Paylocity (NASDAQ:PCTY) reported fourth-quarter fiscal 2026 recurring revenue growth of 12.4% and total revenue growth of 11%, as the human capital management software provider highlighted product expansion, artificial intelligence initiatives and continued client growth.
For the fiscal year ended June 30, 2026, Paylocity generated approximately $1.8 billion in total revenue, up 11%, while recurring revenue increased 12.2%. The company ended the year with about 44,400 clients, a 7% increase from fiscal 2025, and average revenue per client rose more than 5% to roughly $37,200.
AI product launches and acquisitions
Paylocity emphasized its recent launch of Ignite AI, a set of AI capabilities embedded in existing customer workflows. The offering includes a candidate-fit agent for recruiting, a talent-rediscovery agent designed to identify potential candidates from existing talent pools, and an answers-and-insight agent intended to help HR and payroll teams obtain client-specific information through natural-language questions.
The company also introduced an Ignite AI Hub, a centralized dashboard intended to provide customers visibility into AI usage, including questions answered, tasks completed and issues resolved. Beauchamp said AI interactions nearly doubled sequentially during the quarter.
President and CEO Toby Williams said AI is becoming a larger part of conversations with prospective customers, particularly when customers evaluate tools to improve efficiency in payroll, recruiting and time-and-labor management. However, management said its approach to monetization will vary based on the value provided to clients.
“We’re really focused on delivering value to the clients,” Beauchamp said. “When we deliver enough value to the clients, we look to be able to monetize that value.”
The company recently acquired Aidora, an AI-native leave-of-absence management provider. Williams said Paylocity plans to integrate Aidora’s capabilities into its suite as a premium offering. The company is also integrating AI-powered recruiting automation capabilities from its prior Grayscale acquisition, which it expects to offer as a premium product.
Other recent product initiatives include Elevate Solutions, a managed-services offering, and Paylocity Retirement, which brings retirement-plan administration and employee savings tools to the company’s platform. Williams said financial advisors have responded positively to the retirement offering.
Financial performance and retention
Fourth-quarter recurring revenue totaled $415.6 million, while total revenue exceeded the high end of Paylocity’s guidance by $11.3 million. Chief Financial Officer Ryan Glenn said most of the fourth-quarter revenue outperformance came from recurring and other revenue.
Adjusted EBITDA was $145.5 million in the fourth quarter, representing a 32.7% margin and exceeding the top end of guidance by $12.9 million. For fiscal 2026, adjusted EBITDA totaled $654.9 million, or a 37% margin, up 12.3% from the prior year on a dollar basis.
Excluding interest income on funds held for clients, full-year adjusted EBITDA margin was 32.4%, reflecting 120 basis points of operating leverage, according to the company. Fiscal-year free cash flow margin was 24.2%, and free cash flow increased 24.8% on a dollar basis.
On a GAAP basis, Paylocity reported fourth-quarter gross profit of $300.4 million, operating income of $84.4 million and net income of $60.3 million. Full-year gross profit was $1.2 billion, operating income was $386 million and net income was $269.7 million.
Management said fiscal 2026 revenue retention remained above 92%. Benefit brokers accounted for more than 25% of new business during the year, Williams said, as the company continued to invest in its broker channel.
Fiscal 2027 outlook
For the first quarter of fiscal 2027, Paylocity expects recurring and other revenue of $414 million to $419 million, representing approximately 10% growth from the prior-year period. Total revenue is projected at $439.5 million to $444.5 million, or approximately 8% growth.
- First-quarter adjusted EBITDA is expected to be $152 million to $156 million.
- First-quarter adjusted EBITDA excluding interest income on client funds is expected to be $126.5 million to $130.5 million.
- Fiscal 2027 recurring and other revenue is projected at $1.777 billion to $1.792 billion, representing approximately 8% growth.
- Fiscal 2027 total revenue is projected at $1.880 billion to $1.895 billion, representing approximately 7% growth.
- Full-year adjusted EBITDA is expected to be $690 million to $700 million.
The outlook assumes flat workforce levels in fiscal 2027 compared with fiscal 2026, despite workforce growth in the company’s client base during the fourth quarter. It also incorporates two assumed 25-basis-point interest-rate cuts in the second half of fiscal 2027.
Beginning in fiscal 2027, Paylocity will amortize deferred contract costs over eight years rather than seven years. Glenn said the accounting change is expected to add approximately 120 to 140 basis points to adjusted EBITDA margin during the year, with the benefit occurring ratably rather than entirely in the first quarter.
Glenn said newer acquisitions and product launches will create a modest margin headwind in fiscal 2027 because they are currently subscale, but management does not expect those products to be margin dilutive over time. The company reiterated its expectation for continued multi-year free-cash-flow and margin expansion.
Capital allocation
Paylocity repurchased approximately 466,000 shares for $48.1 million in the fourth quarter. For the full fiscal year, it repurchased about 2.8 million shares for $398.1 million, reducing diluted share count by 3.1%.
As of June 30, the company had approximately $1.3 billion remaining under its repurchase authorization, $271.9 million in cash equivalents and invested corporate cash, and $81.3 million outstanding on its credit facility. Glenn said Paylocity expects to continue opportunistic repurchases while preserving flexibility for acquisitions and investments in growth.
About Paylocity (NASDAQ:PCTY)
Paylocity (NASDAQ: PCTY) is a leading provider of cloud-based payroll and human capital management (HCM) software designed to streamline workforce administration for mid-sized organizations. The company’s integrated platform automates core functions such as payroll processing, benefits administration, time and labor tracking, and compliance management, enabling employers to manage employee data more efficiently and reduce administrative burdens.
In addition to payroll and HR capabilities, Paylocity offers talent management solutions including recruiting, onboarding, performance tracking, and learning management.
