10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

________________________________________________________________________

Form 10-Q

________________________________________________________________________

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

For the quarterly period ended September 30, 2022

o 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 x No o

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 x No o

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	x	Accelerated Filer	o
Non-Accelerated Filer	o	Smaller Reporting Company	o
		Emerging Growth Company	o

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. o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 55,673,889 shares of Common Stock, $0.001 par value per share, as of October 28, 2022.

Paylocity Holding Corporation

Form 10-Q

For the Quarterly Period Ended September 30, 2022

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	29
ITEM 4. CONTROLS AND PROCEDURES	30
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	31
ITEM 1A. RISK FACTORS	31
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	31
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	31
ITEM 4. MINE SAFETY DISCLOSURES	31
ITEM 5. OTHER INFORMATION	31
ITEM 6. EXHIBITS	31
SIGNATURES	33

1

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Balance Sheets

(in thousands, except per share data)

	June 30, 2022		September 30, 2022
Assets
Current assets:
Cash and cash equivalents	$	139,756	$	65,484
Accounts receivable, net	15,754		21,519
Deferred contract costs	59,501		64,058
Prepaid expenses and other	28,896		29,122
Total current assets before funds held for clients	243,907		180,183
Funds held for clients	3,987,776		2,299,437
Total current assets	4,231,683		2,479,620
Capitalized internal-use software, net	61,985		66,693
Property and equipment, net	62,839		60,943
Operating lease right-of-use assets	49,210		47,614
Intangible assets, net	45,475		42,704
Goodwill	101,949		102,054
Long-term deferred contract costs	229,067		244,554
Long‑term prepaid expenses and other	7,746		7,624
Deferred income tax assets	19,060		43,303
Total assets	$	4,809,014	$	3,095,109
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,374	$	6,235
Accrued expenses	124,384		105,907
Total current liabilities before client fund obligations	132,758		112,142
Client fund obligations	3,987,776		2,299,437
Total current liabilities	4,120,534		2,411,579
Long-term operating lease liabilities	69,119		67,040
Other long-term liabilities	3,681		3,427
Deferred income tax liabilities	2,217		2,217
Total liabilities	$	4,195,551	$	2,484,263
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2022 and September 30, 2022	$	—	$	—
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2022 and September 30, 2022; 55,190 shares issued and outstanding at June 30, 2022 and 55,664 shares issued and outstanding at September 30, 2022	55		56
Additional paid-in capital	289,843		259,245
Retained earnings	325,868		356,220
Accumulated other comprehensive loss	(2,303)		(4,675)
Total stockholders' equity	$	613,463	$	610,846
Total liabilities and stockholders’ equity	$	4,809,014	$	3,095,109

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 September 30,
	2021		2022
Revenues:
Recurring and other revenue	$	180,824	$	245,406
Interest income on funds held for clients	873		7,874
Total revenues	181,697		253,280
Cost of revenues	63,249		84,543
Gross profit	118,448		168,737
Operating expenses:
Sales and marketing	49,885		71,063
Research and development	23,076		40,093
General and administrative	35,235		50,492
Total operating expenses	108,196		161,648
Operating income	10,252		7,089
Other expense	(117)		(163)
Income before income taxes	10,135		6,926
Income tax benefit	(20,797)		(23,426)
Net income	$	30,932	$	30,352
Other comprehensive loss, net of tax	(75)		(2,372)
Comprehensive income	$	30,857	$	27,980
Net income per share:
Basic	$	0.56	$	0.55
Diluted	$	0.55	$	0.54
Weighted-average shares used in computing net income per share:
Basic	54,810		55,453
Diluted	56,506		56,664

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 September 30, 2021
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount
Balances at June 30, 2021	54,594	$	55	$	241,718	$	235,091	$	66	$	476,930
Stock-based compensation	—	—		21,106		—		—		21,106
Stock options exercised	151	—		1,429		—		—		1,429
Issuance of common stock upon vesting of restricted stock units	524	—		—		—		—		—
Net settlement for taxes and/or exercise price related to equity awards	(250)	—		(62,749)		—		—		(62,749)
Unrealized losses on securities, net of tax	—	—		—		—		(75)		(75)
Net income	—	—		—		30,932		—		30,932
Balances at September 30, 2021	55,019	$	55	$	201,504	$	266,023	$	(9)	$	467,573

	Three Months Ended September 30, 2022
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balances at June 30, 2022	55,190	$	55	$	289,843	$	325,868	$	(2,303)	$	613,463
Stock-based compensation	—	—		43,471		—		—		43,471
Stock options exercised	235	—		2,832		—		—		2,832
Issuance of common stock upon vesting of restricted stock units	549	1		(1)		—		—		—
Net settlement for taxes and/or exercise price related to equity awards	(310)	—		(76,900)		—		—		(76,900)
Unrealized losses on securities, net of tax	—	—		—		—		(2,372)		(2,372)
Net income	—	—		—		30,352		—		30,352
Balances at September 30, 2022	55,664	$	56	$	259,245	$	356,220	$	(4,675)	$	610,846

See accompanying notes to the unaudited consolidated financial statements.

4

PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Statements of Cash Flows

(in thousands)

	Three Months Ended September 30,
	2021		2022
Cash flows from operating activities:
Net income	$	30,932	$	30,352
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Stock-based compensation expense	19,559		39,813
Depreciation and amortization expense	11,322		14,267
Deferred income tax benefit	(20,827)		(23,415)
Provision for credit losses	38		266
Net accretion of discounts and amortization of premiums on available-for-sale securities	90		(842)
Amortization of debt issuance costs	44		94
Other	27		125
Changes in operating assets and liabilities:
Accounts receivable	(173)		(6,020)
Deferred contract costs	(11,114)		(19,328)
Prepaid expenses and other	(9,807)		614
Accounts payable	1,567		(1,805)
Accrued expenses and other	(25,790)		(17,734)
Net cash provided by (used in) operating activities	(4,132)		16,387
Cash flows from investing activities:
Purchases of available-for-sale securities	(135,849)		(118,926)
Proceeds from sales and maturities of available-for-sale securities	9,648		42,850
Capitalized internal-use software costs	(9,159)		(9,953)
Purchases of property and equipment	(3,220)		(3,447)
Acquisitions of businesses, net of cash acquired	(59,581)		—
Net cash used in investing activities	(198,161)		(89,476)
Cash flows from financing activities:
Net change in client fund obligations	1,425,782		(1,688,339)
Taxes paid related to net share settlement of equity awards	(60,809)		(74,071)
Payment of debt issuance costs	(9)		(855)
Net cash provided by (used in) financing activities	1,364,964		(1,763,265)
Net change in cash, cash equivalents and funds held for clients' cash and cash equivalents	1,162,671		(1,836,354)
Cash, cash equivalents and funds held for clients' cash and cash equivalents—beginning of period	1,945,881		3,793,453
Cash, cash equivalents and funds held for clients' cash and cash equivalents—end of period	$	3,108,552	$	1,957,099
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Purchases of property and equipment, accrued but not paid	$	3,079	$	—
Liabilities assumed for acquisitions	$	2,165	$	117
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	63	$	62
Cash paid for income taxes	$	13	$	19
Reconciliation of cash, cash equivalents and funds held for clients' cash and cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents	$	66,431	$	65,484
Funds held for clients' cash and cash equivalents	3,042,121		1,891,615
Total cash, cash equivalents and funds held for clients' cash and cash equivalents	$	3,108,552	$	1,957,099

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 human capital management and payroll software solutions that deliver a comprehensive platform for the modern workforce. Services are provided in a Software-as-a-Service (“SaaS”) delivery model. The Company’s comprehensive product suite delivers a unified platform that helps businesses attract and retain talent, build culture and connection with their employees, and streamline and automate HR and payroll processes.

(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 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, as more experience is acquired, as additional information is obtained and as the operating environment changes.

(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 the three months ended September 30, 2022 are not necessarily indicative of the results for the full year or the results for any future periods. 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, 2022 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.

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.

6

(d) Recently Issued Accounting Standards

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board 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 offers term agreements to its clients, 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 other HCM 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 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.

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 September 30,
	2021		2022
Recurring fees	$	174,697	$	236,819
Implementation services and other	6,127		8,587
Total revenues from contracts	$	180,824	$	245,406

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 payroll processing period or by month. As such, the Company does not recognize contract assets or liabilities related to recurring revenue.

The Company defers and amortizes nonrefundable upfront fees related to implementation services 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 September 30,
	2021		2022
Balance at beginning of the period	$	8,734	$	12,233
Deferral of revenue	4,353		8,232
Revenue recognized	(4,370)		(6,270)
Balance at end of the period	$	8,717	$	14,195

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 $10,462 in fiscal 2023, $3,518 in fiscal 2024 and $215 in fiscal 2025 and thereafter.

7

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.

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

	Three Months Ended September 30, 2021
	Beginning balance		Capitalized costs		Amortization		Ending balance
Costs to obtain a new contract	$	145,718	$	11,737	$	(8,233)	$	149,222
Costs to fulfill a contract	69,175		10,940		(3,330)		76,785
Total	$	214,893	$	22,677	$	(11,563)	$	226,007

	Three Months Ended September 30, 2022
	Beginning balance		Capitalized costs		Amortization		Ending balance
Costs to obtain a new contract	$	182,543	$	18,912	$	(10,367)	$	191,088
Costs to fulfill a contract	106,025		16,862		(5,363)		117,524
Total	$	288,568	$	35,774	$	(15,730)	$	308,612

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 $52,591 as of September 30, 2022, 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

On January 18, 2022, the Company acquired all of the shares outstanding of Cloudsnap, Inc., ("Cloudsnap") through a merger for cash consideration of $50,002, which was paid upon closing. Cloudsnap is a provider of a flexible, low-code solution for integrating disparate business applications. This transaction enables the Company to deliver modern integrations and seamless data sharing between critical systems more efficiently and effectively, while helping to unify and automate business processes across clients' HR, finance, benefits, and other systems.

8

The allocation of the purchase price for Cloudsnap is as follows:

	January 18, 2022
Proprietary technology	$	15,800
Goodwill	33,628
Other assets acquired	3,398
Liabilities assumed	(2,824)
Total purchase price	$	50,002

The Company did not record any material purchase accounting adjustments for Cloudsnap during the three months ended September 30, 2022. The Company accounts for business combinations in accordance with ASC 805, Business Combinations. The Company applied the acquisition method of accounting and recorded the assets acquired and liabilities assumed at their respective estimated fair values as of the date of the acquisition with the excess consideration paid recorded as goodwill.

The results from this acquisition have been included in the Company’s consolidated financial statements since the closing of the acquisition and are not material to the Company. Pro forma information is not presented because the effects of the acquisition are not material to the Company’s consolidated financial statements. The goodwill related to this acquisition is primarily attributable to the assembled workforce and growth opportunities from the expansion and enhancement of the Company’s product offerings. The goodwill associated with this acquisition is not deductible for income tax purposes. Direct costs related to the acquisition were immaterial and were expensed as incurred as General and administrative.

(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, 2022	$	841
Charged to expense	266
Write-offs	(48)
Balance at September 30, 2022	$	1,059

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

	June 30, 2022		September 30, 2022
Capitalized internal-use software	$	193,156	$	204,906
Accumulated amortization	(131,171)		(138,213)
Capitalized internal-use software, net	$	61,985	$	66,693

Amortization of capitalized internal-use software costs is primarily included in Cost of revenues and amounted to $6,128 and $7,042 for the three months ended September 30, 2021 and 2022, respectively.

9

The major classes of property and equipment, net were as follow:

	June 30, 2022		September 30, 2022
Office equipment	$	4,365	$	4,365
Computer equipment	55,495		56,157
Furniture and fixtures	12,791		12,801
Software	8,785		8,518
Leasehold improvements	47,521		47,722
Time clocks rented by clients	6,711		7,039
Total	135,668		136,602
Accumulated depreciation	(72,829)		(75,659)
Property and equipment, net	$	62,839	$	60,943

Depreciation expense amounted to $3,842 and $4,454 for the three months ended September 30, 2021 and 2022, respectively.

The following table summarizes changes in goodwill during the three months ended September 30, 2022:

	September 30, 2022
Balance at June 30, 2022	$	101,949
Measurement period adjustments	105
Balance at September 30, 2022	$	102,054

Refer to Note 4 for further details on current year acquisition activity.

The Company’s amortizable intangible assets and estimated useful lives were as follows:

	June 30, 2022		September 30, 2022		Weighted average useful life (years)
Proprietary technology	$	43,129	$	43,129	6.0
Client relationships	22,200		22,200		7.8
Non-solicitation agreements	1,600		1,600		3.1
Trade names	1,640		1,640		5.0
Total	68,569		68,569
Accumulated amortization	(23,094)		(25,865)
Intangible assets, net	$	45,475	$	42,704

Amortization expense for acquired intangible assets was $1,352 and $2,771 for the three months ended September 30, 2021 and 2022, respectively, and is included in Cost of revenues and General and administrative.

Future amortization expense for acquired intangible assets as of September 30, 2022 is as follows:

Remainder of fiscal 2023	$	8,177
Fiscal 2024	9,943
Fiscal 2025	8,888
Fiscal 2026	7,269
Fiscal 2027	4,893
Thereafter	3,534
Total	$	42,704

10

The components of accrued expenses were as follows:

	June 30, 2022		September 30, 2022
Accrued payroll and personnel costs	$	84,897	$	61,104
Operating lease liabilities	8,399		8,365
Deferred revenue	13,548		16,810
Other	17,540		19,628
Total accrued expenses	$	124,384	$	105,907

(6) Corporate Investments and Funds Held for Clients

Corporate investments and funds held for clients consisted of the following:

	June 30, 2022
Type of Issue	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Cash and cash equivalents	$	139,756	$	—	$	—	$	139,756
Funds held for clients' cash and cash equivalents	3,653,699		—		(2)		3,653,697
Available-for-sale securities:
Commercial paper	58,166		—		(126)		58,040
Corporate bonds	59,568		—		(1,715)		57,853
Asset-backed securities	9,843		2		(141)		9,704
Certificates of deposit	31,879		—		(43)		31,836
U.S. treasury securities	167,566		12		(591)		166,987
U.S government agency securities	8,000		—		(451)		7,549
Other	2,181		—		(71)		2,110
Total available-for-sale securities	337,203		14		(3,138)		334,079
Total investments	$	4,130,658	$	14	$	(3,140)	$	4,127,532

	September 30, 2022
Type of Issue	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Cash and cash equivalents	$	65,484	$	—	$	—	$	65,484
Funds held for clients' cash and cash equivalents	1,891,615		—		—		1,891,615
Available-for-sale securities:
Commercial paper	47,318		1		(112)		47,207
Corporate bonds	67,696		—		(2,428)		65,268
Asset-backed securities	18,875		—		(327)		18,548
Certificates of deposit	28,184		6		(20)		28,170
U.S. treasury securities	239,246		—		(2,656)		236,590
U.S government agency securities	8,000		—		(612)		7,388
Other	4,784		—		(133)		4,651
Total available-for-sale securities	414,103		7		(6,288)		407,822
Total investments	$	2,371,202	$	7	$	(6,288)	$	2,364,921

All available-for-sale securities were included in Funds held for clients at June 30, 2022 and September 30, 2022

Cash and cash equivalents and funds held for clients’ cash and cash equivalents included demand deposit accounts, money market funds, commercial paper and certificates of deposit at June 30, 2022 and September 30, 2022.

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Classification of investments on the Unaudited Consolidated Balance Sheets was as follows:

	June 30, 2022		September 30, 2022
Cash and cash equivalents	$	139,756	$	65,484
Funds held for clients	3,987,776		2,299,437
Total investments	$	4,127,532	$	2,364,921

Available-for-sale securities that had been in an unrealized loss position for a period of less and greater than 12 months as of June 30, 2022 and September 30, 2022 had fair market value as follows:

	June 30, 2022
	Securities in an unrealized loss position for less than 12 months				Securities in an unrealized loss position for greater than 12 months				Total
	Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value
Commercial paper	$	(126)	$	53,756	$	—	$	—	$	(126)	$	53,756
Corporate bonds	(1,715)		57,853		—		—		(1,715)		57,853
Asset-backed securities	(141)		7,354		—		—		(141)		7,354
Certificates of deposit	(43)		27,086		—		—		(43)		27,086
U.S. treasury securities	(591)		129,943		—		—		(591)		129,943
U.S. government agency securities	(451)		7,549		—		—		(451)		7,549
Other	(71)		2,110		—		—		(71)		2,110
Total available-for-sale securities	$	(3,138)	$	285,651	$	—	$	—	$	(3,138)	$	285,651

	September 30, 2022
	Securities in an unrealized loss position for less than 12 months				Securities in an unrealized loss position for greater than 12 months				Total
	Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value
Commercial paper	$	(112)	$	46,207	$	—	$	—	$	(112)	$	46,207
Corporate bonds	(1,849)		52,213		(579)		13,055		(2,428)		65,268
Asset-backed securities	(314)		16,871		(13)		1,419		(327)		18,290
Certificates of deposit	(20)		16,913		—		—		(20)		16,913
U.S. treasury securities	(2,656)		236,590		—		—		(2,656)		236,590
U.S. government agency securities	(34)		966		(578)		6,422		(612)		7,388
Other	(78)		3,732		(55)		864		(133)		4,596
Total available-for-sale securities	$	(5,063)	$	373,492	$	(1,225)	$	21,760	$	(6,288)	$	395,252

The Company regularly reviews the composition of its portfolio to determine the existence of credit impairment. The Company did not recognize any credit impairment losses during the three months ended September 30, 2021 or 2022. All securities in the Company’s portfolio held an A-1 rating or better as of September 30, 2022.

