Third Quarter Highlights and Financial Results Fiscal 2026 Copyright 2026, Paychex, Inc. All rights reserved. Confidential and proprietary. 1 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 limit ...

Core Insights - The article discusses the challenges faced by companies expanding into the European market due to complex labor laws, tax policies, and cultural differences, highlighting the emergence of Employer of Record (EOR) solutions as a convenient and compliant hiring option for businesses [1] Group 1: Service Coverage - Companies should pay attention to the service coverage of EOR providers, as labor laws and market conditions vary significantly across European countries. For instance, INS Global offers comprehensive coverage across all 50 states in the U.S. and over 160 countries, including major European nations, facilitating legal and efficient hiring without the need for extensive local setup [3] Group 2: Experience and Expertise - The experience and professional capabilities of an EOR company are crucial. INS Global, established in 2006, has expanded its influence and now assists over 3,200 companies in managing more than 20,000 professionals globally, providing tailored talent management advice and compliance support based on in-depth knowledge of European labor policies and business environments [3] Group 3: Information Security - Information security is paramount in the digital age, and INS Global has achieved ISO 27001 certification and complies with GDPR requirements, ensuring robust protection for global HR data, which enhances trust for companies utilizing their services [4] Group 4: Client References and Brand Influence - The presence of reputable brand clients can indicate the quality and reliability of EOR services. INS Global's notable clients include Emaar, Sensor Tower, and Xiaohongshu, which serve as endorsements of its service reliability and professionalism [4] Group 5: Pricing and Service Quality - Companies need to evaluate the service offerings and pricing structures of EOR providers, as costs can vary. It is essential to ensure that the fees correspond to high-quality services covering all HR responsibilities, including hiring, contract management, payroll, and local compliance [4] Group 6: Responsiveness and Customer Service - The responsiveness and customer service of an EOR company significantly impact the user experience. INS Global provides 24/7 expert support to ensure seamless global service and timely solutions to operational issues, enhancing the overall service experience for businesses [5] Group 7: Comprehensive Considerations for EOR Selection - In selecting an EOR provider in Europe by 2026, companies should consider multiple factors, including service coverage, experience, information security, client references, pricing, and responsiveness. INS Global stands out as a viable option due to its extensive service coverage, rich experience, reliable information security, and strong brand reputation, aiding companies in achieving compliant and efficient local operations in the European market [5]

Core Insights - The article highlights the increasing trend of Chinese companies expanding overseas, while also emphasizing the compliance risks associated with cross-border employment, which are predicted to be significant in 2026 as the global EOR market is expected to exceed $8.9 billion with a compound annual growth rate of 17.3% [1] Group 1: EOR Model Overview - The Employer of Record (EOR) model allows companies to outsource employment responsibilities, enabling them to focus on daily management and business output while mitigating legal and compliance risks [2] - EOR addresses three main pain points for companies expanding internationally: avoiding high costs and lengthy processes of establishing legal entities abroad, mitigating compliance risks due to unfamiliarity with local labor laws, and enabling rapid team formation and flexible management across borders [2] Group 2: Safeguard Global's Position - Safeguard Global is recognized as a leader in the EOR industry, with over 18 years of experience and a strong global presence, making it a preferred partner for many companies expanding overseas [4] - The company operates in 187 countries/regions, serving over 3,000 clients and employing more than 400 HR experts to ensure 100% compliance in global employment [5] Group 3: Service Advantages - Safeguard Global offers a comprehensive EOR solution that allows companies to quickly build teams without establishing local entities, significantly lowering the barriers to overseas expansion [6] - The company provides an integrated employment solution covering recruitment, onboarding, payroll, and benefits management, allowing for seamless management of cross-border teams through a single interface [6] - The dual-driven model of a technology platform combined with local experts ensures rapid response and deep service, with local experts providing tailored support for labor law interpretation and tax compliance [6] - Safeguard Global can initiate overseas teams in as little as two weeks, with dedicated Chinese-speaking staff to eliminate language barriers [7] Group 4: Industry Recognition and Technological Innovation - In 2025, Safeguard Global won the "Best Employer of Record Service Provider" gold award at the HRM Asia Readers' Choice Awards, showcasing its innovative practices and excellent service in the EOR field [8] - The company is actively integrating generative AI technologies, such as the ChatSG tool and intelligent workforce analytics, to enhance service efficiency while maintaining a human touch in critical processes [8] Group 5: Market Comparison - The article provides a comparative analysis of various EOR service providers in the U.S. market for 2026, indicating that companies should consider their business scale, target market, and budget when selecting an EOR partner [11] Group 6: Choosing an EOR Provider - Companies are advised to evaluate EOR providers based on compliance depth, technological capabilities, cost transparency, and customer support, particularly focusing on local language support and operational teams [14][15][16][17][18] Group 7: Future Outlook - The EOR service market is entering a mature phase, with competition shifting towards compliance depth, technological empowerment, and customer experience [19] - Safeguard Global's extensive coverage and compliance support make it particularly suitable for medium to large enterprises looking to expand in multiple countries [19] - The future of EOR services is expected to become more intelligent and personalized with the deepening application of AI technologies [19]

