Martin Mucci - President and CEO Efrain Rivera - SVP and CFO

Rayna Kumar - Evercore ISI Jason Kupferberg - Jefferies Danyal Hussain - Morgan Stanley Jim Schneider - Goldman Sachs Rick Eskelsen - Wells Fargo Kartik Mehta - Northcoast Research Stephen Sheldon - William Blair David Grossman - Stifel David Ridley-Lane - Bank of America Merrill Lynch Gary Bisbee - RBC Capital Markets Tian Jing Wang - JPMorgan Mark Marcon - R.W. Baird Lisa Ellis - Bernstein Ariel Hughes - Wedbush Securities Glenn Greene - Oppenheimer

Welcome, and thank you for standing by. At this time, all participants will be in listen-only mode until the question-and-answer session of today's conference. [Operator Instructions] Today's call is being recorded as well. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Mr. Martin Mucci, President and Chief Executive Officer. Sir, you may begin.

Thank you. And thank you for joining us for our discussion of Paychex's first quarter fiscal 2017 earnings release. Joining me today is Efrain Rivera, our Chief Financial Officer. This morning, before the market opened, we released our financial results for first quarter ended August 31, 2016. Our Form 10-Q will be filed with the SEC within the next few days, and you can access our earnings release and Form 10-Q on our Investor Relations webpage as they become available. This teleconference is being broadcast over the Internet and will be archived and available on our website for approximately one month. On today's call, I will review highlights for the first quarter in relation to sales and ops and product management development areas. Efrain will review first quarter financial results and discuss our full-year guidance, and then, we'll open it up to your questions. We're off to a solid start for fiscal 2017 with positive results across all major product lines. The number of client worksite employees served by our human resource outsourcing services grew by double digits on a year-over-year basis. Our cloud-based HCM services including time and attendance and human resource management continued to gain strong market acceptance in the quarter as well as last year. Payroll service revenue grew 4% for the first quarter. HRS revenue increased 15% for the quarter driven largely by growth in the client base across all major HCM categories. Total service revenue, up 9%. We acquired Advance Partners last December and are very pleased with their contribution to our results. Advance Partners contributed approximately 1.5% to the growth in the service revenue for the first quarter. Client retention has remained strong, providing excellent customer service as our top priority. We have continued to invest in our operations and compliant services to support growth and ensure we maintain best-in-class client service. One area of focus has been the expansion of our multiproduct service center, which primarily assists our midmarket clients who attach additional services with payroll. We've also invested in our insurance operations team to increase support for our Affordable Care Act service clients as we approach the 2016 calendar year filing. We recently announced the expansion of the AICPA-Paychex partner program to include human resource services in addition to payroll and retirement benefits. This program allows CPAs who refer to us to broaden their advisory role with clients by offering them a suite of best-in-class services and provides a strong referral channel for us. We are proud to be the preferred provider of payroll retirement and now human resource outsourcing services for the AICPA, CPA.com, and its CPA members. The Department of Labor's final overtime rule will become effective December 1, which will expand overtime for millions of workers. This new legislation makes accurate time and attendance tracking more important than ever, and we have found that many businesses remain unaware of the legislation and the impact on their business. We recently announced enhancements to our time and attendance service portfolio with the addition of Paychex Flex Time Essentials, TrueShift Time clock and an advanced scheduling feature within our Paychex Flex Time module. The investment in this technology demonstrates our continued commitment to providing industry-leading solutions that educate and assist our clients to comply with the new regulations and stay more connected to their employees and their businesses. These new products enhance our commitment to supporting our clients for the entire employee journey from the posting of a position, interviewing a job offer, onboarding the new employee, and handling all the daily tasks and life events with a simple integrated SaaS software-as-a-solution platform combined with personalized and flexible service options. We are very proud of the support our employees provide small and midsize businesses with this broad and advanced product set in commitment to great service, particularly as we enter our 45th year in business. Along with that, I’m very proud of some recent recognition our Paychex team has received. Our insurance agency ranked number 23 on Business Insurance Magazine's 2016 list of top 100 brokers of U.S. business. This is our sixth appearance on the list, and we once again rank as one of the fastest-growing insurance agencies in the nation. We've been named to Selling Power Magazine's 2016 list of 50 best companies to sell for landing at number seven. This is the fourth consecutive year Paychex has appeared on the list moving up from the number nine spot last year, very proud to be in the top 10 of best companies to sell for. And Paychex was once again ranked as the largest 401(k) record keeper by total number of defined contribution plans according to the recent survey by PLANSPONSOR Magazine, a national publication dedicated to the pension and retirement industry. We also continue with our shareholder friendly actions in the first quarter. In July, we increased our quarterly dividend by 10% or $0.04 per share to $0.46 per share. Our Board of Directors also approved an additional authorization to repurchase up to $350 million of our outstanding common stock which expires now and May 2019. We did not repurchase any shares in the first quarter but we'll continue to assess the opportunity to buy back shares during the year to offset dilution. In summary, we are off to a great solid start. We're receiving very good recognition and I'm very appreciative of the great work of our Paychex employee team, sales ops, and all the support teams in the company. I’ll now turn the call over to Efrain Rivera and Efrain will review our financial results in more detail. Efrain?

