On Wednesday, Paychex (NASDAQ:PAYX) discussed fourth-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Paychex Inc reported strong financial performance for the fourth quarter and full fiscal year 2026, with total revenue increasing 12% in the fourth quarter to $1.6 billion and 17% for the full year to $6.5 billion.
The company highlighted its strategic focus on expanding its upmarket offerings, strengthening advisory differentiation, and advancing AI capabilities with the launch of WISE, an AI-powered intelligence engine.
For fiscal 2027, Paychex expects total revenue growth of 5-6%, with adjusted diluted earnings per share growth projected at 7-9%.
Operational highlights include record worksite employee retention in ASO and PEO, and significant progress in integrating the Paycor acquisition, contributing to revenue growth and cost synergies.
Management emphasized the benefits of their AI initiatives, noting that WISE is helping to enhance productivity and deliver better client outcomes, and is expected to drive long-term value creation.
Full Transcript
OPERATOR
Good morning everyone and welcome to Paychex’s fourth quarter fiscal 2026 earnings call. Participating on the call today are John Gibson and Bob Schrader. Following these speakers’ prepared remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star two on your telephone keypad.
As a reminder, this conference is being recorded and your participation implies consent to our recording of this call. I would now like to turn the call over to Mr. Bob Schrader, Paychex’s chief financial officer. Please go ahead sir.
Bob Schrader, Chief Financial Officer
Thank you for joining us to discuss Paychex’s fourth quarter and full year fiscal 2026 results. Our earnings release and presentation are available on our investor relations website. We plan to file our form 10-K with the SEC before the end of July. This call is being webcast live and will be available for replay on our investor relations portal. Today’s call includes forward-looking statements that refer to future events and involve some risk. We encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ from our current expectations.
We will also reference non-GAAP financial measures. A description of these items along with the reconciliation of non-GAAP measures can be found in our earnings release. I would now like to turn the call over to John Gibson, Paychex’s President and CEO.
John B. Gibson, President and Chief Executive Officer
Thanks Bob. I’ll begin with our operational highlights for the quarter and the full year and then Bob will discuss our financial performance and outlook before we open the calls for your questions. We finished the year with strong momentum, delivering double-digit revenue and earnings growth in the fourth quarter and the full year while also accelerating organic revenue growth in each quarter. Our team executed well against our strategic priorities expanding upmarket, strengthening our advisory differentiation and advancing our AI capabilities to drive better client outcomes.
Our mission is simple: Help businesses succeed today. Customers are managing more work and complexity than ever before and want more than just the tool; they want a trusted partner that can help them manage cost, attract and retain talent, and navigate a dynamic regulatory landscape. That trust is reflected in our strong client retention across our payroll clients who rely on Paychex for support and advice across a growing number of solutions. Our differentiated advisory and benefits solutions, including ASO, PEO, and retirement, continue to resonate in the market and drive robust revenue growth.
While other providers offer fragmented tools or limited support models, we believe we stand apart by combining technology with trusted human expertise to help customers solve their most important workforce challenges. That differentiation is driving higher engagement in our HR. Outsourcing in ASO engagements increased more than 60% this year alone, reflecting growing demand for support navigating an increasingly complex HR landscape. We believe our investments in go-to-market and technology strengthened our value proposition and contributed to record worksite employee retention in ASO and PEO this year.
PEO in particular remains a key growth driver. PEO worksite employee growth continued to outpace the industry with high single-digit growth in the quarter and full year. The comprehensive solution helps businesses manage regulatory complexity and offer competitive benefits, often with little or no in-house HR staff. We continue to see a long secular runway for growth in this business. Building on our advisory strength, we launched WISE, also known as our Workforce Intelligence Strengthened by Expertise, which is our AI-powered intelligence engine.
WISE extends our capability into agency AI and is powering approximately 600 AI features and agents embedded into the workflow. WISE moves beyond insights and assistance to autonomous execution, helping scale our expertise, enhance productivity, and deliver better client outcomes, all with human-in-the-loop oversight, available on-demand support, and strong governance. We believe differentiated access to large data sets will be a key driver of AI leadership and that Paychex is exceptionally well-positioned.
For more than 50 years we have been at the center of HR, payroll, and benefits, giving us access to a vast proprietary and growing amount of data. WISE now draws on more than 26 trillion data points, helping make our solutions smarter, more relevant, and more proactive. What makes this unique is our patent-pending AI Knowledge Mesh technology which helps unlock insights from unstructured data including emails, calls, and other client interactions and turns it into actionable intelligence.
We believe that our unique technology, large data set, and deep HR and compliance expertise make our AI-enabled HR solutions truly unique in the market. We’re already seeing the benefits in practice with meaningful reductions in administrative work; we can now automatically create and update client employee handbooks as regulations or business needs change in real time. Our workforce management solutions intelligently generate schedules in minutes instead of hours and reduce timesheet approvals by more than 50%.
Reflecting on our commitment to flexible service models, clients can submit payroll by phone or email through a service experience powered by WISE. In addition, our agency payroll solutions have continued to scale significantly, reducing wait times while maintaining the accuracy our clients expect. Over time, we see WISE as a meaningful driver of long-term value creation through direct monetization opportunities as well as indirect benefits including stronger upsell, higher revenue per client, improved retention, and greater pricing power.
As AI automates more routine tasks, we believe differentiation will increasingly come from compliance expertise, advisory capabilities, proprietary data, and trusted execution areas where we believe Paychex is structurally advantaged. Those strengths, combined with continued investment in our innovation roadmap, will position us well for the long-term AI leadership in our category. Turning to our enterprise business, we continue to perform well upmarket among clients with more than 100 employees.
We exceeded our fiscal year 26 synergy targets associated with the Paycor acquisition, contributing more than 50 basis points to revenue growth and generating over $100 million in cost synergies. We continue to make progress cross-selling advisory offerings such as ASO, Retirement, and PEO into the Paycor base and are winning larger deals than originally anticipated. We also saw continued traction in the broker channel, including two new national partnerships this quarter alone, reinforcing our position as a preferred choice for HCM referrals.
During fiscal year 26, we completed the organizational and sales territory realignments associated with moving the Paycor under 100 employee businesses into our SMB segment and integrating the Paychex hundred-plus businesses into our Enterprise segment. We enter fiscal year 27 with clearly aligned teams, brands, and platforms focused on the specific needs of each market segment. All of this is powered by our scaled, modernized, and modular infrastructure, including our new modern tax engine which we expect to further enhance through integration with our WISE Intelligence engine.
Beyond shifting upmarket, two emerging growth areas for us are expanding employee-based revenue streams and growing beyond our payroll base. We introduced Perks, our digital benefits marketplace, less than two years ago and today more than 400,000 unique employees have already purchased affordable transferable benefits through the marketplace. We are now expanding access to Perks to employees on the Paycor platform, increasing our addressable market by more than 2.5 million employees.
More broadly, we now see meaningful opportunities to grow beyond our traditional payroll base. Historically, many of our solutions could only be sold in connection with a client being on our payroll platforms. With the modernization of our underlying infrastructure now complete, we are developing more payroll-agnostic and standalone AI-enabled solutions which we believe will significantly expand our addressable market to help more businesses succeed.
Our momentum this year is also being recognized externally. Time named Paychex one of America’s top work tech companies and Newsweek recognized us as one of America’s most trustworthy companies and greatest workplaces. This underscores the strength of our brand, culture, and the trust we have built with clients and employees. Taken together, this progress reflects strong execution against our strategic priorities. From integrating the largest acquisition in our history to modernizing our infrastructure and rolling out WISE across our HCM platforms and operations, we believe we enter fiscal year 27 well-positioned for continued growth and long-term leadership in the AI era of HCM. I will now turn the call over to Bob to discuss our financial performance and outlook.
