Core Insights - Paychex reported $1.32 billion in revenue for the quarter ended November 2024, a year-over-year increase of 4.7%, with an EPS of $1.14 compared to $1.08 a year ago [1] - The revenue exceeded the Zacks Consensus Estimate of $1.31 billion, resulting in a surprise of +0.29%, while the EPS also surpassed expectations by +1.79% [1] Financial Performance Metrics - Average investment balance for funds held for clients was $4.25 billion, exceeding the estimated $4.13 billion [3] - Average interest rates earned on funds held for clients were 3.4%, matching the average estimate [3] - Average investment balance for corporate cash equivalents and investments was $1.47 billion, slightly below the estimated $1.52 billion [3] - Average interest rates earned on corporate cash equivalents and investments were 4.3%, lower than the estimated 4.8% [3] - Revenue from Management Solutions was $962.90 million, surpassing the average estimate of $959.27 million, reflecting a year-over-year change of +3.5% [3] - Revenue from interest on funds held for clients was $36.10 million, exceeding the estimated $34.81 million, with a year-over-year increase of +14.6% [3] - Total service revenue was reported at $1.28 billion, aligning with the average estimate, and showing a year-over-year change of +4.4% [3] - Revenue from PEO and Insurance Services was $317.90 million, slightly below the average estimate of $319.37 million, but still representing a year-over-year increase of +7.5% [3] Stock Performance - Paychex shares have returned -4.2% over the past month, compared to the Zacks S&P 500 composite's -0.3% change [4] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [4]

Core Insights - Paychex reported slight beats on both revenue and earnings, leading to a 1.4% increase in share price, outperforming the S&P 500 index [1] Financial Performance - For Q2 of fiscal 2025, Paychex generated total revenue of just under $1.32 billion, reflecting a 5% year-over-year increase [2] - Non-GAAP adjusted net income also grew by 5% year-over-year to $411 million, equating to $1.14 per share [2][3] - Both revenue and adjusted net income exceeded consensus analyst estimates of $1.31 billion and $1.13 per share, respectively [3] Business Segments - The core management-solutions business grew by 3% to nearly $963 million, driven by an increase in client count and higher product penetration in human-resources solutions and retirement [3] Future Guidance - Management maintained its guidance for fiscal 2025, expecting revenue growth of 4% to 5% and adjusted net income growth of 5% to 7% compared to fiscal 2024 [4] Investment Appeal - Paychex is viewed as a stable business, benefiting from a rising economy that supports small and mid-sized businesses (SMBs) [5] - The company offers a relatively generous dividend yield of nearly 3%, appealing to income investors seeking under-the-radar opportunities [5]

