Executive Summary

Q4 FY25 delivered a clean beat on both revenue and non-GAAP EPS: revenue $400.7M vs S&P Global consensus $388.2M*, and non-GAAP EPS $1.56 vs $1.35*, driven primarily by recurring & other revenue strength (+14% YoY to $369.9M). Management noted results were $10.2M above the top end of guidance with most of the beat from recurring revenue .
Full-year FY25 grew total revenue 14% to $1.595B and adjusted EBITDA 15% to $583.0M (36.5% margin), with ARPC up ~8% to just over $35,300 and client count up 7% to 41,650, underscoring durable demand and upsell momentum .
FY26 outlook introduced: total revenue $1.707–$1.722B (+~8% YoY), recurring & other revenue $1.597–$1.612B (+~9% YoY), and adjusted EBITDA $608.5–$618.5M; assumptions include four 25bp rate cuts and flat workforce levels, implying interest income headwinds vs FY25 .
Strategic catalysts: launch of Paylocity for Finance (integrating Airbase) broadens TAM into the Office of the CFO; Board added $500M to buyback (with ~$200M remaining under prior program as of 6/30), and company repurchased ~800K shares ($150M) in FY25 .

What Went Well and What Went Wrong

What Went Well
- Beat on revenue and EPS: Q4 revenue $400.7M (+12% YoY) and recurring & other revenue $369.9M (+14% YoY); non-GAAP EPS $1.56 vs $1.48 in Q4 FY24; most of the revenue beat came from recurring revenue .
- Product expansion: Launched Paylocity for Finance (AP Automation, Expense, Corporate Cards, Guided Procurement, Headcount Planning), integrating Airbase and unifying HR + Finance in a single platform; early customer feedback is positive and cross-sell opportunity into >41.6K clients is material .
- Operating leverage and cash generation: FY25 adjusted EBITDA +15% to $583.0M (36.5% margin) and free cash flow $342.8M (21.5% of revenue); management highlighted 50 bps YoY organic operating leverage ex Airbase and confidence in further FCF expansion .
- Management quote: “Fiscal 25 was a very strong year… expansion of average revenue per client and a 7% increase in our client base… launch of Paylocity for Finance…” — Toby Williams, CEO .
What Went Wrong
- Sequential seasonality: Q4 total revenue ($400.7M) declined from Q3 ($454.5M), consistent with seasonal patterns around client funds/float; interest income also dipped YoY ($30.9M vs $32.5M in Q4 FY24) .
- Sales & marketing opex stepped up q/q due to Q4 timing (bonus/programs) and hiring to enter FY26 fully staffed (952 reps, +8% YoY), pressuring quarterly margins vs Q3 .
- Rate sensitivity headwind: FY26 assumes four 25bp cuts; management guides Q1 average client funds ~$2.85B at ~~3.90% (~~$27.5M interest income) and FY26 ~$3.15B at ~~3.50% (~~$110M), a YoY drag vs FY25, muting total revenue growth optics .

Financial Results

Headline results vs prior periods and S&P consensus

Metric	Q4 2024	Q3 2025	Q4 2025	Q4 2025 Consensus
Total Revenue ($M)	$357.3	$454.5	$400.7	$388.2*
Recurring & Other Revenue ($M)	$324.7	$421.1	$369.9	—
Interest Income on Client Funds ($M)	$32.5	$33.5	$30.9	—
GAAP Diluted EPS ($)	$0.86	$1.61	$0.86	—
Non-GAAP EPS ($)	$1.48	$2.43	$1.56	$1.35*
GAAP Operating Income ($M)	$62.9	$127.0	$66.2	—
Adjusted EBITDA ($M)	$120.2	$197.1	$130.7	—
Adj. EBITDA Margin (%)	—	—	32.6%	—

Values with asterisks are from S&P Global consensus. Values retrieved from S&P Global.

