Will Chi

Will Chiu asked about the go-to-market strategy and monetization of AI products, specifically if they lend themselves to more pricing power, help offset costs with productivity improvements, or if any uplift from these products is expected as adoption increases.

Answer

CEO John Gibson explained that AI will improve the value proposition by enabling Paychex to do more for clients at potentially less cost and provide more insights. He anticipates AI-forward customer experiences across all platforms will attract and retain clients. While some AI features will enhance existing bundles to support price increases, others, like Retention Insights and Compensation Insights (leveraging 250M+ data points), offer unique value to small and medium businesses that they may be willing to pay incrementally for. Mr. Gibson emphasized Paychex's historical role in democratizing enterprise-level solutions for smaller businesses and expects AI to continue this trend, driving value, differentiation, and potentially new revenue streams.

Will Chi, on for Ashish Sabadra, asked for comments on the competitive landscape and an update on the company's capital allocation strategy.

Answer

CEO John Gibson stated that the competitive market has not seen any major shifts and remains competitive. Executive Robert Schrader confirmed there is no change to the capital allocation strategy, which prioritizes investing in the business, maintaining the dividend, and pursuing M&A. He added that the near-term focus will be on successfully integrating Paycor, with no other significant M&A expected.

Will Chi asked for commentary on Rate Per Contract (RPC), specifically the impact of a lower proportion of micros and decreased volume tiering, and whether the shift in micros indicates changes in retail trading behavior.

Answer

Lynne Fitzpatrick, CFO, explained that the largest impact on RPC came from the shift in micros, particularly in equities, where the proportion of micros decreased from 47% to 43% of volume, leading to an uplift in equity RPC. She noted that it's challenging to fully disaggregate the impacts of these shifts from other factors like customer mix.

Will Chi asked for commentary on Rate Per Contract (RPC), specifically the impact of a lower proportion of micros and decreased volume tiering, and whether the shift in micros indicates changes in retail trading behavior.

Answer

Lynne Fitzpatrick, CFO, CME Group, explained that the largest impact on RPC came from the shift in micros, particularly in equities, where the proportion of micros decreased from 47% to 43% of volume, leading to an uplift in equity RPC. She noted similar contributions in metals but stated it's challenging to fully disaggregate these shifts due to the complexity of customer mix.