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.”

Miscellaneous Earnings Notes 10.1.15

Jabil Circuit’s (JBL) CEO Mark Mondello on Q4 2015 Results

The world is changing at a frenetic pace

“The world is changing at a frenetic pace and we’re changing with it. Here are three simple takeaways of what’s driving our business today: engineering and technical expertise; addressing real problems with solution selling; and diversification of our solutions and the products we deliver.”

Apple is a 24% customer

“I don’t pay much attention to concentration issues around brands. I pay attention to concentration around risk. And I think we stated that Apple was a 24% customer, that’s public information.”

AZZ’s (AZZ) CEO Tom Ferguson on Q2 2016 Results

Electric utility market remains sluggish in US

“The electric utility market in the U.S. remains sluggish but we have benefited from strong international opportunities and a solid backlog.”

IHS’ (IHS) CEO Jerre Stead on Q3 2015 Results

Automotive and industrial segments performing well

“Automotive continues to be very strong, really good job across the Board, but the rest of the pieces in industrial are performing very well too. In fact I feel really good with the solid performance in total.’

Automotive customers are ahead of the game doing analytics to make better offers to customers

“the source of sales product that we were building that provided OEMs an ability to do more targeted marketing. What I would say about automotive is they’re probably as far ahead as anyone, any of the business in the company around doing analytics with the underlying information and providing more robust offerings to customers.”

We only expect modest trimming of budgets for energy companies in 2016

“There are some smaller players in the U.S. upstream that will be under pressure, but we do think most of the big companies have made most of their cost reductions and the IOCs and major independents are in the process, while they’re in the process of deciding their capital budgets for 2016 and we expect some modest trimming.”

Art’s Way Manufacturing’s (ARTW) Chairman Marc McConnell on Q3 2015 Results

The plight of a small ag equipment manufacturer:

“We are still noticing that the dealers are struggling as well and they are definitely not wanting to stock any of our inventory. So we do anticipate that the sales that we have, we need to have inventory on hand in order to capitalize on those sales.”…

“And so, as we’ve discussed before in April, orders got pretty slow and really price of milk in particular is one thing that was helping us for a period of time and when that went down as well as the other commodities, that’s when it really got quieter order wise for us. So the whole, both oil and gas and especially ag are really in a tough period. And it’s normal part of the cycle. This has happened since the beginning of time, it seems like in the ag industry. And so we are preparing in such a way that we will be able to sustain a long prolonged period of slow sales.”…

“We’re fortunate to have a very strong capital position. We have good relationship with our bank. We are focused on keeping a lot of availability in liquidity with our banks so that we don’t get into any point of vulnerability. ”

Paychex’s (PAYX) CEO Martin Mucci on Q1 2016 Results

Startups are good at selling the low end but cant match our scale

“I think we continue to see good results from a selling perspective and so while they’re out there, I don’t think anyone has — no one has the sales team that we have, the distribution model and the number of sales people and the effectiveness. And so on the low end I think they sell very effectively and the low end being size”

Seeing continued strong employment growth in small businesses

“we’re seeing continued — particularly in the small business under 50, we’re seeing continued better employment growth than prerecession levels of 2004 and so — and it’s down a little bit from last year, but it’s consistently above that level. So we’re feeling like a steady improvement in small business formation and employment hiring ”

Diamond Foods’ (DMND) CEO Brian Driscoll Q4 2015 Results

Expanding capacity for kettle chips

“we’ve seen huge growth in Kettle and we’ve gone from being — our plants being 60% utilized to being basically filled. We are in the process of ordering new fryers and putting them in and our total CapEx this year is likely to be – whereas the year just ended, our CapEx was in the mid-20s, 27 million, our CapEx next year is likely to be in the mid-30s to cover the cost of that kind of expansion.”

It’s a tough market for acquisitions

“I think it’s a tough market. I think everybody says that, it’s a tough market. Valuations are high but maybe that could change with this current ongoing correction, who knows but I think it is a difficult market but we are looking for things that fit our profile. And we’re pretty confident quite frankly that we’re going to find something, maybe something more modest in size that will fit the profile and will work for us, inside what we can afford to pay.”

Paychex 4Q15 Earnings Call Notes

Many employers are just starting to pay attention to the requirements of the Affordable Care Act

“Yeah, we had a nice bump in that the last six months, I think as clients started to really pay attention to it and I do think now we’ll probably see another resurgence of interest in it. And then as Efrain, I think mentioned earlier, I think when you get to the end of the year and those first filings have to be done and the penalty start to come into the 100 plus employee clients, I think they are really going to get a lot of attention at that point. And so the 50 or up, below a 100 will have to file, or the 50 to 100 will have to file. So that will be an awakening, I think for them that well this is a lot more difficult. And I think this is going to be another good year for the ESR product that we have, that helps them with Affordable Care Act.”

Go to market approach changed vs. five years ago from hook and ladder to direct sales of ancillary products

“if you went back to where we were four or five years ago, and I think this is not well understood about the company, I think we were a hooks and ladder approach. So let’s hook him with Payroll and then let’s ladder on everything else. We recognized post-recession that and this, to be fair, the credit goes to the sales force, and to our sales leader, he said, look certain clients need certain solutions very predictably. Let’s do the data analytics and understand by size who needs what. So we did it and we said you know what lo and behold, if you’re — I won’t say the number but a client of a certain size you typically, in our base are going to take x, y and z.

If we know that, then let’s put the right sales people in front of that client and we have one doing that. So that’s what you’re seeing there. Obviously there is pricing too. So I don’t want to completely oversell the point, but I do think we have simply gotten better at understanding when we have a client, and by the way, we had well over a 100,000 of them that we sold, we have a lot of opportunities to go in and say, hey here’s what you really need, if you’re a client of a certain size. And because of the breadth of what we offer, we have a lot more opportunities than most people to do that.”

Haven’t seen a big impact from new competitors

“Yeah, it’s still pretty much the usual players. I know that obviously there has been a lot of announcements but it really hasn’t — we haven’t seen a big impact there, some for price but I think when they look at the feature functionality, the size of the company, whether it’s public or not, meaning that you are trusting your payroll taxes, a very significant cost as a small business with someone and that limited functionality and the limited compliance resources, when you think about Paychex we have 200 people that focus on compliance and been able to deal with all the agencies federal, state and local, it has not been a big impact at this point. We certainly take all competitors very seriously but we haven’t seen a big impact at this point at all.”