Paychex (PAYX) Tops Q1 EPS by 8c, Offers Outlook

Paychex (NASDAQ: PAYX) reported Q1 EPS of $0.63, $0.08 better than the analyst estimate of $0.55. Revenue for the quarter came in at $932.2 million versus the consensus estimate of $893.6 million.

Outlook

Our outlook for the fiscal year ending May 31, 2021 (“fiscal 2021”) incorporates anticipated impacts resulting from the COVID-19 pandemic based on current assumptions and market conditions. As this situation continues, future developments could alter our guidance. During the first quarter, we recognized one-time costs of $31.2 million related to the acceleration of cost-saving initiatives, including the long-term strategy to reduce our geographic footprint and headcount optimization. Our guidance for adjusted operating margin, adjusted EBITDA margin, and adjusted diluted earnings per share excludes these one-time costs. Our outlook is currently as follows:

• Management Solutions revenue is anticipated to decline in the range of 1% to 3%;
• PEO and Insurance Solutions revenue is anticipated to decline in the range of 2% to 5%;
• Interest on funds held for clients is anticipated to be in the range of $55 million to $65 million;
• Total revenue is anticipated to decline in the range of 2% to 4%;
• Adjusted operating margin(1) is anticipated to be approximately 35%;
• Adjusted EBITDA margin(1) is anticipated to be approximately 40%;
• Other expense, net is anticipated to be in the range of $30 million to $35 million;
• The effective income tax rate for fiscal 2021 is anticipated to be in the range of 24.0% to 25.0%; and
• Adjusted diluted earnings per share(2) is anticipated to decline in the range of 6% to 8%.

(1) Adjusted operating margin and adjusted EBITDA margin are not U.S. GAAP measures. Adjusted operating margin is calculated as operating margin, adjusted for one-time non-recurring items, as a percentage of total revenue. Adjusted EBITDA margin is calculated as net income, adjusted for interest, taxes, depreciation, amortization and one-time non-recurring items, as a percentage of total revenue. We believe that the exclusion of certain one-time non-recurring items when calculating these measures provides a better indicator of our core business operations performance period over period.

(2) Adjusted diluted earnings per share is not a U.S. GAAP measure. Please refer to the “Non-GAAP Financial Measures” section on page 4 of this press release for a discussion of this non-GAAP measure and a reconciliation to the most comparable U.S. GAAP measure of diluted earnings per share.

For earnings history and earnings-related data on Paychex (PAYX) click here.

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