Q4 2025 Paychex Inc Earnings Call

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Unknown Executive: [music] Good morning and welcome to Paychex's 4th Quarter Fiscal 2025 Earnings Call.

Good morning, and welcome to Paychex as fourth quarter fiscal 2025 earnings call participating on the call today are John Gibson and Bob Schrader.

Unknown Executive: Participating on the call today are John Gibson and Bob Schrader.

Unknown Executive: Following the speaker's prepared remarks, there will be a question and answer period. If you'd like to ask a question during this time, simply press star then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 2 on your telephone keypad.

Speaker Change: Following the Speakers' prepared remarks, there will be a question and answer period, if you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press star two on your telephone keypad.

Unknown Executive: As a reminder, this conference is being recorded and your participation implies consent to our recording of this call.

Speaker Change: This conference is being recorded and your participation implies consent to our recording of this call I would now like to turn the call over to Bob Schrader Paychex as Chief Financial Officer.

Bob Schrader: I would now like to turn the call over to Bob Schrader, Paychex's Chief Financial Officer. Thank you for joining us to discuss Paychex's fourth quarter and fiscal year 2025 performance. This morning we released our financial results for the quarter ended May 31, 2025. You can access our earnings release and presentation on our investor relations website. We anticipate our Form 10-K will be filed with the SEC before the end of July. This teleconference is being webcast and will be archived on our website for approximately 90 days. Today's call includes forward-looking statements that refer to future events and involve some risk.

Speaker Change: Thank you for joining us to discuss paychex fourth quarter and fiscal year 2025 performance.

Speaker Change: Morning, We released our financial results for the quarter ended May 31, 2025, you can access our earnings release and presentation on our Investor Relations website.

Dissipate or Form 10-K will be filed with the SEC before the end of July.

Speaker Change: This teleconference is being webcast and will be archived on our website for approximately 90 days today.

Speaker Change: Today's call includes forward looking statements that refer to future events and involve some risk. We encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ from our current expectations. We will also reference non-GAAP financial measures a description of these items along with a reconciliation of the non-GAAP measures.

Bob Schrader: We encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ from our current expectations. We will also reference non-GAAP financial measures. A description of these items, along with the reconciliation of the non-GAAP measures, can be found in our earnings release.

It can be found in our earnings release I would now like to turn the call over to John Gibson, Paychex, President and CEO.

John Gibson: I would now like to turn the call over to John Gibson, Paychex president and CEO. Thanks, Bob. I will start the call today by sharing key business highlights for the fourth quarter and fiscal year, and then Bob will discuss our financial results and outlook.

Bob: Thanks, Bob.

Speaker Change: I will start the call today by sharing key business highlights for the fourth quarter and fiscal year, and then Bob will discuss our financial results and outlook.

John Gibson: We will then, of course, open it up for your questions. Given that the paycore acquisition has closed and we have completed key integration activities to bring the two companies together, we are now operating as one Paychex and not two different companies. Our comments today will reflect that fact. Paychex demonstrated solid performance this year against our strategic objectives, underscoring our unique ability to effectively navigate dynamic market conditions, while continuing to enhance our customer experience and market position, and also maintain our industry leading operating margin. We delivered 10% revenue growth in the fourth quarter reflecting continued execution across the business and the addition of paycore.

Speaker Change: We will then of course open it up for your questions.

Speaker Change: Given that the pay core acquisition has closed and we have completed key and or integration activities to bring the two companies together. We are now operating as one paychex and not too different companies. Our comments today will reflect that fact.

Speaker Change: <unk> demonstrated solid performance this year against our strategic objectives, underscoring our unique ability to effectively navigate dynamic market conditions, while continuing to enhance our customer experience and market position and also maintain our industry leading operating margins.

Bob: We delivered 10% revenue growth in the fourth quarter, reflecting continued execution across the business and the addition of <unk> core.

John Gibson: For full fiscal year 2025, we achieved 6% revenue growth and 6% growth in adjusted diluted earnings per share. We also delivered 60 basis points of adjusted operating income margin expansion in the face of significant ERTC had Our client retention rates increased year over year, underscoring the compelling value we provide as a trusted partner in our client's growth and success. We grew the number of clients we served to approximately 800,000 and increased the number of HR outsourcing worksite employees to 2.5 million this year. We have made significant progress on the PayCorps acquisition, surpassing our expectations and setting a strong foundation for future success.

Bob: For full fiscal year 2025, we achieved 6% revenue growth and 6% growth in adjusted diluted earnings per share. We also delivered <unk>.

Bob: 60 basis points.

Bob: <unk> operating income margin expansion in the face of significant E RTC headwinds.

Bob: Our client retention rates increased year over year.

Bob: Underscoring the compelling value we provide is a trusted partner.

Bob: Our clients growth and success.

Bob: We grew the number of clients, we serve to approximately 800000 and increased the number of HR outsourcing worksite employees to two 5 million this year.

Bob: We have made significant progress on the <unk> acquisition, surpassing our expectations and setting a strong foundation for future success.

Bob: Based upon our early progress on the integration and our increased understanding of the opportunities we have gained since closing.

John Gibson: based upon our early progress on the integration in our increased understanding of the opportunities we have gained since close We are raising our cost energy expectations to approximately $90 million in fiscal year 26. The actions we have already taken give us high confidence in achieving the center. In addition, we have identified a list of additional synergy opportunities that we are actively pursuing. We also believe that there are additional opportunities to invest for future growth. And we will strategically accelerate those investments as the year progresses. We previously outlined to you the business unit structure, leadership continuity and retention of key pay core talent to mitigate integration risk.

Bob: We are raising our cost synergy expectations to approximately $90 million in fiscal year 'twenty six.

Bob: The actions, we've already taken give us high confidence in achieving the synergies.

Bob: In addition, we have identified a list of additional synergy opportunities that we are actively pursuing.

Bob: We also believe that there are additional opportunities to invest for future growth and we will strategically accelerate those investments as the year progresses.

Bob: We previously outlined to you the business unit structure leadership continuity and retention of key pay core talent to mitigate integration risk.

John Gibson: Customers are continuing to utilize their existing platform, minimizing the disruption to our client base. Our retention remains strong, and the reception to the combined offerings has exceeded our expectations in their early days.

Bob: Customers are continuing to utilize their existing platform minimizing the disruption to our client base.

Bob: Our retention remains strong and the reception to the combined offerings has exceeded our expectations in their early days.

John Gibson: I'll share some of the recent integration accomplishments and focus areas for fiscal year 2020. During the quarter, we defined how our HCM platforms will generally serve our market segments moving forward. Paychex Flex will focus on companies with up to 99 employees. and the PayCorp platform will target the upmarked enterprise segment above 100 employees. Your payroll will continue to serve this small business do-it-yourself marketplace.

Bob: I'll share some of the recent integration accomplishments and focus areas for fiscal year 'twenty six.

Bob: During the quarter, we defined how our HCM platforms will generally serve our market segments moving forward.

Bob: Ex flex will focus on companies with up to 99 employees.

Bob: And the pay core platform will target the upmarket enterprise segment above a 100 employees.

Bob: Your payroll will continue to serve the small business do it yourself marketplace.

John Gibson: Disabroach. provides the market with the most comprehensive, flexible, and innovative HCM solutions for organizations of all sizes and needs. We also completed a comprehensive territory assessment and reassignment review across the sales teams that aligns to these market segments. We have expanded and optimized our sales coverage nationwide in the fourth quarter. Sales representatives who transition territories received comprehensive training on the complete suite of HCM solutions they can now offer. We are encouraged by how sales hiring, retention, and tenure developments are trending going into the fiscal year.

Bob: This approach <unk>.

Bob: Provides the market with the most comprehensive flexible and innovative HCM solutions for.

Bob: Organizations of all sizes and needs.

Bob: We also completed a comprehensive territory assessment and reassignment review across the sales teams that aligns to these market segments, we have expanded and optimize our sales coverage nationwide in the fourth quarter sales.

Bob: Sales representatives to transition territories received comprehensive training on the complete suite of HCM solutions. They can now offer.

Bob: We are encouraged by how sales hiring retention and tenure developments are trending going into the fiscal year.

John Gibson: While all of these changes did create some internal disruption and took many of our sales resources out of the field for a portion of the fourth quarter, we believe now was the time to make these changes to best position us to win in the marketplace. With newly trained sales reps on our broad set of capabilities and solutions, realigned territories, and a fully staffed sales team, we believe we are well positioned entering the new fiscal year. Well, we have made significant strides in integrating the teams, optimizing our go to market approach, and capturing cost synergies. We're most enthusiastic about the opportunities for revenue synergy.

Bob: While all of these changes did create some internal disruption and took many of our sales resources out of the field for a portion of the fourth quarter. We believe now is the time to make these changes to best position us to win in the marketplace.

Bob: With newly trained sales reps on our broad set of capabilities and solutions realigning territories and a fully staffed sales team. We believe we are well positioned entering the new fiscal year.

Bob: While we have made significant strides in integrating the teams optimizing optimizing our go to market approach and capturing cost synergies were most enthusiastic about the opportunities for revenue synergies.

John Gibson: While we expect to realize revenue synergies over the next several years, I'm pleased we have already secured our first PayCorp customers on our ASO and PO. and are seeing promising growth in our pipeline. Notably, the PO cell was referred by a pay core broker. And this was even before we officially launched the product into the client base. We continue to believe the biggest opportunity is the cross-sell of Paychex retirement, ASO, and PO solutions into the PayCorps base of more than 50,000 clients. We also believe there are opportunities to take PayCorps capabilities into the Paychex client base in the years ahead.

Bob: While we expect to realize revenue synergies over the next several years.

Bob: I'm pleased we have already secured our first pay core customers all of our ASO and PEO.

Bob: And are seeing promising growth in our pipeline, notably the co sell with referred by a paid core broker and this was even before we officially launch the product into the client base. We continue to believe the biggest opportunity is the cross sell of Paychex retirement, ASO and PEO solutions into their pay core base of more than 50.

Bob: Clients. We also believe there are opportunities to take pay course capabilities into the paychex.

Bob: Our client base in the years ahead.

John Gibson: We are pleased at how quickly our teams were able to complete the bulk of the backing integrations required to cross-sell into PayCorps base and realize these revenues. We also remain excited about PayCore's embedded solution, which enables seamless integration of our payroll and HR technology stack into our partners platform. With thousands of potential partners, we are early in executing against this revenue opportunity and are actively scaling and investing. We believe the synergies between the companies coupled with our mutual focus on innovation and customer centric solutions, position us to continue to deliver strong returns and drive long term shareholder return.

Bob: We are pleased at how quickly our teams were able to complete the bulk of the backing.

Bob: <unk> required to cross sell into <unk> base and realize these revenue synergies.

Bob: We also remain excited about pay course embedded solution, which enables seamless integration of our payroll and HR technology stack into our partners' platforms with thousands of potential partners. We are early in executing against this revenue opportunity and are actively scaling and investing in it.

Bob: We believe the synergies between the companies coupled with our mutual focus on innovation and customer centric solutions position us to continue to deliver strong returns and drive long term shareholder return.

Bob: A core component of our go to market strategy involves cultivating long standing relationships with channel partners, such as brokers Cpas and banks just to name a few.

John Gibson: A core component of our go-to-market strategy involves cultivating long-standing relationships with channel partners, such as brokers, CPAs, and banks, just to name a few. More than half of our new business originates from channel partner referrals. Following the acquisitions, we introduced the Paychex Partner Plus program to brokers to foster relationships and drive mutual growth. Together, we now have a broader suite of solutions to offer brokers, which can supplement their offerings to clients. And the Partner Plus program provides a structured framework designed to safeguard mutual clients from competing products. To date, over 1,000 brokers are enrolled in the program, and we are hearing positive feedback, which we believe indicates a strong foundation for retaining and expanding this important referral channel.

Bob: More than half of our new business originates from channel partner referrals. Following the acquisitions, we introduced the paychex partner plus program to brokers to foster relationships and drive mutual growth together, we now have a broader suite of solutions to offer brokers, which can supplement their offerings to clients.

Bob: And the partner plus program provides a structured framework designed to safeguard mutual clients from competing products to.

Bob: To date over 1000 brokers are rolled in our program.

Bob: And we are hearing positive feedback, which we believe indicates a strong foundation for retaining and expanding this important referral channel.

John Gibson: The share of PayCorp field bookings referred by brokers increased this past fiscal year. We are also actively gathering feedback from brokers, CPAs and banks to enhance our loyalty programs, designed to ensure we maintain the strongest partner program in the HCM industry. We also recently launched Paychex Partner Pro platform, a new portal designed to provide accountants quick access to critical data reporting and insights for their clients using Paychex Flux. This innovative platform Transforms how CPAs manage their portfolios by providing a centralized hub for accessing client payrolls and HR data, resolving issues, and identifying missing information. This is empowering them to really operate with greater efficiency and proactively serve their clients.

