0001558370-19-007859 | 10-K | XBRL Viewer

$ 132,476

$ 137,193

^[1]

Corporate investments

29,314

732

Accounts receivable, net

4,358

3,453

21,677

Total current assets before funds held for clients

13,895

11,248

201,720

152,626

Funds held for clients

1,394,469

1,225,614

Total current assets

1,596,189

1,378,240

Capitalized internal-use software, net

27,486

21,094

Property and equipment, net

70,056

62,029

Intangible assets, net

10,751

13,002

Goodwill

9,590

Long-term deferred contract costs

81,422

Long-term prepaid expenses and other

1,975

1,504

Deferred income tax assets, net

6,472

22,140

Total assets

1,803,941

1,507,599

Current liabilities:

Accounts payable

3,954

2,990

Total current liabilities before client fund obligations

57,625

42,241

61,579

45,231

Client fund obligations

1,394,469

1,225,614

Total current liabilities

1,456,048

1,270,845

Deferred rent

31,263

22,812

Other long-term liabilities

1,723

1,118

Deferred income tax liabilities, net

6,943

Total liabilities

1,495,977

1,294,775

Stockholders' equity:

Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2018 and June 30, 2019

Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2018 and June 30, 2019; 52,758 shares issued and outstanding at June 30, 2018 and 53,075 shares issued and outstanding at June 30, 2019

Additional paid-in capital

207,982

219,588

Retained earnings (accumulated deficit)

99,817

(6,678)

Accumulated other comprehensive income (loss)

112

(139)

Total stockholders' equity

307,964

212,824

Total liabilities and stockholders' equity

$ 1,803,941

$ 1,507,599

[1]	Certain amounts have been reclassified to reflect the adoption of Accounting Standards Update (“ASU”) No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force).”

Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Jun. 30, 2019	Jun. 30, 2018
Consolidated Balance Sheets
Preferred Stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred Stock, shares authorized	5,000	5,000
Preferred Stock, shares issued	0	0
Preferred Stock, shares outstanding	0	0
Common Stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common Stock, shares authorized	155,000	155,000
Common Stock, shares issued	53,075	52,758
Common Stock, shares outstanding	53,075	52,758

Consolidated Statements of Operations and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Revenues:
Revenues from Contracts	$ 447,752
Interest income on funds held for clients	19,881	$ 9,093	$ 3,631
Total recurring revenues	456,836	363,525	288,448
Total revenues	467,633	377,527	300,010
Cost of revenues:
Total cost of revenues	153,851	149,197	123,987
Gross profit	313,782	228,330	176,023
Operating expenses:
Sales and marketing	112,599	95,484	77,506
Research and development	50,329	37,645	29,098
General and administrative	94,630	79,252	62,123
Total operating expenses	257,558	212,381	168,727
Operating income	56,224	15,949	7,296
Other income	1,822	802	73
Income before income taxes	58,046	16,751	7,369
Income tax expense (benefit)	4,223	(21,847)	651
Net income	53,823	38,598	6,718
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on securities, net of tax	251	(139)
Total other comprehensive income (loss), net of tax	251	(139)
Comprehensive income	$ 54,074	$ 38,459	$ 6,718
Net income per share:
Basic (in dollars per share)	$ 1.02	$ 0.74	$ 0.13
Diluted (in dollars per share)	$ 0.97	$ 0.70	$ 0.12
Weighted-average shares used in computing net income per share:
Basic (in shares)	52,914	52,425	51,415
Diluted (in shares)	55,414	54,887	54,057
Recurring fees
Revenues:
Revenues from Contracts	$ 436,955	$ 354,432	$ 284,817
Cost of revenues:
Total cost of revenues	125,211	104,009	85,399
Implementation services and other
Revenues:
Revenues from Contracts	10,797	14,002	11,562
Cost of revenues:
Total cost of revenues	$ 28,640	$ 45,188	$ 38,588

Consolidated Statements of Changes in Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-in Capital	Retained Earnings. (Accumulated Deficit)	Accumulated Other Comprehensive Income (Loss)	Total
Balance at Jun. 30, 2016	$ 51	$ 171,515	$ (51,994)		$ 119,572
Balance (in shares) at Jun. 30, 2016	51,132
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		28,507			28,507
Stock options exercised	$ 1	8,550			8,551
Stock options exercised (in shares)	691
Issuance of common stock upon vesting of restricted stock units (in shares)	255
Issuance of common stock under employee stock purchase plan		3,677			3,677
Issuance of common stock under employee stock purchase plan (in shares)	127
Net settlement for taxes and/or exercise price related to equity awards		(19,859)			(19,859)
Net settlement for taxes and/or exercise price related to equity awards (in shares)	(467)
Excess tax benefits from stock-based compensation		447			447
Net income			6,718		6,718
Balance at Jun. 30, 2017	$ 52	192,837	(45,276)		147,613
Balance (in shares) at Jun. 30, 2017	51,738
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		32,378			32,378
Stock options exercised	$ 1	8,001			8,002
Stock options exercised (in shares)	839
Issuance of common stock upon vesting of restricted stock units (in shares)	452
Issuance of common stock under employee stock purchase plan		4,304			4,304
Issuance of common stock under employee stock purchase plan (in shares)	108
Net settlement for taxes and/or exercise price related to equity awards		(17,932)			(17,932)
Net settlement for taxes and/or exercise price related to equity awards (in shares)	(379)
Unrealized gains (losses) on securities, net of tax				$ (139)	(139)
Net income			38,598		38,598
Balance at Jun. 30, 2018	$ 53	219,588	(6,678)	(139)	$ 212,824
Balance (in shares) at Jun. 30, 2018	52,758				52,758
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		41,525			$ 41,525
Stock options exercised		4,882			4,882
Stock options exercised (in shares)	378
Issuance of common stock upon vesting of restricted stock units (in shares)	660
Issuance of common stock under employee stock purchase plan		5,982			5,982
Issuance of common stock under employee stock purchase plan (in shares)	116
Net settlement for taxes and/or exercise price related to equity awards		(29,004)			(29,004)
Net settlement for taxes and/or exercise price related to equity awards (in shares)	(395)
Repurchases of common shares		(34,991)			(34,991)
Repurchases of common shares (in shares)	(442)
Unrealized gains (losses) on securities, net of tax				251	251
Net income			53,823		53,823
Balance at Jun. 30, 2019	$ 53	$ 207,982	99,817	$ 112	$ 307,964
Balance (in shares) at Jun. 30, 2019	53,075				53,075
Increase (Decrease) in Stockholders' Equity
Cumulative effect of change in accounting policy (adoption of Topic 606)			$ 52,672		$ 52,672

Consolidated Statements of Cash Flows - USD ($)
$ in Thousands

12 Months Ended

Jun. 30, 2019

Jun. 30, 2018

Jun. 30, 2017

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

$ 53,823

$ 38,598

^[1]

$ 6,718

^[1]

Stock-based compensation expense

38,765

30,354

^[1]

26,734

^[1]

Depreciation and amortization expense

34,564

30,202

^[1]

21,027

^[1]

Provision for doubtful accounts

4,134

(21,870)

^[1]

152

^[1]

283

296

^[1]

113

^[1]

Net accretion of discounts and amortization of premiums on available-for-sale securities

(2,230)

(443)

^[1]

Net realized losses on sales of available-for-sale securities

^[1]

Loss on disposal of equipment

454

227

^[1]

253

^[1]

Accounts receivable

(1,188)

(1,494)

^[1]

(472)

^[1]

(34,992)

389

(2,141)

^[1]

(2,074)

^[1]

Accounts payable

(75)

740

^[1]

219

^[1]

Tenant improvement allowance

13,625

11,641

^[1]

6,465

^[1]

7,480

11,754

^[1]

2,845

^[1]

Net cash provided by operating activities

115,032

97,866

^[1]

61,980

^[1]

Cash flows from investing activities:

Purchases of available-for-sale securities and other

(250,685)

(196,597)

^[1]

Proceeds from sales and maturities of available-for-sale securities

246,243

73,044

^[1]

Capitalized internal-use software costs

(20,142)

(15,638)

^[1]

(13,641)

^[1]

Purchases of property and equipment

(11,280)

(21,676)

^[1]

(21,338)

^[1]

Lease allowances used for tenant improvements

(7,480)

(11,754)

^[1]

(2,845)

^[1]

Acquisition of business, net of cash and funds held for clients' cash and cash equivalents

^[1]

(6,658)

Net cash used in investing activities

(43,344)

(179,279)

^[1]

(37,824)

^[1]

Cash flows from financing activities:

Net change in client fund obligations

168,855

281,467

^[1]

(297,163)

^[1]

Payment of contingent consideration

(1,000)

Repurchases of common shares

(34,991)

Proceeds from exercise of stock options

^[1]

Proceeds from employee stock purchase plan

5,982

4,304

^[1]

3,677

^[1]

(24,207)

(10,554)

^[1]

(11,342)

^[1]

Excess tax benefits from stock-based compensation

^[1]

447

Net cash provided by (used in) financing activities

114,724

275,217

^[1]

(304,347)

^[1]

Net change in cash, cash equivalents and funds held for clients' cash and cash equivalents

186,412

193,804

^[1]

(280,191)

^[1]

Cash, cash equivalents and funds held for clients' cash and cash equivalents—beginning of period

^[1]

1,239,731

1,045,927

1,326,118

Cash, cash equivalents and funds held for clients' cash and cash equivalents—end of period

1,426,143

1,239,731

^[1]

1,045,927

^[1]

Supplemental Disclosure of Non-Cash Investing and Financing Activities

Build-out allowances received from landlords

1,264

1,956

^[1]

Purchase of property and equipment and internal-use software, accrued but not paid

4,260

659

^[1]

667

^[1]

Supplemental Disclosure of Cash Flow Information

Cash paid (refunds received) for income taxes

412

(53)

^[1]

Reconciliation of cash, cash equivalents and funds held for clients' cash and cash equivalents to the Consolidated Balance Sheets

132,476

137,193

^[1]

103,468

^[1]

Total cash, cash equivalents and funds held for clients’ cash and cash equivalents

1,293,667

1,102,538

^[1]

942,459

^[1]

$ 1,426,143

$ 1,239,731

^[1]

$ 1,045,927

^[1]

[1]	Certain amounts have been reclassified to reflect the adoption of Accounting Standards Update (“ASU”) No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force).”

Organization and Description of Business	12 Months Ended
Organization and Description of Business	Jun. 30, 2019
Organization and Description of Business
Organization and Description of Business	(1) Organization and Description of Business Paylocity Holding Corporation (the “Company”) is a cloud-based provider of payroll and human capital management software solutions for medium-sized organizations. Services are provided in a Software-as-a-Service (“SaaS”) delivery model utilizing the Company’s cloud-based platform. The Company’s comprehensive product suite delivers a unified platform that allows clients to make strategic decisions in the areas of payroll, core HR, workforce management, talent and benefits.

Summary of Significant Accounting Policies

12 Months Ended

Jun. 30, 2019

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

(2) Summary of Significant Accounting Policies

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

The accompanying consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”).

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“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 change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes.

The 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 Company began investing corporate funds in available-for-sale securities during the first quarter of fiscal 2019, and as a result, reclassified $732 as of June 30, 2018 from Prepaid expenses and other on the consolidated balance sheets to Corporate investments in order to conform to the current year’s presentation.

(b) Concentrations of Risk

The Company regularly maintains cash balances that exceed Federal Depository Insurance Corporation limits. No individual client represents 10% or more of total revenues. For all periods presented, 100% of total revenues were generated by clients in the United States.

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

(d) Funds Held For Clients, Corporate Investments and Client Fund Obligations

The Company obtains funds from clients in advance of performing payroll and payroll tax filing services on behalf of those clients. Funds held for clients represent assets that are used solely for the purposes of satisfying the obligations to remit funds relating to payroll and payroll tax filing services. The Company has classified funds held for clients as a current asset since these funds are held solely for the purposes of satisfying the client fund obligations. Funds held for clients is primarily comprised of cash and cash equivalents invested in demand deposit accounts. The Company also invests a portion of its funds held for clients and corporate funds in marketable securities.

Marketable securities classified as available-for-sale are recorded at fair value on the consolidated balance sheets. Unrealized gains and losses, net of applicable income taxes, are reported as other comprehensive income (loss) in the consolidated statements of operations and comprehensive income. Interest on marketable securities included in funds held for clients is reported as interest income on funds held for clients and interest on corporate investments is reported as other income on the consolidated statements of operations and comprehensive income, respectively.

The Company reviews the composition of its portfolio for any available-for-sale security that has a fair value that falls below its amortized cost. If any security fits this criterion, the Company further evaluates whether other-than-temporary impairment exists by considering whether the Company has the intent and ability to retain the security for a period of time sufficient enough to allow for anticipated fair value recovery. The Company did not record any other-than-temporary impairment charges during the years ended June 30, 2018 or 2019.

Client fund obligations represent the Company’s contractual obligations to remit funds to satisfy clients’ payroll and tax payment obligations and are recorded in the accompanying balance sheets at the time that the Company obtains funds from clients. The client fund obligations represent liabilities that will be repaid within one year of the balance sheet date.

