Martin Mucci - President & Chief Executive Officer Efrain Rivera - Chief Financial Officer

George Mihalos - Credit Suisse S.K. Prasad Borra - Goldman Sachs Smitty Srethapramote - Morgan Stanley Jason Kupferberg - Jefferies Kartik Mehta - Northcoast Research Jeff Rossetti - Janney Capital Markets David Togut - Evercore Partners Glenn Greene - Oppenheimer & Co. Sara Gubins - Bank of America Merrill Lynch Jeff Silber - BMO Capital Markets Brian Keen - Deutsche Bank Jim MacDonald - First Analysis Tim McHugh - William Blair David Grossman - Stifel Nicolaus Tim Wiley - Wells Fargo Mark Marcon - Robert W. Baird Lisa Ellis - Sanford Bernstein Tien-tsin Huang - JPMorgan

Welcome everyone and thank you for standing by. All participants have been placed on a listen-only mode until the question-and-answer session. (Operator Instructions). Today's call is being recorded. If you have any objections please disconnect at this time. I’d now like to turn the conference over to Mr. Martin Mucci, President and Chief Executive Officer. You may begin.

Good morning, thank you. Thank you for joining us for our discussion of the Paychex's first quarter of fiscal 2015 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, 2014. Our earnings release and Form 10-Q will be available on our Investor Relations page at Paychex.com. This teleconference will also be broadcast over the Internet and will be archived and available on our website for approximately one month. On today’s call I will review the highlights for the first quarter of our sales, operations and product development areas and Efrain will review our first quarter financial results and discuss our full year guidance; then we’ll open it up for your questions. We are off to a good start in fiscal 2015. We are pleased with our progress toward our growth goals and we begin the year with momentum in both sales and new product enhancements. Client satisfaction and retention also remain at high levels. Payroll revenue is trending well with growth of about 4.5% due to increases in revenue per check, client base and checks per payroll. HRS revenue grew double-digits for the first quarter as we continue to experience success in selling HR outsourcing solutions to our clients. Total service revenue grew 9%. The positive momentum we saw in fiscal 2014 in sales execution has continued into 2015 as we experience solid performance in both new sales revenue and units. Our payroll and Paychex HR services in particular continue to do well in Q1. We also quickly brought onboard the increase in sales reps we planned, so that we are fully staffed and have been successful in adding new bank and franchise referral arrangements in addition to our strong CPA referral channel. Our partnership between our selling organizations has never been more efficient as they have moved down market to be sure our clients are receiving the full value of the breadth of services that Paychex has to offer them. Our execution and service operations has continued its standard of excellence, demonstrated by strong client satisfaction results and client retention levels that remain consistent with recent highs. Our innovative leading edge technology in products, coupled with our exceptional client service we believe is a differentiator in the market. From a technology perspective, continued investment in our SaaS solutions and mobility offerings position us for long-term growth. We have market-leading software-as-a-service solutions leveraging the latest technologies and continue to invest significantly in online capabilities and mobile applications. We recently introduced mobile applications for both our Paychex online accounting services and our expense management solutions. In addition, our online payroll application was recently awarded a five star rating by a leading publication, the only major payroll provider to receive such a rating. We completed the acquisition of nettime solutions, a leading cloud-based time and attendance solution provider, adding yet another powerful offering to our software-as-a-service portfolio. This acquisition pairs Paychex exceptional customer service and on boarding team with the SaaS time and attendance technology of a market leader. In summary, we are off to a solid start for sales, service, product strength and financial performance for fiscal 2015 and I greatly appreciate the work of our Paychex employee team across the country. I will now turn the call over to Efrain Rivera to review our financial results in more detail. Efrain.

Thanks Marty and good morning. I’d like to remind everyone that in today’s conference call we'll make some forward-looking statements that refer to future events and in such involve risks. Refer to the press release for a discussion of forward-looking statements and related risk factors. You may remember that during the latter part of last year we introduced a new health insurance offering within our PEO for PEO clients and work side employees. Due to the self-insurance provisions within the new offering, we began classifying certain PEO direct costs as operating expenses rather than a reduction in service revenue. This change had no impact on operating income. This new product offering had an impact on our first quarter results, since it was not initiated until the second half of fiscal 2014. As Marty indicated, our first quarter financial results for fiscal 2015 represent a strong start to the year. Here are some of the key highlights for the quarter. I will provide greater detail in certain areas and wrap with a review of our outlook. Total service revenue grew 9% for the first quarter to $657 million. Interest on funds held for clients increased 2% for the first quarter to $10 million. This was driven by a 3% increase in average investment balances and as I’ve discussed with some of you, we are getting to the point where we bottom down in terms of decreases on our interest related to our client fund portfolio. The expenses increased 12% for the first quarter, but this was primarily in compensation related costs and the PEO direct costs. The increase in the portion of PEO direct costs is the result of a healthcare offering as I mentioned previously. The increase in compensation-related cost was driven by higher performance-based compensation costs, employee benefit related costs and the sales headcount. We talked a bit about our increase in sales headcount. We are up year-over-year in sales headcount. We continued our investment in our product development and supporting technology, which has been growing at a faster rate than our total expenses. Operating income net of certain items increased 5% to $257 million for the quarter. We maintained strong operating margins and anticipate that our full year will be within our guidance range, which I’ll discuss shortly. Diluted earnings per share increased 7% to $0.47 per share for the quarter and net income increased 5% to $171 million. Diluted earnings per share were positively impacted by stock repurchases we made in the first quarter and in fiscal 2014. On the payroll revenue side, service revenue exceeded 4% for the first quarter to $413 million. We benefited from the increases in revenue per check, client base and checks per payroll and I got a – I saw a note that indicated what were checks per payroll and we didn’t call it out specifically. It was about 1% as we drift in that range or slightly below and we won’t call it out specifically, so check per payroll up about 1%. Revenue per check grew as a result of price increases, net of discounting along with the impact of increased product penetration and as I mentioned, checks per payroll are growing, but at a more moderate rate as we are expecting. On the HRS side, HR service revenue increased 17% to $244 million for the first quarter. The increase reflects strong growth in both clients and work site employees of Paychex HR services and an increase in PEO revenue as a result of the new minimum premium healthcare offerings started during the second half of last year. The increase from the new PEO healthcare offering represents approximately 2.5% of total service revenue for the first quarter, so just so you hear that again, the increase from the new PEO healthcare offering represents approximately 2.5% of total service revenue for the first quarter. Online HR administration products contribute to growth through sales, success of our SaaS solutions and retirement services revenue benefited from an increase in the number of plans and an increase in average asset value of participant funds. Turning to the investment portfolio, our goal as you know is to protect principle and optimize liquidity. We are conservative in the way we manage our portfolio on the short-term side. Primary investment vehicles are bank demand deposit accounts and if you look at the balance sheet, you’ll see that we had a fair amount of cash in the quarter. That’s because of timing and we didn’t choose to invest all of that in VRDN’s in Q1. In our longer portfolio we invest primarily in high credit quality municipal bonds. Our long-term portfolio has an average yield of 1.6% and an average duration of 3.3 years. I would just say that we are positioned where we want to be, to take advantage of rising interest rates should they come at some point soon hopefully. Our combined portfolios have earned an average rate of return of 1.1% for the first quarter, compared to 1.0% for the same period last year. That’s the first time in a while we said the compare is positive. Average balances for interest on funds held for clients increased during the first quarter. This was driven by wage inflation, along with favorable trends in our client base and checks per payroll. I'll now walk you through the highlights of our financial position. It remains strong with cash and total corporate investments of $956 million and no debt. Funds held for clients were $4.1 billion compared to $4.2 billion as of May 31, 2014. Funds held for clients vary widely on a day-to-day basis and averaged $3.6 billion for the quarter; the more relevant comparison. That’s a year-over-year increase of 3%. Total available-for-sale investments, including corporate investments and funds held for clients reflected net unrealized gains on the portfolio of $41 million as of August 31, 2014, compared with a net unrealized gain of $35 million as of May 31, 2014. Total stockholders equity was $1.8 billion, reflecting $138 million in dividend paid during the first quarter and $38 million of shares repurchase. Our return on equity for the past 12 months was 35%. Cash flows from operations were $263 million for the first quarter, which moderated from the prior year. The change was a result of fluctuations in operating assets and liabilities offset by higher net income and non-cash adjustments to net income. The fluctuations in operating assets and liabilities between periods were primarily related to the timing of collections from clients and payments for compensation, PEO payroll and income taxes. It really was primarily as a result of timing of a large income tax payment we made in the year prior period. It is common for us to have some significant fluctuations of working capital between quarters. With respect to guidance, we reaffirmed our guidance for fiscal 2015. I’d like to remind you that our outlook is based upon our current view of economic and interest rate conditions continuing with no significant changes. Total service revenue as we previously said is anticipated to be in the range of 8% to 10% with the ranges for payroll and HR as consistent with previous guidance. Net income growth is anticipated to be in the range of 6% to 8% and operating margin and tax rate for the year are expected to be consistent with prior guidance. And I’ll turn it back to Marty.

