Q1 2025 Paychex Inc Earnings Call

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Speaker Change: Good morning and welcome to the first quarter 2025 Paychecks earnings conference call.

Speaker Change: for participating on the call today or John Gibson and Bob Schrader.

Speaker Change: After the speaker's opening remarks, there will be a question and answer period. If you would like to ask a question during his time, simply press stars number one on your telephone keypad.

Speaker Change: If you would like to withdraw your question, please press star 2.

Speaker Change: As a reminder, this conference is being recorded and your participation implies consent to our recording of this call. If you do not agree with these terms, please just connect at this time. I would now like to turn the call over to Bob Strater, Chief Financial Officer. Please go ahead.

Speaker Change: Thank you for joining us for our review of Paychex First Quarter 2021, Financial Results. Joining me today is our CEO, John Gibson.

Speaker Change: This morning before the market opened, we released our financial results for the first quarter and it August 31st, 2024. You can access our earnings release in investor presentation on the SEC's website as well as on our investor relations website. Our form 10Q will be filed with the SEC in the next few days.

Speaker Change: This teleconference is being broadcast over the internet and will be archived and available on our website for approximately 90 days.

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

Speaker Change: During our call, we will also reference some non-gap financial measures, a description of these items, along with our reconciliation of the non-gap measures can be found in our earnings release. I will now turn the call over to our CEO, John Gibson.

John Gibson: Thank you, Bob, and good morning everyone. I'm going to start today's call with an update on business highlights for the first quarter. And then turn it back over to Bob for a financial update. And then of course we will open it up for your questions.

Speaker Change: As we enter the post-pandemic era of paychecks, we are off to a good start in fiscal year 2025, with total revenue growth exceeding expectations during the first quarter.

Speaker Change: Excluding the impact of non-reoccurring benefits from the GrTC program and having one less processing day in the quarter, revenue growth was 7%.

Speaker Change: has the best operators in the business. We also delivered earnings for share growth. Despite these headwinds, through strong expense this month.

Speaker Change: Small and midsize businesses remain resilient as the U.S. Labor Market gradually returns to its pre-pandemic level.

Speaker Change: Well, growth and hiring has moderated, hiring within our client-based during the first quarter was positive and better than expected across our HCM and HR outsourcing businesses.

Speaker Change: We continue to make investment in transition.

Speaker Change: are a go to market capabilities and products suite to meet the post-pandemic market and drive continuous innovation in our technology and advisory solutions.

Speaker Change: We are excited to launch several new products that are specifically designed to address a constant challenge for small and mid-sized businesses.

Speaker Change: and that simply is finding and retaining qualified employees.

Speaker Change: Our P-Check Flex Engage offering combined with P-Check Flex Perks.

Speaker Change: which was named a top HR product.

Speaker Change: of the year by HR Resource Executive Magazine and a recently announced paychecks recruiting co-pilot are digitally and AI-driven solutions designed to help our clients succeed and when the war for talent in a very challenging labor market.

Speaker Change: These are examples how we are constantly looking for ways to bring enterprise solutions to the SMB market to really level the playing field.

Speaker Change: Flex Engage is a comprehensive digital solution with generators AI capabilities to help businesses manage their workflows, promote communication within your organization, and increase collaboration between employees, many of whom are remote.

Speaker Change: Since launch we've seen interest from businesses across the spectrum of industries and size groups.

Speaker Change: Our award-winning Paycheck's perks offering is a digital marketplace that provides employees access to affordable benefits and discounted products and services.

Speaker Change: PageExperts is attracted to employers as it is available at no cost to the employer and the payments are processed automatically through payroll deductions by the employee.

Speaker Change: This allows us to establish a long-term customer relationship with our clients' employees.

Speaker Change: Our initial in launch includes 17 unique products ranging from voluntary lifestyle benefits to early wage access.

Speaker Change: We will continue to be opportunistic when considering adding other products and services to our marketplace.

Speaker Change: This new capability, which we have been investing in for years, allows us to engage our clients and queries with AI-driven offerings that meet their specific needs in our Flex HCM app.

Speaker Change: It also opens up an exciting new market for us and it's another example of how we are helping small in this size businesses compete for talent against larger companies.

Speaker Change: Recruiting, as we all know, is a costly and time-consuming process. According to a recent Paychecks customer study, 80% of respondents reported that finding qualified candidate is challenging.

Speaker Change: Last year we launched a new program in our PO called the Employer of Choice Playbook, which was designed to help our customers find qualified candidates.

Speaker Change: We are excited to add a new solution to the playbook, not only for the PO, but also all-pick-checked customers.

Speaker Change: and non-Pagex customers with a recent announcement of an AI-assisted recruiting tool for small and mid-sized business owners and HR professionals called the Pagex Recruiting Co-Pilot.

Speaker Change: We believe this new solution will revolutionize recruiting and hiring process by enabling PCHX customers to quickly find top talent instead of relying solely on traditional recruiting methods.

Speaker Change: Paychex recruiting co-pilot analyzes millions of potential employees through a natural language search engine to quickly produce an active list of qualified individuals for open positions. Based upon numerous requirements and other attributes.

Speaker Change: This puts advanced technology that is often only available to enterprise level organizations on large professional recruiting firms into the hands of small and mid-sized companies so they can more effectively compete for talent.

Speaker Change: As you know, paycheck has a long history and experience with AI and we believe Internet AI offers an entirely new set of opportunities.

Speaker Change: We have a large and growing data set which we believe provides us with a significant competitive advantage in the years ahead.

Speaker Change: We have tens of millions of interactions with our clients and their employees every month. We have predicted an AI model deployed across the company with a focus on sales and service and the ability to deliver actual insights based on our vast data set to help our customer succeed.

Speaker Change: T-Tracks is uniquely positioned to be a leader in bringing the power of AI to small and mid-sized businesses.

Speaker Change: The breadth and quality of our solutions allow us to solve problems for business owners by leveraging our best in class data set and HR advisory capabilities to help them win in today's economy.

Speaker Change: We continue to gain recognition with the strength of our HCM technology innovation as well.

Speaker Change: In addition to winning a top HR product of the year for Paycheck's Purks, which I would remind everyone is the fourth time at Paycheck's solution has the name for the top HR product of the year list for of the past five years.

Speaker Change: 4 of the past five years. We also earned an HR tech award for best-small business focus solution and the core HR workforce category for the fifth consecutive year from Lighthouse Research Advisory. This is an area I continue to believe we're not getting our due recognition.

Speaker Change: Hey, Checks, was also recently included in Times in Agarulis of America's best mid-sized company space on the strength of the company's culture, business results, and corporate responsibility efforts.

Speaker Change: Paycheck is uniquely well positioned to solve the problems for small and mid-sized businesses based upon our comprehensive suite of HCM solutions, our advisory expertise, and the insights gained from our large data set and constant interactions with small and mid-sized businesses.

Speaker Change: We remain firmly committed to our purpose of helping businesses succeed while also making a positive impact on our client, employees, communities and shareholders.

Speaker Change: I will now turn it over to Bob to give you as a brief update on our financial results for the first quarter. Bob, yeah, thank you, John, and good morning, everyone. I'll start with a summary of our fiscal quarter's financial results and then provide an update on our fiscal 25 outlook.

Bob: took a revenue increase 3% to 1.3 billion in the first quarter, which refluxed headwinds from the expiration of the ERTC program and having one less processing day as compared to the prior year period.

Bob: These two items impacted growth by approximately 400 basis points, which is consistent with the expectation we shared with you last quarter. As John mentioned, excluding these headwinds, toll revenue in the quarter through 7%.

