Document and Entity Information
Document and Entity Information - USD ($) $ in Billions | 12 Months Ended | ||
Jun. 30, 2018 | Aug. 03, 2018 | Dec. 31, 2017 | |
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, 2018 | ||
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 | $ 1.4 | ||
Entity Common Stock, Shares Outstanding | 52,767,163 | ||
Document Fiscal Year Focus | 2,018 | ||
Document Fiscal Period Focus | FY |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 137,193 | $ 103,468 |
Accounts receivable, net | 3,453 | 2,040 |
Prepaid expenses and other | 11,980 | 14,879 |
Total current assets before funds held for clients | 152,626 | 120,387 |
Funds held for clients | 1,225,614 | 942,459 |
Total current assets | 1,378,240 | 1,062,846 |
Long-term prepaid expenses | 1,504 | 1,535 |
Capitalized internal-use software, net | 21,094 | 17,394 |
Property and equipment, net | 62,029 | 40,756 |
Intangible assets, net | 13,002 | 8,907 |
Goodwill | 9,590 | 6,003 |
Deferred income tax assets, net | 22,140 | |
Total assets | 1,507,599 | 1,137,441 |
Current liabilities: | ||
Accounts payable | 2,990 | 2,046 |
Accrued expenses | 42,241 | 30,301 |
Total current liabilities before client fund obligations | 45,231 | 32,347 |
Client fund obligations | 1,225,614 | 942,459 |
Total current liabilities | 1,270,845 | 974,806 |
Deferred rent | 22,812 | 14,621 |
Other long-term liabilities | 1,118 | |
Deferred income tax liabilities, net | 401 | |
Total liabilities | 1,294,775 | 989,828 |
Stockholders' equity: | ||
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2017 and 2018 | ||
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2017 and 2018; 51,738 shares issued and outstanding at June 30, 2017 and 52,758 shares issued and outstanding at June 30, 2018 | 53 | 52 |
Additional paid-in capital | 219,588 | 192,837 |
Accumulated deficit | (6,678) | (45,276) |
Accumulated other comprehensive loss | (139) | |
Total stockholders' equity | 212,824 | 147,613 |
Total liabilities and stockholders' equity | $ 1,507,599 | $ 1,137,441 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Unaudited Consolidated Balance Sheets | ||
Preferred Stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred Stock, shares authorized | 5,000 | 5,000 |
Preferred Stock, shares issued | 0 | 0 |
Preferred Stock, shares outstanding | 0 | 0 |
Common Stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 155,000 | 155,000 |
Common Stock, shares issued | 52,758 | 51,738 |
Common Stock, shares outstanding | 52,758 | 51,738 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Revenues: | |||
Recurring fees | $ 354,432 | $ 284,817 | $ 217,416 |
Interest income on funds held for clients | 9,093 | 3,631 | 2,688 |
Total recurring revenues | 363,525 | 288,448 | 220,104 |
Implementation services and other | 14,002 | 11,562 | 10,597 |
Total revenues | 377,527 | 300,010 | 230,701 |
Cost of revenues: | |||
Recurring revenues | 104,009 | 85,399 | 66,131 |
Implementation services and other | 45,188 | 38,588 | 31,954 |
Total cost of revenues | 149,197 | 123,987 | 98,085 |
Gross profit | 228,330 | 176,023 | 132,616 |
Operating expenses: | |||
Sales and marketing | 95,484 | 77,506 | 61,832 |
Research and development | 37,645 | 29,098 | 26,736 |
General and administrative | 79,252 | 62,123 | 47,598 |
Total operating expenses | 212,381 | 168,727 | 136,166 |
Operating income (loss) | 15,949 | 7,296 | (3,550) |
Other income (expense) | 802 | 73 | (124) |
Income (loss) before income taxes | 16,751 | 7,369 | (3,674) |
Income tax expense (benefit) | (21,847) | 651 | 177 |
Net income (loss) | 38,598 | 6,718 | (3,851) |
Other comprehensive loss, net of tax | |||
Unrealized losses on securities, net of tax | (139) | ||
Total other comprehensive loss, net of tax | (139) | ||
Comprehensive income (loss) | $ 38,459 | $ 6,718 | $ (3,851) |
Net income (loss) per share: | |||
Basic (in dollars per share) | $ 0.74 | $ 0.13 | $ (0.08) |
Diluted (in dollars per share) | $ 0.70 | $ 0.12 | $ (0.08) |
Weighted-average shares used in computing net income (loss) per share: | |||
Basic (in shares) | 52,425 | 51,415 | 50,913 |
Diluted (in shares) | 54,887 | 54,057 | 50,913 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total |
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 | 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 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Stock-based compensation | 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 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Stock-based compensation | 32,378 | $ 32,378 | |||
Stock options exercised | $ 1 | 8,001 | 8,002 | ||
Stock options exercised (in shares) | 839 | ||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 452 | ||||
Issuance of common stock under employee stock purchase plan | 4,304 | 4,304 | |||
Issuance of common stock under employee stock purchase plan (in shares) | 108 | ||||
Net settlement for taxes and/or exercise price related to equity awards | (17,932) | (17,932) | |||
Net settlement for taxes and/or exercise price related to equity awards (in shares) | (379) | ||||
Unrealized losses on securities, net of tax | $ (139) | (139) | |||
Net income (loss) | 38,598 | 38,598 | |||
Balance at Jun. 30, 2018 | $ 53 | $ 219,588 | $ (6,678) | $ (139) | $ 212,824 |
Balance (in shares) at Jun. 30, 2018 | 52,758 | 52,758 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities: | |||
Net income (loss) | $ 38,598 | $ 6,718 | $ (3,851) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
Stock-based compensation expense | 30,354 | 26,734 | 17,563 |
Depreciation and amortization expense | 30,202 | 21,027 | 13,873 |
Deferred income tax expense (benefit) | (21,870) | 152 | 150 |
Provision for doubtful accounts | 296 | 113 | 159 |
Net accretion of discounts and amortization of premiums on available-for-sale securities | (443) | ||
Net realized losses on sales of available-for-sale securities | 2 | ||
Loss on disposal of equipment | 227 | 253 | 712 |
Changes in operating assets and liabilities: | |||
Accounts receivable | (1,494) | (472) | (725) |
Prepaid expenses and other | (2,141) | (2,074) | (3,270) |
Accounts payable | 740 | 219 | 72 |
Accrued expenses | 11,641 | 6,465 | 8,310 |
Tenant improvement allowance | 11,754 | 2,845 | |
Net cash provided by operating activities | 97,866 | 61,980 | 32,993 |
Cash flows from investing activities: | |||
Purchases of available-for-sale securities from funds held for clients | (196,594) | ||
Proceeds from sales and maturities of available-for-sale securities from funds held for clients | 73,044 | ||
Net change in funds held for clients' cash and cash equivalents | (158,394) | 297,163 | (648,403) |
Capitalized internal-use software costs | (15,638) | (13,641) | (8,391) |
Purchases of property and equipment | (21,676) | (21,338) | (16,083) |
Lease allowances used for tenant improvements | (11,754) | (2,845) | |
Acquisition of business, net of cash acquired | (8,346) | (483) | |
Net cash provided by (used in) investing activities | (339,358) | 259,339 | (673,360) |
Cash flows from financing activities: | |||
Net change in client fund obligations | 281,467 | (297,163) | 648,403 |
Proceeds from exercise of stock options | 34 | 137 | |
Proceeds from employee stock purchase plan | 4,304 | 3,677 | 2,991 |
Taxes paid related to net share settlement of equity awards | (10,554) | (11,342) | (5,926) |
Excess tax benefits from stock-based compensation | 447 | ||
Net cash provided by (used in) financing activities | 275,217 | (304,347) | 645,605 |
Net Change in Cash and Cash Equivalents | 33,725 | 16,972 | 5,238 |
Cash and Cash Equivalents-Beginning of Year | 103,468 | 86,496 | 81,258 |
Cash and Cash Equivalents-End of Year | 137,193 | 103,468 | 86,496 |
Supplemental Disclosure of Non-Cash Investing and Financing Activities | |||
Build-out allowances received from landlords | 1,956 | 1,888 | |
Purchase of property and equipment and internal-use software, accrued but not paid | 659 | 667 | 607 |
Supplemental Disclosure of Cash Flow Information | |||
Cash paid (refunds received) for income taxes | $ (53) | $ 28 | $ 3 |
Organization and Description of
Organization and Description of Business | 12 Months Ended |
Jun. 30, 2018 | |
Organization and Description of Business | |
Organization and Description of Business | (1) Organization and Description of Business Paylocity Holding Corporation (the “Company”) 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, 2018 | |
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. 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 include the accounts of the Company and its wholly owned subsidiaries. All 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) Funds Held For Clients, Corporate Investments 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. 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. Funds held for clients is primarily comprised of cash and cash equivalents invested in demand deposit accounts. Starting in July 2017, the Company also invested a portion of its funds held for clients in marketable securities. Marketable securities classified as available-for-sale are recorded at fair value on the consolidated balance sheets. Unrealized gains and losses, net of applicable income taxes, are reported as other comprehensive income (loss) in the consolidated statements of operations and comprehensive income (loss). Interest on marketable securities included in funds held for clients is reported as interest income on funds held for clients on the consolidated statements of operations and comprehensive income (loss). The Company reviews the composition of its portfolio for any available-for-sale security that has a fair value that falls below its amortized cost. If any security fits this criterion, the Company further evaluates whether other-than-temporary impairment exists by considering whether the Company has the intent and ability to retain the security for a period of time sufficient enough to allow for anticipated fair value recovery. The Company did not record any other-than-temporary impairment charges during the year ended June 30, 2018. 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. (e) 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, 2016 2017 2018 Balance at the beginning of the year $ 149 $ 193 $ 266 Charged to expense 159 113 296 Write-offs (115) (40) (187) Balance at the end of the year $ 193 $ 266 $ 375 (f) 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, corporate investments and time clocks available for sale or lease. (g) 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 or 36-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. (h) 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. (i) Intangible Assets, Net of Accumulated Amortization Intangible assets are comprised primarily of client relationship acquisitions and are reported net of accumulated amortization on the consolidated balance sheets. Client relationships use the straight-line method of amortization over a seven or nine-year time frame from the date of acquisition, while non-solicitation agreements use the straight-line method of amortization over the term 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. (j) 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. Goodwill is not amortized, but instead is tested for impairment at the reporting unit level. The Company adopted ASU 2017-04, Intangibles – Goodwill and Other for its annual goodwill impairment test performed during fiscal 2018. Based on the new standard, if the fair value of the reporting unit is less than its carrying amount, the Company would record an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, but the loss recognized should not exceed the amount of goodwill allocated to the reporting unit. 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 2016, 2017 or 2018 as a result of the Company’s qualitative assessments over its single reporting segment. (k) 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 “Deferred rent” in the accompanying consolidated balance sheets. (l) 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. (m) 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. While the majority of its agreements are generally cancellable by the client on 60 days’ notice or less, the Company began entering into term arrangements in fiscal 2018, which are generally over two years in length. 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. 