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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________________________

FORM 10-Q

_________________________________________

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2024

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

__________________________________________________

Paychex, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

(State or other jurisdiction of incorporation or organization)

16-1124166

(I.R.S. Employer Identification No.)

911 Panorama Trail South

Rochester, NY

(Address of principal executive offices)

14625-2396

(Zip Code)

Registrant's telephone number, including area code: (585) 385-6666

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

PAYX

Nasdaq Global Select Market

 

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. Yes No

 

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). Yes No

 

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.

Large accelerated filer

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, 2024, 360,063,074 shares of the registrant’s common stock, $.01 par value, were outstanding.


Table of Contents

 

PAYCHEX, INC.

Table of Contents

 

 

 

Page

PART I. FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Consolidated Statements of Income and Comprehensive Income

1

 

Consolidated Balance Sheets

2

 

Consolidated Statements of Stockholders’ Equity

3

 

Consolidated Statements of Cash Flows

5

 

Notes to Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

30

PART II. OTHER INFORMATION

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 5.

Other Information

31

Item 6.

Exhibits

31

Signatures

 

32

 


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,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management Solutions

 

$

 

962.9

 

 

$

 

930.7

 

 

$

 

1,924.6

 

 

$

 

1,886.2

 

PEO and Insurance Solutions

 

 

 

317.9

 

 

 

 

295.7

 

 

 

 

637.2

 

 

 

 

593.5

 

Total service revenue

 

 

 

1,280.8

 

 

 

 

1,226.4

 

 

 

 

2,561.8

 

 

 

 

2,479.7

 

Interest on funds held for clients

 

 

 

36.1

 

 

 

 

31.5

 

 

 

 

73.6

 

 

 

 

64.2

 

Total revenue

 

 

 

1,316.9

 

 

 

 

1,257.9

 

 

 

 

2,635.4

 

 

 

 

2,543.9

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of service revenue

 

 

 

379.1

 

 

 

 

364.1

 

 

 

 

759.1

 

 

 

 

724.3

 

Selling, general and administrative expenses

 

 

 

399.7

 

 

 

 

387.6

 

 

 

 

791.5

 

 

 

 

777.1

 

Total expenses

 

 

 

778.8

 

 

 

 

751.7

 

 

 

 

1,550.6

 

 

 

 

1,501.4

 

Operating income

 

 

 

538.1

 

 

 

 

506.2

 

 

 

 

1,084.8

 

 

 

 

1,042.5

 

Other income, net

 

 

 

5.6

 

 

 

 

11.7

 

 

 

 

16.0

 

 

 

 

24.5

 

Income before income taxes

 

 

 

543.7

 

 

 

 

517.9

 

 

 

 

1,100.8

 

 

 

 

1,067.0

 

Income taxes

 

 

 

130.3

 

 

 

 

125.2

 

 

 

 

260.0

 

 

 

 

255.1

 

Net income

 

$

 

413.4

 

 

$

 

392.7

 

 

$

 

840.8

 

 

$

 

811.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss)/income, net of tax

 

 

 

(11.6

)

 

 

 

15.9

 

 

 

 

53.2

 

 

 

 

(7.3

)

Comprehensive income

 

$

 

401.8

 

 

$

 

408.6

 

 

$

 

894.0

 

 

$

 

804.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

 

1.15

 

 

$

 

1.09

 

 

$

 

2.34

 

 

$

 

2.25

 

Diluted earnings per share

 

$

 

1.14

 

 

$

 

1.08

 

 

$

 

2.32

 

 

$

 

2.24

 

Weighted-average common shares outstanding

 

 

 

360.0

 

 

 

 

360.5

 

 

 

 

360.1

 

 

 

 

360.6

 

Weighted-average common shares outstanding, assuming dilution

 

 

 

361.7

 

 

 

 

362.1

 

 

 

 

361.8

 

 

 

 

362.4

 

 

 

See Notes to Consolidated Financial Statements.

1

 


Table of Contents

 

 

PAYCHEX, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

In millions, except per share amounts

 

 

 

November 30,

 

 

May 31,

 

 

 

2024

 

 

2024

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

1,202.1

 

 

$

 

1,468.9

 

Restricted cash

 

 

 

63.1

 

 

 

 

47.8

 

Corporate investments

 

 

 

38.0

 

 

 

 

33.9

 

Interest receivable

 

 

 

23.7

 

 

 

 

23.3

 

Accounts receivable, net of allowance for credit losses

 

 

 

1,256.9

 

 

 

 

1,059.6

 

PEO unbilled receivables, net of advance collections

 

 

 

598.9

 

 

 

 

542.4

 

Prepaid income taxes

 

 

 

92.2

 

 

 

 

47.5

 

Prepaid expenses and other current assets

 

 

 

345.6

 

 

 

 

321.9

 

Current assets before funds held for clients

 

 

 

3,620.5

 

 

 

 

3,545.3

 

Funds held for clients

 

 

 

3,809.1

 

 

 

 

3,706.2

 

Total current assets

 

 

 

7,429.6

 

 

 

 

7,251.5

 

