Paychex (PAYX) 22 Dec 222023 Q2 Earnings call transcript

Good day, everyone, and welcome to the Paychex Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note, this call will be recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. CEO. and President Gibson, John Please go sir. ahead,

Thanks, for our Good year earnings morning, second everyone. us joining 'XX for you release. discussion fiscal Thank quarter Tadd. of Paychex the

is we released financial Officer. today Joining November Chief quarter the our Rivera, XX. the opened, before results Financial me market This Efrain second morning, ended for our

You our release our on earnings access can Investor website. Relations

archived it teleconference and for Internet outlook will X%. SEC comprehensive website and growth XX within are help the up day. our remains financial an delivered Demand clients second quarter be our questions. This Efrain the second the and our adjusted positioned be share the strong the and update our to the over and with for is will revenue available review filed XX-Q results results solid We diluted broadcast fiscal for Form your year of days. open of financial Our the with succeed. being for then on We'll to total on quarter per and will X% well suite earnings 'XX. call then for next solution we We'll approximately business start with

HR expertise this very solutions dynamic Our unique of many and businesses navigate the marketplace small midsized leading HR have continue wide and breadth the combination environment. of to in and technology, we needs the address to help challenging

leading and steady IHS internal and moderating environment We wages. in Small revealed macroeconomic Watch indicators. latest in continue Employment growth findings growth to monitor closely our Business our The from Paychex the jobs

the the labor impacts pandemic challenged be to challenges Our clients continue continuing the market. of inflationary this and of pressures by

businesses and continue resilience. their to show midsized small However,

and value clients focus solutions. remained solid retirement outsourcing, and software retention HCM driving increased revenue we on of our HR penetration Our retaining as and

worksite X outsourcing We and leader. perform major serve clearly revenue us business, HR over this growth overall and ASO employees quarter. milestone Our across business now worksite our achieved employees record well PEO We continues million to establishing strong in an with retention. a as HR

services are turnover. the truly a apart increase HR and on our help our efficiency, issues HR our SMB our data technology from reduce industry-leading they vast us and leveraging clients certified our advisory HR and achieve as Our analytics sets as unique as clients advising greater well employee set are asset to engagement HR professionals operational

demand outsourcing HR lower clients adding pandemic, the technology we solutions current offerings strong, during employer for While see and for benefits. and best for continue situation. the demand shifts saw in are we health remain early to fit their what our find Both

We continue with to insurance but delaying see HR assistance employees. their offering and by also seeking decisions businesses or our high this solutions, driven changing filing for for tax and immediate to adding trend issues their credits on demand ASO

know that area in of volumes and in tax of In of credits. XX,XXX credit XX% even saw business eligible business program or just Florida grow. actually that we've helped discussed owners and date, to lower growth addition, showed our service, continued that participant of we for which retention health eligible they medical similar our last and impacting these didn't the secure area insurance agency demand in sales at-risk business. revenue benefits that credits, in more and tax PEO, our employee in we plan second helps continues clients were of clients the maximize To in billions insurance quarter, -- survey the trends Awareness A XX% some ERTC than recent ERTC. the quarter our

clients. this service as benefits to attract existing continue educate to well We clients leverage new the of as

vast and and on further attendance, our released and continue received Paychex Paychex onboarding, We showing for This time our remain enhancements to businesses to experiences. time of their feature Those leveraging our screening, coupled industry This staff. uses surveyed HR out Clients I'm with time against deliver when experiences. to two-month Flex, is strong a the insights predictive have peers. invest reduction their flight indicating we recruiting, new enhance in recruiting Brandon year risk. four suite provide November, in for Advance the reduced onboarding on the existing the very just now continues In when XX%, administration our we recognized employees. from clients HR to XX% Insights the been Predictive technology, Insights clients to Hall product benefits Award cycle for Technology reported time required solution. has to Through focused our excited that six. offering shortened potential pleased Retention We're retaining consecutive and offering, Bronze typical recruiting, our results customer are XXth Best tracking us. very clients three about turnover data committed and streamlining they've the this sets savings a an compared analytics, Analytics employee at Excellence Retention of which Group average

also leader year-end for that we time, delivering with to honored and and their critical clients have HR are impact to These technology IDC HR services. Service XXXX is received our this Core At validate power heading our real a season. of our we is HR the and we're awards that confirmation the our for Customer focus the the into on as advisory our and During were technology quarter, employees. of award of SaaS recognized quality Paychex Satisfaction another continue Award this

thank I their we dedication in advance work for have and staffed ever. are all momentum. want service, making best in year-end fully this the We in hard and both employees sales to all the and good

who will you turn second take the to financial our Efrain? I'll Efrain it for Now over results through quarter.

