Paychex (PAYX) 19 Dec 242025 Q2 Earnings call transcript

Good morning, and welcome to the Second Quarter Fiscal 2025 Paychex Earnings Conference Call. Participating on the call today are John Gibson and Bob Schrader. [Operator Instructions] As a reminder, this conference is being recorded, and your participation implies consent to our recording of this call.

If you do not agree with these terms, please disconnect at this time.

I would now like to turn the call over to Bob Schrader, Chief Financial Officer. ahead. go Please

joining Second for our of review Thank XXXX us Financial Paychex Quarter Results. the you for

Joining me our today This is XX, John Gibson, our the the ended opened, XXXX. for morning, Chief market we results released financial quarter November before Executive Officer.

access investor on You website our the Relations Investor release on as well our earnings website. SEC's and can presentation as

and being Our available will of days. couple within the Form next and for website XX-Q will our Internet teleconference on be broadcast is approximately filed be the with archived the SEC days. over This XX

differ forward-looking Today's call you that will with information actual events future from and our to that review some contain the encourage our statements We current factors refer for additional cause on to expectations. risks. SEC filings involve could to results

reference non-GAAP these non-GAAP measures A description also with reconciliation our will in found measures some earnings of of the financial release. can the along items We be

the will call over turn John. to I now

I for first solid an Thanks, of it Bob Bob. call update delivered the the for up I'll course, open the for a We second quarter and back second it and the year. business questions. your turn to we'll financial in with the then on update of quarter then, results will and start today's fiscal highlights half

solutions we customers. solve continually the more as enhancing the of company continue HCM deliver Diluted businesses we help proposition quarter the also real per operate offer X% to to of of we the the the find efficiently ways problems. our earnings expiration in as ERTC that was growth share comprehensive while Excluding X% value second impact that was program, revenue growth a suite

help care as rely reevaluate into needs benefits technology costs and can forcing for health on remains small strategies they to solutions key season. we many succeed. are rising and their market our them selling demand advisory and challenging labor A Paychex HR businesses technology The and to head and the HR healthy,

we where and as middle Our know, in breadth in see solutions growth a this take most PO teams to year. activities have we invested, are pipelines fully our strong, the notably believe we staffed our Where you opportunities sales of markets and sales businesses. HCM critical market these provide attractive service and across us We're advantage. time for and of competitive of with our advantage

drive are to improved of awareness adoption expanded We product our investing in also and offerings. advertising

PO value growth overall retention of business and perform strong worksite levels robust enrollment. evidenced to record employee proposition performance, Our by insurance higher well due continues driven exceptionally solid our by to as sales

business in attachment across in underlying Florida the is our mid-single strong While and and our digits. increased plans country was plan Enrollment flat year-over-year. medical levels our at-risk participation the health

more care factors saw our the earnings light a proposition. pass-through value to also These our employees but our revenue, PO cost plans headwind opting costs. rising or health strength in for We health no of lower had create impact to of

year, last improvements near Our past retaining size since remain revenue remains retention Client all as Client year acquiring outsourcing the and above to losses across our year, record levels segments. improved our with solutions continue the we in over HR clients. has and retention and pre-pandemic disciplined employee levels. are remain high-value retention past down during on improved

pace strength consistent our past levels execution has the over with growth proposition. strong highly our of work to The continued speaks expectations. Our hard value marketplace remained and of overall, teams of and retention job have our in U.S. a the customer the service competitive year, and employment moderated

since intentions in last the November remain a level and and with midsize Small we businesses to highest are generally new year November. optimistic into resilient as head rebounding hiring

solution the Paychex designed in customers to their October, digitally AI-powered solve our product biggest proactively market. a we help CoPilot, investment problems. make In clients our challenging to help to find announced in continue a We labor suite Recruiting

into busiest year are head businesses early, as hiring product it's a we for we seeing of Although of survey, building for time momentum recent [indiscernible]. small NFIB the November, trying the no XX% few still to something According hire in XX% to to applicants that address. acquisitions actively This for and fill. the or trying to reported we're trying or reported they're is qualified

We with recently more our offering to customers and insights. expanded our provide HR analytics deeper meaningful

Premium market of interface. the solution, month, a which have chat all broadly We're Generative the manage we and pleased addition planning of offering we AI recruit, last growth current compensation businesses access of to assistant more strong had to our effectively enable clients benchmarks talent sizes strategies. this develop to them data that With report adoption PEO now announced to for Plus month. are to real our Plus to a early Premium also analytics HR and launch

in AI and Through AI usage data actively launching robust easy-to-use of increased September, X increase platform, months. a seen Over using past to insights seen significantly access and the simple, engagement. in insights, customers we with adopters AI-focused provide product interactions. Since are generative with to we've we've XX% the customer have early our the significant through engaged the meaningful in

private data elements us data giving year set. U.S., in value reminder, AI offers one with a and industry. technology the high-quality in in Gen of pay sets and creation, data XX especially one had many believe for used Paychex the workers Paychex years the AI largest we a captures new sector last a of opportunities XX we large when set As and billion for workforce paired

vast us moat. ability the customers Our to growing actionable our deliver competitive with provides set strengthens insights and to data and

services our Flex Paychex employees is digital access award-winning benefits Perks for Our offers and an employers employees September Perks at clients available providers. launched client is offered no we XXX,XXX can deductions. the third-party product one processed affordable purchased clients effectively. compete product payroll marketplace. and discounted Since from to in automatically that products are to cost at over marketplace leverage and scarce more Perks and the to talent have least payments in now through

our by HR product with executive with experts. excellence resonating new of awarded Paychex also HR recently industry Award proposition Year the Product innovation customers Binan-Hall Perks HR is and of Paychex Flex also named placed in Top by the Technology The received the We and a and was The benefit was future requirements. Hall value the silver and ability Nelson consecutive client also payroll were for evaluated immediate recently in quadrant year. for services client a Leader eighth in deliver award. leader to our meet our

and data large upon helping it based the history up, going insights that support most best-in-class our focused solutions, North and To and is businesses. of By suite long sum actionable businesses simply advisory of offering remain succeed. HCM our Star midsized small helping we on proprietary from our comprehensive

