Core Viewpoint - Paychex reported strong fourth-quarter fiscal 2025 results, with earnings and revenues exceeding estimates, indicating positive momentum leading up to the next earnings release [2][12]. Financial Performance - Paychex's Q4 earnings were $1.19 per share, a 6.3% increase year-over-year, and total revenues reached $1.4 billion, a 10% increase from the previous year [2]. - Management Solutions segment revenues grew 12% year-over-year to $1 billion, driven by the acquisition of Paycor and increased revenues per client [3]. - Professional employer organization (PEO) and Insurance Solutions revenues were $340.3 million, up 4% year-over-year, supported by growth in average PEO worksite employees [4]. - Service revenues increased 10% year-over-year to $1.4 billion, while interest on funds held for clients rose 18% to $45.2 million [5]. Profitability Metrics - EBITDA decreased 1% year-over-year to $518.2 million, missing estimates, while operating income fell 11% to $431.1 million, also below projections [6]. - The operating margin was reported at 30.2%, down 700 basis points from the previous year, but still exceeded estimates [6]. Balance Sheet & Cash Flow - At the end of Q4 fiscal 2025, Paychex had cash and cash equivalents of $1.6 billion, with long-term debt totaling $4.5 billion [7]. - Cash generated from operating activities was $394 million, with capital expenditures amounting to $60.5 million [7]. Future Guidance - For fiscal year 2025, Paychex expects revenue growth of 16.5-18.5% and has raised its forecast for interest on funds held for clients to $190-$200 million [8]. Market Sentiment - Recent estimates for Paychex have trended upward, reflecting positive market sentiment and expectations for above-average returns in the coming months [9][12].

Group 1: Technology Sector Overview - Technology stocks constitute approximately one-third of the S&P 500 index and are significantly outperforming the broader index this year [1] - The lack of dividends in many tech stocks is due to reinvestment of profits into scaling successful products, research, and AI infrastructure [2][4] Group 2: Cisco Systems - Cisco Systems reported third-quarter fiscal 2025 revenue of $14.1 billion, an 11% increase year-over-year, with earnings per share (EPS) of $0.62, up 35% from the previous year [5] - The company generated over $1 billion in AI-related revenue in 2024 and aims to double that in 2025, aided by the $28 billion acquisition of Splunk [6] - Cisco's stock has risen 15% in 2025 and offers a dividend yield of 2.3% [7] Group 3: International Business Machines (IBM) - IBM, known for its long history, is currently focused on cybersecurity, cloud computing, and consulting, with 81% of Fortune 500 companies using its mainframe computers [8] - The company has gained 30% in stock value this year, bolstered by its 2019 acquisition of Red Hat, which enhanced its hybrid cloud-computing capabilities [9] - Analysts project IBM's revenue to increase by 5.5% to $66.2 billion this year, with a further 4% growth expected in fiscal year 2026, alongside a 2.3% dividend yield [10] Group 4: Paychex - Paychex, a leader in payroll and human resources services, surpassed $5 billion in revenue in 2024 and serves over 745,000 clients [11][13] - The company experienced double-digit growth in its retirement services division, which now manages $52 billion in assets [13] - Paychex's revenue for fiscal Q4 2025 was $1.42 billion, a 10% increase year-over-year, despite an 11% drop in operating income due to a $4 billion acquisition of Paycor [13] - The company forecasts revenue growth of 16.5% to 18.5% and EPS growth of 8.5% to 10.5% for the next fiscal year [14] - Paychex stock has increased by 2% this year and offers a dividend yield of 3%, with a forward price-to-earnings (P/E) ratio of 26 [15]

Part I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) Paychex is a leading Human Capital Management (HCM) company providing a full suite of technology and advisory solutions in HR, benefits, insurance, and payroll to approximately 800,000 clients - Paychex is an industry-leading Human Capital Management (HCM) company serving approximately **800,000 clients** across the U.S. and parts of Europe as of May 31, 2025[18](index=18&type=chunk) - On April 14, 2025, the company completed its acquisition of Paycor HCM, Inc. to enhance its capabilities in the upmarket segment, expand its sales force, and bolster its AI-driven HCM solutions[22](index=22&type=chunk) - The company's strategy is centered on four key elements: growing its client base, expanding share of wallet with a full suite of solutions, driving