Paychex 2015 Annual Report Download - page 40

clients and a 14% increase in client worksite employees. During both fiscal 2015 and fiscal 2014, the PEO
experienced strong demand contributing to the increase in the growth rate for Paychex HR Services revenue.
• Retirement services revenue is our second largest HRS revenue stream. Retirement services revenue for
fiscal 2015 benefited from pricing, along with a 6% growth in the number of plans served and 7% growth
in the average asset value of retirement services participants’ funds. Retirement services revenue for fiscal
2014 reflected a 5% increase in the number of plans served, price increases, and a 13% increase in the
asset value of retirement services participant’s funds. The asset fee revenue earned on the value of
participants’ funds for fiscal 2014 was partially offset by the impact from a shift in the mix of assets
within these funds to investments that earn lower fees from external managers.
• Insurance services revenue growth for both fiscal 2015 and fiscal 2014 reflected increases in premiums and
clients for workers’ compensation insurance services and in the number of health and benefits applicants. In
fiscal 2015, insurance services revenue benefited from the introduction of our full service product aimed at
assisting clients with health care reform requirements, which has gained market acceptance.
• Our online HR administration products, including time and attendance and human resource management,
contributed to growth through strong sales of our SaaS solutions. Time and attendance solutions benefited
from a small-business acquisition in fiscal 2015.
HRS product key statistics are as follows:
$ in billions
As of May 31, 2015 Change 2014 Change 2013
Paychex HR Services client worksite
employees ......................... 858,000 12% 766,000 14% 672,000
Paychex HR Services clients ............. 31,000 11% 28,000 13% 25,000
Health and benefits services applicants ..... 142,000 6% 134,000 3% 131,000
Retirement services plans ............... 70,000 6% 66,000 5% 62,000
Asset value of retirement services
participants’ funds ................... $ 23.5 7% $ 21.9 13% $ 19.3
Total service revenue: Total service revenue increased 9% for fiscal 2015 and 8% for fiscal 2014,
attributable to the factors previously discussed.
Interest on funds held for clients: Interest on funds held for clients increased 3% for fiscal 2015 after
decreasing 1% for fiscal 2014. For fiscal 2015, the increase was primarily due to an increase in average
investment balances, while average interest rates earned were flat. For fiscal 2014, the decline was the result of
lower average interest rates earned, partially offset by an increase in average investment balances. The lower
average interest rates earned in fiscal 2014 were the result of lower yields on high quality financial instruments.
Average investment balances for funds held for clients increased 3% for fiscal 2015 and 4% for fiscal 2014.
The increase in average investment balances for fiscal 2015 was mainly driven by increases in client base and
wage inflation. The increase for fiscal 2014 was largely due to the expiration of certain payroll tax cuts on
December 31, 2012, which resulted in higher employee social security withholdings, along with increases in
checks per payroll and client base and wage inflation.
Refer to the “Market Risk Factors” section, contained in Item 7A of this Form 10-K, for more information
on changing interest rates.
Combined operating and SG&A expenses: The following table summarizes total combined operating and
SG&A expenses for fiscal years:
In millions 2015 Change 2014 Change 2013
Compensation-related expenses ............ $1,096.8 9% $1,003.9 5% $ 955.8
Depreciation and amortization ............. 106.6 2% 105.0 7% 98.2
Other expenses ......................... 482.6 13% 427.3 16% 367.4
Total expenses ......................... $1,686.0 10% $1,536.2 8% $1,421.4
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