May: May as the solution to revenue increased 1% to $962 million.

John Gibson: This was primarily driven by growth in the number of clients served across our suite of ATM solutions.

John Gibson: and Higher Client worksite employees in our HR solutions.

John Gibson: as well as higher product penetration. Those items were partially offset by the year TC had when that we previously discussed.

John Gibson: P.O. and insurance solutions revenue increased 7% to 319 million, primarily driven by higher average work-selling employees and higher P.O. insurance revenues.

John Gibson: Interest on Funds Health requires increased 15% to $38 million. This is primarily due to higher average interest rates and higher invested balances.

John Gibson: To all expenses for the quarter increase 3% to 772 million.

John Gibson: and this is primarily due to higher peo-direct insurance costs related to growth in our average work site employees within the PO as well as higher peo insurance revenues.

John Gibson: We've also had continued investments in product innovation, AI and our Gordon-Market strategies.

John Gibson: Operating in comes through 2% to 547 million with an operating margin of 41.5%. I'd like to remind everyone operating income was also impacted by the expiration of the ERTC program as well as the one last processing day during the quarter.

John Gibson: Looting earnings per share increase 2% to a dollar 18 per share and adjusted looted earnings per share increase 2% to a dollar 16 per share in the first quarter and those items were also impacted by the headwinds that we previously discussed.

John Gibson: Now turning to our financial position. Our financial position remains strong. We ended the court with cash, restrict the cash and total corporate investments of 1.6 billion and borrowings of approximately 818 million.

John Gibson: Cash Flow from Operations was 546 million in the first quarter, driven by net income and changes in working capital, influenced by timing.

John Gibson: We return to total of $457 million to shareholders during the quarter. This included $353 million of dividends and $104 million of share repurchases. And our 12 month rolling return on equity remains robust at 46%.

Speaker Change: I'll turn to our guidance for the fiscal year and it made 31, 2025. We have maintained our guidance pretty much in all of the categories with the exception of updates to our interest rate assumptions for the remaining of the fiscal year.

Speaker Change: Our Outlook now assumes a total of 125 basis points of cuts to the short-term rate on a full-year basis, which directly impacts our interest on fun, health, requirements, revenue, and other income. Our Outlook also assumes a continuation of the current macro environment.

Speaker Change: A current outlook is as follows.

Speaker Change: Tol Revenue is still expected to grow in the range of 4 to 5.5%. And I'd like to remind everyone this does include approximately 200 basis points of headwind from the expiration of the ERTC program.

Speaker Change: Management Solutions is still expected to grow in the range of three to four percent for the year. No changes to our PPO and insurance guidance that is still expected to grow in the range of seven to nine percent.

Speaker Change: The two changes that we have in guidance, as I mentioned, are related to interest rates of first being interest on fund self-requince is expected to be in the range of 145 to 155 million. That's down from our previous guidance of 150 to 160 million.

Speaker Change: Other income net is expected to be income in the range of 30 to 35 million and that's down from our previous guidance of 35 to 40 million. No change to our operating income margins guidance is still expected to be in the range of 42 to 43%.

Speaker Change: Our effective income tax range is still expected to be in the range of 24 to 25%.

Speaker Change: and despite the changes to the interest rates that I discussed or adjusted the looted earnings per share guidance is still expected to grow in the range of 5% to 7% for the year.

Speaker Change: I'll turn it to the second quarter, provide a little bit of color, we would in titspace, total revenue growth.

Speaker Change: in the second quarter to be between four to five percent and this too includes approximately 200 basis points of headwind from the expiration of the ERTC program and then we would also expect operating margin in the quarter to be in the second quarter to be approximately 40 percent.

Speaker Change: Of course, all this is based on our current assumptions, which are subject to change and we'll update you again when we get to the second quarter call. I will refer you to our best research slides on our website for additional information and with that I'll turn the call back to John. Thank you Bob and we will now open the call up to your questions.

Speaker Change: Thank you. And ladies and gentlemen, at this time, the floor is open for your questions. To ask a question, please press star 1 of your telephone keypad to get out of the queue, press star 2.

Speaker Change: We do ask that you limit yourself to one question and one follow-up to that everyone has a chance to ask their questions.

Speaker Change: and we will take our first question from Mark Morgan with Beard.

Mark Morgan: Good morning and thanks for taking my my questions two questions first.

Mark Morgan: with regards to the environment that you're currently seeing.

Speaker Change: How would you differentiate the true small business market relative to the upper end of your target range companies with 50 to say 1,000 employees?

Speaker Change: How are you John, how are you?

Speaker Change: I would say this is what we're seeing at pretty consistently across the board as we continue to see modern growth in the small and mid-market.

Speaker Change: I would say from a demand perspective, certainly what we're seeing across the board is a lot more demand for driving efficiency or HR outsourcing. I think the pure tech play particularly up in the mid-market enterprise.

Speaker Change: I see a little bit slower decision making going on there, but we're not seeing that in the upper end of our HR outsourcing market so I think right now what I see across the board of businesses are trying to drive efficiency and are looking for opportunities to reduce cost in the business.

Speaker Change: And then the second question is, you know, I had the pleasure of, you know, renewing all of your new solutions.

Speaker Change: at HR Tech, and the team there just did a tremendous job in terms of giving a really professional presentation.

Speaker Change: The solutions were very impressive. I was really struck by the recruiting copilot.

Speaker Change: But one thing that struck me also was that it seems like a lot of the tools.

Speaker Change: For example, the flex benefits I think was benefit.

Speaker Change: you know, every company.

Speaker Change: Some of the other tools seem to be more geared towards companies that we're a little bit larger. So what I was wondering is, you know, to what extent do you think you could become?

Speaker Change: and even bigger player in the upper end of your market. Or how would you characterize where the tools are best employed?

Speaker Change: Mark, I think first of all I would start with, you know, we have a very large upper mid-market business, and half or a decade.

Speaker Change: I think I said, I don't think we get the recognition or people recognize the strength that we have there both in terms of capability from a technology perspective in an advisory solution perspective.

Speaker Change: I think when you step back and look at the products and services that were focused on delivering, we believe there's things to really apply across the spectrum of the market that we serve.

Speaker Change: Finding qualified people is a problem that every small business is having, every mid-sized business is having, and I think what we've had a reputation is doing, what does you look at it? What we did to bring 401k down to the small argument.

Speaker Change: I, you know, over 20, you know, 20, 20 years ago.

Speaker Change: when you look at what we've done to bring an efficient, you know, P&C workers' cop program to this small market to do that efficiently.

Speaker Change: That's always kind of being an RDNA, so I think what we're trying to do is take what are typically tools and capabilities that are reserved for our general prices and figure out how to economic agreements down the small business owners.

Speaker Change: So they can succeed so recruiting is a big issue. We're really excited about the Co-Pilot product. The other thing I would say about Co-Pilot product is that's not just for paychecks.

Speaker Change: That's fine.

Speaker Change: You can go on T-checks.com today on our website, you can buy that digitally, you can try it for a one-time or you can sign up for a subscription service. So, regardless of who your HCM provider may be, we want to help small businesses grow and so that's pretty important.

Speaker Change: The second thing that I think you would say is...

Speaker Change: Getting access to affordable benefits, providing affordable benefits, both to retracting and obtain qualified employees' problem. It's always a safe small, medium-sized businesses.

Speaker Change: So that's where you get into our PX Perth product. We already have a full suite of insurance products as you know, those in terms of their agency as well as in our PEO. But the Perth product I really like it because it gives us employees who may be can't afford to offer benefits.

Speaker Change: A means to afford it, so basically what that works is we've curated digitally, a set of benefits for their employees that will learn points get on boarded into our Flex app.

