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Feb 29, 2020
Paychex Q3 2020 Earnings Report
Paychex reported solid growth across its major business lines, benefiting from investments in product offerings and technology enhancements, and achieving record-level retention rates.
Key Takeaways
Paychex, Inc. announced a 7% increase in total revenue, reaching $1.1 billion for the third quarter ended February 29, 2020. Net income and diluted earnings per share each increased by 9% to $354.5 million and $0.98, respectively. The company experienced solid growth across its major business lines, driven by investments in product offerings and technology.
Total revenue increased 7% to $1.1 billion.
Operating income increased 10% to $470.1 million.
Net income increased 9% to $354.5 million.
Diluted earnings per share increased 9% to $0.98 per share.
Paychex
Paychex
Paychex Revenue by Segment
Revenue by Segment
Management Solutions Revenue
CapyFin.comPEO & Insurance Revenue
CapyFin.comClient Funds Interest Revenue
CapyFin.com Forward Guidance
Paychex anticipates total revenue to grow in the range of 8% to 9%. Management Solutions revenue is anticipated to grow approximately 4% and PEO and Insurance Solutions revenue is anticipated to grow approximately 24%.
Positive Outlook
- Management Solutions revenue is anticipated to grow approximately 4%.
- PEO and Insurance Solutions revenue is anticipated to grow approximately 24%.
- Interest on funds held for clients is anticipated to decline in the range of 2% to 3%.
- Total revenue is anticipated to grow in the range of 8% to 9%.
- The effective income tax rate for fiscal 2020 is expected to be in the range of 23.5% to 24.0%.
Challenges Ahead
- Our outlook for the fiscal year ending May 31, 2020 incorporates known and some estimated impacts related to the COVID-19 virus, including the most recent reductions in the Federal Funds rate.
- The impact from the rapidly changing market and economic conditions due to COVID-19 is uncertain and could impact our results of operations and financial condition in the future.
- That impact could alter our guidance
- Operating margin is anticipated to be approximately 36%.
- Other expense, net is anticipated to be in the range of $22 million to $24 million.
Revenue & Expenses
Visualization of income flow from segment revenue to net income