Paychex

“Over the past year, top challenges for employers were macroeconomic pressures including inflation and interest rates, availability of qualified talent, providing affordable benefits, keeping technology current, and ensuring legal and regulatory compliance.”

Annual report 2026A · The company itself

“Our interest earned on funds held for clients may be impacted by changes in government regulations mandating the amount of tax withheld or timing of remittance. We receive interest income from investing client funds collected but not yet remitted to applicable tax or regulatory agencies or to client employees. A change in regulations either decreasing the amount of taxes to be withheld or allowing less time to remit taxes to applicable tax or regulatory agencies could adversely impact our interest income.”

Annual report 2026A · The company itself

“Our debt obligations may expose us to risks affecting the operation of our business, and our failure to address these risks could have a material adverse effect on our results of operations and financial condition. In April 2025, we issued $4.2 billion aggregate principal amount of fixed rate corporate debt (“Corporate Bonds”). We used the net proceeds from this offering to fund our acquisition of Paycor.”

Annual report 2026A · The company itself

“We and our customers are subject to the impacts related to inflationary pressure, economic instability, changes in interest rates, tariffs, potential instability of the banking environment, climate change-based obligations, and other macroeconomic and/or 14 Table of Contents political events.”

Annual report 2026A · The company itself

“Funds held for clients and corporate investments are subject to general market, interest rate, credit, and liquidity risks. These risks may be exacerbated during periods of unusual financial market volatility and inflationary pressure. The interest we earn on funds held for clients and corporate investments may decrease as a result of a decline in funds available to invest or lower interest rates.”

Annual report 2026A · The company itself

“As a result of our investing activities, we are exposed to changes in interest rates that may materially affect our results of operations and financial position. Changes in interest rates will impact the earnings potential of future investments and will cause fluctuations in the fair value of our long-term AFS 34 Table of Contents securities.”

Annual report 2026A · The company itself

“During fiscal 2026, the average interest rate earned on our combined funds held for clients and corporate cash equivalents and investment portfolios was 3.6%, compared to 3.7% for fiscal 2025.”

Annual report 2026A · The company itself

“If interest rates were to increase, or we increase the frequency or amounts borrowed under these credit facilities, we could experience additional interest expense and a corresponding decrease in earnings.”

Annual report 2026A · The company itself

“We invest our funds held for clients in high quality, investment-grade marketable available-for-sale (“AFS”) securities, money markets, and other cash equivalents. We also invest our corporate funds in short- to intermediate-term instruments.”

Annual report 2026A · The company itself

“Organizations face a rapidly evolving employment landscape including an increasing number and complexity of federal, state, and local regulations; the integration of AI into HCM processes; changing workforce dynamics; increasing medical inflation; and challenges attracting and retaining talent.”

Annual report 2026A · The company itself

“The market for our solutions is characterized by rapid technological advancements, changes in customer requirements, frequent new product introductions and enhancements, and changing industry standards. To maintain our growth strategy, we must adapt and respond to technological advances and technological requirements of our customers.”

Annual report 2026A · The company itself

“Table of Contents We may experience software defects, undetected errors, and development delays, which could damage our relationship with customers, decrease our potential profitability and expose us to liability. Our solutions rely on software and computing systems, including generative and agentic AI solutions, that can encounter development delays, complexities with integrating new technologies, and the underlying software may contain undetected errors, bias, viruses, or defects. Defects in our solutions, errors or delays caused by our solutions and generative AI solutions not working as anticipated could result in additional development costs, diversion of technical and other resources from our other development efforts, loss of credibility with current or potential customers, harm to our reputation and exposure to liability.”

Annual report 2026A · The company itself

“Our solutions require the storage and transmission of proprietary and confidential information of our customers and their employees, including personal or identifying information, as well as geolocation and biometric data. Certain solutions are enhanced with the use of AI and machine learning. Our solutions are subject to various complex government laws and regulations on the federal, state, and local levels, including those governing personal privacy, AI and machine learning, as well as ethical considerations.”

Annual report 2026A · The company itself

“Company Strategy Our strategy is to be the digitally driven HR leader by serving as an essential partner to customers through technology and advisory solutions for HR, payroll, employee benefits, and insurance. We believe that successfully executing this strategy will lead to strong, long-term financial performance. We intend to strengthen and extend our position as a leading provider through continued investments in both our innovative technology and HR advisory solutions.”

