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Paychex, Inc. (NASDAQ:PAYX)
Q1 2019 Earnings Conference Call
October 2, 2018, 9:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Paychex's First Quarter Earnings Call. At this time, I'll turn the conference over to your host, Martin Mucci. Please go ahead.

Martin Mucci -- President and Chief Executive Officer

Thank you. Good morning, everyone. Thank you for joining us for our discussion of the Paychex First Quarter Fiscal 2019 Earnings Release. Joining me today is Efrain Rivera, our Chief Financial Officer. This morning, before the market opened, we released our financial results for the first quarter ended August 31, 2018. You can access our earnings release on our Investor Relations webpage and our Form 10-Q will be filed with the SEC within the next few days.

This teleconference is being broadcast over the Internet and will be archived and available on our website for about one month. On today's call, I will review the business highlights for the first quarter. Efrain will review our first quarter financial results and discuss our guidance for Fiscal 2019. And then we will open it up for your questions.

We have had a good start for Fiscal 2019 and our financial results reflect growth across our major product lines. Our total revenue growth was a solid 9% for the first quarter. Beginning this quarter, we are changing from our traditional disclosures, as Efrain talked about last quarter, of the service revenue categories or payroll and human resource services, and are now reporting service revenues as management solutions revenues, or PEO, and insurance services revenues. This new revenue segregation provides a better representation of how our business has evolved to the selling of more bundled products, and Efrain will provide more information about this in his commentary.

You may recall, last fiscal year, we implemented certain go-to-market strategies for sales, which began to gain momentum in the back half of the year. That momentum has continued for the first quarter, especially [audio cuts out] HR Outsourcing Services, both in our PEO as well as our traditional ASO/HCM service bundle. We have also continued to add to our salesforce and are fully staffed as we head into our upcoming peak selling season.

With regards to client retention in the first quarter, we are very pleased with the continued increase in this metric for retention as well as our strong client satisfaction performance. August 18th was the anniversary of our acquisition of HR Outsourcing Holdings, Inc., or HROI, a national PEO. HROI continues to perform well and has integrated very well into the existing PEO sales and service organization of Paychex.

We also acquired Lessor Group, a payroll and HR services provider headquartered in Denmark, at the end of February 2018. Lessor is performing well and we are enthusiastic about the growth opportunities that these acquisitions provide us. At the HR Tech Conference in September, we premiered our Paychex brand refresh, which focuses on the power of simplicity. This renews our commitment to our customers to make their lives easier by alleviating the complexity of payroll, HR, benefits, and insurance. Paychex has over four decades of experience working with businesses to solve their complex challenges, and everything we do is focused on making it simpler for our clients to run their businesses through a combination of our leading technology, our breadth of product offerings, and our personalized service options.

At HR Tech, we also introduced Paychex Learning Management, a web-based learning management system that provides employers with a simple and affordable learning tool. Paychex Learning Management features access to hundreds of preloaded learning modules, allows clients to create their own new materials, and upload existing training material specific to their industry or workforce. It is also integrated with our performance management solution, which recently underwent a user experience update.

In our current environment of record low unemployment and a war for talent, employers need every advantage they can for recruiting and retaining employees, and our comprehensive suite of HR products can help employers recruit with an attractive benefit package, and our new LMS offering helps with the retention of talent by providing ongoing engagement and professional development.

We also showcased additional new enhancements and features within our HR product suite. We now offer tablet enabled facial recognition for time and attendance, and the new Paychex Flex Assistant, a chatbot for commonly asked HR related questions. These are examples of our ongoing commitment to continually introduce advancements in technology that evolves and enhances our clients' experience and makes it more valuable to them across all of our services.

We are pleased with our progress in retirement services for the eighth consecutive year. Paychex was named by PLANSPONSOR Magazine as the leader in total number of defined contribution plans as we now serve well over 80,000 plans. Paychex Retirement Services meets the needs of businesses of all sizes by delivering next level efficiency with full Paychex HCM integration, fee transparency, plan accessibility across devices, flexibility in investment options and fiduciary solutions, and personalized participant support.

We also ranked number 20 as the 20th largest business insurance agency in 2018, in their top list of 100 brokers in the US. This is up one spot from last year. This is our eighth time on this list as well, and is a testament to our best in class insurance agents who continue to deliver customized solutions to meet the evolving needs of business owners and their employees. Value rich insurance coverage plays a key role in both hiring and keeping key talent.

I'd also like to note that, for the sixth consecutive year, we were recognized by Selling Power Magazine as one of its 50 best companies to sell for, in fact ranking number three. We have been making significant investments in our salesforce, including new technology support tools and more sophisticated demand generation to improve the quantity and quality of the sales leads to support our salesforce and their success. We continue to also provide value to our shareholders. Our quarterly dividend is currently at $0.56 per share, with a last increase of 12% this past April.

In summary, our state of art technology full suite of integrated HCM product offerings and personalized service is a powerful combination that positions us for sustainable growth in our markets. Our employees make this combination successful with their hard work and commitment to our clients each and every day.

I will now turn the call over to Efrain Rivera to review our financial results for the first quarter. Efrain?

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Thanks, Marty, and good morning. I would like to remind everyone that today's conference call will contain forward-looking statements. Please refer to our earnings release that includes a discussion of forward-looking statements and related risk factors. In addition, I will periodically refer to some non-GAAP measures such as adjusted net income and adjusted diluted earnings per share. These measurements include certain discrete tax items and one-time charges. Please refer to the press release and investor slide presentation for a discussion of these measures. The investor slide presentation should be up and it has a lot of supplemental information on it.

As mentioned previously, effective for this fiscal year, we've adopted a new revenue recognition guidance in ASC Topic 606. We've adopted under the full retrospective method, so prior year results have been restated to conform with this guidance. After the previous earnings call in June, you'll recall that I held a supplemental call to introduce the impacts of this new guidance on our financial results. On our IR page, we've published an updated presentation from that call, and that gives quarterly information on the financial impacts of ASC 606 and other non-GAAP adjustments for the past two years.

Overall, the changes from adoption of the accounting standard are not significant, but they do have a modest effect on the quarterly periods. This presentation also reflects the impact of tax reform and non-GAAP measures. In connection with the adoption of the new guidance, the categorization of our service revenues is evolving. In prior years, we disaggregated service revenue into two buckets -- payroll service revenue and human resource services revenue. As our business has evolved, selling more bundled products, this disaggregation has become less meaningful. ASC 606 requires disaggregation of revenues to reflect how the nature, amount, timing, and uncertainty of revenue and cash flows are impacted by economic factors.

Given how we manage our business, and the risk inherent in various services, we've decided that a more meaningful presentation is the categories of management solutions revenue and PEO and insurance revenue. Management solutions revenue includes payroll, and HR, and employee benefits products that are better reflective of offerings in our product bundles. So, this presentation includes our previous category of payroll services, together with retirement services and HR administration solutions, including our comprehensive HR service bundle. This presentation represents our integrated HCM services.