Speaker Change: They're going through an open enrollment, and all of these benefits.

Speaker Change: Costs the employer, nothing. So the employer can tell a little point to join these, you're going to get all these benefits. And then the employee decides, after these benefits, we do the payroll to die. Another thing that we build into this is the capability that if that employee reads that employer.

Speaker Change: They can continue their relationship with paychecks and we'll continue to collect a credit card for those services. So again, it opens up a new market for us. So look, what we see across the board is the problems of...

Speaker Change: Finding the track in quality, employees.

Speaker Change: and getting access to affordable benefits to be able to retain and attract as employees. And then the third thing is really around the funding area and getting access to growth capital. It's continued to be a big problem, not only in the small micro market, but also in the market and we're trying to address these problems.

Speaker Change: That sounds really compelling. Are you going to advertise a little bit more? Because those are compiling solutions.

Speaker Change: I think as you know we'll just be getting into our selling season and certainly it's not a coincidence that we launched all these facts. I would say we've been working on this for what we knew.

Speaker Change: During the pandemic, we were going to have to, when the pandemic ended, that we were going to have to come out with a different value proposition, because, you know, what one business will have three years isn't going to win in the next three.

Speaker Change: and it's not going to be a pure tech play, it's not going to be on bells and whistles. It's really going to be about solving problems in our estimation. And so we've been working on this for some time. You look at the Perks product. We had a really re-engineer redesign our core product so that we can actually create the employee to be able to be a customer of ours. We've never been able to do that before. These are all of the lessons we've been making is interest rates were going up. As we were getting the benefits of the LTC programs, we've been making these investments. And so it's not a coincidence that now they're when the Post-Pay and then the Dara, we're launching these products and I would expect as we're going to sell and see if it's going to hear us talk about it.

Speaker Change: Thank you. Congratulations on the awards. Well deserved.

Speaker Change: Thank you and we will take our next question from Pete Christian Senate with City Group.

Speaker Change: Good morning, thanks for the question, John Bob. Just curious, if there's any sense of how seasonal hiring is shaping up, I know it was.

Speaker Change: A bit of an issue in December quarter, sorry, the November quarter last year, any sense of how that's trending. Appreciate it. Thank you.

Speaker Change: Yeah, so far, Pete, you know, I think we made reference to this in the script and the press release, you know, hiring.

Speaker Change: within our base, both within the ATM base and in our HR outcourcing solutions was positive in the quarter and for the second quarter in the row.

Pete Christian: has been slightly above our expectations. You know we had a couple of quarters last year where things were a little bit below where we expected them to be.

Pete Christian: We tweet that in our forecast. Again, we didn't build our plan this year, assuming a lot of growth in those areas, but for the second quarter in a row, hiring has them positive within our base and in so that we're running ahead of our expectations in our plan.

Speaker Change: I would add to that, we're working on this problem very aggressively.

Speaker Change: and what we're trying to figure out is...

Speaker Change: is how do we help make sure that our clients don't have faith in you?

Speaker Change: All these things you see us doing from recruiting and talking about what we did in the PO last year's you mentioned, where you have to see results of this, and we actually created a program there to go out and do that, and then with this new co-pilot product. So, we've been aggressively trying to figure out ways that we can still, every vacancy that are a client's app, as you can imagine, have seven, four thousand clients.

Speaker Change: All of them have two or three vacancies that adds up to a lot of checks and so if you look at our HR consulting business, our HR consulting consultants.

Speaker Change: Inclusive, there are usually interruptions on both hiring and retaining by 273%. So we're packaging information, we're using analytics to identify clients that we know are having turnover problems, and then we're proactively reaching out to try to help them develop.

Speaker Change: and the individualized strategies to fill those jobs. And so, very pleased in this environment to continue to see that the checks and work site employees have exceeded our expectations and we're going to continue to work on that problem.

Speaker Change: The recruiting student to totally sound exciting here just curious if this deepens a relationship.

Speaker Change: with staffing agencies. I know that's a reasonable portion of your base, just curious if this tool has potential to broaden that exposure. Thank you.

Speaker Change: Yeah, I don't think we designed this tool specifically for this staffing, certainly, as you know, we do some funding in the staffing business, we have staffing companies that are all in same platform as in that effect, and we also...

Speaker Change: and I'm actually stacking companies above the job IPO as well, so this is for not only all of our clients.

Speaker Change: But this is for all small businesses. Again, I'll go out. This is a unique thing for paycheck. Not only is this going to allow us to have for the product penetration and side or base.

Speaker Change: But this is actually a way for us to begin to have a relationship with a non-painchecks payroll customer. So anyone can go on and check that out today and sign up and search for a job today. We really want to encourage and help some of the businesses.

Speaker Change: and we train in police.

Speaker Change: That's great. Thank you. Nice execution.

Speaker Change: Thank you and we will take our next question from Kevin McBae with UBS.

Kevin McBae: Great, thanks so much and congratulations on the quarter.

Kevin McBae: If I think about the pacing of the Q1 to Q2 revenue, is that primarily less head wins from ERTC, John, or is it maybe a little bit better and expected, client interaction or just any thoughts around that?

Kevin McBae: Yeah, Kevin, this is Bob. So when you look at the, I think the, you know, answered a lot of questions and talked a lot to a lot of you over the last quarter about kind of the gating.

Kevin McBae: of the plan, and I think it was a little bit misunderstood, you know, probably some of that's on us as it relates to the ERTC, but when you look at the gating.

Kevin McBae: of the plan this year. It's fairly evenly gated throughout the entire year. So if we go back to last year.

Kevin McBae: We can, you know, we saw more men on.

Kevin McBae: in the second half of last year, you know, we saw an acceleration of growth in the back hat versus the first hat. And that really continued into one, you know, axe bad winds. We mentioned, you know, revenue growth of 7%.

Kevin McBae: and when you look at the getting, you know, by quarter, it's pretty much the same, you know, I know that the guide.

Speaker Change: Employees, Employees of Ramp and Performance, as we move through the year, but that's really... ...doesn't have to do with this year, it has to do with the Comparable Assure, getting easier. So the ERTC Edwin...

Speaker Change: was 200 bases on a foyer standpoint. It was pretty large in Q1. As we move into Q2, it becomes less I mentioned.

Speaker Change: in the prepare of the marches of about 200 basis points in 22. It will become lasting 23 and then it's basically zero and two four. So I have two more quarters.

Speaker Change: of having talked about in the RTC had one in that it's behind us, but really there's not in a assumed ramp in performance.

Speaker Change: in our business. We got good momentum that started in the second half of last year. It's continued into two on and we expect that to continue through the balance of the year.

Speaker Change: at the Chupor Alpha, and then just the adjustments on the float.

Speaker Change: Well, where was the offset because I would see a nice job being able to read from the margin target? Was there any offset on that or is it just where you think you're going to fall in the rage?

Speaker Change: Now, listen, I mean, Q1 was slightly better than what we expected, so I think that that gives us confidence in maintaining.

Speaker Change: the Rangers, and we've been able to, you know, we rolled through the, I mentioned, 125 basis points of cuts, our plan only had 25 basis.

Speaker Change: Pointed across, we've now pretty much aligned with where the Fed would expect a short-term rate to be at the end of this calendar year.

Speaker Change: on which is another safety-based point where it's a cog, and then we also have another 25-based point to the cog that's assumed in our back half.

Speaker Change: which is the first half of the calendar year, but just given.

Speaker Change: You know, the momentum in the business retention was good, losses were down year-over-year. John mentioned the demand environment being strong, we continue to see it.