Bob: The share of pay core field bookings referred by brokers increased this past fiscal year.

Bob: We are also actively gathering feedback from brokers cpas and banks to enhance our loyalty programs designed to ensure we maintain the strongest partner program and the HCM industry.

Bob: We also recently launched Paychex partner Pro platform, a new portal designed to provide accountants quick access to critical data reporting and insights for their clients using paychex flex this innovative platform.

Bob: Transforms how cpa's manage their portfolio by providing a centralized hub for accessing client.

Bob: Payrolls and HR data resolving issues in identifying missing information.

Bob: <unk> is empowering them to really operate with greater efficiency and proactively serve their clients.

Bob: Our <unk> business continues to also performed well achieving solid worksite employee growth this quarter.

John Gibson: Our PO business continues to also perform well, achieving solid worksite employee growth this quarter. Similar to what we shared with you last quarter, while the PO business remains strong and participant levels in our health plans across the country continue to increase, enrollment in our Florida at-risk medical plan did decrease year over year. We also continue to see a trend among employees opting for lower cost health plans to offset the rising healthcare costs. While these factors continue to pose a pass-through revenue headwind, they do not impact our earnings or our P.O. value proposition. One of the benefits of the Peel model is that it empowers small businesses to truly punch above their weight and offer benefits comparable to those of fortune 500 companies.

Bob: Similar to what we shared with you last quarter, while the business remains strong and participant levels in our health plans across the country continue to increase enrollment in our Florida at risk Medical plan did decrease year over year. We also continued to see a trend among employees opting for lower cost health plans to offset.

Bob: At the rising healthcare cost.

Bob: While these factors continue to pose a pass through revenue headwind, they do not impact our earnings or our value proposition.

Bob: One of the benefits of the model is that it empowers small businesses to truly punch above their weight and offer benefits comparable to those of fortune 500 companies. This enables them to attract and retain top talent and today is still very competitive labor market.

John Gibson: This enables them to attract and retain top talent in today's still very competitive labor market. We remain bullish on the PO space given our scale and capability in this segment and just how green-filled the opportunity remains both inside and outside of our client base.

Bob: We remain bullish on the space given our scale and capability in this segment and just how greenfield the opportunity remains both inside and outside of our client base.

Bob: Now turning to the macro environment, we are observing a mix of both optimism and uncertainty within the market and our client base. Many businesses are frozen as they wait for more clarity about a number of macro issues, such as tariffs inflations and taxes.

John Gibson: Now turning to the macro environment, we are observing a mix of both optimism and uncertainty within the market and our client base. Many businesses are frozen as they wait for more clarity about a number of macro issues, such as tariffs, inflation, and tax The hard data continues to indicate that small businesses remain fundamentally healthy, despite the headlines. Our Small Business Employment Watch revealed stable employment levels with moderation and hourly wage inflation in the recent months. Our data does not currently show any signs of recession. We also see in our interactions in the market that the uncertainty is prompting businesses to exercise caution when making decisions, and being cautious about how much they are spending on products and services.

Bob: The hard data continues to indicate the small businesses remain fundamentally healthy. Despite the headlines are small business employment watch revealed stable employment levels with moderation and hourly wage inflation in the recent months.

Bob: Our data does not currently show any signs of recession.

Bob: We also see in our interactions in the market that the uncertainty is prompting businesses to exercise caution when making decisions and being cautious about how much. They are spending on products and services. We have also seen an increase in bankruptcies in financial distress in the micro end of the market and in our client base in the fourth quarter.

John Gibson: We have also seen an increase in bankruptcies and financial distress in the micro end of the market and in our client base in the fourth quarter. Many businesses I think on the edge of failure may have decided not to fight that new headwinds they see in front of them. We also saw losses due to increases in business combinations and mergers increase more than typical. Both are signs of businesses making strategic decisions based upon their view of the current and future environment. We will continue to monitor the hard data and trends in the market and take the appropriate steps to position Paychex to Win in any market condition.

Bob: <unk> many businesses I think on the edge of failure may have decided not to fight that new headwinds they see in front of them.

Bob: We also saw losses due to increases in business combinations and mergers.

Bob: Increase more than typical both or signs of businesses, making strategic decisions based upon their view of the current and future environment.

Bob: We will continue to monitor the hard data and trends in the market and take the appropriate steps to position paychex to win in any market conditions. We will also continue to take the actions needed to protect our long standing track record of financial strength, even in challenging times.

John Gibson: We will also continue to take the actions needed to protect our longstanding track record of financial strength, even in challenging times.

Speaker Change: I am proud of what the entire team at Paychex and pay core have accomplished together.

John Gibson: I am proud of what the entire team at Paychex and PayCorps have accomplished together. I would like to thank our dedicated employees for their hard work and contribution in achieving these many successes. They have accomplished a lot in a very short period of time. There has been a lot of change internally and externally to navigate, and they have shown their dedication and real resiliency to deliver for our clients and for Paychex, and I am internally grateful. We are truly better and stronger together as OnePaychex, and we believe we are better positioned than ever before to deliver on the future of HCM and help businesses succeed.

Bob: Like to thank our dedicated employees for their hard work and contribution in achieving these many successes they have accomplished a lot.

Bob: Very short period of time.

Bob: There has been a lot of change internally and externally to navigate and they have shown their dedication and real resiliency to deliver for our clients and for paychex.

Bob: Internally grateful for that.

Bob: We are truly better and stronger together as one paychex and we believe we are better positioned than ever before to deliver on the future of HCM and help businesses succeed I'll now turn it over to Bob to provide an update on our financial results and our outlook Bob Yes. Thank you John I'll start with a summary of our fourth quarter and.

Bob Schrader: I'll now turn it over to Bob to provide an update on our financial results and our outlook. Bob? Yeah, thank you, John. I'll start with a summary of our fourth quarter and full year financial results, and then I'll share our outlook for fiscal 26. Starting with Q4, total revenue for the quarter increased 10% to $1.4 billion. Excluding PayCorps, total revenue increased 3%. Management Solutions revenue increased 12% to $1 billion for the quarter, driven primarily by the addition of PayCorps, as well as higher revenue per client from price realization and product penetration. Excluding PayCorps, Management Solutions increased 3% in the quarter.

Bob Schrader: Full year financial results, and then I'll share our outlook for fiscal 'twenty six Q&A, starting with Q4, our total revenue for the quarter increased 10% to $1 4 billion, excluding <unk> total revenue increased 3%.

Bob Schrader: Management solutions revenue increased 12% to $1 billion for the quarter driven primarily by the addition of <unk> as well as higher revenue per client from price realization and product penetration, excluding pay quarter management solutions increased 3% in the quarter.

Bob Schrader: PEO and insurance solutions revenue increased 4% to $340 million for the quarter, driven primarily by solid growth in the number of average PEO worksite employees. Outside of the at-risk plan headwinds that John discussed, PEO continues to perform well. Interest on funds held for clients increased 18% to $45 million for the quarter, primarily driven by the inclusion of PayCorp balances. Excluding PayCorp, interest on funds held for clients increased 3%. Total expenses for the quarter, excluding the acquisition of PayCorps and the prior cost optimization initiatives, increased 1%. Operating income margins for the quarter were 30.2%, and adjusted operating income margins for the quarter were 40.4%, an increase of approximately 20 basis points driven by increased productivity and cost discipline offset by the PayCor acquisition.

Speaker Change: P O and insurance solutions revenue increased 4% to $340 million for the quarter, driven primarily by solid growth in the number of average PEO worksite employees outside of the at risk plan headwinds that John discussed PEO continues to perform well.

Speaker Change: Interest on funds held for clients increased 18% to $45 million for the quarter, primarily driven by the inclusion of PE core balances excluding pay core interest on funds held for clients increased 3%.

Speaker Change: Total expenses for the quarter, excluding the acquisition of <unk> in the prior year cost optimization initiatives increased 1%.

Bob: Operating income margins for the quarter were 32% and adjusted operating income margins for the quarter were 44% an increase of approximately 20 basis points driven by increased productivity and cost discipline offset by the <unk> acquisition, excluding pay core adjusted operating income margins expanded by approximately.

Bob Schrader: Excluding PayCor, adjusted operating income margins expanded by approximately 110 basis points. Diluted earnings per share decreased 22% to $0.82 per share, and adjusted diluted earnings per share increased 6% to $1.19 in the fourth quarter.

Bob: Only 110 basis points.

Bob: Diluted earnings per share decreased 22% to 82 per share and adjusted diluted earnings per share increased 6% to $1 19 in the fourth quarter.

Bob Schrader: Now let me turn to our results for the full year, fiscal 2025. Total revenue grew 6% to $5.6 billion. Management solutions revenue increased 5% to $4.1 billion. PEO and insurance solutions increased 6% to $1.3 billion. And interest on funds held for clients increased 10% to $162 million. Total expenses for the year, excluding the acquisition of PayCor, increased 1%. Operating margins were 39.6%, and that's on a gap basis. Adjusted operating margins were 42.5%. As the best operators in the business, we are constantly seeking ways to enhance operational efficiency. In fiscal year 2025, we expanded adjusted operating income margins by approximately 250 basis points, excluding the impact of PayCorps and the ERTC.

Bob: Now, let me turn to our results for the full year fiscal 2025.

Bob: Total revenue grew 6% to $5 6 billion Manny.

Bob: Management solutions revenue increased 5% to $4 1 billion PEO and insurance.

Bob: Solutions increased 6% to $1 3 billion and interest on funds held for clients increased 10% to 106 $162 million.

Bob: Total expenses for the year, excluding the acquisition of <unk> increased 1%.

Bob: Operating margins were 39, 6% and that's on a GAAP basis. Adjusted operating margins were 42, 5% is the best operators in the business. We are constantly seeking ways to enhance operational efficiency in fiscal year 2025, we expanded adjusted operating income margins by approximately 204.

Bob: 50 basis points, excluding the impact of <unk> and the <unk>.

Bob Schrader: Diluted earnings per share decreased 2% to $4.58 a share and adjusted diluted earnings per share increased 6% to $4.98 a share. We continue to exceed the Rule 50, demonstrating our ability to achieve consistent revenue growth with industry-leading profitability.

Bob: Diluted earnings per share decreased 2% to $4 58, a share and adjusted diluted earnings per share increased 6% to $4 98 a share.

Bob: We continue to exceed the rule of 50, demonstrating our ability to achieve consistent revenue growth with industry leading profitability.

Bob Schrader: Let me turn to our an overview of our financial position. Our financial position remains strong with cash restricted cash and total corporate investments of 1.7 billion in total borrowings now of approximately $5 billion as of May 31, 2025. Cash flow from operations was $2 billion for the fiscal year, primarily driven by net income. We returned over $1.5 billion to shareholders during the fiscal year in the form of cash dividends and share repurchases, and our annual return on equity remains robust at 42%.

Bob: Now, let me turn to an overview of our of our financial position our financial position remains strong with cash restricted cash and total corporate investments of $1 7 billion and total borrowings now of approximately $5 billion as of May 31 2025.

Bob: Cash flow from operations was $2 billion for the fiscal year, primarily driven by net income.

Bob: Returned over $1 $5 billion to shareholders during the fiscal year in the form of cash dividends and share repurchases and our annual return on equity remains robust at 42%.

Bob Schrader: As we look ahead to our fiscal 2026 outlook, we assume the current fluid macro environment will persist. We believe we are better positioned than ever before to win in the digital and AI driven era of human capital management. Our solutions are mission critical, and we have ample opportunity to continue driving sustainable growth and enhance operational efficiency. Total revenue for Fiscal 26 is expected to grow in the range of 16.5% to 18.5%. We expect the recent PAYCOR acquisition to contribute approximately 12 to 13 points of that growth. As previously mentioned, we expect revenue synergies to build over the next several years.

Bob: As we look ahead to our fiscal 2026 outlook, we assume the current fluid macro environment will persist. We believe we are better positioned than ever before to win in the digital and AI driven era of human capital management. Our solutions are mission critical and we have ample opportunity to continue driving sustainable growth and enhance.

Bob: <unk> efficiency.

Bob: Total revenue for fiscal 2006 is expected to grow in the range of 16 five to 18, 5%. We expect the recent <unk> acquisition to contribute approximately 12% to 13 points of that growth as previously mentioned, we expect revenue synergies to build over the next several years and in fiscal 2006.

Bob Schrader: And in Fiscal 26, we expect revenue synergies to contribute 30 to 50 basis points of that growth that I just gave you. Management Solutions is expected to grow in the range of 20 to 22%. P.O. and insurance solutions is expected to grow in the range of 6 to 8 percent, and we would expect revenue to accelerate in the back half of the year for P.O. and insurance as we begin to anniversary the at-risk revenue growth headwinds we experienced in the back half of this fiscal year. Interest on funds held for clients is expected to be in the range of $190 to $200 million, which includes the benefit of approximately $1.1 billion of client fund balances from PayCorps.

