0001558370-20-000519 | 10-Q | XBRL Viewer

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Dec. 31, 2019	Jan. 29, 2020
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Dec. 31, 2019
Document Transition Report	false
Entity File Number	001-36348
Entity Registrant Name	PAYLOCITY HOLDING CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	46-4066644
Entity Address, Address Line One	1400 American Lane
Entity Address, City or Town	Schaumburg
Entity Address, State or Province	IL
Entity Address, Postal Zip Code	60173
City Area Code	847
Local Phone Number	463-3200
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	PCTY
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		53,609,063
Entity Central Index Key	0001591698
Current Fiscal Year End Date	--06-30
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Current assets:
Cash and cash equivalents	$ 75,900	$ 132,476
Corporate investments	69,849	29,314
Accounts receivable, net	4,348	4,358
Deferred contract costs	26,150	21,677
Prepaid expenses and other	12,876	13,895
Total current assets before funds held for clients	189,123	201,720
Funds held for clients	1,845,294	1,394,469
Total current assets	2,034,417	1,596,189
Capitalized internal-use software, net	31,619	27,486
Property and equipment, net	71,090	70,056
Operating lease right-of-use assets	51,659
Intangible assets, net	9,626	10,751
Goodwill	9,590	9,590
Long-term deferred contract costs	99,383	81,422
Long-term prepaid expenses and other	8,290	1,975
Deferred income tax assets	7,758	6,472
Total assets	2,323,432	1,803,941
Current liabilities:
Accounts payable	3,714	3,954
Accrued expenses	62,853	57,625
Total current liabilities before client fund obligations	66,567	61,579
Client fund obligations	1,845,294	1,394,469
Total current liabilities	1,911,861	1,456,048
Deferred rent		31,263
Long-term operating lease liabilities	76,929
Other long-term liabilities	1,360	1,723
Deferred income tax liabilities	1,718	6,943
Total liabilities	1,991,868	1,495,977
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2019 and December 31, 2019
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2019 and December 31, 2019; 53,075 shares issued and outstanding at June 30, 2019 and 53,573 shares issued and outstanding at December 31, 2019	54	53
Additional paid-in capital	212,240	207,982
Retained earnings	119,190	99,817
Accumulated other comprehensive income	80	112
Total stockholders' equity	331,564	307,964
Total liabilities and stockholders' equity	$ 2,323,432	$ 1,803,941

Consolidated Statements of Operations and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Revenues:
Recurring and other revenue	$ 127,980	$ 102,739	$ 249,853	$ 199,741
Interest income on funds held for clients	4,394	4,465	9,241	7,967
Total revenues	132,374	107,204	259,094	207,708
Cost of revenues:
Cost of revenues	45,424	38,070	88,054	74,012
Gross profit	86,950	69,134	171,040	133,696
Operating expenses:
Sales and marketing	37,293	26,570	74,250	52,988
Research and development	15,410	12,798	29,804	24,198
General and administrative	28,133	22,739	54,872	45,707
Total operating expenses	80,836	62,107	158,926	122,893
Operating income	6,114	7,027	12,114	10,803
Other income	285	346	759	615
Income before income taxes	6,399	7,373	12,873	11,418
Income tax expense (benefit)	932	1,669	(6,500)	(4,138)
Net income	5,467	5,704	19,373	15,556
Other comprehensive loss, net of tax
Unrealized losses on securities, net of tax	(36)	(15)	(32)
Total other comprehensive loss, net of tax	(36)	(15)	(32)
Comprehensive income	$ 5,431	$ 5,689	$ 19,341	$ 15,556
Net income per share:
Basic (in dollars per share)	$ 0.10	$ 0.11	$ 0.36	$ 0.29
Diluted (in dollars per share)	$ 0.10	$ 0.10	$ 0.35	$ 0.28
Weighted-average shares used in computing net income per share:
Basic (in shares)	53,542	52,842	53,415	52,853
Diluted (in shares)	55,826	55,081	55,692	55,232

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, 2018	$ 53	$ 219,588	$ (6,678)	$ (139)	$ 212,824
Balance (in shares) at Jun. 30, 2018	52,758
Increase (Decrease) in Stockholders' Equity
Repurchases of common shares					(34,991)
Repurchases of common shares (in shares)	(442)
Balance at Sep. 30, 2018	$ 53	176,851	55,846	(124)	232,626
Balance (in shares) at Sep. 30, 2018	52,796
Balance at Jun. 30, 2018	$ 53	219,588	(6,678)	(139)	212,824
Balance (in shares) at Jun. 30, 2018	52,758
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		20,845			20,845
Stock options exercised		2,657			2,657
Stock options exercised (in shares)	212
Issuance of common stock upon vesting of restricted stock units (in shares)	604
Issuance of common stock under employee stock purchase plan		2,824			2,824
Issuance of common stock under employee stock purchase plan (in shares)	58
Net settlement for taxes and/or exercise price related to equity awards		(21,450)			(21,450)
Net settlement for taxes and/or exercise price related to equity awards (in shares)	(303)
Repurchases of common shares		(34,991)			(34,991)
Repurchases of common shares (in shares)	(442)
Net income			15,556		15,556
Balance at Dec. 31, 2018	$ 53	189,473	61,550	(139)	250,937
Balance (in shares) at Dec. 31, 2018	52,887
Balance at Sep. 30, 2018	$ 53	176,851	55,846	(124)	232,626
Balance (in shares) at Sep. 30, 2018	52,796
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		10,795			10,795
Stock options exercised		416			416
Stock options exercised (in shares)	30
Issuance of common stock upon vesting of restricted stock units (in shares)	25
Issuance of common stock under employee stock purchase plan		2,824			2,824
Issuance of common stock under employee stock purchase plan (in shares)	58
Net settlement for taxes and/or exercise price related to equity awards		(1,413)			(1,413)
Net settlement for taxes and/or exercise price related to equity awards (in shares)	(22)
Unrealized losses on securities, net of tax				(15)	(15)
Net income			5,704		5,704
Balance at Dec. 31, 2018	$ 53	189,473	61,550	(139)	250,937
Balance (in shares) at Dec. 31, 2018	52,887
Increase (Decrease) in Stockholders' Equity
Cumulative effect of change in accounting policy (adoption of Topic 606)			52,672		52,672
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
Stock-based compensation		26,140			$ 26,140
Stock options exercised		389			389
Stock options exercised (in shares)	23
Issuance of common stock upon vesting of restricted stock units	$ 1	(1)
Issuance of common stock upon vesting of restricted stock units (in shares)	688
Issuance of common stock under employee stock purchase plan		3,961			3,961
Issuance of common stock under employee stock purchase plan (in shares)	45
Net settlement for taxes and/or exercise price related to equity awards		(26,231)			(26,231)
Net settlement for taxes and/or exercise price related to equity awards (in shares)	(258)
Unrealized losses on securities, net of tax				(32)	(32)
Net income			19,373		19,373
Balance at Dec. 31, 2019	$ 54	212,240	119,190	80	$ 331,564
Balance (in shares) at Dec. 31, 2019	53,573				53,573
Balance at Sep. 30, 2019	$ 54	195,566	113,723	116	$ 309,459
Balance (in shares) at Sep. 30, 2019	53,511
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		13,422			13,422
Stock options exercised		269			269
Stock options exercised (in shares)	15
Issuance of common stock upon vesting of restricted stock units (in shares)	11
Issuance of common stock under employee stock purchase plan		3,961			3,961
Issuance of common stock under employee stock purchase plan (in shares)	45
Net settlement for taxes and/or exercise price related to equity awards		(978)			(978)
Net settlement for taxes and/or exercise price related to equity awards (in shares)	(9)
Unrealized losses on securities, net of tax				(36)	(36)
Net income			5,467		5,467
Balance at Dec. 31, 2019	$ 54	$ 212,240	$ 119,190	$ 80	$ 331,564
Balance (in shares) at Dec. 31, 2019	53,573				53,573

