Ladies and gentlemen, thank you for standing by and welcome to the Paychex First Quarter Fiscal Year 2021 Earnings Conference Call. [Operator Instructions] Thank you. I will now hand the call over to Martin Mucci, President and Chief Executive Officer to begin. Please go ahead, sir.

Great, thank you, and thank you for joining us for our discussion of our Paychex first quarter of fiscal year 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 first quarter ended August 31, 2020. You can access the earnings release on our Investor Relations webpage 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 approximately 90 days. I will start today’s call with an update on the business highlights for the first quarter. Efrain will review our first quarter financial results and provide an update on fiscal ‘21 and then we will open it up for your questions. Fiscal ‘21 is off to a good start. Although the impacts of COVID-19 continue to affect our results causing unfavorable year-over-year comparisons, our first quarter results finished better than originally projected as most of our key business metrics recovered at a faster rate than anticipated. Throughout the COVID-19 crisis, our business model has proven resilient. We have seen good sales momentum, excellent client retention and accelerated product development responsive to the needs of our clients. We also rapidly reduced discretionary costs where needed to protect margins and are ahead of schedule on a number of initiatives to reduce long-term costs as well. We are pleased with our sales performance during the first quarter, which reflected new annualized revenue significantly higher than our expectations. Growth in new payroll sales units was strong year-over-year reflecting the highest fiscal quarter growth in over 5 years. Our investments over the past several years in virtual sales, digital marketing and lead generation, and sales support technologies…

Thanks, Marty and good morning everyone. I want to start by saying I hope that everyone is safe and your families are doing well and our best wishes go out to those who have been impacted by the by the pandemic. Let me remind everyone that today’s conference call will contain forward-looking statements you know all that stuff refer to future events, etcetera, look at the customary disclosures and then I am going to refer to non-GAAP measures such as adjusted EBITDA, same things, please refer to the press release for the reconciliation of GAAP to non-GAAP measures. Let me start by providing some of the key points for the quarter and then follow-up with greater detail in certain areas and then wrap with our fiscal 2021 outlook. First quarter results reflect the impact of economic conditions resulting from COVID-19. As Marty mentioned, for the first quarter, total revenue declined 6% to $932 million largely due to lower volume impacting revenue across our HCM solutions. During our June earnings call, I had noted the first quarter revenue was anticipated to be down high single-digits to low double-digits. Obviously looking at this, our results exceeded those expectations. Total service revenue moderated 6% to $917 million. Within service revenue, Management Solutions revenue declined 5% to $687 million and PEO and Insurance Solutions revenue decreased 7% to $230 million, when I say total service revenue moderating, I mean, declined. Interest on funds held for clients decreased 28% for the quarter to $15 million due to lower average investment balances and lower average interest rates earned. Average balances for interest on funds held for clients declined 6% during the quarter primarily due to the impact of lower checks per client due to COVID. Expenses were up 1% to $650 million, but when you exclude…

Okay, thank you, Efrain. And we will now – operator, we will open it up for your questions.

Thank you. [Operator Instructions] Our first question comes from the line of Ramsey El-Assal of Barclays.

Hi, guys. Thanks for taking my question. I wanted to ask Efrain about your – or Marty as well, the last comments you had on digital and just get your view in terms of how you mentioned, it’s not your father’s Paychex, how permanent do you think some of the shifts are in your business when it comes to things like digital versus analog from, I guess a product standpoint as well as a sales technology standpoint? Is this more of a blip or is this something do you think will kind of fundamentally change the fabric as we go forward?

Yes, I will start and then I will let Efrain jump in on anything that I miss or comment that he has. Look, I think it’s permanent. I also think, as I think everyone has seen things have accelerated quite dramatically with the environment of work-from-home employees, and so a lot of things are the mobile adoption, the use of the look for paperless, everything being paperless from recruiting, to on-boarding, to training, to any change that employee makes is all, we could see all that coming in and had invested in it, as many had, but it has really accelerated with the remote workforces and I think it’s definitely permanent even if employees come back to the office, many will return to the office or a similar environment, and I think that’s never going to change. I think people are just used to it. Also the way they are buying, which is much more virtual, as Efrain commented, the results have been very strong from a -- we are a self-service basically, where they are going online and doing the search for us, which we have invested in looking at demos, which we have invested in, and then buying themselves online through SurePayroll or Flex have both been very strong as Efrain mentioned. And I do think it’s because we have invested well in a product that is simple to use, easy to sign up for, and that’s working very well. So, I think it’s very permanent, all the way through from paperless, to remote, to the mobility app, and everything else in between. So, we feel very well-positioned from a permanent going forward standpoint.

Yes. What I would add is it’s one thing to say, hey, we had great digital sales progress in the quarter. And by that, I mean, not only SurePayroll where we can as Marty mentioned, you can search and onboard yourself in payroll without having anyone involved in the process. That was something we did several years ago, but also our virtual selling efforts that are powered by our digital marketing efforts have been really, really strong too. But all of that needs to be tied together with a digital service model, and I think as Marty was mentioning, we have made a lot of investments on that side. You heard his comments about the number of employees who are actually utilizing our platform to do, to connect and update their information. And so, sometimes we hear this narrative like somehow, the only people in the market that can do that are certain competitors and it’s just interesting, let me put it that way. It isn’t true, but it’s interesting. And we have been making quietly many of the same changes and you can’t compete now in the market. 10 years ago, if you weren’t SaaS, you weren’t -- we were going to be left behind, and now if you are not pivoting to digital, you are going to be left behind too and we understand that.

I am sorry, Efrain, I wanted to say the other stat that’s been so interesting is we’ve talked about our Flex Assistant, which is basically a chatbot that answers questions coming in from clients. 50% of the questions are now being answered by the chatbot, and it’s the use of that is just incredible, and it has saved us a lot from a service perspective, from a people perspective, and what they can focus on. So, our team is always available as I said, the only one that’s available 7/24/365 from a personal service if you need it, and now those people are freed up more than ever for the more value-added questions. So, we feel like the investments we have made are really paying off and it’s accelerated and will be permanent as a result of this pandemic environment.

Great. That’s terrific. One more for me, I wanted to ask another question about how the business is sort of evolving in the context of the pandemic. Can you speak to kind of the relative importance of cross-selling to existing customers versus signing up new ones in terms of your kind of your growth algorithm now? Is the model more reliant today on expanding to the wallet share of existing clients, or is it sort of business as usual, how would you kind of characterize that balance?

