Paylocity Holding Corporation (PCTY): History, Ownership, Mission, How It Works & Makes Money

As the Human Capital Management (HCM) software market keeps consolidating, how exactly does Paylocity Holding Corporation (PCTY) continue to carve out its significant share against giants like ADP and Paychex?

The company's focus on the mid-market paid off handsomely in the 2025 fiscal year, driving total revenue to a strong $1.595 billion and GAAP net income to $227.1 million, representing a 14% and 10% year-over-year increase, respectifully. With over 41,650 clients and a recent expansion into the Office of the CFO with its Paylocity for Finance platform, you have to wonder if this cloud-based provider is defintely the most undervalued player in the space.

Understanding Paylocity's history, its sticky client base-with annual revenue retention above 92%-and its core mission is crucial for any investor or business leader looking to map the future of workforce management technology.

Paylocity Holding Corporation (PCTY) History

You're looking for the bedrock of Paylocity Holding Corporation, and honestly, it's a classic story of spotting a market gap and building a better mousetrap. The company didn't start as a cloud giant; it began as a payroll service bureau, but its founder had the foresight to pivot early to a software-as-a-service (SaaS) model. That early decision is why Paylocity is now a major player in the Human Capital Management (HCM) space, posting $1.595 billion in total revenue for the 2025 fiscal year.

Paylocity Holding Corporation's Founding Timeline

Year established

The company was established in 1997, initially operating under the name Ameripay Payroll Ltd.

Original location

The company started in the Chicago, IL area, specifically in Franklin Park, Illinois, before moving its headquarters to Schaumburg, Illinois.

Founding team members

The company was founded by Steve Sarowitz. He was the visionary who saw the need for a solution that combined in-house technology with the service and liability protection of an outsourced payroll provider.

Initial capital/funding

Sarowitz started the company with a small investment. The first major institutional funding came later, totaling $37.3 million over two rounds from Adams Street Partners. This included a $10 million Series A in 2008 and a $27.3 million Series B in 2012.

Paylocity Holding Corporation's Evolution Milestones

Paylocity Holding Corporation's Transformative Moments

The company's history is defintely defined by a few strategic leaps, not just incremental changes. The biggest one was the early pivot to cloud software, which gave them a technology edge over older payroll providers like ADP and Paychex. That shift was everything.

• The SaaS Platform Launch (2002): Moving from a traditional payroll service bureau (Ameripay Payroll Ltd.) to launching the Web Pay Software-as-a-Service (SaaS) platform was the foundational, transformative decision. This allowed Paylocity to scale its technology and service model efficiently.
• The 2014 IPO: Going public provided the capital needed to compete in the fast-growing Human Capital Management (HCM) market. The IPO raised around $120 million, which fueled the rapid expansion of the product suite and client base.
• The Strategic Expansion into Finance (2024-2025): The September 2024 announcement to acquire Airbase Inc. and the subsequent launch of the Paylocity for Finance suite in fiscal year 2025 show a clear move beyond pure HR. This is a crucial strategic play to capture a larger Total Addressable Market (TAM) by integrating HR, payroll, and spend management. This expansion helped drive the total revenue to $1.595 billion in FY2025.
• Sustained R&D Investment: Paylocity continues to invest heavily in innovation, with R&D spend rising to $282 million in FY2025, or 18% of revenue. This focus on product, including AI-driven analytics, is what keeps their platform competitive.

If you want to dig into the institutional money behind these moves, you should check out Exploring Paylocity Holding Corporation (PCTY) Investor Profile: Who's Buying and Why?

Paylocity Holding Corporation (PCTY) Ownership Structure

Paylocity Holding Corporation is a publicly traded company (NASDAQ: PCTY), meaning its ownership is distributed among a mix of institutional funds, company insiders, and individual investors. This structure ensures broad market governance but concentrates significant influence in the hands of large institutional holders and the founder's stake.

Paylocity Holding Corporation's Current Status

Paylocity Holding Corporation is a public entity, trading on the Nasdaq Global Select Market under the ticker symbol PCTY. This status requires rigorous financial transparency and adherence to U.S. Securities and Exchange Commission (SEC) regulations, which is defintely a good thing for investors like you. The company's governance is driven by a Board of Directors, which includes a mix of executives and independent directors, overseeing the executive team's strategic direction.

