Paychex, Inc. Reports Fourth Quarter and Full Year 2025 Results
Paychex, Inc. (Nasdaq: PAYX) (the "Company," "Paychex," "we," "our," or "us") today reported results for the fiscal quarter ended May 31, 2025 (the "fourth quarter") and fiscal year ended May 31, 2025...
- Double Digit Revenue Growth in Fourth Quarter
- Completed the Acquisition of Paycor HCM, Inc. ("Paycor")
- Issues Fiscal 2026 Business Outlook
ROCHESTER, N.Y.: Paychex, Inc. (Nasdaq: PAYX) (the "Company," "Paychex," "we," "our," or "us") today reported results for the fiscal quarter ended May 31, 2025 (the "fourth quarter") and fiscal year ended May 31, 2025 ("fiscal 2025"). Results compared with the same period last year are as follows:
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| Fourth Quarter |
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| Fiscal Year |
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In millions, except per share amounts |
| 2025 |
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| 2024 |
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| Change(2) |
| 2025 |
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| 2024 |
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| Change(2) | ||||||||||||||
Total revenue |
| $ |
| 1,427.3 |
|
| $ |
| 1,295.1 |
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| 10 |
| % |
| $ |
| 5,571.7 |
|
| $ |
| 5,278.3 |
|
|
| 6 |
| % |
Operating income |
| $ |
| 431.1 |
|
| $ |
| 481.8 |
|
|
| (11 | ) | % |
| $ |
| 2,207.7 |
|
| $ |
| 2,174.1 |
|
|
| 2 |
| % |
Adjusted operating income(1) |
| $ |
| 576.7 |
|
| $ |
| 521.3 |
|
|
| 11 |
| % |
| $ |
| 2,370.0 |
|
| $ |
| 2,213.6 |
|
|
| 7 |
| % |
Operating margin |
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| 30.2 | % |
|
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| 37.2 | % |
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| 39.6 | % |
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| 41.2 | % |
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Adjusted operating margin(1) |
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| 40.4 | % |
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| 40.2 | % |
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| 42.5 | % |
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| 41.9 | % |
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Diluted earnings per share |
| $ |
| 0.82 |
|
| $ |
| 1.05 |
|
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| (22 | ) | % |
| $ |
| 4.58 |
|
| $ |
| 4.67 |
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|
| (2 | ) | % |
Adjusted diluted earnings per share(1) |
| $ |
| 1.19 |
|
| $ |
| 1.12 |
|
|
| 6 |
| % |
| $ |
| 4.98 |
|
| $ |
| 4.72 |
|
|
| 6 |
| % |
(1) | Adjusted operating income, adjusted operating margin, and adjusted diluted earnings per share are not United States ("U.S.") generally accepted accounting principle ("GAAP") measures. Please refer to the "Non-GAAP Financial Measures" section on page 4 of this press release for a discussion of non-GAAP measures. |
(2) | Percentage changes are calculated based on unrounded numbers. |
“Paychex demonstrated solid performance this year against our strategic objectives, underscoring our ability to effectively navigate dynamic market conditions while continuing to enhance our customer experience and market position, and maintaining our industry-leading operating margins,” stated John Gibson, President and Chief Executive Officer. “We delivered 10% revenue growth in the fourth quarter, reflecting continued execution across the business and the addition of Paycor. Our strong client retention this year is a testament to the value we deliver as a trusted partner in our customers' growth and success, particularly during challenging and uncertain times. The strategic investments we continued to make in AI, technology and our customer experience played a significant role in our growth in revenue and profitability, contributing to strong adjusted operating margin expansion this year despite margin headwinds from Paycor and the discontinued Employee Retention Tax Credit (“ERTC”) program.”
Gibson added, “With the successful completion of the Paycor acquisition and significant progress made on the integration, Paychex is better positioned than ever before for continued success in the digital and AI-driven era of human capital management ("HCM"). This strategic move strengthens our capabilities upmarket; expands our total addressable market; enhances our strategic partner network; and provides additional opportunity for cross sell across our client base. The anticipated cost and revenue synergies, coupled with our commitment to innovation and customer-centric solutions, we believe will position us to continue our long-standing commitment to deliver robust returns and create long-term shareholder value.”
Fourth Quarter Business Highlights
Total revenue increased to $1.4 billion for the fourth quarter, representing growth of 10% over the prior year period. Highlights as compared with the corresponding prior year period are as follows:
Management Solutions revenue increased 12% to $1.0 billion for the fourth quarter, primarily due to the following:
- The acquisition of Paycor; and
- Higher revenue per client resulting from price realization and product penetration, including HR Solutions and Retirement.
Excluding the acquisition of Paycor, Management Solutions revenue increased approximately 3% compared with the corresponding prior year period.
Professional Employer Organization ("PEO") and Insurance Solutions revenue increased 4% to $340.3 million for the fourth quarter, primarily due to the following:
- Growth in the number of average PEO worksite employees; and
- Increase in PEO insurance revenues.
