Paychex (PAYX) 27 Sep 232024 Q1 Earnings call transcript

Good day, everyone, and welcome to today's Paychex First Quarter Earnings Conference Call. [Operator Instructions] Please note, this call is being recorded, and I will be standing by if you should need any assistance.

It is now my pleasure to turn the conference over to John Gibson.

Thank you, Shelby. Thank you, everyone, for joining us for our discussion of the Paychex First Quarter Fiscal Year '24 Earnings Release.

Efrain President Chief Relations. of is Bob Officer, today Vice Schrader, Finance me Rivera, Financial our and Joining and Investor

morning, opened, for market before our This results financial we the released quarter. first the

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

filed will next the SEC Our day. be within Form with XX-Q the

The be and broadcast available XX on will being teleconference approximately and our days. is online archived website for

Rivera, to business start then take for highlights I as getting with to we'll make on moment and intention over for through turn our few October of who retire first calendar call a an then as I the results, to of the into CFO a Efrain the will adviser your XXXX, senior for here the I'll remain the announced brief quarter. will want end it though and before financial he the effective his brief Efrain to least Bob update discussion earnings a at questions. update, XX, a But up open acknowledge comments to year.

valued leadership been He financial member has but strong this great team at senior a Paychex XX for provided has Efrain stewardship, importantly, more years. as leadership well. the strategic past of

transformation. a Paychex, been his key significantly services company, strategic expanded transformed and During and with the has into adviser time catalyst we capabilities. and our has company a this for Efrain technology-enabled HR a solutions

of all company. and how gratitude truly to my guidance personally what and you in the appreciate decade know the over we're you've for each done wisdom, for for company. I Efrain, personally integrity, And great the one you've intellect, me us think I your your given your here

were and better our customers, here. shareholders you are Our our because off employees,

So thank you.

review named years over President CFO. co-lead including was Paychex of CEO X.X progressive over the roles Bob Joining being will last efforts us in Efrain of is and and on is of who back leadership since past joined strategic taking strategic X the XXXX Bob many as initiatives. and succeed I subsequent our Schrader, today years,

is a I Bob, will with the forward continue can plan strategic Bob, to succession of I to sustainable to as have position XX strong in to congratulate the years results. bring I a continue innovative promotion leader, guide we Bob's and count track last predictable a a continuing for an company look as you and as in on results, and part going that leader our want an and of innovator you continuing Paychex company forward. who to to record financial delivering work

Now moving on to quarter results, and speaking the predictability first of sustainability.

year-over-year of in We points year 'XX in still the basis growth solid expansion adjusted and fiscal per of drive earnings growth. margin our approximately have XX% X% XX share. business to We've revenue with in operating seen begun total investing future diluted while

Our by all first across quarter of our sales, service and reflected solid execution teams Paychex. our

the in for saw HR growth. quarter, demand revenue HR during retaining and revenue employee worksite continued, advisory new sales high-value resources outsourcing on solutions in and continue The our and client strong resulting acquiring We positive technology quarter clients. focus we to and retention trends our

activity, We KPO during good are and our metrics the see of insurance improvements quarter, across insurance some starting and results to with retention. sales in attachment

that gain taken have are January, completed, we but traction. believe primarily at the more we beginning which actions in We response headwinds to faced this in open time, runs October season after will to from is XXXX know enrollment we our and through

base client stable. our Small their within to central are businesses, levels continues have to show remained which the economy Employment U.S. resiliency.

inflation. modest workers some rates. sustained has trend cooling wage overall consistent businesses continue but small that at add shown shown growth has and in with watch employment business the small Also Our to wages

businesses. midsized Our data indicates and for small a continued stable macro environment

to monitor continue at and see actions environment. this material leading prepared we time, to But change changes. We macro don't indicators again, any take are navigate to to the any appropriate our

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returns behalf. year continue We and be continue the half the for we to anticipate a communicate slight of then their file in a IRS ERTC and amended with and half fiscal prospects will to tailwind that back turn ends. the as the to program We headwind opportunity this the on clients first to existing revenue

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deliver products strong our return a investment on for clients. these of All

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update our you Schrader a now results quarter. give I'll brief for it financial over turn to on to first Bob? the Bob

today. as Yes. with to to you forward commentary and move I here press in good certainly working involve will to our forward-looking you risks, refer this our Thanks, look contain will will Obviously, morning, disclosures John, later forward. and that you those I'll refer everyone some customary be investor we each that our good morning. to I'd to release statements. today's remind and presentation non-GAAP posted of measures. we with It's be and like

quarter realization attendance by turn to on demand going and and financial and the give solutions. attachment revenue Efrain, to a clients solutions continue worksite providing higher to then client million, see X% of revenue Solutions Solutions over employees. an our start by we primarily results, PEO primarily HR revenue retirement our summary higher per and employees, average X% and Insurance billion. and penetration, it million, first services, Management position HR I'll higher year. ancillary price driven in guidance Total and time increased $XXX X% increased to and and driven for quarter update $X.X for increased increased our revenue to $XXX updated he'll for I'm the product client to

in obviously as seeing some As momentum John positive first quarter definitely the relates to the saw year, through in the we're we attachment. medical PEO here. it Those and mentioned, activity sales plan participation signs and some definitely headwinds last positive as quarter first we both moved and were

insurance direct income rates. to made and was $XXX XX% average for held funds into primarily X% improvement higher versus of million. $XXX year expenses higher on to Interest business. $X.XX to share growth for point clients Total to operating the an to Operating due attributable share. $XX that investments largely interest costs, the XX.X%. increased the and compensation a per XX% X% PEO million to million, Expense share basis we've increased share quarter adjusted diluted prior $X.XX to diluted increased period earnings increased with per per earnings increased and XX% margin XX costs That's per

position to and Efrain the it financial guidance through year. take over turn our our now I'll updated you to for

morning and everyone call. on good Thanks, to Bob, the

during honor just you, all generous privilege been with time. say been an the start, absolute to thank I words. It's and Before John, for wanted Paychex professional this to have

financial strong with high-quality As and you we all a cash position maintain know, earnings.

