News Release 911 Panorama Trail South • Rochester, NY 14625 • paychex.com
News Release 911 Panorama Trail South • Rochester, NY 14625 • paychex.com Paychex Reports First Quarter Fiscal 2027 Results • Delivered double-digit diluted EPS growth supported by strong PEO and Insurance Solutions revenue growth • Strong expansion of industry-leading operating margins • Advanced AI leadership and launched WISE Hire agentic recruiting solution Rochester, N.Y. (September 23, 2026) - Paychex (Nasdaq: PAYX), a leading provider of expert- enabled HR, payroll, and benefits, today reported results for the fiscal quarter ended August 31, 2026 (the "first quarter") of the fiscal year ending May 31, 2027 ("fiscal 2027"). Unless otherwise noted, all growth rates refer to the current period versus the comparable prior-year period.
"Paychex delivered a solid start to total revenue growth in fiscal 2027, with double-digit PEO and Insurance Solutions revenue and EPS growth underscoring the strength of our advisory solutions, disciplined execution, and continued progress against our strategic priorities," stated John Gibson, President and Chief Executive Officer. "Our results reflect the durability of our business model, go-to-market investments helping us bring the full breadth of our solutions to more prospects and clients, and the value businesses place on our ability to combine innovative technology with trusted advisory expertise to navigate an increasingly complex workforce, regulatory, and benefits environment." Gibson continued, "We continued to build meaningful momentum in AI with compelling early adopter results from our award-winning WISE engine and the introduction of WISE Hire, our agentic recruiting solution. By extending AI- enabled automation and insights across Paychex HCM platforms and into Microsoft business applications where clients already work, we are making these capabilities easier to access and adopt. Together, we believe these innovations strengthen our competitive position, enhance productivity and client outcomes, and support sustainable growth and long-term shareholder value." First Quarter Business Highlights • Total revenue increased 6% to $1.6 billion. • Management Solutions revenue increased 4% to $1.2 billion driven by higher revenue per client resulting from price realization and product penetration. • Professional Employer Organization ("PEO") and Insurance Solutions revenue increased 12% to $367.6 million, primarily due to growth in the number of average PEO worksite employees and increased PEO insurance volumes. • Interest on funds held for clients increased 5% to $49.8 million due to higher average interest rates. 1 • Operating income grew 14% to $619.2 million, primarily reflecting revenue growth and lower acquisition-related costs, and adjusted operating income grew 9% to $684.7 million. • Operating margin was 38.0% compared to 35.2% and adjusted operating margin* was 42.0% compared to 40.7%. • Diluted earnings per share increased 14% to $1.21 and adjusted diluted earnings per share increased 10% to $1.34. *Adjusted operating income, adjusted operating margin, and adjusted diluted earnings per share are non-GAAP measures. Please refer to the "Non-GAAP Financial Measures" section below. Operating margin and adjusted operating margin are calculated as a percentage of total revenue. Financial Position, Liquidity and Return to Shareholders As of August 31, 2026 • Cash, restricted cash, and total corporate investments of $1.0 billion. • Long-term borrowings, net of debt issuance costs, of $4.6 billion. For the first quarter • Cash flow from operations was $413.5 million. • Paid dividends of $1.19 per share totaling $424.1 million. Fiscal 2027 Business Outlook Our current business outlook reflects current assumptions and market conditions. Changes in the macroeconomic environment could alter our guidance. Forward-looking adjusted operating margin and adjusted diluted earnings per share exclude acquisition- related costs. With consideration of these impacts, we have updated our business outlook as follows:
Fiscal Year 2027 Outlook Updates Total revenue growth 5% to 6% No change Management Solutions 5% to 6% No change revenue growth PEO and Insurance Solutions revenue 7% to 8% Previously 6% to 7% growth Interest on funds held $200 million to $210 Previously $195 million for clients million to $205 million Adjusted operating ~44% No change margin Effective income tax ~24% No change rate Adjusted diluted earnings per share 7% to 9% No change growth
Webcast Details The Company will host an Earnings Conference Call on September 23, 2026 at 9:30 a.m. Eastern Time, to discuss these results. The live webcast will be available for replay on our Investor Relations portal at https://investor.paychex.com , where news releases, current financial information, Securities and Exchange Commission ("SEC") filings, and investor presentations are also accessible. Contacts