I would say it’s fairly business as usual. I mean, we are selling into the base well. I think the clients, the more satisfied the clients are with the existing services they have, obviously the more open they are to talking to us. We have expanded our product set quite dramatically and we have new technology advancements that are coming out all the time, and we have quite a package of services that will help in the pandemic. I think one of the things that during this pandemic is that COVID Help Center has really driven a lot of clients in to see how valuable. You know, when clients need you most is when they see the greatest value and they have really seen great value in what we have offered and what they have been able to access from information. You know when you think about the payroll report that we produced, the same day that the loans were available, we were the first to put out the payroll report that’s been accessed and downloaded over a 0.5 million times now, and now the loan forgiveness estimator, no one has got a better estimator and now signature-ready application to be able to get your loan forgiven, those kinds of things have added a lot of value to clients and therefore our client retention has never been stronger. No one is leaving to go to any competitor that are using those kind of tools because they found them so valuable. So, I think the process of selling additional features are being helped by that, and I think certain things we even saw a big drop in the fourth quarter of last year in retirement sales, because people weren’t focused on retirement, that has come back strong in the first quarter. So, people who were payroll clients or a payroll in HR now look for retirement and retirement actually increased year-over-year from a sales and revenue perspective. So, I think the ability to sell other services has really improved through the pandemic because of the value we have offered.

That’s terrific. I appreciate your answers. Thanks so much for taking the question.

Alright. Thanks.

Our next question comes from the line of David Togut of Evercore ISI.

Thank you. Good morning, Marty and Efrain. I appreciate you are giving guidance in environment, where many companies are not. I am wondering if you could flesh out your thinking a little bit more, Efrain on FY ‘21, you are pointing to the top half of your previous guidance ranges, but it seems like a lot of the metrics that you have called out in terms of record 5-year growth and new payroll sales, double-digit growth in HR sales, highest client retention ever, might actually point to a stronger result for FY ‘21? Are there – are you are you just uncertain if we get another wave of fiscal stimulus or maybe a little more detail around how you are thinking about outcomes for FY ‘21? And then maybe why not – maybe why not a little stronger given all the leading indicators are really off the charts?

Hi, not quite off the chart, that would be good. But yes, so David, I think just a few things on that, one is we feel pretty good that first half is going to be better than what we expected. It was big. So, you don’t win a game in the first half, but it certainly is good to be up several touchdowns before the before the half end. So, we think first half is going to be strong. Having said that, a lot of it depends as you suggest on the back half of the year and fourth quarter is going to be very important. Through Q3, we see results being still muted, because that’s a big quarter and we are comparing against a quarter before all of the pandemic effects occurred. So there is a note of caution and what we have if we could – if we projected the lines we see now we would have different guidance, but we don’t do that, because it’s not – it’s not a accurate or it’s not a forecast we would be very comfortable providing, but we think a lot of the metrics are pointing in the right direction. And certainly from where we were in the June timeframe, things look better. We are not anticipating another stimulus. If it comes, that would be great. We think that as Marty said in other interviews, we think the stimulus did help. It provided a cushion for the blow for a lot of small and medium-sized businesses, but we are not assuming that it’s better. And we don’t assume that there is going to be a dramatic improvement in unemployment over the next several quarters. So, that dictates some caution in terms of what we provide, but the environment is better than or we started the year better than we than we anticipated with recovery in a number of areas coming faster than we thought.

Got it. Just as a quick follow-up, are there any constraints on your ability to implement these record new sales in the payroll services business, I mean, what’s the timeline to implement the strong new book of business?

Well, I think what selling season will be is coming up actually starting in the mid-market of this month, I think probably the only thing that’s going to be the most challenging is getting two clients, some clients are still delaying decisions, particularly in that mid-market to be a little bit careful. We are making sales. We are getting out now to meet with clients if they want to meet. This has all been done really remotely for the last two quarters. And so to have the sales that we have even in a remote selling environment has been pretty impressive and I think we have honed kind of new skills on being able to do that. So, I think probably the biggest challenge to hitting results would be continuing, those results would just be getting access to the client and the client being comfortable to make a decision based on their business and whether they are ready, but right now, we feel good in the small business in particular, in the small business market. I think that’s continuing to expand. So not only do I think we have taken a little share, but we have also seen the pie get larger, because more businesses, small businesses in particular that have not outsourced before, we are seeing them outsource payroll for the – payroll at least, if not payroll and HR for the first time. And so that market, I think is growing as well given kind of the complexities of the environment and so forth and they are seeing the value of being with a payroll provider, for example, to help them get the loans, to help them get the loans forgiven, to work through all of the complicated regulations that are changing and so forth.

Understood. Thank you very much.

Okay, David.

Our next question comes from the line of Jason Kupferberg of Bank of America.

Hey, thanks, guys. Good morning. I just wanted to start with a clarification. Efrain, just on the second half outlook, did you say that revenue should be flat to up total reps?

Yes, flat to up very low single-digits.

Okay, okay. Now, last quarter, were we talking up low single, I know, it’s not much of a difference, but I just wanted to see if I have that nuance, right and is this just kind of a timing thing where the recovery happened a little sooner. So, the year is a little bit more balanced than you might have thought otherwise?

When you say last quarter, Jason, what are you referring to up sequentially or the previous quarter…

No, last quarter when you gave us guidance and you broke down the first half and the second half, I thought at that point in time, the second half was expected to be up low single-digits.

No, I didn’t say low single-digits for second half that wouldn’t have been correct. So, I would have to look at what I said, but no, we haven’t said that, no, no. And Jason, just to provide some clarification, we still expect at this point, third quarter is going to be down versus the prior quarter with growth and then growth more significant growth in fourth quarter. No, I don’t think, we might have said, but I won’t speculate on what we said the transcript will say what we said. But if we said something that indicated we were going to be positive in the back half that our second half, that wouldn’t have been correct.

Okay, okay. Fair enough. And just a question on the margin front, how should we think about the long-term implications obviously for your cost structure, real estate, sales force customer support, etcetera, I mean, is there anyway to quantify that at this point or at some point in the not too distant future, perhaps?

Probably in the not too distant future, not this second. But I think the question you are asking if I can ask a question or answer a question you are not asking, look, there is a range of initiatives that Marty was mentioning the speed with which we did the footprint rationalization, it doesn’t take – it doesn’t take too much to, too many assumptions to think that we can’t continue to evolve that model so that you need less space than you currently do and address costs in that way. So, we will look at that. We are not ready to commit to what that number looks like at this point, but we have had good experience thus far. And I think the acceleration of our other digital efforts suggests that we can at least control costs in that area and maybe get more efficient as we go along. But we will talk more about that in future calls.