Bob? now will a the on our Bob brief to financial it turn I over to for quarter. us results second give update

increased good Total quarter for Yes. our Thanks, revenue X% is a the $X.X expectation summary financial the to fiscal start morning. of with provide second we headwind approximately shared John, with with for from quarter outlook the our results of XXXX. and and quarter. includes basis last I'll the update billion. points, you on the an This which expiration of consistent ERTC XXX program then

mentioned, partially served suite HR offset product by solutions employees of X% revenues. to $XXX our primarily Management revenue solutions and John lower X% revenue across as growth This headwind, driven grew of clients quarter. this well for million. as penetration HCM by was the increased higher in the as ERTC Excluding total in Solutions number client

of to X% increased due insurance Solutions $XX Insurance worksite X% as investments AI to work revenues and and an Operating average in increase product year-over-year as held driven the higher reminder, approximately XX% by related in XX sell expiration to PEO interest ERTC and $XXX which operating This XX.X% balances. up by employees PEO basis $XXX And to expenses increased PEO Interest was go-to-market increased primarily on income million, to well to rates is higher million, invested million. million our grew higher clients in is our costs funds revenue continued as Total income also PEO the in and to generate due innovation, and primarily growth revenues. operating points. $XXX for average program. of with average a X% initiatives. impacted insurance employees debt margin

expanded Diluted prior to both quarter that share earnings in XXX X% and second quarter. diluted adjusted operating $X.XX basis compared per would increased points period. share to the margins Excluding per the have impact, year earnings in the

Now year. of the processing points as the let of which billion, me revenue quickly Total quarter. first months ERTC X basis touch results in X% as one for having on the first grew fewer $X.X approximately days XXX to the headwinds includes well from

million. Solutions funds Management clients total headwinds, of X% fiscal the and these X% to for PEO billion. $XXX year. million Solutions increased revenue to first and half revenue increased XX% X% $XX to held Excluding on the $X.X in increased Insurance interest grew

first that we a share Diluted had of despite approximately to first And $X.X earnings per the of and X% billion, earnings year. headwind increased $X.XX to basis increased XX to for share. per diluted and $X.XX XX.X%. points growth ERTC margins operating share expense adjusted X% Total months the this was the year in expanded the is to the X X% again, half

quarter cash changes by approximately November Our of as position cash, of million operations capital, year, the was timing end. restricted reflects million half borrowings financial the $XXX the with income $X.X remains total by strong and and XX, influenced working driven $XXX our of Cash of of XXXX. and total net for billion from flow corporate first investments in

X rolling share total cash Through and at the equity we a to the XX%. dividends months and of our our of repurchases, return on $XXX first shareholders, returned robust remains year, through million XX-month

now assumes release, some our you at assume the of in however, of reminder, And guidance the to to MPP revenue due the the the items. it discussed expected changes turn range lower grow now XXX seen includes in color be we for of will, X% I in the are a making X% relates to end to as X.X% the the would that to is expected not to the our we the from of grow most provide current is guidance. approximately Solutions and I'll to PEO of line the as for range of basis still of the Solutions environment. factors Management the growth expect of expiration grow outlook press Total Insurance year. expected fiscal range. of the X% to is on to John earlier in still in RTC. any have X to continuation This guidance of that this state macro and of X% ranges range X%. points Florida, to headwind enrollment I

of be on clients expected to XX% million to $XX the $XX be held of range and Interest million expected income margin is to expected is is Operating range other income million. $XXX range of be funds million XX%. to in net to the for $XXX in in to the income

now However, per to expect earnings to the the effective -- be would we of and diluted adjusted the expected earnings grow rate end X% X%. at be share range. in And our the to of tax in of range higher XX% that to to expected is still is range XX%,

to quarter. growth will of be X.X% approximately expiration range the points X%. third ERTC RTC. revenue would We last the from relates to basis headwinds be total the quarter it as in XXX to of This the the includes Turning anticipate This of of headwind to program.

anniversary-ing We operating So XX%. would and expect to margin to very our to XX% forward of the that I'm looking between QX. get as end be much we also

we you QX fact our website I the know, Relations our quarter subject on again all on margin this you think and assumptions, our form to will which I'd update operating investor course, we'll And for -- with that is to call we refer our call. have also largest back the that, to to third benefit That's from John. more filings. annual as I current turn in of the of information quarter. based our is Investor of when due over that's you are change slides. And most

Bob. Thank you,

call We will open now the questions. to

take we'll And Marcon question first Baird. Instructions] our with [Operator from Mark

up jump I'm of in regards be did helpful. what terms business there the field NFIB translating post materially. change index wondering the just pipeline sort to of seeing would any events election. in of to Wondering with We really fairly confidence sentiment actually see if in build. Any that's terms the And really you're commentary

say, businesses moderate Yes, is signs would year that's of continue downward the Listen, of kind escaped that recession really. story you we small really I we continue where I that the The year index, recession. happened. the pressure businesses wages in see and in of don't -- see John. a to at Mark, never look see we on small any think our to growth this

there out, improve. positive we've us. seemed time, this behind to would the optimism at I point momentum. seen not turn a think the of that's I you was that that say election degree uncertainty indexes with Certainly, into

tell However, seen job what you I results. you what increase. in is, certainly, is But would would I tell we've openings

