Paylocity Continues Impressive Growth, but We Lower FVE 15% to $180 on Revised Cash Tax Assumptions

Narrow-moat Paylocity delivered robust third-quarter fiscal-year 2022 results, with group revenue increasing 32% on the prior year supported by strong sales execution and resilient retention. While we expect top-line growth was aided by greater module uptake and a skew to larger businesses, we anticipate the company outpaced industry growth, resulting in modest market share gains. We think the strong performance was underpinned by continued demand for solutions to engage and retain employees amid sustained dispersed workforces and fierce competition for labor. Paylocity’s adjusted EBITDA margin of 34.8% during the quarter exceeded our expectations as improved operating leverage from increased scale and solid retention offset the dilutive impact of recent bolt-on acquisitions.