We're running a little bit behind. Let's get moving on with the program. Thanks everybody for joining here. My name is Tien-Tsin Huang. I follow the IT services and payments and processing group and, you know, Paychex has always been one of the early names I've covered and watched over a couple of decades here. Always means a lot to me to have Paychex here to support the conference. Got the whole team here. John Gibson, President CEO is here. Thank you for doing this fireside chat. I thought we'd kick it off.
John, just to make this conversation as efficient as possible. I know you guys have just announced an AI platform. We do wanna talk about that, just to get it out the way to talk about the macro, if you don't mind.
Yeah.
Sitting at Paychex, you see a lot of great data around SMEs and of course employment. What do you see? Where are you optimistic? Where is there potentially some room for caution?
Yeah.
Thank you for being here.
Oh, it's my pleasure. Thanks for having me. It's always great to see you.
For sure.
I You know, it's, it's crazy because I feel like a broken record. You know, for the last few years, I think we've all worried about some sort of employment or some sort of economic challenge, and particularly given the uncertainty that we've had. You go back to one year ago this month, a month prior, Liberation Day.
All the advents of the tariffs, and then you look at today and the global uncertainty we have. What I would tell you is what we continue to see is a very resilient small business market. In fact, I would say even so far in the last three months, really more strength in both sides, both in our 50 plus and our under 50. I've been very, very pleased. We're in a very much a low hire, low fire type of environment. When we talk to our clients particularly, which are more in the small end of the market, they still are really raising issues about the ability to find qualified labor. Again, we're in the gray and blue collar segment. As you think about plumbers and electricians, now you think about building out all this AI infrastructure.
A lot of building contractors, a lot of electricians needed. There's a shortage out there. Right now, what I would say, well we see no signs of recession in any of our data. We see strong underlying growth both in the small market and in the mid-market at this point.
Good. Good. John, you mentioned the gray, blue collar. Just for the benefit of everyone else, I do get this question quite a bit, can you just remind us of the composition of your client base, your SMB client base, as well as those employees that work there, maybe some of the industries that you're exposed to? The crux of the question is obvious, right? How cyclical is the portfolio? Also where might you be exposed to some of these shifts that are happening in labor?
Yeah. First of all, 95% of our clients have less than 100 employees. When you really think about what we do, for most of our clients, we are the HR department, right? They don't have anyone really assigned to that, or they have people that are multiple hats. When you look in the job classification codes in our client base, now we pay one in 11 private sector workers. 75% of those are blue and gray collars. Again, think plumbers, you know, barbershops, beauticians, landscapers, those type of things. What we continue to see in that market is a challenge finding qualified workers.
We've really not seen this over-hiring situation that we saw happening in the upper end of the market, and we've not seen the layoffs as well. When we look at it, and we've done analysis on our jobs, we think we're pretty well insulated from it. In fact, what I would say, if we'd start training more plumbers and more electricians, our clients would be hiring more.
Right.
I was just talking to one of our contracting clients the other day, and he says, "If I could hire 100 people," he says, "I have more than enough work that I could bid on." Today I'm just not bidding on work I could compete against because I can't find the labor. I mean, you talked about the cyclical part of it. I think that's one of the things that's a little misunderstood. This problem in the segment that we go after, Paychex, this underemployment, difficult to find workers, has been a decade-long problem.
Sure.
If you go to the NFIB survey, been done for decades, you look at the top five issues facing small businesses, and you look at the small segment under 100, you're going to find finding qualified labor is a key part of that. We really, over a decade ago, had to think about our model differently. As you know, we've done a lot more advisory.
business, a lot more adding additional value. You know, you go back, 13- years ago, probably 60%-70% of our revenue was payroll. Now it's less than 40%. Everything else is kind of advisory and other specialty services. If you go back over the growth rate of the company the last 10- years, employment has had zero impact on our growth. It's been basically flat.
Right.
When you go down and even look at the downturns, you look at the financial crisis, you look at COVID, you can go back and look at those models. It's had a really negligible negative impact. A couple things is our model's not built around that, particularly in terms of growth. The second thing is our pricing structure. I think it's another thing that's misunderstood. Because of our positioning in the smaller end of the market, we've always had a high fixed fee or minimum fee basis. We don't have a pure PEPM.
