Paylocity Holding Corp

Previous wording

We are a leading cloud-based provider of human capital management, or HCM, and payroll software solutions that deliver a comprehensive platform for the modern workforce. Our HCM and payroll platform offers an intuitive, easy-to-use product suite that helps businesses attract and retain talent, build culture and connection with their employees, and streamline and automate HR and payroll processes.

Current wording

We are a leading cloud-based provider of human capital management, or HCM, payroll and spend management software solutions that deliver a comprehensive platform for the modern workforce. Our platform offers an intuitive, easy-to-use product suite that helps businesses streamline and automate HR, payroll and spend management processes, attract and retain talent, and build culture and connection with their employees. We are expanding the spend management capabilities of our platform beyond expense management to include accounts payable automation, corporate cards, and procurement capabilities through the acquisition of Airbase Inc. in October 2024. This integrated platform will enable HR and finance leaders to manage all their spend, including payroll, on a single platform.

Previous wording

Effective management of human capital is a core function in all organizations and requires a significant commitment of resources. Our cloud-based software solutions, combined with our unified database architecture, are highly flexible and configurable and feature a modern, intuitive user experience. Our platform offers automated data integration with hundreds of third-party partner systems, such as 401(k), benefits and insurance provider systems. We plan to continue to invest in research and development efforts that will allow us to offer a broader selection of products to new and existing clients focused on experiences that solve our clients’ challenges.

Current wording

Effective management of human capital and business-related spend is a core function in all organizations and requires a significant commitment of resources. Our cloud-based software solutions, combined with our unified database architecture, are highly flexible and configurable and feature a modern, intuitive user experience. Our platform offers automated data integration with hundreds of third-party partner systems, such as 401(k), benefits and insurance provider systems. We plan to continue to invest in research and development efforts that will allow us to offer a broader selection of products to new and existing clients focused on experiences that solve our clients’ challenges.

Previous wording

Our recurring revenue model and high annual revenue retention rates provide significant visibility into our future operating results and cash flow from operations. This visibility enables us to better manage and invest in our business. Total revenues increased from $852.7 million in fiscal 2022 to $1,174.6 million in fiscal 2023, representing a 38% year-over-year increase. Total revenues increased from $1,174.6 million in fiscal 2023 to $1,402.5 million in fiscal 2024, representing a 19% year-over-year increase. During fiscal 2024, total revenue growth was driven by the strong performance of our sales team, continued annual revenue retention in excess of 92%, and growth in interest income on funds held for clients attributable both to rising interest rates and higher average daily balances for funds held for clients, which were due to the addition of new clients as compared to the prior fiscal year. Uncertainties around market and economic conditions may impact revenue growth, which we have recently experienced and may continue to experience, through fluctuations in client employee counts, elongated sales cycles, client losses, and a changing interest rate environment, among other factors.

Current wording

Our recurring revenue model and high annual revenue retention rates provide significant visibility into our future operating results and cash flow from operations. This visibility enables us to better manage and invest in our business. Total revenues increased from $1,174.6 million in fiscal 2023 to $1,402.5 million in fiscal 2024, representing a 19% year-over-year increase. Total revenues increased from $1,402.5 million in fiscal 2024 to $1,595.2 million in fiscal 2025, representing a 14% year-over-year increase. During fiscal 2025, total revenue growth was driven by the strong performance of our sales team and continued annual revenue retention in excess of 92%. Uncertainties around market and economic conditions may impact revenue growth, which we have recently experienced and may continue to experience, through fluctuations in client employee counts, elongated sales cycles, client losses, and a changing interest rate environment, among other factors.

Previous wording

We believe there is a significant opportunity to grow our business by increasing our number of clients. Excluding clients acquired through acquisitions, we have increased the number of clients using our HCM and payroll software solutions from approximately 33,300 as of June 30, 2022 to approximately 39,050 as of June 30, 2024, representing a compound annual growth rate of approximately 8%. The table below sets forth the total number of clients using our HCM and payroll software solutions for the periods indicated, excluding clients acquired through acquisitions, rounded to the nearest fifty.