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The Company did not make any material reclassification adjustments out of accumulated other comprehensive income for realized gains and losses on the sale of available-for-sale securities during the three months ended September 30, 2021 or 2022. There were no realized gains or losses on the sale of available-for-sale securities for the three months ended September 30, 2021 or 2022.

Expected maturities of available-for-sale securities at September 30, 2022 were as follows:

	Amortized cost		Fair value
One year or less	$	275,556	$	274,072
One year to two years	74,836		72,546
Two years to three years	61,708		59,442
Three years to five years	2,003		1,762
Total available-for-sale securities	$	414,103	$	407,822

(7) Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

•Level 1—Quoted prices in active markets for identical assets and liabilities.

•Level 2—Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company measures certain cash and cash equivalents, accounts receivable, accounts payable and client fund obligations at fair value on a recurring basis using Level 1 inputs. The Company considers the recorded value of these financial assets and liabilities to approximate the fair value of the respective assets and liabilities at June 30, 2022 and September 30, 2022 based upon the short-term nature of these assets and liabilities.

Marketable securities, consisting of securities classified as available-for-sale as well as certain cash equivalents, are recorded at fair value on a recurring basis using Level 2 inputs obtained from an independent pricing service. Available-for-sale securities include commercial paper, corporate bonds, asset-backed securities, certificates of deposit, U.S. treasury securities, U.S. government agency and other securities. The independent pricing service utilizes a variety of inputs including benchmark yields, broker/dealer quoted prices, reported trades, issuer spreads as well as other available market data. The Company, on a sample basis, validates the pricing from the independent pricing service against another third-party pricing source for reasonableness. The Company has not adjusted any prices obtained by the independent pricing service, as it believes they are appropriately valued. There were no available-for-sale securities classified in Level 3 of the fair value hierarchy at June 30, 2022 or September 30, 2022.

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The fair value level for the Company’s cash and cash equivalents and available-for-sale securities was as follows:

	June 30, 2022
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	139,756	$	139,756	$	—	$	—
Funds held for clients' cash and cash equivalents	3,653,697		3,640,427		13,270		—
Available-for-sale securities:
Commercial paper	58,040		—		58,040		—
Corporate bonds	57,853		—		57,853		—
Asset-backed securities	9,704		—		9,704		—
Certificates of deposit	31,836		—		31,836		—
U.S. treasury securities	166,987		—		166,987		—
U.S government agency securities	7,549		—		7,549		—
Other	2,110		—		2,110		—
Total available-for-sale securities	334,079		—		334,079		—
Total investments	$	4,127,532	$	3,780,183	$	347,349	$	—

	September 30, 2022
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	65,484	$	65,484	$	—	$	—
Funds held for clients' cash and cash equivalents	1,891,615		1,887,494		4,121		—
Available-for-sale securities:
Commercial paper	47,207		—		47,207		—
Corporate bonds	65,268		—		65,268		—
Asset-backed securities	18,548		—		18,548		—
Certificates of deposit	28,170		—		28,170		—
U.S. treasury securities	236,590		—		236,590		—
U.S government agency securities	7,388		—		7,388		—
Other	4,651		—		4,651		—
Total available-for-sale securities	407,822		—		407,822		—
Total investments	$	2,364,921	$	1,952,978	$	411,943	$	—

Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis

The Company records assets acquired and liabilities assumed in business combinations at fair value. Refer to Note 4 for further details on the fair value measurements of certain assets and liabilities recorded at fair value on a non-recurring basis.

(8) Debt

In July 2019, the Company entered into a revolving credit agreement with PNC Bank, National Association, and other lenders, which is secured by substantially all of the Company’s assets, subject to certain restrictions. In August 2022, the Company entered into a first amendment to the aforementioned credit agreement to increase the borrowing capacity of our revolving credit facility ("credit facility") to $550,000, which may be increased up to $825,000, subject to obtaining additional lender commitments and certain approvals and satisfying other requirements. The amended credit agreement extends the maturity date of the credit facility to August 2027 and replaces the interest rate based on London Interbank Offered Rate with an interest rate based on secured overnight financing rate ("SOFR"). The Company had no borrowings at June 30, 2022 or September 30, 2022.

The proceeds of any borrowings are to be used to fund working capital, capital expenditures and general corporate purposes, including permitted acquisitions, permitted investments, permitted distributions and share repurchases. The

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Company may generally borrow, prepay and reborrow under the credit facility and terminate or reduce the lenders’ commitments at any time prior to revolving credit facility expiration without a premium or a penalty, other than customary “breakage” costs.

Any borrowings under the credit facility will generally bear interest, at the Company’s option, at a rate per annum determined by reference to either the Term SOFR rate plus the SOFR Adjustment or an adjusted base rate, in each case plus an applicable margin ranging from 0.875% to 1.500% and 0.0% to 0.500%, respectively, based on the then-applicable net total leverage ratio. Additionally, the Company is required to pay certain commitment, letter of credit fronting and letter of credit participation fees on available and/or undrawn portions of the credit facility.

The Company is required to comply with certain customary affirmative and negative covenants, including a requirement to maintain a maximum net total leverage ratio of not greater than 4.00 to 1.00, (with a step up to 4.50 to 1.00 for the 4 consecutive fiscal quarters following a fiscal quarter in which certain permitted acquisitions are consummated), and a minimum interest coverage ratio of not less than 2.00 to 1.00. As of September 30, 2022, the Company was in compliance with all of the aforementioned covenants.

(9) Stock-Based Compensation

The Company maintains a 2008 Equity Incentive Plan (the “2008 Plan”) and a 2014 Equity Incentive Plan (the “2014 Plan”) pursuant to which the Company has reserved shares of its common stock for issuance to its employees, directors and non-employee third parties. The 2014 Plan serves as the successor to the 2008 Plan and permits the granting of restricted stock units and other equity incentives at the discretion of the compensation committee of the Company’s board of directors. No new awards have been or will be issued under the 2008 Plan since the effective date of the 2014 Plan. Outstanding awards under the 2008 Plan continue to be subject to the terms and conditions of the 2008 Plan. The number of shares of common stock reserved for issuance under the 2014 Plan may increase each calendar year, continuing through and including January 1, 2024. The number of shares added each year may be equal to the lesser of (a) four and five tenths percent (4.5%) of the number of shares of common stock of the Company issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the Company’s board of directors.

As of September 30, 2022, the Company had 13,827 shares allocated to the plans, of which 1,909 shares were subject to outstanding options or awards. Generally, the Company issues previously unissued shares for the exercise of stock options or vesting of awards; however, shares previously subject to 2014 Plan grants or awards that are forfeited or net settled at exercise or release may be reissued to satisfy future issuances.

The following table summarizes changes in the number of shares available for grant under the Company’s equity incentive plans during the three months ended September 30, 2022:

	Number of Shares
Available for grant at July 1, 2022	12,393
RSUs granted	(702)
MSUs granted	(78)
Shares withheld in settlement of taxes and/or exercise price	310
Forfeitures	63
Shares removed	(68)
Available for grant at September 30, 2022	11,918

Shares removed represents forfeitures of shares and shares withheld in settlement of taxes and/or payment of exercise price related to grants made under the 2008 Plan. As noted above, no new awards will be issued under the 2008 Plan.

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Stock-based compensation expense related to restricted stock units (“RSUs”), market share units (“MSUs”) and the Employee Stock Purchase Plan is included in the following line items in the accompanying unaudited consolidated statements of operations and comprehensive income:

	Three Months Ended September 30,
	2021		2022
Cost of revenues	$	2,607	$	4,041
Sales and marketing	5,159		9,559
Research and development	3,702		8,802
General and administrative	8,091		17,411
Total stock-based compensation expense	$	19,559	$	39,813

In addition, the Company capitalized $1,547 and $2,942 of stock-based compensation expense in its capitalized internal-use software costs in the three months ended September 30, 2021 and 2022.

There were no stock options granted during the three months ended September 30, 2022. The table below presents stock option activity during the three months ended September 30, 2022:

	Outstanding Options
	Number of shares	Weighted average exercise price		Weighted average remaining contractual term (years)	Aggregate intrinsic value
Balance at July 1, 2022	548	$	18.34	1.6	$	85,515
Options exercised	(235)	$	12.07
Balance at September 30, 2022	313	$	23.04	1.8	$	68,454
Options vested and exercisable at September 30, 2022	313	$	23.04	1.8	$	68,454

The total intrinsic value of options exercised was $35,868 and $48,143 during the three months ended September 30, 2021 and 2022, respectively.

The Company grants RSUs under the 2014 Plan with terms determined at the discretion of the compensation committee of the Company’s board of directors. RSUs generally vest over four years following the grant date and have time-based vesting conditions.

The following table represents restricted stock unit activity during the three months ended September 30, 2022:

	Units	Weighted average grant date fair value
Balance at July 1, 2022	1,327	$	168.44
RSUs granted	702	$	263.19
RSUs vested	(549)	$	137.09
RSUs forfeited	(60)	$	112.51
RSU balance at September 30, 2022	1,420	$	228.99

At September 30, 2022, there was $211,211 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested restricted stock units granted. That cost is expected to be recognized over a weighted average period of 2.0 years.

The Company also grants MSUs under the 2014 Plan with terms determined at the discretion of the compensation committee of the Company's board of directors. The actual number of MSUs that will be eligible to vest is based on the achievement of a relative total shareholder return (“TSR”) target as compared to the TSR realized by each of the companies comprising the Russell 3000 Index over an approximately three-year period. The MSUs cliff-vest at the end of the TSR measurement period, and up to 200% of the target number of shares subject to each MSU are eligible to be earned.

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The following table represents market share unit activity during the three months ended September 30, 2022:

	Units	Weighted average grant date fair value
MSU balance at July 1, 2022	101	$	263.83
MSUs granted	78	$	391.85
MSUs forfeited	(3)	$	355.60
MSU balance at September 30, 2022	176	$	319.34

The Company estimated the grant date fair value of the MSUs using a Monte Carlo simulation model that included the following assumptions:

	Three Months Ended September 30,
	2021		2022
Valuation assumptions:
Expected dividend yield	—%		—%
Expected volatility	47.5	%	51.0	%
Expected term (years)	3.04		3.04
Risk‑free interest rate	0.43%		3.11%

At September 30, 2022, there was $35,522 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested MSUs. That cost is expected to be recognized over a period of 2.6 years.

(10) Litigation

On November 16, 2020, a potential class action complaint was filed against the Company with the Circuit Court of Cook County alleging that the Company violated the Illinois Biometric Information Privacy Act. The complaint seeks statutory damages, attorney’s fees and other costs. The Company is unable to estimate any reasonably possible loss, or range of loss, with respect to this matter at this time. The Company intends to vigorously defend against this lawsuit.

From time to time, the Company is subject to litigation arising in the ordinary course of business. Many of these matters are covered in whole or in part by insurance. In the opinion of the Company’s management, the ultimate disposition of any matters currently outstanding or threatened will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity. However, these matters are subject to inherent uncertainties and could materially impact the Company’s financial position, results of operations, or liquidity based on the final disposition of these matters.

(11) Income Taxes

The Company’s quarterly provision for income taxes is based on the annual effective rate method. The Company’s quarterly provision for income taxes also includes the tax impact of certain unusual or infrequently occurring items, if any, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, and other discrete items in the interim period in which they occur.

On August 16, 2022, the Inflation Reduction Act (the "IRA") was signed into law and contains a number of tax related provisions. The Company is in the process of evaluating the IRA but does not expect it to have a material impact on the Company's consolidated financial statements.

The Company’s effective tax rate was (205.2)% and (338.2)% for the three months ended September 30, 2021 and 2022, respectively. The Company’s effective tax rate for the three months ended September 30, 2021 was lower than the federal statutory rate of 21% primarily due to excess tax benefits from employee stock-based compensation and state and local income taxes, partially offset by an increase to the valuation allowance. The Company's effective tax rate for the three months ended September 30, 2022 was lower than the federal statutory rate of 21% primarily due to excess tax benefits from employee stock-based compensation, state and local income taxes, and a decrease to the valuation allowance.

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(12) Net Income Per Share

Basic net income per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares outstanding during the period and, if dilutive, potential common shares outstanding during the period. The Company’s potential common shares consist of the incremental common shares issuable upon the exercise of stock options, the release of restricted stock units and market share units as of the balance sheet date. The following table presents the calculation of basic and diluted net income per share:

	Three Months Ended September 30,
	2021		2022
Numerator:
Net income	$	30,932	$	30,352
Denominator:
Weighted-average shares used in computing net income per share:
Basic	54,810		55,453
Weighted-average effect of potentially dilutive shares:
Employee stock options, restricted stock units and market share units	1,696		1,211
Diluted	56,506		56,664
Net income per share:
Basic	$	0.56	$	0.55
Diluted	$	0.55	$	0.54

The Company excluded 507 and 647 outstanding RSUs from the diluted per share calculations during the three months ended September 30, 2021 and September 30, 2022, respectively, because to include them would have been anti-dilutive.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The statements included herein that are not based solely on historical facts are “forward looking statements.” Such forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties. Our actual results could differ materially from those anticipated by us in these forward-looking statements as a result of various factors, including items discussed below and impacts from the novel coronavirus disease (COVID-19) as discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2022 filed with the SEC on August 5, 2022.

Overview

We are a leading cloud-based provider of human capital management, or HCM, and payroll software solutions that deliver a comprehensive platform for the modern workforce. Our HCM and payroll platform offers an intuitive, easy-to-use product suite that helps businesses attract and retain talent, build culture and connection with their employees, and streamline and automate HR and payroll processes.

Effective management of human capital is a core function in all organizations and requires a significant commitment of resources. Our cloud-based software solutions, combined with our unified database architecture, are highly flexible and configurable and feature a modern, intuitive user experience. Our platform offers automated data integration with hundreds of third-party partner systems, such as 401(k), benefits and insurance provider systems. We plan to continue to invest in research and development efforts that will allow us to offer a broader selection of products to new and existing clients focused on experiences that solve our clients’ challenges.

We believe there is a significant opportunity to grow our business by increasing our number of clients and we intend to invest in our business to achieve this purpose. We market and sell our solutions through our direct sales force. We have increased our sales and marketing expenses as we have added sales representatives and related sales and marketing personnel. We intend to continue to grow our sales and marketing organization across new and existing geographic territories. In addition to growing our number of clients, we intend to grow our revenue over the long term by increasing the number of solutions that clients purchase from us. To do so, we must continue to enhance and grow the number of solutions we offer to advance our platform.

We also believe that delivering a positive service experience is an essential element of our ability to sell our solutions and retain our clients. We supplement our comprehensive software solutions with an integrated implementation and client service organization, all of which are designed to meet the needs of our clients and prospects. We expect to continue to invest in and grow our implementation and client service organization as our client base grows.

We will continue to invest across our entire organization as we continue to grow our business over the long term. These investments include increasing the number of personnel across all functional areas, along with improving our solutions and infrastructure to support our growth. The timing and amount of these investments vary based on the rate at which we add new clients and personnel and scale our application development and other activities. Many of these investments will occur in advance of experiencing any direct benefit from them, which will make it difficult to determine if we are effectively allocating our resources. We expect these investments to increase our costs on an absolute basis, but as we grow our number of clients and our related revenues, we anticipate that we will gain economies of scale and increased operating leverage. As a result, we expect our gross and operating margins will improve over the long term.

Paylocity Holding Corporation is a Delaware corporation, which was formed in November 2013. Our business operations are conducted by our wholly owned subsidiaries.

