PAYX - Earnings call transcript Q2 2022

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Operator

Good day everyone, and welcome to Paychex’s Q2 FY'22 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session. [Operator Instructions]. Please note, this call may be recorded. pleasure and today's Paychex. Chief my Martin over now Chairman Mucci, Executive is to program turn to It Officer of

Martin Mucci

you, Paychex’s, thank our and XXXX Emil joining Thank for us Earnings you Release. discussion Quarter Second for the Fiscal Year of [ph],

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

and will for website, access filed the 'XX. with our on and the XX over earnings SEC the be our for the an with be on and Relations Efrain our and I will archived will the quarter, provide within teleconference fiscal XX-Q highlights approximately financial results can will the You is an This our website quarter Form update review for Internet. release day. It available Investor update broadcast next start today on business on first days. the being

open PEO your quarter of up then double per second as Management both share diluted We for XXXX, adjusted Insurance the increase we and Revenues and Solutions questions. reported financial digits increased for fiscal will earnings it and strong results year-over-year XX%. Today

highest first to digital was environment. strong the made for year. have a across and with have we've continued all growth well for in second success quarter first from revenue continued new for quarter performance year-over-year sold the in our investments the over the in sales technology, us in in product, positioned strong business. annualized to five the of momentum the the and trends record have today's We resulting and across our high Client solutions of fact positive quarter marketing annualized level entire years, half major across bases second The grow. revenue in Sales board,

by return This the near in of our record and in the client remains both expertise. and provided strong in HR tailwinds businesses outsourcing levels. labor per very and resulting Paychex’s value such has Credit in or and introduce To that all U.S. mark. resilience testing in up-to-date states. software federal Most employees through made series a incentives capture confidentially new growth and Macroeconomic state season. businesses them of to Tax of a specific The and enhance we and Retention informed we of management's, webinars, tight proactive talent topics war solutions implementing methods our XX impact in robust our set the and changes, stay our mandates request solution been have is we've Employee closely as on the selling of small to all steps, communication of and may significant our on for for and ourselves testing, Our on monitor keep regulatory unvaccinated. mask guidance over have unique on worksite significant continue vaccination podcast papers, results response, and videos In and updated proactively of to help taken HR of reflective clients, EITC white We clients recently educated solutions retention vaccination the businesses. seen businesses maximize year sizes technology digital tools and available Solutions. persisted need constantly payroll and benefits the and market the these employee benefits businesses workforce, small businesses. need blend of pressure increases support and HR challenging support for progress calendar checks in to strong our to we and for and employee government. we’re help store to to and related digital to all days we HR retain accelerate We've hiring the and COVID-XX attract status the resource demand can leverage mid-size past distributed prepared programs quarter trusted the for The of our talent a during heading a COVID retirement into its trends that for introduced and continue compete in trends well surrounding and solutions. within saw the the and end legislation the solutions pandemic variance to the acceleration XX COVID-XX to clients. stimulus continue, remain the We including advice; from talent upgrade vaccine

business, strong we from reached retirement have business client demand is Another that milestone. XXX,XXX where benefiting is our

leader critical plans are space, retirement of positioned we offering a state provide the meet drive this retention number and mandates in to As satisfaction. a benefit and businesses for growing uniquely to employee help

amount to effectively loan or fact, award or grant. later, Paychex We’ve stimulus a Returns over into were focus of release been months the significant leveraging forgiveness technology We're forgiveness obtain represent our of The to to all Pooled later $X January, helped our Employer service for Protection any also in transitioning level even XX,XXX XX% gain XX clients. we employee and to of and have gain a for Paychex. have a innovations of Two leave we loans in billion for retention. plan we've PPP tool proud PEP our and Plan retention not tool first clients employee able now a access one In powerful our year paid for retention the clients to business. PPP recent leveraged over credits. on in help clients funding businesses has winning some access those most loans, tax Program a ERTC been approximately billions that PEP

use Our and time elements – leaving who today's could likely consider data competitive employers facing help retention may better labor be more based This unique organization. predictive client Paychex’s offering at to to dozen analytics is few identify not analytic our on predictive a given employees uses a their market. first offering retention come insights insights

These and examples of communicate to their impact providing are used compete employers pay employers a We completely technology by and of employees. summary two talent. compensation powerful can we're information the also total that introduced just and for the help use retain of packages enhanced total to be benefits

efficiency enhance chat solutions technology continues digit desktop for clients, Use to Paychex with devices. both deliver employees and our to self-service to increases their applications in bots. based continue mobile grow and We cloud of double and our through our

During our PEO volume. reduction open recent call digitally, enrollment period of employees XX% open their our POE worksite enrollment a our for for in XX% example, completed resulting in clients

Paychex’s quadrant generation HCM management. our as Our recent clients’ client This Technology Flex leader deliver continued annual the were on NelsonHall, based named of validated evaluation immediate expanding report by leading benefits designation NEAT firm, several for the vendor in human digital leader next in Paychex future a Report. awards. capabilities emphasis capital their of research was was global a analyst We on by meet to placed and requirements. ability the

two awards. In Flex in addition, Brandon Technology recognized Hall Group with Excellence Paychex has just

HCM of running category service the we've largest ninth recognized category award and Advance and Management in ERTC technology Business of in space. the Technology was HR recognized program. this Paychex Our Workforce Pre-Check for Innovation. Small in Businesses, program for was Best in The been year longest consecutive award Technology This in our and Strategy recognized the Mid-Sized and and is

has role executive and of Before roles change and continue to closing team like and discuss and operations the Officer. of divisions, Member Senior support XXXX I'd will his X. continue proud in has been performance integral part of we of company. took including of our Founder since to I'd governance Executive John Tom President in the a our Outsourcing, continued and Retirement serve effect continuity to President forward thank growth. move service will Golisano during moment to for quarter. service recent future leadership leadership the will that of future John Board are like Insurance. to Chairman Operating our the leadership of a summary, of John Officer. to role well Chief wish the for an assumed we There and our and as I December all Chief and to in second Paychex’s remain as and on our led Tom HR Payroll, Chairman In his role the of Vice Paychex’s prior executive the been remains take and the and has businesses drive have a the play oversight Board Gibson, promoted