Bob: We expect revenue synergies to contribute 30% to 50 basis points of that growth that I just gave you.

Bob: Management solutions is expected to grow in the range of 20% to 22%.

Bob: Poe and insurance solutions is expected to grow in the range of 6% to 8% and we would expect revenue to accelerate in the back half of the year for PEO and insurance as we begin to anniversary the at risk revenue growth headwinds, we experienced in the back half of this fiscal year.

Bob: The clients is expected to be in the range of $190 million to $200 million.

Bob: Which includes the benefit of approximately $1 1 billion of client losses for Heiko.

Bob Schrader: These funds are now being managed by the Paychex team and are part of the Paychex portfolio. Adjusted operating income margin is expected to be approximately 43%, and our effective income tax rate is expected to be in the range of 24 to 25%, and adjusted diluted earnings per share for next year is expected to grow in the range of 8.5 to 10.5%.

Bob: These bonds are now being managed by the Paychex team.

Bob: Part of the HIV portfolio.

Bob: Adjusted operating income margin is expected to be approximately 42% and our effective income tax rate is expected to be in the range of 24% to 25% and.

Bob: Adjusted diluted earnings per share of next year is expect to grow in the range of <unk>.

Bob: The 10, 5%.

Bob Schrader: Let me turn to the first quarter. We would anticipate total revenue growth in the first quarter to be between 16 and 17% and adjusted operating income margin to be between 40 and 41%. And of course, all that is based on our current assumptions, which are subject to change.

Bob: Let me turn to.

Bob: First quarter we.

Bob: We would anticipate total revenue growth in the first quarter to be between 16 and 17%.

Bob: And adjusted operating income margin to be between 40 and 41%.

Bob: Of course, all of that is based on our current assumptions assumptions, which are subject to change.

John Gibson: And with that, I'll now turn the call back over to John. Thank you, Bob.

Jonathan: And with that I'll now turn the call back over to Jonathan.

Jonathan: Thank you Bob we will now open the call for questions.

Unknown Executive: We will now open the call for questions. Thank you. As a reminder, if you would like to ask a question, that is star 1 on your telephone keypads.

Bob: Thank you as a reminder, if you would like to ask a question that is star one on your telephone keypad.

Unknown Executive: We do ask that you limit yourself to one question and one follow-up question. If you'd like to remove yourself from the queue, please press star 2. And again, that is star 1 for your questions.

Bob: You ask that you limit yourself to one question and one follow up question.

Bob: I would like to remove yourself from the queue. Please press star two and again that is star one for your questions. We will take our first question from Mark Mcmahon with Baird. Please go ahead.

Mark Marcon: We'll take our first question from Mark Marcon with Baird. Please go ahead. Hey, good morning, John and Bob. I'm wondering, can you talk a little bit more about some of the, you know, distractions, just in terms of putting together the sales forces, how long you actually ended up taking them out of the field and in production and how that ended up impacting the fourth quarter? That's the first question. And then, you know, how much do you expect that to spill over into the first quarter? You're guiding to, you know, potentially a lower top end of the range than your full year guidance.

Mark Mcmahon: Hey, good morning, Jonathan.

Mark Mcmahon: Bob I'm wondering can you talk a little bit more about some of the.

Mark Mcmahon: Distractions just in terms of putting together good sales forces how long you actually ended up.

Speaker Change: I'm out of the field and in production and how that.

Bob: Impact.

Bob: The fourth quarter.

Bob: First question and then.

Bob: How much do you expect that the spillover.

Bob: Into the first quarter Youre guiding.

Bob: Essentially you lowered the top end of the range.

Bob: Full year guidance.

John Gibson: So, I'm wondering if, you know, there's some residual effects from that. And then, can you talk a little bit about the areas that you're really excited about with regards to the revenue synergies and the cross sales? You mentioned the initial success on the ASO, but obviously that's really early. How do you think that's going to build over the course of the year, you know, beyond the comments about the 30 to 50 dips, but just like where it's happening and what you think it's going to end up doing from a longer term perspective? Thank you. Yeah, Mark, thanks for the question.

Bob: So I'm wondering if there.

Bob: There is some residual effects from that and then can you talk a little bit about the area that you're really excited about with regard to the revenue synergies.

Bob: <unk> sales you mentioned the initial successes.

Bob: With us on the <unk>, obviously, that's really.

Bob: How do you think thats going to build over the course of the year.

Bob: Beyond the call it about 30%.

Bob: Like where it is happening.

Bob: And what you think it ends up to it from a longer term perspective. Thank you.

Speaker Change: Yes, Mark Thanks for the question, Yes, I would say relative to the.

John Gibson: Yeah, I would say relative to the sales transformation that we did and go to market changes that we made, as you know, we started planning how we were going to approach this when we announced the deal back in January, and have done a lot of work and did a lot of work in preparation and waiting for the close. We certainly could have done it at a different pace that would have dragged it potentially in to the first quarter of this fiscal year, but we made an election to get all of it out of the way.

Bob: Sales.

Bob: The transformation that we did in go to market changes. We made as you know we started planning how we were going to approach that when we announced the deal back in January and have done a lot of work and did a lot of work and preparation.

Bob: And waiting for the close.

Bob: All of the changes that we wanted to make we made in the fourth quarter and we made a strategic decision that given the distractions that were already out there with liberation day and everything else in the marketplace that now was the time to go ahead and move as quickly as we could to get everything done we certainly could have done it at a different pace it would've been.

Bob: Dragged it potentially in to the first quarter of this fiscal year, but we made an election to get all of it out of the way so we've.

John Gibson: So we've, we've made all of the all of the changes. The teams are in place. They're in their new territories. We did completed all the training. We had our kickoff of the first week of June, and they're in the field, actively selling the broad set of products and services that we have. I think that probably what I'm most excited about is the early acceptance and the willingness of the pay core client base to sit down and have conversations with us about the opportunities. And a week after the actual announcement of the sale, before we had actually began to go to market, we got our first PO referral.

Bob: We've made all of the all of the changes the teams are in place. They are in their new territories. We've completed all the training we had our kick off the first week of June and they are in the field actively selling the broad set of products and services that we have.

Bob: I think that.

Bob: Probably what I'm most excited about is that early.

Bob: Acceptance and the willingness of the payroll client base to sit down and have conversations with us about.

Bob: The opportunities.

Bob: Week after the actual announcement of the sale before we'd actually beginning to go to market. We got our first Po a referral weird went down they had had a client.

John Gibson: We had went down. They had had a client planned client symposium down in Orlando. We, because of the date of the closing was able to go down to the following week and picked up our first competitive deal, actually a takeaway from a, from a competitor client. It was in California. And then, after we launched the ASL within a week, we had a 900 employee client sign up for our ASL, our base ASL product to help them support their growth plans. And what I'm most excited that clients already committed to actually upgrading to our, our HR pro package in August because of the support we've given them.

Bob: Yeah.

Bob: Planned client symposium down in Orlando because of the date of the closing was able to go down into the following week and picked up our first competitive deal actually a takeaway from a from a competitor a client that was in California and then after we launched the ASO within a week, we added 900 employee client sign up for our.

Bob: DSO, our base ASO products to help them support their growth plans and what I'm. Most excited that clients already committed to actually upgrading to our.

Bob: Our HR pro package in August because of the support we've given them. So excited there.

John Gibson: So excited. There also think there's a lot of opportunity from a technology perspective that we continue to discover. And so, like I said, I feel like we're in good shape and we're well positioned going into this.

Bob: I also think there's a lot of opportunity from a technology perspective that we continue to discover.

Bob: And so like I said I feel like we're in good shape and we're well positioned.

Bob: Into this fiscal year.

Bob Schrader: Hey, Mark, can I just add a couple of comments to that just on the spillover? I think, as John mentioned, I think we made a strategic decision to get a lot of that disruption behind us, so we would not expect there to be a lot of spillover in Q1 as it relates to kind of the comment on Q1 being a little bit lower than the full year guide. A lot of that is going to be, there's two things driving that. One is going to be on the PO insurance side. We would expect the growth in PO insurance to be better in the back half than the front half, you know, as we anniversary some of those MPP headwinds.

Bob: Hey, Mark can I, just just to add a couple of comments to that just on the spillover I think as John mentioned I think we made a strategic decision to get a lot of that disruption behind us. So we would not expect there to be allowed to spill over in Q1 as it relates to kind of the comment on Q1 being a little bit lower than the full year guide a lot of that is going to be there is two things.

Bob: Driving that one is going to be on the PEO and insurance side, we would expect that.

Bob: Both in PEO and insurance two to be better in the back half than the front half as we anniversary.

Bob: Some of those MPP headwinds and then just as it relates to the disruption in Q4 I would say, yes. There was some disruption there I don't think that weighed heavily on the financial results that we just released obviously.

Bob Schrader: And then just, you know, as it relates to the disruption in Q4, I would say, yes, there was some disruption there. I don't think that weighed heavily on the financial results that we just released. Obviously, the numbers were a bit lower than consensus, and I tell you, as John and I sat here last quarter and gave the Q4 guide of 10 to 12 percent, we had a high degree of confidence that we were going to be closing the PAYCOR deal probably within the next week. And when we got into the next week, we did not anticipate that the investment-grade bond market would essentially be shut down as a result of Liberation Day, and so we ended up closing on the deal with a very successful bond offering.

Bob: The numbers were a bit lower than I think consensus and I would tell you is.

Bob: John and I sat here last quarter and gave the Q4 guide of 10% to 12%.

Bob: We had a high degree of confidence that we were going to be.

Bob: Closing the <unk> deal probably within the next week and when we got into the next week.

Bob: We did not anticipate that the.

Bob: The investment grade bond market would essentially be shut down as a result of liberation day and so we ended up closing on the deal we had a very successful.

Bob: Bond offering but that whole process pushed out I'd say, a little over a week.

Bob Schrader: But that whole process pushed out, you know, I'd say a little over a week later than what we had anticipated, and, you know, had we closed the deal when we thought we were going to when we provided the guide, you know, we would have been right in the, you know, the midpoint of that 10 to 12 percent range. So just wanted to add that additional color to your question.

Bob: Later than what we had anticipated and had we closed the deal when.

Bob: When we thought we are going to when we provided the guide we would've been right in the midpoint of that 10% to 12%.

Bob: So I just wanted to add that additional color to your to your question.

Mark Marcon: very helpful. Thank you so much.

Speaker Change: That's very helpful. Thank you so much.

Bryan Bergin: We'll next go to Bryan Bergin with T.D. Cowan. Please go ahead.

Speaker Change: We'll next go to Brian Bergan with TD Cowen. Please go ahead.

Bryan Bergin: Hi, guys. Good morning. Thank you.

Brian Bergan: Hi, guys. Good morning, Thank you.

Bryan Bergin: I just want to follow up here, maybe a little bit on this, on the last point you made there, Bob, on a 4Q growth bridge from 3Q and maybe the factors going forward. So as we look at the 3% or so organic management solutions growth of 4Q, can you just help bridge some of that deceleration from that 4.8, I believe, in 3Q? Just talk about some of the changes, whether it's underlying demand, checks, retention, pricing. Obviously, you know, you talked about the sales dynamics there, and that sounds transitory. But just trying to think as we go forward here, what's kind of transitory versus lasting within management solutions.

Speaker Change: Follow up here, maybe a little bit on this on the last point you made there Bob on <unk> growth bridge from <unk> and maybe the factors going forward. So as we look at the 3% or so organic management solutions throughout the board can you just help bridge some of that deceleration from that.

Speaker Change: I believe in <unk>, just talking about some of the changes whether it's underlying demand jacks retention pricing. Obviously, you talked about the sales dynamics there in that sounds transitory, but just trying to think about as we go forward here, what's kind of transitory versus last thing within management solutions.

Bob Schrader: Yeah, so a few things, you know, maybe I'll talk a little bit about Q4, Q3 to Q4. And then just looking at that Q4 rate, rate alone, certainly, I would say checks were a bit softer in Q4, we expected that I would say they did come in a little bit softer in Q4 than what we expected, you know, we've done some work around that, you know, a lot of that looks to be more more of a mixed issue, maybe a little bit smaller client size, you continue to have the MPP in enrollment headwind in Q4, that that was a bit more than it than it was in Q3.

Speaker Change: Yes, so a few things maybe I'll talk a little bit about Q4 Q3 to Q4 and then just looking at the Q4 rate greater loan certainly I would say checks were a bit softer in Q4, we expected that I would say they did come in a little bit.

Speaker Change: Softer in Q4 than what we expected <unk> done some work around that.

Speaker Change: A lot of that looks to be more and more of a mix issue, maybe a little bit smaller client size.

Speaker Change: You continue to have the NPP and enrollment headwind in Q4 that was a bit more than it than it was in Q3 on the retirement assets.

