Paychex, Inc. (PAYX) Q1 2024 Earnings Call
Paychex, Inc. (NASDAQ:PAYX) Q1 2024 Earnings Conference Call September 27, 2023 9:30 AM ET
Company Participants
John Gibson - President and Chief Executive Officer
Bob Schrader - Vice President of Finance and Investor Relations
Efrain Rivera - Chief Financial Officer
Conference Call Participants
Ramsey El-Assal - Barclays
Daniel Maxwell - William Blair
Bryan Bergin - TD Cowen
Ashish Sabadra - RBC Capital Markets
Scott Wurtzel - Wolfe Research
Tien-Tsin Huang - JPMorgan
Peter Christiansen - Citigroup
Bryan Keane - Deutsche Bank
Samad Samana - Jefferies
Eugene Simuni - Moffettnathanson
Mark Marcon - Baird
James Faucette - Morgan Stanley
Operator
Good day, everyone, and welcome to today's Paychex First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note, this call is being recorded, and I will be standing by if you should need any assistance.
It is now my pleasure to turn the conference over to John Gibson.
John Gibson
Thank you, Shelby. Thank you, everyone, for joining us for our discussion of the Paychex first quarter fiscal year '24 earnings release.
Joining me today is Efrain Rivera, our Chief Financial Officer; and Bob Schrader, Vice President of Finance and Investor Relations.
This morning before the market opened, we released our financial results for the first quarter. You can access our earnings release on our Investor Relations website. Our Form 10-Q will be filed with the SEC within the next day. The teleconference is being broadcast online and will be archived and available on our website for approximately 90 days.
I will start the call with an update on the business highlights for the first quarter. I'll then turn it over to Efrain and Bob for a financial update, and then, we'll open it up for your questions.
But before getting into the discussion of our earnings results, I want to take a brief moment here to make a few brief comments to acknowledge Efrain Rivera, who announced his intention to retire as CFO effective October 12, 2023; though he will remain as a Senior Advisor at least through the end of the calendar year.
Efrain has been a valuable member of this senior leadership team at Paychex for the past 12 years. He has provided strong financial stewardship, but more importantly, great strategic leadership as well. During his time with Paychex, the company has transformed into a technology-enabled services company and we significantly expanded our HR Solutions and capabilities. Efrain has been a key strategic advisor and a catalyst for this transformation.
Efrain, I think you know how truly I appreciate your intellectual wisdom, your integrity, the guidance you've given me personally over my decade here and to the company. And we are all in great gratitude for what you've done for each one of us personally and for the company. Our customers, our employees and our shareholders are better off because you were here. So, thank you.
Joining us today is Bob Schrader, who will succeed Efrain as CFO. Bob joined Paychex back in 2014 and is taking on progressive leadership roles over the past nine years, including over the last year and a half since I was named President and subsequent CEO of being co-lead of many of our strategic review efforts and strategic initiatives. Bob's promotion is a part of a strategic succession plan to bring in an innovative leader who will continue to guide the company going forward. I want to congratulate Bob and, Bob, I look forward to continuing to work with you as I have in the last 10 years, I mean, as we continue to -- continue our track record of delivering strong financial results and continuing to position Paychex as a leader and innovator and a company that you can count on for predictable and sustainable results.
Now, moving on to the first quarter results, speaking of predictability and sustainability. We have begun the fiscal year '24 with solid growth of 7% in total revenue and 11% in adjusted diluted earnings per share. We've seen operating margin expansion approximately 60 basis points year-over-year, while still investing in our business to drive future growth.
Our first quarter reflected solid execution by our sales, service and all of our teams across Paychex. The demand for our HR technology and advisory solutions continued, resulting in strong quarter new sales, revenue growth, we saw positive trends in client, revenue and HR outsourcing worksite employee retention during the quarter, and we continue to focus our resources on acquiring and retaining high-value clients.
We are starting to see improvements in some of our key PEO and insurance metrics during the quarter, with good results across sales activity, insurance attachment and retention. We will know more after our open enrollment season is completed, which primarily runs from October through January, but at this time, we believe that the actions we have taken in response to the headwinds we faced in 2023 are beginning to gain traction.
Employment levels within our client base have remained stable. Small businesses, which are central to the U.S. economy, continue to show the resiliency. Our Small Business Employment Watch has shown that small businesses continue to add workers at sustained, but modest rates, also the trend in wages is showing some cooling in wage growth consistent with overall inflation. Our data indicate a continued stable macro-environment for small and mid-sized businesses. We continue to monitor our leading indicators and are prepared to take appropriate actions to navigate any changes. But again, at this time, we don't see any material change to the macro-environment.
Small businesses have faced challenges getting access to capital and managing cash flows in this environment. This has continued to drive demand for our full-service Employee Retention Tax Credit Service. I know there's been some recent news of the IRS pause in ERTC processing in order for them to perform increased audits. This is not expected to have an impact on our ability to provide the service, though it may take longer for our clients to receive their funds. We continue to communicate this opportunity to existing clients and prospects and we continue to file amended returns with the IRS on their behalf. We anticipate that ERTC revenue will be a slight tailwind for the first half of the fiscal year and then turn to a headwind in the back half as the program ends.
We are seeing greater adoption of HR software as businesses look to digitize their HR efforts to support the complexities of managing today's workforce in a more efficient manner. We also continue to see strong demand for our HR advisory solutions as businesses deal with the continued challenges of being an employer in today's challenging employment world. Paychex is uniquely positioned to offer a continuum of HR products, technology and services from do-it-yourself payroll all the way to full-service PEO HR outsourcing. All of these products deliver a strong return on investment for our clients.
For the 13th year in a row, we were named the leading retirement record-keeper by number of plans by PLANSPONSOR Magazine. Our leadership position in retirement makes us an excellent resource for small businesses and we continue to educate and execute on this opportunity.
There have -- there has certainly been a lot of excitement about AI and related technology and advancement around the monetization of large datasets. At Paychex, as we've talked on prior calls, this isn't anything new or it's not a fact. We have been using artificial intelligence to transform our business for over a decade. We have over 200 AI models that are actively working on our business today, designed to provide valuable insights, fueled by our vast data assets.
Our award-winning Retention Insights tool uses AI-based predictive analytics to provide HR leaders with early insights into potential employee retention issues. Our Flex Intelligence Engine is an embedded AI chat capability within our Flex platform that allows the customer to get quick answers to over 900 of the most common questions and access over 1,200 instructional resources.
