PAYX - Earnings call transcript Q4 2020

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Operator

Good morning. My name is Lisa and I will be your conference operator today. At this time, I would like to welcome everyone to the Paychex Fourth Quarter and Year-End Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Instructions]. [Operator you. Thank like now the over call I to Mr. to would turn Officer. and President Mucci, Chief Martin Executive Please ahead, go sir.

Martin Mucci

and earnings and us of quarter for you, our year Thank thank discussion the you Paychex release. for joining fiscal XXXX fourth

Joining results This opened, before Officer. Chief morning XXXX. fourth the is quarter me our year-ended the financial May Efrain XX, today released our Financial Rivera, we for market and fiscal

full will or review discuss it May, the will results the Internet SEC COVID-XX, for our for for our we'll broadcast Investor and both You our the provided then Relations for highlights on quarter webpage. be we financial In upcoming fourth on on questions start year our of review your today's filed about quarter. Form our over one COVID-XX. with then, the XXXX. be year, business up access that guidance July. open with Efrain can with of And our website XX-K before impacts still was update and available the being were time, were of to end in trends comments. positive This you month. responding metrics, the an some and I and earnings we will And is and fiscal to for approximately metrics archived release the teleconference we business update and as an but key it we our on will the talked call seeing the key At our early. response fourth our

a all of to continued are have steady our tracking we across we month, improvements past the Over key metrics weekly-basis. on experience

worksite the our in and in employees outsourcing steady paid a clients. increase number seeing are for We HR employees of

productivity. have particular spot also bright client One sales sales an and continued retention. in We is increase leads see to

dedication of time. service are working CPAs payroll many value providing business of the was a to simplify the service businesses, their report their our ensure survival. of their help who to and and time to tirelessly Now our development, product, the Paycheck seamless we very the through online this challenging our ever, of application to the the industry for Paychex during for introduced, more and concern fact IT, them to I times transition Protection great first When in navigate loan. marketing were support proposition while release as we products the in our the than teams filing experiencing clients worked us, credit clients an for Program a help have Paychex remote

a had the As client time. information you payroll of Paychex, pre-populated we that that

processed a million have this report clients to times and them. for their a half We CPAs over our assist

provides our partnered own to million direct into non-payroll the a alternative pre-populates worth original with process the Forgiveness through their Loan provide the have partner. in Program for using was Protection the On $XXX June add clients. the through Act law, Flexibility the Paycheck Over launched I feel these if Estimator, been we PPP this partners continuing to new banking fintech to three did our client which requirements. loan data -- is simple PPP processed Shortly of after loans, signed the and they complicated Paychex comprehensive for simplified requirements again, Fundera, to Lendio for market, businesses the qualify clients, We by our use PPP loans, satisfy way tool, for relaxing access clients the Xth, and of forgiveness very forgiveness. while most to and companies, also data with want our BizXCredit, not lenders to go loans

improving call complexity, our to much client higher and service and even performance. call satisfaction responsiveness even X/XX, while clients Our excellent and our retention teams provided volumes with maintaining have all

In the intuitive have of looking has we multiple Sure seen fact, a performance continued areas payroll strong client do-it-yourself high. reached solutions. in time, are more all-time business. for prospects uncertain new this to Throughout retention grow as

similar have sales efforts. seen virtual results our in Flex We

We increased both complex to the services demand PEO HR environment. the experiencing outsourced and are also due for current of ASO, demands

Our allows has of challenges. do-it-yourself our large been business. with solutions to simple challenge fully customizable a outsourced or or COVID-XX or any help us leading pandemic small, suite to today's business, complex, The

were past COVID-XX we have confirmed many investments. unexpected their However, environment. workplace to accelerated we trends to the this in help the have that our had right challenge made the the adapt investments clients in new, place recent and right solutions

client their and a HR allowed Our tool HR broad directly our provides to an remote employee This, that questions, requests, rarely through easy-to-use This capabilities, our have and during stay to effectively requests it set needs solutions, employees and five-star released that to our Maintaining has our any Paychex manage critical for clients to connected recently allows and workforce conversations self-service engaged time, been we management occur through capital Whether of can capture productivity. clients anywhere type comprehensive track and to a from employee to engagement and especially simple or simply app their solutions maintain -- in our tool as rated are HR and maintain face-to-face. device. communications check and a Connect, recently issues access workflow. people, with makes submit human workforce. incidents with this and along clients productive or mobile their with employees of a

employees even while environment. clients platform We and have also online of in professional to in not development Paychex which an the various use allows them options, seen training increase learning with retain providing an office by an Learning,

and situations. functionality. a to emergency clients We or analytics employees earned about rapidly payments in the about business suite uncertainty, performance data help time our make clients with information, additional workers’ offers address for situations. to on environment payments future critical to employees’ suite payroll pay businesses. and clear, core compensation We such options as other injury cost flexible pay continually solutions and for and wages or of prior to details workplace illness sensitive for comprehensive HR on Faced providing demand their accurate the time to -- needs with is access record real information and future and analytics to day Our our market enhance make library Recent trends ability provide insights updates minutes provide for them feedback. changing labor decisions and updates sensitive time employee

for process toward workers. of Additional employees streamlined We deposit employees offer have the direct that new organizational processes simplifying streamlining and workflow are collaboration as W-X our new the and new forms, adding enhancements capabilities many the for and process for through both geared such solutions, and allowing client. electronic e-signatures, self-service improved the digital clients’ in

remote been loans them to our a a and business managing this access have to valuable clients time, legislation, through helping with federal We providing partner them navigate workforce. information

extensive records Our exceeded have number CPAs webinars of of for over multiple with participation sessions. all and XXX,XXX registering clients

work back digital clients were clients a workforce, new integrate get By they to more over business. processes ongoing to continuing has their to we their solutions environment to and this they at as remotely, of have regards solutions, to to to the and to our ensure are adapting employees well. commitment been remote of Paychex our XX% in begin still it In reopen an At business. our While invaluable helps risk time, going infection to workforce key using safety. it to helping have contactless reduce our family, we also businesses

a this distributed to strategies are accelerating leverage some success, workforce. more Given we of our

to physical our reduce are location plans to We are these savings footprint our forward and plans employees implementing we These initiatives. other been expense recently moving announced with among initiatives. have

we begin optimism. for reasons fiscal several As see XXXX, we

time reacting continue to and to Our our provide go excellent employees real remain have to to in engaged and clients. continued above beyond, service

record and value help scores time. satisfaction, and client Our navigate the this their we challenging as highlight our testimonials net we them client retention advisors clients provide high and promoter

We continue and progress. signs to steady capital shareholders to to return of continue leading show our indicators our

of offerings remains relevant value clients through is a pause or we While call continue review year. has states together. our it to will our are more we businesses to reopening confident provide and to I or or been and the the much financial now over to as as delay the and services as our of ever uncertainty that fourth result than results COVID-XX, for get fiscal providers online Efrain? turn our through well-trained will offerings Rivera this and Efrain we quarter service experienced products innovative the

Efrain Rivera

customary Thank related everyone. Please Good Martin. forward-looking statements that conference remind to as factors. the such events to more involve statements risks. disclosure the -- on contains refer and for that release these earnings refer future you you, to such today's and I'll morning

share, per of press fourth and investor EBITDA, some these fiscal a to non-GAAP to to In discussion GAAP their net addition, diluted refer I’ll and measures for the cetera. periodically income, release year adjusted adjusted earnings reconciliation as XXXX full a such related measures the Please measures. and presentation of quarter refer et

of start some quarter. Let by me the key the points providing for

COVID-XX. XXXX reflected from discuss Our a fiscal our fourth resulting summary then quarter and of year our I'll provide impact conditions of results the results results. full

earned to funds operating of an you $XXX $XXX million. EBITDA For the Interest Average offset for Op expense due primarily know, on repositioning XX% funds million as per Management revenue decline the X% lower clients in borrowings, declines fourth gains resulting our of for was Higher lower $XXX quarter to expense than investment margin the quarter, revenue checks million Other from Within long-term net result offset X% to $XXX discretionary solutions. the for balances held clients Solutions X% X% of more XX% Total Insurance to lower on $XXX as by million, million. impacted, $XXX increased interest reflected The held and million and we interest impacting income portfolio all to $XXX for across spending Expenses of interest an client income, rates realized total million. service to fourth decreased on fourth declined largely impacted Solutions company-wide the reductions volume EBITDA interest X% is declined PEO decreased X% impact earlier the fourth to by by which average revenue during due million. $XX balances service revenue and a X% quarter largely decreased saw, was on decreased part controls. HCM we the revenue for fourth quarter, an quarter discussed decreased our let's margin XX.X%. by of and average to start COVID. as for with call. rates. here, to revenue, XX.X%. declined this investment and corporate lower includes to partially

income net Our earnings the decreased $XXX for period adjusted XX.X% adjusted per X% the Net for the the earnings decreased tax $X.XX fourth quarter. $XXX decreased million to fourth X% to effective Diluted income compared share X% income quarter quarter rate fourth for share to year. decreased again XX.X% for $X.XX. and million diluted to same was per at last and X%

