Paychex 2015 Annual Report Download - page 38

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Outlook
Our outlook for the fiscal year ending May 31, 2016 (“fiscal 2016”) is based upon current market,
economic, and interest rate conditions continuing with no significant changes. Our expected fiscal 2016 payroll
revenue growth rate is based upon anticipated client base growth and increases in revenue per check. Our
anticipated HRS revenue growth for fiscal 2016 reflects the impact of the minimum premium plan offering
within our PEO being in place for a full year in fiscal 2015.
Our fiscal 2016 guidance is as follows:
Low High
Payroll service revenue .............................................. 4% — 5%
HRS revenue ....................................................... 10% — 13%
Total service revenue ................................................ 7% — 8%
Net income ........................................................ 8% — 9%
Operating income, net of certain items, as a percent of total service revenue, is expected to be approximately
38% for fiscal 2016. The effective income tax rate for fiscal 2016 is expected to be consistent with that
experienced in fiscal 2015.
Interest on funds held for clients for fiscal 2016 is expected to be relatively flat. The average rate of return
on our combined funds held for clients and corporate investment portfolios is expected to be approximately 1.0%
for fiscal 2016. As of May 31, 2015, the long-term investment portfolio had an average yield-to-maturity of 1.6%
and an average duration of 3.2 years.
Purchases of property and equipment for fiscal 2016 are expected to be in the range of $110 million to $120
million. This includes costs for internally developed software as we continue to invest in our service-supporting
technology. Fiscal 2016 depreciation expense is projected to be in the range of $95 million to $105 million, and
we project amortization of intangible assets for fiscal 2016 to be in the range of $10 million to $15 million.
Results of Operations
Summary of Results of Operations for the Fiscal Years Ended May 31:
In millions, except per share amounts 2015 Change 2014 Change 2013
Revenue:
Payroll service revenue ................ $1,656.8 4% $1,599.3 4% $1,539.2
HRS revenue ........................ 1,040.7 18% 878.9 18% 746.0
Total service revenue .................. 2,697.5 9% 2,478.2 8% 2,285.2
Interest on funds held for clients ......... 42.1 3% 40.7 (1)% 41.0
Total revenue ....................... 2,739.6 9% 2,518.9 8% 2,326.2
Combined operating and SG&A expenses .... 1,686.0 10% 1,536.2 8% 1,421.4
Operating income ...................... 1,053.6 7% 982.7 9% 904.8
Investment income, net .................. 6.4 17% 5.4 (18)% 6.6
Income before income taxes ............. 1,060.0 7% 988.1 8% 911.4
Income taxes ........................... 385.1 7% 360.6 5% 342.4
Effective income tax rate ............... 36.3% 36.5% 37.6%
Net income ............................ $ 674.9 8% $ 627.5 10% $ 569.0
Diluted earnings per share .............. $ 1.85 8% $ 1.71 10% $ 1.56
17