0001558370-18-000554 | 10-Q | XBRL Viewer

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Dec. 31, 2017	Feb. 02, 2018
Document and Entity Information
Entity Registrant Name	Paylocity Holding Corp
Entity Central Index Key	0001591698
Document Type	10-Q
Document Period End Date	Dec. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		52,603,746
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2017	Jun. 30, 2017
Current assets:
Cash and cash equivalents	$ 111,027	$ 103,468
Accounts receivable, net	2,739	2,040
Prepaid expenses and other	7,456	14,879
Total current assets before funds held for clients	121,222	120,387
Funds held for clients	1,345,702	942,459
Total current assets	1,466,924	1,062,846
Long-term prepaid expenses	1,072	1,535
Capitalized internal-use software, net	18,786	17,394
Property and equipment, net	48,354	40,756
Intangible assets, net	8,189	8,907
Goodwill	6,003	6,003
Total assets	1,549,328	1,137,441
Current liabilities:
Accounts payable	1,794	2,046
Accrued expenses	29,128	30,301
Total current liabilities before client fund obligations	30,922	32,347
Client fund obligations	1,345,702	942,459
Total current liabilities	1,376,624	974,806
Deferred rent	14,243	14,621
Deferred income tax liabilities, net	308	401
Total liabilities	1,391,175	989,828
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2017 and December 31, 2017
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2017 and December 31, 2017; 51,738 shares issued and outstanding at June 30, 2017 and 52,590 shares issued and outstanding at December 31, 2017	53	52
Additional paid-in capital	202,512	192,837
Accumulated deficit	(44,302)	(45,276)
Accumulated Other Comprehensive Income (Loss), Net of Tax	(110)
Total stockholders' equity	158,153	147,613
Total liabilities and stockholders' equity	$ 1,549,328	$ 1,137,441

Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Dec. 31, 2017	Jun. 30, 2017
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	52,590	51,738
Common Stock, shares outstanding	52,590	51,738

Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Revenues:
Recurring fees	$ 81,292	$ 65,347	$ 158,586	$ 127,267
Interest income on funds held for clients	1,783	731	3,400	1,448
Total recurring revenues	83,075	66,078	161,986	128,715
Implementation services and other	2,929	2,576	5,518	4,961
Total revenues	86,004	68,654	167,504	133,676
Cost of revenues:
Recurring revenues	25,638	20,716	49,729	39,819
Implementation services and other	11,202	9,667	22,070	18,923
Total cost of revenues	36,840	30,383	71,799	58,742
Gross profit	49,164	38,271	95,705	74,934
Operating expenses:
Sales and marketing	21,598	17,735	42,778	35,746
Research and development	9,274	7,222	18,169	14,523
General and administrative	18,159	14,957	34,110	28,815
Total operating expenses	49,031	39,914	95,057	79,084
Operating income (loss)	133	(1,643)	648	(4,150)
Other income	141	4	250	43
Income (loss) before income taxes	274	(1,639)	898	(4,107)
Income tax expense (benefit)	(157)	32	(76)	132
Net income (loss)	431	(1,671)	974	(4,239)
Other comprehensive loss, net of tax
Unrealized losses on securities, net of tax	(105)		(110)
Total other comprehensive loss, net of tax	(105)		(110)
Comprehensive income (loss)	$ 326	$ (1,671)	$ 864	$ (4,239)
Net income (loss) per share:
Basic (in dollars per share)	$ 0.01	$ (0.03)	$ 0.02	$ (0.08)
Diluted (in dollars per share)	$ 0.01	$ (0.03)	$ 0.02	$ (0.08)
Weighted-average shares used in computing net income (loss) per share:
Basic (in shares)	52,502	51,384	52,197	51,308
Diluted (in shares)	54,818	51,384	54,639	51,308

Consolidated Statement of Changes in Stockholders' Equity - 6 months ended Dec. 31, 2017 - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total
Balance at Jun. 30, 2017	$ 52	$ 192,837	$ (45,276)		$ 147,613
Balance (in shares) at Jun. 30, 2017	51,738				51,738
Increase (Decrease) in Stockholders' Equity
Stock-based compensation expense		15,328			$ 15,328
Stock options exercised	$ 1	5,739			5,740
Stock options exercised (in shares)	669
Issuance of common stock upon vesting of restricted stock units (in shares)	414
Issuance of common stock under employee stock purchase plan		2,045			2,045
Issuance of common stock under employee stock purchase plan (in shares)	53
Net settlement for taxes and/or exercise price related to equity awards		(13,437)			(13,437)
Net settlement for taxes and/or exercise price related to equity awards (in shares)	(284)
Unrealized losses on securities, net of tax				$ (110)	(110)
Net income			974		974
Balance at Dec. 31, 2017	$ 53	$ 202,512	$ (44,302)	$ (110)	$ 158,153
Balance (in shares) at Dec. 31, 2017	52,590				52,590

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Cash flows from operating activities:
Net income (loss)	$ 974	$ (4,239)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation expense	14,424	12,448
Depreciation and amortization expense	13,438	9,103
Deferred income tax expense (benefit)	(93)	102
Provision for doubtful accounts	76	60
Net accretion of discounts and amortization of premiums on available-for-sale securities	(141)
Net realized losses on sales of available-for-sale securities	2
Loss on disposal of equipment	106	97
Changes in operating assets and liabilities:
Accounts receivable	(775)	(446)
Prepaid expenses and other	1,583	845
Accounts payable	(88)	46
Accrued expenses	(1,290)	(2,626)
Tenant improvement allowance	5,952
Net cash provided by operating activities	34,168	15,390
Cash flows from investing activities:
Purchase of available-for-sale securities from funds held for clients	(95,207)
Proceeds from sales and maturities of available-for-sale securities from funds held for clients	23,181
Net change in funds held for clients' cash and cash equivalents	(331,078)	147,151
Capitalized internal-use software costs	(7,146)	(6,279)
Purchases of property and equipment	(7,998)	(10,038)
Lease allowances used for tenant improvements	(5,952)
Net cash provided by (used in) investing activities	(424,200)	130,834
Cash flows from financing activities:
Net change in client funds obligation	403,243	(147,151)
Proceeds from employee stock purchase plan	2,045	1,823
Taxes paid related to net share settlement of equity awards	(7,697)	(5,135)
Net cash provided by (used in) financing activities	397,591	(150,463)
Net change in Cash and Cash Equivalents	7,559	(4,239)
Cash and Cash Equivalents-Beginning of Period	103,468	86,496
Cash and Cash Equivalents-End of Period	111,027	82,257
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Purchase of property and equipment and internal-use software, accrued but not paid	482	2,172
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes, net of refunds	$ 60	$ 26

