10-Q

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

 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.

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.

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.

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	)		—			—			—