filings.toolsPaychex 10-Q 2026-02-28
Filed 2026-03-26. 4 sections, 182K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2026
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from __________to __________
Commission file number 0-11330
Paychex, Inc.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) | 16-1124166 (I.R.S. Employer Identification No.) |
| 911 Panorama Trail South Rochester**,** NY (Address of principal executive offices) | 14625-2396 (Zip Code) |
Registrant's telephone number, including area code: (585) 385-6666
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, $0.01 par value | PAYX | Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | | Accelerated filer | |
| Non-accelerated filer | | Smaller reporting company | |
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of February 28, 2026, 358,290,881 shares of the registrant’s common stock, $.01 par value, were outstanding.
PAYCHEX, INC.
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PAYCHEX, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
In millions, except per share amounts
| For the three months ended | For the nine months ended | |||||||||||||||||||
| February 28, | February 28, | |||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||
| Revenue: | ||||||||||||||||||||
| Management Solutions | $ | 1,354.6 | $ | 1,100.7 | $ | 3,684.3 | $ | 3,025.3 | ||||||||||||
| PEO and Insurance Solutions | 397.5 | 365.4 | 1,063.5 | 1,002.6 | ||||||||||||||||
| Total service revenue | 1,752.1 | 1,466.1 | 4,747.8 | 4,027.9 | ||||||||||||||||
| Interest on funds held for clients | 56.8 | 42.9 | 158.7 | 116.5 | ||||||||||||||||
| Total revenue | 1,808.9 | 1,509.0 | 4,906.5 | 4,144.4 | ||||||||||||||||
| Expenses: | ||||||||||||||||||||
| Cost of service revenue | 431.2 | 387.4 | 1,257.2 | 1,146.5 | ||||||||||||||||
| Selling, general and administrative expenses | 585.7 | 429.8 | 1,743.5 | 1,221.3 | ||||||||||||||||
| Total expenses | 1,016.9 | 817.2 | 3,000.7 | 2,367.8 | ||||||||||||||||
| Operating income | 792.0 | 691.8 | 1,905.8 | 1,776.6 | ||||||||||||||||
| Interest expense | (68.1 | ) | (22.6 | ) | (204.8 | ) | (41.7 | ) | ||||||||||||
| Other income, net | 15.1 | 16.6 | 55.7 | 51.7 | ||||||||||||||||
| Income before income taxes | 739.0 | 685.8 | 1,756.7 | 1,786.6 | ||||||||||||||||
| Income taxes | 178.7 | 166.5 | 417.2 | 426.5 | ||||||||||||||||
| Net income | $ | 560.3 | $ | 519.3 | $ | 1,339.5 | $ | 1,360.1 | ||||||||||||
| Other comprehensive income, net of tax | 14.9 | 2.3 | 51.0 | 55.5 | ||||||||||||||||
| Comprehensive income | $ | 575.2 | $ | 521.6 | $ | 1,390.5 | $ | 1,415.6 | ||||||||||||
| Basic earnings per share | $ | 1.56 | $ | 1.44 | $ | 3.73 | $ | 3.78 | ||||||||||||
| Diluted earnings per share | $ | 1.56 | $ | 1.43 | $ | 3.71 | $ | 3.76 | ||||||||||||
| Weighted-average common shares outstanding | 358.7 | 360.1 | 359.4 | 360.1 | ||||||||||||||||
| Weighted-average common shares outstanding, assuming dilution | 359.5 | 362.0 | 360.6 | 361.9 |
See Notes to Consolidated Financial Statements.