(e) Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the statements of cash flows. The Company maintains an allowance for doubtful accounts reflecting estimated potential losses in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and the Company’s clients’ financial conditions, the amount of receivables in dispute, the current receivables aging and current payment patterns. The Company reviews its allowance for doubtful accounts quarterly. Past due balances over 60 days and over a specified amount are reviewed individually for collectability. All other balances are reviewed on a pooled basis. Account balances are charged off against the allowance after all commercially reasonable means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its clients.

Activity in the allowance for doubtful accounts was as follows:


	For the Years Ended June 30,
	2017		2018		2019
Balance at the beginning of the year	$	193	$	266	$	375
Charged to expense		113		296		283
Write-offs		(40)		(187)		(185)
Balance at the end of the year	$	266	$	375	$	473

(f) Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist primarily of prepaid licensing fees, prepaid insurance premiums, deposits with vendors, and time clocks available for sale or lease.

(g) Capitalized Internal-Use Software

The Company applies Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350-40, Intangibles—Goodwill and Other—Internal-Use Software, to the accounting for costs of internal-use software. Internal-use software costs are capitalized when module development begins, it is probable that the project will be completed, and the software will be used as intended. Costs associated with preliminary project stage activities, training, maintenance and all other post implementation stage activities are expensed as incurred. The Company also capitalizes certain costs related to specific upgrades and enhancements when it is probable the expenditures will result in significant additional functionality. The capitalization policy provides for the capitalization of certain payroll costs for employees who are directly associated with developing internal-use software as well as certain external direct costs, such as consulting fees. Capitalized employee costs are limited to the time directly spent on such projects.

Capitalized internal-use software costs are amortized on a straight-line basis over the estimated useful lives, generally over a 24 or 36-month period. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

(h) Property and Equipment and Long-Lived Assets

Property and equipment are stated at cost. Depreciation on property and equipment is calculated on the straight-line method over the estimated useful lives of the assets, generally three to seven years for most classes of assets, or over the term of the related lease for leasehold improvements.

Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares the undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

(i) Intangible Assets, Net of Accumulated Amortization

Intangible assets are comprised primarily of acquired client relationships and are reported net of accumulated amortization on the consolidated balance sheets. Client relationships use the straight-line method of amortization over a seven or nine-year time frame from the date of acquisition, while non-solicitation agreements use the straight-line method of amortization over the term of the related agreements. The Company tests intangible assets for potential impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.

(j) Goodwill

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is not amortized, but instead is tested for impairment at the reporting unit level. If the fair value of the reporting unit is less than its carrying amount, the Company would record an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, but the loss recognized should not exceed the amount of goodwill allocated to the reporting unit.

The Company performs its annual impairment review of goodwill in its fiscal fourth quarter or when a triggering event occurs between annual impairment tests. No impairment was recorded in fiscal 2017, 2018 or 2019 as a result of the Company’s qualitative assessments over its single reporting segment.

(k) Deferred Rent

The Company has operating lease agreements for its office space, which contain provisions for future rent increases, periods of rent abatement and build-out allowances. The Company records monthly rent expense for each lease equal to the total payments due over the lease term, divided by the number of months of the lease term. Build-out allowances are recorded as part of leasehold improvements and the incentive is amortized over the lease term against depreciation. The difference between recorded rent expense and the amount paid is included in Accrued expenses and Deferred rent in the accompanying consolidated balance sheets.

(l) Income Taxes

Income taxes are accounted for under the asset and liability 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.

Deferred tax assets may be reduced by a valuation allowance to the extent we determine it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management judgment is required in determining the period in which the reversal of a valuation allowance should occur. The Company is required to consider all available evidence, both positive and negative, such as historical levels of income and future forecasts of taxable income among other items, in determining whether a full or partial release of its valuation allowance is required. The Company is also required to schedule future taxable income in accordance with accounting standards that address income taxes to assess the appropriateness of a valuation allowance, which further requires the exercise of significant management judgment. The Company’s accounting for deferred tax consequences represents the best estimate of those future events.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. When applicable, the Company records interest and penalties as an element of income tax expense.

Refer to Note 11 for additional information on income taxes.

(m) Revenue Recognition

The Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“Topic 606”), effective as of July 1, 2018. Topic 606 requires revenue to be recognized when an entity transfers control of goods or services to a customer in an amount that reflects the consideration to which a company also expects to be entitled to for those goods or services. To achieve this core principle, the Company recognizes revenue from contracts with customers based on the following five steps:

Identify the contract with a customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to performance obligations in the contract; and

Recognize revenue when or as the Company satisfies a performance obligation.

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 began entering into term arrangements in fiscal 2018, which are generally two years in length. Recurring fees are derived from payroll, timekeeping, and HR-related cloud-based computing services as follows:

Payroll processing and related services, including payroll reporting and tax filing services are delivered on a weekly, biweekly, semi-monthly, or monthly basis depending upon the payroll frequency of the client and on an annual basis if a client selects W-2 preparation and processing services,

Time and attendance reporting services, including time clock rentals, are delivered on a monthly basis, and

Cloud-based HR software solutions, including employee administration and benefits enrollment and administration, are delivered on a monthly basis.

The majority of the Company’s recurring fees are satisfied over time as services are provided. The performance obligations related to payroll services are satisfied upon the processing of the client’s payroll with the fee charged and collected based on a per employee per payroll frequency fee. The performance obligations related to time and attendance services and HR related services are satisfied over time each month with the fee charged and collected based on a per employee per month fee. For subscription based fees which can include payroll, time and attendance, and HR related services, the Company recognizes the applicable recurring fees over time each month with the fee charged and collected based on a per employee per month fee.

The Company has certain optional performance obligations that are satisfied at a point in time including the sales of time clocks and W-2 services.

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. Implementation fees are deferred and amortized generally over a period up to 24 months.

Sales taxes collected from clients and remitted to governmental authorities where applicable are accounted for on a net basis and therefore are excluded from revenues in the statements of operations and comprehensive income.

Interest income collected on funds held for clients is recognized in recurring revenues when earned as the collection, holding and remittance of these funds are components of providing these services.

The following table, consistent with the presentation on the consolidated statements of operations and comprehensive income, disaggregates revenue by recurring fees and implementation services and other, representing the major categories of revenue:


	Year Ended
	June 30, 2019
Recurring fees	$	436,955
Implementation services and other		10,797
Total revenues from contracts	$	447,752

Deferred revenue

The timing of revenue recognition for recurring revenue is consistent with the timing of invoicing as they occur simultaneously upon the client payroll-processing period or by month. As such, the Company does not recognize contract assets or liabilities related to recurring revenue.

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


	Year Ended
	June 30, 2019
Balance at beginning of the year	$	—
Deferral of revenue		13,254
Revenue recognized		(6,965)
Balance at end of the year	$	6,289

Deferred revenue related to these nonrefundable upfront fees are recorded within accrued expenses and other long-term liabilities on the consolidated balance sheets. The Company expects to recognize these deferred revenue balances of $4,738 in fiscal 2020, $1,418 in fiscal 2021, and $133 thereafter.

Deferred contract costs

The Company defers certain selling and commission costs that meet the capitalization criteria under ASC 340-40, which were expensed as incurred prior to the adoption of Topic 606. 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. As discussed in Note 2(s), the Company determined that implementation services related to its proprietary products are not separate performance obligations for contracts entered into after July 1, 2018. 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 balances and the related amortization expense for these deferred contract costs:


	For the Year Ended June 30, 2019
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	68,107	$	30,994	$	(16,998)	$	82,103
Costs to fulfill a contract		—		22,739		(1,743)		20,996
Total	$	68,107	$	53,733	$	(18,741)	$	103,099

Deferred contract costs are recorded within deferred contract costs and long-term deferred contract costs on the consolidated balance sheets. Amortization of deferred contract costs is recorded in Implementation services and other cost of revenue, Sales and marketing, and General and administrative in the consolidated statements of operations and comprehensive income.

Remaining Performance Obligations

The Company has applied the practical expedients as allowed under Topic 606 and elects not to disclose 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. The Company’s remaining performance obligations related to minimum monthly fees on its term based contracts was approximately $43,181 as of June 30, 2019, which will be generally recognized over the next 24 months.

(n) Cost of Revenues

Cost of revenues consists primarily of the cost of recurring revenues and implementation services. Cost of recurring revenues consist primarily of costs to provide recurring services and support to the Company’s clients and includes amortization of capitalized internal-use software. The Company expenses these costs when incurred. Cost of implementation services and other consist primarily of costs to provide implementation and other services. Such costs were previously expensed when incurred, but after the adoption of Topic 606 and ASC 340-40, cost of revenues for implementation services for the Company’s proprietary products are amortized over a period of 7 years.

(o) Advertising

Advertising costs are expensed as incurred. Advertising costs amounted to $199, $179 and $283 for the years ended June 30, 2017, 2018 and 2019, respectively.

(p) Stock-Based Compensation

The Company recognizes all employee stock-based compensation as a cost in the financial statements. Equity-classified awards, including those under the 2014 Employee Stock Purchase Plan (“ESPP”), are measured at the grant date fair value of the award and expense is recognized, net of assumed forfeitures, on a straight-line basis over the requisite service period for each separately vesting portion of the award. For stock options and estimated shares purchasable under the ESPP, the Company estimates grant date fair value using the Black-Scholes option-pricing model and periodically updates the assumed forfeiture rates for actual experience over their vesting term or the term of the ESPP purchase period.

(q) Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

(r) Segment Information

The Company’s chief operating decision maker reviews the financial results of the Company in total when evaluating financial performance and for purposes of allocating resources. The Company has thus determined that it operates in a single cloud-based software solution reporting segment.

(s) Recently Adopted Accounting Standards

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Topic 606 supersedes a majority of existing revenue recognition guidance under GAAP, and requires companies to recognize revenue when it transfers goods or services to a customer in an amount that reflects the consideration to which a company expects to be entitled. The standard also provides guidance on the recognition of costs related to obtaining and fulfilling a contract under Subtopic 340-40, Other Assets and Deferred Costs – Contracts with Customers. The Company adopted the new standard, including subsequent amendments and Subtopic 340-40, effective as of July 1, 2018 using the modified retrospective method of transition, which limited the application of the new standard only to contracts that were not completed as of the effective date. The adoption of Topic 606 did not have a material impact in the timing or amount of revenue recognized. However, it did have a material impact on its consolidated balance sheet due to the deferral of costs of obtaining and fulfilling a contract as detailed below. The Company has updated its control framework for new internal controls and has updated existing controls relating to the new standard.

Under the legacy revenue standard through fiscal 2018, the Company accounted for implementation and recurring services each as a separate unit of account. The Company was able to establish standalone value for implementation services as supported by the activity of third-party resellers and other vendors that performed certain implementation services. The Company observed that third party implementation activity had continued to decrease over time and at the same time, the Company had invested in proprietary modules and processes that impact implementation activities. The Company determined that from July 1, 2018 forward it no longer had a sufficient basis to establish standalone value of implementations for its proprietary products due to the culmination of the changes to the Company’s modules and processes that eliminated the ability of third parties to perform implementation services. Similarly, the Company determined that these implementation services are not a separate performance obligation under Topic 606 for contracts entered into after July 1, 2018 and the associated implementation fees are treated as nonrefundable upfront fees which are deferred and amortized over a period of time instead of recognized upon completion. The Company recognized $2,191, net of deferred taxes, of contract assets for implementation fees related to open contracts as of July 1, 2018, which began when the Company was still able to establish standalone value for implementation activities. This adjustment was recorded through retained earnings (accumulated deficit) in the statement of changes in stockholder’s equity upon adoption on July 1, 2018.

The Company also finalized the treatment of costs of obtaining and fulfilling a new contract under the new standard. The Company is now required to defer these costs and amortize them over the expected period of benefit, which it has determined to be 7 years. The Company recognized the cumulative effect related to the deferral of the costs of obtaining new contracts of $50,481, net of deferred taxes, which was recorded through retained earnings (accumulated deficit) in the statement of changes in stockholder’s equity upon adoption on July 1, 2018.