technology innovation with AI, and pursuing strategic acquisitions[24](index=24&type=chunk)[30](index=30&type=chunk) - Client retention for fiscal 2025 was strong, remaining in the range of **82% to 83%** of the beginning client base[26](index=26&type=chunk) [Our Solutions](index=7&type=section&id=Our%20Solutions) Paychex provides comprehensive Human Capital Management solutions, including technology platforms for payroll, HR, and benefits, alongside PEO and insurance services, notably as the largest 401(k) recordkeeper for small businesses - Paychex offers a comprehensive portfolio of solutions categorized into Management Solutions and PEO/Insurance Solutions, including HCM technology platforms and modules for payroll, HR, talent, and benefits administration[31](index=31&type=chunk)[33](index=33&type=chunk)[36](index=36&type=chunk) - The company is the largest **401(k) recordkeeper** for small businesses in the U.S., offering a variety of retirement solutions including 401(k) plans, SIMPLE and SEP IRAs, and Pooled Employer Plans[36](index=36&type=chunk) [Sales and Marketing](index=9&type=section&id=Sales%20and%20Marketing) The company leverages a direct sales force and significant referral channels, including a key partnership with the AICPA, to drive new client acquisition - The company utilizes a direct sales force and indirect channels, including referrals from existing clients, CPAs, benefit brokers, and banks, with over **50% of new payroll clients** originating from these referral sources[34](index=34&type=chunk)[35](index=35&type=chunk) - Paychex has a long-standing partnership with the AICPA as the preferred payroll provider, with the current agreement in place through September 2027[37](index=37&type=chunk) [Human Capital](index=10&type=section&id=Human%20Capital) As of May 31, 2025, Paychex employed approximately 19,000 people, with compensation representing 55% of total expenses, and has been consistently recognized for its ethical practices - As of May 31, 2025, Paychex employed approximately **19,000 people**, primarily in the U.S. on a full-time basis, with none covered by collective bargaining agreements[48](index=48&type=chunk) - For fiscal year 2025, compensation-related expenses accounted for approximately **55% of the company's total expenses**[52](index=52&type=chunk) - Paychex was recognized by Ethisphere as one of the World's Most Ethical Companies for the **17th consecutive time** in 2025[49](index=49&type=chunk) [Item 1A. Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company identifies several key risks that could materially affect its business, including operational, financial, regulatory, and general macroeconomic factors - **Business & Operational Risks:** The company faces risks from rapid technological changes, potential software defects, cyberattacks targeting its vast data stores, and challenges related to the successful integration of acquisitions, specifically mentioning Paycor[62](index=62&type=chunk)[64](index=64&type=chunk)[72](index=72&type=chunk) - **Financial Risks:** Key financial risks include potential losses if clients have insufficient funds for payroll, the impact of regulatory changes on interest earned from client funds, and risks associated with its **$4.2 billion** in corporate bonds issued in April 2025 to fund the Paycor acquisition, requiring adherence to debt covenants including a maximum leverage ratio of **3.5:1.0**[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk)[80](index=80&type=chunk) - **Legal & Regulatory Risks:** The business is subject to complex and changing government regulations, including data privacy laws (like GDPR and CCPA), anti-money laundering rules, and employment laws, with failure to comply potentially resulting in significant penalties and reputational damage[85](index=85&type=chunk)[86](index=86&type=chunk)[88](index=88&type=chunk) - **General Risks:** Macroeconomic factors such as inflation and interest rate changes can adversely impact Paychex's small and medium-sized business clients, potentially reducing demand for its services, and the company also faces risks from political volatility and competition for qualified talent[93](index=93&type=chunk)[94](index=94&type=chunk)[97](index=97&type=chunk) [Item 1C. Cybersecurity](index=23&type=section&id=Item%201C.