And maybe just one last one on the back of the strong sales performance you just saw, can you just talk about the trends you are seeing in terms of new business creation and your overall win rates?

Yes, sure. I mean, we are certainly seeing as I think just generally in the economy, new business startups are up 20% year-over-year. It’s pretty incredible and I think what we are seeing – what you see and we see it on new businesses is people are shifting. So people are getting out of some businesses, shifting to others or evolving their business and others are seeing opportunities in this environment that they didn’t see before. So new business startups are really growing, and I think we are getting a good share of those, because of the investments we have made, where it’s easy to sign up, it’s a very full featured product, whether you go to Sure or whether you need Flex. And so I think, new business startups and that is our helping. And then I think existing businesses, as I mentioned that are now outsourcing, that we are doing payroll and HR themselves have found that it’s time to outsource to someone like Paychex that can deliver great value to them and really protect them – help protect them in an environment that is changing so rapidly with all of the regulations and the benefits and what employees are looking for, from them as well.

Alright. Well, thanks for the comments, guys.

Okay, thank you.

Our next question comes from the line of Steven Wald of Morgan Stanley.

Hey, good morning. Thanks for providing all the continued guidance through all this. We do appreciate it. I was hoping to start off just by sharpening the pencils on a few items that you guys have been talking around specifically, I think – I don’t think I missed it, but an actual retention number for the quarter, I think you said 83% last quarter, but it included an adjustment for businesses that were suspended. And then if you could maybe walk us through how you are thinking about year end – fiscal year end unemployment rate assumptions and business failure rates from here?

Yes, I would say, on the client retention, we really give it once a year, but we are still at the highest levels of retention we had. So even – and I would say that of those – Steven, the numbers that we said that were suspended were probably down three quarters of those from the peak. So, we still have some that have suspended their service, but it’s getting down to a very low number. Now more of those go lost after year end, we are watching that. What we have seen – really a pretty dramatic decrease from the peak, down to probably a quarter of what we saw. So yes, it could still impact client retention, but it’s a much smaller number than what it was and we will have to see as we get through calendar year end, whether they are kind of hanging on for either more stimulus or to be able to get through year end. But at this point, we have seen a real improvement in that. And I am sorry, what was your other question?

The other question is on unemployment.

Unemployment, it’s hard to say, you know, really that’s just a prediction as to where we are. We have seen what half the jobs come back that that were lost. We definitely see the progress slowing as you see employees come back and being paid. So, we are seeing – we saw much better improvement in the first quarter than we had expected as we have talked about and that is slowing. It’s still progressing and positive. But the number – it would be hard to predict kind of where we think that’s going to be. I think it’s going to continue to improve, but at a slower rate than we had. And then I think the hardest prediction is really kind of after the election, what does that do to things. I think that’s why we are a little more cautious in the second half of the year is just saying, hey, we have a pretty good sense of – obviously of second quarter, but when you see third and fourth, it’s a little bit harder to predict.

Yes, we are not pegging our forecast to 7% or 6% or 5% or 4.5% unemployment by Q4. Part the reason for that is the business is more complex than – excuse me than simply what’s happening with worksite employees or with checks per client. We obviously – as Marty said expect it to be – to improve and frankly, the unemployment numbers have been better than we were anticipating originally when we put our plan together. What’s it need to be in Q4 to hit the numbers, I don’t think that’s really – we are not pegging our forecast in that way. So we are looking at a lot of other factors that really have to do with, not only what’s happening on HCM sales, but what’s happening in the rest of the base, which is more than 50% of our revenue.

Yes. The other thing that’s important to note is we are very diversified in our client base. So, even as this happened, we didn’t – even though leisure and hospitality in particular took a huge hit as restaurants closed and then reopened partially and so forth. We certainly have plenty of clients in that leisure and hospitality kind of sector, but we are also very spread around into other sectors. And construction and everything around construction has continued to perform quite well from a jobs perspective, particularly in the south and so forth. So we are quite spread out. And so we don’t see if there is any one industry that’s really taken a hit where that doesn’t necessarily reflect in our results.

Completely understood and appreciate the color on all that. Maybe just one quick follow-up, as you were talking about sort of the diversification, I believe the one area where there was maybe like any concentration among your client base was in the PEO space, where it’s more concentrated. I think you mentioned previously in discussions, Florida, Texas, California, just curious what you are seeing on the ground there relative to how you think about the national footprint and whether that sort of just nets out in the wash on the PEO side or if there is any particular areas of strength from obviously a lot of headlines about migration of investment dollars towards low tax states or any of those things, just thoughts on conditions on the ground in those areas?

Yes, What we have seen, if you look at it from a worksite employee standpoint in those states is we have seen a pretty sharp recovery certainly in several of those states. I would say California is more volatile of the larger PEO states just as they battled flare-ups with COVID. But we have seen a pretty significant rebound in a lot of those states, not to where they were before pre-COVID, but certainly starting to get up towards those levels. And I think that PEO itself, both if you look at it from a revenue standpoint and the amount of worksite employees that were processing and also on a sales standpoint, we are seeing good results on both ends of that equation, which suggests what the environment is normalizing.

Yes, Florida as Efrain said that everybody is still down, but Florida is the strongest on our small business index that we track on a monthly basis. Florida has been number one, South has been strong again construction, both residential and commercial has continued to be strong there. So, where we certainly had more concentration in those states, they have been stronger states and insurance rates on top of that have been good. So, the increases in insurance have been pretty, pretty low. So, I think they will continue to have – we should have continue to have good retention as we go through open enrollment for insurance plans and everything this quarter.

Great. Thanks for taking my questions.

Okay.

You’re welcome.

Our next question comes from the line of Bryan Keane of Deutsche Bank.

Hi, guys. Good morning. Wanted to ask about the change to virtual and e-com, how does it change the revenue per client first? And then secondly, how does it change the margin structure, is there a higher margin inherent in that?

Interesting. So, I think Bryan, it’s a function of size of clients, so the smaller the client, obviously, the lower the revenue. So, if you are driving a lot of smaller clients tend to be the ones that are – that use a lot of the e-commerce solutions. So, you get less revenue in that standpoint. On the other hand, from a margin standpoint, sometimes it’s better because there is lower cost to serve. So there is a little bit of a wash, you got to overcome a bit of the sales, the revenue impact, but longer term, it’s still a pretty positive, a positive development. I didn’t catch the second part of that question. And then margin, I just mentioned it margin can be as good or sometimes even better.

