Paylocity at William Blair Conference: Strategic Growth and Innovation

On Wednesday, June 4, 2025, Paylocity (NASDAQ:PCTY) presented at the 45th Annual William Blair Growth Stock Conference. The company highlighted its robust financial growth and strategic initiatives, including acquisitions and AI integration. While Paylocity’s focus on product innovation and market expansion shows promise, challenges in maintaining competitive differentiation remain in a stable macro environment.

Key Takeaways

• Paylocity projects $1.6 billion in revenue for the fiscal year, with strong EBITDA and cash flow margins.
• The acquisition of Airbase aims to enhance offerings for CFOs, integrating labor and non-labor spend insights.
• AI integration is a priority, enhancing automation and employee insights.
• The company plans to continue strategic investments and acquisitions to drive growth.
• Paylocity maintains a prudent guidance philosophy, focusing on consistent growth and profitability.

Financial Results

• Revenue: Expected to reach approximately $1.6 billion this fiscal year.
• Adjusted EBITDA Margin: Over 35%.
• Free Cash Flow Margin: Exceeds 20%.
• Recurring Revenue Growth: Around 14% this fiscal year.
• Historical Growth: From $100 million revenue at IPO to significant growth over the past decade.
• Trends: Consistent outperformance and guidance adjustments; stock-based compensation reduced from 12% to 9% of revenue.

Operational Updates

• Airbase Acquisition: Integration is on track, with positive feedback. Full integration is expected within 12-18 months, targeting a 10-20% attach rate to the existing client base.
• AI Integration: AI is being embedded to enhance product offerings, focusing on automation, workflow efficiency, and employee insights.
• Upmarket Expansion: Success in targeting larger clients, with a dedicated enterprise sales team.

Future Outlook

• Guidance Philosophy: Consistent approach, with prudent and achievable targets.
• Strategic Plans: Emphasis on product development, cross-selling, and driving revenue growth beyond $2 billion towards $3 billion.
• Capital Allocation: Continued share repurchases and strategic M&A, with a high bar for acquisitions.

Q&A Highlights

• Competitive Landscape: Stable competition with ADP and Paychex; differentiation through modern HCM solutions.
• Macro Environment: Stable with slight workforce growth; no significant client impact observed.
• Broker Channel: Over 25% of new clients originate from broker referrals, a key focus area for growth.

For a deeper dive into Paylocity’s strategic plans and financial outlook, readers are encouraged to refer to the full transcript below.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Jacob Behrge, Research Analyst, William Blair: Both in person and listening over the webcast. Before we kick things off, my name is Jacob Behrge. I am the the research analyst here at William Blair, that covers Paylocity. And so for a full list of our research disclosures, please visit our website at WilliamBlair.com. But with that, really excited to have Ryan Glenn here, chief financial officer of Paylocity.

Thanks thanks for joining us today, Ryan.

Ryan Glenn, Chief Financial Officer, Paylocity: Appreciate it. Thanks for having me.

Jacob Behrge, Research Analyst, William Blair: Yeah. I I guess just to kick things off, maybe for those that are are newer to the story, could you provide maybe a brief history of Paylocity, what the business does, what what what the market opportunity is that you’re addressing, just to to level set the room?

Ryan Glenn, Chief Financial Officer, Paylocity: Yeah. Absolutely. So Paylocity is a payroll human capital management and, spend management software company. We’ve been public since 2014. Business focuses on the 10 to 5,000 employee space.

We have roughly 40,000 clients today. Our average, client has about a 50 employees. Business has grown pretty significantly, as you know, over the decade or so. We’ve been public. We IPO ed at about a hundred million of revenue, and we’ll do roughly 1,600,000,000.0, this fiscal year.

So so growth has has been significant over that period of time. And I think similarly strong financial and profitability profile. So where we sit here today is coming up on 1,600,000,000.0 of revenue, a business that has 35% plus adjusted EBITDA margins, 20% plus free cash flow margins, and, this fiscal year growing about 14% on on the recurring side.

Jacob Behrge, Research Analyst, William Blair: That’s helpful. And then thinking about the competitive landscape, a a common feedback point I get on Paylocity is it’s a it’s a great business. It’s operating in a large market, but there are a lot of other players out there. So how do you think about competing in that type of market, and how do you become one of the long term winners in the space?

