Paychex, Inc. (PAYX) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Paychex COVID-19 business update call. [Operator Instructions] It is now my pleasure to turn the call over to Martin Mucci to begin. Please go ahead, sir.

Thank you, and thank you for joining us today as we gather to discuss the COVID-19 pandemic business update. Joining me today on the call is Efrain Rivera, our Chief Financial Officer. And I will begin the call with an overview of our response to COVID-19 with respect to our employees, clients and communities. Efrain will then update you on our expectations for the fiscal year, May 31, 2020, and then we'll open it up for your questions. When we had our earnings call back on March 25, we were in the very early stages of a national response to COVID-19. At that time, we provided our initial thoughts on the impact to our business, much has changed since then, as we all know. The speed and severity of the impact on the economy over the past 2 months is unprecedented, and we continue to monitor our key metrics on a daily and weekly basis to understand trends to make informed business decisions. Today, we want to update you on how we have successfully responded to the pandemic and what we are seeing in terms of business impacts. We were well prepared with a solid business continuity plan and key technology investments that were already in place before COVID-19. We have experienced BCP events in the past. And while this situation is different, previous experience allowed us to navigate this situation successfully. We were able to quickly enact this plan without any business interruption. The health and safety of our employees has been and will continue to be our top priority. We quickly mobilized and moved more than 95% of our employees, that's over 15,000 employees, to work remotely over about a 5- to 6-day period. Our IT teams work diligently to ensure the availability, resiliency and security of our technology for employee access and connectivity. Thanks to the efforts of our IT operations and service teams, compliance teams, we have successfully remained connected to our clients as well as to each other. This transition to a remote workforce went smoothly. In fact, our client satisfaction scores have remained at record levels, even with a significant increase in client interactions, particularly in the first few weeks of April. I'm extremely proud of both our leadership team and employees for their incredible engagement, commitment to our clients and can-do spirit during this transition. We remain constantly engaged with our employees, providing ongoing communication and training, along with the tools and resources they need to support them in this working-from-home environment. As our service results have been exceptional, we are not in a rush to reopen our offices. We plan to take a careful and deliberate approach to bringing our employees back to ensure their health and safety. We also continue to support our local communities during this time. We recently announced a $1 million donation to the United Way for COVID-19 relief and recovery across the United States. We are fortunate to have a financial position -- to be in a financial position to help our communities in this time of special need. Our commitment to our clients has not waivered. Our 24/7/365 access to trained professionals and the expertise and partnership of our 600-plus HR business partners sets us apart from our competitors and there's a proven -- it is proven invaluable during this time. After an increase in late March and April, we are beginning to see some stabilization in the volume of client interactions. Through all of this, I'm proud to say we continue to see continued record high client satisfaction scores as we demonstrate our value proposition to -- as a trusted business partner. Even more so, we are seeing the value of our ASO and PEO solutions and HR expertise and believe this strength has helped us to both retain and acquire new clients during this time. Our team of compliance experts and legal have been in constant contact with federal, state and local government agencies to stay current on legislative changes and also advocate in the interest of our clients. COVID-19 has resulted in increased business complexity. And as always, Paychex works to make things simple for our clients. We provided system enhancements to manage significant legislative changes. This includes modifications to support paid sick leave changes, paid family medical leave, federal tax and health care credits, and California State payment deferrals. We created and continually updated dedicated help center on our website that provides businesses answers to all of their coronavirus-related questions in 1 place. We also created an interactive scenario-based assessment tool that details new regulations and how Paychex can help. We quickly mobilized to create the Paycheck Protection Program reporting to aid clients in applying for small business loans under the CARES Act. We were the first to create a simple payroll report that clients could use to fulfill the requirements for filing for a loan the day the application process began. We have processed more than 400,000 of these payroll reports for clients since that point. We also enhanced our partnerships with our Pay-on-Demand products and small business lenders to give our clients additional support and flexibility for paying their employees and acquiring SBA loans from approved lenders if banking partners were not readily available to them. We were also the first to recently introduce online tools to help clients estimate and maximize the amount of forgiveness of their Paycheck Protection Program loans. The technology investments we have made in our Flex and HR suite of products positioned us to service our clients well and support them in managing a distributed workforce. We have seen an uptick in the usage of our 5-star rated mobile application and usage of many of our self-service capabilities. Our HR tools assist with evolving workforce needs, whether it be time tracking and remote punch in and punch out capabilities, managing documentation through Paychex Flex document management with electronic approval and signature capabilities, engagement with the clients' employees through HR conversations or professional development through Paychex learning. We are also able to accommodate digital flow of money through our various pay options, including direct deposit, pay cards, Pay-on-Demand and most recently, real-time pay. Now let me shift to what we have been seeing in terms of economic impacts of COVID-19. The economy took a much sharper downturn in late March and April than initially anticipated, with unemployment rates increasing to nearly 15% in April. We have experienced those impacts in our client base with a decline in check volumes and paid employees within our payroll and HR outsourcing businesses. However, over the last week of April and into early May, deterioration in these business indicators appears to have stabilized and are now showing signs of moderation. Clients who have previously missed payrolls are resuming processing. We are seeing this play out an improvement in check volumes and in adding back up worksite employees in our ASO and PEO client base. This is a positive early sign, which may signal that we are seeing the benefits from business reopenings and the PPP program. This data is also supported by internal client surveys of our clients' outlooks over the next month. We are focused on monitoring signs that may give some indication of the speed of the recovery. We are beginning to see improvement in sales leads and activities. Overall, sales are showing resilience in this environment. Certain areas such as SurePayroll have experienced growth in new sales despite COVID-19. We are seeing increased interest in our ASO and PEO HR outsourcing solutions as businesses are looking for guidance during this very uncertain time. We are pleased with our client retention despite an increase in nonprocessing clients during this economic shutdown. We were pleased to see that many of our clients suspended operations instead of closing their businesses and anticipate that many of these clients will begin to process payrolls with us again as the economy begins to reopen. Although there continues to be an elevated risk of losses in the near-term as some businesses may not be able to recover from the pandemic depending on the time frame for recovery. In summary, Paychex was well positioned to navigate through this difficult time. Our development of cloud-based technologies has allowed clients to seamlessly manage their workforces remotely. Previous investments in remote tools and technologies have allowed us to quickly and successfully transition our sales and service teams to a work-from-home environment. And lastly, our legacy of great service and proactive support has been instrumental in helping our clients when they need us the most. And we are seeing early signs of moderation in our leading indicators and stabilizing trends. I will now turn it over to Efrain, who will provide you a little bit more of an update on our outlook for fiscal 2020. Efrain?

