Paychex : Investor Presentation FY 2025

Published: 2025-06-25 08:34:06 ET PAYX

Published on 06/25/2025 at 08:34

Fiscal 2025

Overview

Paychex

An industry-leading human capital management ("HCM") company delivering a full suite of technology and advisory services in human resources, employee benefits, insurance and payroll for small and mid-sized enterprises.

Digitally-driven HCM solutions company

Leading-edge technology platform backed by decades of HR and compliance expertise

Industry leader in comprehensive HR outsourcing solutions with approximately 2.5M worksite employees(1)

~800,000 clients(1)

Strong financial position with cash and total corporate investments(2) of $1.7B

Market capitalization of >$54B(3)

As of May 31, 2025

See slide 15 for additional financial highlights

As of June 24, 2025

Total Revenue

Adjusted Operating Income(1)

Adjusted Diluted EPS(1)

$1,427M

Q4 FY24 Q4 FY25

$577M

$1,2G5M

$521M

Q4 FY24 Q4 FY25

$1.1G

$1.12

Q4 FY24 Q4 FY25

(1) Adjusted operating income and adjusted diluted earnings per share ("EPS") are not U.S. generally accepted accounting principles ("GAAP") measures. Refer to slides 16 and 17 for a reconciliation to the corresponding GAAP measure.

Total Revenue

$1,427

$1,2G5

$45

Key Drivers

Acquisition of Paycor

Higher revenue per client resulting from price realization and product penetration, including HR Solutions and Retirement

$327

$1,042

$930

$340

Excluding the acquisition of Paycor, Management

$38

Q4 FY24

+18%

+4%

+12%

(In Millions)

Q4 FY25

Solutions revenue increased by approximately 3%

Growth in the number of average PEO worksite employees

Increase in PEO insurance revenues

Acquisition of Paycor

Excluding the acquisition of Paycor, interest on funds held for clients increased approximately 3%

Professional Employer Organization ("PEO")

Q4 FY25 Highlights

Revenue growth of 10% and Adjusted operating margin(1) expansion of 20 basis points year-over-year

Completed $4.2 billion bond offering to fund the Paycor acquisition

Closed the Paycor acquisition, strengthening our leadership position with two leading SaaS HCM platforms

Raised our cost synergy expectations to approximately $90 million in fiscal 2026

Integrated sales teams, optimized sales coverage, and provided training on the new offerings

Completed key back-end integrations required to cross-sell into Paycor's base

Solid growth in HR Outsourcing worksite employees (WSEs) and record WSE retention levels

FY25 Highlights

Revenue growth of 6% and Adjusted diluted EPS(1) growth of 6%

Adjusted operating margin(1) expanded 60 basis points year-over-year

Continued to exceed the Rule of 50

Strong performance in Retirement, HR Outsourcing and Paychex Funding Solutions

Product penetration continues to increase across our suite of HCM solutions

Returned $1,553M to shareholders during FY25

Paid $1,449M of dividends and returned $104M through share repurchases

(1) Adjusted diluted EPS and adjusted operating margin are non-GAAP financial measures. Refer to slides 16 and 17 for a reconciliation to the corresponding GAAP measures.

Innovation to meet our customers' evolving business needs

Paychex was recognized for its innovative technology, market leadership, and corporate culture

Fortune® 2025 America's

Most Innovative Companies

Paychex has been recognized for a third consecutive year for its innovative technology and corporate culture

World's Most

Ethical Companies

Paychex was recognized once again by Ethisphere and is one of only three companies to receive this honor 17 times

Newsweek's America's

Greatest Workplaces

Paychex was named one of America's Greatest Workplaces 2025 by Newsweek and Plant-A-Insights Group

Additional Awards

(In Millions, Except Per Share Amounts)

Total Revenue Adjusted Diluted EPS(1)

$5,572

$5,278

$5,007

$4,612

$4,057

$4.72

$4.27

$3.77

$3.04

$4.98

FY21 FY22 FY23 FY24 FY25 FY21 FY22 FY23 FY24 FY25

* 5-Year CAGR

(1) Adjusted diluted earnings per share ("EPS") is not a U.S. generally accepted accounting principles ("GAAP") measure. Refer to our Annual Report on Form 10-K for a discussion of these measures and a reconciliation to the corresponding GAAP measures.