PEO and insurance services revenues have similar operational economic characteristics. Both involve the provision of insurance benefits to clients. PEO revenues also reflect a gross up for certain of our insurance offerings to PEO clients. During this transition period, I want to emphasize this will provide information on service revenues under both our previous and new classification. So, you'll have that information. You'll have the ability to adjust your models as you go forward. And there is information on our Investor Relations site. It provides both as reported disaggregation of revenue, payroll and HRS, and the revised disaggregation of revenue management solutions and PEO and insurance services for the past few years.

Now, with that preface out of the way, I'll provide some of the key highlights for the quarter and then provide greater detail in areas. And, as usual, I will touch briefly on the results and wrap with the review of the Fiscal '19 outlook. Total revenue and services grew 9% for the first quarter, to $863 million and $846 million respectively. The growth was aided by the acquisitions of HROI and Lessor. More to come on those.

Expenses increased 14% for the first quarter. The acquisitions of HROI and Lessor together contributed approximately 6% to the total expense growth for the first quarter. Accelerated investment in sales, marketing, and product development as part of tax reform investments and PEO costs were major factors in expense growth.

Operating income increased 1% to $320 million. Operating margins were 37.1% for the first quarter. Margins were impacted by acquisition expenses, increased investment initiatives, higher growth and PEO costs, and the composition of payroll processing day.

Our effective income tax rate was 24.5% for the first quarter compared to 34.1% for the respective prior year quarter. The significant decline year-over-year in the effective tax rate is, of course, due to tax reform legislation. We anticipate that the effective tax rate will be approximately 24% for the remainder of the year.

Net income increased 16% to $244 million for the first quarter, and adjusted net income increased 18% to $242 million. Diluted earnings per share increased 16% to $0.67 for the first quarter, and adjusted diluted earnings per share increased 18% to $0.67.

I'll provide some additional color now in selected areas, and start with a discussion of service revenues, and we'll discuss results under our previous categories and our new service revenue categories. Under our previously reported categories of service revenue, payroll services revenue growth was 1% for the first quarter, in line with our expectations. Organic growth related to pricing for the first quarter was offset by the impact of client size mix and the composition of payroll processing days within he quarter. If you recall, in June, I indicted that payroll revenue growth for Q1 would be below the low end of the range of our guidance.

HRS revenues grew 18%, approximately 12% excluding the HROI acquisition. This growth is due to the growth in clients across our HR products, in particular Paychex HR Services, ASO and PEO, and retirement services.

Now, let's talk about management solutions revenue. This includes, as I discussed previously, payroll service revenue together with other HCM products included in many of our product bundles. Management solutions revenue increased 3% to $688 million for the first quarter. This increase was driven by growth in client bases across our HCM services, including payroll, ASO, retirement services, and time and attendance solutions. Retirement services revenue also benefited from an increase in the asset value participants' funds. The acquisition of Lessor contributed less than 1% to this growth. The growth was partially offset by the impact of unfavorable composition of payroll processing days in the first quarter compared to the prior year quarter. Same thing that I mentioned on payroll.

PEO and insurance services revenue increased 39% to $158 million for the first quarter. We acquired HROI near the end of the first quarter of Fiscal 2018. The incremental impact of HROI accounts for approximately one-half of this growth. The remaining growth was primarily driven by continued strong demand for combined PEO services as we continue to experience strong growth in the number of client worksite employees. In addition, our insurance services revenue benefited from growth in the number of applicants.

Interest on funds held for clients grew 25% for the first quarter to $17 million, primarily as a result of higher average interest rates earned. And, just to pause there for a second, we have assumed that there would be fed rate increases in this fiscal -- there will likely be more. But we only included two in our plan. The first occurred last month, and we anticipate there will be one more. At least, that's what's contemplated in our plans. As we get to midyear, we'll talk a little bit more about what our expectation is based on where the fed is at that point.

And turning to our investment portfolio, our goal, as always, is to protect principle and not optimize liquidity. On the short-term side, primary short-term investment vehicles were bank demand deposit accounts and variable rate demand notes. In our longer-term portfolio, we invest primarily in high credit quality municipals bonds, corporate bonds, and U.S. government agency securities. Our long-term portfolio has an average yield of 1.9%. Average duration is 3.1 years. Our combined portfolios have earned an average rate of return of 1.8% for the first quarter, up from 1.4% last year. Average balances for interest on funds held for clients were down modestly for the first quarter, primarily driven by impacts of tax reform and client employee withholdings partially offset by wage inflation.

I'll now walk through our thoughts on our financial position. It remains strong with cash and total corporate investments of $788 million as of the end of the quarter. Funds held for clients were $3.8 billion compared to $4.7 billion as of May 31, 2018. Funds held for clients vary widely, as you know, on a day-to-day basis, and averaged $3.7 billion for the first quarter. Our total available-for-sale investments, including corporate investments and funds held for clients, reflected net unrealized losses of $36 million as of August 31, 2018 compared with $38 million as of May 31, 2018.

Total stockholders' equity was $2.4 billion as of August 31, 2018, reflecting $201 million in dividends paid and $33 million of shares repurchased during the first quarter. Our return on equity for the past 12 months has been a stellar 45%. Please note that our return on equity calculation was adjusted to reflect the impacts of the adoption of ASC 606. At Fiscal 2018 year end, we reported 46% return on equity, which would be actually 44% on restated basis, because of those changes made by ASC 606.

Cash flows from operations were $274 million for the first quarter. It was a decline versus the prior year quarter. The change was primarily a result of timing impacts within working capital, largely related to income taxes, and our PEO payroll and related unbilled receivables for payrolls not yet processed as of the reporting date offset by higher net income.

Fiscal 2019 guidance -- now, I'll turn to guidance for the upcoming fiscal year ending May 31, 2019. I'll remind you that our outlook is based upon our current view of economic conditions continuing with no significant changes. Our guidance for Fiscal 2019 is unchanged from what was provided in June, which was given reflecting adoption of the ASC 606. Under our previous revenue categories, there's no change to payroll revenue guidance in the range of 2-3% and HRS revenue guidance in the range of 10-11%.

Payroll services revenue was below the low end of the range in the first quarter, as anticipate, due to the composition of payroll processing days. Growth in payroll revenue will be at or above the high end of the range for Q2 and Q3, and Q4 is anticipated to be within the range. HRS revenue growth for the first quarter was significantly higher than the range due to the timing of the HROI acquisition. Growth for Q2 and Q3 is anticipated to be within the range, for Q4 growth as anticipated to be below the low end of the range due to a more challenging compare caused by the strong growth in the PEO in the latter part of Fiscal 2018.

