Paychex Inc at JPMorgan Global Technology, Media and Communications Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tien-Tsin Huang - JPMorgan - Analyst : Thanks again for being here. So I have to start with the macro question, right? Paychex has got an amazing view of the economy from an employment standpoint. So give us a state of the union on what you see across your SME base?

Question: Tien-Tsin Huang - JPMorgan - Analyst : Yes...

Question: Tien-Tsin Huang - JPMorgan - Analyst : No, which is great. And you have a great view on it, and I appreciate that comment you just had there, John, on the SMB because it has that stigma, I think. And I think the resiliency is probably underappreciated. And I think we've learned a lot since COVID. I would think you would agree with me on that. But you've been CEO now for what, 2.5 years or so. I'm curious just from a priority standpoint, given all the learnings we've had and what you just went through, has that changed your priorities at all? I'm curious if you've reordered them in any way?

Question: Tien-Tsin Huang - JPMorgan - Analyst : Yes. Time --

Question: Tien-Tsin Huang - JPMorgan - Analyst : Hallmark. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2025 / 2:50PM, PAYX.OQ - Paychex Inc at JPMorgan Global Technology, Media and Communications Conference

Question: Tien-Tsin Huang - JPMorgan - Analyst : Yes. I mean like you said, three of the CEOs sitting on the Board. I mean, having -- even with Mr. Golisano and the team, I think it's stuck with what's worked and I've always respected that. So just bringing it up. You mentioned service and how the company has evolved and having tracked it for over a couple of decades it actually has quite changed a bunch. As an outsourced provider of HR tech, right? You're competing against other service providers. You're also competing against software players. Some of them are going to be here at the conference, John. So can you tell us, as you see it on the ground competitively, has that changed at all? Whether it's against your traditional players, maybe more on the in-house side? I know SMB is a little bit difficult with software, but there's a lot of do-it-yourself players that are out there that are attacking at it from different angles, including some of the payment companies that we cover. But what do you see? How do you evaluate the landscape?

Question: Tien-Tsin Huang - JPMorgan - Analyst : Well, one argument you can make if we're doing that debate would be retention. And thinking about retention and I think having followed the name so long, it feels like we've been at an elevated level of retention for quite some time. And you just talked about the advisory piece, the data, the AI and everything else. But what would you attribute this higher level of retention to? Is there a rank order in your mind for that, John?

Question: Tien-Tsin Huang - JPMorgan - Analyst : Yes. So let's then dig into Paycor, the thesis on buying Paycor now, given how well like you said, everything is going. You did mention you're expanding the TAM to $100 billion. I appreciate that. But what does Paycor bring that you couldn't develop or go after on your own?

Question: Tien-Tsin Huang - JPMorgan - Analyst : Yes. No, so you went through the complementary distribution and the cross-sell opportunity there, John. Just thinking about, for those maybe less familiar, you'll have platform decisions to make and some branding decisions to make. Of course, this integration have done. You've done a good job, of course, with Oasis, and you mentioned SurePayroll back in the day. How risky is this acquisition in your mind, whether it be from a cultural platforming technology execution standpoint?

Question: Tien-Tsin Huang - JPMorgan - Analyst : Yes. And I think when you guys -- you took some of the guidance up and you're honoring of course, Paychex's hallmark with everything you've done with margin and accretion and protecting margin, et cetera. And of course, it will accelerate growth. But I'm curious, just bringing back to bigger picture, John, and thinking about margins, and there's so much going on in tech right now, and I'm sure we'll talk about AI. But with this best-in-class margin, is there room for you to potentially sacrifice margin and accelerate growth? It doesn't look like you're doing that here with Paycor. But is that ever a consideration? Is there stuff that's out there and available for you that you could invest in, but you're choosing not to respect the hallmark? But again, with all this tech available, maybe there's a chance to accelerate growth. How do you balance that sitting in your seat?

Question: Tien-Tsin Huang - JPMorgan - Analyst : Okay.

Question: Tien-Tsin Huang - JPMorgan - Analyst : Yes, it's (inaudible) it was always harder for me to absorb that, but now I appreciate (inaudible) yes, you guys have been way above that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2025 / 2:50PM, PAYX.OQ - Paychex Inc at JPMorgan Global Technology, Media and Communications Conference

Question: Tien-Tsin Huang - JPMorgan - Analyst : And Bob's always reminded us that of that. But yes, I know Paychex definitely is always very disciplined on that and respect the company for it. On the -- just to play forward here on the -- let's talk about the tech stack. It is a tech conference, John, and thinking about modernization and automation and AI and all this stuff. And maybe AI, we can talk about separately. But just the tech stack itself, now that you're looking at Paycor and understanding maybe where you are, where are you in the modernization journey?

Question: Tien-Tsin Huang - JPMorgan - Analyst : And it has to help explain the retention back to the earlier conversation right? All of the back office work being described? I mean it has to be showing up with some of your NPS scores and everything else?

Question: Tien-Tsin Huang - JPMorgan - Analyst : So let's do -- we've got 10 minutes left. Just want to make sure we hit these last few questions. Just -- I do want to hit PEO, but let's just stay with tech and AI. I think Andrew went to HR Tech last year, and I think the conclusion was that you guys have put out a lot on the AI front. Flex Engine, AI insights and Flex products you mentioned. What do you see? I mean now that you've been out there a little bit in the marketplace, are you doubling down in certain areas? Is there more to do? Talk about what you're sort of measuring here to say, hey, we could do more or not?

Question: Tien-Tsin Huang - JPMorgan - Analyst : One more follow-up and then we'll move on just on the -- on the data side, you have so much, John. I just went through that. That's very, very clear. And I underappreciated some of the touch points. But -- and I've been asking the other companies this, right? Is it -- the next step for Paychex is it more growth oriented or cost efficiency? You mentioned productivity a little bit, but do you see a balance of where there's more potential for Paychex?

Question: Tien-Tsin Huang - JPMorgan - Analyst : Fair, fair. No, that's good. I'll remember to ask more about balance next time. But all fair points. No learning a lot. Just I have to ask on PEO, not to skip around, but the one learning so far in a pretty extended results season -- last few seasons, Paychex has been outperforming the PEO group and I'd say, uneven results, softer results, whatever you want to call it, within the public PEOs. What's driving that? Is there something that's changed internally that's driving that outperformance?

Question: Tien-Tsin Huang - JPMorgan - Analyst : That's where --

Question: Tien-Tsin Huang - JPMorgan - Analyst : No, it's been nice to see, I think, with the balance -- back to balance and having the Florida, the piece, it does -- and we come back to this, right? Thinking about Oasis and the execution on that. I know it's been some time, but the result has been good and we'll see if it continues. We have 45 seconds left. John, any sort of closing comments, things you want to underline? We covered a lot, and thank you for sharing your thoughts.

Question: Tien-Tsin Huang - JPMorgan - Analyst : Great. We'll leave it at that. That's perfect. Thank you, John. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2025 / 2:50PM, PAYX.OQ - Paychex Inc at JPMorgan Global Technology, Media and Communications Conference