Paychex Inc 10-Q for FY2024 Q3

Paychex Inc (PAYX)

10-Q 2024-04-02 For: 2024-02-29

Added on April 08, 2026

About this 10-Q

Paychex Inc filed this 10-Q on April 2, 2024, covering the quarter ended February 29, 2024 (FY2024 Q3).

Headline figures

Quarter ended February 29, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.44B; up 4.2% from $1.38B a year earlier
Diluted EPS: $1.38; up 7.0% from $1.29 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →



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)


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


Large accelerated filer		Accelerated filer	
Non-accelerated filer		Smaller reporting company	
		Emerging growth company	


		Page
PART I. FINANCIAL INFORMATION		1
Item 1.	Financial Statements (Unaudited)	1
	Consolidated Statements of Income and Comprehensive Income	1
	Consolidated Balance Sheets	2
	Consolidated Statements of Stockholders’ Equity	3
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II. OTHER INFORMATION		30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 5.	Other Information	30
Item 6.	Exhibits	30
Signatures		31


	For the three months ended					For the nine months ended
	February 29,		February 28,			February 29,		February 28,
	2024		2023			2024		2023
Revenue:
Management Solutions	$	1,049.9	$	1,024.5		$	2,936.1	$	2,825.3
PEO and Insurance Solutions		345.5		321.2			939.0		877.3
Total service revenue		1,395.4		1,345.7			3,875.1		3,702.6
Interest on funds held for clients		43.9		35.3			108.1		74.9
Total revenue		1,439.3		1,381.0			3,983.2		3,777.5
Expenses:
Cost of service revenue		379.8		372.9			1,104.1		1,083.2
Selling, general and administrative expenses		409.7		396.2			1,186.8		1,114.5
Total expenses		789.5		769.1			2,290.9		2,197.7
Operating income		649.8		611.9			1,692.3		1,579.8
Other income, net		9.4		5.5			33.9		4.8
Income before income taxes		659.2		617.4			1,726.2		1,584.6
Income taxes		160.6		150.0			415.7		377.7
Net income	$	498.6	$	467.4		$	1,310.5	$	1,206.9

Other comprehensive income/(loss), net of tax		22.0		(5.9	)		14.7		(70.3	)
Comprehensive income	$	520.6	$	461.5		$	1,325.2	$	1,136.6

Basic earnings per share	$	1.39	$	1.30		$	3.64	$	3.35
Diluted earnings per share	$	1.38	$	1.29		$	3.62	$	3.33
Weighted-average common shares outstanding		359.9		360.5			360.4		360.3
Weighted-average common shares outstanding, assuming dilution		361.7		362.3			362.2		362.3


	February 29,			May 31,
	2024			2023
Assets
Cash and cash equivalents	$	1,693.6		$	1,222.0
Restricted cash		41.0			49.8
Corporate investments		36.6			373.4
Interest receivable		22.8			24.4
Accounts receivable, net of allowance for credit losses		1,088.6			873.3
PEO unbilled receivables, net of advance collections		590.7			528.5
Prepaid income taxes		21.0			48.1
Prepaid expenses and other current assets		312.6			289.8
Current assets before funds held for clients		3,806.9			3,409.3
Funds held for clients		6,079.5			4,118.8
Total current assets		9,886.4			7,528.1
Long-term corporate investments		1.6			3.8
Property and equipment, net of accumulated depreciation		419.1			396.3
Operating lease right-of-use assets, net of accumulated amortization		58.9			61.5
Intangible assets, net of accumulated amortization		204.9			187.4
Goodwill		1,882.3			1,834.0
Long-term deferred costs		476.1			470.1
Other long-term assets		94.6			65.2
Total assets	$	13,023.9		$	10,546.4
Liabilities
Accounts payable	$	94.0		$	84.7
Accrued corporate compensation and related items		173.1			209.9
Accrued worksite employee compensation and related items		903.8			763.9
Short-term borrowings		18.8			10.2
Deferred revenue		51.7			47.3
Other current liabilities		518.0			395.4
Current liabilities before client fund obligations		1,759.4			1,511.4
Client fund obligations		6,241.4			4,294.0
Total current liabilities		8,000.8			5,805.4
Accrued income taxes		99.3			83.0
Deferred income taxes		94.8			112.1
Long-term borrowings, net of debt issuance costs		798.5			798.2
Operating lease liabilities		51.5			57.3
Other long-term liabilities		231.9			197.2
Total liabilities		9,276.8			7,053.2
Commitments and contingencies — Note I
Stockholders’ equity
Common stock, $0.01 par value; Authorized: 600.0 shares; Issued and outstanding: 360.0 shares as of February 29, 2024 and 360.5 shares as of May 31, 2023		3.6			3.6
Additional paid-in capital		1,702.5			1,626.4
Retained earnings		2,186.2			2,023.1
Accumulated other comprehensive loss		(145.2	)		(159.9	)
Total stockholders’ equity		3,747.1			3,493.2
Total liabilities and stockholders’ equity	$	13,023.9		$	10,546.4


