Good day, and thank you for standing by. Welcome to the Paychex third quarter fiscal year 2021 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Martin Mucci. Please go ahead. Thank you, and thank you for joining us for our discussion of the Paychex third quarter fiscal 2021 earnings release. Joining me today is Efrain Rivera, our Chief Financial Officer. This morning before the market opened, we released our financial results for the third quarter, ended February 28, 2021. You can access our earnings release on our investor relations website, and our Form 10-Q will be filed with the SEC within the next few days. This teleconference is being broadcast over the Internet, will be archived and available on our website for about 90 days. I will start today's call with an update on the business highlights for the third quarter, and then Efrain will review our third quarter financial results and provide an update on our outlook for fiscal 2021. We will then open it up for your questions. It is hard to believe that it's been over one year since the beginning of the mass shutdowns in response to COVID-19. This past year has been different from any other that we've experienced before. You know, new challenges have forced us to find innovative ways to connect with our clients, prospects, and our own employees. I'm very proud of how the Paychex team embraced these challenges and took a leadership role throughout this pandemic, as evidenced by the newly released Sapient Insights Group annual HR survey just coming out this week that ranked Paychex Flex, our SaaS-based cloud application, number one among all solution providers, as rated by their Voice of the Customer report in both user experience and client satisfaction scores. Our results for the third quarter reflect strong retention in client base growth across all of our lines of business, most notably in our ASO HR outsourcing business. We completed the selling season with strength in our virtual, digital, and HR outsourcing sales, driven by new business starts and the increasing need for HR support. Our traditional sales channels have been impacted by headwinds arising from restrictions on face-to-face meetings and delayed decision-making by the prospects. We've seen growth in key sales metrics, including sales presentations and close rates, which have continued in March, as well as increases in win rates versus our competitors. We are well positioned to take advantage of the opportunities as we transition back to a normal market condition. As Efrain will discuss in more detail, with less than a quarter remaining in our fiscal year, we are proud of the fact that our total service revenue for the year will be roughly flat to last fiscal year after the major impact to businesses during the pandemic. Our initiatives to reduce expenses while accelerating our investment in the innovation of our products and service delivery has not only maintained our industry-leading profit margins, but has positioned us well for growth as the pandemic situation improves. We have delivered solid client growth and demonstrated our unique value to our clients and partners through some of the most difficult times. Throughout every stage of the pandemic, we have demonstrated our commitment to helping clients with our multifaceted approach response, which includes a comprehensive COVID online help center, state-specific resources, educational webinars, product innovations, in-app Paycheck Protection Program tools, specialized employee training, and more. Our efforts were recognized not only by our clients in the form of strong client satisfaction scores and retention, but we were also recently honored as a 2021 silver winner of the Stevie Award for the most valuable COVID-19 response. We continue to listen to and work with small and mid-sized businesses to provide the information, resources, and support they need. A recent Paychex survey to these businesses revealed that three of the biggest obstacles facing small and mid-sized business owners are financial instability, planning the return to office, and employer vaccination policies. While financial instability is the biggest concern, the government stimulus pay plans have been very effective in helping small and mid-sized businesses stay afloat. Paychex has continued to build on its portfolio of PPP solutions in real time as new government relations are passed. To date, we have assisted our clients in quickly applying for and obtaining over $60 billion in PPP loans. We have also helped them claim approximately $1.5 billion in paid leave and employee retention tax credits. Paychex Flex is the first HR software solution to introduce integrated tools to help businesses maximize tax credits while not impacting PPP loan forgiveness. Our experienced HR professionals help our clients by delivering effective recommendations based on our clients' unique circumstances and business needs. These new challenges include assisting in navigating the complex stimulus legislation, developing return-to-office plans, creating vaccination policies, and the data analytics and tools to support employee recruitment and retention in this difficult time. The complexity of these issues has resulted in higher demand for HR outsourcing as more clients recognize the advantage of putting our expertise to work for them. In recent months, this increased demand has contributed to strong growth in our ASO business as businesses are looking for more immediate HR support, but some reluctance to make changes to their employee benefits by selecting the PEO model. We do expect that as businesses begin to evaluate their options and implement benefit decisions, there will be a more normalized mix of ASO and PEO product selection. We announced on the last call that we were introducing our new Pooled Employer Plan or PEP. This new product is a cost-effective retirement plan designed to expand retirement plan access with reduced administration for employers. We have been very pleased with the reception of this new offering in the market, and after just a few short months, have approximately 2,000 new clients on PEP. We believe that recent mandates in California requiring retirement benefits for employees will lead to even more interest in our PEP product and other retirement solutions. Paychex remains the top record keeper for retirement plans, originating the most new plans annually. We also announced our integration with Fiserv's Clover point-of-sale systems. We offer integrated payroll and time and attendance for small business retailers via a new app in the Clover App Market. Integration is now complete, and existing Paychex customers can download the app to allow for time and attendance to be handled within the Clover system with seamless integration with Paychex Flex. This integration increases cross-selling opportunities for both companies and significantly enhances the client experience for shared customers. In addition, we launched several enhancements to our data analytics in Paychex Flex, including a diversity and equal pay live report that builds upon our recently released EEO-1 compliance solution to give administrators the ability to analyze their pay and diversity data, allowing businesses to uncover opportunities to create a more diverse and equitable workforce. Our innovative solutions continue to receive industry recognition. We were recognized by the Business Intelligence Group, earning a 2021 BIG, BIG Innovation Award for being a leader in real-time payments. Last May, we were the first HR solutions provider to offer real-time payments, giving businesses more freedom and flexibility. I'm very proud of the two awards that Paychex has been honored with recently. For the 13th time, Ethisphere named us one of the 2021 World's Most Ethical Companies, and we are also on the Fortune's list of World's Most Admired Companies. These awards acknowledge our commitment to ethical business practices, values-based culture, innovation, social responsibility, and leadership, as well as our support for the business community and its employees throughout the COVID-19 pandemic. I give credit to the innovation, integrity, and hard work of our employees, who have continued to show up for our clients, even while navigating the challenges of the pandemic in their own lives. As we enter our second year with COVID, we remain diligent in helping businesses continue to navigate the pandemic and remain hopeful that the worst is behind us. We are confident that our resilient business model, strong financial position, and dedicated employees will help Paychex to finish fiscal year 2021 even stronger than we started it. I will now turn the call over to Efrain to review our financial results for the third quarter. Efrain? Thanks, Martin. Hello, everyone on the call. Good morning. I'd like to remind you that today's conference call will contain forward-looking statements. You know where to look for those disclosures, and please refer to them. In addition, I'll periodically refer to non-GAAP measures, such as adjusted operating income, adjusted EBITDA, et cetera. Please refer to our press release again in our investor presentation for more information on these measures. I will start by providing some of the key points for the quarter, and then I'll follow up greater detail in certain areas, and then I'll wrap with a review of our fiscal 2021 outlook and some initial thoughts on fiscal 2022. Our third quarter results reflect the impact of economic conditions resulting from COVID. For the third quarter, service revenue of $1.1 billion decreased 2% compared to the prior year, largely due to a lower volume of client employees paid across our HCM solutions. As a reminder, our third quarter includes certain annual revenue streams that declined due to lower employment. Total revenue declined 3% to $1.1 billion, impacted by a decline in interest on funds held for clients. Within service revenue, management solutions revenue was even at $847 million, and PEO and insurance solutions revenue declined 8% to $250 million. Interest