# EDGAR Filing Document

**Accession Number:** 0001591698
**File Stem:** 0001591698-23-000008
**Filing Date:** 2023-2
**Character Count:** 36022
**Document Hash:** 12efab1a5abc187cf5d8bfaf5dd6d241
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001591698-23-000008.hdr.sgml**: 20230202

**ACCESSION NUMBER**: 0001591698-23-000008

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 14

**CONFORMED PERIOD OF REPORT**: 20230202

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230202

**DATE AS OF CHANGE**: 20230202

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Paylocity Holding Corp
- **CENTRAL INDEX KEY:** 0001591698
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-PREPACKAGED SOFTWARE [7372]
- **IRS NUMBER:** 464066644
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 0630

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-36348
- **FILM NUMBER:** 23580909

**BUSINESS ADDRESS:**
- **STREET 1:** 1400 AMERICAN LANE
- **CITY:** SCHAUMBURG
- **STATE:** IL
- **ZIP:** 60173
- **BUSINESS PHONE:** 800-520-2687

**MAIL ADDRESS:**
- **STREET 1:** 1400 AMERICAN LANE
- **CITY:** SCHAUMBURG
- **STATE:** IL
- **ZIP:** 60173

?xml version="1.0" ? pcty-20230202

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

______________________________

**FORM 8-K**

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of the**

**Securities Exchange Act of 1934**

Date of Report (Date of earliest event reported): **February 2, 2023**

**PAYLOCITY HOLDING CORPORATION**

(Exact name of registrant as specified in its charter)

---

| | | |
|:---|:---|:---|
| **Delaware** | **001-36348** | **46-4066644** |
| (State or Other Jurisdiction of <br>Incorporation) | (Commission File Number) | (I.R.S. Employer Identification<br>Number) |

---

**1400 American Lane**

**Schaumburg, Illinois 60173**

(Address of principal executive offices, including zip code)

**(847) 463-3200**

(Registrant's telephone number, including area code)

**Not Applicable**

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol(s)** | **Name of each exchange on which registered** |
| Common Stock, par value $0.001 per share | PCTY | The NASDAQ Global Select Market LLC |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

☐ Emerging growth company

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

------

**Item 2.02 Results of Operations and Financial Condition.**

On February 2, 2023, Paylocity Holding Corporation (the "***Company***") issued a press release announcing financial results for the three month period ended December 31, 2022. The press release contains forward-looking statements regarding the Company, and includes cautionary statements identifying important factors that could cause actual results to differ materially from those anticipated.

The press release issued February 2, 2023 is furnished herewith as Exhibit 99.1. The information in this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that Section, nor shall such information be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as otherwise stated in such filing.

**Item 9.01 Financial Statements and Exhibits.**

(d) Exhibits.

---

| | |
|:---|:---|
| **Exhibit No.** | **Description** |
| <u>[99.1](pcty-20230202xex991.htm)</u> | <u>[Press Release issued by Paylocity Holding Corporation dated](pcty-20230202xex991.htm)[February](pcty-20230202xex991.htm)[2](pcty-20230202xex991.htm)[, 202](pcty-20230202xex991.htm)[3](pcty-20230202xex991.htm)[.](pcty-20230202xex991.htm)</u> |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL) |

---

------

**EXHIBIT INDEX**

---

| | |
|:---|:---|
| **Exhibit No.** | **Description** |
| <u>[99.1](pcty-20230202xex991.htm)</u> | <u>[Press Release issued by Paylocity Holding Corporation dated February 2, 2023.](pcty-20230202xex991.htm)</u> |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL) |

---

------

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

---

| | | |
|:---|:---|:---|
| | | PAYLOCITY HOLDING CORPORATION |
| Date: February 2, 2023 | By: | /s/ Ryan Glenn |
|  |  | Ryan Glenn |
|  |  | Chief Financial Officer and Treasurer |

---

## Exhibit 99.1

**Exhibit 99.1**![tm2131551-1image_002a.jpg](tm2131551-1image_002a.jpg)

press release

Paylocity Announces Second Quarter Fiscal Year 2023 Financial Results

&nbsp;&nbsp;&nbsp;&nbsp;**• Q2 2023 Recurring & Other Revenue of $256.4 million, up 31% year-over-year**

&nbsp;&nbsp;&nbsp;&nbsp;**• Q2 2023 Total Revenue of $273.0 million, up 39% year-over-year**

**SCHAUMBURG, IL. – February 2, 2023 –** Paylocity Holding Corporation (Nasdaq: PCTY), a leading provider of cloud-based HCM and payroll software solutions, today announced financial results for the second quarter of fiscal year 2023, which ended December 31, 2022.

