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~~August 2831, 2025

 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~~August 2831, 2025, ~~360~~359,~~190~~894,~~668~~143 shares of the registrant’s common stock, $.01 par value, were outstanding.

Table of Contents

PAYCHEX, INC.

Table of Contents

		Page
PART I. FINANCIAL INFORMATION		1
Item 1.	Financial Statements (Unaudited)	1
	Consolidated Statements of Income and Comprehensive Income	1
	Consolidated Balance Sheets	2
	Consolidated Statements of Stockholders’ Equity	3
	Consolidated Statements of Cash Flows	54
	Notes to Consolidated Financial Statements	65
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3332
Item 4.	Controls and Procedures	3432
PART II. OTHER INFORMATION		3534
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3534
Item 5.	Other Information	3534
Item 6.	Exhibits	3534
Signatures		3635

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 29,			February 28,		February 29,
	August 31,			August 31,
	2025			2024			~~2025~~		~~2024~~
Revenue:
Management Solutions	$	1,~~100~~163.73		$	~~1,049~~961.97		$	~~3,025.3~~	$	~~2,936.1~~
PEO and Insurance Solutions		~~365~~329.41			~~345~~319.53			~~1,002.6~~		~~939.0~~
Total service revenue		1,~~466~~492.14			1,~~395~~281.40			~~4,027.9~~		~~3,875.1~~
Interest on funds held for clients		4247.96			4337.95			~~116.5~~		~~108.1~~
Total revenue		1,~~509~~540.0			1,~~439~~318.35			~~4,144.4~~		~~3,983.2~~
Expenses:
Cost of service revenue		~~387~~413.48			~~379~~380.80			~~1,146.5~~		~~1,104.1~~
Selling, general and administrative expenses		~~429~~584.83			~~409~~391.78			~~1,221.3~~		~~1,186.8~~
Total expenses		~~817~~998.21			~~789~~771.58			~~2,367.8~~		~~2,290.9~~
Operating income		~~691~~541.89			~~649~~546.87			~~1,776.6~~		~~1,692.3~~
Other (expense)/income, net		(6.0	)		9.4			10.0		33.9
Interest expense		(68.2	)		(9.6	)
Income before income taxes		685.8			659.2			1,786.6		1,726.2
Other income, net		23.8			20.0
Income taxes		166.5			160.6			426.5		415.7
Income before income taxes		497.5			557.1
Net income	$	519.3		$	498.6		$	1,360.1	$	1,310.5
Income taxes		113.7			129.7
Other comprehensive income, net of tax		2.3			22.0			55.5		14.7
Net income	$	383.8		$	427.4
Comprehensive income	$	521.6		$	520.6		$	1,415.6	$	1,325.2
Other comprehensive income, net of tax		28.7			64.8
Basic earnings per share	$	1.44		$	1.39		$	3.78	$	3.64
Comprehensive income	$	412.5		$	492.2
Diluted earnings per share	$	1.43		$	1.38		$	3.76	$	3.62
Basic earnings per share	$	1.07		$	1.19
Weighted-average common shares outstanding		360.1			359.9			360.1		360.4
Diluted earnings per share	$	1.06		$	1.18
Weighted-average common shares outstanding, assuming dilution		362.0			361.7			361.9		362.2
Weighted-average common shares outstanding		360.1			360.1
Weighted-average common shares outstanding, assuming dilution		361.9			361.9

See Notes to Consolidated Financial Statements.

Table of Contents

PAYCHEX, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

In millions, except per share amounts

	February 28,			May 31,
	August 31,			May 31,
	2025			~~2024~~2025
Assets
Cash and cash equivalents	$	~~1,563~~809.80		$	1,~~468~~628.96
Restricted cash		4950.14			47.89
Corporate investments		37861.29			3334.95
Interest receivable		2234.60			2327.39
Accounts receivable, net of allowance for credit losses		1,~~244~~359.83			1,~~059~~330.65
PEO unbilled receivables, net of advance collections		~~597~~609.94			~~542~~616.46
Prepaid income taxes		189.32			4738.59
Prepaid expenses and other current assets		~~359~~379.4			~~321~~378.93
Current assets before funds held for clients		34,~~893~~112.16			34,~~545~~103.32
Funds held for clients		4,~~183~~927.94			34,~~706~~813.23
Total current assets		89,~~077~~040.0			78,~~251~~916.5
Long-term corporate investments		—			3.7
Property and equipment, net of accumulated depreciation		525.4			511.5
Property and equipment, net of accumulated depreciation		451.2			411.7
Operating lease right-of-use assets, net of accumulated amortization		64.2			63.8
Operating lease right-of-use assets, net of accumulated amortization		48.2			46.9
Intangible assets, net of accumulated amortization		1,886.8			1,947.3
Intangible assets, net of accumulated amortization		175.6			194.5
Goodwill		4,523.6			4,514.1
Goodwill		1,877.8			1,882.7
Long-term deferred costs		489.0			482.4
Long-term deferred costs		472.3			477.1
Other long-term assets		134.0			128.5
Other long-term assets		119.5			115.0
Total assets	$	16,663.0		$	16,564.1
Total assets	$	11,221.6		$	10,383.1
Liabilities
Accounts payable	$	~~118~~120.76		$	~~104~~129.38
Accrued corporate compensation and related items		~~157~~151.87			~~135~~183.09
Accrued worksite employee compensation and related items		~~746~~779.87			~~662~~735.48
Short-term borrowings		1718.65			18.76
Deferred revenue		51.7			50.2
Long-term debt, net, current portion		399.9			399.8
Other current liabilities		455.3			469.8
Deferred revenue		68.8			69.4
Current liabilities before client fund obligations		1,547.9			1,440.4
Other current liabilities		641.1			552.0
Client fund obligations		4,251.8			3,868.7
Current liabilities before client fund obligations		2,180.3			2,089.3
Total current liabilities		5,799.7			5,309.1
Client fund obligations		4,948.4			4,867.0
Accrued income taxes		118.2			102.6
Total current liabilities		7,128.7			6,956.3
Deferred income taxes		93.0			86.0
Accrued income taxes		124.9			119.0
Long-term borrowings, net of debt issuance costs		799.0			798.6
Deferred income taxes		518.0			444.7
Operating lease liabilities		47.1			49.0
Long-term borrowings, net of debt issuance costs		4,550.3			4,548.4
Other long-term liabilities		248.0			236.8
Operating lease liabilities		52.9			55.5
Total liabilities		7,105.0			6,582.1
Other long-term liabilities		317.6			312.2
Total liabilities		12,692.4			12,436.1
Commitments and contingencies — Note I
Stockholders’ equity
Common stock, $0.01 par value; Authorized: 600.0 shares;Issued and outstanding: 360.2 shares as of February 28, 2025 and 360.1 shares May 31, 2024		3.6			3.6
Common stock, $0.01 par value; Authorized: 600.0 shares;Issued and outstanding: 359.9 shares as of August 31, 2025 and 360.5 shares as of May 31, 2025		3.6			3.6
Additional paid-in capital		1,~~814~~921.8			1,~~729~~901.51
Retained earnings		2,~~387~~070.82			2,~~213~~277.0
Accumulated other comprehensive loss		(8925.60	)		(~~145~~53.17	)
Total stockholders’ equity		43,~~116~~970.6			34,~~801~~128.0
Total liabilities and stockholders’ equity	$	1116,~~221~~663.60		$	1016,~~383~~564.1

See Notes to Consolidated Financial Statements.

Table of Contents

PAYCHEX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

In millions, except per share amounts

	For the nine months ended February 28, 2025
	For the three months ended August 31, 2025
	Common stock												Accumulated other comprehensive loss
	Shares			Amount			Additional paid-in capital			Retained earnings			Net unrealized loss on AFS securities			Foreign currency translation	~~Cash Flow Hedges~~			~~Foreign~~Total ~~currency~~accumulated ~~translation~~comprehensive loss			Total ~~accumulated comprehensive loss~~			~~Total~~
Balance as of May 31, 2024		360.1		$	3.6		$	1,729.5		$	2,213.0		$	(120.7	)	$		—		$	(24.4	)	$	(145.1	)	$	3,801.0
Balance as of May 31, 2025		360.5		$	3.6		$	1,901.1		$	2,277.0		$	(38.5	)	$		(15.2	)	$	(53.7	)	$	4,128.0
Net income		—			—			—			~~1,360~~383.18			—				—			—			—383.8			~~1,360.1~~
Unrealized gains/(losses), net of $23.2 million in tax expense		—			—			—			—			70.9				(15.9	)		—			55.0			55.0
Unrealized gains on securities, net of $8.4 million in tax expense		—			—			—			—			24.3				—			24.3			24.3
Reclassification adjustment to earnings, net of $0.1 million in tax benefit (1)		—			—			—			—			0.3				7.3			—			7.6			7.6
Reclassification adjustment for realized losses on securities to earnings, net of $0.0 million in tax benefit (1)		—			—			—			—			0.0				—			0.0			0.0
Cash dividends declared ($2.94 per share)		—			—			—			(1,058.9	)		—				—			—			—			(1,058.9	)
Cash dividends declared ($1.08 per share)		—			—			—			(389.0	)		—				—			—			(389.0	)
Repurchases of common shares, including excise taxes of $0.5 million (2)		(0.8	)		(0.0	)		(4.0	)		(100.5	)		—				—			—			—			(104.5	)
Repurchases of common shares (2)		(1.1	)		(0.0	)		(5.3	)		(154.8	)		—				—			—			(160.1	)
Stock-based compensation costs		—			—			5026.58			—			—				—			—			—26.8			~~50.5~~
Foreign currency translation adjustment		—			—			—			—			—				—4.4			(74.14	)		(74.14	)		~~(7.1~~	)
Activity related to equity-based plans		0.95			0.0			38(0.8	)		(2546.98	)		—				—			—			—(47.6	)		~~12.9~~
Balance as of February 28, 2025		360.2		$	3.6		$	1,814.8		$	2,387.8		$	(49.5	)	$		(8.6	)	$	(31.5	)	$	(89.6	)	$	4,116.6
Balance as of August 31, 2025		359.9		$	3.6		$	1,921.8		$	2,070.2		$	(14.2	)	$		(10.8	)	$	(25.0	)	$	3,970.6

	For the three months ended February 28, 2025
	For the three months ended August 31, 2024
	Common stock												Accumulated other comprehensive loss
	Shares			Amount			Additional paid-in capital			Retained earnings			Net unrealized loss on AFS securities			Foreign currency translation	~~Cash Flow Hedges~~			~~Foreign~~Total ~~currency~~accumulated ~~translation~~comprehensive loss			Total ~~accumulated comprehensive loss~~			~~Total~~
Balance as of November 30, 2024		360.1		$	3.6		$	1,789.4		$	2,224.6		$	(63.1	)	$		—		$	(28.8	)	$	(91.9	)	$	3,925.7
Balance as of May 31, 2024		360.1		$	3.6		$	1,729.5		$	2,213.0		$	(120.7	)	$		(24.4	)	$	(145.1	)	$	3,801.0
Net income		—			—			—			~~519~~427.34			—				—			—			—427.4			~~519.3~~
Unrealized gains/(losses), net of $4.3 million in tax expense		—			—			—			—			13.3				(15.9	)		—			(2.6	)		(2.6	)
Unrealized gains on securities, net of $20.2 million in tax expense		—			—			—			—			61.8				—			61.8			61.8
Reclassification adjustment to earnings, net of $0.1 million in tax benefit (1)		—			—			—			—			0.3				7.3			—			7.6			7.6
Reclassification adjustment for realized gains on securities, net of $0.0 million in tax expense (1)		—			—			—			—			(0.0	)			—			(0.0	)		(0.0	)
Cash dividends declared ($0.98 per share)		—			—			—			(~~353~~352.28	)		—				—			—			—(352.8	)		~~(353.2~~	)
Repurchases of common shares, including excise taxes of $0.0 million (2)		—			—			—			—			—				—			—			—			—
Repurchases of common shares (2)		(0.8	)		(0.0	)		(4.0	)		(100.0	)		—				—			—			(104.0	)
Stock-based compensation costs		—			—			1716.65			—			—				—			—			—16.5			~~17.6~~
Foreign currency translation adjustment		—			—			—			—			—				—3.0			(23.70	)		(23.70	)		~~(2.7~~	)
Activity related to equity-based plans		0.16			0.0			719.87			(222.92	)		—				—			—			—(2.5	)		~~4.9~~
Balance as of February 28, 2025		360.2		$	3.6		$	1,814.8		$	2,387.8		$	(49.5	)			(8.6	)	$	(31.5	)	$	(89.6	)	$	4,116.6
Balance as of August 31, 2024		359.9		$	3.6		$	1,761.7		$	2,165.4		$	(58.9	)	$		(21.4	)	$	(80.3	)	$	3,850.4

(1)

Reclassification adjustments to earnings on the sale of available-for-sale ("AFS") securities are reflected in interest on funds held for clients and other ~~(expense)/~~income, net on the Consolidated Statements of Income and Comprehensive Income. Reclassification adjustments to earnings for the cash flow hedges relate to amortization of the excluded component of the initial fair value and are reflected in interest expense and included in other (expense)/income, net on the Consolidated Statements of Income and Comprehensive Income.

(2)

The Company maintains a program to repurchase $400.0 million of its common stock, with authorization expiring May 31, 2027. The ~~Company~~purpose ~~previously~~of ~~maintained~~this a program tois ~~repurchase up~~ to ~~$400.0~~manage ~~million of its~~ common stock, ~~with an authorization that expired on January 31, 2024~~dilution. ~~The~~All ~~purpose~~shares of ~~these programs is to manage~~ common stock ~~dilution~~repurchased were retired.

See Notes to Consolidated Financial Statements.

Table of Contents

	For the nine months ended February 29, 2024
	Common stock												Accumulated other comprehensive loss
	Shares			Amount			Additional paid-in capital			Retained earnings			Net unrealized loss on AFS securities			Cash Flow Hedges		Foreign currency translation			Total accumulated comprehensive loss			Total
Balance as of May 31, 2023		360.5		$	3.6		$	1,626.4		$	2,023.1		$	(130.3	)		—	$	(29.6	)	$	(159.9	)	$	3,493.2
Net income		—			—			—			1,310.5			—			—		—			—			1,310.5
Unrealized gains on securities, net of $3.5 million in tax expense		—			—			—			—			9.9			—		—			9.9			9.9
Reclassification adjustment for realized losses on securities, net of $0.0 million in tax benefit (1)		—			—			—			—			0.0			—		—			0.0			0.0
Cash dividends declared ($2.67 per share)		—			—			—			(962.3	)		—			—		—			—			(962.3	)
Repurchases of common shares (2)		(1.5	)		(0.0	)		(6.2	)		(163.0	)		—			—		—			—			(169.2	)
Stock-based compensation costs		—			—			45.1			—			—			—		—			—			45.1
Foreign currency translation adjustment		—			—			—			—			—			—		4.8			4.8			4.8
Activity related to equity-based plans		1.0			0.0			37.2			(22.1	)		—			—		—			—			15.1
Balance as of February 29, 2024		360.0		$	3.6		$	1,702.5		$	2,186.2		$	(120.4	)		—	$	(24.8	)	$	(145.2	)	$	3,747.1

	For the three months ended February 29, 2024
	Common stock									Accumulated other comprehensive loss
	Shares		Amount		Additional paid-in capital		Retained earnings			Net unrealized loss on AFS securities			Cash Flow Hedges		Foreign currency translation			Total accumulated comprehensive loss			Total
Balance as of November 30, 2023		359.8	$	3.6	$	1,678.6	$	2,009.4		$	(139.4	)		—	$	(27.8	)	$	(167.2	)	$	3,524.4
Net income		—		—		—		498.6			—			—		—			—			498.6
Unrealized gains on securities, net of $6.3 million in tax expense		—		—		—		—			19.0			—		—			19.0			19.0
Reclassification adjustment for realized gains on securities, net of $0.0 million in tax expense (1)		—		—		—		—			(0.0	)		—		—			(0.0	)		(0.0	)
Cash dividends declared ($0.89 per share)		—		—		—		(320.4	)		—			—		—			—			(320.4	)
Repurchases of common shares (2)		—		—		—		—			—			—		—			—			—
Stock-based compensation costs		—		—		14.4		—			—			—		—			—			14.4
Foreign currency translation adjustment		—		—		—		—			—			—		3.0			3.0			3.0
Activity related to equity-based plans		0.2		0.0		9.5		(1.4	)		—			—		—			—			8.1
Balance as of February 29, 2024		360.0	$	3.6	$	1,702.5	$	2,186.2		$	(120.4	)		—	$	(24.8	)	$	(145.2	)	$	3,747.1

Reclassification adjustments to earnings on the sale of AFS securities are reflected in interest on funds held for clients and other (expense)/income, net on the Consolidated Statements of Income and Comprehensive Income. Reclassification adjustments to earnings for the cash flow hedges relate to amortization of the excluded component of the initial fair value and are reflected in interest expense and included in other (expense)/income, net on the Consolidated Statements of Income and Comprehensive Income.

The Company maintained a program to repurchase up to $400.0 million of its common stock, with an authorization that expired on January 31, 2024. On January 19, 2024, the Company's Board of Directors approved a new repurchase plan authorizing up to $400 million of repurchases of its common stock, with authorization expiring on May 31, 2027. The purpose of these programs are to manage common stock dilution.

See Notes to Consolidated Financial Statements.

