In regard to our upcoming conference schedule, we will be attending the Baird Global Consumer, Technology & Services Conference and the William Blair Growth Stock Conference. This acquisition represents a continuation of our broader strategy to embed AI across our platform, delivering intelligence within core workflows. Solid sales and operational execution continued in our busiest time of the year, helping to drive another quarter of strong recurring revenue growth and increased revenue and profitability guidance for fiscal 2026. Recurring and other revenue of $469.9 million grew 11.6% over Q3 of last year and beat the high end of our guidance by $7.4 million.
HCM is a highly regulated, complex, and dynamic industry where accuracy and compliance is paramount with zero margin for error. I would now like to pass the call to Ryan to review the financial results in detail and provide updated fiscal 2026 guidance. Q3 recurring net other revenue was $469.9 million, an increase of 11.6%, with total revenue up 10.5% from the same period last year. Our adjusted gross profit was 77.3% for Q3, an increase of 30 basis points from Q3 of last fiscal year.
Through the first nine months of fiscal 2026, we have driven 60 basis points of adjusted gross profit leverage as we continue to focus on scaling our operational costs while maintaining industry-leading service levels. On a non-GAAP basis, G&A costs were 8.2% of revenue in the third quarter versus 8.4% in the same period last year, representing 20 basis points of leverage. Through the first nine months of fiscal 2026, we have driven 50 basis points of G&A leverage versus the same period last fiscal year. Our Adjusted EBITDA for the third quarter was $220.2 million or 43.8% margin and exceeded the top end of our guidance by $16.2 million, resulting in increased margin guidance for fiscal 2026.
| Metric | Period | Current guidance |
|---|---|---|
| Recurring and other revenue (full year FY2026) | FY2026 | Increased by $15.5 million at the midpoint (+$15.5M at midpoint) |
| Total revenue (full year FY2026) | FY2026 | Increased by $20.5 million at the midpoint (+$20.5M at midpoint) |
| Adjusted EBITDA margin (full year FY2026) | FY2026 | Raised EBITDA guidance by 30 basis points (+30 bps) |
| Recurring revenue growth (Q4) | Q4 FY2026 | 9%-10% growth |
| Interest income (Q4) | Q4 FY2026 | Approximately $26.2 million, on average daily balance of ~$3.2 billion at ~330 bps yield |
| Interest income (full year) | FY2026 | Approximately $117 million, on average daily balance of ~$3.25 billion at ~360 bps yield |
| Metric | YoY | Note |
|---|---|---|
| Recurring and other revenue | +11.6% | Strong selling season performance and solid sales and operational execution; total revenue up 10.5%. |
| Adjusted gross profit margin | +30 bps (77.3% in Q3) | Continued focus on scaling operational costs while maintaining industry-leading service levels. |
| Total R&D investment (expensed plus capitalized) | +8.9% | Continued significant investment to build out the Paylocity platform for the modern workforce. |
| G&A as percent of revenue | 8.2% vs 8.4% (20 bps leverage) | Operational scale and efficiency improvements. |
| Adjusted EBITDA margin excluding interest income | +110 bps | Durable recurring revenue growth combined with expanded profitability from operational scale and automation/AI efficiencies. |
| Cash from operating activities (first nine months) | +27% | Increased profitability and benefits of recent tax legislation changes. |
| Free cash flow (last 12 months) | +25.4% | Increased profitability and tax legislation benefits; free cash flow margin over 24%. |
| Diluted shares outstanding | -2.7% as of end of Q3 | Share repurchases of approximately $350 million fiscal year to date. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Embedding AI across the platform (AI Assistants to AI Agents) | Multi-year investment in R&D and AI capabilities | AI woven in not bolted on; agents embedded in daily workflows; AP agent speeds AP process by over 60% with ~95% clean first-pass; Grayscale acquisition to enable a premium recruiting SKU | Increasing |
| Broker / channel partnerships | Long-standing strong presence and differentiated relationships in the broker channel | Channel referrals again more than 25% of new business; momentum with brokers has grown over the last 18 months | Increasing |
| Platform breadth across HCM, Finance, and IT | Portfolio tripled since IPO; Airbase acquisition added office-of-the-CFO/Finance products | Continued attach of Finance and IT products to new logos and existing base; launch of Paylocity Elevate Solutions managed services | Increasing |
| Client workforce / employment levels | Guidance assumed flat year-over-year workforce levels | Workforce levels have been up and resilient through nine months, a tailwind; Q4 guidance again assumes flat year-over-year | Stable |
| Capital allocation / share repurchases | $650 million repurchased over the prior two years | $350 million repurchased fiscal year to date; board authorized an additional $1 billion repurchase plan in April | Increasing |
| Pricing model | Industry pricing models have been fairly stable | No significant client demand for a different pricing model; consistency maintained in pricing conversations | Stable |