Right.
We're not as cyclical.
Right.
If employment goes up and down. That's just the nature of how we started, more in the small market. Then as we went up in the mid-market, we've continued to kinda match that pricing strategy.
Yeah. It only took 20- years to figure it out, right?
Yeah.
Yeah, the new normal is the normal.
Yeah.
It's, uh-.
Yeah.
Employment is not the primary driver.
That's right.
for Paychex. I know that's the perception.
Yeah. It's just like interest rates.
Sure.
Is the same way.
Sure.
Those were two things that I would say 15- years ago, strategically, the board and the executive team, even before I got there, said, "We've gotta start positioning us away from being a cyclical business.
Yeah.
The off-ramp to that has been our advisory business, our HR outsourcing business, as I said, those other ancillary businesses have really what has driven our growth as you look over the past decade.
Okay. No, thanks for going through that, John. We should dig into some of those details that you just mentioned, but I did wanna make sure we ask now, just it was a big topic last year, right? With Paycor and the acquisition, we talked at length.
Yeah.
that. It's been over a year now. Any surprise or change in the thesis as you see it, and what can we expect in year two from Paycor?
Yeah, no really no surprises, really no change in the thesis. I would say that things have progressed the way that we expected them. When you look at, we've exceeded our expense synergies. We've met and exceeded our revenue synergies so far this year. I like it the way the setup is. When you go back, I think it's important to think about a year ago.
It's like last year at this time, we had just completed the acquisition in April, $4 billion bond offering.
Yep.
We launched on Liberation Day.
Right.
That was not very fun. If you go back and think about where we were. You go back last April, May timeframe, we had just completed the acquisition. The January before that's when we announced. We announced on January seventh.
Okay.
Between January seventh and first of April, Liberation Day, April seventh.
We couldn't say anything 'cause we were waiting for all the approvals.
Right.
As you can imagine, every competitor in the world was saying everything they could about, "They're gonna shut down the platform. They're going to cancel broker contracts. They're gonna" All the Parade of Horribles. You can imagine what was going on in the Paycor sales ecosystem during that period of time. Lo and behold, April, we get it. We said strategically, one of the things that we wanted to do is we wanted to integrate fully our enterprise business with theirs day one.
We could have strung it out, multi-year integration plan. We said we wanna do it once 'cause we saw the opportunity there. In the April and right about this time in May, right when we were meeting, I think right after I left this meeting, we announced the new integration, and we took Paychex's enterprise business and reverse engineered into the Paycor brand, changed every territory, sales management, sales leadership, sales compensation. We redid the broker program with the Partner Plus program, reintroduced that to really attract the and address the needs that we were hearing from the broker community. We did it all the way. As you can imagine, that was disruptive, right? What we told everyone was we said, "This is the plan." I think everyone looked at the plan and said, "Boy, the back half of that plan looks pretty daunting.
Yep.
In terms of expectations, in terms of organic growth acceleration, and bookings acceleration. Now we fast-forward, exactly as you said, third quarter. Guess what? Bookings, back to where we were pre-acquisition. We had the best quarter-over-quarter bookings improvement in my 13- years at Paychex, the third quarter.
When you looked at each quarter, we kept getting better and better. We're now back. Brokers represent 50% of the Paycor bookings, which is where they were before the acquisition. We're back to bookings at the same level.
Right.
We just announced yesterday HUB International has been added to the portfolio, another great firm adding to our portfolio. Not only are they gonna be representing the HCM platform, they're going to represent the full HR outsourcing advisory platform as well. I look at it from where we are right now. We are continuing quarter after quarter, building momentum, delivering on the plan we said we were going to do. Everything's, all the disruption is done. I sit here, you know, today, this May, last May in the middle of a lot of disruption, trying to make the progress, now we don't have disruption in front of us. We've got all that behind us, the messaging set, the broker program's back on track, I feel good about where we are from a staffing perspective and momentum perspective.
Yeah. I remember talking to Bob about it and how quickly you went in and didn't waste time and addressed it. You know, I think sometimes things get dragged out.
