PAYX - Earnings call transcript Q4 2022

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Operator

Good day, everyone. And welcome to today’s Paychex’s Fourth Quarter and Fiscal Year End 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 that this call is being recorded and that I will be standing by should you need any assistance. pleasure today’s my Mr. over now is to program turn to It Mucci, Officer. Executive and Martin Chief Chairman Sir, please begin.

Martin Mucci

fiscal release. Thank for the and our you. discussion XXXX Thank you of Paychex’s for fourth joining us year earnings quarter

and XXXX. Joining me Rivera, market This our and Efrain the today opened, Officer. year we and Operating May before financial full John results fourth Financial Chief for our President morning Gibson, Chief are Officer; XX, the released ended our quarter

the on SEC Investor website can of access be release You available the be broadcast the earnings Form archived our with July. being on will will website before Relations XX-K the is our and end Internet, for over and days. This about filed teleconference the XX

today’s for open with for business results fiscal call or and the and on update and comments. the then it XXXX Efrain fiscal quarter we start will our highlights year. an will outlook up We review financial questions fourth will your for

out are strong pleased We very our to fiscal quarter. yet another with year close

new clients fiscal teams solid and Our sales the in in This cross-functional across company. reflect clients, service the to execution in of a HR in strong our our partnership get results mid-market. proposition, front retaining our includes teams quickly value highlighting and XXXX our outsourcing products success successful

fiscal margin growth adjusted an Our XXXX. reflect XX% operating XX% diluted earnings per expansion to and for of of strong revenue share both growth margin approximately

potential but near recession lower at discretionary have operating invest a XX-year trends control, with the and margins. cost both expand year in in future. concerns there allowed are the positive on focus and to this inflation been for high, efficiencies business of Our spend operating has our us Macroeconomic

existing direction. seen change decline of would leading the signs non-processing in any at key signs any clients, in month first Paychex Typically employment XX-month clients if continue monitor Small activities. in of we the Employment slowdown a not bit have indicators in a positive recession be earnings Business macro of for The latest These to a macroeconomic of consecutive in growth a a at a slowing pace in an deterioration time. a job hourly environment, uptick notice May. increasing a indicators though, continue IHS this gains, XXth reflected but the or levels did sales of signs of consecutive -- to trend We economic Watch

John, finding tight inflation However, Gibson more this of strong employees. been growth us Operating is to, operation pressures. and performance. and John? and being has leading President will U.S. our over to businesses him full in and at will labor we this introduce of this now market call our the I and Earlier an year, are turn near Officer. you XXXX it a Chief of and since on reflective face update employment have small John to participate. them service glad appointed give remained sales John difficulty on Job the who service was

John Gibson

our on this and total I update We year Marty. you growth driven full clients, fiscal both year all performance both provide of Thank payroll happy you, with strong by joining the XXX,XXX and am over and today be the on call quarter with for sales fourth to finished an XXXX. retention.

in we of record PEO the and million and fourth sales addition, a revenue fiscal full with both the level year. our X offerings, In service ASO had now quarter to year. employees new We worksite approximately for fiscal growth XX%

and sales of outsourcing proposition investments improved by sales reflects by board particularly in generation the Our our end productivity the the aided This and demand and from continuing continued value in digital truly executed tools. the across momentum strength our and strong low very HR the sales mid-market teams sales and in in was demand retirement.

have service our to tirelessly support worked and Our sales throughout our teams year. the clients both growth

last with comparable our to pleased retention, very of pre-pandemic record was our are which year. We revenue

make focus quarter them to and on We XXXX. to will in to will today’s are running the progress and environment. hiring very ensure continued meet have success fully turn clients and the those over and business ability success believe on rely make some accelerate navigating We benefits with fourth to now flexible agile Their how complex the their that goals retention continued ability continued simple ready by in the elevated and back we execute will, to in actually Marty. our strong staffed partnering complex needs, I our everyone. course, fiscal then into and result hiring remaining we Paychex increase and their year we that we lead business to to their and to of call provide

Martin Mucci

John. Thanks,

the Research solution to SMB-focused they recognized were Award doing recently and the the core was for clients latest consecutive third most continue year. date Flex help product respond We receiving changing on our with requirements. delivering stood for the that ability rapidly Lighthouse out conditions, Paychex in deal for HR about Tech that issues HR category What to a best consistently is the We workforce to Advisory pressing. to consider the by from our just up

retaining Retention distributed help the and great transitioning offerings Credit, to stimulus government Employee challenges the navigate a gaining environment. We Tax have work including to benefit during enhancing resignation, and been talent able access to like programs clients recruiting digitally-enabled

payroll, strategically every retirement maximize PEO Our designed strong suite them. help to insurance, product have of businesses and presented HR, to been opportunity and resilient

We businesses in to applicant unemployment utilization low designed expanded continue environment. of help talent our and recruiting a see tracking solutions, find to

of our the and deep from employees strong our through Indeed a Over hired access to gain candidates. applicant XX% Flex posting of helping site. with set were module job recruiting is client world’s sourced the clients largest Our tracking integration indeed,

workplace. further now million technology, XXX,XXX client pooled Our -- more safe in with retirement and we while their digital easy-to-use our historically also due HR the benefit over technology. of retirement through stay enjoy and mandates differentiates these plan just in dignified top over tasked allows efficiently. Retirement our environment paper employees Solutions leading set. manage deliver also introduction cloud-enabled compliant demand for for HR, X.X helping record businesses been Paychex employer differentiated We retain employees are HR offerings Paychex enroll operate state on The businesses to modern, With and with industry helping need businesses businesses goals which to a experiencing solution talent. their -- to talent. our with has helps mobile replace help mobile Flex processes

from and HR in been processing. that of obtained to need savings prior brought Pre-Check. experience were benefited the and the and brought time excited million current of in preview with about to more time Given XXXX. and technology on Pre-Check head the early for proactive collection we letting Over scheduling January have inflation, the when employees X.X operate through Paychex employees efficiently. checks Processes during their have fiscal a hiring businesses cost with Pre-Check efficiency payroll, their comes adopters we completely leading rising onboarded approach address avoidance client by gains improve on are challenges bring the Maximum to debuted and are the digital together. and problem

client in that packages, traditional unique a innovate and to comprehensive continuum PEO clients from our is PEO to to by the benefits dental employee continue vision, also space, volunteer health, the purchase insurance, to We new Paychex offers loan designed to robust from options for offerings emerging counseling. like policies and employees, to benefit for anything subsidies, and mental benefit employees critical offerings health part-time pet including student illness funded telemedicine

priority clients help approach a provides address impact benefits differentiated PEO flow our issues businesses for are cash Managing the talent. to a they chain to Paychex top struggling attract of also designed inflation. supply as rising retain top Our and and to is

of including our $X to clients billion and gain PPP ways continue loan program government credits. our $XX of initiative employee XXXX. billion This paid access builds for leave We in access over helping to the in stimulus, on tax retention find customers to momentum

Our has what competitive to forgiveness our we know I loans XX% client’s employees full market. those award loan critical instrumental believe forgiveness. through the employees well-being helped that us and and winning helping of has our are Paychex, focus their labor who tool transition we manage At do, our to on we are and PPP been in

Employers on America’s We are health offering Diversity are well-being programs and recognized of with for Group in the Employers, nation’s identified and by Health we by Magazine Best Business Well-being the for Forbes Best Award. Excellence as one and top one of the Health

quarter to about our key came a year results I Efrain? to I Efrain our and the XXXX Rivera our changing want growth. fiscal environment. employees With that, financial guidance our job the done have for to continued As our will year are XX,XXX we excited of the results thank fiscal fourth in over success XXXX. ever well tremendous call very as for proud and now review for had to excellent who to and as a this close, fiscal the turn am I

