Company Reports

Paylocity's fourth-quarter revenue was up 11% year over year to $445 million, versus the high end of guidance of $433 million. Adjusted EBITDA margin excluding interest income came in at 26.2%, compared with that implied by the high end of guidance at about 25%.

Paylocity is a provider of payroll and workforce management solutions. The firm's healthy growth is attributable to its modular, intuitive platform, which offers comprehensive solutions at competitive prices, making it a compelling option in the small and midsize business, or SMB, and midmarket segments.

Paylocity is a provider of payroll and workforce management solutions. The firm's healthy growth is attributable to its modular, intuitive platform, which offers comprehensive solutions at competitive prices, making it a compelling option in the small and midsize business, or SMB, and midmarket segments.

We are transferring coverage of payroll and human capital management, or HCM, providers ADP, Paychex, and Paycom, and relaunching coverage of Paylocity. Their solutions span payroll, talent management, and workforce analytics, with ADP and Paychex also offering outsourcing and retirement services.

Paylocity is a provider of payroll and workforce management solutions. The firm's healthy growth is attributable to its modular, intuitive platform, which offers comprehensive solutions at competitive prices, making it a compelling option in the small and midsize business, or SMB, and midmarket segments.

We are discontinuing analyst coverage of Paylocity.

Paylocity reported first-quarter revenue of $408 million, representing 12.5% year-over-year growth and adjusted EBITDA margins of almost 36%, a 40-basis-point improvement compared with the same period one year ago. Both metrics were slightly above management's previous guidance.

Paylocity reported fiscal fourth-quarter results slightly above guidance, with revenue and adjusted EBITDA exceeding its outlook by 3% and 8%, respectively. But the stock's reaction was muted as slowing growth gives investors hesitation.

Paylocity is a cloud-based provider of human capital management and payroll software targeting organizations with 10-5,000 employees. Its platform is a single-employee system of record across recruiting and onboarding, payroll, time and labor, human resources, benefits, learning, and performance and compensation. We believe the company differentiates itself by its breadth of offerings, which expands well beyond basic payroll and HCM functions and benefits from its third-party integrations with benefits and 401(k) providers.

We are relaunching coverage of Paychex, Dayforce, and Paylocity due to a change in analyst. After review, we are maintaining our economic moat ratings of narrow for Dayforce and Paylocity and wide for Paychex. However, we are reducing our fair value estimates by 30% to $47 per share for Dayforce, by 29% to $142 for Paylocity, and by 6% to $122 for Paychex.

Paylocity is a cloud-based provider of human capital management and payroll software, targeting organizations with 10 employees-5,000 employees. The Paylocity platform is a single-employee system of record across recruiting and onboarding, payroll, time and labor, HR, benefits, learning, and performance and compensation. We believe the company differentiates based on their breadth of offerings, which expands well beyond basic payroll and HCM functions, and benefits from their third-party integrations with benefits and 401(k) providers.

Narrow-moat Paylocity reported strong fiscal third-quarter results in which the firm generated revenue and adjusted EBITDA above consensus estimates. The company’s strong year-to-date results, and expectations for a strong fourth quarter, give management confidence that full-year sales and adjusted EBITDA will now grow 13% and 13.5%, respectively, above the original guidance provided at the end of fiscal 2024 of 10.2% and 6.5%. After adjusting our model for higher top-line growth and profitability, we raise our fair value estimate to $202 per share from $200.

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.

Paylocity's unified platform appeals to clients that prefer an all-in-one payroll and human capital management, or HCM, solution. Clients can customize through add-on modules, including talent management and benefits administration, alongside core payroll functionality, and integrate with over 400 third-party providers, including referral partners such as benefit brokers. A unique feature of Paylocity's platform is the complementary inclusion of communication and engagement tools, including social collaboration platform Community, and video, survey, and learning management tools. These features aim to drive higher employee engagement and satisfaction, benefiting the client as well as Paylocity by entrenching the software into the business.

Paylocity's unified platform appeals to clients that prefer an all-in-one payroll and human capital management, or HCM, solution. Clients can customize through add-on modules, including talent management and benefits administration, alongside core payroll functionality, and integrate with over 400 third-party providers, including referral partners such as benefit brokers. A unique feature of Paylocity's platform is the complementary inclusion of communication and engagement tools, including social collaboration platform Community, and video, survey, and learning management tools. These features aim to drive higher employee engagement and satisfaction, benefiting the client as well as Paylocity by entrenching the software into the business.

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.

Paylocity's unified platform appeals to clients that prefer an all-in-one payroll and human capital management, or HCM, solution. Clients can customize through add-on modules, including talent management and benefits administration, alongside core payroll functionality, and integrate with over 400 third-party providers, including referral partners such as benefit brokers. A unique feature of Paylocity's platform is the complementary inclusion of communication and engagement tools, including social collaboration platform Community, and video, survey, and learning management tools. These features aim to drive higher employee engagement and satisfaction, benefiting the client as well as Paylocity by entrenching the software into the business.

Narrow-moat Paylocity’s fourth-quarter and full-year fiscal 2024 results met our top-line and profitability expectations. However, we lower our fair value estimate to $195 per share from $205 on disappointing near-term guidance relative to our expectations. We believe Paylocity, like other nascent payroll and HCM peers, is facing fiercer competitive pressure from incumbent providers like ADP, tempering growth over the longer term relative to our prior outlook. Nevertheless, the firm has an attractive growth runway with opportunity to displace rudimentary solutions and upsell incremental modules, and shares continue to screen as attractive on a risk-adjusted basis.

Paylocity's unified platform appeals to clients who prefer an all-in-one payroll and human capital management, or HCM, solution. Clients can customize through add-on modules, including talent management and benefits administration, alongside core payroll functionality, and integrate with over 400 third-party providers, including referral partners such as benefit brokers. A unique feature of Paylocity's platform is the complementary inclusion of communication and engagement tools, including social collaboration platform Community, and video, survey, and learning management tools. These features aim to drive higher employee engagement and satisfaction, benefiting the client as well as Paylocity by entrenching the software into the business.

We maintain our $205 fair value estimate for narrow-moat Paylocity following the release of a robust third-quarter earnings report and improved full-year guidance. Paylocity’s sticky customer base and strong referral-driven pipelines supported healthy revenue growth during the quarter. The firm continues to strategically invest in maintaining a suite of best-in-class solutions to support market share gains. Following the result, we make minor tweaks to our near-term forecasts to account for updated guidance, which are immaterial to our valuation. Shares spiked 12% in after-hours trading yet remain attractive relative to our unchanged fair value estimate.