We'll also provide you with revenue guidance under our new categories as we transition to this approach in the future. Management solutions revenue is anticipated to grow by approximately 4% for Fiscal 2019 as compared to Fiscal 2018. Our Q1 results were obviously lower than this due, as I mentioned before, to the composition of payroll processing days. We anticipate that Q2 and Q3 will be above 4%, and we anticipate that Q4 will be in line with the full year guidance.

PEO and insurance services revenue is anticipated to grow in the range of 18-20%. Growth in the first quarter was obviously significantly higher due to the timing of the HROI acquisition. We anticipate that growth for Q2 and Q3 will be in the range of 15-17%, and for Q4 in the range of 11-13% due to the factors that I mentioned before due to a challenging comparison with strong PEO growth in the latter part of Fiscal 2019. All other guidance remains unchanged.

Finally, just as a reminder, we have provided on our IR website a presentation entitled Service Revenue Disaggregation, which reflects historical revenues as originally reported and as they would be under the new categories. We've also published an updated presentation entitled Impacts of ASC 606 and Other Items that reflects the impacts of adoption of 606 and other non-GAAP adjustments for Fiscal 2017 and Fiscal 2018.

With all of that, I will turn it now back to Marty.

Martin Mucci -- President and Chief Executive Officer

All right. Thank you, Efrain.

...

Operator, we'll now open up the call to questions, please.

Questions and Answers:

Operator

Okay. [Operator Instructions] Our first question will come from the line of Bryan Keane with Deutsche Bank. Please go ahead.

Bryan Keane -- Deutsche Bank Securities, Inc. -- Analyst

Hi, guys. Solid results. I just wanted to ask about the margins that came in a little bit better than expected, and wondering if that had to do with some timing of investments. Because I think the full year operating margins were reiterated.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Yeah, Bryan. I'd say that investments into one were a little bit lower -- they were planned that way, so this wasn't different. Investments were a little bit lower in first quarter than they will be in subsequent quarters. That was one. And then, revenue was a little bit better than we had originally anticipated in the quarter. So, the combination of those two drove margins a bit better than we anticipated.

Bryan Keane -- Deutsche Bank Securities, Inc. -- Analyst

Okay. And then, just in particular on ASO and PEO strength, it looks like those trends continue. In particular, just curious if there are any callouts. And then, Efrain, when we get toward the end of the year, I know it gets a little more challenging on comps. So, does that mean that that 11-13% is a more normalized range for the PEO business and insurance business as we go forward past this fiscal year?

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Bryan, I knew when I put out that number in those ranges, just so everybody could be centered, I'd get that question. I don't know the answer to that at this point. I think I'll talk to that as we get closer to Q2 and Q3. We had an exceptionally strong back half of the year, so I'll have to see. We have some momentum in PEO and we have a degree of conservatism in the way we look at the information. So, I'll hold out on commenting on whether that's the run rate going in the next year. Your first question was any callouts on PEO? I'll just let Marty --

Martin Mucci -- President and Chief Executive Officer

Yeah, Bryan, I think just that we continue -- as Efrain just said, we had a strong back half of last year. That continued right into the first quarter. We're finding a lot of success with the PEO and ASO both from an HR outsourcing perspective. And the integration with HROI has gone very well and, frankly, has complimented us in our teams and the leadership, I think, very well. So, we've really picked up -- continued to have some great momentum in the first quarter. So, right now, the callouts are that there's a great need for the PEO and the ASO products and we're capturing the sales for that need. So, we're very pleased with the work that those guys have been doing.

Bryan Keane -- Deutsche Bank Securities, Inc. -- Analyst

Okay. Helpful. Thanks for taking the questions.

Martin Mucci -- President and Chief Executive Officer

Sure.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

You're welcome. Thanks.

Operator

Our next question comes from the line of David Grossman with Stifel. Please go ahead.

David Grossman -- Stifel, Nicolaus & Company, Inc. -- Analyst

Thank you. Good morning.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Hi, David from Stifel.

David Grossman -- Stifel, Nicolaus & Company, Inc. -- Analyst

Hi. Thanks for taking my question. I'm wondering if you could go back to the PEO for a minute. I don't know if you could just focus on the PEO, excluding the other insurance business, but can you help us understand the components of the growth that you're anticipating for this year broken down? How much of that is unit growth, versus passthrough, versus maybe pricing and other items that may be impacting the growth rate year-over-year.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

You know, David, here's what I'd say. What we're experiencing is strong growth in worksite employees that continued into first quarter. So, it's not primarily pricing driven. It's really much more driven by volume of clients. So, we're not anticipating any significant step up in the rate of attach on healthcare. So, it's not it's getting a little bit more contribution from passthroughs. It's really more volume driven. I got a lot of calls -- we got a lot of questions about whether our worksite employee growth was real, or how real it was and -- or how sustainable more than how real. We had strength in the back half of the year and that's continuing as we start the year.

Martin Mucci -- President and Chief Executive Officer

Yeah, I think you can really see it in -- when you think about it, worksite employee growth is double digits as well. So, it's continued to be very strong. Not only the sales from new sales, but also the existing base is continuing to grow. So, we're getting a little uptick on the economy from those slightly larger businesses -- I guess, I'd say midmarket sized PEO client.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

And, David, one other thing that I'd like to add, because this is probably not what was true five or six years ago. We get a lot of PEO clients outside of the base. So, when you see the growth, a lot of that's coming from outside the Paychex payroll base. So, we're winning both inside the base and outside the base.

David Grossman -- Stifel, Nicolaus & Company, Inc. -- Analyst

And, just to confirm, the way your disclosure is set up, the actual WSE growth that you're quoting now is an organic number, right? Because you had HROI at the end of last -- the fiscal first quarter of last year as well, correct?

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

WSE growth or revenue growth?

Martin Mucci -- President and Chief Executive Officer

Worksite employee growth.

David Grossman -- Stifel, Nicolaus & Company, Inc. -- Analyst

WSE growth.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Yes. I'm sorry.

Martin Mucci -- President and Chief Executive Officer

Organic is double digits.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Yes. Yes. Correct, David.

David Grossman -- Stifel, Nicolaus & Company, Inc. -- Analyst

Right. Got it. Okay, great. And then, just to -- you gave us some good guidance on the growth and the cadence as the year goes by. Do processing days normalize at all as the year goes on, or is that just this year, or a one-quarter, issue with no real impact to the balance of the year?

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

We never recover that one heavy processing day, and the impact on payroll services revenue is about $5 million from that one day. So, we never recover it. And then, you have the normal ups and downs you might have in a given quarter, which is why the other quarters look so different from Q1.

