Paychex (PAYX) 21 Dec 232024 Q2 Earnings call transcript

Good day, everyone, and welcome to today's Paychex Second Quarter Earnings Conference Call. [Operator Instructions] Please note, this call is being recorded, and that I'll be standing by should you need any assistance. It is now my pleasure to turn today's program over to John Gibson.

Thanks, Chelsea. Thank you, everyone, for joining us for our discussion of the Paychex Second Quarter Fiscal 2024 earnings release.

Bob Chief is Officer. today me Schrader, Financial our Joining

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

can the will our XX release and You day. available This SEC earnings on Investor being next will our website, broadcast days. be is Relations and on within on the approximately our and filed website be our XX-Q for teleconference with Internet the Form access archived

highlights brief I'm Bob second for going and business start we'll on to turn for to your course, take update the a and over update I'll with financial then then, quarter, of questions. the today it a

the results double the our first the fiscal was adjusted particularly up the half PEO, had quarter and share up and XX%, in digits. was and with in retirement. Revenue mid-market half solid first X% HCM for of diluted for the year-over-year, year, per We performance earnings second strong

leaders strong a strategies. our The business environment. HR for are business benefit partner rising midsized labor and challenging The can rethink demand face health times. to solutions tight business turn benefits to these HR market their technology remains a forcing and they as costs small and and very as continue And care Paychex advisory many in to trusted

are teams All in final underway. phases, their here As insurance our well HCM and enrollment expectations. we the line today, with is selling are sit our and season mid-market and for PEO our open in our going

year. strong Our pipelines from these and this up last are solutions for time

year. selling delivering well fully we third a year-end, during in up. market, for We of the both our positioned critical just are have and is clients of go, to business ramping time this and small In terms quarter at staffed critical selling season but still

solutions HR remains and retaining over acquiring in pre-pandemic our retention focus revenue levels. resources clients. continue Our at to high-value retention improved record last remains we levels and year, outsourcing our as above Client retention on has

like prior highlight the the specifically in results gain success about business, fiscal on It our of calls. continued first strong to year. to PEO talked half the with I'd has during which we've momentum

a This our mix as long-term We on customer particularly in back lifetime PEO benefits. has and base. positive client seen shift our offering, towards business inside shift impact outside insurance a both clients have on the value attach model,

second, actions took finally, improved recover we discussed and our after one, help existing including: sales revamp PEO attract high-value to to previously ASO PEO three, and models focus challenges, marketing to We putting offerings; more and on last model; identify the leveraging to redesigning execution. prospects; our the upgrading and year's AI health and clients sales HCM

and team mentioned want success PEO in thank the year. earlier, our past specifically tax year rates year are is the the work to insurance As challenging I a far. all for last enrollment after our congratulate and hard up underway, so and

and The midsized to macro and environment environment labor be small challenging for continue businesses.

that small wage of to the stable macro having their actions both which desired inflation, business watch show in and employment by is moderation are indicative and environment job Our Fed a taken the continues impact. growth

add in businesses, haven't many softening including of this we some in which time in our seasonal see the seasonal a started we segments, at While to quarter, the signs HR outsourcing in any year. our employees of seen data, recession particularly hiring large normal of our typically client

challenged and of with the access still uncertainty. inflation high macro are SMBs capital, cost to capital,

to we downturn, any are While required we if trends certainly economic signs of ready such the actions see emerge. take don't

in and any are the successfully able changes As to one have of demonstrated in navigate we the best we environment. business, economic respond operators that

that topic our in AI hot industry. related a remain know and I advancements technology

nothing noted new. AI calls, As past is Paychex at in I've

that in our are vast models We have our to valuable models, fueled today designed business over hundreds actively of assets. provide by growing working data AI -- insights and

opens can for to generative clients. transformation and around now more up the occurring efficient, employees, opportunity so they be The us our is solutions effective to that and exciting AI to bring our AI

be AI We customer gen actual are and and provide actively exploring insights us in succeed. how investing improve it them to used to clients our to and can and experience efficiency the help

salary with succeed. solution market leader enhances million reporting AI-powered Flex Currently, insight and Visier, analytics that our HR partnered we and and will a HR available will and reports help our over in new in industry-leading compensation and core complement analytics advisory partnership provides with and workforce ago, analytics This launched AI-driven model services. solutions, AI The analytics XXX to solutions offering, points. the recently, to of This global HR in retention we benchmarking our AI-driven data year businesses a benchmarking, current an just beginning is we leverage how in offer compensation to to benchmarks against Paychex perfectly our people addition customers.

data like Visier, how with bringing value partnerships, Indeed, is to recruiting and outcomes business example and of our partnership our our Partnerships integration is and the real of deliver improve clients. onboarding power for assets large experience and another Paychex the together with customer

the of service attendance, the also Insights leader also Customer XXXX, time evidence customer receiving Voice to part categories based and report Top recognized provides Sapient Survey the on very as X performance. Evaluation position XXXX and providers. ] the top our for proud of payroll, ratings leadership X [ support. We're Vendor HR, robust consecutive the Group and and NelsonHall be learning our payroll This Vendor in positioned for further X spanning are We that year, pleased we quadrant have XXXX technology for seventh been of in in

most is which customers position of is actually across that Sapient the demonstrates based of actual competitors, our leadership I'm report what industry. on voices really, our from proud the And the and across customers

HCM deliver for selling to trusted Paychex you our on consistently update for into deliver that and solutions head team advisory clients clients. I'm our driven year-end, industry-leading the Bob confident partner and in it our We financial help businesses technology constantly results I'll brief we calendar Bob? will and succeed. remain turn our in they small now in a that deliver to As the that midsized quarter. over season to and be give global

Thanks, that contain some remind risk. be of like in press our today's commentary that Johnny, good website. refer to on I'd level involve release Investor presentation and Relations statements our refer everyone to future you will our as that should as morning, that our forward-looking customer disclosures everyone. to events well I'll

X% That Total by was our realization providing to growth revenue penetration clients X% increased and across served a growth quarter number the primarily $XXX I by a ancillary will of revenue price and summary $X.X our to in start million. of for HCM in driven solutions, second Management increased Solutions results. product services. increased quarter financial of suite our billion.

