0001104659-15-076628 | 10-Q | XBRL Viewer

Document and Entity Information - shares	3 Months Ended
Sep. 30, 2015	Oct. 30, 2015
Document and Entity Information
Entity Registrant Name	Paylocity Holding Corp
Entity Central Index Key	0001591698
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		50,835,160
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1

Unaudited Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Current assets:
Cash and cash equivalents	$ 78,691	$ 81,258
Accounts receivable, net	1,328	1,115
Prepaid expenses and other	5,051	4,416
Deferred income tax assets, net	389	775
Total current assets before funds held for clients	85,459	87,564
Funds held for clients	542,612	591,219
Total current assets	628,071	678,783
Long-term prepaid expenses	409	403
Capitalized internal-use software, net	8,724	7,357
Property and equipment, net	17,195	16,061
Intangible assets, net	11,561	11,941
Goodwill	6,003	6,003
Total assets	671,963	720,548
Current liabilities:
Accounts payable	1,973	1,327
Consideration related to acquisitions	300	511
Accrued expenses	16,855	16,430
Total current liabilities before client fund obligations	19,128	18,268
Client fund obligations	542,612	591,219
Total current liabilities	561,740	609,487
Deferred rent	3,259	2,607
Deferred income tax liabilities, net	572	874
Total liabilities	565,571	612,968
Stockholders' equity
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2015 and September 30, 2015
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2015 and September 30, 2015; 50,703 shares issued and outstanding at June 30, 2015 and 50,833 shares issued and outstanding at September 30, 2015	51	51
Additional paid-in capital	157,919	155,672
Accumulated deficit	(51,578)	(48,143)
Total stockholders' equity	106,392	107,580
Total liabilities and stockholders' equity	$ 671,963	$ 720,548

Unaudited Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Sep. 30, 2015	Jun. 30, 2015
Unaudited 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	50,833	50,703
Common Stock, shares outstanding	50,833	50,703

Unaudited Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Revenues
Recurring fees	$ 42,363	$ 29,142
Interest income on funds held for clients	528	363
Total recurring revenues	42,891	29,505
Implementation services and other	2,217	1,604
Total revenues	45,108	31,109
Cost of revenues
Recurring revenues	13,157	10,057
Implementation services and other	7,038	5,395
Total cost of revenues	20,195	15,452
Gross profit	24,913	15,657
Operating expenses
Sales and marketing	12,450	9,078
Research and development	5,429	4,027
General and administrative	10,451	7,448
Total operating expenses	28,330	20,553
Operating loss	(3,417)	(4,896)
Other income	83	49
Loss before income taxes	(3,334)	(4,847)
Income tax expense	101	28
Net loss	$ (3,435)	$ (4,875)
Net loss per share:
Basic (in dollars per share)	$ (0.07)	$ (0.10)
Diluted (in dollars per share)	$ (0.07)	$ (0.10)
Weighted average share used in computing net loss per share:
Basic (in shares)	50,744	49,566
Diluted (in shares)	50,744	49,566

Unaudited Consolidated Statement of Changes in Stockholders' Equity - 3 months ended Sep. 30, 2015 - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Total
Balance at Jun. 30, 2015	$ 51	$ 155,672	$ (48,143)	$ 107,580
Balance (in shares) at Jun. 30, 2015	50,703			50,703
Increase (Decrease) in Stockholders' Equity
Stock-based compensation expense		3,978		$ 3,978
Stock options exercised		688		688
Stock options exercised (in shares)	115
Issuance of common stock upon vesting of restricted stock units (in shares)	88
Net settlement for taxes and/or exercise price related to equity awards		(2,419)		(2,419)
Net settlement for taxes and/or exercise price related to equity awards (in shares)	(73)
Net loss			(3,435)	(3,435)
Balance at Sep. 30, 2015	$ 51	$ 157,919	$ (51,578)	$ 106,392
Balance (in shares) at Sep. 30, 2015	50,833			50,833

