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Paychex, Inc. (NASDAQ:PAYX)

2013 Annual Shareholder Meeting

October 16, 2013 10:00 am ET


B. Thomas Golisano - Chairman and Member of Executive Committee

Martin Mucci - Chief Executive Officer, President, Director and Chairman of Executive Committee

Efrain Rivera - Chief Financial Officer, Senior Vice President and Treasurer

Todd Card

B. Thomas Golisano

Well, good morning, everybody. I am Tom Golisano, Chairman of the Board of Paychex, and it's my pleasure to welcome you all. 10:00, in accordance with the notice of the Annual Meeting, I call to order the 2013 Annual Meeting of Shareholders. I should mention that our Annual Meeting is being broadcast over the Internet and can be accessed on our website at Broadcast will be archived and available for replay until 1 month from today.

This time, I'd like to introduce our Board of Directors. Present with us today are -- and would you please stand up when I call your name: Joseph Doody, David Flaschen, Phillip Horsley, Grant Inman, Pamela Joseph, Martin Mucci, Joseph Tucci and Joseph Velli.

I would also like to introduce Jeff Sorensen, who is here today representing PricewaterhouseCoopers, the company's independent accountants. Who is Jeff? There in the back. And if anytime after the meeting, we'll hang around for a little. And if you want to ask questions, specific questions to the board members, please help yourself.

I'd like to comment or take a moment to comment on our dividend. In July 2013, we again increased our quarterly dividend. It is now at $0.35 per share. During fiscal 2013, we paid out a little over $476 million in dividend. We returned 84% of our net income for fiscal 2013 to our shareholders.

Now moving onto the more formal part of the meeting, I am Chairman of the Board, Martin Mucci is President and CEO, and Stephanie Schaeffer is Secretary.

This meeting is held pursuant to the printed notice of the Annual Meeting mailed on September 10, 2013, to stockholders of record on August 19, 2013, who are eligible to vote. A list of those shareholders entitled to vote at this meeting and an affidavit attesting to the mailing of the notice of the annual meeting to stockholders -- did a laywer write this? -- are available at the inspector's table for any stockholder who wishes to examine them.

Todd Card has been appointed to act as Inspector of Election at this meeting. Mr. Card has reported that approximately 90% of the outstanding common stock is present in person or by proxy. I hereby declare a quorum is present at the meeting. On behalf of the Board of Directors of the company, I would like to thank all the shareholders who returned their proxies.

The first matter to come before this meeting is the election of 9 directors, each of whom will hold office for a term of 1 year. The following persons have been nominated: B. Thomas Golisano, Joseph Doody, Dave Flaschen, Phil Horsley, Grant Inman, Pamela Joseph, Martin Mucci, Joseph Tucci and Joseph Velli. Is there any discussion on these nominations or any other nominations? We will proceed the voting after presentation and the remaining items of business.

Advisory vote to approve named executive officer compensation. The second proposal in the proxy statement asks stockholders to provide advisory approval of our named executive officer compensation, as disclosed in our proxy statement, commonly known as the say-on-pay vote. Please note that the vote is advisory and therefore, not binding on the company. However, if there is a significant vote against our executive compensation, we will take into consideration stockholder concerns and the board will evaluate whether actions are necessary to address these concerns.

The board is recommending the vote for this proposal. Last year, our stockholders overwhelmingly approved the compensation of our named executive officers, with over 97% of the votes cast in favor of the proposal. As a result, minimum changes were made to our compensation policies for fiscal 2013.

Briefly, it is our belief that the policies, procedures and amounts of compensation, as described in the proxy statement, are effective and achieved in the desired goals of aligning our executive compensation structure with the interest of our shareholders. Is there any discussion on this matter? Everybody understand it? Okay. I'll take a drink while you're thinking about it.

The third matter to come before this meeting is the ratification of selection of the independent registered public accounting firm. The Audit Committee has appointed PricewaterhouseCoopers LLP as the company's independent accountants for the year ending May 31, 2014. The board believes that this is appropriate to seek stockholders ratification of this appointment and does seriously consider stockholder opinion on this issue. If the stockholders do not ratify the appointment, the Audit Committee will review shareholder concerns in the future selection of the independent accountants.