Good morning. Thank you, Marty. Thank you for joining us today. I hope that this call finds you well for those of you in -- primarily located in New York area. I hope you are doing well and your families are doing well for those who have been impacted personally by the crisis. Our thoughts and prayers go out to you. If someone who has family in that area, it's been a very difficult month, and I understand the concern and anxiety many of you may have felt. I'll start with the customary reminders. Throughout this call, there will be forward-looking statements refer to future events and involve some risk, please refer to our press release from earlier this morning that provides disclosure on forward-looking statements and related risk factors. I hope you've looked at the presentation that we uploaded to the web too that cover some of the topics that both Marty and I will cover on this call. We intend to have Q&A. So before I go through this, I just wanted to say if you could keep your questions relatively brief so we can get to as many of you as possible that would be helpful to both you -- for us and for your colleagues. When we provided our thoughts on the impacts of COVID-19 on our March 25 call, we look back to see what had happened to our business during the '08-'09 recession and in the aftermath and 9/11 modeled our expectations, assuming similar impacts. When I say similar impacts, we actually thought it was a little -- going to be a bit more severe initially and then moderating to look a bit more like what 9/11 was. Well, April was a different kind of animal as we all saw. What we've seen since then is much more abrupt and severe decline in the economic environment than we had experienced even in those prior events. The trough from which we start is deeper. So there were 3 questions we were trying to answer back at the end of March. What's the speed? What's the severity? What's the duration? Two of those are now clearer to us. The speed, fast; severity, severe; and duration, we will talk about that. No one knows precisely, but we believe it will -- it's going to -- the recovery is going to be more gradual than at first we assumed. As Marty said, over the last several weeks, we've been seeing signs of stabilization. Similar to other leading providers, we believe the recovery will take time and will be gradual. We've experienced a steeper decline during the fourth quarter than previously anticipated. But again, one more time, recent signs indicate that conditions may moderate during the first quarter of fiscal 2021, with gradual improvement thereafter. Based on the trends we are seeing, we updated our expectations for the balance of 2020. Management Solutions revenue will now grow approximately 3% over fiscal 2019. We revised that from approximately 4%. PEO and insurance solutions anticipated to grow at now approximately 21%. That's revised from 24%. Interest on funds held for clients anticipated to be in the range of $85 million to $90 million. Some of that has to do with portfolio repositioning. Total revenue anticipated to grow approximately 7%, revised from a range of 8% to 9% in our previous guidance. And operating margins and EBITDA margins are anticipated to remain unchanged. They were 36% and 41% in previous guidance. Other expense net is anticipated to be unchanged in the range of $22 million to $24 million. And net income and diluted earnings per share anticipated to grow approximately 6% now, revised from growth of approximately 7%. Adjusted net income and adjusted diluted earnings per share are anticipated to grow in the range of 5% to 6%. This is revised from previous guidance of approximately 6%. This implies that our fourth quarter is anticipated to experience a decline in total revenues of mid- to high single digits and operating margins of approximately 32%. Now let me talk a little bit about the preliminary thoughts we expressed on the call last time. And I just want to emphasize that this is not formal guidance. We'll provide that. We intend to provide at least a framework on the fourth quarter earnings call. But I wanted to let you know and understand, based on what we've seen, what we're thinking about fiscal 2021. As I said, our prevalent thinking of the recovery will be a bit more gradual than originally and anticipated. We still believe that there will be a return to pre-COVID levels late in fiscal 2021. We see total revenue at this stage being somewhere in the low to mid-single digit range for 2021. And the reason why I say that is simply the trough, as I indicated, was deeper. Assuming this revenue expectation, and again, it could change, we anticipated that operating margins will be in the range of 34% to 35%. One of the things that I also would call out is what I'm about to mention about other expense, which is the interest expense less income from corporate investments. We anticipate it to be in the range of $35 million to $40 million. So what's happening there, and I don't think this is completely captured in some of the models is that because of a movement to create more liquidity at the beginning of the year, those investments that would offset interest expense are now in lower-yielding securities. And so we think that at least to begin of the year, our thought process would be that expense, which I called out other expense -- income expense, I called that $22 million to $24 million is going to be approximately, as I said, in the range of -- in the range, I'm sorry, of $35 million to $40 million. Obviously, given the fluidity of the current environment, this could change by the time we speak again in approximately 6 weeks. And as you look at the results in FactSet, I would say what this conversation, this thought process implies is a second half that looks similar to what's there from an earnings standpoint, but a more significant contraction in the first half of the year and a recovery in the back half of the year. So tale of 2 halves of the year. But again, we will come back and we will update in about 6 weeks after we've seen how trends progress through the remainder of the fourth quarter and into the first quarter and give you a better snapshot. As we said on the last call, we're committed to update based on what we knew and that's what we're doing today. So with that, I will turn it back to Marty.

