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2022-03-30 18:30

Shares of Paychex Inc closed the regular session up 3.50% on Wednesday after the company reported its financial results for the third quarter of fiscal year 2022. Paychex is a major provider of integrated human capital management solutions, including HR, payroll, benefits, and insurance.

Financial Results
For the third quarter fiscal 2022 the company’s management solutions revenue was $959.9 million, a rise of 13% compared to the same period in previous year. Professional Employer Organization and Insurance Solutions revenue for the third quarter fiscal 2022 increased by 21% to $301.7 million. The company’s net expense surged by 11% to $713.2 million.

Due to double-digit revenue growth that outpaced expense increases, operating income increased by 20% to $562.8 million. The operating margin (operation income as a percentage of total revenue) was 44.1%, up from 42.2 percent the previous year. And lastly the effective income tax rate for the third quarter fiscal 2022 was 22.3% compared to 24.2% for the same period in previous year. CEO Martin Mucci said:

"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.”

Business Highlights
The following are the highlights for the nine months ended February 28, 2022 as compared to the same time the previous year:

For three quarters in a row, revenue and earnings increased by double digits. With total sales of $3.5 billion, total service revenue and overall revenue both climbed by 15%. The company's operating income climbed by 31% to $1.4 billion. The company's adjusted operating income climbed by 27% to $1.4 billion. Moreover, diluted earnings per share grew by 31% to $3.02 per share. Adjusted diluted earnings per share climbed by 27% to $2.95 per share.

Future Outlook
Current assumptions and market conditions are factored into our projection for the fiscal year ending May 31, 2022. Changes in the macroeconomic climate may have an impact on our forecast. In light of these implications, the company has amended their guidance as follows:

Revenue growth for Management Solutions is now expected to be in the region of 12% to 13%. While the revenue growth for PEO and Insurance Solutions is now anticipated to be in the region of 13% to 14%. Total revenue is expected to increase by 12% to 13% in the coming years. The adjusted operating margin is expected to be in the range of 40%. However, the adjusted EBITDA margin will be in the range of 44% and 45%. Other expenses, net, are now projected to be around $15 million.