Thanks Marty, and good morning. I'd like to remind everyone that today's conference call will contain forward-looking statements that refer to future events and as such involve some risks. Please refer to our earnings release which includes a discussion of forward-looking statements and related risk factors. As discussed first quarter financial results for fiscal 2017 represent a solid start to the year. Here are some of the key highlights for the quarter. I'll provide greater detail in certain areas and end with a review of our 2017 outlook. Total service revenue grew 9% for the first quarter to $774 million. Interest on funds held for clients increased 11% for the first quarter to $12 million as a result of higher average interest rates earned. Expenses increased 8% for the first quarter, and Advance Partners contributed approximately 1% of this growth. Compensation-related expenses increased 6% primarily due to higher wages resulting from growth in headcount in both operations and sales. Our effective income tax rate was 33% for the first quarter compared to 29.7% to the prior year's first quarter. The effective income tax rates have been impacted by discrete tax items recognized in both of these periods, so last quarter - last year's first quarter and this year's first quarter. In the first quarter of this fiscal year, we recorded a tax benefit resulting from the adoption of new accounting guidance partially offset by the recognition of an additional provision related to a state tax matter. These items increased diluted earnings per share by approximately $0.025 per share to be precise. If you remember, last year in the first quarter we’ve recognized a net tax benefit on income from prior tax years related to customer-facing software we produced. This resulted in an increase in diluted earnings per share of approximately $0.06 per share for that period, so now if I could just do an editorial. You'll see that when we talk about net income, we carefully say as reported net income. So we're going to give you guidance on as reported net income and net income excluding discrete items. The punch-line of that - the punch-line of that is that there's been no change. We just need you to look at those two items, down to discrete items, and we will talk about that in a second, and see that essentially it doesn't change the guidance. I have seen some notes that seem to think it does - it doesn't, I’ll come to that in a second. I just mentioned adoption of new accounting guidance impacting the effective tax rate. We early adopted new accounting guidance related to employee share-based payment. As a result, we recognized a net tax benefit in the income statement. This was previously required to be recorded as additional paid-in capital in equity. On an as reported basis, net income increased 4% to $217 million and diluted EPS increased 3% to $0.60 per share in the first quarter. Growth rates for net income and diluted earnings per share were impacted by approximately 5% and 6% as a result of the recognition of the discrete items in the respective periods, so I give you those numbers, so you can reconcile back to what it would look like if you excluded those items. Let's talk about payroll service revenue, it increased 4% for the first quarter to $451 million. We benefited from increases in client base and revenue per check. Revenue per check grew as a result of price increases net of discounting. In addition, Advance Partners, which we acquired last year contributed approximately 1% to the growth in payroll service revenue for the first quarter. Checks per payroll were not a contributing factor in the reported payroll revenue growth, and we expect to continue to see that to be the case. Our HRS revenue increased strongly to 15% in the first quarter $323 million. Increase reflected strong growth in client base across all major HCM Services including our comprehensive outsourcing services, retirement services, time and attendance, and HR administration and I take this point or pause to say that remember that part of what we report in HRS are the modules that we sell on the HCM system. So in order to understand clearly what we're doing, you need to look at both categories. Within Paychex HR Services, we continue to see strong demand which is reflected in the double-digit year-over-year growth in the number of client worksite employees served. Insurance services benefited from continued growth in revenue from our full-service Affordable Care Act product and growth in the number of health and benefit applicants. Our workers comp insurance product benefited from higher average premiums and client base growth. Retirement services revenue benefited from increase in asset fee revenue earned on the value purchase and funds, as well as an increase in plans served. Last, Advance Partners contributed approximately 2% to the growth in HRS revenue for the first quarter. Investments and income. Our goal is to predict principal and optimize liquidity as you all know on the short term side primary short-term investment vehicles or bank demand deposit accounts and variable-rate demands. In our longer term portfolio, we invest primarily in high credit quality municipal bonds, corporate bonds and U.S. government securities. Our long term portfolio has an average yield of 1.7% and an average duration of 3.3 years. Combined portfolios earned an average of 1.2% for the first quarter which is up from 1% last year. I'll just say one note on that, the Fed - it's very difficult to figure out what exactly is going on. Our guidance at this point does not include or anticipate any increases in the interest rate as I look at consensus model, looked like some of you are modeling an increase in their - at this point it's not in our guidance. Average bounces for interest on funds held for clients decreased by approximately 1% during the first quarter primarily as a result of lower state unemployment rates partially offset by growth in client base. I'll now walk you through the highlights of our financial position. It remains strong with cash and total corporate investments of $944 million as of the end of the quarter. Funds held for clients as of August 31 were $3.4 billion compared to $4 billion as of May 2016, but as you know funds held for clients vary widely on a day-to-day basis and they averaged $3.8 billion for the quarter. Our total available-for-sale investments including corporate investments in funds held for clients reflected net unrealized gains of $63 million as of the end of the quarter and this compares with net unrealized gains of $48 million as of the end of May 31. Total stockholders' equity was $2 billion as of August 31, 2016 reflecting $166 million in dividends paid during the first quarter, a return on equity for the past 12 months was a sterling 39%. Our cash flows from operations were $295 million for first quarter, an increase of 6% over the prior year period. This change was primarily a result of higher net income, a slight increase in non-cash adjustments and fluctuations in working capital. Now guidance for the remainder of the year. So with the close of the first quarter, when you take the opportunity to fine-tune the guidance we provided last quarter, we remind you that our outlook is based on our current view of economic and interest rate conditions continue with no significant changes against to the full year fiscal of 2017 is as follows; payroll service revenue growth is anticipated to be in the range of 3% to 4%, and if you recall this is a change we had set 4% and from our perspective it's fine-tuning. Let me give you some detail on the quarter so you know how we expect to get to that. On a quarterly basis if you look at the second and the fourth quarter - second and fourth quarter we expected to be in this range. In the third quarter which is where we lose one day this year, we expect to be between 2% and 3%. So let me just reiterate that. Second and fourth quarters comparable on a daily basis to last year we expect to be in that range of 3 or 4. In the third quarter expect to be between 2 and 3 we have one less day in the third quarter. HRS revenue growth is anticipated to remain the same which is 12% to 14%. Total service revenue continues to be in the range of 7% to 8% also. Consistent with prior guidance, income excluding float as a percentage of total service revenue is expected to be approximately 38%. As you know, first quarter has typically had a higher margin and we expect that operating income excluding float in the second quarter won't be as high, we expect it to be between 38% and 39%. Now, as reported net income growth is anticipated to be approximately 7%. Some people took that and assumed that there was a change in guidance, simply reflecting the fact that we now have discrete items in first quarter and discrete items in the prior year first quarter. We wanted to give you a number that you could anchor your model on to understand what it looks like before you subtract them. So as reported - I repeat that again, net income growth is anticipated to be approximately 7%. This reflects the impact of the discrete tax items I just mentioned which were recognized in both this quarter and prior year first quarter. And it should be obvious that our previous guidance with adjusted for the discrete item in the first quarter of fiscal year 2016. Obviously, we did not know at the time, we’re going to record a discrete item in the first quarter what we would have thought. When you make the adjustments and we exclude non-recurring items, net income will be the same as our prior guidance. So there is no change to the guidance, it simply gives you another data point on which to anchor the market. Our effective tax rate for the year is expected to be approximately 35% which also reflects the impact of the discrete tax items. So, you can see our tax right in the first quarter was lower, subsequent quarters will be a higher to get us to approximately 35% for the year. Other aspects of our guidance have remained unchanged from what we previously provided. I hope that clarifies the guidance and I will turn it now back to Martin.