The cumulative effect of the changes made to the July 1, 2018 balance sheet due to the adoption of Topic 606 were as follows:


	As Reported		Adjustments		Balances at
	June 30, 2018		due to Topic 606		July 1, 2018
Balance Sheet
Assets
Deferred contract costs	$	—	$	14,783	$	14,783
Prepaid expenses and other		11,248		1,730		12,978
Long-term deferred contract costs		—		53,324		53,324
Long-term prepaid expenses and other		1,504		1,226		2,730
Deferred income tax assets, net		22,140		(18,391)		3,749
Stockholders' Equity
Retained earnings (accumulated deficit)		(6,678)		52,672		45,994

The following table summarizes the impact from the adoption of Topic 606 on the Company’s consolidated statements of operations and comprehensive income:


	Year Ended June 30, 2019
	As Reported		Balances under		Impact from
	(Topic 606)		ASC 605		Adoption
Statement of Operations
Revenues
Recurring fees	$	436,955	$	438,685	$	(1,730)
Implementation services and other		10,797		4,786		6,011
Cost of Revenues
Implementation services and other		28,640		49,252		(20,612)
Operating expenses
Sales and marketing		112,599		126,331		(13,732)
General and administrative		94,630		95,278		(648)
Income tax expense (benefit)		4,223		(5,964)		10,187
Net income		53,823		24,737		29,086

The following table summarizes the impact from the adoption of Topic 606 on the Company’s consolidated balance sheet:


	June 30, 2019
	As Reported		Balances under		Impact from
	(Topic 606)		ASC 605		Adoption
Balance Sheet
Assets
Deferred contract costs	$	21,677	$	—	$	21,677
Prepaid expenses and other		13,895		12,823		1,072
Long-term deferred contract costs		81,422		—		81,422
Long-term prepaid expenses and other		1,975		1,821		154
Deferred income tax assets, net		6,472		28,107		(21,635)
Liabilities
Accrued expenses		57,625		54,541		3,084
Other long-term liabilities		1,723		10,818		(9,095)
Deferred income tax liabilities, net		6,943		—		6,943
Stockholders' Equity
Retained earnings (accumulated deficit)		99,817		18,059		81,758

The following table summarizes the impact from the adoption of Topic 606 on the Company’s consolidated statement of cash flows:


	Year Ended June 30, 2019
	As Reported		Balances under		Impact from
	(Topic 606)		ASC 605		Adoption
Statement of Cash Flows
Net income	$	53,823	$	24,737	$	29,086
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax expense (benefit)		4,134		(6,053)		10,187
Changes in operating assets and liabilities:
Deferred contract costs		(34,992)		—		(34,992)
Prepaid expenses and other		389		(1,341)		1,730
Accrued expenses		13,625		19,636		(6,011)
Net cash provided by operating activities		115,032		115,032		—

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash: a consensus of the FASB Emerging Issues Task Force (“ASU 2016-18”), which requires that the statement of cash flows explain the change during a reporting period in total of cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents. Effective July 1, 2018, the Company adopted ASU 2016-18 on a retrospective basis and now includes funds held for clients’ cash and cash equivalents as a component of total cash, cash equivalents and funds held for clients’ cash and cash equivalents in the consolidated statement of cash flows. As a result, the Company reclassified certain amounts previously reported on the statement of cash flows for the years ending June 30, 2017 and 2018 to conform to the requirements of the new standard. The adoption of this standard had no impact to the Company’s balance sheets, statements of operations and comprehensive income or statements of changes in stockholders’ equity.

In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) (“ASU 2018-05”) which incorporates the SEC’s Staff Accounting Bulletin 118 (“SAB 118”) issued on December 22, 2017. SAB 118 provides for a provisional measurement period for entities to finalize their accounting for certain income tax effects related to the Tax Cuts and Jobs Act (the “Tax Act”), not to exceed one year from enactment of the new tax law. Entities are permitted to utilize reasonable estimates until they have finished analyzing the effects of the Tax Act. The Company recognized provisional income tax effects of the Tax Act during fiscal 2018 in accordance with SAB 118, and completed its accounting under the Tax Act in December 2018. Refer to Note 11 for additional information.

(t) Recently Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

The Company plans to adopt the new standard when it is effective on July 1, 2019 using the modified retrospective method and the transition relief guidance provided by the FASB in ASU 2018-11. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before July 1, 2019. The Company plans to elect the package of practical expedients and not reassess prior conclusions on whether contracts are or contain a lease, lease classification, and initial direct costs. In addition, the Company plans to adopt the lessee practical expedient to combine lease and non-lease components for all asset classes. The Company will also elect to not recognize right-of-use assets and lease liabilities for leases with a term of 12 months or less.

While the Company continues to assess all of the effects of adoption, it currently believes the most significant effects relate to (1) the recognition of new ROU assets and lease liabilities on the balance sheet for operating leases; and (2) providing significant new disclosures about leasing activities. Upon adoption, the Company expects to recognize lease liabilities ranging between $82,000 and $87,000.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which amends the requirements for fair value measurement disclosures. ASU 2018-13 removes, modifies or adds certain disclosure requirements under GAAP. This standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Any new disclosure requirements must be applied on a prospective basis in the interim and annual periods of initial adoption; all removed or modified requirements must be applied retrospectively to all periods presented. The Company plans to adopt this standard at the effective date and does not expect any material impact from adoption.

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

Corporate Investments and Funds Held for Clients

12 Months Ended

Jun. 30, 2019

Corporate Investments and Funds Held for Clients

Corporate Investments and Funds Held for Clients

(3) Corporate Investments and Funds Held for Clients

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


	June 30, 2018
			Gross		Gross
	Amortized		unrealized		unrealized
Type of Issue	cost		gains		losses			Fair value
Cash and cash equivalents	$	137,193	$	—	$	—	$		137,193
Funds held for clients' cash and cash equivalents		1,102,541		—		(3)			1,102,538
Available-for-sale securities:
Commercial paper		50,703		3		(4)			50,702
Corporate bonds		37,508		8		(134)			37,382
Asset-backed securities		25,901		1		(55)			25,847
U.S. treasury securities		9,879		—		(2)			9,877
Total available-for-sale securities (1)		123,991		12		(195)			123,808
Total investments	$	1,363,725	$	12	$	(198)	$		1,363,539

(1)

Included within the fair value of total available-for-sale securities above is $732 of corporate investments and $123,076 of funds held for clients.


	June 30, 2019
			Gross		Gross
	Amortized		unrealized		unrealized
Type of Issue	cost		gains		losses		Fair value
Cash and cash equivalents	$	132,478	$	—	$	(2)	$	132,476
Funds held for clients' cash and cash equivalents		1,293,673		—		(6)		1,293,667
Available-for-sale securities:
Commercial paper		63,397		33		(2)		63,428
Corporate bonds		27,044		59		(4)		27,099
Asset-backed securities		26,488		55		(3)		26,540
U.S. treasury securities		13,736		21		-		13,757
Total available-for-sale securities (2)		130,665		168		(9)		130,824
Total investments	$	1,556,816	$	168	$	(17)	$	1,556,967

(2)

Included within the fair value of total available-for-sale securities above is $30,022 of corporate investments and $100,802 of funds held for clients.

The Company began investing corporate funds in available-for-sale securities during the first quarter of fiscal 2019 and as a result, reclassified $732 as of June 30, 2018 from Prepaid expenses and other on the consolidated balance sheets to Corporate investments in order to conform to the current year’s presentation. Cash and cash equivalents and funds held for clients’ cash and cash equivalents included demand deposit accounts, money market funds, commercial paper and short-term U.S. treasury securities as of June 30, 2018 and 2019.

Classification of investments on the consolidated balance sheets is as follows:


	June 30,		June 30,
	2018		2019
Cash and cash equivalents	$	137,193	$	132,476
Corporate investments		732		29,314
Funds held for clients		1,225,614		1,394,469
Long-term prepaid expenses and other		—		708
Total investments	$	1,363,539	$	1,556,967

Available-for-sale securities that have been in an unrealized loss position for a period of less and greater than 12 months are as follows:


	June 30, 2018
	Securities in an				Securities in an
	unrealized loss				unrealized loss
	position for less				position for greater
	than 12 months				than 12 months				Total
	Gross				Gross				Gross
	unrealized				unrealized				unrealized
	losses		Fair value		losses		Fair value		losses		Fair value
Commercial paper	$	(4)	$	23,657	$	—	$	—	$	(4)	$	23,657
Corporate bonds		(134)		29,122		—		—		(134)		29,122
Asset-backed securities		(55)		17,960		—		—		(55)		17,960
U.S. treasury securities		(2)		4,933		—		—		(2)		4,933
Total available-for-sale securities	$	(195)	$	75,672	$	—	$	—	$	(195)	$	75,672


	June 30, 2019
	Securities in an				Securities in an
	unrealized loss				unrealized loss
	position for less				position for greater
	than 12 months				than 12 months				Total
	Gross				Gross				Gross
	unrealized				unrealized				unrealized
	losses		Fair value		losses		Fair value		losses		Fair value
Commercial paper	$	(2)	$	19,055	$	—	$	—	$	(2)	$	19,055
Corporate bonds		(1)		1,500		(3)		3,701		(4)		5,201
Asset-backed securities		(1)		386		(2)		2,958		(3)		3,344
Total available-for-sale securities	$	(4)	$	20,941	$	(5)	$	6,659	$	(9)	$	27,600

The Company did not make any material reclassification adjustments out of accumulated other comprehensive income (loss) for realized gains and losses on the sale of available-for-sale securities during the years ended June 30, 2018 or 2019. Gross realized gains and losses on the sale of available-for-sale securities were immaterial for the years ended June 30, 2018 and 2019.

The Company regularly reviews the composition of its portfolio to determine the existence of other-than-temporary-impairment (“OTTI”). The Company did not recognize any OTTI charges in accumulated other comprehensive income (loss) during the years ended June 30, 2018 or 2019, nor does it believe that OTTI exists in its portfolio as of June 30, 2019. The Company plans to retain the securities in an unrealized loss position for a period of time sufficient enough to recover their amortized cost basis or until their maturity date. The Company believes that the unrealized losses on these securities were not due to deterioration in credit risk. The securities in an unrealized loss position held an A-1 rating or better as of June 30, 2019.

Expected maturities of available-for-sale securities at June 30, 2019 are as follows:


	Amortized
	cost		Fair value
One year or less	$	123,116	$	123,238
One year to two years		7,549		7,586
Total available-for-sale securities	$	130,665	$	130,824

Fair Value Measurement

12 Months Ended

Jun. 30, 2019

Fair Value Measurement

Fair Value Measurement

(4) Fair Value Measurement

The Company applies the fair value measurement and disclosure provisions of ASC 820, Fair Value Measurements and Disclosures, and ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. 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 any 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, 2018 and June 30, 2019 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 and US treasury 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, 2018 or 2019, and the Company did not transfer assets between Levels during the years ended June 30, 2018 or 2019.

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


	June 30, 2018
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	137,193	$	137,193	$	—	$	—
Funds held for clients' cash and cash equivalents		1,102,538		1,076,414		26,124		—
Available-for-sale securities:
Commercial paper		50,702		—		50,702		—
Corporate bonds		37,382		—		37,382		—
Asset-backed securities		25,847		—		25,847		—
U.S. treasury securities		9,877		—		9,877		—
Total available-for-sale securities		123,808		—		123,808		—
Total investments	$	1,363,539	$	1,213,607	$	149,932	$	—


	June 30, 2019
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	132,476	$	116,387	$	16,089	$	—
Funds held for clients' cash and cash equivalents		1,293,667		1,244,856		48,811		—
Available-for-sale securities:
Commercial paper		63,428		—		63,428		—
Corporate bonds		27,099		—		27,099		—
Asset-backed securities		26,540		—		26,540		—
U.S. treasury securities		13,757		—		13,757		—
Total available-for-sale securities		130,824		—		130,824		—
Total investments	$	1,556,967	$	1,361,243	$	195,724	$	—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Business Combinations

12 Months Ended

Jun. 30, 2019

Business Combinations

Business Combinations

(5) Business Combinations

In March 2018, the Company acquired substantially all the assets of BeneFLEX HR Resources, Inc. (“BeneFLEX”), a third party employee benefits administrator, for $7,658, net of cash and funds held for clients’ cash and cash equivalents acquired. BeneFLEX administers employee benefit plans, including flexible spending accounts, health savings accounts, health reimbursement accounts, COBRA, and others. The Company paid $6,658 upon closing and paid an additional $1,000 in fiscal 2019 based on BeneFLEX having attained certain revenue targets. This acquisition expanded the portfolio of services available to the Company’s clients by allowing it to provide additional benefit administration solutions to its clients, prospects, and broker partners.

The Company accounts for business combinations in accordance with ASC 805 (Business Combinations). The Company recorded the acquisition using the acquisition method of accounting and recognized assets at their fair value as of the date of acquisition. The Company determined the fair value of identifiable intangible assets acquired primarily by using an income approach.

The following table summarizes the allocation of the purchase price for BeneFLEX:


	At March 8, 2018
Goodwill	$	3,587
Client relationships		5,550
Non-solicitation agreements		240
Net liabilities assumed		(1,719)
Total purchase price	$	7,658

The results from this acquisition have been included in the Company’s consolidated financial statements since the closing of the acquisition. Pro forma information was not presented because the effect of the acquisition was not material to the Company’s consolidated financial statements. Goodwill associated with this acquisition is amortized over a period of 15 years for income tax purposes. Direct costs related to the acquisitions were recorded as General and administrative expenses as incurred.

Capitalized Internal-Use Software

12 Months Ended

Jun. 30, 2019

Capitalized Internal-Use Software.

Capitalized Internal-Use Software

(6) Capitalized Internal-Use Software

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


	Year ended June 30,
	2018		2019
Capitalized internal-use software	$	67,678	$	90,991
Accumulated amortization		(46,584)		(63,505)
Capitalized internal-use software, net	$	21,094	$	27,486

Amortization of capitalized internal-use software amounted to $9,447, $14,315 and $16,921 for the years ended June 30, 2017, 2018 and 2019, respectively and is included in Cost of revenues—Recurring revenues.

