PAYCHEX INC — Call Transcript 2026

We're running a little bit behind. Let's get moving on with the program. Thanks everybody for joining here. My name is Tien-Tsin Huang. I follow the IT services and payments and processing group and, you know, Paychex has always been one of the early names I've covered and watched over a couple of decades here. Always means a lot to me to have Paychex here to support the conference. Got the whole team here. John Gibson, President CEO is here. Thank you for doing this fireside chat. I thought we'd kick it off. John, just to make this conversation as efficient as possible. I know you guys have just announced an AI platform. We do wanna talk about that, just to get it out the way to talk about the macro, if you don't mind. Yeah. Sitting at Paychex, you see a lot of great data around SMEs and of course employment. What do you see? Where are you optimistic? Where is there potentially some room for caution? Yeah. Thank you for being here. Oh, it's my pleasure. Thanks for having me. It's always great to see you. For sure. I You know, it's, it's crazy because I feel like a broken record. You know, for the last few years, I think we've all worried about some sort of employment or some sort of economic challenge, and particularly given the uncertainty that we've had. You go back to one year ago this month, a month prior, Liberation Day. All the advents of the tariffs, and then you look at today and the global uncertainty we have. What I would tell you is what we continue to see is a very resilient small business market. In fact, I would say even so far in the last three months, really more strength in both sides, both in our 50 plus and our under 50. I've been very, very pleased. We're in a very much a low hire, low fire type of environment. When we talk to our clients particularly, which are more in the small end of the market, they still are really raising issues about the ability to find qualified labor. Again, we're in the gray and blue collar segment. As you think about plumbers and electricians, now you think about building out all this AI infrastructure. A lot of building contractors, a lot of electricians needed. There's a shortage out there. Right now, what I would say, well we see no signs of recession in any of our data. We see strong underlying growth both in the small market and in the mid-market at this point. Good. Good. John, you mentioned the gray, blue collar. Just for the benefit of everyone else, I do get this question quite a bit, can you just remind us of the composition of your client base, your SMB client base, as well as those employees that work there, maybe some of the industries that you're exposed to? The crux of the question is obvious, right? How cyclical is the portfolio? Also where might you be exposed to some of these shifts that are happening in labor? Yeah. First of all, 95% of our clients have less than 100 employees. When you really think about what we do, for most of our clients, we are the HR department, right? They don't have anyone really assigned to that, or they have people that are multiple hats. When you look in the job classification codes in our client base, now we pay one in 11 private sector workers. 75% of those are blue and gray collars. Again, think plumbers, you know, barbershops, beauticians, landscapers, those type of things. What we continue to see in that market is a challenge finding qualified workers. We've really not seen this over-hiring situation that we saw happening in the upper end of the market, and we've not seen the layoffs as well. When we look at it, and we've done analysis on our jobs, we think we're pretty well insulated from it. In fact, what I would say, if we'd start training more plumbers and more electricians, our clients would be hiring more. Right. I was just talking to one of our contracting clients the other day, and he says, "If I could hire 100 people," he says, "I have more than enough work that I could bid on." Today I'm just not bidding on work I could compete against because I can't find the labor. I mean, you talked about the cyclical part of it. I think that's one of the things that's a little misunderstood. This problem in the segment that we go after, Paychex, this underemployment, difficult to find workers, has been a decade-long problem. Sure. If you go to the NFIB survey, been done for decades, you look at the top five issues facing small businesses, and you look at the small segment under 100, you're going to find finding qualified labor is a key part of that. We really, over a decade ago, had to think about our model differently. As you know, we've done a lot more advisory. business, a lot more adding additional value. You know, you go back, 13-years ago, probably 60%-70% of our revenue was payroll. Now it's less than 40%. Everything else is kind of advisory and other specialty services. If you go back over the growth rate of the company the last 10-years, employment has had zero impact on our growth. It's been basically flat. Right. When you go down and even look at the downturns, you look at the financial crisis, you look at COVID, you can go back and look at those models. It's had a really negligible negative impact. A couple things is our model's not built around that, particularly in terms of growth. The second thing is our pricing structure. I think it's another thing that's misunderstood. Because of our positioning in the smaller end of the market, we've always had a high fixed fee or minimum fee basis. We don't have a pure PEPM. Right. We're not as cyclical. Right. If employment goes up and down. That's just the nature of how we started, more in the small market. Then as we went up in the mid-market, we've continued to kinda match that pricing strategy. Yeah. It only took 20-years to figure it out, right? Yeah. Yeah, the new normal is the normal. Yeah. It's, uh-. Yeah. Employment is not the primary driver. That's right. for Paychex. I know that's the perception. Yeah. It's just like interest rates. Sure. Is the same way. Sure. Those were two things that I would say 15-years ago, strategically, the board and the executive team, even before I got there, said, "We've gotta start positioning us away from being a cyclical business. Yeah. The off-ramp to that has been our advisory business, our HR outsourcing business, as I said, those other ancillary businesses have really what has driven our growth as you look over the past decade. Okay. No, thanks for going through that, John. We should dig into some of those details that you just mentioned, but I did wanna make sure we ask now, just it was a big topic last year, right? With Paycor and the acquisition, we talked at length. Yeah. that. It's been over a year now. Any surprise or change in the thesis as you see it, and what can we expect in year two from Paycor? Yeah, no really no surprises, really no change in the thesis. I would say that things have progressed the way that we expected them. When you look at, we've exceeded our expense synergies. We've met and exceeded our revenue synergies so far this year. I like it the way the setup is. When you go back, I think it's important to think about a year ago. It's like last year at this time, we had just completed the acquisition in April, $4 billion bond offering. Yep. We launched on Liberation Day. Right. That was not very fun. If you go back and think about where we were. You go back last April, May timeframe, we had just completed the acquisition. The January before that's when we announced. We announced on January seventh. Okay. Between January seventh and first of April, Liberation Day, April seventh. We couldn't say anything 'cause we were waiting for all the approvals. Right. As you can imagine, every competitor in the world was saying everything they could about, "They're gonna shut down the platform. They're going to cancel broker contracts. They're gonna" All the Parade of Horribles. You can imagine what was going on in the Paycor sales ecosystem during that period of time. Lo and behold, April, we get it. We said strategically, one of the things that we wanted to do is we wanted to integrate fully our enterprise business with theirs day one. We could have strung it out, multi-year integration plan. We said we wanna do it once 'cause we saw the opportunity there. In the April and right about this time in May, right when we were meeting, I think right after I left this meeting, we announced the new integration, and we took Paychex's enterprise business and reverse engineered into the Paycor brand, changed every territory, sales management, sales leadership, sales compensation. We redid the broker program with the Partner Plus program, reintroduced that to really attract the and address the needs that we were hearing from the broker community. We did it all the way. As you can imagine, that was disruptive, right? What we told everyone was we said, "This is the plan." I think everyone looked at the plan and said, "Boy, the back half of that plan looks pretty daunting. Yep. In terms of expectations, in terms of organic growth acceleration, and bookings acceleration. Now we fast-forward, exactly as you said, third quarter. Guess what? Bookings, back to where we were pre-acquisition. We had the best quarter-over-quarter bookings improvement in my 13-years at Paychex, the third quarter. When you looked at each quarter, we kept getting better and better. We're now back. Brokers represent 50% of the Paycor bookings, which is where they were before the acquisition. We're back to bookings at the same level. Right. We just announced yesterday HUB International has been added to the portfolio, another great firm adding to our portfolio. Not only are they gonna be representing the HCM platform, they're going to represent the full HR outsourcing advisory platform as well. I look at it from where we are right now. We are continuing quarter after quarter, building momentum, delivering on the plan we said we were going to do. Everything's, all the disruption is done. I sit here, you know, today, this May, last May in the middle of a lot of disruption, trying to make the progress, now we don't have disruption in front of us. We've got all that behind us, the messaging set, the broker program's back on track, I feel good about where we are from a staffing perspective and momentum perspective. Yeah. I remember talking to Bob about it and how quickly you went in and didn't waste time and addressed it. You know, I think sometimes things get dragged out. Yeah. Negative consequences. I know you mentioned that you had that vacuum. Yeah. where there was disruption, so I think you addressed it quickly. I know it created some uncertainty, but it feels like you're getting the payoff. Yeah. Now. Yeah. Good. The Paycor integration piece we just talked about, I know you just announced this AI platform. I'd love for you to talk about it here too, if you like. Just from a tech prioritization standpoint, with that effort, I know it's never done, but, you know, with all this focus on AI and modernizing and, you know, maybe the platform is a chance to talk about that now. Where are your priorities today with respect to the tech stack and where you wanna push the tech agenda overall? Well, look, I think all the pieces are kind of falling into place. Okay. You know, certainly one of the areas that we wanted to focus on was extending our TAM upmarket. Sure. Paycor was a particularly part of that, what I would say, platform extension that we were looking for. You mentioned AI. AI is an investment we've been making for decades. Quite frankly, I always have to remind everybody, we started using AI internally over a decade ago. We actually hired the money Moneyballer for the Buffalo Bills. Yeah. To create a data science team for us, and we began to use it for internal purposes, and we began to really aggregate all of our data across the enterprise. We started that journey, and in fact, four years ago, when I was coming in as CEO, and I was working through the strategy for the board, we made four key bets that we wanted to make, and the first one was on data and AI. We started building an organization really around, and these are the early predecessors, but building the organization. We talked a lot about, on the calls, how we were using AI internally, making better decisions, making pricing decisions, doing those type of things. You go back and look at it in the product. In 2022. We won the best use of AI in HCM at HR Tech. Right. For our Retention Insights. Who was talking about AI in 2022? I mean, who was even talking about it? We were already beginning to say, we sat on a very large, sophisticated, and proprietary set of information about small, medium-sized businesses. We can begin to look at how our clients' employees are interacting with our systems and predict whether or not they're likely to leave their job. We have compensation data. I can tell you how much should a chef be making in Rochester, New York, and what's the wage increase going on in that particular job class in Rochester, in Upstate. We pay one in 11 people. You augment that with external data, which we've done, and you've really got a great tool on your hands. The fact of the matter is, that investment has been going on, and now you have this acceleration, the capabilities of technology. You mentioned it today, we announced the introduction of the WISE AI platform. Just to give you an idea what WISE is going to be, it stands for Workforce Intelligence Strengthened by Expertise. You know, marketing had to have their say in a very clever in an acronym. Very clever. Had to come up with that. Really what we've done is, we now have taken both all of our data across all of the companies and all of the business units, and all the platforms, and all the acquisitions. Mm-hmm. We've aggregated all of that. We now have a patent pending for the use of AI in using both structured and unstructured HR data to be able to customize actionable steps, and then actually inform agents to take those steps on all issues related to HR compliance in our ecosystem. We've been using it with our roughly 900 HR individuals to actually help them advise our clients, and we're now in the process of integrating that across all three of our built-for-purpose platforms, SurePayroll, in the micro kind of do it yourself end, right, Paychex Flex in the mid-market, and now Enterprise for Paycor. The way to think about it, Tien-Tsin Huang, is this. Yeah. We have the best operating system, I think, in the industry. That's how you get 42% margins. We have a great back office operating system. Every one of the acquisitions we do, including Paycor, which we integrated in three months, we strip all of the back office portions out of their stack, and we put it on our operating stack. We've always had the best operating stack. When you think about it, because we were a service company, we invested a lot of money in back office. What was interesting is we've bought technology companies, they tend to make all their investment in the front end and the bells and whistles and future, not in the back office. That's a natural synergy. Now we have one of the industry-leading best operators operating infrastructures that all of our platforms sat on. We've now coupled that with the next layer, which is the WISE AI layer. Now we're going to start the process of fully integrating and making all of these agents available to all of our customers, regardless of platform. What I'm most excited about, for each of our platforms, we're going to embed our experts into it. What do I mean by that? That now means you start with a kind of a chat type of interface. You're asking a question. You know, "Look, I'm having a problem with this employee named John. He's kind of a hothead, caused a lot of problem in the office. I want to terminate him, and we're in California. Can I do that?" We're gonna come back, and we're gonna look at the parameters of that, and we're gonna say, "Yeah, this is what you need to do. By the way, let me give you the warning letter, okay? We're gonna ask you a few questions about John. Well, it looks like he could be a little bit older than the normal guy. Well, that could be a problem here. We maybe want to watch that. At the end of that step, we're going to offer for you to have a free consultation with one of our employment lawyers or one of our HR generalists to talk you through this specific case and actually give you some talking points about how you can approach John and handle that conversation. That's the human side of it. That's what we do for our clients every day. Right? Most of our clients, again, don't have an HR person sitting in their office. They don't have an HR department. In essence, we become that HR pro. We're holding their hand when they're walking into a hearing. What's amazing around it is because we've taken all the interactions we have with clients and put it into this proprietary and patent-pending infrastructure, we now have case information that can get very specific. What do I mean by specific? I can actually tell you by mediator in the state of California, if you have an unemployment claim, how much that mediator generally settles for and how much another one settles for. Now you're getting very specific about going in and planning a strategy for an unemployment claim in the state of California, and I can now give you specific based upon knowledge that only we would have, because none of the mediation stuff is in public domain. It's only from our experience having worked with clients or in our PEO, because actually we've been part of that case, that we actually know what the result is. Now we can open it up to our clients. As I said, we're using that to make our HR specialist more proactive. You know, if you thought about the job before, what you would do is we'd set up an appointment, we'd do our quarterly or monthly call, depending upon your needs, I'd go and gather a bunch of data, I'd look at Retention Insights, I'd look at the compensation report, I'd sit down with you and say, "Hey, here's some things that I'm seeing, and here's what I'm talking to other clients about." Right. I'm being proactive to do that. We're actually having the agents able to watch this and actually proactively tell you what you need to do in real time, and our specialists are seeing that at the same time. I'm really excited about where we are. The foundation set, I