Paychex March 2010 Conference Call 3rd Quarter Earnings
Client base decline of 2.1%
Earnings goals in first 3 quarters met
Checks per client decreased 2.2% opposed to 3% 5% in past quarters
Client losses are decreasing
50% growth in related service revenues
Positive cash flows
Debt free balance sheet
Implemented new application to for payroll platform, will run more efficient
Payroll service revenues decreased 6%
HR service revenue increased 3% to 135m in 3rd quarter
Combined interest decreased 13% due to lower rates (interest on float)
Operating income down 4%, 7% for 9 months (includes 18m litigation charge)
Diluted EPS 1.00, .03 litigation related
Investing in variable rate demand notes, highly liquid, corporations, universities, municipalities @ much lower rates 18 basis points after tax – divested of these at onset of financial crisis, just now getting back into them
Average client funds expected to be down 5%
ROE for last 12 months was 34%
2010 Full Year Guidance
Payroll svc revenue decrease 5-7%
HR Services 3-6%
Total service revenue decrease 2-5%
Interest in funds held for clients decrease 25-30%
Total revenue decrease 2-5%
Investment income net decrease 30-35%
Net income decrease 10-12% (Reflects 18.8m litigation charge)
Less sales than normal due to lower level of business formation
Core payroll affected by less business formation
Important Economic Indicators
New hire activity down 31% 1yr ago as opposed to down 11% this quarter
Checks per client down 2.2% as opposed to 4.0% last year
57000 jobs was average monthly lost
Unemployment flat 9.7%
Payroll client growth down 3.6%
Sales for new business was 1.2% as opposed to 7% 1 year ago
Business failures are where they were in 2008
Payroll revenue growth -6.0%