No, that’s helpful. That’s what I would have figured, but wanted to confirm. And then Marty, on your comment, sales performance is accelerating with year-over-year growth in number of clients sold. And I think you talked about a record number of units sold, maybe the highest in 5 years. I was just trying to get a sense of where that was in the trough? How much was client growth down maybe in the trough and then how much is it growing now on a year-over-year basis, just hoping to quantify that impact?

Just want to clarify something, Bryan. When Marty said that unit growth was the highest it’s been in 5 years, he is not comparing it in terms of sequential improvement if it was sequential improvement, the number would be even more amazing. But what we are comparing is against the same quarter last year pre-COVID, what we are saying is that our unit growth in the quarter was very high. So, with that, I will let Marty answer the rest of it.

Yes, because when you’re top of the trough tonight, I think that’s where Efrain picked up, where you are talking about last quarter. We are comparing year-over-year. So, year-over-year first quarter, it’s been the best sales unit growth that we have seen in probably 5 years or maybe even a little bit more. So if that’s what you were asking. So, it’s not compared to how low it got in the fourth quarter, it’s compared to last year first quarter. So we have seen a real pickup in demand as I said, Bryan, from those who didn’t outsource before new business starts and I think taking some share as well and then the client retention being so strong overall has really helped. We don’t talk about net client growth except once a year, but it’s needless to say, when you put that together, you got nice growth.

I would say just our digital marketing efforts over the last couple of years have really, really picked up and really been terrific and I think it’s really fueling a lot of those results.

And going forward, do you think Efrain that it’s – is it still the 1% to 3% client growth or maybe does this model change a little bit with these kind of new business starts in this e-com model?

Yes, it’s still early. I want to – well, part of me wants to be, draw a line with several points and then kind of extrapolate out. Yes, I want to be cautious about that. There is an element here that we are in an environment where that favors digital solutions. I mean, that’s not a surprise. And Marty answered earlier when he was asked that question, how permanent or durable is it? Certainly, you got to think that there is a portion of this that’s durable and will continue and that you have got to bake that into your model and that there is demand there, which is what Marty was saying. I mean, one of the things that we have seen is that we have seen some indicators that – some of that demand is coming from companies that didn’t outsource. We also happen to be in an environment, which is counterintuitive where a business formation is better than anyone expected, so very different in some ways from ‘07/08. So we will have to get a couple of more quarters under our belt to get a sense of whether this starts to change that equation a bit.

Great. Thanks for taking the questions.

Okay, Bryan. Thanks.

Our next question comes from the line of Andrew Nicholas of William Blair.

Hi, good morning. I was just hoping you could speak to trends on the workers’ comp side of late. Have you seen any stabilization rates there or will that continue to be a headwind throughout the rest of the year?

I think it will be a bit of a headwind from a revenue standpoint, Andrew, but rates seem to be stabilizing and actually we have seen in some cases been ticking up slightly. So, we think we may have – we maybe getting towards the bottom of the trough so to speak. That has some impacts obviously on PEO in addition to our insurance broker workers’ comp sales. It seems like we are getting closer to the bottom there.

Got it. Good to hear. Good to hear. And then just a follow-up, I was hoping you could speak a little bit to the M&A opportunity right now, are you still open to doing deals, I would assume so and where do you expect to find those opportunities? And then relatedly, if you have any commentary on kind of what pricing is looking like in those areas that would be helpful?

Yes. We are still very open to that and have continued to stay in contact with opportunities and with the banker community and so forth as to what’s available, very interested of course in all the lines of our current business, in particular, so PEO businesses and payroll of course and others. I think, it’s opening up a little bit. I would say valuations are still right up there. I wouldn’t say there was any discounting going on because of COVID. I think it’s difficult – it’s a little bit still difficult to do due diligence and things like that given limited travel and access. But I think we would be able to work through those if we found the right business. So, yes, we are very open to M&A. Obviously we are very liquid and have a good solid cash position and if we find a good acquisition, we are certainly ready and able to execute on that.

Great, thank you.

Okay.

Our next question comes from the line of Bryan Bergin of Cowen.

Hi, good morning. Thank you. I wanted to ask on Management Solutions, I want to understand the mix of your better than expected performance here in 1Q related to the changes in check volume contribution versus some of the new addition momentum you are talking about versus the increased retirement and other services. So, can you just help us understand the mix of the factors that contributed here in 1Q?

Yes, I would say probably the largest change, Bryan, was really a function of where we started, where we ended up in terms of average client base in the quarter. So, if you think about businesses like ours that are more established, you’ve got a number of different factors that are weighing on the revenue, what’s your rate of retention. We said that that was high, actually probably higher than we anticipated or planned. So, that was a positive. You had sales while sales revenue was better than we planned it still wasn’t quite what it was overall pre-COVID. So, that had some better impact. But that wasn’t a big driver. The bigger drivers, what was happening within the client base in terms of the number of clients, so we break that down. It’s not just number of clients, but the employees those clients had. So the employees that the clients that were roughly about what we expected, we just had more clients in the base than we had on average than we had anticipated who were processing. So, remember, we’re putting plans back together in May, June. We’re trying to anticipate in an environment where states like California and New York, which are important revenue states, were largely starting to, or were in the process of being – continuing to be shut down. It turns out that those factors have moderated. So, what we are seeing when you look at a panorama across the country is moderate improving statistics in most geographies where we’re looking at in across most industries, as Marty mentioned earlier, when you put that together, we start – if you will, from a little bit higher – a higher step on the rung or the ladder than we anticipated when the plan was put together. And another way to think about it, if you flip that analogy over or you change the analogy, it was definitely less worse than we anticipated as we started the year. We – the impact of COVID, which was very severe in April, had us all thinking what does this end up looking like. Well, those pundits who thought that the recovery would be sharp were actually more in the right than wrong. And now the recovery from here, we signaled that it’s gradual. We’re still seeing signs of a gradual recovery. Nothing is changing our mind at this point to say that we don’t continue to progress from where we are, however, at a point where the trough wasn’t quite as severe as we thought in the first quarter.

Okay, that’s helpful. And then I wanted to ask a question on the sales force. So, can you just give us a sense of the mix of the sales force that has returned here too in-person meetings, really I guess currently versus in 1Q really feet on the street model versus the virtual sales force and then how should we think about this mix longer term as things normalize?