We to continue quarter. set and selling positioned of the industry our providing call with to results Efrain? for solutions the are innovative value second our season for well the technology clients. Efrain over to review and now leading service turn our financial to will I

Efrain Rivera

some everyone. contain statements forward-looking Marty refer I'd therefore call conference to events and good you will risks. morning and like today's that remind future Thanks that involve to

disclosures. customary non-GAAP In refer addition, periodically to the I some measures; will refer to

in detail key So, points let fiscal quarter, I’ll of review the certain with and outlook. follow-up greater me the finish by our for areas providing XXXX with start

quarter revenue increased strong based resulted results and $X.X higher XX% Solutions continues HR increased our HR strong benefit solutions, both retention. PEO high to Insurance Solutions total portfolio continued internal per XX% economic driven reflected increased Management client and recovery. primarily of million, service to to execution by revenue billion. revenue, service Within $XXX in growth bases second across Our revenue Both demand our In revenue from performance XX% for client and Business particular, growth million. from improved employment $XXX more businesses support. levels. sales and to levels and Client client strong as look solutions of revenue

X% higher products, margin an employees from for and balances. also Interest basis employees, state income quarter second funds with XX.X% were realized partially unemployment expansion higher impact and revenue from operating lower for by on margin our increased prior period, in X% health average gains insurance to compared $XXX the of was clients Total benefited with investment million up in was increase XX.X% continued to offset has to in of expenses $XXX attachment. in held and operating X% of the for points. a The XX.X%. $XX rates growth PEO sales Adjusted XX% investment benefit quarter worksite insurance the resulted Our costs our interest expenses million. decreased insurance average average PEO XXX in an Op cost The million. to and increase year technology, and marketing. direct

touch on compensation and was per earnings per effective Both quarter XX% last the Year-to-date tax to diluted tax to the stock here. ending XX. income Diluted highlights appear for XX.X% service net revenue year income discrete based revenue $XXX adjusted diluted obviously share, and results, per This share to respectively. Our $X.XX were period to XX% Op earnings for $XXX I’ll XX% adjusted $X.XX per and share million, of per earnings adjusted income related six rate to XX% XX% increases and the share. expenses, million increased prior per Adjusted XX% $X.XX billion briefly the payments. increased reflect costs excluding benefits increase period year. is respectively Op compared during share month the incurred income increased November X%. for XX%, XX% and Total total share to same net $X.X one-time to respectively. increased

It strong $XXX million the first higher $XXX net investments by income, Let's cash billion six borrowings corporate November year. talk of flows XX% year-over-year. same last financial capital. up cash operations million, of and of as generated total were working with $XXX XX% were position. cash and period partially months, restricted about flow from offset approximately the in an by The Cash from increases over fluctuations total XX. remains $X.X was during million Free increase driven

$X.XX dividends six per months. a million of first have quarterly total for out $XXX paid at the during We share

months rolling on was Our XX%. return XX equity

XXXX. fiscal current results saw The the Now actually into our second environment, I’ll quarter the the turn taken and for results, year outlook exceeded quarter. that XX, We’ve reflects in macro expectations. ending which second the in account to quarter improvement May current guidance

is that Solutions Adjusted guidance flat to revenue during guidance XX%. to to We previous to up grow XX%, is to X%. Total range We We’ve approximately expected on in of X%. have to in a the held some Interest conservatism the be approximately following year-over-year. saw. to Insurance year. to of funds to the income of clients XX% guided previous PEO of for XX% in Adjusted approximately the margin be op range range revenue XX%. expected updated net growth the to XX%. the of of to Other the $XX uncertainty the XX% is to expected expected X% We is in growth solutions million. approximately be of range be grow previously XX%. of and XX%, guided from you to in to XX% We from $XX guidance of remainder range range up expected expected is is guided previously of macroeconomic to Management prevails expense million EBITDA the to previously grow now the expected XX% of the provided XX%. given in to the grow XX%. as

guidance received change previous in Our second certain the $XX to was during with million $XX due the quarter. of range the to million, non-operating income

tax earnings to per the grow income expected XX%. range XX%. the to XX% XX% to share range diluted and be effective of guided adjusted still growth expected to Our is the now in in XX% XX% previously of We of is to

your the Turning so to be quarter, the of approximately quarters fiscal affect and currently insurance year. timing of rates. total solutions of an impacted creates and by we quarter of PEO the whole the note we state third anticipate and of unemployment models. for Insurance are adjusted for fourth fiscal revenue growth This that XXXX were issues margin approximately It the expecting XXXX. in fourth to and doesn't in compatibility X%, XX%, notification revenues changes operating third third

our at details look it get split presentation post in bit, investor of provided a we the you correct. so we You’ll and can when the little quarters additional

course subject that, update We'll environment. I’ll to third Marty. you current turn the again that just the quarter which is And said could back given Of the call. change assumptions, to call current with our over everything on I

Martin Mucci

Thank we’ll questions call comments please. or you, now open Efrain. Emil the [ph] for

Operator

first Kevin McVeigh Credit [Operator our Suisse. Instructions] we'll from question And take with

Kevin McVeigh

much Efrain, the on like it results. delivered in Great! and margin so Thanks Marty XX.X% a congratulations you looks quarter. and the

back half record changes? new what kind the is maybe and it I today. going range structural to can talked of that's of frame, things just you was was margins. bots, of the kind talk the think some Chat there the just of highest you to income Marty that. may when But float help to Can of be like us a ‘XX on even you

that, leverage and you're the income things any Just wanted margin and model, outsized just some the seeing just we to thoughts in if still like obviously as float could. just because to there start around really expansion headwinds so

Martin Mucci

in and I’ll jump Efrain let Sure, to.