Property and Equipment

12 Months Ended

Jun. 30, 2019

Property and Equipment.

Property and Equipment

(7) Property and Equipment

The major classes of property and equipment are as follows as of June 30:


	Year ended June 30,
	2018		2019
Office equipment	$	3,743	$	4,406
Computer equipment		29,768		36,798
Furniture and fixtures		10,382		11,857
Software		5,965		6,332
Leasehold improvements		36,366		44,350
Time clocks rented by clients		4,534		4,679
Total		90,758		108,422
Accumulated depreciation		(28,729)		(38,366)
Property and equipment, net	$	62,029	$	70,056

Depreciation expense amounted to $10,068, $14,192 and $15,392 for the years ended June 30, 2017, 2018 and 2019, respectively.

Goodwill and Intangible Assets

12 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets

Goodwill and Intangible Assets

(8) Goodwill and Intangible Assets

There were no changes to goodwill between the year ended June 30, 2018 and June 30, 2019. The Company’s amortizable intangible assets and estimated useful lives are as follows:



	June 30,		June 30,		Useful
	2018		2019		Life
Client relationships	$	18,130	$	18,130	7 - 9 years
Non-solicitation agreements		600		600	2 - 4 years
Total		18,730		18,730
Accumulated amortization		(5,728)		(7,979)
Intangible assets, net	$	13,002	$	10,751

Amortization expense for acquired intangible assets was $1,512, $1,695 and $2,251 for the years ended June 30, 2017, 2018 and 2019, respectively. Future amortization expense for acquired intangible assets is as follows, as of June 30, 2019:


Year ending June 30,
2020	$	2,251
2021		2,251
2022		2,232
2023		2,118
2024		1,356
Thereafter		543
Total	$	10,751

Accrued Expenses

12 Months Ended

Jun. 30, 2019

Accrued Expenses

Accrued Expenses

(9) Accrued Expenses

The components of accrued expenses are as follows:


	Year ended June 30,
	2018		2019
Accrued payroll and personnel costs	$	31,206	$	39,095
Lease exit obligations		2,143		1,482
Deferred revenue		654		5,572
Other		8,238		11,476
Total accrued expenses	$	42,241	$	57,625

Leases

12 Months Ended

Jun. 30, 2019

Leases

Leases

(10) Leases

The Company primarily leases office space in Illinois, Florida, Idaho and other U.S. states under non-cancellable operating leases expiring on various dates from August 2019 through October 2032. The leases provide for increasing annual base rents and oblige the Company to fund its proportionate share of operating expenses and, in certain cases, real estate taxes. The Company also leases various types of office and production related equipment under non-cancellable operating leases expiring on various dates from July 2019 through July 2024.

In June 2016, the Company entered into a lease for approximately 310 rentable square feet of office space located in Schaumburg, Illinois. The Company currently utilizes the leased premises as its headquarters, relocating from its previous headquarters in Arlington Heights, Illinois in the fourth quarter of fiscal 2018. In connection with relocating to its new headquarters, the Company ceased using approximately 126 rentable square feet of its former headquarters in fiscal 2018 and fiscal 2019 and exited the office space lease prior to the lease’s contractual termination. The Company recognized $2,336 and $423 in early lease exit costs during the years ended June 30, 2018 and 2019, respectively, that are included in General and administrative expense in its consolidated statements of operations and comprehensive income.

In February 2017, the Company entered into a lease for approximately 62 rentable square feet of office space located in Meridian, Idaho. The Company uses the leased premises to accommodate the continued expansion of its employee base in the western region of the United States. The lease provided for phased delivery and commencement dates and the Company commenced Phase I on July 2, 2018. The Company expects to commence Phase II on February 1, 2020 with the actual commencement date subject to timely delivery of the premises by the landlord. Under the terms of the lease, the Company receives a tenant improvement allowance equal to $50.00 per rentable square foot and a 3-month rent abatement period for each lease phase. The lease began on the Phase I commencement date (July 2, 2018) and will end on July 31, 2028 with four subsequent five-year renewal options.

The following table is a summary of the changes in the remaining lease obligation related to the former headquarters, which is recorded in accrued expenses and other long-term liabilities on the consolidated balance sheet. The difference between the lease exit costs recognized in General and administrative expense as discussed above and the remaining lease obligation relates to the write-off of deferred rent recorded in prior periods.


Balance at June 30, 2018	$	3,261
Additions		611
Payments		(2,336)
Adjustments		111
Balance at June 30, 2019	$	1,647

Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease including any periods of free rent and future rent increases. Rental expense for operating leases, including amortization of leasehold improvements, was $8,571, $12,293 and $13,698 for the years ended June 30, 2017, 2018 and 2019, respectively.

Future minimum lease payments under non-cancellable operating leases (with initial or remaining lease terms in excess of one year) as of June 30, 2019 are:


Year ending June 30,
2020	$	10,449
2021		11,150
2022		9,500
2023		8,840
2024		8,838
Later years, through 2032		59,401
Total minimum lease payments	$	108,178

Income Taxes

12 Months Ended

Jun. 30, 2019

Income Taxes

Income Taxes

(11) Income Taxes

(a) Income Taxes

Income tax expense (benefit) for the years ended June 30, 2017, 2018 and 2019 consists of the following:


	Year ended June 30,
	2017		2018		2019
Current taxes
U.S. federal	$	—	$	294	$	—
State and local		500		364		90
Deferred taxes:
U.S. federal		137		(15,167)		5,449
State and local		14		(7,338)		(1,316)
Total income tax expense (benefit)	$	651	$	(21,847)	$	4,223

(b) Tax Rate Reconciliation

Income tax expense (benefit) differed from the amounts computed by applying the U.S. federal income tax rate of 34% for the years ended June 30, 2017, and 27.55% for the year ended June 30, 2018 and 21% for the year ended June 30, 2019 to pretax income (loss) as a result of the following:


	Year ended June 30,
	2017			2018			2019
Income tax expense (benefit) at statutory federal rate		34.0	%		27.6	%		21.0	%
Increase (reduction) in income taxes resulting from:
Research and development credit, net of federal income tax benefit		(13.9)			(6.6)			(3.0)
Non-deductible expenses		9.3			4.6			1.3
Change in valuation allowance		(18.3)			(136.0)			0.3
Effect of Tax Cuts and Jobs Act		—			51.5			—
Stock-based compensation expense		—			(58.3)			(10.4)
State and local income taxes, net of federal income tax benefit		(2.7)			(13.5)			(2.0)
Other		0.4			0.3			0.1
		8.8	%		(130.4)	%		7.3	%

The effective tax rate for the years ended June 30, 2018 and 2019 was (130.4)% and 7.3%, respectively, on pre-tax income of $16,751 and $58,046, respectively. The increase in the effective tax rate is primarily due to the increase to pre-tax income and non-recurring $22,771 benefit resulting from the release of the valuation allowance in fiscal year 2018, partially offset by the reduced federal rate and non-recurring detriment of $8,626 from tax reform in fiscal year 2018.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at June 30, 2018 and 2019 are presented below.


	Year ended June 30,
	2018		2019
Deferred tax assets:
Deferred rent	$	1,177	$	1,963
Accrued expenses		2,709		4,250
Stock-based compensation		10,833		10,373
Net operating loss carryforwards		10,775		9,980
Federal and state tax credits		7,674		11,977
Intangible assets		271		385
Other		146		94
Total deferred tax assets		33,585		39,022
Valuation allowance		(355)		(502)
Net deferred tax assets		33,230		38,520
Deferred tax liabilities:
Deferred contract costs		—		(27,116)
Research and development costs		(4,711)		(6,294)
Depreciation		(6,379)		(5,581)
Total deferred tax liabilities		(11,090)		(38,991)
Net deferred tax asset (liability)	$	22,140	$	(471)

Succeeding multiple years of recording a full valuation allowance, the Company concluded in the third quarter of fiscal 2018, that all of the valuation allowance for the Company’s U.S. federal deferred tax assets and substantially all state deferred tax assets was no longer needed. This was primarily due to three years’ cumulative income through the third quarter of fiscal 2018 and the forecast of future taxable income. At March 31, 2018, based on the evaluation of positive and negative evidence, management believed it was more likely than not that the net deferred tax assets could be realized for all federal and substantially all state purposes. Accordingly, the Company recognized a non-recurring tax benefit of $22,771 related to the valuation allowance reversal. As of June 30, 2019, the Company continues to maintain a valuation allowance of $502 for certain state tax benefits which may not be realized. Such assessment may change in the future as further evidence becomes available.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law. The Tax Act reduced the U.S. federal corporate income tax rate from 35% to 21%. Following the passage of the Tax Act and in accordance with ASC 740, companies were required to re-measure deferred tax balances using the new enacted tax rates. During fiscal year 2018, the Company recorded a one-time net $8,626 tax expense to revalue its net deferred tax assets to the newly enacted federal statutory rate. The Company generally expects to benefit from the lower statutory rates provided by the Tax Act.

In December 2017, the staff of the SEC issued guidance under Staff Accounting Bulletin No. 118 (later codified into ASU 2018-05), “Income Tax Accounting Implications of the Tax Cuts and Jobs Act,” allowing taxpayers to record provisional amounts for reasonable estimates when they do not have the necessary information available, prepared or analyzed in reasonable detail to complete their accounting for certain income tax effects of the Tax Act. The SEC also issued rules that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the related tax impacts. The Company’s analysis was completed during the second quarter of fiscal 2019 with no additional adjustments made.

At June 30, 2019, the Company has gross net operating loss carryforwards for federal income tax purposes of approximately $41,810, of which $40,018 expire from 2029 to 2038. The Company has gross net operating loss carryforwards for state income tax purposes of approximately $19,636, of which $18,435 expire from 2020 to 2039. The remaining $2,993 federal and state net operating loss carryforwards have an indefinite utilization period. The Company also has gross federal and state research and development tax credit and other state credit carryforwards of approximately $11,977, which expire between 2020 and 2039.

The Company had no unrecognized tax benefits as of June 30, 2017, 2018 and 2019, respectively.

The Company files income tax returns with the United States federal government and various state jurisdictions. Certain tax years remain open for federal and state tax reporting jurisdictions in which the Company does business due to net operating loss carryforwards and tax credits unutilized from such years or utilized in a period remaining open for audit under normal statute of limitations relating to income tax liabilities. The Company, including its domestic subsidiary, files a consolidated federal income tax return. For years before fiscal year ended June 30, 2016, the Company is no longer subject to U.S. federal examination; however, the Internal Revenue Service (IRS) has the ability to review years prior to fiscal year 2016 to the extent the Company utilized tax attributes carried forward from those prior years. The statute of limitations on state filings is generally three to four years.

Stockholders' Equity	12 Months Ended
Stockholders' Equity	Jun. 30, 2019
Stockholders' Equity
Stockholders' Equity	(12) Stockholders’ Equity Common Stock Holders of common stock are entitled to one vote per share and to receive dividends, when declared. The holders have no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares.

Benefit Plans

12 Months Ended

Jun. 30, 2019

Benefit Plans

Benefit Plans

(13) Benefit Plans

(a) Equity Incentive Plans

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. The Company’s board of directors determined that it would not increase the number of shares in reserve for issuance under the 2014 Plan as of January 1, 2019.

As of June 30, 2019, the Company had 13,097 shares allocated to the plans, of which 3,338 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 the changes in the number of shares available for grant under the Company’s equity incentive plans during the year ended June 30, 2019:


		Number of Shares
Available for grant at July 1, 2018		10,030
RSUs granted		(782)
Shares withheld in settlement of taxes and/or exercise price		395
Forfeitures		192
Shares removed		(76)
Available for grant at June 30, 2019		9,759

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 stock options, restricted stock units (“RSUs”), and the Employee Stock Purchase Plan (as described below) is included in the following line items in the accompanying consolidated statements of operations and comprehensive income:


	Year ended June 30,
	2017		2018		2019
Cost of revenue – recurring	$	2,162	$	2,830	$	3,388
Cost of revenue – implementation services and other		1,357		1,388		1,639
Sales and marketing		6,287		7,295		7,631
Research and development		3,086		3,748		5,325
General and administrative		13,842		15,093		20,782
Total stock-based compensation expense	$	26,734	$	30,354	$	38,765

In addition, the Company capitalized $1,773, $2,024 and $2,760 of stock-based compensation expense in its capitalized internal-use software costs in the years ended June 30, 2017, 2018 and 2019, respectively.

In June 2017, Peter McGrail ceased to serve as the Company’s Chief Financial Officer, but continued to serve as an employee of the Company. In connection with Mr. McGrail’s modified employment arrangement, the compensation committee of the Board of Directors approved modifications to terms of the unvested equity awards granted to Mr. McGrail. Any awards held by Mr. McGrail that were subject to time-based vesting became fully-vested upon his death in August 2017. Additionally, any performance-based restricted stock unit (“PSU”) awards held by Mr. McGrail will continue to vest and settle based upon actual achievement of previously-established performance metrics, with Mr. McGrail receiving a pro-rata share of the PSU awards based on the number of days Mr. McGrail was employed over the vesting period. As a result of these award modifications, the Company recognized $2,925 in additional stock-based compensation expense for the fiscal year ended June 30, 2017, which was included in General and administrative expense in the Company’s consolidated statements of operations and comprehensive income.