Bob Schrader, Chief Financial Officer
Thank you, John. I’ll begin with our fourth quarter and full year financial results and then I’ll share our outlook for fiscal 27. For the fourth quarter, total revenue increased 12% over the prior year to $1.6 billion, reflecting the mid-quarter anniversary of the Paycor acquisition. As John noted, we accelerated organic revenue growth in each quarter this fiscal year. Management Solutions revenue grew 14% to $1.2 billion, driven by product penetration, price realization, and approximately 8 percentage points of growth from Paycor.
PEO and Insurance Solutions revenue increased 9% to $370 million, driven primarily by strong growth in PEO worksite employees as well as an increase in PEO insurance revenues. Interest on funds held for clients grew 15% to $52 million. Total expenses for the quarter were relatively flat as higher compensation, amortization, and continued investments in our strategic priorities were offset by lower acquisition-related costs. Operating income margins increased approximately 750 basis points to 37.7%.
Adjusted operating income margins increased by approximately 170 basis points to 42.1% for the quarter. This was driven by increased productivity and cost discipline while increasing our investments in AI. Diluted earnings per share increased 43% to $1.17 per share and adjusted diluted earnings per share increased 11% to $1.32 per share. Turning to the full year results, for the full year, we delivered on our total revenue guidance, accelerated our organic growth in the back half of the year, and exceeded our earnings guidance.
After raising expectations twice during the year, total revenue increased 17% over the prior year to $6.5 billion. Management Solutions revenue grew 20% to $4.9 billion. PEO and Insurance Solutions revenue increased 7% to $1.4 billion. Operating income margins for the year were 38.6% and our adjusted operating income margins increased by approximately 70 basis points to 43.2%. Diluted earnings per share increased 7% to $4.89 a share and adjusted diluted earnings per share increased 11% to $5.51 a share.
Our financial position remains strong with cash, restricted cash, and total corporate investments of $1.2 billion and total borrowings of approximately $4.6 billion at the end of the quarter. Cash flow generation continues to be a key strength of our model. Our operating cash flows for the year increased 35% to $2.6 billion and our free cash flows increased 36% to $2.3 billion this fiscal year. Our capital allocation strategy remains focused on delivering long-term shareholder value.
This year we returned $2.2 billion to shareholders through $1.6 billion in cash dividends and $600 million in share repurchases. In addition to this, we reduced our leverage ratio a half a turn due to the combination of our strong earnings growth and repaying the initial $400 million tranche of debt from the OASIS acquisition that matured in March. We remain focused on the levers of long-term shareholder returns that are within our control, including strong EPS growth, sustained dividend growth, and disciplined capital deployment.
Our 12-month rolling return on equity remains robust at 45%. Turning to our guidance for fiscal 27, our outlook reflects the current macro environment as well as the assumptions that employment levels will continue to remain flat. For fiscal 27, we expect total revenue growth in the range of 5 to 6%. Management Solutions revenue growth is also expected to be in the range of 5 to 6%. PEO and Insurance Solutions revenue growth will be in the range of 6 to 7%.
Interest on funds held for clients is expected to be in the range of $195 to $205 million this year. The year-over-year decline reflects the full-year impact of the 75 basis points of cuts at the end of last calendar year and the lapping of one-time gains associated with the strategic portfolio repositioning we executed in the second quarter. The outlook also assumes no further changes in the Fed funds rate. Adjusted operating income margins are expected to be approximately 44% and our effective income tax rate is expected to be approximately 24%.
Adjusted diluted earnings per share is expected to grow in the range of 7 to 9%. Now I’ll provide a little bit of color on the first quarter expectations. We would expect total revenue growth to be consistent with our full-year guidance with an adjusted operating margin of 41 to 42%. And of course, this outlook is based on current assumptions as I mentioned and remains subject to change. Our business fundamentals remain strong as we enter fiscal 27.
As John mentioned, I think we’re exiting the back half of the year with strong momentum. We believe Paychex is exceptionally well-positioned to succeed in the AI era of HCM and continue delivering shareholder value. Our efficient operating model continues to generate industry-leading operating and free cash flow margins with meaningful opportunity for further expansion over time. The durability of our business, the strength of our cash generation, and our disciplined capital allocation support our confidence in continued revenue and earnings growth and sustained rule of 50 performance.
And now I’ll turn the call back over to John.
John B. Gibson, President and Chief Executive Officer
Thank you, Bob. We will now open the call to your questions.
OPERATOR
Thank you, Mr. Gibson. Ladies and gentlemen, at this time, if you do have any questions or comments, please press star 1. As always, you can remove yourself from the queue by pressing star 2. Additionally, we do ask that you please limit yourself to one question and one follow-up. We’ll go first this morning to Brian Keen with Citi.
Brian Keen, Analyst at Citi
Hey guys, good morning. Solid results. Just hoping you guys could talk a little bit about the trend in organic growth that you saw in the second half of the year. What are you guys calculating it as? And as we jump off here into fiscal year 27 with the range of 5 to 6%, what gets us to the low end? What gets us to the high end? For that, as we think about organic growth, bookings, trends, all that adds up to the numbers. Thanks.
Bob Schrader, Chief Financial Officer
Yeah, Brian, I’ll start and Jon can add some color. As you mentioned in your report last week or a couple of weeks ago, I mean, we’ve definitely continued to see a sequential improvement in the organic growth of the business. I think if you go back to this time last year, we were exiting last fiscal year at around 3%. We’ve nearly doubled the organic growth of the business with improvement each quarter as we move through the year. And so I think if you look at the Q4 numbers, the Q4 exit rate from an organic growth standpoint, I would say is largely in line with the guide that we provided.
And I think if you look at the midpoint of the management solutions and the PEO guide, I think you’ll get to a service revenue growth rate that pretty much is in line with the organic growth that we’re exiting the year at. Obviously next year there’s a little bit of a headwind. We had a tailwind this year from float with the Paycor balances and some other things. Next year there’s a little bit of a headwind. Expecting interest on funds to be down about 4% to 5%.
You got the full year impact of the cuts that happened last year, as I mentioned in the prepared remarks. And then we had some gains this year from some repositioning that we did earlier in the year. But I think those things added up together. I think get you to a guide next year that pretty much is in line with a strong organic growth improvement this year in where we’re exiting the year. Obviously it’s early on, so better performance would drive higher end.
We’re assuming a stable macro environment. We’re not expecting that to change. But the typical things that you’re aware of that could move the needle in one direction or another. I’d say the other thing, really strong momentum in bookings. We talked about this last quarter. I think you highlighted it in your report. Probably one of the stronger selling seasons that we had in Q3 and I think we followed that up. John can provide some more color on it, but we followed that up in Q4 with really another strong performance in bookings and it was really broad-based across many categories.
Certainly we’re benefiting from the Paycor acquisition. When you look at ASO, PEO, retirement, that’s really driving a lot of the growth, both of what you see in the P&L as well in bookings. And a lot of that is coming from the ability to go into Paycor’s base and upsell them those high-value solutions. So I don’t know if you have anything you want to add to that, John?
John B. Gibson, President and Chief Executive Officer
Yeah, no, I think if we go back a year on this call we kind of laid out, we went through a pretty significant integration of our enterprise business together and we said our view was as we execute the integration plan that we had, we believed that we were going to continue to build momentum each of the quarters. And I think there are probably some skeptics about the back half and I’m very pleased and proud of the team for what they delivered every quarter.