"Our differentiated value proposition of providing the most modern software in the industry, coupled with continued strong sales execution, helped drive recurring and other revenue growth of 31% and total revenue growth of 39% in the second quarter. Our continued strong momentum is the result of ongoing investments in product innovation, including leveraging last year's acquisition of Cloudsnap, a flexible, low-code solution for integrating disparate business applications. We have fully integrated Cloudsnap into the Paylocity suite and are leveraging this technology to provide the most modern software in the industry to accelerate the rollout of new integrations and use-cases to better serve our clients and their employees. Additionally, we continue to see strong attach rates in our modern workforce solutions, as clients realize the value in creating a unique employee experience and engaging culture for remote, hybrid and in-office teams," said Steve Beauchamp, Co-Chief Executive Officer of Paylocity.

**<u>Second Quarter Fiscal 2023 Financial Highlights</u>**

**Revenue:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total revenue was $273.0 million, an increase of 39% from the second quarter of fiscal year 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Recurring & other revenue was $256.4 million, an increase of 31% from the second quarter of fiscal year 2022.

**Operating Income:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** GAAP operating income was $18.2 million and Non-GAAP operating income was $65.1 million in the second quarter of fiscal year 2023.

**Net Income:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• GAAP net income was $15.6 million or $0.28 per share in the second quarter of fiscal year 2023 based on 56.5 million diluted weighted average common shares outstanding.

**Adjusted EBITDA:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** Adjusted EBITDA, a non-GAAP measure, was $77.4 million in the second quarter of fiscal year 2023.

**Balance Sheet and Cash Flow:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** Cash and cash equivalents totaled $120.1 million as of the second quarter of fiscal year 2023.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Cash flow from operations for the second quarter of fiscal year 2023 was $62.4 million.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• As of December 31, 2022, Paylocity had no long-term debt and had not drawn on its credit facility.

A reconciliation of GAAP to non-GAAP financial measures has been provided in this press release, including the accompanying tables. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

------

**<u>Business Outlook</u>**

Based on information available as of February 2, 2023, Paylocity is issuing guidance for the third quarter and full fiscal year 2023 as indicated below.

**Third Quarter 2023:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total revenue is expected to be in the range of $330.5 million to $334.5 million, which represents approximately 35% growth over fiscal 2022 third quarter total revenue.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adjusted EBITDA, a non-GAAP measure, is expected to be in the range of $121.5 million to $124.5 million.

**Fiscal Year 2023:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total revenue is expected to be in the range of $1.156 billion to $1.161 billion, which represents approximately 36% growth over fiscal year 2022 total revenue.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adjusted EBITDA, a non-GAAP measure, is expected to be in the range of $358.5 million to $362.5 million.

We are unable to reconcile forward-looking non-GAAP Adjusted EBITDA to its directly comparable GAAP financial measure because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.

**<u>Conference Call Details</u>**

Paylocity will host a conference call to discuss its second quarter fiscal year 2023 results at 4:30 p.m. Central Time today (5:30 p.m. Eastern Time). A live audio webcast of the conference call along with detailed financial information can be accessed through <u>https://investors.paylocity.com/events-and-presentations</u> where dial in details are provided. A replay of the call will be available and archived via webcast at <u>https://investors.paylocity.com/</u>.

**<u>About Paylocity</u>**

Paylocity is a leading provider of cloud-based HCM and payroll software solutions headquartered in Schaumburg, IL. Founded in 1997 and publicly traded since 2014, Paylocity offers an intuitive, easy-to-use product suite that helps businesses tackle today's challenges while moving them toward the promise of tomorrow. Known for its unique culture and consistently recognized as one of the best places to work, Paylocity accompanies its clients on the journey to create great workplaces and help people achieve their best through automation, data-driven insights, and engagement. For more information, visit <u>www.paylocity.com</u>.