Efrain Rivera

information. is Thanks, of one like presentation non-GAAP on and results, and the pretty XXXX. Despite grounded returns guidance to will refer -- today’s refer you, will what that’s get work forward-looking press continue to by team the please fourth Refer good successful end great modest everyone forward the customary and They to Marty, quickly market. to providing from investor to the for year financial that conference then morning are of us I results join that the periodically for company’s adjustments. summary have of history. more full start our a It’s investment have the provide I in you. years some will invest quarter release call statements. remind success will a at to will the all to I’d always contain shareholder and some fiscal of most lead you disclosures. and to measures, deliver

another our increasing total XX% higher the levels payroll fiscal base. service that’s XX% Management including higher X% billion. base, revenue of and higher client revenue product from in approximately million, $XXX driven quarter, per by revenue XXXX, you across service. for both to and client revenue saw For our services to Solutions increased revenue attachment revenue suite, strong HCM ancillary as client had growth service of employment the within revenue, ERTC quarter reached $X.X ERTC fourth year. pricing, The reflects total our our per to

is PEO due XX% not and continue and base. X% for both While by funds clients primarily level, to outside the in still next for primarily million, worksite resulted driven wage tailwind primarily stream to growth year. revenue while have impact expense higher $XXX our and increased hikes anticipate million, due performance-based headcount this balances. XX% revenue base, to that revenue. rate remains rates The on to to not compensation fiscal average insurance expenses provide higher significant $XX support Total quarter, significant compensation. a to recent a quarter Insurance health we on to increase a opportunity client cost increased from the our average just will Interest there that growth $XXX to did investment Solutions inside held at Note employees million. do they in increased growing for and

marketing. Operating diluted result continue did and in me share the and fourth that our Net leads I operating margin all $XXX for call for XX% the of increased the said, reasons, think business share, want to quarter deliberate per of made per positioned $X.XX hiring increased the Adjusted to increased In to the the that’s share bottomline we technology marketing to the adjusted increased XX% as are investment. choice modest. of and in margin choices. $XXX quickly. were invest some base very client per choices on pull $X.XX think our employees, we of we all touch of operating deliberate flow a And said, we diluted and we not products, to a share, and net among adjusted -- through I Full sustainability per the million go I adjustments an those why XX.X%, into that and quarter, was addition, $XXX QX. year in with to XX% back spend in quarter just just was in the let XX% we million to future our that anticipated despite both to margin to and well, very down that income our out flat income invest XXXX, earnings that respectively, million, that fiscal as relatively for earnings and income quarter the

margin total and was to X%. search XX%, points will $XXX next total revenue respectively, someone XX% of playing during the was translate one-time we $X.X out, operating rock That’s delivered we during for what You Adjusted to total total That’s I am the saw that. share year, just year to you earnings $X.X Expenses, $X.XX service investing cash XXX earnings XX% of restricted income We not our prior do. We cash. the both it companies a Diluted of all fiscal while incurred into are year. call I billion, really diluted delivered billion, kind are And per flow remains borrowings that company, that year. XX. XX.X%, the of Free the billion. cash, per billion We solid share $X.X including our increased for haul. Operating -- with and game high increased that per Adjusted costs increase in the the generated and that do long basis financial adjusted May proud $X.XX to to level. from year and delivered the revenues of prior were at low from Cash have $X.X we an income XX% year-over-year. operating billion. you our up find operations that over investments when as of increased share. company. flow million XX% increased We a or and playing per cash next are position $X.X position. XX% the game because that corporate we think share. what quarter and financial you earnings expansion was

this So earnings year. were flow really strong and cash

than stock a share. Paychex to million. you we shareholders, May, to one shares X.X in out we fiscal dividend repurchased in commitment returning sector $XXX certainly in per we of $X know, XXXX, during leading as XX% quarterly common of paid billion our Given capital performance dividends our million dividend increased And $X.XX we total and And the many to the strong our of industry. also and for and of have

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

is about talk expected follows. and to revenue XXXX. year to to Solutions Now range in the turn of as range for X% to is our fiscal let’s I of to expected the PEO $XX the Solutions upcoming million. X%. grow range in and million be Interest clients going expected current funds to $XX guidance to grow held am of Management is on the XX%. Insurance to X% in

the we in take out of of be calendar rates that X% understand with end What through call give that plans year. increases is of that are only in Let leverage we revenue despite Adjusted having as lot into go operating did expected made XX%, the additional $X we not we expense business expected the a are to net income to EBITDA long. have year, of million investments committing a million. is specifically? reflects this to in think saying quarter, end the year X%. our grow of Total that XX%. margin me just will It margin line we stellar mean the be Adjusted this is by X% does expected be stage. or range is another of Other and to expected calendar a range we this approximately the what gone we XXX-basis-point fed is the to be in to range means at increase, XXXX in interest deliver in to $XX assuming as XX% a in next to that

combination the Just -- the so of why million that on is the portfolio, $XX less million. both remember income gain to $X you it’s a all interest that’s expense,

the we will expense. see offset interest the portfolio that of from expect some We income

The struggle know business Marty the something we are of to year. we diluted to all share has expect XX% at strong our assumes XX%. outlook expected and range adjusted indicators federal grow said. as This the the of to uncertainty. macro that the to coming Our earnings of sometimes to X% in some is point, you that We I week-to-week of out the effective to is exit are in be this reiterate you like what environment, the in XX% government. current per range understand income signals are want tax which

certainly we second as not that’s right So of year it half, see will half first see. now, concern a in as much the the we in

going So fiscal we the Fed half. know XXXX exactly second will those to to see obviously, into do? going inflation better indicators, what half have What We the be? where is they doing. of We that. end of first is Don’t we all some think comments, have up than the given visibility

happen first total the the first then an the we of range to growth we what to about be margin think are half with X% be getting the of think operating closer, we revenue will XX%. of X% That’s and what the expect a approximately with in at XX%. in we of In first range for to here’s operating growth in quarter X% will total year XX% little stage, the the the half this to XX% anticipating half. first currently revenue So adjusted in margin range of

all course, change you Of current is update the first and assumptions, to of on this subject will quarter call. subject are to we again which

to Let And investor you will turn me that, call Marty. additional for back the I information. refer to our on slides website with the

Martin Mucci

Thank questions or now up you, Operator, it Efrain. open will comments. for we

Operator

[Operator with first from will Instructions] Evercore ISI. question come David Our sir. Yes, Togut

David Togut

the helpful Thank call-outs… you. Good all morning. Appreciate

Martin Mucci

Hi. Yeah.

