Q1 2026 Paychex Inc Earnings Call

John B. Gibson: Good morning.

Operator: Welcome to Paychex first quarter fiscal 2026 earnings call. Participating on the call today are John B. Gibson and Robert Lewis Schrader. Following the speaker's prepared remarks, there will be a question and answer period. If you would 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. As a reminder, 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 Mr. Robert Lewis Schrader, Paychex Chief Financial Officer.

Good morning and welcome to paychecks. First quarter, fiscal 2026 earnings call participating on the call today are John Gibson and Bob Shrader

If you would 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.

John B. Gibson: Please go ahead, sir.

Robert Lewis Schrader: Thank you for joining us to discuss Paychex Inc. first quarter fiscal 2026 results. This morning we released our financial results for the quarter ended August 31, 2025. You can access our earnings release and presentation on our Investor Relations website. We plan to file our Form 10-Q with the SEC within the next couple of days. This conference call is being webcast live and will be available for replay on our Investor Relations portal. Today's call includes forward-looking statements that refer to future events and involve some risk. We encourage you to review our filing 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 non-GAAP measures, can be found in our earnings release.

As a reminder, 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 Mr. Robert Schrader, Paychex Chief Financial Officer. Please go ahead, sir.

Thank you for joining us to discuss Paychex. This first quarter of fiscal 2026 results, this morning. We released our financial results for the quarter ended August 31, 2025. You can access our earnings release and presentation on our Investor Relations website. We plan to file our Form 10-Q with the SEC within the next couple of days. This conference call is being webcast live and will be available for replay on our Investor Relations portal.

Robert Lewis Schrader: I would now like to turn the call over to John B. Gibson, Paychex Inc. President and CEO.

John B. Gibson: Thanks, Bob. I will start by sharing our first quarter business highlights, and then Bob will come back and discuss our financial results and outlook. Of course, we'll open it up for your questions. We are off to a strong start in fiscal year 2026, delivering robust 17% revenue growth and solid adjusted diluted earnings per share growth of 5% in the first quarter. This performance reflects continued progress integrating Paycor and sustained demand for our HCM solutions amid a resilient small business environment. We remain pleased with the progress of the Paycor integration. We are on track to achieve targeted Paycor revenue synergies and exceed our initial cost synergy expectations. Our fiscal year 2026 cost synergy target remains approximately $90 million. We are pursuing additional synergies beyond this target while retaining our flexibility to reinvest those gains for additional growth and innovation investments.

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 the reconciliation of non-GAAP measures, can be found in our earnings release. I would now like to turn the call over to John Gibson, Paychex President and CEO.

Thanks Bob. Um,

I will start by sharing our first quarter of business highlights and then Bob will come back and discuss our financial results and Outlook. And then of course we'll put it up for your questions.

We are off to a strong start in fiscal year 2026, delivering robust 17% revenue growth and solid adjusted diluted earnings per share growth of 5% in the first quarter.

This performance reflects continued progress, integrating pay core and sustained demand for our HCM Solutions amid a resilient small business environment.

We remain pleased with the progress of the payor integration. We are on track to achieve targeted payor revenue synergies and exceed our initial cost synergy expectations.

John B. Gibson: Bringing the two companies together provides us a broader set of technology solutions and service models to both win and retain business. We have already enabled several notable client retention wins in the quarter across our purpose-built platforms. Additionally, we are encouraged by the speed at which we have completed the back-end technology integrations to enable the full breadth of revenue and cost synergy opportunities for fiscal year 2026. We remain optimistic about the revenue synergies, particularly cross-selling Paychex, Retirement Solutions, ASO, and PEO solutions to Paycor's approximately 50,000 clients. More than half of Paycor's clients fall right in our sweet spot for ASO and PEO, while Retirement Solutions has a broad relevance across the entire client base. We recently developed a propensity model to target which Paycor clients are more likely to purchase Paychex's broad range of solutions, and we are building a strong pipeline.

Our fiscal year 26, cost energy Target remains approximately 90 million dollars. We are pursuing additional synergies Beyond this target. While retaining our flexibility to reinvest those gains for additional growth and Innovation Investments.

Bringing the 2 companies together provides us a broader set of Technology Solutions and service models to both win and retain business.

We have already enabled. Several notable client retention wins in the quarter. Across our purpose-built platforms. Additionally, we are encouraged by the speed at which we have completed. The back-end technology Integrations to enable the full breadth of Revenue and cost energy opportunities for fiscal year 26.

We remain optimistic about the revenue synergies, particularly cross-selling Paychex retirement, ASO, and Poe solutions to Paycor's approximately 50,000 clients. More than half of Paycor's clients fall right in our sweet spot for Osso and Poe.

While Retirement Solutions has a broad relevance across the entire client base.

We recently developed a propensity model.

John B. Gibson: Among this quarter's cross-sell successes was an ASO sale to a Paycor client with several thousand employees, among the largest in Paychex's history. This initial progress is promising, and early wins reinforce our confidence in the path forward. Beyond Paycor, we continue to see a long runway to further monetize our entire client base, where we believe penetration rates still remain low. Building on the momentum from Paycor, another cornerstone of our growth strategy is our long-standing relationships with channel partners. Brokers, CPAs, and banks are important referral sources for new business for us and have been for decades. The Partner Plus program for brokers continues to be received well, with broker enrollment nearly doubling since our last earnings call in June. We believe this momentum provides a strong foundation to retain and expand this vital referral channel.

To target which pay core clients are more likely to purchase Paychex's broad range of solutions, we are building a strong pipeline.

Among this quarter's cross sales, successes was an ASO sell to a pay core client with several thousand employees among the largest in paychecks history.

This initial progress is promising and early wins. Reinforce our confidence in the path forward

Beyond poor. We continue to see a long runway to further monetize our entire client base, where we believe penetration rates still remain low.

Building on the momentum from poor performance, another cornerstone of our growth strategy is our long-standing relationships with channel partners.

Brokers CPAs and Banks.

Our important reforms are sources for new business for us and have been for decades.

The Partner Plus program for brokers continues to be received well.

With broker enrollment nearly doubling since our last earnings call in June,

John B. Gibson: The program centers on helping brokers maximize client impact, grow their book of business, and deliver exceptional service and advisory support. We remain confident our partner program is the best in the industry, and we recently launched new marketing campaigns to further expand awareness and growth. Building on our longstanding partnership with the CPA community, we launched our new CPA Partner portal in the quarter. We recently introduced another powerful Paychex Flex solution supporting small and mid-sized businesses and their CPAs. BillPay, powered by Bill.com, is our new financial management solution designed to simplify payments for SMBs. BillPay integrates payroll, HR, and accounts payable into a seamless experience, providing small business owners real-time financial clarity to make smarter and faster decisions. Additionally, BillPay will enhance CPAs' ability to support their clients by integrating critical payment and HR functions to deliver even more valuable insights.

We believe this momentum provides a strong foundation to retain and expand this vital referral channel.

the program centers on helping Brokers, maximize client impact, grow, their book of business and deliver exceptional service and advisory support

Building on our long-standing partnership with the CPA Community. We launched our new CPA partner, Pro portal in the quarter. We recently introduced another powerful paychecks, Flex solution, supporting small, and mid-size, businesses, and their CPAs.

Bill Pay, powered by Bill, is our new financial management solution designed to simplify payments for SMBs.

Bill pay integrates payroll HR and accounts payable into a seamless experience, providing small business owners real-time Financial Clarity to make smarter and faster decisions.

John B. Gibson: We plan to expand BillPay to include accounts receivable and roll that out in our additional platforms in the future. Continuing our track record of innovation, Paychex led the digital and AI-driven transformation of human capital management. We deliver pragmatic AI solutions that drive measurable value for our clients and our business. I'm excited to share several recent advancements that demonstrate how we are harnessing AI internally and externally to enhance client experiences, boost operational efficiency, and we believe, position Paychex for sustained growth. We recently expanded AI Insights, our generative AI Assistant for workforce questions, to serve our PEO clients in addition to our HCM clients. This AI-powered tool provides instant natural language insights on pay equity, turnover, hiring trends, and labor costs.

Additionally, Bill Pay will enhance CPAs' ability to support their clients by integrating critical payment and HR functions to deliver even more valuable insights.

We plan to expand bill pay to include accounts receivable and roll that out in our additional platforms in the future.

Continuing our track record of innovation, Paychex leads the digital and AI-driven transformation of Human Capital Management.

We deliver pragmatic AI solutions that drive measurable value for our clients and our business.

I'm excited to share several recent advancements that demonstrate how we are. Harnessing AI internally and externally to enhance client experiences. Boost operational efficiency and we believe position paychecks for sustained growth.

we recently expanded AI insights our generative, AI assistant for Workforce questions to serve our po clients in addition to our HCM clients,

John B. Gibson: Through an intuitive chat interface, users can query complex HR metrics, drill down into detailed analytics, and follow up questions to uncover deep insights and predictive trends. In June, we launched our generative AI-powered HR Guidance tool. Developed using HR Insights drawn from our nearly 40 million client interactions each year, this internal AI-enabled tool empowers our HR experts to deliver efficient, effective responses to client queries and provide enhanced client support. In addition, we have deployed AI tools across our organization, empowering our teams to focus on higher value work while enhancing quality, efficiency, and innovation. For example, AI is augmenting our software engineering group by automating tasks, improving code quality, and allowing us to accelerate our development. We are also piloting agency AI solutions this quarter to transform some of our higher volume inbound client tasks across multiple channels.

This AI-powered tool provides instant natural language insights on pay equity, turnover, hiring trends, and labor costs.