Current wording

We believe there is a significant opportunity to grow our business by increasing our number of clients. Excluding clients acquired through acquisitions, we have increased the number of clients using our software solutions from approximately 36,200 as of June 30, 2023 to approximately 41,650 as of June 30, 2025, representing a compound annual growth rate of approximately 7%. The table below sets forth the total number of clients using our software solutions for the periods indicated, excluding clients acquired through acquisitions, rounded to the nearest fifty.

Previous wording

(1) Represents acquisition-related costs and severance costs related to certain roles that have been eliminated. We exclude one-off severance costs that we incur as part of the normal course of our business operations.

Current wording

(1) Represents acquisition-related costs and severance cost adjustments related to certain roles that have been eliminated. We exclude one-off severance costs that we incur as part of the normal course of our business operations.

Previous wording

We generate substantially all of our recurring and other revenue from ongoing subscriptions to our cloud-based HCM and payroll software solutions, which are recurring in nature. Recurring fees for each client generally include a base fee in addition to a fee based on the number of client employees and the number of products a client uses. We also charge fees attributable to our preparation of W-2 documents and annual required filings on behalf of our clients. We charge implementation fees for professional services provided to implement our HCM and payroll solutions. Implementations of our solutions typically require one to eight weeks, depending on the size and complexity of each client, at which point the new client’s payroll is first processed using our solution. Our average client size has continued to be over 150 employees.

Current wording

We generate substantially all of our recurring and other revenue from ongoing subscriptions to our cloud-based software solutions, which are recurring in nature. Recurring fees for each client generally include a base fee in addition to a fee based on the number of client employees and the number of products a client uses. We also charge fees attributable to our preparation of W-2 documents and annual required filings on behalf of our clients. We charge implementation fees for professional services provided to implement our software solutions. Implementations of our solutions typically require one to eight weeks, depending on the size and complexity of each client, at which point the new client’s payroll is first processed using our solution. Our average client size has continued to be over 150 employees.

Previous wording

While the majority of our agreements with clients are generally cancellable by the client on 60 days’ notice or less, we also have entered into term agreements, which are generally two years in length. Our 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. We recognize recurring fees in the period in which services are provided and the related performance obligations have been satisfied. We defer implementation fees related to our proprietary products over a period generally up to 24 months. Recurring and other revenue accounted for approximately 99%, 93% and 91% of our total revenues during the years ended June 30, 2022, 2023 and 2024, respectively.

Current wording

While the majority of our agreements with clients are generally cancellable by the client on 60 days’ notice or less, we also have entered into term agreements, which are generally two years in length. Our 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. We recognize recurring fees in the period in which services are provided and the related performance obligations have been satisfied. We defer implementation fees related to our proprietary products over a period generally up to 24 months. Recurring and other revenue accounted for approximately 93%, 91% and 92% of our total revenues during the years ended June 30, 2023, 2024 and 2025, respectively.

Previous wording

We earn interest income on funds held for clients. We collect funds for employee payroll payments and related taxes in advance of remittance to employees and taxing authorities. Prior to remittance to employees and taxing authorities, we earn interest on these funds through demand deposit accounts with financial institutions with which we have automated clearing house, or ACH, arrangements. We also earn interest by investing a portion of funds held for clients in highly liquid, investment-grade marketable securities.

Current wording

We earn interest income on funds held for clients. We collect funds from clients in advance of performing payroll, payroll tax filing and spend management services on behalf of those clients. Until these funds are remitted to the respective payees, we earn interest on these funds through demand deposit accounts with financial institutions with which we have automated clearing house, or ACH, arrangements. We also earn interest by investing a portion of funds held for clients in highly liquid, investment-grade marketable securities.