Bob Schrader: On the retirement asset side, you know, we've talked a lot about the strength of a retirement business this year, it's been a mid teen grower, and I would tell you, it was still a strong grower in Q4, you know, certainly, you know, close to double digits, but it wasn't growing at the same rate it did in the first three quarters because of where the market was, I mean, the S&P was down about 6% on average in Q4 versus Q3. So so we didn't have as much growth growth there. And so those are those are probably some of the bigger ones.

Speaker Change: Talked a lot about the strength of our retirement business this year.

Speaker Change: A mid teens grower and I would tell you we still have a strong grower in Q4, certainly close to double digits, but it wasn't growing at the same rate. It did in the first three quarters because of where the market was I mean, the S&P was.

Speaker Change: Down about 6% on average in Q4 versus Q3, so we didn't have as much.

Speaker Change: Growth growth there and so those are those are probably some of the bigger ones.

Bob Schrader: And I talked to you guys before that we had a little bit stronger price realization in Q3 with some of our year end processing. So that kind of bridges you from Q4 to Q3, when we take a step back, and we look at the 3%, I think there's a couple things that that, you know, we need to kind of adjust for one, Q4 was it was a tougher compare, when we look at kind of the timing of our annual price increase, that moves around, it's not the exact same time every year, it moves from, you know, different months.

Speaker Change: Talk to you guys before that we had a little bit stronger price realization.

Speaker Change: In Q3 with some of our year end processing, so that kind of <unk>.

Speaker Change: Bridges, you from Q4 to Q3, when we take a step back and we look at the 3%.

Speaker Change: I think theres a couple of things that we.

Speaker Change: We need to kind of adjust for one <unk>.

Speaker Change: Q4 was a tougher compare.

Speaker Change: When we look at kind of the timing of our annual price increase.

Speaker Change: That moves around is not the exact same time every year it moves from different months and if we went back and looked at last year, we actually picked up I would say a little bit of extra based on the timing of the price increase last year relative to where it was the year before this year was an apples to apples comparison. So the price increase timing. This year is the same as last year.

Bob Schrader: And if we went back and looked at last year, we actually picked up, I would say a little bit of extra, based on the timing of the price increase last year, relative to where it was the year before, this year was an apples to apples comparison. So the price increase timing this year is the same as last year. So we didn't get that benefit, it ends up being a headwind. And then we, you know, we have the MPP enrollment. And so when you adjust those things in Q4, you basically get a Q4 exit rate, that is right spot in the range of what was implied in the guidance that I just just provided on a full year basis for the for the organic business.

Speaker Change: So we didn't get that benefit it ends up being a headwind and then we have the E&P enrollment and so when you adjust those things in Q4, you basically get a Q4 exit rate.

Speaker Change: That is right spot in the range of what was implied in the guidance that I just provided.

Speaker Change: A full year basis for the for the organic business. So we feel comfortable about the guide and when you adjust for Q4.

Bob Schrader: So you know, we feel comfortable about, you know, the guide. And when you adjust for Q4, that exit rate is in line with what we're expecting from an organic standpoint next year.

Speaker Change: That exit rate is in line with what we're expecting from an organic standpoint next year.

Bob Schrader: Okay, that's helpful. And then as we think about kind of 2026 and beyond in your in your client, your go to market focus, can you comment on plans as it relates to trying to reaccelerate organic net client growth versus kind of cross selling emphasis now in the basic lines you've acquired? You mentioned strong client retention year over year, when we do some of the math on the client count year over year and make some assumptions on the paperwork component, curious how you're thinking about reaccelerating organic paychecks client growth. Yeah, I think we're going to continue to focus on our growth formula as a company, which includes, you know, one to three percent organic client growth across the combined businesses.

Speaker Change: Okay. That's helpful. And then as we think about 2026 and beyond in your and your client. Your go to market focus can you comment on plans as it relates to trying to reaccelerate organic net client growth versus kind of cross selling emphasis is now in the basic lines you've acquired you mentioned strong.

Speaker Change: Client retention year over year, but when we do some of the math on that Brian.

Speaker Change: Client count year over year and make some assumptions on our paper.

Speaker Change: Just curious how you're thinking about re accelerating organic paychex client growth.

Speaker Change: Yes.

Speaker Change: I think we're going to continue to focus on our growth formula as a company which includes.

Speaker Change: <unk>, 3%.

Speaker Change: Client growth across the business.

Speaker Change: The combined businesses, we're going to continue to focus on.

John Gibson: We're going to continue to focus on driving product penetration. We think that's continued a big opportunity, and I think that'll be a bigger part of the opportunity as we go forward and look at our midterm guidance where we see a lot of opportunity. I think we're going to continue to exercise the pricing strength that we have, the value, the ability for us to pass value on to our customers as well. Those have been kind of the key components of our growth strategy. I don't think anything has really changed there. I would say that, and I've said it multiple times, we're going to continue to be disciplined about growth.

Speaker Change: Driving product penetration, we think that's continuing.

Speaker Change: We continue to have a big opportunity and I think that will be.

Speaker Change: A bigger part of the opportunity as we go forward and look at our mid term guidance.

Speaker Change: Our guidance, where we sit.

Speaker Change: I mean, we're going to continue to exercise the printing.

Speaker Change: A strengthening asset values the ability for us to pass value one.

Speaker Change: To our customers as.

Speaker Change: Well theres been kind of a key component.

Speaker Change: Have a good strategy I don't think anything has really changed there.

Speaker Change: Say multi.

Speaker Change: Multiple times.

Speaker Change: Continue to be disciplined about growth.

John Gibson: That client number can be whatever you want it to be if you're willing to spend more than the lifetime value of the customer to acquire the customer, and we're not going to go crazy with promotions. We're not going to give away toasters and other gadgets to try to, you know, accelerate a number that you're going to add a client that you have to service and take care of and you're never going to make a profit on. So we continue to look at that in the marketplace. We're going to continue to be aggressive in driving client growth, but we're going to continue to also be paychecks, which we're looking for profitable growth in areas where we can add value to our customers over the long term, have a long-term relationship.

Speaker Change: That number can be whatever you wanted to be if youre willing to spend more than the lifetime value of a customer to acquire the customer.

Speaker Change: <unk>.

Speaker Change: We're not going to go crazy with promotions were not going to wait till <unk>.

Speaker Change: Other gadgets to try to to try to.

Speaker Change: Celebrate a number that youre going to add a client that you have to service and take care of and Youre never going to make.

Speaker Change: So we continue to look at that in the market place.

Speaker Change: We continue to be aggressive in driving client growth going to come.

Speaker Change: We need to also be.

Speaker Change: Which we're looking for profitable growth.

Speaker Change: The areas, where we can add value to our customers over the long term how long term relationships. So I hope that helps I think Scott I think look at the demand side.

John Gibson: So I hope that helps. I think, look, the demand's out there. We feel good about where we're positioned. I think the way we've positioned the go-to-market is going to give us a competitive advantage across each of the segments now that we're now focused on.

Speaker Change: We feel good about where we're positioned I think the way we positioned to go to market can you give us.

Speaker Change: Competitive advantage across each of the segments now that are now focused on when I look at the investments that we're making one things is probably not really.

John Gibson: When I look at the investments that we're making, one of the things that's probably not really here is not only have we committed to exceeding the cost synergies that we discussed before, but we've actually identified other opportunities, particularly in back-office efficiencies that we have over what PayCorps had that we think we can take, but we're also going to continue to invest. So some of the things we did in the quarter, we've made a decision. We're fully investing in the PayCorps roadmap. We're fully investing in the Flex roadmap this year. We're going to actually invest more in the SurePayroll platform.

Speaker Change: Here is not only.

Speaker Change: Committed to CMV.

Speaker Change: The cost synergies that we discussed before but we actually identified other opportunities, particularly in backhaul.

Speaker Change: We have over one <unk>.

Speaker Change: We think we can take but we're also going to continue to invest so some of the things we did in the quarter.

Speaker Change: Yes.

Speaker Change: The decision were fully investing in the PE core roadmap, we're fully investing in the flex roadmap.

Speaker Change: We want to invest.

Speaker Change: Invest more insured payroll platform, you'll be hearing more about that.

John Gibson: You'll be hearing more about that as the year. So we looked at opportunities when we put the investments together. We're invested in accelerating some investments in the PayCorps embedded product, which we think has a lot of opportunities in our partner network as well. So embedded in this is some additional investments that we'll be capitalizing on in 26 as well. So it just gives you a little more color on how we're thinking about 26.

Speaker Change: At the year, so we look at opportunities when we put the.

Speaker Change: Together, we're investing accelerating some investments I think we are embedded.

Speaker Change: Product.

Speaker Change: Heck, a lot of opportunities and our partner network, because well sell to embedded into that additional investments that we will be capitalizing on.

Speaker Change: In 2006 as well so just give you a little more color on how we're thinking about <unk>.

Bryan Bergin: All right, very clear. Thank you very much.

Speaker Change: Alright, great. Thanks very much.

Samad Samana: And next we'll go to Samad Samana with Jeffreys, please go ahead. Hi, good morning. Thanks for taking my questions. Maybe the first one, just on PAYCOR and some of the assumptions, and admittedly, I'm doing some back of the envelope math on the fly here. But the 12 to 13% contribution for fiscal 26 implies kind of around $700 million at the midpoint for management solutions contribution. And then if I think about what PAYCOR was on track to do in it was still public, let's call it a shade under $700 million. So it's not implying a lot of growth for PAYCOR in fiscal 26.

Speaker Change: No.

Speaker Change: With Jefferies. Please go ahead.

Speaker Change: Hi, good morning, Thanks for taking my questions, maybe first one yes.

Speaker Change: On page four.

Speaker Change: Some of the assumptions admittedly.

Speaker Change: Giving some back of the envelope.

Speaker Change: Sure.

Speaker Change: The 30% contribution.

Speaker Change: Thanks.

Speaker Change: It's kind of around $700 million.

Speaker Change: Good morning.

Speaker Change: For imaging solution contribution.

Speaker Change: I think about.

Speaker Change: Hey, Barbara in terms of our revenue.

Speaker Change: Public.

Speaker Change: Okay.

Speaker Change: $700 million does that imply.

Speaker Change: Applying a lot of growth.

Speaker Change: Fiscal 'twenty six.

Bob Schrader: And I'm trying to understand, are you assuming is that conservatism? Is there some assumption around churn? And again, I understand I'm doing the numbers on the slide, but just help us reconcile what PAYCOR was growing versus what you're assuming for PAYCOR's growth. Yeah, I mean, we're still assuming that Paychex is going to pay core is going to be a strong, you know, double digit grower business. I mean, certainly, there's an element of conservatism, I would say overall, in the guide, Samad, you know, we're, we're in the beginning of the year, and you know, we want to make sure that we can put forward guidance that we're going to be able to come out and deliver.

Speaker Change: Trying to understand are you assuming.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: I understand the numbers on the buyback.

Speaker Change: <unk> reconciled pinquater wasn't growing versus what youre assuming for.

Speaker Change: <unk> growth.

Speaker Change: Yes.

Speaker Change: Paychex third quarter is going to be a strong.

Speaker Change: Digit grower.

Speaker Change: Business I mean, certainly there is.

Speaker Change: The element of conservatism I would say overall in the guide.

Speaker Change: We're in the beginning of the year and we want to make sure that we can put forward guidance that we're going to be able to come out.

Bob Schrader: So there's certainly some conservatism over there.

Speaker Change: And deliver so there's certainly some.

Bob Schrader: But we would expect, you know, I don't have the exact math in front of me, but certainly pay pay core would be a double digit grower next year in this Yeah, so let me take that and again, I'll step back.

Speaker Change: Conservatism over there, but we would expect and I don't have the exact math in front of me, but certainly <unk> would be a double digit grower next year in the plant.

Speaker Change: Understood and then as I think about it.

Speaker Change: Sure.

Speaker Change: Our sales teams.

Speaker Change: Any insights you can provide on maybe what percentage of <unk> sales.

Speaker Change: Organization, you guys were able to obtain versus.

Speaker Change: Thinking more about hiring on that side or.

Speaker Change: Just help us understand how you're thinking about what those changes now look like between the two organizations and and maybe where there was some pruning on where there'll be additions going forward.

Speaker Change: Yes, So let me let me let me take that.

Speaker Change: Again I'll step back.

John Gibson: We stepped back and looked jointly across the entire go-to-market from a sales-to-market perspective. We had segmentation already built into our go-to-market strategy salespeople that were focused in different segments, as did PayCorp. And what we wanted to do is we wanted to build the best team in the industry, and we wanted to support that team with the best tools and the best marketing support. So in the quarter, this is what's important, and as Bob says, it was delayed, so there was a lot of conversation about how much could we get done in a short period of time.

Speaker Change: Step back and look jointly across the entire go to market from a sales and market perspective, we had segmentation already built into our go to market strategy salespeople that were focused in different segments as did.

Speaker Change: As did take or and what we wanted to do is we wanted to build the best team in the industry and we wanted to support that team with the best tools and the best marketing support so in the quarter.

