Paylocity Holdng (PCTY)

Short-term

Turnover ratios

The activity ratios of Paylocity Holdings provide insights into its operational efficiency over a specified period by analyzing inventory turnover, receivables turnover, payables turnover, and working capital turnover.

Inventory Turnover:
The data indicates that Paylocity's inventory turnover was largely absent from 2020 through early 2022, reflecting negligible or no inventory activity, consistent with its nature as a cloud-based software provider that typically does not hold physical inventory. Beginning in June 2022, a slight increase is observed, with ratios progressing from 0.07 to 0.15 by September 2023 before a decline to 0.12 in December 2023. These low and relatively stable figures suggest minimal inventory holdings, aligning with industry characteristics, with incremental changes possibly reflecting adjustments in asset management or reporting practices rather than fundamental shifts.

Receivables Turnover:
Paylocity demonstrates a high receivables turnover, indicating efficient collection processes. The ratios ranged from a peak of 122.09 in September 2020, decreasing significantly to 44.46 by March 2022, and then fluctuating slightly before stabilizing around 35-42 in 2023 and mid-2024. The initial high ratio suggests rapid collection of receivables, typical of SaaS companies with predictable billing cycles. The decline observed from the peak could indicate a shift towards longer collection periods or changes in customer billing or credit policies, but overall, the ratios remain relatively high, showing efficiency in receivables management.

Payables Turnover:
The payables turnover charges display considerable variability. Early ratios such as 58.82 in September 2020 fluctuate markedly over time, with rapid increases to 81.91 in March 2024 and subsequent declines, reflecting inconsistent payment cycles to suppliers or vendors. The significant spikes, such as 86.97 in December 2024, may indicate periods of deferred payments or strategic management of payable terms. Overall, these ratios reveal a dynamic payables management approach, possibly influenced by operational needs or cash flow considerations.

Working Capital Turnover:
This ratio measures how effectively Paylocity uses its working capital to generate sales. The data shows a pattern of substantial variation, with a notably high ratio of 13.58 in September 2022 and lower readings like 2.09 in September 2024. The high peak suggests periods where the company efficiently utilized working capital relative to sales, whereas the decline indicates periods of less efficient utilization or increased working capital relative to sales. Fluctuations across the period may reflect strategic shifts in operational financing, sales growth, or changes in receivables and payables management.

Overall Summary:
Given its service-oriented, software-as-a-service business model, Paylocity exhibits activity ratios consistent with minimal inventory presence and high receivables turnover, indicative of efficient cash collection practices. Variations in payables and working capital ratios reflect a flexible approach to vendor payments and capital utilization, potentially driven by strategic cash flow management or operational adjustments. The ratios collectively suggest a company managing its working capital effectively while maintaining operational efficiency aligned with industry norms for SaaS providers.

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Average number of days

The activity ratios for Paylocity Holding exhibit notable variations over the analyzed periods, highlighting aspects of operational efficiency and working capital management.

Days of Inventory on Hand (DOH):
The DOH data is largely unavailable for most periods, with significant figures emerging only from June 30, 2022, onward. Notably, the DOH sharply increased starting in June 2022, reaching approximately 5,147 days, before declining substantially in subsequent quarters: December 2022 (~3,493 days), March 2023 (~3,439 days), June 2023 (~2,685 days), and September 2023 (~2,482 days). The data for the remaining periods is absent, so it is unclear whether the initial spike was an anomaly or a result of data inconsistency. The decreasing trend from mid-2022 indicates a reduction in inventory holdings or a change in inventory management strategies, though the very high initial value suggests potential data irregularities or perhaps non-standard inventory accounting practices.

Days of Sales Outstanding (DSO):
The DSO figures suggest that the company has maintained relatively low receivables collection periods, with values fluctuating modestly around 2.99 to 10.59 days over the analyzed periods. The lowest DSO was recorded in September 2020 (~2.99 days), with fluctuations moving upward to a peak of approximately 10.59 days in December 2024. Despite this variability, the DSO remains within a range that indicates efficient receivables management, ensuring quick cash collection relative to sales, which is typical for SaaS or subscription-based businesses. The increasing trend towards December 2024 might reflect changes in billing cycles, customer credit terms, or collection efficiency.

Number of Days of Payables:
The payables period exhibits more volatility, with values spanning from a low of approximately 4.20 days (December 2024) to a high of about 12.78 days (September 2024). The general trend suggests periodic fluctuations in payment practices, possibly influenced by strategic payment timing or liquidity considerations. Notably, the payables period increased significantly in September 2024 to 12.78 days before dropping to nearly 4.20 days in December 2024, indicating a possible shift in supplier payment terms or cash management strategies.

Overall Assessment:
The activity ratios collectively suggest that Paylocity Holding maintained efficient receivables collection practices throughout the period, with DSO remaining comparatively low. The fluctuations in days payables indicate active management of supplier payments, which can impact working capital cycles. The extraordinary and inconsistent DOH figures starting from June 2022 raise questions about data reliability or changes in inventory reporting, but the subsequent decline points toward potentially improved inventory or asset management practices. These ratios illustrate a focus on optimizing cash flows and managing operational efficiency, consistent with a technology-centric service provider.

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Long-term

The analysis of Paylocity Holding’s long-term activity ratios reveals varying trends over the observed periods. The Fixed Asset Turnover ratio exhibits significant fluctuations, with notable peaks such as 10.95 on September 30, 2021, and 12.36 on March 31, 2022, indicating periods of heightened efficiency in utilizing fixed assets to generate revenue. Conversely, the ratio declined to a low of 6.12 on June 30, 2021, suggesting a temporary reduction in fixed asset utilization or increased investment in fixed assets not yet contributing proportionally to revenue.

The Total Asset Turnover demonstrates a more consistent pattern of moderate fluctuations, with values oscillating between 0.16 and 0.36. The lowest recorded ratio of 0.16 on March 31, 2022, indicates a period of relatively lower overall asset efficiency, while the highest at 0.36 on September 30, 2023, suggests improved utilization of total assets in generating sales.

Overall, the data indicates that Paylocity Holding’s asset utilization efficiency has experienced periods of both enhancement and decline. The considerable variability in fixed asset turnover suggests fluctuating effectiveness in deploying fixed assets, potentially influenced by strategic investments or operational adjustments. Meanwhile, the total asset turnover reflects a relatively stable, though variable, efficiency pattern over time, with recent periods indicating marginal improvements in overall asset utilization.