David Grossman -- Stifel, Nicolaus & Company, Inc. -- Analyst

All right. So, just 1Q is the $5 million and nothing else through --

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

[Crosstalk] Yeah, just to be clear, because I'll get this question. We're not saying there's one less day. It's really just the composition of a heavier processing day in Q1 that we lost, and then the rest of the year is normal, which will mean you've got some a little bit more in one quarter, a little bit less in other quarters, but it'll look like a normal year.

David Grossman -- Stifel, Nicolaus & Company, Inc. -- Analyst

Got it. And then, just one last quick question on the competitive dynamic. A nontraditional competitor came out with a revised payroll solution during the quarter. I think it's been out there, so it's really not terribly new. But, I guess the reason I bring it up is that in the past, point of sale usually goes in a small business before payroll. I'm just curious how you're thinking about that. If in fact a point of sale competitor comes in with a stronger solution, and how that may impact you given that, typically, the cash register, if you will, goes in before the payroll system.

Martin Mucci -- President and Chief Executive Officer

David, this is Marty. You're absolutely right. That's how it's always been. Of course, other competitors have been out there with those solutions for a while. This one is not a new one. A lot was made about it, but it's a mobile version of something they've had for a number of years. It doesn't support all the states. It's not as complex, obviously, as opposed to our offering. You have to do payroll many days ahead. So, at least, in this instance, I don't see it as any big change from a competitive standpoint. And, you're right, in that point of sale -- typically, because we're also selling through a partner those payments solutions, we find that is something that they take upfront and then payroll comes along a little bit later. So, we've experienced that ourselves. So, we can be selling it -- we actually unseat more payment solutions because they already have them before they ever talk about payroll with us.

So, we don't see that as a big change at this point. Again, a number of competitors have been out there and this one really wasn't that big of a change, or anything close to the competitiveness that we have. It's a mobile payroll solution. It doesn't, I don't believe, even have employee access, which is what many companies are looking for now on a mobile basis.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

And, just more concretely -- building on what Marty said. Look, we have a really competitive offering the microenterprise space, and we'll be talking as we go through the year about some really significant enhancements of that product that we think will put us certainly at the forefront of what's happening on the low end of the DIYSS part of the market. We're doing really well in that part of the business. It was really, really surprising to us, the reaction that occurred as a result of that because we don't see any of that in our numbers. As a matter of fact, in the past six months, we've been building momentum in that part of the market.

So, everyone's entitled to make their own opinion as to what a press release makes. Unfortunately, from the standpoint of the facts, we're not seeing any impact. So, I just want to make that very clear.

David Grossman -- Stifel, Nicolaus & Company, Inc. -- Analyst

Thanks for that, but I guess the follow-up related to that -- does this change at all your appetite to be in the merchant acquiring business? Or has that really not changed?

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

No. I mean, we're selling and our sales have done very well. We have inside team that sells through a couple of partners now, and has continued to do well. But, as far as getting into a full-fledged -- doing the processing itself of the payments -- I don't think so. There is not a great interest there. As you know, the company dynamics are very different. The financials are very different. I don't think it makes a huge difference from the payroll side, on the frontend. Frankly, we've had better experience with having the payroll and then unseating an existing competitor in the payment space because those rates constantly are changing and we can give them a little bit better product. And frankly, sometimes it offsets the cost of payroll or other products. So, we're in it, but I think we're in it at the right level right now.

David Grossman -- Stifel, Nicolaus & Company, Inc. -- Analyst

All right. Got it. Great. Thanks very much.

Martin Mucci -- President and Chief Executive Officer

Thanks, David.

Operator

Our next question will come from the line of Tim McHugh with William Blair. Please go ahead.

Timothy McHugh -- William Blair & Company -- Analyst

Thanks. Two questions on the PEO business. One is somewhat of a follow-up. The WSE growth had double digits versus the 19% organic growth. It seems -- double digits doesn't sound quite as high as 19%, so what's the revenue per WSE. Maybe talk about that in terms of that dropping incremental growth. I'll stop there first.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Yeah, so we don't disclose the revenue per WSE number, Tim. We will talk to that as we go through the year. It doesn't sound impressive because when we said organic was 19, remember that the base now, including HROI, increases the number of WSEs. It's still pretty strong. So, I wouldn't take that as an implication that growth is somehow decelerating because now, when we talk about organic, we're talking about the inclusion of HROI in the base, which adds more WSEs. So, we're talking about a more apples-to-apples comparison. And then, as we walk through the year, we'll talk more about revenue per worksite employee.

Timothy McHugh -- William Blair & Company -- Analyst

Is the implication of that last comment that, I guess, HROI wouldn't be growing as fast as your organic? Is that what you're saying -- now that it's rolled in --

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

No, the implication of that is that now you've got a larger base on which to calculate growth. So, the 19% was on the Paychex business itself. That was the organic comparison. And now, we roll in the HROI base to our clients, and so the growth rate, obviously, is a little bit lower because you have a bigger base on which you're calculating the growth.

Martin Mucci -- President and Chief Executive Officer

Yeah, and we didn't really mean to imply that double digits means at the low end of double digits.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Yeah.

Timothy McHugh -- William Blair & Company -- Analyst

Okay. And then, a broader question. You're breaking PEO and insurance out into a separate segment. I get it's somewhat driven by the revenue disclosures, but also even just this call -- a lot of discussion of this business and you've talked about a lot of momentum in it. Yet it's still a smaller piece relative to your business. I know it's been clearly an area of expansion. Should we read anything into how important this is going to be strategically to Paychex in terms of your focus and where the investment dollars are going over the next three years, given all of those factors?

Martin Mucci -- President and Chief Executive Officer

Well, I think you certainly could read into it that we think that's an important part of our business going forward. The HR Outsourcing has been very important, and the PEO has picked up momentum the last two or three years in particular, even from the client standpoint, from accepting what a PEO is and understanding. The competition that's out there, I think, has also helped drive that -- understanding what a PEO is and how that can assist them. The changes in insurance have driven that. So, yeah, I think you'll see us continue to make investment in that business and we do think -- we wouldn't break it out as a segment with insurance unless we thought it was certainly a significantly growing piece of the business. And it adds different dynamics, obviously, to the financials that we'd like to call out as well.

Timothy McHugh -- William Blair & Company -- Analyst

Okay. Thank you. Actually, one more on that -- the dynamics part. Sorry to raise the question. Just, the margins on that side of the business? Can you comment at all? Is it different versus the other segment as we think about the growth of that side of the --

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

[Crosstalk] Hey, Tim. So, we'll talk more -- this is the first quarter reporting on it. But, obviously, because PEO is bundled with insurance -- well, not bundled with insurance, but presented with insurance -- and PEO has passthrough costs, it's lower than the overall company margin. And management solutions is higher. We'll have to go through the year and see where rates normalize, but it's fair to say it is lower than overall company margins.

Timothy McHugh -- William Blair & Company -- Analyst

Okay. Thank you.