Do an intent intuitive chat interface users, can query complex HR metrics drill down in the detailed analytics and follow-up questions to uncover, deep, insights and predictive trends.

In June, we launched our generative AI powered HR guidance tool developed using HR insights to draw drawn. From our nearly 40 million client, interactions each year. This internal AI enabled tool. Empowers, our HR experts to deliver efficient effective responses to client queries, and provide enhanced client support.

In addition, we have deployed AI tools across our organization, empowering our teams to focus on higher-value work while enhancing quality, efficiency, and innovation. For example, AI is augmenting our Software Engineering Group by automating tasks, improving code quality, and allowing us to accelerate our development.

John B. Gibson: These AI agents autonomously manage routine client interaction, enhancing operational efficiency and elevating the client experience, all while freeing up our service providers to focus on high value advisory and support to our customers. Our PEO business continues to also perform well with another strong quarter of strong demand and retention performance leading to mid-single-digit worksite employee growth. We remain bullish on PEO due to our scale, capabilities, and the growth opportunities we see. The PEO model empowers small businesses to offer benefits comparable to Fortune 500 companies, addressing one of the top challenges of attracting and retaining talent. Turning to the macro environment, small businesses remain resilient. Our Small Business Employment Watch shows stable employment and moderating wage inflation and has over the past year with no signs of recession. Since our last call, we've seen greater clarity on key issues such as tariffs, taxes, and inflation.

We are also piloting agentic AI solutions this quarter to transform some of our higher volume inbound client tasks across multiple channels.

These AI agents autonomously manage routine client interactions, enhancing operational efficiency and elevating the client experience, all while freeing up our service providers to focus on high-value advisory and support.

To our customers.

Our PO business continues to also perform well, with another strong quarter of strong demand and retention performance leading to mid-single-digit worksite employee growth.

we remain bullish on PO, due to our scale capabilities and the growth opportunities we see

The PO model, empowers small businesses to offer benefits comparable to Fortune, 500 companies, addressing 1 of the top challenges of attracting and retaining Talent.

Turning to the macro environment. Small businesses remain resilient, our small business employment. Watch shows, stable employment and moderating wage inflation and has and has over the past year with no signs of recession.

John B. Gibson: With the tax bill in place and Fed rate cuts done, we believe this will support renewed business confidence. This clarity should encourage business owners, particularly those previously adopting a wait and see approach, to make more informed strategic decisions, potentially boosting investment and hiring. Lastly, I'm proud of the hard work demonstrated by our employees. Despite an ever-evolving external environment and the integration of our largest acquisition in the company's history, the team has remained focused on our clients and our purpose. Their dedication and efforts have been recognized once again, this time by Newsweek, which named Paychex Inc. one of America's Greatest Companies and Most Admired Workplaces. Our people and our culture remain a key differentiator, underscoring the vital role our employees play in driving our sustained success. I will now turn it over to Bob to provide an update on our financial results and outlook.

Since our last call, we've seen greater Clarity on key issues such as terrorists, taxes, and inflation.

With the tax bill in place and Fed rate Cuts done.

We believe this will support renewed business confidence. This Clarity should encourage business owners. Particularly those previously, adopting a wait and see approach to make more informed, strategic decisions, potentially boosting investment and hiring.

Lastly, I'm proud of the hard work demonstrated by our employees.

Despite an ever-evolving external environment and the integration of our largest acquisition in the company's history, the team has remained focused on our clients and our purpose.

Paychex, one of America's greatest companies and most admired workplaces.

Our people and our culture remain a key differentiator underscoring, the vital role, our employees play in driving. Our sustained success.

John B. Gibson: Bob, thank you John.

Robert Lewis Schrader: I'll start with a summary of our first quarter financial results and then share an update on our outlook for fiscal 2026. Let me begin by sharing our first quarter results. Total revenue increased 17% over the prior year to $1.5 billion. Management Solutions revenue increased 21% to $1.2 billion, primarily due to the addition of Paycor as well as higher revenue per client driven by price realization and increased product penetration. Paycor contributed approximately 17% to Management Solutions revenue growth year over year. PEO and Insurance Solutions revenue increased 3% to $329 million, primarily driven by solid growth in the number of average PEO worksite employees. Outside of the at risk plan headwinds, PEO continues to perform well. Interest on funds held for clients increased 27% to $48 million due to the inclusion of the Paycor balances.

I will now turn it over to Bob to provide an update on our financial results and our Bob, thank you. John. I'll start with a summary of our first quarter Financial results, and then share an update on our outlook for fiscal 2026. Let me Begin by sharing our first quarter results.

Total revenue, increase 17% over the prior year to 1.5 billion.

Management Solutions Revenue increased 21% to $1.2 billion, primarily due to the addition of Paycor, as well as higher revenue per client driven by price realization and increased product penetration. Paycor contributed approximately 17% to Management Solutions Revenue growth year-over-year.

And Insurance Solutions Revenue, increased 3% to 329 million, primarily driven by solid growth. In the number of average, uh, peo work site employees outside of the at risk plan. Headwinds poo continues to perform well,

Robert Lewis Schrader: Total expenses increased 29% to $998 million, primarily driven by the Paycor acquisition. Operating income margins for the quarter were 35.2% and adjusted operating income margins were 40.7%. Diluted earnings per share decreased 10% to $1.06 per share and our adjusted diluted earnings per share for the quarter increased 5% to $1.22. Our financial position remains strong with cash, restricted cash, and total corporate investments of $1.7 billion and total borrowings of approximately $5 billion. As of 08-31-2020, cash flow from operations was $718 million for the first quarter, primarily driven by net income. We returned $549 million to shareholders during the quarter in the form of cash dividends and share repurchases. Our 12-month rolling return on equity remains robust at 40%. Let me now turn to our updated guidance for the year, which assumes the current macro environment.

Interest on funds held for clients increased 27% to $48 million due to the inclusion of the payor. Total expenses increased 29% to $99,999,998 million, primarily driven by the payor acquisition.

Operating income margins for the quarter were 35.2%, and adjusted operating income margins were 40.7%.

Diluted earnings per share decreased 10% to $1.60 per share, and our adjusted diluted earnings per share for the quarter increased 5% to $1.22.

our financial position remains strong with cash restricted cash and total corporate Investments of 1.7 billion and total borrowings of approximately 5 billion as of August 31st, 2025

12 from operations, was 718 million for the first quarter, primarily driven by net income.

We returned $549 million to shareholders during the quarter in the form of cash, dividends, and share repurchases. Our 12-month rolling return on equity remains robust at 40%.

Robert Lewis Schrader: We are reaffirming our fiscal 2026 outlook, with the exception of our earnings expectation, which we are raising. Total revenue is still expected to grow between 16.5% and 18.5%, and as we previously noted, we would expect revenue synergies to contribute 30 to 50 basis points of growth in fiscal 2026. Management Solutions is expected to grow in the range of 20% to 22%. PEO and Insurance Solutions is expected to grow in the range of 6% to 8%. We expect revenue to accelerate in the back half of the year as we anniversary the at risk revenue growth headwinds we experienced last fiscal year. Interest on funds held for clients is still expected to be in the range of $190 million to $200 million. Adjusted operating income margin is expected to be approximately 43%.

Let me now turn to our updated guidance for the year, which assumes the current macro environment.

We are reaffirming our fiscal 2026 Outlook with the exception of our earnings expectation, which we are raising

Total revenue is still expected to grow between 16 and 1.5 and 18 and 1/2%. And as we previously noted, we would expect Revenue synergies to contribute 30 to 50 basis points of growth in fiscal 2026.

Management Solutions is expected to grow in the range of 20% to 22%.

Poe and Insurance Solutions is expected to grow in the range of 6% to 8%. As previously noted, we expect revenue to accelerate in the back half of the year as we anniversary the at-risk revenue growth headwinds we experienced last fiscal year.

Interest on funds held for clients is still expected to be in the range of 190 to 200 million.

Robert Lewis Schrader: Our effective income tax rate is expected to be in the range of 24% to 25%. As I mentioned, we are now raising our earnings expectations with adjusted diluted earnings per share now expected to grow between 9% and 11%, up from 8.5% to 10.5% that we shared with you last quarter. Now I'll provide you a little bit of color for the second quarter. We would anticipate total revenue growth to be approximately 18% in Q2 with an adjusted operating margin of approximately 41%. This is based on our current assumptions, which are subject to change. With that, I'll now turn the call back over to John.

Adjusted operating income margin is expected to be approximately 43%.

Our effective income tax rate is expected to be in the range of 24 to 25%. And as I mentioned, we are now raising our earnings expectations with adjusted diluted earnings per share. Now, expected to grow between 9 and 11% up from 8 and a half to 10 and a half percent that we shared with you last quarter.

John B. Gibson: Thank you, Bob. With that, we will now open up the call for your questions.

Operator: Thank you very much, Mr. Gibson. Ladies and gentlemen, at this time if you do have any questions, please press Star 1. If you find your question has been addressed, you may remove yourself from the queue by pressing Star 2. Additionally, we ask that you please limit yourself to one question and one follow-up question. We'll go first this morning to Bryan C. Bergin of TD Cowen.

Now, I'll provide you a little bit of color for the second quarter. We would anticipate total revenue growth to be approximately 18% in Q2, with an adjusted operating margin of approximately 41%. And, of course, this is based on our current assumptions, which are subject to change. With that, I'll now turn the call back over to John. Thank you, Bob. And with that, we will now open up the call for your questions.

[Analyst 1]: Hi, this is actually Jared Levine on.