Okay. We will now open the call to any questions. Operator.

Thank you. (Operator Instructions). The first question today is from George Mihalos with Credit Suisse. George Mihalos - Credit Suisse: Hey guys, thanks for taking my question and a very nice start to the year.

Thank you. George Mihalos - Credit Suisse: I wanted to kick it of on the payroll growth side, a 4.5% number sort of at the high end of your 3% to 5% range. Just curious, is there any reason why you wouldn’t be narrowing the range say to 4% to 5% from the 3% to 5% and the 3% seems conservative, even if we are only in the first quarter. Just wondering if you are seeing anything else there?

Yes, George thanks. So I guess it’s a philosophy issues. Sorry, I should state what the philosophy is. What we try to do when we come into the year is say, what do we think the ranges are for the year as a whole, so we don’t have to revise every quarter guidance. We try to call out, if somehow a quarter falls, is a little bit unusual in terms of the guidance. So yes, I would say at the bottom end, right now 3% is pretty conservative. We obviously start a little bit better than that number, but we still feel comfortable with the overall guidance range. George Mihalos - Credit Suisse: Okay great, thanks for the color there. And then wanted to switch gears as it relates to your payroll card program or initiative, the partnership with Skylight that you have. Any color you can provide there as to demand for payroll cards and just wanted to get a sense, is a payroll card more profitable to Paychex than a standard check?

Yes, I wouldn’t say it’s more profitable. It’s not necessarily more profitable, because we have a partner obviously involved in providing it. I’d say the demand for it George has been consistent, but not huge. I think we were one of the first to have a payroll card, meant (ph) over 10 years ago and it just – it has a small kind of grouping; those that are on bank for example and so forth. And while we’ve seen that go up and down a little bit over time, more and more people want one card if they are bank. They want one card, they don’t want a separate payroll card, so I would say that the demand is consistent. We really like the product that we are involved with now and think that that may pick up demand a little bit, but it’s one of those things where we just like to offer a full wide range of offerings to the client as to however they want to receive their pay. George Mihalos - Credit Suisse: Okay, great. Thanks.

Okay.

Thanks George.

Thank you. The next question is from S.K. Prasad Borra with Goldman Sachs. S.K. Prasad Borra – Goldman Sachs: Thanks for taking my question. Just with regards to your investments in sales force, when do you expect to see the benefits come through? Is it more second half weighted or we should start seeing movements in the first half as well?

Yes, as I said, I think we got off to a good start. I think the new headcount that we’ve added in the last quarter, I think you’ll see more of those benefits in the second half of the year. We have a great training program, but obviously they get trained. They start building their relationships with CPA’s and other channels and I think you’ll see that more in the second half of the year. But we feel like we are off to a very good start. We continued in from Q4 and feel good about both sales units and revenue from the perspective particularly of payroll. S.K. Prasad Borra – Goldman Sachs: And probably just to follow-on on that. What’s the split between the sales force recruitment in payroll and HRS segments?

As far as what the additions were? S.K. Prasad Borra – Goldman Sachs: Yes.

The additions were a little stronger on the payroll side. We felt that that was starting to pick up again in the second half of last year and so much of the ads – I won’t break it out exactly, but much of the ads were on the payroll side and because we felt we are very well positioned on the HRS services side. S.K. Prasad Borra – Goldman Sachs: Thanks for taking my question.

Okay.

Thank you. The next question is from Smitty Srethapramote with Morgan Stanley. Smitty Srethapramote - Morgan Stanley: Great, thank you. Just wanted to just get some more color on the PEO segment. How it’s tracking and may be you can give us an update in terms of how pricing is developing on the PEO side?

I would say we thought really strong about the last half of the year from a competitive standpoint where we feel very competitive. They’ve done very well with the carriers. The new plan as Efrain mentioned, we think has put us in an even better competitive position in the Florida area and so we feel very good we are off to a – the big months are kind of coming in now this quarter is what’s coming up for the benefit plans and so forth, but we feel very strong fully staffed on the sales side, a lot of experience in that team and of course we offer both the PEO and the ASO version. So what’s good about the way I believe we offered it is, whatever the client needs to get the most value out of the service we have to offer him. But feel very good about the PEO side and our opportunity you are coming up particularly this second quarter as we see benefit plans get subscribed too.

Yes, I’d just add Pramod that we are positioned certainly in the market as well as we’ve ever been positioned. The addition to the minimum premium plan really helps in Florida, but we are seeing good demand across other markets. So the only caution or caveat I'd put on that is that third quarter is a big quarter for PEO and that’s where you see kind of how much you are winning the battle. So we feel good about where we started. Still the year needs to play out a bit more. Smitty Srethapramote - Morgan Stanley: Got it. And may be just a follow up on nettimes solutions. Can you just give us some more color in terms of the level of traction that you are getting with that new offering and may be compare that to your legacy T&E product. And are there any other product sets that you are looking to buy or to build or buy to improve your overall product portfolio at the movement?

Yes, right now we are feeling very good about the portfolio of products. The nettime was an opportunity that we felt we had a – there was a real market leader there and that the team would fit very well and would fit into our SaaS products. We are seeing good traction really out of the gate as we integrate it into our payroll offering, which will come in stages and then there is organic growth that we’ve continued at nettime itself. So we feel good about the organic growth, which they’ll sell directly and integrating it into our payroll platform. We’ve already had a number of sales. We are training everyone in our team on the product and so you’ll see a good combination of sales from the organic and to tie into Paychex. The integration takes a little bit of time, but that will be coming up in the next quarter or so. So we are very pleased with the product. The whole management team is in place at nettime. Our leadership is taking a very strong role and is just a great cultural fit with the company, so we feel very good about where this is. The legacy product has been very strong. We had a good strong year last year and we’ll just kind of phase. The legacy product has little more for us integrated bells and whistles on it, which we are introducing actually even this quarter and next year. You’ll see not only web-punch online, but complete mobility punch as well, time punches and so we’ll still be building on the legacy product for a little bit until we get nettime fully integrated in, but we are really pleased with the product and everything that it offers.