Summary of Significant Accounting Policies	6 Months Ended
Summary of Significant Accounting Policies	Dec. 31, 2017
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, incurred but not reported medical and dental claims, stock-based compensation, valuation of deferred income tax assets and liabilities 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 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, 2017 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, 2017 included in the Company’s Annual Report on Form 10-K filed with the SEC on August 11, 2017. (c) Funds Held For Clients and Corporate Investments Funds held for clients is primarily comprised of cash and cash equivalents invested in demand deposit accounts. Starting in July 2017, the Company also invested a portion of its funds held for clients in marketable securities. Marketable securities classified as available-for-sale are recorded at fair value on the consolidated balance sheets. Unrealized gains and losses, net of applicable income taxes, are reported as other comprehensive income (loss) in the consolidated statements of operations and comprehensive income (loss). Interest on marketable securities included in funds held for clients is reported as interest income on funds held for clients on the consolidated statements of operations and comprehensive income (loss). The Company reviews the composition of its portfolio for any available-for-sale security that has a fair value that falls below its amortized cost. If any security fits this criterion, the Company further evaluates whether other-than-temporary impairment exists by considering whether the Company has the intent and ability to retain the security for a period of time sufficient enough to allow for anticipated fair value recovery. The Company did not record any other-than-temporary impairment charges during the three or six months ended December 31, 2017. (d) Income Taxes Income taxes are accounted for in accordance with ASC 740, Income Taxes, using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and 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. (e) 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. (f) 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. In addition, in March 2016, April 2016, May 2016 and December 2016 the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”), ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”), ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”) and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20”), respectively, to amend certain guidance in ASU 2014-09. Topic 606 allows for either a retrospective or cumulative effect transition method. ASU 2014-09 was originally effective for fiscal years beginning after December 15, 2016. In July 2015, the FASB approved a one-year deferral of ASU 2014-09 and all amendments to it, 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 currently expects to adopt the new standard in its fiscal year beginning July 1, 2018 using the full retrospective method. While the impact the new revenue recognition standard will have on its consolidated financial statements and disclosures has not yet been fully assessed, the Company currently expects that there will be a material impact in the manner in which it treats certain costs of obtaining new contracts (i.e., selling and commission costs). The new standard will require the Company to defer these costs and amortize them versus current treatment of expensing these costs as incurred. The Company is continuing to evaluate all potential impacts as well as the changes required for systems, processes and internal controls to meet the new standard’s reporting and disclosure requirements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) which amends various aspects of existing guidance for leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease with terms greater than twelve months, along with additional qualitative and quantitative disclosures. ASU 2016-02 also requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the potential effects of these changes to its consolidated financial statements and expects to adopt this new standard in its fiscal year beginning July 1, 2019. In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718) (“ASU 2016-09”) which modifies accounting for excess tax benefits and tax deficiencies, forfeitures, and employer tax withholding requirements. ASU 2016-09 also clarifies certain classifications on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company adopted this standard effective July 1, 2017. Due to the Company’s tax valuation allowance, the adoption of this standard did not have a material impact on its consolidated financial statements and disclosures. The Company will continue to estimate forfeitures at each reporting period, rather than electing an accounting policy change to record the impact of such forfeitures as they occur. 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.

Balance Sheet Information

6 Months Ended

Dec. 31, 2017

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, 2017	$	266
Charged to expense		76
Write-offs		(85)
Balance at December 31, 2017	$	257

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


	June 30,		December 31,
	2017		2017
Capitalized internal-use software	$	49,663	$	57,758
Accumulated amortization		(32,269)		(38,972)
Capitalized internal-use software, net	$	17,394	$	18,786

Amortization of capitalized internal-use software costs is included in Cost of Revenues-Recurring Revenues and amounted to $1,950 and $3,314 for the three months ended December 31, 2016 and 2017, respectively, and $3,634 and $6,703 for the six months ended December 31, 2016 and 2017, respectively.

Property and equipment, net consist of the following:


	June 30,		December 31,
	2017		2017
Office equipment	$	3,591	$	3,797
Computer equipment		24,411		27,567
Furniture and fixtures		7,547		8,821
Software		4,954		5,008
Leasehold improvements		21,426		29,324
Time clocks rented by clients		4,240		4,489
Total		66,169		79,006
Accumulated depreciation		(25,413)		(30,652)
Property and equipment, net	$	40,756	$	48,354

Depreciation expense amounted to $2,504 and $3,092 for the three months ended December 31, 2016 and 2017, respectively, and $4,707 and $6,017 for the six months ended December 31, 2016 and 2017, respectively.

Intangible assets, net consist of the following:



					Weighted
					Average
	June 30,		December 31,		Useful
	2017		2017		Life
Client relationships	$	12,580	$	12,580	9 years
Non-solicitation agreements		360		360	2 - 3 years
Total		12,940		12,940
Accumulated amortization		(4,033)		(4,751)
Intangible assets, net	$	8,907	$	8,189

Amortization expense for acquired intangible assets was $381 and $359 for the three months ended December 31, 2016 and 2017, respectively, and $762 and $718 for the six months ended December 31, 2016 and 2017, respectively.