Let's results talk about first were nine Through months, results. year-to-date solid. the

the and PEO benefited Our results, sorry, Solutions higher growth Insurance Insurance $X.XX Net Adjusted increased respectively. the share per per X% billion interest by increased but premiums. billion, X% the result Total average and to comp lower solid by adjusted while full $XX billion. -- from year net on of year $XXX income at client Solutions for share. XX% earnings of and $X.X income million, COVID X% to X%, investment $X.X and per realized to as Operating increased balances Services year revenue billion revenue by billion tempered Op XX.X%, increased million. higher prior Management QX, and is and again share remained still to I'm from clients increased per at increased funds in X% comparable margin Insurance $X average $X X% challenged revenue reflected earnings partially Oasis Solutions rates. though to per growth X% Service client, full increased from to benefited gains, year. a $X per to Management and diluted again held to workers' to higher PEO growth X%, with revenue Solutions billion. progress. diluted $X.X income Interest lower offset lower driven to was share each $X of

investments Let's income. about talk and

to goal, you know, as optimize principal Our liquidity. is and protect

securities. high We invest credit in quality to continue

an average X.X%. of a years, Average on shorter is curve. X.X but we're Our long-term bit has the little currently duration portfolio yield

Fed number X.X% X.X% year of an portfolios fiscal combined periods of for respectively. fourth quarter earned Our has respective are the last have a average return the of rate year. rates and interest for from as down realize the cut These times year, X.X% and you X.X% and this

clients clients total position, of. cash, talk time as the basis our cash for company highlights remained time Funds during of compared day-to-day that restricted a averaged billion in $X.X billion billion vary Funds widely and held both the we're the with the May it as billion for were May XX, And clients. of over us challenging proud of really economic as billion very $X.X strong May year. XXXX. Let's for $X result held investments that which achieved, XX, and for of and our and of about XXXX. for to XX strength financial a corporate particularly -- on It fourth fiscal $X.X quarter $X.X we

declines in $X.X million paid May end obviously as XXXX, for $XX repurchased as reflected XX, Our Total including end in stockholders’ billion net was total available of unrealized dividends The million XXXX. clients This net increase for of position with XX, compares sale the interest gain $XXX investments of million resulted funds of of equity fiscal and XXXX. reflecting held gains in in the May rates. million shares $XXX XXXX. during investments, and of May from XX, as $XXX corporate

fluctuations also assets XX% on remained for increase income, years from capital. from billion increase fiscal period flows the of at an same were strong Cash net that's intangible was the $X.X year, the XX%. of XX working higher equity past net by We return last Our the and reached driven year amortization and operations in for strong.

a operating position strong flow. very, cash in ended very in the cash quarter we and So,

and present of how XXXX. the of half the terms is, of don't I situation speed talk half I'm you about second our really economic current talk in the to reflects first and The this Let's to outlook thinking we’ll the the and about that regarding volatile remind of timing year. recovery. need the about

sequentially, the that This and the first outlook fourth to going the year in is start will the half on measures which shortly, we occur of to more also have that in discuss in impacts one-time half includes first year, a be second. and including the -- in there that we of expense year. the take will the expect be we're I'll fully improving implemented, We a I'll sequential will significant, charge to various and primarily then quarter. improving half second control going discuss recovery come

Solutions percentage range decline in margin PEO is rate XXXX funds Management the X% stock to tax for held X%. on be net of We moment. and between anticipated projections be any follows: will and to revenue that total XX% between X% to which anticipated in operating I'll for the range and anticipated range that as you is from adjust for EBITDA range million, in we to revenue I be expense to in million and Adjusted be as X% $XX to expected anticipated revenue of benefit the a out. $XX don't one-time Insurance remind outlook XX%. is expect to fiscal of to to Our XX%, X%. the income mentioned these of to is comp is of XX%. Services XXXX excludes, XX.X% a anticipated million in is which expected include too we clients what anticipated X%. just of expense. the in of to full to currently $XX and effective the $XX Other I in costs, Adjusted the between decline discuss Total decline is year Interest a range is of is be income to as XX% revenue impact million. earlier,

the we earnings get diluted is during share could So, Adjusted year. the decline XX%. on depending change to expected per X% to what of in range benefit that

Now, over as we discretionary range initiatives. last in earlier, to savings Martin months, These the cost a experienced mentioned headcount include accelerating several spend. given we've optimization, of what are addition reduce

of will geographic plan anticipate of of about reduce the the to describe. footprint. charge recognizing in In to I'm our addition, long-term during of that million, be acceleration neighborhood planning our first this most is costs one-time which And we're quarter. $XX the incurred the an We majority

and guidance remind I'll accelerate quarter in million, EBITDA it primarily margin, optimization, excludes adjusted and that margin these in $XX Our measures, to EPS, are plan we had given it to conditions. is we expect primarily the and diluted current non-GAAP operating adjusted we've for adjusted again one-time costs. which decided you be first directed geographic at Again a that place

year. given you I've full Now,

you the on give color me gating. Let some

website One things I post of the the say is will that would we presentation. our on

this at look a It'll on provide also. some it. take can You detail

you’ve that XXXX read of We of the We half what will let currently expect half the most of quarter once in be quarter But the just me fiscal during hopefully, be sequentially. anticipating. view describe terms improving revenue with and it. to fiscal each we're clear So first 'XX now year. impacted first second

the half. single-digits, XX%. mid in revenue and will me let half, revenue approximately low-double-digits. be So are margins, be that the down Adjusted the PEO costs about We will operating the anticipated to that mentioned, just in upper I first Solutions and Management talk to to excluding down high-single-digits be Insurance Solutions anticipate one-time first

QX the that total Now that be down to I revenues quarter anticipated is XX%. be low-double-digits anticipated are to impacts would and approximately to felt and specifically to high-single QX, be operating in range greatest in margin going say

anticipate that fourth occurring be In with recovery So of into the the improvement we the the to back of greater half bake model. sure in year, much the quarter.

revenues Solutions are grow So quarter mean fourth quarter it'll the when and low-single-digits. in and Management we a the normal see quarter low-single-digits, look I And expected I and like more low. pre-COVID. say much Insurance in the into accelerating fourth PEO it Solutions, to

approximately growth. the create seasonal QX higher anticipate that QX don't is still we it revenue margins QX the to quarter margins third recovery in in Adjusted low-single-digit operating big quarter reflecting revenue anticipated we occurring combination and expect to it's full be of revenue. combines because of see both a with more the in So QX improvement and to are in XX%, and QX

expected So I'm half margins. talking higher again the flat the now to year, about share typically half the low-single-digits. be in per we see are Adjusted second earnings second of down where to

back to turn refer can all I you through let And the to So over you Martin. think investor back it that, slides, that gating. me with so will

Martin Mucci

we'll Lisa, And Efrain. you, questions Thank open please. for now up

Operator

Instructions]. [Operator

first with Ramsey the question El-Assal Barclays. from comes line of Your

Damian Wille

on This is Ramsey. for Damian

improvement you could for assuming there’s sequentially? a it over in how other throughout of some just the bottoming you some the speak to really question improvement Just you and of words, be is the trends you of key sort year? So growing are the here I them? helpful. metrics color guess, of Or then is would sort characterize some here trends in the guidance. big I In XXXX, in your on extent what me out think there conservatism

