As Paychex’s first quarter in Fiscal Year 2018 drew to a close on Aug. 31, the company has seen gains across the board, from total revenue to interest on funds.
The payroll and human resources firm brought in $803.1 million in total service revenue, a 4 percent increase from the same time last year ($773.5 million). Payroll revenue increased 2 percent to $457.8 million, while human resources revenue rose 7 percent, to $345.3 million. For stockholders, this meant a 5 percent increase in diluted earnings per share, to 63 cents per share, and an 11 percent increase in adjusted diluted earnings per share, at 62 cents per share.
“We posted solid growth across our major human capital management product lines in the first quarter, in particular our comprehensive human resource outsourcing solutions and our cloud-based time and attendance products continue to perform well,” said President and CEO Martin Mucci, in a statement.
While expenses rose 2 percent to $471.8 million, due in part to investment in new technology, operating income increased 7 percent to $345 million (42.2 percent of total revenue). This marks an increase from the same time frame last year, when operating income clocked in at 41.1 percent of total revenue. The first quarter also saw cash flow of $343.6 million, an increase of 17 percent from the first quarter of fiscal year 2017.
With positive metrics starting out the first quarter, Paychex set a high bar for their goals by the close of Fiscal Year 2018 on May 31. Among these are growing human resources revenue between 12 percent and 14 percent, increasing total revenue by 6 percent, and keeping operating income between 39 percent and 40 percent and effective income tax between 35 percent and 35.5 percent. The income tax rate in the first quarter was 34.4 percent, compared to 33 percent in the same period in Fiscal Year 2017.
“We continued to experience strong demand for our HR outsourcing solutions. This demand, along with our recently announced acquisition of HR Outsourcing, Inc. (HROI), a national professional employer organization (PEO) serving small- to mid-sized businesses, positions us for continued growth,” Mucci said. “We announced the acquisition of HROI on August 21, 2017. We believe this acquisition affirms our strong presence in the PEO industry and demonstrates our continued commitment to providing our clients with industry-leading HR solutions.”