Previous wording

Cost of revenues includes costs to provide our payroll and other HCM solutions which primarily consists of employee-related expenses, including wages, stock-based compensation, bonuses and benefits, relating to the provision of ongoing client support and implementation activities, payroll tax filing, distribution of printed checks and other materials as well as delivery costs, computing costs, amortization of certain acquired intangibles and bank fees associated with client fund transfers. Costs related to recurring support are generally expensed as incurred. Implementation costs related to our proprietary products are capitalized and amortized over a period of 7 years. Our cost of revenues is expected to increase in absolute dollars for the foreseeable future as we increase our client base. However, we expect to realize cost efficiencies over the long term as our business scales, resulting in improved operating leverage and increased margins.

Current wording

Cost of revenues consists primarily of employee-related expenses, including wages, stock-based compensation, bonuses and benefits, relating to the provision of ongoing client support and implementation activities, payroll tax filing, distribution of printed checks and other materials as well as delivery costs, computing costs, amortization of certain acquired intangibles and bank fees associated with client fund transfers. Costs related to recurring support are generally expensed as incurred. Implementation costs related to our proprietary products are capitalized and generally amortized over a period of 7 years. Our cost of revenues is expected to increase in absolute dollars for the foreseeable future as we increase our client base. However, we expect to realize cost efficiencies over the long term as our business scales, resulting in improved operating leverage and increased margins.

Previous wording

We also capitalize a portion of our internal-use software costs, which are then primarily amortized as Cost of revenues. We amortized $25.3 million, $31.4 million and $45.2 million of capitalized internal-use software costs in fiscal 2022, 2023 and 2024, respectively.

Current wording

We also capitalize a portion of our internal-use software costs, which are then primarily amortized as Cost of revenues. We amortized $31.4 million, $45.2 million and $59.9 million of capitalized internal-use software costs in fiscal 2023, 2024 and 2025, respectively.

Previous wording

Sales and marketing expenses consist primarily of employee-related expenses for our direct sales and marketing staff, including wages, commissions, stock-based compensation, bonuses, benefits, marketing expenses and other related costs. Our sales personnel earn commissions and bonuses for attainment of certain performance criteria based upon new sales throughout the fiscal year. We capitalize certain selling and commission costs related to new contracts or purchases of additional services by our existing clients and amortize them over a period of 7 years.

Current wording

Sales and marketing expenses consist primarily of employee-related expenses for our direct sales and marketing staff, including wages, commissions, stock-based compensation, bonuses, benefits, marketing expenses and other related costs. Our sales personnel earn commissions and bonuses for attainment of certain performance criteria based upon new sales throughout the fiscal year. We capitalize certain selling and commission costs related to new contracts or purchases of additional services by our existing clients and generally amortize them over a period of 7 years.

Previous wording

Other income (expense) generally consists of interest income related to interest earned on our cash and cash equivalents, net of losses on disposals of property and equipment and interest expense related to our revolving credit facility.

Current wording

Other income (expense) generally consists of interest income related to interest earned on our cash and cash equivalents, net of interest expense related to our revolving credit facility.

Previous wording

Recurring and other revenue for the year ended June 30, 2024 increased by $183.6 million, or 17%, to $1,281.7 million from $1,098.0 million for the year ended June 30, 2023. Recurring and other revenue increased primarily as a result of incremental revenues from new and existing clients due to the strong performance by our sales team and continued annual revenue retention in excess of 92%. Excluding clients acquired through acquisitions, the number of clients using our HCM and payroll software solutions at June 30, 2024 increased by 8% to approximately 39,050 from approximately 36,200 at June 30, 2023.

Current wording

Recurring and other revenue for the year ended June 30, 2025 increased by $190.1 million, or 15%, to $1,471.8 million from $1,281.7 million for the year ended June 30, 2024. Recurring and other revenue increased primarily as a result of incremental revenues from new and existing clients due to the strong performance by our sales team and continued annual revenue retention in excess of 92%. Excluding clients acquired through acquisitions, the number of clients using our software solutions at June 30, 2025 increased by 7% to approximately 41,650 from approximately 39,050 at June 30, 2024.