Long-term corporate investments

 

 

 

 

 

 

 

3.7

 

Property and equipment, net of accumulated depreciation

 

 

 

432.1

 

 

 

 

411.7

 

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

 

 

 

46.3

 

 

 

 

46.9

 

Intangible assets, net of accumulated amortization

 

 

 

179.8

 

 

 

 

194.5

 

Goodwill

 

 

 

1,879.8

 

 

 

 

1,882.7

 

Long-term deferred costs

 

 

 

468.0

 

 

 

 

477.1

 

Other long-term assets

 

 

 

119.1

 

 

 

 

115.0

 

Total assets

 

$

 

10,554.7

 

 

$

 

10,383.1

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

 

89.2

 

 

$

 

104.3

 

Accrued corporate compensation and related items

 

 

 

112.9

 

 

 

 

135.0

 

Accrued worksite employee compensation and related items

 

 

 

704.3

 

 

 

 

662.4

 

Short-term borrowings

 

 

 

18.2

 

 

 

 

18.7

 

Deferred revenue

 

 

 

50.7

 

 

 

 

50.2

 

Other current liabilities

 

 

 

458.9

 

 

 

 

469.8

 

Current liabilities before client fund obligations

 

 

 

1,434.2

 

 

 

 

1,440.4

 

Client fund obligations

 

 

 

3,895.0

 

 

 

 

3,868.7

 

Total current liabilities

 

 

 

5,329.2

 

 

 

 

5,309.1

 

Accrued income taxes

 

 

 

113.2

 

 

 

 

102.6

 

Deferred income taxes

 

 

 

95.3

 

 

 

 

86.0

 

Long-term borrowings, net of debt issuance costs

 

 

 

798.9

 

 

 

 

798.6

 

Operating lease liabilities

 

 

 

45.7

 

 

 

 

49.0

 

Other long-term liabilities

 

 

 

246.7

 

 

 

 

236.8

 

Total liabilities

 

 

 

6,629.0

 

 

 

 

6,582.1

 

Commitments and contingencies — Note I

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Common stock, $0.01 par value; Authorized: 600.0 shares;
Issued and outstanding:
360.1 shares as of November 30, 2024
and May 31, 2024

 

 

 

3.6

 

 

 

 

3.6

 

Additional paid-in capital

 

 

 

1,789.4

 

 

 

 

1,729.5

 

Retained earnings

 

 

 

2,224.6

 

 

 

 

2,213.0

 

Accumulated other comprehensive loss

 

 

 

(91.9

)

 

 

 

(145.1

)

Total stockholders’ equity

 

 

 

3,925.7

 

 

 

 

3,801.0

 

Total liabilities and stockholders’ equity

 

$

 

10,554.7

 

 

$

 

10,383.1

 

 

 

See Notes to Consolidated Financial Statements.

2

 


Table of Contents

 

 

PAYCHEX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

In millions, except per share amounts

 

 

 

For the six months ended November 30, 2024

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional paid-in capital

 

 

Retained earnings

 

 

Net unrealized loss on AFS securities

 

 

Foreign currency translation

 

 

Total accumulated comprehensive loss

 

 

Total

 

Balance as of May 31, 2024

 

 

360.1

 

 

$

 

3.6

 

 

$

 

1,729.5

 

 

$

 

2,213.0

 

 

$

 

(120.7

)

 

$

 

(24.4

)

 

$

 

(145.1

)

 

$

 

3,801.0

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

840.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

840.8

 

Unrealized gains on securities, net of $18.9 million in tax expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57.6

 

 

 

 

 

 

 

 

57.6

 

 

 

 

57.6

 

Reclassification adjustment for realized gains on securities, net of $0.0 million in tax expense (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.0

)

 

 

 

 

 

 

 

(0.0

)

 

 

 

(0.0

)

Cash dividends declared ($1.96 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(705.7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(705.7

)

Repurchases of common shares, including excise taxes of $0.5 million (2)

 

 

(0.8

)

 

 

 

(0.0

)

 

 

 

(4.0

)

 

 

 

(100.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(104.5

)

Stock-based compensation costs

 

 

 

 

 

 

 

 

 

 

32.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32.9

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4.4

)

 

 

 

(4.4

)

 

 

 

(4.4

)

Activity related to equity-based plans

 

 

0.8

 

 

 

 

0.0

 

 

 

 

31.0

 

 

 

 

(23.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8.0

 

Balance as of November 30, 2024

 

 

360.1

 

 

$

 

3.6

 

 

$

 

1,789.4

 

 

$

 

2,224.6

 

 

$

 

(63.1

)

 

$

 

(28.8

)

 

$

 

(91.9

)

 

$

 

3,925.7

 

 

 

 

 

For the three months ended November 30, 2024

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional paid-in capital

 

 

Retained earnings

 

 

Net unrealized loss on AFS securities

 

 

Foreign currency translation

 

 

Total accumulated comprehensive loss

 

 

Total

 

Balance as of August 31, 2024

 

 

359.9

 

 

$

 

3.6

 

 

$

 

1,761.7

 

 

$

 