This summer, our Audit Committee undertook a review process to determine our auditors for fiscal 2014. The outcome of that process with the Audit Committee appointed PricewaterhouseCoopers as our independent auditors. Every 5 years, we go through a process of reviewing request for proposals and so forth. And this year, we made the switch from Ernst & Young to Pricewaterhouse. The polls are now open for voting. If you vote, wish to vote in person at this meeting, please proceed to the investor's -- inspector's table to complete your vote. Is there anybody who needs to meet with our inspector? Okay. While that's being done, I will now turn the meeting over to Martin Mucci, our President and Chief Executive Officer, to provide an overview of what is happening at Paychex and to answer your question. Marty?


Martin Mucci

Thank you. That is a copy of our new brand video, so it helps kind of -- helps our clients, shareholders, our investors. We use this to kind of show how broad the brand is now and all the things that we're offering. I want to thank you for coming to the meeting this morning, for our Annual Meeting of the Paychex shareholder. I'd like to call your attention, there's a special anniversary that we just recently passed, and that was 30 years that Paychex has traded on NASDAQ. And so congratulations to Tom and all of the employees who helped start Paychex. All those who have been here over the past 30 years, I thank you for all the efforts, and I thank all the current employees as well.

I would like to point out a few things, whether they probably want me to or not. There's a few people in this picture from 1983, roughly, that you'll recognize that are in the crowd today. This is what makes Paychex so special. Tom is there, obviously, in the center with the shovel. Tom Clark is second to your right, which is our first CFO. Tom Clark is here. And Tom, thanks for being here. Tom Clark.

On the end here -- I won't make any comment. On the end here is Bob Sebo, the head of operations. And Bob is also here. Please recognize Bob Sebo who is the first head of operations.

And Phil Wehrheim is here. Phil was Tom's first partner. He opened up some regional offices up here in upstate New York. And Phil is here with his wife as well. Thank you, Phil, for being here.

It's wonderful, it's a great -- as I've talked to some of the executives here, some for the first time are -- their first meeting here, it is so special when you bring together the shareholders of Paychex because you have so many of those that started the company, that first invested in the company. I think all of you know the great story of the stock, obviously. That it's always good to remember that if you invested $10,000 in 1983 when the stock first went public, that would be worth over $2.3 million today. And in fact, if you reinvested all the dividends that Tom mentioned, it would be worth over $3 million today. So it's just a tremendous story all the way around for all those who built the company, and I'm very proud to be in this position to represent the company today and our executive team.

We're pleased to be here at Strong again. You can, again, take a tour of Strong, the museum, if you'd like. It is the home of the National Toy Hall of Fame, for those who don't know. And you can get a free wristband that's complimentary. You can take a tour after the meeting if you'd like do that. It's right at the admissions desk.

As I look back on 2013, it's a great year of progress and positive growth for Paychex. Our focus continues to be on growth and making sure that all the elements are in place for that growth and that we continue to grow and hit new levels of revenue and operating income that we've never seen before at the company. It's about the right people, the products, service results, sales execution needed to support our position as the leader in payroll and HR outsourcing for small and midsized businesses.

We've been expanding our businesses -- I'll talk about it in a few minutes -- with new products, technology, geography. We've been really invigorating growth. That is the focus of this executive team and delivering solid financial results to our clients, to our shareholders and to our employees, making it a great place to work.

We saw further signs of economic improvement in our client base last year. Those signs continued in the early fiscal 2014. In our first quarter results released last month, we announced continued improvement in key metrics, including checks for payroll, which is up for 14 straight quarters. So it's a good sign from an economy standpoint. You're seeing our small businesses and midsized businesses adding employees, so checks per client up for 14 quarters in a row, something we've never seen before. And our client retention is at a historic best.

Our purpose as a company remains very simple. It's providing our clients the freedom to succeed in their businesses. As a leading provider of payroll and HR, human resource, and benefit services for the businesses throughout the nation and some out of the country now, we achieved this through a combination of innovation and technology and world-class service.