Ryan Glenn, Chief Financial Officer, Paylocity: Sure. I think it is HCM specifically has always been a competitive space. As I referenced a minute ago, we focus on 10 to 5,000 employee segment of the market. There are over a million businesses in The US that fit that definition, and and that’s compared to the 40,000 clients or so we have today. So feel like we’re only a few percentage points penetrated into that market opportunity.

I think on top of that, we’ve also grown significantly through increasing average revenue per client. So being able to expand the percentage or the attach rate of of our HCM suite. And now with the acquisition of of Airbase starting to move more firmly into office as CFO, which we think will also expand the addressable market over time. So it is really a story of large market opportunity and pretty significant competitive differentiation on the product side.

Jacob Behrge, Research Analyst, William Blair: That’s helpful. And then double clicking into that kinda competitive differentiation on the product side, what acts as a differentiator between you and some of the other cloud platforms out there, like a a Paycom or a Paycor? We we’d love to kinda double click and know where where you really win, what type of customers, and what really sets the product apart.

Ryan Glenn, Chief Financial Officer, Paylocity: Sure. I think what has been a differentiator for us for the the, really, last several years plus has been the focus on product investment and and really positioning ourselves as the most modern HCM provider. So we’ve seen increasing attach rates on really all of those those newer products, whether that is community, premium video, market pay, recognition and rewards, some of the expanded offerings across time and labor and and learning management. So we’re really able to go to market with a competitive, differentiated story across the product set. We have a number of products that others don’t in the industry, and I think we’ve been able to really articulate how the software is useful certainly from a reduction of manual effort, being able to automate, various elements across, you know, an individual client’s use case.

But how do you drive our product set to get better better insights around your employee base? How do you drive it, Whether that is from an AI or other standpoint around automation and increasing workflows in in in in that perspective. And I think all that has been backed up with really, really strong performance from an operational standpoint. So industry leading service levels, industry leading implementation as well. So really, really strong package there.

Jacob Behrge, Research Analyst, William Blair: Yeah. That’s helpful. And then one of the largest portions of your your new business still comes from ADP and paycheck say, but there’s there’s recently been talk about maybe a little bit improving churn for those vendors. And so could you talk about what you’re what you’re seeing on the competitive front with them and kinda how that opportunity, should trend moving forward? Sure.

You know,

Ryan Glenn, Chief Financial Officer, Paylocity: I think that’s that’s probably been a question that we’ve gotten every quarter for the the last decade we’ve we’ve been public. I think the competitive landscape has been stable. Nothing that I would call out, as far as, different players we’re seeing in the space, any any new entrants or or folks that we’re seeing less. We’ve certainly seen increased success upmarket, as you know, over the last few years. So we have increased that target client with with up to 5,000 employees over the last few years.

So we’re seeing increased success in that part of the market. But largely speaking, it it has always been competitive, and I think that’s why you see us continue to press hard on strategy, press hard on product investment, and and sales and marketing as well. So nothing nothing really new that I would call out that we’re seeing, whether that is from from ADP or otherwise.

Jacob Behrge, Research Analyst, William Blair: Okay. That’s helpful. And then shifting over the macro environment, obviously, it’s it’s a bit variable, especially over the last few months with the recent tariff announcements. So can you talk about how the macro has impacted your your business over the past few quarters and if there’s been any change in demand since the the recent tariff announcements? Yeah.

Nothing that

Ryan Glenn, Chief Financial Officer, Paylocity: I would call out. I think it it has we we described it last month on the earnings call as a stable macro environment, and and that continues to be the case. I think year over year, we’ve seen client workforce levels or or pays per control up a touch. You know, I think we’re seeing the same, seasonal increase in, client workforce levels that we typically see in the the spring and summer months. So it’s certainly a question, I think, that is that is out there with some clients and prospects.

Obviously, you know, everyone sees some of the the volatility, whether that is from a policy standpoint, tariffs, or or just the overall news cycle, but nothing tangible that that we have seen yet within the client base. And, certainly, when you look at the results we put up in the third quarter, the ability and and the fact that we’ve beat our guidance each of the quarters this fiscal year. We’ve raised the year by more than the beat. We’ve increased profitability pretty substantially as well. There there’s nothing that I would call out.

Certainly something we’re watching, but has not shown up in any of our data to date.

Jacob Behrge, Research Analyst, William Blair: Yeah. Biggest being in q three too, so it’s, definitely helpful in terms of the the business trends there. So, but as we think about the macro, you’re you’re obviously heading into a q four, gonna be guiding for the the full year. So what are some of the kinda high level considerations you’ll you’ll be looking at as you’re looking to put that that guidance for the full year?