Key Metrics

We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

Revenue Growth

Our recurring revenue model and high annual revenue retention rates provide significant visibility into our future operating results and cash flow from operations. This visibility enables us to better manage and invest in our business. Total revenues increased from $181.7 million for the three months ended September 30, 2021 to $253.3 million for the three months ended September 30, 2022, representing a 39% year-over-year increase. The increase in year-over-year revenue growth was driven by the strong performance by our sales team and also increases in client workforce levels and

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growth in interest income on funds held for clients attributable to rising interest rates and higher average daily balances for funds held for clients due to new clients and increases in client workforce levels as compared to the prior fiscal year. Our revenue growth in future periods may be impacted by fluctuations in client employee counts, potential increases in client losses, a changing interest rate environment, uncertainties around market and economic conditions including inflation risk, among other factors.

Adjusted Gross Profit and Adjusted EBITDA

We disclose Adjusted Gross Profit and Adjusted EBITDA because we use them to evaluate our performance, and we believe Adjusted Gross Profit and Adjusted EBITDA assist in the comparison of our performance across reporting periods by excluding certain items that we do not believe are indicative of our core operating performance. We believe these metrics are used in the financial community, and we present them to enhance investors’ understanding of our operating performance and cash flows.

Adjusted Gross Profit and Adjusted EBITDA are not measurements of financial performance under generally accepted accounting principles in the United States (“GAAP”), and you should not consider Adjusted Gross Profit as an alternative to gross profit or Adjusted EBITDA as an alternative to net income or cash provided by operating activities, in each case as determined in accordance with GAAP. In addition, our definition of Adjusted Gross Profit and Adjusted EBITDA may be different than the definition utilized for similarly-titled measures used by other companies.

We define Adjusted Gross Profit as gross profit before amortization of capitalized internal-use software costs, amortization of certain acquired intangibles, stock-based compensation expense and employer payroll taxes related to stock releases and option exercises, and other items as defined below. We define Adjusted EBITDA as net income before interest expense, income tax expense, depreciation and amortization expense, stock-based compensation expense and employer payroll taxes related to stock releases and option exercises and other items as defined below.

The table below sets forth our Adjusted Gross Profit and Adjusted EBITDA for the periods presented.

	Three Months Ended September 30,
	2021		2022
	(in thousands)
Adjusted Gross Profit	$	128,115	$	182,697
Adjusted EBITDA	46,124		66,623

	Three Months Ended September 30,
	2021		2022
	(in thousands)
Reconciliation from Gross Profit to Adjusted Gross Profit
Gross profit	$	118,448	$	168,737
Amortization of capitalized internal-use software costs	6,128		7,042
Amortization of certain acquired intangibles	—		1,854
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises	3,527		5,045
Other items (1)	12		19
Adjusted Gross Profit	$	128,115	$	182,697

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	Three Months Ended September 30,
	2021		2022
	(in thousands)
Reconciliation from Net income to Adjusted EBITDA
Net income	$	30,932	$	30,352
Interest expense	108		187
Income tax benefit	(20,797)		(23,426)
Depreciation and amortization expense	11,322		14,267
EBITDA	21,565		21,380
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises	23,756		44,978
Other items (2)	803		265
Adjusted EBITDA	$	46,124	$	66,623

(1)Represents nonrecurring acquisition-related costs.

(2)Represents nonrecurring costs including acquisition and other transaction-related costs.

Basis of Presentation

Revenues

Recurring and other revenue

We derive the majority of our revenues from recurring fees attributable to our cloud-based HCM and payroll software solutions. Recurring fees for each client generally include a base fee in addition to a fee based on the number of client employees and the number of products a client uses. We also charge fees attributable to our preparation of W-2 documents and annual required filings on behalf of our clients. We charge implementation fees for professional services provided to implement our HCM and payroll solutions. Implementations of our payroll solutions typically require one to eight weeks, depending on the size and complexity of each client, at which point the new client’s payroll is first processed using our solution. We implement additional HCM products as requested by clients and leverage the data within our payroll solution to accelerate our implementation processes. Our average client size has continued to be over 100 employees.

The number of client employees on our platform and the mix of products purchased by a client as well as the timing of services provided with respect to those client employees can vary each period. As such, the number of client employees on our system is not a good indicator of our financial results in any given period. Recurring and other revenue accounted for substantially all of our total revenues during the three months ended September 30, 2021 and 97% of our total revenues for the three months ended September 30, 2022.

While the majority of our agreements with clients are generally cancellable by the client on 60 days’ notice or less, we also have term agreements, which are generally two years in length. Our agreements do not include general rights of return and do not provide clients with the right to take possession of the software supporting the services being provided. We recognize recurring fees in the period in which services are provided and the related performance obligations have been satisfied. We defer implementation fees related to our proprietary products over a period generally up to 24 months.

Interest Income on Funds Held for Clients

We earn interest income on funds held for clients. We collect funds for employee payroll payments and related taxes in advance of remittance to employees and taxing authorities. Prior to remittance to employees and taxing authorities, we earn interest on these funds through demand deposit accounts with financial institutions with which we have automated clearing house, or ACH, arrangements. We also earn interest by investing a portion of funds held for clients in highly liquid, investment-grade marketable securities.

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Cost of Revenues

Cost of revenues includes costs to provide our HCM and payroll solutions which primarily consists of employee-related expenses, including wages, stock-based compensation, bonuses and benefits, relating to the provision of ongoing client support and implementation activities, payroll tax filing, distribution of printed checks and other materials as well as delivery costs, computing costs, amortization of certain acquired intangibles and bank fees associated with client fund transfers. Costs related to recurring support are generally expensed as incurred. Implementation costs related to our proprietary products are capitalized and amortized over a period of 7 years. Our cost of revenues is expected to increase in absolute dollars for the foreseeable future as we increase our client base. However, we expect to realize cost efficiencies over the long term as our business scales, resulting in improved operating leverage and increased margins.

We also capitalize a portion of our internal-use software costs, which are then amortized as Cost of revenues. We amortized $6.1 million and $7.0 million of capitalized internal-use software costs during the three months ended September 30, 2021 and 2022, respectively.

Operating Expenses

Sales and Marketing

Sales and marketing expenses consist primarily of employee-related expenses for our direct sales and marketing staff, including wages, commissions, stock-based compensation, bonuses, benefits, marketing expenses and other related costs. Our sales personnel earn commissions and bonuses for attainment of certain performance criteria based on new sales throughout the fiscal year. We capitalize certain selling and commission costs related to new contracts or purchases of additional services by our existing clients and amortize them over a period of 7 years.

We will seek to grow our number of clients for the foreseeable future, and therefore our sales and marketing expense is expected to continue to increase in absolute dollars as we grow our sales organization and expand our marketing activities.

Research and Development

Research and development expenses consist primarily of employee-related expenses for our research and development and product management teams, including wages, stock-based compensation, bonuses and benefits. Additional expenses include costs related to the development, maintenance, quality assurance and testing of new technologies and ongoing refinement of our existing solutions. Research and development expenses, other than internal-use software costs qualifying for capitalization, are expensed as incurred.

We capitalize a portion of our development costs related to internal-use software. The timing of our capitalized development projects may affect the amount of development costs expensed in any given period. The table below sets forth the amounts of capitalized and expensed research and development expenses for the three months ended September 30, 2021 and 2022.

	Three Months Ended September 30,
	2021		2022
	(in thousands)
Capitalized portion of research and development	$	9,829	$	11,750
Expensed portion of research and development	23,076		40,093
Total research and development	$	32,905	$	51,843

We expect to grow our research and development efforts as we continue to broaden our product offerings and extend our technological leadership by investing in the development of new technologies and introducing them to new and existing clients. We expect research and development expenses to continue to increase in absolute dollars but to vary as a percentage of total revenue on a period-to-period basis.

General and Administrative

General and administrative expenses consist primarily of employee-related costs, including wages, stock-based compensation, bonuses and benefits for our finance and accounting, legal, information systems, human resources and other

22

administrative departments. Additional expenses include consulting and professional fees, occupancy costs, insurance and other corporate expenses. We expect our general and administrative expenses to continue to increase in absolute dollars as our company continues to grow.

Other Income (Expense)

Other income (expense) generally consists of interest income related to interest earned on our cash and cash equivalents, net of losses on disposals of property and equipment and interest expense related to our revolving credit facility.

Results of Operations

The following table sets forth our statements of operations data for each of the periods indicated.

	Three Months Ended September 30,
	2021		2022
	(in thousands)
Consolidated Statements of Operations Data:
Revenues:
Recurring and other revenue	$	180,824	$	245,406
Interest income on funds held for clients	873		7,874
Total revenues	181,697		253,280
Cost of revenues	63,249		84,543
Gross profit	118,448		168,737
Operating expenses:
Sales and marketing	49,885		71,063
Research and development	23,076		40,093
General and administrative	35,235		50,492
Total operating expenses	108,196		161,648
Operating income	10,252		7,089
Other expense	(117)		(163)
Income before income taxes	10,135		6,926
Income tax benefit	(20,797)		(23,426)
Net income	$	30,932	$	30,352

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The following table sets forth our statements of operations data as a percentage of total revenues for each of the periods indicated.

	Three Months Ended September 30,
	2021		2022
Consolidated Statements of Operations Data:
Revenues:
Recurring and other revenue	100	%	97	%
Interest income on funds held for clients	0	%	3	%
Total revenues	100	%	100	%
Cost of revenues	35	%	33	%
Gross profit	65	%	67	%
Operating expenses:
Sales and marketing	27	%	28	%
Research and development	13	%	16	%
General and administrative	19	%	20	%
Total operating expenses	59	%	64	%
Operating income	6	%	3	%
Other expense	0	%	0	%
Income before income taxes	6	%	3	%
Income tax benefit	(11)	%	(9)	%
Net income	17	%	12	%

Comparison of Three Months Ended September 30, 2021 and 2022

Revenues

($ in thousands)

	Three Months Ended September 30,						Change
	2021			2022			$		%
Recurring and other revenue	$	180,824		$	245,406		$	64,582	36	%
Percentage of total revenues	100		%	97		%
Interest income on funds held for clients	$	873		$	7,874		$	7,001	802	%
Percentage of total revenues	0		%	3		%

Recurring and Other Revenue

Recurring and other revenue for the three months ended September 30, 2022 increased by $64.6 million, or 36%, to $245.4 million from $180.8 million for three months ended September 30, 2021. Recurring and other revenue increased primarily as a result of incremental revenues from new and existing clients due to the strong performance by our sales team and also increases in client workforce levels as compared to the prior fiscal year.

Interest Income on Funds Held for Clients

Interest income on funds held for clients for the three months ended September 30, 2022 increased by $7.0 million, or 802%, to $7.9 million from $0.9 million for the three months ended September 30, 2021. Interest income on funds held for clients increased primarily due to higher interest rates and higher average daily balances for funds held due to the addition of new clients to our client base and also increases in client workforce levels as compared to the prior fiscal year.

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Cost of Revenues

($ in thousands)

	Three Months Ended September 30,						Change
	2021			2022			$		%
Cost of revenues	$	63,249		$	84,543		$	21,294	34	%
Percentage of total revenues	35		%	33		%
Gross margin	65		%	67		%

Cost of Revenues

Cost of revenues for the three months ended September 30, 2022 increased by $21.3 million, or 34%, to $84.5 million from $63.2 million for the three months ended September 30, 2021. Cost of revenues increased primarily as a result of the continued growth of our business, in particular, $11.5 million in additional employee-related costs resulting from additional personnel necessary to provide services to new and existing clients, $5.6 million in additional delivery and other processing costs and $1.9 million in amortization of certain acquired intangible assets.

Operating Expenses

($ in thousands)

Sales and Marketing

	Three Months Ended September 30,						Change
	2021			2022			$		%
Sales and marketing	$	49,885		$	71,063		$	21,178	42	%
Percentage of total revenues	27		%	28		%

Sales and marketing expenses for the three months ended September 30, 2022 increased by $21.2 million, or 42%, to $71.1 million from $49.9 million for the three months ended September 30, 2021. The increase in sales and marketing expense was primarily due to $13.4 million of additional employee-related costs, including those incurred to expand our sales team. The increase was also driven by $4.4 million of additional stock-based compensation costs associated with our equity incentive plan and $2.7 million in additional marketing lead generation costs.

Research and Development

	Three Months Ended September 30,						Change
	2021			2022			$		%
Research and development	$	23,076		$	40,093		$	17,017	74	%
Percentage of total revenues	13		%	16		%

Research and development expenses for the three months ended September 30, 2022 increased by $17.0 million, or 74%, to $40.1 million from $23.1 million for the three months ended September 30, 2021. The increase in research and development expenses was primarily due to $11.3 million of additional employee-related costs related to additional development personnel and $5.1 million of additional stock-based compensation costs associated with our equity incentive plan.

General and Administrative

	Three Months Ended September 30,						Change
	2021			2022			$		%
General and administrative	$	35,235		$	50,492		$	15,257	43	%
Percentage of total revenues	19		%	20		%

General and administrative expenses for the three months ended September 30, 2022 increased by $15.3 million, or 43%, to $50.5 million from $35.2 million for the three months ended September 30, 2021. The increase in general and

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administrative expense was primarily due to $9.3 million of additional stock-based compensation costs associated with our equity incentive plan and $5.1 million in additional employee-related costs.

Other Expense

	Three Months Ended September 30,						Change
	2021			2022			$		%
Other expense	$	(117)		$	(163)		$	(46)	40	%
Percentage of total revenues	0		%	0		%

Other expense did not materially change for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021.

Income Taxes

Our effective tax rate was (205.2)% and (338.2)% for the three months ended September 30, 2021 and 2022, respectively. Our effective tax rate for the three months ended September 30, 2021 was lower than the federal statutory rate of 21% primarily due to excess tax benefits from employee stock-based compensation and state and local income taxes, partially offset by an increase to the valuation allowance. Our effective tax rate for the three months ended September 30, 2022 was lower than the federal statutory rate of 21% primarily due to excess tax benefits from employee stock-based compensation, state and local income taxes, and a decrease to the valuation allowance.

Quarterly Trends and Seasonality

Our overall operating results fluctuate from quarter to quarter as a result of a variety of factors, some of which are outside of our control. Our historical results should not be considered a reliable indicator of our future results of operations.

We experience fluctuations in revenues and related costs on a seasonal basis, which are primarily seen in our fiscal third quarter, which ends on March 31 of each year. Specifically, our recurring revenue is positively impacted in our fiscal third quarter as a result of our preparation of W-2 documents for our clients’ employees in advance of tax filing requirements. The seasonal fluctuations in revenues also positively impact gross profits during our fiscal third quarter. Our historical results for our fiscal third quarter should not be considered a reliable indicator of our future results of operations. Our interest income earned on funds held for clients is also positively impacted during our fiscal third quarter as a result of our increased collection of funds held for clients. Certain payroll taxes are primarily collected during our fiscal third quarter and subsequently remitted.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions and, to the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

Accounting estimates used in the preparation of these consolidated financial statements change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes. Our critical accounting policies and use of estimates are disclosed in our audited consolidated financial statements for the year ended June 30, 2022 included in our Annual Report on Form 10-K filed with the SEC on August 5, 2022.

Liquidity and Capital Resources

Our primary liquidity needs are related to the funding of general business requirements, including working capital requirements, research and development, and capital expenditures. As of September 30, 2022, our principal source of liquidity was $65.5 million of cash and cash equivalents. In August 2022, we amended the credit agreement entered in July 2019 to increase the borrowing capacity under our revolving credit facility to $550.0 million, which may be increased up to

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$825.0 million. No amounts were drawn on the revolving credit facility as of September 30, 2022. Refer to Note 8 of the Notes to the Unaudited Consolidated Financial Statements for additional detail on the amended credit agreement.

We may invest portions of our excess cash and cash equivalents in highly liquid, investment-grade marketable securities. These investments may consist of commercial paper, corporate debt issuances, asset-backed debt securities, certificates of deposit, U.S. treasury securities, U.S. government agency securities and other securities with credit quality ratings of A-1 or higher. As of September 30, 2022, we did not have any corporate investments.

In order to grow our business, we intend to increase our personnel and related expenses and to make significant investments in our platform, data centers and general infrastructure. The timing and amount of these investments will vary based on our financial condition, the rate at which we add new clients and new personnel and the scale of our module development, data centers and other activities. Many of these investments will occur in advance of experiencing any direct benefit from them, which could negatively impact our liquidity and cash flows during any particular period and may make it difficult to determine if we are effectively allocating our resources. However, we expect to fund our operations, capital expenditures, acquisitions and other investments principally with cash flows from operations, and to the extent that our liquidity needs exceed our cash from operations, we would look to our cash on hand or utilize the borrowing capacity under our credit facility to satisfy those needs.