Our employees and executive team really have one goal: to be the very best in what we do in our industry, and this is in the eyes of our clients, our shareholders and our employees. And I'd like to introduce that executive team to you now as they sit before you: Mark Bottini -- and please stand up, I want to introduce you -- Mark Bottini, Senior Vice President of Sales. John Gibson, Senior Vice President of Service. John joined us in May of this -- last May. Mike Gioja, our Senior Vice President of Information Technology, Product Management and Development; Andy -- or Efrain Rivera, over here, our Senior Vice President, Chief Financial Officer and Treasurer. Andy Childs, our VP of Marketing; Kevin Hill, our Vice President of Insurance and Human Resource Solutions Service; Sanjay Hiranandani, our Vice President of Information Technology Operations; Bryan Hodge, Vice President of Eastern Operations; Laurie Maffett, Vice President of Centralized Product Operations and Support; Rob Morin, our Vice President of Major Market Payroll Sales; Lonny C. Ostrander, our Vice President of Human Resource Services Sales; Neil Rohrer, Vice President of Core Payroll Sales, East; Stefanie Schaeffer, our VP and Chief Legal Officer and Secretary; Terry Sukalski, our Vice President of Core Payroll Sales, Central; Tom Szwak, Vice President of Western Operations; Jenny Vossler, our VP and Controller; Lisa Williams-Garcia, our Vice President of Core Payrolls Sales, West; and Laurie Zaucha, our Vice President of Human Resources and Organizational Development. Please help me give a hand to this great executive team.

I hope you feel as confident as I do. This is an exceptional team. I'm very fortunate to work with them, and we're very focused on the results of Paychex and the future of Paychex in driving great growth.

We provide over 570,000 small and midsized businesses with payroll and HR and benefit and insurance services that they need so that they can focus on what they do best, which is running their businesses.

As I look back on '13, I'm very proud of the result of our employees and the progress we've made. We reached the highest levels of service revenue and profitability in the history of the company during, frankly, a continued sluggish economy as it bounces back. Between 2009 and '11, we grew $20 million in revenue. Between 2011 and '13, we grew $250 million in revenue. So we're very thrilled with the results that we've been able to achieve and get ourselves back on a higher growth path.

We've invested significantly in technology over the last 4 years, and I'm proud of the product innovation that's resulted from the investment. We do this with a focus on innovative leadership and differentiation from our competitors. Our mobility applications allow clients and our employees to access all their information in 1 to 2 clicks on their phone or on their iPad. And now, clients can actually complete, edit and -- I'm sorry, and complete their payrolls on their phones as well as of a few weeks ago.

From a product standpoint, we've also created and have been offering solutions for health care reform. So I had some questions in the reception earlier. We have created products. It's a very fluid situation as health care reform continues to change. But I'm very proud of the fact that we were out pretty early with health care reform products that will help clients kind of navigate all of the complexity of health care reform and the Affordable Care Act. And I think, overall, it's going to be a net positive for us even though I think it has hurt some small businesses starting up and expanding at least in the short term.

Over the last 3 years, we've acquired a number of companies and products to expand our portfolio and provide a richer, more broader product experience for our clients. In 2013, we acquired ExpenseWire and myStaffingPro, the last 2 on the list there on the left. They broaden not only the product set but where we compete, which markets and which size of clients. It helps us have more growth opportunities in the future.

And last week, we announced the strategic partnership with Kashoo. Kashoo is a cloud software that is for accountants, and it's simple accounting software for businesses. This is a business we think is going to be expanding. We'll be doing some more work on that product over the next 2 months, but we've invested in the company and we'll continue to grow with them. And we think this is going to help not only our businesses, our business clients, but also our CPAs and give them alternatives to QuickBooks and other alternatives that are out there. And we think it fits very well with our CPA relationships that we hold very dearly across the country.

We've also renewed our geographic expansion, so we've recently announced an investment in a joint venture with Semco Partners in Brazil. So we've already hired 8 employees in São Paulo, Brazil, and we'll be starting up payroll operations as well as some other products in the first calendar quarter, so January 1, and we're already up and running and trialing with some beta client in Brazil. We picked Brazil because it has a lot of complications from a regulatory perspective. It also has some very new requirements from the government for electronic filing, filing of information on the hiring of new employees. And this is all making it more difficult for small businesses to do payroll and other HR services themselves, and we think it's a perfect time, not to mention they have $5 million small and midsized businesses in Brazil. And we think it's a great place for us to go next.