Yes, I think we are – we have picked up more virtual this year. So, it’s still probably of the total. It might be 25% to 30%. I think that will continue to grow, particularly I think this is, as I mentioned earlier in the call, Bryan, I think that is accelerated. I think more client prospects, client prospects are able to do things over a Zoom call or over a Webex call, feel comfortable going through the demo digitally over and online and be able to make their decision. So, I think that’s going to accelerate. I think it also is – it’s more productive and efficient if they can be virtual. However, we are opening up, kind of as we speak, across the country with being able to go visit as well. We are doing it based on kind of state-by-state or city-by-city and whether the local management feels that the rules are there that they can visit, that the client is – the prospect is comfortable and the rep is comfortable. But that’s starting to open up much more now. But I think you will see more virtual, more growth in virtual sales, meaning telephonic. We’ve been in it for many years, and you also have more self-service as well – as both Efrain and I have mentioned – that on the low end, the smaller sized clients, much more is being done without ever talking to a rep at all because of the investments we’ve made at both Sure and SurePayroll’s products and Flex’s product that you can go online and basically search, find it, demo it and buy it pretty much without talking to anybody, but you can always reach someone if you needed. So, virtual is going to be more of a way of the future, but we’re still always going to have furthermore complex sales, the experienced reps that are there in person and with the sales engineering team demoing the product and so forth.

Yes. And I just want to reiterate what Marty said. While in the past you would have thought about – okay, sales equates to how many sales people you have and where are they. That’s only one factor in the equation. If you have end-to-end e-commerce, the ability to sell without any salespeople, which was a something we invested in the last couple of years, then you’re not constrained by the amount of people that you have in the field and we have seen the benefit of that in this quarter.

Just a follow-up there, what’s the top end of employer size that you are seeing do it by themselves to that e-commerce model?

I think, well, it depends on the – it’s not always employer size. It could be employee size. It could be complexity. If you are pretty straightforward, it could be up into the 20 employees, but typically, I’d say it’s under 10 Bryan. But if it’s a straightforward business it could be more employees than that, but it’s – I think it’s typically under 10 employees.

Thanks, guys.

Okay.

Our next question comes from the line of Kartik Mehta of Northcoast Research.

Hey, good morning, Marty and Efrain. Efrain, I wanted to ask a little bit about the guidance, and I’m wondering if you have factored in any price increases into it. I know last year or last fiscal year you decided against it because of the situation we’re in. I’m just wondering for fiscal ‘21 what you anticipate?

Yes. So, the short answer is yes, there are price increases selective, I would say, that we are implementing. One of the reasons why we feel comfortable doing that is in part customer feedback, in part the fact that our operations people did such a stellar job that our NPS scores are again – I mean, we could keep going on and on about things that are record highs. But our NPS scores at this point through the pandemic are at record high, and that’s the strength of our model. The strength of our model really plays well for this environment. And so, we think that there is opportunity for selective price increases. We obviously delayed through the first part of the year because we didn’t think it was appropriate and we knew there were clients that were just hanging on and just struggling to get through the environment that we’re facing. We think that many, many of our clients have stabilized, as evidenced by the increase in or the decrease in non-processing clients. And the level of service, we’ve gotten great feedback on. And we think that many of our clients will be okay with modest price increase. So, we will do that as we go through the year.

And then just a second question on health insurance premiums, your expectations going into next year and what do you think that will – how that will impact the PEO business, if at all?

I think Kartik, as I mentioned I think it’s going to be pretty favorable. Generally, I think a high single-digit kind of increases depending on the client, of course, but generally I think if you looked crossed. And I think that’s going to be very favorable for gaining new insurance clients. I think we performed very well. Our risk and underwriting team has done very well and therefore, I think, we’re going to benefit from better rates, better rate changes. And I think also the overall environment is certainly helping us as well. So, I think that should bode well for better sales, even better sales from an insurance perspective for both PEO and the agency, the insurance agency itself.

Hey, thank you very much. Appreciate it.

Okay, Kartik. Thanks.

Our next question comes from the line of Pete Christiansen of Citi.

Good morning. Thank you for the question and nice trends. I had two quick questions. So, I was wondering if you could characterize your win rates that you are seeing lately in terms of where are you winning these new accounts? Are you seeing it from self-processors or other competitors? Any discernible trends there would be helpful to understand and whether or not you believe you are seeing early signs of some share shift?

Yes, I think – well, it’s a little bit of both. We have mentioned, I think we are seeing those who have been self-processing, doing things themselves, and the complexity of the changes and the need for help at a critical time kind of in their business survival or growth, they have looked to outsource for the first time. So, I think, as I said, I think the pie has gotten larger. I think more are outsourcing. And that’s been pretty steady over the years. And now that’s – it feels like that changed and we are very happy that we have won, we think, a large number of those because of the product set and – not to mention as Efrain has mentioned many times – our lead generation and digital, the offering in the demo, etcetera., and the mobility app. And then I think also we have seen a net gain from some competitors this quarter, based something we track on our largest competitor. we see some gain there. I wouldn’t say it’s huge, but I would say definitely a net positive gain from what we have sold from a competitor or taking in from a competitor versus lost, we saw a net gain. So, we are definitely gaining some market share there, at least as well as probably some of the smaller regional payroll providers in particular that just can’t keep up with the need to support them from a payroll – a paycheck protection loan program, be able to give them the information they need for the loans that I said we had available to them pre-populated and then the Loan Estimator and for the forgiveness. I mean, we have a signature-ready application. All you have to do is go in and fill in rent, utilities or anything else that’s non-payroll, the payroll data is already pre-populated. You can either sign electronically or print and just file that to get your loan forgiven. When you see those kind of technology advancements that we offer as opposed to particularly a regional company and even some of the national ones, it’s a very different value proposition. So, in a time of extra need, I think you are seeing a shift toward more outsourcing.

That’s helpful. And then I just had a quick one on, at least there’s been some data that’s coming out at least at the enterprise level, suggesting that companies that haven’t been impacted directly by the pandemic are just now beginning to shed some jobs. And I was wondering if you are seeing any trends or any particular areas within the small business community that indicates that that trend is possibly creeping into small business?