We particularly of in to some we've add, desire qualified the our the we've challenging clients to problems, had. is still the market, doing find know very employees biggest people, that still that which That's one been to strong. of the solutions want is why of small

So would now, I a at through translate moderate but year. seeing seen right we've optimism, say, into been in growth any point, this more that change this that significant not we've the

of what data the you're to? question business. the field It are some what relates you're the actually to new follow-up are My it you faster the you are that relative offering needs that business What all of And what I'm we helping? actually the PEO like growing are that PEO to addressing out public there. side To competitors that's like some the looks some of doing on attributing solutions looks the that degree that is, wondering really than you AI insurance outlined? see,

say a in quarter. new you double would up share. I adds year -- in we'd in retention I mean that our Mark, That's get we digits. that I PEO it. double got I the that mean digits. the contracted tell question in up were There's group. we about record PEO was no revenue won't demand second is high contracted -- high the contracted row revenue Client the Yes, the you see gaining our mean, that

proposals up doubles. high Our were

So there's the PEO of market. a in lot activity

think an health I it's inflation issue. say fair to that is

and that's going And shop event. that's causing a I an lot and of be think annual out to people go to

looking I getting think the people going best to are option. always at be

why broad services. I raised I think a think are we set ourselves? do products good of question a differentiating we have and you

prospect us, So I think that they have knows come paychecks the read things of they one the with or don't if client change. to a need they

a And can build so they solid reputation.

solid with a very As great have we ASO you business. know, business HCM

of So lot there's a there. optionality

leverage also PEO. the in our We interagency embedded

perspective. really both price So need from a give the a flexibility us clients' meet it maximum to would

options Our but health every PEO we provide plans, of not a it's lot option.

You options only and manage can so so risk. manage much many

the plans or it really doesn't perspective. the without have, matter on problem. great is market The the our then looking they're whether we or not you're and a and PO during than you're client a plan the that. employee little one the on if can So go you're for master that into open and our do high perspective enrollment deductible move can have any going the That's aspects billing, the we enrollment, from experience, we of PO, client period agency within to of open both all same

business can change as So their and a of needs I can with their do to think a change, lifetime it have know and offerings, the home come us for of we them. that They that evolve client we differentiates fact paycheck. can call do suite the broad that

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

management I start on here. wanted solutions to growth

you like range. feel know range? you maybe and we in and will ranges, guess, favorably the appreciate total Do on an Just where the the you most within the all I offset in Management have curious total, Management color that in you So the help the maintained I Solutions business comfortable offset land that Solutions PEO. growth

the mean Yes. Solutions change I to Management you guide. the Bryan, guide. we gave No

there. been well. MS, we're the always yes, with strong strong, as think I PEO is And comfortable range but

employee digits. we both So when is at of growth businesses grow those I bookings, both single businesses able for we've those upper of been worksite to look new think

that businesses. investor flagged we in the both presentation, is think strong retention I in

we see So trade-off. really don't a

growth. the maybe in quarter. that businesses penetration. that strong a Management and seen see And ASO We We've trade-off past, to strong we then again, both Solutions, between PEO. continue product within this not see did had

Solutions, in quarter. our We the have double digits grew that several businesses Retirement Solutions business. Funding category in

feel updated we businesses, those and the that good of then businesses. we guidance the both both performance quarter for the ranges of provided. So with about

you ERT. there likely? seems not, the Is that are reserving forward? you here? know release on clear. revenue less going how some legislation. about retroactive thinking that on legislation reserve this were for year quarter And in I if given the Was proposed That's any then proposed Okay. just And RTC

Yes.

and to that at program what sold it think in retro came referencing, January. we I we're when was legislation risk -- to that ERTC the you're because So Brian, put we proposed out was that the reserve going is to end that the in last did, it February QX going of end believe of be of of I for the amount year month

conservative. for big So that. that plan reserved have dollar for amount. it our and were release have We year the a and really of it. We we that carried reserve, not longer quarters, guide the assumed It couple the was for guide to did a but in we QX was year. in this We no that

holding justify there. So been no There's anymore. we it couldn't movement

reserve And the it dollar was so amount of grand scheme longer a books. the immaterial no small is But things. in that on

We'll El-Assal take question our next from Barclays. with Ramsey

I cuts something you points contemplating guidance. XXX worth were of like Fed last think into basis quarter,

you despite solid about think I'm Fed the about that we range being given perhaps? You announced a little this curious how conservative, what maintain beat see of sort should more this just yesterday, quarter. do range that the

and but then didn't of current already well cuts the points I to in then -- as XXX Yes. based XX November happened, get a and the forecast basis year, news, update yesterday's forecast this we have our prior the forecast obviously chance mean as September [indiscernible] yesterday's the Ramsey. on cut. contemplated forecast

the or this not yesterday was more we back happen. the cut that provided half may have update year that one on of in based So may

but be of there, a not the going a little given not it's could timing material upside it bit there happens or the impact, whether of to year. have just So

is on. what of that's So kind the based forecast

Got it.

you product Can growth out management contribute solutions, penetration which algorithm? sort us core kind of totality Just How How higher is an obviously on the the my over the an to of changed have drivers in that put growth time? give then And versus called does business? your of trying of way you finger over that your core trend. Okay. ongoing products and on HCM HCM update key of evolved pulse has time? much the

Yes. it terms talk total in of of the least significantly. to changed half to larger it our hasn't honest, But out business. and I And get historically That's monetizing lot driven penetration, probably driven at our base. our existing increased of wallet we growth of about mean, ability be we've a client of growth. share

we in step take they're within the still back those of when of about think and we existing key particularly look kind talk some low around the rates and base, penetration range being it we PEO. the typically relatively X% to penetration a at I rates client solutions, our X% in