They had a really nice track record of growing that business over 60% over the last three years and it’s a good example of the kind of acquisitions. We like smaller. We buy them to grow them, not for growth and good products set, good management and they are off to a good start. Smitty Srethapramote - Morgan Stanley: Thanks for that. And may be just one last quick question is, as you can give us an update on the retention ratio, the retention rate that you are seeing in your business.

Yes, very similar to last year, we are really ahead from our perspective on retention, so very strong. It’s probably still at historic best for the company from a payroll retention stand point and we feel very good. So not only the sales have great momentum, but the retention is right up there with our historic best and we haven’t seen any change in that. Obviously big quarter is coming up here with year-end, but so far we are feeling very good about the retention. Smitty Srethapramote - Morgan Stanley: Great. Thank you.

Okay.

Thank you. The next question is from Jason Kupferberg with Jefferies. Jason Kupferberg - Jefferies: Hi guys, thanks. I wanted to just ask a little bit about new business formation. Get some general observation from you guys on whether you think we are stable or is there any improvement there, I know its obviously an important source of new sales and growth for Paychex?

Yes, so Jason two answers to that. It would be greater if we had real time data on what’s going on in the economy in the absence of that. We’ve noticed a trend ticking up on our sales to newly formed businesses and it seems like over a number of quarters now we seem to be picking up in that area and if you go back a couple of years ago, we weren’t seen that trend. That now seems to be evident. It looks like you getting better business formation, but of course we are kind of an indirect, our observation on that is indirect, our sales to new businesses are up. Jason Kupferberg - Jefferies: Okay. Is there any way to get a feel, either qualitatively or quantitatively whether or not that’s reflective of any kind of share shift in terms of who is winning new businesses or is it not enough data to really call that out.

Yes, there really isn’t enough data to pull it out. Its very difficult to get that granular for new business sales, and I would tend to describe it a little bit more to some underlying growth in new businesses and then I think we are getting better at execution too.

Yes, I think we have felt good about kind of the win loss ratio against competitors, that we are definitely seeing an up-tick in the sales from competitors and kind of when we look at it from a net gain from competitors and we are definitely an up-tick and a positive at this point as we started to see that the second half of last year too. So well Efrain’s right, its quite hard. We are still not at the full new business, a creation that we were pre-recession. Its certainly up, but it’s not where it was based on everything we see. But as Efrain said, new sales, sales to new businesses are up and definitely the gain from competitors is up. So we are feeling very good about that. Jason Kupferberg - Jefferies: Okay. And then just on pricing, are you still kind of trending closer to the lower end of 2% to 4% range and I wanted to just gets a feel in terms of contract renewals in general, what percent of those are currently being done with the unit price increase versus how many are flat and how many have a unit price decrease and has there been any change in those relative percentages over the past, I don’t know a year or so?

Yes, so Jason so what we said is 2% to 4% I would say we are floating off the bottom of that a little bit closer to the middle of it. We do not give uniform price increases, so that’s experienced a little bit differently by different customers and we also don’t have contracts. So one of the things that does differentiate us is that virtual across every single customer that we have, if you don’t earn our keep from a service standpoint, you can get to walk without penalties. We do a little bit of that in the mid market, but that’s a relative small part of our business. So I would say the pricing environment is easing somewhat.

Yes, we feel good about it you know. Now that we’re through that first quarter, we have not seen a lot of fallout from the price increase and so that’s always a good determining factor in that first quarter, although we would see it typically in the July, August timeframe and haven’t, so… Jason Kupferberg - Jefferies: Okay. Just my last question, any update you wanted to provide on the Brazil, JV or what’s happening overseas in Germany and your kind of processing offering as well.

Yes, I’d say Brazil is off to a good start. There was a delay in some of the electronic filing requirements that we had expected the government had put in place, they delayed for year, but we are off to a pretty good start. We don’t give exact client growth, but we feel very good about the start that we’ve had there since January and in Germany sales are above plans. So they are continuing to do well and we are always looking for other ways to grow Germany even faster and the other, Brazil as well. Jason Kupferberg - Jefferies: Okay. I appreciate the comments. Thanks guys.

Thank you. The next question is from Kartik Mehta with Northcoast Research Kartik Mehta - Northcoast Research: Hey, good morning Marty and Efrain. Efrain as you look at the results that you reported for the first quarter, would you say were they in line with your internal plans or were you a little bit a head of internal plans?

Crickets right. We felt pretty good about the first quarter. Kartik Mehta - Northcoast Research: Alright, so Efrain the balance sheet looks amazing still, you have a lot of cash on hand. Any thoughts as to what you would like to do with that cash. I know you have a share buy back in place and just beyond that?

Yes so we do have an opportunity to buy shares back. We have bought to-date, including last year about 7 million shares that we purchased those significantly below where the stock is trading. We obviously thought that made a lot of sense where we see opportunities to go and buy. We will do that opportunistically, we think that makes sense. But the other thing is we have a good pipeline of acquisition opportunities. We want to keep our powder dry. We are as all of you know, we don’t tend to do stupid acquisitions just to grow and we like some properties out there. Now, whether there’s going to be something that we see over the course of the year, we’ll evaluate that and if we are getting to the end of the year and we have a significant cash build up, then we’ll have to have a discussion with the board about what next steps would be there. Kartik Mehta - Northcoast Research: And then Marty just on the Paychex accounting online business, how its progressing, where you are, if you think you need to change the business model at all.

Well, I think the biggest thing we are learning is how to really acquire the clients and kind of get them, and I guess I’ll even step back further, get them to even to realize it’s a great accounting product that we have invested in with Kashoo and this has been out there for a while. It’s a strong online accounting product. More of a book keeping type of software as a service, but they still come to Paychex for payroll benefits and outsourcing and while the reputation is very strong there, they are not always – it’s a different marketing game to teach them about the accounting or bookkeeping online that we have available to them. So I think the biggest thing, I wouldn’t really change much. We may get a little more aggressive as far as getting to our own clients and in getting them to understand that we have this nice offering that I think is going to be a real benefit and value to them. So probably more from a market standpoint, we are trying to see if we can get the knowledge that its out there and that its us and that it has all the power, the strength of Paychex behind it, that’s the biggest thing. Other than that, we are really pleased with the product. I think we are just finding that the marketing is a little bit different in the approach and so forth and we expect that to start to pick up. Kartik Mehta - Northcoast Research: Hey, thank you very much. I appreciate it.

Thank you. The next question is from Joe Foresi with Janney Capital Markets.

Hi Joe. Jeff Rossetti - Janney Capital Markets: Hi, good morning. This is Jeff Rossetti in for Joe. Thanks for taking my questions. Just wanted to see if I could get an update on the sales force hiring. I know you were targeting 5% growth on the sales force hires for the year. Just wanted to see how Q1 shook out.

