Form 4: Paylocity Executive Granted Equity Awards

Paylocity's Sr VP of Operations, Andrew Cappotelli, received significant equity grants including RSUs, PSUs, and MSUs, alongside tax-related stock dispositions.

Summary

• Andrew Cappotelli, Senior Vice President of Operations at Paylocity Holding Corp (PCTY), reported changes in his beneficial ownership of company securities.
• On August 15, 2025, Mr. Cappotelli was granted 10,874 Restricted Stock Units (RSUs) at a price of $0.00 per share. These RSUs will vest over four years, with 6.25% vesting every three months.
• Also on August 15, 2025, he received 3,219 Performance Stock Units (PSUs) at a price of $0.00 per share, for which performance criteria have been satisfied. 50% of these PSUs vest on August 15, 2025, with the remainder vesting in two equal installments on August 15, 2026, and August 15, 2027, subject to continued service.
• Additionally, on August 15, 2025, Mr. Cappotelli was granted 1,554 Market Stock Units (MSUs) at a price of $0.00 per unit. The number of MSUs that ultimately vest can range from 0% to 200% of this target, depending on the achievement of certain total shareholder return objectives.
• The MSUs have four separate performance periods, starting August 31, 2025, and ending November 30, 2027, February 29, 2028, May 31, 2028, and August 31, 2028, respectively. 25% of the total award may be earned after each period and, if earned, will vest quarterly.
• To cover tax obligations, Mr. Cappotelli disposed of 1,010 shares of common stock at $171.64 per share on August 15, 2025, and 208 shares at $171.96 per share on August 18, 2025.
• Following these transactions, Mr. Cappotelli beneficially owns 24,828 shares of common stock directly and 1,554 Market Stock Units directly.

Sentiment

Score: 7

Explanation: The filing indicates routine executive compensation and retention activities through equity grants, with performance criteria being met for some awards. The dispositions are for tax purposes, which is standard. This suggests stability in executive compensation practices and continued alignment of management incentives with company performance, which is generally positive.

Positives

• Significant equity grants (RSUs, PSUs, MSUs) align executive compensation with shareholder interests and serve as a retention mechanism.
• Performance Stock Units (PSUs) were awarded because performance criteria have been satisfied, indicating successful achievement of company goals.
• Market Stock Units (MSUs) offer potential for higher vesting (up to 200%) based on total shareholder return, incentivizing strong company performance.

Negatives

• Dispositions of common stock occurred to cover tax withholding obligations, which is a routine event for equity compensation.

Risks

• The vesting of RSUs, PSUs, and MSUs is subject to continued service, meaning the executive must remain employed by Paylocity to receive the full benefit.
• The actual number of shares received from Market Stock Units (MSUs) can vary from 0% to 200% of the target, depending on the achievement of total shareholder return objectives, introducing variability in compensation.
• Future vesting of PSUs is subject to continued service through August 15, 2026, and August 15, 2027.

Future Outlook

The filing indicates future vesting schedules for RSUs (over four years), PSUs (in 2026 and 2027), and MSUs (based on performance periods ending through August 2028), contingent on continued service and performance criteria.

Industry Context

This filing reflects a standard practice in the technology and software industry, where equity compensation, including RSUs, PSUs, and MSUs, is a common component of executive remuneration packages designed to attract, retain, and incentivize key talent by aligning their interests with long-term shareholder value creation. Paylocity, as a provider of cloud-based HR and payroll software, utilizes these mechanisms to reward executives for achieving performance targets and contributing to overall company growth.

Comparison to Industry Standards

• The use of Restricted Stock Units (RSUs) with multi-year vesting schedules is a common compensation tool across the software and SaaS industry, comparable to practices at companies like Workday, ADP, and Ceridian, aiming for executive retention.
• Performance Stock Units (PSUs) tied to specific performance criteria, as seen here, are also standard in the industry, similar to how Salesforce or Oracle might incentivize executives based on revenue growth, profitability, or other strategic metrics.
• Market Stock Units (MSUs) linked to Total Shareholder Return (TSR) objectives are a more advanced form of equity compensation, increasingly adopted by growth-oriented tech companies to directly tie executive payouts to stock market performance, a practice observed at companies like Microsoft or Apple for their senior leadership.

Stakeholder Impact

• Shareholders: The equity grants align the interests of a key executive (Sr VP Operations) with long-term shareholder value creation, potentially leading to better performance and retention of talent.
• Employees: The equity incentive plan provides a framework for executive compensation, which can influence overall compensation philosophy and morale within the company.
• Management: The grants provide significant incentive and compensation to the Sr VP Operations, motivating continued performance and commitment to the company's strategic goals.

Next Steps

• RSUs will continue to vest quarterly over four years from August 15, 2025.
• Remaining PSUs will vest in two equal installments on August 15, 2026, and August 15, 2027.
• MSUs will be earned based on performance periods ending November 30, 2027, February 29, 2028, May 31, 2028, and August 31, 2028, with earned units vesting quarterly thereafter.

Key Dates

Keywords

Paylocity, PCTY, SEC Form 4, Insider Trading, Equity Grant, Restricted Stock Units, Performance Stock Units, Market Stock Units, Executive Compensation, Stock Ownership, Corporate Governance