Paychex’s higher first-quarter expenses cloud profit forecast boost

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(Reuters) -HR software provider Paychex on Tuesday reported higher expenses in the first quarter overshadowing a lift to its annual earnings forecast, and dragging the company’s shares down 6.2% in early trading.

Total expenses surged 29% to $998.1 million in the June-to-August quarter, fueled by higher compensation costs and amortization of intangible assets tied to its acquisition of payroll processing firm Paycor, earlier this year.

Spending on technology, sales and marketing also rose as Paychex pushed ahead with strategic investments and integrated the newly acquired business.

Despite the higher expenses, Paychex raised its annual adjusted earnings growth forecast to a range of 9%–11%, from its prior outlook of 8.5%–10.5%.

The company said it continues to benefit from gains in client numbers, boosted by Paycor’s addition, as well as growth in worksite employees under its human resources solutions segment.

The company’s revenue rose 17% to $1.54 billion in the quarter ended Aug. 31, in line with analysts’ estimates, according to data compiled by LSEG.

Paychex serves over 745,000 clients and offers a comprehensive suite of services including HR outsourcing, payroll processing, human capital management technology, as well as retirement and insurance solutions.

On an adjusted basis, the company posted first-quarter profit per share of $1.22, compared with analysts’ estimate of $1.21.

(Reporting by Kritika Lamba in Bengaluru; Editing by Shailesh Kuber)