And in Germany, we've been there for over 8 years. We just did an acquisition in Berlin that will double our size of clients. We'll be up to over 5,000 clients now in Germany. And we will also -- this takes our revenue from about $3.5 million to $8 million. And we're continuing to look at other ways to grow in Germany and really expand that. Germany has been a good place for us to grow. It grew slowly at first. It's now starting to pick up some steam, and we're really proud of the acquisition that the team did there.

After 3 years of declining client base overall because of the economy and losses and so forth, we achieved positive gain, a smaller gain than we'd like to see, but positive gain for the last 2 years, and we're continuing to focus on how to drive more clients and more units.

Our client retention reached historic best levels in 2013, continued into this year. Our core payroll service satisfaction reached an all-time high, again, the result, I think, of new products, greater technology and also just great service by our folks across the company. We have over 12,500 employees now in over 100 locations. We're very proud of the sales execution and the service that we provide.

Also, we're very proud -- as an executive team, we're very proud of the recognition that Paychex receives on behalf of our employees. And particularly, we've been recognized as one of the world's most ethical companies from Ethisphere Magazine, and one of the top industry innovators, that's a first for us to be on that list of top industry innovators, by InformationWeek 500. And we're very proud of that. We also just got named one of the top 50 places for salespeople -- so salespeople -- to work, and we're getting a lot of mileage out of that with the sales team as we recruit new salespeople. And I think Mark and the team here has done a great job making it not only a place to incent people to come but to stay and have a great sales career with Paychex.

We continue to be a leader in our markets. I've shown a slide similar to this before. We serve over 9 million client employees with our payroll services. We ranked #1 in number of clients in small business and #2 in the midsize market that we deliver payroll in. And Paychex continues to be at the forefront in providing HR services for small businesses. We now service over 672,000 work site employees with HR outsourcing. So we are the HR support for small and midsized businesses that don't hire their own HR person. We have more work site employees than anyone else and we are #1 in this category, and we're very proud of that.

Nationwide, we're also #1 in record keeper for 401(k). This is both new plans. We sell more new plans than anyone else and we handle more existing plans 401(k)than anyone else, at 62,000. And we service plans in all 50 states. And actually, we service 1 in 10 of the 401(k) plans across the country.

Our insurance agency, Paychex Insurance Agency, now has over 100,000 clients. We provide those businesses with coverages anywhere from health, workers' compensation insurance, property and casualty, pretty much insurance need you have. Our agency placed over $1 billion in premiums last year, and it's just a full array of products. And now the Insurance Agency is the top 25th largest agency in the country. So we've moved pretty quickly in this market, and a great job to the sales team and the service team as we move to a really great position there of being the top 25 agency in the industry.

Paychex has a great foundation. I think you know this. We're strong financially. Efren will talk about that in a few minutes. We continue to be debt-free, very profitable, and with healthy cash generation and dividends. Tom talked about the dividends. We increased the dividends 6% in the first quarter, the board did. And we've paid out 84% of our net income in dividends, as Tom mentioned.

We have a great product set in place and are continuing to expand or products that really puts us on a track to achieve growth. We deliver industry-leading products that our clients need. We provide, I think, the best service in the industry. When combined with the technology changes that we've made, I think it's an outstanding shareholder value, and certainly for our clients, as well and our employees.

We do work an awful lot on making this a great place to work and a high place of employee engagement. And we actually have us a survey coming out next. Here we take a survey of our employees. Is this a great place to be? How can we make it better? What can we do differently? And that next survey actually comes out next week across the board. It's very important to us that we're #1 from a client standpoint, an employee standpoint and a shareholder standpoint.

So together with all Paychex employees, we're committed and focused on what's essential to our success, which is really growing the business. And we appreciate your investment, continued investment and support. And I thank you for your support and confidence as shareholders and for being here with us today.

With that, I'd like to turn it over to Efrain Rivera. And Efrain will give you a little more detail on our financial position. Thank you.

Efrain Rivera

Thanks, Marty. It's really an honor to be here to present these results, the effort of a lot of people in the company and many people who laid the foundation of this great company in the past. I want to welcome our shareholders. And I'm going to talk about our financial results for 2013, share expectations for '14, and we'll review our financial position and our strategy.

Before I do that, I always have to start with the standard legal disclaimer. So you should be aware that certain forward-looking statements that may be made today by management need to be evaluated in light of certain risk factors. These risk factors are disclosed in the earnings press releases and periodic filings with the SEC. And yes, that was written by lawyers.

