Welcome to Paylocity's earnings results call for the fourth quarter in fiscal 2026, which ended on June 30th, 2026. For fiscal 2026, recurring revenue growth 12.2% and total revenue grew 11% as we ended the year with approximately $1.8 billion of revenue. We also continue to see significant growth in our client base in fiscal 2026 to 44,400 clients, representing approximately 7% growth from fiscal 2025. Our commitment to product development also continues to be recognized in the market, with Paylocity recently recognized by HR Tech Outlook Magazine as the top payroll software for 2026.
This commitment to product innovation and world-class service continues to be reflected in our industry-leading revenue retention rates, which once again remained above 92% in fiscal 2026. Our strong culture, industry-leading software innovation, and exceptional sales and operational execution would not be possible without the dedication and commitment of our employees. I would now like to pass the call to Ryan to review the financial results in detail and provide initial outlook on fiscal 2027. Recurring revenue for the fourth quarter was $415.6 million, an increase of 12.4%, with total revenue up 11% from the same period last year.
Adjusted EBITDA for the fourth quarter was $145.5 million, or 32.7% margin, and exceeded the top end of our guidance by $12.9 million. For fiscal 2026, adjusted EBITDA was $654.9 million, or 37% margin, an increase of 12.3% on a dollar basis from fiscal 2025, resulting in leverage of 50 basis points. Additionally, we continue to show strong growth on free cash flow with fiscal 2026 free cash flow margin of 24.2%, representing an increase of 24.8% on a dollar basis from fiscal 2025. Excluding the impact of interest income on client held funds, we expanded free cash flow by approximately 40% in fiscal 2026, representing margin expansion of 370 basis points.
| Metric | Period | Current guidance |
|---|---|---|
| Total revenue | Q1 FY2027 | $439.5M-$444.5M (~8% growth) |
| Recurring & other revenue | Q1 FY2027 | $414M-$419M (~10% growth) |
| Adjusted EBITDA | Q1 FY2027 | $152M-$156M ($126.5M-$130.5M excluding client-fund interest income) |
| Total revenue | FY2027 | $1.880B-$1.895B (~7% growth) |
| Recurring & other revenue | FY2027 | $1.777B-$1.792B (~8% growth) |
| Adjusted EBITDA | FY2027 | $690M-$700M ($587M-$597M ex client-fund interest; ~80 bps leverage at midpoint) |
| Deferred-contract-cost amortization life | FY2027 | 8 years — adds ~120-140 bps to adjusted EBITDA margin (ratable over FY2027; ~60% in S&M, ~40% in gross margin) |
| Interest income on client funds | FY2027 | ~$103M (avg balance ~$3.4-3.5B at ~300 bps; ~$25.5M in Q1 at ~340 bps); assumes 25 bps cuts in Jan and Mar 2027 |
| Metric | YoY | Note |
|---|---|---|
| Recurring revenue | +12.4% to $415.6M | Solid go-to-market execution, >92% retention, product expansion (ARPU) and ~7% client growth against a stable demand backdrop. |
| Total revenue (GAAP) | +11.0% to $445M | Recurring growth plus interest income on client funds; Q4 beat the top of guidance by $11.3M. |
| GAAP diluted EPS | $1.12 | Q4 GAAP operating income of $84.4M and net income of $60.3M on an 11% revenue increase. |
| Operating margin (GAAP) | 19.0% | Operating leverage from scale, partly offset by continued R&D investment (14.5% of revenue on a combined non-GAAP basis). |
| Adjusted EBITDA (Q4) | $145.5M / 32.7% margin | Beat top of guidance by $12.9M as top-line overperformance fell to the bottom line. |
| Adjusted EBITDA (FY2026) | $654.9M / 37% margin (+12.3%) | 120 bps of operating leverage ex client-fund interest; ~350 bps of organic operating EBITDA leverage over two years. |
| Average revenue per client | +5%+ to ~$37,200 | Product expansion across HCM, finance and IT plus new AI-native SKUs. |
| Client base | +7% to 44,400 | Modern platform value proposition and strong channel referrals (brokers >25% of new business). |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Ignite AI and AI monetization | Indirect AI within workflows | Ignite AI embeds agents (candidate fit, talent rediscovery, answers/insights) into core workflows with a new Ignite AI Hub dashboard; the company is shifting toward directly monetized AI-native SKUs (Grayscale recruiting, Aidora leave-of-absence) while keeping pricing flexible (per-user, PEPM, or utilization-based). | — |
| Platform breadth: HCM + finance + IT | Airbase entry into finance/IT | The most robust new-product roadmap in years — Airbase, Elevate Solutions, Paylocity Retirement, Grayscale, Aidora and Ignite — deepens differentiation and ARPU, with Airbase cross-sell tracking to its 10-20% penetration target within three to five years. | — |
| M&A and capital allocation | Balanced build-and-buy | Grayscale and Aidora funded with balance-sheet cash; ~$1.3B remains on the buyback authorization; management says it can both reduce diluted shares and invest for growth, prioritizing acquisitions with the most strategic value across the platform. | — |
| Channel / broker strategy | Brokers key lead source | Benefit brokers again drove more than 25% of new business (Paylocity does not sell competing insurance), and financial advisors showed strong receptivity to the new Paylocity Retirement offering, reinforcing the referral channel. | — |
| Margin trajectory | Multi-year expansion | The 7-to-8-year deferred-cost amortization change adds 120-140 bps to FY2027 adjusted EBITDA; subscale acquisitions are a slight headwind, but management reaffirms multi-year margin expansion and an 80%+ gross-margin target at $3B revenue driven by scale, AI/automation and vendor pricing power. | — |
| Guidance philosophy | Beat-and-raise | FY2027 is set with the same prudent approach (flat workforce assumption, conservative rate-cut and balance assumptions) that produced FY2026's steady beats and quarterly margin raises, with management expecting to raise revenue and margin through the year if momentum holds. | — |
| Sales enablement of new products | Established launch playbook | The same methodical training/solution-consultant playbook is being run across the nine-month wave of launches, with early traction reported strong across Elevate, Retirement, Grayscale, Aidora and Ignite as the sales force ramps. | — |