Paylocity Holdng (PCTY)

The liquidity ratios of Paylocity Holding over the specified period exhibit notable trends and shifts in the company's ability to meet its short-term obligations.

The current ratio, which measures the company's capacity to cover current liabilities with its current assets, started at 1.09 as of June 30, 2021, indicating a marginally adequate liquidity position. This ratio declined slightly to 1.03 by June 30, 2022, suggesting a modest decrease in liquidity cushion, but then recovered marginally to 1.10 in June 30, 2023. The increase continued into June 30, 2024, reaching 1.13, reflecting a slight improvement in overall liquidity. However, a significant shift occurred by June 30, 2025, when the current ratio surged to 2.89, indicating a substantial enhancement in liquidity and a stronger ability to meet short-term obligations.

The quick ratio, which excludes inventories from current assets to assess more liquid assets, followed a similar pattern. It was at 0.11 on June 30, 2021, and decreased to 0.04 by June 30, 2022, highlighting a tightening in liquidity when considering only the most liquid assets. Subsequently, it returned to 0.11 in June 30, 2023, and slightly increased to 0.14 in June 30, 2024. The notable development occurred in June 30, 2025, when the quick ratio jumped to 2.09, indicating a significant increase in the company's liquid assets relative to its immediate liabilities.

The cash ratio, which measures the most conservative liquidity position based solely on cash and cash equivalents, was 0.11 in June 2021 and declined to 0.03 in June 2022. It recovered to 0.10 in June 2023 and increased marginally to 0.13 in June 2024. Similar to the other ratios, a substantial rise was observed by June 30, 2025, as the cash ratio reached 1.89, signifying a vastly improved cash position relative to current liabilities.

Overall, the data indicates a period of relatively stable but modest liquidity strength from June 2021 through June 2024, with ratios hovering close to or below 1, reflecting limited immediate liquidity. The pronounced increase by June 2025 across all three ratios suggests a significant strengthening of liquidity, likely attributable to improved cash holdings, asset management, or strategic financial actions. This positive trend enhances the company’s short-term financial stability and indicates a favorable position to cover upcoming obligations.

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Additional liquidity measure

The cash conversion cycle (CCC) of Paylocity Holding demonstrates notable fluctuations over the analyzed period. As of June 30, 2021, the CCC was approximately 2,917.95 days, indicating an exceptionally prolonged period between the company's cash outlay for inventory or services and the receipt of cash from sales. Such a high figure may suggest inefficiencies in receivables collection, inventory management, or payables timing, or potentially unusual accounting treatments.

By June 30, 2022, the CCC markedly declined to approximately 1.76 days, reflecting a significant improvement in operational efficiency. This dramatic reduction indicates that the company effectively shortened the time between cash outflows and inflows, perhaps through optimized receivables collection processes, better payables management, or a shift in operational practices.

The trend of substantial fluctuation continued into subsequent years. As of June 30, 2023, the CCC increased substantially again to approximately 2,686.20 days, reverting to a protracted cycle reminiscent of the 2021 levels. This resurgence suggests potential operational or strategic changes leading to delays in cash conversion, possibly due to invoicing practices, customer payment delays, or changes in supplier terms.

In June 30, 2024, the CCC further decreased to approximately 1.45 days, indicating an enhancement in cash management efficiency relative to previous years. The cycle remained very short, implying that the company maintained tight control over receivables collection and payables turnover.

By June 30, 2025, the CCC turned negative at approximately -3.18 days. A negative cash conversion cycle indicates that the company is able to collect receivables before it needs to pay its suppliers, effectively operating with a form of early cash inflow relative to outflows. This negative cycle points to highly efficient working capital management, possibly driven by favorable payment terms with suppliers or prompt customer payments.

Across the observed period, the data reflects a pattern of substantial volatility in the cash conversion cycle, with some periods exhibiting extremely extended cycles and others showing highly optimized, even negative, cycles. This volatility underscores significant variations in operational practices, working capital management, or accounting policies over time. Overall, while recent data suggests improved efficiency and potential negative cash conversion cycle benefits, the earlier periods highlight periods of considerable operational inefficiency or unique accounting circumstances.