Good day, everyone, and welcome to today's Paychex third quarter fiscal 2022 earnings. At this time, all participants are in a listen-only mode. Later, you'll have the opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing the star and one on your touchtone phone. You may withdraw yourself from the queue by pressing the Pound key. Please note this call may be recorded. I will be standing by if you need any assistance. It is now my pleasure to turn the conference over to Mr. Martin Mucci, Chairman and Chief Executive Officer of Paychex. Thank you, Katie, and thank you for joining us for our discussion of the Paychex third quarter fiscal year 2022 earnings release. Joining me today, of course, is Efrain Rivera, our Chief Financial Officer. This morning before the market opened, we issued our financial results for the third quarter ended February 28th, 2022. You can access our earnings release on our investor relations website. Our Form 10-Q will be filed with the SEC within the next few days. This teleconference is being broadcast over the Internet and will be archived and available on our website for about 90 days. I will start today's call with an update on our business highlights for the third quarter, and Efrain will review our financial results for the quarter and provide an update on fiscal 2022, fiscal 2022. We'll open it up for your questions or comments. Our strong results for the first half of the year continued in the third quarter as both Management Solutions and PEO and Insurance Solutions revenues increased by double-digit percentages year-over-year and adjusted diluted earnings per share increased 20%. We continue to see positive trends in our key indicators and strong momentum across all our lines of business, driven by a combination of solid internal execution and a market-leading suite of innovative solutions uniquely designed to address today's HR challenges. This momentum carried through calendar year-end and selling season, resulting in record sales performance and near record level retention. Our value proposition continues to resonate in the market, particularly in this challenging environment. Our sales results were broad-based with double-digit growth and new annualized revenue across all lines of business, HR outsourcing, retirement, payroll, and insurance. We continue to improve our traction in the mid-market space, which has benefited from the investments we've made in our technology and product suite. Our client retention continues to surpass our expectations and remains near our record levels of the prior year, well ahead of the pre-pandemic levels. Our revenue retention remains at record levels for the year as we continue to bring in even more focus on our higher value clients. Demand for our comprehensive set of solutions, including our integrated Paychex Flex Human Capital Management technology and our comprehensive ASO and PEO HR offerings, remains high. Businesses of all sizes are facing continued pressure from supply chain and labor shortages, the rising costs of doing business, and ongoing challenges with COVID-19. As staffing challenges persist, businesses are looking for integrated technology to deliver increased productivity, operating efficiencies, and access to experienced HR professionals to help them navigate a complex regulatory environment and complicated distributed workforce dynamics. We continue to invest in our product set to differentiate us in the market and deliver solutions designed to meet the growing challenges of running a business. Our most recent product launch introduced a series of enhancements designed to support both an on-site and distributed workforce, including an enhanced iris scanning time clock, which delivers a hands-free punch experience with industry-best security, including both the iris and facial scanning, a new secure document management solution, which allows clients to safely and confidentially store documents, like employee vaccination status, within the Flex platform, and a compensation summary, which allows clients to provide employees a full view of their compensation to promote retention. Enhancements to our financial wellness offering to help client employees more effectively budget, manage debt, and save for retirement. Each of these enhancements builds on our award-winning Paychex Flex technology. Several industry awards provide the latest validation of the benefits of our innovative technology. We were recently recognized with two awards for our Paychex Pre-Check solution, the 2022 BIG Innovation Award presented by the Business Intelligence Group, and a 2022 Stevie Award for innovation in customer service. Paychex Pre-Check combines payroll, HR, time and attendance, and employee self-service into a complete system of check and balances, ensuring that work hours are never missed, pay rates are properly applied, paid time off is not overlooked, and that pay is always calculated correctly. We have seen a strong response in terms of both client adoption and client results with Paychex Pre-Check. Our focus on helping clients maximize available government stimulus was recognized by Accounting Today as we were awarded with the Top New Product Award for our Employee Retention Tax Credit service. We recently surpassed $7 billion in total credits processed for our clients. I'm very proud of the agility demonstrated by our IT and service teams to proactively assist our clients with these government subsidies to help them sustain and enhance our clients' financial position. Our mobile and self-service technology solutions deliver efficiency for our clients and their employees, and we have seen significant increases in Flex sessions, both through the desktop and mobile devices, with an increasing proportion of the sessions, of course, done by the mobile app. Contributing to this growth is traction we are gaining with wearables devices. The use of the Apple Watch has increased mobile usage for our time and attendance solution. Obviously, this provides another safer method for employees to punch in and out and avoid exposure to COVID and other illnesses. I am particularly proud of two awards that Paychex has recently been honored with for our commitment to business integrity through our best-in-class ethics, compliance, and government practices. For the 14th time, Ethisphere named us one of the world's most ethical companies. We are also on Fortune's list of the world's most admired companies. These awards acknowledge our ethical business practices, our values-based culture, innovation, social responsibility, and leadership. We believe doing business the right way leads to greater success. Ethisphere agrees, noting that their 2022 ethics index, a collection of publicly traded companies recognized as recipients of this year's World's Most Ethical Companies designation, outperformed a comparable index of large cap companies by almost 25% over the past five years. I give credit to the innovation, integrity, and