As a reminder, this conference is being recorded, and your participation implies consent to our recording of this call. If you do not agree with these terms, please disconnect at this time. I would now like to turn the call over to Bob Schrader, Paychex's Chief Financial Officer. Please go ahead. Thank you. Good morning and welcome to our conference call to discuss the signing of a definitive agreement to acquire Paycor. Joining me today are John Gibson, our Chief Executive Officer, Raul Villar, Jr., Chief Executive Officer of Paycor, and Adam Ante, the Chief Financial Officer of Paycor. A press release and investor presentation with information about today's announcement can be found on our investor relations website. Additionally, a replay of this conference call will be made available in the investor relations sections of our website. Now, before turning the call over to John, I'll share some important disclaimers. The matters that both companies will be discussing today include forward-looking statements and, as such, are subject to risk and uncertainties, including those risk factors discussed in the most recent reports on Forms 10-Q and 10-K filed by each company, as well as those discussed in the press release of each company announcing this acquisition. These and other risk and uncertainties could cause actual results to differ from those contained in our forward-looking statements. We will also refer to certain non-GAAP financial measures during the call. For each company, a description of these items, along with a reconciliation of the non-GAAP measures, can be found in prior earnings releases available in the investor relations sections of each company's website. Lastly, I'd like to remind everyone that today's call will pertain strictly to Paychex's execution of a definitive agreement to acquire Paycor. None of the comments in this call should be viewed as an update to either Paychex or Paycor's current quarter. And before I turn the call over to John, I will mention we are going to have a Q&A session at the end. As you guys can imagine, we have a very busy day from a communication standpoint, so we'd like to keep the call to an hour, and we are going to limit every analyst to one question, and we ask that you respect that request. And with that, I will turn the call over to John. Okay. Thanks, Bob. Good morning, everyone. I want to thank everybody for joining us today. I know it's a little short notice, but some of you have maybe been talking about it sooner, so I'm not surprised. As you can see from our announcements, this is a very exciting day for Paychex. Earlier this morning, we announced our intent to acquire Paycor, a leading provider of HCM payroll and talent management software, which I know many of you know well. We're excited to welcome Paycor into the Paychex family. For over 50 years, Paychex has been committed to helping businesses succeed, and this acquisition represents a significant milestone in our journey to provide best-in-class HCM solutions to businesses of all sizes. Growing through acquisition has always been a part of the growth formula and history of Paychex, and as we have communicated to the investment community in the past, we are always looking for opportunities that meet our strategic and financial objectives. We've taken a disciplined approach to inorganic growth over the years, with a focus on opportunities where we can add scale in new and existing markets and drive synergies by leveraging our best operators' expertise. The acquisition of Paycor aligns well across all our key evaluation criteria, including strong strategic and complementary fit. The cultural alignment and the financial characteristics are strong. The acquisition of Paycor is highly complementary. It will enhance our capabilities up-market, broaden our suite of AI-driven HR technology capabilities across the platforms, and provide new channels for sustained long-term growth. Our customers will benefit from an expanded suite of technology and advisory solutions designed to help them address their HR challenges, and Paycor's customers will benefit from our broad product set of HR advisory and employee solutions and from the scale and tradition of operational and service excellence that Paychex is well known for in the marketplace. From a technology perspective, this acquisition unifies two open platforms, each purpose-built for distinct segments of the market: Paychex Flex for SMB and Paycor for up-market enterprise. Leveraging Paycor's complementary strengths up-market, we will be able to extend our current position in this customer segment, and our combined offering will be one of the most comprehensive HCM portfolios in the industry, allowing Paychex to better meet the needs of new and existing customers across all customer segments. We are committed to our strategy to be the digital HR leader by continuously innovating, adapting to the evolving needs of businesses, and leveraging the power of AI. You've heard me talk about this a lot before. Paychex has used AI technology for many years to improve our business, improve our growth, and improve the customer experience. We believe AI offers a new set of opportunities for value creation, especially when paired with our high-quality workforce data sets, which we believe to be among the largest in the industry. Paycor, I know, shares our focus on using data and AI to enhance the customer experience and their business results, and we believe the acquisition will enable us to expand product innovation and our investments in technology and AI in the years ahead. Doing so will drive growth across all of our market segments. The acquisition of Paycor will also accelerate and enhance our go-to-market strategy. It will expand our sales force and provide significant opportunity to cross-sell multiple products bidirectionally between Paychex and Paycor's nearly 50,000 customers. By unlocking new embedded HCM product capabilities that Paycor has developed, we believe that we can expand our opportunity in the market, and also we will be expanding our distribution channels and strategic partnerships for the benefit of both companies. I'm very excited about the great cultural fit between our two organizations. As Raul and I had a chance to talk and visit in Cincinnati, a place I know well as a kid and as a professional when I worked there often, both companies have an incredible, talented team with deep-rooted values around innovation, customer success, and most importantly, integrity. We are both firmly committed to our purpose of helping businesses succeed while also making a positive impact on our clients and employees. We talked a lot about the importance of communities, and certainly Paycor and Paychex have a long history of supporting the