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 and the 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 or additional consideration is contingent on the delivery of future services, 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 and comprehensive income (loss). (n) 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. (o) Advertising Advertising costs are expensed as incurred. Advertising costs amounted to $219, $199 and $179 for the years ended June 30, 2016, 2017 and 2018, respectively. (p) 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. For stock options and estimated shares purchasable under the ESPP, 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. (q) 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. (r) 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. (s) Recently Adopted Accounting Standards 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, and it resulted in an increase to the Company’s gross net operating loss of $30,783. As of December 31, 2017, the adoption of this standard did not have a material impact on its consolidated financial statements and disclosures due to the Company’s valuation allowance on deferred tax assets. However, during the third quarter of fiscal 2018, the Company released its valuation allowance and as a result, the Company recorded a significant increase in deferred tax assets due to excess tax benefits from employee stock exercises. Refer to Note 11 for additional information on the release of the valuation allowance and the impact of excess tax benefits from employee stock exercises. 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. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) (“ASU 2017-01”) which clarifies the definition of a business. ASU 2017-01 provides guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. It is effective, on a prospective basis, for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard effective January 1, 2018. The adoption of ASU 2017-01 did not have a material impact on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) (“ASU 2017-04”), which eliminated Step 2 of the goodwill impairment test, which required the impairment charge to be measured as a difference between the implied fair value of goodwill against its carrying amount. Instead, an entity measures goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company adopted this standard for the annual goodwill impairment test performed during fiscal 2018. The adoption of ASU 2017-04 did not have a material impact on the Company’s financial statements. In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) (“ASU 2018-05”) which incorporates the SEC’s Staff Accounting Bulletin 118 (“SAB 118”) issued on December 22, 2017. SAB 118 provides for a provisional measurement period for entities to finalize their accounting for certain income tax effects related to the Tax Cuts and Jobs Act (the “Act”), not to exceed one year from enactment of the new tax law. Entities are permitted to utilize reasonable estimates until they have finished analyzing the effects of the Act. The Company recognized provisional income tax effects of the Act during fiscal 2018 in accordance with SAB 118, and expects to complete its accounting under the Act by the end of December 2018. Refer to Note 11 for additional information. (t) Recently Issued Accounting Standards In May 2014, the 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 modified retrospective 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 will adopt the new standard in its fiscal year beginning July 1, 2018 using the modified retrospective method of transition, which limits the application of the new standard only to contracts that were not completed as of the effective date of July 1, 2018. The Company is in the process of finalizing its accounting conclusions around the new standard as well as finalizing the impacts of the disclosure requirements and transition adjustments on its consolidated financial statements. The estimated impact is described below. The Company is also nearly complete in updating its existing internal controls and processes as it relates to the new standard. Under the current revenue standard through fiscal 2018, the Company accounts for implementation and recurring services each as a separate unit of account. The Company has been able to establish standalone value for implementation services as supported by the activity of third-party resellers and other vendors that performed certain implementation services. The Company has observed that third party implementation activity has continued to decrease over time and at the same time, the Company has invested in proprietary applications and processes that impact implementation activities. The Company has determined that from July 1, 2018 forward it will no longer have a sufficient basis to establish standalone value of implementations for its proprietary products due to the culmination of the changes to the Company’s applications and processes that eliminate the ability of third parties to perform implementation services. Similarly, the Company determined that these implementation services are not a separate performance obligation under the new standard for contracts entered into after July 1, 2018 and the associated implementation fees will be treated as nonrefundable upfront fees which will be deferred and amortized over a period of time instead of recognized upon completion. The Company also has assessed the treatment of certain costs under the new standard and currently expects that there will be a material impact in the manner in which it treats both costs of obtaining new contracts (i.e., selling and commission costs) and direct costs of fulfillment. The Company will be required to defer these costs and amortize them over the expected period of benefit, which it has determined to be 7 years. The Company estimates that the cumulative effect related to the deferral of the costs of obtaining new contracts will be approximately $51,000, net of deferred taxes, which will be recorded through Accumulated Deficit in the Statement of Changes in Stockholder’s Equity upon adoption on July 1, 2018. 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. In March 2018, the FASB affirmed its proposed ASU, Leases (Topic 842): Targeted Improvements, which provides an additional transition method allowing an entity to apply the new lease accounting and disclosure requirements only for the year of adoption with the comparative periods continuing to be in accordance with current GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. While the Company is still assessing the impact of the new standard, it expects the adoption of this standard will have a material effect on its consolidated balance sheets. The Company is evaluating the transition methods and will adopt this new standard in its fiscal year beginning July 1, 2019. 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 Corp
Funds Held for Clients and Corporate Investments | 12 Months Ended |
Jun. 30, 2018 | |
Funds Held For Clients And Corporate Investments [Abstract] | |
Funds Held for Clients and Corporate Investments | (3) Funds Held for Clients and Corporate Investments Investments consist of the following as of June 30, 2018: Gross Gross Amortized unrealized unrealized Type of Issue cost gains losses Fair value Funds held for clients' cash and cash equivalents $ 1,102,541 $ — $ (3) $ 1,102,538 Available-for-sale securities: Commercial paper 50,703 3 (4) 50,702 Corporate bonds 37,508 8 (134) 37,382 Asset-backed securities 25,901 1 (55) 25,847 U.S. treasury securities 9,879 — (2) 9,877 Total available-for-sale securities 123,991 12 (195) 123,808 Investments $ 1,226,532 $ 12 $ (198) $ 1,226,346 Funds held for clients’ cash and cash equivalents included demand deposit accounts, commercial paper and money market funds as of June 30, 2018. Classification of investments on the consolidated balance sheets is as follows: Year ended June 30, 2017 2018 Funds held for clients $ 942,459 $ 1,225,614 Prepaid expenses and other — 732 Total investments $ 942,459 $ 1,226,346 Available-for-sale securities that have been in an unrealized loss position for a period of less than 12 months as of June 30, 2018 had fair market values as follows: Gross unrealized losses Fair value Commercial paper $ (4) $ 23,657 Corporate bonds (134) 29,122 Asset-backed securities (55) 17,960 U.S. treasury securities (2) 4,933 Total available-for-sale securities $ (195) $ 75,672 As the Company started investing funds held for clients in available-for-sale securities during the year ended June 30, 2018, no securities have been in an unrealized loss position for more than 12 months. The Company did not make any material reclassification adjustments out of accumulated other comprehensive loss for realized gains and losses on the sale of available-for-sale securities during the year ended June 30, 2018. Gross realized gains and losses on the sale of available-for-sale securities were immaterial for the year ended June 30, 2018. The Company regularly reviews the composition of its portfolio to determine the existence of other-than-temporary-impairment (“OTTI”). The Company did not recognize any OTTI charges in accumulated other comprehensive loss during the year ended June 30, 2018, nor does it believe that OTTI exists in its portfolio as of June 30, 2018. The Company plans to retain the securities in an unrealized loss position for a period of time sufficient enough to recover their amortized cost basis or until their maturity date. The Company believes that the unrealized losses on these securities were not due to deterioration in credit risk. The securities in an unrealized loss position held an A-1 rating or better as of June 30, 2018. Expected maturities of available-for-sale securities at June 30, 2018 are as follows: Amortized cost Fair value One year or less $ 99,420 $ 99,319 One year to two years 22,571 22,487 Two years to three years 2,000 2,002 Total available-for-sale securities $ 123,991 $ 123,808 |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Jun. 30, 2018 | |
Fair Value Measurement | |
Fair Value Measurement | (4) Fair Value Measurement The Company applies the fair value measurement and disclosure provisions of ASC 820, Fair Value Measurements and Disclosures , and ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS . Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: · Level 1—Quoted prices in active markets for identical assets and liabilities. · Level 2—Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. · Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. The Company measures any cash and cash equivalents, accounts receivable, accounts payable and client fund obligations at fair value on a recurring basis using Level 1 inputs. The Company considers the recorded value of these financial assets and liabilities to approximate the fair value of the respective assets and liabilities at June 30, 2017 and June 30, 2018 based upon the short-term nature of these assets and liabilities. Marketable securities, consisting of securities classified as available-for-sale as well as certain cash equivalents, are recorded at fair value on a recurring basis using Level 2 inputs obtained from an independent pricing service. Available-for-sale securities include commercial paper, corporate bonds, asset-backed securities and US treasury securities. The independent pricing service utilizes a variety of inputs including benchmark yields, broker/dealer quoted prices, reported trades, issuer spreads as well as other available market data. The Company, on a sample basis, validates the pricing from the independent pricing service against another third-party pricing source for reasonableness. The Company has not adjusted any prices obtained by the independent pricing service, as it believes they are appropriately valued. There were no available-for-sale securities classified in Level 3 of the fair value hierarchy at June 30, 2018, and the Company did not transfer assets between Levels during the year ended June 30, 2018. The Company did not hold any marketable securities at June 30, 2017. The fair value level for the funds held for clients’ cash and cash equivalents and available-for-sale securities as of June 30, 2018 is as follows: Total Level 1 Level 2 Level 3 Funds held for clients' cash and cash equivalents $ 1,102,538 $ 1,076,414 $ 26,124 $ — Available-for-sale securities: Commercial paper 50,702 — 50,702 — Corporate bonds 37,382 — 37,382 — Asset-backed securities 25,847 — 25,847 — U.S. treasury securities 9,877 — 9,877 — Total available-for-sale securities 123,808 — 123,808 — Investments $ 1,226,346 $ 1,076,414 $ 149,932 $ — |
Business Combinations
Business Combinations | 12 Months Ended |
Jun. 30, 2018 | |
Business Combinations | |
