Paychex, Inc. · NASDAQ:PAYX

Paychex — FY2014 Earnings Presentation

17 slides from Paychex's earnings presentation, July 2014

  1. Slide 1: Highlights and Financial Results Fiscal 2014

    Highlights and Financial Results Fiscal 2014 © 2014, PAYCHEX, Inc. All rights reserved.

  2. Slide 2: Forward Looking Statements

    Forward Looking Statements Certain written and oral statements made by management of Paychex, Inc. and its wholly owned subsidiaries (“we,” “our,” “us”) may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Ref

  3. Slide 3: Contents

    Contents  Company Overview  Highlights  Fiscal 2014 Financial Results  Fiscal 2015 Outlook © 2014, PAYCHEX, Inc. All rights reserved. 3

  4. Slide 4: Paychex Overview

    Paychex Overview Paychex is a leading provider of integrated payroll, human resource, insurance, and benefits outsourcing solutions for small to mid-sized businesses  Market capitalization of $15B  Strong financial position with no debt  Approximately 580,000 clients at May 31, 2014 © 2014, PAYCH

  5. Slide 5: Revenue Source

    Revenue Source Small Business Payroll  Small business targets businesses with 1-50 employees HRS Mid-Market Payroll 35%  Mid-market targets businesses with 50-1,000 employees  Growing portfolio of standalone services – ExpenseWire; applicant tracking Payroll Human Resource Services 65%  Market l

  6. Slide 6: Product Highlights

    Product Highlights 10M #1 Small Business (1-50 EE’s) Payroll 580,000 clients Employees paid #2 Mid-Market (50-500 EE’s) HR Outsourcing 770,000 Top ASO/PEO for Small 28,000 clients WSEs Business Retirement 65,000 plans > 700,000 #1 Recordkeeper – # Plans participants Insurance 109,000 clients 134,000

  7. Slide 7: Fiscal 2014 Financial Highlights

    Fiscal 2014 Financial Highlights  Total service revenue up 8%*  Operating income, excluding interest on funds held for clients, increased 9%, with operating margin of 38%*  Average balances of funds held for clients increased 4%  Combined interest on funds held for clients and investment income

  8. Slide 8: Fiscal 2014 Highlights

    Fiscal 2014 Highlights  Solid execution driving strong results  Client retention, revenue retention, and satisfaction remain at high levels  Strong new business revenue growth, particularly in core payroll and Paychex HR Solutions  Industry-leading operating margin of 38% while continuing to inv

  9. Slide 9: Strong Earnings History

    Strong Earnings History Net Income (in millions) EPS 650 $1.75 600 $1.50 550 500 $1.25 450 400 $1.00 FY10 FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14 © 2014, PAYCHEX, Inc. All rights reserved.

  10. Slide 10: Accelerating Performance

    Accelerating Performance (in millions) Service Revenue Operating Income (Net of Certain Items) $2,500 $950 $900 $2,300 $850 $2,100 $800 $750 $1,900 $700 $1,700 $650 FY10 FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14 *Reflects change to classify certain PEO direct costs as operating expenses rather th

  11. Slide 11: Fiscal 2014 Financial Results

    Fiscal 2014 Financial Results (In millions, except per share amounts) Three Months Year % % Ended Ended Change Change May 31, 2014 May 31, 2014 Payroll Service Revenue $ 394.5 3% $ 1,599.3 4% Human Resource Services Revenue* 234.3 22% 878.9 18% Total Service Revenue $ 628.8 9% $ 2,478.2 8% Interest

  12. Slide 12: Investment Portfolios Results

    Investment Portfolios Results Fiscal Year Ended 2014 May 31, 2013 % Change Average Investment Portfolios (in billions): Funds Held for Clients $3.9 $3.7 4% Corporate Investments $0.9 $0.8 17% Average Rate of Return Earned: Funds Held for Clients 1.0% 1.1% Corporate Investments 0.7% 0.8% Realized Gai

  13. Slide 13: Balance Sheet and Cash Flows

    Balance Sheet and Cash Flows May 31, 2014 May 31, 2013 Cash & Investments $936.8 $874.6 Debt $0 $0 Return on Equity 35% 34% For the year ended: May 31, 2014 May 31, 2013 Free Cash Flow $776.2 $550.2 Dividends Paid $510.6 $476.7 Dividend Coverage Ratio 1.5x 1.2x © 2014, PAYCHEX, Inc. All rights reser

  14. Slide 14: Fiscal Year 2015 Outlook

    Fiscal Year 2015 Outlook Payroll Service Revenue 3% – 5% Human Resource Services Revenue (HRS)* 16% – 19% Total Service Revenue 8% – 10% Net Income 6% – 8% Operating Income, Net of Certain Items, as a Percent of 37% – 38% Service Revenue Effective Income Tax Rate (approximate) 36% – 37% * HRS revenu

  15. Slide 15: Long-Term Capital Strategy

    Long-Term Capital Strategy  Cash deployment  Investment for organic growth  Strategic, accretive acquisitions  Return cash to shareholders through dividends and stock repurchase  Capital expenditures expected to be in the range of $110M to $120M for fiscal 2015  Authorization of stock repurcha

  16. Slide 16: © 2014, PAYCHEX, Inc. All rights reserved.

    © 2014, PAYCHEX, Inc. All rights reserved.

  17. Slide 17: Supplemental Schedule

    Supplemental Schedule Quarterly Guidance Growth Rate Ranges Q1 Q2 Q3 Q4 HRS Revenue FY15 16%-19% 20%-23% 15%-18% 14%-17% FY14, adjusted $208 $211 $226 $234 (in millions) Operating Expenses FY14, adjusted $170 $174 $191 $198 (in millions) Operating income, net FY15 38%-39% 38%-39% 36%-37% 36%-37% of

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