Thank you very much Mr. Gibson, ladies and gentlemen, at this time, if you do have any questions, please press star 1, if you find your question, has been addressed. You may remove yourself from the queue by pressing star 2. Additionally, we ask that you please limit yourself to 1 question and 1. Follow-up question. We'll go first this morning to Brian Bergin, a PD Cohen,

Robert Lewis Schrader: For Bryan C. Bergin today.

[Analyst 1]: I guess to start here, can you give us an update in terms of the demand environment? Any notable differences when you think about employer size segments or across core offerings here?

Hi, this is Jared Levine on for Brian Bergin today. I guess to start here, can you give us an update in terms of the demand environment? Are there any notable differences when you think about employer size segments or core offerings here?

Robert Lewis Schrader: Jared, this is John.

John B. Gibson: No real change. I mean, look, demand remains consistent with what we've been seeing historically. Matter of fact, activity is up, I'd say. I think there's a lot of shoppers in the market right now. RPO booking continued to be very solid, up double digits this past quarter. You really, across the board, are seeing a lot of activity and good traction in the micro segment as well, which had been a little lighter in the fourth quarter. Like I said, right now the demand environment seems stable to me. Great.

[Analyst 1]: We've been getting a lot of questions in terms of the Paycor XFLO growth there. I just wanted to confirm, in Q1 did it still grow low double digits in terms of XFLO growth, and is that still what you're assuming for the year as well?

That right now. Um, the main environment seems stable to me.

Great. And then we begin a lot of questions in terms of the pay core xflow growth there. So just want to confirm and 1 cue. Did it still grow low double digits in terms of X low growth? And is that still what you're assuming for the year as well?

John B. Gibson: Yeah.

Operator: Jerry, this is Bob.

Robert Lewis Schrader: Certainly, on a full year basis, we expect the recurring revenue to be, you know, on Paycor, to be a double digit grower. I don't want to get into the quarterly splits. Obviously, they were invested short on the client fund, so that, with rate decreases that occurred last year and where we are now, that would have been a little bit of a headwind. The recurring revenue growth for Paycor in Q1 was in line with our expectations, and we would expect the business to grow double digits on a full year basis.

John B. Gibson: Great. Thank you. Thank you.

Yeah, Jared. This is Bob, it's certainly on a full year basis. We expect, you know, the recurring Revenue to be on pay core to be a double digit grower. I don't want to get into the the quarterly splits obviously, you know, the they were invested short on the client funds. So so that, you know, with rate decreases that occurred last year and where we are now that that would have been a little bit of a headwind, but the recurring Revenue growth for poor in queue line was in q1 was in line with our uh, expectations. Um, and we would expect, you know, the business to to grow double digits on a full year basis.

Great. Thank you.

Operator: We go next now to Mark Steven Marcon of Robert W. Baird & Co. Incorporated.

[Analyst 1]: Good morning and thanks for taking my questions. Just on the PEO side, I know we're going to lap some tough over some easier comps.

Thank you. We go next now to Mark. Mark, go ahead.

Robert Lewis Schrader: In the second half on the PEO.

[Analyst 1]: When we get to the second half, aside from that, how would you characterize the PEO environment? It has been slowing down, and when we take a look at the sequential pattern Q1 relative to Q4, it is a little bit worse than what we've typically seen. I'm just wondering, is the environment solid for the PEO, or what are the primary headwinds right now?

Good morning and thanks for taking my questions. Um, so 1 just on the peo side, um, I know we're, we're going to lap, you know, some some tough, or some, um, some easier comps and second half on the, on the peo sudden when we get to the second half, but aside from that, how would you characterize the peo environment? Um, because it has been slowing down. And when we take a look at the sequential, um, email pattern, um, you know, q1

Relative to Q4, it's a little bit worse than what we've typically seen. And so I'm just wondering, is the environment?

Solid for the peo or what are the the primary headwinds right now?

John B. Gibson: Mark, I'll start, and Bob can have maybe a little more color for you. Our PEO continues to perform well, and if you look at the numbers, mid-single-digit worksite employee growth, I think you're going to find we're leading the market there. Our bookings were double digit in the quarter. We had record retention in the first quarter. Remember, last year we had record retention, and we're continuing on that pace. I continue to see strong demand there. I look at some states. Take California. Our medical enrollment's up 10% there. Our medical enrollment overall across the country is up. We can talk about a bit later where we are in Florida, which is where we have our MPP. That's where we have a little more challenge again. You know that market, pretty competitive in that market, and we don't take a lot of risk.

John B. Gibson: We're not going to go after business that's going to be a bad risk. Overall, I feel very good about where we are from a PEO perspective. Really, really like what I'm hearing in the early engagements with clients and our broker partners as we approach some of the Paycor clients as well. We've been building a pipeline there. As you know, that sales cycle is a little longer, but I'm very pleased with the activity and what we have going on there. Yeah, just to add a little color.

Well, Mark, I'll I'll start. Um, and then but, you know, Bob can add maybe a little more color for you. Um, look RPO continues to perform well, and if you look at the numbers, uh, mid single digit worksite employee growth. Um, I think you're going to find where leading the market there are Brookings, were double digit in the quarter. Um, we had record retention in the first quarter. Remember last year, we had record retention and that 1 will continuing on that pace. Um, so I continue to see, you know, strong demand there. I look at some states, take California, our medical enrollments up 10% their, our medical enrollment overall across the country's up. We can talk about a bit later where we are in Florida, which is where we have our mppp. That's where we have a little more challenge. Uh, and again, you know, that market pretty competitive in that market, and we don't take a lot of risk. So we're not going to go after business. That's going to be a bad risk. So overall, um, I feel very good about where we are from a perspective.

Really really like what I'm hearing in the early engagements with clients in in our broker Partners. Um, as we approach some of the pay core clients as well. So we've been building a pipeline there. Um, as you know, that that sales cycle is a little longer, uh, but I'm very pleased with the activity and what we have going on there.

Robert Lewis Schrader: Mark, I mean, certainly the PEO I would say was probably a bit better than our expectations in the quarter. As John mentioned, and we've talked about this in the past with the PEO, it's all about worksite employees and that was strong in the quarter. I think John highlighted in the prepared remarks, you know, mid-single digits. I think when you pull the PEO apart, you know, from the agency, the growth of the PEO was, you know, in line with that worksite employee growth, despite the, you know, the at-risk headwinds that we have, which we will anniversary here as we turn into the new calendar year.

Robert Lewis Schrader: The growth rate overall, I'd say if there's one aspect of our business that was maybe a little bit softer than what we expected in the quarter, it was the agency that was a drag on the growth rate of the category. We continue to see some rate pressures from a workers' comp standpoint. Certainly demand was good from an agency standpoint. Overall, we feel really good about where the PEO is. As you mentioned, we will, you know, anniversary those MPP headwinds and we'll start seeing some stronger growth with the easier compare as we move into the back half of the year.

Yeah, just to add a little color Mark. I mean, certainly the the the peo I would say was probably a bit better than our expectations in the quarter as John mentioned. And we've talked about this in the past, with the PO, it's all about work, site employees and and that was strong. Um, in in the quarter, I think John highlighted in, in, in the prepared. Remarks, you know, mid single digits. I think when you pull the peo apart, you know, from the agency, the growth of the peo was, you know, in in line with that work site in in employee growth, despite the, you know, the at risk headwinds that we have, which we will anniversary here, as as we turn, you know, into the new uh, uh, calendar year, the the growth rate overall. You know, I, I'd say if there's 1 aspect of our business that was, was maybe a little bit softer than what we expected in the quarter. It was the agency on that, that, that was a drag on on the growth rate of of the category. You know, we continue to see some rate pressures from from a worker's comp standpoint. Certainly demand was good from an agency standpoint but

John B. Gibson: Great.

You know, overall we feel really good about um, where the PO is. And and as you mentioned, we will, you know, anniversary those MPP, headwinds and and we'll start seeing some stronger growth with the easier compared as we move into the back half of the year.

[Analyst 1]: For my follow up, you know, direct expenses as a percentage of revenue, you ended up seeing some pretty nice leverage there. I'm wondering, you know, that was really strong. How would you characterize direct expenses on a go forward basis? Compare and contrast that to SG&A. When we strip out the one time charges and the goodwill, just in terms of the ongoing operating expenses because it.

Great. And then for my follow-up, you know direct direct expenses as a percentage of Revenue. Um you ended up seeing some some pretty nice leverage there and so, I'm I'm wondering

John B. Gibson: Seemed like there was a little bit.

[Analyst 1]: Of a contrast between the two. In other words, direct expenses stripping out everything else looked better. SG&A expense, I imagine just because you've got more overlap and a number of items, maybe a little bit heavier than what we were looking for. How would you expect those to go as the year unfolds? It seems really encouraging.

John B. Gibson: I think.

Is stripping out, everything else looked better. Um sgna expense, I imagine just because you've got more overlap um and and a number of items, maybe a little bit. Um you know, a little bit heavier than what we were looking for. So how would you expect those to to go as the year unfolds and it it seems really encouraging. I mean I think

Robert Lewis Schrader: Yeah, thanks, Mark. We think so as well. Obviously we've been focused on the synergies and as you know, we're the best operators in the business, so we're always focused on trying to be efficient and productive. I think the expense growth in the quarter obviously is a big number driven by the Paycor acquisition. If you were to strip it out, it's probably closer to about 3% expense growth overall. The one thing we didn't highlight in the script, which was probably a miss. I mean, if you look at the adjusted operating income growth in the quarter, it was 15%. Right. That's coming from the strong top line growth of 17%, but certainly trying to find ways to be more productive and more efficient and really strong adjusted operating income growth for the quarter.

we we we we

Robert Lewis Schrader: On a full year basis, expense growth, I would probably think what we saw this quarter organically would probably be consistent with what we would see going forward.

