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Q2 Fiscal 2025 Investor Presentation
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2 This presentation is for informational purposes only and is not an offer to sell securities or a solicitation of an offer to buy any securities, and may not be relied upon in connection with the purchase or sale of any security. This presentation is proprietary and is intended solely for the information of the persons to whom it is presented. It may not be retained, reproduced or distributed, in whole or in part, by any means (including electronic) without the prior written consent of Paylocity Corporation. This presentation contains forward-looking statements. All statements other than statements of historical fact contained in this presentation are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. These forward-looking statements are subject to a number of risks, including those described under the heading “Risk Factors” in our periodic reports we have filed with the Securities and Exchange Commission (the “SEC”). Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this presentation. In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP. Investors are encouraged to review the reconciliation of the non-GAAP measures to their most directly comparable GAAP measures for the periods presented provided in the Current Reports on Form 8-K filed with the SEC on February 6, 2025, August 1, 2024, August 3, 2023, August 4, 2022, and August 5, 2021. This presentation contains statistical data that we obtained from industry publications and reports generated by third parties. Although we believe that the publications and reports are reliable, we have not independently verified this statistical data. Safe Harbor Statement 2
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We are a leading provider of cloud-based HR, payroll, and spend management software solutions to a diversified set of clients across verticals & geographies Our Business Demonstrated ability to drive strong revenue growth with increasing profitability 39,050 clients 6,400 employees 150+ avg. client size 10-5,000 employees target market Schaumburg, IL Headquarters $853 $1,175 $1,403 $1,563 $238 $375 $506 $546 FY22 FY23 FY24 FY25 Guidance $326 $377 $113 $126 Q2 FY24 Q2 FY25 Rule of 62% Rule of 70% Rule of 56% 16% YoY growth Total Revenue (FYE June 30, $mm) Rule of 46% Adj. EBITDA *Rule of % = Total Revenue Growth + Adj. EBITDA Margin 3
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~3% penetrated into addressable market Realized HCM TAM of ~$19.5 billion Source: U.S. Census Bureau Current average client size of 150+ employees 39,050 clients as of June 30, 2024 69 million employees in the 10-5,000 segment of the market 4 HCM Addressable Market (TAM) We remain squarely focused on increasing our limited penetration of a large, and growing, total addressable market Further increasing TAM with Finance solutions Approximately 1.3 million businesses in the 10–5,000 segment of the market ~50%+ Realized HCM PEPY
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Workday Limited overlap in target market. Enterprise solutions focused on companies with several thousand employees and up – do not see them often competitively Ultimate Kronos Group / Dayforce Enterprise solution focusing primarily on >1,000 employee companies – seen in deals at the higher-end of our target market Paycom Average client size is larger than ours, generally seen at the middle / higher-end of our target market Paycor Average client size is smaller than ours, generally seen at the middle/lower-end of our target market ADP / PAYX Biggest competitors – compete throughout our target market Regionals Smaller to mid-part of our market In-House Primarily lower end of the market Paylocity differentiates with a payroll, HCM, and spend management platform built for the modern workforce + best- in-class client support Focused on taking share in our target market of roughly 1.3 million businesses Enterprise Market (10,000+ Employees) 5,000 Employees Mid-Market (51-1,000 Employees) SMB Market (1-50 Employees) Core Market in-house solutions ~3,000 regional providers Average Client Size HCM Competitive Landscape 5
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The Most Modern Platform HCM & Finance 6
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Process Payroll in a few Clicks Submit payroll through a simple navigation flow reducing manual data entry and minimizing errors Simplify Tasks for HR and Employees Save time and money with intuitive scheduling and time tracking, bringing your team into the future of work Find and Retain Top Talent Get top candidates in the door quickly and keep them on the path to success to drive satisfaction and growth Setup Frictionless Benefits Easily set up enrollment, navigate compliance and automate processes 7 Payroll HR Time & Labor Benefits Recruiting The Most Complete HCM Platform for The Modern Workforce
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Mobile & on-demand Everything employees need at their fingertips on any device Flexibility & wellbeing Empower employees to manage their shifts & pay schedule without HR overhead Feeling heard & valued Create engagement with opportunities for feedback & recognition Connection across the org Foster transparency and a sense of belonging with open communication Providing HR the tools to better engage with their employees Employee Home Recognition & Rewards Community & Video 8 Learning Employee Voice
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9 Spend Analytics ERP Integration AP Automation & Expense Management Guided Procurement Corporate Cards Significant TAM Expansion = HCM + Finance Material new TAM expansion opportunity into high growth Office of the CFO category Differentiated Platform with unified experience across HCM and Finance Unified payroll and non-payroll spend on a single platform is valuable to our client segment and is a highly differentiated position in the mid-market vs. Payroll & HCM competitors High value-add for HR and finance teams to manage ALL spend through a single pane of glass Provides real-time visibility, faster close, and improved financial controls, enabling HR and Finance teams to manage all costs in one centralized platform Automate manual processes for Finance, HR and employees through fully integrated system, workflows, and real-time spend visibility Leverages PCTY’s employee of record as the core driver to automate workflows, integrating finance and HR processes while unlocking synergies for real-time spend visibility and controls Modern finance & spend management software that puts CFOs in control Vendor Management