Companies like Paychex with large amounts of data will clearly be the winner with AI, and we will continue to harness the power of AI and leverage our extensive data to drive internal efficiencies and provide actionable insights and solutions to our clients.
This quarter, we continued to be recognized for our innovation, service and the positive impact we are having on our customers, our industry and the world. For the third time, Paychex has been recognized by TrustRadius with a 2023 Tech Cares Award for the company's Corporate Social Responsibility programs and our community impact. We also received an award from Selling Power for our commitment to fostering a diverse and inclusive workforce, and from Forbes as one of the Best Employers for Women in 2023.
On the product and service side, NelsonHall, once again, identified Paychex as the leader in its 2023 Next Generation HCM Technology Market Report. We also earned at silver Brandon Hall Group 2023 HR Excellence Award for breadth and depth of training that we provide our HR advisors to keep them up to speed on the ever-changing complexities of the employer-employee relationship. Paychex was also named the 2023 Constellation Research on their ShortList for best payroll for North American small and mid-sized businesses.
The depth and breadth of our product suite provide American businesses the freedom to succeed with the technology and advice that they desperately need to remain competitive in a very complicated world. I want to thank our over 16,000 global employees who consistently deliver for our clients and our shareholders. It's because of them that we are off to such a good start this fiscal year.
I'll now turn it over to Bob Schrader to give you a brief update on our financial results for the first quarter. Bob?
Bob Schrader
Yeah, thanks, John, and good morning. It's good to be here with you this morning, and I certainly look forward to working with each of you as we move forward.
I'd like to remind everyone that today's commentary will contain forward-looking statements; obviously, those involve risk. And we will refer to some non-GAAP measures. I'll refer you to our customary disclosures in our press release and our investor presentation that will be posted later today.
I'll start providing a summary of our first quarter results and I'm going to turn it over to Efrain, he'll give an update on our financial position and updated guidance for the year.
Total revenue for the quarter increased 7% to $1.3 billion.
Management Solutions revenue increased 6% to $956 million, primarily driven by higher clients and client employees, product penetration, price realization and HR ancillary services. We continue to see increased attachment and demand for our HR Solutions, retirement, and time and attendance solutions.
PEO and Insurance Solutions revenue increased 5% to $298 million, driven primarily by higher revenue per client and higher average worksite employees. As John mentioned, we definitely saw some positive momentum in the PEO in the first quarter as it relates to both sales activity in medical plan participation and attachment, those were obviously headwinds last year, and we are definitely seeing some positive signs as we move through the first quarter here.
Interest on funds held for clients increased 83% to $33 million, primarily due to higher average interest rates.
Total expenses increased 5% to $750 million. Expense growth was largely attributable to higher compensation costs, PEO direct insurance costs and investments that we've made into the business.
Operating income increased 8% to $536 million, with an operating margin of 41.7%, that's a 60 basis point improvement versus the prior-year period.
And diluted earnings per share increased 10% to $1.16 per share, and adjusted diluted earnings per share increased 11% for the quarter to $1.14 per share.
I'll now turn it over to Efrain to take you through our financial position and our updated guidance for the year.
Efrain Rivera
Thanks, Bob, and good morning to everyone on the call.
Before I start, just wanted to say thank you, John, for the generous words. It's been an absolute professional privilege and honor to have been with Paychex during all this time.
As you all know, we maintain a strong financial position with high quality cash and earnings. Our balance for cash, restricted cash, and total corporate investments with more than $1.7 billion. Total borrowings were approximately $812 million as of August 21, 2023.
Cash flows from operations were $656 million for the first quarter, was driven by net income and changes in working capital. There was some influence of timing there. It wasn't quite as strong as the percentages would indicate, but nonetheless, it was a very solid quarter. As you know, our earnings quality, which many -- some of you have pointed out, is among the best candidly in the entirety of the S&P 500.
In the first quarter, we acquired a small company that purchases outstanding accounts receivable of their customers under non-recourse arrangements. This acquisition is a good strategic fit with another business that we have called Paychex Advance, and that business purchases accounts receivable for temporary staffing clients. This acquisition will provide an opportunity for our small business clients to manage working capital challenges. As John alluded to earlier, we've seen over the last several years that access to financing is very important for small and medium-sized businesses. We think this plays well into our -- in our portfolio of businesses that we have. I'm very excited to have it. The acquisition, at this stage, is not anticipated to have a material impact on our financial results this year.
We paid a total of $322 million in dividends during the first quarter. Our 12-month rolling return on equity was a stellar, superb, amazing 47%.
Now, let me turn to guidance for the fiscal year ending May 31, 2024. I'm going to give you color on not only the full year, the first half and the second half, and we typically do that at this stage. As you noted, we have raised guidance for interest on funds held for clients and for adjusted EPS, but I want to go through a little bit of color as we go through to give you a sense of what our thinking is.
Our current outlook is as follows: You saw that Management Solutions still expected to grow in the range of 5% to 6%. PEO and Insurance Solutions expected to grow in the range of 6% to 9%. Interest on funds held for clients now, as I have mentioned, expected to be in the range of $140 million to $150 million, raised from our previous guide of $135 million to $145 million.
And before I get the question, are we anticipated a range -- are we anticipating a range of additional increases, no, we are poised looking at what the Fed is doing just like everyone else is, but this is our best estimate of, at least some additional activity by the Fed, but not -- likely not contemplating all of it to the extent that the Fed does something now. We'll have a conversation later in the year. Maybe the Fed will decide that they actually do want to pause, but at this point, that's where we anticipate being.
Total revenue is expected to grow in the range of 6% to 7%, but now we think this is likely towards the high end of the range.
So, operating income margin is expected to be in the range of 41% to 42%. Other income net is expected to be income in the range of $30 million to $35 million.
The effective income tax expected to be in the range of $24 million to $25 million.
Adjusted diluted earnings per share is expected to grow in the range of 9% to 11%, and this is raised from our previous guide of 9% to 10%.
This full year outlook assumes current macroeconomic conditions, which has some uncertainty surrounding future interest rate changes and their impact on the economy. And I would just say, it's been almost -- I would say, at least six quarters where we keep saying, "Hey, we don't know what's going to happen in the back half of the year and it could change our outlook." I think John summarized it very well. At this point, things look pretty stable. So, we are feeling directionally more and more confident in the back half.
