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%, driven by strong sales and new client additions.

• Net income increased to $49.6 million ($0.88/share), up from $34.5 million ($0.61/share) in the prior year quarter.

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

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

• Maintained strong sales momentum and consistent channel performance, with over 25% of new business from referrals.

Financial highlights

• Adjusted gross profit margin was 74% in Q1, up 60 basis points year-over-year; gross profit was $248 million, with gross margin at 68.4%.

• Adjusted EBITDA reached $129 million (35.6% margin), exceeding guidance and up from $104.9 million year-over-year.

• GAAP operating income was $64.1 million; net income was $49.6 million; diluted EPS increased to $0.88.

• Free cash flow margin over the last 12 months was about 23%; free cash flow in Q1 was $73.9 million.

• Ended Q1 with $778.5 million in cash and equivalents, including $325 million drawn for the Airbase acquisition.

Outlook and guidance

• Raised FY25 revenue guidance to $1.535–$1.550 billion (10% growth), with recurring and other revenue at $1.427–$1.442 billion (12% growth).

• FY25 adjusted EBITDA expected at $530–$540 million; excluding interest income, $422–$432 million.

• Q2 revenue expected at $364–$369 million (12% growth), with adjusted EBITDA of $116–$120 million.

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

• Guidance incorporates anticipated interest rate cuts totaling 150 basis points over FY25.