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash flows from operating activities:
Net income	$ 19,373	$ 15,556
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	24,832	19,524
Depreciation and amortization expense	18,261	16,801
Deferred income tax benefit	(6,500)	(4,139)
Provision for doubtful accounts	63	112
Net accretion of discounts and amortization of premiums on available-for-sale securities	(1,052)	(893)
Amortization of debt issuance costs	73
Loss on disposal of equipment	250	357
Changes in operating assets and liabilities:
Accounts receivable	(53)	(926)
Deferred contract costs	(22,434)	(14,156)
Prepaid expenses and other	773	635
Accounts payable	261	147
Accrued expenses and other	2,231	1,027
Tenant improvement allowance		251
Net cash provided by operating activities	36,078	34,296
Cash flows from investing activities:
Purchases of available-for-sale securities and other	(253,950)	(117,053)
Proceeds from sales and maturities of available-for-sale securities	124,780	88,879
Capitalized internal-use software costs	(12,139)	(9,425)
Purchases of property and equipment	(12,398)	(7,532)
Lease allowances used for tenant improvements		(251)
Net cash used in investing activities	(153,707)	(45,382)
Cash flows from financing activities:
Net change in client fund obligations	450,825	33,159
Repurchases of common shares		(34,991)
Proceeds from exercise of stock options		85
Proceeds from employee stock purchase plan	3,961	2,824
Taxes paid related to net share settlement of equity awards	(25,954)	(18,878)
Payment of debt issuance costs	(675)
Net cash provided by (used in) financing activities	428,157	(17,801)
Net change in cash, cash equivalents and funds held for clients' cash and cash equivalents	310,528	(28,887)
Cash, cash equivalents and funds held for clients' cash and cash equivalents-beginning of period	1,426,143	1,239,731
Cash, cash equivalents and funds held for clients' cash and cash equivalents-end of period	1,736,671	1,210,844
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Purchases of property and equipment, accrued but not paid		252
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	53
Cash paid for income taxes, net of refunds	19	357
Reconciliation of cash, cash equivalents and funds held for clients' cash and cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents	75,900	84,114
Funds held for clients' cash and cash equivalents	1,660,771	1,126,730
Total cash, cash equivalents and funds held for clients' cash and cash equivalents	$ 1,736,671	$ 1,210,844

Summary of Significant Accounting Policies

6 Months Ended

Dec. 31, 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

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

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. Accounting estimates used in the preparation of these consolidated financial statements change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes.

Beginning in fiscal 2020, the Company simplified the presentation of revenue and cost of revenues on its Unaudited Consolidated Statements of Operations and Comprehensive Income. The line items “Recurring fees” and “Implementation services and other” have been combined into one revenue line: “Recurring and other revenue”. Likewise, the line items “Cost of revenues – recurring revenues” and “Cost of revenues – implementation services and other” have been combined into one line: “Cost of revenues”. The Company changed the presentation of revenue and cost of revenues as Implementation services and other has become a smaller component of its overall revenue mix due to the human capital management (“HCM”) suite becoming a larger part of the portfolio. Previously reported results for the three and six month periods ended December 31, 2018 have been reclassified to conform to the current presentation.

(b) Interim Unaudited Consolidated Financial Information

The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with GAAP and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s financial position, results of operations, changes in stockholders’ equity and cash flows. The results of operations for the three and six months ended December 31, 2019 are not necessarily indicative of the results for the full year or the results for any future periods. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended June 30, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on August 9, 2019.

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

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

(d) Recently Adopted Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use (“ROU”) model 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 adopted the new standard on July 1, 2019 using the modified retrospective method and the transition relief guidance provided by the FASB in ASU 2018-11, Leases (Topic 842): Targeted Improvements. Consequently, the Company did not update financial information or provide disclosures required under the new standard for dates and periods prior to July 1, 2019. The Company elected the package of practical expedients and did not reassess prior conclusions on whether contracts are or contain a lease, lease classification, and initial direct costs. In addition, the Company adopted the lessee practical expedient to combine lease and non-lease components for all asset classes and elected to not recognize ROU assets and lease liabilities for leases with a term of 12 months or less.

Adoption of the new standard resulted in the Company recording operating lease ROU assets and operating lease liabilities of $52,083 and $83,852, respectively, as of July 1, 2019. The ROU assets were recorded net of $31,769 in deferred rent adjustments that were previously recorded in Accrued expenses and Deferred rent on the Consolidated Balance Sheets as of June 30, 2019. The adoption of this standard did not result in any cumulative-effect adjustments to Retained earnings. Additionally, there was no impact on the Company’s unaudited consolidated statements of operations and comprehensive income or the unaudited statement of cash flows as a result of the adoption of Topic 842 for the three and six months ended December 31, 2019.

Refer to Note 8 for additional disclosures over the Company’s leases.

(e) Recently Issued Accounting Standards

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 on July 1, 2020 and does not expect any material impact from adoption.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) which provides guidance to reduce complexity in certain areas of accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and simplifies various aspects of the current guidance to promote consistent application of the standard among reporting entities. This standard is effective for fiscal years beginning after December 15, 2020 with early adoption permitted. The Company is currently assessing the impact of ASU 2019-12 on its financial statements as well as the timing and method of 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.

Revenue

6 Months Ended

Dec. 31, 2019

Revenue

Revenue

(3) Revenue

The Company derives its revenue from contracts predominantly from recurring and non-recurring service fees. While the majority of its agreements are generally cancellable by the client on 60 days’ notice or less, the Company also has term arrangements, which are generally two years in length. Recurring fees are derived from payroll, timekeeping, and HR-related cloud-based computing services. The majority of the Company’s recurring fees are satisfied over time as services are provided. The performance obligations related to payroll services are satisfied upon the processing of the client’s payroll with the fee charged and collected based on a per employee per payroll frequency fee. The performance obligations related to time and attendance services and HR related services are satisfied over time each month with the fee charged and collected based on a per employee per month fee. For subscription based fees which can include payroll, time and attendance, and HR related services, the Company recognizes the applicable recurring fees over time each month with the fee charged and collected based on a per employee per month fee. Non-recurring service fees consist mainly of nonrefundable implementation fees, which involve setting the client up in, and loading data into, the Company’s cloud-based modules. These implementation activities are considered set-up activities. The Company has determined that the nonrefundable upfront fees provide certain clients with a material right to renew the contract. Implementation fees are deferred and amortized generally over a period up to 24 months.

Disaggregation of revenue

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


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2018		2019		2018		2019
Recurring fees	$	100,275	$	123,562	$	196,036	$	241,339
Implementation services and other		2,464		4,418		3,705		8,514
Total revenues from contracts	$	102,739	$	127,980	$	199,741	$	249,853

Deferred revenue

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

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


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2018		2019		2018		2019
Balance at beginning of the period	$	2,019	$	6,580	$	—	$	6,289
Deferral of revenue		2,995		3,172		5,513		6,243
Revenue recognized		(1,391)		(2,899)		(1,890)		(5,679)
Balance at end of the period	$	3,623	$	6,853	$	3,623	$	6,853

Deferred revenue related to these nonrefundable upfront fees are recorded within Accrued expenses and Other long-term liabilities on the Unaudited Consolidated Balance Sheets. The Company expects to recognize these deferred revenue balances of $3,826 in fiscal 2020, $2,581 in fiscal 2021, $446 in fiscal 2022 and thereafter.

Deferred contract costs

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

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

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


	Three Months Ended December 31, 2018
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	69,933	$	5,635	$	(4,092)	$	71,476
Costs to fulfill a contract		5,343		5,776		(332)		10,787
Total	$	75,276	$	11,411	$	(4,424)	$	82,263


	Three Months Ended December 31, 2019
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	86,688	$	11,401	$	(5,241)	$	92,848
Costs to fulfill a contract		26,398		7,499		(1,212)		32,685
Total	$	113,086	$	18,900	$	(6,453)	$	125,533


	Six Months Ended December 31, 2018
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	68,107	$	11,346	$	(7,977)	$	71,476
Costs to fulfill a contract		—		11,250		(463)		10,787
Total	$	68,107	$	22,596	$	(8,440)	$	82,263


	Six Months Ended December 31, 2019
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	82,103	$	20,886	$	(10,141)	$	92,848
Costs to fulfill a contract		20,996		13,865		(2,176)		32,685
Total	$	103,099	$	34,751	$	(12,317)	$	125,533

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

Remaining Performance Obligations

The Company’s remaining performance obligations related to minimum monthly fees on its term based contracts was approximately $42,966 as of December 31, 2019, which will be generally recognized over the next 24 months. This balance excludes the value of unsatisfied performance obligations for contracts that have an original expected duration of one year or less and contracts for which the variable consideration is allocated entirely to wholly unsatisfied performance obligations.

Balance Sheet Information

6 Months Ended

Dec. 31, 2019

Balance Sheet Information

Balance Sheet Information

(4) Balance Sheet Information

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

Activity in the allowance for doubtful accounts was as follows:


Balance at June 30, 2019	$	473
Charged to expense		63
Write-offs		(48)
Balance at December 31, 2019	$	488

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


	June 30,		December 31,
	2019		2019
Capitalized internal-use software	$	90,991	$	104,182
Accumulated amortization		(63,505)		(72,563)
Capitalized internal-use software, net	$	27,486	$	31,619

Amortization of capitalized internal-use software costs is included in Cost of revenues and amounted to $4,418 and $4,690 for the three months ended December 31, 2018 and 2019, respectively, and $8,630 and $9,147 for the six months ended December 31, 2018 and 2019, respectively.