hard work of our employees who live our Paychex values each and every day. In summary, we are very proud of our performance during the third quarter and year- to- date, and I thank our employees for their tireless dedication during our busiest time of the year. Our set of innovative technology and service solutions provides industry-leading value to our clients and leaves us well-positioned for a strong finish for fiscal 2022 and continued growth into fiscal 2023. I'll now turn the call over to Efrain to review our financial results for the third quarter. Efrain? Thanks, Marty. Good morning. Thanks for being on the call. I'd like to remind everyone that today's conference call will contain forward-looking statements, refer to the customary disclosures. Let me start by providing some of the key points for the quarter. I'll follow up with greater detail in certain areas. I'll finish with a review of fiscal 2022 outlook and some very preliminary thoughts on fiscal 2023. Our third quarter results reflect strong internal execution, as Marty mentioned, and continued improvement in key indicators. Service revenue and total revenue increased 15% to $1.3 billion. Within service revenue, Management Solutions revenue increased 13% to $960 million, driven by higher client bases across our HCM suite, check volumes, revenue per client, payroll funding, and outsourced service for temporary staffing clients and ancillary HR services resulting from ERTC, which Marty just mentioned. Although the revenue associated with ERTC is substantially nonrecurring, ERTC has afforded Paychex the opportunity to continue to deepen its relationship with clients, increase revenue per client, and showcase its industry-leading suite of solutions for small and medium-sized businesses. A significant opportunity remains both inside and outside our base. One thing I'd like to point out here is there are a number of HCM platforms in the market, you all know that, but there are only a select few partners. In order for you to be able to access the opportunities that arise from having an HCM suite with bundled ancillary services, you have to be a partner, not simply a platform provider. There's only a few of those in the market. Our results demonstrate the power of being one, and we are one of the leading ones. Our results are not surprising to us. Our clients wanna know the difference between a MEP, a SEP, and a PEP. They wanna know what the implication of the ERTC is for their business, and they wanna know what the implications of legislation like the SECURE Act, how it's going to impact their business. We know that. We're experts, and we're the partner that our clients look to for solutions to those issues. Our results demonstrate that this quarter. Now, client base growth in the quarter resulted from both strong sales performance and high levels of client retention. In particular, HR Solutions business continues to benefit from strong demand as businesses look for more HR support. PEO and Insurance Solutions revenue increased 21% to $302 million. Our PEO business benefited from higher average worksite employees, state unemployment insurance revenue, and health insurance attachment. Interest on funds held for clients decreased 5% for the quarter to $14 million as the impact of lower average interest rates was partially offset by an increase of 13% in average investment balances. Obviously, this is one of the things that's going to change as we go through both the remainder of the year and into the next year. We haven't seen the impact of rising rates yet. We will. Total expenses increased 11% to $713 million. The growth in expenses resulted from higher PEO direct insurance costs, headcount to support our growing client base, and continued investment in our product technology, sales, and marketing. Operating income increased 20% to $563 million, with an operating margin of 44.1%, an expansion of almost 200 basis points. Our effective income tax rate was 22.3% compared to 24.2% for the same period last year. Both periods reflect net discrete tax benefits related to stock-based compensation benefits. Or payments, I'm sorry. In addition, the current quarter includes tax benefits related to prior year research and development expenses incurred in the production of customer-facing software. We had an adjustment there, and that's part of our lower tax rate. Net income and diluted earnings per share both increased 23% for the quarter to $431 million and $1.19 per share, respectively. Adjusted net income and adjusted diluted earnings per share increased 20% for the quarter to $419 million and $1.15 per share, respectively. I'll quickly highlight our results for the nine month period ending February 28th. Both revenue and earnings have grown by double digits for each of the past three quarters. Total service revenue and total revenue growth of 15% each to $3.4 billion and $3.5 billion, respectively. Expenses, excluding one-time costs incurred during the prior year, increased 7%, so we've gotten very good leverage. Operating income and adjusted operating income were $1.4 billion, increases of 31% and 27%, respectively. Diluted earnings per share increased 31% to $3.02 per share. Adjusted diluted earnings per share increased 27% to $2.95 a share. Let me walk through the highlights of our financial position. As you all can see, it's very strong. Cash, restricted cash, and total corporate investments now total over $1.4 billion, and our total borrowings of approximately $860 million is where it stood at February 28th, 2022. Cash flow from operations was robust in the quarter. It was at $1.2 billion, an increase of 34% from the same period last year. Free cash flow generated for the nine months was $1 billion, up 36% over last year. The increases were driven by higher net income and fluctuations in working capital. We paid out quarterly dividends of $0.06 a share for a total of $715 million during the first nine months. Our 12 month rolling return on equity was 44%. Those are strong numbers. Now I will turn to our guidance for the current fiscal year ending May 31st, 2022. The outlook reflects the current macro environment, which saw improvement in the quarter despite some disruption from Omicron. We've taken that into account, and we've taken into account the fact that third quarter results exceeded expectations but have tempered our outlook given the changing macroeconomic environment, and we provided the following updated fiscal 2022 guidance. As you saw, Management Solutions revenue is now expected to grow in the range of 12%-13%. We previously guided the growth in a range of 10%-11%. PEO and Insurance Solutions is expected to grow in the range of 13%-14%. We previously guided the growth in the range of 10%-12%. Interest on funds held for client is expected to be relatively flat year-over-year. We won't see the impact yet significantly of Fed raises. Total revenue is expected to grow in the range of 12%-13%. We previously guided