Great, and operator, we'll now open up for any questions please.

[Operator Instructions] We have a question from David Togut from Evercore ISI. Sir, your line is open.

Good morning, this is Rayna Kumar for David Togut. Thanks for the clarification on the net income guidance. That was very helpful. Just one more on the guidance. I know you said you fine-tuned your payroll service revenue from 4% growth to now 3% to 4%. I guess what are you seeing that may be different in the market that made you bring the guidance a notch down?

Well we said the guidance was approximately 4% when we released in or when we discussed it in the fourth quarter, and it just simply reflects fine-tuning as we look through the remainder of the quarters in the year. So, we don’t think it represents a significant change from where we were, and it puts us pretty comparable to the growth rate we had last year.

Got it. So your largest competitor is seeing some client losses in the mid market. Are you, is Paychex benefiting from this?

I think - this is Marty. I think to some degree, yes, I mean I don’t think we felt like the competitive environment has changed all that much. I do think that we're very proud of the product that we have now, very full suite of HCM's total solution including the latest time and attendance additions. And so I think we’re competing very well with them. I think - I don’t think it’s changed. We haven't seen a change dramatically but we’ve certainly continue to feel very positive about where we are.

It's very helpful. And lastly, could you just quantify on that price increases you're seeing in both payroll and HR services? Thank you.

So payroll is different from HR services, but both are in the same in the same range -- in the range of 2% to 4%. On HRS, we don't uniformly apply price increases across all products. We really do that based on where we see the market. So - but our price increases are in the 2% to 4% range.

Thanks.

Our next question comes from Jason Kupferberg from Jefferies. Your line is now open.

Thanks guys. Good morning. I just wanted to ask a follow-up on the core payroll outlook. And I understand that in terms of order of magnitude, it is fine-tuning from about 3% to 4%. But historically it's somewhat unusual for Paychex to tweak its outlook really at all so early in the fiscal year. So just curious what led to the decision to kind of formally make that change, even though it's not a big one given that you've got eight months left in the fiscal year? Was there anything kind of company specific or I think you said you are not really assuming any changes in the macro backdrop. So just on the margin where -- was there a little bit of an adjustment from your perspective?

Yes, I guess, Jason, what I - I’ll be answering that, this way. So when we look at the year, there are lots of things that can affect what we expect the growth rate to be not the least of which is what's the composition of the days in a year. And so, where we begin and where we end has an impact as we go through the year and we look at what the run rate is on a particular day. That's one thing that influences it. But second thing is, what is the actual impact of one less day in a given quarter? So in the third quarter, we have one less day. We quantify that impact as we go through the year and understand what we think it will be, and that basically was what was impacting our decision to fine-tune a bit.

Okay. I mean, as you look beyond this year, I mean is three to four kind of a new normal – I mean you've got the U.S. economy that’s basically running in the range of full employment, you’ve still got a little bit of help from Advance on a full-year basis this year. So I just want to make sure our expectations are properly calibrated, eventually unemployment, probably tick-up. So is three to four a decent range or do you think you can really be mid-single digits in core payroll kind of over the medium to longer-term?

So two things I would say, Jason. One is, it’s early I think we need to go through the year and see.

Yes.

I would say that we do not get the contribution from checks for payroll that we were getting two or three years ago and don't expect that that will recur. So you got to work a little bit harder. And then the third thing I would say is that, I want to be careful to say that the payroll service revenue is core payroll, it is not. Payroll service revenue is core payroll plus the portions of the HCM bundle that are payroll. That number can vary and it will depend on what - how much of those packages we sell in the mid-market and what the pricing the payroll in the mid-market is. You have to look at both components of revenue in order to understand what the trends are. So subject to all of that we'll update as we go through, we’ll update when we get to the end of the year.

Okay. Just one more from me. I think you haven’t bought back any shares and I think three of the past four quarters, but you did the new authorization over the summer. So is the lack of buyback just because the current price is not viewed as attractive enough or is the M&A pipeline becoming more robust or any other factors that you might highlight? And thanks for taking the questions.

Yes, I appreciate it. I think it has something to do with the timing of authorization and the other factors. You mentioned we're excluding the price of the shares that’s really not part of what goes into our thinking.

Thank you.

Our next question comes from Danyal Hussain from Morgan Stanley. Your line is now open.

Hi, good morning, Martin and Efrain and thanks for taking the question. I just wanted to ask about the relative performance of payroll versus HRS and I know Efrain there's one thing you called before at the revenue allocation process that maybe, if you could talk a little bit about more about it and specifically is that client are being given an explicitly higher discount on payroll upfront then exchange for adding more module or did they only see a single bundle price, just little more color there, will be helpful? Thanks.

Well I think Danyal to your point, there is no general answer I can give on that. But certainly depending on the deal you discount at, what you think make sense and is logical. So, it could very well be that a bundle that has more modules and it is discounted more than a bundle that has fewer models in it. So that's part of the equation. But there is other elements that add into it which is, what’s the composition and the size of the clients you are selling in a given quarter. So that can be variable, so as we go through the year we'll see where we end up.

And I think the focus more and more they do see a bundle price, so I think more and more we tend to look at the total service revenue, the allocation between them, because we are selling more and more bundles and the bundles are getting larger and more complex. I think we tend to more and more look at the total service revenue growth and where that growth is and how we target that. So it gets a little bit harder here as Efrain said that keep - kind of splitting this up and allocating it out and getting really fine-tuned on everything

Got it. And then just the question on the upcoming December 1 deadline, could you just remind us what the current penetration is of the timing and product. And then you mentioned some of these newer I guess versions, so is there any revenue uplift associated with those?

We certainly expect it to be. What we are doing is we fine tune the full product the Flex Time with more - with better more I guess I'd say more advance scheduling modules, so there is lot more flexibility to scheduling and how you do it. We've added a clock on the low end that gives you, it's a wireless clock and that's the shift time and it makes it easier to have a clock and maybe some difficult locations and has a couple of other features with it as well. And then the Essentials is probably the biggest thing we've introduced. It's a basically a scale down version of our web- based Paychex Flex Time offering. So to make it easier for clients to get started and to have a product that doesn't have quite as many bells and whistles on it but that they need it. So we do think there is going to be some uplift. We've seen double-digit increases in the sales. I'd say the penetration is still pretty low. So it's definitely, I'd say where we are now, you know 10% or somewhere in there little bit more, but it will lot of room to grow and our biggest opportunity I think right now is we still see 50% slightly or 50% of our clients based on our surveys or in businesses in general, small businesses that are impacted, you are not even aware of the overtime regulations. So we think there is going to be some good sales not only this quarter, next quarter, but I think it's going to continue as the compliance requirements and maybe some push back on enforcement makes businesses realize they really got a - they got to get involved and make sure that they are recording and scheduling time appropriately.