Property and equipment, net consist of the following:


	June 30,		December 31,
	2019		2019
Office equipment	$	4,406	$	4,490
Computer equipment		36,798		42,344
Furniture and fixtures		11,857		12,682
Software		6,332		6,638
Leasehold improvements		44,350		44,697
Time clocks rented by clients		4,679		4,893
Total		108,422		115,744
Accumulated depreciation		(38,366)		(44,654)
Property and equipment, net	$	70,056	$	71,090

Depreciation expense amounted to $3,588 and $4,076 for the three months ended December 31, 2018 and 2019, respectively, and $7,045 and $7,989 for the six months ended December 31, 2018 and 2019, respectively.

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



	June 30,		December 31,		Useful
	2019		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		(7,979)		(9,104)
Intangible assets, net	$	10,751	$	9,626

Amortization expense for acquired intangible assets was $563 and $562 for the three months ended December 31, 2018 and 2019, respectively, and $1,126 and $1,125 for the six months ended December 31, 2018 and 2019, respectively.

Future amortization expense for acquired intangible assets as of December 31, 2019 is as follows:


Remainder of fiscal 2020	$	1,126
Fiscal 2021		2,251
Fiscal 2022		2,232
Fiscal 2023		2,118
Fiscal 2024		1,356
Thereafter		543
Total	$	9,626

The components of accrued expenses were as follows:


	June 30,		December 31,
	2019		2019
Accrued payroll and personnel costs	$	39,095	$	36,341
Operating lease liabilities		—		7,694
Deferred revenue		5,572		7,405
Other		12,958		11,413
Total accrued expenses	$	57,625	$	62,853

Corporate Investments and Funds Held for Clients

6 Months Ended

Dec. 31, 2019

Corporate Investments and Funds Held for Clients

Corporate Investments and Funds Held for Clients

(5) Corporate Investments and Funds Held for Clients

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


	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 (1)		130,665		168		(9)		130,824
Total investments	$	1,556,816	$	168	$	(17)	$	1,556,967

(1)

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.


	December 31, 2019
			Gross		Gross
	Amortized		unrealized		unrealized
Type of Issue	cost		gains		losses		Fair value
Cash and cash equivalents	$	75,902	$	1	$	(3)	$	75,900
Funds held for clients' cash and cash equivalents		1,660,771		1		(1)		1,660,771
Available-for-sale securities:
Commercial paper		148,627		7		(8)		148,626
Corporate bonds		22,511		54		(1)		22,564
Asset-backed securities		55,857		68		(14)		55,911
U.S. treasury securities		33,891		9		(3)		33,897
Total available-for-sale securities (2)		260,886		138		(26)		260,998
Total investments	$	1,997,559	$	140	$	(30)	$	1,997,669

(2)

Included within the fair value of total available-for-sale securities above is $76,475 of corporate investments and $184,523 of funds held for clients.

Cash and cash equivalents and funds held for clients’ cash and cash equivalents include demand deposit accounts, money market funds, commercial paper and short-term U.S. treasury securities as of June 30, 2019 and December 31, 2019.

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


	June 30,		December 31,
	2019		2019
Cash and cash equivalents	$	132,476	$	75,900
Corporate investments		29,314		69,849
Funds held for clients		1,394,469		1,845,294
Long-term prepaid expenses and other		708		6,626
Total investments	$	1,556,967	$	1,997,669

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, 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


	December 31, 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	$	(8)	$	79,890	$	—	$	—	$	(8)	$	79,890
Corporate bonds		(1)		2,908		—		—		(1)		2,908
Asset-backed securities		(13)		29,007		(1)		266		(14)		29,273
U.S. treasury securities		(3)		19,200		—		—		(3)		19,200
Total available-for-sale securities	$	(25)	$	131,005	$	(1)	$	266	$	(26)	$	131,271

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 during the three or six months ended December 31, 2018 or 2019, nor does it believe that OTTI exists in its portfolio as of December 31, 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 December 31, 2019.

The Company did not make any material reclassification adjustments out of accumulated other comprehensive income for realized gains and losses on the sale of available-for-sale securities during the three or six months ended December 31, 2018 or 2019. Gross realized gains and losses on the sale of available-for-sale securities were immaterial for both the three and six months ended December 31, 2018 and 2019.

Expected maturities of available-for-sale securities at December 31, 2019 are as follows:


	Amortized
	cost		Fair value
One year or less	$	232,303	$	232,346
One year to two years		28,583		28,652
Total available-for-sale securities	$	260,886	$	260,998

Fair Value Measurement

6 Months Ended

Dec. 31, 2019

Fair Value Measurement

Fair Value Measurement

(6) 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 certain cash and cash equivalents, accounts receivable, accounts payable and client fund obligations at fair value on a recurring basis using Level 1 inputs. The Company considers the recorded value of these financial assets and liabilities to approximate the fair value of the respective assets and liabilities at June 30, 2019 and December 31, 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 U.S. 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, 2019 or December 31, 2019, and the Company did not transfer assets between Levels during the six months ended December 31, 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, 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	$	—


	December 31, 2019
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	75,900	$	50,758	$	25,142	$	—
Funds held for clients' cash and cash equivalents		1,660,771		1,620,350		40,421		—
Available-for-sale securities:
Commercial paper		148,626		—		148,626		—
Corporate bonds		22,564		—		22,564		—
Asset-backed securities		55,911		—		55,911		—
U.S. treasury securities		33,897		—		33,897		—
Total available-for-sale securities		260,998		—		260,998		—
Total investments	$	1,997,669	$	1,671,108	$	326,561	$	—

- 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

Leases

6 Months Ended

Dec. 31, 2019

Leases

Leases

(8) Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in Operating lease right-of-use assets, Accrued expenses, and Long-term operating lease liabilities in the Unaudited Consolidated Balance Sheets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The operating lease right-of-use assets also include any lease payments made at or before the commencement date and are reduced by any lease incentives received. The Company’s lease terms may include options to extend or not terminate the lease when it is reasonably certain that it will exercise any such options. For the majority of its leases, the Company concluded that it is not reasonably certain that any renewal options would be exercised, and, therefore, the amounts are not recognized as part of Operating lease right-of-use assets nor Operating lease liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized on a straight-line basis over the expected lease term.

The Company’s most significant leases are real estate leases of office space. The remaining operating leases are primarily comprised of leases of printers and other equipment. For all leases, the Company has elected the practical expedient permitted under Topic 842 to combine lease and non-lease components. As a result, non-lease components, such as common area or equipment maintenance charges, are accounted for as a single lease element. The Company does not have any finance leases.

Fixed lease expense payments are recognized on a straight-line basis over the lease term. Variable lease payments vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time, and are often due to changes in an external market rate or the value of an index (e.g. Consumer Price Index). Certain of the Company’s operating lease agreements include variable payments that are passed through by the landlord, such as insurance, taxes, and common area maintenance, payments based on the usage of the asset, and rental payments adjusted periodically for inflation. Variable payments are expensed as incurred and included within variable rent expense.

The Company’s lease agreements do not contain material residual value guarantees, restrictions, or covenants.

The components of operating lease expense were as follows:


	Three Months Ended		Six Months Ended
	December 31, 2019		December 31, 2019
Operating lease cost	$	2,374	$	4,637
Short-term lease cost		1		14
Variable lease cost		725		1,460
Total lease costs	$	3,100	$	6,111

The classification of the Company’s operating lease right-of-use assets and operating lease liabilities and other supplemental information related to the Company’s operating leases are as follows:


	December 31, 2019
Operating lease right-of-use assets	$	51,659
Accrued expenses	$	7,694
Long-term operating lease liabilities	$	76,929
Weighted-average remaining lease term (years)		10.56
Weighted-average discount rate		3.84	%

The following table summarizes supplemental cash flow information related to the Company’s operating leases as of December 31, 2019:


	Six Months Ended
	December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	5,088
Operating lease assets obtained in exchange for new liabilities	$	2,627

The undiscounted cash flows for future maturities of the Company’s operating lease liabilities and the reconciliation to the balance of operating lease liabilities reflected on the Company’s balance sheet are as follows as of December 31, 2019:


Remainder of fiscal 2020	$	5,378
Fiscal 2021		10,839
Fiscal 2022		9,574
Fiscal 2023		9,227
Fiscal 2024		9,209
Thereafter		60,026
Total undiscounted cash flows		104,253
Less: Present value discount		(19,630)
Total operating lease liabilities	$	84,623

The table above excludes $546 in the undiscounted future minimum lease payments for operating lease liabilities that had not yet commenced for terms up to 5.67 years.