Investor Relations: Media Relations: Rachel White Tracy Volkmann Head of Investor Relations Manager, Public Relations (513) 954-7388 (585) 387-6705 investors@paychex.com public_relations@paychex.com
Paychex, Inc. (Nasdaq: PAYX) provides a comprehensive suite of expert-enabled technology and advisory solutions that help businesses manage HR, payroll, and benefits. Serving approximately 840,000 customers and paying 1 in 11 U.S. private sector workers, Paychex combines scale, trusted expertise, and innovation to help businesses succeed. Built on more than 50 years of workforce experience and one of the industry's largest proprietary HR datasets, Paychex's WISE agentic AI engine embeds intelligence directly into workflows to improve productivity, enhance decision-making, and deliver better outcomes. Learn more atpaychex.com. Non-GAAP Financial Measures In addition to reporting operating income, operating margin, net income, and diluted earnings per share, which are U.S. generally accepted accounting principles ("GAAP") measures, we present adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, earnings before interest, taxes, depreciation, and amortization ("EBITDA"), and adjusted EBITDA, which are non-GAAP financial measures. We believe these additional measures are indicators of the performance of our core business operations period over period. Adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, EBITDA, and adjusted EBITDA are not calculated through the application of U.S. GAAP and are not required forms of disclosure by the SEC. As such, they should not be considered a substitute for the U.S. GAAP measures of operating income, operating margin, net income, and diluted earnings per share, and, therefore, they should not be used in isolation but in conjunction with the U.S. GAAP measures. The use of any non-GAAP measure may produce results that vary from the U.S. GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies. For reconciliations of these non-GAAP financial measures to the comparable financial measures prepared in accordance with GAAP, please refer to the "Reconciliation of Non-GAAP Financial Measures to the Comparable GAAP Financial Measures” table of this press release. Cautionary Note Regarding Forward-Looking Statements Certain written statements in this press release 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 can be identified by such words and phrases as "expect," "outlook," "will," "guidance," "projections," "anticipate," "believe," "can," "continue," "could," "future," "may," "possible," "potential," "should," and other similar words or phrases. Forward-looking statements include, without limitation, all matters that are not historical facts. Examples of forward-looking statements include, among others, statements we make regarding operating performance, events, or developments that we expect or anticipate will occur in the future, including statements relating to our outlook, revenue growth, earnings, earnings-per-share growth, and similar projections.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to known and unknown uncertainties, risks, changes in circumstances, and other factors that are difficult to predict, many of which are outside our control. Our actual performance and outcomes, including without limitation, our actual results and financial condition, may differ materially from those indicated in or suggested by the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: 3 our ability to keep pace with changes in technology or provide timely enhancements to our solutions and support;
risks related to our use of artificial intelligence ("AI") and new technologies in our business;
the possibility of cyberattacks, security vulnerabilities or Internet disruptions, including data security and privacy leaks, and data loss and business interruptions;
the possibility of failure of our business continuity plan during a catastrophic event;
the possibility that we may be exposed to additional risks related to our co- employment relationship with our PEO business;
changes in health insurance and workers' compensation insurance rates and underlying claim trends;
risks related to acquisitions and the integration and performance of the businesses we acquire;
the effect of changes in government regulations mandating the amount of tax withheld or the timing of remittances;
our failure to comply with covenants in our corporate bonds and debt agreements;
the impact of macroeconomic factors on the U.S. and global economy, and in particular on our small- and medium-sized business clients;
volatility in the political, market, and economic environment, including inflation and interest rate changes;
the possible effects of negative publicity on our reputation and the value of our brand.
