Fourth Quarter

Fiscal Year

In millions, except per share amounts

2021

2020

Change(2)

2021

2020

Change(2)

Total service revenue

$

$

%

$

$

%

Total revenue

$

$

%

$

$

 —

%

Operating income

$

$

%

$

$

 —

%

Diluted earnings per share

$

$

%

$

$

 —

%

Adjusted diluted earnings per share(1)

$

$

%

$

$

%

⁽¹⁾

Adjusted diluted earnings per share is not a  United States (“U.S.”) generally accepted accounting principle (“GAAP”) measure. Adjusted diluted earnings per share includes adjustments  for one-time non-recurring cost-saving initiatives in the first half of our 2021 fiscal year and net tax windfall benefits related to employee stock-based compensation payments. Please refer to the “Non-GAAP Financial Measures” section on page 4 of this press release for a discussion of non-GAAP measures and a reconciliation to the U.S. GAAP measure of diluted earnings per share.

·

Increase in our client base and penetration of our suite of solutions, particularly HR outsourcing, retirement services, and time and attendance.

·

Continued solid growth experienced from new services and product initiative offerings.

·

Higher checks per client as businesses start to recover from the COVID-19 pandemic and their employees return to work.

·

Increase in the number of worksite employees at our clients.

·

Higher margins on state unemployment insurance.

·

Lower realized gains of $8.7 million and lower average interest rates impact of $3.9 million, offset by

·

11% increase in average investment balances; impacted by growth in our overall client base and improving macroeconomic conditions as businesses recover from the pandemic.

·

Higher performance-based compensation compared to fiscal fourth quarter of 2020 when  performance was negatively affected by the sharp decline due to the start of the pandemic.

·

Increase in PEO direct insurance costs due to growth in client worksite employees across the PEO business.

·

Payroll client base growth of 4%.

·

HR Solutions and PEO client worksite employees growth of 18%.

·

Payroll client base growth and increased penetration of our suite of solutions, including HR Solutions, Retirement Services, and Time and Attendance.

·

Growth in ancillary products and services due to higher transaction volumes, offset by

·

A  decline in check volumes experienced during the first three quarters of our fiscal year from an overall reduction in the number of clients processing payrolls due to lower employment levels during the pandemic.

·

Decrease in the number of worksite employees at our clients in the first three quarters, offset by growth in the fourth quarter.

·

Lower workers’ compensation premiums driven by reduced wages and softening of market rates.

·

Lower average interest rates and realized gains.

·

Average investment balances were consistent.

·

Higher performance-based compensation due to stronger than anticipated performance for fiscal 2021, compared to fiscal 2020 where performance was impacted in the fourth quarter by the sharp decline due to the start of the pandemic.

·

Increases were largely offset by lower discretionary and facilities spend due to office closures and restrictions resulting from the pandemic, as well as lower amortization of intangible assets and the impact of cost savings initiatives.

·

Cash, restricted cash, and total corporate investments of $1.1 billion.  

·

Short-term and long-term borrowings, net of debt issuance costs, of  $804.7 million. 

·

Cash flows from operations were $1.3 billion for the fiscal year.  

·

Paid quarterly dividends totaling $908.7 million.

·

Repurchased 1.7 million shares of our common stock for a total of $155.7 million.







For the three months ended

For the twelve months ended



May 31,

May 31,

$ in millions

2021

2020

Change

2021(1)

2020

Change

Operating income

$

$

%

$

$

 —

%

Non-GAAP adjustments:

Cost-saving initiatives(2)

 —

 —

 —

Total non-GAAP adjustments

 —

 —

 —

Adjusted operating  income

$

$

%

$

$

%



Net income

$

$

%

$

$

 —

%

Non-GAAP adjustments:

Excess tax benefit related to employee stock-based compensation payments(3)

Cost-saving initiatives(2)

 —

 —

 —

Total non-GAAP adjustments

Adjusted net income

$

$

%

$

$

%



Diluted earnings per share

$

$

%

$

$

 —

%

Non-GAAP adjustments:

Excess tax benefit related to employee stock-based compensation payments(3)

 —

Cost-saving initiatives(2)

 —

 —

 —

Total non-GAAP adjustments

 —

Adjusted diluted earnings per share

$

$

%

$

$

%



Net income

$

$

%

$

$

 —

%

Non-GAAP adjustments:

Interest expense, net

Income taxes

Depreciation and amortization expense

Total non-GAAP adjustments

EBITDA

%

$

%

Cost-saving initiatives(2)

 —

 —

 —

Adjusted EBITDA

$

$

%

$

$

%

⁽¹⁾

The calculation of the impact of non-GAAP adjustments on diluted earnings per share is performed on each line independently. The table may not add down by +/- $0.01 due to rounding.

⁽²⁾

One-time costs and corresponding tax benefit recognized related to the acceleration of cost-saving initiatives, including the long-term strategy to reduce our geographic footprint and headcount optimization. These events are not expected to recur. 

⁽³⁾

Net tax windfall benefits related to employee stock-based compensation payments recognized in income taxes. This item is subject to volatility and will vary based on employee decisions on exercising employee stock options and fluctuations in our stock price, neither of which is within the control of management. 

·

Management Solutions revenue is anticipated to grow approximately 7%;

·

PEO and Insurance Solutions revenue is anticipated to grow in the range of 8% to 10%;

·

Interest on funds held for clients is expected to be flat;

·

Total revenue is anticipated to grow approximately 7%;

·

Adjusted operating margin(1) is anticipated to be approximately 38%;

·

Adjusted EBITDA margin(1) is anticipated to be approximately 42%;

·

Other expense, net is anticipated to be in the range of  $33 million to $37 million;

·

The effective income tax rate for fiscal 2022 is anticipated to be in the range of 24% to 25%; and

·

Adjusted diluted earnings per share(2) is anticipated to grow in the range of 10% to 12%.