on funds held for clients decreased 29% for the quarter to $15 million due to lower average interest rates and realized gains. Average balances for interest on funds held for clients were consistent with the prior year. Expenses were down 4% to $643 million. The decline in expenses was driven by lower discretionary spending, reduced facilities costs, and lower amortization of intangible assets. Operating income was flat at $469 million and reflected an operating margin of 42.2%, a 100 basis point improvement from the prior year quarter. Our effective income tax was 24.2% for the third quarter, compared to 23.6% for the same period last year. Both periods reflect net discrete tax benefits related to stock-based compensation payments that occur with the exercise of stock option awards. Adjusted net income decreased 1% to $349 million for the quarter. Adjusted diluted earnings per share also decreased 1% during the quarter to $0.96 per share. Year to date, service revenue declined 3% to $3 billion, with management solutions revenue declining 1% and PEO and insurance declining 6%. Interest on funds held for clients declined 27% to $45 million. Total revenue declined 3% to $3 billion. Operating income decreased 5% to $1.1 billion, and adjusted operating income decreased 2% to $1.1 billion, reflecting a margin of 37.6%, an improvement of 50 basis points compared to the prior year period. Adjusted operating margin excludes one-time costs of $32 million related to acceleration of cost savings initiatives, including the long-term strategy to reduce our geographic footprint and headcount optimization, the majority of which was recognized during the first quarter. Adjusted diluted earnings per share decreased 3% to $2.32. Turning to our investment portfolio, our primary goal is to protect principal and optimize liquidity. As we've mentioned frequently, we continue to invest in high credit quality securities. Our long-term portfolio has an average yield currently of 1.9% and an average duration of 3.4 years. Our combined portfolios have earned an average rate of return of 1.1% for the quarter, down from 1.8% last year. Those were the good days. I will now walk through the highlights of our financial position. It remains strong. Cash, restricted cash, and total corporate investments are $1.1 billion, and total borrowings were $804 million as of February 28, 2021. Funds held for clients as of the same date, February 28, 2021, were $4.2 billion, an increase from $3.4 billion as of May 31, 2020. Funds held for clients, as you know, vary widely on a day-to-day basis and average $4.5 billion for the third quarter. Our total available for sale investments, including corporate investments and funds held for clients, reflected net unrealized gains of $82 million as of February 28, 2021. That compares to $100 million as of May 31, 2020. The decrease in net gain position resulted from increases in longer-term yields during the nine-month period. Total stockholders' equity was $3 billion as of February 28, reflecting $671 million in dividends paid and $78 million of shares repurchased during the first nine months. Our return on equity for the past 12 months was 37%. Cash flows from operations were $871 million for the first nine months. That was a decrease from the same period last year. The decrease was driven by lower net income and fluctuations in working capital, including an increase in purchased accounts receivables due to continued recovery from COVID-19 pandemic and growth in the business. The COVID-19 pandemic and growth in the business are offset by an increase in work site employees' payroll-related liabilities. I'm going to turn to guidance for the current fiscal year ending May 31, 2021. The outlook reflects our current thinking regarding the speed and timing of the economic recovery. It does not assume any acceleration due to government stimulus, rather assumes current course and speed of the recovery. Results for the first nine months of the fiscal year exceeded expectations. Uncertainty about the pace of the recovery over the remainder of the year remains. We have provided the following updates to our guidance after seeing the third quarter results. Management Solutions revenue growth year-over-year is expected to be in the range of flat to growth of 2%. We previously guided to a range of decline to 1% to growth of 1%. PEO and Insurance Solutions is expected to decline in the range of 2%-5%. This is unchanged from prior guidance. We're now providing guidance on total service revenues. This is total service revenue, not total revenue, which is now expected to be in the range of a decline of 1% to growth of 1%. Interest on funds held for clients is expected to be between $55 million-$65 million, and this is unchanged from prior guidance. Total revenue is expected to be in the range of a decline of 2% to flat. We previously guided to a range of a decline of 3% to flat. Adjusted operating income as a percent of total revenue is now anticipated to be in the range of 36%-37%, up from previous guidance of approximately 36%. Adjusted EBITDA margin for the full year fiscal 2021 is expected to be in the range of 41%-42%, up from approximately 41%. Other expense net is anticipated to be in the range of $25 million-$30 million, unchanged from previous guidance. Our effective income tax rate is expected to be in the range of 23%-24%, while we previously guided to approximately 24%. Adjusted diluted earnings per share is expected to be in the range of a decline of 2% to flat. We previously guided to a decline in the range of 1%-4%. Obviously, we need to go through the fourth quarter to see where the year ends, but we're really pleased with our ability to manage through the P&L impacts of the pandemic, especially loss of variable revenue, which, as you all know, carries a high margin. We offset much of that, including a decline in interest on funds held for clients. If there's any doubt about our ability to manage the P&L, I think that this year we showed some of the skeptics on that. Turning to the fourth quarter of the fiscal year, we currently anticipated total service revenue growth will be in the range of 7%-9%. Remember, I said total service revenue growth. To get total, you need to understand the next one, which is interest on funds held for clients, expected to be approximately $15 million. Consistent with previous quarters, that is interest on funds held is consistent with previous quarters. Obviously, in the fourth quarter, we expect to see a sharp rebound from what we've experienced in the first three quarters and a return to growth. Adjusted operating margin is expected to be in the range of 33%-34%. We're also currently in the process of preparing our annual plan for fiscal year 2022. We'll lead. Others haven't talked about it. We'll talk about it. Wanted to give you some indications of what our thinking is. We'll provide more complete guidance for fiscal 2022 during our fiscal 2021 fourth quarter call in June. I wanna provide some very preliminary color on our initial thoughts around fiscal 2022 in this call. With those caveats, we believe that total service revenue growth will be in the range of 6%-7%. Interest on funds held for clients is expected to be in the range of $55 million-$65 million and does not assume any significant change in interest rates. Obviously, we've got a lot of work to do with thinking about the right way to position the portfolio, but this is where we're at right now. We also anticipate that adjusted operating margin will be approximately 37% and that the effective tax rate will be in the range of 24%-25%. Let me just say one thing on that. As you know, we typically will exclude our benefits from stock comp exercise. At this point, we're not baking any in. We probably will get some benefit, but too early to call. Now, if as if that wasn't enough of a caveat, all of this is subject to our current assumptions, which are subject to change. We will update you again on the fourth quarter call after we have gone through the fourth quarter. I'll refer you to our investor slides on our website for additional information. With that, I'll turn the call back to Martin. Thank you, Efrain. Operator, at this point, we will open it up for questions. Thank you. The floor is now open for questions. In order to ask questions, simply press star then the number one on your telephone keypad. Again, that is star one. If at any point your question has been answered and you wish to remove yourself from the queue, press the pound key. Our first question comes from one of David Togut of Evercore ISI. Thank you. Good morning, Martin and Efrain. Good morning. Good morning. Good morning. Two questions, please. First, if you could quantify some of the key performance indicators a little bit more. For example, client retention. Martin, you, I think referred to some delays in sales cycles. Can you kind of walk through the booking trends you saw in the quarter? My follow-up is really around the receivables balance, which was up 81% versus the May balance sheet. You know, perhaps, Efrain, you can talk a little bit more about kind of the purchased accounts receivable. You know, what are the terms around that? Yeah. Let me talk to that, David. As many of you know, we have a business that provides funding for staffing firms. Those of you who co-cover the staffing industry, there's a number of you that know that in the last quarter of the year, let's call it April, May, and June, basically, staffing was flat on its back. What happened was that we weren't providing any lending because there was no lending to be provided to staffing firms. As a consequence, the receivables balance was very low. Our cash flow was very high in the quarter, in the last quarter. What's happened is that trend persisted through the first, excuse me, half of the year, staffing came roaring back, starting in January. In particular, really in the month of February, as there was a ramp-up in a number of areas in staffing, including healthcare. At the end of the quarter, we