To give you a little bit of a line of sight, because it is the 31st of January, so we do actually have a tiny bit of visibility specifically to the down market. And you asked about trends into the third quarter. What I would offer to you is January looks good. I think we’re actually on track to onboard something close to like 30,000 units in that business alone in the month of January. And so, that’s the size of some companies, if you will. So, it’s pretty incredible to see the execution in the down market. We have solid pipelines really across the mid-market as well as off-market. The mid-market did incredibly well in the second quarter. From a competitive standpoint, I think we get a lot of questions around the competitive landscape. Has it shifted in the mid-market?
What I would offer to you, it hasn’t really shifted. It’s been a competitive space per us for a long time. It’s an area for us that we’re executing very, very well. We have best-in-class products. We continue to take friction away from our clients, make it easy for our clients to engage with us. We know this based on our results and retention. We know this based on our results and record NPS. We had good bookings in the mid-market. So, I think the mid-market is solid and certainly not getting any easier for our clients to be employers in the mid-market. As it relates to the international space, I think I covered that already, so I won’t touch much more on international, but a good Q2 on the heels of a good Q1. And then in our enterprise and upmarket space, this is an area that has normally, I think it’s kind of the new normal on longer deal cycles that have more individuals involved in those cycles.
We’re paying close attention to it and certainly all the things that are happening kind of across that space. But I would suggest to you that we feel relatively solid about our pipelines and our ability to bring that business in the back half.
Scott Wurtzel: Great. That’s helpful. And just a follow-up for Don, just on the float income guidance, sort of noticed a pretty notable increase on your outlook for the client short portfolio. So, just wondering if you can maybe give a little bit of color on sort of the changing geography on those investments for the balance of the year. Thanks.
Don McGuire: Yes, so maybe let me clarify that for you a little bit. So, really, we haven’t changed our investment strategy at all. What we have done is we’ve tweaked a little bit the way we’re going to – we were borrowing funds in the market day in, day out. So, what you’re seeing is, we’re actually entering the market a little bit early. So, instead of borrowing everything we need to on a peak borrowing day, we’ve simply spread the borrowing out over two, three days so that we can tap the market in a more – in a smoother way, if you will. And I think if you’re looking at the average balances on that – on the appendix sheet that’s in the release, you’ll notice that that number’s gone up in the short fair bit, but that’s the driver. So, it’s not a change in our investment strategy at all. It’s just a change in a bit of a tweak in the way we’re actually borrowing funds in the market when we need larger amounts of – when we have larger amounts of borrowing.
Scott Wurtzel: Great. Thanks, guys.
Operator: Thank you. Our next question comes from Bryan Bergin with TD Cowen. Your line is open.
Bryan Bergin: Hi, good morning. Thank you. First question I had is on EBIT margin. Can you comment on what drove the outperformance versus your view for that to be down I think in 2Q? I’m curious if that was an aspect of timing within the year versus better-than-expected efficiency. And I think, Don, I heard you mentioned some GenAI investments to come. Is that incremental spend versus the prior plan?
Don McGuire: So, yes, let me start – Bryan, let me start with the first part of your question. So, there was a little bit of modest revenue outperformance in the quarter. So, I think that was a contributor to the margin. And then we had some expenses. We always have focus on expenses. There’s a few things, a little bit of bad debt, a little bit of headcount, et cetera, and perhaps a little bit of timing, but nothing significant to really call out as a contributor. In terms of the GenAI spend, yes, we are spending a little bit more than we said we were going to last quarter. So, we do have a bit of incremental spend. It’s not a huge amount, but I know that lots of folks like to measure things in 10 bps. So, we are calling it out. Not an incredible amount, but a little bit more than we had said in the prior quarter.
Bryan Bergin: Okay. And then just I guess a follow-up then on GenAI and ADP Assist here. Is that a feature you’re able to monetize directly or more so kind of an enhancement you’re offering for free to drive the CSAT stores higher? And I guess understanding you’re leaning into these developments, do you kind of view it – when you think about the monetization of GenAI products, is this a near-term dynamic or more so kind of feature and product differentiation that’s a longer term monetization dynamic?
Maria Black: So, Bryan, ADP Assist is really the overarching, call it, brand, if you will, that we’re leveraging to talk through all the things that we’re putting into our product to make things easier. The way that I think about it is it’s really just the next phase of digital transformation for ADP using new tools and technology. So, said differently, our intention is not to charge to make things easier for our clients to do business. That is our commitment to our clients, always has been, is to make it as easy as possible to process payroll, to have accurate payrolls. And so, it’s not a monetization effort as it stands. It’s really about just leveraging the new technology to step change the digital transformation that we’ve had underway candidly, for many, many decades since the dawn of the computing era.
So, that’s kind of how we’re thinking about ADP Assist. In terms of monetization in general, do I believe there’s monetization as it relates to GenAI? Of course. I think it’s more about the dollar long term, right? So, I think about it – the dollars that we’re putting in today will yield multiple dollars for us in years to come. So, there will be distinct monetization opportunities as we create new products into the market, as we think about various things of that nature, perhaps features and functionality. There will also be gains in sales and retention that will lead, in my mind, to investments that are proven today in GenAI to drive incremental bookings and retention over the long term. So, I think it’s about putting a dollar in today with the belief that it will yield many dollars of margin to come, if you will, as well as bookings, et cetera.
Bryan Bergin: Okay, understood. Thank you.
Operator: Thank you. Our next question comes from Samad Samana with Jefferies. Your line is open.
Samad Samana: Hi, good morning. Thanks for taking my questions. Maybe on the PEO business, I was curious, I know you guys called out some of the bigger verticals inside of the PEO business and that there’s maybe some more softness there than you’d expected in technology and professional services. Any change in the exposure rather inside the PEO business or within like the big verticals? Are you guessing any change in the trends that you saw maybe over the last couple of quarters?