Thanks, Efrain. Operator, we'll now open the call for any questions.

[Operator Instructions] Your first question comes from Steven Wald with Morgan Stanley.

I hope you guys are staying safe and healthy. Maybe if we could just start off, Efrain, on 2021 and how we're thinking about the path through here and how you guys are moderating investment and balancing that. It sounds like a little bit more conservative on the margin. Can you just walk us through just high level how you're thinking about that? I know there are some areas that you guys typically think about investing for growth, and I know PEO has been an area of expansion. Just how you guys are thinking about that, how that's evolved over the last month or so?

Yes. So I'd say what -- 2 things, Steven, in terms of what we don't intend to do and then what we intend to do. What we don't intend to do is in this environment, cut back on our sales investment. We just don't think that's a smart move. We could do that. We could drive margins higher. But we think, as I said earlier, that there's going to be a rebound in the back half of the year and to position that -- position yourself that way is not -- wouldn't be smart. We don't think it is. So that's one. At this stage, we also need to lead in place an infrastructure based on our expectation that the back half of 2021, we see a rebound in conditions -- in economic conditions. We're starting to see some improvement in May. We think that starts to -- that continues through the remainder of the balance of '21, but it's going to be very, very gradual. But we don't think that removing all of that infrastructure makes a lot of sense. So that's our thought process in terms of how you get to margins that looks something like what I just cited. So a balance of making the right investments, not slashing investment too much. Because we're going to be in a back half -- first half, back half scenario where the first half is going to be very different from the growth in the back half of the year.

Yes. And the only thing I would add to that is not only sales, but marketing and IT as well. We have done -- I think the IT investments have proven to be very successful for us, particularly in this time, when you think about the clients and their need to be remote. I don't think a lot of that is going to change dramatically, at least in the next few months. And then longer term, I think it's changing a lot of the models, which many of us certainly think that. And so I think you'll see us -- there'll be some more remote selling models for us. The IT investment, the marketing investment, the sales investment, though, we'll be very focused on driving that and not hurting our chances of good growth coming out of this because we do think it's going to come back. And in fact, seeing some of the stabilization, we're already seeing that those investments in the technology that we made in the mobile app and in many of the products and the things that I mentioned are really paying off right now in this environment. And of course, we've been remote selling for many years, and you'll see that continue to expand and things like that. So we'll be looking to make good margin decisions, but at the same time, making sure we invest, so we're ready to grow even stronger when we come out of this.

Okay. Great. That's super helpful, and it was actually going to bring me into my next area that I just wanted to touch on quickly, which is sort of the change in the sales experience, and you guys flagged that there's still headwinds going on there, but then you said also an uptick in areas of demand like PEO. I think there's been a sort of prevailing expectation that like you said, some of this product and structure would shift towards more remote onboarding and more permanent sort of virtual sales type processes. But can you just talk about the puts and takes on the product side? And I think you guys lowered the guide on the PEO and insurance. Is that more insurance driven than PEO given the strength you called out there?

Yes. And I think Efrain could comment on that, too, but it definitely is. You're seeing a lot happen to workers' comp rates right now, who knows going to happen in the future with those. But right now, with everyone home and the workers' comp rates have come down. Also, carriers are looking at -- and states are looking at doing other things with workers' comp and deferring things and lowering. So that has had a pretty big impact. So that's probably more of the change there, but Efrain can comment on that. I think from a selling perspective, yes, we're seeing that frankly, things that we were already doing and anticipated doing have just been accelerated from a time frame. So there's more remote selling. We knew that more clients of ours were going online. They were looking for more self-service and doing things themselves and having their employees do it from a service perspective. So it's really plans that we had, had in place to move to are being accelerated a bit, and we're well positioned from the mobility app, the self-service, the online training, all of the-Pay-on-Demand and things that we're doing in now real-time payments, all helping us and add a lot of value to clients. And I think what we're hearing back from clients, Steven, as well is that the work we've done on COVID, they've been very pleased with. It's given us a chance to even shine more with what we put on the website, how we've answered questions, how we were the first to put out the payroll report, they could file for the loans easily, all these things have really helped us from a market perspective, even faster than we probably would have originally thought.

Yes. Steven, I think that the PEO is not immune to some of the similar trends that we have or trend similar to what we've seen on the payroll side. Different, it varies a bit by geography and also by industry. And what you saw in PEO was pretty significant decline in worksite employees among the verticals that are more challenged, retail and hospitality. We're starting to see some indicators that some of that is going to come back. But early days, we thought it was important to moderate that look based on what we saw in April.

Your next question comes from David Togut with Evercore.

Could you dimension the impact you saw in March and April on kind of your key performance indicators, especially check volumes and then your May observations. When you say stabilization and modest improvement, if you could quantify that as well and indicate whether that's kind of sequentially versus March and April?

Yes. So David, what I'd say is that our checks per payroll, the highest we had experienced previously, was somewhere in the range of upper single digits when we were 2, 2.5x that number in terms of decline. So it was significant. And then what we were looking at as we went through April is, okay, well, where do we hit bottom and start coming back up. So the answer to that was late April, and then we bounced back modestly. So we're still down in terms of checks per payroll, double-digit teens levels. However, I would say this. One thing that's important in terms of both checks and checks for payroll is, I think Marty mentioned in his discussion, we saw immediately that smaller clients -- we saw a number of smaller clients basically decide to go on hiatus and suspend processing and then over the last couple of weeks, we started to see them come back and start processing. So when I give you those numbers, what I'm also indicating is that, that includes the fact that there were a number of clients who in the middle of the pandemic basically said, hey, I'm going to step to the sidelines, I'll be back in touch when it's time to reopen, and we're starting to see some of that happen over the last several weeks.