Speaker Change: Strong demand and performance in our HRL sourcing solutions and in our retirement business. They say that three businesses during the quarter that work.

Speaker Change: at Double Digital Growers, the PGO Retirement and then our funding business organically with the Double Digital Growers. So, it's just based on the momentum and the business.

Speaker Change: The Q1 performance we've been able to kind of cover the changes to the short term rates in really maintain guidance. I wouldn't expect guidance to be any different part within the ranges where we were in the beginning of the year.

Speaker Change: I can't remember if it's...

John: We're John a lot of things in front of us, in the election, Rodgers.

John: Gogo!

Speaker Change: I think that we have to continue to monitor, and we're just really getting into our selling season and everyone there. So a lot to start, sell, start as part says, we like...

Speaker Change: with our products, the oldest stuff we've been doing, the Center Self Self for the Police Pandemic era.

Speaker Change: are in place. We've got a lot of changes. We've made to our build market approach and strategies and those investments are showing good signs early in the fiscal year and so we're like it's that they're still there. So they're still headwind out there. That would definitely try and get to me in the journal as well.

Speaker Change: Thank you.

Speaker Change: Thank you, and we will take our next question from Brian Birgen with T.B. Cohen.

Brian Birgen: Hi guys, good morning, thank you. I wanted to dig in a little bit on the modesty better one cue revenue growth. You noted playing hiring was better than expected. Can you comment on how bookings and retention just how did those perform versus your plan?

Speaker Change: and I would say the retention was positive, continues to be at the mirror.

Speaker Change: Reckers, fellows, and particularly in our HR outsourcing business, our client retention actually was better year over year as well, both controllable and uncontrollable.

Speaker Change: The latter being a good sign relative to non-visessionary type of activities that the faculty has to have, that's kind of out of business and financial distress losses, so retention was a solid record.

Speaker Change: Okay, now I'm peeing for peo growth. Do you remind us what makes the peo accelerate from here as you go for the year and maybe just comment on how from peo health enrollment standpoint, how they do October 1 in enrollment period is going for this expectation.

Speaker Change: Yeah, so Brian, you know, the fact matter is that PO acceleration is going to happen by contingency, for exciting point acceleration, which we continue to see. And we have solid bookings.

Speaker Change: and the first quarter. Now, as you know, the OSTART's law, the first quarter is important because you pointed out that's the time that we roll out our new benefits plans. And I can see these plans are resonating, both with our clients and with the market price.

Speaker Change: and the first part of our enrollment and that enrollment is needing the site where you exceeding our expectations.

Speaker Change: I'm both in terms of quiet retention, as well as participant.

Speaker Change: and Patentration as well. So, please, where we are there, we still have, as you know, more to go as we finish out. Jane Murray, but I would say that where we are, this point right now is where we were last year at this point. I feel really good about the setup for the TGO.

Speaker Change: Okay, very good. Thank you.

Speaker Change: Thank you and we will take our next question from Tencent Wang with JP Morgan.

Tencent Wang: I think you said I thought I'd turn on the just one to have some of the book definitely some good product velocity echo a lot of comments that I'm going into the selling season would you expect some of the products you're showcasing to impact you in growth more or Or is it more about upselling it and higher revenue purge just wants it better understand that

Speaker Change: Yeah, I think since we weren't trying to focus on and I'll keep going back to this. There's three core problems that we're focused on, putting our energy that we think have been consistent problems before the pandemic, during the pandemic, as accelerated in the post-pandemic.

Speaker Change: That is recruiting and retaining quality employees.

Speaker Change: and we believe that the solutions that we're applying in that area, not only help us drive more unit growth.

Speaker Change: but we also believe that it improves our retention, that if we're helping our clients solve that problem.

Speaker Change: and then that's going to help them see the value of paychecks and we can provide a value proposition. I can help you find people you have not been able to find.

Speaker Change: We think that's going to attract any clients as well.

Speaker Change: So we think it's attentive, we think it's additional, upsell opportunity with existing clients to add that module on, we also think it's a way to track new clients as well. I'll remind you on the copilot.

Speaker Change: You don't have to be existing creature's clients to buy it today.

Speaker Change: and what we certainly hope is that when you come and start using our...

Speaker Change: Small Business Recruiting Tool to find individuals that you're going to get a call from one of our HR advisors and talk to you about what else we can be doing, to help you engage your employees and keep them as well. So we also think that's a good thing. And then you look at the second problem that we're trying to do, which is affordable benefits. I mean, I think we still have not heard the sonic boom of the pandemic in healthcare costs.

Speaker Change: and I think they'll have a contract to go to each and to the hospitals and carriers. All that's coming through and what we see from an health information perspective is that people are looking for someone who has this scale and the capability and the relationships.

Speaker Change: to be able to help them manage cough. Now, what, when I go provide cheap insurance.

Speaker Change: but at least we think we can certainly help people manage over the long term in talking with Jimmy Street that.

Speaker Change: in our P.O. and our agent, you can do that as well. And then the first thing that we're still working on, and more to come on then.

Speaker Change: is trying to help our client stay access to growth funding.

Speaker Change: One of the things that I would say that it's going to headwind for us or the headwind this quarter, it's been headwind for some time. It's typically within our client days, our clients are adding new locations.

Speaker Change: and so that's why we get a natural growth we call it client referrals, but it's really not client referrals. It's a client, you know, we deal with a lot of entrepreneurs, they open a lot of businesses. The fact that they're not adding additional sites, it's actually...

Arigina Gibson: I'm a current, Arigina Gibson, a little bit for several years.

Speaker Change: and I think with the February going down, that's going to help, but we've also been working with syntax and others, and what we want to do is create an ecosystem where we can help support our client scheme actors to affordable funding to be able to grow their business because if they're growing their business, that's been helped each other.

Speaker Change: I'm on that ladder, that's a great point because I've been turning a lot of fintech conferences, so this concept, you mentioned early rejects us, the concept of...

Speaker Change: but maybe do a more of that directly versus with partners as your view changed on.

Speaker Change: on that? No, I think that's what we're trying to do is create a think about it this way. Like, you know, in our app today, if you're in a point, and you're going to onboard and in a point, we want to create an importing experience like you are with a large company of IP checks.

Speaker Change: She's going to come in, she's going to give you your information and feel like you're your tax information for, so we can load you up and then we're going to offer you an open enrollment experience to look at benefits. But you can buy on your own, you don't need your employer tipping in.

Speaker Change: The same thing we're trying to do for the employer when they're going to run your payroll because for most small businesses the payroll is the largest expense.

Speaker Change: So while we're trying to do instead of an ecosystem that when it comes time to fund your payroll, we want to bring a set of partners right there in the app, what your ability to say, look, your pre-clawolified for a $10,000 loan, or you could potentially get access to fund if you need it just for your payroll for a period of time. So we're trying to create that ecosystem, nothing yet, but that's the vision we have in talking to our small business owners about how we can help them. We have a program called Pitchx Promise.

Speaker Change: which for a lot of our long-standing clients that have demonstrated that they're a good risk that will actually work with them a little bit on the payroll of payroll basis a lot we can do it. So again, it's just one of those things that we believe that we do that, it's going to attract more customers, it's going to retain more customers, and it's really addressing the critical need that that the small business owner's at.

Speaker Change: Thanks for your time, thank you.

Speaker Change: Thank you, and we will take our next question from James Falsett with Morgan Stanley.

Speaker Change: Hi everyone, it's Michael on Fontam for James. Thanks for taking our question. I just wanted to go back to some commentary that you provided last quarter just in terms of, you know, some of the challenges that you may be saw just in terms of your capacity to sort of get deals across the finish line and how pricing and discounting is playing into that was that.

