Paychex Earnings Call NUGGETS: New Sales, New Business Growth
Kartik Mehta – Northcoast Research: Marty, I want to ask you just about new sales and where they are and consideration to your expectations and the second part of that, you’ve seen any change in channels where you’re getting the new sales?
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Martin Mucci – President and CEO: I think Kartik we feel good about the first quarter, we’re off to a good start. We don’t give a lot of detail till we get past the selling season, but I would say that we feel good about a good start and I think we’re driving more revenue per client, so not only getting good revenue from the clients coming in on payroll, but also driving more of the HRS services, so we’re feeling good about that. Regarding the channels, we – in the Investor Day we talked about market segmentation and feel very good of the fact that we’re well on our way, we’ve introduced all of the plans that we had put in place last year strategically for market segmentation. Market segmentation was about kind of refining our approach that all the different channels and payroll, we went after a very specific segment and split that up. That’s going very well in and 401k was going after larger in the wholesale market which we just introduced that sales force. They are now all getting licensed and it has all been approved and they are out there, and we went after the franchise and banking business and we signed one of the largest franchises in the country already to an agreement as a preferred provider of payroll. So we feel we are off to a good start that will keep us in with the guidance.
Kartik Mehta – Northcoast Research: Then just a final question Marty. The Paychex has been amazingly good at controlling expenses, where you don’t let your expenses get out of control considering revenue growth. But do you think during this environment is there a need to maybe invest more now so you can have greater revenue growth going forward or are you pretty happy with the way investments are and there is really no reason to increase those investments?
Martin Mucci – President and CEO: Well, yes, we feel very good about the investments we are making. As Efrain and I have talked about a number of times the IT and the product development has been up double-digit percent for two or three years now and we feel very good about that. That it’s been the right investments and obviously we have been bearing the fruits of that with the new technology and what you will see next month as we roll out the new and probably I think the best in the industry online reporting suite of (serve) suite. So I think that investment has been good and the productivity from the operations team has been important that that continues to help us fuel the IT and development investment while still gaining great margins that we are known for. So I feel very good about the level of expense. Efrain anything.
New Business Growth
Joseph Foresi – Janney Montgomery Scott: My first question is just taking a look at sort of your comments again, just revisiting here about the new business growth. Are you tracking in line with plan, ahead of plan? Then any impacted or any thoughts on what could take place here with the election on the demand front?
Martin Mucci – President and CEO: Yes. I think, our new business growth, I think it’s been above met expectations. So I think we still see kind of a gradually improving economy. No great shakes, but it has met our expectations and we’re pleased with that and I think, what we feel really good is that the revenue we’re driving per client has certainly met our expectations or even a little bit better. So we’re feeling good about that first quarter start.
Joseph Foresi – Janney Montgomery Scott: Then on the elections, any change you think in the demand environment post or pre?
Martin Mucci – President and CEO: I don’t, I think it has probably slowed some new business development. I think its new growth, but that’s just speculation. I think that whenever there is an election coming up and certainly the fiscal clip on taxes and healthcare reform changes it is kind of holding businesses back a little bit from investing if they are on the edge of whether to start their business or not. So, I think there’s pluses and minuses to either way the election goes, with more regulation our services are more in demand, but with more regulation and taxes I think fewer new businesses start up. So, we’ll make the best of it either way and we feel good about the year at this point.
Joseph Foresi – Janney Montgomery Scott: Then on the margin outlook obviously you are giving guidance there. Is it fair to say that margins are being held back a little bit here by some of the investment you are doing on the technology side and can you give us some time frame for when you would expect them to sort of start to expand again?
Efrain Rivera – SVP, CFO and Treasurer: So, Joe what I would say is first, the rate of spend on IT investment is what we planned it’s moderated a little bit from prior years. So it’s not holding back margins and that’s not the only area where we obviously spend money. So we’ll see some expansion, we just didn’t want to call it any higher than we did in the guidance as we go through the year. So I don’t think we would be constrained in terms of margin expansion by the level of spend we’re doing.
Joseph Foresi – Janney Montgomery Scott: Just one last one from me, just on the demand environment itself, are you seeing any shifts in market share or win rates in any which way?
Martin Mucci – President and CEO: No, not really. We’re seeing the competitive environments about the same and including the pricing and so forth, I think, it’s always been pretty healthy and we haven’t really seen any change plus or minus for that.
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