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Paychex Revs Decline Slightly

Paychex revenue was off 1 percent for the second quarter ended November 30. While employment is still down, the company saw no further deterioration from the recent surges in Covid-19 cases and it was buoyed by small business starts.

Payroll revenue is incorporated in the management solutions segment and not reported separately. However, in a recent earnings webcast, CEO Martin Mucci noted the quarter was “driven by increases in our client base and increased penetration of our suite of solutions, particularly HR outsourcing, time and attendance, and retirement services, partially offset by a decline in check volumes.”

For the most recently ended quarter, net income was $272.4 million, a decline of 5 percent from $258.7 a year ago. Revenue reached $983.7 million, down from $990.7 million. The top line was impacted by a 4-percent decline in funds held for clients which yielded a 25-percent drop in interest on those funds to $15 million

Meanwhile, the company adjusted its fiscal 2021 outlook, now expecting a 3 percent drop in revenue. The previous forecast was for a revenue decline of 2 percent to 4 percent.  However, Management Solutions revenue is now expected to range from a drop of 1 percent to 1-percent growth, compared to the prior guidance of a percent to 3-percent decline.

Management Solutions had $732.8 million in revenue, up 1 percent from $726.7 in last year’ corresponding period while the PEO and Insurance Solutions segment had a 3-percent drop to $236.1 million from $244.1 million.

Paychex is seeing new business starts, which is typical of downturns as laid off employees start their own companies. In the last quarter, “part of the unit sales on the small end in particular have been a lot of new business starts,” CFO Efrain Rivera said, noting the company “typically has been very successful at selling brand new businesses on our Paychex and SurePayroll platforms.”

Rivera said the last report on new business starts was their increase is in the “high-30%” year over year.

Bob Scott
Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind
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