everyone future Thanks, statements forward-looking to morning. that John, refer like remind today's will and commentary to good that I'd events. contain

that. the Take press release look comments. questions have if customary know any You a our on you on

product $XXX to penetration. better-than-expected of outlook. I Both and of that fiscal of note and largely Revenue points quarter growth service X% the and total I'll million see with revenue $X.X Solutions strong services, moderate HR strong results. key to some increased price retirement revenue XXXX we will solutions. to per and led ERTC for would client. execution by realization, Management revenue from client billion. but HR attachment ERTC higher time our ancillary our We revenue the attendance have positively driven in impacted approximately by continue demand solutions, a anticipated our benefited XXXX then and employment second ERTC start by and and revenue client levels X%. Let revenue providing by additional X% to revenue per fiscal quarter, was service me review increased finish

million. ERTC growth The impact participant client. PEO quarter on to shift funds $XXX of the Solutions note the due increased was headcount, period. the growth half, to the higher rates and was primarily the Insurance Solutions of including While PEO. increased support balances. investment ASO. interest And the half. plan X% discussed, Total to a mix to become Insurance John Operating just a rates attachment worksite headwind increased with in $XXX in growth previously Solutions, along growth by would Management in to general along rate revenue first in for margin Expense average Solutions X% I and of line largely tailwind and an expenses operating tempered held $XX million business. of factors XX% growth $XXX to employees PEO wage X% moderate per second below year higher our for volumes prior was will attributable million, revenue and growth average income with costs to was the by to to XX.X%, with significantly for rate the driven of million lower Interest with and it increased Insurance medical clients growth on

to year share, tax earnings Insurance XX.X% Our effective X% billion. to and diluted per the and results, $X.XX adjusted increased service to XX.X% period. income Op income a million increased both for to to and share Quick $XXX summary in with million. compared $X.X and was share diluted Management share. revenue increased share. adjusted Net total year-over-year earnings expansion increased quarter and per adjusted $XXX and $XXX X% per million XX.X% XX% earnings both with million diluted share increased the quarter X% to and respectively. of X% $X.X modest to year-to-date margin of from $XXX Adjusted net prior both X% increased income XX% rate increased financial $X.XX billion. revenue Solutions per increased net PEO $X.XX the income per total to per Solutions and XX%

and income capital. XXXX, XXXX. XX, higher million total for $XXX and borrowings per of look restricted our total strong was the and fiscal first and million out was share position. the at dividends We paid It's Let's financial this Cash $XXX first billion during $X.XX increased than quarterly corporate flow cash, $X.X $XXX with approximately of and driven of half cash half as from total operations investments by for changes November of more a at XXXX. of million working of in net

Our absolutely stellar, XX-month rolling XX%. return on equity was

I'll XX, Now XXXX. the May turn to fiscal current guidance the year for ending

incorporates view our first outlook evolving of macroeconomic results, obviously, our in half environment. Our current the

to corporate net. to I'd grow to grow the expected income portfolios, revenue to and many of and Management is earnings grow now range in in Solutions that earnings debt expected million. X%. $X Total towards in lower and range as to guidance but PEO Interest Updated Insurance tax for X% be just million previously other We of funds to moderated tax are be discussed. And X%. the for do on per service areas to on PEO plus of net margin range Guidance margins the is clients on the have leaning $XXX share on end Solutions the our effective the range the end in expected number we Solutions you $XX on for $XXX income/expense rate. million. upper to the unchanged, X% raised based guidance remind of range is that is factors Adjusted of is revenue XX%. range X% range now expected expected approximately Insurance to although of operating diluted follows: to held anticipate of and to in grow the expected the effective rate of XX% our million

that XX% growth and X% total currently quarter. to third operating quarter third revenue the the anticipate range will XX%. to the be that in approximately be margin will We in Turning of

could Of in course, current to is change environment. our all which are changes subject there if this macro assumptions, of the

will third will John. and turn quarter for website investor refer I you the I'll the update over information. you more call, to to on on now our We slides back again the call

for now we Tadd, will Efrain. the you, open Thank call questions.

[Operator Ramsey El-Assal from Barclays. first Instructions] question We'll take our with

other to What holidays there? you do attachment on I driver happy Thanks kind Is and that the terms business. in you that sort mentioned right is have I'm any medical ASO. had lower think are of insight a insurance you. shift just question in you to dynamics question mix for the color curious, or of those taking my kicking this morning there the plan now? why of underlying and

I on think a your Look, and question. little zero-in back step I'll I'll Yes. then bit

think I HR ASO double-digit the continues of to there. We're with combination solutions, progress our and the rates. when grow at at very happy you PEO, look

we year back were and about million if in X.X at surpassed served. go disclosed. employees said, we the million fiscal that, you As X we And 'XX, think

probably COVID, And XX% where in about increase. X%. a then think like that, you that's it’s year had we I think So one

very in of So products. those solid growth both

plans. for offer first When to there's though two of business that think employers product. are our at insurance think dynamic buy things. their it; need I And there the and clients, some then insurance this I want economic who a time, look electing finding activity. adding pressure We've share. their fair you to think inside, not would economically look an time think in and difficult participation And employees in new participate employer lot I when look we of agency it's type I need first then to need the seen to are struggled. environment, agency you you rate, tends they of One, on employees. you lot contribute about has decreases the who that is think employer employers they're the employees start to think, when I for attract their them to offering Most to of driven in you also a other even insurance under,

of wouldn't So I the that's connect economic But worked, be you pressure the directly. two look at if made some I surprised have looked wages, being when I can't certainly, those two of there. the I decision at dynamics, inflationary when hours that's

me. for follow-up One

you your product You that in, Can to of also there? using broader talked about us on what execute levers Management Solutions and opportunity? update you're of in inning cross-sell. cross-sell we're What strategy on kind terms higher attachment

what for. board, efficiency our Look, solutions attract Yes. inside our we've things That's the continue companies. seen are offerings, looking to digital their online across that driving

our with dealing about time think more and You solutions. dispersed also workforces. attendance They're

So that's and onboarding, demand, onboarding. driving recruiting

medium-sized small we So still tight very labor businesses. a and market have for

So with in really partnership demand, our driven it's recruiting and onboarding has experience Indeed.

