Paylocity’s third quarter results were shaped by steady demand for its workforce management software and increased adoption of its AI-powered platform. Management highlighted that the recent launch of Paylocity for Finance and new AI assistant features played a significant role in expanding use across HR, finance, and IT functions. CEO Toby Williams noted, "Our ongoing investment in AI capabilities is resulting in higher product engagement and client satisfaction." Additionally, the company’s broker referral channel remained robust, contributing over a quarter of new business and supporting stable client retention.
Is now the time to buy PCTY? Find out in our full research report (it’s free for active Edge members).
Paylocity (PCTY) Q3 CY2025 Highlights:
- Revenue: $408.2 million vs analyst estimates of $400.6 million (12.5% year-on-year growth, 1.9% beat)
- Adjusted EPS: $1.75 vs analyst estimates of $1.57 (11.3% beat)
- Adjusted Operating Income: $121.2 million vs analyst estimates of $109 million (29.7% margin, 11.1% beat)
- The company slightly lifted its revenue guidance for the full year to $1.72 billion at the midpoint from $1.71 billion
- EBITDA guidance for the full year is $620 million at the midpoint, in line with analyst expectations
- Operating Margin: 18.2%, in line with the same quarter last year
- Annual Recurring Revenue: $378.9 million (13.7% year-on-year growth)
- Market Capitalization: $7.74 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Paylocity’s Q3 Earnings Call
- Brad Reback (Stifel): asked about macro trends and workforce assumptions; CFO Ryan Glenn described stable client workforce levels and maintained a prudent outlook in guidance.
- Mark Marcon (Robert W. Baird): inquired about early adoption and go-to-market strategy for Paylocity for Finance; CEO Toby Williams cited positive feedback and traction across both new and existing clients.
- Daniel Jester (BMO Capital Markets): pressed for more detail on the IT opportunity and rationale for updating long-term financial targets; Executive Chairman Steven Beauchamp outlined expanded asset and identity management use cases and confidence from AI-driven leverage.
- Connor Passarella (Truist Securities): asked about key execution milestones for reaching the $3 billion revenue target; Williams pointed to a mix of new client growth and average revenue per user expansion, especially through cross-selling.
- Sitikantha Panigrahi (Mizuho): questioned whether AI-driven efficiency gains would be reinvested or flow to margins; Beauchamp highlighted the company’s balanced approach of margin expansion with ongoing R&D investment.
Catalysts in Upcoming Quarters
In upcoming quarters, our analysts will focus on (1) the pace of adoption and cross-sell rates for Paylocity for Finance and IT modules, (2) the impact of AI and automation on operational efficiency and margin trends, and (3) sustained strength and productivity in the broker referral channel. Progress on these fronts will be critical to tracking execution against management’s long-term strategy.
Paylocity currently trades at $145.14, up from $139.60 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).
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