Paychex(US:PAYX)2023-12-21 21:05Financial Performance - Total service revenue for the second quarter of 2023 was $1,226.4 million, a 5% increase compared to $1,168.6 million in the prior year[98]. - Net income for the second quarter of 2023 reached $392.7 million, reflecting a 9% increase from $360.3 million in the same period last year[99]. - Diluted earnings per share for the second quarter of 2023 were $1.08, up 9% from $0.99 in the prior year[99]. - Management Solutions revenue was $930.7 million for the second quarter, representing a 4% increase year-over-year[99]. - PEO and Insurance Solutions revenue increased by 8% to $295.7 million for the second quarter compared to $273.3 million in the prior year[99]. - Total revenue for the six months ended November 30, 2023, was $2,543.9 million, a 6% increase from $2,396.5 million in the prior year[98]. - Total expenses for the second quarter were $751.7 million, reflecting a 5% increase from $718.0 million in the prior year[105]. - Operating income increased 7% to $506.2 million for the second quarter, driven by revenue growth outpacing expense increases[105]. - Adjusted diluted earnings per share for the second quarter was $1.08, a 9% increase from $0.99 in the prior year[110]. Cash Flow and Investments - Cash flow from operations was $1.0 billion for the six months ended November 30, 2023[113]. - The company reported net cash used in investing activities of $(109.7) million, a decrease of $1,137.5 million compared to the previous year[125]. - For the six months ended November 30, 2023, net cash provided by operating activities was $1,004.3 million, an increase of $284.6 million compared to the prior year[125]. - The company maintained a strong financial position with cash, restricted cash, and total corporate investments of $1.4 billion as of November 30, 2023[113]. - The average interest rate earned on combined funds held for clients and corporate cash equivalents was 3.7% for the six months ended November 30, 2023, compared to 2.0% for the prior year[133]. - As of November 30, 2023, the company had $3.3 billion invested in AFS securities at fair value, with a weighted-average yield-to-maturity of 3.0%[140]. - The net unrealized losses on the investment portfolio were $187.2 million as of November 30, 2023, reflecting fluctuations driven by changes in market interest rates[139]. - The company expects its total investment portfolio to average approximately $6.0 billion for the year ending May 31, 2024, with 40% in short-term securities and 60% in AFS securities[138]. Shareholder Returns - Dividends paid to stockholders increased by 12% to $320.2 million in the second quarter compared to $284.7 million in the prior year[98]. - Cash dividends per common share increased from $1.58 to $1.78 compared to the prior year period[125]. - The company repurchased 1.5 million shares of common stock at a weighted average price of $115.37 per share during the six months[131]. Tax and Interest - The effective income tax rate for the second quarter was 24.2%, consistent with the prior year[99]. - Interest on funds held for clients rose by 44% to $31.5 million for the second quarter, compared to $21.7 million in the prior year[99]. - Interest on funds held for clients was $31.5 million for the second quarter, a 44% increase due to higher average interest rates[103]. Debt and Commitments - The company borrowed $800.0 million through the issuance of long-term private placement debt, with Series A and Series B Senior Notes having stated interest rates of 4.07% and 4.25%, respectively[121]. - As of November 30, 2023, the company had outstanding commitments to purchase approximately $3.9 million of capital assets and contributed approximately $22.6 million of a total funding commitment of $30.0 million to venture capital funds in the financial technology sector[122]. Accounting and Risk - Recently adopted accounting pronouncements are discussed in Note A of the Notes to Consolidated Financial Statements (Unaudited) in Item 1 of Form 10-Q[147]. - Recently issued accounting pronouncements are also detailed in Note A of the Notes to Consolidated Financial Statements (Unaudited) in Item 1 of Form 10-Q[147]. - Market risk factors are addressed under the caption "Market Risk Factors" in Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations[148].