Kartik Mehta

Kartik Mehta asked James Kelly about the expected organic revenue growth rate of the business once the ODM hardware transition is complete, given the numerous changes made at the company. He also asked Darren Wilson about the benefits (revenue, cost, cross-sales) of the changes being made to third-party integration.

Answer

James Kelly, CEO, stated that ARR and total revenue are expected to grow well into 2026 and 2027, driven by backlog deployment, price increases on the retail side, and integrating payments with new sales. Darren Wilson, President, Retail and Payments, highlighted the 'one throat to choke' customer service proposition, improved implementation control, pricing upside by switching revenue from third-party payment providers, and the benefit of having full end-to-end payments data in the platform for loyalty and personalization.

Kartik Mehta asked CEO Jim Kelly about the expected organic revenue growth rate of the business once the ODM hardware transition is fully completed. He also inquired about the benefits of the changes in third-party integration, specifically potential revenue, cost, or cross-sales advantages for Voyix.

Answer

CEO James Kelly projected improved software, services, and payments revenue for 2026, excluding hardware, despite potential headwinds from AI-driven chip price increases. He expressed strong confidence in accelerating ARR and total revenue growth into 2026 and 2027, driven by building backlog and faster deployments. Kelly highlighted a shift towards integrating payments with new platform sales rather than retrofitting legacy applications, anticipating a step-up in software pricing and market-leading product configuration. President of Retail and Payments Darren Wilson explained that the primary benefit of enhanced third-party integration is a simplified 'one throat to choke' customer service model, streamlining implementations and providing a single point of contact. He highlighted a revenue upside by internalizing payments revenue and stressed the strategic advantage of having full end-to-end payments data within their platform for loyalty and personalization.

Kartik Mehta of Northcoast Research Partners LLC asked about the expected progression of the payments business over the next 12-18 months and inquired about the competitive landscape in the restaurant sector.

Answer

CEO James Kelly expressed high expectations for payments, stating the partnership with Worldpay provides capabilities to serve large enterprise clients for the first time, with growth expected to ramp into next year. Restaurants President Benny Tadele and Kelly noted that while the restaurant space is competitive, NCR Voyix's focus on the enterprise level insulates it from some of the pressures seen in the SME market.

Kartik Mehta inquired about the new Worldpay payments agreement, asking about the timing of its potential benefits and the key strategic opportunities for NCR Voyix in 2025.

Answer

CEO James Kelly detailed the significant opportunity presented by the $500 billion in payment volume, stating the Worldpay partnership will be live by late summer 2025, creating a completely new revenue stream. An executive added that major opportunities exist in next-generation solutions and recurring revenue models for services, with significant customer announcements expected in the coming quarters.

Kartik Mehta asked about the implementation of the new sales compensation plan and its potential near-term effects. He also inquired about the strategic opportunities for the new international president, Darren Wilson.

Answer

CEO David Wilkinson stated the new sales compensation plan will be fully implemented in January to avoid Q4 disruption. For international strategy, Wilkinson identified key opportunities for Darren Wilson, including accelerating platform migration in Japan, expanding the restaurant portfolio globally, exploring payment solutions in markets like the U.K., and developing a mid-market offering outside the U.S.

Kartik Mehta of Northcoast Research asked about the net impact of AI on Kelly Services, specifically whether it has been positive, negative, or neutral in terms of demand for services versus internal efficiency and cost savings.

Answer

CEO Chris Layden affirmed that AI presents a net positive opportunity for Kelly, driving productivity improvements and accelerating growth through AI-enabled recruiting solutions and flexible, scalable offerings for employers. Mehta also inquired about permanent hiring trends in the first week of 2026. Layden stated that perm hiring, representing about 1% of total gross profit, showed continued stability with no significant changes.

Kartik Mehta asked for Kelly's perspective on the net impact of AI, specifically whether it has been positive, negative, or neutral in terms of demand for services versus the efficiency and cost benefits derived from its internal use. He also inquired about the trends observed in permanent hiring and the fee business during the first week of 2026 and what these trends might indicate for the full year.

Answer

Chris Layden (CEO, Kelly Services) affirmed confidence that AI presents a net positive opportunity for Kelly, driving productivity improvements and accelerating growth. He highlighted the AI-enabled recruiting solution as a differentiator and emphasized Kelly's unique ability to provide employers with the flexibility and scalability needed to transition to an AI-enabled workforce. Regarding permanent hiring, Mr. Layden reported no significant change, noting stability in the perm business, which constitutes approximately 1% of total gross profit.

Kartik Mehta inquired about the performance of the newly acquired MRP business relative to initial expectations, whether monthly revenue trends improved across the business in Q3, and if margins could expand in 2025 assuming stable revenue.

Answer

CEO Peter W. Quigley stated that MRP has met expectations, performing in line with Kelly's own SET business amid industry headwinds. CFO Olivier Thirot confirmed that after a slow July and August, revenue trends improved in September, particularly in the SET segment. Thirot expressed confidence that margin expansion can continue into 2025 even with modest top-line growth, citing the company's proven ability to leverage its transformed cost structure and a strong Q4 margin outlook.

Kartik Mehta inquired about the fundamental business trends for the newly acquired Motion Recruitment Partners (MRP), current pricing dynamics across business segments, and the company's strategy for future acquisitions.

Answer

CFO Olivier Thirot provided financial details on MRP's performance, noting H1 revenue of $260 million and an expected slight improvement in H2. CEO Peter W. Quigley added that Kelly remains bullish on MRP's long-term strategic fit. Regarding pricing, Quigley stated that the company has maintained pricing discipline, which Thirot confirmed by noting stable spreads. On future M&A, Quigley explained that while the immediate priority is MRP, the company continues to develop a pipeline for future acquisitions in high-margin areas like science, technology, and education.

Kartik Mehta asked about the traction and financial manifestation of Jack Henry's new pricing renewals strategy. He also inquired about bank spending trends, specifically if there's a bifurcation by asset size and if smaller banks show hesitation to spend on technology due to consolidation discussions.