Next slide. Let's talk about our financial results in 2013. They reflected sustained progress in the business. Total service revenue grew 5%. We look at payroll service revenue, it increased 2% and the growth was aided by a 1.6% increase in checks per payroll, as Marty mentioned. We also experienced modest growth in revenue per check as a result of price increases, partially offset by discounting. Payroll revenue growth for fiscal 2013 was tempered slightly by 2 events: the impact of Hurricane Sandy in the fall of 2012. It seems a long time ago, but it was about this time when Sandy hit and severely impacted our operations for a period of time. I should say, it severely impacted clients. And we made a remarkable recovery from an operations standpoint during that period of time. And then we have 1 less payroll processing day overall due to the leap year in fiscal 2012.

Turning to HRS, revenue increased 10% for fiscal 2013. This increase reflects client growth in our retirement services, Paychex HR Solutions and eServices, and also price increases. As Marty mentioned, our Insurance services continued to improve as a result of growth in health and benefits applicants, though at moderating rates, and higher revenue from other insurance policies that we sell such as dental, vision, disability and life.

The PEO business stabilized during the year and its result strengthened as the year progressed. Interest rates on high-quality investments have remained low. Our combined investment portfolio of interest on funds held for clients and also on our corporate investments earned at an average rate of return of about 1% for fiscal 2013, down from 1.1% for fiscal 2012. We continue to follow an investment strategy that's focused on protecting principal, optimizing liquidity and assuring we meet our client obligations each and every day.

Total expenses increased 3% from fiscal 2013. Continued investment in leading-edge technology contributed to this increase, and expenses -- and that those expenses increased at a faster rate than total expenses.

Employees rose to the challenge in 2013, becoming more productive, while maintaining excellent levels of client service that Marty just showed. Operating income net of certain items increased 7% as we leveraged our resources to deliver strong operating margin at 37.8%. And in the last 3 years, we've grown from 36.3% of operating margin to 37.1% to 37.8%, growing at about 70 to 80 basis points per year.

Net income increased 4% and diluted earnings per share increased 3% for fiscal 2013. This was a result of the fact that we increased the tax provision related to a state matter that we settled in Q4, and this will reduce our diluted earnings per share by $0.04. It won't have an impact going forward.

Let's look at the balance sheet and our cash flow. Corporate cash and investments grew more from $790 million as of May 31, 2012 to $875 million as of May 31, 2013. This increased occurred while we were paying out slightly more, as Tom indicated, in $476 million in dividends to stockholders. I'll provide more details on capital strategy in a few moments.

Stockholders' equity was $1.8 billion as of May 31, 2013, and return on equity was 34% for the year, consistent with the prior years.

Now I'd like to take you through our expectations for 2014 and the results for the first quarter -- first fiscal first quarter. We're off to a solid start in 2014. Here are some of the highlights of the quarter. Total service revenue, again, increased 5%, driven by growth in both payroll and HRS revenue. Payroll service revenue increased more than 2%, influenced mainly by increased checks per payroll and growth in revenue per check. Our checks per payroll increased 1.6% consistent with what we saw last year for the first quarter and it was consistent with our growth, as I mentioned, for all of 2013.

HRS revenue grew 11%, slightly faster, reflecting favorable trends in client growth in our retirement services, Paychex HR Solutions and eServices, products and price. Insurance services continued to reflect growth in health and benefits applicants.

Interest on funds held for clients declined 1%, driven by lower average rate of return offset, by higher average investment balances. Yields on high-quality financial securities remained low, but it looks like interest rates now have started to turn. We should see better results going forward.

Operating income net of certain items increased 8% to $245 million. Typically, our first quarter reflects the highest operating margins, and this first quarter 41%. Operating margins for the remainder of the year are anticipated to be more consistent with our full year 2014 guidance, which is a margin of approximately 38%. Net income increased 6% to $163 million and EPS increased 5% to $0.44 per share.

In summary, we're on track to achieve our fiscal 2014 plans.

Let's look at fiscal year 2014 outlook. We document this outlook with our guidance in the disclosure provided to Wall Street. The guidance is provided in press releases and/or our SEC filings that can be found on our website.