think we've got all the pieces of the puzzle, both in terms of the built-for-purpose platforms for each of the segments of the market that we wanna go after. I think we've got the best operating layer. I think now with our large proprietary data set and with the capabilities that we're doing with Agentic AIs, I think we're well set. Oh, I forgot. Sierra just announced yesterday, Yeah, that they were our partner. We've been working on this for two years. Right. We actually have a voice payroll agent. Today you can call. It's not my voice. I want it to be my voice, but people said, no, I couldn't do that. You got a good voice. Yeah, exactly. You can go and you can actually have a conversation, and you can provide payroll data, you can add employees, and our voice bot will do it. In a couple weeks, one of our partners will be announcing that they were our partner on our email agentic bot, which is in production right now, which is taking email data and self-populating that into our system. Our specialists are doing a final kind of quality check, and then we're releasing the payroll. Again, the efficiencies we're gaining, the opportunity for us to move more of our service transactional support into more advisory, and that's really what I'm leaning into, is what's gonna differentiate us is our ability to proactively advise clients, leverage our proprietary data and our proprietary system. To be able to help them be in front of everything instead of always reacting to it. That's what a small business owner's always doing. They're reacting to a problem. Sure. They don't have anyone that can proactively take steps, and I just think that's what AI is gonna bring for us. I think it gives us a competitive advantage over pure tech players. Again, for our customer segment, what they want is they want an advisor. They want someone they trust that's going to hold their hand, and not only give them compliant steps and information about what they need to do, but actually help me execute the steps that I need to do. Yeah. I know there's a lot of this, everyone saying run, run towards AI, you know, sort of playing back what you said, you've been taking your data, leveraging AI for a long time. I know it, we've talked about RPA. Machine learning with Paychex. Yeah. Over the years. You have a privileged, you know, position from a data standpoint. If I'm hearing you correctly on WISE, you can now consume a lot of that data regardless of your categorization, take the data that you're learning, and you'll be able to give the advice on how to address it, whether it be at the estate level side issue or. Local. A labor issue or municipal issue, whatever it is. Am I saying that correctly? Yeah, that's exactly right. That's you're taking that data and you can consume that. Right. Regardless of the category. Regardless of the category and regardless of our business unit, regardless of our market unit. If you're interfacing with a prospect or interfacing with a client, we're capturing all of that data from all of those systems and all those transactions as well and dumping that into WISE. We're constantly refining our data set day in and day out. One follow-up question to that, just 'cause it's new, and forgive me if I'm just off the cuff asking. No, that's fine. Thinking about consuming that and pricing that, Should we expect there to be a lot of products that get spun off of this that, you know, again, regardless of what you look like as a customer, that you'll be able to consume this ad hoc almost as in a modular way? Is that the thinking around where this is going, or is it more of a Holistic offering? I'm a part of Paychex, this is available to me. Look, I think what we wanna do is we wanna create a ecosystem. We want to be the definitive source for HR compliance and human capital management AI-driven answers. Yeah. Right? To deal with anything. Yeah, everything I said. With the employer-employee relationship. Today, you gotta be in our ecosystem to do that, and if you looked at it today, that's really built for our specialist or our HR generalist or our legal team to provide coaching and advice to you and produce documents for you. What is fundamentally changing with the announcement today is we're gonna embed that in the platform. Got it. You're gonna be able to start to be able to do that. Now, is that something we may wanna share with the world on a per drink or in another basis? Stay tuned. Okay. I mean, that's one of the things we'll look at. For me, it's really about making sure that clients know, look, we're what we're trying to do is drive more value to our clients every year. Those are all, always been the investments we're doing. That's what allows us to have the price, you know, uplift that we typically have. We've continually done that to retain clients because we wanna do something that no one else can do. They can't go somewhere else and get this, right? We've continued to try to expose our clients to our advisory services. That's our fastest growing business, growing faster than our HCM business. We continue to view that the market is moving towards, "I not only want the technology, I want the combination of technology and human support to be able to do this." I think as you look up market, look, today, most of our clients don't have HR departments. I have a point of view that when you look at the scale of AI and what you need, you need large data to make AI work. If there's one thing I've learned, our partners would tell you, and again, I think this is an issue, AI benefits large incumbents, period. People who have large data and expertise are going to dominate this world because it's unlike the dot-com and the internet where there could be a level playing field. Sure, Amazon and eBay and Walmart could have their website. Guess what? Joe's Shoe Store could go to web.com at the time, if I remember web.com. Yep. Go to that. You could go and do that. You could kind of level the playing field. At least I could have an e-commerce site, right? I'm telling you can't build an AI agent if you don't have data and you don't have expertise. You need large amounts of it. If you're gonna do what we're doing at the accuracy rate that's expected, I mean, we're the largest 401(k) record keeper in the U.S., have more plans than anybody else. We're pay one in 11, we're the 30th largest insurance agency. The things that we deliver are absolutely critical to people. You can't have mistakes. I mean, a 1% mistake in payroll at Paychex equates to $14 billion of missed payrolls. Who are the 14 billion people that we don't wanna get paid in the U.S. next Friday? I don't think that's, I don't, I again, I keep looking at we're a records system, we're a compliance system, and we deal with state and local governments where compliance is not automated, and I can tell stories on that. I'm pretty excited about where we're positioned, and where we are, you know, going into this next AI era of our industry. Yeah, no, that's the moat. No errors and gotta be fully compliant. That's right. This sounds easy, but I get that it's not. Okay. No, thanks for going through that. It's fun. Let's, time goes by quickly. Less than 10-minutes left. Let's hit a few important subjects. Let's do PEO. Okay. PEO, we had Maria earlier, we talked about it. Yeah. Just to be candid with you, Paychex has been outgrowing the market, right? I think if we stack up Paychex versus the peers, you are the industry leader in terms of growth and WSEs, et cetera. What are you doing differently, and is this premium growth sustainable? Are you benchmarking it this way? What would you share? Yeah. First of all, I'd say I'm very proud of our PEO team and the work they're doing. That's number one. in executing. Just because, you know, to double-digit revenue, double-digit bookings, record retention go down, I mean, I'm used to like if we got five key KPIs, I mean, four out of five is pretty good. You hit five out of five, you're doing pretty damn good, you know? Sure. I'm very happy with what's going on there. I think it's interesting when you think about the PEO. This is really driven by, we're a very purpose-driven organization. We're very thoughtful. We're very planful. We think about things a long time. As you know, we're known as somewhat conservative, right? You go back, Paychex was not a PEO company. Right. A decade ago, 15-years ago. We had a PEO. Our bigger business was our ASO business, PEO was more something defensively that we had in the business. One of our clients would be approached by a PEO, we'd go, "We got one of those, too. You know, you can stick with us." Almost all of our PEO business was sold inside the base, more of a defensive move. Right. Because a client was looking for it. When we decided that we wanted to gravitate away from the story we've said of kind of being a payroll provider, back then 70% of our revenue was payroll, today it's less than 40%, HR was a key part of that. Sure. We certainly saw that not only our ASO business, but the PEO business had an opportunity. You go back and look at that 10-years ago, I joined the company 13-years ago, we started focusing on our organic PEO business. We invested in it. We began to get it growing. We leveraged our balance sheet. Wisely. Some tuck-in acquisitions. We proved that we could do that. We said at that time, we were probably in three states. I mean, technically, when you looked at the concentration, we were at scale in three states in the country. We knew we wanted to go national. It took two things. It took expertise. We knew we needed scale. You just mentioned it. At that time, we made the largest acquisition in the company's history, with the largest privately held PEO in the country at the time, Oasis, with a $1.1 billion. We did that in 2018. We integrated that, then we executed the plan. From that, we now are a national leader. As you said, 50% of our business is coming from within our base. 50% is coming from outside our base where we're introducing new clients to the PEO outsourcing story. It's just absolutely a fabulous story. In a decade's time with a purpose-built strategy, right, we went from a very small player in an industry to be an industry-leading player. I like where we're positioned in terms of our value proposition and how the team's executing and our staffing, and how our value proposition stacks up. I think that's a good example that I think is probably a parallel that are my expectations and what we're trying to repeat in the enterprise with the Paycor. Gotcha. Which is we were investing in our business in the enterprise side. We knew we needed additional capabilities. We knew we needed a brand that would play in that market. Now that we've done that, we've integrated it, now it's about execution and continuing to accelerate the growth there as well. Okay. Yeah, similar playbook. I know sourced a little bit differently. Yeah. Right. in terms of time. I know you're a big architect, of course, of the Oasis piece, but yeah, so the Paycor one is the next one to watch. Okay, good. And we're running out of time, so make sure I hit a few of the fun ones. Before I talk about the outlook, maybe just the product roadmap then, John. It's just we talked about WISE. You know, product velocity is a big subject in broader fintech-. Yeah. And processing and payments. In a minute or two, what's your philosophy on product velocity and what should we be watching for, and what might move the needle? Yeah. No question we already talked about, won't talk about again. Yeah. A lot of our product right now is the integration of WISE into the AI. You'll also see this year that we will offer across all three platforms an AI Agentic user experience for each of those platforms for people who wanna have that going through there. You're gonna continue to see us, you mentioned, integrate partners. One of the big things that we've been focused on is enabling our systems to allow our clients' employees to be customers of ours. We've created both a customer marketplace that's embedded. We're using AI to identify customers that would be needing financial products or other products and services that we don't sell. through partners. We're increasing that partner network. We're also doing it on the employee side. We call that program Perks. Give you an idea, we've continued to add to that. We just surpassed 400,000 paying customers within our employee base. That's about in 18-months of adding things. I think you're gonna continue to see us look for partners that augment adjacencies, integrate them into our marketplaces, both client marketplaces, as well as our employee marketplaces, and then we're going to allow them to leverage our AI and our intelligence to be able to market that at the type of need to both our clients and our employees. I think right now that's gonna fill our roadmap for the. Sure. For the rest of the year. No, going to more of a consumer employee model I thought always made sense given how many touch points you have. If we mix all this together and say, "Hey, what does it all mean for pricing?" I know we're accustomed to thinking about Paychex having pricing power. Has your thinking around pricing changed given all the work you've put in and some of the things that are coming out now? No. I think that our viewpoint is, look, we don't take it for granted that we're able each year to go to our customers and charge them more for our products and services and our solutions and also improve retention. The reason why we can do that is all the things I just said. We're constantly investing in the platform and our solutions so that we're showing the value. With small businesses, if you show the value, they're willing to pay. Again, in the small scheme of things, when we're talking about the increases we're talking about, it's probably a cup of coffee, you know, or two a month for one of our clients in terms of that. If we're providing that value, we feel good with the investments we're making, we can continue to do that. I do think there are portions of the Agentic AI model, there'll be things that we're doing that will allow us to provide some outcome-based pricing that could be a potential. Not doing any of that yet. Okay. Certainly something that we're talking about. When I look at it, I think we think we're adding additional value. Our customers are seeing that value, and I think that we're gonna be able to continue to really pass that value price on to our customers as we go forward. Okay. Good. Bringing it back to the numbers, if you don't mind, John. Yeah. Just thinking about the outlook and the models, I know you didn't give preliminary guidance for fiscal 2027. You'll be doing that pretty soon. You did express comfort with where consensus was, which we had interpreted it, okay, that's fine, no surprise, but it's running a little bit below what we think of as mid-cycle growth guidance for Paychex. Is that a fair characterization? What kind of macro factors maybe could be attributing to that? What might drive some acceleration or something to do a little bit better? There's so many things happening at Paychex. I'm really curious that what, you know, what could move the dial in the short term? Yeah. Okay. Well, today I'm not going to give guidance, and I'm gonna give in June. No, I didn't expect you to. I think what we said, and which I think is true. Yeah. Well, we told everybody at the start of last fiscal year that we were coming out of an integration and a transition, and that there were things that we need to accomplish. We need to see progress, and that what you would see is you would see, organic growth building quarter-by-quarter, bookings growing quarter-by-quarter. I think what we said on the last call was that when you look at the second half of the year growth rate, that feels to us like a good number. Yeah. for us to think about that we can go into next year. I think at the time that we made those comments, there was a lot of macro uncertainty in terms of what's going on. I think there's still, you know, we're not seeing it show up in the numbers. That'll be a question that Bob and I'm sure, will be talking about. Of course. The other thing is, I think that we're still working through our, as we talked about, our product roadmap and launches that we'll be announcing over the course of the next, you know, 60-90-days, and those things will go into that equation as well. Look, I'm, I'm pleased with the progress we're making quarter after quarter in a very challenging environment, and doing that, and I'm very proud of the team 'cause we did it while Look, it is not easy to integrate a $4 billion acquisition in the middle of all the chaos that's been going on in the last year in the world. There's a lot of things to distract your employees from doing what they gotta do each day to get that job done. I'm so proud of the team for what they've done and the fact that we ended the third quarter, like I said, with really the one of the best booking increases I've seen in my 13-years at Paychex, and really see the momentum going into the back half of this fiscal year, and it gives us confidence of going into 2027. Yeah. No, I think it, you guys, it's been playing out a lot like you have said. I don't take for granted, right, the execution and how hard it is against, you know, the integration. Does feel like a lot of product momentum. That's why I asked the question. I'm excited to see how it all translates. Maybe just to close it out, John. Thanks for the time. Just thinking about, right, the dividend is what it is. You have upsized though the buyback authorization. That's created some question, right? Should we infer from that that there's a bias towards buying back stock versus maybe doing the next acquisition? I know you're a year away from Paycor and hard work to do there. How should we interpret the buyback being upped? Yeah. I. authorization? I would just interpret it as being opportunistic. Okay. I think the same way we look at M&A, right? I think, you know, we don't have a commitment every year we're going to do M&A. You go back and look over a horizon of 10-years, what you'll find is that that adds to our growth story, and we expect that to happen over the next decade as well. That's opportunistic. You look at the things, M&A, dividends, all the things that we wanna do, buybacks, to be opportunistic. Your point, you know, number 1 is we did announce a rather generous 10%, 10.2%.