Table of Contents

PAYCHEX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

In millions

	For the nine months ended
	For the three months ended
	February 28,			February 29,
	August 31,			August 31,
	2025			2024
Operating activities
Net income	$	~~1,360~~383.18		$	~~1,310~~427.54
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		~~123~~109.83			~~130~~39.90
Amortization of premiums and discounts on AFS securities, cash flow hedges and long-term debt, net		5.1			(4.7	)
Amortization of premiums and discounts on AFS securities and long-term debt, net		(2.1	)		(2.8	)
Amortization of deferred contract costs		~~176~~60.64			~~173~~58.45
Stock-based compensation costs		5026.58			4516.15
Benefit from deferred income taxes		(16.1	)		(20.9	)
Provision on/(benefit from) deferred income taxes		66.0			(11.0	)
Provision for credit losses		177.67			147.95
Net realized losses on sales of AFS securities		0.4			0.0
Net realized losses/(gains) on sales of AFS securities		0.0			(0.0	)
Premiums paid on cash flow hedges		(19.2	)		—
Changes in operating assets and liabilities:
Interest receivable		0(6.71	)		10.64
Accounts receivable and PEO unbilled receivables, net		(9918.9	)		(336.54	)
Prepaid expenses and other current assets		229.35			926.23
Accounts payable and other current liabilities		~~107~~124.89			~~184~~65.26
Deferred costs		(~~173~~68.75	)		(~~184~~51.36	)
Net change in other long-term assets and liabilities		256.43			218.64
Net change in operating lease right-of-use assets and liabilities		(40.37	)		(21.07	)
Net cash provided by operating activities		~~1,557~~718.14			~~1,676~~546.01
Investing activities
Purchases of AFS securities		(83,~~473~~731.29	)		(61,~~007~~029.47	)
Proceeds from sales and maturities of AFS securities		82,~~500~~547.43			61,~~345~~013.60
Net purchases of short-term accounts receivable		(~~153~~47.30	)		(~~101~~45.81	)
Purchases of property and equipment		(~~131~~55.39	)		(~~120~~35.16	)
Acquisition of businesses, net of cash acquired		—(0.2	)		~~(208.3~~—	)
Purchases of other assets, net		(2415.30	)		(2512.86	)
Net cash used in investing activities		(~~281~~1,302.7	)		(~~117~~110.80	)
Financing activities
Net change in client fund obligations		~~383~~81.14			~~1,947~~(25.41	)
Net change in short-term borrowings		—			9.0
Dividends paid		(389.1	)		(353.4	)
Dividends paid		(1,059.2	)		(962.5	)
Repurchases of common shares		(160.1	)		(104.0	)
Repurchases of common shares, including excise tax		(104.5	)		(169.2	)
Activity related to equity-based plans		(47.6	)		(2.5	)
Debt issuance fees		(11.4	)		—
Net cash used in financing activities		(515.4	)		(485.0	)
Activity related to equity-based plans		12.9			15.1
Net change in cash, restricted cash, and equivalents		(1,099.7	)		(48.9	)
Net cash (used in)/provided by financing activities		(779.1	)		839.8
Cash, restricted cash, and equivalents, beginning of period		2,734.3			1,897.0
Net change in cash, restricted cash, and equivalents		496.3			2,398.0
Cash, restricted cash, and equivalents, end of period	$	1,634.6		$	1,848.1
Cash, restricted cash, and equivalents, beginning of period		1,897.0			2,134.9
Cash, restricted cash, and equivalents, end of period	$	2,393.3		$	4,532.9
Reconciliation of cash, restricted cash, and equivalents
Cash and cash equivalents	$	~~1,563~~809.80		$	1,~~693~~459.6
Restricted cash		4950.14			4154.09
Restricted cash and restricted cash equivalents included in funds held for clients		~~780~~775.42			~~2,798~~333.36
Total cash, restricted cash, and equivalents	$	21,~~393~~634.36		$	41,~~532~~848.91

See Notes to Consolidated Financial Statements.

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PAYCHEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~February~~August 2831, 2025

Note A: Description of Business, Basis of Presentation, and Significant Accounting Policies

Description of business: Paychex, Inc. and its wholly owned subsidiaries (collectively, the “Company” or “Paychex”) is an industry-leading human capital management ("HCM") company delivering a full suite of technology and advisory services in human resources ("HR"), employee benefit solutions, insurance and payroll processing for ~~small- to medium-sized~~ businesses and their employees across the United States (“U.S.”) and parts of Europe. The Company also has operations in India. Paychex, a Delaware corporation formed in 1979, reports as one segment. Refer to Note K Segment Reporting for additional information on the Company's segment results.

Basis of presentation: The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q ("Form 10-Q") and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statement presentation. The consolidated financial statements include the consolidated accounts of the Company with all intercompany transactions eliminated. Certain disclosures are reported as zero balances due to rounding. In the opinion of management, the information furnished herein reflects all adjustments (consisting of items of a normal recurring nature) necessary for a fair statement of the results for the interim period. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and related Notes to Consolidated Financial Statements presented in the Company’s Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended May 31, ~~2024~~2025 (“fiscal ~~2024~~2025”). Operating results and cash flows for the ~~nine~~three months ended ~~February~~August 2831, 2025 are not necessarily indicative of the results that may be expected for other interim periods or for the fiscal year ending May 31, ~~2025~~2026 (“fiscal ~~2025~~2026”).

Reclassifications: Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported consolidated earnings.

Restricted cash and restricted cash equivalents: Restricted cash and restricted cash equivalents are recorded at fair value, and consist of cash and cash equivalents, primarily money market securities, included in funds held for clients and cash that is restricted in use to secure commitments for certain workers’ compensation insurance policies.

Accounts receivable, net of allowance for credit losses: Accounts receivable balances are shown on the Consolidated Balance Sheets net of the allowance for credit losses ~~of $23.8 million and $21.3 million~~ as of February 28, 2025 and May 31, 2024, respectively. These balances include trade receivables for services provided to clients and receivables purchased from the Company's clients under non-recourse arrangements. Trade receivables were $170.5 million and $141.3 million as of February 28, 2025 and May 31, 2024, respectively. Purchased receivables, at gross, were $1.1 billion and $939.6 million as of February 28, 2025 and May 31, 2024, respectively. follows:

The Company is exposed to credit losses through the sale of services, payment of client obligations, and collection of purchased receivables. To mitigate this credit risk, the Company has multiple programs in place to assess and continuously monitor each client’s ability to pay for these solutions and support. Credit monitoring programs include, but are not limited to, new client credit reviews, establishing appropriate credit limits, monitoring of credit distressed clients, and early electronic wire and collection procedures. The Company also considers contract terms and conditions, client business type or strategy and may require collateralized asset support or prepayment to mitigate credit risk.


	August 31,		May 31,
In millions	2025		2025
Trade receivables	$	222.1	$	205.4
Purchased receivables		1,161.6		1,151.1
Total accounts receivable, gross		1,383.7		1,356.5
Less: Allowance for credit losses		24.4		26.0
Accounts receivable, net of allowance for credit losses	$	1,359.3	$	1,330.5

~~Accounts~~Trade ~~receivable~~receivables are ~~written off and charged against the allowance~~ for ~~credit~~services ~~losses~~provided ~~when~~to ~~the~~clients ~~Company~~in has exhausted all collection efforts without success. The Company estimates its credit losses based on historical loss activity adjusted for current economic conditions and reasonable and supportable forecast factors, when applicable. The provision for the ~~allowance~~normal ~~for~~course credit losses and accounts written off were not material for the three and nine months ended February 28, 2025 and February 29, 2024. No single client had a material impact on total accounts receivable as of ~~February~~business ~~28, 2025~~ and ~~May~~purchased ~~31,~~receivables ~~2024~~are oracquired ~~service~~from ~~revenue and results of operations for~~ the ~~three~~Company's ~~and~~clients ~~nine~~under ~~months~~non-recourse ~~ended February 28, 2025 and February 29, 2024~~arrangements.

~~Professional~~The ~~Employer~~Company ~~Organization~~is ~~(“PEO”)~~exposed ~~unbilled~~to ~~receivables,~~credit ~~net~~losses through the sale of ~~advance~~its ~~collections:~~solutions ~~PEO~~and ~~unbilled~~support ~~receivables~~services, ~~including~~payment ~~estimated~~of ~~revenues~~client obligations, ~~offset~~and bycollection ~~advance~~of ~~collections~~purchased ~~from~~receivables. ~~clients~~To mitigate this credit risk, ~~are~~the ~~recorded~~Company ashas ~~PEO~~multiple ~~unbilled~~programs ~~receivables,~~in ~~net~~place ofto ~~advance~~assess ~~collections~~and oncontinuously ~~the~~monitor ~~Company~~each client’s ~~Consolidated~~ability ~~Balance~~to ~~Sheets~~pay for these solutions and support services. AsCredit ofmonitoring ~~February~~programs 28include, ~~2025~~but ~~and~~are ~~May~~not 31limited to, ~~2024~~new client credit reviews, ~~advance~~establishing ~~collections~~appropriate ~~were~~credit ~~$0.6~~limits, ~~million~~monitoring of credit distressed clients, and $0early electronic wire and collection procedures.7 ~~million~~The Company also considers contract terms and conditions, ~~respectively~~client business type or strategy and may require collateralized asset support or prepayment to mitigate credit risk.

Accounts receivable are written off and charged against the allowance for credit losses when the Company has exhausted all collection efforts without success. The Company estimates its allowance for credit losses based on historical loss activity adjusted for current economic conditions and reasonable and supportable forecast factors, when applicable.

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Allowance for credit losses activity related to accounts receivables are as follows:


	Three months ended August 31,
In millions	2025			2024
Balance, beginning of period	$	26.0		$	21.3
Provision for credit losses		7.7			7.5
Write-offs and recoveries		(9.3	)		(2.8	)
Balance, end of period	$	24.4		$	26.0

No single client had a material impact on total accounts receivable as of August 31, 2025 and May 31, 2025 or service revenue and results of operations for the three months ended August 31, 2025 and August 31, 2024.

Professional Employer Organization (“PEO”) unbilled receivables, net of advance collections: PEO unbilled receivables, including estimated revenues, offset by advance collections from clients, are recorded as PEO unbilled receivables, net of advance collections on the Company’s Consolidated Balance Sheets. As of August 31, 2025 and May 31, 2025, advance collections were $2.8 million and $1.8 million, respectively.

PEO insurance reserves: As part of its PEO solution, the Company offers workers’ compensation insurance and health insurance coverage to clients for the benefit of client employees. Workers’ compensation insurance is primarily provided under fully insured high deductible workers’ compensation insurance policies. Workers’ compensation insurance reserves are established to provide for the estimated costs of paying claims up to per occurrence liability limits. These reserves include estimates of certain expenses associated with processing and settling claims. For fiscal 2026 and fiscal 2025, the Company has an aggregate maximum liability of $1.0 million for claims exceeding $1.0 million, and once met, the maximum individual claims liability is $1.0 million.

With respect to PEO health insurance, the Company offers various health insurance plans that take the form of either fully insured guaranteed cost plans or fully insured insurance arrangements where the Company retains risk. A reserve for insurance arrangements where the Company retains risk is established to provide for the payment of claims in accordance with the Company’s service contract with the carrier. The claims reserve includes estimates for reported losses, plus amounts for those claims incurred but not reported, and estimates of certain expenses associated with processing and settling the claims. The Company’s maximum individual claims liability was $0.5 million under its policies during both fiscal 2026 and fiscal 2025.

Estimating the ultimate cost of future claims is an uncertain and complex process based upon historical loss experience and accepted actuarial methods and assumptions. These reserves are subject to change due to multiple factors, including economic trends, changes in legal liability law, and damage awards, all of which could materially impact the reserves as reported in the consolidated financial statements. Accordingly, final claim settlements may vary from the present estimates, particularly with workers’ compensation insurance where those payments may not occur until well into the future. The Company regularly reviews the adequacy of its estimated insurance reserves. Adjustments to previously established reserves are reflected in the results of operations for the period in which the adjustment is identified. Such adjustments could be significant, reflecting any combination of new and adverse or favorable trends.

Stock-based compensation costs: The Company has issued stock-based awards to employees and members of its Board of Directors (the “Board”) consisting of stock options, restricted stock units, and restricted stock awards. The Company accounts for all stock-based awards to employees and members of the Board as compensation costs in the consolidated financial statements based on their fair values measured as of the date of grant. These costs are recognized over the requisite service period. Stock-based compensation costs recognized were $26.8 million for the three months ended August 31, 2025, compared with $16.5 million for the three months ended August 31, 2024.

Recently adopted accounting pronouncements: There were no recently adopted accounting pronouncements during the three months ended August 31, 2025 that had a material impact on the Company's consolidated financial statements or disclosures.

Recently issued accounting pronouncements: In December 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU updates income tax disclosure requirements primarily by requiring specific categories and greater disaggregation within the rate reconciliation and disaggregation of income taxes paid by jurisdiction. This ASU is effective for annual periods beginning after December 15, 2024, and is applicable to the Company’s Annual Report on Form 10-K for fiscal 2026, with early application permitted. The transition method is prospective with the retrospective method permitted. The requirements of this ASU are disclosure-related and will not have an impact on the Company’s financial condition, results of operations, or cash flows. The Company is currently evaluating the impact of adopting this ASU on its income tax disclosures.

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~~PEO~~In ~~insurance~~November ~~reserves:~~2024, Asthe ~~part~~FASB issued ASU No. 2024-03 “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of ~~its~~Income ~~PEO~~Statement ~~solution,~~Expenses.” ~~the~~ASU ~~Company~~No. ~~offers~~2024-03 ~~workers’~~as ~~compensation~~amended ~~insurance~~by ~~and~~subsequent ~~health~~ASUs ~~insurance~~on ~~coverage~~the topic requires public business entities to ~~clients~~disclose, for ~~the~~interim ~~benefit~~and ofannual ~~client~~reporting ~~employees~~periods, additional information about certain income statement expense categories. ~~Workers’~~The ~~compensation~~requirements ~~insurance~~are iseffective ~~primarily~~for ~~provided~~annual ~~under~~reporting ~~fully~~periods ~~insured~~beginning ~~high~~after ~~deductible~~December ~~workers’~~15, ~~compensation~~2026, ~~insurance~~and ~~policies.~~for ~~Workers’~~interim ~~compensation~~periods ~~insurance~~within ~~reserves~~annual reporting periods beginning after December 15, 2027. Entities are ~~established~~permitted to ~~provide~~apply ~~for~~either the ~~estimated~~prospective ~~costs~~or ofretrospective ~~paying~~transition ~~claims~~methods. upThis ASU is applicable to ~~per~~the ~~occurrence~~Company’s ~~liability~~Annual ~~limits.~~Report ~~These~~on ~~reserves~~Form ~~include~~10-K ~~estimates~~for ofthe ~~certain~~fiscal ~~expenses~~year ~~associated~~ending ~~with~~May ~~processing~~31, 2028, and ~~settling~~subsequent ~~claims~~interim periods, with early application permitted. ~~For~~The ~~fiscal~~requirements ~~2025~~of ~~and~~this ~~2024,~~ASU ~~the~~are ~~Company~~disclosure-related ~~has~~and will not have an ~~aggregate~~impact ~~maximum~~on ~~liability~~the ofCompany’s ~~$1.0~~financial ~~million~~condition, ~~for~~results ~~claims~~of ~~exceeding~~operations, $1or cash flows.0 ~~million,~~The ~~and~~Company ~~once~~is ~~met,~~currently evaluating the ~~maximum~~impact ~~individual~~of ~~claims~~adopting ~~liability~~this isASU ~~$1.0~~on ~~million.~~its disclosures.

~~With~~In ~~respect~~July ~~to PEO health insurance coverage~~2025, the ~~Company~~FASB ~~offers~~issued ~~various~~ASU ~~health~~No. ~~insurance~~2025-05 ~~plans~~“Financial ~~that~~Instruments ~~take~~– ~~the~~Credit ~~form~~Losses of(Topic ~~either~~326): ~~fully~~Measurement ~~insured~~of ~~guaranteed~~Credit ~~cost~~Losses ~~plans~~for orAccounts ~~fully~~Receivable ~~insured~~and ~~insurance~~Contract ~~arrangements~~Assets,” ~~where~~which ~~the~~introduces ~~Company~~a ~~retains~~practical ~~risk.~~expedient ~~A reserve~~ for ~~insurance~~the ~~arrangements~~application ~~where~~of the ~~Company~~current ~~retains~~expected ~~risk~~credit isloss ~~established~~model to ~~provide~~current ~~for~~accounts ~~the~~receivable ~~payment~~and ofcontract ~~claims~~assets. inThis ~~accordance~~ASU ~~with~~is ~~the~~effective ~~Company’s~~for ~~service~~annual ~~contract~~periods ~~with~~beginning ~~the~~after ~~carrier.~~December ~~The~~15, ~~claims~~2025, ~~reserve~~and ~~includes~~interim ~~estimates~~periods ~~for~~within ~~reported~~those ~~losses,~~annual ~~plus~~reporting ~~amounts~~periods. ~~for~~This ~~those~~ASU ~~claims~~is ~~incurred~~applicable ~~but~~to ~~not~~the ~~reported,~~Company’s ~~and~~fiscal ~~estimates~~year ofbeginning ~~certain~~June ~~expenses~~1, ~~associated~~2026, with ~~processing~~early ~~and~~application ~~settling~~permitted. ~~the~~The ~~claims~~transition method is prospective. The Company’s ~~maximum~~is ~~individual~~currently ~~claims~~evaluating ~~liability~~the isimpact ~~$0.5~~of ~~million~~adopting ~~under~~this ~~its~~ASU ~~policies~~on ~~covering~~its ~~both~~consolidated ~~fiscal~~financial ~~2025~~statements and ~~fiscal 2024~~disclosures.