David Togut

are year-over-year how peak, you Thanks. And FY bracket …Efrain, Second, us client from wage quarter and revenue are increase? retention, revenue about on XXXX First, expectations impact the price could and you fiscal revenue in revenue from your XXXX on Could assuming if in client things? on -- fourth versus if impacts. retention you margin down margin expenses? other guidance, should three third, specifically XXXX? FY margin inflation fiscal quantify frame you your we for what driven your change XXXX could think pandemic coming

Efrain Rivera

Okay. By us Hey, for could the there triple David. the Thanks about way XX that questions. take minute. header

make it. We will try to

So we specific question are Marty and us, quantify to won’t I inflation as with about will it’s talk in It’s but the I to we let numbers, good impact about inflation thinking tell baked a about and respect year. that the to number, will how one kind of how obviously, am it going how that’s affecting think we we a the into you we us. what expect think

Martin Mucci

in jump touch Efrain I it, place. on will Yeah. can and David any

most of expenses an are think lot for of -- a Wage by material not very inflation, numbers, I captured -- were the increases good impacted, which wage us. obviously, a really of our in from wage we us obviously, our have most that higher. impacts, going these think little to are we is

mentioned, were a somewhere we forth some in that market year a wages other fourth little one-time in bonuses for was took successful competitive did our very we so Efrain given As the some built one-time, higher steps we that employees. bit things standpoint. quarter from were The and year-end that

So that in have captured wages sales overall we of invest that with we think an we a tightly, large them T&E not remote, That’s the the business. normally we go. less impact, experienced there able still we coming basically to continue we costs, would than having that Things trend, we think very have even hit, the expectation learned well, in controlled pandemic. than home, we been little yet that wages have well. Other from have really bit quarter, working much first expenses and this out were it happens higher very that have captured

have So there. that you we is have I those standpoint inflationary in a from there think the very strong numbers got guidance

Efrain Rivera

Yeah.

actions position well think, fourth call wanted the lot for we out So, we that Marty think is to mentioned very that quarter took that, us in thing I a of XXXX. -- the I

for now. much from adjustments have inflationary So make captured we There adjustments, right standpoint is but further as always I wages are think to around we know some room as the an really us.

we So, think, that. captured have I

on are have was at and say would the product. varies in range. price certainly end the depending of to X% On year X% the that it I that that the said we we this increase, a is high always range

right I just it’s and raising not mixture of value. prices, key value about think it’s price, there get better thing is delivering and the the also to about

we approximately So at had the it we I think the on approximately was we good retention, we was was mentioned pandemic really were John then a are close good year. books -- XX%. high year, our earlier approximately And XX%. that this and a client record there. When

think strides So year of a a to we from There’s more we five of four I had good really we revenue lots made a standpoint. years were years, elements retention years, that, ago. three probably for have but lot

the those -- your that’s David. answers to are So question,

David Togut

would assuming or XX% can you And you step then, the some you FY for client down? Efrain, XXXX retention, assuming sustain

Efrain Rivera

that, that where are I a wouldn’t of comparable. of be a little to got we think I -- bit to because normalized be think say it’s transitioning you number it are see surprised slippage simply, going in environment, lots wouldn’t more surprising it I competition. see from to

Our discounting a our go will because that level bit plan of competition. assumption of up in the is

everyone pandemic swinging. of has the So out come

are people are in wobblier. we some think we a pretty shape are I We and in good position are pretty well. defend to shape. think better Others in

Marty, in in I talk what on other us let, us I And strong would to year had will really happened helped thing, that, the helped that’s too. really of there, the kind really a The mid-market. we year as that’s say, because

Martin Mucci

Yeah.

tailored in for up offering, mid-market, and are the it’s good decisions, up. probably retention a demand really that of The on times On make is looking ago year it’s we a saw side, in of to kind some really are a we combination of clients suite we there The sales of I the said have not year a that year And probably and this a the had that made couple make back full that opened probably, and pent-up great a as revenue call. where a picked was execution, been ago, now. think will point winning we people products we mid-market history products lot our exactly mid-markets. that strongest been to have what

the retention in better So have on are we of that would in we a lot revenue are well. as standpoint. go-forward help Not strong a success certainly retaining very selling a had from only there, but way we mid-market,

David Togut

Understood. very much. Thank you

Efrain Rivera

you, David. Thank

Martin Mucci

Thanks.

Operator

you. Thank

Our next Kevin question McVeigh will with Credit come from Suisse.

Kevin McVeigh

I it’s a congratulations. if much like for level, so retention you at feels level and Thanks have higher the is structurally know been Great. of don’t flow a higher or but Hey. Marty like Efrain, may this range. clearly within

So about maybe probably more structurally than that, help of structural of off, clearly service in just what what that robust drove you post-COVID kind there like kind just the feels understand and in realizing are level us drove of offering? it comes but was Is the again product or it think you kind higher of kind any XXXX? way a where were to

Martin Mucci

Yeah. I there start. I think is consistency definitely that Kevin there. will it,

you right. think structurally I are So

We we have -- of continued have perspective seen better controllable a really definitely strength seen trend a from there.

use have that and stronger workforces. and don’t more, that’s were mobile and to got They that they change people everything. the during distributed had fashion. their it That clients time remote retirement to we the they as technology ever They their really have board paid. in going as app and I able use to the are workforce, stick employees the John been before a have it or looks in funds pandemic like things are and mobile the a certainly, clients years, paperless on side They used accelerated employees but retirement the on for the have then They got about from Pre-Check. Really what see will mobile The use up, seeing but are really much talk have more many are don’t their just it the because been their it think product for it to to take returned use know I very made app think to the rest better cut. and responsive leads -- product online They part the seeing the give is they what its in. retention of check I products continued by clients well, of to to able want are and side, really example, app, retention Everything the their because employees talked it. more. and is good. get about and and change

are and own they other direct changes, bank so their things. deposit making And their changes

that employees So with last talked that, the the I few improvement, of which to payroll the has years, want just client’s as structural all Paychex, my stay us, pay are in client HR they of we led because not is person. think, to over about invested or

will of it. ask that’s to think as piece well, big but So, I to I add a that John

John Gibson

this I would a No, Yeah. Marty. And Kevin, say, is probably multiyear story.

competitive You issues. back and to go model triggers, to doing differentiate before doing may are service retention anticipate in focus, we we our using have COVID. relative been have service Things our to things AI we analytics where

better our perspective our that I and to the if led were fiscal past in or fiscal And year that less Marty’s handle piece. year back have And time record we also year. point, can product you there XXXX controllable if half upper relationship of particularly a really than would typically But and introducing to things to actually management and what of that’s you -- particularly would you to -- our been of us to tools, a I seen you very particularly in a and value retirement, price to dramatic stickiness outsourcing and it’s this All at we technology see know losses. about I that capability so getting fact we from to our really stickiness. we creating aggressive particularly on look be in they in our attachment we doing I those done market, begin go XXXX, degree clients have XXXX, are tell the utilization what and and just the XXXX historically. of at look, losses HR Flex we service mean, only things in with have not attachment, the in HR, go were have product this back all pieces.

we is doing is controllable do execute. there a can watching. component feel going there. side. uncontrollable continue There’s what to good the to that a to The on be this more And we we can are I structural we and monitoring always So are about thing

Kevin McVeigh

cost one terms And follow-up, it Like, if little you of know to tell will XXXX, as just variable. what variable ask, that us. more any imagine frame I a opposed investment, of was quick and there way that in repeat like fixed it of then Is the in that sounds it more I’d fourth quarter Efrain, is fair? was to kind I of would was kind could kind

Efrain Rivera

guess I Well, Kevin. so,

different answer slightly way me responsive in Let it it’s saying. hopefully and are you what a

So variable. did a in structurally long-term then There we of to increase mixture did were we one-time certain in were there place incentive. areas put there were that things we that that things as things and were wages for that --

employees would were that So, their more them that fourth of term. some not one in other with related variable was items one longer I be were was of one-time wage other There the will also -- and to did say, respect quarter. were those were structural the that and two we

there of in I but both. that buckets of part the or being base. a ended terms characterize there, it So, percentages, were it expense other three one was way up wouldn’t mix the of

Martin Mucci

And of I think guidance the said, all Efrain of increasing the obviously in is margin. as that

operating more in over margin in wage structural bonus XX% next expense, and that’s So the ongoing even expense increasing the or all though guidance. somewhere year

Efrain Rivera

Yeah. It’s important.

