Paychex, Inc. reports 88.3% CAPEX growth in 2018 and 7.3% Revenue growth
06/27/2018 • About Paychex, Inc. (
$PAYX) • By InTwits
Paychex, Inc. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is relatively stable: 42.2% in FY2018 vs. 43.4% in FY2017 vs. 43.2% in FY2014
- Paychex, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.1%. At the same time it's in pair with industry average of 7.6%
- CAPEX is quite volatile: $305m in 2018, $111m in 2017, $118m in 2016, $85m in 2015, $103m in 2014
- The company has highly profitable business model: ROIC is 64.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Paychex, Inc.'s Revenue increased on 7.3%. Revenue growth showed acceleration in FY18Q4 - it increased 9.1% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 15.7 pp from 20.9% to 36.5% in 2018.
Gross Margin decreased slightly on 0.92 pp from 70.8% to 69.9% in FY2018. SG&A as a % of Revenue showed almost no change in FY2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018.
Net Income margin increased slightly on 1.7 pp from 25.9% to 27.6% in FY2018. Net Income margin grew at 0.67 pp per annum in FY2014-FY2018. The efficient tax rate was 28.0% in FY2018 while the average for the last five years was 33.6%.
Investments (CAPEX, working capital and M&A)
In FY2018 Paychex, Inc. had CAPEX/Revenue of 5.7%. Paychex, Inc.'s CAPEX/Revenue increased slightly on 1.9 pp from 3.9% in FY2015 to 5.7% in FY2018. For the last three years the average CAPEX/Revenue was 4.2%.
Accounts receivable as a % of Revenue showed almost no change in FY2018. Accounts payable as a % of Revenue increased slightly on 1.1 pp from 6.2% to 7.3% in FY2018.
Paychex, Inc. has spent
$180m on M&A in FY2018 which accounts for 5.3% of revenue.
Return on investment
The company operates at high and attractive ROIC (64.5%) and ROE (46.9%). ROIC increased slightly on 0.55 pp from 63.9% to 64.5% in FY2018. ROE increased on 4.7 pp from 42.3% to 46.9% in FY2018. ROIC followed a growing trend at 2.5 pp per annum in the last 5 years. ROE followed a growing trend at 2.8 pp per annum in the last 5 years.
Leverage (Debt)
The company has no debt. Cash surged on 94.0%.
Valuation and dividends
The company's trades at EV/EBITDA 16.6x and P/E 25.7x.
The company paid 79.3% of Net Income as dividends in FY2018. Dividends grew on average at 7.7% per annum in the last 5 years).
Management team
Paychex, Inc.'s CEO is Martin Mucci "Marty". Martin Mucci "Marty" is a founder and has 8 years tenure with the company. CEO total compensation was
$6,736,164 in FY2018 which included
$950,000 salary. Paychex, Inc.'s CFO Efrain Rivera has spent 8 years with the company.
At the end of financial year the company had 10.7% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 14,300 employees. The number of employees increased on 4.4%. Average revenue per employee in FY2018 was
$236,427 and it increased on 2.8%.
Financial and operational results
FY ended 05/31/2018
Paychex, Inc. ($PAYX) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 2,519 | 2,740 | 2,952 | 3,151 | 3,381 | 7.3% |
| Gross Profit | 1,786 | 1,932 | 2,095 | 2,232 | 2,363 | 5.9% |
| SG&A | 699 | 771 | 833 | 865 | 938 | 8.4% |
| EBITDA | 1,088 | 1,160 | 1,262 | 1,367 | 1,426 | 4.3% |
| EBIT | 983 | 1,054 | 1,147 | 1,240 | 1,288 | 3.9% |
| Interest expence | 1 | 1 | 1 | 3 | 4 | 56.0% |
| Tax | 361 | 385 | 394 | 428 | 362 | -15.2% |
| Net Income | 628 | 675 | 757 | 817 | 934 | 14.2% |
| Stock Based Compensation | 26 | 31 | 35 | 35 | 45 | 26.0% |
Balance Sheet
|
|---|
| Cash | 153 | 170 | 132 | 185 | 358 | 94.0% |
| Accounts Receivable | 149 | 177 | 409 | 508 | 531 | 4.7% |
| Accounts Payable | 49 | 52 | 57 | 57 | 75 | 30.2% |
| Short Term Debt | 0 | 0 | 0 | 0 | 0 | |
| Long Term Debt | 0 | 0 | 0 | 0 | 0 | |
Cash flow
|
|---|
| Capex | 95 | 106 | 107 | 103 | 194 | 88.3% |
| Dividends | 511 | 552 | 607 | 662 | 740 | 11.8% |
| Acquisitions | 9 | 27 | 296 | | 180 | |
Ratios
|
|---|
| Revenue growth | 8.3% | 8.8% | 7.7% | 6.8% | 7.3% | |
| EBITDA growth | 8.4% | 6.7% | 8.7% | 8.3% | 4.3% | |
|
|---|
| Gross Margin | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% | -0.9% |
| EBITDA Margin | 43.2% | 42.3% | 42.7% | 43.4% | 42.2% | -1.2% |
| EBIT Margin | 39.0% | 38.5% | 38.8% | 39.3% | 38.1% | -1.3% |
| SG&A, % of revenue | 27.7% | 28.2% | 28.2% | 27.5% | 27.7% | 0.3% |