Our $XXX capital. a of solid nonetheless, total cash, borrowings $X.X there. from a and and for was changes was were of cash approximately would balanced corporate first quite quarter Cash it indicate, investments but XX, in million It wasn't There billion. income working flows more as million influence than strong as Total by as the net were $XXX quarter. was driven very restricted some XXXX. for was percentage August timing operations

is our quality, the you of the candidly know, best among you entirety of some pointed S&P the XXX. out As earnings have in which

fit their small acquired we under is purchases customers accounts receivable a Advance, purchases we business that of arrangements. quarter, have first another called staffing the temporary Paychex acquisition strategic company outstanding This and clients. nonrecourse for receivable good that a accounts business with that In

we that that will our into and very impact small is John stage an provide important challenges, to have our several for not is and businesses year. as capital it. portfolio to financing have. well earlier, results small -- years The our acquisition to business at a We're on plays this this manage alluded for think to access of this businesses, clients have acquisition to seen we anticipated financial opportunity excited very in the This medium-sized we've last material over working our

in paid a We of dividends total quarter. first $XXX during the million

amazing a Our XX%. equity return XX-month was rolling stellar on superb

second the XX, turn the typically May and let you full I'm year at going half, not Now stage. the do we on ending XXXX. to and only the this me that fiscal give first to year, guidance for color half

we noted, little what go funds As of interest EPS, adjusted we want but and through through sense give for for clients have bit raised a color a as you go guidance on of held to is. for to you thinking our I

outlook current is Our as follows.

range get to Solutions the anticipated now, increases? on be we before as and previous are range million grow raised Interest to X%. additional anticipating a funds range Solutions Management held in we expected still $XXX our mentioned, the Are in I $XXX range? to a the X% of grow that expected X% in $XXX saw clients X%. of to million the of to to You I guide range to million $XXX from expected PEO of million of Insurance for and question,

contemplating this like but some not We're the best else this where the Fed, that want it. Fed the a year, estimate but what -- is in But extent Fed of of No. we being. looking at just conversation the activity is everyone pause. will all now, decide they Fed that's have the to least actually our anticipate doing additional To not we'll maybe later by poised that something does at the likely at do is, point,

now X%, Total the likely revenue think this is expected but towards of of is the to end range. X% high the we to range grow in

the in the in Other range range is operating be margin income XX% income to $XX to million. expected XX%. $XX expected to is million of So be income of to net

raised earnings tax our the to per income diluted to XX%. and this expected Adjusted is in is the guide in expected be range to X% to grow XX%, XX% of Effective of of share X% range from previous to XX%.

it and could it At full their macroeconomic the conditions uncertainty in don't future of stable. almost, very point, to look the year pretty This economy. the just have least happen things we outlook." our say, say, changes interest where summarized keep some saying which current think I change it's outlook on "Hey, assumes what's been would I would we John back X going this rate know year well. and surrounding half I quarters impact at And

confident we're half. feeling the more back in So more directionally and

second the as half some we X% we the comments the will growth in talk I anticipate of I second half half wouldn't ramp year dramatic. heard guidance released are to is of the Project first in difference range year, the and half differences operating and approximately current that in of half margin revenue through navigate the after a guidance year. XX%. of significant back XX% but a not in you, the back half the our we when have describe between of of Obviously, first the total and back that in there year. the ramp to

to subject assumptions, subject change. Of are course, these to comments current our are all which of

update will call. on you the again second quarter We

of So sure. make a to let me just couple things repeat

half in you website range of X%, the in And to in slides the to to the growth XX%. revenue XX% to anticipate operating total second approximately I be of point, margin XX%. operating range in to range the our then at X% refer growth the this we additional total X%, revenue investor of First XXXX, information. XX% for margin half, on

things I to else appreciate with would it's long that to think the here say someone reins I my a who better to over an just you the together, to John, I Before handing like relationship I We've than even have. will built Paychex. time had during at each I've job time do back and hand time of over

because got One of Efrain for said, or making someone strikes entire call here that and the at a time, a someone -- during things that CFOs two have and I and old got retired you're of I entire you me been me many ride. the Paychex. I've note

that's We're all think unfortunately bit getting little true. So I older. a

years, of the the argue that may. I one write. you we are say best over I and analysts the that covered the But things that me rated with think low, you I is disagreed of the I've of too by it some be of though business. even that things can't always in strikes group still that have you but as us some with

here Schrader sure that I'm in So in that do and that with just say to I many hands. years, a and I want note, prior capable -- better separate worked for I Bob Paychex. you Bob very to this, I'm an will know job both I've one And leaving even than the do.