Projecting the second half of the year, we anticipate total revenue growth of approximately 7% and operating margin in the range of 42% to 43%. I heard some comments after -- first -- when we released guidance that we have a ramp in the back half of the year. I wouldn't describe our current guidance as a significant ramp in the back half of the year. Obviously, there are differences in the back half of the year that we'll navigate through and talk to you, but the difference between first half and second half is not dramatic.
Of course, all of these comments are subject to our current assumptions, which are subject to change. We will update you again on the second quarter call.
So, let me just repeat a couple of things to make sure. First half 2024 total revenue growth in the range of 6% to 7%, operating margin in the range of 40% to 41%. And then, in the second half at this point, we anticipate total revenue growth to be approximately 7%, operating margin in the range of 42% to 43%. I refer you to our investor slides on the website for additional information.
Before handing things back over to John, I would just like to say that, I appreciate the relationship I've built with each of you during my time here at Paychex. We've had a long time together and it's time to hand the reins over to someone else who I think we'll do an even better job than I have.
One of the things that strikes me during that entire time, and many of you have been here for the entire ride, I got a call and someone -- or I got note and someone said, "Efrain you're making me old, because I've retired two CFOs at Paychex." So, I think that's unfortunately true. We are all getting a little bit older.
But one of the things that always strikes me is that we are covered by the best group of analysts in the business. I'd say that even though I have disagreed with some of you over the years and I still think you have us rated too low, but be that as it may, I can't argue with some of the things that you write.
And in a separate note, I just want to say this, I've worked with Bob Schrader for many years, both here and prior to Paychex. I know that I'm leaving you in very capable hands. And I'm sure that Bob will do an even better job than the one that I do.
And with that, let me turn it back to John.
John Gibson
Well, thank you, Efrain.
Before I open the call for questions, probably two things. One, we have a lot of people here and the last time Efrain did a great job of providing rules on questions, particularly on compound questions and multiple follow-ups. So, we could just follow the Efrain rule in honor of Efrain's retirement. I know he would greatly appreciate it, and maybe we can create a new tradition here. But no, feel free to answering your questions.
But I would like to also add, make everyone aware, there's many ways you can learn more about Paychex, and really the amazing success stories and the impact that we are having on the world. We've recently launched a series of reports that you can find on our Investor page both our annual report, our ESG report and a new client impact report, and very shortly, you'll be seeing a new Investor Relations 101 Presentation that will be launched on the website prior to our Annual Meeting in the coming weeks. And again, I think these documents provide a lot more color and really a lot more insights of just how significant, how broad our products are, how big an impact we are having on our customers, how big an impact we are having on our employees, how and why Paychex is known as one of the most admired, most ethical and most innovative companies in the world, and I encourage you to check that out.
So, with that advertisement of our Investor website, Shelby, you can now turn it over for questions.
Question-and-Answer Session
Operator
[Operator Instructions] And we'll take our first question from Ramsey El-Assal with Barclays. Your line is open.
Ramsey El-Assal
Hi. Thank you for taking my question, and congratulations to you, Efrain.
Efrain Rivera
Thank you.
Ramsey El-Assal
We will miss hearing your voice on these calls certainly. I was wondering if you could comment on the interest from corporate investments was relatively high in the first quarter, and it doesn't necessarily feel like that's going to flow through for -- to the full year guide in terms of maybe recurring each quarter. So, maybe if you could talk about that contribution to other income and just how you might see it trending the rest of the year?
Efrain Rivera
Yeah. So, Ramsey, there's a couple of things that go into that line beyond just -- so for everyone who isn't focusing on that line that much. So that's a combination of our interest expense, our interest income from corporate portfolios primarily, and also some gains and losses on investments that we have in small investment fund that we have. Those things can swing a bit during the year and are subject to whatever we think the balance is going to be on corporate funds during the year. We made an acquisition, so we expect that. During the year, our average corporate balances will be lower. So that will generate lower interest income. And then, the other part of that, Ramsey, is gains and losses on that other investments as the mark-to-market can change from quarter-to-quarter. So, there could be a little bit of lumpiness in that number, but it might be a little bit different.
I would say one other thing just by way of color on that line. We ended up with a fairly high cash balance that was influenced by timing. I think, I called that out,, or if I didn't, let me call it out now. It just really had to do with the day on which we closed the quarter so our cash balances were higher. They are likely to be a bit lower -- not a bit lower, but lower as we progress through the year. So, you might see that number change a bit.
Ramsey El-Assal
Okay. Fantastic. And a quick follow-up. If you could talk about SECURE Act 2.0? How you see that evolving? And how you see that potentially -- presumably benefiting the business over time?
John Gibson
Yeah, look, SECURE Act 2.0, I think is a great action and great step that the government has taken is encouraging and helping small and mid-sized businesses, provide for the retirement of their employees. We are certainly out there educating the market on the opportunity. It really provides an opportunity for them to add a 401(k) plan or get a tax credit back for the implementation fees or the set-up fees of the plan. And then allows them to actually do a match for their employees and get that back into a tax credit as well. So, we are very happy our 401(k) business has continued -- has very, very strong growth, that has continued.
The thing I continue to remind people, we have some experience in this in other state mandates and what we realized is that there's a lot of education that has to go on to get the market educated about the cost of a 401(k) plan, the benefits of a 401(k) plan. And certainly, we are out actively in the market, educating the market, educating our strategic partners on that, and we believe that the SECURE Act 2.0 is going to allow us to continue to sustain the double-digit growth rates that we've seen in the retirement business over the last several years.
Ramsey El-Assal
Fantastic. Thank you very much.
Operator
And we'll take our next question from Andrew Nicholas with William Blair. Your line is open.
Daniel Maxwell
Hey, good morning, guys. This is Daniel Maxwell on for Andrew today. To start off, I was hoping you could dig in a little on any changes to the dynamic between ASO and PEO, and whether over the past couple of months, you've seen any preferences shift on that. You called it out the last couple of quarters, and I was wondering, if anything changed.
John Gibson
Yeah. So, I would say this, we continue to see strong demand for our HR outsourcing solutions across the board. And I would say that the balance is probably more back to prior to '23, where we saw a little shift to ASO. We've seen more of what -- more traditional balance of ASO to the PEO. As we mentioned on our last call, we've made some changes I think to our product portfolio in the PEO that I think is balanced that out a little bit.