to calling with I on are now, ask things the XX%, web over but a employee's, just over When reduced and someone think you lot picked when question, worksite POE PEO did. questions with handled One there Flex now we in to chat answered is as count think the a automated up look comments, employees in you before two being as we've and that anyone XX% temporary a questions about fashion my challenging of in our mentioned enrollment you things the of offering, in service of to think they by would at I XXX% if it. done issues in online about an impact parts bot I creative the been digitally say Also really we've some chat hiring, in open and is for is, to hires we almost But lot XX%. a go a the live. second automated head due we some that really down know it overall have bigger you of the bots, models. comes quarter

through or also our chat, So to we're and a product, added allowing range. value saving being handle but they number client, these the reduced the a either of and receive to the service we're things time the expense answer and is calls with the only faster are calls not etc., done which want automatically that lot for are so a the they in. themselves model more the it, way but wider happier specialists it's coming doing of Not with getting are clients are only have

kind a but is there's little know you wider of we year-after-year. that's doing think best as is You and DNA, temporary, range we've would drive margin things is to always I the that our can. little bit know say of I a been it most

Efrain Rivera

Yeah, us. analysts you that of Kevin. well there say the – and that I’ll cover add there's this I just no many to know mean think I very

standpoint. We have evolved a significantly from technology

have model terms show the and our it. the capabilities evolved shows We margin it, digital in significantly of

and against its We anyone technology business, will to our put point, based. durable, sustainable up Marty's margins because its its the in

Kevin McVeigh

think No, for I is in the back numbers there themselves. too same the human success front that the that just Is when get component of way that kind up that. the the implementation. I'll as Like you of terms is follow to But level is a for about abstract? and any how on too implementing a more in much client opposed speak on are of first queue, to digitalized because a time, And get that end too. the fully of

Martin Mucci

good clients I'd There's No, not time – that it's for because heading. I happening, SurePayroll themselves. want this can continuing client is expenses, still more more only newer division What but self-onboard. and we're has we into the that. to more to is is really saying been good process, client, the and are for doing that exactly our into grow know. it's some we're that for Flex your say self-onboard

you to buying to you start do many service is don't, thing And frankly help, you self-onboarding it's multiple to online people a a you sales particularly than costs, a sale it really, onboarding does to doing and want if that, client So their the fewer want there's you complete reduces to at and people how digitally might pace better it benefits. better it and with to it and allows a it they when is they interactions you're it clients, the want is at if lot client implement because and yourself on-board you. do that the also they themselves only smaller themselves, times it's then service creates team, talking last their start it but pace it. errors and need own Not couple and the if

down – definitely path, definitely on SurePayroll more that side, we're we're but well. Flex is this increasing as headed So

Kevin McVeigh

Thank you, the promotions. and again on congrats

Martin Mucci

Thanks Kevin.

Efrain Rivera

you. Thank

Operator

to next go with Bryan Bergin We'll Cowen.

Bryan Bergin

holidays! Good you you the Can retention. moderation in some expect to and I sounds just with like did still its talk start Hi! there? It about but happy wanted record, year. morning you're seeing what

month front closures help So of you talk clients And can you as as underlying that to normal bit on into of any see well? December typically beyond can little and it driver just tensions switching also would that behavior. business change about out if relates some a you the the XQ, us or factors

Martin Mucci

far QX wasn't so think QX, a even really there think I think saw it's product. are the that. out there levels. we Yeah, value. last still but that is at the pre just better as I value were that is close still things we in is than record but as quarter It we helping of high we're will record quite was seeing said near as very the that kind What of and out I I number some of also place to of business, pandemic that, fewer the

value client, All and only Pre-Check, kind where we’re before exactly as not which them getting processed. the even improving we and value is retention distributed the we of with all leaving ability. the the to gets what giving have product, doing category, of we of the workforce, review from own their You value adding from price technology, with know the tools especially time the he are that clients the these pay things not seeing for in approve all adding are allowing we're because kind mobile we that are the COVID, bringing of we're that but apps back side, seeing they employees retention. many value now a the is hoped, a to Paychex and And are and them of from value handling product

December. Don't near changing see anything QX. we're in point in record at So this levels

see number things Of expect where but for out better right course to December-January we'll levels. is even this really certainly pre year end, pandemic at the we point than

Bryan Bergin

you you good the impact? pipeline – it was on know any understand with sales outlook may in everything just impact have going given that’s Okay, sure making actual or seen that's And the in conservatism see then some the yet Any actual to I activity you or hear. a – an omicron. conservatism

Efrain Rivera

always know like all business, half I seeing revenue areas, be. know an you strong, how season seems of record said, But we're par mid-market and really levels think in but strong. in you in growth and sales, that'll and we're Solutions, the like be trying going conservative, still of first all right really It especially quarter. selling mid-sized right retirement, annualized the is sales, the now to virtual environment HR this, when business year second but you know we our digital now

Bryan Bergin

Do you. thank Okay, well.

Martin Mucci

Mike. Thanks Okay.

Operator

from comes next with Andrew William Nicholas Our Blair.

Andrew Nicholas

appreciate the I to questions. morning. my my I of the taking responses technology Good kind first is Hi! you with couple from sticking guess questions. one theme first the of

to as that talent, expensive; has Just kind it kind is paying know software, that it more of for to my is building more engineering, kind relates relates of for you getting sense of talent time. and some

the Just think supply also you you perspective, an here of the labor and but year about wondering both rest forward a how from perspective beyond. move that, through expense as

Martin Mucci

Yeah, think thing the just tenured Mike know a we've got you and team has and a job. very team one gear Gioja done I

and think compete things, XX one very you yes, just and the in this that know Mike’s I with and effectively. in You we've of up think charge to market that has team and over years done great the know have costs that done a now you I and for been job go of

develop lot a they and them make home, meet home. working work. working all latest – regularly, they work and on where all we also way that's architecture of Years we them digital can issue; infrastructure have, but you the and from leader it past services and was you development, only to the from also ago latest office Well are that in, for to working technology? They well you innovative as technology have are the come an can some space retention a years with we know and you of they're the also know use. We products adds They that a all they XX We're great there but we great to place yet that we’ve them product from an ago, available that. the know know not well. always XX-plus, blown

so the to stay very attractive to think here. I employees And attracted that candidates to is and

very proud the and So of had have we've I we're that's tenure competitively pay retention. good and we why we very think

