EXHIBIT 99.1



PRESS RELEASE OF PAYCHEX, INC. DATED DECEMBER 21, 2016





Paychex, Inc. Reports Second Quarter Results



December 21, 2016 



Second Quarter Fiscal 2017 Highlights

Rochester, N.Y., (December 21, 2016) — Paychex, Inc. (“Paychex,” “we,” “our,” or “us”) (NASDAQ:PAYX) today announced total service revenue of $760.0 million for the three months ended November 30, 2016 (the “second quarter”), an increase of 7% from $711.3 million for the same period last year.  Net income increased 7% to $202.1 million and diluted earnings per share increased 8% to $0.56 per share.    

Martin Mucci, President and Chief Executive Officer, commented, “During the second quarter, we continued to achieve growth across all of our major human capital management (“HCM”) product lines and reached a new milestone of one million client worksite employees served by our Paychex HR Services.  This month also marks the one-year anniversary of our acquisition of Advance Partners.  We are pleased with the contributions of this acquisition to our financial results and remain encouraged by the opportunities for growth in this business.”   

Mucci added, “While the presidential election brought discussion about the future of healthcare reform, and a  delay was initiated for the Department of Labor’s Overtime Rule, we continued to experience solid retention of our ACA product clients and increased growth of our time and attendance solutions.  We have a long history and proven track record of educating and assisting our clients with navigating changes in the regulatory landscape, and we expect this expertise to be in demand more than ever during this time of policy changes.”   

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Payroll service revenue was $440.9 million for the second quarter, a  3% increase compared to the same period last year.  Advance Partners contributed approximately 1% to this growth in payroll service revenue for the second quarter.    The remaining increase was driven by growth in our client base and revenue per check.  Revenue per check improved as a result of price increases, net of discounts.    

Human Resource Services (“HRS”) revenue was $319.1 million for the second quarter, an increase of 12% compared to the same period last year. HRS revenue growth was primarily driven by increases in our client base across all major HCM services, including: comprehensive human resource outsourcing services; retirement services; time and attendance; and human resource administration.  Our largest HRS revenue stream is Paychex HR Services, which includes our administrative services organization and our professional employer organization (“PEO”).  Strong demand for these services resulted in double-digit growth in the number of client worksite employees served as of November  30, 2016 as compared to November  30, 2015.  Retirement services revenue also benefited from an increase in asset fee revenue earned on the asset value of participants’ funds.  Insurance services revenue benefited from continued growth of our full-service Affordable Care Act (“ACA”)  product and health and benefit applicants, coupled with higher average premiums and an increase in clients in our workers' compensation insurance product.  Advance Partners contributed approximately 2% to the growth in HRS revenue for the second quarter.

Interest on funds held for clients increased 2% to $11.4 million for the second quarter, compared to the respective period last year. The increase resulted primarily from slightly higher average interest rates earned.  The funds held for clients average investment balances were down 1% for the second quarter as the impact of client base growth was offset by the impact of timing of certain remittances to taxing authorities. 

Average investment balances and interest rates are summarized below:







Total expenses increased 8% to $460.3 million compared to the same period last year.  Advance Partners contributed approximately one and one-half percent to this growth.  The primary driver of expense growth was higher wages and related expenses resulting from increased headcount in operations.  Selling expenses increased modestly.  Growth in selling expenses was tempered by strong sales in the prior year quarter.  Continued growth in our PEO also contributed to total expense growth. 

Operating income increased 6% to $311.1 million compared to the same period last year.  Operating income, as a percent of total revenue, was approximately 40% for the second quarter, comparable with the same period last year.

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Our effective income tax rate was 35.2% for the second quarter compared to 36.0% for the same period last year.  The decrease in the effective income tax rate was due to the recognition of insignificant discrete tax items during the second quarter.

Year-To-Date Fiscal 2017 Highlights

The highlights for the six months ended November 30, 2016 (the “six months”) are as follows:



Financial Position and Liquidity

Our financial position as of November 30, 2016 remained strong with cash and total corporate investments of $725.1 million.  Our primary source of cash is generated from our ongoing operations.  Short-term borrowings totaled $103.1 million as of November 30, 2016.  Our positive cash flows have historically allowed us to support our business and to pay substantial dividends to our stockholders.  It is anticipated that cash and total corporate investments as of November 30, 2016, along with projected operating cash flows and available short-term financing, will support our normal business operations, capital purchases, business acquisitions, share repurchases, and dividend payments for the foreseeable future.    

