We saw that all of last year and definitely the finish last year, and it makes me happy because it’s a lot of the places that, well, good performance makes me happy regardless, but it’s a lot of the places where we’ve been making meaningful investments both in the product as well as the distribution. So excited to see the continued performance there and the outperformance. The overall results do keep us in line with our full year guide. So excited to confirm that again here today. In terms of the overall demand environment and I feel like I’ve been saying this quarter-to-quarter, but we’re not really seeing any major changes in demand. Demand is still strong, demand is still healthy. We see that in our bookings results. There are all sorts of other indicators that we look at in terms of pipelines, in the up-market, in the mid-market, certainly in the down-market.
We’re looking at things such as new appointments and kind of activity, excuse me, activity measures to really give us a guide on whether demand is strong. And I would tell you pipelines are healthy year-on-year and certainly activity is healthy. And so we don’t see a big demand change again this quarter. In fact, it’s kind of the opposite stepping into the quarter on the heels of a strong September. We feel really good about where our pipeline sit year-on-year, which again is giving us the confidence in the full year guide. As always though, Bryan, we continue to keep an eye on the macro. We continue to keep an eye on our global space and international and making sure that we’re understanding both any macroeconomic changes coupled with any demand environment that could shift given everything kind of going on in the world, if you will.
So that’s the current story on kind of pipelines demand in the quarter.
Don McGuire: Yeah, maybe..
Bryan Bergin: Okay.
Don McGuire: If I could add a couple of comments on the macro, certainly macro continues to be pretty positive. Unemployment rates continue to be near decade lows here in the United States. Unemployment rates around the world continue to be quite low. The discussion about whether or not we’re going to be in a recession, I think the odds are now not for a recession. So soft landing is pretty much what is being anticipated. Interest rates are expected to have peaked here in the US. So I think all things considered, things are pretty positive. I think the one area that we put in our original guidance for the year and that we continue to look at is our guidance had in fact contemplated a slowing and pays per control growth. Maria mentioned that and talked about that in the PEO business, but we are confident.
We are still seeing growth, albeit, we are seeing growth at a slower pace than we had previously. But once again, that was fully contemplated in our original guide for the year.
Bryan Bergin: Okay. That’s helpful. Thanks, Don. My follow-up on the PEO. So heard you, the bookings are a little bit lighter than you expected to start, but you’re also calling out, I think higher selling expenses impacting the PEO margins here year-over-year. So can you — maybe talk about the puts and takes there driving that dynamic?
Maria Black: Specifically on PEO margins? I will let Don…
Don McGuire: No. But I think originally, Bryan, you mentioned bookings were lighter than expected. I think our bookings came in – our bookings came in pretty good, as Maria has mentioned.
Maria Black: Yeah. I think he’s referencing the comment I made around PEO bookings was slightly lighter than expected. By the way, still higher than ES, which we expect to be the case throughout the balance of the year. So that’s the kind of nuanced [Multiple Speakers]
Bryan Bergin: So the question there, you’re also citing higher selling expenses impacting the PEO margin. So it seems like there’s a bit of a disconnect there. Just trying to understand that.
Don McGuire: Yeah. So we had planned the year, we talked about the growth being stronger in the second half in bookings, sorry, in margins than in the first half. And certainly we have seen some investment and some higher selling expenses and we’ll see in the first half than we will in the second half, but nothing really surprising. A little bit off, but certainly we’re in line with what we expected.
Bryan Bergin: Okay. Thanks.
Operator: Thank you. Our next question comes from James Faucette with Morgan Stanley. Please go ahead.
James Faucette: Great. Thanks. I wanted to ask just a couple of quick follow-up questions. First, I think the comment was made that you’re still anticipating a bit worse performance in terms of out of business rates on a go-forward basis, but to-date those have been a little bit better than you had anticipated. Can you help provide some detail as to what you’re seeing, why you think we’re seeing better, survival rates, and kind of the things you may be looking at as indicators that could get worse on a go-forward basis.
Don McGuire: Yeah. Demand continues to be strong in the economy overall, and I think that’s supporting what tends to be this view that we’re not going to enter into a recession. At best, there’s going to be a soft landing. So I think that strong demand environment, particularly consumer demand is keeping small business afloat. So when you also look at what we’re seeing in terms of new business formations, there seems to be continued strength in new business formations. So generally I would say that the environment, irrespective of the higher interest rates, the environment continues to be favorable for small business, and I think that’s translating itself into what looks to be lower out of business than contemplated now. We have continued, as we said in our original guide, and as we will reiterate or update here today, we have continued to think that we will see a little bit more normalization in other business.
So we’d have contemplated that, but we think we are getting closer to where we think we’re going to plateau or hit the bottom there. So I think we’re very close, and once again, I think it just comes back to demand environment. It tends to be supporting the economy more broadly and more generally and small businesses benefiting from that as well.
Maria Black: Yeah. I think if I may, I think the only thing I would add is that it’s still very early in the year, right? So when I think about retention, we did have a record level in fiscal ’23. We were near that record level a year before, we were at that record level the year before that. And so we’ve had this tremendous strength. And I think Don is spot on in terms of all the reasons from a macro perspective that we’ve had that strength in terms of client retention. And so as that normalizes, we believe it’s still prudent for us to have the retention guide that we have, which is really a byproduct of how we planned the year in the back half. So I think I got the question last quarter and so I’ll answer it proactively this quarter, which is, are we just being conservative?