%20Cybersecurity) Paychex's cybersecurity program is aligned with the NIST Cybersecurity Framework 2.0, employing a layered controls approach to manage threats, overseen by the Audit Committee and managed by the Enterprise Security Organization - The company's security program is aligned with the National Institute of Standards and Technology Version 2.0 Cybersecurity Framework (NIST CSF) and uses a layered controls approach[101](index=101&type=chunk) - Cybersecurity governance is handled by the Audit Committee of the Board, which receives quarterly updates from the Chief Information Security Officer (CISO), with management's implementation overseen by a Security Governance Council (SGC) chaired by the CISO[107](index=107&type=chunk)[108](index=108&type=chunk) - The Enterprise Security Organization (ESO) includes the Paychex Cyber Fusion Center, which provides **24x7x365** cybersecurity monitoring and incident response[103](index=103&type=chunk) - As of May 31, 2025, the company is not aware of any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect its business, operations, or financial condition[106](index=106&type=chunk) [Item 2. Properties](index=25&type=section&id=Item%202.%20Properties) As of May 31, 2025, Paychex owned approximately 998,000 square feet of facility space, primarily in Rochester, NY, and leased approximately 1,198,000 square feet across the U.S. and international locations Owned and Leased Properties as of May 31, 2025 | Facility Type | Location | Square Feet | | :--- | :--- | :--- | | **Owned** | Rochester, NY | 832,000 | | | Other U.S. locations | 166,000 | | | **Total Owned** | **998,000** | | **Leased** | Rochester, NY | 53,000 | | | Other U.S. locations | 865,000 | | | International locations | 280,000 | | | **Total Leased** | **1,198,000** | Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=26&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Paychex common stock trades on the NASDAQ Global Select Market under the symbol 'PAYX', with the company having a history of paying quarterly dividends and a share repurchase program approved in January 2024 Fiscal 2025 Share Repurchases | Period | Total Shares Purchased (millions) | Average Price Paid per Share | Total Dollars (millions) | Approximate Value Remaining for Purchase (millions) | | :--- | :--- | :--- | :--- | :--- | | First Quarter | 0.8 | $125.50 | $104.0 | $296.0 | | Second Quarter | — | $— | $— | $296.0 | | Third Quarter | — | $— | $— | $296.0 | | Fourth Quarter | — | $— | $— | $296.0 | | **Fiscal Year Total** | **0.8** | **$125.50** | **$104.0** | **$296.0** | Five-Year Cumulative Total Return Comparison | Date | Paychex | S&P 500 | Peer Group | | :--- | :--- | :--- | :--- | | May 31, 2020 | $100.00 | $100.00 | $100.00 | | May 31, 2021 | $144.16 | $140.30 | $127.00 | | May 31, 2022 | $180.70 | $139.86 | $118.53 | | May 31, 2023 | $157.41 | $143.91 | $121.82 | | May 31, 2024 | $185.79 | $184.45 | $153.68 | | May 31, 2025 | $251.16 | $209.35 | $186.69 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal 2025, Paychex's total revenue grew 6% to $5.6 billion, driven by growth in both Management Solutions and PEO and Insurance Solutions, along with higher interest on funds held for clients, with the Paycor acquisition contributing to this growth Fiscal 2025 Financial Highlights vs. Fiscal 2024 | Metric | Fiscal 2025 (in millions) | Fiscal 2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $5,571.7 | $5,278.3 | 6% | | Operating Income | $2,207.7 | $2,174.1 | 2% | | Adjusted Operating Income | $2,370.0 | $2,213.6 | 7% | | Net Income | $1,657.3 | $1,690.4 | (2)% | | Adjusted Net Income | $1,802.9 | $1,709.1 | 5% | | Diluted EPS | $4.58 | $4.67 | (2)% | | Adjusted Diluted EPS | $4.98 | $4.72 | 6% | - The acquisition of Paycor on April 14, 2025, is a key event, extending the company's upmarket position and expanding its suite of HR technology and advisory solutions[134](index=134&type=chunk) HR Solutions Client Metrics | Metric (as of May 31) | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Paychex HR solutions (ASO and PEO) client worksite employees | 2,460,000 | 2,332,000 | 5% | | Retirement solutions plans | 124,000 | 121,000 | 3% | | Asset value of retirement solutions participants' funds (in billions) | $55.7 | $51.8 | 8% | [Results of Operations](index=32&type=section&id=Results%20of%20Operations) In fiscal 2025, total revenue increased 6% to $5.57 billion, primarily from service revenue and interest on client funds, while adjusted operating margin improved despite a slight decline in reported operating margin Revenue Breakdown (Fiscal Year 2025 vs 2024) | Revenue Source | FY 2025 (in millions) | FY 2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Management Solutions | $4,067.1 | $3,866.4 | 5% | | PEO and Insurance Solutions | $1,342.9 | $1,265.6 | 6% | | **Total Service Revenue** | **$5,410.0** | **$5,132.0** | **5%** | | Interest on funds held for clients | $161.7 | $146.3 | 10% | | **Total