Annual report 2026A · The company itself

“We believe we are well positioned to capitalize on AI opportunities through our large and growing data sets, predictive analytics and AI models, and continued investments to increase efficiency, enhance the customer experience, support better outcomes and create growth opportunities.”

Annual report 2026A · The company itself

“Key features of our solutions include: • Comprehensive cloud-based HCM platforms optimized to meet customers' HR and payroll needs; • AI-powered capabilities through WISE, our workforce intelligence engine, which leverages our large proprietary datasets to help automate workflows, enhance decision making, and increase productivity across our solutions and operations; • Expertise in HR and payroll backed by approximately 250 compliance experts and over 650 HR business professionals; • Streamlined workforce management that combines technology with flexible, tech-enabled support options; • Modern, mobile, and intuitive user experience with self-service capabilities; and • Scalable and customizable platforms that provide customers the flexibility to add solutions as they grow.”

Annual report 2026A · The company itself

“The insurance costs are impacted by claims experience and are a significant portion of our PEO costs. If we experience a sudden or unexpected increase in claims activity, or our reserves were insufficient for claims activity, our costs could increase.”

Annual report 2026A · The company itself

“We may be adversely impacted by changes in health insurance and workers’ compensation rates and underlying claims trends. Within our PEO business, we maintain health and workers’ compensation insurance covering worksite employees. We establish workers’ compensation insurance reserves to provide for the estimated costs of paying claims up to per occurrence liability limits.”

Annual report 2026A · The company itself

“Insurance solutions: Our licensed insurance agency, Paychex Insurance Agency, Inc., provides insurance through a variety of carriers, allowing employers to expand their employee benefit and corporate offerings at an affordable cost. Insurance offerings include property and casualty coverage such as workers’ compensation, business-owner policies, cybersecurity protection, commercial auto, and health and benefits coverage, including health, dental, vision, and life.”

Annual report 2026A · The company itself

“As part of providing services to customers, we rely on a number of third-party service providers. These third-party service providers include, but are not limited to, banks used to electronically transfer funds from clients to their employees, information technology vendors servicing cloud-based platforms, and other third-party providers supporting customer interactions.”

Annual report 2026A · The company itself

“Overview We are an industry-leading human capital management (“HCM”) company providing comprehensive technology and advisory solutions in human resources (“HR”), payroll processing, employee benefits, and insurance.”

Annual report 2026A · The company itself

“Our service platforms enable our customers to store and process personal data on premises or, increasingly, in a cloud-based environment that we host.”

Annual report 2026A · The company itself

“Pursuing strategic acquisitions. We utilize acquisitions, when appropriate, as a means to expand our portfolio, enter new markets, or increase our scale. We will continue to evaluate potential acquisitions that are aligned with our overall strategy.”

Annual report 2026A · The company itself

“Table of Contents On April 14, 2025, we completed our acquisition of Paycor HCM, Inc. ("Paycor"), a leading provider of HCM, payroll and talent software. This acquisition expanded our presence upmarket, increased cross-sale opportunities, and enhanced our suite of AI-driven HCM solutions.”

Annual report 2026A · The company itself

“We made and may continue to make acquisitions that involve numerous risks and uncertainties. Acquisitions subject us to risks, including increased debt, assumption of unforeseen liabilities, and difficulties in integrating operations. Successful integration involves many challenges, including the difficulty of developing and marketing new solutions and support, our exposure to unforeseen liabilities of acquired companies, and the loss of key employees of an acquired business.”

Annual report 2026A · The company itself

“Our Customers We provide HCM solutions to a diverse customer base operating in a broad range of industries throughout the U.S. and parts of Europe.”

Annual report 2026A · The company itself

“SurePayroll® serves the digitally driven small business self-service market. Paychex Flex® is our proprietary HCM SaaS platform for small and medium-sized businesses. Paycor® is our primary SaaS-based HCM platform for larger businesses with more complex needs.”

Annual report 2026A · The company itself

“We could be subject to reduced revenues, increased costs, liability claims, or harm to our competitive position as a result of cyberattacks, security vulnerabilities or Internet disruptions. We rely upon information technology (“IT”) networks, cloud-based platforms, and systems to process, transmit, and store electronic information, and to support a variety of business processes, some of which are provided by third-party vendors. Cyberattacks and security threats are a risk to our business and reputation.”