Answer

Gregory Adelson, President and CEO, confirmed that the new pricing renewals strategy is gaining traction and manifesting in financial results, leading to a significant percentage of new versus renewed contracts and allowing them to negotiate from a position of strength. Regarding bank spending, Mr. Adelson acknowledged that some institutions spend more on technology than others, noting that those spending less might eventually be on the market for acquisition, as technology is crucial for growth in areas like deposits, lending, and efficiency.

Kartik Mehta asked if Jack Henry's new pricing renewal strategy has gained traction and is manifesting in financial results. He also inquired about any bifurcation in bank technology spending based on asset size, especially with consolidation impacting smaller banks.

Answer

Gregory Adelson (President, CEO, and Board Member) confirmed the new pricing renewal strategy is gaining traction and manifesting in financial results, with a significant percentage of new vs. renewals and a stronger negotiation position. He acknowledged that some institutions spend more or less depending on needs/desires, noting that banks prioritizing financial deals over impressive technology may be seen on the market for acquisition later.

Kartik Mehta of Northcoast Research Partners LLC questioned whether the pricing pressure on renewals was standard or if there was incremental pressure on new or renewal deals. He also asked how the partnership with Move is progressing relative to initial expectations.

Answer

President & CEO Greg Adelson stated that pricing pressure occurs on both new deals and renewals, which is typical in a competitive market, but noted Jack Henry still commands premium pricing. He added that the partnership with Move has exceeded his expectations, highlighting that the certification process for Tap to Local was completed in ten months, far ahead of the typical 18-24 month timeline.

Kartik Mehta asked if project delays are affecting core purchasing decisions and requested an update on the SMB product partnership with Moov, including its revenue potential.

Answer

CEO Greg Adelson confirmed that delays are confined to smaller, non-recurring items and hardware, not core decisions, and stated he is bullish on Q4 core wins. Regarding the SMB strategy, he said Jack Henry Rapid Transfers is actively enrolling clients, and the merchant acquiring solution with Moov is on track for a closed beta in June, with a broader rollout expected in the first quarter of fiscal 2026.

Kartik Mehta from Northcoast Research asked if the market environment for core deals has changed and inquired about the timeline for the Moov partnership to generate meaningful revenue.

Answer

President and CEO Greg Adelson stated that the core deal environment remains largely unchanged, with the company still tracking towards its typical 50 annual wins, including a notable increase in larger deals. Regarding the Moov partnership, Adelson anticipates it will begin contributing meaningful revenue in fiscal year 2026, with potentially minor contributions in late fiscal 2025.

Kartik Mehta from Northcoast Research asked about anticipated taxpayer behavior patterns for the current tax season, specifically regarding filing peaks and whether the One Big Beautiful Bill would influence these trends. He also inquired about early indications of refund amounts compared to the previous year.

Answer

President and CEO Curtis Campbell indicated that historical trends of slower season starts are expected to continue, with the One Big Beautiful Bill likely increasing the demand for assistance rather than altering filing timing. He noted it was too early for definitive data on refunds but anticipated some taxpayers would see larger refunds due to significant deduction increases.

Kartik Mehta from Northcoast Research asked about anticipated taxpayer behavior patterns for the current tax season, specifically if the One Big Beautiful Bill Act would alter the typical timing of filings or refund amounts compared to the previous year.

Answer

President and CEO Curtis Campbell indicated that while the One Big Beautiful Bill Act might increase demand for assisted filing due to complexity, he doesn't expect it to significantly change the timing of taxpayer engagement, anticipating a slower start to the season consistent with prior years. Regarding refunds, Campbell noted it was too early for data but projected a portion of clients could see slightly higher refunds due to various deduction increases.

Kartik Mehta of Northcoast Research Partners LLC inquired about H&R Block's growth assumptions for the assisted and DIY tax preparation markets in the upcoming year, and whether the company plans to adjust its bank product offerings to attract early-season filers, given the potential for higher tax refunds.

Answer

President & CEO Jeffrey Jones stated that H&R Block anticipates a similar shift to the assisted tax business as seen in the prior year, driven by consumer uncertainty around new tax legislation. CFO Tiffany Mason added that the midpoint of their FY26 guidance assumes they will cut market share losses in half. Regarding bank products, Mr. Jones deferred specific commentary until the November earnings call for competitive reasons.

Kartik Mehta inquired about the multi-year industry trend of the Assisted tax segment growing faster than DIY, and asked for H&R Block's perspective on the underlying drivers of this shift. He also questioned if H&R Block observed different volume patterns between the early and late parts of the tax season and if any product changes were being considered as a result.

Answer

Executive Jeffrey Jones attributed the shift to Assisted filing to consumer uncertainty, noting that even discussions of potential tax changes prompt filers to seek expert help. Jones confirmed the season started slow but ended with record volumes in the final days, a trend driven by clients waiting to see if tax law changes would materialize. He stated that H&R Block will analyze the full season's data to evaluate potential changes to its offerings to better serve the growing segment of more complex, higher-income clients who are filing later.

Kartik Mehta of Northcoast Research inquired about early tax season volume trends for the industry and H&R Block, the competitive environment, particularly regarding Intuit, and any resulting adjustments to H&R Block's marketing strategy.

Answer

President and CEO Jeff Jones responded that H&R Block anticipates normal industry volume growth of 1%, with DIY growing slightly faster. He acknowledged Intuit's moves into the assisted tax space as the primary competitive development. Jones explained that H&R Block's marketing strategy is focused on its own strengths and value propositions like the price match guarantee, increased Refund Advance, and Second Look service, rather than being purely reactive to competitors.

Kartik Mehta asked about the competitive landscape for the upcoming tax season, particularly regarding Intuit's moves, and questioned H&R Block's pricing strategy for its DIY product relative to TurboTax.

Answer

President and CEO Jeff Jones stated that H&R Block has not seen a material impact from Intuit's entry into the assisted category and expects a normal tax season with about 1% industry growth. Regarding DIY pricing, Jones explained that the strategy is rooted in product improvement, such as the enhanced AI Tax Assist, which will be free in paid SKUs. He acknowledged the price gap with competitors and noted that the company will continuously evaluate pricing as its product value increases, leveraging the dynamic nature of the DIY market.

Kartik Mehta asked if Kforce anticipates positive year-over-year revenue growth for the rest of 2026 if current trends continue. He also requested a comparison of the current 'best start since 2022' to 2022 metrics like cancel rates, order entry, and pipeline size.

