filings.toolsPaychex 10-Q 2024-08-31
Filed 2024-10-01. 4 sections, 134K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2024
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 August 31, 2024, 359,898,021 shares of the registrant’s common stock, $.01 par value, were outstanding.
PAYCHEX, INC.
Ta****ble of Contents
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 | ||||||||||
| August 31, | August 31, | |||||||||
| 2024 | 2023 | |||||||||
| Revenue: | ||||||||||
| Management Solutions | $ | 961.7 | $ | 955.5 | ||||||
| PEO and Insurance Solutions | 319.3 | 297.8 | ||||||||
| Total service revenue | 1,281.0 | 1,253.3 | ||||||||
| Interest on funds held for clients | 37.5 | 32.7 | ||||||||
| Total revenue | 1,318.5 | 1,286.0 | ||||||||
| Expenses: | ||||||||||
| Cost of service revenue | 380.0 | 360.2 | ||||||||
| Selling, general and administrative expenses | 391.8 | 389.5 | ||||||||
| Total expenses | 771.8 | 749.7 | ||||||||
| Operating income | 546.7 | 536.3 | ||||||||
| Other income, net | 10.4 | 12.8 | ||||||||
| Income before income taxes | 557.1 | 549.1 | ||||||||
| Income taxes | 129.7 | 129.9 | ||||||||
| Net income | $ | 427.4 | $ | 419.2 | ||||||
| Other comprehensive income/(loss), net of tax | 64.8 | (23.2 | ) | |||||||
| Comprehensive income | $ | 492.2 | $ | 396.0 | ||||||
| Basic earnings per share | $ | 1.19 | $ | 1.16 | ||||||
| Diluted earnings per share | $ | 1.18 | $ | 1.16 | ||||||
| Weighted-average common shares outstanding | 360.1 | 360.8 | ||||||||
| Weighted-average common shares outstanding, assuming dilution | 361.9 | 362.8 |
See Notes to Consolidated Financial Statements.
PA****YCHEX, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
In millions, except per share amounts
| August 31, | May 31, | |||||||||
| 2024 | 2024 | |||||||||
| Assets | ||||||||||
| Cash and cash equivalents | $ | 1,459.6 | $ | 1,468.9 | ||||||
| Restricted cash | 54.9 | 47.8 | ||||||||
| Corporate investments | 38.4 | 33.9 | ||||||||
| Interest receivable | 22.9 | 23.3 | ||||||||
| Accounts receivable, net of allowance for credit losses | 1,126.2 | 1,059.6 | ||||||||
| PEO unbilled receivables, net of advance collections | 553.8 | 542.4 | ||||||||
| Prepaid income taxes | — | 47.5 | ||||||||
| Prepaid expenses and other current assets | 342.4 | 321.9 | ||||||||
| Current assets before funds held for clients | 3,598.2 | 3,545.3 | ||||||||
| Funds held for clients | 3,763.2 | 3,706.2 | ||||||||
| Total current assets | 7,361.4 | 7,251.5 | ||||||||
| Long-term corporate investments | — | 3.7 | ||||||||
| Property and equipment, net of accumulated depreciation | 417.4 | 411.7 | ||||||||
| Operating lease right-of-use assets, net of accumulated amortization | 49.5 | 46.9 | ||||||||
| Intangible assets, net of accumulated amortization | 187.7 | 194.5 | ||||||||
| Goodwill | 1,884.9 | 1,882.7 | ||||||||
| Long-term deferred costs | 471.0 | 477.1 | ||||||||
| Other long-term assets | 117.2 | 115.0 | ||||||||
| Total assets | $ | 10,489.1 | $ | 10,383.1 | ||||||
| Liabilities | ||||||||||
| Accounts payable | $ | 80.9 | $ | 104.3 | ||||||
| Accrued corporate compensation and related items | 120.8 | 135.0 | ||||||||
| Accrued worksite employee compensation and related items | 677.2 | 662.4 | ||||||||
| Short-term borrowings | 18.9 | 18.7 | ||||||||
| Accrued income taxes | 73.5 | — | ||||||||
| Deferred revenue | 50.3 | 50.2 | ||||||||
| Other current liabilities | 478.7 | 469.8 | ||||||||
| Current liabilities before client fund obligations | 1,500.3 | 1,440.4 | ||||||||
| Client fund obligations | 3,843.6 | 3,868.7 | ||||||||
| Total current liabilities | 5,343.9 | 5,309.1 | ||||||||
| Accrued income taxes | 108.6 | 102.6 | ||||||||
| Deferred income taxes | 95.1 | 86.0 | ||||||||
| Long-term borrowings, net of debt issuance costs | 798.7 | 798.6 | ||||||||
| Operating lease liabilities | 49.4 | 49.0 | ||||||||
| Other long-term liabilities | 243.0 | 236.8 | ||||||||
| Total liabilities | 6,638.7 | 6,582.1 | ||||||||
| Commitments and contingencies — Note I | ||||||||||
| Stockholders’ equity | ||||||||||
| Common stock, $0.01 par value; Authorized: 600.0 shares; Issued and outstanding: 359.9 shares as of August 31, 2024 and 360.1 shares as of May 31, 2024 | 3.6 | 3.6 | ||||||||
| Additional paid-in capital | 1,761.7 | 1,729.5 | ||||||||
| Retained earnings | 2,165.4 | 2,213.0 | ||||||||
| Accumulated other comprehensive loss | (80.3 | ) | (145.1 | ) | ||||||
| Total stockholders’ equity | 3,850.4 | 3,801.0 | ||||||||
| Total liabilities and stockholders’ equity | $ | 10,489.1 | $ | 10,383.1 |
See Notes to Consolidated Financial Statements.