communities in which we work and live, and of course, supporting our shareholders. We believe this acquisition will generate significant value for the stakeholders of both companies. I also want to be clear that there will not be any changes to Paychex's capital allocation strategy as a result of this transaction. We remain committed to returning capital to our shareholders and maintaining our dividend growth policy and our strong balance sheet. It is my pleasure now to introduce Raul, who has done a tremendous job of leading a great company in Paycor over the last several years. Raul? Thanks, John, and thank you, everyone on the line, for joining us this morning. It is my pleasure to be here with John, Bob, Adam, and all of you to discuss this very exciting news. Paycor's mission is to empower business leaders to achieve greater success. We help leaders drive employee engagement and retention by providing tools to coach, develop, and inspire employees, and we give leaders unprecedented people and performance insights with a unified HCM experience. Over the last several years, we have made tremendous progress as investments we have made in our up-market solution, client experience, and sales team have paid off. We have expanded sales coverage, and average customer and deal sizes have increased as we continue to strengthen our up-market position. In addition, we have significantly expanded our product portfolio by adding new products to the platform and deepening existing modules, which has enabled us to meet the complex needs of larger customers. We have built a strong business, and we are confident that this highly complementary acquisition will accelerate our mission and unlock even greater value for our customers, partners, and employees. Combined, Paychex and Paycor will offer a portfolio of products, solutions, and advisory capabilities that will be one of the most comprehensive in the industry, enabling us to serve customers from simple startups to large, complex enterprises. Paychex will be able to harness our technology to strengthen their up-market capabilities, broaden their suite of AI-driven HR technology, and unlock new channels for growth, such as our embedded channel. Our existing customers will have access to an expanded portfolio of ancillary products, and together, both of our teams will be able to better compete for new business across all customer segments. The use of AI has been incredibly exciting, and over the past several years, we have incorporated a diverse array of AI innovation into our platform. Paychex shares our commitment to investing in AI and product innovation. Together, we will be able to accelerate AI investments to improve efficiency, enhance the customer experience, and unlock new growth opportunities. This acquisition is highly complementary both strategically and culturally, as Paychex shares many of the same values as we do at Paycor, such as taking care of customers and employees, acting with integrity, driving innovation, and competing to win. We are both deeply committed to helping leaders and businesses succeed. We believe this transaction will create a great outcome for our clients and key stakeholders, and we are very excited to be joining Paychex for the next phase of our journey. With that, let me turn the call over to Bob. Thank you, Raul. As John noted, we've always taken a disciplined approach to acquisitions that support long-term shareholder value creation and are aligned with our strategic goals. Throughout Paychex's history, our focus has been to support the growth of the company while accelerating and expanding our total addressable market in faster-growing markets where we can add differentiated value. When we look at acquisitions, we evaluate three criteria: strategic and complementary fit, cultural alignment, and financial characteristics. Beyond the traditional valuation metrics, we are looking for opportunities for value creation through synergies. As you heard from both John and Raul, we believe the acquisition of Paycor meets all of these criteria and brings an exceptionally talented team and employees with a shared vision of the future to Paychex. Let me now briefly review the details of the transaction. Paychex intends to acquire Paycor for $22.50 per share in cash, which represents a premium of approximately 19% over Paycor's 30-day volume-weighted average trading price as of the unaffected trading date of January 3, 2025, and represents approximately $4.1 billion in enterprise value. We have entered into a fully committed, unsecured bridge facility provided by JPMorgan that, together with our cash and our revolving credit facilities, provides us sufficient financial flexibility to complete the transaction, and we are currently evaluating long-term debt financing options. As John stated earlier, this transaction will not change our capital allocation strategy, and we are committed to maintaining our dividend policy and our strong balance sheet. We expect to close the acquisition in the first half of calendar 2025, subject to satisfaction of regulatory approvals and other customary closing conditions. By acquiring Paycor, we will be adding over $650 million of highly recurring revenue, growing double digits. Combined, our businesses will serve and support over 790,000 clients and approximately 13 million employees across the United States. We would expect run-rate cost synergies in excess of $80 million in the near term. In addition, as John alluded to before, we expect there to be substantial revenue synergy opportunity to capture over time as the acquisition will enable us to expand our sales force, accelerate investments and go-to-market productivity, increase our cross-sell opportunity, and expand product innovation, as well as technology and AI investments and to drive growth across all market segments. We expect the transaction to be neutral to slightly accretive to our adjusted diluted EPS in the first fiscal year post-close and accretive in the second fiscal year and beyond. We are very confident that Paycor's highly complementary business aligns extraordinarily well with our long-term growth strategy, enhances our go-to-market capabilities, and enables us to take advantage of the many opportunities ahead of us. We believe this acquisition provides significant value creation potential, and we are excited about the strategic and cultural fit, and with that, I will now turn the call back over to John. Okay. Thanks, Bob and Raul. Appreciate that. Again, we're very excited about the opportunity ahead of us as we welcome Paycor to the Paychex family. We believe Paycor is a great strategic and cultural fit and that it is highly complementary. This highly complementary acquisition will generate significant value for our shareholders