So [ product growth growth and our see as that we forward. our drive to to we through lots ability relates move penetration formal as still -- of it room ]

clients' this paychecks. able the business. HR ourselves, product up I monetize the technology seeing for has lot think the become we've thing RTC our which the is products and opened payroll of that really story. of really be very we're XX% under technology pleased than to a a technology that basically plant. as continued customer the is trend a that perks driving that decade. Paychex product that rewiring and attachment money quarter We get has excited It's And Pure for really that what we're position our you with kind Flex to a been about when an this story a in our investing it, employees of nearly employees really of of the less before. It's through into to do we've clients' our new the market continues

do you that launch, of launch built first marketplace. since a think small starting about Now September, the we and initial trial. We we when can this wave And in launch did that.

now And Flex has broader platform I it a small base to but XXX,XXX lot a it potential think that's started period client employees. our a weeks X to the have to of legs. XXX,XXX short we to double opened on and we think of pretty something amount, it we impressive open customers. is start about time, up up It's relatively

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

from HR about or single-digit to to wanted I existing outsourced how an worksite any clients of Is for employees. the way relationship payroll Paychex are upper that entirely? think us much uptell to with new comes clients that in growth versus there ask about outsourcing from

proposition Yes. of quarter, in to that of AI across look our insurance base AI. analytics made with have play sales I'll value and really at target to to agency and both we lot on in a what we have we're PEO the add at insurance, actually to Mark time that say, when they're point able client client. inside certainly AI relative maybe do a and for the and we're the paying the our using the good then second had use hey, And renewals, about It this so we how health and base a may others increase

it flows. think ebbs I So and

target look the book as would that the or will I to last would more base the say, all PEO, that the base. of rebalance of upsell. able best inside year. we the business enrollment was we not them. get would inside capability base the We our is half inside the well inside tilted say, base. as period ASO AI be bit a base out the in to But second proposition and figure whether out client good and what's imagine PEO I up through it's I outside have the balance specifically. offer solid But very Almost really in quarter. the as performance, across had of models itself during value and outside the our to in the go little again, Again, a that a we base,

bit just obviously, Florida. the what's at follow-up, exposure an get in this kind refresh a to quite for of the point? of the us insight have bit you much in little on terms my understanding Could business also then way if more But a driving you And decade enrollment over there's And any if that? speak sense. just any ago dynamic Florida, Makes Oasis to a PEO came to of how that of represents now. on trying from that businesses of

viewed Yes. frankly, start say including I'll [indiscernible] is at-risk you revenue driving this on earnings I and think that quite frankly. want. Florida, PEO all, say growth the I positive the flat us. for clients, I insurance investors doesn't it I And I results, would look should all. at pass-through be as impact a insurance we off -- our MPP actually think would And revenue think, you business, first add and mean, of expanded performance when if for I What's this at way. PEO The in the really penetration. quite

attached bought attached. employees the of PEO the that we in percentage clients of number and in expanded We expanded insurance have has the it less did but within it insurance ways. risky our that We pack, insurance

the more in of health that some conservatively some of made cost given So underwrite cost. seeing we're the to volatility we increases and decision the

than the NPV Florida. So plan just we have in more options

We agency. have the

in And It the a mid-single was actual our up look PEO program insurance flat and was that some so overall, when of one digits. you conscious was decision. this inside

have leveraging and we options So we're one our model those. great of the about is things

then specific risk And a give MPP, with. aggressive on a don't We're a we to that's going that feel the we XX them have we'll the the prospect more at than looking looking for that plan have in that client we may we put agency. business. be So something we're is not pricing if doing comfortable competitor find or a on

I going real be is risk, health So the to manage growers in of have of particularly if disciplined business. We're to that inflation you're well. think we PEO at business,

-- very fact, a matter of management I team. the with so And I'm think I'm pleased very pleased

both. and I risk, we in of right think with they balancing made got call growth terms the

good and got increased got risk think we I I and think base. managed across they we've growth, insurance better the penetration actually

winners that So out the to -- for the all I'll accounting are how recognize And to leave to the have work why Bob that you and because you these economics [indiscernible] explain way revenue, me.

mean we have a just that have insurance I and of the add, scale I in a we mean, a made bit scale I'd I others. mean, model is little we unique Florida. compared Well, to game, decision

decision be So made at a only on ago at state would our years strategically number medical That's Florida. we where of a we we're that risk in the plans risk.

mix have an So you of if inside issues, Florida could impact revenue. that -- you if of going you're outside the versus Florida, on get get

was relative I think very the mentioned growth overall, marked someone it feel earlier PEO strong. think strong. mean is the to the we strong. the pleased I employee I with of competition. was Retention Sales business. Worksite continued our to strength relative -- performance in quarter was

at that that we was bad decisions revenue we decisions an just for clients have make company. net point, take not into to impact. making the would if making Florida, But just spaced look revenue agency John's you earnings those it the right up for again, medical this going or to was single we it look the upper to digits. to we're We're was John's to are enrollment plans to never when standpoint in do a chase not year the that going the a And in be where illustrate our MPP on at point PEO back, thought when the Florida. It's are coming that were thing the from business. really standpoint, not And because a that's service step

at strength of our the PEO good with where So continued about we business. feel we're pretty

Yes.