That's helpful. Thank you.

Our next question comes from Jim Schneider from Goldman Sachs. Your line is open.

Good morning. Thanks for taking my question. I was wondering if you could maybe comment one last time on the kind of the pricing environment and I think Marty you referenced the fact that in the mid market you're seeing little bit more mid market pricing pressure. Can you maybe say whether that is at all a contributor to the downtick in the core payroll guidance, or whether it's just another factor of the bundle pricing that you referenced earlier?

Yes, I don’t - on the mid market if I did - you might be misread, I didn’t really feel - I don’t see too much different pricing pressure there. I feel the competitive environment is pretty much the same as that has been same number of competitors and I think if anything we are feeling stronger about where we are from a mid market product than we certainly did a year or two years ago with the complete bundle product that we offer and the addition that we're constantly making almost quarterly to the HCM bundle we have for Flex. So, we are feeling good about it. The pricing is as Efrain said still in that 2% to 4% kind of increased range. I think we are holding price pretty well particularly in that mid market and we are gaining more revenue per client based on the bundle. So we feel pretty good about it right now. I think the only thing that we see impacting that would be more of the economy in general and we don’t really see any major changes there other than that businesses are getting closer to full employment and we are seeing the checks per client slow, but we expect that frankly for the last couple of years as people came back from recession. So we feel good about the mid market and we are fully staffed, in fact we've increased more reps there than any other division in the mid market because of the product investments we've made and the opportunity we have between service and product. So you're pretty good about the mid market right now and the opportunity particularly for selling season.

Understand, thanks. And then maybe - can you maybe comment on the bookings environment you've seen over the past few months separately on the HRS versus the PEO side and whether those have been running kind of ahead of plan given the fact that you've been putting up little bit stronger HRS revenue growth in the current quarter than you guided too.

I think the human resource outsourcing in total, we're reaching nearly a million client employees now and between our product sets and I think that need continues to grow. So, we're feeling good about overall HR outsourcing solutions that we're providing. So I think that’s going to continue. The need as these rules keep getting more complex, whether it’s time and attendance or minimum wage or ACA even for this year for many clients now starting to even pay attention that didn't last year as the rules and deadlines are really sticking this year as opposed to being delayed last year. I think that needs are going to continue to increase and will do well in that in that category.

Thank you.

Our next question comes from Rick Eskelsen from Wells Fargo. Your line is now open.

Hi, how are you? Thank you for taking my question. The first one is just a quick follow-up on the question related to the timing of attendance products. Can you just confirm that, that’s in HRS piece of the - how you reported. So if there is an uptick, it would be in HRS.

Yes, I'd confirm two things, one is, yes it is and second, we did see an uptick.

Specifically from the time and attendance?

Yes, we did.

Okay. Then the next question is just more of a sort of a philosophical one about service versus technology, would you guys having built out your technology platform and just got the full functionality here and you’re turning up the dial on some service investments, maybe if you could just talk a little bit about how you view service relative to technology and the competitive differentiation there. I know in the past you’ve talked about how you think your services, a big strong differentiator. So just what, how do you view that now and what do you think the investments you’re making are going to do to continue to deepen that. Thank you.

Yes I think so - we’ve always been very much known as a service company and our technology was really more internal that next external for the client facing in beginning about six years ago, we really ramped up the investment and technology. And I think the technology becomes part of the service story, clients want to do more themselves, they want to do it online, mobile, they want to do and how they want to do it when and where they want. And I think that the investments have been very balanced in both technology and service from a service perspective, the big investments, particularly the last few years have been driving now multi-product centers, so pulling our folks together to service multiple products in those bundles together driving a little bit more self service, so clients can do more things and their employees can on the web around mobile apps. I think it’s always going to be about service, it’s how you define service and the service definition has become a lot more about technology and how easy it is for clients to use it, if they want to use it and when and how they want to use it. So we feel very good about the balance of investments that we’ve made in technology and service and continue to make.

Thank you very much.

Our next question comes from Kartik Mehta from Northcoast Research. Your line is open.

Good morning, Marty and Efrain. Marty, I wanted to ask you about, you talked about ACA and that being a benefit, I'm wondering as you look at the HRS business, how much of a benefit do you think that is and can it continue into next year or do you start comping against that next year?

Well, I think you do to some degree. Obviously, even last year the big sales opportunity was that initial push for the majority of our existing clients to say, hi, you need this and we sell it to them. We've done well there with retention in the sales last year now you’re selling more to those clients that in our client base either weren't. We’re not aware of it, it didn’t apply to them or they just didn’t bother to buy it and they're trying to get through it on their own and then new clients coming on of course that now needed we’re changing. So I think you’ll see that has some impact this year because there’s not as, obviously as much opportunity as last year. But, but what then on the other hand, we see time and attendance in the overtime regulations as the new opportunity not quite as big as the ACA opportunity, but I think, yes the comps will get tougher on that only but more to last year because you had that initial, I can sell a lot of clients that my existing client base that doesn't have it.

And Efrain I know I apologize, I know I’m parsing words here but I just want to make sure if you talk about checks per client not helping, was it a detractor or was it just neutral?

It actually had a slight, a slight negative effect largely due to mix, but we’ve been that’s been part of the equation over the last three or four quarters - certainly last three quarters.

And then just one last question, Marty. Advance Partner seems like that acquisition is going well, I just wanted to get your thoughts on your ability to maybe consolidate that industry more and make it a bigger part of Paychex. Is that a possibility now that you own it and just your perspective on the industry and the Paychex's ability to grow in that?

Yes, Kartik I think it is. I think there is an opportunity there that if we've seen the leadership team there and their results have been very positive and better than we've expected and as we've gotten to know that industry little bit more from the leadership team there and now getting to know the business even better, we do think there is an opportunity for more roll up there with various smaller firms, there is a tremendous amount of companies that do this on a small basis and our niche kind of oriented and I think it really benefit from a consolidation strategy there. So we're certainly looking at that and trying to be very opportunistic and see if the evaluations are correct and I do think we have the capacity to do that and the leadership team there has capacity to do that.