The other thing that I would point to that we mentioned on the prior call is that when we over-index with ASO in the prior year, we always look at that as a great opportunity for us to go back to those customers and then upgrade them or selective them into our PEOs product. And we started doing that. We actually -- that's a good example of AI, where we are actually using AI tools to be able to go into the ASO base and find clients that we believe there's going to be a valuable value proposition to be in the PEO relationship for multitude of different reasons, and that program actually has shown results in the first quarter.
It's early in the process, but I would tell you that our transition of ASO to PEO customers, the number of customers that we transitioned this first quarter versus last first quarter was nearly 2x the number of clients. So, exactly what we thought could happen, which was we over-indexed when ASO in the prior fiscal year. We continue to sell outside to new logos and that was also double-digit strong in PEO in the first quarter. So, we have both benefits. We had strong outside the base growth in PEO in the first quarter, and we had good migration or upgrades ASO to PEO, which was a good start to the first quarter.
We still got three quarters to go and we are in the middle of our open enrollment, which is critical there. But good early signs. We had good signs in the PEO in the fourth quarter, and we've talked about that on the last call, and that just accelerated in the first quarter. So, now we just got to see if that can continue into the core selling season.
Daniel Maxwell
Great. Good to hear. And then for my follow-up, any detail you can give on the increase to the direct insurance costs from workers' comp? Any color or any reminder of your exposure to any volatility in that area?
Bob Schrader
Yeah. This is Bob here. I mean, we, obviously, take risk in the PEO business on workers' comp. Obviously, we are very prudent in managing that risk in which -- and picking on which risk we are willing to take. I'd say there is growth in the quarter, primarily driven by, we have growth in worksite employees, that is going to drive higher workers' compensation costs. We go through every quarter and do true-ups of our reserves and so forth, but nothing specific to call out other than growth in the business that would drive growth in direct costs.
John Gibson
Yeah. There has been no change to our underwriting standards. There's no change to our programs in terms of caps and limits, and there is no real change in the overall program performance.
Daniel Maxwell
All right. Thanks a lot, guys, and congrats again to Efrain on your retirement and Bob on your promotion.
Bob Schrader
Thank you.
Operator
And we'll take our next question from Bryan Bergin with TD Cowen. Your line is open.
Bryan Bergin
Hi. Good morning, guys. Thank you. Efrain and Bob, let me echo my congrats as well. Efrain, it's been nice working with you here. Enjoy your retirement.
Efrain Rivera
Thank you.
Bryan Bergin
I got to ask the question because we've gotten a lot of question, just as it relates to ERTC. So, it doesn't sound like you have any change in your fiscal '24 revenue expectation there surrounding ERTC after this recent IRS announcement, but can you just dig in there a little bit more since there have been a lot of questions? Is there any evidence of any clients wanting to potentially delay submitting new claims there? Any dynamic there to be mindful of?
John Gibson
Listen, Bryan, appreciate the question. Look, ERTC was in line with our expectations in the first quarter. We continue to submit. No one is wanting to delay. The program is going to end. And, I -- again, the IRS announcement is not stopping anyone's efforts -- our efforts in approaching clients who are assisting and then filing the tax credits. And in fact, the IRS specifically commented to clients and small business owners that they should seek trusted partners to complete their filings.
The IRS pause in processing that, and accepting. So they're accepting filings. It's really due to some just really bad actors out there that are providing bad advice to small businesses and putting them at risk. I talked about this probably a year ago when this started when these little pop-up companies started to show up. And again, I think the IRS is trying to do a prudent thing to tamp down on fraud and also to make sure these small businesses are not getting bad advice from these pop-up firms.
So, we actually are continuing to accept and encouraging our clients and prospects to file, and we provide a service where we are confident that the advice we are giving them is adequate and we'll continue to try to get their processing done before the filing deadline early next calendar year. The delay impact for the client is really going to be in the processing, which is really going to be when they get the refund.
Bryan Bergin
Okay. Very good. That's clear. And then, my follow-up, just on the target here. Can you share as it relates to the M&A the financial profile of this target? Just any revenue attribution to call out now included in the current year outlook? I did hear you mentioned, I believe, the upper end of your growth range. But just wanted to confirm there were no organic offsets of that.
Efrain Rivera
Organic offsets, which...
Bryan Bergin
As far as anything in the organic side being offset by now any incremental inorganic in the year?
Efrain Rivera
Not really, Bryan. I mean, it will contribute a modest amount of revenue, we'll call it out as we go through the year. But it's not masking something or additive in that respect. I think there's a number of different vectors of growth within the company that are working pretty well. So, no, not really.
Bryan Bergin
All right. Thank you.
Efrain Rivera
Yeah, you're welcome.
Operator
And we'll take our next question from Ashish Sabadra with RBC Capital Markets. Your line is open.
Ashish Sabadra
Thanks for taking my question. And Bob and Efrain, congrats to both of you. Just on my question, I wanted to better understand the raising of the guidance and confidence in the back half. Is that both on Management Solution as well as PEO? Any color on that front? Thanks.
Efrain Rivera
Yeah. So, one is, kind of, I'd say, process and structural, and then, the second is the substance of what we saw in the first half. So, the process and the substance is simply that, at a point in time you're taking a snapshot and saying, okay, when we issued the guidance back four months or so ago, we had a certain set of macro conditions. We didn't know of it, whether they would hold at that point. The macro conditions, as John said earlier, haven't changed significantly. So, we fast forward four months and now we have more certainty as to what environment we are looking at, at least in the medium-term. Medium-term being three to six months. So that's one.
The second part is, we look at the trends in the business where we close, where we correct in terms of the trends that we saw. You heard some of the comments that John said on the PEO, so much of that was what we expected from an execution standpoint, but it's one thing to expect it, it's another thing to deliver it, and thus far we've started on a good note. So those are those are two parts of it.
So, by the time we get to September and we are in the October now. We know with reasonable degree of certainty what Q2 looks now. We project forward into the back half of the year and do we feel reasonably confident based on the combination of all the factors that we are seeing at the back half expectations will be as we expect. As we sit here, the answer is yes. So, as you look at the guidance it anticipates that PEO will strengthen in the back half of the year. And at this point, we are seeing indications. Can we say that with certainty? You can never say anything certainly. But we -- based on all of that combination of factors, we feel pretty positive about where things are turning.