	For the nine months ended February 29, 2024
													Accumulated
							Additional						other
	Common stock						paid-in			Retained			comprehensive
	Shares			Amount			capital			earnings			loss			Total
Balance as of May 31, 2023		360.5		$	3.6		$	1,626.4		$	2,023.1		$	(159.9	)	$	3,493.2
Net income		—			—			—			1,310.5			—			1,310.5
Unrealized gains on securities, net of $3.5 million in tax expense		—			—			—			—			9.9			9.9
Reclassification adjustment for realized losses on securities, net of $0.0 million in tax benefit (1)		—			—			—			—			0.0			0.0
Cash dividends declared ($2.67 per share)		—			—			—			(962.3	)		—			(962.3	)
Repurchases of common shares (2)		(1.5	)		(0.0	)		(6.2	)		(163.0	)		—			(169.2	)
Stock-based compensation costs		—			—			45.1			—			—			45.1
Foreign currency translation adjustment		—			—			—			—			4.8			4.8
Activity related to equity-based plans		1.0			0.0			37.2			(22.1	)		—			15.1
Balance as of February 29, 2024		360.0		$	3.6		$	1,702.5		$	2,186.2		$	(145.2	)	$	3,747.1


	For the three months ended February 29, 2024
										Accumulated
					Additional					other
	Common stock				paid-in		Retained			comprehensive
	Shares		Amount		capital		earnings			loss			Total
Balance as of November 30, 2023		359.8	$	3.6	$	1,678.6	$	2,009.4		$	(167.2	)	$	3,524.4
Net income		—		—		—		498.6			—			498.6
Unrealized gains on securities, net of $6.3 million in tax expense		—		—		—		—			19.0			19.0
Reclassification adjustment for realized gains on securities, net of $0.0 million in tax expense (1)		—		—		—		—			(0.0	)		(0.0	)
Cash dividends declared ($0.89 per share)		—		—		—		(320.4	)		—			(320.4	)
Repurchases of common shares (2)		—		—		—		—			—			—
Stock-based compensation costs		—		—		14.4		—			—			14.4
Foreign currency translation adjustment		—		—		—		—			3.0			3.0
Activity related to equity-based plans		0.2		0.0		9.5		(1.4	)		—			8.1
Balance as of February 29, 2024		360.0	$	3.6	$	1,702.5	$	2,186.2		$	(145.2	)	$	3,747.1


	For the nine months ended February 28, 2023
										Accumulated
					Additional					other
	Common stock				paid-in		Retained			comprehensive
	Shares		Amount		capital		earnings			loss			Total
Balance as of May 31, 2022		359.9	$	3.6	$	1,545.9	$	1,669.6		$	(133.9	)	$	3,085.2
Net income		—		—		—		1,206.9			—			1,206.9
Unrealized losses on securities, net of $23.3 million in tax benefit		—		—		—		—			(70.7	)		(70.7	)
Reclassification adjustment for realized gains on securities, net of $0.0 million in tax expense (1)		—		—		—		—			(0.1	)		(0.1	)
Cash dividends declared ($2.37 per share)		—		—		—		(854.5	)		—			(854.5	)
Repurchases of common shares (2)		—		—		—		—			—			—
Stock-based compensation costs		—		—		46.0		—			—			46.0
Foreign currency translation adjustment		—		—		—		—			0.5			0.5
Activity related to equity-based plans		0.6		0.0		16.1		(28.3	)		—			(12.2	)
Balance as of February 28, 2023		360.5	$	3.6	$	1,608.0	$	1,993.7		$	(204.2	)	$	3,401.1