John B. Gibson: Perfect. Thank you. Thank you.

Reason, as you know, we're the best operators in the business and so, you know, we're always focused on on trying to be efficient and productive. I I think the expense growth in the quarterly is a big number driven by the payor acquisition. If you're to strip it out, it's probably closer to about 3%. Um, expense growth overall. And, you know, the 1 thing we, we didn't highlight in the script, which was probably, uh, a Miss. I mean, if you look at the adjusted operating income growth in in the quarter, it it was 15%, right? So, um, obviously that's coming from, you know, the the the strong Topline growth of 17% but certainly trying to find ways to be more productive in, in, in more efficient and really strong adjusted operating income growth, um, um, for for the quarter. And um, you know, on a full year basis, expense growth. You know, we're we're I would probably think what we saw. Um, this quarter organically would would probably be consistent, what with what we would see going forward.

Terrific. Thank you.

Operator: We go next now to Samad Saleem Samana at Jefferies LLC.

Thank you. We go next to Samad Semana at Jefferies.

Operator: Hi, good morning and thanks for taking my questions. This might be a little bit pointed, but I want to get back to the Paycor, just the recurring revenue component, excluding float revenue, which is uncontrollable.

Robert Lewis Schrader: Right.

Operator: What rates will do. If we think about the contribution in the quarter, it implies essentially, let's call it around 7.8% growth for Paycor recurring revenue, which is a pretty material slowdown than what Paycor is doing on a standalone basis. Is there some sort of integration related disruption?

Hi, good morning, and thanks for taking my questions. Uh, this might be a little bit pointed, but I want to get back to the poor. Just the recurring revenue component, excluding what revenue, which is uncontrollable, right? Rates will do what rates will do.

if we think about the contribution in the quarter, it implies essentially let's call it, you know, around 7, 8% growth for poor recurring Revenue,

John B. Gibson: I know we're not trying to do this.

Operator: Quarterly businesses, but that's a pretty material difference versus what the growth rate, what Paycor had as a standalone business. We're just trying to understand in the first full quarter, integrated, what the implications of that are and how we should think about that accelerating or improving. If that improvement or that double digit that you're calling out includes the revenue synergies. I have one follow up.

Which is a pretty material slow down to what poor was going to stand alone basis. So is there some sort of integration related disruption? I know, we're not trying to do quarterly businesses but that's a pretty material difference versus what the growth rate, what poor had

As a standalone business. So we're just trying to understand in the First full quarter.

Integrated, what the implications of that are, and how we should think about that accelerating or improving? And if that Improvement or that double digit, that you're calling out, includes the revenue synergies and then I have 1, follow-up.

John B. Gibson: Yeah, let me start.

Robert Lewis Schrader: Maybe John could add some color there. I would, you know, again, I don't want to get into a math reconciliation, but I think our numbers would suggest that the recurring revenue growth is closer to double digits than what you had in Q1. As I mentioned, Q1 was in line with our expectations for Paycor. Obviously, some performance builds during the year. We know that last year, particularly in Q4, we were going through integration and getting our go-to-market aligned and our new segments aligned. We called that out last quarter or last Q4, getting that behind us. Obviously, there's probably some level of disruption there coming into the year. Q1 was strong for Paycor. It was in line with our expectations. John can probably add a little bit of color to that.

Yeah, let me start and then maybe John John John, John could add some color there. I, I would, you know, again, I don't want to get into a math reconciliation, but I, I think our numbers would suggest that, um, the recurring Revenue growth is closer to double digits than, than what you had in in q1. As I mentioned, q1 was in line with our expectations, um, for for pay core. Obviously, there's some performance that builds during the year,

John B. Gibson: Yeah, yeah. Simone, look, as Bob said, Paycor was in line with our expectations that we put together. High retention was in line and they're at their historical levels. I think the one thing that's going to be a challenge for all of us here to talk about. I think we talked about this on the last call. We purposely determined to segment our business and we co-mingled all of the Paychex assets, over 100 employees, with Paycor. Then Paycor had a business that was under 100 and we moved that business into our mid-market and small market at Paychex. We have a lot of moving parts. You didn't take the ancillary components over it. As I said, this can be extremely difficult for Bob and the team and it's not the way I'm looking at the business or operating the business. We now have operating segments. They're performing well.

We know that we, you know, last year, particularly in Q4, we were going through in in integration and, and, and getting our go to market aligned, and, and, and our new segments aligned, and, and, and, and we called that out last quarter or last last Q4, getting that behind us. Obviously, there's probably some level of disruption there, um, coming into the year. But, you know, Q q1 was strong for pay core. It was, you know, um, in line with our expectations and, you know, John can probably add a little bit of color to that. Yeah, yeah, yeah, smart. I I look, it's Bob said poor was designed with our expectations that we put together uh kind of retention was in line and and and they're at their historical levels. Um, I think the 1 thing that I think that's going to be a challenge for all of us here to talk about, I think we talked about this on the last call. We we purposely determined the segment, our business.

John B. Gibson: Very happy with our sales performance, actually exceeding our expectations across the board and very happy with the progress that we're making with the Paycor acquisition. I mean, we're making strong progress. A good example is we have HR outsourcing. I sell at a multi-thousand, one of the largest ASO deals in the company's history in the ASO portion of that revenue. Where do I allocate that? Is that Paycor or is that historical Paychex? Where do I put that $750,000 incremental a year and depending on where I want to stick it, I guess we have a number, whatever we want the number to be. I think what we're looking at is segments and we believe that the Paycor acquisition is going to help us in the up market and we believe by combining the two assets together, we're going to be better together.

And we co-mingled all of the paychecks assets, over a hundred employees, um, with poor. And then pour had a business that was under 100. And we moved that business, um, into our into our mid-market, in small Market at at paycheck. So we have a lot of moving Parts. You then take the ancillary components over it. So, you know, as I, as I said, this is going to be difficult for Bob and the team and it's not the way I'm looking at the business or operating the business. We now have, um, operating segments, um, they're performing well, very happy with our sales performance. Uh, it actually exceeding our expectations across the board, um, and very happy with the progress that we're making.

Uh, with the poor um, acquisition. I mean we're making strong progress there. A good example, is we have, we have HR Outsourcing. So I sell and uh, a multi thousand 1 of the largest ASO deals in the company's history. In the ASO portion of that Revenue where do I allocate that? Is that pay core? Or is that historical paychecks?

Or do I put that?

750,000 incremental a year.

John B. Gibson: We're seeing progress there and very pleased with the progress we're making in the quarter.

And we believe that the poor acquisition is going to help us in the upmarket, and we believe that by combining the two assets together, we're going to be better together. We're seeing progress there and are very pleased with the progress we're making in the quarter.

Operator: Understood. Maybe just again if I think about, and this will probably be equally difficult just based on the commentary about disaggregating where things should be placed. If I exclude the paper contribution, it's kind of getting us to Bob, I appreciate this rounding given how you guys give us the contribution, but it gets you to somewhere close to about 4% organic growth for the Management Solutions revenue in the quarter, which again, the slightly easier comp again and based on what we were expecting for F4Q. I guess how should we think about that acceleration through the year? Do you still expect that? It seems to be maybe a little bit out of the gate slower than anything from F4Q carry into F1Q we should be aware of. We're just trying to juggle the different pieces with the full appreciation that it's difficult.

John B. Gibson: Not really. I think.

Robert Lewis Schrader: Yeah, no, I appreciate that and no, I wouldn't say anything significant. I think you see an improvement, and again we are giving you round numbers, so we can debate whether they're higher or lower. You saw an improvement in the organic growth of the overall business from a total revenue standpoint. I think the guide implies an organic growth of 5% on a full year basis. You know we're at 4% in Q1. We knew that that's how the plan was built. There are a couple of drivers of it, but the big driver of it is the PEO MPP headwind that we have in the front half of the year that we anniversary, and you get an easier compare as we move forward. We feel good about it.

Understood and then maybe just again, if I think about and this will probably be equally difficult just based on the commentary about disagrees should be placed. But if I exclude, the paperwork contribution, it's kind of getting us to an Bob. I appreciate those rounding given how you guys give us the contribution, but it gets you to somewhere close to about 4% organic growth for for the Management Solutions Revenue in the quarter, which, you know, again, it's a slightly easier cop, uh, you know, again and based on what we were expecting for f4q. Uh, I guess, how should we think about that acceleration for the through the year? Do you still expect that? It seems to be maybe a little bit out of the gate slower than anything from F4. You carry into f1q we should be aware of again. We're just trying to juggle the different pieces, but the full appreciation that it's difficult, not really, I mean, I think,

Yeah, no. I I appreciate that. And and and um, no, I I wouldn't say anything significant. I, I think you see an improvement. Um, and again, it we are giving you round numbers. So, you know, we can debate whether the higher or lower but um you know, you saw an improvement in your organic growth of the overall business from a total revenue standpoint. I think the guide implies an organic growth of of

John B. Gibson: Where we are through Q1.

Robert Lewis Schrader: As John said, we made a ton of progress on the integration. We're really starting to see a lot of momentum on going after the revenue synergies and kind of building a strong pipeline. We feel good about, you know, where we are and, you know, the organic growth there. There are some improvements as we move through the year as the revenue synergies build on, particularly to the management solutions side. Hopefully that provides you some additional color.