Yes, I’m not sure if – yes, that was confusing. We are probably more in like the 3% type of growth rate and we felt very good about that. We’ve been fairly flat the last few years. Didn’t grow a lot in the sales force given the economy and some of the results and things that we were doing in sales. And this year we decided, we committed to a good strong 3% growth and that all got completed very quickly. So we hired up between the fourth quarter and the first quarter and we are fully staffed. A lot of training has already been done and I think they are hitting the ground running. So I feel very good about that. We really haven’t put – we’ve been more cautious the last couple of years. This year we started getting back to the kind of old trends of adding 2% to 3% to the sales force in the year.

Just Jeff one other add to that. While as Marty said we are going to add 3%, we are actually up over that when you compare where we were in the Q1 of last year. We came in a little light last year and Q1 started the year, built up and then added 3%. So we are actually above the 3%. Jeff Rossetti - Janney Capital Markets: Okay, great. And I know last quarter you had called out some increased investment in the first half of the fiscal year. You were above your operating margin guided range in the first quarter. Is there any kind of push out on your increased investment on the IT side or sales force like heading into Q2?

As Marty said, I think we did a lot of the hiring we were going do on the sales force in Q1. IT will ramp a bit as we progress through the year. So I don’t think we are way off what we were expecting. Jeff Rossetti - Janney Capital Markets: Okay, thanks. And one final question just on – I know its been, we have discussed kind of delayed decisions on the healthcare reform side. Just wanted to see if there was any update on that. If clients are addressing compliance requirements. Thanks.

I think you know Jeff we are still get a lot of interest. It gets us in front of a lot of clients, but I think that this quarter we’ll get a better sense of it again as the benefit plans. People come up, some are getting off exchanges, some of the small clients are going to be moving to the exchanges. I think we’ll get a better sense. I think we’ve still seen kind of a, I wouldn’t say a freeze, but kind of a hesitation to know what to do and of course the delay in some of the requirements for the 50 to 99, the under 100, 50 to 100 basically has pushed off that decision for a few more. We still feel okay. We got a very strong health insurance team out there and they are getting in front of a lot of clients, but you are still seeing a little bit of hesitation I think. Got great products to help them monitor whether it applies to them, how it applies to them, give them real time information, but we are not seeing a big up-tick, at least at this point, but we do expect it will probably pick up a little bit more in the next few months. Jeff Rossetti - Janney Capital Markets: Thank you.

Okay.

Thank you. The next question is from David Togut with Evercore.

Hey David. David Togut - Evercore Partners: Thank you. Good morning Marty and Efrain.

Good morning. David Togut - Evercore Partners: Marty you highlighted that up-tick in competitive takeaways recently. Could you just flush out those comments a little bit. Why do you think your competitive takeaways are increasing? It seems that there has been an increase in innovation generally across the payroll services industry.

Yes. Well, when I think, you know I think we’ve been a big part of that innovation up-tick. When you think about where we were just a few years ago versus today, online product very strong and we are seeing a big push from clients looking for online products. We have a very good online product, we are continuing to add to that constantly and the report writer and report builder products are very strong for us. Then you have mobility, so we are really – I think we have the best mobility product out there from a combined product breadth for the clients, so you can have everything on you. You can get to one to two clients, you can do your own payroll, your employees use it for certainly their pay stubs and W2s and 401(k) information. So I think we’ve been part of that. I think that’s helped us between that and the great service that we’ve always been know for. I think it has put us in a very good position and I think the sales team has really hit those strides in execution, particularly the last half of last year and continued into the first quarter this year are just doing very well. We’ve also gone after – not only we’ve had very good referrals from CPAs over the years, but we’ve gone after making sure we are getting the CPAs that we hadn’t in previous years, with a lot of work that Mark Bottini and the sales team are doing with more direct hitting CPAs that haven’t necessarily referred in past years and getting into those, and the bank channel has picked up for us for us as well as franchise referrals. So we’ve signed up not only the support of like SUBWAY and Tim Hortons and Yum Brands and Midas, but also from our banks; Union Bank and SunTrust of course and a number of others, we all have strong relationship. So I think all that’s helping us kind of beat the competition a little bit more than we have in the past. David Togut - Evercore Partners: Along the same vein, your primary national competitor has talked about completing their entire small business base over to a SaaS base platform by the end of June of next year. Do you think that will have any impact on your head-to-head competitive success versus them?

I don’t think so. I think for those clients who want a SaaS base offering, we have a very good one and what we I think combined very well is the dedicated personal service with that offering. So you can have a great online offering and I’m sure our competitors do, but I think we have a extremely competitive offering that we’ve invested in for a number of years and knew this was coming, and on top of that just have always provided that great dedicated service, very personalized to the client and I think that helps a lot. What we like to show a client from a sales perspective is if your getting on with us from payroll, particularly in that under 20 range, look you can do your payroll on your mobile phone, you can do it online, you can do it through a payroll specialist, you can change up, you can call us when you need to, you always have a dedicated person available to you and I think that on top of having the innovation has prepared us very well, even as clients move to a SaaS based offering, we have a very strong one and a number of clients, a great number of our clients are on a SaaS based offering already.

And David what I’d add to what Marty said is that when a client is interested in payroll and they are searching particularly over the web, I’ve said this to many of you, we don’t steer them one way or the other. If what they want is a SaaS based solution, they want to get up and running quickly, SurePayroll is there and they do a phenomenal job. Not every client wants that. Some clients want more service. Service matters. Make no mistake about it. We know that from research, we know at what size clients service matters. If you leave yourself in a situation where you’re only offering your SaaS, you’ve exposed some vulnerability, because clients do value and are willing to pay for service. David Togut - Evercore Partners: Understood. Thank you very much.

Okay, thanks.

Thank you. The next question is from Glenn Greene with Oppenheimer. Glenn Greene - Oppenheimer & Co.: Thank you. Good morning. A clean quarter. Just a few sort of number questions. Just the first one for Efrain. On the HRS revenue growth, the 17%, could you just sort of help us sort of parse the benefit from the acquisition of and also the premium healthcare product. I know you called out what it was as a percentage of total service revenue and if my math was right its, I don’t know, $6.5 million of revenue, but what I was trying to understand is what the contribution to that 17% revenue growth in HRS was along with the acquisition benefit?

Yes, acquisition benefit is negligible. It really wasn’t very much, so essentially nothing. On the service revenue you said 6.5, that’s not quite correct. I said 2.5% of total service revenue, so its more in the $16 million range than the $6 million. Glenn Greene - Oppenheimer & Co.: Yes, I said $16 million, must have just misheard.

Yes. So that was the benefit from the accounting change. Glenn Greene - Oppenheimer & Co.: But you restated the prior year thought too, right.

Yes, that’s correct. Yes, we did, yes. Glenn Greene - Oppenheimer & Co.: So the growth contribution is less than the $16 million, right.

No, we didn’t have it in the first half though.

No Glenn. In the first quarter the numbers include some element of the adjustment, because the first quarter of last year as we stated has a workers comp gross up. So the right apple to apples is an addition of $16 million for the change. Glenn Greene - Oppenheimer & Co.: Okay, that’s helpful. And then just on the margin expectations throughout the year, you were sort of asked this question before, but obviously typically your first quarter’s the strongest and you again had another strong sort of margin quarter, not as strong as a year ago quarter and you obviously had a very tough comparison versus a year ago. But how should we think about the seasonal pattern of the margins. Is the first quarter typically going to be as it is historically going to be the strongest margin quarter of the year?

