John Gibson: Well, let me take the last one first. Yes, I would tell you that we talked about the PEO in the fourth quarter of the last fiscal year. We told you about many of the changes we were making across that business. We began to see acceleration there. It accelerated further in the first quarter, and it continued in the second quarter. And it continued both outside the base as well as inside the base. So, as Bob pointed out, this ASO to PEO conversion. So, we’ve seen a very healthy pipeline. And I would say not only in the PEO, also in our mid-market. So, when you look at the two businesses, that are — in summary, if you — if we’re sitting here today in the selling season in our mid-market HCM and PEO, they’re well underway.
They’re really in the final stages. Our pipeline was very strong. And then, the enrollment of the insurance, it was very strong as well. I would tell you that we’re getting back in line to where we’ve been historically. If you remember, we had a little degradation. And actually, what we saw inside the existing customer base was an increase, I would say, maybe single-digit increase in penetration. If you remember, last year, we had some employees in it sign up for plans. We did some things on changing our plan lineup. We did some things in the way we’re doing education and open enrollment there. And the team has done a great job of improving our attach rate within the existing client base as well during this enrollment.
Bryan Bergin: All right, thank you. Happy holidays.
John Gibson: Happy holidays.
Bob Schrader: Same to you.
Operator: Thank you. Our next question comes from Jason Kupferberg with Bank of America.
Jason Kupferberg: Good morning, guys. I wanted to ask a follow-up just on Management Solutions. I mean, I know we’re talking about the lower end of the 5% to 6% for the year. So, you basically need to maintain the 5% growth rate that you saw in the first half, in the second half, despite the fact you’re lapping ERTC, and it sounds like maybe the tone on overall health of SMBs is down-ticking a little bit. So, just wanted to get your perspective on the visibility of Paychex’s ability to maintain that 5% growth in the second half given some of those moving parts out there? Thank you.
Bob Schrader: Yeah. I mean, I can start and then John can add on. I mean, obviously, there is the headwind there with ERTC, but there’s other areas of the business. And although ASO, we had some of the hiring challenges that John referenced as well as better PEO performance, ASO still continues to be a strong contributor to growth, and we expect that to continue to be the case in the back half of the year. We talked about retirement. That has been a really strong driver of growth for us and just really increased product penetration. We expect that to continue into the back half of the year, Jason. That will offset, to some extent, some of the ERTC headwind. And again, we did do a small acquisition. It’s not a huge contributor to growth on a full-year basis.
But again, that will help mitigate some of that headwind as we move into the back half of the year. And when we kind of put all those things together, we would expect Management Solutions to be in a similar growth rate in the back half of the year than the first half — or same as the first half.
John Gibson: Yeah. Jason, I just think the other thing I would add on commentary, relative to the SMB market, we’re not even in really the key selling season. So, we’re just in the selling season. That’s just beginning to kick off, and we have a lot of execution during January, as you know, to go out in the marketplace. So that’s just starting. So, the areas where we are nearly complete with the selling season, the mid-market, the PEO, the high end of ASO, those pipelines are full, much better than last year. And really in that small market, we’re just beginning to enter the selling season with a lot of execution to go in the next 60 days.
Jason Kupferberg: Okay. That’s good color. I know you talked about how you’re thinking about overall revenue growth for Q3 versus Q4, but can you just parse out maybe your segment level growth expectations for Q3 versus Q4, just so we get our models tuned properly? Thank you, guys. Have a great holiday.
John Gibson: Thanks, Jason. Happy holidays.
Bob Schrader: Yeah, I’m just — I’m taking a look at that, Jason. Obviously, the Management Solutions will probably be a bit lower in Q3 than Q4 because of the headwinds that we talked about being greater with ERTC in Q3. And then, the PEO and Insurance, those growth rates are going to be similar to where they were in Q2. And hopefully, when you look at the full-year guidance, the guide that I gave you on Q3, you can kind of do the math and should get you close.
John Gibson: Yeah. The other thing, Jason, I just think, again, on color of this — Bob said that this geography shifting that we have going over last year counter rotated the ASO from the PEO offering when we’re offering both, there’s more movement that way. So, we’re talking geography. Now, we’re talking the geography move from Management Solutions to PEO and Insurance, because it’s tilted kind of the other way. The other thing that I would remind everybody, which is a little different on the ASO to PEO conversions, there’s not a selling season for that. We do those migrations all year long. And so, we continue to see good traction there, and we don’t intend to slow that down. There’s no reason to. It’s higher revenue, it’s a higher lifetime value in our overall model.
So again, just relative to forecasting between the two areas as well doing — Bob’s got a model, he’ll go through it with you. But the caveat I always have that I’ll say that geography thing is if we can continue to move more of our clients from HCM and ASO to PEO in the back half of the year, we’ll do that.
