Paylocity reports slowing revenue growth as margins expand
The payroll software provider reported total revenue of $444.7 million for the fourth quarter.
Paylocity Holding (PCTY) reported a deceleration in revenue growth for the fourth quarter as the company shifted its focus toward margin expansion and shareholder returns. The cloud-based payroll and human capital management provider saw total revenue rise 11.0% year-over-year to $444.7 million.
This result marked a slowdown from the 12% growth reported in the same period last year. Recurring and other revenue followed a similar trajectory, rising 12.4% to $415.6 million, compared to 14% growth in the prior-year fourth quarter.
For the full fiscal year 2026, total revenue grew 11.0% to $1.771 billion, a decline from the 14% growth rate seen in fiscal 2025. Recurring and other revenue for the year grew 12.2% to $1.651 billion, slowing from 15% growth in the previous year.
Despite the slowing top line, the company improved profitability. GAAP net income increased 18.8% to $269.7 million from $227.1 million in fiscal 2025. Adjusted EBITDA margin expanded to 37.0% of total revenue, up from 36.5% in the prior year. When excluding interest income on funds held for clients, the Adjusted EBITDA margin on recurring and other revenue rose to 32.4% from 31.2%.
Cash flow metrics also improved. The free cash flow margin reached 24.2% of total revenue, up from 21.5% in fiscal 2025. Net cash provided by operating activities as a percentage of total revenue rose to 30.1% from 26.2%.
Paylocity increased its capital return to shareholders, repurchasing $398.1 million in shares during fiscal 2026. This was a significant increase from the $150 million repurchased in fiscal 2025.
Growth is expected to slow further in fiscal 2027. Recurring and other revenue will grow approximately 8% and total revenue approximately 7% over fiscal 2026 levels.
To support margins, the company will amortize deferred contract costs over an 8-year useful life instead of 7 years starting in fiscal 2027. This change is expected to increase Adjusted EBITDA margins by 120 to 140 basis points.
During fiscal 2026, the company launched Ignite AI, Elevate Solutions, and Paylocity Retirement, and acquired Grayscale Labs in April.