Do you have a sense of what percentage of clients that were on hiatus, with respect to processing, have come back and are fully processing at this point?

It's still early days. We're -- we've seen some of them return to processing. But frankly, to give a better answer, I think we're going to have to wait a few more weeks to see how we go through that. Marty -- we know the amount of clients that are -- that have applied for the PPP loans. We think that, that's going to have a beneficial impact, but a little too early to say how many will come back and start processing regularly.

Yes, the good news on there is that it's stabilized. We were still seeing more clients kind of suspend operations, again, really pleased that they -- we worked with them to suspend kind of say, hey, stay with us, you can come back a lot faster. We have all your data. And therefore, we don't have to resell them again and worry about them having a tough time starting up. What we actually saw in the last 2 weeks now, a few of those start to come back and process. So I wouldn't give you solid numbers on that yet, but we definitely saw a bottom out and then an improvement now is coming back and starting to process, which you'd expect as you're seeing businesses open back up. But what it imply to us is, okay, they actually did open back up, and they survived, at least at this point, they survived the closure and are now starting to rehire their employees and get their business back up and running.

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

Can you hear me?

Yes, we can hear you now, Jason.

Sorry about that. So it looks like revenues are going to be down, I guess, about 7% year-over-year in the May quarter. Given that you're talking about some early signs of moderation and stabilization, some of the key metrics, do you think this down 7% is going to be the trough? Or could the August quarter end up being the trough?

Well, the thing, Jason, I'd point out is that for us, unlike other people, other companies that report, remember that March is included in our fourth quarter. So March was really, relatively speaking, not significantly impacted. So if we're down 7%, that implies that April and May are more significant and that we carry that momentum into Q1, and then we start to rebound from there. So yes, in the sense that the trough is really kind of a 2-month period, meaning April and May, we expect that June and July start to become better, but you're bouncing off a trough where we're starting to see improvement, but early innings.

Okay. Understood. What kind of lead indicators do you monitor to forecast how many of the nonprocessing clients who have suspended operations will ultimately survive? And can you give us a sense of roughly, how many clients went into the nonprocessing category, even if it was just temporary, and they've already started processing again? I'm just trying to kind of frame the size of that group of clients.

Yes. So let me take the first question and then give you a qualitative answer on the second question. So we monitor literally funds flow on a daily basis. So I look at a number -- what do I mean by funds flow? How many dollars are flowing through our pipes every single day. I would say that's in some ways the earliest indicator. Another comparable indicator is what's happening in terms of our time and attendance data and how many people are punching in to do work. And then we look at interactions in our Flex system. So all of those are giving us real-time indicators well before anyone runs a payroll. In terms of number of clients, I'd rather wait until we get to the end of the quarter because as I said, we're starting to see some improvement in that number, and we'll have a better sense of that because we need that to project where we're going in the quarter. But it's in the tens of thousands.

I think the other indicators, obviously, how many checks are processed, how many people are being paid, how many clients are back processing, as we said, that we're not processing. We have a great deal of information that we can track on a daily basis, all the funds, as Efrain mentioned, what's flowing through, the tax filings and so forth. So -- and then that's not even touching all of the PEO side, the insurance, the workers' comp, the SUI claims, et cetera. So we're watching everything pretty closely. And again, overall, feel like what we're seeing is that as April was pretty rough, May is -- at the end of April, that last week and then the early 2 weeks here of May are starting to stabilize and improve.

Your next question comes from Bryan Keane with Deutsche Bank.

Just wanted to follow up on that. Given what you guys are seeing in the fund flow and some of the data, I mean, do you have a sense yet of what bankruptcies might be like versus, for example, the '08-'09 recession, which you guys compared a lot of things to, to give the guidance?

It's early innings, Bryan. And I think that we -- obviously, when we get to the point where we give the formal guidance, we'll have a better sense of what we're seeing in terms of people that we now evaluate and say, over this period of time -- over the period of time, meaning the 90 days or so since we reported last, what clients do we really think are not going to come back. The thing that complicates that picture. So we think it's going to be elevated, short answer to that. Do we think it's '08-'09 level? Probably not. That was more of a rolling impact over a period of time. And I think the key thing that is different from this situation compared to that is the massive amount of stimulus that's been injected into the economy. We think that's going to help small businesses, and we think it's going to stable off the actual number of bankruptcies that occur. And we're starting to get very early anecdotal signs that may be occurring. But it's really a little bit too early to call. We'll have a better sense of that as we get to late June, July.

Yes. You also have such strange demand metrics. When you're looking at for these, let's just say, the restaurant, some are opening up. Some are opening up at 25% or 30% capacity than 50%, than full, yet the demand seems to be quite strong, which has caused some problems in some areas, right, where they don't constrain that. So there seems to be this pent-up demand where it wasn't necessarily -- it certainly wasn't that way back when you look at 2008 and '09. And then it's how long can the businesses hold on? Well, as Efrain said, the more they do with the stimulus. I think the loan forgiveness program was a good start. They're looking at a number of changes that would be very important that we think are going to happen, which is that the long -- the time frame is longer than the 8 weeks, that would make a big difference, the fact that you could pay more in mortgage and utilities and not worry about the forgiveness. We think that's probably going to happen. Those kind of things could really do it. The good sign to us was that many businesses as we said, suspended and didn't close right away. So they're kind of hanging on to see between the stimulus and the demand and how long it goes, can they hang on and be back in business. But so far and by the way, a number of them have done pretty well with the takeout kind of business and have been able to reduce their cost and handle the reduced revenue through that. So it's really hard to tell right now. We really need a little bit more time. But obviously, it gets tougher, the longer it goes on, and they're constrained on their demand and the revenues that are coming in. But right now, it's -- a lot of them are holding on and not declaring bankruptcy, not closing on us. So it's good news.