Annual report 2026A · The company itself

“Data Security and Privacy Leaks: We collect, use, and retain increasingly large amounts of personal information about our customers, employees of our customers, our employees, and other third parties, including: bank account, credit card, social security numbers, tax return information, health care information, retirement account information, payroll information, system and network passwords, and other sensitive personal and business information. At the same time, the continued occurrence of high-profile cyber and ransomware attacks and data breaches provides evidence of an external environment increasingly hostile to information security. We may be particularly targeted for cyberattack because of the amount and type of personal and business information that we collect, use, and retain, as well as during and after periods in which we acquire other companies.”

Annual report 2026A · The company itself

“The security of our IT infrastructure is an important consideration in our customers’ purchasing decisions.”

Annual report 2026A · The company itself

“Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently, are increasingly more complex and sophisticated and may be difficult to detect for long periods of time, we may be unable or fail to anticipate these techniques or implement adequate or timely preventative or responsive measures. As cyber threats continue to evolve, we are focused on ensuring that our operating environments safeguard and protect personal and business information. We may be required to invest significant additional resources to comply with evolving cybersecurity regulations and to modify and enhance our information security and controls, and to investigate and remediate any security vulnerabilities.”

Annual report 2026A · The company itself

“While we have security systems and IT infrastructure in place designed to detect and protect against unauthorized access to such information, including our Cyber Fusion Center, if our security measures are breached, either internally or externally, our business could be substantially harmed, and we could incur significant liabilities. Any such breach or unauthorized access could negatively affect our ability to attract new customers, cause existing customers to terminate their agreements with us, result in reputational damage, and subject us to lawsuits, regulatory fines, or other actions or liabilities which could materially and adversely affect our business and operating results.”

Annual report 2026A · The company itself

“Third-parties, including vendors that provide services for our operations, could also be a source of security and reputational risk to us in the event of a failure of their own security systems and infrastructure.”

Annual report 2026A · The company itself

“Table of Contents Data Loss and Business Interruption: If our systems are disrupted or fail for any reason, or if our systems are infiltrated by unauthorized persons, the Company, our customers and employees of our customers could experience data loss, financial loss, harm to reputation, or significant business interruption. Hardware, applications, and services, including cloud-based services, that we develop or procure from third-party vendors may contain defects in design or other problems that could compromise the integrity and availability of our services. Any delays or failures caused by network outages, software or hardware failures, or other data processing disruptions, could result in our inability to provide services in a timely fashion or at all.”

Annual report 2026A · The company itself

“Organizations face a rapidly evolving employment landscape including an increasing number and complexity of federal, state, and local regulations; the integration of AI into HCM processes; changing workforce dynamics; increasing medical inflation; and challenges attracting and retaining talent.”

Annual report 2026A · The company itself

“Over the past year, top challenges for employers were macroeconomic pressures including inflation and interest rates, availability of qualified talent, providing affordable benefits, keeping technology current, and ensuring legal and regulatory compliance.”

Annual report 2026A · The company itself

“Our success, growth, and financial results depend in part on our continuing ability to attract, retain, motivate, and upskill highly qualified and diverse personnel in a rapidly changing environment at all levels, including management, technical, compliance, sales, and support personnel. Competition for these individuals can be intense, and we may not be able to retain our key people, or attract, assimilate, or retain other highly-qualified individuals in the future, which could harm our future success.”

Annual report 2026A · The company itself

“Human Capital We believe our ability to attract and retain qualified employees in all areas of our business is critical to our future success and growth. We strive to foster a workplace that promotes belonging and engagement and supports our ability to attract, retain, and develop talented employees while maintaining a safe working environment.”

Annual report 2026A · The company itself

“Talent Acquisition and Development: We compete for talent with our direct competitors and other companies in the geographic areas we serve. We invest significant resources to attract and retain top talent.”

Annual report 2026A · The company itself

“For fiscal 2026, compensation-related expenses accounted for approximately 52% of our total expenses.”

Annual report 2026A · The company itself

“Organizations face a rapidly evolving employment landscape including an increasing number and complexity of federal, state, and local regulations; the integration of AI into HCM processes; changing workforce dynamics; increasing medical inflation; and challenges attracting and retaining talent.”

