Paychex's higher quarterly expenses overshadow annual earnings forecast raise

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)

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