ROCHESTER, New York, June 29, 2023-- Paychex, Inc., announced the following results for the quarter ended May 31, 2023 (the "fourth quarter") and fiscal year ended May 31, 2023 ("fiscal 2023"), as compared to the corresponding prior-year period:

John Gibson, President and Chief Executive Officer, commented, “We achieved a significant milestone of over $5 billion in total revenue. Our results for fiscal 2023 were strong with 9% growth in total revenue and 13% growth in adjusted diluted earnings per share. These results were due to the hard work and dedication of over 16,000 employees and the investments we have made in our human capital management ("HCM") technology and Human Resources ("HR") advisory solutions and the trust our clients have placed in us. We are proud to be there to support our customers and their employees in a complex and challenging environment for small and medium sized businesses. We have helped them leverage our HR technology, provided advice on complex HR issues, hire and retain talent, and secure funding such as the Employee Retention Tax Credit.”

Mr. Gibson continued, “As we look into next year, we are well positioned to deliver on our purpose – to help businesses succeed. Our industry leadership and differentiated set of solutions will allow us to continue to serve our customers, our shareholders, and our communities.”

Fourth Quarter and Fiscal 2023 Business Highlights

Management Solutions revenue increased 7% to $905.2 million for the fourth quarter and increased 8% to $3.7 billion for fiscal 2023, primarily due to the following factors:

Increase in the number of clients and client employees served for HCM and worksite employees for HR Solutions;

Higher revenue per client resulting from price realization and product attachment, including increased demand for HR Solutions, retirement, and time and attendance solutions;

Continued growth in HCM ancillary services.

Professional Employer Organization ("PEO") and Insurance Solutions revenue increased 5% to $299.5 million for the fourth quarter and increased 6% to $1.2 billion for fiscal 2023, primarily due to the following:

Growth in the number of average PEO worksite employees and increases in average wages per worksite employee;

Higher state unemployment insurance revenue and health insurance premiums;

Growth in ancillary services.

Interest on funds held for clients increased 69% to $24.9 million for the fourth quarter and 73% to $99.8 million for the fiscal year primarily due to higher average interest rates and average investment balances, partially offset by higher net realized losses.

Total expenses increased 3% to $776.3 million for the fourth quarter and increased 7% to $3.0 billion for the fiscal year, primarily due to the following:

Compensation costs were higher due to increases in headcount and average wage rates;

Continued investment in product development, technology, and marketing.

Operating income grew 15% to $453.3 million for the fourth quarter and 10% to $2.0 billion for the fiscal year. Operating margin (operating income as a percentage of total revenue) increased to 36.9% for the fourth quarter compared to 34.4% for the prior year period. For the fiscal year, operating margin increased to 40.6%, compared to 39.9% for the prior year.

Other income/(expense) increased $15.5 million to $10.3 million for the quarter and $30.5 million to $15.1 million for the fiscal year primarily as a result of higher average interest rates earned on our corporate investments.

Paychex's effective income tax rate was 24.4% for the fourth quarter compared to 23.8% in the prior year period. For fiscal 2023, the effective income tax rate was 24.0% compared to 23.7% for the prior year. The prior year fourth quarter period was impacted by a decrease to state tax expense and the recognition of net discrete tax benefits related to employee stock-based compensation payments. The full year periods were impacted by the recognition of net discrete tax benefits related to employee stock-based compensation payments. The effective tax rate in the prior fiscal year was also impacted by the recording of a tax benefit related to prior years' research and development expenses incurred in the production of customer-facing software.

Financial Position and Liquidity

Paychex's financial position and cash flow generation remained strong during the fiscal year. As of May 31, 2023, it had:

Cash, restricted cash, and total corporate investments of $1.6 billion.

Short-term and long-term borrowings, net of debt issuance costs, of $808.4 million.

Cash flow from operations was $1.7 billion for the fiscal year.

Return to Stockholders During the Year

Paid cumulative dividends of $3.26 per share totaling $1.2 billion, resulting in a dividend payout ratio of 75%.

Business Outlook

Paychex outlook for the fiscal year ending May 31, 2024 ("fiscal 2024") incorporates current assumptions and market conditions. Changes in the macroeconomic environment could alter its guidance. With consideration of these impacts, its outlook is as follows:

Management Solutions revenue is anticipated to grow in the range of 5% to 6%;

PEO and Insurance Solutions revenue is anticipated to grow in the range of 6% to 9%;

Interest on funds held for clients is expected to be in the range of $135 million to $145 million;

Total revenue is anticipated to grow in the range of 6% to 7%;

Operating margin is anticipated to be in the range of 41% to 42%

Other income, net is anticipated to be in the range of $30 million to $35 million;

The effective income tax rate for fiscal 2024 is anticipated to be in the range of 24% to 25%;

Adjusted diluted earnings per share is anticipated to grow in the range of 9% to 10%.

About Paychex

Paychex, Inc. (Nasdaq:PAYX) is industry-leading HCM company delivering a full suite of technology and advisory services in human resources, employee benefit solutions, insurance, and payroll. The company serves approximately 740,000 customers in the U.S. and Europe and pays one out of every 12 American private sector employees. The more than 16,000 people at Paychex are committed to helping businesses succeed and building thriving communities where they work and live.

SOURCE Paychex