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1. Company Snapshot

1.a. Company Description

Paylocity Holding Corporation provides cloud-based human capital management and payroll software solutions for workforce in the United States.The company offers Payroll and Tax Services solution to simplifies payroll, automates processes, and manages compliance requirements within one system; and expense management, on demand payment, and garnishment solutions.It also provides human capital management and employee self-service solutions, document library, compliance dashboard, and HR edge; time and attendance solution; schedule tracking services; and time collection devices, including kiosks, time clocks, and mobile and web applications.


In addition, the company offers talent management solutions comprising recruiting and onboarding, as well as learning, performance, and compensation management; employee benefits management and third-party administrative solutions; employee experiences solutions, including community, premium video, survey, and peer recognition; and insights and recommendations solutions, such as modern workforce index, data insights, and reporting.Further, it provides implementation and training, client, and tax and regulatory services.The company serves for-profit and non-profit organizations across industries, including business services, financial services, healthcare, manufacturing, restaurants, retail, technology, and others.


It sells its products through sales representatives.The company was founded in 1997 and is headquartered in Schaumburg, Illinois.

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1.b. Last Insights on PCTY

Paylocity Holding Corporation faced negative drivers, including a reduction in holdings by Bessemer Group Inc. by 66.4% in Q2. Despite beating Q1 2026 earnings estimates with $1.75 per share, compared to the Zacks Consensus Estimate of $1.5 per share, the company's growth prospects may be viewed with skepticism. Additionally, several institutional investors, including Cullen Frost Bankers Inc., IFP Advisors Inc., and Cwm LLC, increased their holdings, while Y Intercept Hong Kong Ltd purchased a new position. The company also announced a $200 million share buyback in Q1 Fiscal Year 2026.

1.c. Company Highlights

2. Paylocity's Q1 FY'26 Earnings: A Strong Start with AI-Driven Growth

Paylocity reported total revenue of $408.2 million, a 12% increase from the same period last year, with recurring and other revenues up 14%. Adjusted gross margin was 75.1% for Q1, representing 110 basis points of leverage. The company's adjusted EBITDA margin of 35.9% exceeded the top end of their guidance by $11.4 million. Earnings per share (EPS) came in at $1.75, beating analyst estimates of $1.5.

Publication Date: Nov -10

📋 Highlights
  • Revenue Growth:: Total revenue reached $408.2 million, a 12% YoY increase, with recurring and other revenues up 14%.
  • AI-Driven Efficiency:: AI implementation improved engineering productivity and code quality, contributing to 110 basis points of gross margin leverage (75.1% adjusted gross margin).
  • Share Repurchases:: $200 million spent to repurchase 1.2 million shares at an average price of $172.30.
  • Long-Term Targets:: Raised guidance to achieve $3 billion in revenue with 25-30% free cash flow margin, driven by HCM, finance, and IT expansion.
  • Cross-Sell Momentum:: Finance and IT offerings contributed to 92% client retention and ARPU growth, with IT modules showing a $10-15/employee revenue opportunity.

Financial Performance

The strong financial results were driven by the company's AI strategy, which has enabled Paylocity to expand and deepen AI capabilities across their platform. The company's engineering teams are utilizing AI coding assistants for code generation, testing, and design mockups, resulting in increased productivity and code quality.

AI-Driven Growth

Paylocity's AI investments are expected to drive efficiency and productivity, with the company planning to invest in R&D to fuel growth. According to Steven Beauchamp, "We're planning to invest in R&D to fuel growth, while also getting leverage in other parts of the business."

Valuation

With a P/E Ratio of 34.61 and an EV/EBITDA of 18.64, the market is pricing in a certain level of growth for Paylocity. The company's ROE of 19.12% and ROIC of 17.52% indicate a strong ability to generate returns on equity and invested capital. The Free Cash Flow Yield of 4.85% is also attractive, suggesting that the company's shares may be undervalued.

Business Outlook

Paylocity has increased their long-term financial targets, including revenue, adjusted gross margin, and adjusted EBITDA margin. The company expects to drive durable growth, significant profitability increases, and natural scale in their business. With a strong start to FY'26, Paylocity is well-positioned to achieve its goal of reaching $3 billion in revenue with 25-30% free cash flow margin.

Product Expansion

The company's product expansion, particularly in IT and finance, is expected to drive ARPU growth. Paylocity is seeing a significant increase in revenue from its finance and IT offerings, which is expected to drive a portion of the $1 billion raise in revenue target. The company's strategy is to integrate its capabilities with marketplace and API offerings, providing customers with options to leverage its solution or their existing identity providers.