Funds held for clients and client fund obligations will vary substantially from period to period as a result of the timing of payroll and tax obligations due. Our payroll processing activities involve the movement of significant funds from accounts of employers to employees and relevant taxing authorities. Though we debit a client’s account prior to any disbursement on its behalf, there is a delay between our payment of amounts due to employees and taxing and other regulatory authorities and when the incoming funds from the client to cover these amounts payable actually clear into our operating accounts. We currently have agreements with eleven major U.S. banks to execute ACH and wire transfers to support our client payroll and tax services. We believe we have sufficient capacity under these ACH arrangements to handle all transaction volumes for the foreseeable future. We primarily collect fees for our services via ACH transactions at the same time we debit the client’s account for payroll and tax obligations and thus are able to reduce collectability and accounts receivable risks.

We believe our current cash and cash equivalents, future cash flow from operations, and access to our credit facility will be sufficient to meet our ongoing working capital, capital expenditure and other liquidity requirements for at least the next 12 months, and thereafter, for the foreseeable future.

The following table sets forth data regarding cash flows for the periods indicated:

	Three Months Ended September 30,
	2021		2022
Net cash provided by (used in) operating activities	$	(4,132)	$	16,387
Cash flows from investing activities:
Purchases of available-for-sale securities	(135,849)		(118,926)
Proceeds from sales and maturities of available-for-sale securities	9,648		42,850
Capitalized internal-use software costs	(9,159)		(9,953)
Purchases of property and equipment	(3,220)		(3,447)
Acquisitions of businesses, net of cash acquired	(59,581)		—
Net cash used in investing activities	(198,161)		(89,476)
Cash flows from financing activities:
Net change in client fund obligations	1,425,782		(1,688,339)
Taxes paid related to net share settlement of equity awards	(60,809)		(74,071)
Payment of debt issuance costs	(9)		(855)
Net cash provided by (used in) financing activities	1,364,964		(1,763,265)
Net change in cash, cash equivalents and funds held for clients' cash and cash equivalents	1,162,671		(1,836,354)

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Operating Activities

Net cash provided by (used in) operating activities was $(4.1) million and $16.4 million for the three months ended September 30, 2021 and 2022, respectively. The change in net cash provided by (used in) operating activities from the three months ended September 30, 2021 to the three months ended September 30, 2022 was primarily due to improved operating results after adjusting for non-cash items including stock-based compensation expense, depreciation and amortization expense and deferred income tax benefit, accompanied by net changes in operating assets and liabilities during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021.

Investing Activities

Net cash used in investing activities was $198.2 million and $89.5 million for the three months ended September 30, 2021 and 2022, respectively. The net cash used in investing activities is significantly impacted by the timing of purchases and sales and maturities of investments as we invest portions of funds held for clients in highly liquid, investment-grade marketable securities. The amount of funds held for clients invested will vary based on timing of client funds collected and payments due to client employees and taxing and other regulatory authorities.

The change in net cash used in investing activities was primarily due to a $59.6 million decrease in amounts paid for acquisitions, net of cash acquired, $33.2 million in additional proceeds from the sales and maturities of available-for-sale securities and $16.9 million in fewer purchases of available-for-sale securities during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021.

Financing Activities

Net cash provided by (used in) financing activities was $1,365.0 million and $(1,763.3) million for the three months ended September 30, 2021 and 2022, respectively. The change in net cash provided by (used in) financing activities was primarily the result of a decrease in the change in client fund obligations of $3,114.1 million due to the timing of client funds collected and related remittance of those funds to client employees and taxing authorities during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021.

Contractual Obligations and Commitments

At September 30, 2022, our principal commitments consisted of $88.2 million in operating lease obligations, of which $10.7 million is due in the next twelve months. We also had $39.6 million in purchase obligations, of which $22.0 million is due in the next twelve months.

Capital Expenditures

We expect to continue to invest in capital spending as we continue to grow our business and expand and enhance our operating facilities, data centers and technical infrastructure. Future capital requirements will depend on many factors, including our rate of sales growth. In the event that our sales growth or other factors do not meet our expectations, we may eliminate or curtail capital projects in order to mitigate the impact on our use of cash. Capital expenditures were $3.2 million and $3.4 million for the three months ended September 30, 2021 and 2022, respectively, exclusive of capitalized internal-use software costs of $9.2 million and $10.0 million for the same periods, respectively.

New Accounting Pronouncements

Refer to Note 2 of the Notes to the Unaudited Consolidated Financial Statements for a discussion of recently issued accounting standards.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We have operations primarily in the United States and are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate and certain other exposures including risks relating to changes in the general economic conditions in the United States. Refer to “Part I. Item 1A. Risk Factors” on our Annual Report on Form 10-K filed with the SEC on August 5, 2022 for risks related to our business as well as risks related to the COVID-19 pandemic.

We have not used, nor do we intend to use, derivatives to mitigate the impact of interest rate or other exposure or for trading or speculative purposes.

Interest Rate Risk

As of September 30, 2022, we had cash and cash equivalents of $65.5 million and funds held for clients of $2,299.4 million. We did not hold corporate investments on our balance sheet as of September 30, 2022. We deposit our cash and cash equivalents and significant portions of our funds held for clients in demand deposit accounts with various financial institutions. We invest portions of our excess cash and cash equivalents and funds held for clients in marketable securities including commercial paper, corporate debt issuances, asset-backed debt securities, certificates of deposit, U.S. government agency securities and other which were classified as available-for-sale securities as of September 30, 2022. Our investment policy is focused on generating higher yields from these investments while preserving liquidity and capital. However, as a result of our investing activities, we are exposed to changes in interest rates that may materially affect our financial statements.

In a falling rate environment, a decline in interest rates would decrease our interest income earned on both cash and cash equivalents and funds held for clients. An increase in the overall interest rate environment may cause the market value of our investments in fixed rate available-for-sale securities to decline. If we are forced to sell some or all of these securities at lower market values, we may incur investment losses. However, because we classify all marketable securities as available-for-sale, no gains or losses are recognized due to changes in interest rates until such securities are sold or decreases in fair value are deemed due to expected credit losses. We have not recorded any credit impairment losses on our portfolio to date.

Based upon a sensitivity model that measures market value changes caused by interest rate fluctuations, an immediate 100-basis point increase in interest rates would have resulted in a decrease in the market value of our available-for-sale securities by $3.4 million as of September 30, 2022. An immediate 100-basis point decrease in interest rates would have resulted in an increase in the market value of our available-for-sale securities by $3.4 million as of September 30, 2022. Fluctuations in the value of our available-for-sale securities caused by changes in interest rates are recorded in other comprehensive income and are only realized if we sell the underlying securities.

Additionally, as described in Note 8 of the Notes to the Unaudited Consolidated Financial Statements, we entered into a first amendment to our credit agreement that provides for a revolving credit facility (“credit facility”) in the aggregate amount of $550.0 million, which may be increased up to $825.0 million. Borrowings under the credit facility generally bear interest at a rate based upon the Term Secured Overnight Financing Rate (“SOFR”) plus the SOFR Adjustment or an adjusted base rate plus an applicable margin based on our then-applicable net total leverage ratio. As of September 30, 2022, there were no amounts drawn on the credit facility. To the extent that we draw additional amounts under the credit facility, we may be exposed to increased market risk from changes in the underlying index rates, which affects our interest expense.

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Co-Chief Executive Officers and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Co-Chief Executive Officers and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of such date.

Changes in Internal Control over Financial Reporting

During the quarter ended September 30, 2022, we implemented a new client billing module within our financial system to strengthen our ability to scale our business. In connection with the implementation, we modified certain existing internal controls within our revenue process which were previously determined to be effective. We will continue to monitor and ensure effectiveness of any changes in internal controls.

There were no other changes to our internal control over financial reporting during the three-month period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in litigation related to claims arising from the ordinary course of our business. We believe that there are no claims or actions pending or threatened against us, the ultimate disposition of which would have a material adverse effect on us.

Item 1A. Risk Factors

There have been no material changes in our risk factors disclosed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2022 filed with the SEC on August 5, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)Sales of Unregistered Securities

Not applicable.

(b)Use of Proceeds

On March 24, 2014, we completed our initial public offering or IPO, of 8,101,750 shares of common stock, at a price of $17.00 per share, before underwriting discounts and commissions. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-193661), which was declared effective by the SEC on March 18, 2014. With the proceeds of the IPO, we repaid amounts outstanding under a note issued by us to Commerce Bank & Trust Company on March 9, 2011, which totaled $1.1 million, paid $9.4 million for the purchase of substantially all of the assets of BFKMS Inc. and paid $9.5 million for the purchase of substantially all of the assets of Synergy Payroll, LLC.

On December 17, 2014, we completed a follow-on offering of 4,960,000 shares of common stock at a price of $26.25 per share, before underwriting discounts and commissions. The offer and sale of all of the shares in the follow-on offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-200448) which was declared effective by the SEC on December 11, 2014. There have been no material changes in the planned use of proceeds from the follow-on as described in the final prospectus filed with the SEC pursuant to Rule 424(b) on December 12, 2014.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The information required by this Item is set forth in the Index to Exhibits immediately following this page.

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INDEX TO EXHIBITS

Exhibit Nos.	Description
3.1	Second Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 of Paylocity Holding Corporation’s Current Report on Form 8-K on December 3, 2021 (Registration No. 001-36348)).
3.2	Second Amended and Restated Bylaws of Paylocity Holding Corporation (filed as Exhibit 3.2 of Paylocity Holding Corporation’s Current Report on Form 8-K on December 3, 2021 (File No. 001-36348)).
10.1	Separation Agreement dated as of June 30, 2022 by and between Paylocity Corporation and Mark Kinsey.(filed as Exhibit 10.1 of Paylocity Holding Corporation's Current Report on Form 8-K on July 1, 2022 (File No. 001-36348)).
10.2	First Amendment to Credit Agreement and Security Agreement, dated as of August 19, 2022, by and among Paylocity Holding Corporation, the Guarantor party thereto, the Lenders party thereto, PNC Bank, National Association, as Administrative Agent, and PNC Capital Markets, LLC and JPMorgan Chase Bank, N.A., as joint lead arrangers and joint bookrunners. (filed as Exhibit 10.1 of Paylocity Holding Corporation's Current Report on Form 8-K on August 22, 2022 (File No. 001-36348)).
31.1*	Certification of Co-Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-4 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Co-Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-4 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3*	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-4 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification pursuant to 18 U.S.C. 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Co-Chief Executive Officer.
32.2**	Certification pursuant to 18 U.S.C. 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Co-Chief Executive Officer.
32.3**	Certification pursuant to 18 U.S.C. 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Financial Officer.
101.INS*	XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*    Filed herewith

**    Furnished herewith

32

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

		PAYLOCITY HOLDING CORPORATION
Date:	November 4, 2022	By:	/s/ Steven R. Beauchamp
		Name:	Steven R. Beauchamp
		Title:	Co-Chief Executive Officer (Principal Executive Officer) and Director
Date:	November 4, 2022	By:	/s/ Toby J. Williams
		Name:	Toby J. Williams
		Title:	President, Co-Chief Executive Officer (Principal Executive Officer) and Director
Date:	November 4, 2022	By:	/s/ Ryan Glenn
		Name:	Ryan Glenn
		Title:	Chief Financial Officer and Treasurer (Principal Financial Officer)

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Steven R. Beauchamp, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Paylocity Holding Corporation (the “Company”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fiscal quarter ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 4, 2022		/s/ Steven R. Beauchamp
	Name:	Steven R. Beauchamp
	Title:	Co-Chief Executive Officer (Principal Executive Officer) and Director

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Toby J. Williams, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Paylocity Holding Corporation (the “Company”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fiscal quarter ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 4, 2022		/s/ Toby J. Williams
	Name:	Toby J. Williams
	Title:	President, Co-Chief Executive Officer (Principal Executive Officer) and Director

EX-31.3

EXHIBIT 31.3

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Ryan Glenn, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Paylocity Holding Corporation (the “Company”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fiscal quarter ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 4, 2022		/s/ Ryan Glenn
	Name:	Ryan Glenn
	Title:	Chief Financial Officer and Treasurer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, the Co-Chief Executive Officer of Paylocity Holding Corporation (the “Company”), does hereby certify under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 4, 2022		/s/ Steven R. Beauchamp
	Name:	Steven R. Beauchamp
	Title:	Co-Chief Executive Officer (Principal Executive Officer) and Director

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, the Co-Chief Executive Officer of Paylocity Holding Corporation (the “Company”), does hereby certify under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 4, 2022		/s/ Toby J. Williams
	Name:	Toby J. Williams
	Title:	President, Co-Chief Executive Officer (Principal Executive Officer) and Director

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.3

Exhibit 32.3

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, the Chief Financial Officer of Paylocity Holding Corporation (the “Company”), does hereby certify under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 4, 2022		/s/ Ryan Glenn
	Name:	Ryan Glenn
	Title:	Chief Financial Officer and Treasurer (Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover Page - shares	3 Months Ended
	Sep. 30, 2022	Oct. 28, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	001-36348
Entity Registrant Name	PAYLOCITY HOLDING CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	46-4066644
Entity Address, Address Line One	1400 American Lane
Entity Address, City or Town	Schaumburg
Entity Address, State or Province	IL
Entity Address, Postal Zip Code	60173
City Area Code	847
Local Phone Number	463-3200
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	PCTY
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		55,673,889
Entity Central Index Key	0001591698
Current Fiscal Year End Date	--06-30
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Unaudited Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022
Current assets:
Cash and cash equivalents	$ 65,484	$ 139,756
Accounts receivable, net	21,519	15,754
Deferred contract costs	64,058	59,501
Prepaid expenses and other	29,122	28,896
Total current assets before funds held for clients	180,183	243,907
Funds held for clients	2,299,437	3,987,776
Total current assets	2,479,620	4,231,683
Capitalized internal-use software, net	66,693	61,985
Property and equipment, net	60,943	62,839
Operating lease right-of-use assets	47,614	49,210
Intangible assets, net	42,704	45,475
Goodwill	102,054	101,949
Long-term deferred contract costs	244,554	229,067
Long‑term prepaid expenses and other	7,624	7,746
Deferred income tax assets	43,303	19,060
Total assets	3,095,109	4,809,014
Current liabilities:
Accounts payable	6,235	8,374
Accrued expenses	105,907	124,384
Total current liabilities before client fund obligations	112,142	132,758
Client fund obligations	2,299,437	3,987,776
Total current liabilities	2,411,579	4,120,534
Long-term operating lease liabilities	67,040	69,119
Other long-term liabilities	3,427	3,681
Deferred income tax liabilities	2,217	2,217
Total liabilities	2,484,263	4,195,551
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2022 and September 30, 2022	0	0
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2022 and September 30, 2022; 55,190 shares issued and outstanding at June 30, 2022 and 55,664 shares issued and outstanding at September 30, 2022	56	55
Additional paid-in capital	259,245	289,843
Retained earnings	356,220	325,868
Accumulated other comprehensive loss	(4,675)	(2,303)
Total stockholders' equity	610,846	613,463
Total liabilities and stockholders’ equity	$ 3,095,109	$ 4,809,014

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Unaudited Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Sep. 30, 2022	Jun. 30, 2022
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000	5,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	155,000	155,000
Common stock, shares issued (in shares)	55,664	55,190
Common stock, shares outstanding (in shares)	55,664	55,190

XML

Unaudited Consolidated Statements of Operations and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Revenues:
Recurring and other revenue	$ 245,406	$ 180,824
Interest income on funds held for clients	7,874	873
Total revenues	253,280	181,697
Cost of revenues	84,543	63,249
Gross profit	168,737	118,448
Operating expenses:
Sales and marketing	71,063	49,885
Research and development	40,093	23,076
General and administrative	50,492	35,235
Total operating expenses	161,648	108,196
Operating income	7,089	10,252
Other expense	(163)	(117)
Income before income taxes	6,926	10,135
Income tax benefit	(23,426)	(20,797)
Net income	30,352	30,932
Other comprehensive loss, net of tax	(2,372)	(75)
Comprehensive income	$ 27,980	$ 30,857
Net income per share:
Basic (in dollars per share)	$ 0.55	$ 0.56
Diluted (in dollars per share)	$ 0.54	$ 0.55
Weighted-average shares used in computing net income per share:
Basic (in shares)	55,453	54,810
Diluted (in shares)	56,664	56,506

