Samad Samana: Great. Thank you. Enjoy the holiday season.
John Gibson: Thank you.
Operator: Thank you. Our next question will come from Bryan Keane with Deutsche Bank.
Bryan Keane: Hi, guys. Good morning. Just a couple of clarifications from me. When you talked about SMBs investing for growth, hesitation — some hesitation there. Does that impact their willingness to buy ancillary services and maybe has impacted the management services growth as well?
John Gibson: We’ve really not seen that, Bryan. I think what we see is, it’s probably in the case of — I’ll just use an example, let’s use an example. You may have a very good business owner has opened a couple of franchises, doing very, very well financially, and probably could justify adding another franchise store somewhere. But the cost of capital, access to capital is constrained, and they’re holding back on doing that because the hurdle rate just can’t be met. So that’s more what I see than people pulling back and saying that I don’t need that. Again, most of the time when you look at our products and services that we’re offering, they’re either driving efficiency or they’re helping them retain and attract quality employees, either by enhancing their benefits or by having an HCM solution.
So, I kind of view that most of our clients that are looking at our services understand the value of the products and services, and believe that they’re actually going to help their business be more successful. And so, I don’t think they always view it as an expense line item, if you know what I mean.
Bryan Keane: Got it. And then, the other clarification I had is, the shift to ASO the PEO, did that surprise you guys or was that all part of the plan and pretty typical?
John Gibson: No, I mean, it’s something we’ve always historically done. What I would say is that it turned out better than we expected. Now, let’s keep in mind, last year when we’re out in the market with the PEO and ASO offering, we saw a tilt towards — we had great HR outsourcing sales last year, we have great HR outsourcing sales this year. They’re just in different locations on the reporting structure. And so, last year, we knew we had a lot of clients that we would have typically seen be great candidates for PEO and they, for whatever reason, went to the ASO offering. And we said in the calls, we felt like that would be a good opportunity to go back to them once they’ve experienced our human capital management system, the benefits of our HR advisory solutions and our HRGs to go back and kind of reintroduce them to the comprehensive outsourcing of the PEO model.
That’s exactly what we did. And so, we had a bigger group of clients inside the base because of the success of ASO last year to go in mind. And then, the other point that I said, what we’re doing in terms of analytics to be able to identify clients that we have a high degree of certainty that they’re going to benefit from the co-employment relationship that a PEO provides, and that’s enabling us to what I would say a little bit better cherry-pick inside our vast customer base, who we should go after.
Bryan Keane: Got it. That’s helpful. And then, just a quick one for Bob. Just to quantify the small acquisition, does that add about 1 point to 2 points of revenue for third quarter or how do we think about that?
Bob Schrader: No, it’s small. I don’t have the exact number, Bryan, On a full year basis, we said it’s not a material contributor to revenue growth at all. I mean, way less than 1%. I don’t have the split in front of me by quarter.
Bryan Keane: Yeah, I was just thinking maybe it could offset some of the ETRC…
Bob Schrader: Yeah, I mean, it certainly is, and that’s assumed in the guide, and it certainly is offsetting it, but ERTC was so large in the back half of last year, particularly in Q3, and unfortunately, it comes nowhere near close enough to offset the full thing, but it does minimize it a little bit, the headwind.
Bryan Keane: Great. Happy holidays.
Bob Schrader: Yeah, same to you.
John Gibson: Happy holidays.
Operator: Thank you. Our next question will come from James Faucette with Morgan Stanley.
James Faucette: Great. Good morning, guys. Just a couple of quick follow-up questions. In terms of back to this point on seasonal hiring, maybe being a little bit weaker, I’m just wondering from your perspective if there’s been any impact or truth even before now to this narrative that we’ve heard a lot around labor hoarding and that smaller businesses in particular were keeping people on payroll or employed that they maybe otherwise wouldn’t have just because they were concerned about shortages. And just wondering if you’d seen any evidence of that actually in your customers and if that could be impacting the seasonal hiring at all.
John Gibson: Well, James. I actually would say in the small business, it’s not been hoarding at all. It’s been a deficit. Now, to be fair, in our index, which we follow very closely, and I’ve reported a lot on this, small businesses probably nine months ago kind of got back to a level playing field. I think where you saw hoarding was more in the upper end and enterprise side of the space. I think you saw that. Now — so that’s where I think you saw hoarding and hiring of people maybe they didn’t even need. And these stats where you’ve seen in some of these bigger downsizing. I think to the point you may be making is I do think that small and mid-sized business owners were reluctant to change employees out because they were trying a lot of focus on retention.
