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Paychex sees higher third-quarter revenues due to recent takeovers

Last updated: 11:05 26 Mar 2018 EDT, First published: 06:05 26 Mar 2018 EDT

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Paychex reaps benefits of its acquisition of two rivals

Paychex Inc (Nasdaq:PAYX), the payroll and human resources outsourcing company, reported stronger third-quarter revenue Monday on the back of recent takeovers.

The acquisition last year of HR Outsourcing Holdings, a rival group, helped to push up Paychex’s revenues by 9% from the same quarter a year ago to US$866.5mln. By the third quarter’s close, Paychex had also seen the completion of its takeover of the Lessor group, a Danish provider of payroll and human resources software, which conducts business across Northern Europe.

In the three months until the close of February, Paychex reported net income of US$260.4mln, or US$0.72 per share, up from US$202.2mln or US$0.56 per share in the same period a year ago.

In a statement, Martin Mucci, president and chief executive of Paychex, indicated that the company’s human resources outsourcing, retirement and insurance businesses fared particularly well in the quarter and that his company had benefited from changes to the U.S. tax code. The group’s income tax rate dropped to 11.7% in the third quarter, down from 34.2% in the year-ago quarter, due to the US tax reforms introduced last December.

“Comprehensive human resource outsourcing solutions, retirement services, insurance services, and our time and attendance solutions have performed well,” said Mucci in a statement. “The benefits of tax reform and the products … we provide to our clients continue to strengthen and enhance our … position.”

Not all of its revelations for the quarter were rosy, however, as Paychex said its expenses rose 17% from the same period a year ago to US$574mln and its operating income fell 5% to US$292.5mln.

Paychex said it saw a one-off tax benefit of US$20.8mln in the quarter due to the reassessment of its tax liabilities and a net tax benefit of US$36.1mln due to the change in its income tax rate. Its cash and investments position stood at US$826.6mln in the quarter and its short-term borrowings amounted to US$57.7mln at the close of February.

Shares in Paychex held steady at US$61.42 in early trade.

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