Kevin McVeigh

you, all. Super. Thank

Efrain Rivera

Kevin. Thanks, Okay.

Martin Mucci

Thank you.

Operator

you. Thank

with will next from Cowen. Bergin question Bryan come Our

Bryan Bergin

Thank Good guys. morning. you. Hi,

can give here. winning commentary what hoping you us dig weeks? recent there? I telling on those and on in measuring been what So is client in specifically So those specifically positive some key am on are of more a you sense you indicators have XQ broadly could

Efrain Rivera

Yeah.

So, dusted Bryan, were during indicators of looking we at was, kind we what forward COVID. did off we

down clients. So we go clock by did punches. hours to daily daily we daily and employees talking by am about punches I employee, our

information. have So to obviously we access that

all look what and On looking sharp the have base happening obvious. and look employment seeing we basis losses at then year. the with tell platforms. other that you at of moment, understand IHS of And and all look We been it sales micro the those XXX,XXX the on are pretty have significantly that we all at us, We are HIS at half look we clients. to in than in of the doesn’t not that Marty in systems that’s the weekly, indicators -- index blender daily, the of of at put What’s that different first we indicators look that are monthly put at at the our with together when and any engagement we to looking a changes. We that trends at top we mentioned, terms are seeing trends.

the as that, point, are note things you neither interest change, to So, -- ton could sharp in of of slowing world sharp looking down. know things a this not we at say corner of to information. all part can beginning the economy, at are pieces look, the look. and I this temper guys about the respect rise a to are they nor Having our will be things you I HCM looking of seeing. different corner is, but said And point caution, this seem with of with All of be inflation way our rate at

Martin Mucci

small its the demand that’s people. mid-size demand. is seeing a for That thing Bryan, products consistent, still The and services business is Yeah. finding great and and

the is employees. it’s So job index, this under growth, slowed XX if in anything if

those with and hospitality the training. client our PEO a there in and HCM still reason find will for and only so XXX trying huge have need. other engaging, there are over is in that And the hiring, technology there to you functions, sales ASO in not I and particularly you that so is them but are find more the specialists, well is hearing performed still the but a said, not growth over, who hunger Efrain As a hear there things. it to employees, is retention it’s is need front need everybody recruiting, in for in our leisure to HR support is It’s slowed able and just mean because the the people, such bit. help over a being because for space, HR in there, you knows line, little there, service are demand

Bryan Bergin

anticipating about still the can and other and as we just think kind you in ASO segment specifically, Can you built, forecast Okay. And are and fiscal Management XXXX some areas you within with Solutions, unpack, then retirement of thinking and HCM? you growth that us you versus the areas about underlying digits payroll are of help double the in grow business to how these XXXX?

Efrain Rivera

Yeah. right. about It’s

demand is see bullish based the is payroll. side, recovery macro the employees very of going you specifically, is say, pandemic, Management of things other through normalized still we in Obviously, Marty XXXX. But Solution that’s HCM of but not part those are partly of businesses. in services robust, the those we of on which which and just that to said terms has uplift on said. of the very, haven’t would we number areas very implicit, that some I all for see the the from other the the think That I continuing strong on are all on demand

Martin Mucci

Yeah.

to we and work some -- a that need the is $XXX,XXX be the help mentioned with I the ERTC generated did, continued me our Protection process retention team getting and mentioned actually to between times. a service, we Paycheck have has credit employee your additional were The let service, the this this tax billion that clients. $X was now employee we credits other say, that got at that value, down spur credits credit you tight continue let I see loans. really per retention me do will hadn’t try other those small yet, tax given in hey, year. that very things. in have thing The said, we And hey, think to other all this in successful tax helped HR That That pretty where employee business we they to credits very around me has sales average retention that really success that

We this year. are good to a already start off

subsidy. still government a getting finding from huge that are So benefit a clients of lot

Bryan Bergin

All right. Thank you.

Efrain Rivera

Thanks.

Martin Mucci

Okay.

You are welcome.

Operator

Thank you.

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

Ramsey El-Assal

question Thanks of how highlight your give know over update in of a sales sort you for wondering channels. am this digital I model. mix the if of us trended the different was the morning. I your my terms time? various clearly channels is an the curious taking contributions of have sales could from I just on

Martin Mucci

do to? John, you want

John Gibson

Yeah. Yeah. Yeah. Yeah.

channels imagine, you, continued our paychex.com, would seen But there we our share and of have continue have increase characteristics strong seen and As there. traction to sales we you and really to seen and tell pandemic. can in more very attach good What both we finding digital all demand across say, rate would also are use of have particularly doing sales payroll.com shopping. I clients I in good we the hybrid terms

discussion So help maybe services. other and up can starting ending on and products and paychex.com ERTC about with a off, in them we then then how

our this. That’s seen also new So thing can I are has when productivity. job a team other the see continue not to good the of pivoting sales, the that think we to sales done and but sales really pandemic only we hit, drive increased and very that ways how of that to buying, reality people adjusting find adapt with have we more

Ramsey El-Assal

am into fewer marketplace you out more any of you And mind of pandemic, characterize coming competitors running or kind out you is in I changes, would wouldn’t perceive you evolved? the commenting how Okay. environment the whether if if landscape competitive how the on are curious also or there the competitive

Martin Mucci

I start. Marty. will It’s. Yeah.

seeing are I it think we consistent. fairly

offer out retirement, PEP say like would first plan. and the of things ability PEP gate that, we Although, were plan I the to with the the the

with have pooled offered employer success that had yet, Other competitors. not great competitors for retirement. plan We have the not all

well. the that did and market one we So jumped really very on

hey, tax and I the through that. can we you saying, think that again, to go and receive let back if and retention go us we credits you think, me to prospect going client have employment

have that lot I a the over the We gun of that competition lack with market. that. frankly in of participation jumped surprised am

with We helped in bring our sales prospects very have well and done value that current has clients. which to

a generally, but our and I So, also I the introductions is little stronger. think have that competitive some bit the product but improvements I of us really same, think, environment positioned -- actually

introduction quarter. mid-market ago, years, the I last that back be products really first a this years think been and went you to as years sales the really the is response we four mid-market, positioned of if particularly we in over it they us, last continuing year three five haven’t strong, it’s have want strong think, I the to the into

So feeling very about in we mid-market good the are particular.

Ramsey El-Assal

Thank right. All it. Got you much. very

Martin Mucci

Okay.

Efrain Rivera

Thanks, Ramsey.

Operator

Thank you.

come of Kupferberg will Bank with from question Jason America. Our next

Jason Kupferberg

you mentioned management. front you dynamic. guys. any wanted can that know I that on morning, certain Good just for on rates quantification that increased I attach I there am driving HR products if and provide wondering start to perhaps are

John Gibson

Hi. Yeah. Jason. Hey,

the the XX-K. update We number will in of clients

So will see you that.

approaching XX,XXX are We are we XX,XXX clients. -- and between

You clients too. will see strong pretty the of double-digit in growth number there

at We give you few look exact in an will we XX-K a that number the you can file when weeks.

