Financial Performance - Third quarter service revenues increased by 15% to $1,262 million compared to $1,097 million in Q3 FY21[10] - Adjusted operating income increased by 20% to $563 million in Q3 FY22, compared to $469 million in Q3 FY21[10] - Adjusted diluted EPS increased by 20% to $1.15 in Q3 FY22, compared to $0.96 in Q3 FY21[10] - Total revenue increased by 15% to $1,276 million for the three months ended February 28, 2022[51] - Total service revenue increased by 15% to $3,424.4 million for the nine months ended February 28, 2022[51] - Adjusted diluted EPS increased by 27% for the nine months ended February 28, 2022[51] Segment Performance - Management Solutions revenue increased by 13% to $959.9 million for the three months ended February 28, 2022[51] - PEO and Insurance Solutions revenue increased by 21% to $301.7 million for the three months ended February 28, 2022[51] Fiscal Year 2022 Outlook - The company anticipates adjusted diluted EPS growth of 22.5%-23% for fiscal year 2022[40]

Paychex, Inc. (NASDAQ:PAYX) Q3 2022 Earnings Conference Call March 30, 2022 9:30 AM ET Company Participants Martin Mucci - Chairman & Chief Executive Officer Efrain Rivera - Chief Financial Officer Conference Call Participants Bryan Bergin - Cowen Andrew Nicholas - William Blair Kevin McVeigh - Credit Suisse Jason Kupferberg - Bank of America Kartik Mehta - Northcoast Research Eugene Simuni - MoffettNathanson James Faucette - Morgan Stanley Mark Marcon - Baird Tien-Tsin Huang - JPMorgan Peter Christiansen - ...

Financial Data and Key Metrics Changes - The company reported a 13% increase in total revenue to $1.1 billion for Q2 FY'22, with service revenue also increasing by 13% [27] - Adjusted net income rose by 25% to $330 million, and adjusted diluted earnings per share increased to $0.91 [31] - Operating income increased by 24% to $440 million, with an operating margin of 39.7%, up from 36.1% in the prior year [30] Business Line Data and Key Metrics Changes - Management Solutions revenue increased by 14% to $832 million, driven by client base growth and higher revenue per client [27] - PEO and Insurance solutions revenue grew by 11% to $262 million, benefiting from higher average worksite employees and state unemployment insurance revenue [28] - Interest on funds held for clients decreased by 5% to $14 million due to lower average interest rates [29] Market Data and Key Metrics Changes - The company experienced strong client retention rates, near record levels, reflecting the resilience of small businesses in the U.S. [9] - The demand for HR Solutions and retirement services has been strong, with the retirement business reaching a milestone of 100,000 clients [14] - The company has helped clients access over $6 billion in employee retention and paid leave tax credits [16] Company Strategy and Development Direction - The company is focused on enhancing its technology solutions and digital capabilities to support clients in a competitive labor market [19] - Investments in technology, product, sales, and digital marketing have positioned the company for success [9] - The company aims to continue providing industry-leading value through innovative technology and service solutions [24] Management's Comments on Operating Environment and Future Outlook - Management noted that the tight labor market poses challenges, but proactive steps have been taken to attract talent [10] - The company remains optimistic about future growth, with updated guidance reflecting expected revenue growth of 10% to 11% [36] - Management expressed confidence in the sustainability of growth driven by structural demand in HR outsourcing and retirement services [80] Other Important Information - The company has introduced new digital solutions related to COVID-19 vaccination and testing to support clients [11] - Recent changes in executive leadership were announced, with Martin Mucci continuing as CEO and Chairman [22][23] - The company has received multiple awards for its technology solutions, highlighting its leadership in human capital management [20][21] Q&A Session All Questions and Answers Question: Can you talk about the structural changes leading to margin expansion? - Management highlighted automation in service models and increased efficiency through technology as key drivers of margin expansion [46][50] Question: What is the current status of client retention? - Retention remains near record levels, with clients valuing the company's products and services, especially during COVID-19 [60] Question: How is the company addressing rising costs for engineering and software talent? - The company has a tenured team and offers competitive pay, which helps retain talent despite rising costs [68][69] Question: Can you break down the performance of PEO versus insurance? - PEO showed solid double-digit growth, while the insurance segment faced challenges, particularly in workers' compensation [71][72] Question: What are the drivers behind the strong performance in Management Solutions? - The growth is attributed to strong demand for HR outsourcing and retirement