Ryan Glenn, Chief Financial Officer, Paylocity: Sure. Yeah. So as a earnings call, we’ll provide, guidance for q one twenty six and then the full year. And I think very you know, expectation will be very consistent approach from a a guidance philosophy standpoint as we went into fiscal twenty five, which is we we feel like we set, you know, probably prudent but but reasonable guidance that if we performed well, we’d be able to beat raise throughout the year, and that’s exactly the execution that we’ve seen. Typically, you’d see a little bit higher, recurring revenue growth in the near term quarters because you have a better visibility.

You’ve got, you know, less volatility and and uncertainty. And then as you think about what the guidance could look like on a full year basis, there’s probably, you know, incremental prudence there because, you know, we haven’t seen it in the data yet, but there’s some uncertainty from a macro standpoint. You know, you have larger and, and some level of execution risk when you’re guiding for a full year. So I think from a phil philosophic standpoint, we’ll we’ll likely have a very similar approach, and we’ll give

Jacob Behrge, Research Analyst, William Blair: you more details next quarter. Yeah. Makes sense. Okay. Taking a step back and thinking about Airbase.

So recent recent acquisition you all did. Can you talk about that that product? What it exactly does? Who it competes with? And maybe just kinda help us better understand that that product opportunity moving forward.

Ryan Glenn, Chief Financial Officer, Paylocity: Yeah. I think, you know, for us, as we think about how do you drive durable revenue growth for for years and years to come, not only within HCM, but with the broader offerings. I think ops the CFO of software broadly has been something that we’ve probably looked at for each of the last few years. We made a small acquisition of a company called Trace a few years ago, which became headcount planning software, and and that was really our first entree into office of the CFO. And I think Airbase is a business that we probably knew for, I don’t know, nine to twelve months leading up to the acquisition.

It was certainly an adjacency that was interesting to us, and I think the value proposition at the time continues to be really where we’re focused today is as we get through a real purposeful integration process, being able to be in a position where not only for the 40,000 clients we have today, but but for prospects as well, a integrated single pane of glass where they’re able to see all of their labor and non labor spend altogether in a fully integrated product set that links in in a seamless with with their ERP. There’s really nobody else in our industry that has that level of offering. So the air based product set would be really everything from from procure to pay, spend management, AP automation, procurement, expense management more broadly, corporate cards, and things like that. So we’re continuing to work through the, the integration. I think all of that has, tracked exactly how we would have expected, and we’ll be able to provide more details as we head into ’26.

But, you know, I think for us, that is one of the elements as you think about how do you drive global revenue growth on a go forward basis, how do you expand the addressable market, I think there’s there’s, you know, a lot of excitement that we have around what that can be on a on a multiyear basis.

Jacob Behrge, Research Analyst, William Blair: Yeah. Obviously, you primarily sell into the HR department, but there is some overlap between the office of the CFO because the CFO with the customers that you’re dealing with is is making a lot of decisions for Yep. For both of those purchasing decisions. So how often are you selling your core HCM platform to a CFO type of buyer profile Mhmm. That you already have a foot in the door to sell these types of solutions?

Ryan Glenn, Chief Financial Officer, Paylocity: Yeah. I think, you know, it’s it’s with reasonable regularity that the the CFO or or VP of finance is involved in in these decisions. Many organizations, the the HR team or the payroll team specifically may roll up to to the finance org. Ours ours would be no different.

Jacob Behrge, Research Analyst, William Blair: So Yeah.

Ryan Glenn, Chief Financial Officer, Paylocity: The the payroll team is is part of my organization. So that would be, you know, something that that we would look at holistically within my team. So we see that with with pretty regular, regular cadence today. I think, you know, no question as you think about, Airbase more broadly, that is something that I think we’ll see incremental focus with that buyer persona, but we feel like we’ve got a pretty strong number of use cases around what that buyer is looking for. And I think as we as we go go on a go forward basis, that would be one of the areas that we would be focusing on, around what that buyer needs and and what that persona does and and may impact to our our sale process.

Jacob Behrge, Research Analyst, William Blair: Okay. That’s helpful. And then, I know you’re still early in the the integration process, but but what has the initial reception been like from customers, especially thinking about kinda the combined customers that you have? And when do you think that that integration process should be kind of fully fully wrapped up?

