Shares of Paychex Inc (NASDAQ:PAYX) shares are trading higher on Wednesday after the third-quarter earnings.
The company reported third-quarter revenue growth of 5% year-on-year to $1.509 billion, marginally missing the analyst consensus estimate of $1.516 billion.
Adjusted EPS of $1.49 beat the consensus estimate of $1.48.
Management Solutions revenue increased 5% to $1.1 billion and Professional Employer Organization (PEO) and Insurance Solutions revenue gained 6% to $365.4 million.
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Total expenses increased 4% to $817.2 million due to acquisition-related costs associated with the pending Paycor acquisition, increase in PEO direct insurance costs and investment in product, technology, data, and AI.
Operating income for the quarter increased 6% to $691.8 million and the operating margin expanded 70 basis points to 45.8%.
Adjusted EBITDA climbed 8% to $751.6 million. Paychex held $2.39 billion in total cash and equivalents as of February 28, 2025.
The operating cash flow for nine months totaled $1.6 billion. Repurchased 828,855 shares for $104.0 million and paid cumulative dividends of $2.94 per share totaling $1.1 billion for the nine months.
The Paycor acquisition is expected to close in April 2025, subject to other customary closing conditions.
“The third quarter of this fiscal year has been a transformational time at Paychex. As we position ourselves for the digitally and AI driven future of human capital management (“HCM”), we believe the combination of our continued positive momentum and the pending acquisition of Paycor positions Paychex for continued growth,” said President and CEO John Gibson.
Outlook: PEO and Insurance Solutions revenue is now anticipated to grow in the range of 6.0% to 6.5%. Adjusted operating margin is anticipated to be approximately 43%.
Price Action: PAYX shares traded higher by 6.06% at $152.87 at last check on Wednesday.
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