think matter a As reported, approaching the million just experience, six number. since new X.X X we're onboarding somewhere million we we fact, the of last hired and months in onboarding through time around and I last employees were we the -- hiring this reported mark

are people to attract as and our and Retention then retain, trying attractive Insights. very been that's So

interesting the professionals to have scenes and going to insights they to and Insights, proactively our we clients engage them a Retention our that having data the It's on were flagging behind think issue, doing clients. a out, we have we analytics in consultants our and an So out HR actually we're HR team, then conversation. go actually we're talking them

Bergin from Bryan Cowen. next with question Our comes

dig in environment. some of demand indicators the here leading Wanted to the and on just

since you well demand new seeing offering? you last you're and last that employer as the and reported talk size what can just about weeks, then over So few in across just

we're tell Yes. be continues everything it's in and Again, resiliency would of environment, midsized is, a strong. what macro though small businesses I read the mixed the a about and -- the to kind that you challenging you even seeing

when we and what we of reported time, kind downturn, we've at at of this So the would looking here. of first those in not simply a leading the that indicators indicators be at that's signs look we're seeing our

covers, the certainly to COVID better the think micro customers under customers seem from effect small when you indicators our inflation dealing than indicate I mid-market our anything and seem But there's in small downturn this be to customers I would of perspective. a be Certainly, that the think scene. customers been macro rare when any and than the businesses. we're our larger look time doing kind customers with perspective, for doing overall in of at the look terms better recruiting seeing small and not at you coaster

Okay.

that. Okay. That's to good follow-up hear. a I just on guess

for second you're what loss think the you assumptions client macro had can like talk client a half just levels, employment about the or things business we outlook, As that? about underlying thinking about

first point, similar think pretty quarter. is I we're versus -- previous think we at this what at in see this to as I assuming that's the to an pace continue the you that moderating caveat, a And looked quarter-over-quarter, with that saw half. Bryan, environment we've

think I through fiscal. into think that's of continues the the we end the trend

the sharp continuing a as So see while we represent still moderation it doesn't go signs we through departure, of year.

What of monitor we We're firms couple change, effect raising pressures. Now have that. would to occurring. that it continues on same peak we Fed's having that they now, of change have rates. our impact their in short-term is is rate serve. going mean, to first tamp of that SME had we note X% If interest. quarters. of there the at especially to that by that? the caution we not assumptions. don't we hiring approach see I a would short-term we're consider see not to as assumed the Right just right it's But started right now, to what what in And it's I that do a impact the now, the starting wage dramatic It's incremental the having that impact have mean

dramatic from the departure no first half. So

of with Kupferberg Bank Jason America. from comes question next Our

Solutions start raise on the wanted there. of guidance Management I the with revenue to just

the operating pricing, of it which metrics checks retention, bullish now Just I per bookings, are key you on? mean is client?

Yes.

-- let So couple stronger, it's pick as and driving where strong. Jason, of is say we're those that, me where a not out

over of strong to we're coupled little retention, which do. unit during given year. is higher expected strong. to We're seeing and strong client be balance bit of to retaining, but in So remain what we the revenue obviously, retention and of want very mix to on retention the and last expect so It's that's client end, couple expect the clients it's the that increase low with more we we churn the unit years, client a base the value occur

On in We half. it the the check first payroll control per a half in that's growth that strong saw expect question, don't the good good be to half, checks for the pays one because or of the year. we back first in per

compares the half moderates the saw that expect we we partly partly growth last second get of into of that of we simply it So year as because year. amount the

So ERTC half much in of it that's the We quite moderate through think will still consider will still the that go sales positive will then the although And demand that remain I it positive obviously out still but to year, as the we called be Solutions contributor. positive -- factor that think be to it won't It and we just a be. environment back be as a Management moderating. perceive year. we

So a each of more bit those. color that's little on

has look them at of businesses, in been an when the we to we're and our I very for worksite increase solutions, high seeing demand like employees I retention PEO. What both We our add historic record to Yes. both see outsourcing the HR record ASO I the And Jason, at those demand. in would and mean mean probably HR that. continue highs. you

helping certainly we've macro when HR had look at and positive And very, across that's the in So you level. at on us going area, then as what's well. -- solid revenue the results, retention very

business you question you that think side of I things. effects issues are softer vis-a-vis a -- or that to have about some back to would than you macroeconomic anything -- execution insurance that next could But coming just Understood. challenge be the on take causing to look talked a there mean, about the you any talked feel anticipated. Okay. My cyclical. you at is little structural need you on are border

can see unpack we if wanted that Just more? to little a

Yes. we've a of little businesses. that's product. been business about majority vast been a of is has Well, soft period a time. P&C most workers' our continued a market bit. a Jason, talked I remember, the of because P&C start-up talk new let's the mean to little very Again, comp, it bit And agency for

that drag has be turned not certainly, a and around. has to So that continued

so I think more benefit a you impacted less a at starts, been went pandemic. which you through cost the It's at and look side, when a say, from the this as and little pressure and you people both H&B have bit down employee employer has kind we're little what of I side. talking to, of new business an you adding people have slower then economic that up

anything structurally. there's think I So don't terribly

one H&B. with kind side. more meet may programs. this marketplace side, to And be on But the of approach is lack economical. them to where of our the we're we're a a going then Now clients we the benefit this also continued our We're again, more terms have converting in that product to of of portfolio to to P&C at existing P&C things both expanding of doing continue the doing digital attachment adjustments participation make from on look trying and insurance things in backup really H&B engagement sluggishness and is some with back lot in more we're current the demands certainly going to more we driving may success think

