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01/11 04:04
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary indicates strong financial performance with high revenue growth expectations, a successful Paycor acquisition, and robust EPS growth. The Q&A section reveals positive sentiments towards PEO growth, retention rates, and revenue synergies. Despite some challenges, such as competitive markets and integration disruptions, the overall outlook remains optimistic, supported by strategic partnerships and AI-driven productivity improvements. The positive guidance and strong performance metrics suggest a likely stock price increase over the next two weeks.
Total Revenue $1.5 billion, a 17% increase year-over-year. This growth was primarily driven by the addition of Paycor, higher revenue per client due to price realization, and increased product penetration.
Management Solutions Revenue $1.2 billion, a 21% increase year-over-year. This was mainly due to the addition of Paycor, which contributed approximately 17% to the growth, as well as higher revenue per client and increased product penetration.
PEO and Insurance Solutions Revenue $329 million, a 3% increase year-over-year. This growth was driven by solid growth in the number of average PEO worksite employees, despite at-risk plan headwinds.
Interest on Funds Held for Clients $48 million, a 27% increase year-over-year. This increase was due to the inclusion of Paycor balances.
Total Expenses $998 million, a 29% increase year-over-year. This increase was primarily driven by the Paycor acquisition.
Operating Income Margins 35.2%, with adjusted operating income margins at 40.7%. No specific year-over-year comparison provided.
Diluted Earnings Per Share $1.06, a 10% decrease year-over-year. Adjusted diluted earnings per share increased 5% to $1.22. The decrease in diluted EPS was not explicitly explained, but adjusted EPS growth reflects operational performance.
Cash Flow from Operations $718 million, primarily driven by net income. No specific year-over-year comparison provided.
Cash, Restricted Cash, and Total Corporate Investments $1.7 billion as of August 31, 2025. No specific year-over-year comparison provided.
Total Borrowings Approximately $5 billion as of August 31, 2025. No specific year-over-year comparison provided.
Return to Shareholders $549 million in the form of cash dividends and share repurchases during the quarter. No specific year-over-year comparison provided.
12-Month Rolling Return on Equity 40%. No specific year-over-year comparison provided.
Bill Pay; Powered by BILL: A new financial management solution designed to simplify payments for SMBs. It integrates payroll, HR, and accounts payable into a seamless experience, providing real-time financial clarity for small business owners. Future plans include expanding to accounts receivable.
Generative AI-powered HR guidance tool: Launched in June, this tool uses insights from 40 million client interactions annually to provide efficient and effective responses to client queries, enhancing client support.
AI insights for workforce questions: Expanded to serve PEO clients, providing instant insights on pay, equity, turnover, hiring trends, and labor costs through a chat interface.
Paycor integration: Progress in integrating Paycor, targeting revenue synergies and exceeding cost synergy expectations. Cross-selling Paychex solutions to Paycor's 50,000 clients is a key focus.
Partner Plus program: Broker enrollment nearly doubled since June, strengthening referral channels for new business.
CPA Partner Pro portal: Launched to enhance partnerships with CPAs, supporting small and midsized businesses.
AI tools for internal operations: Deployed AI tools to enhance operational efficiency, improve code quality, and automate tasks in software engineering.
Agentic AI solutions: Piloted to manage routine client interactions autonomously, improving efficiency and client experience.
PEO business growth: Mid-single-digit growth in worksite employees, leveraging scale and capabilities to attract small businesses.
Small business resilience: Stable employment and moderating wage inflation observed, with renewed business confidence due to clarity on tariffs, taxes, and inflation.
Integration of Paycor: While the integration of Paycor is progressing well, there is a risk of not achieving the targeted revenue and cost synergies, which could impact financial performance and operational efficiency.
Economic Environment: Although small businesses remain resilient, any unexpected economic downturns or changes in the macroeconomic environment could adversely affect client demand and revenue growth.
PEO Business Challenges: The PEO business faces 'at-risk plan headwinds,' which could limit growth despite strong demand and retention performance.
AI and Technology Investments: Heavy reliance on AI and technology investments carries risks such as implementation challenges, cybersecurity threats, and the potential for not achieving the expected operational efficiencies or client satisfaction.
Revenue Growth Dependence: Revenue growth is heavily dependent on cross-selling and upselling to Paycor's client base. Failure to effectively execute this strategy could hinder revenue expansion.
Regulatory and Tax Changes: While current clarity on tariffs, taxes, and inflation is beneficial, any future regulatory or tax changes could disrupt business operations and financial planning.
Operational Costs: Total expenses increased significantly (29%) due to the Paycor acquisition, which could pressure margins if revenue growth does not offset these costs.
Total Revenue Growth: Expected to grow between 16.5% and 18.5% for fiscal 2026.
Management Solutions Revenue Growth: Expected to grow in the range of 20% to 22% for fiscal 2026.
PEO and Insurance Solutions Revenue Growth: Expected to grow in the range of 6% to 8% for fiscal 2026.
Interest on Funds Held for Clients: Expected to be in the range of $190 million to $200 million for fiscal 2026.
Adjusted Operating Income Margin: Expected to be approximately 43% for fiscal 2026.
Effective Income Tax Rate: Expected to be in the range of 24% to 25% for fiscal 2026.
Adjusted Diluted Earnings Per Share Growth: Expected to grow between 9% and 11% for fiscal 2026, up from the previous guidance of 8.5% to 10.5%.
Second Quarter Revenue Growth: Anticipated to be approximately 18%.
Second Quarter Adjusted Operating Margin: Anticipated to be approximately 41%.
Cash Dividends: $549 million returned to shareholders during the quarter in the form of cash dividends and share repurchases.
Share Repurchases: $549 million returned to shareholders during the quarter in the form of cash dividends and share repurchases.
The earnings call presents a mixed outlook. Financial performance shows strong adjusted EPS growth and shareholder returns, but overall EPS fell. The Q&A reveals concerns about Paycor integration, smaller deal sizes, and cost-conscious clients, which may dampen growth. However, AI deployment and strong PEO performance could drive future gains. The company's guidance remains cautious, with management comfortable at the low end. Without clear market cap data, the overall sentiment remains neutral, reflecting a balance of positive and negative factors.
The earnings call summary indicates strong financial performance with high revenue growth expectations, a successful Paycor acquisition, and robust EPS growth. The Q&A section reveals positive sentiments towards PEO growth, retention rates, and revenue synergies. Despite some challenges, such as competitive markets and integration disruptions, the overall outlook remains optimistic, supported by strategic partnerships and AI-driven productivity improvements. The positive guidance and strong performance metrics suggest a likely stock price increase over the next two weeks.
The earnings call highlighted strong financial performance with expected revenue and EPS growth, and optimistic guidance for Paycor's acquisition. The Q&A addressed concerns about sales force disruptions and macroeconomic trends, with management providing reassuring responses. Positive indicators include the integration of Paycor, focus on organic growth, and maintaining shareholder returns. Despite some uncertainties, the overall sentiment is positive, supported by expected revenue synergies and growth in the PEO business. The combination of these factors suggests a likely positive stock price movement in the short term.
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