Summary
Paylocity closed fiscal 2023 with a strong fourth quarter. Total revenue for the quarter ended June 30, 2023 reached $308.5 million, up 34.7% from the prior-year quarter. Gross margin climbed to 68.6% from 66.2%. Operating income rose to $49.4 million, up 162.1%, and operating margin expanded to 16.0% from 8.2%. Net income for the quarter was $37.3 million, up 146.0%.
The full year was stronger still. Revenue for fiscal 2023 was $1.17 billion, up 37.8%, and gross profit was $807.6 million, up 42.8%. Operating income for the year was $155.0 million, up 83.3%. Net income was $140.8 million, up 55.1% from $90.8 million, and diluted EPS was $2.49, up 54.7% from $1.61.
Cash generation improved sharply. Operating cash flow for fiscal 2023 was $282.7 million, up 82.3% from $155.1 million, and operating cash flow for the quarter was $76.6 million, up 54.3%. Capital expenditures were $13.1 million in the quarter, up 384.2%, and $21.9 million for the year, up 21.3%. Free cash flow, a non-GAAP measure, was $215.8 million, or 18.4% of total revenue. Non-GAAP Adjusted EBITDA for fiscal 2023 was $375.2 million, up 58% from $237.8 million, or 31.9% of total revenue compared with 27.9% in fiscal 2022. The quarter's Adjusted EBITDA came in at $100.6 million.
Spending grew alongside the business. Cost of revenues for fiscal 2023 rose $80.0 million, or 28%, sales and marketing rose $82.3 million, or 38%, research and development rose $61.1 million, or 59%, and general and administrative rose $28.1 million, or 17%. The effective tax rate was 11.2% for fiscal 2023 compared with (8.6)% for fiscal 2022. Deferred revenue at June 30, 2023 was $22.6 million, up 84.9% from the prior-year quarter, and remaining performance obligations were $62.9 million, up 21.4%.
Operationally, the client base kept expanding. Excluding acquisitions, the company served approximately 36,200 clients at June 30, 2023, up 9% from approximately 33,300 a year earlier, and annual revenue retention stayed above 92%. Interest income on funds held for clients reached $76.6 million for fiscal 2023, up $71.6 million, or 1,445%, helped by higher rates and higher average daily balances. Management highlighted new premium products, including Advanced Scheduling, Learning Management and Market Pay, and noted recognition in NelsonHall's 2023 HCM report.
Guidance points to slower but still solid growth. For the first quarter of fiscal 2024, total revenue is expected between $314.1 million and $318.1 million, roughly 25% growth over the first quarter of fiscal 2023, with Adjusted EBITDA of $89.5 million to $92.5 million. For the full fiscal year 2024, revenue is guided to $1.405 billion to $1.410 billion, about 20% growth over fiscal 2023, with Adjusted EBITDA of $464.0 million to $468.0 million. Long-term targets were raised as well: adjusted gross profit margin to 75 - 80% from 70 - 75%, Adjusted EBITDA to 35 - 40% from 30 - 35%, and free cash flow to 20 - 25% from 15 - 20%.
Risks remain. The company cites fluctuations in client employee counts, potential increases in client losses, a changing interest rate environment, inflation and weaker employment rates at clients as pressures on revenue. The safe harbor language also lists cybersecurity threats and evolving cybersecurity regulations, the ability to keep and win clients, the challenge of scaling a sales organization, competition, and limits that current and future laws may place on the use of AI and machine learning. Paylocity ended fiscal 2023 with $288.8 million in cash and cash equivalents, no amounts drawn on its $550.0 million revolving credit facility, and commitments that include $81.3 million in operating lease obligations and $59.0 million in purchase obligations.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $308.5M | $339.9M | -9.2% | $228.9M | +34.7% |
| Gross profit | $211.7M | $244.1M | -13.3% | $151.6M | +39.7% |
| Gross margin | 68.7% | 71.8% | -3.2 pp | 66.2% | +2.5 pp |
| Research & development | $40.5M | $42.3M | -4.2% | $28.9M | +40.4% |
| Sales & marketing | $75.9M | $74.1M | +2.5% | $59.6M | +27.3% |
| General & administrative | $46.0M | $47.4M | -3.0% | $44.2M | +3.9% |
| Total operating expenses | $162.4M | $163.8M | -0.8% | $132.7M | +22.4% |
| Operating income (loss) | $49.4M | $80.4M | -38.6% | $18.8M | +162.1% |
| Operating margin | 16.0% | 23.6% | -7.6 pp | 8.2% | +7.8 pp |
| Net income (loss) | $37.3M | $57.6M | -35.3% | $15.1M | +146.0% |
| Net margin | 12.1% | 16.9% | -4.9 pp | 6.6% | +5.5 pp |
| Diluted EPS | $0.66 | $1.02 | -$0.36 | $0.27 | +$0.39 |
Risks
Adverse economic conditions such as lower employment levels, inflation, rising interest rates and banking instability could reduce client workforce counts and spending on HCM and payroll solutions. MD&A states future revenue growth may be impacted by fluctuations in client employee counts, potential increases in client losses, and a changing interest rate environment.
Interest income on funds held for clients is subject to interest rate risk and became a larger part of revenue in fiscal 2023. MD&A warns that a changing interest rate environment could impact future revenue growth, and client funds deposited in consolidated accounts exceed applicable FDIC insurance limits.
Paylocity relies on major U.S. banks to execute ACH and wire transfers supporting client payroll and tax services. A bank failure or systemic banking shutdown could prevent fund processing, expose the company to client fund losses, and require additional short-term liquidity.
Risk factors state that rapid technological advancements in AI and machine learning may enable competitors to deliver HCM solutions at lower prices or more efficiently, which could limit demand for Paylocity's solutions. The company also notes that new AI or machine learning technologies may fail to operate as expected.
Paylocity processes personal information, including HIPAA-protected health data via BeneFLEX, and is subject to GDPR, CCPA/CPRA and other privacy laws. The filing notes GDPR noncompliance can trigger fines up to 4% of worldwide revenue, and evolving money transmitter and AI regulations could impose additional licensing or compliance costs.
The HCM and payroll market is fragmented and highly competitive, with larger competitors such as ADP, Ceridian, Paychex, Paycom and Paycor. These competitors may offer price concessions or delayed payment terms that negatively impact Paylocity's sales, profitability or market share.
Growth depends on attracting, training and retaining qualified sales, implementation, client service and software development personnel. The filing states competition for skilled employees is intense, and failure to attract or retain personnel could severely harm future growth prospects.
SaaS KPIs
All quarters →Average Client Size
Annual Revenue Retention Rate
Summary, forecast, risks and KPIs are extracted from Paylocity Holding Corp's SEC filings for Q4 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.