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Paychex Earnings Grow on Strength of New Products
From the Wall Street Journal of Fri, 19 Dec 2014 09:13:00 EST

Paychex Inc. said higher revenue thanks to a new health-insurance product in its human-resources segment helped drive results in the second quarter, a sign the company’s strategy to diversify its service offerings is paying off.

The results beat Wall Street expectations.

The Rochester, N.Y., company, which provides payroll services to small companies, has sought to broaden its offerings. This includes a suite of payment-processing solutions, which it launched in January, and a cloud accounting system rolled out last year. Earlier this year, Paychex acquired cloud-based time-and-attendance-data provider Nettime Solutions LLC.

“We have experienced strong demand for our comprehensive suite of human resource outsourcing services, while payroll-services revenue continues to advance,” said Chief Executive Martin Mucci. In the most recent quarter, the company also introduced Paychex Flex, which streamlines workforce management.

For the period ended Nov. 30, Paychex reported a profit of $173 million, or 47 cents a share, up from $159 million, or 43 cents a share, a year earlier. Revenue grew 10% to $676 million.

Analysts polled by Thomson Reuters expected per-share profit of 46 cents and revenue of $674 million.

Payroll-service sales increased 3.9% to $411 million on growth in revenue per check and in client base.

Human-resources revenue grew 21% to $255 million. Results were helped by the new product offering, a minimum-premium health insurance, introduced in the second half of the previous year. This new product accounted for about 7% of human-resource revenue in the second quarter.

Human-resources revenue increases were also helped by more plans being sold in the retirement-services area, and higher average asset value of participant funds.

Paychex affirmed its fiscal year outlook.

Shares, which inched up slightly in premarket trading, are up about 5% this year through Thursday’s close.

Write to Angela Chen at

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