XML

Unaudited Consolidated Statement of Changes in Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Beginning balance (in shares) at Jun. 30, 2021		54,594
Beginning balance at Jun. 30, 2021	$ 476,930	$ 55	$ 241,718	$ 235,091	$ 66
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	21,106		21,106
Stock options exercised (in shares)		151
Stock options exercised	1,429		1,429
Issuance of common stock upon vesting of restricted stock units (in shares)		524
Net settlement for taxes and/or exercise price related to equity awards (in shares)		(250)
Net settlement for taxes and/or exercise price related to equity awards	(62,749)		(62,749)
Unrealized losses on securities, net of tax	(75)				(75)
Net income	30,932			30,932
Ending balance (in shares) at Sep. 30, 2021		55,019
Ending balance at Sep. 30, 2021	$ 467,573	$ 55	201,504	266,023	(9)
Beginning balance (in shares) at Jun. 30, 2022	55,190	55,190
Beginning balance at Jun. 30, 2022	$ 613,463	$ 55	289,843	325,868	(2,303)
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	43,471		43,471
Stock options exercised (in shares)		235
Stock options exercised	2,832		2,832
Issuance of common stock upon vesting of restricted stock units (in shares)		549
Issuance of common stock upon vesting of restricted stock units	0	$ 1	(1)
Net settlement for taxes and/or exercise price related to equity awards (in shares)		(310)
Net settlement for taxes and/or exercise price related to equity awards	(76,900)		(76,900)
Unrealized losses on securities, net of tax	(2,372)				(2,372)
Net income	$ 30,352			30,352
Ending balance (in shares) at Sep. 30, 2022	55,664	55,664
Ending balance at Sep. 30, 2022	$ 610,846	$ 56	$ 259,245	$ 356,220	$ (4,675)

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Unaudited Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Cash flows from operating activities:
Net income	$ 30,352	$ 30,932
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Stock-based compensation expense	39,813	19,559
Depreciation and amortization expense	14,267	11,322
Deferred income tax benefit	(23,415)	(20,827)
Provision for credit losses	266	38
Net accretion of discounts and amortization of premiums on available-for-sale securities	(842)	90
Amortization of debt issuance costs	94	44
Other	125	27
Changes in operating assets and liabilities:
Accounts receivable	(6,020)	(173)
Deferred contract costs	(19,328)	(11,114)
Prepaid expenses and other	614	(9,807)
Accounts payable	(1,805)	1,567
Accrued expenses and other	(17,734)	(25,790)
Net cash provided by (used in) operating activities	16,387	(4,132)
Cash flows from investing activities:
Purchases of available-for-sale securities	(118,926)	(135,849)
Proceeds from sales and maturities of available-for-sale securities	42,850	9,648
Capitalized internal-use software costs	(9,953)	(9,159)
Purchases of property and equipment	(3,447)	(3,220)
Acquisitions of businesses, net of cash acquired	0	(59,581)
Net cash used in investing activities	(89,476)	(198,161)
Cash flows from financing activities:
Net change in client fund obligations	(1,688,339)	1,425,782
Taxes paid related to net share settlement of equity awards	(74,071)	(60,809)
Payment of debt issuance costs	(855)	(9)
Net cash provided by (used in) financing activities	(1,763,265)	1,364,964
Net change in cash, cash equivalents and funds held for clients' cash and cash equivalents	(1,836,354)	1,162,671
Cash, cash equivalents and funds held for clients' cash and cash equivalents—beginning of period	3,793,453	1,945,881
Cash, cash equivalents and funds held for clients' cash and cash equivalents—end of period	1,957,099	3,108,552
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Purchases of property and equipment, accrued but not paid	0	3,079
Liabilities assumed for acquisitions	117	2,165
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	62	63
Cash paid for income taxes	19	13
Reconciliation of cash, cash equivalents and funds held for clients' cash and cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents	65,484	66,431
Funds held for clients' cash and cash equivalents	1,891,615	3,042,121
Total cash, cash equivalents and funds held for clients' cash and cash equivalents	$ 1,957,099	$ 3,108,552

XML

Organization and Description of Business

3 Months Ended

Sep. 30, 2022

Organization and Description of Business [Abstract]

Organization and Description of Business

(1) Organization and Description of Business

Paylocity Holding Corporation (the “Company”) is a cloud-based provider of human capital management and payroll software solutions that deliver a comprehensive platform for the modern workforce. Services are provided in a Software-as-a-Service (“SaaS”) delivery model. The Company’s comprehensive product suite delivers a unified platform that helps businesses attract and retain talent, build culture and connection with their employees, and streamline and automate HR and payroll processes.

XML

Summary of Significant Accounting Policies

3 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

(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 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, as more experience is acquired, as additional information is obtained and as the operating environment changes.

(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 the three months ended September 30, 2022 are not necessarily indicative of the results for the full year or the results for any future periods. 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, 2022 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.

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 Issued Accounting Standards

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board 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.

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Revenue

3 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue

(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 offers term agreements to its clients, 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 other HCM 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 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.

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 September 30,
	2021		2022
Recurring fees	$	174,697	$	236,819
Implementation services and other	6,127		8,587
Total revenues from contracts	$	180,824	$	245,406

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 payroll processing period or by month. As such, the Company does not recognize contract assets or liabilities related to recurring revenue.

The Company defers and amortizes nonrefundable upfront fees related to implementation services 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 September 30,
	2021		2022
Balance at beginning of the period	$	8,734	$	12,233
Deferral of revenue	4,353		8,232
Revenue recognized	(4,370)		(6,270)
Balance at end of the period	$	8,717	$	14,195

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 $10,462 in fiscal 2023, $3,518 in fiscal 2024 and $215 in fiscal 2025 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.

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

	Three Months Ended September 30, 2021
	Beginning balance		Capitalized costs		Amortization		Ending balance
Costs to obtain a new contract	$	145,718	$	11,737	$	(8,233)	$	149,222
Costs to fulfill a contract	69,175		10,940		(3,330)		76,785
Total	$	214,893	$	22,677	$	(11,563)	$	226,007

	Three Months Ended September 30, 2022
	Beginning balance		Capitalized costs		Amortization		Ending balance
Costs to obtain a new contract	$	182,543	$	18,912	$	(10,367)	$	191,088
Costs to fulfill a contract	106,025		16,862		(5,363)		117,524
Total	$	288,568	$	35,774	$	(15,730)	$	308,612

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 $52,591 as of September 30, 2022, 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.

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Business Combinations

3 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Business Combinations

4) Business CombinationsOn January 18, 2022, the Company acquired all of the shares outstanding of Cloudsnap, Inc., ("Cloudsnap") through a merger for cash consideration of $50,002, which was paid upon closing. Cloudsnap is a provider of a flexible, low-code solution for integrating disparate business applications. This transaction enables the Company to deliver modern integrations and seamless data sharing between critical systems more efficiently and effectively, while helping to unify and automate business processes across clients' HR, finance, benefits, and other systems.

The allocation of the purchase price for Cloudsnap is as follows:

	January 18, 2022
Proprietary technology	$	15,800
Goodwill	33,628
Other assets acquired	3,398
Liabilities assumed	(2,824)
Total purchase price	$	50,002

The Company did not record any material purchase accounting adjustments for Cloudsnap during the three months ended September 30, 2022. The Company accounts for business combinations in accordance with ASC 805, Business Combinations. The Company applied the acquisition method of accounting and recorded the assets acquired and liabilities assumed at their respective estimated fair values as of the date of the acquisition with the excess consideration paid recorded as goodwill.

The results from this acquisition have been included in the Company’s consolidated financial statements since the closing of the acquisition and are not material to the Company. Pro forma information is not presented because the effects of the acquisition are not material to the Company’s consolidated financial statements. The goodwill related to this acquisition is primarily attributable to the assembled workforce and growth opportunities from the expansion and enhancement of the Company’s product offerings. The goodwill associated with this acquisition is not deductible for income tax purposes. Direct costs related to the acquisition were immaterial and were expensed as incurred as General and administrative.

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Balance Sheet Information

3 Months Ended

Sep. 30, 2022

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Information

(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, 2022	$	841
Charged to expense	266
Write-offs	(48)
Balance at September 30, 2022	$	1,059

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

	June 30, 2022		September 30, 2022
Capitalized internal-use software	$	193,156	$	204,906
Accumulated amortization	(131,171)		(138,213)
Capitalized internal-use software, net	$	61,985	$	66,693

Amortization of capitalized internal-use software costs is primarily included in Cost of revenues and amounted to $6,128 and $7,042 for the three months ended September 30, 2021 and 2022, respectively.

The major classes of property and equipment, net were as follow:

	June 30, 2022		September 30, 2022
Office equipment	$	4,365	$	4,365
Computer equipment	55,495		56,157
Furniture and fixtures	12,791		12,801
Software	8,785		8,518
Leasehold improvements	47,521		47,722
Time clocks rented by clients	6,711		7,039
Total	135,668		136,602
Accumulated depreciation	(72,829)		(75,659)
Property and equipment, net	$	62,839	$	60,943

Depreciation expense amounted to $3,842 and $4,454 for the three months ended September 30, 2021 and 2022, respectively.

The following table summarizes changes in goodwill during the three months ended September 30, 2022:

	September 30, 2022
Balance at June 30, 2022	$	101,949
Measurement period adjustments	105
Balance at September 30, 2022	$	102,054

Refer to Note 4 for further details on current year acquisition activity.

The Company’s amortizable intangible assets and estimated useful lives were as follows:

	June 30, 2022		September 30, 2022		Weighted average useful life (years)
Proprietary technology	$	43,129	$	43,129	6.0
Client relationships	22,200		22,200		7.8
Non-solicitation agreements	1,600		1,600		3.1
Trade names	1,640		1,640		5.0
Total	68,569		68,569
Accumulated amortization	(23,094)		(25,865)
Intangible assets, net	$	45,475	$	42,704

Amortization expense for acquired intangible assets was $1,352 and $2,771 for the three months ended September 30, 2021 and 2022, respectively, and is included in Cost of revenues and General and administrative.

Future amortization expense for acquired intangible assets as of September 30, 2022 is as follows:

Remainder of fiscal 2023	$	8,177
Fiscal 2024	9,943
Fiscal 2025	8,888
Fiscal 2026	7,269
Fiscal 2027	4,893
Thereafter	3,534
Total	$	42,704

The components of accrued expenses were as follows:

	June 30, 2022		September 30, 2022
Accrued payroll and personnel costs	$	84,897	$	61,104
Operating lease liabilities	8,399		8,365
Deferred revenue	13,548		16,810
Other	17,540		19,628
Total accrued expenses	$	124,384	$	105,907

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Corporate Investments and Funds Held for Clients

3 Months Ended

Sep. 30, 2022

Corporate Investments and Funds Held for Clients [Abstract]

Corporate Investments and Funds Held for Clients

(6) Corporate Investments and Funds Held for Clients

Corporate investments and funds held for clients consisted of the following:

	June 30, 2022
Type of Issue	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Cash and cash equivalents	$	139,756	$	—	$	—	$	139,756
Funds held for clients' cash and cash equivalents	3,653,699		—		(2)		3,653,697
Available-for-sale securities:
Commercial paper	58,166		—		(126)		58,040
Corporate bonds	59,568		—		(1,715)		57,853
Asset-backed securities	9,843		2		(141)		9,704
Certificates of deposit	31,879		—		(43)		31,836
U.S. treasury securities	167,566		12		(591)		166,987
U.S government agency securities	8,000		—		(451)		7,549
Other	2,181		—		(71)		2,110
Total available-for-sale securities	337,203		14		(3,138)		334,079
Total investments	$	4,130,658	$	14	$	(3,140)	$	4,127,532

	September 30, 2022
Type of Issue	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Cash and cash equivalents	$	65,484	$	—	$	—	$	65,484
Funds held for clients' cash and cash equivalents	1,891,615		—		—		1,891,615
Available-for-sale securities:
Commercial paper	47,318		1		(112)		47,207
Corporate bonds	67,696		—		(2,428)		65,268
Asset-backed securities	18,875		—		(327)		18,548
Certificates of deposit	28,184		6		(20)		28,170
U.S. treasury securities	239,246		—		(2,656)		236,590
U.S government agency securities	8,000		—		(612)		7,388
Other	4,784		—		(133)		4,651
Total available-for-sale securities	414,103		7		(6,288)		407,822
Total investments	$	2,371,202	$	7	$	(6,288)	$	2,364,921

All available-for-sale securities were included in Funds held for clients at June 30, 2022 and September 30, 2022

Cash and cash equivalents and funds held for clients’ cash and cash equivalents included demand deposit accounts, money market funds, commercial paper and certificates of deposit at June 30, 2022 and September 30, 2022.

Classification of investments on the Unaudited Consolidated Balance Sheets was as follows:

	June 30, 2022		September 30, 2022
Cash and cash equivalents	$	139,756	$	65,484
Funds held for clients	3,987,776		2,299,437
Total investments	$	4,127,532	$	2,364,921

Available-for-sale securities that had been in an unrealized loss position for a period of less and greater than 12 months as of June 30, 2022 and September 30, 2022 had fair market value as follows:

	June 30, 2022
	Securities in an unrealized loss position for less than 12 months				Securities in an unrealized loss position for greater than 12 months				Total
	Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value
Commercial paper	$	(126)	$	53,756	$	—	$	—	$	(126)	$	53,756
Corporate bonds	(1,715)		57,853		—		—		(1,715)		57,853
Asset-backed securities	(141)		7,354		—		—		(141)		7,354
Certificates of deposit	(43)		27,086		—		—		(43)		27,086
U.S. treasury securities	(591)		129,943		—		—		(591)		129,943
U.S. government agency securities	(451)		7,549		—		—		(451)		7,549
Other	(71)		2,110		—		—		(71)		2,110
Total available-for-sale securities	$	(3,138)	$	285,651	$	—	$	—	$	(3,138)	$	285,651

	September 30, 2022
	Securities in an unrealized loss position for less than 12 months				Securities in an unrealized loss position for greater than 12 months				Total
	Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value
Commercial paper	$	(112)	$	46,207	$	—	$	—	$	(112)	$	46,207
Corporate bonds	(1,849)		52,213		(579)		13,055		(2,428)		65,268
Asset-backed securities	(314)		16,871		(13)		1,419		(327)		18,290
Certificates of deposit	(20)		16,913		—		—		(20)		16,913
U.S. treasury securities	(2,656)		236,590		—		—		(2,656)		236,590
U.S. government agency securities	(34)		966		(578)		6,422		(612)		7,388
Other	(78)		3,732		(55)		864		(133)		4,596
Total available-for-sale securities	$	(5,063)	$	373,492	$	(1,225)	$	21,760	$	(6,288)	$	395,252

The Company regularly reviews the composition of its portfolio to determine the existence of credit impairment. The Company did not recognize any credit impairment losses during the three months ended September 30, 2021 or 2022. All securities in the Company’s portfolio held an A-1 rating or better as of September 30, 2022.

The Company did not make any material reclassification adjustments out of accumulated other comprehensive income for realized gains and losses on the sale of available-for-sale securities during the three months ended September 30, 2021 or 2022. There were no realized gains or losses on the sale of available-for-sale securities for the three months ended September 30, 2021 or 2022.

Expected maturities of available-for-sale securities at September 30, 2022 were as follows:

	Amortized cost		Fair value
One year or less	$	275,556	$	274,072
One year to two years	74,836		72,546
Two years to three years	61,708		59,442
Three years to five years	2,003		1,762
Total available-for-sale securities	$	414,103	$	407,822

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Fair Value Measurement

3 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurement

(7) Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

•Level 1—Quoted prices in active markets for identical assets and liabilities.

•Level 2—Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company measures certain cash and cash equivalents, accounts receivable, accounts payable and client fund obligations at fair value on a recurring basis using Level 1 inputs. The Company considers the recorded value of these financial assets and liabilities to approximate the fair value of the respective assets and liabilities at June 30, 2022 and September 30, 2022 based upon the short-term nature of these assets and liabilities.

Marketable securities, consisting of securities classified as available-for-sale as well as certain cash equivalents, are recorded at fair value on a recurring basis using Level 2 inputs obtained from an independent pricing service. Available-for-sale securities include commercial paper, corporate bonds, asset-backed securities, certificates of deposit, U.S. treasury securities, U.S. government agency and other securities. The independent pricing service utilizes a variety of inputs including benchmark yields, broker/dealer quoted prices, reported trades, issuer spreads as well as other available market data. The Company, on a sample basis, validates the pricing from the independent pricing service against another third-party pricing source for reasonableness. The Company has not adjusted any prices obtained by the independent pricing service, as it believes they are appropriately valued. There were no available-for-sale securities classified in Level 3 of the fair value hierarchy at June 30, 2022 or September 30, 2022.

