S

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2021

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from     to     

Commission file number 001-36348

PAYLOCITY HOLDING CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	46-4066644
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1400 American Lane Schaumburg, Illinois	60173
(Address of principal executive offices)	(Zip Code)

(847) 463-3200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	PCTY	The NASDAQ Global Select Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐  No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 54,479,322 shares of Common Stock, $0.001 par value per share, as of April 30, 2021.

Paylocity Holding Corporation

Form 10-Q

For the Quarterly Period Ended March 31, 2021

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets	2
Unaudited Consolidated Statements of Operations and Comprehensive Income	3
Unaudited Consolidated Statement of Changes in Stockholders’ Equity	4
Unaudited Consolidated Statements of Cash Flows	5
Notes to the Unaudited Consolidated Financial Statements	6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	32
ITEM 4. CONTROLS AND PROCEDURES	33
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	34
ITEM 1A. RISK FACTORS	34
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	34
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	34
ITEM 4. MINE SAFETY DISCLOSURES	34
ITEM 5. OTHER INFORMATION	34
ITEM 6. EXHIBITS	35
SIGNATURES	37

1

PART I

FINANCIAL INFORMATION

Item 1.    Financial Statements

PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Balance Sheets

(in thousands, except per share data)

	June 30,		March 31,
	2020		2021
Assets
Current assets:
Cash and cash equivalents	$	250,851	$	175,453
Corporate investments		34,556		6,823
Accounts receivable, net		4,923		9,211
Deferred contract costs		32,332		40,721
Prepaid expenses and other		13,188		14,198
Total current assets before funds held for clients		335,850		246,406
Funds held for clients		1,327,304		2,051,914
Total current assets		1,663,154		2,298,320
Capitalized internal-use software, net		36,501		42,704
Property and equipment, net		66,737		62,187
Operating lease right-of-use assets		48,658		45,112
Intangible assets, net		13,360		14,055
Goodwill		21,655		33,184
Long-term deferred contract costs		125,711		156,943
Long‑term prepaid expenses and other		4,917		3,773
Deferred income tax assets		4,955		7,274
Total assets	$	1,985,648	$	2,663,552
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,755	$	3,319
Accrued expenses		79,881		83,139
Total current liabilities before client fund obligations		81,636		86,458
Client fund obligations		1,327,304		2,051,914
Total current liabilities		1,408,940		2,138,372
Long-term debt		100,000		—
Long-term operating lease liabilities		73,299		68,661
Other long-term liabilities		1,747		1,910
Deferred income tax liabilities		8,754		—
Total liabilities	$	1,592,740	$	2,208,943
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2020 and March 31, 2021	$	—	$	—
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2020 and March 31, 2021; 53,792 shares issued and outstanding at June 30, 2020 and 54,451 shares issued and outstanding at March 31, 2021		54		54
Additional paid-in capital		227,907		231,208
Retained earnings		164,272		223,208
Accumulated other comprehensive income		675		139
Total stockholders' equity	$	392,908	$	454,609
Total liabilities and stockholders’ equity	$	1,985,648	$	2,663,552

See accompanying notes to unaudited consolidated financial statements.

2

PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share data)

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2021		2020		2021
Revenues:
Recurring and other revenue	$	167,095	$	184,927	$	416,948	$	465,195
Interest income on funds held for clients		4,551		1,126		13,792		2,981
Total revenues		171,646		186,053		430,740		468,176
Cost of revenues		48,081		57,326		136,135		160,248
Gross profit		123,565		128,727		294,605		307,928
Operating expenses:
Sales and marketing		37,801		40,055		112,051		115,504
Research and development		15,612		18,458		45,416		56,443
General and administrative		22,411		31,071		77,283		87,038
Total operating expenses		75,824		89,584		234,750		258,985
Operating income		47,741		39,143		59,855		48,943
Other income (expense)		435		(207)		1,194		(843)
Income before income taxes		48,176		38,936		61,049		48,100
Income tax expense (benefit)		8,044		2,102		1,544		(10,836)
Net income	$	40,132	$	36,834	$	59,505	$	58,936
Other comprehensive loss, net of tax		(182)		(126)		(214)		(536)
Comprehensive income	$	39,950	$	36,708	$	59,291	$	58,400
Net income per share:
Basic	$	0.75	$	0.68	$	1.11	$	1.09
Diluted	$	0.72	$	0.65	$	1.07	$	1.05
Weighted-average shares used in computing net income per share:
Basic		53,629		54,415		53,486		54,244
Diluted		55,953		56,414		55,760		56,338

See accompanying notes to unaudited consolidated financial statements.

