Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2017 | Aug. 04, 2017 | Dec. 31, 2016 | |
Document and Entity Information | |||
Entity Registrant Name | Paylocity Holding Corp | ||
Entity Central Index Key | 1,591,698 | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --06-30 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 774.8 | ||
Entity Common Stock, Shares Outstanding | 51,750,086 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2017 | Jun. 30, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 103,468 | $ 86,496 |
Accounts receivable, net | 2,040 | 1,681 |
Prepaid expenses and other | 14,879 | 7,409 |
Total current assets before funds held for clients | 120,387 | 95,586 |
Funds held for clients | 942,459 | 1,239,622 |
Total current assets | 1,062,846 | 1,335,208 |
Long-term prepaid expenses | 1,535 | 845 |
Capitalized internal-use software, net | 17,394 | 11,427 |
Property and equipment, net | 40,756 | 26,787 |
Intangible assets, net | 8,907 | 10,419 |
Goodwill | 6,003 | 6,003 |
Total assets | 1,137,441 | 1,390,689 |
Current liabilities: | ||
Accounts payable | 2,046 | 1,621 |
Accrued expenses | 30,301 | 24,979 |
Total current liabilities before client fund obligations | 32,347 | 26,600 |
Client fund obligations | 942,459 | 1,239,622 |
Total current liabilities | 974,806 | 1,266,222 |
Deferred rent | 14,621 | 4,646 |
Deferred income tax liabilities, net | 401 | 249 |
Total liabilities | 989,828 | 1,271,117 |
Stockholders' equity: | ||
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2016 and 2017 | ||
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2016 and 2017; 51,132 shares issued and outstanding at June 30, 2016 and 51,738 shares issued and outstanding at June 30, 2017 | 52 | 51 |
Additional paid-in capital | 192,837 | 171,515 |
Accumulated deficit | (45,276) | (51,994) |
Total stockholders' equity | 147,613 | 119,572 |
Total liabilities and stockholders' equity | $ 1,137,441 | $ 1,390,689 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands | Jun. 30, 2017 | Jun. 30, 2016 |
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 | 51,738 | 51,132 |
Common Stock, shares outstanding | 51,738 | 51,132 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Revenues: | |||
Recurring fees | $ 284,817 | $ 217,416 | $ 142,168 |
Interest income on funds held for clients | 3,631 | 2,688 | 1,901 |
Total recurring revenues | 288,448 | 220,104 | 144,069 |
Implementation services and other | 11,562 | 10,597 | 8,629 |
Total revenues | 300,010 | 230,701 | 152,698 |
Cost of revenues: | |||
Recurring revenues | 85,399 | 66,131 | 46,366 |
Implementation services and other | 38,588 | 31,954 | 24,530 |
Total cost of revenues | 123,987 | 98,085 | 70,896 |
Gross profit | 176,023 | 132,616 | 81,802 |
Operating expenses: | |||
Sales and marketing | 77,506 | 61,832 | 43,035 |
Research and development | 29,098 | 26,736 | 19,864 |
General and administrative | 62,123 | 47,598 | 32,824 |
Total operating expenses | 168,727 | 136,166 | 95,723 |
Operating income (loss) | 7,296 | (3,550) | (13,921) |
Other income (expense) | 73 | (124) | 54 |
Income (loss) before income taxes | 7,369 | (3,674) | (13,867) |
Income tax expense | 651 | 177 | 105 |
Net income (loss) | $ 6,718 | $ (3,851) | $ (13,972) |
Net income (loss) per share: | |||
Basic (in dollars per share) | $ 0.13 | $ (0.08) | $ (0.28) |
Diluted (in dollars per share) | $ 0.12 | $ (0.08) | $ (0.28) |
Weighted-average shares used in computing net income (loss) per share: | |||
Basic (in shares) | 51,415 | 50,913 | 50,127 |
Diluted (in shares) | 54,057 | 50,913 | 50,127 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total |
Balance at Jun. 30, 2014 | $ 50 | $ 125,255 | $ (34,171) | $ 91,134 |
Balance (in shares) at Jun. 30, 2014 | 49,564 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Follow-on offering, net of issuance costs | $ 1 | 18,366 | 18,367 | |
Follow-on offering, net of issuance costs (in shares) | 750 | |||
Stock-based compensation expense | 13,824 | 13,824 | ||
Stock options exercised | 4,335 | 4,335 | ||
Stock options exercised (in shares) | 452 | |||
Issuance of common stock upon vesting of restricted stock units (in shares) | 120 | |||
Issuance of common stock under employee stock purchase plan | 1,773 | 1,773 | ||
Issuance of common stock under employee stock purchase plan (in shares) | 83 | |||
Net settlement for taxes and/or exercise price related to equity awards | (7,881) | (7,881) | ||
Net settlement for taxes and/or exercise price related to equity awards (in shares) | (266) | |||
Net income (loss) | (13,972) | (13,972) | ||
Balance at Jun. 30, 2015 | $ 51 | 155,672 | (48,143) | 107,580 |
Balance (in shares) at Jun. 30, 2015 | 50,703 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Stock-based compensation expense | 18,641 | 18,641 | ||
Stock options exercised | 6,197 | 6,197 | ||
Stock options exercised (in shares) | 536 | |||
Issuance of common stock upon vesting of restricted stock units (in shares) | 120 | |||
Issuance of common stock under employee stock purchase plan | 2,991 | 2,991 | ||
Issuance of common stock under employee stock purchase plan (in shares) | 102 | |||
Net settlement for taxes and/or exercise price related to equity awards | (11,986) | (11,986) | ||
Net settlement for taxes and/or exercise price related to equity awards (in shares) | (329) | |||
Net income (loss) | (3,851) | (3,851) | ||
Balance at Jun. 30, 2016 | $ 51 | 171,515 | (51,994) | $ 119,572 |
Balance (in shares) at Jun. 30, 2016 | 51,132 | 51,132 | ||
Increase (Decrease) in Stockholders' Equity | ||||
Stock-based compensation expense | 28,507 | $ 28,507 | ||
Stock options exercised | $ 1 | 8,550 | 8,551 | |
Stock options exercised (in shares) | 691 | |||
Issuance of common stock upon vesting of restricted stock units (in shares) | 255 | |||
Issuance of common stock under employee stock purchase plan | 3,677 | 3,677 | ||
Issuance of common stock under employee stock purchase plan (in shares) | 127 | |||
Net settlement for taxes and/or exercise price related to equity awards | (19,859) | (19,859) | ||
Net settlement for taxes and/or exercise price related to equity awards (in shares) | (467) | |||
Excess tax benefits from stock-based compensation | 447 | 447 | ||
Net income (loss) | 6,718 | 6,718 | ||
Balance at Jun. 30, 2017 | $ 52 | $ 192,837 | $ (45,276) | $ 147,613 |
Balance (in shares) at Jun. 30, 2017 | 51,738 | 51,738 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Cash flows from operating activities: | |||
Net income (loss) | $ 6,718 | $ (3,851) | $ (13,972) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
Stock-based compensation expense | 26,734 | 17,563 | 13,169 |
Depreciation and amortization expense | 21,027 | 13,873 | 8,609 |
Deferred income tax expense | 152 | 150 | 91 |
Provision for doubtful accounts | 113 | 159 | 90 |
Loss on disposal of equipment | 253 | 712 | 256 |
Changes in operating assets and liabilities: | |||
Accounts receivable | (472) | (725) | (449) |
Prepaid expenses and other | (2,074) | (3,270) | (1,754) |
Accounts payable | 219 | 72 | (186) |
Accrued expenses | 6,465 | 8,310 | 5,251 |
Tenant improvement allowance | 2,845 | ||
Net cash provided by operating activities | 61,980 | 32,993 | 11,105 |
Cash flows from investing activities: | |||
Capitalized internal-use software costs | (13,641) | (8,391) | (4,215) |
Purchases of property and equipment | (21,338) | (16,083) | (9,020) |
Lease allowances used for tenant improvements | (2,845) | ||
Payments for acquisitions | (483) | (11,979) | |
Net change in funds held for clients | 297,163 | (648,403) | (173,958) |
Net cash provided by (used in) investing activities | 259,339 | (673,360) | (199,172) |
Cash flows from financing activities: | |||
Net change in client funds obligation | (297,163) | 648,403 | 173,958 |
Proceeds from follow-on offering, net of issuance costs | 18,367 | ||
Payments on initial public offering costs | (75) | ||
Proceeds from exercise of stock options | 34 | 137 | 247 |
Proceeds from employee stock purchase plan | 3,677 | 2,991 | 1,773 |
Taxes paid related to net share settlement of equity awards | (11,342) | (5,926) | (3,793) |
Excess tax benefits from stock-based compensation | 447 | ||
Net cash provided by (used in) financing activities | (304,347) | 645,605 | 190,477 |
Net change in Cash and Cash Equivalents | 16,972 | 5,238 | 2,410 |
Cash and Cash Equivalents-Beginning of Year | 86,496 | 81,258 | 78,848 |
Cash and Cash Equivalents-End of Year | 103,468 | 86,496 | 81,258 |
Supplemental Disclosure of Non-Cash Investing and Financing Activities | |||
Build-out allowances received from landlords | 1,888 | ||
Purchase of property and equipment and internal-use software, accrued but not paid | 667 | 607 | 210 |
Supplemental Disclosure of Cash Flow Information | |||
Cash paid for income taxes, net of refunds | $ 28 | $ 3 | $ 162 |
Organization and Description of
Organization and Description of Business | 12 Months Ended |
Jun. 30, 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. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | (2) Summary of Significant Accounting Policies (a) Basis of Presentation, Consolidation, and Use of Estimates The accompanying consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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 net deferred income tax assets and the best estimate of selling price for revenue recognition purposes. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. Accounting estimates used in the preparation of these consolidated financial statements change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes. The consolidated financial statements reflect the financial position and operating results of Paylocity Holding Corporation and include its wholly owned subsidiary Paylocity Corporation. Intercompany accounts and transactions have been eliminated in consolidation. (b) Concentrations of Risk The Company regularly maintains cash balances that exceed Federal Depository Insurance Corporation limits. No individual client represents 10% or more of total revenues. For all periods presented, 100% of total revenues were generated by clients in the United States. (c) Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. (d) Accounts Receivable Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the statements of cash flows. The Company maintains an allowance for doubtful accounts reflecting estimated potential losses in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and the Company’s clients’ financial conditions, the amount of receivables in dispute, the current receivables aging and current payment patterns. The Company reviews its allowance for doubtful accounts quarterly. Past due balances over 60 days and over a specified amount are reviewed individually for collectability. All other balances are reviewed on a pooled basis. Account balances are charged off against the allowance after all commercially reasonable means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its clients. Activity in the allowance for doubtful accounts was as follows: For the Years Ended June 30, 2015 2016 2017 Balance at the beginning of the year $ 126 $ 149 $ 193 Charged to expense 90 159 113 Write-offs (67) (115) (40) Balance at the end of the year $ 149 $ 193 $ 266 (e) Prepaid Expenses and Other Assets Prepaid expenses and other assets consist primarily of tenant improvement allowance receivable from landlord, prepaid licensing fees, prepaid insurance premiums, deposits with vendors and time clocks available for sale or lease. (f) Capitalized Internal-Use Software The Company applies Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350-40, Intangibles—Goodwill and Other—Internal-Use Software , to the accounting for costs of internal-use software. Internal-use software costs are capitalized when application development begins, it is probable that the project will be completed, and the software will be used as intended. Costs associated with preliminary project stage activities, training, maintenance and all other post implementation stage activities are expensed as incurred. The Company also capitalizes certain costs related to specific upgrades and enhancements when it is probable the expenditures will result in significant additional functionality. The capitalization policy provides for the capitalization of certain payroll costs for employees who are directly associated with developing internal-use software as well as certain external direct costs, such as consulting fees. Capitalized employee costs are limited to the time directly spent on such projects. Capitalized internal-use software costs are amortized on a straight-line basis over the estimated useful lives, generally over a 24-month period. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. (g) Property and Equipment and Long-Lived Assets Property and equipment are stated at cost. Depreciation on property and equipment is calculated on the straight-line method over the estimated useful lives of the assets, generally three to seven years for most classes of assets, or over the term of the related lease for leasehold improvements. Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares the undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. (h) Intangible Assets, Net of Accumulated Amortization Intangible assets are comprised primarily of client list acquisitions and are reported net of accumulated amortization on the consolidated balance sheets. Client relationships use the straight-line method of amortization over a nine-year time frame from the date of acquisition, while non-solicitation agreements use the straight-line method of amortization over the lives of the related agreements. The Company tests intangible assets for potential impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. (i) Goodwill Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. As described in Note 5, the Company has recorded goodwill in connection with the acquisitions of certain assets of BFKMS, Inc. and Synergy Payroll, LLC. Goodwill is not amortized, but instead is tested for impairment at least annually in the fourth quarter. ASU 2011-08, Testing Goodwill for Impairment provides an entity the option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount prior to performing the two-step impairment test. If the estimated fair value of a reporting unit, including goodwill, is less than its carrying amount, the two-step goodwill impairment test is required. Otherwise, no further analysis is required. If the two-step goodwill impairment test is required, the fair value of the reporting unit is compared with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying amount, an indication of goodwill impairment exists for the reporting unit. In the second step, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of the goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. In the event the fair value of the reporting unit exceeds its carrying amount, step two is not performed. The Company performs its annual impairment review of goodwill in its fiscal fourth quarter or when a triggering event occurs between annual impairment tests. No impairment was recorded in fiscal 2015, 2016 or 2017 as a result of the Company’s qualitative assessments over its single reporting segment. (j) Deferred Rent The Company has operating lease agreements for its office space, which contain provisions for future rent increases, periods of rent abatement and build-out allowances. The Company records monthly rent expense for each lease equal to the total payments due over the lease term, divided by the number of months of the lease term. Build-out allowances are recorded as part of leasehold improvements and the incentive is amortized over the lease term against depreciation. The difference between recorded rent expense and the amount paid is included in “Accrued expenses” and as “Deferred rent” in the accompanying consolidated balance sheets. (k) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Significant management judgment is required in determining the period in which the reversal of a valuation allowance should occur. The Company is required to consider all available evidence, both positive and negative, such as historical levels of income and future forecasts of taxable income among other items, in determining whether a full or partial release of its valuation allowance is required. The Company is also required to schedule future taxable income in accordance with accounting standards that address income taxes to assess the appropriateness of a valuation allowance, which further requires the exercise of significant management judgment. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties as an element of income tax expense. Refer to Note 11 for additional information on income taxes. (l) Revenue Recognition The Company recognizes revenue in accordance with ASC 605-25, Revenue Recognition—Multiple Element Arrangements , Accounting Standards Update No. 2009-13, Multiple-Deliverable Revenue Arrangements (“ ASU 2009‑13 ”), and Staff Accounting Bulletin 104, Revenue Recognition . Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the fee is fixed or determinable and collection of the revenue is probable. The Company derives its revenue predominantly from recurring fees and non-recurring service fees. Recurring fees are collected under agreements for payroll, timekeeping, HR-related cloud-based computing services and monthly time clock rentals, all of which are generally cancellable by the client on 60 days’ notice or less. Non-recurring service fees consist mainly of implementation and custom reporting services. Such fees are billed to clients and revenue is recorded upon completion of the service. The Company’s agreements do not include general rights of return and do not provide clients with the right to take possession of the software supporting the services being provided. As such, the agreements are accounted for as service contracts. Interest income collected on funds held for clients is recognized in recurring revenues when earned as the collection, holding and remittance of these funds are critical components of providing these services. Most multiple-element arrangements include a short implementation services phase, which involves establishing the client within and loading data into the Company’s cloud-based applications. Major recurring fees included in multiple-element arrangements include: · Payroll processing and related services, including payroll reporting and tax filing services delivered on a weekly, biweekly, semi-monthly, or monthly basis depending upon the payroll frequency of the client and on an annual basis if a client selects W-2 preparation and processing services, · Time and attendance reporting services, including time clock rentals, delivered on a monthly basis, and · Cloud-based HR software solutions, including employee administration and benefits enrollment and administration, delivered on a monthly basis. For each agreement, the Company evaluates whether the individual deliverables qualify as separate units of accounting. If one or more of the deliverables does not have standalone value upon delivery, the deliverables that do not have standalone value are generally combined and treated as a single unit of accounting by frequency of occurrence for the product category involved such as biweekly payroll or monthly timekeeping services. Revenues for arrangements treated as a single unit of accounting are generally recognized within the same month that the services are rendered given that the agreements are cancellable with 60 days’ or less notice. In determining whether implementation services can be accounted for separately from recurring revenues, the Company considers the nature of the implementation services and the availability of the implementation services from other vendors. The Company was able to establish standalone value for implementation activities based on the historical activity of third-party vendors that performed these services and as such, accounts for such implementation services separate from the recurring revenues. If the recurring services have standalone value upon delivery, the Company accounts for each separately and revenues are recognized as services are delivered with allocation of consideration based on the relative selling price method as established in ASU 2009-13. That method requires the selling price of each element in a multiple-deliverable arrangement to be based on, in descending order: (i) vendor specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of fair value (“TPE”) or (iii) management’s best estimate of the selling price (“BESP”). The Company is not able to establish VSOE because the deliverables are sold across an insufficiently narrow range of prices on a stand-alone basis and is also not able to establish TPE because no third-party offerings are reasonably comparable to the Company’s offerings. The Company thus established its BESP by service offering, requiring the use of significant estimates and judgment. The Company considers numerous factors, including the nature of the deliverables themselves; the geography of the sale; and pricing and discounting practices utilized by the Company’s sales force. Arrangement consideration is allocated to each deliverable based on the established BESP and subject to the limitation that because the arrangements are cancellable with 60 days’ or less notice, recurring revenue is not allocated to any deliverable until the consideration has been earned, typically with each payroll cycle or monthly, depending on the service. Revenues generated from sales through partners or utilizing partner services are recognized in accordance with the appropriate accounting guidance of ASC 605-45, Principal Agent Considerations . The Company reports revenue generated through partners or utilizing partner services at the gross amount billed to clients when (i) the Company is the primary obligor, (ii) the Company has latitude to establish the price charged and (iii) the Company bears the credit risk in the transaction. Sales taxes collected from clients and remitted to governmental authorities where applicable are accounted for on a net basis and therefore are excluded from revenues in the statements of operations. (m) Cost of Revenues Cost of revenues consists primarily of the cost of recurring revenues and implementation services, which are expensed when incurred. Cost of revenues for recurring revenues consists primarily of costs to provide recurring services and support to the Company’s clients, and includes amortization of capitalized internal-use software. Cost of revenues for implementation services and other consists primarily of costs to provide implementation and other services. (n) Advertising Advertising costs are expensed as incurred. Advertising costs amounted to $187, $219 and $199 for the years ended June 30, 2015, 2016 and 2017, respectively. (o) 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 their vesting term or the term of the ESPP purchase period. (p) Commitments and Contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. (q) Segment Information The Company’s chief operating decision maker reviews the financial results of the Company in total when evaluating financial performance and for purposes of allocating resources. The Company has thus determined that it operates in a single cloud-based software solution reporting segment. (r) 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 and is evaluating adoption methods. 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 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 is evaluating the timing of adoption. 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, it does not expect the portions of the updated standard that relate to excess tax benefits and deficiencies to have a material impact on the Consolidated Financial Statements and disclosures. Additionally, 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. |
Funds Held for Clients and Clie
Funds Held for Clients and Client Fund Obligations 10K | 12 Months Ended |
Jun. 30, 2017 | |
Funds Held for Clients and Client Fund Obligations | |
Funds Held for Clients and Client Fund Obligations | (3) Funds Held for Clients and Client Fund Obligations The Company obtains funds from clients in advance of performing payroll and payroll tax filing services on behalf of those clients. Funds held for clients represent assets that are used solely for the purposes of satisfying the obligations to remit funds relating to payroll and payroll tax filing services. Funds held for clients are held in demand deposit and money market accounts at major financial institutions. The Company has classified funds held for clients as a current asset since these funds are held solely for the purposes of satisfying the client fund obligations. Client fund obligations represent the Company’s contractual obligations to remit funds to satisfy clients’ payroll and tax payment obligations and are recorded in the accompanying balance sheets at the time that the Company obtains funds from clients. The client fund obligations represent liabilities that will be repaid within one year of the balance sheet date. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurement | |
Fair Value Measurement | (4) Fair Value Measurements The Company applies the fair value measurement and disclosure provisions of ASC 820, Fair Value Measurements and Disclosures , and ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS . Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: · Level 1—Quoted prices in active markets for identical assets and liabilities. · Level 2—Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. · Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. Substantially all of the Company’s assets that are measured at fair value on a recurring basis are measured using Level 1 inputs. The Company considers the recorded value of its financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, funds held for clients, accounts payable and client fund obligations to approximate the fair value of the respective assets and liabilities at June 30, 2016 and 2017 based upon the short-term nature of these assets and liabilities. |
Business Combinations
Business Combinations | 12 Months Ended |
Jun. 30, 2017 | |
Business Combinations | |
