Paychex, Inc. ($PAYX)

Running a little bit behind, but let's get move it 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 Paychex has always been one of the early names I've covered and watched it over a couple of decades here. So always means a lot to me to have Paychex here to support the conference. So I got the whole team here, John Gibson, President and CEO, is here. Thank you for doing this fireside chat. I thought we'd kick it off.

I gathered a lot of questions. John, just to make this conversation as efficient as possible. I know you guys just announced an AI platform. We do want to talk about that. But just to get it out of the way to talk about the macro, if you don't mind. Sitting at Paychex, you see a lot of great data around SMEs and, of course, employment, what do you? Where are you optimistic? Where is there potentially some for caution? Thank you for being here.

It's my pleasure. Thanks for having me. It's always great to see you for sure. So it's crazy because I feel like a broken record. For the last few years, I think we've all read about some sort of employment or some sort of economic challenge, particularly given the uncertainty that we've had. You go back to 1 year ago, this month, month prior, a Liberation Day and all the advents of the tariffs, and then you look at today and the global uncertainty that we have, what I would tell you is what we continue to see is a very resilient small business market. And in fact, I would say, even so far in the last 3 months, really more strength in both sides, both in our 50 plus and our under 50. So I've been very, very pleased. We're in a very much a low-higher, 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 [indiscernible] the labor. Again, we're in the gray and blue collar segment. So as you think about plumbers electricians, and now you think about building out all this AI infrastructure, a lot of building contractors, a lot of electricians needed, and there's a shortage out there. So right now, what I would say, what 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. So John, you mentioned [indiscernible] for the benefit of everyone else, so 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 and -- the cost of the question is obvious, right, how cyclical is the portfolio? And then also, where might you be exposed to some of these ships that are happening in labor?

Yes. So first of all, 95% of our clients have less than 100 employees. So 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 there are multiple hats. When you look in the job classification codes, in our client base, now we pay 1 in 11 private sector workers. 75% of those are blue and gray colors. Again, think plumbers, barbershops, [indiscernible], landscapers, those type of things. What we continue to see in that market is a challenge finding qualified workers. So we've really not seen This overhiring situation that we saw happening in the upper end of the market, and we've not seen the layoffs as well. So when we look at it, and we've done an analysis on our jobs, we think we're pretty well insulated from it. And in fact, what I would say, if we start training more plumbers and more electricians, our clients would be hiring more. I was just talking to one of our contracting clients here [indiscernible] if I could hire 100 people, he says, "I have more than enough work that I could bid on." But 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 simpler 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 paycheck. This underemployment, difficult to find workers, has been a decade-long problem. So if you go to the NIFB survey, they've done for a you look at the top 5 issues facing small businesses. And you look to small segment under 100, you're going to find and qualified labor is a key part of that. So we rely a decade ago had to think about our model differently. So as you know, we've done a lot more advisory business, a lot more adding additional value. You go back 13 years ago, probably 60% to 70% of our revenue was payroll. Now it's less than 40%. Everything else is kind of advisory and other specialty services. So if you go back over the growth rate of the company the last 10 years, employment has had 0 impact on our growth. It's been basically flat. And so when you go down and even look at the downturns, you look at the financial crisis, you look at [indiscernible], you can go back and look at those models, it's had a really negligible negative impact. A couple of things, our model is not built around that, particularly in terms of growth. The second thing is our pricing structure. I think it's nothing [indiscernible] 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 [indiscernible], so we're not as cyclical if employment goes up and down. And that's just the nature of how we started more in the small market. And then as we went up in the mid-market, we've continued to kind of match that pricing strategy.

Yes. It only took 20 years to figure it out, right? But yes, the new normal is the normal employment is not the primary driver at Paychex. I know that's the perception.

It's just like interest rates, is the same way. Those are 2 things that I would say, 15 years ago, strategically, the Board and the executive team even before I got there, said, "We've got to start positioning us away from being a cyclical business" and really the offering to that has been our advisory business, our HR outsourcing business. And 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. So we should dig into some of those details that you just mentioned, but I did want to make sure we ask now just -- it was a big topic last year, right, with Paycor and the acquisition. We talked at length about that. So 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 2 from Paycor?