saw double downgrades in we single-digit to the double I we're business is high time, single plan. because in as selecting Most change saw to a think that choices, on across the PEO, plan. the digits well see a plans. also the want would on Typically, plan. they given percentage. the the downgrade the their just downgrading some digit. insurance It year, each in of add an employee that's that you'll don't stay other when employees the saw thing they to people is I really to We across the board. this the They once We And plan, mid- their not as but with issue. get

think it number. back I MPP want say this again, I And get to a I -- [indiscernible] story. on revenue again just real the So on the just to is inflation

we're I number We -- it. maybe for mean hit have only then lot before. have for it that. that's can for quarter out that and to we to quarters hit and number you're that what can play. maybe not hit and probably risk But disciplined. I to And game be said, going X or movie you that that seen we in hit of that a problem do can quarter the We're play a like the you control a that number do over we've industry want a and number going you you and

options. have going avail revenue the We We to we're [indiscernible] of business. options, disciplined and of ourselves growers in

Michael Morgan We'll question take our Infante with Stanley. next from

a how the their partnership alongside SMB BXB wanted think If partnership payments your you. of to payroll that's embed of to incremental partnership competitors of some not and some channel their an I about for channel of more or I on whether one broadly. I'm just just start curious capabilities you about think the investment capabilities. striking of source

Yes. partners. Look, of a we lot have

some the lot payment a probably you're partners, of referring to. space, long-standing have including those We which of in

call say partner call many with what it, certainly, a, that. white type you And say, growing. the it with have to has others. area, I And our to a as partner wholesale or micro business. well within we we're been in and and them, we certainly would healthy a I we And would So of capability CPA partner business that's embedded, label way in I open

that come to broader terms more partnerships. we how in on So of approach

what continue tried which are ways partnerships to they we expand think to can can I look at to forward. we've continue for I to expand to and And something ways going the partner, bring and to said, something bring in like our we that us. look

revenue a that historical basis? obviously Is you're to helpful. the compare Maybe X logo the how on of historical of you on to and front, would retention those That's levels? buckets fact tracking above just sort sort relative spoke you And ranges. that both

of Revenue Listen, a demonstrating the I proposition. but of and team, think improved value client last year. there also the the alternatives near retention lot levels, out solid, continuing losses retention over are was There's work record solid. proposition, was hard the value really

a logo improvement year-over-year. even So on basis, we saw

of So the we is the have across of Typically, one where kind this of segments the well well where seen doing pretty really [indiscernible] as of all positive. kind the first one which in segment that half also we've one is is business others, improvements. as or a years of one those quarters not and as consistent

So hats to off the there. team

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

kind growth of signs the starts? business see that any for you'll Any business new development or yet pickup of of or starts new

their general people own business odd year-over-year. Bryan, going to Again, I off call tell where the They moderate That's still down continue What Yes, sense again, gone kind had really up degree the a But on seeing continued doing COVID not this other still during year. above a of starts I'm I moderate. kind to of still there's I economy. We and of you, this that of direction. pre-pandemic entrepreneurship not anomaly in higher -- lot they're we're that's what would that. levels. spiked they above.

back that just balance. about I'm trying starts if the And is to to cyclically improve? might that think that comes economy on when timing something

assessment and in And see I I to is large optimism point, I grow can capital to cost moderate business. is money look our solid would wanting another other to clients afford shape. I the location, the be growth. can going small I'm to in Well, find the at or then another really if is the economy the if to restaurant business. shape. Again, not We I'm face think of open think that the And We their index, up the mean we you one in going and continue is there. if challenges underlying business today. is capital, premise access up market they find our the open the think of it's small this of even your great question I shape good

X what are those needs get people I done qualified work And building are that that to the chips day. that fill I do X to my We Can doing things think We do deal things right with with satisfy now Street Main people like don't hair that's cutting every we customers. and to Wall see and with deal the I on and are Street, bitcoins. that that.

economy. And those right your X on constraints so real are think I the now

mid-market product you be Is seem dynamic? kind as out a causing particular resonating is better? of new HCM activity. strong Or And it. Anything that that? the that a just to business that sales competitive Got a in called follow-up,

Well, I combination a of it's things. think

which manage more in we engagement invest and product, with AI-based certainly, allows product, tool mid-market. big that both businesses in is been the an winner rewards Paychex a their employees to effectively. new think I performance engagement compensation the and continue Flex Engage the that and That's to

par, technology our been So I always think has on par. on

I in to think marketplace. continue a resonating do in the value the have We HR proposition strong capability outsourcing very mid-market. the technology is that

be our that needs think come can your stay value as your can one you I to to proposition and change, paychecks to able you place. changing business in say,

You to don't move. have

back You forth. go and can

that's And disruption. some been think there's resonating. I think I

has provided I think quite to the some position us an opportunity frankly. table, builder disruption mid-market in at been there's that the ourselves for

again, And think, market that has changed little so bit. a I

about growth, for there's actually talking profitability rationality. think I talking we've as a time. been bit that as about little They're and more some well

paycheck. I So to think there's and that in I more are customers coming rationality think around market,

it. it. Got Got

on the results. Congrats Okay.

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

Great.

of PEO, kind that you capturing from? to start mentioned, share had Where some I there do I an thought see. news that I is interesting a think data which in think, good point. because were wanted that's You was coming to you

introducing PEO-to-PEO Yes, tend that to we're do. Kevin, quite what not a would head-to-head concept. movement, people tell I you We of do lot what to still predominantly I PEO frankly. That's call the we

a that PEOs that from Now risk issues would There's business want particular taking I away PEO going lot when deciding select lot a but in client to of I of not a am in thinking there involved that's There's is other that. motion. -- to the about, sales we they is marketplace head-to-head stay go not say, we our that. generally from, that we're you're a if

the general those plays towards the value PEO proposition. are it's the PEO proposition are we Our head-to-head to HCM clients In are with cases, interviewing market in It's sales going or our our proposition. the for that it's advisory moving value And of our going value the head strength the I technologies, head our capability. of again, the strength think strength other PEOs marketplace. in of to clients