Annual report 2026A · The company itself

“Over the past year, top challenges for employers were macroeconomic pressures including inflation and interest rates, availability of qualified talent, providing affordable benefits, keeping technology current, and ensuring legal and regulatory compliance.”

Annual report 2026A · The company itself

“We and our customers are subject to the impacts related to inflationary pressure, economic instability, changes in interest rates, tariffs, potential instability of the banking environment, climate change-based obligations, and other macroeconomic and/or 14 Table of Contents political events.”

Annual report 2026A · The company itself

“Further, inflation and uncertainty about tariff implementation may negatively impact our business and/or our customers' business, raise costs and reduce profitability.”

Annual report 2026A · The company itself

“There continues to be uncertainty in the changing market and economic conditions, including the possibility of additional measures that could be taken by the U.S. President, the Federal Reserve and other government agencies related to the overall macroeconomic environment. We will continue to monitor the market and economic conditions.”

Annual report 2026A · The company itself

“Our services are subject to various laws and regulations, including, but not limited to, the SECURE Act 2.0, data privacy regulations, and anti-money laundering rules. The growth of our international operations also subjects us to additional risks, such as compliance with foreign laws and regulations. The enactment of new laws and regulations, modifications of existing laws and regulations, or the adverse application or interpretation of new or existing laws or regulations can adversely affect our business.”

Annual report 2026A · The company itself

“Our solutions require the storage and transmission of proprietary and confidential information of our customers and their employees, including personal or identifying information, as well as geolocation and biometric data. Certain solutions are enhanced with the use of AI and machine learning. Our solutions are subject to various complex government laws and regulations on the federal, state, and local levels, including those governing personal privacy, AI and machine learning, as well as ethical considerations.”

Annual report 2026A · The company itself

“We must also comply with such laws as the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, and the Patient Protection and Affordable Care Act of 2010 (as amended). Additionally, we must also comply with federal and state labor and employment laws, and state data breach notification and data privacy laws, such as the California Consumer Privacy Act, and biometric information privacy laws all as amended. Our European operations are subject to the European Union’s General Data Privacy Regulation.”

Annual report 2026A · The company itself

“Legal, Regulatory and Political Risks Our business, services, and financial condition may be adversely impacted by changes in government laws and regulations.”

Annual report 2026A · The company itself

“Organizations face a rapidly evolving employment landscape including an increasing number and complexity of federal, state, and local regulations; the integration of AI into HCM processes; changing workforce dynamics; increasing medical inflation; and challenges attracting and retaining talent.”

Annual report 2026A · The company itself

“Table of Contents Software Maintenance and Development The ever-changing mandates of federal, state, and local tax and regulatory agencies require us to regularly update our proprietary software to provide payroll and HCM solutions to our customers. We are regularly engaged in developing enhancements to and maintaining our various software platforms to meet the changing requirements of our customers and the marketplace.”

Annual report 2026A · The company itself

“Many federal and state laws that apply to the employer-employee relationship do not specifically address the obligations and responsibilities of the “co-employment” relationship within our PEO business. State and federal positions regarding co-employment relationships are in a constant state of flux and change with varying degrees of impact on our operations. We cannot predict when changes will occur or forecast whether any future changes will be favorable or unfavorable to our operations. There is a possibility that we may be subject to liability for violations of employment or discrimination laws by our customers and acts or omissions of customer employees, who may be deemed to be our agents, even if we do not participate in any such acts or violations.”

Annual report 2026A · The company itself

“Many of our services, particularly payroll tax administration services, employee benefit plan administration services, and PEO services are designed according to government regulations that often change. Changes in regulations could affect the extent and type of benefits employers are required, or may choose, to provide employees or the amount and type of taxes employers and employees are required to pay. Such changes could reduce or eliminate the need for some of our services and substantially decrease our revenue.”

Annual report 2026A · The company itself

“Our customers are sensitive to negative changes in economic conditions. If they cease operations or file for bankruptcy protection, we may not be paid for solutions we already provided, and our customer base will shrink, which will lower our revenue. If under financial pressure, our customers may determine they are no longer willing to pay for the solutions and support we provide, which would reduce our revenue.”

Annual report 2026A · The company itself

“Trade, monetary and fiscal policies, and political and economic conditions may substantially change, and credit markets may experience periods of constriction and variability. Additionally, instability in the banking environment may adversely affect our business. These conditions may impact our business due to lower transaction volumes or an increase in the number of customers going out of business.”