Under the 2008 and 2014 Plans, the exercise price of each option cannot be less than the fair value of a share of common stock on the grant date. The options typically vest ratably over a three or four year period and expire 10 years from the grant date. Stock-based compensation expense for the fair value of the options at their grant date is recognized ratably over the vesting schedule for each separately vesting portion of the award.

The Company values stock options using the Black-Scholes option-pricing model, which requires the input of subjective assumptions, including the risk-free interest rate, expected life, expected stock price volatility and dividend yield. The risk-free interest rate assumption is based upon observed interest rates for U.S. Treasury securities consistent with the expected term of the Company’s employee stock options. The expected life represents the period of time the stock options are expected to be outstanding and is based on the simplified method. Under the simplified method, the expected life of an option is presumed to be the mid-point between the vesting date and the end of the contractual term. As the Company has a limited history of trading as a public company, the Company utilizes the simplified method due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the stock options. Therefore, the expected volatility is based on historical volatilities for publicly traded stock of comparable companies over the estimated expected life of the stock options. The Company assumed no dividend yield because it does not expect to pay dividends in the near future, which is consistent with the Company’s history of not paying dividends.

Stock option activity during the periods indicated is as follows:


	Outstanding Options
				Weighted
		Weighted		average
		average		remaining	Aggregate
	Number of	exercise		contractual	intrinsic
	shares	price		term (years)	value
Balance at July 1, 2018	1,907	$	12.40	5.00	$	88,595
Options exercised	(378)	$	12.92
Options forfeited	(4)	$	20.78
Balance at June 30, 2019	1,525	$	12.24	3.95	$	124,373
Options exercisable at June 30, 2019	1,497	$	11.82	3.91	$	122,770
Options vested and expected to vest at June 30, 2019	1,524	$	12.24	3.95	$	124,362

There were no stock options granted during the years ended June 30, 2017, 2018 or 2019. The total intrinsic value of options exercised during the years ended June 30, 2017, 2018 and 2019 was $20,802, $34,083 and $24,920, respectively. At June 30, 2019, total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options granted under the Plan was immaterial.

The Company may also grant 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 three or four years following the grant date. Certain RSU awards have time-based vesting conditions while other RSUs vest based on the achievement of certain revenue and Adjusted EBITDA targets in future fiscal years. The following table represents restricted stock unit activity during the year ended June 30, 2019:


	Units	Weighted average grant date fair value
RSU balance at July 1, 2018	1,879	$	43.39
RSUs granted	782	$	67.13
RSUs vested	(660)	$	41.52
RSUs forfeited	(188)	$	48.83
RSU balance at June 30, 2019	1,813	$	53.78
RSUs expected to vest at June 30, 2019	1,689	$	53.67

At June 30, 2019, there was $36,226 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 1.85 years.

The total excess income tax benefits for stock-based compensation arrangements was $15,130, $33,443 and $41,195 for the years ended June 30, 2017, 2018 and 2019, respectively, and were recognized through income tax expense.

(b) Employee Stock Purchase Plan

Under the Company’s Employee Stock Purchase Plan (“ESPP”), the Company can grant stock purchase rights to all eligible employees during specific offering periods not to exceed twenty-seven months. Each offering period will begin on the trading day closest to May 16 and November 16 of each year. Shares are purchased through employees’ payroll deductions, up to a maximum of 10% of employees’ compensation for each purchase period, at a purchase price equal to 85% of the lesser of the fair market value of the Company’s common stock at the first trading day of the applicable offering period or the purchase date. Participants may purchase up to $25 worth of common stock or 2 shares of common stock in any one year. The ESPP is considered compensatory and results in compensation expense.

As of June 30, 2019, a total of 995 shares of common stock were reserved for future issuances under the ESPP. The number of shares of common stock reserved for issuance under the ESPP 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) 400, (b) seventy-five one hundredths percent (0.75%) of the number of shares of common stock of the Company issued and outstanding on the immediately preceding December 31, or (c) an amount determined by the Company’s board of directors. The Company’s board of directors determined that it would not increase the number of shares in reserve for issuance under the ESPP as of January 1, 2019.

The Company issued a total of 116 shares upon the completion of its six-month offering periods ending November 15, 2018 and May 15, 2019. The Company recorded compensation expense attributable to the ESPP of $1,263, $1,331 and $1,949 for the years ended June 30, 2017, 2018 and 2019, respectively, which is included in the summary of stock-based compensation expense above. The grant date fair value of the ESPP offering periods was estimated using the following weighted average assumptions:



	Year ended June 30,
	2017		2018		2019
Valuation assumptions:
Expected dividend yield	0	%	0	%	0	%
Expected volatility	38.9 - 53.4	%	28.3 - 39.1	%	33.5 - 38.6	%
Expected term (years)	0.5		0.5		0.5
Risk‑free interest rate	0.28 - 1.02	%	1.02 - 2.10	%	2.10 - 2.48	%

The Company maintains a 401(k) plan with a matching provision that covers all eligible employees. The Company matches 50% of employees’ contributions up to 8% of their gross pay. Contributions were $3,667, $4,632 and $5,693 for the years ended June 30, 2017, 2018 and 2019, respectively.

Commitments and Contingencies	12 Months Ended
Commitments and Contingencies	Jun. 30, 2019
Commitments and Contingencies
Commitments and Contingencies	(14) Commitments and Contingencies (a) Employment Agreements The Company has employment agreements with certain of its key officers. The agreements allow for minimum annual compensation increases, participation in equity incentive plans and bonuses for annual performance as well as certain change of control events as defined in the agreements. (b) Litigation On July 12, 2019, a former employee filed a class and collective action complaint under federal and state law alleging that certain employees of the Company were misclassified as salaried exempt employees. The complaint seeks unpaid overtime and other damages. This claim is still in its earliest stages and the Company is unable to estimate any reasonably possible loss, or range of loss, with respect to these matters. 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.

Net Income Per Share

12 Months Ended

Jun. 30, 2019

Net Income Per Share

Net Income Per Share

(15) Net Income Per Share

Basic net income per 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 the shares purchasable via the employee stock purchase plan as of the balance sheet date.

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


	Year ended June 30,
	2017		2018		2019
Numerator:
Net income	$	6,718	$	38,598	$	53,823

Denominator:
Weighted-average shares used in computing net income per share:
Basic		51,415		52,425		52,914
Weighted-average effect of potentially dilutive shares:
Employee stock options, restricted stock units and employee stock purchase plan shares		2,642		2,462		2,500
Diluted		54,057		54,887		55,414

Net income per share:
Basic	$	0.13	$	0.74	$	1.02
Diluted	$	0.12	$	0.70	$	0.97

The following table summarizes the outstanding employee stock options, restricted stock units and employee stock purchase plan shares as of the balance sheet date that were excluded from the diluted per share calculation for the periods presented because to include them would have been anti-dilutive:


	Year ended June 30,
	2017	2018	2019
Employee stock options	145	—	—
Restricted stock units	627	92	69
Employee stock purchase plan shares	14	—	13
Total	786	92	82

In August 2018, the Company announced that its board of directors approved a program to repurchase up to $35,000 of the Company’s common stock, with authorization through August 14, 2019. During the first quarter of fiscal 2019, the Company completed the repurchase program and repurchased 442 shares for $34,991. All shares of common stock repurchased were retired.

Selected Quarterly Financial Data (unaudited)

12 Months Ended

Jun. 30, 2019

Selected Quarterly Financial Data (unaudited)

Selected Quarterly Financial Data (unaudited)

(16) Selected Quarterly Financial Data (unaudited)

The following tables set forth selected unaudited quarterly statements of operations data for the years ended June 30, 2018 and 2019.


	Quarter Ended
	September 30,		December 31,
	2017		2017		March 31, 2018		June 30, 2018
Consolidated Statements of Operations Data
Revenues	$	81,500	$	86,004	$	113,407	$	96,616
Gross profit	$	46,541	$	49,164	$	74,755	$	57,870
Operating income (loss)	$	515	$	133	$	20,465	$	(5,164)
Net income (loss)	$	543	$	431	$	39,177	$	(1,553)
Net income (loss) per share:
Basic	$	0.01	$	0.01	$	0.74	$	(0.03)
Diluted	$	0.01	$	0.01	$	0.71	$	(0.03)
Weighted-average shares used in computing net income (loss) per share:
Basic		51,893		52,502		52,615		52,699
Diluted		54,610		54,818		55,030		52,699


	Quarter Ended
	September 30,		December 31,
	2018		2018		March 31, 2019		June 30, 2019
Consolidated Statements of Operations Data
Revenues	$	100,504	$	107,204	$	139,552	$	120,373
Gross profit	$	64,562	$	69,134	$	99,807	$	80,279
Operating income	$	3,776	$	7,027	$	36,212	$	9,209
Net income	$	9,852	$	5,704	$	28,026	$	10,241
Net income per share:
Basic	$	0.19	$	0.11	$	0.53	$	0.19
Diluted	$	0.18	$	0.10	$	0.51	$	0.18
Weighted-average shares used in computing net income per share:
Basic		52,865		52,842		52,934		53,017
Diluted		55,487		55,081		55,465		55,692

Subsequent Events	12 Months Ended
Subsequent Events	Jun. 30, 2019
Subsequent Events
Subsequent Events	(17) Subsequent Events In July 2019, the Company entered into a five-year 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. The revolving credit agreement provides for a senior revolving credit facility, under which the Company may borrow up to $250,000, which may be increased to up to $375,000, subject to obtaining additional lender commitments and satisfying other requirements. The revolving credit facility is scheduled to mature in July 2024, and no amounts have been drawn to date. Borrowings under the senior revolving credit facility will generally bear interest, at the Company’s option, at a rate per annum determined by reference to either the London Interbank Offered Rate (“LIBOR”) (or a replacement index for the LIBOR rate) or an adjusted base rate, in each case plus an applicable margin ranging from 0.875% to 1.375% and 0.0% to 0.375%, respectively, based on the then-applicable net senior secured leverage ratio. In addition, the Company is required to pay certain fees, including (i) a quarterly commitment fee at a rate ranging from 0.10% to 0.175% per annum on the daily amount of the undrawn portion of the revolving commitments under the Facility, based on the then-applicable net senior secured leverage ratio, and (ii) a letter of credit fronting fee at a rate of 0.125% per annum on the daily amount available to be drawn under each letter of credit and a letter of credit participation fees at a rate ranging from 0.875% to 1.375% per annum on the daily undrawn amount of all outstanding letters of credit and unreimbursed disbursements relating to letters of credit, based on the then-applicable net senior secured leverage ratio. The proceeds from any borrowings under the revolving credit facility 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 revolving 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 with respect to LIBOR revolving loans. Under the revolving credit agreement, the Company is required to maintain a maximum net total leverage ratio of not greater than 4.00 to 1.00, a maximum net senior secured leverage ratio of not greater than 3.50 to 1.00 and a minimum interest coverage ratio of not less than 3.00 to 1.00. Additionally, the revolving credit agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company to, among other things, grant liens, incur or guaranty debt, effect certain mergers, make investments, dispose of assets, enter into certain transactions, including swap agreements, pay dividends or distributions on their capital stock, make changes in fiscal year or organizational documents, grant negative pledges and enter into transactions with affiliates, in each case subject to customary exceptions for similar credit facilities.

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Jun. 30, 2019

Summary of Significant Accounting Policies

Basis of Presentation, Consolidation, and Use of Estimates

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

The accompanying consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”).

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Concentrations of Risk

(b) Concentrations of Risk

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Funds Held For Clients, Corporate Investments and Client Fund Obligations

(d) Funds Held For Clients, Corporate Investments and Client Fund Obligations

Accounts Receivable

(e) Accounts Receivable

Activity in the allowance for doubtful accounts was as follows:


	For the Years Ended June 30,
	2017		2018		2019
Balance at the beginning of the year	$	193	$	266	$	375
Charged to expense		113		296		283
Write-offs		(40)		(187)		(185)
Balance at the end of the year	$	266	$	375	$	473

Prepaid Expenses and Other Assets

(f) Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist primarily of prepaid licensing fees, prepaid insurance premiums, deposits with vendors, and time clocks available for sale or lease.

Capitalized Internal-Use Software

(g) Capitalized Internal-Use Software

Property and Equipment and Long-Lived Assets

(h) Property and Equipment and Long-Lived Assets

Intangible Assets, Net of Accumulated Amortization

(i) Intangible Assets, Net of Accumulated Amortization

Goodwill

(j) Goodwill

Deferred Rent

(k) Deferred Rent

Income Taxes

(l) Income Taxes

Refer to Note 11 for additional information on income taxes.

Revenue Recognition

(m) Revenue Recognition

Identify the contract with a customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to performance obligations in the contract; and

Recognize revenue when or as the Company satisfies a performance obligation.

Time and attendance reporting services, including time clock rentals, are delivered on a monthly basis, and

Cloud-based HR software solutions, including employee administration and benefits enrollment and administration, are delivered on a monthly basis.

The Company has certain optional performance obligations that are satisfied at a point in time including the sales of time clocks and W-2 services.


