Paychex shares are up 3%; Here is why

Paychex Inc. (NASDAQ: PAYX) is up 3% after announcing its results for the quarter ending February 28, 2022. Chairman and CEO Martin Mucci stated:

Our strong results for the third quarter, including double-digit growth in both revenue and earnings are a result of progress against key initiatives. We had a strong calendar year-end and selling season, delivering a record quarter for new sales revenue and maintaining high levels of client retention.

Revenue was up 15% YoY in fiscal Q3 2022

Total revenue during the quarter was $1.276 billion representing a 15% YoY increase. In the third quarter, total management service revenue was $1.261 billion, a 15% Yoy increase, while Professional Employer Organisation and Insurance Solutions revenue was up 21% to $301.7 million.

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Operating income was $562.8 million representing a 20% YoY increase. The company reported earnings growth of 23% YoY to $1.19 per diluted share, and on an adjusted basis, earnings were up 20% to $1.15 per diluted share.

Management solutions revenue increased 13%, YoY driven by Strong sales performance and good retention levels have led to a rise in client bases throughout human capital management (“HCM”) offerings, with ongoing growing demands for HR Solutions. Also, HCM has seen an increase in checks per payroll. In contrast, HR Solutions has seen an increase in worksite employees, with revenue per client equally increasing because of better price realization.

Full-year business outlook

Mucci added:

Now more than ever businesses need trusted partners, like Paychex, to provide them the right human resource (“HR”) technology solutions as well as help them navigate the complex HR landscape. As a trusted partner, we have helped small businesses obtain over $7 billion in combined Employee Retention and Paid Leave tax credit.

 For fiscal 2022 ending May 31, 2022, the company expects management solution revenue to grow between 12% and 13%. PEO and Insurance solutions revenue is expected to grow by 13% to 14%, and total revenue should increase by 12% to 13%. As a result, the company expects the adjusted EBITDA margin to be 44% to 45%, and adjusted earnings per diluted share will grow between 22.5% and 23%.