	For the three months ended February 28, 2023
										Accumulated
					Additional					other
	Common stock				paid-in		Retained			comprehensive
	Shares		Amount		capital		earnings			loss			Total
Balance as of November 30, 2022		360.5	$	3.6	$	1,588.6	$	1,811.4		$	(198.3	)	$	3,205.3
Net income		—		—		—		467.4			—			467.4
Unrealized losses on securities, net of $3.3 million in tax benefit		—		—		—		—			(9.4	)		(9.4	)
Reclassification adjustment for realized gains on securities, net of $0.0 million in tax expense (1)		—		—		—		—			0.0			0.0
Cash dividends declared ($0.79 per share)		—		—		—		(284.9	)		—			(284.9	)
Repurchases of common shares (2)		—		—		—		—			—			—
Stock-based compensation costs		—		—		16.3		—			—			16.3
Foreign currency translation adjustment		—		—		—		—			3.5			3.5
Activity related to equity-based plans		0.0		0.0		3.1		(0.2	)		—			2.9
Balance as of February 28, 2023		360.5	$	3.6	$	1,608.0	$	1,993.7		$	(204.2	)	$	3,401.1


In millions	Estimated
Year ending May 31,	recognition of unearned revenue
2024	$	8.4
2025		29.7
Thereafter		35.2
Total recognition of unearned revenue	$	73.3


Costs to obtain contracts:
	For the three months ended						For the nine months ended
	February 29,			February 28,			February 29,			February 28,
In millions	2024			2023			2024			2023
Balance, beginning of period	$	605.0		$	562.6		$	597.5		$	550.2
Capitalization of costs		53.7			65.2			163.1			172.2
Amortization		(51.6	)		(48.9	)		(153.5	)		(143.5	)
Balance, end of period	$	607.1		$	578.9		$	607.1		$	578.9


Costs to fulfill contracts:
	For the three months ended						For the nine months ended
	February 29,			February 28,			February 29,			February 28,
In millions	2024			2023			2024			2023
Balance, beginning of period	$	75.8		$	74.5		$	75.3		$	72.3
Capitalization of costs		7.5			8.3			21.2			23.4
Amortization		(6.7	)		(6.6	)		(19.9	)		(19.5	)
Balance, end of period	$	76.6		$	76.2		$	76.6		$	76.2


	February 29, 2024
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
In millions	cost		gains		losses			value
Type of issue:
Funds held for clients' money market securities and other restricted cash equivalents	$	2,798.3	$	—	$	—		$	2,798.3
AFS securities:
Asset-backed securities		101.1		0.2		(0.9	)		100.4
Corporate bonds		1,429.4		1.9		(31.2	)		1,400.1
Municipal bonds		1,096.1		0.2		(91.5	)		1,004.8
U.S. government agency and treasury securities		820.3		0.2		(40.8	)		779.7
Variable rate demand notes		—		—		—			—
Total AFS securities		3,446.9		2.5		(164.4	)		3,285.0
Other		33.3		3.0		(1.9	)		34.4
Total funds held for clients and corporate investments	$	6,278.5	$	5.5	$	(166.3	)	$	6,117.7


	May 31, 2023
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
In millions	cost		gains		losses			value
Type of issue:
Funds held for clients' money market securities and other restricted cash equivalents	$	863.1	$	—	$	—		$	863.1
AFS securities:
Asset-backed securities		88.1		—		(1.4	)		86.7
Corporate bonds		1,468.3		3.7		(31.1	)		1,440.9
Municipal bonds		1,091.3		0.1		(105.3	)		986.1
U.S. government agency and treasury securities		788.1		0.3		(41.6	)		746.8
Variable rate demand notes		344.1		—		—			344.1
Total AFS securities		3,779.9		4.1		(179.4	)		3,604.6
Other		30.1		1.1		(2.9	)		28.3
Total funds held for clients and corporate investments	$	4,673.1	$	5.2	$	(182.3	)	$	4,496.0


	February 29, 2024
	Amortized		Fair
In millions	cost		value
Maturity date:
Due in one year or less	$	157.0	$	154.5
Due after one year through three years		1,262.6		1,197.0
Due after three years through five years		1,675.5		1,588.0
Due after five years		351.8		345.5
Total	$	3,446.9	$	3,285.0