of both companies. Shelby, we'll now open it up for questions. At this time, if you'd like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Please limit yourself to one question and return to the queue for any follow-up questions. Once again, that is star and one to ask a question. We will pause for a moment to allow questions to queue. And we'll take our first question from Bryan Bergin with TD Cowen. Your line is open. Hi, guys. Good morning and congrats on this deal. I guess the first question, or I guess the one question I got here is, when you consider the most promising revenue synergy and upsell opportunities, can you double-click on that further? Where do you see the most significant opportunities in this combined organization? And the accretion assumptions, what scale of potential revenue synergy are required to hit those accretion assumptions here over the next two fiscal years? Well, Bryan, thank you for your congratulations, and I'll take the first part of your question, and Bob can fill in the rest. Raul can certainly chime in here because he and I have talked about this. I think the biggest synergy is our ability to bring our HR advisory and outsourcing capabilities to what is a solid HCM platform, and particularly in the mid-market. What we've been seeing, we've talked about it before, is the adoption of PEO in larger enterprises continues to increase, some of that being driven by the challenges of finding cost-effective healthcare, and PEO is certainly a unique alternative to do that. We actually partner a lot with brokers in our PEO to help them bring a comprehensive, unique solution to their clients and sometimes the PEO fit. We also have the ASO capability so that they're looking to add an HR capability or HR outsourcing advisory support around the technology platform. We're the leader in that as well. I think that's the biggest area of opportunity, but what was amazing as we got closer to this and I got to understand it more and more was the understanding that there are some modules. When I looked at the revenue per customer by segment, there are areas where Paycor did a little better than we did, and it was because of some of the interesting workforce management and talent management solutions that they have, and as we got to know and understand their tech stack better with our tech stack, what we began to realize is that probably with little, I'm going to say little effort, but with reasonable effort, we can integrate because both platforms are open. We'll be able to move their modules over to our platform for our customers, and they'll be able to move some of our modules over to their platform. And so we're really going to have this really comprehensive suite of opportunities that's going to meet any need of any particular customer segment. So when I look at it, I certainly think the advisory capabilities, the outsourcing capabilities, our managed services capabilities that could be wrapped around that are probably there where we see the best opportunities. Bob, you want to start? Yeah, Bryan. So on the synergies, I mean, we gave you the cost synergies that we've assumed in the model. Obviously, we do believe there's substantial revenue synergy opportunities. Those are probably more medium term. It's not an exaggeration to say the ink is still a little bit wet on this thing, and so we're going to start building out our detailed integration plans. We think there's tremendous opportunities both from a cost standpoint and revenue standpoint. Obviously, we have more visibility and believe the cost synergies will be more near term. We're going to get our teams together, start working on this so we're ready for a day-one close, and we're obviously going to try to get as many of those revenue synergy opportunities as soon as we can, but not ready to quantify that. There is some implied in that model with the dilution or the accretion that I gave you in year one, but just not ready to quantify it at this stage. Okay. Understood. Thank you. Shelby, are you there? Pardon the interruption, gentlemen. We'll take our next question from Bryan Bergin at TD Cowen. Shelby, are you there? Pardon the interruption, gentlemen. This is the operator. We'll hear from Mark Marcon at Baird. There we go. Mark. Okay. Mark, are you there? Hearing no response from Mr. Marcon. We'll move to Kevin McVeigh at UBS. Great. Kevin? Yep. Kevin, you hear me? You can now. Terrific. Hey, let me ask you something. I hope we did cut Mark off, but go ahead, Kevin. That's all right. Yeah. We'll get Mark back in. Hey, just real quick, when I think about the product gaps and interoperability across the modules, it seems pretty interesting. How much of that is kind of dictated based on the average client size as opposed to gaps, I guess? And just to follow up on that, Paycor's always done a really, really nice job framing their PEPM. I think they talked about a $19 PEPM more recently, up from $15 in 2021. Is there any way to think about where your PEPM sits relative to that 19, and how much of that optionality on the revenue is predicated on client growth as opposed to, meaning average client size, as opposed to maybe gaps you had in the portfolio, if there's a way to think about that? Okay. I'll take a stab at this. I think as we got close, let me back up a little bit. Paycor is a great company, and I think a lot of people know Paycor as a leading HCM mid-market and up-market company, and Raul and the team have done a great job of positioning the company. But for those of you who've been around the industry a while, you know Paycor has been around for 35 years. So there is a legacy-strength business there that has its heritage in the payroll business and the early days of HCM there. So when we really began to talk and look at the various business segments, what I would tell you we found was opportunities where client size, and you look at what Paychex would get in an average revenue per customer in a client segment, where we were actually getting more per customer. Some of that was driven by 401(k). Some of that was driven by our legacy capabilities at Paychex, all of our ancillary products and services, which we have a long history. We talked about ASO. We talked about PEO. What I think Paycor was missing in maybe the lower end of the market was all of these ancillary products, which could add increased revenue per customer. We are very well capable of achieving those revenue synergies. We know how to do that. That's our bread and butter. As we walked up the stack and we began to look at higher in mid-market in enterprise, to your point, you begin to see really a trade-off where Paycor actually has a little bit more PEPM than Paychex. When we looked under the hood of that, it was some of the additional