Any of these factors, as well as such other factors as discussed in our SEC filings, could cause our actual results to differ materially from our anticipated results. The information provided in this document is based upon the facts and circumstances known as of the date of this press release, and any forward-looking statements made by us in this document speak only as of the date on which they are made. Except as required by law, we undertake no obligation to update these forward-looking statements after the date of issuance of this press release to reflect events or circumstances after such date, or to reflect the occurrence of unanticipated events. 4 PAYCHEX, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In millions, except per share amounts)
(1) Further information on interest on funds held for clients, other income, net, and the short- and long-term effects of changing interest rates can be found in our filings with the SEC, including our Quarterly Reports on Form 10-Q and our Annual Report on Form 10-K, as applicable, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and subheadings "Results of Operations" and "Market Risk Factors." These filings are accessible at https://investor.paychex.com . 5 PAYCHEX, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions, except per share amounts)
August 31, May 31, ASSETS 2026 2026 ────────────────────────────────────────────────────────────────────────────── Cash and cash $ 600.9 $ 1,088.2 equivalents Restricted cash 55.0 52.8 Corporate investments 333.3 36.3 Interest receivable 39.2 36.1 Accounts receivable, net of allowance 1,615.9 1,507.6 for credit losses PEO unbilled receivables, net of 680.2 664.2 advance collections Prepaid income taxes 11.5 11.2 Prepaid expenses and other current 409.2 384.7 assets Current assets before funds held for 3,745.2 3,781.1 clients Funds held for 4,348.4 4,832.2 clients Total current assets 8,093.6 8,613.3 Property and equipment, net of 614.6 588.9 accumulated depreciation Operating lease right-of-use assets, net 75.8 63.9 of accumulated amortization Intangible assets, net of accumulated 1,626.2 1,684.0 amortization Goodwill 4,534.1 4,527.4 Long-term deferred 571.0 555.8 costs Other long-term 145.4 141.2 assets Total assets $ 15,660.7 $ 16,174.5 LIABILITIES Accounts payable $ 141.4 $ 154.8 Accrued corporate compensation and 132.5 162.1 related items Accrued worksite employee compensation 824.7 844.8 and related items Accrued income taxes 81.1 87.8 Deferred revenue 70.8 69.4 Other current 648.8 637.1 liabilities Current liabilities before client fund 1,899.3 1,956.0 obligations Client fund 4,440.7 4,884.6 obligations Total current 6,340.0 6,840.6 liabilities Accrued income taxes 145.5 140.5 Deferred income taxes 537.6 543.3 Long-term borrowings, net of debt 4,558.0 4,556.1 issuance costs Operating lease 62.9 52.2 liabilities Other long-term 311.2 306.7 liabilities Total liabilities 11,955.2 12,439.4 STOCKHOLDERS’ EQUITY Common stock, $0.01 par value; Authorized: 600.0 shares; Issued and 3.6 3.6 outstanding: 356.0 shares as of August 31, 2026 and 355.6 shares as of May 31, 2026 Additional paid-in 1,994.8 1,975.6 capital Retained earnings 1,788.4 1,805.8 Accumulated other (81.3 ) (49.9 ) comprehensive loss Total stockholders’ 3,705.5 3,735.1 equity Total liabilities and stockholders’ $ 15,660.7 $ 16,174.5 equity
Three months ended OPERATING August 31, ACTIVITIES 2026 2025 ────────────────────────────────────────────────────────────────────────────── Net income $ 429.7 $ 383.8 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and 109.8 109.3 amortization Amortization of premiums and discounts on available-for-sa… (2.2 ) (2.1 ) ("AFS") securities and long-term debt, net Amortization of deferred contract 66.0 60.4 costs Stock-based compensation 19.3 26.8 costs Provision on deferred income 9.3 66.0 taxes Provision for 8.6 7.7 credit losses Net realized (gains)/losses on (0.0 ) 0.0 sales of AFS securities Changes in operating assets and liabilities: Interest (3.1 ) (6.1 ) receivable Accounts receivable and (73.3 ) (18.9 ) PEO unbilled receivables, net Prepaid expenses and other current (19.8 ) 29.5 assets Accounts payable and other current (56.7 ) 124.9 liabilities Deferred costs (86.1 ) (68.5 ) Net change in other long-term 12.0 6.3 assets and liabilities Net change in operating lease right-of-use (0.0 ) (0.7 ) assets and liabilities Net cash provided by operating 413.5 718.4 activities INVESTING ACTIVITIES Purchases of AFS (5,072.2 ) (3,731.9 ) securities Proceeds from sales and 4,880.7 2,547.3 maturities of AFS securities Net purchases of short-term (63.2 ) (47.0 ) accounts receivable Purchases of property and (56.1 ) (55.9 ) equipment Acquisition of businesses, net (18.1 ) (0.2 ) of cash acquired Purchases of (6.9 ) (15.0 ) other assets, net Net cash used in investing (335.8 ) (1,302.7 ) activities FINANCING ACTIVITIES Net change in client fund (443.9 ) 81.4 obligations Dividends paid (424.1 ) (389.1 ) Repurchases of — (160.1 ) common shares Contingent consideration (15.0 ) — paid for acquisitions Activity related to equity-based (23.6 ) (47.6 ) plans Net cash used in financing (906.6 ) (515.4 ) activities Net change in cash, restricted (828.9 ) (1,099.7 ) cash, and equivalents Cash, restricted cash, and equivalents, 1,484.8 2,734.3 beginning of period Cash, restricted cash, and $ 655.9 $ 1,634.6 equivalents, end of period Reconciliation of cash, restricted cash, and equivalents Cash and cash $ 600.9 $ 809.0 equivalents Restricted cash 55.0 50.4 Restricted cash and restricted cash equivalents - 775.2 included in funds held for clients Total cash, restricted cash, $ 655.9 $ 1,634.6 and equivalents
