Paychex (PAYX) 2021 Q4 Financial Results

Back in the 1970s, there was no notable firm providing payroll accounting services to smaller businesses. Former sales manager at Electronic Accounting Systems, Thomas Golisano, saw this gap as a huge opportunity. So in 1971, Golisano founded Paymaster that was later renamed Paychex Inc. (NASDAQ:PAYX). The company started offering payroll services to small and medium-sized enterprises. Today, it is a leading provider of HR, payroll, and benefit outsourcing services in the U.S.

Paychex recently announced better-than-expected financial results for the fourth quarter, helped by solid demand for its services. The company reported earnings of 73 cents per share for the three months ended May 31, compared to 61 cents per share in the year-ago quarter. It earned 72 cents per share on an adjusted basis, ahead of the consensus estimate of 67 cents per share.

Revenue came in at $1.03 billion, versus $915.1 million in the year-ago quarter. Analysts, on average, were expecting Paychex to report revenue of $980 million. If we look at the performance of key segments, revenue from the management solutions segment rose 14 percent to $756.4 million, while PEO and insurance solutions revenue surged 13 percent to $258.3 million.

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Commenting on the results, CEO Martin Mucci said in a statement, “Our fourth quarter results were driven by record client retention levels, record sales results, and stronger checks per client, which were driven by improving macroeconomic conditions and gains in employment. Client base growth was strong and we ended the fiscal year with over 710,000 clients. We are proud to finish the year with positive service revenue growth which is a testament to the resiliency, innovation, and commitment of our employees and the strength of our business model. Having navigated through the uncertain environment of the pandemic, we are well-positioned with the continued innovation of our technology and product suite to meet the continuing needs of businesses and help them succeed and thrive as they begin to bring employees back to work and adjust to the changes of how, where, and when work gets done.”

Looking forward, Paychex is anticipating revenue growth of around 7 percent for its fiscal year ending May 31, 2022. Moreover, adjusted earnings are expected to increase in the range of 10-12 percent on a year-over-year basis.