was higher PEO worksite million. and revenue higher including per primarily and Insurance employees. average by to X% client, insurance Solutions That driven $XXX revenue increased revenues

medical continued rates. largely Expense costs, and to second was direct to Total costs $XX our compensation marketing investments increased and Interest John in to during was As attributable PEO held average X% expenses technology. quarter. on mentioned, due clients the PEO activity sales, for and higher increased funds saw $XXX plan continued That million. sales purchase to growth insurance million. in primarily higher volumes interest and momentum XX%

the XX.X%. million point share operating adjusted margin $X.XX And both year over per the per earnings That's a share and per earnings an $XXX quarter to X% increased for diluted X% basis to XX expansion income of period. prior diluted Operating increased share. with

first year. of quickly results million. Management the PEO XX% interest $X.X the now on Total revenue for of held months half increased first X billion. for on in to year And Solutions funds touch to was X% the million. $X.X X% and clients billion. revenue increased to Insurance the the will $XX up grew X% I to $XXX Solutions

first Our months earnings our per respectively. first of $X.XX, X% the over to total operating for XX Diluted expenses adjusted the was point $X.X that And share and increased and were the to a diluted $X.XX for year. margins both the XX% per year up and share improvement were XX%, half prior basis X earnings billion.

overview a company's through you financial the take of I'll quick position.

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

was our $XXX as of and million restricted Our corporate balance investments $X.X for than cash, end November. cash borrowings approximately billion, were more the of total total and

the the timing there level. the operating differences why last on collection where That we ended, a through are flow months based want driving move year operations higher similar date ended X last quarter, XX% as the same the primarily to This were compared the out, XX% fluctuations up for Do driven and of Cash period net was first you see working that's year. that's income $X That's cash for on to quarter flows. call moderate capital. some higher will billion, year. and by to in there

share the That We of and on returned strong rolling And shareholders at includes $XXX million equity a million return $XXX months. to total during of our remained X repurchases. million XX-month of XX%. dividends first $XXX

I'll May certain now based ended performance this on fiscal guidance year We've on quarter. guidance to past our raised XX, XXXX. measures for the turn

the For on when provide get now other measures, more we Q&A. I where the to within be detail we some to color certainly, ranges, also will we provide some can expect and

some the The outlook interest environment, assumes relates economy. and the uncertainty, to macro as particularly which has in rate current competitive changes it future

now with revenue Interest has we expect that's middle growth the X%, of follows: do grow to was the more X% last although is thought is range X% now the range a expectation. outlook X%, be of So million. expect the it changed. unchanged, guidance revenue range of aligned expected of that bit clients stronger. of will in of low X% X%, $XXX and be as guidance, we quarter, more not X%. on grow to expected know I our now Total guidance $XXX the We expect be that up X% Solutions million in Insurance of our We be at range. end to the now the to range. be but held still in funds to for current range to to X% total to our anticipate the is original which Management might Solutions to it previous to in X% with in to we is the PEO from

end in to our towards net that million margin Other expected be XX% of from to to range upper XX% million range is $XX XX% anticipate million. grow of of is in to income earnings is probably diluted range. we we'll tax that income now million, that be between rate. $XX be share We now adjusted per and expect guidance to previous XX%. the then range No raised XX%. the change And to of $XX income be in expected still effective the XX%, to the that's income of and although the expected Operating to $XX to

to we're So quarter we seeing, based expect to just stronger, XX% and that we raising guidance XX%. to raised that on last bit what to X% to that we're a XX%, be

give Now a to third to you color the on I'm turn quarter. quarter going the to third little

We operating margins are and for anticipating be revenue X% of XX%. to in XX% range be the range growth X% of currently to third total quarter the to the to in

stands in right be the it those middle to of we right much now, As would expect pretty ranges. X

everyone we've with to ERTC in selling over And a of the look that year. had was QX ERTC, go the the largest half about and been remind that we've becomes year I'd back that years last past, X.X the that If the headwind this we I quarter ERTC. of last talked back in like

of more than And of but a headwind the be so will back bit half year. a in in the that's a headwind QX, QX

quarter Of subject update on and again back our call. We'll based on you current change. to which are course, come of this third all is the assumptions,

slides posted to refer mentioned, investor will I on information. that, And I'll for there it are turn John. website, back As you with our so additional I the over

Thank you, Bob. Okay.

-- will Chelsea? We the open for questions. up it now call

Instructions] our with [ come first Kevin question McVay And from UBS. will ] [Operator

the be last And congratulations will on I the want call, as to quarter close this Bob I the you John, thank year. think is out too. Efrain because and Efrain,

be and levels And or -- John you feels revenue middle you little a record bit? of bit like think about the the because range. the but talked Can So may retention better, little a retention maybe improving. client it dimensionalize that's that getting revenue I more Bob, at

the tweak driving overall? revenue kind what's of improvement? just maybe then expectations the on the So And

and a Yes. Kevin, talk the I'll some can where jump expectations. little be in. Look, we very add and that, off retention. revenue will pleased we on about bit start with are continue to Bob retention, on I'll on revenue color then we

counts, impact what an on as been we've where talked think and we've and critical I that's it continually areas having we've that's our really in segments, highly seen. about, those focused high-value

PEO, very year to and was levels controllables. the across of business, attributable with retention, and was and first the we're in business that's half year, Client outsourcing fiscal better record job retention than really great managing the pleased actually that. of it fiscal HR the of Our team's ASO this both really last

period We're me market, businesses continuing that seen level we've And the trouble really of start lot business starts when have most know of we see bankruptcies of the to the to financially. during on out small lower of year-over-year. losses ago, and being out companies the end surprising elevated noncontrollable That's a those COVID at those just see levels. X not higher years you of that

highs near continues retention the to at overall, I pre-pandemic be historic so at remind And levels, company. which would was you, for revenue

the on guide. just add Kevin, Yes, I'll

think at be As high towards remember, we range. you quarter, the we had the where I expected to guys end the ended QX, we said of end of the

last couple reasons were we in wanted that. another I But of I'd think trends felt at positive in PEO I of that I quarter wait the that little some we saw that saying business, seeing bit year. the confidence. why trends us there PEO to were really going gave the the to a of QX. we definitely a positive we raised into back we say, time say think one, That guidance. continued confident before end would

but in end I in that acquisition guys the I things QX, the as a say of upper employment of those confidence -- do thing us you employee highlight a think we assumptions seasonal through contributor think that really growth, combined I'll the to know, related although be both growth, the big sizes at get typically made did -- might gave the big PEO, growth have X it as to a And bit thought larger of Not we plan range. hiring. QX. got Management we we the I'd our small didn't end particularly we we reference John and some across one Solutions towards to

past. expected That to materialize there. in see expected the We that growth level the we've certainly seen to and what didn't some we

pause. And that's so us a given of little bit

able would talked the of I as the across both outrun Management insurance that strong just the that, to given And for was categories, the they've The PEO, insurance. and I PEO Solutions, mentioned, part, say, there. been John about strength most demand business.