Speaker 2: We're running a little bit behind. Let's get moving on with the program. Thanks everybody for joining here. My name is Tien-Tsin Huang. I follow the IT services and payments and processing group and, you know, Paychex has always been one of the early names I've covered and watched over a couple of decades here. Always means a lot to me to have Paychex here to support the conference. Got the whole team here. John Gibson, President CEO is here. Thank you for doing this fireside chat. I thought we'd kick it off. We're running a little bit behind. we're running a little bit behind Let's get moving on with the program. let's get moving on with the program Thanks everybody for joining here. thanks everybody for joining here My name is Tien-Tsin Huang. my name is tien-tsin huang I follow the IT services and payments and processing group and, you know, Paychex has always been one of the early names I've covered and watched over a couple of decades here. i follow the it services and payments and processing group and you know paychex has always been one of the early names i've covered and watched over a couple of decades here Always means a lot to me to have Paychex here to support the conference. always means a lot to me to have paychex here to support the conference Got the whole team here. got the whole team here John Gibson, President CEO is here. john gibson president ceo is here Thank you for doing this fireside chat. thank you for doing this fireside chat I thought we'd kick it off. i thought we'd kick it off John, just to make this conversation as efficient as possible. I know you guys have just announced an AI platform. We do wanna talk about that, just to get it out the way to talk about the macro, if you don't mind. John, just to make this conversation as efficient as possible. john just to make this conversation as efficient as possible I know you guys have just announced an AI platform. i know you guys have just announced an ai platform We do wanna talk about that, just to get it out the way to talk about the macro, if you don't mind. we do wanna talk about that just to get it out the way to talk about the macro if you don't mind

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Sitting at Paychex, you see a lot of great data around SMEs and of course employment. What do you see? Where are you optimistic? Where is there potentially some room for caution? Sitting at Paychex, you see a lot of great data around SMEs and of course employment. sitting at paychex you see a lot of great data around smes and of course employment What do you see? what do you see Where are you optimistic? where are you optimistic Where is there potentially some room for caution? where is there potentially some room for caution

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Thank you for being here. Thank you for being here. thank you for being here

Speaker 1: Oh, it's my pleasure. Thanks for having me. It's always great to see you. Oh, it's my pleasure. oh it's my pleasure Thanks for having me. thanks for having me It's always great to see you. it's always great to see you

Speaker 2: For sure. For sure. for sure

Speaker 1: I You know, it's, it's crazy because I feel like a broken record. You know, for the last few years, I think we've all worried about some sort of employment or some sort of economic challenge, and particularly given the uncertainty that we've had. You go back to one year ago this month, a month prior, Liberation Day. I You know, it's, it's crazy because I feel like a broken record. i you know it's it's crazy because i feel like a broken record You know, for the last few years, I think we've all worried about some sort of employment or some sort of economic challenge, and particularly given the uncertainty that we've had. you know for the last few years i think we've all worried about some sort of employment or some sort of economic challenge and particularly given the uncertainty that we've had You go back to one year ago this month, a month prior, Liberation Day. you go back to one year ago this month a month prior liberation day All the advents of the tariffs, and then you look at today and the global uncertainty we have. What I would tell you is what we continue to see is a very resilient small business market. In fact, I would say even so far in the last three months, really more strength in both sides, both in our 50 plus and our under 50. I've been very, very pleased. We're in a very much a low hire, low fire type of environment. When we talk to our clients particularly, which are more in the small end of the market, they still are really raising issues about the ability to find qualified labor. Again, we're in the gray and blue collar segment. As you think about plumbers and electricians, now you think about building out all this AI infrastructure. All the advents of the tariffs, and then you look at today and the global uncertainty we have. all the advents of the tariffs and then you look at today and the global uncertainty we have What I would tell you is what we continue to see is a very resilient small business market. what i would tell you is what we continue to see is a very resilient small business market In fact, I would say even so far in the last three months, really more strength in both sides, both in our 50 plus and our under 50. in fact i would say even so far in the last three months really more strength in both sides both in our 50 plus and our under 50 I've been very, very pleased. i've been very very pleased We're in a very much a low hire, low fire type of environment. we're in a very much a low hire low fire type of environment When we talk to our clients particularly, which are more in the small end of the market, they still are really raising issues about the ability to find qualified labor. when we talk to our clients particularly which are more in the small end of the market they still are really raising issues about the ability to find qualified labor Again, we're in the gray and blue collar segment. again we're in the gray and blue collar segment As you think about plumbers and electricians, now you think about building out all this AI infrastructure. as you think about plumbers and electricians now you think about building out all this ai infrastructure A lot of building contractors, a lot of electricians needed. There's a shortage out there. Right now, what I would say, well we see no signs of recession in any of our data. We see strong underlying growth both in the small market and in the mid-market at this point. A lot of building contractors, a lot of electricians needed. a lot of building contractors a lot of electricians needed There's a shortage out there. there's a shortage out there Right now, what I would say, well we see no signs of recession in any of our data. right now what i would say well we see no signs of recession in any of our data We see strong underlying growth both in the small market and in the mid-market at this point. we see strong underlying growth both in the small market and in the mid-market at this point

Speaker 2: Good. Good. John, you mentioned the gray, blue collar. Just for the benefit of everyone else, I do get this question quite a bit, can you just remind us of the composition of your client base, your SMB client base, as well as those employees that work there, maybe some of the industries that you're exposed to? The crux of the question is obvious, right? How cyclical is the portfolio? Also where might you be exposed to some of these shifts that are happening in labor? Good. good Good. good John, you mentioned the gray, blue collar. john you mentioned the gray blue collar Just for the benefit of everyone else, I do get this question quite a bit, can you just remind us of the composition of your client base, your SMB client base, as well as those employees that work there, maybe some of the industries that you're exposed to? just for the benefit of everyone else i do get this question quite a bit can you just remind us of the composition of your client base your smb client base as well as those employees that work there maybe some of the industries that you're exposed to The crux of the question is obvious, right? the crux of the question is obvious right How cyclical is the portfolio? how cyclical is the portfolio Also where might you be exposed to some of these shifts that are happening in labor? also where might you be exposed to some of these shifts that are happening in labor

Speaker 1: Yeah. First of all, 95% of our clients have less than 100 employees. When you really think about what we do, for most of our clients, we are the HR department, right? They don't have anyone really assigned to that, or they have people that are multiple hats. When you look in the job classification codes in our client base, now we pay one in 11 private sector workers. 75% of those are blue and gray collars. Again, think plumbers, you know, barbershops, beauticians, landscapers, those type of things. What we continue to see in that market is a challenge finding qualified workers. Yeah. yeah First of all, 95% of our clients have less than 100 employees. first of all 95% of our clients have less than 100 employees When you really think about what we do, for most of our clients, we are the HR department, right? when you really think about what we do for most of our clients we are the hr department right They don't have anyone really assigned to that, or they have people that are multiple hats. they don't have anyone really assigned to that or they have people that are multiple hats When you look in the job classification codes in our client base, now we pay one in 11 private sector workers. 75% of those are blue and gray collars. when you look in the job classification codes in our client base now we pay one in 11 private sector workers 75% of those are blue and gray collars Again, think plumbers, you know, barbershops, beauticians, landscapers, those type of things. again think plumbers you know barbershops beauticians landscapers those type of things What we continue to see in that market is a challenge finding qualified workers. what we continue to see in that market is a challenge finding qualified workers We've really not seen this over-hiring situation that we saw happening in the upper end of the market, and we've not seen the layoffs as well. When we look at it, and we've done analysis on our jobs, we think we're pretty well insulated from it. In fact, what I would say, if we'd start training more plumbers and more electricians, our clients would be hiring more. We've really not seen this over-hiring situation that we saw happening in the upper end of the market, and we've not seen the layoffs as well. we've really not seen this over-hiring situation that we saw happening in the upper end of the market and we've not seen the layoffs as well When we look at it, and we've done analysis on our jobs, we think we're pretty well insulated from it. when we look at it and we've done analysis on our jobs we think we're pretty well insulated from it In fact, what I would say, if we'd start training more plumbers and more electricians, our clients would be hiring more. in fact what i would say if we'd start training more plumbers and more electricians our clients would be hiring more

Speaker 2: Right. Right. right

Speaker 1: I was just talking to one of our contracting clients the other day, and he says, "If I could hire 100 people," he says, "I have more than enough work that I could bid on." Today I'm just not bidding on work I could compete against because I can't find the labor. I mean, you talked about the cyclical part of it. I think that's one of the things that's a little misunderstood. This problem in the segment that we go after, Paychex, this underemployment, difficult to find workers, has been a decade-long problem. I was just talking to one of our contracting clients the other day, and he says, "If I could hire 100 people," he says, "I have more than enough work that I could bid on." Today I'm just not bidding on work I could compete against because I can't find the labor. i was just talking to one of our contracting clients the other day and he says "if i could hire 100 people," he says "i have more than enough work that i could bid on." today i'm just not bidding on work i could compete against because i can't find the labor I mean, you talked about the cyclical part of it. i mean you talked about the cyclical part of it I think that's one of the things that's a little misunderstood. i think that's one of the things that's a little misunderstood This problem in the segment that we go after, Paychex, this underemployment, difficult to find workers, has been a decade-long problem. this problem in the segment that we go after paychex this underemployment difficult to find workers has been a decade-long problem

Speaker 2: Sure. Sure. sure

Speaker 1: If you go to the NFIB survey, been done for decades, you look at the top five issues facing small businesses, and you look at the small segment under 100, you're going to find finding qualified labor is a key part of that. We really, over a decade ago, had to think about our model differently. As you know, we've done a lot more advisory. If you go to the NFIB survey, been done for decades, you look at the top five issues facing small businesses, and you look at the small segment under 100, you're going to find finding qualified labor is a key part of that. if you go to the nfib survey been done for decades you look at the top five issues facing small businesses and you look at the small segment under 100 you're going to find finding qualified labor is a key part of that We really, over a decade ago, had to think about our model differently. we really over a decade ago had to think about our model differently As you know, we've done a lot more advisory. as you know we've done a lot more advisory business, a lot more adding additional value. You know, you go back, 13-years ago, probably 60%-70% of our revenue was payroll. Now it's less than 40%. Everything else is kind of advisory and other specialty services. If you go back over the growth rate of the company the last 10-years, employment has had zero impact on our growth. It's been basically flat. business, a lot more adding additional value. business a lot more adding additional value You know, you go back, 13- years ago, probably 60%-70% of our revenue was payroll. you know you go back 13- years ago probably 60%-70% of our revenue was payroll Now it's less than 40%. now it's less than 40% Everything else is kind of advisory and other specialty services. everything else is kind of advisory and other specialty services If you go back over the growth rate of the company the last 10- years, employment has had zero impact on our growth. if you go back over the growth rate of the company the last 10- years employment has had zero impact on our growth It's been basically flat. it's been basically flat

Speaker 2: Right. Right. right

Speaker 1: When you go down and even look at the downturns, you look at the financial crisis, you look at COVID, you can go back and look at those models. It's had a really negligible negative impact. A couple things is our model's not built around that, particularly in terms of growth. The second thing is our pricing structure. I think it's another thing that's misunderstood. Because of our positioning in the smaller end of the market, we've always had a high fixed fee or minimum fee basis. We don't have a pure PEPM. When you go down and even look at the downturns, you look at the financial crisis, you look at COVID, you can go back and look at those models. when you go down and even look at the downturns you look at the financial crisis you look at covid you can go back and look at those models It's had a really negligible negative impact. it's had a really negligible negative impact A couple things is our model's not built around that, particularly in terms of growth. a couple things is our model's not built around that particularly in terms of growth The second thing is our pricing structure. the second thing is our pricing structure I think it's another thing that's misunderstood. i think it's another thing that's misunderstood Because of our positioning in the smaller end of the market, we've always had a high fixed fee or minimum fee basis. because of our positioning in the smaller end of the market we've always had a high fixed fee or minimum fee basis We don't have a pure PEPM. we don't have a pure pepm

Speaker 2: Right. Right. right

Speaker 1: We're not as cyclical. We're not as cyclical. we're not as cyclical

Speaker 2: Right. Right. right

Speaker 1: If employment goes up and down. That's just the nature of how we started, more in the small market. Then as we went up in the mid-market, we've continued to kinda match that pricing strategy. If employment goes up and down. if employment goes up and down That's just the nature of how we started, more in the small market. that's just the nature of how we started more in the small market Then as we went up in the mid-market, we've continued to kinda match that pricing strategy. then as we went up in the mid-market we've continued to kinda match that pricing strategy

Speaker 2: Yeah. It only took 20-years to figure it out, right? Yeah. yeah It only took 20- years to figure it out, right? it only took 20- years to figure it out right

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Yeah, the new normal is the normal. Yeah, the new normal is the normal. yeah the new normal is the normal

Speaker 1: Yeah. Yeah. yeah

Speaker 2: It's, uh-. It's, uh-. it's uh-

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Employment is not the primary driver. Employment is not the primary driver. employment is not the primary driver

Speaker 1: That's right. That's right. that's right

Speaker 2: for Paychex. I know that's the perception. for Paychex. for paychex I know that's the perception. i know that's the perception

Speaker 1: Yeah. It's just like interest rates. Yeah. yeah It's just like interest rates. it's just like interest rates