Speaker Change: sort of one time in nature, did you see any of that in the quarter and how should we expect that to play out over the near-to-medium term? Thanks.

Speaker Change: Yeah, I would say that the competitive environment is stable in terms of that, you know, certainly it's a highly competitive environment, but I'm not saying anything well-occurred to anything dramatically different in terms of the pricing environment.

John: John, I'm California.

Speaker Change: Maybe just to piggyback on Brian's earlier question, just in terms of bookings composition. If you sort of had to stratify a between...

John: Two buckets, payroll in H.M. versus insurance and retirement. I think insurance and retirement were sort of some of the key drivers last quarter, but sort of what's driving the relative strength now is it fairly broad-based and how do you think that strength is going to persist over the near-term? Thanks.

Speaker Change: Yeah, I think what I would say, I think if the man is out there across the sweep, actually, when I don't get proposals, our proposals are almost all segments.

Speaker Change: are up year over year.

Speaker Change: I think there are a lot of people out there kind of shopping and working, again, as we know, we're just entering our facilities for most of our market segments, this is when people really are making their decisions. But I do think there's a lot of people that are out there shopping and working and comparing providers. I'm seeing that, I see that in the numbers that we see. And now it's just a matter of giving them the compelling, dying propositions to close.

Speaker Change: as we get into the selling season. So I see very, you know, stable demand environment and so good about, you know, how would position going into the selling season. But we have a lot of work to do and that's really what we're going to see over the second and third quarter.

Speaker Change: Appreciate the color.

Speaker Change: Thank you, and we will take our next question from Samad Smana with Jefferies.

Samad Smana: Good morning and thanks for taking my questions. Maybe first on the new kind of benefits or financial wellness solutions.

Samad Smana: Could you just remind us how the modernization works there and in what type of contribution you've embedded into the fiscal 25 outlook and just what for my just what segment it goes into as well that I want to follow up.

Speaker Change: Well, other all described, you know, this is something we're just beginning to launch. We've been, we've been, we've been, we've been, we've been, we're all eight weeks into it. I'm pleased with the initial.

Speaker Change: and Mitchell results. We've been testing this for a while, but basically, once I said you're an employee of our client, you get onboarding your new employee coming on, you go through the onboarding process where you're loading your address, your information, your tax information, we didn't put you into a traditional opening moment at screen where you didn't have a menu of choices both in terms of.

Speaker Change: You know, benefits as well as earned away jacksets, you sign up for those, and then we do dot that from the wages each payroll.

Speaker Change: and I'm glad they did.

Speaker Change: Good luck, sir, I got it. Then I'll put you in my bag.

Speaker Change #100: Well, just on the second part of your question, it's early innings. We do have some dollars assuming the plan, but it would say at this point in time, it's not material.

Speaker Change #100: and a lot of that is insurance related and would hit the beyond insurance category. But it's small dollars assumed in the plan. John said we're just kicking this off and it's early ining, but we think it has a lot of potential.

John: I will continue to be cycling from being.

Speaker Change #101: Guidance that we go through a letter, not only going to increase revenue and profit, but also going to improve our ability to attract by differentiating ourselves for new clients and creating a return effect with existing clients because we're providing something that's not being offered in the market.

Speaker Change #102: Gotcha, and then maybe just a follow-up. I know the last couple of quarters you guys have talked about.

Speaker Change #103: the Discounting Environment and the Pricing Environment sub-curious system.

Speaker Change #104: What you saw in this most recent quarter from a discount and perspective, and then need the frequency and magnitude that you're having to discount, just like what trends you've observed and if there's been any change from what you've observed of the entire couple of quarters.

Speaker Change #105: I would say that what we're seeing is a little more stability to what we've seen over the last, you know, probably a couple quarters.

Speaker Change #106: is a stoichiometric environment.

Speaker Change #106: but what I would say is a little more stable in terms of what we've seen now. And I would say that we're about to enter the selling season and we'll see what things come up with. I do think an interesting phenomenon is running itself across our industry and to think it's called that profitability.

Speaker Change #106: and for that team to keep driving for rationality as well.

Speaker Change #107: I understand, thank you again for taking my questions to appreciate it.

Speaker Change #107: Thank you and we will take our next question from Andrew Nicholas with William Blair.

Andrew Nicholas: Hi, good morning, and welcome to first follow-up on the last question. Just specific to...

Speaker Change #109: the PEO business. I'm going to make sure that.

Andrew Nicholas: You can speak to like to compose dynamics in the pricing there, it seems like.

Speaker Change #110: some of your peers, both public and private are.

Speaker Change #111: was talking about increased aggressiveness on the pricing front you had very good growth in that business now for several quarters in a row. So just curious if you're coming about it being a little bit more stable also applies to that part of your business.

Speaker Change #112: Yeah, I guess that I would say crossed across each one of our business segments I would say that that's true and particularly that the year.

Speaker Change #113: Okay, understood. And then, for a follow-up, just curious on the agency business or the insurance solutions business, specifically I know you've been.

Speaker Change #114: has some growth headwinds on the right side over the past couple of years, just curious if there's any signs.

Speaker Change #115: of Stabilization there or that bottoming and what that could potentially mean for growth in the back half of this year or um, to future years if there's a, a trough in that part of the business. Thank you.

Speaker Change #116: Yeah, I mean, it's unfortunately, Andrew, that had when continued in the Q1 on the workers' conversation on the racer side. I think if you picked up on the comment that I made earlier at your way through the strength of the field.

Speaker Change #117: Business, I mean, overall, the category grew at 7% but D.O. with the double-digitaler was strong, you know, sales performance retention.

Speaker Change #117: and just overall really good strength in that field business in terms of continuing to be a drag on that category. So, you know, we factor that into the plan.

Speaker Change #117: So I don't see a lot of risk as we move forward to what we're calling out here from from a guy's standpoint. But the print numbers here that don't really do the justice for the PEO business, you know, because it's combined with insurance.

Speaker Change #117: because it just continues to be a strong performer for us again this quarter.

Speaker Change #117: And as we mentioned, we're going to continue to innovate around the insurance business, the perks.

Lawrence: Lawrence is one example, standing that market now to include, they may be able to have a relationship with

Lawrence: with our clients employees directly and we're going to continue to look for ways that we can expand the market.

Lawrence: Opportunity for the insurance business, we could certainly say the 2.5 May. Workers' cloud market has been challenging.

Lawrence: for several years. We keep thinking it's going to turn around and the macros are not happening so we've got to take control of our own destiny and we're going to continue to work on that business and come up with new ways to add revenue there.

Speaker Change #119: Okay, thank you.

Speaker Change #120: Thank you, and we will take our next question from a Chisholpajra with RBC.

Speaker Change #120: Hi, this is David Page on for a sheet, thanks for taking our question.

David Page: Just a quick follow-up on what was discussed earlier, the five and a half percent of your growth at cost of service revenues. What was the, get it to provide more color on what was driving that growth year of year, and then I guess half should we think about that line item for the rest of the year. Thank you.

Speaker Change #122: I mean we don't specifically break break get out and provide guidance on expenses. I would tell you over between the different lines. David, I think, is a mention in the prepared remarks.

Speaker Change #123: Expenses were up 3% in the quarter. A lot of that was driven by the performance in the PEO business.

Speaker Change #123: in the higher insurance revenue that we've seen, I think.

Speaker Change #124: X, X, those higher costs that are expenses were essentially.

Speaker Change #124: in the quarter, you know, it's done mentioned earlier. We spent a lot of time last year.