Fiscal Year 2026 Outlook

FY'26 Guidance

Total Revenue Growth

16.5% - 18.5%

Management Solutions Revenue Growth

20% - 22%

PEO C Insurance Solutions Revenue Growth

6% - 8%

Interest on Funds Held for Clients Revenue

$190M - $200M

Adjusted Operating Income, as a Percent of Total Revenue(1)

~43%

Effective Income Tax Rate

24% - 25%

Adjusted Diluted EPS (1)

8.5% - 10.5%

(1) Adjusted operating income and adjusted diluted EPS are non-GAAP financial measures. Refer to our discussion of non-GAAP financial measures in our fourth quarter fiscal 2025 earnings press release.

For the Three Months and Twelve Months ended May 31, 2025

(In millions, except per share amounts)

Three Months Ended

May 31, 2025

Change

Twelve Months Ended

May 31, 2025

Change

Management Solutions

$ 1,041.8

12%

$ 4,067.1

PEO and Insurance Solutions

$ 340.3

$ 1,342.9

Total Service Revenue

$ 1,382.1

10%

$ 5,410.0

Interest on Funds Held for Clients

$ 45.2

18%

$ 161.7

10%

Total Revenue

$ 1,427.3

10%

$ 5,571.7

Operating Income

$ 431.1

(11%)

$ 2,207.7

Net Income

$ 297.2

(22%)

$ 1,657.3

(2%)

Diluted EPS

$ 0.82

(22%)

$ 4.58

(2%)

Non-GAAP Measures:(1)

Adjusted Operating Income

$ 576.7

11%

$ 2,370.0

Adjusted EBITDA

$ 623.1

10%

$ 2,539.6

Adjusted Net Income

$ 429.6

$ 1,802.9

Adjusted Diluted EPS

$ 1.19

$ 4.98

(1) Refer to a reconciliation of non-GAAP financial measures to the related GAAP financial measures on slides 16 and 17.

(In millions)

May 31, 2025

May 31, 2024

Cash, Restricted Cash, & Total

Corporate Investments

$ 1,711.0

$ 1,554.3

Total Debt, Net of Debt Issuance Costs(1)

$ 4,966.8

$ 817.3

Net Cash/(Debt) Position

$ (3,255.8)

$ 737.0

Net Leverage Ratio(2)

1.3x

(0.3x)

($ in Millions)

Strong liquidity position with

$1.7B in cash and corporate investments

Net leverage ratio of <1.5x

Return on equity of 42%

Consistent free cash flow generation supports industry leading dividend payout ratio

Return on Equity 42% 47%

Fiscal Year-to-Date Period Ended: May 31, 2025 May 31, 2024

Operating Cash Flow

$ 1,951.1

$ 1,897.7

Free Cash Flow(3)

$ 1,759.3

$ 1,736.3

Dividends Paid

$ 1,448.5

$ 1,315.3

Dividend Coverage Ratio(4)

1.2x

1.3x

Excludes operating lease liabilities of $78.0M and $68.2M as of May 31, 2025 and May 31, 2024, respectively.

Net leverage ratio calculated as net debt divided by trailing-twelve-month adjusted EBITDA. Refer to a reconciliation of non-GAAP financial measures to the related GAAP financial measures on slides 16 and 17.

In fiscal 2025, the definition of free cash flow was revised to conform more closely to peers. The current definition is net cash provided by operating activities less purchases of property and equipment (which includes internally developed software costs). Historical periods have been revised accordingly.

Dividend coverage ratio is calculated as free cash flow divided by dividends paid.

For the Three Months and Twelve Months ended May 31, 2025

(In millions, except per share amounts) Three Months Ended Twelve Months Ended

May 31,

2025

2024

Change

2025

2024

Change

Operating Income

$ 431.1

$ 481.8

(11%)

$ 2,207.7

$ 2,174.1

Non-GAAP Adjustments:

Acquisition-related costs(1)

Cost optimization initiatives (2)

145.6

-39.5

162.3

-39.5

Adjusted Operating Income(3)

$ 576.7

$ 521.3

11%

$ 2,370.0

$ 2,213.6

Adjusted Operating Margin(3)

40.4%

40.2%

42.5%

41.9%

Net Income

$ 297.2

$ 379.9

(22%)

$ 1,657.3

$ 1,690.4

(2%)

Non-GAAP Adjustments:

Acquisition-related costs(1)

Cost optimization initiatives (2)

166.4

-39.5

196.3

-39.5

Tax impact of above adjustments

Excess Tax Benefit Related to Employee Stock-Based Compensation Payments(4)

(33.3)

(0.7)

(9.6)

(5.7)

(40.6)

(10.1)

(9.6)

(11.2)

Adjusted Net Income(3)