Martin Mucci -- President and Chief Executive Officer

Okay.

Operator

Our next question will come from the line of James Fossett with Morgan Stanley. Please go ahead.

James Fossett -- Morgan Stanley & Co. LLC -- Analyst

Thanks very much. I just wanted to follow-up on the question related to the crossover. You've made it clear that you feel like merchant acquiring, etc., is a different business. But, I am wondering if there is opportunity, or how you think about the selling motion to continue to make sure that Paychex has the best opportunity to win the business where you do want it, especially the way people are setting up new businesses, etc., seems to be changing.

Martin Mucci -- President and Chief Executive Officer

I hope I got the question. You mean, specific to the payment business -- payment with payroll?

James Fossett -- Morgan Stanley & Co. LLC -- Analyst

Yeah, just as people are starting to think about it as they set up new business, especially smaller businesses, that may be looking for a one-stop shop. I can understand what you're talking about in terms of where merchant acquiring maybe doesn't fit within Paychex. But, I think perhaps what people are expressing some concern about is what that selling motion looks like or needs to look like so you can get the best opportunity to win new business.

Martin Mucci -- President and Chief Executive Officer

Yeah, I think we are very much at the frontend. I would just say our experience has been that, with the payment solutions -- that we do a payment solution through two partners. We're, I think, very effective at it. That sales team has grown. It's all an inside team, so we get referrals from the field and we have, of course, one of the largest field-based selling teams out there in payroll and HR. And so, when we run into brand new clients, we can certainly refer them back to that team to sell payment now and then build a relationship to payroll. But we also, more times than not, have payroll first and then unseat the payment solution.

On the other hand, I would tell you that a lot of the work that we're doing now on the frontend is to be able to get at those clients where they come to us on the Web. So, you're seeing a lot more web-based -- coming in through the web and then selling them whatever they need at that point, whether that's payment, payroll, or a combination of that with HR. So, I think we're well positioned, very much, to get those businesses at the frontend of when they're searching. And more of our dollars, frankly, have shifted to marketing, and web development, and demand generation than any time in our history -- because of that. Because of the way the whole sales approach is.

And Efrain mentioned, SurePayroll, a component of ours out of Chicago, is also -- we're working on some things that we'll be releasing and talking about the next quarter or two, that I think will help that even more.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

The other thing is, we have been involved with merchant services over the past five years. And I think we have a pretty good understanding of the dynamics of how that sale occurs and how it occurs with payroll. So, I think, between SurePayroll and what we do on the merchant side, we're in a position to see if that starts to tilt or tip, and take the appropriate action. Right now, though, I just want to emphasize that we're not seeing that. And a lot of the dynamics that we saw five years ago still remain. Now, what happens in the future we'll monitor and see what's going on.

James Fossett -- Morgan Stanley & Co. LLC -- Analyst

Great. That's really reassuring. On your online customer acquisition and referral efforts, and what you're putting in there, any even qualitative color you can share with us about the effectiveness of that versus the traditional salesforce, and maybe how that has been changing, and what kinds of further improvements you may be able to make, at least on what those metrics look like? Thanks.

Martin Mucci -- President and Chief Executive Officer

Yeah, sure. I think it's been a very significant change, particularly over the last year. We've moved more leads to a virtual team inside for the smallest of clients. Those were starting up one to four. We use more virtual teams, or telephonic sales -- because that's the way the client in those small areas in particular -- their leads come in, they want to be addressed very quickly. We've really become much more sophisticated in our lead generation, in the way we're scoring leads, and then communicating with prospects who aren't ready to buy yet. Those used to all be kind of in a bucket with all the leads being the same. That is not the way it's done anymore.

We know when someone just comes in. We know where they start and stop looking at our product. We know if we've been compared to somewhere else. We know if they've looked at pricing or not. And we can respond telephonically much faster, with much better data targeted right at that client. And we're set up to demo and sell over the phone, or through chat, very quickly. So, the dynamics have changed quite dramatically, particularly for the inbound web search and low-end client. And I think we've really -- last year, we started this toward the beginning of the year, or actually in the fourth quarter of the year before, and we really have picked up momentum in the last six months. I think we've really finetuned this to where it's working very well.

James Fossett -- Morgan Stanley & Co. LLC -- Analyst

That's great color. Thanks, guys.

Martin Mucci -- President and Chief Executive Officer

Okay.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Thank you.

Operator

And our next question will come from the line of Jim Schneider with Goldman Sachs. Please go ahead.

Jim Schneider -- Goldman Sachs Group, Inc. -- Analyst

Good morning. Thanks for taking my question. Marty, if you could talk through -- I think you touched on some of them, but maybe talk through the remaining product and service initiatives you've got under way for the fiscal year. And maybe share what goals you might have in terms of retention rates exiting this fiscal year. If you could give us any color on that, that would be great.

Martin Mucci -- President and Chief Executive Officer

I'll start with the latter. Certainly, our goal is always to be at the best we've ever been. I think we're approaching that from a client retention level. First quarter doesn't make the year, but we certainly have seen continuous improvement in the -- our net promotor scores and our satisfaction surveys, which have then translated into even better retention. We went through a pretty big service realignment two years ago that really settled out through last year, and we feel like all of that is behind us now and has worked very effectively in how we're servicing clients in different ways with different teams.

We've also added a lot of technology for the retention. So, we put in a whole new unified communications system across all of our branches and locations. We collect a lot more data. I know a lot more about the clients, what they're looking at, and what their history has been before I ever talked to them when they're calling in. And, of course, we've continued to use a lot of data analytic models to anticipate if a client is possibly going to leave us or not and then do proactive calling to them. So, our goal is certainly to have the best retention ever in our history, and we hit that peak about two to two-and-a-half years ago, and we're slightly below that and aiming for more.

From a product standpoint, Jim, we're very -- at HR Tech just a few weeks ago, we released, as I mentioned, the Paychex Learning Management. That tied training into development, so now we have a fully bundled development. So, you can think about it all the way from acquiring new employees for our clients. We can do all of that in a paperless fashion, right from the recruiting to the onboarding of the client, so there is no paper necessary. Once they're in the system, now we've been much more full featured as far as training them, developing them, giving turnover data analytics of what's going on in the environment. I think the data and the enhancements have never come faster.

And then, adding more self-service. The other thing we're seeing is, a lot of clients wanting self-service. So, if they have questions, or their employees have questions, or their employees want to make changes, we allow them to do that in the app, whether mobile or on the desktop. They can make changes. They can ask questions. We'll be introducing a chatbot that we showed at HR Tech, that will service 50-60 answers to questions. All you have to do is, "Where's my W-2," or, "Where do I find this," or, "How do I do that," and that'll pop up. And you'll see that continue to evolve throughout the year.