Speaker Change #124: on our cost structure getting our cost in line.

Speaker Change #124: Knowing that we had a fairly big headwind this year, from an earnings standpoint, and margin standpoint, with the RTC.

Speaker Change #124: So we spent a lot of time last year, and obviously we announced our cost optimization project at the end of the last year to really get costs and lines so we can continue to invest in the business and I think you're seeing.

Speaker Change #124: You know, the fruits of those investments with a lot of the new solutions that John highlighted and that we were able to.

Speaker Change #124: Showcase last week, HR tech and really still being able to deliver some margin at the expansion, you know, the midpoint of the guide assumes a lot of 50-based points of margin expansion.

Speaker Change #124: in Navelong, us doing thus in deliver margin expansion in the face of that year TC had one which has a fairly significant earnings headwind as well.

Speaker Change #125: Thank you.

Speaker Change #126: Thank you and we will take our next question from Brian Keene with Deutsche Bank.

Nate Sensen: Hi guys, this is Nate Sensen on for Brian, I just kind of want to follow up on the margin comments there. So, expecting to cue margin to 40% maybe a little bit lower than you expected and still maintain the full-year guide, confident to do to 43%. So, I know there's seasonality in the business and you know the backup tends to be...

Speaker Change #128: Stronger for you guys in terms of margin, but maybe you can talk about your confidence in realizing, I guess, some pretty material margin, sequential margin experience in the back cap, particularly it looks like there's still going to be some ERTC headwinds in the third quarter. Yeah, I mean, it's really the same story as...

Speaker Change #129: the Revenue. I mean, it's really the compare, you know, margins.

Speaker Change #130: Axie ERTC, Mergin expansion in Q1 was about 200 basis points of margin expansion in Q1, but the RTC is...

Speaker Change #130: and I gave you the 40% for Q2 color, which implies

Speaker Change #130: West Point, contraction of margin versus last year, but again, if you exclude the RTC, it's between 150 to 200 basis points.

Speaker Change #130: of Margin Expansion in 2-2 as well.

Speaker Change #130: and then obviously the headwinds subside in the back half of the year and that's where you get the margin expansion on the four-year basis. So similar to...

Speaker Change #130: the Revenue Acceleration that appears to be in the plan. It's the same story with Margin expansion. He really relates to the prior year compared.

Speaker Change #131: got it, that's helpful and then for the fall of, you know, you mentioned.

Speaker Change #132: and I know last quarter we talked about some of the need to grow out issues with the digital channel, but assume those are behind us now. Maybe beyond that, are you starting to see some traction on the changes you made with your go to market approach? Are there any lessons you've learned? Maybe positive proof points on the things that you've changed and some early progress that you're seeing there?

Speaker Change #133: Good question. We learned something new every day on this front, which is one of the things that were very pleased about. So I would say, when I looked at the quarter, we started in the PEO a year ago.

Speaker Change #133: We're getting some of these go-to-market which includes a totally revised marketing and sales technology stack implementation. So, think about the margins story about just told.

Speaker Change #133: We didn't deliver these margins while investing significantly and preparing for the post-pandemic world. So why interest rates were going up and we were having the benefit of the RTC. We had been putting money into the business.

Speaker Change #133: to prepare for what we knew was coming and so I'm most pleased in the core of the results that we're seeing from these numerous investments that we...

Speaker Change #133: Proving the POW now extended across all of our market segments.

Speaker Change #134: The Weekchains are a marketing approach, we change our sales technology stack.

Speaker Change #134: We're exceeding our expectations in these new go-to-market teams and we put together we've refined our segmentation and we're going to continue to refine that. So one of the things that we're doing digitally is collecting all of our interactions.

Speaker Change #134: and we're looking on a daily basis about what's resonating with our clients and how our sales teams are executing. So, I've been very pleased with the execution that I go to part, go to market transformation teams and we're working on and when you think about that it's really about re-tooling and retraining, you know, over.

Speaker Change #134: 3,000 sellers.

Speaker Change #134: in the market place, and we've actually been increased our segmentation, so I think the question was that earlier about a little bit more in the mid and the upper market, we have a lot of confidence and we can do that. We've actually added honours in that particular segment, and given the results that we've seen in the first quarter, and it's good to market, pilots have been done across the various other segments.

Speaker Change #134: We are actually accelerating self-hiring, so we're going into the selling season, not only pulling staff, but given the results we've had, we're going to be accelerating, accelerating, and hiring into this and going to market strategy.

Speaker Change #135: Great call, I appreciate it.

Speaker Change #135: Thank you, and we will take our next question from Ramsey Ellisol with Barclays.

Speaker Change #135: Hi, this is Owen Onferenzie. I appreciate you taking our question this morning. You just touched on, kind of, your, your sales team and one to get an update on sort of the growth drivers which within management solutions.

Speaker Change #136: Just wondering if the focus has shifted a bit from new client wins to further penetration in your existing client base with the additional HM services.

Speaker Change #137: and any of your expectations going forward with given all the new product rollouts, which you expect to lean into more one-verse the other and inside there would be helpful. Thanks.

Speaker Change #138: No, I would say look our growth portal has been changed, it's a growth client.

Speaker Change #139: Drive through the penetration of new products, continue to innovate, we have more products driving to the client base.

Speaker Change #139: and continue to provide value to our clients, so that we have pricing capacity. You go to the past, price on, and I would say that that's...

Speaker Change #139: That's been paycheck to your history and that's what we're going to continue to work against.

Speaker Change #140: and just on Costs of Service Revenues, you touched on that a bit early in the call. Just also interested on the benefit side if any increase in cost is associated with the kind of utilization in kind of claims cost, any color there and kind of expectations going forward would be helpful as well.

Speaker Change #141: Yeah, I just add to my comment, you know, overall, I think what you're seeing there is cost being driven by not so much higher claim, but really work site employer and higher insurance attachment that we've seen all over the last year, so you know, some site employees go in the PEO was strong.

Speaker Change #141: You know that's what we're focused on is driving a work-side employee to play or growth and I think when you do that

Speaker Change #141: Coupled with the insurance attachment, you get some wage inflation, and mental inflation, then you're able to put together a PO business that's growing.

Speaker Change #141: in the double digit range, like ours did this quarter and had, you know, for the past couple quarters, and that's what's really driving the higher cost is just the performance of the, that's not so much unfavorable clean history or anything like that.

Speaker Change #142: I understood, I appreciate the clarity there. Thanks, yep.

Speaker Change #143: Thank you. And we will take our next question from Kartek meta with North Coast Research.

Speaker Change #143: [inaudible]

Kartek meta: Hey, just getting your thoughts on acquisitions versus buyback, you know, talked a lot about some of the new products you have, maybe change of what businesses want to need. And so I'm wondering, you know, as you look forward, just your thoughts and maybe what you're trying to prioritize and how you might allocate capital.

Speaker Change #145: Yeah, I take part in thanks to thanks for your question, I've been you'll well.

Speaker Change #146: I would say that, you know, we are constantly and have always been looking at which we talked about the growth formula, growth clients.

Speaker Change #146: Increased our product penetration, you know, provide that, you see that we can get proper price for what we deliver for our clients and then, you know, tucking in all the game and growth on top of that. That's always been kind of what we've looked at. I think we've always felt certain times. The market, I would say over the last.

Speaker Change #146: 12 months had changed.

Speaker Change #146: and a little more rational of what we're saying. I would say you better pipeline is robust at this point in time. And I think there's more rationality coming in to the industry at this point in time and in terms of a willingness to...

