exceeded. definitely exceeded.
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Paychex beat the Street in its fiscal second quarter by a penny a share at $.20/share
mktnews.nasdaq.com\\www\nasdaq\news\msnbc\1998\12\15\NASDAQ_1150_16997.htm&usymbol=PAYX&logo=True&companyname=Paychex%2C+Inc%2E
CNBC - MARKET WATCH
PAYCHEX CHAIRMAN AND CEO TOM GOLISANO
DECEMBER 15, 1998
ABSTRACT: Golisano says Paychex just had its 30th consecutive quarter where earnings have risen over 30%. Golisano says Paychex is always looking to acquire other payroll processing companies.
Ted: Payroll services company, Paychex, reported fiscal second-quarter earnings of 20 cents per diluted share. That's a penny above street estimates and a nickel over the year-ago period. Paychex is the second-largest payroll accounting company in the U.S., serving over 300,000 small- to midsize businesses. There's the chart. You don't need to be a market technician to figure out it looks pretty darn good. The trend intact back to December of '97. Joining us for a look at his company's numbers and future, is Paychex chairman and CEO Tom Golisano, who comes to us live from Rochester, New York. Nice to have you with us.
Good morning.
Ted: So, you didn't win the governor's race. You decided to make more money at your business; is that the deal?
Yeah, it was nice come back to Paychex. The company is doing very well and we have quite an opportunity in front of us, so it's nice to be back.
Ted: Obviously. What's your take on these numbers? You beat the street by a penny, a nickel better than last year. What's the core of strength here?
I think what Paychex has been doing and is doing, of course, is focusing on its core market. We have almost a fixed cost of infrastructure and consequently incremental revenue is very profitable to the company. We just had our 30th consecutive quarter where earnings have risen over 30% and we continue to have our revenues grow at the 19% to 20% range and slightly higher.
Ted: Your client base is up, what, 11% year-over-year?
Yes. We have 309,000 payroll clients. The opportunity though is still very large. There are over 5 1/2 million businesses between 100 and 200 employees in the markets that we currently serve.
So we continually focus on increasing our client base by 11% to 12%. We sell a lot of ancillary services such as 401(k) record keeping, employee handbooks and cafeteria plans and so forth. This is what drives our revenue growth over 19% to 20% and, again, because of the fixed infrastructure cost, our profitability continues to grow in excess of 25% or 30%.
Ted: Tell us, if you would, the human resources professional employer organization segment of your business, what does that do, because here the income was up 159%.
Well, basically that is 401(k) record keeping. We started the year with about 6,000 clients. We expect to finish our fiscal year with about 11,000 clients, almost an 80% increase. The popularity of 401(k)s, of course, in the United States is quite high. The demand is very high. And because Paychex has the advantage of preparing our clients' payrolls, we provide the most efficient and the most accurate 401(k) record keeping, we think, in the industry. And because of our operating efficiencies, because we do process the payroll, we're able to keep the cost very low. That's probably the primary product that's driven our HRS area.
Ted: Expenses were up 13% though, the corporate expenses. How come?
Well, I think you probably have noticed that Paychex now sponsors a Nascar racecar, number 11, driven by Brett Bodyne [phonetic]. And we've incurred some of the new costs in the current quarter, that's part of it. But most of it is general operating expenses.
Ted: AUD, the ticker for ADP, they're number one. What worries you most about them? Why aren't you number one? And what are you doing to take them out?
Well, first of all, Automatic Data has been a great company at a 25-year head start. They've been great for Paychex as a role model, because you know they've had such a great string of consecutive profitability growth year over year, I think the longest in Wall Street, has also done a great job of educating the market. We're now we're in a mode of peaceful coexistence. We're very strong competitors. It's a huge marketplace. There's no reason why both companies shouldn't be very successful.
Ted: Are you open to being acquired or would you look to do some acquisitions in the near term?
Paychex is always interested in acquiring other payroll processors. There seems be a limited supply today. As far as us being acquired, very few people talk to us. I think probably our high-price earnings ratio has something do with that.
Ted: How high is it?
I think right now it's probably in the high 60s.
Ted: What was that again? I'm sorry?
Our price-earnings ratio is probably 68 or 69.
Ted: Yeah, all right. Well, nice to have you with us. The stock is certainly doing well today, up better than 3 points. Thanks for joining joining us, Paychex chairman and CEO, Tom Golisano live from Rochester, New York. |