the growth in the range of 10%-11%. Adjusted operating income margin is expected to be approximately 40%, up from previous guidance of 39%-40%. Adjusted EBITDA margin is expected to be in the range of 44%-45%, up from previous guidance of approximately 44%. Other expense, net is expected to be approximately $15 million. Our previous guidance was in the range of 15-18. Effective income tax rate is expected to be approximately 24%. We previously guided in the range of 24%-25%. Adjusted diluted earnings per share is expected to grow in the range of 22.5%-23%. We previously guided to growth in the range of 18%-20%. This guidance reflects our intention to continue to invest in our businesses to help drive future growth. I would just comment that in the fourth quarter, we intend to take some additional actions with respect to investment in the business, so that will temper the margin a little bit as we head into 2023. Now comments on 2023. We're currently in the process of preparing our annual plan. We'll provide guidance, final guidance for fiscal 2023 during our fiscal 2022 fourth quarter in June. I wanna provide a preliminary thought process around fiscal 2023 as we enter the planning cycle. On a preliminary basis, we believe that total revenue growth will be in the upper single digits. At this stage, I'd call that somewhere around 7%. I would caution that there's a lot of work to be done to digest completely where the Fed's going to end up and how we position the portfolio, so there's still some moving pieces there. The other thing we would say right now with respect to operating margin is we expect an improvement of about 50 basis points. You know that typically that's what we're aiming for. We've had very, very significant operating margin improvement, but we're still committed to leveraging the business. That's where we're at right now. I wanna call out one thing that's important. Other expense net is going to be in the range of $25 million -$30 million next year due to the absence of equity gains that we got this year. We have a portfolio that we invest in had equity gains during the year. Those will not be in next year, at least we can't plan on them or anticipate they will be there, and then the effective tax rate will be in the range of 24%-25%. Of course, all of this is very preliminary. It's subject to revision, and it's based on assumptions that could change given the uncertain macro environment, especially as we gain additional insight into what the Fed actually will do. We'll update you again on the fourth quarter call. With all of that, I'll turn it back over to Marty. Thank you, Efrain. We'll now open the call to questions. Katie? Thank you. At this time, if you would like to ask a question, please press the star and one on your touch tone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and one to ask a question. We'll pause for a moment to allow questions to queue. Thank you. Our first question will come from Bryan Bergin with Cowen. Hi, good morning, guys. Hi, Bryan. Appreciate you giving us an early fiscal 2023 view here. Understanding you've got some outsized double-digit growth comps materializing this year, that's good to hear for next year's number. I guess more importantly, though, a question we're often getting is how to think about a sustainable level of growth in your business. You've had some peers speak to medium-term targets in the model. Anything you could share as a framework for how you're thinking about maybe longer-term growth based on what you're seeing in the market and what you've done here to drive that stronger sales execution? Yeah. Hey, Bryan, first of all, thanks for the comments. I think that you know, we start with, I guess, two things and then one further building block. You know, with respect to Management Solutions, many of you heard me say this, we start with the premise that we're going to be at least mid, and we would hope over that timeframe to get above mid to upper single digits in Management Solutions. When we get to Q4, we'll call that out a little bit more. On the PEO and Insurance Solutions side, we expect to be around double digits. We start with that premise that yields a certain revenue growth that we think is going to be upper single digits. The other thing is that our expectation is that we will leverage. In typical years, we average at least 50 basis points. Some years we won't do that, some years we'll do 200. A year like this year from a leverage perspective doesn't come around that often, so I don't suspect there'll be too many 200 basis point leverage years in us. We do expect to continue to leverage going forward, certainly over the intermediate term. Just one other point on that's not simply an arithmetic exercise. It's a function of all of the work that's being done in the background around automating and making the business more efficient. I said earlier in the comments that, you know, we are a leading HCM suite provider, but what makes us so unique is we do that at margins that are industry-leading. We work very hard on that. That's as we go into a plan process here, that will be a mantra that's repeated over and over, and we expect to be able to deliver on those commitments over the intermediate term. I think just to add to that on the sales execution, you know, we feel very strong this year. We've had great sales execution. Selling season was very strong. Record third quarter sales performance. As we've gone through it, you know, really across the board. We're really pleased that not only the marketing and brand work we've done, but the product development that we've done and innovation there has really, you know, I think hit the marketplace very well at a time we really timed it very well to hit the market with the HR support that businesses and prospects, current clients and prospects needed from attracting and hiring and retaining talent. You know, we really hit the right timing on that. Then in addition to it, as Efrain said, this just doesn't happen. You know, the thought that went into the Employee Retention Tax Credit, which has been very successful for us, we've been able to go to current clients and prospects and talk about how we can get this government subsidy for you. You know, those tax credits have averaged around $180,000 per client. When you think of our average client size, that's a significant dollar amount that adds, as Efrain mentioned earlier, a lot of value. Then to say, "Hey, not only are we helping you with that, here's how we can help you continue to sustain your growth and your business," that's been very successful. You know, that's how we play the game. We feel we'll continue to be able to do that. Okay. Makes sense. Just follow up on retention. Can you just share where unit retention landed here in 3Q? It doesn't sound like you have any change of your holding higher post-pandemic levels, but correct me if I'm wrong there. Just one thing. Are you seeing any change in the gap