headwind. that the action plans we've fine-tuning of some kind off what on of have guidance been as kind you of quarter range the of provided. taken it's paid really a that of little I But well And that's see there. a the as Management Solutions side, And the the bit in just

come Andrew will from question Nicholas next William with Our Blair.

I we've the within space cycle. dynamics aggressive is kind the wanted in stacking are peers? about that are more quarter pricing you've strong in Paychex competitors terms health increases more certain Really navigating side of on wondering the during health the on that how just front. players specifically, to to that insurance, PEO this from relative faring there. just some there ask being maybe of And broadly environment, seen those side? that, I'm if how And rate pricing year's up you're on heard renewal

Yes.

has year tell the pipeline continued Andrew. our numbers strong thanks in this. question, to improve I to would by year. as The that And So gone I'll PEO, can you you the very comparison the tell growth last for say is on.

not you value the health as [ can doing, of proposition a assure our part resonating. ] cheap whatever So value that is we're proposition. are the using vast competitors I

clients for probably are we're a conversation they're that looking health, at -- very it in value engaging proposition. comprehensive go probably if more we cheap So And HR long. not outsourcing as

solid. But the our pipeline where have We the with is agency you The performance. -- insurance now, pleased leverage strong on capability, within as right know, the well. our also to as we with very PEO are very PEO

in can would as the and I in pipelines, in in much pretty both are as of know, you very typically, of terms the And for mid-market, We selling terms insurance both imagine. say final as the innings. are strong, you very, final attachment sales. That PEO, the season earlier, it's the stages, much in

you fiscal a trending like towards in quarter your that's if is a mind, expectation comp on And don't Great. sounds third that the It follow-up ERTC. tougher. just the bit

Just liable wanted for to the to making potentially And looks that. PEOs taken confirm then a IRS stance respect like and also, it ERTC has that. with

you're presents thinking dynamic or business? that risk about the that kind any how in of part if that wondering of Just

finally to But after say, from been we just I'd front Yes. with up most the right for little standpoint kind it ERTC, financials. the part, half of years. our it a to the year. on That's of was I'll a the expectation. got start It's most the challenging part, behind for of X forecast assumed Most in us. be that. lined that has forecasting

is a promised gotten lined part, half bit I There a back this most it the ERTC. But to little in for I've on update the question year. of up. has an the still provide lot.

to That's was slight slight had my expected tailwind. So of essentially, we the the a prior word, that tailwind the to I'm where it was front half which stick to be It a front landed. half going in year. said we

will the year. be We a back half to headwind the expected headwind back It it be in half the in the of a year. of

And growth. know, address the in a do I then to on to would want headwind little and the front basis, on half X% the be bit to about math But I tailwind color, and you basis the to year into in full you half, expect full headwind John, wanted year the and a back PEO? back kind it it. do can a But guys we a more provide don't of the with

Yes. Yes.

the in stands equation and and to on of rules. PEO I trying that been tighten for say parts would look your think and question the ERTC on I actors relative to IRS it. the both IRS bad has

As our process. diligent you compliance can imagine, we've with up very our teams and been setting

ERTC In and out services. contracting wanted because for fact, we on through little the the that going were slower of way the our clients with approach to in PEO compliance a the we we product all work those

So we we and our very that Andrew, managing feel position risk. I you, where of would good are terms in about tell

Our Barclays. next from Ramsey come question with El-Assal will

me that ERTC. they a processing. had strikes right, I a of kind on follow-up there's a backlog paused as It building,

to type about? Yes, we back is So it's that in the again, flow should in the again the the complicated headwind deadlines eventually, might into revenue and know 'XX. calendar year. of of But it 'XX a of shift more future? begins thing I revenue the think sort of rolling in of processing that the in And start half -- future. Is this IRS some as a it's they're

about So for ERTC how I curious how that the should beyond thinking not just was but following you're maybe a little revenue, -- quarters, we bit just that?

returns because the Yes. doing we're for submissions accept. amending the Not clients, really, Randy, which filing is and continues to IRS the what our basically we're

that revenue. do recognizing as they're still we're the so and And And we accepting submissions.

and So our IRS to really hasn't The our a from to continue really QX at standpoint. into there's revenue base sell has there. go impacted ability impacted the the that end a made timing shift not it, forecast really our change of

been the them, turn end we're base Everyone this them. have has And and a it. the years through talked you radio the them. fiscal to to if for we And really else can our deadline talked here haven't to you're the clients talked the opportunity. identified The is deadline, at that year. on And are We've all you X qualified of big approaching difference have we've that into

no next into So the shift may for in there's about most benefit that year, some what but stop it's I to some timing X qualified significance. into have of nothing be but And the that related talking point of advantage can bit there hoping flows small taken think it." ERTC, there opportunity. And little "Hey, just, I this IRS years we're businesses did. really I'm at a time,

in SECURE kind your about framing follow-up, any X.X, of Great. that helpful. And a how That's for in that the us selling your is give conversations Act season, is Paychex? view latest opportunity very of up

Yes.

continued a highlighted I mentioned, half think XXX(k), and solid first very performance. we

pleased So that with very we're offering.

