Analyst Note| Emma Williams |
Paychex’s second-quarter fiscal 2023 result exceeded our expectations amid a backdrop of challenging macroeconomic conditions. As expected, employment growth continues to moderate cycling the pandemic era rebound, however, Paychex’s revenue retention has proven resilient relative to our forecasts. This is due to strong retention of larger, higher-value clients and greater product attachment offsetting an uptick of churn in the microbusiness market. Despite a slowdown in hiring activity, the company continues to benefit from tight labor markets and inflationary pressure supporting demand for recruitment, benefits, and outsourced HR solutions, as well HR technology which can support operational efficiencies for clients.