Paychex : Investor Presentation Q3 2025

Published: 2025-03-26 08:33:12 ET PAYX

Third Quarter Highlights and

Financial Results

Fiscal 2025

Paychex Overview

An industry-leading human capital management ("HCM") company delivering a full suite of technology and advisory services in human resources, employee benefits, insurance and payroll for small- to medium-sized businesses.

• Digitally-driven HCM solutions company

• Leading-edge technology platform backed by decades of

HR and compliance expertise

• Industry leader in comprehensive HR outsourcing solutions with approximately 2.3M worksite employees(1)

• >745,000 clients(1)

• Strong financial position with net cash and equivalents(2)

of $834M

• Market capitalization of >$54B(3)

(1) As of May 31, 2024

(2) See slide 17 for additional financial highlights

(3) As of February 28, 2025

Third Quarter Highlights

Third Quarter Financial Highlights

Total Revenue5% Adjusted Operating Income(1)

Adjusted Diluted EPS(1)

$1,509M

$708M

$1.49

$650M

$1.38

$1,439M

Q3 FY24

Q3 FY25

(1) Adjusted operating income and adjusted diluted earnings per share ("EPS") are not U.S. generally accepted accounting principles ("GAAP") measures. Refer to slides 18 and 19 for a reconciliation to the corresponding GAAP measure.

(In Millions)

Key Drivers

Total Revenue: +6% excluding ERTC

Management Solutions

• Continued growth in the number of clients served across our suite of HCM solutions and client worksite employees for HR Solutions

• Higher revenue per client resulting from price realization and product penetration, including HR Solutions and Retirement

• Lower revenue from ancillary services, primarily due to the expiration of our ERTC program

PEO(1) & Insurance Solutions

• Growth in the number of average PEO worksite employees

• Increase in PEO insurance revenues

Q3 FY24

Q3 FY25

Interest on Funds Held for Clients

• Lower average interest rates

(1) Professional Employer Organization ("PEO")

Third Quarter Business Highlights

Sustained growth in revenue and earnings

o Solid revenue growth of 5% (6% ex-ERTC) and adjusted diluted EPS(1) growth of 8%

o Adjusted operating margin(1) expanded 180 basis points year-over-year, driven by investments in automation and technology

o Strong performance in HR Solutions, Retirement and Funding Solutions

Solid execution across key operational metrics

o Client retention improved from last year and remains near record levels with higher client retention observed across all employee size segments

o Revenue retention improved from last year and remains near record levels

o Product penetration continues to increase across our suite of HCM solutions

Positioned to strengthen our leadership position with acquisition of Paycor

o Unifies two leading SaaS HCM platforms that are highly complementary, each purpose-built for customers of different sizes

o Our nearly 800,000 customers will benefit from having access to the most comprehensive, flexible, and innovative HCM solutions in the industry

o Offers significant cross-sell opportunities and provides new distribution channels for sustained long-term growth

o Expands our salesforce and accelerates investments in go-to-market, product innovation and technology to drive sustainable growth

o Extends our vast proprietary data assets and enhances our AI capabilities to improve efficiency, enhance the customer experience and provide our clients with actionable insights to help them succeed

Returned $1,163M to shareholders year-to-date

o Paid $1,059M of dividends

o Returned $104M through share repurchases

(1) Adjusted diluted EPS and adjusted operating margin are non-GAAP financial measures. Refer to slides 18 and 19 for a reconciliation to the corresponding GAAP

measures.

Pending Acquisition of Paycor

Transaction Overview Financial Impact Financing & Capital Return Timing & Approvals

Announced signing of definitive agreement to acquire 100% of Paycor (Nasdaq: PYCR) for $22.50 per share on January 7, 2025, reflecting approximately $4.1 billion of enterprise value

Adam Ante (Paycor CFO) expected to join Paychex as SVP of Paycor business

Ryan Bergstrom (Paycor Chief Product and Technology Officer) expected to serve as Chief Product Officer of Paychex

Paycor will remain headquartered in Cincinnati, and Cincinnati will become a strategic corporate location for Paychex Expected annual cost synergies of more than $80 million in first fiscal year after closing and substantial revenue synergies over the next several years

Transaction expected to be accretive to adjusted diluted EPS(1) in fiscal 2026

Including Paycor, we expect revenue growth of 10% to 12% in fiscal 4Q25 and the impact to adjusted diluted EPS(1) to be neutral

Obtained committed financing from J.P. Morgan to support the transaction

Paychex plans to issue public debt prior to closing to finance the acquisition

Committed to maintaining our dividend policy and strong balance sheet post-closing

The acquisition is expected to close in April 2025, subject to customary closing conditions

The waiting period with respect to the consummation of the acquisition under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, as amended, expired on February 21, 2025

Paycor's majority stockholder has approved the transaction by written consent

(1) Adjusted diluted earnings per share ("EPS") is not a U.S. generally accepted accounting principles ("GAAP") measure. Refer to our Annual Report on Form 10-K for discussion of this measure and slides 18 and 19 for a reconciliation to the corresponding GAAP measure.

Paycor is a Leading HR, Payroll, and Talent Platform, Purpose-Built for Larger Organizations

Note: Paycor metrics as of June 30, 2024 (Fiscal 2024 Year-End) (1) 49,400 clients from over 30,000 parent customers

Product & Technology Horizon

Innovation to meet our customers' evolving business needs

Disclaimer

Paychex Inc. published this content on March 26, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on March 26, 2025 at 12:32:13.308.