Ryan Glenn, Chief Financial Officer, Paylocity: Yeah. I think early days were, you know, call it six or seven months post acquisition and and, as I said, going through the the really thoughtful integration process, but continue to be really optimistic. I think early feedback has been very positive and and consistent with the work we did, during diligence both for our existing clients as as well as the Airbase clients around what that combined offering may look like. So I think we’ve really characterized that integration as twelve to eighteen months. So I think that puts you deeper into fiscal ’twenty six and certainly the ability to unlock and deliver value over time.

So we’ve started to have more fulsome conversations with our existing client base, and I think that will continue, as you get deeper into in the next fiscal year.

Jacob Behrge, Research Analyst, William Blair: Yeah. That makes sense. And then you all have talked about a lot of your your acquisitions, the expectation that attaches to 10 to 20% of the Yep. The existing base over the first few years of the acquisition. Is there any reason Airbase would be different, or do you think that that type of framework, should hold true for for Airbase as well?

Ryan Glenn, Chief Financial Officer, Paylocity: 10 to 20%, I think, has has generally been our target, not only for acquisitions, but but really for for new products as well. And I think we’ve seen a number of examples over the years where products have actually attached it at higher than than 20% rates quicker than we would have expected. So learning management is a good example. Premium video, you know, both of those two products as examples attached quicker in in in in a larger way than we would have expected. So, yes, I think that’s a reasonable attach rate.

That’s a multiyear expectation. Right? This is certainly a new product set in its adjacency, so would not expect out of the gate you’re gonna see 10 to 20%. But as you think about that on a multiyear basis, certainly feel like that is the right target for the, you know, roughly 40,000 clients we have today as as well as a target attach rate for for new deals as well.

Jacob Behrge, Research Analyst, William Blair: Yeah. That’s helpful. And then just taking a step back, longer term, thinking about Airbase and the opportunity in the office of the CFO, how large do you think that opportunity and portion of the business could be one day compared to the the core HCM suite?

Ryan Glenn, Chief Financial Officer, Paylocity: Yeah. You know, I think if you start to do the math around what a a 10 to 20% attach rate could be across the 40,000 plus clients that we have and growing plus the number of new clients we would we would attach in any given year at a similar rate. I think it it’s an it’s certainly a product that we see growing at a at a healthy rate going forward. And, you know, as as I mentioned earlier, as you think about how do you drive dribble revenue growth, not only to to $2,000,000,000, which we’re, you know, a couple years away from, but from that 2,000,000,000 to 3,000,000,000 range, having the ability to expand the product offering, having the ability to to to cross sell in a in a continued fashion, I think, you know, this is a this is a business that can can grow at a pretty healthy rate for many years to come.

Jacob Behrge, Research Analyst, William Blair: Okay. That’s helpful. And then shifting back over the the core HCM suite, you all have obviously increased Pepe quite a quite a bit over the past few years. Can you talk about where you’ve seen the most traction driving actual kind of the the effective Pepe within your your customer base? Sure.

I think we’ve seen increasing average revenue per client, really manifest itself in a in

Ryan Glenn, Chief Financial Officer, Paylocity: a few different ways. One has been continued focus with upselling existing clients. So most of our revenue growth has been focused on landing new logos, but each year, we have added to the team that that is is fully focused on going back to existing clients and upselling them either new products that they didn’t take at at point of, sale or maybe products that have, been released since they since they joined Paylocity. So that has been a key driver of growth. We continue to have success, upmarket, so we we have increased our target businesses that have up to 5,000 employees over the last few years.

So we’re seeing continued success in what we would define as the enterprise space as well. And then within the the the core offering in that, call that 50 to 500 range, we are seeing, you know, clients attach with premium video and and market pay recognition and rewards. Those are some of the newer product. Learning management, I think, has continued to attach at a healthy rate. So, really, those products that move beyond traditional HCM functionality are the things that that we’re seeing clients have a particular interest in.

Jacob Behrge, Research Analyst, William Blair: Okay. That’s helpful. And then you mentioned it a little bit there, but you all have started to move upmarket in recent years, kind of expanding the the top end of your threshold. There was a little bit of kind of noise beginning in that transition, but things have seemed to stabilize, and you’re seeing more and more momentum at market. So what what are you seeing there, and what what’s kind of led to that that better, execution upmarket over the last few quarters?