Rent expense was $2,330 and $4,463 for the three and six months ended December 31, 2018, respectively.

Future minimum lease payments under non-cancellable operating leases (with initial or remaining terms in excess of one year) as of June 30, 2019 under ASC 840 were as follows:


Fiscal 2020	$	10,449
Fiscal 2021		11,150
Fiscal 2022		9,500
Fiscal 2023		8,840
Fiscal 2024		8,838
Thereafter		59,401
Total minimum lease payments	$	108,178

Benefit Plans

6 Months Ended

Dec. 31, 2019

Benefit Plans

Benefit Plans

(9) Benefit Plans

(a) Equity Incentive Plan

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 options to purchase common stock and other equity incentives at the discretion of the compensation committee of the Company’s board of directors. No new awards have been or will be issued under the 2008 Plan since the effective date of the 2014 Plan. Outstanding awards under the 2008 Plan continue to be subject to the terms and conditions of the 2008 Plan. The number of shares of common stock reserved for issuance under the 2014 Plan may increase each calendar year, continuing through and including January 1, 2024. The number of shares added each year may be equal to the lesser of (a) four and five tenths percent (4.5%) of the number of shares of common stock of the Company issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the Company’s board of directors.

As of December 31, 2019, the Company had 12,643 shares allocated to the plans, of which 3,185 shares were subject to outstanding options or awards. Generally, the Company issues previously unissued shares for the exercise of stock options or vesting of awards; however, shares previously subject to 2014 Plan grants or awards that are forfeited or net settled at exercise or release may be reissued to satisfy future issuances.

The following table summarizes changes in the number of shares available for grant under the Company’s equity incentive plans during the six months ended December 31, 2019:


		Number of Shares
Available for grant at July 1, 2019		9,759
RSUs granted		(638)
Shares withheld in settlement of taxes and/or exercise price		258
Forfeitures		80
Shares removed		(1)
Available for grant at December 31, 2019		9,458

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 unaudited consolidated statements of operations and comprehensive income:


	Three Months Ended December 31,				Six Months Ended December 31,
	2018		2019		2018		2019
Cost of revenues	$	1,304	$	1,446	$	2,542	$	2,695
Sales and marketing		2,000		3,379		3,697		7,347
Research and development		1,460		1,768		2,738		3,046
General and administrative		5,335		6,177		10,547		11,744
Total stock-based compensation expense	$	10,099	$	12,770	$	19,524	$	24,832

In addition, the Company capitalized $696 and $652 of stock-based compensation expense in its capitalized internal-use software costs in the three months ended December 31, 2018 or 2019, respectively, and $1,321 and $1,308 in the six months ended December 31, 2018 and 2019, respectively.

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 vested 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.

There were no stock options granted during the six months ended December 31, 2018 or 2019. The table below presents stock option activity during the six months ended December 31, 2019:


	Outstanding Options
				Weighted
		Weighted		average
		average		remaining	Aggregate
	Number of	exercise		contractual	intrinsic
	shares	price		term (years)	value
Balance at July 1, 2019	1,525	$	12.24	3.95	$	124,373
Options exercised	(23)	$	17.35
Balance at December 31, 2019	1,502	$	12.17	3.43	$	163,219
Options vested and exercisable at December 31, 2019	1,502	$	12.17	3.43	$	163,219

The total intrinsic value of options exercised was $1,501 and $1,409 during the three months ended December 31, 2018 and 2019, respectively, and $13,704 and $2,080 during the six months ended December 31, 2018 and 2019, respectively. As of December 31, 2019, the Company had recognized all stock-based compensation cost related to outstanding stock options and all outstanding options had vested.

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 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 growth and Adjusted EBITDA margin targets in future fiscal years.

The following table represents restricted stock unit activity during the six months ended December 31, 2019:


	Units	Weighted average grant date fair value
RSU balance at July 1, 2019	1,813	$	53.78
RSUs granted	638	$	99.48
RSUs vested	(688)	$	49.43
RSUs forfeited	(80)	$	57.65
RSU balance at December 31, 2019	1,683	$	73.21
RSUs expected to vest at December 31, 2019	1,553	$	72.66

At December 31, 2019, there was $67,519 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested restricted stock units granted. That cost is expected to be recognized over a weighted average period of 2.03 years.

(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 December 31, 2019, a total of 950 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 issued 45 shares upon the completion of its six-month offering period ending November 15, 2019. The Company recorded compensation expense attributable to the ESPP of $446 and $715 for the three months ended December 31, 2018 and 2019, respectively, and $885 and $1,377 for the six months ended December 31, 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:


	Six Months Ended
	December 31,
	2018		2019
Valuation assumptions:
Expected dividend yield	0	%	0	%
Expected volatility	33.5 - 38.3	%	38.6 - 43.3	%
Expected term (years)	0.5		0.5
Risk‑free interest rate	2.10 - 2.48	%	1.58 - 2.44	%

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 $1,140 and $1,768 for the three months ended December 31, 2018 and 2019, respectively, and $2,534 and $3,771 for the six months ended December 31, 2018 and 2019, respectively.

Net Income Per Share

6 Months Ended

Dec. 31, 2019

Net Income Per Share

Net Income Per Share

(12) Net Income Per Share

Basic net income per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares outstanding during the period and, if dilutive, potential common shares outstanding during the period. The Company’s potential common shares consist of the incremental common shares issuable upon the exercise of stock options, the release of restricted stock units, and 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:


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2018		2019		2018		2019
Numerator:
Net income	$	5,704	$	5,467	$	15,556	$	19,373

Denominator:
Weighted-average shares used in computing net income per share:
Basic		52,842		53,542		52,853		53,415
Weighted-average effect of potentially dilutive shares:
Employee stock options and restricted stock units		2,239		2,284		2,379		2,277
Diluted		55,081		55,826		55,232		55,692

Net income per share:
Basic	$	0.11	$	0.10	$	0.29	$	0.36
Diluted	$	0.10	$	0.10	$	0.28	$	0.35

The following table summarizes the outstanding 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:


	Three Months Ended		Six Months Ended
	December 31,		December 31,
	2018	2019	2018	2019
Restricted stock units	25	3	687	616
Employee stock purchase plan shares	17	15	17	15
Total	42	18	704	631

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. The Company completed the repurchase program during the first quarter of fiscal 2019 and repurchased 442 shares for $34,991. All shares of common stock repurchased were retired.

Summary of Significant Accounting Policies (Policies)	6 Months Ended
Summary of Significant Accounting Policies (Policies)	Dec. 31, 2019
Summary of Significant Accounting Policies
Basis of Presentation, Consolidation, and Use of Estimates	(a) Basis of Presentation, Consolidation and Use of Estimates These unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. Accounting estimates used in the preparation of these consolidated financial statements change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes. Beginning in fiscal 2020, the Company simplified the presentation of revenue and cost of revenues on its Unaudited Consolidated Statements of Operations and Comprehensive Income. The line items “Recurring fees” and “Implementation services and other” have been combined into one revenue line: “Recurring and other revenue”. Likewise, the line items “Cost of revenues – recurring revenues” and “Cost of revenues – implementation services and other” have been combined into one line: “Cost of revenues”. The Company changed the presentation of revenue and cost of revenues as Implementation services and other has become a smaller component of its overall revenue mix due to the human capital management (“HCM”) suite becoming a larger part of the portfolio. Previously reported results for the three and six month periods ended December 31, 2018 have been reclassified to conform to the current presentation.
Interim Unaudited Consolidated Financial Information	(b) Interim Unaudited Consolidated Financial Information The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with GAAP and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s financial position, results of operations, changes in stockholders’ equity and cash flows. The results of operations for the three and six months ended December 31, 2019 are not necessarily indicative of the results for the full year or the results for any future periods. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended June 30, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on August 9, 2019.
Income Taxes	(c) Income Taxes Income taxes are accounted for in accordance with ASC 740, Income Taxes, using the asset and liability method. The Company’s provision for income taxes is based on the annual effective rate method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net-recorded amount, it would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
Recently Adopted Accounting Standards	(d) Recently Adopted Accounting Standards In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use (“ROU”) model 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 adopted the new standard on July 1, 2019 using the modified retrospective method and the transition relief guidance provided by the FASB in ASU 2018-11, Leases (Topic 842): Targeted Improvements. Consequently, the Company did not update financial information or provide disclosures required under the new standard for dates and periods prior to July 1, 2019. The Company elected the package of practical expedients and did not reassess prior conclusions on whether contracts are or contain a lease, lease classification, and initial direct costs. In addition, the Company adopted the lessee practical expedient to combine lease and non-lease components for all asset classes and elected to not recognize ROU assets and lease liabilities for leases with a term of 12 months or less. Adoption of the new standard resulted in the Company recording operating lease ROU assets and operating lease liabilities of $52,083 and $83,852, respectively, as of July 1, 2019. The ROU assets were recorded net of $31,769 in deferred rent adjustments that were previously recorded in Accrued expenses and Deferred rent on the Consolidated Balance Sheets as of June 30, 2019. The adoption of this standard did not result in any cumulative-effect adjustments to Retained earnings. Additionally, there was no impact on the Company’s unaudited consolidated statements of operations and comprehensive income or the unaudited statement of cash flows as a result of the adoption of Topic 842 for the three and six months ended December 31, 2019. Refer to Note 8 for additional disclosures over the Company’s leases.
Recently Issued Accounting Standards	(e) Recently Issued Accounting Standards 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 on July 1, 2020 and does not expect any material impact from adoption. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) which provides guidance to reduce complexity in certain areas of accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and simplifies various aspects of the current guidance to promote consistent application of the standard among reporting entities. This standard is effective for fiscal years beginning after December 15, 2020 with early adoption permitted. The Company is currently assessing the impact of ASU 2019-12 on its financial statements as well as the timing and method of 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.