Paylocity Holding Corporation's Ownership Breakdown

As of the 2025 fiscal year, the company's stock ownership is heavily tilted toward institutional investors, which is typical for a mature, mid-cap technology company. Institutional holders-firms like BlackRock, Inc. and Vanguard Group Inc-control the majority of the shares, while company insiders retain a substantial, influential stake. Here's the quick math on how the shares break down:

The high institutional ownership-nearly 68%-means major investment houses have a powerful voice in shareholder votes and corporate strategy. Still, the 20.10% held by insiders, particularly the founder, gives the executive team strong control over the company's long-term vision. If you want to dive deeper into who specifically is buying and selling, you should check out Exploring Paylocity Holding Corporation (PCTY) Investor Profile: Who's Buying and Why?

Paylocity Holding Corporation's Leadership

The company is steered by an experienced leadership team with a blend of long-tenured executives and strategic specialists. These are the people ultimately responsible for delivering on the company's growth targets and managing its $8.27 billion market capitalization.

• Toby Williams, President and Chief Executive Officer: Mr. Williams took the CEO role in February 2025. His total estimated compensation for the 2025 fiscal year was approximately $18,044,482, reflecting his strategic importance to the organization.
• Steven Beauchamp, Executive Chairman of the Board: As the former CEO, he maintains an active role in governance and strategic oversight.
• Ryan Glenn, Chief Financial Officer (CFO): He manages the company's financial operations and strategy, a critical role given the company's recent Q1 2026 total revenue of $408.2 million.
• Steven I. Sarowitz, Founder & Director: Though no longer in an executive role, his substantial ownership stake of over 8.5 million shares makes him a key voice on the Board.

The management team's average tenure is around 3.3 years, suggesting a relatively stable and experienced group guiding the company through the competitive Human Capital Management (HCM) software market.

Paylocity Holding Corporation (PCTY) Mission and Values

Paylocity Holding Corporation's purpose goes beyond cloud-based Human Capital Management (HCM) software sales; it's about fundamentally improving the daily working life for employees and leaders. The company's mission is to elevate the modern workforce experience, a goal they back up with significant investment, like the 14.3% of fiscal year 2025 revenue they poured into total Research and Development (R&D) on a non-GAAP basis.

Paylocity Holding Corporation's Core Purpose

Understanding a company's mission and values is like checking the foundation before buying the house. For Paylocity Holding Corporation, their cultural DNA drives their product roadmap and client retention, which was greater than 92% in fiscal year 2025. That's a strong indicator that their values translate into real-world value for their nearly 41,650 clients.

Official mission statement

The mission is simple, direct, and focused on the user, not just the administrator. It's a clear statement of intent that guides their product development, which is why they continue to expand their platform to unify critical workflows, as seen with the launch of Paylocity for Finance.

• To elevate the modern workforce experience.

This focus on the employee experience is what helps drive their recurring revenue, which hit $1,471.8 million in fiscal year 2025, up 15% year-over-year. You can dig deeper into that growth trajectory here: Breaking Down Paylocity Holding Corporation (PCTY) Financial Health: Key Insights for Investors.

Vision statement

The company's vision is a clear map of where they are heading, especially as they integrate new technologies like Artificial Intelligence (AI) to solve complex business problems. It's not just about HR anymore; it's about connecting the entire enterprise.

• Equip leaders with modern AI-powered solutions that bridge the gap between HR and finance on our single unified platform.

This is a defintely smart move. By unifying HR and finance data, they increase the average revenue per client, which reached just over $35,300 in fiscal year 2025, up approximately 8% from the prior year. This is how you create value that sticks.

Paylocity Holding Corporation's Core Values and Guiding Principle

These values are the operating manual for Paylocity Holding Corporation's nearly 6,700 employees as of June 30, 2025. They are action-oriented, not just corporate posters. The guiding principle, 'Forward Together,' is the umbrella for their five core values, showing a commitment to collaborative progress.

• Earn It, Every Day: Greatness is earned, not given.
• Growth Fuels Opportunity: Continuous expansion creates space for employee and client success.
• Think Next Generation: Focus on innovation to stay ahead in the HCM market.
• Live the Reputation: Uphold the company's strong culture and service quality.
• Be Unbeatable Together: Emphasize teamwork and partnership.

