10-Q 1 payx-20211130x10q.htm 10-Q payx-20211130x10q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 

_________________________________________

FORM 10-Q

_________________________________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2021

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from __________to __________

Commission file number 0-11330

__________________________________________________

Paychex, Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

16-1124166

(I.R.S. Employer Identification No.)

911 Panorama Trail South

Rochester, NY

(Address of principal executive offices)

14625-2396

(Zip Code)

Registrant's telephone number, including area code: (585) 385-6666

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

PAYX

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  

As of November 30, 2021, 360,756,990 shares of the registrant’s common stock, $.01 par value, were outstanding.


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PAYCHEX, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

In millions, except per share amounts

For the three months ended

For the six months ended

November 30,

November 30,

2021

2020

2021

2020

Revenue:

Management Solutions

$

832.0

$

732.8

$

1,637.5

$

1,420.2

PEO and Insurance Solutions

262.4

236.1

525.3

466.0

Total service revenue

1,094.4

968.9

2,162.8

1,886.2

Interest on funds held for clients

14.1

14.8

28.6

29.7

Total revenue

1,108.5

983.7

2,191.4

1,915.9

Expenses:

Cost of service revenue

331.6

319.9

644.1

627.0

Selling, general and administrative expenses

336.6

309.5

664.1

650.6

Total expenses

668.2

629.4

1,308.2

1,277.6

Operating income

440.3

354.3

883.2

638.3

Other expense, net

(2.7)

(4.7)

(1.7)

(12.6)

Income before income taxes

437.6

349.6

881.5

625.7

Income taxes

105.5

77.2

215.8

141.7

Net income

$

332.1

$

272.4

$

665.7

$

484.0

Other comprehensive (loss)/income, net of tax

(41.3)

(6.4)

(48.0)

16.6

Comprehensive income

$

290.8

$

266.0

$

617.7

$

500.6

Basic earnings per share

$

0.92

$

0.76

$

1.85

$

1.35

Diluted earnings per share

$

0.91

$

0.75

$

1.83

$

1.34

Weighted-average common shares outstanding

360.7

360.0

360.4

359.5

Weighted-average common shares outstanding, assuming dilution

363.1

362.0

362.9

361.6

See Notes to Consolidated Financial Statements.

PAYCHEX, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

In millions, except per share amounts

November 30,

May 31,

2021

2021

Assets

Cash and cash equivalents

$

636.2

$

995.2

Restricted cash

52.5

51.3

Corporate investments

376.0

36.7

Interest receivable

22.7

24.4

Accounts receivable, net of allowance for credit losses

817.0

578.3

PEO unbilled receivables, net of advance collections

531.8

450.9

Prepaid income taxes

57.3

33.5

Prepaid expenses and other current assets

264.3

249.2

Current assets before funds held for clients

2,757.8

2,419.5

Funds held for clients

3,874.6

3,750.0

Total current assets

6,632.4

6,169.5

Long-term restricted cash

29.9

37.0

Long-term corporate investments

7.0

7.1

Property and equipment, net of accumulated depreciation

398.6

395.8

Operating lease right-of-use assets, net of accumulated amortization

97.3

103.0

Intangible assets, net of accumulated amortization

245.9

275.8

Goodwill

1,832.3

1,820.7

Long-term deferred costs

394.0

384.1

Other long-term assets

50.7

34.2

Total assets

$

9,688.1

$

9,227.2

Liabilities

Accounts payable

$

85.9

$

89.0

Accrued corporate compensation and related items

170.2

209.7

Accrued worksite employee compensation and related items

669.8

586.4

Short-term borrowings

8.9

7.4

Deferred revenue

39.8

37.9

Other current liabilities

408.4

336.8

Current liabilities before client fund obligations

1,383.0

1,267.2

Client fund obligations

3,838.9

3,671.0

Total current liabilities

5,221.9

4,938.2

Accrued income taxes

44.6

25.8

Deferred income taxes

207.6

218.0

Long-term borrowings, net of debt issuance costs

797.5

797.3

Operating lease liabilities

86.7

92.4

Other long-term liabilities

210.0

207.5

Total liabilities

6,568.3

6,279.2

Commitments and contingencies — Note H

 

 

Stockholders’ equity

Common stock, $0.01 par value; Authorized: 600.0 shares;
Issued and outstanding: 360.8 shares as of November 30, 2021
and 359.8 shares as of May 31, 2021

3.6

3.6

Additional paid-in capital

1,505.5

1,446.7

Retained earnings

1,606.9

1,445.9

Accumulated other comprehensive income

3.8

51.8

Total stockholders’ equity

3,119.8

2,948.0

Total liabilities and stockholders’ equity

$

9,688.1

$

9,227.2

See Notes to Consolidated Financial Statements. 

PAYCHEX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

In millions, except per share amounts

For the six months ended November 30, 2021

Accumulated

Additional

other

Common stock

paid-in

Retained

comprehensive

Shares

Amount

capital

earnings

income

Total

Balance as of May 31, 2021

359.8

$

3.6

$

1,446.7

$

1,445.9

$

51.8

$

2,948.0

Net income

665.7

665.7

Unrealized losses on securities, net of $10.6 million in tax benefit

(32.7)

(32.7)

Reclassification adjustment for realized gains on securities, net of $ - million in tax expense (1)

(0.1)

(0.1)

Cash dividends declared ($1.32 per share)

(476.4)

(476.4)

Repurchases of common shares (2)

Stock-based compensation costs

26.4

26.4

Foreign currency translation adjustment

(15.2)

(15.2)

Activity related to equity-based plans

1.0

0.0

32.4

(28.3)

4.1

Balance as of November 30, 2021

360.8

$

3.6

$

1,505.5

$

1,606.9

$

3.8

$

3,119.8

For the three months ended November 30, 2021

Accumulated

Additional

other

Common stock

paid-in

Retained

comprehensive

Shares

Amount

capital

earnings

income

Total

Balance as of August 31, 2021

360.6

$

3.6

$

1,481.5

$

1,513.3

$

45.1

$

3,043.5

Net income

332.1

332.1

Unrealized losses on securities, net of $10.5 million in tax benefit

(32.2)

(32.2)

Reclassification adjustment for realized gains on securities, net of $ - million in tax expense (1)

Cash dividends declared ($0.66 per share)

(238.3)

(238.3)

Repurchases of common shares (2)

Stock-based compensation costs

14.0

14.0

Foreign currency translation adjustment

(9.1)

(9.1)

Activity related to equity-based plans

0.2

0.0

10.0

(0.2)

9.8

Balance as of November 30, 2021

360.8

$

3.6

$

1,505.5

$

1,606.9

$

3.8

$

3,119.8

(1) Reclassification adjustments out of accumulated other comprehensive income for realized gains, net of tax, on the sale of available-for-sale (“AFS”) securities are reflected in interest on funds held for clients and other expense, net on the Consolidated Statements of Income and Comprehensive Income.

(2) The Company maintains two programs to repurchase up to $400.0 million of its common stock under each program, with authorization expiring on May 31, 2022 and January 31, 2024, respectively. The purpose of these programs is to manage common stock dilution.

See Notes to Consolidated Financial Statements.


PAYCHEX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) - continued

In millions, except per share amounts

For the six months ended November 30, 2020

Accumulated

Additional

other

Common stock

paid-in

Retained

comprehensive

Shares

Amount

capital

earnings

income

Total