had purchased significantly more receivables than than we had anticipated when the year started. On an average basis, we're only about 4% or 5% above where we were last year. It's a little bit of an artifact of the decline in staffing, followed by a sharp rebound. That number will come down significantly in the fourth quarter. That's what's happening on receivables. You had three questions there. I think the other ones were retention and booking growth. On the David, on the sales side, yeah, I think what we've seen is a improvement, particularly toward the end of the quarter, and which has continued now into March on sales opportunities. So getting in front of clients for presentations. What we've seen throughout the first half of the year and into the selling season was really a lot of no decisions. So we get in front of clients, but they're just not ready to make a move. So we're starting to see now a little bit of that open up in the last month or so. So we're getting good opportunities in front of clients. Actually, our win rates where they make a decision, we're doing better against competitors than we have in the past. Sales results kind of year to date are pretty much on track for the year is the kind of what we expected. I think that we're seeing improvements now and things starting to open up. One of the tough things that played against that was just not getting enough face-to-face with clients certainly, you know, has put a little bit of a dampening effect on, particularly on a selling season where we have so many units that come in that way. The positives have been digital. We increased our marketing and got a lot more digital sales. Coming in over through the web, selling telephonically, selling online. You know, we've seen that, and that's helped. That's been really helped by new business starts, which are up, I think, you know, double digits year-over-year. We're taking advantage of that. Everything is improving, but it did have some dampening effect on selling season not getting in front of people. We're now opening that up and getting out with prospects face-to-face as they're comfortable and reps are comfortable, that's starting to pick up. ASO, very strong. HR needs very strong, as you would expect, just in all the things that I already described. How do I handle, continue to handle work from home? How do I handle return to office? How do I handle a vaccination? What do I require it or not? Big growth, very strong double-digit growth in ASO. On the PEO side, as I mentioned, a little bit slower because they haven't really wanted to change. You go back to this kind of no decision thing. You haven't seen as many businesses wanting to get into insurance and change their insurance right now or their benefit plans, given that that's kind of the least of their concerns. We think that'll normalize going forward. You know, very strong in HR performance, HR sales on the ASO side, very strong on the digital side, in telephonic sales, and starting to pick up on all of the opportunities and win rates. On the client retention, on track really for the best retention in our history. We have very strong client retention. Again, I think some of that, certainly we're getting help from clients saying, "Hey, you know, I'm getting great value from Paychex," with the help on the PPP loans I mentioned. We've helped facilitate through Biz2Credit, our partner, and other banks and so forth with our innovation in the Flex product. We've helped facilitate over $60 billion in our clients to get loans from the PPP program. What's really picked up now in the last even few months is employee retention tax credits. We have helped tremendously. That means we go back and refile some of the IRS Form 941s to help them apply for those credits, and that has taken off very quickly as well. Clients are feeling it's a great time for us to show the complete value of what Paychex expertise it brings to them, and that has really helped client retention to be extremely strong right now. We have the best net client gain. You know, we don't give specific numbers on clients until the end of the year, but we had the best net client gain in the third quarter, I think, in our history, at least in the last four or five years anyway, with a combination of the sales and retention. Appreciate that. Thanks for all the helpful detail. Okay, David. Our next question comes from the line of Ramsey El-Assal of Barclays. Hi, good morning, and thanks so much for taking my question, and also thanks for the early view on fiscal 2022. That's super appreciated. Can you help us think through kind of the key drivers of PEO performance next year? What are the sort of pressure points in that business that need to lift to see it return to a sort of a more normalized growth profile? I think you just mentioned a reticence for customers to change providers. I think in the past you've mentioned some hospitality over-indexing in that industry vertical. Sort of what are the end market conditions have to be in order to see that mark that segment return to a more normalized growth profile? Yeah, I think one, it is indexed a little higher on the hospitality side and, particularly on the Oasis acquisition that we did, you know, and, concentrated in, of course, southern states. I think as you see the hospitality come back, you know, the stimulus that are out there now and that are picking up the new grants, in particular for restaurants and bars, hotels, et cetera, that are out there, they're now These grants, not loans, but grants are gonna be given out. I think all these things are gonna help kind of bring hospitality back. Of course, just the opening up of more states and more restaurants to full either expanded capacity or full capacity, I think will bring that back and that will drive certainly more of the PEO who tend to go, those clients tend to go that way. The other thing is I just think more comfort in getting their employees back into the business place. Now they're gonna be interested in, okay, how do I get employees back? How do I retain them? How do I recruit them? Benefit plans are gonna become very interesting again for them. I think the more complexity of those benefit plans and how competitive they are is gonna be very important to them. I think the stimulus, the bounce back, the opening and the bounce back in hospitality, which is coming toward the later end of some of the stimulus, and the need to have very strong benefit plans, I think we'll start to see the PEO pick back up and a lot of interest from prospects. Okay. A follow-up from me is, I wonder if you could kind of update us on the relative importance in the business now of kind of cross-selling to existing customers versus signing up new ones. Has the model kind of evolved in the context of the pandemic to being more reliant on expanding wallet share rather than signing up de novo clients simply because there's been a lot of pressure in that area in the economy? It's an interesting question. I mean, you know, we've gone, you know, the last number of years, two to three years, talking about the power of 3,000 sales reps, which is our reps across all divisions. Our traditional model of selling payroll and then coming back in after has changed quite a lot in our go-to-market strategy. We've really seen that we saw that we were leaving money on the table and value for our clients on the table. We sell HR complete benefit packages upfront or at least make sure that they're aware of that. That hasn't changed all that dramatically during the pandemic. It's been harder to get full interest, so I think we've been good about coming back around and selling other products. I think leading with HR actually was very important during the pandemic, and you can see that in really the double-digit growth that we've seen in the sales of ASO because, you know, you could go in and talk. If we were just going in and pushing payroll first over the last year during the pandemic, I don't think we would have been as successful as that we've been trained to have our salespeople talk about HR and how we can help them completely, not just with payroll, and that has really helped us. I'd say that actually, you know, we stayed with the full HR value, and that has been a lot of our success during the pandemic because that was the real need, you know, for our clients and the prospects. Okay. Operator? Our next question comes from one of Kevin McVeigh of Credit Suisse. Great. Thank you. Hey, Martin, I think you talked about an increase in win rates against competitors. Can you help us kind of understand that a little bit, maybe how much of that is, you know, you know, just a better service through the pandemic versus more competitive product? You know, was there any part of the client base you'd call out in terms of, you know, obviously, you know, towards the lower end or kind of mid-market? Just any thoughts on that, because I think that's an interesting development. Yeah. I think, Kevin, I think what we've seen is, first of all, the innovation in the product. You know, we have such a complete product set now, in a SaaS-based cloud, Flex platform, and I think our document management has been very popular. We've seen a big increase in that. The mobile app being five-star continues to be five-star, and increased use of that in self-service by our clients. I think selling, going back to the go-to-market of selling HR completely, you know, I think, you know, if you went back two years, they still saw us selling payroll upfront versus our competitors selling an integrated HR and payroll. The HR focus that we've put the last two years has really positioned us very well. We've also done more, using sales engineers in the mid-market to demo the product and have experts demoing the product earlier in the process, and I think that also has shown the full value of Flex. Then just on top of it, I just think our employees' response, both in our IT, our product development, our marketing, you know, to the COVID and how we've helped clients, has really