think really which capabilities. Our HRGs, business I have And are terms of the of what PEO. provide the of fact data it's is the driving advice our and I these clients use the the I we best think we're which of then in in it's that AI broad in said a set analytics, they earlier,

if notes, lot and true, So I've think, you're with PEO. outsourcing vendors. I read a would I we a -- not non-PEO HR change, if say have HCM totally don't have clients but for with something And going if know to some start I that things we of again, a -- wanting else do deal us change, you got to And customers to as see I option only. and I

the do I the Yes. suite. this of in competitors of think par consolidation and getting get terms of each of so even kind And you as HCM vendors capabilities across

to to there That year. and to say, my makes every I can switching managing I long-term partner, build relationship. time look, than a to trying going be go if more reliable. be think can sense predictable, They're a and stay I clients they're can and going vendors multiple spend

sense. That makes out, apologize. a been And just of -- I've then and lot I in

remind the pace and to what the a does guidance as commentary trying back kind is And of well. as gave year. to you it the in more from some that range take us understand that high QX what end to then QX the of opposed on low to I just think just in of get the I revenue. perspective, kind Can the end, half the guess, of revenue help you

Yes.

of QX, I the X.X% was between about XXX that and we and headwind would basis ERTC. gave on X%, we points from think that Kevin, color that's still includes beat

So this is ERTC. last quarter the of

on the that's due the Obviously, ERTC away, the to guide in growth we headline the half quarter. revenue acceleration the year to in going So the you're of going that. see We the color an provided with PEO. that for back numbers headwind mentioned

the going bit talked the of in enrollment by and in be the front of impact at-risk on Florida. half I to we the a in say the revenue the driven than that So pass-through is we would probably in PEO earnings. lighter half back that the really revenues no that's year about saw year, Again,

when see And So and what of at take similar growth saw of of half when the the rates back half, half in than growth ERTC half ERTC a see versus front kind to the started the that's organic of think up again, mentioned step we year. the pickup look business. last of back half second the you front I for year you'll [indiscernible] last fairly we back in a think -- the year, going to in we X%. I [ back year, were And the ] turned quarter we that the corner

X% corner, the X% the call we And turn it, front the at when of think is grew strong row seen in quarter that ERTC. half -- digit, fourth last I a we we've drove growth ERTC. year, upper then this single

to rates the helped interest has in XX%. headwind the expect be the ERTC half, of in front continued the the year, in the would helped certainly back of will Now half. to in all and back back half turn all, there, business performance That up to help last But as this half the year. forward into rates, the similar year, interest of we half move of we first a in

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

talked on Does of guys demand specifically. the inform in dig the -- risk general, comments just that's thinking get I'm there. which health thinking Florida given that that your there? data safe always and planned employee educational, that you to on does wanted about more you assuming and quickly downgrading only, SMB, in at really just more I about comment, that

insurance. in control cost employees and managing as and we increases I of attaching that saw mechanism, at all. percentage personal a this RPO view employee in percentage both in the costs. employers at more clients lines their Again, don't of the their increases I managing view people the Tien-Tsin,

more offering agree insurance. of didn't we that So them actually are

old to Now when year plan year, downgrading what offered I [indiscernible] plan. and myself for bought to buy, did a order to you don't I [indiscernible], offer get are under terms what the right, or a I I people -- that I really use people last did want I guess, now last and Catavact And [indiscernible].

the a our is to who's the decade a is market the what beating an from at over I going to I single-digit been et to really inflation want nice food people for about to and being they we're manage health see this looking perspective. clients be was last the health again, that ways at closed increases last paying what our increase plan. they those going have talk over with in program, for And cetera, and they year, make managing to is they're year." you money and But think a saying, us, try medical looking decade already manage that's trim I cetera, you back looking last less And can I this pump market that's high call et really and the fair, other for ways would you inflation. the clients and we our could predictable more mid- somebody to I gas they're opportunities plan commitment but at at X% than to inflation that inflation like have it for so "Look, that's we've it see cost. can -- issue. what And on is going successfully

deductibles they're of we're just different what it and not making They're do. in terms people seeing dropping plans. choices That's

they be the impact plans, the value to out we Yes. end higher to may line. that would add the of them drives revenue that difference there's choice. But in is only if health from those want stickiness bit in I plant and And to would that top somewhat be pick to model, get found the it when retention, the we to lifetime impact because our of an that the we really standpoint. obviously, I at great what attach indifferent there bottom a thing day, in little mean, is attachment line, the no a we're

choice that that we for plan their find because and us. help them needs, want them in retention to that a give value drives plan really provide them And so meets but lifetime

good. it's it. Got No,

inflation the trying sounds like attach and being it's selection just It great, around is I'm and Now strong to learn care mostly planned health attacking there? the SMBs that.

broader and this new specific discounting be for you about seeing thinking So to you're to related, a PEO new any pricing question, discounting considerations as pursue not and is growth. question not in and that intended just trying HCM and maybe pricing thinking just you're or there? health terms or but So of what retain around but broader

of business It's all Yes. and No, across I segments the ordinary. competitive of across all market. We've the not market segments. a seen of the would out anything say

people when drive We continue again, little value value get as price -- a a options premium I cost out there's there, the it. recognize market and think in they see but to

little price we've And anything a but seeing that, we're on out group. the ordinary. radical competitiveness. So any more seen had of anything not planned seeing not We across of the

whether that's risk, think to understand. going across I that's after client, Again, will the this, going to disciplined. just we're be going not to growers. to that And revenue. going disciplined to I We're say we're important insurance get be continue do it to comes a When health

client we look what Google value is the somebody to You be going got get double how Google else If lifetime seen I let I'll that somebody. clients, of that pay by increasing freight. to to pay at is much pay

and going appreciate as we're over that position so the believe continue We're to jeopardize to our consistent not are we to that's anything going crazy disciplined. clients time. that's long do what be to predictable that long-standing to And going being going and

get balance that's your business. got a you're At And absorb you taking to day, on to the money risk a if client are good as not than business. can you've of more more end spending the make sheet, then

our and -- sense this that into rational seeing little call, pricing. down continue So be where But to called to there's as people not think my more mid-market thing no the going that rationality I said drive on beginning I our realize we're markets profitability, in will both coming to we're -- was said, disciplined. last bit a I market