Future amortization expense for acquired intangible assets is as follows, as of December 31, 2017:


Remainder of fiscal 2018	$	709
Fiscal 2019		1,398
Fiscal 2020		1,398
Fiscal 2021		1,398
Fiscal 2022		1,398
Thereafter		1,888
Total	$	8,189

The components of accrued expenses were as follows:


	June 30,		December 31,
	2017		2017
Accrued payroll and personnel costs	$	25,131	$	22,405
Other		5,170		6,723
Total accrued expenses	$	30,301	$	29,128

Funds Held for Clients and Corporate Investments

6 Months Ended

Dec. 31, 2017

Funds Held For Clients And Corporate Investments [Abstract]

Funds Held For Clients And Corporate Investments [Text Block]

(4) Funds Held for Clients and Corporate Investments

Investments consist of the following as of December 31, 2017:


			Gross		Gross
	Amortized		unrealized		unrealized
Type of Issue	cost		gains		losses		Fair value
Funds held for clients' cash and cash equivalents	$	1,273,819	$	—	$	(5)	$	1,273,814
Available-for-sale securities:
Corporate bonds		34,323		5		(70)		34,258
Commercial paper		25,375		—		(13)		25,362
Asset-backed securities		12,295		—		(27)		12,268
Total available-for-sale securities		71,993		5		(110)		71,888
Investments	$	1,345,812	$	5	$	(115)	$	1,345,702

Investments are classified as Funds held for clients on the consolidated balance sheets. Funds held for clients’ cash and cash equivalents included demand deposit accounts, commercial paper and money market funds as of December 31, 2017.

Available-for-sale securities that have been in an unrealized loss position for a period of less than 12 months as of December 31, 2017 had fair market values as follows:


	Gross
	unrealized
	losses		Fair value
Corporate bonds	$	(70)	$	31,549
Commercial paper		(13)		25,362
Asset-backed securities		(27)		12,268
Total	$	(110)	$	69,179

As the Company started investing funds held for clients in available-for-sale securities during the six months ended December 31, 2017, no securities have been in an unrealized loss position for more than 12 months. The Company did not make any material reclassification adjustments out of accumulated other comprehensive loss for realized gains and losses on the sale of available-for-sale securities during the three or six months ended December 31, 2017. 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, 2017.

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 loss during the three or six months ended December 31, 2017, nor does it believe that OTTI exists in its portfolio as of December 31, 2017. 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, 2017.

Expected maturities of available-for-sale securities at December 31, 2017 are as follows:


	Amortized
	cost		Fair value
One year or less	$	54,968	$	54,912
One year to two years		15,421		15,368
Two years to three years		1,604		1,608
Total available-for-sale securities	$	71,993	$	71,888

Fair Value Measurements

6 Months Ended

Dec. 31, 2017

Fair Value Measurement

Fair Value Measurement

(5) Fair Value Measurement

The Company applies the fair value measurement and disclosure provisions of ASC 820, Fair Value Measurements and Disclosures, and ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

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

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

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

The Company measures any cash and cash equivalents, accounts receivable, accounts payable and client fund obligations at fair value on a recurring basis using Level 1 inputs. The Company considers the recorded value of these financial assets and liabilities to approximate the fair value of the respective assets and liabilities at June 30, 2017 and December 31, 2017 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 asset-backed securities, corporate bonds and commercial paper. 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 December 31, 2017, and the Company did not transfer assets between Levels during the six months ended December 31, 2017. The Company did not hold any marketable securities at June 30, 2017.

The fair value level for the funds held for clients’ cash and cash equivalents and available-for-sale securities as of December 31, 2017 is as follows:


	Total		Level 1		Level 2		Level 3
Funds held for clients' cash and cash equivalents	$	1,273,814	$	1,245,955	$	27,859	$	—
Available-for-sale securities:
Corporate bonds		34,258				34,258
Commercial paper		25,362				25,362
Asset-backed securities		12,268				12,268
Total available-for-sale securities		71,888		—		71,888		—
Investments	$	1,345,702	$	1,245,955	$	99,747	$	—

- 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

Benefit Plans

6 Months Ended

Dec. 31, 2017

Benefit Plans

Benefit Plans

(6) 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 December 31, 2017, the Company had 11,589 shares allocated to the plans, of which 3,940 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, 2017:


		Number of Shares
Available for grant at July 1, 2017		8,227
RSUs granted		(845)
Shares withheld in settlement of taxes and/or exercise price		284
Forfeitures		28
Shares removed		(45)
Available for grant at December 31, 2017		7,649

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 (loss):


	Three Months Ended December 31,				Six Months Ended December 31,
	2016		2017		2016		2017
Cost of revenue – recurring	$	593	$	734	$	1,136	$	1,356
Cost of revenue – non-recurring		367		377		668		749
Sales and marketing		1,683		2,205		3,208		4,143
Research and development		870		945		1,664		1,816
General and administrative		3,122		3,557		5,772		6,360
Total stock-based compensation expense	$	6,635	$	7,818	$	12,448	$	14,424

In addition, the Company capitalized $500 and $471 of stock-based compensation expense in its capitalized internal-use software costs in the three months ended December 31, 2016 and 2017, respectively, and $872 and $904 in the six months ended December 31, 2016 and 2017, 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.