P****AYCHEX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
In millions, except per share amounts
| For the three months ended August 31, 2024 | |||||||||||||||||||||||||||||||||||||||
| Common stock | Accumulated other comprehensive loss | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional paid-in capital | Retained earnings | Net unrealized loss on AFS securities | Foreign currency translation | Total accumulated comprehensive loss | Total | ||||||||||||||||||||||||||||||||
| Balance as of May 31, 2024 | 360.1 | $ | 3.6 | $ | 1,729.5 | $ | 2,213.0 | $ | **(**120.7 | ) | $ | **(**24.4 | ) | $ | **(**145.1 | ) | $ | 3,801.0 | |||||||||||||||||||||
| Net income | — | — | — | 427.4 | — | — | — | 427.4 | |||||||||||||||||||||||||||||||
| Unrealized gains on securities, net of $20.2 million in tax expense | — | — | — | — | 61.8 | — | 61.8 | 61.8 | |||||||||||||||||||||||||||||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations reviews the operating results of Paychex, Inc. and its wholly owned subsidiaries (“Paychex,” the “Company,” “we,” “our,” or “us”) for the three months ended August 31, 2024 (the “first quarter”), the prior year period ended August 31, 2023 (the “prior year period”), and our financial condition as of August 31, 2024. The focus of this review is on the underlying business reasons for material changes and trends affecting our revenue, expenses, net income, and financial condition. This review should be read in conjunction with the August 31, 2024 consolidated financial statements and the related Notes to Consolidated Financial Statements (Unaudited) contained in this Quarterly Report on Form 10-Q (“Form 10-Q”). This review should also be read in conjunction with our Annual Report on Form 10-K (“Form 10-K”) for the year ended May 31, 2024 (“fiscal 2024”). Forward-looking statements in this Form 10-Q are qualified by the cautionary statement included under the next sub-heading, “Cautionary Note Regarding Forward-Looking Statements.”
Cautionary Note Regarding Forward-Looking Statements
Certain written statements made in this Form 10-Q may contain, and members of management may from time to time make or discuss statements which constitute, “forward-looking statements” within the meaning of the safe harbor provisions of the United States (“U.S.”) Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by such words and phrases as “expect,” “estimate,” “intend,” “intent,” “outlook,” “will,” “would,” “projections,” “strategy,” “mission,” “anticipate,” “believe,” “could,” “may,” “target,” “potential,” “purpose,” “design,” “might,” and other similar words or phrases. Forward-looking statements include, without limitation, all matters that are not historical facts. Examples of forward-looking statements include, among others, statements we make regarding operating performance, events, or developments that we expect or anticipate will occur in the future, including statements relating to our outlook, revenue growth, earnings, earnings-per-share growth, and similar projections.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to known and unknown uncertainties, risks, changes in circumstances, and other factors that are difficult to predict, many of which are outside our control. Our actual performance and outcomes, including without limitation, our actual results and financial condition, may differ materially from those indicated in or suggested by the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
our ability to keep pace with changes in technology or provide timely enhancements to our solutions and support;
software defects, undetected errors, and development delays for our solutions;
the possibility of cyberattacks, security vulnerabilities or Internet disruptions, including data security and privacy leaks and data loss and business interruptions;
the possibility of failure of our business continuity plan during a catastrophic event;
the failure of third-party service providers to perform their functions;
the possibility that we may be exposed to additional risks related to our co-employment relationship with our professional employer organization (“PEO”) business;
changes in health insurance and workers’ compensation insurance rates and underlying claim trends;
risks related to acquisitions and the integration of the businesses we acquire;
our clients’ failure to reimburse us for payments made by us on their behalf;
the effect of changes in government regulations mandating the amount of tax withheld or the timing of remittances;
our failure to comply with covenants in our debt agreements;
changes in governmental regulations, laws, and policies;
our ability to comply with U.S. and foreign laws and regulations;
our compliance with data privacy and artificial intelligence laws and regulations;
our failure to protect our intellectual property rights;
potential outcomes related to pending or future litigation matters;
the impact of macroeconomic factors on the U.S. and global economy, and in particular on our small- and medium-sized business clients;
volatility in the political and economic environment, including inflation and interest rate changes;
our ability to attract and retain qualified people; and
the possible effects of negative publicity on our reputation and the value of our brand.
Any of these factors, as well as other factors discussed in our Form 10-K for fiscal 2024 or in our other periodic filings with the Securities and Exchange Commission (“SEC”), could cause our actual results to differ materially from our anticipated results. The information provided in this Form 10-Q is based upon the facts and circumstances known as of the date of this report, and any forward-looking statements made by us in this Form 10-Q speak only as of the date on which they are made. Except as required by law, we undertake no obligation to update these forward-looking statements after the date of filing this Form 10-Q with the SEC to reflect events or circumstances after such date, or to reflect the occurrence of unanticipated events.
Our investor presentation regarding the financial results for the first quarter is available and accessible on our Paychex Investor Relations portal at https://investor.paychex.com. Information available on our website is not a part of, and is not incorporated into, this Form 10-Q. We intend to make future investor presentations available exclusively on our Paychex Investor Relations portal.
Overview
We are an industry-leading human capital management (“HCM”) company delivering a full suite of technology and advisory services in human resources (“HR”), employee benefit solutions, insurance and payroll processing for small- to medium-sized businesses and their employees across the U.S. and parts of Europe.
We offer a full range of integrated HCM solutions from hire to retire for businesses and their employees. Clients may choose from a breadth of solutions that cover the spectrum of the employee life cycle, but we also allow integrations with popular HR, accounting, point-of-sale, and productivity applications available on the market today.
We support our small-business clients by utilizing our proprietary, robust, software as a service (“SaaS”) Paychex Flex® platform and the Company’s SurePayroll® SaaS-based solutions. Our medium-sized clients generally have more complex payroll and employee benefit needs, though with the environment of increasing regulations, we believe the need for HR outsourcing services has been moving down-market. Any of our clients on Paychex Flex can opt for the integrated suite of HCM solutions, which allows clients to choose the service and software solutions that will meet the needs of their businesses.
Our portfolio of technology, HR advisory, and employee benefits-related solutions is disaggregated into two categories, (1) Management Solutions and (2) PEO and Insurance Solutions, as discussed under the heading “Description of Solutions” in Part I, Item 1 of our Form 10-K for fiscal 2024.