I would – I think small business took the biggest hit in Q4 – in what was our Q4, I mean that kind of March-April timeframe. And they have now – I think they are hurting and they need another stimulus. We are not counting on it based on what we have seen, but they certainly could use it. I think the most recent survey was over 80% of small businesses in particular who took the loans have used them up now and they are looking for a second stimulus to kind of help them through. And then we are not sure what the impact is going to be particularly in the Northeast as restaurants have to bring more diners inside and then have capacity constraints. So, I – there still could be some fallout. But I think small to mid-size business is probably hopefully took their biggest hit already and we are not necessarily seeing more layoffs there. They were also much more careful about bringing them back. We haven’t seen a total return of the employees that have come back and they are probably down double-digits right now from where they were pre-COVID. Small businesses meaning, I haven’t – I have started to bring people that I furloughed or laid off back, but I haven’t brought everybody back yet. And so, I think we already saw that. I don’t think we are seeing necessarily another drop off, unless there is no stimulus and people just say, hey, I can’t survive anymore. But most of our data has shown a pretty good come back, progressively continuing to improve.

That’s really helpful commentary, Marty. Thank you so much, gentlemen. Nice trends.

Alright. You are welcome. Thanks.

Our next question comes from the line of Lisa Ellis of MoffettNathanson.

Hi. Good morning, guys. First question is related to the PEO. I just want to understand a bit better what’s going on in the PEO. I think, Efrain, you mentioned you first saw a sharp downturn and then now a sharp upturn. Can you just elaborate were you referring to sales or performance of the existing business or both of those?

Yes. Sorry about that, Lisa. Actually, it’s probably both. But when I was making that comment really was a sharp decline in the number of worksite employees. So, even before we saw checks – check volume in checks and employees decline in the HCM business, we were seeing that in the PEO business where they shed employees more quickly. And then PEO had a more sharp upturn as conditions started to get better. Now, part of that could be what that – for example, states like Florida felt the impact in hospitality, accommodations, leisure. So, they were feeling it at first and then they started to come back and started hiring back, but – but that’s what I was referring to, and obviously it also impacted sales and now we are talking back in the March-April timeframe.

Yes, okay. And so, on the sales side, are you finding – like, how are sales doing in the PEO? Are you finding that – I mean I know that’s typically a reasonably complex sale, but I would imagine there is a lot of demand for it in the current environment. Are you finding that you are able – that the sales are rebounding and you are able to sell the PEO in the – even if it’s remote in the current environment?

Yes, Lisa. They have recovered even stronger, our ASO business. Our reps sell both PEO and ASO, meaning not the co-employment. And – but the need for HR kind of across the board has really taken off. So, they are – we are really strong on the ASO side and coming back on the PEO side as well. I think what Efrain said the strongest strength in the PEO has been the recovery of the worksite employees coming back on the payroll. On the sales side, PEO has done fine but the ASO has been even stronger. Now, our reps can sell both. So, I think whatever the need of the client has and if it’s not as much of an insurance need or they are not as interested in insurance right now, but the needs airs toward HR, which I think we have seen, then that may lead to an ASO sale, which sometimes is a little bit quicker because you don’t have to go through the underwriting and so forth. So, I think PEO has come back, but ASO has been much stronger. And overall, it’s been because it’s driven by an HR need, a human resource administration and need to handle all of – whether it’s furloughs, layoffs, COVID, leaves of absence for family etcetera., that’s where the biggest demand has been is how do I handle all of this stuff, and we have really seen that. And of course, we have those strong HRG’s, the HR generalist, 600 of them across the country. We have been able to sell the value of that HR person that’s helping those clients quite dramatically here in the last quarter.

Okay. And then I will – for my last one, I will ask the inevitable election question, because by the time we talk to you guys next quarter it will be over. So, what policies or agenda items are you keeping the most close eye on, as we get closer to the election?

Well, it’s interesting because I think one generally has obviously been better – it appears better for business when you look at the last few years, because of the growth in businesses and so forth. And the other side could probably bring a lot more regulations and more opportunities with depending on the healthcare and so forth that comes out in the regulation. So, if it’s heavier regulations, there’s going to be a lot of opportunity there. If the administration changes that would give us great opportunity. If the administration stays in place with try to be less regulations but I would say more confusing regulation that gives us an opportunity as well. So, we really see kind of not trying to play the middle of the line here, but we do see opportunities on both sides, whatever happens with the election. Probably, it tends to be a little bit more on the regulation side if a Democrat gets in there but – and it will just be change which will make some businesses outsource more because they are worried about the changes. But either way, I think we see opportunities coming from it. We are watching the level of insurance and healthcare regulations, any impacts on 401(k) in retirement and what that impact there. And then on payroll and HR, it really is just the level of regulations and so forth. Either way, I think there is going to be plenty for us to do and plenty of opportunity to be frank with you.

Terrific. Thanks, guys. Good stuff.

Okay. Thanks, Lisa.

Our next question comes from the line of Jeff Silber of BMO Capital.

Thanks so much. I know it’s late. I will just keep it to one. You talked about accelerating some of the cost initiatives. Can you tell us of the $31 million booked, how is that separated between OpEx spends and SG&A and what kind of cost savings should we expect on both those line items from these initiatives? Thanks.

Hey, Jeff, rather than get into, I am laughing, because I talked to the controller and most of it’s going to end up in G&A, but we will just footnote it in the slide, so you can update your models.

Okay, great. And in terms of the cost savings, have you quantified what you expect?

I think I provided some guidance last quarter. I would have to go back and update that. I think it will be comparable to the cost that we take out, but let me revisit that to get a better answer.

Okay, appreciate it. Thanks so much.

Okay.

Our next question comes from the line of Samad Samana of Jefferies.

Hi, good morning. Thanks for taking my question. Similarly, I will keep it to one. Just Efrain, did you mention this quarter how many customers are still Paychex customers, but that aren’t processing payrolls actively. I think you gave that mix last quarter. Just maybe an update on that and how that changed quarter-over-quarter would be helpful?

Yes.

Go ahead.

Sorry.

No, go ahead, Marty.

Samad, as I mentioned earlier, we didn’t give the absolute number, but we are down about three quarters from the peak. And even that number was, I think people misunderstood that it was very large even at its peak and – but we are down to like we are down three quarters from where it peaked. We still could take some losses from those clients, but it’s not a big number compared to our client base and we are watching those clients. Some of those again maybe hanging on for year end or to see if they get another stimulus to kind of help them through, but the number – and the number dropped three quarters and very few of them went lost. So, we really feel very good about the ones that came – that reduced the number that were non-processing. Most of them are back processing now. They are processing with the fewer employees, then – because they haven’t brought them all back, but they are processing and less than – definitely less than 10% of the number went lost. So, it was really a very positive so far and we have got kind of that last quarter that were suspended kind of hanging on either for more stimulus or year end and we will have a good sense of that, I think at the end of the next quarter, I can tell you kind of exactly. My guess is that will be pretty much off the service by then or there will be very few left, but it’s not a number now that’s really impacting us that much at all.