Thanks, Marty. I appreciate it.

We have a question from Tim McHugh from William Blair. Your line is open.

Good morning. It's Stephen Sheldon in for Tim. First, now that Paychex Flex is out in the market and most products are on the platform. I guess where you're guiding kind of incremental investments spending at this point?

Well it continues to be into that product like when you think about I think now we are getting more probably fine tuning - when you think about time and attendance for example, we saw that the existing module is very good for mid market and more complex clients, but we had a real opportunity one of the difficulties with time and attendance is somewhat complex to get started and that tend to turns clients off sometimes. And so we scale down and rolled out the Flex Time Essentials now just this quarter. And so I think you'll see continued investments like that. The other thing is analytics. We are getting more into data analytics and using our reporting packages to guide - to make them more flexible and easier to gain data out of the reporting packages to offer data analytics to our clients frankly of all sizes, and you'll see continued investment in analytics and reporting. And I'd say as well, continued kind of adding more kind of bells and whistles. At the same time we're building out a simpler interface to HTML5 for all of our products and mobile first design. So everything is being designed now mobile first and so that it can be used very effectively on our mobile approximately, as well as then expand to whatever device you are using. So more products finding niches where the product like Flex Time Essentials can be used and the design itself making it easier to use.

Okay. That's helpful. And then I think you touched on it little bit before, but just wanted to ask about usage of cash on this point and maybe an update on the M&A environment and the pipeline you are seeing? Thanks.

I think earlier I answered the question on Jason might have asked about share repurchase. So we'll do share repurchases to combat some dilution that we are seeing. So that will be part of it this year and then the M&A pipeline is pretty robust. So there are number of opportunities that we see could use part of that cash or all of it. So we are - we continue to evaluate those frequently get down the road down and then for whatever reason it doesn’t look up to pretty choosy, but we think there is opportunities out there and that's why in part that cash is there.

Thanks.

Our next question comes from David Grossman of Stifel. Sir, your line is open.

Hi Efrain, Marty, good morning. Just quick follow-up to one of the question I think Marty you'd mentioned in response to the Affordable Care Act, you said you were pretty much comping against that strength already this year, I just wanted to make sure that I heard that right?

I think well what we are having against is yes that big first burst last year that we had been able to sell a lot to the existing client base, that didn’t have it. Basically went from no one having it to a large number of our clients having it. Now you are selling to those clients that now needed because their situation changed, they're new clients, or they just didn’t bother with it last year because they thought it didn’t apply to them. So, it does put a little bit of a push on us that we've got to surpass the initial growth rate last year.

So stated differently, I think the spirit of the other question was that going into fiscal 2018 you wouldn’t really expect much of a headwinds from whatever thrust you got or incremental sales you got from the Affordable Care Act last year?

No, not in 2018, actually more of the pressure is this year because we are selling…..

Right, okay. And then the second question I had is, this week one of the ERP vendor mentioned that they were moving down market and I think the way they characterized this was about 250 employees. And I know that probably above your sweet spot, but I'm just curious what your views are on that segment given that it seems to be getting increasingly crowded and then if you could tie that into your comment about the use of -- the increasing focus on technology and more interaction if you will with the end user?

Yes, I heard we’ve -- I'm not sure exactly who that, because I guess I haven’t seen that, but there is a number of over the years that there’s been a number of large players who have said, hey, I am going to come down into that below 500 market and capture that. And the issue is, usually they are very heavy in technology and complicated technology and have a hard time bringing it down to a business that has an HR Department of one to five to 10 people, and making it simple for them to use, affordable for them to use, and then being able to service them and keep the margins that they're used to. They also tend to be much higher in software development, typically and technology only then knowing how to service those kind of clients. I think we've had obviously a track record of moving up and our -- we do feel like in the mid-market our sweet spot is certainly, anywhere from 20 to 500 in that mid-market space. We used to think it was 50 plus, but it really has come down some with the need to the business. So it doesn’t -- I don’t -- we haven’t seen much change in the competitive environment and while I'm always concerned about changing competition, we don’t see anybody right now knew that’s coming down, that necessarily could be that successful. But, hey, that’s why we got to keep our products and service great, so that we can certainly compete with anybody.

Right. Can give us a sense for just kind of important the technology is versus the service, as you migrate between these different break points in terms of employees?

Yes. I think the technology gets more important as a component of service when you get a 100 plus, 200 plus, because there are also we are seeing clients move more toward pushing employees to be more self service. But that’s exactly where number of our investments have been going as being sure that whether it’s on a mobile app for the employee of the client, or for the client itself that they can do things, they can make changes, they can view, so they are taking heat off the HR departments of these companies. And I think so when you get a 100 plus, 200 plus, the technology is important, but you better have the service to back it up, because, well it sounds great when those employees got to do something self service, you want to have some place for them to fall back on to call and that’s where I think we are very good at balancing both the technology investment and our service. Particularly now when we have added web chats, 7/24 service, multi-product centers all those are appealing to that group that’s looking for technology, but once it fall back to personalized committed service.

I got it. Thanks. That’s actually very helpful. And just one last question. Efrain, for the headwind when do we actually anniversary that on the balance?

That’s a good question. I think we're going to -- we'll battle it most throughout the year. So I think probably somewhere in third and fourth quarter, my guess is probably more fourth quarter.

All right. And then it does not then it flattens out for fiscal 2018?

David, yes, I would expect that and then every year we go through another round of seeing what’s happening with unemployment rate. So we could have variability.

Great. Thank you.

Our next question comes from David Ridley-Lane, dialed in for Sara Gubins from Bank of America Merrill Lynch. Your line is open. David Ridley-Lane: I wanted to ask about the pace of service headcount additions to support the midmarket and maybe Affordable Care Act offerings. Are you currently at the plan staffing levels, are you planning to continue to increase through the year.

Yes David, at this point we’re at the planned levels, we're stepped up in all areas. And we’ve got full complement of what we need we feel unless the sales pick up more than we thought, but we feel very good about where we are. We've also made some technology changes to make it easier for a client to give us the information and for us to file because there won’t be - we don’t expect any delay in the filing requirements this year. So we’re fully staffed in and ready to handle it. David Ridley-Lane: Got it. And then on the adoption of same day ACH payments, would that have a potential negative impact on your client float balances over time.