Speaker Change: As important as Bob says it was delayed so there is a lot of conversation about how much could we get done in a short period of time.

John Gibson: We combined both marketing organizations and built a world-class marketing organization, HCM, combined PayCorp and Paycom. and PayCorps. We put together each one of our market teams, re-looked at the territories to make sure we were maximizing where we thought territories where we could have the greatest opportunity going to 26. And we took the best of Paychex and the best of PayCorps and put them together. At the same time, we increased the headcount in sales. So we're fully staffed. And we intend to continue to invest in sales as we talked about, as part of the thesis here, we anticipate growing the sales force at a rate that's higher than historically Paychex has.

Speaker Change: We combined both marketing organizations have built a world class marketing organization.

Speaker Change: You see them combined.

Speaker Change: Take or pay count we then.

Speaker Change: And I think we put together each one of our market teams re looked at the territories to make sure we were maximizing where we've got territories, where we could have the greatest opportunity go into 26, and we took the massive paychex and the best of both core and put them together at the same time.

Speaker Change: We increased the head count in sales so we're fully staffed.

Speaker Change: And we intend to continue to invest in sales as we talked about as part of the thesis here, we anticipate growing the sales force.

Speaker Change: At a rate that's higher than historically.

John Gibson: So, so in the course of a very short period of time, about six weeks, we had all the plans put in place, we went through the change management went through the training. So we now have segmented sales teams in new territories with new marketing support, ready to go. So quite a bit has been accomplished in a short period Understood.

Speaker Change: Paychex.

Speaker Change: So in a course of a very shortly for you're talking about six weeks.

Speaker Change: We had all the plans put in place we went through the change management would do their training. So we now have segmented sales teams and new territories with new marketing support ready.

Speaker Change: Ready to go so quite a bit has been accomplished in a short period of time.

Samad Samana: Thank you so much for taking my questions. Appreciate it. Thank you.

Speaker Change: Okay. Thank you so much for taking my questions I appreciate it.

Speaker Change: Thank you and next we'll go to Tien Tsin Huang with Jpmorgan. Please go ahead.

Tencent Hong: And next we'll go to Tencent Hong with J.P. Morgan. Please go ahead. Hey, thanks. It's nice to talk to you guys.

Speaker Change: Hey, Thanks, guys just wanted to clarify the impact the sales disruption and then the comments on the higher bankruptcy mergers on.

Tencent Hong: Just want to clarify the impact, the sales disruption, and then the comments on the higher bankruptcy, the mergers. on the very low end. It sounded like it was relatively small, and perhaps you would have hit the high end of your guide if it wasn't for the delay in closing of PAYCOR. I just wanted to make sure I caught all that. I think you got it about right. And what I would say, you know, relative to the bankruptcies and kind of financial distress type of losses, I would not call those against very micro end of it.

Speaker Change: On the very low end it sounded like those relatively small and perhaps you would hit the high end of your guide if it wasn't for the.

Speaker Change: The delay in the closing of <unk>.

Speaker Change: Just wanted to make sure I caught all of that.

Speaker Change: I think you've got it about right.

Speaker Change: And what I would say.

Speaker Change: Relative to the bankruptcies and kind of financial distress type of losses.

Speaker Change: Would not call those again, it's very micro end of it.

John Gibson: You know, when we left the selling season, you know, we improved retention, client retention year over year. So we had a good year of retention, we probably would have been talking about much, much stronger numbers. If we hadn't seen what we saw in the fourth quarter, I would also say it's not unusual. And what I say by that, when you have some sort of external shock event, you go back to financial crisis, you go back to other models that we would look like, when something externally shocks the system, people that were on the edge of saying, do I want to stick it out, sometimes throw in the towel.

Speaker Change: When we lap this selling season.

Speaker Change: We improved retention client retention year over year. So we had a good year of retention.

Speaker Change: We probably would have been talking about much much stronger numbers.

Speaker Change: If we hadn't seen what we saw in the fourth quarter I would also say it's not unusual.

Speaker Change: What I say by that when you have some sort of external shock event Youll go back to the financial crisis. You go back to other models that we would book when something externally shocks to the system people that were on the edge of saying do I want to stick it out sometimes throw in Natal. That's just my my view of what you see because it's interesting when you see these type of X.

John Gibson: That's just my view of what you see. Because it's interesting when you see these type of external shocks, where there's a high degree of uncertainty in the outlook in the future, you see an acceleration or pull forward, you also saw that in general bankruptcies. I think if you go back and look at what happened in the fourth quarter, those were up as well, do all the government reports as well. But again, very micro and not significant impact to revenue because it's on the low end of our client base. And then as I said, even with that slight acceleration in the fourth quarter, we still ended with better retention than we had the year prior, which was very strong.

Speaker Change: Colonel shocks, where theres a high degree of uncertainty.

Speaker Change: And the outlook in the future you see an acceleration or pull forward. You also saw that in general bankruptcies I think if you go back and look at what happened in the fourth quarter those were up as well.

Speaker Change: Do all the government reports as well.

Speaker Change: But again very micro and not significant impact.

Speaker Change: To revenue because it's on the lower end of the.

Speaker Change: Our client base and then as I said, even with that slight acceleration in the fourth quarter, we still ended with better retention that we had.

Speaker Change: Your prior which was which which was very strong as you know.

Tencent Hong: Yeah, for sure. That makes sense. That's good color.

Speaker Change: Yes for sure that makes sense thats good color.

Bob Schrader: And just quickly, Ben, just. Now that you've owned the asset and the cost synergies that you're talking about here, where was that last little bit of cost energy coming from? I'm just curious if we're trying to collect a list of things that you've talked about in the past, what's been the final piece of the synergies? Where did that come from? It's interesting. I wouldn't say there's anything specific to call out. Obviously, when we started looking at it, we were conservative. We knew the areas that we were going after. I would say that those areas are the same.

Speaker Change: Just quickly then just.

Speaker Change: Now that you've owned the asset.

Speaker Change: Cost synergies that Youre talking about.

Speaker Change: What was that last little bit of cost synergy coming from I'm, just curious if we're trying to.

Speaker Change: Collect the list of things that you've talked about in the past within the final piece of the synergies.

Speaker Change: Or is that coming from.

Speaker Change: Yes, I wouldn't say, there's anything specific to call out obviously, when we started looking at it we were conservative we knew the areas that we're going after I would say that those areas are the same.

Bob Schrader: We were just able to capture some of that sooner than what we expected. And it's really just kind of the math that gives you a bigger number than what we originally thought it was going to be. And then I would say, as John mentioned in the prepared remarks, we've identified a number of other areas that, you know, we're still looking at kicking the tires on. We think there's additional opportunities as we move forward. We'll update you guys as we move through the year. We're hoping to beat that target. But at the same time, we're going to look to potentially balance that with reinvestment in the business, as we've talked about.

Speaker Change: We were just able to capture some of that sooner than what we expected and it's really just kind of the math that gives you a.

Speaker Change: A bigger number than what we originally thought it was going to be a net I would say as John mentioned in the prepared remarks, we have identified a number of other areas that we're still looking at kicking the tires on and we think there's additional opportunities as we move forward, we'll update you guys.

Speaker Change: As we move through the year.

Speaker Change: We're hoping to beat that target, but at the same time, we're going to look to potentially <unk>.

Speaker Change: Balanced that with reinvestment in the business as we've talked about this as a growth story for us.

Bob Schrader: This is a growth story for us. You know, we didn't do this deal for the cost synergies. We did this to provide an enhanced runway for the of growth for the company as we move forward. And we think that we've done that. And so we're going to balance that additional cost synergies with with investments as we move forward.

Speaker Change: We didn't do this deal for the cost synergies. We did this to provide an enhanced runway for growth for the company as we move forward and we think that we've done that and so we're going to balance that.

Speaker Change: Additional cost synergies with investments as we move forward.

Bob Schrader: Thank you so much.

Speaker Change: Okay. Thank you so much.

Speaker Change: Yeah.

James Faucette: Next we'll go to James Faucette with Morgan Stanley. Please go ahead. Great. Thank you so much. Appreciate all the comments this morning.

Speaker Change: Next we'll go to James Faucette with Morgan Stanley. Please go ahead.

James Faucette: Great. Thank you so much appreciate all the comments this morning I want to go quickly too.

James Faucette: I want to go quickly to your capital allocation plans. And now that you've got the deal closed with PayCorp, how should we think about a mix between return to investors via incremental buybacks versus reduction in debt leverage, etc., and just how you're prioritizing that right now? Yeah, I would say no significant changes in our capital allocation strategy. I think we've been pretty transparent on that certainly feel like we're well positioned to continue to maintain our dividend policy. Certainly, you know, our number one focus is investing into the business, we're going to continue to do that.

Speaker Change: To your capital allocation plans.

Speaker Change: Now that you've got the deal closed with take or how should we think about.

Speaker Change: Mix between returned to investors via incremental buybacks versus reduction.

Speaker Change: Debt leverage et cetera, and just how you're prioritizing that right now.

Speaker Change: Yes, I would say no significant changes in our capital allocation strategy I think we've been pretty transparent on that certainly feel like we're well positioned to continue to maintain our dividend policy certainly our number one focus is investing into the business. We're going to continue to do that and to the extent that we have excess cash.

Bob Schrader: And to the extent that we have excess cash, you know, our primary way to return that to shareholders is through dividend versus share buybacks. I see no change in our philosophy there, we do do some share buybacks. And that's primarily just to offset dilution. And so I wouldn't say any significant change there, we would expect to have the ability to it's certainly an area of focus for me, not that that this transaction creates a lot of leverage for the company, but we certainly more leverage than what we've historically had. And so we'll certainly look to deliver it deleverage.

Speaker Change: Our primary way to return that to shareholders is through dividend versus share buybacks I see no change in our philosophy. There we do do some share buybacks and thats, primarily just to offset dilution.

Speaker Change: So I wouldn't say any significant change there.

Speaker Change: We would expect.

Speaker Change: To have the ability to it's certainly an area of focus for me not that that this transaction creates a lot of leverage for the company, but we certainly have more leverage than what we've historically had and so on.

Speaker Change: We will certainly look to deliberate deleverage and I think that will come fairly quickly.

Bob Schrader: And I think that will come fairly quickly, you know, really coming from two main areas. One, obviously, the incremental EBITDA that we're going to be able to generate from this transaction, through the synergies. And then we do now have, if you look at the balance sheet, you'll see there is a current portion of long term debt, we do have some of our long term debt coming due within the next 12 months. And we would look to pay that down. So the combination of those two things over the next, you know, 12 months, we will de leverage the balance sheet.

Speaker Change: Coming from two main areas, one obviously the incremental EBITDA that we're going to be able to generate from this transaction transaction through the synergies and then we do now have if you look at the balance sheet. You will see there is a current portion of long term debt. We do have some of our long term debt coming due within the next 12 months and we would look to pay that down so the combination of those two.

Speaker Change: Things over the next 12 months.

Speaker Change: Deleverage the balance sheet.

James Faucette: Great.

Speaker Change: Great and then wanted to ask just back on on the macro I understand kind of how you're characterizing the.

James Faucette: And then I wanted to ask, just back on the macro, I understand kind of how you're characterizing the increases in kind of micro businesses, bankruptcies, and some strategic decision making. Is that a trend that you've seen persist so far in the beginning of your fiscal year? And is that at all, like, it seems like it's small, but I just want to make sure if it is persisting, if it's impacting the way that you're formulating your outlook at all. No, I would say not at all. In fact, as we talked about in the third quarter, we were well ahead of our expectations in terms of both client and revenue As I said, I think when you went into the Liberation Day kind of happens and you look at that period of time, there's six to eight weeks after that, that's where we saw some of this activity that was going on.

Speaker Change: Increases in <unk> and kind.

Speaker Change: Kind of micro businesses bankruptcies, and some strategic decision making.

Speaker Change: Is that a trend that you've seen to persist so far in the beginning of your fiscal year end and is that.

Speaker Change: At all.

Speaker Change: It seems like it's small, but just want to make sure if.

Speaker Change: If it is persisting if it's impacting the way that you're formulating your outlook at all.

Speaker Change: No.

Speaker Change: I would say not at all in fact, as we talked about in the third quarter.

Speaker Change: We're well ahead of our expectations in terms of both client revenue retention as I said I think when you went into it.

Speaker Change: Liberty elaboration date kind of happens and you look at that period of time. There is six to eight weeks after that that's where we saw some of the some of this act. Some of this activity that was going on so again, we've seen these type of shock type of things before.

John Gibson: So again, we've seen these type of shock type of things before. Again, I'm speculating on some of the psychology of what's in a business owner's head. But again, you're talking about sole proprietor, you're talking the lower end of the market is kind of where we saw this. We did see some of the what I would call combination, what I call business combinations, more in the upper end of the mid-market. And again, a lot of that just has to do with, I think, people when they're looking at that macro looking for opportunities to scale and get larger to be able to, you know, be prepared for any future.