Previous wording

Interest income on funds held for clients for the year ended June 30, 2024 increased by $44.3 million, or 58%, to $120.8 million from $76.6 million for the year ended June 30, 2023. Interest income on funds held for clients increased primarily due to higher interest rates and higher average daily balances for funds held due to the addition of new clients to our client base as compared to the prior fiscal year.

Current wording

Interest income on funds held for clients for the year ended June 30, 2025 increased by $2.6 million, or 2%, to $123.4 million from $120.8 million for the year ended June 30, 2024. Interest income on funds held for clients increased slightly, as the positive impact from higher average daily balances of funds held for new and existing clients was mostly offset by lower interest rates as compared to the prior fiscal year.

Previous wording

Cost of revenues for the year ended June 30, 2024 increased by $74.7 million, or 20%, to $441.7 million from $367.0 million for the year ended June 30, 2023. Cost of revenues increased primarily as a result of the continued growth of our business, in particular, $44.9 million in additional employee-related costs resulting from additional personnel necessary to provide services to new and existing clients, $13.8 million in additional processing and delivery related costs and $13.6 million in increased internal-use software amortization. Gross profit margin was 69% for both years ended June 30, 2023 and 2024.

Current wording

Cost of revenues for the year ended June 30, 2025 increased by $56.5 million, or 13%, to $498.2 million from $441.7 million for the year ended June 30, 2024. Cost of revenues increased primarily as a result of the continued growth of our business, in particular, $22.1 million in additional employee-related costs, $14.7 million in increased internal-use software amortization, $12.6 million in additional processing and delivery related costs and $8.3 million in increased amortization of certain acquired intangible assets. Gross profit margin was 69% for both years ended June 30, 2024 and 2025.

Previous wording

Sales and marketing expenses for the year ended June 30, 2024 increased by $38.2 million, or 13%, to $335.0 million from $296.7 million for the year ended June 30, 2023. The increase in sales and marketing expense was primarily due to $26.8 million of additional employee-related costs, including those incurred to expand our sales team. The increase was also driven by $7.4 million in additional marketing lead generation costs.

Current wording

Sales and marketing expenses for the year ended June 30, 2025 increased by $39.3 million, or 12%, to $374.2 million from $335.0 million for the year ended June 30, 2024. The increase in sales and marketing expense was primarily due to $36.8 million of additional employee-related costs, including those incurred to expand our sales team.

Previous wording

Research and development expenses for the year ended June 30, 2024 increased by $14.3 million, or 9%, to $178.3 million from $164.0 million for the year ended June 30, 2023. The increase in research and development expenses was primarily due to $29.0 million of additional employee-related costs related to additional development personnel, partially offset by $16.6 million in higher period-over-period capitalized internal-use software costs.

Current wording

Research and development expenses for the year ended June 30, 2025 increased by $27.5 million, or 15%, to $205.9 million from $178.3 million for the year ended June 30, 2024. The increase in research and development expenses was primarily due to $25.7 million of additional employee-related costs related to additional development personnel.

Previous wording

General and administrative expenses for the year ended June 30, 2024 decreased by $4.4 million, or 2%, to $187.4 million from $191.8 million for the year ended June 30, 2023. The decrease in general and administrative expenses was primarily due to a $4.3 million gain related to lease exit activity. Excluding the gain on lease exit activity, general and administrative expenses remained relatively flat year over year as we continue to focus on achieving cost efficiencies as our business scales.

Current wording

General and administrative expenses for the year ended June 30, 2025 increased by $25.5 million, or 14%, to $212.9 million from $187.4 million for the year ended June 30, 2024. The increase in general and administrative expenses was primarily due to $14.3 million of additional employee-related costs and a $4.3 million gain related to lease exit activity during the year ended June 30, 2024.