Yeah.
Negative consequences. I know you mentioned that you had that vacuum.
Yeah.
where there was disruption, so I think you addressed it quickly. I know it created some uncertainty, but it feels like you're getting the payoff.
Yeah.
Now.
Yeah.
Good. The Paycor integration piece we just talked about, I know you just announced this AI platform. I'd love for you to talk about it here too, if you like. Just from a tech prioritization standpoint, with that effort, I know it's never done, but, you know, with all this focus on AI and modernizing and, you know, maybe the platform is a chance to talk about that now. Where are your priorities today with respect to the tech stack and where you wanna push the tech agenda overall?
Well, look, I think all the pieces are kind of falling into place.
Okay.
You know, certainly one of the areas that we wanted to focus on was extending our TAM upmarket.
Sure.
Paycor was a particularly part of that, what I would say, platform extension that we were looking for. You mentioned AI. AI is an investment we've been making for decades. Quite frankly, I always have to remind everybody, we started using AI internally over a decade ago.
We actually hired the money Moneyballer for the Buffalo Bills.
Yeah.
To create a data science team for us, and we began to use it for internal purposes, and we began to really aggregate all of our data across the enterprise. We started that journey, and in fact, four years ago, when I was coming in as CEO, and I was working through the strategy for the board, we made four key bets that we wanted to make, and the first one was on data and AI. We started building an organization really around, and these are the early predecessors, but building the organization. We talked a lot about, on the calls, how we were using AI internally, making better decisions, making pricing decisions, doing those type of things. You go back and look at it in the product. In 2022. We won the best use of AI in HCM at HR Tech.
Right.
For our Retention Insights. Who was talking about AI in 2022? I mean, who was even talking about it? We were already beginning to say, we sat on a very large, sophisticated, and proprietary set of information about small, medium-sized businesses. We can begin to look at how our clients' employees are interacting with our systems and predict whether or not they're likely to leave their job. We have compensation data. I can tell you how much should a chef be making in Rochester, New York, and what's the wage increase going on in that particular job class in Rochester, in Upstate. We pay one in 11 people. You augment that with external data, which we've done, and you've really got a great tool on your hands.
The fact of the matter is, that investment has been going on, and now you have this acceleration, the capabilities of technology. You mentioned it today, we announced the introduction of the WISE AI platform. Just to give you an idea what WISE is going to be, it stands for Workforce Intelligence Strengthened by Expertise. You know, marketing had to have their say in a very clever in an acronym.
Very clever.
Had to come up with that. Really what we've done is, we now have taken both all of our data across all of the companies and all of the business units, and all the platforms, and all the acquisitions. Mm-hmm. We've aggregated all of that.
We now have a patent pending for the use of AI in using both structured and unstructured HR data to be able to customize actionable steps, and then actually inform agents to take those steps on all issues related to HR compliance in our ecosystem. We've been using it with our roughly 900 HR individuals to actually help them advise our clients, and we're now in the process of integrating that across all three of our built-for-purpose platforms, SurePayroll, in the micro kind of do it yourself end, right, Paychex Flex in the mid-market, and now Enterprise for Paycor. The way to think about it, Tien-Tsin Huang, is this. Yeah. We have the best operating system, I think, in the industry. That's how you get 42% margins. We have a great back office operating system.
Every one of the acquisitions we do, including Paycor, which we integrated in three months, we strip all of the back office portions out of their stack, and we put it on our operating stack. We've always had the best operating stack. When you think about it, because we were a service company, we invested a lot of money in back office. What was interesting is we've bought technology companies, they tend to make all their investment in the front end and the bells and whistles and future, not in the back office. That's a natural synergy. Now we have one of the industry-leading best operators operating infrastructures that all of our platforms sat on. We've now coupled that with the next layer, which is the WISE AI layer.
Now we're going to start the process of fully integrating and making all of these agents available to all of our customers, regardless of platform. What I'm most excited about, for each of our platforms, we're going to embed our experts into it. What do I mean by that? That now means you start with a kind of a chat type of interface. You're asking a question. You know, "Look, I'm having a problem with this employee named John. He's kind of a hothead, caused a lot of problem in the office. I want to terminate him, and we're in California. Can I do that?" We're gonna come back, and we're gonna look at the parameters of that, and we're gonna say, "Yeah, this is what you need to do. By the way, let me give you the warning letter, okay?