Revenue composition

Metric	Q4 2024	Q4 2025	YoY Change
Recurring & Other Revenue ($M)	$324.7	$369.9	+14%
Interest Income on Client Funds ($M)	$32.5	$30.9	-5.2% (calc from cited)
Total Revenue ($M)	$357.3	$400.7	+12%

KPIs and operating drivers

KPI	FY 2024	FY 2025 / Current	Commentary
Average Revenue per Client (ARPC)	$32,800	just over $35,300 (+~8%)	Upsell and product expansion drove ARPC gains .
Clients	—	41,650 (+7% YoY)	Broad base for cross-sell of Finance suite .
Revenue Retention	—	>92%	Stable retention through FY25 .
Sales Reps	—	952 (+8% YoY)	Fully staffed entering FY26 .
Broker Channel Mix	—	>25% of new business	Ongoing differentiator; no insurance competition .

Guidance Changes

Metric	Period	Previous Guidance	Current	Change
Total Revenue ($M)	Q4 2025	$385.5–$390.5	Actual: $400.7	Beat high end; CFO: +$10.2M vs top end
Recurring & Other Revenue ($M)	Q1 2026	N/A	$370.0–$375.0	Introduced
Total Revenue ($M)	Q1 2026	N/A	$397.5–$402.5	Introduced
Adjusted EBITDA ($M)	Q1 2026	N/A	$131.0–$135.0	Introduced
Adj. EBITDA ex Interest ($M)	Q1 2026	N/A	$103.5–$107.5	Introduced
Recurring & Other Revenue ($B)	FY 2026	N/A	$1.597–$1.612	Introduced
Total Revenue ($B)	FY 2026	N/A	$1.707–$1.722	Introduced
Adjusted EBITDA ($M)	FY 2026	N/A	$608.5–$618.5	Introduced
Adj. EBITDA ex Interest ($M)	FY 2026	N/A	$498.5–$508.5	Introduced

Management assumption: FY26 outlook embeds four 25bp rate cuts and flat workforce levels; interest income expected ~$110M for FY26 on ~$3.15B average client funds .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 FY25, Q3 FY25)	Current Period (Q4 FY25)	Trend
AI/Technology initiatives	Reached max PEPY $600 via product innovation (Benefits Decision Support, Headcount Planning) .	Increased AI interest/adoption; expanding chatbot and embedded AI across suite .	Rising adoption and roadmap density.
Broker/channel	>25% of new business from brokers/financial advisors (Q3) .	>25% broker-driven new business again; message resonates as PCTY doesn’t sell insurance .	Stable, durable contribution.
Product expansion	Continued differentiation, expanded suite (Q3) .	Launch of Paylocity for Finance integrating Airbase; early feedback positive; pricing PEPM; targets 10–20%+ module penetration over time with higher ARPC impact .	New TAM vector; multiyear cross-sell.
Macro/demand	“Stable macro” in Q2/Q3 commentary .	Demand environment stable through Q4; unit and ARPC growth steady; FY26 guide assumes flat workforce levels .	Steady/stable.
Interest income/rates	—	Q1 FY26 client funds ~$2.85B at ~~3.90% (~~$27.5M); FY26 ~$3.15B at ~~3.50% (~~$110M); assumes four cuts .	Rate headwind baked into FY26.
R&D execution	Ongoing R&D driving differentiation (Q3) .	FY25 combined total R&D investments = 14.3% of revenue (non-GAAP view) supporting roadmap .	Sustained investment focus.

Management Commentary

Strategy and FY25 performance: “Our strong growth was driven by the continued expansion of average revenue per client and a 7% increase in our client base… launch of Paylocity for Finance… unifying data to connect critical workflows…” — Toby Williams, CEO .
Profitability and FCF: “Adjusted EBITDA for the fourth quarter was $130.7M or 32.6% margin… FY25 adjusted EBITDA was $583M or 36.5%… free cash flow margin of 21.5%” — Ryan Glenn, CFO .
FY26 framing: “Our guidance assumes four 25bp rate cuts… Q1 interest income of ~$27.5M; full-year ~$110M… we remain confident in durable recurring revenue growth and prudent approach to guidance” — CFO .
New product vector: “Paylocity for Finance… delivers a comprehensive suite… bridging HR and finance on a single unified platform” — Steve Beauchamp/management .