Ryan Glenn, Chief Financial Officer, Paylocity: The enterprise space for us, which which we really think of as as clients with 500 to a thousand plus employees up to that 5,000 threshold, that’s an area that going back several years on, we really didn’t focus on. Specifically, we didn’t have a dedicated sales team that was focused on that part of the market. But as we built out the entirety of the HCM suite, as we move beyond HCM over the last few years, we’ve certainly been pulled up market. So we’ve seen incremental success there with with clients having incremental interest in in Paylocity. And over the last three or four years, we’ve really built out a enterprise level sales team.

We’ve we’ve built out all of the, I think, required elements across the organization to sell larger and larger deals. So that’s that’s a part of our go to market motion that has performed really well this year included, and I think, you know, that’s an area where maybe growth looks a little bit more consistent with our with our broader sales segments as as we’ve invested significantly over the last few years, but certainly an area that we think can continue to provide a nice nice tailwind for us. And the focus for us, you know, to your question over the last few years is really how do you scale that team? How do you focus on talent? We have felt really good about the offer, and we’ve felt really good about the talent and team we have in place.

And the focus for us is really onboarding, training, and development. So that new set of reps is able to perform and execute as well as the the base reps have, and and we’ve certainly seen some really nice progress there.

Jacob Behrge, Research Analyst, William Blair: Okay. That’s helpful. And then does the competitive environment change as you move upmarket? And if you if you start when you get into those a thousand plus employee organizations, maybe run into a Dayforce or some of the legacy ERP offerings more, like, what what’s kind of the differentiation point? Like, does the selling, message change there versus how you’re selling to a an organization with two or 300 employees?

It it does.

Ryan Glenn, Chief Financial Officer, Paylocity: I don’t think there’s a there’s a bright line there to say, hey. Above a thousand employees, it’s entirely different. But, certainly, the enterprise sales process is is different in a number of ways. It is typically a longer sales process that you would see down market. You’re gonna have a sophisticated buyer involved.

The buyer oftentimes is going to wanna have conversations with the implementation leadership team. They’re gonna wanna understand who their account manager is from a service standpoint. Oftentimes, they’re gonna wanna have conversations with your product road map looks like. So I think there is a a a real packaged go to market team that we have with those larger deals, and you have a a sales rep that has more tenure and is able to sell to the enterprise buyer as well. So we have, I think, learned over time, continued to tweak that go to market motion, but have felt really good about the success we’ve had up market.

Okay.

Jacob Behrge, Research Analyst, William Blair: And then I know you’re the the primary growth engine for you over the years has always been acquiring new logos and seeing that growth. But but given the expanding product portfolio and especially with Airbase recently, how are the the recent sales investments been, changing in terms of targeting, upselling the existing base? And when do you do you think that ever becomes the the biggest driver of your growth rate, kind of sales back into the base?

Ryan Glenn, Chief Financial Officer, Paylocity: Yeah. So today, the vast majority of our sales would be would be new new logo driven. We certainly have seen success really for the last probably seven or eight years that we’ve had an inside sales team focused on existing clients. We’ve added to that team from a rep perspective every single year. Productivity continues to trend very positive with that team, and I think, you know, that’s something that we have done in a in a very measured and thoughtful way versus making an investment in one or two year period and then having rollover concerns or or not really being able to to go back to that well.

So we’ve been pleased with how that team’s executed. I think we’ve been pleased with the strategy that we have taken to to grow that organization. And I think we’re in a spot where as we continue to to grow the HCM product suite, as we continue to expand, and integrate the offering within Office of CFO, that that we will be able to add to that team as well into ’26 and beyond. So I think we’re still a long ways away, though, from that that being the the predominant, driver of of new logos or or new new revenue.

Jacob Behrge, Research Analyst, William Blair: Yeah. That makes sense. And then shifting over to the broker channel, over 25% of new clients come from the the channel referrals. So why do you think that’s been so consistent? Why do you think you’ve done so well in that that channel over the years?

Ryan Glenn, Chief Financial Officer, Paylocity: The broker channel, I think, for us, has been a really consistent driver of of new business for us for certainly a decade plus. Going back to the IPO, we were still seeing 20% to 25% plus of our business coming from the broker channel. And obviously, the business has grown, that contribution on a dollar basis has grown with it. So that’s something that, you know, we have invested and and focused on. That is a part of the market that is nurtured and developed on a rep by rep basis.

