pcty-20250930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

________________________________________________________________________

Form 10-Q

________________________________________________________________________


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

For the quarterly period ended September 30, 2025


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

For the transition period from to

Commission file number 001-36348

________________________________________________________________________

PAYLOCITY HOLDING CORPORATION

(Exact name of registrant as specified in its charter)

________________________________________________________________________


Delaware						46-4066644
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)


1400 American Lane Schaumburg, Illinois						60173
(Address of principal executive offices)						(Zip Code)

(847) 463-3200

(Registrant’s telephone number, including area code)

________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

PCTY

The NASDAQ Global Select Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 54,381,607 shares of Common Stock, $0.001 par value per share, as of October 29, 2025.

Table of Contents

Paylocity Holding Corporation

Form 10-Q

For the Quarterly Period Ended September 30, 2025

TABLE OF CONTENTS


			Page

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Unaudited Consolidated Balance Sheets			2

Unaudited Consolidated Statements of Operations and Comprehensive Income			3

Unaudited Consolidated Statement of Changes in Stockholders’ Equity			4

Unaudited Consolidated Statements of Cash Flows			5

Notes to the Unaudited Consolidated Financial Statements			6

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			21

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			32

ITEM 4. CONTROLS AND PROCEDURES			33

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS			34

ITEM 1A. RISK FACTORS			34

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			34

ITEM 3. DEFAULTS UPON SENIOR SECURITIES			34

ITEM 4. MINE SAFETY DISCLOSURES			34

ITEM 5. OTHER INFORMATION			35

ITEM 6. EXHIBITS			36

SIGNATURES			37

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Balance Sheets

(in thousands, except per share data)


	June 30, 2025		September 30, 2025
Assets
Current assets:
Cash and cash equivalents	$	398,070	$	165,192

Accounts receivable, net	41,642		41,721
Deferred contract costs	117,177		121,050
Prepaid expenses and other	50,943		59,416
Total current assets before funds held for clients	607,832		387,379
Funds held for clients	2,704,137		2,775,579
Total current assets	3,311,969		3,162,958
Capitalized internal-use software, net	132,317		133,721
Property and equipment, net	54,210		51,723
Operating lease right-of-use assets	35,997		35,413
Intangible assets, net	92,671		87,410
Goodwill	343,100		343,158
Long-term deferred contract costs	393,671		400,418
Long‑term prepaid expenses and other	7,739		7,202
Deferred income tax assets	17,754		14,129
Total assets	$	4,389,428	$	4,236,132

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	17,347	$	6,012
Accrued expenses	193,081		174,181
Total current liabilities before client fund obligations	210,428		180,193
Client fund obligations	2,694,842		2,765,135
Total current liabilities	2,905,270		2,945,328
Long-term debt	162,500		81,250
Long-term operating lease liabilities	46,772		46,238
Other long-term liabilities	8,580		8,487
Deferred income tax liabilities	32,559		51,350
Total liabilities	$	3,155,681	$	3,132,653
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2025 and September 30, 2025	$	—	$	—
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2025 and September 30, 2025; 55,366 shares issued and outstanding at June 30, 2025 and 54,376 shares issued and outstanding at September 30, 2025	55		54
Additional paid-in capital	327,518		148,581
Retained earnings	900,583		948,574
Accumulated other comprehensive income	5,591		6,270
Total stockholders' equity	$	1,233,747	$	1,103,479
Total liabilities and stockholders’ equity	$	4,389,428	$	4,236,132

See accompanying notes to unaudited consolidated financial statements.

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PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share data)


	Three Months Ended September 30,
	2024		2025
Revenues:
Recurring and other revenue	$	333,105	$	378,858
Interest income on funds held for clients	29,851		29,314
Total revenues	362,956		408,172
Cost of revenues	114,960		128,380
Gross profit	247,996		279,792
Operating expenses:
Sales and marketing	88,431		96,368
Research and development	47,260		55,607
General and administrative	48,161		53,606
Total operating expenses	183,852		205,581
Operating income	64,144		74,211
Other income	4,742		702
Income before income taxes	68,886		74,913
Income tax expense	19,313		26,922
Net income	$	49,573	$	47,991
Other comprehensive income, net of tax	6,811		679
Comprehensive income	$	56,384	$	48,670

Net income per share:
Basic	$	0.89	$	0.87
Diluted	$	0.88	$	0.86

Weighted-average shares used in computing net income per share:
Basic	55,640		55,013
Diluted	56,266		55,859

See accompanying notes to unaudited consolidated financial statements.

