• Total Revenue: $377 million, up 16% from the same period last year.
• Recurring and Other Revenue: $347.7 million, an increase of 17% year-over-year.
• Adjusted Gross Profit Margin: 73.8%, up from 72.7% in the previous year.
• Adjusted EBITDA: $126.2 million, or 33.5% margin, exceeding guidance by $8.2 million.
• Net Income: $37.5 million for Q2.
• Cash and Cash Equivalents: $482.4 million at the end of the quarter.
• Debt Outstanding: $325 million related to the Airbase acquisition.
• Share Repurchase: $8.6 million or approximately 40,000 shares repurchased at an average price of $197.90 per share.
• Q3 Revenue Guidance: Total revenue expected between $439 million to $444 million.
• Fiscal Year '25 Revenue Guidance: Total revenue expected between $1.558 billion to $1.568 billion.

• Warning! GuruFocus has detected 6 Warning Signs with SYNA.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Paylocity Holding Corp (NASDAQ:PCTY) reported a 17% increase in recurring and other revenue, with total revenue growing 16% year-over-year.
• The company achieved its target of increasing max PEPY from $550 to $600, driven by new product launches and expansion into the office of the CFO.
• Paylocity's AI Assistant chatbot has seen a 30% increase in utilization, improving user efficiency by reducing report search time by over 20%.
• The company received recognition as a leader in 10 HCM product categories in G2's Winter 2025 grid reports and won the TrustRadius Buyer's Choice Award.
• Strong performance in the broker referral network, contributing over 25% of new business in Q2, highlights the effectiveness of Paylocity's broker channel strategy.

Negative Points

• Despite strong revenue growth, the contribution from the Airbase acquisition remains relatively small, representing only about 1% of total revenue.
• The company faces ongoing competitive pressure in the market, particularly from well-capitalized private competitors in the down-market segment.
• Paylocity's free cash flow growth appears less expansive year-over-year, partly due to the Airbase acquisition impacting financials.
• The integration of Airbase is expected to take 12 to 24 months, indicating a long-term effort before realizing full cross-sell opportunities.
• Guidance for Q4 suggests recurring revenue growth may slow to around 10% or below, raising concerns about potential conservatism in projections.

Q & A Highlights

Q: With Paycor getting taken out and their broker channel now competing with those brokers, do you see this as an opportunity to accelerate your broker go-to-market? A: Toby Williams, President and Co-CEO, responded that Paylocity's success with the broker channel is due to their investments in building relationships and providing meaningful technology and integrations. They do not compete with brokers by selling insurance products, which helps maintain strong relationships. Any disruption from the Paycor deal could be an opportunity for Paylocity to strengthen its broker relationships.

Q: How do you view sales hiring for calendar '25 as you start to think about '26? A: Toby Williams explained that they entered the fiscal year with an 8% increase in sales headcount, focusing on driving productivity. They remain optimistic about being a destination for talent and are ready to invest further if the macro environment changes favorably.

Q: Can you provide insights on the early reception of the Airbase acquisition from customers? A: Steve Beauchamp, Co-CEO, noted that while Airbase is still a small revenue stream, they are pleased with early indications. Customers are engaging in conversations about how Airbase can help modernize their HCM suite, and there is interest from both new and existing customers.

Q: What are your thoughts on the Paychex-Paycor deal and its impact on the market? A: Steve Beauchamp mentioned that industry consolidation is common and can drive high margins. Paycor focuses on larger customers, which might complement Paychex's offerings. Paylocity will continue to innovate and deliver a modern experience to customers, potentially benefiting from any market disruption.

Q: How are you thinking about integrating Airbase with Paylocity's platform over the next 12 to 18 months? A: Ryan Glenn, CFO, stated that the goal is to integrate Airbase into Paylocity's platform to provide a unified experience. This will be a multi-year effort, with the expectation of gaining momentum in product integration over the next fiscal year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.