Bookings got better and better. Fourth quarter was better than the third quarter and the third quarter, as I said on our last call, was the best I’ve seen in 13 years here. So I feel good about the momentum we have going into this. Certainly having all the disruptions behind us is going to be a positive going into this. I would say the macro environment, despite all the potential challenges that we have going on globally around us, has been stable, no signs of recession.
And in fact if you look at our index, the last several reports have actually shown an increase in the index under 50. We continue to see good growth, I’d say solid growth, not good growth, but solid growth in the 50 plus. And we’ll be announcing our index next week and again I’m just amazed at the resiliency. So I think we’re going into this year with all the disruptions behind us with better focus. Our product roadmap, our integration roadmap is just really accelerating.
AI is helping us accelerate that even more in terms of the development roadmap. And so I’m very encouraged about what the setup is going into this fiscal year.
Brian Keen, Analyst at Citi
Great. And just as a follow-up, just thinking about the launch of Wise and AI in general, how do we think about the potential revenue opportunities that AI could bring Paychex and how long will it take maybe to start developing some of those?
John B. Gibson, President and Chief Executive Officer
Well, I would say we’re already generating some revenue from that. We’ve launched several components of Wise. Some of that is in the reporting area. So what I would say enhancements to our current reporting capabilities and we’ve launched that into our client base. We’ve gotten good success there. When you look at it at this point in time, we also did our intelligence timekeeping in Flex. We currently have about 10,000 customers that are in our soft launch of that.
And again, we think that’s going to be another opportunity. What we’re seeing there in terms of just time savings, but more importantly error predictions. So we’re actually cutting errors down like 70% up front. And so what I see that’s going to be a good value upsell opportunity for us as we go into the year. So I think we’re early in figuring out the monetization. I would say a lot of what we’re getting right now from Wise has been turned internally.
So our service concierge, where now all of our service individuals have access to all of our knowledge systems across all of our products and services instantaneously. And then also what we’re calling the sales guru, which is a Wise-based product which again gives access to all of our data sets across all of our platforms and all of our service and sales interactions to our salespeople in real time to be able to both plan their calls appropriately and offer the right solution for the client.
So a lot of it right now is internally we’re starting the product roadmap. You know, we’ve launched the first kind of AI-based product we launched was in 2022 with Retention Insights. And now what we’ll do is we’re going back and looking at refreshing those legacy AI products with the Wise platform.
Brian Keen, Analyst at Citi
Okay. Great. Thanks for taking the questions.
John B. Gibson, President and Chief Executive Officer
Thanks, Brian.
OPERATOR
We’ll go next now to Mark Marcon with Baird.
Mark Marcon, Analyst at Baird
Hey, good morning, John and Bob. And thanks for taking my questions. John, I wanted to ask you about a couple of strategic elements. First of all, you mentioned that you’re developing payroll agnostic solutions, you know, in order to help businesses to a greater extent. Can you talk a little bit more about that in terms of what your outlook is for that? You know, when should investors, you know, expect the launches? What areas do you think you can go into? And with the AI tools in terms of coding, how quickly do you think you can do that?
John B. Gibson, President and Chief Executive Officer
Well, I think we have been doing. So this has been a long-term project. Let me step back, Mark. We have been investing really since kind of the COVID ERTC era, when we had the opportunity to take some of the cash flow that was being generated during that time. And we looked across the platform and said, how do we want to modernize our back office and our operating layer? And as you all know, our operating layer of our business is best in class. That’s how we get the margins we do.
We wanted to modernize it, we wanted to modulize it and really allow us to begin to offer more products and services on a standalone basis. Because most of our products and services that we’ve built at Paychex, we really didn’t have the means to bill a client, to engage a client separately outside of being part of our HCM payroll infrastructure. And so one of the key things we wanted to do was break that apart, break our tax engine apart from break all the payments orchestration that we do apart.
So all of that has been done and finally completed over the past fiscal year. So what we have today is the capability that if a customer would leave our HCM platform but enjoy our insurance agency, they can now stay with our insurance agency. That’s something a lot of times it did not happen in the past. Someone leaves our HCM platform and they like our 401 product. We could do that. It also gives us the potential to partner with those separate products separately as well, something we’ve historically not done.
So we look at it as a big opportunity for us. That investment that we’ve made in that back office infrastructure is what allowed us to launch perks because it also allows us to treat every one of our clients, employees as potential standalone customers. And again, they can continue to be a customer of Paychex even if they leave their current employer and even if they’re not on one of our HCM platforms. So you know, this is in the early innings of really getting this put together.
Of course, we’re going to look at the economics both in terms of go to market and capability. But what I would tell you, it enhances our ability to retain customers in some way across our multiple products. It gives us new go to market opportunities and it gives us new customer segments that we could potentially go after. I also believe, particularly as it pertains to Wise and what we’re putting together in terms of HR compliance and real-time advisory solutions that can be digitally enabled with our HR people in the background.
I think that could be valuable for customers, small and mid-sized customers or HR professionals, whether or not they’re on one of our platforms or not. And so certainly one of the things I think is a great potential for us to help businesses succeed is to be able to turn our 50 plus years of HR advisory and HR and payroll and tax compliance capabilities and monetize that for the benefit for a broader market. And those are things we’re considering as well.
Mark Marcon, Analyst at Baird
Could you also get into more of the office of the CFO or the office of the CTO from a longer-term perspective?
John B. Gibson, President and Chief Executive Officer
I think Mark, at this point in time we see the opportunity within HR, particularly in the segment we serve, to be the best place for our investment in time. We still have a lot of opportunity I think, and particularly most of our clients don’t have an HR department. HR is becoming more complex. I think at this point in time what we’re focused on is continuing to do that and also try to put into our marketplace for their employees a set of benefit solutions that allows a small employer to mimic a large employer in terms of what benefits they can offer an employee without having to contribute to that from a financial perspective because those are the things that we hear from our small clients all the time that is more important to them than us helping help be their CFO at this point in time.
Mark Marcon, Analyst at Baird
That’s great. Thank you so much.
John B. Gibson, President and Chief Executive Officer
Thanks Mark.
OPERATOR
We’ll go next now to Andrew Nicholas with William Blair.
Andrew Nicholas, Analyst at William Blair
Hi, good morning. Appreciate you taking my question. You’ve hit on a few of the reasons, but I was just hoping you could expand on kind of what drives your conviction in the HRMS acceleration next year on an organic basis and any color you could provide on kind of expected growth by market segment would be helpful between mid-market and enterprise.
John B. Gibson, President and Chief Executive Officer
Yeah, well look, I think that we feel very confident across the portfolio again as we see we’ve had continued momentum across the portfolio throughout the year when you look at the enterprise side, continue to see good growth there as we combine the groups together. You go back and look at our enterprise bookings in the fourth quarter, we had the highest booking dollar volume we’ve had all year. And I think as we told you before, that it continued to build through the third quarter.
We’ve continued to add partners there. And I just think with the integration behind us and all the disruption that caused and having the focus, I think we’re entering the year very well focused with a good set of products and services going to market. Then when you look across HR solutions and benefits retirement, the acceleration there has just been phenomenal. It just really has and not stopped. Our bookings have continued to grow in those areas, continued to show strong retention, continued to see strong cross-sell across the various teams.
