AddedRisk Factors
Our use of AI technology and the incorporation of AI technology into our solutions carries risks and challenges that could adversely affect our business, financial condition, results of operations, and prospects.
The 10-K against last year's
110 changes: 23 added, 22 removed, 64 reworded, 1 quiet changes
10-K 0001193125-26-307785 (2026-07-17) vs 10-K 0000950170-25-095300 (2025-07-11) Not compared: Legal Proceedings, Accounting Policies.
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The paragraph that changed most in each section
Marked against last year's 10-K:
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MD&A 113 words changed in this paragraph; it is 42% similar to last year's version.
We currently self-insure the deductible portion of various insured exposures under certain corporate employee and PEO employee health, medical, health and workers' compensation medical benefit plans. Our estimated loss exposure under these insurance arrangements is recorded in other current liabilities on our Consolidated Balance Sheets. Historically, the amounts accrued for these plans have not been material and were not material as of May 31, 2025. 2026. We also maintain corporate insurance coverage self-insure the deductible portion of certain PEO workers' compensation benefit plans. Refer to Note A in addition the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K for additional information regarding our purchased primary insurance policies for gap coverage for employment practices liability, errors and omissions, warranty liability, theft and embezzlement, cyber threats, and acts of terrorism; and capacity for deductibles and self-insured retention through our captive insurance company. estimated loss exposure under these PEO workers' compensation benefit plans.
Source: Item 7, 10-K 0001193125-26-307785 vs Item 7, 10-K 0000950170-25-095300
Risk Factors 85 words changed in this paragraph; it is 87% similar to last year's version.
The market for our solutions is characterized by rapid technological advancements, changes in customer requirements, frequent new product introductions and enhancements, and changing industry standards. To maintain our growth strategy, we must adapt and respond to technological advances and technological requirements of our clients. customers. Our future success will depend on our ability to: enhance our current solutions and introduce new solutions in order to keep pace with solutions offered by our competitors, including the successful utilization of AI technologies (including generative AI and machine learning solutions; solutions); enhance capabilities and increase the performance of our internal systems, particularly our systems that meet our clients’ customers’ requirements; and adapt to technological advancements and changing industry standards. We may pursue new target markets or implement new lines of business to grow our customer base, which may not be successful. For example, we intend to expand sales of solutions beyond our traditional payroll clients and to develop additional standalone offerings that can be sold independent of our core payroll and HCM solutions. In addition, we continue to make significant investments related to the development of new technology. If our systems or solutions become outdated, it may negatively impact our ability to meet performance expectations related to quality, time to market, cost and innovation relative to our competitors. The failure to provide a more efficient and user-friendly customer-facing digital experience across internet and mobile platforms as well as in physical locations may adversely impact our business and operating results. There can be no assurance that our efforts to update and integrate systems will be successful. If we do not integrate and update our systems in a timely manner, or if our investments in technology fail to provide the expected results, or if our efforts to target new markets or implement new lines of business are unsuccessful, there could be a material adverse effect to our business and results of operations. The failure to continually develop enhancements and use of technologies such as robotics and other workflow automation tools, natural language processing, and AI/machine learning may impact our ability to increase the efficiency of and reduce costs associated with operational risk management and compliance activities.
Source: Item 1A, 10-K 0001193125-26-307785 vs Item 1A, 10-K 0000950170-25-095300
Every change, by type
Sentences and paragraphs added, removed or reworded
Sentences and paragraphs of PAYX's Risk Factors and MD&A, 10-K 2026-07-17 against 10-K 2025-07-11. Each links to the text at sec.gov.
Quiet changes are sentences kept from last year with one to four words changed, at least one of them a hedge, a modal or a qualifier (may, could, will, not, significant, material…). A year or date rolling forward is not counted.