Jim Schneider -- Goldman Sachs Group, Inc. -- Analyst

That's helpful. Maybe a corollary question to that is, are you seeing those initiatives now starting to translate to higher bookings at this point? I know you don't give the precise booking figures, but is there a way to quantify how much higher bookings were this quarter than say a year ago quarter?

Martin Mucci -- President and Chief Executive Officer

Not without giving it to you, but a good try anyway. I would just say we had some momentum going into the last half of last year. We feel like that has continued. So, selling season is the peak and we're fully staffed up on our sales team. We did that very quickly. We added some additional sales. We have added more to virtual, to telephonic, as well. Both field and telephonic -- and I think we're well positioned for peak selling season product wise and sales wise. And, by the way, I didn't even mention, the sales team has a lot more tools as well. So, when you think about the use of Salesforce and how sophisticated Salesforce has not become for them, it's amazing the tools that are at their disposal. And the ability to train and get them to use it is coming much better too.

They're seeing that, when they give us data on a prospect that maybe didn't close this time, they're getting a lot more information back the next time they go out and talk to CPAs, current clients, etc. So, it's starting to translate. Wouldn't quite call it the year yet, because we have to get through that peak selling season. But, we're feeling really good about where we are now.

Jim Schneider -- Goldman Sachs Group, Inc. -- Analyst

Well, I had to try. Thanks very much, though.

Martin Mucci -- President and Chief Executive Officer

Okay. All right.

Operator

Our next question will come from the line of Tien-tsin Huang with JP Morgan. Please go ahead.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Thanks, Tien-tsin.

Tien-tsin Huang -- JPMorgan Chase & Co. -- Analyst

Good morning. Thanks for the slides. It's all very helpful. Just a couple of quick clarification questions and then I have a strategic question. Within the PEO side, I heard you mention that it's more new rather than existing. But, are you taking preexisting PEO clients and converting to your own, or are these first-time PEO clients? I'm just trying to understand the end market dynamics.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Yeah, I don't have a good split between previous -- obviously, you get a lot outside the PEO who know PEO. So, we're doing well there. And the split, as to new to PEO, I don't know. My suspicion is it's more people who know about the PEO model to start with. But I do want to say -- just reiterate, Tien-tsin, what you said, which is as we looked at the data we always had a certain amount of PEO clients outside the base. But, that trend has certainly been accelerating.

Tien-tsin Huang -- JPMorgan Chase & Co. -- Analyst

Gotcha. It seems that way. But then, within core payroll, I know the segmenting is changing. But, as we go into 2Q-3Q, you mentioned it would be at the high end or above the range. Is that just a function of the processing days? Are there any other drivers -- pricing, units, retention -- that you might see?

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Yeah, yeah. It is a function of the days, but our assumption is that through the year we build in terms of sales units and sales volume as we progress through the next three quarters. As Marty said, we're off to a decent start this year.

Tien-tsin Huang -- JPMorgan Chase & Co. -- Analyst

Got it. So, it's a backlog conversion. Okay. Great. And then the last one -- for you, Marty -- I have a question on freelancers and that whole market. I'm curious if that's an area of focus, for you to potentially go after that freelance market?

Martin Mucci -- President and Chief Executive Officer

I'm not sure --

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

1099 -- gig --

Martin Mucci -- President and Chief Executive Officer

Oh, I'm sorry. The gig economy. Yeah, I --

Tien-tsin Huang -- JPMorgan Chase & Co. -- Analyst

The gig economy -- sorry.

Martin Mucci -- President and Chief Executive Officer

That's all right.

Tien-tsin Huang -- JPMorgan Chase & Co. -- Analyst

It's a trendier word to use.

Martin Mucci -- President and Chief Executive Officer

I think we're well prepared for that. We've been building out -- a number of the products I'm looking at are from a strategy standpoint of how do we look at, from an insurance, retirement, savings, and payroll -- but even more so, from the benefit side -- how do you look at ways to let that follow the employee as opposed to being so client focused, the employer focused? And I think we'll have some things to talk about in future quarters as we're rolling that out. We're not seeing a big impact from that right now. I think it was a little bit overstated last year, but we're certainly preparing for that. I think, already, with the mobile app and the way we're building out the data by employee, you're going to see much more of a shift toward the employee and how they can carry information with them. We'll be prepared to react to that as it continues to grow.

Tien-tsin Huang -- JPMorgan Chase & Co. -- Analyst

Very good. Thank you.

Martin Mucci -- President and Chief Executive Officer

Okay. All right.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Thanks.

Operator

[Omit attempt to connect caller] We'll move on to the next question. It comes from the line of Jason Kupferberg with Bank of America. Please go ahead.

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Thanks. Good morning, guys. How are you?

Martin Mucci -- President and Chief Executive Officer

Good morning, Jason.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Good.

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Good. So, I had a question to follow-up on core payroll. Thanks for continuing to give the disclosure there. I just wanted to try and break down the pieces because it seems like there's a few moving parts. So, I guess, it seems like the tailwind from Lessor was more or less offset by the one less processing day. So, if that's right, you have about this 1% underlying revenue growth. It does sound like pricing is still a tailwind. I know it had been running around 2%. So, I'm just trying to figure out the implications for organic client count, because qualitatively it doesn't sound, based on what you're saying, that that metric would be down year-over-year. But, what are the other pieces here? Is this an average client size issue or is organic client count down?

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

No, no, no. No, it isn't.

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Okay.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

And I don't typically give quarterly, but I can say no. No, it's really client size, and that abates as we go through the year. We anticipate it will abate in addition to all of the other factors changing as we go through the year. We have another day. We assume better unit and volume growth -- all of those and mix of dates a bit. So, it's those factors.

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Are you running at about 16 on the average client size now?

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

We're between, I think -- 15-16 is where we ended up -- the client base last year.

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Okay. Can you just talk a little bit about what the differences may be in the pricing trends between renewals of existing clients versus pricing for new clients that you're bidding on? And, at a high level, are you still running at around a 2% pricing uplift?

Martin Mucci -- President and Chief Executive Officer

Yeah. You want to take that?

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

No, go ahead.

Martin Mucci -- President and Chief Executive Officer

I think, that would be -- our anticipation is still two to three -- we've always said two to four, but tend to recognize a little on the lower end of that. I think, on new clients, you're seeing some discounting there upfront, but we're able to roll that off very effectively and pretty quickly through using a lot of data analytics. We started this a number of years ago, but instead of leaving it to individual branches to decide how to roll off discounts, we do it on a much more automated basis and it's done with data analytics. So, we know based on the history of the client whether we can roll off more of a discount or less of a discount. And that has been very effective for us at bringing the price -- the discount back off.