talent management, some of which we've started in other areas. So what we saw was there was a set of complementary opportunities. We also were looking at embedded payroll as an investment opportunity. We're kind of in that business in our SurePayroll business, as a matter of fact. And so we were looking at expanding and getting there. And here, we actually have a product that's actually launched and working and has relationships and partners. So I think that's another market opportunity that kind of checked the box. So what I would tell you is where Paychex is strong, we can help Paycor, and where Paycor is strong, they can help Paychex. And I think overall, across every market segment, we see revenue increase opportunities in the client base for both companies. And so I'm pretty excited about that. And then as we looked at the architecture and the way we've designed to be able to plug in our modules, the way they've designed to plug in their modules, we think we can do that integration pretty quickly and therefore give more optionality up to and including. We feel pretty confident that we'll be able to roll out our employee solutions into the Paycor to allow their employees, their roughly 3 million employees, to access our employee marketplace, which on the last call we talked about, we launched six weeks ago in Flex and already have over 120,000 customers buying something in our marketplace. So we just look at that across the board and see there's a lot of opportunities to explore between now and day one. Thank you. Thank you. We'll take our next question from Mark Marcon with Baird. Your line is open. Hey, good morning and congratulations. Can you hear me now? We can. We can, Mark. Sorry about that. All right. Great. Hey, since I got cut off, maybe allow me just a little bit. I've got a super short question and then a little bit more of a complex accounting question. From a super short perspective, you run SurePayroll as an independent subsidiary. How are you thinking about branding as you're positioning the Paycor solutions? That's the really fast question. And then the longer question is just with regards to if we take a look at the dilution, I noticed you said adjusted diluted EPS, but got a number of investors that were asking just about how we keep it from not being diluted given Paycor's $64 million in stock-based comp and $91 million of intangible amortization. Would you just exclude that? So that's one that a lot of investors have been asking about. Yeah. I'll let John take the first one, and I'll answer the adjusted question. I don't get to take a count. Well, you can. You can take that one. I'll take the branded one. No, that's all right. Yeah. Hey, Mark, yeah. Listen, I think to your point, Paychex has a history here. Some of you may remember a company called Advantage or a company called Preview that we bought, and we used and leveraged that brand in the marketplace for some period of time. You mentioned SurePayroll. Look, Paycor has done a great job of building a strong reputation in the upper end of the market, a well-known brand. And so I think you should assume that we're going to continue to leverage that brand in the marketplace just as we do the SurePayroll. I don't think it would be unique to our industry to have different branded products for different segments in the marketplace. I think that if you're at the scale that we are, you recognize there's a lot of different markets there. So the SurePayroll entity operates as a standalone business unit. When we made the Oasis acquisition, we stood up our PEO and reverse integrated it into the Oasis. And now that's the Paychex PEO, and it operates as a separate subsidiary and business unit. And I think you should expect that's the way we're going to proceed here as well because it's worked. It's worked for us for decades. It's a good model, and we're going to leverage the strength of both companies to go to the market. Yeah. So Mark, on the adjusted EPS question, as you know, we typically don't have a lot of adjustments from an EPS standpoint. We typically have our one tax benefit that we adjust out. As it relates to this transaction, there will be a couple of things that we are adjusting. Obviously, there's going to be some transaction one-time related costs upfront. We would adjust those out. And then we are planning going forward as it relates to this, we will be adjusting out the amortization associated with the purchase price allocation, which obviously hasn't been finalized yet. So those are the two things. So we will be talking about adjusted operating income, adjusting operating income margins, adjusted EPS, and EBITDA going forward. And so hopefully that answers your question. It does. Thank you so much, and congratulations. Thank you. Thank you. Thank you. We'll take our next question from Andrew Nicholas with William Blair. Your line is open. Hi, good morning. Thanks for taking my question. Talked quite a bit about the revenue synergies. I was hoping we could cover the other side of the coin. You said at least $80 million of cost synergies in the near term. Any more color you can give on kind of primary sources of those savings and maybe how we should think about the cadence of realizing those synergies, and especially to the extent that it's baked into your accretion framework? Thank you. Yeah. Let me start. I mean, first, you got two public companies, right? And so I would say there's quite a bit of overlap in primarily general and administrative-type costs that you would need to just operate as public companies. I think those are easier to achieve. And then certainly, Paychex is known as the best operators. We're going to apply our operating model and see areas where we think we can improve efficiencies. And certainly, there's things that Paycor is doing that we can leverage as well in our model. And so the number that I gave you is what we think that we could realize on a run rate basis in the near term. So you should think about that probably between a 12 and 15-month type timeframe that we would be able to achieve those ongoing cost synergies. That's what our current model is based on the numbers that I gave you. Yeah. Listen, Andrew, I want to add on to that so that this is clear. This is really a growth play. This is about investing in innovation and being able to target that investment in innovation into unique needs of specific segments and AI that we talked about and trying to reconfigure our P&L to be able to make the investments that we know we want to make, investments in sales and marketing as well. And so this is really about a growth play and our ability to bring our backend of operating systems, which we've invested a ton of money on. You don't get to the margins we have in this industry and do