Financial Performance - For the three months ended November 30, 2024, revenue was $1,280.8 million, a 4% increase from $1,226.4 million in the prior year period[113]. - For the six months ended November 30, 2024, revenue was $2,561.8 million, a 3% increase from $2,479.7 million in the prior year[113]. - Adjusted net income for the three months ended November 30, 2024, was $538.1 million, a 6% increase from $506.2 million in the prior year[113]. - Adjusted diluted earnings per share for the three months ended November 30, 2024, was $1.14, a 6% increase from $1.08 in the prior year[113]. - Total revenue increased to $1.3 billion for the second quarter and $2.6 billion for the six months, reflecting increases of 5% and 4% respectively compared to the prior year periods[115]. - Management Solutions revenue was $962.9 million for the second quarter and $1.9 billion for the six months, reflecting increases of 3% and 2% respectively[117]. - PEO and Insurance Solutions revenue was $317.9 million for the second quarter and $637.2 million for the six months, reflecting increases of 7% for each period[118]. - Operating income increased 6% to $538.1 million for the second quarter and 4% to $1.1 billion for the six months[123]. - Diluted earnings per share increased to $1.14 for the second quarter and $2.32 for the six months, reflecting increases of 6% and 4% respectively[1]. - EBITDA for the six months ended November 30, 2024, was $1,164.9 million, reflecting a 3% increase from $1,129.2 million for the same period in 2023[125]. - Net income for the three months ended November 30, 2024, was $413.4 million, a 5% increase from $392.7 million for the same period in 2023[125]. Equity and Investments - The company reported a 10% increase in total stockholders' equity to $352.8 million for the three months ended November 30, 2024, compared to $320.2 million in the prior year[113]. - The company reported total corporate investments of $1.3 billion as of November 30, 2024, with cash and restricted cash contributing significantly to liquidity[126]. - The company has approximately $2.0 billion in unused capacity under its unsecured credit facilities as of November 30, 2024[126]. - The company has outstanding commitments to purchase approximately $6.3 million of capital assets and has contributed $24.1 million of a $30.0 million commitment to venture capital funds[136]. - As of November 30, 2024, the total investment portfolio is expected to average approximately $6.2 billion, with 45% in short-term securities and 55% in AFS securities[161]. - The net unrealized losses on investment portfolios were $85.9 million as of November 30, 2024, down from $162.5 million as of May 31, 2024[162]. - The weighted-average yield-to-maturity for AFS securities was 3.1% as of November 30, 2024, compared to 3.0% as of May 31, 2024[163]. - Credit risk exposure includes $2.4 billion of AFS securities with fair values below amortized cost, but expected to be collected in accordance with contractual terms[165]. Cash Flow and Financing - Net cash provided by operating activities decreased to $841.1 million from $1,004.3 million, a change of $(163.2) million[143]. - Net cash used in investing activities increased to $(302.7) million from $(109.7) million, a change of $(193.0) million[143]. - Net cash used in financing activities changed to $(776.4) million from $532.3 million, a decrease of $(1,308.7) million[143]. - Cash dividends per common share increased to $1.96 from $1.78[143]. - The weighted-average interest rate on short-term borrowings was 8.22% for the $1 billion JPM credit facility and 5.54% for the $250 million PNC facility[131]. - The company anticipates that its cash flows and available financing will support business operations, capital purchases, and dividend payments for the foreseeable future[126]. Strategic Focus - The company aims to expand its leadership in HR and grow its client base through strategic acquisitions[109]. - The company is investing in technology and digital capabilities to capitalize on long-term growth opportunities[110]. - The company is focused on providing integrated technology and superior customer experiences to support small- and medium-sized businesses[109]. - The company utilizes its proprietary Paychex Flex® platform to support small-business clients and meet their complex payroll and employee benefit needs[107]. - The company is closely monitoring the evolving challenges faced by small- and mid-sized businesses to provide effective solutions[111]. Internal Controls and Compliance - The Company conducted an evaluation of its disclosure controls and procedures, concluding they were effective at a reasonable assurance level as of November 30, 2024[173]. - There were no changes in the Company's internal control over financial reporting during the fiscal quarter ended November 30, 2024, that materially affected its internal controls[174]. - The Company has a stock repurchase program authorized for up to $400.0 million, expiring on May 31, 2027, with $296.0 million remaining available for repurchases[175]. - The Company paid $0.5 million in federal excise tax for net share repurchases made during the fiscal year ended May 31, 2024[176].

