Paylocity Holdng (PCTY)

Short-term

Turnover ratios

The activity ratios of Paylocity Holding reflect notable fluctuations over the analyzed period, offering insights into the company's operational efficiency and asset management.

Inventory Turnover:
The inventory turnover ratio exhibits a significant spike in 2022, surging from 0.12 on June 30, 2021, to an exceptional 64.41, indicating a rapid clearance of inventory during that period. However, this ratio declines sharply subsequently, returning to a minimal 0.14 by June 30, 2023. The absence of data beyond 2023 prevents analysis of trends afterward. Overall, the extraordinary spike in 2022 suggests a temporary or exceptional event rather than a consistent operational pattern, with subsequent figures implying a return to slow inventory movement or possible inventory management challenges.

Receivables Turnover:
The receivables turnover ratio shows a declining trend from 101.42 in 2021 to 54.12 in 2022, continuing downward to 46.82 in 2023, and further decreasing to approximately 42.50 in 2024 and 38.31 projected for 2025. This decline suggests the company's collection period has lengthened over time, indicating a potential deterioration in receivables management or an extension of credit terms, which could impact cash flow.

Payables Turnover:
The payables turnover ratio decreases from 51.84 in 2021 to 34.27 in 2022 and then increases significantly to 59.65 in 2023, indicating an acceleration in settling payables during that year. Afterwards, it decreases again to 51.14 in 2024, with a further reduction projected to 28.72 in 2025. These fluctuations may reflect changes in payment policies, supplier negotiations, or shifts in cash management strategies, with recent years showing a tendency toward faster payments or reduced payable periods.

Working Capital Turnover:
Working capital turnover ratios fluctuate between 3.83 in 2021 and a peak of 7.67 in 2022. Post-2022, the ratio declines to 4.29 in 2023 and then decreases further to 3.44 in 2024 before slightly increasing again to 4.01 projected for 2025. This pattern indicates that the efficiency of utilizing working capital has improved markedly in 2022 but has regressed somewhat afterward, suggesting variations in sales efficiency relative to working capital investments.

In summary, Paylocity Holding demonstrates periods of exceptional activity, particularly in inventory turnover during 2022, alongside a general trend of declining receivables turnover and variable payables management. These patterns reflect shifts in operational efficiency and cash flow management, highlighting the importance of monitoring receivables and payables strategies to sustain optimal asset utilization over time.

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Average number of days

The activity ratios of Paylocity Holding, specifically the days of inventory on hand (DOH), days of sales outstanding (DSO), and the number of days of payables, reveal notable trends over the period from June 2021 to June 2023, with data for future periods unavailable.

Days of Inventory on Hand:
In June 2021, the company exhibited an unusually high DOH of approximately 2,921 days. Such a figure indicates an extremely high level of inventory relative to sales or potentially an anomaly in accounting or reporting. By June 2022, this ratio drastically decreased to about 5.67 days, reflecting a significant reduction in inventory holdings or perhaps a change in inventory management or reporting practices. Subsequently, in June 2023, the DOH increased again to approximately 2,685 days, signaling a substantial rise in inventory levels compared to the previous year but still far below the 2021 figure. The absence of data beyond June 2023 prevents further analysis of this ratio.

Days of Sales Outstanding (DSO):
The DSO indicates the average number of days it takes for the company to collect receivables. It rose modestly from 3.60 days in June 2021 to 6.74 days in June 2022, and further to 7.80 days in June 2023. The progressive increase suggests a slight elongation in the receivables collection period over time, which could imply changes in credit policies, customer payment behaviors, or industry norms. Nonetheless, these values remain relatively low, indicating efficient receivables management.

Number of Days of Payables:
This ratio measures how long the company takes to settle its obligations to suppliers. It increased from about 7.04 days in June 2021 to 10.65 days in June 2022, then decreased to 6.12 days in June 2023. The fluctuation indicates a variable approach to managing payables—initially extending payment periods, then shortening them. A shorter payable period in 2023 could suggest efforts to improve supplier relationships, optimize cash flow, or changes in payment terms.

Summary:
The data indicates a considerable reduction in inventory holdings from 2021 to 2022, with a subsequent substantial increase in 2023. The collection period for receivables has gradually lengthened over the analyzed years, though remaining relatively minimal overall. The payables management appears to fluctuate, extending period in 2022 and shortening again in 2023. Overall, these ratios reflect changes in operational efficiencies and possibly strategic adjustments in working capital management, with notable anomalies or reporting issues evident in the extraordinarily high inventory days reported in 2021.

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Long-term

The analysis of Paylocity Holding’s long-term activity ratios reveals notable trends over the observed periods. The Fixed Asset Turnover ratio demonstrates a consistent upward trajectory from 6.12 times as of June 30, 2021, to 7.61 times as of June 30, 2022, and further increases to 10.86 times by June 30, 2023. This progression indicates a more efficient utilization of fixed assets in generating revenue over time. The absence of data beyond June 30, 2023, precludes assessment of subsequent developments in fixed asset efficiency.

Conversely, the Total Asset Turnover ratio illustrates more modest fluctuations. It decreased from 0.26 in 2021 to 0.18 in 2022, suggesting a decline in overall asset efficiency during that period. However, it rebounded to 0.32 in 2023, illustrating an improvement in asset utilization. The ratio shows a gradual increase to 0.33 in 2024 and further to 0.36 in 2025, reflecting ongoing enhancements in how effectively the company’s total assets are being employed to generate revenue.

In summary, Paylocity’s fixed asset turnover exhibits significant improvement, indicating increased fixed asset productivity in recent years. Meanwhile, the total asset turnover shows a pattern of initial decline followed by steady recovery and growth, implying a positive trend in the efficiency of the broader asset base in supporting revenue generation. This analysis suggests a strengthening focus on optimizing asset utilization, particularly fixed assets, contributing to operational efficiency improvements over the period.