Unaudited Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash flows from operating activities:
Net loss	$ (3,435)	$ (4,875)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation	3,712	3,283
Depreciation and amortization	2,719	1,931
Deferred income tax expense	84	20
Provision for doubtful accounts	25	42
Loss on disposal of equipment	66	30
Changes in operating assets and liabilities:
Accounts receivable	(238)	(85)
Prepaid expenses	(639)	(368)
Trade accounts payable	133	(245)
Accrued expenses	551	67
Net cash provided by (used in) operating activities	2,978	(200)
Cash flows from investing activities:
Capitalized internal-use software costs	(2,043)	(912)
Purchases of property and equipment	(1,588)	(2,499)
Payments for acquisitions	(183)	(2,385)
Net change in funds held for clients	48,607	(14,964)
Net cash provided by (used in) investing activities	44,793	(20,760)
Cash flows from financing activities:
Net change in client funds obligation	(48,607)	14,964
Payments on initial public offering costs		(75)
Proceeds from exercise of stock options	137	66
Taxes paid related to net share settlement of equity awards	(1,868)
Net cash provided by (used in) financing activities	(50,338)	14,955
Net Change in Cash and Cash Equivalents	(2,567)	(6,005)
Cash and Cash Equivalents-Beginning of Period	81,258	78,848
Cash and Cash Equivalents-End of Period	78,691	72,843
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Build-out allowance received from landlord	375
Purchases of property and equipment, accrued but not paid	845	488
Supplemental disclosure of cash flow information
Cash paid for income taxes	$ 16	$ 2

Summary of Significant Accounting Policies	3 Months Ended
Summary of Significant Accounting Policies	Sep. 30, 2015
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	(2) Summary of Significant Accounting Policies (a) 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 subsidiary. 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. Significant items subject to such estimates and assumptions include the allowance for doubtful accounts, internal-use software, valuation and useful lives of long-lived assets, definite-lived intangibles, goodwill, stock-based compensation, valuation of net deferred income tax assets and the best estimate of selling price for revenue recognition purposes. 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. (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 results of operations, financial position, changes in stockholders’ equity and cash flows. The results of operations for the three-months ended September 30, 2015 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, 2015 included in the Company’s Annual Report on Form 10-K filed with the SEC on August 14, 2015. (c) Income Taxes Differences in the normal relationship between the income tax expense and pre-tax loss materially result from the existence of a valuation allowance recorded against the preponderance of the net deferred tax assets. (d) Stock-Based Compensation The Company recognizes all employee stock-based compensation as a cost in the financial statements. Equity-classified awards, including those under the 2014 Employee Stock Purchase Plan (“ESPP”), are measured at the grant date fair value of the award and expense is recognized, net of assumed forfeitures, on a straight-line basis over the requisite service period for each separately vesting portion of the award. The Company estimates grant date fair value using the Black-Scholes option-pricing model and periodically updates the assumed forfeiture rates for actual experience over the option vesting term or the term of the ESPP purchase period. (e) Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 supersedes a majority of existing revenue recognition guidance under US GAAP, and requires companies to recognize revenue when it transfers goods or services to a customer in an amount that reflects the consideration to which a company expects to be entitled. Companies may need to apply more judgment and estimation techniques or methods while recognizing revenue, which could result in additional disclosures to the financial statements. Topic 606 allows for either a “retrospective” or “cumulative effect” transition method. The original standard was effective for fiscal years beginning after December 15, 2016. In July 2015, the FASB approved a one-year deferral of this standard, with a new effective date for fiscal years beginning after December 15, 2017 with early adoption permitted as of the original effective date. The Company is currently assessing the potential effects of these changes to its consolidated financial statements and is evaluating the adoption method and timing. 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 recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption.

Balance Sheet Information

3 Months Ended

Sep. 30, 2015

Balance Sheet Information

Balance Sheet Information

(3) 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, 2015	$	149
Charged to expense	25
Write-offs	(28		)

Balance at September 30, 2015	$	146

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

	June 30,			September 30,
	2015			2015
Capitalized internal-use software	$	24,733		$	27,042
Accumulated amortization	(17,376		)	(18,318		)

Capitalized internal-use software, net	$	7,357		$	8,724

Amortization of capitalized internal-use software costs is included in Cost of Revenues-Recurring Revenues and amounted to $593 and $942 for the three months ended September 30, 2014 and 2015, respectively.

Property and equipment consist of the following:

	June 30,			September 30,
	2015			2015
Office equipment	$	1,875		$	2,090
Computer equipment	11,783			13,029
Furniture and fixtures	2,423			2,526
Software	5,218			5,435
Leasehold improvements	6,639			7,130
Time clocks rented by clients	3,217			3,318

	31,155			33,528
Accumulated depreciation	(15,094		)	(16,333		)

Property and equipment, net	$	16,061		$	17,195

Depreciation expense amounted to $1,148 and $1,397 for the three months ended September 30, 2014 and 2015, respectively.