Great. I appreciate the clarity and hope you and your families are all doing well. Thanks again.

Thank you, Samad. You too.

Our next question comes from the line of Tien-tsin Huang of JPMorgan.

Thank you so much. Also encouraging results. I just wanted to hone in on the winning the startups piece. I thought that was really interesting. How much of your success there with startups do you think is organic versus doing something different in digital marketing and driving internet leads? I know, Efrain, you and I have talked about this, I am curious if there is a different muscle you are using to generate that?

Well, I think it is. I think as Efrain mentioned, he has used the word digital probably, I think he has won the prize for using it. Those investments, Tien-tsin, have really made a big difference. As Efrain pointed out, you start back a number of years ago and whether it’s SurePayroll or Flex, both we have invested a lot in making that easy to search to then demo online as well as be able to buy online and that has really paid off, as Efrain mentioned, in this environment, while people are remote and they are going to get – they are getting more used to not talking to anyone. I think that was the trend anyway. All of us would say that right that people not wanting to necessarily meet with someone just especially if they are small in fairly simple business to be able to go online and figure it out themselves and set themselves up. Not to mention that one of the biggest challenges of having more leads was then getting a hold of the prospect after you got the lead. This ability allows people to start and then actually encourages them to start the process of self – of sign-up and setting themselves up and then sales rep can jump in at any time and realizes if that has slowed down to help them through the process. But now they have already started to setup. Before when you had to reach someone and contact them, a lot of times we weren’t able to contact the prospect or they had already gone somewhere else. This, in these investments that we have done from a digital standpoint in both the lead generation and the self setup, have helped a lot and at a time when a lot more startups are looking for someone, that has been kind of the perfect marriage of timing there.

Yes, thank you for that, Marty. That’s very complete answer. Just the follow-up and I will let you guys go. Just on the – there is a lot of talk about outsourcing and going through the selling season. Can you remind us, because I get this question a lot, I just want to make sure I am fresh on it, just what percent of the SMB market is in-house, as you define it versus outsourcing today?

Well, the number has always pretty consistently been 30%, 30% to 35% outsource and 65% to 70% still do it themselves of the small business market and that has not changed for many years. Now, I haven’t got the most up-to-date data, but I would definitely feel that has adjusted given the pandemic and then I think that’s a trend that’s going to continue as people have – once they have seen the value of it, that’s what’s changed. So, it’s always been kind of a 30%, 70% meaning outsource and not outsource, and I definitely think that shifted. It probably had a pretty good shift here in the last two quarters.

Makes sense. Thanks for your time.

Okay.

Our next question comes from the line of Mark Marcon of Baird.

Hey, good morning, Marty and Efrain. Wondering with regards to the in-house clients that you are picking up, what are they using typically? Are they using Intuit and QuickBooks or are they using Excel spreadsheets, just what’s the level of sophistication and what are you seeing in terms of the average client that’s switching over?

Mark, it’s going to be more anecdotal. We don’t track it really close, because the client doesn’t always say it, but I think it’s a mix of those. I would say, it’s probably more do it kind of themselves manually than it is Intuit, but I think Intuit could be – that could be 25% or 30% of the mix coming in. But a lot of times they haven’t used anything. It’s more just figuring it out themselves on an Excel spreadsheet type of thing and that kind of thing. And then the need for payroll kind of combined with HR has pushed them kind of over the limit to say, hey, I need something else. I just don’t need a calculator of payroll. I need to understand the rules and regs and I have got somebody that’s now taking a family leave because of COVID or they need to stay home with children or something, how do I handle all this? What about parental leave? How do I handle all these rules? And it’s by multi-state in particular it’s really hard to keep up with it. So, I think it’s been that combination of not just – I don’t just need a calculator, I need really helping how to do these things and that my employees are asking for more from a mobile standpoint. So – and my employees are expecting to be – they are now asking for Pay-on-Demand, for example. We haven’t even touched on that in this call. We offer Pay-on-Demand. They have started asking that I worked 8 hours, because more employees are working shifts and part-time and various shits where instead of being more normalized, they are asking for Pay-on-Demand. They are asking for access to their checks stubs on a mobile. We are now offering Google search. So, if I say – Hey, Google, what – I want to be able to ask Siri or Google what I got paid and when I got paid. That’s now available. These are things that more younger, I guess I would say employees are asking for that flexibility and those demand, and they can’t do that with what they have been using.

Since you brought it up, on the Pay-on-Demand, what percentage of the clients are now using that?

You know, it’s still pretty small, but it’s growing. I think more clients are seeing the ability to have it. I don’t – I think the clients feel like, especially with our – the way we’re offering it today, it’s no risk to the clients themselves. It’s being done that way. I think more employees that are realizing that it’s available are asking for it and more clients being aware of how simple it is to do it, it will pick up. It’s still very small from a starting standpoint, but it’s starting to get attention, particularly again with this environment where hey, I just may need somebody to work 8 hours here. And that employees says, if I am only working 8 hours this week or because of children at home, I can only work 16 hours or 20 hours, I would like the money right now instead of waiting 2 weeks to get my check, because I am not working full-time right now. It’s becoming more interest. So, we are trying to get the word out there that it’s available. And I think it’s starting to catch up, but it’s still pretty small at this point.

Appreciate that. And of the new clients that you are getting that warrants doing self-service, can you break it out just in terms of what percentage of the new clients you are getting were self-service versus your largest competitor versus regionals?

I don’t have that right in front of me. I don’t know Efrain, if you.

No, I don’t have that detail.

I would have to – we would have to look and see if we have got that. But I would try – I don’t have it right in front of me. It’s a pretty good – as we are saying, I think the uptick from normal sales value that’s driving a lot of growth is the more at the newer outsourcing that we have talked about that are outsourcing for the first time. And new business is definitely up, I would say, double digits as well.

Yes, Mark, part of the reason why you are not getting a crisp answer on that is we recognize we are in an unusual environment where new business formation is up.

Yes.

And we think that there is a – in addition to everything else, we are benefiting from that and we seem to have the right solutions for the right time, at the right place in the market.

And new units are up. What percentage were they up during this last quarter?

You were going to ask. So, the answer is good. we are not going to give you the exact number. So good means certainly more than low single-digits, Mark.

More than low single digits, okay. And how about ACV?

I am sorry, how about what?

Average client base.

ACV.

The average client base, I am not sure I know what the acronym means or maybe I am missing?