Our mission is to be the leading provider of HR, employee benefits, insurance, and payroll solutions by being an essential partner to small- and medium-sized businesses across the U.S. and parts of Europe. Our strategy focuses on providing industry-leading, integrated technology; delivering superior customer experiences; expanding our leadership in HR; growing our client bases; and engaging in strategic acquisitions. We believe that successfully executing this strategy will lead to strong, long-term financial performance.
We maintain industry-leading margins by managing our personnel costs and expenses while continuing to invest in our business, particularly in sales and marketing and leading-edge technology. We believe these investments are critical to our success. Looking to the future, we believe that investing in our solutions, people, and digital capabilities will position us to capitalize on opportunities for long-term growth.
We closely monitor the evolving challenges and needs of small- and mid-sized businesses, and proactively aid our clients in navigating macroeconomic challenges, legislative changes, and other complexities they may face. Through our unique blend of innovative technology solutions, backed by our extensive compliance and HR expertise, we help clients more effectively hire, develop, and retain top talent in this challenging workforce environment. Our ongoing investments in our platforms have prepared us well for the demands of the current business and regulatory environments, allowing us to adapt while maintaining strong solutions and support delivery, resulting in high levels of client satisfaction and retention.
First Quarter Business Highlights
Highlights compared to the prior year period are as follows:
| For the three months ended | |||||||||||||||||
| August 31, | August 31, | ||||||||||||||||
| In millions, except per share amounts | 2024 | 2023 | Change**(2)** | ||||||||||||||
| Total service revenue | $ | 1,281.0 | $ | 1,253.3 | 2 | % | |||||||||||
| Total revenue | $ | 1,318.5 | $ | 1,286.0 | 3 | % | |||||||||||
| Operating income | $ | 546.7 | $ | 536.3 | 2 | % | |||||||||||
| Net income | $ | 427.4 | $ | 419.2 | 2 | % | |||||||||||
| Adjusted net income(1) | $ | 421.2 | $ | 415.1 | 1 | % | |||||||||||
| Diluted earnings per share | $ | 1.18 | $ | 1.16 | 2 | % | |||||||||||
| Adjusted diluted earnings per share(1) | $ | 1.16 | $ | 1.14 | 2 | % | |||||||||||
| Dividends paid to stockholders | $ | 353.4 | $ | 321.9 | 10 | % |
(1)
Adjusted net income and adjusted diluted earnings per share are not U.S. generally accepted accounting principle (“GAAP”) measures. Refer to the “Non-GAAP Financial Measures” section of this Item 2 for a discussion of non-GAAP measures and a reconciliation to the U.S. GAAP measures of net income and diluted earnings per share.
(2)
Percentage changes are calculated based on unrounded numbers.
For further analysis of our results of operations for the first quarter and prior year period, and our financial position as of August 31, 2024, refer to the tables and analysis in the “Results of Operations” and “Liquidity and Capital Resources” sections of this Item 2.
RESULTS OF OPERATIONS
Summary of Results of Operations:
| For the three months ended | |||||||||||||||||
| August 31, | August 31, | ||||||||||||||||
| In millions, except per share amounts | 2024 | 2023 | Change**(1)** | ||||||||||||||
| Revenue: | |||||||||||||||||
| Management Solutions | $ | 961.7 | $ | 955.5 | 1 | % | |||||||||||
| PEO and Insurance Solutions | 319.3 | 297.8 | 7 | % | |||||||||||||
| Total service revenue | 1,281.0 | 1,253.3 | 2 | % | |||||||||||||
| Interest on funds held for clients | 37.5 | 32.7 | 15 | % | |||||||||||||
| Total revenue | 1,318.5 | 1,286.0 | 3 | % | |||||||||||||
| Total expenses | 771.8 | 749.7 | 3 | % | |||||||||||||
| Operating income | 546.7 | 536.3 | 2 | % | |||||||||||||
| Other income, net | 10.4 | 12.8 | (19 | ) | % | ||||||||||||
| Income before income taxes | 557.1 | 549.1 | 1 | % | |||||||||||||
| Income taxes | 129.7 | 129.9 | — | % | |||||||||||||
| Effective income tax rate | 23.3 | % | 23.7 | % | |||||||||||||
| Net income | $ | 427.4 | $ | 419.2 | 2 | % | |||||||||||
| Diluted earnings per share | $ | 1.18 | $ | 1.16 | 2 | % |
(1) Percentage changes are calculated based on unrounded numbers.
Total revenue increased to $1.3 billion for the first quarter, reflecting an increase of 3% compared to the prior year period. Excluding the impact of the expiration of the Employee Retention Tax Credit ("ERTC") program and one less payroll processing day as compared with the prior year quarter, revenue growth was 7%. The changes in revenue as compared to the prior year period were primarily driven by the following factors:
Management Solutions revenue: $961.7 million for the first quarter, reflecting an increase of 1%:
o
Growth in the number of clients served across our suite of HCM solutions and client worksite employees for HR solutions;
o
Higher product penetration, including HR solutions and retirement; and
o
Lower revenue from ancillary services, primarily due to the expiration of our ERTC Service.
PEO and Insurance Solutions revenue: $319.3 million for the first quarter, reflecting an increase of 7%:
o
Growth in the number of average PEO worksite employees; and
o
Increase in PEO insurance revenues.
Interest on funds held for clients: $37.5 million for the first quarter, reflecting an increase of 15%, primarily due to higher average interest rates and average investment balances.
We invest in highly liquid, investment-grade fixed income securities and do not utilize derivative instruments to manage interest rate risk.
