NEW YORK: Paychex Inc. ( PAYX ) reported a profit for the second-quarter ended November 30, 2015 that increased 9 percent from last year.
Adjusted earnings per share topped analysts’ expectations, while quarterly revenue missed their estimates. The company reaffirmed its earnings and revenue growth guidance for the fiscal-year 2016.
Martin Mucci, President and Chief Executive Officer, said, “The second quarter reflected continued growth across our major product lines. Payroll service revenue advanced 4% and we continue to experience solid sales execution. The double-digit growth in client worksite employees served within our human resource services is an indication of the continued strong demand for these services.”
Total service revenue was $711.3 million, an increase of 7% from $665.9 million for the same period last year. Total revenue for the quarter grew 7% to $722.4 million from $676.3 million in the previous year. Wall Street expected revenues of $724.47 million for the quarter.
Payroll service revenue was $427.4 million for the second quarter, an increase of 4% compared to the same period last year. The increase in payroll service revenue was primarily driven by growth in client base and revenue per check. This growth in revenue per check was the result of price increases, net of discounts.
Human Resource Services or “HRS” revenue was $283.9 million for the second quarter, an increase of 11% compared to the same period last year. Thelargest HRS revenue stream was Paychex HR Services, which included administrative services organization and its professional employer organization or “PEO”. These services experienced strong growth as a result of increases in clients and client worksite employees served.
Total expenses were $428.2 million for the second quarter, an increase of 5% compared to the same period last year. Compensation-related expenses increased 6%, primarily related to higher wages and performance-based compensation costs. Strong growth in its PEO also contributed to the growth in total expenses for the second quarter.
Looking ahead to fiscal 2016, the company continues to expect net income to grow 8 to 9 percent and total service revenue to improve 7 to 8 percent from the fiscal 2015 level. Wall Street currently is looking for fiscal year 2016 earnings of $2.04 per share on annual revenues of $2.94 billion. The net income guidance excludes the impact of the net tax benefit related to prior tax years that was recorded in the first quarter.
PAYX closed Monday’s trading at $52.60. In Tuesday’s pre-market trading, the company’s shares are up $0.51 or 0.97% to $53.11
