Paychex Inc Q1 2026 Earnings Call Transcript

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

Question: Jared Levine - Cowen and Company LLC - Analyst : This is actually Jared Levine on for Bryan Bergin today. I guess to start here, can you give us an update in terms of the demand environment? Any notable differences when you think about employer size segments or across core offerings here?

Question: Jared Levine - Cowen and Company LLC - Analyst : Great. And then we've been getting a lot of questions in terms of the Paycor (inaudible) growth there. So I just want to confirm in 1Q, did it still grow low double digits in terms of (inaudible) growth? And is that still what you're assuming for the year as well?

Question: Jared Levine - Cowen and Company LLC - Analyst : Great. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 30, 2025 / 1:30PM, PAYX.OQ - Q1 2026 Paychex Inc Earnings Call

Question: Mark Marcon - Robert W. Baird & Co Inc - Analyst : Thanks for taking my questions. So one, just on the PEO side. I know we're going to lap some tough or some easier comps in the second half on the PEO side when we get to the second half. But aside from that, how would you characterize the PEO environment? Because it has been slowing down. And when we take a look at the sequential pattern, Q1 relative to Q4 is a little bit worse than what we've typically seen. And so I'm just wondering, is the environment solid for the PEO? Or what are the primary headwinds right now?

Question: Mark Marcon - Robert W. Baird & Co Inc - Analyst : Great. And then for my follow up, direct expenses as a percentage of revenue, you ended up seeing some pretty nice leverage there. And so I'm wondering that was really strong. How would you characterize direct expenses on a go-forward basis? And then compare and contrast that to SG&A when we strip out the one-time charges and the goodwill just in terms of the ongoing operating expenses. Because it seemed like there was a little bit of a contrast between the two. In other words, direct expenses stripping out everything else looked better, SG&A expense. I imagine just because you've got more overlap and a number of items, maybe a little bit heavier than what we were looking for. So how would you expect those to go as the year unfolds? And it seems really encouraging.

Question: Mark Marcon - Robert W. Baird & Co Inc - Analyst : Perfect. Thank you.

Question: Tien-Tsin Huang - JPMorgan Chase & Co - Analyst : Just a clarification on the question. Just on the clarification, what's driving the EPS increase of, I think, 50 bps on either end? And then just with retention, any call-outs there? It sounds like PEO was a record Paycor in line? Any other callouts? I remember there were higher bankruptcies and mergers at the low end last quarter, anything new beyond that?

Question: Tien-Tsin Huang - JPMorgan Chase & Co - Analyst : Great. Thank you, both.

Question: Andrew Nicholas - William Blair Capital Partners - Analyst : Thanks for taking my questions. You touched on it briefly in your response to one of your earlier questions, but I just wanted to kind of dig into the second-half ramp for PEO. Can you speak a little bit more to how the attach rate dynamics in Florida specifically, have they stabilized? And it is mostly just a comp dynamic or have you seen some improvement there in Florida with that plan?

Question: Andrew Nicholas - William Blair Capital Partners - Analyst : Perfect. Thank you. Makes sense. And maybe just sticking with the PEO market. Just broadly, I hear all the momentum there, mid-single-digit worksite employee growth, double-digit bookings, record retention. Is -- how would you describe the competitiveness of the environment, maybe outside of kind of the healthcare and the insurance piece. Like are your competitors there being aggressive with price on the admin fee? Or how aggressive are you willing to be on kind of the administration fee relative to maybe some desperate competitors in that market that are seeing the same level of growth as you had this quarter?

Question: Andrew Nicholas - William Blair Capital Partners - Analyst : Perfect. Thank you.

Question: Michael Infante - Morgan Stanley - Analyst : It's Michael Infante on for James. Thanks for taking our question. I just wanted to ask about the BILL partnership. Can you maybe just paint a picture for us in terms of the customer profile who would be most likely to initially adopt some of these capabilities. How you think about some of the go-to-market dynamics between the two organizations? And maybe how we should be thinking about ARPU uplift potential for your average payroll customer that begins to use some of those AP capabilities?

Question: Michael Infante - Morgan Stanley - Analyst : That's helpful. I appreciate that. Bob, just a quick housekeeping one on the agency dynamic within the PEO. I know you called out the agency piece, but was there anything incremental either in terms of PEO versus ASO mix shift and/or employees opting for lower cost health plans and maybe how that trended sequentially?

Question: Michael Infante - Morgan Stanley - Analyst : Thanks, Bob. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 30, 2025 / 1:30PM, PAYX.OQ - Q1 2026 Paychex Inc Earnings Call

Question: Daniel Jester - Bank of Montreal - Analyst : Thanks for taking my question. I wanted to go back to the comment in the prepared remarks about piling some agentic AI in your sedan organization. I guess I know it's early days, but any sense about how much you would expect productivity to improve? Or how are you measuring the success of these pilot programs?

Question: Daniel Jester - Bank of Montreal - Analyst : That's great color. Thank you. And then on the revenue synergies, holding them consistent with what you shared last quarter, I guess, would you be able to provide any color on sort of the learnings that you've had? You highlighted that big win in the prepared remarks. But as you're approaching the cross-sell revenue synergy opportunity, anything that you may be modifying now that you've been out in a couple of months trying to do this.

Question: Daniel Jester - Bank of Montreal - Analyst : Great. Thanks very much.

Question: Scott Wurtzel - Wolfe Research LLC - Analyst : Thank you for taking my question. I appreciate the incremental color on the cost synergy side and sort of your view on the targets there. Wondering if you can just talk about -- just give us a kind of update or inform us of the milestones that you've had so far? What's left to come and where maybe some of these incremental potential cost synergies will be coming from down the line?

Question: Scott Wurtzel - Wolfe Research LLC - Analyst : Got it. Thank you And then just a quick follow up. Just on the retirement side. Wondering if you can maybe quantify how contributory that was to growth this quarter, just given where kind of equity markets landed at the end of the quarter relative to when you guys reported earnings if there was any incremental tailwind on the retirement side during the quarter. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 30, 2025 / 1:30PM, PAYX.OQ - Q1 2026 Paychex Inc Earnings Call

Question: Scott Wurtzel - Wolfe Research LLC - Analyst : Great. Thanks, guys.