PRESS RELEASE OF PAYCHEX, INC. DATED JUNE 25, 2025 Paychex, Inc. Reports Fourth Quarter and Full Year 2025 Results Rochester, N.Y. (June 25, 2025) - Paychex, Inc. (Nasdaq: PAYX) (the "Company," "Paychex," "we," "our," or "us") today reported results for the fiscal quarter ended May 31, 2025 (the "fourth quarter") and fiscal year ended May 31, 2025 ("fiscal 2025"). Results compared with the same period last year are as follows: | | | | Fourth Quarter | | | | Fiscal Year | | | | --- | --- | --- | --- | --- | ...

Financial Performance - Total revenue for Q4 FY25 reached $1.427 billion, a 10% increase compared to $1.295 billion in Q4 FY24 [7, 10] - Adjusted operating income for Q4 FY25 was $577 million, an 11% increase from $521 million in Q4 FY24 [7] - Adjusted diluted EPS for Q4 FY25 was $1.19, a 6% increase compared to $1.12 in Q4 FY24 [7] - For the full fiscal year 2025, total revenue grew by 6% to $5.5717 billion [32] - Adjusted diluted EPS for the full fiscal year 2025 increased by 6% to $4.98 [17, 32] Revenue Breakdown and Key Drivers - Management Solutions revenue in Q4 FY25 increased by 12% to $1.042 billion [10] - PEO & Insurance Solutions revenue in Q4 FY25 increased by 4% to $340 million [10] - Interest on Funds Held for Clients revenue in Q4 FY25 increased by 18% to $45 million [10] Fiscal Year 2026 Outlook - The company anticipates total revenue growth of 16.5% - 18.5% for fiscal year 2026 [30] - Management Solutions revenue is expected to grow by 20% - 22% in fiscal year 2026 [30] - PEO & Insurance Solutions revenue is projected to increase by 6% - 8% in fiscal year 2026 [30] - Interest on Funds Held for Clients revenue is estimated to be between $190 million and $200 million for fiscal year 2026 [30]

October 2024 Forward-Looking Statements Certain written statements in this presentation may contain, and members of management may from time to time make or discuss statements which constitute, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, all matters that are not historical facts. Forward-looking statements are not assurances of future performance. Instead, t ...

Core Insights - Paychex, Inc. (PAYX) is set to release its fourth-quarter fiscal 2025 results on June 25, with a history of positive earnings surprises, averaging 1.7% above the Zacks Consensus Estimate over the past four quarters [1] Revenue Expectations - The consensus estimate for Paychex's Q4 fiscal 2025 revenues is $1.4 billion, reflecting a 9.3% increase year-over-year, driven by segmental growth [2][9] - Management Solutions revenues are projected at $979 million, indicating a 5.2% rise year-over-year, supported by an increasing number of clients and higher revenues per client due to pricing and product penetration [3][9] - PEO and insurance solution revenues are expected to reach $340.9 million, a 4.4% increase from the same quarter last year, attributed to a rise in the average number of worksite employees [4][9] Earnings Projections - The Zacks Consensus Estimate for earnings is $1.19 per share, representing a 6.3% increase from the previous year, with strong margins anticipated to support the bottom line [5] - Paychex has an Earnings ESP of -1.27% and a Zacks Rank of 3, indicating that the model does not predict a definitive earnings beat this time [6][7]

Company Overview - Paychex, Inc. (NASDAQ: PAYX) is set to announce its fourth-quarter report pre-market next Wednesday, with high expectations surrounding the announcement [1]. Business Model - The company primarily generates revenue by handling payroll services, maintaining a straightforward business model focused on payroll management [1]. Analyst Insights - The article emphasizes the importance of business analysis, fundamental analysis, and valuation in understanding Paychex's long-term growth potential, particularly in sectors like AI, fintech, finance, and tech [1]. Market Position - Paychex is actively analyzed for its business model, earnings performance, and competitive positioning within the market, indicating a focus on its operational strengths and market dynamics [1].