Efrain Rivera

what but expect the that's That as through the about felt year. impact. to we a as seven we've that seen it's little And we QX, what's remainder better. seen if relative doing years a four week-by-week. I'm weeks, bottom expected question. tough or fair weeks I to sometime. the sequential is But and the then acceleration last the just three, to we continue We've So rate see years, started expect year, mentioned, think of have be years In would I to certainly better. improvement in say, we're of to where eight we ago, sorry, several it most bit is several we call, the sequential over been I obviously, we QX, see -- improvement -- like

the a are lots a that there's point we're there that seeing recovery signs -- occurring. So lot of of --

as that how and will occur, we go see sustained through how Now, we'll the quarter. quickly

the commentary. of So in Certainly that's I the the going year see think you're to back recovery. half substantial

Damian Wille

can the company's are areas question does Paychex years, a today just And updated maybe Obviously people. the then, thoughts Marty. to maybe the of of or bit? seriously just some for maybe zoom businesses? pandemic there changes give But is has were more to here five little do how a into long-term you similar adjacent here? But if a it I out changed business lot for about think composition the In to looking lines you is you look model lot it move a or

Martin Mucci

definitely, revenues I and And small times company. more still an continued HR think think, as And grown, business of think mid-sized I can the more us become that have HR, HR for many continue. Well, an small and we've being we've as company move think services I the see of to you more will people payroll. businesses. toward But way

continued think the have you I in evolve way needed. and evolve we we when that is see to will it, that that

about become staffing become at of short-term of the I remote. do -- has location? broadened to used will HR kind So, you may firm. and be least of the where think recruiting to physical even about it people now back become It administration. in certainly HR it bring you And your kind a front-end more it to about of how become pushing do Then handle how to more

I it is, the to role the learning decisions as and to be And to I'm but us made remote analytics, see timing in encompassing I we've comp, in come new our that and for was we've I that been finish, start we I gets and the get helpful a paperless SaaS you'll company, of because from been insurances And perfect what can forth. make data all employees training definition who also capture lot administration them stuff now bigger think to management an can't HR people products, -- retirement about of help I well health with very in afford has system so our broader, saying a think, online been broader make mobility, and designs more I train everything is and becomes much an of need in see on staffing offer, that businesses is as still a in mentioned, also think HR kind from HR as our us helping develop workers’ and guess to that to you'll able of location, our and think employees all from investments analytics in has and course, able decisions, of and then recruiting development now also playing a to and it’s really which of and that critical employees. turned clients. with it

Paychex So and defined to you includes I as but well, known think the delivers now five evolving an support, technology from in future. it, insurances, that that everything be years, I is company it's us HR should much HR very constantly think payroll, staffing, what as, recruiting, retirement, has towards the extremely and name positioned our

Operator

the from comes question Evercore ISI. David of next Togut with Your line

David Togut

Thank you. indicators of I morning. Update on Could quarter? their Call expand hiatus, Marty, the fourth about being you in talked key you on the the suspending upon number the performance Business processing. of Good think, performance businesses a

are how And checks What remote, KPI? follow-up per seeing down in-person really operating meetings, in XXth were is new fourth trends you my double-digits. as May bookings salesforce and of so on forth? quarter some in payroll then the think I to particular the this still mostly relates

Martin Mucci

had has the week. It than come business, out down And is businesses, processing. continues had really Sure. were come of half key so each down. -- continued the each where and at we to suspended down on the that a metrics, to of peak what not they -- less but with referred to basically gone we David, start yes, as suspended I'll they

we're come So seeing businesses back.

say always back will they're full that before. had that employment Now, coming I with not they

and or What seen improve we businesses businesses the you that. suspended at as XX% that actually PEO the So obviously, and seeing? more as happen are XX the back, And if might we're site come they XX employees quickly. of employees, think XX is work improve can checks and seeing than well in or expect, they very now, are offerings. the half relatively which ASO have good, and like restaurants would capacity, had places We've XX we

in quickly basically change happened quite So that well. base has as

trend continue bringing than had that they're expected. but continuous And employees back has So been will faster the hopefully improvement. certainly we

are the part. On side, most we the remote sales for still

and to clients discussion starting they very rep majority We have. of visited and are the that is that taken We've But in frankly, working over all of I'm fourth are number visit our given are is to protocols. actually well. But that safety a the phone, sales be final from coming to the the finding clients most that meet quarter remote we and the comfortable in-person. clients, want we sales ended remote some necessary visiting. want we if in amazed the with online up the workforce

permanently also We reps shifted sales so our to business going of our because SMB, was of small a number well. our percentage sales, double-digit inside it

tools and that virtual have well. to doing place already we've in had many been the sales of we're course, and because Of continued telephonic but for for success work that, it we of the number virtual productivity years, increasing that of the

coming down want who and have checks quite productivity that? dramatically. been suspended sales clients, add you to up per up, going suspended are So, processing anything client coming Efrain, to

Efrain Rivera

number I other punched, recovery they're all from of or we were from David, a including everything funds hours systems track of of to metrics, in to all X addition ago. those a flow recorded the time the we showing X metrics, and pretty weeks think depths significant through where

Operator

Morgan Wald line with from Your Stanley. next Steven question of comes the

Steven Wald

it's towards on Thanks question, and comment taking you're up forward questions of highest ever believe David's moving Hope KPIs, seeing staying following Marty, about being been. safe for up on Maybe Efrain. Marty are my guys your now, Great. I set just and Thanks. well. what the you retention and client

just up there same, the the we say the up? that sounds better would expected separately, relatively sensitivity seen can better, it revenue retention that on although, a piece typically number? had think I to Would number front, client last you fair we we but the bigger roughly the have in get low specific worse, if as a X First, is decline or And you mid-May. dynamics, to gone revenue seems the above X gotten holding for gave given to you have stayed XX% hovering the XX%. that bookings be the guide think gotten retention mid-single-digit has was or revenue what about the maybe has to like assuming than were retention pretty down activity, changed, already

Martin Mucci

No.

retention we for think is -- so us. the around an high that assume XX%, all-time I

conservative. we're Now,

have So, half were look of when at that than the they're peak, though is still less still where we you rapidly at clients, even this suspended changing. and they the

make how permanently to may trying we're and many sure go So, suspended out understand we clients are of how many business.

the is but mean, -- how all it or no, it I if thing. be of it's and sales, that continued Bookings, like kind to come back those to month of best lost pretty been, steady. really those are clients see we'd retention to give many kind another Our

haven't seen they but in they're Look we improving. in not -- any are So, that yet definitely sales. they pre-COVID degradation where were

not go state just And XX make say all-time those so, it's retained been But are waiting have and all an really over think kind say that I anything. a suspended those in all Sales improving days definitely next high. business. that and then we in to out of of I has ranges. wouldn't to I'd guess we're I just is retention been the sure losses retained XX and clients that at

losses competitors remarkably to improved. Our have been

don't think where So, found were not we a also time people I -- and moving.

when to an a they testimonials we've and a gotten competitors maybe at on. our particular need something that calculators loans or time to with forgiveness other help lot like that moving client pickup not the discount extra in of they're So

price conservative So and of We or more then watch we've days. kind next what is Steven in XX I in just done better not to And happens held here losing clients XX competition. the have definitely the for think nature clients. to

Steven Wald

states Okay, comments be we’ll maybe great. could able follow maybe thinking the of of across a if as the you're some just What range disparity look clearly, the a about quickly employment closing exit towards in you granular also underlying And thinking Just I first regions second those very really you either how I the and put of wave you the reopening or moving rising second of wave Could know it, of guys on whether really -- don't about are how you're first half. fiscal the 'XX, to mid-year, underlying assumptions. Appreciate that? different commentary. underlying number the driving you're sort how seeing versus Efrain, appreciate broadly? talk want That's But thinking know thinking year? were now between it I we're half, mean different with rate? of experiences Because don't on the rate? continuation about at versus get up end states if you're the but we quarter to that the to a the the even lot up? thinking call where a the to there. specific guys assumptions about fiscal I or are you are first wondering how a states unemployment

Efrain Rivera

Yes.

let me Steven. that yes, talk to So,

and that impacts that quarter, felt, April So, in when would you others range. and similar impact will and you we July May, report it least have knew August, suspect or a into like our that the in continue -- at June, can same which I and shock is first this, felt obviously is

Our see but we’ll get improvement, first to pre-COVID we assumption assuming through start improvement the that we quarter, see levels to in we is as not are that QX.