The fair value level for the Company’s cash and cash equivalents and available-for-sale securities was as follows:

	June 30, 2022
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	139,756	$	139,756	$	—	$	—
Funds held for clients' cash and cash equivalents	3,653,697		3,640,427		13,270		—
Available-for-sale securities:
Commercial paper	58,040		—		58,040		—
Corporate bonds	57,853		—		57,853		—
Asset-backed securities	9,704		—		9,704		—
Certificates of deposit	31,836		—		31,836		—
U.S. treasury securities	166,987		—		166,987		—
U.S government agency securities	7,549		—		7,549		—
Other	2,110		—		2,110		—
Total available-for-sale securities	334,079		—		334,079		—
Total investments	$	4,127,532	$	3,780,183	$	347,349	$	—

	September 30, 2022
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	65,484	$	65,484	$	—	$	—
Funds held for clients' cash and cash equivalents	1,891,615		1,887,494		4,121		—
Available-for-sale securities:
Commercial paper	47,207		—		47,207		—
Corporate bonds	65,268		—		65,268		—
Asset-backed securities	18,548		—		18,548		—
Certificates of deposit	28,170		—		28,170		—
U.S. treasury securities	236,590		—		236,590		—
U.S government agency securities	7,388		—		7,388		—
Other	4,651		—		4,651		—
Total available-for-sale securities	407,822		—		407,822		—
Total investments	$	2,364,921	$	1,952,978	$	411,943	$	—

Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis

The Company records assets acquired and liabilities assumed in business combinations at fair value. Refer to Note 4 for further details on the fair value measurements of certain assets and liabilities recorded at fair value on a non-recurring basis.

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Debt

3 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt

(8) Debt

In July 2019, the Company entered into a revolving credit agreement with PNC Bank, National Association, and other lenders, which is secured by substantially all of the Company’s assets, subject to certain restrictions. In August 2022, the Company entered into a first amendment to the aforementioned credit agreement to increase the borrowing capacity of our revolving credit facility ("credit facility") to $550,000, which may be increased up to $825,000, subject to obtaining additional lender commitments and certain approvals and satisfying other requirements. The amended credit agreement extends the maturity date of the credit facility to August 2027 and replaces the interest rate based on London Interbank Offered Rate with an interest rate based on secured overnight financing rate ("SOFR"). The Company had no borrowings at June 30, 2022 or September 30, 2022.

The proceeds of any borrowings are to be used to fund working capital, capital expenditures and general corporate purposes, including permitted acquisitions, permitted investments, permitted distributions and share repurchases. The

Company may generally borrow, prepay and reborrow under the credit facility and terminate or reduce the lenders’ commitments at any time prior to revolving credit facility expiration without a premium or a penalty, other than customary “breakage” costs.

Any borrowings under the credit facility will generally bear interest, at the Company’s option, at a rate per annum determined by reference to either the Term SOFR rate plus the SOFR Adjustment or an adjusted base rate, in each case plus an applicable margin ranging from 0.875% to 1.500% and 0.0% to 0.500%, respectively, based on the then-applicable net total leverage ratio. Additionally, the Company is required to pay certain commitment, letter of credit fronting and letter of credit participation fees on available and/or undrawn portions of the credit facility.

The Company is required to comply with certain customary affirmative and negative covenants, including a requirement to maintain a maximum net total leverage ratio of not greater than 4.00 to 1.00, (with a step up to 4.50 to 1.00 for the 4 consecutive fiscal quarters following a fiscal quarter in which certain permitted acquisitions are consummated), and a minimum interest coverage ratio of not less than 2.00 to 1.00. As of September 30, 2022, the Company was in compliance with all of the aforementioned covenants.

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Stock-Based Compensation

3 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

(9) Stock-Based Compensation

The Company maintains a 2008 Equity Incentive Plan (the “2008 Plan”) and a 2014 Equity Incentive Plan (the “2014 Plan”) pursuant to which the Company has reserved shares of its common stock for issuance to its employees, directors and non-employee third parties. The 2014 Plan serves as the successor to the 2008 Plan and permits the granting of restricted stock units and other equity incentives at the discretion of the compensation committee of the Company’s board of directors. No new awards have been or will be issued under the 2008 Plan since the effective date of the 2014 Plan. Outstanding awards under the 2008 Plan continue to be subject to the terms and conditions of the 2008 Plan. The number of shares of common stock reserved for issuance under the 2014 Plan may increase each calendar year, continuing through and including January 1, 2024. The number of shares added each year may be equal to the lesser of (a) four and five tenths percent (4.5%) of the number of shares of common stock of the Company issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the Company’s board of directors.

As of September 30, 2022, the Company had 13,827 shares allocated to the plans, of which 1,909 shares were subject to outstanding options or awards. Generally, the Company issues previously unissued shares for the exercise of stock options or vesting of awards; however, shares previously subject to 2014 Plan grants or awards that are forfeited or net settled at exercise or release may be reissued to satisfy future issuances.

The following table summarizes changes in the number of shares available for grant under the Company’s equity incentive plans during the three months ended September 30, 2022:

	Number of Shares
Available for grant at July 1, 2022	12,393
RSUs granted	(702)
MSUs granted	(78)
Shares withheld in settlement of taxes and/or exercise price	310
Forfeitures	63
Shares removed	(68)
Available for grant at September 30, 2022	11,918

Shares removed represents forfeitures of shares and shares withheld in settlement of taxes and/or payment of exercise price related to grants made under the 2008 Plan. As noted above, no new awards will be issued under the 2008 Plan.

Stock-based compensation expense related to restricted stock units (“RSUs”), market share units (“MSUs”) and the Employee Stock Purchase Plan is included in the following line items in the accompanying unaudited consolidated statements of operations and comprehensive income:

	Three Months Ended September 30,
	2021		2022
Cost of revenues	$	2,607	$	4,041
Sales and marketing	5,159		9,559
Research and development	3,702		8,802
General and administrative	8,091		17,411
Total stock-based compensation expense	$	19,559	$	39,813

In addition, the Company capitalized $1,547 and $2,942 of stock-based compensation expense in its capitalized internal-use software costs in the three months ended September 30, 2021 and 2022.

There were no stock options granted during the three months ended September 30, 2022. The table below presents stock option activity during the three months ended September 30, 2022:

	Outstanding Options
	Number of shares	Weighted average exercise price		Weighted average remaining contractual term (years)	Aggregate intrinsic value
Balance at July 1, 2022	548	$	18.34	1.6	$	85,515
Options exercised	(235)	$	12.07
Balance at September 30, 2022	313	$	23.04	1.8	$	68,454
Options vested and exercisable at September 30, 2022	313	$	23.04	1.8	$	68,454

The total intrinsic value of options exercised was $35,868 and $48,143 during the three months ended September 30, 2021 and 2022, respectively.

The Company grants RSUs under the 2014 Plan with terms determined at the discretion of the compensation committee of the Company’s board of directors. RSUs generally vest over four years following the grant date and have time-based vesting conditions.

The following table represents restricted stock unit activity during the three months ended September 30, 2022:

	Units	Weighted average grant date fair value
Balance at July 1, 2022	1,327	$	168.44
RSUs granted	702	$	263.19
RSUs vested	(549)	$	137.09
RSUs forfeited	(60)	$	112.51
RSU balance at September 30, 2022	1,420	$	228.99

At September 30, 2022, there was $211,211 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested restricted stock units granted. That cost is expected to be recognized over a weighted average period of 2.0 years.

The Company also grants MSUs under the 2014 Plan with terms determined at the discretion of the compensation committee of the Company's board of directors. The actual number of MSUs that will be eligible to vest is based on the achievement of a relative total shareholder return (“TSR”) target as compared to the TSR realized by each of the companies comprising the Russell 3000 Index over an approximately three-year period. The MSUs cliff-vest at the end of the TSR measurement period, and up to 200% of the target number of shares subject to each MSU are eligible to be earned.

The following table represents market share unit activity during the three months ended September 30, 2022:

	Units	Weighted average grant date fair value
MSU balance at July 1, 2022	101	$	263.83
MSUs granted	78	$	391.85
MSUs forfeited	(3)	$	355.60
MSU balance at September 30, 2022	176	$	319.34

The Company estimated the grant date fair value of the MSUs using a Monte Carlo simulation model that included the following assumptions:

	Three Months Ended September 30,
	2021		2022
Valuation assumptions:
Expected dividend yield	—%		—%
Expected volatility	47.5	%	51.0	%
Expected term (years)	3.04		3.04
Risk‑free interest rate	0.43%		3.11%

At September 30, 2022, there was $35,522 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested MSUs. That cost is expected to be recognized over a period of 2.6 years.

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Litigation

3 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Litigation

(10) Litigation

On November 16, 2020, a potential class action complaint was filed against the Company with the Circuit Court of Cook County alleging that the Company violated the Illinois Biometric Information Privacy Act. The complaint seeks statutory damages, attorney’s fees and other costs. The Company is unable to estimate any reasonably possible loss, or range of loss, with respect to this matter at this time. The Company intends to vigorously defend against this lawsuit.

From time to time, the Company is subject to litigation arising in the ordinary course of business. Many of these matters are covered in whole or in part by insurance. In the opinion of the Company’s management, the ultimate disposition of any matters currently outstanding or threatened will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity. However, these matters are subject to inherent uncertainties and could materially impact the Company’s financial position, results of operations, or liquidity based on the final disposition of these matters.

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Income Taxes

3 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

(11) Income Taxes

The Company’s quarterly provision for income taxes is based on the annual effective rate method. The Company’s quarterly provision for income taxes also includes the tax impact of certain unusual or infrequently occurring items, if any, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, and other discrete items in the interim period in which they occur.

On August 16, 2022, the Inflation Reduction Act (the "IRA") was signed into law and contains a number of tax related provisions. The Company is in the process of evaluating the IRA but does not expect it to have a material impact on the Company's consolidated financial statements.

The Company’s effective tax rate was (205.2)% and (338.2)% for the three months ended September 30, 2021 and 2022, respectively. The Company’s effective tax rate for the three months ended September 30, 2021 was lower than the federal statutory rate of 21% primarily due to excess tax benefits from employee stock-based compensation and state and local income taxes, partially offset by an increase to the valuation allowance. The Company's effective tax rate for the three months ended September 30, 2022 was lower than the federal statutory rate of 21% primarily due to excess tax benefits from employee stock-based compensation, state and local income taxes, and a decrease to the valuation allowance.

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Net Income Per Share

3 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

Net Income Per Share

(12) Net Income Per Share

Basic net income per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares outstanding during the period and, if dilutive, potential common shares outstanding during the period. The Company’s potential common shares consist of the incremental common shares issuable upon the exercise of stock options, the release of restricted stock units and market share units as of the balance sheet date. The following table presents the calculation of basic and diluted net income per share:

	Three Months Ended September 30,
	2021		2022
Numerator:
Net income	$	30,932	$	30,352
Denominator:
Weighted-average shares used in computing net income per share:
Basic	54,810		55,453
Weighted-average effect of potentially dilutive shares:
Employee stock options, restricted stock units and market share units	1,696		1,211
Diluted	56,506		56,664
Net income per share:
Basic	$	0.56	$	0.55
Diluted	$	0.55	$	0.54

The Company excluded 507 and 647 outstanding RSUs from the diluted per share calculations during the three months ended September 30, 2021 and September 30, 2022, respectively, because to include them would have been anti-dilutive.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation, Consolidation and Use of Estimates

(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 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, as more experience is acquired, as additional information is obtained and as the operating environment changes.

Interim Unaudited Consolidated Financial Information

(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 the three months ended September 30, 2022 are not necessarily indicative of the results for the full year or the results for any future periods. 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, 2022 included in the Company’s Annual Report on Form 10-K.

Income Taxes

(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.

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.

Recently Issued Accounting Standards

(d) Recently Issued Accounting Standards

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board 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.

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Revenue (Tables)

3 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Schedule of 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 September 30,
	2021		2022
Recurring fees	$	174,697	$	236,819
Implementation services and other	6,127		8,587
Total revenues from contracts	$	180,824	$	245,406

Schedule of changes in deferred revenue related to nonrefundable upfront fees

The following table summarizes the changes in deferred revenue (i.e., contract liability) related to these nonrefundable upfront fees as follows:

	Three Months Ended September 30,
	2021		2022
Balance at beginning of the period	$	8,734	$	12,233
Deferral of revenue	4,353		8,232
Revenue recognized	(4,370)		(6,270)
Balance at end of the period	$	8,717	$	14,195

Schedule of deferred contract costs and the related amortization expense

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

	Three Months Ended September 30, 2021
	Beginning balance		Capitalized costs		Amortization		Ending balance
Costs to obtain a new contract	$	145,718	$	11,737	$	(8,233)	$	149,222
Costs to fulfill a contract	69,175		10,940		(3,330)		76,785
Total	$	214,893	$	22,677	$	(11,563)	$	226,007

	Three Months Ended September 30, 2022
	Beginning balance		Capitalized costs		Amortization		Ending balance
Costs to obtain a new contract	$	182,543	$	18,912	$	(10,367)	$	191,088
Costs to fulfill a contract	106,025		16,862		(5,363)		117,524
Total	$	288,568	$	35,774	$	(15,730)	$	308,612

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Business Combinations (Tables)

3 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Summary of the allocation of purchase price

The allocation of the purchase price for Cloudsnap is as follows:

	January 18, 2022
Proprietary technology	$	15,800
Goodwill	33,628
Other assets acquired	3,398
Liabilities assumed	(2,824)
Total purchase price	$	50,002

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Balance Sheet Information (Tables)

3 Months Ended

Sep. 30, 2022

Balance Sheet Related Disclosures [Abstract]

Schedule of activity in the allowance for credit losses related to accounts receivable

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

Balance at June 30, 2022	$	841
Charged to expense	266
Write-offs	(48)
Balance at September 30, 2022	$	1,059

Schedule of capitalized internal-use software and accumulated amortization

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

	June 30, 2022		September 30, 2022
Capitalized internal-use software	$	193,156	$	204,906
Accumulated amortization	(131,171)		(138,213)
Capitalized internal-use software, net	$	61,985	$	66,693

Schedule of property and equipment, net

The major classes of property and equipment, net were as follow:

	June 30, 2022		September 30, 2022
Office equipment	$	4,365	$	4,365
Computer equipment	55,495		56,157
Furniture and fixtures	12,791		12,801
Software	8,785		8,518
Leasehold improvements	47,521		47,722
Time clocks rented by clients	6,711		7,039
Total	135,668		136,602
Accumulated depreciation	(72,829)		(75,659)
Property and equipment, net	$	62,839	$	60,943

Schedule of changes in goodwill

The following table summarizes changes in goodwill during the three months ended September 30, 2022:

	September 30, 2022
Balance at June 30, 2022	$	101,949
Measurement period adjustments	105
Balance at September 30, 2022	$	102,054

Schedule of amortizable intangible assets and estimated useful lives

The Company’s amortizable intangible assets and estimated useful lives were as follows:

	June 30, 2022		September 30, 2022		Weighted average useful life (years)
Proprietary technology	$	43,129	$	43,129	6.0
Client relationships	22,200		22,200		7.8
Non-solicitation agreements	1,600		1,600		3.1
Trade names	1,640		1,640		5.0
Total	68,569		68,569
Accumulated amortization	(23,094)		(25,865)
Intangible assets, net	$	45,475	$	42,704

Schedule of future amortization expense for acquired intangible assets

Future amortization expense for acquired intangible assets as of September 30, 2022 is as follows:

Remainder of fiscal 2023	$	8,177
Fiscal 2024	9,943
Fiscal 2025	8,888
Fiscal 2026	7,269
Fiscal 2027	4,893
Thereafter	3,534
Total	$	42,704

Schedule of components of accrued expenses

The components of accrued expenses were as follows:

	June 30, 2022		September 30, 2022
Accrued payroll and personnel costs	$	84,897	$	61,104
Operating lease liabilities	8,399		8,365
Deferred revenue	13,548		16,810
Other	17,540		19,628
Total accrued expenses	$	124,384	$	105,907

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Corporate Investments and Funds Held For Clients (Tables)

3 Months Ended

Sep. 30, 2022

Corporate Investments and Funds Held for Clients [Abstract]

Schedule of corporate investments and funds held for clients

Corporate investments and funds held for clients consisted of the following:

