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.