back let And with John. turn it that, me to

thank Well, Efrain. you,

the Before questions a on job last and providing here. questions, One, I questions, Efrain for time, around follow-ups. probably two a compound open things. And rules call of great of lot people we did multiple have particularly

Efrain and a tradition retirement. questions. rule, he no, of answer of we Efrain's if create would appreciate feel So new just could here. the free it, in to greatly follow we I can But honor any know maybe

to weeks. the like the you success prior make about launched on be both ESG impact the reports to series website be recently more annual amazing report that And having new many Paychex you a will new world. really meeting learn can our launched you'll that and and also page, coming presentation our would we're annual XXX ways our add, the Investor Relations client there's there We very But the and that of can Investor on I stories shortly, on find impact in seeing report, a report. everyone aware, a our

our lot how of big products most broad employees, having we're think you just that these why the impact how are, more documents and of encourage an color an our lot a most admired impact as world, more Paychex customers, I really having in big significant, on how a is again, companies and and how one And known on we're the innovative our to the ethical how out. most check insights I and provide

of can advertisement that, website, now it So for questions. Shelby, with over our turn you investor

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

comment hearing to quarter. recurring you in to guide doesn't your the and it corporate these We'll relatively necessarily certainly. quarter each Congratulations investments you, year was was interest that's the the if full to through for flow could Efrain. I miss first terms like calls, going on -- wondering in high of on voice feel from maybe

you if talk income maybe might contribution could So about to that other the see the and you it how trending just of year. rest

Yes.

everyone, -- go just who that for focusing So into Ramsey, couple that of that isn't so on a much. beyond line there's things that line

So interest that's our of a expense. combination

some have. from have also corporate investment and we we fund Our in on primarily small that interest a income investments gains losses and portfolios that

balances Those the we funds to change that be the the interest year, And corporate that subject income. corporate so are so and balance the the to an part We year is then made of from during as quarter-to-quarter. bit things losses acquisition, during whatever can think mark-to-market that on will can our investment we other is expect we swing a year. gains on average other will going and Ramsey, be that lower, generate lower during

there be little in might little bit a could it of bit be number, a So lumpiness but different. that

that high that by say cash thing, by one was up timing. color influenced way a fairly ended balance would I of on line. just with We other

me call the with closed which do I out think it the It just if had didn't, or I we called on that day out I quarter. let really to now.

lower through not are a a likely -- to So lower year. cash bit bit be our but progress as higher. the balances were lower They we

bit. see change a might number you that So

Okay. Fantastic. quick And follow-up. a

time? -- potentially presumably about how could you benefiting see that how the see Act you If X.X, SECURE over business that you talk and evolving

opportunity tax plan, their tax as the step credit a plan midsized and small taken back businesses for Yes. employees their out setup and certainly of We're I retirement that then the for them match the action, the into there a the that get of great a market really allows sort actually well. credit is an is provide Look, fees, and helping XXX(k) government for Act a on them the and do to provides opportunity. think, to for back has great fees a of It X.X, educating add implementation a the SECURE employees. get encouraging

continue So thing we've mandates. have certainly, And lot to we're is to have continued XXX(k) And actively that the double-digit we this we realized education to us market, has and last market educated continued. people, allow state SECURE very in that. very plan, benefits to of XXX(k) is the the we several going what in business X.X other XXX(k) strong educating the to there's in partners the get has rates has the to I remind growth strategic market, And Act that plan. happy, cost that on we're the that business of our very, in some experience a that years. to of seen sustain The a out our go retirement educating growth the the on continue about believe a

question we'll from Nicholas next And Andrew our take with William Blair.

the over wondering This changes I if was dynamic little of To you've preferences any ASO of between Daniel called a quarters. you on it PEO is shift whether the on today. and last months, the couple any I could off, dig on hoping for You anything out that? Andrew Maxwell past seen couple was and start in changed.

Yes.

we demand of PEO. the what 'XX, are HR ASO, our see more little the would outsourcing across I back probably to that the strong to of prior would more say we've to shift traditional we say solutions is more where to continue a to saw balance seen ASO this, for board. balance I And So

our bit. the think, last call, made we've we in I out changes, balanced our on As little that has some PEO product mentioned portfolio that I think to a

a to doing of call to that. year, at other as I PEO would us to be that the we clients with in the has valuable those AI, relationship we reasons. quarter. to a AI multitude on And tools that ASO select there's look first them we different early able a point that's to The PEO them It's in program ASO was go of value thing where into we're first believe of be base or customers find the into and a that would you that that go when And number prior nearly using We customers we always the clients. tell quarter that shown actually prior first the to Xx last that and be customers we good quarter results number the that -- I our actually opportunity to back mentioned proposition process, the going -- transitioned PEO over-index in great example started actually in for for upgrade but to ASO product. the then this our we transition is of versus of

first exactly and we we So we appeal double-digit year, logos, outside thought strong the what when was ASO sell the over-indexed to in to fiscal new could continue prior which that happen, was in the quarter. in also

So our growth enrollment, But in call, the early the three first that start talked of signs. strong good the there. benefits. the PEO a open and the the and we quarter. good upgrades quarter, PEO, We and we fourth middle to signs and quarter. We was had we last to PEO first the still which had that accelerated which quarters on base, is critical had outside or the to in go in in good we're about in good migration We both just ASO first got quarter, in had

So core to just season. into selling got now that see continue if the we can

costs insurance your area? that hear. of the color workers' And Great. volatility to reminder give the or for Good you my then any exposure to Any follow-up. on Any can any comp? from increase detail direct to in

every going nothing in picky in on in we and I'd very worksite I Yes, higher to risk Obviously, business in quarter the that forth. growth workers' to go specific compensation to are and -- direct quarter growth we willing than so business is our of say This drive risk and driven by reserves that's through growth We PEO workers' But on Yes. other comp. true-ups out we're obviously mean, have the which take. there's would the primarily risk costs. take prudent growth and do drive that cost. employees in we Bob. managing call

our no no Yes. of There's in change There's our standards. program change real overall change to caps underwriting and to been programs no terms the limits in performance. and

So...