PA****YCHEX, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
In millions, except per share amounts
| February 28, | May 31, | |||||||||
| 2026 | 2025 | |||||||||
| Assets | ||||||||||
| Cash and cash equivalents | $ | 1,742.5 | $ | 1,628.6 | ||||||
| Restricted cash | 49.8 | 47.9 | ||||||||
| Corporate investments | 38.1 | 34.5 | ||||||||
| Interest receivable | 37.0 | 27.9 | ||||||||
| Accounts receivable, net of allowance for credit losses | 1,435.0 | 1,330.5 | ||||||||
| PEO unbilled receivables, net of advance collections | 598.8 | 616.6 | ||||||||
| Prepaid income taxes | 37.7 | 38.9 | ||||||||
| Prepaid expenses and other current assets | 378.2 | 378.3 | ||||||||
| Current assets before funds held for clients | 4,317.1 | 4,103.2 | ||||||||
| Funds held for clients | 5,610.9 | 4,813.3 | ||||||||
| Total current assets | 9,928.0 | 8,916.5 | ||||||||
| Property and equipment, net of accumulated depreciation | 569.2 | 511.5 | ||||||||
| Operating lease right-of-use assets, net of accumulated amortization | 69.8 | 63.8 | ||||||||
| Intangible assets, net of accumulated amortization | 1,748.2 | 1,947.3 | ||||||||
| Goodwill | 4,526.6 | 4,514.1 | ||||||||
| Long-term deferred costs | 530.0 | 482.4 | ||||||||
| Other long-term assets | 139.6 | 128.5 | ||||||||
| Total assets | $ | 17,511.4 | $ | 16,564.1 | ||||||
| Liabilities | ||||||||||
| Accounts payable | $ | 132.4 | $ | 129.8 | ||||||
| Accrued corporate compensation and related items | 176.7 | 183.9 | ||||||||
| Accrued worksite employee compensation and related items | 824.6 | 735.8 | ||||||||
| Short-term borrowings | — | 18.6 | ||||||||
| Accrued income taxes | 62.5 | — | ||||||||
| Long-term debt, net, current portion | 400.0 | 399.8 | ||||||||
| Deferred revenue | 70.3 | 69.4 | ||||||||
| Other current liabilities | 609.0 | 552.0 | ||||||||
| Current liabilities before client fund obligations | 2,275.5 | 2,089.3 | ||||||||
| Client fund obligations | 5,603.6 | 4,867.0 | ||||||||
| Total current liabilities | 7,879.1 | 6,956.3 | ||||||||
| Accrued income taxes | 136.6 | 119.0 | ||||||||
| Deferred income taxes | 553.5 | 444.7 | ||||||||
| Long-term borrowings, net of debt issuance costs | 4,554.1 | 4,548.4 | ||||||||
| Operating lease liabilities | 59.3 | 55.5 | ||||||||
| Other long-term liabilities | 315.2 | 312.2 | ||||||||
| Total liabilities | 13,497.8 | 12,436.1 | ||||||||
| Commitments and contingencies — Note I | ||||||||||
| Stockholders’ equity | ||||||||||
| Common stock, $0.01 par value; Authorized: 600.0 shares; Issued and outstanding: 358.3 shares as of February 28, 2026 and 360.5 shares as of May 31, 2025 | 3.6 | 3.6 | ||||||||
| Additional paid-in capital | 1,965.4 | 1,901.1 | ||||||||
| Retained earnings | 2,047.3 | 2,277.0 | ||||||||
| Accumulated other comprehensive loss | (2.7 | ) | (53.7 | ) | ||||||
| Total stockholders’ equity | 4,013.6 | 4,128.0 | ||||||||
| Total liabilities and stockholders’ equity | $ | 17,511.4 | $ | 16,564.1 |
See Notes to Consolidated Financial Statements.
P****AYCHEX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
In millions, except per share amounts
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations reviews the operating results of Paychex, Inc. and its wholly owned subsidiaries (“Paychex,” the “Company,” “we,” “our,” or “us”) for the three months ended February 28, 2026 (the “third quarter”), the nine months ended February 28, 2026 (the "nine months"), the respective prior year periods ended February 28, 2025 (the “prior year periods”), and our financial condition as of February 28, 2026. The focus of this review is on the underlying business reasons for material changes and trends affecting our revenue, expenses, net income, and financial condition. This review should be read in conjunction with the February 28, 2026 consolidated financial statements and the related Notes to Consolidated Financial Statements (Unaudited) contained in this Quarterly Report on Form 10-Q (“Form 10-Q”). This review should also be read in conjunction with our Annual Report on Form 10-K (“Form 10-K”) for the year ended May 31, 2025 (“fiscal 2025”). Forward-looking statements in this Form 10-Q are qualified by the cautionary statement included under the next sub-heading, “Cautionary Note Regarding Forward-Looking Statements.”
