Summary
Paylocity closed fiscal 2026 with fourth-quarter total revenue of $444.7 million, up 11.0% from the prior-year quarter, and full-year total revenue of $1.771 billion, also up 11.0%. Subscriptions to the cloud platform supply the bulk of that revenue, billed largely on a per-employee-per-month basis. GAAP operating income was $84.4 million in the quarter, up 27.5%, and $386.0 million for the fiscal year, up 27.0%. GAAP net income came to $60.3 million in the quarter, up 24.1%, and $269.7 million for the year, up 18.8%. Diluted EPS for the fiscal year was $4.92, up 22.4%. Gross margin slipped to 67.5% in the quarter, down 0.3 percentage points, while the full-year gross margin improved to 69.2%, up 0.4 percentage points. Operating margin rose to 19.0% in the quarter, up 2.5 percentage points, and to 21.8% for the year, up 2.7 percentage points.
Cash generation strengthened. Operating cash flow was $111.9 million in the fourth quarter, up 29.3%, and $533.3 million for fiscal 2026, up 27.5%. The company reported free cash flow, a non-GAAP measure, of $427.8 million, or 24.2% of total revenue. Capital expenditures were $20.6 million in the quarter, up 278.7%, and $36.2 million for the year, up 176.5%. Deferred revenue was $35.4 million at June 30, 2026, up 25.2%. Remaining performance obligations were $237.6 million, up 61.8%. That jump points to a larger booked backlog, though the balance is still modest next to annual revenue.
Client metrics point to steady expansion. Excluding clients acquired through acquisitions, Paylocity counted approximately 44,400 clients at June 30, 2026, up 7% from approximately 41,650 a year earlier. Annual revenue retention stayed in excess of 92%, and average client size remained above 150 employees. The company bought Grayscale Labs in April 2026 to add AI-powered recruiting automation. It also rolled out Ignite AI, Paylocity Retirement, and Elevate Solutions. Non-GAAP profitability grew as well. Fourth-quarter Adjusted EBITDA was $145.5 million, and fiscal 2026 Adjusted EBITDA was $654.9 million, up 12.3%, equal to 37.0% of total revenue. Adjusted EBITDA excluding interest income on funds held for clients was $116.4 million in the quarter and $534.9 million for the year, up 16.4% and equal to 32.4% of recurring and other revenue. Non-GAAP operating income was $120.2 million in the quarter and $557.3 million for the year. Non-GAAP net income was $99.4 million, or $1.84 per share, in the quarter, and $455.1 million, or $8.31 per share, for the year.
Guidance for the first quarter of fiscal 2027 and for full fiscal 2027 points to slower growth than fiscal 2026. First-quarter recurring and other revenue is expected to be $414.0 million to $419.0 million, approximately 10% growth. First-quarter total revenue is expected to be $439.5 million to $444.5 million, approximately 8% growth. First-quarter Adjusted EBITDA is expected to be $152.0 million to $156.0 million, and Adjusted EBITDA excluding interest income on funds held for clients is expected to be $126.5 million to $130.5 million. For full fiscal 2027, recurring and other revenue is expected to be $1.777 billion to $1.792 billion, approximately 8% growth. Full fiscal 2027 total revenue is expected to be $1.880 billion to $1.895 billion, approximately 7% growth. Full fiscal 2027 Adjusted EBITDA is expected to be $690.0 million to $700.0 million, and Adjusted EBITDA excluding interest income on funds held for clients is expected to be $587.0 million to $597.0 million. The company also extended the amortization period for deferred contract costs from seven years to eight years, a change expected to lift fiscal 2027 Adjusted EBITDA margins by approximately 120 to 140 basis points. That change does not affect fiscal 2026 results.