Efrain again and on Congrats to retirement your your promotion. on Bob

we'll Bryan our And with TD Cowen. Bergin next from take question

Efrain with let gotten me it's to and been lot Bob, got just your to I the working because it echo of my congrats as retirement. ask well. relates nice question Enjoy ERTC. a here. Efrain, you we've as questions

there since mindful is revenue in to have any just Any questions, of? doesn't delay any like there? be clients dig there more bit any claims there sound your submitting this a evidence IRS announcement. of there after expectation can there it wanting So have a you 'XX fiscal lot of recent been dynamic potentially new to change in But ERTC little surrounding you

the Bryan, Listen, in was appreciate the Look, ERTC I expectations first with quarter. our question. in line

seek in IRS that to the business IRS small pause tax -- filing clients to specifically filings. The should complete they in their the in The We credits. clients our partners processing submit, or wanting and in fact, announcement owners anyone's And continue program them efforts efforts end, is again, and delay. to not no is in the assisting -- to IRS going stopping and accepting. approaching trusted to one's commented

to and also bad started not them that tamp that businesses accepting just these risk. fraud businesses advice I due providing bad up. out So to a thing think make to at filings, to that and this do to ago pop-up again, are I pop-up some trying to really firms. there they're is small IRS a when and advice the about talked And show actors this probably year are really putting on that companies started, down it's these prudent little sure from small getting

in advice that So really we provide next going actually to the filing calendar accept really get is service, be we the file, going them to be delay to the is client we'll continue and to get to they we're and the clients which processing really is a done to encouraging and early try the confident our we're prospects adequate, The giving are and for before deadline processing, impact year. refund. the when continuing

That's Okay. the my M&A, target, to Very profile just call included to now year Can of no your the just I mention, end the this upper share current of of wanted were did And clear. attribution it out growth in I just here. on follow-up, you organic the that. there but outlook? any offsets then financial relates you to as revenue target confirm good. believe the hear range,

Organic offsets? by you What mean that. do

As far offset being organic year? by the side inorganic incremental the in as in anything any now

in that but contribute call Not masking or a it's it something respect. will amount revenue. year, really, Bryan. as of additive I modest mean the We'll it out we not through go

a of company that working well. in of vectors pretty growth are different there's number think I the

not So no, really.

our RBC question take Capital we'll Markets. with from next And Ashish Sabadra

congrats Efrain, and to Bob of both you.

confidence better CEO? raising Any half. well my understand the of on wanted on front? and I on solution as question, that that both Is in to Just the guidance as back color management the

Yes.

is of and substance what say, of, second saw one we process first And structural. So kind I'd is then half. the in the the

hold So the said macro would a as saying, certain X John didn't point back okay, haven't snapshot point. significantly. simply process that The months at had whether we set at they the conditions, and in the guidance changed macro taking issued We we a earlier, conditions. substance is so or when that know you're of ago, time, a and

to environment at, we at forward least term, as X So in fast X to medium term months being we're what and have we looking the certainty months. more now medium X

So that's one.

is the the where we business, look part correct we in in saw. The trends close, trends terms where second we that at we of the

on some PEO. that You of heard the said John the comments

execution of expected that but deliver note. was So another good far, on started standpoint, from much we've what that's expected, it's an it's thing to one thus And we a thing it.

it. So parts of two those are

degree all expected. reasonable confident the get sit we're do the to we're and So seeing half as And certainty on we be we a of back We feel the the now, October the with reasonably that based forward looks of is of will now, by we we here, answer yes. project we half year. into that time September expectations back what combination the QX into factors know the

the look factors, say of indication. in that that will that we the You we we're point, the things you pretty anticipate anything of at Can But strengthen never say positive combination all at as And trending. of back certainty? about certainly. we PEO seeing this can So that I are where on guidance half -- feel year. based

think, just I selling a and I -- have quarter -- has the third is add rhythm season. critical -- our we business that's on Yes. again, every a to to that,

what be quarter, quarter. the are the we're environment Those fourth will third trying always macro to things so guess. in the And

at the last would solutions our we and left actually when I what PEO think I of characterize new fourth talked quarter, Insurance is point the in fiscal this half second both accelerating. management I we bookings and sales about in the time saw year,

strong. in Retirement HR We PEO, digital that in continue and ASO double-digit strong, see the to payroll momentum quarter. Outsourcing, is first quarter, the strong mid-market

and the be the and saw employment look to first what index continuation quarter. our in a and second when seeing, quarter what we half we're the the environment, So then look of particularly the fourth we up we environment at set at with demand kind repeat of

offer companies wider about, talked it's part PEO a there relates have employees, you choice. What as of it the a we we how range. attachments, the as why reason that's that is the of insurance the bit continue first their little have is to benefits portion to insurance determine Now to many business, to

many those of insurance and choice up employees they for. second health what sign sign is plans for do how up The

way want I the which got expect. continues, that in Now started went that us through quarter And be back left. if again, what still to think three should I half. process that gives again, what I we confidence that's bit a And that of little we're predictable relative we to quarters has at expected. But where point, XX% about What away, running are say only already a on would we this process, decision XX% par really I through.