There were no stock options granted during the six months ended December 31, 2016 or 2017. The table below presents stock option activity during the six months ended December 31, 2017:


	Outstanding Options
				Weighted
		Weighted		average
		average		remaining	Aggregate
	Number of	exercise		contractual	intrinsic
	shares	price		term (years)	value
Balance at July 1, 2017	2,751	$	11.54	5.69	$	92,556
Options forfeited	(4)	$	17.00
Options exercised	(669)	$	8.58
Balance at December 31, 2017	2,078	$	12.48	5.52	$	72,068
Options exercisable at December 31, 2017	1,951	$	11.36	5.42	$	69,856
Options vested and expected to vest at December 31, 2017	2,072	$	12.43	5.52	$	71,981

The total intrinsic value of options exercised was $1,648 and $23,875 during the three months ended December 31, 2016 and 2017, respectively, and $5,539 and $27,255 during the six months ended December 31, 2016 and 2017, respectively. At December 31, 2017, there was $365 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options granted under the Plan. That cost is expected to be recognized over a weighted average period of 1.06 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 four years following the grant date. Certain RSU awards have time-based vesting conditions while other RSU awards are based on the achievement of certain revenue and Adjusted EBITDA targets in future fiscal years. The following table represents restricted stock unit activity during the six months ended December 31, 2017:


	Units	Weighted average grant date fair value
RSU balance at July 1, 2017	1,455	$	39.96
RSUs granted	845	$	45.72
RSUs vested	(414)	$	39.37
RSUs forfeited	(24)	$	41.41
RSU balance at December 31, 2017	1,862	$	42.68
RSUs expected to vest at December 31, 2017	1,605	$	42.48

At December 31, 2017, there was $40,457 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested restricted stock units granted. That cost is expected to be recognized over a weighted average period of 1.94 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, 2017, a total of 771 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 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 issued 53 shares upon the completion of its six-month offering period ending November 15, 2017. The Company recorded compensation expense attributable to the ESPP of $319 and $309 for the three months ended December 31, 2016 and 2017, respectively, and $663 and $648 for the six months ended December 31, 2016 and 2017, 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,
	2016		2017
Valuation assumptions:
Expected dividend yield	0	%	0	%
Expected volatility	38.9 - 53.4	%	28.3 - 39.1	%
Expected term (years)	0.5		0.5
Risk‑free interest rate	0.28 - 0.61	%	1.02 - 1.35	%

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 $775 and $995 for the three months ended December 31, 2016 and 2017, respectively, and $1,677 and $2,106 for the six months ended December 31, 2016 and 2017, respectively.

Net Income (Loss) Per Share

6 Months Ended

Dec. 31, 2017

Net Income (Loss) Per Share

Net Income (Loss) Per Share

(7) Net Income (Loss) Per Share

Basic net income (loss) per common share is computed using the weighted‑average number of common shares outstanding during the period. Diluted net income (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 following table presents the calculation of basic and diluted net income (loss) per share:


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2016		2017		2016		2017
Numerator:
Net income (loss)	$	(1,671)	$	431	$	(4,239)	$	974

Denominator:
Weighted-average shares used in computing net income (loss) per share:
Basic		51,384		52,502		51,308		52,197
Weighted-average effect of potentially dilutive shares:
Employee stock options and restricted stock units		—		2,316		—		2,442
Diluted		51,384		54,818		51,308		54,639

Net income (loss) per share:
Basic	$	(0.03)	$	0.01	$	(0.08)	$	0.02
Diluted	$	(0.03)	$	0.01	$	(0.08)	$	0.02

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		Six Months Ended
	December 31,		December 31,
	2016	2017	2016	2017
Employee stock options	3,262	—	3,262	—
Restricted stock units	1,501	5	1,501	795
Employee stock purchase plan shares	21	15	21	15
Total	4,784	20	4,784	810

Summary of Significant Accounting Policies (Policies)	6 Months Ended
Summary of Significant Accounting Policies (Policies)	Dec. 31, 2017
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, incurred but not reported medical and dental claims, stock-based compensation, valuation of deferred income tax assets and liabilities 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 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, 2017 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, 2017 included in the Company’s Annual Report on Form 10-K filed with the SEC on August 11, 2017.
Funds Held For Clients and Corporate Investments	c) Funds Held For Clients and Corporate Investments Funds held for clients is primarily comprised of cash and cash equivalents invested in demand deposit accounts. Starting in July 2017, the Company also invested a portion of its funds held for clients in marketable securities. Marketable securities classified as available-for-sale are recorded at fair value on the consolidated balance sheets. Unrealized gains and losses, net of applicable income taxes, are reported as other comprehensive income (loss) in the consolidated statements of operations and comprehensive income (loss). Interest on marketable securities included in funds held for clients is reported as interest income on funds held for clients on the consolidated statements of operations and comprehensive income (loss). The Company reviews the composition of its portfolio for any available-for-sale security that has a fair value that falls below its amortized cost. If any security fits this criterion, the Company further evaluates whether other-than-temporary impairment exists by considering whether the Company has the intent and ability to retain the security for a period of time sufficient enough to allow for anticipated fair value recovery. The Company did not record any other-than-temporary impairment charges during the three or six months ended December 31, 2017.
Income Taxes	(d) Income Taxes Income taxes are accounted for in accordance with ASC 740, Income Taxes, using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and 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.
Stock-Based Compensation	(e) 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	(f) 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. In addition, in March 2016, April 2016, May 2016 and December 2016 the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”), ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”), ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”) and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20”), respectively, to amend certain guidance in ASU 2014-09. Topic 606 allows for either a retrospective or cumulative effect transition method. ASU 2014-09 was originally effective for fiscal years beginning after December 15, 2016. In July 2015, the FASB approved a one-year deferral of ASU 2014-09 and all amendments to it, 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 currently expects to adopt the new standard in its fiscal year beginning July 1, 2018 using the full retrospective method. While the impact the new revenue recognition standard will have on its consolidated financial statements and disclosures has not yet been fully assessed, the Company currently expects that there will be a material impact in the manner in which it treats certain costs of obtaining new contracts (i.e., selling and commission costs). The new standard will require the Company to defer these costs and amortize them versus current treatment of expensing these costs as incurred. The Company is continuing to evaluate all potential impacts as well as the changes required for systems, processes and internal controls to meet the new standard’s reporting and disclosure requirements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) which amends various aspects of existing guidance for leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease with terms greater than twelve months, along with additional qualitative and quantitative disclosures. ASU 2016-02 also requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the potential effects of these changes to its consolidated financial statements and expects to adopt this new standard in its fiscal year beginning July 1, 2019. In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718) (“ASU 2016-09”) which modifies accounting for excess tax benefits and tax deficiencies, forfeitures, and employer tax withholding requirements. ASU 2016-09 also clarifies certain classifications on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company adopted this standard effective July 1, 2017. Due to the Company’s tax valuation allowance, the adoption of this standard did not have a material impact on its consolidated financial statements and disclosures. The Company will continue to estimate forfeitures at each reporting period, rather than electing an accounting policy change to record the impact of such forfeitures as they occur. 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 + Details

- Definition

Disclosure of accounting policy for investments in financial assets, including marketable securities (debt and equity securities with readily determinable fair values), investments accounted for under the equity method and cost method, securities borrowed and loaned, and repurchase and resale agreements. For marketable securities, the disclosure may include the entity's accounting treatment for transfers between investment categories and how the fair values for such securities are determined. Also, for all investments, an entity may describe its policy for assessing, recognizing and measuring impairment of the investment.