positioned us well versus some of our competitors who are just not as large and as fully capable. When you know, you go back to that number, I mean, we've helped our clients get $60 billion in PPP loans. That was all responding to stimulus, like the day it was out or the day after it was out, partnering with Biz2Credit and other financial players who could get them the loans quickly. I think clients really saw the strength of a Paychex brand, through all the things that we're doing like that has helped us against competitors that they may have been selling technology, but certainly didn't have the compliance or the experience and the wherewithal that our resources have. That's helpful. Then, Efrain, real quick, if you think about the margin and things for the preliminary 2022, does that dial in some normalization of cost? You know, how should we think about maybe some structural cost savings coming out of COVID? You know, does that, again, assume some uptick of cost coming back into the business, or is there any way to think about that? Yeah. Yeah, Kevin. You know, I get that question on a fairly frequent basis. Yes, it does contemplate that some of the variable costs that came out of the business will go back in. That's part of our thinking already. I think we've done a pretty responsible job this year, and I think that we've already started to add back costs actually back half of the year to normalize our cost structure so that next year wouldn't be quite as big an impact as it otherwise would be. We've taken that into account. I will say this, I think one of the great lessons of this year, for not only for us, but for everyone, is that there are pockets of costs that won't come back and that we don't need. They're not coming back, and they're not needed, and they won't be in the P&L. I think that that's why you see You know, we exceeded expectations, our own expectations and certainly external expectations on margins. As I said, a lot of the revenue that we were looking at was marginal revenue drop to beat that number. Going into next year, we're expecting to leverage further. I think that we're comfortable with that cost structure moving forward. It does include continued savings from actions that we took this year, but we've added back some costs. I think just to add to that, one of the things that we were already doing before the pandemic, and it helped us a great deal, because some of the calls coming into payroll specialists and HR specialists that we have were very complex. We've been able, the last two years, to really drive a lot of, you know, easier tasks back to the client who wanted to do them anyway in a self-service perspective. When you think about, we've talked about chatbots, you know, 50% of the service questions that come in online for us are now handled by an automated chatbot that respond to that. 7 by 24 by 365 personal support is open, but that has been a tremendous help. The other thing that when you change your direct deposit, number or address changes, over 80% of those changes are now done by clients or their employees online through the mobile app or on the desktop. That has made a tremendous amount of difference in driving operational costs down, and that's the innovation of our operations team, and driven them to the client who wants to do them anyway. It's freed up our people to do a lot more, and it's reduced cost. Successful. Any sense, and just ask if you can answer it, what percent of clients are totally DIY at this point? Are totally DIY? Yes. It's over, certainly over 50%. I think the way we think about it is you don't have to be totally DIY to be largely in a DIY service setting. Probably the number is higher than that. Thank you. Our next question comes from the line of Bryan Bergin of Cowen. Hi, guys. Good morning. Thank you. Curious, how are you thinking about the PPP impact on potential future switching behavior due to reg and reporting requirements? Is there any dynamic that can leave the base potentially stickier for an extended period of time? Are you planning for a more normalized switching behavior in fiscal 2022 that you were seeing pre-COVID? Yeah. Great question. I think we're planning for more switching behavior, just because I think we have found that many clients, just because of our sales experience as well as client retention, to be fair, is that people are just kind of buttoned down and not making changes, while they've got other things to worry about. I do think that there's been, certainly a, as I mentioned earlier, a great value that clients have seen that they wouldn't normally have been able to see from us, how we facilitated their help or how we facilitated helping them through the innovation of Flex to really pre-populate information, file for their loans, and be able to help them through difficult times. I think that's, there's definitely gonna have some retention impacts, 'cause we see it in the client satisfaction scores being at an all-time high, great feedback from clients, awards that we've won, the help center online that we've produced. I think there will be some stickiness, but we also know that they're just the ability that people are more comfortable and they will now focus on, do I need something else? Do I, you know, grab a discount option to get three months free or something like that. That's probably gonna happen as people are more comfortable. Let me just add one other thing because I think you raise a good point. You know, those of you who've followed us for a while know that we tend to err on the side of being a bit conservative in terms of what we say and try not to get over our skis too much. I would say this, if you look through the first three quarters, and Martin mentioned that our net client gain was the highest that certainly it's been in recent memory in the third quarter. If you look through three quarters, we're on a pace to really smash our retention records. I mean, significant improvements that frankly nine years ago I would never have thought was possible. Let's leave that to the side. Right now as we speak, our rate of revenue retention, ignore client retention, is verging on 90%+. That's a number given our client base, which is really pretty extraordinary. When I look at those numbers and I say, "Why is that?" It's all of those small actions, seemingly small in helping clients, that have driven them to stay with us. Will we end the year there? I would say we have to see what happens in the fourth quarter. We're on record-setting levels from the standpoint of both locking down the client base on units and also in terms of revenue retention through the first three quarters of the year. We're feeling pretty good. We expect some slippage as we get into the summer. That's to be expected, but we've set ourselves up pretty well. If we can continue to derive benefit from all of the actions that are occurring and all of the packages that have been released and continue to serve clients well, we're well positioned for next year. You know, Bryan, one other point just to be very clear on that too. On the question that you had, when you think about it, they will need, they will look for our support to file for forgiveness, loan forgiveness, as well as, you know, these, a lot of the stimulus things move through into our next fiscal year. I do think it will have specific retention benefits based on the fact that they'll need support on loan forgiveness that we have automated into the Paychex Flex system that makes it easy for them to apply. Also, for things like the employee retention tax credits, if they have to refile quarterly returns or file them correctly or go back and get data, I think it will certainly help us. There'll be a little bit of a tail on some of the stimulus piece of it. Okay. That's really helpful. Thanks for all that color. Just a follow-up. I wanted to dig in a little bit more around the demand improvement by client size. We heard the continuation of strong performance on the small end. Can you quantify anything around SurePayroll? On your upper end, anything around mid-market that you're seeing different? You know, SurePayroll, the low end has continued to be strong, not as strong as it was in the first half. You know, there was a big bounce there for household employers like nanny payrolls, things like that. It is, you know, that demand isn't as strong. The demand coming in from a digital perspective through marketing and on the website and sales from a digital continue to be strong and consistent and persistent, I would say. On the mid-market side, that's probably been more affected by the no decision. We're getting in front. The, as I mentioned earlier, the key metrics of getting in front of more clients, winning when there is a decision made against competitors is better. We're not, you know, I wouldn't say we're as strong as we wanted to be in the mid-market, more because of no decision, not because of losing to a competitor. Okay. Thank you very much. Okay. Our next question comes from one of Andrew Nicholas of William Blair. Hi, good morning. Hi, Andrew. Given the demand dynamics around the ASO and PEO businesses, I'm wondering how we should think about the likelihood of an ASO client eventually opting for the insurance benefit via the PEO offering. What type of upsell frequency have you historically experienced? If you could give any color on what the economics look like when a client transitions from ASO to PEO, that'd be helpful. Yeah. I think I'll start with the demand for it. I think, we do look at that. Now remember that we kinda go in and can offer both upfront, and many times, if they're not a good insurance risk, or, you know, fit the underwriting, the ASO is a stronger platform for them. We can take them through our agency. I think that, you know, there's always availability of upsell, ASO to PEO later, but it's not always as strong. We make that available to them. We always are ready to offer that to them. We keep an eye on that through the HR generalists that service them, that if they have benefit and