In ~~establishing~~September 2025, the ~~PEO~~FASB ~~workers'~~issued ~~compensation~~ASU ~~insurance~~No. ~~reserves,~~2025-06 ~~the~~“Intangibles ~~Company~~– ~~uses~~Goodwill anand ~~independent~~Other ~~actuarial~~– ~~estimate~~Internal-Use ofSoftware ~~undiscounted~~(Subtopic ~~future~~350-40): ~~cash~~Targeted ~~payments~~Improvements ~~that~~to ~~would~~the beAccounting ~~made~~for toInternal-Use ~~settle claims~~Software.” ~~Estimating~~This ~~the~~ASU ~~ultimate~~updates the cost ofcapitalization ~~future~~threshold ~~claims~~for isinternal-use ansoftware ~~uncertain~~development ~~and~~costs ~~complex~~by ~~process~~removing ~~based~~all ~~upon~~references ~~historical~~to ~~loss~~software ~~experience~~project ~~and~~development ~~accepted~~stages ~~actuarial methods~~ and ~~assumptions.~~providing ~~These~~new ~~reserves~~guidance ~~are~~on ~~subject~~how to ~~change~~evaluate ~~due~~whether the probable-to-complete ~~multiple~~recognition ~~factors,~~threshold ~~including~~has ~~economic~~been ~~trends,~~met. ~~changes~~This inASU ~~legal~~is ~~liability~~effective ~~law,~~for ~~and~~annual ~~damage~~periods ~~awards,~~beginning ~~all~~after ofDecember ~~which~~15, ~~could~~2027, ~~materially~~and ~~impact~~interim ~~the~~periods ~~reserves~~within asthose ~~reported~~annual inreporting ~~the~~periods. ~~consolidated~~This ~~financial~~ASU ~~statements.~~is ~~Accordingly,~~applicable ~~final~~to ~~claim~~the ~~settlements~~Company’s ~~may~~fiscal ~~vary~~year ~~from~~beginning ~~the~~June ~~present~~1, ~~estimates~~2028, ~~particularly~~ with ~~workers’~~early ~~compensation~~application ~~insurance~~permitted. ~~where~~The ~~those~~transition ~~payments~~method may ~~not~~be ~~occur~~prospective, ~~until~~modified, ~~well~~or ~~into the future~~retrospective. The Company ~~regularly~~is ~~reviews~~currently ~~the~~evaluating ~~adequacy of its estimated insurance reserves. Adjustments to previously established reserves are reflected in~~ the ~~results~~impact of ~~operations~~adopting ~~for~~this ~~the~~ASU ~~period~~on inits ~~which~~consolidated ~~the~~financial ~~adjustment~~statements ~~is identified. Such adjustments could be significant, reflecting any combination of new~~ and ~~adverse or favorable trends~~disclosures.

Stock-based compensation costs: The Company has issued stock-based awards to employees and members of its Board of Directors (the “Board”) consisting of stock options, restricted stock units, and restricted stock awards. The Company accounts for all stock-based awards to employees and members of the Board as compensation costs in the consolidated financial statements based on their fair values measured as of the date of grant. These costs are recognized over the requisite service period. Stock-based compensation costs recognized were $17.6 million and $50.5 million for the three and nine months ended February 28, 2025, and $14.4 million and $45.1 million for the three and nine months ended February 29, 2024.

Derivative Instruments: Interest rate swaption contracts (“Swaption Contracts”), qualifying as cash flow hedges of interest payments, are used to hedge a portion of the Company's exposure to fluctuations in benchmark interest rates related to the anticipated issuances of long-term fixed rate debt. At inception, a derivative asset is recorded for the fair value of the premiums paid. Changes to the fair value of these cash flow hedges is temporarily reported in Accumulated other comprehensive loss on the Company’s Consolidated Balance Sheets and reclassifed to earnings as the hedged item affects earnings. Refer to Note H Supplemental Information for additional information on the Company's Swaption Contracts.

We formally assess, both at inception and at least quarterly, whether the financial instruments used in hedging transactions are effective at offsetting changes in cash flows of the related underlying exposure.

Recently adopted accounting pronouncements: There were no recently adopted accounting pronouncements during the nine months ended February 28, 2025 that had a material impact on the Company's consolidated financial statements or disclosures.

Recently issued accounting pronouncements: In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU expands public business entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The requirements are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, and are required to be applied retrospectively. This ASU is applicable to the Company’s Annual Report on Form 10-K for fiscal 2025, and subsequent interim periods, with early application permitted. The requirements of this ASU are disclosure-related and will not have an impact on the Company’s financial condition, results of operations, or cash flows. The Company is currently evaluating the impact of adopting this ASU on its reportable segment disclosures.

In December 2023, the FASB issued ASU No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU updates income tax disclosure requirements primarily by requiring specific categories and greater disaggregation within the rate reconciliation and disaggregation of income taxes paid by jurisdiction. This ASU is effective for annual periods

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beginning after December 15, 2024, and is applicable to the Company’s fiscal year beginning June 1, 2025, with early application permitted. The transition method is prospective with the retrospective method permitted. The requirements of this ASU are disclosure-related and will not have an impact on the Company’s financial condition, results of operations, or cash flows. The Company is currently evaluating the impact of adopting this ASU on its income tax disclosures.

In November 2024, the FASB issued ASU No. 2024-03 “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 as amended by subsequent ASUs on the topic requires public business entities to disclose, for interim and annual reporting periods, additional information about certain income statement expense categories. The requirements are effective for annual reporting periods beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027. Entities are permitted to apply either the prospective or retrospective transition methods. This ASU is applicable to the Company’s Annual Report on Form 10-K for the fiscal year ending May 31, 2028, and subsequent interim periods, with early application permitted. The requirements of this ASU are disclosure-related and will not have an impact on the Company’s financial condition, results of operations, or cash flows. The Company is currently evaluating the impact of adopting this ASU on its disclosures.

Note B: Service Revenue

Service revenue is primarily attributable to fees for providing services to the Company’s clients and is recognized when control of the contracted services is transferred to its clients, in an amount that reflects the consideration it expects to receive in exchange for such services. Insurance Solutions revenue is commissions earned on premiums collected and remitted to insurance carriers. The Company’s contracts generally do not contain specified contract periods and may be terminated by either party with a 30-day notice of termination. Sales and other applicable non-payroll related taxes are excluded from service revenue.

Based upon similar operational and economic characteristics, the Company’s service revenue is disaggregated by Management Solutions and PEO and Insurance Solutions as reported in the Company’s Consolidated Statements of Income and Comprehensive Income. The Company believes these revenue categories depict how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

Management Solutions Revenue

Management Solutions revenue is primarily derived from the Company’s integrated HCM ~~services~~ and HR outsourcing solutions. Clients can select services on an á la carte basis or as part of various product bundles. The Company’s offerings often leverage the information gathered in its base payroll processing service, allowing it to provide comprehensive services covering the HCM spectrum. Management Solutions revenue is generally recognized over time as services are performed and the client simultaneously receives and controls the benefits from these services.

Revenue earned from delivery service for the distribution of certain client payroll checks and reports is also included in Management Solutions revenue in the Company’s Consolidated Statements of Income and Comprehensive Income. Delivery service revenue is recognized at a point in time following the delivery of payroll checks, reports, quarter-end packages, and tax returns to the Company’s clients.

~~PEO and Insurance Solutions Revenue~~7

PEO solutions are sold through the Company’s registered and licensed subsidiaries and offer businesses HCM and HR solutions. The Company serves as a co-employer of its clients’ employees, offers health insurance coverage to client employees, and assumes the risks and rewards of workers’ compensation insurance and certain health insurance offerings. PEO Solutions revenue is recognized over time as the services are performed and the client simultaneously receives and controls the benefits from these services. PEO Solutions revenue is reported net of certain pass-through costs billed and incurred, which include payroll wages, payroll taxes, including federal and state unemployment insurance, and health insurance premiums on guaranteed cost benefit plans. For workers’ compensation and health insurance plans where the Company retains risk, revenues and costs are recorded on a gross basis.

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PEO and Insurance Solutions Revenue

PEO Solutions are sold through the Company’s registered and licensed subsidiaries and offer businesses HCM and HR solutions. The Company serves as a co-employer of its clients’ employees, offers health insurance coverage to client employees, and assumes the risks and rewards of workers’ compensation insurance and certain health insurance offerings. PEO Solutions revenue is recognized over time as the services are performed and the client simultaneously receives and controls the benefits from these services. PEO Solutions revenue is reported net of certain pass-through costs billed and incurred, which include payroll wages, payroll taxes, including federal and state unemployment insurance, and health insurance premiums on guaranteed cost benefit plans. For workers’ compensation and health insurance plans where the Company retains risk, revenues and costs are recorded on a gross basis.

PEO pass-through costs netted within the PEO and Insurance Solutions revenue were as follows:

	For the three months ended				~~For the nine months ended~~
	February 28,		February 29,		February 28,		February 29,
	August 31,		August 31,
In millions	2025		2024		~~2025~~		~~2024~~
Payroll wages and payroll taxes	$	7,~~783~~356.01	$	76,~~317~~881.06	$	~~21,836.6~~	$	~~20,378.5~~
State unemployment insurance (included in payroll wages and payroll taxes)	$	8123.57	$	7823.0	$	~~127.9~~	$	~~116.3~~
Guaranteed cost benefit plans	$	~~172~~175.65	$	165.68	$	~~505.9~~	$	~~499.4~~

Insurance solutions are sold through the Company’s licensed insurance agency, Paychex Insurance Agency, Inc., which provides insurance through a variety of carriers, ~~allowing~~enabling ~~companies~~clients to expand their employee benefit offerings at an affordable cost. Insurance offerings include property and casualty coverage such as workers’ compensation, business-owner policies, commercial auto, cyber security, and health and benefits coverage, including health, dental, vision, life and disability. Insurance Solutions revenue reflects commissions earned on remitted insurance services premiums billed and is recognized over time as services are performed and the client simultaneously receives and controls the benefits from these services.

Contract Balances

The timing of revenue recognition for Management Solutions and PEO and Insurance Solutions is consistent with the invoicing of clients as they both occur during the respective client payroll period for which the services are provided. Therefore, the Company does not recognize a contract asset or liability resulting from the timing of revenue recognition and invoicing.

Payments received for certain of the Company’s service offerings for set-up fees are considered a material right. Therefore, the Company defers revenue associated with these performance obligations, which exceed one year, and subsequently recognizes them as future services are provided, over approximately ~~three~~two to four years.

Changes in deferred revenue related to material rights that exceed one year were as follows:

	For the three months ended						~~For the nine months ended~~
	February 28,			February 29,			February 28,			February 29,
	August 31,			August 31,
In millions	2025			2024			~~2025~~			~~2024~~
Balance, beginning of period	$	7492.04		$	6974.89		$	~~74.9~~		$	~~62.0~~
Deferral of revenue		1112.51			127.46			~~29.1~~			~~36.3~~
Recognition of unearned revenue		(914.95	)		(8.9.1	)		~~(28.4~~	)		~~(25.0~~	)
Balance, end of period	$	7590.60		$	73.34		$	~~75.6~~		$	~~73.3~~

Deferred revenue related to material rights is reported in the deferred revenue and other long-term liabilities line items on the Company’s Consolidated Balance Sheets. As of ~~February~~August 2831, 2025, the Company expects to recognize deferred revenue related to these material rights for the remainder of fiscal ~~2025~~2026 and subsequent fiscal years as follows:

In millions	Estimated
Year ending May 31,	recognition of unearned revenue
2025	$	9.4
2026		32.1
Thereafter		34.1
Total recognition of unearned revenue	$	75.6

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In millions	Estimated
Year ending May 31,	recognition of unearned revenue
2026	$	36.0
2027		32.9
Thereafter		21.1
Total recognition of unearned revenue	$	90.0

Assets Recognized from the Costs to Obtain and Fulfill Contracts

The Company recognizes an asset for the incremental costs of obtaining a contract with a client if it is expected that the economic benefit and amortization period will be longer than one year. The Company also recognizes an asset for the costs to fulfill a contract with a client if the costs are specifically identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered.

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Deferred costs to obtain and fulfill contracts are reported in the prepaid expenses and other current assets and long-term deferred costs line items on the Company’s Consolidated Balance Sheets. Amortization expense related to costs to obtain and fulfill a contract are included in cost of service revenue and selling, general and administrative expenses in the Company’s Consolidated Statements of Income and Comprehensive Income and recognized over the expected economic benefit period.

The Company regularly reviews its deferred costs for potential impairment and did not recognize an impairment loss during the ~~nine~~three months ended ~~February~~August 2831, 2025 or ~~February~~August 2931, 2024.

Changes in deferred costs to obtain and fulfill contracts were as follows:

Costs to obtain contracts:

For the three months ended

~~For the nine months ended~~

February 28,

February 29,

February 28,

February 29,

August 31,

In millions

2025

2024

~~2025~~

~~2024~~

Balance, beginning of period

~~600~~609.70

~~605~~609.04

~~609.4~~

~~597.5~~

Capitalization of costs

5948.09

5345.73

~~154.2~~

~~163.1~~

Amortization

(52.68

)

(51.68

)

~~(156.5~~

)

~~(153.5~~

)

Balance, end of period

~~607~~605.1

~~607~~602.19

~~607.1~~

Costs to fulfill contracts:
	For the three months ended						~~For the nine months ended~~
	February 28,			February 29,			February 28,			February 29,
	August 31,			August 31,
In millions	2025			2024			~~2025~~			~~2024~~
Balance, beginning of period	$	7587.80		$	7576.86		$	~~76.6~~		$	~~75.3~~
Capitalization of costs		619.96			76.53			~~19.5~~			~~21.2~~
Amortization		(6.7.6	)		(6.7	)		~~(20.1~~	)		~~(19.9~~	)
Balance, end of period	$	7699.0		$	76.62		$	~~76.0~~		$	~~76.6~~

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Note C: Basic and Diluted Earnings Per Share

Basic and diluted earnings per share were calculated as follows:

For the three months ended

~~For the nine months ended~~

February 28,

February 29,

February 28,

February 29,

August 31,

In millions, except per share amounts

2025

2024

~~2025~~

~~2024~~

Basic earnings per share:

Net income

~~519~~383.38

~~498~~427.64

~~1,360.1~~

~~1,310.5~~

Weighted-average common shares outstanding

360.1

~~359~~360.91

~~360.1~~

~~360.4~~

Basic earnings per share

1.4407

1.3919

~~3.78~~

~~3.64~~

Diluted earnings per share:

Net income

~~519~~383.38

~~498~~427.64

~~1,360.1~~

~~1,310.5~~

Weighted-average common shares outstanding

360.1

~~359~~360.91

~~360.1~~

~~360.4~~

Dilutive effect of common share equivalents

1.98

1.8

~~1.8~~

Weighted-average common shares outstanding, assuming dilution

~~362~~361.09

361.79

~~361.9~~

~~362.2~~

Diluted earnings per share

1.4306

1.3818

~~3.76~~

~~3.62~~

Weighted-average anti-dilutive common share equivalents

0.02

0.6

~~0.3~~

~~0.6~~

Weighted-average common share equivalents that ~~have~~had an anti-dilutive impact are excluded from the computation of diluted earnings per share.

Note D: Business Combinations

The Company accounts for acquisitions in accordance with the guidance in FASB Accounting Standards Codification 805, Business Combinations ("ASC 805"). This guidance requires disclosure of consideration transferred, including any contingent consideration, assets acquired, and liabilities assumed to be measured at their fair values as of the acquisition date. This guidance further provides that: (1) acquisition costs will generally be expensed as incurred, (2) restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and (3) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. ASC 805 requires that any excess of the purchase price over the fair values of the net assets acquired, including identifiable intangibles and liabilities assumed, be recognized as goodwill.

Paycor HCM, Inc.

On April 14, 2025, the Company completed its acquisition of Paycor HCM, Inc. (“Paycor”) for total purchase consideration of approximately $4.1 billion, of which $4.06 billion was paid in cash and $25.1 million was paid in the form of replacement awards. To finance the purchase consideration, Paychex issued a $4.2 billion aggregate principal amount of fixed-rate corporate bonds ("Corporate Bonds"). Refer to Note N of the Notes to Consolidated Financial Statements contained in Item 8 of the Company's Form 10-K for fiscal 2025 for further details on the Corporate Bonds. Paycor is a leading Software-as-a-Service (“SaaS”) provider of HCM solutions for small and medium-sized businesses across all 50 states within the U.S.

Acquisition related costs consist of miscellaneous professional service fees and expenses for our recent acquisitions. The Company recognized $84.1 million of acquisition-related costs, including $61.1 million related to amortization for step-up basis intangible assets, that were expensed in the three months ended August 31, 2025. These costs are shown as part of selling, general and administrative expenses on the Consolidated Statements of Income and Comprehensive Income.

The transaction aims to enhance the Company’s capabilities in the upmarket segment and expand its suite of AI-driven HCM solutions.

Purchase Price Allocation

The purchase price allocation as of the acquisition date is subject to change as additional information about the fair values of assets acquired and liabilities assumed becomes available. These adjustments will be finalized no later than one year from the acquisition date.

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~~Note~~During D:the ~~Business~~three ~~Combinations~~months ended August 31, 2025, the Company adjusted its purchase price allocation, which increased goodwill $5.8 million, primarily resulting from the write-down of a building by $4.9 million, net of deferred taxes of $1.9 million as a result of an updated valuation. The impact of these changes on previously reported earnings was not material.

Effective July 31, 2023, substantially all of the net assets of Alterna Capital Solutions LLC (“Alterna”), were acquired by a wholly owned subsidiary of the Company. Alterna purchases outstanding accounts receivable of their customers under non-recourse arrangements. This acquisition allows the Company to increase and diversify its portfolio of solutions and support serving small- to medium-sized businesses. The acquisition consideration was comprised of a base purchase price of $95.1 million plus immediate settlement of debt totaling $128.9 million, net of $15.7 million in cash and restricted cash acquired. Accounts receivable balances acquired, net of allowance for credit losses, and less amounts due to clients related to funding arrangements, totaled $146.1 million. Management determined that intangible assets related to the client list were $18.9 million to be amortized utilizing an accelerated method of amortization over a weighted average of 8 years. Goodwill in the amount of $46.7 million was recorded as a result of the acquisition, which is tax-deductible. The Company finalized the purchase price allocation for the acquisition of Alterna as of November 30, 2023. The financial results of Alterna are included in the Company’s consolidated financial statements from its respective date of acquisition. This acquisition was not material to the Company’s results of operations, financial position, or cash flows.