+ References + Details

Balance Sheet Information (Tables)

6 Months Ended

Dec. 31, 2017

Balance Sheet Information

Schedule of activity in allowance for doubtful accounts


Balance at June 30, 2017	$	266
Charged to expense		76
Write-offs		(85)
Balance at December 31, 2017	$	257

Schedule of capitalized internal-use software and accumulated amortization


	June 30,		December 31,
	2017		2017
Capitalized internal-use software	$	49,663	$	57,758
Accumulated amortization		(32,269)		(38,972)
Capitalized internal-use software, net	$	17,394	$	18,786

Schedule of property and equipment


	June 30,		December 31,
	2017		2017
Office equipment	$	3,591	$	3,797
Computer equipment		24,411		27,567
Furniture and fixtures		7,547		8,821
Software		4,954		5,008
Leasehold improvements		21,426		29,324
Time clocks rented by clients		4,240		4,489
Total		66,169		79,006
Accumulated depreciation		(25,413)		(30,652)
Property and equipment, net	$	40,756	$	48,354

Schedule of intangible assets



					Weighted
					Average
	June 30,		December 31,		Useful
	2017		2017		Life
Client relationships	$	12,580	$	12,580	9 years
Non-solicitation agreements		360		360	2 - 3 years
Total		12,940		12,940
Accumulated amortization		(4,033)		(4,751)
Intangible assets, net	$	8,907	$	8,189

Schedule of future amortization expense for acquired intangible assets

Future amortization expense for acquired intangible assets is as follows, as of December 31, 2017:


Remainder of fiscal 2018	$	709
Fiscal 2019		1,398
Fiscal 2020		1,398
Fiscal 2021		1,398
Fiscal 2022		1,398
Thereafter		1,888
Total	$	8,189

Schedule of components of accrued expenses


	June 30,		December 31,
	2017		2017
Accrued payroll and personnel costs	$	25,131	$	22,405
Other		5,170		6,723
Total accrued expenses	$	30,301	$	29,128

Funds Held For Clients And Corporate Investments (Tables)

6 Months Ended

Dec. 31, 2017

Funds Held For Clients And Corporate Investments [Abstract]

Schedule of investments

Investments consist of the following as of December 31, 2017:


			Gross		Gross
	Amortized		unrealized		unrealized
Type of Issue	cost		gains		losses		Fair value
Funds held for clients' cash and cash equivalents	$	1,273,819	$	—	$	(5)	$	1,273,814
Available-for-sale securities:
Corporate bonds		34,323		5		(70)		34,258
Commercial paper		25,375		—		(13)		25,362
Asset-backed securities		12,295		—		(27)		12,268
Total available-for-sale securities		71,993		5		(110)		71,888
Investments	$	1,345,812	$	5	$	(115)	$	1,345,702

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

Available-for-sale securities that have been in an unrealized loss position for a period of less than 12 months as of December 31, 2017 had fair market values as follows:


	Gross
	unrealized
	losses		Fair value
Corporate bonds	$	(70)	$	31,549
Commercial paper		(13)		25,362
Asset-backed securities		(27)		12,268
Total	$	(110)	$	69,179

Schedule of expected maturities of available-for-sale securities

Expected maturities of available-for-sale securities at December 31, 2017 are as follows:


	Amortized
	cost		Fair value
One year or less	$	54,968	$	54,912
One year to two years		15,421		15,368
Two years to three years		1,604		1,608
Total available-for-sale securities	$	71,993	$	71,888

Fair Value Measurements (Tables)

6 Months Ended

Dec. 31, 2017

Fair Value Measurement

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

The fair value level for the funds held for clients’ cash and cash equivalents and available-for-sale securities as of December 31, 2017 is as follows:


	Total		Level 1		Level 2		Level 3
Funds held for clients' cash and cash equivalents	$	1,273,814	$	1,245,955	$	27,859	$	—
Available-for-sale securities:
Corporate bonds		34,258				34,258
Commercial paper		25,362				25,362
Asset-backed securities		12,268				12,268
Total available-for-sale securities		71,888		—		71,888		—
Investments	$	1,345,702	$	1,245,955	$	99,747	$	—

Benefit Plans (Tables)

6 Months Ended

Dec. 31, 2017

Benefit Plans

Summary of shares available for grant under equity incentive plans


		Number of Shares
Available for grant at July 1, 2017		8,227
RSUs granted		(845)
Shares withheld in settlement of taxes and/or exercise price		284
Forfeitures		28
Shares removed		(45)
Available for grant at December 31, 2017		7,649

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,
	2016		2017		2016		2017
Cost of revenue – recurring	$	593	$	734	$	1,136	$	1,356
Cost of revenue – non-recurring		367		377		668		749
Sales and marketing		1,683		2,205		3,208		4,143
Research and development		870		945		1,664		1,816
General and administrative		3,122		3,557		5,772		6,360
Total stock-based compensation expense	$	6,635	$	7,818	$	12,448	$	14,424