Its typically been the pattern. I mean it could change in a year given investments, but typically we’re going to have our strongest quarter in the first quarter. At least the trajectory of the direction Glenn is going to be similar to prior years. Glenn Greene - Oppenheimer & Co.: Okay, and then just quickly, I can then infer from your pricing commentary and your attrition commentary, it sounds like competitively your seeing no change. At a minimum you feel at least stable to perhaps somewhat better competitively.

Yes, I would say somewhat better Glenn. I think definitely between the momentum of the innovation and the products that we are offering and the execution from sales, we are feeling better from a competitive standpoint. So yes, I feel the market, the competitive environment hasn’t really changed all that much and we feel we’re even in the best position we’ve probably been in a long time.

Just to add to Marty’s comment, Marty called out the recent review we got for our online product and we don’t highlight SurePayrolls numerous awards. We win a lot of technology awards. I think seven years ago, five years ago we recognized that there were investments to be made. If you look at the breadth of products that we’ve got, you look at nettime, you look at myStaffingPro, you look at ExpenseWire, these are all leading products in their respective categories. So we understand this is a technology gain. We are very, very clear on that. We also understand which some people in the market seem to be forgetting, its also a service gain and especially in the under 50 space where we have 94% of our clients. Ability to provide service is a differentiator and while some people don’t seem to be thinking it is, we’ve done the research and we know it is. So we feel pretty good about where we’re at. Glenn Greene - Oppenheimer & Co.: Great. Thanks a lot guys.

Okay.

Thank you. The next question is from Sara Gubins with Bank of America Merrill Lynch. Sara Gubins - Bank of America Merrill Lynch: Hi, thanks. Good morning. With the checks per payroll growth around 1%, how much of that 1% do you think is mix, maybe bringing that down versus actual hiring trends?

So if I give you 1% Sara, that’s an apple-to-apples. So we modified the methodology a little bit using our normal methodology and also doing same store. Same store for us is about 1%. If you don’t do it the other way we’re doing it, there’s probably a two-tenths difference; its not significant. So the 1% probably is – well, not probably, but is a hiring within the base. Sara Gubins - Bank of America Merrill Lynch: So really, your seeing really slower hiring than you had been before.

I would say if you just look at our small business index, so where we’ve seen, where definitely this year has been strong at the rate of growth in hiring in small business over last year and even thought its been a little, its tempered down a little bit the last three out of four months, its still stronger than last year and its definitely stronger than our base year for the index, which is 2004. Its like a whole percent stronger hiring growth rate in small businesses under 50 employees. So we still think that hiring is up over last year, even though it tempered a little in the summer. Its still stronger than last year and we’re certainly benefiting from that. Sara Gubins - Bank of America Merrill Lynch: Okay, and then separately, last quarter you talked about new sales growth being the highest that you’ve seen; I think it was in seven years. Did you see continued momentum along those lines in the first quarter?

Yes, definitely. Definitely felt that the execution continued. We are seeing not only good unit growth in the number of sales, but also holding price and gaining in kind of the revenue per client. So we are seeing very good sales execution and feel very good that that momentum has continued and we certainly are looking forward to continue through a big selling season here coming up. Sara Gubins - Bank of America Merrill Lynch: Great, and then just last question I wanted to clarify something from earlier. The sales force hiring for the fiscal year, you said you’ve done about 3% so far. I had thought that you were thinking about planning on doing 5%. Is the target now 3%?

No, I think that probably what happened there was we were comparing against where we were at a point prior to the year. Right now we’re about 4%, close to 4.5% higher than we were last year. So at the end of May we’re about 4.5% higher than we are.

But we were down a little bit. Last year headcount, there was a little bit more turnover. Turnover has come down a lot and it wasn’t super high last year, but it was higher than it is now and so turnover is come down and we were a little bit low, below where we wanted to be last year at some points of the year and where we are now is besides the new hiring everything is fully staffed, in fact overstaffed in a few areas. Sara Gubins - Bank of America Merrill Lynch: Great, thank you very much.

Okay.

Thank you. The next question is from Jeff Silber with BMO Capital Markets. Jeff Silber - BMO Capital Markets: Thanks so much. Sorry, just a quick follow-up on the sales force question. Assuming normal turnover will sales force have probably stayed relatively stable for the rest of the year, is that correct?

Well, I think what we’re saying is it would be up. It will stay fairly stable for now, from where we are now, yes. Jeff Silber - BMO Capital Markets: That’s my question.

Yes. Jeff Silber - BMO Capital Markets: Okay, great. And then just on the seasonality side, Efrain I know you called out a few things last quarter regarding growth rates in the HRS revenue and your operating margins for each quarter. Any changes to that or anything else we need to be aware of on a seasonal basis. Thanks.

Not particularly. We’ll call out in next quarter’s call if we see anything’s that are different from guidance, but no. I think the other thing Jeff I’d say is that if you look at the presentation that we posted, should have posted it just recently, we have the supplemental guidance schedule at the end there. We are still within those ranges, so if you look at that closely, that’s a pretty good guide for where we expect to be. Jeff Silber - BMO Capital Markets: All right, great. I’ll take a look at that. Thanks so much.

Yes.

Thank you. The next question is from Brian Keen with Deutsche Bank. Brian Keen - Deutsche Bank: Yes, hi guys; just a couple of clarifications. What percentage of the new sales is going towards the SaaS based solution versus more of a full service model in core payroll?

Yes, we don’t break that out Brian specifically and its becoming increasingly difficult to do so and the reason for that is that not only do we have SurePayroll, but we also have our own online product, which Marty talked about earlier. If you combine both of those, you’re probably up over a quarter, maybe even 30% or so of sales in those models. That’s about as definitive as we can get. Brian Keen - Deutsche Bank: Okay. And the record sales you guys have seen, does that get us to potentially outside kind of the guided range? Are we trending above the range of kind of where we guided to for core and HR? I’m just trying to get a sense. How does it translate into revenue if the sales numbers seem to be due and come track it ahead of plan.

Yes, no. I don’t think we are ready to start changing the guidance ranges. I would say we feel pretty comfortable that we’re well within those guidance ranges. Build revenue builds over the course of the year and while we feel real good about Q1, we still have three quarters to go. We’ll get a better picture as we get through the selling season, get some early signs. Brian Keen - Deutsche Bank: Okay, and just last question for me. It looked like finally we turned the corner on interest and clients’ funds, but just your expectations, we always get the question on rates and rate increases. Just maybe give us an update on that. Thanks so much.

So you know our assumption is not much is going to change in this fiscal, so this fiscal growth is to May. We think the real action then starts to occur in 2016. The fed is really giving a lot of very inconsistent signals. It looks like they want to race sooner rather than later, but our planning assumption is really, its going to be a 2016 event, not a 2015 event. If they do it, obviously we’ll be happy with it, but its probably a next year event. Brian Keen - Deutsche Bank: And then just remind us, a raise of 25 basis points or just the impact of the model, just so we can get ready for it.

It’s about between $4 million and $5 million; that’s the cliff notes version. It’s a little bit more complicated than that, but that’s our disclosure in the Q, so yes. It starts to add up in a hurry if we get what we hope, which is a rise in short term interest rates and the long part of the yield curve also goes up. Brian Keen - Deutsche Bank: Okay, super. Thanks so much.

Yes.

Thank you. The next question is from Jim MacDonald with First Analysis. Jim MacDonald - First Analysis: Yes, good morning guys.