we're open in both advantage a and we're making And we and the think, Insurance, we make taking we're then the management attachment. need successful solution. enrollment so to being, doing sure drive And in that making do executing to of cautious sure sure marketplace. I PEO insurance We're the prudently what have opportunities in

can you great just that's quick adoption improved question color. And leaner on demand product. the about follow-up or for products? the insurance if last better the you're And quarter, better side seeing commentary -- just was I a also maybe Obviously, talked stronger rate. I That's wondering insurance or on if ask attach PEO a driving on

improved both employees would customers things, value Yes. insurance, process. our relative terms proposition we've say more changed I technology. a the lot -- doing advisory and choices we the both tools a our to targeting aspect clients I that advisers with We've can we products of educational that. the We've there's with can We've changed approach, think that We've employers tweaked have. our every that that -- around engagement approach so multitude in and we how probably HR of got we the in can we're but of of there. of what drive analytics drive expanded

but after from across I of the and quarter, and when looked board, ago pleased I with see what there approach right we're now, press, done I year do at we're mean, we we team results that is more to you really there and every of to think say, just has health a in through, only So a job very general experienced I we And if there. customers for in good degree value inflation. our alternatives of think first a demand for do interesting. how going And read have reimagining renewals. again, you those We see XX% the were will great the we need that activities. this. seeing it's it be proposition think a aspect would shopping And way we we the insurance, typically occurs, the

our we'll with Wolfe question Research. And Scott take next from Wurtzel

back to the acquisition. going Maybe just

way, you and to of color bit on some now of said with Just little another deal and behind the maybe maybe a wondering other give can the you at? looking relative it rationale this like if sort why targets more were strategic

ways. X it in bracket Well, I'll

funding The our or businesses is and had access small important and alluded on medium in to first should so service, looking for thing is funding eyes small the that capability ability John to said we say, I earlier, access our build to area. that

then saw I'd right for them The you do in And asset We don't businesses. decided they exactly the second high-quality you that do the it opportunity and need time. And what environment arises, to to. third present interesting thing you is for it's themselves is was take opportunity you acquisitions know, timing, when of advantage an are, the as an an expect always say to it. which that small a

access to and what's opportunities is becoming given rising where tricky with happened interest more with funding banks rates. So

acquisition, our of the the But the think Advance think yes, corner a by on pretty seemed very again, we market, that timing we've bought. with spend profitable alternative acquisition time. and we had thing revenue think of success It's we don't a the do the modest And So can way. based much company well. to it's lot fit with side. too Possible relatively same Paychex I we a and our we

several that access figure we did and et partners of the neither COVID add, have something to just one have And risk the that need clients and could these profile to together. approach. several of And it dragged both are partnership partners to into of We banks are started got we And maybe led would program if partnership that that with we When cetera, technology then things put like struggling we were to this. wanting fintechs. them fund or that payroll you to a kind program meet that. if integrations, more to. We've I new and hit, us. a a out how and a our remember introduce got to we Yes. PPP

really kind rates. Efrain environment what then lot with out And that are macro just rates. introduced So a the affordable to certainly businesses this and great strong just know access to struggled at concept have customers we of small capital we to we customers get got there, interest that midsized just said, of rising banks,

been started which there this we've for business, a the for a that acquisition staffing partnership been piece. And positives advanced through doing those us, so great lot then customers. those in had a adjacent. and business of introduces And great are companies just of a are it's and And payroll and business that was we kind for us,

conference the people And to it's for know upon customers them the we help right. a ourselves and opportunities been know Why partners. business. of literally, at their and timing fact introducing so you and people the get you're and introduce saw one a that continue them grow who the just we potentially based classic, And not piece thought seemed strong that were we've action. us our And already to of to to there need

So a strategic that very small said, you the like at time. was in rationale. of And kind this it's -- small point

rather longer gears past duration the the just the I the plots higher we securities about Got recent securities. commentary than of a about super a even I portfolio duration going follow-up, you trajectory recent months the then on in on And maybe ago. know afraid, sustained quickly talked if Fed Fed longer I'm towards were expecting mean, think in portfolio. just than showing -- you've to sort helpful. I'm few of more it. When more the in a dot position one this commentary maybe duration. float the portfolio rate we as shorter That's wondering sort just

Yes.

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positioning so the And manage will position an to portfolio, do same sure on we're way I'm the and it portfolio, the way to orderly in will down. the be we Bob able

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And question Huang we'll with JPMorgan. our Tien-Tsin take next from

adding a lot to understand the I access, Paychex of whatnot. I follow-up with here acquisition the acquisition, and the when make that some you're Is was and early I and was about wage employees. $XXX more factoring funding I funding specifically want more Advance, now to million payroll deal on just remember for modern sure just opportunities here. announced, want and this in the what strategic fit about there

short no. Yes. The is answer

becomes So that significant. that's when a at initiative separate some we'll point, it about talk more

Now, what they is do Tien-Tsin, focused more on receivable.

dipped our it financing. clients work. another source we obviously, degree firms, become And have that -- all our with it receivables, a was of that of opportunity because make water to than to but we staffing can we've in So one the toe the saw our or broader data and an got

Okay. Very clear.

an this opportunity? is AR So

Yes.