Business Combinations | (5) Business Combinations The Company had agreements with two resellers. The Company, under the revenue sharing provisions of the terminated reseller agreements, paid $2,495 to BFKMS Inc. during fiscal year 2014, and $2,081 and $2,361 to Synergy Payroll, LLC during fiscal years 2014 and 2015, respectively. The reseller agreements provided that the Company was required to acquire the assets of the resellers upon termination of the agreements. The following acquisitions were accounted for as a business combination in accordance with ASC 805, Business Combinations. The Company recorded the acquisitions using the acquisition method of accounting and recognized assets at their fair value as of the date of acquisition. In May 2014, the Company acquired certain assets sufficient to sell the Company’s products in the Southern California marketplace upon the termination of its reseller agreement with BFKMS Inc. The total consideration paid for the acquisition was $9,435, of which $6,450 and $2,985 was paid during the years ended June 30, 2014 and 2015, respectively. The following table summarizes the fair value of the assets acquired at the date of acquisition: At May 23, 2014 Intangible assets $ 6,400 Goodwill 3,035 Total purchase price $ 9,435 The $6,400 of amortizable intangible assets consists of $6,180 in client relationships and $220 in a non-solicitation agreement. Goodwill will be amortized over a period of 15 years for income tax purposes. In April 2015, the Company acquired certain assets sufficient to sell the Company’s products in the State of New Jersey marketplace upon the termination of its reseller agreement with Synergy Payroll, LLC, as part of the Company’s strategy of simplifying its sales channels. The total consideration for the acquisition was $9,508, of which $8,994 was paid at closing. The Company paid $483 during fiscal year 2016, which was net of adjustments in accordance with the asset purchase agreement. The following table summarizes the fair value of the assets acquired at the date of acquisition: At April 16, 2015 Intangible assets $ 6,540 Goodwill 2,968 Total purchase price $ 9,508 The $6,540 of amortizable intangible assets consists of $6,400 in client relationships and $140 in non-solicitation agreements. Goodwill will be amortized over a period of 15 years for income tax purposes. The balance of the acquired intangibles, net of amortization, is stated separately on the consolidated balance sheet. Direct costs related to the acquisition were recorded as general and administrative expense as incurred. |
Capitalized Internal-Use Softwa
Capitalized Internal-Use Software | 12 Months Ended |
Jun. 30, 2017 | |
Capitalized Internal-Use Software. | |
Capitalized Internal-Use Software | (6) Capitalized Internal-Use Software Capitalized internal-use software and accumulated amortization were as follows: Year ended June 30, 2016 2017 Capitalized internal-use software $ 34,249 $ 49,663 Accumulated amortization (22,822) (32,269) Capitalized internal-use software, net $ 11,427 $ 17,394 Amortization of capitalized internal-use software amounted to $2,606, $5,446 and $9,447 for the years ended June 30, 2015, 2016 and 2017, respectively and is included in Cost of Revenues—Recurring Revenues. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Jun. 30, 2017 | |
Property and Equipment | |
Property and Equipment | (7) Property and Equipment The major classes of property and equipment are as follows as of June 30: Year ended June 30, 2016 2017 Office equipment $ 2,528 $ 3,591 Computer equipment 18,139 24,411 Furniture and fixtures 4,308 7,547 Software 5,059 4,954 Leasehold improvements 11,164 21,426 Time clocks rented by clients 4,046 4,240 Total 45,244 66,169 Accumulated depreciation (18,457) (25,413) Property and equipment, net $ 26,787 $ 40,756 Depreciation expense amounted to $5,084, $6,905 and $10,068 for the years ended June 30, 2015, 2016 and 2017, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Jun. 30, 2017 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | (8) Goodwill and Intangible Assets Goodwill represents the excess of cost over the net tangible and identifiable intangible assets of acquired businesses. Goodwill amounts are not amortized, but rather tested for impairment at least annually in the fourth quarter. Identifiable intangible assets acquired in business combinations are recorded based on fair value at the date of acquisition and amortized over their estimated useful lives. See Note 5 for further information regarding the acquisitions completed in 2014 and 2015. The Company’s amortizable intangible assets have estimated useful lives as follows: Weighted Average Year ended June 30, Useful 2016 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 (2,521) (4,033) Intangible assets, net $ 10,419 $ 8,907 Amortization expense for acquired intangible assets was $919, $1,522 and $1,512 for the years ended June 30, 2015, 2016 and 2017, respectively. Future amortization expense for acquired intangible is as follows, as of June 30, 2017: Year ending June 30, 2018 $ 1,427 2019 1,398 2020 1,398 2021 1,398 2022 1,398 Thereafter 1,888 Total $ 8,907 |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Jun. 30, 2017 | |
Accrued Expenses | |
Accrued Expenses | (9) Accrued Expenses The components of accrued expenses are as follows: Year ended June 30, 2016 2017 Accrued payroll and personnel costs $ 21,658 $ 25,131 Other 3,321 5,170 Total accrued expenses $ 24,979 $ 30,301 |
Leases
Leases | 12 Months Ended |
Jun. 30, 2017 | |
Leases | |
Leases | (10) Leases The Company primarily leases office space in Illinois, California, Florida, Idaho, New Jersey, New Hampshire and New York under non-cancellable operating leases expiring on various dates from June 2018 through October 2032. The leases provide for increasing annual base rents and oblige the Company to fund proportionate share of operating expenses and, in certain cases, real estate taxes. The Company also leases various types of office and production related equipment under non-cancellable operating leases expiring on various dates from April 2018 through December 2021. In June 2016, the Company entered into a lease for approximately 310 rentable square feet of office space located in Schaumburg, Illinois. The Company intends to use the leased premises as its headquarters upon the expiration of the lease of its current headquarters. The lease provides for phased delivery and commencement dates, with commencement expected to occur on the following approximate dates: Phase I (June 1, 2017), Phase II (November 1, 2017), Phase III (July 1, 2018), and Phase IV (July 1, 2019). The actual commencement dates are subject to timely delivery of the premises by the landlord. Under the terms of the lease, the Company will receive a tenant improvement allowance equal to $65.00 per rentable square foot and a 12-month rent abatement period for each lease phase. The lease also provides for a term beginning on the Phase I commencement date and ending 180 full calendar months after the landlord delivers the Phase II premises to the Company, which is expected to be on or about November 1, 2017, with two subsequent five-year renewal options. In February 2017, the Company entered into a lease for approximately 62 rentable square feet of office space located in Meridian, Idaho. The Company intends to use the leased premises to accommodate the continued expansion of its employee base in the western region of the United States. The lease provides for phased delivery and commencement dates with commencement expected to occur on the following approximate dates: Phase I (July 1, 2018) and Phase II (February 1, 2020). The actual commencement dates are subject to timely delivery of the premises by the landlord. Under the terms of the lease, the Company will receive a tenant improvement allowance equal to $50.00 per rentable square foot and a 3-month rent abatement period for each lease phase. The lease also provides for a term beginning on the Phase I commencement date and ending after 120 full calendar months with four subsequent five-year renewal options. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease including any periods of free rent and future rent increases. Rental expense for operating leases, including amortization of leasehold improvements, was $4,238, $5,596 and $8,571 for the years ended June 30, 2015, 2016 and 2017, respectively. Future minimum lease payments under non-cancellable operating leases (with initial or remaining lease terms in excess of one year) as of June 30, 2017 are: Year ending June 30, 2018 $ 7,025 2019 8,354 2020 8,573 2021 9,677 2022 8,548 Later years, through 2033 75,161 Total minimum lease payments $ 117,338 |
Income Taxes
Income Taxes | 12 Months Ended |
Jun. 30, 2017 | |
Income Taxes | |
Income Taxes | (11) Income Taxes (a) Income Taxes Income tax expense for the years ended June 30, 2015, 2016 and 2017 consists of the following: Year ended June 30, 2015 2016 2017 Current taxes U.S. federal $ — $ — $ — State and local 14 27 500 Deferred taxes: U.S. federal 83 136 137 State and local 8 14 14 Total income tax expense $ 105 $ 177 $ 651 (b) Tax Rate Reconciliation Income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 34% to pretax income (loss) as a result of the following: Year ended June 30, 2015 2016 2017 Income tax expense (benefit) at statutory federal rate $ (4,716) $ (1,249) $ 2,503 Increase (reduction) in income taxes resulting from: Research and development credit, net of federal income tax benefit (276) (504) (1,025) Non-deductible expenses 418 557 685 Change in valuation allowance 4,570 2,590 (1,349) State and local income taxes, net of federal income tax benefit (562) (432) (196) Other 671 (785) 33 $ 105 $ 177 $ 651 (c) Components of Deferred Tax Assets and Liabilities The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at June 30, 2016 and 2017 are presented below. Year ended June 30, 2016 2017 Deferred tax assets: Deferred rent $ 694 $ 1,090 Allowance for doubtful accounts 73 100 Accrued expenses 1,812 2,290 Stock-based compensation 7,367 11,034 Net operating loss carryforwards 4,498 253 Research and development and other credits 3,236 4,984 AMT Credits 11 29 Intangible assets 413 657 Total deferred tax assets 18,104 20,437 Valuation allowance (10,038) (8,689) Net deferred tax assets 8,066 11,748 Deferred tax liabilities: Research and development costs (3,681) (5,649) Prepaid expenses (91) — Depreciation (4,543) (6,500) Total deferred liabilities (8,315) (12,149) Net deferred tax liability $ (249) $ (401) In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized through the generation of future taxable income. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income and tax-planning strategies in making this assessment. Taxable loss for the years ended June 30, 2015, 2016 and 2017 was approximately $12,424, $8,330 and $3,294, respectively, prior to utilization or establishment of net operating loss carryforwards. Based upon the same three-year period pre-tax book income, the Company is in a three-year cumulative loss position. As a result of this and other assessments in the year ended June 30, 2017, management concluded that a full valuation allowance is required for all deferred tax assets except for those associated with indefinite-lived intangible assets. At June 30, 2017, the Company has gross excess tax benefits from stock option exercises of approximately $30,264 for federal and state income tax purposes. At June 30, 2017, the Company has net operating loss carryforwards for federal income tax purposes of approximately $484 and state income tax purposes of approximately $1,777, both excluding the excess tax benefits from stock option exercises noted above. The net tax impact of $10,290 and $644 for federal and state income tax purposes, respectively, related to the excess tax benefits from stock option exercises will be credited to additional paid-in capital when realized. The federal NOL carryforwards expire from 2030 to 2037.The state NOL carryforwards expire from 2020 to 2037. The Company also has gross federal and state research and development tax credit and other state credit carryforwards of approximately $4,984, which expire between 2018 and 2037. In addition, the Company has alternative minimum tax credit carryforwards of approximately $11, which are available to reduce future federal regular income taxes, if any, over an indefinite period. The Company had no unrecognized tax benefits as of June 30, 2015, 2016 and 2017, respectively. The Company files income tax returns with the United States federal government and various state jurisdictions. Certain tax years remain open for federal and state tax reporting jurisdictions in which the Company does business due to net operating loss carryforwards and tax credits unutilized from such years or utilized in a period remaining open for audit under normal statute of limitations relating to income tax liabilities. The Company, including its domestic subsidiary, files a consolidated federal income tax return. For years before 2013 (fiscal year ended June 30, 2014), the Company is no longer subject to U.S. federal examination; however, the Internal Revenue Service (IRS) has the ability to review years prior to 2013 to the extent the Company utilized tax attributes carried forward from those prior years. The statute of limitations on state filings is generally three to four years. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Jun. 30, 2017 | |