Intangible assets consist of the following:

	June 30, 2015			September 30, 2015			Weighted Average Useful Life
Client relationships	$	12,580		$	12,580		9 years
Non-solicitation agreements	360			360			2-3 years

Total	12,940			12,940
Accumulated amortization	(999		)	(1,379		)

Intangible assets, net	$	11,941		$	11,561

Amortization expense for acquired intangible assets was $190 and $380 for the three months ended September 30, 2014 and 2015, respectively.

The components of accrued expenses were as follows:

	June 30,		September 30,
	2015		2015
Accrued payroll and personnel costs	$	14,275	$	13,973
Current portion of deferred rent	727		281
Other	1,428		2,601

Total accrued expenses	$	16,430	$	16,855

Benefit Plans

3 Months Ended

Sep. 30, 2015

Benefit Plans

Benefit Plans

(5) 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 will increase automatically each calendar year, continuing through and including January 1, 2024. The number of shares added each year will be equal to the lesser of (a) four and five tenths percent (4.5%) of the number of shares of common stock of the Company issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the Company’s board of directors.

As of September 30, 2015, the Company had 8,670 shares allocated to the plans, of which 4,961 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 during the quarter in the number of shares available for grant under our equity incentive plans:

	Number of Shares
Available for grant at July 1, 2015	4,490
RSUs granted	(716	)
Options granted	(149	)
Shares withheld in settlement of taxes and exercise price	73
Forfeitures	43
Shares removed	(32	)

Available for grant at September 30, 2015	3,709

Shares removed represents forfeitures of shares and shares withheld in settlement of taxes and 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:

	Three months ended September 30,
	2014		2015
Cost of revenue – recurring	$	348	$	357
Cost of revenue – non-recurring	291		270
Sales and marketing	884		913
Research and development	535		569
General and administrative	1,225		1,603

Total stock-based compensation	$	3,283	$	3,712

In addition, the Company capitalized $162 and $266 of stock compensation costs in its internal use software in the three months ended September 30, 2014 and 2015, 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 typically vest ratably over a three or four year period and expire 10 years from the grant date. Stock-based compensation expense for the fair value of the options at their grant date is recognized ratably over the vesting schedule for each separately vesting portion of the award.

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

The following table summarizes the assumptions used for estimating the fair value of stock options granted for the three months ended September 30:

	Period ended September 30,
	2014		2015
Valuation assumptions:
Expected dividend yield	0	%	0	%
Expected volatility	43.9	%	34.0	%
Expected term (years)	6.25		6.25
Risk-free interest rate	1.91	%	1.83	%

The table below presents stock option activity during the three months ended September 30, 2015:

	Outstanding Options
	Number of shares		Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Balance at July 1, 2015	3,956		$	10.96	7.63	$	98,434
Options granted	149		35.28
Options forfeited	(31	)	17.33
Options exercised	(115	)	5.98

Balance at September 30, 2015	3,959		$	11.98	7.49	$	72,102

Options exercisable at September 30, 2015	1,978		$	7.02	6.62	$	45,436

Options vested and expected to vest at September 30, 2015	3,837		$	11.72	7.46	$	70,790

The weighted average grant date fair value of options granted during the three-month period ended September 30, 2014 and 2015 was $11.15 and $12.92, respectively. The total intrinsic value of options exercised during the three month period ended September 30, 2014 and 2015 was $224 and $2,935, respectively. At September 30, 2015, there was $6,200 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock option granted under the Plan. That cost is expected to be recognized over a weighted average period of 1.7 years.

The Company may also grant RSUs under the 2014 Plan with terms determined at the discretion of the Compensation Committee of the Company’s Board of Directors. RSUs generally vest over three or four years following the grant date. Certain RSU awards have time-based vesting conditions while other RSU awards are based on attainment of certain performance benchmarks. The following table represents restricted stock unit activity during the three months ended September 30, 2015:

	Units		Weighted average grant date fair value
RSU balance at July 1, 2015	386		$	24.98
RSUs granted	716		35.28
RSUs vested	(88	)	24.75
RSUs cancelled/forfeited	(12	)	30.15

RSU balance at September 30, 2015	1,002		$	32.34

RSUs expected to vest at September 30, 2015	859		$	32.14

At September 30, 2015, there was $23,568 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested restricted stock awards granted under the Plan. That cost is expected to be recognized over a weighted average period of 2.5 years.