We're gonna ask you a few questions about John. Well, it looks like he could be a little bit older than the normal guy. Well, that could be a problem here. We maybe want to watch that. At the end of that step, we're going to offer for you to have a free consultation with one of our employment lawyers or one of our HR generalists to talk you through this specific case and actually give you some talking points about how you can approach John and handle that conversation. That's the human side of it. That's what we do for our clients every day. Right? Most of our clients, again, don't have an HR person sitting in their office. They don't have an HR department. In essence, we become that HR pro.
We're holding their hand when they're walking into a hearing. What's amazing around it is because we've taken all the interactions we have with clients and put it into this proprietary and patent-pending infrastructure, we now have case information that can get very specific. What do I mean by specific? I can actually tell you by mediator in the state of California, if you have an unemployment claim, how much that mediator generally settles for and how much another one settles for. Now you're getting very specific about going in and planning a strategy for an unemployment claim in the state of California, and I can now give you specific based upon knowledge that only we would have, because none of the mediation stuff is in public domain.
It's only from our experience having worked with clients or in our PEO, because actually we've been part of that case, that we actually know what the result is. Now we can open it up to our clients. As I said, we're using that to make our HR specialist more proactive. You know, if you thought about the job before, what you would do is we'd set up an appointment, we'd do our quarterly or monthly call, depending upon your needs, I'd go and gather a bunch of data, I'd look at Retention Insights, I'd look at the compensation report, I'd sit down with you and say, "Hey, here's some things that I'm seeing, and here's what I'm talking to other clients about." Right. I'm being proactive to do that.
We're actually having the agents able to watch this and actually proactively tell you what you need to do in real time, and our specialists are seeing that at the same time. I'm really excited about where we are. The foundation set, I think we've got all the pieces of the puzzle, both in terms of the built-for-purpose platforms for each of the segments of the market that we wanna go after. I think we've got the best operating layer. I think now with our large proprietary data set and with the capabilities that we're doing with Agentic AIs, I think we're well set. Oh, I forgot. Sierra just announced yesterday, Yeah, that they were our partner. We've been working on this for two years. Right. We actually have a voice payroll agent.
Today you can call. It's not my voice. I want it to be my voice, but people said, no, I couldn't do that.
You got a good voice.
Yeah, exactly. You can go and you can actually have a conversation, and you can provide payroll data, you can add employees, and our voice bot will do it. In a couple weeks, one of our partners will be announcing that they were our partner on our email agentic bot, which is in production right now, which is taking email data and self-populating that into our system. Our specialists are doing a final kind of quality check, and then we're releasing the payroll.
Again, the efficiencies we're gaining, the opportunity for us to move more of our service transactional support into more advisory, and that's really what I'm leaning into, is what's gonna differentiate us is our ability to proactively advise clients, leverage our proprietary data and our proprietary system. To be able to help them be in front of everything instead of always reacting to it. That's what a small business owner's always doing. They're reacting to a problem.
Sure.
They don't have anyone that can proactively take steps, and I just think that's what AI is gonna bring for us. I think it gives us a competitive advantage over pure tech players. Again, for our customer segment, what they want is they want an advisor. They want someone they trust that's going to hold their hand, and not only give them compliant steps and information about what they need to do, but actually help me execute the steps that I need to do.
Yeah. I know there's a lot of this, everyone saying run, run towards AI, you know, sort of playing back what you said, you've been taking your data, leveraging AI for a long time. I know it, we've talked about RPA.
Machine learning with Paychex.
Yeah.
Over the years. You have a privileged, you know, position from a data standpoint. If I'm hearing you correctly on WISE, you can now consume a lot of that data regardless of your categorization, take the data that you're learning, and you'll be able to give the advice on how to address it, whether it be at the estate level side issue or.
Local.
A labor issue or municipal issue, whatever it is. Am I saying that correctly?
Yeah, that's exactly right.
That's you're taking that data and you can consume that.