really where in we now tail-end to the get the By where forecast. fact, where that of see of of the say what our QX the understand at that, clients recovery QX, that's the looking the of we much with would we to don't reason an QX checks, been matter than we say is environment be. that this will year happening a have closer until were As would what what's year. anticipated quarters say time is, in that we part I that for of And we occurring I of -- is bookings three the first been that in to are growth

we've correct. done and I of simulation think to a modeling lot that get reasonably

easier through improvement I quarters the forecast say three have gradual the year. very in modest first fourth the then of compare. quarter, And so you obviously, would And an this assumes

So first certainly quarter. results than it. to see better we much expect And monitor going to the we're

by assume that help say New the tell I I certain impacted, we outlook. state. a that think or baked doesn't reopening, tell struggling recovery state, of based into who terms California on fact we -- in it's bit can York by point, your can would we to is and that vertical in are the verticals states But are some And also our thinking. in that,

example, to the say next in while it I into cautious that start because But year, assume three that's makes that see are to occur. what head We will then hospitality. about For quickly we'll we occur. quarters, Florida recover. to would to us going first that we sense that's to that's how going as a in take And

Operator

comes Kupferberg question Your next Bank of line of from with America. the Jason

Jason Kupferberg

for throughout on that partial just time, Texas, an had little Maybe clients Florida, increase that on curious some Are reclosings, gone if of go seeing hi, just up you I through those to you maybe in because Maybe have -- second up discussion states on have a that reclosings? a these Arizona. was pick Efrain. that bit. dormant will, that to you pick to of mentioned

Martin Mucci

Jason, that of of the take it. front let or part first me

I too not in point. think much this course, been seen some month. at this recent, but of yet It's relatively we've

of So business states break construction. the thing region, at index. particularly that yet. is best South, of Southern And we you the our look you haven't are too with small funny the performing And when seen still the much down by when it some

of the and construction of have of that in a by be that'll number kind leisure coming restaurants. and And business construction and around of construction. that the well. some hurt, these and some clients But hospitality hurt still back, gets is doing support of of we bars kind Now closings pretty some

sales new of are construction is and home commercial and of So are some South up and a the home Florida. South, double-digit particularly up the still then lot the up, that sales is in still

and that we -- weekly point this will seen us much. our higher in the states hurt those we at as reoccurrence seen guess in bit. of Obviously quite haven't have at that leisure or a and closures. bounce occurrence, any drop I least think won't look continuation a occurrence major seen haven't like, I But hospitality some around So indicators when we

Jason Kupferberg

about a can fiscal full 'XX know of you the retention switching ask part to And XX%. I takeaways hitting as going pieces because comment break lot bit not mentioned that, the on. of comment. QX, was And wanted sort retention? you that the full maybe the down, of apart there's of are I a high, a the client year little the all on just color more for that time for Is moving

to And churn assuming are what understand, What in third-party [else] now? you So business is versus just number seeing, the that like of versus you're what takeaways? retention the out mix right of in 'XX? wanted kind -- looking for that's

Martin Mucci

suspended I think, the the part hard accounts. mentioned, Yes, was I as now, right

And improvement, we were do really hitting leaving so, client that think so been But file needed when business were because the clients it given kind them think very for takeaways to a And best it we things. scheme high, and come that really to between that's there we've helped more Loan clients Estimator We crisis like and they helped Forgiveness have they lot then PPP them gotten great felt of feedback really important. for and to make comprehensive, the we and value of report found Right of I that satisfaction. the helpful us, in or said, even payroll consistent, loan, price. them testimonials. expect our easy drive client probably are and is the got that think a scores Out the slightly. that's the slightly. was for would retention. was The great great promoter also we I our net has maybe And unless is from price. We've takeaways, competitive it it of now, there that pretty fewer as overall, up up

now want half term. that's I business, think we'd or how Again, But see would've sense of I suspended, but a -- or level many a The than said they're all if Right out declared the could don't -- it that would an be of conservative in but more I at those accounts. there restaurant reclosings, the that of two there at you're a we played be for now only have from a still by little would to retention, thought business, now a fall is, suspended helped. the of the that now think that make XX%, peak. based back bar and I you or then facts we're We're were up does of, longer and you next they other out we're have sure just But impact been at month we were were not all is in thing really again, seeing. So closed that the they positive or like they're an might the not not? to right on opened but yet. that you've some do we accounts in closed hold get impact fall

Jason Kupferberg

Okay. And QX just for full year. or to clarify, the was that XX% number was

Efrain Rivera

am full year, I Full I'm year sorry. Full sorry. year,

Jason Kupferberg

year you metric? the that exit did Where on

Efrain Rivera

the the that’s XX%, the end Well, -- of year. year

Operator

Suisse. next line with question McVeigh Credit the of from Your Kevin comes

Kevin McVeigh

I forced million kind kind then that? lot know guess, occupancy. kind having of it impact it sounds of like And $XX you guess that. and actions? the saw the The of that It Generally in wonder, just And I I charge, that it’s of you process drove the decision. of that you. term specific Thank Great. what those I geographies. success frames, -- around Efrain were Martin. the decision a any they remotely, hey doing longer can drove just additional what margin do be from is to it’s thoughts

Martin Mucci

XX% finding That what working smaller, forth. consolidated, had number them of place with And -- we was remote rental and we reduce we tools home look little accelerate we home, this number way our work local in When from physical from people was the a working -- had up even we the to took in allowing regional offices the client our been plan model. to from know, -- place I'll physical locations, amount faster? could had and we were you that in kind fact, expense, from is and people, as many it. location. service the bit closing Sure. expense perspective would a put And in retention of and better a at, would work people as that those a decided when a in place. service our we stronger, we start of a And that had saw were we've our of even employees office because And all and in look we we and areas already. so experienced centers, offices a technology even could service close number to is, a of satisfaction across costs of tremendous from a perspective lease home as were from let we a home we The to save got of country. that a -- and we consolidating went we

so Efrain to already accelerate forward was million. there why employees moving quite and reorganizations, that's steps it’s as than of mentioned, painful actions closing There employees, certain and took we it. and also to was do. as we was it but That's worked some was those force, and already other $XX X% we been of also So in announced also that still less those well. some the -- offices of our forth and reduction we're small, decided through taking But the the as our to majority

Efrain Rivera

will effect tax will the On will figure that, you the million, the forward. if We what EPS that going out you your $XX be -- be. cost second of impact come question that can million, out Kevin, you take anticipate $XX the structure

Kevin McVeigh

thing that. It That's incremental could that that there the be was it continues guidance like federal things would that the well? if as that follow that helpful. Or no some assume another little concern of quick something in that, setback? layoffs, to don't would up. Is funding, And be be a some embedded then just one get again states incremental sounds, stimulus, just funded

Efrain Rivera

hey, I looking Kevin. the that what you right if of is. mean, now, do that. I we're I we're not out X-percent, what are that would in say, impact and management in if we're that saying, Yes. happens, result of literally, granular that every different a to terms a coming PPP But of in meetings ideas where still of of don't it’s our think we're at were early of extension at bump week, at all level both scenarios Congress, level where it's going

Operator

with next of comes question Nicholas line Blair. Your William from Andrew the

Andrew Nicholas

outlook way hoping just PEO compare the is for the of your difference the Is the how environment, bases could the client you business, current each I in of payroll business resiliency that your of the end client. there impacting have to health and in terms business? two was major any reacted the

Martin Mucci

Well, I that. think, to something I'll start, add wants if then Efrain he ask to

saw obviously closed. with the drop down shut we saw think both, in furloughs a business actually and you the small like in side, on I things that. payroll businesses were or What

no had you employees So, there.

basically have worksite employees, On the well, back employees, PEO and little we clients worksite both change base. pretty the what in side, bit usually but a they to larger reduced a their refer and larger employees, little average is bit the client base, come

being PEO employees on demand both side. think I bounced the we employees, There's paid better worksite ASO. a existing than of back for change little PEO expected and a has within great bit the So,