Stockholders' Equity | |
Stockholders' Equity | (12) Stockholders’ Equity Common Stock Holders of common stock are entitled to one vote per share and to receive dividends, when declared. The holders have no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares. |
Benefit Plans
Benefit Plans | 12 Months Ended |
Jun. 30, 2017 | |
Benefit Plans | |
Benefit Plans | (13) Benefit Plans (a) Equity Incentive Plans The Company maintains a 2008 Equity Incentive Plan (the “2008 Plan”) and a 2014 Equity Incentive Plan (the “2014 Plan”) pursuant to which the Company has reserved shares of its common stock for issuance to its employees, directors and non-employee third parties. The 2014 Plan serves as the successor to the 2008 Plan and permits the granting of 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 (“Evergreen provision”). 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. The Company’s board of directors determined that, effective January 1, 2017, it would increase the number of common shares in reserve for issuance under the 2014 Plan by 2,314 shares. As of June 30, 2017, the Company had 12,433 shares allocated to the plans, of which 4,206 shares were subject to outstanding options or awards. Generally, the Company issues previously unissued shares for the exercise of stock options or vesting of awards; however, shares previously subject to 2014 Plan grants or awards that are forfeited or net settled at exercise or release may be reissued to satisfy future issuances. The following table summarizes changes during the year ended June 30, 2017 in the number of shares available for grant under the Company’s equity incentive plans: Number of Available for grant at July 1, 2016 6,244 January 1, 2017 Evergreen provision increase 2,314 RSUs granted (774) Shares withheld in settlement of taxes and/or exercise price 467 Forfeitures 89 Shares removed (113) Available for grant at June 30, 2017 8,227 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 audited consolidated statements of operations: Year ended June 30, 2015 2016 2017 Cost of revenue – recurring $ 1,532 $ 1,648 $ 2,162 Cost of revenue – non-recurring 1,222 1,127 1,357 Sales and marketing 3,247 4,441 6,287 Research and development 2,533 2,789 3,086 General and administrative 4,635 7,558 13,842 Total stock-based compensation expense $ 13,169 $ 17,563 $ 26,734 In addition, the Company capitalized $655, $1,078 and $1,773 of stock-based compensation costs in its internal-use software in the years ended June 30, 2015, 2016 and 2017, respectively. In June 2017, Peter McGrail ceased to serve as the Company’s Chief Financial Officer, but continued to serve as an employee of the Company. In connection with Mr. McGrail’s modified employment arrangement, the compensation committee of the Board of Directors approved modifications to terms of the unvested equity awards granted to Mr. McGrail. Any awards held by Mr. McGrail that are subject to time-based vesting will become fully-vested upon his death or disability. Additionally, any performance-based restricted stock unit (“PSU”) awards held by Mr. McGrail will continue to vest and settle based upon actual achievement of previously-established performance metrics, with Mr. McGrail receiving a pro-rata share of the PSU awards based on the number of days Mr. McGrail is employed over the vesting period. As a result of these award modifications, the Company recognized $2,925 in additional stock-based compensation expense for the fiscal year ended June 30, 2017, which was included in general and administrative expense in the Company’s consolidated statements of operations. Under the 2008 and 2014 Plans, the exercise price of each option cannot be less than the fair value of a share of common stock on the grant date. The options typically vest ratably over a three or four year period and expire 10 years from the grant date. Stock-based compensation expense for the fair value of the options at their grant date is recognized ratably over the vesting schedule for each separately vesting portion of the award. The Company values stock options using the Black-Scholes option-pricing model, which requires the input of subjective assumptions, including the risk-free interest rate, expected life, expected stock price volatility and dividend yield. The risk-free interest rate assumption is based upon observed interest rates for U.S. Treasury securities consistent with the expected term of the Company’s employee stock options. The expected life represents the period of time the stock options are expected to be outstanding and is based on the simplified method. Under the simplified method, the expected life of an option is presumed to be the mid-point between the vesting date and the end of the contractual term. As the Company has a limited history of trading as a public company, the Company utilizes the simplified method due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the stock options. Therefore, the expected volatility is based on historical volatilities for publicly traded stock of comparable companies over the estimated expected life of the stock options. The Company assumed no dividend yield because it does not expect to pay dividends in the near future, which is consistent with the Company’s history of not paying dividends. There were no stock options granted during the year ended June 30, 2017. The following table summarizes the assumptions used for estimating the fair value of stock options granted for the years ended June 30: Year ended June 30, 2015 2016 Valuation assumptions: Expected dividend yield Expected volatility Expected term (years) 6.25 Risk-free interest rate Stock option activity during the periods indicated is as follows: Outstanding Options Weighted Weighted average average remaining Aggregate Number of exercise contractual intrinsic shares price term (years) value Balance at July 1, 2016 3,464 $ 11.75 6.70 $ 108,944 Options forfeited (22) $ 18.88 Options exercised (691) $ 12.37 Balance at June 30, 2017 2,751 $ 11.54 5.69 $ 92,556 Options exercisable at June 30, 2017 2,395 $ 9.80 5.47 $ 84,757 Options vested and expected to vest at June 30, 2017 2,742 $ 11.47 5.68 $ 92,414 There were no stock options granted during the year ended June 30, 2017. The weighted average grant date fair value of options granted during the years ended June 30, 2015 and 2016 was $11.14 and $12.92, respectively. The total intrinsic value of options exercised during the years ended June 30, 2015, 2016 and 2017 was $8,802, $13,362 and $20,802, respectively. At June 30, 2017, there was $625 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options granted. That cost is expected to be recognized over a weighted average period of 1.36 years. The following table summarizes information about stock options outstanding and stock options exercisable at June 30, 2017: Options Outstanding Options Exercisable Price Range Number of Weighted Weighted Number of Weighted $1.31 to $3.58 463 3.15 $ 1.49 463 $ 1.49 $3.59 to $5.96 854 5.14 $ 4.88 854 $ 4.88 $5.97 to $12.02 224 6.03 $ 7.04 128 $ 7.04 $12.03 to $20.90 796 6.72 $ 17.00 796 $ 17.00 $20.91 to $35.28 414 7.48 $ 28.46 154 $ 27.16 Total 2,751 5.69 $ 11.54 2,395 $ 9.80 The Company may also grant RSUs under the 2014 Plan with terms determined at the discretion of the compensation committee of the Company’s board of directors. RSUs generally vest over three or four years following the grant date. Certain RSU awards have time-based vesting conditions while other RSUs vest based on the achievement of certain revenue metrics in future fiscal years. The following table represents restricted stock unit activity during the year ended June 30, 2017: Units Weighted RSU balance at July 1, 2016 1,003 $ 32.74 RSUs granted 774 $ 45.66 RSUs vested (255) $ 32.97 RSUs forfeited (67) $ 38.09 RSU balance at June 30, 2017 1,455 $ 39.96 RSUs expected to vest at June 30, 2017 1,269 $ 39.59 At June 30, 2017, there was $20,599 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 1.89 years. The total excess income tax benefits for stock-based compensation arrangements was $5,562, $8,228 and $15,130 for the years ended June 30, 2015, 2016 and 2017, respectively. As described in Note 2, the Company will adopt ASU 2016-09 as of July 1, 2017. As a result, in the future, the Company will recognize these tax benefits through income tax expense instead of additional paid-in capital as required under current GAAP. (b) Employee Stock Purchase Plan Under the Company’s Employee Stock Purchase Plan (“ESPP”), the Company can grant stock purchase rights to all eligible employees during specific offering periods not to exceed twenty-seven months. Each offering period will begin on the trading day closest to May 16 and November 16 of each year. Shares are purchased through employees’ payroll deductions, up to a maximum of 10% of employees’ compensation for each purchase period, at a purchase price equal to 85% of the lesser of the fair market value of the Company’s common stock at the first trading day of the applicable offering period or the purchase date. Participants may purchase up to $25 worth of common stock or 2 shares of common stock in any one year. The ESPP is considered compensatory and results in compensation expense. As of June 30, 2017, a total of 824 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. For fiscal year 2017, the Company’s board of directors determined that it would not increase the number of common shares reserved for issuance under the ESPP. The Company issued a total of 127 shares upon the completion of its six-month offering periods ending November 15, 2016 and May 15, 2017. The Company recorded compensation expense attributable to the ESPP of $656, $1,069 and $1,263 for the years ended June 30, 2015, 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: Year ended June 30, 2015 2016 2017 Valuation assumptions: Expected dividend yield Expected volatility 35.5 - 48.4% 44.1 - 53.4% 38.9 - 53.4% Expected term (years) 0.3 - 0.5 0.5 0.5 Risk ‑ free interest rate 0.04 - 0.11% 0.11 - 0.31% 0.28 - 1.02% (c) 401(k) Plan The Company maintains a 401(k) plan with a safe harbor matching provision that covers all eligible employees. Up to December 31, 2015, the Company matched 50% of the employees’ contributions up to 6% of their gross pay. Effective January 1, 2016, the Company increased its match to 50% of employees’ contributions up to 8% of their gross pay. Contributions were $1,656, $2,717 and $3,667 for the years ended June 30, 2015, 2016 and 2017, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies | |
Commitments and Contingencies | (14) Commitments and Contingencies (a) Employment Agreements The Company has employment agreements with certain of its key officers. The agreements allow for minimum annual compensation increases, participation in equity incentive plans and bonuses for annual performance as well as certain change of control events as defined in the agreements. (b) Litigation From time to time, the Company is subject to litigation arising in the ordinary course of business. Many of these proceedings are covered in whole or in part by insurance. In the opinion of the Company’s management, the ultimate disposition of any matters currently outstanding or threatened will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity. |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Jun. 30, 2017 | |
Net Loss Per Share | |
Net Income Per Share | (15) Earnings Per Share Basic net income (loss) per 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: Year ended June 30, 2015 2016 2017 Numerator: Net income (loss) $ (13,972) $ (3,851) $ 6,718 Denominator: Weighted-average shares used in computing net income (loss) per share: Basic 50,127 50,913 51,415 Weighted-average effect of potentially dilutive shares: Employee stock options and restricted stock units — — 2,642 Diluted 50,127 50,913 54,057 Net income (loss) per share: Basic $ (0.28) $ (0.08) $ 0.13 Diluted $ (0.28) $ (0.08) $ 0.12 The following table summarizes the outstanding employee stock options, restricted stock units and employee stock purchase plan shares that were excluded from the diluted per share calculation for the periods presented because to include them would have been anti-dilutive: Year ended June 30, 2015 2016 2017 Employee stock options 3,956 3,464 145 Restricted stock units 386 1,003 627 Employee stock purchase plan shares 13 15 14 Total 4,355 4,482 786 |
Selected Quarterly Financial Da
Selected Quarterly Financial Data (unaudited) | 12 Months Ended |
Jun. 30, 2017 | |
Selected Quarterly Financial Data (unaudited) | |