Details regarding our combined funds held for clients and corporate cash equivalents and investment portfolios were as follows:
| For the three months ended | |||||||||||||||||
| August 31, | August 31, | ||||||||||||||||
| $ in millions | 2024 | 2023 | Change**(1)** | ||||||||||||||
| Average investment balances: | |||||||||||||||||
| Funds held for clients | $ | 4,286.1 | $ | 4,156.9 | 3 | % | |||||||||||
| Corporate cash equivalents and investments | 1,619.9 | 1,706.9 | (5 | ) | % | ||||||||||||
| Total | $ | 5,906.0 | $ | 5,863.8 | 1 | % | |||||||||||
| Average interest rates earned (exclusive of net realized gains): | |||||||||||||||||
| Funds held for clients | 3.5 | % | 3.2 | % | |||||||||||||
| Corporate cash equivalents and investments | 4.9 | % | 5.0 | % | |||||||||||||
| Combined funds held for clients and corporate cash equivalents and investments | 3.9 | % | 3.7 | % | |||||||||||||
| Total net realized gains/(losses) | $ | 0.0 | $ | (0.0 | ) |
(1) Percentage changes are calculated based on unrounded numbers.
| August 31, | May 31, | |||||||||||
| $ in millions | 2024 | 2024 | ||||||||||
| Net unrealized losses on available for sale (“AFS”) securities (1) | $ | (80.4 | ) | $ | (162.5 | ) | ||||||
| Federal Funds rate (2) | 5.50 | % | 5.50 | % | ||||||||
| Total fair value of AFS securities | $ | 3,431.3 | $ | 3,329.6 | ||||||||
| Weighted-average duration of AFS securities in years (3) | 2.6 | 2.7 | ||||||||||
| Weighted-average yield-to-maturity of AFS securities (3) | 3.1 | % | 3.0 | % |
(1) The net unrealized loss on our investment portfolio was approximately $49.3 million as of September 27, 2024. Refer to Note F in the Notes to Consolidated Financial Statements and the "Market Risk Factors" caption contained in this Form 10-Q for more information regarding AFS securities held in an unrealized loss position.
(2) The Federal Funds rate was in the range of 5.25% to 5.50% as of August 31, 2024 and as of May 31, 2024. Effective September 19, 2024, the Federal Reserve decreased the Federal Funds rate to a range of 4.75% to 5.00%.
(3) These items exclude the impact of variable rate demand notes (“VRDNs”) as they are tied to short-term interest rates.
Total expenses: The following table summarizes the total combined cost of service revenue and selling, general and administrative expenses for the period below:
| For the three months ended | |||||||||||||||
| August 31, | August 31, | ||||||||||||||
| In millions | 2024 | 2023 | Change**(1)** | ||||||||||||
| Compensation-related expenses | $ | 451.3 | $ | 455.3 | (1 | ) | % | ||||||||
| PEO direct insurance costs | 130.3 | 110.2 | 18 | % | |||||||||||
| Depreciation and amortization | 39.0 | 41.2 | (5 | ) | % | ||||||||||
| Other expenses | 151.2 | 143.0 | 6 | % | |||||||||||
| Total expenses | $ | 771.8 | $ | 749.7 | 3 | % |
(1) Percentage changes are calculated based on unrounded numbers.
Total expenses increased 3% to $771.8 million for the first quarter compared to the prior year period. Total expenses increased as a result of the following:
PEO direct insurance costs: $130.3 million for the first quarter, reflecting an increase of 18%, related to growth in average worksite employees and PEO insurance revenues.
Other expenses: $151.2 million for the first quarter, reflecting an increase of 6%, primarily related to continued investment in technology, sales, and marketing.
Operating income: Operating income increased 2% to $546.7 million for the first quarter. Operating income was impacted by the expiration of the ERTC program and one less payroll processing day as compared with the prior year quarter.
Operating margin (operating income as a percentage of total revenue) was as follows:
| For the three months ended | ||||||||||
| August 31, | August 31, | |||||||||
| 2024 | 2023 | |||||||||
| Operating margin | 41.5 | % | 41.7 | % |
Other income, net: Other income, net decreased 19% to $10.4 million for the first quarter, primarily as a result of lower average investment balances on our corporate investments.
Income taxes: Our effective income tax rate was 23.3% for the first quarter, compared to 23.7%, for the prior year period. Both periods were impacted by the recognition of excess tax benefits related to employee stock-based compensation payments.
Non-GAAP Financial Measures: Adjusted net income, adjusted diluted earnings per share, and earnings before interest, taxes, depreciation, and amortization (“EBITDA”) are summarized as follows:
| For the three months ended | |||||||||||||||
| August 31, | August 31, | ||||||||||||||
| $ in millions | 2024 | 2023 | Change | ||||||||||||
| Net income | $ | 427.4 | $ | 419.2 | 2 | % | |||||||||
| Non-GAAP adjustments: | |||||||||||||||
| Excess tax benefits related to employee stock-based compensation payments(1) | (6.2 | ) | (4.1 | ) | |||||||||||
| Adjusted net income | $ | 421.2 | $ | 415.1 | 1 | % | |||||||||
| Diluted earnings per share(2) | $ | 1.18 | $ | 1.16 | 2 | % | |||||||||
| Non-GAAP adjustments: | |||||||||||||||
| Excess tax benefits related to employee stock-based compensation payments(1) | (0.02 | ) | (0.01 | ) | |||||||||||
| Adjusted diluted earnings per share | $ | 1.16 | $ | 1.14 | 2 | % | |||||||||
| Net income | $ | 427.4 | $ | 419.2 | 2 | % | |||||||||
| Non-GAAP adjustments: | |||||||||||||||
| Interest income, net | (10.3 | ) | (12.1 | ) | |||||||||||
| Income taxes | 129.7 | 129.9 | |||||||||||||
| Depreciation and amortization expense | 39.0 | 41.2 | |||||||||||||
| Total non-GAAP adjustments | 158.4 | 159.0 | |||||||||||||
| EBITDA | $ | 585.8 | $ | 578.2 | 1 | % |
(1) Excess tax 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.
(2) 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.
