Paylocity (PCTY) Q2 2025 earnings summary

Executive summary

• Q2 FY25 total revenue reached $377.0M, up 16% year-over-year, with recurring and other revenue at $347.7M, up 17% year-over-year, driven by strong sales, product launches, and new client additions.

• Airbase acquisition completed for $320.4M, expanding spend management capabilities and integration progressing with positive feedback.

• AI assistant chatbot adoption increased 30% since October, reducing user report search time by over 20%.

• Product launches, including Benefit Decision Support and Headcount Planning, contributed to higher average revenue per client and increased max PEPY to $600.

• Company recognized for product and workplace excellence by multiple industry organizations.

Financial highlights

• Adjusted gross profit margin rose to 73.8% from 72.7% year-over-year; adjusted gross profit for Q2 FY25 was $278.2M.

• Adjusted EBITDA reached $126.2M (33.5% margin), exceeding guidance midpoint by $8.2M; FY25 guidance projects $542M–$550M.

• GAAP net income was $37.5M ($0.66/share) for Q2 FY25; operating income $46.6M.

• Cash and equivalents at $482.4M; $325M in debt from Airbase acquisition.

• Free cash flow margin (TTM) ~21%; adjusted free cash flow for first six months was $115.8M.

Outlook and guidance

• FY25 recurring and other revenue guidance raised to $1.445–$1.455B (13% growth); total revenue to $1.558–$1.568B (11% growth); adjusted EBITDA expected at $542–$550M.

• Q3 FY25 recurring and other revenue expected at $410–$415M (12–13% growth); total revenue $439–$444M (10% growth); adjusted EBITDA $171M–$175M.

• Guidance reflects all Fed rate cuts to date and assumes an additional 25bp cut in May.

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

• Management expects continued investment in R&D, sales, and client service to drive long-term growth and operating leverage.