I’ve been asked a couple times so same day ACH if it reached widespread adoption could impact short term cash balance, probably not long-term. It also has a benefit in that you may be able to get additional fees for running very late payroll. So it's too early to tell. I would say, it’s a very modest negative but that would depend on it being adopted in a widespread way.

Yes, we've really seen is - it’s a benefit to our clients that have a last-minute change or something as Efrain said, there might be some revenue opportunity there. There is also a great service opportunity where someone a client makes an error needs a last-minute change, we’re now able to work that through the banking system with the ACH and so we’re not expecting it to be kind of like a basic payroll, where that's the norm, it’s more an additional service really that we can provide. David Ridley-Lane: Got it. And then just a quick numbers question. Does the new $350 million buyback replace deal authorization?

Yes, yes. Basically we cancelled that out in start with 350. David Ridley-Lane: Got it. Thank you very much.

Our next question comes from Gary Bisbee from RBC Capital Markets. Your line is open.

Hi guys, good morning. First question, does the new share-based payment accounting treatment, assuredly thinking that as a discrete impact on the quarter, or is that going to be an ongoing impact of putting this and if so do you have a sense what you’re expecting in the remainder of the fiscal year and moving forward.

Yes, so good question. So it is discrete and it will remain discrete when we, when we recorded in a given quarter. It could have modest impacts in subsequent quarters, we’ll call it out, we don’t expect that will have the level of impact that it had - that it had this quarter. So I’ll just leave it at that.

And was there sort of a catch-up impact or was this just - that there was for some reason bigger tax benefit than normal from options this quarter and now that close the P&L versus historically didn't?

Yes, there wasn’t a catch up - without getting into the weeds on the mechanics of the computation which are complex, sufficed to say that the combination of an increase in share price coupled with an increase in share exercises ended up creating a situation where we had more benefit in the quarter. And this will happen periodically throughout in the future. And we’ll just call it out when it happens. We don’t anticipate that it will be as sharp as it was this quarter.

Okay, great, thanks. And then there's always a lot of questions about the payroll growth versus HR and I guess it seems to me that you alluded a couple of times that may be the distinction isn’t as strong as it was in the past. But from that perspective, can you just help us understand how much of your selling efforts headcount time in the field, however you want to talk about it, its focused on upselling more components, the broader product set into a pretty sticky in large phase versus people who are out there prospecting for new payroll customers. Has that changed is it more of the focus selling more stuff in the base today than it was in the past?

I don’t think is changed. Well, obviously there is lot more opportunity, but I would say you know probably if you thought about core payroll and that sales team and then the way MMS the mid market team goes after, probably 40%, 50% is still on acquiring new clients and going after them and getting them on board and then the other 50% is really there - when you think about all of HRS really they're selling into the base for the most part. And then a number of the core and MMS payroll teams are back selling more clients - more products, but I'd say it's probably around 50-50 and I don’t know if it's changed all that much. I think they are focused though on selling the full package upfront is different. So it's a little bit different than the way I was probably you're thinking about it. We sale a lot more full package right upfront, our old style would be so payroll you get used to us, you get happy with us. Six months later I come back and see if 401(k) is value to you or workers comp or health insurance. Now what we are finding is clients want the full value upfront. They want - they have a full need in mind and it's not just they want payroll for now and then I'll come talk to me. So we are selling more and what we call integrated sales approach where multiple teams will go and see a brand new client and sale them could be everything including HR outsourcing because that's what they really were looking for and payroll was just coming along with it. So but I think if you say 50-50 roughly that would be fine, it just a focus is very different now for the sales team every from core right through.

And then can you just give us an update on penetration of some of the key categories and what's getting factor to further penetrate and whether it's 401(k) or full outsource than some of the other major product categories, is it price, is it you are getting out and telling the story what can you do to drive that penetration are?

Well that's something obviously we are always looking at. I think the penetration rates are still pretty low, so lot's of opportunity there for us. I think it's a combination of all of those. It's a combination what is the client see the value and for like 401(k) for example and or do they feel the pressure from their employee base. We are feeling more clients come to us for products like insurance and 401(k) because there is - it's harder with full employment are moving towards full employment, it's harder for them to capture new employees unless they have the benefit packages that they might not have needed two years ago in order to compete for their employees. So it's the need in the market. It's a value to the client and it's execution. Obviously, we spend a tremendous amount of time training, making sure the products are available, making sure that we have the training and all the sales force tools. We've added tremendous amount of tools to the sales force, data analytics what clients we have that are most likely to buy 401(k), most likely to buy insurance, sales force all of that tools all helped execution. So it's a number of things, I'd say penetration rate still give us tremendous amount of opportunity. We are moving them up, but there is still lot of room to grow and I think we are putting everything in place to be successful about it.

Great. Thank you.

Our next question comes from Tian Jing Wang from JPMorgan. Your line is open.

Good morning. I was going to talk to you guys. The slides - just looking at the slides it looks like on the cash the long term capital strategy page you are talking strategic accretive acquisitions. I'm curious accretive is that sort of one year sort of ambition or is it - are you telling us where we shouldn’t expect any dilutive deals from there.

I would say that's a long term issue and when I mentioned this, look if the technology is right we think there is a strategic advantage in buying a company for example SurePayroll that would not accretive we'll do it. So every deal is not going to be accretive right out of the gate, some aren’t. So we are pretty tough on the criteria of dilution in the first year, but if it makes sense we look at it.

Understood. That's good to know. And then just on the overtime legislation, you said there was a little bit uptick in this quarter, but is there a time frame which we might expect a more significant uptick and tax rate on time and attendants?

Well, I think we actually have pretty good uptick double-digit growth in this quarter and I think it will -- my expectation would be -- it will be into the next couple of quarters that we’ll continue to see sales do very well with time and attendance. As we are getting closure to that December 1 time frame, this month, next couple of months should see probably the biggest benefit. But I think after that I think clients are really just kind of making themselves aware. But the other thing is -- there is a lot of discussion in the news about, will it be over turned, could it be push back through some court proceeding, but we don’t see that happening at this point, but that could be making clients say, I'm going to wait and see how it happens. So it should be a good year overall, certainly for time and attendance, but I think that this next quarter, this quarter and next quarter probably the best.

Got it. So going into and coming out of it we could see little bit of lift, that’s good to know. Then just lastly just I know there is a lot of questions around payroll and HRS, but just broadly speaking for the quarter how did each of those lines come in versus your internal plan?