We reaffirmed our guidance from the guidance we provided at the end of June. And that guidance is as follow: We anticipate that payroll services revenue will increase in the range of 3% to 4%, an acceleration from what we saw in Q1. Our payroll revenue growth is based on anticipated client base growth and modest increases in revenue per check. HRS revenue is expected to grow between 9% and 10%, in line with recent growth.

Overall, we expect an improvement of 9% to 10% in our net income for 2014. This growth rate reflects the impact of the increased tax provision in the fourth quarter of fiscal 2013 related to the settlement of a state income tax matter. This matter is not anticipated to impact our effective rate going forward.

Now let's look financial strength and stability. I'm sure that this is an important issue to all of our stockholders. And as you can see, we continued to have a very strong foundation, with $925 million in cash and total corporate investments as of August 31, 2013. During fiscal 2013, we returned slightly more than $476 million to stockholders in dividends, representing 84% of our net income for that year.

Last October, the board approved the stock repurchase plan for up to 350 million of our common stock. The authorization goes through May 31, 2014. And thus far, we have repurchased $84 million of common stock, and we anticipate further repurchases to offset dilution throughout the remainder of fiscal 2014.

Now long-term capital strategy. Management and the board continuously look for other opportunities to maximize our cash deployment. We continue to invest in technology innovation, anticipating capital expenditures annually of approximately $100 million. In the past few years, we have closed on acquisitions key to our success, as Marty mentioned earlier. And in July 2013, we increased the dividend 6% to $0.35 per share.

Finally, in summary, we fully expect to continue to execute on our plans and to create value for shareholders. Our top line revenue growth will continue to drive the bottom line, generate positive cash flow and result in a strong company for our stockholders.

And with that, I'll turn it back to Martin Mucci, President and CEO. Thank you.

Martin Mucci

Thanks, Efrain. I gave him all the detail stuff to go over, so. We'd now like to open it up for any questions or comments that you may or you'd like to have. And we have microphones. If you just raise your hand, we'll bring the mic to you. Any questions? Yes, right here in the front.

Question-and-Answer Session

Unknown Attendee


Martin Mucci

Great question. How is Obamacare or the Affordable Care Act impacting our clients and us? I think one on the client piece, I think it's had a little bit of a hurt. I think they've slowed a little bit in hiring and maybe even from opening like a second business, those who have a number of businesses. What we've heard from our clients is, without knowing what the cost is going to be to them, they -- those that are impacted or close to being impacted have been a little bit more cautious as far as how they've acted, and hired and so forth, although we haven't really seen that in our client base, from the checks per client being up 14 quarters in a row. From our standpoint, we see it as an opportunity. Whenever businesses need help navigating through something difficult, Paychex is there, whether it's payroll our HR or insurance. So we've created products that will help them determine whether it applies to them or not. Now the employer piece of it has been pushed off, as you know, a year until January 15. But they still -- many clients are still looking for, does this impact me or not? It's not just if I have 50 employees or not. It's really if you take my full-time equivalents by putting all my part-timers together and my full-timer together, look at the hours, divide them by monthly -- their monthly number, it's really quite complicated. So we've created reports that we now sell to clients that will give them all that information. And we've have also created a product that we'll be releasing shortly. While the first product is out now, which is a combined flexible spending health savings and health reimbursement account card, because our clients were saying, I'd like to have the ability to move all those accounts together, where people have set aside money for health care. And we actually offer our card now to our clients, and we're just starting to sell that. So I think it's kind of a mixed bag. I think, overall, it's slowing business development a little bit, new businesses coming up and maybe growing. I do think it's produced some opportunity for us, but we'll see probably more next fiscal year than this one. But we've already released products, and I think we've got the products out very quickly, actually. Okay. Any other questions, sir? Okay. Tom?

Unknown Attendee

What's the competitive landscape look today?

Martin Mucci

The competitive -- Tom is asking, what's the competitive landscape today? For all of the services, really I think, it's very competitive. ADP is still the prime national competitor. There's a number of regional players. The smaller the regional payroll company, I think they're falling behind a little bit in the technology. They're not able to keep us with us and ADP from a technology standpoint. I think our service is better, because it's larger and more diversified across our 82 branch locations. But I think the pricing is still very competitive. You're seeing more competition on the HR side as well for outsourcing. But no one, again, has the breadth of what we offer and I think the service model. And so it's still very competitive, but I think that's why we needed to keep -- get ahead with the technology as well as the servicing combined. We're extremely competitive, I think. Okay. Anything else? Question? Yes, right down here.