Investor Relations:

Efrain Rivera, CFO, or Terri Allen

585‑383‑3406

Media Inquiries:

Adam Kranitz, Director of Corporate Communications

585‑383‑3074

·

the impact of the COVID-19 pandemic on the U.S. and global economy, and in particular on our small- and medium-sized business clients;

·

changes in governmental regulations and policies;

·

our ability to comply with U.S. and foreign laws and regulations;

·

our ability to keep pace with changes in technology and to provide timely enhancements to our products and services; 

·

our compliance with data privacy laws and regulations;

·

the possibility of cyberattacks, security vulnerabilities and Internet disruptions, including breaches of data security and privacy leaks, data loss and business interruptions;

·

the possibility of failure of our operating facilities, computer systems, or communication systems during a catastrophic event;

·

the failure of third-party service providers to perform their functions;

·

the possibility that we may be subject to additional risks related to our co-employment relationship with our PEO;

·

changes in health insurance and workers’ compensation insurance rates and underlying claim trends;

·

our clients’ failure to reimburse us for payments made by us on their behalf;

·

the effect of changes in government regulations mandating the amount of tax withheld or the timing of remittances;

·

volatility in the political and economic environment;

·

risks related to acquisitions and the integration of the businesses we acquire;

·

our failure to comply with covenants in our debt agreements;

·

changes in the availability of qualified people, including management, technical, compliance and sales personnel;

·

our failure to protect our intellectual property rights;

·

the possible effects of negative publicity on our reputation and the value of our brand; and

·

potential outcomes related to pending or future litigation matters.







For the three months ended

For the twelve months ended



May 31,

May 31,



2021

2020

Change(2)

2021

2020

Change(2)

Revenue:

Management Solutions

$

$

%

$

$

%

PEO and Insurance Solutions

%

%

Total service revenue

%

%

Interest on funds held for clients(1)

%

%

Total revenue

%

 —

%

Expenses:

Cost of service revenue

%

%

Selling, general and administrative expenses

%

%

Total expenses

%

%

Operating income

%

 —

%

Other expense, net(1)

n/m

n/m

Income before income taxes

%

 —

%

Income taxes

%

%

Net income

$

$

%

$

$

 —

%



Basic earnings per share

$

$

%

$

$

 —

%

Diluted earnings per share

$

$

%

$

$

 —

%

Weighted-average common shares

   outstanding

Weighted-average common shares

   outstanding, assuming dilution







May 31,



2021

2020

ASSETS

Cash and cash equivalents

$

$

Restricted cash

Corporate investments

Interest receivable

Accounts receivable, net of allowance for doubtful accounts

PEO unbilled receivables, net of advance collections

Prepaid income taxes

Prepaid expenses and other current assets

Current assets before funds held for clients

Funds held for clients

Total current assets

Long-term restricted cash

Long-term corporate investments

Property and equipment, net of accumulated depreciation

Operating lease right-of-use assets, net of accumulated amortization

Intangible assets, net of accumulated amortization

Goodwill

Long-term deferred costs

Other long-term assets

Total assets

$

$



LIABILITIES

Accounts payable

$

$

Accrued corporate compensation and related items

Accrued worksite employee compensation and related items

Short-term borrowings

Accrued income taxes

 —

Deferred revenue

Other current liabilities

Current liabilities before client fund obligations

Client fund obligations

Total current liabilities

Accrued income taxes

Deferred income taxes

Long-term borrowings, net of debt issuance costs

Operating lease liabilities

Other long-term liabilities

Total liabilities



STOCKHOLDERS’ EQUITY

Common stock, $0.01 par value; Authorized: 600.0 shares;

  Issued and outstanding: 359.8 shares as of May 31, 2021

   and 358.8 shares as of May 31, 2020

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income

Total stockholders’ equity

Total liabilities and stockholders’ equity

$

$







For the twelve months ended



May 31,



2021

2020

OPERATING ACTIVITIES

Net income

$

$

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Amortization of premiums and discounts on available-for-sale securities, net

Amortization of deferred contract costs

Stock-based compensation costs

(Benefit)/provision for deferred income taxes

Provision for allowance for doubtful accounts

Net realized gains on sales of available-for-sale securities

Changes in operating assets and liabilities:

Interest receivable

Accounts receivable and PEO unbilled receivables, net

Prepaid expenses and other current assets

Accounts payable and other current liabilities

Deferred costs

Net change in other long-term assets and liabilities

Net change in operating lease right-of-use assets and liabilities

Net cash provided by operating activities

INVESTING ACTIVITIES

Purchases of available-for-sale securities

Proceeds from sales and maturities of available-for-sale securities

Purchases of property and equipment

Acquisition of businesses, net of cash acquired

Purchases of other assets

Net cash (used in)/provided by investing activities

FINANCING ACTIVITIES

Net change in client fund obligations

Net proceeds from short-term borrowings

Dividends paid

Repurchases of common shares

Activity related to equity-based plans

Net cash used in financing activities

Net change in cash, restricted cash, and equivalents

Cash, restricted cash, and equivalents, beginning of fiscal year

Cash, restricted cash, and equivalents, end of fiscal year

$

$



Reconciliation of cash, restricted cash and equivalents

Cash and cash equivalents

$

$

Restricted cash

Restricted cash and restricted cash equivalents included in funds held for clients

Total cash, restricted cash, and equivalents

$

$