that. And Raul may agree with me that they probably invested more on the front end than the backend. And so when we look at it from a backend perspective, we have a lot of tools. We've talked a lot about our AI tools, both on the sales and the service side. We have an operating platform that specialists can use that automates you. You look at our tax. You look at our global footprint capabilities. You look at our RPA capabilities that does a lot of the same transactions that they do. So we believe by putting our underlying operating platform in place across the platform, we can drive productivity. So it's really about growing their client base without having to add the same cost per client that they historically have. And I think this is all about growth because I think there's tons of opportunity here. You look and particularly, I want to make this point. This year alone, we'll hire 3,000 people at Paychex. And we hire somewhere between 2,500 and 3,000 people about every year. You go back the last three years, the company's employee count has increased almost 9% across the board. And again, our margins have expanded as well, as you all know. So this is about growth. And as we grow, that creates opportunities for employees to be able to grow their careers. And because of our operating model and our history of being able to expand margins and our investments in our operating back office, we're able to do that. So I think this is more about a growth play. I think the cost savings will come from accelerating growth and our ability not to incrementally have to add operating costs at the same rate as Paycor has historically had to do. And to Bob's point, there's probably we don't need two accounting firms either. Makes sense. Thanks, you both. Thank you. We'll take our next question from James Faucette with Morgan Stanley. Your line is open. Thank you so much. Just a quick clarification on the GAAP to non-GAAP. What about stock-based compensation and how that's likely to be treated? I mean, typically, Paychex hasn't had too much, but I don't know about Paycor and kind of what we should anticipate there. And then my question was really around the financing, etc. Are you able to give us a rough outline of what those terms will look like and how we should think about impact to interest expense, etc.? Thanks. GAAP to non-GAAP. Oh, yeah. Stocks. Yeah. I'm sorry. On the stock-based comp. Yeah. So we do not adjust that out of our GAAP earnings, and we would not plan to do that prospectively. There's some unvested shares that, as part of this transaction, will vest over time related to the transaction. Those would be adjusted out. But prospectively, any new stock-based comp that's issued to our new employees that are joining the Paychex family, we would not plan to adjust that out. As it relates to the financing, that work begins today. As I mentioned in my prepared remarks, we have a committed facility. We have the financial resources to complete the transaction. This will likely. We're evaluating the different long-term financing options, but this will likely be financed by issuing high investment-grade public bonds. And that work begins for us today. And so we'll have more to come on that. I think you guys can probably do some work around that and look at treasury rates and credit spreads and probably get pretty close to what some assumptions would be around the appropriate interest rates on that new debt. Great. Appreciate it. Good luck. Yeah. Thank you. Thank you. We'll take our next question from Samad Samana with Jefferies. Your line is open. Hey, good morning, and congrats to both the Paychex and the Paycor team. So maybe we'll start with just why now? What is changing either inside of Paychex's business or in the market landscape that's making you think about one of the more sizable acquisitions that you've done? And I guess along that line, did you look at any of the other companies in the space, particularly on the private side? And again, why now? What do you see in the business and landscape? And what did you see in the industry that made you land on Paycor specifically? Okay. This is John. I'll say this. We are constantly. We talked about this, I think, almost every call. We are constantly looking at every opportunity in the marketplace that is going to help us either add scale to our existing business, allow us to extend our reach into new markets, which this does. I think it's going to increase our TAM almost over $10 billion, in my opinion, and so we're constantly looking at everything in the marketplace. At the same time, as I said, we're very disciplined, and I've said this on a number of our calls in the past. The market valuations and where they were three years ago are not where they are today, and so some of this is really timing. The way our screening works is we have a whole set of characteristics we look at. We then look at what we think the asset would bring to Paychex, what we could bring to the asset. It's always that one plus one equals three, and then we've got a general idea about what the number would be that we think would be reasonable for us to be able to drive the type of returns that we want to have with our capital, and so I would just say the timing was right, and again, Paycor will be disclosing, I'm sure, more details about the conversations and the timing around that, but the timing was right. What I would tell you is it was the right time for Paychex. We've been thinking and been watching Paycor for some period of time, been very impressed with what Raul and his team has done in positioning their products. The timing was right, and it was time for us to pull the trigger, and we did. I'm just sneaking a quick follow-up. Just the distribution side of it. Obviously, Paychex is a very large direct sales organization. Can you just remind us maybe how many quota-carrying reps that you have and how many focus on maybe that 50-employee-plus side of the market? And where do you see kind of the biggest distribution? So not product or revenue, but in terms of the sales organizations, what are the synergies? I'm not going to disclose how many salespeople we have in any market or holistically. It's a lot, thousands. And we have a lot of distribution partners, and I would say that Paycor will extend our distribution partner network. And that's one of the things that was very attractive to us. I think on prior calls, we've talked about we have been adding sales headcount and sales investment in the up market internally. And I think on our last call, we shared with you our mid-market growth was in the double digits. And so I think we were having good success organically. There were some things that we thought further up market that Paycor would be advantageous. And what I would say