3

PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Statement of Changes in Stockholders’ Equity

(in thousands)

	Three Months Ended March 31, 2020
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income (Loss)		Equity
Balances at December 31, 2019	53,573	$	54	$	212,240	$	119,190	$	80	$	331,564
Stock-based compensation	—		—		10,051		—		—		10,051
Stock options exercised	130		—		1,318		—		—		1,318
Issuance of common stock upon vesting of restricted stock units	20		—		—		—		—		—
Net settlement for taxes and/or exercise price related to equity awards	(63)		—		(8,508)		—		—		(8,508)
Unrealized losses on securities, net of tax	—		—		—		—		(182)		(182)
Net income	—		—		—		40,132		—		40,132
Balances at March 31, 2020	53,660	$	54	$	215,101	$	159,322	$	(102)	$	374,375

	Three Months Ended March 31, 2021
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income		Equity
Balances at December 31, 2020	54,370	$	54	$	221,525	$	186,374	$	265	$	408,218
Stock-based compensation	—		—		16,663		—		—		16,663
Stock options exercised	104		—		545		—		—		545
Issuance of common stock upon vesting of restricted stock units	14		—		—		—		—		—
Net settlement for taxes and/or exercise price related to equity awards	(37)		—		(7,525)		—		—		(7,525)
Unrealized losses on securities, net of tax	—		—		—		—		(126)		(126)
Net income	—		—		—		36,834		—		36,834
Balances at March 31, 2021	54,451	$	54	$	231,208	$	223,208	$	139	$	454,609

	Nine Months Ended March 31, 2020
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income (Loss)		Equity
Balances at June 30, 2019	53,075	$	53	$	207,982	$	99,817	$	112	$	307,964
Stock-based compensation	—		—		36,191		—		—		36,191
Stock options exercised	153		—		1,707		—		—		1,707
Issuance of common stock upon vesting of restricted stock units	708		1		(1)		—		—		—
Issuance of common stock under employee stock purchase plan	45		—		3,961		—		—		3,961
Net settlement for taxes and/or exercise price related to equity awards	(321)		—		(34,739)		—		—		(34,739)
Unrealized losses on securities, net of tax	—		—		—		—		(214)		(214)
Net income	—		—		—		59,505		—		59,505
Balances at March 31, 2020	53,660	$	54	$	215,101	$	159,322	$	(102)	$	374,375

	Nine Months Ended March 31, 2021
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income		Equity
Balances at June 30, 2020	53,792	$	54	$	227,907	$	164,272	$	675	$	392,908
Stock-based compensation	—		—		48,896		—		—		48,896
Stock options exercised	338		—		2,477		—		—		2,477
Issuance of common stock upon vesting of restricted stock units	622		—		—		—		—		—
Issuance of common stock under employee stock purchase plan	60		—		6,100		—		—		6,100
Net settlement for taxes and/or exercise price related to equity awards	(361)		—		(54,172)		—		—		(54,172)
Unrealized losses on securities, net of tax	—		—		—		—		(536)		(536)
Net income	—		—		—		58,936		—		58,936
Balances at March 31, 2021	54,451	$	54	$	231,208	$	223,208	$	139	$	454,609

See accompanying notes to the unaudited consolidated financial statements.

4

PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Statements of Cash Flows

(in thousands)

