UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________
FORM
_________________________________________
For the quarterly period ended
OR
For the Transition Period from __________to __________
Commission file number
__________________________________________________
(Exact name of registrant as specified in its charter)
|
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
Registrant's telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Accelerated filer |
|
|
Non-accelerated filer |
|
Smaller reporting company |
|
|
|
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of November 30, 2023,
PAYCHEX, INC.
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PAYCHEX, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
In millions, except per share amounts
|
|
For the three months ended |
|
|
For the six months ended |
|
||||||||||||||
|
|
November 30, |
|
|
November 30, |
|
||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management Solutions |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
PEO and Insurance Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest on funds held for clients |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income/(expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other comprehensive income/(loss), net of tax |
|
|
|
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
Comprehensive income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings per share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Diluted earnings per share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding, assuming dilution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
1
PAYCHEX, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
In millions, except per share amounts
|
|
November 30, |
|
|
May 31, |
|
||||
|
|
2023 |
|
|
2023 |
|
||||
Assets |
|
|
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
||
Restricted cash |
|
|
|
|
|
|
|
|
||
Corporate investments |
|
|
|
|
|
|
|
|
||
Interest receivable |
|
|
|
|
|
|
|
|
||
Accounts receivable, net of allowance for credit losses |
|
|
|
|
|
|
|
|
||
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 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 |
|
|
|
|
|
|
|
|
||
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, $ |
|
|
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
|
|
||
Retained earnings |
|
|
|
|
|
|
|
|
||
Accumulated other comprehensive loss |
|
|
|
( |
) |
|
|
|
( |
) |
Total stockholders’ equity |
|
|
|
|
|
|
|
|
||
Total liabilities and stockholders’ equity |
|
$ |
|
|
|
$ |
|
|
See Notes to Consolidated Financial Statements.
2
PAYCHEX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
In millions, except per share amounts
|
|
For the six months ended November 30, 2023 |
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
other |
|
|
|
|
|
||||||||
|
|
Common stock |
|
|
paid-in |
|
|
Retained |
|
|
comprehensive |
|
|
|
|
|
|||||||||||||
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
earnings |
|
|
loss |
|
|
Total |
|
|||||||||||
Balance as of May 31, 2023 |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|||||
Net income |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||
Unrealized losses on securities, net of $ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Reclassification adjustment for realized losses on securities, net of $ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Cash dividends declared ($ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Repurchases of common shares (2) |
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Stock-based compensation costs |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
||
Foreign currency translation adjustment |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Activity related to equity-based plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
|
||||
Balance as of November 30, 2023 |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
|
For the three months ended November 30, 2023 |
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
other |
|
|
|
|
|
||||||||
|
|
Common stock |
|
|
paid-in |
|
|
Retained |
|
|
comprehensive |
|
|
|
|
|
|||||||||||||
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
earnings |
|
|
loss |
|
|
Total |
|
|||||||||||
Balance as of August 31, 2023 |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|||||
Net income |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||
Unrealized gains on securities, net of $ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Reclassification adjustment for realized gains on securities, net of $ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Cash dividends declared ($ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Repurchases of common shares (2) |
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Stock-based compensation costs |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
||
Foreign currency translation adjustment |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Activity related to equity-based plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
|
||||
Balance as of November 30, 2023 |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
See Notes to Consolidated Financial Statements.
3
|
|
For the six months ended November 30, 2022 |
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
other |
|
|
|
|
|
||||||||
|
|
Common stock |
|
|
paid-in |
|
|
Retained |
|
|
comprehensive |
|
|
|
|
|
|||||||||||||
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
earnings |
|
|
loss |
|
|
Total |
|
|||||||||||
Balance as of May 31, 2022 |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|||||
Net income |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||
Unrealized losses on securities, net of $ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Reclassification adjustment for realized gains on securities, net of $ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Cash dividends declared ($ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Repurchases of common shares (2) |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Stock-based compensation costs |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
||
Foreign currency translation adjustment |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Activity related to equity-based plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
|||
Balance as of November 30, 2022 |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
|
For the three months ended November 30, 2022 |
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
other |
|
|
|
|
|
||||||||
|
|
Common stock |
|
|
paid-in |
|
|
Retained |
|
|
comprehensive |
|
|
|
|
|
|||||||||||||
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
earnings |
|
|
loss |
|
|
Total |
|
|||||||||||
Balance as of August 31, 2022 |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|||||
Net income |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||
Unrealized losses on securities, net of $ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Reclassification adjustment for realized losses on securities, net of $ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Cash dividends declared ($ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Repurchases of common shares (2) |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Stock-based compensation costs |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
||
Foreign currency translation adjustment |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Activity related to equity-based plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
|
||||
Balance as of November 30, 2022 |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
See Notes to Consolidated Financial Statements.