Yes. No, really no surprises, really no change in the thesis. I would say that things have progressed the way that we expected. And when you look at, we've exceeded our expense synergies. We've met and exceeded our revenue synergies so far this year. And I like the way this setup is. And when you go back, I think it's important to -- think a year ago, it's like last year, at this time, we had just completed the acquisition in April, a $4 billion bond offering. We launched on Liberation Day. That was not very fun. But if you go back and think about where we were, so you go back last April, May time frame, we had just done the -- completed the acquisition. The January before that's when we announced, we announced on January 7. So between January 7, and 1st of April, Liberation Day April 7, if I remember right, we couldn't say anything because we were waiting for all the approvals. As you can imagine, every competitor in the world were saying everything they could about, "They're going to shut down the platform. They going to cancel broker contracts. They're going to," all the crate horribles. And so you can imagine what was going on in the Paycor sales ecosystem during that period of time. So then on behold April, we did it. And we said strategically, one of the things that we wanted to do is we want to integrate fully our enterprise business with theirs day 1. We could have strong it out a multiyear integration plan. We said we want to do it once because we sold the opportunity there. So 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 [indiscernible] business and reverse engineered into the Paycor brand, changed every territory sales management, sales leadership, sales compensation, we redid the broker program with the Partners Plus program. We introduced that to really attract and address the needs that we were hearing from the broker community. So we did it all the way. So as you can imagine, that was disruptive, right? And so what we told everyone was we said, "This is the plan," and I think everyone looked at the plan and said, "Boy, the back half of that plan looks really daunting in terms of expectations, in terms of organic growth acceleration and bookings acceleration." So now we fast forward, exactly what [indiscernible], 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. So when you look at each quarter, we're getting better and better. We're now back where brokers represent 50% of the Paycor bookings, which is where they were before the acquisition. We're back to bookings at the same level. We just announced yesterday, Hub International has been added to the portfolio, another great firm adding to our portfolio, not only are they going to be representing the HCM platform, they're going to represent the full HR outsourcing advisory platform as well. So 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 is -- all the disruption is done. So I sit here today, this May, last May, in the middle of a lot of disruption, trying to make progress, and now we don't have disruption in front of us. We've got all that behind us, the messaging's set, the broker programs back on track, and I feel good about where we are from a staffing perspective and a momentum perspective.

Yes. I remember talking to Bob about it and how quickly you went in and didn't waste time and addressed it, and I think sometimes things get dragged out, and it has negative consequences. I know you mentioned that you had that vacuum 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 now.

Yes.

Good. So 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. But just from a tech prioritization standpoint, with that effort, I know it's never done, but with all this focus on AI and modernizing and maybe the platform has the chance to talk about that now, but where are your priorities today with respect to the tech stack and where you want to push the tech agenda overall?