Business Combinations | (5) Business Combinations In March 2018, the Company acquired substantially all the assets of BeneFLEX HR Resources, Inc. (“BeneFLEX”), a third party employee benefits administrator, for $9,346, net of cash acquired. BeneFLEX administers employee benefit plans, including flexible spending accounts, health savings accounts, health reimbursement accounts, COBRA, and others. The Company paid $8,346 upon closing and may be required to pay an additional $1,000 subject to BeneFLEX attaining certain revenue targets and in the absence of indemnity claims. This acquisition expands the portfolio of services available to the Company’s clients by allowing it to provide additional benefit administration solutions to its clients, prospects, and broker partners. The Company accounts for business combinations in accordance with ASC 805 ( Business Combinations ). The Company recorded the acquisition using the acquisition method of accounting and recognized assets at their fair value as of the date of acquisition. The Company determined the fair value of identifiable intangible assets acquired primarily by using an income approach. The following table summarizes the allocation of the purchase price for BeneFLEX: At March 8, 2018 Goodwill $ 3,587 Client relationships 5,550 Non-solicitation agreements 240 Net liabilities assumed (31) Total purchase price $ 9,346 The results from this acquisition have been included in the Company’s consolidated financial statements since the closing of the acquisition. Pro forma information has not been presented because the effect of the acquisition is not material to the Company’s consolidated financial statements. Goodwill will be amortized over a period of 15 years for income tax purposes. Direct costs related to the acquisitions were recorded as general and administrative expenses as incurred. |
Capitalized Internal-Use Softwa
Capitalized Internal-Use Software | 12 Months Ended |
Jun. 30, 2018 | |
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, 2017 2018 Capitalized internal-use software $ 49,663 $ 67,678 Accumulated amortization (32,269) (46,584) Capitalized internal-use software, net $ 17,394 $ 21,094 Amortization of capitalized internal-use software amounted to $5,446, $9,447 and $14,315 for the years ended June 30, 2016, 2017 and 2018, respectively and is included in Cost of Revenues—Recurring Revenues. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Jun. 30, 2018 | |
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, 2017 2018 Office equipment $ 3,591 $ 3,743 Computer equipment 24,411 29,768 Furniture and fixtures 7,547 10,382 Software 4,954 5,965 Leasehold improvements 21,426 36,366 Time clocks rented by clients 4,240 4,534 Total 66,169 90,758 Accumulated depreciation (25,413) (28,729) Property and equipment, net $ 40,756 $ 62,029 Depreciation expense amounted to $6,905, $10,068 and $14,192 for the years ended June 30, 2016, 2017 and 2018, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | (8) Goodwill and Intangible Assets The following table summarizes changes in goodwill during the year ended June 30, 2018: Balance at June 30, 2017 $ 6,003 Additions attributable to current year acquisition 3,587 Balance at June 30, 2018 $ 9,590 The Company’s amortizable intangible assets and estimated useful lives are as follows: June 30, June 30, Useful 2017 2018 Life Client relationships $ 12,580 $ 18,130 7 - 9 years Non-solicitation agreements 360 600 2 - 4 years Total 12,940 18,730 Accumulated amortization (4,033) (5,728) Intangible assets, net $ 8,907 $ 13,002 The increase in goodwill and intangible assets is related to the acquisition of BeneFLEX as discussed in Note 5. Amortization expense for acquired intangible assets was $1,522, $1,512 and $1,695 for the years ended June 30, 2016, 2017 and 2018, respectively. Future amortization expense for acquired intangible is as follows, as of June 30, 2018: Year ending June 30, 2019 $ 2,251 2020 2,251 2021 2,251 2022 2,232 2023 2,118 Thereafter 1,899 Total $ 13,002 |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Jun. 30, 2018 | |
Accrued Expenses | |
Accrued Expenses | (9) Accrued Expenses The components of accrued expenses are as follows: Year ended June 30, 2017 2018 Accrued payroll and personnel costs $ 25,131 $ 31,206 Lease exit obligations — 2,143 Other 5,170 8,892 Total accrued expenses $ 30,301 $ 42,241 |
Leases
Leases | 12 Months Ended |
Jun. 30, 2018 | |
Leases | |
Leases | (10) Leases The Company primarily leases office space in Illinois, California, Florida, Idaho, New Jersey, New Hampshire, New York, Michigan and Missouri under non-cancellable operating leases expiring on various dates from July 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 January 2019 through June 2022. In June 2016, the Company entered into a lease for approximately 310 rentable square feet of office space located in Schaumburg, Illinois. The Company currently utilizes the leased premises as its headquarters, relocating from its previous headquarters in Arlington Heights, Illinois in the fourth quarter of fiscal 2018. The lease provided for phased delivery and commencement dates, and the Company commenced each phase on the following dates: Phase I (June 1, 2017), Phase II (November 1, 2017) and Phase III (July 1, 2018). The Company expects to commence Phase IV on July 1, 2019 with the actual commencement date subject to timely delivery of the premises by the landlord. Under the terms of the lease, the Company receives 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 began on the Phase I commencement date (June 1, 2017) and will end on October 31, 2032 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 uses the leased premises to accommodate the continued expansion of its employee base in the western region of the United States. The lease provided for phased delivery and commencement dates and the Company commenced Phase I on July 2, 2018. The Company expects to commence Phase II on February 1, 2020 with the actual commencement date subject to timely delivery of the premises by the landlord. Under the terms of the lease, the Company receives 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 began on the Phase I commencement date (July 2, 2018) and will end on July 31, 2028 with four subsequent five-year renewal options. In June 2018, the Company ceased using approximately 110 rentable square feet of its former headquarters in Arlington Heights, Illinois in conjunction with relocating to its new Schaumburg, Illinois headquarters. As a result, the Company recognized $2,336 in early lease exit costs that are included in general and administrative expense in its consolidated statements of operations and comprehensive income (loss). The following table is a summary of the changes in the remaining lease obligation related to the former headquarters, which is recorded in accrued expenses and other long-term liabilities on the consolidated balance sheet. The difference between the lease exit costs recognized in general and administrative expense as discussed above and the remaining lease obligation relates to the write-off of deferred rent recorded in prior periods. Balance at June 30, 2017 $ — Additions 3,446 Payments (199) Adjustments 14 Balance at June 30, 2018 $ 3,261 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 $5,596, $8,571 and $12,293 for the years ended June 30, 2016, 2017 and 2018, 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, 2018 are: Year ending June 30, 2019 $ 8,909 2020 9,077 2021 10,126 2022 8,803 2023 8,345 Later years, through 2032 67,225 Total minimum lease payments $ 112,485 |
Income Taxes
Income Taxes | 12 Months Ended |
Jun. 30, 2018 | |
Income Taxes | |
Income Taxes | (11) Income Taxes (a) Income Taxes Income tax expense (benefit) for the years ended June 30, 2016, 2017 and 2018 consists of the following: Year ended June 30, 2016 2017 2018 Current taxes U.S. federal $ — $ — $ 294 State and local 27 500 364 Deferred taxes: U.S. federal 136 137 (15,167) State and local 14 14 (7,338) Total income tax expense (benefit) $ 177 $ 651 $ (21,847) (b) Tax Rate Reconciliation Income tax expense (benefit) differed from the amounts computed by applying the U.S. federal income tax rate of 34% for the years ended June 30, 2016 and 2017, and 27.55% for the year ended June 30, 2018 to pretax income (loss) as a result of the following: Year ended June 30, 2016 2017 2018 Income tax expense (benefit) at statutory federal rate $ (1,249) $ 2,503 $ 4,615 Increase (reduction) in income taxes resulting from: Research and development credit, net of federal income tax benefit (504) (1,025) (1,101) Non-deductible expenses 557 685 1,531 Change in valuation allowance 2,590 (1,349) (22,771) Effect of Tax Cuts and Jobs Act 8,626 Stock-based compensation expense (10,527) State and local income taxes, net of federal income tax benefit (432) (196) (2,262) Other (785) 33 42 $ 177 $ 651 $ (21,847) (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, 2017 and 2018 are presented below. Year ended June 30, 2017 2018 Deferred tax assets: Deferred rent $ 1,090 $ 1,177 Accrued expenses 2,290 2,709 Stock-based compensation 11,034 10,833 Net operating loss carryforwards 253 10,775 Research and development and other credits 4,984 7,674 Intangible assets 256 271 Other 129 146 Total deferred tax assets 20,036 33,585 Valuation allowance (8,689) (355) Net deferred tax assets 11,347 33,230 Deferred tax liabilities: Research and development costs (5,649) (4,711) Depreciation (6,099) (6,379) Total deferred tax liabilities (11,748) (11,090) Net deferred tax asset (liability) $ (401) $ 22,140 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. The Company established a valuation allowance in fiscal 2014 on all of its net deferred tax assets except for deferred tax liabilities associated with indefinite-lived intangible assets, given that the Company determined that it was more likely than not that the Company would not recognize the benefits of its net operating loss carryforwards prior to their expiration. The Company continued to record a valuation allowance through the first six months of fiscal 2018. In the third quarter of fiscal 2018, management concluded that all of the valuation allowance for the Company’s U.S. federal deferred tax assets and substantially all state deferred tax assets was no longer needed. This is primarily due to three years’ cumulative income through the third quarter of fiscal 2018 and the forecast of future taxable income. At March 31, 2018, based on the evaluation of positive and negative evidence, management believed it is more likely than not that the net deferred tax assets will be realized for all federal and substantially all state purposes. Accordingly, management recognized a non-recurring tax benefit of $22,585 related to the valuation allowance reversal. As of June 30, 2018, the Company continues to maintain a valuation allowance of $355 for certain state tax benefits. Such assessment may change in the future as further evidence becomes available. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law. Over the long term, the Company generally expects to benefit from the lower statutory rates provided by the Act and is currently assessing all other aspects relevant to the Company. The Company operates solely in the United States; therefore, the international provisions of the Act do not apply. In accordance with ASC 740, during the second quarter the Company modified its current federal statutory rate for the year to account for the rate change. At that time, the Company recorded a $156 income tax benefit attributable to the rate change effect on the deferred tax liability for indefinite-lived intangible assets. In response to the Act, the SEC subsequently issued SAB 118 (later codified into ASU 2018-05) allowing registrants to record provisional amounts to the extent a company’s accounting for the Act is incomplete. Pursuant to disclosure under SAB 118, revaluation of deferred taxes as of December 22, 2017 is incomplete. The Company has recorded provisional estimated tax expense of $8,626 related to the rate change and additional limitations on executive compensation. As the Company released substantially all of its valuation allowance against its deferred taxes, this expense is included in the income tax (benefit) for the year. As of June 30, 2018, the Company is still analyzing the impact of the Act with respect to limitations on the deductibility of executive compensation and certain aspects of bonus depreciation expense. The Company needs additional time to finalize its estimates and expects additional guidance to be issued by the Internal Revenue Service before the assessment of the impact of the Act can be completed. The Company currently expects to complete its accounting for the effects of the Act by the end of December 2018. At June 30, 2018, the Company has gross net operating loss carryforwards for federal income tax purposes of approximately $45,839 and state income tax purposes of approximately $18,409. The federal NOL carryforwards expire from 2029 to 2038. The state NOL carryforwards expire from 2019 to 2038. The Company also has gross federal and state research and development tax credit and other state credit carryforwards of approximately $7,674, which expire between 2018 and 2038. The Company had no unrecognized tax benefits as of June 30, 2016, 2017 and 2018, 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 2014 (fiscal year ended June 30, 2015), 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 2014 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, 2018 | |
