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View All NewsPaychex revenue up 9% in fiscal Q3; revenue in division that includes PEO up 17%
Revenue rose 9% at Paychex Inc. (NASD: PAYX) in the Rochester, NY-based company’s fiscal third quarter ended Feb. 28. However, revenue rose 17% in the firm’s Human Resource Services segment, which includes the company’s professional employer organization business. Revenue growth in the segment was driven by increases in the company’s client base.
Demand for Paychex’s HR services, which includes administrative services as well as PEO, resulted in strong growth in the number of client worksite employees served, according to the company.
| (US$ millions) | Q3 2018 | Q3 2017 | % growth |
| Payroll service revenue | $455.0 | $446.6 | 2% |
| Human resource services revenue | $393.4 | $336.0 | 17% |
| Interest on funds held for clients | $18.1 | $13.2 | 37% |
| Total revenue | $866.5 | $795.8 | 9% |
| Net income | $260.4 | $202.5 | 29% |
Paychex reported its acquisition of PEO provider HR Outsourcing Holdings Inc., completed in August 2017, contributed approximately 3% to growth of total revenue.
At the end of the third quarter, Paychex acquired Lessor Group, a Denmark-based provider of payroll and HCM software solutions that serves clients in Northern Europe.
Quote
“We continued to experience solid growth in the third quarter across all major human capital management product lines,” said President and CEO Martin Mucci. “In particular, comprehensive human resource outsourcing solutions, retirement services, insurance services, and our time and attendance solutions have performed well. Our service delivery also remained strong as we continue to experience favorable client retention results.”
Guidance
Paychex forecast Human Resource Services revenue to be up 13% to 14% in this fiscal year compared to last, and total revenue is expected to grow approximately 7%. The guidance is up from the previous quarter and now including the impact of the Tax Cuts and Jobs Act of 2017 and the acquisition of Lessor.
“The effective income tax rate for the third quarter was significantly impacted by the Tax Act,” the company stated. “As it relates to the Tax Act, we recorded a one-time net tax benefit of $20.8 million for the revaluation of our net deferred tax liabilities and a net tax benefit of $36.1 million for the change in our annual effective income tax rate for the first six months of the current fiscal year ending May 31, 2018.”
Share price and market cap
Shares in Paychex fell 1.26% to $60.95 as of 1:51 p.m. Eastern time. The company had a market cap of $21.90 billion.