I think that cross-sell motion is really getting going, particularly in the legacy Paycor sales teams. I think they’re trying to finally figuring out how they can leverage the full power of Paychex to drive not only meetings, but also to drive deals coming to closure. So I feel good about where we are again heading into this fiscal year just with everything behind us. And I think all the things are in place, the organizational components are in place, the technology components and all the focus we’ve been having on what I would say and you guys don’t see it, what we see, all the inside work we’ve had to do in finishing the transformation of our operating layer, dealing with all the integration issues, with the largest integration we’ve had, all the internal things we needed to do organizationally around that, from a sales and sales territory perspective, you guys don’t see that we’ve been seeing that and now to not have to be focused on that and to be able to totally focus on execution and then the tailwinds that I’m seeing in product development from AI utilization there, that’s going to accelerate our ability to execute the roadmap faster.
And the benefit that I’m seeing, both our sales and service teams are having in leveraging these tools, these Wise tools that we’ve launched to them over the last quarter and the benefits we’re seeing in their productivity really makes me encouraged about how we’re setting up for this year.
Bob Schrader, Chief Financial Officer
The other thing I would just add from a conviction standpoint, Andrew, I think this next fiscal year sets up a lot differently than last fiscal year for all the reasons that John highlighted. But in addition to hit last year’s guide, the 26 guide, there was an acceleration that was required in the back half, there were reasons for that. Some of it was on the compares, but we certainly delivered that. But now I think as we go into next fiscal year, John talked about all the momentum that we have exiting this year, and really what we’ve set up next year from a guide standpoint is pretty much in line with what we’re delivering and what we’re exiting the year. So certainly from a conviction standpoint, the year sets up much differently than last year did. We don’t have this big ramp in the second half. We delivered it like we mentioned, but it certainly gives us a lot more confidence just given the, you know, the momentum that we have exiting this year and not having to deliver a significant step up as we move through the year.
Andrew Nicholas, Analyst at William Blair
Helpful. Thank you. And then maybe I just switch over to PEO and insurance services. That was a result that was quite a bit better than what we expected. Can you walk through kind of what PEO revenue looks like compared to insurance services in the quarter and kind of level set where we’re at, heading into 27 in terms of the health care plan and those dynamics that you were kind of fighting against at the beginning of 2016? Thank you.
Bob Schrader, Chief Financial Officer
Yeah, I mean, the underlying operating performance for the PEO business has been strong for a number of quarters and a number of years. We know we had some challenges last year with some of the optics with the MPP enrollment. You and I have, we have talked about this. You’re very familiar with the PEO industry. To me, it’s all about driving worksite employee growth. And we continue to do that and as John mentioned in the prepared remarks, continue to outpace kind of the industry there.
And it’s really coming from strong demand. We saw another quarter of double-digit demand in the PEO business as well as record worksite employee retention. And so we know the strength of that business model, the value proposition is very strong. And that business grew double digits in the quarter. Obviously, the category was a little bit below that. You know, the agency continues to be a drag on the overall growth of that quarter. We are seeing some positive trends certainly in the back half of this year as it relates to the agency, both from a demand and retention standpoint.
So we would expect prospectively that headwind from the agency side to subside somewhat, but continue to expect the momentum that we’ve seen in the PEO. And the other thing too, I would just say from an enrollment standpoint, as you know, we had the MPP challenges last year. We anniversaried those which helped with the compare. But we’ve also seen the enrollment growth not only overall in medical attachment across the PEO within Florida where we have that at-risk plan.
We actually grew that this year. And so we’re seeing good enrollment. We had good annual renewals in those books of business as well as we’re seeing, I would say, better attachment of medical upfront, which really helps drive that worksite employee retention that we talked about because it just really makes those clients much more stickier when they attach their health with us. So a lot of positive trends as we move forward in the PEO.
Kevin McVeigh, Analyst at UBS
Great, thanks so much. The commentary on the first quarter was helpful in terms of the revenue growth. And Bob, if I heard you right, I think you said the first quarter should be similar to the full year. Maybe just help us the pacing over the course of quarters two through four and as you start to comp tougher comps, where’s the offset to that? Is it just the way the bookings come in or maybe just help us dimensionalize that a little bit?
Bob Schrader, Chief Financial Officer
Yeah, I think, listen, I think the year sets up. As I mentioned earlier, the gating is fairly consistent. When you talk about comps, I mean we certainly had easier comps in the back half of this year relative to the PEO. So you’re not going to have, you know, we’re comparing the back half of this year to last year when we were actually down in enrollment. Now we’re going to be up in enrollment. So the comps get a little bit tougher. Kevin, on the PEO business, as we move in the back half, obviously we continue to expect improved performance from bookings and retention and all the things within our control.
But when you look at the quarters, the gating is relatively consistent quarter to quarter. There’s always puts and takes. I don’t see as much risk maybe as was perceived with this fiscal year.
Kevin McVeigh, Analyst at UBS
Got it. And Bob, with Paycor in the base now, is there anything from a seasonality perspective that we should consider just as the year kind of shapes up?
Bob Schrader, Chief Financial Officer
I mean, nothing that comes to mind. I mean similar to our business, there’s obviously a lot of year-end processing revenue that hits the third quarter and obviously that drives a lot of it’s high margin. So it drives a lot of profitability in Q3. But outside of that, I can’t think of anything offhand that would give you some differences quarter to quarter.
John B. Gibson, President and Chief Executive Officer
I would add, you know, anytime you have larger deals, larger deals a lot of times we’ll wait until the end of the year. So that’s one of the things we constantly look is the bookings. There’s building and building and building in the larger segments. In the larger segments, a lot of times you’ll either they’ll wait for a quarter or a lot of times they want to wait till the end of a calendar year. So again, nothing that I would say is meaningful. Remember, we had a very large enterprise business before we bought Paycor.
We’re familiar with it, but certainly as we focus there, we’re watching how the bookings develop because the bookings may be building, but then the implementation date isn’t for nine months away. So we’re looking at that as well, but we’re not seeing anything that’s meaningful to change substantially the gating we’ve seen historically in our business.
Kevin McVeigh, Analyst at UBS
And John, just on that point, that would impact your Q3 more, right, in terms of as they go live January 1st.
John B. Gibson, President and Chief Executive Officer
That’s correct. That’s correct. But again, that’s something we’re very, very typical in our business. But again, because we’re putting more resources against the enterprise area, we’re also, again, we’re doing ASO and we’re doing PEO at the point of sale as well. And again, as we do larger deals, any larger deal, a lot of times those clients are going to want to do something on a clean quarter. Whereas in the small business, we’ll do it during the middle of the week if we need to.
OPERATOR
Thank you. We’ll go next now to Jared Levine with TD Cowan.
Jared Levine, Analyst at TD Cowan
Thank you. I wanted to dig in in terms of the implied Paycor growth, right around 4% based on my math here in 4Q, I guess any way to size how much of that deceleration in growth is more so cross sells of the ASO and PEO. Thinking about kind of revenue shifting out of Paycor to Paychex, more so than kind of revenue churn or even weaker than expected bookings here.
Bob Schrader, Chief Financial Officer
Yeah, Jared, I’ll talk the way we talked last quarter as it relates to that. I think it’s somewhat of an apples to oranges comparison, just given the way we’re managing the business this year versus the way it was managed last year with revenue and resources moving around between the two. I think the way we’ve been looking at that business is as our enterprise business, which is kind of 100 plus loosely defined. And when we kind of look at that, the growth of that business I think was fairly strong in Q3 and we saw similar trends in Q4 where our enterprise business across both platforms.
