Paychex, Inc. (NASDAQ:PAYX) stock rose 1.38% (As on December 22, 11:14:22 AM UTC-4, Source: Google Finance) after the company posted mixed result for the second quarter of FY 24. Service revenue increased to $1.2 billion for the second quarter, growth of 5% over the prior year period. Revenues from the Management Solutions segment increased 4% year over year to $930.7 million. The growth can be attributed to an increase in the clientele utilizing the company’s range of human capital management solutions, augmented revenue per client through enhanced price realization and greater product penetration, including HR Solutions and retirement offerings, as well as an expansion in ancillary services. Professional employer organization (“PEO”) and Insurance Solutions’ revenues totaled $295.7 million, up 8% from the year-ago quarter’s level. Interest on funds held for clients increased 44% year over year to $31.5 million.

Further, EBITDA of $551 million increased 6% year over year. Operating income increased 7% year over year to $506.2 million. Operating margin was 40.2%, up 50 basis points from the year-ago reported figure. Paychex exited the quarter with cash and cash equivalents of $1.36 billion compared with $1.65 billion reported at the end of the prior quarter. Long-term debt totaled $798.4 million compared with $798.3 million in the prior quarter. Cash generated from operating activities amounted to $348.5 million while capital expenditures totaled $40.7 million.

PAYX in the second quarter of FY 24 has reported the adjusted earnings per share of $1.08, beating the analysts’ estimates for the adjusted earnings per share of $1.07, according to Zacks Investment Research. The company had reported the adjusted revenue growth of 5.7 percent to $1.26 billion in the second quarter of FY 24, missing the analysts’ estimates for revenue of $1.27 billion. Total expenses increased 5% to $751.7 million for the second quarter primarily due to higher compensation costs driven by increases in average wage rates, increase in PEO direct insurance costs related to growth in average worksite employees and PEO insurance revenues; and continued investment in technology, sales and marketing.

Paychex provided its fiscal 2024 outlook, wherein adjusted EPS is expected to register 10-11% growth from the previously estimated 9-11%. PAYX reaffirmed its projection of total revenues to register 6-7% growth.

For fiscal 2024, Management Solutions’ revenues are expected to grow around 5-6%. PEO and Insurance Solutions’ revenues are anticipated to grow 7-9%, up from the previously guided 6-9%. Interest on funds held for clients is anticipated to be in the range of $140-$150 million. The company expects operating margin in the range of 41-42%.