Operator: Helpful. Appreciate you taking the questions as always.

5% on on a full year uh basis. You know, we're at 4 and Q in in in in q1. We we we knew that, that, that's how the plan was built it. You know, there's a couple of drivers of it but the Big Driver of it is is the peo um, MPP, you know headwind that we have in the front half of the year that we anniversary and you got an easier compared a, as we move forward. So you know, we feel good about where we, where we are through. Q1 is John said we made a ton of progress on on the integration. We're really starting to see a lot of momentum on going after the revenue synergies and, and kind of building a strong pipeline. We haven't, we haven't talked about that. But um we feel good about, you know, where we are and you know, the organic growth. Um there there is some improvements as we move through the year as the revenue synergies build on this particular to the management solution side. So hopefully that provides you some additional color

Robert Lewis Schrader: Thanks guys.

How about appreciate you taking the questions as always? Thanks guys.

John B. Gibson: Thank you.

Yep.

Yep.

Operator: We go next now to Tien-Tsin Huang of JPMorgan Chase & Co.

Thank you, we go next now to TNC and hang of JP Morgan.

Robert Lewis Schrader: Thanks so much.

John B. Gibson: Just a clarification and a question.

Robert Lewis Schrader: Just on the clarification, what's driving that.

John B. Gibson: EPS increase of I think 50 bps.

Thanks so much. Just a clarification and a question, just on the clarification. What, what's driving? The eps.

Robert Lewis Schrader: On either end, and then just with retention, any call outs there? It sounds like PEO was a record, Paycor in line. Any other call outs?

Increase of, I think 50 Pips on on either end and then just with retention any call outs there, it sounds like peo was a record poor.

John B. Gibson: I remember there were higher bankruptcies.

Robert Lewis Schrader: Mergers at the low end last quarter.

John B. Gibson: Anything new beyond that? Thank you.

Robert Lewis Schrader: Yeah, maybe I'll hit the EPS then John can touch on the retention. Obviously the Q1 came in a little bit strong retention. Obviously we have a quarter behind us of owning the asset. There's a higher degree of confidence and certainly both the cost and revenue synergies, and you see some of that playing through. As you know, there's always an element of conservatism as you come into the year, particularly when you have a new asset like that, and just increased confidence. We feel good about, you know, we achieved what we thought we were going to achieve in Q1, and we see a lot of momentum both from the cost synergy and revenue synergy, just letting that play through to the bottom line. John can touch on the retention.

In in line, any other call outs. I remember, or higher bankruptcies or mergers at the low end last quarter, anything new beyond that. Thank you.

John B. Gibson: Yeah, I'll add on to that. Just to remind everybody, we made a strategic decision. We talked about it last quarter to get a lot of stuff out of the way quickly. A lot of disruption in the sales organization, pulling them out of the field, resetting territories, relaunching the broker program, and really got aggressive on the synergy front out of the gate. We wanted to get it behind us so we could focus on execution and moving forward into the selling season. We could have dragged that out for a long time. I think we feel confident that we've got the cost synergies that we committed to, which were higher than our original commitments at the time. Remind everybody of that, and we have a list of other items that we can work on.

Yeah, maybe I'll hit the EPS then Jack in touch on the retention. I mean, obviously, the Q q1 came in a little bit stronger tension. Um, obviously, you know, we, we have a quarter behind us of of owning the asset there, there's a higher degree of of, of, of confidence and, and certainly the, you know, both the cost and and, and revenue synergies. And so, you see some of that playing through, and I, as, you know, there's always a element of conservatism. As you come come, come come, come into the are particularly when, when you have a new asset like that. And so, just in increased confidence, we feel good about, you know, the we we achieve what we thought we were going to achieve in q1 and we see a lot of momentum. Um, both from the cost of energy and revenue Synergy. So just letting that play through, um, to to the bottom line and John can touch on the the retention. Yeah, I'll I'll add on to that. I just, you remind everybody, we made a, we made a a strategic decision. If we talked about it last quarter to get a lot of stuff out of the way quickly, a lot of disruption in the sales organization, pulling them out of the field, resetting territories, relaunching, the broker program.

And really got aggressive uh, you know, on the Synergy front out of the gate. We wanted to get it behind us. So we could focus on execution and moving forward into the selling season. Um, we get to drag that out for a long time. So I think we feel confident that we've got the cost synergies that we committed to which were higher than our original commitments. At the time, remind everybody,

John B. Gibson: I will say that we also see additional opportunities for investment both in terms of expanding marketing and sales investment and innovation investment. We'll manage that appropriately. We felt, based upon where we were, the degree of confidence we have in the certainty of the synergies that we've already executed, that we felt comfortable in raising earnings guidance. Relative to retention, I'd say payroll, client, and revenue retention continue to be strong at pre-pandemic levels, which I'll remind you were near record levels for the company. We did continue to see concentrated losses in the small business area, predominantly out of business. I think you see bankruptcies that we kind of saw in the fourth quarter continue into the first part of the first quarter.

John B. Gibson: I'll remind everybody, if you go back and look at the bankruptcy data, while it's a little bit elevated, it's still at that kind of pre-pandemic type of level. It's not out of the ordinary. As we mentioned, the PEO worksite employee retention is maintaining a record level performance from last year. I feel very good about where we are from a retention standpoint. I think our value proposition is resonating. Good job with all the disruption. When you think about all the disruption, what we're seeing in the Paycor client base there, what we're seeing in our client base, given all the uncertainty in the market and all the talk about challenges in the economy, we certainly are not seeing that in our retention numbers and we're not seeing it in any of our other indicators as well. Thank you.

Company, um, we we did continue to see concentrated losses in the small business area predominantly out of business. Um, I think you see, you see bankruptcies that we kind of saw in the fourth quarter, kind of continued into the first part of the um uh of the first quarter. But I'll remind everybody, if you go back and look at the at the bankruptcy data, while it's a little bit elevated, um it's still it's still at that kind of pre-pandemic type of level. It's not, it's not out of the ordinary. So and then as we mentioned the PO worksite employee, um uh retention is is is maintaining a record level performance from last year. So I I feel I feel very good about where we are from a retention. I think our value proposition is resonating good job with all the disruption. When you think about all the disruption, what we're seeing in the poor client base. There what we're seeing in in our client base, uh, given all the uncertainty in the market and all the talk about, uh, you know, challenges in the economy, we certainly are not seeing that in our retention numbers and we're not seeing it in any of our other, uh, indications.

Indicators as well.

Great, thank you both.

Operator: We'll go next now to Andrew Owen Nicholas of William Blair & Company L.L.C.

Thank you. We'll go next now to Andrew Nicholas of William Blair.

Robert Lewis Schrader: Hi, good morning. Thanks for taking my question.

Operator: You touched on it briefly in a.

Robert Lewis Schrader: Response to one of the earlier questions.

John B. Gibson: I just wanted to kind of.

Robert Lewis Schrader: Dig into the second half ramp for PEO. Can you speak a little bit more to kind of the attach rate dynamics in Florida specifically? Have they stabilized, and is it mostly just a competitor dynamic, or have you seen some improvement there in Florida with that plan?

Hi, good morning, thanks for taking my questions. Um, you you touched on it, briefly in a response to 1 of the earlier questions. But I just wanted to kind of dig into the second half ramp for for peo. Can you speak a little bit more to kind of the attach rate Dynamics uh in Florida specifically have they

Stabilized. And and um,

it is mostly just a comp dynamic or or have you seen some improvement there in Florida with the that that plan?

John B. Gibson: Yeah, so I'll take it. First, Andrew. What I would say is look, we're very early, you know our enrollment cycles, we're very early in the process. We have enrollments in October, we have another one in January. Now only about 25% of the employees will end up electing in the October timeframe. We're in very, very early. What I would say is we've done a lot of work to make sure we have different plan lineups. Those have been put in place. We have several initiatives going on there. We've done some improvements in the underwriting side. We're providing hand on client and employee enrollment support.

John B. Gibson: We launched an AI partnership that we just recently announced as well that will actually provide a tool to help employees select a plan that they can afford and then combine some things together with savings accounts, which I think is going to help us as well. I think we're early in there. We continue to see across insurance, both the agency and in the PEO employees being very, very particular in terms of cost and value in the plan. We've done everything we can and we think that we need to do to be able to make sure that we get the participation. When I step back at it, what I know all the stuff we're doing is working because we're expanding our overall enrollment and our health plans in the PEO.

Yeah, yeah. So I'll take it first and what I would say is look, we're very early, you know, our enrollment Cycles. Uh, we're very early, uh, in the process. We have enrollments. Uh, in October, we have another 1 in January. Now, only about 25% of the employees will end up electing in the October time frame. Uh, so we're very, very early days. Um, what I would say is we've done a lot of work, um, to make sure we have a different plan lines lineups. Those have been put in place, we have several initiatives going on there. We've done some improvements in the underwriting side. We're providing hand on client and Employee Enrollment support. We launched a AI partnership. Um, that we just recently announced as well. That'll actually provide a tool to help employee select a plan that they can afford um, and then combine some things together with savings accounts. What I which I think is going to help us as well. So you know, look I think we're, we're early in their uh we continue to see across Insurance, both the agency and then the PO.

John B. Gibson: The issue really is in that Florida plan, as we've talked about, we continue to monitor. What I'm going to do is I'm not going to adjust in an environment, a competitive environment in Florida. I'm not going to adjust my underwriting to take on undue risk. That doesn't get you in a lot of places and it ends up in a place. When I look at it, I look at California, we're increasing our participation 10% and that's because we've been rational there the whole time and we're taking opportunities as they present themselves. It's a very delicate balance, particularly in the case where we have this program in Florida in balancing risk along with the growth of the plan. Remind everybody, does it have anything to do with our profitability? I don't think it has anything to do with the value of our proposition overall.