	Nine Months Ended
	March 31,
	2020		2021
Cash flows from operating activities:
Net income	$	59,505	$	58,936
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense		34,348		46,947
Depreciation and amortization expense		27,832		32,070
Deferred income tax expense (benefit)		1,544		(10,656)
Provision for credit losses		232		213
Net accretion of discounts and amortization of premiums on available-for-sale securities		(1,673)		315
Amortization of debt issuance costs		113		127
Other		331		545
Changes in operating assets and liabilities:
Accounts receivable		(1,635)		(4,495)
Deferred contract costs		(37,829)		(39,621)
Prepaid expenses and other		68		(2,531)
Accounts payable		863		1,592
Accrued expenses and other		3,096		2,318
Net cash provided by operating activities		86,795		85,760
Cash flows from investing activities:
Purchases of available-for-sale securities and other		(400,343)		—
Proceeds from sales and maturities of available-for-sale securities		250,791		82,488
Capitalized internal-use software costs		(19,213)		(21,664)
Purchases of property and equipment		(14,578)		(8,155)
Acquisition of business, net of cash acquired		—		(14,992)
Net cash provided by (used in) investing activities		(183,343)		37,677
Cash flows from financing activities:
Net change in client fund obligations		334,707		724,610
Repayment of credit facility		—		(100,000)
Proceeds from exercise of stock options		—		146
Proceeds from employee stock purchase plan		3,961		6,100
Taxes paid related to net share settlement of equity awards		(33,136)		(51,828)
Payment of debt issuance costs		(675)		(56)
Net cash provided by financing activities		304,857		578,972
Net change in cash, cash equivalents and funds held for clients' cash and cash equivalents		208,309		702,409
Cash, cash equivalents and funds held for clients' cash and cash equivalents—beginning of period		1,426,143		1,492,133
Cash, cash equivalents and funds held for clients' cash and cash equivalents—end of period	$	1,634,452	$	2,194,542
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Liabilities assumed for acquisition	$	—	$	281
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	115	$	820
Cash paid (refunds received) for income taxes	$	24	$	(222)
Reconciliation of cash, cash equivalents and funds held for clients' cash and cash equivalents to the Unaudited Consolidated Balance Sheets
Cash and cash equivalents	$	114,325	$	175,453
Funds held for clients' cash and cash equivalents		1,520,127		2,019,089
Total cash, cash equivalents and funds held for clients' cash and cash equivalents	$	1,634,452	$	2,194,542

See accompanying notes to unaudited consolidated financial statements.

5

PAYLOCITY HOLDING CORPORATION

Notes to the Unaudited Consolidated Financial Statements

(all amounts in thousands, except per share data)

(1)  Organization and Description of Business

Paylocity Holding Corporation (the “Company”) is a cloud-based provider of payroll and human capital management software solutions for medium-sized organizations. Services are provided in a Software-as-a-Service (“SaaS”) delivery model utilizing the Company’s cloud-based platform. The Company’s comprehensive product suite delivers a unified platform that allows clients to make strategic decisions in the areas of payroll, core HR, workforce management, talent and benefits.

(2)  Summary of Significant Accounting Policies

(a)  Basis of Presentation, Consolidation and Use of Estimates

These unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Future events, including the impact from the outbreak of the novel coronavirus disease (“COVID-19”), and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. Accounting estimates used in the preparation of these consolidated financial statements may change as new events occur, more experience and additional information is acquired, and the operating environment evolves, including the ongoing impact of COVID-19.

(b)  Interim Unaudited Consolidated Financial Information

The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with GAAP and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s financial position, results of operations, changes in stockholders’ equity and cash flows. The results of operations for three or nine months ended March 31, 2021 are not necessarily indicative of the results for the full year or the results for any future periods. The impact of the COVID-19 pandemic will not be fully known or reflected in the Company’s results of operations and overall financial performance until future periods. Refer to “Part I. Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC on August 7, 2020 for risks related to the COVID-19 pandemic and its impact on the Company’s business and financial performance. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K.

(c)  Income Taxes

Income taxes are accounted for in accordance with ASC 740, Income Taxes, using the asset and liability method. The Company’s provision for income taxes is based on the annual effective rate method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 

6

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net-recorded amount, it would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

(d)  Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial instruments held at amortized cost, including trade receivables. Under ASU 2016-13, the Company assesses its allowance for credit losses on accounts receivable by taking into consideration current economic conditions, reasonable and supportable forecasts, as well as past experience including historical write-off trends and client-specific circumstances. The new standard also eliminated the concept of other-than-temporary impairment and requires expected credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The Company adopted this standard effective July 1, 2020, using a modified retrospective approach, and the adoption did not have a material impact on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which amends the requirements for fair value measurement disclosures. ASU 2018-13 removes, modifies or adds certain disclosure requirements under GAAP. The Company adopted this standard on July 1, 2020, and removed or modified disclosure requirements retrospectively to all periods presented, whereas any new requirements are being applied prospectively from the adoption date. The adoption of this standard did not have a material impact on the Company’s financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) which provides guidance to reduce complexity in certain areas of accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and simplifies various aspects of the current guidance to promote consistent application of the standard among reporting entities. The Company adopted ASU 2019-12 on July 1, 2020, and the adoption of this standard did not have a material impact on the Company’s financial statements.