Financial Data and Key Metrics - Total revenue for Q2 increased 5% to $1.3 billion, with a 7% growth excluding the impact of the ERTC program expiration [24] - Diluted earnings per share grew 6% to $1.14, and adjusted diluted earnings per share also increased 6% to $1.14 [27] - Operating income grew 6% to $538 million, with an operating margin of 40.9%, up 60 basis points year-over-year [26] - Interest on funds held for clients increased 15% to $36 million, driven by higher average interest rates and invested balances [25] Business Line Data and Key Metrics - Management Solutions revenue increased 3% to $963 million, driven by growth in the number of clients and higher product penetration [25] - PEO and Insurance Solutions revenue increased 7% to $318 million, primarily due to higher average worksite employees and PEO insurance revenues [25] - The PEO business saw strong worksite employee growth, record retention levels, and higher insurance enrollment, although enrollment in the Florida at-risk medical plan was flat year-over-year [11] Market Data and Key Metrics - The pace of U.S. job growth has moderated, but small and mid-size businesses remain resilient, with hiring intentions in November rebounding to the highest level since last November [14] - The company's HR analytics solution saw strong early adoption, with over 80% of early adopters actively engaging with the platform [18] - Paychex Flex Perks, a digital marketplace offering employee benefits, saw over 100,000 client employees purchasing at least one product since its launch in September [20] Company Strategy and Industry Competition - The company continues to invest in product innovation, data, and AI, with a focus on enhancing its HCM solutions and leveraging its large proprietary data set [10][17] - Paychex is leveraging AI to provide actionable insights to customers, with generative AI being used to enhance customer engagement and provide robust data analysis [17][18] - The company's PEO business is gaining market share, with high-double-digit growth in new contracted revenue and client adds, driven by a strong value proposition and competitive advantage [49][50] Management Commentary on Operating Environment and Future Outlook - The company expects total revenue growth for fiscal 2025 to be in the range of 4% to 5.5%, with Management Solutions expected to grow 3% to 4% and PEO and Insurance Solutions expected to grow 7% to 9% [33] - Operating income margin is expected to be in the range of 42% to 43%, with the company anticipating it to be at the higher end of the range [34] - The company remains focused on helping small and midsized businesses succeed by offering comprehensive HCM solutions, best-in-class advisory support, and actionable insights [22] Other Important Information - The company returned $810 million to shareholders through cash dividends and share repurchases in the first half of the year, with a 12-month rolling return on equity of 46% [31] - Paychex was named a leader in payroll services by NelsonHall for the eighth consecutive year and received awards for its HR technology and product innovation [21] Q&A Summary Question: Post-election business sentiment and pipeline impact [42] - The company has not seen significant changes in business sentiment post-election, with moderate growth continuing in small businesses [44][46] Question: PEO business growth and competitive differentiation [47] - The PEO business is gaining market share due to strong sales performance, record retention, and a broad suite of offerings, including AI-driven solutions and flexible insurance options [49][50][53] Question: Management Solutions growth and ERTC reserve [59] - Management Solutions growth is expected to remain within the guided range, with strong performance in both ASO and PEO businesses [60][61] - The ERTC reserve was released, as the proposed retroactive legislation is no longer expected to impact the company [64][65] Question: Fed rate cuts and revenue guidance [70] - The company's revenue guidance already factored in 125 basis points of Fed rate cuts, with one more cut expected in the back half of the year [71][72] Question: HCM product penetration and growth algorithm [73] - Product penetration continues to drive growth, with the company seeing opportunities to increase penetration rates in key solutions, particularly in the PEO segment [75][76] Question: PEO business exposure to Florida and enrollment dynamics [87] - The company's PEO business in Florida saw flat enrollment in the at-risk medical plan, but overall insurance penetration increased, with the company managing risk conservatively [90][92] Question: Partnership channel and incremental investment [106] - The company has a strong partnership channel, including long-standing relationships in the payments space, and is open to expanding partnerships in a white-label or embedded manner [107][108] Question: Retention trends and historical comparison [109] - Retention remains strong, with revenue retention near record levels and client losses improving across all segments [110][111] Question: New business starts and economic outlook [114] - Business starts are down year-over-year but remain above pre-pandemic levels, with the company seeing moderate growth in small businesses and no signs of a recession [115][116] Question: Mid-market HCM business growth drivers [121] - The mid-market HCM business is seeing strong growth due to product innovation, a strong value proposition, and market disruption, with clients increasingly looking for comprehensive solutions [123][125] Question: PEO market share gains and competitive dynamics [130] - The company is gaining PEO market share by introducing clients to the PEO concept and leveraging its broad suite of offerings, rather than competing head-to-head with other PEOs [131][132] Question: Q3 revenue guidance and factors impacting growth [137] - Q3 revenue is expected to grow 4.5% to 5%, with the last quarter of ERTC headwinds, and the company anticipates similar growth rates in the back half of the year ex-ERTC [138][140] Question: Florida at-risk medical plan and SMB health demand [145] - The company views the flat enrollment in the Florida at-risk medical plan as a cost control mechanism, with clients and employees downgrading plans to manage rising healthcare costs [147][151] Question: Pricing and discounting trends in HCM [155] - The company has not seen significant changes in pricing or discounting trends, with clients continuing to value the company's premium offerings and strong value proposition [156][158] Question: PEO direct insurance costs and health care inflation [163] - PEO direct insurance costs are up, driven by growth in worksite employees and health care inflation, with the company managing costs through innovative plan designs and product mix [164][167] Question: Seasonal hiring trends [168] - Hiring has been in line with expectations, with no significant changes in seasonal hiring trends compared to last year [170] Question: Pricing trends and inflation impact [173] - The company maintains a strong price value proposition, with clients continuing to appreciate the value of its offerings, despite increased price sensitivity in the market [174][178] Question: Float management and interest rate environment [179] - The company has repositioned its portfolio in anticipation of rate cuts and continues to optimize its investments based on the shape of the yield curve [180][182] Question: Margin performance and efficiency drivers [185] - Margin performance has been driven by digital adoption, AI-driven productivity improvements, and cost efficiencies across the business [186][189] Question: Go-to-market strategy and client adoption trends [190] - The company is seeing more clients adopt comprehensive solutions upfront, particularly in the mid-market, where clients are looking to consolidate point solutions into a full suite offering [192][195] Question: Selling season preparation and competitive environment [198] - The company is leaning into its award-winning product suite, including HR analytics, AI-driven recruiting solutions, and employee benefits offerings, to drive value in the key selling season [200][203] Question: M&A pipeline and inorganic growth [205] - The company has a strong M&A pipeline but remains disciplined in its approach, focusing on opportunities that add scale, expand product offerings, and drive synergies [207][210]

