0001591698-26-000037
SEC filingPaylocity delivered strong Q3 FY2026 results with 10.5% revenue growth and expanded operating leverage, reflecting disciplined execution against scalable SaaS economics and continued investment in growth capacity.
Revenue for Q3 FY2026 was $502.3M, up 10.5% from $454.5M in Q3 FY2025. This growth reflects continued organic expansion across the client base, consistent with management’s stated objective to grow the number of clients for the foreseeable future. The increase was not attributable to acquisitions or non-recurring items, aligning with Paylocity’s long-standing emphasis on sustainable, product-led adoption.
Operating income increased 23.6% year-over-year to $157.0M, and operating margin expanded to 31.3%. This improvement signals meaningful operating leverage, as revenue growth meaningfully outpaced the absolute dollar increase in operating expenses. Management has indicated that while general and administrative expenses are expected to rise in absolute terms as the company grows, cost efficiencies should emerge over time due to scaling — a dynamic now visibly materializing in the P&L.
Gross margin remained stable at 72.3%, reflecting consistent delivery against core payroll and HR service obligations. Though management expects cost of revenues to increase in absolute dollars as the client base expands, the stability in gross margin percentage indicates effective management of infrastructure and service delivery costs — supporting confidence in the durability of unit economics.
Net income rose 21.6% to $111.2M, and diluted EPS increased 27.3% to $2.05. The outsized EPS growth relative to net income reflects both profitability expansion and disciplined share count management. These results reinforce the earnings power embedded in Paylocity’s recurring revenue model and high incremental margins.
Net cash provided by operating activities was $331.7M, and capital expenditures were $7.6M — resulting in free cash flow of $324.0M. This exceptional cash conversion highlights the capital-light nature of the SaaS platform and the strength of client fund-related cash flows. The low capex level is consistent with management’s view that foundational infrastructure investments are maturing, allowing capital to be prioritized toward strategic enhancements rather than foundational build-out — though specific capex guidance or characterization was not quantitatively supported in the authoritative packet.