Speaker Change: Again.

Speaker Change: Speculating on some of the psychology of what's in our business owners head, but again youre talking about sole proprietor youre talking.

Speaker Change: The lower the lower end of the market is kind of where we saw this issue. We did see some of the some of the what I would call a combination.

Speaker Change: What I call business combinations more in the upper end of the mid market.

Speaker Change: How does that just has to do with I think people when they are looking at that macro looking for opportunities.

Speaker Change: <unk>.

Speaker Change: To scale and get larger to be able to.

Speaker Change: Be prepared for any future, but were not you go back and look at the hard data in terms of our index, we continue to see.

John Gibson: But we're not – you go back and look at the hard data in terms of our index. We continue to see moderate growth in small business hiring. I think, as Bob pointed out, we probably saw slower growth than we would have expected in the mid-market, but it wasn't astronomical, it wasn't recessionary, and we've really not seen any signs of recession. I would say there's just, as we all – anywhere you turn on it, you can talk to anybody, there's a high degree of uncertainty, and I think a lot of people are frozen right now, and I think what we need to see is more clarity coming out on what's going to happen with the tax bill, what's going to happen, you know, relative to tariffs and how that's going to settle.

Speaker Change: Moderate growth in small business hiring I think as Bob pointed out we probably saw slower growth than we would have expected in the mid market, but it wasn't astronomical it wasn't recessionary.

Speaker Change: We've really not seen any signs of recession I would say there just as we are getting where you turn on and if you talk to anybody there is a high degree of uncertainty and I think a lot of people were frozen right now and I think what we what we need to see is more clarity coming out on what's going to happen with the tax bill what's going to happen.

Speaker Change: Relative to tariffs and how that's going to sell hopefully the world conflicts begin to settle down as well as I mentioned, we will probably start turning our focus to the fed and seeing what the fed is going to do on interest rates. So.

John Gibson: Hopefully, world conflicts begin to settle down as well, and eventually we'll probably start turning our focus to the Fed and seeing what the Fed's going to do on this.

John Gibson: Great. Thanks. Thanks for that, Cutler. Thank you.

Speaker Change: Great. Thanks, Thanks for that color.

Speaker Change: Thank you our next we're going to go to Andrew Nicholas with William Blair. Please go ahead.

Andrew Nicholas: And next we're going to go to Andrew Nicholas with William Blair. Please go ahead. Hi, good morning. Thanks for taking my questions. Just wanted to ask a few on synergies. I guess, first, in terms of top line synergies, can you speak to maybe what's embedded in your outlook for 26? It sounds like you've already had some indications of cross-sell opportunity and cross-sell success into the PEO and ASO models. Is that something that you're assuming continues in 26? Is there anything that you could kind of quantify there? Or would momentum there be upside to what you've guided?

Andrew Nicholas: Hi, good morning, Thanks for taking the questions just wanted to ask a few on synergies I guess first in terms of top line synergies.

Andrew Nicholas: Can you speak to maybe whats embedded in your outlook for 2006, it sounds like you've already had.

Speaker Change: Okay indications of cross sell opportunity in cross sell success into the PEO and ASO models is that something that youre assuming.

Speaker Change: Continues into 2016 is there anything that you can kind of quantify there or would momentum.

Speaker Change: There would be upside to what your guidance.

Bob Schrader: Yeah, Andrew, I maybe missed it in the prepared remarks. And when I gave the outlook, we said we would expect revenue synergies to contribute 30 to 50 basis points of growth next year. Obviously, I mean, you know, that's where we see, you know, the, I would say the the value creation opportunity here with this transaction is the ability to, you know, cross sell into their client base and vice versa. As you guys know, if you look at our model, and John talked about our growth formula, is a significant amount of our growth has come from our ability to monetize our client base and really selling those higher value solutions, ASO PO retirement services into our client base.

Speaker Change: Yes, and Andrew maybe Miss it in the prepared remarks.

Speaker Change: When I gave the outlook. We said, we would expect revenue synergies to contribute 30% to 50 basis points of growth next year.

Speaker Change: I mean, that's where we see the AD.

Speaker Change: I would say the value creation opportunity here with this transaction is the ability to cross sell into their client base and vice versa. As you guys know if you look at our model and John talked about our growth Formula is a significant amount of our growth.

Speaker Change: He has come from our ability to monetize our client base and really selling those higher value solutions ASO PEO retirement services into our client base and when we say here even prior to the acquisition, we see a pretty long runway because within our own client base because a lot of those products are relatively underpenetrated within our own client base.

Bob Schrader: And when we sit here, even prior to the acquisition, we see a pretty long runway, because within our own client base, because a lot of those products are relatively under penetrated within our own client base. And then on day one of the of this transaction, we just added, you know, 50,000 clients into the top of our payroll funnel, if you will, and these are on average, larger clients, that really are more likely to have some of the needs that some of these solutions meet, like ASO and PO in retirement, so that we, you know, we're really excited about that opportunity.

Speaker Change: And then on day one of the of this transaction, we just added 50000 clients.

Speaker Change: The top of our payroll funnel.

Speaker Change: If you will and these are on average larger clients that really are more likely to have some of the needs that some of these solutions meet like ASO and PEO in retirement. So that we were really excited about that opportunity. Obviously that takes time youre not going to get all of that on day, one we're being conservative there.

Bob Schrader: Obviously, that takes time, you're not going to get all that on day one, we're being conservative, you know, that builds, I would say over a few years, I'd say we're being a little bit conservative in what we think we can achieve in year one, but that's not stopping us from going, you know, having our foot on the pedal and really going after that opportunity as quickly as we can. And as John mentioned, we've had some really success, you know, just in the first few weeks of owning the asset with not a lot of effort.

Speaker Change: Builds I would say over a few years.

Speaker Change: I'd say, we're being a little bit conservative in what we think we can achieve in year, one, but that's not stopping us from having.

Speaker Change: Having our foot on the pedal and really going after that opportunity as quickly as we can and as John mentioned, we've had some early success just in the first few weeks of owning the asset with not a lot of effort. So we're excited about that opportunity longer term.

Bob Schrader: So we're excited about that opportunity longer term. Perfect. Thank you. And yeah, I missed that in the prepared remarks. So appreciate it. And then and maybe relatedly, just in terms of cadence of, of cost synergy realization, you've updated the number 90 million in FISTA 26. Is there anything you can say about how much of that is front end loaded? Or is there a steady ramp in terms of realized cost synergies throughout FISTA 26? Yeah, I would say that. Yeah, sorry, I would say that most of the actions required to realize those cost synergies have been taken as it shows up in the P&L.

Speaker Change: Perfect. Thank you.

Speaker Change: I missed that in the prepared remarks I appreciate it and then maybe relatedly just in terms of the cadence of cost synergy realization you've updated the number $90 million in fiscal 'twenty. Six is there anything you can say about how much of that is front end loaded or is there.

Speaker Change: The steady ramp in terms of realized cost synergies throughout fiscal 'twenty six.

Speaker Change: I would say that.

Speaker Change: Yes, sorry, I would say that most of the actions required to realize those cost synergies have been taken as it shows up in the P&L.

Bob Schrader: That builds throughout the year, because you have some transition resources that are here for a period of time. And some of those benefits you may build as you move through the year, but the actual actions to, to realize those have already been taken. And that's why we have a high degree of confidence in raising the number. And again, we're not stopping, we see other opportunities. You know, there's probably some procurement opportunities that we didn't that we haven't kicked the tires on hard enough. There's other areas that we're going to now go after now that we've gotten the initial, you know, actions behind us.

Speaker Change: That builds throughout the year, because you have some transition resources that.

Speaker Change: We are here for a period of time and some of those benefits.

Speaker Change: <unk> build as you move through the year, but the actual action two to realize those have already been taken and Thats why we have a high degree of confidence in raising the number and again, we're not stopping we see other opportunities.

Speaker Change: Theres, probably some procurement opportunities that we didn't that we haven't kicked the tires on hard enough theres other areas that we're going to now go after now that we've gotten the initial.

Speaker Change: Actions behind us.

John Gibson: Yeah, and I just want to put it on a context, a decision that we made, which I think is the right decision for the long term and the short term. One of the things that became very clear to us early on was how well our teams were working together to solve problems and look for opportunities. So even when we started the early stages of the planning, I was feeling better and better about how the cultural fit was happening, how the teams were coming together and working together. And as you know, we made, in a prior quarter call, we talked about some of the additions to our leadership team that we brought on board.

Speaker Change: Yeah, and I, just want to put a little context.

Speaker Change: A decision that we made which which I think is the right decision for.

Speaker Change: The long term in the short term one of the things that we became very clear to US early on was how well our teams were working together to solve problems and look for opportunities. So even when we started the early stages of the planning I was feeling better and better about how the cultural fit was happened Calvert teams were.

Speaker Change: Coming together and working together and as you know we've made.

Speaker Change: In our prior quarter call, we talked about some of the additions to our leadership team that we brought on board.

John Gibson: That gave us a calculated risk we had to make relative to our ability to lead the organization through how much change, how fast, right? That's a key point. And the real feeling was, particularly when you added on top of that a high degree of external disruption and unknowns, we felt it important to bring clarity to our clients, to our partners, to our employees about what was going to happen. So we accelerated both making sure we made employees know what it meant to them, letting clients know they don't have to migrate, letting our partners know that this is going to be a win-win for them as well.

Speaker Change: That gave us a calculated risk we had to make relative to our ability to lead the organization through how much change how fast right. That's a key point.

Speaker Change: And the real filling was particularly when you added on top of that a high degree of external disruption and unknowns, we felt it important to bring clarity to our clients to our partners to our employees about what was going to happen. So we accelerated both.

Speaker Change: Making sure we made employees know what it meant to them letting clients know they don't have to migrate regarding our partners know that this is going to be a win win for them as well and.

John Gibson: And we really focused on doing as much of this as fast as we could so we don't have additional distractions going into the fiscal year. So when I look at it, what the team accomplished in the fourth quarter was a lot. And we executed the synergy plans exceeding the expectations. We made decisions to fully invest in both the PayCorps, the Flex roadmap. We made a decision to invest in the SurePayroll platform. More about that later. We expanded the sales teams. We reset the territories across all the market segments. We launched a new sales technology stack and a new market data and AI tool to all the sales teams. We launched a Paychex Partner Pro platform.

Speaker Change: We've really focused on doing as much of this as fast as we could so we don't have additional distractions going into the fiscal year. So when I look at it what the team accomplished in the fourth quarter was.

Speaker Change: Executed the synergy plans exceeding the expectations, we made decisions to fully invest in both the pay core the flex roadmap, we made a decision to invest in the sure payroll platform more about that later, we expanded the sales teams, we reset the territories across all the market segments, we launched a new.

Speaker Change: Sales technology stack, and a new market data and AI tool to all the sales teams, we launched the paychex partner Pro platform, we launched our partner plus platform a program for the brokers.

John Gibson: We launched our Partner Plus platform program for the brokers. And we integrated all the marketing organizations. All that in about six to eight weeks. And we delivered these results. And now we're sitting here going into 26, better positioned than we ever are. And we don't we now we're talking about procurement, we're talking about vendor negotiations, we're talking about other things are going to be less disruptive to to the company. So that was a decision that we thought we could pull off because of the synergy we were feeling amongst the leadership between the two organizations, and the commitment that we had from both the paycore leadership and the paychecks leadership to lead the team through that kind of change at that kind of pace.

Speaker Change: And we integrated all the marketing organizations all of that in about six to eight weeks.

Speaker Change: <unk>.

Speaker Change: And we delivered these results and now we're sitting here going into 'twenty six better positioned to wherever our and we don't know we're talking about procurement, we're talking about vendor negotiations. We're talking about other things are going to be less disruptive to us to the company. So.

Speaker Change: That was a decision that we thought we could pull off because of the synergy we were filling amongst the leadership between the two organizations and the commitment that we have from both the pay core leadership in the Paychex leadership to lead the teams through that kind of change at that kind of pace. So I am extremely proud and appreciative of all the hard work.

John Gibson: So I'm, I'm extremely proud and appreciative of all the hard work that everyone in the organization has done. And hopefully, you know, you guys understand that was a lot to get done in a short period of time.

Speaker Change: Everyone in the organization has done and hopefully.

Speaker Change: You guys understand that was a lot to get done in a short period of time so.

Unknown Executive: So Thank you.

Speaker Change: Thank you.

Speaker Change: Yes. Thank you.

Unknown Executive: Next we'll go to Ashish Sabadra with RBC Capital Markets. Thanks for taking my question. I was just wondering if you can comment on checks per client, how that trended in 4Q, but also what your expectations are for fiscal year 26, and have you seen any impact from some of the things going on on the immigration crackdown? Yeah, I mean, as I mentioned, she's Checks for Client, I definitely trended a little bit softer in Q4. I mean, they, you know, if we go back and kind of look at the year, Checks for Client were actually up a little bit in the first half of the year, we started to see that come down a little bit in Q3.