2,165.4

 

 

$

 

(58.9

)

 

$

 

(21.4

)

 

$

 

(80.3

)

 

$

 

3,850.4

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

413.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

413.4

 

Unrealized losses on securities, net of $1.3 million in tax benefit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4.2

)

 

 

 

 

 

 

 

(4.2

)

 

 

 

(4.2

)

Reclassification adjustment for realized gains on securities, net of $0.0 million in tax expense (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.0

)

 

 

 

 

 

 

 

(0.0

)

 

 

 

(0.0

)

Cash dividends declared ($0.98 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(352.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(352.9

)

Repurchases of common shares, including excise taxes of $0.5 million (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.5

)

Stock-based compensation costs

 

 

 

 

 

 

 

 

 

 

16.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16.4

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7.4

)

 

 

 

(7.4

)

 

 

 

(7.4

)

Activity related to equity-based plans

 

 

0.2

 

 

 

 

0.0

 

 

 

 

11.3

 

 

 

 

(0.8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.5

 

Balance as of November 30, 2024

 

 

360.1

 

 

$

 

3.6

 

 

$

 

1,789.4

 

 

$

 

2,224.6

 

 

$

 

(63.1

)

 

$

 

(28.8

)

 

$

 

(91.9

)

 

$

 

3,925.7

 

 

(1)
Reclassification adjustments out of accumulated other comprehensive loss for realized gains/(losses), net of tax, on the sale of AFS securities are reflected in interest on funds held for clients and other income, net on the Consolidated Statements of Income and Comprehensive Income.
(2)
The Company maintains a program to repurchase $400.0 million of its common stock, with authorization expiring May 31, 2027. The Company previously maintained a program to repurchase up to $400.0 million of its common stock, with an authorization that expired on January 31, 2024. The purpose of these programs is to manage common stock dilution.

3

 


Table of Contents

 

 

 

 

For the six months ended November 30, 2023

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional paid-in capital

 

 

Retained earnings

 

 

Net unrealized loss on AFS securities

 

 

Foreign currency translation

 

 

Total accumulated comprehensive loss

 

 

Total

 

Balance as of May 31, 2023

 

 

360.5

 

 

$

 

3.6

 

 

$

 

1,626.4

 

 

$

 

2,023.1

 

 

$

 

(130.3

)

 

$

 

(29.6

)

 

$

 

(159.9

)

 

$

 

3,493.2

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

811.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

811.9

 

Unrealized losses on securities, net of $2.8 million in tax benefit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9.1

)

 

 

 

 

 

 

 

(9.1

)

 

 

 

(9.1

)

Reclassification adjustment for realized losses on securities, net of $0.0 million in tax benefit (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.0

 

 

 

 

 

 

 

 

0.0

 

 

 

 

0.0

 

Cash dividends declared ($1.78 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(641.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(641.9

)

Repurchases of common shares (2)

 

 

(1.5

)

 

 

 

(0.0

)

 

 

 

(6.2

)

 

 

 

(163.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(169.2

)

Stock-based compensation costs

 

 

 

 

 

 

 

 

 

 

30.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30.7

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.8

 

 

 

 

1.8

 

 

 

 

1.8

 

Activity related to equity-based plans

 

 

0.8

 

 

 

 

0.0

 

 

 

 

27.7

 

 

 

 

(20.7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.0

 

Balance as of November 30, 2023

 

 

359.8

 

 

$

 

3.6

 

 

$

 

1,678.6

 

 

$

 

2,009.4

 

 

$

 

(139.4

)

 

$

 

(27.8

)

 

$

 

(167.2

)

 

$

 

3,524.4

 

 

 

 

 

For the three months ended November 30, 2023

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional paid-in capital

 

 

Retained earnings

 

 

Net unrealized loss on AFS securities

 

 

Foreign currency translation

 

 

Total accumulated comprehensive loss

 

 

Total

 

Balance as of August 31, 2023

 

 

361.2

 

 

$

 

3.6

 

 

$

 

1,666.4

 

 

$

 

2,100.9

 

 

$

 

(154.2

)

 

$

 

(28.9

)

 

$

 

(183.1

)

 

$

 

3,587.8

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

392.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

392.7

 

Unrealized gains on securities, net of $4.8 million in tax expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14.8

 

 

 

 

 

 

 

 

14.8

 

 

 

 

14.8

 

Reclassification adjustment for realized gains on securities, net of $0.0 million in tax expense (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.0

)

 

 

 

 

 

 

 

(0.0

)

 

 

 

(0.0

)

Cash dividends declared ($0.89 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(320.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(320.5

)

Repurchases of common shares (2)

 

 

(1.5

)

 

 

 

(0.0

)

 

 

 

(6.2

)

 

 

 

(163.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(169.2

)

Stock-based compensation costs

 

 

 

 

 

 

 

 

 

 

14.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14.7

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.1

 

 

 

 

1.1

 

 

 

 

1.1

 

Activity related to equity-based plans

 

 

0.1

 

 

 

 

0.0

 

 

 

 

3.7

 

 

 

 

(0.7

)