between unit and revenue retention as your mid-market and larger client push materializes? It's a good question. I think revenue retention is a little higher, and so we are seeing a little bit of a gap there, as you'd expect, just based on the size of the clients and that we're getting more mid-market success in both sales and retention. The overall retention number, you know, is gonna be better than pre-pandemic, at least it is expected to be right now. It's better than pre-pandemic. We think that will stay through the rest of the fiscal year and but not quite at the record levels. It doesn't surprise us. I think a lot of people held on through the pandemic, and we're trying to figure out where they were. Things like the Employee Retention Tax Credit, those things have helped our retention, and we're trying to see if businesses, even under the pressure that they're under, can still sustain their business and keep themselves going. There's a lot of challenges out there, as you know, with supply chain and just inflation and so forth. We're a little cautious, but right now, we don't see that impacting them very much. Okay. Thank you. All right, Bryan. Thanks. Thank you. Our next question comes from Andrew Nicholas with William Blair. Hi, good morning. Thank you for taking my questions. First one I had was just on the pricing environment in the PEO business specifically. Are you seeing any noticeable change in the aggressiveness of your competitors when it comes to price? And if so, is that something that's had any impact on new business generation or competitive win rates to this point? Yeah, no, we have not. I don't see any real changes in that environment. We've been able to, you know, I think, take good price, get good price, on our sales and have not seen any increase in the need to discount further or anything like that. We've been very pleased with not only high sales at a record level, but we've been able to hold price, as well. Hey, Andrew, the other thing I'd add is, first of all, nice report on the PEO industry, by the way. Appreciate it. The other part is, you know, if you get aggressive on price in the wrong way in the PEO, you pay a ferocious price, but you don't pay the price in the next 6 to 12 months. If you discount your healthcare insurance and then don't price it appropriate to market. Of course, you know this better than I do, you pay a price down the road. We are really careful on that point. I would say it's one of the five things we're probably most careful about is pricing all of that ancillary, all of the insurance, direct insurance in a way that's appropriate to the risk. We haven't had any blowups. We monitor that closely. We think there's a really compelling value prop in PEO that's gonna continue to grow, but it won't be on the basis of selling cheap insurance. We're very cautious about that. No, that's helpful. Part of why I ask is because some of the conversations we've had indicate maybe there's some other players that are being aggressive on that front. Not specific to Paychex. In terms of my follow-up, Efrain, I think you mentioned in your prepared remarks toward the end that you intend to take some additional investment actions in the fourth quarter. Yep. Can you spend a little bit more time talking about, you know, areas of interest there, just to give us a little bit more insight on what to look out for going forward? Thank you. Yeah. Andrew, I can take some of that too. I would say, you know, there's certainly, as you can expect from an employee retention standpoint, there's some actions we wanna take and kind of move some of that up in the process. There's also more marketing. We're finding, you know, good response to our SEM and SEO investments on brand and also the products that's worked well with us for sales in the last three quarters, so we decided to continue to spend there. Some of the investment in IT that we would've planned typically to start into the first quarter, we can move some of that up, we feel, and accelerate it to get the products out even a little faster that are coming up. It's really kind of across the board. The other thing is, you know, we have been hiring, so we've got a little low in the first part of the year, particularly in service and with turnover and so forth. We have now accelerated that hiring and done well in the third quarter, and that'll pick up some additional costs in the fourth quarter. Makes sense. Thank you very much. Okay. Thank you. Thank you. Our next question comes from Kevin McVeigh with Credit Suisse. Hi, Kevin. Great. Thanks so much. Hey, Efrain. Hey, Marty. Nice job. Hey. Thanks. Hey, Efrain, thanks so much for the preliminary results in terms of outlook for 2023. Is there any way to frame what type of Fed funds is in that 7%? I just didn't get that. I know it's fluid, but is there any way to think about just initial thoughts on that? We have some, we don't have all of it in at this point in the preliminary outlook, Kevin. We wanna get a sense of whether six is real, four is real, nine is real, eight is real, and I think we're all trying to read the tea leaves. Is it 50? Is it 25? We have what I can characterize as a moderate scenario, certainly not the most aggressive. A lot of that growth is really more being driven by improvements in operating performance. If the Fed gets very constructive and we avoid a recession, that's part of what we'll have a better, a clearer answer to when we get to June. That's super helpful. My other question is more. I don't know if it's longer term or whether it's for you or Marty, but can you help us understand the addressable market at Paychex today versus last cycle? Because obviously you've done a ton of investment. It seems like, you know, what you're able to offer your clients is much more robust today. Is there any way to think about kind of whether it's a dollar amount or just how you're thinking about the addressable market today versus maybe what it was coming out of the last cycle? Yeah, I think definitely from the product set that we offer and the integration with Flex and the digital approach to everything we've done, I think it is definitely larger. I don't know if I could put a dollar amount on it, but you know, I think our success in the mid-market sales in particular and the retention there over the last three quarters has really shown that, you know, we're hitting the mark, as I mentioned earlier. We really focused on what would be the impact of coming out of COVID, kind of the heavy COVID period, which is that distributed workforce, how do you allow the hiring, the onboarding, the retaining of employees who are maybe distributed or maybe in the office, how do you handle all that? I think those products have really positioned us well to a larger mid-market base. It's not necessarily larger clients, but I think maybe a broader set of solutions that will hit a lot of different areas for clients. I think at the same time, you know, I think we