Paychex Inc at Nasdaq London Investor Conference Summary

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

Question: James Faucette - Morgan Stanley - Analyst : <_ALACRA_META_ABSTRACT>Obviously, time is short, and these go quick. So I guess without any further ado, John, Bob, pretty interesting start to the week. We know that you've got earnings coming up, but you had some AI-related announcements that certainly is a topic in every conversation that we're having today. Why don't you kind of talk to us about some of your recent announcements, and we can start to talk a little more broadly about how you think that will impact -- how you think AI will impact the labor market, but I'd love to hear what the work you're doing now.

Question: James Faucette - Morgan Stanley - Analyst : Yes. Yes. A lot of interesting tools for sure there. So I want to come back to that and have some questions about impact on labor markets, but maybe as we're talking about labor markets, let's start with the big picture. What are you seeing across the US employment landscape particularly among the small midsized businesses that you serve primarily? And how are you thinking about managing the potential for an acceleration in small business bankruptcies in the base? I mean, I think if we go back to COVID, it's been this like period where we've seen fewer out of businesses and bankruptcies than we have historically. There seems to be some normalization, but I don't know if we're fully there. So how do you think about the market generally?

Question: James Faucette - Morgan Stanley - Analyst : So I want to ask back tying AI and labor, there's been some speculation. We even have this debate internally at Morgan Stanley about, is AI hurting job growth? Is it impacting some elements of employment, at least in -- even in introductory or entry-level, white collar, et cetera? You talked about that you're -- you guys have a high level of exposure to blue and gray collar. But what is your view on the AI's impact on the labor market? And is the pace of employment growth due to AI not a risk to bookings? Or how should we think about that?

Question: James Faucette - Morgan Stanley - Analyst : So I think that that's a good place for us to look at kind of on a kind of look forward and both -- Paychex has always been like a very consistent business. I mean, you guys do a very good job historically, and up to today, continuing to drive that business the way you have. But one thing that certainly raised eyebrows was your announced acquisition of Paycor. And can you walk us through a little bit the strategic rationale? It was a little bit of a product and market pivot for you, at least on -- at least looking at it from the outside. Like what was the strategic rationale for you? How is the integration progressing? And what are you talking about in terms of potential revenue synergies?

Question: James Faucette - Morgan Stanley - Analyst : So John, I will come back like -- and just have you elaborate a little bit on how you're thinking about the incremental steps now that you've got Paycor, you're integrating that, but what are the incremental steps that you look at in terms of adding incremental functionality to the HCM solution, et cetera? Like what are your priorities for the next few years?

Question: James Faucette - Morgan Stanley - Analyst : So let's transition a little bit to PEO. This has been really an area of strength for Paychex, especially when we compare your worksite employee growth versus some of the competitors. What's driving the dynamic for you and PEO generally?

Question: James Faucette - Morgan Stanley - Analyst : So I want to ask you, just as a follow-up there, just to help at least me understand the business a little bit better. One of the trends that we've observed within PEO businesses generally is that when employment or macro maybe softens, employees tend to offer lower-cost health plans and/or employers stop offering some of the ancillary services like insurance and 401(k). Is that a structural phenomenon? And is that accurate? I guess, maybe it's the first question. And is that structural? Or what can you do to mitigate the impact as we see different parts of the economic cycle?

Question: James Faucette - Morgan Stanley - Analyst : Right. And then, it goes back then to the point that you're making earlier, there's still some underemployment there to lack of skills, et cetera, for your customer base. We've got just a few minutes left. I did want to touch on a couple of financial questions, and obviously, keeping in mind that you guys are due to report earnings next week.

Question: James Faucette - Morgan Stanley - Analyst : Yeah, yeah. But how should investors be thinking about the drivers of medium-term revenue growth either by segment or consolidate across new logos, upsell, cross-sell? Just elaborate that a little bit.

Question: James Faucette - Morgan Stanley - Analyst : So just last question here to wrap this up. Just elaborate in a little more detail there on capital allocation and took on about $5 billion in debt, some of that comes due within the next 12 months. How are you prioritizing capital allocation between the debt paydown? Dividends are currently like 97% payout ratio and that kind of thing. So just --

Question: James Faucette - Morgan Stanley - Analyst : Great. Well, that's all the time we have. John, Bob, thanks for joining us today.