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, 2017	2,751	$	11.54	5.69	$	92,556
Options forfeited	(4)	$	17.00
Options exercised	(669)	$	8.58
Balance at December 31, 2017	2,078	$	12.48	5.52	$	72,068
Options exercisable at December 31, 2017	1,951	$	11.36	5.42	$	69,856
Options vested and expected to vest at December 31, 2017	2,072	$	12.43	5.52	$	71,981

Schedule of restricted stock unit activity


	Units	Weighted average grant date fair value
RSU balance at July 1, 2017	1,455	$	39.96
RSUs granted	845	$	45.72
RSUs vested	(414)	$	39.37
RSUs forfeited	(24)	$	41.41
RSU balance at December 31, 2017	1,862	$	42.68
RSUs expected to vest at December 31, 2017	1,605	$	42.48

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


	Six Months Ended
	December 31,
	2016		2017
Valuation assumptions:
Expected dividend yield	0	%	0	%
Expected volatility	38.9 - 53.4	%	28.3 - 39.1	%
Expected term (years)	0.5		0.5
Risk‑free interest rate	0.28 - 0.61	%	1.02 - 1.35	%

Net income (Loss) Per Share (Tables)

6 Months Ended

Dec. 31, 2017

Net Income (Loss) Per Share

Schedule of calculation of basic net income (loss) per share


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2016		2017		2016		2017
Numerator:
Net income (loss)	$	(1,671)	$	431	$	(4,239)	$	974

Denominator:
Weighted-average shares used in computing net income (loss) per share:
Basic		51,384		52,502		51,308		52,197
Weighted-average effect of potentially dilutive shares:
Employee stock options and restricted stock units		—		2,316		—		2,442
Diluted		51,384		54,818		51,308		54,639

Net income (loss) per share:
Basic	$	(0.03)	$	0.01	$	(0.08)	$	0.02
Diluted	$	(0.03)	$	0.01	$	(0.08)	$	0.02

Summary of anti-dilutive securities


	Three Months Ended		Six Months Ended
	December 31,		December 31,
	2016	2017	2016	2017
Employee stock options	3,262	—	3,262	—
Restricted stock units	1,501	5	1,501	795
Employee stock purchase plan shares	21	15	21	15
Total	4,784	20	4,784	810

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, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Jun. 30, 2017
Activity in allowance for doubtful accounts
Balance at beginning of period			$ 266
Charged to expense			76	$ 60
Write-offs			(85)
Balance at end of period	$ 257		257
Capitalized internal-use software and accumulated amortization
Capitalized internal-use software	57,758		57,758		$ 49,663
Accumulated amortization	(38,972)		(38,972)		(32,269)
Capitalized internal-use software, net	18,786		18,786		17,394
Property and equipment, net
Property and equipment, gross	79,006		79,006		66,169
Accumulated depreciation	(30,652)		(30,652)		(25,413)
Property and equipment, net	48,354		48,354		40,756
Depreciation expense	3,092	$ 2,504	6,017	4,707
Cost of revenue - recurring
Capitalized internal-use software and accumulated amortization
Amortization of capitalized internal-use software	3,314	$ 1,950	6,703	$ 3,634
Office equipment
Property and equipment, net
Property and equipment, gross	3,797		3,797		3,591
Computer equipment
Property and equipment, net
Property and equipment, gross	27,567		27,567		24,411
Furniture and fixtures
Property and equipment, net
Property and equipment, gross	8,821		8,821		7,547
Software
Property and equipment, net
Property and equipment, gross	5,008		5,008		4,954
Leasehold improvements
Property and equipment, net
Property and equipment, gross	29,324		29,324		21,426
Time clocks rented by clients
Property and equipment, net
Property and equipment, gross	$ 4,489		$ 4,489		$ 4,240

Balance Sheet Information - Intangible Assets and Accrued Expenses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Jun. 30, 2017
Intangible Assets
Intangible assets	$ 12,940		$ 12,940		$ 12,940
Accumulated amortization	(4,751)		(4,751)		(4,033)
Intangible assets, net	8,189		8,189		8,907
Amortization expense for acquired intangible assets	359	$ 381	718	$ 762
Future amortization expense for acquired intangible assets
Remainder of fiscal 2018	709		709
2019	1,398		1,398
2020	1,398		1,398
2021	1,398		1,398
2022	1,398		1,398
Thereafter	1,888		1,888
Intangible assets, net	8,189		8,189		8,907
Components of accrued expenses
Accrued payroll and personnel costs	22,405		22,405		25,131
Other	6,723		6,723		5,170
Total accrued expenses	29,128		29,128		30,301
Client relationships
Intangible Assets
Intangible assets	12,580		$ 12,580		12,580
Useful life			9 years
Non-solicitation agreements
Intangible Assets
Intangible assets	$ 360		$ 360		$ 360
Minimum \| Non-solicitation agreements
Intangible Assets
Useful life			2 years
Maximum \| Non-solicitation agreements
Intangible Assets
Useful life			3 years

Funds Held For Clients And Corporate Investments - Reconciliation (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Funds Held For Clients And Corporate Investments [Line Items]
Amortized cost of funds held for clients' cash and cash equivalents	$ 1,273,819
Funds held for clients' cash and cash equivalents, gross unrealized gains
Funds held for clients' cash and cash equivalents, gross unrealized losses	5
Fair value of funds held for clients' cash and cash equivalents	1,273,814
Available-for-sale Debt Securities
Amortized cost	71,993
Gross unrealized gains	5
Gross unrealized losses	(110)
Fair value	71,888
Total investments at amortized cost	1,345,812
Total investments gross unrealized gain	5
Total investments gross unrealized loss	(115)
Total investments at fair value	1,345,702
Corporate bonds
Available-for-sale Debt Securities
Amortized cost	34,323
Gross unrealized gains	5
Gross unrealized losses	(70)
Fair value	34,258
Commercial paper
Available-for-sale Debt Securities
Amortized cost	25,375
Gross unrealized losses	(13)
Fair value	25,362
Asset-backed securities
Available-for-sale Debt Securities
Amortized cost	12,295
Gross unrealized losses	(27)
Fair value	$ 12,268