7 PAYCHEX, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO THE COMPARABLE GAAP FINANCIAL MEASURES (Unaudited) (In millions, except per share amounts)
Three months ended August 31, 2026 2025 Change ────────────────────────────────────────────────────────────────────────────── Operating income $ 619.2 $ 541.9 14 % Non-GAAP adjustments: Acquisition-related 65.5 84.8 costs(1) Adjusted operating $ 684.7 $ 626.7 9 % income Adjusted operating 42.0% 40.7% margin Net income $ 429.7 $ 383.8 12 % Non-GAAP adjustments: Acquisition-related 65.5 84.8 costs(1) Income tax benefit for -15.7 -20.6 acquisition-related costs Discrete tax windfall related to employee stock-based -0.3 -7.2 compensation payments(2) Adjusted net income $ 479.2 $ 440.8 9 % Diluted earnings per $ 1.21 $ 1.06 14 % share(3) Non-GAAP adjustments: Acquisition-related 0.18 0.23 costs(1) Income tax benefit for -0.04 -0.06 acquisition-related costs Discrete tax windfall related to employee stock-based -0.00 -0.02 compensation payments(2) Adjusted diluted $ 1.34 $ 1.22 10 % earnings per share Net income $ 429.7 $ 383.8 12 % Non-GAAP adjustments: Interest expense 65.1 68.2 Interest income on -10.2 -18.7 corporate investments Income taxes 135.3 113.7 Depreciation and 109.8 109.3 amortization expense EBITDA $ 729.7 $ 656.3 11 % Non-GAAP adjustments: Acquisition-related 8.6 23.7 costs(1) Adjusted EBITDA $ 738.3 $ 680.0 9 %
(1) Acquisition-related costs included in selling, general and administrative expenses include: • $56.9 million for the first quarter compared to $61.1 million for the corresponding prior-year period, in amortization of intangibles acquired in the acquisition of Paycor HCM, Inc. ("Paycor") • $8.5 million for the first quarter compared to $18.7 million for the corresponding prior-year period, in compensation costs related to the acquisition and integration of Paycor, including replacement awards, severance and retention bonuses, and • $0.1 million for the first quarter compared to $5.0 million for the corresponding prior-year period, in other acquisition-related costs. (2) Net tax windfall related to stock-based compensation payments recognized in income taxes. This item is subject to volatility and will vary based on option holder decisions related to exercising stock options and fluctuations in our stock price, neither of which is within the control of management. (3) The calculation of the impact of non-GAAP adjustments on diluted earnings per share is performed on each line independently. The table may not add down by +/- $0.01 due to rounding. 8
Full text with the tables
News Release 911 Panorama Trail South • Rochester, NY 14625 • paychex.com
Paychex Reports First Quarter Fiscal 2027 Results • Delivered double-digit
diluted EPS growth supported by strong PEO and Insurance Solutions revenue
growth • Strong expansion of industry-leading operating margins • Advanced AI
leadership and launched WISE Hire agentic recruiting solution Rochester, N.Y.
(September 23, 2026) - Paychex (Nasdaq: PAYX), a leading provider of expert-
enabled HR, payroll, and benefits, today reported results for the fiscal quarter
ended August 31, 2026 (the "first quarter") of the fiscal year ending May 31,
2027 ("fiscal 2027"). Unless otherwise noted, all growth rates refer to the
current period versus the comparable prior-year period.
In millions,
except per Three months
share ended
amounts August 31, 2026 2025 Change
──────────────────────────────────────────────────────────────────────────────
Total $ 1,630.5 $ 1,540.0 6 %
revenue
Operating $ 619.2 $ 541.9 14 %
income
Adjusted
operating $ 684.7 $ 626.7 9 %
income*
Diluted
earnings $ 1.21 $ 1.06 14 %
per share
Adjusted
diluted $ 1.34 $ 1.22 10 %
earnings
per share*
"Paychex delivered a solid start to total revenue growth in fiscal 2027, with
double-digit PEO and Insurance Solutions revenue and EPS growth underscoring the
strength of our advisory solutions, disciplined execution, and continued
progress against our strategic priorities," stated John Gibson, President and
Chief Executive Officer. "Our results reflect the durability of our business
model, go-to-market investments helping us bring the full breadth of our
solutions to more prospects and clients, and the value businesses place on our
ability to combine innovative technology with trusted advisory expertise to
navigate an increasingly complex workforce, regulatory, and benefits
environment." Gibson continued, "We continued to build meaningful momentum in AI
with compelling early adopter results from our award-winning WISE engine and the
introduction of WISE Hire, our agentic recruiting solution. By extending AI-
enabled automation and insights across Paychex HCM platforms and into Microsoft
business applications where clients already work, we are making these
capabilities easier to access and adopt. Together, we believe these innovations
strengthen our competitive position, enhance productivity and client outcomes,
and support sustainable growth and long-term shareholder value." First Quarter
Business Highlights • Total revenue increased 6% to $1.6 billion. • Management
Solutions revenue increased 4% to $1.2 billion driven by higher revenue per
client resulting from price realization and product penetration. • Professional
Employer Organization ("PEO") and Insurance Solutions revenue increased 12% to
$367.6 million, primarily due to growth in the number of average PEO worksite
employees and increased PEO insurance volumes. • Interest on funds held for
clients increased 5% to $49.8 million due to higher average interest rates.