Um, employees being very, uh, very particular in terms of cost and and value in the plan. So, we've done everything we can and we think that we need to do, uh, to be able to make sure that we get the participation when I step back at it. What I know all the stuff we're doing is working because we're expanding our overall enrollment and our health plans in the PO. Uh, the issue really is in that Florida plan. As we've talked about, we continue to monitor what? I'm not going to do is I'm not going to adjust in an environment, a competitive environment in Florida. I'm not going to adjust my underwriting to take on undue risk. Um, that doesn't get you a lot of places and it ends up in a place. And I, you know, again, when I look at it, um, I Look at California, we're increasing our participation 10%, and that's because we've been rationale there the whole time and we're taking opportunities as they present themselves. So it's a very delicate balance. Um, particularly in the case where we have this program in Florida and balancing risk, um, along with along with

You know, the growth of the plan reminds everybody.

Robert Lewis Schrader: The only thing I would add to that, Andrew, on your compare question is, you know, the enrollment headwind, the lower enrollment that we had in Florida occurred as we went through the annual enrollment cycles last year. When you look at the front half of the year, we have a tougher compare because we had higher enrollment last year. Once you get through that January enrollment, then you've kind of anniversary that, that headwind goes away and you have a much easier compare. All the things that John talked about that were focused on driving enrollment as well as worksite employee growth, that's why you get the acceleration in the PEO in the back half of the year.

Does it have anything to do with our profitability? And I don't think it has anything to do with the value of our proposition overall. So

Yeah, and just the only thing I would add to that. Andrew on, on your compare question is, you know, the, the enrollment had when, you know, the, the lower enrollment that we had in Florida occurred as we went through, you know, the, the, the, the annual enrollment Cycles last year. So, when you look at the front half of the year,

um, we have a tougher compared because we had higher enrollment last year. Once you get through that January enrollment, then you've kind of anniversary that that headwind goes away and you have a much easier compared and then, you know, all the things that John talked about that were focused on driving in enrollment, as well as work site employee growth. And, and that's why you get the, the, the acceleration, um, in the poo, in the back, half of the year.

John B. Gibson: Perfect. Thank you. Makes sense.

Robert Lewis Schrader: Maybe just sticking with the PEO market broadly, I hear all the momentum there. Mid-single-digit worksite employee growth, double-digit bookings, record retention. How would you describe the competitiveness of the environment? Maybe outside of the healthcare and the insurance piece, are your competitors there being aggressive with price on the admin fee? How aggressive are you willing to be on the administration fee relative to maybe some desperate competitors in that market that aren't seeing the same level of growth as you had this quarter?

Maybe outside of, of kind of the healthcare and the insurance piece like, are, are your competitors there being aggressive with price on the admin fee? How aggressive are you willing to be on on kind of the administration fee? Um, you know, relative to to maybe some desperate competitors in that market that aren't seeing the same level of growth as as you have this quarter.

John B. Gibson: Yeah, Andrew, I don't view it. I've been in that business a long time, as you know, so I don't view it any different than any other cycle we've seen, ebbs and flows of who's being more aggressive or less aggressive. I'd say the overall environment is very consistent. There's always going to be one or two irrational players out there. My view is of that value proposition. It's a holistic value proposition. You mentioned admin fee. What the client wants to know is what are you providing from a technology and HR advisory support for the fee that I'm paying. I believe with all the investments we've made with the data assets we have, we introduced our AI-based HR assistance tool to support our HR experts in helping clients. We got the retention insight.

John B. Gibson: While we're going and telling them what are you getting for your admin fee, it is a comprehensive HCM technology platform supported by the best supported HR experts in the industry. I think head to head with a smaller provider that doesn't offer that type of capability, someone that's looking for HR outsourcing and looking for someone to help them build HR strategies, I think they're going to pay the additional admin fees. We believe we provide a great value proposition comprehensively from our benefits offering, from our technology platforms, from our HR advisory support. I feel very good about where we're positioned right now in terms of the competition. Perfect. Thank you. Thank you.

Yeah, yeah Andrew. I don't I don't view it. I've been in that business a long time as you know. Um, so I don't I don't view it any different than any other cycle. We've seen, you know at es and flows in terms of who's being more aggressive or less aggressive. I'd say the overall environment is very consistent, there's always going to be 1 or 2 irrational players out there. Um I my view is of that value proposition. It's a holistic value proposition. You mentioned admin fee? Well, what the client wants to know, is what are you providing from a technology and HR advisory support for the fee that I'm paying? I believe with all the Investments we've made with the data assets we have we we introduced our AI based HR assistance tool to support our HR experts in in helping clients. We got the retention Insight. So while we're going and telling them, what are you getting for your admin fee? It is a comprehensive HCM technology platform so supported by the best supported HR experts in the industry. And so

I, you know, I think had to add with the smaller provider that doesn't offer that type of capability. Someone that's looking for HR outsourcing and looking for someone to help them, uh, build HR strategies, I think they're going to pay the additional uh, admin fees. So we're not, we're not being, we believe we provide a great value proposition comprehensively from our benefits offering, from our technology platforms, from our HR advisory support. And so, I feel very good about where we're positioned right now in terms of the competition.

Perfect, thank you.

Operator: We'll go next now to James Eugene Faucette of Morgan Stanley.

Thank you, we'll go next now to James faucet of Morgan Stanley.

[Analyst 2]: Hi guys, it's Michael Infante on for James. Thanks for taking our question. I just wanted to ask about the Bill.com partnership.

Robert Lewis Schrader: Can you maybe just paint the picture?

[Analyst 2]: For us, in terms of the customer profile who would be most likely to initially adopt some of these capabilities, how you think about some of the go-to-market dynamics between the two organizations, and maybe how we should be thinking about ARP uplift potential for your average payroll customer that begins to use some.

Robert Lewis Schrader: Of those AP capabilities.

John B. Gibson: Thanks. Yeah, Michael. Thanks. We're real excited about the partnership. You know, we've kind of been in the payments business, allow our clients to make ancillary payments in the millions, believe it or not, through our system. It's not been our core business, and certainly we viewed it as another value add. I'm not looking at a big ARPU increase. We're trying to add value to the platform, and with this full digital integration that we're going to have with Bill.com, it really blossomed out of our relationship with the CPAs, and we've had a long-standing one with the association of CPAs. So does Bill.com, and that's what kind of started it. This really allows us to very quickly integrate. It's going to be integrated in our Flex application. Again, it's focused towards small businesses.

Hi, guys, it's Michael and Fontaine for James. Thanks for taking our question. I just wanted to ask about the bill partnership. Can you maybe just paint the picture for us in terms of the customer profile? Who would be most likely to initially adopt some of these capabilities? How do you think about some of the go-to-market dynamics between the two organizations, and maybe how we should be thinking about our pooled uplift potential for your average payroll customer that begins to use some of those AP capabilities? Thanks.

Yeah, Michael. Well, thanks. We're real excited about the partnership. Um, you know, we've kind of been in the payments, uh, business allow, our clients to make, uh, ancillary payments in the millions, believe it or not, um, through our through our system, it's not been our Core Business and, and certainly we've viewed it as a another value ad. So well, I'm not looking at a big arpu, increase. We're

John B. Gibson: They have a 7 million payer and vendor network already built into their system, so it's a big advantage for easy payments. We're also going to augment that, so our clients are going to have the most broad set of payment options embedded in the application. We're going to start with AP and then look to add accounts receivable in 2026. We're going to bundle this offering to bring more value to our overall HCM bundle. I'm not going to get into details of how we're going to do that because we're getting ready to go into selling season. I think it's simple to say that we continue to look for opportunities to partner and fully integrate to add the most value in the HCM industry. That's helpful.

Trying to add value to the platform and with this full digital integration that we're going to have with bill.com it, it really blossomed out of, you know, our relationship with the CPAs. Um and we've had a long-standing 1 with the association of CPAs so does bill.com and that's what kind of you started this. So, this really allows us to very quickly integrate. It's going to be integrated in our Flex, um, uh, application. Um, again, it's focused towards small businesses. Um, they have 7 million, um, uh, pay, uh, payer and vendor Network already built into their system. So it's a big Advantage for easy payments. We're also going to augment that. So our, our our clients are going to have the most broad set of um payment options embedded in the application. We're going to start with ap and then look to add accounts receivable uh in 2026. So we're going to bundle this offering um really to bring more value to um our overall HCM bundle.

Um, and I'm not going to get into a lot of the details of how we're going to do that because we're getting ready to go into the selling season. Uh, but I think it's simple to say that we're going to continue to look for opportunities to partner and fully integrate to add the most value in the HCM industry. So.

[Analyst 2]: Appreciate that. Bob, just a quick housekeeping one on the agency dynamic within the PEO. I know you called out the agency piece, but was there anything incremental either in terms of PEO versus ASO mix shift and or employees opting for lower cost health plans and maybe how that trended sequentially?

John B. Gibson: Thanks.

On top of that Bob, just a quick housekeeping 1 on the agency dynamic, within the, within the Poo. I know you called out, um, the agency piece but there was there anything incrementally there in terms of peo versus ASO mix shift, Andor employees opting for for lower cost health plans and maybe how that trended sequentially. Thanks.