positioned ourselves well that from what the client is really feeling coming out of COVID, it opened up an opportunity, like distributed workforces, to say, "Let me tell you how powerful mobile, the mobile app of Flex is." Look at how. You know, just take an example that our head of product management did for a team the other day, an investment team looking at products. You know, just the mobile app of time and attendance and how that works and how you can, of course, punch in and out, but how you can shift swap remotely, you know, alert them, someone that you need, don't need this shift or you don't need that shift, and open it up and take it, and all that's done on a mobile app for, across employees. Very powerful, not to mention retention analytics and a lot of the analytics, work that we've given clients. I think, long answer, I think we've opened up a lot more opportunities for us at a very perfect time to do that. The other thing I'd add, Kevin, is and this quarter really is a demonstration of that. When COVID started, we were doing a lot of consulting with our clients and we weren't charging. It wasn't monetized. But I will say that in the midst of the pandemic, some of our competitors referred their clients to our website in terms of information. I think as we progressed through COVID, what we learned was that there is a tremendous amount of opportunity in the services that attach around the HCM suite. So ERTC is a great example of that situation. Our retirement services promises to be another important opportunity going forward, and there will be others which we don't know a lot about right now because they haven't been surfaced. What we're finding is that in addition to the technology that Marty highlighted, that technology opens another door for the opportunity to provide a set of solutions that clients are interested in once we inform them about it or once we partner with them. I would say our marketing, our product, our IT teams, and our compliance teams also are all working very hard, including I put in our legal team too, to uncover those kinds of opportunities that we can monetize. Within the product set, there's one set of opportunities, and I think there's this growing amount of services that we can provide our clients that play off our technology. That part, we'll be looking to dimension as we go forward, but it's becoming increasingly important. Yeah. You got us excited to talk about this. You know, adding to what Efrain just said, it's the use of the data. We really have maximized the use of our client data now. You know, like when the Paycheck Protection Program started, you know, our teams here figured out, "Hey, look, we'll use the data to immediately alert the clients that they could file for the loans," and we could basically prepopulate the entire application other than they have to sign it. When it became you could add other expenses in there, okay, just add the other expenses. We prepopulated, if you're a client of ours, all of the data that we have in our system. 94%-95% of those loans now have all been, by the way, turned into grants. They've all been approved as complete grants. It's also using the power of our data. As Efrain said, the Employee Retention Tax Credit was, we used the data to now go to our clients and say, "Hey, look, based on what we have in our data, we think you can apply for this. And you sign a couple of things electronically, and we'll help you file, and then we'll amend the returns, and you're gonna have $180,000 on average." That's a big deal. That added a lot of value to the clients that said, "Wow, I didn't realize that Paychex, you know, could do all this for me." It added a lot, I think, to the retention and the brand value of what we could do for them. Makes a lot of sense. Thank you. Okay. Thank you. Our next question comes from Jason Kupferberg with Bank of America. Thanks, guys. Good morning. Efrain, I just wanted to start by probing some of your comments in the prepared remarks around macro. I think you said something to the effect of tempering your outlook, but obviously you raised the outlook, at least for revenue for the year, you know, by more than what you just beat the quarter by. Just wanted to try and reconcile that. Is that really reflected in the- Yeah. In the initial outlook for 2023? Yeah. That was mostly for people like you, Jason, who would ding me on why aren't you more constructive on Q4? As a number of you who know me and who I've known for now a number of years, we're gonna point out about how we're looking at Q4. You know, there's an element of caution in Q4, and if you look at FactSet at Q4, you can derive an imputed number for Q4. The point I was simply making there is that as Marty highlighted earlier, given the year, we decided that it was important to continue to spend into Q4. That was one element of it. Tempered a little bit from an expense standpoint. Our flow-through of what we think could be revenue in the quarter. That's one. Second, when we were putting all the data together, I think the macro environment was looking a little bit more uncertain than maybe it is right now. I don't mean that something suddenly changed in the last week, but the environment's kind of volatile, and I just wanted to highlight that we're sitting here feeling okay from a macro perspective. By the way, business-wise, we feel very okay. Things could change over the next month. I just wanted to inject a small note of caution to what was a really strong quarter for us. Yeah. Yeah, it was. Okay, totally understand. I know, I think the past couple of quarters you've been calling out some tailwind from temp staffing clients, and I was just curious if you can quantify maybe how much of a lift that has provided to Management Solutions and your thoughts on sustainability of the tailwind. It's modest, Jason. Many of you know that we provide funding for staffing companies. Just to make sure everyone's clear, we're not in the staffing business, we're in the funding of the staffing business. The staffing business has been on fire over the last six months, and our funding business has done very, very well this year. It's still modest. It's a highly profitable business for us, but it's contributed in the mix of things that have gone well, and it's a long list of things that have gone well this year. It's one of the businesses that's had a pretty robust recovery. Okay. Yeah, appreciate the color. Yeah. Thank you. Okay. Thank you. Our next question comes from Kartik Mehta with Northcoast Research. Hey, good morning, Marty and Efrain. Efrain, I know one of the areas we always talk about is pace for control, and you've talked about how in this environment that's been difficult. I'm wondering, you know, what the trend's been and what you kinda expect the trend to be over the next six months or so? Yeah, Kartik, I mean, you know better than most, if I would have said at this point that unemployment was at 3.8%, I think that most people