Unknown Attendee

Your operation in Brazil, do you find that the atmosphere in Brazil is conducive to work for your company?

Martin Mucci

I -- yes, we think so. As we studied the number of countries to go into, Brazil, one, had a very large small and midsized business environment, over 5 million small and midsized businesses. They were complicated from a tax structure. They're continuing to grow. And they also -- as I mentioned earlier, they've had some new requirements, where they have to file electronically. Now businesses have to file. They have to file new hire information. It's becoming harder for them to do it themselves, so I think it's very conducive to our method of servicing the client. And in Brazil, either the client handles the payroll or their CPA, and we have a great relationship with CPAs, which we're building there as well in Brazil. So I think it's going to be good. It's going to take a while to build it up and grow like Germany. But I think it's a great place to grow after Germany. We're very pleased with that.

Unknown Attendee

Do you have a significant competitor or competitors in Brazil for this work?

Martin Mucci

Great question. No, we don't. At this stage, there's not really any small business competitor. ADP is in Brazil, but they handle larger clients that we don't typically go after. So the under 50 employees, there are not -- there's not much competition there. That was one of the other reasons we went there. It's pretty much a CPA community. And the CPAs, as it gets more complicated, they don't find as much -- that's not as value-added to them. They'd rather -- they want to keep the client but they don't necessarily want to do their payroll, just like what we found in the U.S. many years ago. And that's the relationship we're building is to get the CPA to refer the client to us, so that we take it off the CPA and do it for the client. We've got another one here.

Unknown Attendee

How about Canada?

Martin Mucci

Great question. We looked at -- we've continued to look at Canada. In fact, Kashoo, which is a company that we just invested in and have built a partnership with on the accounting software side, is based in Vancouver. And so we think that, that will give us an opening in Canada for the accounting platform, as well as some payroll. And so we're continuing to look at that, and you may hear some things on that in the near future. That's kind of the next country that we think is the best opportunity for us to get into. We actually found that when we invested in Kashoo, the accounting software company, they're actually in a 180 countries, about 5 of which are outlawed by the federal government. So we had to kind of work that out. But they only had about 5 clients there, so that's all taken care of before we get there. So any other questions? Okay. Well, thank you, again for your support. Thank you for the board support and the work that they do, on behalf of Paychex. I'd now like to turn the meeting over to close with Tom Golisano, our Chairman.

B. Thomas Golisano

Who came up with the name Kashoo? I think we failed to mention, when I talked about the dividend earlier, the board did declare a quarterly dividend for this quarter. And I thought you might like to know that. The other thing you might like to know is that Marty did a great job of representing our dedication and purpose and so forth to our clients and to our employees. But I would like to reiterate that our board -- I think our Board of Directors does an excellent job of representing our shareholders. I also, at this time, can take the liberty to mention that a year ago, our stock price was $32.84, and today, it's just under $41. Marty also kiddingly reminded me, when he took over, it's $27.50. I told him I wasn't going to tell anybody that but I decided to do it. Okay. Has everybody had an opportunity to vote? I now declare the polls closed. The Inspector of Elections will proceed to tabulate the votes and provide his report. Mr. Todd Card?

Todd Card

Mr. Chairman, in connection with the proposal to elect 9 directors, I wish to report that a majority of votes cast were voted for the election of each of the 9 nominees. In connection with the proposal for an advisory vote to approve named executive officer compensation, I wish to report that a majority of the votes cast were voted for the proposal. In connection with the proposal to ratify the selection of the company's independent registered public accounting firm, I wish to report that a majority of the votes cast were voted for the proposal.

B. Thomas Golisano

Okay. You've heard the results. I hereby declare that the nominees for directors have been duly elected, the named executive officer compensation, as disclosed in the 2013 proxy statement, has been approved on an advisory basis and the selection of our independent accountants has been approved.

Is there any other business or comments or questions anybody who wants to ask before we adjourn? Okay. If there's no other business, this concludes our meeting. On behalf of my fellow Board of Directors and the company's officers, I wish to express our appreciation to all of you for attending the meeting. And we will be available for a little while to answer any of your direct questions personally. Thank you very much.

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