Robert Lewis Schrader: Yeah, no difference there at all, Michael, than what we've seen in the past. I'd say good balance between ASO and PEO. We didn't see the pendulum swinging in one direction or the other. As I mentioned, the PEO was actually slightly above what we expected in the quarter. I wanted to highlight the agency because the overall growth of that category is being impacted by what we continue to see is some workers' comp rate headwinds on the agency side, but overall the PEO business performed solidly and slightly above our expectations in the quarter.

Yeah. No. No.

In the quarter. And, you know, I wanted to highlight the agency because the, you know, the overall growth, um, of of, that category is B is being impacted by, you know what, what we continue to see is some workers comp rate headwinds on the agency side. But overall the the Poo business, um, performed solidly. And, and slightly above our, uh, expectations in the quarter,

Operator: Thanks Tom.

Thanks Todd.

John B. Gibson: Thank you.

Operator: We go next now to Daniel Jester of BMO Capital.

Thank you, we go next. Now, to Daniel, gesture of BMO capital,

Robert Lewis Schrader: Great, thanks for taking my questions. Wanted to go back to the comment in the prepared remarks about piloting some agentic AI inside your own organization. I guess I know it's early days, but any sense about how much you would expect productivity to improve or how are you measuring the success of these pilot programs?

Uh, great thanks for taking my question. Um, wanted to go back to the comment that prepared remarks about piling. Some agentic AI in your inside, your own organization. I guess. I know it's early days, but any sense about how much you would expect productivity to improve or how are you measuring, uh, the success of these pilot programs.

John B. Gibson: Yeah. Daniel, let me kind of maybe lay out to you. It's a pretty impressive track record of what we've done from an AI perspective. Dating back to the first AI-based product before ChatGPT when we won the award for our retention insights dating back in early 2022, we've continued to add a series of capabilities into our product set that really are providing more value for our clients. One of the things we strongly believe is we have one of the largest data sets of small and medium-sized businesses when it comes to HR. We're having 40 million interactions with our clients on an annual basis that we're now capturing and analyzing. We believe that we are now applying that technology capability to really be able to provide them better insights. We think that's going to differentiate our products and our technology in the industry.

Yeah, so, so Daniel, let me, uh, let me kind of, maybe lay out to you. It's, it's a pretty impressive, uh, track record of what we've done. Um, from an AI perspective, you know, dating back to the first AI, based product before chat TPT when we, uh, won the award for our retention, insights dating back in early. Uh, 2 2022. And we've continued to add a series of

Capabilities into our into our products that that really are providing more value for our clients. 1 of the things, we strongly believe is we have the 1 of the largest data sets,

John B. Gibson: Number one, the biggest thing we're looking at is how does it continue to help us drive more value, get price in the marketplace, how does it help us win? That's one key way. We're using it a lot in the back office in terms of determining how we do discounting, how we do pricing. We're using it to help our service providers be more productive, as you mentioned. We continue to look at ways in which we can leverage it to help our sales forces target their messaging and the clients in which they're talking to. It's really across the board, we're doing a lot of different things there. We have also just recently launched an actual agency AI tool that will actually begin to handle some of these high-volume transactions through multiple channels.

Of small medium-sized businesses when it comes to HR. We're having 40 million interactions with our clients on an annual basis that we're now. Capturing and analyzing. We believe that we are now applying that technology capability to really be able to provide them better insights. We think that's going to differentiate our products, um, and our technology, uh, in the industry. And so we the number 1, the biggest thing we're looking at is, how does it continue to help us drive, more value, get get, get get price, uh, in the marketplace. How does it help us. Help us win. So that's, that's 1 key way. We're using it a lot in the back office, uh, in terms of determining How We Do discounting How We Do pricing. Um, we're using it to help our service providers, uh, be more productive as you mentioned. Um, and we continue to look at ways in which we can leverage it to, to help our sales forces Target, um, their messaging and and the clients in which they're talking, uh, talking to. So it's it's really across the board. Uh, what we're doing a lot of different

John B. Gibson: It's early innings in this, but we're really optimistic about what the impact it can be to really allow us to provide more value for the clients and then for us to free up the transactional time that our frontline service providers are doing today for the client so that they can look at the analytics and go and provide more advisory support. We think that's going to differentiate us from anyone else, particularly the smaller players in the industry that don't have access to the massive data set that we have. That's great.

There we have. Also just recently launched an actual genic AI tool that will actually begin to handle some of these high-volume transactions through multiple channels. And so it's early early innings in this, but we're really optimistic about what the impact can be to really allow us to provide more value for the clients

And then for us to free up the transactional time that our Frontline service providers are doing today for the client so that they can look at the analytics and go and provide more advisory support we think that's going to differentiate us uh, from anyone else, particularly the smaller person in the industry that don't have access to the massive data set that we have.

Operator: Color.

Robert Lewis Schrader: Thank you. On the revenue synergies, holding them consistent with what you shared last quarter, I guess.

John B. Gibson: Would you be able to.

Robert Lewis Schrader: Provide any color on sort of the learnings that you've had? You highlighted that big win in the prepared remarks. As you're approaching the cross-sell revenue synergy opportunity, anything that you may be modifying now that you've been out a couple months trying to do this?

Operator: Thank you so much.

That's great color. Thank you. And then on the revenue synergies, you know, holding them, uh, you know, consistent with uh, what you shared last quarter, I guess, you know, would you be able to provide any color on sort of the learnings that you've had, you know, you highlighted that big win uh, in the prepared remarks, but as you're approaching the the cross, sell Revenue to energy opportunity, anything that you maybe modifying, now that you've been out in a couple months, uh, trying to do that. Thank you so much.

John B. Gibson: Yeah, look, I think the integration has been going really well. All the things that can happen during a large integration, I have been very happy with the progress we're making on getting the cost synergies as we've already talked about. I think we actually believe there's additional opportunities over the long term to go after those. There's also additional investment opportunities that we see that we think could drive growth and drive further innovation. On the revenue side, we met our revenue synergy expectations for the first quarter and every month that we were engaging with Paycor's clients, we continued to see the pipeline grow and we continued to see the receptivity grow. When we looked at areas where we thought that we may have concerns with channels, we've seen that continue to improve through the course of the quarter.

yeah, look I think I you know, look the the the

John B. Gibson: All the things that we kind of knew going into it, the knowns, if you will, I've been very pleased with how we've worked through those. The culture and the people side is always a thing you get concerned about. You get concerned about client disruption. I go and I look at attrition. Employee attrition actually is better than what Paycor had seen historically. You take the synergies we took out aside, you look at what we've done from integrating them into the executive leadership team, they're making huge contributions both in terms of just general management expertise, product expertise, marketing expertise, legal expertise. Across the board, the people of Paychex and Paycor have come together and we're making more powerful decisions, I think, as an organization. I look at it and I go, what's my biggest surprise?

The integration has been going really well. Uh, I mean, all the things that can it can happen during a large integration, have been very happy. Uh, with the progress we're making on getting the cost synergies as we've already talked about, and I think we actually believe there's additional opportunities, um, over the long term to go after those, there's also additional investment opportunities that we see that we think could drive growth and and drive further Innovation, um, on the revenue side. Um, you know, we met our Revenue, Synergy, expectations for the first quarter. And every month that we were engaging with poor clients, we continue to see the pipeline grow and we can send you to see the re re receptivity grow, when we looked at areas where we thought that we may have concerns with channels. We've seen that continue to improve through the course of the course, so all the things that we kind of knew going into it, um, the known, if you will, I've been very pleased with how we've how we've worked through those the culture and the people side is always the thing. You get concerned about you get concerned about client disruption. So I go

when I look at attrition employee attrition,

John B. Gibson: We have a very specific model at Paychex that we went after, particularly in upsell. We have these target segments that we know exactly what the sweet spot is for an ASO client, someone who's going to use our HR outsourcing. What surprised me is how further up market that value proposition could potentially go. When I'm getting multi-thousand ASO HR outsourcing deals, two of them early stages, that was surprising to me. We're actually now trying to rethink, okay, what does that look like upmarket in much bigger scale than what we're used to. We've done it before at Paychex, but again, in the first six to eight weeks, we're landing some large clients that we really would not have thought or certainly was not in our model because we were targeting more of our sweet spot. That's the thing that I'm most excited about.

Take the synergies. We took out aside. You look at what we've done from integrating them into the executive leadership team, they're making huge contributions both from the terms of just general management, expertise product, expertise marketing, expertise, legal, expertise, across the board that people of paychecks paychecks and pay core have come together. And we're making more powerful, um, decisions. I think as as an organization. And and so then I I look at it and I go, what's my biggest surprise? You know, we have a very specific model at paychecks that we um, went after a particularly an upsell and we had these Target segments, that we know exactly what the sweet spot is for an ASO client, someone's going to use our HR. Outsourcing, what's surprised me is how much further up Market that value proposition could potentially go

I mean, what I'm getting is multi-ASO HR outsourcing deals.

2 of them early stages.

John B. Gibson: I think the value, same thing in 401k. I think the value proposition that we've historically had at Paychex I think is also resonating more up market. I think that's going to give us some upside opportunity.

Um, that was surprising to me and we're actually now trying to rethink. Okay. What does that look like up Market in, in much bigger scale than what we're used to. We've done it before at paychecks. But again, you know, in in the first, first 6, to 8 weeks, we're Landing some large, uh, clients. That we, we really would not have thought or certainly was not in our model because we were targeting more of our sweet spot. So um I that's that's the thing that that I'm most excited about is. I think the value, same thing of

K. I think the value proposition that we've historically had at paychecks, I think is also resonating more up market, and I think that's going to give us some some upside opportunity.

Robert Lewis Schrader: Great. Thank you very much.

