Paylocity Earnings: Solid Second-Half Outlook Impresses; Raising Our Fair Value Estimate by 5%

Narrow-moat Paylocity reported decent fiscal 2025 second-quarter results. Recurring revenue growth of 17% in the quarter was an excellent result, ahead of management’s previous guidance for 14% growth. Adjusted EBITDA was up 12%, also ahead of guidance. With these solid results, management raised its full-year guidance for revenue, which is now expected to grow by 13%, up from 10% previously. Adjusted EBITDA guidance was also raised. We have mildly adjusted our forecasts for higher revenue growth in fiscal 2025 and are raising our fair value estimate to $200 per share, up from $190 previously. Overall, we view this as a positive result given the increasing competition in the space, with Paylocity holding its own. As Paychex pursues its acquisition of Paycor and consolidation remains a long-term trend in the space, building out complete, and easy to use product suites will be key to remaining differentiated. We view shares, which were trading up after-hours to roughly 10% above our updated fair value estimate, as slightly over valued.