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Paychex, Inc. (“Paychex,” “we,” “our,” or “us”) (NASDAQ:PAYX) today announced total service revenue of $600.5 million for the three months ended November 30, 2013 (the “second quarter”), an increase of 7% from $559.4 million for the same period last year. Net income increased 7% to $158.7 million and diluted earnings per share increased 5% to $0.43 per share.
Martin Mucci, President and Chief Executive Officer, commented, “We are pleased with our progress in the second quarter of fiscal 2014. The rate of growth in our Payroll service revenue accelerated to 5% and Human Resource Services revenue growth continued to advance at a double-digit rate. Sales execution remained strong, particularly in core payroll and in Human Resource Services. We continue to deliver client satisfaction and client retention at record levels."
Mr. Mucci added, "We have broadened our software-as-a-service offerings and recently launched Paychex Accounting Online, a cloud accounting solution. It was created and delivered through a strategic partnership and investment in Kashoo, a leading cloud accounting provider. This software-as-a-service solution complements our industry-leading payroll and HR solutions by expanding our suite of services for new businesses and entrepreneurs."
Payroll service revenue was $395.7 million for the second quarter, an increase of 5% compared to the same period last year. This increase was driven by growth in checks per payroll and revenue per check. Checks per payroll increased again this quarter, in line with the growth experienced in the three months ended August 31, 2013 (the "first quarter"). Revenue per check growth was the result of price increases net of discounts, together with the impact of increased product penetration. The absence of the disruptive effects of Hurricane Sandy that occurred in the same period last year also benefited our rate of growth.
Human Resource Services (“HRS”) revenue was $204.8 million for the second quarter, an increase of 12% compared to the same period last year. Revenue from both our administrative services organization and professional employer organization ("PEO") grew at double-digit rates. The growth in HRS revenue was driven primarily by client base growth, particularly in retirement services, Paychex HR Solutions, and eServices products. Retirement services revenue also benefited from an increase in the average asset value of participants' funds. Insurance services revenue reflected higher premiums in workers' compensation insurance services and an increase in the number of health and benefits applicants. Our eServices products contributed to growth through sales success for software-as-a-service products. HRS revenue growth was tempered modestly by higher direct costs within our PEO.