Selected Quarterly Financial Data (unaudited) | (16) Selected Quarterly Financial Data (unaudited) The following tables set forth selected unaudited quarterly statements of operations data for each of the eight quarters in the years ended June 30, 2016 and 2017. Quarter Ended September 30, December 31, 2015 2015 March 31, 2016 June 30, 2016 Consolidated Statements of Operations Data Revenues $ 45,108 $ 55,184 $ 70,570 $ 59,839 Gross profit $ 24,913 $ 31,084 $ 43,361 $ 33,258 Operating income (loss) $ (3,417) $ (1,294) $ 6,201 $ (5,040) Net income (loss) $ (3,435) $ (1,165) $ 6,161 $ (5,412) Net income (loss) per share: Basic $ (0.07) $ (0.02) $ 0.12 $ (0.11) Diluted $ (0.07) $ (0.02) $ 0.12 $ (0.11) Weighted-average shares used in computing net income (loss) per share: Basic 50,744 50,890 50,962 51,058 Diluted 50,744 50,890 53,424 51,058 Quarter Ended September 30, December 31, 2016 2016 March 31, 2017 June 30, 2017 Consolidated Statements of Operations Data Revenues $ 65,022 $ 68,654 $ 90,273 $ 76,061 Gross profit $ 36,663 $ 38,271 $ 58,191 $ 42,898 Operating income (loss) $ (2,507) $ (1,643) $ 14,880 $ (3,434) Net income (loss) $ (2,568) $ (1,671) $ 14,801 $ (3,844) Net income (loss) per share: Basic $ (0.05) $ (0.03) $ 0.29 $ (0.07) Diluted $ (0.05) $ (0.03) $ 0.27 $ (0.07) Weighted-average shares used in computing net income (loss) per share: Basic 51,231 51,384 51,447 51,602 Diluted 51,231 51,384 54,002 51,602 |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Basis of Presentation, Consolidation, and Use of Estimates | (a) Basis of Presentation, Consolidation, and Use of Estimates The accompanying consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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 net deferred income tax assets and the best estimate of selling price for revenue recognition purposes. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. Accounting estimates used in the preparation of these consolidated financial statements change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes. The consolidated financial statements reflect the financial position and operating results of Paylocity Holding Corporation and include its wholly owned subsidiary Paylocity Corporation. Intercompany accounts and transactions have been eliminated in consolidation. |
Concentrations of Risk | (b) Concentrations of Risk The Company regularly maintains cash balances that exceed Federal Depository Insurance Corporation limits. No individual client represents 10% or more of total revenues. For all periods presented, 100% of total revenues were generated by clients in the United States. |
Cash and Cash Equivalents | (c) Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. |
Accounts Receivable | (d) Accounts Receivable Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the statements of cash flows. The Company maintains an allowance for doubtful accounts reflecting estimated potential losses in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and the Company’s clients’ financial conditions, the amount of receivables in dispute, the current receivables aging and current payment patterns. The Company reviews its allowance for doubtful accounts quarterly. Past due balances over 60 days and over a specified amount are reviewed individually for collectability. All other balances are reviewed on a pooled basis. Account balances are charged off against the allowance after all commercially reasonable means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its clients. Activity in the allowance for doubtful accounts was as follows: For the Years Ended June 30, 2015 2016 2017 Balance at the beginning of the year $ 126 $ 149 $ 193 Charged to expense 90 159 113 Write-offs (67) (115) (40) Balance at the end of the year $ 149 $ 193 $ 266 |
Prepaid Expenses and Other Assets | (e) Prepaid Expenses and Other Assets Prepaid expenses and other assets consist primarily of tenant improvement allowance receivable from landlord, prepaid licensing fees, prepaid insurance premiums, deposits with vendors and time clocks available for sale or lease. |
Capitalized Internal-Use Software | (f) Capitalized Internal-Use Software The Company applies Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350-40, Intangibles—Goodwill and Other—Internal-Use Software , to the accounting for costs of internal-use software. Internal-use software costs are capitalized when application development begins, it is probable that the project will be completed, and the software will be used as intended. Costs associated with preliminary project stage activities, training, maintenance and all other post implementation stage activities are expensed as incurred. The Company also capitalizes certain costs related to specific upgrades and enhancements when it is probable the expenditures will result in significant additional functionality. The capitalization policy provides for the capitalization of certain payroll costs for employees who are directly associated with developing internal-use software as well as certain external direct costs, such as consulting fees. Capitalized employee costs are limited to the time directly spent on such projects. Capitalized internal-use software costs are amortized on a straight-line basis over the estimated useful lives, generally over a 24-month period. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. |
Property and Equipment and Long-Lived Assets | (g) Property and Equipment and Long-Lived Assets Property and equipment are stated at cost. Depreciation on property and equipment is calculated on the straight-line method over the estimated useful lives of the assets, generally three to seven years for most classes of assets, or over the term of the related lease for leasehold improvements. Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares the undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. |
Intangible Assets, Net of Accumulated Amortization | (h) Intangible Assets, Net of Accumulated Amortization Intangible assets are comprised primarily of client list acquisitions and are reported net of accumulated amortization on the consolidated balance sheets. Client relationships use the straight-line method of amortization over a nine-year time frame from the date of acquisition, while non-solicitation agreements use the straight-line method of amortization over the lives of the related agreements. The Company tests intangible assets for potential impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. |
Goodwill | (i) Goodwill Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. As described in Note 5, the Company has recorded goodwill in connection with the acquisitions of certain assets of BFKMS, Inc. and Synergy Payroll, LLC. Goodwill is not amortized, but instead is tested for impairment at least annually in the fourth quarter. ASU 2011-08, Testing Goodwill for Impairment provides an entity the option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount prior to performing the two-step impairment test. If the estimated fair value of a reporting unit, including goodwill, is less than its carrying amount, the two-step goodwill impairment test is required. Otherwise, no further analysis is required. If the two-step goodwill impairment test is required, the fair value of the reporting unit is compared with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying amount, an indication of goodwill impairment exists for the reporting unit. In the second step, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of the goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. In the event the fair value of the reporting unit exceeds its carrying amount, step two is not performed. The Company performs its annual impairment review of goodwill in its fiscal fourth quarter or when a triggering event occurs between annual impairment tests. No impairment was recorded in fiscal 2015, 2016 or 2017 as a result of the Company’s qualitative assessments over its single reporting segment. |
Deferred Rent | (j) Deferred Rent The Company has operating lease agreements for its office space, which contain provisions for future rent increases, periods of rent abatement and build-out allowances. The Company records monthly rent expense for each lease equal to the total payments due over the lease term, divided by the number of months of the lease term. Build-out allowances are recorded as part of leasehold improvements and the incentive is amortized over the lease term against depreciation. The difference between recorded rent expense and the amount paid is included in “Accrued expenses” and as “Deferred rent” in the accompanying consolidated balance sheets. |
Income Taxes | (k) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Significant management judgment is required in determining the period in which the reversal of a valuation allowance should occur. The Company is required to consider all available evidence, both positive and negative, such as historical levels of income and future forecasts of taxable income among other items, in determining whether a full or partial release of its valuation allowance is required. The Company is also required to schedule future taxable income in accordance with accounting standards that address income taxes to assess the appropriateness of a valuation allowance, which further requires the exercise of significant management judgment. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties as an element of income tax expense. Refer to Note 11 for additional information on income taxes. |
Revenue Recognition | (l) Revenue Recognition The Company recognizes revenue in accordance with ASC 605-25, Revenue Recognition—Multiple Element Arrangements , Accounting Standards Update No. 2009-13, Multiple-Deliverable Revenue Arrangements (“ ASU 2009‑13 ”), and Staff Accounting Bulletin 104, Revenue Recognition . Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the fee is fixed or determinable and collection of the revenue is probable. The Company derives its revenue predominantly from recurring fees and non-recurring service fees. Recurring fees are collected under agreements for payroll, timekeeping, HR-related cloud-based computing services and monthly time clock rentals, all of which are generally cancellable by the client on 60 days’ notice or less. Non-recurring service fees consist mainly of implementation and custom reporting services. Such fees are billed to clients and revenue is recorded upon completion of the service. The Company’s agreements do not include general rights of return and do not provide clients with the right to take possession of the software supporting the services being provided. As such, the agreements are accounted for as service contracts. Interest income collected on funds held for clients is recognized in recurring revenues when earned as the collection, holding and remittance of these funds are critical components of providing these services. Most multiple-element arrangements include a short implementation services phase, which involves establishing the client within and loading data into the Company’s cloud-based applications. Major recurring fees included in multiple-element arrangements include: · Payroll processing and related services, including payroll reporting and tax filing services delivered on a weekly, biweekly, semi-monthly, or monthly basis depending upon the payroll frequency of the client and on an annual basis if a client selects W-2 preparation and processing services, · Time and attendance reporting services, including time clock rentals, delivered on a monthly basis, and · Cloud-based HR software solutions, including employee administration and benefits enrollment and administration, delivered on a monthly basis. For each agreement, the Company evaluates whether the individual deliverables qualify as separate units of accounting. If one or more of the deliverables does not have standalone value upon delivery, the deliverables that do not have standalone value are generally combined and treated as a single unit of accounting by frequency of occurrence for the product category involved such as biweekly payroll or monthly timekeeping services. Revenues for arrangements treated as a single unit of accounting are generally recognized within the same month that the services are rendered given that the agreements are cancellable with 60 days’ or less notice. In determining whether implementation services can be accounted for separately from recurring revenues, the Company considers the nature of the implementation services and the availability of the implementation services from other vendors. The Company was able to establish standalone value for implementation activities based on the historical activity of third-party vendors that performed these services and as such, accounts for such implementation services separate from the recurring revenues. If the recurring services have standalone value upon delivery, the Company accounts for each separately and revenues are recognized as services are delivered with allocation of consideration based on the relative selling price method as established in ASU 2009-13. That method requires the selling price of each element in a multiple-deliverable arrangement to be based on, in descending order: (i) vendor specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of fair value (“TPE”) or (iii) management’s best estimate of the selling price (“BESP”). The Company is not able to establish VSOE because the deliverables are sold across an insufficiently narrow range of prices on a stand-alone basis and is also not able to establish TPE because no third-party offerings are reasonably comparable to the Company’s offerings. The Company thus established its BESP by service offering, requiring the use of significant estimates and judgment. The Company considers numerous factors, including the nature of the deliverables themselves; the geography of the sale; and pricing and discounting practices utilized by the Company’s sales force. Arrangement consideration is allocated to each deliverable based on the established BESP and subject to the limitation that because the arrangements are cancellable with 60 days’ or less notice, recurring revenue is not allocated to any deliverable until the consideration has been earned, typically with each payroll cycle or monthly, depending on the service. Revenues generated from sales through partners or utilizing partner services are recognized in accordance with the appropriate accounting guidance of ASC 605-45, Principal Agent Considerations . The Company reports revenue generated through partners or utilizing partner services at the gross amount billed to clients when (i) the Company is the primary obligor, (ii) the Company has latitude to establish the price charged and (iii) the Company bears the credit risk in the transaction. Sales taxes collected from clients and remitted to governmental authorities where applicable are accounted for on a net basis and therefore are excluded from revenues in the statements of operations. |