Answer

CFO Jeff Hackman indicated that Q1 guidance midpoint is effectively flat year-over-year, but with momentum from Q4 and a strong January, year-over-year growth is possible for 2026 if the macro environment remains stable. President and CEO Joe Liberatore highlighted Q1 client visits as the highest he can recall, indicating strong client engagement. He noted that order flow returned to pre-holiday levels immediately, unlike previous years, and that operating units jumped back to pre-holiday peak levels, which hasn't been seen since early 2022.

Kartik Mehta asked to compare current front-end indicators like cancel rates, order entry, or pipeline size to the 'best start since 2022.'

Answer

Joe Liberatore (President and CEO, Kforce) highlighted that Q1 client visits are at the highest levels he can recall, indicating client desire to scope work. He noted that things hit the ground running from day one in 2026, with some operating units returning to pre-holiday peak levels, a trend not seen since early 2022. He also mentioned that order flow jumped right back to pre-holiday levels, usually taking longer to pick up.

Kartik Mehta inquired about Kforce's current operational capacity and how much revenue growth could be absorbed before needing to increase personnel. He also asked for an assessment of revenue visibility compared to more normal economic periods.

Answer

COO David Kelly stated that sales headcount is already slightly above levels from when Kforce had $1.7B in revenue, suggesting roughly 40% capacity to handle increased demand without significant hiring. CEO Joseph Liberatore noted that potential productivity gains from new AI tools are not yet factored into this outlook. Regarding visibility, Liberatore and CFO Jeff Hackman pointed to stable front-end KPIs, a consistent 10-month average assignment length, and a lack of proactive project cancellations from clients, which provides reasonable clarity.

Kartik Mehta questioned Kforce's current operational capacity, asking how much revenue could be added without significant hiring. He also asked if the new facility in India could be leveraged to improve SG&A efficiency in the future.

Answer

COO David Kelly responded that Kforce has been intentional with its staffing, increasing sales teams while reducing delivery resources by 15% year-over-year. He affirmed the company has ample capacity to absorb several quarters of demand improvement without significant hiring. Regarding the India facility, Kelly stated that while the initial focus is on meeting external client needs, the company is thoughtfully considering leveraging it for internal back-office efficiencies and cost arbitrage in the future.

Kartik Mehta asked for clarification on whether the improved trends in October were new or part of a progression through Q3, and questioned if margins could be maintained in 2025 on flat revenue given cost pressures like merit increases.

Answer

COO David Kelly confirmed a modest improvement in late Q3 and early October but urged caution against extrapolating it as a new trend. CFO Jeff Hackman stated that if revenue remains flat in 2025, the company has taken sufficient cost-cutting measures to largely mitigate pressures from merit and vendor increases, benefiting from the full-year impact of 2024 adjustments.

Karthik Mehta asked about the pricing environment for Protiviti in 2026, specifically regarding the ability to secure price increases to offset compensation expenses, and how AI could serve as a driver for both Protiviti and Talent Solutions in assisting clients.

Answer

CEO Keith Waddell clarified that while the competitive pricing environment with the Big Four continues, the industry generally sees cost-of-living type increases, with mix being a significant factor in composite rates. He noted Protiviti's shift from large, high-margin FSI regulatory projects to smaller, lower-margin work has caused some compression. On AI, Mr. Waddell argued that accounting, even at SMBs, is already highly automated, and GenAI's current accuracy limitations make it less impactful for precision-sensitive accounting tasks. He highlighted AI's positive role in making hiring harder for clients (due to mass applications, tailored resumes, and fabricated work histories), thereby increasing the value of Robert Half's vetting services and proprietary candidate performance data.

Karthik Mehta asked about Protiviti's pricing environment for 2026, specifically the ability to secure price increases to offset compensation expenses, given the competitive landscape with the Big Four. He also inquired about the potential for AI to be a positive driver for both Protiviti and Talent Solutions in assisting clients.

Answer

CEO Keith Waddell explained that while the industry generally secures cost-of-living increases, Protiviti's composite rates are influenced by the mix of work, with a shift from large, high-margin FSI regulatory projects to smaller, lower-margin engagements causing some compression. Regarding AI, Waddell argued that its negative impact on accounting is overstated due to existing automation and accuracy requirements. He highlighted AI's positive role in making hiring harder for clients (mass applications, AI-tailored resumes, fictitious work histories), thereby increasing the value of Robert Half's vetting services and proprietary performance data.

Kartik Mehta inquired about Protiviti's near-term incremental margins, considering capacity, and also asked about the possibility of using a portion of the company's cash on the balance sheet for stock buybacks, given current stock prices, from a broader capital allocation perspective.

Answer

CEO Keith Waddell stated an expectation of 100-200 basis points of additional gross margin for Protiviti in 2026, with potential upside, driven by project nature, staff mix, and cost focus, aiming for substantial progress towards double-digit operating margins. Regarding capital allocation, Mr. Waddell reiterated the commitment to the dividend, which consumes most free cash flow, leaving less for repurchases despite attractive stock prices. He reaffirmed the policy of returning free cash flow to shareholders and maintaining a conservative, unlevered balance sheet.

Kartik Mehta inquired about Protiviti's incremental margins in the near term, specifically for 2026, and whether the company would consider using a portion of its balance sheet cash for stock buybacks given current stock prices and confidence in free cash flow.

Answer

CEO Keith Waddell stated that for 2026, they would be disappointed if Protiviti couldn't achieve between 100 and 200 basis points of additional gross margin, with potential upside, through project mix, staff assignment, and cost focus. He reiterated that while it "hurts" not to buy more stock at current prices, the company is committed to its dividend, which consumes most of the free cash flow, leaving a smaller residual for repurchases. He also emphasized maintaining a conservative, unlevered balance sheet.

Kartik Mehta asked if the current positive momentum is different from previous 'false starts' this year and inquired about any changes in the competitive dynamics for the Protiviti business.

Answer

President & CEO M. Keith Waddell suggested the current environment is more stable as clients have become 'numbed' to policy uncertainty, and major issues like tax law are now settled. He stated that competitive dynamics for Protiviti, primarily against the Big Four, have not changed and are not the cause of its recent performance.