Core Insights - G&A Partners has acquired Ethan Allen HR Services, enhancing its presence in New York and expanding its benefits offerings [1][2] - The acquisition allows G&A to provide additional resources to Ethan Allen's clients, including a broader range of medical plans [2] - Ethan Allen HR Services will continue to operate independently under its current leadership, focusing on staffing and recruitment [2] Company Overview - G&A Partners is a leading professional employer organization (PEO) with 30 years of experience in HR administration, benefits, payroll, and compliance [4] - The company has been recognized 20 times on the Inc. 5000 list of America's fastest-growing private companies [2] - G&A serves over 6,000 clients and 130,000 worksite employees nationwide [2] Ethan Allen HR Services - Founded in 1992, Ethan Allen HR Services is based in Poughkeepsie, New York, and provides tailored HR solutions to various clients [5][6] - The company has a strong client retention rate, with some relationships lasting decades [6] - Ethan Allen offers comprehensive HR outsourcing services, including payroll management, benefits administration, and compliance [6]

Core Insights - Insperity, Inc. (NSP) is experiencing significant challenges due to rising healthcare costs, which have led to a sharp decline in earnings [1] - Despite current difficulties, there is a belief that the company is positioned for a rebound in earnings [1] Company Analysis - Insperity operates in the HR and human capital resources outsourcing sector, which is currently facing pressures from increasing operational costs [1] - The company's financial performance is being closely monitored, particularly in light of the impact of healthcare expenses on profitability [1] Investment Perspective - The investment philosophy focuses on identifying mispriced securities by analyzing the underlying drivers of a company's financials, often utilizing a DCF model for valuation [1] - This approach allows for a flexible investment strategy that encompasses various aspects of a stock's potential, rather than adhering strictly to traditional investment categories [1]

Core Insights - Insperity, Inc. (NSP) is experiencing significant challenges due to rising healthcare costs, which have led to a sharp decline in earnings [1] - Despite current difficulties, there is a belief that the company is positioned for a rebound in earnings [1] Company Analysis - Insperity operates in the HR and human capital resources outsourcing sector, which is currently facing pressures from increasing operational costs [1] - The company's financial performance is being closely monitored, particularly in light of the impact of healthcare expenses on profitability [1] Investment Perspective - The investment philosophy focuses on identifying mispriced securities by analyzing the underlying financial drivers of companies, which can be effectively evaluated through a DCF model [1] - This approach allows for a comprehensive assessment of a stock's potential, considering various investment strategies beyond traditional value, dividend, or growth investing [1]

Financial Performance - Total revenue for the second quarter of fiscal year 2026 reached $1,558 million, an 18% increase compared to $1,317 million in the second quarter of fiscal year 2025[8] - Adjusted operating income for the second quarter of fiscal year 2026 was $649 million, a 21% increase compared to $538 million in the second quarter of fiscal year 2025[8] - Adjusted diluted EPS for the second quarter of fiscal year 2026 was $1.26, an 11% increase compared to $1.14 in the second quarter of fiscal year 2025[8] - For the six months ended November 30, 2025, total revenue was $3,097.6 million, an 18% increase[35] - For the six months ended November 30, 2025, adjusted operating income was $1,275.7 million, an 18% increase[35] - For the six months ended November 30, 2025, adjusted diluted EPS was $2.48, an 8% increase[35] Revenue Drivers - Management Solutions revenue increased by 21% from $963 million to $1,166 million[11] - PEO & Insurance Solutions revenue increased by 6% from $318 million to $337 million[11] - Interest on Funds Held for Clients increased by 51% from $36 million to $54 million[11] Fiscal Year 2026 Outlook - The company anticipates total revenue growth of 16.5% - 18.5% year-over-year[33] - The company anticipates adjusted diluted EPS growth of 8.5% - 10.5% year-over-year[33]