1
• Operating income grew 14% to $619.2 million, primarily reflecting revenue
growth and lower acquisition-related costs, and adjusted operating income grew
9% to $684.7 million. • Operating margin was 38.0% compared to 35.2% and
adjusted operating margin* was 42.0% compared to 40.7%. • Diluted earnings per
share increased 14% to $1.21 and adjusted diluted earnings per share increased
10% to $1.34. *Adjusted operating income, adjusted operating margin, and
adjusted diluted earnings per share are non-GAAP measures. Please refer to the
"Non-GAAP Financial Measures" section below. Operating margin and adjusted
operating margin are calculated as a percentage of total revenue. Financial
Position, Liquidity and Return to Shareholders As of August 31, 2026 • Cash,
restricted cash, and total corporate investments of $1.0 billion. • Long-term
borrowings, net of debt issuance costs, of $4.6 billion. For the first quarter •
Cash flow from operations was $413.5 million. • Paid dividends of $1.19 per
share totaling $424.1 million. Fiscal 2027 Business Outlook Our current business
outlook reflects current assumptions and market conditions. Changes in the
macroeconomic environment could alter our guidance. Forward-looking adjusted
operating margin and adjusted diluted earnings per share exclude acquisition-
related costs. With consideration of these impacts, we have updated our business
outlook as follows:
Fiscal Year 2027 Outlook Updates
Total revenue growth 5% to 6% No change
Management Solutions 5% to 6% No change
revenue growth
PEO and Insurance
Solutions revenue 7% to 8% Previously 6% to 7%
growth
Interest on funds held $200 million to $210 Previously $195 million
for clients million to $205 million
Adjusted operating ~44% No change
margin
Effective income tax ~24% No change
rate
Adjusted diluted
earnings per share 7% to 9% No change
growth
Webcast Details The Company will host an Earnings Conference Call on September
23, 2026 at 9:30 a.m. Eastern Time, to discuss these results. The live webcast
will be available for replay on our Investor Relations portal at
https://investor.paychex.com , where news releases, current financial
information, Securities and Exchange Commission ("SEC") filings, and investor
presentations are also accessible. Contacts
Investor Relations: Media Relations:
Rachel White Tracy Volkmann
Head of Investor Relations Manager, Public Relations
(513) 954-7388 (585) 387-6705
investors@paychex.com public_relations@paychex.com
2
About Paychex
Paychex, Inc. (Nasdaq: PAYX) provides a comprehensive suite of expert-enabled
technology and advisory solutions that help businesses manage HR, payroll, and
benefits. Serving approximately 840,000 customers and paying 1 in 11 U.S.
private sector workers, Paychex combines scale, trusted expertise, and
innovation to help businesses succeed. Built on more than 50 years of workforce
experience and one of the industry's largest proprietary HR datasets, Paychex's
WISE agentic AI engine embeds intelligence directly into workflows to improve
productivity, enhance decision-making, and deliver better outcomes. Learn more
atpaychex.com.
Non-GAAP Financial Measures
In addition to reporting operating income, operating margin, net income, and
diluted earnings per share, which are U.S. generally accepted accounting
principles ("GAAP") measures, we present adjusted operating income, adjusted
operating margin, adjusted net income, adjusted diluted earnings per share,
earnings before interest, taxes, depreciation, and amortization ("EBITDA"), and
adjusted EBITDA, which are non-GAAP financial measures. We believe these
additional measures are indicators of the performance of our core business
operations period over period. Adjusted operating income, adjusted operating
margin, adjusted net income, adjusted diluted earnings per share, EBITDA, and
adjusted EBITDA are not calculated through the application of U.S. GAAP and are
not required forms of disclosure by the SEC. As such, they should not be
considered a substitute for the U.S. GAAP measures of operating income,
operating margin, net income, and diluted earnings per share, and, therefore,
they should not be used in isolation but in conjunction with the U.S. GAAP
measures. The use of any non-GAAP measure may produce results that vary from the
U.S. GAAP measure and may not be comparable to a similarly defined non-GAAP
measure used by other companies. For reconciliations of these non-GAAP financial
measures to the comparable financial measures prepared in accordance with GAAP,
please refer to the "Reconciliation of Non-GAAP Financial Measures to the
Comparable GAAP Financial Measures” table of this press release.