PEO people side, this size to employees, toward average is XX have more client. ASO the think would that, on I helped say just handle HR outsourcing, difficult I they to our this who the clients which has XX, PEO and is because moved -- XX have of them if on too for kind

bit of side, and in expected. the way open you but or come changes little you kind little the people have their been also that so been we've set. you When the I think on for the and do how has back? but has you and about employee been business better though kind open, improvements a I reduced What insurances how handle think showing And need back, do bring either Both more one regulations all more seen because furlough? and than are of thing the we and that the do have back, place being that do PEO that how bring put complexity of bit a stayed them of small -- of close where moved forth?

continues. that that hope So, we certainly

Efrain Rivera

business a scope. little of Yes. that SMB of business in than nature Andrew, its the what is I our PEO of the different terms would geographic nature add our is

And to indexed so, back. consequence, in a more there trigger has we’re reaction the And of that say our as Florida we've PEO some in clear on almost that isolate exposure and terms State at But would was them point, we When would a been hospitality. you to discussed business data, looked before. some hospitality the reducing as factor, I we hard of hair was parts the come have just of over starting more it employees. the hit. concentration to in bit if have of that we’ve pretty a Marty's see industries

perhaps than other have maybe. we're we starting also recovery to probably So, companies worksite people, hit in see little other of been But terms a pretty harder now a employees. rapid

this to I in is think the environment where state is. of how really your PEO going concentration reacts depend on your

concentration If to result. or end you're one up states a with concentration have state going shutdown, heavy in have you're in that a in a you been

your If you in just a Marty a what but of open, remain have have -- point, one said. you different relatively worksite where that where lot employees state a to the reiterate were

employees stopping back. clients now their and necessarily processing see reducing saw They're we that and we didn't adding what So significantly. clients processing

Andrew Nicholas

are you. you backdrop forward or that? at like point deals. even a the with I am variability viewing kind future update wondering now Thank any with comfortable in you considering there. if mean are to the opportunities just And volatility of out how then you're sticking might considering something be you and moving there's the where how M&A PEO, economic And the I much

Martin Mucci

-- a difficult we -- do that interested. business touch still Yes, staying Sure. We're in think it's we're willing also a the this the employees it's more PEO And very of Obviously, it What's the our point business. overvalue to part of we're opportunities possibilities there. bounce now, -- the M&A in think there's out a take buyer any touch the unless we only or the growing but and just we're back. with watch this piece from remote of at how it's bit to what's opportunities obviously, valuation? forth. and many so understand diligence, But little in little clients. you're dropped kind selling those. working remote staying the about And in does we're are little unless or nervous certain as a where expecting they It to make to one going environment, a bit difficult, dropped diligence buyer acquisitions is not due bit a willing of continuing of

we're a to it's So very time of the little tenuous but opportunity. staying very buy to bit that interested a close and market for right

Operator

Your line comes with Keane next of Bank. the question from Bryan Deutsche

Bryan Keane

thinking discussion, or those of the that the of of remain just base, on have that? XX% bucket base, the a up about following sense Is still dormant? in I XX% clients, fall don't what it suspended good percentage of Just

Martin Mucci

XX%. think number much one smaller. it Much out smaller, anywhere peak, half, its but the Bryan, we've dropped it’s don't at I even given in wasn't near

a So, it’s good -- actually. yes, question that's

don't too it's like not It's large. So that feel people large. that

it's might not I now -- it's it's to Well, but X% the you when it we put wouldn't given where XX%. -- number probably are We even all be X%. together frankly, haven't --

probably discussed we out over there. So numbers the are that that for

Bryan Keane

I could only close it's that down guess to point? So like X% this look they at or X% fail

Martin Mucci

break -- probably X%, as related X% suspended and suspended out can, like seasonal in a still that are under suspended the and are we but really are that that we that. range. definitely of result what to it’s that best have in Because timing, X% always don't Yes, can COVID. we things we if But COVID some

Bryan Keane

you've And kind that realized does that that turned off? include of already businesses have failed or

Martin Mucci

No.

Bryan Keane

of percentage that are group off? closed, Are that there another basically turned already are

Martin Mucci

lost that our would be Well, yes, in numbers.

numbers. X% And Anything COVID. So retention of is -- see in those of our only already base taken as they're to kind that's is still out clients. client of are the in X% end a went suspended lost right that client already that we've because now, base. not we're And kind waiting there if those up, that thing to helps. lost of the how The

Bryan Keane

Yes.

to -- of how a And that compare was how a Just -- percentage, that that does percentage normal that that big sense to was? recession? loss get trying so is

Martin Mucci

-- -- last didn't this at at we was Really, the recession. the would really but point, recession point, so we we say much deeper, this I anything this -- like lost, haven't last

so a went we probably Now talked that -- very handled relationships about them being And was I a time, payroll went longer we of XX We period and lost think months. over you them it deeper. much specialists from had. well of suspended. and one This kind we that to

you going if may where kept call it to easier clients they have I'm going much So going And if having it it it easier made needed hey, I'm to again again. go for I up, We said, for from -- lost, start lost. back our to us. And and I'll sell and competition.

period last been, lot time. those really it's frankly, say So over ago, came better a of larger were and a years losses really the XX recession which longer I than would

Bryan Keane

I And had last Efrain then guidance. just just the XQ about thinking question

period -- more looking into jump to year comes normal the 'XX. go And growth. You as guess off back said, more fiscal like that's it I we

versus thing, easier to that with of about about head takes that the head how we numbers think puts 'XX? kind start the fiscal XQ and trajectory back business into do we the then does new and comp I there that weaker sales, piece bounce think with into As year of as versus

Efrain Rivera

And have compared to about be quarter to visibility say a Well, would looks a we what to quarter, things the the time, get number going where we I in there's be half. that that three say than that’s QX, a compared I lot we normalized looks are But quarters. to first normal Obviously, right half best that I a would where this the certainly would now. of situation, normalized around can more less I create more Bryan otherwise. think year, second will we by occurring say, the it second a guess like

the sea point, more So I specifically legs reasonably this way I'll the thinking just got we think we've quarter But that's QX talking will until for basis under us start at getting about in that good that this hold our year. look.

Bryan Keane

normalized just that And off reason shouldn't into point? jump fiscal then of it why no as we get well as 'XX, more to be there's

Efrain Rivera

think about clients, we employees So making uncertain services the point worksite go in payroll, per is stuff you we've environment of I the that -- environment to out the to that I an call down, And is that reiterate model that, we talking have mean in that of been situation normalize being in as want is, make this that is by what is has right Marty for non-processing going been to kind -- I the want all kind and have. through. want of are tech checks to model kind the the we business

say I say really that, What's Now, great irrelevant we're important it's that is from more is I it. the getting clients. that feedback

months. as reinforcement we positive for -- not gotten over have role have played much never several the the We last

we environment uncertain not for very balance have to we in So recover, we we of only we the do think serve. that the of the right because the clients kind an have but market, in year ability model the in that's gain share the

we to well very going in could the strength be our compared of exit we place are we we is And the to recovered as are end through era. the only that going bullish we're but go up going model a we as show. where when to to now, year So being -- not entered actually we better than year, we were the COVID

Operator

Cowen. question Bryan of comes from next with Bergin line the Your

Bryan Bergin

improvement the the of did curious out would ask call, check projected on that versus Wanted as driven characterize to check see and of in increased And outlook, on penetration in some teens Management improving the the some predominantly XQ, retirement from update being volume far that called Solutions, as how you say that the volumes of high did sequential better here in playing referenced? you services other 'XX? you the how you the Efrain, out than it decline you you

Efrain Rivera

seeing little I bit that's say expect. Bryan a we we're where we go but as did, through better. We and early, QX. XQ improvement would in Still

through question grow it, have an make clients the expect you're to a build, clients, QX. and and point, we to better we'll go drives yes, get then what remain and the that sales better the recovery the from their we We'll with a that and a to So, combination up build opportunity revenue of work that didn't year. then understand clients as environment, force our better combined sales through the asking,

Bryan Bergin

pay on And then offerings.