Revenue** | **$5,571.7** | **$5,278.3** | **6%** | Expense Breakdown (Fiscal Year 2025 vs 2024) | Expense Category | FY 2025 (in millions) | FY 2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Compensation-related expenses | $1,853.0 | $1,810.4 | 2% | | PEO direct insurance costs | $520.1 | $471.3 | 10% | | Other expenses | $659.8 | $606.5 | 9% | | Acquisition-related costs | $162.3 | $— | n/m | | Cost optimization initiatives | $— | $39.5 | n/m | | **Total Expenses** | **$3,364.0** | **$3,104.2** | **8%** | - Operating margin for fiscal 2025 was **39.6%**, down from **41.2%** in fiscal 2024, however, the adjusted operating margin, which excludes acquisition costs and other non-core items, increased to **42.5%** from **41.9%**[148](index=148&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong financial position with $1.7 billion in cash and investments, supported by $5.0 billion in long-term debt, primarily from financing the Paycor acquisition - The company's financial position remains strong with **$1.7 billion** in cash, restricted cash, and total corporate investments as of May 31, 2025, and it has **$5.0 billion** in long-term borrowings outstanding[157](index=157&type=chunk) - To finance the Paycor acquisition, the company issued **$4.2 billion** in fixed-rate corporate bonds in April 2025 and entered into a bridge loan commitment which was subsequently canceled[167](index=167&type=chunk)[168](index=168&type=chunk) Cash Flow Summary (Fiscal Year 2025 vs 2024) | Cash Flow Activity (in millions) | FY 2025 | FY 2024 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $1,900.9 | $1,897.7 | $3.2 | | Net cash used in investing activities | $(3,356.8) | $(260.9) | $(3,095.9) | | Net cash provided by/(used in) financing activities | $2,293.2 | $(1,874.7) | $4,167.9 | - The significant increase in cash used in investing activities and cash provided by financing activities in FY2025 is primarily due to the acquisition of Paycor and the related debt issuance[181](index=181&type=chunk)[190](index=190&type=chunk) [Critical Accounting Policies and Estimates](index=42&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies encompass revenue recognition, PEO insurance reserves, goodwill and intangible asset impairment, stock-based compensation, and business combinations, with significant judgment applied to PEO reserves and acquisition accounting - Key critical accounting policies include revenue recognition, accounting for PEO insurance reserves, goodwill and intangible asset impairment testing, stock-based compensation valuation, and accounting for business combinations[186](index=186&type=chunk) - PEO insurance reserves are a critical estimate, particularly for workers' compensation, which involves using independent actuarial estimates based on historical claims, loss development factors, and future cost trends[194](index=194&type=chunk) - For business combinations, the company uses the acquisition method, which requires significant judgment in allocating the purchase price to the fair values of assets acquired and liabilities assumed, with the excess recorded as goodwill[206](index=206&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Paychex is primarily exposed to market risk from changes in interest rates, affecting earnings on client funds and corporate investments, which it manages by investing in high-quality, short- to intermediate-term instruments - The average interest rate earned on the combined funds held for clients and corporate investment portfolios was **3.7%** in fiscal 2025, down from **3.8%** in fiscal 2024[212](index=212&type=chunk) - A **25-basis-point change** in short-term interest rates is estimated to affect after-tax earnings by approximately **$6.0 million to $6.5 million** over a twelve-month period[217](index=217&type=chunk) - As of May 31, 2025, the combined funds held for clients and corporate available-for-sale securities had net unrealized losses of **$53.6 million**, a significant improvement from **$162.5 million** at the end of fiscal 2024[219](index=219&type=chunk) - The company is also exposed to credit risk through its investments and client receivables, but believes its high-quality portfolio (predominantly **AA rated or higher**) and monitoring procedures mitigate this risk, with no investments deemed impaired due to credit risk as of May 31, 2025[224](index=224&type=chunk)[225](index=225&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=52&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for the fiscal year ended May 31, 2025, and the preceding two years, along with the auditor's report and notes - Management