(b) Employee Stock Purchase Plan

The Company’s 2014 Employee Stock Purchase Plan (“ESPP”) was adopted by the Company’s board of directors and approved by the stockholders on February 6, 2014 and was effective upon completion of the Company’s initial public offering.

Under the Company’s 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 September 30, 2015, a total of 1,053 common stock were reserved for future issuances under the ESPP. The number of shares of common stock reserved for issuance under the ESPP will increase automatically each calendar year, continuing through and including January 1, 2024. The number of shares added each year will 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 recorded compensation expense attributable to the ESPP of $130 and $252 for the three-month ended September 30, 2014 and 2015, 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:

	Period ended September 30,
	2014		2015
Valuation assumptions:
Expected dividend yield	0	%	0	%
Expected volatility	41.7	%	48.4	%
Expected term (years)	0.3		0.5
Risk-free interest rate	0.04	%	0.11	%

The Company maintains a 401(k) plan with a safe harbor matching provision that covers all eligible employees. The Company matches 50% of the employees’ contributions up to 6% of their gross pay. Contributions were $382 and $580 for the three-month period ended September 30, 2014 and 2015, respectively.

Loss Per Share

3 Months Ended

Sep. 30, 2015

Loss Per Share

Loss Per Share

(6) Loss Per Share

Basic net loss per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted net loss 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 dilutive effect of outstanding stock options is reflected in diluted earnings per share by application of the treasury stock method. The following table presents the calculation of basic and diluted net loss per share:

	Three months ended September 30,
	2014			2015
Numerator:
Net loss	$	(4,875	)	$	(3,435	)

Denominator:
Weighted-average shares used in computing net loss per share:
Basic	49,566			50,744
Weighted-average effect of potentially dilutive shares:
Employee stock options, restricted stock units and employee stock purchase plan shares	—			—

Diluted	49,566			50,744

Net loss per share:
Basic	$	(0.10	)	$	(0.07	)
Diluted	$	(0.10	)	$	(0.07	)

The following table summarizes the outstanding employee stock options, restricted stock units, and shares purchasable via the employee stock purchase plan 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 September 30,
	2014	2015

Restricted stock units	480	1,002
Employee stock purchase plan shares	27	52
Employee stock options	4,600	3,959

Total	5,107	5,013

Summary of Significant Accounting Policies (Policies)	3 Months Ended
Summary of Significant Accounting Policies (Policies)	Sep. 30, 2015
Summary of Significant Accounting Policies
Consolidation and Use of Estimates	(a) 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 subsidiary. 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. Significant items subject to such estimates and assumptions include the allowance for doubtful accounts, internal-use software, valuation and useful lives of long-lived assets, definite-lived intangibles, goodwill, stock-based compensation, valuation of net deferred income tax assets and the best estimate of selling price for revenue recognition purposes. 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.
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 results of operations, financial position, changes in stockholders’ equity and cash flows. The results of operations for the three-months ended September 30, 2015 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, 2015 included in the Company’s Annual Report on Form 10-K filed with the SEC on August 14, 2015.
Income Taxes	(c) Income Taxes Differences in the normal relationship between the income tax expense and pre-tax loss materially result from the existence of a valuation allowance recorded against the preponderance of the net deferred tax assets.
Stock-Based Compensation	(d) Stock-Based Compensation The Company recognizes all employee stock-based compensation as a cost in the financial statements. Equity-classified awards, including those under the 2014 Employee Stock Purchase Plan (“ESPP”), are measured at the grant date fair value of the award and expense is recognized, net of assumed forfeitures, on a straight-line basis over the requisite service period for each separately vesting portion of the award. The Company estimates grant date fair value using the Black-Scholes option-pricing model and periodically updates the assumed forfeiture rates for actual experience over the option vesting term or the term of the ESPP purchase period.
Recently Issued Accounting Standards	(e) Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 supersedes a majority of existing revenue recognition guidance under US GAAP, and requires companies to recognize revenue when it transfers goods or services to a customer in an amount that reflects the consideration to which a company expects to be entitled. Companies may need to apply more judgment and estimation techniques or methods while recognizing revenue, which could result in additional disclosures to the financial statements. Topic 606 allows for either a “retrospective” or “cumulative effect” transition method. The original standard was effective for fiscal years beginning after December 15, 2016. In July 2015, the FASB approved a one-year deferral of this standard, with a new effective date for fiscal years beginning after December 15, 2017 with early adoption permitted as of the original effective date. The Company is currently assessing the potential effects of these changes to its consolidated financial statements and is evaluating the adoption method and timing. 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 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 + Details