- Definition

Disclosure of accounting policy for income taxes, which may include its accounting policies for recognizing and measuring deferred tax assets and liabilities and related valuation allowances, recognizing investment tax credits, operating loss carryforwards, tax credit carryforwards, and other carryforwards, methodologies for determining its effective income tax rate and the characterization of interest and penalties in the financial statements.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 20
-URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32847-109319

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 954
-SubTopic 740
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6491622&loc=d3e9504-115650

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=84158767&loc=d3e18780-107790

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 17
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=116657188&loc=SL116659661-227067

Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 19
-URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32840-109319

Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 45
-Paragraph 25
-URI http://asc.fasb.org/extlink&oid=116821951&loc=d3e32247-109318

Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 45
-Paragraph 28
-URI http://asc.fasb.org/extlink&oid=116821951&loc=d3e32280-109318

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 30
-Section 05
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=65884525&loc=d3e40913-109327

+ Details

Revenue (Tables)

6 Months Ended

Dec. 31, 2019

Revenue

Schedule of disaggregation of revenue


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2018		2019		2018		2019
Recurring fees	$	100,275	$	123,562	$	196,036	$	241,339
Implementation services and other		2,464		4,418		3,705		8,514
Total revenues from contracts	$	102,739	$	127,980	$	199,741	$	249,853

Schedule of changes in deferred revenue related to nonrefundable upfront fees


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2018		2019		2018		2019
Balance at beginning of the period	$	2,019	$	6,580	$	—	$	6,289
Deferral of revenue		2,995		3,172		5,513		6,243
Revenue recognized		(1,391)		(2,899)		(1,890)		(5,679)
Balance at end of the period	$	3,623	$	6,853	$	3,623	$	6,853

Schedule of deferred contract costs and the related amortization expense


	Three Months Ended December 31, 2018
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	69,933	$	5,635	$	(4,092)	$	71,476
Costs to fulfill a contract		5,343		5,776		(332)		10,787
Total	$	75,276	$	11,411	$	(4,424)	$	82,263


	Three Months Ended December 31, 2019
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	86,688	$	11,401	$	(5,241)	$	92,848
Costs to fulfill a contract		26,398		7,499		(1,212)		32,685
Total	$	113,086	$	18,900	$	(6,453)	$	125,533


	Six Months Ended December 31, 2018
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	68,107	$	11,346	$	(7,977)	$	71,476
Costs to fulfill a contract		—		11,250		(463)		10,787
Total	$	68,107	$	22,596	$	(8,440)	$	82,263


	Six Months Ended December 31, 2019
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	82,103	$	20,886	$	(10,141)	$	92,848
Costs to fulfill a contract		20,996		13,865		(2,176)		32,685
Total	$	103,099	$	34,751	$	(12,317)	$	125,533

Balance Sheet Information (Tables)

6 Months Ended

Dec. 31, 2019

Balance Sheet Information

Schedule of activity in the allowance for doubtful accounts


Balance at June 30, 2019	$	473
Charged to expense		63
Write-offs		(48)
Balance at December 31, 2019	$	488

Schedule of capitalized internal-use software and accumulated amortization


	June 30,		December 31,
	2019		2019
Capitalized internal-use software	$	90,991	$	104,182
Accumulated amortization		(63,505)		(72,563)
Capitalized internal-use software, net	$	27,486	$	31,619

Schedule of property and equipment, net


	June 30,		December 31,
	2019		2019
Office equipment	$	4,406	$	4,490
Computer equipment		36,798		42,344
Furniture and fixtures		11,857		12,682
Software		6,332		6,638
Leasehold improvements		44,350		44,697
Time clocks rented by clients		4,679		4,893
Total		108,422		115,744
Accumulated depreciation		(38,366)		(44,654)
Property and equipment, net	$	70,056	$	71,090

Schedule of amortizable intangible assets and estimated useful lives



	June 30,		December 31,		Useful
	2019		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		(7,979)		(9,104)
Intangible assets, net	$	10,751	$	9,626

Schedule of future amortization expense for acquired intangible assets


Remainder of fiscal 2020	$	1,126
Fiscal 2021		2,251
Fiscal 2022		2,232
Fiscal 2023		2,118
Fiscal 2024		1,356
Thereafter		543
Total	$	9,626

Schedule of components of accrued expenses


	June 30,		December 31,
	2019		2019
Accrued payroll and personnel costs	$	39,095	$	36,341
Operating lease liabilities		—		7,694
Deferred revenue		5,572		7,405
Other		12,958		11,413
Total accrued expenses	$	57,625	$	62,853

Corporate Investments and Funds Held For Clients (Tables)

6 Months Ended

Dec. 31, 2019

Corporate Investments and Funds Held for Clients

Schedule of corporate investments and 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 (1)		130,665		168		(9)		130,824
Total investments	$	1,556,816	$	168	$	(17)	$	1,556,967

(1)

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.


	December 31, 2019
			Gross		Gross
	Amortized		unrealized		unrealized
Type of Issue	cost		gains		losses		Fair value
Cash and cash equivalents	$	75,902	$	1	$	(3)	$	75,900
Funds held for clients' cash and cash equivalents		1,660,771		1		(1)		1,660,771
Available-for-sale securities:
Commercial paper		148,627		7		(8)		148,626
Corporate bonds		22,511		54		(1)		22,564
Asset-backed securities		55,857		68		(14)		55,911
U.S. treasury securities		33,891		9		(3)		33,897
Total available-for-sale securities (2)		260,886		138		(26)		260,998
Total investments	$	1,997,559	$	140	$	(30)	$	1,997,669

(2)

Included within the fair value of total available-for-sale securities above is $76,475 of corporate investments and $184,523 of funds held for clients.

Schedule of the classification of investments


	June 30,		December 31,
	2019		2019
Cash and cash equivalents	$	132,476	$	75,900
Corporate investments		29,314		69,849
Funds held for clients		1,394,469		1,845,294
Long-term prepaid expenses and other		708		6,626
Total investments	$	1,556,967	$	1,997,669

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


	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


	December 31, 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	$	(8)	$	79,890	$	—	$	—	$	(8)	$	79,890
Corporate bonds		(1)		2,908		—		—		(1)		2,908
Asset-backed securities		(13)		29,007		(1)		266		(14)		29,273
U.S. treasury securities		(3)		19,200		—		—		(3)		19,200
Total available-for-sale securities	$	(25)	$	131,005	$	(1)	$	266	$	(26)	$	131,271

Schedule of expected maturities of available-for-sale securities

Expected maturities of available-for-sale securities at December 31, 2019 are as follows:


	Amortized
	cost		Fair value
One year or less	$	232,303	$	232,346
One year to two years		28,583		28,652
Total available-for-sale securities	$	260,886	$	260,998

Fair Value Measurement (Tables)

6 Months Ended

Dec. 31, 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, 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	$	—