concluded that the company maintained effective internal control over financial reporting as of May 31, 2025, with the assessment excluding the recently acquired Paycor, which represented approximately **8% of total assets** and **2% of revenues**[233](index=233&type=chunk)[234](index=234&type=chunk) - The independent auditor, PricewaterhouseCoopers LLP, identified two Critical Audit Matters: (1) the valuation of PEO workers' compensation insurance reserves due to significant management judgment, and (2) the valuation of customer relationships acquired in the Paycor acquisition due to the subjectivity of assumptions like revenue growth and discount rates[247](index=247&type=chunk)[249](index=249&type=chunk)[252](index=252&type=chunk) [Consolidated Financial Statements](index=57&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's audited consolidated financial statements, including income statements, balance sheets, and cash flow statements, for the fiscal years ended May 31, 2025, 2024, and 2023 Consolidated Statement of Income (in millions, except per share) | Metric | FY 2025 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | | Total Revenue | $5,571.7 | $5,278.3 | $5,007.1 | | Operating Income | $2,207.7 | $2,174.1 | $2,033.1 | | Net Income | $1,657.3 | $1,690.4 | $1,557.3 | | Diluted EPS | $4.58 | $4.67 | $4.30 | Consolidated Balance Sheet (in millions) | Metric | As of May 31, 2025 | As of May 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $8,916.5 | $7,251.5 | | Goodwill | $4,514.1 | $1,882.7 | | **Total Assets** | **$16,564.1** | **$10,383.1** | | Total Current Liabilities | $6,956.3 | $5,309.1 | | Long-term Debt, net | $4,548.4 | $798.6 | | **Total Liabilities** | **$12,436.1** | **$6,582.1** | | **Total Stockholders' Equity** | **$4,128.0** | **$3,801.0** | [Notes to Consolidated Financial Statements](index=61&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key notes detail the $4.1 billion Paycor acquisition, which significantly impacted goodwill and intangible assets, an increase in stock-based compensation, and the company's $5.0 billion long-term debt structure - **Note D (Business Combinations):** On April 14, 2025, Paychex acquired Paycor for total consideration of approximately **$4.1 billion**, adding **$2.6 billion** in goodwill and **$1.8 billion** in identifiable intangible assets, primarily customer relationships (**$1.1 billion**) and developed technology (**$367 million**)[337](index=337&type=chunk)[346](index=346&type=chunk)[348](index=348&type=chunk) - **Note F (Stock-Based Compensation):** Total stock-based compensation expense was **$111.8 million** in FY2025, up from **$61.1 million** in FY2024, partly due to replacement awards issued in the Paycor acquisition[356](index=356&type=chunk)[361](index=361&type=chunk) - **Note N (Long-term Financing):** As of May 31, 2025, total long-term debt was **$5.0 billion**, consisting of **$0.8 billion** in Senior Notes and **$4.2 billion** in Corporate Bonds issued in April 2025 to finance the Paycor acquisition[414](index=414&type=chunk) [Item 9A. Controls and Procedures](index=100&type=section&id=Item%209A.%20Controls%20and%20Procedures) Based on an evaluation as of May 31, 2025, the company's principal executive officer and principal financial officer concluded that Paychex's disclosure controls and procedures were effective - The company's principal executive and financial officers concluded that as of May 31, 2025, the company's disclosure controls and procedures were effective[437](index=437&type=chunk) - No changes occurred during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[438](index=438&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=102&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section provides information on the company's executive officers as of May 31, 2025, including their ages, positions, and business experience, with new executives joining from the Paycor acquisition Key Executive Officers as of May 31, 2025 | Name | Age | Position | | :--- | :--- | :--- | | John B. Gibson | 59 | President and CEO | | Robert L. Schrader | 53 | Chief Financial Officer | | Mason Argiropoulos | 47 | Chief Human Resources Officer | | Sipi Bhandari | 54 | Chief Legal Officer, Chief Ethics Officer and Secretary | | Adam Ante | 44 | Senior Vice President, Paycor | | Ryan Bergstrom | 46 | Chief Product Officer | [Item 11. Executive Compensation](index=104&type=section&id=Item%2011.