Balance Sheet Information (Tables)

3 Months Ended

Sep. 30, 2015

Balance Sheet Information

Schedule of activity in allowance for doubtful accounts

Balance at June 30, 2015	$	149
Charged to expense	25
Write-offs	(28		)

Balance at September 30, 2015	$	146

Schedule of capitalized internal-use software and accumulated amortization

	June 30,			September 30,
	2015			2015
Capitalized internal-use software	$	24,733		$	27,042
Accumulated amortization	(17,376		)	(18,318		)

Capitalized internal-use software, net	$	7,357		$	8,724

Schedule of property and equipment

	June 30,			September 30,
	2015			2015
Office equipment	$	1,875		$	2,090
Computer equipment	11,783			13,029
Furniture and fixtures	2,423			2,526
Software	5,218			5,435
Leasehold improvements	6,639			7,130
Time clocks rented by clients	3,217			3,318

	31,155			33,528
Accumulated depreciation	(15,094		)	(16,333		)

Property and equipment, net	$	16,061		$	17,195

Schedule of intangible assets

	June 30, 2015			September 30, 2015			Weighted Average Useful Life
Client relationships	$	12,580		$	12,580		9 years
Non-solicitation agreements	360			360			2-3 years

Total	12,940			12,940
Accumulated amortization	(999		)	(1,379		)

Intangible assets, net	$	11,941		$	11,561

Schedule of components of accrued expenses

	June 30,		September 30,
	2015		2015
Accrued payroll and personnel costs	$	14,275	$	13,973
Current portion of deferred rent	727		281
Other	1,428		2,601

Total accrued expenses	$	16,430	$	16,855

Benefit Plans (Tables)

3 Months Ended

Sep. 30, 2015

Benefit Plans

Summary of shares available for grant under our equity incentive plans

	Number of Shares
Available for grant at July 1, 2015	4,490
RSUs granted	(716	)
Options granted	(149	)
Shares withheld in settlement of taxes and exercise price	73
Forfeitures	43
Shares removed	(32	)

Available for grant at September 30, 2015	3,709

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

	Three months ended September 30,
	2014		2015
Cost of revenue – recurring	$	348	$	357
Cost of revenue – non-recurring	291		270
Sales and marketing	884		913
Research and development	535		569
General and administrative	1,225		1,603

Total stock-based compensation	$	3,283	$	3,712

Summary of the assumptions used for estimating the fair value of stock options granted

	Period ended September 30,
	2014		2015
Valuation assumptions:
Expected dividend yield	0	%	0	%
Expected volatility	43.9	%	34.0	%
Expected term (years)	6.25		6.25
Risk-free interest rate	1.91	%	1.83	%

Schedule of stock option activity

	Outstanding Options
	Number of shares		Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Balance at July 1, 2015	3,956		$	10.96	7.63	$	98,434
Options granted	149		35.28
Options forfeited	(31	)	17.33
Options exercised	(115	)	5.98

Balance at September 30, 2015	3,959		$	11.98	7.49	$	72,102

Options exercisable at September 30, 2015	1,978		$	7.02	6.62	$	45,436

Options vested and expected to vest at September 30, 2015	3,837		$	11.72	7.46	$	70,790

Schedule of Restricted stock unit activity

	Units		Weighted average grant date fair value
RSU balance at July 1, 2015	386		$	24.98
RSUs granted	716		35.28
RSUs vested	(88	)	24.75
RSUs cancelled/forfeited	(12	)	30.15

RSU balance at September 30, 2015	1,002		$	32.34

RSUs expected to vest at September 30, 2015	859		$	32.14

Schedule of estimated grant date fair value of ESPP offering period using weighted average assumptions

	Period ended September 30,
	2014		2015
Valuation assumptions:
Expected dividend yield	0	%	0	%
Expected volatility	41.7	%	48.4	%
Expected term (years)	0.3		0.5
Risk-free interest rate	0.04	%	0.11	%

Loss Per Share (Tables)

3 Months Ended

Sep. 30, 2015

Loss Per Share

Schedule of calculation of basic and diluted net loss per share

	Three months ended September 30,
	2014			2015
Numerator:
Net loss	$	(4,875	)	$	(3,435	)