Good morning. Jim MacDonald - First Analysis: I just wanted to clarify a comment. Marty, I think you said something about moving down market with your sales force. Maybe you could explain that.

Yes, one of the things is that we found that in selling, our approach in the past has been a lot in what we call core payroll sales side. Its been very much the sell-in payroll and then the other sales teams would kind of reach in over time at different stages to say, hey, are you ready now for a 401(k) or workers comp or health insurance and so forth and while we made some changes this year in saying that if you’re a certain size, that we are coming in now with a combined sales force. So I guess what I’m saying is, we’ve kind of moved down in offering the full breadth of our services right up front in the way we approach a client and I think we’ve gotten some nice traction and good stories on it already. By approaching a client with multiple sales teams together at once if they are lets say 20 employees, you might go in with HR Outsourcing, 401(k) and payroll all at the same time. In the past our model was much more, hey I’ll sell you payroll and then the other teams will come in after you’ve had a month or two on the service and see if you need something else. So we’re finding that that kind of the need for those services, I’m sure you’ve seen this, has kind of pushed down over time and with the technology and the number of products available and we think that this is a better way to capitalize on some of that. Its making sure the full need of the client is addressed right up front as opposed to our traditional model, which was selling them payroll right up front.

And I would say one other thing Jim is that our sales force execution capability is really, really superb and that’s helped us to understand the potential of this integrated selling approach and its paying dividends, yes. Jim MacDonald - First Analysis: And maybe just another update on how you’re doing in the middle markets. I don’t think we’ve talked about that much yet.

Yes, I think there we’ve offered an awful lot of products, so we’re combining all that product. I think you’ll see shortly we are going to kind of brand that whole thing together, because we’ve been adding a lot of product as Efrain said and mentioned. MyStaffingPro, ExpenseWire, our own Paychex, next generation offerings, our time and attendance now with both our legacy product and nettime and we are in the process of being sure. Now we’ve already been selling it that way, but we are kind of bundling it all together and we’ll be announcing that shortly to kind of put a tag all the way around that, along with we’ve been changing some of the service model there to be sure that when you have multi products from us, that its handled as smoothly as possible from a multi product standpoint. So mid market is, we’d always like it to be stronger, but its doing well against the competition that’s out there and because I think we have a full breadth of product as well as a great sales team there. Jim MacDonald - First Analysis: Thanks very much.

Okay.

Thank you. The next question is from Tim McHugh with William Blair. Tim McHugh - William Blair: Yes, thanks. Just following up on that last one I guess, are you seeing faster growth in the middle market or amongst your smaller customer base at this point, just relative to each other?

Relative I’d say, kind of the small under 50 is stronger. I think that’s the marketplace. I think that’s the economy. What we are seeing is small business starting to pick up finally. Still not where it was, but that’s starting to pick up and that we’re offering that approach of – we’ve already been offering the larger clients the 50 plus, the multitude of products upfront. This approach of selling the breadth of our services below 50 on the front end is a newer approach and so I think that’s – we’re picking up there a little bit faster because of that approach. Also, the referral channels that I talk about, the banking, the franchise and of course are continuing in the CPA referral model, its always been strong for us, that’s where you see the smaller business growth come from, because these are start-ups or companies that have reached the size, that under 50, but that they need a payroll solution. So I definitely say that the under 50 is seeing a little bit stronger growth rate now. I think that’s more because of those things than anything. Tim McHugh - William Blair: And the change in the PEO business in terms of the self assured plans, I get that counting impact that you’ve described to us, but I guess is it driving a significant improvement or acceleration in the growth rate of that business as well. I mean is it also helping in the unit adds in a big way, because its more attractive to people.

Yes, I mean its still fairly new to us, but I definitely – we did it as much, because from a competitive standpoint we felt that it was worth taking on a little bit more of the risk and so forth, because we had even more competitive product. We still have a number of carriers, but this plan particularly in Florida where it’s a very competitive PEO market I think put us in a great spot. We’ll find out a lot more in the next quarter or so as you get into the true selling season of benefits and so forth, but we feel very good that that’s positioned us even more competitively now in the PEO.

And we also – just to add to what Marty said, I mean we really have a terrific PEO team and group that manages that business. So I think our execution capability, our product capability have never been better. Tim McHugh - William Blair: Can you or would you, in terms of the comprehensive I know you report comprehensive HR Outsourcing, kind of work side employees. Can you give us a rough sense of how much of that is PEO at this point and how big is that business now for you guys?

Yes, its still relatively, I should say on the gross of it – I was going to say it was relatively small. Its still not the bulk of HRS, but its growing in importance. Tim, the reason why I give you a somewhat imprecise answer there is that unlike other competitors, we manage our ASO and PEO and this other smaller product we call HR essentially, which is a lighter version of our outsourcing product together in one sales force and we are somewhat still agnostic in terms of whether a sales person sells a PEO or ASO. Its going to depend on what client needs are. ,:

Yes, I think the point there is Efrain saying, when you look at all the products combined, that outsourcing of the HR function is a significant part of the HRS business and I think as we said in fourth quarter, we don’t give the numbers, all that probably one a year, but we service more client employees than any competitor combined and I think for the most part probably any two competitors combined. When you combined PEO, ASO and what Efrain’s HRE, kind of an essential offering, we are the largest HR outsourcer in that product set. So we are very proud of that and that growth is going very well. Tim McHugh - William Blair: Thank you.

Thank you. The next question is fro David Grossman with Stifel. David Grossman - Stifel Nicolaus: Hi, thank you. I’m wondering if we can just go back to another question, because maybe I just misunderstood. But when we look at the growth year-over-year of 17% in that HRS line, to get an apples-to-apples number, should we backing out $16 million of this year revenue, because that’s …

That’s correct. David Grossman - Stifel Nicolaus: So it looks like then the growth rate was about 10% year-over-year. Does that sound right to you?

Not too far off. David Grossman - Stifel Nicolaus: Right. And is that, I don’t know if I got good comps for the year, for the fiscal ‘13 year. So is that deceleration from what we say last year or last years numbers.

Its comparable to Q4 of last year. David Grossman - Stifel Nicolaus: Okay. And then, but the guidance for the year is – how do we normalize that guidance for the…

Yes, so I think we went through that David. So we have a 16% to 19% guidance range and we said about 5% of it is the PEO. 16% to 19% HRS to be precise and minus 5%, so you pick the number you feel makes more sense. So I think the gist to your question, not reading in too much is that we expect HRS to accelerate as the year goes on. David Grossman - Stifel Nicolaus: Right, and what is the basis for that, based on – because you guys certainly improve your visibility in your business, so…

Yes, I think there is probably three things on that; one is we expect insurance services to accelerate as we go through the year, that’s a function of a number of things, not the least of which is being fully staffed and anniversarying some comparison in that business that we talked last year, that’s one. And then I think as Marty said, we talked a lot of this call, just the growth and the momentum in HR outsourcing services we think continues to build through the quarters and through the year. David Grossman - Stifel Nicolaus: Right and just on that last point, is there anything we should be thinking about in the context of what’s going on, either with the affordable care act or the regulatory environment at larger that would make us more optimistic or less optimistic over the next 12 to 18 months.