The full word list
adverse, adversely, all, although, anticipate, anticipates, any, approximately, believe, believes, can, cannot, certain, could, expect, expects, generally, however, if, intend, intends, largely, likely, many, material, materially, may, might, most, must, never, no, not, possible, primarily, probable, should, significant, significantly, some, substantial, substantially, unlikely, will, wouldAddedRisk Factors
We have and are increasingly incorporating AI capabilities into many of our solutions, enabled by WISE, and internal processes to enable our customers and our employees to improve efficiency, scalability, and productivity. The integration of AI into our solutions presents risks and challenges, including that we may be unable to integrate AI technologies into our solutions when or as we expect, that our customers do not welcome or realize the anticipated benefits of such technologies or may use AI technologies from other providers instead of using our services, that new AI technologies may disrupt our industry adding market pressure, that our AI-based solutions could produce inaccurate results or have other unintended consequences, or that our AI-based solutions may expose us to lawsuits, regulatory investigations, or other proceedings, and subject us to legal liability as well as brand and reputational harm, all of which could negatively affect our business, financial condition, results of operations, and prospects.
AddedRisk Factors
While AI technologies may offer significant benefits, they also create risks and challenges. Although we implement measures to address the accuracy and appropriate use of AI tools, including internal AI policies and training, these efforts may not always be successful. Use of AI tools that introduce bias, errors, hallucinations (false, misleading, or fabricated text purporting to be factual), as well as any failure by our employees, contractors, or partners to adhere to our AI policies, or inappropriate use of AI, could result in violations of confidentiality obligations, ethical considerations, laws, or regulations, jeopardize our intellectual property rights, or expose our solutions or business systems to defects and malware, any of which could adversely affect our business, financial condition, results of operations, and prospects.
AddedRisk Factors
costs. Increases in costs not incorporated into service fees timely or fully could have a material adverse effect on our results of operations. Incorporating cost increases into service fees could also impact our ability to attract and retain customers.
AddedRisk Factors
We and our customers are subject to the impacts related to inflationary pressure, economic instability, changes in interest rates, tariffs, potential instability of the banking environment, climate change-based obligations, and other macroeconomic and/or
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RewordedRisk Factors
The Agreement, and the credit agreements providing for our credit facilities, facilities with JP Morgan Chase Bank, N.A., contain similar financial covenants which also contain financial covenants, which are reviewed for compliance on a quarterly basis, that require us not to exceed a maximum leverage ratio of 3.5:1.0 and a minimum interest coverage ratio of 2.0:1.0. 3.5:1.0.
RewordedRisk Factors
If we do not integrate and update our systems in a timely manner, or if our investments in technology fail to provide the expected results, or if our efforts to target new markets or implement new lines of business are unsuccessful, there could be a material adverse effect to our business and results of operations.
RewordedRisk Factors
The addition of complex added requirements could also increase our cost of doing business. business and our ability to timely remit funds on behalf of our customers.
RewordedRisk Factors
In addition, threat actors may seek to engage in payment-related fraud or by more frequently attempting to gain access to our systems through phishing or other means. means that may include, but are not limited to, leveraging stolen identities.
RewordedRisk Factors
The Note Purchase and Guarantee Agreement (the “Agreement”) that we entered into in January 2019 in connection with our acquisition of Oasis Outsourcing Group Holdings, L.P., also contains covenants which may restrict our flexibility to operate our business.
RewordedRisk Factors
Our success, growth, and financial results depend in part on our continuing ability to attract, retain, motivate, and motivate upskill highly qualified and diverse personnel in a rapidly changing environment at all levels, including management, technical, compliance, sales, and sales support personnel.
RewordedRisk Factors
In addition, an acquisition could adversely impact cash flows and/or operating results, and dilute stockholder interests, for many reasons, including charges to our income to reflect the impairment of acquired intangible assets including goodwill, interest costs and debt service requirements for any debt incurred in connection with an acquisition, costs incurred to enforce our rights under acquisition agreements and any issuance of securities in connection with an acquisition or new business venture that dilutes or lessens the rights of our current stockholders.
RewordedRisk Factors
Our future success will depend on our ability to: enhance our current solutions and introduce new solutions in order to keep pace with solutions offered by our competitors, including the successful utilization of AI technologies (including generative AI and machine learning solutions; solutions); enhance capabilities and increase the performance of our internal systems, particularly our systems that meet our clients’ customers’ requirements; and adapt to technological advancements and changing industry standards.