Great, thank you very much.

John B. Gibson: Thank you.

Operator: Just a quick reminder, ladies and gentlemen, any further questions this morning, please press Star one. We'll go next now to Ashish Sabadra of RBC Capital Markets.

Thank you, and just a quick, reminder, ladies and gentlemen, any further questions this morning? Please press star. 1. We'll go next now, to Ashish sabadra of RBC Capital markets,

John B. Gibson: Hi, good morning. This is David on for Ashish. Thanks for all the color provided on the call so far. Just taking a step back in terms of the regulatory environment, government shutdowns, maybe changes to H1B. How are you thinking about that and how's the business, I guess, positioned to weather those changes, whether it be good or bad. Thank you. Yeah, look, we've been through a lot of cycles and what I would say is that our small business clients tend to be resilient in terms of Paychex Inc. specifically. You know, we don't have a heavy concentration with government, with the federal government, and I don't expect any impact directly to our business. I'm sure we'll have some clients in the D.C. area that may have some issues.

Hi, good morning. This is David Ahn first sheesh.

Thanks for all the color provided on the call. So far, just take a step back in terms of the regulatory environment, uh, government shutdowns, maybe changes to H-1B. Uh, how, how, how are you thinking about that? And how is the business I guess? Positioned to what are those changes?

Whether it be good or bad, thank you.

John B. Gibson: We don't have a lot of H1B visa issues internally as a company, so again, I don't view those things as a big issue. What I would tell you is the small, medium-sized business market continues to be resilient. We've seen stability in terms of employment since the start of the year. You know, it's not taking off, but it's not going down in a recessionary mode. We continue to see wage inflation below 3%, very steady. That's been very steady for almost 18 quarters now. We see a very stable small business environment. I think some of the things with the tax bill being behind us and there's a degree, at least some degree of certainty there, which is probably important for people to make some investment decisions, particularly the R&D credit issue. Also, I think with now you getting the Fed, the first rate cut is underway.

Yeah, look, I mean, we've been through a lot of cycles and what I would say is our small business clients tend to be resilient in terms of the paycheck specifically, um, you know, we don't have a heavy concentration with the government, um, with the federal government. Um, and so I, you know, don't expect any impact directly to our business. I'm sure we'll have some clients in the DC area that you may have some, you know, some, some some issues. Um, and then we don't have a lot of, uh, H1B of of Visa issues, um, internally as a company. Um, so again, I don't, I don't view those things. Um, as a, as a big issue, what I would tell you is this

John B. Gibson: We'll see where that's going. I would say that we're still in kind of a restrictive environment, but I think if you continue to see that, you continue to see investment capital. I feel pretty good about where small businesses are set up. I think they're more optimistic now than they were at the start of the year. Like I said, I just think we continue to work through additional surprises. Thanks. Thank you.

Same sized business Market continues to be resilient. We've seen stability in terms of employment since the start of the year, um, you know, it's not taking off but it's not going down in a recessionary mode. We continue to see uh wage inflation below 3%. Very steady. That's been very steady for almost 18 quarters now. So we see a very stable small business environment. I think some of the things with the tax, um, bill being behind us and there's a degree, at least some degree of certainty there, which is probably important for people to make some investment decisions, particularly the R&D of credit issue. And then also I I think with now you getting the FED but the First Rate cut is underway. We'll see where that's going. I would say that we're still in kind of restrictive environment, but I think if you continue to see that you continue to see investment Capital, um, I I feel pretty good about where small businesses are set up. I think they're more optimistic, uh, now than they were at the start of the year. Um, and and like I said, I just think we like continue to work through.

Um, additional surprises.

Thanks.

Operator: We'll go next now to Scott Darren Wurtzel of Wolfe Research.

[Analyst 3]: Hey, good morning guys. Thank you for taking my questions. Appreciate the incremental color on the cost synergy side and your view on the targets there. Wondering if you can just talk about, give us a kind of update or reinforce the milestones that you've hit so far, what's left to come, and where maybe some of these incremental potential cost synergies would be coming from down the line.

Thank you. We'll go next now to Scott Wortzel of Wolfe Research.

John B. Gibson: Thanks.

Hey, good morning guys. Thank you for uh taking my questions. Appreciate the uh incremental color on the uh cost energy side, and sort of your view on the targets. They're wondering if we can just talk about, uh, just give us a kind of update or, you know, reinforce of the Milestones that you've hit so far, what's left to come and where maybe some of these, you know, incremental, potential cost synergies would be coming from down the line. Thanks.

Robert Lewis Schrader: Yeah, maybe I'll start and John can answer. I would say most of the actions required to realize the cost synergies are behind us, Scott. A lot of that happened early on after we closed the transaction. Obviously, we had some transition resources that we carried through a period of time to help us there. I would say most of the cost synergies, obviously a lot of that is overlap in functions. You have two public companies coming together and there are other areas that we're going after. We think there's certainly some opportunities from a procurement standpoint in leveraging the combined spend to get better rates and things like that. Those are the additional opportunities that we're going to go after. As we've said, we're going to balance how much of that we drop to the bottom line versus looking for additional investment opportunities as we move forward.

Transition resources that that we carried through a period of time and you know, to to help us there and and um, so I I would say most of the cost synergies. Obviously a lot, a lot of that is, you know, overlap and and and functions you have 2 public companies coming together. And you know, there's other areas that we're going after. We we think there's certainly some some opportunities um, from a procurement standpoint and and leveraging, you know, the the combined, spend to get better rates and things like that. So those are the additional uh, opportunities that that we're going to go after. And as we've said, we're going to balance, you know, how much of that we we drop to the bottom line versus, you know uh looking for uh additional uh investment opportunities as we move forward.

John B. Gibson: Got it.

Robert Lewis Schrader: Thank you.

[Analyst 3]: Just a quick follow up, on the retirement side, wondering if you can maybe quantify how contributory that was to growth this quarter just given where kind of equity markets landed at the end of the quarter relative to when you guys reported earnings, if there was any incremental tailwind on the retirement side during the quarter.

John B. Gibson: Thanks.

Robert Lewis Schrader: Yeah, I mean that's been a strong growth business for us for some time. In the quarter that continued, I would say was near double-digit growth in Q1.

Got it. Thank you. And then, just a quick follow-up. Um, just on the retirement side, I’m wondering if you can maybe quantify how contributory that was to growth this quarter, just given where kind of equity markets landed at the end of the quarter relative to when you guys reported earnings. Um, if there was any incremental tailwind on the retirement side during the quarter, thanks.

Yeah, I mean that that that's been a strong uh, uh growth uh, business for us, for, for some time. And and in the quarter of that, that continued I would say was near near double digit growth in in, in q1.

John B. Gibson: Thanks, guys. Thank you.

All right. Thanks guys.

Operator: Gentlemen, it appears we have no further questions this morning. Mr. Gibson, I'd like to turn the conference back to you for any closing comments.

Thank you and gentlemen, it appears. We have no further questions this morning. Mr. Gibson. I'd like to turn the conference back to you for any closing comments.

John B. Gibson: Thank you both. Appreciate it. In summary, as we stated, we're off to a good start in fiscal year 2026, delivering robust revenue growth and solid earnings per share. The integration continues to exceed our expectation. We're hitting the cost synergies. Revenue synergy opportunity continues to just reinforce to me the strategic value of the opportunity acquisition. We truly believe that the innovation that we have in front of us with AI-driven solutions is going to drive better value and efficiency really across the entire business for our clients and for our shareholders. I think as you look at the company today, having gotten the major lifting and the integration behind us, we are now stronger as one Paychex. That's really what we are going forward.

John B. Gibson: I really believe that we have the most comprehensive set of platforms and capabilities in the industry that meet the need of any client of any size. That's only been reinforced in the last quarter, understanding the power of our HR outsourcing and its ability to move upmarket. I think that we're better positioned than we've ever been to fulfill our purpose to help businesses succeed. I want to thank you for your interest in Paychex and hope you have a great day.

Okay, well, thank you both appreciate it. Um, well, listen in summary. I i, as we stated, we're off to a good start in fiscal year 26, delivering a robust Revenue growth, uh, solid earnings per, uh, per share. Um, the integration, uh, continues to exceed our expectation. Uh, we're hitting the cost synergies Revenue, Center, G Revenue, Synergy opportunity continues to just reinforced to me, the Strategic value of the acquisition. Um, and we and we truly believe that the Innovation that we have in front of us, uh, with AI driven Solutions are are going to drive better value, and efficiency really across the entire business, um, for our clients and for our shareholders, um, I think as you look at the the company today, having gotten the major lifting and the integration behind us. Um, we we are now stronger as 1 paychecks. Um, and that's really what we are going forward. Uh and I really believe that we have the most comprehensive um set of platforms and capabilities.

In the industry to meet the need of any client of any size and that should only been reinforced in the last quarter, understanding the power of our HR Outsourcing and its ability to move, um, up market. And I think that we're better positioned than we've ever been, uh, to fulfill our purpose to help businesses succeed. So, I want to thank you for your interest in paychecks and hope you have a great day.

Operator: Thank you, Mr. Gibson, and thank you, Mr. Schrader. Ladies and gentlemen, that will conclude Paychex Inc. first quarter fiscal 2026 earnings call. Thank you so much for joining us this morning. We wish you all a great day.

John B. Gibson: Goodbye.

Thank you, Mr. Gibson, and thank you, Mr. Shrader again, ladies and gentlemen, that will conclude paychecks first quarter, fiscal 2026 earnings call again. Thank you so much for joining us this morning. And again, we wish you all a great day, goodbye.