$ 429.6

$ 404.1

$ 1,802.9

$ 1,709.1

Acquisition-related costs included in Selling, general and administrative expenses includes (i) $40.7 million for the fourth quarter and $40.7 million for fiscal 2025 in amortization of intangibles acquired in the acquisition of Paycor, (ii) $70.8 million for the fourth quarter and $70.8 million for fiscal 2025 in compensation costs related to the acquisition and integration of Paycor, including replacement awards, severance, and retention and transaction bonuses, and (iii) $34.1 million for the fourth quarter and $50.8 million for fiscal 2025 in other acquisition-related costs, primarily reflecting professional service fees. Acquisition-related costs included in Other income, net includes $20.8 million for the fourth quarter and $34.0 million for fiscal 2025 reflecting the amortization of financing fees related to debt instruments associated with the financing of the Paycor acquisition and the excluded component of the initial fair value of the interest rate swaption contracts.

Cost optimization initiatives recognized in fiscal 2024 includes further reductions to our geographic footprint, reprioritization of certain technology investments and headcount optimization.

Adjusted operating income, adjusted operating margin, adjusted other income, net, adjusted net income, adjusted diluted EPS, EBITDA, and adjusted EBITDA are non-GAAP financial measures. Refer to our fourth quarter fiscal 2025 press release for further discussion.

Net tax windfall benefits related to employee stock-based compensation payments recognized in income taxes. This item is subject to volatility and will vary based on employee decisions on exercising employee stock options and fluctuations in our stock price, neither of which is within the control of management.

For the Three Months and Twelve Months ended May 31, 2025

(In millions, except per share amounts) Three Months Ended Twelve Months Ended

May 31,

2025

2024

Change

2025

2024

Change

Diluted EPS(5)

$ 0.82

$ 1.05

(22%)

$ 4.58

$ 4.67

(2%)

Non-GAAP Adjustments:

Acquisition-related costs(1)

0.46

0.54

Cost optimization initiatives (2)

0.11

Tax impact of above adjustments

Excess Tax Benefit Related to Employee

(0.09)

(0.03)

(0.11)

(0.03)

Stock-Based Compensation Payments(4)

(0.00)

(0.02)

(0.03)

Adjusted Diluted EPS(3)

$ 1.19

$ 1.12

$ 4.98

$ 4.72

Net Income

$ 297.2

$ 379.9

(22%)

$ 1,657.3

$ 1,690.4

(2%)

Non-GAAP Adjustments:

Interest expense/(income), net

43.2

(12.1)

32.6

(45.4)

Income Taxes

92.1

111.9

518.6

527.6

Depreciation and Amortization Expense

85.7

45.6

209.5

176.5

EBITDA(3)

$ 518.2

$ 525.3

(1%)

$ 2,418.0

$ 2,349.1

Non-GAAP Adjustments:

Acquisition-related costs(1)

104.9

121.6

Cost optimization initiatives (2)

39.5

Adjusted EBITDA(3)

$ 623.1

$ 564.8

10%

$ 2,539.6

$ 2,388.6

Cost optimization initiatives recognized in fiscal 2024 includes further reductions to our geographic footprint, reprioritization of certain technology investments and headcount optimization.

The calculation of the impact of non-GAAP adjustments on diluted earnings per share is performed on each line independently. The table may not add down by +/- $0.01 due to rounding.

Three Months Ended

Twelve Months Ended

May 31, May 31,

($ in millions)

2025 2024

Change

2025

2024

Change

Average Investment Balances:

Funds Held For Clients

$ 5,142.7 $ 4,679.1

10%

$ 4,699.5

$ 4,462.0

Corporate Cash Equivalents and Investments

$ 1,964.0 $ 1,647.4

19%

$ 1,649.2

$ 1,605.3

Total

$ 7,106.7 $ 6,326.5

12%

$ 6,348.7

$ 6,067.3

Average Rate of Return Earned:

Funds Held For Clients

3.5% 3.5%

3.4%

3.3%

Corporate Cash Equivalents and Investments

4.2% 5.3%

4.4%

5.2%

Combined

3.7% 4.0%

3.7%

3.8%

Realized Gain/(Loss), Net

$ - $ (2.6)

$ (0.4)

$ (2.6)

End of Period:

Unrealized Loss, Net

May 31, 2025

$53.6

May 31, 2024

$162.5

Management Solutions PEO s Insurance Solutions

5% - 10%

Other

10% - 15%

$1.3B

Insurance Solutions

25% - 30%

HR Solutions (ASO)

$4.1B

50% - 55% 85% - G0%

10% - 15%

Retirement

Payroll C HCM Software (including Paycor)

PEO

Disclaimer

Paychex Inc. published this content on June 25, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on June 25, 2025 at 12:33 UTC.