	Year Ended
	June 30, 2019
Recurring fees	$	436,955
Implementation services and other		10,797
Total revenues from contracts	$	447,752

Deferred revenue


	Year Ended
	June 30, 2019
Balance at beginning of the year	$	—
Deferral of revenue		13,254
Revenue recognized		(6,965)
Balance at end of the year	$	6,289

Deferred contract costs

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


	For the Year Ended June 30, 2019
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	68,107	$	30,994	$	(16,998)	$	82,103
Costs to fulfill a contract		—		22,739		(1,743)		20,996
Total	$	68,107	$	53,733	$	(18,741)	$	103,099

Remaining Performance Obligations

Cost of Revenues

(n) Cost of Revenues

Advertising

(o) Advertising

Advertising costs are expensed as incurred. Advertising costs amounted to $199, $179 and $283 for the years ended June 30, 2017, 2018 and 2019, respectively.

Stock-Based Compensation

(p) Stock-Based Compensation

Commitments and Contingencies

(q) Commitments and Contingencies

Segment Information

(r) Segment Information

Recently Adopted Accounting Standards

(s) Recently Adopted Accounting Standards

The cumulative effect of the changes made to the July 1, 2018 balance sheet due to the adoption of Topic 606 were as follows:


	As Reported		Adjustments		Balances at
	June 30, 2018		due to Topic 606		July 1, 2018
Balance Sheet
Assets
Deferred contract costs	$	—	$	14,783	$	14,783
Prepaid expenses and other		11,248		1,730		12,978
Long-term deferred contract costs		—		53,324		53,324
Long-term prepaid expenses and other		1,504		1,226		2,730
Deferred income tax assets, net		22,140		(18,391)		3,749
Stockholders' Equity
Retained earnings (accumulated deficit)		(6,678)		52,672		45,994

The following table summarizes the impact from the adoption of Topic 606 on the Company’s consolidated statements of operations and comprehensive income:


	Year Ended June 30, 2019
	As Reported		Balances under		Impact from
	(Topic 606)		ASC 605		Adoption
Statement of Operations
Revenues
Recurring fees	$	436,955	$	438,685	$	(1,730)
Implementation services and other		10,797		4,786		6,011
Cost of Revenues
Implementation services and other		28,640		49,252		(20,612)
Operating expenses
Sales and marketing		112,599		126,331		(13,732)
General and administrative		94,630		95,278		(648)
Income tax expense (benefit)		4,223		(5,964)		10,187
Net income		53,823		24,737		29,086

The following table summarizes the impact from the adoption of Topic 606 on the Company’s consolidated balance sheet:


	June 30, 2019
	As Reported		Balances under		Impact from
	(Topic 606)		ASC 605		Adoption
Balance Sheet
Assets
Deferred contract costs	$	21,677	$	—	$	21,677
Prepaid expenses and other		13,895		12,823		1,072
Long-term deferred contract costs		81,422		—		81,422
Long-term prepaid expenses and other		1,975		1,821		154
Deferred income tax assets, net		6,472		28,107		(21,635)
Liabilities
Accrued expenses		57,625		54,541		3,084
Other long-term liabilities		1,723		10,818		(9,095)
Deferred income tax liabilities, net		6,943		—		6,943
Stockholders' Equity
Retained earnings (accumulated deficit)		99,817		18,059		81,758

The following table summarizes the impact from the adoption of Topic 606 on the Company’s consolidated statement of cash flows:


	Year Ended June 30, 2019
	As Reported		Balances under		Impact from
	(Topic 606)		ASC 605		Adoption
Statement of Cash Flows
Net income	$	53,823	$	24,737	$	29,086
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax expense (benefit)		4,134		(6,053)		10,187
Changes in operating assets and liabilities:
Deferred contract costs		(34,992)		—		(34,992)
Prepaid expenses and other		389		(1,341)		1,730
Accrued expenses		13,625		19,636		(6,011)
Net cash provided by operating activities		115,032		115,032		—

Recently Issued Accounting Standards

(t) Recently Issued Accounting Standards

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Jun. 30, 2019

Summary of Significant Accounting Policies

Schedule of activity in the allowance for doubtful accounts


	For the Years Ended June 30,
	2017		2018		2019
Balance at the beginning of the year	$	193	$	266	$	375
Charged to expense		113		296		283
Write-offs		(40)		(187)		(185)
Balance at the end of the year	$	266	$	375	$	473

Schedule of disaggregated revenue from customers


	Year Ended
	June 30, 2019
Recurring fees	$	436,955
Implementation services and other		10,797
Total revenues from contracts	$	447,752

Schedule of changes in deferred revenue


	Year Ended
	June 30, 2019
Balance at beginning of the year	$	—
Deferral of revenue		13,254
Revenue recognized		(6,965)
Balance at end of the year	$	6,289

Schedule of deferred contract costs and the related amortization expense


	For the Year Ended June 30, 2019
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	68,107	$	30,994	$	(16,998)	$	82,103
Costs to fulfill a contract		—		22,739		(1,743)		20,996
Total	$	68,107	$	53,733	$	(18,741)	$	103,099

Schedule of the cumulative effect of the adoption of ASC 606 on prior year balance sheet


	As Reported		Adjustments		Balances at
	June 30, 2018		due to Topic 606		July 1, 2018
Balance Sheet
Assets
Deferred contract costs	$	—	$	14,783	$	14,783
Prepaid expenses and other		11,248		1,730		12,978
Long-term deferred contract costs		—		53,324		53,324
Long-term prepaid expenses and other		1,504		1,226		2,730
Deferred income tax assets, net		22,140		(18,391)		3,749
Stockholders' Equity
Retained earnings (accumulated deficit)		(6,678)		52,672		45,994

Schedule of the impact of adoption of ASC 606 on current period financial statements

The following table summarizes the impact from the adoption of Topic 606 on the Company’s consolidated statements of operations and comprehensive income:


	Year Ended June 30, 2019
	As Reported		Balances under		Impact from
	(Topic 606)		ASC 605		Adoption
Statement of Operations
Revenues
Recurring fees	$	436,955	$	438,685	$	(1,730)
Implementation services and other		10,797		4,786		6,011
Cost of Revenues
Implementation services and other		28,640		49,252		(20,612)
Operating expenses
Sales and marketing		112,599		126,331		(13,732)
General and administrative		94,630		95,278		(648)
Income tax expense (benefit)		4,223		(5,964)		10,187
Net income		53,823		24,737		29,086

The following table summarizes the impact from the adoption of Topic 606 on the Company’s consolidated balance sheet:


	June 30, 2019
	As Reported		Balances under		Impact from
	(Topic 606)		ASC 605		Adoption
Balance Sheet
Assets
Deferred contract costs	$	21,677	$	—	$	21,677
Prepaid expenses and other		13,895		12,823		1,072
Long-term deferred contract costs		81,422		—		81,422
Long-term prepaid expenses and other		1,975		1,821		154
Deferred income tax assets, net		6,472		28,107		(21,635)
Liabilities
Accrued expenses		57,625		54,541		3,084
Other long-term liabilities		1,723		10,818		(9,095)
Deferred income tax liabilities, net		6,943		—		6,943
Stockholders' Equity
Retained earnings (accumulated deficit)		99,817		18,059		81,758

The following table summarizes the impact from the adoption of Topic 606 on the Company’s consolidated statement of cash flows:


	Year Ended June 30, 2019
	As Reported		Balances under		Impact from
	(Topic 606)		ASC 605		Adoption
Statement of Cash Flows
Net income	$	53,823	$	24,737	$	29,086
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax expense (benefit)		4,134		(6,053)		10,187
Changes in operating assets and liabilities:
Deferred contract costs		(34,992)		—		(34,992)
Prepaid expenses and other		389		(1,341)		1,730
Accrued expenses		13,625		19,636		(6,011)
Net cash provided by operating activities		115,032		115,032		—

Corporate Investments and Funds Held For Clients (Tables)

12 Months Ended

Jun. 30, 2019

Corporate Investments and Funds Held for Clients

Schedule of corporate investments and funds held for clients


	June 30, 2018
			Gross		Gross
	Amortized		unrealized		unrealized
Type of Issue	cost		gains		losses			Fair value
Cash and cash equivalents	$	137,193	$	—	$	—	$		137,193
Funds held for clients' cash and cash equivalents		1,102,541		—		(3)			1,102,538
Available-for-sale securities:
Commercial paper		50,703		3		(4)			50,702
Corporate bonds		37,508		8		(134)			37,382
Asset-backed securities		25,901		1		(55)			25,847
U.S. treasury securities		9,879		—		(2)			9,877
Total available-for-sale securities (1)		123,991		12		(195)			123,808
Total investments	$	1,363,725	$	12	$	(198)	$		1,363,539

(1)

Included within the fair value of total available-for-sale securities above is $732 of corporate investments and $123,076 of funds held for clients.


	June 30, 2019
			Gross		Gross
	Amortized		unrealized		unrealized
Type of Issue	cost		gains		losses		Fair value
Cash and cash equivalents	$	132,478	$	—	$	(2)	$	132,476
Funds held for clients' cash and cash equivalents		1,293,673		—		(6)		1,293,667
Available-for-sale securities:
Commercial paper		63,397		33		(2)		63,428
Corporate bonds		27,044		59		(4)		27,099
Asset-backed securities		26,488		55		(3)		26,540
U.S. treasury securities		13,736		21		-		13,757
Total available-for-sale securities (2)		130,665		168		(9)		130,824
Total investments	$	1,556,816	$	168	$	(17)	$	1,556,967

(2)

Included within the fair value of total available-for-sale securities above is $30,022 of corporate investments and $100,802 of funds held for clients.

Tabular disclosure of the classification of investments


	June 30,		June 30,
	2018		2019
Cash and cash equivalents	$	137,193	$	132,476
Corporate investments		732		29,314
Funds held for clients		1,225,614		1,394,469
Long-term prepaid expenses and other		—		708
Total investments	$	1,363,539	$	1,556,967

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


	June 30, 2018
	Securities in an				Securities in an
	unrealized loss				unrealized loss
	position for less				position for greater
	than 12 months				than 12 months				Total
	Gross				Gross				Gross
	unrealized				unrealized				unrealized
	losses		Fair value		losses		Fair value		losses		Fair value
Commercial paper	$	(4)	$	23,657	$	—	$	—	$	(4)	$	23,657
Corporate bonds		(134)		29,122		—		—		(134)		29,122
Asset-backed securities		(55)		17,960		—		—		(55)		17,960
U.S. treasury securities		(2)		4,933		—		—		(2)		4,933
Total available-for-sale securities	$	(195)	$	75,672	$	—	$	—	$	(195)	$	75,672


	June 30, 2019
	Securities in an				Securities in an
	unrealized loss				unrealized loss
	position for less				position for greater
	than 12 months				than 12 months				Total
	Gross				Gross				Gross
	unrealized				unrealized				unrealized
	losses		Fair value		losses		Fair value		losses		Fair value
Commercial paper	$	(2)	$	19,055	$	—	$	—	$	(2)	$	19,055
Corporate bonds		(1)		1,500		(3)		3,701		(4)		5,201
Asset-backed securities		(1)		386		(2)		2,958		(3)		3,344
Total available-for-sale securities	$	(4)	$	20,941	$	(5)	$	6,659	$	(9)	$	27,600

Schedule of expected maturities of available-for-sale securities


	Amortized
	cost		Fair value
One year or less	$	123,116	$	123,238
One year to two years		7,549		7,586
Total available-for-sale securities	$	130,665	$	130,824

Fair Value Measurement (Tables)

12 Months Ended

Jun. 30, 2019

Fair Value Measurement

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


	June 30, 2018
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	137,193	$	137,193	$	—	$	—
Funds held for clients' cash and cash equivalents		1,102,538		1,076,414		26,124		—
Available-for-sale securities:
Commercial paper		50,702		—		50,702		—
Corporate bonds		37,382		—		37,382		—
Asset-backed securities		25,847		—		25,847		—
U.S. treasury securities		9,877		—		9,877		—
Total available-for-sale securities		123,808		—		123,808		—
Total investments	$	1,363,539	$	1,213,607	$	149,932	$	—


	June 30, 2019
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	132,476	$	116,387	$	16,089	$	—
Funds held for clients' cash and cash equivalents		1,293,667		1,244,856		48,811		—
Available-for-sale securities:
Commercial paper		63,428		—		63,428		—
Corporate bonds		27,099		—		27,099		—
Asset-backed securities		26,540		—		26,540		—
U.S. treasury securities		13,757		—		13,757		—
Total available-for-sale securities		130,824		—		130,824		—
Total investments	$	1,556,967	$	1,361,243	$	195,724	$	—

Business Combinations (Tables)

12 Months Ended

Jun. 30, 2019

Business Combinations

Summary of the allocation of the purchase price of the business combination

The following table summarizes the allocation of the purchase price for BeneFLEX:


	At March 8, 2018
Goodwill	$	3,587
Client relationships		5,550
Non-solicitation agreements		240
Net liabilities assumed		(1,719)
Total purchase price	$	7,658

Capitalized Internal-Use Software (Tables)

12 Months Ended

Jun. 30, 2019

Capitalized Internal-Use Software.

