01—Abstract
Summary
Summary of the 10-K filed July 16, 2021. Cited figures are marked; the original filing is the authoritative source.
Paychex, Inc. reported fiscal 2021 (year ended May 31, 2021) results in this 10-K, filed July 16, 2021.
Total revenue was $4,056.8 milliona versus $4,040.5 million in fiscal 2020, with total service revenue of $3,997.5 million (up 1%). Management Solutions revenue rose 2% to $3,023.4 million, while PEO and Insurance Solutions revenue declined 2% to $974.1 million. Interest on funds held for clients fell 32% to $59.3 million, reflecting lower average interest rates and lower realized gains.
Operating income was $1,460.7 millionb, essentially flat, and net income was $1,097.5 million, or $3.03 per diluted share (versus $3.04). Adjusted diluted EPS, a non-GAAP measure, was $3.04 versus $3.00, after adding back $32.2 million in one-time cost-saving initiative charges. Client growth and retention were the main operating positives.
The payroll and PEO client base exceeded 710,000 as of May 31, 2021, up from 680,000, and client retention was at record levels of approximately 85%. Cash flow from operations was $1,260.3 millionc, and dividends paid totaled $908.7 million. Management noted that the COVID-19 pandemic reduced check volumes and PEO worksite employees during the first three quarters, and that the company substantially completed cost-saving initiatives including a geographic footprint reduction.
The balance sheet shows $995.2 milliond of cash and cash equivalents, $800.0 million of Senior Notes, and total stockholders' equity of $2,948.0 million. The board authorized an additional $400.0 million share repurchase program in July 2021, and the company declared a quarterly dividend of $0.66 per share.
02—Key points
Key Highlights
- Total revenue of $4,056.8 million, roughly flat versus $4,040.5 million in fiscal 2020; total service revenue rose 1% to $3,997.5 million.
- Management Solutions revenue increased 2% to $3,023.4 million, driven by payroll client base growth of approximately 4% and record client retention.
- PEO and Insurance Solutions revenue decreased 2% to $974.1 million, reflecting fewer worksite employees in the first three quarters.
- Interest on funds held for clients declined 32% to $59.3 million on lower average interest rates and lower realized gains.
- Net income was $1,097.5 million ($3.03 diluted EPS); adjusted diluted EPS, a non-GAAP measure, rose 1% to $3.04.
- Payroll and PEO client base grew to more than 710,000 from 680,000, and cash flow from operations was $1,260.3 million.
- Board authorized an additional $400.0 million share repurchase program in July 2021, and the company declared a quarterly dividend of $0.66 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Paychex kept $0.27.
- Revenue$4.00B100.0%
- Cost of revenue−$1.27B31.8%
- Gross profit$2.73B68.2%
- Operating costs−$1.27B31.7%
- Operating income$1.46B36.5%
- Interest, other & tax−$363.2M9.1%
- Net income$1.10B27.5%
Where FY2021 revenue went
$4.00B- SG&A: $1.32B, 33% of revenue
- Cost of revenue: $1.27B, 32% of revenue
- Net income: $1.10B, 27% of revenue
- Interest, other & tax: $363.2M, 9.1% of revenue
Kept 27% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed July 16, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $4.00B$4.04B | −1.1% |
| Cost of Revenue | $1.27B$1.28B | −0.7% |
| Gross Profit | $2.73B$2.76B | −1.2% |
| SG&A Expenses | $1.32B$1.30B | +2.0% |
| Operating Expenses | $2.60B$2.58B | +0.6% |
| Operating Income | $1.46B$1.46B | 0.0% |
| Interest Expense | $35.80M$38.80M | −7.7% |
| Net Income | $1.10B$1.10B | −0.1% |
| EPS (Basic) | $3.05$3.06 | −0.3% |
| EPS (Diluted) | $3.03$3.04 | −0.3% |
| Shares Outstanding (Basic) | 359.90M358.50M | +0.4% |
| Shares Outstanding (Diluted) | 362.10M361.00M | +0.3% |
05—Questions
Frequently Asked Questions
How did Paychex perform financially in fiscal 2021?
Total revenue was $4,056.8 million, nearly flat versus $4,040.5 million in fiscal 2020. Operating income was $1,460.7 million, and net income was $1,097.5 million, or $3.03 per diluted share, compared with $3.04 in the prior year. Adjusted diluted EPS, a non-GAAP measure, was $3.04 versus $3.00.
What drove the change in revenue by segment?
Management Solutions revenue grew 2% to $3,023.4 million on payroll client base growth and higher penetration of HR, retirement, and time and attendance services, partly offset by lower check volumes during the pandemic. PEO and Insurance Solutions revenue fell 2% to $974.1 million due to fewer worksite employees early in the year, partly offset by growth in the fourth quarter.
What were the main one-time costs and cost actions?
The company recorded $32.2 million of cost-saving initiative expenses related to accelerating its strategy to reduce its geographic footprint and optimize headcount. The filing states these costs are not expected to recur and that the initiatives provide ongoing savings in rent, facilities maintenance, and wage-related expenses.
How is the company's capital being returned to shareholders?
Dividends paid totaled $908.7 million in fiscal 2021, and the company repurchased 1.7 million shares for $155.7 million. The quarterly dividend rate increased 6% beginning in May 2021, and the board authorized an additional $400.0 million repurchase program in July 2021.
What debt and liquidity position does Paychex report?
The company had $800.0 million of Senior Notes outstanding, with fixed rates of 4.07% (Series A, due 2026) and 4.25% (Series B, due 2029). Total lines of credit available were $1,742.6 million, and cash, restricted cash, and total corporate investments were $1.1 billion. The company stated it was in compliance with its debt covenants as of May 31, 2021.
06—Continue