services, which are expected to be sustainable [78][80] Question: How does inflation impact the company's pricing strategy? - Inflation provides the company with pricing power, allowing for potential price increases while maintaining value for clients [86] Question: What is the outlook for net client base growth? - The company expects to trend at the high end of historical growth rates, driven by strong sales performance and retention [106] Question: How is the company adapting its sales strategy in light of the new variant? - The company continues to successfully sell virtually, with no significant changes to its sales strategy anticipated [108]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements) This section provides the unaudited consolidated financial statements for the three and six months ended November 30, 2021 [Consolidated Statements of Income and Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) The company reported significant revenue and net income growth for the three and six-month periods ended November 30, 2021 Financial Performance Summary (in millions, except per share amounts) | Metric | Q2 2021 | Q2 2020 | YoY Change | H1 2021 | H1 2020 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $1,108.5 | $983.7 | 12.7% | $2,191.4 | $1,915.9 | 14.4% | | **Operating Income** | $440.3 | $354.3 | 24.3% | $883.2 | $638.3 | 38.4% | | **Net Income** | $332.1 | $272.4 | 21.9% | $665.7 | $484.0 | 37.5% | | **Diluted EPS** | $0.91 | $0.75 | 21.3% | $1.83 | $1.34 | 36.6% | Revenue by Segment (in millions) | Segment | Q2 2021 | Q2 2020 | YoY Change | H1 2021 | H1 2020 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Management Solutions** | $832.0 | $732.8 | 13.5% | $1,637.5 | $1,420.2 | 15.3% | | **PEO and Insurance Solutions** | $262.4 | $236.1 | 11.1% | $525.3 | $466.0 | 12.7% | [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet as of November 30, 2021, reflects growth in total assets, liabilities, and stockholders' equity Key Balance Sheet Items (in millions) | Account | Nov 30, 2021 | May 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $6,632.4 | $6,169.5 | | **Total Assets** | $9,688.1 | $9,227.2 | | **Total Current Liabilities** | $5,221.9 | $4,938.2 | | **Total Liabilities** | $6,568.3 | $6,279.2 | | **Total Stockholders' Equity** | $3,119.8 | $2,948.0 | [Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity increased for the six months ended November 30, 2021, primarily from net income, partially offset by dividends - Cash dividends of **$1.32 per share**, totaling **$476.4 million**, were declared during the six months ended November 30, 2021[13](index=13&type=chunk) - The company maintains **two share repurchase programs**, each authorizing up to **$400.0 million**, with expiration dates in 2022 and 2024[14](index=14&type=chunk)[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities increased for the six months ended November 30, 2021, while investing and financing activities used cash Cash Flow Summary (in millions) | Activity | H1 2021 | H1 2020 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $555.4 | $430.7 | | **Net Cash used in Investing Activities** | $(451.4) | $(490.4) | | **Net Cash used in Financing Activities** | $(302.9) | $(462.4) | | **Net Change in Cash** | $(198.9) | $(522.1) | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed information on the company's accounting policies, business segments, investments, and income tax rates - Paychex is a **leading human resource (HR) software and services company** offering **integrated human capital management (HCM) solutions** for small- to medium-sized businesses in the U.S. and parts of Europe[23](index=23&type=chunk) Funds Held for Clients and Corporate Investments (in millions) | Category | Nov 30, 2021 (Fair Value) | May 31, 2021 (Fair Value) | | :--- | :--- | :--- | | **Funds held for clients** | $3,874.6 | $3,750.0 | | **Corporate investments** | $376.0 | $36.7 | | **Long-term corporate investments** | $7.0 | $7.1 | | **Total** | $4,257.6 | $3,793.8 | - The effective income tax rate for the six months ended November 30, 2021, was **24.5%**, **up from 22.7%** in the prior year period, partly due to lower tax benefits from stock-based compensation and an increase in state taxes[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, segment results, and strategic initiatives for the first half of fiscal 2022 [Overview](index=21&type=section&id=Overview) Paychex provides integrated HCM solutions, focusing on digital technology, client satisfaction, strategic acquisitions, and client support - The company's strategy focuses on providing **integrated digital technology solutions**, **increasing client satisfaction**, **expanding HR leadership**, **growing the client base**, and **strategic acquisitions**[99](index=99&type=chunk) - Paychex has assisted businesses in securing **$6.0 billion in ERTC and paid leave credits** related to the COVID-19 pandemic[106](index=106&type=chunk) - In October 2021, the company completed an **acquisition of a benefits administration software platform** to drive innovation