Yes, I’ll let Marty talk to kind of compliance related products, which is its own sort of set of discussions. But I do want to clarify that our guidance doesn’t assume that there is some material change in what we are seeing in terms of up-tick of some of the compliance related products, which Marty can talk to a second. We just are looking at based on the rate and on our plan where we expect to be as the year progresses.

Yes, I think in general, David its not getting any less regulated. Everything is getting more complex and so one, regulations aren’t going to get any easier and the healthcare reform just continues to drive a lot of confusion at all levels as to when its kicking in, what does it mean for them and I think its probably still pretty fluid from the way things have been. Second, the technology has gotten a lot better, the innovation has gotten a lot better, and for example our products and in others products, other competitors products that drive the ability to use HR services online at a lower level of client size, employee size and so a lot of that is come down because the technology and the products have gotten better and I think that that bodes well for us. We talk about time and attendance, and we talk about HR administration online, products that we have. These used to be 50 plus solidly, 50 to 100 plus. They’ve come down and many clients are using them now, and the mobility offerings make it a lot easier as well. We find that the mobility offerings are being used by clients for everything from their employee contact list to reviewing an employees 401(k) with them right face to face, just looking at their mobile app. So all that bodes well I think for demand for HR online, payroll online and a lot of the other. We didn’t even really touch on 401(k), but 401(k) continues to be very strong as well. I think the market leaves it always a little shaky and 401(k) whether to jump in or not, but we are certainly seeing assets increase and our initiative on large market, larger plans has started to pick up and pay some dividends as well.

Yes, and just to build on Marty, I just focused almost exclusively on HR outsourcing, but we also expect that our retirement services revenue is going to build through the year too. David Grossman - Stifel Nicolaus: Right. And just one last thing; again, based on the comment you made earlier, if the quarter came in perhaps a little bit stronger than you had anticipated and again, that you typically have pretty good visibility on your business going into a year, let alone a quarter, can you help us better understand what the components were that maybe kind of drove a slightly better result than you had anticipated.

Yes, David I think I’d just leave it that to say we thought we had a strong quarter, we were pleased with it. If we were happy with what we saw on the payroll service side and HRS continue to performer strongly, I’m cautious about getting too granular about projecting Q1 trends for the remainder of the year, because as I said easier, we try to give annual guidance and stick with that, so we don’t get into a quarter-over-quarter conversation. And the only think on caveat is the selling season is important to us and its good to start well, its much, much better to finish well and so we will continue to work on doing that, so we can continue to deliver good results. David Grossman - Stifel Nicolaus: All right, fair enough. Thank you.

All right, thanks.

Thank you. The next question is from Tim Wiley with Wells Fargo. Tim Wiley - Wells Fargo: Thanks and good morning. I wanted to – you just touched on it, but my question was about the 401(k) and retirement services business on two fronts. First was, I remember – I guess this is probably within the last couple of years. There was some shift towards different kind of plans that I think was sort of herding the revenue growth relative to asset or account growth in that business. I’m sort of curious if we’ve sort of cycled through that and there is not any kind of revenue issue relative to account growth or asset values that would have been a headwind like you transitioned through.

Yes, I think you have might been – I’m sorry go ahead. Tim Wiley - Wells Fargo: No, and then the second part of the question if I could was just again you talked about the confidence you have in that business. Just anything specific to sales or product or if there are different referral channels that maybe more productive around 401(k) and retirement services that you are focused or sort of figured out some opportunities around the sales management referral channels to help that business.

I’ll let Marty take the second part. So the first part Tim, I think you might be referring to the fact that about two years ago or so we decided to take a portion of the retirement services sales force and dedicate them to the up market. When we did that, we took people who were servicing the smaller market out and didn’t necessarily replace those. So we had a little bit of a transition in that business as we did that as the larger market reps were starting to ramp up. So we’ve anniversaried that. We think that the larger market reps are doing a really good job and in execution its helped our growth rates and retirement services and fell that we’ve got a nice runway in front of us. You can see that in part by the amount of the growth and assets that hasn’t been just market growth, but its also been planed growth, meaning more plans and larger plans. So I think we are past that anniversary. I’ll let Marty talk about the second part question.

I think Efrain pretty much covered it. I think the other thing we were doing was, we were having a team that builds a lot more – focuses on relationships with the financial advisors and I think that that’s really starting to pay some dividends there. It takes time to kind of build that relationships, so that they trust us going into not only a brand new client, but to go with a larger client and a conversion of a larger asset base and we are really starting to pickup I think some momentum there and some trust from financial advisors to not just give us the start-ups, but the larger clients as well and I think to us that gives us confidence that we are going to see the year either as we predicted or a little bit stronger. Tim Wiley - Wells Fargo: Great. Thanks very much.

Okay.

You’re welcome.

Thank you. The next question is from Mark Marcon with Robert W. Baird. Mark Marcon - Robert W. Baird: Good morning and congratulations Martin and Efrain.

Thanks Mark. Mark Marcon - Robert W. Baird: With regards, just staying on the 401(k) for a second, so what sort of level of growth should we anticipate roughly speaking on return of services?

Mark, obviously we don’t break that out. It doesn’t grow quite as quickly as HRS overall, but it’s a little bit less than that. Mark Marcon - Robert W. Baird: Just a little bit less that what, the organic underlying growth.

Correct yes, the organic underlying growth. Thanks for the clarification. Mark Marcon - Robert W. Baird: Yes, and then with regards to the healthcare offering on the PEO side, how should we think about the profitability of that.

The profitability of… Mark Marcon - Robert W. Baird: Of the minimum premium plan healthcare option.

: Mark Marcon - Robert W. Baird: So, it sounds like the reality of what we should think about from an economic perspective would basically be that 11% to 14% growth on an underlying basis is really where we should focus.

That’s right, that’s right, yes. Mark Marcon - Robert W. Baird: Okay, great. And then with regards to the core, really glad to hear about how things are shaping up. Can you talk a little bit about some of the sales force metrics with regards to both the turnover rate, as well as the percentage of sales people that are currently running at your historical quarter rates?

Yes, well one, for turnover it’s a little bit below where we’ve been historically. Kind of historical average is in that 30% to 35% turnover rate. We are at the low end to that range right now and that can always change, but for first quarter its been very good. The recruiting I think of the new reps has been very good. So I think we are picking up a very good quality of new reps and the training consistently has been revamped and so forth. I think its very good execution in the leadership team across the board from the senior team right to the district sales managers. It just feels like a good experience level now in that team and that they done very well. So when you look at the metrics and I think I have said this, the units what they are selling, the number of units is good, as well as holding price. So that to us bodes well from an experience level and in execution of the rep. So they are not just going in selling price and we are getting more units at a low price. We are getting unit growth and revenue per unit growth. So again first quarter, but we are feeling positive about the execution of that sales team from those kind of metrics. Mark Marcon - Robert W. Baird: Great and is there a sizable percentage that are now approaching our old historical pre-recession quarter rates.