Denominator:
Weighted-average shares used in computing net loss per share:
Basic	49,566			50,744
Weighted-average effect of potentially dilutive shares:
Employee stock options, restricted stock units and employee stock purchase plan shares	—			—

Diluted	49,566			50,744

Net loss per share:
Basic	$	(0.10	)	$	(0.07	)
Diluted	$	(0.10	)	$	(0.07	)

Summary of outstanding employee stock options, restricted stock units and employee stock purchase plan shares excluded from the diluted per share calculation because to include them would have been anti-dilutive

	Three months ended September 30,
	2014	2015

Restricted stock units	480	1,002
Employee stock purchase plan shares	27	52
Employee stock options	4,600	3,959

Total	5,107	5,013

Balance Sheet Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Jun. 30, 2015
Activity in allowance for doubtful accounts
Balance at beginning of period	$ 149
Charged to expense	25	$ 42
Write-offs	(28)
Balance at end of period	146
Capitalized internal-use software and accumulated amortization
Capitalized internal-use software	27,042		$ 24,733
Accumulated amortization	(18,318)		(17,376)
Capitalized internal-use software, net	8,724		7,357
Amortization of capitalized internal-use software costs	942	593
Property and equipment
Property and equipment, gross	33,528		31,155
Accumulated depreciation	(16,333)		(15,094)
Property and equipment, net	17,195		16,061
Depreciation expense	1,397	$ 1,148
Components of accrued expenses
Accrued payroll and personnel costs	13,973		14,275
Current portion of deferred rent	281		727
Other	2,601		1,428
Total accrued expenses	16,855		16,430
Office equipment
Property and equipment
Property and equipment, gross	2,090		1,875
Computer equipment
Property and equipment
Property and equipment, gross	13,029		11,783
Furniture and fixtures
Property and equipment
Property and equipment, gross	2,526		2,423
Software
Property and equipment
Property and equipment, gross	5,435		5,218
Leasehold improvements
Property and equipment
Property and equipment, gross	7,130		6,639
Time clocks rented by clients
Property and equipment
Property and equipment, gross	$ 3,318		$ 3,217

Benefit Plans (Details 4) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Jun. 30, 2015
Stock options
Valuation assumptions:
Expected dividend yield (as a percent)	0.00%	0.00%
Expected volatility (as a percent)	34.00%	43.90%
Expected term (years)	6 years 3 months	6 years 3 months
Risk-free interest rate (as a percent)	1.83%	1.91%
Shares Available for Grant
Options granted (in shares)	(149)
Forfeitures (in shares)	31
Number of shares
Balance at the beginning of the period (in shares)	3,956
Options granted (in shares)	149
Options forfeited (in shares)	(31)
Options exercised (in shares)	(115)
Balance at the end of the period (in shares)	3,959		3,956
Options exercisable at the end of the period (in shares)	1,978
Options vested and expected to vest at the end of the period (in shares)	3,837
Weighted average exercise price
Balance at the beginning of the period (in dollars per share)	$ 10.96
Options granted (in dollars per share)	35.28
Options forfeited (in dollars per share)	17.33
Options exercised (in dollars per share)	5.98
Balance at the end of the period (in dollars per share)	11.98		$ 10.96
Options exercisable at the end of the period (in dollars per share)	7.02
Options vested and expected to vest at the end of the period (in dollars per share)	$ 11.72
Weighted average remaining contractual term
Balance at the beginning of the period	7 years 5 months 27 days		7 years 7 months 17 days
Balance at the end of the period	7 years 5 months 27 days		7 years 7 months 17 days
Options exercisable at the end of the period	6 years 7 months 13 days
Options vested and expected to vest at the end of the period	7 years 5 months 16 days
Aggregate intrinsic value
Balance at the beginning of the period	$ 98,434
Options exercisable at the end of the period	45,436
Options vested and expected to vest at the end of the period	70,790
Balance at the end of the period (in dollars)	$ 72,102		$ 98,434
Weighted average grant date fair value of options granted (in dollars per share)	$ 12.92	$ 11.15
Total intrinsic value of options exercised	$ 2,935	$ 224
Total unrecognized compensation cost, net of estimated forfeitures	$ 6,200
Weighted average period to recognize unrecognized compensation cost	1 year 8 months 12 days
Stock options \| Minimum
Weighted average grant date fair value
Vesting period	3 years
Stock options \| Maximum
Weighted average grant date fair value
Vesting period	4 years
RSUs
Shares Available for Grant
RSU's granted (in shares)	(716)
Aggregate intrinsic value
Total unrecognized compensation cost, net of estimated forfeitures	$ 23,568
Weighted average period to recognize unrecognized compensation cost	2 years 6 months
Units
RSU Balance at the beginning of the period (in shares)	386
RSU's granted (in shares)	716
RSUs vested (in shares)	(88)
RSUs cancelled/forfeited (in shares)	(12)
RSU Balance at the end of the period (in shares)	1,002		386
RSUs expected to vest at the end of the period (in shares)	859
Weighted average grant date fair value
RSU Balance at the beginning of the period (in dollars per share)	$ 24.98
RSU's granted (in dollars per share)	35.28
RSUs vested (in dollars per share)	24.75
RSUs cancelled/forfeited (in dollars per share)	30.15
RSU Balance at the end of the period (in dollars per share)	32.34		$ 24.98
RSUs expected to vest at the end of the period (in dollars per share)	$ 32.14
RSUs \| Minimum
Weighted average grant date fair value
Vesting period	3 years
RSUs \| Maximum
Weighted average grant date fair value
Vesting period	4 years

