PAYCHEX INC
For the period ended Nov 30, 2025. Filed Dec 22, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Nov 30, 2025 · Filed Dec 22, 2025
PAYX$117.06-2.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-08-31; filed 2025-09-30.
0001193125-25-224997
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-11-30; filed 2025-12-22.
0001193125-25-328698
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 166 previous paragraphs and 169 current paragraphs.
107 unchanged; 52 reworded; 9 added; 6 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 12 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
risks related to our use of artificial intelligence ("AI") and new technologies in our business;
Current report
Second Quarter and Year to Date Business Highlights
Current report
PEO and Insurance Solutions revenue: $336.9 million for the second quarter and $666.0 million for the six months, reflecting increases of 6% and 5%, respectively:
Current report
Interest on funds held for clients: $54.3 million for the second quarter and $101.9 million for the six months, reflecting increases of 51% and 38% respectively:
Current report
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Current report
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Current report
Higher realized gains due to strategic repositioning of our investment portfolio during the second quarter.
Current report
Net increase in accrued income taxes due to the timing of estimated tax payments as compared to the accrual of income tax expense; offset by
Current report
Net increase in accrued income taxes due to the timing of estimated tax payments as compared to the accrual of income tax expense;
Removed paragraphs (6)
Previous report
First Quarter Business Highlights
Previous report
PEO and Insurance Solutions revenue: $329.1 million for the first quarter, reflecting an increase of 3%:
Previous report
Other income, net: Other income, net was $23.8 million for the first quarter compared to $20.0 million for the prior year period. Other income, net primarily includes interest income on corporate investments.
Previous report
An increase in accrued interest related to our corporate bonds, for which the first interest installment payment is due in October; and
Previous report
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
Previous report
Net increase in accrued income taxes due to the timing of our first quarter tax installment, which historically is settled during our second fiscal quarter; offset by
Reworded paragraphs (52)
Previous wording
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 August 31, 2025 (the “first quarter”), the respective prior year period ended August 31, 2024 (the “prior year period”), and our financial condition as of August 31, 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 August 31, 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, 2025 (“fiscal 2025”). Forward-looking statements in this Form 10-Q are qualified by the cautionary statement included under the next sub-heading, “Cautionary Note Regarding Forward-Looking Statements.”
Current wording
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 November 30, 2025 (the “second quarter”), the six months ended November 30, 2025 (the "six months"), the respective prior year periods ended November 30, 2024 (the “prior year periods”), and our financial condition as of November 30, 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 November 30, 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, 2025 (“fiscal 2025”). Forward-looking statements in this Form 10-Q are qualified by the cautionary statement included under the next sub-heading, “Cautionary Note Regarding Forward-Looking Statements.”
Previous wording
Certain written and oral statements made by management of Paychex may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States (“U.S.”) Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by such words and phrases as “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.
Current wording
Certain written and oral statements made by management of Paychex may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States (“U.S.”) Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by such words and phrases as “expect,” “outlook,” “will,” “guidance,” “projections,” “strategy,” “mission,” “anticipate,” “believe,” “can,” “could,” “design,” “look forward,” “may,” “possible,” “potential,” “should,” “target,” 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.
Previous wording
our ability to comply with U.S. and foreign laws and regulations;
Current wording
our ability to comply with U.S., state, and foreign laws and regulations;
Previous wording
our compliance with data privacy and artificial intelligence laws and regulations;
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our compliance with data privacy and AI laws and regulations;
Previous wording
volatility in the political and economic environment, including inflation and interest rate changes;
Current wording
volatility in the political, market, and economic environment, including inflation and interest rate changes;
Previous wording
Our investor presentation regarding the financial results for the first quarter is available and accessible on our Paychex Investor Relations portal athttps://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.
Current wording
Our investor presentation regarding the financial results for the second quarter is available and accessible on our Paychex Investor Relations portal athttps://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.
Previous wording
Highlights compared to the prior year period are as follows:
Current wording
Highlights compared to the prior year periods are as follows:
Previous wording
For further analysis of our results of operations for the first quarter and prior year period, and our financial position as of August 31, 2025, refer to the tables and analysis in the “Results of Operations” and “Liquidity and Capital Resources” sections of this Item 2.
Current wording
For further analysis of our results of operations for the second quarter and six months, the prior year periods, and our financial position as of November 30, 2025, refer to the tables and analysis in the “Results of Operations” and “Liquidity and Capital Resources” sections of this Item 2.
Previous wording
Total revenue increased to $1.5 billion for the first quarter, represented growth of 17% over the prior year period. The changes in revenue as compared to the prior year period were primarily driven by the following factors:
Current wording
Total revenue increased to $1.6 billion for the second quarter and $3.1 billion for the six months, reflecting increases of 18% over the prior year periods. The changes in revenue as compared to the prior year periods were primarily driven by the following factors:
Previous wording
Management Solutions revenue: $1.2 billion for the first quarter, reflecting an increase of 21%. Paycor, acquired in April 2025, contributed approximately 17% to Management Solutions revenue growth year-over-year:
Current wording
Management Solutions revenue: $1.2 billion for the second quarter and $2.3 billion for the six months, reflecting increases of 21% over the prior year periods. Paycor, acquired in April 2025, contributed approximately 17% to Management Solutions revenue growth for the second quarter and six months. Management Solutions revenue increased due to the following:
Previous wording
Higher revenue per client driven by Paycor's upmarket client base, price realization, and product penetration, including HR solutions and retirement.
