Back in April of 2020, as the consequences of COVID’s arrival in the U.S. sent financial markets reeling, Paychex CFO Efrain Rivera had the temptation “to say nothing.”
As the company’s quarterly earnings call with analysts quickly approached, Rivera explains, a number of management team members had gathered in conference to debate the idea of halting any future guidance in light of things being just so uncertain.Read More
“The problem was that we did have data!,” explains Rivera, referring to Paychex’s unique lines of sight into the payroll practices of thousands of middle-market businesses.
The subsequent earnings call was unusual for its length (2 hours) as well as the general nature of the discussion, recalls Rivera.
“Half of the analyst questions were really about the general economy and what we were seeing because they knew that we had unique insights into employees,” remarks Rivera, who notes that the prior debate ended with those lobbying for “more guidance” scoring the win.
Rivera adds that the prevailing point of view became, “We need to say what we know, and we need to say, ‘This is the limit of what we know.’”
Weeks later, when Paychex found it necessary to revise some of the guidance that it had provided on the Spring 2020 call, there was no double-guessing of the earlier debate’s outcome.
Says Rivera: “To this day, we still get credit for having said what we said and shared what we shared at a moment when people were very concerned about saying anything.” –Jack Sweeney
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CFOTL: Tell us about Paychex … what does this company do, and what are its offerings today?
Rivera: Paychex is the preeminent human capital management provider focusing on small and medium-size businesses. There are other people in the market that service parts of it, but we focus on small and medium-size firms. We’ve been around for over 50 years. When I joined the company, we were at approximately $2 billion in revenue. Today, we’re close to $4.5 billion. Our market cap was between $10 billion and $11 billion. Today, we’re between $45 billion and $50 billion, depending on the day.Read More
Paychex does a lot of outsourcing for small and medium-size businesses. We focus on HR—human capital management, retirement services, a variety of the kinds of outsource services that small and medium size growing businesses are going to want. We pay 1 in 12 workers in the economy, a pretty amazing stat. In addition to being the largest player in our sector, we’re also the second largest player in the entire space. We are a highly, highly profitable business, with a long track record of growth since our founding in the 1970s. It’s really an amazing story. I work with a great group of colleagues who have taken the business from where it was when I joined it to where we are today.
For those who have navigated well through the pandemic—and I would consider us to be one of those companies—the questions are: “What’s next? How do we plan a sustainable trajectory going forward, which is really about the next 12 months? What are the decisions that we need to be making today so that during the next 12 months we are on a sustainable growth trajectory?” We’ve had a beautiful recovery, but we want to keep it going.
If you haven’t done so well, the question is, “How do we recover?”
So, our thoughts are really focused on building a track record of continuing sustainable growth going forward. There are lots of challenges around but lots of opportunities to make this happen, too.
Pachex | www.paychex.com | Rochester, New York