Martin Mucci

between employees also And outsourcing attachment time John we and I products X in a HR space worksite the million HR like our that, attendance. hit think mentioned, in things have and over great

in we technology you that punch don’t Clock. -- mask or you something their in mobile your even Iris not, that about kiosk we are -- latest use the whether out. attendance, been don’t clocks and just These introduced the have scan have we non-touch, So new talk Scan iris, time as much are they your wearing between eyes are your a the that punch and

attachment time attendance. attendance We Pre-Check. have can and have time you When in you and now and seen good very Flex, use

you okay, it. now don’t your you I If of see any sending as issues, check. is is have see we confirmed let you employees working. Pre-Check This know to you with issues it? So notice, this saying, a many you and got us Do -- recording that said hours

your let If employer know. issues, you have

before the some issue of We their employer didn’t that are that issue the something huge seeing the cut, payrolls about that they catch and time the are resolving X% benefits. that’s finding right employer, is

and are and Pre-Check those use and and attendance retention more employees of attachment time things seeing of by seeing all again are attachment attachment and retirement, So you and making clients are we so better go up. the

Jason Kupferberg

midpoint that. flow-through It up expansion on forecasted in margins roughly kind Okay. for core get your margin about Thanks XXX% wanted million would or $XX margin assuming XX looks you our of for income, basically follow-up on looks the I year-over-year that if it the to like ask is be midpoint suggest float would would right and of guide just XXXX, to and business. you which like flattish bps get of the fiscal to drive math that. that about that’s

wanted of that, this duration on I even with given for and the you can float you check a also, Thanks. So trajectory if bigger upcoming in agree the of perhaps, rate year? a wondering bit portfolio, on increase if I just income all And us have assessment? hikes, would to remind magnitude thought guess, that general some just

Efrain Rivera

math. Interesting Yeah.

process. respect doing together plan even margins business a choices only are I -- the I probably being lot the I comment that, making we around investments, in different you choices choose to dispute a think way investment that, of increase plan Jason. would points. what that are is to would that made a in XX with say where There basis wouldn’t looking make math, you put when is I at the

we the ahead choices that some made of business, was with the So discussed that some your and in could of to parts underlying of while isn’t different deploy that the It’s I it wages respect greater there to -- other we items just in leverage doesn’t not chose think probably math indicate that that we business. leverage far flow-through is off, that previously.

everything have given which things, do, area of and look but have we way that impact is we we come the This said discussions, certain especially changes, we would to year element change when The different unusual that through they the on it. second an then portfolio, how the we about the we that at walk get certain things incorporate the conservatism there is of we I’d been outlook the thing ways of to sense other that they has could have the have the there. an that fed will P&L. back in say, extent to saying think it, they some in in and have But parts in

now leverage more the choose half short-term use it. portfolio duration over if long-term. get that, right is bit we final and -- three and the to to our is about ways that positioned half have Then and choose We point is a little

levers to go if a pull portfolio or shorter even we have of We on to want longer duration address either to. there the we wanted lot if

your math. your with I just the with a about wouldn’t little would leverage business. quibble underlying bit in I quibble the conclusion So

Jason Kupferberg

Good color. I Efrain. that. Thanks, appreciate

Efrain Rivera

Sure.

Operator

Thank you.

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

Bryan Keane

morning. basis for single-digit Good points compare how revenue preliminary quarter the guidance Efrain, XXXX, Hi, would XX the gave high you detailed guys. growth margin fiscal you of last think, year expansion I guidance. of with

made to were macro out either wanted adjustments you if some there factors? due Just or figure to some other

Efrain Rivera

I if say, Bryan, this I’d kind was -- of at -- looking Yeah. it.

think or approximately so. X% we I said

stronger. So is thing out, The this year’s that this recur. I of bit not is that, a going revenues. little I call out ERTC called was was, to X% knew XQ we

to were to was of hurdle a overcome. a that going bit we that little So have

as I think that we high as year. although it be was have won’t last significant it degree, overcome to

jobs. people, really tough around what part. many with there for That there the factor is other demand fill was called are those The that Marty people unfortunately levels. to really not as employment out. happens but is There

way it’s is are. a seeing three the by lot a point let’s full-time. that about There use, a And Look, different not otherwise is for years the like are things fed but the then final in part-time is are bad way. you fill just it from have thing that. like bit at the way the to been variability years of more market we you this a that what That’s wage or So than maybe put creative looking have by filled there, employees would jobs us we ago. just perspective, and it two would thought little

of is half we happens not. back terms haven’t beyond perspective there going X.XX% with very is increase. just or what about our year a anything whether The interesting from so landing soft And assumed -- of be the to in

side April, I understand guidance be. is said this it and set we that plan interest stronger changed -- could this thinking. that said was its than some a to then, having but solid bit the -- the environment because So, -- here Hey, little so current that, lot said, all tried what a change. of create we gets And on of this March, word since us see the than we through a we to stuff fed’s that of basically were of you

So uptake been with plans of we in will involved macro, here. you. the of say, that would as any the XX probably But it’s have or I changeable XX terms

Bryan Keane

Got a a then just towards hold lot as, about Got up, it. How and the a that the recessionary some we of in model do And and recession. slowdown on high a recession global? level does an if movement U.S. a worry at are the or economic just in the there’s what high of it. see environment impact level model, could variables the a

Efrain Rivera

Yeah.

called I the we comments. out think in

I you is see kinds think in pandemic those it, that, there it is that in part actually first that would Bryan, see interesting offset, where saw up is, Marty’s, an sometimes in saw obviously less see clients even we the That’s But you the would environment. we retention processing. before you slowdown of during demand. picks

ball have the that. what’s a of on crystal don’t that, So I net

down, of also fed them the immediate would happening or some we what’s would with going interest it I decides, revenue to that just depends because help to if slowdown, And impact on from well, of an the levels at rates, side. revenue remain standpoint. interest it the ratchet have rates offset a are softness a think current

through I think it we certainly it and gradual I think we it’s if on. manage manage through will will

managing good at the a have We through bottomline. on shot

to if that kinds abrupt situations. of that, are manage handle prepared think to through those it’s we it’s I really tough

Bryan Keane

helpful. Very it. Got Thanks guys.

Efrain Rivera

Thanks.

Martin Mucci

Thanks.

Efrain Rivera

Thanks, Bryan.

Operator

Thank you.

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

Andrew Nicholas

levels? that an you at margins bit that manage leeway past have more areas some two of where to or flexibility my a environment, Hi. Good more bottomline the in a have if spend on the the environment challenging expense a of I time could Thanks that on follow you comment over for the you taking base to here bit last maybe you are economic up been year questions. made Efrain, where wanted more relative morning. to very strong where in

Efrain Rivera

Well, say, things. three I’d

if of gets thing appropriate that will So have P&L assume you to level the and through as to is it we we go, that. if bit in areas worse, handle this, you is, manage and like have a environment little a in the environment the the first see current an can slowdown we it

is So taken I That’s would precautions that. we the have on what thing. first appropriate say

we is we simply talk the the unique do we it, do. way quite have we don’t about model we but a the this Second that, We -- we and expect do. thing where bit. extent We doesn’t client the it. don’t do that hiring up to flex a To base do in that

macro terms don’t then XX% of XX% thing wages of depending the hiring, duration plan. in portfolio if in the to of of the third on we So, flexibility the we are to the seeing you XX% on the the -- then XX% And we to in get is, terms that have on do are the the benefit of environment. address what adjustments

when be manage and point There incorrect. that to I with if way, of those able lot through not everyone being right prove tools, of everyone that the history went in toolkit will, any is April down think guide. thought has challenging. and gone stock are was we environment were But $XX is, front out and going more just of no in there to able I be you history the us. we by the in XXXX, to of are terms would through. remember thing shown least should is a manage could I that here the to that environments precedent, in say, others, certainly I’d at the this to one be