Interest on funds held for clients increased 18% to $45.2 million for the fourth quarter, primarily due to the acquisition of Paycor. Excluding the acquisition of Paycor, interest on funds held for clients increased approximately 3% compared with the corresponding year period.
Total expenses increased 22% to $1.0 billion for the fourth quarter, primarily impacted by the following factors:
- Acquisition-related costs associated with Paycor;
- Increase in compensation-related expenses, primarily due to the acquisition of Paycor; and
- Continued investment in product, technology, data, and AI; partially offset by
- Cost optimization initiatives totaling $39.5 million recognized in the prior year period.
Excluding the acquisition of Paycor and the prior year period cost optimization initiatives noted above, total expenses increased 1% for the fourth quarter compared to the prior year period.
Operating income decreased 11% to $431.1 million for the fourth quarter. Operating margin (operating income as a percentage of total revenue) was 30.2% for the fourth quarter compared to 37.2% for the prior year period. Adjusted operating income(1) grew 11% to $576.7 million for the fourth quarter. Adjusted operating margin(1) (adjusted operating income as a percentage of total revenue) was 40.4% for the fourth quarter compared to 40.2% for the prior year period. Excluding Paycor, adjusted operating margin(1) expanded by approximately 110 basis points compared to the prior year period.
Interest expense increased $54.2 million to $63.7 million for the fourth quarter, primarily due to the issuance of incremental debt to finance the acquisition of Paycor and acquisition-related costs.
Our effective income tax rate was 23.7% for the fourth quarter and 22.8% for the prior year period. Both periods were affected by the recognition of discrete tax impacts related to employee stock-based compensation payments.
Diluted earnings per share decreased 22% to $0.82 per share and adjusted diluted earnings per share(1) increased 6% to $1.19 per share for the fourth quarter.
(1) | Adjusted operating income, adjusted operating margin, and adjusted diluted earnings per share are not U.S. GAAP measures. Please refer to the "Non-GAAP Financial Measures" section on page 4 of this press release for a discussion of non-GAAP measures. |
Fiscal Year Business Highlights
Highlights for fiscal 2025 as compared with the corresponding prior year are as follows:
- Total revenue increased 6% to $5.6 billion.
- Operating income increased 2% to $2.2 billion and adjusted operating income(1) increased 7% to $2.4 billion.
- Operating margin was 39.6% for the fiscal year compared to 41.2% for the prior year. Adjusted operating margin(1) was 42.5% for the fiscal year compared to 41.9% for the prior year.
- Diluted earnings per share decreased 2% to $4.58 per share. Adjusted diluted earnings per share(1) increased 6% to $4.98 per share.
(1) | Adjusted operating income, adjusted operating margin, and adjusted diluted earnings per share are not U.S. GAAP measures. Please refer to the "Non-GAAP Financial Measures" section on page 4 of this press release for a discussion of non-GAAP measures. |
Financial Position and Liquidity
Our financial position and cash flow generation remained strong during fiscal 2025. As of May 31, 2025, we had:
- Cash, restricted cash, and total corporate investments of $1.7 billion.
- Short-term and long-term borrowings, net of debt issuance costs, of $5.0 billion, an increase of $4.1 billion compared to May 31, 2024, primarily related to the financing for the Paycor acquisition.
- Cash flow from operations was $2.0 billion for the fiscal year.
- Cash used from investing activities was $3.7 billion for the fiscal year, primarily related to acquisitions.
- Cash flow from financing activities was $2.6 billion for the fiscal year, primarily related to the financing for the Paycor acquisition.
Return to Stockholders During Fiscal 2025
- Paid cumulative dividends of $4.02 per share totaling $1.4 billion, resulting in a dividend payout ratio of 87% of net income.
- Repurchased 828,855 shares of our common stock for $104.0 million.
Non-GAAP Financial Measures
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| For the three months ended |
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| For the twelve months ended |
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| May 31, |
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| May 31, |
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$ in millions, except per share amounts |
| 2025 |
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| 2024 |
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| Change |
| 2025 |
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| 2024 |
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| Change | ||||||||||||||
Operating income |
| $ |
| 431.1 |
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| $ |
| 481.8 |
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| (11 | ) | % |
| $ |
| 2,207.7 |
|
| $ |
| 2,174.1 |
|
|
| 2 |
| % |
Non-GAAP adjustments: |
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Acquisition-related costs(1) |
|
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| 145.6 |
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| — |
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| 162.3 |
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| — |
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Cost optimization initiatives(2) |
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| — |
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| 39.5 |
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| — |
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| 39.5 |
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Adjusted operating income |
| $ |
| 576.7 |
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| $ |
| 521.3 |
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| 11 |
| % |
| $ |
| 2,370.0 |
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| $ |
| 2,213.6 |
|
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| 7 |
| % |
Adjusted operating margin |
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| 40.4 | % |
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| 40.2 | % |
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| 42.5 | % |
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| 41.9 | % |
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