and growth in the benefits marketplace[102](index=102&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) This section details the drivers of financial performance, highlighting revenue growth across segments and operating income expansion - **Management Solutions Revenue:** Increased **14% in Q2** and **15% in H1**, driven by higher checks per payroll, growth in client bases, improved price realization, and increased funding for temporary staffing clients[112](index=112&type=chunk) - **PEO and Insurance Solutions Revenue:** Grew **11% in Q2** and **13% in H1**, due to an increase in the number of average worksite employees and higher average wages[112](index=112&type=chunk) - **Total Expenses:** Increased **6% for Q2** and **2% for H1**. The H1 increase was moderated by one-time cost-saving initiatives in the prior year. Key drivers of the increase were higher PEO insurance costs and compensation-related expenses[117](index=117&type=chunk) - Operating margin for the second quarter was **39.7%**, **up from 36.0%** in the prior year. For the six-month period, operating margin was **40.3%**, **up from 33.3%**[119](index=119&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong financial position with substantial cash, investments, and credit facilities, ensuring sufficient liquidity - As of November 30, 2021, the company's financial position remained **strong** with cash, restricted cash, and total corporate investments of **$1.1 billion**[126](index=126&type=chunk) - In September 2021, the company amended and **increased** one of its credit facilities with JPM from **$500.0 million to $750.0 million** and extended its term[130](index=130&type=chunk) Cash Flow Activity Summary (Six months ended Nov 30, in millions) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $555.4 | $430.7 | | **Net cash used in investing activities** | $(451.4) | $(490.4) | | **Net cash used in financing activities** | $(302.9) | $(462.4) | [Item 3. Quantitative and Qualitative Disclosures of Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20of%20Market%20Risk) This section discusses the company's primary market risk exposure to interest rate fluctuations on its investment portfolios - The company's **primary market risk exposure** is to **changes in interest rates**, which can affect earnings from its investment portfolios of funds held for clients and corporate investments[147](index=147&type=chunk) - A hypothetical **25-basis-point change** in short-term interest rates is estimated to impact after-tax earnings by approximately **$3.0 million to $3.5 million** over a twelve-month period[154](index=154&type=chunk) - The weighted-average duration of the AFS securities portfolio was **3.3 years** as of November 30, 2021. A hypothetical **25 basis point increase** in interest rates would **decrease** the portfolio's fair value by approximately **$25.0 million**[114](index=114&type=chunk)[157](index=157&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were effective as of November 30, 2021, with no material changes to internal control - The company's management, including the CEO and CFO, concluded that as of November 30, 2021, disclosure controls and procedures were **effective** at a reasonable assurance level[166](index=166&type=chunk) - **No changes** in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[167](index=167&type=chunk) PART II. OTHER INFORMATION [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase shares during the second quarter, with significant funds remaining available under authorized programs - The company maintains **two stock repurchase programs**, each authorizing up to **$400 million**[169](index=169&type=chunk) - **No shares were repurchased** during the second quarter, and **$472.4 million remains available** for future repurchases under both programs combined[169](index=169&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including credit agreement amendments and required certifications - Exhibits filed with the report include **amendments to credit agreements** and **certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act**[171](index=171&type=chunk) [Signatures](index=34&type=section&id=Signatures) The report was duly signed and authorized by the company's principal executive, financial, and accounting officers - The Form 10-Q was signed on **December 22, 2021**, by the company's Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer[176](index=176&type=chunk)

Second Quarter Highlights and Financial Results Fiscal 2022 PAYCHEX Forward Looking Statements You should be aware that certain written and oral statements made by management may constitute "forward-looking statements" within the meaning of the safe-harbor provisions of the United States ("U.S.") Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________________________ FORM 10-Q _________________________________________ x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 31, 2021 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from __________to __________ Commission file number 0-11330 _____________________________ ...