Understood.

want us before, course, Okay. the Efrain, the for been to next wish just for And I a for you, No you've all time. I've me. really long follow-up helpful of it for chapter. best, said

miss going to that, talking you. So definitely thanks for to

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

you and congrats or a capital Paychex' SMB whether it to money general. more congrats and is want news working and certainly, Welcome, a possibility into bit may other Bob bank a in into business here. types thank adjacency thoughts is this and dig of Efrain. the lending as Paycheck that is SMB a delve cash on into payroll consider further future? the lending, merchant little thought often bit in solutions. you we to see Obviously, to be your center John, that I Do lending nice advances big getting SMB Should

is help that to we're things if our And are in. do integrating as we're to said, the that opportunities to on partnership succeed. Well, technology, do participate make look, that we're through what interested clients really whether those sure what we in or need trying with that's our I think to that process, focused there's for us do I

answers, not those clients I I our is We that. if on -- partnerships we're had have that fintech and you in anything more do need good base, our been than thought as constant engaging we're and to go go basis, clients that. But a something managed our and opportunity and they with that an And hear relationships us and do our advisers of that we large search this a several them. And that adjacent with deeper by a balance say has our can make we we out read for in We know an banks. we for businesses part was payroll. banking I when are banks our should general, with the business successfully coming into issue that sheet, you with there client for been think, there that on has to said, factors natural with this. this we potentially partnerships return have expertise, doing and we want in about relationship that very of And shareholders. could

It's based should upon reading today environment, think customers this that one and are the our regional think bank, of of if for for lot don't seeing we don't be I I owners. that from place the matches medium-sized business think competition and to grow. we're just small not just an major of go-to is generally so more tightening a with a any And banks. are macro anything And at to funds. you it, the Most acquisition the not available. more small opportunistic going need which a into that there's is these that's clients And the access these not businesses, getting good

to partnerships we're build so do can we how try And that. to out figure going to

you're a see versus on versa, wondering trade to That's you any just balances defense where improve competitive more could areas opportunity out offense. has where vice a an wise? Are you follow-up, just helpful. call Paychex And there or bit super trends if some dynamics areas as then

maybe of Just any the of of sense as your balance competitors and on versus trade well. some some regionals

I'd this. Well, mean, I just say

talked in quarter quarter. saw the first we've continues the momentum we about, sales in our second that As

gaining do On to environment. of looking seeing look it, at under I'm commented side, would I when favor several we there not first had mid-market. relative these it's on I I the things at good shifts back balance in again, front all forth. a But there When trade Peter. competitive fourth more in were go good a quarter monumental, say We any I'm the key not on competitive little -- areas as macro and the monitor. in major that it, several the That quarter. our was in signs it's the well.

same very more We'll kind than a market, same It's stable It's It's competitors, competitive mid, And high-end competitive the of leave Same our kind of pricing I think it end, environment. marketplace. at set character, the same environment, PEO. of low competitive fair we're winning environment. that. share.

we'll take Keane our Bryan Bank. next with Deutsche question from

first cash about substantial. in ask quarter, was year-over-year flow increase to the it want free the I

growth rate to we cash X% growth the same working to year? equal in And Or fiscal time up was end it that of kind much think How get onetime capital? we the the to year? of the XX%. much see in that in the a decrease should was how should that I XX% fiscal through of flow carry free over growth the of earnings by out to

mean, this think that's I I a about it. to Bob. Bryan, Yes, is think fair way

a of the you our had we timing think have guys big quarter of on working we day. swings mentioned, at ended a And collection in I a capital. bit the don't as typically know, as big end The quarter. Efrain little there

influx cash a had So go the that out we next would of big day.

and then by cash M&A. to free gets obviously, impacted really about operating think flows flow cash way the So our

was there QX with bit net going cash typically, So to our operating in of little line impact growth is free to But an trend flow. growth. a cash income our in flow there

should and And year, see as expect move growth through we you moderate the standpoint. you'll so that that's a what from

to hoping an a the if just in that's normalized? recent update here. more you guys on it. for curious what seeing just SMB Got elevated still I has been elevated And become it. they've it a follow-up. little bankruptcy rates. are bit was I'm Got then past know I get levels? Or

No. Yes.

over elevated Actually, and years. below when a say think trending COVID elevated, what they're the still X.X they X, So were are during we kind that pre-pandemic rate. toward of bankruptcies period, there's slightly I where saw we normalized

you have record of boom, a near we've small, when Revenue called our levels. say, out We is particularly we when HR I business I levels. big more out very record outsourcing seen had in and lot start-up release. the the we on in seen And that, at at our that businesses retention look businesses at that start-up would press think

what we've that's kind of on seen so the bankruptcy And side.

me related kind and new we had first normal saw stat the the to an big interesting. is gravitated new we starts bankruptcies other of then saw we kind was click actually And towards quarter in of elevated uptick this that in The interesting business business in area we levels that back down first surprised actually starts. quarter, up, of kind again, which

our Samad we'll from And take Samana next question with Jefferies.