This culture of continuous improvement is what allowed them to deliver total revenue of $1,595.2 million in fiscal year 2025, a solid 14% growth year-over-year. They also returned capital to shareholders, repurchasing 800,000 shares for $150 million during the same fiscal year. That's a company executing on its mission and delivering for its owners.

Paylocity Holding Corporation (PCTY) How It Works

Paylocity Holding Corporation operates as a cloud-based Human Capital Management (HCM) software provider, delivering a unified platform that manages the entire employee lifecycle from recruitment to retirement, plus the critical financial workflows that support it. The company primarily makes money through subscription fees for its software modules, which drove recurring and other revenue to approximately $1.472 billion in fiscal year 2025.

In practice, Paylocity serves as the single system of record for HR, payroll, and increasingly, finance data, helping mid-market companies streamline complex administrative tasks. Its total revenue for the fiscal year ending June 30, 2025, was $1.595 billion, a 14% increase year-over-year, demonstrating strong client adoption and expansion of services.

Given Company's Product/Service Portfolio

Given Company's Operational Framework

Paylocity's operational framework centers on a unified, single-database architecture that connects all Human Resources (HR) and financial data, which is defintely a core value driver for clients. This single system eliminates manual data reconciliation between departments, which can save clients up to 40% on reconciliation costs.

Here's the quick math on their reach: The company ended fiscal year 2025 with an estimated 41,650 existing clients, having increased its client base by 7% during the year. This growth is fueled by a product-centric approach where development is continuous, often leveraging internal employee feedback before external launch, a practice they call 'Drinking Our Own Wine.'

• Subscription Model: The vast majority of revenue is recurring, based on a per-employee-per-month (PEPM) or per-client fee structure for the modules used.
• Float Income: A secondary revenue stream comes from interest earned on client funds held between the payroll date and the settlement date, though the core business is the software.
• R&D Focus: Sustained investment in research and development (R&D) drives product differentiation, which in turn expands the average revenue per client (ARPC), a key metric that reached $35,300 in FY 2025.

To be fair, managing this continuous product expansion requires disciplined execution, but it's what keeps their platform sticky. If you want to dive deeper into the numbers, check out Breaking Down Paylocity Holding Corporation (PCTY) Financial Health: Key Insights for Investors.

Given Company's Strategic Advantages

The company's competitive edge comes from a combination of platform design, target market focus, and a relentless push into the financial office. They are not chasing the global enterprise market like some competitors; they own the US mid-market.

• Unified HCM-Finance Platform: The strategic launch of Paylocity for Finance, augmented by the Airbase acquisition, directly targets the Office of the CFO, unifying traditionally separate HR and finance functions in one system. This is a major differentiator against legacy Human Resources Information Systems (HRIS).
• High Client Stickiness: Paylocity maintains a high net retention rate, often cited above 95%, which validates the value and stickiness of its integrated platform once adopted.
• Employee Experience & Innovation: The platform is known for its modern, mobile-first design and features that drive employee engagement, like peer recognition and communication tools. This focus on the end-user experience is a key selling point for HR leaders.
• Strong Profitability: Operational efficiency is strong, with the fiscal year 2025 Adjusted EBITDA reaching $583.0 million, representing a 36.5% margin of total revenue. This financial strength allows for sustained R&D investment.

Paylocity Holding Corporation (PCTY) How It Makes Money

Paylocity Holding Corporation primarily makes money through a subscription-based model for its cloud-based human capital management (HCM) software, which accounts for the vast majority of its revenue. A smaller, but still significant, portion of its income comes from the interest earned on client funds awaiting payroll and tax disbursements, known as float income.

Paylocity Holding Corporation's Revenue Breakdown

For the fiscal year 2025 (FY2025), which ended June 30, 2025, Paylocity Holding Corporation reported total revenue of $1.5952 billion. This revenue is broken down into two main streams, with the predictable, high-margin software subscriptions driving the core business.

The Recurring & Other Revenue stream, totaling $1.4718 billion in FY2025, is the bedrock of the company's valuation. This 15% year-over-year growth shows strong demand for their full suite of HCM products, from payroll to talent management. Float Income, which was approximately $123.4 million for FY2025, is a function of short-term interest rates and the volume of client funds held, and while it's a nice bonus, its near-term trend is decreasing, with Q4 2025 seeing a 5.2% decline year-over-year.