John Gibson
Yeah, just to add on to that, I think, again, every business has -- we have a rhythm and the third quarter is a critical -- that's our selling season. And so, what the macroenvironment will be in the third quarter, fourth quarter, those are all the things we are trying to guess. I think what I would characterize it at this point in time is when we left the fourth quarter, I talked about the second half of our last fiscal year, we actually saw new sales bookings, both in Management Solutions and the PEO and Insurance accelerating. We continue to see that double-digit momentum in the first quarter, HR outsourcing, ASO and PEO, strong mid-market in the quarter, retirement is strong, digital payroll is strong. So, when we look at the demand environment, then we look at the employment environment with our index and what we are seeing the first quarter set-up to be kind of a repeat and continuation of what we saw in the second half and particularly the fourth quarter.
Now as it relates to the PEO business as we talked about the insurance is a portion of that, insurance attachment is part of the reason why we have a little bit of a wider range. What you have to determine there is, how many companies continue to offer benefits to their employees? That's the first choice. The second choice is, how many of those employees sign up for Health Insurance, and what plans do they sign up for? Now, we are only a quarter way through that decision process, which really is already started, about 25% of the way through. What I would say at this 25% away, we are running a little bit on par, where we expected. I mean if that continues, I think that's what gives us confidence in the back half. But again, I still got three quarters of that process left and again, I want to be predictable relative to what we should expect.
And so, we are being, I think prudently cautious in making sure that we are executing both Management Solutions, we are taking advantage of the opportunities in the marketplace, and then in the POE and Insurance, making sure we are doing what we need to do to make sure we have a successful open enrollment and drive insurance attachment.
Ashish Sabadra
That's a great color. And maybe if I can just ask a quick follow-up question on the commentary on the PEO side on the improved insurance attach rate. Obviously, last quarter you had also talked about a leaner product and I was wondering if that's driving better adoption or you are seeing just better adopt -- demand or stronger demand for insurance product? Thanks.
John Gibson
Yeah. So, I would say that there is a multitude of things that we probably tweaked every aspect of how we approach the insurance, both in terms of analytics of what we are doing relative to targeting customers that we think can drive -- we can drive value proposition there. We've changed the technology. We've changed our advisory approach, and we've expanded the products -- choices that both employers and employees can have. We've improved our educational tools in that process. We got a lot more engagement with our HR advisors, with clients around that.
So, I would say, across the board after what we experienced a year ago in the first quarter, we've looked at every aspect of it and the team has really done a great job there and just re-imagining how we need to approach this. And again, we are only 25% of the way through, but we are seeing results from those activities.
And, I do think demand for insurance, and I think it's going to be interesting. We were very pleased with our renewals. I mean, if you read in the general press right now, you will see that there is a degree of health inflation, and when that occurs, we do typically see more customers shopping for alternatives that we think we have a good value proposition there.
Ashish Sabadra
That's a great color. Thank you.
Operator
And we'll take our next question from Scott Wurtzel with Wolfe Research. Your line is open.
Scott Wurtzel
Great. Good morning, guys, and thanks for taking my question. Maybe just going back to the acquisition. I'm just wondering if you could maybe give a little bit more color on the strategic rationale behind it and sort of said another way, like why now with this deal, and maybe relative to some of the other targets that you were looking at? Thanks.
Efrain Rivera
Well, I'll bracket it in three ways. The first thing is that, as John alluded to or said earlier, the ability for small businesses to access funding -- in small and medium size, I should say, access funding is important. So, we had our eyes on looking to build our capability in that area.
The second thing is, acquisitions are, as you would know, they don't always present themselves with exactly the timing which you would expect them to, and when an opportunity arises and you do what you need to do to take advantage of it. We saw an opportunity for high-quality asset and decided that it was the right time.
And I would say the third is that, it's an interesting environment for small businesses, so where access to funding opportunities is becoming more tricky given what has happened with banks and with rising interest rates. So, we think the timing seemed to fit pretty well. And again, I don't spend too much time. It's a relatively modest acquisition based on our revenue side, but we think we've had a lot of success with our Paychex Advance acquisition, and it's a very profitable corner of the market. And we think we can do the same thing with the company that we bought, called the [indiscernible] by the way.
John Gibson
Yeah. And I would just add, neither one of these things are new to us. We kind of get dragged into this. When COVID hit, if you remember the PPP program and the banks were struggling to figure out how to access it, and we put a program together, and that started a partnership with several fintechs. We did both technology, integrations, et cetera, and that led to a more of a partnership approach. And then, we have several partners that if we have clients that meet our risk profile and are wanting to maybe need to fund the payroll or something like that, we've got partners that we can introduce them to.
So, we got kind of introduced to this concept and certainly then the macroenvironment, what Efrain just said, banks, rising interest rates, and we just know we have a lot of great customers out there, small, mid-size customers are strong businesses that just really struggled to get access to capital at affordable rates. And so, that started just through a partnership piece. And then we had the Advance business, which was kind of doing this for staffing companies and we've been in that. It has been a great business for us. It's a great acquisition business for us. Introduced us as a payroll customer. There's just a lot of positives there. And those are adjacent.
And so literally, it's one of those classic, you're at a conference and you know people who know people and the timing seemed right. And just based upon the need we saw and the fact that we thought there were opportunities for us to potentially help our strong customers continue to grow their business. We've already been introducing them to partners. Why not introduce them to ourselves and get a piece of that action? So that was kind of the strategic rationale. And it's a small, like you said, very small at this point in time.
Scott Wurtzel
Got it. That's super helpful. Thank you. And then, just as a follow-up. I mean, just one quickly on the float portfolio. When we think about the recent Fed commentary and dot plot showing maybe a sustained higher rate trajectory than maybe we were expecting a few months ago. I'm afraid, I know you've talked about in the past wanting to position the portfolio more on longer duration securities. I was just wondering if this -- the recent Fed commentary sort of gears you even more towards sort of the longer duration securities in the portfolio rather than shorter duration? Thanks.
Efrain Rivera
Yeah. We are reviewing monthly to figure out based on and looking at the same dot plots you are to see what happens. I would just go back to something I've said from the point that the Fed started raising rates. The problem isn't taking advantage of the rates going up, the problem is what happens when it comes down. And so, we are positioning the portfolio, we will position the portfolio, and I'm sure Bob will do the same, to be able to manage it in an orderly way on the way down. So, we are looking at -- this is a time when you want to go longer, if you can, even if perhaps there are opportunities on the short-end of the curve, because at some point, it will come up, and that's what you got to figure out how best to manage, and that's what we are working on.