to go most I you one we simple ] market providers, our plan to the largest for the set comprehensive not we out plans. [ businesses, pet think as retirement the small if provider that know, of anywhere with probably offerings of from largest are IRAs the

part is campaign. So of season very pleased with that. selling It our

of to about from said, try think, mandates, costs for continue the to things I there's learned of the to of state the of there's is the business lot in, lot involved, as to I education a X is pound a some it, business this things the we've lot retirement compliance owner, even I X of small though do. there you have still a this issues. benefits are

so sign is And not this for. just up something people that

So a it a them of SECURE to our understand entice benefits lot finding leveraging are getting the of there's we as but once certainly education that into offerings. Act we're and a the to and and be conversation has do clients successful means pre-marketing done, to

next come from Bergin Cowen. Our will with TD Bryan question

you on so the things be funnels you job And seeing as seasonal talent curious a that So and it is out this I in clients' issues Solutions. start on hiring? more weaker acquisition in So or client like for to pullback view, called can light hiring in that. drives to profile? what dig more here I'm background demand that might that relates checks, employees just you've The wanted the Management openings,

Yes, very under Bryan. insightful good to as very that question we're well. a It's trying a because good get -- question, that's

for midsized what tell you. is very and Here's challenging a I'll It businesses. environment small

leave our it I workers. seeing at finding very always in of it they terms still challenging think they're HR challenged, challenged in are a we're market still labor that. with advising, I and qualified

issue. think the that's part certainly So of I

they're capital, investing I I being cautious the cost of also very think with they're high -- with think capital, growth. lower for about certainly to access

for do how out figure to trying I less. do they're more So

want these of time, some bit same to our talking a had hesitancy. I people. qualified think And people little less they qualified they At while small was a was hire to paying experience, we little found they be that were the And what rates group higher for a hear may people. of saying, were business to have disciplinary hire no are shows, then I I person, we off out the our with, think to types be dealing use issues, HR to if owners of issues, matters how I can a there. figure get can't lot that I a I may there So better try where all I people qualified

just say we're So reductions. -- downsizings that would in a as I read anything seeing not I environment seeing. macro data That's we're our or what because mass that not

various would say mostly have you I the seasonal we in more into enterprise on choppiness did think seeing at hiring. industries. I across we've are it's not what seen. typically really, side, particularly, historically seeing what where in That's that And a rightsizing hiring the When seen the little going and upmarket we're rates mid-market, you business. that in see is we where the higher-end get

interesting is our a that, point that -- can you a I'll I when seasonal Florida, clients the results of are what's imagine, our -- Now about in of see remember, which, as pretty when you time state PEO of team see this lot impressive year. out, is

Managed not business. with and Solutions hiring. thing extent, headwind similar ASO having there the our were a growth a of as HCM the We is lesser business, So to you're saw seasonal seeing in mid-market in in which much -- numbers our

there. would So choppiness more say I

from index, people of downsizing being same on more in they they can't would moderation market, find it's but at want headcount fill the employment I you more the actions additional say the not In they're what either really an time. of spots adding taking or small to hesitant or clients our this that see perspective,

don't I if you that color. gives know So additional some

a I want just Bryan, bit. little to add

it ask Management didn't as as Solutions. your You weaker just this, but relates to specifically comment

to that The guys We beyond we to well. reaccelerate versus had kind growth a that expected, other you other as of in PEO with there. the what our the about lot the strong ability the questions We've part that of of do PEO has hiring part to on talked performance of business. and softer

really base, last the that our inside of of there data, that was the good back really last actually leverage the year. the better put we and leverage strategies would We than was what plan we've together that our a X anticipated. X strong has go executing at ASO And to the we knew clients AI had bit that been And thought look been a really months, plan over on little fits. we be PEO models,

the back together category. businesses way. But other job and my now we've pendulum PEO. a just of should swung in success would So a with little had put X probably much We It easier. these bit X has make the -- John's lot

weaker rate some I Management there. performance see Solutions. the that impacting bit think that's use is why And you little to extent, to your in the word,

last go-live the kind go in as quarter? period? more insurance participation there. the just PEO attachment a understand to you all shift of Can you around specifically, PEO. helpful of in quarter on follow-up did bookings bit here accelerate versus That's PEO the expectations a fully towards And ASO X/X color rates on health dig relative Okay. at-risk the the maybe just And

the we first. the were as last Well, see in fiscal one tell continued last business. take outside We quarter, that Yes, as quarter the of of let me I changes the about many told talked in the year. would We you the we you -- PEO accelerated there. fourth and in quarter. further acceleration And it both inside It base it continued the making the well second that across began the base. first to about

PEO out, conversion. ASO So this as Bob to pointed

mid-market. healthy I also in PEO, our And pipeline. a say seen not in we've would very the So only

are selling HCM if here So you They're when stages. -- well our you today look underway. in that PEO, -- the the final they're at the in X season we're in summary, that -- in if businesses, sitting and really mid-market

pipeline very was the And Our of very was enrollment the well. then as strong. insurance, it strong

you would historically. we've where to back getting tell I in we're line that been

we're an penetration was in we for a I changing And client some We and sign maybe a we single-digit you things this the enrollment. up in lineup. way has actually, We in increase, the increase base had the inside some there. existing some year. our improving degradation. remember, rate education did our And what on great If doing last to of We things done job base it customer had saw employees plan as similar well attach within during little did would the open say, team existing enrollment plans.

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

just on of wanted about ask lower Management the the X% for I end we're I talking follow-up a to year. X% Solutions. the know to I mean,