is, with this transaction, we will be significantly increasing our sales capacity in the marketplace and are making a commitment in the numbers that we're providing to accelerate sales headcount growth in the years ahead as well, slightly above what Paychex would have historically done. So this is, again, this is a growth play. We see opportunities. We see opportunities inside each one of the client bases to drive up average revenue per customer. And we see opportunities to go into the marketplace and hopefully take share in the mid and the upper end of the mid-market and enterprise. Great. Congratulations again to both organizations. It's satisfying. Thank you. Thank you. We'll take our next question from Peter Christiansen with Citi. Your line is open. Thank you. Good morning and congratulations, gentlemen. We're getting a bunch of questions here. I'd just like to dig a bit more into the capital allocation side here. Bob, if we think about Paychex $1.7-$1.8 billion free cash flow generation, you pay out $1.5 billion-ish in dividend, thinking about maybe an incremental $200 million in interest costs, it leaves the question about debt service and how you think about that long term. Maybe we're not thinking about the numbers correctly here, but I was just wondering if you could just frame that part of the equation for investors. Seems to be where we're getting the most questions. Thank you. Yeah. And I'd say, Pete, your math is pretty good. And I'll just start by saying I've had a lot of smart people over the last several weeks helping me think through this and how best to finance this transaction. And we see this as an opportunity to create significant value for our shareholders. And we did not think that it made sense to dilute the value that we're going to create here by issuing equity. As you mentioned, the free cash flow in our model is significant, and it's well north of what would be required to continue to maintain our dividend policy, as well as, as you pointed out, service the incremental debt that we would expect to take on as it relates to this transaction. That's on day one. That's without including the positive free cash flow that's improving in Paycor's model, as well as all of the synergy opportunities that we think we're going to be able to drive out of this transaction, so that made the most sense, and we're able to do that on day one. That's helpful. And just a quick one for John, maybe Raul. What do you see as potentially what could be some integration risk here? Thank you. Well, I think from an integration risk perspective, they're known. The good thing is we're in this business, so we know what the business is. It's not something new to us. We know how to operate these businesses and where they are. I think the key thing is that we're working on right now, and we're going to do right after this call, is make sure we continue to tell our employees on both sides of the aisle that this is a growth story, that this is a great place to build your career, and that this is about providing opportunities for our clients to have a better customer experience, more products and services, and for us to jointly build the best team in the industry to be able to go out and continue to deliver for all of our shareholders. So we're going to work diligently. I know Raul and his team are working diligently on that because, again, these are two great companies in the industry, and we think bringing them together is only going to accelerate the benefits to customers, employees, and shareholders alike. That's great. Thank you so much. Very helpful. Thank you. We'll take our next question from Bryan Keane with Deutsche Bank. Your line is open. Hi. Good morning and congratulations. I was just hoping you could talk a little about Paycor's organic growth rates. Where have they been at for some of us who are a little less familiar, and what would be the normalized growth rate? Trying to figure out maybe if there's a bump from the economy or have they had any softness due to economic slowdown. Just trying to understand the model a little bit. Thanks. Yeah. Hi, this is Raul. We've been driving organic growth the previous two years in the high teens, low 20s. We forecasted this year, call it the low teens, growth rate based on some of the economic headwinds year- over- year, but consistently double-digit-plus, and we would expect that to continue and accelerate with a lot of the great cross-sell opportunities that this combination will present us. Thanks, operator. Very good questions. Thank you. We'll take our next question from David Grossman with Stifel. Your line is open. Good morning. Thank you. And congratulations to all of you. I just had a couple of very brief follow-up questions. And one was about the float. I see that they do generate float income at Paycor. And just wondering, is there any synergies or things we should think about in the context of you're obviously a much larger company and whether there's some real benefits to running that float through the Paychex platform? Yeah. I mean, certainly, the treasury team is looking at that. We're looking at that as an opportunity. I think Paycor has probably invested more short than what we are in our portfolio. And we have a lot of smart people on our treasury team that will be looking at how we can leverage our resources to be able to optimize that and drive some incremental opportunities there. I wouldn't say it's a significant opportunity assumed in our synergies, but certainly something that we're going to take a hard look at. Right. And then just back to a question I was asked before a couple of times about stock comp is that I believe if we use when you think about how we model the financial impact going forward, do you want us just looking at consensus, do you want us to reduce that by the amount of stock comp? Because I think there, if I'm remembering right, it's about a $50 million run rate this year. And just want to make sure I got the mechanics of that right. Yeah. I mean, a lot of. I guess I'm not ready to answer that yet, David, and get into details of the model. Obviously, some of that stock comp would likely go away. And then I kind of gave you the insight on how we're going to treat it prospectively for new issuances of Paychex stock as we move forward in our model. We're not at a point where I think we're ready to provide that level of detail. I know everyone's anxious to get their models updated. I think we wanted to give you some information. Obviously, Paycor is a public company. Paychex is a public company. We needed to give you a few other breadcrumbs, synergy opportunities, how we were going to finance the transaction, but wanted to give you some pieces so you guys could start working on your models. But we're just not