Andrew Nicholas

helpful. you. That's And then Thank topic. my a for just different follow-up,

Just on quarter. the you PEO maybe performance the insurance break versus could performance down the business, insurance in PEO

I insurance be think your last time was expectation year. was slower going this spoke bit to a we that

Just wondering if that’s further. played itself out to speak this point and that to if you. second quarter any helps Thank

Efrain Rivera

Andrew, Yeah, question. thanks fair

the at nicely; but benefit you PEO at about part or comp, smaller tough compare, moderated and and because good the has digits the client is growing a good of years side when but to grew business, but is in flat talking So where point back smaller it’s business we going cities. am good was business growth overall say that four wins. I a versus client health where PEO yet. look it probably soft. it comp hasn't single two were year-over-year, bounced but increasingly market still remains the on workers and and continues five softness of to least it business, to a of tale be ads, the Insurance solid The upper the Insurance. double Insurance digits Insurance moderated of PEO really

will don't creating as that I've of been into year So get that it moderates say on benefits well. next amount. the comp PEO before, take very Hopefully the kind overall a start we the to I’d that Thanks. doing insurance to well. situation health bank. so wrong side and before said are and turn But around. Workers are doing

Andrew Nicholas

Happy thank Holidays! Alright, you.

Efrain Rivera

Thanks Andrew.

too. You

Operator

Eugene MoffettNathanson. next go to We'll with Simuni

Eugene Simuni

Solutions. wanted this Good I Very ask very expectations. Thank first to your everybody’s, quarter, outperforming much. performance think including I about you impressive Management morning!

of you out of a us in be nature forward? temporary one of listed number which that give sustained outperformance. time, moving behind a drivers little You drivers of more are of kind which bit that are we're can as these in color Can

Efrain Rivera

further can color. maybe start then a some Marty me and Let add

really look kind Management umbrella you kind and important you So, of if stream, revenue apply, in have at a Solutions components. of of you three that what's broad

important, talk increasingly PEO. retirement got call ASR, a very, revenue we that about many As much, roughly there's have Outsourcing; say you've also are and under don't what stream, solutions this but very are that services I of which HR but combination know, we would parts become two half that as of the you about, of bit would not HCM little other then

at that those So in HCM. now of at HCM, they HCM is look faster if rates that, comparison you two almost to growing they and than what are are XX% are

HCM services HR Now just even It's it didn’t. strong a even that quarter; it's not had very had retirement and quarters. that Outsourcing stronger, stronger

Now demand for not in one-time both those the environment things. are There's services. retirement

we etc. Marty leading mentioned our clear success I think pretty in selling the and there, PEP plans, are market terms of of product. that

higher of as strong. plans of that trace states by trace is and Sales strong that our HR business have for proposition been the driven been consequence demand you retirement very increasing sales. never demand, on have the that you those a release area, very solution uncertainty environment, Outsourcing the too. continues the unique grow our in didn't the are side, on employees And you are but strong of strongly. has been that at, and are value amounts because we back it, that's mandating if and to look very If to the the that HR, retirement back, Market factors there benefited Both side,

think those Management forces retirement have other obviously we lot a of are services, what are to I forces just demand from but a said? I responding that said benefited that in rebounded, within pandemic Outsourcing of So economy the I've isolate Solutions and if the pretty have durable. the HR

that short, factors in of There there there. story isn’t rebound are driving certainly one-time structural are structural long of also some demands; it, is things. are there The higher. but a demand So part lot

Martin Mucci

true, is is, Plan Employer clients. we that's come I back didn't think as year, the as our Yeah, even and of went one to the not every be strong. as necessarily it product are Efrain mentioned just later and to year we're very strong those, product, PEP retirement XX,XXX in of through as PEP out a I We January with pooled the so this first product, expect

extremely have when look the and Solutions in critically We is that you mention you important HR so across environment technology Efrain well know sold the time COVID board, and we've been a and that are reduced be attendance, between digital experience were the to unvaccinated, a and those things so really to apps, clients are distributed ability to part on all really handle who the vaccinations, workforces, track that these mobile seeing. able but of

most macro growth think drop off sustainable the but and that see there's in there’s we're seeing. room sustainable Even to that you're next still so the it a that seeing, should be because of year, of and forth more is don't in unless grow. I very checks So we the

there’s know half the still employed people of in expect next that not are that up of and could of we calendar pick lot a year. next the part You first

Eugene Simuni

Got it, for quickly the your of follow-up you. takes us day, own And about remind to business. of got kind and of the I high word inflation you being COVID my the the just then wanted for it. could of Thank ask quickly impact, inflation inflation puts

Efrain Rivera

of pricing what if have and suspect net because a the market enterprise of So, they'll we way, that than in in, pricing have general although know more that it power. to the hard in the is is more more space, but segment say you it we're positive, work inflation I power relatively you does

of in rates we extent to maybe little terms a than model, has that the higher previous years, experienced higher bit us, ability also the have measure to So our on it drives in interest inflation also of a that business. to a gives benefit price

surged rates going is interest some could on it's dampening and effect inflation a but in be economic reasonable high, level, growth, terms for a net obviously business. assuming too have under if a positive So of, there there balance to it's the

Eugene Simuni

Got it. you. happy Thank holidays Well, guys!

Martin Mucci

you. to Thank Same you.