RewordedRisk Factors
The increasing velocity of disruptive innovations involving cyberattacks, security vulnerabilities, unintended data exposure, and Internet disruptions enabled by new and emerging technologies, such as advancements in AI and AI, machine learning, and quantum computing, may outpace our organization's ability to compete and/or manage the risk appropriately.
RewordedRisk Factors
Future acquisitions or transactions may bring us closer to the these covenant thresholds previously outlined, thresholds, potentially requiring further amendments to our credit facilities and debt obligations on less favorable terms.
RewordedRisk Factors
We collect, use, and retain increasingly large amounts of personal information about our clients, customers, employees of our clients, customers, our employees, and other third parties, including: bank account, credit card, and social security numbers, tax return information, health care information, retirement account information, payroll information, system and network passwords, and other sensitive personal and business information.
RewordedRisk Factors
Additionally, there is uncertainty regarding intellectual property ownership and license rights of AI algorithms and content generated by AI and we could become subject to similar claims of infringement as we expand our use of AI. AI, enabled by WISE.
AddedMD&A
We support our customers with three proprietary SaaS-based HCM platforms: SurePayroll®, Paychex Flex®, and Paycor®, each designed to meet diverse customer needs and business requirements. For example, larger customers often have more complex HCM demands. Our integrated HCM solutions span the entire employee life cycle, enabling customers to choose from a broad range of solutions that seamlessly integrate with leading HR, accounting, enterprise resource planning, and point-of-sale applications. Our technology is complemented by a wide array of advisory, benefits, and insurance solutions. In today's dynamic, complex regulatory landscape, we see growing demand for HR outsourcing solutions.
AddedMD&A
As a digitally driven HR leader, our mission is to help businesses succeed. Our strategy includes growing our customer base; increasing product penetration; driving technology innovation; and pursuing strategic acquisitions, all aimed at achieving long-term financial success.
AddedMD&A
oHigher revenue per client driven by Paycor's upmarket customer base, price realization, and product penetration.
AddedMD&A
oHigher average investment balances, resulting from the acquisition of Paycor; and
AddedMD&A
oHigher realized gains due to the strategic repositioning of our investment portfolio during the second quarter of fiscal 2026.
AddedMD&A
oHigher property and equipment balances compared to the prior year, including increased development and enhancement of our customer-facing internal-use software, as well as the impact of the acquisition of Paycor; and
AddedMD&A
oContinued investment in technology, selling, and marketing investments driven by the acquisition of Paycor and continued investments in our strategic priorities; and
AddedMD&A
(2)Acquisition-related costs included in selling, general and administrative expenses include:
AddedMD&A
•$242.0 million for fiscal 2026 compared to $40.7 million for the prior year period, in amortization of intangibles acquired in the acquisition of Paycor,
AddedMD&A
•$10.1 million for fiscal 2026 compared to $50.8 million for the corresponding prior year period in other acquisition-related costs primarily consisting of professional service fees.
AddedMD&A
Effective January 23, 2026, we entered into amendments of our $750.0 million, five-year, unsecured, revolving credit facility (the "2017 JPM Credit Facility") and our $1.0 billion, five-year, unsecured, revolving credit facility (the "2019 JPM Credit Facility") with a syndicate of lenders for which JP Morgan Chase Bank, N.A. ("JPM") acts as administrative agent. The amendments to these credit facilities, among other things, increase the aggregate amount of principal available under the 2017 Credit Facility from $750 million to $1.0 billion, extend its maturity date from September 17, 2026 to January 23, 2031, and amend certain interest provisions and covenants under both credit facilities. In connection with these amendments, we terminated our three-year, $250 million, unsecured, revolving credit facility for which PNC Bank, N.A. ("PNC") acted as administrative agent (the "2020 PNC Credit Facility"). As of the date of its termination, there were no outstanding loans under the PNC Credit Facility. Refer to Note M in the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K and our Current Report on Form 8-K filed on January 26, 2026, for additional information.
