Dec 19 (Reuters) – Payroll services provider Paychex reported higher expenses for the second quarter on Friday, taking the shine off its raise in annual adjusted earnings growth forecast.
Shares of the company were down 2.6% in early trading. They have fallen around 18% so far this year.
Paychex said its total expenses rose 27% to $985.7 million in the quarter from a year earlier, driven by higher technology spending, and costs related to the integration of payroll processing firm Paycor.
The company operates in a crowded market that includes large enterprise vendors such as Automatic Data Processing, Workday and Oracle, putting pressure on pricing and customer acquisition costs.
“We are seeing a little bit smaller deal sizes,” Paychex CFO Bob Schrader said on a post-earnings call.
The company said that clients are being “very cost-conscious” and are “looking carefully” for value in managing their cost.
Paychex has rolled out enhancements to its all-in-one HR management tool Paychex Flex, aimed at improving usability for both employers and employees.
The company now expects annual adjusted earnings to grow between 10% and 11%, compared with its prior expectations of between 9% and 11%.
Revenue for the quarter ended November 30 stood at $1.56 billion, missing analysts’ average estimate of $1.57 billion, according to data compiled by LSEG.
Paychex reported second-quarter adjusted earnings of $1.26 per share, topping estimates of $1.23.
(Reporting by Arnav Mishra in Bengaluru; Editing by Maju Samuel)
