Paychex delivered a solid QQ1 2025 (quarter ended Aug 31, 2024) despite explicit headwinds from the expiration of the Employee Retention Tax Credit (ERTC). Reported total revenue rose 3% to $1.3185 billion, with gross margin at 71.2% and operating margin of 41.5%, resulting in net income of $427.4 million and diluted EPS of $1.18. When excluding the ERTC impact and one fewer processing day, revenue growth was 7% for the quarter, underscoring the company’s underlying demand trajectory. Management highlighted resilience in small and mid-sized business activity and progress in AI-enabled product initiatives designed to help clients recruit, retain, and pay employees more efficiently. Cash flow remained robust, with cash flow from operations of $546.1 million and free cash flow of $510.5 million; Paychex returned $457 million to shareholders through dividends ($353 million) and share repurchases ($104 million). The 12-month rolling ROE stood at a robust 46%. On guidance, Paychex maintained FY2025 targets: revenue growth of 4% to 5.5% (with ~200bp ERTC headwind), Management Solutions growth of 3% to 4%, PEO and insurance growth of 7% to 9%, and a full-year operating margin of 42% to 43%. The company also updated interest-rate assumptions to reflect 125bp of short-term rate cuts for the year. In summary, Paychex demonstrates healthy profitability and liquidity, a disciplined balance sheet, and a strategic product roadmap focused on AI-enabled HR and talent solutions that could extend its SMB market leadership.