registrations been a quick the interest you webinars, Great. a maybe And that for inbound one seeing for sir. a retirement, years. quarter? help questions to indicator of how Efrain, you the missing appreciate trend well-deserved funnel that I'm leads going of levels, top as bookings? guys just digital me, to how asked. just working all with a are my But in I and have over the change lot would in Maybe enjoy of of the channel? maybe in the anything look Any is first just leading terms

double-digit rates that's first you quarter, portion that, that If digital Again, can in of growing well. as the I'll business, are go surmise sales growing our back. an ever-growing is at

to the the and across really both So strong we businesses, continue doubt wouldn't digitally that. across see demand I environment board.

quarter maybe plans we any then than year? should sales doing better own expected, plans? maybe the game original to trends plan And Or the hiring expect the some your Great. change just own you're seeing, maybe with for hiring your on

side. in we're Really, into making second in always thought the service the We're side sales quarter, sure attrition in fully No. planned season, plans. staffed on the and selling any staffing the change cover and to the and or no certainly up going both able

fully fair on the take to properly now make it service have sure we're of stay? strong to of advantage we're operations clients going season. is when in relatively, we you've our the sure X onboard want to stay? it's you can been make both year-end. when think demand I certainly opportunity going say on and So Is to that quarters full the going staffed staffed and to and it services close all during side to to that selling We

from we'll take next question Eugene Simuni our with MoffettNathanson.

Congratulations, Bob. look Efrain Efrain, to you. and with we'll miss with Bob, working you. forward working

and in follow-ups. can last current, you're reacceleration that's so And far? year trends a target have bit Last together think range. One, for was this of that you growth a above client this comments your X% how historical on below year your Just to tying I quarter you two sales growth kind commented year, client year. looking comment quick together

far? it's So can going you comment on so how

give the the a number, conclusions positive, a are give many Eugene, ways, you sort impossible you cover. selling of that year, really it And of quarter. In where is some that lose It season on just to on you reason and in you can but gain so through one. I many it's some I'll to would is if -- almost reality out client predict. can a start some and then so difficult that is. first project trends trends to almost the really drive John and draw what of in base conclusion tricky or some It's full -- were are sense

innings. a be than were still early to last better we bit expect We it's year, but

it. Got

question different Okay. in checks from and any of follow-up is better And PEO the the you are of PEO overall or kind are your terms now base in is, that worse then there trends whether and -- per the seeing growth? customer base control, your on employment

PEO would definitely seeing our say in I line areas employees. We I positive a we're other tailwind, business. wouldn't in of what say huge probably adding with PEO Yes. but our in and and it's see the it's probably business, it's consistent. employees clients

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

pleasure a you. bit longer-term I of want for Efrain, with been with go some lot lot for absolute one little a Paychex And an long have an been time. around these on about period been has doing and been been short permeated looking relationship. working was the implications we working everybody can Obviously, way, it's you thank or LOMs quarters your pleasure. A the questions ago, picture a Bob, question. forward scope couple have you to quarter And -- back for with But that talk to I'm a you. what AI? with wondering now term. further you've absolute Efrain, of John, it's of AI. of AI consciousness. long a a asking the if a big thinking the about journey just evolution of business perspective margin are a about How perspective? And been of from you are

big -- that's is question. Wow, a Mark, that

Everybody the about quarter. is asking

both more also let But it's going expensive it's some just out. think people large has back the large separate and a this like -- and you've Paychex And going potential you of the finding of And people to rest. getting company terms we to that's expensive sets a better the ourselves that relative office, to have. this give differentiators that's No. model It's really those of And buying train works in that to biggest as you some teams coming because I idea. said, to and language will technology. is a me our do I to all way through how probably Because mean data the models. I data across of the looking aspect of we of of with great say leverage large back also we at the one could to front only it's the G&A data -- office, from be got the help is the large. evaluating think every business, have starts sets a organization multiple have capabilities and continually the one I

recording So transcribing think clients. This we're calls. with we're our today, calls of million year, it X.X those

or a whether to have having service not using they're or we opportunity the opportunity upsell analytics advisers. we are opportunity have determine in that We an if our with sales or a conversations

morning. then X analysis already with sales We overnight where words, almost natural market our of to could and close our our piloting quarter. are using million on prospects, And winning. sales segments, this. testing the PEO, doubled next and adjusting looking we've mean rate on that conversations and do are right what our play where about our language data in some first the changing the processing in that for phrases, we're on doing and Using I nearly I we're go just

which to about one to value to able so we we And it. at I time, retention just we're because of it's drive want one I quite when think to insights, about years was opportunities no we the for this think start And wrote was then I multiple example And going thinking productize the up, there are much bringing AI what more even the award ago, I think launched we people anything examples frankly, an begin this customers. AI. knew can be a and that's this launched, -- I tremendous that thinking you X.X and and provide, keep value

proposition. I so to able And we're value a go with think be going to

And fair, that other going I probably competitors it's make claims. similar large think there's are differentiator. But to be certainly to a

to people sustained only further going established the deliver and already to businesses probably to If that advisers, the market. insights be has in relative you and HR And to technology we use run service salespeople, Paychex your going not increase. position our that the our I that trusted on same medium-sized is and we've ourselves a what's and harness can payroll area, local what's going company, think our labor in have if and small on the you're to data that and for adviser going

us hook give Bob is So the me I the bandwagon going give think [indiscernible]. to to

my a And just then question. quick for follow-up,

Just float pace in Is terms above aside processing. just there a out obviously, being loaded? and that? the balances beyond anything from Is in bit a half, call certain seasonality front-end of second it little of first the the margin uplift half to half from first investments to normal and the forms