%20Executive%20Compensation) All detailed information regarding executive compensation, including the Compensation Discussion and Analysis, executive and director compensation tables, and the Compensation and Leadership Committee Report, is incorporated by reference from the company's forthcoming 2025 Proxy Statement - All detailed information regarding executive compensation is incorporated by reference from the company's forthcoming 2025 Proxy Statement[448](index=448&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=104&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section provides details on the company's equity compensation plans as of May 31, 2025, including securities to be issued upon option exercise and those remaining available for future issuance Equity Compensation Plan Information as of May 31, 2025 | Plan Category | Number of securities to be issued upon exercise of outstanding options (in millions) | Weighted-average exercise price of outstanding options | Number of securities remaining available for future issuance (in millions) | | :--- | :--- | :--- | :--- | | Equity compensation plan approved by security holders | 3.0 | $84.33 | 12.0 | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=105&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) All detailed information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's forthcoming 2025 Proxy Statement - All detailed information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's forthcoming 2025 Proxy Statement[452](index=452&type=chunk) [Item 14. Principal Accounting Fees and Services](index=105&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) All detailed information regarding principal accounting fees and services is incorporated by reference from the company's forthcoming 2025 Proxy Statement - All detailed information regarding principal accounting fees and services is incorporated by reference from the company's forthcoming 2025 Proxy Statement[453](index=453&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=106&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K, including the Paycor merger agreement and debt agreements - This section contains a comprehensive list of all exhibits filed with the Form 10-K, including material contracts, debt instruments, and governance documents[455](index=455&type=chunk) [Item 16. Form 10-K Summary](index=108&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable as the report indicates there is no Form 10-K summary provided - The registrant has provided no summary for Form 10-K[459](index=459&type=chunk)

Group 1: Labor Market Overview - The U.S. job market exceeded expectations for the 11th consecutive month, with 147,000 jobs added in June compared to the forecast of 110,000 [1] - The unemployment rate decreased from 4.2% to 4.1%, better than the expected 4.3% [1] - Average hourly earnings increased by 0.2% month-over-month and 3.7% year-over-year [1] Group 2: Payroll Stocks Performance - Paylocity Holding Corporation (PCTY) and Dayforce (DAY) saw stock increases of over +2% and +1% respectively, both classified as Zacks Rank 3 (Hold) [2] - Paychex (PAYX) is noted for its integrated Human Capital Management (HCM) solutions and has a Zacks Rank 2 (Buy), with expectations for steady growth in top and bottom lines [3] - Maximus (MMS) is identified as a strong buy with a Zacks Rank 1 (Strong Buy), despite a 21% decline from its 52-week high, attributed to a spike in FY25 EPS estimates by 7% [5] Group 3: Market Reactions and Economic Implications - The dip in Maximus stock followed the announcement of 7,000 federal government job cuts, but this may be an overreaction given the addition of 47,000 state government jobs and 19,000 social assistance jobs [6] - The resilient labor market and better-than-expected jobs report contribute positively to the stock market's recovery, making payroll stocks particularly attractive [8]

Core Insights - Paychex reported a nearly 10% decline in stock price following the announcement of its Q4 FY'25 results, despite a year-over-year revenue growth of 10% to $1.43 billion and adjusted earnings increasing by 6% to $1.19 per share [2] - The company's FY'26 guidance of 16.5% to 18.5% revenue growth was below market expectations, contributing to investor disappointment [2] - Challenges include integration issues from the recent acquisition of Paycor and rising interest costs from debt incurred for the acquisition, along with the negative impact of the conclusion of the Employee Retention Tax Credit program [2] Financial Performance - Paychex's revenues have shown modest growth, with a 4.3% increase from $5.2 billion to $5.4 billion over the last year, compared to a 5.5% growth for the S&P 500 [7] - Quarterly revenues rose by 4.8% to $1.5 billion in the latest quarter, matching the S&P 500's