4
PAYCHEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
In millions
|
|
For the six months ended |
|
|||||||
|
|
November 30, |
|
|||||||
|
|
2023 |
|
|
2022 |
|
||||
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 AFS securities, net |
|
|
|
( |
) |
|
|
|
|
|
Amortization of deferred contract costs |
|
|
|
|
|
|
|
|
||
Stock-based compensation costs |
|
|
|
|
|
|
|
|
||
Benefit from deferred income taxes |
|
|
|
( |
) |
|
|
|
( |
) |
Provision for credit losses |
|
|
|
|
|
|
|
|
||
Net realized losses/(gains) on sales of AFS 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 AFS securities |
|
|
|
( |
) |
|
|
|
( |
) |
Proceeds from sales and maturities of AFS securities |
|
|
|
|
|
|
|
|
||
Net purchases of short-term accounts receivable |
|
|
|
( |
) |
|
|
|
( |
) |
Purchases of property and equipment |
|
|
|
( |
) |
|
|
|
( |
) |
Proceeds from sales of property and equipment |
|
|
|
|
|
|
|
|
||
Acquisition of businesses, net of cash acquired |
|
|
|
( |
) |
|
|
|
— |
|
Purchases of other assets, net |
|
|
|
( |
) |
|
|
|
( |
) |
Net cash (used in)/provided by investing activities |
|
|
|
( |
) |
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
||
Net change in client fund obligations |
|
|
|
|
|
|
|
( |
) |
|
Net change in short-term borrowings |
|
|
|
|
|
|
|
|
||
Dividends paid |
|
|
|
( |
) |
|
|
|
( |
) |
Repurchases of common shares |
|
|
|
( |
) |
|
|
|
— |
|
Activity related to equity-based plans |
|
|
|
|
|
|
|
( |
) |
|
Net cash provided by/(used in) financing activities |
|
|
|
|
|
|
|
( |
) |
|
Net change in cash, restricted cash, and equivalents |
|
|
|
|
|
|
|
|
||
Cash, restricted cash, and equivalents, beginning of period |
|
|
|
|
|
|
|
|
||
Cash, restricted cash, and equivalents, end of period |
|
$ |
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
||
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 |
|
$ |
|
|
|
$ |
|
|
See Notes to Consolidated Financial Statements.
5
PAYCHEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
November 30, 2023
Note A: Description of Business, Basis of Presentation, and Significant Accounting Policies
Description of business: Paychex, Inc. and its wholly owned subsidiaries (collectively, the “Company” or “Paychex”) is a leading provider of integrated human capital management (“HCM”) solutions for human resources (“HR”), payroll, benefits, and insurance for small- to medium-sized businesses in the United States (“U.S.”) and parts of Europe. The Company also has operations in India. Paychex, a Delaware corporation formed in 1979, reports as
Basis of presentation: The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q ("Form 10-Q") and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statement presentation. The consolidated financial statements include the consolidated accounts of the Company with all intercompany transactions eliminated. Certain disclosures are reported as zero balances due to rounding. In the opinion of management, the information furnished herein reflects all adjustments (consisting of items of a normal recurring nature) necessary for a fair statement of the results for the interim period. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and related Notes to Consolidated Financial Statements presented in the Company’s Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended May 31, 2023 (“fiscal 2023”). Operating results and cash flows for the six months ended November 30, 2023 are not necessarily indicative of the results that may be expected for other interim periods or for the fiscal year ending May 31, 2024 (“fiscal 2024”).
Reclassifications: Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported consolidated earnings.
Revision to previously issued financial statements: The consolidated statement of cash flows for the six months ended November 30, 2022 includes a revision to previously reported amounts related to the presentation of the cash flows associated with short-term receivables purchased from the Company’s clients under non-recourse arrangements. The revision increased net cash provided by operating activities and net cash used in investing activities by $
Restricted cash and restricted cash equivalents: Restricted cash and restricted cash equivalents are recorded at fair value, and consist of cash and cash equivalents, primarily money market securities, included in funds held for clients and cash that is restricted in use to secure commitments for certain workers’ compensation insurance policies.
Accounts receivable, net of allowance for credit losses: Accounts receivable balances are shown on the Consolidated Balance Sheets net of the allowance for credit losses of $
The Company is exposed to credit losses through the sale of services, payment of client obligations, and collection of purchased receivables. To mitigate this credit risk, the Company has multiple programs in place to assess and continuously monitor each client’s ability to pay for these solutions and support. Credit monitoring programs include, but are not limited to, new client credit reviews, establishing appropriate credit limits, monitoring of credit distressed clients, and early electronic wire and collection procedures. The Company also considers contract terms and conditions, client business type or strategy and may require collateralized asset support or prepayment to mitigate credit risk.
Accounts receivable are written off and charged against the allowance for credit losses when the Company has exhausted all collection efforts without success. The Company estimates its credit losses based on historical loss activity adjusted for current economic conditions and reasonable and supportable forecast factors, when applicable. The provision for the allowance for credit losses and accounts written off were
6