Schedule of capitalized internal-use software and accumulated amortization


	Year ended June 30,
	2018		2019
Capitalized internal-use software	$	67,678	$	90,991
Accumulated amortization		(46,584)		(63,505)
Capitalized internal-use software, net	$	21,094	$	27,486

Property and Equipment (Tables)

12 Months Ended

Jun. 30, 2019

Property and Equipment.

Schedule of property and equipment, net


	Year ended June 30,
	2018		2019
Office equipment	$	3,743	$	4,406
Computer equipment		29,768		36,798
Furniture and fixtures		10,382		11,857
Software		5,965		6,332
Leasehold improvements		36,366		44,350
Time clocks rented by clients		4,534		4,679
Total		90,758		108,422
Accumulated depreciation		(28,729)		(38,366)
Property and equipment, net	$	62,029	$	70,056

Goodwill and Intangible Assets (Tables)

12 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets

Schedule of amortizable intangible assets before amortization expense



	June 30,		June 30,		Useful
	2018		2019		Life
Client relationships	$	18,130	$	18,130	7 - 9 years
Non-solicitation agreements		600		600	2 - 4 years
Total		18,730		18,730
Accumulated amortization		(5,728)		(7,979)
Intangible assets, net	$	13,002	$	10,751

Schedule of future amortization expense for acquired intangible assets


Year ending June 30,
2020	$	2,251
2021		2,251
2022		2,232
2023		2,118
2024		1,356
Thereafter		543
Total	$	10,751

Accrued Expenses (Tables)

12 Months Ended

Jun. 30, 2019

Accrued Expenses

Schedule of components of accrued expenses


	Year ended June 30,
	2018		2019
Accrued payroll and personnel costs	$	31,206	$	39,095
Lease exit obligations		2,143		1,482
Deferred revenue		654		5,572
Other		8,238		11,476
Total accrued expenses	$	42,241	$	57,625

Leases (Tables)

12 Months Ended

Jun. 30, 2019

Leases

Schedule of the changes in the lease exit obligation


Balance at June 30, 2018	$	3,261
Additions		611
Payments		(2,336)
Adjustments		111
Balance at June 30, 2019	$	1,647

Schedule of future minimum lease payments under non-cancellable operating leases


Year ending June 30,
2020	$	10,449
2021		11,150
2022		9,500
2023		8,840
2024		8,838
Later years, through 2032		59,401
Total minimum lease payments	$	108,178

Income Taxes (Tables)

12 Months Ended

Jun. 30, 2019

Income Taxes

Schedule of income tax expense


	Year ended June 30,
	2017		2018		2019
Current taxes
U.S. federal	$	—	$	294	$	—
State and local		500		364		90
Deferred taxes:
U.S. federal		137		(15,167)		5,449
State and local		14		(7,338)		(1,316)
Total income tax expense (benefit)	$	651	$	(21,847)	$	4,223

Schedule of tax rate reconciliation by applying the U.S. federal income tax rate to pretax income (loss)


	Year ended June 30,
	2017			2018			2019
Income tax expense (benefit) at statutory federal rate		34.0	%		27.6	%		21.0	%
Increase (reduction) in income taxes resulting from:
Research and development credit, net of federal income tax benefit		(13.9)			(6.6)			(3.0)
Non-deductible expenses		9.3			4.6			1.3
Change in valuation allowance		(18.3)			(136.0)			0.3
Effect of Tax Cuts and Jobs Act		—			51.5			—
Stock-based compensation expense		—			(58.3)			(10.4)
State and local income taxes, net of federal income tax benefit		(2.7)			(13.5)			(2.0)
Other		0.4			0.3			0.1
		8.8	%		(130.4)	%		7.3	%

Schedule of tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities


	Year ended June 30,
	2018		2019
Deferred tax assets:
Deferred rent	$	1,177	$	1,963
Accrued expenses		2,709		4,250
Stock-based compensation		10,833		10,373
Net operating loss carryforwards		10,775		9,980
Federal and state tax credits		7,674		11,977
Intangible assets		271		385
Other		146		94
Total deferred tax assets		33,585		39,022
Valuation allowance		(355)		(502)
Net deferred tax assets		33,230		38,520
Deferred tax liabilities:
Deferred contract costs		—		(27,116)
Research and development costs		(4,711)		(6,294)
Depreciation		(6,379)		(5,581)
Total deferred tax liabilities		(11,090)		(38,991)
Net deferred tax asset (liability)	$	22,140	$	(471)

Benefit Plans (Tables)

12 Months Ended

Jun. 30, 2019

Benefit Plans

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


		Number of Shares
Available for grant at July 1, 2018		10,030
RSUs granted		(782)
Shares withheld in settlement of taxes and/or exercise price		395
Forfeitures		192
Shares removed		(76)
Available for grant at June 30, 2019		9,759

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


	Year ended June 30,
	2017		2018		2019
Cost of revenue – recurring	$	2,162	$	2,830	$	3,388
Cost of revenue – implementation services and other		1,357		1,388		1,639
Sales and marketing		6,287		7,295		7,631
Research and development		3,086		3,748		5,325
General and administrative		13,842		15,093		20,782
Total stock-based compensation expense	$	26,734	$	30,354	$	38,765

Schedule of stock option activity


	Outstanding Options
				Weighted
		Weighted		average
		average		remaining	Aggregate
	Number of	exercise		contractual	intrinsic
	shares	price		term (years)	value
Balance at July 1, 2018	1,907	$	12.40	5.00	$	88,595
Options exercised	(378)	$	12.92
Options forfeited	(4)	$	20.78
Balance at June 30, 2019	1,525	$	12.24	3.95	$	124,373
Options exercisable at June 30, 2019	1,497	$	11.82	3.91	$	122,770
Options vested and expected to vest at June 30, 2019	1,524	$	12.24	3.95	$	124,362

Schedule of restricted stock unit activity


	Units	Weighted average grant date fair value
RSU balance at July 1, 2018	1,879	$	43.39
RSUs granted	782	$	67.13
RSUs vested	(660)	$	41.52
RSUs forfeited	(188)	$	48.83
RSU balance at June 30, 2019	1,813	$	53.78
RSUs expected to vest at June 30, 2019	1,689	$	53.67

Summary of weighted average assumptions used for estimating grant date fair value of the ESPP



	Year ended June 30,
	2017		2018		2019
Valuation assumptions:
Expected dividend yield	0	%	0	%	0	%
Expected volatility	38.9 - 53.4	%	28.3 - 39.1	%	33.5 - 38.6	%
Expected term (years)	0.5		0.5		0.5
Risk‑free interest rate	0.28 - 1.02	%	1.02 - 2.10	%	2.10 - 2.48	%

Net Income Per Share (Tables)

12 Months Ended

Jun. 30, 2019

Net Income Per Share

Schedule of calculation of basic and diluted net income per share


	Year ended June 30,
	2017		2018		2019
Numerator:
Net income	$	6,718	$	38,598	$	53,823

Denominator:
Weighted-average shares used in computing net income per share:
Basic		51,415		52,425		52,914
Weighted-average effect of potentially dilutive shares:
Employee stock options, restricted stock units and employee stock purchase plan shares		2,642		2,462		2,500
Diluted		54,057		54,887		55,414

Net income per share:
Basic	$	0.13	$	0.74	$	1.02
Diluted	$	0.12	$	0.70	$	0.97

Summary of anti-dilutive securities


	Year ended June 30,
	2017	2018	2019
Employee stock options	145	—	—
Restricted stock units	627	92	69
Employee stock purchase plan shares	14	—	13
Total	786	92	82

Selected Quarterly Financial Data (unaudited) (Tables)

12 Months Ended

Jun. 30, 2019

Selected Quarterly Financial Data (unaudited)

Schedule of selected unaudited quarterly statements of operations data


	Quarter Ended
	September 30,		December 31,
	2017		2017		March 31, 2018		June 30, 2018
Consolidated Statements of Operations Data
Revenues	$	81,500	$	86,004	$	113,407	$	96,616
Gross profit	$	46,541	$	49,164	$	74,755	$	57,870
Operating income (loss)	$	515	$	133	$	20,465	$	(5,164)
Net income (loss)	$	543	$	431	$	39,177	$	(1,553)
Net income (loss) per share:
Basic	$	0.01	$	0.01	$	0.74	$	(0.03)
Diluted	$	0.01	$	0.01	$	0.71	$	(0.03)
Weighted-average shares used in computing net income (loss) per share:
Basic		51,893		52,502		52,615		52,699
Diluted		54,610		54,818		55,030		52,699


	Quarter Ended
	September 30,		December 31,
	2018		2018		March 31, 2019		June 30, 2019
Consolidated Statements of Operations Data
Revenues	$	100,504	$	107,204	$	139,552	$	120,373
Gross profit	$	64,562	$	69,134	$	99,807	$	80,279
Operating income	$	3,776	$	7,027	$	36,212	$	9,209
Net income	$	9,852	$	5,704	$	28,026	$	10,241
Net income per share:
Basic	$	0.19	$	0.11	$	0.53	$	0.19
Diluted	$	0.18	$	0.10	$	0.51	$	0.18
Weighted-average shares used in computing net income per share:
Basic		52,865		52,842		52,934		53,017
Diluted		55,487		55,081		55,465		55,692

Summary of Significant Accounting Policies - Current Presentation, Concentration of Risk, Accounts Receivable (Details) - USD ($)
$ in Thousands

12 Months Ended

Jun. 30, 2019

Jun. 30, 2018

Jun. 30, 2017

Current presentation

Amount of prepaid expenses and other reclassified to corporate investments to conform to current year's presentation

$ 732

Funds Held For Clients, Corporate Investments and Client Fund Obligations

Period of repayment of client fund obligations

1 year

Other than temporary impairment losses

OTTI recognized in Accumulated Other Comprehensive Income

$ 0

Accounts Receivable

Number of days past due before a balance will be reviewed for collectability

60 days

Activity in the allowance for doubtful accounts

Balance at beginning of the year

$ 375

266

$ 193

Charged to expense

283

296

^[1]

113

^[1]

Write-offs

(185)

(187)

(40)

Balance at end of the year

$ 473

$ 375

$ 266

Total Revenue | Clients | Major Customer With Ten Percent Or More Of Benchmark

Concentrations of Risk

Percentage of total revenues

0.00%

Total Revenue | Geographic Concentration Risk | UNITED STATES

Concentrations of Risk

Percentage of total revenues

100.00%

[1]	Certain amounts have been reclassified to reflect the adoption of Accounting Standards Update (“ASU”) No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force).”

Summary of Significant Accounting Policies - Capitalized Internal-Use Software (Details) - Internal-Use Software	12 Months Ended
	Jun. 30, 2019
Minimum
Capitalized internal-use software
Estimated useful lives	24 months
Maximum
Capitalized internal-use software
Estimated useful lives	36 months

Summary of Significant Accounting Policies - PP&E (Details)	12 Months Ended
	Jun. 30, 2019
Minimum
Property and Equipment and Long-Lived Assets
Estimated useful lives of the assets	3 years
Maximum
Property and Equipment and Long-Lived Assets
Estimated useful lives of the assets	7 years

Summary of Significant Accounting Policies - Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Goodwill
Impairment loss	$ 0	$ 0	$ 0
Minimum \| Client relationships
Intangible assets, net of accumulated amortization
Estimated useful lives	7 years
Maximum \| Client relationships
Intangible assets, net of accumulated amortization
Estimated useful lives	9 years

Summary of Significant Accounting Policies - Revenue Recognition (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Revenue from contracts terms
Period of term arrangements	2 years
Disaggregation of revenue
Revenues from Contracts	$ 447,752
Deferred contract costs
Amortization period of capitalized contract costs	7 years
Beginning Balance	$ 68,107
Capitalized Costs	53,733
Amortization	(18,741)
Ending Balance	$ 103,099	$ 68,107
Remaining Performance Obligations
Practical expedient - remaining performance obligation	The Company has applied the practical expedients as allowed under Topic 606 and elects not to disclose 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.
Cost of revenues:
Type of Cost, Good or Service [Extensible List]	Implementation services and other
Amortization period of cost of revenues for proprietary products	7 years
Maximum
Revenue from contracts terms
Notice period to cancel agreement	60 days
Deferred and amortized period of implementation fees	24 months
Costs To Obtain A New Contract
Deferred contract costs
Beginning Balance	$ 68,107
Capitalized Costs	30,994
Amortization	(16,998)
Ending Balance	82,103	68,107
Costs to Fulfill A Contract
Deferred contract costs
Capitalized Costs	22,739
Amortization	(1,743)
Ending Balance	20,996
Recurring fees
Disaggregation of revenue
Revenues from Contracts	436,955	354,432	$ 284,817
Remaining Performance Obligations
Minimum value of unsatisfied performance obligations on term-based contracts	43,181
Implementation services and other
Disaggregation of revenue
Revenues from Contracts	10,797	$ 14,002	$ 11,562
Changes in deferred revenue related to nonrefundable upfront fees
Deferral of revenue	13,254
Revenue recognized	(6,965)
Balance at end of period	6,289
Deferred revenue from nonrefundable upfront fees expected to be recognized in fiscal 2020	4,738
Deferred revenue from nonrefundable upfront fees expected to be recognized in fiscal 2021	1,418
Deferred revenue from nonrefundable upfront fees expected to be recognized thereafter	$ 133
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-07-01 \| Recurring fees
Remaining Performance Obligations
Remaining performance obligation period	24 months