Operator

go Keane, Deutsche Bryan Bank. We'll next to

Bryan Keane

you I almost that. higher Hi my client. doing I the here! that's then at guys! guys on revenue Congrats know are going break drivers down the looking to separate what realization, favorite on price topic know quarter know specifically that just thinking a on And the of I you kind that's per want about thing front. been

Martin Mucci

I'll in. let Efrain start and then jump

The and yeah we're think things like just really even the attendance much other services. and and we've one, stronger, of Bryan though the doing helpful revenue even client when about that client are think, has really solid think some talked selling ERTC, time you is about per been driving things well. more I the revenue I as growth

some We of services still the pressure different frame taking. it's realization, time are it's in like I don't price that Efrain know But we're to in think on you From it's standpoint, think price competitive client inflationary I one do. bringing, it it, feeling think of well, think it is we but of – as how also been kind challenged have and still just given this very adoption was revenue more probably market. to not while also value difficult much able we're get is as a really seeing more that mentioned there's much as and I good the we've because the

something type benefiting cost a Credit, If Retention know client much relatively bringing low that a our like you they're lot. so we're at to you Tax just Employee

price point that Efrain? even bring to through at has that start, helped better they value see think get realization. more I more and us COVID that we

Efrain Rivera

to very very, this thing know want forget you don't we of I One Yeah, client, extra, Bryan this I the we've very our on been in average price think process. it's that – and your added to positive you in in very haven't plus the the revenue I price sold HCM so clients, we've do had when don't retention, very, additional point, about, good value services able triangulate especially to well. realization talked to environment which we per our terms been want

very our of that model and the really this earlier. quick, strengths we are very, is One of mentioned Marty

We up are very, result agile responding terms of changes a very that to in come legislation. in two new opportunities as of

this we we So service Retention Credit. Tax mentioned call Employee there's that

Marty clients because that of few we're value us and our services We value to pandemic quickly losing the and keep both been revenue helped helped for and done. well. the to providing clients. responded also average what we price its to, raising realization and That’s have, I dissatisfaction and client, our we’ve the price we’ve the because said, very of they've with agility creating raise think added products very shown throughout responding to in value per very clients justify terms part

Bryan Keane

the the a are driving is thing that, is and it something there that there? you in guys success competitive then at Got having or there difference mid-market, going on

Martin Mucci

think years. you tenured few that's really. that driving a it's great know I leadership for Bryan force been sales We've very, got a now more much now

a those lot back great now decisions, these the deals I think we going year winning ran so but not think we're or presentations, we're and making of last competitors. into and people at against I a

a one out that well the really yesterday doing against in big there. won Just and competitors are

need done, I that's the product that is think really the exactly because been they fitting technology at of moment. work what and the

the them for be for have The like clients Efrain around new As turn agility whatever their compensation able employees, things summaries fact we they retention their said, or give to to insights. employee needed. that

you a a We in of and attraction retention are that feeling right particular the about them, talked do have to they been call. it remember Indeed, Flex we've site, post of the I where with everything feeling on things Paychex the are and and ahead able you new and teams. if like employees, the you can the hats credit of we This and are mean world's partnership management respond if get off step the post, job all they're they is system, job been hire goes clients mid-market we step a on we're ahead we Indeed these largest development kind particular just need. that, digitally really and mid-market then need posting to and another ahead of to digitally it paperless, through into and now in Indeed, really pinch electronically, everything in Indeed, you we're it right product connected to the have

power is I come and the that has team really So sales think of through. the real then

Efrain Rivera

previous I’d thing know lot we terms a clients before in other years add down that in sold. you talked is of The Bryan about trending client sizes

and not do all think not has mid-market a to because class competition the especially all we’ve the of to that competition in value and is, bundle the not now. the that, services and You trending part winning up, an marketplace the seen ability I it right know proposition in that that's think are added I can what business of is client environment right clients the of year in last there integrated – the very our in a valued highly level mid-market in this platform, plus of down, service sizes, world

Bryan Keane

guys, great holiday. Alright have safe it. a and Got

Martin Mucci

Thanks Bryan.

too. You

Operator

We’ll with next go of Bank to Jason America. Kupferberg

Jason Kupferberg

Hey! Thanks guys. Holidays! Happy

Martin Mucci

you. Thank

Jason Kupferberg

Thank you. you, thank

gone So things return to of growth as to we the entered you X% historical of was think the fiscal based had guys ’XX, kind how more normalized X%. levels to expectation But client I on net first higher for have base extent year, you to client you do gross half and outperformance? to that does, it more attribute figure come the the think to the retention that of or would through in could ads the it the

Efrain Rivera

I end the yeah, We’ll trending Jason. that beat see high range. actually of So high certainly think the we end we’re at whether

to in was up But good but to which earlier fueled management performance. sales X% surprised X% is pleasantly this quarter I'd of measure reflect was that, I've know levels. an last were year was retention, continue record that's you about the PEO great, performance actually important our have really We second really think return, still and we up been very this a had I say quick We that I – has you as been retention, solutions that return think part it's see was a year, I been it started insurance and back, know last X%. growth. year. really or Marty at strong when to mentioned revenue by balanced

of the rather really I but a both have say than driving. sales what's is side, little it So would towards been those strong side retention a bit more the combination helps of both

Efrain Rivera

Absolutely!

Jason Kupferberg

Okay. the key just strategy in-person in bearing kind months? since the next season up the selling over picking here, is topic having of sales that Maybe on couple light you are variant, versus just the your of new of virtual entering any on here, sales of so

Martin Mucci

know, they it and in and what great in a different through the out frankly and client digitally we’ll and that. and it we’ve probably I building get, now, rep be it, so they’ve really job going them a see they're in really agree client and that still think I client with think know are is this know been through selling examples so team, done very front not. even the have variant, are so that the You time. And doing of we've I the I can engineering to the particularly if ‘this sales just work doing all to that, them you the presentations very But More this of of – know together. how the still sandboxes and front them of for take many can Jason, it. think virtually really they easier midmarket you virtually to are it's they through and know I it and you it's that they right mean virtually from get because you the do of kind than you in continue think could know you're personalized option the you can fine-tuned is successful is client say, done

everything's don't end So selling momentum. but us. well think so with at We're it very pretty yeah, but will we we're good now, you I know feels affect right know the right very well, moving really we'll products;, staffed, season, it feel great now of strong the

Jason Kupferberg

appreciate guys. again. but the Okay, I Thanks comments

Operator

to next go Stanley. with Morgan We'll James Faucette

James Faucette

I follow-up on quickly much. very in retention wanted sites. Thanks to

stability in Flex function adoption is partly you now product for can to-date? platform retention that of and and of to and the your the you right generally, key give the a customers. client on that tool Is sites some integration mentioned retention idea You

Martin Mucci

feedback to likely insight are mid-market most kind pretty and – to internally you clients, looking everyone's but some of it's certainly think we that Yeah the just for them clients to now use. able at mean what information some which employees into for and of early kind be do from factors great that I James, leave; and can thing small gives to getting that with using a of because we're look time same and them number it It the for more help retention. a use have built and it’s much lot of

the and guess to think in thing adoption, accepted that been very early way I get they insight. innings easy use of but early pretty like well say, this it's would it's it's an I really to feel Flex So I

a doing from say but I So feedback what we're predictive with still it's analytic would early, basis. great

James Faucette

Great! macro question just me. from then And a quick

of there back or particular labor come what's insight to people the a than labor you lingering or are force just you what try some we of know You being give are that seeing overall right force? grasp as responding; there seeing areas in openings. into Are view to from big a fill industries Are others to uncertainties able happening just that any there and get and are of perspective? you just Can on participation fulfill the that one little big, is one the aren't macro economy responding kind now industries generally? better

Martin Mucci

Yeah, sure.

