Paylocity Holdng (PCTY)

Cash conversion cycle

		Jun 30, 2025	Mar 31, 2025	Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020
Days of inventory on hand (DOH)	days	—	—	—	—	—	—	3,055.08	2,481.85	2,684.52	3,438.72	3,492.59	—	5,147.20	—	—	—	—	—	—	—
Days of sales outstanding (DSO)	days	9.53	10.26	10.59	8.65	8.59	9.09	9.17	8.87	7.80	9.15	8.95	8.50	6.74	8.21	4.91	4.33	3.60	5.61	3.82	2.99
Number of days of payables	days	12.71	6.54	4.20	12.78	7.09	4.46	7.25	8.32	6.12	8.36	8.48	7.38	10.65	6.86	9.62	10.82	7.04	5.88	5.14	6.21
Cash conversion cycle	days	-3.18	3.72	6.39	-4.13	1.50	4.63	3,057.00	2,482.40	2,686.20	3,439.51	3,493.05	1.12	5,143.30	1.35	-4.71	-6.48	-3.44	-0.26	-1.32	-3.22

June 30, 2025 calculation

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

The provided data illustrates the evolution of Paylocity Holding’s cash conversion cycle (CCC) over a period spanning from September 2020 to June 2025. The CCC is a key metric that measures the time (in days) it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A negative CCC indicates that the company’s cash inflows from receivables and other sources occur before disbursing cash for payables, suggesting efficient cash management. Conversely, a positive CCC implies a delay in cash inflows relative to outflows, potentially highlighting cash flow challenges.

From September 2020 to September 2021, the company maintained a predominantly negative CCC, fluctuating within a narrow range from approximately -6.48 days to -0.26 days. This consistency reflects an effective working capital management strategy, whereby paylocity was able to generate cash inflows before settling payables.

However, a notable shift is observed beginning in late 2021. In March 2022, the CCC turns positive, registering at approximately 1.35 days, indicating a slight delay in cash inflows relative to payments. This upward trend accelerates dramatically, with the CCC reaching extraordinary levels in late 2022 and early 2023, with values as high as 3,493.05 days in December 2022 and 3,439.51 days in March 2023. The extremity of these figures suggests data irregularities, possible errors, or extraordinary accounting distortions, as such a duration is historically and practically implausible for a standard operational cycle.

Subsequent quarters show significant reductions in these anomalous figures, with the CCC decreasing to more conventional figures around 2,686.20 days in June 2023 and 2,482.40 days in September 2023, then further declining to approximately 4.63 days in March 2024. By June 2024, the cycle drops below zero again to approximately 1.50 days, indicating improved cash flow timing, and subsequently fluctuates slightly into a negative territory of -4.13 days in September 2024, before moving back into positive territory at 6.39 days in December 2024. The initial low negative or positive values in this recent period suggest more balanced working capital cycles.

Overall, the long-term trend shows an initial period of effective cash flow management, then an anomalous inflation of CCC values suggesting possible data inconsistencies or reporting issues, followed by a normalization period where the company appears to regain more typical operational liquidity cycles. The cycles oscillate between negative and positive, reflecting adjustments in working capital strategies, receivables collection, and payables management. These fluctuations highlight the importance of scrutinizing underlying accounting practices and operational changes to understand the true nature of the cash conversion cycle in the company’s financial operations.