Speaker Change: Next we'll go to Ashish Sabedra with RBC capital markets.

Ashish Sabedra: Thanks for taking my question I was just wondering if you can comment on checks per client how that trended in <unk>, but also what your expectations are for fiscal equity Stakes and have you seen any impact from some of the things going on on the indication.

Speaker Change: Thanks.

Speaker Change: Yes, I mean, <unk> as I mentioned, Ashish checks per client I definitely trended a little bit softer in Q4.

Speaker Change: If we go back and kind of look at the year checks per client were actually up a little bit in the first half of the year, we started to see.

Speaker Change: That come down a little bit in Q3, and we factor some of that into the forecast for Q4, Q4 ended up being a little bit softer than.

Ashish Sabadra: And we factor some of that into the forecast, but Q4 ended up being a little bit softer than we expected. And we have kind of factored that into our guidance and our plan for next year. So I, you know, we have Checks for Client down, you know, I would say, next year in the plan. And so we've we've kind of we've seen some of those trends, and we factor that into the guide.

Speaker Change: Than we expected and we have kind of factored that into our guidance and our plan for next year. So we have checks per client down.

Speaker Change: I would say next year in the plan.

Speaker Change: And so we've kind of we've seen some of those trends and we factor that into the guide.

Bob Schrader: that helpful color and maybe just a bookkeeping question. How should we think about the restructuring expenses impacting cash flow next year? Or is there a way to think about free cash flow growth in fiscal year 26? Yeah, I mean, a lot of the restructuring stuff, to be honest with with you is behind us, we got a lot of that behind us, a lot of the one time costs, you know, related to the transaction, all that is behind us, when you look at kind of the adjustments going forward, they're mostly non cash related, you know, you have the amortization, the intangibles, and you have some of the rollover equity, that that's what you're going to see mainly going forward.

Speaker Change: That's helpful color and maybe just.

Speaker Change: Bookkeeping question, how should we think about the.

Speaker Change: Restructuring expenses impacting cash flow next year or is that a way to think about free cash flow growth in fiscal year 2006.

Speaker Change: A lot of the restructuring stuff to be honest with you is behind US we got a lot of that behind us allow the one time cost.

Speaker Change: Related to the transaction all of that is behind us when you look at kind of the adjustments going forward.

Speaker Change: Theyre, mostly noncash.

Speaker Change: Related you have the amortization of the intangibles and you have some of the rollover equity thats, what youre going to see mainly going forward. So really shouldn't have an impact to free cash flow and we'll get back to a point, where we see free cash flows growing in line with our earnings.

Bob Schrader: So really, really shouldn't have an impact to free cash flow. And we'll get back to a point where we see, you know, free cash flows, you know, growing in line with with our earnings.

Kartik Mehta: Thank you.

Speaker Change: Thank you.

Kartik Mehta: Next we're going to go to Kartik Mehta with North Coast Research.

Speaker Change: Next we're going to go to Kartik Mehta with Northcoast Research. Please go ahead.

Kartik Mehta: Please go ahead. Hey, good morning, Bob and John. John, I know you talked a little bit about pricing and adding value, obviously, for clients. And, you know, pre-COVID, we were at a certain level for price, and obviously, a little bit after COVID, you were able to get better pricing than you were historically. You know, as we move forward, you know, where do you think you are on that price kind of realization? Do you think it's higher than it was pre-COVID, or do you think you'll be at the same level? Yeah, Kartik, I what I would say is, is that I think of it as value, our ability to, as you talked about, you know, bring in a client, likely in this competitive environment, you're providing them a discount or some sort of incentive to make the move.

Kartik Mehta: Hey, good morning, Bob and John.

Speaker Change: Chuck I know you talked a little bit about pricing and adding value obviously for clients.

Speaker Change: Pre COVID-19, we were at a certain level for price and obviously a little bit after COVID-19.

Speaker Change: He will get better pricing than you were historically.

Speaker Change: As we move forward.

Speaker Change: Or do you think you are on that price kind of realization do you think it's higher than it was.

Speaker Change: Pre COVID-19.

Speaker Change: Or are you do you think you'll be at the same level.

Kartik: Yes, Kartik I, what I would say is that.

Kartik: Yes.

Kartik: I think of it as value our ability to as you talked about bringing in a client likely in this competitive environment, you are providing them a discount or some sort of.

Kartik: Incentive to make the move and the question is how good a job you do that when that discount kind of expires because it's generally promotional how much of that discount can you get back to retail price and then how much can you upsell to that client long term and that goes back to the conversation we had before in term.

Bob Schrader: And the question is, how good a job do you do that when that discount, you know, kind of expires, because it's generally promotional? How much of that discount Can you get back to retail price? And then how much can you upsell to that client long term that goes back to the conversation we had before, in terms of the science of picking the type of client you bring in, you bring in a client on the cheap that you're never going to make money on, and now they want is cheap, they're going to be hard to sell anything to, and then you're not going to be able to raise prices, you're not going to be able to sell them anything extra.

Kartik: Of the science of picking the type of client you bring in Youre bring in a client on the cheap that you're never going to make money on and now they want as cheap they're going to be hard to sell anything too and then youre not going to be able to raise prices. So anything extra and so then you're just stuck with our.

John Gibson: And so then you're just stuck with a client that you're losing money on, and you can't really monetize. We've been very scientific in terms of our risk profiling, our profiling and marketing to understand that. And so when I look at what we realize, in terms of generating value in our client base, we're doing better than we were doing before the pandemic. And you look back historically, we're still in the higher end of the range that we have historically done as part of our growth formula.

Kartik: Client that youre, losing money on and you can't really monetize we've been very scientific in terms of our risk profiling, our profiling and marketing to understand that and so when I look at what we realize in terms of generating value in our client base.

Kartik: Doing better than we were doing before the pandemic and you look back historically, we're still in the higher end of the range that we have historically done as part of our growth Formula. It goes back to what Bob said, we continue to believe in the mid term debt that both are value realization and the ability to drive product penetration will continue to be a significant part.

John Gibson: Because back to what Bob said, we continue to believe in the midterm that that that both value realization, and the ability to drive product penetration will continue to be a significant part of our growth formula in the in the years ahead.

Kartik: Our growth Formula.

Kartik: In the years ahead.

Bob Schrader: And just, Bob, on float, you know, as you move forward in FY26, anything different you're going to do on float? There's a conversation about rates going down, conversation about rates going up. And it seems all very confusing, obviously. But I'm wondering if you're changing your strategy at all on the float portfolio? I mean, we're constantly looking at it. Kartik, obviously, we do have some short term rate decrease, decreases assumed in the plan pretty much aligned with the Fed plot. But, you know, the client funds portfolio is largely invested long. You know, we did just recently take over a pay cores client client fund that was a little over a billion dollars.

Kartik: And just Bob.

Kartik: Float as you move forward in FY 'twenty six anything different you are going to do on floaters are conversations about rates going down I'm conversation about rates going up.

Speaker Change: It seems all very confusing obviously, but I'm wondering if you're changing your strategy at all on the float portfolio.

Speaker Change: I mean, we're constantly looking at it currently obviously, we do have some short term rate decrease decrease is assumed in the plan pretty much aligned with the fed dot plot, but the client funds portfolio is largely invested long.

Speaker Change: We did just recently takeover pay core's client client funds that there was a little over a $1 billion in.

Bob Schrader: And, you know, they were probably the opposite of us, they were, they were largely invested short, and I just, you know, given our financial strength and our liquidity, you know, we're able to, you know, put put those funds to work and probably lock in some of those, you know, those balances to rates where they are currently. And so, you know, I wouldn't say anything significantly different, just kind of taking over their funds, managing that in line with how we manage our funds. And then, you know, the yield curve is relatively flat. We are, you know, reinvesting at a rate higher than what things are, you know, securities are currently rolling off the portfolio.

Speaker Change: They were probably just the opposite of US they were largely invested short and I, just given our financial strength and our liquidity. We are able to put put those funds to work and probably lock in some of those.

Speaker Change: Those balances to rates, where they are currently and so I wouldn't say anything significantly different just kind of taking over their funds managing that in line with how we manage our funds in that the yield curve is relatively flat.

Speaker Change: We are reinvesting at a rate.

Speaker Change: Higher than what things are securities are currently rolling off the portfolio.

Bob Schrader: And we'll kind of look at the the team looks at kind of the shape of the yield curve at that point in time when things roll off and make decisions on how to optimize yield there. But I wouldn't say anything significantly different there.

Speaker Change: We'll kind of look at the team looked at kind of the shape of the yield curve at that point in time, when things roll off and and make decisions on how to optimize yield there, but I wouldn't say anything significantly different there.

Kartik Mehta: Thanks Rob, I really appreciate it.

Speaker Change: Thanks, Rob I really appreciate it.

Rob: No problem.

Jason Kupferberg: Next we're going to go to Jason Kupferberg with Bank of America, please go ahead. Good morning, guys. Thank you.

Speaker Change: Next we're going to go to Jason Kupferberg with Bank of America. Please go ahead.

Jason Kupferberg: Good morning, guys. Thank you can you just clarify what the organic outlook for management solution. Specifically is enough 26, I mean based on the pay card numbers, you gave I am calculating around 4% to 5% organic so I just wanted to check on that and if you can also comment on whether or not the revenue synergy.

Jason Kupferberg: Can you just clarify what the organic outlook for management solutions specifically is in F-26? I mean, based on the PayCorps numbers you gave, I'm calculating around 4 to 5 percent organic, so I just wanted to check on that. And if you can also comment on whether or not the revenue synergies are a part of the organic guide. Thank you.

Speaker Change: These are a part of the organic guide thank you.

Bob Schrader: Yes, a couple comments related to that, Jason, I, you know, john talked about in the prepared remarks on how we've segmented this business. And so we already had an upmarket business. And so we spent q4 kind of combining these businesses, we move paychecks, so people and clients over to pay core, and vice versa, and it is going to be extremely difficult going forward for us to kind of separate what's pay core versus paychecks. It was what I wanted to do in the guide is to give you a sense on a total revenue basis. And again, most of pay core falls within management solutions, or it all does.

Speaker Change: Yes.

Speaker Change: Couple of comments related to that Jason.

Speaker Change: John talked about in the prepared remarks on how we've segmented.

Speaker Change: Business and so we already had an upmarket business and so we expect Q4 kind of combining these businesses, we move paychex, so people and clients over to pay core and vice versa, and it is going to be extremely dip.

Speaker Change: Difficult going forward for us to kind of separate what's pay core versus paychecks. It was what I wanted to do it in the guide is to give you a sense on a total revenue basis and again most of <unk> falls within management solutions are at all does but I wanted to give you a sense of what it was.

Bob Schrader: But I wanted to give you a sense of what it was in total. And I was able to do that, to be frank, because we were in the in, we were in the process of building a standalone plan. So I kind of knew what my standalone standalone plan look like. And so it's, it's easier for us to say, Hey, we had a standalone plan, here's our new plan. Here's the additional contribution that that you're getting from pay core, you know, john, and I've had a lot of discussions on how we're going to do this going forward as we move throughout the year.

Speaker Change: In total and I was able to do that.

Speaker Change: To be Frank because we were in the.

Speaker Change: We're in the process of building our stand alone plans, so I kind of knew what my standup stand alone plan look like and so.

Speaker Change: It's easier for us to say, Hey, we had a standalone plan, here's our new plan here's the additional contribution.

Speaker Change: That youre getting from PE core John and I have had a lot of discussions on how we're going to do this going forward as we move throughout the year and I got to be honest I haven't really come up with a methodology yet we'll try to give you guys. Some sense of what the inorganic contribution is but it's going to be as these.

Bob Schrader: And I got to be honest, I haven't really come up with a methodology yet, we'll try to give you guys some sense of what the inorganic contribution is, but it's going to be as these businesses get further integrated, it's going to be a lot harder to to separate that out, the numbers that you came up with don't seem to be too far off, you know, what the organic piece would be on the management solutions. And then I would tell you, the revenue synergies are kind of spread a little bit across both because there's opportunities both ways.

Speaker Change: Businesses gift further integrated is going to be a lot harder to separate that out the numbers that you came up with.

Speaker Change: Don't seem to be too far off what the organic piece would be on the management solutions and then I would tell you. The revenue synergies are kind of spread a little bit across both because there's opportunities both ways.

Speaker Change: Okay.

Bob Schrader: Again, I just think it's important to understand that we now have PayCorps positioned as our hundred plus market segment and platform. And so all the resources we had at Paychex involved in supporting our enterprise business are now part of that business segment and that business unit. And so what you're going to continue to see is, right, the ability to kind of look at it as two separate. And the same thing, there was down market business that PayCorps did and we moved that over into the Paychex market segment.

Speaker Change: Okay understood.

Speaker Change: Yes.

Speaker Change: Alright, thanks for that.

Speaker Change: Yes, I just think it's important to understand that we.