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

trending health how given could per order this to was reference cost. to a that's increase the there employee then forward, plan you on changes basis a And in going worksite as inflation? was PEO to I the comment manage think are just just an we insurance in if There wondering any care insurance about costs. direct on

costs mentioned in workers' are of up, me, mean the don't and going by They're I numbers growth not largely just worksite single be Yes. help. those direct had just our was front also in driven it's to aren't -- I Ashish. upper have but I certainly comp employees, costs which digits.

So no standpoint. significant a changes design planned from plan

well, Again, just and I X business going both think not we're then the the our really growth across well. and attachment. as and from a worksite comp, how things, board but across of medical both doing standpoint employee books that's in from are workers medical be to with comp factor workers' performing a

Yes.

well. as this about talked we've think I

it's think system not -- And we're we'll set to and the I during continue that health to the meet of inflation effects so of still broadest for think COVID the health look and constantly COVID the can that ways. we a the offer. real health public again, issue. is occurred seeing we policy We But at a pricing now. mix I inflation after -- We're We're continue and innovative still looking we've that. health customer through evaluating the needs plans constantly seeing we're products issue, board of the right do across the working

very for follow-up, quick a helpful color. my Very, clarification. And just

year? was wondering year I any So XQ seasonal the of this in if seasonal have trend last on seen trends hiring, slower you that impacted by was hiring

a our hiring hiring, lot assumed think was the has pretty what played of been much the been this expectations. That's year not No. And out. line the has was base. in assumed how client about much I year, I in talked pretty mean in in which our with guide, we've earlier

with and So lined within I up say, both expectations QX pretty much employment our would existing client were. QX, is levels it our what base

We'll take Kartik from our Research. Mehta question Northcoast next with

little inflation commentary. And on bit higher got better pricing just you've I I'm before, past. maybe wondering how than some expected. -- that's pricing year. on maybe in probably the year, Just the the last Obviously, this than a know everybody out playing year

was the ancillary you products that opportunity lower the have get maybe of pricing some Or and stuff, couple You to than end pricing some of it back? years anticipate will ago? on do be

Kartik, think I remains doing. client proposition the with this. area. has our say formula I once value think Paychex, continued historical And of that what board strong that in what with see on the that our been gets I I say value price would clients. existing we're maintain would growth And we've to they that our

our our product then penetration and clients. as as new to both add well to to price those more of ability terms in our think part of I growth add products services more which adds that formula value, and

I think sound. very those things have been

that than think they I prospects pre-COVID. are price clients sensitive more and were

certainly able a digital were people think I true. to compliance that's they don't trying were HR that and that's needing manage so I be of battle during There surprising to distressed to running, to systems think COVID, issues was get workforces. lot

to of when getting what lot our there to trying see, check back but deal. a a look to think marketplace they're I there that market in our at there's they're their to shoppers, is volumes, sure price, and where market that the a call are percentage proposal they're activity they're look of I trying the volumes, the we're at they're indicates to I make mean, right trying out I today, I call me

again, to years has XX-some but see don't my -- And I what I history saw what prior the industry. COVID that different in than and any been

point would we my be still So provider. a are value is

as our marketplace the you I continued are both see the think in the growth I our of and think And our value client premium retention, segments. still revenue in a to segments. price that clients retention in continuing we're each appreciate across provider

just, float this manage wondering, the the in Bob, maybe beginning flow know about float, any of the I'm how the the cuts or how environment? you managing are then of that on anticipated to changing And going you're at happen. you maybe I But because year, you'll talked change more

while mean, rates to we Not a specific, Kartik. down. come did some anticipation ago in anything I that repositioning going were

there's us for think there. whole don't I So a lot do to

reinvesting more just I over at at on to we'll of our most you rate you because probably But And risk. we'll to off, shape curve shape portfolio, past, when think given investments the shorter so out, you the bit too one the kind the don't the got to then of any it was a much and look have the of in it's portfolio. curve, optimize right been reinvestment spread curve probably the year to look want to get recent as where things been continue roll in little of now, we've long the end inverted the look there. the place curve.

optimize at say to time. just in that's based point on significant But treasury We where the would curve department have changes our at every looking a in strong team our looking to approach day. given is no philosophy, this I any

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

the last for this some there's year. the higher And been I our Just on in investments I the outperformance of view know front. pretty also mean, the been around sort towards end pointing guide of advertising side. the constructive margin has

seen. just drive the if performance we've some you're us where those wondering kind better finding you margin of some of of that I'm can efficiencies So of remind to

it's into doing the company it I talk about, Scott. DNA than we're how this we we always with start just as to to Yes, ourselves, is would yesterday. built better could off the continue ask basic number do of one,

And we're the business, that. so company, aspects of every board, think of constantly the the doing across part I all

adoption to able think the we're and we the is effectively more drive way the that tailwinds leveraging all have have now areas the sets across we right in be that real to data far I AI digital productivity.