Funds Held For Clients And Corporate Investments - Classification (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Dec. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)
Available-for-sale securities in a continuous unrealized loss position
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months	$ 69,179	$ 69,179
Unrealized loss on available-for-sale securities in a continuous loss position for less than 12 months		110
Available-for-sale securities in a continuous loss position for more than 12 months	0	0
Gross realized gains and losses on the sale of available-for-sale securities	0	0
OTTI recognized in AOCI	0	0
Reclassification out of Accumulated Other Comprehensive Loss
Available-for-sale securities in a continuous unrealized loss position
Gross realized gains and losses on the sale of available-for-sale securities	0	0
Corporate bonds
Available-for-sale securities in a continuous unrealized loss position
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months	31,549	31,549
Unrealized loss on available-for-sale securities in a continuous loss position for less than 12 months		70
Commercial paper
Available-for-sale securities in a continuous unrealized loss position
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months	25,362	25,362
Unrealized loss on available-for-sale securities in a continuous loss position for less than 12 months		13
Asset-backed securities
Available-for-sale securities in a continuous unrealized loss position
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months	$ 12,268	12,268
Unrealized loss on available-for-sale securities in a continuous loss position for less than 12 months		$ 27

Funds Held For Clients And Corporate Investments - Maturities (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Available-for-sale maturities, amortized cost
One year or less	$ 54,968
One year to two years	15,421
Two years to three years	1,604
Total available-for-sale securities	71,993
Available-for-sale maturities, fair value
One year or less	54,912
One year to two years	15,368
Two years to three years	1,608
Total available-for-sale securities	$ 71,888

Fair Value Measurement (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Fair value measurements
Funds held for clients' cash and cash equivalents	$ 1,273,814
Available-for-sale securities:
Available for sale debt securities	71,888
Total investments at fair value	1,345,702
Fair value asset transfers
Transfers from level 1 to level 2	0
Transfers from level 2 to level 1	0
Fair Value, Inputs, Level 1
Fair value measurements
Funds held for clients' cash and cash equivalents	1,245,955
Available-for-sale securities:
Total investments at fair value	1,245,955
Fair Value, Inputs, Level 2
Fair value measurements
Funds held for clients' cash and cash equivalents	27,859
Available-for-sale securities:
Available for sale debt securities	71,888
Total investments at fair value	99,747
Fair Value, Inputs, Level 3
Available-for-sale securities:
Available for sale debt securities	0
Corporate bonds
Available-for-sale securities:
Available for sale debt securities	34,258
Corporate bonds \| Fair Value, Inputs, Level 2
Available-for-sale securities:
Available for sale debt securities	34,258
Commercial paper
Available-for-sale securities:
Available for sale debt securities	25,362
Commercial paper \| Fair Value, Inputs, Level 2
Available-for-sale securities:
Available for sale debt securities	25,362
Asset-backed securities
Available-for-sale securities:
Available for sale debt securities	12,268
Asset-backed securities \| Fair Value, Inputs, Level 2
Available-for-sale securities:
Available for sale debt securities	$ 12,268

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, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Jun. 30, 2017
Vesting period
Expiration period			10 years
Options Outstanding, Number of Shares
Balance at the beginning of the period			2,751
Options granted			0	0
Options forfeited			(4)
Options exercised			(669)
Balance at the end of the period	2,078		2,078		2,751
Options Outstanding, Weighted average exercise price
Balance at the beginning of the period (in dollars per share)			$ 11.54
Options forfeited (in dollars per share)			17.00
Options exercised (in dollars per share)			8.58
Balance at the end of the period (in dollars per share)	$ 12.48		$ 12.48		$ 11.54
Options Additional Disclosures
Weighted average remaining contractual term			5 years 6 months 7 days		5 years 8 months 9 days
Aggregate intrinsic value, at the beginning of the period			$ 92,556
Weighted average remaining contractual term of options exercisable at the end of the period (years)			5 years 5 months 1 day
Aggregate intrinsic value, at the end of the period	$ 72,068		$ 72,068		$ 92,556
Options exercisable at the end of the period (in shares)	1,951		1,951
Options exercisable at the end of the period, weighted average exercise price (in dollars per share)	$ 11.36		$ 11.36
Options exercisable intrinsic value	$ 69,856		$ 69,856
Total intrinsic value of options exercised	$ 23,875	$ 1,648	$ 27,255	$ 5,539
Options vested and expected to vest
Number of shares	2,072		2,072
Weighted average exercise price	$ 12.43		$ 12.43
Weighted average remaining contractual term			5 years 6 months 7 days
Aggregate intrinsic value	$ 71,981		$ 71,981
Unrecognized Compensation Costs Not yet Recognized
Total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options	$ 365		$ 365
Weighted average period to recognize unrecognized compensation cost			1 year 22 days
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, 2017 USD ($) $ / shares shares
Unrecognized Compensation Costs Not yet Recognized
Total unrecognized compensation cost, net of estimated forfeitures \| $	$ 40,457
Weighted average period to recognize unrecognized compensation cost	1 year 11 months 9 days
RSUs Outstanding Rollforward, Units
RSU Balance at the beginning of the period \| shares	1,455
RSUs granted \| shares	845
RSUs vested \| shares	(414)
RSUs forfeited \| shares	(24)
RSU Balance at the end of the period \| shares	1,862
RSUs expected to vest at the end of the period \| shares	1,605
RSUs Outstanding, Weighted average grant date fair value
RSU Balance at the beginning of the period \| $ / shares	$ 39.96
RSUs granted \| $ / shares	45.72
RSUs vested \| $ / shares	39.37
RSUs cancelled/forfeited \| $ / shares	41.41
RSU Balance at the end of the period \| $ / shares	42.68
RSUs expected to vest at the end of the period \| $ / shares	$ 42.48
Maximum
Vesting period
Vesting period	4 years