Cash flows from operations were $413.4 million for the six months, a decrease of 2% from the same period last year.  This decrease resulted mainly from fluctuations in working capital, partially offset by higher net income adjusted for non-cash items.  Working capital fluctuations contributed $147.0 million of cash outflows for the six months, compared with $111.5 million of cash outflows for the same period last year.

During the six months, we repurchased 2.9 million shares of our common stock for a total of $166.2 million.  In the respective prior year period, we repurchased 1.3 million shares for $62.9 million.

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Outlook

Our outlook for the fiscal year ending May 31, 2017 (“fiscal 2017”) is based upon current market, economic, and interest rate conditions continuing with no significant changes. Our guidance for fiscal 2017 is summarized as follows:





Non-GAAP Financial Measures





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In addition to reporting net income and diluted earnings per share, U.S. GAAP measures, we present adjusted net income and adjusted diluted earnings per share, which are non-GAAP measures.  We believe adjusted net income and adjusted diluted earnings per share are appropriate additional measures, as they are indicators of our core business operations performance period over period.  Adjusted net income and adjusted diluted earnings per share both exclude the additional tax benefit or shortfall related to employee stock-based compensation recognized in income taxes.  This arose from early-adoption in June 2016 of new accounting guidance, but will be a recurring item going forward.  This item is subject to volatility and will vary based on employee decisions on exercising employee stock options and fluctuations in our stock price, neither of which is in the control of management.  Also excluded is a  net tax benefit that was recorded for income derived in prior tax years related to customer-facing software that we produced.  This was an unusual event that is not expected to recur.  We believe presenting net income and diluted earnings per share excluding these particular discrete tax items allows a better understanding of core business performance.  Adjusted net income and adjusted diluted earnings per share are not calculated through the application of GAAP and are not a required form of disclosure by the Securities and Exchange Commission (“SEC”).  As such, they should not be considered as a substitute for the GAAP measures of net income and diluted earnings per share, and therefore should not be used in isolation, but in conjunction with, the GAAP measures.  The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.

Quarterly Report on Form 10-Q

We anticipate filing our Quarterly Report on Form 10-Q (“Form 10-Q”) for the three months ended November 30, 2016 within the next few days and it will be available at www.paychex.com.  This press release should be read in conjunction with the Form 10-Q and the related Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in that Form 10-Q.



Conference Call

Interested parties  may access the webcast of our Earnings Release Conference Call, scheduled for December 21, 2016 at 9:30 a.m. Eastern Time at http://investor.paychex.com/webcasts. The webcast will also be archived for approximately one month. Our news releases, current financial information, SEC filings, and investor presentation are also accessible at http://investor.paychex.com.

For more information, contact:



About Paychex

Paychex, Inc. (NASDAQ:PAYX) is a leading provider of integrated human capital management solutions for payroll, human resources, retirement, and insurance services. By combining its innovative software-as-a-service technology and mobility platform with dedicated, personal service, Paychex empowers small- and medium-sized business owners to focus on the growth and management of their business. Backed by 45 years of industry expertise, Paychex serves approximately 605,000 payroll clients as of May 31, 2016 across more than 100 locations and pays one out of every 12 American private sector employees. Learn more about Paychex by visiting www.paychex.com and stay connected on Twitter  (www.twitter.com/paychex)  and LinkedIn  (www.linkedin.com/company/paychex).

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Cautionary Note Regarding Forward-Looking Statements Pursuant to the U.S. Private Securities Litigation Reform Act of 1995

Certain written and oral statements made by us may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by such words and phrases as “we expect,” “expected to,” “estimates,” “estimated,” “current outlook,” “we look forward to,” “would equate to,” “projects,” “projections,” “projected,” “projected to be,” “anticipates,” “anticipated,” “we believe,” “could be,” and other similar words or phrases. Examples of forward-looking statements include, among others, statements we make regarding operating performance, events, or developments that we expect or anticipate will occur in the future, including statements relating to our outlook, revenue growth, earnings, earnings-per-share growth, or similar projections.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict, many of which are outside our control. Our actual results and financial conditions may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance upon any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

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Any of these factors, as well as such other factors as discussed in our SEC filings, could cause our actual results to differ materially from our anticipated results. The information provided in this document is based upon the facts and circumstances known at this time, and any forward-looking statement made by us in this document speaks only as of the date on which it is made. Except as required by law, we undertake no obligation to update these forward-looking statements after the date of issuance of this press release to reflect events or circumstances after such date, or to reflect the occurrence of unanticipated events.



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PAYCHEX, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

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PAYCHEX, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In millions, except per share amount)







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PAYCHEX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

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© 2016 Paychex, Inc.

 

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