Well, so look, I think all the pieces are kind of falling into place. Certainly, one of the areas that we wanted to focus on was extending our TAM up market, and so Paycor was a particular 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. And quite frankly, I always have to remind everybody we started using AI internally over a decade ago. We actually hired the money baller for, the [ Buffalo Bills ], to create 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. And so we started that journey. And in fact, 4 years ago, when I was coming in as CEO and I was working through the strategy for the Board, we made 4 key bets that we wanted to make. And the first one was on data and AI. So we started building an organization really around -- and the other early predecessors, but building the organization, and 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, HR tech for our retention insights. Now who was talking about AI in 2022? I mean who was even talking about? But we're already beginning to say we set on a very large, sophisticated and proprietary set of information all small/medium sized businesses. We can begin to look out how our clients, employees are interacting with our systems and protect whether or not they're likely to leave their job. We have compensation data, so I can tell you how much of the chef making in Rochester, New York and what's the wage increase going on in that particular job class in Rochester [indiscernible]. We pay 1, 11 people. You augment that with external data, which we've done, and you've really got a great [indiscernible] in your hand. So the fact of matter is that investment has been going on, and now you have this acceleration in the capabilities of technology. So you mentioned it today, we announced the introduction of the Wise AI platform. And just to give you an idea what Wise is going to be, it stands for Workforce Intelligence Supported by Expertise. So your marketing to have their say in an [indiscernible], so I had to come up with that. But 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. We've aggregated all of that. We've created a -- 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 roughly 900 HR individuals, to actually help them advise our clients. And we're now in the process of integrating that across all 3 of our built-for-purpose platforms, sure payroll, in the micro kind of do-it-yourself and Paychex Flex in the mid-market and now Enterprise for Paycor. So the way you think about it [indiscernible] 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 paper, which we integrated in 3 months, we stripped all of the back office portions out of their stack, and we put it on our operating stack. So we've also had the best operating stack. And 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 other investments in front end and the [indiscernible] and uses in the future. not in the back office. So that's a natural synergy. So now we have one of the industry leading, best operators operating infrastructures that all of our platforms set on. We've now coupled that with the next layer, which is the Wise AI layer. And 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. And then 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? So that now means you start with the kind of a chat type of interface. You're asking a question, "Look, I'm having a problem with this employee name John. He's kind of a hot head, caused a lot of problem in the office. I want to terminate him. We're in California, can I do that?" We're going to come back and we're going to look at the parameters of that. And we're going to say, "Yes, this is what you need to do. And by the way, let me give you the warning letter," okay? Then we're going to ask you a few questions about John, "It looks like it could be a little bit older than the normal guy. That could be a problem here. You may be 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 journalists, to talk you through the specific case and actually give you some talking points about how you can approach John and handle that out of it. That's the human side of it. And 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. So in essence, we become that HR pro. We're holding their hand when they're walking into a hearing. And 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? So 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 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 PO, because actually, we've been part of that case, that we actually know what the result is. And so now we can open it up to our clients. And as I said, we're using that to make our HR specialists more proactive. If you thought about the job before, what you would do is you'd -- we'd set up an appointment, and we do our quarterly or monthly call, depending upon your needs. And I go and gather a bunch of data, and I look at retention insights, and I'd look at the compensation report, and I'd sit down with you and say, "Hey, here's some things and I'm saying, and here's what I'm talking to other clients about," right? And I'm being proactive to do that. Now we're actually having 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. So 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 want to go after. I think we've got the best operating layer. And I think now with our proprietary data set in a with the capabilities that we're doing with the genic AI, I think we're well -- I forgot. Sierra just announced yesterday that they were our partner. We've been working on this for 2 years. We actually have a voice payroll agent. So today, you can call. It's not my voice. I wanted to be my voice, but people said, no, I couldn't do that.

[indiscernible]

Yes, exactly. But you can go and you can actually have a conversation, and you can provide payroll data. You can add employees and, our voice will do it. In a couple of weeks, one of our partners will be announcing that they were our partner on our e-mail agentic bot, which is in production right now, which is taking e-mail data and self populating that into our system. And then our specialists are doing a final kind of quality check and then we're releasing the payroll. So 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 going to 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 is always doing. They're reacting to a problem because they don't have anyone that can proactively take steps. And I just think that's what AI is going to bring for us. And look, I think it gives us a competitive advantage of our pure tech players because again, for our customer segment, what they want, is they want an adviser. 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.

Yes. I know there's a lot of -- everyone's saying run, run, run towards AI, but sort of playing back what you said, you've been taking your data, leveraging AI for a long time. I know we've talked about RPA and team learning with Paychex. Over the years, you have a privileged 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 state level issue or a labor issue or manipulation -- whatever is that. Am I understanding that correctly?

Yes, that's right.

Taking that data and you can consume that 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 facing with a client, we're capturing all of that data from all of those systems and all these transactions as well and dumping that into Wise. So we're constantly refining our data set in day and day out.

So one follow-up question on that just because it's new and forgive me if I'm just the [indiscernible] asking, but just...

That's fine.

Thinking about consuming that and pricing that. So should we expect there to be a lot -- a lot of products that get spun off of this that, again, regardless of what you look like as a customer that you'll be able to consume this ad hoc almost 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"?

