Jun 27, 2018 • 09:30 am ET



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Welcome everyone and thank you for standing by. At this time, all participants are in a listen-only mode until the question and answer session of Paychex Conference. (Operator Instructions) This call is being recorded, if you have any objections, you may disconnect now. May I introduce our speaker for today, the President and CEO, Martin Mucci. Please go ahead.

Martin Mucci

Thank you. Thank you for joining us for the discussion of the Paychex Fourth Quarter Fiscal 2018 Earnings Release. Joining me today is Efrain Rivera, our CFO. This morning before the market opened, we released our financial results for the fourth quarter and fiscal year ended May 31, 2018. You can access our earnings release on our IR webpage, and our 10-K will be filed with the SEC before the end of July. 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 fourth quarter, Efrain will review our fourth quarter and full-year financial results, and discuss our guidance for Fiscal 2019. Then we will open it up for your questions. We were pleased with our strong finish to Fiscal 2018 and the progress we made on key initiatives. Our total revenue growth was 9% for the fourth quarter and 7% for the fiscal year, including our acquisitions of HROI and the Lessor Group. As of May 31, 2018, we served over 650,000 payroll clients.

We acquired HROI, a national PEO in August of 2017, and acquired the Lessor Group, a payroll and HR service provider headquartered in Denmark, at the end of February 2018. We are pleased with both of these acquisitions, which have so far exceeded our expectations and are progressing well, and we believe these acquisitions position us well for the long-term growth in both our PEO and international businesses.

At the start of Fiscal 2018, we implemented certain changes on our sales go-to-market strategy. We started off slowly in the first half of the year, but gained momentum in the second half. We are particularly pleased with the sales performance in our comprehensive HR outsourcing services, including our PEO business, which performed well in both sales and client retention. And excluding Lessor, our payroll client base was comparable to last year.

Client retention was greater than 81% of our beginning fiscal year payroll client base at the end of last year. We had just completed a realignment of our service organization to allow greater flexibility and customization of the service our clients receive. During that transition, we experienced a slight reduction in retention. If Fiscal 2018, client loss trends improved as the year progressed, and in particular, we showed strong retention in our comprehensive HR outsourcing solutions for the year.

Job growth among small businesses has moderated and the unemployment rate is the lowest we've seen in many years. These reflect the tightening labor markets. We are well positioned at Paychex to help business owners make