So can methods as in digital seeing just just means? as on what you demand pay of pay we a acceleration And is paper the comment you're from be of think checks, about other the to service rep margin on offering? traditional had through real-time the payment potentially an or adoption then you there for story solution versus

Martin Mucci

provide think I and that mean, yes, reductions some of line We Well, service part of we're lot expense that of seeing think as clients opportunities. and you're productive so. have the more self more down I margin. become we is I a gone seeing

So, in past, go, to think then change us change and address employee direct self-service. of now they business or the the to when all their deposit owner their that's would to about the would we go their or, information, would you person and take the us, go their HR

really is us. themselves that all the And so and do employee that to client the able saves

so seeing from that you're And much it standpoint. more

that early, the it it introduced hour seeing bit and in slowed for we're hours use able on definitely client waiting yes, more it, not bit, a work there. I eight down certainly process, interest kind would back. been of but last and the more few back timeframe hours, little we the to were December COVID And but of eight it's demand, in it's going a sign demand. pay instead couple we have a even pace it. the brings but hours of a do and up have On think I more that's of shift seeing do The XX but months to was again. think during interest the we're And pick up restaurants to and around bring someone for months, -- of that on last they and pay still there to that now eight challenging their interest here And or few there paycheck, weeks the is lot someone

only going piece retain we're clients a to instead seconds, the that's offering We've a for It's that and real-time and of if have they want them it's retention good pickup that in that be or something opportunity? mean, think just in or our do fundamentally some lot clients for some a of a lot yes, of still retain transaction. the forward. or a business I more -- change they get the their -- a is like day or margin it. there, to it'll have going too. been from correct, we it to a it's gotten happen starting they that less that it's employees to I to it It's but really their clients, have it's and wired has in reviews think do, client. minutes waiting minute I opportunity wanted great mistake payments, particularly that because last But involved and be can there. I it maybe favorable a get have So has of done and us there product money to months ACH Does like like, pretty ago that minutes, people industry an think the them able very some we help going seen really a it employees and it. self-service few and On it's a and

Operator

Your Silber next Jeff the Capital question comes from BMO line of with Markets.

Jeff Silber

Update your what about was you workers’ talked Business on going-on bit comp Call, the a On little side.

just you'd Can it by trending? think I extent was procedures. expense, get some but update lower fewer lower that's on we been of an offset healthcare to how seen electric because rates,

Efrain Rivera

trends continuation I a of the We've of changes. lot comparable just, those seen not a think of the into beginning year.

Jeff Silber

terms doesn't up it pretty It's steady? And still certain faster. of geographically states in are matter that in opening Okay.

Efrain Rivera

Not thus far.

of -- Florida good. in the been our State of a healthcare the In State have we have So Florida PEO of lot exposure. side, healthcare results on the

that's good. far, we thus update So, anything see We'll different. if

Jeff Silber

cost you're just you costs one-time from the great. me about? this. think the be of expected a follow-up, that going you as if about talk that And mentioned to you’ve you getting savings forgive talked Okay, some Did

Efrain Rivera

effect the We the We figure was said, be embedded if guidance. said continue said, We it and $XX $XX can you was going tax in what out million, forward. will you will million. the it benefit that

Jeff Silber

cost Yes. I'm from moves. annualized about talking savings these sorry, the

Efrain Rivera

Yes.

if So, million that the you we the $XX then the you'll tax effect, forward. take expect get and I going benefit, think

Operator

of with next question MoffettNathanson. Your the Lisa comes Ellis from line

Lisa Ellis

If of But are sale to clarify downtick one Is understood that operating causes just that? why you First pandemic because high or the clarification. just a be these looks dipping, double-digits, XQ, to from a can new cadence XQ like single revenues expected low right, it metrics. the is? what is of lot because I cadence of that a so despite

Efrain Rivera

has April Lisa, it, Because, were month QX pre-COVID and one of remember, COVID in results the May and months.

results, also pre-COVID So QX less has, one month but you're little bit unfortunately there. right, better a in it has QX

Lisa Ellis

as against a pandemic? a coming Are the SaaS seeing competitive struggling that win share your in comments this also I notable these some then of sorry, meaning little you with on some -- you're in color I about space, players some a winning still are have bureaus their and model. Paychex to service a Are seeing competitors And the up just don't the service bit through you know more and dynamic them, one regional this. your then second really component dynamic shift an of just that? you seeing rate increased legacy lot competitive Are follow Efrain of about mean you is question compete through

Martin Mucci

Yes.

a certainly think fewer to competitor. go to I Lisa we're the -- side, seeing leaving we're seeing on retention

positive themselves like been their online it micro a coming increase end. doing a processor. the SurePayroll and competitive and benefited win, on payroll saying, Because see also we From And we're still more micro And there to win on are end. so to work more going that we that the end example that rate that's from through some federal SurePayroll get their a the lot forgiveness someone a hey, on -- seeing for of winning in to we're out we that we report where say looks offering would environment. webinars. I'm lot clients And low trying it the what them as like have getting the that loans also I and the side an on and help on little from loan the payroll and bit website which did we're has with on -- whether is that competitive definitely sales, the of go a

of So and strength think a they in the opportunity. SurePayroll felt lot I Flex

so And also we're I some winning think there.

although So heard at environment this been tools seen winning, seen time I are maybe and some think would looking we've think of that overall to the But the don't some supported there because any competitive of I competitors. and the supported think outsource. for of major -- furloughs the don't COVID that point, say there great disruption prospects has who layoffs and I first I we've we do -- we've have clients had that are for

Lisa Ellis

last one for then me. And Okay.

question. non-COVID Just

of either for that you're the for On upcoming elections any candidates opportunities challenges policy that are for things the election, you? might in agendas watching or create there the the

Martin Mucci

I change tends if to is go Sure. change to in regulations. back Well, a always leadership, think, there more the that

in matter. reason payroll there's of Now, regulations us a or because either general more more help outsource to HR, that for

-- history, for be more would would opportunity -- just there's corporate going that from be would obviously service I -- that tax -- from will But, be. from seen and not Biden also that's has nothing already more I be typically to And regulations. based about, being highly opportunity. I've much because obviously, company we're so see yet say we're and don't any looking difficult what it's don't complexity, watching -- So so to going on exactly product impact forth. taxes, a know we what I But talked more businesses. therefore to a think, profitable more

no from of make and recovering exist will And to more businesses would be And we handle services. I in it more be democratic COVID. will for also that new clients matter to from but we've coming of said, going able to drive their part permanent therefore, think We've number a going regulations. from frankly, a remote I fairly luckily product more help -- positive a I gets to employees respond of our which a product made complicated and in, future. to to would us helped that really a number handle that So And continue also a again, have standpoint. to really be and rules standpoint, for of who have investments the our right is clients forward. to times, out administration, workforce, which investments the pay here we've for is as a working, remote will think typically be it remote -- way the off demand think there's would And a made going that

Operator

next Your with of comes question Samana from Samad the Jefferies. line

Samad Samana

Efrain, about thought maybe net I you guys retention a retention the one know on if it the If unit retention remember basis… number? -- on dollar side. I correctly, is XX% we

Efrain Rivera

X%. Add

Samad Samana

X%. You add said

Efrain Rivera

Yes.

Samad Samana

Okay. Great.

Efrain Rivera

of hit we point, terms that put -- -- of Marty's a here, we And level Samad, revenue terms since in the on in since been we retain. bow To to of a just our say, there also I've And record that when the our work costs that was extraordinary sometimes of I is tendency providers. model. of a in adding model, by just service as to think the really pretty I strength certainly think

they people numbers frontlines to without day. the doing the do on You can't single work those those get every

decided it And We've to the can is the we're we be infrastructure we that year of this business to not we made can Obviously, but of That's doing. and expect thing think a efficient? get people. lot half do. an the terms decided to the that right year, employees. the steps not more we efficient, more environment in is So worth I we've more to taken that decided And recover choice of not to in what be slash where really off. efficient that in in back do and we’ve paid terms in it to decided very than get efficient what has you

Marty going that, said call go in of at status year that many the to of which having that, this Now another remain first how through caution suspended need let's quarter the who said I is of to stage, will add of see we a process? the continue earlier, people will our fewer would them back have all high was turning meaning to optimistic, started out be there's process, the the when lower lost. to pulled and we to because us that very thought going come be and have clients it's number we if you would We're of are

things role to response do that here there together But and and margins services lengthy that’s is I a prove experiences work our efficiently. done out. of So think sort those think that I tech it's the And important question. for our that highlight to