So it really doesn’t matter where the client was last year and where they are this year. We saw high single-digit growth in our enterprise business during the quarter and again, I think we’ve talked about that. That’s our expectation. Prospectively, when you look at the other assets in that space, that growth rate is not too dissimilar to what the other pays are producing. And we would expect at minimum to continue to keep pace with that growth in that segment of the market.
John B. Gibson, President and Chief Executive Officer
Yeah, I just, I want to add on to this because the first thing I’m always cautious of because I don’t want to come off as being like defensive about this topic, but it’s been challenging as we launch the integration. And I think what’s probably not known as you look at the Paycor business and one of the things that attracted us to us strategically is this was a legacy business that had a rather sizable under 100 client base. And probably the brand was known as something larger than that.
But when we looked under, there was and there was emotion in that business to keep that client base at least stable and we made it. So when you’re looking at comps about what growth was three years ago, you’re looking at a growth of both under 100 and an over 100 business. Stop right there. We made a conscious decision which I think is the best decision for the company, was we wanted to focus that technology and brand where it was resonating most and where it was getting both the best traction.
So when we separated the two, we took all that under 100 and moved that to our small business segment and vice versa. So look, on an aggregate basis, it’s aggregate basis, but in terms of, you know, Paycor is now a brand for our enterprise segment that we define as 100 employees and more. And we’re selling complete solutions there. We’re selling at the point of sale a PEO, an ASO, and those are going into different parts of our business segments.
So it’s very complicated to do that. You know, what I’m looking at is the enterprise. Here’s what I can tell you. Our enterprise business at Paychex is growing faster than it’s grown number one. And number two, our 100 plus retention is the highest it’s been since I’ve been here in 13 years. So again, the combination of having the right technology, the right capabilities focused on these upper end enterprise segments I think is benefiting us not only from accelerating our historical organic growth there, but also in retaining clients.
So I certainly think we’re better together. We’re totally together now. We’re totally integrated. And I think as we move forward, what we’re going to be focused on is continuing to grow and serve that enterprise segment and making sure we’re maximizing the product penetration, both PEO, ASO and HCN in the 100 plus segment in the marketplace. Hope that helps.
Jared Levine, Analyst at TD Cowan
No, that was helpful. And then as I follow up here in terms of the roughly flat client count growth this year, I guess anything to call out in terms of notable differences, whether it came to call it the core Paychex versus Paycor and when might this potentially inflect and return back to growth?
John B. Gibson, President and Chief Executive Officer
I think when you look at it from a retention perspective across the board, our client retention was record in our ASO PEO business worksite employee basis. Our 100 plus, as I said, was record level as well. When you look at client losses, client losses tend to be in the lower end of the market and tend to be out of business. And that’s just really where the year has gone. And as I said repeatedly, we constantly are selective in clients that we’re going to bring in to the business.
We know what a good client’s going to be, a client that we can attach a client we’re going to get lifetime value on. We understand the cost of acquisition very, very well. And we’re not going to do irrational things just to add clients that are not going to be profitable clients. You cannot achieve the margin profile that we do and have a lot of unprofitable clients. So that’s going to continue to be our strategy and we think that’s going to continue to not only grow revenue for us, but I think it’s also going to make sure that we have the right underlying financial performance in terms of margins and margin expansion going forward.
OPERATOR
We’ll go next now to Daniel Jester with BMO Capital Markets.
Daniel Jester, Analyst at BMO Capital Markets
Good morning. Thanks for taking my question on the revenue synergies, the outperformance that you had this fiscal year, more than 50 basis points. It sounded like from some of the comments on the questions that maybe the Paycor sales force wasn’t sort of fully engaged the whole fiscal year. And so is there any way to think about how that cross sell could progress next year? The opportunity, could it actually contribute more to growth next fiscal year than this past one?
Thank you.
Bob Schrader, Chief Financial Officer
Yeah, I mean, I’ll start.
John B. Gibson, President and Chief Executive Officer
Yeah, go ahead. Well, first thing, I don’t want to categorize it as they weren’t that they weren’t engaged. We were very engaged and we had good success. You look at ASO and retirement penetration really exceeded our expectations. Po, which is a longer sales cycle. We got several large deals and that’s accelerated as the years went on. Look, I just, I’d go back and remind you we did change territories, we changed management, we changed leadership structure and we retrained them on the various products and services.
And all that didn’t start until June a year ago. So what I would not characterize it wasn’t a lack of engagement. It’s really just that point of kind of learning and then getting accustomed to, okay, how do I put this into my sales motion? How do I put these talk tracks in and how do I engage my Paychex partners in the sales process? So as you can imagine, you just get better with that over time. And we’re constantly learning on that. So I don’t want to characterize it as we weren’t having engagement, but there’s no question as we do it more frequently and we have success doing it, that success brings more success and more people are doing it.
And that’s what we’re seeing in our bookings and our referrals. This year across all the platform was stellar. It really drove a lot of the booking success that we had this year.
Bob Schrader, Chief Financial Officer
Yeah, I mean, the only thing I would just add to it is that I mean, it’s the reason why we did the deal, right? It was one of the main reasons why we did the deal is the opportunity, you know, to go after those revenue synergies because we knew how successful that we had been in going in monetizing our client base, particularly with these higher value solutions. And so we’re already having a ton of success with the Paycor client base. I think when we did the deal we highlighted that that wasn’t one and done type of thing, that we would continue to build momentum there over time.
As we went after that opportunity, we exceeded this year’s number and now we got to grow over that. Right. And we would expect probably even stronger contribution next year and beyond to growth. And I do think it is what’s fueling a lot of the improvement in the organic revenue growth that we’ve talked about as we move through the year.
John B. Gibson, President and Chief Executive Officer
Yeah, look, I think that this product is going to resonate with clients of all sizes. And the reason why I say that let’s just talk about the HR compliance capabilities that we now have based upon our 50 year history. For a client that does not have an HR department, this enables them to, in real time make sure that they’re always in compliance. So when you’re hitting thresholds in a certain state, either because you now hired your fifth employee and now you’ve got certain state stipulations that you’ve got to do certain things instead of you needing to wait or remembering it’s five, or for us reminding you you just hired your fifth, the system’s automatically doing that and automatically taking the action to enroll you in a workers comp program or unemployment insurance. So I think in the small end, I think this is going to give them greater peace of mind. I think we’re going to have less errors on tax and tax ID issues that we have, which I think is going to be beneficial from a retention perspective. And then I think as you go up market, I think this tool in the hands of an HR professional is going to give them far more confidence and capability to be able to focus on strategic HR initiatives and have our AI models and agents actually do the work for them.
Stop this. Our wise AI compliance tool, some of which we did through acquisition, integrates with most of the large HCM platforms that are in the market today. So again, as I said, you can have the compliance AI agenic AI patent pending paycheck compliance capability, regardless of the platform that you’re on. And we will integrate with your platform to help you have a digital HR agent keep you compliant.
OPERATOR
We’ll go next now to Jacob Smith with Guggenheim Securities.
Jacob Smith, Analyst at Guggenheim Securities
Hey, thanks for taking my question. How did Paycor broker referrals trend during the quarter? Did you continue to see acceleration in bookings like you called out last quarter? Then on the Hub International partnership you announced back in May? Curious what’s actually different in that arrangement versus how you and Paycor worked with the broker channel before? We’ve also had several quarters now to gather feedback from partners on what they want to see.
I’m wondering if this is an evolution of the Partner Plus program and whether this model is something you’re looking to take to other national brokerages to drive new business referrals. Going forward.