Cautionary Note Regarding Forward-Looking Statements
Certain written statements in this press release 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 can be identified by such words and phrases as "expect," "outlook,"
"will," "guidance," "projections," "anticipate," "believe," "can," "continue,"
"could," "future," "may," "possible," "potential," "should," and other similar
words or phrases. Forward-looking statements include, without limitation, all
matters that are not historical facts. Examples of forward-looking statements
include, among others, statements we make regarding operating performance,
events, or developments that we expect or anticipate will occur in the future,
including statements relating to our outlook, revenue growth, earnings,
earnings-per-share growth, and similar projections.
Forward-looking statements are neither historical facts nor assurances of future
performance. Instead, they are based only on our current beliefs, expectations,
and assumptions regarding the future of our business, future plans and
strategies, projections, anticipated events and trends, the economy, and other
future conditions. Because forward-looking statements relate to the future, they
are subject to known and unknown uncertainties, risks, changes in circumstances,
and other factors that are difficult to predict, many of which are outside our
control. Our actual performance and outcomes, including without limitation, our
actual results and financial condition, may differ materially from those
indicated in or suggested by the forward-looking statements. Therefore, you
should not rely on any of these forward-looking statements. Important factors
that could cause our actual results and financial condition to differ materially
from those indicated in the forward-looking statements include, among others,
the following:
3
our ability to keep pace with changes in technology or provide timely
enhancements to our solutions and support;
risks related to our use of artificial intelligence ("AI") and new technologies
in our business;
software defects, undetected errors, and development delays for our solutions;
the possibility of cyberattacks, security vulnerabilities or Internet
disruptions, including data security and privacy leaks, and data loss and
business interruptions;
the possibility of failure of our business continuity plan during a catastrophic
event;
the failure of third-party service providers to perform their functions;
the possibility that we may be exposed to additional risks related to our co-
employment relationship with our PEO business;
changes in health insurance and workers' compensation insurance rates and
underlying claim trends;
risks related to acquisitions and the integration and performance of the
businesses we acquire;
our clients' failure to reimburse us for payments made by us on their behalf;
the effect of changes in government regulations mandating the amount of tax
withheld or the timing of remittances;
our failure to comply with covenants in our corporate bonds and debt agreements;
changes in our credit ratings;
changes in governmental regulations, laws, and policies;
our ability to comply with U.S., state, and foreign laws and regulations;
our compliance with data privacy and AI laws and regulations;
our failure to protect our intellectual property rights;
potential outcomes related to pending or future litigation matters;
the impact of macroeconomic factors on the U.S. and global economy, and in
particular on our small- and medium-sized business clients;
volatility in the political, market, and economic environment, including
inflation and interest rate changes;
our ability to attract and retain qualified people; and
the possible effects of negative publicity on our reputation and the value of
our brand.
Any of these factors, as well as such other factors as discussed in our SEC
filings, could cause our actual results to differ materially from our
anticipated results. The information provided in this document is based upon the
facts and circumstances known as of the date of this press release, and any
forward-looking statements made by us in this document speak only as of the date
on which they are made. Except as required by law, we undertake no obligation to
update these forward-looking statements after the date of issuance of this press
release to reflect events or circumstances after such date, or to reflect the
occurrence of unanticipated events.