Cost of Revenues | (m) Cost of Revenues Cost of revenues consists primarily of the cost of recurring revenues and implementation services, which are expensed when incurred. Cost of revenues for recurring revenues consists primarily of costs to provide recurring services and support to the Company’s clients, and includes amortization of capitalized internal-use software. Cost of revenues for implementation services and other consists primarily of costs to provide implementation and other services. |
Advertising | (n) Advertising Advertising costs are expensed as incurred. Advertising costs amounted to $187, $219 and $199 for the years ended June 30, 2015, 2016 and 2017, respectively. |
Stock-Based Compensation | (o) 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 their vesting term or the term of the ESPP purchase period. |
Commitments and Contingencies | (p) Commitments and Contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. |
Segment Information | (q) Segment Information The Company’s chief operating decision maker reviews the financial results of the Company in total when evaluating financial performance and for purposes of allocating resources. The Company has thus determined that it operates in a single cloud-based software solution reporting segment. |
Recently Issued Accounting Standards | (r) 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 and is evaluating adoption methods. 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 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 is evaluating the timing of adoption. 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, it does not expect the portions of the updated standard that relate to excess tax benefits and deficiencies to have a material impact on the Consolidated Financial Statements and disclosures. Additionally, 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. |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Schedule of activity in allowance for doubtful accounts | For the Years Ended June 30, 2015 2016 2017 Balance at the beginning of the year $ 126 $ 149 $ 193 Charged to expense 90 159 113 Write-offs (67) (115) (40) Balance at the end of the year $ 149 $ 193 $ 266 |
Business Combinations (Tables)
Business Combinations (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
BFKMS Inc | |
Summary of fair value of the assets acquired at the date of acquisition | At May 23, 2014 Intangible assets $ 6,400 Goodwill 3,035 Total purchase price $ 9,435 |
Synergy Payroll LLC | |
Summary of fair value of the assets acquired at the date of acquisition | At April 16, 2015 Intangible assets $ 6,540 Goodwill 2,968 Total purchase price $ 9,508 |
Capitalized Internal-Use Soft26
Capitalized Internal-Use Software (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Capitalized Internal-Use Software. | |
Schedule of capitalized internal-use software and accumulated amortization | Year ended June 30, 2016 2017 Capitalized internal-use software $ 34,249 $ 49,663 Accumulated amortization (22,822) (32,269) Capitalized internal-use software, net $ 11,427 $ 17,394 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Property and Equipment | |
Schedule of property and equipment | Year ended June 30, 2016 2017 Office equipment $ 2,528 $ 3,591 Computer equipment 18,139 24,411 Furniture and fixtures 4,308 7,547 Software 5,059 4,954 Leasehold improvements 11,164 21,426 Time clocks rented by clients 4,046 4,240 Total 45,244 66,169 Accumulated depreciation (18,457) (25,413) Property and equipment, net $ 26,787 $ 40,756 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Goodwill and Intangible Assets | |
Schedule of amortizable intangible assets before amortization expense | Weighted Average Year ended June 30, Useful 2016 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 (2,521) (4,033) Intangible assets, net $ 10,419 $ 8,907 |
Schedule of future amortization expense for acquired intangible assets | Year ending June 30, 2018 $ 1,427 2019 1,398 2020 1,398 2021 1,398 2022 1,398 Thereafter 1,888 Total $ 8,907 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Accrued Expenses | |
Schedule of components of accrued expenses | Year ended June 30, 2016 2017 Accrued payroll and personnel costs $ 21,658 $ 25,131 Other 3,321 5,170 Total accrued expenses $ 24,979 $ 30,301 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Leases | |
Schedule of future minimum lease payments under non-cancellable operating leases | Year ending June 30, 2018 $ 7,025 2019 8,354 2020 8,573 2021 9,677 2022 8,548 Later years, through 2033 75,161 Total minimum lease payments $ 117,338 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Income Taxes | |
Schedule of income tax expense | Year ended June 30, 2015 2016 2017 Current taxes U.S. federal $ — $ — $ — State and local 14 27 500 Deferred taxes: U.S. federal 83 136 137 State and local 8 14 14 Total income tax expense $ 105 $ 177 $ 651 |
Schedule of tax rate reconciliation by applying the U.S. federal income tax rate to pretax income (loss) | Year ended June 30, 2015 2016 2017 Income tax expense (benefit) at statutory federal rate $ (4,716) $ (1,249) $ 2,503 Increase (reduction) in income taxes resulting from: Research and development credit, net of federal income tax benefit (276) (504) (1,025) Non-deductible expenses 418 557 685 Change in valuation allowance 4,570 2,590 (1,349) State and local income taxes, net of federal income tax benefit (562) (432) (196) Other 671 (785) 33 $ 105 $ 177 $ 651 |
Schedule of tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities | Year ended June 30, 2016 2017 Deferred tax assets: Deferred rent $ 694 $ 1,090 Allowance for doubtful accounts 73 100 Accrued expenses 1,812 2,290 Stock-based compensation 7,367 11,034 Net operating loss carryforwards 4,498 253 Research and development and other credits 3,236 4,984 AMT Credits 11 29 Intangible assets 413 657 Total deferred tax assets 18,104 20,437 Valuation allowance (10,038) (8,689) Net deferred tax assets 8,066 11,748 Deferred tax liabilities: Research and development costs (3,681) (5,649) Prepaid expenses (91) — Depreciation (4,543) (6,500) Total deferred liabilities (8,315) (12,149) Net deferred tax liability $ (249) $ (401) |
Benefit Plans (Tables)
Benefit Plans (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Benefit Plans | |
Summary of shares available for grant under our equity incentive plans | Number of Available for grant at July 1, 2016 6,244 January 1, 2017 Evergreen provision increase 2,314 RSUs granted (774) Shares withheld in settlement of taxes and/or exercise price 467 Forfeitures 89 Shares removed (113) Available for grant at June 30, 2017 8,227 |
Schedule of stock-based compensation expense related to stock options, restricted stock units and the Employee Stock Purchase Plan | Year ended June 30, 2015 2016 2017 Cost of revenue – recurring $ 1,532 $ 1,648 $ 2,162 Cost of revenue – non-recurring 1,222 1,127 1,357 Sales and marketing 3,247 4,441 6,287 Research and development 2,533 2,789 3,086 General and administrative 4,635 7,558 13,842 Total stock-based compensation expense $ 13,169 $ 17,563 $ 26,734 |
Summary of the assumptions used for estimating the fair value of stock options granted | Year ended June 30, 2015 2016 Valuation assumptions: Expected dividend yield Expected volatility Expected term (years) 6.25 Risk-free interest rate |
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, 2016 3,464 $ 11.75 6.70 $ 108,944 Options forfeited (22) $ 18.88 Options exercised (691) $ 12.37 Balance at June 30, 2017 2,751 $ 11.54 5.69 $ 92,556 Options exercisable at June 30, 2017 2,395 $ 9.80 5.47 $ 84,757 Options vested and expected to vest at June 30, 2017 2,742 $ 11.47 5.68 $ 92,414 |
Schedule of stock options outstanding and stock options exercisable | Options Outstanding Options Exercisable Price Range Number of Weighted Weighted Number of Weighted $1.31 to $3.58 463 3.15 $ 1.49 463 $ 1.49 $3.59 to $5.96 854 5.14 $ 4.88 854 $ 4.88 $5.97 to $12.02 224 6.03 $ 7.04 128 $ 7.04 $12.03 to $20.90 796 6.72 $ 17.00 796 $ 17.00 $20.91 to $35.28 414 7.48 $ 28.46 154 $ 27.16 Total 2,751 5.69 $ 11.54 2,395 $ 9.80 |
Schedule of restricted stock unit activity | Units Weighted RSU balance at July 1, 2016 1,003 $ 32.74 RSUs granted 774 $ 45.66 RSUs vested (255) $ 32.97 RSUs forfeited (67) $ 38.09 RSU balance at June 30, 2017 1,455 $ 39.96 RSUs expected to vest at June 30, 2017 1,269 $ 39.59 |
Summary of weighted average assumptions used for estimating grant date fair value of ESPP | Year ended June 30, 2015 2016 2017 Valuation assumptions: Expected dividend yield Expected volatility 35.5 - 48.4% 44.1 - 53.4% 38.9 - 53.4% Expected term (years) 0.3 - 0.5 0.5 0.5 Risk ‑ free interest rate 0.04 - 0.11% 0.11 - 0.31% 0.28 - 1.02% |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Net Loss Per Share | |
Schedule of calculation of basic net income (loss) per share | Year ended June 30, 2015 2016 2017 Numerator: Net income (loss) $ (13,972) $ (3,851) $ 6,718 Denominator: Weighted-average shares used in computing net income (loss) per share: Basic 50,127 50,913 51,415 Weighted-average effect of potentially dilutive shares: Employee stock options and restricted stock units — — 2,642 Diluted 50,127 50,913 54,057 Net income (loss) per share: Basic $ (0.28) $ (0.08) $ 0.13 Diluted $ (0.28) $ (0.08) $ 0.12 |
Summary of anti-dilutive securities | Year ended June 30, 2015 2016 2017 Employee stock options 3,956 3,464 145 Restricted stock units 386 1,003 627 Employee stock purchase plan shares 13 15 14 Total 4,355 4,482 786 |
Selected Quarterly Financial 34
Selected Quarterly Financial Data (unaudited) (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Selected Quarterly Financial Data (unaudited) | |
Schedule of selected unaudited quarterly statements of operations data | Quarter Ended September 30, December 31, 2015 2015 March 31, 2016 June 30, 2016 Consolidated Statements of Operations Data Revenues $ 45,108 $ 55,184 $ 70,570 $ 59,839 Gross profit $ 24,913 $ 31,084 $ 43,361 $ 33,258 Operating income (loss) $ (3,417) $ (1,294) $ 6,201 $ (5,040) Net income (loss) $ (3,435) $ (1,165) $ 6,161 $ (5,412) Net income (loss) per share: Basic $ (0.07) $ (0.02) $ 0.12 $ (0.11) Diluted $ (0.07) $ (0.02) $ 0.12 $ (0.11) Weighted-average shares used in computing net income (loss) per share: Basic 50,744 50,890 50,962 51,058 Diluted 50,744 50,890 53,424 51,058 Quarter Ended September 30, December 31, 2016 2016 March 31, 2017 June 30, 2017 Consolidated Statements of Operations Data Revenues $ 65,022 $ 68,654 $ 90,273 $ 76,061 Gross profit $ 36,663 $ 38,271 $ 58,191 $ 42,898 Operating income (loss) $ (2,507) $ (1,643) $ 14,880 $ (3,434) Net income (loss) $ (2,568) $ (1,671) $ 14,801 $ (3,844) Net income (loss) per share: Basic $ (0.05) $ (0.03) $ 0.29 $ (0.07) Diluted $ (0.05) $ (0.03) $ 0.27 $ (0.07) Weighted-average shares used in computing net income (loss) per share: Basic 51,231 51,384 51,447 51,602 Diluted 51,231 51,384 54,002 51,602 |
Summary of Significant Accoun35
Summary of Significant Accounting Policies - Concentration of Risk, Accounts Receivable (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Accounts Receivable | |||
Number of days past due before a balance will be reviewed for collectability | 60 days | ||
Activity in allowance for doubtful accounts | |||
Balance at beginning of period | $ 193 | $ 149 | $ 126 |
Charged to expense | 113 | 159 | 90 |
Write-offs | (40) | (115) | (67) |
Balance at end of period | $ 266 | $ 193 | $ 149 |
Total Revenue | Customer Concentration Risk | Major Customer With Ten Percent Or More Of Benchmark [Member] | |||
