We do — we have businesses that do that. But I think, in general, you should not read anything more into this than the fact there is a need out there that we had an adjacent business that has been very successfully managed and has been a good return for our shareholders. And there was a natural relationship and opportunity that we thought by us coming in with our balance sheet, with our expertise, with our client base, that we could potentially make something of this. And so, I don’t think you should read anything more into it than opportunistic acquisition that matches a need that we are seeing today from our customers, and one that based upon the macroenvironment, we think we are going to grow. And I don’t think this is competition with any of the major banks.
Most of these clients are just not getting access to the funds. It’s just not available. And if there’s more tightening at the regional bank, which is generally the go-to place for small and medium-sized businesses, that’s not good for small business owners. And so, we are going to try to figure out how we can build partnerships to do that.
Peter Christiansen: Well, thank you. That’s super helpful. And then just as a follow-up, just wondering if you could call out any trends balance of trade-wise, are there areas where you see Paychex has an opportunity to improve the competitive dynamics or vice versa some areas where you’re a bit more on defense versus offense? Just any sense on balance of trade versus some of your competitors and maybe some of the regionals as well?
John Gibson: Well, I’ll just say this, as we’ve talked about our sales momentum continues in the first quarter that we saw in the second quarter, on the macro side, when I’m looking at it, I’m not seeing any major shifts at all relative to balancing trade in the competitive environment. I commented on the fourth quarter. When I do look under it, again, these things go back and forth. I would say, it’s raining a little more in our favor on the competitive front in several key areas that we monitor. We had a good first quarter in the mid-market. That was — there were several good signs there as well, but it’s not monumental. It’s the same market, very stable competitive environment. Same set of competitors, low-end, mid, high-end PEO. It’s the same cast of characters, same kind of pricing environment, competitive environment. It’s a competitive marketplace. We’ll leave it at that, and I think we are winning more than our fair share.
Peter Christiansen: Yeah, for sure. Thanks again, and congrats, Efrain. Good luck.
Efrain Rivera: Thank you.
Operator: And we’ll take our next question from Bryan Keane with Deutsche Bank. Your line is open.
Efrain Rivera: Hey, Bryan.
Bryan Keane: Hi, good morning. I wanted to ask about the free cash flow increase year-over-year in the first quarter, it was substantial. I think it was up over 23%. How much of that was that one-time in working capital? And how much should that carry through the fiscal year? Or should we see a decreasing kind of growth rate in free cash flow to equal out the same growth of the 9% to 11% earnings growth by the time we get to the end of the fiscal year?
Bob Schrader: Yeah, Bryan, this is Bob. I mean I think that’s a fair way to think about it. I think as you guys know, we typically don’t have big swings in our working capital. And as Efrain mentioned, we had a little bit of a timing there at the end of quarter. The quarter ended on a big collection day, so we had a big influx of cash that would go out the next day. So, the way to really think about our operating cash flows and then, obviously, free cash flow gets impacted by M&A. So, there was a little bit of an impact there in Q1 to free cash flows. But typically, our operating cash flows growth is going to trend in line with our net income growth. And so, you’ll see that moderate as we move through the year and that’s what you should expect from a growth standpoint.
Bryan Keane: Got it. And then just a follow-up. I was hoping to get an update on what you guys are seeing for SMB bankruptcy rates. I know they have been a little bit elevated in the recent past here. And just curious if that’s still at elevated levels or is it become more normalized?
John Gibson: Yeah, no — so, when we say elevated, I think that they are elevated over what we saw during the COVID period that’s two, two-and-a-half years. Actually, bankruptcies are still slightly below where they were pre-pandemic and kind of trending toward a normalized rate. We have seen that. I would say, particularly in the start-up businesses when we had the big start-up boom, we’ve seen a lot more out of businesses on the very small — I think we called that out in our press release. Revenue retention at near-record levels, and when you look at our HR outsourcing businesses at record levels. So that’s what we’ve kind of seen on the bankruptcy side. The other interesting stat related to bankruptcy that kind of surprised me in the first quarter is we actually saw an uptick in new business starts.
And again, we had this big elevated area and then we kind of gravitated back down towards kind of normal levels. And we actually saw in the first quarter new business starts click up, which was interesting.
Bryan Keane: Got it. Great. And Efrain, it’s been a real pleasure working with you. You’ll be missed.
Efrain Rivera: Thank you, Bryan. Appreciate it.
Operator: And we’ll take our next question from Samad Samana with Jefferies. Your line is open.
Samad Samana: Great. Thank you. Efrain, I’ll echo, missing working with you and enjoy a well-deserved retirement, sir. Appreciate all the help over the years.
Efrain Rivera: Appreciate it.
Samad Samana: Maybe just a quick one for me. A lot of the questions have been asked. But just how are you guys seeing the top of the funnel in terms of inbound leads, the digital channel? Any change in maybe interest levels, registrations for webinars, just anything that we can look look at as a leading indicator of bookings? And how has that trended maybe in first quarter?