improvement [8] - The company has an average annual growth rate of 6.6% over the past three years, slightly outperforming the S&P 500's 5.5% [7] Profitability Metrics - Paychex's net income for the last four quarters was $1.7 billion, resulting in a net income margin of 32.0%, significantly higher than the S&P 500's 11.6% [9] - The operating income for the last four quarters was $2.3 billion, reflecting a high operating margin of 41.5% [15] - Operating cash flow during this period was $1.8 billion, indicating a strong operating cash flow margin of 32.7% compared to the S&P 500's 14.9% [15] Financial Stability - Paychex's debt stood at $864 million, with a market capitalization of $50 billion, resulting in a low debt-to-equity ratio of 1.6% compared to the S&P 500's 19.4% [10] - Cash and cash equivalents amount to $1.6 billion, contributing to a cash-to-assets ratio of 14.3% out of total assets of $11 billion [10] Valuation Comparison - Paychex's price-to-sales (P/S) ratio is 10.1, significantly higher than the S&P 500's 3.1 [7] - The price-to-free cash flow (P/FCF) ratio is 34.3 compared to 20.9 for the S&P 500, and the price-to-earnings (P/E) ratio is 31.6 versus 26.9 for the benchmark [7][4] - The elevated valuation of Paychex stock raises concerns about its upside potential in the short to medium term [14]

Group 1 - The article promotes a subscription service called Beyond the Wall Investing, which offers high-quality analysis of Wall Street buying and selling ideas [1] - Daniel Sereda is highlighted as the chief investment analyst at a family office, emphasizing his expertise in navigating vast amounts of information to extract critical investment ideas [1] - The investing group provides access to information prioritized by institutional market participants, indicating a focus on professional-grade analysis [1] Group 2 - The article includes a disclosure from Seeking Alpha, stating that past performance does not guarantee future results and that no specific investment recommendations are provided [2] - It notes that the views expressed may not reflect those of Seeking Alpha as a whole, highlighting the independent nature of the analysts involved [2] - The analysts are described as third-party authors, which may include both professional and individual investors without formal licensing [2]

Core Insights - Zacks Premium provides various tools for investors to enhance their stock market strategies and confidence [1] - The Zacks Style Scores are designed to help investors select stocks with the highest potential to outperform the market in the short term [2] Zacks Style Scores Overview - Stocks are rated based on value, growth, and momentum characteristics, with scores ranging from A to F, where A indicates the highest potential for outperformance [3] - The Value Score focuses on identifying undervalued stocks using financial ratios like P/E and Price/Sales [4] - The Growth Score assesses a company's financial health and future growth potential through earnings and sales projections [5] - The Momentum Score identifies optimal entry points based on price trends and earnings estimate changes [6] - The VGM Score combines the three Style Scores to highlight stocks with attractive value, growth, and momentum characteristics [6] Zacks Rank and Performance - The Zacks Rank is a proprietary model that utilizes earnings estimate revisions to guide investors in stock selection [7] - Stocks rated 1 (Strong Buy) have historically delivered an average annual return of +25.41% since 1988, significantly outperforming the S&P 500 [8] - There are over 800 stocks rated 1 or 2, making it essential for investors to utilize Style Scores to narrow down choices [9] Investment Strategy - For optimal returns, investors should focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B [10] - Stocks with lower ranks but high Style Scores may still face downward price pressure due to negative earnings outlooks [11] Company Spotlight: Paychex (PAYX) - Paychex, Inc. is a leading provider of integrated human capital management solutions for small- to medium-sized businesses [12] - Currently rated 3 (Hold) with a VGM Score of B, Paychex shows potential for growth with an 8% year-over-year earnings growth forecast [13] - Recent upward revisions in earnings estimates and a solid earnings surprise average of 1.3% position Paychex as a strong candidate for growth investors [13]

