Loading...
01/11 04:04
Loading...
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Total Revenue $1.6 billion, an increase of 18% year-over-year. Growth was driven by product penetration and price realization, though moderated by softer-than-expected revenue per client.
Management Solutions Revenue $1.2 billion, an increase of 21% year-over-year. Paycor contributed approximately 17 percentage points to this growth. Growth was primarily driven by product penetration and price realization.
PEO and Insurance Solutions Revenue $337 million, an increase of 6% year-over-year. Growth was driven by solid growth in the number of average PEO worksite employees and an increase in PEO insurance revenues. However, the insurance agency faced headwinds due to continued weakness in workers' compensation rates and lower health and benefit volumes.
Interest on Funds Held for Clients $54 million, an increase of 51% year-over-year. This was due to the addition of Paycor balances and higher realized gains from strategic repositioning in the long-term investment portfolio.
Total Expenses $986 million, an increase of 27% year-over-year. This increase was primarily driven by the Paycor acquisition. Excluding Paycor, expenses grew in the low single digits.
Operating Income Margins 36.7%, with adjusted operating income margins increasing by approximately 80 basis points year-over-year to 41.7%. This was driven by increased productivity and continued cost discipline.
Diluted Earnings Per Share $1.10, a decrease of 4% year-over-year. Adjusted diluted earnings per share increased by 11% to $1.26.
Operating Cash Flows $445 million, largely driven by net income.
Shareholder Returns $514 million returned to shareholders in the form of cash dividends and share buybacks during the quarter.
Return on Equity 40% on a 12-month rolling basis.
AI-powered knowledge mesh system: Transforms unstructured data into a connected searchable network, unlocking deep insights and enabling smarter workforce management.
GenAI-powered employment law and compliance platform: Helps clients and HR experts navigate changing laws, generate compliant documents, and stay updated with regulations.
Agentic AI pilots: Successfully handled thousands of payroll calls and emails with nearly 100% accuracy, reducing payroll processing time.
PEO business growth: Achieved mid-single-digit worksite employee growth driven by strong demand and near-record retention.
Broker relationships and Partner Plus program: Strengthened broker relationships and expanded integration with Paycor, enhancing cross-sales efforts.
Cost synergies from Paycor integration: Identified $100 million in cost synergies for fiscal year 2026.
AI-driven operational efficiencies: Integrated AI into operational systems, improving productivity and enabling strategic advisory support.
AI-driven strategy: Focused on leveraging proprietary data and AI to enhance client outcomes, expand margins, and strengthen leadership in HCM.
Paycor acquisition and integration: Progressed in integrating Paycor, aligning go-to-market, technology, and cultural initiatives.
Revenue per client: Softer-than-expected revenue per client moderated overall revenue growth, indicating potential challenges in achieving revenue targets.
Insurance agency performance: Continued weakness in workers' compensation rates and lower health and benefit volumes created a headwind for the insurance agency.
Macroeconomic uncertainty: The current macro environment presents some uncertainty, which could impact fiscal 2026 performance.
Integration of Paycor: The complexity and scale of integrating Paycor, including achieving cost and revenue synergies, pose operational and strategic challenges.
Small business labor market: Small businesses face challenges sourcing qualified talent in competitive labor markets, which could impact client retention and growth.
Workers' compensation rates: Weakness in workers' compensation rates negatively affects the insurance segment's revenue.
Fiscal 2026 Revenue Guidance: Management Solutions, PEO and Insurance, and total revenue are expected to come in towards the low end of the previously provided ranges. Interest on funds held for clients is expected to be at the high end of the $190 million to $200 million range.
Earnings Expectations for Fiscal 2026: Adjusted diluted earnings per share are now expected to grow between 10% and 11%, up from the previous guidance of 9% to 11%. The effective income tax rate for the year is expected to be approximately 24%.
Third Quarter Fiscal 2026 Projections: Total revenue growth is anticipated to be approximately 18%, with an adjusted operating margin between 47% and 48%. This quarter is expected to be one of the larger quarters in terms of revenue and operating margin due to higher-margin year-end fees.
Cash Dividends: During the quarter, $514 million was returned to shareholders in the form of cash dividends and share buybacks.
Share Buybacks: During the quarter, $514 million was returned to shareholders in the form of cash dividends and share buybacks.
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.
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