Benefit Plans (Details 5) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended
	Feb. 06, 2014	Sep. 30, 2015	Sep. 30, 2014
Equity Incentive Plans
Compensation expense (in dollars)		$ 3,712	$ 3,283
Employee stock purchase plan shares
Equity Incentive Plans
Percentage of employee compensation, maximum	10.00%
Percentage of fair market value as a purchase price	85.00%
Value of purchase per employee, maximum	$ 25
Number of shares per employee, maximum	2
Number of periods during which shares can be purchased	1 year
Number of shares of common stock reserved for issuance		1,053
Potential number of shares reserved for issuance each year		400
Potential percentage of additional number of shares reserved for issuance each year		0.75%
Compensation expense (in dollars)		$ 252	$ 130
Valuation assumptions:
Expected dividend yield		0.00%	0.00%
Expected volatility		48.40%	41.70%
Expected term (years)		6 months	3 months 18 days
Risk-free interest rate		0.11%	0.04%
Employee stock purchase plan shares \| Maximum
Equity Incentive Plans
Offering period	27 months

Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Numerator:
Net loss	$ (3,435)	$ (4,875)
Weighted-average shares used in computing net loss per share:
Basic (in shares)	50,744	49,566
Weighted-average effect of potentially dilutive shares:
Employee stock options, restricted stock units and employee stock purchase plan shares	0	0
Diluted (in shares)	50,744	49,566
Net loss per share:
Basic (in dollars per share)	$ (0.07)	$ (0.10)
Diluted (in dollars per share)	$ (0.07)	$ (0.10)
Anti-dilutive securities excluded from diluted per share calculation
Total (in shares)	5,013	5,107
Employee stock options
Anti-dilutive securities excluded from diluted per share calculation
Total (in shares)	3,959	4,600
RSUs
Anti-dilutive securities excluded from diluted per share calculation
Total (in shares)	1,002	480
Employee stock purchase plan shares
Anti-dilutive securities excluded from diluted per share calculation
Total (in shares)	52	27

Organization and Description of Business	3 Months Ended
Organization and Description of Business	Sep. 30, 2015
Organization and Description of Business
Organization and Description of Business	(1) Organization and Description of Business Paylocity Holding Corporation (the “Company”), through its wholly owned subsidiary, Paylocity Corporation, is a cloud-based provider of payroll and human capital management software solutions for medium-sized organizations. Services are provided in a Software-as-a-Service (“SaaS”) delivery model utilizing the Company’s cloud-based platform. Payroll services include collection, remittance and reporting of payroll liabilities to the appropriate federal, state and local authorities. Secondary Offering In September 2015, the Company completed a secondary offering in which its existing shareholders sold 3,740 shares of common stock at a public offering price of $29.75 per share. The Company did not receive any proceeds from the sale of common stock by the existing shareholders. In October 2015, the underwriters for the Company’s secondary offering exercised their option to purchase 561 additional shares from certain shareholders of the Company as described in the final prospectus filed with the SEC on September 25, 2015. The Company did not receive any proceeds from the sale of common stock by the existing shareholders.