Annul contract value of the bookings that you are selling. In other words, book of sales…

Okay, okay. Yes, yes. No, no, no. We will update that as we go through the year, Mark. So, we are not going to provide that on a quarterly basis.

Okay, great.

Okay. That’s a good one. I will just put that in the acronym lexicon.

Okay. And then finally, Marty, I heard your interview with regards to the discussion in terms of employment growth and the PPP. How are you thinking about this fall and winter with regards to – you said you are not expecting the stimulus that comes through. It sounded in your interview like you thought that was really crucial for some clients. Can you just discuss like how crucial do you think it is? What percentage of the clients are really kind of at the end here or – and how we should think about that, because all the comments are really positive. And it sound – but it also sounds like you’re not expecting the stimulus to come through. So, I am just trying to put those two together?

Yes.

Hey, Mark, I just want to clarify something. The comments are positive versus expectations. I mean, we’re not sitting here saying that everything is great, etcetera. We understand the environment which we are operating. Our comments are positive, because the results suggest that it’s better than we expected and we are navigating through the environment. So, I just want to make sure we are not painting a rosy macroeconomic picture that everything is great. We are saying we are navigating effectively through the environment. That’s the idea that we want to convey. We understand the challenges.

Yes. And that it’s better than we expected. We expected less of a recovery in that first quarter and it’s been much stronger and we performed very well compared to our expectations. But you are right, triangulating all my interviews, this is the problem with doing too many interviews. You are right, about 80% – what we have seen in general surveys, not just our clients, but in general. About 80% are saying they are at the end of the first loan. About 40% or 45% are saying they need additional stimulus. We think it’s important that they get additional stimulus. What Efrain was saying that in our forecast, we have not built that into say that that’s going to be a big impact. And we have not built in that they are going to get it, and that’s going to have a big impact. So, as we look out, the hardest thing is forecasting the second half of the year, because – one, we did much better than we thought in the first quarter. We can kind of see what that’s – what’s happening into the second quarter. That’s probably fairly predictable. What’s really unpredictable is the second, the third and fourth quarters, fourth quarter in particular, where we estimated already that there was going to be a positive growth year-over-year. Now, it’s a better compare obviously to a tough fourth quarter previous year, but it’s hard to predict. So, I think the stimulus is – another stimulus for small and mid-sized businesses is absolutely needed. It needs to have more flexibility, it needs to have an easier way to forgive the loans. Is that going to happen? I don’t know. It’s just that I think Efrain was saying at the beginning, hey, we didn’t build in like that was going to have a big impact in the second quarter. So, if it does happen, that should help us and give us even more tailwind. But we weren’t including it at this point.

I appreciate that. Great job in terms of all the things you can control.

Okay. Thank you.

Thanks Mark. Appreciate it. It means a lot.

Our next question comes from…

Operator, are there any other questions?

Our next question comes from the line of Kevin McVeigh, Credit Suisse.

Great, thanks. Just a follow-up. Alright, I will keep it tight. Efrain, I will keep it tight. Hey, just the record sales, and you have talked about this a couple of different ways, but is there a way to frame just what the average client size is or maybe just how much of those sales coming in are DIY as opposed to traditional method? And did that – did the mix help contribute to the margin boost in terms of the guidance or was that more just over performance on expense, just better expense management?

Yes. I would say, because of where it was coming and because of the channels through which came in, it tended to be smaller rather than larger. That’s where you tend to see more of an impact on those kinds of sales. It doesn’t contribute necessarily the change in margin profile going forward. But obviously, if we continue to see that kind of sustained performance, it’s positive for the business.

Awesome. I will leave it there just in the interest of time. Thank you.

Okay, thank you.

Our next question comes from the line of Matthew O’Neill of Goldman Sachs. Matthew O’Neill: Yes, hi, gentlemen. Can you hear me? I’m sorry.

Yes, go ahead, Matt. Matthew O’Neill: Thanks so much for taking my question. I realize we are way beyond time here. I was just curious, so many things have been asked and answered and really impressive resiliency of the business throughout, obviously, unprecedented time here. Going back to the Paycheck Protection, is there any quantifiable dynamics that you guys have kind of internally studied with respect to the percentage of the current base that’s been a recipient of that or when you think about those businesses that are may be at this point kind of struggling, is there any kind of quantifiable metrics around that?

I don’t – Matt, I don’t have those numbers right in front of me. We do know that – well, we did a number of things. We partnered with three FinTech companies to help – including Vista Credit and some others to help get loans out there. We provided those reports, as I said, the first to provide the payroll report. We think our clients have about 28 billion in loans based on what we know out there. When you think about that across the whole base that’s not a huge number, when you think about distressed businesses in the base, we felt good about the fact that we are able to help them get those loans and secure those loans and – but I think it’s not a real large percentage that took the loan or needed it. But I am sorry I don’t have that, I know we were trying to track it. It was tough to be able to track through that data to see how many of our clients actually took the loan. We do know that we worked through about $28 billion is what we expect of loans outstanding. So we will try to follow up on that. Matthew O’Neill: Okay. Thanks so much, guys. I will leave it there.

Okay. Thanks, Matt. Matthew O’Neill: That sounds great. Thank you.

Operator, I think we are going to – yes. Operator, I think, given the time, we will close the call at this point.

Are there – is there anyone else on the call?

Operator?

We do have a final question from the line of David Grossman of Stifel.

Okay, we will take that.

Thanks. Sorry, I didn’t mean to prolong this even longer than it already is going. I am sorry.

For you, we will prolong.

Thank you. I really just have a clarification and I really just wanted to follow-up the question earlier about growth in the second half of the year. Like Jason, actually I had the guidance at low single-digit growth for the previous call in the back half of the year and perhaps we all misunderstood what you had said previously. So perhaps, Efrain, you could just share with what your guide was for the back half, 3 months ago?

Yes, I think I just said that we expect the back half of the year to be flat to very low single-digits. So, to the extent you say, hey, Efrain, you are not saying anything different than you said. Let’s just say I say it with a little bit more conviction this time.

Alright, fair enough. Let’s leave it there. Thanks again.

Okay. Thanks a lot.

Okay, at this point, we will close the call. And if you are interested in replaying the webcast of this conference call, it will be archived for approximately 30 days. Thank you for taking the time to participate in our first quarter press release conference call and for your interest in Paychex. Hope everyone stays safe and thank you for calling in.

Thank you, ladies and gentlemen. This does conclude today’s conference call. You may now disconnect.