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, 2018 | |
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 (the “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, 2018, it would increase the number of common shares in reserve for issuance under the 2014 Plan by 2,367 shares. As of June 30, 2018, the Company had 13,816 shares allocated to the plans, of which 3,786 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 the changes in the number of shares available for grant under the Company’s equity incentive plans during the year ended June 30, 2018: Number of Available for grant at July 1, 2017 8,227 January 1, 2018 Evergreen provision increase 2,367 RSUs granted (929) Shares withheld in settlement of taxes and/or exercise price 379 Forfeitures 58 Shares removed (72) Available for grant at June 30, 2018 10,030 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 and comprehensive income (loss): Year ended June 30, 2016 2017 2018 Cost of revenue – recurring $ 1,648 $ 2,162 $ 2,830 Cost of revenue – non-recurring 1,127 1,357 1,388 Sales and marketing 4,441 6,287 7,295 Research and development 2,789 3,086 3,748 General and administrative 7,558 13,842 15,093 Total stock-based compensation expense $ 17,563 $ 26,734 $ 30,354 In addition, the Company capitalized $1,078, $1,773 and $2,024 of stock-based compensation expense in its capitalized internal-use software costs in the years ended June 30, 2016, 2017 and 2018, 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 were subject to time-based vesting became fully-vested upon his death in August 2017. 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 was 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 and comprehensive income (loss). 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 years ended June 30, 2017 or 2018. The following table summarizes the assumptions used for estimating the fair value of stock options granted for the year ended June 30, 2016: Valuation assumptions: Expected dividend yield % Expected volatility % Expected term (years) 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, 2017 2,751 $ 11.54 5.69 $ 92,556 Options forfeited (5) $ 18.41 Options exercised (839) $ 9.54 Balance at June 30, 2018 1,907 $ 12.40 5.00 $ 88,595 Options exercisable at June 30, 2018 1,781 $ 11.18 4.89 $ 84,935 Options vested and expected to vest at June 30, 2018 1,905 $ 12.37 5.00 $ 88,538 There were no stock options granted during the years ended June 30, 2017 or 2018. The weighted average grant date fair value of options granted during the year ended June 30, 2016 was $12.92. The total intrinsic value of options exercised during the years ended June 30, 2016, 2017 and 2018 was $13,362, $20,802 and $34,083, respectively. At June 30, 2018, there was $152 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options granted under the Plan. That cost is expected to be recognized over a weighted average period of 0.84 years. The following table summarizes information about stock options outstanding and stock options exercisable at June 30, 2018: Options Outstanding Options Exercisable Price Range Number of Weighted Weighted Number of Weighted $2.28 to $3.58 73 2.92 $ 2.28 73 $ 2.28 $3.59 to $5.96 847 4.14 $ 4.88 847 $ 4.88 $5.97 to $12.02 127 5.02 $ 7.04 127 $ 7.04 $12.03 to $20.90 521 5.72 $ 17.00 521 $ 17.00 $20.91 to $35.28 339 6.47 $ 28.32 213 $ 27.50 Total 1,907 5.00 $ 12.40 1,781 $ 11.18 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 and Adjusted EBITDA targets in future fiscal years. The following table represents restricted stock unit activity during the year ended June 30, 2018: Units Weighted RSU balance at July 1, 2017 1,455 $ 39.96 RSUs granted 929 $ 46.61 RSUs vested (452) $ 39.30 RSUs forfeited (53) $ 42.08 RSU balance at June 30, 2018 1,879 $ 43.39 RSUs expected to vest at June 30, 2018 1,667 $ 43.23 At June 30, 2018, there was $29,656 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 1.85 years. The total excess income tax benefits for stock-based compensation arrangements was $8,228, $15,130 and $33,443 for the years ended June 30, 2016, 2017 and 2018, respectively. As described in Note 2, the Company adopted ASU 2016-09 as of July 1, 2017. As a result, the Company recognized these tax benefits through income tax expense instead of additional paid-in capital. (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, 2018, a total of 1,111 shares of common stock were reserved for future issuances under the ESPP. The number of shares of common stock reserved for issuance under the ESPP will increase automatically each calendar year, continuing through and including January 1, 2024. The number of shares added each year will be equal to the lesser of (a) 400, (b) seventy-five one hundredths percent (0.75%) of the number of shares of common stock of the Company issued and outstanding on the immediately preceding December 31, or (c) an amount determined by the Company’s board of directors. The Company’s board of directors determined that, effective January 1, 2018, it would increase the number of common shares in reserve for issuance under the ESPP by 395 shares . The Company issued a total of 108 shares upon the completion of its six-month offering periods ending November 15, 2017 and May 15, 2018. The Company recorded compensation expense attributable to the ESPP of $1,069, $1,263 and $1,331 for the years ended June 30, 2016, 2017 and 2018, 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, 2016 2017 2018 Valuation assumptions: Expected dividend yield % % % Expected volatility 44.1 - 53.4 % 38.9 - 53.4 % 28.3 - 39.1 % Expected term (years) 0.5 0.5 0.5 Risk-free interest rate 0.11 - 0.31 % 0.28 - 1.02 % 1.02 - 2.10 % (c) 401(k) Plan The Company maintains a 401(k) plan with a 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 $2,717, $3,667 and $4,632 for the years ended June 30, 2016, 2017 and 2018, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Jun. 30, 2018 | |
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. |
Net Income (Loss) Per Share
Net Income (Loss) Per Share | 12 Months Ended |
Jun. 30, 2018 | |
Net Income (Loss) Per Share | |
Net Income Per Share | (15) Net Income (Loss) 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, 2016 2017 2018 Numerator: Net income (loss) $ (3,851) $ 6,718 $ 38,598 Denominator: Weighted-average shares used in computing net income (loss) per share: Basic 50,913 51,415 52,425 Weighted-average effect of potentially dilutive shares: Employee stock options, restricted stock units and employee stock purchase plan shares — 2,642 2,462 Diluted 50,913 54,057 54,887 Net income (loss) per share: Basic $ (0.08) $ 0.13 $ 0.74 Diluted $ (0.08) $ 0.12 $ 0.70 The following table summarizes the outstanding employee stock options, restricted stock units and employee stock purchase plan shares as of the balance sheet date that were excluded from the diluted per share calculation for the periods presented because to include them would have been anti-dilutive: Year ended June 30, 2016 2017 2018 Employee stock options 3,464 145 — Restricted stock units 1,003 627 92 Employee stock purchase plan shares 15 14 — Total 4,482 786 92 |
Selected Quarterly Financial Da
Selected Quarterly Financial Data (unaudited) | 12 Months Ended |
Jun. 30, 2018 | |
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, 2017 and 2018. 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 Quarter Ended September 30, December 31, 2017 2017 March 31, 2018 June 30, 2018 Consolidated Statements of Operations Data Revenues $ 81,500 $ 86,004 $ 113,407 $ 96,616 Gross profit $ 46,541 $ 49,164 $ 74,755 $ 57,870 Operating income (loss) $ 515 $ 133 $ 20,465 $ (5,164) Net income (loss) $ 543 $ 431 $ 39,177 $ (1,553) Net income (loss) per share: Basic $ 0.01 $ 0.01 $ 0.74 $ (0.03) Diluted $ 0.01 $ 0.01 $ 0.71 $ (0.03) Weighted-average shares used in computing net income (loss) per share: Basic 51,893 52,502 52,615 52,699 Diluted 54,610 54,818 55,030 52,699 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Jun. 30, 2018 | |
Subsequent Events | |
Subsequent Events | (17) Subsequent Events On August 9, 2018, the Company announced that its Board of Directors approved a stock repurchase plan under which it is authorized to purchase (in the aggregate) up to $35,000 of its issued and outstanding common stock, over a 12-month period. Shares may be repurchased from time-to-time in open market transactions at prevailing market prices or privately negotiated transactions. The actual timing, number and value of shares repurchased will depend on the market price of its common stock, general market conditions and other corporate and economic considerations. |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2018 | |
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. 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 include the accounts of the Company and its wholly owned subsidiaries. All 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. |
Funds Held For Clients, Corporate Investments and Client Fund Obligations | (d) Funds Held For Clients, Corporate Investments 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. 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. Funds held for clients is primarily comprised of cash and cash equivalents invested in demand deposit accounts. Starting in July 2017, the Company also invested a portion of its funds held for clients in marketable securities. Marketable securities classified as available-for-sale are recorded at fair value on the consolidated balance sheets. Unrealized gains and losses, net of applicable income taxes, are reported as other comprehensive income (loss) in the consolidated statements of operations and comprehensive income (loss). Interest on marketable securities included in funds held for clients is reported as interest income on funds held for clients on the consolidated statements of operations and comprehensive income (loss). The Company reviews the composition of its portfolio for any available-for-sale security that has a fair value that falls below its amortized cost. If any security fits this criterion, the Company further evaluates whether other-than-temporary impairment exists by considering whether the Company has the intent and ability to retain the security for a period of time sufficient enough to allow for anticipated fair value recovery. The Company did not record any other-than-temporary impairment charges during the year ended June 30, 2018. 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. |
Accounts Receivable | (e) 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, 2016 2017 2018 Balance at the beginning of the year $ 149 $ 193 $ 266 Charged to expense 159 113 296 Write-offs (115) (40) (187) Balance at the end of the year $ 193 $ 266 $ 375 |
Prepaid Expenses and Other Assets | (f) 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, corporate investments and time clocks available for sale or lease. |
Capitalized Internal-Use Software | (g) 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 or 36-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 | (h) 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 | (i) Intangible Assets, Net of Accumulated Amortization Intangible assets are comprised primarily of client relationship acquisitions and are reported net of accumulated amortization on the consolidated balance sheets. Client relationships use the straight-line method of amortization over a seven or nine-year time frame from the date of acquisition, while non-solicitation agreements use the straight-line method of amortization over the term 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 | (j) 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. Goodwill is not amortized, but instead is tested for impairment at the reporting unit level. The Company adopted ASU 2017-04, Intangibles – Goodwill and Other for its annual goodwill impairment test performed during fiscal 2018. Based on the new standard, if the fair value of the reporting unit is less than its carrying amount, the Company would record an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, but the loss recognized should not exceed the amount of goodwill allocated to the reporting unit. 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 2016, 2017 or 2018 as a result of the Company’s qualitative assessments over its single reporting segment. |
Deferred Rent | (k) 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 “Deferred rent” in the accompanying consolidated balance sheets. |