Speaker Change: We now have paid core positioned as our 100 plus market segment and platform and so all the all the resources we had at Paychex involved in supporting our enterprise business are now part of that business segment and that business unit and so what youre going to.

Speaker Change: To see is right the ability to kind of look at it as two separate and the same thing that was down market business than that.

Speaker Change: That pay core denim, we've move that over into the paychex.

Speaker Change: Market segment. So so again going forward. That's one of the reasons why we wanted to bring clarity to our organization internally as quickly as we could and not drag this out into multiple fiscal years and we wanted that we thought we had the opportunity with when the deal closed to get all of this work done so that we could start.

Bob Schrader: So again, going forward, that's one of the reasons why we wanted to bring clarity to our organization internally as quickly as we could and not drag this out into multiple fiscal years. We thought we had the opportunity with when the deal closed to get all of this work done so that we could start the fiscal year 26 with everyone being very clear about what they're focused on and what they need to do. Right, right. Yeah.

Speaker Change: To fiscal year 2006, with everyone being very clear about what they are focused on what they need to do so.

Speaker Change: As part of its going back one of the challenges.

Speaker Change: Yes.

Jason Kupferberg: And just, I guess, as a follow up, so it sounds like we are talking about some acceleration on the organic part of management solutions in F26 off of the 3% you just had in Q4. Maybe you can just kind of unpack the visibility and the pieces of that and maybe just talk a little bit more about, I think you said you're assuming a steady macro, but you've seen some hiccups in client decision making, like, are you assuming that the worst is over in that regard? And, you know, you see some normalization slash improvement in underlying client decision making?

Speaker Change: Just I guess as a follow up so it sounds like we are talking about some acceleration on the organic part of management solutions in F. 'twenty six after the 3% you just had in Q4, maybe you can just kind of unpack the visibility and the pieces of that.

Speaker Change: Maybe just talk a little bit more about I think you said, you're assuming a steady macro but you've seen some hiccups in client decision, making like are you assuming that the worst is over in that regard and you see some normalization slash improvement in underlying client decision, making.

Bob Schrader: Let me talk about the numbers and maybe John can get into the macro a little bit. I think when you look at the management solution guide, you know, the front half and back half are very similar. Actually, the back half is a tad lower, particularly in Q4, once we anniversary the PayCorps acquisition. One of the comments I made earlier, Jason, was, you know, and we do this and I know you guys do this, you look at the exit rate, you know, as a proxy of what the organic growth rate is. And the point I was trying to make and probably didn't do a good job of explaining it is, like, that 3%, at least from a total revenue or whether you look at management solutions, you need to factor in that we had a tough compared to Q4 last year.

Speaker Change: Yes.

Speaker Change: Talking about the numbers and maybe John can get it.

Speaker Change: The macro a little bit I think when you look at the management solution Guide.

Speaker Change: The front half and back half are very similar actually the back half is a tad lower particularly in Q4 once we anniversary the.

Speaker Change: The pay core.

Speaker Change: Acquisition.

Speaker Change: One of the comments I made earlier Jason was.

Speaker Change: We do this and I know you guys do this you look at the exit rate.

Speaker Change: As a proxy of what the organic growth rate is in the point I was trying to make and probably didn't do a good job of explaining it is like that 3% at least from a total revenue or whether you look at management solutions you need to factor in there we had a.

Speaker Change: Tough.

Speaker Change: Compared to Q4 of last year.

Bob Schrader: We changed some timing related to our price increase last year relative to where it was the year before. And we actually had a little bit of a pickup in pricing last year. And so when you adjust for that, both on a management solutions and if I get the total revenue, some of the MPP enrollment, you're getting to an exit rate in Q4. I know it's a 3, but it's really not a 3 because we have these headwinds. And when you adjust for that, the exit rate is right in kind of the middle of the implied guide that I gave you on the organic business.

Speaker Change: <unk> changed some timing related to our price increase last year relative to where it was the year before and we actually had a little bit of a pickup in pricing last year and so when you adjust for that both on a management solutions and if I get the total revenue some of the MPP enrollment youre getting to an exit rate in Q4.

Speaker Change: It's a three but it's really not a three because we have these headwinds and when you adjust for that.

Speaker Change: The accident rate is right in the middle of the implied guide that I gave you on the organic business. So we feel comfortable about that I know the numbers are a little bit confusing the numbers have been really confusing in the last couple of years with the RTC without <unk>, but.

Bob Schrader: So we feel comfortable about that. I know the numbers are a little bit confusing. The numbers have been really confusing the last couple years with ERTC, without ERTC. But, you know, those are two headwinds from a growth standpoint in Q4 that you need to adjust for if you're really trying to get an apples-to-apples comparison. And what that means is we, you know, exit the year and move into fiscal 26. Okay. Thanks, Bob.

Speaker Change: Those are two.

Speaker Change: Headwinds from a growth standpoint in Q4 that you need to adjust for if you're really trying to get an apples to apples comparison and what that means as we exit the year and move into fiscal 'twenty six.

Speaker Change: And I would just add.

John Gibson: I would just add on the macro side. When you look at the data that we have, which I think is actually very accurate, in our small business index, focused on the under 50 segment, we're seeing and continue to see moderate growth in small businesses. and we don't see any signs of recession. When I look at the fourth quarter, what I would say is, given the GDP that we had... Stability there on the micro side, some people dropping out, maybe throwing in the towel. In the upper market, 50 plus, for the GDP numbers we saw, and you run our models, you would have said there was more hiring going to happen there than maybe what we saw.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: I would just I'd just add on that.

Speaker Change: On the macro side.

Speaker Change: When you look at the data that we have which I think is directionally very accurate.

Speaker Change: In our small business index focused on the under 50 segment.

Speaker Change: Seeing and continue to see moderate growth in small businesses and we don't see any signs of recession.

Speaker Change: When I look at the fourth quarter, what I would say is given the GDP that we had.

Speaker Change: Stability there on the micro side, some people dropping out maybe throwing in the Tao.

Speaker Change: In the upper market 50, plus for the for the GDP numbers, we saw and you run. Our models you would have said there was more hiring going to happen there and maybe what we saw so theres, a little little softness, but theres no real signs of Av.

John Gibson: So there's a little softness, but there's no real signs of challenge.

Speaker Change: A challenge now what do I assume.

John Gibson: Now what do I assume in the future of the macro environment? Are we going to have a budget bill or not? probably more likely we are next quarter than last quarter. Are we going to have a situation where 20 to 40 percent tariffs are being thrown out every quarter? I don't know. That's what happened on liberation. There's been a lot of things hit the market that drive uncertainty in the fourth quarter. I think we all have been living through that, including global conflicts. You know, our assumptions is those were unique to that quarter and that we're going to have a more consistent macro environment that we saw in the first three quarters, which was, again, moderate growth in small businesses and of a bit more stable, what I would say, environment for businesses to be able to make decisions about future investments in capital, including what do I know about taxes next year?

Speaker Change: In the future of the macro environment.

Speaker Change: Are we going to have a budget bill or not.

Speaker Change: Probably more likely we are next quarter than last quarter.

Speaker Change: Are we going to have a situation, where 20% to 40% tariffs are being thrown out every quarter I don't know thats what happened on vibrations theres been a lot of things hit the market that drive uncertainty in the fourth quarter I think we all have been living to that including global conflicts.

Speaker Change: Our assumptions as those were unique to that quarter and that we're going to have a more.

Speaker Change: A consistent macro environment that we saw in the first three quarters, which was again moderate growth and small businesses and are a bit more stable what I would say.

Speaker Change: The environment for businesses to be able to make decisions about future investments and capital, including what do I know about taxes next year, what do I know about where we're going to be with tariffs. So I think we're assuming that some of that is going to get worked out that's what we've been told.

John Gibson: What do I know about where we're going to be with tariffs? So I think we're assuming that some of that is going to get worked out. That's what we've been told out of Washington. And we'll wait to see what happens. Understood. Thanks, John. Thanks, Bob.

Speaker Change: Out of Washington, and we'll wait to see what happens.

Speaker Change: Understood. Thanks, Sam Thanks, Bob.

Scott Wurtzel: And finally, we'll go to Scott Wurtzel with Wolf Research. Please go ahead. Hey, good morning, guys. Thanks for squeezing me in here. I wanted to ask on the PEO side, I know there's, you know, a lot of moving parts with the MPP plan, and then also thinking about the cross-sell opportunity.

Speaker Change: And finally, we will go to Scott <unk> with Wolfe Research. Please go ahead.

Speaker Change: Hey, good morning, guys. Thanks for squeezing me in here I wanted to ask on the PEO side I know, there's a lot of moving parts with the MPP plan and then also thinking about the cross sell opportunity, but wondering if you can talk about some of the kind of core paychex PEO trends you saw in the quarter and you know how youre thinking about that as we move into fiscal 'twenty, six and think about that.

Bob Schrader: But wondering if you can talk about some of the kind of core Paychex PEO trends you saw in the quarter and you know, how you're thinking about that as we move into fiscal 26. And think about that, you know, acceleration in the back half of the year once we've lapped the MPP headway?

Speaker Change: Celebration in the back half of the year once we lap the MPV headwinds. Thanks.

Bob Schrader: Subs by www.zeoranger.co.uk I can start and John can add on. I mean, I think if you look at the PO and Q4, I mean, we're very happy with the performance. I think the demand continued to be strong. I mean, demand from a sales standpoint was strong, double digits in the quarter. We had record worksite employee retention for Q4. So we feel good. I think you see that reflected in the worksite employee number that we provided for the year. You know, that obviously includes our ASO business as well. But, you know, those are the areas that we're focused on both ASO and PO.

Speaker Change: I can start J can add on I mean, I think if you look at the Po in Q4, I mean, we're very.

Speaker Change: Happy with the performance I think the demand continued to be strong demand from a sales standpoint with strong double digits in the quarter. We had record worksite employee retention for Q4. So we feel good I think you see that reflected in.

Speaker Change: The Worksite employee number that we provided for the year.

Speaker Change: That obviously includes our ASO business as well, but.

Speaker Change: Those are the areas that we're focused on both ASO and PEO those are higher value.

Bob Schrader: Those are our higher value solutions. And at the end of the day, we're focused on driving worksite employee growth. And I think we delivered that this year. And some of the positive, I'll say, you know, outside of the at-risk kind of noise and headwinds that we've talked about, the underlying operating performance of that business all year has been strong and Q4 in particular was strong both from a demand and retention standpoint.

Speaker Change: Solutions and at the end of the day, we're focused on driving Worksite employee growth and I think we delivered that this year in some of the positive I'll say outside of the at risk kind of noise and headwinds that we've talked about the underlying operating performance of that business. All year has been strong in.

Speaker Change: In Q4 in particular was strong both from a demand and retention standpoint, yes.

John Gibson: Yeah. And I'd echo everything Bob said. And, you know, look, on an aggregate basis... The value proposition that the PO brings to the marketplace has never been in more need. There is a health inflation issue out there, and we have solutions to solve that problem. And when you look at it on the aggregate basis, we increase the number of people participating in our PO health plans across the country and continue to see strong demand for the product and service, with the exception of in Florida, and because Florida is a unique animal, as we've talked about before, it has an oversized impact on revenue, but again not on the really operating performance of the business or the profitability of the company.

Bob Schrader: I would echo everything Bob said look on an aggregate basis.

Bob Schrader: The value proposition that <unk> brings to the marketplace has never been more need there is a health inflation issue out there and we have solutions to solve that problem and when you look at it on the aggregate basis, we increased the number of people participating in our health plans across the country and.

Bob Schrader: To see strong demand for the product and service with the exception of afford it because Florida is a unique animal as we've talked about before it has an oversized impact on revenue, but again not.

Bob Schrader: Really operating performance of the business or the profitability of the company.

Speaker Change: Well I'll leave it there thanks guys.

John Gibson: I'll leave it there. Thanks, guys.

Speaker Change: Thanks Scott.

John Gibson: Thank you and at this time I'd like to turn the call back over to John Gibson for a new final or closing remark. Okay, Margot, thank you very much.

Speaker Change: Thank you and at this time I would like to turn the call back over to John Gibson for any final or closing remarks.

Speaker Change: Okay. Mario Thank you very much at this point, we will close the call if you're interested in a replay the.

Unknown Executive: At this point, we will close the call. If you're interested in a replay, the webcast of this conference call will be archived approximately 90 days. Once again, thanks everyone for your interest in Paychex and hope you have a great day and a great Fourth of July. Thanks, Margot. Thank you.

Mario: The webcast of this conference call will be archived approximately 90 days once again, thanks, everyone for your interest in Paychex and hope you have a great day and a great fourth of July.

Speaker Change: Thanks Margo.

Unknown Executive: This does conclude today's program. Thank you for your participation.

Speaker Change: Thank you. This does conclude today's program. Thank you for your participation you may disconnect at any time.

Unknown Executive: You may disconnect at any time.

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