John B. Gibson, President and Chief Executive Officer
Yeah, no, our partner, our bookings holistically through the Paycor again, our enterprise, sorry through our enterprise reps has grown every quarter since the acquisition and the broker pipeline has continued to grow with it, including the fourth quarter being higher than the third quarter. So again, even if you strip out seasonality, which there is in that business in terms of timing, we’re seeing and we’re now back to what I would say is pre acquisition levels in that area we did sign actually two.
One is named Hub. You mentioned one. There’s another one unnamed that we have already signed and it is part of our Partner Plus. The thing that is different about the Partner Plus program that we’re going to market with is it is holistic. They are able to represent all of our products and services, any product and services that we have in the Paychex portfolio. We’re also partnering with them on some of the HR compliance and some of the HR capabilities that I just mentioned to you.
So I really think when you begin to look at the holistic, both advisory solutions, compliance tools and then the breadth of the capabilities we have from a technology perspective, we’re bringing all that to bear in our Partner Plus program for brokers. And so we actually are getting good feedback from those loyal brokers that have been there. And as we’re adding new brokers, they like the approach that we’re bringing, that it’s a holistic approach.
Jacob Smith, Analyst at Guggenheim Securities
Great, thanks. And a quick follow up as well. Just on Paycor sales headcount last quarter you mentioned intention to expand there maybe just an update there. Should we expect, you know, that to help FY27 bookings or maybe a little bit further out since there’s a ramp period?
John B. Gibson, President and Chief Executive Officer
Yes, I mean we have, we’re committed, as we said when we did the acquisition, to continue to add a sales headcount that is in our plan. And we are actively building sales headcount as we speak. So we have openings. So if you know anybody, you can refer them.
OPERATOR
Thank you. We’ll go next now to Samad Samana at Jefferies.
Samad Samana, Analyst at Jefferies
Hi, good morning. Thanks for taking my questions. Maybe just unpacking the fiscal 27 guidance a little bit. If I think about the assumptions around unit growth versus pricing, contribution versus new bookings, I know you guys don’t guide to those components specifically, but just as we think about the fiscal 26 contribution, how are you tilting those variables? What are you assuming? Are you assuming retention is flat up or down? How are you thinking about the amount of price you can take in fiscal 27 versus 26. Just help us understand the growth algorithm, given all the changes that have occurred over the last 18 months.
Bob Schrader, Chief Financial Officer
Yeah, I mean, we always put together a plan where we’re trying to sell more and lose less. So retention has improved significantly over the last five years. Particularly when you look at the ASO in po, it’s pretty remarkable how much retention is improved. But the teams always challenge themselves and we’re always trying to get better, improved retention. Obviously trying to look to grow sales, as John mentioned, look for opportunities that add headcount.
And so when you look at our client base, Samad, and our assumptions, listen, our client base has been relatively flat. We’re not getting a ton of growth from that really, we don’t need to get a ton of growth out of that. We’re trying to be thoughtful and make the right investments in really trying to attract the right client. And so overall we’re trying to outsell our losses and grow our client base a little bit, but really trying to grow our client base in the right client sizes.
That was one of the reasons why we pulled the, the trigger on the Paycor acquisition, trying to get larger clients in the door because we know where we’ve gotten all of our growth from ASO and PO Retirement Services. A lot of those solutions meet the needs of larger customers. But our assumption is not that we’re going to generate a ton of client base growth, that we would continue to maintain our client base, but maybe improve in the right client sizes to really execute on our model, which I think you and I have talked about.
This is really a revenue per client model, really our ability to go in, get a larger share of wallet out of our client base. When we look at the penetration rates of the key solutions within the Paychex Flex client base, they’re still relatively low. So we see lots of opportunities there. And then obviously there’s the huge opportunity in front of us that we’ve been executing on with, with the Paycor client base. And so when you look at the plan next year, it’s that it’s assuming that client base will be relatively flat, but maybe improving a little bit and in the right client sizes.
And then it’s really going to be an increase in revenue per client, which is really our model. Roughly half of that is coming from pricing and half of it is coming from share of wallet. And as I mentioned, there’s a bit of a headwind on float this year just given what happened with short term rates at the end of last calendar year. So that’s kind of how we’re thinking about the year.
Samad Samana, Analyst at Jefferies
Great. And then I just wanted to ask one follow up on the especially since you just mentioned kind of revenue per client, I thought the discussion around, I guess being able to have products and not while not having the payroll or core payroll module is a good strategy for the retention component. But how is that impacting maybe the initial land? Are you seeing the funnel either broaden to where you’re getting a greater mix of non payroll customers at the outset of joining the Paychex journey? And is that changing maybe what the average revenue per new customer added looks like? And how should we think about that? Maybe in your guidance as well?
John B. Gibson, President and Chief Executive Officer
No, I think Samad, what you should think about is, you know, as we’ve now had, now that we have this capability and we’ve been using this capability, you know, let’s say just somewhat defensively, let’s don’t lose everything. Let’s, you know, if there’s opportunities for us to add a client on a standalone basis that is non-standalone payroll, let’s go and do that. I think what you’re going to see is now that we have this capability, we will try to begin to integrate that into our sales motions so that if it’s not the right time for a client to transition their payroll provider, their HCM provider, it may be the right time for them to leverage our compliance tool or it may be the right time for them to use another one of our products or services like one of our benefits, so retirement or et cetera. So I think one of the things that is probably different in the motion that we now have the capability to do that we just have to figure out the economics, the go-to-market strategy around is okay, when I’m in that deal and I’m trying to sell the entire bundle, which is typically what we’re trying to do.
We’re trying to convince someone to move to our HCM and payroll platform and then we’re bringing our 401 partner in at the same time. Those things are generally our insurance or ASO. Those things were generally done as an integrated bundle. If you didn’t win the HCM payroll, you didn’t win anything. And now what we have an enablement to do technologically that’s the start, right? Is that we can actually bill it and we can actually collect it and we can actually service it.
That’s the breakthrough here. And I think now we’re just really to the point of saying okay, can you do that profitably? What are the economics of that? But certainly the capability is what I’m excited about, because I do think it gives us an opportunity to be able to impact more customers in the marketplace and then build a relationship with them. And I think over the long term, what we’ve proven is over the long term, if we build a relationship with a client, they’re going to buy more from us and they’re getting value.
I look at our retention this year, for example, our price value losses were down significantly. Again, it’s a very competitive environment, and I think it just indicates that customers are seeing the value that we’re providing. And I think as long as we continue to do that and now that we have more products and services that we can serve those clients with, I think gives us more opportunities to get hooks into a client. And then I think if we get a hook into a client, I think we know how to monetize that relationship over the long term.
Samad Samana, Analyst at Jefferies
Great. Thank you so much.
OPERATOR
We’ll go next now to Ashish Shabadra at RBC Capital Markets.
Bill Chi, Analyst at RBC Capital Markets
Hey, good morning, guys. This is Bill Chi on First Chiefs Advisor. Appreciate you guys taking our question. Maybe just on the fiscal year 27 margin guidance, 44% came in a little bit above our expectations. I think you alluded to some of the factors with the better client selection, but just wondering if you could break out the drivers there as we kind of rationalize increased resources towards Salesforce, but also general prudent cost management and optimization across the rest of the firm.
Bob Schrader, Chief Financial Officer
Yeah, well, let me start by saying I said approximately 44%, so you can leave that interpretation. So listen, I think we typically are looking for ways to, you know, in a normal year, we’re looking at 25 to 50 basis points of margin expansion. This is probably on the, you know, the guide probably assumes the higher end of that. And I think we’ve talked a lot about this. I think the investments in technology and what we’re seeing from a productivity standpoint.