McVeigh Credit Kevin next our with take question Suisse. We'll from

not wanted because EBITDA there takes then the call. like more income Happy pretty and I the John, too. And of holding is line, in float, the that been in drill on a some swing step-up the into the But anything and guidance is is income that, business profitable, your -- of profitable. Or a offsetting pretty congratulations bit. below is to opposed like parts sizable on it first Efrain? on and floats overperforming as we're pretty it the mean, other doesn't factor I profitable conservatism? puts seem the which there's other holidays, that's know is and I but the little to of the the through. the a Just seems flowing little above, kind

I'm about anything there is just missing thinking that or not right? there So

you gave I No, no, not when towards mean ourselves was think more that and of you the the up that I the end top the we really, Kevin. I what color you range. do saw arithmetic,

go And there anticipate of to is don't through, in So that ourselves half floats year we the at year, flow revenue. through going look that position back assume we the also with into approach outperforming We XXX% that end 'XX. as caution an on the spending year. always of number but we potential this conservatism we and point, up may at the element do through

from of And lot Fed then funds what a that in Efrain, million million, terms perspective? us, makes Fed remind funds $XXX $XXX in can is a That sense. just of you

that it saying to between the long and portfolio. the on depend that what do Yes. as We a balance just assume year simply into rate we're And up I The is. position I that throughout take been will terminal where close put going the X% spring. caution to portfolio is around term is can't the Fed what want the we I've the to -- in short you end get because term and rate

same and suddenly occurred. cycle to than So were sharply cut, more we're thing we where we we're the bit situation don't protected -- and Fed a raise when little so in the the if decides a last then during

but flowing -- P&L. through the So we're obviously, that

next Jefferies. Samad Samana question Our comes from with

the of on the to then macroeconomic adjust as end clients your guess, year on the maybe can aggregate the comment and maybe closer and of as bookings the we changing quarter seeing the both linearity get what just Maybe in I you're activity, performance. and towards record environment? you sales

Yes.

see very and demand look, products strong for continue -- we services. our we So to

all. really landscape more certainly, clients there, making a in on inflation. side, struggling at see strength to continue we with dealing Again, our at said, lot I are not continue As our And point with of seeing to them our efficient. technology products. solutions are of competitive the We're find the continue HR this all change digital

ERTC. got us. become play we've helped them. and helping efficiency a helping we're Again, That's a also $XXX,XXX client XX,XXX clients, per average help I our the definitely We've remember, think them So them. with is helping over there. to big We're economic that that's

to as We mandates and the we're benefit see a time in their an XXX(k) I business attendance rolling online as that well to as strength our continue online digital that's popular and group from attachment, all critical and becoming recruiting. of that state want out of have, well. mentioned people very services, this comprehensive experiences

All that the businesses of resonating those happening. with are are really problems small

So to there the second your question, think had stumped by a as of I the you to way, linearity it. me for

can that to Here's I correctly. if it answered me answer my and you tell

look solid it growth, have strong. comparing if now first go certainly half on and back was to you bookings how So I are two-year sales we And stack quarter, business to call is, at pre-pandemic, favorably important the is most QX for quarter. this that question But really on of compare important everyone to as time. certainly the knows, period our a the we

generally, we first bit up tougher up a strong half, little first half, the bit second second the strong we start half end the lob we in line in the in in So when little to a half. when

pretty is I that point, to to season only think sense the the we the where The have know pretty have a -- we're third John's get for selling through much through. the well of year. season. where get I We're rolled we out time has year the would caveat much we see to to by are we how quarter really for positioned come selling was of kind

I we're So well. think lined up

third part won't that, it, the would of I in we're think numbers the and the more out in middle report, suggest quarter.

just, on your follow-up guess, own. then And a I maybe

think about that's doing. I your are customers what

that are and maybe about thinking planning assumptions for guidance own guys well? organization? going said as -- forward staffing you you levels. How your expected Just sales your you you're in marketing the you are on own at and in the made the based hiring How

Yes.

given both do adding that opportunities and that in said, in And where to in cautious We're we time. season, fully sales monitor to that. above some service very we're staffed, which in As to to say point going going demand I seeing. we be is would selling we're we're continue for we want the this at being see exactly investment. the

As see products services promote in will we those in are make the resonating we Efrain to and the said, investments think market. the that selling and we opportunity season if certain

So to that. If what levers know we're are. of some do holding able to see back be we we the sort change,

them this we've best operators continue we're in We've we're because do said, that not leverage, As the We're going business. on but in demand just seeing hands the got to to that the merit that. our the pulling decrease at point we're would not that.

comes Mehta question Research. Kartik from next with Northcoast Our

just pricing, John, thoughts Efrain or I changing. isn't it's said how on taking? know, John, you the competitive environment

to had have recent increases you put in? price customers most that wondering I'm the reacted So to

solutions, attachment, above revenue driven about that HCM the HR I average we've experiences attachment digital the the the seeing per say we're we're is from And doing talked the our even digits. pricing levels, and already the our would of Kartik, from by value to we're really double client we're providing. Well, upgrading the any It's that's it, adding.

well actually a revenue revenue customer as sold So from well there. per are a per new customer, as doing very we very,

So the have. demonstrates it power it I the we think I demonstrates that value pricing and think

sheet. the What back valuations balance just thoughts just sheet buying maybe And if looking is shape. your and M&A maybe the more economy sense versus Obviously, opportunities? down, at on come for makes stock in slows And balance then Paychex? the great