Income Taxes | (l) 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 | (m) 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. While the majority of its agreements are generally cancellable by the client on 60 days’ notice or less, the Company began entering into term arrangements in fiscal 2018, which are generally over two years in length. 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. 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 and the 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 or additional consideration is contingent on the delivery of future services, 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 and comprehensive income (loss). |
Cost of Revenues | (n) 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 | (o) Advertising Advertising costs are expensed as incurred. Advertising costs amounted to $219, $199 and $179 for the years ended June 30, 2016, 2017 and 2018, respectively. |
Stock-Based Compensation | (p) 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. For stock options and estimated shares purchasable under the ESPP, 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 | (q) 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 | (r) 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 Adopted Accounting Standards | (s) Recently Adopted Accounting Standards 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, and it resulted in an increase to the Company’s gross net operating loss of $30,783. As of December 31, 2017, the adoption of this standard did not have a material impact on its consolidated financial statements and disclosures due to the Company’s valuation allowance on deferred tax assets. However, during the third quarter of fiscal 2018, the Company released its valuation allowance and as a result, the Company recorded a significant increase in deferred tax assets due to excess tax benefits from employee stock exercises. Refer to Note 11 for additional information on the release of the valuation allowance and the impact of excess tax benefits from employee stock exercises. 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. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) (“ASU 2017-01”) which clarifies the definition of a business. ASU 2017-01 provides guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. It is effective, on a prospective basis, for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard effective January 1, 2018. The adoption of ASU 2017-01 did not have a material impact on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) (“ASU 2017-04”), which eliminated Step 2 of the goodwill impairment test, which required the impairment charge to be measured as a difference between the implied fair value of goodwill against its carrying amount. Instead, an entity measures goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company adopted this standard for the annual goodwill impairment test performed during fiscal 2018. The adoption of ASU 2017-04 did not have a material impact on the Company’s financial statements. In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) (“ASU 2018-05”) which incorporates the SEC’s Staff Accounting Bulletin 118 (“SAB 118”) issued on December 22, 2017. SAB 118 provides for a provisional measurement period for entities to finalize their accounting for certain income tax effects related to the Tax Cuts and Jobs Act (the “Act”), not to exceed one year from enactment of the new tax law. Entities are permitted to utilize reasonable estimates until they have finished analyzing the effects of the Act. The Company recognized provisional income tax effects of the Act during fiscal 2018 in accordance with SAB 118, and expects to complete its accounting under the Act by the end of December 2018. Refer to Note 11 for additional information. |
Recently Issued Accounting Standards | (t) Recently Issued Accounting Standards In May 2014, the 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 modified retrospective 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 will adopt the new standard in its fiscal year beginning July 1, 2018 using the modified retrospective method of transition, which limits the application of the new standard only to contracts that were not completed as of the effective date of July 1, 2018. The Company is in the process of finalizing its accounting conclusions around the new standard as well as finalizing the impacts of the disclosure requirements and transition adjustments on its consolidated financial statements. The estimated impact is described below. The Company is also nearly complete in updating its existing internal controls and processes as it relates to the new standard. Under the current revenue standard through fiscal 2018, the Company accounts for implementation and recurring services each as a separate unit of account. The Company has been able to establish standalone value for implementation services as supported by the activity of third-party resellers and other vendors that performed certain implementation services. The Company has observed that third party implementation activity has continued to decrease over time and at the same time, the Company has invested in proprietary applications and processes that impact implementation activities. The Company has determined that from July 1, 2018 forward it will no longer have a sufficient basis to establish standalone value of implementations for its proprietary products due to the culmination of the changes to the Company’s applications and processes that eliminate the ability of third parties to perform implementation services. Similarly, the Company determined that these implementation services are not a separate performance obligation under the new standard for contracts entered into after July 1, 2018 and the associated implementation fees will be treated as nonrefundable upfront fees which will be deferred and amortized over a period of time instead of recognized upon completion. The Company also has assessed the treatment of certain costs under the new standard and currently expects that there will be a material impact in the manner in which it treats both costs of obtaining new contracts (i.e., selling and commission costs) and direct costs of fulfillment. The Company will be required to defer these costs and amortize them over the expected period of benefit, which it has determined to be 7 years. The Company estimates that the cumulative effect related to the deferral of the costs of obtaining new contracts will be approximately $51,000, net of deferred taxes, which will be recorded through Accumulated Deficit in the Statement of Changes in Stockholder’s Equity upon adoption on July 1, 2018. 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. In March 2018, the FASB affirmed its proposed ASU, Leases (Topic 842): Targeted Improvements, which provides an additional transition method allowing an entity to apply the new lease accounting and disclosure requirements only for the year of adoption with the comparative periods continuing to be in accordance with current GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. While the Company is still assessing the impact of the new standard, it expects the adoption of this standard will have a material effect on its consolidated balance sheets. The Company is evaluating the transition methods and will adopt this new standard in its fiscal year beginning July 1, 2019. 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 Accoun25
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Summary of Significant Accounting Policies | |
Schedule of activity in allowance for doubtful accounts | For the Years Ended June 30, 2016 2017 2018 Balance at the beginning of the year $ 149 $ 193 $ 266 Charged to expense 159 113 296 Write-offs (115) (40) (187) Balance at the end of the year $ 193 $ 266 $ 375 |
Funds Held For Clients And Co26
Funds Held For Clients And Corporate Investments (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Funds Held For Clients And Corporate Investments [Abstract] | |
Schedule of investments | Gross Gross Amortized unrealized unrealized Type of Issue cost gains losses Fair value Funds held for clients' cash and cash equivalents $ 1,102,541 $ — $ (3) $ 1,102,538 Available-for-sale securities: Commercial paper 50,703 3 (4) 50,702 Corporate bonds 37,508 8 (134) 37,382 Asset-backed securities 25,901 1 (55) 25,847 U.S. treasury securities 9,879 — (2) 9,877 Total available-for-sale securities 123,991 12 (195) 123,808 Investments $ 1,226,532 $ 12 $ (198) $ 1,226,346 |
Classification of investments on the consolidated balance sheets | Year ended June 30, 2017 2018 Funds held for clients $ 942,459 $ 1,225,614 Prepaid expenses and other — 732 Total investments $ 942,459 $ 1,226,346 |
Schedule of available-for-sale securities that have been in an unrealized loss position for less than 12 months | Gross unrealized losses Fair value Commercial paper $ (4) $ 23,657 Corporate bonds (134) 29,122 Asset-backed securities (55) 17,960 U.S. treasury securities (2) 4,933 Total available-for-sale securities $ (195) $ 75,672 |
Schedule of expected maturities of available-for-sale securities | Amortized cost Fair value One year or less $ 99,420 $ 99,319 One year to two years 22,571 22,487 Two years to three years 2,000 2,002 Total available-for-sale securities $ 123,991 $ 123,808 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Fair Value Measurement | |
Schedule of fair value level for funds held for clients cash and cash equivalents and available-for-sale securities measured on a recurring basis | Total Level 1 Level 2 Level 3 Funds held for clients' cash and cash equivalents $ 1,102,538 $ 1,076,414 $ 26,124 $ — Available-for-sale securities: Commercial paper 50,702 — 50,702 — Corporate bonds 37,382 — 37,382 — Asset-backed securities 25,847 — 25,847 — U.S. treasury securities 9,877 — 9,877 — Total available-for-sale securities 123,808 — 123,808 — Investments $ 1,226,346 $ 1,076,414 $ 149,932 $ — |
Business Combinations (Tables)
Business Combinations (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Business Combinations | |
Summary of fair value of the assets acquired at the date of acquisition | The following table summarizes the allocation of the purchase price for BeneFLEX: At March 8, 2018 Goodwill $ 3,587 Client relationships 5,550 Non-solicitation agreements 240 Net liabilities assumed (31) Total purchase price $ 9,346 |
Capitalized Internal-Use Soft29
Capitalized Internal-Use Software (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Capitalized Internal-Use Software. | |
Schedule of capitalized internal-use software and accumulated amortization | Year ended June 30, 2017 2018 Capitalized internal-use software $ 49,663 $ 67,678 Accumulated amortization (32,269) (46,584) Capitalized internal-use software, net $ 17,394 $ 21,094 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Property and Equipment. | |
Schedule of property and equipment | Year ended June 30, 2017 2018 Office equipment $ 3,591 $ 3,743 Computer equipment 24,411 29,768 Furniture and fixtures 7,547 10,382 Software 4,954 5,965 Leasehold improvements 21,426 36,366 Time clocks rented by clients 4,240 4,534 Total 66,169 90,758 Accumulated depreciation (25,413) (28,729) Property and equipment, net $ 40,756 $ 62,029 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets | |
Schedule of changes in goodwill | Balance at June 30, 2017 $ 6,003 Additions attributable to current year acquisition 3,587 Balance at June 30, 2018 $ 9,590 |
Schedule of amortizable intangible assets before amortization expense | June 30, June 30, Useful 2017 2018 Life Client relationships $ 12,580 $ 18,130 7 - 9 years Non-solicitation agreements 360 600 2 - 4 years Total 12,940 18,730 Accumulated amortization (4,033) (5,728) Intangible assets, net $ 8,907 $ 13,002 |
Schedule of future amortization expense for acquired intangible assets | Year ending June 30, 2019 $ 2,251 2020 2,251 2021 2,251 2022 2,232 2023 2,118 Thereafter 1,899 Total $ 13,002 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Accrued Expenses | |
Schedule of components of accrued expenses | Year ended June 30, 2017 2018 Accrued payroll and personnel costs $ 25,131 $ 31,206 Lease exit obligations — 2,143 Other 5,170 8,892 Total accrued expenses $ 30,301 $ 42,241 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Leases | |
Schedule of the changes in the lease exit obligation | Balance at June 30, 2017 $ — Additions 3,446 Payments (199) Adjustments 14 Balance at June 30, 2018 $ 3,261 |
Schedule of future minimum lease payments under non-cancellable operating leases | Year ending June 30, 2019 $ 8,909 2020 9,077 2021 10,126 2022 8,803 2023 8,345 Later years, through 2032 67,225 Total minimum lease payments $ 112,485 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Income Taxes | |