would have thought I was crazy, and that we were gonna base a plan on that idea. At 3.8%, yeah, look, it's been more robust than we thought. You know, I'll let Marty comment 'cause we just, I should say, released the employment index, and so we've got a little bit more. He's got a lot more color on that than I do. I would say in the, you know, you're getting to the point where it's gonna get difficult for that number to run. It's been running positive, and it's been running ahead of what we thought, but you're getting to a point where it's gonna be difficult to continue to run quite as hot as it's been. I'll let Marty talk a little bit. Yeah, I think we've seen, you know, Kartik, in the index this is really the clients under 50, in that index. You know, we've continued to see strong job growth and, it has moderated the last two months, but it's still strong growth over last year. I think, you know, as we've sold more into the mid-market as well, you know, we're seeing, you know, probably a little bit better growth there from the number of employees because we're into a larger client size. I think what we're trying to measure is, you know, with the things that are going on now in the macro environment, what is that gonna mean going forward? Like, there's a number of government subsidies, but are we getting to the end of those? Now, we still think, by the way, the Employee Retention Tax Credit will help us in next year as well and help our clients, because there's still a lot we can file for as we go back through the process. But I think it's just how much are they gonna grow going forward? Right now, there's a bit of pessimism in small clients as to between inflation, supply chain, et cetera. Should we be a little bit careful? But they have demand, right? Especially restaurants and so forth. So when you look at leisure and hospitality, you know, job growth is up 21%, the fastest of all of them. But you know, how will that continue given inflation concerns and supply chain stuff that continues? So we'll see. I think it's still positive. We're still seeing growth, but it's moderating. Then Marty, just on pricing, you know, every business has taken the opportunity to raise prices just because of the environment we're in and everybody's faced with inflationary pressures just like you are. Now I'm wondering maybe what the strategy is for Paychex from a price standpoint, as we move forward, or at least for this year. I think what we're seeing is the opportunity, you know, to be at the high end of our range. The range would still be in that same, but I think we'll be at the high end of that range. You know, our some costs are up obviously for us, but I think that the value of the products to our clients have increased. It's all the things we talked about before with the help that we're giving them through government subsidies, with all of the value we're giving them in HR, then all the product investments we've made. I think that they'll tolerate that quite well actually, 'cause we're just gonna be toward the high end of the range that we normally would have. All right. Thank you both very much. Appreciate it. Thank you. Our next question will come from Eugene Simuni with MoffettNathanson. Thank you. Good morning, Marty and Efrain. Two quick follow-ups. One, just on retention. I just wanted to clarify, separating between out-of-business churn and competitive losses. Can you maybe elaborate a little bit on how those two things are trending in relation to, you know, the still near record high retention levels overall? Is it across both of those metrics? Is one of them now picking up in terms of churn versus the other? Yeah. Our business is pretty solid and so is the competition. It has not changed all that much, really. In fact, we always look at how much have we sold to their clients and sold them away from the competitor and how much have we lost. We're a net gain at this point. We're not losing any more really to competitors. Some but here and there, but really we're pretty solid on the retention kind of across the board as to how we're doing. Obviously, if we're, you know, near record levels, we're continuing to be pretty steady in where we are in retention. Yeah. Got it. Yeah, sorry, just to clarify. Out of business in terms of like bankruptcies, as we, you know, maybe move away from government stimulus, you're not really seeing that pressure yet in your base. Not yet. Even? Nope. Okay. Nope, not yet. Interesting. Great. Then another quick one on the PEO. Just wanted to see if you can provide some color on what drove the 21% growth in revenue across the, you know, the major drivers that you call out, which is worksite employees and maybe contribution of the insurance revenue to that number. I'll start, and then Efrain can jump in. I think, one, we've had very solid sales, very strong sales results. With those sales results, we've seen great attachment to insurance, so better attachment for insurance products. I think that's very reflective of the need to provide insurance and the good benefit plans, and opportunity that the PEO provides, clients and prospects. Last, we've seen, you know, obviously an increase in worksite employees, from the clients that we have, so they've been adding back employees. You really kinda got it across the board. You got good sales, solid retention. You got better attachment to insurance and growing worksite employees of the existing base. Yeah. The other two to round that out is increasing wages and increasing SUTA. So I don't know. There's not a lot more than a trifecta, but a lot of good things going on. We had a really strong PEO quarter. I mean, obviously the results speak for themselves, but it was a good quarter in PEO land. Yeah. Got it. Sorry. Your worksite employee growth, was it, you know, how was it relative to this maybe 21% number? I assume it was lower since there were other factors, but can you give us a sense of- Yes Where it was? Can you give us some of the worksite employee growth? I don't know. Oh, no, no. We'll update that, Eugene, at year-end. We don't separate out PEO, so you're not disappointed. It's included in our overall worksite employees served in our HR outsourcing businesses. The numbers, it's both have been pretty robust growth. Got it. Okay. Thank you. Thank you. Our next question comes from James Faucette with Morgan Stanley. Hey, good morning, everybody, and thanks a lot for all the color. I Sure I wanna follow up on previous question and some of your commentary. First on your own customer retention, you know, obviously great work there and you continue to operate at record levels and not really seeing the softening that you had anticipated maybe a couple of quarters ago. I'm wondering, like, how are you adjusting your planning for that long-term retention level? You know, what should we think that could baseline at down the road? Well, I think, you know, right now, as I've said, it's a little dicey given, okay, we had some