**Non-GAAP Financial Measures**

The company uses certain non-GAAP financial measures in this release, including Adjusted EBITDA, adjusted gross profit, non-GAAP operating income, non-GAAP net income, non-GAAP net income per share, non-GAAP sales and marketing, non-GAAP total research and development and non-GAAP general and administrative and free cash flow. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. We define Adjusted EBITDA as net income (loss) before interest expense, income tax expense (benefit), and depreciation and amortization expense, adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises and other items as described later in this release. Adjusted gross profit is adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises and amortization of capitalized internal-use software costs and certain acquired intangibles. Non-GAAP operating income is adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises, the amortization of acquired intangibles and other items as described later in this release. Non-GAAP sales and marketing expense is adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises and other items as described later in this release. Non-GAAP general and administrative expense is adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises, the amortization of certain acquired intangibles and other items as described later in this release. Non-GAAP net income and non-GAAP net income per share are adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises, the amortization of acquired intangibles and other items as described later in this release, including the income tax effect on these items. Non-GAAP total research and development is adjusted for capitalized internal-use software costs paid and to eliminate stock-based compensation expense and employer payroll taxes related to stock releases

------

and option exercises and other items as described later in this release. Free cash flow is defined as net cash provided by operating activities less capitalized internal-use software costs, purchase of property and equipment and lease allowances used for tenant improvements. Please note that other companies may define their non-GAAP financial measures differently than we do. Management presents certain non-GAAP financial measures in this release because it considers them to be important supplemental measures of performance. Management uses these non-GAAP financial measures for planning purposes, including analysis of the company's performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management believes that these non-GAAP financial measures provide additional insight for analysts and investors in evaluating the company's financial and operational performance. Management also intends to provide these non-GAAP financial measures as part of the company's future earnings discussions and, therefore, the inclusion of the non-GAAP financial measures should provide consistency in the company's financial reporting. Non-GAAP financial measures have limitations as an analytical tool. Investors are encouraged to review the reconciliation of the non-GAAP measures to their most directly comparable GAAP measures provided in this release.

**Safe Harbor/Forward Looking Statements**

This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included herein regarding Paylocity's future operations, ability to scale its business, future financial position and performance, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "will," "would," "seek" and similar expressions (or the negative of these terms) are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about management's estimates regarding future revenues and financial performance and other statements about management's beliefs, intentions or goals. Paylocity may not actually achieve the expectations disclosed in the forward-looking statements, and you should not place undue reliance on Paylocity's forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to differ materially from the expectations disclosed in the forward-looking statements, including, but not limited to the general economic conditions in regions in which Paylocity does business, including the ongoing impact of the novel coronavirus disease ("COVID-19") on the U.S. and the global economy, changes in interest rates, business disruptions, reductions in employment and an increase in business failures that have occurred or may occur in the future; the continuing impact of COVID-19 on Paylocity's employees and clients; Paylocity's ability to retain existing clients and to attract new clients to enter into subscriptions for its services; the challenges associated with a growing company's ability to effectively service clients in a dynamic and competitive market; challenges associated with expanding and evolving a sales organization to effectively address new geographies and products and services; challenges related to cybersecurity threats and evolving cybersecurity regulations; Paylocity's reliance on and ability to expand its referral network of third parties; Paylocity's reliance on third party payroll partners in foreign jurisdictions in its Blue Marble business; difficulties associated with accurately forecasting revenue and appropriately planning expenses; challenges with managing growth effectively; risks related to regulatory, legislative and judicial uncertainty in Paylocity's markets; Paylocity's ability to protect and defend its intellectual property; the risk that Paylocity's security measures are compromised or a threat actor gains unauthorized access to customer data; unexpected events in the market for Paylocity's solutions; changes in the competitive environment in Paylocity's industry and the markets in which it operates; adverse changes in general economic or market conditions; changes in the employment rates of Paylocity's clients and the resultant impact on revenue; the possibility that Paylocity may be adversely affected by other economic, business, and/or competitive factors; and other risks and potential factors that could affect Paylocity's business and financial results identified in Paylocity's filings with the Securities and Exchange Commission (the "SEC"), including its 10-K filed with the SEC on August 5, 2022. Additional information will also be set forth in Paylocity's future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that Paylocity makes with the SEC. These forward-looking statements represent Paylocity's expectations as of the date of this press release. Subsequent events may cause these expectations to change, and Paylocity disclaims any obligations to update or alter these forward-looking statements in the future, whether as a result of new information, future events or otherwise.