Risks are the familiar ones. The 10-K lists general economic conditions, changes in interest rates, reductions in employment, and increases in business failures as factors that can move revenue. It also flags challenges tied to AI regulation and ethical considerations, client retention, cybersecurity threats, acquisition integration, and competition. Market conditions could affect client employee counts, sales cycles, client losses, and interest income on funds held for clients. Paylocity returned capital during fiscal 2026, repurchasing $398.1 million, or 2.8 million shares, and the board approved an additional $1 billion increase to the repurchase program in April 2026. Long-term debt stood at $81.3 million at year end, and cash and cash equivalents totaled $271.9 million. The open question for fiscal 2027 is whether the AI launches and the Grayscale deal can keep recurring revenue growth near double digits as guided growth steps down.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2026 | Q3 FY2026 | QoQ | Q4 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $444.7M | $502.3M | -11.5% | $400.7M | +11.0% |
| Gross profit | $300.4M | $363.2M | -17.3% | $271.9M | +10.5% |
| Gross margin | 67.5% | 72.3% | -4.8 pp | 67.8% | -0.3 pp |
| Research & development | $55.5M | $52.5M | +5.7% | $51.0M | +8.8% |
| Sales & marketing | $103.7M | $95.7M | +8.3% | $100.9M | +2.8% |
| General & administrative | $56.7M | $58.0M | -2.1% | $53.7M | +5.6% |
| Total operating expenses | $216.0M | $206.2M | +4.7% | $205.6M | +5.0% |
| Operating income (loss) | $84.4M | $157.0M | -46.2% | $66.2M | +27.5% |
| Operating margin | 19.0% | 31.3% | -12.3 pp | 16.5% | +2.4 pp |
| Net income (loss) | $60.3M | $111.3M | -45.8% | $48.6M | +24.1% |
| Net margin | 13.6% | 22.1% | -8.6 pp | 12.1% | +1.4 pp |
| Diluted EPS | $1.10 | $2.05 | -$0.95 | $0.86 | +$0.24 |
Risks
The filing expands on AI-related risks, noting competitors may use AI or machine learning to deliver lower-cost, more efficient, or more convenient solutions. AI outputs trained on inaccurate, biased, or misleading data could lead to customer dissatisfaction, reputational harm, or litigation, and AI may be used by threat actors to improve cyberattacks.
Evolving AI, data privacy, and money transmitter regulations could impose increased costs or limit business activities. For example, new money transmitter statutes could subject the company to registration or licensing, and GDPR non-compliance could result in fines up to 4% of worldwide revenue.
Payroll and spend management involve movement of significant funds. If client payments are rejected or fail to clear, the company may need additional short-term liquidity. Reliance on major U.S. banks for ACH and wire transfers means a bank failure or systemic banking shutdown could prevent fund processing and harm liquidity.
The company has experienced cybersecurity attacks in the past, though none were material. It notes that incorporating AI and machine learning features may increase vulnerability, and threat actors may use AI to improve attack capabilities. Third-party supply-chain attacks and system outages could also harm the business.
Processing of personal information is subject to HIPAA, GDPR, CCPA, and expanding U.S. state laws. Enforcement actions and investigations continue to increase, and a finding of noncompliance could lead to significant penalties, legal liability, and restrictions on operations.
Interest income on funds held for clients decreased by $3.5 million, or 3%, to $120.0 million for FY2026 from $123.4 million for FY2025 due to lower interest rates, partially offset by higher average daily balances. Continued rate declines could further reduce other income.
Uncertainties around market and economic conditions may impact revenue growth through fluctuations in client employee counts, elongated sales cycles, client losses, and a changing interest rate environment. Macro factors include inflation, tariffs, and trade policy uncertainty.
The board authorized a $500 million increase in July 2025 and a $1 billion increase in April 2026 to the repurchase program. During fiscal 2026, the company repurchased 2.8 million shares for approximately $398.1 million. Repurchases reduce cash available for working capital, acquisitions, or other investments.
Effective June 30, 2026, the company extended the estimated period of benefit for deferred contract costs from seven to eight years on a prospective basis. This change is expected to increase fiscal 2027 Adjusted EBITDA margins by approximately 120 to 140 basis points but did not impact FY2026 results.
The effective tax rate increased to 30.4% for FY2026 from 26.5% for FY2025, primarily due to stock-based compensation shortfalls and state and local income taxes. This is above the federal statutory rate of 21%.
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 FY2026 (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.