4
PAYCHEX, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In millions, except
per share amounts)
Three months
ended
August 31,
Revenue: 2026 2025 Change
──────────────────────────────────────────────────────────────────────────────
Management $ 1,213.1 $ 1,163.3 4 %
Solutions
PEO and
Insurance 367.6 329.1 12 %
Solutions
Total service 1,580.7 1,492.4 6 %
revenue
Interest on
funds held for 49.8 47.6 5 %
clients(1)
Total revenue 1,630.5 1,540.0 6 %
Expenses:
Cost of service 430.1 413.8 4 %
revenue
Selling, general
and 581.2 584.3 -1 %
administrative
expenses
Total expenses 1,011.3 998.1 1 %
Operating income 619.2 541.9 14 %
Interest expense -65.1 -68.2 -5 %
Other income, 10.9 23.8 -54 %
net(1)
Income before 565.0 497.5 14 %
income taxes
Income taxes 135.3 113.7 19 %
Net income $ 429.7 $ 383.8 12 %
Basic earnings $ 1.21 $ 1.07 13 %
per share
Diluted earnings $ 1.21 $ 1.06 14 %
per share
Weighted-average
common shares 355.8 360.1
outstanding
Weighted-average
common shares
outstanding, 356.6 361.9
assuming
dilution
(1) Further information on interest on funds held for clients, other income,
net, and the short- and long-term effects of changing interest rates can be
found in our filings with the SEC, including our Quarterly Reports on Form 10-Q
and our Annual Report on Form 10-K, as applicable, under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and subheadings "Results of Operations" and "Market Risk Factors."
These filings are accessible at https://investor.paychex.com .
5
PAYCHEX, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions, except per
share amounts)
August 31, May 31,
ASSETS 2026 2026
──────────────────────────────────────────────────────────────────────────────
Cash and cash $ 600.9 $ 1,088.2
equivalents
Restricted cash 55.0 52.8
Corporate investments 333.3 36.3
Interest receivable 39.2 36.1
Accounts receivable,
net of allowance 1,615.9 1,507.6
for credit losses
PEO unbilled
receivables, net of 680.2 664.2
advance
collections
Prepaid income taxes 11.5 11.2
Prepaid expenses and
other current 409.2 384.7
assets
Current assets before
funds held for 3,745.2 3,781.1
clients
Funds held for 4,348.4 4,832.2
clients
Total current assets 8,093.6 8,613.3
Property and
equipment, net of 614.6 588.9
accumulated
depreciation
Operating lease
right-of-use assets,
net 75.8 63.9
of accumulated
amortization
Intangible assets,
net of accumulated 1,626.2 1,684.0
amortization
Goodwill 4,534.1 4,527.4
Long-term deferred 571.0 555.8
costs
Other long-term 145.4 141.2
assets
Total assets $ 15,660.7 $ 16,174.5
LIABILITIES
Accounts payable $ 141.4 $ 154.8
Accrued corporate
compensation and 132.5 162.1
related items
Accrued worksite
employee compensation 824.7 844.8
and related items
Accrued income taxes 81.1 87.8
Deferred revenue 70.8 69.4
Other current 648.8 637.1
liabilities
Current liabilities
before client fund 1,899.3 1,956.0
obligations
Client fund 4,440.7 4,884.6
obligations
Total current 6,340.0 6,840.6
liabilities
Accrued income taxes 145.5 140.5
Deferred income taxes 537.6 543.3
Long-term borrowings,
net of debt 4,558.0 4,556.1
issuance costs
Operating lease 62.9 52.2
liabilities
Other long-term 311.2 306.7
liabilities
Total liabilities 11,955.2 12,439.4
STOCKHOLDERS’ EQUITY
Common stock, $0.01
par value;
Authorized: 600.0
shares;
Issued and 3.6 3.6
outstanding: 356.0
shares as of August
31, 2026
and 355.6 shares as
of May 31, 2026
Additional paid-in 1,994.8 1,975.6
capital
Retained earnings 1,788.4 1,805.8
Accumulated other (81.3 ) (49.9 )
comprehensive loss
Total stockholders’ 3,705.5 3,735.1
equity
Total liabilities and
stockholders’ $ 15,660.7 $ 16,174.5
equity
6
PAYCHEX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In millions)
Three months
ended
OPERATING August 31,
ACTIVITIES 2026 2025
──────────────────────────────────────────────────────────────────────────────
Net income $ 429.7 $ 383.8
Adjustments to
reconcile net
income to
net cash provided
by operating
activities:
Depreciation and 109.8 109.3
amortization
Amortization of
premiums and
discounts
on
available-for-sa… (2.2 ) (2.1 )
("AFS")
securities
and long-term
debt, net
Amortization of
deferred contract 66.0 60.4
costs
Stock-based
compensation 19.3 26.8
costs
Provision on
deferred income 9.3 66.0
taxes
Provision for 8.6 7.7
credit losses
Net realized
(gains)/losses on (0.0 ) 0.0
