Paylocity (PCTY) Q2 2026 earnings summary

Executive summary

• Q2 2026 revenue reached $416.1 million, up 10–10.4% year-over-year, with recurring and other revenue at $387.0 million, up 11–11.3% year-over-year.

• FY25 revenue was $1.595 billion, with FY26 guidance at $1.732–$1.742 billion, reflecting a 10% year-over-year increase and a 14% CAGR.

• Strong sales execution, product innovation, and stable demand environment contributed to results and increased full-year guidance.

• AI and automation investments are driving operational efficiency, client engagement, and product differentiation.

• Client retention remains strong, with net revenue retention above 92% for over a decade.

Financial highlights

• Adjusted gross profit margin for Q2 was 74.4%, up 60 bps year-over-year; adjusted EBITDA was $142.7 million (34.3% margin), exceeding guidance by $7.2 million.

• Net income for Q2 was $50.2 million ($0.92 per diluted share), up from $37.5 million ($0.66 per share) in Q2 2025.

• Free cash flow margin for the trailing twelve months was 23.6%, with free cash flow of $396.9 million, up from $315.1 million a year earlier.

• Q2 revenue exceeded midpoint of guidance by $8.1 million, prompting a $14.5 million increase in full-year revenue guidance.

• Adjusted EBITDA margin expanded from 27.2% in FY23 to 31.7% in FY25.

Outlook and guidance

• FY26 recurring and other revenue guidance is $1.62–$1.63 billion (10–11% growth); total revenue guidance is $1.732–$1.742 billion (9% growth).

• Adjusted EBITDA guidance for FY26 is $622.5–$630.5 million; Q3 2026 revenue expected at $487–$492 million, with adjusted EBITDA of $200–$204 million.

• Guidance assumes flat employment levels in H2 and incorporates anticipated Fed rate cuts.

• Long-term targets include 80%+ adjusted gross profit margin and 25–30% free cash flow margin.

• Management expects continued investment in personnel, platform, and infrastructure to drive long-term growth.