Technology
Software - Application
$48.90B
16.5K
Paychex is a leading human capital management company providing a full suite of technology and advisory services in HR, employee benefits, insurance, and payroll processing. They serve over 745,000 small to medium-sized businesses across the U.S. and parts of Europe. Paychex differentiates itself through a comprehensive, cloud-based platform, HR expertise, and flexible support options, focusing on integrated HCM solutions from hire to retire.
Key insights and themes extracted from this filing
Total revenue reached $1.509 billion, up from $1.439 billion in the prior year. Management Solutions revenue increased by 5% and PEO and Insurance Solutions revenue increased by 6%.
Operating income increased to $691.8 million, up from $649.8 million in the prior year. This was driven by revenue growth outpacing expense increases.
Net income increased to $519.3 million, up from $498.6 million in the prior year. However, adjusted net income, which excludes acquisition-related costs, increased by 9%.
On January 7, 2025, Paychex entered into an agreement to acquire Paycor for $22.50 per share, representing an enterprise value of approximately $4.1 billion. The acquisition is expected to close in April 2025.
Management Solutions revenue increased by 5% due to continued growth in the number of clients served and higher revenue per client resulting from price realization and product penetration.
PEO and Insurance Solutions revenue increased by 6% due to growth in the number of average PEO worksite employees and an increase in PEO insurance revenues.
Operating margin increased to 45.8%, up from 45.1% in the prior year. This was driven by revenue growth outpacing expense increases.
The company has cash, restricted cash, and total corporate investments of $1.7 billion. Unused capacity under unsecured credit facilities was approximately $2.0 billion.
The Company's long-term debt agreement contains customary representations, warranties, affirmative and negative covenants, including financial covenants that are usual and customary for such arrangements. The Company was in compliance with all of these covenants as of February 28, 2025.
The company incurred $16.7 million in acquisition-related costs, primarily reflecting third-party professional service fees related to the pending Paycor acquisition.
The company is exposed to changes in interest rates that may materially affect our results of operations and financial position. Changes in interest rates will impact the earnings potential of future investments and will cause fluctuations in the fair value of our long-term AFS securities.
We have some credit risk exposure relating to our purchase of client accounts receivable under non-recourse arrangements. There is also credit risk exposure relating to our trade accounts receivable.
The company continues to invest in its business, particularly in sales and marketing and leading-edge technology. We believe these investments are critical to our success.
On January 7, 2025, we entered into an agreement to acquire Paycor, a leading provider of HCM, payroll and talent software, in an all-cash transaction for $22.50 per eligible share, representing an enterprise value of approximately $4.1 billion. This acquisition will extend our upmarket position and expand our suite of HR technology and advisory solutions.
We closely monitor the evolving challenges and needs of small- and medium-sized businesses, and proactively aid our clients in navigating macroeconomic challenges, legislative changes, and other complexities they may face.
Operating income increased 6% to $691.8 million for the third quarter and 5% to $1.8 billion for the nine months, as a result of revenue growth which outpaced expense increases as previously discussed.
We support our small-business clients by utilizing our proprietary, robust, software as a service ("SaaS”) Paychex Flex® platform and the Company's SurePayroll® SaaS-based solutions.
Through our unique blend of innovative technology solutions, backed by our extensive compliance and HR expertise, we help clients more effectively hire, develop, and retain top talent in this challenging workforce environment.
Our positive cash flows have allowed us to support our business and pay dividends. We currently anticipate that corporate cash, corporate restricted cash, and total corporate investments as of February 28, 2025, along with projected operating cash flows and available short-term financing, will support our business operations, capital purchases, primarily investment in our technology solutions, share repurchases, dividend payments, and the servicing of long-term debt for the foreseeable future.
We offer a full range of integrated HCM solutions from hire to retire for businesses and their employees. Clients may choose from a breadth of solutions that cover the spectrum of the employee life cycle, but we also allow integrations with popular HR, accounting, point-of-sale, and productivity applications available on the market today.
We closely monitor the evolving challenges and needs of small- and medium-sized businesses, and proactively aid our clients in navigating macroeconomic challenges, legislative changes, and other complexities they may face.
The Company maintains a program to repurchase up to $400.0 million of the Company's common stock with authorization that expires on May 31, 2027. The purpose of this program is to manage common stock dilution.
Cumulative dividends paid at $2.94 per share. The payment of future dividends is dependent on our future earnings and cash flow and is subject to the discretion of our Board of Directors (the "Board"); and
Cash used to repurchase 0.8 million shares of our common stock at a weighted average price of $125.50 per share during the nine months. All repurchased shares were retired upon acquisition; offset by
We had outstanding commitments under existing workers' compensation insurance agreements and legally binding contractual arrangements.
The Company currently self-insures the deductible portion of various insured exposures under certain corporate employee and PEO employee health and medical benefit plans.
The Company also maintains insurance, in addition to its purchased primary insurance policies, for gap coverage for employment practices liability, errors and omissions, warranty liability, theft and embezzlement, cyber threats, and acts of terrorism; and capacity for deductibles and self-insured retention through its captive insurance company.
We closely monitor the evolving challenges and needs of small- and medium-sized businesses, and proactively aid our clients in navigating macroeconomic challenges, legislative changes, and other complexities they may face.
Our failure to comply with covenants in our debt agreements; changes in governmental regulations, laws, and policies; our ability to comply with U.S. and foreign laws and regulations; our compliance with data privacy and artificial intelligence laws and regulations; our failure to protect our intellectual property rights; potential outcomes related to pending or future litigation matters; the impact of macroeconomic factors on the U.S. and global economy, and in particular on our small- and medium-sized business clients; volatility in the political and economic environment, including inflation and interest rate changes;
Our failure to comply with covenants in our debt agreements; changes in governmental regulations, laws, and policies; our ability to comply with U.S. and foreign laws and regulations; our compliance with data privacy and artificial intelligence laws and regulations; our failure to protect our intellectual property rights; potential outcomes related to pending or future litigation matters; the impact of macroeconomic factors on the U.S. and global economy, and in particular on our small- and medium-sized business clients; volatility in the political and economic environment, including inflation and interest rate changes;