I has obviously constructive would came sense along, don't the changed, anything M&A be on we for in those that think Kartik, opportunities. if the opportunities right

at. the that looking we're We have funnel opportunities a range of in

opportunities see after we sometimes And this going point. more be aggressively that may worth at

of think our on that that the to point buying to changed funnel. we've With set based we in outlook dilution. think at have we respect this terms of back have shares, don't back in desire I I the buying normal opportunities our combat

more I productive a can and -- M&A. tuck-in the little talk do has bit environment to in we're think a this, very also that interested changed for environment doing acquisitions sense. I that. don't in looks And John but So larger scale lot think both and doing the

Yes.

on had add very think changing I to think changed. I think, always, a for I sure. market We've similar to Kartik. the Look, The that, position is has not position.

just not reasonable what the And to we're I presenting market to We interested as of that very the are, cross after meaning these M&A active technology be or moderation allocators think, we're themselves And in amount where what the able been of to a capital. is been to changing, at valuations be that known think of but we match going in. can we've doing conservative good are I some pay we have to opportunities point us always to going the bolt-ons interested we're have been and be in barrier. think not some And to it's unreasonable we're more valuations. hopefully, a is reasonable they're to for valuations as And we continue starting seeing see some past. businesses get there. least that for

Our Keane Bank. Deutsche with next from Bryan question comes

seeing? Paychex? from that the inflation about up general. or in inflation attachment, for direct just What's Is it client less the thinking wage Just effect you'll spending end less

talk let's wage so about inflation. Well,

wage tell that First of all, have it's moderating. been probably I'd we inflation, you but

what's were before. months of certain bit and our pricing at at parts look the the Paychex you steady from kind increases industry. And the X%. our in wages wage, business a percentage we we've that's IHS for been in three of pricing about a you on particular, seeing based is When the models certain last to little the index, If similar of in actually PEO our some think about of in moderated

not big in impact does have a some revenue. wage our So that rate have general, can the uplift. on But

doesn't appetite guys? you buy with impact big it or to attachments a more And spend on typically have their

business, I in Not that really. the checks, more I never seen don't would employees in HR indicate one see would that. the employed, thing are analysis number of payroll people key have of our would that The are getting say, side that the checks driver better. the look, more I businesses, worksite the the that the probably people employees, is that.

beginning see. the of we're you that Association they're That's survey different potentially job are at people within on tell would recent see looking of a base. that getting more adding the I XX% seeing Staffing that one places adults employees client impact found hours. is of inflation terms the we component two are things of American is the second of actually we to now checks A is working in One at

imagine, you can As that's check as check. a a

of more that's And people where our checks, for type if are more working positive see that and -- places, business. so working again, more, in getting going you

high happening then you next guys months. growth? over end about the I as client are guys' head X% for always low season? Got X%. helpful. it. few it the of season into key the selling it as What about Is expectations to No, end, obviously, Is is your that's you And talked think -- new that

I to Bryan, typically, say X%. so think Well, X% we

We will see where of there. we come the out range

it expect We to a be good season.

what that's in think I we're about of can as say as much I it. midst the

from next with Eugene question Our Simuni comes MoffettNathanson.

don't have you the to if for been insurance on PEO the to second, answered the back come of to a questions PEO I lot side on specifically. mind. of things. click double just A wanted But insurance wanted I

you that aside agency helpful. very seeing be on was literally and talked bookings the you aside, trend even just would what putting attachment the there? putting bones in explicitly are think PEO the PEO bare issues So insurance I at with comment works business, employees, about, can which

Yes.

double take the and double, to click kind I on let there. I of John think I'll revenue but as So a affect you to PEO that And that's second revenue of, growth the question. talk a just want elements said, great sales, to

if knows that the the State of that, but healthcare side. health Florida care is side. on in on the from is the PEO in insurance different, the first primarily Workers' in So comp everyone on revenue the derived thing call

that in call want So as specific it's some year going but had idiosyncratic didn't in insurance. the of a short, first half the period level happened primarily people big saw where it on was number, that there, PEO, of out in the excuse Florida of things see in to don't the point, State John's an of story in characteristics first stayed To have And but the influenced it's decided We first by be anecdotally didn't we Florida an to of the state we year a of they Long didn't situation. bit insurance unusual who with had little the interesting year. expected unusual want particular, frankly, attachment to but of we to materialize. the pile what half half the because, that Florida.

be the what based As stronger sense? little half insurance we it, Well, a we I seeing we than to half. the will But second what attachment. looked first makes we're with at PEO cautious looked it we're at respect don't revenue in and we expect on said expect,

for And an lowered range abundance of revenue the had half. the We so that's PEO second on in we why caution.

that on has to impact I the it's or net point, margins make line all is really of income. no important, on punch think this

could wouldn't we insurance X% the PEO have any easily and admin X% the depending of X% or revenue, margins. X% mix growth impact So have on on versus have that on or

side them that's half PEO and which to and solid So than an But and be the a be seeing that seeing expecting bit encourages not in we the sharp is. business, by attachment. reason largely that do. Obviously, to worksite manage really insurance quarter. of We're growth terms reporting, business in me it had fourth business, we're the to That's in there. money we out I spike a back that's driven way the I the could we one of softness the reporting make worksite the of think employees, we'd on of the What really of important We could that point. like be higher important it's thing PEO in we're remember employees is year. it is

that's employees, softness the of not we're of So and seeing profitability worksite really terms in driver the business. in

have sites, not don't it. going have to work You the you're

John in, little the -- to sales beneath what's it's So it, solid. fundamentals issue looks the question. side? you you digging really bit on the insurance of at look talk a asked I'll the right it happening let when

this Efrain’s -- localized attachment is Look, No. insurance our point, thing to Yes. to Florida.