In millions
Total purchase price	$	4,085.7
Assets Acquired
Cash and cash equivalents	$	168.8
Restricted cash		0.0
Interest receivable		0.7
Accounts receivable		26.5
Prepaid income taxes		1.0
Prepaid expenses and other current assets		29.3
Funds held for clients		1,288.2
Property and equipment		27.6
Operating lease right-of-use assets		9.1
Intangible assets (new fair value)		1,776.5
Other long-term assets		1.9
Total assets	$	3,329.6
Liabilities Assumed
Current liabilities	$	136.3
Client funds obligation		1,288.9
Deferred income taxes		342.4
Other long-term liabilities		69.7
Total Liabilities	$	1,837.3
Fair value of purchase consideration		4,085.7
Less: fair value of net assets		1,492.3
Goodwill	$	2,593.4

OnCustomer ~~January~~relationships 7,were ~~2025,~~ the ~~Company~~most ~~entered~~significant ~~into~~of athe ~~definitive~~acquired ~~agreement~~identifiable tointangible ~~acquire Paycor HCM, Inc~~assets. ~~("Paycor")~~The infair anvalue ~~all-cash~~of ~~transaction for $22.50 per eligible share, without interest (~~the ~~"Acquisition").~~customer ~~The~~relationship ~~Company~~intangible ~~expects~~asset ~~the~~was ~~Acquisition~~estimated ~~will~~using ~~enhance~~a ~~its capabilities up market, broaden its suite of AI~~multi-~~driven~~period HRexcess ~~Technology~~earnings ~~capabilities, and provide new channels for sustained long-term growth~~method. The ~~waiting~~cash ~~period~~flow ~~with~~projections ~~respect~~for to the ~~consummation~~acquired ofPaycor ~~the~~customer ~~Acquisition~~relationships ~~under~~reflected ~~the~~significant ~~Hart-Scott-Rodino~~judgments ~~Antitrust~~and ~~Improvements~~assumptions ~~Act~~including ofthe ~~1976,~~revenue asgrowth ~~amended~~rate, ~~expired~~customer onattrition ~~February 21~~rate, ~~2025.~~and ~~The~~discount ~~expiration of the waiting period satisfies one of the major conditions to the closing of the Acquisition, which remains subject to other customary closing conditions~~rate. The Company ~~currently~~amortizes ~~has~~its aintangible ~~bridge~~assets ~~commitment~~assuming ~~letter~~no ~~("Bridge~~residual ~~Loan~~value ~~Commitment")~~over inperiods ~~place and expects to have long-term fixed financing~~ in ~~place~~which ~~prior~~the toeconomic ~~closing.~~benefit ~~The~~of ~~Acquisition~~these assets is ~~expected~~consumed to(the ~~close~~useful ~~in April 2025, subject to customary closing conditions~~life).

~~Note~~The E:goodwill ~~Other~~is ~~(Expense)/Income~~attributable primarily to the expected revenue synergies expected from combining the operations of both entities, ~~Net~~and intangible assets that do not qualify for separate recognition, including assembled workforce acquired through the acquisition. None of the goodwill is expected to be deductible for income tax purposes.

~~Other~~Unaudited ~~(expense)/income,~~Pro ~~net,~~Forma ~~consisted~~Financial ~~of the following items:~~Information

	For the three months ended						For the nine months ended
	February 28,			February 29,			February 28,			February 29,
In millions	2025			2024			2025			2024
Interest income on corporate investments	$	16.6		$	19.3		$	52.3		$	61.1
Interest expense		(22.6	)		(9.9	)		(41.7	)		(27.8	)
Other		(0.0	)		(0.0	)		(0.6	)		0.6
Other (expense)/income, net	$	(6.0	)	$	9.4		$	10.0		$	33.9

The following unaudited pro forma consolidated results of operations are provided for illustrative purposes only and present the estimated unaudited pro forma combined results of Paychex and Paycor for three months ended August 31, 2024, as if the acquisition had occurred on June 1, 2023:

During the three months ended February 28, 2025, the Company entered into a Bridge Loan Commitment and executed three Swaption Contracts in connection with its pending acquisition of Paycor. This resulted in an additional $13.2 million of expense related to the amortization of debt issuance costs on the Bridge Loan Commitment and the excluded component of the initial fair value of the Swaption Contracts. These amounts are included in interest expense in the above table and in other (expense)/income, net on the Consolidated Statements of Income and Comprehensive Income. Refer to Note G Fair Value Measurements and Note H Supplemental Information for further discussion of the Bridge Loan Commitment and Swaption Contracts.


	Three months ended
In millions	August 31, 2024
Revenues	$	1,486.0
Net income	$	345.6

The supplemental pro forma financial information has been prepared using the acquisition method of accounting and is based on the historical financial information of Paychex and Paycor. The supplemental pro forma financial information does not necessarily represent what the combined companies’ revenue or results of operations would have been had the Paycor Acquisition been completed on June 1, 2023, nor is it intended to be a projection of future operating results of the combined company. It also does not reflect any operating efficiencies or potential cost savings that might be achieved from synergies of combining Paychex and Paycor.

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The unaudited supplemental pro forma financial information reflects primarily pro forma adjustments related to removal of seller's amortization of cost to obtain and fulfill contracts, elimination of seller's stock-based compensation expense offset by compensation expense related to replacement awards and settlement of seller awards, amortization expense for step-up in fair value estimates of intangible assets, and interest expense and deferred financing cost amortization related to the Corporate Bonds issued to finance the Paycor acquisition. The unaudited supplemental pro forma financial information includes transaction charges associated with the Paycor acquisition. There are no material, nonrecurring pro forma adjustments directly attributable to the Paycor acquisition included in the reported pro forma revenue and loss from continuing operations before income taxes.

Paycor’s fiscal year end was June 30. Since Paycor and the Company had different fiscal year end dates, the unaudited pro forma operating results were prepared based on comparable periods. The pro forma financial information does not purport to be indicative of the results that would have been obtained had the transactions been completed as of June 1, 2023, for the period presented and are not intended to be a projection of future results or trends.

Note E: Other Income, Net

Other income, net, consisted of the following items:


	For the three months ended
	August 31,		August 31,
In millions	2025		2024
Interest income on corporate investments	$	18.7	$	19.9
Other		5.1		0.1
Other income, net	$	23.8	$	20.0

Note F: Funds Held for Clients and Corporate Investments

Funds held for clients and corporate investments were as follows:

	February 28, 2025
	August 31, 2025
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
In millions	cost		gains		losses			value
Type of issue:
Funds held for clients' money market securities and other restricted cash equivalents	$	~~780~~775.42	$	—	$	—		$	~~780~~775.42
AFS securities:
Asset-backed securities		~~166~~165.96		1.16		(0.1	)		167.91
Corporate bonds		1,~~358~~922.36		720.20		(85.90	)		1,~~356~~937.6
Municipal bonds		~~1,043~~973.12		01.50		(5033.72	)		~~992~~941.90
U.S. government agency and treasury securities		~~904~~1,111.78		27.42		(1912.45	)		~~887~~1,106.75
Total AFS securities		3,473.0		11.2		(79.1	)		3,405.1
Variable rate demand notes		824.6		—		—			824.6
Other		33.0		3.7		(1.1	)		35.6
Total AFS securities		4,997.8		29.8		(50.8	)		4,976.8
Total funds held for clients and corporate investments	$	4,286.4	$	14.9	$	(80.2	)	$	4,221.1
Other		34.3		3.5		(0.5	)		37.3
Total funds held for clients and corporate investments	$	5,807.3	$	33.3	$	(51.3	)	$	5,789.3

	May 31, 2024
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
In millions	cost		gains		losses			value
Type of issue:
Funds held for clients' money market securities and other restricted cash equivalents	$	380.3	$	—	$	—		$	380.3
AFS securities:
Asset-backed securities		135.7		0.1		(1.1	)		134.7
Corporate bonds		1,400.3		1.3		(32.8	)		1,368.8
Municipal bonds		1,060.1		0.2		(86.9	)		973.4
U.S. government agency and treasury securities		896.0		0.1		(43.4	)		852.7
Total AFS securities		3,492.1		1.7		(164.2	)		3,329.6
Other		32.3		3.2		(1.6	)		33.9
Total funds held for clients and corporate investments	$	3,904.7	$	4.9	$	(165.8	)	$	3,743.8

Included in funds held for clients' money market securities and other restricted cash equivalents as of February 28, 2025 were bank demand deposit accounts, money market funds, and U.S. government agency and treasury securities.

Included in asset-backed securities as of February 28, 2025 were investment-grade securities primarily collateralized by fixed-rate auto loans and credit card receivables and all have credit ratings of AAA. The primary risk associated with these securities is the collection of the underlying receivables. Collateral on these asset-backed securities has performed as expected through February 28, 2025.

Included in corporate bonds as of February 28, 2025 were investment-grade securities covering a wide range of issuers, industries, and sectors primarily carrying credit ratings of A or better and having maturities ranging from March 6, 2025 through July 23, 2030.

Included in municipal bonds as of February 28, 2025 were general obligation bonds and revenue bonds primarily carrying credit ratings of AA or better and have maturities ranging from March 1, 2025 through August 1, 2032.

A substantial portion of the Company's portfolios are invested in high credit quality securities with ratings of AA or higher, and A-1/P-1 ratings on short-term securities.

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	May 31, 2025
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
In millions	cost		gains		losses			value
Type of issue:
Funds held for clients' money market securities and other restricted cash equivalents	$	1,057.8	$	—	$	—		$	1,057.8
AFS securities:
Asset-backed securities		158.3		0.9		(0.0	)		159.2
Corporate bonds		1,640.3		10.7		(7.0	)		1,644.0
Municipal bonds		1,017.3		0.5		(44.3	)		973.5
U.S. government agency and treasury securities		993.2		2.3		(16.7	)		978.8
Variable rate demand notes		—		—		—			—
Total AFS securities		3,809.1		14.4		(68.0	)		3,755.5
Other		33.1		2.3		(0.9	)		34.5
Total funds held for clients and corporate investments	$	4,900.0	$	16.7	$	(68.9	)	$	4,847.8

Included in funds held for clients' money market securities and other restricted cash equivalents as of August 31, 2025 were corporate bonds, municipal bonds, U.S. government agency and treasury securities, bank demand deposit accounts, and money market funds with maturities of 90 days or less.

Included in asset-backed securities as of August 31, 2025 were investment-grade securities primarily collateralized by fixed-rate auto loans and credit card receivables and all have credit ratings of AAA. The primary risk associated with these securities is the collection of the underlying receivables. Collateral on these asset-backed securities has performed as expected through August 31, 2025.

Included in corporate bonds as of August 31, 2025 were investment-grade securities covering a wide range of issuers, industries, and sectors primarily carrying credit ratings of A or better and having maturities ranging from September 1, 2025 through January 23, 2035.

Included in municipal bonds as of August 31, 2025 were general obligation bonds and revenue bonds primarily carrying credit ratings of AA or better and have maturities ranging from September 1, 2025 through August 1, 2032.

A substantial portion of the Company's portfolios are invested in high credit quality securities with ratings of AA or higher, and A-1/P-1 ratings on short-term securities.

The classification of funds held for clients and corporate investments on the Consolidated Balance Sheets was as follows:

	February 28,		May 31,
	August 31,		May 31,
In millions	2025		~~2024~~2025
Funds held for clients	$	4,~~183~~927.94	$	34,~~706~~813.23
Corporate investments		37861.29		3334.95
Long-term corporate investments		—		3.7
Total funds held for clients and corporate investments	$	5,789.3	$	4,847.8
Total funds held for clients and corporate investments	$	4,221.1	$	3,743.8

Funds held for clients’ money market securities and other restricted cash equivalents is collected from clients before due dates for payroll tax administration services and employee payment services and is invested until remitted to the applicable tax or regulatory agencies or client employees. Based upon the Company’s intent and its contractual obligation to clients, these funds are considered restricted until they are remitted to fund these client obligations.

The Company’s AFS securities reflected net unrealized losses of $6721.90 million and $~~162~~53.56 million as of ~~February~~August 2831, 2025 and May 31, ~~2024~~2025, respectively. Included in net unrealized losses as of ~~February~~August 2831, 2025 and May 31, ~~2024~~2025, were ~~658~~505 and ~~957~~600 AFS securities in an unrealized loss position, representing approximately 6845% and 9550% of the total securities held, respectively.

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AFS securities in an unrealized loss position for which a credit loss has not been recognized were as follows:

	February 28, 2025
	August 31, 2025
	Securities in an unrealized loss position for less than twelve months					Securities in an unrealized loss position for more than twelve months					Total
	Gross					Gross					Gross
	unrealized			Fair		unrealized			Fair		unrealized			Fair
In millions	losses			value		losses			value		losses			value
Type of issue:
Asset-backed securities	$	(0.0	)	$	~~3.0~~—	$	(0.1	)	$	62.08	$	(0.1	)	$	92.08
Corporate bonds		(0.61	)		~~249~~56.25		(84.39	)		~~280~~207.32		(85.90	)		~~529~~263.57
Municipal bonds		(12.75	)		2944.59		(4930.07	)		~~922~~843.32		(5033.72	)		~~951~~888.81
U.S. government agency and treasury securities		(0.47	)		7873.42		(1911.08	)		~~529~~506.54		(1912.45	)		~~607~~579.96
Total	$	(23.73	)	$	~~360~~174.16	$	(7647.45	)	$	1,~~738~~559.16	$	(7950.18	)	$	21,~~098~~734.2

	May 31, 2024
	May 31, 2025
	Securities in an unrealized loss position for less than twelve months					Securities in an unrealized loss position for more than twelve months					Total
	Gross					Gross					Gross
	unrealized			Fair		unrealized			Fair		unrealized			Fair
In millions	losses			value		losses			value		losses			value
Type of issue:
Asset-backed securities	$	(0.40	)	$	7716.4	$	(0.70	)	$	432.08	$	(10.10	)	$	~~120~~19.42
Corporate bonds		(80.41	)		~~620~~83.82		(246.49	)		~~647~~236.87		(327.80	)		~~1,268~~319.69
Municipal bonds		(82.02	)		~~102~~48.5		(7842.91	)		~~864~~880.71		(8644.93	)		~~967~~928.26
U.S. government agency and treasury securities		(60.27	)		~~268~~152.20		(3716.20	)		~~547~~531.28		(4316.47	)		~~815~~683.48
Total	$	(233.0	)	$	~~1,068~~300.91	$	(~~141~~65.20	)	$	21,~~102~~651.74	$	(~~164~~68.20	)	$	31,~~171~~951.65

The Company regularly reviews its investment portfolios to determine if any investment is impaired due to changes in credit risk or other potential valuation concerns. The Company believes the investments held as of ~~February~~August 2831, 2025 that had gross unrealized losses of $7950.18 million were not impaired due to credit risk or other valuation concerns, and the Company was not required to record a credit loss or an allowance for credit losses on its AFS securities. The Company believes it is probable that the principal and interest will be collected in accordance with contractual terms and that the unrealized losses on these securities were due to changes in interest rates and were not due to increased credit risk or other valuation concerns. A substantial portion of the securities in an unrealized loss position as of ~~February~~August 2831, 2025 and as of May 31, ~~2024~~2025 held an AA rating or better. The Company does not intend to sell these investments until the recovery of their amortized cost basis or maturity and further believes that it is not more-likely-than-not that it will be required to sell these investments prior to that time. The Company’s assessment that an investment is not impaired due to credit risk or other valuation concerns could change in the future due to new developments or changes in the Company’s strategies or assumptions related to any particular investment.

Realized gains and losses on the sale of AFS securities are determined by specific identification of the cost basis of each security. On the Consolidated Statements of Income and Comprehensive Income, realized gains and losses from the funds held for clients portfolio and corporate investments portfolio are included in interest on funds held for clients and other income, net, respectively.

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Realized gains and losses from the sale of AFS securities were as follows:

	For the three months ended						~~For the nine months ended~~
	February 28,			February 29,			February 28,			February 29,
	August 31,			August 31,
In millions	2025			2024			~~2025~~			~~2024~~
Gross realized gains	$	0.0		$	0.0		$	~~0.0~~		$	~~0.0~~
Gross realized losses		(0.40	)		—(0.0	)		~~(0.4~~	)		~~(0.0~~	)
Net realized (losses)/gains	$	(0.40	)	$	(0.0	)	$	~~(0.4~~	)	$	~~(0.0~~	)

The amortized cost and fair value of AFS securities that had stated maturities as of ~~February~~August 2831, 2025 are shown below by expected maturity.

	February 28, 2025
	August 31, 2025
	Amortized		Fair
In millions	cost		value
Maturity date:
Due in one year or less	$	~~460~~677.19	$	~~455~~672.42
Due after one year through three years		12,~~921~~104.78		12,~~868~~078.47
Due after three years through five years		~~879~~645.59		~~867~~650.92
Due after five years		~~211~~1,569.72		~~213~~1,575.47
Total	$	34,~~473~~997.08	$	34,~~405~~976.18

Variable rate demand notes (“VRDNs”), ~~when held by the Company,~~ are primarily categorized as due after five years in the table above as the contractual maturities on these securities are typically 20 to 30 years. Although these securities are issued as long-term securities, they are priced and traded as short-term instruments because of the liquidity provided through the tender feature.

Note G: Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The accounting standards related to fair value measurements include a hierarchy for information and valuations used in measuring fair value that is broken down into three levels based on reliability, as follows:

•

Level 1 valuations are based on quoted prices in active markets for identical instruments that the Company can access at the measurement date.

•

Level 2 valuations are based on inputs other than quoted prices included in Level 1 that are observable for the instrument, either directly or indirectly, for substantially the full term of the asset or liability including the following:

quoted prices for similar, but not identical, instruments in active markets;

quoted prices for identical or similar instruments in markets that are not active;

inputs other than quoted prices that are observable for the instrument; or

inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•

Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement.

The carrying values of cash and cash equivalents, restricted cash and restricted cash equivalents, accounts receivable, net of allowance for credit losses, PEO unbilled receivables, net of advance collections, accounts payable and short-term borrowings, when used by the Company, approximate fair value due to the short maturities of these instruments. Marketable securities included in funds held for clients and corporate investments consist primarily of securities classified as AFS and are recorded at fair value on a recurring basis.

