Paychex, Inc. (NASDAQ:PAYX) Q4 2018 Earnings Conference Call - Preliminary Transcript

Jun 27, 2018 • 09:30 am ET


Paychex, Inc. (NASDAQ:PAYX) Q4 2018 Earnings Conference Call - Preliminary Transcript


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Welcome everyone and thank you for standing by. At this time, all participants are in a listen-only mode until the question and answer session of today's conference. (Operator Instructions) This call is being recorded. If you have any objections, you may disconnect now. May I introduce our speaker for today, the President and Chief Executive Officer, Martin Mucci. Please go ahead.

Martin Mucci

Thank you. Thank you for joining us for the discussion of our Paychex's fourth quarter fiscal 2018 earnings release. Joining me today is Efrain Rivera, our Chief Financial Officer. This morning, before the market opened, we released our financial results for the fourth quarter and fiscal year ended May 31, 2018. You can access our earnings release and our Investor Relations webpage and our 10-K will be filed with the SEC before the end of July.

This teleconference is being broadcast over the Internet and will be archived and available on our website for about one month. On today's call, I will review the business highlights for the fourth quarter. Efrain will review our fourth quarter and full year financial results and discuss our guidance for fiscal 2019. And then we will open it up for your questions.

We were pleased with our strong finish to the fiscal 2018 and the progress we made on key initiatives. Our total revenue growth was 9% for the fourth quarter and 7% for the fiscal year including our acquisitions of HROI, and the Lessor Group. As of May 31, 2018 we served over 650,000 payroll clients.

We acquired HROI, a national PEO in August of 2017, and acquired the Lessor Group, a payroll and HR service provider headquartered in Denmark at the end of February 2018. We are pleased with both of these acquisitions which have so far exceeded our expectations and are progressing well, and we believe these acquisition position us well for the long-term growth in both our PEO and international businesses.

At the start of fiscal 2018 we implemented certain changes on our sales go-to-market strategy. Our results -- we started off slowly in the first half of the year but gained momentum in the second half. We are particularly pleased with the sales performance in our comprehensive HR outsourcing services including our PEO business which performed well in both sales and client retention. And excluding Lessor, our payroll client base was comparable to last year.

Client retention was greater than 81% of our beginning fiscal year payroll client base at the end of last year. We just completed the realignment of our service organization to allow greater flexibility and customization of our service - the service our clients receive and during that transition we experienced a slight reduction in retention. In fiscal '18 client lost trends improved as the year progressed and in particular we showed strong retention in our comprehensive HR outsourcing solutions for the year.

Job growth among small businesses is moderated and the unemployment rate is the lowest we've seen in many years. These reflect the