Paychex, Inc. · NASDAQ:PAYX
Paychex — Q1 FY2020 Earnings Presentation
20 slides from Paychex's earnings presentation, October 2019
Slide 1: First Quarter Highlights and Financial Results Fiscal 2020
First Quarter Highlights and Financial Results Fiscal 2020
Slide 2: Forward Looking Statements
Forward Looking Statements You should be aware that certain written and oral statements made by management may constitute “forward-looking statements” within the meaning of the safe-harbor provisions of the United States (“U.S.”) Private Securities Litigation Reform Act of 1995. Forward-looking stat
Slide 3: Paychex Overview
Paychex Overview • Integrated, cloud-based HCM platform • Unique, personalized, A leading provider of integrated technology-enabled service human capital management (HCM) model solutions for payroll, benefits, human resources (HR), and • Leader in comprehensive HR insurance services for small- to ou
Slide 4: First Quarter Highlights
First Quarter Highlights 4
Slide 5: First Quarter Financial Highlights
First Quarter Financial Highlights Total Revenues Operating Income Adjusted Diluted EPS(1) 15% 9% 6% 5% Organic $992M $349M $0.71 $320M $863M $0.67 Q1 FY19 Q1 FY20 Q1 FY19 Q1 FY20 Q1 FY19 Q1 FY20 (1) Adjusted Diluted Earnings per Share (“EPS”) is a non-GAAP measure. Refer to slide 18 for a reconcili
Slide 6: First Quarter Service Revenue
First Quarter Service Revenue Reflects solid growth and increased mix of PEO(1) and Insurance Services (In Millions) Growth Drivers PEO & Insurance Services $972 • Oasis Outsourcing Group (“Oasis”) acquisition (December 2018) $846 $779 $247 • Growth in worksite employees served (“WSEs”) $158 +56% $1
Slide 7: First Quarter Highlights
First Quarter Highlights • Strong growth across the business, in particular comprehensive outsourcing services, HCM software, and retirement services. • Continued investments in sales force, product, and technology to drive future growth in the business. • Integration of Oasis, acquired in December
Slide 8: Recent Product & Technology Launches
Recent Product & Technology Launches Designed to simplify common HR and payroll challenges Paychex Solo New bundled offering to meet the specific needs of sole proprietors. Combines payroll, 401(k), and incorporation services into one solution. Payroll Grid View Enhanced grid entry view enables powe
Slide 9: Product & Technology Horizon
Product & Technology Horizon Innovation to meet our customers’ evolving business needs Wearable Solutions Pay-on-Demand Real-Time Payments Paychex Flex Expanded Voice Intelligence Engine Integrations (APIs) Recognition 9
Slide 10: Sustained Financial Performance
Sustained Financial Performance (In Millions, Except Per Share Amounts) Total Service Revenue Diluted EPS $2.86 $2.75 $3,692 $3,314 $2.28 $3,102 $814 $2,906 $2.09 $2,698 $556 $422 $1.85 $379 $326 $2,681 $2,758 $2,878 $2,371 $2,527 FY15 FY16 FY17(1) FY18(1) FY19 FY15 FY16 FY17(1) FY18(1),(2) FY19 Man
Slide 11: Operating and EBITDA Margins
Operating and EBITDA(1) Margins Three Months Ended August 31, 2019 2018 % Change • Operating margins impacted by Total Revenue $ 992.0 $ 862.8 15% growth in PEO direct insurance costs Operating Income 349.1 320.3 9% Operating Margin 35.2% 37.1% • Amortization in the first quarter Net Income 264.2 24
Slide 12: Balance Sheet and Cash Flows
Balance Sheet and Cash Flows ($ in Millions) • Strong liquidity position August 31, 2019 May 31, 2019 Cash, Restricted Cash, & • $800M of private placement, Total Corporate Investments $ 695.3 $ 779.9 fixed-rate long-term debt to fund Total Debt, Net of Debt $ 853.0 $ 796.4 Oasis acquisition Return
Slide 13: Fiscal 2020 Outlook
Fiscal 2020 Outlook
Slide 14: Fiscal Year 2020 Outlook
Fiscal Year 2020 Outlook Original Guidance Revised Guidance Year-over-Year Growth Year-over-Year Growth (1) Management Solutions Revenue ~4% ~5% (1) PEO & Insurance Services Revenue 30% - 35% ~30% Interest on Funds Held for Clients 4% - 8% 4% - 8% Total Revenue 10% - 11% 10% - 11% (2) EBITDA 9% - 11
Slide 15: Oasis Revenue Reclassification
Oasis Revenue Reclassification Twelve Months Ended Original Revised May 31, 2019 Pre-Guidance Adjustment Post-Guidance Management Solutions(1) $2,869.6 $8.1 $2,877.7 PEO & Insurance Services(1) 822.3 (8.1) 814.2 Total Service Revenue $3,691.9 - $3,691.9 (1) Subsequent to the fourth quarter fiscal 20
Slide 16: Financial Results
Financial Results 16
Slide 17: Financial Results for the Quarter
Financial Results for the Quarter (In Millions, Except Per Share Amounts) Three Months Ended % August 31, 2019 Change Management Solutions $ 724.5 5% PEO and Insurance Services 247.0 56% Total Service Revenue 971.5 15% Interest on Funds Held for Clients 20.5 20% Total Revenue $ 992.0 15% Operating I
Slide 18: Non-GAAP Financial Measures
Non-GAAP Financial Measures (In Millions, Except Per Share Amounts) Three Months Ended August 31, % 2019 2018(1) Change Net Income $ 264.2 $ 243.6 8% Non-GAAP Adjustments: Excess Tax Benefit Related to Employee Stock-Based Compensation Payments (6.6) $ (3.3) Revaluation of Net Deferred Tax Liabiliti
Slide 19: Investment Portfolio Results
Investment Portfolio Results Three Months Ended August 31, % 2019 2018 Change Average Investment Balances (in billions): Funds Held For Clients $ 3.7 $ 3.7 1% Corporate Investments $ 0.9 $ 0.9 -3% Average Rate of Return Earned: Funds Held For Clients 2.1% 1.9% Corporate Investments 1.8% 1.4% Realize
Slide 20: PAYCHEX
PAYCHEX HR | Payroll | Benefits | Insurance The Power of Simplicity 20