Scott Wurtzel
Great. Thank you, and congrats, Efrain.
Efrain Rivera
Thank you.
Operator
And we'll take our next question from Tien-Tsin Huang with JPMorgan. Your line is open.
Efrain Rivera
Hi, Tien-Tsin.
Tien-Tsin Huang
Hey, good morning. Thanks. I just wanted to follow-up on the acquisition, the $200 million acquisition here, and the strategic fit with Paychex Advance. I remember when that deal was announced and there was a lot about payroll funding and factoring and whatnot. Is this now more about early wage access and some of the more modern funding opportunities for employees? Just want to make sure I understand what you're adding specifically here.
Efrain Rivera
Yeah, the short answer is no. So that's a separate initiative. At some point, we'll talk about when it becomes more significant. Now, Tien-Tsin, this what they do is more focused on receivable. So, obviously, we dipped our toe in the water with staffing firms, but we saw an opportunity that broader than that, because our -- all of our clients have to one degree or another, receivables, and it can become a source of financing. And we've got the data to make it work.
Tien-Tsin Huang
Okay, very clear. So, this is an AR opportunity?
Efrain Rivera
Yeah.
Tien-Tsin Huang
Understood, okay. No follow-up for me. Just want to wish you, Efrain, all the best, of course, for the next chapter. And I've said it before, you've been really helpful for us for a long time. So, thanks for that. I definitely going to miss talking to you.
Efrain Rivera
Thanks, Tien-Tsin.
Operator
And we'll take our next question from Peter Christiansen with Citigroup. Your line is open.
Peter Christiansen
Good morning. Welcome, and congrats to Bob, and certainly congrats and thank you to Efrain. John, I wanted to dig a little bit into your thoughts on SMB lending in general. Obviously, this news of big money center bank is getting into the payroll business a bit more and SMB lending is often thought as a nice adjacency here. Should we consider the possibility that Paychex may further delve into SMB lending, whether it would be merchant cash advances or other types of working capital solutions? You see that in Paychex's future?
John Gibson
No, well look, I think what we are trying to do is make sure that we are focused on what do we need to do to help our clients succeed. And as I said, whether that's through partnership or if there's opportunities for us to participate in that process integrating that with our technology, those are really the things that we are interested in. And when we hear our clients, and we are engaging those clients through our advisors on a constant basis, say, this is an issue for them, we go and search for answers, and partnerships are part of that. And as I said, we have several partnerships with fintechs that we are doing and relationships with large banks.
I can go deeper on that if you want to know about banking and banks and payroll. We do -- we have businesses that do that. But I think, in general, you should not read anything more into this than the fact there is a need out there that we had an adjacent business that has been very successfully managed and has been a good return for our shareholders. And there was a natural relationship and opportunity that we thought by us coming in with our balance sheet, with our expertise, with our client base, that we could potentially make something of this.
And so, I don't think you should read anything more into it than opportunistic acquisition that matches a need that we are seeing today from our customers, and one that based upon the macroenvironment, we think we are going to grow. And I don't think this is competition with any of the major banks. Most of these clients are just not getting access to the funds. It's just not available. And if there's more tightening at the regional bank, which is generally the go-to place for small and medium-sized businesses, that's not good for small business owners. And so, we are going to try to figure out how we can build partnerships to do that.
Peter Christiansen
Well, thank you. That's super helpful. And then just as a follow-up, just wondering if you could call out any trends balance of trade-wise, are there areas where you see Paychex has an opportunity to improve the competitive dynamics or vice versa some areas where you're a bit more on defense versus offense? Just any sense on balance of trade versus some of your competitors and maybe some of the regionals as well?
John Gibson
Well, I'll just say this, as we've talked about our sales momentum continues in the first quarter that we saw in the second quarter, on the macro side, when I'm looking at it, I'm not seeing any major shifts at all relative to balancing trade in the competitive environment. I commented on the fourth quarter. When I do look under it, again, these things go back and forth. I would say, it's raining a little more in our favor on the competitive front in several key areas that we monitor. We had a good first quarter in the mid-market. That was -- there were several good signs there as well, but it's not monumental. It's the same market, very stable competitive environment. Same set of competitors, low-end, mid, high-end PEO. It's the same cast of characters, same kind of pricing environment, competitive environment. It's a competitive marketplace. We'll leave it at that, and I think we are winning more than our fair share.
Peter Christiansen
Yeah, for sure. Thanks again, and congrats, Efrain. Good luck.
Efrain Rivera
Thank you.
Operator
And we'll take our next question from Bryan Keane with Deutsche Bank. Your line is open.
Efrain Rivera
Hey, Bryan.
Bryan Keane
Hi, good morning. I wanted to ask about the free cash flow increase year-over-year in the first quarter, it was substantial. I think it was up over 23%. How much of that was that one-time in working capital? And how much should that carry through the fiscal year? Or should we see a decreasing kind of growth rate in free cash flow to equal out the same growth of the 9% to 11% earnings growth by the time we get to the end of the fiscal year?
Bob Schrader
Yeah, Bryan, this is Bob. I mean I think that's a fair way to think about it. I think as you guys know, we typically don't have big swings in our working capital. And as Efrain mentioned, we had a little bit of a timing there at the end of quarter. The quarter ended on a big collection day, so we had a big influx of cash that would go out the next day. So, the way to really think about our operating cash flows and then, obviously, free cash flow gets impacted by M&A. So, there was a little bit of an impact there in Q1 to free cash flows. But typically, our operating cash flows growth is going to trend in line with our net income growth. And so, you'll see that moderate as we move through the year and that's what you should expect from a growth standpoint.
Bryan Keane
Got it. And then just a follow-up. I was hoping to get an update on what you guys are seeing for SMB bankruptcy rates. I know they have been a little bit elevated in the recent past here. And just curious if that's still at elevated levels or is it become more normalized?
John Gibson
Yeah, no -- so, when we say elevated, I think that they are elevated over what we saw during the COVID period that's two, two-and-a-half years. Actually, bankruptcies are still slightly below where they were pre-pandemic and kind of trending toward a normalized rate. We have seen that. I would say, particularly in the start-up businesses when we had the big start-up boom, we've seen a lot more out of businesses on the very small -- I think we called that out in our press release. Revenue retention at near-record levels, and when you look at our HR outsourcing businesses at record levels. So that's what we've kind of seen on the bankruptcy side.