Speaker 2: Sure. Sure. sure

Speaker 1: Is the same way. Is the same way. is the same way

Speaker 2: Sure. Sure. sure

Speaker 1: Those were two things that I would say 15-years ago, strategically, the board and the executive team, even before I got there, said, "We've gotta start positioning us away from being a cyclical business. Those were two things that I would say 15- years ago, strategically, the board and the executive team, even before I got there, said, "We've gotta start positioning us away from being a cyclical business. those were two things that i would say 15- years ago strategically the board and the executive team even before i got there said "we've gotta start positioning us away from being a cyclical business

Speaker 2: Yeah. Yeah. yeah

Speaker 1: The off-ramp to that has been our advisory business, our HR outsourcing business, as I said, those other ancillary businesses have really what has driven our growth as you look over the past decade. The off-ramp to that has been our advisory business, our HR outsourcing business, as I said, those other ancillary businesses have really what has driven our growth as you look over the past decade. the off-ramp to that has been our advisory business our hr outsourcing business as i said those other ancillary businesses have really what has driven our growth as you look over the past decade

Speaker 2: Okay. No, thanks for going through that, John. We should dig into some of those details that you just mentioned, but I did wanna make sure we ask now, just it was a big topic last year, right? With Paycor and the acquisition, we talked at length. Okay. okay No, thanks for going through that, John. no thanks for going through that john We should dig into some of those details that you just mentioned, but I did wanna make sure we ask now, just it was a big topic last year, right? we should dig into some of those details that you just mentioned but i did wanna make sure we ask now just it was a big topic last year right With Paycor and the acquisition, we talked at length. with paycor and the acquisition we talked at length

Speaker 1: Yeah. Yeah. yeah

Speaker 2: that. It's been over a year now. Any surprise or change in the thesis as you see it, and what can we expect in year two from Paycor? that. that It's been over a year now. it's been over a year now Any surprise or change in the thesis as you see it, and what can we expect in year two from Paycor? any surprise or change in the thesis as you see it and what can we expect in year two from paycor

Speaker 1: Yeah, no really no surprises, really no change in the thesis. I would say that things have progressed the way that we expected them. When you look at, we've exceeded our expense synergies. We've met and exceeded our revenue synergies so far this year. I like it the way the setup is. When you go back, I think it's important to think about a year ago. Yeah, no really no surprises, really no change in the thesis. yeah no really no surprises really no change in the thesis I would say that things have progressed the way that we expected them. i would say that things have progressed the way that we expected them When you look at, we've exceeded our expense synergies. when you look at we've exceeded our expense synergies We've met and exceeded our revenue synergies so far this year. we've met and exceeded our revenue synergies so far this year I like it the way the setup is. i like it the way the setup is When you go back, I think it's important to think about a year ago. when you go back i think it's important to think about a year ago It's like last year at this time, we had just completed the acquisition in April, $4 billion bond offering. It's like last year at this time, we had just completed the acquisition in April, $4 billion bond offering. it's like last year at this time we had just completed the acquisition in april $4 billion bond offering

Speaker 2: Yep. Yep. yep

Speaker 1: We launched on Liberation Day. We launched on Liberation Day. we launched on liberation day

Speaker 2: Right. Right. right

Speaker 1: That was not very fun. If you go back and think about where we were. You go back last April, May timeframe, we had just completed the acquisition. The January before that's when we announced. We announced on January seventh. That was not very fun. that was not very fun If you go back and think about where we were. if you go back and think about where we were You go back last April, May timeframe, we had just completed the acquisition. you go back last april may timeframe we had just completed the acquisition The January before that's when we announced. the january before that's when we announced We announced on January seventh. we announced on january seventh

Speaker 2: Okay. Okay. okay

Speaker 1: Between January seventh and first of April, Liberation Day, April seventh. Between January seventh and first of April, Liberation Day, April seventh. between january seventh and first of april liberation day april seventh We couldn't say anything 'cause we were waiting for all the approvals. We couldn't say anything 'cause we were waiting for all the approvals. we couldn't say anything 'cause we were waiting for all the approvals

Speaker 2: Right. Right. right

Speaker 1: As you can imagine, every competitor in the world was saying everything they could about, "They're gonna shut down the platform. They're going to cancel broker contracts. They're gonna" All the Parade of Horribles. You can imagine what was going on in the Paycor sales ecosystem during that period of time. Lo and behold, April, we get it. We said strategically, one of the things that we wanted to do is we wanted to integrate fully our enterprise business with theirs day one. As you can imagine, every competitor in the world was saying everything they could about, "They're gonna shut down the platform. as you can imagine every competitor in the world was saying everything they could about "they're gonna shut down the platform They're going to cancel broker contracts. they're going to cancel broker contracts They're gonna" All the Parade of Horribles. they're gonna" all the parade of horribles You can imagine what was going on in the Paycor sales ecosystem during that period of time. you can imagine what was going on in the paycor sales ecosystem during that period of time Lo and behold, April, we get it. lo and behold april we get it We said strategically, one of the things that we wanted to do is we wanted to integrate fully our enterprise business with theirs day one. we said strategically one of the things that we wanted to do is we wanted to integrate fully our enterprise business with theirs day one We could have strung it out, multi-year integration plan. We said we wanna do it once 'cause we saw the opportunity there. In the April and right about this time in May, right when we were meeting, I think right after I left this meeting, we announced the new integration, and we took Paychex's enterprise business and reverse engineered into the Paycor brand, changed every territory, sales management, sales leadership, sales compensation. We redid the broker program with the Partner Plus program, reintroduced that to really attract the and address the needs that we were hearing from the broker community. We did it all the way. As you can imagine, that was disruptive, right? What we told everyone was we said, "This is the plan." I think everyone looked at the plan and said, "Boy, the back half of that plan looks pretty daunting. We could have strung it out, multi-year integration plan. we could have strung it out multi-year integration plan We said we wanna do it once 'cause we saw the opportunity there. we said we wanna do it once 'cause we saw the opportunity there In the April and right about this time in May, right when we were meeting, I think right after I left this meeting, we announced the new integration, and we took Paychex's enterprise business and reverse engineered into the Paycor brand, changed every territory, sales management, sales leadership, sales compensation. in the april and right about this time in may right when we were meeting i think right after i left this meeting we announced the new integration and we took paychex's enterprise business and reverse engineered into the paycor brand changed every territory sales management sales leadership sales compensation We redid the broker program with the Partner Plus program, reintroduced that to really attract the and address the needs that we were hearing from the broker community. we redid the broker program with the partner plus program reintroduced that to really attract the and address the needs that we were hearing from the broker community We did it all the way. we did it all the way As you can imagine, that was disruptive, right? as you can imagine that was disruptive right What we told everyone was we said, "This is the plan." I think everyone looked at the plan and said, "Boy, the back half of that plan looks pretty daunting. what we told everyone was we said "this is the plan." i think everyone looked at the plan and said "boy the back half of that plan looks pretty daunting

Speaker 2: Yep. Yep. yep

Speaker 1: In terms of expectations, in terms of organic growth acceleration, and bookings acceleration. Now we fast-forward, exactly as you said, third quarter. Guess what? Bookings, back to where we were pre-acquisition. We had the best quarter-over-quarter bookings improvement in my 13-years at Paychex, the third quarter. In terms of expectations, in terms of organic growth acceleration, and bookings acceleration. in terms of expectations in terms of organic growth acceleration and bookings acceleration Now we fast-forward, exactly as you said, third quarter. now we fast-forward exactly as you said third quarter Guess what? guess what Bookings, back to where we were pre-acquisition. bookings back to where we were pre-acquisition We had the best quarter-over-quarter bookings improvement in my 13- years at Paychex, the third quarter. we had the best quarter-over-quarter bookings improvement in my 13- years at paychex the third quarter When you looked at each quarter, we kept getting better and better. We're now back. Brokers represent 50% of the Paycor bookings, which is where they were before the acquisition. We're back to bookings at the same level. When you looked at each quarter, we kept getting better and better. when you looked at each quarter we kept getting better and better We're now back. we're now back Brokers represent 50% of the Paycor bookings, which is where they were before the acquisition. brokers represent 50% of the paycor bookings which is where they were before the acquisition We're back to bookings at the same level. we're back to bookings at the same level

Speaker 2: Right. Right. right

Speaker 1: We just announced yesterday HUB International has been added to the portfolio, another great firm adding to our portfolio. Not only are they gonna be representing the HCM platform, they're going to represent the full HR outsourcing advisory platform as well. I look at it from where we are right now. We are continuing quarter after quarter, building momentum, delivering on the plan we said we were going to do. Everything's, all the disruption is done. I sit here, you know, today, this May, last May in the middle of a lot of disruption, trying to make the progress, now we don't have disruption in front of us. We've got all that behind us, the messaging set, the broker program's back on track, I feel good about where we are from a staffing perspective and momentum perspective. We just announced yesterday HUB International has been added to the portfolio, another great firm adding to our portfolio. we just announced yesterday hub international has been added to the portfolio another great firm adding to our portfolio Not only are they gonna be representing the HCM platform, they're going to represent the full HR outsourcing advisory platform as well. not only are they gonna be representing the hcm platform they're going to represent the full hr outsourcing advisory platform as well I look at it from where we are right now. i look at it from where we are right now We are continuing quarter after quarter, building momentum, delivering on the plan we said we were going to do. we are continuing quarter after quarter building momentum delivering on the plan we said we were going to do Everything's, all the disruption is done. everything's all the disruption is done I sit here, you know, today, this May, last May in the middle of a lot of disruption, trying to make the progress, now we don't have disruption in front of us. i sit here you know today this may last may in the middle of a lot of disruption trying to make the progress now we don't have disruption in front of us We've got all that behind us, the messaging set, the broker program's back on track, I feel good about where we are from a staffing perspective and momentum perspective. we've got all that behind us the messaging set the broker program's back on track i feel good about where we are from a staffing perspective and momentum perspective

Speaker 2: Yeah. I remember talking to Bob about it and how quickly you went in and didn't waste time and addressed it. You know, I think sometimes things get dragged out. Yeah. yeah I remember talking to Bob about it and how quickly you went in and didn't waste time and addressed it. i remember talking to bob about it and how quickly you went in and didn't waste time and addressed it You know, I think sometimes things get dragged out. you know i think sometimes things get dragged out

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Negative consequences. I know you mentioned that you had that vacuum. Negative consequences. negative consequences I know you mentioned that you had that vacuum. i know you mentioned that you had that vacuum

Speaker 1: Yeah. Yeah. yeah

Speaker 2: where there was disruption, so I think you addressed it quickly. I know it created some uncertainty, but it feels like you're getting the payoff. where there was disruption, so I think you addressed it quickly. where there was disruption so i think you addressed it quickly I know it created some uncertainty, but it feels like you're getting the payoff. i know it created some uncertainty but it feels like you're getting the payoff

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Now. Now. now

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Good. The Paycor integration piece we just talked about, I know you just announced this AI platform. I'd love for you to talk about it here too, if you like. Just from a tech prioritization standpoint, with that effort, I know it's never done, but, you know, with all this focus on AI and modernizing and, you know, maybe the platform is a chance to talk about that now. Where are your priorities today with respect to the tech stack and where you wanna push the tech agenda overall? Good. good The Paycor integration piece we just talked about, I know you just announced this AI platform. the paycor integration piece we just talked about i know you just announced this ai platform I'd love for you to talk about it here too, if you like. i'd love for you to talk about it here too if you like Just from a tech prioritization standpoint, with that effort, I know it's never done, but, you know, with all this focus on AI and modernizing and, you know, maybe the platform is a chance to talk about that now. just from a tech prioritization standpoint with that effort i know it's never done but you know with all this focus on ai and modernizing and you know maybe the platform is a chance to talk about that now Where are your priorities today with respect to the tech stack and where you wanna push the tech agenda overall? where are your priorities today with respect to the tech stack and where you wanna push the tech agenda overall

Speaker 1: Well, look, I think all the pieces are kind of falling into place. Well, look, I think all the pieces are kind of falling into place. well look i think all the pieces are kind of falling into place

Speaker 2: Okay. Okay. okay

Speaker 1: You know, certainly one of the areas that we wanted to focus on was extending our TAM upmarket. You know, certainly one of the areas that we wanted to focus on was extending our TAM upmarket. you know certainly one of the areas that we wanted to focus on was extending our tam upmarket

Speaker 2: Sure. Sure. sure

Speaker 1: Paycor was a particularly part of that, what I would say, platform extension that we were looking for. You mentioned AI. AI is an investment we've been making for decades. Quite frankly, I always have to remind everybody, we started using AI internally over a decade ago. Paycor was a particularly part of that, what I would say, platform extension that we were looking for. paycor was a particularly part of that what i would say platform extension that we were looking for You mentioned AI. you mentioned ai AI is an investment we've been making for decades. ai is an investment we've been making for decades Quite frankly, I always have to remind everybody, we started using AI internally over a decade ago. quite frankly i always have to remind everybody we started using ai internally over a decade ago We actually hired the money Moneyballer for the Buffalo Bills. We actually hired the money Moneyballer for the Buffalo Bills. we actually hired the money moneyballer for the buffalo bills

