PAYX
#And to build on that, <UNK>, I think when you look at how we are going to market and how we sell that product, ASO tends to be, as Marty mentioned, tends to be a little bit lower, typically worksite employees and within the base.
PEO tends to be a little bit bigger, and a combination of inside the base and outside the base.
So, our PEO sales are not just to existing Paychex clients, but also outside the base.
I think they're generally comparable.
They're pretty close on both sides.
It's just the preference for what, how the client thinks.
I think the other thing that we probably didn't mention is selling this more upfront, we have found that typically our model was sell them payroll, then come back and say do you need HR services in three months or six months.
We're selling much more up front, if we think the client is of a 20 plus in a complexity we will go in and team sell.
I think we're winning more clients right up front an ASO or PEO basis.
Good question.
The answer is yes, we do.
Although, for example, we reported, I believe last year about 580,000 clients.
We think we had in excess of 20,000 clients that don't take payroll but take other ancillary products.
I think, <UNK>, it points to the fact that the company that we were prior to the recession is very different than the company that we emerged out of the recession.
We're much more of an integrated full-service provider to small and medium-size businesses and you're starting to see that in the client base.
We'll update some of that information when we get to the end of the year.
I would say on the average, not necessarily the smallest clients, although new business formation has picked up some, obviously, and we're kind of getting back to where we were pre-recession levels.
And, I think our sales to new businesses are back up over last year, at this time.
So, I think there's some small, but I think primarily it's net average base, if not slightly higher I'd say, meaning one or two employees or something like that.
I think we're right in the average, and in the midmarket I think it's about the same.
We focused very heavily on the 50 to 500 in that midmarket space and I think that's been a very good sweet spot for us.
We certainly have clients that are above that, but we're really focusing the team on that 50 to 500.
It's a very hot space right now for multiple products.
Those are the clients that need multiple products that are integrated and SaaS-based and we fit really well there.
What I mentioned earlier is over the next six months you'll see even stronger integration.
So, all on kind of the same user interface and so forth.
They're integrated today from different levels but over the next six months, stratustime that we acquired last year, myStaffingPro and BeneTrac will see even enhanced integration.
Which will make that even a stronger product then right from applicant tracking, right through to retirement, as they say.
Particularly on the front end of the applicant tracking and the benefit enrollment.
Building on what Marty said, the way we segment markets, <UNK>, is under 50 and 50 to 500.
If you look at it from a unit basis, the growth is pretty comparable.
I guess I'd say, if this is what you mean, we sell a lot more bundled services.
Certainly, than stand around payroll.
That's gone up dramatically over the last four years.
I'd say from low double digits as a percent to mid, almost.
Okay.
Double-digit.
Where we used to sell, probably standalone payroll ---+ and this is a change in the whole sales team ---+ bundled services right up front 10% to 20% of the time, now we're selling a complete bundle probably 40% to 50% of the time.
It's pretty dramatic.
We've bundled the products, as well, and the way that sales has looked to increase the revenue per client and really to sell the client everything they need right up front as part of a bundle.
I'd say it's still close to half.
Still close to that 50%.
I think so, yes.
<UNK>, it's really been typically between about 45% and low 50%s, 52%, 53%.
It's hard to envision that that changes that much.
Part of what distinguishes us from a lot of companies is that we're mining that new base to get our customers.
So, we got the three person payroll and they eventually become an 8, 10, 20 person payroll because we mine that base.
So, that's part of the way we sell how we do that, how we go-to-market over time may change, but that's really core to how we're approaching the market.
That's a very wonderfully elliptical, euphemistic way of saying we typically have a pretty tough target.
Management doesn't get paid.
We don't start having conversations until we're getting close to double digits.
So, we will expect that we will have a double-digit target and we'll expect that if we don't meet it, we'll suffer the consequences.
So, that's kind of where we're at from management's comp perspective, obviously, sales has its own set of comp.
Thanks, appreciate it.
Wages we generally seen around 2%.
So, it wouldn't say it's anything overly strong.