sales of
AFS securities
Changes in
operating assets
and
liabilities:
Interest (3.1 ) (6.1 )
receivable
Accounts
receivable and (73.3 ) (18.9 )
PEO unbilled
receivables, net
Prepaid expenses
and other current (19.8 ) 29.5
assets
Accounts payable
and other current (56.7 ) 124.9
liabilities
Deferred costs (86.1 ) (68.5 )
Net change in
other long-term 12.0 6.3
assets and
liabilities
Net change in
operating lease
right-of-use (0.0 ) (0.7 )
assets and
liabilities
Net cash provided
by operating 413.5 718.4
activities
INVESTING
ACTIVITIES
Purchases of AFS (5,072.2 ) (3,731.9 )
securities
Proceeds from
sales and 4,880.7 2,547.3
maturities of
AFS securities
Net purchases of
short-term (63.2 ) (47.0 )
accounts
receivable
Purchases of
property and (56.1 ) (55.9 )
equipment
Acquisition of
businesses, net (18.1 ) (0.2 )
of cash
acquired
Purchases of (6.9 ) (15.0 )
other assets, net
Net cash used in
investing (335.8 ) (1,302.7 )
activities
FINANCING
ACTIVITIES
Net change in
client fund (443.9 ) 81.4
obligations
Dividends paid (424.1 ) (389.1 )
Repurchases of — (160.1 )
common shares
Contingent
consideration (15.0 ) —
paid for
acquisitions
Activity related
to equity-based (23.6 ) (47.6 )
plans
Net cash used in
financing (906.6 ) (515.4 )
activities
Net change in
cash, restricted (828.9 ) (1,099.7 )
cash, and
equivalents
Cash, restricted
cash, and
equivalents, 1,484.8 2,734.3
beginning of
period
Cash, restricted
cash, and $ 655.9 $ 1,634.6
equivalents,
end of period
Reconciliation of
cash, restricted
cash,
and equivalents
Cash and cash $ 600.9 $ 809.0
equivalents
Restricted cash 55.0 50.4
Restricted cash
and restricted
cash
equivalents - 775.2
included in funds
held for
clients
Total cash,
restricted cash, $ 655.9 $ 1,634.6
and
equivalents
7
PAYCHEX, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO THE COMPARABLE
GAAP FINANCIAL MEASURES (Unaudited) (In millions, except per share amounts)
Three months ended
August 31, 2026 2025 Change
──────────────────────────────────────────────────────────────────────────────
Operating income $ 619.2 $ 541.9 14 %
Non-GAAP adjustments:
Acquisition-related 65.5 84.8
costs(1)
Adjusted operating $ 684.7 $ 626.7 9 %
income
Adjusted operating 42.0% 40.7%
margin
Net income $ 429.7 $ 383.8 12 %
Non-GAAP adjustments:
Acquisition-related 65.5 84.8
costs(1)
Income tax benefit
for -15.7 -20.6
acquisition-related
costs
Discrete tax windfall
related to
employee stock-based -0.3 -7.2
compensation
payments(2)
Adjusted net income $ 479.2 $ 440.8 9 %
Diluted earnings per $ 1.21 $ 1.06 14 %
share(3)
Non-GAAP adjustments:
Acquisition-related 0.18 0.23
costs(1)
Income tax benefit
for -0.04 -0.06
acquisition-related
costs
Discrete tax windfall
related to
employee stock-based -0.00 -0.02
compensation
payments(2)
Adjusted diluted $ 1.34 $ 1.22 10 %
earnings per share
Net income $ 429.7 $ 383.8 12 %
Non-GAAP adjustments:
Interest expense 65.1 68.2
Interest income on -10.2 -18.7
corporate investments
Income taxes 135.3 113.7
Depreciation and 109.8 109.3
amortization expense
EBITDA $ 729.7 $ 656.3 11 %
Non-GAAP adjustments:
Acquisition-related 8.6 23.7
costs(1)
Adjusted EBITDA $ 738.3 $ 680.0 9 %
(1) Acquisition-related costs included in selling, general and administrative
expenses include: • $56.9 million for the first quarter compared to $61.1
million for the corresponding prior-year period, in amortization of intangibles
acquired in the acquisition of Paycor HCM, Inc. ("Paycor") • $8.5 million for
the first quarter compared to $18.7 million for the corresponding prior-year
period, in compensation costs related to the acquisition and integration of
Paycor, including replacement awards, severance and retention bonuses, and •
$0.1 million for the first quarter compared to $5.0 million for the
corresponding prior-year period, in other acquisition-related costs. (2) Net tax
windfall related to stock-based compensation payments recognized in income
taxes. This item is subject to volatility and will vary based on option holder
decisions related to exercising stock options and fluctuations in our stock
price, neither of which is within the control of management. (3) The calculation
of the impact of non-GAAP adjustments on diluted earnings per share is performed
on each line independently. The table may not add down by +/- $0.01 due to
rounding.
8