Previous wording

Our effective tax rates were 11.2% and 25.4% for the years ended June 30, 2023 and 2024, respectively. Our effective tax rate for the year ended June 30, 2023 was lower than the federal statutory rate of 21% primarily due to benefits from stock-based compensation and research and development tax credits generated. Our effective tax rate for the year ended June 30, 2024 was higher than the federal statutory rate of 21% primarily due to increase in state taxes.

Current wording

Our effective tax rates were 25.4% and 26.5% for the years ended June 30, 2024 and 2025, respectively. Our effective tax rates for the years ended June 30, 2024 and 2025 were higher than the federal statutory rate of 21% primarily due to state income taxes.

Previous wording

We apply Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“Topic 606”), whereby we recognize revenue when we transfer control of goods or services to our customers in an amount that reflects the consideration to which we expect to be entitled to for those goods or services. We derive our revenue from contracts with clients substantially all from recurring service fees. Recurring fees are derived from payroll processing and related services such as payroll reporting and tax filing services, time and labor services, time clock rentals, and HR-related software solutions, including employee management and benefits enrollment and administration, substantially all of which are delivered on a monthly basis.

Current wording

We apply Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“Topic 606”), whereby we recognize revenue when we transfer control of goods or services to our customers in an amount that reflects the consideration to which we expect to be entitled to for those goods or services. We derive our revenue from contracts with clients substantially all from recurring service fees. Recurring fees are mostly derived from payroll processing and related services such as payroll reporting and tax filing services, time and labor services, time clock rentals, and HR-related software solutions, including employee management and benefits enrollment and administration, substantially all of which are delivered on a monthly basis.

Previous wording

Internal-use software is amortized on a straight-line basis, generally over a two- to three-year period while certain projects that support our main processing activities are amortized over ten years. We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. There was no impairment to capitalized internal-use software during the years ended June 30, 2022, 2023 or 2024. We capitalized $42.2 million, $55.6 million and $75.5 million of internal-use software costs for the years ended June 30, 2022, 2023 and 2024, respectively, including stock-based compensation costs of $7.1 million, $11.9 million and $14.4 million for the years ended June 30, 2022, 2023 and 2024, respectively. We amortized $25.3 million, $31.4 million and $45.2 million of capitalized internal-use software costs for the years ended June 30, 2022, 2023 and 2024, respectively.

Current wording

Internal-use software is amortized on a straight-line basis, generally over a two- to three-year period while certain projects that support our main processing activities are amortized over ten years. We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. There was no impairment to capitalized internal-use software during the years ended June 30, 2023, 2024 or 2025. We capitalized $55.6 million, $75.5 million and $75.9 million of internal-use software costs for the years ended June 30, 2023, 2024 and 2025, respectively, including stock-based compensation costs of $11.9 million, $14.4 million and $13.0 million for the years ended June 30, 2023, 2024 and 2025, respectively. We amortized $31.4 million, $45.2 million and $59.9 million of capitalized internal-use software costs for the years ended June 30, 2023, 2024 and 2025, respectively.

Previous wording

We include the results of businesses acquired in our consolidated financial statements from the date of acquisition. We allocate the purchase price consideration associated with our acquisitions to the fair values of assets acquired and liabilities assumed at their respective acquisition dates, with the excess recorded to goodwill. The purchase price allocations require us to make significant judgments and estimates in determining such fair values, particularly related to intangible assets. Such estimates used in valuation methodologies can include, but are not limited to, forecasted revenue growth rates and cost projections, expected time and costs to rebuild developed technology, and discount rates. These estimates are inherently uncertain and may be refined over the measurement period. Adjustments to the fair values of assets acquired and liabilities assumed may be recorded during the measurement period, which may be up to one year from the acquisition date, with the corresponding offset to goodwill.

