Paylocity Earnings: Revenue Growth Trending in Right Direction While Airbase Dilutes Margins

Narrow-moat Paylocity reported solid fiscal 2025 first-quarter results. Revenue growth of 14% in the quarter was a good result, just ahead of FactSet consensus and ahead of management’s previous guidance. Adjusted EBITDA was up 23% as Paylocity continues to benefit from scaling its revenue base. With these solid results, management raised its full-year guidance for revenue, which is now expected to grow 10%, up from 8%. Adjusted EBITDA guidance was unmoved, as management cited the dilutive effects of the recent Airbase acquisition. We have mildly adjusted our forecasts for higher revenue growth in fiscal 2025 but less margin expansion. We have also tamped down some of our longer-term growth forecasts, which were set to continually exceed 2025 growth rates for years, as we have less confidence that a reacceleration will occur, given rival ADP’s recent strength and increasing competition from new entrants. The net result is that our fair value estimate drops to $190 per share from $195. We view the shares, which were trading up after hours, as fairly valued.