Our in has Texas all. attachment revenue rate on our in the PEO at impact for clients no our

very that fact impact. it proposition the has solid. so still PEO value an look, Florida still I the It's But is in And strong. think does

evidence at there is clients retention at our look strong. near our that. look You I very of and retention of at record revenue levels,

to a We see continue worksite growth. strong employee

fully season feel good there. I products market. positioned. and staffed really and the services We're we that We're where very into And confident selling the about so are for right again, that have we

dynamics they others expect if impact the again, to in change, I going like impact those market just So are us. would

for embedding on the comprehensive it. can I to my actually, And landscape, software provide of Got helpful. competitive pressure I competitive into very if thoughts you're your any very ask side on the follow-up, things. seeing from double-click, a it. trend Well, was HR payroll wanted solutions. then of of Got kind management On you curious

those seeing So are? the you payments business offerings I providers, is successful modules, obviously, was about software providers side, we're They any guys a lot efforts think the the pressure? of And do seeing, their and of at top with to lot how other you are looking from if you always competitive a list. you payroll curious expand talk that. will,

about in seen worrisome not seeing what type I terms a of of our I've dramatic anything are that not say would growth. and change new in entrants think any that I

things to some not other the the is the same to go marketing -- the selling the point et past. will of probably cetera, think as it season we make they'll see have way -- who I in be interesting to I money and need whether into of I would competitors one think make still that we will and upstart necessarily marketing market they the in don't or be approach the spend, able is

think, dialing back. So seen, that I some we've already of

them I'm seeing that So any not I'm seeing of see having that in data that the I an impact.

and traded don't four payroll the the fintech about on calls and an back such know, ago down, go said three, has in providers embedded I'd And look, our and stock payroll. I getting and was I X% embedded years of like solution and why one Eugene, probably day, such

of impact about you those surest not or level in what a the [loan], at, opportunity there. too seen way, arrogant think thing covered to about pretty that that end never arrogant, is depending of part just because some consider market. for stumble service space dramatic the market attached cover We've payroll, those of folks. not the obviously in which payroll. the there's you're We've and I think you having by act to the thing addressing there's a think way looked of not that in And impact. the other dramatic much were enterprise some the we've to the to is to on look, to an got or people solutions. simple ability we're Especially the upper there us for in the market on They're other a payroll, need and benefit

with take Citi. Peter We'll from our next question Christiansen

on about a working Welcome, quick of changing as what's And that's all. John, staffing you quarter. activity more I question this with wanted capital to even out holidays Efrain, and your had to a perhaps just called to of follow-up. going Wondering indicative happy if ask tail clients? if macro-wise? that's a some then -- I a benefit And

Pete. question, great Well,

the year, you last significantly. business So if -- look period is really first short comparable that staffing the the at at to the answer rebounded

balances pretty be not funding receivables But capital The to have we're we year. use we business, business last net so staffing our on so that's a had just the we receivable grew. the business. of had And the in everyone call continues that as -- don't working Advance growth staffing strong, Partners

consequence So perspective, in from have as a of that didn't change in use we working net a capital funds.

business a see in that what's as it's and and on the advertorial So it. market just well doing that's a continuing both to funding we're business, growth of And really whole. staffing part driving quick our the

things are to want -- particularly into the And are dealing directly then channel qualify with how just you I and guys Clover, relationship last little how guys have you sales? -- channel distribution pleased have bit or if with a I question, partners. deeper And on are going wondering just you side, dig merchant with follow a the think other some I merchants, you you know

there, if sales the helpful. you that efficiency you're be about talk Just could would that seeing

say, I'd business you It's cadre we're still, then referring we're of digital our business from would a portion CPA at to It's clients in development, add still it's small have we And us. getting add continuing continue Yes. from channels. clients where look I a our additional our is say them. development, we existing marketing. when to partners, to our from

the of but goodness, this that. back and down market and trend kind then you emerging said, have as tend I'm complex, they're So a to to kind type a is get not which do of you more one minute our occur. know service or into I'm breaks big the Again, is one sense. start don't you're this find as they of HR I saying important, something very a if see I've That's and looks unbundling of my If where of They're not into that pleased, the simple, segment that migrate that I products. we sort you I'd it's major shift simple we it their I for goes looking Efrain into to and solution solutions and says, HCM incremental, modules prior add-on obviously are that seen of helpful. know comments. anything. makes if to get the model is that needs "Oh, our see integrated what say complexity. There's integrated continue my of getting emerging threat." for these

HR We're So market when that. that digital continuing it our to so the need not particularly look there's for businesses and offerings, of up again, a we're we seeing for. look our at makes But sense at think where I the much. portion

to clients. I less think it's important those

next of Morgan our take question We'll James Stanley. from Faucette

couple of a for me. Great. just questions And follow-up

is And of anticipate a you do levers lot durability levels would these seems lower perhaps were what -- going that going end? the And margins? to we peak First near us a growth impacted, we're what question should impact revenue we the were margin to think to be recession, now. to right get should It see end particularly, levels your we have versus higher we of back a get on and forward? how outlook to would pretty about margin if margins. the How like