Current wording

We include the results of businesses acquired in our consolidated financial statements from the date of acquisition. We allocate the purchase price consideration associated with our acquisitions to the fair values of assets acquired and liabilities assumed at their respective acquisition dates, with the excess recorded to goodwill. The purchase price allocations require us to make significant judgments and estimates in determining such fair values, particularly related to the proprietary technology intangible asset. Such estimates used in valuation methodologies can include, but are not limited to, forecasted revenue growth rates, royalty rates, technology migration rates and required rate of return. These estimates are inherently uncertain and may be refined over the measurement period. Adjustments to the fair values of assets acquired and liabilities assumed may be recorded during the measurement period, which may be up to one year from the acquisition date, with the corresponding offset to goodwill.

Previous wording

Our primary liquidity needs are related to the funding of general business requirements, including working capital requirements, research and development, and capital expenditures. As of June 30, 2024, our principal sources of liquidity were $401.8 million of cash and cash equivalents. We also have a credit agreement which provides for a $550.0 million revolving credit facility which may be increased up to $825.0 million. No amounts were drawn on the revolving credit facility as of June 30, 2024. In the third quarter of fiscal 2022, we borrowed $50.0 million in connection with our acquisition of Cloudsnap, Inc., which we repaid within the same quarter. Refer to Note 12 of the Notes to the Consolidated Financial Statements included in Part II, Item 8: “Financial Statements and Supplementary Data” for additional details on the credit agreement and borrowing activity.

Current wording

Our primary liquidity needs are related to the funding of general business requirements, including working capital requirements, research and development, and capital expenditures. As of June 30, 2025, our principal sources of liquidity were $398.1 million of cash and cash equivalents. We maintain a credit agreement which provides for a $550.0 million revolving credit facility which may be increased up to $825.0 million. No amounts were drawn on the revolving credit facility as of June 30, 2024. In September 2024, we borrowed $325.0 million under this credit facility to fund the October 2024 acquisition of Airbase Inc. We had $162.5 million in outstanding borrowings under this credit facility at June 30, 2025, as we repaid $162.5 million during the second half of fiscal 2025. Refer to Notes 7 and 12 of the Notes to the Consolidated Financial Statements included in Part II, Item 8: “Financial Statements and Supplementary Data” for additional details on the Airbase acquisition and credit agreement, respectively.

Previous wording

In April 2024, our board of directors authorized the repurchase of up to $500 million of our common stock (the “Repurchase Program”). The extent to which we repurchase shares, the number and price of any shares repurchased and the timing of any repurchases depends on the market price of our common stock, trading volume, general market conditions and other corporate and economic considerations. During fiscal year 2024, we repurchased an aggregate of 1.1 million shares for approximately $150.0 million at an average cost per share of $142.82 under the Repurchase Program. As of June 30, 2024, approximately $350.0 million remains authorized for repurchases under the Repurchase Program.

Current wording

In April 2024, our board of directors authorized the repurchase of up to $500 million of our common stock (the “Repurchase Program”). The extent to which we repurchase shares, the number and price of any shares repurchased and the timing of any repurchases depends on the market price of our common stock, trading volume, general market conditions and other corporate and economic considerations. During fiscal 2024, we repurchased an aggregate of 1.1 million shares for approximately $150.0 million at an average cost per share of $142.82 under the Repurchase Program. During fiscal 2025, we repurchased 0.8 million shares for approximately $149.6 million at an average cost per share of $190.16 under the Repurchase Program. In July 2025, our board of directors authorized an additional $500 million of our common stock for repurchase under the Repurchase Program. Refer to Notes 15 and 20 of the Notes to the Consolidated Financial Statements included in Part II, Item 8: “Financial Statements and Supplementary Data” for additional detail on our Repurchase Program.

Previous wording

In order to grow our business, we intend to increase our personnel and related expenses and to make significant investments in our platform, data centers and general infrastructure. The timing and amount of these investments will vary based on our financial condition, the rate at which we add new clients and new personnel and the scale of our module development, data centers and other activities. Many of these investments will occur in advance of experiencing any direct benefit from them, which could negatively impact our liquidity and cash flows during any particular period and may make it difficult to determine if we are effectively allocating our resources. However, we expect to fund our operations, capital expenditures, acquisitions, share repurchases and other investments principally with cash flows from operations, and to the extent that our liquidity needs exceed our cash from operations, we would look to our cash on hand or utilize the borrowing capacity under our credit facility to satisfy those needs.