Yes. Look, I think what we want to do is we want to create an ecosystem, and we want to be the definitive source for HR compliance and human capital management, I driven answers, right, to deal with anything with the employer-employee relationship. Today, you've got to be in our ecosystem to do that. And if you looked at it today, that's really built for our specialist or our HR generalists 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 going to embed that in the platform. And you're going to be able to start to be able to do that. Now is that something we may want to share with the world on a per drink or in another basis? Stay tuned. I mean that's one of the things we'll look at. But for me, it's really about making sure that clients know what we're trying to do is drive more value to our clients every year. Those are always been the investments we're doing. That's what allows us to have the price uplift that we typically have. We've continually done that to retain clients because we want to 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. And we continue to view that the market is moving towards, not only want the technology, I want the combination of technology and human support to be able to do this. And I think as you look up market look -- today, most companies 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 and [indiscernible]. If one thing I've learned and our partners would tell you, and again, I think this is an issue: AI benefits large incumbents. 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 full, sure, Amazon and eBay and Walmart could have their website. But guess what, [indiscernible] put -- go to Web.com at the time, if I remember Web.com. You could go and do that, and you could kind of level the playing [indiscernible] I could have an e-commerce site, right? I'm telling you, you can't build an AI agent if you don't have data, and you don't have expertise, and you need to work the amounts of it. And if you're going to do what we're doing at the accuracy rate is expected, I mean we're in the largest 401(k) record keeper in the United States, add more points than anybody else, were pay [ 111 ], we're the 30th largest insurance agency. The things that we deliver are absolutely critical to people. You can't have mistakes. I mean 1% mistake mistaken in payroll at Paychex equates to $14 billion of missed payrolls. Now who are the 14 billion people that we don't want to get paid in the U.S. next Friday. I don't think that's -- I don't -- again, I keep looking at. We're a record system. We're a compliance system, and we deal with state and local governments where compliance is not automated. I can tell stories on that. But I'm pretty excited about where we're positioned and where we are going into this next AI era of [indiscernible].

Yes. No, that's the moat. No errors and got to be fully compliant. And it sounds easy, but I get that it's not. No, thanks for going to that is fun. So let's -- time goes back quickly, less than 10 minutes left. Let's hit a few important subjects. Let's do PEO. So PEO, had Maria earlier, we talked about it. 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 in WSEs, et cetera. What are you doing differently? And is this premium growth sustainable? Are you benchmarking it this way? What do you share?

Yes. So first of all, I'm very proud of our PEO and the work they're doing in executing just because, to double-digit revenue, double-digit bookings, record retention [indiscernible], I mean I'm used to, like we've got 5 key KPIs, I mean 4 out of 5 is pretty good. You have 5 out 5, you're doing pretty damn good. So I'm very happy with what's going on there. And 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 plan-full. We think about things a long time. As you know, we're known as somewhat conservative, right? And you go back, Paychex was an PEO company a decade ago, 15 years ago. We had a PEO. Our bigger business was our ASO business, and PEO was more something defensively that we had in the business. One of our clients would be approached by a PEO. And we go, we got 1 of those 2, you can stick with us. And almost all of our PEO business was sold inside the base, more of a defensive move or because a client was looking for it. And so when we decided that we wanted to gravitate away from the story we've set to kind of being a payroll provider. Back then 70% of our revenue was payroll. Today is less than 40%. HR was a key part of that. And we certainly saw that not only our ASO business, but the PEO business had an opportunity. So you go back and look at that 10 years ago, I joined the company 13 years ago, we start focusing on our organic PEO business. We invested in it. We began to get it growing. We then leveraged our balance sheet to make some tuck-in acquisitions. We proved that we could do that. And then we said -- and at that time, we were probably in 3 states. I mean technically, when you look at the concentration, we were at scale in 3 states in the country. And we knew we wanted to go national, and it took 2 things. It took the expertise. So we knew we needed scale. So 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, a little $1.1 billion. We did that in 2018. We integrated that, and we executed the plan. And 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 best, where we're introducing new clients to the PEO outsourcing story. It's just absolutely a fabulous, fabulous story. So 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 is executing and our staffing and then how our value proposition stacks up. But I think that's a good example that I think is probably a parallel or my expectations and what we're trying to repeat in the enterprise with the Paycor, which is we're 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. And so now that we've done that, we've integrated it, and now it's about execution and continuing to accelerate the growth there as well.