In addition to reporting net income and diluted earnings per share, which are U.S. GAAP measures, we present adjusted net income, adjusted diluted earnings per share, and EBITDA, which are non-GAAP measures. We believe these additional measures are indicators of our core business operations’ performance period over period. Adjusted net income, adjusted diluted earnings per share, and EBITDA are not calculated through the application of U.S. GAAP and are not required forms of disclosure by the SEC. As such, they should not be considered a substitute for the U.S. GAAP measures of net income and diluted earnings per share, and, therefore, they should not be used in isolation, but in conjunction with the U.S. GAAP measures. The use of any non-GAAP measure may produce results that vary from the U.S. GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.
LIQUIDITY AND CAPITAL RESOURCES
Our financial position as of August 31, 2024 remained strong with cash, restricted cash, and total corporate investments of $1.6 billion. Short-term borrowings of $18.9 million and long-term borrowings of $800.0 million were outstanding as of August 31, 2024. Our unused capacity under our unsecured credit facilities was approximately $2.0 billion as of August 31, 2024. Our primary source of cash is our ongoing operations, which was $546.1 million for the first quarter. Our positive cash flows have allowed us to support our business, and pay dividends. We currently anticipate that corporate cash, corporate restricted cash, and total corporate investments as of August 31, 2024, along with projected operating cash flows and available short-term financing, will support our business operations, capital purchases, primarily investment in our technology solutions, share repurchases, dividend payments, and the servicing of long-term debt for the foreseeable future.
For client funds liquidity, we have the ability to borrow on our unsecured credit facilities or use corporate liquidity when necessary to meet short-term funding needs related to client fund obligations. Historically, we have borrowed, typically on an overnight basis, to settle short-term client fund obligations, rather than liquidate previously collected client funds invested in our long-term AFS portfolio. We believe that our investments in an unrealized loss position as of August 31, 2024 were not impaired due to increased credit risk or other valuation concerns, nor has any event occurred subsequent to that date to indicate any change in our assessment. We do not intend to sell these investments until recovery of their amortized cost basis or maturity and further believe that it is not more-than-likely that we would be required to sell these investments prior to that time.
Financing
Short-term financing: We maintain committed and unsecured credit facilities and irrevocable letters of credit as part of our normal and recurring business operations. The purpose of these credit facilities is to meet short-term funding requirements, finance working capital needs, and for general corporate purposes. We typically borrow on an overnight or short-term basis under our credit facilities. Refer to Note M of the Notes to Consolidated Financial Statements contained in Item 8 of our Form 10-K for fiscal 2024 for further discussion of our credit facilities.
Details of our credit facilities as of August 31, 2024 were as follows:
| Maximum | August 31, 2024 | ||||||||||||||||
| Amount | Outstanding | Available | |||||||||||||||
| $ in millions | Expiration Date | Available | Amount | Amount | |||||||||||||
| Credit facilities: | |||||||||||||||||
| JP Morgan Chase Bank, N.A. (“JPM”) | April 12, 2029 | $ | 1,000.0 | $ | - | $ | 1,000.0 | ||||||||||
| JPM | September 17, 2026 | $ | 750.0 | - | 750.0 | ||||||||||||
| PNC Bank, National Association (“PNC”) | February 6, 2026 | $ | 250.0 | 18.9 | 231.1 | ||||||||||||
| Total Lines of Credit Outstanding and Available | $ | 18.9 | $ | 1,981.1 |
Amounts outstanding under the PNC credit facility as of August 31, 2024 remain outstanding as of the date of this report.
Details of borrowings under each credit facility during the first quarter were as follows:
| For the three months ended August 31, 2024 | ||||||||||||||||||
| Credit Facility | ||||||||||||||||||
| $1 Billion | $750 Million | $250 Million | ||||||||||||||||
| $ in millions | JPM | JPM | PNC | |||||||||||||||
| Number of days borrowed | — | — | 92 | |||||||||||||||
| Maximum amount borrowed | $ | — | $ | — | $ | 19.0 | ||||||||||||
| Weighted-average amount borrowed | $ | — | $ | — | $ | 18.6 | ||||||||||||
| Weighted-average interest rate | — | % | — | % | 6.07 | % |
We primarily use short-term borrowings to settle client fund obligations, rather than liquidating previously collected client funds invested in our long-term AFS investment portfolio.
Subsequent to August 31, 2024, we borrowed twice, on an overnight basis, $333.5 million on a weighted-average basis under our PNC and JPM credit facilities.
We expect to have access to the amounts available under our current credit facilities to meet our ongoing financial needs. However, if we experience reductions in our operating cash flows due to any of the risk factors outlined in, but not limited to, Item 1A in our Form 10-K for fiscal 2024 and other SEC filings, we may need to adjust our capital, operating and other discretionary spending to realign our working capital requirements with the capital resources available to us. Furthermore, if we determine the need for additional short-term liquidity, there is no assurance that such financing, if pursued and obtained, would be adequate or on terms acceptable to us.
Letters of credit: As of August 31, 2024, we had irrevocable standby letters of credit available totaling $165.4 million, primarily to secure commitments for certain insurance policies. The letters of credit expire at various dates between October 02, 2024 and August 24, 2025. No amounts were outstanding on these letters of credit during the first quarter or as of August 31, 2024.
Long-term financing: We have borrowed $800.0 million through the issuance of long-term private placement debt. Refer to Note N of the Notes to Consolidated Financial Statements contained in Item 8 of our Form 10-K for fiscal 2024 for further discussion on our long-term financing.
Other commitments: We had outstanding commitments under existing workers’ compensation insurance agreements and legally binding contractual arrangements. We also entered into various purchase commitments with vendors in the ordinary course of business and had outstanding commitments to purchase approximately $3.9 million of capital assets as of August 31, 2024. In addition, we are involved in three limited partnership agreements to contribute a maximum of $30.0 million to venture capital funds in the financial technology sector. As of August 31, 2024, we have contributed approximately $23.6 million of the total funding commitment.