Cautionary Note Regarding Forward-Looking Statements
Certain written and oral statements made by management of Paychex may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States (“U.S.”) Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by such words and phrases as “aim,” “expect,” “outlook,” “will,” “guidance,” “projections,” “strategy,” “mission,” “anticipate,” “believe,” “can,” “could,” “design,” “may,” “possible,” “potential,” “should,” “view,” and other similar words or phrases. Forward-looking statements include, without limitation, all matters that are not historical facts. Examples of forward-looking statements include, among others, statements we make regarding the integration of Paycor HCM, Inc. ("Paycor"), operating performance, events, or developments that we expect or anticipate will occur in the future, including statements relating to our outlook, revenue growth, earnings, earnings-per-share growth, and similar projections.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to known and unknown uncertainties, risks, changes in circumstances, and other factors that are difficult to predict, many of which are outside our control. Our actual performance and outcomes, including without limitation, our actual results and financial condition may differ materially from those indicated in or suggested by the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
our ability to keep pace with changes in technology or provide timely enhancements to our solutions and support;
software defects, undetected errors, and development delays for our solutions;
the possibility of cyberattacks, security vulnerabilities or Internet disruptions, including data security and privacy leaks and data loss and business interruptions;
risks related to our use of artificial intelligence ("AI") and new technologies in our business;
the possibility of failure of our business continuity plan during a catastrophic event;
the failure of third-party service providers to perform their functions;
the possibility that we may be exposed to additional risks related to our co-employment relationship with our professional employer organization (“PEO”) business;
changes in health insurance and workers’ compensation insurance rates and underlying claim trends;
risks related to acquisitions and the integration of the businesses we acquire, including risks related to the integration of Paycor;
our clients’ failure to reimburse us for payments made by us on their behalf;
the effect of changes in government regulations mandating the amount of tax withheld or the timing of remittances;
our failure to comply with covenants in our corporate bonds and debt agreements;
changes in our credit ratings;
changes in governmental regulations, laws, and policies;
our ability to comply with U.S., state, and foreign laws and regulations;
our compliance with data privacy and AI laws and regulations;
our failure to protect our intellectual property rights;
potential outcomes related to pending or future litigation matters;
the impact of macroeconomic factors on the U.S. and global economy, and in particular on our small- and medium-sized business clients;
volatility in the political, market, and economic environment, including inflation and interest rate changes;
our ability to attract and retain qualified people; and
the possible effects of negative publicity on our reputation and the value of our brand.
Any of these factors, as well as such other factors as discussed in our Form 10-K for fiscal 2025 and in our periodic filings with the Securities and Exchange Commission (the “SEC”), could cause our actual results to differ materially from our anticipated results. The information provided in this Form 10-Q is based upon the facts and circumstances known as of the date of this report, and any forward-looking statements made by us in this Form 10-Q speak only as of the date on which they are made. Except as required by law, we undertake no obligation to update these forward-looking statements after the date of filing this Form 10-Q with the SEC to reflect events or circumstances after such date, or to reflect the occurrence of unanticipated events.
Our investor presentation regarding the financial results for the third quarter is available and accessible on our Paychex Investor Relations portal at https://investor.paychex.com. Information available on our website is not a part of, and is not incorporated into, this Form 10-Q. We intend to make future investor presentations available exclusively on our Paychex Investor Relations portal.
Overview
We are an industry-leading human capital management (“HCM”) company providing comprehensive technology and advisory solutions in human resources (“HR”), employee benefits, insurance, and payroll across the U.S. and parts of Europe.
We support our clients with three proprietary SaaS-based HCM platforms: SurePayroll®, Paychex Flex®, and Paycor®, each designed to meet diverse client needs and business requirements. For example, larger clients often have more complex HCM demands. Our integrated HCM solutions span the entire employee life cycle, enabling clients to choose from a broad range of solutions that seamlessly integrate with leading HR, accounting, enterprise resource planning, and point-of-sale applications. Our technology is complemented by a wide array of advisory, benefits, and insurance solutions. In today's dynamic, complex regulatory landscape, we see growing demand for HR outsourcing solutions.
Our offerings are disaggregated into two categories, (1) Management Solutions and (2) PEO and Insurance Solutions, as discussed under the heading “Our Solutions” in Part I, Item 1 of our Form 10-K for fiscal 2025.
As the digitally driven HR leader, our mission is to help businesses succeed. Our strategy includes growing our client base; increasing product penetration; driving technology innovation; and pursuing strategic acquisi
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Item 5. Other Information
During the third quarter, none of our directors or officers (as defined by Rule 16a-1 under the Exchange Act), adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined by Item 408(c) of Regulation S-K).
Ite****m 6. Exhibits
INDEX TO EXHIBITS
- Exhibit filed or furnished with this report
SIGNA****TURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PAYCHEX, INC.
| Date: | March 26, 2026 | /s/ John B. Gibson | |
| John B. Gibson | |||
| President, Chief Executive Officer and Director | |||
| (Principal Executive Officer) | |||
| Date: | March 26, 2026 | /s/ Robert L. Schrader | |
| Robert L. Schrader | |||
| Senior Vice President and Chief Financial Officer | |||
| (Principal Financial Officer) | |||
| Date: | March 26, 2026 | /s/ Christopher Simmons Christopher Simmons Vice President, Controller and Treasurer (Principal Accounting Officer) |