| SBC, % of revenue | 1.0% | 1.1% | 1.2% | 1.1% | 1.3% | 0.2% |
| Net Income Margin | 24.9% | 24.6% | 25.6% | 25.9% | 27.6% | 1.7% |
| CAPEX, % of revenue | 3.8% | 3.9% | 3.6% | 3.3% | 5.7% | 2.5% |
|
|---|
| ROIC | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% | 0.5% |
| ROE | 35.3% | 37.9% | 40.9% | 42.3% | 46.9% | 4.7% |
| Net Debt/EBITDA | -0.1x | -0.1x | -0.1x | -0.1x | -0.3x | -0.1x |
People
|
|---|
| Insider ownership | 10.7% | 10.7% | 10.7% | 10.7% | 10.7% | 0.0% |
| Employees | 12,700 | 13,000 | 13,500 | 13,700 | 14,300 | 4.4% |
| Revenue/Employee, th. $ | 198 | 211 | 219 | 230 | 236 | 2.8% |
Paychex, Inc. ($PAYX) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 793 | 803 | 936 | 871 | | 0.9% | 4.1% | 17.6% | 9.1% |
| EBITDA | 349 | 337 | 406 | 354 | | -1.0% | -1.3% | 20.1% | 5.5% |
| Net Income | 210 | 199 | 367 | 229 | | -3.2% | -1.6% | 81.3% | 17.0% |
Balance Sheet
|
|---|
| Cash | 234 | 257 | 324 | 358 | | 80.3% | 55.9% | 70.6% | 94.0% |
| Short Term Debt | 57 | 133 | 58 | 0 | | 11.5% | 29.4% | 4.2% | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 70.7% | 69.0% | 70.9% | 69.4% | | -0.6% | -1.6% | 0.7% | -1.6% |
| EBITDA Margin | 44.1% | 41.9% | 43.3% | 40.6% | | -0.8% | -2.3% | 0.9% | -1.4% |
| Net Income Margin | 26.5% | 24.8% | 39.2% | 26.2% | | -1.1% | -1.4% | 13.8% | 1.8% |
Peers in Data Processing & Outsourced S
Below we provide Paychex, Inc. benchmarking against other companies in Data Processing & Outsourced S industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | | 167.8% |
| StoneCo Ltd ($STNE) | | | | 74.3% | 106.0% |
| PagSeguro Digital Ltd. ($PAGS) | | 107.1% | 68.7% | 121.7% | 71.8% |
| Payment Data Systems, Inc. ($PYDS) | | 7.4% | -16.0% | 20.7% | 71.7% |
| StarTek, Inc. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
| |
|---|
| Median (55 companies) | | 7.0% | 7.6% | 11.8% | 7.5% |
|---|
| Paychex, Inc. ($PAYX) | | 8.8% | 7.7% | 6.8% | 7.3% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | 97.4% | 97.5% |
| Everi Holdings Inc. ($EVRI) | 25.8% | 38.3% | 36.1% | 34.5% | 79.9% |
| StoneCo Ltd ($STNE) | | | 69.7% | 70.8% | 79.5% |
| Global Payments Inc. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
| WEX Inc. ($WEX) | 85.3% | 83.8% | 54.7% | 58.8% | 63.3% |
| |
|---|
| Median (44 companies) | 38.4% | 39.5% | 39.2% | 38.9% | 40.9% |
|---|
| Paychex, Inc. ($PAYX) | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Visa Inc. ($V) | 64.0% | 68.9% | 55.6% | 69.2% | 65.8% |
| FleetCor Technologies, Inc. ($FLT) | 56.1% | 50.4% | 52.0% | 50.8% | 55.9% |
| StoneCo Ltd ($STNE) | | | 31.4% | 26.0% | 53.0% |
| Mastercard Incorporated ($MA) | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% |
| Everi Holdings Inc. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| |
|---|
| Median (56 companies) | 20.4% | 21.0% | 21.2% | 20.6% | 19.2% |
|---|
| Paychex, Inc. ($PAYX) | 43.2% | 42.3% | 42.7% | 43.4% | 42.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crypto Co/The ($CRCW) | 0.0% | 0.0% | | 1,216.6% | 853.5% |
| Steel Connect, Inc. ($STCN) | 0.6% | 1.5% | 1.7% | 1.1% | 75.6% |
| Everi Holdings Inc. ($EVRI) | 3.0% | 9.3% | 9.4% | 9.9% | 21.9% |
| StoneCo Ltd ($STNE) | | | 7.2% | 18.4% | 8.9% |
| Cardtronics plc ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.0% |
|---|
| Paychex, Inc. ($PAYX) | 3.8% | 3.9% | 3.6% | 3.3% | 5.7% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GreenSky, Inc. ($GSKY) | | | | 156.4% | 93.7% |
| Mastercard Incorporated ($MA) | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% |
| NIC Inc. ($EGOV) | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% |
| Automatic Data Processing, Inc. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
| 3PEA International, Inc. ($TPNL) | 118.8% | -0.3% | 48.2% | 44.9% | 36.0% |
| |
|---|
| Median (62 companies) | 13.3% | 12.8% | 11.1% | 10.6% | 10.2% |
|---|
| Paychex, Inc. ($PAYX) | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StarTek, Inc. ($SRT) | -0.1x | | 2.2x | 2.3x | 18.4x |
| Square, Inc. ($SQ) | | | | | 13.3x |
| Steel Connect, Inc. ($STCN) | -12.5x | | | | 12.6x |
| Exela Technologies Inc ($XELAU) | | | 8.1x | | 9.7x |
| Alliance Data Systems Corporation ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| |
|---|
| Median (54 companies) | 0.6x | 0.7x | 1.6x | 2.3x | 2.2x |
|---|
| Paychex, Inc. ($PAYX) | -0.1x | -0.1x | -0.1x | -0.1x | -0.3x |
