The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Andrew Owen Nicholas - William Blair & Company L.L.C., Research Division - Analyst
: I wanted to start on the PEO and Insurance Services segment. Obviously, growth came in on the bottom end of the full year range.
You're now guiding to kind of lower end of the range for the full year. I know you mentioned some weakness in the insurance business
this quarter.
Is there anything else to call out within that business that surprised you, whether it was the upside or the downside? It sounds like
existing clients' hiring activities are still quite strong. Sales are good. So just want to make sure I understand all the dynamics there
as well.
Question: Andrew Owen Nicholas - William Blair & Company L.L.C., Research Division - Analyst
: Great. Those comments were super helpful. For my follow-up, I just wanted to ask a bigger picture question. You mentioned the HR
Tech Conference in your press release and I think again in the prepared remarks. And I, personally, I was impressed by the number
of vendors at the conference and the level of innovation really across the sector.
So with that in mind, given the number of new products, the amount of money that's come into the space over the past several
years, just wondering if it's changed how you kind of think about the build versus buy equation.
Does M&A make more sense today, given the rate of change in the market and how rapidly new products are being built and gaining
adoption? Essentially, just want to get your thoughts on build versus buy, appetite for M&A, given all that's going on right now.
Question: Eugene M. Simuni - MoffettNathanson LLC - Analyst
: So I wanted to come back for a second to macro. I'm hearing loud and clear what you guys are saying that you're not seeing any
signs of recession slowdown in the employment numbers and still a very tight labor market. That's clear.
I wanted to ask about a slightly different metric, which is, let's say, businesses' willingness to invest in new technology, right? So
situations where you would get real upgrades, feature additions or maybe switching from a legacy provider to you guys, things like
that.
I'm curious if you're seeing any incremental caution across your small business customers on that even as performance remains
strong as people just get more cautious looking ahead. And if not, then, in your experience running this company for a long time,
when times get a little bit more volatile, can we expect that caution to increase? And why? Why not?
Question: Eugene M. Simuni - MoffettNathanson LLC - Analyst
: Got it. Okay. Okay. And then for my follow-up, probably a question for Efrain, actually switching gears a bit. We talked about the
margin dynamics over the short term already a bit, so I understand there's kind of ups and downs for the quarter. But I wanted to
touch on the longer-term margin dynamics for a second.
As we are now moving away from the COVID pandemic and settling more in maybe the steady state where digital channels have
become a bigger part, digital buying has become a bigger part post-pandemic of your model, how are you seeing that really impacting
structural margins of the business as we kind of get more experience with that maybe more digitally-focused model, I'm curious.
|