I think we saw, <UNK> mentioned earlier, from a bonus perspective, which we watch, bonuses were higher.
There didn't seem to be as many, necessarily, or much of an increase as we thought, but they were higher.
General wage has been pretty consistent at around 2% increase.
Think you're picking up, <UNK>, on the 3% client fund balances.
So, that incorporates not only wages but anything else that we're paying.
It looks like it's ticking up moderately.
I would say, in the PEO side, I think it's probably 60/40.
I haven't seen that number lately, but I would say more new.
When you think about ---+ it trends tends to be with our overall business.
We're 50% new businesses, I think if that's what you're asking from a payroll standpoint.
I think the PEO is similar to that, maybe a little bit more on the new side, but I think it's right in that range of 50/50.
I have been in Germany, now, for 9 or 10 years.
We doubled our size last year with an acquisition and continued sales growth.
So, we've got a nice base there.
Brazil, we started last year and we're kind of chugging along.
It didn't help that the kind of Brazil, the economy slowed down at a time where we were starting up there.
We're learning there and breaking into the business.
Winning over the CPAs so that they'll refer more of their payroll business out to us.
We're still very interested in it.
We were going to focus on two or three countries, kind of the third country.
We haven't quite found a good entryway in, yet.
We've looked at a number of them.
It'll always, I think, at this point, it tends to be small.
It's going to tend to be a small part of where we are as we approach $3 billion in revenue, but it's still of interest to us and we continue to look at acquisition opportunities and ways to increase sales and profit there.
Sure.
We don't really ---+ the, SaaS, most of our products now, most of our clients are on SaaS.
So, well over 80% of them.
From a growth standpoint, we don't break out SurePayroll anymore.
But, they're doing fine.
Really, they've had good client growth year over year and I think they're competing very effectively with, particularly, the micro businesses for payroll.
All of that is done through web.
<UNK>eting and sales on the phone, once people call in.
I think they've been very effective at that in growing their client base.
We continue to be pleased with that and continue to always watch who we're competing against.
Not a lot of new competitors, there.
Some startups, got quite a bit of press for a while, but then it's dropped out a little bit because they're not a full product and as sure.
So, I think primarily, it's Intuit that we run into as a competitor there.
Folks just wanting to stay manual and doing their payroll manually.
The other thing I'd add, you surf the web, there's a bunch of these different rating services, but they just won a recent award in terms of user access and appearance.
So, they are very, very formidable competitor in platform in that micro enterprise space.
<UNK>, two things.
In a quarter when we have particularly strong sales execution, then our expenses tend to ramp up.
So, we had probably a little higher expense growth in the quarter and then in the back half of the year based on the performance we're seeing.
Hopefully, obviously, that leads to a little bit better build revenue going forward.
So, unless we set our plans too low and they constantly beat them, that's not the way we tend to do it.
We tend to set them pretty high.
The sales force has done a great job of rising to the challenge.
With respect to expense, you know, I think there's really going to be no change in terms of the approach we take.
We're going to leverage on operating expenses as much as we can.
We're going to continue to invest in IT, probably a little bit more of a moderate rate than you've seen in past years, more than has been embedded in the SG&A number, which is where it appears.
And then we're going to continue to make selective investments in sales where we think there's opportunities to grow the business.
So, I think that will not change dramatically.
Quarter over quarter, you might have some changes, as results are higher than where we expected.
Yes.
As you know, double-digit increases in IT investment for many years, and I think what we're saying, it tends to flatten out.
We've reached a very good point of the amount of productivity we're getting and the development needs and that's still ---+ it's become a very large part of our investment, as you would expect, with a SaaS-based company that's very much technology driven service.
The biggest, now, certainly, as I say, is HR outsourcing.
Both ASO, PEO, and what we call our HR essentials product which is more telephonic support, HR light, HR outsourcing light, the second is our retirement services business and third, insurance.
Nothing's changed there.
Those are all businesses that are growing nicely and performing well within the portfolio.
Your biggest followed by the next biggest followed by the smallest.
All right.
Thank you.
At this point we will close the call.
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