Got it. Got it. That's helpful. And then just as a follow-up, the strength in SurePayroll, what insights can we read into by that? I mean, does that mean maybe a different economy that we're looking at going forward with a more virtual workforce? Just trying to think about some of the implications of that.

I think it's been a couple of things. One, it's been more people looking to outsource that have done it themselves, right? So it hasn't been as they've gotten through doing their own payroll. But these complications, the loans, the HR issues, when to pay the tax credit, all of the different stimulus on waving payroll taxes and so forth are just too much for anybody to keep track of. And so I think we're getting more of those clients to add to the growth. Also, SurePayroll, along with Paychex and the strength of our combined marketing teams and the support we give, I think have gotten a lot of positive feedback about the fact that they've been able to help a lot of clients, and there's been a lot more support on their website and their tools that they give clients, particularly those smallest clients versus some of the competitors. So we have won a number of businesses. I thought it was more people coming that have not processed before with an outsourcer, and that has happened, but we've also had a nice uptick in winning from competitors on the low-ended SurePayroll because of the work they've done on COVID and the support resources they've had on the website.

Your next question comes from Samir Samana (sic) [ Samad Samana ] with Jefferies.

I think that meant me. I hope both of you are doing well. I wanted to maybe ask a couple of questions on the new bookings side. I know a couple of people touched on it, but any pattern in terms of the type of customer, the profile? Are they more on the smaller end, more mid-market, more upper end? And then a couple -- a follow-up question to that.

Yes. I think well, it's been in both areas. I think the -- we've seen -- on the small end, we've seen some of the same things with Flex and SurePayroll. We've given a lot of support, and you're seeing some clients that are able to call up, demo the product online, talk to a salesperson online and buy online and see the support that they need and they're taking it. And so I think we've seen good leads, very strong leads, actually, lead activities coming in, lead generation, they've been a little bit slower to close. So we've had good lead generation. Some of the biggest pickup, beating even the February numbers in the last week or 2, but they are a little bit slower to close, so we'll have to see how that goes and that tends to be on the small end. In the mid-market, we've also done well with the tools and offerings that we provided. And the only thing there is that more of those clients do sometimes like to see the sales rep in front of them. So they're delaying action and close rates as well, but the end user presentations are picking up now, and they're being done remotely, and people are just getting more used to it. So I'd say we're seeing a pickup on both small and mid from a lead generation, it's now if we can get the prospect to close.

Great. And then, Efrain, maybe on the PEO side, I know there is -- there are questions around the at-risk pool in Florida. I'm curious if you've seen any change in the underlying behavior there that we should think about over the last several weeks since you last reported.

No significant changes, Samad. I think that like with some of the other PEO competitors reported, we've seen a decline in elective procedures. And so actually, health care expense has declined and so that's actually been a positive when that bounces back. We'll see as we get through this. But from a risk perspective and from the management of that health care book, it's performed the way we thought it would, actually maybe a little bit more positively than we anticipated.

Yes. And the demand for the HR side has obviously been up because of all of the actions that these businesses have had to take. We're getting a good increase in leads on the HR side, interest on the HR side for the HR generalist that we have, the support tools and how to handle layoffs and furloughs and what does a furlough mean to them and then going through tracking employees and time like they never have before. So there's been a good demand for the HR side, the ASO and PEO. Operator, are there any other questions?

Your next question comes from Lisa Ellis with Moffett.

Follow-on question on the sales side, actually, more of from a -- of a secular nature. Do you believe, based on what you're seeing -- I mean it sounds like you're seeing sales momentum, both, as you highlighted on the HR outsourcing side and on the SurePayroll side, and seeing continued strong retention in the base that has not discontinued. I'm wondering if you believe that coming out of this, you're going to see a sort of secular acceleration in the industry, meaning increased demand, both for full outsourced solutions for the full-service solutions that you offer, where you've got experts on the phone and then also on the technology side for your mobile solutions. I know it's like we're in the middle of -- it's a very difficult period. I'm just wondering with what you're seeing, if you do you think that, that -- you might actually see an uptick like that over the next few quarters?

Yes. Lisa, we're very hopeful for that. I mean we are seeing indicators that, as I mentioned, both for Sure and us, let's take the small end that more people are deciding to outsource for the first time. And I think that is because it is so complicated right now. And usually, once they make that move, they don't go back. So I do think that the demand for that will be up, and I think more clients will see the value of outsourcing that have not on the small end. On the mid-market, I think the demand for the HR side will definitely do that as well. I think they're going -- this is not going to be over quickly, I don't think. As Efrain has said, we see the recovery. And as you go through the recovery, there's going to be a lot of questions as to how to handle employees from an HR perspective, how to handle remote workforces that may now become permanent to some degree. And I do think that something else that we're very qualified in from a virtual sales or telephonic sales perspective now that we've been doing for many years, we'll see a big bump just in itself, both in all markets. We can -- people will search, obviously, and we're doing really well with the web leads, that will pick up. I think the demand will come from more web generation like that than the telesales and demonstration of the product and the selling and close of the product will happen more remotely, and we're well positioned on those because we've done it for many years. And the product is very much set up for remote workforces in using everything from time and attendance to the document management to the learning modules for training, all these things are set up. And I do think it's going to change -- we all think, I think, that the businesses are going to be changing the way they do business more permanently. And I think our position -- our products and our sales approaches are well positioned for that.

