PAYX

• Incorporating AI (including generative AI) into solutions via WISE creates risks of inaccurate outputs, bias, regulatory exposure, and customer rejection.
• A large April 2025 debt issuance ($4.2B) to fund the Paycor acquisition imposes leverage (3.5x) and interest coverage (2.0x) covenants that could constrain operations.
• The PEO business faces co-employment liability, rising health and workers' compensation claims costs, and regulatory uncertainty that could materially raise expenses.
• Cyberattacks and data breaches threaten sensitive payroll, tax, and health data; a breach could cause customer loss, regulatory fines, and reputational harm.
• Macroeconomic factors—inflation, interest rates, tariffs, banking instability—may reduce customer spending, shrink the client base, and lower interest income on client funds.

We owned and leased the following properties as of May 31, 2026: Square feet Owned facilities: Rochester, New York 832,000 Cincinnati, Ohio 136,000 Other U.S. locations 30,000 Total owned facilities 998,000 Leased facilities: Rochester, New York 53,000 Cincinnati, Ohio 167,000 Other U.S. locations 605,000 International locations 235,000 Total leased facilities 1,060,000 Our facilities in Rochester, New York and Cincinnati, Ohio house various distribution, processing, and technology functions, certain ancillary functions, a telemarketing unit, and other back-office functions. Facilities outside of Rochester, New York are in various locations throughout the U.S. and house our service centers, fulfillment centers and sales functions. Our International locations primarily consist of our European operations in Denmark and Germany, our Canadian operations, and locations in India, Serbia and Israel which house information technology, service, and sales support functions. During fiscal 2026, three leased premises in Other U.S. locations and one lease in an International location were vacated upon lease expiration. 17 Table of Contents

We are subject to various claims and legal matters that arise in the normal course of our business. Refer to Note Q of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K for further discussion of our legal proceedings, if any.

• Management Solutions revenue grew 20% to $4.9B, with the Paycor acquisition contributing approximately 15 percentage points of that growth alongside higher revenue per client.
• PEO and Insurance Solutions revenue increased 7% to $1.4B, supported by growth in average worksite employees and higher PEO insurance revenues.
• Interest on funds held for clients jumped 30% to $210.9M, benefiting from higher average investment balances from the Paycor acquisition and realized gains from a portfolio repositioning.
• Total expenses rose 19% to $4.0B, led by a 13% increase in compensation costs from higher headcount, an 87% jump in acquisition-related costs to $304.2M, and a 28% rise in other expenses for technology and selling investments.
• Operating income grew 14% to $2.5B, while adjusted operating income, which excludes acquisition-related costs, increased 19% to $2.8B, expanding adjusted operating margin to 43.2%.
• Net cash from operations was $2.6B, and the company ended the year with $1.2B in cash and corporate investments, $4.6B in long-term borrowings, and $2.0B in unused credit facilities.

• The combined investment portfolio averaged ~$7.4B in fiscal 2026, allocated roughly 35% to short-term securities/VRDNs (<30 days duration) and 65% to AFS securities (2–3.25 years target duration).
• A 25-basis-point change in short-term taxable rates is estimated to impact after-tax earnings by approximately $4.5–5.0 million over twelve months under normal conditions.
• A hypothetical 25-basis-point decrease in longer-term rates would increase the fair value of the AFS portfolio by approximately $30–35 million, with an offsetting entry in stockholders’ equity and no immediate P&L impact absent credit impairment.
• As of May 31, 2026, AFS securities of $3.0B had fair values below amortized cost, but the $59.8M gross unrealized loss was attributed to interest-rate movements, not credit concerns; most positions held an AA rating or better.
• Credit risk from client funds and trade receivables is diversified; no single customer is material, and accounts receivable purchases are under non-recourse arrangements.
• The company has no exposure to high-risk or non-liquid investments and insignificant exposure to European investments.

• Management assessed internal control over financial reporting as effective as of May 31, 2026, using the COSO 2013 framework.
• PricewaterhouseCoopers LLP issued an unqualified opinion on both the consolidated financial statements and the effectiveness of internal control over financial reporting.
• The auditor identified PEO workers' compensation insurance reserves ($237.7 million liability) as a critical audit matter due to significant management judgment and actuarial assumptions.
• The audit involved testing controls and using independent actuarial specialists to evaluate the loss development factors and overall reserve estimate.
• The report acknowledges inherent limitations of internal controls, noting they may not prevent or detect all misstatements.