So maintain in health in rate you and on overall half, the you of little second it tone a sounds fact ERTC the to growth maybe is basically that you're SMBs downticking half, X% need the the lapping bit. first despite the like saw

wanted maintain to second to of half just your of visibility those X% get on Paychex' the that perspective moving growth there? given the parts some So ability out in

just increased talked expect contributor ASO growth, year. We growth back in continues a penetration. to can performance, That of been I of the ASO, but us and challenges well on. half to we we mean, with really and the referenced the John continue be the of start And areas to still a retirement. although headwind really for ERTC, product then strong business. the I obviously, is case Yes. as hiring there had add John can be and PEO of as other better driver that the some there there's I strong to about has mean, that

into the that as we all first a offset, do back the of move rate of put the We some to continue growth It's year, that the in we that headwind. growth the That on half will And expect of back But Solutions on to kind a things some half be a we acquisition. -- as would the into extent, headwind the when similar full And in not to again, -- same we mitigate did the a help than of huge again, first year back half Management ERTC year basis. of half half. small of will the some to year. together, expect those contributor Jason. or

would the add not in I relative thing on selling key other the really to even think SMB commentary, just I the Jason, season. market, Yes. we're

beginning in of That's the execution know, just you the during we as to we're January, have selling kick to -- out marketplace. lot and off, go to a season. So just in

just starting. that's So

are with the where XX high season to market, small the lot full, enter with to of the end than a ASO, are just that those of last we nearly season, So we're the complete pipelines go really next the the in And selling execution better selling PEO, in the beginning year. areas days. mid-market, much

thinking our Thank growth maybe revenue holiday. so you're I talked we guys. segment Okay. great That's a you get can properly? versus versus QX QX, QX models parse overall about growth QX, how out just for tuned about good color. expectations your but Have just know you level for you,

to And QX. taking Obviously, ERTC with a -- will of close. rates I gave the just you about that, full QX they are should -- in the in be when get growth we look bit QX. were at the I'm QX, you the because year I'm hopefully, guide Yes, similar Jason. a QX the of look math being guidance, can than you the that at probably on greater in those be And headwinds going insurance, lower kind and you then Management the to do talked Solutions in PEO that where

Yes.

think, shifting that There's both. the the that offering last said Bob again, PEO of thing, way. on we we're that geography I this just Jay, -- this year counter The from more offering over movement color going rotated ASO have other when

So we're talking geography.

tilted we're from geography way. the Management kind Solutions insurance Now it's the other move of because PEO talking to

that which is season We migrations long. PEO everybody, There's all for a do that. those conversions. would not different year to the ASO little I on remind thing selling a other The

to And higher traction intend see so overall don't continue reason value lifetime There's no down. we good it's slow higher there, we model. -- in our it's and that a revenue, to to

continue But forecasting from the ASO half So relative always that. more I thing PEO of he'll can go in year, have back doing, to do between we geography X caveat model, clients the if that of as our areas the again, that through say with well to you. just got a to I'll the we'll it is HCM move Bob's and

from Christiansen Citi. question Peter next with will Our come

a could in also Management in here. question. talk you John, you're of playing Nice execution the part I hoping balance AI you was Bob, Thanks if about for noticing, trends Solutions little the area? then particularly that Any just a John, -- bit role. And trade. and mentioned sales the

wondering commentary. you holidays. give the you're Happy dig on headway Appreciate could of if where front? Just us making a a into little bit and that that sense

think there. PEO we the the very across I happy pleased we are very much. growth about there. with very relative to platforms you with look, the talked We've in already, Thank mid-market, No, where have Yes. the

metrics -- And I call, -- that, I've As competitive it's next say selling continue across it's entering on changes. the talked is our say the market. I look would solid. we're trade all a wouldn't always last small I about competitive and XX is and the balance to there's about say look any I major business about of the market. season, days a

So we'll see.

trade happy sit knowns very in balance something... progress, we pleased -- sit upper the of question the missed market. where of we in said, PEO, another as with areas. I'm There end was ASO the our very the here upmarket are And mid-market here as other with But known pleased with our today, as on we HCM, I today, then I --

the it. you front, think On AI mentioned I

you, out And is of been opportunity decades. Oh, public tell quite amazing. about yes. I there this but can't up I AI. the for believe a in will I we've AI it's really now around to passed it's talk lot -- an doing kind Look, domain,

terms PEO we're side, in lift using using We're talk our talk get and in targeting base. that we about in the it productivity of it our mining the about the using let's of see. is going where like point almost they going client being getting you the what have able -- to be -- almost understand know the where pre-proposal a like you because to almost is to you're add our sales side. it we we underwriting. The can to on We're value on in So

a And terms all things we to there. Doing pricing. things now platform based particular that actually client, our cetera. value us proposal of volume and of we of based So lot to common bit those lot those factors, X actually refine upon management rate. in X we're -- what actually we maximize across a we're expand and allowing going the major this that to real competitive use data in AI allow of models level have about gives there would et talked the of on and the our using based And models time we the set, then sales for a and doing a AI upon the of mid-market that's started the price client both proposal, And on and pricing what our of sales numerous discounting to continue we're is And have reps models, in management. teams models building teams.

a we're impressive. able are phrases and relative can things what to and our what all pretty of having that, what get we're with real taking using scripts in But we're the on accordingly. and of advantage, working, price what we top in Then things marketing are those from to sales the getting actually what those are it terms marketing to productivity voice We're we're message fly sales change targeting coaching getting we're and a to conversations prospects teams actually time, our the the right of working, competitive analytics for to of give the sales perspective, analytics. getting dynamically messages terms on perspective, with in biggest using on ability set

we quarter having ton the things that to changes back very that when It So piloting to last challenges. of start doing. lift. as PEO best just the see half could of We lot of the thought interesting place these get some the we some was and if in started a we're were second a to in was our actually go-to-market, interesting we

what some of And the PEO, tactics. seen some these direct of a is think we've of I in result

Our next Kartik question Mehta will Northcoast with Research. come from

different kind than little is a about or the I'm little this the you're You key a talked wondering you of in selling if year? season, anything seeing if -- obviously, change bit SMB. -- And time talked in price any you've about competition a John, that seen bit last little

market, Kartik, look, been I a look, and I've don't XX long as in it industry, years. has been -- the competitive as it's

So discounting. lot there, strings you be it's Really the same it's of aggressive. to kinds look, the The kind of think is have there There's the very are market -- of terms It all offers were out using there's there's it them. matter you is basic, long in of environment what how and I under of what a of attached. think is, of of details tricks. all fact kinds I when get the

And both mean, value we I the would I was continue to and price see look, very within in that and But our say base pricing years. pricing in the high we this. pressure X that have -- market. power, last

we're to to I That I strong the said, being think and for really it with for and there, very been done we been command haven't pricing not decades. the ERTC very PPP mean, be decades. we've the out have power. cost able able provider lowest

our the something is I at when clients retention the at on think And you At see look of end think necessarily you small, our on about existing day, value, highs, record value the I price. what proposition. I buy says owners think business with not levels medium-sized that

where away the giving can to store. not So And tell from people we're in in of head going going see they but to got head, to the combat competitive, good meet that being we're we've be where record you to you be we're are And we're margins, going good our we're success. competitive. winning can We've pipeline market. stupid. a track a We're been and not as

all the per a on pays expectations the just in about employees. seeing? what just just bit -- X, if Solutions consolidate came that, matter control Is but seasonal is it and of Bob, little that then, of because you're of were Management your less kind we of talking And -- you're they kind a

