Paychex 2016 Annual Report Download - page 37

$ in millions
As of May 31, 2016 2015 2014
Net unrealized gains on available-for-sale securities(1) ........... $ 47.6 $ 13.6 $ 34.5
Federal Funds rate(2) ..................................... 0.50% 0.25% 0.25%
Total fair value of available-for-sale securities ................. $4,141.9 $3,595.6 $3,391.4
Weighted-average duration of available-for-sale securities in
years(3) .............................................. 3.1 3.2 3.0
Weighted-average yield-to-maturity of available-for-sale
securities(3) ........................................... 1.7% 1.6% 1.6%
(1) The net unrealized gain on our investment portfolios was approximately $63.5 million as of July 15, 2016.
(2) The Federal Funds rate was in the range of 0.25% to 0.50% as of May 31, 2016, and in the range of zero to
0.25% as of May 31, 2015.
(3) These items exclude the impact of VRDNs, as they are tied to short-term interest rates.
Payroll service revenue: Payroll service revenue was $1.7 billion for both fiscal 2016 and fiscal 2015,
reflecting growth of 4% for both fiscal 2016 and fiscal 2015 compared to fiscal 2014. Both fiscal 2016 and fiscal
2015 benefited from increases in client base and revenue per check. Revenue per check improved as a result of
price increases, net of discounts. Fiscal 2016 also benefited from two additional processing days during the year.
For fiscal 2016 and fiscal 2015, our total payroll client base growth was approximately 2%. Client retention
was in excess of 82% of the beginning of the year client base for fiscal 2016, consistent with fiscal 2015, which
reflected a record high.
Human Resource Services revenue: HRS revenue was $1.2 billion for fiscal 2016 and $1.0 billion for
fiscal 2015, reflecting growth of 13% and 18%, respectively, compared to each of the prior fiscal year periods.
For both fiscal 2016 and fiscal 2015, HRS revenue growth was primarily driven by increases in client base
across all major HCM services, including: comprehensive outsourcing services; retirement services; time and
attendance; and HR. HRS product key statistics are as follows:
$ in billions
As of May 31, 2016 Change 2015 Change 2014
Paychex HR Services client worksite
employees ......................... 944,000 10% 858,000 12% 766,000
Paychex HR Services clients ............. 35,000 10% 31,000 11% 28,000
Health and benefits services applicants ..... 150,000 6% 142,000 6% 134,000
Retirement services plans ............... 74,000 7% 70,000 6% 66,000
Asset value of retirement services
participants’ funds ................... $ 23.6 —% $ 23.5 7% $ 21.9
We continue to experience strong demand for our Paychex HR Services, our largest HRS revenue stream, as
evidenced by the continued double-digit growth in client worksite employees. During both fiscal 2016 and fiscal
2015, the PEO, in particular, experienced strong demand.
Retirement services revenue growth was tempered in fiscal 2016 by a lower average asset value of
participants’ funds, offset somewhat by higher basis points earned from external fund managers. Retirement
services revenue for fiscal 2015 compared to fiscal 2014 benefited from pricing and higher average asset value of
participants’ funds.
Insurance services revenue growth for both fiscal 2016 and 2015 benefited from growth in our full-service
ACA product. In addition, higher average premiums and clients in our workers’ compensation product positively
impacted revenue in both years.
Our HR administration products, including time and attendance and HR management, contributed to growth
through strong sales of our SaaS solutions. Time and attendance solutions benefited from a small business
acquisition in fiscal 2015.
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