XX You we under that clients that know and ours are the really looks small obviously our at of employees. business from index

now, growth months is a row the for six job growth in we're good. so know seeing You job continued growth,

We're we're as pre still X you and pre pandemic. I X.X million XX% hospitality. I round are of think, rate participation you around still what to million down is percentage from know pandemic, jobs a leisure from of which know those Now couple short points

the the than sees back kind days few most you I that cut normally know would anecdotally say of closed are ones struggling even you probably or everyone are and still that So the restaurants more from hours would. they a know

base. years part client ago been was where has dramatically. you that's month. think XX. seeing pay everybody amazing you has is struggle which thing time time of pay to getting the $XX.XX when an know it's pay hour average up combination two arguing our biggest for last We're per and think gone about Part It's still the a I

the up the one that is child it up, I from normal levels, change as of probably the most. stimulus more dries costly changed the more supplies the going that of costly, you it's are money suffering I away been has think do the well, think some that's know toward employment credit well, arguments. perspective, tax things unemployment but an is more So and But as may but as end course back now

them, now. you They've payments deferred been your to tuition of know pay many rents. You got

from think to what I in second and you're the clients. on first see more come be we're back going hearing quarter would our people guess based

what they’ve are balances, in are people but to I still So hired all think of growth, lot a be of to there's overall just the coming together we you of seen the as more as people But on sidelines. on things next that know depending months course cash does continues six sitting pick still market the that and up. kind expect

James Faucette

That’s great color. Thanks a lot Marty; thanks.

Martin Mucci

James. Thanks

Operator

We’ll go next to Kartik Mehta with Research. Northcoast

Kartik Mehta

environment. that same I'm the with strategy follow-ons to and change two is made just what’s a on increase? current a price go you get up of May and I a increases, you Hey! and inflation price I bit were there larger a around opportunity you change you Marty usually a Good the and wanted answering question back Efrain, to pricing. an to pricing Efrain. still comment add Are to morning maybe timing or little wondering know when two

Efrain Rivera

Yeah, question. good that's a

things: I’ll company philosophy two say make about of I’d then So question. One the answer what is, the does a and statement

increase, it we to in really I late April typically flexible we broadcast going it to so part. more you're late adopted I when or circumstances the a going - of. look thing is and have to at was and used first what so the first and we the that would We don't fan in in I look decide spring to raise do right spring. in we say The think right we're a the are then pandemic at typically it. a big in not June/July actually would timing, May plug it's we're But do necessarily say bit little Kartik, in price it that's which that,

it’s to know fair customers. you we that important perspective be think our to think I from

end can two we price does whether by fact not with think take our in that determine The we we guided that clients. will, I increases the relationship thought. we're because or more even value

create is to and increase indication what that. a supports during much is I an been Marty job saying that call Our this has think price of value of all

to that So situation out the charging. spring, don't makes sense. look for We a perceive clients getting want in where value create not we'll we're take are figure what they a certainly the what

they increase what we about On creating when greater ourselves along, do occurs. and greater don't generally complain the it that so we per that's other hand task value with client, and passive

Kartik Mehta

difficult that maybe question, think I Marty, then is but this a some insight. you have And –

in employees six about next the bit coming little a months. to back talked You the workforce

kind base, tell back, you a of openings look mean way and there are pays If all what your to to do really per client check? if your could at come many maybe people that there is how

Martin Mucci

we to like would to you've to if Would Kartik, just that the like number but have try do kind could Interesting! and in we you I some someone continue our I to for of of me we tell something watch employees. an “Hey! jobs posting them, you right we of because You that reducing see with and – products you they it?” let just you use know a employee, and and forth give think can I know of with notice you think don't post that says, course front we average see know so actually them know if this? to

economy to size some tailwind hiring from that is. have grow as benefit we've we where clients said definitely you of are that that sense as seeing think our of clients the and us employees, I and know, continue the our seen the obviously Efrain can it the it well. that average We're

So there's tailwind. continued give grow room would that obviously still to think some us and we there

Efrain Rivera

Kartik, the February I’d It think. of in end frame. be what create get a we into really where time plan see up say January we spring detailed we year And important next of the estimate to a we’ll more put we together to obviously as - will

impact. have now year there York and to last now, get right it the post-thanksgiving sense next There but did to know many, You month it half, and get outbreak. many, we're like ago, of that outbreak and a having an years seems seeing bit winter New month, little the a like not we'll in was a of We're through we're better was where have at.

Martin Mucci

and some because of we and Yeah, efficient. fill they and not openings or thing this that that seen during them somebody. if extended how have more is period certainly may many do with could more have period become get or this to have time We that the know clients there knew, employer other of efficient not. to that going been is that if after They back realize back don't our we not become restaurant are, without sense you an or able even one business hire

little So to a there's certainly but we to it's predict, that hard for room think grow. still

Kartik Mehta

appreciate you Well, I it. both thank of really you.

Martin Mucci

thanks. Kartik, Okay

Operator

to next go Marcon We’ll with Mark Baird.

Mark Marcon

and Hey! have and Marty promotions. Good congratulations happy Efrain the morning holidays questions. and Marty I and John, several on

terms actually that much accuracy Paychex of of of helping in sort you what are the is pre-check, the and On how the adaption getting payrolls?

