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Paychex Reports Strong Q4 and FY2024 Results, Stock Drops 6%
Rochester, N.Y., June 26, 2024 — Paychex, Inc. (NASDAQ: PAYX), a leading provider of human capital management solutions, today reported its financial results for the fourth quarter and fiscal year ended May 31, 2024. The company achieved solid total revenue growth and operating margin expansion, with significant increases in diluted earnings per share (EPS) and adjusted diluted EPS. Despite these strong results, Paychex's stock dropped 6% during the trading session.
Fiscal Year 2024 Highlights
- Total Revenue: $5.28 billion, a 5% increase from $5.01 billion in the prior fiscal year.
- Operating Income: $2.17 billion, a 7% increase from $2.03 billion last year.
- Diluted EPS: $4.67, up 9% from $4.30.
- Adjusted Diluted EPS: $4.72, an 11% increase from $4.27.
Fourth Quarter Highlights
- Total Revenue: $1.3 billion, up 5% from $1.23 billion in the same period last year.
- Operating Income: $481.8 million, a 6% increase from $453.3 million.
- Diluted EPS: $1.05, an 8% increase from $0.97.
- Adjusted Diluted EPS: $1.12, a 15% increase from $0.97.
John Gibson, President and CEO of Paychex, commented, “As we close out the fiscal year, I am pleased to report that Paychex delivered solid financial results. Our achievements reflect our ability to navigate changing market conditions by providing innovative HR technology and advisory solutions that deliver value for our clients and their employees.”
Fourth Quarter Business Highlights
- Management Solutions Revenue: Increased 3% to $930.3 million, driven by growth in the number of clients and higher product penetration, particularly in Human Resource Solutions and Retirement Services.
- PEO and Insurance Solutions Revenue: Increased 9% to $326.6 million, primarily due to growth in the number of average PEO worksite employees and higher PEO insurance revenues.
- Interest on Funds Held for Clients: Increased 54% to $38.2 million due to higher average interest rates and invested balances.
- Total Expenses: Increased 5% to $813.3 million, driven by cost optimization initiatives, higher PEO direct insurance costs, and lower compensation-related expenses.
Fiscal Year Business Highlights
- Total Revenue: Increased 5% to $5.3 billion.
- Operating Income: Increased 7% to $2.2 billion.
- Operating Margin: Improved to 41.2%, with an adjusted operating margin of 41.9%.
- Effective Income Tax Rate: 23.8%, slightly lower than the prior year’s 24.0%.
- Financial Position: Strong with $1.6 billion in cash, restricted cash, and total corporate investments, and $1.9 billion in cash flow from operations.
- Return to Stockholders: Paid $1.3 billion in dividends and repurchased 1.5 million shares for $169.2 million.
Fiscal 2025 Business Outlook
- Total Revenue Growth: Expected to be in the range of 4.0% to 5.5%.
- Adjusted Diluted EPS Growth: Anticipated to be between 5% and 7%.
- Management Solutions Revenue Growth: Forecasted at 3.0% to 4.0%.
- PEO and Insurance Solutions Revenue Growth: Projected at 7.0% to 9.0%.
- Interest on Funds Held for Clients: Expected to be between $150 million and $160 million.
- Operating Margin: Anticipated to be in the range of 42% to 43%.
- Other Income, Net: Expected to be between $35 million and $40 million.
- Effective Income Tax Rate: Projected to be in the range of 24% to 25%.
Paychex's strong financial performance and optimistic outlook demonstrate its resilience and strategic positioning in the market, underscoring its commitment to helping small and mid-size businesses navigate complex regulatory environments and challenging economic conditions. However, investors seemed cautious as the stock fell by 6% during the trading session.
(Source: PAYX)
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