(e)  Recently Issued Accounting Standards

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of other recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption.

(3) Revenue

The Company derives its revenue from contracts predominantly from recurring and non-recurring service fees. While the majority of its agreements are generally cancellable by the client on 60 days’ notice or less, the Company also has term arrangements, which are generally two years in length. Recurring fees are derived from payroll, timekeeping, and HR-related cloud-based computing services. The majority of the Company’s recurring fees are satisfied over time as services are provided. The performance obligations related to payroll services are satisfied upon the processing of the client’s payroll with the fee charged and collected based on a per employee per payroll frequency fee. The performance obligations related to time and attendance services and HR related services are satisfied over time each month with the fee charged and collected based on a per employee per month fee. For subscription-based fees which can include payroll, time and attendance, and HR related services, the Company recognizes the applicable recurring fees over time each month with the fee charged and collected based on a per employee per month fee. Non-recurring service fees consist mainly of nonrefundable implementation fees, which involve setting the client up in, and loading data into, the

7

Company’s cloud-based modules. These implementation activities are considered set-up activities. The Company has determined that the nonrefundable upfront fees provide certain clients with a material right to renew the contract. Implementation fees are deferred and amortized generally over a period up to 24 months.

Disaggregation of revenue

The following table disaggregates revenue by Recurring fees and Implementation services and other, which the Company believes depicts the nature, amount and timing of its revenue:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2021		2020		2021
Recurring fees	$	161,266	$	178,711	$	402,605	$	448,864
Implementation services and other		5,829		6,216		14,343		16,331
Total revenues from contracts	$	167,095	$	184,927	$	416,948	$	465,195

Deferred revenue

The timing of revenue recognition for recurring revenue is consistent with the timing of invoicing as they occur simultaneously based on the client’s payroll frequency or by month for subscription-based fees. As such, the Company does not recognize contract assets or liabilities related to recurring revenue.

The nonrefundable upfront fees related to implementation services are invoiced with the client’s first payroll period. The Company defers and amortizes these nonrefundable upfront fees generally over a period up to 24 months based on the type of contract. The following table summarizes the changes in deferred revenue (i.e. contract liability) related to these nonrefundable upfront fees as follows:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2021		2020		2021
Balance at beginning of the period	$	6,853	$	7,065	$	6,289	$	8,434
Deferral of revenue		6,099		5,821		12,342		11,811
Revenue recognized		(3,992)		(4,097)		(9,671)		(11,456)
Balance at end of the period	$	8,960	$	8,789	$	8,960	$	8,789

Deferred revenue related to these nonrefundable upfront fees are recorded within Accrued expenses and Other long-term liabilities on the Unaudited Consolidated Balance Sheets. The Company expects to recognize these deferred revenue balances of $3,389 in fiscal 2021, $4,425 in fiscal 2022 and $975 in fiscal 2023 and thereafter.

Deferred contract costs

The Company defers certain selling and commission costs that meet the capitalization criteria under ASC 340-40. The Company also capitalizes certain costs to fulfill a contract related to its proprietary products if they are identifiable, generate or enhance resources used to satisfy future performance obligations and are expected to be recovered under ASC 340-40. Implementation fees are treated as nonrefundable upfront fees and the related implementation costs are required to be capitalized and amortized over the expected period of benefit, which is the period in which the Company expects to recover the costs and enhance its ability to satisfy future performance obligations.

The Company utilizes the portfolio approach to account for both the cost of obtaining a contract and the cost of fulfilling a contract. These capitalized costs are amortized over the expected period of benefit, which has been determined to be over 7 years based on the Company’s average client life and other qualitative factors, including rate of technological changes. The Company does not incur any additional costs to obtain or fulfill contracts upon renewal. The Company recognizes additional selling and commission costs and fulfillment costs when an existing client purchases additional services. These additional costs only relate to the additional services purchased and do not relate to the renewal of previous services.