Business Economics

The economic engine of Paylocity Holding Corporation is built on a sticky, subscription-based model that focuses on two key levers: client acquisition and, more critically, expanding the average revenue per client (ARPC). This is a classic Software as a Service (SaaS) playbook.

• Subscription Stickiness: Once a company integrates its payroll and HR data into an HCM platform, switching costs become extremely high. This creates a very reliable, recurring revenue base.
• Average Revenue Per Client (ARPC) Expansion: The company's strategy is to sell more modules (like their Benefits Decision Support or Headcount Planning tools) to their existing client base. In FY2025, ARPC increased by approximately 8%, a clear sign the upsell strategy is working.
• Client Base Growth: They continue to grow their client count, which increased by 7% in FY2025. This dual-pronged growth-more clients and more revenue per client-is a powerful combination.
• Strategic Expansion: The recent launch of Paylocity for Finance, which integrates the Airbase acquisition, is a major move. It broadens the total addressable market (TAM) by targeting the Office of the CFO, not just HR. This is defintely a key catalyst for future ARPC expansion and cross-selling.

Here's the quick math: with a 7% client increase and an 8% ARPC increase, you get a solid 15.56% top-line growth if you ignore float income, which aligns perfectly with their 15% recurring revenue growth. That's how you drive sustainable growth.

Paylocity Holding Corporation's Financial Performance

Paylocity Holding Corporation's financial health in FY2025 shows strong operational leverage-the ability to grow profits faster than revenue-which is what you want to see in a maturing SaaS business. The numbers are precise and indicate a focus on profitable growth.

• Profitability Margin: Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), a key measure of core operating profitability, was $583.0 million in FY2025, representing a strong 36.5% margin of total revenue. This is up from 36.0% in the prior year, showing margin expansion.
• Net Income: GAAP Net Income for FY2025 was $227.1 million, a 10% increase from the previous fiscal year. This translates top-line growth into bottom-line profit.
• Cash Generation: Free Cash Flow (FCF) was robust at $342.8 million for FY2025, or 21.5% of total revenue. This strong cash flow gives the company capital for share repurchases-they bought back $150 million of stock in FY2025-and continued investment in R&D.

What this estimate hides is the potential volatility of the Interest Income stream. The FY2026 guidance assumes lower interest yields, which means the core subscription business must continue its high-growth trajectory to offset any decline in float income. You can dive deeper into who is betting on this growth in Exploring Paylocity Holding Corporation (PCTY) Investor Profile: Who's Buying and Why?

Paylocity Holding Corporation (PCTY) Market Position & Future Outlook

Paylocity Holding Corporation is firmly positioned as a leading cloud-based Human Capital Management (HCM) provider for the U.S. mid-market, characterized by its focus on a modern, engaging employee experience.

The company demonstrated solid execution in fiscal year 2025, achieving total revenue of $1.595 billion, a 14% increase year-over-year, which sets a strong foundation for its strategic push into the Office of the CFO.

Competitive Landscape

The HCM and payroll market remains highly fragmented and competitive, but Paylocity maintains a significant presence, particularly in the mid-market segment (10-5,000 employees).

In the payroll-management category, Paylocity holds a market share of 12.10%, placing it just behind the long-time industry leader.

Opportunities & Challenges

As a seasoned analyst, I see Paylocity's future trajectory hinging on its ability to cross-sell new modules and manage the inherent risks of a growing, complex regulatory environment. You need to see the full picture. For more on the financials, check out Breaking Down Paylocity Holding Corporation (PCTY) Financial Health: Key Insights for Investors.

Industry Position

Paylocity is a high-growth, profitable player in the HCM space, specifically dominating the 10 to 5,000 employee segment with a differentiated product. The company's focus on engagement tools, like the Community platform, helps it stand out against older, more transactional systems.

• Maintain a high annual revenue retention rate, consistently above 92% for the last three fiscal years, indicating a very sticky client base.
• The referral network is a key growth engine, delivering over 25% of new-client Annual Recurring Revenue (ARR) in FY2025.
• FY2025 GAAP net income was $227.1 million, demonstrating that growth is defintely paired with strong profitability, a crucial factor in this competitive software-as-a-service (SaaS) sector.

The strategy is clear: use a superior, integrated product to drive greater average revenue per client and continue chipping away at the massive mid-market opportunity.