Paychex Beats Q2 Earnings, Reiterates FY16 Outlook

Paychex Inc. (PAYX – Snapshot Report) reported mixed results for second-quarter fiscal 2016 wherein the bottom line beat the Zacks Consensus Estimate but top line missed the same. Nevertheless, the company marked year-over-year improvement on both the counts.

Earnings of 52 cents per share surpassed the Zacks Consensus Estimate by a penny and jumped 10.6% from the year-ago quarter mainly backed by higher revenues.

Paychex Inc. (PAYX – Snapshot Report) EPS BNRI & Surprise Percent – Last 5 Quarters | FindTheCompany

Quarter Details

Paychex reported total revenue (including Interest on funds held for clients) of $722.million, up 7% year over year. However, it missed the Zacks Consensus Estimate of $724 million. Excluding interest on funds held for clients, total services revenue (Payroll service and Human Resource Services) grew 7% year over year to $711.3 million.

Payroll Service segment revenues went up 4% from the year-ago period to $427.4 million, primarily on the back of higher revenue per check and client base.

Human Resource Services segment revenues rose 11% year over year to $283.9 million mainly driven by solid growth in client base and worksite employees, increased revenues from retirement and online HR administration services.

Interest on funds held for clients increased 8% on a year-over-year basis to $11.1 million primarily benefiting from a 1% rise in average investment balances backed by growth in client base.

Paychex’s total expenses increased 5% from the year-ago figure to $428.2 million due to 6% rise in compensation-related expenditure. However, total expenses, as a percentage of total revenue, decreased 70 basis points (bps) to 59.3%.

Consequently, Paychex’s operating margin expanded 70 bps to 40.7%. Moreover, in dollar terms, reported operating income increased 9% year over year to $294.2 million.

Excluding interest on funds held for clients, Paychex’s operating income came in at $283.1 million or 39.8% of total services revenue compared with $259.8 million or 39% a year ago.