I don’t know if I’d go that far. I would say from a annualized revenue perspective, there is certainly showing some promise, but I don’t think again the economy isn’t where it was pre-recession. But I’d say, relative to the last few years and last year where we started to see really the best in seven years, we are still at that level. So it’s defiantly the best we’ve seen since the recession and it continues to go up. I wouldn’t say its right at that pre-recession levels yet though. Mark Marcon - Robert W. Baird: Right and then one last one. Marty, with regards to the commentary in terms of the competitive takeaways, I missed that in terms of who that’s coming from. Can you…

No, because I don’t think I said. So it didn’t miss the exact things here, but it certainly is the national player and as well as the regionals, more regional players. I think what you are seeing is, national player I think what we are doing very well is selling the value of our service combined with the technology and that means that they can be online or they can be a SaaS offering that’s online with mobile or full service. I think from the regional players what you are seeing is particularly smaller players in the market. They are struggling more with the technology. They don’t have the mobility offerings, they don’t have the online offerings. These are changing constantly. We are updating our mobile offerings probably every quarter with something new. And the smaller players just can’t, you just can’t keep up with that technology now and we are finding the clients are really using it. : Mark Marcon - Robert W. Baird: That’s great color. Thank you very much.

You’re welcome Mark.

Thank you. The next question is from Lisa Ellis with Sanford Bernstein. Lisa Ellis - Sanford Bernstein: Hi guys, good morning and I’m happy to be joining these calls. I had a question on the PEO business. Clearly, a healthy growth there. Can you characterize what if any risk you take on as you grow this business and sort of what the mitigation approaches are around that?

Yes, so Lisa there’s two risks that everyone takes on, who is in the PEO business. It’s the quality of the workers comp, underwriting and then secondarily, although we have talked a lot about minimum premium plans, we still have a lot of health insurance plans that are not under this cost sharing arrangements. In the cost sharing arrangements and I should say the risk sharing arrangements, if your healthcare book is not what you would expected it to be, you can end up with having more healthcare costs than you gauged and the same thing with workers comp. We use a number of sets of actuaries. I’m pretty familiar with the underwriting process in both areas and we set the probabilities that we will exceed our targets at a very, very low rate. Meaning, when we ask our actuaries to do projections of what we think the costs are, we are not asking them to do a 95% probability and typically we’re asking them to set it at 99%-plus. So on the workers comp side, we have done that over a number of years and have very, very good results managing books, our books of business on the workers comp side and we feel pretty comfortable we have very deep expertise on the healthcare side, understanding and assisting risks and in the last year really build up our underwriting capability and our management capability is the PEO. So we fell pretty comfortable. Wouldn’t go down this route if we didn’t. Lisa Ellis - Sanford Bernstein: Yes, and has that been sort of the rate limiting factor on growth in the business, given we are seeing health growth in the PEO business is kind of across the industry and the economics, they are kind of coming in new to the space. Right, the economics to you and the economics to the client appear to be pretty compelling. So I’m just trying to understand like really nice healthy growth, but why isn’t that faster. Does it end up being the underwriting component of it that kind of rate limits that?

No. I think its one element of it, but Marty faces the decision around how to make tradeoffs with investments across a number of different sales forces that are growing and so I would say two or three years ago people who followed us closely knew we struggled a little bit in the PEO, took a breather, retooled and have really gotten ourselves back in the game. So I think our level of investment in that sales force is commensurate with what we think the opportunity is right now. And one other thing I would add to that is that its not just PEO for us. That’s an important element of what we sell in HRO, but we have a very, very strong ASO business, which is very similar to PEO, but doesn’t have some of the risk characteristics that the PEO does. So we’re looking at it a bit more holistically than other competitors do. Lisa Ellis - Sanford Bernstein: Terrific, and real quick on the core payroll business. You mentioned that you’re seeing continued growth in the number of clients in core payroll. I know you don’t disclose that on a quarterly basis, but can you kind of bound that? I know in this past fiscal year it went up above 1% for the first time in several years. Are we sort of still running in that trajectory, stronger, weaker?

So last year we finished at about 2%. We’re certainly in that range. Lisa Ellis - Sanford Bernstein: Good. Thank you.

Okay.

Thank you. The next question is from Tien-tsin Huang with JPMorgan. Tien-tsin Huang – JPMorgan: Thanks. Good morning. Good results. So just quickly on the competitive take away question. I caught the national and regional, but what about against point solution providers. You made it pretty clear that service is still in high demand. How about the competitive take away versus point solution providers?

Okay, so define your definition Tien-tsin on… Tien-tsin Huang – JPMorgan: Yes, I’m thinking about point, you know I’m thinking about call it a payroll always player or benefits only provider, only 401(k) administrator. Just trying to think about, unbundling all the different HRS solutions out there and seeing if maybe those are drifting in your direction. Does that make sense Efrain?

Yes, it makes sense.

And I think that that is – we tend to do very well again. I think that the demand for the HR, kind of the overlapping services is pushed down in the market and so with the technology and the offerings and so forth, and so I think the point service, kind of the point providers as you’d say, I think its tougher for them to sell by themselves and the better you can integrate that experience and make it easier for the client, they do – more and more clients need multiple services and they are not as interested in, hey I’m going to take things from three different providers. So the key is, okay now and you can see what we’ve acquired over the years. We’ve brought in these great point solutions and the key is to integrate them as seamlessly as possible from a service perspective for the clients, so that you’re adding a lot more value. They don’t have the time or the desire anymore to integrate themselves, the clients, to integrate three different products and I don’t think, and so it’s all a matter of integrating it in together and that’s what we’ve continued to do and we’ll continue to work on.

And Tien-tsin, in the under 50 space particularly, it maybe different in the enterprise space. What clients value about – one of the many things that clients value in that space is the ability to have one single point of access to your data. So a single sign on is really, really big and then when that single sign on is coupled with your ability to access all of the different aspects of the data that your trying to manage, be it health and benefits, 401(k), HR Outsourcing, that’s really the compelling proposition. It maybe different in the enterprise space, but certainly in the under 50 space they are looking for that integration as Marty said. Tien-tsin Huang – JPMorgan: Yes, now that makes sense. Its just my only follow-on is just, I know there’s a lot of questions on the 3%, the sales force increase, but given the single point of access, the sales person is now required to be smart on a lot of different subjects. So does that change your comp structure or even your go to market and how you touch the client?

No, not really. I mean I think we’ve had it. We’re very competitive first of all from the comp structure and we always made changes to be sure we stay very competitive on that, but also we are doing a lot of team selling. So the point I was trying to make earlier is that where we’ve come down now, where that was always the approach, pretty much the approach anyway on the 50 plus, below 50 now and probably even in that 20 and above range, there’s a lot more team selling going on. So we have expertise, not necessarily expecting the rep to know everything. Its saying, hey when you used to go in and sell payroll and then your 401(k) sales team would come in a month later or two months later or six months later. Now we go in together as a team on a lot of these leads and say what’s the full breadth of what the client needs and look to sell them upfront. So its not necessarily requiring a lot more from each individual sales person, but more of a team approach to the way we’re selling, which seems to be getting some traction now. I think the markets ready for it and I think we’re going to – we will execute it well. Tien-tsin Huang – JPMorgan: Got it. Thanks Marty, thanks Efrain.

Okay.

Welcome.

Thank you. Our final question today is from Ashwin Shirvaikar with Citi.

Hi Ashwin.

Please check your mute.

Okay, I think Ashwin may have left the building.

I’m not receiving any response and I’m showing no further question.

Okay, at this point we will close the call. If you’re interested in replaying the webcast to this conference call, it will be archived till October 24. Our annual meeting of stockholders will be held October 15 at 10:00 a.m. in Rochester, New York and that meeting will also be broadcast over the Internet as well. I thank you for you taking the time to participate in our call and your interest in Paychex. Have a great day.

Thank you. This concludes today’s conference. Thank you for joining. You may disconnect at this time.