Summary of Significant Accounting Policies - Advertising, Segment Information (Details) $ in Thousands	12 Months Ended
	Jun. 30, 2019 USD ($) segment	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)
Advertising
Advertising costs \| $	$ 283	$ 179	$ 199
Segment Information
Number of reporting segments \| segment	1

Summary of Significant Accounting Policies - Adjustments for Adoption (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jul. 01, 2018	Jun. 30, 2018
Changes related to contracts with customers, assets and liabilities
Retained earnings (accumulated deficit)	$ 99,817	$ 45,994	$ (6,678)
Amortization period of capitalized contract costs	7 years
Impact from Adoption \| Topic 606
Changes related to contracts with customers, assets and liabilities
Retained earnings (accumulated deficit)	$ 81,758	52,672
Contract Assets For Implementation Fees related to open contracts, net of deferred taxes \| Topic 606
Changes related to contracts with customers, assets and liabilities
Retained earnings (accumulated deficit)		2,191
Deferral Of Costs to Obtain a New Contract, net of deferred taxes \| Topic 606
Changes related to contracts with customers, assets and liabilities
Retained earnings (accumulated deficit)		$ 50,481

Summary of Significant Accounting Policies - Cumulative effect of balance sheet changes (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jul. 01, 2018	Jun. 30, 2018
Assets
Deferred contract costs	$ 21,677	$ 14,783
Prepaid expenses and other	13,895	12,978	$ 11,248
Long-term deferred contract costs	81,422	53,324
Long-term prepaid expenses and other	1,975	2,730	1,504
Deferred income tax assets, net	6,472	3,749	22,140
Stockholders' equity:
Retained earnings (accumulated deficit)	99,817	45,994	(6,678)
Impact from Adoption \| Topic 606
Assets
Deferred contract costs	21,677	14,783
Prepaid expenses and other	1,072	1,730
Long-term deferred contract costs	81,422	53,324
Long-term prepaid expenses and other	154	1,226
Deferred income tax assets, net	(21,635)	(18,391)
Stockholders' equity:
Retained earnings (accumulated deficit)	81,758	$ 52,672
Balances under ASC 605
Assets
Prepaid expenses and other	12,823		11,248
Long-term prepaid expenses and other	1,821		1,504
Deferred income tax assets, net	28,107		22,140
Stockholders' equity:
Retained earnings (accumulated deficit)	$ 18,059		$ (6,678)

Summary of Significant Accounting Policies - Impact on Statement of Operations and Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Revenues:
Revenues from Contracts									$ 447,752
Cost of revenues:
Total cost of revenues									153,851	$ 149,197	$ 123,987
Operating expenses:
Sales and marketing									112,599	95,484	77,506
General and administrative									94,630	79,252	62,123
Income tax expense (benefit)									4,223	(21,847)	651
Net income	$ 10,241	$ 28,026	$ 5,704	$ 9,852	$ (1,553)	$ 39,177	$ 431	$ 543	53,823	38,598	6,718
Impact from Adoption \| Topic 606
Operating expenses:
Sales and marketing									(13,732)
General and administrative									(648)
Income tax expense (benefit)									10,187
Net income									29,086
Balances under ASC 605
Operating expenses:
Sales and marketing									126,331
General and administrative									95,278
Income tax expense (benefit)									(5,964)
Net income									24,737
Recurring fees
Revenues:
Revenues from Contracts									436,955	354,432	284,817
Cost of revenues:
Total cost of revenues									125,211	104,009	85,399
Recurring fees \| Impact from Adoption \| Topic 606
Revenues:
Revenues from Contracts									(1,730)
Recurring fees \| Balances under ASC 605
Revenues:
Revenues from Contracts									438,685
Implementation services and other
Revenues:
Revenues from Contracts									10,797	14,002	11,562
Cost of revenues:
Total cost of revenues									28,640	$ 45,188	$ 38,588
Implementation services and other \| Impact from Adoption \| Topic 606
Revenues:
Revenues from Contracts									6,011
Cost of revenues:
Total cost of revenues									(20,612)
Implementation services and other \| Balances under ASC 605
Revenues:
Revenues from Contracts									4,786
Cost of revenues:
Total cost of revenues									$ 49,252

Summary of Significant Accounting Policies - Impact on Balance Sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jul. 01, 2018	Jun. 30, 2018
Assets
Deferred contract costs	$ 21,677	$ 14,783
Prepaid expenses and other	13,895	12,978	$ 11,248
Long-term deferred contract costs	81,422	53,324
Long-term prepaid expenses and other	1,975	2,730	1,504
Deferred income tax assets, net	6,472	3,749	22,140
Liabilities
Accrued expenses	57,625		42,241
Other long-term liabilities	1,723		1,118
Deferred income tax liabilities, net	6,943
Stockholders' equity:
Retained earnings (accumulated deficit)	99,817	45,994	(6,678)
Impact from Adoption \| Topic 606
Assets
Deferred contract costs	21,677	14,783
Prepaid expenses and other	1,072	1,730
Long-term deferred contract costs	81,422	53,324
Long-term prepaid expenses and other	154	1,226
Deferred income tax assets, net	(21,635)	(18,391)
Liabilities
Accrued expenses	3,084
Other long-term liabilities	(9,095)
Deferred income tax liabilities, net	6,943
Stockholders' equity:
Retained earnings (accumulated deficit)	81,758	$ 52,672
Balances under ASC 605
Assets
Prepaid expenses and other	12,823		11,248
Long-term prepaid expenses and other	1,821		1,504
Deferred income tax assets, net	28,107		22,140
Liabilities
Accrued expenses	54,541
Other long-term liabilities	10,818
Stockholders' equity:
Retained earnings (accumulated deficit)	$ 18,059		$ (6,678)

Summary of Significant Accounting Policies - Impact on Cash Flow Statement (Details) - USD ($)
$ in Thousands

12 Months Ended

Jun. 30, 2019

Jun. 30, 2018

^[1]

Jun. 30, 2017

^[1]

Cash Flows

Adjustments to reconcile net income to net cash provided by operating activities:

$ 53,823

$ 38,598

$ 6,718

4,134

(21,870)

152

(34,992)

389

(2,141)

(2,074)

Net cash provided by operating activities

13,625

11,641

6,465

115,032

$ 97,866

$ 61,980

Impact from Adoption | Topic 606

Cash Flows

Adjustments to reconcile net income to net cash provided by operating activities:

29,086

10,187

(34,992)

1,730

(6,011)

Balances under ASC 605

Cash Flows

Adjustments to reconcile net income to net cash provided by operating activities:

24,737

(6,053)

(1,341)

Net cash provided by operating activities

19,636

$ 115,032

[1]	Certain amounts have been reclassified to reflect the adoption of Accounting Standards Update (“ASU”) No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force).”

Summary of Significant Accounting Policies - Leases (Details) - ASU 2016-02 - Forecast $ in Thousands	Jul. 01, 2019 USD ($)
Lessee Disclosure [Abstract]
Lease, Practical Expedients, Package [true false]	true
Minimum
Lessee Disclosure [Abstract]
Operating Lease, Liability	$ 82,000
Maximum
Lessee Disclosure [Abstract]
Operating Lease, Liability	$ 87,000

Corporate Investments and Funds Held For Clients - Reconciliation (Details) - USD ($)
$ in Thousands

Jun. 30, 2019

Jun. 30, 2018

Jun. 30, 2017

^[1]

Corporate Investments and Funds Held for Clients [Line Items]

Amortized cost of cash and cash equivalents

$ 132,478

$ 137,193

Cash and cash equivalents, gross unrealized losses

(2)

Fair value of cash and cash equivalents

132,476

137,193

^[1]

$ 103,468

Amortized cost of funds held for clients' cash and cash equivalents

1,293,673

1,102,541

Funds held for clients' cash and cash equivalents, gross unrealized losses

(6)

(3)

Fair value of funds held for clients' cash and cash equivalents

1,293,667

1,102,538

^[1]

$ 942,459

130,665

123,991

168

(9)

(195)

Total investments at amortized cost

130,824

123,808

1,556,816

1,363,725

Total investments gross unrealized gain

168

Total investments gross unrealized loss

(17)

(198)

1,556,967

1,363,539

Commercial paper

63,397

50,703

(2)

(4)

63,428

50,702

Corporate bonds

27,044

37,508

(4)

(134)

27,099

37,382

Asset-backed securities

26,488

25,901

(3)

(55)

26,540

25,847

U.S. treasury securities

13,736

9,879

(2)

13,757

9,877

Corporate investments

30,022

732

Funds Held for Clients

Corporate Investments and Funds Held for Clients [Line Items]

$ 100,802

$ 123,076

[1]	Certain amounts have been reclassified to reflect the adoption of Accounting Standards Update (“ASU”) No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force).”

Corporate Investments and Funds Held For Clients - Classification (Details) - USD ($)
$ in Thousands

12 Months Ended

Jun. 30, 2019

Jun. 30, 2018

Jun. 30, 2017

^[1]

Amount of prepaid expenses and other reclassified to corporate investments to conform to current year's presentation

$ 732

Long-term prepaid expenses and other

132,476

$ 137,193

^[1]

$ 103,468

Corporate investments

29,314

732

Funds held for clients

1,394,469

1,225,614

708

1,556,967

1,363,539

Unrealized loss on available-for-sale securities in a loss position for less than 12 months

(4)

(195)

Fair market value of available-for-sale securities in an unrealized loss position less than 12 months

20,941

75,672

Unrealized loss on available-for-sale securities in a loss position for greater than 12 months

(5)

Fair market value of available-for-sale securities in an unrealized loss position greater than 12 months

6,659

(9)

(195)

Gross realized gains and losses on the sale of available-for-sale securities

27,600

75,672

OTTI recognized in Accumulated Other Comprehensive Income

Reclassification out of Accumulated Other Comprehensive Income (Loss)

Gross realized gains and losses on the sale of available-for-sale securities

Commercial paper

Unrealized loss on available-for-sale securities in a loss position for less than 12 months

(2)

(4)

Fair market value of available-for-sale securities in an unrealized loss position less than 12 months

19,055

23,657

(2)

(4)

19,055

23,657

Corporate bonds

Unrealized loss on available-for-sale securities in a loss position for less than 12 months

(1)

(134)

Fair market value of available-for-sale securities in an unrealized loss position less than 12 months

1,500

29,122

Unrealized loss on available-for-sale securities in a loss position for greater than 12 months

(3)

Fair market value of available-for-sale securities in an unrealized loss position greater than 12 months

3,701

(4)

(134)

5,201

29,122

Asset-backed securities

Unrealized loss on available-for-sale securities in a loss position for less than 12 months

(1)

(55)

Fair market value of available-for-sale securities in an unrealized loss position less than 12 months

386

17,960

Unrealized loss on available-for-sale securities in a loss position for greater than 12 months

(2)

Fair market value of available-for-sale securities in an unrealized loss position greater than 12 months

2,958

(3)

(55)

$ 3,344

17,960

U.S. treasury securities

Unrealized loss on available-for-sale securities in a loss position for less than 12 months

(2)

Fair market value of available-for-sale securities in an unrealized loss position less than 12 months

4,933

(2)

$ 4,933

[1]	Certain amounts have been reclassified to reflect the adoption of Accounting Standards Update (“ASU”) No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force).”

Corporate Investments and Funds Held For Clients - Maturities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018
Expected maturities of available-for-sale securities, amortized cost
One year or less	$ 123,116
One year to two years	7,549
Total available-for-sale securities	130,665	$ 123,991
Expected maturities of available-for-sale securities, fair value
One year or less	123,238
One year to two years	7,586
Total available-for-sale securities	$ 130,824	$ 123,808

Fair Value Measurement (Details) - USD ($)
$ in Thousands

Jun. 30, 2019

Jun. 30, 2018

Jun. 30, 2017

^[1]

Fair value measurement

$ 132,476

$ 137,193

^[1]

$ 103,468

1,293,667

1,102,538

^[1]

$ 942,459

1,556,967

1,363,539

Transfers from level 1 to level 2

130,824

123,808

Fair value asset transfers

Transfers from level 2 to level 1

Amount of prepaid expenses and other reclassified to corporate investments to conform to current year's presentation

732

Level 1

Fair value measurement

116,387

137,193

1,244,856

1,076,414

1,361,243

1,213,607

Level 2

Fair value measurement

16,089

48,811

26,124

195,724

149,932

130,824

123,808

Level 3

Commercial paper

Commercial paper | Level 2

63,428

50,702

63,428

50,702

Corporate bonds

Corporate bonds | Level 2

27,099

37,382

27,099

37,382

Asset-backed securities

Asset-backed securities | Level 2

26,540

25,847

26,540

25,847

U.S. treasury securities

U.S. treasury securities | Level 2

13,757

9,877