Okay. Yes. So similar playbook, sourced a little bit differently in terms of time. I know you're big architect of course, of the Oasis piece. But yes, so the Paycor one 1 is the is the next 1 to watch. Okay, good. So we're running out time. So make sure I hit a few of the fun ones. Before I talk about the outlook, maybe just a product growth at then, John, just we talked about Wise, product velocity would be subject in broader fintech and processing and payments. And so in a minute or 2, what's your philosophy on product velocity? And what should we be watching for? And what might move the needle?

Yes. So no question we already talked about. We want to talk about it again. A lot of our product provide right now is the integration of Wise into the AI. You'll also see this year that we will offer across all 3 platforms and AI a genic user experience. for each of the platforms for people who want to have that going through there. You're going to continue to see us -- you mentioned integrated partners. So one of the big things that we've been focusing on is enabling our systems to allow our clients, employees to be customers of ours. So we've created both a customer marketplace that's embedded. We're using AI to identify customers that would be needing financial product or other products and services that we don't sell to partners. We're increasing that partner network. We're also doing it on the employee side. So we call that program Perks, [indiscernible] 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. So I think you're going to 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. And I think right now, that's going to fill our road map for the rest of the year.

No, more of a consumer employee model. I thought always made sense given how many touch points you have. So if we mix all this together and say, "Hey, what does it all mean for pricing?" And we're accustomed to thinking about Paychex having big power. Has your thinking around pricing changed given all the work you 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. And the reason why we can do that is all the things I just said, we're constantly investing in our solutions so that we're showing the value. And 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 or 2 a month. from one of our clients in terms of that. And 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, but it's certainly something that we're talking about. And so 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'll be able to continue to really pass that value price on to our customers as we go forward.

Okay. Good. So bringing it back to the numbers that you don't mind you. I was just thinking about the outlook and the models, and I know you didn't give preliminary guidance for fiscal '27, you'll be doing it pretty soon. But 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 may be a [indiscernible] little bit better? There's so many things happening at Paychex. I'm really curious what could the [indiscernible] in the short term?

Okay. Well, today, I'm not going to give guidance [indiscernible] So I think what we said and which I think -- what I think is true is, well, we told everybody to start of last fiscal year that this was we were coming out of an integration in the transition and that there are things that we need to accomplish. And we need to see progress in that what you would see, is you would see organic growth building quarter-by-quarter bookings growing quarter-by-quarter. And so 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 for us to think about that we can go into next year. And 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 -- we're not seeing it show up in the numbers. That will be a question that Bob and I, I'm sure will be talking about. And then the other thing is I think that -- we're still working through our -- as we talked about, our product road map and launches that we'll be announcing over the course of the next 60 to 90 days. And those things will go into that equation as well. But look, 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. Because we did it well, look, it is not easy to integrate a $4 billion acquisition in the middle of [indiscernible] been going on in the last year in the world. There's a lot of things to stretch our employees from doing what they got to do each day to get that job done. And so 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 one of the best booking increases I've seen in my 13 years of Paychex and really see the momentum going into the back half of this fiscal year, and it gives us confidence going into '27.

Yes. No, I think that -- look, you guys -- it's been playing out a lot, like you have said. So I don't take for granted, right? The execution and how hard it is against the integration. But it does feel like a lot of product momentum. So that's why I asked the question and excitedly how it all translates. Maybe just to close it out, John, and thanks for the time. Just thinking about, right, dividend is what it is. You have upsized though, the buyback authorization, and 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 you have hard work to do there. But how should we interpret that back being up?

Yes, I would just interpret it as being opportunistic and I think the same way we look at M&A, right? I think we don't have a commitment every year we're going to do M&A. But if you go back and look over a horizon of 10 years, what you'll find is that adds to our growth story, and we expect that to happen over the next decade as well. But that's opportunistic. So you look at the things, M&A, dividends, all the things that we want to do, buybacks, to be opportunistic. To your point, number one is we did announce a rather generous 10%, 10.2%, if you're counting, increased our dividend. And so that gives us almost a little bit over 5% return there. [Audio Gap]