Former President & Chief Executive Officer, Paychex
Jim Cramer exclusive interview with Paychex's incoming and outgoing CEOs.
Chairman and CEO Marty Mucci and President and COO John Gibson on Mad Money with Jim Cramer.
About Martin Mucci
Martin Mucci, former President and CEO of Paychex, appeared on financial news programs in 2022 and 2023 to discuss the company's performance and labor market trends. In a March 2023 interview on CNBC's "Mad Money," Mucci noted that Paychex's stock had increased significantly since he began appearing on the show 12 years ago, and he credited the company's 16,000 employees for navigating challenges including recession and COVID-19. He also discussed government subsidies, stating that programs like the Paycheck Protection Program and Employee Retention Tax Credit had helped sustain businesses, and suggested policymakers "ought to keep an eye on something like that for the future." In earlier appearances, Mucci commented on wage growth and hiring conditions for small businesses. In March 2022, he described wage growth as "really strong" at 4.8% year-over-year, and said small businesses faced pressure from supply chain issues and inflation but had strong demand. He noted that rising interest rates benefit Paychex due to the float it carries, but expressed concern about the impact on clients and new business formation. In May 2021, Mucci attributed a pickup in small business hiring to the reopening of leisure and hospitality sectors, and said businesses were optimistic about demand but worried about finding workers. In September 2020, he reported that small business job growth had held steady after an initial rebound from pandemic shutdowns, and said the PPP program had helped many businesses continue operating.
Transcript (27 segments)
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Jim Cramer0:06
I said at the top of the show about the United Kingdom central bank, the Fed here isn't going to stop tightening to tamp down wage inflation. That's why I like to consult Paychex. They reported a solid quarter, which is great news for you, the shareholder, but not so great if you're Fed Chief Jay Powell worried about an overheated job market. Earlier today, we got a chance to check in with the chairman and current CEO of Paychex, John Gibson. Take a look. Gentlemen, welcome to Mad Money.
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Martin Mucci0:47
Thanks, Jim.
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Jim Cramer0:48
I got to start with you, Marty. It's been a long journey, probably the most consistent test we've had, and I want to give you kudos because I believe the stock has gone up tremendously since we started talking.
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Martin Mucci1:05
Started at 27.50 when we started talking 12 years ago, and I think we're around over $40 billion, so it's up four times.
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Jim Cramer1:18
Let's not forget tremendous dividend the whole way.
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Martin Mucci1:20
Exactly.
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Jim Cramer1:21
Good and bad you came on. I can't remember bad, but the analysts thought they were bad. Maybe the analysts are gone and you outlasted them.
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Martin Mucci1:30
Maybe. You've always been a nice supporter and having me on, I appreciate it.
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Jim Cramer1:35
As a satisfied customer and somebody that knows how to read a balance sheet, I appreciate you. What are some things you're going to continue to grow? Because there are so many different lines that Marty started that made this company into a technology company that handles paychecks.
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John Gibson1:55
You're exactly right, Jim. I'm pleased to be part of the team the almost last decade with Marty transforming Paychex. Really focused on a jar, and you should expect to continue doing that. We're one of the best operators of the business in 41% margins this quarter, very consistently over the time I've been here. We demonstrated capability to do that, and we'll continue to be a stable financial investment for investors and really generate a great total shareholder return. Those are three things we'll keep focused on.
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Jim Cramer2:27
It's clear that you guys love technology, and there are things that people don't realize. But as a small business owner, I know like when you do something that is voice-assisted, that matters tremendously.
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John Gibson2:38
There is no doubt about it. You got to think small business owners today are under tremendous pressure. Their time is extremely valuable. If you run a restaurant, chances are people aren't showing up, and you've got to go from one location to the other, so your time is invaluable. We're allowing you with our Paychex Voice Assist, with Google Voice, you can complete your HR pay.
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Jim Cramer3:04
A lot of people say they have artificial intelligence, I can't see. It seems to be natural and fiction. One thing, we've had three or four recession scares, and one of them real. Now we have one again. When I look at the number of people, number of companies you have, and the creation, it makes me hard-pressed to think that we're about to be -- that we're on a precipice.