insurance needs where we can supplant their ASO offering with a plan, you know, we can do that. I would say that we do a pretty good job upfront of identifying for the client whether the better value is to go PEO or ASO and offer those options to them. As far as the, you wanna touch on the economics effort? Yeah, there's a revenue uplift if you go from PEO to ASO. Just to kind of build on what Martin said, you know, this has been an extraordinary year in terms of the growth in the ASO offering. I think that what happened, Andrew, this year, we'll see how this trend plays out, was that because people were so interested in getting HR support quickly, they opted for what ended up being the solution that gave them that support the quickest. We do think there's an opportunity for ASO to PEO conversion, and there's revenue uplift in two areas. One, because the admin fee is higher, and second, because of course the attachment of insurances would boost revenue. We think there's an opportunity there. I think we'll wait for the dust to settle in the fourth quarter, see where that opportunity is, and then see how we go after attacking that. For now, as Martin's been saying over the last three quarters, clients have a desire to get a HR solution in place quickly because of the changing landscape of regulations. Our HR specialists have been terrific in guiding clients through that. Some more to come on that. Got it. That's really helpful. For my follow-up, I was wondering if you could just speak to how healthcare utilization and claim costs are trending in your risk-based plans, and also whether your experience over the past 12+ months has impacted how you're thinking about risk-taking in the PEO business broadly, if at all. Thank you. Yeah. Short answer is really not much of a significant change. I think that what you're continuing to see, to be fair, I'd like to claim it was all superior management, and I would say to my colleagues in the PEO, of course it was superior management for them. The reality is also that there's a market component here where people continue to defer elective surgeries, or elective medical procedures, not just surgeries. Costs have been very contained, and I would say that's across a wide range of plans that we have. It doesn't change our perspective on risk on healthcare. I think properly managed, if you underwrite it correctly, and you have a strong underwriting group, which we do, I think that our appetite for risk on healthcare remains unchanged. I think that that will continue. As Martin said earlier, the value prop of healthcare, we think that that will start to come back next year as conditions change, the pandemic abates, and people are looking at a little bit more normalized environment. That's where those things stand. Makes sense. Thank you. Okay. Our next question comes from one of Jason Kupferberg of Bank of America. Hi, good morning. This is Mihir on for Jason. Firstly, thank you for taking our questions. Sure. First, I just wanted to ask, can we just get the latest update on what you're seeing in different parts of the market, just in terms of pricing, in terms of, you know, promotional offers, discounting, things like that? Sure. I think it's been pretty consistent with what we've seen. I don't think there's been any major changes from that. We still feel like we have pricing power and can do the things that we normally do. We do offer various, you know, competitive pricing tactics to win clients over, but I don't think things have changed all that drastically out there. Great. Thank you. Just a question on the early view you provided on the fiscal 2022. Firstly, appreciate you providing that view, but maybe if you could share just some of the underlying assumptions that are embedded in that guidance. You know, just things like U.S. unemployment rate, GDP growth, or new business formation, just what you expect from the competitive environment, things like that. You know, I would say that our outlook at this stage embodies a continued gradual recovery into next year. We're not expecting some sort of sharp decrease in unemployment. We are wrestling with that. We're wrestling with the current environment. I would say that fourth quarter is trending close to what we expected from a macro standpoint, but we're not expecting it to be dramatically different. Probably doesn't change. You don't start to see a significant change until end of year, beginning of next year calendar 2021 into 2022. The macro doesn't change significantly. We are benefiting, I would say, especially us, other competitors not so much, from a very robust environment in terms of new business formation. Our new business sales are up significantly that benefits more the lower end than the mid-market. We can expect that it will continue to be positive. From an interest rate standpoint, it looks like we've had a sharp move upwards. We don't expect it to be that significantly different. I think that we're expecting the trends that you start to see in the fourth quarter that we're experiencing already in March are gonna continue but it will be more gradual. Got it. Thank you. You're welcome. Our next question comes from the line of Jeff Silber of BMO Capital Markets. Thank you so much. You talk a lot about what you've been doing for clients with some of the stimulus funds that's been, you know, pushed into the economy over the past year. You know, last week we had an announcement of an infrastructure plan. I don't know if you're going to be, you know, benefiting or your clients are benefiting it from directly, but is there anything in there that you might be able to participate in? Well, I think probably more indirectly. I think we'll, you know, like if you think about a lot of the infrastructure going to construction, you know, we benefit from construction. You know, when there is more construction, whether it's, you know, in home building or road construction or other facilities, you know, everything kind of around that. There's a lot of small business around that small and mid-sized businesses. I think, definitely it provides more jobs, and then we'll benefit from that. I don't see it directly, you know, but indirectly, I think, certainly any boost like that to construction, to everything around it will be a positive for us. Still early to see exactly how that's gonna play out and how long it takes to get that money into the economy, but we should be a benefactor of it. Okay. All right. That's helpful. Then Efrain, I guess the implied guidance for the fourth quarter is somewhat wide. Can you just give us any, you know, framework, what should we expect on the high end and the low end, and also what share count is embedded in that guidance? Thanks so much. Yeah. Jeff, I think that, you know, shares will move slightly lower than where they are right now, but not a significant change. The service revenue, you know, I think I called it out at 7%-9% for fourth quarter. I would just add a little bit of color to that, which is to say that management solutions will grow faster than PEO in the fourth quarter. I guess that's, I think that's enough to kind of add the add the points together to get you to where you need when you couple it with the with the with the year guidance. I would say, look, it will be good to talk about growth. We've had pockets of growth in the last three quarters, but it'll be good to resume a period of more normalized growth in the fourth quarter. That's what we're expecting at this stage. All right. That's really helpful. Thanks so much. Okay. Our next question comes from the line of Kartik Mehta of Northcoast Research. Hey, good morning, Efrain and. Good morning, Kartik. Yeah, I wanted to ask a little bit about payroll, and I think you alluded to this a little bit, Martin. You know, when COVID-19 was originally occurring last year, one of the issues that you had was not doing price increases or not putting that burden on your customers. You know, where we stand today, do you think you'll go back to the normal cycle, or how do you think that environment looks in terms of the ability to get some price increases? I think the ability is there. In fact, Kartik, I think during this year, you know, as a lot of things that we've talked about, we've shown a lot of value to our clients, and I think we're probably in as good or better position than we've ever been. You know, one of the opportunities, while it's difficult on us and on our clients, is the ability to show how strong we are as a company and what we add to our clients and help them through a very difficult time. I think the pricing power is very consistent, and I think you'd see more of a normalized move in that, in that regard. Just a second question, Efrain, last question. Any change in thoughts on how you'll manage the float portfolio? I know you kind of gave guidance for FY 2022, but I'm wondering, considering what's happening with rates, how you might change the management of that? Yeah. I've got a long meeting in a to discuss various scenarios. The short answer is, we're looking at that. You know, the shape of the yield curve presents opportunities that wouldn't have been there several years ago. We're looking at a range of options there to see if we can squeeze a bit more out of the portfolio. I wouldn't expect anything significant, but we're looking at opportunities to optimize it given the fact that we now have a steeper yield curve, and it looks like longer term rates may be heading higher. I don't have a complete answer yet. We'll build that obviously when we get to fourth quarter. All right. Thank you very much. Appreciate it. Thanks, Kartik. Our next question comes from the line of Eugene Simuni of MoffettNathanson. Good morning. Thanks for taking my question. Sure. I have two that I'll ask up front, both related to M&A. You closed the Oasis acquisition about 2.5 years ago. One question is the integration of that acquisition fully completed now? I know obviously you went through the crisis, so maybe there was some pause there. Or is there synergies left