They were within the range of expectation. So -- I think that’s part of what we look at every quarter is and try to understand what we think trends are and adjust based on what we are seeing. You can see we didn’t change our guidance on income, fine tuned revenue actually HRS services had a strong quarter. We’ll see where we end up year, but overall we think we are in the range of what we expected.

And we feel good about how we are positioned; we've got fully staffed. From a sales rep standpoint, we grew pretty much all the divisions, but -- in particularly the payroll divisions and that’s getting kind of these new reps -- the newer reps to get up to the production that we like to see. But we're fully staffed in that group. We're are fully staffed in the service teams to handle ACA, which was you know struggle last year just there was just so much change going on there and so we feel good that we are kind of on target for what we expected.

Great. Appreciate the update.

Our next question comes from Mark Marcon from R.W. Baird. Your line is open.

Good morning, Marty and Efrain. Thanks for taking my question. Just on the HRS services could you just talk about like what are the two most penetrated solutions that you are currently offering and what sort of penetration rate that has in order to give a perspective in terms of the opportunity for further cross sell?

I think the two most penetrated would probably workers comp and the insurance and 401(k), and but the biggest opportunities are still 401(k) certainly and I think we’ve talked about it. We expanded the last -- roughly now two years until what we call large market 401(k). So where we focus a lot on new plans for the first almost 18 years of having the product. The last couple of years we added a whole team which is expanded on conversion plan. So larger asset plans and that group has been doing very well particularly in first quarter we had some nice growth there. So we are building relationships with brokers who refer us now and as these rules get more complex for brokers I think they are bringing our talented kind of tenured team on the large market in the more deals. So that’s very good. So lot of opportunity in 401(k) and lot of opportunity in HR outsourcing would certainly be the next largest meaning ACA -- I am sorry, ASO, PEO and HRE or HR Essentials. So biggest opportunity as big as revenue basis and opportunities that grow I think are 401(k) and HR outsourcing by far.

Okay. And what’s the penetration rate currently?

On HR outsourcing you know less than 10% and if you look at client employees, I did say that we're approaching a million worksite employees and we put out about 11 million, 12 million W-2s. So we are little less than 10% on the employees that we are servicing and not all of them will need it based on their size, but we think that their penetration rate is less than 10 and certainly has a lot of upside.

That’s great color. And then with regards to -- there is clearly a greater emphasis with regards to selling more modules upfront when first sign a client. Can you give us a little bit of perspective in terms of over last couple of years how that’s changed in terms of like typically we used to sell maybe three modules, with the brand new client and now we are up to five, six et cetera like what’s -- what you are seeing on average with new clients, above the smallest clients that you might have just be signing up for this payroll?

I would say, it’s hard to look at it, because the way we bundle it we don’t think of it as quite as models, but I would say that, probably 25% of the clients to 30% of the clients are taking something maybe 20% to 30% are taking something more right now. This is relatively new approach to the way we’re selling, because we’ve had so many years of selling payroll then coming back. I think if you're asking how many do we sell a larger bundle upfront. I’d say its closer; it’s more in the 20% to 30% range that we’re selling a bundle versus payroll only and in it has at least one additional service or module with it. I mean we’ve seen the revenue per client has been, we’ve been successful at driving up that revenue per client year after year. So it’s probably the last couple of years. So I hope that helps.

It does. And then you mentioned checks per client not getting as much help partially due to mix, where are they -- you’re not selling as many like tiny clients anymore are you?

We sell small, I mean we absolutely compete very well, its an interesting point Mark. So, there is a trade-off between, if you’re going to go get clients you have to take them away or you have to get them new. And I think we’ve been doing very -- we’ve been very effective particularly in the fourth quarter of last year, we had very good unit growth. So we continue to see unit growth and there is a little bit of a trade-off between unit growth, the unit growth, we’ve been seeing, which has been between 2% and 3% and size of client. So that impacts a little bit. It has a little bit of a drag on growth in the short term not in long-term.

And tiny, I was talking like the sub six employee?

Yes, yes, Mark, absolutely, but a lot of new clients are in that category, absolutely.

Remember, we're still get great referrals from CPAs and so forth. And so we’re still seeing 50% of the sales are coming from brand-new businesses, and Efrain said a lot of those brand new businesses are sub six.

Okay, great. And then client retention, I didn’t hear any comments there.

Yes, still feeling very good about it. We’re right on plan. It’s remained at pretty much close to highest levels of client retention. So right now we feel very good about it. It was a good quarter, continued right through from last year.

Great. And then lastly on just the strategic acquisitions, you mentioned maybe it was -- maybe I misheard, but I thought I heard you say potentially could use all of the cash. Is that, I mean, that sounds unusual relative to what you’ve done in the past?

No, I guess, what I was saying, Mark, is that we have opportunities in the pipeline that could use all of the cash. It doesn’t mean we have an opportunity that’s going to use all of the cash.

I mean that would not be the expectation.

Yes, that would not be the expectation.

Great. Thanks for clarifying. Congrats.

Next question comes from Lisa Ellis from Bernstein. Your line is open.

Hi, good morning. Thank you for squeezing me. Just wanted to follow up on the comments related to the Accountable Care Act. Now that you’re into the first quarter, I know there’s been a lot of debate about whether this year is going to continue to be strong in Obamacare as companies that didn’t choose to comply last year due this year versus whether they’re sort of a hangover effect or not. So how are you feeling about that now that you’re a few months in?

Yes, so we’re -- I think the point was, Lisa, that just that last year, it was kind of that first chance to go after the entire client base, nobody basically have the product. There are a very few, and so we’re able to sell a lot in the particularly in the first few quarters of the year. And now when you anniversary that, we’re still selling the product, but there’s not as much opportunity there. So I think then the question was what does it look for 2018? 2018 won’t be much of an issue because I think we’ll be very consistent with 2017 to 2018. But 2016 to this year, 2017, there is some impact that we’re not selling as much. On the other hand, we’re selling more of the time and attendance solutions, but their revenue is not quite as much -- the opportunity is not quite as much there. And it’s not as probably as far-reaching or as demanding or as creating as much angst with clients as the Affordable Care Act was because of the penalty situation. Now the overtime stuff could start to pick up if enforcement picks up as well. But I think that’s just going to take a little bit longer. So again, it’s having some impact versus last year, but it’s not a huge thing, but it’s having some impact.

Yes. And are there other regulatory changes or rules on the horizon that you would call out like that you see sort of steady pipeline of these real thing considered either at the federal level or in certain states that would kind of continue to drive the incremental secular demand from the regulatory changes?