Financial Performance - Service revenues increased by 16% to $1,068 million in Q1 FY22, compared to $917 million in Q1 FY21[9] - Adjusted operating income increased by 41% to $443 million in Q1 FY22, compared to $315 million in Q1 FY21[9] - Adjusted diluted EPS increased by 41% to $0.89 in Q1 FY22, compared to $0.63 in Q1 FY21[9] - Total revenue increased by 16% to $1,082.9 million for the three months ended August 31, 2021[38] - The company paid $238 million of dividends to shareholders during the quarter[14] Business Highlights - The company has >710,000 clients as of May 31, 2021[5] - Management Solutions revenue increased by 17% due to client base growth and higher revenue per client[11] - PEO & Insurance Solutions revenue increased by 14% due to an increase in average PEO worksite employees and higher state unemployment insurance revenues[11] - Total debt, net of debt issuance costs, was $804.5 million as of August 31, 2021[31] Fiscal Year 2022 Outlook - The company anticipates Management Solutions Revenue to grow by approximately 7% year-over-year[34] - The company anticipates PEO & Insurance Solutions Revenue to grow by 8% - 10% year-over-year[34] - The company anticipates Total Revenue to grow by approximately 7% year-over-year[34] - The company anticipates Adjusted Diluted EPS to grow by 10% - 12% year-over-year[34]

Financial Data and Key Metrics Changes - Total revenue increased by 16% to $1.1 billion, with service revenue also up by 16% [28][4] - Adjusted diluted earnings per share rose by 41% to $0.89, with adjusted net income increasing by 42% to $323 million [33][4] - Operating income increased by 56% to $443 million, with an operating margin of 41%, up from 33.8% in the prior year [32][4] - Cash flow from operations was $386 million, a 79% increase year-over-year, while free cash flow was $354 million, up 83% [36] Business Line Data and Key Metrics Changes - Management Solutions revenue increased by 17% to $805 million, while PEO and Insurance Solutions revenue rose by 14% to $263 million [29] - Interest on funds held for clients decreased by 3% due to lower average interest rates [29] Market Data and Key Metrics Changes - The company reported a net increase in worksite employees within its existing HR outsourcing client base, particularly in ASO offerings [5] - Client retention rates remained near record levels, reflecting the resilience of small businesses [5] Company Strategy and Development Direction - The company continues to invest in its sales force and digital marketing initiatives, positioning itself well for the upcoming selling season [7] - Investments in technology, including AI and machine learning, are aimed at enhancing the capabilities of its software platform, Paychex Flex [7] - The introduction of new offerings, such as Paychex Pre-Check, aims to automate payroll processes and improve client services [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong start to fiscal year 2022, despite uncertainties in the macroeconomic environment [21] - The company anticipates total revenue growth of approximately 8% for the fiscal year, with adjusted operating income expected to be in the range of 38% to 39% [39][41] Other Important Information - The company has assisted clients in securing over $65 billion in Paycheck Protection loans, representing 9% of total PPP loans provided [17] - Paychex has been recognized for its innovative HR technology solutions, winning multiple awards [13][15] Q&A Session All Questions and Answers Question: Can you flesh out your thinking on the remaining 3 quarters of the year? - Management indicated that additional hiring and a stable unemployment picture are factored into their guidance, which remains conservative due to macroeconomic uncertainties [48][50] Question: What are the biggest drivers of the margin beat in the quarter? - Management noted that expenses are flat compared to 2020, with efficiency improvements and delayed hiring contributing to the margin performance [56][59] Question: How did demand trend within the quarter? - Management reported consistent demand throughout the quarter, with strong performance in mid-market and digital sales [66][67] Question: Can you comment on the PEO performance versus insurance performance in the quarter? - Both PEO and ASO are growing well, with increased interest in insurance plans as companies focus on employee retention [88][90] Question: How has the sales distribution changed as a result of digital improvements? - The company has seen a shift towards digital sales, which now account for a larger percentage of client acquisition compared to traditional methods [96][98]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________________________ FORM 10-K _________________________________________ x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended May 31, 2021 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From __________to __________ Commission file number 0-11330 ____________________________________ Payche ...

Paychex, Inc. (NASDAQ:PAYX) Q4 2021 Earnings Conference Call June 25, 2021 9:30 AM ET Company Participants Martin Mucci - President and Chief Executive Officer Efrain Rivera - Chief Financial Officer Conference Call Participants David Togut - Evercore Ramsey El-Assal - Barclays Jason Kupferberg - Bank of America Bryan Bergin - Cowen Bryan Keane - Deutsche Bank Eugene Simuni - MoffettNathanson Kartik Mehta - Northcoast Research Samad Samana - Jefferies Andrew Nicholas - William Blair Jeff Silber - BMO Capita ...