Speaker Change #146: to look at the control, you know, combinations, I just, you know, I did just see that in our pipeline and the way dealers are coming together. But what we're looking at has a good change. We're looking at opportunities that scale and there are existing markets.

Speaker Change #146: where we can drive our advisory and really the full breadth of our services, remember, we're just not a tech company, we have a ton of other products and services that we can bring to those markets. We're looking for opportunities to expand our products suite, so we can, in which we can continue to add products and services that we can sell to all of our clients.

Speaker Change #146: and Wolf Continuously looking at digital capabilities.

Speaker Change #146: where we could add that into our business.

Speaker Change #146: and then I'm looking for a Jason Gross Class One. So all of those right there, when I told you, I would have said,

Speaker Change #147: 3 years ago, we had a lot of interest in prices were unbelievably high for the value and we're very, as you know, very conservative in looking at deals that we're going to do. What I've seen over the last 2 years is more rationality, glass 12 months, even more rationality, and now I think.

Speaker Change #147: You know, one more individuals are going at serious conversations and so again, we're out there looking but we're going to make sure it's a smart deal and one bit is going to, you know, get treated for our shareholders on term.

Bob: and just one follow-up, my Bob, I think, or when you initially gave guidance to anticipate it kind of five-pays for control, seems like things are going a little bit better than you expected.

Bob: Any thoughts in terms of, you know, kind of you look out if there's expectation and need to be changed or maybe feel better about the guidance for a pace for control?

Speaker Change #148: Yeah, I would say it's more of the ladder card we feel better again, it wasn't assumed in the plan to be a big contributor to growth. We had it, I would say, in the Czechs per client, part of the business on the ATM side, we assumed it was going to be flattish on a full year basis and it turned it a little bit.

Speaker Change #148: is more positive there so that I think that gives us confidence in the guy and again, you know, we're maintaining the guy.

Speaker Change #148: in the face of some interest rate headwind on the top line as well. And then when we look at our bigger client sizes, particularly our HR outsourcing models, we did assume a little bit of growth there in the plan, again, not as huge contributor growth, but certainly expected it to be positive.

Speaker Change #149: and it was slightly better than where we expected to be in Q1 and I think that is this confidence and kind of maintaining the guide and where we're happy to get me to one of them were big contributors to Robin and Goat that on a full year basis.

Speaker Change #149: Thanks for our John, I appreciate it.

Speaker Change #150: Thank you, and we will take our next question from Jason Coup for Berg with Bank of America.

Speaker Change #151: Hey, guys, good morning. I wanted to start on the management solution. You give us a sense of what you expect for a second quarter.

Speaker Change #152: Broke there, I know you will still have the ERTC headwind, but you won't have the processing.

Speaker Change #153: Day Headwind. And then just any comment on visibility on the second half acceleration and plot on the guide. It doesn't sound like you're, I mean, any kind of real improvement in underlying performance, but just any other color on that aspect. So thanks.

Speaker Change #154: Yes, I think you've motivated me a similar question, that's correct, that could be wrong, but I don't want to get into giving quarterly guidance, you know, particularly on the splits, we're trying to...

Speaker Change #154: you know, maintain our approach which is to provide annual guidance and provide updates.

Speaker Change #154: Quarterly, you know, I try to give you guys a little bit of color on the next quarter to help you out with your model, but I don't want to get into the specifics.

Speaker Change #154: [inaudible]

Speaker Change #155: He knows 200 basis points on total revenue, so I'd like to kind of...

Speaker Change #155: Stick to that, and again, I'll just reiterate my prior comments as a release to the acceleration in the back half when you look at the gating by quarter.

Speaker Change #155: and you exclude the RTC headwind, the gating by quarter from a gross standpoint is very consistent quarter to quarter and is in line with kind of where we were.

Speaker Change #155: Exiting last year, which again was an acceleration versus where we were.

Speaker Change #155: in the first half of the business. So again, we feel like we got a lot of positive momentum in the business.

Speaker Change #156: Lots of great things to talk about, certainly, from new product and solution introductions that have rolled out here in the last month or so and, you know, we expect that momentum to continue to the bounce of the year, but there really is not an acceleration assumed it's really the compare last year that makes it look like.

Speaker Change #157: and the Groof Exhaust in the back cap.

Speaker Change #158: Okay, understood, just on operating margins, I think you came in above the guide for the first quarter where there are any expenses timing dynamics there or other factors, and I know you're in the full year, how to look.

Speaker Change #159: Yeah, I think a couple of things. I mean, revenue was a little bit favorable to our expectations, so that's certainly helped and we put together a plan and...

Speaker Change #160: You know, when we look at expenses, we have investments that we want to make, you know, high content we're adding and maybe that takes us a little bit longer than what we assumed in the plan.

Speaker Change #160: We thought we were going to get in the first month and it takes a little bit longer. So I say, you know, we had a little bit of expensive availability, a little bit of revenue and favorability, and those two things combine, you know, provide a little bit better margin than what we had to get to.

Bob: Okay, thank you, Bob.

Speaker Change #161: Thank you. And we will take our final question from Scott Wordssel with Wolf Research.

Scott Wordssel: Good morning, guys. Thanks for speaking me in here. I just wanted to touch on the 2K margin guidance, a little bit more, you know, we touched on sort of the cadence for the full year, but you know, just kind of looking obviously guidance implies a similar, you over year change, I guess relative to what you reported in first quarter, but we have, you know, a little bit of, you know, improving our better PRTC had when just wondering if there's any kind of items we should think about in with respect to the 2K margin, understand we're getting into the selling season, there's any items around that or others that we should be contemplating.

Speaker Change #163: Yeah, I think if you look at the dating of the margin, you know, throughout the year, it's not exactly the same quarter by quarter, I think someone had referenced it's higher in the back app, it's typically higher in two, three because of some of the urine processing that is high margin that occurs.

Speaker Change #164: in Accord, but I would say nothing specific to call out to others then.

Speaker Change #164: You know, the guide implies a slight contraction versus prior year, but again, that's really coming from the head went from the RTC when you exclude that. You're seeing good margins, you know, we'd expect to see good margin expansion in Q2 between 150 and 200 basis points that I think if you did the math.

Speaker Change #165: That's what you would get to achieve. It takes good the year to see headwind. But nothing specific to call out. Yes, we're going into selling season. I want to make sure we're gearing up and we feel like we're in a good position. Full of staff and making investments. So we're going to have a successful, so we can have a successful selling season.

Speaker Change #166: Yeah, and then just as just the follow-up of me, I'm just looking at the presentation you called out, you know, high single digit growth and HR outsourcing WSEs, which seems pretty impressive and you just want to maybe understand the drivers they're a little bit better and if you can talk about maybe some of the growth that you saw, you know, an ASO business during the quarter would be very helpful.

Speaker Change #167: Yeah, I would say what's driving that is the power of the value proposition. I don't think one, the last three years in our industry is going to be what is going to win in the next few years.

Speaker Change #167: and I think it's not about the bells and whistles and I think when you look at our comprehensive.

Speaker Change #167: HR outsourcing, offering and assistance that we provide that the on just the tech play. And that's three to the resonating. And I do think the outsourcing message of our P.O.C. is going to begin with building back. And you know what I'm just at a page where ASL is a little more tilted than P.O. We now see that till back.

Speaker Change #168: to the PO value proposition, and the team has done a great job of putting together a powerful set of, I think, that it's in all terms and an execution in the PO market, so that's been what's striding with excited people.

Speaker Change #169: Yeah, thanks guys.

Speaker Change #170: and there are no further questions at this time.

Speaker Change #171: Okay. Well, it's in thanks everyone at this point. We're going to pose the call. If you're interested in a replay of the webcast, it will be archived for approximately nine days. Again, I want to thank you for your interest in paycheck to another one. It has a great day.