Martin Mucci

need costs How that very many -- I and well. down? Yeah. some those recession, depending the on times will some other How could even some for that be during we -- clients pandemic do that there for do And during think I could HR I thing, respond we -- my during support. a of think need showed for the the more manage to I

need and economy way So and you. with in be you the down, and keep the manage that HR, did we really we technology got to broad and when you Efrain growing cost recession hire support thought, to If know, extremely to I need fast products, they you there you with able their the and as we is if it’s jeez, help in are your help quite think showed and we it’s and you have I things you -- people technology the the to need that and to the said turn are people a to people the do well. will we or the help don’t as pandemic well out margins, that people growth to

And have and we able period, during other hire that that learned too. now got we as through you costs have we mentioned, where you recessionary so but the fact even also -- more could give lot some a pandemic hiring, before that a probably very not and hybrid flexibility Efrain which out that we obviously more have remote use been drive workforces out than from of levers few frankly one is a the

Andrew Nicholas

to all you there for little a That’s you. specifically just a very performance the quick No. insurance more helpful. Great. to that the kind quarter, on of can Thank up, you. business talk PEO I within fourth bit that segment? question then Thank coming And relative want the of the

Efrain Rivera

PEO of insurance in stream? mean revenue insurance or the as you the part So part PEO of

Andrew Nicholas

Thank you. latter. The Yeah.

Efrain Rivera

Okay. Do you to… want

Martin Mucci

want, John. Yeah. you Do

Efrain Rivera

I think.

Martin Mucci

Yeah. Take it.

John Gibson

Yeah.

-- talking of so within I are understand just is you the performing. and PEO attachment the the think insurance how question, about I how the insurance

Andrew Nicholas

on basis… guess, kind PEO of you business business within the to segment, break relative that I standalone just could down I insurance Yeah. -- if am just the

John Gibson

Yeah. Yeah.

Andrew Nicholas

helpful. be would That

John Gibson

Yeah.

rate. say would and but able put demand their employers, in are benefits be that the benefits business in for larger we segment a would to to about growth, to Again, slightly keep attract they where really cities. that attract I to I said, they they PEO the that trying call small are employees talked what again, against support particularly say going very to strong two back clients of to have together had, keep we growth the So, this, employees. of that’s think increase the to I double-digit insurance below compete well, and portfolio last tale continues

good time. health soft PNC, growth So there. demand good to we for been in there and see are again and long it’s -- we continue market benefits, a

attachment rate but see we that’s a So base. our seen still a of issue, more bit attachment good always in -- there have that historical

demand it, health predominantly and insurance for of right still So by led performance benefits. the the behind strong PEO,

Martin Mucci

my broad mentioned thing in worked And I was team PEO really the hard, the -- the other we comments John’s broaden in PEO, have offering. the

health you broader as to So to other small that health really, about John say, support right yourself. very the dental and envision just it’s you offering this can now, PEO it’s bring offer can not particular businesses said, hey, that and you not would able can hot now plans is things you mental insurance offer be can more to in do and that offer by in other

that the growth the the creativity can PEO So shown in that we with give the has them. is supported team really offerings that

John Gibson

to able comments, things their The of PEO said, attachment for our employees. that stated, that us and we and our seen it’s of have attachment. the thought seeing to be have benefits, saw XXX(k), the health well provide generally these that we in clients, the maybe attachment they received want we from was. across even opportunity to now the Marty as so very gravitating to technology Those what I that are very, Board other things towards been That’s really in question part the Yeah. the we tools one and add the and

to of open all our insurance able we a and revenue. enrollment think over benefits generate offer that voluntary back are to and clients period, other to you set be So will going our whole of of October, course will going start all we about and when which the to go all PEO add of now those the are are in

as more the well. is clients the again, the another that So, helps way to and not only also does it benefits but that revenue offering their help retention, employees

the marketplace are seeing there. demand We good in

Efrain Rivera

Yeah.

John lower workers’ that be a absent on continues side based to the of the very, the than said, number fact on years. over market Andrew, comp revenue -- side the Sorry. PEO the as insurance growth of a very

Andrew Nicholas

No. That’s helpful.

it. You did it I answering didn’t tonight. a ask much better job

So I appreciate it.

Efrain Rivera

Thanks. all. at Not No. No.

Operator

Thank you.

with Northcoast comes question Kartik from Research. next Our Mehta

Kartik Mehta

morning. Good

Efrain Rivera

Good morning.

Kartik Mehta

on Marty, manage I good have maybe, on wondering, am business. I slowdowns know manage you a think or talked time would past would the you a on based how little bit about all seen, based could some have in than you a might recession Paychex be any and you Efrain different? investing? you that the Would you you hiring different mean answer this I of learned? gave as continue what

Martin Mucci

Well, not seeing I as Kartik, that are now, slowdown. really we right mentioned,

at beginning the really behind difficult side the year year we HR got on half of of in mean, to in are little So, going hiring, we made and fiscal it get into yeah, and I the bit and that ahead the great actually over-staffed the now actually we of last a particular was team right in service John last headway the year. because

very with we are pleased that. So

decisions. and making, we in benefits that compensation investments hiring are strong we now. attracting are made still The So

service, but better. back track and attracting We individuals not looking only our getting more retention on are is sales and

was are are of forces out handling don’t more more So, and and hybrid yeah, learned that. in work, pandemic are a those different in remote through that sales the as though, of and selling, think and could lot think, I I the digital ways manage well we what mentioned I where for are flexibility we coming marketplace differently, how prepared they sales there sales in is more we

those we to are always we all yeah, and So, think very so. record breaking It’s the some are and about and learning are I pandemic we the have in and and I set decisions certainly successful. Obviously, had that pleased good think right right certainly made up place making have well another learned were during people you having year with ones. we for XXXX a we very one, fiscal we

Kartik Mehta

that about of areas retirement growth that in continue am business. you had programs one success And can then that maybe you wondering the the plan talk have like is of in been SMBs. Efrain, to you had have if that successful I California I kind expect has and how they think just, for mandates

Martin Mucci

Yeah. I It’s take Marty. Kartik. will that,

what we free, Paychex retirement But and plan a the think that against a to bit a very we lot to don’t that early understanding basic free. California business are in last this even we was, were really that have small respond and was a of We advertising generated found higher summer month the early for so little I successful. because mandates retirement of on a did very penalty is little that always business advertising effective mandate, really that. were to some fighting had a going rate had the provider

very done We have well.

in had sales history. retirement, obviously retirement So we in in have -- in growth the California, fastest our retirement

as so see has the been that advertising, there we And forth. a out in federal made we so successful and we carry timing we there, that think and comes marketing to and that little well we maybe learned made of very on on even the maybe if but and approach approach Secure will a the certainly other retirement mandate, have states it Act

Kartik Mehta

Appreciate Thanks, it. Marty. you. Thank

Martin Mucci

Kartik. right, All

Operator

Thank you.

will next Peter question with come Christiansen Our from Citi.