at a place right now where we're going to get that specific. This transaction, we're still two separate companies and will be for some time until we finalize and close later this year. I will provide an update. I'm sure everyone will want me to do this, but I'm committed to providing an update when we get to our March call as we kind of move through the next couple of months and build our integration plans and so forth. And we'll come back to you at that point in time. Yeah. I just want to say again. I want to reiterate that this transaction in no way changes our capital allocation strategy in terms of we've historically grown through acquisitions. We will continue to look for acquisitions that meet our criteria, and we will continue to deliver on our growth dividend policy and the historic share buyback program that we've had in place as a company. So I think there's nothing fundamentally in terms of a change in philosophy as it relates to capital allocation and our position to provide a great return for our shareholders, both in terms of dividend and continuing to use share buyback as needed to avoid dilution. Got it. And thanks for that. I appreciate that and the timing. And if you don't mind, can I just ask Raul a question? As you think about kind of your sweet spot in the market and for folks like me who just have to simplify this down and think about it in terms of number of employees, and I know that small companies can have fairly sophisticated needs from an HCM perspective, but when you think about your core business today, what do you think your sweet spot is right now in terms of number of employees? Yeah. We've shifted the business over the last few years to really focus on the 50-employee to 2,500-employee segment. Obviously, we have clients that have 20,000 employees, and we have clients that have one employee. So the platform has a lot of capabilities, which is why we think this acquisition is so complementary that we'll be able to leverage the Paychex strength for our clients, specifically down market, where we don't have a lot of the benefit offerings that Paychex has already providing their customers. And then up market, I think we can help coordinate with their current up market platforms and continue to win more share in the marketplace. Thank you. We'll take our next question from Ashish Sabadra with RBC Capital Markets. Your line is open. Thanks for taking my question. If I can just ask two questions. First, one on the PEO opportunity, your ability to potentially upsell, cross-sell PEO into the Paycor customer base. That's one. And then secondly, I know there were some questions asked on the intangible amortizations, but I just wanted to clarify, how do you think about the treatment going forward, both for what Paycor might already have, but through the acquisition as well? Would that be excluded on a pro forma basis? Thanks. Yeah. I'll start with the PEO. Again, as I said, the fact that we're focused on up market and what we've seen with our PEO market out in the marketplace becoming a more viable option for larger enterprises. I know Raul has past experience from another company in this area. And I think both of us saw that PEO and the HR outsourcing, the managed solutions portion of our capability that you can wrap around the technology platform. We think is going to be well received in this environment where a lot of mid and enterprise companies are trying to figure out how can they be more cost-effective, deal with inflation, potentially outsource some of their HR tasks. When you look at some of the rising cost of healthcare, we think that we have a lot of attractive options to be able to help them both in HR outsourcing and in helping them manage their benefits costs. Yeah. Ashish, on the intangible amortization, listen, whatever Paycor had that goes away, there will be a purchase price allocation for the consideration. And our plan going forward is that we would adjust out the amortization associated with the intangible assets prospectively as we move forward. That's very helpful, caller. And congrats on the team. Thanks. Thank you. Thank you. We'll take our next question from Ramsey El-Assal with Barclays. Your line is open. Hi there. Thank you for taking my question. It doesn't sound like there's much overlap in your respective client bases, but just wanted to ask, are there any synergies to consider in the context of the transaction? None that I can think of or that we've actually discussed. No. No. I mean, again, very complementary, as I said. It started off being very complementary, and the more that we got into it, it became very clear that in certain customer segments, Paychex had things that Paycor didn't have that we could very quickly bring to their client segments and drive revenue and I think win more deals in the process, and then as we went further up market into the larger sector, it became obvious that there were things that Paycor had that we didn't have that was driving higher revenue and higher win rates, and now we'll have those things at Paychex, and so to me, it was a lot more complementary and not really seeing any real synergy. Paycor did not have any of the ancillary products. We have over 92 products and services. We have an employee marketplace that by the end of next year, we'll probably have almost 100 different products and services that we can offer to employees digitally through the HCM platform. And we believe that we'll be able to integrate that into the Paycor platform and then monetize the roughly 3 million employees on their platform as well. So like I said, we see a lot of revenue opportunities and best of both worlds opportunities in this transaction. Perfect. Thank you. Thank you. We'll take our next question from Kartik Mehta with North Coast Research. Your line is open. Hey, good morning. Hey, Bob, just a question. I know you've answered a lot on debt service, but I'm wondering, as you look at the balance sheet, just the minimum amount of cash you'd want to keep on the balance sheet. And then just, John, on margins, any thoughts on how this will impact margins as you move up market? And could this pressure margins, but you get revenue growth as an offset? Oh, the debt service. Yeah. Sorry. Yeah. Remind me the question on the debt service again, Kartik. Sorry, I was taking a note. Oh, no, no worries, Bob. Just wondering, the amount of cash, minimum amount of cash you want to be seeing on the balance sheet. Yeah. Yeah. So I mean, we obviously looked at that. There was a question earlier about looking at other assets. I think one of the things that we liked about this asset was the ability to service the debt, really maintain our strong balance sheet, continue to maintain our dividends and policy and grow our dividends. So