8

The following tables present the deferred contract costs and the related amortization expense for these deferred contract costs:

	Three Months Ended March 31, 2020
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	92,848	$	15,141	$	(5,738)	$	102,251
Costs to fulfill a contract		32,685		7,483		(1,491)		38,677
Total	$	125,533	$	22,624	$	(7,229)	$	140,928

	Three Months Ended March 31, 2021
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	125,817	$	17,315	$	(7,390)	$	135,742
Costs to fulfill a contract		55,657		8,872		(2,607)		61,922
Total	$	181,474	$	26,187	$	(9,997)	$	197,664

	Nine Months Ended March 31, 2020
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	82,103	$	36,027	$	(15,879)	$	102,251
Costs to fulfill a contract		20,996		21,348		(3,667)		38,677
Total	$	103,099	$	57,375	$	(19,546)	$	140,928

	Nine Months Ended March 31, 2021
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	113,575	$	43,026	$	(20,859)	$	135,742
Costs to fulfill a contract		44,468		24,376		(6,922)		61,922
Total	$	158,043	$	67,402	$	(27,781)	$	197,664

Deferred contract costs are recorded within Deferred contract costs and Long-term deferred contract costs on the Unaudited Consolidated Balance Sheets. Amortization of deferred contract costs is recorded in Cost of revenues, Sales and marketing, and General and administrative in the Unaudited Consolidated Statements of Operations and Comprehensive Income.

Remaining Performance Obligations

The balance of the Company’s remaining performance obligations related to minimum monthly fees on its term-based contracts was approximately $47,582 as of March 31, 2021, which will be generally recognized over the next 24 months. This balance excludes the value of unsatisfied performance obligations for contracts that have an original expected duration of one year or less and contracts for which the variable consideration is allocated entirely to wholly unsatisfied performance obligations.

(4)  Business Combinations

In November 2020, the Company acquired all of the shares outstanding of Samepage Labs Inc. (“Samepage”) through a merger for purchase price consideration of $15,018, which was paid in cash upon closing. Samepage offers digital collaboration tools including task management, file sharing, real-time collaboration and more. This transaction expands the Company’s product functionality in these areas and demonstrates its commitment to building a modern workforce suite of solutions that meet the needs of HR teams and employees.

The Company accounts for business combinations in accordance with ASC 805, Business Combinations. The Company recorded the acquisition using the acquisition method of accounting and recognized assets and liabilities at their fair value as of the date of acquisition, with the excess recorded to goodwill. The preliminary allocation of the purchase price is approximately $11,529 of goodwill, $3,167 of proprietary technology and other immaterial assets and liabilities. The fair values of assets acquired and liabilities assumed may change over the measurement period as

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additional information is received. The primary area that is subject to change is deferred taxes. The measurement period will end no later than one year from the acquisition date.

The results from this acquisition have been included in the Company’s consolidated financial statements since the closing of the acquisition. Pro forma information was not presented because the effect of the acquisition was not material to the Company’s consolidated financial statements. The goodwill associated with this acquisition is not deductible for income tax purposes. Direct costs related to the acquisition were recorded as General and administrative expenses as incurred.

In April 2020, the Company acquired all of the shares outstanding of VidGrid Inc. (“VidGrid”). During the second quarter of fiscal 2021, the Company completed its purchase accounting for this acquisition and did not record any changes to the preliminary purchase price allocation. Refer to Note 6 of the audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2020 for additional details on the acquisition of VidGrid.

(5)  Balance Sheet Information

The following tables provide details of selected consolidated balance sheet items:

Activity in the allowance for credit losses related to accounts receivable was as follows:

Balance at June 30, 2020		617
Charged to expense		213
Write-offs		(66)
Balance at March 31, 2021	$	764

Capitalized internal-use software and accumulated amortization were as follows:

	June 30,		March 31,
	2020		2021
Capitalized internal-use software	$	119,178	$	142,654
Accumulated amortization		(82,677)		(99,950)
Capitalized internal-use software, net	$	36,501	$	42,704

Amortization of capitalized internal-use software costs is included in Cost of revenues and amounted to $4,926 and $6,005 for the three months ended March 31, 2020 and 2021, respectively, and $14,073 and $17,273 for the nine months ended March 31, 2020 and 2021, respectively.

Property and equipment, net consist of the following:

	June 30,		March 31,
	2020		2021
Office equipment	$	4,619	$	5,208