Current wording

In order to grow our business, we intend to increase our personnel and related expenses and to make investments in our platform, data centers and general infrastructure, some of which may be significant. The timing and amount of these investments will vary based on our financial condition, the rate at which we add new clients and new personnel and the scale of our module development, data centers and other activities. Many of these investments will occur in advance of experiencing any direct benefit from them, which could negatively impact our liquidity and cash flows during any particular period and may make it difficult to determine if we are effectively allocating our resources. However, we expect to fund our operations, capital expenditures, acquisitions, share repurchases and other investments principally with cash flows from operations, and to the extent that our liquidity needs exceed our cash from operations, we would look to our cash on hand or utilize the remaining borrowing capacity under our credit facility to satisfy those needs.

Previous wording

Funds held for clients and client fund obligations will vary substantially from period to period as a result of the timing of payroll and tax obligations due. Our payroll processing activities involve the movement of significant funds from accounts of employers to employees and relevant taxing authorities. Though we debit a client’s account prior to any disbursement on its behalf, there is a delay between our payment of amounts due to employees and taxing and other regulatory authorities and when the incoming funds from the client to cover these amounts payable actually clear into our operating accounts. We currently have agreements with various major U.S. banks to execute ACH and wire transfers to support our client payroll and tax services. We believe we have sufficient capacity under these ACH arrangements to handle all transaction volumes for the foreseeable future. We primarily collect fees for our services via ACH transactions at the same time we debit the client’s account for payroll and tax obligations and thus are able to reduce collectability and accounts receivable risks.

Current wording

Our payroll and spend management processing activities involve the movement of significant funds from accounts of clients to their employees, relevant taxing authorities and vendors. Funds held for clients and client fund obligations will vary substantially from period to period mostly as a result of the timing of payroll and payroll tax obligations due. Though we debit a client’s account prior to any disbursement on its behalf, there is a delay between when our payments are due and when the incoming funds from the client to cover these amounts payable actually clear into our operating accounts. We currently have agreements with various major U.S. banks to execute ACH and wire transfers to support our services. We believe we have sufficient capacity under these ACH arrangements to handle all transaction volumes for the foreseeable future. We primarily collect fees for our HCM and payroll services via ACH transactions at the same time we debit the client’s account for payroll and payroll tax obligations and thus are able to reduce collectability and accounts receivable risks.

Previous wording

Net cash provided by operating activities was $155.1 million, $282.7 million and $384.7 million for the years ended June 30, 2022, 2023 and 2024, respectively.

Current wording

Net cash provided by operating activities was $282.7 million, $384.7 million and $418.2 million for the years ended June 30, 2023, 2024 and 2025, respectively.

Previous wording

Net cash used in investing activities was $479.8 million, $220.2 million and $101.9 million, for the years ended June 30, 2022, 2023 and 2024, respectively. Net cash used in investing activities is significantly impacted by the timing of purchases and sales and maturities of investments as we may invest a portion of our excess cash and cash equivalents and funds held for clients in highly liquid, investment-grade marketable securities. The amount of funds held for clients invested will vary based on timing of client funds collected and payments due to client employees and taxing and other regulatory authorities.

Current wording

Net cash used in investing activities was $220.2 million, $101.9 million and $455.5 million, for the years ended June 30, 2023, 2024 and 2025, respectively. Net cash used in investing activities is significantly impacted by the timing of purchases and sales and maturities of investments as we may invest a portion of our excess cash and cash equivalents and funds held for clients in highly liquid, investment-grade marketable securities. The amount of funds held for clients invested will vary based on timing of client funds collected and payments due to client employees and taxing and other regulatory authorities.