	June 30, 2022
Type of Issue	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Cash and cash equivalents	$	139,756	$	—	$	—	$	139,756
Funds held for clients' cash and cash equivalents	3,653,699		—		(2)		3,653,697
Available-for-sale securities:
Commercial paper	58,166		—		(126)		58,040
Corporate bonds	59,568		—		(1,715)		57,853
Asset-backed securities	9,843		2		(141)		9,704
Certificates of deposit	31,879		—		(43)		31,836
U.S. treasury securities	167,566		12		(591)		166,987
U.S government agency securities	8,000		—		(451)		7,549
Other	2,181		—		(71)		2,110
Total available-for-sale securities	337,203		14		(3,138)		334,079
Total investments	$	4,130,658	$	14	$	(3,140)	$	4,127,532

	September 30, 2022
Type of Issue	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Cash and cash equivalents	$	65,484	$	—	$	—	$	65,484
Funds held for clients' cash and cash equivalents	1,891,615		—		—		1,891,615
Available-for-sale securities:
Commercial paper	47,318		1		(112)		47,207
Corporate bonds	67,696		—		(2,428)		65,268
Asset-backed securities	18,875		—		(327)		18,548
Certificates of deposit	28,184		6		(20)		28,170
U.S. treasury securities	239,246		—		(2,656)		236,590
U.S government agency securities	8,000		—		(612)		7,388
Other	4,784		—		(133)		4,651
Total available-for-sale securities	414,103		7		(6,288)		407,822
Total investments	$	2,371,202	$	7	$	(6,288)	$	2,364,921

Schedule of the classification of investments

Classification of investments on the Unaudited Consolidated Balance Sheets was as follows:

	June 30, 2022		September 30, 2022
Cash and cash equivalents	$	139,756	$	65,484
Funds held for clients	3,987,776		2,299,437
Total investments	$	4,127,532	$	2,364,921

Schedule of available-for-sale securities that have been in an unrealized loss position for less than and greater than 12 months

Available-for-sale securities that had been in an unrealized loss position for a period of less and greater than 12 months as of June 30, 2022 and September 30, 2022 had fair market value as follows:

	June 30, 2022
	Securities in an unrealized loss position for less than 12 months				Securities in an unrealized loss position for greater than 12 months				Total
	Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value
Commercial paper	$	(126)	$	53,756	$	—	$	—	$	(126)	$	53,756
Corporate bonds	(1,715)		57,853		—		—		(1,715)		57,853
Asset-backed securities	(141)		7,354		—		—		(141)		7,354
Certificates of deposit	(43)		27,086		—		—		(43)		27,086
U.S. treasury securities	(591)		129,943		—		—		(591)		129,943
U.S. government agency securities	(451)		7,549		—		—		(451)		7,549
Other	(71)		2,110		—		—		(71)		2,110
Total available-for-sale securities	$	(3,138)	$	285,651	$	—	$	—	$	(3,138)	$	285,651

	September 30, 2022
	Securities in an unrealized loss position for less than 12 months				Securities in an unrealized loss position for greater than 12 months				Total
	Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value
Commercial paper	$	(112)	$	46,207	$	—	$	—	$	(112)	$	46,207
Corporate bonds	(1,849)		52,213		(579)		13,055		(2,428)		65,268
Asset-backed securities	(314)		16,871		(13)		1,419		(327)		18,290
Certificates of deposit	(20)		16,913		—		—		(20)		16,913
U.S. treasury securities	(2,656)		236,590		—		—		(2,656)		236,590
U.S. government agency securities	(34)		966		(578)		6,422		(612)		7,388
Other	(78)		3,732		(55)		864		(133)		4,596
Total available-for-sale securities	$	(5,063)	$	373,492	$	(1,225)	$	21,760	$	(6,288)	$	395,252

Schedule of expected maturities of available-for-sale securities

Expected maturities of available-for-sale securities at September 30, 2022 were as follows:

	Amortized cost		Fair value
One year or less	$	275,556	$	274,072
One year to two years	74,836		72,546
Two years to three years	61,708		59,442
Three years to five years	2,003		1,762
Total available-for-sale securities	$	414,103	$	407,822

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Fair Value Measurement (Tables)

3 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Schedule of fair value level for cash and cash equivalents and available-for-sale securities measured on a recurring basis

The fair value level for the Company’s cash and cash equivalents and available-for-sale securities was as follows:

	June 30, 2022
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	139,756	$	139,756	$	—	$	—
Funds held for clients' cash and cash equivalents	3,653,697		3,640,427		13,270		—
Available-for-sale securities:
Commercial paper	58,040		—		58,040		—
Corporate bonds	57,853		—		57,853		—
Asset-backed securities	9,704		—		9,704		—
Certificates of deposit	31,836		—		31,836		—
U.S. treasury securities	166,987		—		166,987		—
U.S government agency securities	7,549		—		7,549		—
Other	2,110		—		2,110		—
Total available-for-sale securities	334,079		—		334,079		—
Total investments	$	4,127,532	$	3,780,183	$	347,349	$	—

	September 30, 2022
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	65,484	$	65,484	$	—	$	—
Funds held for clients' cash and cash equivalents	1,891,615		1,887,494		4,121		—
Available-for-sale securities:
Commercial paper	47,207		—		47,207		—
Corporate bonds	65,268		—		65,268		—
Asset-backed securities	18,548		—		18,548		—
Certificates of deposit	28,170		—		28,170		—
U.S. treasury securities	236,590		—		236,590		—
U.S government agency securities	7,388		—		7,388		—
Other	4,651		—		4,651		—
Total available-for-sale securities	407,822		—		407,822		—
Total investments	$	2,364,921	$	1,952,978	$	411,943	$	—

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Stock-Based Compensation (Tables)

3 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Schedule of changes in the number of shares available for grant under equity incentive plans

The following table summarizes changes in the number of shares available for grant under the Company’s equity incentive plans during the three months ended September 30, 2022:

	Number of Shares
Available for grant at July 1, 2022	12,393
RSUs granted	(702)
MSUs granted	(78)
Shares withheld in settlement of taxes and/or exercise price	310
Forfeitures	63
Shares removed	(68)
Available for grant at September 30, 2022	11,918

Schedule of stock-based compensation expense related to restricted stock units, market share units and the Employee Stock Purchase Plan

Stock-based compensation expense related to restricted stock units (“RSUs”), market share units (“MSUs”) and the Employee Stock Purchase Plan is included in the following line items in the accompanying unaudited consolidated statements of operations and comprehensive income:

	Three Months Ended September 30,
	2021		2022
Cost of revenues	$	2,607	$	4,041
Sales and marketing	5,159		9,559
Research and development	3,702		8,802
General and administrative	8,091		17,411
Total stock-based compensation expense	$	19,559	$	39,813

Schedule of stock option activity

The table below presents stock option activity during the three months ended September 30, 2022:

	Outstanding Options
	Number of shares	Weighted average exercise price		Weighted average remaining contractual term (years)	Aggregate intrinsic value
Balance at July 1, 2022	548	$	18.34	1.6	$	85,515
Options exercised	(235)	$	12.07
Balance at September 30, 2022	313	$	23.04	1.8	$	68,454
Options vested and exercisable at September 30, 2022	313	$	23.04	1.8	$	68,454

Schedule of restricted stock unit activity

The following table represents restricted stock unit activity during the three months ended September 30, 2022:

	Units	Weighted average grant date fair value
Balance at July 1, 2022	1,327	$	168.44
RSUs granted	702	$	263.19
RSUs vested	(549)	$	137.09
RSUs forfeited	(60)	$	112.51
RSU balance at September 30, 2022	1,420	$	228.99

Schedule of market share unit activity

The following table represents market share unit activity during the three months ended September 30, 2022:

	Units	Weighted average grant date fair value
MSU balance at July 1, 2022	101	$	263.83
MSUs granted	78	$	391.85
MSUs forfeited	(3)	$	355.60
MSU balance at September 30, 2022	176	$	319.34

Summary of the assumptions used for estimating the grant date fair value of MSUs

The Company estimated the grant date fair value of the MSUs using a Monte Carlo simulation model that included the following assumptions:

	Three Months Ended September 30,
	2021		2022
Valuation assumptions:
Expected dividend yield	—%		—%
Expected volatility	47.5	%	51.0	%
Expected term (years)	3.04		3.04
Risk‑free interest rate	0.43%		3.11%

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Net Income Per Share (Tables)

3 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

Schedule of calculation of basic and diluted net income per share

The following table presents the calculation of basic and diluted net income per share:

	Three Months Ended September 30,
	2021		2022
Numerator:
Net income	$	30,932	$	30,352
Denominator:
Weighted-average shares used in computing net income per share:
Basic	54,810		55,453
Weighted-average effect of potentially dilutive shares:
Employee stock options, restricted stock units and market share units	1,696		1,211
Diluted	56,506		56,664
Net income per share:
Basic	$	0.56	$	0.55
Diluted	$	0.55	$	0.54

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Revenue - Disaggregation (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Revenue
Period of term arrangements not cancellable by client	2 years
Disaggregation of revenue
Total revenues from contracts	$ 245,406	$ 180,824
Maximum
Revenue
Period of notice to cancel by client	60 days
Recurring fees
Disaggregation of revenue
Total revenues from contracts	$ 236,819	174,697
Implementation services and other
Disaggregation of revenue
Total revenues from contracts	$ 8,587	$ 6,127

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Revenue - Deferred Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Changes in deferred revenue related to nonrefundable upfront fees
Beginning balance	$ 12,233	$ 8,734
Deferral of revenue	8,232	4,353
Revenue recognized	(6,270)	(4,370)
Ending balance	14,195	$ 8,717
Implementation services and other
Changes in deferred revenue related to nonrefundable upfront fees
Deferred revenue from nonrefundable upfront fees expected to be recognized in fiscal 2023	10,462
Deferred revenue from nonrefundable upfront fees expected to be recognized in fiscal 2024	3,518
Deferred revenue from nonrefundable upfront fees expected to be recognized in fiscal 2025 and thereafter	$ 215
Maximum
Revenue
Amortization period of nonrefundable upfront implementation fees	24 months

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Revenue - Deferred Contract Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Deferred contract costs
Amortization period of capitalized contract costs	7 years
Beginning balance	$ 288,568	$ 214,893
Capitalized costs	35,774	22,677
Amortization	(15,730)	(11,563)
Ending balance	308,612	226,007
Costs to obtain a new contract
Deferred contract costs
Beginning balance	182,543	145,718
Capitalized costs	18,912	11,737
Amortization	(10,367)	(8,233)
Ending balance	191,088	149,222
Costs to fulfill a contract
Deferred contract costs
Beginning balance	106,025	69,175
Capitalized costs	16,862	10,940
Amortization	(5,363)	(3,330)
Ending balance	$ 117,524	$ 76,785

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Revenue - Remaining Performance Obligations (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Remaining Performance Obligations
Minimum value of unsatisfied performance obligations on term-based contracts	$ 52,591
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01
Remaining Performance Obligations
Remaining performance obligation period	24 months

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Business Combinations (Details) - USD ($) $ in Thousands	Jan. 18, 2022	Sep. 30, 2022	Jun. 30, 2022
Business Combinations
Goodwill		$ 102,054	$ 101,949
Cloudsnap, Inc
Business Combinations
Cash consideration	$ 50,002
Goodwill	33,628
Other assets acquired	3,398
Liabilities assumed	(2,824)
Total purchase price	50,002
Cloudsnap, Inc | Proprietary technology
Business Combinations
Proprietary technology	$ 15,800

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Balance Sheet Information - Allowance for Credit Losses for Accounts Receivable, Capitalized Internal-Use Software and Property, Plant and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Jun. 30, 2022
Activity in the allowance for credit losses
Beginning balance	$ 841
Charged to expense	266	$ 38
Write-offs	(48)
Ending balance	1,059
Capitalized internal-use software and accumulated amortization
Capitalized internal-use software	204,906		$ 193,156
Accumulated amortization	(138,213)		(131,171)
Capitalized internal-use software, net	66,693		61,985
Property and equipment, net
Property and equipment, gross	136,602		135,668
Accumulated depreciation	(75,659)		(72,829)
Property and equipment, net	60,943		62,839
Depreciation expense	4,454	3,842
Changes in Goodwill
Beginning balance	101,949
Measurement period adjustments	105
Ending balance	102,054
Cost of revenues
Capitalized internal-use software and accumulated amortization
Amortization of capitalized internal-use software	7,042	$ 6,128
Office equipment
Property and equipment, net
Property and equipment, gross	4,365		4,365
Computer equipment
Property and equipment, net
Property and equipment, gross	56,157		55,495
Furniture and fixtures
Property and equipment, net
Property and equipment, gross	12,801		12,791
Software
Property and equipment, net
Property and equipment, gross	8,518		8,785
Leasehold improvements
Property and equipment, net
Property and equipment, gross	47,722		47,521
Time clocks rented by clients
Property and equipment, net
Property and equipment, gross	$ 7,039		$ 6,711

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Balance Sheet Information - Intangible Assets and Accrued Expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Jun. 30, 2022
Amortizable intangible assets
Amortizable intangible assets, gross	$ 68,569		$ 68,569
Accumulated amortization	(25,865)		(23,094)
Intangible assets, net	42,704		45,475
Amortization expense for acquired intangible assets	2,771	$ 1,352
Future amortization expense for acquired intangible assets
Remainder of fiscal 2023	8,177
Fiscal 2024	9,943
Fiscal 2025	8,888
Fiscal 2026	7,269
Fiscal 2027	4,893
Thereafter	3,534
Intangible assets, net	42,704		45,475
Components of accrued expenses
Accrued payroll and personnel costs	61,104		84,897
Operating lease liabilities	8,365		8,399
Deferred revenue	16,810		13,548
Other	19,628		17,540
Total accrued expenses	105,907		124,384
Proprietary technology
Amortizable intangible assets
Amortizable intangible assets, gross	$ 43,129		43,129
Weighted average useful life (years)	6 years
Client relationships
Amortizable intangible assets
Amortizable intangible assets, gross	$ 22,200		22,200
Weighted average useful life (years)	7 years 9 months 18 days
Non-solicitation agreements
Amortizable intangible assets
Amortizable intangible assets, gross	$ 1,600		1,600
Weighted average useful life (years)	3 years 1 month 6 days
Trade names
Amortizable intangible assets
Amortizable intangible assets, gross	$ 1,640		$ 1,640
Weighted average useful life (years)	5 years

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Corporate Investments and Funds Held For Clients - Reconciliation (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022	Sep. 30, 2021
Corporate Investments and Funds Held for Clients
Amortized cost of cash and cash equivalents	$ 65,484	$ 139,756
Fair value of cash and cash equivalents	65,484	139,756	$ 66,431
Amortized cost of funds held for clients' cash and cash equivalents	1,891,615	3,653,699
Accumulated gross unrealized loss, before tax of funds held for clients' cash and cash equivalents		(2)
Fair value of funds held for clients' cash and cash equivalents	1,891,615	3,653,697	$ 3,042,121
Available-for-sale securities:
Amortized cost	414,103	337,203
Gross unrealized gains	7	14
Gross unrealized losses	(6,288)	(3,138)
Fair value	407,822	334,079
Total investments at amortized cost	2,371,202	4,130,658
Total investments gross unrealized gains	7	14
Total investments gross unrealized losses	(6,288)	(3,140)
Total investments	2,364,921	4,127,532
Commercial paper
Available-for-sale securities:
Amortized cost	47,318	58,166
Gross unrealized gains	1	0
Gross unrealized losses	(112)	(126)
Fair value	47,207	58,040
Corporate bonds
Available-for-sale securities:
Amortized cost	67,696	59,568
Gross unrealized gains	0	0
Gross unrealized losses	(2,428)	(1,715)
Fair value	65,268	57,853
Asset-backed securities
Available-for-sale securities:
Amortized cost	18,875	9,843
Gross unrealized gains	0	2
Gross unrealized losses	(327)	(141)
Fair value	18,548	9,704
Certificates of deposit
Available-for-sale securities:
Amortized cost	28,184	31,879
Gross unrealized gains	6	0
Gross unrealized losses	(20)	(43)
Fair value	28,170	31,836
U.S. treasury securities
Available-for-sale securities:
Amortized cost	239,246	167,566
Gross unrealized gains	0	12
Gross unrealized losses	(2,656)	(591)
Fair value	236,590	166,987
U.S government agency securities
Available-for-sale securities:
Amortized cost	8,000	8,000
Gross unrealized gains	0	0
Gross unrealized losses	(612)	(451)
Fair value	7,388	7,549
Other
Available-for-sale securities:
Amortized cost	4,784	2,181
Gross unrealized gains	0	0
Gross unrealized losses	(133)	(71)
Fair value	$ 4,651	$ 2,110