Solutions on big sizes, our as in we've and Management I as seasonal prior I'd around little It's in Yes. we it wasn't is year. overall, clients assumptions market. mentioned, PEO on had that, for that and QX, and we with models. that talked really those like seen some to that had get we've a typically of it's than both employees. Kartik, the softer. bigger PEO, about some look seeing across clients, full more bit moderate what hasn't some say We level It hiring. or size assumption year the of a our basis, not and the expectations end would get driver what was They're growth we're larger ASO because what in a low But of years. client particularly We every materialized adding

than the they're getting little bit John's So that assumed not it's small -- in anticipated. are earlier, we of the not to across a It's rid board. just softer adding that level is point the But we what plan. businesses it's it really employees, to

Our next question with Jefferies. Samad comes Samana from

that assumptions provide Since time single-digit put was the if guys stepping some company wondering out you upper think midterm context in last revenue, growth just target back. us employment on in just out between guys that just I for the has And the Maybe especially we reported, you financial could you are? as maybe goals. it about building they reported? are, assumption, put help there was understand last time the just doing -- rates was -- that now the what what and especially And be us maybe may what given blocks peaking,

Yes.

You want me...

Go ahead.

gotten I've a question Samad. this lot. Yes,

I the this about we a the you with you many talked well midterm gave. if look we've specifically. of guidance whether question this. of growth, done about back it look years that or you within XX talked X -- over what on we've revenue from it's that think But at years, if I've range last it's at

And within a we assume that you I that go least mix as we about about the at And say that say is would base the I that would way anyone, to with range I be well think providing know, It's would well. past performance. it year, way we're then better growth. we that guidance a of this growth. than have as delivering client similar also

When value look our lot of getting ASO, a larger low. think of with the our share higher client penetration still we're base solutions, rates you wallet opportunity PEO, good a that is fairly our are thing with a really there's of out One the solutions, at lot -- We at those of inside key particularly base. retirement.

so there. believe have we opportunity to we drive growth continue And to lot of a

John of we have We to the we'll have our we years is has we together, I'd you look been pricing a we've we that that continue level value capture it, of and in our that, did that look other we right? I as be you say capturing enable expect used power, is hey, last growth going XX And where for couple deliver the strong business, and inflation part expectation put not the proposition was, future. back think our component the continue of what opportunities, to when formula. the future. all growth M&A be a years. in that we X will historically part to of part It's growth delivered as and of way that to but that last drive us over when we in at over believe to a might proposition have strong the mentioned, price value As and price And the

expect most be confidence be not by but will to you year, part, single-digit the put us in when of that that going together, that gives kind can deliver So that -- upper it to year we all level. to that range. in It's for continue we vary

sales should have a guys we how out that near-term just then or observed in or called based quarter, Any plan most And in you that observed just on to recent quota-carrying trends about sales you so this own plans the prior far reps for maybe the your Understood. think you change in hiring own quarter? just on what follow-up, organization? your what based maybe

opportunity continue to are and staffed, our the the is starts grow fully strong. We're to the business No. marketplace intent feel up. is We Look, in like sales.

of tell some we will gains go-to-market trying out the you I to thing of that the are productivity balance get strategies. we is can the Now

showed really I the testing some we As that in some PEO words did said, good lift.

we're could of the I have we the frankly, apply But And the of well. on in And market. I going end be those lift to investing upper back no mid-market so growth. also a plans think think pulling those quite and SMB as in

next Bryan Our Keane come with Bank. question will Deutsche from

me. impacted Does maybe well? hesitation, for investing to Just talked from a ancillary hesitation there. willingness growth, services of some buy clarifications their growth the you impact about SMBs management as that and couple When services has

really not that, Bryan. We've seen

-- the an see and of example, I'll case example. use we ] think of is what [ I just luster probably in

rate business capital store very, holding probably access a But opened couple met. because on owner have adding financially, just the another of well may hurdle very cost the a You back can't could -- has constrained, and a that doing they're justify franchise somewhere. of good is doing to franchises, be and capital, very

more what I and that's people that. than pulling back So need don't saying that see I

of that and Again, the by look services our time, when most or we're solution. they're them enhancing at benefits and you attract either an either HCM by quality employees, or the our having helping offering, products driving their retain efficiency they're

and at they're more and of I looking services the the our value going view products that most So kind help to their that successful. our of be of believe that actually clients business services are understands

always they view mean. think it don't you line what I item, as expense so an And know if I

all the pretty other part of that Or the that PEO, to had clarification ASO to you it. surprise Got shift and was plan it. And guys? typical? Got I then is, did the

it's turned mean, I something expected. than out would historically better No. say it I done. we've is always we What that

-- Now last sales with great and we're had a offering, we in year. year, saw tilt let's HR PEO market outsourcing the in the keep we that ASO when out mind towards last

HR We structure. the They're this locations different on sales year. have great reporting in outsourcing just

we year, kind have ASO once the of model. system, of the our that the And comprehensive of felt experienced went our PEO. last That's exactly back to HR knew did. clients the candidates go reintroduce HRG to of solutions great call, we outsourcing the like we so be we typically PEO to for we what a would them said them be reason, would to And whatever And lot benefits opportunity for they, seen to that they've in we human had a back go good advisory and capital management and our offering.

the And success so of of ASO we to inside mind. go group because base the of had a year last in clients bigger

from point analytics have of cherrypick doing provides. identify high that going that bit what certainty other of enabling that I they're to in to benefit our that vast clients the that's better said, a to to I And co-employment be PEO what then terms able we little us inside relationship the would customer go we're say, a we And who a base, after. should degree

it. a X That's Bob. Got And then for quick helpful. just

Just add that how quarter? to about about for we small X do the X that? think does of to Or acquisition, points third quantify revenue

material mean, No. basis, It's a front to I don't of Bryan. small. full a On growth I said exact have way year less split in number, it's don't contributor me X%. quarter. by all. I revenue have not we at than the the

