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Paychex, Inc. Reports First Quarter 2020 Results

Paychex, Inc. has announced total revenue of $992.0 million for the three months ended August 31, 2019, an increase of 15% from $862.8 million for the same period last year. Oasis Outsourcing Group Holdings, L.P., acquired during December 2018 ...

Oct. 02, 2019

paychex

Paychex, Inc. has announced total revenue of $992.0 million for the three months ended August 31, 2019, an increase of 15% from $862.8 million for the same period last year. Oasis Outsourcing Group Holdings, L.P., acquired during December 2018, contributed a little less than 10% to the growth in total revenue compared to the same period last year.  Net income increased 8% to $264.2 million and diluted earnings per share increased 9% to $0.73 per share for the first quarter.  Adjusted net income and adjusted diluted earnings per share, both non-GAAP measures, each increased 6% to $257.6 million and $0.71 per share, respectively, for the first quarter.

First Quarter Fiscal 2020 Highlights

  • Total revenue increased 15% to $992.0 million.
  • Operating income increased 9% to $349.1 million.
  • Net income increased 8% to $264.2 million and adjusted net income increased 6% to $257.6 million.
  • Diluted earnings per share increased 9% to $0.73 per share and adjusted diluted earnings per share increased 6% to $0.71 per share.
  • Earnings before interest, taxes, depreciation and amortization (“EBITDA”) increased 13% to $403.0 million.

Martin Mucci, President and Chief Executive Officer, commented, “We had a solid start to the fiscal year as we experienced good progress across our major business lines. Our human resource (“HR”) outsourcing services, time and attendance solutions, and retirement services performed well. In addition, demand for our professional employer organization (“PEO”) business continues to grow.

“We are committed to offering advanced solutions to help our clients thrive and meet their evolving business needs.  During the quarter, we provided a set of enhancements to our solutions that will streamline payroll processes and support business owners and HR professionals as they work to optimize operations, comply with regulations, and drive productivity.”

Mucci added, “We are excited to be introducing several new solutions at the 2019 HR Technology Conference & Exposition, which is currently taking place in Las Vegas.  This includes wearable technology for tracking time worked, pay-on-demand, the next generation of the Paychex Flex intelligence engine, and an API integration network.  Our investments in technology focus on meeting the evolving needs of our clients and their employees by providing a more flexible, personalized work experience.”

Management Solutions revenue was $724.5 million for the first quarter, a 5% increase compared to the same period last year. The increase was primarily driven by increases in our client bases across many of our services and growth in revenue per client, which improved as a result of price increases, net of discounts. Retirement services revenue also benefited from an increase in asset fee revenue earned on the asset value of participants’ funds.

PEO and Insurance Services revenue was $247.0 million for the first quarter, an increase of 56% compared to the same period last year.  In addition to the acquisition of Oasis, this increase was driven by growth in clients and client worksite employees across our existing PEO business. Insurance Services revenue was moderated by softness in the workers’ compensation market as state insurance fund rates declined. This was partially offset by an increase in the number of health and benefit clients and applicants.

Interest on funds held for clients increased 20% to $20.5 million for the first quarter, compared to the same period last year. The increase resulted primarily from higher average interest rates earned.  Funds held for clients average investment balances increased 1% for the first quarter compared to the same period last year, as the impact of wage inflation and increases within our client base were offset by changes in client base mix and timing of collections and remittances.