Previous wording

The change in net cash used in investing activities from fiscal 2023 to fiscal 2024 was primarily due to a $294.4 million decrease in purchases of available-for-sale securities, partially offset by $152.3 million less proceeds from sales and maturities of available-for-sale securities as compared to the year ended June 30, 2023.

Current wording

The change in net cash used in investing activities from fiscal 2024 to fiscal 2025 was primarily due to $265.8 million in additional amounts paid for acquisitions, net of cash acquired, associated with the fiscal 2025 acquisition of Airbase. It was also attributable to $134.4 million in less proceeds from sales and maturities of available-for-sale securities, partially offset by $43.5 million in less purchases of available-for-sale securities as compared to the year ended June 30, 2024.

Previous wording

Net cash provided by (used in) financing activities was $2,172.3 million, $(1,434.7) million and $141.6 million for the years ended June 30, 2022, 2023 and 2024, respectively. The change in net cash provided by (used in) financing activities was primarily due to the change in client fund obligations of $1,687.5 million due to the timing of client funds collected and related remittance of those funds to client employees and taxing authorities, partially offset by $150.0 million in share repurchases during the year ended June 30, 2024 as compared to the year ended June 30, 2023.

Current wording

Net cash provided by (used in) financing activities was $(1,434.7) million, $141.6 million and $(325.8) million for the years ended June 30, 2023, 2024 and 2025, respectively. The change in net cash provided by (used in) financing activities from fiscal 2024 to fiscal 2025 was primarily due to the change in client fund obligations of $623.0 million due to the timing of client funds collected and related remittance of those funds to client employees, taxing and other regulatory authorities and vendors during the year ended June 30, 2025 as compared to the year ended June 30, 2024. The change in client fund obligations was offset by $162.5 million in net borrowings on our credit facility as we borrowed $325.0 million in September 2024 to acquire Airbase of which we repaid $162.5 million during the year ended June 30, 2025.

Previous wording

We expect to continue to invest in capital spending as we continue to grow our business and expand and enhance our operating facilities, data centers and technical infrastructure. Future capital requirements will depend on many factors, including our rate of sales growth. In the event that our sales growth or other factors do not meet our expectations, we may eliminate or curtail capital projects in order to mitigate the impact on our use of cash. Capital expenditures were $18.1 million, $21.9 million and $18.0 million for the years ended June 30, 2022, 2023 and 2024, respectively, exclusive of capitalized internal-use software costs of $34.5 million, $45.0 million, and $60.7 million for the same periods, respectively.

Current wording

We expect to continue to invest in capital spending as we continue to grow our business and expand and enhance our operating facilities, data centers and technical infrastructure. Future capital requirements will depend on many factors, including our rate of sales growth. In the event that our sales growth or other factors do not meet our expectations, we may eliminate or curtail capital projects in order to mitigate the impact on our use of cash. Capital expenditures were $21.9 million, $18.0 million and $13.1 million for the years ended June 30, 2023, 2024 and 2025, respectively, exclusive of capitalized internal-use software costs of $45.0 million, $60.7 million, and $62.4 million for the same periods, respectively.

Previous wording

Our principal commitments consist of $64.1 million in operating lease obligations, of which $9.8 million is due in the next twelve months. Refer to Note 13 of the Notes to the Consolidated Financial Statements included in Part II, Item 8: “Financial Statements and Supplementary Data” for additional details on our lease activity. We also have $72.7 million in purchase obligations, of which $43.5 million is due in the next twelve months.

Current wording

At June 30, 2025, our principal commitments consist of $162.5 million in borrowings on our revolving credit facility, which is contractually not due in the next twelve months, and related interest payments, as well as $64.6 million in operating lease obligations, of which $11.0 million is due in the next twelve months. Refer to Note 13 of the Notes to the Consolidated Financial Statements included in Part II, Item 8: “Financial Statements and Supplementary Data” for additional details on our lease activity. We also have $95.5 million in purchase obligations, of which $57.6 million is due in the next twelve months.