Speaker Change #171: Thank you. That concludes today's first quarter, 2025, paychecks earnings conference call. You may now disconnect your lines at this time and have a wonderful day.

John Gibson: I'm John Gibson, Robert Schrader, Robert Schrader, Robert Schrader, Robert Schrader, Robert Schrader.

John Gibson: I'm Robert Schrader, I'm Robert Schrader, I'm Robert Schrader. I'm Robert Schrader.

John Gibson: I'm Robert Schrader, I'm Robert Schrader, I'm Robert Schrader. I'm Robert Schrader.

John Gibson: Music

John Gibson: Good morning, and welcome to the first quarter 2025 paychecks earnings conference call. Participating on the call today or John Gibson and Bob Schrader.

John Gibson: After the speaker is opening remarks, there will be a question and answer period.

John Gibson: If you would like to ask a question during this time, simply press stars and the number one on your telephone keypad. If you would like to withdraw your question, please press star 2.

John Gibson: As a reminder, this conference is being recorded and your participation implies consent to our recording of this call.

John Gibson: If you do don't agree with these terms, please disconnect at this time. I would now like to turn the call over to Bob Schrader, Chief Financial Officer. Please go ahead.

Bob Schrader: Thank you for joining us for our review of Paychex 1st Quarter 2020-25 financial results. Joining me today is our CEO, John Gibson.

Speaker Change #173: This morning before the market opened, we released our financial results for the first quarter and it August 31, 2024. You can access our earnings release in investor presentation on the SEC's website as well as on our investor relations website. Our form 10Q will be filed with the SEC in the next few days.

Speaker Change #173: This teleconference is being broadcast over the internet and will be archived and available on our website for approximately 90 days.

Speaker Change #173: Today's call will contain overlooking statements that refer to future events in involves some risk. We encourage you to review our findings with the SEC for additional information on factors that could cause actual results that differ from our current expectations.

Speaker Change #173: During our call, we will also reference some non-gap financial measures, a description of these items along with our reconciliation of the non-gap measures can be found in our earnings release. I will now turn the call over to our CEO, John Gibson.

John Gibson: Thank you, Bob and good morning everyone. I'm going to start today's call with an update on business highlights for the first quarter and then turn it back over to Bob for a financial update and then of course we will open it up to your questions.

Speaker Change #174: As we enter the post-pandemic era of Paycheck, we are off to a good start in fiscal year 2025 with total revenue growth exceeding expectations during the first quarter.

Speaker Change #174: Excluding the impact of non-reoccurring benefits from the BRTC program and having one last processing day in the quarter, revenue growth was 7%.

Speaker Change #174: has a best operators in the business. We also delivered earnings for share growth. Despite these headwinds, through strong expense this month.

Speaker Change #174: Small and midsize businesses remain resilient as the US Labor Market gradually returns to its pre-pandemic level. While growth and hiring has moderated, hiring within our client-based during the first quarter was positive and better than expected across our HCM and HR outsourcing businesses.

Speaker Change #174: We continue to make investment in transition.

Speaker Change #174: are a go-to-market capabilities and products suite to meet the post-pandemic market and drive continuous innovation in our technology and advisory solutions.

Speaker Change #174: We are excited to launch several new products that are specifically designed to address a constant challenge for small and mid-sized businesses.

Speaker Change #174: and that simply is finding and retaining qualified employees.

Speaker Change #175: RK checks flex and gauge offering combined with P-check flex perks.

Speaker Change #175: which was named a top HR product of the year by HR Resource Executive Magazine.

Speaker Change #175: and the recently announced paychecks recruiting co-pilot are digitally in AI-driven solutions designed to help our clients succeed and when that will work for talent in a very challenging labor market.

Speaker Change #175: These are examples how we are constantly looking for ways to bring enterprise solutions to the SMB market to really level the playing field.

Speaker Change #175: Flex Engage is a comprehensive digital solution with generators AI capabilities to help businesses manage their workflows, promote communication within your organization, and increase collaboration between employees, many of whom are remote.

Speaker Change #175: Since launch, we have seen interest from businesses across the spectrum of industries and science groups.

Speaker Change #176: Our award-winning Paychex Perks offering is a digital marketplace that provides employees access to affordable benefits and discounted products and services.

Speaker Change #177: Patrex Perks is attracted to employers as it is available at no cost to the employer and the payments are processed automatically through payroll deductions by the employee.

Speaker Change #177: This allows us to establish a long-term customer relationship with our clients' employees.

Speaker Change #178: Our initial in launch includes 17 unique products ranging from voluntary lifestyle benefits to early-weight jacks up.

Speaker Change #178: We will continue to be opportunistic when considering adding other products and services to our marketplace.

Speaker Change #178: This new capability, which we have been investing in for years, allows us to engage our clients' employees with AI-driven offerings that meets their specific needs in our Flex HCM app.

Speaker Change #178: and it also opens up an exciting new market for us and it's another example of how we are helping small and this size businesses compete for talent against larger companies.

Speaker Change #178: Recruiting as we all know is a costly and time-consuming process.

Speaker Change #179: According to a recent paychecks customer study, 80% of the respondents reported that finding qualified candidates is challenging.

Speaker Change #179: Last year we launched a new program in our PO called the Employer of Choice Playbook, which was designed to help our customers find qualified candidates.

Speaker Change #179: We are excited to add a new solution to the playbook not only for the PO, but also all paychecks customers and non-paychecks customers.

Speaker Change #179: with a recent announcement of an AI-assisted recruiting tool for small and mid-sized business owners and HR professionals called the Paychecks Recruiting Co-Pilot.

Speaker Change #179: We believe that new solution will revolutionize recruiting and hiring process by enabling pay-check customers to quickly find top-count. Instead of relying solely on traditional recruiting methods.

Speaker Change #179: Paycheck's recruiting co-pilot analyzes millions of potential employees through a natural language search engine to quickly produce an active list of qualified individuals for open positions based upon numerous requirements and other attributes.

Speaker Change #179: This puts advanced technology that is often only available to enterprise level organizations on large professional recruiting firms into the hands of small and mid-sized companies so they can more effectively compete for talent.

Speaker Change #180: As you know, Paycheck has a long history and experience with AI and we believe in her AI offers an entirely new set of opportunities.

Paycheck: We have a large and growing data set which we believe provides us with a significant competitive advantage in years ahead.

Speaker Change #182: We have tens of millions of interactions with our clients and their employees every month. We have predictors and AI models deployed across the company with a focus on sales and service and the ability to deliver actual insights based upon our vast data set to help our customers succeed.

Speaker Change #182: Hey, Jackson, you need quick position to be a leader in bringing the power of AI to small and mid-sized businesses.

Speaker Change #182: The breadth and quality of our solutions allow us us to solve problems for business owners by leveraging our testing class data set and HR advisory capabilities to help them win in today's economy.

Speaker Change #182: We continue to gain recognition with the strength of our HCM technology innovation as well.

Speaker Change #183: in addition to winning a top HR product of the year for Patrex Perks, which I would remind everyone is the fourth time a Patrex solution has the name for the top HR product of the year list for of the past five years.

Speaker Change #183: 4.5 years. We also earned an HR tech award for best-small business-focused solution in the core HR Workforce category for the fifth consecutive year from Lighthouse Research Advisory. This is an area I continue to believe we are not getting our due recognition.

Speaker Change #184: Hey, Checks, was also recently included in Times in Agarulist of America's best mid-sized company, space on the strength of the company's culture, business results, and corporate responsibility efforts.