------

**PAYLOCITY HOLDING CORPORATION**

**Unaudited Consolidated Balance Sheets**

**(in thousands, except per share data)**

---

| | | |
|:---|:---|:---|
| | **June 30,<br>2022** | **December 31,<br>2022** |
| **Assets** | | |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $139756 | $120053 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net | 15754 | 24540 |
| &nbsp;&nbsp;&nbsp;Deferred contract costs | 59501 | 68557 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other | 28896 | 30175 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets before funds held for clients | 243907 | 243325 |
| &nbsp;&nbsp;&nbsp;Funds held for clients | 3987776 | 3065697 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 4231683 | 3309022 |
| Capitalized internal-use software, net | 61985 | 71083 |
| Property and equipment, net | 62839 | 59506 |
| Operating lease right-of-use assets | 49210 | 46604 |
| Intangible assets, net | 45475 | 39934 |
| Goodwill | 101949 | 102054 |
| Long-term deferred contract costs | 229067 | 262313 |
| Long-term prepaid expenses and other | 7746 | 6727 |
| Deferred income tax assets | 19060 | 40530 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $4809014 | $3937773 |
| **Liabilities and Stockholders' Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $8374 | $7611 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 124384 | 115795 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities before client fund obligations | 132758 | 123406 |
| &nbsp;&nbsp;&nbsp;Client fund obligations | 3987776 | 3065697 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 4120534 | 3189103 |
| Long-term operating lease liabilities | 69119 | 65353 |
| Other long-term liabilities | 3681 | 3333 |
| Deferred income tax liabilities | 2217 | 2217 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | $4195551 | $3260006 |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2022 and December 31, 2022 | $— | $— |
| &nbsp;&nbsp;&nbsp;Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2022 and December 31, 2022; 55,190 shares issued and outstanding at June 30, 2022 and 55,768 shares issued and outstanding at December 31, 2022 | 55 | 56 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 289843 | 310050 |
| &nbsp;&nbsp;&nbsp;Retained earnings | 325868 | 371820 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss | (2303) | (4159) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | $613463 | $677767 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity | $4809014 | $3937773 |

---

------

**PAYLOCITY HOLDING CORPORATION**

**Unaudited Consolidated Statements of Operations and Comprehensive Income**

**(in thousands, except per share data)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>December 31,** | **Three Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** |
| | **2021** | **2022** | **2021** | **2022** |
| Revenues: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Recurring and other revenue | $195041 | $256434 | $375865 | $501840 |
| &nbsp;&nbsp;&nbsp;Interest income on funds held for clients | 996 | 16574 | 1869 | 24448 |
| Total revenues | 196037 | 273008 | 377734 | 526288 |
| Cost of revenues | 70821 | 90076 | 134070 | 174619 |
| Gross profit | 125216 | 182932 | 243664 | 351669 |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Sales and marketing | 52219 | 75694 | 102104 | 146757 |
| &nbsp;&nbsp;&nbsp;Research and development | 25278 | 41029 | 48354 | 81122 |
| &nbsp;&nbsp;&nbsp;General and administrative | 39581 | 48001 | 74816 | 98493 |
| Total operating expenses | 117078 | 164724 | 225274 | 326372 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating income | 8138 | 18208 | 18390 | 25297 |
| Other expense | (372) | (5) | (489) | (168) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes | 7766 | 18203 | 17901 | 25129 |
| Income tax expense (benefit) | (2087) | 2603 | (22884) | (20823) |
| Net income | $9853 | $15600 | $40785 | $45952 |
| Other comprehensive income (loss), net of tax | (335) | 516 | (410) | (1856) |
| Comprehensive income | $9518 | $16116 | $40375 | $44096 |
| Net income per share: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | $0.18 | $0.28 | $0.74 | $0.83 |
| &nbsp;&nbsp;&nbsp;Diluted | $0.17 | $0.28 | $0.72 | $0.81 |
| Weighted-average shares used in computing net income per share: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | 55067 | 55721 | 54938 | 55587 |
| &nbsp;&nbsp;&nbsp;Diluted | 56468 | 56474 | 56486 | 56559 |