Kartik Mehta asked about Robert Half's ability to ramp up operations quickly if the economy improves suddenly and the potential impact on margins. He also questioned whether technology platforms like LinkedIn have significantly impacted the company's business with small business customers.

Answer

Executive M. Waddell expressed high confidence in the company's ability to ramp up, citing that revenue-producing staff levels were maintained and that new AI tools are improving recruiter efficiency. He is bullish on upside potential from pent-up demand and normalizing labor churn. On competition, Waddell stated that platforms like LinkedIn are long-standing 'frenemies' and have not recently altered the competitive landscape in a significant way.

Kartik Mehta of Northcoast Research asked about the current staffing capacity within the Protiviti division. He also sought to understand the financial impact of fewer billing days and FX in Q1 and whether that lost revenue is made up later in the year.

Answer

Executive M. Waddell explained that Protiviti has utilization capacity with its full-time staff and can scale quickly using contractors from Talent Solutions, a key competitive advantage. He also clarified that the revenue impact from fewer billing days is not made up later in the year and that one billing day represents about $22.5 million in revenue.

Kartik Mehta inquired about Deluxe's primary objectives for 2026, specifically asking for the top two goals, and followed up on the pipeline for growing distribution in the Merchant business, particularly regarding the ISV channel.

Answer

President and CEO Barry McCarthy reiterated Deluxe's three strategic priorities: shifting revenue mix towards Payments and Data, driving operational efficiencies, and increasing cash flow to reduce debt. He also detailed specific segment goals, including strengthening the ISV channel in Merchant Services, accelerating B2B software, maintaining Data's growth, and preserving Print margins.

Kartik Mehta asked about Deluxe's primary objectives for 2026, focusing on the top two strategic goals. He also inquired about the pipeline for the merchant business, particularly regarding the expansion of the ISV distribution channel.

Answer

Barry McCarthy, President and CEO, reiterated three core strategic planks for 2026: shifting revenue mix towards payments and data to achieve parity, driving enterprise-wide operating efficiencies, and increasing cash flow generation to lower net debt and leverage ratio. For the merchant business, he noted significant muscle-building in the ISV channel with new leadership, improved API suite, reporting tools, and features, expressing optimism for future wins.

Kartik Mehta of Northcoast Research Partners LLC inquired about the drivers of the significant margin improvement in the Merchant Services segment, the progress of new leadership in implementing strategic ideas, and the specific factors contributing to the increased full-year free cash flow guidance.

Answer

CEO Barry McCarthy attributed the Merchant Services margin expansion to a combination of operating efficiencies, pricing actions, new market penetration, and new software vendor partnerships. He also confirmed that the new division head, Brian Mahoney, is already implementing new strategies with early positive results. CFO Chip Zint explained that the raised free cash flow guidance reflects strong first-half execution, improved profitability, a significant reduction in cash restructuring spend, and ongoing working capital efficiencies.

Kartik Mehta asked for details on the Merchant Services business, inquiring about its fundamental performance, which segments are doing well versus lagging, and the potential strategic changes under its new leadership.

Answer

President and CEO Barry McCarthy explained that the Merchant Services business is resilient and diversified across strong verticals like government, non-profit, and auto repair. He noted that the new leader, Brian Mahani, will focus on enhancing partner relationships, moving upmarket to win larger financial institutions like Town Bank, and expanding distribution channels.

Kartik Mehta inquired about the fundamental health and 2025 focus for the Merchant business, the primary drivers of the significant projected free cash flow improvement in 2025, and the competitive strategy for the low-margin promotional products within the Print segment.

Answer

CEO Barry McCarthy expressed confidence in the Merchant business, highlighting investments in the Deluxe Payment platform and the hiring of a new leader to penetrate new markets. CFO Chip Zint attributed the strong 2025 free cash flow guidance to improved profitability and lower restructuring spend from the North Star program, noting it's a key step toward their 2026 goals. Regarding the Print segment, Zint stated Deluxe will not chase low-margin deals at the expense of profitability, emphasizing the segment's role is to generate cash flow to fund the company's transformation.

Kartik Mehta asked if there has been any noticeable change in the type of PEO client over the last 12 months, regarding size or industry. He also inquired about AI's impact on ADP's internal operations, specifically if it has changed sales headcount needs or increased productivity, and if success is leading to increased investment.

Answer

Maria Black, President and CEO, confirmed no noticeable difference in the type of PEO client, with the strongest fits remaining consistent across size and industry over decades. She noted a slight increase in average client size over time due to the PEO's best-in-class mid-market offer. Peter Hadley, CFO, stated that AI has not changed ADP's approach to sales headcount, which remains committed to growth. Instead, AI has made sellers more efficient and effective, and ADP will continue to invest in both headcount and AI-infused tools like 'the Zone' to maximize sales opportunities.

Kartik Mehta asked if ADP has observed any changes in the type of PEO client over the last 12 months, specifically regarding client size or industry. He also inquired about the impact of AI implementation within ADP, asking if it has changed sales headcount needs or increased productivity, and if success is leading to increased investment.

Answer

Maria Black, President and CEO, ADP, stated there's no noticeable difference in the type of PEO client, with the strongest fit remaining consistent across size and industry over decades. She noted a slight increase in average client size over time due to the PEO's best-in-class mid-market offering. Peter Hadley, CFO, ADP, confirmed that AI has not changed ADP's approach to sales headcount, which remains committed to growth. Instead, AI has enabled sellers to be more efficient and effective, with ADP still in the early stages of realizing the full benefits. ADP will continue to invest in both headcount and AI-infused tools to maximize sales opportunities.

Kartik Mehta asked if ADP's pricing expectations for FY26, originally anticipated at a 100 basis points benefit, remained unchanged given the evolving economic environment. He also inquired about the progress and rollout percentage of the generative AI tools for the salesforce, known as 'the zone'.

Answer

CFO Peter Hadley confirmed that pricing expectations remain unchanged, with no observations in Q1 necessitating a shift. He reiterated that pricing will be slightly lower than last year but appropriate for the long-term value proposition. President and CEO Maria Black stated that the deployment of 'the zone' for sellers has increased beyond the 40% cited at Investor Day. She highlighted the significant advancements in generative AI tools for sales, describing them as a 'game changer' for productivity and expressing enthusiasm for their future impact on sales workflows.

