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Paychex Beats First-Quarter Expectations Despite Covid-19 Hit

Paychex says client retention is still strong and sales performance is accelerating.

Paychex  (PAYX) - Get Paychex, Inc. Report said Tuesday first-quarter results took a hit from the coronavirus pandemic but the payroll benefits manager still beat Wall Street's expectations 

Shares of the Rochester, New York-based company were falling 2.4% to $79.57.

Paychex reported net income of $211.6 million, or 59 cents a share, down from $264.2 million, or 73 cents a share, a year ago. Adjusted earnings came to 63 cents, beating FactSet's consensus forecast of 55 cents. 

Revenue slipped 6% to $932.2 million, ahead of FactSet's call for $895.4 million. 

Service revenue came to $917.3 million, beating expectations of $881.3 million. 

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The company said adjusted net income includes adjustments for one-time costs of $31.2 million related to the acceleration of cost-saving initiatives, "including the long-term strategy to reduce our geographic footprint and headcount optimization, and net tax windfall benefits related to employee stock-based compensation payments."

Looking ahead to fiscal 2021, Paychex said it expects adjusted earnings to decline 6% to 8% from a year ago. FactSet is looking for earnings of $2.75, pointing toward a decline of 8.3%.

President and CEO Martin Mucci said that the results "showed marked improvement as most of our key business metrics recovered at a faster rate than anticipated."

"The effects of the Covid-19 pandemic continue to impact our results causing unfavorable year-over-year comparisons," Mucci said in a statement, "however, client retention has remained strong and sales performance is accelerating with year-over-year growth in the number of clients sold." 

The company said that its financial position as of Aug. 31 "remained strong with cash, restricted cash, and total corporate investments of $952.1 million."