we've done that analysis. We would remain north of $1 billion, which we think is plenty of cash to have on the balance sheet going forward. Yeah. And Kartik, on your question on margins, again, I think it goes back to what I said before. We know that we have an operating model that's best in class in the industry. And we know how to apply that in acquisitions to be able to drive growth and expand margins at the same time, which is our history. I'd only point you back to our acquisition of Oasis. And when we made that acquisition, remember, that was a PEO acquisition. So now you wanted to have a low margin. With the pass-through, that could be a low margin business. There's no pass-through in this business. And so this is a traditional HCM business. And if you go back and look at our history, I think you saw the first year of that acquisition, the margins were compressed. I will not apologize for our margins now or post this transaction. They will still be industry leading, and if you go back and look at our history on Oasis, every year we expanded margins and got back to 41% margins, so that's the legacy. That's the tradition of Paychex. We know how to do it, and that's what we'll do over the long term is we'll continue to drive operational efficiency and margin expansion through growth and scale. That's the key thing. How do you do that? You grow, and then you leverage your scale to be able to expand your margins. Yeah. Well, thank you both. I really appreciate it. Thanks, Eric. Thank you. We'll take our next question from Jason Kupferberg with Bank of America. Your line is open. Good morning, guys. Thanks for all the info. I just had two numbers questions. The first, just how free cash flow may be impacted by the acquisition in terms of dollars as well as net income conversion? And then secondly, I know that Paychex's medium-term guidance for revenue growth has been upper single digit. Does this acquisition change that view at all? Thanks. Yeah. Hey, Jason. So obviously, there's going to be an impact to free cash flow, particularly upfront with a lot of the one-time costs that we'll get behind us in year one as we move through this and realize the synergies. Paycor already had positive free cash flows in a plan that was improving them over time. And then we'll bring in our operational excellence as well as the synergies. And as we move through this, you'll see free cash flow margins close to where we were before. And I think relative to your other questions, Jason, remember our midterm and long-term and our historical growth formula at Paychex has really been built around several things: client growth, client value creation, meaning we add more value to the client and they pay us more for that value, and product attachment and inorganic growth, M&A. And that's always been part of our growth formula as a company when we set a range of what we kind of say we're going to be in the high single digits. And M&A has always been a part of that. I think it's fair to say that M&A has been lumpier, but that is due to our disciplined nature in which when we're looking at opportunities. And as we've talked about on past calls, I would say the environment the last three to five years had asset prices at a place where we didn't do a lot. We did a lot of technology tuck-in type of things. So this is part of our normal growth formula. We're not changing our growth formula. This deal does not prevent us from continuing to look at inorganic growth opportunities that add scale or technology capability. That's one of the things we liked about it is it allows us to maintain our capital allocation strategy, and it keeps our growth formula intact. And certainly, you're going to see in the short term some upticks in revenue growth because of the addition of the additional clients. But over the long term, it really is not changing the profile of our growth formula much at all. Okay. Thank you. Thank you, and we'll take our last question from Zachary Gunn with Stephens Inc. Your line is open. Hey there. Thanks for fitting me in here. I just wanted to ask that if I remember correctly, this is largest deal Paychex has done. So I guess just what gives you confidence that right now is the right time for a deal like this? And just as we frame the kind of $80 million in expense synergies, just wondering what level of conservatism there is just with the uncertainty of having not done deals this size and not necessarily having that muscle memory there. Thanks. I'll start on the synergies. I think, listen, if we gave a number on the synergies, I think we're confident that we're going to be able to deliver that. Obviously, there's a range of opportunity there, but we feel like in the near term, the $80 million number that we gave you, we feel confident that we're going to be able to deliver that. Again, a lot of that, there's some duplication of cost across the organization. We feel like we're well positioned to be able to achieve that number without a lot of risk. Yeah. And I would just say relative to the size of the deal, Paychex is a much bigger company than it was four years ago when we did four or five years ago when we did the Oasis acquisition. We're a much bigger company than when we were when we did this payroll acquisition. And so again, I think in terms of relative size, I think you look at any metric. This is in our core business. We understand this business. We have a playbook of doing acquisitions, including large acquisitions relative to our size. And we're also picking up a great team at Paycor that knows this business. And as I said, they'll be operating as a standalone business unit. And so we really believe that we're going to be able to enhance what they were already doing as part of their growth strategy, which Raul already told you was double digits. Instead of $650 million going double digits, we think we can augment that with additional product and services and with our operating platform to help them expand their margins and achieve their operating income objectives that they set out as well. So I hope that helps. Got it. Thanks and congrats. Thanks. Thank you. And it appears that we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks. Okay. Shelby, thank you. At this point, we will close the call. If you're interested in replaying the webcast of this conference call, it will be archived for approximately 90 days. I want to thank you again for joining us on short notice today. We could not be more excited about this opportunity. I hope you're excited for us as well. We'll see that in the notes and what it means to Paychex's future, and we really look forward to sharing additional information with you soon, and again, I want to thank you for your interest in Paychex and hope everyone has a great day.