Fair Value Measurements	3 Months Ended
Fair Value Measurements	Sep. 30, 2015
Fair Value Measurements
Fair Value Measurements	(4) Fair Value Measurement The Company applies the fair value measurement and disclosure provisions of ASC 820, Fair Value Measurements and Disclosures, and ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:  Level 1—Quoted prices in active markets for identical assets and liabilities.  Level 2—Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.  Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. Substantially all of the Company’s assets that are measured at fair value on a recurring basis are measured using Level 1 inputs. The Company considers the recorded value of its financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, and accounts payable, to approximate the fair value of the respective assets and liabilities at June 30, 2015 and September 30, 2015 based upon the short-term nature of the assets and liabilities.

Income Taxes	3 Months Ended
Income Taxes	Sep. 30, 2015
Income Taxes
Income Taxes	(7) Income Taxes The Company’s quarterly provision for income taxes is based on an estimated annual income tax rate. The Company’s quarterly provision for income taxes also includes the tax impact of certain unusual or infrequently occurring items, if any, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. The Company recorded income tax expense of $28 and $101 for the three-month periods ended September 30, 2014 and 2015, respectively. The Company’s effective tax rate for the three months ended September 30, 2015 differs from statutory rates primarily due to the existence of a valuation allowance recorded against the preponderance of the net deferred tax assets. The Company’s effective tax rate for the three months ended September 30, 2014 differs from statutory rates primarily due to the existence of a valuation allowance recorded against the preponderance of the net deferred tax assets. The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and, therefore, the need for a valuation allowance on a quarterly basis. It established a valuation allowance on all of its net deferred tax assets except for deferred tax liabilities associated with indefinite-lived intangible assets during fiscal 2014, given that the Company determined that it was more likely than not that the Company would not recognize the benefits of its net operating loss carryforwards prior to their expiration. The Company has continued to carry the valuation allowance during fiscal 2015 and for the three months ending September 30, 2015. As of September 30, 2015, the Company had no unrecognized tax benefits.

Organization and Description of Business (Detail) - Secondary Offering - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	1 Months Ended
	Oct. 31, 2015	Sep. 30, 2015
Secondary offering
Public offering price (in dollar per share)		$ 29.75
Existing shareholders
Secondary offering
Number of shares of common stock sold		3,740
Proceeds received from public offering		$ 0
Subsequent event
Secondary offering
Secondary offering exercised by underwriters (in shares)	561
Proceeds received from public offering	$ 0

Benefit Plans (Details 6) - USD ($) $ in Thousands	3 Months Ended
Benefit Plans (Details 6) - USD ($) $ in Thousands	Sep. 30, 2015	Sep. 30, 2014
Benefit Plans
Matching contributions by the Company as percentage of employees' contributions	50.00%
Maximum contributions as percentage of employees' gross pay	6.00%
Contributions	$ 580	$ 382

Benefit Plans (Details) shares in Thousands	3 Months Ended
Benefit Plans (Details) shares in Thousands	Sep. 30, 2015 shares
Stock options
Equity Incentive Plans
Expiration period	10 years
Stock options \| Minimum
Equity Incentive Plans
Vesting period	3 years
Stock options \| Maximum
Equity Incentive Plans
Vesting period	4 years
2008 Plan
Equity Incentive Plans
Awards issued (in shares)	0
2014 Plan
Equity Incentive Plans
Potential additional shares available for grant (as a percent)	4.50%
Equity Incentive Plans
Equity Incentive Plans
Number of shares of common stock reserved for issuance	8,670
Outstanding options or awards	4,961

Benefit Plans (Details 3) - USD ($) $ in Thousands	3 Months Ended
Benefit Plans (Details 3) - USD ($) $ in Thousands	Sep. 30, 2015	Sep. 30, 2014
Benefit Plans
Total stock-based compensation	$ 3,712	$ 3,283
Stock-based compensation costs capitalized	266	162
Cost of revenue - recurring
Benefit Plans
Total stock-based compensation	357	348
Cost of revenue - non-recurring
Benefit Plans
Total stock-based compensation	270	291
Sales and marketing
Benefit Plans
Total stock-based compensation	913	884
Research and development
Benefit Plans
Total stock-based compensation	569	535
General and administrative
Benefit Plans
Total stock-based compensation	$ 1,603	$ 1,225

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Sep. 30, 2014
Income Taxes
Income tax expense	$ 101	$ 28
Unrecognized tax benefits	$ 0