Right.
Regardless of the category.
Regardless of the category and regardless of our business unit, regardless of our market unit. If you're interfacing with a prospect or interfacing with a client, we're capturing all of that data from all of those systems and all those transactions as well and dumping that into WISE. We're constantly refining our data set day in and day out.
One follow-up question to that, just 'cause it's new, and forgive me if I'm just off the cuff asking.
No, that's fine.
Thinking about consuming that and pricing that, Should we expect there to be a lot of products that get spun off of this that, you know, again, regardless of what you look like as a customer, that you'll be able to consume this ad hoc almost as in a modular way? Is that the thinking around where this is going, or is it more of a Holistic offering? I'm a part of Paychex, this is available to me.
Look, I think what we wanna do is we wanna create a ecosystem. We want to be the definitive source for HR compliance and human capital management AI-driven answers.
Yeah.
Right? To deal with anything.
Yeah, everything I said.
With the employer-employee relationship. Today, you gotta be in our ecosystem to do that, and if you looked at it today, that's really built for our specialist or our HR generalist or our legal team to provide coaching and advice to you and produce documents for you.
What is fundamentally changing with the announcement today is we're gonna embed that in the platform.
Got it.
You're gonna be able to start to be able to do that. Now, is that something we may wanna share with the world on a per drink or in another basis? Stay tuned.
Okay.
I mean, that's one of the things we'll look at. For me, it's really about making sure that clients know, look, we're what we're trying to do is drive more value to our clients every year. Those are all, always been the investments we're doing. That's what allows us to have the price, you know, uplift that we typically have. We've continually done that to retain clients because we wanna do something that no one else can do. They can't go somewhere else and get this, right? We've continued to try to expose our clients to our advisory services.
That's our fastest growing business, growing faster than our HCM business. We continue to view that the market is moving towards, "I not only want the technology, I want the combination of technology and human support to be able to do this." I think as you look up market, look, today, most of our clients don't have HR departments. I have a point of view that when you look at the scale of AI and what you need, you need large data to make AI work. If there's one thing I've learned, our partners would tell you, and again, I think this is an issue, AI benefits large incumbents, period. People who have large data and expertise are going to dominate this world because it's unlike the dot-com and the internet where there could be a level playing field.
Sure, Amazon and eBay and Walmart could have their website. Guess what? Joe's Shoe Store could go to web.com at the time, if I remember web.com.
Yep.
Go to that. You could go and do that. You could kind of level the playing field. At least I could have an e-commerce site, right? I'm telling you can't build an AI agent if you don't have data and you don't have expertise. You need large amounts of it. If you're gonna do what we're doing at the accuracy rate that's expected, I mean, we're the largest 401(k) record keeper in the U.S., have more plans than anybody else. We're pay one in 11 , we're the 30th largest insurance agency. The things that we deliver are absolutely critical to people. You can't have mistakes. I mean, a 1% mistake in payroll at Paychex equates to $14 billion of missed payrolls.
Who are the 14 billion people that we don't wanna get paid in the U.S. next Friday? I don't think that's, I don't, I again, I keep looking at we're a records system, we're a compliance system, and we deal with state and local governments where compliance is not automated, and I can tell stories on that. I'm pretty excited about where we're positioned, and where we are, you know, going into this next AI era of our industry.
Yeah, no, that's the moat. No errors and gotta be fully compliant. That's right. This sounds easy, but I get that it's not. Okay. No, thanks for going through that. It's fun. Let's, time goes by quickly. Less than 10- minutes left. Let's hit a few important subjects. Let's do PEO.
Okay.
PEO, we had Maria earlier, we talked about it.
Yeah.
Just to be candid with you, Paychex has been outgrowing the market, right? I think if we stack up Paychex versus the peers, you are the industry leader in terms of growth and WSEs, et cetera. What are you doing differently, and is this premium growth sustainable? Are you benchmarking it this way? What would you share?
Yeah. First of all, I'd say I'm very proud of our PEO team and the work they're doing.
That's number one.
in executing. Just because, you know, to double-digit revenue, double-digit bookings, record retention go down, I mean, I'm used to like if we got five key KPIs, I mean, four out of five is pretty good. You hit five out of five, you're doing pretty damn good, you know?