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10 Combination of ADP/Paychex represents our largest source of new clients Where Our Clients Come From HCM Competitive Landscape Why we win Industry-leading product suite combined with strong focus on client service resulting in 92%+ revenue retention In-house solutions (did not use a traditional 3rd party provider) Local / regional payroll providers All other competitors and new business formation 10
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11 We hire experienced sales professionals • Most have prior HCM platform, HR technology or B2B sales experience • All sales are direct through our salesforce • Our reps are focused on deals with 10-5,000 employees with our largest opportunities supported by our most experienced teams Go-To-Market Strategy All major U.S. geographies covered, but room to add reps in every state Our client base is well diversified across all industry verticals and geographies 8% From 820 reps in fiscal 2024 885 reps in fiscal 2025 11
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Channel Value Proposition Strong Referral Channel We do not compete with our channel partners – We do not sell insurance or benefits; other major payroll / HCM competitors compete with brokers and financial advisors for insurance business and assets Flexible platform with hundreds of available Integrations and open APIs for insurance, 401k and other providers. We continue to invest in integrations to add value for the broker community Partner Portal allows our partners to differentiate Providing visibility to brokers and helping drive change at their clients by providing unique data insights 25%+ of our new client revenue comes from referrals from channels Paylocity is the most complete platform for the modern workforce which helps our channel partners reach employees in new ways 12
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13 $200 $600 2014 Current Over 200% increase in product suite since 2014 Sustained R&D Investment Drives Product Expansion and Revenue Growth Max HCM PEPY Human Resources PayrollBenefitsRecruiting & Onboarding Performance & Compensation Time & Labor Employee Experience HCM Ongoing Product Innovation Employee Voice LearningVideoCommunity Market Pay 13
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14 Over 92%+ net revenue retention as a public company Continued Client Service Investments Support Strong Revenue Retention 92%+ Net Revenue Retention Retention Churn(1) *Net Revenue Retention = total revenue for the preceding 12 months, less the annualized value of revenue lost during the preceding 12 months, divided by our total revenue for the preceding 12 months. We calculate the annualized value of revenue lost by summing the recurring fees paid by lost clients over the previous twelve months prior to their termination if they have been a client for a minimum of twelve months. For those lost clients who became clients within the last twelve months, we sum the recurring fees for the period that they have been a client and then annualize the amount. We exclude interest income on funds held for clients from the revenue retention calculation. (1)Includes controllable and uncontrollable churn Delivering world class service Providing the most modern platform 14
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Recurring and Other Revenue $ millions Financials Squarely focused on revenue growth while demonstrating meaningful leverage in our business model Current Total Revenue $2Bn+ Adjusted Gross Profit 75-80% Non-GAAP total R&D 10-15% Non-GAAP Sales & Marketing 20-25% Non-GAAP General & Administrative 5-10% Adjusted EBITDA 35-40% Free Cash Flow 20-25% Stock-Based Compensation <10% Long-Term Financial Targets Increased profitability targets reflect commitment to driving greater operational efficiency over time $632 $848 $1,098 $1,282 $1,450 $636 $853 $1,175 $1,403 $1,563 FY21 FY22 FY23 FY24 FY25 Guidance Recurring and Other Revenue Total Revenue 34% YoY growth 30% YoY growth 17% YoY growth Note: Financial targets based on percentage of total revenue 15 13% YoY growth
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Financials (cont.) Driving continued margin expansion on an annual basis Driving greater leverage over time • Successfully driven roughly 800bps of adj. EBITDA margin leverage since FY21 • Intend to drive leverage primarily through cost of sales and G&A on a go forward basis Adjusted EBITDA $ millions $170 $238 $375 $506 $546 FY21 FY22 FY23 FY24 FY25 Guidance 26.7% Margin 27.9% Margin 31.9% Margin 36.0% Margin 16 34.9% Margin
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17 Financials (cont.) $87 $103 $216 $306 FY21 FY22 FY23 FY24 13.7% Margin 12.0% Margin 18.4% Margin 21.8% Margin Strong Balance Sheet - $482M Cash & Cash Equivalents as of 12/31/24 Demonstrating meaningful FCF leverage • Successfully driven ~800bps of FCF margin leverage since FY21 • Targeting to achieve our long-term FCF margin target of 20%-25% • Repurchased 44k shares of common stock at an average price of $197.90 per share for $8.6m in aggregate repurchases in Q2 FY25 • $341m remaining under existing share repurchase program Free Cash Flow $ millions Driving continued margin expansion on an annual basis
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Corporate Social Responsibility 18 Sustainability We are committed to promoting environment responsibility and sustainable practices to ensure a healthier plant for future generations. Governance at Paylocity Our Board of Directors and Executive team are committed to promoting transparency and adhering to the highest ethical values. Information Security We view the protection of our client’s data as a top priority. In addition to our strong culture and the world-class service, Paylocity is committed to being a leader in social and environmental responsibility, and corporate governance
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Our Diversity, Equity, Inclusion, and Accessibility Journey Transparency is a crucial part of our DEIA journey. That’s why we share annual data so our employees, clients, and partners can see where we stand. Our progress will continue to be rooted in intentional action together. Our goal isn’t about reaching a certain number — it’s about building the most inclusive culture possible, filled with talented and amazing people. *Ethnicity Representation includes only U.S. employees **Leadership includes manager+ roles 19
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External Recognition 2012-2024 2022-2023 2024 2023 2019-2024 2020-2024 2023-2024 2023 2020-2024 2023-2024 2023 2020-2024 2024 2022-2023 2024 2023-2024 2023 2024 2024 2023-2024 20
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• Creating the most modern HCM and spend management platform • Increasing average revenue per client • Growing client base • Strong client retention Positioned for Long-Term Growth & Margin Expansion 21