If you asked us a few years ago whether we’d be able to get the 44% margins, we probably would have had a different answer. But we continue to look for ways to be more productive, more efficient. One of the metrics that John and I are holding ourselves and the team accountable to is really trying to drive. Drive higher service revenue per employee. And that’s growing at a rate higher than our revenue growth rate. And so that certainly helps with driving margin expansion.
And then I’d say the other thing to think about there too is we bought a business that had structurally significantly lower operating margins than what we had. And we came in and we applied our operating model to it, got a lot of synergies associated with that. And you’re going to see the full year. You know, a lot of that was realized this year, but you’re also going to get the full year impact of that next year, which helps from a margin standpoint.
And we’re not done. I’m not sure we’ll talk further about expense synergies as we go forward. It’ll be BAU, but we see further opportunities there certainly from a procurement standpoint as contracts come up for renewal and in those types of things. But you know, I would say those are probably the things that contributed to maybe being a bit on the high end of a normal year, but not too dissimilar than what we’ve been able to deliver. I think it was 70 basis points this year.
It’s in that range next year.
John B. Gibson, President and Chief Executive Officer
Yeah, I don’t. Again, I’m going to harp on this a little bit because this is something that doesn’t get exposure. You can’t go to HR tech and look at our back office system. You go to HR tech and you look at all of the client-facing components. And so I know for some people it’s a mystery how we can have the margins. We have 42, 44%. And it really has to do with the heritage of us being a payroll service company that invested a lot of technology and having a very tight operating model and system internally.
And so I always say that because this modernization that we’ve been able to unlock and do systematically across each portion of the back office component of what we do, I think has been one of the reasons why you’ve seen this constant progression. It’s why when we went into an acquisition, even I remember in the OASIS days when we did the OASIS acquisition and someone from their operations comes in and looks at our tax capability and go like, well, when can we get off of ours?
So it’s those type of things you begin to have that. Because in our business the most expense is generated by mistakes and errors. Because if you have to clean up a tax error, then it takes a lot of manual work to do that with the government, et cetera. So the capability now to prevent these errors up front and now to be able to use agency AI to actually proactively identify those issues and get in front of them and actually fix them on our behalf at the scale that we operate, that is a significant benefit and it really frees up resources for us to move more resources to an advisory and support capability so that we can be more responsive to our clients when they need us. And a lot of that benefit, we’re going to be able to drive more value to customers. So I’m real excited again, as you guys know, I’m the old operator here. So these are the things I was dreaming we would have someday and now we have them. And I think there’s a lot of potential and a lot of runway because literally we just got this completed. And so more to come, I think, in the years ahead here.
Bill Chi, Analyst at RBC Capital Markets
Thank you, guys.
OPERATOR
We’ll go next now to Kartik Mehta at North Coast Research.
Kartik Mehta, Analyst at North Coast Research
Good morning, John and Bob. John, I wanted to go back to a comment you made or Bob made on client growth and kind of just to understand your philosophy on client growth and looking at that. And I know you said it’s going to be kind of flat to upslide and how you’re approaching that. And do you think you can accelerate client growth or would that be bad and hurt margins? I’m just interested to get your perspective on that.
John B. Gibson, President and Chief Executive Officer
Well, Kartik, I think the first thing we want to do is we want to make sure we’re driving retention in our highest lifetime value customer segments. So we already said record PO ASO and 100 plus. And let’s start there. When you look at where we have client attrition, again, you go back and let’s look holistically. Payroll, our payroll retention is at pre-pandemic levels, which I would remind you was record levels at the time for Paychex. So at the end of the day, from a retentive perspective, I think we’re holding our own in the marketplace where we are putting our go-to-market motions are in our higher value segments.
And what we’re trying to do as you look in the lower end of the market is we’re trying to make sure that we are not overpaying from a cost of acquisition for a client that we know we will not make a long-term return on or monetize. And again, that’s been our philosophy, I think is that’s how we get the margins we do. That’s how we focus on driving more value over the long term. And so that is our, that’s our operating model. As Bob said, it’s not been a big part of our growth story over the past several years.
And really that’s been our strategy at this point in time.
Kartik Mehta, Analyst at North Coast Research
Perfect, John. And just follow up, just your perspective on competition, obviously based on the bookings growth you’ve talked about, it looks like PTX is holding its own better than holding its own. So curious as to what the competitive environment looks like.
John B. Gibson, President and Chief Executive Officer
I don’t look. I think the competitive environment remains exactly the same. I think it’s a very competitive market. I think that we have a broad suite of products and services. I think obviously our value proposition is resonating well with our existing clients, given the retention we’ve had. And I think when you look at the bookings accelerating, we’re doing very well. We’re certainly doing extremely well in the PO business. And I would say the HR advisory side, just given the growth rates that we’re seeing in comparison to the other benchmarks I’ve seen in the industry. So I feel good about the way we’re positioned. We have a competitive product and I’ve not seen any major shifts in the competitors or competitive behaviors as well.
Kartik Mehta, Analyst at North Coast Research
Perfect. Thank you very much, as always. Appreciate it.
John B. Gibson, President and Chief Executive Officer
Thanks, Kartik.
OPERATOR
We’ll go next now to David Grossman with Stifel.
David Grossman, Analyst at Stifel
Good morning. Thank you. So, you know, healthcare costs have been fairly elevated this year, actually quite elevated. And I’m just curious, what impact, if any, do the changes in healthcare inflation have on the growth of the PEO? And if you could just remind us on whether the PEO renewals are skewed to any particular quarter or quarters like it is for some of your peers.
Bob Schrader, Chief Financial Officer
Yeah, I mean, I’ll start and then John can add on. I think in general, medical inflation, which is high and we would expect to continue to be high, I think that is a tailwind for the PEO business. I think it’s helping drive our growth, certainly. I think we have a long history of trying to help small businesses punch above their weight. And I think that’s one of the strengths of that PEO business model, that we can typically leverage our scale in being able to offer rates and benefits to small businesses that are cheaper than what they’d be able to offer on their own.
And so I see that as contributing to the strength of that business model that we’re currently seeing. And we would expect that to continue in the future as it relates to our renewals. David, I think there’s two. There’s one that happens just based on acquisitions and so forth. We haven’t fully aligned those. There’s one that happens in the fall timeframe and then there’s one that happens at the beginning of the calendar year. We went through both of those this year with successful renewals.
And when I look at across the PEO, whether it’s our Florida at Risk medical plans, whether it’s maybe attachment within our agency and the open market, or whether it’s outside of Florida, on our other master plans, our medical enrollment was up really across the board. And again, I think that just speaks to the value of, of that business model in really helping small businesses deal with a pretty big challenge for them. You know, not only inflation, but the cost of medical inflation.
John B. Gibson, President and Chief Executive Officer
Yeah, look, I think this is one of, you know, the top three issues that I think our market segment faces is in order to compete for labor, which is very difficult for small, medium-sized businesses to compete with, you’ve got to be able to have competitive benefit packages against larger companies. Okay. So I’ve got to do it to be competitive for labor. And then when you look at the cost, the cost is in many ways unsustainable for both the employer and the employee.
So it’s a double-edged sword. While you get the tailwind of a rising cost of your insurance that may show up in your revenue, the problem is that rising cost also scares people away from being able to afford it. So it kind of balances itself out. And I think to Bob’s point, that’s why we’ve had a multitude of different ways in which we can procure and provide health insurance, both in our PEO and more generally across our business. And I think it’s the other thing that we continue to try to do is come up with innovative approaches to be able to assist small businesses.