Martin Mucci

sense didn't something aren’t that – a That So Yeah, of.” seen the they they pre-check, the complain this, for approve accuracy its the from standpoint. employer innings standpoint a quarter those chance getting good their I know perspective their client you digital check them, it's to easy I helping really that a in can is the that but better care and early or that but or to feedback we've be they got a to good the standpoint, “Hey! they that that have a very chance for them clients employees with you the take see that on it's got hours, say accuracy a got from going to a and in to we're that they give that feedback early. early they from disagree very Mark, from feel I'd something two, probably able paycheck. question that expect

Mark Marcon

Right. are at small that in and of on-demand payroll you And what the for seeing the end? terms demand

Martin Mucci

it's still say been steady, I'd but pretty you know light. Yeah,

that, the are more bit little things adopt a it. like slow hourly and still they certain to You clients, and the restaurants, know there's

think to and lot can, we get that used it demand still opportunity, it. people to a advance I really there's as more got for we of more

not ask I employees going sometimes it sure it, doesn't, it think little about have so are which cashful clients because not concerned the and a if and are offering for a we of are to don't that's they aware impact, it. then

you going take resurgence of because I you're more big think paid a see years, to it's next, for know to I hours want that the kind they'll employees over now of today’ I'm where but couple want next a ‘hey, in but the as I and look the demand just it'll think I hours money get they're thing say, working there. I economy jobs, be two here very think all you'll gig or eight of see eight three think I

that be success the it, a find for because future. and in I'd who we're new going to grow to that So still those like demand do say they it's pretty we really build ways trying light and out business, to big it, think

Mark Marcon

selling season, and versus thus you between you Obviously would more but what terms seen sized versus of in describe you are. mentioned key far terms in the what strong micro new of you're differences between established you've of sales, wondering formations? you then know brand this And terms gross the the things Great! middle of season, are versus I'm in how in the clients how you're the business it medium the seeing small,

Martin Mucci

I best one we're SurePayroll Yeah, very of years I the talked the I had mean is bit about and doing small a the would from say, that. really right growth mid-size, on well. in Flex strong and to and at strong we've from mid-market sure growth from side size, This years really sizes. little very all strong

had the got only maybe are an technology. integrated the that think decide. in that only, bunch last package as can major really of Some clients a said, we offer just that are of fashion the that to I really everything the presented Efrain latest to overall with of two one year ready the we competitors is But

what and back can you very if connect you're have you up, they people want the parts going buy really over HR do place which seeing We that's all but now, strong. experts, HR in to can So it third from to but is a have with to as XXX and to expertise the like it back-up one are other that competitors, too, parties.

So board, it the we're the seeing different. was of across what sorry the it part all was that, second

Mark Marcon

of two you of the offer were one in saying some that mean coming terms being new to versus out everything, you level back businesses, are newer just an there. what the established like The the of competitors are with from seeing of brand can that increased companies only I you wins

Martin Mucci

And I maybe starts. to year-to-date and well. a and think still as are some getting of XX% the in than head-to-head the new and mid-market front. up some, strong XX%. like you we going seeing those winning winning but it's on would We're today, them as yes, necessarily we're back, up I seeing know, business say on up it's the front I growth more stronger It's still, we're think

end, small very the think low right very it's and but a low start-up still just typically part So of know, on lot are now. as businesses, seeing there the the still a I we're we getting on of is end more economy you

Mark Marcon

Thank That's Congrats! you. great.

Martin Mucci

Okay, thanks.

Operator

to We'll go JPMorgan. with Tien-tsin next Huang with

Unidentified Analyst

Hi we just guys! out last calendar and Its back to PEO strong part PEO know ask to year, you were a wanted a the and Andrew of earlier into to on Tien-tsin. for question. ago, about talking I this year wanted quarter. in – just this about I talked we quarter know selling ask hello! coming a question ASO about I I

high two how more I differ those level, today wanted coping to solutions? across that’s margin the just ask So and how just

Martin Mucci

and sales having strong the ASO evened we're I that mean say pretty have I'd first Yeah, good. PEO Andrew sales. out

has strong, particularly know that I teams very we're the off in; those, great come on in to think service markets PEO there. hats and the you sales

but We good not ASO. only growth there, also are having

only So that sides it need the benefits. for can from HR that strong it was markets from also a HR but really Solutions for both both solution, bring and in just full we're growth having the digital demand the and not I with we good Expertise think shows

got really of from overall retain let very included, out – for financial you Efrain, things they're a to to is, the attract going comes need want that out for that from One did we benefits, really it and employees, and look you just the survey and retirement that's strong you're if their that’s to. looking a I’ll standpoint, wellbeing Efrain perspective. if

Efrain Rivera

question of Yeah, on margins, you I’m going margins, on be know core not the – with the has offering respect of sorry because on lower, PEO because the to the lower absence but margins inclusion pass the through revenues to insurance. are

Those got costs, a portion attached. pass-through. insurances lower So when are to you sell the you've point benefit, full because carry them Marty's of

is the be the lower higher. the or revenue PEO can margin So on

Undefined Analyst

the of the quarter also just I ways lot are that's you Thank that we hiring Got with talked Paychex Indeed. guys I the what to had just can how and curious help a on you SMBs retention with tools hear if recall one are offering trending. side, the partnership customers, but hiring? know was follow-up. their some could you last I I about you talked just about it! actual

Martin Mucci

site. from Indeed this digitally that And have and as its being partnership that I to to able deal largest postings, get is strong, Yeah, with in that think be and that the job also so the more the right of and benefit, It's now partner everyone I with world attracts do many people. insurance client. Then it's all able very job it, to really all I said, attracting to to hot with to I you think them to market know said where some think I benefits, a the retirement you post then is full to just a they very who know benefits, retaining continuing that they the the full hire, connect, Indeed people HR of as that is the credits benefits Solution other of also To difficult. well. trend are posting have knows

is standpoint that today. So generation all deciding offer, to that there can is a they out a set, technology attracts want only things work that where really not but that from solution from full a we

mobile app want full You their Paychex is mobile on know app. things featured. Flex they The

can your You insurance, paystub, your retirement, your Paychex. have have you now

technology you who benefits, they somebody you like product. know has not are when working are leader feel only use You our in but you for a full

how to mid-market that succeed our of for say I So guess and in we're a clients, them and that's particularly I’d drives value lot helping for us. the

Unidentified Analyst

a and you, and Year's New Thank holiday Bye! Great! have happy Eve.