So as you think about the roughly 900 sales reps we have today, those are relationships that each of those reps are are cultivating and and building in their individual territory. And you have, you know, for context, tens of thousands of individual brokers across The US. So there’s not a level of concentration there with one or two brokers giving us the vast majority of deals. You have a real strong level of diversification there, which I think has allowed us to to grow that to grow that channel. You know, I think for us too, as we as we get larger and have continued success there, we’re able to really double down on the playbook with our with our sales reps.

We’re able to train them and onboard them to understand what actually works with that channel, what our brokers want. And then similarly, we’re in constant conversation and communication with brokers, understand what can we do better, what are the investments you want us to make, you know, how do we continue to, to see referrals come in from you. So whether that is product investments, service, or operational investments, continued focus on integrations and API, those are the things and conversations we’re having with brokers. And, you know, it’s it’s not an area that you’re you’re ever the work has ever done. It’s a continued area of focus.

But I think for us, given how large the market is and and the the decade plus success we have, we feel really good about being able to to drive strong referrals there going forward.

Jacob Behrge, Research Analyst, William Blair: Yeah. That makes sense. And then both maybe a competition question as well as a broker network question. There’s obviously a lot of lot of us have seen the the recent acquisition of of Paychex and Paycor, that that business combination. Obviously, Paycor drove a lot of its new business from the broker referral network.

I think it was over 50%, towards the end there. So curious how you’re thinking about that opportunity now that Paycor is under the Paychex umbrella and may actually start competing more with the broker network. So curious how you’re thinking about that from a competitive standpoint and if there’s any playbooks that that you may be looking to run, to address that moving forward. I think anytime you you have a level of consolidation come coming

Ryan Glenn, Chief Financial Officer, Paylocity: with that is a level of uncertainty within the broker channel. And, you know, for us, as as we just talked about, that has been an area that we have consistently performed well. We’ve seen strong and consistent execution there. And I think that’s an opportunity for us to really double down on our value proposition to those individual brokers. There’s, you know, a level of questions and uncertainty that many of those brokers have, and we’re able to really have those direct conversations with them and remind them the value that Paylocity provides, the fact that we don’t compete with them, the fact that we don’t sell competing insurance products.

So I think for us, it is it is a inflection point where we’re able to really double down on that focus, and, you know, I think over time, we’ll see some increased success there.

Jacob Behrge, Research Analyst, William Blair: Okay. Helpful. And then AI is obviously a big topic in in software land this day these days, so maybe could you kinda double click into to how AI, what what that means for Paylocity and how you’re looking to address that opportunity moving forward? Sure. So I

Ryan Glenn, Chief Financial Officer, Paylocity: think Paylocity has been a leader in AI within HCM really for the for the last handful of years, and I think we’ve we’ve now have levels of of elements of AI across nearly every product we have today. We have had a few press releases over the last few years. We talked about it in a a more fulsome way on the earnings call in in May, and we’re seeing increased usage and adoption with within our client base. So we’re seeing clients use it to, really drive automation, increase workflows, being able to allow their employees to get access to answers in a more efficient way so they’re not having to call their Paylocity account manager, not having to interact with their HR leader. So being able to leverage our AI assistant to understand questions like what type of sick time do I have, what type of vacation time do I have, employee handbook related questions.

We’re seeing clients use AI within our time and labor offering to help, really curate more intelligent scheduling to reduce overtime and make sure that they have the right employees for the right shifts based on certifications or other requirements. We’re seeing clients use AI within learning management to help curate, really specific recommended learning paths for their employees based on tenure or development areas of focus. So there are elements of AI, I think, throughout the product suite and certainly seeing increased adoption. And as I think about ’26 and and the investment we’re making in product, that is certainly one of the key areas of of focus us focus for us as as well as broader automation, opportunities. And I think that goes for both the the product set as well as ways that we can drive efficiencies within our our teams as well internally.

Jacob Behrge, Research Analyst, William Blair: Okay. That’s helpful. And then you all have talked about the the kind of the key strategies, embedding AI into the existing platform to drive better attention, better win rates against the competition is kind of a unique differentiator. So now that we’re a year or two into the initial AI releases, what are you seeing on that front? Like, are you seeing the improvements to retention?

Are you seeing the improvements to win rates? Just curious if you could kinda flesh out how that strategy has been going.