Speaker 2: Yeah. Yeah. yeah

Speaker 1: To create a data science team for us, and we began to use it for internal purposes, and we began to really aggregate all of our data across the enterprise. We started that journey, and in fact, four years ago, when I was coming in as CEO, and I was working through the strategy for the board, we made four key bets that we wanted to make, and the first one was on data and AI. We started building an organization really around, and these are the early predecessors, but building the organization. We talked a lot about, on the calls, how we were using AI internally, making better decisions, making pricing decisions, doing those type of things. You go back and look at it in the product. In 2022. We won the best use of AI in HCM at HR Tech. To create a data science team for us, and we began to use it for internal purposes, and we began to really aggregate all of our data across the enterprise. to create a data science team for us and we began to use it for internal purposes and we began to really aggregate all of our data across the enterprise We started that journey, and in fact, four years ago, when I was coming in as CEO, and I was working through the strategy for the board, we made four key bets that we wanted to make, and the first one was on data and AI. we started that journey and in fact four years ago when i was coming in as ceo and i was working through the strategy for the board we made four key bets that we wanted to make and the first one was on data and ai We started building an organization really around, and these are the early predecessors, but building the organization. we started building an organization really around and these are the early predecessors but building the organization We talked a lot about, on the calls, how we were using AI internally, making better decisions, making pricing decisions, doing those type of things. we talked a lot about on the calls how we were using ai internally making better decisions making pricing decisions doing those type of things You go back and look at it in the product. you go back and look at it in the product In 2022. in 2022 We won the best use of AI in HCM at HR Tech. we won the best use of ai in hcm at hr tech

Speaker 2: Right. Right. right

Speaker 1: For our Retention Insights. Who was talking about AI in 2022? I mean, who was even talking about it? We were already beginning to say, we sat on a very large, sophisticated, and proprietary set of information about small, medium-sized businesses. We can begin to look at how our clients' employees are interacting with our systems and predict whether or not they're likely to leave their job. We have compensation data. I can tell you how much should a chef be making in Rochester, New York, and what's the wage increase going on in that particular job class in Rochester, in Upstate. We pay one in 11 people. You augment that with external data, which we've done, and you've really got a great tool on your hands. For our Retention Insights. for our retention insights Who was talking about AI in 2022? who was talking about ai in 2022 I mean, who was even talking about it? i mean who was even talking about it We were already beginning to say, we sat on a very large, sophisticated, and proprietary set of information about small, medium-sized businesses. We can begin to look at how our clients' employees are interacting with our systems and predict whether or not they're likely to leave their job. we were already beginning to say we sat on a very large sophisticated and proprietary set of information about small medium-sized businesses. we can begin to look at how our clients' employees are interacting with our systems and predict whether or not they're likely to leave their job We have compensation data. we have compensation data I can tell you how much should a chef be making in Rochester, New York, and what's the wage increase going on in that particular job class in Rochester, in Upstate. i can tell you how much should a chef be making in rochester new york and what's the wage increase going on in that particular job class in rochester in upstate We pay one in 11 people. we pay one in 11 people You augment that with external data, which we've done, and you've really got a great tool on your hands. you augment that with external data which we've done and you've really got a great tool on your hands The fact of the matter is, that investment has been going on, and now you have this acceleration, the capabilities of technology. You mentioned it today, we announced the introduction of the WISE AI platform. Just to give you an idea what WISE is going to be, it stands for Workforce Intelligence Strengthened by Expertise. You know, marketing had to have their say in a very clever in an acronym. The fact of the matter is, that investment has been going on, and now you have this acceleration, the capabilities of technology. the fact of the matter is that investment has been going on and now you have this acceleration the capabilities of technology You mentioned it today, we announced the introduction of the WISE AI platform. you mentioned it today we announced the introduction of the wise ai platform Just to give you an idea what WISE is going to be, it stands for Workforce Intelligence Strengthened by Expertise. just to give you an idea what wise is going to be it stands for workforce intelligence strengthened by expertise You know, marketing had to have their say in a very clever in an acronym. you know marketing had to have their say in a very clever in an acronym

Speaker 2: Very clever. Very clever. very clever

Speaker 1: Had to come up with that. Really what we've done is, we now have taken both all of our data across all of the companies and all of the business units, and all the platforms, and all the acquisitions. Mm-hmm. We've aggregated all of that. Had to come up with that. had to come up with that Really what we've done is, we now have taken both all of our data across all of the companies and all of the business units, and all the platforms, and all the acquisitions. really what we've done is we now have taken both all of our data across all of the companies and all of the business units and all the platforms and all the acquisitions Mm-hmm. mm-hmm We've aggregated all of that. we've aggregated all of that We now have a patent pending for the use of AI in using both structured and unstructured HR data to be able to customize actionable steps, and then actually inform agents to take those steps on all issues related to HR compliance in our ecosystem. We've been using it with our roughly 900 HR individuals to actually help them advise our clients, and we're now in the process of integrating that across all three of our built-for-purpose platforms, SurePayroll, in the micro kind of do it yourself end, right, Paychex Flex in the mid-market, and now Enterprise for Paycor. The way to think about it, Tien-Tsin Huang, is this. Yeah. We have the best operating system, I think, in the industry. That's how you get 42% margins. We have a great back office operating system. We now have a patent pending for the use of AI in using both structured and unstructured HR data to be able to customize actionable steps, and then actually inform agents to take those steps on all issues related to HR compliance in our ecosystem. we now have a patent pending for the use of ai in using both structured and unstructured hr data to be able to customize actionable steps and then actually inform agents to take those steps on all issues related to hr compliance in our ecosystem We've been using it with our roughly 900 HR individuals to actually help them advise our clients, and we're now in the process of integrating that across all three of our built-for-purpose platforms, SurePayroll, in the micro kind of do it yourself end, right, Paychex Flex in the mid-market, and now Enterprise for Paycor. we've been using it with our roughly 900 hr individuals to actually help them advise our clients and we're now in the process of integrating that across all three of our built-for-purpose platforms surepayroll in the micro kind of do it yourself end right paychex flex in the mid-market and now enterprise for paycor The way to think about it, Tien-Tsin Huang, is this. the way to think about it tien-tsin huang is this Yeah. yeah We have the best operating system, I think, in the industry. we have the best operating system i think in the industry That's how you get 42% margins. that's how you get 42% margins We have a great back office operating system. we have a great back office operating system Every one of the acquisitions we do, including Paycor, which we integrated in three months, we strip all of the back office portions out of their stack, and we put it on our operating stack. We've always had the best operating stack. When you think about it, because we were a service company, we invested a lot of money in back office. What was interesting is we've bought technology companies, they tend to make all their investment in the front end and the bells and whistles and future, not in the back office. That's a natural synergy. Now we have one of the industry-leading best operators operating infrastructures that all of our platforms sat on. We've now coupled that with the next layer, which is the WISE AI layer. Every one of the acquisitions we do, including Paycor, which we integrated in three months, we strip all of the back office portions out of their stack, and we put it on our operating stack. every one of the acquisitions we do including paycor which we integrated in three months we strip all of the back office portions out of their stack and we put it on our operating stack We've always had the best operating stack. we've always had the best operating stack When you think about it, because we were a service company, we invested a lot of money in back office. when you think about it because we were a service company we invested a lot of money in back office What was interesting is we've bought technology companies, they tend to make all their investment in the front end and the bells and whistles and future, not in the back office. what was interesting is we've bought technology companies they tend to make all their investment in the front end and the bells and whistles and future not in the back office That's a natural synergy. that's a natural synergy Now we have one of the industry-leading best operators operating infrastructures that all of our platforms sat on. now we have one of the industry-leading best operators operating infrastructures that all of our platforms sat on We've now coupled that with the next layer, which is the WISE AI layer. we've now coupled that with the next layer which is the wise ai layer Now we're going to start the process of fully integrating and making all of these agents available to all of our customers, regardless of platform. What I'm most excited about, for each of our platforms, we're going to embed our experts into it. What do I mean by that? That now means you start with a kind of a chat type of interface. You're asking a question. You know, "Look, I'm having a problem with this employee named John. He's kind of a hothead, caused a lot of problem in the office. I want to terminate him, and we're in California. Can I do that?" We're gonna come back, and we're gonna look at the parameters of that, and we're gonna say, "Yeah, this is what you need to do. By the way, let me give you the warning letter, okay? Now we're going to start the process of fully integrating and making all of these agents available to all of our customers, regardless of platform. now we're going to start the process of fully integrating and making all of these agents available to all of our customers regardless of platform What I'm most excited about, for each of our platforms, we're going to embed our experts into it. what i'm most excited about for each of our platforms we're going to embed our experts into it What do I mean by that? what do i mean by that That now means you start with a kind of a chat type of interface. that now means you start with a kind of a chat type of interface You're asking a question. you're asking a question You know, "Look, I'm having a problem with this employee named John. you know "look i'm having a problem with this employee named john He's kind of a hothead, caused a lot of problem in the office. he's kind of a hothead caused a lot of problem in the office I want to terminate him, and we're in California. i want to terminate him and we're in california Can I do that?" We're gonna come back, and we're gonna look at the parameters of that, and we're gonna say, "Yeah, this is what you need to do. can i do that?" we're gonna come back and we're gonna look at the parameters of that and we're gonna say "yeah this is what you need to do By the way, let me give you the warning letter, okay? by the way let me give you the warning letter okay We're gonna ask you a few questions about John. Well, it looks like he could be a little bit older than the normal guy. Well, that could be a problem here. We maybe want to watch that. At the end of that step, we're going to offer for you to have a free consultation with one of our employment lawyers or one of our HR generalists to talk you through this specific case and actually give you some talking points about how you can approach John and handle that conversation. That's the human side of it. That's what we do for our clients every day. Right? Most of our clients, again, don't have an HR person sitting in their office. They don't have an HR department. In essence, we become that HR pro. We're gonna ask you a few questions about John. we're gonna ask you a few questions about john Well, it looks like he could be a little bit older than the normal guy. well it looks like he could be a little bit older than the normal guy Well, that could be a problem here. well that could be a problem here We maybe want to watch that. we maybe want to watch that At the end of that step, we're going to offer for you to have a free consultation with one of our employment lawyers or one of our HR generalists to talk you through this specific case and actually give you some talking points about how you can approach John and handle that conversation. at the end of that step we're going to offer for you to have a free consultation with one of our employment lawyers or one of our hr generalists to talk you through this specific case and actually give you some talking points about how you can approach john and handle that conversation That's the human side of it. that's the human side of it That's what we do for our clients every day. that's what we do for our clients every day Right? right Most of our clients, again, don't have an HR person sitting in their office. most of our clients again don't have an hr person sitting in their office They don't have an HR department. they don't have an hr department In essence, we become that HR pro. in essence we become that hr pro We're holding their hand when they're walking into a hearing. What's amazing around it is because we've taken all the interactions we have with clients and put it into this proprietary and patent-pending infrastructure, we now have case information that can get very specific. What do I mean by specific? I can actually tell you by mediator in the state of California, if you have an unemployment claim, how much that mediator generally settles for and how much another one settles for. Now you're getting very specific about going in and planning a strategy for an unemployment claim in the state of California, and I can now give you specific based upon knowledge that only we would have, because none of the mediation stuff is in public domain. We're holding their hand when they're walking into a hearing. we're holding their hand when they're walking into a hearing What's amazing around it is because we've taken all the interactions we have with clients and put it into this proprietary and patent-pending infrastructure, we now have case information that can get very specific. what's amazing around it is because we've taken all the interactions we have with clients and put it into this proprietary and patent-pending infrastructure we now have case information that can get very specific What do I mean by specific? what do i mean by specific I can actually tell you by mediator in the state of California, if you have an unemployment claim, how much that mediator generally settles for and how much another one settles for. i can actually tell you by mediator in the state of california if you have an unemployment claim how much that mediator generally settles for and how much another one settles for Now you're getting very specific about going in and planning a strategy for an unemployment claim in the state of California, and I can now give you specific based upon knowledge that only we would have, because none of the mediation stuff is in public domain. now you're getting very specific about going in and planning a strategy for an unemployment claim in the state of california and i can now give you specific based upon knowledge that only we would have because none of the mediation stuff is in public domain It's only from our experience having worked with clients or in our PEO, because actually we've been part of that case, that we actually know what the result is. Now we can open it up to our clients. As I said, we're using that to make our HR specialist more proactive. You know, if you thought about the job before, what you would do is we'd set up an appointment, we'd do our quarterly or monthly call, depending upon your needs, I'd go and gather a bunch of data, I'd look at Retention Insights, I'd look at the compensation report, I'd sit down with you and say, "Hey, here's some things that I'm seeing, and here's what I'm talking to other clients about." Right. I'm being proactive to do that. It's only from our experience having worked with clients or in our PEO, because actually we've been part of that case, that we actually know what the result is. it's only from our experience having worked with clients or in our peo because actually we've been part of that case that we actually know what the result is Now we can open it up to our clients. now we can open it up to our clients As I said, we're using that to make our HR specialist more proactive. as i said we're using that to make our hr specialist more proactive You know, if you thought about the job before, what you would do is we'd set up an appointment, we'd do our quarterly or monthly call, depending upon your needs, I'd go and gather a bunch of data, I'd look at Retention Insights, I'd look at the compensation report, I'd sit down with you and say, "Hey, here's some things that I'm seeing, and here's what I'm talking to other clients about." Right. you know if you thought about the job before what you would do is we'd set up an appointment we'd do our quarterly or monthly call depending upon your needs i'd go and gather a bunch of data i'd look at retention insights i'd look at the compensation report i'd sit down with you and say "hey here's some things that i'm seeing and here's what i'm talking to other clients about." right I'm being proactive to do that. i'm being proactive to do that We're actually having the agents able to watch this and actually proactively tell you what you need to do in real time, and our specialists are seeing that at the same time. I'm really excited about where we are. The foundation set, I think we've got all the pieces of the puzzle, both in terms of the built-for-purpose platforms for each of the segments of the market that we wanna go after. I think we've got the best operating layer. I think now with our large proprietary data set and with the capabilities that we're doing with Agentic AIs, I think we're well set. Oh, I forgot. Sierra just announced yesterday, Yeah, that they were our partner. We've been working on this for two years. Right. We actually have a voice payroll agent. We're actually having the agents able to watch this and actually proactively tell you what you need to do in real time, and our specialists are seeing that at the same time. we're actually having the agents able to watch this and actually proactively tell you what you need to do in real time and our specialists are seeing that at the same time I'm really excited about where we are. i'm really excited about where we are The foundation set, I think we've got all the pieces of the puzzle, both in terms of the built-for-purpose platforms for each of the segments of the market that we wanna go after. the foundation set i think we've got all the pieces of the puzzle both in terms of the built-for-purpose platforms for each of the segments of the market that we wanna go after I think we've got the best operating layer. i think we've got the best operating layer I think now with our large proprietary data set and with the capabilities that we're doing with Agentic AIs, I think we're well set. i think now with our large proprietary data set and with the capabilities that we're doing with agentic ais i think we're well set Oh, I forgot. oh i forgot Sierra just announced yesterday, Yeah, that they were our partner. sierra just announced yesterday yeah that they were our partner We've been working on this for two years. we've been working on this for two years Right. right We actually have a voice payroll agent. we actually have a voice payroll agent Today you can call. It's not my voice. I want it to be my voice, but people said, no, I couldn't do that. Today you can call. today you can call It's not my voice. it's not my voice I want it to be my voice, but people said, no, I couldn't do that. i want it to be my voice but people said no i couldn't do that