Core Insights - Paychex reported a 10% year-over-year revenue increase to $1.43 billion in Q4 of fiscal year 2025, with adjusted earnings rising 6.3% to $1.19 per diluted share [2] - Despite meeting consensus analyst estimates, management's guidance for the next fiscal year was mixed, projecting full-year earnings 2% above current analyst views but revenue targets 0.8% below Wall Street's consensus [3] - The modest revenue target indicates that Paychex may experience smaller-than-expected benefits from the recent Paycor acquisition, suggesting potential integration challenges [5] Financial Performance - Revenue for Q4 fiscal year 2025 reached $1.43 billion, reflecting a 10% increase year-over-year [2] - Adjusted earnings per diluted share were reported at $1.19, marking a 6.3% increase [2] Management Guidance - Full-year earnings guidance is projected to be 2% above current analyst expectations [3] - Revenue guidance is set at 0.8% below Wall Street's consensus, indicating potential concerns about future growth [3] Acquisition Impact - The Paycor acquisition is expected to expand Paychex's market reach, particularly into larger client segments, although initial revenue targets are modest [5][6] - Integration of Paycor may face challenges, but long-term synergies are anticipated as existing customers with growing needs are likely to remain with Paychex [6] Stock Performance - Paychex shares fell as much as 9.9% following the earnings report but recovered slightly to a 7.6% drop by midday [1] - The stock remains within a reasonable valuation range, suggesting that the earnings report should not significantly alter investment analysis [7]

Core Insights - Paychex reported a 10% total revenue growth in Q4 2025, driven by the Paycor acquisition, with a full-year revenue growth of 6% and adjusted diluted EPS growth of 6% [1] - The integration of Paycor exceeded management expectations, leading to raised cost synergy targets and guidance for fiscal 2026 projecting total revenue growth of 16.5%-18.5% [2] Integration and Market Strategy - The Paycor acquisition added over 50,000 clients, contributing approximately 12-13 percentage points to consolidated revenue growth in fiscal 2026 [3] - Paychex Flex targets companies with up to 99 employees, while Paycor focuses on enterprises with over 100 employees, and SurePayroll serves the smallest businesses [4] Cost Synergy and Operational Efficiency - Management raised cost synergy expectations for fiscal 2026 to $90 million, with most actions completed shortly after the acquisition [5][6] - Adjusted operating income margins, excluding Paycor, expanded by 110 basis points in Q4 and by 250 basis points for the full year, indicating operational discipline [5] Channel Ecosystem and Revenue Synergies - Over half of new business originates from channel partners, with initial cross-sell achievements validating the combined referral-driven go-to-market framework [7] - The Paychex Partner Plus program has enrolled over 1,000 brokers, fostering relationships and expanding the referral network [8] Future Outlook - For fiscal 2026, management projects total revenue growth of 16.5%-18.5%, with significant contributions from the Paycor acquisition and expected growth in various segments [9] - Most cost synergy actions have been executed, balancing incremental cost reductions and investments for long-term growth [10]

Core Insights - Paychex, Inc. (PAYX) reported strong fourth-quarter fiscal 2025 results, with earnings and revenues exceeding the Zacks Consensus Estimate [1][10] - The company's shares have increased by 33.4% over the past year, outperforming the industry and the Zacks S&P 500 composite [2] Financial Performance - Fiscal fourth-quarter earnings were $1.19 per share, a 6.3% increase year-over-year, and total revenues reached $1.4 billion, up 10% from the previous year [1][10] - Management Solutions segment revenues grew by 12% year-over-year to $1 billion, driven by Paycor's acquisition and higher revenues per client [3][10] - Revenues from Professional Employer Organization (PEO) and Insurance Solutions were $340.3 million, a 4% increase from the year-ago quarter [4] - Service revenues increased by 10% year-over-year to $1.4 billion, surpassing projections [5] - EBITDA decreased by 1% year-over-year to $518.2 million, while operating income fell by 11% to $431.1 million, with an operating margin of 30.2% [6] Balance Sheet & Cash Flow - At the end of the fourth quarter, the company had cash and cash equivalents of $1.6 billion, with long-term debt totaling $4.5 billion [7] - Cash generated from operating activities was $394 million, and capital expenditures amounted to $60.5 million [7] Future Guidance - Paychex anticipates revenue growth of 16.5-18.5% for fiscal year 2025 and has raised its forecast for interest on funds held for clients to $190-$200 million [8][10]