Yes.

say noticed is Mark. -- if One the that's I'd obvious. a couple you P&L we pattern think of I things. and it, pretty

And tended load get for into season. make to then we're spending sure have bit in front We little prepared as in of stronger. know, selling we margins more QX a that you part to typically, quarter, the have year as we've in heavied influx anticipations the because QX, spending processing -- of you annual our up that makes anticipating starting generally higher. fourth

anticipate that more two There's half bit it, you mentioned. little first I to in And as through. the then creating that revenue less flow get years it in margin but way little QX, those revenue to a back uplift the expenses without back as been I nothing be unusual combine the it's in half is spending when the a in heavy prior and about bit the the it half, just more don't quite you

our take from Faucette James last with We'll Stanley. question Morgan

want to I and Bob congratulations my Efrain. to share

think like that a wanted same employers? those driver your and had the are But this some to follow-up out response things services on back durability kind and cetera. insurance et quick the and kind of your of PEO Just that ancillary gauge ancillary and and here as by the growth watching question PEO customers providing of pulled some improvement like calling now for XXX(k), you've you're growth services you're of quarter. What had about in you on of mentioned talked customers, I and

looking mean you James, So we what are at?

behavior even things customer Like project of or economy to the to macro gauge and in the that try more Yes. Yes. in are durability the what your improvement?

maybe Well, let and me start, John can and Bob in. can then weigh

So to question answering make sure correctly. that just want I'm the I

bit opportunity to the PEO a if we to year tilt where on And an it was the saw think an between what and sale. was that back PEO key thing, a the balance saw is I we also last attachment versus be. you expected ASO step we sale

this key at momentum take seeing on the able go and at and to we looking which we seeing out. Last I'm insurance that's we're James, So side what -- talking point were we attachment fall occur then we're attachment, year of important enrollment. that insurance year actually advantage beginning are create into on One the the were some year, when is where something positioned insurance the not thing, point, appropriately in clients lowering unusual, as at, least be to and to their start their sorry, in the first, we year, of dropping at attachment. their the to points actually

start at year. that of the seen haven't we So

So negative the of a is absence positive.

seeing think we're balance I And piece. we're that seems little So out That's more Also between to and balance. come something think that is is a into on bit called PEO, right. important. that John what one I that ASO

the those year think both two well. I things started have So

So I don't know...

just trying to I No, understand. Yes.

again, as got it because as on existing doesn't way revenue client pass-through, behavior, -- works. on an relates have the always attachment. it So remember, it particularly insurance, it's huge got impact a because to And right, the we've oversized you've it's number, it's difficult the margin impact

and the And Cadillac to saw That you they plan? customers consider so they the have far two year. We to said, ASO are decision. last They And have and we enrollment the less And not something our see, we dynamics. attaching? want then insurance, plan had bucket. was to seeing seeing Efrain continuing advisory what people, we the they they we're offering. that seen of technology attachment? catching Are -- thus in went year, One that people adding existing through basic wanted That's last that opting and the going saw not plan the low-value HR product, in but or as to war the that have are services. that don't value the behavior, want normally wanted add our they not dropping wanted they and or first we

to Now of the offering. insurance. saying, And now PEO now do the are want wait, add them we're going them back we're okay, I upgrading that some to now to

rates back attachment we're value your in to see and of So prior using in we're this those strong saw part Paychex, we PEO their of going not clear, and third we and our of PEO some thing value add clients seeing of were was have ASO using and customers got 'XX if can group with hope upgrade to back that we're market to we new both then year, into we've analytics of what some going James, is, the experience. And in new demand, what... clients is that -- propositions insurance net go last seeing I what as and and to back similar ASO the I logo we're on question. terms the going proposition. that answers demand

back And I what it helpful. expect particularly to a really of actually to would you it for environment. in Yes. reverting that just of really kind guess was your most offerings some terms be really, -- of was so employers as sounds that they're their in like on is last That's those atypical? normalized year And of behavior

the Yes. resignation. around just recession what remember, say. up. make I the recall -- time, to X and bottom economy would the was ago, Last that? -- Does to the everybody was all this right I again, the That's out you And was corner. try was years of stuff great fall year I it's and commitment I offer it emotional expectation you're very and just roller you're you're forward. going to that going making your this model businesses. And employees of medium-sized mean it's a a been to into they're that is because small making magnitude business decision your a ride baking the a -- coaster benefit for when going

a And so I lot think there hesitancy. was of

businesses medium-sized But now, is and confident are in we'll seen But and I'm last they behavior than next small seeing mean XX% I year, call. right is that to only patterns, be the tell more were we're similar what that know does through we've an last to I historical what don't in year? seeing what the anomaly. seems today it can Now know. I'm you Again, more enrollment. more

it we close Let's leave call. will this the point, that. At at

the great all you're again, in day. for for of I in conference days. you investor have If on these fabulous the it Paychex Paychex, interest your a everyone also and thank will replaying that's we this be reports to interested approximately hope website, webcast we call, want where read. archived And for has your Again, XX

you Thank for teleconference. today's participation. concludes your That

may a now disconnect, wonderful You and day. have