Paychex Inc (0KGE.L) Q1 2026 Earnings Report

Paychex delivered a solid QQ1 2026 performance with strong top-line momentum and robust free cash flow generation. Revenue reached $1.54 billion, up 16.8% year-over-year, driven by continued demand for integrated human capital management solutions that combine payroll, HR, and benefits administration for small- and medium-sized businesses in the US, Europe, and India. Gross profit rose to $1.126 billion (gross margin 73.13%), underscoring the scalable nature of Paychex’s cloud-based offering and services mix. Net income of $383.8 million and diluted EPS of $1.06-$1.07 reflect stable profitability amid a moderate operating expense base. EBITDA stood at $541.9 million with an EBITDA margin of 35.2%, aligning with a historically high-margin software/services model. Cash flow remained a key strength. Operating cash flow was $718.4 million and free cash flow was $662.5 million, supported by disciplined capital allocation. Free cash flow conversion was solid given the revenue scale, while the company continued returning capital to shareholders via a $160.1 million share repurchase and a $389.1 million dividend payout. The balance sheet remains liquidity-rich, with $809 million of cash and cash equivalents and a net cash position of approximately $737.6 million, despite a net decline in cash over the quarter driven by ongoing buybacks and distributions. Looking ahead, the quarter reinforces Paychex’s ability to monetize its multi-product HCM platform and sustain profitability as SMB demand for outsourced HR and payroll solutions persists. However, the absence of formal forward guidance in the provided data introduces some execution uncertainty into near-term planning. Investors should monitor trajectory in international expansion (Europe/India), client retention and cross-sell momentum, and continued efficiency in selling and SG&A spend as the company scales.”