Paylocity (PCTY) TD Cowen Human Capital Management Summit summary

Demand environment and sales trends

• Sales cycles for larger clients (500+ employees) remain elongated due to more decision-makers and additional demos, but overall demand is stable and not worsening.

• Sales team performance is strong, with positive momentum heading into January, the peak month for new client starts.

• Pipeline levels are healthy across all segments, supporting increased revenue outlook for the fiscal year.

• Elongated sales cycles have not inflated pipeline size; execution improvements and team scaling have contributed to pipeline health.

Revenue growth drivers and outlook

• FY25 organic revenue growth deceleration is attributed to the law of large numbers, stable demand, and balanced contributions from client adds and average revenue per client.

• Recurring revenue growth is guided at roughly 12%, with a beat-and-raise cadence expected to continue.

• Free cash flow margins exceed 20%, and stock-based compensation is targeted below 10% of revenue.

• Growth is expected to remain balanced between new client adds and upselling existing clients.

Upsell strategy and product expansion

• Upsell efforts are successful across all client segments, with a slight skew toward clients with 50+ employees.

• Newer products like Employee Voice, Rewards and Recognition, and Market Pay address previously unmet needs, often representing greenfield opportunities.

• Attach rates for new modules increase over time as products mature and sales teams gain experience.

• The upsell team continues to grow annually, supporting ongoing expansion across all industries and segments.