Paychex, Inc.

Good day, everyone, and welcome to today's Paychex fourth quarter and fiscal year-end earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one keys on your touchtone phone. Please note that this call is being recorded and that I will be standing by should you need any assistance. It is now my pleasure to turn today's program over to Mr. Martin Musi, Chairman and Chief Executive Officer. Sir, please begin.

Thank you, and thank you for joining us for our discussion of the Paycheck's fourth quarter and fiscal year 2022 earnings release. Joining me today are Efren Rivera, our Chief Financial Officer, and John Gibson, our President and Chief Operating Officer. This morning, before the market opened, we released our financial results for the fourth quarter and full year ended May 31, 2022. You can access earnings release on the Investor Relations website, and a Form 10-K will be filed with the SEC before the end of July. This teleconference is being broadcast over the Internet and will be archived and available on the website for about 90 days. We will start today's call with an update on business highlights for fourth quarter and the fiscal year. Efren will review our financial results and outlook for fiscal 2023, and we will then open it up for your questions or comments. We are very pleased to close out our fiscal year with yet another strong quarter. Our successful fiscal 2022 results reflect strong execution across the company. This includes our sales teams highlighting our value proposition, our service teams in retaining clients, our cross-functional partnership to get new products in front of clients quickly, and a solid success in HR outsourcing and in the mid-market. Our adjusted diluted earnings per share growth of 24%. reflects both strong revenue growth and margin expansion to an operating margin of approximately 40% for fiscal 2022. Our focus on cost control, lower discretionary spend, and operating efficiencies has allowed us to both invest in our business and expand operating margins. Macroeconomic trends have been positive this year, but with inflation at a 40-year high, there are concerns for potential of a recession in the near future. We continue to monitor key leading indicators for any signs of a change in the macroeconomic environment, but have not seen any signs of deterioration at this time. Typically, the first signs of a macroeconomic recession would be a decline in employment levels at existing clients, an uptick in non-processing clients, or a slowdown in sales activities. These indicators continue to trend in a positive direction. The latest Paychex IHS Small Business Employment Watch reflected a 12th consecutive month of increasing hourly earnings gains, though we did notice slowing a bit of the pace of job growth in May. However, this is more reflective of being near full employment and the difficulty of finding employees. Job growth at U.S. small businesses remains strong in the face of a tight labor market and inflation pressures. Earlier this year, John Gibson was appointed President and Chief Operating Officer. John has been leading our service operations since 2013, and we're glad to introduce you to him on this call and have him participate. I will now turn it over to John, who will give us an update on our sales and service performance. John? Thank you, Marty.

I'm happy to be joining all of you today on this call. and provide an update on our performance both for the fourth quarter and full fiscal year 22. We finished the year with over 730,000 total payroll clients with growth driven by both strong sales and retention. In addition, we now service approximately 2 million worksite employees to our ASO and PO offerings with 18% growth in the fiscal year. We had a record level of new sales revenue for both the fourth quarter and full fiscal year. Our sales teams truly executed across the board, from digital sales in the low end and continuing momentum in the mid-market and very particularly strong demand in HR outsourcing and retirement. This reflects the strength of our value proposition and was aided by the improved sales productivity by our continued investments in demand generation and sales tools. Our service teams have worked tirelessly to both support our clients and our sales growth throughout the year. We are very pleased with our revenue retention, which was comparable to our pre-pandemic record of last year. We have continued to make strong progress in hiring, and we actually accelerate some hiring into the fourth quarter to ensure we are fully staffed and ready to execute our goals in fiscal year 23. We believe that by partnering with our clients and remaining agile and flexible in how we meet those needs, we will provide them the ability to focus on running their business and increase their success in navigating today's very complex business environment. Their ability to rely on paychecks to make the complex, simple result and their continued success and will, of course, then lead to continued elevated retention that benefits everyone. I'll now turn the call back over to Marty.