Peter Christiansen

activity Good in morning, that’s I your it know clients, and indicator a both the a out sometimes before, called bit chance I a I gentlemen. just cycle. at know little the Thanks staffing you here. been ends giving of the was leading for wondering, industry, staffing question

if and into if wondering seeing dig maybe around can the bit into that you you little of Just about dig you you some there color are a that? are could -- implications thinking

Efrain Rivera

Yeah. some analyst. and That’s of a staffing interesting question you really are

a this but to we a small very I successful bit do, staffing had firms. medium what for funding to do and we provide everyone. larger year, some here’s you, differ to typically and little year is very, What set with level size, have So we just

a And window right have we business. the very are now So into the staffing very, with well. doing staffing is what businesses in happening trends

So demand services. for a lot of there’s

light the of economy, of But It this, the six well, probably lot has but and that portions and the demand. can labor to surprising, are certain would used over say, rebound disciplines, seems you of many In you occupations know I portions been three nursing of is other months lot of in I a -- that economy. why labor, seeing skilled been a You the like argue, is what’s there’s of that? the temp months last in that business. technical part industrial. called what’s skilled

that. we that more of that for we the any are typically projected themselves flexibility the do So on continue terms it’s collar that and through to that is starting know It robust But demand is -- from demand. is a of be indications year. blue of are people benefiting absolute don’t and number to end workforce. argued we What the perhaps temp the workers position work. that’s the that have more to up could in It’s

Peter Christiansen

in Okay. there That’s for growth, could guess, products pricing PEP you there just had helpful, last contribution, you and overall year? Efrain. plan, value-based frame had growth that, sure. like way And I But the I and retention like where realize then, product like like again, of that a is what the has things attach -- things any help on back I products certainly phenomenal type think, like

Efrain Rivera

Yeah.

So it’s it I going out, called I two characterize fair to not. ways. say I think am it to because it’s

above it’s way the of bit for little revenue a The year. say, X% been first I’d

review profound highlight great is said, Marty product product on a obviously clients and about that I impact great it but the was of had would like a thing we the that it. a and So something that has

the impact of opportunity If and it and had second I really, the is good really mentioned they the because part that of a It’s that Marty That’s you still good. good. the the there is reality on it you are But good not lot testimonials think them. stories, are in But is, clients just got PEP. the that, feel are they saw it to feel important about important amazing.

going that we So same benefit, not we benefit last to year, are but we this got to expect to year a will level continue get get. continue the we of

Martin Mucci

clarify, I term you ERTC, think, used he Peter? PEP, to Did you say, Efrain, just have said might PEP.

Peter Christiansen

Yeah.

Efrain Rivera

PEP. talking about He is the

Martin Mucci

Okay. Everybody, a I apologize. Yeah. PEP bit different. little is

ERTC, relationship on final that a important simply to that that of cementing a or point. PEP I Paychex. are clients provide terms the suite say is there of services is would set in a really that, or whether So with very it’s we

was PEP. So year this it’s ERTC. it year Last

opportunities the say, cement on lookout or that what that so are I clients, constantly John? relationship sorry. to We with

John Gibson

Yeah. I know…

Martin Mucci

talking about apologize. ERTC, He would

John Gibson

attaching Price, see measurable lot at and clients ability plan they two improvement XXX(k) are much that to traditional of they said Those because things there’s a are Yeah. And get say Peter. of supportive when are that at and look products because as with those out machine in basis. deciding because clients that companies small that good the who talking plan, a we is in that and look complexities resonating be to daily I an for from so, I that in whatever these this on places, credit driving HR not innovation are which Those well our of appreciative XXX would PEP somewhat tax from go are some also business our I are assistance. other and value can closely. we owners areas price. a more that, again, are that to reduces in probably not I cousins package the a the very our with reason, other add professionals of get as there really clients that those, overall if is the to to retention price nearly can we you

package leveraging having our building that combination in and resonating a a and that the getting technology I just of I mean the us ERTC done. support mean, it’s also have stories, real they advice again in really and hear field then So the to that our help calling with stories their the business are individuals Marty, them really It’s -- we about clients. Efrain and for mentioned saving the appreciative. I helping how thanking people plan PEP and well me is hear me and

Martin Mucci

Yeah.

heard sorry about and… I Just, that. PEP

John Gibson

Yeah.

Martin Mucci

… be ERTC. to I interpreted

solutions. that, of management I other that and the quantification of say that it’s the growth The thing part is would

digits a revenue took PEP on single-digit of approaching happened back a solution. business, retirement that and take upper basis to and ability single our business you If the post-PEP, what we of XX% on been growth driven it’s kind pre-PEP and really the mid to offer to from

So, sorry into about the digression ERTC.

Peter Christiansen

But Last it No That’s ramping peers might did, that. I you mentioned minimal. some color great John still activity price have are I No. been up in value losses Efrain, before to like you discounting the promotional from from really seeing maybe me, or market. innovation worry. machine cousins. one the and John and really earlier

and the sense elasticity for market that’s Just versus whether your overall pre-pandemic pricing different today? for across

Martin Mucci

pretty feels it feel I obliviously, we think, prices. our -- good,

but therefore benefited it’s it. worth easily. well. that we the me talking very those end, by we it’s the of of been Those I have the had the we hey, on driving to them -- bringing price. think, much come good help fact really retention retention all But given feel have solutions, we we price We that think have digital that quickly the and think and forgiven the employee continuing helping really John could impacts product and them that price PPP and elasticity to adding, well hire increase about pandemic The higher And impacted time added -- and opportunity -- tax value am come earlier with is feel credit pandemic really we fact that, be this that Efrain good a or past. opportunity people, is things the of really we show through recession kind bundle the very that of that I giving I we the is other driving for and the with are down a than saying, forth. it toward on more in them than I retain probably depends for because but products -- mentioned I very more teams during price the by period the as for very so us been much the there the company the to products, right value loan were mentioned value other much -- we as that in value losses them are that think took out value focus how about that sees we and remotely that things on their handle as strong less difficult now John I people, paperless their we as in that,

Peter Christiansen

the Thank detail you, appreciate I color. gentlemen.

Efrain Rivera

Thank you.

Martin Mucci

Peter. right, All Thanks.

Operator

you. Thank

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

Jonathan Lee

valuation if your Hey, James. in Jonathan than recessionary on strategy environment, is change attractive M&A How guys. does particularly for private get see drop This material opportunities? were a we you around to

Martin Mucci

Well, we would love that.

don’t on I that think yet. We not And in side nice quite the the seen. various up we see We still have valuations but that caught have talked the all about markets hunt. in opportunities happened the that past, that we at have are always valuations private on some seem

kind follow So, it we behind side of are it. does expecting, of typically the public

it’s We the the things on take and a better up, on markets positioned will to lose valuation. just about, But see advantage in get happen, positioned much talked it recession lot because what the with think is sure they conservative approaches, of of well opportunities you of happens. there lot kind I can will are much come that whether private a already themselves a some we see cost cutting make of the don’t of where to more repricing that cash that valuations, to or a Efrain so

So, we are closely. watching very

will we keep think to to even better have and valuations, it to a in I continuing an past talked are opportunity. We talk the that we but eye those companies in gives

Jonathan Lee

a focused called on product Got are and investment out you it. IT, development product improving portfolio tech that perspective. or you from further where Appreciate And in perspective?

Martin Mucci

Yeah.

standpoint, continues the to think just it sales from digital I side. think particularly be a I on

it’s You themselves. buying to able is the much do about process more just that being it obvious --

themselves whether bringing and mentioned rep it involved, or need or sales also or whether demo. it’s so sales engineer a or Flex John a that then doing web the I research, a those some think in person or then and person we is digital whether that Sure. in in want availability, is have of the a earlier, for on rep sales going still far -- that it’s it’s through on whether go the web and it’s And there buying it’s a combination format,

I think partnership to that today roadmaps that And are choose continue connected those out pay is much for just availability want through also years So think -- Product and to more access, we to see that continuing and those the layout also flexibility investments continue. be wage we planned investments earned we the product well. way something and the who is investments, But expand. Certainly access offer to I will the next with. expand, we a and -- will overall from pay. two demand, we to pay ability

certain of are of expanding really we So but API keep business, to HR, APIs to, that our if portions gain opportunity. have an standpoint, very Flex you the the busy from set you of power want

why set. still have and show levels a guided we margins that has actually investment produce investing are about that we of of So to, in and the are we can we talked fact significantly proud and lot Efrain continued digital a very product the

Jonathan Lee

color, Thanks guys. for the

Efrain Rivera

Okay.

welcome. are You

Martin Mucci

Thank you.