	December 31, 2019
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	75,900	$	50,758	$	25,142	$	—
Funds held for clients' cash and cash equivalents		1,660,771		1,620,350		40,421		—
Available-for-sale securities:
Commercial paper		148,626		—		148,626		—
Corporate bonds		22,564		—		22,564		—
Asset-backed securities		55,911		—		55,911		—
U.S. treasury securities		33,897		—		33,897		—
Total available-for-sale securities		260,998		—		260,998		—
Total investments	$	1,997,669	$	1,671,108	$	326,561	$	—

Leases (Tables)

6 Months Ended

Dec. 31, 2019

Leases

Schedule of components of operating lease expense


	Three Months Ended		Six Months Ended
	December 31, 2019		December 31, 2019
Operating lease cost	$	2,374	$	4,637
Short-term lease cost		1		14
Variable lease cost		725		1,460
Total lease costs	$	3,100	$	6,111

Schedule of the classification of operating lease right-of-use assets and operating lease liabilities and other supplemental information related to operating leases


	December 31, 2019
Operating lease right-of-use assets	$	51,659
Accrued expenses	$	7,694
Long-term operating lease liabilities	$	76,929
Weighted-average remaining lease term (years)		10.56
Weighted-average discount rate		3.84	%

Schedule of supplemental cash flow information related to operating leases


	Six Months Ended
	December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	5,088
Operating lease assets obtained in exchange for new liabilities	$	2,627

Schedule of future maturities of operating lease liabilities and the reconciliation to the balance of operating lease liabilities


Remainder of fiscal 2020	$	5,378
Fiscal 2021		10,839
Fiscal 2022		9,574
Fiscal 2023		9,227
Fiscal 2024		9,209
Thereafter		60,026
Total undiscounted cash flows		104,253
Less: Present value discount		(19,630)
Total operating lease liabilities	$	84,623

Schedule of future minimum lease payments under non-cancellable operating leases under Topic 840


Fiscal 2020	$	10,449
Fiscal 2021		11,150
Fiscal 2022		9,500
Fiscal 2023		8,840
Fiscal 2024		8,838
Thereafter		59,401
Total minimum lease payments	$	108,178

Benefit Plans (Tables)

6 Months Ended

Dec. 31, 2019

Benefit Plans

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


		Number of Shares
Available for grant at July 1, 2019		9,759
RSUs granted		(638)
Shares withheld in settlement of taxes and/or exercise price		258
Forfeitures		80
Shares removed		(1)
Available for grant at December 31, 2019		9,458

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


	Three Months Ended December 31,				Six Months Ended December 31,
	2018		2019		2018		2019
Cost of revenues	$	1,304	$	1,446	$	2,542	$	2,695
Sales and marketing		2,000		3,379		3,697		7,347
Research and development		1,460		1,768		2,738		3,046
General and administrative		5,335		6,177		10,547		11,744
Total stock-based compensation expense	$	10,099	$	12,770	$	19,524	$	24,832

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, 2019	1,525	$	12.24	3.95	$	124,373
Options exercised	(23)	$	17.35
Balance at December 31, 2019	1,502	$	12.17	3.43	$	163,219
Options vested and exercisable at December 31, 2019	1,502	$	12.17	3.43	$	163,219

Schedule of restricted stock unit activity


	Units	Weighted average grant date fair value
RSU balance at July 1, 2019	1,813	$	53.78
RSUs granted	638	$	99.48
RSUs vested	(688)	$	49.43
RSUs forfeited	(80)	$	57.65
RSU balance at December 31, 2019	1,683	$	73.21
RSUs expected to vest at December 31, 2019	1,553	$	72.66

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


	Six Months Ended
	December 31,
	2018		2019
Valuation assumptions:
Expected dividend yield	0	%	0	%
Expected volatility	33.5 - 38.3	%	38.6 - 43.3	%
Expected term (years)	0.5		0.5
Risk‑free interest rate	2.10 - 2.48	%	1.58 - 2.44	%

Net Income Per Share (Tables)

6 Months Ended

Dec. 31, 2019

Net Income Per Share

Schedule of calculation of basic and diluted net income per share


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2018		2019		2018		2019
Numerator:
Net income	$	5,704	$	5,467	$	15,556	$	19,373

Denominator:
Weighted-average shares used in computing net income per share:
Basic		52,842		53,542		52,853		53,415
Weighted-average effect of potentially dilutive shares:
Employee stock options and restricted stock units		2,239		2,284		2,379		2,277
Diluted		55,081		55,826		55,232		55,692

Net income per share:
Basic	$	0.11	$	0.10	$	0.29	$	0.36
Diluted	$	0.10	$	0.10	$	0.28	$	0.35

Summary of anti-dilutive securities


	Three Months Ended		Six Months Ended
	December 31,		December 31,
	2018	2019	2018	2019
Restricted stock units	25	3	687	616
Employee stock purchase plan shares	17	15	17	15
Total	42	18	704	631

Balance Sheet Information - Allowance for Doubtful Accounts, Capitalized Internal-Use Software and Property, Plant and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Activity in the allowance for doubtful accounts
Balance at beginning of period			$ 473
Charged to expense			63	$ 112
Write-offs			(48)
Balance at end of period	$ 488		488
Capitalized internal-use software and accumulated amortization
Capitalized internal-use software	104,182		104,182		$ 90,991
Accumulated amortization	(72,563)		(72,563)		(63,505)
Capitalized internal-use software, net	31,619		31,619		27,486
Property and equipment, net
Property and equipment, gross	115,744		115,744		108,422
Accumulated depreciation	(44,654)		(44,654)		(38,366)
Property and equipment, net	71,090		71,090		70,056
Depreciation expense	4,076	$ 3,588	7,989	7,045
Cost of revenues
Capitalized internal-use software and accumulated amortization
Amortization of capitalized internal-use software	4,690	$ 4,418	9,147	$ 8,630
Office equipment
Property and equipment, net
Property and equipment, gross	4,490		4,490		4,406
Computer equipment
Property and equipment, net
Property and equipment, gross	42,344		42,344		36,798
Furniture and fixtures
Property and equipment, net
Property and equipment, gross	12,682		12,682		11,857
Software
Property and equipment, net
Property and equipment, gross	6,638		6,638		6,332
Leasehold improvements
Property and equipment, net
Property and equipment, gross	44,697		44,697		44,350
Time clocks rented by clients
Property and equipment, net
Property and equipment, gross	$ 4,893		$ 4,893		$ 4,679

Balance Sheet Information - Intangible Assets And Accrued Expenses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Amortizable intangible assets
Intangible assets, gross	$ 18,730		$ 18,730		$ 18,730
Accumulated amortization	(9,104)		(9,104)		(7,979)
Intangible assets, net	9,626		9,626		10,751
Amortization expense for acquired intangible assets	562	$ 563	1,125	$ 1,126
Future amortization expense for acquired intangible assets
Remainder of fiscal 2020	1,126		1,126
Fiscal 2021	2,251		2,251
Fiscal 2022	2,232		2,232
Fiscal 2023	2,118		2,118
Fiscal 2024	1,356		1,356
Thereafter	543		543
Intangible assets, net	9,626		9,626		10,751
Components of accrued expenses
Accrued payroll and personnel costs	36,341		36,341		39,095
Operating lease liabilities	7,694		7,694
Deferred revenue	7,405		7,405		5,572
Other	11,413		11,413		12,958
Total accrued expenses	62,853		62,853		57,625
Client relationships
Amortizable intangible assets
Intangible assets, gross	18,130		$ 18,130		18,130
Client relationships \| Minimum
Amortizable intangible assets
Useful life			7 years
Client relationships \| Maximum
Amortizable intangible assets
Useful life			9 years
Non-solicitation agreements
Amortizable intangible assets
Intangible assets, gross	$ 600		$ 600		$ 600
Non-solicitation agreements \| Minimum
Amortizable intangible assets
Useful life			2 years
Non-solicitation agreements \| Maximum
Amortizable intangible assets
Useful life			4 years

