Paychex FY 1Q17 Earnings Call Notes

Paychex’s (PAYX) CEO Martin Mucci on Q1 2017 Results

#7 best company to sell for according to selling power magazine

“We’ve been named to Selling Power Magazine’s 2016 list of 50 best companies to sell for landing at number seven. This is the fourth consecutive year for Paychex has appeared on the list moving up from the number nine spot last year very proud to be in the top 10 of best companies to sell for.”

Price increases in the 2-4% range

“So payroll is different from HR services but both are in the same in the same range in the range of 2% to 4%. On HRS, we don’t uniformly apply price increases across all products. We really do that based on where we see the market. So – but our price increases are in the 2% to 4% range.”

The competitive environment is pretty much the same as it had been

“I feel the competitive environment is pretty much the same as that has been same number of competitors and I think if anything we are feeling stronger about where we are from a mid market product than we certainly did a year or two years ago with the complete bundle product that we offer and the addition that we’re constantly making almost quarterly to the HCM bundle we have for Flex.”

Don’t see any changes in the economy in general

” I think we are holding price pretty well particularly in that mid market and we are gaining more revenue per client based on the bundle. So we feel pretty good about it right now. I think the only thing that we see impacting that would be more of the economy in general and we don’t really see any major changes there other than that businesses are getting closer to full employment and we are seeing the checks per client slow, but we expect that frankly for the last couple of years as people came back from recession.”

Feel good about the middle market

“So we feel good about the mid market and we are fully staffed, in fact we’ve increased more reps there than any other division in the mid market because of the product investments we’ve made and the opportunity we have between service and product. So you’re pretty good about the mid market right now and the opportunity particularly for selling season.”

Always been known more as a service company

” we’ve always been very much known as a service company and our technology was really more internal that next external for the client facing in beginning about six years ago, we really ramped up the investment and technology. And I think the technology becomes part of the service story, clients want to do more themselves, they want to do it online, mobile, they want to do and how they want to do it when and where they want.”

Regulation has created opportunities

“there has been a steady flow based on current administration and probably won’t change much in the election which could have some impact, but minimum wage for example right now it’s extremely confusing for our clients minimum wage rules are different by state, the Feds talk about changing minimum wage they have for government, but some of those are in that tied into government, but states are different, cities are different and we really help a lot of our clients help – we help them through our payroll service only or our HR outsourcing to stay up with minimum wage changes because not only are they are not changing ones they are changing over period of years and you have to make sure that you stay current with those.

And there is a lot of work on identifying like who is a the kind of immigration type things, who is – you got to know your customer, you got to know your employees, you got to make sure you got all that well documented.

So the rules keep coming, I don’t think that helps necessarily the business environment in general because of over regulation, but it certainly gives Paychex a lot of opportunities to go and talk to clients about their payroll need and their HR outsourcing need, because small to midsized business is just can’t keep it up with all of these changes.

The other thing is that enforcement and the penalty have increased as states and federal governments have looked for revenue sources. So not only is there an issue about whether you are compliant, but if you are challenged on your compliance, we can provide a tremendous amount of help. If you get a penalty in payroll, if you get a penalty for a time issue – a time and attendance issue, we’re there to support you with expert documentation and background and relationships with federal state and local governments and that’s a big plus that we sell to clients, but they don’t realize sometimes until they are hit with an audit or enforcement penalty.”