Kartik Mehta inquired about ADP's pricing expectations for FY2026, specifically the anticipated 100 basis points benefit, given the evolving economic environment. He also asked for an update on the AI rollout for the salesforce, including the percentage of salespeople currently using AI tools and plans for a full rollout.

Answer

Peter Hadley (CFO) confirmed no change in pricing expectations, still anticipating a slightly lower benefit than last year but appropriate for market receptivity. Maria Black (President and CEO) discussed "The Zone," ADP's generative AI tool for sellers, which includes features like call summarization and pre-call planning. She stated that deployment is now "north of 40%" of sellers (up from 40% at Investor Day) and expressed enthusiasm for future iterations, highlighting sales leaders' willingness to adopt these tools to enhance productivity.

Kartik Mehta inquired about the risk of delayed bookings turning into cancellations and asked about any notable differences in pays per control (PPC) trends between the Employer Services and PEO segments.

Answer

President & CEO Maria Black stated that sales pipelines remain healthy and active across all segments, with no signs of cancellations despite some deals having longer cycles. CFO Peter Hadley noted that PPC trends are similar for both ES and PEO, with a gradual moderation. He observed that PEO's PPC growth has recently returned to its historical norm of being slightly higher than ES.

Kartik Mehta asked if international bookings softness was related to pushback against ADP as a U.S. company and inquired if the pays per control (PPC) gap between the ES and PEO segments had narrowed.

Answer

CEO Maria Black and CFO Don McGuire both asserted that the softness is due to general macro uncertainty, not ADP's nationality, emphasizing their strong local presence in many countries. Don McGuire confirmed that the PPC rates for ES and PEO did converge this quarter, with both trending down to 1%, and PEO's rate being slightly stronger.

Kartik Mehta questioned if the current pricing environment, yielding about 100 basis points, represents a new normal or is a temporary phenomenon. He also asked if the trend of PEO pays per control growth lagging ES growth is an anomaly or a more structural change.

Answer

CFO Don McGuire suggested future pricing is dependent on the economic outlook but stressed that ADP's primary focus is on delivering long-term value to maintain high retention. For PEO pays per control, he noted it has historically outpaced ES and expressed optimism for improvement, citing recent stabilization in key PEO industries as a positive sign.

Kartik Mehta asked about the overall health of small businesses based on ADP's KPIs and whether there were any plans to change the client funds investment portfolio strategy.

Answer

CEO Maria Black described the health of small businesses as strong, though she noted new business formations, while still elevated, are down year-over-year. CFO Don McGuire confirmed there is no compelling reason to change the laddered investment portfolio strategy, as the normalizing yield curve should become more beneficial, and lower short-term borrowing costs are offsetting lower reinvestment rates.

Kartik Mehta inquired whether AI implementation uncertainties are causing clients to delay decisions and asked for a normalized Q2 gross margin figure, excluding the impact of healthcare costs and extra holidays.

Answer

CEO Roger Carlile and COO Bhadresh Patel indicated that AI itself isn't a primary cause for decision delays, but market uncertainty and client confusion over AI technologies contribute to a learning phase. CFO Jenn Ryu estimated that Q2 gross margin would have been approximately 38% without the abnormal healthcare costs, highlighting steady improvements in the pay-bill ratio and focus on bill rates and consulting utilization.

Kartik Mehta sought to reconcile comments about customers being price-conscious with Paychex's ability to achieve anticipated price realization. He also asked if the higher share buyback this quarter indicated a change in strategy or was an opportunistic, one-time event.

Answer

CEO John Gibson clarified that price consciousness primarily impacts prospects, who are 'shopping' and opting for lower bundles or fewer attachments, while existing customers continue to see value and accept anticipated price realization. CFO Bob Schrader explained that the higher share buyback was opportunistic, leveraging existing authorization and capacity. He noted that while the philosophy of offsetting dilution and maintaining a flat share count hasn't changed, the current stock valuation presented an opportunity to pull forward future purchases, as the company's future growth opportunities are not perceived to be less than when the stock was trading higher six months prior.

Kartik Mehta sought clarification on the seemingly contradictory comments about customers being price-conscious yet Paychex achieving anticipated price realization. He also asked about the higher share buyback this quarter, inquiring if it signals a change in strategy or was an opportunistic, one-time event.

Answer

CEO John Gibson clarified that price realization is strong within the existing customer base due to added value, while price-consciousness is observed among prospects who are shopping and opting for lower-tier bundles or fewer attachments. CFO Bob Schrader explained that the higher share buyback was opportunistic, leveraging existing authorization and capacity when the stock price was lower, but does not represent a change in the philosophy of maintaining a flat share count and offsetting dilution.

Kartik Mehta of Northcoast Research asked about the outlook for price realization compared to pre-COVID levels and the strategy for the client funds portfolio amid interest rate uncertainty.

Answer

President & CEO John Gibson stated that value realization from pricing is better than pre-pandemic levels and remains a key component of the growth formula. CFO Bob Schrader explained the float strategy is unchanged, with the portfolio largely invested long. They are now managing Paycor's shorter-duration funds and will lock in current rates, while assuming some short-term rate decreases in the plan.

Kartik Mehta asked about the outlook for price realization compared to pre-COVID levels and inquired about the strategy for managing the client funds float portfolio amid interest rate uncertainty.

Answer

President & CEO John Gibson stated that value realization from pricing is better than pre-pandemic levels and remains a key growth driver. CFO Bob Schrader noted the float strategy is consistent, with the portfolio invested long. They are now managing Paycor's shorter-duration funds and will lock in current rates where possible.

Kartik Mehta asked whether the current softness in the PEO business reflects a fundamental change in the market or is simply an anomaly related to the Florida plan and benefit costs.

Answer

CEO John Gibson asserted the issue is a unique situation specific to their Florida program and not a fundamental market shift. He believes the macro environment of health inflation will actually drive more demand for PEO solutions. Executive Robert Schrader added that the company remains very bullish on the PEO opportunity, emphasizing that worksite employee growth, the key metric, remains strong and is outpacing competitive benchmarks.

Kartik Mehta inquired about the current pricing environment compared to recent years and asked if there were any changes to the company's float management strategy.