Corporate Investments and Funds Held For Clients - Reconciliation (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
Corporate Investments and Funds Held for Clients
Amortized cost of cash and cash equivalents	$ 75,902	$ 132,478
Cash and cash equivalents, gross unrealized gains	1
Cash and cash equivalents, gross unrealized losses	(3)	(2)
Fair value of cash and cash equivalents	75,900	132,476	$ 84,114
Amortized cost of funds held for clients' cash and cash equivalents	1,660,771	1,293,673
Funds held for clients' cash and cash equivalents, gross unrealized gains	1
Funds held for clients' cash and cash equivalents, gross unrealized losses	(1)	(6)
Fair value of funds held for clients' cash and cash equivalents	1,660,771	1,293,667	$ 1,126,730
Available-for-sale securities
Amortized cost	260,886	130,665
Gross unrealized gains	138	168
Gross unrealized losses	(26)	(9)
Fair value	260,998	130,824
Total investments at amortized cost	1,997,559	1,556,816
Total investments gross unrealized gain	140	168
Total investments gross unrealized loss	(30)	(17)
Total investments at fair value	1,997,669	1,556,967
Commercial paper
Available-for-sale securities
Amortized cost	148,627	63,397
Gross unrealized gains	7	33
Gross unrealized losses	(8)	(2)
Fair value	148,626	63,428
Corporate bonds
Available-for-sale securities
Amortized cost	22,511	27,044
Gross unrealized gains	54	59
Gross unrealized losses	(1)	(4)
Fair value	22,564	27,099
Asset-backed securities
Available-for-sale securities
Amortized cost	55,857	26,488
Gross unrealized gains	68	55
Gross unrealized losses	(14)	(3)
Fair value	55,911	26,540
U.S. treasury securities
Available-for-sale securities
Amortized cost	33,891	13,736
Gross unrealized gains	9	21
Gross unrealized losses	(3)
Fair value	33,897	13,757
Corporate investments
Available-for-sale securities
Fair value	76,475	30,022
Funds held for clients
Available-for-sale securities
Fair value	$ 184,523	$ 100,802

Corporate Investments and Funds Held For Clients - Classification (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Corporate Investments and Funds Held for Clients
Cash and cash equivalents	$ 75,900	$ 84,114	$ 75,900	$ 84,114	$ 132,476
Corporate investments	69,849		69,849		29,314
Funds held for clients	1,845,294		1,845,294		1,394,469
Long-term prepaid expenses and other	6,626		6,626		708
Total investments at fair value	1,997,669		1,997,669		1,556,967
Available-for-sale securities
Unrealized loss on available-for-sale securities in a loss position for less than 12 months	(25)		(25)		(4)
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months	131,005		131,005		20,941
Unrealized loss on available-for-sale securities in a loss position for greater than 12 months	(1)		(1)		(5)
Fair market value of available-for-sale securities in an unrealized loss position greater than 12 months	266		266		6,659
Total gross unrealized losses	(26)		(26)		(9)
Total fair value	131,271		131,271		27,600
Gross realized gains and losses on the sale of available-for-sale securities	0	0	0	0
OTTI in accumulated other comprehensive income	0	0	0	0
Reclassification out of Accumulated Other Comprehensive Income (Loss)
Available-for-sale securities
Gross realized gains and losses on the sale of available-for-sale securities	0	$ 0	0	$ 0
Commercial paper
Available-for-sale securities
Unrealized loss on available-for-sale securities in a loss position for less than 12 months	(8)		(8)		(2)
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months	79,890		79,890		19,055
Total gross unrealized losses	(8)		(8)		(2)
Total fair value	79,890		79,890		19,055
Corporate bonds
Available-for-sale securities
Unrealized loss on available-for-sale securities in a loss position for less than 12 months	(1)		(1)		(1)
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months	2,908		2,908		1,500
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
Total gross unrealized losses	(1)		(1)		(4)
Total fair value	2,908		2,908		5,201
Asset-backed securities
Available-for-sale securities
Unrealized loss on available-for-sale securities in a loss position for less than 12 months	(13)		(13)		(1)
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months	29,007		29,007		386
Unrealized loss on available-for-sale securities in a loss position for greater than 12 months	(1)		(1)		(2)
Fair market value of available-for-sale securities in an unrealized loss position greater than 12 months	266		266		2,958
Total gross unrealized losses	(14)		(14)		(3)
Total fair value	29,273		29,273		$ 3,344
U.S. treasury securities
Available-for-sale securities
Unrealized loss on available-for-sale securities in a loss position for less than 12 months	(3)		(3)
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months	19,200		19,200
Total gross unrealized losses	(3)		(3)
Total fair value	$ 19,200		$ 19,200

Fair Value Measurement (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
Fair value measurement
Cash and cash equivalents	$ 75,900	$ 132,476	$ 84,114
Funds held for clients' cash and cash equivalents	1,660,771	1,293,667	1,126,730
Total investments at fair value	1,997,669	1,556,967
Available-for-sale securities:
Total available-for-sale securities	260,998	130,824
Fair value asset transfers
Transfers from level 1 to level 2	0		0
Transfers from level 2 to level 1	0		$ 0
Level 1
Fair value measurement
Cash and cash equivalents	50,758	116,387
Funds held for clients' cash and cash equivalents	1,620,350	1,244,856
Total investments at fair value	1,671,108	1,361,243
Level 2
Fair value measurement
Cash and cash equivalents	25,142	16,089
Funds held for clients' cash and cash equivalents	40,421	48,811
Total investments at fair value	326,561	195,724
Available-for-sale securities:
Total available-for-sale securities	260,998	130,824
Level 3
Available-for-sale securities:
Total available-for-sale securities	0	0
Commercial paper
Available-for-sale securities:
Total available-for-sale securities	148,626	63,428
Commercial paper \| Level 2
Available-for-sale securities:
Total available-for-sale securities	148,626	63,428
Corporate bonds
Available-for-sale securities:
Total available-for-sale securities	22,564	27,099
Corporate bonds \| Level 2
Available-for-sale securities:
Total available-for-sale securities	22,564	27,099
Asset-backed securities
Available-for-sale securities:
Total available-for-sale securities	55,911	26,540
Asset-backed securities \| Level 2
Available-for-sale securities:
Total available-for-sale securities	55,911	26,540
U.S. treasury securities
Available-for-sale securities:
Total available-for-sale securities	33,897	13,757
U.S. treasury securities \| Level 2
Available-for-sale securities:
Total available-for-sale securities	$ 33,897	$ 13,757

Benefit Plans - Stock Option Activity (Details) - Stock options - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Vesting period
Expiration period			10 years
Options Outstanding, Number of Shares
Balance at the beginning of the period			1,525
Options granted			0	0
Options exercised			(23)
Balance at the end of the period	1,502		1,502		1,525
Options Outstanding, Weighted average exercise price
Balance at the beginning of the period (in dollars per share)			$ 12.24
Options exercised (in dollars per share)			17.35
Balance at the end of the period (in dollars per share)	$ 12.17		$ 12.17		$ 12.24
Options Additional Disclosures
Weighted average remaining contractual term			3 years 5 months 4 days		3 years 11 months 12 days
Aggregate intrinsic value, at the beginning of the period			$ 124,373
Weighted average remaining contractual term of options vested and exercisable at the end of the period (years)			3 years 5 months 4 days
Aggregate intrinsic value, at the end of the period	$ 163,219		$ 163,219		$ 124,373
Options vested and exercisable at the end of the period (in shares)	1,502		1,502
Options vested and exercisable at the end of the period, weighted average exercise price (in dollars per share)	$ 12.17		$ 12.17
Options vested and exercisable intrinsic value	$ 163,219		$ 163,219
Total intrinsic value of options exercised	$ 1,409	$ 1,501	$ 2,080	$ 13,704
Minimum
Vesting period
Vesting period			3 years
Maximum
Vesting period
Vesting period			4 years

Benefit Plans - RSU activity (Details) - Restricted stock units $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended
	Dec. 31, 2019 USD ($) $ / shares shares
Unrecognized Compensation Costs Not yet Recognized, Net of Estimated Forfeitures
Total unrecognized compensation cost, net of estimated forfeitures related to unvested RSUs \| $	$ 67,519
Weighted average period to recognize unrecognized compensation cost	2 years 10 days
RSUs Outstanding Rollforward, Units
RSU Balance at the beginning of the period \| shares	1,813
RSUs granted \| shares	638
RSUs vested \| shares	(688)
RSUs forfeited \| shares	(80)
RSU Balance at the end of the period \| shares	1,683
RSUs expected to vest at the end of the period \| shares	1,553
RSUs Outstanding, Weighted average grant date fair value
RSU Balance at the beginning of the period \| $ / shares	$ 53.78
RSUs granted \| $ / shares	99.48
RSUs vested \| $ / shares	49.43
RSUs forfeited \| $ / shares	57.65
RSU Balance at the end of the period \| $ / shares	73.21
RSUs expected to vest at the end of the period \| $ / shares	$ 72.66
Maximum
Vesting period
Vesting period	4 years