Core Insights - Paychex (PAYX) is expected to report quarterly earnings of $1.19 per share, reflecting a 6.3% increase year over year, with revenues projected at $1.39 billion, a 7.3% increase compared to the previous year [1] Earnings Estimates - The consensus EPS estimate has been revised down by 1.8% in the last 30 days, indicating a reassessment by analysts [2] - Revisions to earnings estimates are crucial for predicting investor actions, as empirical research shows a strong correlation between these revisions and short-term stock price performance [3] Revenue Projections - Analysts estimate 'Revenue- Management Solutions' at $1.01 billion, a 9% increase from the prior year [5] - 'Revenue- Interest on funds held for clients' is projected to reach $40.14 million, up 5.1% year over year [5] - 'Revenue- Total service revenue' is expected to be $1.36 billion, reflecting a 7.9% increase from the previous year [5] - 'Revenue- PEO and Insurance Services' is forecasted to be $341.79 million, a 4.7% increase year over year [6] Investment Balances - The 'Average investment Balance - Funds held for clients' is projected at $4.43 billion, down from $4.68 billion reported in the same quarter last year [6] - 'Average investment Balance - Corporate cash equivalents and investments' is expected to be $1.63 billion, compared to $1.65 billion a year ago [7] Interest Rates - Analysts expect 'Average interest rates earned - Funds held for clients' to be 3.4%, down from 3.5% in the same quarter last year [7] - 'Average interest rates earned - Corporate cash equivalents and investments' is projected to be 4.3%, compared to 5.3% a year ago [8] Stock Performance - Over the past month, Paychex shares have declined by 3.8%, while the Zacks S&P 500 composite has increased by 0.6% [9] - Paychex holds a Zacks Rank 3 (Hold), suggesting its performance will likely align with the overall market in the near term [9]

Group 1 - Albert Anthony is a senior analyst with over 10 years of experience in investment banking, focusing on industry and company research [1] - The analyst has gained over 1 thousand followers on Seeking Alpha since 2023 and writes for various financial media platforms [1] - A new book titled "The Analyst: 6 Steps To Picking Stocks For Future Growth (2025 edition)" is set to launch, detailing a 6-step system for stock analysis [1] Group 2 - Albert Anthony has a background in IT analysis and transitioned to the financial sector during the remote-work era of 2020 [1] - The analyst has earned degrees and certificates from institutions such as Drew University and the Corporate Finance Institute [1] - The brand "Albert Anthony & Company" is a privately-held enterprise registered in Austin, Texas [1]

Group 1 - Paychex is set to announce earnings at the end of June, with a consensus forecast of approximately $1.20 per share, up from $1.12 in the same quarter last year, and revenues projected to rise by about 6.5% year-over-year to $1.38 billion [1] - The growth is expected to be driven by the strength in Management Solutions and Professional Employer Organization (PEO) services, with operating margins likely trending upward due to technology and data analytics [1] - The company has a current market capitalization of $57 billion, with revenue over the past twelve months at $5.4 billion, operating profits of $2.3 billion, and net income of $1.7 billion [2] Group 2 - Historical data shows that Paychex has recorded 20 earnings data points over the past five years, with 11 positive and 9 negative one-day (1D) returns, resulting in positive 1D returns approximately 55% of the time [5] - This percentage increases to 58% when considering data from the last 3 years, with a median of 3.6% for positive returns and -4.2% for negative returns [5] - The correlation between 1D, 5D, and 21D historical returns can provide insights for traders, particularly if the 1D and 5D returns exhibit high correlation [3][4]