Answer

CEO John Gibson stated that while new prospects are price-sensitive, the overall environment is similar to pre-COVID levels, and Paychex maintains its strong value proposition. EVP Robert Schrader confirmed no significant changes to float management, as the portfolio was already repositioned for lower rates, and the team continues to optimize based on the yield curve.

Kartik Mehta asked about the company's prioritization of acquisitions versus share buybacks and for an update on expectations for 'pays per control', which seem to be trending better than anticipated.

Answer

CEO John Gibson stated that the M&A pipeline is robust and that valuations have become more rational, but the company remains disciplined, focusing on scale, product expansion, and adjacent platforms. Executive Robert Schrader noted that while 'pays per control' trends are better than the flattish assumption in the plan, it wasn't a major growth driver in the forecast, but the positive trend adds confidence in the overall guidance.

Kartik Mehta inquired if the projected $1 billion loan volume within six months from partnerships assumes full integration or if there's further upside, and asked about the anticipated trend for Customer Acquisition Cost (CAC) as partnerships grow.

Answer

Vishal Garg, Founder and CEO of Better Home & Finance Holding Company, confirmed that the $1 billion target could be 'a lot more' once partnerships are fully integrated. He explained that partnerships have no upfront CAC, but D2C CAC remains high due to the long gestation cycle of purchase loans. He anticipates CAC will materially decrease if interest rates decline, referencing a $1,000 per loan refi CAC during the last favorable rate cycle.

Kartik Mehta questioned whether Better Home & Finance's projected $1 billion loan volume run rate in six months fully accounts for partner integration and sought insights into the anticipated trajectory of Customer Acquisition Cost (CAC) as partnerships grow.

Answer

Vishal Garg, Founder and CEO, indicated that the $1 billion target could be significantly higher once partners are fully integrated. He explained that partnerships incur no upfront CAC, while D2C CAC remains elevated due to long purchase loan gestation cycles and pre-approvals that don't immediately convert. He anticipates material CAC reduction if interest rates decline, citing a $1,000 per refi loan CAC in the last favorable rate cycle.

Kartik Mehta sought clarification on North America trends, specifically whether the slowdown in August compared to July and late September was due to pricing competition or a generally slow market.

Answer

Devin McGranahan (CEO) attributed the August slowdown to market conditions and consumer behavior, not competitor pricing, noting that Banco de Mexico data also supported this trend. Matt Cagwin (CFO) provided specific Banco de Mexico data points for June, July, August, and September, showing transaction declines that bounced around.

Kartik Mehta sought to understand North America's performance better, asking if the observed worsening trends in August compared to July or late September were due to pricing competition or a generally slow market.

Answer

CEO Devin McGranahan stated that from the company's perspective, it was a market-driven slowdown, not due to different competitor behavior, but rather different consumer behavior. CFO Matt Cagwin supported this with external Banco de Mexico data, showing fluctuating declines in June, July, and August.

Kartik Mehta from Northcoast Research asked for more color on the margin impact and investment strategy for 2026, specifically whether any benefits from these investments are anticipated in the latter part of 2026 or if they will primarily materialize in 2027. He also asked if the benefits from sales and service investments could be quantified.

Answer

President and CEO Steven Sintros clarified that ERP-enabled benefits (like inventory management) are expected in 2027 and beyond, while sales and service investments will build throughout 2026, aiming to power through a softer employment environment and gain momentum into 2027. He noted that quantifying direct benefits is challenging, but these investments are crucial for achieving sustainable mid-single-digit growth, which is UniFirst's top priority.

Kartik Mehta of Northcoast Research asked for clarification on the timing of benefits from UniFirst's margin-impacting investments, specifically whether any positive impacts are anticipated in the latter half of fiscal 2026 or if they are primarily expected in fiscal 2027. He also inquired if the benefits from investments in the sales and servicing parts of the business could be quantified.

Answer

President and CEO Steve Sintros explained that ERP-enabled benefits related to inventory management and procurement are largely expected in fiscal 2027 and beyond. However, investments in sales and service are designed to build momentum throughout fiscal 2026, helping to navigate a potentially softer employment environment and accelerate growth into the following year. Mr. Sintros noted that quantifying these benefits is challenging, but emphasized that sales investments aim for effectiveness and efficiency, while service investments leverage organizational stability to enhance retention, cross-selling, and pricing strategies.

Kartik Mehta from Northcoast Research inquired about the new sales environment, the status of the add/stop metric, and whether customer caution is affecting the sale of ancillary products.

Answer

President & CEO Steven Sintros reported that new sales momentum is incrementally positive compared to six months prior but not a dramatically different component of overall growth. He confirmed that the add/stop metric, which turned negative last quarter, remains negative and slightly more so in Q3. Sintros also acknowledged that general customer caution likely has some impact on ancillary product sales, but the company remains optimistic about the long-term penetration opportunity.

Kartik Mehta inquired about the potential impact of tariffs on the business, given its manufacturing presence in Mexico, and asked for an update on the pricing environment for both new and existing customers.

Answer

President and CEO Steven Sintros explained that no specific impact from potential tariffs has been factored into guidance due to the high level of uncertainty. He acknowledged a possible short-term impact but expressed confidence in the company's ability to pivot. Regarding pricing, he stated the environment is unchanged from the prior quarter, with customers remaining sensitive to price adjustments and the market for new accounts staying highly competitive.

Kartik Mehta of Northcoast Research asked for details on pricing trends, specifically comparing the environment for new versus existing customers. He also inquired about the 'add-stop' metric and trends in employee levels at customer locations.

Answer

CEO Steven Sintros explained that new business pricing remains highly competitive, while the dynamic with existing customers is challenging as post-inflationary contract renewals are negotiated. He emphasized that providing a superior customer experience is key to maintaining pricing. On the add-stop metric, Mr. Sintros confirmed that net wearer levels declined and were 'a little weaker' this quarter compared to the prior year, reflecting some broad weakening at the existing customer base.

Kartik Mehta from Northcoast Research asked about the current status of wearer additions versus stops ('ad stops'), questioning if they are neutral or have turned negative. He also sought clarification on whether UniFirst is still able to secure price increases from its existing customer base.