Yes, there hasn’t been - there has been a steady flow based on current administration and probably won't change much in the election which could have some impact, but minimum wage for example right now it's extremely confusing for our clients minimum wage rules are different by state, the Feds talk about changing minimum wage they have for government, but some of those are in that tied into government, but states are different, cities are different and we really help a lot of our clients help - we help them through our payroll service only or our HR outsourcing to stay up with minimum wage changes because not only are they are not changing ones they are changing over period of years and you have to make sure that you stay current with those. And there is a lot of work on identifying like who is a the kind of immigration type things, who is - you got to know your customer, you got to know your employees, you got to make sure you got all that well documented. So the rules keep coming, I don’t think that helps necessarily the business environment in general because of over regulation, but it certainly gives Paychex a lot of opportunities to go and talk to clients about their payroll need and their HR outsourcing need, because small to midsized business is just can't keep it up with all of these changes. The other thing is that enforcement and the penalty have increased as states and federal governments have looked for revenue sources. So not only is there an issue about whether you are compliant, but if you are challenged on your compliance, we can provide a tremendous amount of help. If you get a penalty in payroll, if you get a penalty for a time issue - a time and attendance issue, we're there to support you with expert documentation and background and relationships with federal state and local governments and that's a big plus that we sell to clients, but they don’t realize sometimes until they are hit with an audit or enforcement penalty.

Got it. And then just one final follow-up. I think the last couple of quarters you called out the dynamic in the client base that's been interesting, I think overall average employees per client have been slightly trending down due to the strength in SurePayroll and there is new business formation on the low end, but then at the same time your mid market offerings have been performing well. So it's almost like Barbell kind of effect, or you continuing to see that sort of trend in the client base or anything else like you called out?

Yes, let me just provide little more color on that. Yes, if you look at average client size is down very, very slightly that has an impact but you are right the difficulty is you can't see that completely in payroll, so if you look at our mid market platform taken as a whole including the module that are typically sold with our HR online and time and attendance, you see nice growth over the last two or three years. Payroll has done fine too, but it has a little bit of that headwind because of slightly lower client size driven by some positive which is increasing client growth. So, we've gone from growing the client base of 1% to growing between 2% and 3%, hopefully that continues to grow. The reason why we are not as concerned about that is that those clients eventually become larger and purchase more services. So we want to keep the funnel reasonably open at the top.

Terrific. Thank you. Good clarification. Thanks.

Our next question comes from Ariel Hughes from Wedbush Securities. Your line is open.

Hi, Good morning. This is Ariel Hughes. Can you provide us with some color around the correlation between rate increases and float income, specifically around the expected lag time between rate and floating from increases? Thank you.

Typically you're going to see at least one if not sometime two quarter to reflect full impact of the rate increase and then we quantify in the Q or in the K at least that the impact of 25 basis points translates into about $3.5 million to $4 million on an annual basis. So that's kind of the thought process that we have.

Okay. Thank you.

Our last question in queue comes from Glenn Greene from Oppenheimer. Your line is open.

Thanks for squeezing me in. Two questions clarifications really on earlier discussion. So first is on the ACA dynamic from last year into this year. I guess I’m little confused if you’re talking about sales bookings benefit last year or revenue benefit and yes I’m a little confused as how quickly these things convert. And the order of magnitude what we’re talking about is, was there sort of a revenue benefit last year that you're now lapping and is overemphasizing this.

No, just that that’s sales. I’m sorry, just to be clear, glad you asked the clarifying question, that from a revenue standpoint it’s sales perspective. So I’m just saying that we had a big sales impact last year – we've had a good sales impact last year as we sold the client base, but this year so sales have come down some in the ACA product itself. The revenue because the retention of the clients has been fine and so and there hasn't been any price change really associated with that product or anything else.

So I guess the natural follow-on is the magnitude of the revenue benefit that you’re realizing in fiscal '17 related to that.

Yes, so Glenn I was asked this periodically during the year, we got about a point benefit last year on revenue from additional ACA, ACA revenue and obviously we're anniversarying that and it’s incorporated in the guidance and are dealing with that, that's slight drag and particularly in HRS.

Okay. And then I know Efrain you went through this in great detail and I appreciate, I know you want to have clarity out there, and I hate you go back to the guidance but I can tell there is still something huge and so I’m going to be specific. So what you’re talking about is take the reported fiscal '16 net income or roughly $757 million well at 7% and then just for sake of argument, we can argue with the fully diluted share account but just using this quarter at 364, we’re talking 222 to 223 in EPS and maybe you get some benefit from share repurchase.

Yes it depends on what your assumptions are around shares et cetera. But yes, you’re right.

Okay.

And the reason is maybe I'm being too helpful. You’re going to have a set of reported numbers last year. We're going to have a set of reported numbers this year. I can't give you guidance this year that now excludes one thing in one year and another thing in another year. I could have just done it and say, hey, it is as it is. But my concern is someone's not going to pick up a number that they should. The other thing I would just say is that we want to stir as much away from providing guidance that's not on a GAAP basis, so that’s why we try to clarify stuff.

So one last thing, so the lower tax rate, the 35% that you now sort of alluded to in your guide, is that the good run rate to think about obviously beyond fiscal '17?

35% no, Glenn, because we’ve got a benefit in the first quarter. So that’s why you - if you remember our guide at the beginning of - in the fourth quarter we guided to 35.5% to 36%. That's a better number than the 35%. The 35% benefits from this one-time benefit we got in Q1, which is from the one-time benefit we got the prior year.

It makes sense. Okay. I got it, thank you very much.

Speakers, we show no questions in queue.

All right. Thank you, Jim. Well, at this point, we'll close the call. I just want you to know that we appreciate the interest in questions. We feel very good. As we said, we’re staffed up and ready. We’ve increased our sales force. We feel good about the product and the technology and service investments we've made, and I think we’re off to very consistent and good start. At this point, we’ll close the call. And if you’re interested in replaying the webcast of this conference call, it will be archived for approximately 30 days. Our annual meeting of stockholders will be held on Wednesday, the 12th, October 12 at 10 a.m. in Rochester. And that meeting will be broadcast simultaneously over the Internet as well. Thank you for taking the time to participate in our first quarter press release conference call and for your interest in Paychex. Have a great day.

That concludes today's conference. Thank you so much for your participation. You may now disconnect.