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The Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows:

	February 28, 2025
	August 31, 2025
			Quoted		Significant
			prices in		other		Significant
	Carrying		active		observable		unobservable
	value		markets		inputs		inputs
In millions	(Fair value)		(Level 1)		(Level 2)		(Level 3)
Assets:
Restricted and unrestricted cash equivalents:
Money market securities	$	58.1	$	58.1	$	—	$	—
Corporate bonds	$	7.5	$	—	$	7.5	$	—
U.S. government agency and treasury securities		888.6		—		888.6		—
Municipal bonds		0.8		—		0.8		—
Total restricted and unrestricted cash equivalents	$	946.7	$	58.1	$	888.6	$	—
U.S. government agency and treasury securities		284.9		—		284.9		—
Money market securities		67.7		67.7		—		—
Total restricted and unrestricted cash equivalents	$	360.9	$	67.7	$	293.2	$	—
AFS securities:
Asset-backed securities	$	167.91	$	—	$	167.91	$	—
Corporate bonds		1,~~356~~937.6		—		1,~~356~~937.6		—
Municipal bonds		~~992~~941.90		—		~~992~~941.90		—
U.S. government agency and treasury securities		~~887~~1,106.75		—		~~887~~1,106.75		—
Total AFS securities	$	3,405.1	$	—	$	3,405.1	$	—
VRDNs		824.6		—		824.6		—
Interest Rate Swaption Contracts	$	3.4	$	—	$	3.4	$	—
Total AFS securities	$	4,976.8	$	—	$	4,976.8	$	—
Other	$	3537.63	$	3537.63	$	—	$	—
Liabilities:
Other long-term liabilities	$	3537.63	$	3537.63	$	—	$	—

	May 31, 2024
	May 31, 2025
			Quoted		Significant
			prices in		other		Significant
	Carrying		active		observable		unobservable
	value		markets		inputs		inputs
In millions	(Fair value)		(Level 1)		(Level 2)		(Level 3)
Assets:
Restricted and unrestricted cash equivalents:
Money market securities	$	31.4	$	31.4	$	—	$	—
Corporate bonds	$	4.7	$	—	$	4.7	$	—
U.S. government agency and treasury securities		386.4		—		386.4		—
Municipal bonds		0.4				0.4		—
Total restricted and unrestricted cash equivalents	$	417.8	$	31.4	$	386.4	$	—
U.S. government agency and treasury securities		615.5		—		615.5		—
Money market securities		42.8		42.8		—		—
Total restricted and unrestricted cash equivalents	$	663.4	$	42.8	$	620.6	$	—
AFS securities:
Asset-backed securities	$	~~134~~159.72	$	—	$	~~134~~159.72	$	—
Corporate bonds		1,~~368~~644.80		—		1,~~368~~644.80		—
Municipal bonds		973.45		—		973.45		—
U.S. government agency and treasury securities		~~852~~978.78		—		~~852~~978.78		—
Total AFS securities	$	3,329.6	$	—	$	3,329.6	$	—
VRDNs		—		—		—		—
Interest Rate Swaption Contracts	$	—		—		—		—
Total AFS securities	$	3,755.5	$	—	$	3,755.5	$	—
Other	$	3334.95	$	3334.95	$	—	$	—
Liabilities:
Other long-term liabilities	$	3334.95	$	3334.95	$	—	$	—

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In determining the fair value of its assets and liabilities, the Company predominately uses the market approach. Money market securities, which are cash equivalents, are considered Level 1 investments as they are valued based on quoted market prices in active markets. Cash equivalents also include corporate bonds, municipal bonds, and U.S. government agency and treasury securities with original maturities of 90 days or less which are considered Level 2 investments as they are valued based on similar, but not identical, instruments in active markets. AFS securities, including asset-backed securities, corporate bonds, municipal bonds, U.S. government agency securities, and VRDNs, ~~when held by the Company,~~ are included in Level 2 and are valued utilizing inputs obtained from an independent pricing service. To determine the fair value of the Company’s Level 2 AFS securities, the independent pricing service uses a variety of inputs, including benchmark yields, reported trades, non-binding broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, new issue data, and monthly payment information. The Company has not adjusted the prices obtained from the independent pricing service because it believes that they are appropriately valued.

Swaption Contracts are considered a Level 2 asset as they are remeasured on a recurring basis using observable market inputs, such as forward curves, volatility levels, discount, and interest rates with gains and losses reported through other comprehensive income on the Consolidated Statements of Income and Comprehensive Income.

Assets included as other are mutual fund investments, consisting of participants’ eligible deferral contributions under the Company’s non-qualified and unfunded deferred compensation plans. The related liability is reported as other long-term liabilities. The mutual funds are considered Level 1 investments as they are valued based on quoted market prices in active markets.

The Company’s long-term borrowings are accounted for on a historical cost basis. AsThe ofamortized ~~February~~cost ~~28, 2025~~ and ~~May 31, 2024, the~~ fair value of ~~long-term~~these borrowings, ~~net~~were ofas ~~debt issuance costs was $398.2 million and $391.8 million for the Senior Notes, Series A, respectively, and $395.5 million and $386.0 million for the Senior Notes, Series B, respectively.~~follows:

The Company’s long-term borrowings are not traded in active markets, and as a result, its fair values were estimated using a market approach employing Level 2 valuation inputs, including borrowing rates the Company believes are currently available based on loans with similar terms and maturities.


	August 31, 2025				May 31, 2025
	Amortized		Fair		Amortized		Fair
In millions	cost		value		cost		value
Senior Notes, Series A	$	399.9	$	399.3	$	399.8	$	398.3
Senior Notes, Series B		399.3		400.5		399.3		395.5
5-Year Fixed Rate Corporate Bonds		1,485.6		1,529.2		1,484.8		1,505.1
7-Year Fixed Rate Corporate Bonds		1,483.3		1,533.3		1,482.7		1,504.9
10-Year Fixed Rate Corporate Bonds		1,182.1		1,221.8		1,181.6		1,201.9
Total long-term borrowings, net of debt issuance costs	$	4,950.2	$	5,084.1	$	4,948.2	$	5,005.7

The Company’s Senior Notes, Series A and Senior Notes, Series B borrowings are not traded in active markets, and as a result, its fair values were estimated using a market approach employing Level 2 valuation inputs, including borrowing rates the Company believes are currently available based on loans with similar terms and maturities.

The Company's Corporate Bonds are not traded on active markets. The fair value of Corporate Bonds was estimated using a market approach employing Level 2 valuation inputs obtained from an independent pricing service. The Company reviews the values generated by the independent pricing service for reasonableness and has not adjusted the prices obtained because it believes that they are appropriately valued.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Note H: Supplemental Information

Property and equipment, net of accumulated depreciation: Depreciation expense was $30.3 million and $86.8 million for the three and nine months ended February 28, 2025, respectively, compared to $32.3 million and $94.7 million for the three and nine months ended February 29, 2024, respectively.

Goodwill and intangible assets, net of accumulated amortization: Amortization expense relating to intangible assets was $12.8 million and $37.0 million for the three and nine months ended February 28, 2025, respectively, compared to $12.5 million and $36.2 million for the three and nine months ended February 29, 2024, respectively. Goodwill and intangible assets were recorded during the nine months ended February 29, 2024 related to the acquisition of Alterna. The goodwill related to this acquisition is included in the Purchased Receivable reporting unit for goodwill impairment testing. Refer to Note D Business Combinations for additional information regarding this acquisition and the impact it had on goodwill and intangible assets. The Company did not recognize an impairment loss as it relates to its goodwill or intangible assets during the nine months ended February 28, 2025 or February 29, 2024.

Short-term financing: Outstanding borrowings on the Company’s credit facilities had a weighted-average interest rate of 4.11% and 6.14% as of February 28, 2025 and May 31, 2024, respectively. The unused amount available under these credit facilities as of February 28, 2025 was approximately $2.0 billion.

The credit facilities contain various financial and operational covenants that are usual and customary for such arrangements. The Company was in compliance with all of these covenants as of February 28, 2025.

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~~Letters~~Note ~~of credit~~H: ~~The~~Supplemental Company had irrevocable standby letters of credit available totaling $168.7 million and $168.5 million as of February 28, 2025 and May 31, 2024, respectively, primarily to secure commitments for certain insurance policies. The letters of credit expire at various dates between March 03, 2025 and February 28, 2026. No amounts were outstanding on these letters of credit as of, or during the nine months ended February 28, 2025 and February 29, 2024, or as of May 31, 2024.Information

~~Long-term debt~~Leases: ~~There~~As ~~have~~of ~~been~~August ~~no material changes to the Company's long-term debt agreement or balances subsequent to May~~ 31, ~~2024.~~2025, ~~The~~the Company’s ~~long-term~~entered ~~debt~~into ~~agreement~~two ~~contains~~lease ~~customary~~agreements ~~representations,~~that ~~warranties,~~had ~~affirmative~~not ~~and~~yet ~~negative~~commenced ~~covenants,~~for ~~including~~terms ~~financial~~ranging ~~covenants~~from ~~that~~7.58 ~~are~~years ~~usual~~to ~~and~~10.25 ~~customary for such arrangements~~years. ~~The~~These ~~Company~~leases ~~was~~will inrequire ~~compliance~~aggregate ~~with~~lease ~~all~~payments of ~~these~~approximately ~~covenants~~$28.8 asmillion ofover ~~February~~their ~~28,~~respective ~~2025~~terms.

~~Bridge~~Property ~~Loan Commitment: On January 7, 2025, the Company~~ and ~~a Company subsidiary~~equipment, ~~Paychex~~net of ~~New~~accumulated ~~York,~~depreciation: ~~LLC,~~Depreciation ~~entered~~expense ~~into~~was ~~a Bridge Loan Commitment with JPMorgan Chase Bank, N.A. (“JPM”), pursuant to which JPM committed to provide a 364-day senior unsecured credit facility of up to~~ $334.5 ~~billion~~million for the ~~acquisition~~three ofmonths ~~Paycor,~~ended ~~including~~August ~~related~~31, ~~fees~~2025 ~~and~~compared ~~expenses.~~to ~~The Company incurred~~ $1127.42 million in debt financing fees, including structuring and commitment fees, which were capitalized as Prepaid expenses and other current assets on the Company’s Consolidated Balance Sheets and are recognized as interest expense on a straight-line basis until the expected issuance date for ~~permanent financing. There were no borrowings under~~ the ~~Bridge~~three ~~Loan~~months ~~Commitment~~ended asAugust ~~of February 28~~31, ~~2025 or for the period from January 7, 2025 to February 28, 2025~~2024.

~~The~~Goodwill ~~Company~~ and ~~certain~~intangible ~~subsidiaries~~assets, ~~will~~net ~~guarantee~~of ~~any~~accumulated ~~borrowings~~amortization: ~~that~~Amortization ~~are~~expense ~~made~~relating ~~under~~to intangible assets was $74.8 million for the ~~Bridge~~three ~~Loan~~months ~~Commitment~~ended August 31, 2025 compared to $11.8 ~~The~~million ~~Bridge~~for ~~Loan~~the ~~Commitment~~three ~~contains~~months ~~various~~ended ~~financial~~August ~~and~~31, ~~operational~~2024. ~~covenants~~During ~~that~~the ~~would~~three ~~have~~months ~~been~~ended ~~applicable~~August 31, 2025, goodwill related to ~~any~~the ~~borrowings~~acquisition ~~under~~of Paycor increased $5.8 million, primarily due to the ~~Bridge~~write-down ~~Loan~~of ~~Commitment~~a ~~and~~building ~~that~~by ~~are~~$4.9 ~~usual~~million, ~~and~~net ~~customary~~of ~~for~~deferred ~~such~~taxes ~~arrangements~~of $1.9 Ifmillion ~~such~~as ~~covenants~~a ~~were~~result inof ~~effect,~~an updated valuation. Refer to Note D Business Combinations for additional information regarding this acquisition and the ~~Company~~impact ~~would~~it ~~have~~had ~~been~~on ingoodwill ~~compliance~~and ~~with~~intangible ~~all~~assets. ofThe ~~these~~Company ~~covenants~~did not recognize an impairment loss as ofit ~~February~~relates 28to its goodwill or intangible assets during the three months ended August 31, 2025. or August 31, 2024.

~~Interest~~Short-term ~~Rate Swaption Contracts~~financing: OnOutstanding ~~January~~borrowings ~~31,~~on ~~2025,~~ the Company’s ~~executed~~credit ~~three~~facilities ~~Swaption~~had ~~Contracts~~a ~~with~~weighted-average ~~JPM.~~interest ~~The~~rate ~~Swaption Contracts qualify as cash flow hedges, have an aggregate notional amount~~ of $34.003% ~~billion,~~ and ~~are~~3.87% ~~being~~as ~~utilized to manage exposure to fluctuations in benchmark interest rates associated with the anticipated issuance~~ of ~~long-term~~August ~~fixed~~31, ~~rate~~2025 ~~debt~~and toMay ~~fund~~31, ~~the planned acquisition of Paycor. At inception~~2025, ~~the Company recorded Swaption Contract assets related to paid premiums of $19~~respectively.2 ~~million.~~ The ~~fair~~unused ~~value~~amount ofavailable ~~the~~under ~~Swaption~~these ~~Contract~~credit ~~assets~~facilities ~~is classified~~ as ~~Prepaid~~of ~~expenses~~August ~~and~~31, ~~other~~2025 ~~current~~was ~~assets~~approximately ~~on the Company’s Consolidated Balance Sheets~~$2.0 ~~Refer to Note G: Fair Value Measurements for additional information on the Company's Swaption Contracts~~billion.

Letters of credit: The Company had irrevocable standby letters of credit available totaling $177.2 million and $165.0 million as of August 31, 2025 and May 31, 2025, respectively, primarily to secure commitments for certain insurance policies. The letters of credit expire at various dates between September 01, 2025 and February 28, 2027. No amounts were outstanding on these letters of credit as of, or during the three months ended August 31, 2025 and August 31, 2024, or as of May 31, 2025.

Long-term debt: There have been no material changes to the Company's long-term debt agreement or balances subsequent to May 31, 2025. The Company’s long-term debt agreement and Corporate Bonds contain customary representations, warranties, affirmative and negative covenants, including financial covenants that are usual and customary for such arrangements. The Company was in compliance with all of these covenants as of August 31, 2025.

Note I: Commitments and Contingencies

Other commitments: The Company had outstanding commitments under existing workers’ compensation insurance agreements and other legally binding contractual arrangements. The Company also enters into various purchase commitments with vendors in the ordinary course of business and had outstanding commitments to purchase capital assets of approximately $69.12 million as of ~~February~~August 2831, 2025 and $24.9 million as of May 31, ~~2024~~2025.

In the normal course of business, the Company makes representations and warranties that guarantee the performance of services under service arrangements with clients. Historically, there have been no material losses related to such guarantees. The Company has also entered into indemnification agreements with its officers, directors, and non-officer fiduciaries of ~~certain~~our ofpooled ~~its~~employer plan retirement ~~plans~~offering, which require the Company to defend and, if necessary, indemnify these individuals for certain pending or future claims as they relate to their services provided to the Company.

The Company currently self-insures the deductible portion of various insured exposures under certain corporate employee and PEO employee health, medical, and ~~medical~~workers' compensation benefit plans. The Company’s estimated loss exposure under these insurance arrangements is recorded in other current liabilities on the Consolidated Balance Sheets. Historically, the amounts accrued have not been material and were not material as of ~~February~~August 2831, 2025. The Company also maintains insurance, in addition to its purchased primary insurance policies, for gap coverage for employment practices liability, errors and omissions, warranty liability, theft and embezzlement, cyber threats, and acts of terrorism, as well as capacity for deductibles and self-insured retentions through its captive insurance company.

Contingencies: The Company is subject to various claims and legal matters that arise in the normal course of its business. These include disputes or potential disputes related to breach of contract, tort, employment-related claims, tax claims, statutory, and other matters.

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The Company’s management currently believes that resolution of any outstanding legal matters will not have a material adverse effect on the Company’s financial position or results of operations. However, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of these matters could have a material adverse impact on the Company’s financial position and results of operations in the period in which any such effects are recorded.

Note J: Income Taxes

The Company’s effective income tax rate was 2422.~~3% and 23.~~9% for the three ~~and nine~~ months ended ~~February~~August 2831, 2025, ~~respectively,~~ compared to 2423.43% ~~and 24.1%~~ for the three ~~and nine~~ months ended ~~February~~August 2931, 2024~~, respectively~~. ~~All~~Both periods were impacted by the recognition of excess tax benefits related to employee stock-based compensation payments.

On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was enacted into law. The most significant provisions applicable to the Company relate to accelerated tax deductions for qualified property and research expenditures. As a result, the Company’s deferred tax liabilities will be impacted in fiscal 2026 by the deductibility of previously capitalized research expenditures and accelerated tax depreciation. The Act is not expected to have a significant impact on the Company’s effective tax rate.

Note K: Segment Reporting

Total revenue, net income, and significant expenses used by the chief operating decision maker for the purpose of allocating resources and evaluating the Company's financial performance were as follows:


	For the three months ended
	August 31,			August 31,
In millions	2025			2024
Total revenue	$	1,540.0		$	1,318.5

Core business operations:
Compensation-related expenses		530.0			451.3
PEO direct insurance costs		138.6			130.3
Depreciation and amortization		48.2			39.0
Other segment items(1)		196.5			151.2
Non-core business operations:
Acquisition-related costs(2)		84.8			—
Total expenses		998.1			771.8
Interest expense		(68.2	)		(9.6	)
Other income, net		23.8			20.0
Income before income taxes		497.5			557.1
Income tax expense		113.7			129.7
Net income	$	383.8		$	427.4

(1)

Other segment items include professional service expense, marketing and advertising expenses, and other overhead expenses.

(2)

Acquisition-related costs included in total expenses include the amortization of intangibles acquired in the acquisition of Paycor, compensation costs related to the acquisition and integration of Paycor, including replacement awards, severance, and retention bonuses, and other acquisition-related costs, primarily reflecting third-party professional service fees.

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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~~August 2831, 2025 (the “~~third~~first quarter”), the ~~nine months ended February 28, 2025 (the "nine months"), the~~ respective prior year ~~periods~~period ended ~~February~~August 2931, 2024 (the “prior year ~~periods~~period”), and our financial condition as of ~~February~~August 2831, 2025. 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~~August 2831, 2025 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, ~~2024~~2025 (“fiscal ~~2024~~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 inby ~~this~~management ~~Form 10-Q may contain, and members~~ of ~~management~~Paychex may ~~from time to time make or discuss statements which~~ 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 “expect,” “outlook,” “will,” “guidance,” “projections,” “strategy,” “mission,” “anticipate,” “believe,” “can,” “could,” “design,” “look forward,” “may,” “possible,” “potential,” “should,” 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~~, and the pending acquisition of Paycor HCM, Inc~~. ~~("Paycor").~~

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;

•

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 ~~acquisition and~~ 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. and foreign laws and regulations;

•

our compliance with data privacy and artificial intelligence 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 and economic environment, including inflation and interest rate changes;

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•

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 ~~2024~~2025 orand in our ~~other~~ 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~~first 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 delivering a full suite of technology and advisory ~~services~~solutions in human resources (“HR”), employee ~~benefit solutions~~benefits, insurance, and payroll ~~processing for small- to medium-sized businesses and their employees~~ across the U.S. and parts of Europe.