Answer

President and CEO Steven Sintros confirmed that net wearer metrics have become slightly negative, showing a consistent sequential decline through fiscal 2024, which points to a softer hiring environment. Regarding pricing, he stated that while UniFirst can still achieve increases from existing customers, the magnitude is less than it was two years ago, as more clients are challenging prices upon renewal, a trend he views as cyclical.

Kartik Mehta inquired about the revenue trends and any volatility observed throughout the quarter in major markets, the specific drivers of gross margin pressure beyond perm and outplacement, and whether there was any change in the level of customer uncertainty.

Answer

EVP and CFO Jack McGinnis detailed improving trends in France and Italy during Q3, with the U.S. being more stable but experiencing volatility due to year-over-year RPO volumes. He attributed staffing margin pressure primarily to a mix shift towards enterprise clients, noting no dramatic changes in pricing. Chairman and CEO Jonas Prising stated clients are increasingly resilient to policy fluctuations, viewing them as a 'feature,' and anticipate improved visibility into 2026.

Kartik Mehta inquired about the consistency of trends throughout Q3, any volatility observed, and further details on gross margin issues beyond perm and outplacement, specifically regarding price pressure or other mix impacts. He also asked about the perceived level of customer uncertainty.

Answer

EVP and CFO Jack McGinnis noted improving trends in France and Italy during Q3, with the U.S. being more stable despite RPO volatility. He reiterated that staffing margin pressure was mainly due to a mix shift towards enterprise clients, with no dramatic changes in pricing. Chairman and CEO Jonas Prising stated that clients are increasingly resilient to policy fluctuations, with tariffs settling, and expectations for an improved economic environment in 2026, leading to more stability in the outlook.

Kartik Mehta from Northcoast Research Partners LLC asked about intra-quarter trends and whether the challenges in Northern Europe and the UK are cyclical or indicative of a structural issue.

Answer

EVP & CFO Jack McGinnis described trends as relatively steady, with the U.S. Manpower business improving during the quarter and Italy showing continued strength. Chairman & CEO Jonas Prising stated that the issues in Northern Europe are believed to be largely cyclical, driven by economic headwinds and exacerbated by the region's 'bench model' legislative framework, with an expectation that these markets will recover as the economy turns.

Kartik Mehta asked a broader question about whether technology platforms like LinkedIn are having a structural impact on the temporary staffing industry, and followed up by asking if the passage of the French budget and tax hike had negatively impacted demand.

Answer

CEO Jonas Prising attributed the industry's recent challenges, particularly in the U.S., to post-pandemic anomalies like labor hoarding rather than a structural technology shift, with the exception of AI impacting specific roles like software programming. Regarding France, CFO Jack McGinnis noted that the resolution of budget uncertainty actually helped demand improve through the quarter, with January being the weakest month and trends stabilizing afterward.

Kartik Mehta asked about the company's current capacity levels after cost-cutting measures and inquired whether the pricing environment has seen increased competitive pressure.

Answer

Chief Executive Officer Jonas Prising stated that the company has intentionally preserved capacity by not cutting SG&A in line with gross profit declines, leaving 'ample space' to capitalize on a recovery. He described the pricing environment as competitive but rational, attributing the slight gross margin decline to business mix rather than price pressure, supported by ongoing structural talent shortages.

Kartik Mehta inquired about intra-quarter business trends across key geographies and the outlook for incremental margins following recent SG&A cost management initiatives.

Answer

CFO John McGinnis detailed the monthly performance, noting an Olympics boost in France, steady declines in the U.S., resilience in Italy, and persistent weakness in the U.K. He also stated that ongoing cost actions and back-office transformation are expected to improve EBITA margins by approximately 25 basis points upon completion, with further upside when market conditions improve.

Kartik Mehta requested a comprehensive summary of Cintas' perspective on economic changes over the last six months, highlighting key metrics that have improved, remained unchanged, or worsened. He also asked if Cintas was observing any changes in M&A prices or if sellers were lowering prices due to the current environment.

Answer

Todd Schneider, President and CEO, summarized that Cintas' business is performing very well with good momentum, noting improvements in the rental business and high performance across all three route-based businesses. He mentioned that the uniform direct sale business was a 30 basis point headwind, implying a 9% growth otherwise, and emphasized ongoing investments for future opportunities. He stated that there's no real change in M&A prices, as seller decisions are complex and influenced by various factors beyond market conditions, and Cintas focuses on leveraging its relationships and reputation.

Kartik Mehta requested a comprehensive summary of how the economy has changed in the last six months from Cintas's perspective, highlighting key metrics, what has improved, remained unchanged, or worsened, and also asked if there's been any change in M&A prices, specifically if sellers are lowering prices.

Answer

President and CEO Todd Schneider summarized that Cintas's business is performing very well with good momentum, noting improvements in the rental business and strong performance across all three route-based businesses. He mentioned the uniform direct sale business was a 30 basis point headwind in Q1, but overall growth would be 9% without it, and they are investing for a bright future. He stated there has been no real change in M&A prices, as predicting seller readiness is challenging due to various factors beyond economic conditions.

Kartik Mehta requested a comprehensive summary of Cintas' perspective on how the economy has changed in the last six months, specifically what key metrics have improved, remained unchanged, or worsened for each business segment.

Answer

Todd Schneider, President and CEO, summarized that the business is performing well with good momentum, highlighting improvements in the rental business and strong performance across all three route-based businesses. He noted that the uniform direct sale business was a 30 basis point headwind to overall growth in Q1, but if adjusted, total growth would have been 9%. He reiterated Cintas' ongoing investments for future growth and value provision to customers. For a follow-up on M&A pricing, Mr. Schneider stated there's no real change in M&A prices, explaining that predicting when a seller is ready is challenging due to various factors like succession planning, health, and future business outlook. He emphasized Cintas' focus on leveraging relationships and its strong reputation to be well-positioned for opportunities.

Kartik Mehta from Northcoast Research questioned how much of the First Aid business's double-digit growth is attributable to pricing. He also asked about the current role and impact of artificial intelligence at Cintas.

Answer

President & CEO Todd Schneider clarified that pricing in the First Aid business is at historical levels and that the vast majority of its growth is driven by volume. Regarding AI, he described it as being in the 'early innings' for Cintas but part of a long-term technology investment strategy. He expects AI to yield incremental improvements over many years by making work easier for employees and business easier for customers.