Schedule of income tax expense | Year ended June 30, 2016 2017 2018 Current taxes U.S. federal $ — $ — $ 294 State and local 27 500 364 Deferred taxes: U.S. federal 136 137 (15,167) State and local 14 14 (7,338) Total income tax expense (benefit) $ 177 $ 651 $ (21,847) |
Schedule of tax rate reconciliation by applying the U.S. federal income tax rate to pretax income (loss) | Year ended June 30, 2016 2017 2018 Income tax expense (benefit) at statutory federal rate $ (1,249) $ 2,503 $ 4,615 Increase (reduction) in income taxes resulting from: Research and development credit, net of federal income tax benefit (504) (1,025) (1,101) Non-deductible expenses 557 685 1,531 Change in valuation allowance 2,590 (1,349) (22,771) Effect of Tax Cuts and Jobs Act 8,626 Stock-based compensation expense (10,527) State and local income taxes, net of federal income tax benefit (432) (196) (2,262) Other (785) 33 42 $ 177 $ 651 $ (21,847) |
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, 2017 2018 Deferred tax assets: Deferred rent $ 1,090 $ 1,177 Accrued expenses 2,290 2,709 Stock-based compensation 11,034 10,833 Net operating loss carryforwards 253 10,775 Research and development and other credits 4,984 7,674 Intangible assets 256 271 Other 129 146 Total deferred tax assets 20,036 33,585 Valuation allowance (8,689) (355) Net deferred tax assets 11,347 33,230 Deferred tax liabilities: Research and development costs (5,649) (4,711) Depreciation (6,099) (6,379) Total deferred tax liabilities (11,748) (11,090) Net deferred tax asset (liability) $ (401) $ 22,140 |
Benefit Plans (Tables)
Benefit Plans (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Benefit Plans | |
Summary of shares available for grant under equity incentive plans | Number of Available for grant at July 1, 2017 8,227 January 1, 2018 Evergreen provision increase 2,367 RSUs granted (929) Shares withheld in settlement of taxes and/or exercise price 379 Forfeitures 58 Shares removed (72) Available for grant at June 30, 2018 10,030 |
Schedule of stock-based compensation expense related to stock options, restricted stock units and the Employee Stock Purchase Plan | Year ended June 30, 2016 2017 2018 Cost of revenue – recurring $ 1,648 $ 2,162 $ 2,830 Cost of revenue – non-recurring 1,127 1,357 1,388 Sales and marketing 4,441 6,287 7,295 Research and development 2,789 3,086 3,748 General and administrative 7,558 13,842 15,093 Total stock-based compensation expense $ 17,563 $ 26,734 $ 30,354 |
Summary of the assumptions used for estimating the fair value of stock options granted | Valuation assumptions: Expected dividend yield % Expected volatility % Expected term (years) 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, 2017 2,751 $ 11.54 5.69 $ 92,556 Options forfeited (5) $ 18.41 Options exercised (839) $ 9.54 Balance at June 30, 2018 1,907 $ 12.40 5.00 $ 88,595 Options exercisable at June 30, 2018 1,781 $ 11.18 4.89 $ 84,935 Options vested and expected to vest at June 30, 2018 1,905 $ 12.37 5.00 $ 88,538 |
Schedule of stock options outstanding and stock options exercisable | Options Outstanding Options Exercisable Price Range Number of Weighted Weighted Number of Weighted $2.28 to $3.58 73 2.92 $ 2.28 73 $ 2.28 $3.59 to $5.96 847 4.14 $ 4.88 847 $ 4.88 $5.97 to $12.02 127 5.02 $ 7.04 127 $ 7.04 $12.03 to $20.90 521 5.72 $ 17.00 521 $ 17.00 $20.91 to $35.28 339 6.47 $ 28.32 213 $ 27.50 Total 1,907 5.00 $ 12.40 1,781 $ 11.18 |
Schedule of restricted stock unit activity | Units Weighted RSU balance at July 1, 2017 1,455 $ 39.96 RSUs granted 929 $ 46.61 RSUs vested (452) $ 39.30 RSUs forfeited (53) $ 42.08 RSU balance at June 30, 2018 1,879 $ 43.39 RSUs expected to vest at June 30, 2018 1,667 $ 43.23 |
Summary of weighted average assumptions used for estimating grant date fair value of ESPP | Year ended June 30, 2016 2017 2018 Valuation assumptions: Expected dividend yield % % % Expected volatility 44.1 - 53.4 % 38.9 - 53.4 % 28.3 - 39.1 % Expected term (years) 0.5 0.5 0.5 Risk-free interest rate 0.11 - 0.31 % 0.28 - 1.02 % 1.02 - 2.10 % |
Net income (Loss) Per Share (Ta
Net income (Loss) Per Share (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Net Income (Loss) Per Share | |
Schedule of calculation of basic net income (loss) per share | Year ended June 30, 2016 2017 2018 Numerator: Net income (loss) $ (3,851) $ 6,718 $ 38,598 Denominator: Weighted-average shares used in computing net income (loss) per share: Basic 50,913 51,415 52,425 Weighted-average effect of potentially dilutive shares: Employee stock options, restricted stock units and employee stock purchase plan shares — 2,642 2,462 Diluted 50,913 54,057 54,887 Net income (loss) per share: Basic $ (0.08) $ 0.13 $ 0.74 Diluted $ (0.08) $ 0.12 $ 0.70 |
Summary of anti-dilutive securities | Year ended June 30, 2016 2017 2018 Employee stock options 3,464 145 — Restricted stock units 1,003 627 92 Employee stock purchase plan shares 15 14 — Total 4,482 786 92 |
Selected Quarterly Financial 37
Selected Quarterly Financial Data (unaudited) (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Selected Quarterly Financial Data (unaudited) | |
Schedule of selected unaudited quarterly statements of operations data | 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 Quarter Ended September 30, December 31, 2017 2017 March 31, 2018 June 30, 2018 Consolidated Statements of Operations Data Revenues $ 81,500 $ 86,004 $ 113,407 $ 96,616 Gross profit $ 46,541 $ 49,164 $ 74,755 $ 57,870 Operating income (loss) $ 515 $ 133 $ 20,465 $ (5,164) Net income (loss) $ 543 $ 431 $ 39,177 $ (1,553) Net income (loss) per share: Basic $ 0.01 $ 0.01 $ 0.74 $ (0.03) Diluted $ 0.01 $ 0.01 $ 0.71 $ (0.03) Weighted-average shares used in computing net income (loss) per share: Basic 51,893 52,502 52,615 52,699 Diluted 54,610 54,818 55,030 52,699 |
Summary of Significant Accoun38
Summary of Significant Accounting Policies - Concentration of Risk, Accounts Receivable (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Funds Held For Clients, Corporate Investments and Client Fund Obligations | |||
Period of Repayment of Client Fund Obligation Liabilities | 1 year | ||
Other than temporary impairment losses | |||
OTTI recognized in AOCI | $ 0 | ||
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 | $ 266 | $ 193 | $ 149 |
Charged to expense | 296 | 113 | 159 |
Write-offs | (187) | (40) | (115) |
Balance at end of period | $ 375 | $ 266 | $ 193 |
Total Revenue | Customer Concentration Risk | Major Customer With Ten Percent Or More Of Benchmark | |||
Concentrations of Risk | |||
Percentage of total revenues | 0.00% | ||
Total Revenue | Geographic Concentration Risk | UNITED STATES | |||
Concentrations of Risk | |||
Percentage of total revenues | 100.00% |
Summary of Significant Accoun39
Summary of Significant Accounting Policies - Capitalized Internal-Use Software (Details) - Capitalized internal-use software | 12 Months Ended |
Jun. 30, 2018 | |
Minimum | |
Capitalized internal-use software | |
Estimated useful lives | 24 months |
Maximum | |
Capitalized internal-use software | |
Estimated useful lives | 36 months |
Summary of Significant Accoun40
Summary of Significant Accounting Policies - PP&E (Details) | 12 Months Ended |
Jun. 30, 2018 | |
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 Accoun41
Summary of Significant Accounting Policies - Goodwill and Other Intangible Assets (Details) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018USD ($)segment | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | |
Goodwill and other intangible assets, net of accumulated amortization | |||
Goodwill, Impairment Loss | $ 0 | $ 0 | $ 0 |
Advertising | |||
Advertising costs | $ 179 | $ 199 | $ 219 |
Segment Information | |||
Number of reporting segments | segment | 1 | ||
Minimum | |||
Revenue Recognition | |||
Period of contract arrangement | 2 years | ||
Minimum | Client relationships | |||
Goodwill and other intangible assets, net of accumulated amortization | |||
Estimated useful lives | 7 years | ||
Maximum | |||
Revenue Recognition | |||
Period of notice days given for cancellation of agreement | 60 days | ||
Maximum | Client relationships | |||
Goodwill and other intangible assets, net of accumulated amortization | |||
Estimated useful lives | 9 years |
Summary of Significant Accoun42
Summary of Significant Accounting Policies - Recently Adopted and Recently Issued ASUs (Details) $ in Thousands | 12 Months Ended |
Jun. 30, 2018USD ($) | |
ASU 2016-09 | |
Recently adopted accounting standards | |
Increase in gross net operating loss | $ (30,783) |
ASC 606 | |
Recently issued accounting standards | |
Expected period of benefit | 7 years |
Estimated cumulative effect of cost deferrals, net | $ 51,000 |
Funds Held For Clients And Co43
Funds Held For Clients And Corporate Investments - Reconciliation (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Funds Held For Clients And Corporate Investments [Line Items] | ||
Amortized cost of funds held for clients' cash and cash equivalents | $ 1,102,541 | |
Funds held for clients' cash and cash equivalents, gross unrealized losses | 3 | |
Fair value of funds held for clients' cash and cash equivalents | 1,102,538 | |
Available-for-sale Debt Securities | ||
Amortized cost | 123,991 | |
Gross unrealized gains | 12 | |
Gross unrealized losses | (195) | |
Fair value | 123,808 | |
Total investments at amortized cost | 1,226,532 | |
Total investments gross unrealized gain | 12 | |
Total investments gross unrealized loss | (198) | |
Total investments at fair value | 1,226,346 | $ 942,459 |
Commercial paper | ||
Available-for-sale Debt Securities | ||
Amortized cost | 50,703 | |
Gross unrealized gains | 3 | |
Gross unrealized losses | (4) | |
Fair value | 50,702 | |
Corporate bonds | ||
Available-for-sale Debt Securities | ||
Amortized cost | 37,508 | |
Gross unrealized gains | 8 | |
Gross unrealized losses | (134) | |
Fair value | 37,382 | |
Asset-backed securities | ||
Available-for-sale Debt Securities | ||
Amortized cost | 25,901 | |
Gross unrealized gains | 1 | |
Gross unrealized losses | (55) | |
Fair value | 25,847 | |
U.S. treasury securities | ||
Available-for-sale Debt Securities | ||
Amortized cost | 9,879 | |
Gross unrealized losses | (2) | |
Fair value | $ 9,877 |
Funds Held For Clients And Co44
Funds Held For Clients And Corporate Investments - Classification (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Funds Held For Clients And Corporate Investments [Line Items] | ||
Funds held for clients | $ 1,225,614 | $ 942,459 |
Prepaid expenses and other | 732 | |
Total investments at fair value | 1,226,346 | $ 942,459 |
Available-for-sale securities in a continuous unrealized loss position | ||
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months | 75,672 | |
Unrealized loss on available-for-sale securities in a continuous loss position for less than 12 months | (195) | |
Available-for-sale securities in a continuous loss position for more than 12 months | 0 | |
Gross realized gains and losses on the sale of available-for-sale securities | 0 | |
OTTI recognized in AOCI | 0 | |
Reclassification out of Accumulated Other Comprehensive Loss | ||
Available-for-sale securities in a continuous unrealized loss position | ||
Gross realized gains and losses on the sale of available-for-sale securities | 0 | |
Commercial paper | ||
Available-for-sale securities in a continuous unrealized loss position | ||
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months | 23,657 | |
Unrealized loss on available-for-sale securities in a continuous loss position for less than 12 months | (4) | |
Corporate bonds | ||
Available-for-sale securities in a continuous unrealized loss position | ||
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months | 29,122 | |
Unrealized loss on available-for-sale securities in a continuous loss position for less than 12 months | (134) | |
Asset-backed securities | ||
Available-for-sale securities in a continuous unrealized loss position | ||
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months | 17,960 | |
Unrealized loss on available-for-sale securities in a continuous loss position for less than 12 months | (55) | |
U.S. treasury securities | ||
Available-for-sale securities in a continuous unrealized loss position | ||
Fair market value of available-for-sale securities in an unrealized loss position less than 12 months | 4,933 | |
Unrealized loss on available-for-sale securities in a continuous loss position for less than 12 months | $ (2) |
Funds Held For Clients And Co45
Funds Held For Clients And Corporate Investments - Maturities (Details) $ in Thousands | Jun. 30, 2018USD ($) |
Available-for-sale maturities, amortized cost | |
One year or less | $ 99,420 |
One year to two years | 22,571 |
Two years to three years | 2,000 |
Total available-for-sale securities | 123,991 |