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PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Statement of Changes in Stockholders’ Equity

(in thousands)


	Three Months Ended September 30, 2024
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount
Balances at June 30, 2024	55,514	$	56	$	360,488	$	673,456	$	(936)	$	1,033,064
Stock-based compensation	—	—		38,000		—		—		38,000
Stock options exercised	114	—		2,822		—		—		2,822
Issuance of common stock upon vesting of equity awards	273	—		—		—		—		—

Net settlement for taxes and/or exercise price related to equity awards	(163)	—		(24,358)		—		—		(24,358)
Unrealized gains on securities, net of tax	—	—		—		—		6,811		6,811
Net income	—	—		—		49,573		—		49,573
Balances at September 30, 2024	55,738	$	56	$	376,952	$	723,029	$	5,875	$	1,105,912


	Three Months Ended September 30, 2025
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Shares	Amount
Balances at June 30, 2025	55,366	$	55	$	327,518	$	900,583	$	5,591	$	1,233,747
Stock-based compensation	—	—		41,501		—		—		41,501

Issuance of common stock upon vesting of equity awards	273	—		—		—		—		—

Net settlement for taxes related to equity awards	(109)	—		(18,723)		—		—		(18,723)
Repurchases of common shares	(1,154)	(1)		(201,715)		—		—		(201,716)
Unrealized gains on securities, net of tax	—	—		—		—		733		733
Foreign currency translation adjustments	—	—		—		—		(54)		(54)
Net income	—	—		—		47,991		—		47,991
Balances at September 30, 2025	54,376	$	54	$	148,581	$	948,574	$	6,270	$	1,103,479

See accompanying notes to the unaudited consolidated financial statements.

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PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Statements of Cash Flows

(in thousands)


	Three Months Ended September 30,
	2024		2025
Cash flows from operating activities:
Net income	$	49,573	$	47,991
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	33,540		37,846
Depreciation and amortization expense	21,552		27,453
Deferred income tax expense (benefit)	(2,556)		22,101
Provision for credit losses	221		332
Net accretion of discounts on available-for-sale securities	(662)		(405)


Other	304		355
Changes in operating assets and liabilities:
Accounts receivable	(903)		(73)
Deferred contract costs	(13,081)		(10,424)
Prepaid expenses and other	(773)		(9,833)
Accounts payable	7,885		(10,530)
Accrued expenses and other	(3,645)		(18,357)
Net cash provided by operating activities	91,455		86,456
Cash flows from investing activities:
Purchases of available-for-sale securities	(20,174)		(30,456)
Proceeds from sales and maturities of available-for-sale securities	25,022		32,358
Capitalized internal-use software costs	(15,210)		(15,460)
Purchases of property and equipment	(2,328)		(3,797)

Other investing activities	(638)		(338)
Net cash used in investing activities	(13,328)		(17,693)
Cash flows from financing activities:
Net change in client fund obligations	(621,746)		70,293
Borrowings under credit facility	325,000		—
Repayment of credit facility	—		(81,250)

Repurchases of common shares	—		(200,000)

Taxes paid related to net share settlement of equity awards	(21,536)		(18,723)
Other financing activities	(11)		(12)
Net cash used in financing activities	(318,293)		(229,692)
Net change in cash, cash equivalents and funds held for clients' cash and cash equivalents	(240,166)		(160,929)
Cash, cash equivalents and funds held for clients' cash and cash equivalents—beginning of period	2,845,669		2,482,526
Cash, cash equivalents and funds held for clients' cash and cash equivalents—end of period	$	2,605,503	$	2,321,597
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Purchases of property and equipment and capitalized internal-use software, accrued but not paid	$	960	$	278

Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	123	$	2,325
Cash paid for income taxes	$	6,194	$	7,226
Reconciliation of cash, cash equivalents and funds held for clients' cash and cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents	$	778,549	$	165,192
Funds held for clients' cash and cash equivalents	1,826,954		2,156,405
Total cash, cash equivalents and funds held for clients' cash and cash equivalents	$	2,605,503	$	2,321,597

See accompanying notes to unaudited consolidated financial statements.