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John Gibson3:37
We had best sales performance, record-breaking sales. We see our clients adding employees, and so it's getting a little easier to add them, Jim, as you know. It's easier to find them, still a lot of openings there, but a little bit easier now. So we really are not seeing it at this point, and we have revenue retention that is still record best, even better than pre-pandemic at this point.
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Jim Cramer4:03
What is more amazing, when I start with my -- all the analysts cared about is how low the interest rates were so he couldn't outperform. Marty told me over and over again, watch us, we're not going to be depending upon that particular metric. At the same time, the short rates are really, really high, and it does seem like that you have a bank with no credit risk.
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John Gibson4:26
Well, Jim, look, I think as Marty has done a great job, we really positioned the company as a technology and HR solutions company. And if interest rates go up, that's certainly good for us. What we're focused on is how do we sell maximum value to the customers, and we're doing that. Look at the results this quarter, our team executed greatly and really selling the most value. Our average revenue is up 9%, that's far more than price increase. We're selling more because of the products and services we have are resonating for what they need.
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Jim Cramer4:57
One of the things that I think we're acutely feeling since this Jackson Hole conference is gun-shy. If you want to start a business and may need credit, I think you might be more fearful than you were. I wonder whether there was another way or better way, say, to be able to tamp down inflation and yet still allow growth because you went through COVID. You saw what could be done. So what could the government do a little bit more gingerly to make it so we still have more people putting food on --
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Martin Mucci5:28
Well, Jim, the subsidies were a great help.
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Jim Cramer5:30
Yes.
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Martin Mucci5:30
They really fed the economy a lot. Not only businesses, you know, we helped provide over 9% of the PPP loans that came out. We were there the day after they were available. That was a tremendous help. Now, the employer retention tax credit, we've done a tremendous job giving over 45,000 of our clients employer retention tax credit, helping them get that for over $8 billion. Probably on average $190,000. Subsidies like that have really helped carry over businesses into a tough time, and maybe we ought to keep an eye on something like that for the future.
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Jim Cramer6:02
I think that's a great point. John, in a time since Marty came in, it seems like many states have changed the rules on small business, and one of the things that is very important is that Paychex changed with them. How many different rules in the time -- you've been here for a while. How many rules changed and how much more advice do you have to give to clients, which is very sticky when you give that advice?
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John Gibson6:27
There is no doubt about it. I couldn't tell you how many more regulations, it's different by every state and changing every day. We have over -- one of our fastest-growing business reported is the HR outsourcing business. Unbelievable growth. Why? Because this complex for small business owners to understand what the rules are, and so we have over 700 trained HR consultants actively engaging every day, helping them figure out how they navigate these complex rules. And the other thing that's happening, Jim, people are a lot more remote today, so the likelihood small or mid-sized businesses have employees in multiple states, you totally blew the lid off the complexities. New York doesn't necessarily work in California or Illinois, so you're seeing business owners saying, look, I can't handle this anymore, and calling Paychex to help them out.
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Jim Cramer7:18
Marty, I'll give you the last word. What can you say to shareholders about what they've done and what you're most proud of?
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Martin Mucci7:26
I'm proud of the team. The 16,000 employees of Paychex have done it all. We talked about recession, tough times, COVID, they've always come through focused on service. Service is defined as much technology, a lot of self-service. Our employees and mobile app is still a five-rated mobile app out of five just about, and it's just really made a difference for remote employees. We've always been there, and our employees, I'm very proud of them. And our shareholders have certainly done well, and they expected, and with Jen, we'll continue to deliver.
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Jim Cramer7:58
I want to congratulate you for a great run. Many shareholders, many shareholders have thanked me for introducing you to the public. John, I wish you the best of luck. Will you please continue with us the way Marty did?
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John Gibson8:10
Absolutely.
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Jim Cramer8:11
All right, then we're winners then. I want to thank Marty, chairman and CEO of