Annual report 2026A · The company itself

“There continues to be uncertainty in the changing market and economic conditions, including the possibility of additional measures that could be taken by the U.S. President, the Federal Reserve and other government agencies related to the overall macroeconomic environment. We will continue to monitor the market and economic conditions.”

Annual report 2026A · The company itself

“Our customers are sensitive to negative changes in economic conditions. If they cease operations or file for bankruptcy protection, we may not be paid for solutions we already provided, and our customer base will shrink, which will lower our revenue. If under financial pressure, our customers may determine they are no longer willing to pay for the solutions and support we provide, which would reduce our revenue.”

Annual report 2026A · The company itself

“Our customers may decrease their workforce, which would decrease their demand for our solutions. Because of spending constraints on our customers and competition in the industry, we may face pricing pressure on our solutions and challenges in onboarding new customers, which would reduce revenue and ultimately impact our results of operations.”

Annual report 2026A · The company itself

“We could be subject to reduced revenues, increased costs, liability claims, or harm to our competitive position as a result of cyberattacks, security vulnerabilities or Internet disruptions. We rely upon information technology (“IT”) networks, cloud-based platforms, and systems to process, transmit, and store electronic information, and to support a variety of business processes, some of which are provided by third-party vendors. Cyberattacks and security threats are a risk to our business and reputation.”

Annual report 2026A · The company itself

“Data Security and Privacy Leaks: We collect, use, and retain increasingly large amounts of personal information about our customers, employees of our customers, our employees, and other third parties, including: bank account, credit card, social security numbers, tax return information, health care information, retirement account information, payroll information, system and network passwords, and other sensitive personal and business information. At the same time, the continued occurrence of high-profile cyber and ransomware attacks and data breaches provides evidence of an external environment increasingly hostile to information security. We may be particularly targeted for cyberattack because of the amount and type of personal and business information that we collect, use, and retain, as well as during and after periods in which we acquire other companies.”

Annual report 2026A · The company itself

“We and our customers are subject to the impacts related to inflationary pressure, economic instability, changes in interest rates, tariffs, potential instability of the banking environment, climate change-based obligations, and other macroeconomic and/or 14 Table of Contents political events.”

Annual report 2026A · The company itself

“Further, inflation and uncertainty about tariff implementation may negatively impact our business and/or our customers' business, raise costs and reduce profitability.”

Annual report 2026A · The company itself

“The regulatory framework for privacy, AI, and machine learning issues is rapidly evolving and future enactment of more restrictive laws, rules, or regulations and/or future enforcement actions or investigations could have a materially adverse impact on us through increased costs or restrictions on our business and noncompliance could result in regulatory penalties and significant legal liability.”

Annual report 2026A · The company itself

“Our operations are dependent on our ability to protect our infrastructure against damage from catastrophe or natural disaster, unauthorized security breach, power loss, telecommunications failure, terrorist attack or act of war, public health emergency, pandemic, or other events that could have a significant disruptive effect on our operations. Climate-related weather disasters, including hurricanes, flooding, snowstorms, and severe rainstorms, could also threaten the business continuity of our operations.”

Annual report 2026A · The company itself

“We are required to comply with regulations administered by multi-national bodies and governmental agencies worldwide including, but not limited to, the economic sanctions and embargo programs administered by the Office of Foreign Assets Control (“OFAC”), and the Foreign Corrupt Practices Act (“FCPA”). OFAC places restrictions on the sale or export of certain products and services to certain countries and persons. A violation of a sanction or embargo program, or of the FCPA, or similar laws prohibiting certain payments to governmental officials, could subject us, and individual employees, to a regulatory enforcement action as well as significant civil and criminal penalties which could adversely impact our business and operations.”

Annual report 2026A · The company itself

“Trade, monetary and fiscal policies, and political and economic conditions may substantially change, and credit markets may experience periods of constriction and variability. Additionally, instability in the banking environment may adversely affect our business. These conditions may impact our business due to lower transaction volumes or an increase in the number of customers going out of business.”

Annual report 2026A · The company itself

“As of May 31, 2026, we served approximately 840,000 total customers across the U.S. and parts of Europe, of which approximately 800,000 are payroll clients.”

Annual report 2026A · The company itself

“Census data indicates that in the U.S., there are over 6 million employer firms in our target markets.”

Annual report 2026A · The company itself