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Corporate Investments and Funds Held For Clients - Classification (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Jun. 30, 2022
Corporate Investments and Funds Held for Clients
Cash and cash equivalents	$ 65,484	$ 66,431	$ 139,756
Funds held for clients	2,299,437		3,987,776
Total investments	2,364,921		4,127,532
Gross unrealized losses on available-for-sale securities in unrealized loss positions for less than 12 months	(5,063)		(3,138)
Fair value of available-for-sale securities in unrealized loss positions for less than 12 months	373,492		285,651
Gross unrealized losses on available-for-sale securities in unrealized loss positions for greater than 12 months	(1,225)		0
Fair value of available-for-sale securities in unrealized loss positions for greater than 12 months	21,760		0
Gross unrealized losses on available-for-sale securities in unrealized loss positions	(6,288)		(3,138)
Fair value of available-for-sale securities in unrealized loss positions	395,252		285,651
Credit impairment losses	0	0
Realized gains or losses	0	$ 0
Commercial paper
Corporate Investments and Funds Held for Clients
Gross unrealized losses on available-for-sale securities in unrealized loss positions for less than 12 months	(112)		(126)
Fair value of available-for-sale securities in unrealized loss positions for less than 12 months	46,207		53,756
Gross unrealized losses on available-for-sale securities in unrealized loss positions for greater than 12 months	0		0
Fair value of available-for-sale securities in unrealized loss positions for greater than 12 months	0		0
Gross unrealized losses on available-for-sale securities in unrealized loss positions	(112)		(126)
Fair value of available-for-sale securities in unrealized loss positions	46,207		53,756
Corporate bonds
Corporate Investments and Funds Held for Clients
Gross unrealized losses on available-for-sale securities in unrealized loss positions for less than 12 months	(1,849)		(1,715)
Fair value of available-for-sale securities in unrealized loss positions for less than 12 months	52,213		57,853
Gross unrealized losses on available-for-sale securities in unrealized loss positions for greater than 12 months	(579)		0
Fair value of available-for-sale securities in unrealized loss positions for greater than 12 months	13,055		0
Gross unrealized losses on available-for-sale securities in unrealized loss positions	(2,428)		(1,715)
Fair value of available-for-sale securities in unrealized loss positions	65,268		57,853
Asset-backed securities
Corporate Investments and Funds Held for Clients
Gross unrealized losses on available-for-sale securities in unrealized loss positions for less than 12 months	(314)		(141)
Fair value of available-for-sale securities in unrealized loss positions for less than 12 months	16,871		7,354
Gross unrealized losses on available-for-sale securities in unrealized loss positions for greater than 12 months	(13)		0
Fair value of available-for-sale securities in unrealized loss positions for greater than 12 months	1,419		0
Gross unrealized losses on available-for-sale securities in unrealized loss positions	(327)		(141)
Fair value of available-for-sale securities in unrealized loss positions	18,290		7,354
Certificates of deposit
Corporate Investments and Funds Held for Clients
Gross unrealized losses on available-for-sale securities in unrealized loss positions for less than 12 months	(20)		(43)
Fair value of available-for-sale securities in unrealized loss positions for less than 12 months	16,913		27,086
Gross unrealized losses on available-for-sale securities in unrealized loss positions for greater than 12 months	0		0
Fair value of available-for-sale securities in unrealized loss positions for greater than 12 months	0		0
Gross unrealized losses on available-for-sale securities in unrealized loss positions	(20)		(43)
Fair value of available-for-sale securities in unrealized loss positions	16,913		27,086
U.S. treasury securities
Corporate Investments and Funds Held for Clients
Gross unrealized losses on available-for-sale securities in unrealized loss positions for less than 12 months	(2,656)		(591)
Fair value of available-for-sale securities in unrealized loss positions for less than 12 months	236,590		129,943
Gross unrealized losses on available-for-sale securities in unrealized loss positions for greater than 12 months	0		0
Fair value of available-for-sale securities in unrealized loss positions for greater than 12 months	0		0
Gross unrealized losses on available-for-sale securities in unrealized loss positions	(2,656)		(591)
Fair value of available-for-sale securities in unrealized loss positions	236,590		129,943
U.S government agency securities
Corporate Investments and Funds Held for Clients
Gross unrealized losses on available-for-sale securities in unrealized loss positions for less than 12 months	(34)		(451)
Fair value of available-for-sale securities in unrealized loss positions for less than 12 months	966		7,549
Gross unrealized losses on available-for-sale securities in unrealized loss positions for greater than 12 months	(578)		0
Fair value of available-for-sale securities in unrealized loss positions for greater than 12 months	6,422		0
Gross unrealized losses on available-for-sale securities in unrealized loss positions	(612)		(451)
Fair value of available-for-sale securities in unrealized loss positions	7,388		7,549
Other
Corporate Investments and Funds Held for Clients
Gross unrealized losses on available-for-sale securities in unrealized loss positions for less than 12 months	(78)		(71)
Fair value of available-for-sale securities in unrealized loss positions for less than 12 months	3,732		2,110
Gross unrealized losses on available-for-sale securities in unrealized loss positions for greater than 12 months	(55)		0
Fair value of available-for-sale securities in unrealized loss positions for greater than 12 months	864		0
Gross unrealized losses on available-for-sale securities in unrealized loss positions	(133)		(71)
Fair value of available-for-sale securities in unrealized loss positions	$ 4,596		$ 2,110

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Corporate Investments and Funds Held For Clients - Maturities (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022
Expected maturities of available-for-sale securities, amortized cost
One year or less	$ 275,556
One year to two years	74,836
Two years to three years	61,708
Three years to five years	2,003
Total available-for-sale securities	414,103	$ 337,203
Expected maturities of available-for-sale securities, fair value
One year or less	274,072
One year to two years	72,546
Two years to three years	59,442
Three years to five years	1,762
Total available-for-sale securities	$ 407,822	$ 334,079

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Fair Value Measurement (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022	Sep. 30, 2021
Fair value measurement
Cash and cash equivalents	$ 65,484	$ 139,756	$ 66,431
Funds held for clients' cash and cash equivalents	1,891,615	3,653,697	$ 3,042,121
Available-for-sale securities:
Total available-for-sale securities	407,822	334,079
Total investments	2,364,921	4,127,532
Level 1
Fair value measurement
Cash and cash equivalents	65,484	139,756
Funds held for clients' cash and cash equivalents	1,887,494	3,640,427
Available-for-sale securities:
Total available-for-sale securities	0	0
Total investments	1,952,978	3,780,183
Level 2
Fair value measurement
Cash and cash equivalents	0	0
Funds held for clients' cash and cash equivalents	4,121	13,270
Available-for-sale securities:
Total available-for-sale securities	407,822	334,079
Total investments	411,943	347,349
Level 3
Fair value measurement
Cash and cash equivalents	0	0
Funds held for clients' cash and cash equivalents	0	0
Available-for-sale securities:
Total available-for-sale securities	0	0
Total investments	0	0
Commercial paper
Available-for-sale securities:
Total available-for-sale securities	47,207	58,040
Commercial paper | Level 1
Available-for-sale securities:
Total available-for-sale securities	0	0
Commercial paper | Level 2
Available-for-sale securities:
Total available-for-sale securities	47,207	58,040
Commercial paper | Level 3
Available-for-sale securities:
Total available-for-sale securities	0	0
Corporate bonds
Available-for-sale securities:
Total available-for-sale securities	65,268	57,853
Corporate bonds | Level 1
Available-for-sale securities:
Total available-for-sale securities	0	0
Corporate bonds | Level 2
Available-for-sale securities:
Total available-for-sale securities	65,268	57,853
Corporate bonds | Level 3
Available-for-sale securities:
Total available-for-sale securities	0	0
Asset-backed securities
Available-for-sale securities:
Total available-for-sale securities	18,548	9,704
Asset-backed securities | Level 1
Available-for-sale securities:
Total available-for-sale securities	0	0
Asset-backed securities | Level 2
Available-for-sale securities:
Total available-for-sale securities	18,548	9,704
Asset-backed securities | Level 3
Available-for-sale securities:
Total available-for-sale securities	0	0
Certificates of deposit
Available-for-sale securities:
Total available-for-sale securities	28,170	31,836
Certificates of deposit | Level 1
Available-for-sale securities:
Total available-for-sale securities	0	0
Certificates of deposit | Level 2
Available-for-sale securities:
Total available-for-sale securities	28,170	31,836
Certificates of deposit | Level 3
Available-for-sale securities:
Total available-for-sale securities	0	0
U.S. treasury securities
Available-for-sale securities:
Total available-for-sale securities	236,590	166,987
U.S. treasury securities | Level 1
Available-for-sale securities:
Total available-for-sale securities	0	0
U.S. treasury securities | Level 2
Available-for-sale securities:
Total available-for-sale securities	236,590	166,987
U.S. treasury securities | Level 3
Available-for-sale securities:
Total available-for-sale securities	0	0
U.S government agency securities
Available-for-sale securities:
Total available-for-sale securities	7,388	7,549
U.S government agency securities | Level 1
Available-for-sale securities:
Total available-for-sale securities	0	0
U.S government agency securities | Level 2
Available-for-sale securities:
Total available-for-sale securities	7,388	7,549
U.S government agency securities | Level 3
Available-for-sale securities:
Total available-for-sale securities	0	0
Other
Available-for-sale securities:
Total available-for-sale securities	4,651	2,110
Other | Level 1
Available-for-sale securities:
Total available-for-sale securities	0	0
Other | Level 2
Available-for-sale securities:
Total available-for-sale securities	4,651	2,110
Other | Level 3
Available-for-sale securities:
Total available-for-sale securities	$ 0	$ 0

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Debt (Details) - Five-year revolving credit agreement - Senior secured debt $ in Thousands	Aug. 31, 2022 USD ($)
Debt
Maximum borrowing capacity	$ 550,000
Maximum borrowing capacity, subject to additional lender commitments and satisfaction of other requirements	$ 825,000
Minimum
Debt
Interest coverage ratio	2.00
Maximum
Debt
Net total leverage ratio	4.00
Net total leverage ratio with step-up	4.50
SOFR | Minimum
Debt
Margin on base rate	0.875%
SOFR | Maximum
Debt
Margin on base rate	1.50%
Adjusted base rate | Minimum
Debt
Margin on base rate	0.00%
Adjusted base rate | Maximum
Debt
Margin on base rate	0.50%

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Stock-Based Compensation - General Information (Details) shares in Thousands	3 Months Ended
	Sep. 30, 2022 shares
Equity Incentive Plans
Equity Incentive Plans
Number of shares of common stock reserved for issuance (in shares)	13,827
Number of shares allocated but not yet issued that are subject to outstanding options or awards (in shares)	1,909
2008 Plan
Equity Incentive Plans
Awards issued (in shares)	0
Awards issuable (in shares)	0
2014 Incentive Plan
Equity Incentive Plans
Potential number of additional shares available for grant each year (as a percent)	4.50%

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Stock-Based Compensation - Incentive Plans Activity (Details) - Equity Incentive Plans shares in Thousands	3 Months Ended
	Sep. 30, 2022 shares
Shares Available for Grant
Beginning balance (in shares)	12,393
RSUs granted (in shares)	(702)
MSUs granted (in shares)	(78)
Shares withheld in net settlement for taxes and/or exercise price (in shares)	310
Forfeitures (in shares)	63
Shares removed (in shares)	(68)
Ending balance (in shares)	11,918

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Stock-Based Compensation - Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Benefit Plans
Total stock-based compensation expense	$ 39,813	$ 19,559
Stock-based compensation expense capitalized in internal-use software costs	2,942	1,547
Cost of revenues
Benefit Plans
Total stock-based compensation expense	4,041	2,607
Sales and marketing
Benefit Plans
Total stock-based compensation expense	9,559	5,159
Research and development
Benefit Plans
Total stock-based compensation expense	8,802	3,702
General and administrative
Benefit Plans
Total stock-based compensation expense	$ 17,411	$ 8,091

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Stock-Based Compensation - Stock Option Activity (Details) - Stock options - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		12 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Jun. 30, 2022
Options Outstanding, Number of Shares
Beginning balance (in shares)	548
Options granted (in shares)	0
Options exercised (in shares)	(235)
Ending balance (in shares)	313		548
Options Outstanding, Weighted average exercise price
Beginning balance (in dollars per share)	$ 18.34
Options exercised (in dollars per share)	12.07
Ending balance (in dollars per share)	$ 23.04		$ 18.34
Options Additional Disclosures
Weighted average remaining contractual term (years)	1 year 9 months 18 days		1 year 7 months 6 days
Weighted average remaining contractual term of options vested and exercisable at the end of the period (years)	1 year 9 months 18 days
Aggregate intrinsic value at the beginning of the period	$ 85,515
Aggregate intrinsic value at the end of the period	$ 68,454		$ 85,515
Options vested and exercisable at the end of the period (in shares)	313
Options vested and exercisable at the end of the period, weighted average exercise price (in dollars per share)	$ 23.04
Options vested and exercisable, aggregate intrinsic value	$ 68,454
Total intrinsic value of options exercised	$ 48,143	$ 35,868

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Stock-Based Compensation - RSU activity (Details) - Restricted Stock Units (RSUs) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Sep. 30, 2022 USD ($) $ / shares shares
RSUs Outstanding, Units
Beginning balance (in shares) | shares	1,327
RSUs granted (in shares) | shares	702
RSUs vested (in shares) | shares	(549)
RSUs forfeited (in shares) | shares	(60)
Ending balance (in shares) | shares	1,420
RSUs Outstanding, Weighted average grant date fair value
Beginning balance (in dollars per share) | $ / shares	$ 168.44
RSUs granted (in dollars per share) | $ / shares	263.19
RSUs vested (in dollars per share) | $ / shares	137.09
RSUs forfeited (in dollars per share) | $ / shares	112.51
Ending balance (in dollars per share) | $ / shares	$ 228.99
Unrecognized Compensation Costs Not Yet Recognized, Net of Estimated Forfeitures [Abstract]
Total unrecognized compensation cost, net of estimated forfeitures related to unvested RSUs | $	$ 211,211
Weighted average period to recognize unrecognized compensation cost (in years)	2 years
Maximum
Equity Incentive Plans
Vesting period	4 years

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Stock-Based Compensation - MSU activity (Details) - Market Share Units [Member] shares in Thousands	3 Months Ended
	Sep. 30, 2022 $ / shares shares
Equity Incentive Plans
Vesting period	3 years
Percentage of target number of shares subject to each MSU	200.00%
MSUs Outstanding, Units
Beginning balance (in shares) | shares	101
MSUs granted (in shares) | shares	78
MSUs forfeited (in shares) | shares	(3)
Ending balance (in shares) | shares	176
MSUs Outstanding, Weighted average grant date fair value
Beginning balance (in dollars per share) | $ / shares	$ 263.83
MSUs granted (in dollars per share) | $ / shares	391.85
MSUs forfeited (in dollars per share) | $ / shares	355.60
Ending balance (in dollars per share) | $ / shares	$ 319.34

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Stock-Based Compensation - MSU Information (Details) - Market Share Units [Member] - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Valuation assumptions:
Expected dividend yield	0.00%	0.00%
Expected volatility	51.00%	47.50%
Expected term (years)	3 years 14 days	3 years 14 days
Risk‑free interest rate	3.11%	0.43%
Unrecognized Compensation Costs Not Yet Recognized, Net of Estimated Forfeitures [Abstract]
Total unrecognized compensation cost, net of estimated forfeitures related to unvested MSUs	$ 35,522
Weighted average period to recognize unrecognized compensation cost (in years)	2 years 7 months 6 days

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Income Taxes (Details)	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Income Tax Disclosure [Abstract]
Effective tax rate for the period (as a percent)	(338.20%)	(205.20%)
U.S. federal income tax rate (as a percent)	21.00%	21.00%

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Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Numerator:
Net income	$ 30,352	$ 30,932
Weighted-average shares used in computing net income per share:
Basic (in shares)	55,453	54,810
Weighted-average effect of potentially dilutive shares:
Employee stock options, restricted stock units and market share units (in shares)	1,211	1,696
Diluted (in shares)	56,664	56,506
Net income per share:
Basic (in dollars per share)	$ 0.55	$ 0.56
Diluted (in dollars per share)	$ 0.54	$ 0.55
Restricted Stock Units (RSUs)
Net income per share:
Anti-dilutive securities excluded (in shares)	647	507