that might help the recovery in the PEO over the next 12 months or so? I'll ask the second one right away. Just more broadly as we're coming out of the crisis, is M&A again a consideration? If so, what kind of assets could be attractive to you guys? Okay. I think the Oasis integration, yeah, it's gone very well, particularly lately. I mean, we've been in the PEO business for a long time, so that integration made sense. We made sure You know, at the beginning, I, you know, when you think back now almost two years, I mean, we had some bumps in the road from a combination of the sales teams and their compensation policies and all that stuff. We're past that and I think that we've continued to see good synergies that we expected. Unfortunately, the pandemic obviously put a damper on some of that from a sales perspective, as you can see. A little disappointing there. Generally, I think we were heading on a good path until the pandemic hit, you know, now over a year ago. I do think there's always still synergies that we can look for there, as we combine kind of our traditional, our PEO business with Oasis, and we continue to do that from a platform perspective, look at the platform, look at the way we're selling, how we sell ASO to both markets and those things. I think there's still some things there we can do, but, you know, we're very high on the PEO market and the ability of where it's gonna come back, as we come out of the pandemic. All the things we talked about earlier, a little bit higher indexed in hospitality, in some states and some areas of the states that were hit a little bit harder. I do think we have some opportunity to see that bounce back. On M&A, I think, you know, we've continued through the pandemic to continue to look at opportunities that we see. There, we'll still have the same kind of ideas in mind for that. That can be the PEO business. We're obviously interested in from a product standpoint, if there's things we need, but we don't see a big need there right now. Always looking at payroll, HR, and anything else that we can do there. In international, we picked up a small acquisition that we think will add to the product set internationally as well. We did that, kind of under the radar. It kind of was a small one, but, we think that could have some impact too. Yeah, we're still very interested in M&A. Obviously, we're in a good position from a cash standpoint, if that opportunity comes up, and we'll continue to watch for good valuations, that make sense, particularly coming out of the pandemic. Got it. Thank you very much. Very helpful. Okay. Our next question comes from the line of Peter Christiansen of Citi. Good morning. Thanks for taking my question. Morning, I was wondering if you'd talk about, you know, the decision delay discussion that we've been having here. Has that been a regional issue? You know, given that some of the Southern states have opened up where there is a lot of PEO business there. I was just curious if that's been a factor, certainly impacting face-to-face meetings, so on and so forth. Then as a follow-up, Efrain, I was wondering if you'd talk about expectations for go-to-market spending in 2022, and if that is a factor in the margin outlook. Thank you. Yep. I would say yeah. I mean, as more businesses open up, they're getting more comfortable with the ability to have a rep come in and talk to them. I think, you know, I do think as we look back at the year, we transitioned very quickly to virtual selling, all telephonic. Of course, we've been selling telephonic for, you know, many years, and really maximizing the use of our marketing spend to bring more leads in to the website and into telephonic sales. I think that really helped us kind of hone our skills very quickly because we'd already been on that path and actually got us there even faster. I think, yeah, we're really looking forward to where more businesses are comfortable. We've already started to open that back up to say that we're available for face-to-face meetings. We do want the rep and the client have to be comfortable with it. I think you're gonna see that pick up quite quickly, as you're seeing the states open up, but people just get more comfortable with it, from that standpoint. That I think will drive an increase in certainly in close rate. Then just the comfort level that their customers are coming back. Our business, our clients, customers are coming back. I think now they'll be more open to making a decision as to what they need, and I think Paychex has a full suite of products that can help them grow in this as we come out of the pandemic. Yeah, Pete, with respect to go-to-market spending, you know, we in the face of the pandemic actually increased our marketing spend. We going into next year will continue to spend against the opportunities that we see. Don't anticipate that that's gonna get clawed back. There is an opportunity in California on retirement services. Not a business we talk about a lot, but a business that has done well, in which we think there's an opportunity. Martin mentioned PEP, but there's also a mandate in California around providing retirement services. We think that could be a nice opportunity, we're looking at ways to optimize that opportunity going into fiscal year 2022. We'll continue to spend at a good clip to be able to address the market needs that we see. Thank you. Yep. Okay. Our next question comes from the line of Samad Samana of Jefferies. Hi. Thanks for taking my questions. Maybe a follow-up to the last question around go-to-market. Efrain, how should we think about maybe the incremental cost to acquire a customer and how that's trended? Not just the absolute spending, but the CAC for customers, especially with most of you and your competitors having to sell virtually still in this environment. Are you seeing the per unit costs go up, or have they stayed relatively consistent? Could you give some color on that? Yeah, it depends on the channel, Samad. I would say that where those leads are driven through our digital channels, while I would say we've spent more, we actually have gotten good economies of scale in our spending. I would say the marketing group has done a fantastic job of optimizing our marketing spend. I think in that sense, that's been good. I see as we pivot field-based resources into more digital or virtual, we end up realizing a savings that we then plow back into marketing. I think that we can make that equation work with some net savings. With respect to the other channels, it's about the same. It's not dramatically different from what it was. As the business pivots more towards digital, and it will continue to do that, I think what you're gonna see is an ability to optimize spend, and to get better economies of scale in that trade. Great. Maybe similarly on the retention side, the number you called out was quite high. Any trends now that we're a year in on the retention of customers acquired more through the digital channels throughout the last year or so versus maybe the historical base? If there's any dispersion in the retention trends there. Yeah. Two things. I'll answer a question you didn't ask, then I'll answer the question you asked. First, the question you asked. The short answer to the question is the smaller the client, the more the propensity to churn. That hasn't changed. We would expect that we'll see a bit more churn as we get into next year, simply because the survival rates on clients that are under four are typically not terrific. We haven't seen any significant increases in that bucket of clients. We're certainly handling out selling losses either through SurePayroll and/or through our virtual sales. That's been a positive, we expect that a lot of those trends will continue into next year. Will it lock down to the extent? By lock down, I mean, will we have less churn in the way we've experienced this year going into next year? You know, that's to be seen. I would certainly expect in the first half of the year we're gonna see continued positive news on retention. We'll see what happens in the back half of the year when things start to open up. The second thing I'd say is that one of the things that we looked at very closely is in terms of clients who now have taken our HR solutions, how are they churning or not churning in the base? The short answer to that is they're not. They see a lot of value in what we're providing. That's big revenue for us, and I think that's helping to drive what are really good revenue retention numbers that I will update as we get into next year. Great. Thank you, guys. I'll pass it along to the next analyst. All right. Thank you. Our next question comes from the line of Tien-Tsin Huang of JP Morgan. Hi, Tien-Tsin Huang. Hey, thank you. Hey, good morning. Always great to connect. A lot of great questions already. I'm just trying to think about some of the answers you've given around the client indecisions, and I'm just trying to summarize in my head. Is it more structural or cyclical? It sounds like it's both, but I just wanna make sure it's not one more so than the other, if that makes sense. I think the no decision, if I get your question right, Tien-Tsin, I think it's just I mean, honestly, I think it's just focus. I think, you know, they're interested in the presentation, so our presentations are up, our end user presentations, and we're feeling very good about that. What's happening is the client is deciding, "Well, I'm just not ready to decide yet. There's just too many things going on." Either they're, you know, many getting a loan, they're finding out new ways to get employee retention tax credits. They've got a lot going on. I think, you know, what you're finding is that it's a no decision, not a or it's a not right now decision, let me put it that way, versus a no decision. It's not losing to competitors. As I said, what we're seeing is better competitor win rates when they are making a decision, so we feel good about it, from that standpoint. I think it's more of a timing of what we're getting. The feedback