Kartik Mehta

Peter said AI hasn't changed headcount approach -- they continue investing in both headcount and tools. AI is making sellers more efficient and effective but they're still in relatively early innings of taking dividends from these investments.

Maria said PEO client profile has been largely consistent across size and industry over the last couple of decades. Average size has pulled up slightly as PEO sits on Workforce Now stretching into mid-market.

Maria said the Zone AI tool is now deployed to more than 40% of sellers (up from Investor Day). Previewed next iteration of GenAI tools at recent sales leadership meeting, calling them a game changer for seller productivity.

Peter confirmed pricing assumptions completely unchanged at ~100bps, with no change in market receptivity. Coming in slightly lower than FY25 but consistent with long-term value proposition approach.

Maria provided detailed breakdown by segment: small business activity healthy (leads, appointments, opportunities), PEO RFPs and benefit underwriting strong, enterprise pipeline aging but still active and up year-on-year.

Peter noted PPC is similar across segments with PEO recently slightly above ES, normalizing a flipped dynamic from recent quarters. FY26 PEO guide not too far from ES.

Don confirmed PEO PPC actually slightly exceeded ES PPC this quarter, with both converging near 1%; a positive development after several quarters of PEO lagging.

Maria firmly denied any anti-American pushback; noted ADP has 80 peers on the ground in nearly 50 countries serving clients locally. Don added ADP is embedded in local social security and tax ecosystems.

Don noted PEO pays per control stabilization across most industries including financial/administrative which had been weak; historically PEO has outpaced ES and expects improvement.

Don declined to speculate on multi-year pricing trajectory given inflation uncertainty from potential policy changes; emphasized retention as most important metric when balancing pricing decisions.

Don confirmed no changes to portfolio strategy; yield curve normalizing should provide more benefit, and lower short-end borrowing costs offset the $10M reduction in client funds interest forecast.

Maria noted overall SMB health is strong; new business formations down YoY but still elevated vs pre-pandemic levels. General sentiment and demand across down-market remains solid.

Greg clarified he actually expects MORE credit union wins this year on higher share, but that fewer credit union RFPs are available, which is cyclical. One provider could open up additional credit union opportunities depending on how events play out.

Greg said timing depends on contract term remaining and client engagement, not institution size. New core wins usually go live 15 to 24 months out, while Jack-Henry-to-Jack-Henry mergers can be done in six months or less.

Greg expects annual RFPs to increase from typical 200 to 250-275 over next couple years driven by competitor unrest and M&A dynamics. Jack Henry typically wins more than loses in M&A scenarios. Both competitive takeaway and M&A opportunities increasing.

Mimi said card business has most macro sensitivity but no big change in exposure mix. No volatility from global economic issues observed. Greg added debit card most affected by consumer sentiment. Clients at SI event indicated plans to spend more on technology as their way to combat economic challenges.

Greg acknowledged some smaller banks spend less, but those institutions often end up being acquired. Banks that want to grow must invest in technology. Some spend well above the 6-10% forecast while others take cheaper deals with less impressive technology, the latter tend to appear on the market later.

Greg confirmed renewal pricing strategy is showing in financial results. New-versus-renewal mix significantly improved. Sales team embracing the change. Negotiating from position of strength versus years past.

Greg said M&A headwind is leveling out with convert-merge activity nearly doubled year-over-year in banking. The timing-based headwind was heavily weighted to Q1. Expects core wins to remain around 50 based on pipeline. Competitor core consolidation could increase RFP flow. Mimi added that the $100M-$10B segment contracted only 13% (CU) and grew 4% (bank) vs 30% total market contraction over the last decade.

Greg said pricing pressure is inherent to renewals with roughly 100 opportunities per year. JKHY changed its renewal approach in H2 including pricing strategy, timing of compression handling, and sales team compensation. Seeing improvements in Q4 from these changes.

Greg said it exceeded expectations, completing Visa and Mastercard certification in 10 months versus expected 18-24 months. Both card associations said they had never seen that speed before. Plans to roll out to all 1,000 Banno clients over 2-3 months after Jack Henry Connect conference.

Greg confirmed Jack Henry Rapid Transfers in closed beta with 3 clients and now taking active enrollments. Moov merchant acquiring solution on track for closed beta in June with 2 clients. Strong interest from non-Jack Henry clients as well.

Greg confirmed delays are 100% on smaller nonrecurring items and hardware, not core decisions. Very bullish on Q4 core success rates based on what he's already seen.

Greg confirmed tracking to 50-ish wins, continued success with larger deals including $8B win. Pipeline strong with 7 over $1B already this year.

John reported no real competitive shifts, discounting and offers consistent with the prior 6-12 months, and demand still solid across products and services.

Gibson said the priority is retention in high-lifetime-value segments and disciplined client selection to protect margins; answered.

Follow-up on Salesforce alignment for revenue synergies and share buyback philosophy.

Management addressed Salesforce alignment for revenue synergies and share buyback philosophy.

Gibson: existing clients receiving full value realization, retention and upsell working. Prospect side is where softness shows, choosing lower bundles, fewer attachments, smaller sizes. Still winning the clients, just at lower initial rates. Will upsell over time as historically done.

Schrader: no philosophy change, still primarily offset dilution. Opportunistic pull-forward given stock price vs growth outlook. Believes growth opportunities unchanged from six months ago. Focused on fundamentals as high-quality compounder.

Management addressed Pricing realization post-COVID and float strategy for FY26.

Follow-up on Pricing realization post-COVID and float strategy for FY26.

Gibson framed issue as Florida-specific, not structural. Health inflation actually driving MORE shopping and demand for PEO-style scaled offerings. Schrader added PEO was double-digit grower in H1 and remains strong. WSE growth outpacing competitive benchmarks despite headwinds.

Gibson said pricing formula intact with existing clients. Prospects more price-sensitive post-COVID but shopping behavior similar to pre-pandemic norms. Premium positioning maintained.

Gibson described robust M&A pipeline with more rational valuations emerging over past 12 months. Looking at scale opportunities, product expansion, digital capabilities, and adjacent platforms.

Rental continuing to improve. All three route-based businesses performing at high level. Direct Sale was 30bps headwind, ex-Direct Sale, total company grew 9%. Investing for the future given bright outlook.

No change in M&A pricing. Timing driven by seller readiness (succession planning, health, business outlook). Strong relationships cultivated over decades position Cintas well.

AI in early innings. Foundation built on SAP, then data analytics, algorithms, now ML/AI. Expects incremental improvements over many years.

First Aid growth is primarily volume-driven, not pricing. Pricing at historical levels across all businesses.