---

Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises for each of the three and six months ended December 31, are included in the above line items:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>December 31,** | **Three Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** |
| | **2021** | **2022** | **2021** | **2022** |
| Cost of revenues | $3327 | $5310 | $6854 | $10355 |
| Sales and marketing | 5749 | 10871 | 11769 | 21371 |
| Research and development | 5446 | 11472 | 10220 | 21706 |
| General and administrative | 11948 | 16328 | 21383 | 35527 |
| Total stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | $26470 | $43981 | $50226 | $88959 |

---

------

**PAYLOCITY HOLDING CORPORATION**

**Unaudited Consolidated Statements of Cash Flows**

**(in thousands)**

---

| | | |
|:---|:---|:---|
| | **Six Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** |
| | **2021** | **2022** |
| Cash flows from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income | $40785 | $45952 |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 45802 | 83364 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 23383 | 29094 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax benefit | (22952) | (20856) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for credit losses | 103 | 602 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net accretion of discounts and amortization of premiums on available-for-sale securities | 221 | (2039) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of debt issuance costs | 90 | 157 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other | 247 | 1253 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (916) | (9377) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred contract costs | (26786) | (40638) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other | (10008) | 616 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 1403 | (392) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other | (24514) | (8979) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 26858 | 78757 |
| Cash flows from investing activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchases of available-for-sale securities | (190000) | (296060) |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sales and maturities of available-for-sale securities | 60391 | 190253 |
| &nbsp;&nbsp;&nbsp;&nbsp;Capitalized internal-use software costs | (17966) | (19740) |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchases of property and equipment | (10528) | (6663) |
| &nbsp;&nbsp;&nbsp;&nbsp;Acquisitions of businesses, net of cash acquired | (60234) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other investing activities |  | 29 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | (218337) | (132181) |
| Cash flows from financing activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net change in client fund obligations | 160325 | (922079) |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from employee stock purchase plan | 7216 | 8450 |
| &nbsp;&nbsp;&nbsp;&nbsp;Taxes paid related to net share settlement of equity awards | (67109) | (79369) |
| &nbsp;&nbsp;&nbsp;&nbsp;Payment of debt issuance costs | (41) | (864) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) financing activities | 100391 | (993862) |
| Net change in cash, cash equivalents and funds held for clients' cash and cash equivalents | (91088) | (1047286) |
| Cash, cash equivalents and funds held for clients' cash and cash equivalents—beginning of period | 1945881 | 3793453 |
| Cash, cash equivalents and funds held for clients' cash and cash equivalents—end of period | $1854793 | $2746167 |
| Supplemental Disclosure of Non-Cash Investing and Financing Activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchases of property and equipment, accrued but not paid | $125 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Liabilities assumed for acquisitions | $1874 | $117 |
| Supplemental Disclosure of Cash Flow Information |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash paid for interest | $126 | $157 |
| &nbsp;&nbsp;&nbsp;&nbsp;Refunds received for income taxes | $(115) | $(158) |
| Reconciliation of cash, cash equivalents and funds held for clients' cash and cash equivalents to the Consolidated Balance Sheets |  |  |
| Cash and cash equivalents | $84104 | $120053 |
| Funds held for clients' cash and cash equivalents | 1770689 | 2626114 |
| Total cash, cash equivalents and funds held for clients' cash and cash equivalents | $1854793 | $2746167 |

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**Paylocity Holding Corporation**

**Reconciliation of GAAP to non-GAAP Financial Measures**

**(In thousands except per share data)** 

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>December 31,** | **Three Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** |
| | **2021** | **2022** | **2021** | **2022** |
| **Reconciliation from Gross profit to Adjusted gross profit:** |  |  |  |  |
| Gross profit | $125216 | $182932 | $243664 | $351669 |
| Amortization of capitalized internal-use software costs | 6087 | 7478 | 12215 | 14520 |
| Amortization of certain acquired intangibles |  | 1853 |  | 3707 |
| Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 3327 | 5310 | 6854 | 10355 |
| Other items (1) | 36 |  | 48 | 19 |
| Adjusted gross profit | $134666 | $197573 | $262781 | $380270 |

