Paychex, Inc. · NASDAQ:PAYX

Paychex — Q3 2015 Earnings Presentation

16 slides from Paychex's earnings presentation, May 1, 2015

  1. Slide 1: Third Quarter Highlights and Financial Results Fiscal 2015

    Third Quarter Highlights and Financial Results Fiscal 2015 © 2015, PAYCHEX, Inc. All rights reserved.

  2. 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 Private Securities Litigation Reform Act of 1995. Forward-looking statements ar

  3. Slide 3: Contents

    Contents  Company Overview  Quarterly Highlights  Third Quarter Financial Results  Fiscal 2015 Outlook © 2015, 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 in excess of $18B  Strong financial position with no debt  Approximately 580,000 clients at May 31, 2014 © 2

  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 – expense management; applicant tracking; time and labor Payroll Human Resource

  6. Slide 6: Third Quarter 2015 Highlights

    Third Quarter 2015 Highlights  Results reflected growth and progress against key initiatives  Continued to expand the Paychex Flex platform, an industry-leading solution that streamlines workforce management through innovative technology and flexible choice of service  Released the newest version

  7. Slide 7: Third Quarter 2015 Financial Highlights

    Third Quarter 2015 Financial Highlights  Total service revenue up 8%  Operating income, excluding interest on funds held for clients, increased 6%, with operating margin of 37%  Average balances of funds held for clients increased 3%  Combined interest on funds held for clients and investment in

  8. Slide 8: 2015 Third Quarter Financial Results

    2015 Third Quarter Financial Results (In millions, except per share amounts) Three Months Nine Months % % Ended Ended Change Change February 28, 2015 February 28, 2015 Payroll Service Revenue $ 423.8 2% $ 1,247.8 4% Human Resource Services Revenue 269.8 19% 768.3 19% Total Service Revenue 693.6 8% 2

  9. Slide 9: Payroll Service Revenue

    Payroll Service Revenue (In millions) YTD Full Year 1,599 1,510 1,539 1,405 1,439 1,248 1,157 1,205 1,141 1,064 1,082 2010 2011 2012 2013 2014 2015 % Full Year (5%) 2% 5% 2% 4% Increase % of Service 72% 71% 69% 67% 65% Revenue © 2015, PAYCHEX, Inc. All rights reserved. 9

  10. Slide 10: Human Resource Services Revenue

    Human Resource Services Revenue YTD Full Year (In millions) 879 746 768 676 645 597 541 553 505 444 400 2010 2011 2012 2013 2014 2015 % Full Year 3% 10% 13% 10% 18% Increase % of Service 28% 29% 31% 33% 35% Revenue Reflects change to classify certain PEO direct costs as operating expenses rather tha

  11. Slide 11: Investment Portfolios Results Nine Months Ended

    Investment Portfolios Results Nine Months Ended February 28, February 28, 2015 2014 % Change Average Investment Portfolios (in billions): Funds Held for Clients $3.9 $3.7 3% Corporate Investments $0.9 $0.9 3% Average Rate of Return Earned: Funds Held for Clients 1.1% 1.1% Corporate Investments 0.8%

  12. Slide 12: Balance Sheet and Cash Flows

    Balance Sheet and Cash Flows February 28, 2015 May 31, 2014 Cash & Investments $1,029.4 $936.8 Debt $0 $0 Return on Equity 36% 35% For the fiscal year-to-date ended: February 28, 2015 February 28, 2014 Free Cash Flow $591.5 $626.6 Dividends Paid $414.4 $383.4 Dividend Coverage Ratio 1.4x 1.6x © 2015

  13. Slide 13: 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

  14. Slide 14: 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  Authorization of stock repurchase up to $350 million through May 31, 2017. $70 million, for 1.7 million shares, util

  15. Slide 15: © 2015, PAYCHEX, Inc. All rights reserved.

    © 2015, PAYCHEX, Inc. All rights reserved.

  16. Slide 16: Supplemental Schedule

    Supplemental Schedule Quarterly Guidance Growth Rate Ranges Q1 Q2 Q3 Q4 HRS Revenue FY15 16%-19% 20%-23% 16%-18% 13%-15% FY14, adjusted $208 $211 $226 $234 (in millions) FY14, adjusted Operating Expenses $170 $174 $191 $198 (in millions) Operating income, net of certain items, as a % FY15 38%-39% 38

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