Good. And then my follow-on, I'll ask actually on the digital access to cash that you highlighted. What kind of uptake are you seeing on things like Direct Deposit, paycard, Pay-on-Demand? We're hearing about that from a lot of places that Pay-on-Demand, in particular, is of particular interest right now? And then is that a meaningful enough piece of your business yet at this point that, that's a help on the revenue side?

Well, certainly -- sure. Certainly, Direct Deposit is, most of our clients have gone with Direct Deposit and any new client is virtually -- everyone is going with Direct Deposit that comes in now, although they're still -- there's still live checks out there. But the vast majority are with direct -- the majority are with Direct Deposit. Pay-on-Demand is relatively new for us in about 6 months, but we've seen it really increase demand. And I think this has helped bump that and accelerate it because they're seeing the ability that if I only need to bring someone in, particularly in a restaurant or one of these areas where I'm bringing somebody in for 8 hours, and they might not work again for another week or I'm doing much more flexibility with the hours, that uptick is starting to happen, and it's only been 6 months old. So I wouldn't say it's meaningful yet, but it's showing fast growth. And then real-time payments, which we were the first to just introduce, we'll make it easier for immediate payment of payroll and corrections and changes that clients make and we're excited about that as well. So I do think that there's a need for flexibility now more than ever in the market because of this, and there's a need for speed because people need the money, and we're very well positioned for both of those.

Glad to know you are doing well.

Thank you, Lisa.

Your next question comes from Andrew Nicholas with William Blair.

Can you speak to how the current environment has affected the competitive landscape for your PEO business? Are you seeing any stress in that market, particularly amongst smaller players? And if so, could disruption lead to improve -- some improved share in that market, in your opinion?

Well, I think always when you're in a crisis situation like this, the larger companies like ourselves, who have a lot of experience in PEO and ASO, for that matter, in HR outsourcing, come off stronger. We have more flexibility. We have -- as I mentioned, we have the compliance teams that are really working with the treasury and the federal government to understand the issues and the rules and get them out faster and be able to help our clients. So I think it positions us as a large player much better. I wouldn't say that I've seen anyone struggle yet too much to a certain degree except on the low end where we've seen it, but not so much PEO, where we've seen -- we've taken some share. But I think that's going to happen. I think where PEOs will certainly find it more difficult, smaller ones. They -- can they offer the plans, can they offer the flexibility, can they offer the HR support that someone like Paychex can? It probably will. I wouldn't say we've seen it yet, but I do think there is an increased interest in PEO and ASO, really an increase in the need for HR, not as much as insurance because, as Efrain noted, right now, insurance -- elective surgeries and things like that are actually down. So some of the claims are down. But you can imagine that they're going to come back probably pretty strong with the demand that has been suppressed and will now come back, and I think they'll really rely on their PEO partners to help them with the best benefit plans and how to handle some of that expense.

Got it. Makes sense. And then maybe for Efrain, can you speak a bit more about the portfolio repositioning you referenced in your prepared remarks and how that impacts how you're thinking about interest income for 2021?

Yes, Andrew, so 2 things. Obviously, in a situation like this, there's a premium on liquidity. So we have heard many times the mantra that cash is king. What's been very encouraging to us is that since the end of third quarter, our cash position is actually built. We'll see where we end the quarter, but we're in very, very strong position. What we -- not understanding completely how the crisis would unfold, we have put -- had a bias towards more liquidity, and that has an impact on less yield. We'll adopt that posture through the first half of the year, certainly through the first quarter, that may impact yields a bit on the portfolio. But we think that, that makes some sense till we see how the landscape of the recovery looks like. So that's what I was referring to. The other thing I called out was in my initial conversation back in March, I really didn't talk too much about other income and expense. And because interest expense is offset by the gains -- I'm sorry, by the yield on the corporate investments at that time, we hadn't made a complete call as to how to manage that -- the impact of being a little bit more liquid, has an impact on overall other income and expense. And so the combination of all of those things is probably going to drive yield. In addition, obviously, interest rates being lower, but it's going to drive yield lower than otherwise would be. We think that's a prudent posture to be in. And then as we go through the year, we'll figure out what makes sense in terms of the way to properly position the portfolio, given the environment we're seeing.

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

So as you look at kind of FY '21, what is the more difficult right now to predict? Is it to predict net clients or is it kind of pace for control? I know they're a little interrelated, but I'm just wondering, as you look at the business, maybe what's a little bit harder to predict? And maybe where do you think there could be some differences than you were anticipating?

Well, I would say, Kartik, they're both probably a little bit tough to forecast. But I think the checks per client would be a little harder because it looks like businesses, at least at this point, are staying kind of in business. So now the hard thing will be how many employees are they going to bring back, and it's really going to be -- depend on, like if a restaurant, can -- how long are they at 25% capacity to 50% to 70% to 100%, and do they get all the demand back? So I think the hardest thing to predict is how many checks per client are going to come back. Will they be able to get back? Now we do think that it's going to get back. If you just think 2.5 months ago, we had the strongest economy going, and there was a lot of demand and the hardest thing to do was find employees. And so can we get back to that point where the most difficult thing for businesses are finding people to hire? We hope so. And -- but at this point, I think that would be the harder one to predict. And predict from a timing perspective for when they're going to come back, that would probably be a little bit dicier. Efrain?

Yes. I agree with Marty. There's 3 things you're trying to figure out, obviously, to figure out where you are from a client-based perspective, Kartik, because you know what's filling the funnel, what are the sales, who are the clients that you're losing? And then the clients that you have, as Marty said, how many employees do they have? All of them are tricky, but it's trickier to, in some ways, figure out, okay, well, what staffing levels will they continue to have? And how many checks are they going to be running per period? I would say that as we look at it, if you look at from where we had the conversation in March, that probably ended up being the trickiest thing to get a good projection on.