ETRC some the ]. [ offset of could you maybe thinking just was I Yes,

I in does minimize full mean little it and certainly it Unfortunately, to the large that's in ERTC But close -- so near and is it offset QX. certainly enough is year, guide, half comes back last assumed thing. in nowhere bit, was it But it the offsetting headwind. it. of the the particularly a

Our James question Morgan with Faucette from next Stanley. will come

couple of follow-up quick a Just questions.

little and maybe have in businesses, otherwise narrative of at that this to of back your if in all? hiring just around labor particular, out just your maybe perspective, wondering, any impact to weaker, even lot actually I'm bit they heard were wouldn't that were point this In if that a we've And smaller evidence the keeping seen from there's any if truth been hiring on people on a being be shortages? could because terms before hoarding seasonal about that impacting payroll or employed customers wondering you've that seasonal and just they concerned or

in would small not hoarding actually all. Well, it's say James, It's been deficit. at a the business, been I

ago, to closely and kind to fair, back of very Now got lot this, I've playing on months field. follow level which a a businesses, small X our reported in be index, probably -- we

of I you the in end upper in the more hoarding saw think space. side enterprise was where

saw I that. think you

and downsizing. Now people think didn't that's where saw you maybe bigger sets of you've so need. where And some hiring seen hoarding -- of even these they I the

change small small reluctant of employees employee launched think are may I sure to year lot focus think the that what because business ago our good they because hard retention. trying maybe we're we do really to Retention was high-quality have employee and small X ago I [ making and that the base? offering midsized And I I have Insights don't do do is base some about wanted I talking I people. how were to that years that's workforces. to you about trying hire AI to to want feed is I of point see forced to the more my And out. on That's people we when HR that think make was them generalists it employees. kind find because weed business their now owners why be ] over owners business a keep owners a

any there's end. opportunity what seeing in the Now my kind more we're wouldn't That's low I to workforce. upskill hoarding. say of

back business business period And of you wanted we in the think -- component we end? an other I continued on -- levels the strong on seeing just this just seeing? but set. over mentioned that to us much levels on context that yet, that been in of -- and What business update out that wondering there get it. economy a rates business correctly. and are was still interpreting that the weren't make of I can of kind of I strong to I'm Okay. And give sure had failure the generally just about how out particularly we're Got then starts, starts. or what pre-pandemic viewed of customer you rates in

over bankruptcies are would up the last I you on have been year. the tell and rise Yes. that probably

deaths. this of to I report typically of continue would data over in lag. you You're births bankruptcies just reasons. outpacing still in that a our seeing accelerate business terms little year now tell out deaths year And last

X ago such that in first think years. concerns births years those them businesses, of X high to -- rates Again, are them had warn that pandemic, that basis, is into math And gone gone of just years. survivability most people during that if XX% don't what of way. do business it levels the a of the of view macro after read matter new here data, you the on the always want other I The X of are I we because I people fact

that you're So years what big that seeing of that is ago. X shedding bulk started

are of first out group of those The business. going

think given of properly? an X not a that over business I And the so years, level starts last bankruptcies it's that the say had I makes abnormal that level sense. there's of sign Did if that we

births, but sounds should surpass to at probably -- I they Yes, it point, number does if given expect have haven't, on -- your that surpassed pre-COVID Or clearly, not point levels so some they that like customer right? -- of just It rising, them have -- sets, levels? large in bankruptcies pre-COVID been we have and yet? Or they

I fiscal -- because Yes. which surpassed you bankruptcies here and tell would what I have year I pandemic. let up 'XX levels, the just [indiscernible] is me is -- are would definitely

it. Got

[ in second quarter. ] just mark And the

Our next question with Mark will from come Marcon Baird.

new of existing client between words some dissecting by base? into introduced? further just are what the driven recently other So to -- there. what Bob, mid upper I'm tools in good on off and and the end the that wondering, bit Management In you've upsells John started seeing and and you the new the is strength being you that of little Solutions, versus performance talking a stronger seeing -- by extent about logos upper being terms

performance strength where I our unit Yes. John And above of prepared mentioned, lot mean, we that in this think time from you last in mid-market. the sales QX, John, at a was remarks, a seen the we mentioned as think had performance year. I standpoint, in I we've were

there's ASO, logo standpoint, penetration the a into base, as We upsells board, that's particularly see upsells would PEO, both in whether into the Mark, as I well from existing the strength new continue to the say, retirement. mid-market But strong client base, within the base. across

an side, Great. and strong assuming you've And slower so be slightly increase pace bankruptcies. the mentioned we're would despite growth, it that in basically then basically SBS a -- with terms of

in provide season, In it's know things any SurePayroll? terms are of selling differences sort what between would of Paychex you seeing but -- in you're and of the said? versus above differences color you -- there terms would that Any any that I selling the already season, that and you've still early beyond

again, Yes. No, what seeing set. what Mark. SurePayroll typically would more micro I we're is seen, in say the we've

of type a there's new -- starts. the set, continuing of So to similar if business look I lot see at micro

the So in there's you early just there small a XX key business, to out. as going to lot next shake growth. how of Really, so really the for tell that's are then us know, selling days in And season. the going we're opportunity

Back geography have think time. the to the original I Solutions at on same on -- Management your issue remember, what occurring question is, you as well was

selling lot of PEO. into inside capital we're base some and our human is So we're ASO base, more a management what upselling our while

PEO said, Management And And relative other both the the then impacted a insurance moving ASO the the the the in the to the seasonal which on and PEO happened is to market, side. this so we issue of hiring geography a end market which good side over and on upper as P&L, that thing perspective. long-term from the they're on Solutions

what the then for offered And to side, relative through to enrollment season? point. X on insurance insurance last great you an plans question what with PEO a similar partners are On seeing apples-for-apples coming year basis, of That's health for just increase this your sort was the regards various price costs.

