Paychex (PAYX) investor relations material

Executive summary

• Achieved 18% year-over-year revenue growth in Q2, reaching $1.6 billion, with strong contributions from the Paycor acquisition, organic growth in Management Solutions and PEO, and AI-driven solutions.

• Adjusted operating income rose 21% to $649 million, and adjusted diluted EPS increased 11% to $1.26, while net income declined 4% due to higher acquisition-related costs and interest expense.

• Integration of Paycor expanded the upmarket client base, enhanced AI/data initiatives, and exceeded synergy targets.

• Returned over $1 billion to shareholders year-to-date through dividends and share repurchases.

• Announced rollout of advanced AI tools for workforce management and raised full-year adjusted EPS guidance.

Financial highlights

• Total revenue rose 18% year-over-year to $1.6 billion; Management Solutions revenue up 21% to $1.2 billion, with Paycor contributing about 17 percentage points.

• PEO and Insurance Solutions revenue increased 6% to $336.9 million, driven by worksite employee growth and higher insurance revenues.

• Interest on funds held for clients grew 51% to $54.3 million, aided by Paycor balances and investment gains.

• Adjusted EBITDA for the quarter was $698.4 million, up 21% year-over-year.

• Adjusted operating income margin improved to 41.7%; diluted EPS down 4% to $1.10, but adjusted diluted EPS up 11% to $1.26.

Outlook and guidance

• Fiscal 2026 total revenue expected to grow 16.5%–18.5% year-over-year, with adjusted diluted EPS projected to increase 10–11%.

• Management Solutions revenue growth guidance: 8.5%–11%; PEO & Insurance Solutions revenue expected to grow 20%–22%.

• Adjusted operating income margin anticipated at ~43%; effective tax rate for the year expected at ~24%.

• Q3 revenue growth anticipated at ~18%, with adjusted operating margin between 47–48%.

• Company anticipates sufficient liquidity and cash flow to support operations, capital investments, dividends, and debt service.