Speaker 2: You got a good voice. You got a good voice. you got a good voice

Speaker 1: Yeah, exactly. You can go and you can actually have a conversation, and you can provide payroll data, you can add employees, and our voice bot will do it. In a couple weeks, one of our partners will be announcing that they were our partner on our email agentic bot, which is in production right now, which is taking email data and self-populating that into our system. Our specialists are doing a final kind of quality check, and then we're releasing the payroll. Yeah, exactly. yeah exactly You can go and you can actually have a conversation, and you can provide payroll data, you can add employees, and our voice bot will do it. you can go and you can actually have a conversation and you can provide payroll data you can add employees and our voice bot will do it In a couple weeks, one of our partners will be announcing that they were our partner on our email agentic bot, which is in production right now, which is taking email data and self-populating that into our system. in a couple weeks one of our partners will be announcing that they were our partner on our email agentic bot which is in production right now which is taking email data and self-populating that into our system Our specialists are doing a final kind of quality check, and then we're releasing the payroll. our specialists are doing a final kind of quality check and then we're releasing the payroll Again, the efficiencies we're gaining, the opportunity for us to move more of our service transactional support into more advisory, and that's really what I'm leaning into, is what's gonna differentiate us is our ability to proactively advise clients, leverage our proprietary data and our proprietary system. To be able to help them be in front of everything instead of always reacting to it. That's what a small business owner's always doing. They're reacting to a problem. Again, the efficiencies we're gaining, the opportunity for us to move more of our service transactional support into more advisory, and that's really what I'm leaning into, is what's gonna differentiate us is our ability to proactively advise clients, leverage our proprietary data and our proprietary system. To be able to help them be in front of everything instead of always reacting to it. again the efficiencies we're gaining the opportunity for us to move more of our service transactional support into more advisory and that's really what i'm leaning into is what's gonna differentiate us is our ability to proactively advise clients leverage our proprietary data and our proprietary system. to be able to help them be in front of everything instead of always reacting to it That's what a small business owner's always doing. that's what a small business owner's always doing They're reacting to a problem. they're reacting to a problem

Speaker 2: Sure. Sure. sure

Speaker 1: They don't have anyone that can proactively take steps, and I just think that's what AI is gonna bring for us. I think it gives us a competitive advantage over pure tech players. Again, for our customer segment, what they want is they want an advisor. They want someone they trust that's going to hold their hand, and not only give them compliant steps and information about what they need to do, but actually help me execute the steps that I need to do. They don't have anyone that can proactively take steps, and I just think that's what AI is gonna bring for us. they don't have anyone that can proactively take steps and i just think that's what ai is gonna bring for us I think it gives us a competitive advantage over pure tech players. i think it gives us a competitive advantage over pure tech players Again, for our customer segment, what they want is they want an advisor. again for our customer segment what they want is they want an advisor They want someone they trust that's going to hold their hand, and not only give them compliant steps and information about what they need to do, but actually help me execute the steps that I need to do. they want someone they trust that's going to hold their hand and not only give them compliant steps and information about what they need to do but actually help me execute the steps that i need to do

Speaker 2: Yeah. I know there's a lot of this, everyone saying run, run towards AI, you know, sort of playing back what you said, you've been taking your data, leveraging AI for a long time. I know it, we've talked about RPA. Yeah. yeah I know there's a lot of this, everyone saying run, run towards AI, you know, sort of playing back what you said, you've been taking your data, leveraging AI for a long time. i know there's a lot of this everyone saying run run towards ai you know sort of playing back what you said you've been taking your data leveraging ai for a long time I know it, we've talked about RPA. i know it we've talked about rpa Machine learning with Paychex. Machine learning with Paychex. machine learning with paychex

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Over the years. You have a privileged, you know, position from a data standpoint. If I'm hearing you correctly on WISE, you can now consume a lot of that data regardless of your categorization, take the data that you're learning, and you'll be able to give the advice on how to address it, whether it be at the estate level side issue or. Over the years. over the years You have a privileged, you know, position from a data standpoint. you have a privileged you know position from a data standpoint If I'm hearing you correctly on WISE, you can now consume a lot of that data regardless of your categorization, take the data that you're learning, and you'll be able to give the advice on how to address it, whether it be at the estate level side issue or. if i'm hearing you correctly on wise you can now consume a lot of that data regardless of your categorization take the data that you're learning and you'll be able to give the advice on how to address it whether it be at the estate level side issue or

Speaker 1: Local. Local. local

Speaker 2: A labor issue or municipal issue, whatever it is. Am I saying that correctly? A labor issue or municipal issue, whatever it is. a labor issue or municipal issue whatever it is Am I saying that correctly? am i saying that correctly

Speaker 1: Yeah, that's exactly right. Yeah, that's exactly right. yeah that's exactly right

Speaker 2: That's you're taking that data and you can consume that. That's you're taking that data and you can consume that. that's you're taking that data and you can consume that

Speaker 1: Right. Right. right

Speaker 2: Regardless of the category. Regardless of the category. regardless of the category

Speaker 1: Regardless of the category and regardless of our business unit, regardless of our market unit. If you're interfacing with a prospect or interfacing with a client, we're capturing all of that data from all of those systems and all those transactions as well and dumping that into WISE. We're constantly refining our data set day in and day out. Regardless of the category and regardless of our business unit, regardless of our market unit. regardless of the category and regardless of our business unit regardless of our market unit If you're interfacing with a prospect or interfacing with a client, we're capturing all of that data from all of those systems and all those transactions as well and dumping that into WISE. if you're interfacing with a prospect or interfacing with a client we're capturing all of that data from all of those systems and all those transactions as well and dumping that into wise We're constantly refining our data set day in and day out. we're constantly refining our data set day in and day out

Speaker 2: One follow-up question to that, just 'cause it's new, and forgive me if I'm just off the cuff asking. One follow-up question to that, just 'cause it's new, and forgive me if I'm just off the cuff asking. one follow-up question to that just 'cause it's new and forgive me if i'm just off the cuff asking

Speaker 1: No, that's fine. No, that's fine. no that's fine

Speaker 2: Thinking about consuming that and pricing that, Should we expect there to be a lot of products that get spun off of this that, you know, again, regardless of what you look like as a customer, that you'll be able to consume this ad hoc almost as in a modular way? Is that the thinking around where this is going, or is it more of a Holistic offering? I'm a part of Paychex, this is available to me. Thinking about consuming that and pricing that, Should we expect there to be a lot of products that get spun off of this that, you know, again, regardless of what you look like as a customer, that you'll be able to consume this ad hoc almost as in a modular way? thinking about consuming that and pricing that should we expect there to be a lot of products that get spun off of this that you know again regardless of what you look like as a customer that you'll be able to consume this ad hoc almost as in a modular way Is that the thinking around where this is going, or is it more of a Holistic offering? is that the thinking around where this is going or is it more of a holistic offering I'm a part of Paychex, this is available to me. i'm a part of paychex this is available to me

Speaker 1: Look, I think what we wanna do is we wanna create a ecosystem. We want to be the definitive source for HR compliance and human capital management AI-driven answers. Look, I think what we wanna do is we wanna create a ecosystem. look i think what we wanna do is we wanna create a ecosystem We want to be the definitive source for HR compliance and human capital management AI-driven answers. we want to be the definitive source for hr compliance and human capital management ai-driven answers

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Right? To deal with anything. Right? right To deal with anything. to deal with anything

Speaker 2: Yeah, everything I said. Yeah, everything I said. yeah everything i said

Speaker 1: With the employer-employee relationship. Today, you gotta be in our ecosystem to do that, and if you looked at it today, that's really built for our specialist or our HR generalist or our legal team to provide coaching and advice to you and produce documents for you. With the employer-employee relationship. with the employer-employee relationship Today, you gotta be in our ecosystem to do that, and if you looked at it today, that's really built for our specialist or our HR generalist or our legal team to provide coaching and advice to you and produce documents for you. today you gotta be in our ecosystem to do that and if you looked at it today that's really built for our specialist or our hr generalist or our legal team to provide coaching and advice to you and produce documents for you What is fundamentally changing with the announcement today is we're gonna embed that in the platform. What is fundamentally changing with the announcement today is we're gonna embed that in the platform. what is fundamentally changing with the announcement today is we're gonna embed that in the platform

Speaker 2: Got it. Got it. got it

Speaker 1: You're gonna be able to start to be able to do that. Now, is that something we may wanna share with the world on a per drink or in another basis? Stay tuned. You're gonna be able to start to be able to do that. you're gonna be able to start to be able to do that Now, is that something we may wanna share with the world on a per drink or in another basis? now is that something we may wanna share with the world on a per drink or in another basis Stay tuned. stay tuned

Speaker 2: Okay. Okay. okay

Speaker 1: I mean, that's one of the things we'll look at. For me, it's really about making sure that clients know, look, we're what we're trying to do is drive more value to our clients every year. Those are all, always been the investments we're doing. That's what allows us to have the price, you know, uplift that we typically have. We've continually done that to retain clients because we wanna do something that no one else can do. They can't go somewhere else and get this, right? We've continued to try to expose our clients to our advisory services. I mean, that's one of the things we'll look at. i mean that's one of the things we'll look at For me, it's really about making sure that clients know, look, we're what we're trying to do is drive more value to our clients every year. for me it's really about making sure that clients know look we're what we're trying to do is drive more value to our clients every year Those are all, always been the investments we're doing. those are all always been the investments we're doing That's what allows us to have the price, you know, uplift that we typically have. that's what allows us to have the price you know uplift that we typically have We've continually done that to retain clients because we wanna do something that no one else can do. we've continually done that to retain clients because we wanna do something that no one else can do They can't go somewhere else and get this, right? they can't go somewhere else and get this right We've continued to try to expose our clients to our advisory services. we've continued to try to expose our clients to our advisory services That's our fastest growing business, growing faster than our HCM business. We continue to view that the market is moving towards, "I not only want the technology, I want the combination of technology and human support to be able to do this." I think as you look up market, look, today, most of our clients don't have HR departments. I have a point of view that when you look at the scale of AI and what you need, you need large data to make AI work. If there's one thing I've learned, our partners would tell you, and again, I think this is an issue, AI benefits large incumbents, period. People who have large data and expertise are going to dominate this world because it's unlike the dot-com and the internet where there could be a level playing field. That's our fastest growing business, growing faster than our HCM business. that's our fastest growing business growing faster than our hcm business We continue to view that the market is moving towards, "I not only want the technology, I want the combination of technology and human support to be able to do this." I think as you look up market, look, today, most of our clients don't have HR departments. we continue to view that the market is moving towards "i not only want the technology i want the combination of technology and human support to be able to do this." i think as you look up market look today most of our clients don't have hr departments I have a point of view that when you look at the scale of AI and what you need, you need large data to make AI work. i have a point of view that when you look at the scale of ai and what you need you need large data to make ai work If there's one thing I've learned, our partners would tell you, and again, I think this is an issue, AI benefits large incumbents, period. if there's one thing i've learned our partners would tell you and again i think this is an issue ai benefits large incumbents period People who have large data and expertise are going to dominate this world because it's unlike the dot-com and the internet where there could be a level playing field. people who have large data and expertise are going to dominate this world because it's unlike the dot-com and the internet where there could be a level playing field Sure, Amazon and eBay and Walmart could have their website. Guess what? Joe's Shoe Store could go to web.com at the time, if I remember web.com. Sure, Amazon and eBay and Walmart could have their website. sure amazon and ebay and walmart could have their website Guess what? guess what Joe's Shoe Store could go to web.com at the time, if I remember web.com. joe's shoe store could go to web.com at the time if i remember web.com

