Paychex, Inc. (NASDAQ:PAYX) stock rose 3.98% (As on September 27, 11:23:34 AM UTC-4, Source: Google Finance) after the company reported better-than-anticipated earnings in its fiscal first quarter, as the payroll processor said artificial intelligence helped power its offerings to clients. Service revenue increased to $1.3 billion for the first quarter, growth of 5% over the prior year period. Management Solutions revenue increased 6% to $955.5 million for the first quarter primarily due to the growth in the number of clients and client employees served for human capital management (“HCM”) solutions and client worksite employees for HR Solutions and higher revenue per client resulting from price realization and product penetration, including sustained demand for HR Solutions, retirement, and time and attendance solutions; and Continued demand for HCM ancillary services. Professional Employer Organization (“PEO”) and Insurance Solutions revenue increased 5% to $297.8 million for the first quarter primarily due to the growth in the number of average PEO worksite employees, higher state unemployment insurance revenue and Growth in ancillary services.

PAYX in the first quarter of FY 24 has reported the adjusted earnings per share of $1.14, beating the analysts’ estimates for the adjusted earnings per share of $1.12, according to Bloomberg consensus estimates. The company had reported the adjusted revenue growth of 7 percent to $1.29 billion in the first quarter of FY 24, beating the analysts’ estimates for revenue of $1.28 billion. Operating income grew 8% to $536.3 million for the first quarter. Operating margin (operating income as a percentage of total revenue) increased to 41.7% for the first quarter compared to 41.1% for the prior year period. Total expenses increased 5% to $749.7 million for the first quarter primarily due to the higher compensation costs driven by increases in average wage rates, fringe benefits, and performance-based compensation; Increase in PEO direct insurance costs primarily due to growth in workers’ compensation claims costs; and Continued investment in product development, technology, and marketing. As of August 31, 2023, the company had cash, restricted cash, and total corporate investments of $1.7 billion. Short-term and long-term borrowings, net of debt issuance costs, of $812.0 million. Cash flow from operations was $655.8 million for the first quarter.

For the fiscal year ending May 31, 2024, Interest on funds held for clients is now expected to be in the range of $140 million to $150 million. Adjusted diluted earnings per share is now anticipated to grow in the range of 9% to 11%.