And then, Efrain, you talked about kind of 34% or 35% margins. And Marty, you talked about continuing to invest in the business. Do you see -- let's say, the predictions come out to be or the reality comes out to be a little bit more dire than anticipated. Marty, is there -- do you continue to invest in the business because you know that's what you need to do for the long run? Or is there a point where you say, "Hey, maybe we need to take a little bit of a break, just so we could maintain some assemblance of margins in that 30% range."

Well, it's -- there's always a balance, obviously. But I think -- I do think when you look at this, it's so different than a long-term -- at least it appears to be much different than a long-term financial crisis with. This should, with a vaccine and at some point, whatever you want to predict that's going to be, I think there could be a pretty good snapback in demand, and we want to be sure that the products and sales and marketing that we have are going to be strong. So we're -- obviously, margins are very important to us, and we're going to take the steps we need to protect our margins and feel very strongly, but we're in good financial position, and I think we'll be able to continue to invest to have market-leading products and sales and marketing approaches with what we have. But I definitely think you want to be prepared for that future given that there is going to be an end to this, where others are harder to predict when the end is if it was a deeper financial bank kind of driven crisis versus a health driven kind of crisis that should have a vaccine that make things change quite dramatically. Whether that's 6 months or 12 months from now is hard to say. I wouldn't know, but I think that is going to be a pretty strong bounce back.

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

Any sense of -- Marty, you talked about a little bit, what have you factored in for kind of runoff in payroll protection as it gets extended? And then just weaving that into how's attrition spend amongst your clients and are these folks coming back? Are they furloughed workers you're seeing now? Or what's been the dynamic for kind of laid off and furloughs you've been thinking about, just the guidance for the balance of 2020.

It's hard to say. We don't know exactly how much is loan based. I think you're asking is, how much is, "Hey, I've got a loan, and this is going to be temporary or how much is it that I'm bringing back because things are getting better." I think it's definitely a mix, and I don't have a great sense yet of what that mix is. We know that basically, if you took -- our surveys would say that less than half of our clients took a loan, give or take, 50% or 40% to 50%. So some of the bounce back will be the loan. But I do think that there -- as they reopen and see the demand, we're seeing that as well. So I'd say it might be 50-50 or I would tend to lean a little bit stronger on coming back for demand than for the loan itself because I think even those with loans are still being a little bit cautious, which -- that would make me more optimistic that they're coming back for demand, that they will tend to be more permanent than and won't be just until the loan runs out.

The other thing, Kevin, is we're surveying -- Marty mentioned earlier in his comments that we're surveying clients on a pretty regular basis. So if you furloughed or laid off people, what's it look like coming back? So we have some information on that. We know what their intent is. Their intent is positive. But I think we need some more time to figure out whether that intent translates into action over the next 4 to 6 weeks.

That's helpful. And then I guess the other question I had was seems like the margins are holding in together, obviously, better than in the GFC, which was a much worse environment. Is that just a more flexible cost overall? Or just any thoughts on -- and even just the revenue relative to the fundamentals seems like you've clearly outpaced it. Just any thought around that dynamic.

I just think we have a lot of cost discipline in the business. And I think the -- one of the hallmarks certainly over the last 8 or 9 years is that margin is important. And we do what we need to do to protect it. I think that we've been responsible in our thought process around where we think we can go. And we take the actions necessary to ensure that we get to the right levels that we need to without hurting, impacting the long-term prospects of the business.

Your next question comes from Bryan Bergin with Cowen.

I hope everybody's doing well. Wanted to -- just a clarification on the volumes. So in April, Efrain, I think you mentioned their check volumes down have your mid-teens on a year-over-year basis. I'm curious, based off of that and what you're seeing in May, can you just give us a sense on how you expect to exit the fiscal year on a year-over-year basis in volumes?

Yes. So that's a tricky question, Bryan, that I'm going to defer. But I would say in April, we saw upper teens, not mid-teens, and then we saw a moderation. We started to see moderation. I don't know that yet. So I can draw a curve, I'm not sure it's a really good curve. But I would expect that going into first quarter, we're going to see still volumes down in that range. Now to be fair and to be precise, that doesn't define all of our revenue. But we still think the impact going into Q1 is going to continue to be pretty severe. That's what we plan on, let's say, and then we'll update when we go. That's what's tricky. I would say, we -- over the last couple of weeks, we saw a bounce back and moderation improvement, but it's still big volumes. But we also have other data, other forward data that suggests to us other indicators are getting better. So it's a little too early to call that precisely. We assume that going into Q1, we're still going to have a pretty significant impact just from what we saw in April and into May.

Okay. No, that's fair. I appreciate you giving the estimate, given the visibility you do have now. Just then on -- as we think about contracting structure, nonprocessing clients, are those still charged a base fee? How should we be thinking about that impact?

Nonprocessing clients are largely not charged a, what we would call, minimum fee. There's a minimum that applies. And for those clients, that fees wave. When they process, they do get some fee, but they don't. So as long as they remain in that status, then we don't get the revenue we would otherwise get.

Yes. We're leaning toward -- there's non processing, there's minimum monthlies and there's kind of seasonal clients. We're leaning toward -- we have leaned toward not charging them a base fee as we've gone through this process. That's where we are on these. Normally, there would be a kind of a base, a minimum monthly to stay in the files and in the processing kind of thing, but we're not during this period.

Our next question comes from the line of Mark Marcon of Baird.

I was wondering, can you just give a little bit more detail with regards to the -- so where you're thinking about in terms of like sales quotas, like what the magnitude of productivity is? And then also, if you could just talk a little bit about from a competitive win perspective, it sounds like you're doing really well against some of the self-service competitors that are out there. I'm wondering if you can just give a little bit more detail. Is it the small regionals? Is it CPAs? Is it the Intuits, the Gustos, who are you seeing the competitive takeaways from?