In the normal course of business, we make representations and warranties that guarantee the performance of services under service arrangements with clients. Historically, there have been no material losses related to such guarantees. We have also entered into indemnification agreements with our officers, directors, and fiduciaries of certain of our retirement plans, which require us to defend and, if necessary, indemnify these individuals for certain pending or future legal claims as they relate to their services provided to us.
We currently self-insure the deductible portion of various insured exposures under certain corporate and PEO employee health and medical benefit plans. Our estimated loss exposure under these insurance arrangements is recorded in other current liabilities on our Consolidated Balance Sheets. Historically, the amounts accrued have not been material and were not material as of August 31, 2024. We also maintain corporate insurance coverage in addition to our purchased primary insurance policies for gap coverage for employment practices liability, errors and omissions, warranty liability, theft and embezzlement, cyber threats, and acts of terrorism; and capacity for deductibles and self-insured retention through our captive insurance company.
Operating, Investing, and Financing Cash Flow Activities
Primary sources of cash, restricted cash, and equivalents are through collections for services rendered to our customers and interest earned on funds held for clients and corporate investments. Primary uses of cash include employee compensation and contractual obligations related to business operations, cash dividends paid, share repurchases, purchases of property and equipment, and acquisitions.
Our investment portfolio incorporates both corporate cash and funds held for clients. Interest rates, market conditions, and our volatile cash flows are among several factors influencing our investment strategy directing the mix between long-term and VRDN AFS securities compared to short-term restricted cash and cash equivalents held in the portfolio. A portfolio strategy that favors larger balances held in restricted cash and cash equivalents will impact our investing activities due to the offsetting activity in the purchases and sales or maturities of AFS investments.
Our cash flows include certain activities that are short-term in nature and have an impact on short-term cash flows due to timing of collection and settlement of obligations as follows:
PEO receivables and worksite-employee ("WSE") accrued compensation: PEO receivables and WSE accrued compensation fluctuate based on either/both: (1) the timing of the payroll cut-off date and the Company’s month-end close, and (2) the timing of when cash is collected from the customer, and it is remitted to either the WSE for wages earned or applicable tax or regulatory agencies for payroll taxes. PEO accounts receivable collections and compensation payments to WSEs and applicable tax or regulatory agencies are settled through our corporate cash and the fluctuations impact our operating activities.
Client fund obligations: Client fund obligations liability will vary based on the timing of when cash is collected from the clients and when it is remitted to employees of the clients utilizing employee payment services or applicable tax or regulatory agencies for payroll tax administration services. Collections from clients are typically remitted from one to 30 days after receipt, with some items extending to 90 days. Fluctuations in client fund obligations impact financing activities.
Summarized cash operating, investing, and financing cash flow information for the first quarter and the prior period:
| For the three months ended | |||||||||||||||
| August 31, | August 31, | ||||||||||||||
| In millions | 2024 | 2023 (1) | Change | ||||||||||||
| Net cash provided by operating activities | $ | 546.1 | $ | 693.0 | $ | (146.9 | ) | ||||||||
| Net cash used in investing activities | (110.0 | ) | (13.2 | ) | (96.8 | ) | |||||||||
| Net cash (used in)/provided by financing activities | (485.0 | ) | 1,069.4 | (1,554.4 | ) | ||||||||||
| Net change in cash, restricted cash, and equivalents | $ | (48.9 | ) | $ | 1,749.2 | $ | (1,798.1 | ) | |||||||
| Cash dividends per common share | $ | 0.98 | $ | 0.89 |
The changes in our cash flow for the first quarter compared to the prior year period were primarily the result of the following key drivers:
Operating Cash Flow Activities
Fiscal 2025
Net income attributable to the reasons discussed in the “Results of Operations” section of this Item 2;
Net increase in accrued income taxes due to the timing of our first quarter tax installment, which historically is settled during our second fiscal quarter; offset by
Net changes in PEO assets and liabilities as a result of the timing of cash collected and the settlement of payroll taxes; and
A net decrease in accrued corporate compensation primarily due to the settlement of fiscal 2024 year-end bonuses, offset by an increase in accrued payroll due to the timing of processing.
Fiscal 2024
Net income attributable to the reasons discussed in the “Results of Operations” section of this Item 2;
Net increase in accrued income taxes due to the timing of our first quarter tax installment, which historically is settled during our second fiscal quarter;
Net changes in PEO assets and liabilities as a result of the timing of cash collected and the settlement of payroll taxes; and
A net increase in refunds owed to our PEO clients related to tax benefits allowed under the Coronavirus Aid, Relief, and Economic Security Act; offset by
A net decrease in accrued corporate compensation primarily due to the settlement of fiscal 2023 year-end bonuses.
Investing Cash Flow Activities
Fiscal 2025
Cash used to develop and enhance our client facing internal-use software and the acquisition of third-party customer lists;
Net purchases of short-term accounts receivable due to an increase in our client base, the timing of cash collections on outstanding receivables and cash settlement of the related reserve; and
Net purchases of AFS securities related to investment in our long-term portfolio.
Fiscal 2024
Cash used for the acquisition of Alterna Capital Solutions, LLC and settlement of its outstanding debt at closing. Refer to Note D of the Notes to Consolidated Financial Statements for additional discussion of this transaction;
Cash used to develop and enhance our client facing internal-use software and the acquisition of third-party customer lists; and
Net purchase of short-term accounts receivable due to an increase in our client base, and funding to existing client base, and the timing of net cash collections; offset by
Net sales from AFS securities primarily due to a shift from investing in VRDNs to reinvesting in cash and cash equivalents due to more favorable interest rates. Our VRDN holdings were $11.3 million at August 31, 2023 compared to $344.1 million at May 31, 2023.
Financing Cash Flow Activities
Fiscal 2025
Dividends paid at $0.98 per share. The payment of future dividends is dependent on our future earnings and cash flow and is subject to the discretion of our Board of Directors (the "Board");
Cash used to repurchase 0.8 million shares of our common stock at a weighted average price of $125.50 per share during the first quarter. All repurchased shares were retired upon acquisition; and
Decrease in client fund obligations related to the timing of collections and remittances of client funds.