Speaker 2: Yep. Yep. yep

Speaker 1: Go to that. You could go and do that. You could kind of level the playing field. At least I could have an e-commerce site, right? I'm telling you can't build an AI agent if you don't have data and you don't have expertise. You need large amounts of it. If you're gonna do what we're doing at the accuracy rate that's expected, I mean, we're the largest 401(k) record keeper in the U.S., have more plans than anybody else. We're pay one in 11, we're the 30th largest insurance agency. The things that we deliver are absolutely critical to people. You can't have mistakes. I mean, a 1% mistake in payroll at Paychex equates to $14 billion of missed payrolls. Go to that. go to that You could go and do that. you could go and do that You could kind of level the playing field. you could kind of level the playing field At least I could have an e-commerce site, right? at least i could have an e-commerce site right I'm telling you can't build an AI agent if you don't have data and you don't have expertise. i'm telling you can't build an ai agent if you don't have data and you don't have expertise You need large amounts of it. you need large amounts of it If you're gonna do what we're doing at the accuracy rate that's expected, I mean, we're the largest 401(k) record keeper in the U.S., have more plans than anybody else. if you're gonna do what we're doing at the accuracy rate that's expected i mean we're the largest 401(k) record keeper in the u.s have more plans than anybody else We're pay one in 11 , we're the 30th largest insurance agency. we're pay one in 11 we're the 30th largest insurance agency The things that we deliver are absolutely critical to people. the things that we deliver are absolutely critical to people You can't have mistakes. you can't have mistakes I mean, a 1% mistake in payroll at Paychex equates to $14 billion of missed payrolls. i mean a 1% mistake in payroll at paychex equates to $14 billion of missed payrolls Who are the 14 billion people that we don't wanna get paid in the U.S. next Friday? I don't think that's, I don't, I again, I keep looking at we're a records system, we're a compliance system, and we deal with state and local governments where compliance is not automated, and I can tell stories on that. I'm pretty excited about where we're positioned, and where we are, you know, going into this next AI era of our industry. Who are the 14 billion people that we don't wanna get paid in the U.S. next Friday? who are the 14 billion people that we don't wanna get paid in the u.s next friday I don't think that's, I don't, I again, I keep looking at we're a records system, we're a compliance system, and we deal with state and local governments where compliance is not automated, and I can tell stories on that. i don't think that's i don't i again i keep looking at we're a records system we're a compliance system and we deal with state and local governments where compliance is not automated and i can tell stories on that I'm pretty excited about where we're positioned, and where we are, you know, going into this next AI era of our industry. i'm pretty excited about where we're positioned and where we are you know going into this next ai era of our industry

Speaker 2: Yeah, no, that's the moat. No errors and gotta be fully compliant. That's right. This sounds easy, but I get that it's not. Okay. No, thanks for going through that. It's fun. Let's, time goes by quickly. Less than 10-minutes left. Let's hit a few important subjects. Let's do PEO. Yeah, no, that's the moat. yeah no that's the moat No errors and gotta be fully compliant. no errors and gotta be fully compliant That's right. that's right This sounds easy, but I get that it's not. this sounds easy but i get that it's not Okay. okay No, thanks for going through that. no thanks for going through that It's fun. it's fun Let's, time goes by quickly. let's time goes by quickly Less than 10- minutes left. less than 10- minutes left Let's hit a few important subjects. let's hit a few important subjects Let's do PEO. let's do peo

Speaker 1: Okay. Okay. okay

Speaker 2: PEO, we had Maria earlier, we talked about it. PEO, we had Maria earlier, we talked about it. peo we had maria earlier we talked about it

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Just to be candid with you, Paychex has been outgrowing the market, right? I think if we stack up Paychex versus the peers, you are the industry leader in terms of growth and WSEs, et cetera. What are you doing differently, and is this premium growth sustainable? Are you benchmarking it this way? What would you share? Just to be candid with you, Paychex has been outgrowing the market, right? just to be candid with you paychex has been outgrowing the market right I think if we stack up Paychex versus the peers, you are the industry leader in terms of growth and WSEs, et cetera. i think if we stack up paychex versus the peers you are the industry leader in terms of growth and wses et cetera What are you doing differently, and is this premium growth sustainable? what are you doing differently and is this premium growth sustainable Are you benchmarking it this way? are you benchmarking it this way What would you share? what would you share

Speaker 1: Yeah. First of all, I'd say I'm very proud of our PEO team and the work they're doing. Yeah. yeah First of all, I'd say I'm very proud of our PEO team and the work they're doing. first of all i'd say i'm very proud of our peo team and the work they're doing

Speaker 2: That's number one. That's number one. that's number one

Speaker 1: in executing. Just because, you know, to double-digit revenue, double-digit bookings, record retention go down, I mean, I'm used to like if we got five key KPIs, I mean, four out of five is pretty good. You hit five out of five, you're doing pretty damn good, you know? in executing. in executing Just because, you know, to double-digit revenue, double-digit bookings, record retention go down, I mean, I'm used to like if we got five key KPIs, I mean, four out of five is pretty good. just because you know to double-digit revenue double-digit bookings record retention go down i mean, i'm used to like if we got five key kpis i mean four out of five is pretty good You hit five out of five, you're doing pretty damn good, you know? you hit five out of five you're doing pretty damn good you know

Speaker 2: Sure. Sure. sure

Speaker 1: I'm very happy with what's going on there. I think it's interesting when you think about the PEO. This is really driven by, we're a very purpose-driven organization. We're very thoughtful. We're very planful. We think about things a long time. As you know, we're known as somewhat conservative, right? You go back, Paychex was not a PEO company. I'm very happy with what's going on there. i'm very happy with what's going on there I think it's interesting when you think about the PEO. i think it's interesting when you think about the peo This is really driven by, we're a very purpose-driven organization. this is really driven by we're a very purpose-driven organization We're very thoughtful. we're very thoughtful We're very planful. we're very planful We think about things a long time. we think about things a long time As you know, we're known as somewhat conservative, right? as you know we're known as somewhat conservative right You go back, Paychex was not a PEO company. you go back paychex was not a peo company

Speaker 2: Right. Right. right

Speaker 1: A decade ago, 15-years ago. We had a PEO. Our bigger business was our ASO business, PEO was more something defensively that we had in the business. One of our clients would be approached by a PEO, we'd go, "We got one of those, too. You know, you can stick with us." Almost all of our PEO business was sold inside the base, more of a defensive move. A decade ago, 15- years ago. a decade ago 15- years ago We had a PEO. we had a peo Our bigger business was our ASO business, PEO was more something defensively that we had in the business. our bigger business was our aso business peo was more something defensively that we had in the business One of our clients would be approached by a PEO, we'd go, "We got one of those, too. one of our clients would be approached by a peo we'd go "we got one of those too You know, you can stick with us." Almost all of our PEO business was sold inside the base, more of a defensive move. you know you can stick with us." almost all of our peo business was sold inside the base more of a defensive move

Speaker 2: Right. Right. right

Speaker 1: Because a client was looking for it. When we decided that we wanted to gravitate away from the story we've said of kind of being a payroll provider, back then 70% of our revenue was payroll, today it's less than 40%, HR was a key part of that. Because a client was looking for it. because a client was looking for it When we decided that we wanted to gravitate away from the story we've said of kind of being a payroll provider, back then 70% of our revenue was payroll, today it's less than 40%, HR was a key part of that. when we decided that we wanted to gravitate away from the story we've said of kind of being a payroll provider back then 70% of our revenue was payroll today it's less than 40% hr was a key part of that

Speaker 2: Sure. Sure. sure

Speaker 1: We certainly saw that not only our ASO business, but the PEO business had an opportunity. You go back and look at that 10-years ago, I joined the company 13-years ago, we started focusing on our organic PEO business. We invested in it. We certainly saw that not only our ASO business, but the PEO business had an opportunity. we certainly saw that not only our aso business but the peo business had an opportunity You go back and look at that 10- years ago, I joined the company 13- years ago, we started focusing on our organic PEO business. you go back and look at that 10- years ago i joined the company 13- years ago we started focusing on our organic peo business We invested in it. we invested in it We began to get it growing. We leveraged our balance sheet. We began to get it growing. we began to get it growing We leveraged our balance sheet. we leveraged our balance sheet

Speaker 2: Wisely. Wisely. wisely

Speaker 1: Some tuck-in acquisitions. We proved that we could do that. We said at that time, we were probably in three states. I mean, technically, when you looked at the concentration, we were at scale in three states in the country. We knew we wanted to go national. It took two things. It took expertise. We knew we needed scale. You just mentioned it. At that time, we made the largest acquisition in the company's history, with the largest privately held PEO in the country at the time, Oasis, with a $1.1 billion. We did that in 2018. Some tuck-in acquisitions. some tuck-in acquisitions We proved that we could do that. we proved that we could do that We said at that time, we were probably in three states. we said at that time we were probably in three states I mean, technically, when you looked at the concentration, we were at scale in three states in the country. i mean technically when you looked at the concentration we were at scale in three states in the country We knew we wanted to go national. we knew we wanted to go national It took two things. it took two things It took expertise. it took expertise We knew we needed scale. we knew we needed scale You just mentioned it. you just mentioned it At that time, we made the largest acquisition in the company's history, with the largest privately held PEO in the country at the time, Oasis, with a $1.1 billion. at that time we made the largest acquisition in the company's history with the largest privately held peo in the country at the time oasis with a $1.1 billion We did that in 2018. we did that in 2018 We integrated that, then we executed the plan. From that, we now are a national leader. As you said, 50% of our business is coming from within our base. 50% is coming from outside our base where we're introducing new clients to the PEO outsourcing story. It's just absolutely a fabulous story. In a decade's time with a purpose-built strategy, right, we went from a very small player in an industry to be an industry-leading player. I like where we're positioned in terms of our value proposition and how the team's executing and our staffing, and how our value proposition stacks up. I think that's a good example that I think is probably a parallel that are my expectations and what we're trying to repeat in the enterprise with the Paycor. We integrated that, then we executed the plan. we integrated that then we executed the plan From that, we now are a national leader. from that we now are a national leader As you said, 50% of our business is coming from within our base. 50% is coming from outside our base where we're introducing new clients to the PEO outsourcing story. as you said 50% of our business is coming from within our base 50% is coming from outside our base where we're introducing new clients to the peo outsourcing story It's just absolutely a fabulous story. it's just absolutely a fabulous story In a decade's time with a purpose-built strategy, right, we went from a very small player in an industry to be an industry-leading player. in a decade's time with a purpose-built strategy right we went from a very small player in an industry to be an industry-leading player I like where we're positioned in terms of our value proposition and how the team's executing and our staffing, and how our value proposition stacks up. i like where we're positioned in terms of our value proposition and how the team's executing and our staffing and how our value proposition stacks up I think that's a good example that I think is probably a parallel that are my expectations and what we're trying to repeat in the enterprise with the Paycor. i think that's a good example that i think is probably a parallel that are my expectations and what we're trying to repeat in the enterprise with the paycor

Speaker 2: Gotcha. Gotcha. gotcha

Speaker 1: Which is we were investing in our business in the enterprise side. We knew we needed additional capabilities. We knew we needed a brand that would play in that market. Now that we've done that, we've integrated it, now it's about execution and continuing to accelerate the growth there as well. Which is we were investing in our business in the enterprise side. which is we were investing in our business in the enterprise side We knew we needed additional capabilities. we knew we needed additional capabilities We knew we needed a brand that would play in that market. we knew we needed a brand that would play in that market Now that we've done that, we've integrated it, now it's about execution and continuing to accelerate the growth there as well. now that we've done that we've integrated it now it's about execution and continuing to accelerate the growth there as well

Speaker 2: Okay. Yeah, similar playbook. I know sourced a little bit differently. Okay. okay Yeah, similar playbook. yeah similar playbook I know sourced a little bit differently. i know sourced a little bit differently

Speaker 1: Yeah. Right. Yeah. yeah right Right. right

Speaker 2: in terms of time. I know you're a big architect, of course, of the Oasis piece, but yeah, so the Paycor one is the next one to watch. in terms of time. in terms of time I know you're a big architect, of course, of the Oasis piece, but yeah, so the Paycor one is the next one to watch. i know you're a big architect of course of the oasis piece but yeah so the paycor one is the next one to watch Okay, good. And we're running out of time, so make sure I hit a few of the fun ones. Before I talk about the outlook, maybe just the product roadmap then, John. It's just we talked about WISE. You know, product velocity is a big subject in broader fintech-. Okay, good. okay good And we're running out of time, so make sure I hit a few of the fun ones. and we're running out of time so make sure i hit a few of the fun ones Before I talk about the outlook, maybe just the product roadmap then, John. before i talk about the outlook maybe just the product roadmap then john It's just we talked about WISE. it's just we talked about wise You know, product velocity is a big subject in broader fintech-. you know product velocity is a big subject in broader fintech-

Speaker 1: Yeah. Yeah. yeah

Speaker 2: And processing and payments. In a minute or two, what's your philosophy on product velocity and what should we be watching for, and what might move the needle? And processing and payments. and processing and payments In a minute or two, what's your philosophy on product velocity and what should we be watching for, and what might move the needle? in a minute or two what's your philosophy on product velocity and what should we be watching for and what might move the needle

Speaker 1: Yeah. No question we already talked about, won't talk about again. Yeah. yeah No question we already talked about, won't talk about again. no question we already talked about won't talk about again

Speaker 2: Yeah. Yeah. yeah

Speaker 1: A lot of our product right now is the integration of WISE into the AI. You'll also see this year that we will offer across all three platforms an AI Agentic user experience for each of those platforms for people who wanna have that going through there. You're gonna continue to see us, you mentioned, integrate partners. One of the big things that we've been focused on is enabling our systems to allow our clients' employees to be customers of ours. We've created both a customer marketplace that's embedded. We're using AI to identify customers that would be needing financial products or other products and services that we don't sell. A lot of our product right now is the integration of WISE into the AI. a lot of our product right now is the integration of wise into the ai You'll also see this year that we will offer across all three platforms an AI Agentic user experience for each of those platforms for people who wanna have that going through there. you'll also see this year that we will offer across all three platforms an ai agentic user experience for each of those platforms for people who wanna have that going through there You're gonna continue to see us, you mentioned, integrate partners. you're gonna continue to see us you mentioned integrate partners One of the big things that we've been focused on is enabling our systems to allow our clients' employees to be customers of ours. one of the big things that we've been focused on is enabling our systems to allow our clients' employees to be customers of ours We've created both a customer marketplace that's embedded. we've created both a customer marketplace that's embedded We're using AI to identify customers that would be needing financial products or other products and services that we don't sell. we're using ai to identify customers that would be needing financial products or other products and services that we don't sell through partners. We're increasing that partner network. We're also doing it on the employee side. We call that program Perks. Give you an idea, we've continued to add to that. We just surpassed 400,000 paying customers within our employee base. That's about in 18-months of adding things. I think you're gonna continue to see us look for partners that augment adjacencies, integrate them into our marketplaces, both client marketplaces, as well as our employee marketplaces, and then we're going to allow them to leverage our AI and our intelligence to be able to market that at the type of need to both our clients and our employees. I think right now that's gonna fill our roadmap for the. through partners. through partners We're increasing that partner network. we're increasing that partner network We're also doing it on the employee side. we're also doing it on the employee side We call that program Perks. we call that program perks Give you an idea, we've continued to add to that. give you an idea we've continued to add to that We just surpassed 400,000 paying customers within our employee base. we just surpassed 400,000 paying customers within our employee base That's about in 18- months of adding things. that's about in 18- months of adding things I think you're gonna continue to see us look for partners that augment adjacencies, integrate them into our marketplaces, both client marketplaces, as well as our employee marketplaces, and then we're going to allow them to leverage our AI and our intelligence to be able to market that at the type of need to both our clients and our employees. i think you're gonna continue to see us look for partners that augment adjacencies integrate them into our marketplaces both client marketplaces as well as our employee marketplaces and then we're going to allow them to leverage our ai and our intelligence to be able to market that at the type of need to both our clients and our employees I think right now that's gonna fill our roadmap for the. i think right now that's gonna fill our roadmap for the

