Paychex, Inc. Reports Third Quarter Results

By a News Reporter-Staff News Editor at Managed Care Weekly Digest -- Paychex, Inc. ("Paychex," "we," "our," or "us") (NASDAQ:PAYX) announced total service revenue of $693.6 million for the three months ended February 28, 2015 (the "third quarter"), an increase of 8% from $639.9 million for the same period last year. Net income increased 6% to $169.4 million and diluted earnings per share increased 5% to $0.46 per share (see also Paychex, Inc.).

Martin Mucci, President and Chief Executive Officer, commented, "We continued to make good progress against our initiatives during the third quarter. Selling season execution was strong in new annualized revenue sold. Demand for our comprehensive suite of human resource services continues to advance, and our full service products to help clients navigate health care reform are gaining market acceptance. We are also experiencing gains in the number of worksite employees served through our human resource service solutions."

Payroll service revenue was $423.8 million for the third quarter, an increase of 2% compared to the same period last year. The increase in payroll service revenue was primarily driven by growth in revenue per check and client base. Revenue per check growth was the result of price increases, net of discounts, together with the impact of increased product penetration. Checks per payroll continued to show growth, but at a more moderated rate.

Human Resource Services ("HRS") revenue was $269.8 million for the third quarter, an increase of 19% compared to the same period last year. HRS revenue growth was positively impacted by the minimum premium plan health insurance offering for our professional employer organization ("PEO") clients and worksite employees, which was introduced in the second half of the fiscal year ended May 31, 2014. The minimum premium plan contributed five percentage points of the growth in HRS revenue for the third quarter. In addition, HRS revenue reflects strong growth in clients and worksite employees served within our Paychex HR Services, which includes our administrative services organization and our PEO. Retirement services revenue increased as a result of pricing and growth in the number of plans served, and also benefited from an increase in the average asset value of participants' funds. Insurance services revenue benefited from the ramping up of our full service product assisting clients with health care reform, a moderate increase in health and benefits applicants, and higher average premiums in our workers' compensation insurance product. Our online HR administration services contributed to growth through increases in our client base for our software-as-a-service solutions.

Total expenses were $440.0 million for the third quarter, an increase of 10% compared to the same period last year. Compensation-related expenses increased 9% due to higher employee-benefit-related costs, primarily medical costs, along with higher sales headcount and performance-based compensation costs. Costs relating to the new minimum premium plan health insurance offering within our PEO contributed three percentage points of the growth in total expenses for the third quarter.

Keywords for this news article include: Paychex Inc, Health Insurance.