AddedMD&A
Senior Note Corporate Bonds $ in billions Series B 5-year 7-year 10-year Principal amount $ 0.4 $ 1.5 $ 1.5 $ 1.2 Principal payment date March 13, 2029 April 15, 2030 April 15, 2032 April 15, 2035 Fixed interest rate 4.25% 5.10% 5.35% 5.60% Interest payment dates in arrears March and September April and October April and October April and October
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RewordedMD&A
Acquisition-related costs(2) 304.2 196.3 — Cost optimization initiatives(3) — 39.5 Tax impact of above adjustments (40.6) (9.6) Excess Income tax benefit for acquisition-related costs (73.3) (40.6) Discrete tax windfall related to employee stock-based compensation payments(4) payments(3) (6.2) (10.1) (11.2) Adjusted net income $ 1,984.8 $ 1,802.9 $ 1,709.1 5% 10% Diluted earnings per share(5) share(4) $ 4.89 $ 4.58 $ 4.67 (2 )% 7% Non-GAAP adjustments:
RewordedMD&A
Acquisition-related costs(2) 0.84 0.54 — Cost optimization initiatives(3) — 0.11 Tax impact of above adjustments (0.11) (0.03) Excess Income tax benefit for acquisition-related costs (0.20) (0.11) Discrete tax windfall related to employee stock-based compensation payments(4) (0.03) payments(3) (0.02) (0.03) Adjusted diluted earnings per share $ 5.51 $ 4.98 $ 4.72 6% 11% Net income $ 1,760.1 $ 1,657.3 $ 1,690.4 (2 )% 6% Non-GAAP adjustments:
RewordedMD&A
Year ended May 31, 2025 Credit Facility $1 Billion $750 Million $250 Million 2026 2019 JPM 2017 JPM 2020 PNC $ in millions JPM JPM PNC Credit Facility Credit Facility Credit Facility Number of days borrowed 3 365 10 211 Maximum amount borrowed $ 201.5 922.0 $ $ 243.9 243.4 Weighted-average amount borrowed $ 104.3 323.1 $ $ 20.1 25.5 Weighted-average interest rate 8.22% 5.19% % 5.12% 4.33%
RewordedMD&A
Year ended May 31, In millions 2026 2025 2024 Change Net cash provided by operating activities $ 1,900.9 2,556.7 $1,900.9 $ 1,897.7 $ 3.2 655.8 Net cash used in investing activities (1,152.4) (3,356.8) (260.9) (3,095.9) 2,204.4 Net cash provided by/(used in) (used in)/provided by financing activities (2,653.8) 2,293.2 (1,874.7) 4,167.9 (4,947.0) Net change in cash, restricted cash, and equivalents $ 837.3 (1,249.5) $837.3 $ (237.9) $ 1,075.2 (2,086.8) Cash dividends per common share $ 4.02 $ 3.65 4.43 $4.02
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Refer to Note C of G in the Notes to Consolidated Financial Statements contained in Item 8 and the "Market Risk Factors" section contained in Item 7A of this Form 10-K for more information on dilutive shares outstanding. regarding AFS securities held in an unrealized loss position.
RewordedMD&A
We maintain industry-leading margins by efficiently managing our personnel costs and expenses while continuing to invest strategically investing in our business, particularly in sales and marketing and leading-edge technology. leading-edge, AI-driven technology and advisory solutions, which we view as critical to our ongoing success.
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Interest expense/(income), net 32.6 (45.4) expense 269.5 105.4 Interest income on corporate investments (63.4) (72.8) Income taxes 550.8 518.6 527.6 Depreciation and amortization expense 442.6 209.5 176.5 EBITDA $ 2,959.6 $ 2,418.0 $ 2,349.1 3% 22% Non-GAAP adjustments:
RewordedMD&A
Diluted earnings per share was $4.89 per diluted share for fiscal 2026 and $4.58 per diluted share for fiscal 2025 and $4.67 per diluted share for fiscal 2024. 2025, reflecting an increase of 7%.
RewordedMD&A
Our portfolio of technology, HR advisory, and employee benefits-related solutions is offerings are disaggregated into two categories, (1) Management Solutions and (2) professional employer organization (“PEO”) PEO and Insurance Solutions, as discussed under the heading “Our Solutions” in Part I, Item 1 of this Form 10-K.
Quiet changesMD&A
Adjusted net income and adjusted diluted earnings per share in all both periods include an adjustment for net tax windfall benefits related to employee stock-based compensation payments.