So, you're still seeing pretty much the same level of competition upfront, which drives a little bit more of the discounting -- or the same level of discounting. But, we're able to roll that off. And, I think, between the service levels, the additional products we offer -- all of that allows you to drive more revenue per client after you have the client. And, once you have the client, the price increase seems to stick pretty well. So, the more of that discounting is more upfront to get the client in a competitive environment, but not as much once you're going forward.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Okay. Thanks for the commentary, guys.

Martin Mucci -- President and Chief Executive Officer

Sure.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

You're welcome.

Operator

Our next question comes from the line of Rick Eskelsen with Wells Fargo. Please go ahead.

Rick Eskelsen -- Wells Fargo Securities, LLC -- Analyst

Hi. Good morning. Thank you for taking my question.

Martin Mucci -- President and Chief Executive Officer

Sure.

Rick Eskelsen -- Wells Fargo Securities, LLC -- Analyst

Just one for me. I was wondering if you could talk about the talent acquisition. You did mention, Marty, in your script about how you're fully staffed up on the sales headcount increase that you were looking for. But, just in general, across your organization, how has it been finding talent? Maybe if you could spend a little bit of time on finding the sales talent as you upped your investments. Thanks.

Martin Mucci -- President and Chief Executive Officer

Yeah. Interesting question. I think it's still been pretty good as far as finding -- I know there's the shortages -- that are more difficult to find based on the work that we do in the overall market, as well as Paychex itself, is more in the IT side. And we've actually been very successful there too. But that's where -- when you get into certain disciplines of IT security and so forth, that's been difficult. Sales has not been too difficult. I think, one, we're attracting good, solid sales folks. Typically, we still look for that some sales experience already, and they're seeing the level of products and success that we're having. They're seeing growth opportunities that, when they come into the company, they could start. And, frankly, in virtual telephonic, they can grow to the field payroll. They can advance to midmarket. They can grow into HRS.

In fact, we just came back from our sales conference two weeks ago, and just tremendous enthusiasm and a lot of good employee referrals. So, we're really not having an issue of getting fully staffed. In fact, we got fully staffed faster than we expected in the first quarter because of the success in the recruiting. And the retention is improving across virtually every sales organization. So, the retention is getting back in line with where we were historically as well. I think that's all about them feeling like they've got the right tools -- Salesforce, the enhancements we've made to that; the lead generation that they're getting; the leads and that they can be successful. All of that equates well to acquiring and retaining the talent.

Rick Eskelsen -- Wells Fargo Securities, LLC -- Analyst

Thank you.

Martin Mucci -- President and Chief Executive Officer

Thanks, Rick.

Operator

And our next question will come from the line of Jeff Silber with BMO. Please go ahead.

Jeff Silber -- BMO Capital Markets Corp -- Analyst

All right. Thank you so much. This is going to be really quick. I know you're not directly impacted by all the noise regarding tariff wars, etc. Are you seeing, though, any hesitation from your clients that might be impacted, that could indirectly impact you?

Martin Mucci -- President and Chief Executive Officer

Not at this point. We're not seeing much. There certainly are specific small and midsized businesses that are impacted, whether they're supplying the automobile industry and so forth. But, we have not seen much of an impact on our client base at all. And, when you think about also, when we saw the storm impacting an awful lot of businesses in South Carolina and North Carolina, we haven't seen too much of an impact there yet, either. So, so far, retention is in very good shape, as I mentioned earlier, and we're not seeing an impact, either from regulation and tariff changes or the hurricane.

Jeff Silber -- BMO Capital Markets Corp -- Analyst

Okay, great. Thanks for squeezing me in.

Martin Mucci -- President and Chief Executive Officer

Sure.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

You're welcome.

Operator

Our next question comes from the line of Samad Samana with Jefferies. Please go ahead.

Samad Samana -- Jefferies, LLC -- Analyst

Hi. Thanks for taking my question this morning. A couple of follow-ups to some of the answers. You mentioned a lot of new tools for the sales organization. I was wondering if maybe you could dig deeper into what those are and how much you're factoring in productivity increases from these tools into the forecast for this year. And then, I have one follow-up.

Martin Mucci -- President and Chief Executive Officer

Yeah, I think when you think about -- like Salesforce. We've had Salesforce for some time, but we've really added a team that has worked with the sales team to encourage them to find it to be much more useful. So, we've gotten a lot more into the analytics of Salesforce, and we've also profiled the clients and the leads that they're getting much better. So, let me start with the leads. When the leads come in -- in the past, as I mentioned, they were in kind of one big bucket. So, all of the leads that came in that had interest went out to the salesforce, and they may have been of different quality. We started with a new leader in marketing with a lot of experience in demand generation, and started making these much more sophisticated.

We're scoring the leads now at the frontend. We have a team that has been talking to leads for some time, taking them through the web, etc., and now scoring them. And if they don't score high enough, they're put back into the system to get worked and continue to provide information and details to prospective clients before we send a salesperson out to them. So, we're seeing that the quality of the leads to the sales team is much better. As the sales team continues to use Salesforce and gives us more data on their prospects, that goes back into data analytics that then helps us profile the clients -- also profile the CPAs, and give you more data on the CPAs and what's the last time that they referred us, who referred us, how they referred us, what they referred us -- all giving the sales rep much more data to go out and approach either a prospective client, a current client for referral, a CPA, or other lead referral source.

You're also evolving into giving them a lot more data on their mobile phone as to where their next appointments are, how they make the best use of their time, and how they can then get data off of social media on those prospects so that, when I walk into a prospect, I know a lot about them already from our internal resources and combining that with external resources. So, the level of sophistication, and the tools that we give them, has increased dramatically just even in the last 6-12 months. And we're starting to see some benefit from that one -- I think better retention of the salesforce, and certainly we're looking for improved productivity as well. And it's a little early in the year to talk about that, but so far, as we have said a number of times, we think we're off to a good start.

Samad Samana -- Jefferies, LLC -- Analyst

That's very helpful. And if I could just ask a follow-up, with that in mind, and then some of the commentary about nontraditional competitors and customer acquisition -- I'm curious if you've seen a change in your customer acquisition costs as you move more to virtual and/or your nontraditional competitors try to spend aggressively in building their merchant base. I'm just curious what you've seen in your customer acquisition cost trends.

Martin Mucci -- President and Chief Executive Officer

Yeah, I would say, first of all, not in the merchant base. Again, it seems like that got an awful lot of play and we just haven't seen that there. I think it's just not really much of an impact, at least at this time. We have seen the shift of dollars have definitely gone toward marketing. So, where you would necessarily put dollars more in to sales, we continue to put dollars into sales -- but I have to say some has shifted earlier in the process. So, redesigning our web, redesigning the whole lead flow that I just talked about, data analytics and the work in building those support systems -- more money goes into, and investment goes into, the marketing side.

