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PEO Rev Drop Hurts Paychex 3Q

An 8-percent drop in revenue from its professional services organization revenues contributed a a 1-percent decline in revenue for Paychex for the third quarter ended February 28. Meanwhile, payroll services revenue was virtually unchanged.

The PEO decline contributed to an overall drop of 2 percent in services revenue. This was “largely due to a lower volume of client employees paid across our HCM solutions,” CEO Martin Mucci said in this week’s webcast for earnings for the third quarter.

Net income fell to $350.5 million for the most recent ended period, off from $354.1 million a year earlier. Total revenue fell percent to $1.11 billion from $1.14 billion for last year’s corresponding period. PEO revenue fell to slightly less than $250 million from $271.5 million for the compared periods. Management solutions (largely payroll) came in at $847.8 million, essentially unchanged from $850 million.

The revenue decline was also attributed to the fall off in interest on funds held for clients, which fell 29 percent to $15 million in the most recently ended quarter because of lower interest rates.

Mucci also said Paychex continues to expect total service revenue for 2021 will be “roughly flat to last fiscal year” despite the impact of the COVID-19 pandemic.

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