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Paychex Inc PAYX
Q3 2013 Earnings Call Transcript

Transcript Call Date 03/28/2013

Operator: Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would like to introduce your host for the call today, Mr. Martin Mucci, President and Chief Executive Officer. Sir, you may begin.

Martin Mucci - President and CEO: Thank you, Sherry. Thank you for joining us for our discussion of Paychex's Third Quarter Fiscal 2013 Earnings Release. Joining me today is Efrain Rivera, our Chief Financial Officer. Yesterday afternoon after the market closed we released our financial results for the third quarter ending February 28th, 2013 and filed our Form 10-Q which provides additional discussion and analysis of the results for the quarter. These documents are available by accessing our Investor Relations page at paychex.com.

This teleconference is being broadcast over the Internet and will be archived and available on our website for approximately one month. On today's call I will review the highlights for the third quarter and our operation, sales, and product development areas and Efrain will review our third quarter financial results and discuss our full-year guidance and then we'll open it up for your questions.

Our results for the third quarter of fiscal 2013 reflect continued solid progress. We are focused on driving growth in revenue and profits with industry-leading service and technology solutions given to our clients and their employees. Our client base, checks per payroll and client retention demonstrate continued positive growth. Efrain will go into more detail on the financial results and the comparisons; however, I would like to provide you a few highlights from the quarter.

Payroll revenue grew by 2% due to the increases in both checks per payroll and revenue per check. This growth rate is up from the first half of the fiscal year. HRS revenue grew double-digit for the third quarter as we continue to experience success in selling 401(k) and HR Outsourcing and other value-added solutions to our clients. Total service revenue grew 4%.

Checks per payroll has improved for 12 consecutive quarters and was stronger than anticipated. Third quarter growth was about 2.3% compared to 1.8% for the prior-year third quarter. Checks per payroll was positively impacted by a higher calendar year-end bonus payment activity. Execution and operations remained solid as evidenced by the exceptionally strong client satisfaction results. It is our exceptional client service along with our technology that sets us apart. The dedication of our employees has resulted in client retention that remains at record levels, and through the first nine months have us on track for another strong year of retention and possibly our best ever.

In addition, the operations team did a great job for our clients with year-end processing and the distribution of our W-2s and year-end reporting that ended ahead of schedule. Our third quarter is our peak selling season and we put a lot of focus throughout the year on sales execution. We added new territories, focused on market segmentation in both payroll as well as 401(k) and other areas and got involved in more franchise and banking opportunities.

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