Benefit Plans - ESPP Information (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Equity Incentive Plans
Compensation expense	$ 12,770	$ 10,099	$ 24,832	$ 19,524
Employee stock purchase plan shares
Equity Incentive Plans
Percentage of employee compensation, maximum	10.00%		10.00%
Percentage of fair market value as a purchase price			85.00%
Maximum value of purchase per employee			$ 25
Number of shares per employee, maximum			2
Period during which shares can be purchased			1 year
Number of shares of common stock reserved for issuance	950		950
Potential number of additional shares reserved for issuance each year			400
Potential number of additional shares reserved for issuance each year (as percent)			0.75%
Number of shares issued			45
Compensation expense	$ 715	$ 446	$ 1,377	$ 885
Valuation assumptions:
Expected dividend yield			0.00%	0.00%
Expected term (years)			6 months	6 months
Employee stock purchase plan shares \| Minimum
Valuation assumptions:
Expected volatility			38.60%	33.50%
Risk-free interest rate			1.58%	2.10%
Employee stock purchase plan shares \| Maximum
Equity Incentive Plans
Offering period			27 months
Valuation assumptions:
Expected volatility			43.30%	38.30%
Risk-free interest rate			2.44%	2.48%

Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended			6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Dec. 31, 2019	Dec. 31, 2018	Aug. 31, 2018
Anti-dilutive securities excluded from diluted per share calculation
Anti-dilutive securities excluded	18	42		631	704
Numerator:
Net income	$ 5,467	$ 5,704		$ 19,373	$ 15,556
Weighted-average shares used in computing net income per share:
Basic (in shares)	53,542	52,842		53,415	52,853
Weighted-average effect of potentially dilutive shares:
Employee stock options and restricted stock units	2,284	2,239		2,277	2,379
Diluted (in shares)	55,826	55,081		55,692	55,232
Net income per share:
Basic (in dollars per share)	$ 0.10	$ 0.11		$ 0.36	$ 0.29
Diluted (in dollars per share)	$ 0.10	$ 0.10		$ 0.35	$ 0.28
Stock Repurchase Program
Repurchases of common shares			$ 34,991		$ 34,991
Maximum
Stock Repurchase Program
Maximum value of issued and outstanding common stock eligible for repurchase under the stock repurchase program						$ 35,000
Restricted stock units
Anti-dilutive securities excluded from diluted per share calculation
Anti-dilutive securities excluded	3	25		616	687
Employee stock purchase plan shares
Anti-dilutive securities excluded from diluted per share calculation
Anti-dilutive securities excluded	15	17		15	17
Common Stock
Stock Repurchase Program
Repurchases of common shares (in shares)			442		442

Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Dec. 31, 2019	Jun. 30, 2019
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	53,573	53,075
Common Stock, shares outstanding	53,573	53,075

Revenue - Performance Obligations (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Remaining Performance Obligations
Minimum value of unsatisfied performance obligations on term-based contracts	$ 42,966
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01
Remaining Performance Obligations
Remaining performance obligation period	24 months

Debt (Details) - Five-year revolving credit agreement - Senior secured debt - USD ($) $ in Thousands	1 Months Ended	6 Months Ended
	Jul. 31, 2019	Dec. 31, 2019
Debt
Term of credit agreement	5 years
Maximum borrowing capacity	$ 250,000
Maximum borrowing capacity, subject to additional lender commitments and satisfaction of other requirements	$ 375,000
Amount drawn on revolving line of credit		$ 0
Minimum
Debt
Interest coverage ratio	3.00
Maximum
Debt
Net total leverage ratio	4.00
Senior secured leverage ratio	3.50
LIBOR \| Minimum
Debt
Margin on base rate	0.875%
LIBOR \| Maximum
Debt
Margin on base rate	1.375%
Adjusted base rate \| Minimum
Debt
Margin on base rate	0.00%
Adjusted base rate \| Maximum
Debt
Margin on base rate	0.375%

Benefit Plans - 401(k) Plan (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Benefit Plans
401(k) Plan Matching contributions by the Company as percentage of employees' contributions			50.00%
401(k) Plan Maximum contributions by the Company as percentage of employees' gross pay			8.00%
401(k) Plan contributions	$ 1,768	$ 1,140	$ 3,771	$ 2,534

Income Taxes (Details)	3 Months Ended		6 Months Ended
Income Taxes (Details)	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Income Taxes
Effective tax rate for the period (as a percent)	14.60%	22.60%	(50.50%)	(36.20%)
U.S. federal income tax rate (as a percent)	21.00%	21.00%	21.00%	21.00%

Summary of Significant Accounting Policies - Adjustments for Adoption (Details) - USD ($) $ in Thousands		3 Months Ended	6 Months Ended
	Jul. 01, 2019	Dec. 31, 2019	Dec. 31, 2019
Recently adopted accounting standards
Operating lease right-of-use assets		$ 51,659	$ 51,659
Operating lease liabilities		84,623	84,623
Topic 842
Recently adopted accounting standards
Change in Accounting Principle, Accounting Standards Update, Adopted [true false]	true
Change in Accounting Principle, Accounting Standards Update, Transition Option Elected [Fixed List]	Modified Retrospective
Practical expedients package adopted	true
Practical expedient single lease component adopted	true
Operating lease right-of-use assets	$ 52,083
Operating lease liabilities	83,852
Deferred rent adjustments included in net ROU assets	$ 31,769
Impact of adoption on unaudited consolidated statements of operations and comprehensive income or the unaudited statement of cash flows		$ 0	$ 0

Revenue - Disaggregation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Revenue - Disaggregation (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Revenue
Period of term arrangements not cancellable by client			2 years
Disaggregation of revenue
Recurring and other revenue	$ 127,980	$ 102,739	$ 249,853	$ 199,741
Maximum
Revenue
Period of notice to cancel by client			60 days
Recognition period of nonrefundable upfront implementation fees			24 months
Recurring fees
Disaggregation of revenue
Recurring and other revenue	123,562	100,275	$ 241,339	196,036
Implementation services and other
Disaggregation of revenue
Recurring and other revenue	$ 4,418	$ 2,464	$ 8,514	$ 3,705

Corporate Investments and Funds Held For Clients - Maturities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Expected maturities of available-for-sale securities, amortized cost
One year or less	$ 232,303
One year to two years	28,583
Total available-for-sale securities	260,886	$ 130,665
Expected maturities of available-for-sale securities, fair value
One year or less	232,346
One year to two years	28,652
Total available-for-sale securities	$ 260,998	$ 130,824

Leases - Operating lease ROU assets and operating lease liabilities (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Operating leases:
Operating lease right-of-use assets	$ 51,659
Accrued expenses	7,694
Long-term operating lease liabilities	$ 76,929
Weighted-average remaining lease term (years)	10 years 6 months 21 days
Weighted-average discount rate	3.84%

Leases - Future maturities (Details) $ in Thousands	6 Months Ended
Leases - Future maturities (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Undiscounted cash flows for future maturities of operating lease liabilities and the reconciliation to the balance of operating lease liabilities
Remainder of fiscal 2020	$ 5,378
Fiscal 2021	10,839
Fiscal 2022	9,574
Fiscal 2023	9,227
Fiscal 2024	9,209
Thereafter	60,026
Total undiscounted cash flows	104,253
Less: Present value discount	(19,630)
Total operating lease liabilities	84,623
Amount of undiscounted future minimum lease payments excluded from total for operating lease liabilities that had not yet commenced	$ 546
Maximum
Undiscounted cash flows for future maturities of operating lease liabilities and the reconciliation to the balance of operating lease liabilities
Operating lease term for leases not yet commenced	5 years 8 months 1 day

Leases - Future minimum lease payments under Topic 840 (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Future minimum lease payments under Topic 840
Fiscal 2020	$ 10,449
Fiscal 2021	11,150
Fiscal 2022	9,500
Fiscal 2023	8,840
Fiscal 2024	8,838
Thereafter	59,401
Total minimum lease payments	$ 108,178

Benefit Plans - General Information (Details) shares in Thousands	6 Months Ended
	Dec. 31, 2019 shares
Equity Incentive Plans
Equity Incentive Plans
Number of shares of common stock reserved for issuance	12,643
Number of shares allocated but not yet issued that are subject to outstanding options or awards	3,185
2008 Plan
Equity Incentive Plans
Awards issued (in shares)	0
Awards issuable (in shares)	0
2014 Plan
Equity Incentive Plans
Potential number of additional shares available for grant each year (as a percent)	4.50%

Benefit Plans - Incentive Plans Activity (Details) - Equity Incentive Plans shares in Thousands	6 Months Ended
	Dec. 31, 2019 shares
Shares Available for Grant
Balance at the beginning of the period	9,759
RSUs granted	(638)
Shares withheld in settlement of taxes and/or exercise price	258
Forfeitures	80
Shares removed	(1)
Balance at the end of the period	9,458