Yes.

think put and we then think, ways made Let gone James in we company it Look, has two it's I question delivered of and I'll especially tax transformation part that five answer I the over and that a last -- get the would the it me lot, over I of to we particular, investments the reform post the I'd post year, that everyone years, on. through say, last, remind John.

but look to much transformation well-functioning what Our company a was than like been more a to perfectly more accelerate intent the had technology certainly business was before, which services tech we technology.

technology there's is margin also by ability challenge can investments So We really margin you to everything a drive technology. a as if then balanced of service fully can don't, hear through we The is drive in and the a optimize successfully, delivered deploy road that? as our all consequence, and by think see terms tomorrow's say, to that that do about technology service the I growth. go And the of digitize but year much. it get we a at lot delivered say you still of type of today's that a tech background. do of revenue the set of of of lot that And doing. deliver to think, what that have point ability to We where passionate range point of service this on background the we And we the of feel of What's of I been driving. if state-of-the-art you calls that many can all end. look but technology tools ourselves long you we're expansion the every a in in back improvement potential it investments that

to and think So that's those the this said exactly really XX%, come the business, we'd answer level -- stage. potential look, to at going continue we of I And the off. the have at. we're play be turn about yes, if where to don't "Hey, it ago, for I'll the wouldn't leverage." you to be we in we're that XX%, investment John beyond point precision were we're day look, with if I can need a known think years comments the there, where that then but say, we There not make is, you short to over talking may I to But business, five were we expand at trying hit growth that of too. we'd for

Yes.

they on I our to benefit. to and talk we're do start, to think been it and don't we operators to They And that's And proud it's it. marketplace something to X-star to in in happening said and client going helps is want opportunities, that's That there. best and better you in do the get is from are app, us. adoption them as they for it of part investing adoption that macro I very covered, employers and Efrain. us do to and known I a experience. be Employees the want able to in anymore. a want think helps provides want of. our digital efficiency themselves have we We're I've It some that, looking the that. to business, whenever have the ways continue DNA, mean the drive to do I'm

on another on. continuing adoption we're have at in that continue think in we're then opportunity to is but our runway and I to move points, still different invest office push So still -- and and back still in macro we're doing and digitizing what we

decade operational unbelievable in our to digital onboarding there's over of sales areas but in of across the last fully we've the also our starting years look look five business. the back to that for provide So we're think you last as And growth our in doing that's for of in will in invested mode capability be clients end us the continue market at what continue January. not the launched for We've low to selling to I that plenty mean a digitize digital office. only digital the over solutions that. opportunity of to business and ways I

built out that digital and several strategy forward and further of additional around all So And looking to test and growth across test business. learn. driving the are session November adoption our learn investments other that coming driving we have

topic generally? mean, and the been more efficiencies, manager? related That's the trending? I investments, as I bit you're an the And has et it guys guess point kind has hiring then points into your season just know a as I how going in wondering on to hiring -- the a of typical Just well for that are been a sounds market efficiency the for a seeing that I guess service client But you of levels. that needs you concern of are about environment we I'm question. that of on right of technology as And change are of little broadly And that dig and helpful. earlier. like selling realizing cetera, into as own and just well-staffed, you existing the an allowing count account increase now? indicator

say would for environment Yes. us. I the hiring

execute were year ago we when we the a was staffed, year be and like and And we a probably not here to year-end entering like reporting fully sitting I fully going people different prepared most stabilized, much think season. today, here than fully to ago, were staffed where season would sit has trained it into to selling we the that.

environment hiring to are well. a productivity as So it's much different us drive we for as continuing well. And

next our question Mark from take Baird. Marcon We'll with

want you, to Efrain. getting callbacks, just break little little you versus the lot this effort. your all Services, to I've component And Can save because you between Insurance a PEO out question Can PEO and time I'm got live. a John some on a component? then... out I just the on you you holidays, just and gift Happy the for million? break that it $XXX.X save agency

ahead. go So

and seeing to change you time. clicking, will in then of the break terms double of save down a ended And is what it within those year-over-year you but this up more than lot

of property was the regards of impact terms the the the casualty, to of in workers' change the health much comp? and how insurance an with uptake Just and there

Yes.

asking you percentages. this at a of So would PEO and who insurance questions all fiscal beginning investors I are year, fiscal end last which those broke chart solid the good by year, out included of of we that to point Mark, the

and you the half go if see didn't the of the you'll exact year the significantly So there at of as of that, end first percentages in and look change the really percentages year. the

first the part. that's So

is half of said, roughly is roughly as the H&B half -- half comp John insurance and insurance. half I'm second P&C, largely The and but revenue half H&B that's other the part is and sorry, is workers'

say I in on that -- P&C And it so the qualitatively, P&C growth sorry, and digits still H&B flat only growth single which describe -- on is I'm itself in to workers' quarter to seeing we're down. will a low comp seeing was we're still

a impact different of four weighing was insurance market, than was So ago really three, is on the soft years which that. it