We offer a full range of integrated HCM solutions ~~from~~spanning ~~hire~~the toemployee ~~retire~~life cycle for businesses and their employees. Clients may choose from a breadth of solutions that ~~cover~~also ~~the~~allow ~~spectrum~~integration with some of the ~~employee~~most ~~life~~popular ~~cycle~~HR, ~~but~~accounting, weenterprise ~~also~~resource ~~allow integrations with popular HR~~planning, ~~accounting,~~and point-of-sale, ~~and productivity~~ applications ~~available~~ on the market today.

We support our ~~small-business~~ clients bythrough ~~utilizing~~ our proprietary SaaS-based solutions, ~~robust~~SurePayroll®, ~~software as a service (“SaaS”)~~ Paychex Flex®, ~~platform~~ and ~~the Company’s SurePayroll~~Paycor® ~~SaaS-based solutions~~. Our ~~medium-sized~~larger clients generally have more complex payroll and employee benefit needs, though with the environment of increasing regulations, we believe the need for HR outsourcing ~~services~~solutions has been ~~moving down-market~~expanding. Any of our clients on Paychex Flex or Paycor can opt for the integrated suite of HCM solutions, which ~~allows~~enables clients to choose the service and software solutions that ~~will~~best meet the needs of their ~~businesses~~business.

Our portfolio of technology, HR advisory, and employee benefits-related solutions is disaggregated into two categories, (1) Management Solutions and (2) PEO and Insurance Solutions, as discussed under the heading “~~Description~~Our of Solutions” in Part I, Item 1 of our Form 10-K for fiscal ~~2024~~2025.

Our mission is to behelp ~~the leading provider of HR, employee benefits, insurance, and payroll solutions by being an essential partner to small- and medium-sized~~ businesses ~~across~~succeed as the ~~U.S.~~digitally ~~and~~driven ~~parts~~HR ~~of Europe~~leader. Our strategy focuses on ~~providing~~growing ~~industry-leading,~~our ~~integrated~~client ~~technology~~base; ~~delivering~~increasing ~~superior~~product ~~customer experiences~~penetration; ~~expanding~~driving ~~our~~technology ~~leadership in HR~~innovation; ~~growing our client bases;~~ and ~~engaging~~pursuing in strategic acquisitions. We believe that successfully executing this strategy will lead to strong, long-term financial performance.

We maintain industry-leading margins by managing our personnel costs and expenses while continuing to invest in our business, particularly in sales and marketing and leading-edge technology. We believe these investments are critical to our success. Looking to the future, we believe that investing in our solutions, people, and digital capabilities will position us to capitalize on opportunities for long-term growth.

We closely monitor the evolving challenges and needs of ~~small-~~our ~~and medium-sized businesses~~clients, and proactively aid our clients in navigating macroeconomic challenges, legislative changes, and other complexities they may face. Through our unique blend of innovative technology solutions, backed by our extensive compliance and HR expertise, we help clients more effectively hire, develop, and retain top talent in this challenging workforce environment. ~~Our~~Ongoing ~~ongoing~~ investments in our platforms have prepared us well for the demands of the current business and regulatory environments, ~~allowing~~enabling us to adapt while maintaining strong solutions and support delivery, resulting in high levels of client satisfaction and retention.

On ~~January~~April 714, 2025, we ~~entered~~completed ~~into~~our anacquisition ~~agreement~~of ~~to acquire~~ Paycor, a leading provider of HCM, payroll and talent software~~, in an all-cash transaction for $22~~.50 ~~per eligible share, representing an enterprise value of approximately $4.1 billion.~~ This acquisition ~~will~~extends ~~extend~~ our upmarket position and ~~expand~~expands our suite of HR technology and advisory solutions. ~~This~~Refer ~~acquisition is expected~~ to ~~close~~the in"Results ~~April~~of ~~2025,~~Operations" ~~subject~~and ~~to customary closing conditions. Refer to the~~ “Liquidity and Capital Resources” section of this Item 2 for additional information.

Table of Contents

~~Third~~First Quarter ~~and Year to Date~~ Business Highlights

Highlights compared to the prior year ~~periods~~period are as follows:

	For the three months ended								~~For the nine months ended~~
	February 28,		February 29,						February 28,		February 29,
	August 31,		August 31,
In millions, except per share amounts	2025		2024		Change(2)				~~2025~~		~~2024~~		~~Change(2)~~
Total service revenue	$	1,~~466~~492.14	$	1,~~395~~281.40		517		%	$	~~4,027.9~~	$	~~3,875.1~~		4	%
Total revenue	$	1,~~509~~540.0	$	1,~~439~~318.35		517		%	$	~~4,144.4~~	$	~~3,983.2~~		4	%
Operating income	$	~~691~~541.89	$	~~649~~546.87		6(1	)	%	$	~~1,776.6~~	$	~~1,692.3~~		5	%
Adjusted operating income(1)	$	~~708~~626.57	$	~~649~~546.87		915		%	$	~~1,793.3~~	$	~~1,692.3~~		6	%
Net income	$	~~519~~383.38	$	~~498~~427.64		4(10	)	%	$	~~1,360.1~~	$	~~1,310.5~~		4	%
Adjusted net income(1)	$	~~541~~440.18	$	~~498~~421.32		95		%	$	~~1,373.3~~	$	~~1,305.0~~		5	%
Diluted earnings per share	$	1.4306	$	1.3818		4(10	)	%	$	~~3.76~~	$	~~3.62~~		4	%
Adjusted diluted earnings per share(1)	$	1.4922	$	1.3816		85		%	$	~~3.79~~	$	~~3.60~~		5	%
Dividends paid to stockholders	$	~~353~~389.01	$	~~320~~353.4		10		%	$	~~1,059.2~~	$	~~962.5~~		10	%

(1)

Adjusted operating income, adjusted net income, and adjusted diluted earnings per share are not U.S. generally accepted accounting principle (“GAAP”) measures. Refer to the “Non-GAAP Financial Measures” section of this Item 2 for a discussion of non-GAAP measures and a reconciliation to the U.S. GAAP measures of operating income, net income, and diluted earnings per share.

(2)

Percentage changes are calculated based on unrounded numbers.

For further analysis of our results of operations for the ~~third~~first quarter and ~~nine months, the~~ prior year ~~periods~~period, and our financial position as of ~~February~~August 2831, 2025, refer to the tables and analysis in the “Results of Operations” and “Liquidity and Capital Resources” sections of this Item 2.

RESULTS OF OPERATIONS

Summary of Results of Operations:

	For the three months ended												~~For the nine months ended~~
	February 28,				February 29,								February 28,			February 29,
	August 31,				August 31,
In millions, except per share amounts	2025				2024				Change(1)				~~2025~~			~~2024~~			~~Change(1)~~
Revenue:
Management Solutions	$	1,~~100~~163.73			$	~~1,049~~961.97				521		%	$	~~3,025.3~~		$	~~2,936.1~~			3	%
PEO and Insurance Solutions		~~365~~329.41				~~345~~319.53				63		%		~~1,002.6~~			~~939.0~~			7	%
Total service revenue		1,~~466~~492.14				1,~~395~~281.40				517		%		~~4,027.9~~			~~3,875.1~~			4	%
Interest on funds held for clients		4247.96				4337.95				(227	)	%		~~116.5~~			~~108.1~~			8	%
Total revenue		1,~~509~~540.0				1,~~439~~318.35				517		%		~~4,144.4~~			~~3,983.2~~			4	%
Total expenses		~~817~~998.21				~~789~~771.58				429		%		~~2,367.8~~			~~2,290.9~~			3	%
Operating income		~~691~~541.89				~~649~~546.87				6(1	)	%		~~1,776.6~~			~~1,692.3~~			5	%
Other (expense)/income, net		(6.0	)			9.4			n/m					10.0			33.9		n/m
Interest expense		(68.2	)			(9.6	)		n/m
Income before income taxes		685.8				659.2				4		%		1,786.6			1,726.2			4	%
Other income, net		23.8				20.0				19		%
Income taxes		166.5				160.6				4		%		426.5			415.7			3	%
Income before income taxes		497.5				557.1				(11	)	%
Effective income tax rate		24.3		%		24.4		%						23.9	%		24.1	%
Income taxes		113.7				129.7				(12	)	%
Net income	$	519.3			$	498.6				4		%	$	1,360.1		$	1,310.5			4	%
Effective income tax rate		22.9		%		23.3		%
Diluted earnings per share	$	1.43			$	1.38				4		%	$	3.76		$	3.62			4	%
Net income	$	383.8			$	427.4				(10	)	%
Diluted earnings per share	$	1.06			$	1.18				(10	)	%

(1) Percentage changes are calculated based on unrounded numbers.

n/m — not meaningful

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Total revenue increased to $1.5 billion for the ~~third~~first quarter ~~and $4.1 billion for the nine months~~, ~~reflecting~~represented ~~increases~~growth of 517% ~~and~~over ~~4% respectively, compared to~~ the prior year ~~periods~~period. ~~Excluding the impact of the expiration of the Employee Retention Tax Credit ("ERTC") program, revenue growth for both the third quarter and the nine months was 6%.~~ The changes in revenue as compared to the prior year ~~periods~~period were primarily driven by the following factors:

•

Management Solutions revenue: $1.12 billion for the ~~third~~first quarter, ~~and~~reflecting $3an increase of 21%.0 ~~billion~~Paycor, ~~for~~acquired ~~the~~in ~~nine~~April ~~months~~2025, ~~reflecting~~contributed ~~increases~~approximately ~~of 5~~17% ~~and~~to ~~3%,~~Management ~~respectively~~Solutions revenue growth year-over-year:

~~Continued~~Growth ~~growth~~ in the number of clients served, ~~across~~primarily ~~our~~driven ~~suite~~by ofthe ~~HCM~~acquisition ~~solutions~~of Paycor, and client worksite employees for HR ~~solutions~~Solutions; and

Higher revenue per client ~~resulting~~driven ~~from~~by Paycor's upmarket client base, price realization, and product penetration, including HR solutions and retirement~~; and~~.

•

~~Lower~~PEO ~~revenue~~and ~~from~~Insurance ~~ancillary~~Solutions ~~services,~~revenue: ~~primarily~~$329.1 ~~due~~million tofor the ~~expiration~~first ofquarter, ~~our~~reflecting ~~ERTC~~an ~~program~~increase ~~during~~of ~~the three-month period ended February 29, 2024.~~3%:

PEO and Insurance Solutions revenue: $365.4 million for the third quarter and $1.0 billion for the nine months, reflecting increases of 6% and 7%, respectively:

Growth in the number of average PEO worksite employees; and

Increase in PEO insurance revenues.

•

Interest on funds held for clients: $4247.96 million for the ~~third~~first quarter ~~reflecting a decrease of 2%~~, ~~primarily due to lower average interest rates. $116.5 million for the nine months,~~ reflecting an increase of 827%, ~~primarily~~ due to higher average ~~interest~~investment ~~rates~~balances, ~~and~~resulting ~~average~~from ~~investment~~the ~~balances~~acquisition of Paycor.

We invest in highly liquid, investment-grade fixed income securities. Details regarding our combined funds held for clients and corporate cash equivalents and investment portfolios were as follows:

	For the three months ended										~~For the nine months ended~~
	February 28,				February 29,						February 28,				February 29,
	August 31,				August 31,
$ in millions	2025				2024			Change(1)			~~2025~~				~~2024~~				~~Change(1)~~
Average investment balances:
Funds held for clients	$	5,~~116~~400.80			$	4,~~975~~286.71			326	%	$	~~4,551.7~~			$	~~4,389.6~~				4		%
Corporate cash equivalents and investments		1,~~541~~776.49				1,~~526~~619.89			110	%		~~1,544.3~~				~~1,591.3~~				(3	)	%
Total	$	67,~~658~~176.29			$	65,~~502~~906.50			222	%	$	~~6,096.0~~			$	~~5,980.9~~				2		%
Average interest rates earned (exclusive of net realized (losses)/gains):
Funds held for clients		3.45		%		3.5	%					~~3.4~~		%		~~3.3~~		%
Corporate cash equivalents and investments		4.32		%		54.19	%					~~4.5~~		%		~~5.1~~		%
Combined funds held for clients and corporate cash equivalents and investments		3.67		%		3.9	%					~~3.7~~		%		~~3.8~~		%
Total net realized (losses)/gains	$	(0.40	)		$	0.0					$	~~(0.4~~	)		$	~~(0.0~~	)

(1) Percentage changes are calculated based on unrounded numbers.

	February 28,				May 31,
	August 31,				May 31,
$ in millions	2025				~~2024~~2025
Net unrealized losses on available for sale (“AFS”) securities (1)	$	(6721.90	)		$	(~~162~~53.56	)
Federal Funds rate (2)		4.50		%		54.50		%
Total fair value of AFS securities	$	34,~~405~~976.18			$	3,~~329~~755.65
Weighted-average duration of AFS securities in years (3)		2.25				2.72
Weighted-average yield-to-maturity of AFS securities (3)		3.15		%		3.03		%

(1) The net unrealized loss on our investment portfolio was approximately $22.9 million as of September 26, 2025. Refer to Note F in the Notes to Consolidated Financial Statements and the "Market Risk Factors" caption contained in this Form 10-Q for more information regarding AFS securities held in an unrealized loss position.

(2) The Federal Funds rate was in the range of 4.25% to 4.50% as of August 31, 2025 and May 31, 2025. Effective September 18, 2025, the Federal Reserve decreased the Federal Funds rate to a range of 4.00% to 4.25%.

(3) These items exclude the impact of variable rate demand notes (“VRDNs”) as they are tied to short-term interest rates.

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~~(1) The~~Total ~~net~~expenses: ~~unrealized~~Total ~~loss~~expenses, onwhich ~~our~~reflects ~~investment~~the ~~portfolio~~total ~~was~~combined ~~approximately~~cost ~~$70.2~~of ~~million~~service asrevenue ofand ~~March 24~~selling, ~~2025.~~general ~~Refer~~and toadministrative ~~Note~~expenses, Fincreased in29% ~~the Notes~~ to ~~Consolidated~~$998.1 ~~Financial~~million ~~Statements~~for ~~and~~ the ~~"Market~~first ~~Risk~~quarter. ~~Factors"~~The ~~caption~~following ~~contained~~table insummarizes ~~this~~the ~~Form~~components ~~10-Q~~of ~~for~~total ~~more information regarding AFS securities held in an unrealized loss position.~~expenses:

(2) The Federal Funds rate was in the range of 4.25% to 4.50% as of February 28, 2025 and 5.25% to 5.50% as of May 31, 2024.


	For the three months ended
	August 31,		August 31,
In millions	2025		2024		Change(1)
Core business operations:
Compensation-related expenses	$	530.0	$	451.3		17	%
PEO direct insurance costs		138.6		130.3		6	%
Depreciation and amortization		48.2		39.0		23	%
Other expenses		196.5		151.2		30	%
Non-core business operations:
Acquisition-related costs		84.8		—	n/m
Total expenses	$	998.1	$	771.8		29	%

(3) These items exclude the impact of variable rate demand notes (“VRDNs”) as they are tied to short-term interest rates.

Total expenses: The following table summarizes the total combined cost of service revenue and selling, general and administrative expenses for the periods below:

	For the three months ended								For the nine months ended
	February 28,		February 29,						February 28,		February 29,
In millions	2025		2024		Change(1)				2025		2024		Change(1)
Compensation-related expenses	$	455.7	$	461.6		(1	)	%	$	1,361.4	$	1,369.5		(1	)	%
PEO direct insurance costs		127.7		119.8		7		%		388.8		341.5		14		%
Depreciation and amortization		43.1		44.8		(4	)	%		123.8		130.9		(5	)	%
Acquisition-related costs		16.7		—	n/m					16.7		—	n/m
Other expenses		174.0		163.3		7		%		477.1		449.0		6		%
Total expenses	$	817.2	$	789.5		4		%	$	2,367.8	$	2,290.9		3		%

(1) Percentage changes are calculated based on unrounded numbers.

n/m — not meaningful

~~Total~~The ~~expenses~~changes ~~increased~~in 4%total toexpenses ~~$817.2~~as ~~million for the third quarter and 3% to $2.4 billion for the nine months,~~ compared to the prior ~~year~~period ~~periods.~~were ~~Total~~primarily ~~expenses~~driven ~~increased~~by ~~as a result of~~ the following factors:

•

~~PEO~~Compensation-related ~~direct insurance costs~~expenses: $~~127~~530.70 million for the ~~third~~first quarter ~~and $388.8 million for the nine months~~, reflecting ~~increases~~an increase of 717% ~~and 14% respectively~~, ~~related~~primarily due to ~~growth~~an increase in ~~average~~headcount, ~~worksite~~driven ~~employees~~by ~~and~~the ~~PEO~~acquisition ~~insurance~~of ~~revenues~~Paycor.

•

~~Acquisition-related~~PEO direct insurance costs: $16138.76 million infor the ~~third~~first quarter ~~and nine months~~, ~~primarily~~ reflecting ~~third-party~~an ~~professional~~increase ~~service~~of ~~fees~~6%, related to ~~the~~growth ~~pending~~in ~~Paycor~~average ~~acquisition~~worksite employees and PEO insurance revenues.

•

~~Other~~Depreciation ~~expenses~~and amortization: $~~174~~48.02 million for the ~~third~~first quarter ~~and $477.1 million for the nine months~~, reflecting ~~increases~~an increase of 723% ~~and 6% respectively~~, primarily ~~related~~due to ~~continued~~higher ~~investment~~property inand ~~technology,~~equipment ~~general~~balances ~~cost~~compared ~~increases~~ to ~~support business growth, and~~ the ~~benefit~~prior ~~from~~year ~~a sales tax audit recognized in the three-month~~ period ~~ended February 29~~, ~~2024.~~including Inan ~~addition, the~~ increase ~~for~~in the ~~nine~~development ~~months~~and ~~included~~enhancement ~~continued~~of ~~investment~~our inclient-facing ~~sales~~internal-use ~~and marketing~~software.