Benefit Plans - ESPP Information (Details) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
	Nov. 15, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Equity Incentive Plans
Compensation expense		$ 7,818	$ 6,635	$ 14,424	$ 12,448
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		771		771
Potential number of additional shares reserved for issuance each year				400
Potential percentage of additional number of shares reserved for issuance each year				0.75%
Number of shares issued	53
Compensation expense		$ 309	$ 319	$ 648	$ 663
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				28.30%	38.90%
Risk-free interest rate				1.02%	0.28%
Employee stock purchase plan shares \| Maximum
Equity Incentive Plans
Offering period				27 months
Valuation assumptions:
Expected volatility				39.10%	53.40%
Risk-free interest rate				1.35%	0.61%

Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Anti-dilutive securities excluded from diluted per share calculation
Anti-dilutive securities excluded	20	4,784	810	4,784
Numerator:
Net income (loss)	$ 431	$ (1,671)	$ 974	$ (4,239)
Weighted-average shares used in computing net income (loss) per share:
Basic (in shares)	52,502	51,384	52,197	51,308
Weighted-average effect of potentially dilutive shares:
Employee stock options and restricted stock units	2,316		2,442
Diluted (in shares)	54,818	51,384	54,639	51,308
Net income (loss) per share:
Basic (in dollars per share)	$ 0.01	$ (0.03)	$ 0.02	$ (0.08)
Diluted (in dollars per share)	$ 0.01	$ (0.03)	$ 0.02	$ (0.08)
Employee stock options
Anti-dilutive securities excluded from diluted per share calculation
Anti-dilutive securities excluded		3,262		3,262
Restricted stock units
Anti-dilutive securities excluded from diluted per share calculation
Anti-dilutive securities excluded	5	1,501	795	1,501
Employee stock purchase plan shares
Anti-dilutive securities excluded from diluted per share calculation
Anti-dilutive securities excluded	15	21	15	21

Organization and Description of Business	6 Months Ended
Organization and Description of Business	Dec. 31, 2017
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.

Income Taxes	6 Months Ended
Income Taxes	Dec. 31, 2017
Income Taxes
Income Taxes	(8) Income Taxes The Company’s quarterly provision for income taxes is based on the discrete effective tax rate method. The Company’s quarterly provision for income taxes also includes the tax impact of certain unusual or infrequently occurring items, if any, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. The Company recorded income tax expense (benefit) of $32 and $(157) for the three months ended December 31, 2016 and 2017 respectively, and $132 and $(76) for the six months ended December 31, 2016 and 2017, respectively. The Company’s effective tax rates for the three and six months ended December 31, 2016 and 2017 differ 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 2017 and for the six months ended December 31, 2017. However, it is reasonably possible within this fiscal year that the Company may release all or a portion of its valuation allowance if results and other subjective evidence continue to improve such that the deferred tax assets become more likely than not to be realizable. As of December 31, 2017, the Company had no unrecognized tax benefits. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Act) was signed into law. Over the long term, the Company generally expects to benefit from the lower statutory rates provided by the Act and is currently assessing all other aspects relevant to the Company. The Company operates solely in the United States; therefore, the international provisions of the Act do not apply. In accordance with ASC 740, during the second quarter the Company modified its current federal statutory rate for the year to account for the rate change. The Company recorded a $156 income tax benefit attributable to the rate change effect on the deferred tax liability for indefinite-lived intangible assets. In response to the Act, the SEC issued SAB 118 allowing registrants to record provisional amounts to the extent a company’s accounting for the Act is incomplete. Pursuant to disclosure under SAB 118, revaluation of deferred taxes as of December 22, 2017 is incomplete. Items recorded as provisional amounts include a revaluation of deferred tax assets as of June 30, 2017. The provisional amount computed was $3,404 of income tax expense. As the Company maintains a valuation allowance against all of its deferred taxes except for a deferred tax liability related to indefinite-lived intangible assets, this expense was offset by the valuation allowance. As of December 31, 2017, the Company is still analyzing the impact of the Act with respect to the appropriate period of reversal of deferred tax assets and liabilities, as well as additional limitations on the deductibility of executive compensation and on certain meals and entertainment expenses and the related impacts to the assessment of valuation allowance. The Company needs additional time to obtain, prepare, and analyze information related to the above mentioned items before the assessment of the impact of the Act can be completed. The Company expects to complete its accounting for the effects of the Act by the end of fiscal year 2018.

Benefit Plans - 401(k) Plan (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
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	$ 995	$ 775	$ 2,106	$ 1,677

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Income Taxes
Income tax expense (benefit)	$ (157)	$ 32	$ (76)	$ 132
Unrecognized tax benefits	0		$ 0
Effect of Tax Cuts and Jobs Act of 2017, Accounting Incomplete, Provisional
Tax benefit attributable to the rate change effect on the deferred tax liability for indefinite-lived intangible assets	156
Provisional amount of income tax expense attributable to a revaluation of deferred tax assets from change in tax rate	3,404
Amount of provisional income tax expense attributable to tax rate change offset by valuation allowance	$ 3,404

Benefit Plans - General Information (Details) shares in Thousands	6 Months Ended
	Dec. 31, 2017 shares
Equity Incentive Plans
Equity Incentive Plans
Number of shares of common stock reserved for issuance	11,589
Number of shares subject to outstanding options or awards	3,940
2008 Plan
Equity Incentive Plans
Awards issued (in shares)	0
Awards issuable (in shares)	0
2014 Plan
Equity Incentive Plans
Potential additional shares available for grant (as a percent)	4.50%

Benefit Plans - Incentive Plans Activity (Details) shares in Thousands	6 Months Ended
	Dec. 31, 2017 shares
Equity Incentive Plans
Shares Available for Grant
Balance at the beginning of the period	8,227
RSUs granted	(845)
Shares withheld in settlement of taxes and/or exercise price	284
Forfeitures	28
Balance at the end of the period	7,649
2008 Plan
Shares Available for Grant
Shares removed	(45)