Core Viewpoint - Paychex, Inc. (PAYX) reported strong second-quarter fiscal 2025 results, with earnings and revenues exceeding the Zacks Consensus Estimate [1][2]. Financial Performance - Earnings per share were $1.1, surpassing the Zacks Consensus Estimate by 1.8% and increasing 5.6% year-over-year [2]. - Total revenues reached $1.3 billion, slightly exceeding the consensus estimate and reflecting a 4.8% year-over-year growth [2]. - Revenues from the Management Solutions segment rose 3% year-over-year to $962.9 million, beating the estimate of $955.5 million [3]. - Professional employer organization (PEO) and Insurance Solutions revenues were $317.9 million, up 7% year-over-year, but missed the estimate of $319.4 million [3]. - Service revenues increased 5% year-over-year to $1.3 billion, meeting the estimate [4]. - Interest on funds held for clients grew 15% year-over-year to $36.1 million, falling short of the projection of $36.8 million [4]. - EBITDA was $579.1 million, a 5% increase from the previous year, but missed the estimate of $581.3 million [5]. - Operating income rose 6% year-over-year to $538.1 million, slightly exceeding the projection [5]. - The operating margin improved to 40.9%, up 70 basis points year-over-year, but missed the estimate of 41% [5]. Balance Sheet & Cash Flow - At the end of the second quarter of fiscal 2025, cash and cash equivalents were $1.2 billion, down from $1.5 billion in the previous quarter [6]. - Long-term debt stood at $798.9 million, slightly up from $798.7 million in the first quarter of fiscal 2025 [6]. - Cash generated from operating activities was $295 million, with capital expenditure totaling $47 million [6]. Guidance - Paychex expects interest on funds held for clients to be between $145 million and $155 million [7]. - The company anticipates other income to be in the range of $30 million to $35 million [7]. - Paychex currently holds a Zacks Rank 2 (Buy) [7].

Second Quarter Highlights and Financial Results Fiscal 2025 Forward Looking Statements Certain written statements in this presentation may contain, and members of management may from time to time make or discuss statements which constitute, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, all matters that are not historical facts. Forward-looking statements are n ...

Paychex (PAYX) came out with quarterly earnings of $1.14 per share, beating the Zacks Consensus Estimate of $1.12 per share. This compares to earnings of $1.08 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 1.79%. A quarter ago, it was expected that this payroll processor and human-resources services provider would post earnings of $1.14 per share when it actually produced earnings of $1.16, delivering a surprise of 1.75%.Ove ...

PRESS RELEASE OF PAYCHEX, INC. DATED DECEMBER 19, 2024 911 Panorama Trail South · Rochester, NY 14625 · paychex.com Paychex, Inc. Reports Second Quarter Results • Sustained Growth in Revenue and Earnings • Returned $810 Million to Stockholders in the First Half of Fiscal 2025 Rochester, N.Y. - (December 19, 2024) - Paychex, Inc. (the "Company," "Paychex," "we," "our," or "us") today reported results for the fiscal quarter ended November 30, 2024 (the "second quarter"). Results compared with the same period ...

Wall Street analysts expect Paychex (PAYX) to post quarterly earnings of $1.12 per share in its upcoming report, which indicates a year-over-year increase of 3.7%. Revenues are expected to be $1.31 billion, up 4.4% from the year-ago quarter.The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. This reflects how the analysts covering the stock have collectively reevaluated their initial estimates during this timeframe.Ahead of a company's earnings disclosure, it is crucial ...

The market expects Paychex (PAYX) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended November 2024. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released o ...