Core Insights - Stadium Capital Management has initiated a new position in Insperity, acquiring 263,715 shares valued at approximately $13 million, making it one of the fund's largest holdings [1][2][6] - Insperity's stock has significantly underperformed, down 55% over the past year, while the S&P 500 has increased by 14% during the same period [3][8] Company Overview - Insperity provides human resources outsourcing, payroll administration, employee benefits, compliance, and cloud-based HR management solutions, primarily targeting small and mid-sized businesses in the U.S. [5] - The company reported a trailing twelve months (TTM) revenue of $6.8 billion and a net income of $17 million, with a dividend yield of 7% [4] Financial Performance - In the last quarter, Insperity's revenue rose by 4% to $1.6 billion, but the company faced a net loss of $20 million due to elevated healthcare costs, with adjusted EBITDA falling to $10 million [7][8] - Management has indicated progress on cost controls and the benefits of a new multi-year contract with UnitedHealthcare, which is expected to reduce large-claim cost exposure starting in 2026 [6][8] Investment Perspective - The significant investment by Stadium Capital suggests confidence in Insperity's potential for operational recovery rather than a structural decline, despite current challenges [6][8] - The current stock price reflects pessimism about future conditions, presenting a potential opportunity for investors who believe in the company's long-term recurring-revenue model [8]

Core Insights - Value stocks often trade at discounts, providing opportunities for patient investors, but they may be cheap for valid reasons [1] - Identifying high-quality companies among value stocks is challenging, and StockStory aims to assist in this process [2] Company Summaries American Express Global Business Travel (GBTG) - GBTG has a forward price-to-sales ratio of 1.5x and is currently trading at $7.77 per share [3][5] - The company offers comprehensive business travel and expense management solutions, connecting corporate clients with travel suppliers [3] Covenant Logistics (CVLG) - CVLG has a forward P/E ratio of 10.7x and is trading at $19.41 per share [6][8] - The company provides expedited long-haul freight services and has grown from 25 trucks and 50 trailers [6] Insperity (NSP) - NSP has a forward P/E ratio of 16.6x and is involved in human resources outsourcing for small and medium-sized businesses [9] - Sales growth has been modest at 5.7% annually over the last two years, which is below the typical growth for software companies [10] - Estimated sales growth for the next 12 months is projected at 3.8%, indicating a potential slowdown in demand [10] - Gross margin stands at 61.1%, which is lower than competitors, limiting investment in marketing and R&D [10] - Free cash flow margin has decreased by 10 percentage points over the last five years, indicating higher capital consumption to remain competitive [11] - Returns on capital are shrinking, suggesting increased competition is impacting profitability [11]

Core Insights - The report from Paycheck indicates a stable job market for small businesses, but hiring has slowed down slightly [1][3] - Small businesses, particularly those with fewer than 50 employees, have shown less than a 1 percentage point change in hiring over the past year, indicating stability despite economic uncertainties [3][4] - There is a notable increase in weekly hours worked, reaching a near-decade high, suggesting that employers are hesitant to hire new staff [5][6] Employment Trends - The small business segment is experiencing a labor supply issue, with challenges in finding qualified workers due to immigration constraints [6][7] - In the last two months, there has been a consecutive increase of over 3% in hours worked, a trend not seen in the past decade [8] - Historically, increases in hours worked at this level often precede employment growth in subsequent quarters, indicating potential future hiring [9] Wage Growth and Inflation - Hourly wage growth has remained below 3% for the 15th consecutive month, which is below the pace of annualized inflation [10][11] - The cost of labor is a significant factor for small and midsize businesses, and maintaining wage inflation at this level could help reduce overall inflation towards the Federal Reserve's target of 2% [11][12]