The other interesting stat related to bankruptcy that kind of surprised me in the first quarter is we actually saw an uptick in new business starts. And again, we had this big elevated area and then we kind of gravitated back down towards kind of normal levels. And we actually saw in the first quarter new business starts click up, which was interesting.
Bryan Keane
Got it. Great. And Efrain, it's been a real pleasure working with you. You'll be missed.
Efrain Rivera
Thank you, Bryan. Appreciate it.
Operator
And we'll take our next question from Samad Samana with Jefferies. Your line is open.
Samad Samana
Great. Thank you. Efrain, I'll echo, missing working with you and enjoy a well-deserved retirement, sir. Appreciate all the help over the years.
Efrain Rivera
Appreciate it.
Samad Samana
Maybe just a quick one for me. A lot of the questions have been asked. But just how are you guys seeing the top of the funnel in terms of inbound leads, the digital channel? Any change in maybe interest levels, registrations for webinars, just anything that we can look look at as a leading indicator of bookings? And how has that trended maybe in first quarter?
John Gibson
Again, I'll go back, if our sales are growing at double-digit rates in the first quarter, digital is an ever-growing portion of that business where you can surmise that that's growing as well. So, we continue to see strong demand environment across the businesses, both digitally and really across the board, I wouldn't -- that's about it.
Samad Samana
Great. And then maybe just on your own hiring plans with the quarter doing better than expected and maybe some trends you're seeing, any change to your own sales hiring plans or should we expect maybe the original game plan to be here?
John Gibson
No, really no change in plans. We are certainly, in the second quarter, always in the staffing up and making sure we are fully staffed and able to cover any thought or planned attrition going in for the selling season, both on the service side and the sell-side. So, I think it's fair to say when you add now going on close to three quarters of strong demand, when you've been relatively, is it going to stay, is going to stay, yeah, we certainly want to make sure that we are properly staffed to take full advantage of all the opportunity in our selling season and we are fully staffed on the operations on the service side to make sure that we can both onboard and service these clients during year-end.
Samad Samana
Great. Appreciate you taking my questions. Thank you.
Efrain Rivera
Thank you.
Operator
And we'll take our next question from Eugene Simuni with Moffettnathanson. Your line is open.
Eugene Simuni
Thank you. Good morning, guys, and congratulations, Efrain and Bob.
Efrain Rivera
Thank you, Eugene.
Eugene Simuni
Efrain, we will miss working with you, and Bob look forward to working with you. Just have two quick follow-ups. One tying together your comments on sales and current, can you comment how it adds together to client growth trends this year so far? Last year, it was a bit below your historical target range and I think you commented that last quarter that this year you're looking for a reacceleration in client growth kind of above 2% a year. So, can you comment on how it's going so far?
Efrain Rivera
Hey, Eugene, I'll start, then John [can make a comment] (ph). It really -- if I were to give you a number, it would give you some sort of false sense of what reality is. It's almost impossible to draw a conclusion on that where you are in first quarter. In some ways, some trends are positive and you can draw conclusions on project out through the year, but client base is really a tricky one. And the reason is you just lose so many and gain so many in the selling season that it's almost difficult to predict and we expect to be a bit better than we were last year, but it's still early innings.
Eugene Simuni
Got it. Okay. And then, another follow-up is on the PEO and the question there is, in your PEO customer base, in terms of kind of checks per control, are you seeing any trends that are different from your overall base whether better or worse employment growth?
John Gibson
Yeah, I would say it's probably consistent. We definitely see employees in our PEO -- clients in our PEO business adding employees. I wouldn't say it's a huge tailwind, but it's positive and probably in-line with what we are seeing in other areas of the business.
Eugene Simuni
Got it. Okay. Thank you very much, guys.
Efrain Rivera
Thank you.
Operator
And we'll take our next question from Mark Marcon with Baird. Your line is open.
Mark Marcon
Hey, good morning. Hey, Efrain, we go back a long way as it's been an absolute pleasure working with you.
Efrain Rivera
Same here.
Mark Marcon
I want to thank you for the relationship. And Bob, looking forward to working with you, but Efrain, it's been an absolute pleasure.
Efrain Rivera
Thank you.
Mark Marcon
A lot of questions have been on the short term. John, one big-picture question. A quarter ago everybody was asking about AI. Obviously, you've been -- Paychex has been doing a lot with AI for a long period of time. I'm wondering if you can just talk a little bit about -- now that some of these LLMs have been around for a couple of quarters and permeated the consciousness, how are you thinking about further evolution of your journey with AI? And what are the longer-term implications from a margin perspective or a scope of business perspective?
John Gibson
Wow, that's -- Mark, that is a big question.
Mark Marcon
Well, everybody is asking about the quarter...
John Gibson
Yes, it is a great one, because I really think this is probably has the potential to be one of the biggest differentiators that's going to help company like Paychex, separate ourselves from the rest. Because as you said, the large language models, it starts with a large, and the only way that this works is you've got to have large sets of data and large sets of data coming through to continually train those models. I will also say relative to, it's expensive to do, and it's getting more expensive both in terms of finding the people and buying the technology, and I think that's going to also back some people out.
But let me just give you some idea. I mean, we have multiple teams across the organization looking at every aspect of our business, front-office, back-office, G&A and evaluating how we could better leverage all of the capabilities of the data that we have. So, think of it today we are recording 6.5 million calls with our clients. This year, we are transcribing those call. We are using analytics to determine whether or not we have a service opportunity, or if we have a sales opportunity or an upsell opportunity in the conversations that we are having with our advisors.
We are already doing almost 1 million natural language processing and analysis on our sales conversations with prospects looking for what are the right phrases, words, markets, segments where we are winning. And then adjusting that overnight and changing our sales play the next morning. Using some of that in our PEO, we've nearly doubled our close rates in the first quarter. I mean, I just could go on and on about where we are piloting and testing and using our data to do this. And so, I think there are tremendous opportunities.
And then, when you begin to productize this and start thinking about the value that we can provide, the Retention Insights, which we launched, I keep bringing this up. We launched this a year-and-a-half ago. We won an award for AI and I think at the time, no one even wrote anything much about it. And because I don't think any people knew what AI was. And quite frankly it's -- I think that's just one example of multiple examples we are going to be able to drive more value to customers.