Sure.
I'm very happy with what's going on there. I think it's interesting when you think about the PEO. This is really driven by, we're a very purpose-driven organization. We're very thoughtful. We're very planful. We think about things a long time. As you know, we're known as somewhat conservative, right? You go back, Paychex was not a PEO company.
Right.
A decade ago, 15- years ago. We had a PEO. Our bigger business was our ASO business, PEO was more something defensively that we had in the business. One of our clients would be approached by a PEO, we'd go, "We got one of those, too. You know, you can stick with us." Almost all of our PEO business was sold inside the base, more of a defensive move.
Right.
Because a client was looking for it. When we decided that we wanted to gravitate away from the story we've said of kind of being a payroll provider, back then 70% of our revenue was payroll, today it's less than 40%, HR was a key part of that.
Sure.
We certainly saw that not only our ASO business, but the PEO business had an opportunity. You go back and look at that 10- years ago, I joined the company 13- years ago, we started focusing on our organic PEO business. We invested in it.
We began to get it growing. We leveraged our balance sheet.
Wisely.
Some tuck-in acquisitions. We proved that we could do that. We said at that time, we were probably in three states. I mean, technically, when you looked at the concentration, we were at scale in three states in the country. We knew we wanted to go national. It took two things. It took expertise. We knew we needed scale. You just mentioned it. At that time, we made the largest acquisition in the company's history, with the largest privately held PEO in the country at the time, Oasis, with a $1.1 billion. We did that in 2018.
We integrated that, then we executed the plan. From that, we now are a national leader. As you said, 50% of our business is coming from within our base. 50% is coming from outside our base where we're introducing new clients to the PEO outsourcing story. It's just absolutely a fabulous story. In a decade's time with a purpose-built strategy, right, we went from a very small player in an industry to be an industry-leading player. I like where we're positioned in terms of our value proposition and how the team's executing and our staffing, and how our value proposition stacks up. I think that's a good example that I think is probably a parallel that are my expectations and what we're trying to repeat in the enterprise with the Paycor.
Gotcha.
Which is we were investing in our business in the enterprise side. We knew we needed additional capabilities. We knew we needed a brand that would play in that market. Now that we've done that, we've integrated it, now it's about execution and continuing to accelerate the growth there as well.
Okay. Yeah, similar playbook. I know sourced a little bit differently.
Yeah. Right.
in terms of time. I know you're a big architect, of course, of the Oasis piece, but yeah, so the Paycor one is the next one to watch.
Okay, good. And we're running out of time, so make sure I hit a few of the fun ones. Before I talk about the outlook, maybe just the product roadmap then, John. It's just we talked about WISE. You know, product velocity is a big subject in broader fintech-.
Yeah.
And processing and payments. In a minute or two, what's your philosophy on product velocity and what should we be watching for, and what might move the needle?
Yeah. No question we already talked about, won't talk about again.
Yeah.
A lot of our product right now is the integration of WISE into the AI. You'll also see this year that we will offer across all three platforms an AI Agentic user experience for each of those platforms for people who wanna have that going through there. You're gonna continue to see us, you mentioned, integrate partners. One of the big things that we've been focused on is enabling our systems to allow our clients' employees to be customers of ours. We've created both a customer marketplace that's embedded. We're using AI to identify customers that would be needing financial products or other products and services that we don't sell.
through partners. We're increasing that partner network. We're also doing it on the employee side. We call that program Perks. Give you an idea, we've continued to add to that. We just surpassed 400,000 paying customers within our employee base. That's about in 18- months of adding things. I think you're gonna continue to see us look for partners that augment adjacencies, integrate them into our marketplaces, both client marketplaces, as well as our employee marketplaces, and then we're going to allow them to leverage our AI and our intelligence to be able to market that at the type of need to both our clients and our employees. I think right now that's gonna fill our roadmap for the.
Sure.
For the rest of the year.
No, going to more of a consumer employee model I thought always made sense given how many touch points you have. If we mix all this together and say, "Hey, what does it all mean for pricing?" I know we're accustomed to thinking about Paychex having pricing power. Has your thinking around pricing changed given all the work you've put in and some of the things that are coming out now?