Fiscal 2024
Increase in client fund obligations related to the timing of collections and remittances of client funds. The accrual balance as of May 31, 2023 was impacted by the deferral of semi-weekly payroll tax payments due to the Memorial Day holiday; offset by
Dividends paid at $0.89 per share. The payment of future dividends is dependent on our future earnings and cash flow and is subject to the discretion of our Board.
MARKET RISK FACTORS
Changes in interest rates and interest rate risk: Funds held for clients are primarily comprised of short-term funds and AFS securities. Corporate investments are primarily comprised of AFS securities. As a result of our investing activities, we are exposed to changes in interest rates that may materially affect our results of operations and financial position. Changes in interest rates will impact the earnings potential of future investments and will cause fluctuations in the fair value of our long-term AFS securities. We follow an investment strategy of protecting principal and optimizing liquidity. A substantial portion of our portfolios is invested in high credit quality securities with ratings of AA or higher, and A-1/P-1 ratings on short-term securities. We invest predominantly in corporate bonds; municipal bonds; U.S. government agency securities; and VRDNs when available in the market. We limit the amounts that can be invested in any single issuer and invest primarily in short- to intermediate-term instruments whose fair value is less sensitive to interest rate changes. We manage the AFS securities to a benchmark duration of two and one-half to three and three-quarters years.
During the first quarter, our primary short-term investment vehicles were U.S. government agency discount notes and bank demand deposit accounts. We have no exposure to high-risk or non-liquid investments. We have insignificant exposure to European investments. We have not and do not utilize derivative financial instruments to manage our interest rate risk.
During the first quarter, the average interest rate earned on our combined funds held for clients and corporate cash equivalents and investment portfolios was 3.9% compared to 3.7% for the prior year period. When interest rates are falling, the full impact of lower interest rates will not immediately be reflected in net income due to the interaction of short- and long-term interest rate changes. During a falling interest rate environment, earnings will decrease from our short-term investments, and over time, decrease from our longer-term AFS securities. Earnings from AFS securities, which as of August 31, 2024 had an average duration of 2.6 years, would not reflect decreases in interest rates until the investments are sold or mature and the proceeds are reinvested at lower rates.
The amortized cost and fair value of AFS securities that had stated maturities as of August 31, 2024 are shown below by expected maturity.
| August 31, 2024 | ||||||||||
| Amortized | Fair | |||||||||
| In millions | cost | value | ||||||||
| Maturity date: | ||||||||||
| Due in one year or less | $ | 263.7 | $ | 259.7 | ||||||
| Due after one year through three years | 1,703.7 | 1,644.6 | ||||||||
| Due after three years through five years | 1,232.2 | 1,210.7 | ||||||||
| Due after five years | 312.1 | 316.3 | ||||||||
| Total | $ | 3,511.7 | $ | 3,431.3 |
VRDNs, when held by us, are primarily categorized as due after five years in the table above as the contractual maturities on these securities are typically 20 to 30 years. Although these securities are issued as long-term securities, they are priced and traded as short-term instruments because of the liquidity provided through the tender feature.
As of August 31, 2024, the Federal Funds rate was in the range of 5.25% to 5.50%. Effective September 19, 2024, the Federal Reserve decreased the Federal Funds rate to a range of 4.75% to 5.00%. There continues to be uncertainty in the changing market and economic conditions, including the possibility of additional measures that could be taken by the Federal Reserve and other government agencies related to the overall macroeconomic environment. We will continue to monitor the market and economic conditions.
Calculating the future effects of changing interest rates involves many factors. These factors include, but are not limited to:
governmental action to address inflation and/or intervene to support financial markets;
daily interest rate changes;
seasonal variations in investment balances;
actual duration of short-term and AFS securities;
the proportion of taxable and tax-exempt investments;
changes in tax-exempt municipal rates versus taxable investment rates, which are not synchronized or simultaneous; and
financial market volatility and the resulting effect on benchmark and other indexing interest rates.
Subject to these factors and under normal financial market conditions, a 25-basis-point change in taxable interest rates generally affects our tax-exempt interest rates by approximately 19 basis points. Under normal financial market conditions, the impact to earnings from a 25-basis-point change in short-term interest rates would be approximately $5.0 million to $5.5 million, after taxes, for a twelve-month period. Such a basis point change may or may not be tied to changes in the Federal Funds rate.
Our total investment portfolio (funds held for clients and corporate cash equivalents and investments) is expected to average approximately $6.2 billion for the year ending May 31, 2025. Our anticipated allocation is approximately 45% invested in short-term securities and VRDNs with an average duration of less than 30 days and 55% invested in AFS securities, with an average duration of two and one-half to three and three-quarters years.
The combined funds held for clients and corporate AFS securities reflected net unrealized losses of $80.4 million as of August 31, 2024 and $162.5 million as of May 31, 2024. During the first quarter, the net unrealized loss on our investment portfolios ranged from a loss of $162.5 million to a loss of $75.8 million. These fluctuations were driven by changes in market rates of interest. The net unrealized loss on our investment portfolio was approximately $49.3 million as of September 27, 2024.
As of August 31, 2024 and May 31, 2024, we had $3.4 billion and $3.3 billion, respectively, invested in AFS securities at fair value. The weighted-average yield-to-maturity was 3.1% as of August 31, 2024 and 3.0 % as of May 31, 2024. The weighted-average yield-to-maturity excludes AFS securities tied to short-term interest rates, such as VRDNs, when held. Assuming a hypothetical decrease in longer-term interest rates of 25 basis points, the resulting potential increase in fair value for our portfolio of AFS securities as of August 31, 2024, would be in a range of approximately $20.0 million to $25.0 million. Conversely, a corresponding increase in interest rates would result in a comparable decrease in fair value. This hypothetical decrease or increase in the fair value of the portfolio would be recorded as an adjustment to the portfolio’s recorded value, with an offsetting amount recorded in stockholders’ equity. These fluctuations in fair value would have no related or immediate impact on our results of operations unless any declines in fair value are due to credit related concerns and an impairment loss is recognized.
