Kartik Mehta • Northcoast Research

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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CEO Kurt Wolf explained that while he couldn't comment on future buyback activity, the company's recent repurchase rate and his own option-based incentive structure indicate where management sees value. He noted the strategic review's internal phase will likely continue through 2025, with the external phase beginning in 2026. Regarding Presort, Wolf stated the focus is on maximizing EBIT dollars, even if it means accepting lower margin percentages to retain profitable customers, a strategy he believes is viable due to the company's operational efficiency.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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President & CEO John Gibson stated that value realization is currently better than pre-pandemic levels and remains at the high end of the company's historical range, driven by a focus on acquiring high-value clients. CFO Bob Schrader explained the float strategy is consistent, with the newly acquired Paycor funds being invested longer-term to lock in current rates, which are higher than those on maturing securities.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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