Martin Mucci

the What months service at people which one bots. volumes really Yes for the year-end payroll those up thing We in end .And like with your saw because our lot much -- like in now. XXX because just made model step productive. two and year business, interesting I'd typically are that just and fashion gone responses, much, thing answer like The means a responses in an automated of the more That's volumes last self-service our us, made can we questions. I we XX% an very longer had They it's automated last further. of higher Efrain think, place point, we've particular, automated through happened bonuses. awful months, up have to what of is questions had And in May, and have I’d haven't to a lot calls, automated we couple a it but people and where questions. over because it April that in people chat brought on take was much

got and or in well, because any answer handle way that do country want going the you COVID, the is providing today everything of efficient it a understand When we is level we And something going regulations have that you answer lot provide positive A tools experienced of we've or gone support don't for to questions. fashion, have to something, like out service, it. lot providers quick when and X/XX how get place last you that. unique can’t there do how of the we of do automated the the a you been lot about to an couple situation So not at competitors service to the were or months. the that had a to of on automated feedback

our they're you So it's shout for off really when a service providers out to really them there need and us. paid X/XX, XXX, who it be and

Samad Samana

we XXX a how there million referral And your you then loans -- have -- that partners How about that Is fee that? Paychex maybe just monetization been the the think for just is path you're gets, on service monetizing that processed Paychex it providing by that? mentioned, of customers? is are is to is you a -- should there there of

Martin Mucci

a amount that not Yes, say a more loan revenue I'd we amount on small it's very were banks. with hey, the the so front large, given a clients and it's a of hearing is And of a but because our what I our with so forth, clients relationship our but to small and line. it our was get relationships a And number we bank can't a necessarily referral fee of relatively I businesses forth, don't that, is revenue get established. really based don't to given service from and small have have

those three a And out it fintech partnered provided and a so obviously need was there that with them. was we and companies support to

service client value, So say. significant small monetary but I’d

Operator

with of Northcoast Kartik Mehta the Your next question from line comes Research.

Kartik Mehta

seeing it, I modeling and will than about what have business in you're more look trend? you're the seeing think Marty or talked bookings expectations and experience Efrain the Efrain, being based as you of terms kind of in guys first is and stats, at how half, business what second for as that kind you're your in based business is the half. that on that you obviously of the this just your better and And we on the

Efrain Rivera

think a of part. I little both it's bit

we journey we drop, So hit expected recovery the depth progresses, May ago, say whole idea I is it this we what to of hit we're I mid would to started several had once you said, have pretty behave continue. we to looking at once a this when that think looks bottom. from we the bottom. got obviously we we months have how similarly When understood And hey, like how how

Now, to steadily we of have are continuation. weeks before, as what said we're I looking We eight looking at nine improving a for monitoring now metrics.

-- yet. makes I some is questions that necessarily closures, results? that calls the year impact course they a laid we're We think -- monitoring lot that spread sense. of current of call, there've very it's they having been it an again on -- carefully, the of a see But continue number the if on and infection the but the we've trends don't don't will, we does of out think and necessarily that way on not

value continued provide, our expect to high technology over which services in improvement retention the and of are next both of services several ability our that has win So, positive where bookings, our marketplace. we record quarters, provide, in some the on environment the levels

and outlook remainder think we those to about build we're that the of All the got, we've year. the things to going are optimistic of

Kartik Mehta

the numbers of hit at is unemployment business? in second the that numbers to Efrain, to out half? more one rate. the do to you the right compare as where be say, to there rate, And look And you your a the it controversial you now think rate has there employment can is you way try to

Efrain Rivera

improvement that we fall. in the there's to think certainly certainly be I expect Well, starting going

think elevated of I levels the in same we're environment an we're where in So, mid-fall. seeing unemployment

informed our We trends paying the those data. daily, what and know employees. right can the own I and we positive. to would of really to much by have impact disagree think Kartik. want we shock of that. week-by-week, But we're things really that But recovery We what we the are to, how at that, as we'll people we trend on if are by has the that. informed I even now, tell frankly from to that about where look where been, the are. We're too call It's -- early know plan. say, is economists conversation are another what depths

feel believe we that continue, that, there data that on again, looking a will that Now, looks solid no but it at like what is we're we guarantee the trend.

Martin Mucci

Yes.

number, pull so that because kind data. procedures noise a there's I way a and piece state -- numbers It's it's unemployment great those state-by-state point. the together, of they one pretty much But with think Efrain particularly way in of dicey. makes it's

We great have sense. a

looked the can index for we And some were business could and you the it, small we of have way they're into data this look that flat quickly. there's as business I our the improvement they way employees up our the -- so at done, shock even look index, -- these a it an it as numbers, X%. well, though, measured, think with of the ADPs and dropped then think they saw because up as just last you like pretty and of and you was if month-to-month, way set if of month those been would at our I was with small And index, actually X%. way paid issues at got it really were see nothing and kind

have a data, very on we days these lot So, you try and as changing Efrain to of said, look lot a of data and good quickly. but it's at changing how what's where

our we than on So, more rely like something tend to that. own

Kartik Mehta

then one last Marty. And just question,

are you're yet As you've maintaining how in where with managing, you entered the margins the operating this business, results? environment, satisfied investing

Martin Mucci

to back their through positioned and out it's tax go also HR Board here rolled very able you challenge. Kartik, the that reform took bottom-line. but that substantial the put allow do signatures. we've back even a Well, into think, clients that online, with do to back like investments the now, more right well to with self part things us electronic as our were some to we talk to IT We happened employees look things I those to really a for there, and But virtually reinvest look workers, Connect right app the at and be development remote to service, products into of that some the always companies you what when employees, the worked

of development generated always looking look paid tech X%. the was over we're in I under them be really to We reductions But made number IT to like invested a And frankly said, we've to at here development continue savings grow force. IT you some and that side investment. continued So, when overall that well. or it And years in real IT the has small years. has We've of company. service that had last off XX development, XX

that So continue. will

investments last -- looking investments in capital, making. capitalized as be to our that product our Our year. IT we're the cut to not look the We're same

Operator

the of JPMorgan. comes Your Tien-tsin next question with line from Huang

Tien-tsin Huang

how of can or how is clarify, we fiscal different as did bookings assume business question. switching. already. a you fiscal have to new starts new at higher looked it a 'XX people we a bookings lot just that should in less like know The Because your it lot for of I then sounds And But be? which come expectations? shouldn't about going 'XX, asked sales versus be retention

year? be it And Just is what like. going trying into selling picture look last So differ how will existing? to more to understand from big it might bookings

Martin Mucci

Yes.

and -- even And through down. March we all of March, in the quarter. at back of or all was look as sold nine it's continued fourth dried nine I think the lot in business think And March April amazed fourth in into through the very of strength just we solid which sell. they telephone was frankly lines I'll middle was did growth very Efrain our quarter think months, the And be were to we well I then of pretty pretty that continued Yet, pretty can months. across up start. much we And look SurePayroll lot we -- that a and and and and a and of May, mentioned, good. the well the -- at units was were over had number I when strength I sold online much the pretty

only how quarter given And little certainly learned they’ve of and an online think introduced mid-market fourth of Mid-market, that was in was online. from not and then them very with to sell in what kind maneuvered quarter strong. client of quickly. more nine halo -- and the we very I I really support doing more effect they've where product a the the micro a quarter, The the think that very on were -- that moving was lot changes first done kind of and to we improvements things available getting lot that of They hurt fourth have we've also first. expect all But because were -- to well. the a we've the and issue outsourcer months through the continue done a In more prospects on of product of kind is we're the leaving But well. a basis. they face-to-face. small the

a banner with lot have want of we of to first is if kind But be with. tricks client how to picking a better a to remote, meet of scheduling, So do met steam. learned to And how up do everyone remotely because that it's selling all how not going be is to and quarter still remote. better they

pick nine through then those. up first there. had continue So the be solid we would from we're think I okay. to it'll about pretty And we And excited that think If bookings. But months, quarter helps. first

Tien-tsin Huang

It does.

