Paylocity Holdng (PCTY)

Cash conversion cycle

		Jun 30, 2025	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021
Days of inventory on hand (DOH)	days	—	—	2,684.52	5.67	2,921.39
Days of sales outstanding (DSO)	days	9.53	8.59	7.80	6.74	3.60
Number of days of payables	days	12.71	7.14	6.12	10.65	7.04
Cash conversion cycle	days	-3.18	1.45	2,686.20	1.76	2,917.95

June 30, 2025 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 9.53 – 12.71
= -3.18

The cash conversion cycle (CCC) of Paylocity Holding exhibits significant fluctuations over the analyzed period from June 30, 2021, to June 30, 2025, reflecting notable changes in the company's operational efficiency and working capital management.

In the fiscal year ending June 30, 2021, the CCC was extraordinarily high at approximately 2,917.95 days. This figure suggests a prolonged period of cash being tied up in the operating cycle, possibly due to extended receivables collection periods, lengthy inventory turnover, or delays in payable processes, which collectively hindered short-term liquidity management.

By June 30, 2022, there was a dramatic reduction in the CCC to approximately 1.76 days, indicative of a significant improvement in cash flow management. Such a sharp decrease implies that the company had optimized its receivables, payables, or inventory turnover significantly, possibly through strategic operational adjustments or technological efficiencies.

The trend persisted, with the CCC increasing again to approximately 2,686.20 days as of June 30, 2023, returning to a level akin to that observed in 2021. This resurgence points toward potential challenges or shifts in operational processes, leading to, or coinciding with, extended cash conversion periods.

By June 30, 2024, the CCC improved markedly again, reaching approximately 1.45 days. This suggests a renewed focus on efficient working capital management, with shorter cash conversion times and enhanced liquidity efficiency.

Finally, in the fiscal year ending June 30, 2025, the CCC turned negative at approximately -3.18 days. A negative CCC indicates that the company is able to convert its investments in inventory and receivables into cash faster than it needs to pay its suppliers, effectively generating cash before settling liabilities. This scenario often reflects highly optimized receivables and payables strategies, perhaps through early collection practices or extended payment terms, positioning the company favorably in terms of liquidity and operational efficiency.

Overall, the trend demonstrates substantial variability in Paylocity Holding's cash conversion cycle, with periods of extreme elongation followed by sharp improvements, culminating in a negative cycle that underscores highly effective working capital practices and a strong cash flow position by mid-2025.