Financial Data and Key Metrics Changes - The company has seen a stable demand environment since Q4 of the previous fiscal year, with strong execution reflected in financial performance, beating expectations and raising guidance significantly [5][6][68] - The company is guiding for approximately 100 basis points of ex-float EBITDA margin expansion for FY 2025, despite headwinds from the Airbase acquisition [38] - Long-term adjusted gross margin targets are set at 75% to 80%, compared to last year's performance of 74%, driven by scale and lighter implementation lifts for existing products [42][43] Business Line Data and Key Metrics Changes - The company has maintained a relatively flat level of employees on the platform, which has moderated growth expectations compared to pre-COVID levels [8][70] - The acquisition of Airbase is expected to enhance the company's offerings in spend and expense management, expanding its product suite beyond HR functions [25][87] Market Data and Key Metrics Changes - The broker environment is highly fragmented, presenting opportunities for the company to expand relationships and increase referrals from brokers [18][79] - The company targets businesses with 15,000 employees, with a significant runway for growth as it currently serves only 40,000 clients out of over 1.3 million potential businesses in the U.S. [60] Company Strategy and Development Direction - The company aims to be a destination for referrals by providing significant value to the broker community, focusing on technology investments that facilitate data integration [12][83] - The strategy includes expanding into the office of the CFO and IT departments, leveraging existing HR data to automate processes and improve client experiences [36][87] Management's Comments on Operating Environment and Future Outlook - Management expressed satisfaction with the stability in the demand environment and the company's performance, indicating a positive outlook for the remainder of the fiscal year [6][68] - There is an acknowledgment of potential challenges in the market, but the company is positioned to take advantage of any disruptions that may arise from industry M&A activities [11][20] Other Important Information - The company is exploring the integration of Gen AI into its offerings, aiming to enhance client experiences and operational efficiencies [46][50] - The company has a consistent track record of growing sales headcount, focusing on productivity and efficiency in its go-to-market efforts [55] Q&A Session Summary Question: How would you characterize the current demand environment? - The demand environment has been stable since Q4 of last fiscal year, with no significant disruptions impacting performance [4][68] Question: What are the primary headwinds to growth the company is facing? - The company has guided for a flat level of employees on the platform, which has moderated growth expectations compared to pre-COVID levels [8][70] Question: How does the recent M&A activity in the industry create opportunities for Paylocity? - The company is prepared to take advantage of any disruptions in the broker market resulting from the integration of competitors [11][12] Question: What is the expected penetration rate for new offerings like Airbase? - The company targets a 10% to 20% penetration rate over a three to five-year timeframe for new solutions, including Airbase [31][90] Question: How does the company plan to leverage Gen AI in customer support? - The company is already implementing AI to enhance client experiences by surfacing answers to common questions, aiming for better service and efficiency [51][52]

Paychex (PAYX) FY Conference Summary Company Overview - **Company**: Paychex (PAYX) - **Event**: FY Conference held on May 13, 2025 - **Key Speaker**: John Gibson, President and CEO Industry Insights - **Labor Market**: The small business labor market is described as relatively healthy and stable, with no signs of recession observed. Employment acceleration was noted in the under 50 market, surprising many analysts [5][9] - **Client Engagement**: Clients are focused on employee retention due to the challenges faced during the pandemic, indicating a shift in priorities towards maintaining workforce stability [8][10] Strategic Priorities - **Company Evolution**: Paychex has transitioned from a traditional service bureau to a tech-enabled company, enhancing its advisory services [13][14] - **Market Positioning**: The company aims to provide comprehensive, flexible, and innovative Human Capital Management (HCM) solutions, catering to various business sizes and needs [17][18] Acquisition Insights - **Paycor Acquisition**: The acquisition of Paycor is expected to expand Paychex's Total Addressable Market (TAM) by $10 billion, bringing the total TAM to approximately $100 billion. This acquisition strengthens Paychex's capabilities in the upmarket and enhances its product suite [18][31][40] - **Cross-Selling Opportunities**: There are significant cross-selling opportunities between Paychex's and Paycor's products, particularly in advisory services and workforce management [37][39] Technology and Innovation - **Tech Stack Modernization**: Paychex has invested heavily in technology modernization, focusing on both front-end user experience and back-office operations. The integration of Paycor is expected to enhance these capabilities further [66][70] - **AI Utilization**: The company has been leveraging AI for customer service and retention, with a focus on intelligent pricing and data analytics to improve client interactions [79][81][88] Financial Performance - **Retention Rates**: Paychex has achieved the highest retention rates in its history, attributed to the breadth of its products and services, which allow flexibility as client needs evolve [28][30] - **Profitability and Growth**: The company maintains a high "Rule of 40" standard, indicating a balance between growth and profitability. Paychex aims to continue growing revenue while driving costs down through automation and efficiency improvements [54][96] Challenges and Market Dynamics - **Competitive Landscape**: The HR tech industry is becoming increasingly competitive, with numerous startups and tech companies entering the market. Paychex believes its comprehensive data set and established market presence provide a competitive advantage [25][88] - **PEO Performance**: Paychex has been outperforming competitors in the Professional Employer Organization (PEO) space, focusing on technology and HR-centric solutions to address small and mid-sized businesses' challenges [100][107] Conclusion - **Long-Term Vision**: Paychex is committed to a long-standing tradition of profitable growth, with a focus on enhancing shareholder value through dividends and stock appreciation [110]