•

~~Total~~Other expenses,: ~~excluding~~$196.5 ~~acquisition-related~~million ~~costs~~for ~~noted~~the ~~above~~first quarter, ~~increased~~reflecting 1an increase of 30%, primarily due to ~~$800.5~~higher ~~million~~technology, ~~for~~selling, and marketing investments driven by the ~~third~~acquisition ~~quarter~~of Paycor and 3%our tocontinued $2strategic initiatives.4 ~~billion~~The ~~for~~increase ~~the~~also ~~nine~~reflects ~~months,~~general ~~compared~~cost increases to ~~the~~support ~~prior~~business ~~year periods~~growth.

•

~~Operating~~Acquisition-related ~~income~~costs: ~~Operating income increased 6% to~~ $~~691~~84.8 million for the ~~third~~first quarter, ~~and~~reflecting ~~5% to $1.8 billion for~~ the ~~nine~~amortization ~~months, as a result~~ of ~~revenue~~intangibles ~~growth~~acquired ~~which~~in ~~outpaced expense increases as previously discussed. Adjusted operating income(1), which excludes~~ the ~~impact~~acquisition of ~~the~~Paycor, ~~acquisition-related~~compensation costs, ~~increased~~related 9% to ~~$708.5 million for~~ the ~~third~~acquisition ~~quarter~~ and 6%integration toof ~~$1.8~~Paycor, ~~billion~~including ~~for~~replacement ~~the~~awards, ~~nine~~severance, ~~months.~~and ~~Operating~~retention ~~income~~bonuses, ~~for~~and ~~both~~other ~~periods~~acquisition-related ~~was~~costs, ~~impacted~~primarily byreflecting ~~the~~third-party ~~expiration~~professional ofservice ~~the ERTC program~~fees.

Operating ~~margin~~income: ~~(operating~~Operating income asdecreased a1% ~~percentage~~to of$541.9 ~~total~~million ~~revenue)~~for ~~and~~the ~~adjusted~~first quarter. Adjusted operating ~~margin~~income(1), ~~(operating~~which ~~income,~~excludes as$84.1 ~~adjusted~~million ~~for~~of Paycor acquisition-related costs included in selling, asgeneral aand ~~percentage~~administrative ofexpenses, ~~total~~grew ~~revenue)~~15% ~~were~~to as$626.7 ~~follows:~~million for the first quarter.

	For the three months ended						For the nine months ended
	February 28,			February 29,			February 28,			February 29,
	2025			2024			2025			2024
Operating margin		45.8	%		45.1	%		42.9	%		42.5	%
Adjusted operating margin (1)		46.9	%		45.1	%		43.3	%		42.5	%

Operating margin (operating income as a percentage of total revenue) and adjusted operating margin(1) (adjusted operating income as a percentage of total revenue) were as follows:


	For the three months ended
	August 31,			August 31,
	2025			2024
Operating margin		35.2	%		41.5	%
Adjusted operating margin (1)		40.7	%		41.5	%

(1)

Adjusted operating income and adjusted operating margin are not U.S. GAAP measures. Refer to the “Non-GAAP Financial Measures” section of this Item 2 for a discussion of non-GAAP measures and a reconciliation to the U.S. GAAP measures of net income and diluted earnings per share.

Interest expense: Interest expense increased $58.6 million to $68.2 million for the first quarter, primarily due to the issuance of incremental debt to finance the acquisition of Paycor.

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Other ~~(expense)/~~income, net: Other ~~(expense)/~~income, net ~~decreased~~was $1523.48 million ~~to expense of $6.0 million~~ for the ~~third~~first quarter ~~and~~compared ~~decreased $23.9 million~~ to ~~income of~~ $1020.0 million for the ~~nine~~prior ~~months,~~year ~~primarily~~period. asOther aincome, ~~result~~net ofprimarily ~~acquisition-related~~includes ~~costs associated with the pending Paycor acquisition recognized in~~ interest ~~expense~~income ~~and lower average interest rates earned~~ on ~~our~~ corporate investments.

Income taxes: Our effective income tax rate was 2422.39% for the ~~third~~first quarter ~~and~~compared to 23.93%, for the ~~nine~~prior ~~months,~~year ~~compared to 24~~period.4% ~~and~~The ~~24.1%,~~effective ~~for~~income ~~the~~tax ~~prior~~rates ~~year~~in ~~periods,~~both ~~respectively. All~~ periods were ~~impacted~~affected by the recognition of ~~excess~~discrete tax ~~benefits~~impacts related to employee stock-based compensation payments.

25Non-GAAP Financial Measures: Adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, earnings before interest, taxes, depreciation, and amortization (“EBITDA”), and adjusted EBITDA are summarized as follows:

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	For the three months ended
	August 31,			August 31,
$ in millions, except per share amounts	2025			2024			Change
Operating income	$	541.9		$	546.7			(1	)	%
Non-GAAP adjustments:
Acquisition-related costs(1)		84.8			—
Adjusted operating income	$	626.7		$	546.7			15		%
Adjusted operating margin		40.7	%		41.5	%

Net income	$	383.8		$	427.4			(10	)	%
Non-GAAP adjustments:
Acquisition-related costs(1)		84.8			—
Income tax benefit for acquisition-related costs		(20.6	)		—
Excess tax benefits related to employee stock-based compensation payments(2)		(7.2	)		(6.2	)
Adjusted net income	$	440.8		$	421.2			5		%

Diluted earnings per share(3)	$	1.06		$	1.18			(10	)	%
Non-GAAP adjustments:
Acquisition-related costs(1)		0.23			—
Income tax benefit for acquisition-related costs		(0.06	)		—
Excess tax benefits related to employee stock-based compensation payments(2)		(0.02	)		(0.02	)
Adjusted diluted earnings per share	$	1.22		$	1.16			5		%

Net income	$	383.8		$	427.4			(10	)	%
Non-GAAP adjustments:
Interest expense		68.2			9.6
Interest income on corporate investments		(18.7	)		(19.9	)
Income taxes		113.7			129.7
Depreciation and amortization expense		109.3			39.0
EBITDA	$	656.3		$	585.8			12		%
Non-GAAP adjustments:
Acquisition-related costs(1)		23.7			—
Adjusted EBITDA	$	680.0		$	585.8			16		%

(1)

~~Non~~Acquisition-~~GAAP~~related ~~Financial~~costs ~~Measures:~~for ~~Adjusted~~the ~~operating~~first ~~income,~~quarter ~~adjusted~~included ~~operating~~in ~~margin~~selling, ~~adjusted~~general ~~other~~and ~~income,~~administrative ~~net,~~expenses ~~adjusted~~include ~~net~~(i) ~~income,~~$61.1 ~~adjusted~~million ~~diluted~~in ~~earnings~~amortization ~~per~~of ~~share,~~intangibles ~~earnings~~acquired ~~before~~in ~~interest~~the acquisition of Paycor, ~~taxes~~(ii) $18.7 million in compensation costs related to the acquisition and integration of Paycor, ~~depreciation~~including replacement awards, severance and ~~amortization~~retention ~~(“EBITDA”)~~bonuses, and ~~adjusted~~(iii) ~~EBITDA~~$5.0 ~~are~~million ~~summarized~~in asother ~~follows:~~acquisition-related costs, primarily reflecting professional service fees

(2)

	For the three months ended										For the nine months ended
	February 28,			February 29,							February 28,			February 29,
$ in millions	2025			2024			Change				2025			2024			Change
Operating income	$	691.8		$	649.8			6		%	$	1,776.6		$	1,692.3			5		%
Non-GAAP adjustments:
Acquisition-related costs(1)		16.7			—							16.7			—
Adjusted operating income	$	708.5		$	649.8			9		%	$	1,793.3		$	1,692.3			6		%
Adjusted operating margin		46.9	%		45.1	%						43.3	%		42.5	%
Other (expense)/income, net	$	(6.0	)	$	9.4		n/m				$	10.0		$	33.9		n/m
Non-GAAP adjustments:
Acquisition-related costs(1)		13.2			—							13.2			—
Adjusted other income, net	$	7.2		$	9.4			(23	)	%	$	23.2		$	33.9			(31	)	%
Net income	$	519.3		$	498.6			4		%	$	1,360.1		$	1,310.5			4		%
Non-GAAP adjustments:
Acquisition-related costs(1)		29.9			—							29.9			—
Income tax (benefit)/provision for acquisition-related costs		(7.3	)		—							(7.3	)		—
Excess tax benefits related to employee stock-based compensation payments(2)		(0.8	)		(0.3	)						(9.4	)		(5.5	)
Adjusted net income	$	541.1		$	498.3			9		%	$	1,373.3		$	1,305.0			5		%
Diluted earnings per share(3)	$	1.43		$	1.38			4		%	$	3.76		$	3.62			4		%
Non-GAAP adjustments:
Acquisition-related costs(1)		0.08			—							0.08			—
Income tax (benefit)/provision for acquisition-related costs		(0.02	)		—							(0.02	)		—
Excess tax benefits related to employee stock-based compensation payments(2)		(0.00	)		—							(0.03	)		(0.02	)
Adjusted diluted earnings per share	$	1.49		$	1.38			8		%	$	3.79		$	3.60			5		%
Net income	$	519.3		$	498.6			4		%	$	1,360.1		$	1,310.5			4		%
Non-GAAP adjustments:
Interest expense/(income), net		6.0			(9.4	)						(10.6	)		(33.3	)
Income taxes		166.5			160.6							426.5			415.7
Depreciation and amortization expense		43.1			44.8							123.8			130.9
EBITDA	$	734.9		$	694.6			6		%	$	1,899.8		$	1,823.8			4		%
Non-GAAP adjustments:
Acquisition-related costs(1)		16.7			—							16.7			—
Adjusted EBITDA	$	751.6		$	694.6			8		%	$	1,916.5		$	1,823.8			5		%

Acquisition-related costs recognized related to the pending Paycor acquisition, including (i) $16.7 million for the third quarter and nine months primarily reflecting third-party professional service fees included in Selling, general, and administrative expenses and (ii) $13.2 million for the third quarter and nine months reflecting the amortization of financing fees related to debt instruments associated with the financing of the pending Paycor acquisition and the excluded component of the initial fair value of the interest rate swaption contracts ("Swaption Contracts") that are included in Other (expense)/income, net in the Company's Consolidated Statements of Income.

Excess tax benefits related to employee stock-based compensation payments recognized in income taxes. This item is subject to volatility and will vary based on employee decisions on exercising employee stock options and fluctuations in our stock price, neither of which is within the control of management.

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The calculation of the impact of non-GAAP adjustments on diluted earnings per share is performed on each line independently. The table may not add down by +/- $0.01 due to rounding.

~~n/m — not meaningful~~25

InTable addition to reporting operating income, operating margin, other (expense)/income, net, net income, and diluted earnings per share, which are U.S. GAAP measures, we present adjusted operating income, adjusted operating margin, adjusted other income, net, adjusted net income, adjusted diluted earnings per share, EBITDA, and adjusted EBITDA, which are non-GAAP measures. We believe these additional measures are indicators of our core business operations’ performance period over period. Adjusted operating income, adjusted operating margin, adjusted other income, net, adjusted net income, adjusted diluted earnings per share, EBITDA, and adjusted EBITDA are not calculated through the application of U.S. GAAP and are not required forms of disclosure by the SEC. As such, they should not be considered a substitute for the U.S. GAAP measures of operating income, operating margin, other (expense)/income, net, net income and diluted earnings per share, and, therefore, they should not be used in isolation, but in conjunction with the U.S. GAAP measures. The use of any non-GAAP measure may produce results that vary from the U.S. GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.Contents

In addition to reporting operating income, operating margin, net income, and diluted earnings per share, which are U.S. GAAP measures, we present adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, EBITDA, and adjusted EBITDA, which are non-GAAP measures. We believe these additional measures are indicators of our core business operations’ performance period over period. Adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, EBITDA, and adjusted EBITDA are not calculated through the application of U.S. GAAP and are not required forms of disclosure by the SEC. As such, they should not be considered a substitute for the U.S. GAAP measures of operating income, operating margin, net income, and diluted earnings per share, and, therefore, they should not be used in isolation, but in conjunction with the U.S. GAAP measures. The use of any non-GAAP measure may produce results that vary from the U.S. GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.

LIQUIDITY AND CAPITAL RESOURCES

Our financial position as of ~~February~~August 2831, 2025 remained strong with cash, restricted cash, and total corporate investments of $1.7 billion. Short-term borrowings of $1718.65 million and long-term borrowings of $~~800~~5.0 ~~million~~billion were outstanding as of ~~February~~August 2831, 2025. Our unused capacity under our unsecured credit facilities was approximately $2.0 billion as of ~~February~~August 2831, 2025. ~~We also maintain a bridge commitment letter (“Bridge Loan Commitment”) in connection with our acquisition of Paycor.~~ Our primary source of cash is our ongoing operations, which was $1718.64 ~~billion~~million for the ~~nine~~first ~~months~~quarter. Our positive cash flows have allowed us to support our business and pay dividends. We currently anticipate that corporate cash, corporate restricted cash, and total corporate investments as of ~~February~~August 2831, 2025, along with projected operating cash flows and available short-term financing, will support our business operations, capital purchases, primarily investment in our technology solutions, share repurchases, dividend payments, acquisitions and ~~the servicing of long-term~~ debt service for the foreseeable future.

For client funds liquidity, we have the ability to borrow on our unsecured credit facilities or use corporate liquidity when necessary to meet short-term funding needs related to client fund obligations. Historically, we have borrowed, typically on an overnight basis, to settle short-term client fund obligations, rather than liquidate previously collected client funds invested in our long-term AFS portfolio. We believe that our investments in an unrealized loss position as of ~~February~~August 2831, 2025 were not impaired due to increased credit risk or other valuation concerns, nor has any event occurred subsequent to that date to indicate any change in our assessment. We do not intend to sell these investments until recovery of their amortized cost basis or maturity and further believe that it is not more-than-likely that we would be required to sell these investments prior to that time.

Financing

Short-term financing: We maintain committed and unsecured credit facilities and irrevocable letters of credit as part of our normal and recurring business operations. The purpose of these credit facilities is to meet short-term funding requirements, finance working capital needs, and for general corporate purposes. We typically borrow on an overnight or short-term basis under our credit facilities. Refer to Note M of the Notes to Consolidated Financial Statements contained in Item 8 of our Form 10-K for fiscal ~~2024~~2025 for further discussion of our credit facilities.

Details of our credit facilities as of ~~February~~August 2831, 2025 were as follows:

			Maximum			~~February~~August 2831, 2025
			Amount			Outstanding			Available
$ in millions	Expiration Date		Available			Amount			Amount
Credit facilities:
JP Morgan Chase Bank, N.A. (“JPM”)	April 12, 2029	$		1,000.0	$		-	$		1,000.0
JPM	September 17, 2026	$		750.0			-			750.0
PNC Bank, National Association (“PNC”)	February 6, 2026	$		250.0			1718.65			~~232~~231.45
Total Lines of Credit Outstanding and Available					$		1718.65	$		1,~~982~~981.45

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Amounts outstanding under the PNC credit facility as of ~~February~~August 2831, 2025 remain outstanding as of the date of this report.

Details of borrowings under each credit facility during the ~~third~~first quarter were as follows:

		For the three months ended February 28, 2025
		For the three months ended August 31, 2025
		Credit Facility
		$1 Billion				$750 Million				$250 Million
$ in millions		JPM				JPM				PNC
Number of days borrowed			—				—				9092
Maximum amount borrowed	$		—		$		—		$		18101.29
Weighted-average amount borrowed	$		—		$		—		$		1719.85
Weighted-average interest rate			—	%			—	%			4.5717	%

We primarily use short-term borrowings to settle client fund obligations, rather than liquidating previously collected client funds invested in our long-term AFS investment portfolio.

WeSubsequent ~~expect~~ to ~~have~~August ~~access~~31, ~~to the amounts available under our current credit facilities to meet our ongoing financial needs. However~~2025, if we ~~experience~~borrowed ~~reductions~~three intimes ~~our~~on ~~operating~~an ~~cash~~overnight ~~flows due to any of the risk factors outlined in~~basis, ~~but~~$185.2 ~~not~~million ~~limited~~on ~~to,~~a ~~Item 1A in our Form 10~~weighted-Kaverage ~~for~~basis ~~fiscal~~under ~~2024 and other SEC filings, we may need to adjust~~ our ~~capital,~~PNC ~~operating~~ and ~~other~~JPM ~~discretionary~~credit ~~spending to realign our working capital requirements with the capital resources available to us~~facilities. ~~Furthermore, if we determine the need for additional short-term liquidity, there is no assurance that such financing, if pursued and obtained, would be adequate or on terms acceptable to us.~~

~~Letters~~We ofexpect to have access to the amounts available under our current credit: Asfacilities ofto ~~February~~meet ~~28,~~our ~~2025~~ongoing financial needs. However, if we ~~had~~experience ~~irrevocable~~reductions ~~standby~~in ~~letters~~our operating cash flows due to any of ~~credit~~the ~~available~~risk ~~totaling~~factors ~~$168.7~~outlined ~~million~~in, ~~primarily~~but not limited to, ~~secure~~Item ~~commitments~~1A ~~for~~in ~~certain~~our ~~insurance~~Form ~~policies.~~10-K ~~The~~for ~~letters~~fiscal of2025 ~~credit~~and ~~expire~~other atSEC ~~various~~filings, ~~dates~~we ~~between~~may ~~March~~need 03to adjust our capital, ~~2025~~operating and ~~February~~other ~~28,~~discretionary ~~2026.~~spending Noto ~~amounts~~realign ~~were~~our ~~outstanding~~working oncapital ~~these~~requirements ~~letters~~with ofthe ~~credit~~capital ~~during~~resources available to us. Furthermore, if we determine the ~~third~~need ~~quarter~~for oradditional asshort-term ofliquidity, ~~February~~there 28is no assurance that such financing, ~~2025.~~if pursued and obtained, would be adequate or on terms acceptable to us.