we're getting and we're seeing is it's more of a timing thing than anything. We're hoping for a pickup. It's just a big number in the selling season. Sure to produce. You know, that's a tough one when you're not getting as many decisions being made. It's a little bit more obviously on the mid-market side where they have more complexity to their business that they're working in. Yeah. I know your, the retention results have been great, and I'm sure you're not standing by from a sales perspective. Given what you've learned on selling so far, do you anticipate changing your traditional versus digital sales investments from a mix perspective going into fiscal 2022? Or is it more you're just gonna be ready to catch it in the net here as things open up? Yeah, no, I think, you know, it's one of those things that's gonna continue to evolve. We were doing that beforehand. You know, where you're gonna see more, as Efrain said, you're gonna see more spend, the shift in marketing and sales. You're gonna see more spend in marketing, as we've already seen this year. It's just, you know, the way things clients and prospects have gotten more used to saying, "Hey, I don't know if I have to see somebody in person," right? "So I can sell." I mean, you know, I don't wanna give you the impression that we still, we're pretty much year to date where we thought we would be on sales, so you know, it's worked. This pivot of going and selling remotely has worked pretty well, so we're not gonna go back to the full model. We'll certainly go back to more of the selling face-to-face. We found a lot of new tools and a lot of new training and ways to sell online. Frankly, it's more effective, and you can spend more in marketing, but you're gonna spend a little bit less, a little bit less in sales. Direct sales kind of thing. I don't think It's not gonna go back to where we were. It'll continue to evolve, you know, as we need to sell the product. Yeah, no, that's clear. Thank you for the insight. Okay. Our next question comes from one of Mark Marcon of Baird. Good morning, Martin and Efrain. Hey, Mark. Wondering, with regards to the win rates, the improvement that you're seeing, who is that, primarily coming against? Do you have any sense? Well, you'd know them very well. They're, you know, the major competitors in the mid-market space, would be most of them. That's, you know, the ones that we're seeing. It's pretty consistent. It's not just one of them. It's been, you know, the top players in there that you would know very well and cover. With regards to, you know, your assumptions for next year, How do you think it's gonna end up trending in terms of the, you know, the clients being distracted? You know, initially they were distracted because of, you know, obviously COVID-19 and the unprecedented nature. Now it looks like, you know, we're gonna end up having, you know, potentially a lot of stimulus combined with COVID-19 fading. Are they gonna get overwhelmed with business and too busy to think about things? Or do you think if they're really super busy, you know, that could actually be a spur to increasing decisions? No, I think we expect an increasing in decisions. You know, COVID-19, the thing was how do I deal with, first of all, remote workforces, many of them, or closures? How do I deal with all of these rules? If those start to ease, those are the major issues of why I wouldn't be buying HR or payroll or retirement. I think that as that opens, you know. The stimulus, frankly, have been a plus. Obviously, they've kept afloat a lot of businesses. You know, we've seen those businesses that we saw as not processing, but in a hold pattern, come down dramatically. I think the stimulus has been a big help. As more stimulus comes out, like now, like these grants, Not loans, but grants to restaurants, I think that will, you know, really stir some more interest in saying, "Okay, I got employees coming back. I need help from an HR generalist that Paychex provides. How do I bring them back? How do I manage these? You know, how do I manage people? How do I recruit?" There, there's gonna be some challenges here in recruiting, retaining, and I think that's gonna increase the demand. As the, the kind of living day-to-day of COVID starts to ease through the vaccinations and so forth, I think it's gonna pick up, is our expectation. Got it. With regards to the micro end of the market, are you seeing any impact from a large competitor introducing a micro solution? We have not yet. you know, I think, you know, it's going to be interesting. We're going to watch it, obviously. you know, it's a very basic product. you know, you're going to get what you pay for. It's very basic. There's not going to be personal support, I don't believe. you know, as we've said, we've moved a lot to self-service, but at the same time, we're always ready, you know, 7 by 24 by 365 to provide that support, and we've found that to be very critical to our clients during the pandemic in particular, you know. If they get hung up on something and they need to talk to someone, they don't wanna wait for a text back, or someone to answer an email that when they can't talk to a live person, just like, you know, how many of us find software support these days. It's gonna be as good until you need something different, and then it's could be a frustration. Haven't seen the impact yet, but we'll watch it. Got it. With regards to two things, just the PEO, under what conditions do you think that really does transition where people will say, you know, ASO is great, but PEO is really what would be better? Like how confident are you in terms of seeing that? The second question is this: on the service footprint, just, you know, as you cut back on the geography, and it seems like retention is doing extremely well. It seems like your client satisfaction must be really doing well. Are there any negatives with regards to the cut back with regards to the geographic footprint on the service side? You know, have not seen a lot of it, Mark. It's really attributed to our operations leadership team and how we've handled that. You know, many of those tenured employees that were in the offices that we closed are working from home, so the clients have not seen that disruption from losing their payroll specialist that they've had for many years. We've been able to transition to that work from home environment, which, you know, was accelerated by the pandemic. We had already planned on doing some of that over the next few years, but accelerated it. Frankly, my hats off to the technology teams here, the operations leadership, that have really done a very good job in making sure that that continued to be handled. They've also, you know, positioned clients into the right service centers. If they were normally calling in, we're transitioning them to different service centers that can handle them, from that standpoint. I think we've done a really good job, and have not seen a fallout on that. On the PEO question, I think, you know, again, it's gonna come back to is as compliance feel a little bit more, you know, things are calmed down. Now it's gonna be, again, how do I recruit, retain, and really make sure I get the employees that I need while there's still, some disruption to the employees? I think even through the summer with childcare, with unemployment having an additional, higher rate, payment to them. They're gonna be interested in, hey, what are the benefit plans that I can offer them? How am I gonna be able to provide those benefit plans? Are they a good benefit plan? I think the PEO interest will pick back up, you know, as we get into the second half of the calendar year and into our next fiscal year. We expect that will start to pick back up again. Great. Then last one for me, just Clover, how's that partnership worked? Have you seen much of an impact, or do you expect to see more of an incremental impact over the coming year? I think coming up, it's gonna have more of an impact coming up. We finished this integration where the Flex app is on the Clover platform. I'm a Clover customer. I go, I fire up my point of sale terminal, and I've got the marketplace from Clover, Fiserv's Clover there. Paychex is, you know, is right there as a preferred app. Once they realize that if they're a Flex customer from Paychex and a Fiserv point of sale Clover customer, they can now have all of that information integrated. The time and attendance will automatically populate from the point of sale terminal. I think all of that integration has recently kind of gotten done now, and so I think that we'll see more of an impact in the next fiscal year as that gets out there more and they start to see the combined benefits of being together, Clover and Flex. Great. Thank you so much. Okay. Thanks, Mark. Your next question comes from the line of David Grossman of Stifel. Good morning. Thanks for indulging me this late in the call. No, it's like crazy. Just a couple of really quick ones. You know, there's a lot of noise in the market right now. I mean, I think it's fair to say retention's gonna be up for everybody in the industry. Yeah. You know, increased complexity definitely plays into the outsourcing theme. You've got really difficult comps this year transitioning, obviously, the more favorable comps next year. You know, we all appreciate the fiscal 2022, you know, early look. You know, however, at the risk of sounding greedy, you know, perhaps you could help us sort through how to view more normalized growth, you know, when you get past these distortions from the reopening and the compares. You mean what are our expectations, Dave? Yeah. I mean, I don't wanna ask you to get too granular, obviously, but just a way to think about what a more normalized growth. You know, I think that Yeah. What I say when I get asked that question is, you know, pre-pandemic, Management Solutions was growing about 6%. We certainly expect Management Solutions will grow in mid-single digits, maybe a hair faster. We'd want it to grow faster than that. We expect PEO to