Paychex (NASDAQ: PAYX) reported Q4 EPS of $0.61, $0.01 better than the analyst estimate of $0.60. Revenue for the quarter came in at $915.1 million versus the consensus estimate of $910.91 million.

Fourth Quarter Fiscal 2020 Highlights

• Total revenue decreased 7% to $915.1 million.
• Operating income decreased 5% to $299.6 million.
• Net income decreased 4% to $220.7 million. Adjusted net income(1) decreased 3% to $220.6 million.
• Diluted earnings per share decreased 5% to $0.61 per share. Adjusted diluted earnings per share(1) decreased 3% to $0.61 per share.

Martin Mucci, President and Chief Executive Officer, commented, “Fiscal 2020 was on track to be a solid year, reflecting growth across our business. As we began the fourth quarter, COVID-19 caused worldwide business shutdowns directly affecting small and medium-sized businesses, which impacted our business sales and financial performance. Since the end of April, we have seen sequential improvement in our key business metrics across our lines of business.

“Our performance during the COVID-19 pandemic has shown that we are truly a trusted business partner for our clients. We were well prepared to service our clients in this unprecedented environment due to our investments in technology and our online, SaaS service offerings. In less than 6 days, we transitioned over 15,000 employees to work from home in an effort to keep our employees safe and provide service continuity to help our clients navigate these uncertain times. In this changing work environment, our human capital management solutions and mobility applications have enabled our clients to function and maintain their businesses while working remotely. We created a COVID-19 Help Center to provide clients with information and tools to navigate the complexities of the Coronavirus Aid, Relief, and Economic Security Act and Families First Coronavirus Response Act, including processing over 400,000 payroll reports to accelerate and simplify the Small Business Administration loan application process and creating an online tool to lessen the complexity of the loan forgiveness program. We are very proud to have not only navigated the challenges of the last few months, but to have seen even higher client satisfaction and retention as well – a real tribute to our employees’ commitment to our clients.”

Fiscal 2021 Outlook

Our outlook for the fiscal year ending May 31, 2021 (“fiscal 2021”) incorporates anticipated impacts resulting from the COVID-19 pandemic based on current assumptions and market conditions. As this situation continues to evolve, future developments could alter our guidance. In addition, we are planning an acceleration of our long-term strategy to reduce our geographic footprint. We anticipate recognizing one-time costs of approximately $40.0 million related to this, primarily in the first quarter of fiscal 2021. Our guidance for adjusted operating margin, adjusted EBITDA margin, and adjusted diluted earnings per share excludes these one-time costs. With consideration of these impacts, our outlook is currently as follows:

• Management Solutions revenue is anticipated to decline in the range of 1% to 4%;
• PEO and Insurance Solutions revenue is anticipated to decline in the range of 2% to 7%;
• Interest on funds held for clients is anticipated to be in the range of $55 million to $65 million;
• Total revenue is anticipated to decline in the range of 2% to 5%;
• Adjusted operating margin(1) is anticipated to be in the range of 34% to 35%;
• Adjusted EBITDA margin(1) is anticipated to be in the range of 39% to 40%;
• Net interest expense is anticipated to be in the range of $30 million to $35 million;
• The effective income tax rate for fiscal 2021 is anticipated to be in the range of 24.5% to 25.0%; and
• Adjusted diluted earnings per share(2) is anticipated to decline in the range of 6% to 10%.

For earnings history and earnings-related data on Paychex (PAYX) click here.