And overall, that probably does raise the cost of acquiring a client to some degree, certainly. But you're also getting more productive on the sales side -- or that's your hope. So, you're getting more revenue, and more success, and a higher close rate as a result of that. But, you're definitely doing more upfront and the spend is much more upfront to get that. That's just the way they're searching. Most client prospects today are 60% of the way through the sales process before we even get contacted. That's very different than in our past. And we think we're very much ready for that.

Samad Samana -- Jefferies, LLC -- Analyst

That's very helpful. Thanks, again, for taking my questions.

Martin Mucci -- President and Chief Executive Officer

Sure.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

You're welcome.

Operator

Our next question comes from the line of James Berkley with Wolfe Research. Please go ahead.

James R. Berkley -- Wolfe Research, LLC -- Analyst

Thanks, guys. Appreciate the time. On the service revenue disaggregation slide that you put out earlier this week -- or last week, rather -- I was wondering if you could speak to the drop-off in growth for the restated HR Management Solutions revenue from Fiscal '17 and '18? It goes from 6.1 to 2.9 --

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

[Crosstalk] Yeah, I'll just make that really quick. So, what happens there is that because we bundle into that revenue the impacts from modules related to The Affordable Care Act, you didn't see that growth in that number. So, that number started to tail off. We penetrated the base and that part of the module, which a couple of years earlier started at basically zero, didn't grow very much. So, that dropped off in growth. And then, the second thing was the impact of payroll services revenue growing more slowly as seen in that number.

You'll see, if you look at the numbers that we're projecting in terms of growth for the remainder of the year, that we bounce back off that number that we had last year and we start to see better growth in the back half of this year. But those are the reasons -- growth in payroll, growth in that one category, was muted.

James R. Berkley -- Wolfe Research, LLC -- Analyst

Okay. Thanks. And just a quick follow-up. I know last quarter you guys talked about organic growth guidance being 1.5% for payroll and then 9-10% for HRS. Are you able to provide those numbers for the new segmentation?

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

We repeated it. It should be on the website. We break out management solutions and PEO and insurance, and then we just reaffirmed the guidance that we provided for the full year.

James R. Berkley -- Wolfe Research, LLC -- Analyst

On an organic basis?

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

On an organic basis. Yeah, I think what we said, James, was that Lessor would be about 1% of payroll growth.

James R. Berkley -- Wolfe Research, LLC -- Analyst

Okay. All right. Thank you very much.

Martin Mucci -- President and Chief Executive Officer

Okay.

Operator

Our next question comes from the line of Kartik Mehta with Northcoast Research. Please go ahead.

Kartik Mehta -- Northcoast Research Holdings, LLC -- Analyst

Hey, good morning, Efrain and Marty.

Martin Mucci -- President and Chief Executive Officer

Good morning, Kartik.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Good morning.

Kartik Mehta -- Northcoast Research Holdings, LLC -- Analyst

I wanted to go back to -- I think, Efrain, you were talking about client growth. I'm just wondering if you could talk about maybe -- is there a difference in the client growth you're seeing between your traditional payroll and mature payroll? So, in essence, are you seeing client growth in both? And is one greater than the other?

Martin Mucci -- President and Chief Executive Officer

We don't break out the client base between them anymore, Kartik. But, I think both are growing. You certainly see, as Efrain said, on the low end of both companies a stronger growth. We really feel like that has picked up a lot of momentum, particularly on the low end. And I think that's a lot of the things that we've been talking about -- the demand generation, the virtual sales team, the faster response to leads, doing it with chat, and selling over the phone much more. So, I think both of them are doing well. Certainly, Sure has continued to see good growth as well. We're really pleased with the team there.

Kartik Mehta -- Northcoast Research Holdings, LLC -- Analyst

And just lastly, on the PEO side, any thoughts on price competition? It seems like that business is really growing well, so I'm assuming it's attracting all of the competitors into that space. Any worries on that becoming a little bit more price competitive as we go through this fiscal year?

Martin Mucci -- President and Chief Executive Officer

Yeah, always some concern with that. But, I think right now, what you see in those kinds of clients that are taking a PEO solution is, they're much more interested in the service that they're getting and the support for the insurance in particular. And they're looking at those costs -- do you have the right insurance plans, and do you have the right service with the HR generalist. And we have 500 of those out there that are supporting PEO and ASO. Do they have the right experience? It's really much more of a value play, so frankly I worry less about that price competition than I would small business payroll, which is much more competitive.

So, the more that we grow toward the PEO side, from a price standpoint, I think that the value is much stronger to say -- hey, we hear plenty of clients that say to us this was -- having a strong HR person and this insurance plan was very valuable to my business. And they probably pay more.

Kartik Mehta -- Northcoast Research Holdings, LLC -- Analyst

Thanks, Marty. I appreciate it.

Martin Mucci -- President and Chief Executive Officer

Okay, Kartik.

Operator

And the last question that we have in queue, comes from the line of Matt O'Neal with Autonomous Research. Please go ahead.

Martin Mucci -- President and Chief Executive Officer

Hi, Matt.

Matthew E. O'Neal -- Autonomous Research LLP -- Analyst

Hi, guys. Thank you for taking my question. It's actually already been answered, so I thank you for the time.

Martin Mucci -- President and Chief Executive Officer

Yep. Okay. Thank you.

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Thanks.

Operator

And we have no further question in queue at this time.

Martin Mucci -- President and Chief Executive Officer

All right. Thank you. At this point, we'll close the call. If you're interested in replaying the webcast for this conference call, it'll be archived for approximately 30 days.

...

Thank you for taking the time to participate in our first quarter press release conference call and for your interest in Paychex. We very much appreciate it. Have a great day.

Operator

Ladies and gentlemen, that does conclude today's conference. Thank you for your participation. You may now disconnect.

Duration: 74 minutes

Call participants:

Martin Mucci -- President and Chief Executive Officer

Efrain Rivera -- Senior Vice President, Chief Financial Officer, and Treasurer

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Jim Schneider -- Goldman Sachs Group, Inc. -- Analyst

Kartik Mehta -- Northcoast Research Holdings, LLC -- Analyst

Bryan Keane -- Deutsche Bank Securities, Inc. -- Analyst

Rick Eskelsen -- Wells Fargo Securities, LLC -- Analyst

David Grossman -- Stifel, Nicolaus & Company, Inc. -- Analyst

Jeff Silber -- BMO Capital Markets Corp -- Analyst

Tien-tsin Huang -- JPMorgan Chase & Co. -- Analyst

James Fossett -- Morgan Stanley & Co. LLC -- Analyst

James R. Berkley -- Wolfe Research, LLC -- Analyst

Timothy McHugh -- William Blair & Company -- Analyst

Samad Samana -- Jefferies, LLC -- Analyst

Matthew E. O'Neal -- Autonomous Research LLP -- Analyst

More PAYX analysis

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