Paychex (NASDAQ: PAYX) reported Q3 EPS of $0.96, $0.04 better than the analyst estimate of $0.92. Revenue for the quarter came in at $1.1 billion versus the consensus estimate of $1.11 billion.

Business 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. Changes in the macroeconomic environment could alter our guidance. During the nine months, we recognized one-time costs of $32.2 million related to the acceleration of cost-saving initiatives, including the long-term strategy to reduce our geographic footprint and headcount optimization. Our guidance for adjusted operating margin, adjusted EBITDA margin, and adjusted diluted earnings per share excludes these one-time costs. In addition, adjusted diluted earnings per share excludes the tax benefit on stock-based compensation payments of $17.2 million. We have updated our guidance as follows:

• Management Solutions revenue is anticipated to be in the range of flat to 2%;
• Total service revenue is anticipated to be in the range of (1%) to 1%;
• Total revenue is anticipated to be in the range of (2%) to flat;
• Adjusted operating margin(1) is anticipated to be in the range of 36% to 37%;
• Adjusted EBITDA margin(1) is anticipated to be in the range of 41% to 42%;
• The effective income tax rate for fiscal 2021 is anticipated to be in the range of 23% to 24%; and
• Adjusted diluted earnings per share(2) is anticipated to be in the range of (2%) to flat.

Other aspects of our guidance for fiscal 2021 remain unchanged from what we provided previously.

(1)

Adjusted operating margin and adjusted EBITDA margin are not U.S. GAAP measures. Adjusted operating margin is calculated as operating margin, adjusted for one-time non-recurring items, as a percentage of total revenue. Adjusted EBITDA margin is calculated as net income, adjusted for interest, taxes, depreciation, amortization and one-time non-recurring items, as a percentage of total revenue. We believe that the exclusion of certain one-time non-recurring items when calculating these measures provides a better indicator of our core business operations performance period over period.

(2)

Adjusted diluted earnings per share is not a U.S. GAAP measure. Please refer to the “Non-GAAP Financial Measures” section on page 4 of this press release for a discussion of this non-GAAP measure and a reconciliation to the most comparable U.S. GAAP measure of diluted earnings per share.

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