Kartik Mehta from Northcoast Research inquired about the role of pricing in the First Aid segment's growth and asked about the company's current use of and investment in artificial intelligence (AI).

Answer

President & CEO Todd Schneider clarified that pricing in the First Aid business is at historical levels, meaning the segment's strong growth is driven primarily by volume. Regarding AI, he described it as being in the 'early innings' for Cintas but part of a broader, long-term technology investment strategy. He sees opportunities for AI to improve efficiency and make it easier for employees and customers to do business, with benefits expected incrementally over many years.

Kartik Mehta from Northcoast Research Partners LLC asked if the company is at an inflection point for sustained revenue growth, given the positive Q3 outlook. He also inquired about current trends in pricing competition.

Answer

CEO Taryn Owen expressed encouragement about the momentum and stabilization but noted that clients still seek more certainty before confidently planning workforce needs. CFO Carl Schweiss addressed pricing, stating that bill rates grew 1.8% while pay rates grew 1.2% in the quarter, leading to a 10 basis point margin improvement and demonstrating pricing discipline. CEO Taryn Owen added that a new in-app pricing quote feature in JobStack has seen nearly 100% acceptance since its June launch.

The analyst asked about business trends throughout the quarter and into October, the potential impact of the holiday season on customer behavior, and the expected incremental margin leverage when revenue growth returns.

Answer

Executives confirmed that October trends were in line with their Q4 guidance. They noted that customer sentiment remains cautious and uncertain, which is reflected in the guidance. Regarding leverage, they stated that due to significant cost-saving actions, they expect incremental margins to be north of 20% (up from a historical 15-20%) when revenue growth returns, leading to higher profitability than seen historically.

Kartik Mehta of Northcoast Research inquired about business trends during the quarter and into October, the potential impact of the holiday season, and the expected operating leverage and incremental margins when revenue growth returns.

Answer

CFO Carl Schweihs reported that October trends were in line with the Q4 guidance provided. Executive Taryn Owen noted that customer sentiment remains cautious. Regarding leverage, Carl Schweihs stated that due to over $70 million in cost savings, a 10% revenue growth scenario should yield incremental margins of 20-22%, an improvement over the historical 15-20% range. Taryn Owen added that organizational changes are also improving operational metrics like fill rates and cross-selling.

Kartik Mehta asked about the monthly business trends throughout the quarter, any early signs of success from the new PeopleReady field sales representatives, and how the performance of the recently acquired HSP business compared to expectations.

Answer

Executive Taryn Owen noted that PeopleManagement returned to growth and that momentum in both PeopleManagement and PeopleReady continued into April. CFO Carl Schweihs provided specific exit rates, with PeopleReady at -8% and PeopleManagement at +4% in March, and confirmed that sales-enabled territories are outperforming the rest of the business. Schweihs also stated that HSP's financial results were in line with expectations for Q1.

Kartik Mehta of Northcoast Research Partners LLC inquired about the company's intentions for its new share buyback authorization, the timeline for the ongoing strategic review, and the strategy for the Presort business regarding customer pricing and margins.

Answer

CEO Kurt Wolf explained that while he couldn't comment on future buyback activity, the company's past actions and his own incentive structure indicate a belief that the stock is undervalued. He noted the strategic review's internal phase will likely continue through 2025, with the new CFO expected to accelerate the process. Regarding Presort, Wolf stated the focus is on maximizing absolute EBIT dollars rather than margin percentages, correcting a past 'unforced error' of losing profitable customers over price concessions.

Kartik Mehta of Northcoast Research inquired about the revenue impact of shifting to lease extensions in SendTech, recent developments at the USPS, and potential customer hesitation in Presort due to tariff uncertainty.

Answer

Executive Robert Gold explained that lease extensions create more stable, predictable revenue streams without eliminating new equipment sales. CEO Lance Rosenzweig affirmed the company's strong, century-long partnership with the USPS, noting he recently met with their leadership. He also mentioned observing some anecdotal, non-material deal delays due to macro uncertainty but no significant impact on the Presort business.

Kartik Mehta asked about the volume expectations for the Presort business in 2025 and what specific metrics the Board will monitor before executing the new share repurchase authorization.

Answer

Interim CFO John Witek responded that Presort volumes in 2025 are expected to be similar to the prior year, with the key variables being the mix of mail types and potential for unplanned project work. CEO Lance Rosenzweig added that the execution of the share buyback will be guided by the flexibility within their newly renegotiated debt covenants, leverage ratios, cash flow generation, and attractive market opportunities.

Kartik Mehta asked about the primary competitors in the SendTech shipping business and requested more detail on the cash generation opportunity from selling lease receivables to the Pitney Bowes Bank.

Answer

CEO Lance Rosenzweig identified competitors in the shipping space as companies like Octane and in-house solutions, emphasizing that Pitney Bowes differentiates itself with a comprehensive technology platform for shipping optimization, analytics, and security. CFO John Witek elaborated on the PB Bank program, stating that while they are still evaluating the full potential, the goal is to expand the program by approximately $100 million in net earning assets over the next several years, which would benefit both the bank and the parent company.

Kartik Mehta asked why Intuit lowered its long-term tax guidance despite strong momentum in its Live products and also inquired about the current health of its small business customers.

Answer

CEO Sasan Goodarzi explained the guidance adjustment was a prudent measure. While the high-growth TurboTax Live is performing well, it still represents only 30% of the Consumer franchise. The adjustment reflects this mix until Live becomes a larger majority. On the health of small businesses, Goodarzi described the environment as 'stable,' noting that while cash reserves are down slightly year-over-year, they remain well above pre-pandemic levels, and business revenue and profitability are up.

Asked if there are any signs of a slowdown in corporate spending for the GES business. Also inquired about the M&A environment for Pursuit regarding valuations, and the current labor situation for the upcoming season.

Answer

The executive reported no signs of a slowdown in GES corporate spending; demand remains strong. Regarding Pursuit M&A, they see many opportunities but did not comment on valuations, stating they will act when the timing is right. The labor situation for Pursuit is very positive, with the company being fully staffed for the upcoming season, a significant improvement over prior years.