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Paychex, Inc. Reports First Quarter Results

Paychex, Inc. (“Paychex,” “we,” “our,” or “us”) (NASDAQ:PAYX) today announced total revenue of $578.2 million for the three months ended August 31, 2012 (the “first quarter”), an increase of 3% from $563.1 million for the same period last year. Net income increased 3% to $153.1 million and diluted earnings per share increased 2% to $0.42 per share.

Martin Mucci, President and Chief Executive Officer, commented, “The first quarter has fiscal 2013 off to a good start with results meeting our expectations. Our client base continued to improve, checks per payroll continued to increase, and our client retention is near a historic high. Growth rates reflect fluctuations in the frequency of payroll processing compared to the same period last year. For fiscal 2013, we have reaffirmed our financial guidance.”

Payroll service revenue increased 1% to $385.9 million for the first quarter compared to the same period last year. Checks per payroll increased 2.0% for the first quarter compared to 2.4% for the same period last year. Revenue per check grew modestly, impacted by price increases, partially offset by discounting. Growth was tempered by the impact of greater payroll processing per day in the same period last year.

Human Resource Services (“HRS”) revenue increased 7% to $182.2 million for the first quarter compared to the same period last year. The following factors contributed to this growth:
  • Paychex HR Solutions revenue was positively impacted by the favorable trend in checks per payroll, price increases, and growth in both clients and client employees. The rate of growth for Paychex HR Solutions revenue was tempered by lower client employees within our professional employer organization and product mix.
  • Insurance services revenue, including our health and benefits services and our workers’ compensation payment services, increased 21% for the first quarter compared to the same period last year. This result has benefited from the growth in health and benefits services applicants and increases in both clients and premiums in workers’ compensation insurance services.
  • Retirement services revenue was positively impacted by client growth and an increase in the average asset value of retirement services client employees’ funds, offset partially by the impact from a shift in the mix of assets within these funds to investments that earn lower fees from external fund managers.
  • Products that primarily support our Major Market Services clients through our software-as-a-service solution also contributed to growth in revenue.

Total expenses increased 2% to $340.2 million for the first quarter compared to the same period last year. We continued our investment in product development and supporting technology, with those expenses growing at a faster rate than total expenses during the first quarter. This was offset by increased productivity within operations, which has allowed us to maintain solid operating margins.

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