We are also exposed to interest rate risk through the use of our credit facilities as outlined in the Liquidity and Capital Resources section of this Form 10-Q. If interest rates were to increase, or we increase the frequency or amounts borrowed under these credit facilities, we could experience additional interest expense and a corresponding decrease in earnings.
Credit risk: We are exposed to credit risk in connection with our investments in AFS securities through the possible inability of the borrowers to meet the terms of their bonds. We regularly review our investment portfolios to determine if any investment is impaired due to increased credit risk or other valuation concerns and we believe that the investments we held as of August 31, 2024 were not impaired as a result of the previously discussed reasons. While $2.0 billion of our AFS securities had fair values that were below amortized cost, we believe that it is probable that the principal and interest will be collected in accordance with the contractual terms, and that the gross unrealized losses of $98.0 million were due to changes in interest rates and were not due to increased credit risk or other valuation concerns. A substantial portion of the AFS securities in an unrealized loss position as of August 31, 2024 and May 31, 2024 had an AA rating or better. We do not intend to sell these investments until the recovery of their amortized cost basis or maturity, and further believe that it is not more-likely-than-not that we will be required to sell these investments prior to that time. Our assessment that an investment is not impaired due to increased credit risk or other valuation concerns could change in the future due to new developments, including changes in our strategies or assumptions related to any particular investment.
We have some credit risk exposure relating to our purchase of client accounts receivable under non-recourse arrangements. There is also credit risk exposure relating to our trade accounts receivable. This credit risk exposure is diversified amongst multiple client arrangements and all such arrangements are regularly reviewed for potential write-off. No single client was material in respect to total accounts receivable, service revenue, or results of operations as of August 31, 2024.
Market risk: We have an ongoing monitoring system for financial institutions we conduct business with and maintain cash balances at large well-capitalized (as defined by their regulators) financial institutions. We closely monitor market conditions and take appropriate measures, when necessary, to minimize potential risk exposure to our client’s and our cash and investment balances.
CRITICAL ACCOUNTING ESTIMATES
Our critical accounting policies are described in Item 7 of our Form 10-K for fiscal 2024, filed with the SEC on July 11, 2024. On an ongoing basis, we evaluate the critical accounting policies and estimates used to prepare our consolidated financial statements, including, but not limited to, those related to:
revenue recognition;
assets recognized from the costs to obtain and fulfill contracts;
PEO insurance reserves;
goodwill and other intangible assets;
impairment of long-lived assets;
stock-based compensation costs; and
income taxes.
There have been no material changes in these aforementioned critical accounting policies and estimates.
NEW ACCOUNTING PRONOUNCEMENTS
Recently adopted accounting pronouncements: Refer to Note A of the Notes to Consolidated Financial Statements (Unaudited) contained in Item 1 of this Form 10-Q for a discussion of recently adopted accounting pronouncements.
Recently issued accounting pronouncements: Refer to Note A of the Notes to Consolidated Financial Statements (Unaudited) contained in Item 1 of this Form 10-Q for a discussion of recently issued accounting pronouncements.
Ite****m 3. Quantitative and Qualitative Disclosures About Market Risk
The information called for by this item is provided under the caption “Market Risk Factors” under Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations and is incorporated herein by reference.
Ite****m 4. Controls and Procedures
Disclosure Controls and Procedures: Disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures: As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, of the effectiveness of disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on such evaluation, the Company’s principal executive officer and principal financial officer have concluded that as of August 31, 2024, the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting: The Company also carried out an evaluation of the internal control over financial reporting to determine whether any changes occurred during the fiscal quarter ended August 31, 2024. Based on such evaluation, there have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter ended August 31, 2024, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PAR****T II. OTHER INFORMATION
I****tem 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company maintains a program to repurchase up to $400.0 million of the Company’s common stock with authorization that expires on May 31, 2027. The purpose of this program is to manage common stock dilution. Shares repurchased under this program during the first quarter were as follows:
| In millions, except per share amounts | Total number of shares purchased | Average price paid per share | Total dollars | Approximate dollar value of shares that may yet be purchased under the programs | ||||||||||||||||
| June 1, 2024 - June 30, 2024 | — | $ | — | $ | — | $ | 400.0 | |||||||||||||
| July 1, 2024 - July 31, 2024 | — | — | — | $ | 400.0 | |||||||||||||||
| August 1, 2024 - August 31, 2024 | 0.8 | 125.50 | 104.0 | $ | 296.0 | |||||||||||||||
| Total for the period | 0.8 | $ | 125.50 | $ | 104.0 | $ | 296.0 |
Item 5. Other Information
During the three months ended August 31, 2024, none of our directors or officers (as defined by Rule 16a-1 under the Exchange Act), adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined by Item 408(c) of Regulation S-K).
Ite****m 6. Exhibits
INDEX TO EXHIBITS
| Exhibit number | Description | |
| * # | 10.1 | Paychex, Inc. 2002 Stock Incentive Plan (as amended and restated effective October 15, 2020) Form of 2024-2027 Performance Restricted Stock Unit Award Agreement |
| * | 31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| * | 31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| * | 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| * | 32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| * | 101.INS | Inline XBRL Instance Document– the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
| * | 101.SCH | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
| * | 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
- Exhibit filed or furnished with this report
Management contract or compensatory plan
SIGNA****TURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PAYCHEX, INC.
| Date: | October 01, 2024 | /s/ John B. Gibson | |
| John B. Gibson | |||
| President, Chief Executive Officer and Director | |||
| (Principal Executive Officer) | |||
| Date: | October 01, 2024 | /s/ Robert L. Schrader | |
| Robert L. Schrader | |||
| Senior Vice President and Chief Financial Officer | |||
| (Principal Financial Officer) | |||
| Date: | October 01, 2024 | /s/ Christopher Simmons Christopher Simmons Vice President, Controller and Treasurer (Principal Accounting Officer) |