Martin Mucci

to Andrew. Great! Bye-bye! you. Thank Same you,

Operator

go from next Christiansen Citi. We’ll to Peter

Peter Christiansen

and Marty Happy Efrain. morning, Good Holidays!

Martin Mucci

Yeah thanks.

Peter Christiansen

Nice the just did of you could know up it's been of or trend what then you. driving I gaining, be, up. degree and new chats been regards the be helped Efrain number results. wondering margin pandemic; less formation the strong. Certainly that some guess opportunity you To there sophisticated my the from typically players new regional, strong. XX% that is out And maybe ASO, Has A has or quarters that's Thank How of here. been mix shift But from continues is from I them? to the really was follow HRO you're would been that there. mix-shift my helping if sales. seeing have about behaving sales new are a of couple maybe the talked as you you the what, of mention questions that follow to perhaps trends some file talk the sales? for business since

Martin Mucci

the it I’ll of start with regional out players. some

regional perspective, net adding are losing. from meaning a net We player versus - certainly selling

value off I that policy, from stuff speed in many think The struggling regional web. COVID. – demands mid-size to players which as you going regulations to many at and of the businesses like are the to through smaller the mandate, us copy on latest, our small for and and environment vaccination fact players many are this get someone as provide changing you're the try know in what's much

it do and have a on you here's marketing that for that by-state all that puts where technology very you products you telling with you from help have a do, a service the to comprehensive information will have and to the standpoint. website then We what

don't to just So players breadth it's of more us. able difficult I really service think to up the been compliance today with knowledge the have keep regional or that people on be

be thing out. the as compliance that We as follow these may earlier almost have and we every issues so come experts creating that on agile mentioned over that that's happening happen, XXX as single Efrain can products soon as

competitor seen from standpoint the that very we've ads So strong year-to-date. on net regional a

to want take the…? You

Efrain Rivera

drop on lot one or four associated a with quarters have over revenue, of you have and margin mostly to certainly things Yeah, so the is seen part, know attendant when growth three, last don't that you the scale line. bottom you in you've you model typically, the so Peter I that the it think and costs the in and

a works, think margin management revenue the so when on the it's ASOs rate where line. at higher the portion – a and up model that's growing, because I ends of true that's particularly growing that that's higher of dropping bottom solutions way business the is margin lot that our to the of that

been the to terms has So helpful all business shift mix margins. in has way – it growing of been the the of

Peter Christiansen

Happy Very helpful Holidays! gentleman.

Martin Mucci

Same you. you. Thank to

Efrain Rivera

Take care.

Martin Mucci

Are questions? there any other

Operator

We’ll final Wurtzel with take question Scott our from Wolfe Research.

Your is line open.

Martin Mucci

Okay, you. thank

Scott Wurtzel

guys, this Scott Hey on is for Thanks! Darrin.

you Just one little retirement color conditions for marketing just improved services, on was could you within if called give of first guys that? drivers more wondering the our I Solutions a out, being Management one,

Martin Mucci

are mandates think is I what's now there's out coming lot happening that state. there Yeah, a of by

been know coming sizes still federal mandate, saying businesses employees. that discussed plan retirement all that's a have lot some some a states, some we – haven't particular, in know lot, offer cases you You of necessarily seen in to sort York, are New but California out the their but a of others to

– will there to some be there's is to penalties So some are there have that be starting mandates enacted. that going

in I in Some are in already and California up place coming June. think

looking of difficult the of people hiring So there's suite full as I a for employees to that standpoint lot attraction in that’s a but from market. retain it them from full only of at benefits having lot helping a them interest standpoint, also mentioned just benefits. and not a in attract a there There's wellbeing the of and

your from hybrid of So combined, of it's working home insurance, policy, your retirement, home. work kind those just it’s not things in policy all office and it's what's compensation. it's It’s

milestone. raised offer and great fact multitude to between plan we’ve and that earlier. continued up that XXX,XXX and and have X We're So and picked went strong retirement just It's them. products in of great had, in and very our we plans very a a we new that's over really I conditions from them clients that mentioned still Number the XXX-K strong a market and the regular I servicing offered our and think XXX-K PEP plans strong success selling are team, our very selling sales

Scott Wurtzel

just then one And Great! follow-up.

the lot side As forward, to course know I a the digital things. the the self-service investments you've on investing over we pandemic think and in of business going got of about

you of more approach forward? maybe may more on employing environment, you color some where could little normalized Just investment dollars hopefully give as be we a a going

Martin Mucci

will have it in a well get our to marketing sure, very work in team done. from Yeah We've standpoint. that marketing are and the as the continue digital successful coming side certainly been the on – leadership leads

and That through buying, as the way digital how is also a it way that onboard expect we but see we continue continue. are We to the in and sell people COVID to you'll from well. accelerated standpoint

to They they as be they online, go want way about, going the that, to want we self-service surprise, to the go no want talk this see You're that's because going continued, to is be implementing deal. and product, that's mobile test experience, innovative your price to themselves, got. and your start product, do even and that class it see your and product to we've what with a able world product clients

we to the So of continue. continue far digital investment from lot that's that out success see put seen a We've you'll standpoint. in investments so our going and

Scott Wurtzel

Thanks guys. Holidays! Happy Great!

Martin Mucci

Same you. to Thank you.

Operator

remarks. in closing further call to to no like turn time. this are questions at the speakers or back There queue for our additional I'd any over

Martin Mucci

we Alright, thank the you. At close will this call. point

for be holiday If and Paychex. interested will and call interest days. release you and earnings you safe webcast, this second you the Thank your you're time all. happy are in season. in wish to XX very in archived a Thank We participate for for quarter taking it families replaying about you the your

Operator

conclude This you participation. program. Thank your for today's does

You may disconnect at any time.

Paychex (PAYX) 22 Dec 212022 Q2 Earnings call transcript