Ryan Glenn, Chief Financial Officer, Paylocity: Yeah. I I think I think this will be a a multiyear endeavor, and we’re still very early days. But, you know, to my comments a minute ago, we’re definitely seeing increased and usage across the products. We we we very confident that there continues to be ways that we can differentiate within the product suite with AI. And I think going forward, there are certainly ways that we can drive efficiencies within our operation teams, which should improve the client experience, I think, reduce the effort of our employees, help us drive increased profitability going forward.

So this is, again, this is at a multiyear journey for us, but we’re certainly seeing some some early signs of of positivity there and and feel like going in ’26, that will be an area that we continue to see some strong momentum.

Jacob Behrge, Research Analyst, William Blair: Okay. That’s helpful. And then last last one on the AI front. Obviously, there’s been a lot of talk about AgenTic over the last few years last year or so. So curious if if how you’re thinking about the AgenTic opportunities in your platform.

And then do you see AgenTic as potential, like, productization where it could be a separate SKU that you can monetize it, or do you think it’ll fall into the the earlier discussion around improving retention and win rates?

Ryan Glenn, Chief Financial Officer, Paylocity: Yeah. I I think Augenic AI, I’d put that under the broader umbrella around things that we would be looking at and investments we would be making with within AI. So that that would be certainly part of the use cases and value proposition that we would be thinking about on a go forward basis. Probably early days to understand the ability to monetize AI specifically, but, you know, I think no question, we are seeing ways to increase the client experience, reduce client effort, which over the long term certainly would would help with the stickiness of clients. And then as I mentioned a minute ago, I think there’s a number of opportunities for us to drive efficiencies internally as well.

So whether it’s AgenTic or or broader AI opportunities, it’s it’s definitely an area that that we think, will will drive dividends into ’26

Jacob Behrge, Research Analyst, William Blair: and beyond. Yeah. That’s helpful. And then thinking, taking a step back, thinking about capital allocation, you’ve obviously you’ve done some m and a over the years. You have a share buyback in place.

How are you thinking about capital allocation moving forward just as the the chief financial officer? How you how do you see things moving forward?

Ryan Glenn, Chief Financial Officer, Paylocity: I I think we’re in a a really strong position from a financial standpoint. Very strong balance sheet, increasing cash flows. We have a $500,000,000 share repurchase authorization of of which we have repurchased $300,000,000 of stock over the last thirteen months or so or so, almost 2,000,000 shares. We’ve reduced diluted share count. And I think going forward, you know, we’ll be able to continue to drive share repurchase activity going forward.

How much and and when I think is is dependent on share price and and competing priorities, but I would view a level of share repurchase activity as pretty foundational to our capital allocation program going forward. And I think similarly, as you think about stock based comp, that has been an area of focus for us too. So we’ve reduced stock comp from, call it, roughly 12% of revenue a few years ago down to roughly 9% of revenue this fiscal year, and on on top of that, being able to reduce, share count as well. So I think for us, we’re in a position where not only can you you buy buy back stock, but we’re able to be acquisitive as well. Bar is obviously very high, but I think for us, if if there are products or other opportunities out there that speed go to market or things that are on our product road map, expand addressable market, we think we’ve got the ability to to continue to utilize our buyback as well as the opportunistic there from an m and a perspective.

Jacob Behrge, Research Analyst, William Blair: Okay. That’s helpful. And then I know we’re we’re coming up on time here, so maybe just one last question from me. What gets you most excited about the Paylocity opportunity moving forward? And if there was a world in which we could potentially reaccelerate the company’s growth, what what would be the kind of building blocks and drivers of that?

Ryan Glenn, Chief Financial Officer, Paylocity: Sure. We’re, like, really excited about the results we’ve had this fiscal year as we as we talked about earlier, have had really strong results each of the the first nine months each of the first quarters of this fiscal year. We’ve raised the revenue by a significant amount. We’ve guided to 100 basis points of operating EBITDA leverage, which includes a hundred basis point headwind from the Airbase acquisition, so surely 200 basis points of organic leverage. So really excited about the results this year, and I think excited about fiscal twenty six.

Large market opportunity within HCM. We feel good about where we are from an integration standpoint within Airbase and and what that can do to help us drive revenue growth going forward. So feel really good about the execution and and where we’re headed into ’26 and beyond.

Jacob Behrge, Research Analyst, William Blair: Well, sounds good. Well, Ryan, thanks for, thanks for the time today. Thanks everyone in the audience for, attending. For those that wanna dig a little bit deeper in, we will have the breakout starting in ten minutes in the Adler Room on the Second Floor. But thanks everyone for joining today.

Thank you.

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