It has been about a month since the last earnings report for Paylocity (PCTY). Shares have added about 0.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Paylocity due for a pullback? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent drivers for Paylocity Holding Corporation before we dive into how investors and analysts have reacted as of late.
Paylocity Q1 Earnings Beat Estimates, Revenues Increase Y/Y
Paylocity reported first-quarter fiscal 2026 non-GAAP net income of $1.75 per share, beating the Zacks Consensus Estimate by 16.67%. Paylocity's revenues rose 12% year over year to $408.2 million and surpassed the Zacks Consensus Estimate by 1.95%.
Top-line growth can be attributed to a 14% increase in Recurring and other revenues (92.8% of the total revenues) to $378.9 million. Interest income on funds held for clients (7.2% of total revenues) declined 1.8% year over year to $29.3 million.
Quarterly Details of PCTY
Paylocity's adjusted gross profit was $306.7 million, up 14.2% from the year-ago period. The adjusted gross margin expanded 110 basis points (bps) to 75.1%. The non-GAAP operating income rose 15.5% year over year to $121.2 million. The non-GAAP operating margin expanded 90 bps to 29.7%. Adjusted EBITDA rose 13.4% from the year-ago quarter to $146.4 million. The adjusted EBITDA margin for the first quarter of fiscal 2026 is up 130 bps to 35.9%.
Balance Sheet & Cash Flow Details
As of Sept. 30, 2025, Paylocity's cash and cash equivalents were $165.2 million compared with $398.1 million as of June 30, 2025. Long-term debt totaled $81.3 million as of the first quarter of fiscal 2026, reflecting approximately $81.3 million repaid on the outstanding balance during the first quarter of fiscal year 2026 following the Airbase acquisition completed on Oct. 1, 2024. As of September 30, 2025, net cash provided by operations for the first three months of fiscal year 2026 was $86.5 million compared to $91.5 million for the first three months of fiscal year 2025. Paylocity repurchased $200 million or 1.2 million shares during Q1 fiscal 2026, with $500 million or 3.0 million shares repurchased since May 2024.
PCTY Provides Q2 & FY26 Updated Guidance
For the second quarter of fiscal 2026, the company expects total revenues of $405.5-$410.5 million, indicating 8% growth from the year-ago period's actual. Adjusted EBITDA is projected to be in the range of $131.5-$135.5 million. For fiscal 2026, Paylocity projects total revenues between $1.715 billion and $1.730 billion, implying 8% growth from the year-ago period's actual. Adjusted EBITDA is expected to be between $615 million and $625 million.
Long-Term Financial Targets Update
Paylocity announced updated long-term financial targets reflecting sustained revenue growth, increasing profitability and scale. The company raised its total revenue target from $2 billion or more to $3 billion. Adjusted gross profit margin targets increased to 80% or higher from the previous range of 75-80%. Non-GAAP research and development remains targeted at 10-15% of revenue, while non-GAAP sales and marketing was reduced to a 15-20% target from the previous 20-25% range. Non-GAAP general and administrative expenses are targeted at 5-7%, narrowed from the previous 5-10% range. Adjusted EBITDA margin targets were increased to 40-45% from 35-40%, and free cash flow margin targets expanded to 25-30% from 20-25%. Stock-based compensation is targeted at 5% of revenue, down from the previous target of less than 10%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in fresh estimates.
VGM Scores
At this time, Paylocity has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Paylocity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Paylocity belongs to the Zacks Internet - Software industry. Another stock from the same industry, Automatic Data Processing (ADP), has gained 0.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2025.
ADP reported revenues of $5.18 billion in the last reported quarter, representing a year-over-year change of +7.1%. EPS of $2.49 for the same period compares with $2.33 a year ago.
ADP is expected to post earnings of $2.58 per share for the current quarter, representing a year-over-year change of +9.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.2%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for ADP. Also, the stock has a VGM Score of D.
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Paylocity Holding Corporation (PCTY): Free Stock Analysis Report Automatic Data Processing, Inc. (ADP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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