government stimulus that some clients were able to take advantage of. At the same time, you've got rising inflation and then supply chain hopefully getting better. You got a lot of macro things going on at the same time. Right now, we'd expect that it's still gonna be strong. You know, based on how we are year- to- date, we've said we're not at record levels that we had last year, but we're better than pre-pandemic. We would expect that we continue to be at better than pre-pandemic levels, that we have added a lot of value to our clients and that it'll continue to be strong. I think that's how we feel, but there's a lot of macro stuff that could go on there with, again, with bankruptcies and things like that right now we haven't seen. Our expectation going forward is that we're at a pretty similar level to where we are right now. Got it. No, that's actually really helpful context. As far as your investment that you've called out multiple times here and what you wanna do, at least in the period in which you're giving guidance over the next quarter or so, and then how we should think about that longer term, can you talk a little bit about where you're seeing opportunities for organic investment and, you know, what's the time to pay back on those and what we should be looking for either from a product or service perspective as you continue to invest there? Yeah, I think it was definitely two main things, well, maybe three. You got sales investments, so we'll be continuing to invest on our sales teams. We'll be growing the sales team, you know, in select markets. But we're really across the board seeing better opportunities for investing in sales. Two is marketing costs. We'll continue to invest in marketing. It's driving a lot of leads into the business, and that's the way people are obviously searching and buying now, so we're gonna continue to see that investment go up, and it's not getting any less expensive to do it. I'd say, you know, three would be product. You know, we're gonna see new product. As you've seen from us, you know, we've had new product releases, you know, basically every season. We kinda look at them as a season type of thing. In the spring and summer season, you know, we'll have continued new products that we've rolled out. We just released, you know, kind of talked about our winter release now going into the spring release. You're gonna just see continued product enhancements to what we have. It is gonna, you know, we continue to do a lot, again, as I said, with our data and from a digital standpoint and really maximizing the use of that mobile app so that we can build even more retention strength with the employees of our clients. They're the ones that are using that mobile app and always have even more than our clients. We're trying to give our clients' employees everything they possibly can on their mobile app to produce better retention for us and not allow their employer to leave paychecks or wanna leave paychecks, just like time and attendance, just like punching in and out, shift swapping, and being able to do things like, you know, when we hire someone, everything is digital now, everything is paperless. You know, from the time we post with Indeed, you know, we have that automatic integration with Indeed. You can post on Indeed, the world's largest job site. That prospect or applicant is brought in without paper. When they hire them, it's brought on and onboarding. You're gonna just see us continue to build out our HR suite, where everything is around that mobile app, to build strength and sustainability for the client. Hey, Marty, Efrain, thank you so much as always for your comments on both macro, et cetera. Appreciate it. Thank you. Thank you. Our next question comes from Mark Marcon with Baird. Hey, good morning, and congratulations on the strong quarter, Marty and Efrain. Thanks, Mark. Wondering a little bit on the new sales. It sounds like, you know, things are going really well there. I'm wondering if you can comment a little bit about, are you seeing any sort of change in terms of the source of new sales? You mentioned your largest competitor and being a net gainer there. But relative to everybody else that the public companies know about or the public companies that are out there or also just the local and regionals, and any sort of upshift in terms of on-premise systems, both as it relates to your core sized clients and then also the progress that you're making on the mid-size clients. Yeah. I'd say on the small side, you know, market continues to be really online, you know. It's still pretty strong from CPA referrals and existing client referrals. But more and more of those we've seen, and this is over the last few years. You know, it may be in the old days, the CPA would refer us, and then the call would come right to us. You know, the CPA may now refer us, but someone then looks and comes in through the web and to buy. So we're definitely seeing an increase from web sales, particularly on the low end. You're gonna see even more of those sales, you know, come in on a self-serve onboarding basis, where the client can sign themselves up, you know, and come in and search. It's gonna be. Of course, we've learned that with virtually all of the salespeople working remotely and virtually, that has been very strong for sales to come in and be sold over the phone or over the web. I think on the mid-market side, yeah, I think we've done very well against the competitors that you know well and cover. We've taken some clients back that have left us and found, as Efrain mentioned very eloquently earlier, that you know, we have a total platform. You can buy certain pieces of it, but we have a total product set, not just one platform to have you know, your payroll on and then you know, connect to everybody else. We have everything if you want it, and makes it much more seamless, and we also can keep whatever components you want on your own and API into virtually anybody through a marketplace. I think we've seen, yes, definitely a growth in the opportunity to take back some share from competitors, and we think that's gonna certainly continue as we continue to add product. Great. Can you talk a little bit on the PEO side in terms of the strong growth that you're experiencing there? How much of it is coming from upsells as opposed to new logos? You know, I think you'd see a majority probably from upsell. But there's plenty of new logos now that are coming in, new businesses that for the first time are, and especially in those states where we're prominent, you know, the Florida, the Georgia, the Texas, they're new to PEO, and are not necessarily coming from ASO. I would say a slight majority are still upsales. You know, we're really good at that. They know us, and there's a great close rate there, saying, "Hey, you're on, you know, payroll only or maybe you're ASO, but you wanna, you know, go to a better benefit opportunities, better benefit plans and go