Available-for-sale maturities, fair value | |
One year or less | 99,319 |
One year to two years | 22,487 |
Two years to three years | 2,002 |
Total available-for-sale securities | $ 123,808 |
Fair Value Measurement (Details
Fair Value Measurement (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Fair value measurements | ||
Funds held for clients' cash and cash equivalents | $ 1,102,538 | |
Available-for-sale securities: | ||
Available for sale debt securities | 123,808 | |
Total investments at fair value | 1,226,346 | $ 942,459 |
Fair value asset transfers | ||
Transfers from level 1 to level 2 | 0 | |
Transfers from level 2 to level 1 | 0 | |
Level 1 | ||
Fair value measurements | ||
Funds held for clients' cash and cash equivalents | 1,076,414 | |
Available-for-sale securities: | ||
Total investments at fair value | 1,076,414 | |
Level 2 | ||
Fair value measurements | ||
Funds held for clients' cash and cash equivalents | 26,124 | |
Available-for-sale securities: | ||
Available for sale debt securities | 123,808 | |
Total investments at fair value | 149,932 | |
Level 3 | ||
Available-for-sale securities: | ||
Available for sale debt securities | 0 | |
Commercial paper | ||
Available-for-sale securities: | ||
Available for sale debt securities | 50,702 | |
Commercial paper | Level 2 | ||
Available-for-sale securities: | ||
Available for sale debt securities | 50,702 | |
Corporate bonds | ||
Available-for-sale securities: | ||
Available for sale debt securities | 37,382 | |
Corporate bonds | Level 2 | ||
Available-for-sale securities: | ||
Available for sale debt securities | 37,382 | |
Asset-backed securities | ||
Available-for-sale securities: | ||
Available for sale debt securities | 25,847 | |
Asset-backed securities | Level 2 | ||
Available-for-sale securities: | ||
Available for sale debt securities | 25,847 | |
U.S. treasury securities | ||
Available-for-sale securities: | ||
Available for sale debt securities | 9,877 | |
U.S. treasury securities | Level 2 | ||
Available-for-sale securities: | ||
Available for sale debt securities | $ 9,877 |
Business Combinations (Details)
Business Combinations (Details) - USD ($) $ in Thousands | Mar. 08, 2018 | Jun. 30, 2018 | Jun. 30, 2016 | Jun. 30, 2017 |
Business Combinations | ||||
Purchase price paid | $ 8,346 | $ 483 | ||
Goodwill | 9,590 | $ 6,003 | ||
Finite-lived intangible assets | 18,730 | 12,940 | ||
Client relationships | ||||
Business Combinations | ||||
Finite-lived intangible assets | 18,130 | 12,580 | ||
Non-solicitation agreements | ||||
Business Combinations | ||||
Finite-lived intangible assets | $ 600 | $ 360 | ||
BeneFLEX | ||||
Business Combinations | ||||
Total purchase price, net of cash acquired | $ 9,346 | |||
Purchase price paid | 8,346 | |||
Purchase price payable | 1,000 | |||
Goodwill | 3,587 | |||
Net liabilities assumed | (31) | |||
Total purchase price | $ 9,346 | |||
Goodwill amortization period for income tax purposes | 15 years | |||
BeneFLEX | Client relationships | ||||
Business Combinations | ||||
Finite-lived intangible assets | $ 5,550 | |||
BeneFLEX | Non-solicitation agreements | ||||
Business Combinations | ||||
Finite-lived intangible assets | $ 240 |
Capitalized Internal-Use Soft48
Capitalized Internal-Use Software (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Capitalized internal-use software and accumulated amortization | |||
Capitalized internal-use software | $ 67,678 | $ 49,663 | |
Accumulated amortization | (46,584) | (32,269) | |
Capitalized internal-use software, net | 21,094 | 17,394 | |
Cost of revenue - recurring | |||
Capitalized internal-use software and accumulated amortization | |||
Amortization of capitalized internal-use software | $ 14,315 | $ 9,447 | $ 5,446 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Property and equipment | |||
Property and equipment, gross | $ 90,758 | $ 66,169 | |
Accumulated depreciation | (28,729) | (25,413) | |
Property and equipment, net | 62,029 | 40,756 | |
Depreciation expense | 14,192 | 10,068 | $ 6,905 |
Office equipment | |||
Property and equipment | |||
Property and equipment, gross | 3,743 | 3,591 | |
Computer equipment | |||
Property and equipment | |||
Property and equipment, gross | 29,768 | 24,411 | |
Furniture and fixtures | |||
Property and equipment | |||
Property and equipment, gross | 10,382 | 7,547 | |
Software | |||
Property and equipment | |||
Property and equipment, gross | 5,965 | 4,954 | |
Leasehold improvements | |||
Property and equipment | |||
Property and equipment, gross | 36,366 | 21,426 | |
Time clocks rented by clients | |||
Property and equipment | |||
Property and equipment, gross | $ 4,534 | $ 4,240 |
Goodwill and Intangible Asset50
Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Changes in goodwill | |||
Balance at beginning of the period | $ 6,003 | ||
Additions attributable to current period acquisition | 3,587 | ||
Balance at end of the period | 9,590 | $ 6,003 | |
Intangible assets | |||
Intangible assets | 18,730 | 12,940 | |
Accumulated amortization | (5,728) | (4,033) | |
Intangible assets, net | 13,002 | 8,907 | |
Amortization expense for acquired intangible assets | 1,695 | 1,512 | $ 1,522 |
Future amortization expense for acquired intangible assets | |||
2,019 | 2,251 | ||
2,020 | 2,251 | ||
2,021 | 2,251 | ||
2,022 | 2,232 | ||
2,023 | 2,118 | ||
Thereafter | 1,899 | ||
Intangible assets, net | 13,002 | 8,907 | |
Client relationships | |||
Intangible assets | |||
Intangible assets | $ 18,130 | 12,580 | |
Client relationships | Minimum | |||
Intangible assets | |||
Useful life | 7 years | ||
Client relationships | Maximum | |||
Intangible assets | |||
Useful life | 9 years | ||
Non-solicitation agreements | |||
Intangible assets | |||
Intangible assets | $ 600 | $ 360 | |
Non-solicitation agreements | Minimum | |||
Intangible assets | |||
Useful life | 2 years | ||
Non-solicitation agreements | Maximum | |||
Intangible assets | |||
Useful life | 4 years |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Components of accrued expenses | ||
Accrued payroll and personnel costs | $ 31,206 | $ 25,131 |
Lease exit obligations | 2,143 | |
Other | 8,892 | 5,170 |
Total accrued expenses | $ 42,241 | $ 30,301 |
Leases (Details)
Leases (Details) ft² in Thousands, $ in Thousands | 1 Months Ended | 12 Months Ended | ||||
Jun. 30, 2018USD ($)ft² | Feb. 28, 2017ft²item$ / ft² | Jun. 30, 2016ft²item$ / ft² | Jun. 30, 2018USD ($)ft² | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($)ft²item | |
Operating Leased Assets [Line Items] | ||||||
Rental expense for operating leases | $ 12,293 | $ 8,571 | $ 5,596 | |||
Lease exit obligations activity | ||||||
Additions | 3,446 | |||||
Payments | (199) | |||||
Adjustments | 14 | |||||
Balance at end of period | $ 3,261 | $ 3,261 | ||||
Leased office space | Schaumburg Lease | ||||||
Operating Leased Assets [Line Items] | ||||||
Area of lease | ft² | 310 | 310 | ||||
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 | ||||||
Operating Leased Assets [Line Items] | ||||||
Area of lease | ft² | 62 | |||||
Tenant improvement allowance per rentable square foot | $ / ft² | 50 | |||||
Rent abatement period per lease phase | 3 months | |||||
Number of renewal options | item | 4 | |||||
Renewal period | 5 years | |||||
Leased office space | Arlington Heights Lease | ||||||
Operating Leased Assets [Line Items] | ||||||
Area under lease no longer in use | ft² | 110 | 110 | ||||
Early lease exit costs | $ 2,336 |
Leases - Future minimum lease p
Leases - Future minimum lease payments (Details) $ in Thousands | Jun. 30, 2018USD ($) |
Future minimum lease payments under non-cancellable operating leases | |
2,019 | $ 8,909 |
2,020 | 9,077 |
2,021 | 10,126 |
2,022 | 8,803 |
2,023 | 8,345 |
Later years, through 2032 | 67,225 |
Total minimum lease payments | $ 112,485 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2018 | Dec. 31, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Current taxes | |||||
U.S. federal | $ 294 | ||||
State and local | 364 | $ 500 | $ 27 | ||
Deferred taxes: | |||||
U.S. federal | (15,167) | 137 | 136 | ||
State and local | (7,338) | 14 | 14 | ||
Total income tax expense (benefit) | $ (21,847) | $ 651 | $ 177 | ||
Tax Rate Reconciliation | |||||
U.S. federal income tax rate (as a percent) | 27.55% | 34.00% | 34.00% | ||
Income tax expense (benefit) at statutory federal rate | $ 4,615 | $ 2,503 | $ (1,249) | ||
Increase (reduction) in income taxes resulting from: | |||||
Research and development credit, net of federal income tax benefit | (1,101) | (1,025) | (504) | ||
Non-deductible expenses | 1,531 | 685 | 557 | ||
Change in valuation allowance | (22,771) | (1,349) | 2,590 | ||
Effect of Tax Cuts and Jobs Act | 8,626 | ||||
Stock-based compensation expense | (10,527) | ||||
State and local income taxes, net of federal income tax benefit | (2,262) | (196) | (432) | ||
Other | 42 | 33 | (785) | ||
Total income tax expense (benefit) | (21,847) | 651 | $ 177 | ||
Deferred tax assets: | |||||
Deferred rent | 1,177 | 1,090 | |||
Accrued expenses | 2,709 | 2,290 | |||
Stock-based compensation | 10,833 | 11,034 | |||
Net operating loss carryforwards | 10,775 | 253 | |||
Research and development and other credits | 7,674 | 4,984 | |||
Intangible assets | 271 | 256 | |||
Other | 146 | 129 | |||
Total deferred tax assets | 33,585 | 20,036 | |||
Valuation allowance | (355) | (8,689) | |||
Net deferred tax assets | 33,230 | 11,347 | |||
Deferred tax liabilities: | |||||
Research and development costs | (4,711) | (5,649) | |||
Depreciation | (6,379) | (6,099) | |||
Total deferred tax liabilities | (11,090) | (11,748) | |||
Net deferred tax asset | $ 22,140 | ||||
Net deferred tax liability | $ (401) | ||||
Period of cumulative income | 3 years | ||||
Non-recurring tax benefit for valuation allowance reversal | $ 22,585 | ||||
Effect of Tax Cuts and Jobs Act of 2017, Accounting Incomplete, Provisional | |||||
Tax benefit attributable to the rate change effect on the deferred tax liability for indefinite-lived intangible assets | $ 156 | ||||
Provisional amount of income tax expense attributable to a revaluation of deferred tax assets from change in tax rate | $ 8,626 | ||||
State | |||||
Deferred tax assets: | |||||
Valuation allowance | $ (355) |
Income Taxes - Carryforwards (D
Income Taxes - Carryforwards (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Unrecognized Tax Benefits | |||
Unrecognized tax benefits | $ 0 | $ 0 | $ 0 |
Federal | |||
Operating loss carryforwards | |||
Net operating loss carryforwards | $ 45,839 | ||
Federal | Minimum | |||
Operating loss carryforwards | |||
Expiration date for net operating losses | Jun. 30, 2029 | ||
Federal | Maximum | |||
Operating loss carryforwards | |||
Expiration date for net operating losses | Jun. 30, 2038 | ||
State | |||
Operating loss carryforwards | |||
Net operating loss carryforwards | $ 18,409 | ||
State | Minimum | |||
Operating loss carryforwards | |||
Expiration date for net operating losses | Jun. 30, 2019 | ||
Unrecognized Tax Benefits | |||
Statute of limitations on filings | 3 years | ||
State | Maximum | |||
Operating loss carryforwards | |||
Expiration date for net operating losses | Jun. 30, 2038 | ||
Unrecognized Tax Benefits | |||
Statute of limitations on filings | 4 years | ||
Research and development tax credit and other state credit carryforwards | |||
Tax credit carryforwards | |||
Tax credit carryforwards | $ 7,674 | ||
Research and development tax credit and other state credit carryforwards | Minimum | |||
Tax credit carryforwards | |||
Expiration date for tax credit carryforwards | Jun. 30, 2018 | ||
Research and development tax credit and other state credit carryforwards | Maximum | |||
Tax credit carryforwards | |||
Expiration date for tax credit carryforwards | Jun. 30, 2038 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) | 12 Months Ended |
Jun. 30, 2018item | |
Common Stock | |
Stockholders' Equity | |
Number of common stock vote per share | 1 |
Benefit Plans - General Informa
Benefit Plans - General Information (Details) - shares shares in Thousands | Jan. 01, 2018 | Jun. 30, 2018 |
Equity Incentive Plans | ||
Equity Incentive Plans | ||
Increase in number of common shares available for grant | 2,367 | |
Number of shares of common stock reserved for issuance | 13,816 | |
Number of shares allocated but not yet issued that are subject to outstanding options or awards | 3,786 | |
2008 Plan | ||
Equity Incentive Plans | ||
Awards issued (in shares) | 0 | |
Awards issuable (in shares) | 0 | |
2014 incentive Plan | ||
Equity Incentive Plans | ||
Potential additional shares available for grant (as a percent) | 4.50% | |
Increase in number of common shares available for grant | 2,367 |
Benefit Plans - Incentive Plans
Benefit Plans - Incentive Plans Activity (Details) - shares shares in Thousands | Jan. 01, 2018 | Jun. 30, 2018 |
Equity Incentive Plans | ||