3. NewsRoom

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Cetera Investment Advisers Has $1.60 Million Stake in Paylocity Holding Corporation $PCTY

Dec -02

Source: defenseworld.net

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Paylocity Holding Corporation $PCTY Shares Purchased by Bell Asset Management Ltd

Nov -27

Source: defenseworld.net

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American Century Companies Inc. Has $96.91 Million Stock Position in Paylocity Holding Corporation $PCTY

Nov -26

Source: defenseworld.net

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4,497 Shares in Paylocity Holding Corporation $PCTY Purchased by Y Intercept Hong Kong Ltd

Nov -05

Source: defenseworld.net

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Paylocity Holding Corporation (PCTY) Q1 2026 Earnings Call Transcript

Nov -05

Source: seekingalpha.com

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Paylocity (PCTY) Q1 Earnings and Revenues Surpass Estimates

Nov -05

Source: zacks.com

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Paylocity Announces First Quarter Fiscal Year 2026 Financial Results

Nov -04

Source: globenewswire.com

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Can These 5 Internet Software Stocks Hit Targets This Earnings Season?

Nov -04

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.47%)

6. Segments

Cloud-based Human Capital Management and Payroll Software Solution

Expected Growth: 10.55%

Paylocity's cloud-based HCM and payroll software solution growth is driven by increasing adoption of digital HR solutions, rising demand for automated payroll processing, and growing need for data-driven workforce insights. Additionally, the shift towards remote work and the requirement for seamless employee experience are contributing to the 10.55% growth.

Interest Income on Funds Held for Clients

Expected Growth: 9.27%

The 9.27% growth in Interest Income on Funds Held for Clients from Paylocity Holding Corporation is driven by increasing client adoption of its treasury management services, expansion of its client base, and rising interest rates. Additionally, the company's strategic partnerships and investments in digital platforms have enhanced its ability to attract and retain clients, resulting in higher interest income.

7. Detailed Products

Core HR

A comprehensive human capital management (HCM) platform that provides a single, unified solution for managing HR, payroll, and benefits administration.

Payroll

A cloud-based payroll processing solution that provides accurate and timely payroll processing, tax compliance, and reporting.

Time and Attendance

A time-tracking and attendance management solution that provides real-time visibility into employee work hours, absences, and leave.

Talent Management

A suite of tools for recruiting, onboarding, performance management, and learning management.

Benefits Administration

A benefits administration solution that provides online enrollment, benefits education, and compliance management.

Workforce Analytics

A data analytics platform that provides insights into workforce trends, productivity, and performance.

Mobile Access

A mobile app that provides employees with secure, on-the-go access to HR, payroll, and benefits information.

8. Paylocity Holding Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Paylocity Holding Corporation's services are specialized and tailored to specific industries, making it difficult for substitutes to emerge. However, the company still faces competition from other HR and payroll software providers.

Bargaining Power Of Customers

Paylocity Holding Corporation's customers are largely small to medium-sized businesses, which have limited bargaining power. The company's services are also highly customized, making it difficult for customers to switch to alternative providers.

Bargaining Power Of Suppliers

Paylocity Holding Corporation has a diversified supplier base, and its suppliers have limited bargaining power. The company's suppliers are primarily technology and infrastructure providers, which are readily available and interchangeable.

Threat Of New Entrants

While there are barriers to entry in the HR and payroll software market, new entrants can still emerge. However, Paylocity Holding Corporation's established brand and customer base provide a competitive advantage.

Intensity Of Rivalry

The HR and payroll software market is highly competitive, with several established players competing for market share. Paylocity Holding Corporation faces intense competition from companies like ADP, Workday, and BambooHR.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 7.70%
Debt Cost 3.95%
Equity Weight 92.30%
Equity Cost 8.34%
WACC 8.00%
Leverage 8.34%

11. Quality Control: Paylocity Holding Corporation passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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AppFolio

A-Score: 5.1/10

Value: 0.6

Growth: 9.7

Quality: 8.8

Yield: 0.0

Momentum: 7.0

Volatility: 4.7

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Paylocity

A-Score: 4.9/10

Value: 2.0

Growth: 9.2

Quality: 7.8

Yield: 0.0

Momentum: 3.0

Volatility: 7.3

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Value: 2.9

Growth: 7.7

Quality: 6.1

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Value: 0.0

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Quality: 6.2

Yield: 0.0

Momentum: 7.5

Volatility: 5.0

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Duolingo

A-Score: 4.4/10

Value: 0.3

Growth: 9.9

Quality: 8.0

Yield: 0.0

Momentum: 6.0

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A-Score: 4.1/10

Value: 2.4

Growth: 8.7

Quality: 6.5

Yield: 0.0

Momentum: 1.0

Volatility: 6.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

146.52$

Current Price

146.52$

Potential

-0.00%

Expected Cash-Flows