Operator

Thank you.

Our Mark Baird. question with from comes Marcon next

Mark Marcon

Wondering, asked little has different been Hey. Good want but question way. and ask Efrain morning, John. bit, a I to a this Marty, in

If out different? been If a rates didn’t there perspective. experienced, all the the if are macro -- higher are you if would see macro you aware are, see all and you of you obviously, all headlines, all higher of are impact see hadn’t headlines the that you ultimately you and didn’t have from of didn’t the guidance how macro we rates

Martin Mucci

are more on this. You

Efrain Rivera

I would disaggregate looking that and can -- question I just this, at say Mark, indicators. if you I am say,

So and saw. indicators that we indicators, before we would presented the with say it’s we we put the a hard than to are are the plan much plan just be a people that we the it, together It’s are because these different plan. me, are looking at that team at not that say, looking of

would interest You have lower rates.

of all X% little was have faster we out pandemic, a You at before but about CAGR digitizing, about with on leadership made on because team. the up, take into more end were you this the bit I that, that. just shared come you trending different. in all But our investments we side. and the might I going of rate, pandemic still the pandemic-related the Pre-pandemic, wouldn’t occurred, on a digitalizing, things it these operating of automating, pandemic -- XX% all we the it the topline push X% into of CAGR bottomline. leading bit remind significantly did and growing name in than it, of lot the the if occurred, growth were pandemic, a little a impacts people the we we be We are doing

so the have uptrend And so was lot if part the company and that by way, in double-digit pretty like I looking at of record the something the doing long Marty -- this deliver growth, those single-digit year would there a DNA track and has which you of that the the And an were upper bottomline, of are continue. on close company. the to business operated is would actions expected, a we of way team

So, I my answer to guess, question. that’s the

Martin Mucci

when I Mark, And add, it. you just at look Yeah. would

up a tailwind Efrain So -- if you assume rate. is interest mentioned interest we as from and there rates go obviously the

that hand, other around small the the slow market of On could there’s some housing business housing. and a lot

offsetting it. that’s So

that account the overall, we pandemic, we changing. up -- So take whether pandemic the and there’s rates as the is have offsets well. the that’s a higher think, had growth into interest Efrain rate into of said, were as I really And through account take rates with consistent before that to we been come out interest

business and is development take will that risk we growth. know small also but comes the with tailwind, We there that that some for

Mark Marcon

just more little those That’s assumption? is into conservative than I bit is great, you been. a Marty. macro my have that headlines, would see probably account not do the probably mean, and were that -- correct sense I a headlines all took you I macro

Efrain Rivera

Mark. Hey,

amount and exactly know very tell and specific. you they but have a other predictability consistency do. think what it the we tell me out with The course, way, just that’s is, answer is, that way that we the business, just the the one it would of be and what fair -- that’s competitors we issue because we business. isn’t way I the call I run am is it and to we when not we business have don’t, so right, the of not more Let we have in this say saying we challenge been transparent we you The street,

specific of your year. is, the first first see answer good to half year of We the is. the we question pretty about the So, can the feel where half

it second the this year the Here’s half it that factors there The macro effect are impact It’s gets bit point, the going little macro not have year. and second where is the was will that into up lining of same Marty’s it’s that half of kind where fact cloudier. to we had of to the cloudier to exactly a isn’t the take way year. we

We half. pretty we good feel So the looked that. at first about

second we update will half the it. year, as The go we through

don’t we pretty the to understand even struggling everything know view you think it now. is got fed indicators macro looking what But have we the a at. on remind based to that like what looks they of need I I good are

Mark Marcon

then, to the fourth the then, breakdown in mid-market? And with logos specifically characterize bookings, and micro of upsells? would pipeline is seeing Understood. what Yeah. terms growth versus hey, the you are you looking bookings how to to you up versus that and SBS how you seeing And can with ended regards extent new regards quarter versus

Martin Mucci

Yeah.

of been the couple across think, I called Board, we that particular strong really in strong. pretty out times, a midmarket is have

as quarter, done and this last year have I starting think very we well in fiscal as first continued. off well

the struggling very doing little really everything we I is be the and out. a and And competition small against that sales market execution with the think bit putting might very we strong midmarket driven the to I that the feel product think the on results be okay. continues well the are side, in we things are

on bit in probably the and and micro, strong. side. they the Flex particular, think be on growth very to are growth struggling solid I continues more to we had Sure, the are little have ones then continue that very a

the across so shape I and fully of rep the from into was whether best in the frankly, that staffed, ever ASO, heading a the Board, PEO, really good bit had most, much think year pretty little shape. growth HR, So Board, retirement, but Board and about side, so. talking their the sales good payroll the every really I side, you Sales across are mean, in area, quarter, across

Mark Marcon

upsells Great. percentage And new versus what of are the logos? bookings

Martin Mucci

good sales new say, businesses I a have half but roughly payroll still coming have haven’t is really business side. on very somewhat, the in the and XX% winning we same. had Oh! new business. side, -- it’s track on particularly new still payroll the about I’d the of say would still we on about slowed record It’s

Mark Marcon

Thank Terrific. you.

Martin Mucci

you, Thank Mark. Okay.

Operator

you. Thank

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

Scott Wurtzel

guys. down Good to we pretty was half. relative for ask first the bit margins guide my Hey. I morning, look on thought for questions. margins, little to at a like guiding wanted full Thanks the year just to the wanted for be encouraging, but half adjusted the to year. first just taking last It operating looks are you

was what that to is takes other wondering inflation, impacts mostly around the sort -- the more puts have just sort you that, So and it of taken there? of it any there increased due wage headcount of

Efrain Rivera

our of What levels that, were year, are because lower. when in dig half employment in the that the seeing, our you underneath part Yeah. first you margins is stronger were

the year wage were took. of actions staffed half I and we in fully kept that last in staffed saying fully addition that staffed now first adequately the are So not we the to and we year

impact benefit the half back an first margin you half. driving down the the has then and that in in So get of

Scott Wurtzel

it. maybe what this. yield? on interest are sort puts may balance unpack any missed then, is way Got fund sorry, it. I I the but and on if can of just you client like what’s Thank have you. and Got discussed, guidance, know you the was just, it expecting And income there between growth takes

Efrain Rivera

Yeah.

We are expecting balance growth. modest

strong this growth We year. have had pretty balance

our the -- by what between end being year. of is fed is and driven the the really anticipation now So do growth going to really

But it’s on wage we are driven. expecting balance So to rate inflation. client interest growth based more really

Scott Wurtzel

Thanks, guys. Got it.

Efrain Rivera

Yeah.

You welcome. are

Operator

does call. the today’s Thank you. of conclude This session question-and-answer

Martin Mucci

right. All

Operator

I would back like to turn over our to it speakers.

Martin Mucci

At All the will we call. point, right. you. this Thank close

the our If I Talk conference you summer. taking participate you of and your time call, hope the quarter soon. enjoy webcast conference for safe this interested interest you earnings Thank very the archived thank are days strong in happy release and in XX to it’s you in all and fourth replaying call for approximately Paychex. you. to

Operator

Thank we does and and conference This your ladies participation. gentlemen. conclude you, appreciate today’s call

may You time. disconnect any at

Paychex (PAYX) 29 Jun 222022 Q4 Earnings call transcript