Current wording
Higher revenue per client driven by Paycor's upmarket client base, price realization, and product penetration.
Previous wording
Interest on funds held for clients: $47.6 million for the first quarter, reflecting an increase of 27%, due to higher average investment balances, resulting from the acquisition of Paycor.
Current wording
Higher average investment balances, resulting from the acquisition of Paycor; and
Previous wording
(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.
Current wording
(1) The net unrealized loss on our investment portfolio was approximately $15.8 million as of December 17, 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.
Previous wording
(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%.
Current wording
(2) The Federal Funds rate was in the range of 3.75% to 4.00% as of November 30, 2025 and 4.25% to 4.50% as of May 31, 2025. Effective December 11, 2025, the Federal Reserve decreased the Federal Funds rate to a range of 3.50% to 3.75%.
Previous wording
Total expenses: Total expenses, which reflects the total combined cost of service revenue and selling, general and administrative expenses, increased 29% to $998.1 million for the first quarter. The following table summarizes the components of total expenses:
Current wording
Total expenses: Total expenses, which reflects the total combined cost of service revenue and selling, general and administrative expenses, increased 27% to $985.7 million for the second quarter and 28% to $2.0 billion for the six months. The following table summarizes the components of total expenses:
Previous wording
Compensation-related expenses:$530.0 million for the first quarter, reflecting an increase of 17%, primarily due to an increase in headcount, driven by the acquisition of Paycor.
Current wording
Compensation-related expenses:$525.5 million for the second quarter and $1.1 billion for the six months, reflecting increases of 16% and 17% respectively, primarily due to an increase in headcount, driven by the acquisition of Paycor.
Previous wording
PEO direct insurance costs: $138.6 million for the first quarter, reflecting an increase of 6%, related to growth in average worksite employees and PEO insurance revenues.
Current wording
PEO direct insurance costs: $137.0 million for the second quarter and $275.6 million for the six months, reflecting increases of 5% and 6% respectively, related to growth in average worksite employees and PEO insurance revenues.
Previous wording
Depreciation and amortization: $48.2 million for the first quarter, reflecting an increase of 23%, primarily due to higher property and equipment balances compared to the prior year period, including an increase in the development and enhancement of our client-facing internal-use software.
Current wording
Depreciation and amortization: $49.1 million for the second quarter and $97.3 million for the six months, reflecting increases of 18% and 21% respectively, primarily due to higher property and equipment balances compared to the prior year period, including an increase in the development and enhancement of our client-facing internal-use software.
Previous wording
Other expenses:$196.5 million for the first quarter, reflecting an increase of 30%, primarily due to higher technology, selling, and marketing investments driven by the acquisition of Paycor and our continued strategic initiatives. The increase also reflects general cost increases to support business growth.
Current wording
Other expenses:$197.0 million for the second quarter and $393.5 million for the six months, reflecting increases of 30%, primarily due to higher technology, selling, and marketing investments driven by the acquisition of Paycor and our continued strategic initiatives. The increase also reflects general cost increases to support business growth.
Previous wording
Acquisition-related costs:$84.8 million for the first quarter, reflecting 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.
Current wording
Acquisition-related costs:$77.1 million for the second quarter and $161.9 million for the six months, reflecting 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.
Previous wording
Operating income: Operating income decreased 1% to $541.9 million for the first quarter. Adjusted operating income(1), which excludes $84.1 million of Paycor acquisition-related costs included in selling, general and administrative expenses, grew 15% to $626.7 million for the first quarter.
Current wording
Operating income: Operating income increased 6% to $571.9 million for the second quarter and 3% to $1.1 billion for the six months. Adjusted operating income(1), which excludes acquisition-related costs included in selling, general and administrative expenses, grew 21% to $649.0 million for the second quarter and 18% to $1.3 billion for the six months.
Previous wording
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.
Current wording
Interest expense: Interest expense increased $59.0 million to $68.5 million for the second quarter and $117.6 million to $136.7 million for the six months, primarily due to the issuance of incremental debt to finance the acquisition of Paycor.
Previous wording
Income taxes: Our effective income tax rate was 22.9% for the first quarter compared to 23.3%, for the prior year period. The effective income tax rates in both periods were affected by the recognition of discrete tax impacts related to employee stock-based compensation payments.
Current wording
Income taxes: Our effective income tax rate was 24.0% for the second quarter and 23.4% for the six months compared to 24.0% and 23.6%, for the prior year periods respectively. The effective income tax rates in all periods were affected by the recognition of discrete tax impacts related to employee stock-based compensation payments.