into the PEO where you're kind of in those shared plans and so forth." I'd say a slight majority from upsales, but plenty of new logos. We've really been very successful, obviously, if you're growing over 20% in the quarter. Great. Then two sort of related macro questions. One just in terms of the preliminary thoughts with regards to 2023, how are you thinking about float balance growth? That's one. Then two, just clarification with regards to, you know, the tempering of expectations. Are you actually seeing anything that's actually occurring on the ground, or is your comment more related to, you know, just the expectation that there would be some, you know, reason for tempering, obviously, if rates end up, you know, going up significantly? I think it's more the latter, Mark, on that question. Look, hey, it's all fun and games to say that we're gonna get all the benefit from six, seven, eight raises depending on your perspective, but you've gotta be somewhat cautious about what the impact on the economy as a whole, especially on the small end of the market would be. We don't have any crystal ball. You have a better one than we do, but that's an issue that we need to realize 'cause the Fed will take and the Fed will give, and we're trying to analyze how all of that looks. With respect to base growth, I would say it's probably gonna be low single digits to the mid-single digits at this point, depending on what's happening with wage inflation and the other factors that go in insurance. At this point, that's what our thought process is. We've had a pretty robust growth this year. Obviously, the recovery in wages and in clients has helped a lot. It'll moderate a bit next year. Great. Thank you. Sure. Okay. Thanks, Mark. Thank you. Our next question comes from Tien-Tsin Huang with JP Morgan. Hi, Tien-Tsin Huang. Hey, good morning. Great results and profitability. Wanted to quickly, if you don't mind, just one question to ask about existing versus new client revenue growth. I'm just thinking about what you said. I think, Efrain, you said it, or maybe Marty, double-digit annualized contract value growth sounded like it was broad-based. Just trying to disaggregate that comment with the growth outlook, thinking about it between new client versus existing client, if that makes sense. Just 'cause it seems like your first look at 2023 is pretty consistent with what we typically would observe. I just wanna make sure it's the composition isn't different. Yeah. Let me take that, Tien-Tsin Huang. Yeah. I think it is pretty consistent what we observe. We typically are gonna generate about half of our new logos, if you will, from newly formed businesses. We expect that to continue going into next year. With the normal amount of upsell and cross-sell and growth and revenue per client that we end up getting. Obviously, the net adds will come. Half of it will come from newly formed businesses, or new sales will come from newly formed businesses. There was one thing that I highlighted that's important is, and I think it was in response to Kevin's question. We're seeing more opportunity to add revenue per client as we see more opportunity for the kinds of services that, for example, ERTC and well, you know, it's easy to overlook that, but it's part of the way that Marty said it's part of who we are. Perfect. That's what I needed 'cause it looks like you're, yeah, despite the tough comp, getting sort of right back on what we usually wanna expect from Paychex. Thank you. Thank you, guys. Thanks, Tien-Tsin. Thank you. Our next question and our final question for today is from Peter Christiansen with Citi. Good morning. Thanks for the question. Great job, guys. Yeah, thank you. Appreciate it. Yeah, to the degree that you can tell, are you winning new business from previous, like, self-filers still? Is that still a reasonable pool to draw from on the new sales front? Oh, it is definitely. I mean, there's still plenty of small businesses on the small side that are, you know, have tried to continue to do things themselves. I do think over the last two years, you know, that's become even more difficult, and they're losing a lot of opportunity, you know, by not going with someone. Yeah, that's still a great opportunity. It's still a big piece of the pie that's available out there. You're making it easier for them to sign up and do everything themselves, but do it in an automated fashion with someone who has over 200 compliance experts to make sure they're doing it right. Yeah, that's still a good opportunity for us. That's why, as Efrain said, half our sales are coming from new businesses, and many of those new businesses may be new, but they might have even tried to do something themselves for a few months or a year before they went to someone like us. That's interesting. Then any thoughts on industry consolidation at this point, particularly from, I guess, the more private regional players? Do you see any trends evolving there? Then maybe juxtapose that with how you're thinking about the M&A landscape for Paychex. Yeah. I think we've seen some of the smallest ones consolidate. You know, it's just too difficult today for many of them to provide the product suite that people are demanding. The online presence, the mobile app, the constant increase in product development, they're just not able to keep up. All the compliance. I mean, you know, the government's not getting any easier to deal with. They wanna, particularly the IRS, they're under-budgeted, they're understaffed. So it's difficult for smaller payroll, in particular, companies to keep up with someone like us that has the powerful team behind the products. So I think there is some consolidation there. I wouldn't say any on the larger ones just yet, but I wouldn't be surprised if at some point it just becomes too difficult to keep up with the investment. From an M&A standpoint, you know, there's still plenty of things that we're looking at, you know, in PEOs, payroll, everything, and in a lot of other opportunities. We're finding opportunities. They're not always panning out. We're very selective. Obviously, we've had a great success rate, particularly over the last 10 years on acquisitions, and we're very careful about what we add and that the valuation makes sense. Right now, the valuations are still a little lofty, I'd say. Oh, great. Well, thanks for the color. Really great. Okay. Thank you. All right. Okay. Bye. There are no further questions at this time. I'll now turn it back to our presenters for any additional and closing remarks. Thank you. At this point, we'll close the call. If you're interested in replaying the webcast, it will be archived for approximately 90 days. Thank you for taking the time to participate in our third quarter earnings release conference call and for your interest in Paychex. I hope you all continue to remain safe and healthy. Thank you. Thank you, ladies and gentlemen. This concludes today's event. You may now disconnect.