And that's boost been a big so I to us. think

continue clients. to see We our

their work get And We that experiences. continue employees to better -- customer us digital to done. see our employee provide helps means adopt

leverage and offer. And a I a I or whether won't increasing we with work digitize before that's that detail reasons, right? the data continue cost the call employees decisions and see better have they're to to up save about say, to that for ready make creative come that." to getting I anticompetitive close front and "Hey, got ways front very and more rates, go of that's us to our make effective, into reengineer And client reduces client saving a in better but it to insights to client we're in the of a us getting that whether

to have the for pay tune don't same a commission to them desk, I and don't client. the We have to safe

of of I fact is the that, the getting the to matter the front board add think, the So fact across continues markets. we're in to

on maybe sort clients with your side. of in then clients, more wondering of That's your product are sale in the dynamic. for if sort of I'm go-to-market adopt of then it. Got the the more and environment seeing maybe kind sort And cross-sell just helpful. upsell you just as seeing instead the initial you're a follow-up, selling of on going initial

them Paychex become payroll a to to in call XX we the would offering that. I a versus seeing later, then would for ASO PEO. making waiting them or execution we're difference proposition the from them major of say we've say upgrading a that integrated selling sales of client and I'm a I in not that job what upgrading full days upfront dialogue done better kind initial value a and sure

we say on would look a more that I operate. So back old our that model, little would you if how was

is if upsell in. more lot them a saw you so And get

And what think area, still majority do the we and of wanting therefore, I I in. solutions, we It's would doing for the clients that using would They of have they really HCM a cobbled see upfront happens. together they're ancillary management. probably we that in better point suite. account a a of and job say looking full their of suite what [indiscernible] talent more dropping they're kind times, that lot that's I with product say point that where can that's we're today, if have the was area that add an package. I market integrated higher-value still the that do. do a think then other management solutions

seeing in, over a So and end say, little mid-market the more that I'm bit upper I'd more of the in enterprise.

We'll take Jason with Kupferberg from question our Bank of next America.

in versus other that's as competitive entered I preparing a anything year's selling season, whether you're environment season, selling is was just different the backdrop for there you or the for environment regulatory factors? wondering key last

I for anything would from preparing a say perspective. that we're competitive not different

we'll is the see think I leaning product I off into be and think some kicking you're introduced year. see you'll we've going advertising, that this what award-winning suite us to really

we've analytics you I enhancing should done from advanced compensation is XX paying to our think you figure employee Gen be you going in be HR Premium allow going what to now is which analytics. Plus records when AI benchmarking million provide to perspective have insights. now what look a able in out product, our with to workforce We at that it's

you can actually and the against simple a bring it'll report you you benchmarks. back fact The and that analytical these an compare chatbot question, come ask and

only a stand-alone to client a continue Paychex buy What's that can another that is What or our that to copilot, that. which you with Paychex talent Flex AI-assisted recruiting acquisition Paychex you going is we're into great be we're product. a solution. have to doing read think I about as

think more small can't then to benefits hear talk that of you'll I of about, any their and lot talked offer I us they product about perks businesses, that we employees. for think the a

at I've because they're choice. got so disadvantage have a significant a they benefits. don't And And competitive

their company allows have their a company or that this doesn't. go the been and over that And value can to a really that to open midsized you see the see port. go to. to to And And cost on can get board, their on to you come that. a the said, can set has no employees do rates employees see I the that employer proposition as that at benefits really to the I enrollment interesting small something access through adoptions has to you offer here sell a excited is process. what of benefits if then employees It's go to to client been attach they that of

not us So And do. we going to else market I'm I lean expecting across segments. I'm -- you're no what more be the see our proposition, value can do that various to into expecting rational the one think again, can

if growers. not We're what is will going you disciplined market be continue rational, I the And can to be. assure is we to

Understood. just the us there? just can any whether contribution an is fiscal out not there update what give remind follow-up, M&A seeing guidance? your you Understood. you're on 'XX or us And in And pipeline, as inorganic a

there No, then smart. because on you know does, is We stuff that's plan M&A. to causes what do no that not M&A that don't you

probably that's are across It got seems more value. do been in transact people I've Paychex pipeline across be the to the the good various strong. that Probably largest like want deals seems various about and can't business the I've people deals for cake. and to rational sure. areas. me, Look, I realizations back to seen to icing It So areas the in a is be cake pipeline bit to of the would coming try like more this, you on tell the since the

focused to can So breadth advisory and drive drive in our going in. to or on of new solutions scale going opportunities our we're opportunity again, leverage really we go at where suite. from operators currently those our be markets we and to that's We're full look to outsourcing continue that to either targets. Areas and best existing our drive add and capabilities product to synergies continue expand

at. there analytics. opportunities building data on in good of working lot our looking a and We're HR there's and capabilities completing digital that we're think I really

focus continue there. for we'll that new to it. continuing adjacent a we're pipeline looking So are so talk and to on. We platforms good growth then got And

synergies and see growth as individuals, I said, so And well. been us with be pleased I would and in in targets how inorganic our like to to interesting but to come growth But we're organic how going not have only joining growth what and back said, around that. I many go ecosystem it's pretty the disciplined I many say

we're value to can our targets fair where a a So sure where think we make we're multiplier. finding have drive we're getting we and for going synergies shareholders to that

to do. and got be X, to equals So it's going one plus one continue that's what we're to

no that further at it time. And appears questions this have we

it the here. must Well, short be holiday, questions on Okay.

going Look, the close great. point, this at So call. to we're

interested and you're a safe one to a in for all families replay, your to every of as of XX approximately conference season. of Year you New talking be and wish the in you I webcast happy holiday archived well. will We a so wish and happy look the each like Look, would If forward to days. the call I year, you new and

So interest Paychex, day. and in great for thank have your a you

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

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