Paychex(PAYX)2024-10-01 20:21Revenue and Income - Total revenue for the first quarter increased to $1.3 billion, reflecting a 3% increase compared to the prior year period[75]. - Management Solutions revenue was $961.7 million, an increase of 1%, driven by growth in the number of clients and higher product penetration[75]. - PEO and Insurance Solutions revenue reached $319.3 million, reflecting a 7% increase due to growth in average PEO worksite employees[76]. - Total service revenue was $1,281.0 million, a 2% increase from the prior year[73]. - Net income for the first quarter was $427.4 million, a 2% increase compared to $419.2 million in the prior year[74]. - Diluted earnings per share increased to $1.18, reflecting a 2% growth from $1.16 in the prior year[74]. - Adjusted net income increased by 1% to $421.2 million, with adjusted diluted earnings per share rising by 2% to $1.16[80]. Expenses and Tax - Total expenses increased by 3% to $771.8 million for the first quarter compared to the prior year period, driven by an 18% increase in PEO direct insurance costs to $130.3 million and a 6% increase in other expenses to $151.2 million[78]. - The effective income tax rate was 23.3% for the first quarter, compared to 23.7% in the prior year[74]. - The effective income tax rate was 23.3% for the first quarter, a slight decrease from 23.7% in the prior year[80]. Cash Flow and Investments - Net cash provided by operating activities decreased to $546.1 million for the three months ended August 31, 2024, down from $693.0 million in the prior year, a change of $146.9 million[94]. - Net cash used in investing activities was $(110.0) million for the current period, compared to $(13.2) million in the prior year, reflecting a change of $(96.8) million[94]. - Net cash used in financing activities was $(485.0) million, a significant decrease from $1,069.4 million in the prior year, resulting in a change of $(1,554.4) million[94]. - Cash, restricted cash, and total corporate investments amounted to $1.6 billion as of August 31, 2024, with short-term borrowings of $18.9 million and long-term borrowings of $800.0 million[82]. - The company anticipates that its cash flows and available financing will support ongoing operations, capital purchases, and dividend payments for the foreseeable future[82]. Stock and Dividends - Dividends paid to stockholders increased by 10% to $353.4 million[73]. - Cash dividends per common share increased to $0.98 from $0.89 year-over-year[94]. - The company maintains a stock repurchase program with authorization to buy back up to $400.0 million of its common stock, expiring on May 31, 2027[114]. - During the first quarter, the company repurchased a total of 0.8 million shares at an average price of $125.50 per share, totaling approximately $104.0 million[115]. - The total dollar value that may yet be repurchased under the stock repurchase program is approximately $296.0 million[115]. Investment Portfolio - The average interest rate earned on combined funds held for clients and corporate cash equivalents was 3.9% compared to 3.7% for the prior year period[102]. - As of August 31, 2024, the total investment portfolio is expected to average approximately $6.2 billion for the year ending May 31, 2025, with 45% in short-term securities and VRDNs[105]. - The net unrealized losses on the investment portfolio were $80.4 million as of August 31, 2024, down from $162.5 million as of May 31, 2024[106]. - The weighted-average yield-to-maturity for AFS securities was 3.1% as of August 31, 2024, compared to 3.0% as of May 31, 2024[107]. - The company had $3.4 billion invested in AFS securities at fair value as of August 31, 2024[107]. - A hypothetical decrease in longer-term interest rates of 25 basis points could increase the fair value of the AFS securities portfolio by approximately $20.0 million to $25.0 million[107]. Corporate Governance and Controls - As of August 31, 2024, the company's disclosure controls and procedures were deemed effective at a reasonable assurance level[113]. - There have been no material changes in the company's critical accounting policies and estimates as of the latest reporting period[111]. - The company reported no changes in its internal control over financial reporting that materially affected its operations during the fiscal quarter ended August 31, 2024[114]. - The company evaluates critical accounting policies related to revenue recognition, insurance reserves, and stock-based compensation costs among others[111]. - The company has adopted and issued new accounting pronouncements, details of which can be found in the Notes to Consolidated Financial Statements[112]. - The company has a program to manage common stock dilution through its stock repurchase initiative[114]. - The company continues to assess market risk factors as part of its financial condition and results of operations[112].