Previous wording
Acquisition-related costs for the first quarter included in selling, general and administrative expenses include (i) $61.1 million in amortization of intangibles acquired in the acquisition of Paycor, (ii) $18.7 million in compensation costs related to the acquisition and integration of Paycor, including replacement awards, severance and retention bonuses, and (iii) $5.0 million in other acquisition-related costs, primarily reflecting professional service fees
Current wording
Acquisition-related costs included in selling, general and administrative expenses include (i) $60.0 million for the second quarter and $121.0 million for the six months in amortization of intangibles acquired in the acquisition of Paycor, (ii) $13.2 million for the second quarter and $31.9 million for the six months in compensation costs related to the acquisition and integration of Paycor, including replacement awards, severance and retention bonuses, and (iii) $3.9 million for the second quarter and $9.0 million for the six months in other acquisition-related costs, primarily reflecting professional service fees.
Previous wording
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.
Current wording
Net tax shortfall/(windfall) 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.
Previous wording
Our financial position as of August 31, 2025 remained strong with cash, restricted cash, and total corporate investments of $1.7 billion. Short-term borrowings of $18.5 million and long-term borrowings of $5.0 billion were outstanding as of August 31, 2025. Our unused capacity under our unsecured credit facilities was approximately $2.0 billion as of August 31, 2025. Our primary source of cash is our ongoing operations, which was $718.4 million for the first 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 August 31, 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 debt service for the foreseeable future.
Current wording
Our financial position as of November 30, 2025 remained strong with cash, restricted cash, and total corporate investments of $1.6 billion. Short-term borrowings of $18.2 million and long-term borrowings of $5.0 billion were outstanding as of November 30, 2025. Our unused capacity under our unsecured credit facilities was approximately $2.0 billion as of November 30, 2025. Our primary source of cash is our ongoing operations, which was $1.2 billion for the six months. 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 November 30, 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 debt service for the foreseeable future.
Previous wording
Details of borrowings under each credit facility during the first quarter were as follows:
Current wording
Details of borrowings under each credit facility during the second quarter were as follows:
Previous wording
Subsequent to August 31, 2025, we borrowed three times on an overnight basis, $185.2 million on a weighted-average basis under our PNC and JPM credit facilities.
Current wording
Subsequent to November 30, 2025, we borrowed one time on an overnight basis, $595.0 million under our PNC and JPM credit facilities.
Previous wording
Letters of credit: As of August 31, 2025, we had irrevocable standby letters of credit available totaling $177.2 million, 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 during the first quarter or as of August 31, 2025.
Current wording
Letters of credit: As of November 30, 2025, we had irrevocable standby letters of credit available totaling $172.9 million, primarily to secure commitments for certain insurance policies. The letters of credit expire at various dates between December 01, 2025 and February 28, 2027. No amounts were outstanding on these letters of credit during the second quarter or as of November 30, 2025.
Previous wording
Other 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.
Current wording
Other 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 $5.9 million of capital assets as of November 30, 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 November 30, 2025, we have contributed approximately $32.1 million of the total funding commitment.
Previous wording
We currently self-insure the deductible portion of various insured exposures under certain corporate and PEO employee health, medical, and workers' compensation 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 August 31, 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.
Current wording
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, as well as capacity for deductibles and self-insured retention through our captive insurance company.
Previous wording
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.
Current wording
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 client and when 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.
Previous wording
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.
Current wording
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 to 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.
Previous wording
Summarized operating, investing, and financing cash flow information for the first quarter and the prior period:
Current wording
Summarized operating, investing, and financing cash flow information for the six months and the prior period:
Previous wording
The changes in our cash flow for the first quarter compared to the prior year period were primarily the result of the following key drivers:
Current wording
The changes in our cash flow for the six months compared to the prior year period were primarily the result of the following key drivers:
Previous wording
Net increase in refunds owed to our clients related to tax benefits allowed under the Coronavirus Aid, Relief, and Economic Security Act;
Current wording
Net increase in refunds owed to our clients and other cash collections related to tax benefits; and
Previous wording
A net decrease in accrued corporate compensation primarily due to the settlement of year-end bonuses for our fiscal year ended May 31, 2024, offset by an increase in accrued payroll due to the timing of processing.
Current wording
A net decrease in accrued corporate compensation primarily due to the settlement of fiscal 2024 year-end bonuses.
Previous wording
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.
Current wording
Net purchases of short-term accounts receivable and an increase in our funding to existing clients.
Previous wording
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
Current wording
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;
Previous wording
Cash used to develop and enhance our client facing internal-use software and the acquisition of third-party customer lists;
Current wording
Cash used to develop and enhance our client facing internal-use software and the acquisition of third-party customer lists; and
Showing the first 40 of 52 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
We currently self-insure the deductible portion of various insured exposures under certain corporate employee and PEO employee health and medical benefit plans. Historically, the amounts accrued for these plans have not been material and were not material as of November 30, 2025. We also self-insure the deductible portion of certain PEO workers' compensation benefit plans. Refer to Note A in the Notes to Consolidated Financial Statements in this Form 10-Q for additional information regarding our estimated loss exposure under these PEO workers' compensation benefit plans.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Reserve and other government agencies related to the overall macroeconomic environment. We will continue to monitor the market and economic conditions.