And so, I think we are going to be able to go with a value proposition. And to be fair, there's other large competitors that probably are going to make similar claims, but I certainly think it's a differentiator. If you run a local payroll company, you're not going to have the same data and the insights that Paychex has relative to what's going on in your area, what's going on in the labor market. And if we can harness that and use technology to deliver that to our salespeople, our service people and our HR advisors, I think the trusted advisor position that we've already established ourselves for small and medium-sized businesses, it's only going to be further sustained and probably increase.
So, I think Bob is going to -- has given me the hook to get off the bandwagon. [indiscernible]
Mark Marcon
And then for my follow-up, just a quick question. Just in terms of the margin uplift from the first half to the second half, aside from normal seasonality and obviously float balances, certain forms of processing, is there anything to call out above and beyond that? Is it just pace of investments in the first half being a little bit front-end loaded?
Efrain Rivera
Yeah, I think that's it. Mark, it's a couple of things. One is, we -- have you noticed the pattern in P&L, pretty obvious, we have attended to front-load a little bit more of spending, in part to make sure that we are prepared for selling season and then as we get into the fourth quarter typically we have heavied up our spending and anticipating -- in anticipation of starting the year stronger. Q3, as you know, because you could have that influx of annual processing, generally makes Q3 margins higher and then in Q4, I don't anticipate it would be quite as heavy as it has been in prior years when you combine those two, you get a little bit more spending in the first half, a little bit less in the back half, but more revenue in the back half, [indiscernible] margin uplift that I mentioned. There's nothing unusual about it. It's just the way that revenue and expenses flow through.
Mark Marcon
Terrific. Thanks again, Efrain. I'll miss working with you.
Efrain Rivera
Yeah, thank you.
Operator
And we'll take our last question from James Faucette with Morgan Stanley. Your line is open.
James Faucette
Thank you very much. And I want to share my congratulations to Bob and Efrain. Just wanted to quick follow-up question here on PEO, and you had mentioned some of your customers, and I think you've kind of talked about this and had pulled back on providing ancillary services like insurance and 401(k), et cetera. But now you're calling out some growth in those same ancillary services as the driver of PEO growth in the quarter. What are the things that you're watching for to gauge like the durability of that improvement and kind of response by your customers and employers?
Efrain Rivera
So, James, you mean, what are we looking at...
James Faucette
Yeah, like what are the things in a more macroeconomy or even in your customer behavior to try to gauge and project the durability of that improvement?
Efrain Rivera
Well, let me start, and then John and maybe Bob can weigh in. So, I just want to make sure that I'm answering the question correctly. I think the key thing in -- if you step back on the PEO is, we saw that attachment last year where we expected it to be. And also we saw an opportunity to tilt the balance a bit between what was an ASO sale versus a PEO sale. So, what we are looking at, at least to start the year is, first, are we positioned appropriately on the insurance side to be able to take advantage of that, and create momentum as we go into some key points in the year which occur in the fall and then at the beginning of the year on insurance and attachment.
But one thing, James, that's important to point out, last year, when we were talking at this point, we were seeing actually something unusual where we are seeing clients dropping insurance and actually lowering their attachment -- I'm sorry, not their attachment, their enrollment. So, we haven't seen that start of the year. So, the absence of a negative is a positive. So, I think -- that's one piece.
And John called out something, I think, that is important, also that balance between what we are seeing on ASO and PEO that seems to kind of come into a little bit more in balance. So, I think those two things bode -- or have started the year well. And...
John Gibson
Yeah, no, I'm trying to understand. So, remember, we've got -- you've got existing client behavior, particularly as it relates to attachment, and again, it's always difficult because the insurance it's pass-through, it doesn't have a huge impact on margin as an oversized impact on the revenue numbers right, because is that the way it works. And so you had two dynamics. One was existing customers that have the product, are they continuing to want that attachment? And then, what are they attaching on? Are they attaching the catalog plan or the basic low value plan? That's the first decision. And last year, we had something we normally don't see, and we have not seen thus far through our enrollment of people, as Efrain said, instead of going to a lower plan, dropping and not offering. We're not seeing that behavior, we saw that last year.
We saw less people opting to want to add that or seeing value in adding the insurance, but they wanted the HR, and they wanted the technology, and they wanted our advisory services. They went in the ASO buckets. Now we are going back to some of them that are now saying okay wait, now I do want to add the insurance, and now we are upgrading them to the PEO offering. So, what we are seeing is, both in terms of new logo demand, some new net customers to Paychex, we are seeing strong demand in our ASO and PEO market with attachment rates in the PEO similar to what we saw prior to the '23 experience.
And then, the third thing that we've got going on is we are going back into this ASO group of clients that we were -- last year, and we are going back and using analytics and using value propositions to see if we can go back and have some of those clients upgrade and add insurance as part of their value proposition. I hope that answers your question. I wasn't clear, James...
James Faucette
That's actually really helpful. And I guess just as -- so it sounds like for most of your employers in terms of their behavior on particularly some of those offerings is that they're kind of reverting back to what you would expect to be in a normalized environment, and really it was last year that was really atypical.
John Gibson
Yes, that's what I would say it. Again, you just make stuff out. I was just trying to remember two years ago was the great resignation. Last year this time, the bottom was going to fall out of the economy and all is the recession was right around the corner. They are going to recall that. I mean, it's just -- it's been a very emotional roller coaster ride for small and medium-sized businesses. And when they're making a decision of this magnitude because you're making a commitment to your employees that you're going to offer a benefit and the expectation is you're baking that into your business model going forward. And so, I think there was a lot of hesitancy.
Now, does that mean small, medium-sized businesses are more confident today than they were last year? I don't know, but what I can tell you is we are seeing more behavior that is similar to what we've seen in historical patterns. And last year, it seemed to be an anomaly. Again, I'm only 25% through the enrollment, but what I'm seeing right now we'll know more in the next call. Let's leave it at that.
James Faucette
Got it. That's really helpful. Thank you, guys.
Efrain Rivera
Appreciate it.
John Gibson
Okay. Shelby, I think that wraps it up. At this point, we will close the call. If you're interested in replaying the webcast of this conference call that will be archived for approximately 90 days. Again, that's on the Paychex Investor website, where we also have all these fabulous reports for you to read. And again, we want to thank you for your interest in Paychex and hope everyone has a great day.
Operator
That concludes today's teleconference. Thank you for your participation. You may now disconnect, and have a wonderful day.