			Maximum			February 29, 2024
			Amount			Outstanding			Available
$ in millions	Expiration Date		Available			Amount			Amount
Credit facilities:
JP Morgan Chase Bank, N.A. (“JPM”)	July 31, 2024	$		1,000.0	$		-	$		1,000.0
JPM	September 17, 2026	$		750.0			-			750.0
PNC Bank, National Association (“PNC”)	February 6, 2026	$		250.0			18.8			231.2
Total Lines of Credit Outstanding and Available					$		18.8	$		1,981.2


		For the three months ended February 29, 2024
		Credit Facility
		$1 Billion				$750 Million				$250 Million
$ in millions		JPM				JPM				PNC
Number of days borrowed			—				—				91
Maximum amount borrowed	$		—		$		—		$		19.3
Weighted-average amount borrowed	$		—		$		—		$		18.6
Weighted-average interest rate			—	%			—	%			6.43	%


		For the three months ended February 28, 2023
		Credit Facility
		$1 Billion				$750 Million				$250 Million
$ in millions		JPM				JPM				PNC
Number of days borrowed			—				—				90
Maximum amount borrowed	$		—		$		—		$		10.2
Weighted-average amount borrowed	$		—		$		—		$		10.0
Weighted-average interest rate			—	%			—	%			5.52	%


	February 29, 2024
	Securities in an unrealized loss position for less than twelve months					Securities in an unrealized loss position for more than twelve months					Total
	Gross					Gross					Gross
	unrealized			Fair		unrealized			Fair		unrealized			Fair
In millions	losses			value		losses			value		losses			value
Type of issue:
Asset-backed securities	$	(0.3	)	$	63.2	$	(0.6	)	$	15.3	$	(0.9	)	$	78.5
Corporate bonds		(9.5	)		792.2		(21.7	)		478.5		(31.2	)		1,270.7
Municipal bonds		(7.9	)		98.7		(83.6	)		892.1		(91.5	)		990.8
U.S. government agency and treasury securities		(3.9	)		249.8		(36.9	)		518.8		(40.8	)		768.6
Total	$	(21.6	)	$	1,203.9	$	(142.8	)	$	1,904.7	$	(164.4	)	$	3,108.6


	February 29, 2024
			Quoted		Significant
			prices in		other		Significant
	Carrying		active		observable		unobservable
	value		markets		inputs		inputs
In millions	(Fair value)		(Level 1)		(Level 2)		(Level 3)
Assets:
Restricted and unrestricted cash equivalents:
Money market securities	$	64.6	$	64.6	$	—	$	—
U.S. government agency and treasury securities		1,324.1		—		1,324.1		—
Total restricted and unrestricted cash equivalents	$	1,388.7	$	64.6	$	1,324.1	$	—
AFS securities:
Asset-backed securities	$	100.4	$	—	$	100.4	$	—
Corporate bonds		1,400.1		—		1,400.1		—
Municipal bonds		1,004.8		—		1,004.8		—
U.S. government agency and treasury securities		779.7		—		779.7		—
Total AFS securities	$	3,285.0	$	—	$	3,285.0	$	—
Other	$	34.4	$	34.4	$	—	$	—
Liabilities:
Other long-term liabilities	$	34.4	$	34.4	$	—	$	—


	Senior Notes	Senior Notes
	Series A	Series B
Stated interest rate	4.07%	4.25%
Effective interest rate	4.14%	4.31%
Interest rate type	Fixed	Fixed
Interest payment dates	Semi-annual, in arrears	Semi-annual, in arrears
Principal payment dates	March 13, 2026	March 13, 2029
Note type	Unsecured	Unsecured


	Exhibit number	Description

#	10.1	Agreement between Paychex, Inc. and Efrain Rivera, dated as of December 15, 2023, incorporated herein by reference from Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended November 30, 2023, filed with the Commission on December 21, 2023.
*	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)


Date:	April 02, 2024	/s/ John B. Gibson
		John B. Gibson
		President, Chief Executive Officer and Director
		(Principal Executive Officer)

Date:	April 02, 2024	/s/ Robert L. Schrader
		Robert L. Schrader
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date:	April 02, 2024	/s/ Christopher Simmons Christopher Simmons Vice President, Controller and Treasurer (Principal Accounting Officer)