No. I think that our viewpoint is, look, we don't take it for granted that we're able each year to go to our customers and charge them more for our products and services and our solutions and also improve retention. The reason why we can do that is all the things I just said. We're constantly investing in the platform and our solutions so that we're showing the value. With small businesses, if you show the value, they're willing to pay. Again, in the small scheme of things, when we're talking about the increases we're talking about, it's probably a cup of coffee, you know, or two a month for one of our clients in terms of that.
If we're providing that value, we feel good with the investments we're making, we can continue to do that. I do think there are portions of the Agentic AI model, there'll be things that we're doing that will allow us to provide some outcome-based pricing that could be a potential. Not doing any of that yet.
Okay.
Certainly something that we're talking about. When I look at it, I think we think we're adding additional value. Our customers are seeing that value, and I think that we're gonna be able to continue to really pass that value price on to our customers as we go forward.
Okay. Good. Bringing it back to the numbers, if you don't mind, John.
Yeah.
Just thinking about the outlook and the models, I know you didn't give preliminary guidance for fiscal 2027. You'll be doing that pretty soon. You did express comfort with where consensus was, which we had interpreted it, okay, that's fine, no surprise, but it's running a little bit below what we think of as mid-cycle growth guidance for Paychex. Is that a fair characterization? What kind of macro factors maybe could be attributing to that? What might drive some acceleration or something to do a little bit better? There's so many things happening at Paychex. I'm really curious that what, you know, what could move the dial in the short term?
Yeah. Okay. Well, today I'm not going to give guidance, and I'm gonna give in June.
No, I didn't expect you to.
I think what we said, and which I think is true.
Yeah.
Well, we told everybody at the start of last fiscal year that we were coming out of an integration and a transition, and that there were things that we need to accomplish. We need to see progress, and that what you would see is you would see, organic growth building quarter- by- quarter, bookings growing quarter- by- quarter. I think what we said on the last call was that when you look at the second half of the year growth rate, that feels to us like a good number.
Yeah.
for us to think about that we can go into next year. I think at the time that we made those comments, there was a lot of macro uncertainty in terms of what's going on. I think there's still, you know, we're not seeing it show up in the numbers. That'll be a question that Bob and I'm sure, will be talking about.
Of course.
The other thing is, I think that we're still working through our, as we talked about, our product roadmap and launches that we'll be announcing over the course of the next, you know, 60- 90- days, and those things will go into that equation as well. Look, I'm, I'm pleased with the progress we're making quarter after quarter in a very challenging environment, and doing that, and I'm very proud of the team 'cause we did it while Look, it is not easy to integrate a $4 billion acquisition in the middle of all the chaos that's been going on in the last year in the world. There's a lot of things to distract your employees from doing what they gotta do each day to get that job done.
I'm so proud of the team for what they've done and the fact that we ended the third quarter, like I said, with really the one of the best booking increases I've seen in my 13- years at Paychex, and really see the momentum going into the back half of this fiscal year, and it gives us confidence of going into 2027.
Yeah. No, I think it, you guys, it's been playing out a lot like you have said. I don't take for granted, right, the execution and how hard it is against, you know, the integration. Does feel like a lot of product momentum. That's why I asked the question. I'm excited to see how it all translates. Maybe just to close it out, John. Thanks for the time. Just thinking about, right, the dividend is what it is. You have upsized though the buyback authorization. That's created some question, right? Should we infer from that that there's a bias towards buying back stock versus maybe doing the next acquisition? I know you're a year away from Paycor and hard work to do there. How should we interpret the buyback being upped?
Yeah. I.
authorization?
I would just interpret it as being opportunistic.
Okay.
I think the same way we look at M&A, right? I think, you know, we don't have a commitment every year we're going to do M&A. You go back and look over a horizon of 10- years, what you'll find is that that adds to our growth story, and we expect that to happen over the next decade as well. That's opportunistic. You look at the things, M&A, dividends, all the things that we wanna do, buybacks, to be opportunistic. Your point, you know, number 1 is we did announce a rather generous 10%, 10.2%.