grow double digit or around there. Insurance is a little bit of a drag at this point. Unfortunately, the workers' comp market has not recovered. You know, that's what we expect. Frankly, in some ways, if you look at the guidance next year, that's sort of what you're seeing, right? Could we do better? Sure. You know, there's a possibility as we get through Q4 that we come out of it even stronger than we expected. I think as a reasonable starting point, that's where we're at right now. Yeah. On the PEO, I mean, obviously you're underperforming the peers right now, you gave us some of those reasons. How impactful are the insurance and the SUI, you know, versus the over-indexing the hospitality? Can you help us think through the relative impact? I would say I think it's a mix of that, and I think the insurances haven't helped. You put your finger on SUI. SUI is gonna be an impact into Q4. That's gonna be an impact. Workers' comp has an impact too. I think you got a mix, a melange, as they say, of different. Right. Issues there. I think we start to anniversary those as we get into next year. Right. Then you mentioned one other interesting thing about self-service characteristics of the platform, and I think you mentioned it in the context of your costs going down. Yeah. I guess my question is really more, you know, competitively since that's one of the biggest criticisms, you know, throughout the spectrum of client size of, you know, kind of your model versus a software model. You know, am I reading too much into that, or is there more to come here, and where may we be on that journey? Yeah you know, embedding more self-service characteristics to give the client more control and just give them the services when they need it? Yeah, no, I think it's been very important to us. It's actually something, that innovation, we've been on a path for that for some time. You know, it's really an ability of getting the client and the client's employees to see how easy it is to do those things. I think the pandemic has helped in the fact that while employees were away from many work sites, you know, it forced the clients to say, "Hey, you can do this yourself, or I can do it for you, but we're not together, so we can't be passing paper around," and there's no longer a need for that. As I mentioned, you know, over 80% of changes like direct deposit changes, address changes, things like that, are done by the clients or their employees now, and we see that continuing. The next movement will continue to be self-service, even in sales itself and setting up the client allowing themselves to be set up. Much of that is done with SurePayroll now, that'll continue on the Flex platform. You know, we're, "Hey, you're there." We're always gonna be available to them if they need us, definitely there is not only a cost saving, but even probably more important, there's a value to the client that want to do it themselves when they wanna do it. We've been on that track for some time. We just probably haven't talked about it as much from that standpoint. I think we're well on that continuum, and that will continue as an offering to clients. Always leaving that, "Hey, if you have an issue, you can get to us anytime, to be able to get you through it if you need it. The other thing I'd say, David, is, you know, we're proudly a tech services firm. You cannot win the awards that we won. Those aren't paid awards. We didn't pay anyone to give us those awards, unless independent third parties look at your platform and your service and say, "Yeah, you know what? They do what they're gonna do," and clients agree with that. Look at those awards. I would just say to people, look at that. The prevalence of the model, the strength of the model is shown by our retention numbers and the service we were able to deliver to clients. I would say this, of course, there's an opportunity for pure software players in the market. If everyone drops out and provides no service, that's great for us because you know what? We'll be there to catch those clients because a lot of clients, especially in the SME market, need some element of service. We're not gonna run away from that. How we deliver it, that can change. Frankly, over the last Since tax reform, many of you know, we made significant investments to accelerate the opportunity. You want a low-end solution where you don't talk to anyone, and you can onboard yourself? By the way, let's talk about reality. Ask our competitors who can do that. We can. Ask them if they can do it end to end. I think you're gonna get some funny stares on that. My point is, we don't cede our tech chops to anyone. We're as good as anyone else. What we do is we also give you value-added service, and this year was a year where you saw the benefit of that. What we're seeing, the reason we're seeing, our retention numbers and revenue retention numbers at the levels they are is because we did it with excellence. All right. Very good. Well, thank you very much. All right, David. Thank you. Our last question comes from one of James Faucette of Morgan Stanley. Hey, Martin. Hey, Efrain. Thanks so much. Yeah. Being so generous with your time today. Yeah, no problem. I wanted to follow up just on that last comment. You know, obviously, you guys have been very successful in adding capabilities, not just evidenced by the awards, but also by the capabilities and new products, et cetera. How are you feeling now about kind of the pace of innovation in the industry, and, you know, what are you feeling in terms of what Paychex needs to do to match that or exceed that, both from an R&D perspective? It seems like you're pretty comfortable from that perspective. Is there some supplementation you're looking at from an M&A where it makes sense to go out and acquire capabilities or technologies, or do you feel like most of what you're seeing and what you need to do can be handled through internal development? I think most of it can be done by internal development. You know, just following up on Efrain's passionate speech there, I mean, I think we have probably undersold the technology side of us over the years, because we're so proud of the service side as well. You know, when you think about things like, the loans, when that stimulus, when the CARES Act first came out, the next day we introduced a product that said, "All of your information is pre-populated in Flex. If you're a client of ours, all of your payroll information is in there. You can apply for the loan." Then we shortly said, "You can now send your information to Biz2Credit, and it'll automatically apply. All you have to add is a few things, and we have signature-ready forms for you to apply for forgiveness as well. I'm very proud of the fact of what our IT and the technology team have done. I think we've added those things, you know, over the years that we needed. Time and attendance, we bought as a very small add-on product and have now turned it into a very large business growing extremely strong, now as part of a revenue stream for us. We've integrated that into the SaaS cloud-based Flex product. The mobile app, as I mentioned a few times, still a five-star app that is getting increased usage and has a lot of ways to go. I'm very comfortable. We're always looking probably from an M&A standpoint also, or even partnership standpoint, like the Clover example. You know, we have the technology, when you integrate that now with a point-of-sale platform that's best in the business, now you really have some additional power that you're putting to technology. I've got a point-of-sale, boy, now I've got a great time and attendance solution and a payroll solution that's all integrated with seamless connection. That's really powerful. It's probably more partnership than it is even M&A, we're always interested in that. We've built out most of our technology, and we're very proud of it. That's great color there, Martin. My last question here is just, you know, we've talked about over the course of the last year, some variances from geographies in terms of pace of recovery, et cetera. Does that continue to be the case? What key things are you watching for to measure and try to forecast that recovery, particularly in maybe some of the regions, if there are differences that are a little bit behind? Well, our own, you know, small business index that Paychex puts out with IHS Markit every month, I mean, we've seen this last month, we saw the best one-month gain in jobs in about eight years, and it was across all regions. That's very positive. You know, the South has been the strongest, as you'd expect. There are lower wages, but they've had more growth, just exodus to the South and just more construction, you know, commercial and residential. Right now, in March anyway, we saw growth in every region, and I think 18 out of the 20 states that we look at for the best growth. We're seeing, you know, pretty growth across that. We use our own metrics that way. We're seeing that, we're seeing a bounce back in employees a little bit, it's gonna be interesting through the summer. I think you're really gonna see the bounce in September as people start saying, "Okay, schools are back in. People are coming back full-time into work." There may be still flexible work conditions, that's when I think, you know, as you see the summer and I guess be ready for all that, our clients are gonna start picking up on the decision-making. That's great. Thank you so much, you guys, for your generosity today. All right. Thank you. You're welcome. That's all the questions, right, operator? That's correct, sir. All right. At this point, we will close the call. If you're interested in a replaying the webcast of this conference call, it'll be archived for about 90 days. Thank you for taking the time to participate in our third quarter press release conference call and your interest in Paychex. We greatly appreciate it. I hope you all continue to remain safe and healthy. Thank you very much. Thank you. This does conclude today's conference call. You may now disconnect.