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PAYLOCITY HOLDING CORPORATION

Notes to the Unaudited Consolidated Financial Statements

(all amounts in thousands, except per share data)

(1) Organization and Description of Business

Paylocity Holding Corporation (the “Company”) is a cloud-based provider of HR, finance and IT software solutions that deliver a comprehensive platform for the modern workforce. Services are provided in a Software-as-a-Service (“SaaS”) delivery model. The Company offers an intuitive, easy-to-use product suite that helps businesses automate and streamline HR, finance and IT processes, attract and retain talent, and build culture and connection with their employees.

(2) Summary of Significant Accounting Policies

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

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

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

(b) Interim Unaudited Consolidated Financial Information

The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with GAAP and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s financial position, results of operations, changes in stockholders’ equity and cash flows. The results of operations for the three months ended September 30, 2025 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, 2025 included in the Company’s Annual Report on Form 10-K.

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

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

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(d) Recently Issued Accounting Standards

In December 2023, the FASB issued Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosure ("ASU 2023-09"). ASU 2023-09 mostly requires, on an annual basis, disclosure of specific categories in an entity's effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. The incremental disclosures may be presented on a prospective or retrospective basis. The ASU is effective for fiscal years beginning after December 15, 2024 with early adoption permitted. While adoption of this ASU is not expected to have a material effect on the Company's consolidated financial condition, results of operations or cash flows, it will result in expanded income tax disclosures beginning with the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2026.

In November 2024, the FASB issued Accounting Standards Update 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"). ASU 2024-03 requires the disclosure of additional information about specific expense categories in the notes to the financial statements. The incremental disclosures may be presented on a prospective or retrospective basis. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impacts of this ASU on its consolidated financial statement disclosures including the method and timing of adoption.

In September 2025, the FASB issued Accounting Standards Update 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software ("ASU 2025-06"). ASU 2025-06 removes all references to software development stages in existing guidance and, instead, requires the capitalization of software development costs when the Company's management has authorized and committed to funding a project and it is probable the project will be completed and the software will be used to perform its intended function. This ASU may be applied on a prospective, retrospective or on a modified transition basis based on project and capitalization status before the adoption date. This ASU is effective for all fiscal years beginning after December 15, 2027 and interim periods beginning within those annual reporting periods, with early adoption permitted as of the beginning of an annual reporting period. The Company is currently assessing the impact of this ASU on its consolidated financial statements and is evaluating the method and timing of adoption.

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

(3) Revenue

The Company derives substantially all of its revenue from contracts from recurring service fees. While the majority of its agreements are generally cancellable by the client on 60 days’ notice or less, the Company also offers term agreements to its clients, which are generally two years in length. Recurring fees are mostly derived from cloud-based payroll and HCM software solutions which includes payroll processing and related services such as payroll reporting and tax filing services, time and labor services, time clock rentals, and HR-related software solutions, including employee management and benefits enrollment and administration, substantially all of which are delivered on a monthly basis. Substantially all of the Company’s recurring fees are satisfied over time as services are provided. The performance obligations related to recurring services are generally satisfied monthly as services are provided, with fees charged and collected based on a per-employee-per-month fee. The Company has certain optional performance obligations that are satisfied at a point in time including the sales of time clocks and W-2 services. Implementation services and other consist mainly of nonrefundable implementation fees, which involve setting the client up in, and loading data into, the Company’s cloud-based modules. These implementation activities are considered set-up activities. The Company has determined that the nonrefundable upfront fees provide certain clients with a material right to renew the contract.

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Disaggregation of revenue

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


	Three Months Ended September 30,
	2024		2025
Recurring fees	$	319,314	$	364,298
Implementation services and other	13,791		14,560
Total revenues from contracts	$	333,105	$	378,858

Deferred revenue

The timing of revenue recognition for recurring revenue is generally consistent with the timing of invoicing as they occur monthly as services are provided based on a per-employee-per-month fee. As such, the Company does not generally recognize contract assets or liabilities related to recurring revenue.

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


	Three Months Ended September 30,
	2024		2025
Balance at beginning of the period	$	24,883	$	28,306
Deferral of revenue	11,274		12,411
Revenue recognized

SEC Form 10-Q filed by Paylocity Holding Corporation