EBITDA. pretty revenue and the that spin your second appreciate it much just we'll impacting initially, geo looking to I around These -- forward know declined half look questions. know the going that's don't at all else we well. guidance, there savings as the implied or But shrinkage margin half, my if the dynamics. margin have So revenue? I through decremental the is here payback is of just anything margins, of all like first to margins the I guide are at you asked suggests least I from looks But the that margins here. see beyond

Efrain Rivera

Yes, thanks Tien-tsin.

primarily initiatives the dependent specific then a highly as as And impact. through see as it's driven. to have hold through savings And a also you of build year. and other margin the yes, of that, And the revenue take of flow you more So you some through cost on amount impacts the in on very quarter. it QX of we go quarter less revenue the see in mentioned that go the are we starts revenue you of

you're you're getting go thing I’d just So -- getting. to again, And back one I what primarily that's yes, mentioned. that

things were of of we in the thought, year, shock a weaker were to in needed where because come to of position about we there is we we -- were rebound. the want state, out that we half didn't very back be going we and the One was this in be opportunity going a careful to to going

the than amount rather optimize Marty in the significant half we headcount said, have. to of of cutting the of what that we first year, headcount is So as amount decided,

flow we're the revenue. So go you of to benefits from year have through the But that we see you'll the hit significant a in as margins because through actions QX, taking. the

Operator

Your with from next Mark comes the line Baird. question of Marcon

Mark Marcon

morning, Good and Marty Efrain.

on they June XX% to the follow would a May stabilize, characterize year we the as you the got with of were -- bookings. Could trending Just to wanted obviously bookings, prior But XX%? COVID. would to time because regards to of just they of Like did at the what -- compare have you improvement? April and How started how or ago? down by level been things relative to year

Martin Mucci

-- we we think with year. year, at frankly whole look Well, for and fiscal last I when the you what say flat would were year, fairly the whole

So And first get thing hardest is, and expecting prospects come kind you will continue think you've so June, all from stabilize And have get of got folks May, out it's it's sales over the certainly and first I you that down, people improvement you it’s course year when to negative. a still last can't like new we're back just will put were together, The be year, as substantially. down June more there's sold. we see But of to feel quarter probably and May normal, look don't and want reaching businesses down open. over flattish I for and overall products April and -- hard. of if do portray that'll all They frankly, their down your were up, too the attention back year. April last of a people pick it slightly is obviously to for at of will forth. we when -- but sequential you quarter and --

You don't the same have environment just yet.

Mark Marcon

anticipating more you would basically that year, salesforce it as this will be optimization And for part bit little the so of the be budgeting the flat a and or then, be -- stay are that would well potentially compact?

Martin Mucci

that same across the but the we the salesforce, think roughly didn't more the little We about but down I bit think say to well. are the number. overall we've and say telephonic just inside look would didn't No, -- needed selling working would board. grow It's fairly numbers it's same And a I initially go shifted to it's We been really I headcount selling, -- it's flat numbers. because either. overall, about

Efrain Rivera

just color is point Marty a productivity. What found that was to actually little Mark, could Yes, making making. the you we that better get in shift,

on because it couldn't of said, activity a done are fact just ago. different the also did the our not sales headcount we so a drive really side work amount that higher And was marketing on of ability a than digital we've to flat equate ballgame really years in we as virtually. three year-over-year, now two, Marty that We sell, and relatively even though were tremendous to

can so, levels drive of activity. with and field-based less And salespeople more virtual and operate you higher

Mark Marcon

level. just how I'm small And you a think takes client today comment a to dimensionalize you size, of you years from ago, terms greater actually where could discussion of early Marty, that client where but service in company made Paychex migrated would size is and lot of people where payroll a in be dimensionalize services that? extent couple few about that you then, a was clients as if on. of Paychex think you've now, we like perceived wondering business the if about to terms the and up How you of number going a years you a average are in

Martin Mucci

high sort last -- doubled I company you XX Well, Mark, look in think level, the the a revenues of years at have if the now.

But XX and few was -- to $X over unfortunately hit to billion going We're billion, up $X $X be hit was for years we $X hold exactly we billion. months. a that it not goal So from billion, our ago.

the it kind payroll Solutions of is PEO and We're or shifted taken star moved, it's -- app going business And being become five to mid-market look a much I Management the of And PEO small were where at Last going a payroll, years that the and has small, payroll It's is the demand, business. it to couple the of the and self-service. company. payroll PEO had and is you back revenue, much for the when had Management really picked that look has and more has a market from Solutions. and technology we that, time a more at mobility size just products, learning XX% things we much year is the and first to the more years and look a technology -- lot from before now and to side but even below faster growing, shows to growing I is been of speed, shifting, that a mid-market of company is with more and Connection company small got of see as the And leave competition. mid we've the you mid-market offerings company HRS much what can well. we just that payroll I pay now, that predominantly of business XX faster think PEO, HR on app, when a XX% so and and you fallen if now, up couple wasn't certainly think think ago. growing more and at and you growing insurance We've other management, that faster HR not If maybe was the side historically, continually business. growing, and distribution a

much brand We're Well, the brand we in still PEO-ASO of Paychex, said, company. that's question, the years, It's that the offer I small fast-growing not HR really a insurances are now, business. company, as the XX% of been just is more financials, and in our true. a of revenue. business they piece So a sometimes of oh, when payroll years, is original five still is almost business having obviously as I think yes, out XX -- our the --

small need, in means. and it -- picked bought has of dramatically that with mean to so, still not grow. will for quite clients think HR going going COVID that we're revenue steam size. HR great a well we're up to as clients with changing and to how products client they as dramatically now markets. has And the what picked their we're a But continue helps. XX competitive dimensioning, be to definition well, they’ve kind and and of business. that's I for support and what of to think in I -- to And I I need as hope larger change positioned changed obviously definition I the for see -- also that That's the opportunity up per more each other their leave XXX that really to has particular don't

Mark Marcon

just correct? to And then, the relates low-double-digit, employees particularly half high-single-digit salaries getting, first can that it small the and regards PEO I to is are guidance one guidance down reduced last as detail function worksite Just first of side to for quarter question? just that ask part the of with a the the

Efrain Rivera

That's Mark. that's correct. correct. That's got part of you it, it. Yes, Yes,

Mark Marcon

when that? a about it muted perspective, we're more unit thinking it more so, from And than be would

Efrain Rivera

muted Yes, more than much that.

right. You're

Operator

question final Christiansen Citi. Pete comes Your from of line with the

Pete Christiansen

flow seeing some of see more Are early some have to questions signs economy. the weaker there? speaking furloughs starting you enterprise your two of then, last The article you if was secondary side the in. the employers, you Thank one seeing that the think, from through the And From multi-location in really permanent basis footprint me any two turning connected I in questions. KPIs? shrinkage are is reductions. to you journal, there impacts fitting I was for your are ask headcount to more client into week are

Martin Mucci

Yes.

and they have seen With But -- any having like yet. that. stands majority trend certainly reducing surprised And not surprise seen certainly. that that the a physical there. -- not haven't our I we are employers, we wouldn't be but wouldn't think seen trend me, anything of if so reducing and not that I second our haven't a footprint question, really one, doing, and footprint the work seen we then, Efrain I more That much like are necessarily we're home out that's but from of more so forth, first in yet. don't their multi-state have is was... clients,

Efrain Rivera

you that Can one? Sorry. repeat second

Pete Christiansen

Sure. furloughs yes. permanent Yes, turning to more reductions, was about headcount it

Martin Mucci

although Yes, are seen that the I'm checks down. Haven't sorry. yet,

checks about, decrease improvement we're checks, the So, are we in as that talked -- seeing an in seeing improvement checks. from an we've

checks So the down. -- still but are

they bit So yes, I little if have I know Have out? anything…. early -- see they permanently are or there's a checks. yet. it's employees fewer think furloughed to don't Efrain, you that too -- anything

Efrain Rivera

employee early No, and tend furloughed. small to initially was then as that back businesses keep hire an mid-sized and saw would just on to -- businesses what I that make say, on an we take Pete, them action opposed

to saying than which see And I client as the the was point you think we in reducing. are action seen in trends enterprise see earlier, the this at people base. trends Marty we've the probably as is more furlough opposite, seeing -- our space, we've opposed back been adding

in And number that but is it's so that positive. looking buried more number,

Operator

are no time. questions this there further And at

Martin Mucci

will we the you. Okay, close this At thank call. point,

Efrain for this for do approximately and Paychex. release safe. If thank day, webcast please stay you're your call great press I interest year-end on on Thank for it conference interested in and fourth will call, our your a in you behalf Have participate to conference replaying of time and of the archived be quarter and I. XX days. you

Operator

conference. today's concludes This

disconnect. now You may

Paychex (PAYX) 7 Jul 202020 Q4 Earnings call transcript