Shares Available for Grant | ||
Balance at the beginning of the period | 8,227 | |
January 1, 2018 Evergreen provision increase | 2,367 | |
RSUs granted | (929) | |
Shares withheld in settlement of taxes and/or exercise price | 379 | |
Forfeitures | 58 | |
Shares removed | (72) | |
Balance at the end of the period | 10,030 | |
2014 incentive Plan | ||
Shares Available for Grant | ||
January 1, 2018 Evergreen provision increase | 2,367 |
Benefit Plans - Compensation Ex
Benefit Plans - Compensation Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Benefit Plans | |||
Total stock-based compensation expense | $ 30,354 | $ 26,734 | $ 17,563 |
Stock-based compensation expense capitalized | 2,024 | 1,773 | 1,078 |
Cost of revenue - recurring | |||
Benefit Plans | |||
Total stock-based compensation expense | 2,830 | 2,162 | 1,648 |
Cost of revenue - non-recurring | |||
Benefit Plans | |||
Total stock-based compensation expense | 1,388 | 1,357 | 1,127 |
Sales and marketing | |||
Benefit Plans | |||
Total stock-based compensation expense | 7,295 | 6,287 | 4,441 |
Research and development | |||
Benefit Plans | |||
Total stock-based compensation expense | 3,748 | 3,086 | 2,789 |
General and administrative | |||
Benefit Plans | |||
Total stock-based compensation expense | 15,093 | $ 13,842 | $ 7,558 |
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, 2018 | Jun. 30, 2016 | |
Valuation assumptions: | ||
Expected dividend yield (as a percent) | 0.00% | |
Expected volatility (as a percent) | 34.00% | |
Expected term (years) | 6 years 3 months | |
Risk-free interest rate (as a percent) | 1.83% | |
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, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Vesting period | |||
Expiration period | 10 years | ||
Options Outstanding, Number of Shares | |||
Balance at the beginning of the period | 2,751 | ||
Options granted | 0 | 0 | |
Options forfeited | (5) | ||
Options exercised | (839) | ||
Balance at the end of the period | 1,907 | 2,751 | |
Options Outstanding, Weighted average exercise price | |||
Balance at the beginning of the period (in dollars per share) | $ 11.54 | ||
Options forfeited (in dollars per share) | 18.41 | ||
Options exercised (in dollars per share) | 9.54 | ||
Balance at the end of the period (in dollars per share) | $ 12.40 | $ 11.54 | |
Options Additional Disclosures | |||
Weighted average remaining contractual term | 5 years | 5 years 8 months 9 days | |
Aggregate intrinsic value, at the beginning of the period | $ 92,556 | ||
Weighted average remaining contractual term of options exercisable at the end of the period (years) | 4 years 10 months 21 days | ||
Aggregate intrinsic value, at the end of the period | $ 88,595 | $ 92,556 | |
Options exercisable at the end of the period (in shares) | 1,781 | ||
Options exercisable at the end of the period, weighted average exercise price (in dollars per share) | $ 11.18 | ||
Options exercisable intrinsic value | $ 84,935 | ||
Total intrinsic value of options exercised | $ 34,083 | $ 20,802 | $ 13,362 |
Options vested and expected to vest | |||
Number of shares | 1,905 | ||
Weighted average exercise price | $ 12.37 | ||
Weighted average remaining contractual term | 5 years | ||
Aggregate intrinsic value | $ 88,538 | ||
Weighted average grant date fair value | |||
Weighted average grant date fair value of options granted (in dollars per share) | $ 12.92 | ||
Unrecognized Compensation Costs Not yet Recognized | |||
Total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options | $ 152 | ||
Weighted average period to recognize unrecognized compensation cost | 10 months 2 days | ||
Minimum | |||
Vesting period | |||
Vesting period | 3 years | ||
Maximum | |||
Vesting period | |||
Vesting period | 4 years |
Benefit Plans - Stock Options O
Benefit Plans - Stock Options Outstanding and Stock Options Exercisable 10K (Details) shares in Thousands | 12 Months Ended |
Jun. 30, 2018$ / sharesshares | |
Stock options | |
Schedule of stock options outstanding and stock options exercisable | |
Number Outstanding at end of the period | shares | 1,907 |
Weighted-Average Remaining Contractual Term | 5 years |
Weighted-Average Exercise Price (in dollars per share) | $ 12.40 |
Number Exercisable at the end of the period | shares | 1,781 |
Weighted Average Exercise Price (in dollars per share) | $ 11.18 |
$2.28 - $3.58 | |
Schedule of stock options outstanding and stock options exercisable | |
Exercise price range, lower limit (in dollars per share) | 2.28 |
Exercise price range, upper limit (in dollars per share) | $ 3.58 |
$2.28 - $3.58 | Stock options | |
Schedule of stock options outstanding and stock options exercisable | |
Number Outstanding at end of the period | shares | 73 |
Weighted-Average Remaining Contractual Term | 2 years 11 months 1 day |
Weighted-Average Exercise Price (in dollars per share) | $ 2.28 |
Number Exercisable at the end of the period | shares | 73 |
Weighted Average Exercise Price (in dollars per share) | $ 2.28 |
$3.59 - $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 - $5.96 | Stock options | |
Schedule of stock options outstanding and stock options exercisable | |
Number Outstanding at end of the period | shares | 847 |
Weighted-Average Remaining Contractual Term | 4 years 1 month 21 days |
Weighted-Average Exercise Price (in dollars per share) | $ 4.88 |
Number Exercisable at the end of the period | shares | 847 |
Weighted Average Exercise Price (in dollars per share) | $ 4.88 |
$5.97 - $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 - $12.02 | Stock options | |
Schedule of stock options outstanding and stock options exercisable | |
Number Outstanding at end of the period | shares | 127 |
Weighted-Average Remaining Contractual Term | 5 years 7 days |
Weighted-Average Exercise Price (in dollars per share) | $ 7.04 |
Number Exercisable at the end of the period | shares | 127 |
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 | 521 |
Weighted-Average Remaining Contractual Term | 5 years 8 months 19 days |
Weighted-Average Exercise Price (in dollars per share) | $ 17 |
Number Exercisable at the end of the period | shares | 521 |
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 | 339 |
Weighted-Average Remaining Contractual Term | 6 years 5 months 19 days |
Weighted-Average Exercise Price (in dollars per share) | $ 28.32 |
Number Exercisable at the end of the period | shares | 213 |
Weighted Average Exercise Price (in dollars per share) | $ 27.50 |
Benefit Plans - RSU activity (D
Benefit Plans - RSU activity (Details) - RSUs - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Vesting period | |||
Unrecognized excess income tax benefits for stock-based compensation arrangements | $ 33,443 | $ 15,130 | $ 8,228 |
Unrecognized Compensation Costs Not yet Recognized | |||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options | $ 29,656 | ||
Weighted average period to recognize unrecognized compensation cost | 1 year 10 months 6 days | ||
RSUs Outstanding Rollforward, Units | |||
RSU Balance at the beginning of the period | 1,455 | ||
RSUs granted | 929 | ||
RSUs vested | (452) | ||
RSUs forfeited | (53) | ||
RSU Balance at the end of the period | 1,879 | 1,455 | |
RSUs expected to vest at the end of the period | 1,667 | ||
RSUs Outstanding, Weighted average grant date fair value | |||
RSU Balance at the beginning of the period | $ 39.96 | ||
RSUs granted | 46.61 | ||
RSUs vested | 39.30 | ||
RSUs cancelled/forfeited | 42.08 | ||
RSU Balance at the end of the period | 43.39 | $ 39.96 | |
RSUs expected to vest at the end of the period | $ 43.23 | ||
Minimum | |||
Vesting period | |||
Vesting period | 3 years | ||
Maximum | |||
Vesting period | |||
Vesting period | 4 years |
Benefit Plans - ESPP Informatio
Benefit Plans - ESPP Information (Details) - USD ($) shares in Thousands, $ in Thousands | Jan. 01, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 |
Equity Incentive Plans | ||||
Compensation expense | $ 30,354 | $ 26,734 | $ 17,563 | |
Valuation assumptions: | ||||
Expected dividend yield | 0.00% | |||
Expected volatility | 34.00% | |||
Expected term (years) | 6 years 3 months | |||
Risk-free interest rate | 1.83% | |||
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% | |||
Maximum value of purchase per employee | $ 25 | |||
Number of shares per employee, maximum | 2 | |||
Period during which shares can be purchased | 1 year | |||
Number of shares of common stock reserved for issuance | 1,111 | |||
Actual increase in number of shares reserved for issuance | 395 | |||
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 | 108 | |||
Compensation expense | $ 1,331 | $ 1,263 | $ 1,069 | |
Valuation assumptions: | ||||
Expected dividend yield | 0.00% | 0.00% | 0.00% | |
Expected term (years) | 6 months | 6 months | 6 months | |
Employee stock purchase plan shares | Minimum | ||||
Valuation assumptions: | ||||
Expected volatility | 28.30% | 38.90% | 44.10% | |
Risk-free interest rate | 1.02% | 0.28% | 0.11% | |
Employee stock purchase plan shares | Maximum | ||||
Equity Incentive Plans | ||||
Offering period | 27 months | |||
Valuation assumptions: | ||||
Expected volatility | 39.10% | 53.40% | 53.40% | |
Risk-free interest rate | 2.10% | 1.02% | 0.31% |
Benefit Plans - 401(k) Plan (De
Benefit Plans - 401(k) Plan (Details) - USD ($) $ in Thousands | Jan. 01, 2016 | Dec. 31, 2015 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 |
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 | $ 4,632 | $ 3,667 | $ 2,717 |
Net Income (Loss) Per Share (De
Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Anti-dilutive securities excluded from diluted per share calculation | |||||||||||
Anti-dilutive securities excluded | 92 | 786 | 4,482 | ||||||||
Numerator: | |||||||||||
Net income (loss) | $ 38,598 | $ 6,718 | $ (3,851) | ||||||||
Weighted-average shares used in computing net income (loss) per share: | |||||||||||
Basic (in shares) | 52,699 | 52,615 | 52,502 | 51,893 | 51,602 | 51,447 | 51,384 | 51,231 | 52,425 | 51,415 | 50,913 |
Weighted-average effect of potentially dilutive shares: | |||||||||||
Employee stock options, restricted stock units and employee stock purchase plan shares | 2,462 | 2,642 | |||||||||
Diluted (in shares) | 52,699 | 55,030 | 54,818 | 54,610 | 51,602 | 54,002 | 51,384 | 51,231 | 54,887 | 54,057 | 50,913 |
Net income (loss) per share: | |||||||||||
Basic (in dollars per share) | $ (0.03) | $ 0.74 | $ 0.01 | $ 0.01 | $ (0.07) | $ 0.29 | $ (0.03) | $ (0.05) | $ 0.74 | $ 0.13 | $ (0.08) |
Diluted (in dollars per share) | $ (0.03) | $ 0.71 | $ 0.01 | $ 0.01 | $ (0.07) | $ 0.27 | $ (0.03) | $ (0.05) | $ 0.70 | $ 0.12 | $ (0.08) |
Employee stock options | |||||||||||
Anti-dilutive securities excluded from diluted per share calculation | |||||||||||
Anti-dilutive securities excluded | 145 | 3,464 | |||||||||
RSUs | |||||||||||
Anti-dilutive securities excluded from diluted per share calculation | |||||||||||
Anti-dilutive securities excluded | 92 | 627 | 1,003 | ||||||||
Employee stock purchase plan shares | |||||||||||
Anti-dilutive securities excluded from diluted per share calculation | |||||||||||
Anti-dilutive securities excluded | 14 | 15 |
Selected Quarterly Financial 67
Selected Quarterly Financial Data (unaudited) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Consolidated Statements of Operations Data | |||||||||||
Revenues | $ 96,616 | $ 113,407 | $ 86,004 | $ 81,500 | $ 76,061 | $ 90,273 | $ 68,654 | $ 65,022 | $ 377,527 | $ 300,010 | $ 230,701 |
Gross profit | 57,870 | 74,755 | 49,164 | 46,541 | 42,898 | 58,191 | 38,271 | 36,663 | 228,330 | 176,023 | 132,616 |
Operating income (loss) | (5,164) | 20,465 | 133 | 515 | (3,434) | 14,880 | (1,643) | (2,507) | 15,949 | 7,296 | (3,550) |
Net income (loss) | $ (1,553) | $ 39,177 | $ 431 | $ 543 | $ (3,844) | $ 14,801 | $ (1,671) | $ (2,568) | $ 38,598 | $ 6,718 | $ (3,851) |
Net income (loss) per share: | |||||||||||
Basic (in dollars per share) | $ (0.03) | $ 0.74 | $ 0.01 | $ 0.01 | $ (0.07) | $ 0.29 | $ (0.03) | $ (0.05) | $ 0.74 | $ 0.13 | $ (0.08) |
Diluted (in dollars per share) | $ (0.03) | $ 0.71 | $ 0.01 | $ 0.01 | $ (0.07) | $ 0.27 | $ (0.03) | $ (0.05) | $ 0.70 | $ 0.12 | $ (0.08) |
Weighted-average shares used in computing net income (loss) per share: | |||||||||||
Basic (in shares) | 52,699 | 52,615 | 52,502 | 51,893 | 51,602 | 51,447 | 51,384 | 51,231 | 52,425 | 51,415 | 50,913 |
Diluted (in shares) | 52,699 | 55,030 | 54,818 | 54,610 | 51,602 | 54,002 | 51,384 | 51,231 | 54,887 | 54,057 | 50,913 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent event $ in Thousands | Aug. 09, 2018USD ($) |
Subsequent events | |
Period of time the stock repurchase plan is authorized | 12 months |
Maximum | |
Subsequent events | |
Amount of issued and outstanding common stock that may be repurchased under the stock repurchase plan | $ 35,000 |