Management I look So end PEO and last at of in end there. the also summary, Solutions the I of and a say, would on got the insurance, fiscal it's quarter, on year, breakout

a half you buying and that smaller can as see comp on that's And that in it in drag workers' H&B, still insurance, clients the point, You'll H&B. it's exerting John's more insurance. that the should and to Workers' entire is. become comp one see on grow then growth segment. say is half what roughly, We constructive

strip the component digits? we if component, insurance is low digits, And high still PEO it. growing Got ex double the business out insurance the single

in deep the I a a of where What is parts growth. markets serve of out good and we worksite employee point strip -- the look growth, But most what then it hard getting of little with way that's you'd other to because it's Mark. worksite the happening that growth do out market. dive to split major look way It's have versus we're employee earlier you when the markets, of across and on I'd the focusing bit we're said with at certainly employee because that seeing worksite what's good that Florida and I that in it kind value it. tough call proposition, in to won't we're

what releases, I'm in And was it before, I'm it's sorry, but was -- worksite the the what of mentioned one you sure growth? employee

end good PEO the We of say on what force a and employees. one say did providers. What other for ASO thing in model, growth, try, year. into both that. to or everyone. we X the client million surpassed we Remember, We the that significant ASO, a X say lot we're said had what million We'll didn't report of Mark, other don't and we unlike either PEO worksite is did and We not the John Mark. though, we've did And it employee it. at

to in value have bundle. you say we So can on either a client, depending what the you

And we're so seeing what strong across of both demand. solutions is those

Solutions, modeled slow better got in Great. But one expected, Managed Management than to from than solid obviously, and on And investors and we relative Solutions is better QX what than XQ? guided. why basically you've then I question did what some better that

checks quarter. significant the versus in That payroll was But That a that control short in And the answered answer three bucket I good question. the quarter. one. one was to Okay. pace growth or the first say, I'd quarter that thing question, after per ways. prior Mark, per it is the first

part wasn't words, was the was a as a which second The large was contributor positive. it in wasn't And in the that It everything else, was in other incremental then In contributor significant growth. great ERTC as second quarter. third quarter.

innovative Got voice it. sense the solution. a I'm of if for tools, your uptake Great. seeing? sort And the give last activated tools John, discussion, can then, are currently the most mentioned innovative like you you us for cool really particularly during wondering quarterly what you

one the Well, is issues, is which I having and where are clients really one. hiring onboarding on mentioned the

-- that had that had I that product point, beta it. million then in that through look announced last X.X when been had we that we that it’s you employees mentioned So at we million actually reported, process. launched and maybe X.X if think hired At I

today, we're here will approach X sit people to I hired we platform. million As that

So good give popular. frequently frankly, is of being one and some that The and so there. another you impact, reviews idea utilization Retention quite the of used, the of very how and getting that's that, good very we've had use that's Insights uptake

talking was the... Yes. about I

time doing well. those products well XXX(k), traditional and of all other as online attendance,

to referring Google solution. voice activated was the I

yes. Yes,

to that. customers it. just starting it watching we utilize how that, and -- adapt So It's launch see we're launched we're and to to

Our last Huang with JPMorgan. question will come from Tien-Tsin

recession? know been a wanted bankruptcy the revisit it's possible past retention, into Efrain, bit just going little record this of retention, really know And risk probably around would what before. I that you've I been better. has SMB we doing downcycles. you shared I But on I getting side. I've can it retention do ask and would did to lot here well. And questions in a imagine

platform, here. But would the little do the given would always think tech. here do investments I the you than a in think shifts better you better in people I

to year. -- So out want the we I revisit just close but that before

Yes. Yes.

guess, you're depending we down XX% revenue on about Tien-Tisn you would XX% the business was looking back So was were 'XX, if 'XX, But about what troughed, about basis. which payroll I HRS, then. rough about side where this to back I to attrition. and the 'XX, at a retention roughly know -- was I you unit I think XX% don't know, at, get XX% on mean go retention

the of Tien-Tsin, Now that why what that's as mention reasons payroll, lower, now, pure there than lower, if sell. isolate were half right call that's lower on lot knows call we band. what we would certainly just But a we everyone less lower, not fact, the to of a

of in generates when stuff and rest model the act the So better retention. creates our you

even in in position put a PEO. So you yourself now completely different

to retention very in the way. and by still downturn. There's the back we think revenue perhaps worth in that if see we mentioned micro there the a and me, to add the those a -- you a we dictate likely are from to segment going want call that than from a And mix But -- that you're have than ago. in to other clients factors would element that. 'XX, would are very, very a I churn we seeing One to that -- that not standpoint, point elevated that, year I -- that's the you're going are in churn have understand comments not did But here. So during more see 'XX. into I the it's 'XX, anticipated different my less outcome solid. you

that's my So long-winded to answer question. your

follow-up. far? first a here lot half, what questions sub my know here. quick so big attribute I or The margin would margin overperforming the or overperformance the the in to contributors rank, And of you prices there's any

Tien-Tsin, but an hate is expense very of question. and use beat very answer generic Yes. a would We generic to to I to the answer it question, had the kind the plan it.

did. I there that did, want So mix the overperforming in way Management was Solutions I mean, it fact effect. say some don't it to

better But first. that's it. also I in part So think expenses the of were

turn no or this closing back John further you. remarks. it to have additional we Mr. for questions And I'll any Thank at Gibson time.

to Thank of you, I know the look I'm to to talk get the every support and this talk CEO. sure we'll for like to in to we've during President and to your you, a point, as would each Tadd. And some close you thank got future. one chance Well, we'll chance I a at better forward of more. my first you to call call. getting

your If you're I in support archived for and families it holiday you want Happy hope to of for of all of Again, you a a have call, and replay XX of interested thank your approximately will I New Year. conference the happy Paychex. days. this webcast be

We Thank call. patience. appreciate you. today's concludes This your

any disconnect time. may You at