Paylocity (PCTY) Q1 2025 earnings summary

Executive summary

• Q1 FY25 total revenue reached $363 million, up 14.3% year-over-year, with recurring and other revenue also up 14.2% and strong client additions.

• Net income for Q1 FY25 was $49.6 million ($0.88/share), up from $34.5 million ($0.61/share) in the prior year.

• Completed the acquisition of Airbase on October 1, 2024, funded by a $325 million draw on the credit facility, expanding into finance and spend management.

• Launched Paylocity AI Assistant and announced Headcount Planning solution to enhance HR and workforce management.

• Client retention remains above 92%, with a focus on expanding the addressable market through product innovation.

Financial highlights

• Adjusted EBITDA for Q1 FY25 was $129 million (35.6% margin), up from $104.9 million, and adjusted gross profit was $268.7 million.

• GAAP gross profit was $248 million; operating income $64.1 million; diluted EPS $0.88.

• Free cash flow margin over the last 12 months was about 23%, with Q1 FY25 free cash flow at $73.9 million.

• Cash and equivalents at quarter-end were $778.5 million, including $325 million drawn for the Airbase acquisition.

• FY24 total revenue reached $1.403 billion, up 14% year-over-year, with adjusted EBITDA at $506 million.

Outlook and guidance

• Q2 FY25 recurring/other revenue expected at $337.5–$342.5 million (14% growth); total revenue at $364–$369 million (12.3% growth).

• FY25 recurring/other revenue guidance raised to $1.427–$1.442 billion (12% growth); total revenue to $1.535–$1.550 billion (10% growth); adjusted EBITDA expected at $530–$540 million.

• Airbase expected to contribute ~1% of FY25 revenue and dilute adjusted EBITDA margin by ~100 basis points.

• Guidance assumes 150 basis points of rate cuts over the fiscal year.

• Long-term targets: $2B+ total revenue, 75-80% adjusted gross profit, 35-40% adjusted EBITDA margin, and 20-25% free cash flow margin.