health unionization to I by see with going more is our is tailwind the They carriers. think you're which pandemic. expenses starts negotiate Pushing to post takes at future, that item community, inflation. at legislature. have continue get I think that Yes. think system It an really, health evolve the the process. Look, to pointing state for care with In will -- a strikes Then is approved contracts in the a local I have do. through pay. a hospital slow there's that in to hospital. is to that more evolve And costs on years and They has that local you'll

we aware years future. we're So We're care, increase for health cost start that. plan in of things saw health doing to way X that that, its certainly and last making the to is inflationary prepare costs to going in the

give where changes the our our plans. health the last in to the inflation that year, when line was And same did about making general to say care that competitive to what we been And keeping talked we we And more sure lot people, to that highly a right I lineups in of actually have we're time. was. our they've at would historically apples-to-apples MLRs choices

very helps. through have been so our are teams think if they good services some solutions, up that some creative I And finding and and a don't in have. designs other I health products clients ways to some that plan creative in of we've alternatives with which competitive portfolio coming our got that know

to say, does. out offering impact sort more at you for be that's -- owner trying looking it to manage in what they or your else that year through increases would business less that John, have? But situation? And last of It a everything PEO this higher would as be make that's Does there, attractive you year? then would small that than does terms of relative

say, that results competitive would very we're not I and see results look I Well, at. given us successful. the the a We're in pipeline in the -- made environment. that's a more That's I

So most I of that And the else lineup in. involved someone comparable. think very is involved our in, deals is we're

plans the of and something things is services inflation, they breadth they we've that differentiates of I we options and I that I think in that standard beat say breadth that our way X our broadened every from would I in find tend is what want we others. think client, offerings, plans. to think a manage health you is And there of -- that something portfolio the us such what that such can for of our

Wurtzel question next Our with will Wolfe from Research. come Scott

market have your some on of per mostly segment? side market us and remind were your end maybe you heard Can seeing PEO PEO some quickly. what X in of from challenges vertical, We me exposures. control to of exposures by top pace from worksite are peers the employee who the sort X Just end due certain

be you can of So have where helpful larger some your remind us just guys the very of guys in PEO. exposures if it would you

not Scott, payroll any do Remember, we our client our historically, PEO. in base. general really concentrations market. the our our client upsell was an have within PEO high It's base,

is small in base country's diverse client as from as strategy a payroll Our perspective. originate business PEO the market. We didn't business vertical a

particular any some of area. maybe got national [ the concentrated us made a before but really we acquisition ], geographic We the player. broad the Oasis concentration highly had never So ] [ in acquisition Oasis

industry And so that there's one business. drives concentration really no that

Our from next Sabadra question with RBC Ashish Markets. Capital will come

you Ashish. a you by if is the the the quarter. like acquisition. like This X%. It David Management looks could I revenue [ us small could remind regarding Page on maybe a ] But just growth looks X $XXX -- growth million just for you David what -- is? organic quick had in had grew Solutions It you in organic

helpful. that be So would

a you was keep you And being other I a very actually half. tailwind mind, ERTC in the kind to on in of quarter. we color growth headwind first was a the QX. that It small Yes. mean, the in in to contributor, thing need David, Yes, gave slight

most So in came that of QX.

you're acquisition. going you slight to is be But the the the different rate So organic not have reported. as far kind from have you tailwind headwind a -- you see growth ERTC, from too of of what

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

the close out to Yes, just call.

PEO attractive. I've don't the this for LTV [indiscernible] that the You mentioned I business think all heard for being year. from

elaborate on the So you you ASO that. to could it HRO think Just the can't size to that or relative learn just ratio there? love more you or on

the getting the different And in That's the they offer. different and look [ the -- we've Yes. the when sooey their health we you it client has offer, all insurance get full solutions you of have value. we into I insurance they're the that us offerings. that ] PEO with we and all can workers' our their that highest mean all and the lifetime across -- and as past of that really talked is imagine, model, and when comp start about PEO certainly certainly you solution

into hooks You're them. getting more

be have their the new with insurance if were in may may get to would might have insurance health have for to -- different health with they be cards. that very to employees. us, they have to when have particularly they network, And if they doctors. us, insurance leave their change their disruptive a might They PEO, They

that's So very disruptive.

a you get in so them model. lot hooks And into of that

driver retention of a is big know, you value. as And lifetime

as we've in PEO right when them of we're them very model to want meets and over needs, is X strategies -- that we base, to favorable. this long into that go get year ultimately model that really back that although term are that about, So the put model the in their talked selling the economics was, into clients, our over because

of part our strategy. And so that's

the so in the retention business margins know in competition. payroll my -- high. figured I the notionals payroll also that mind, are was Yes. and high. a it. Got I [indiscernible] [indiscernible] tough are But

it's really Yes, the that up... retention drives

easy I thing. it's Tien-Tsin, very think a Yes.

in. to then HCM know we We If a you'd our is is business approach you've it, platform, you and say think about the be you on got add what way good our stand-alone basis that ASOs. a

We business. There's then advising HR an more value got your is that retentive add there. nature you professional, someone You our high. know of

attractive Now you into clients done a adding very metric term, inflation you that then sooey a of job mentioned managing everything else. you for And predictable ], terms the becomes long in that get we've such because there. there's health mentioned of over bots the and the strong insurance [ that certainty

a So of you've top a business profitable sticky business on of got top product. on a profitable

you it just there. so keep And

clients, you the larger will. I And to if studies, attractive more think evidence tends to the et XX-plus, and survivability in you fair, to national of look be at is be others, is, terms the cetera, both

business rate. longer, PEO the So are a But all they and going that us the higher the benefit margins. we're with and through we have And the those is Outsourcing of in with rate see they're a there's survivability higher HR staying survivability HCM is naturally simple and what the fact getting then solution. flow of

it's it chunk you know CAT -- low it. of [ I ] coming is because proposed. And said a the also into still good selling is

Good point.

Good point. Yes.

Okay.

we'll point, close I think was At call. the it. that this

and a our If of want certainly you're to be this in families your safe will on you holiday to very [ for Webex you and interest day. hope of I We archived in wish call great everyone Paychex XX care. want your thank continue season. conference for and would interested website. replay all days a the of happy ] to Take a has approximately

your Thank we you, This ladies program, participation. gentlemen. and concludes appreciate today's and

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