01—Abstract
Summary
Summary of the 8-K filed June 26, 2024. Cited figures are marked; the original filing is the authoritative source.
Paychex, Inc. furnished a press release dated June 26, 2024 reporting results for the three and twelve months ended May 31, 2024 (fiscal 2024).
Fourth-quarter total revenue was $1.3 billiona ($1,295.1 million), up 5% from the prior-year quarter, with the filing noting that lower contribution from the employee retention tax credit (ERTC) service reduced growth by approximately 300 basis points. Fourth-quarter diluted EPS was $1.05, up 8%, and adjusted diluted EPS was $1.12, up 15%, after $39.5 million of one-time cost optimization initiatives. Fiscal 2024 total revenue was $5.3 billion (up 5%), operating income was $2.2 billion (up 7%), and diluted EPS was $4.67 (up 9%), with adjusted diluted EPS of $4.72 (up 11%).
For fiscal 2025, the company guided to total revenue growth of 4.0% to 5.5%, adjusted diluted EPS growth of 5% to 7%, and an operating margin of 42% to 43%. Management noted that small and mid-size business clients face a challenging environment marked by complex regulations, a tight labor market and inflationary pressures. Cash flow from operations was $1.9 billionb for the year, and the company paid $1.3 billion in dividends and repurchased 1.5 million shares for $169.2 million.
The filing is furnished under Item 2.02 and is not deemed filed for Section 18 purposes. The press release states that the company expects to file its Form 10-K before the end of July 2024.
02—Key points
Key Highlights
- Fiscal 2024 total revenue rose 5% to $5.3 billion, and operating income rose 7% to $2.2 billion.
- Fourth-quarter diluted EPS increased 8% to $1.05; adjusted diluted EPS increased 15% to $1.12, excluding $39.5 million of one-time cost optimization initiatives.
- Fourth-quarter revenue growth was reduced by roughly 300 basis points from lower ERTC service contribution.
- Management Solutions revenue rose 3% to $930.3 million in the fourth quarter, while PEO and Insurance Solutions revenue rose 9% to $326.6 million.
- Interest on funds held for clients increased 54% to $38.2 million in the fourth quarter.
- Fiscal 2025 outlook calls for total revenue growth of 4.0% to 5.5%, adjusted diluted EPS growth of 5% to 7%, and an operating margin of 42% to 43%.
- Fiscal 2024 capital return included $1.3 billion in dividends ($3.65 per share) and $169.2 million in share repurchases.
03—Questions
Frequently Asked Questions
How did Paychex perform in fiscal 2024?
Total revenue rose 5% to $5.3 billion, operating income rose 7% to $2.2 billion, and diluted EPS rose 9% to $4.67. Adjusted diluted EPS, a non-GAAP measure, rose 11% to $4.72.
What drove the fourth-quarter results?
Revenue growth was 5% to $1.3 billion. Management Solutions revenue rose 3% and PEO and Insurance Solutions rose 9%. Total expenses rose 5%, including $39.5 million of one-time cost optimization initiatives, while expenses excluding those initiatives were relatively flat.
What is the fiscal 2025 outlook?
Paychex expects total revenue growth of 4.0% to 5.5%, adjusted diluted EPS growth of 5% to 7%, Management Solutions revenue growth of 3.0% to 4.0%, and PEO and Insurance Solutions revenue growth of 7.0% to 9.0%. It also expects an operating margin of 42% to 43% and an effective tax rate of 24% to 25%.
What did the ERTC service change mean for results?
The filing states that lower contribution from the employee retention tax credit (ERTC) service reduced fourth-quarter revenue growth by approximately 300 basis points, and that lower ancillary service revenue from the expiration of the ERTC service affected Management Solutions revenue.
How did Paychex return capital to shareholders in fiscal 2024?
The company paid cumulative dividends of $3.65 per share totaling $1.3 billion, representing a 78% dividend payout ratio of net income, and repurchased 1.5 million shares of common stock for $169.2 million.
04—Continue