Concentrations of Risk | |||
Percentage of total revenues | 0.00% | ||
Total Revenue | Geographic Concentration Risk [Member] | UNITED STATES | |||
Concentrations of Risk | |||
Percentage of total revenues | 100.00% |
Summary of Significant Accoun36
Summary of Significant Accounting Policies - PP&E (Details) | 12 Months Ended |
Jun. 30, 2017 | |
Minimum | |
Property and Equipment and Long-Lived Assets | |
Estimated useful lives of the assets | 3 years |
Maximum | |
Property and Equipment and Long-Lived Assets | |
Estimated useful lives of the assets | 7 years |
Summary of Significant Accoun37
Summary of Significant Accounting Policies 10K (Details) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017USD ($)segment | Jun. 30, 2016USD ($) | Jun. 30, 2015USD ($) | |
Goodwill and other intangible assets, net of accumulated amortization | |||
Goodwill, Impairment Loss | $ 0 | $ 0 | $ 0 |
Revenue Recognition | |||
Period of notice days given for cancellation of agreement | 60 days | ||
Advertising | |||
Advertising costs | $ 199 | $ 219 | $ 187 |
Segment Information | |||
Number of reporting segments | segment | 1 | ||
Capitalized Internal-Use Software | |||
Goodwill and other intangible assets, net of accumulated amortization | |||
Estimated useful lives | 24 months | ||
Client relationships | |||
Goodwill and other intangible assets, net of accumulated amortization | |||
Estimated useful lives | 9 years |
Funds Held for Clients and Cl38
Funds Held for Clients and Client Fund Obligations (Details) | 12 Months Ended |
Jun. 30, 2017 | |
Funds Held for Clients and Client Fund Obligations | |
Period of repayment of client fund obligation liabilities | 1 year |
Business Combinations (Details)
Business Combinations (Details) $ in Thousands | Apr. 16, 2015USD ($) | May 23, 2014USD ($) | Apr. 30, 2015USD ($) | May 31, 2014USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2015USD ($) | Jun. 30, 2014USD ($) | Jun. 30, 2017USD ($) |
Business Combinations | ||||||||
Number of reseller agreements prior to the termination of said agreements | 2 | |||||||
Payments for acquisition | $ 483 | $ 11,979 | ||||||
Goodwill | 6,003 | $ 6,003 | ||||||
BFKMS Inc | ||||||||
Business Combinations | ||||||||
Amount paid to reseller per terms of a reseller agreement | $ 2,495 | |||||||
Total consideration | $ 9,435 | |||||||
Payments for acquisition | 2,985 | 6,450 | ||||||
Intangible assets | $ 6,400 | |||||||
Goodwill | 3,035 | |||||||
Total purchase price | $ 9,435 | |||||||
Goodwill amortization period for income tax purposes | 15 years | |||||||
BFKMS Inc | Client relationships | ||||||||
Business Combinations | ||||||||
Intangible assets | $ 6,180 | |||||||
BFKMS Inc | Non Solicitation Agreement | ||||||||
Business Combinations | ||||||||
Intangible assets | $ 220 | |||||||
Synergy Payroll LLC | ||||||||
Business Combinations | ||||||||
Amount paid to reseller per terms of a reseller agreement | $ 2,361 | $ 2,081 | ||||||
Total consideration | $ 9,508 | |||||||
Payments for acquisition | $ 8,994 | $ 483 | ||||||
Intangible assets | 6,540 | |||||||
Goodwill | 2,968 | |||||||
Total purchase price | $ 9,508 | |||||||
Goodwill amortization period for income tax purposes | 15 years | |||||||
Synergy Payroll LLC | Client relationships | ||||||||
Business Combinations | ||||||||
Intangible assets | $ 6,400 | |||||||
Synergy Payroll LLC | Non Solicitation Agreement | ||||||||
Business Combinations | ||||||||
Intangible assets | $ 140 |
Capitalized Internal-Use Soft40
Capitalized Internal-Use Software (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Capitalized internal-use software and accumulated amortization | |||
Capitalized internal-use software | $ 49,663 | $ 34,249 | |
Accumulated amortization | (32,269) | (22,822) | |
Capitalized internal-use software, net | 17,394 | 11,427 | |
Cost of revenue - recurring | |||
Capitalized internal-use software and accumulated amortization | |||
Amortization of capitalized internal-use software | $ 9,447 | $ 5,446 | $ 2,606 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Property and equipment | |||
Property and equipment, gross | $ 66,169 | $ 45,244 | |
Accumulated depreciation | (25,413) | (18,457) | |
Property and equipment, net | 40,756 | 26,787 | |
Depreciation expense | 10,068 | 6,905 | $ 5,084 |
Office equipment | |||
Property and equipment | |||
Property and equipment, gross | 3,591 | 2,528 | |
Computer equipment | |||
Property and equipment | |||
Property and equipment, gross | 24,411 | 18,139 | |
Furniture and fixtures | |||
Property and equipment | |||
Property and equipment, gross | 7,547 | 4,308 | |
Software | |||
Property and equipment | |||
Property and equipment, gross | 4,954 | 5,059 | |
Leasehold improvements | |||
Property and equipment | |||
Property and equipment, gross | 21,426 | 11,164 | |
Time clocks rented by clients | |||
Property and equipment | |||
Property and equipment, gross | $ 4,240 | $ 4,046 |
Goodwill and Intangible Asset42
Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Intangible Assets | |||
Intangible assets | $ 12,940 | $ 12,940 | |
Accumulated amortization | (4,033) | (2,521) | |
Intangible assets, net | 8,907 | 10,419 | |
Amortization expense for acquired intangible assets | 1,512 | 1,522 | $ 919 |
Future amortization expense for acquired intangible assets | |||
2,018 | 1,427 | ||
2,019 | 1,398 | ||
2,020 | 1,398 | ||
2,021 | 1,398 | ||
2,022 | 1,398 | ||
Thereafter | 1,888 | ||
Intangible assets, net | 8,907 | 10,419 | |
Client relationships | |||
Intangible Assets | |||
Intangible assets | $ 12,580 | 12,580 | |
Useful life | 9 years | ||
Non-solicitation agreements | |||
Intangible Assets | |||
Intangible assets | $ 360 | $ 360 | |
Non-solicitation agreements | Minimum | |||
Intangible Assets | |||
Useful life | 2 years | ||
Non-solicitation agreements | Maximum | |||
Intangible Assets | |||
Useful life | 3 years |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Jun. 30, 2016 |
Components of accrued expenses | ||
Accrued payroll and personnel costs | $ 25,131 | $ 21,658 |
Other | 5,170 | 3,321 |
Total accrued expenses | $ 30,301 | $ 24,979 |
Leases (Details)
Leases (Details) ft² in Thousands, $ in Thousands | 1 Months Ended | 12 Months Ended | |||
Feb. 28, 2017ft²Option$ / ft² | Jun. 30, 2016ft²item$ / ft² | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($)ft²item | Jun. 30, 2015USD ($) | |
Rental expense for operating leases | $ 8,571 | $ 5,596 | $ 4,238 | ||
Future minimum lease payments under non-cancellable operating leases | |||||
2,018 | 7,025 | ||||
2,019 | 8,354 | ||||
2,020 | 8,573 | ||||
2,021 | 9,677 | ||||
2,022 | 8,548 | ||||
Later years, through 2033 | 75,161 | ||||
Total minimum lease payments | $ 117,338 | ||||
Leased office space | Schaumburg Lease | |||||
Area of lease | ft² | 310 | 310 | |||
Lease term | 180 months | ||||
Tenant improvement allowance per rentable square foot | $ / ft² | 65 | ||||
Rent abatement period per lease phase | 12 months | ||||
Number of renewal options | item | 2 | 2 | |||
Renewal period | 5 years | ||||
Leased office space | Meridian Lease | |||||
Area of lease | ft² | 62 | ||||
Lease term | 120 months | ||||
Tenant improvement allowance per rentable square foot | $ / ft² | 50 | ||||
Rent abatement period per lease phase | 3 months | ||||
Number of renewal options | Option | 4 | ||||
Renewal period | 5 years |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Current taxes | |||
U.S. federal | |||
State and local | 500 | 27 | 14 |
Deferred taxes: | |||
U.S. federal | 137 | 136 | 83 |
State and local | 14 | 14 | 8 |
Total income tax expense | $ 651 | 177 | 105 |
Tax Rate Reconciliation | |||
U.S. federal income tax rate (as a percent) | 34.00% | ||
Income tax expense (benefit) at statutory federal rate | $ 2,503 | (1,249) | (4,716) |
Increase (reduction) in income taxes resulting from: | |||
Research and development credit, net of federal income tax benefit | (1,025) | (504) | (276) |
Non-deductible expenses | 685 | 557 | 418 |
Change in valuation allowance | (1,349) | 2,590 | 4,570 |
State and local income taxes, net of federal income tax benefit | (196) | (432) | (562) |
Other | 33 | (785) | 671 |
Total income tax expense | 651 | 177 | 105 |
Deferred tax assets: | |||
Deferred rent | 1,090 | 694 | |
Allowance for doubtful accounts | 100 | 73 | |
Accrued expenses | 2,290 | 1,812 | |
Stock-based compensation | 11,034 | 7,367 | |
Net operating loss carryforwards | 253 | 4,498 | |
Research and development and other credits | 4,984 | 3,236 | |
AMT Credits | 29 | 11 | |
Intangible assets | 657 | 413 | |
Total deferred tax assets | 20,437 | 18,104 | |
Valuation allowance | (8,689) | (10,038) | |
Net deferred tax assets | 11,748 | 8,066 | |
Deferred tax liabilities: | |||
Research and development costs | (5,649) | (3,681) | |
Prepaid expenses | (91) | ||
Depreciation | (6,500) | (4,543) | |
Total deferred liabilities | (12,149) | (8,315) | |
Net deferred tax liability | (401) | (249) | |
Taxable loss | $ (3,294) | $ (8,330) | $ (12,424) |
Period of cumulative loss position | 3 years |
Income Taxes - Carryforwards (D
Income Taxes - Carryforwards (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Operating Loss Carryforwards | |||
Excess tax benefits from exercise of stock options | $ 30,264 | ||
Unrecognized Tax Benefits | |||
Unrecognized tax benefits | 0 | $ 0 | $ 0 |
Federal | |||
Operating Loss Carryforwards | |||
Excess tax benefits from exercise of stock options | 10,290 | ||
Net operating loss carryforwards | $ 484 | ||
Federal | Minimum | |||
Operating Loss Carryforwards | |||
Expiration date for tax credit carryforwards | Jun. 30, 2030 | ||
Federal | Maximum | |||
Operating Loss Carryforwards | |||
Expiration date for tax credit carryforwards | Jun. 30, 2037 | ||
State | |||
Operating Loss Carryforwards | |||
Excess tax benefits from exercise of stock options | $ 644 | ||
Net operating loss carryforwards | $ 1,777 | ||
State | Minimum | |||
Operating Loss Carryforwards | |||
Expiration date for tax credit carryforwards | Jun. 30, 2020 | ||
Statute of limitations on filings | 3 years | ||
State | Maximum | |||
Operating Loss Carryforwards | |||
Expiration date for tax credit carryforwards | Jun. 30, 2037 | ||
Statute of limitations on filings | 4 years | ||
Research and development tax credit carryforwards | |||
Operating Loss Carryforwards | |||
Tax credit carryforwards | $ 4,984 | ||
Research and development tax credit carryforwards | Minimum | |||
Operating Loss Carryforwards | |||
Expiration date for tax credit carryforwards | Jun. 30, 2018 | ||
Research and development tax credit carryforwards | Maximum | |||
Operating Loss Carryforwards | |||
Expiration date for tax credit carryforwards | Jun. 30, 2037 | ||
Alternative minimum tax credit carryforwards | |||
Operating Loss Carryforwards | |||
Tax credit carryforwards | $ 11 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) | 12 Months Ended |
Jun. 30, 2017item | |
Common Stock | |
Stockholders' Equity | |
Number of common stock vote per share | 1 |
Benefit Plans - General Informa
Benefit Plans - General Information (Details) shares in Thousands | 12 Months Ended |
Jun. 30, 2017shares | |
Equity Incentive Plans | |
Equity Incentive Plans | |
Number of shares of common stock reserved for issuance | 12,433 |
Number of shares allocated but not yet issued that are subject to outstanding options or awards | 4,206 |
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
Benefit Plans - Incentive Plans Activity (Details) - Equity Incentive Plans shares in Thousands | 12 Months Ended |
Jun. 30, 2017shares | |
Shares Available for Grant | |
Balance at the beginning of the period (in shares) | 6,244 |
January 1, 2017 Evergreen provision increase | 2,314 |
RSUs granted (in shares) | (774) |
Shares withheld in settlement of taxes and/or exercise price (in shares) | 467 |
Forfeitures (in shares) | 89 |
Shares removed (in shares) | (113) |
Balance at the end of the period (in shares) | 8,227 |
Benefit Plans - Compensation Ex
Benefit Plans - Compensation Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Benefit Plans | |||
Total stock-based compensation expense | $ 26,734 | $ 17,563 | $ 13,169 |
Stock-based compensation expense capitalized | 1,773 | 1,078 | 655 |
Cost of revenue - recurring | |||
Benefit Plans | |||
Total stock-based compensation expense | 2,162 | 1,648 | 1,532 |
Cost of revenue - non-recurring | |||
Benefit Plans | |||
Total stock-based compensation expense | 1,357 | 1,127 | 1,222 |
Sales and marketing | |||
Benefit Plans | |||
Total stock-based compensation expense | 6,287 | 4,441 | 3,247 |
Research and development | |||
Benefit Plans | |||
Total stock-based compensation expense | 3,086 | 2,789 | 2,533 |
General and administrative | |||
Benefit Plans | |||
Total stock-based compensation expense | 13,842 | $ 7,558 | $ 4,635 |
Modified award agreement | General and administrative | |||
Benefit Plans | |||
Total stock-based compensation expense | $ 2,925 |
Benefit Plans - Valuation Assum
Benefit Plans - Valuation Assumptions (Details) | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Valuation assumptions: | |||
Expected dividend yield (as a percent) | 0.00% | 0.00% | |
Expected volatility (as a percent) | 34.00% | 43.90% | |