~~Long-term~~Letters ~~financing~~of credit: WeAs ~~have~~of ~~borrowed~~August ~~$800.0~~31, ~~million~~2025, ~~through~~we ~~the~~had ~~issuance~~irrevocable standby letters of ~~long-term~~credit ~~private~~available ~~placement~~totaling ~~debt~~$177.2 ~~Refer~~million, primarily to ~~Note~~secure Ncommitments offor ~~the~~certain ~~Notes~~insurance topolicies. ~~Consolidated~~The ~~Financial~~letters ~~Statements~~of ~~contained~~credit inexpire ~~Item~~at 8various ofdates ~~our~~between ~~Form~~September ~~10-K~~01, ~~for~~2025 ~~fiscal~~and ~~2024~~February ~~for~~28, ~~further~~2027. ~~discussion~~No amounts were outstanding on ~~our~~these ~~long-term~~letters ~~financing~~of credit during the first quarter or as of August 31, 2025.

~~Bridge~~Long-term ~~Loan Commitment~~financing: InWe ~~addition~~have toborrowed ~~our~~$0.8 ~~recurring~~billion ~~credit~~through ~~facilities,~~the onissuance ~~January 7, 2025, we and our subsidiary, Paychex~~ of ~~New York, LLC, entered into a Bridge Loan Commitment with JPM, pursuant to which JPM committed to provide a 364~~long-~~day~~term ~~senior~~private ~~unsecured~~placement ~~credit~~debt ~~facility~~(“Senior ~~not~~Notes”) toand ~~exceed~~ $34.52 billion ~~for~~through the ~~acquisition~~issuance of ~~Paycor,~~three ~~including~~fixed ~~related~~rate ~~fees~~corporate ~~and~~bonds ~~expenses.~~("Corporate ~~We incurred $11~~Bonds").4 ~~million~~The infollowing ~~debt~~is ~~financing~~information ~~fees, including structuring and commitment fees, which were capitalized as Prepaid expenses and other current assets~~ on ~~the~~each ~~Company’s~~of ~~Consolidated~~our ~~Balance Sheets and are recognized as interest expense on a straight~~long-~~line~~term ~~basis until the expected issuance date for permanent~~ financing. ~~There~~arrangements ~~were~~related ~~no borrowings under the Bridge Loan Commitment as of February 28, 2025 or for the period from January 7, 2025~~ to ~~February~~future ~~28,~~cash ~~2025.~~commitments:

We and certain of our subsidiaries will guarantee any borrowings that are made under the Bridge Loan Commitment. The Bridge Loan Commitment contains various financial and operational covenants that would have been applicable to any borrowings under the Bridge Loan Commitment and that are usual and customary for such arrangements. If such covenants were in effect, we would have been in compliance with all of these covenants as of February 28, 2025.


	Senior Notes				Corporate Bonds
$ in millions	Series A		Series B		5-year		7-year		10-year
Principal amount	$	400.0	$	400.0	$	1,500.0	$	1,500.0	$	1,200.0
Principal payment date	March 13, 2026		March 13, 2029		April 15, 2030		April 15, 2032		April 15, 2035
Fixed interest rate	4.07%		4.25%		5.10%		5.35%		5.60%
Interest payment dates in arrears	March and September		March and September		April and October		April and October		April and October

~~Interest~~Refer Rate Swaption Contracts: On January 31, 2025, the Company executed three Swaption Contracts with JPM. The Swaption Contracts qualify as cash flow hedges, have an aggregate notional amount of $3.0 billion, and are being utilized to ~~manage~~Note ~~exposure~~N ~~to fluctuations in benchmark interest rates associated with the anticipated issuance~~ of ~~long-term fixed rate debt to fund~~ the ~~planned~~Notes ~~acquisition of Paycor. At inception, we recorded Swaption Contract assets related~~ to ~~paid premiums of $19.2 million. The fair value of the Swaption Contract assets is classified as Prepaid expenses and other current assets on the Company’s~~ Consolidated ~~Balance~~Financial ~~Sheets.~~Statements ~~Refer~~contained toin ~~Note~~Item G8 of ~~the~~our ~~Notes~~Form to10-K ~~Consolidated~~for ~~Financial~~fiscal ~~Statements~~2025 for ~~additional~~further ~~information~~discussion on ~~the~~our ~~Swaption~~long-term ~~Contracts~~financing.

28Other commitments: We had outstanding commitments under existing workers’ compensation insurance agreements and legally binding contractual arrangements. We also entered into various purchase commitments with vendors in the ordinary course of business and had outstanding commitments to purchase approximately $9.2 million of capital assets as of August 31, 2025. In addition, we are involved in six limited partnership agreements to contribute a maximum of $37.5 million to venture capital funds. As of August 31, 2025, we have contributed approximately $31.4 million of the total funding commitment.

In the normal course of business, we make representations and warranties that guarantee the performance of services under service arrangements with clients. Historically, there have been no material losses related to such guarantees. We have also entered into indemnification agreements with our officers, directors, and non-officer fiduciaries of our pooled employer plan retirement

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~~Other~~offering, ~~commitments:~~which Werequire ~~had~~us ~~outstanding~~to ~~commitments~~defend ~~under existing workers’ compensation insurance agreements~~ and, ~~legally~~if ~~binding~~necessary, ~~contractual~~indemnify ~~arrangements.~~these Weindividuals ~~also~~for ~~entered~~certain ~~into~~pending ~~various~~or ~~purchase~~future ~~commitments~~legal ~~with~~claims ~~vendors in the ordinary course of business and had outstanding commitments to purchase approximately $6.1 million of capital assets~~ as ofthey ~~February~~relate ~~28, 2025. In addition, we are involved in five limited partnership agreements~~ to ~~contribute~~their aservices ~~maximum~~provided ~~of $37.0 million~~ to ~~venture capital funds~~us. ~~As of February 28, 2025, we have contributed approximately $28.1 million of the total funding commitment.~~

InWe currently self-insure the ~~normal~~deductible ~~course~~portion of ~~business,~~various weinsured ~~make~~exposures ~~representations~~under certain corporate and ~~warranties~~PEO ~~that~~employee ~~guarantee~~health, ~~the~~medical, ~~performance~~and ofworkers' ~~services~~compensation benefit plans. Our estimated loss exposure under ~~service~~these insurance arrangements ~~with~~is ~~clients~~recorded in other current liabilities on our Consolidated Balance Sheets. Historically, ~~there~~the amounts accrued have not been nomaterial and were not material ~~losses~~as ~~related~~of toAugust ~~such~~31, ~~guarantees~~2025. We ~~have~~ also ~~entered~~maintain ~~into~~corporate ~~indemnification~~insurance ~~agreements~~coverage ~~with~~in ~~our~~addition ~~officers,~~to ~~directors,~~our ~~and~~purchased ~~fiduciaries~~primary ofinsurance ~~certain~~policies offor ~~our~~gap ~~retirement~~coverage ~~plans,~~for ~~which~~employment ~~require~~practices usliability, toerrors ~~defend~~ and omissions, ifwarranty ~~necessary~~liability, ~~indemnify~~theft ~~these~~and ~~individuals~~embezzlement, ~~for~~cyber ~~certain~~threats, ~~pending~~and oracts ~~future~~of ~~legal~~terrorism; ~~claims~~and ascapacity ~~they~~for ~~relate~~deductibles toand ~~their~~self-insured ~~services~~retention ~~provided~~through toour uscaptive insurance company.

We currently self-insure the deductible portion of various insured exposures under certain corporate and PEO employee health and medical benefit plans. Our estimated loss exposure under these insurance arrangements is recorded in other current liabilities on our Consolidated Balance Sheets. Historically, the amounts accrued have not been material and were not material as of February 28, 2025. We also maintain corporate insurance coverage in addition to our purchased primary insurance policies for gap coverage for employment practices liability, errors and omissions, warranty liability, theft and embezzlement, cyber threats, and acts of terrorism; and capacity for deductibles and self-insured retention through our captive insurance company.

On January 7, 2025, we entered into a definitive agreement to acquire Paycor in an all-cash transaction for $22.50 per eligible share, without interest (the "Acquisition"). The waiting period with respect to the consummation of the Acquisition under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired on February 21, 2025. The expiration of the waiting period satisfies one of the major conditions to the closing of the Acquisition, which remains subject to other customary closing conditions. We have the Bridge Loan Commitment in place and expect to secure long-term fixed financing prior to closing. The Acquisition is expected to close in April 2025, subject to customary closing conditions.

Operating, Investing, and Financing Cash Flow Activities

Primary sources of cash, restricted cash, and equivalents are through collections for services rendered to our customers and interest earned on funds held for clients and corporate investments. Primary uses of cash include employee compensation and contractual obligations related to business operations, cash dividends paid, share repurchases, purchases of property and equipment, long-term debt service, and acquisitions.

Our investment portfolio incorporates both corporate cash and funds held for clients. Interest rates, market conditions, and our ~~volatile~~variable cash flows are among several factors influencing our investment strategy directing the mix between long-term and VRDN AFS securities ~~compared~~vs. to short-term restricted cash and cash equivalents held in the ~~investment~~ portfolio. AnA ~~investment~~ portfolio strategy that favors larger balances held in restricted cash and cash equivalents may impact our investing activities due to the offsetting activity in the purchases and sales or /maturities of AFS investments.

Our cash flows include certain activities that are short-term in nature and have an impact on short-term cash flows due to timing of collection and settlement of obligations as follows:

•

PEO receivables and worksite-employee ("WSE") accrued compensation: PEO receivables and WSE accrued compensation fluctuate based on either/both: (1) the timing of the payroll cut-off date and our month-end close, and (2) the timing of when cash is collected from the customer, and it is remitted to either the WSE for wages earned or applicable tax or regulatory agencies for payroll taxes. PEO accounts receivable collections and compensation payments to WSEs and applicable tax or regulatory agencies are settled through our corporate cash and the fluctuations impact our operating activities.

•

Client fund obligations: Client fund obligations liability will vary based on the timing of when cash is collected from the clients and when it is remitted to employees of the clients utilizing employee payment services or applicable tax or regulatory agencies for payroll tax administration services. Collections from clients are typically remitted from one to 30 days after receipt, with some items extending to 90 days. Fluctuations in client fund obligations impact financing activities.

29Summarized operating, investing, and financing cash flow information for the first quarter and the prior period:


	For the three months ended
	August 31,			August 31,
In millions	2025			2024				Change
Net cash provided by operating activities	$	718.4		$	546.1		$		172.3
Net cash used in investing activities		(1,302.7	)		(110.0	)			(1,192.7	)
Net cash used in financing activities		(515.4	)		(485.0	)			(30.4	)
Net change in cash, restricted cash, and equivalents	$	(1,099.7	)	$	(48.9	)	$		(1,050.8	)

Cash dividends per common share	$	1.08		$	0.98

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~~Summarized~~The ~~operating,~~changes ~~investing,~~in ~~and~~our ~~financing~~ cash flow ~~information~~ for the ~~nine~~first ~~months~~quarter ~~and~~compared to the prior year period were primarily the result of the following key drivers:

	For the nine months ended
	February 28,			February 29,
In millions	2025			2024				Change
Net cash provided by operating activities	$	1,557.1		$	1,676.0		$		(118.9	)
Net cash used in investing activities		(281.7	)		(117.8	)			(163.9	)
Net cash (used in)/provided by financing activities		(779.1	)		839.8				(1,618.9	)
Net change in cash, restricted cash, and equivalents	$	496.3		$	2,398.0		$		(1,901.7	)
Cash dividends per common share	$	2.94		$	2.67

The changes in our cash flow for the nine months compared to the prior year period were primarily the result of the following key drivers:

Operating Cash Flow Activities

Fiscal 2026

•

Net income, adjusted for non-cash items including depreciation and amortization, provision on deferred taxes and stock-based compensation, attributable to the reasons discussed in the “Results of Operations” section of this Item 2;

•

Net increase in refunds owed to our clients related to tax benefits allowed under the Coronavirus Aid, Relief, and Economic Security Act;

•

An increase in accrued interest related to our corporate bonds, for which the first interest installment payment is due in October; and

•

Net decrease in prepaid income taxes due to the timing of our first quarter tax installment, which historically is settled during our second fiscal quarter; offset by

•

A net decrease in accrued corporate compensation primarily due to the settlement of fiscal 2025 year-end bonuses.

Fiscal 2025

•

Net income, adjusted for non-cash items including depreciation and amortization, benefit from deferred taxes and stock-based compensation, attributable to the reasons discussed in the “Results of Operations” section of this Item 2; and

•

Net ~~changes~~increase in ~~PEO~~accrued ~~assets~~income ~~and~~taxes ~~liabilities~~due asto athe ~~result~~timing of ~~the~~our ~~timing~~first ofquarter ~~cash~~tax ~~collected~~installment, ~~and~~which ~~the~~historically ~~settlement~~is ofsettled ~~payroll~~during ~~taxes~~our second fiscal quarter; offset by

•

A net decrease in refunds owed to our PEO clients related to tax benefits allowed under the Coronavirus Aid, Relief, and Economic Security Act.

Fiscal 2024

Net income attributable to the reasons discussed in the “Results of Operations” section of this Item 2;

Net changes in PEO assets and liabilities as a result of the timing of cash collected and the settlement of payroll taxes; and

•

A net ~~increase~~decrease in ~~refunds~~accrued ~~owed~~corporate compensation primarily due to ~~our~~the ~~PEO~~settlement ~~clients~~of ~~related~~year-end tobonuses ~~tax~~for ~~benefits~~our ~~allowed~~fiscal ~~under~~year ~~the~~ended ~~Coronavirus~~May ~~Aid~~31, ~~Relief~~2024, ~~and~~offset ~~Economic~~by ~~Security~~an ~~Act~~increase in accrued payroll due to the timing of processing.

Investing Cash Flow Activities

Fiscal 2026

•

Net purchases of AFS securities related to investments in VRDNs at quarter-end and investment in our long-term portfolio;

•

Cash used to develop and enhance our client facing internal-use software and the acquisition of third-party customer lists; and

•

Net purchases of short-term accounts receivable due to an increase in our funding percentage to clients, increase in client base, and increased funding to existing clients.

Fiscal 2025

•

Cash used to develop and enhance our client facing internal-use software and the acquisition of third-party customer lists;

•

Net purchases of short-term accounts receivable due to an increase in our client base, the timing of cash collections on outstanding receivables and cash settlement of the related reserve; and

•

~~Cash~~Net ~~used~~purchases toof ~~develop~~AFS ~~and~~securities ~~enhance~~related ~~our~~to ~~client~~investment ~~facing~~in ~~internal-use~~our ~~software and the acquisition of third~~long-~~party~~term ~~customer~~portfolio. ~~lists; offset by~~

Net sales of AFS securities related to investment in our long-term portfolio.

Fiscal 2024

Cash used for the acquisition of Alterna Capital Solutions, LLC and settlement of its outstanding debt at closing. Refer to Note D of the Notes to Consolidated Financial Statements for additional discussion of this transaction;

Cash used to develop and enhance our client facing internal-use software and the acquisition of third-party customer lists; and

Net purchase of short-term accounts receivable due to an increase in our client base, and funding to existing client base, and the timing of net cash collections; offset by

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Net sales from AFS securities primarily due to a shift from investing in VRDNs to reinvesting in cash and cash equivalents due to more favorable interest rates. We had no VRDN holdings as of February 29, 2024 compared to $344.1 million as of May 31, 2023.

Financing Cash Flow Activities

Fiscal 2026

•

Dividends paid at $1.08 per share. The payment of future dividends is dependent on our future earnings and cash flow and is subject to the discretion of our Board of Directors (the "Board"); and

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•

Cash used to repurchase 1.1 million shares of our common stock at a weighted average price of $145.59 per share during the first quarter. All repurchased shares were retired upon acquisition.

Fiscal 2025

•

~~Cumulative~~Dividends ~~dividends~~ paid at $20.9498 per share. The payment of future dividends is dependent on our future earnings and cash flow and is subject to the discretion of ~~our Board of Directors (~~the "Board"); ~~and~~

•

Cash used to repurchase 0.8 million shares of our common stock at a weighted average price of $125.50 per share during the ~~nine~~first ~~months~~quarter. All ~~repurchased~~repurchases ~~shares~~ were retired upon acquisition; ~~offset by~~and

•

~~Increase~~Decrease in client fund obligations related to the timing of collections and remittances of client funds.

Fiscal 2024

Increase in client fund obligations related to the timing of collections and remittances of client funds. The accrual balance as of May 31, 2023 was impacted by the deferral of semi-weekly payroll tax payments due to the Memorial Day holiday; offset by

Cumulative dividends paid at $2.67 per share. The payment of future dividends is dependent on our future earnings and cash flow and is subject to the discretion of our Board; and

Cash used to repurchase 1.5 million shares of our common stock at a weighted average price of $115.37 per share during the nine months ended February 29, 2024. All repurchases were retired upon acquisition.

MARKET RISK FACTORS

Changes in interest rates and interest rate risk: Funds held for clients are primarily comprised of short-term funds and AFS securities. Corporate investments are primarily comprised of AFS securities. As a result of our investing activities, we are exposed to changes in interest rates that may materially affect our results of operations and financial position. Changes in interest rates will impact the earnings potential of future investments and will cause fluctuations in the fair value of our long-term AFS securities. We follow an investment strategy of protecting principal and optimizing liquidity. A substantial portion of our portfolios is invested in high credit quality securities with ratings of AA or higher, and A-1/P-1 ratings on short-term securities. We invest predominantly in corporate bonds; municipal bonds; U.S. government agency securities; and VRDNs when available in the market. We limit the amounts that can be invested in any single issuer and invest primarily in short- to intermediate-term instruments whose fair value is less sensitive to interest rate changes. We manage the AFS securities to a benchmark duration of two to three and one-quarter years.

During the ~~nine~~first ~~months~~quarter, our primary short-term investment vehicles were U.S. government agency discount notes and bank demand deposit accounts. We have no exposure to high-risk or non-liquid investments. We have insignificant exposure to European investments.

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