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>December 31,** | **Three Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** |
| | **2021** | **2022** | **2021** | **2022** |
| **Reconciliation from Operating income to Non-GAAP Operating income:** |  |  |  |  |
| Operating income | $8138 | $18208 | $18390 | $25297 |
| Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 26470 | 43981 | 50226 | 88959 |
| Amortization of acquired intangibles | 2000 | 2770 | 3352 | 5541 |
| Other items (2) |  | 151 | 803 | 416 |
| Non-GAAP Operating income | $36608 | $65110 | $72771 | $120213 |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>December 31,** | **Three Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** |
| | **2021** | **2022** | **2021** | **2022** |
| **Reconciliation from Net income to Non-GAAP Net income:** |  |  |  |  |
| Net income | $9853 | $15600 | $40785 | $45952 |
| Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 26470 | 43981 | 50226 | 88959 |
| Amortization of acquired intangibles | 2000 | 2770 | 3352 | 5541 |
| Other items (2) | 208 | 151 | 1011 | 416 |
| Income tax effect on adjustments (3) | (2241) | 496 | (25929) | (22439) |
| Non-GAAP Net income | $36290 | $62998 | $69445 | $118429 |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>December 31,** | **Three Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** |
| | **2021** | **2022** | **2021** | **2022** |
| **Calculation of Non-GAAP Net income per share:** |  |  |  |  |
| Non-GAAP Net income | $36290 | $62998 | $69445 | $118429 |
| Diluted weighted-average number of common shares | 56468 | 56474 | 56486 | 56559 |
| Non-GAAP Net income per share | $0.64 | $1.12 | $1.23 | $2.09 |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>December 31,** | **Three Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** |
| | **2021** | **2022** | **2021** | **2022** |
| **Reconciliation from Net income to Adjusted EBITDA:** |  |  |  |  |
| Net income | $9853 | $15600 | $40785 | $45952 |
| Interest expense | 110 | 190 | 218 | 377 |
| Income tax expense (benefit) | (2087) | 2603 | (22884) | (20823) |
| Depreciation and amortization expense | 12061 | 14827 | 23383 | 29094 |
| EBITDA | 19937 | 33220 | 41502 | 54600 |
| Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 26470 | 43981 | 50226 | 88959 |
| Other items (2) | 208 | 151 | 1011 | 416 |
| Adjusted EBITDA | $46615 | $77352 | $92739 | $143975 |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>December 31,** | **Three Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** |
| | **2021** | **2022** | **2021** | **2022** |
| **Reconciliation of Non-GAAP sales and marketing:** |  |  |  |  |
| Sales and marketing | $52219 | $75694 | $102104 | $146757 |
| Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 5749 | 10871 | 11769 | 21371 |
| Other items (1) | 76 |  | 102 | 22 |
| Non-GAAP sales and marketing | $46394 | $64823 | $90233 | $125364 |

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>December 31,** | **Three Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** |
| | **2021** | **2022** | **2021** | **2022** |
| **Reconciliation of Non-GAAP total research and development:** |  |  |  |  |
| Research and development | $25278 | $41029 | $48354 | $81122 |
| Capitalized internal-use software costs | 8807 | 9787 | 17966 | 19740 |
| Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 5446 | 11472 | 10220 | 21706 |
| Other items (1) | 325 | 151 | 468 | 369 |
| Non-GAAP total research and development | $28314 | $39193 | $55632 | $78787 |

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>December 31,** | **Three Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** | **Six Months Ended<br>December 31,** |
| | **2021** | **2022** | **2021** | **2022** |
| **Reconciliation of Non-GAAP general and administrative:** |  |  |  |  |
| General and administrative | $39581 | $48001 | $74816 | $98493 |
| Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 11948 | 16328 | 21383 | 35527 |
| Amortization of certain acquired intangibles | 2000 | 917 | 3352 | 1834 |
| Other items (2) | (437) |  | 185 | 6 |
| Non-GAAP general and administrative | $26070 | $30756 | $49896 | $61126 |

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(1) Represents certain nonrecurring acquisition-related costs.

(2) Represents nonrecurring costs including acquisition-related costs and lease exit activity.

(3) Includes the income tax effect on non-GAAP net income adjustments related to stock-based compensation expense and employer payroll taxes related to stock releases and option exercises, amortization of acquired intangibles and other items, which include acquisition-related costs and lease exit activity.

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