Expected term (years) | 6 years 3 months | 6 years 3 months | |
Risk-free interest rate (as a percent) | 1.83% | 1.91% | |
Stock options | |||
Vesting period | |||
Expiration period | 10 years | ||
Stock options | Minimum | |||
Vesting period | |||
Vesting period | 3 years | ||
Stock options | Maximum | |||
Vesting period | |||
Vesting period | 4 years |
Benefit Plans - Stock Option Ac
Benefit Plans - Stock Option Activity (Details) - Stock options - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Options Outstanding, Number of Shares | |||
Balance at the beginning of the period | 3,464 | ||
Options granted | 0 | ||
Options forfeited | (22) | ||
Options exercised | (691) | ||
Balance at the end of the period | 2,751 | 3,464 | |
Options Outstanding, Weighted average exercise price | |||
Balance at the beginning of the period (in dollars per share) | $ 11.75 | ||
Options granted (in dollars per share) | $ 12.92 | $ 11.14 | |
Options forfeited (in dollars per share) | 18.88 | ||
Options exercised (in dollars per share) | 12.37 | ||
Balance at the end of the period (in dollars per share) | $ 11.54 | $ 11.75 | |
Options Additional Disclosures | |||
Weighted average remaining contractual term | 5 years 8 months 9 days | 6 years 8 months 12 days | |
Aggregate intrinsic value, at the beginning of the period | $ 108,944 | ||
Weighted average remaining contractual term of options exercisable at the end of the period (years) | 5 years 5 months 19 days | ||
Aggregate intrinsic value, at the end of the period | $ 92,556 | $ 108,944 | |
Options exercisable at the end of the period (in shares) | 2,395 | ||
Options exercisable at the end of the period, weighted average exercise price (in dollars per share) | $ 9.80 | ||
Options exercisable intrinsic value | $ 84,757 | ||
Total intrinsic value of options exercised | $ 20,802 | $ 13,362 | $ 8,802 |
Options vested and expected to vest | |||
Number of shares | 2,742 | ||
Weighted average exercise price | $ 11.47 | ||
Weighted average remaining contractual term | 5 years 8 months 5 days | ||
Aggregate intrinsic value | $ 92,414 | ||
Unrecognized Compensation Costs Not yet Recognized | |||
Total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options | $ 625 | ||
Weighted average period to recognize unrecognized compensation cost | 1 year 4 months 10 days |
Benefit Plans - Stock Options O
Benefit Plans - Stock Options Outstanding and Stock Options Exercisable 10K (Details) shares in Thousands | 12 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Stock options | |
Schedule of stock options outstanding and stock options exercisable | |
Number Outstanding at end of the period | shares | 2,751 |
Weighted-Average Remaining Contractual Term | 5 years 8 months 9 days |
Weighted-Average Exercise Price (in dollars per share) | $ 11.54 |
Number Exercisable at the end of the period | shares | 2,395 |
Weighted Average Exercise Price (in dollars per share) | $ 9.80 |
$1.31 to $3.58 | |
Schedule of stock options outstanding and stock options exercisable | |
Exercise price range, lower limit (in dollars per share) | 1.31 |
Exercise price range, upper limit (in dollars per share) | $ 3.58 |
$1.31 to $3.58 | Stock options | |
Schedule of stock options outstanding and stock options exercisable | |
Number Outstanding at end of the period | shares | 463 |
Weighted-Average Remaining Contractual Term | 3 years 1 month 24 days |
Weighted-Average Exercise Price (in dollars per share) | $ 1.49 |
Number Exercisable at the end of the period | shares | 463 |
Weighted Average Exercise Price (in dollars per share) | $ 1.49 |
$3.59 to $5.96 | |
Schedule of stock options outstanding and stock options exercisable | |
Exercise price range, lower limit (in dollars per share) | 3.59 |
Exercise price range, upper limit (in dollars per share) | $ 5.96 |
$3.59 to $5.96 | Stock options | |
Schedule of stock options outstanding and stock options exercisable | |
Number Outstanding at end of the period | shares | 854 |
Weighted-Average Remaining Contractual Term | 5 years 1 month 21 days |
Weighted-Average Exercise Price (in dollars per share) | $ 4.88 |
Number Exercisable at the end of the period | shares | 854 |
Weighted Average Exercise Price (in dollars per share) | $ 4.88 |
$5.97 to $12.02 | |
Schedule of stock options outstanding and stock options exercisable | |
Exercise price range, lower limit (in dollars per share) | 5.97 |
Exercise price range, upper limit (in dollars per share) | $ 12.02 |
$5.97 to $12.02 | Stock options | |
Schedule of stock options outstanding and stock options exercisable | |
Number Outstanding at end of the period | shares | 224 |
Weighted-Average Remaining Contractual Term | 6 years 11 days |
Weighted-Average Exercise Price (in dollars per share) | $ 7.04 |
Number Exercisable at the end of the period | shares | 128 |
Weighted Average Exercise Price (in dollars per share) | $ 7.04 |
$12.03 to $20.90 | |
Schedule of stock options outstanding and stock options exercisable | |
Exercise price range, lower limit (in dollars per share) | 12.03 |
Exercise price range, upper limit (in dollars per share) | $ 20.90 |
$12.03 to $20.90 | Stock options | |
Schedule of stock options outstanding and stock options exercisable | |
Number Outstanding at end of the period | shares | 796 |
Weighted-Average Remaining Contractual Term | 6 years 8 months 19 days |
Weighted-Average Exercise Price (in dollars per share) | $ 17 |
Number Exercisable at the end of the period | shares | 796 |
Weighted Average Exercise Price (in dollars per share) | $ 17 |
$20.91 to $35.28 | |
Schedule of stock options outstanding and stock options exercisable | |
Exercise price range, lower limit (in dollars per share) | 20.91 |
Exercise price range, upper limit (in dollars per share) | $ 35.28 |
$20.91 to $35.28 | Stock options | |
Schedule of stock options outstanding and stock options exercisable | |
Number Outstanding at end of the period | shares | 414 |
Weighted-Average Remaining Contractual Term | 7 years 5 months 23 days |
Weighted-Average Exercise Price (in dollars per share) | $ 28.46 |
Number Exercisable at the end of the period | shares | 154 |
Weighted Average Exercise Price (in dollars per share) | $ 27.16 |
Benefit Plans - RSU activity (D
Benefit Plans - RSU activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Vesting period | |||
Unrecognized excess income tax benefits for stock-based compensation arrangements | $ 15,130 | $ 8,228 | $ 5,562 |
Restricted stock units | |||
Vesting period | |||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options | $ 20,599 | ||
Weighted average period to recognize unrecognized compensation cost | 1 year 10 months 21 days | ||
RSUs Outstanding Rollforward, Units | |||
RSU Balance at the beginning of the period (in shares) | 1,003 | ||
RSUs granted (in shares) | 774 | ||
RSUs vested (in shares) | (255) | ||
RSUs forfeited (in shares) | (67) | ||
RSU Balance at the end of the period (in shares) | 1,455 | 1,003 | |
RSUs expected to vest at the end of the period (in shares) | 1,269 | ||
RSUs Outstanding, Weighted average grant date fair value | |||
RSU Balance at the beginning of the period (in dollars per share) | $ 32.74 | ||
RSUs granted (in dollars per share) | 45.66 | ||
RSUs vested (in dollars per share) | 32.97 | ||
RSUs cancelled/forfeited (in dollars per share) | 38.09 | ||
RSU Balance at the end of the period (in dollars per share) | 39.96 | $ 32.74 | |
RSUs expected to vest at the end of the period (in dollars per share) | $ 39.59 | ||
Restricted stock units | Minimum | |||
Vesting period | |||
Vesting period | 3 years | ||
Restricted stock units | Maximum | |||
Vesting period | |||
Vesting period | 4 years |
Benefit Plans - ESPP Informatio
Benefit Plans - ESPP Information (Details) - USD ($) shares in Thousands, $ in Thousands | 6 Months Ended | 12 Months Ended | |||
May 15, 2017 | Nov. 15, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Equity Incentive Plans | |||||
Compensation expense (in dollars) | $ 26,734 | $ 17,563 | $ 13,169 | ||
Valuation assumptions: | |||||
Expected dividend yield | 0.00% | 0.00% | |||
Expected volatility | 34.00% | 43.90% | |||
Expected term (years) | 6 years 3 months | 6 years 3 months | |||
Risk-free interest rate | 1.83% | 1.91% | |||
Employee stock purchase plan shares | |||||
Equity Incentive Plans | |||||
Offering period | 6 months | ||||
Percentage of employee compensation, maximum | 10.00% | ||||
Percentage of fair market value as a purchase price | 85.00% | ||||
Value of purchase per employee, maximum (in dollars) | $ 25 | ||||
Number of shares per employee, maximum | 2 | ||||
Period during which shares can be purchased (in years) | 1 year | ||||
Number of shares of common stock reserved for issuance | 824 | ||||
Additional shares authorized, net (in shares) | 0 | ||||
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 | 127 | 127 | |||
Compensation expense (in dollars) | $ 1,263 | $ 1,069 | $ 656 | ||
Valuation assumptions: | |||||
Expected dividend yield | 0.00% | 0.00% | 0.00% | ||
Employee stock purchase plan shares | Minimum | |||||
Valuation assumptions: | |||||
Expected volatility | 38.90% | 44.10% | 35.50% | ||
Expected term (years) | 6 months | 3 months 18 days | |||
Risk-free interest rate | 0.28% | 0.11% | 0.04% | ||
Employee stock purchase plan shares | Maximum | |||||
Equity Incentive Plans | |||||
Offering period | 27 months | ||||
Valuation assumptions: | |||||
Expected volatility | 53.40% | 53.40% | 48.40% | ||
Expected term (years) | 6 months | 6 months | |||
Risk-free interest rate | 1.02% | 0.31% | 0.11% |
Benefit Plans - 401(k) Plan (De
Benefit Plans - 401(k) Plan (Details) - USD ($) $ in Thousands | Jan. 01, 2016 | Dec. 31, 2015 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 |
Benefit Plans | |||||
401(k) Plan Matching contributions by the Company as percentage of employees' contributions | 50.00% | 50.00% | |||
401(k) Plan Maximum contributions by the Company as percentage of employees' gross pay | 8.00% | 6.00% | |||
401(k) Plan contributions | $ 3,667 | $ 2,717 | $ 1,656 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Anti-dilutive securities excluded from diluted per share calculation | |||||||||||
Anti-dilutive securities excluded (in shares) | 786 | 4,482 | 4,355 | ||||||||
Numerator: | |||||||||||
Net income (loss) | $ (3,844) | $ 14,801 | $ (1,671) | $ (2,568) | $ (5,412) | $ 6,161 | $ (1,165) | $ (3,435) | $ 6,718 | $ (3,851) | $ (13,972) |
Weighted-average shares used in computing net loss per share: | |||||||||||
Basic (in shares) | 51,602 | 51,447 | 51,384 | 51,231 | 51,058 | 50,962 | 50,890 | 50,744 | 51,415 | 50,913 | 50,127 |
Weighted-average effect of potentially dilutive shares: | |||||||||||
Employee stock options and restricted stock units | 2,642 | ||||||||||
Diluted (in shares) | 51,602 | 54,002 | 51,384 | 51,231 | 51,058 | 53,424 | 50,890 | 50,744 | 54,057 | 50,913 | 50,127 |
Net income (loss) per share: | |||||||||||
Basic (in dollars per share) | $ (0.07) | $ 0.29 | $ (0.03) | $ (0.05) | $ (0.11) | $ 0.12 | $ (0.02) | $ (0.07) | $ 0.13 | $ (0.08) | $ (0.28) |
Diluted (in dollars per share) | $ (0.07) | $ 0.27 | $ (0.03) | $ (0.05) | $ (0.11) | $ 0.12 | $ (0.02) | $ (0.07) | $ 0.12 | $ (0.08) | $ (0.28) |
Employee stock options | |||||||||||
Anti-dilutive securities excluded from diluted per share calculation | |||||||||||
Anti-dilutive securities excluded (in shares) | 145 | 3,464 | 3,956 | ||||||||
Restricted stock units | |||||||||||
Anti-dilutive securities excluded from diluted per share calculation | |||||||||||
Anti-dilutive securities excluded (in shares) | 627 | 1,003 | 386 | ||||||||
Employee stock purchase plan shares | |||||||||||
Anti-dilutive securities excluded from diluted per share calculation | |||||||||||
Anti-dilutive securities excluded (in shares) | 14 | 15 | 13 |
Selected Quarterly Financial 58
Selected Quarterly Financial Data (unaudited) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Consolidated Statements of Operations Data | |||||||||||
Revenues | $ 76,061 | $ 90,273 | $ 68,654 | $ 65,022 | $ 59,839 | $ 70,570 | $ 55,184 | $ 45,108 | $ 300,010 | $ 230,701 | $ 152,698 |
Gross profit | 42,898 | 58,191 | 38,271 | 36,663 | 33,258 | 43,361 | 31,084 | 24,913 | 176,023 | 132,616 | 81,802 |
Operating income (loss) | (3,434) | 14,880 | (1,643) | (2,507) | (5,040) | 6,201 | (1,294) | (3,417) | 7,296 | (3,550) | (13,921) |
Net income (loss) | $ (3,844) | $ 14,801 | $ (1,671) | $ (2,568) | $ (5,412) | $ 6,161 | $ (1,165) | $ (3,435) | $ 6,718 | $ (3,851) | $ (13,972) |
Net income (loss) per share: | |||||||||||
Basic (in dollars per share) | $ (0.07) | $ 0.29 | $ (0.03) | $ (0.05) | $ (0.11) | $ 0.12 | $ (0.02) | $ (0.07) | $ 0.13 | $ (0.08) | $ (0.28) |
Diluted (in dollars per share) | $ (0.07) | $ 0.27 | $ (0.03) | $ (0.05) | $ (0.11) | $ 0.12 | $ (0.02) | $ (0.07) | $ 0.12 | $ (0.08) | $ (0.28) |
Weighted-average shares used in computing net income (loss) per share: | |||||||||||
Basic (in shares) | 51,602 | 51,447 | 51,384 | 51,231 | 51,058 | 50,962 | 50,890 | 50,744 | 51,415 | 50,913 | 50,127 |
Diluted (in shares) | 51,602 | 54,002 | 51,384 | 51,231 | 51,058 | 53,424 | 50,890 | 50,744 | 54,057 | 50,913 | 50,127 |