Q&A Highlights

Demand and go-to-market: Management characterized demand as stable through FY25 with steady unit and ARPC growth; Q4 S&M expense uptick tied to typical year-end timing and hiring to be fully staffed for FY26 .
Airbase integration and sales motion: First phase integration complete; fully integrated product in market with ongoing quarterly enhancements; field reps refer opportunities to an inside expert team; expect longer cycles than typical HCM module given higher price point but greater ARPC impact .
Free cash flow outlook: Potential tailwind from new tax legislation in FY26; management confident in continuing to expand free cash flow margin .
Guidance cadence: Q1 shows momentum; implied Q2–Q4 recurring growth ~8.5% under prudent framework, with potential to raise through the year if execution remains strong .
AI adoption: Increasingly a differentiator in sales cycles; growing embedded AI usage across modules and chatbot improvements using client and knowledge data .
Retention: Revenue retention >92% sustained; no material changes in controllable/uncontrollable churn called out .

Estimates Context

Q4 FY25 results vs S&P Global consensus: revenue $400.7M vs $388.2M*, non-GAAP EPS $1.56 vs $1.35*, signaling broad-based upside led by recurring revenue . Values retrieved from S&P Global.
Management also exceeded internal guidance by $10.2M at the top end on revenue (majority from recurring), reinforcing sales execution and ARPC expansion .
Where models may adjust: FY26 guide embeds lower interest yields and flat workforce levels, likely prompting consensus mix-shifts (more recurring growth sensitivity; lower interest income contribution) and updated assumptions on Paylocity for Finance penetration over time .

Clear Implications for Investors

Broad beat with prudent FY26 outlook: Recurring engine remains robust; FY26 revenue growth optics tempered by rate assumptions—stock reaction likely hinges on confidence in ex-rate growth and Finance suite cross-sell .
Paylocity for Finance is a multiyear ARPC lever: Early traction and unified platform differentiation vs HCM peers could expand win rates and deepen wallet share; expect gradual ramp but higher dollar impact per client .
Durable retention and channel strategy: >92% retention and >25% broker mix continue to underpin predictable recurring growth without channel conflict (no insurance sales) .
FCF resilience: Despite tax and rate headwinds, FY25 FCF margin 21.5% and management confidence in further expansion support ongoing buybacks ($500M authorization increase) .
Watch rate path and client funds: Lower yields are an explicit FY26 headwind; upside vs guide could emerge if rate cuts are shallower/slower than assumed .
Execution bar: Maintaining sales productivity with an 8% larger salesforce (952 reps) and realizing cross-sell into 41,650 clients are key to sustaining double-digit recurring growth .

Appendix: Detailed Financial Tables

Income statement detail (select line items)

Metric	Q4 2024	Q3 2025	Q4 2025
Total Revenues ($M)	$357.287	$454.548	$400.737
Gross Profit ($M)	$240.407	$324.695	$271.872
GAAP Operating Income ($M)	$62.909	$127.030	$66.227
GAAP Net Income ($M)	$48.819	$91.483	$48.606
Diluted EPS ($)	$0.86	$1.61	$0.86
Non-GAAP EPS ($)	$1.48	$2.43	$1.56
Adjusted EBITDA ($M)	$120.158	$197.056	$130.749

Balance sheet and cash flow (FY25 year-end)

Cash & equivalents: $398.1M; LT debt: $162.5M (Airbase financing; ~$162.5M repaid in 2H FY25); FY25 CFO: $418.2M; FCF: $342.8M (21.5% of revenue) .

Business outlook detail (as provided)

Q1 FY26: Recurring & other revenue $370.0–$375.0M; total revenue $397.5–$402.5M; adjusted EBITDA $131.0–$135.0M; adjusted EBITDA ex interest $103.5–$107.5M .
FY26: Recurring & other revenue $1.597–$1.612B; total revenue $1.707–$1.722B; adjusted EBITDA $608.5–$618.5M; adjusted EBITDA ex interest $498.5–$508.5M .

Footnote: Consensus figures marked with an asterisk (*) are from S&P Global. Values retrieved from S&P Global.

Paylocity Holding Corp (PCTY)·Q4 2025 Earnings Summary