Speaker 2: Sure. Sure. sure

Speaker 1: For the rest of the year. For the rest of the year. for the rest of the year

Speaker 2: No, going to more of a consumer employee model I thought always made sense given how many touch points you have. If we mix all this together and say, "Hey, what does it all mean for pricing?" I know we're accustomed to thinking about Paychex having pricing power. Has your thinking around pricing changed given all the work you've put in and some of the things that are coming out now? No, going to more of a consumer employee model I thought always made sense given how many touch points you have. no going to more of a consumer employee model i thought always made sense given how many touch points you have If we mix all this together and say, "Hey, what does it all mean for pricing?" I know we're accustomed to thinking about Paychex having pricing power. if we mix all this together and say "hey what does it all mean for pricing?" i know we're accustomed to thinking about paychex having pricing power Has your thinking around pricing changed given all the work you've put in and some of the things that are coming out now? has your thinking around pricing changed given all the work you've put in and some of the things that are coming out now

Speaker 1: No. I think that our viewpoint is, look, we don't take it for granted that we're able each year to go to our customers and charge them more for our products and services and our solutions and also improve retention. The reason why we can do that is all the things I just said. We're constantly investing in the platform and our solutions so that we're showing the value. With small businesses, if you show the value, they're willing to pay. Again, in the small scheme of things, when we're talking about the increases we're talking about, it's probably a cup of coffee, you know, or two a month for one of our clients in terms of that. No. no I think that our viewpoint is, look, we don't take it for granted that we're able each year to go to our customers and charge them more for our products and services and our solutions and also improve retention. i think that our viewpoint is look we don't take it for granted that we're able each year to go to our customers and charge them more for our products and services and our solutions and also improve retention The reason why we can do that is all the things I just said. the reason why we can do that is all the things i just said We're constantly investing in the platform and our solutions so that we're showing the value. we're constantly investing in the platform and our solutions so that we're showing the value With small businesses, if you show the value, they're willing to pay. with small businesses if you show the value they're willing to pay Again, in the small scheme of things, when we're talking about the increases we're talking about, it's probably a cup of coffee, you know, or two a month for one of our clients in terms of that. again in the small scheme of things when we're talking about the increases we're talking about it's probably a cup of coffee you know or two a month for one of our clients in terms of that If we're providing that value, we feel good with the investments we're making, we can continue to do that. I do think there are portions of the Agentic AI model, there'll be things that we're doing that will allow us to provide some outcome-based pricing that could be a potential. Not doing any of that yet. If we're providing that value, we feel good with the investments we're making, we can continue to do that. if we're providing that value we feel good with the investments we're making we can continue to do that I do think there are portions of the Agentic AI model, there'll be things that we're doing that will allow us to provide some outcome-based pricing that could be a potential. i do think there are portions of the agentic ai model there'll be things that we're doing that will allow us to provide some outcome-based pricing that could be a potential Not doing any of that yet. not doing any of that yet

Speaker 2: Okay. Okay. okay

Speaker 1: Certainly something that we're talking about. When I look at it, I think we think we're adding additional value. Our customers are seeing that value, and I think that we're gonna be able to continue to really pass that value price on to our customers as we go forward. Certainly something that we're talking about. certainly something that we're talking about When I look at it, I think we think we're adding additional value. when i look at it i think we think we're adding additional value Our customers are seeing that value, and I think that we're gonna be able to continue to really pass that value price on to our customers as we go forward. our customers are seeing that value and i think that we're gonna be able to continue to really pass that value price on to our customers as we go forward

Speaker 2: Okay. Good. Bringing it back to the numbers, if you don't mind, John. Okay. okay Good. good Bringing it back to the numbers, if you don't mind, John. bringing it back to the numbers if you don't mind john

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Just thinking about the outlook and the models, I know you didn't give preliminary guidance for fiscal 2027. You'll be doing that pretty soon. You did express comfort with where consensus was, which we had interpreted it, okay, that's fine, no surprise, but it's running a little bit below what we think of as mid-cycle growth guidance for Paychex. Is that a fair characterization? What kind of macro factors maybe could be attributing to that? What might drive some acceleration or something to do a little bit better? There's so many things happening at Paychex. I'm really curious that what, you know, what could move the dial in the short term? Just thinking about the outlook and the models, I know you didn't give preliminary guidance for fiscal 2027. just thinking about the outlook and the models i know you didn't give preliminary guidance for fiscal 2027 You'll be doing that pretty soon. you'll be doing that pretty soon You did express comfort with where consensus was, which we had interpreted it, okay, that's fine, no surprise, but it's running a little bit below what we think of as mid-cycle growth guidance for Paychex. you did express comfort with where consensus was which we had interpreted it okay that's fine no surprise but it's running a little bit below what we think of as mid-cycle growth guidance for paychex Is that a fair characterization? is that a fair characterization What kind of macro factors maybe could be attributing to that? what kind of macro factors maybe could be attributing to that What might drive some acceleration or something to do a little bit better? what might drive some acceleration or something to do a little bit better There's so many things happening at Paychex. there's so many things happening at paychex I'm really curious that what, you know, what could move the dial in the short term? i'm really curious that what you know what could move the dial in the short term

Speaker 1: Yeah. Okay. Well, today I'm not going to give guidance, and I'm gonna give in June. Yeah. yeah Okay. okay Well, today I'm not going to give guidance, and I'm gonna give in June. well today i'm not going to give guidance and i'm gonna give in june

Speaker 2: No, I didn't expect you to. No, I didn't expect you to. no i didn't expect you to

Speaker 1: I think what we said, and which I think is true. I think what we said, and which I think is true. i think what we said and which i think is true

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Well, we told everybody at the start of last fiscal year that we were coming out of an integration and a transition, and that there were things that we need to accomplish. We need to see progress, and that what you would see is you would see, organic growth building quarter-by-quarter, bookings growing quarter-by-quarter. I think what we said on the last call was that when you look at the second half of the year growth rate, that feels to us like a good number. Well, we told everybody at the start of last fiscal year that we were coming out of an integration and a transition, and that there were things that we need to accomplish. well we told everybody at the start of last fiscal year that we were coming out of an integration and a transition and that there were things that we need to accomplish We need to see progress, and that what you would see is you would see, organic growth building quarter- by- quarter, bookings growing quarter- by- quarter. we need to see progress and that what you would see is you would see organic growth building quarter- by- quarter bookings growing quarter- by- quarter I think what we said on the last call was that when you look at the second half of the year growth rate, that feels to us like a good number. i think what we said on the last call was that when you look at the second half of the year growth rate that feels to us like a good number

Speaker 2: Yeah. Yeah. yeah

Speaker 1: for us to think about that we can go into next year. I think at the time that we made those comments, there was a lot of macro uncertainty in terms of what's going on. I think there's still, you know, we're not seeing it show up in the numbers. That'll be a question that Bob and I'm sure, will be talking about. for us to think about that we can go into next year. for us to think about that we can go into next year I think at the time that we made those comments, there was a lot of macro uncertainty in terms of what's going on. i think at the time that we made those comments there was a lot of macro uncertainty in terms of what's going on I think there's still, you know, we're not seeing it show up in the numbers. i think there's still you know we're not seeing it show up in the numbers That'll be a question that Bob and I'm sure, will be talking about. that'll be a question that bob and i'm sure will be talking about

Speaker 2: Of course. Of course. of course

Speaker 1: The other thing is, I think that we're still working through our, as we talked about, our product roadmap and launches that we'll be announcing over the course of the next, you know, 60-90-days, and those things will go into that equation as well. Look, I'm, I'm pleased with the progress we're making quarter after quarter in a very challenging environment, and doing that, and I'm very proud of the team 'cause we did it while Look, it is not easy to integrate a $4 billion acquisition in the middle of all the chaos that's been going on in the last year in the world. There's a lot of things to distract your employees from doing what they gotta do each day to get that job done. The other thing is, I think that we're still working through our, as we talked about, our product roadmap and launches that we'll be announcing over the course of the next, you know, 60- 90- days, and those things will go into that equation as well. the other thing is i think that we're still working through our as we talked about our product roadmap and launches that we'll be announcing over the course of the next you know 60- 90- days and those things will go into that equation as well Look, I'm, I'm pleased with the progress we're making quarter after quarter in a very challenging environment, and doing that, and I'm very proud of the team 'cause we did it while Look, it is not easy to integrate a $4 billion acquisition in the middle of all the chaos that's been going on in the last year in the world. look i'm i'm pleased with the progress we're making quarter after quarter in a very challenging environment and doing that and i'm very proud of the team 'cause we did it while look it is not easy to integrate a $4 billion acquisition in the middle of all the chaos that's been going on in the last year in the world There's a lot of things to distract your employees from doing what they gotta do each day to get that job done. there's a lot of things to distract your employees from doing what they gotta do each day to get that job done I'm so proud of the team for what they've done and the fact that we ended the third quarter, like I said, with really the one of the best booking increases I've seen in my 13-years at Paychex, and really see the momentum going into the back half of this fiscal year, and it gives us confidence of going into 2027. I'm so proud of the team for what they've done and the fact that we ended the third quarter, like I said, with really the one of the best booking increases I've seen in my 13- years at Paychex, and really see the momentum going into the back half of this fiscal year, and it gives us confidence of going into 2027. i'm so proud of the team for what they've done and the fact that we ended the third quarter like i said with really the one of the best booking increases i've seen in my 13- years at paychex and really see the momentum going into the back half of this fiscal year and it gives us confidence of going into 2027

Speaker 2: Yeah. No, I think it, you guys, it's been playing out a lot like you have said. I don't take for granted, right, the execution and how hard it is against, you know, the integration. Does feel like a lot of product momentum. That's why I asked the question. I'm excited to see how it all translates. Maybe just to close it out, John. Thanks for the time. Just thinking about, right, the dividend is what it is. You have upsized though the buyback authorization. That's created some question, right? Should we infer from that that there's a bias towards buying back stock versus maybe doing the next acquisition? I know you're a year away from Paycor and hard work to do there. How should we interpret the buyback being upped? Yeah. yeah No, I think it, you guys, it's been playing out a lot like you have said. no i think it you guys it's been playing out a lot like you have said I don't take for granted, right, the execution and how hard it is against, you know, the integration. i don't take for granted right the execution and how hard it is against you know the integration Does feel like a lot of product momentum. does feel like a lot of product momentum That's why I asked the question. that's why i asked the question I'm excited to see how it all translates. i'm excited to see how it all translates Maybe just to close it out, John. maybe just to close it out john Thanks for the time. thanks for the time Just thinking about, right, the dividend is what it is. just thinking about right the dividend is what it is You have upsized though the buyback authorization. you have upsized though the buyback authorization That's created some question, right? that's created some question right Should we infer from that that there's a bias towards buying back stock versus maybe doing the next acquisition? should we infer from that that there's a bias towards buying back stock versus maybe doing the next acquisition I know you're a year away from Paycor and hard work to do there. i know you're a year away from paycor and hard work to do there How should we interpret the buyback being upped? how should we interpret the buyback being upped

Speaker 1: Yeah. I. Yeah. yeah I. i

Speaker 2: authorization? authorization? authorization

Speaker 1: I would just interpret it as being opportunistic. I would just interpret it as being opportunistic. i would just interpret it as being opportunistic

Speaker 2: Okay. Okay. okay

Speaker 1: I think the same way we look at M&A, right? I think, you know, we don't have a commitment every year we're going to do M&A. You go back and look over a horizon of 10-years, what you'll find is that that adds to our growth story, and we expect that to happen over the next decade as well. That's opportunistic. You look at the things, M&A, dividends, all the things that we wanna do, buybacks, to be opportunistic. Your point, you know, number 1 is we did announce a rather generous 10%, 10.2%. I think the same way we look at M&A, right? i think the same way we look at m&a right I think, you know, we don't have a commitment every year we're going to do M&A. i think you know we don't have a commitment every year we're going to do m&a You go back and look over a horizon of 10- years, what you'll find is that that adds to our growth story, and we expect that to happen over the next decade as well. you go back and look over a horizon of 10- years what you'll find is that that adds to our growth story and we expect that to happen over the next decade as well That's opportunistic. that's opportunistic You look at the things, M&A, dividends, all the things that we wanna do, buybacks, to be opportunistic. you look at the things m&a dividends all the things that we wanna do buybacks to be opportunistic Your point, you know, number 1 is we did announce a rather generous 10%, 10.2%. your point you know number 1 is we did announce a rather generous 10% 10.2%