We look at our perks product. So again, we offer these types of health and dental and other traditional big company benefits in our perks marketplace where an employer can say I offer these benefits but they don’t pay into it. And then we’re providing a discounted and a better user experience, just like in an open enrollment for one of their employees to be able to buy it a la carte. We have over 400,000 unique employees buying from that marketplace today.
And as we mentioned, we’re now rolling that out to the Paycor 2.5 million employees. We also have a health reimbursement arrangement solution that we’ve brought to market and we’ll continue to bring to market to try to help businesses. So look, I think this healthcare inflation issue is real. It’s a real squeeze for small and medium-sized businesses that want to compete for labor and they’re at a disadvantage and we’re providing a ton of different options and that’s why they’re gravitating towards PEO.
Because it’s not one size fits all, we can give you a multitude of different solutions and your employees will have a very similar experience as if they were on a master plan. So I do think that’s another differentiator for us, the marketplace there.
David Grossman, Analyst at Stifel
Great, thank you very much for that. And just one other quick one. You know Bob, I know you said the cadence of growth should be relatively consistent across the year. However, you know, given we all over-index to very small variations in growth quarter to quarter, just based on the comps, is it reasonable to expect that we’d be closer to the high end of the range in the first half or the higher, you know, the upper half of the range in the first half of the year, maybe the lower half in the second half of the year just based on the tick and the comparisons.
Bob Schrader, Chief Financial Officer
Yeah, David, I’m not sure I want to get into trying to parse the quarters at this point in time. You know, there’s puts and takes as we go through the year. We’ll kind of update you guys and try to provide more color on at least the next quarter. Again, I’m kind of looking at it in front of me and there’s not really a lot of variation quarter to quarter, so we’ll provide more color on the splits as we move through the year. But just kind of given we’re at the beginning of the year and it’s fairly consistent as we move through the year, I’m not going to kind of get into the puts and takes between the different quarters at this point in time.
David Grossman, Analyst at Stifel
Great. Fair enough. Thank you very much.
OPERATOR
Thank you.
We’ll go next now to Scott Wurtzel with Wolff Research.
Scott Wurtzel, Analyst at Wolff Research
Hey, good morning guys. Thanks for joining. Squeezing me in. Just one from me, just thinking about the potential cross-sell opportunities with the PEO. Have you given any thought to bringing the PEO platform and functionality over to the Paycor side or is it going to continue to just remain on the Paychex platform? Thanks.
John B. Gibson, President and Chief Executive Officer
So Scott, I think the complexities of PEO tax and unemployment insurance are a pretty heavy lift. We feel like we have a very solid platform. We’ve worked a lot on managing that migration because remember we did that internally as well. I would say that we continually look particularly with the advances we’re seeing from a product development perspective with the use of AI and as I talked about before, as we now have completed the modularization of our various back office components, that’s certainly something that we’ll continue to look at.
What we are committed to is offering a client a seamless migration path across our platforms and across our solutions. And whether that’s done from moving them to one platform to another platform and doing that in a very seamless and effortless way, or whether that’s empowering each one of our platforms to offer the full suite of capabilities is really going to be a cost-benefit analysis that our product team is going to have to do.
Scott Wurtzel, Analyst at Wolff Research
Thanks, guys.
OPERATOR
And we’ll go next now to Jason Kupferberg with Wells Fargo.
Jason Kupferberg, Analyst at Wells Fargo
Hey, thank you, guys.
So just reflecting on your midterm target for upper single-digit revenue growth. I mean, this year, obviously we’re guiding to 5 to 6%. Very consistent with what you had previewed last quarter. But just conceptually, as we think about that medium term, does upper single digits still feel like the right range or is it possible we need some more M&A to get there? We’d love some perspective on that, thanks.
Bob Schrader, Chief Financial Officer
Yeah, I mean, I think if you look at kind of historically the business, I mean, we updated the slides in the investor slides, so when you look at the revenue CAGR, it’s obviously much higher. I think it’s A no. It’s actually 13, I think on the top line over the last five years. Obviously big contribution from Paycor. But if you strip that out, Jason, we’ve typically been in that 7 to 8% range historically. And when you look at the growth formula, whatever you want to call it, typically we’re just driving 1 to 2% from M&A. And that continues to be an area of interest to us to look for opportunities. I don’t expect us to do anything, at least in the near term, like we just did with the Paycor acquisition. But there’s certainly opportunities out there and we would expect to leverage M&A prospectively, like we have in the past to drive growth in our business. We’re, we see opportunities. And so I think if you look at the organic growth of the business coupled with what we’ve historically contributed over a longer period of time, 1 to 2% from M&A, you can clearly see where it’s in that upper single-digit range.
Jason Kupferberg, Analyst at Wells Fargo
Okay, that color is helpful. And just coming back to the conversation earlier about some of the recategorization between Paychex and Paycor. I know you took the sub 100 employee clients from Paycor, put them in Paychex and then the 100 plus, obviously going to Paycor. And that’s making some of the comparability in the Apple samples harder to really discuss. But sitting here today, if we look at management solutions revenue based on all this recategorization, like what percent of MS revenue is now enterprise?
That is the 100 plus.
Bob Schrader, Chief Financial Officer
You know, I don’t have that breakdown in front of me, to be fair, and I don’t really want to try to guess. I mean, when we look at that enterprise segment, we’re not just talking management solutions, we’re looking at the entire business. So certainly in the PEO we have larger clients as well. So I just, you know, maybe that’s something that we can add to. Just based on your feedback, we can add to a future IR deck. But I don’t have that breakdown in front of me.
Jason Kupferberg, Analyst at Wells Fargo
Okay, that would be great. Thanks, Bob.
OPERATOR
Thank you. And gentlemen, it appears we have no further questions this morning. Mr. Gibson, I’d like to turn things back to you, sir, for any closing comments.
John B. Gibson, President and Chief Executive Officer
Thank you, Bo. Well, listen, thanks everybody for your questions and for joining us today and your interest in Paychex. We’re entering the fiscal year 2027 positioned better than ever. I really feel. We’ve had strong momentum as we went through fiscal year 26. We’ve made meaningful progress across our strategic priorities, including our upmarket expansion and the integration of Paycor. The work that we’ve done to drive advisory differentiation and the AI innovation that we’ve done in a very short period of time.
Very proud of all the work the teams have done across the board. It’s just really been, if you think back, what this team and this organization has been through the last year since we just all came together just one short year ago and the amount of work that needed to be done in the back office, the amount of work that needed to be done in the integration front and the progress we’ve made. I’m just so proud of the company and to deliver these results that we delivered.
Again to hit the original guidance that I think probably were some skeptics about a year ago on the back half, to be able to land that and to be able to raise guidance twice on earnings per share as we went through the year because we demonstrated our best operator capabilities and were able to exceed the expense synergies in the acquisition. So look, I think we sit here today with the teams in place with the technology and platforms that are built for perfect purpose for the markets that they serve and now an AI-enabled organization that I really think is just really going to continue the momentum that we’ve seen build over fiscal year 26.
So we believe this enhances our competitive position. As I said, we’re stronger together and I think it really supports the growth and value creation for Paychex not only in 2027, but I think well beyond. So again, thank you for your support and we’ll talk to you next quarter.
OPERATOR
Thank you, Mr. Gibson, and thank you, Mr. Schrader. Ladies and gentlemen, this does conclude the Paychex fourth quarter fiscal 2026 earnings call. We’d like to thank you all so much for joining us today and wish you all a great remainder of your day.
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