Sure. On the small end mark, it would be the more national providers. It's not as much the regional players as it is the national providers, and you mentioned them. I do think that we've gotten a lot of positive feedback from clients and new clients on the support that was on the website and the ability to help them with the loan program and so forth more than some of the competitors. That's the feedback we got. So it wasn't just it is -- I'm sure some are regional players that couldn't help them much at all, but it was definitely more the national providers of which you mentioned. As far as sales go, I think it's early. I think we're doing better than we expected in this quarter from a to-quota, it's still way off what we'd like, and what we were used to and certainly what we were experiencing year-to-date -- or I guess, year-to-date through March 1. But I think that they're making a nice transition to remote selling. And of course, we've been doing it for a long time with telephonic convert, what we call virtual sales, and I think you'll just continue to see more of that. I do think that the -- one of the things we were very impressed with is the marketing leads that we've been getting. I give hats off to the marketing team. We've done -- I think we've put so much information out on COVID. It's given us a nice opportunity for clients who are looking for that information. The webinars we've been doing for not only clients, prospects and CPAs as well are now attended by 10,000 or 12,000 participants where it used to be under 1,000. So we're getting great connections with -- and leads from those webinars and from the marketing that we've done. And I do think that while it's certainly not the sales where we want to be and where we were through March 1, it definitely is better than we expected. It's just a matter now, especially in the mid-market, of closing because clients are listening, are going through the demonstration, and then just kind of hesitant about closing, kind of waiting to see, I think, how things shape out, but I think that's going to pick up.

Marty, how does this change your longer term philosophy with regards to client acquisition? Some of those national players have tons of small clients that are out there, and you clearly have some advantages that they don't. Does that change the targeting? Or should we anticipate more national advertising? And how does that factor into the operating margin target? Is it going to be -- is there going to be more pressure on the SG&A deleveraging or the gross margin as it relates to the preliminary thoughts for fiscal '21?

Well, you may have noticed, we had the first TV commercial that we've ever had in our history roll out just a few months ago.

I saw it.

So it's -- I think we are positioning ourselves to probably take more from competitors because I think we're in very good shape from a product and from a selling perspective, both Flex and Sure, and so I think you will see more of that. Hey, it's always a balance market, as you know, as Efrain said, and we've said, the margins are very important to us as they are to those that invest in us, and we keep track of that. And if we need to shift -- I think definitely, we have shifted over the last 2 or 3 years more to a -- looking at sales and marketing, marketing has become a much more important part of it and for everyone, frankly, to get leads over the web and to take those leads and how effective do you handle those. It's not always with a feet on the street rep, and that certainly is going to be that way when you use more of those. There's still a lot of channels that we need to work with from a field rep perspective, and we do that very well with CPAs and banks and current clients. But when the web leads are making up a bigger part of it, those need to be dealt with very quickly and usually telephonically, where you can demo the product and sell it online. And I think we're showing a lot of good momentum there, and you'll continue to see that. So I think the cost will be just a balance, but you've seen -- we certainly have -- if you looked at sales and marketing in total, we have shifted toward marketing because it's very critical to get the leads upfront.

Our next question comes from the line of Tien-Tsin Huang of JPMorgan.

So a couple of quick ones. Just in April, did you provide, Efrain, the revenue -- what the revenue performance was for the month of April? And then Marty, I think you mentioned workers' comp. We've been trying to study that here and make sure it's not a blind spot. Can you give us a little bit more on what we need to consider here for workers' comp and as people come back to work?

Tien-Tsin, we didn't give a specific monthly revenue decline. I think that we were giving some indicators based on what we saw with the decline in checks per payroll, which is pretty severe. So we didn't do a specific April number. And I think it's implied, obviously, in the guidance that it looks pretty severe. So -- and then a bounce back on May. So -- but no, we didn't specify how much it was in April.

You want to -- I mean, workers' comp and Efrain can jump into it. It's just -- it's obviously been a market where rates have been -- were coming down anyway. We're down, and that's put some pressure in there. And who knows how this is going to come out. I mean it's very interesting now that you're seeing, will accidents at home -- with so much on the remote workforce, will accidents at home qualify for workers' comp and so forth. That's really just starting, I think, in the discussion on that. And rates may go back up over time, if there's more claims or typically, historically, if there's more layoffs, and where people aren't making -- sometimes you end up with more claims before that happens. So it's kind of quite a changing market right now, but rates are definitely down, and you're seeing states put pressure on trying to reduce those rates to help people out. So we're feeling that -- we're certainly feeling a bit of that pressure, but I think we'll work through it like usual.

Yes. There's an interplay, Tien-Tsin, between these enhanced unemployment benefits and workers' comp. I don't think you'll see much movement or assumptions. We're not going to see a lot of movement on workers' comp rates until the effects of state unemployment benefits start to run out. Then, typically, in these kinds of situations, we would start to see workers' comp claims pick up. And at that point, you'd start to see rates come up. And that has an impact both on the Paychex insurance agency and also on our PEO.

Our next question comes from the line of Henry Chien of BMO.

Just wanted to follow-up from -- just from what you're seeing. I know it just contrasted to the last downturn and the global financial crisis. What's the risk here of, I guess, leverage from the small business side? I guess if I've been thinking safe demand comes back a little slower than expected, is there like a risk factor of some of these small businesses just have loans and they may have gotten like a bridge loan from the PPP loans, but just decided to just shut down the business if you know they can't make the business any more?

Well, sure, there's always that risk. I think it really depends how long it goes. And most -- a lot of small businesses don't have the cash flow to survive too long of a period without the demand. But you're starting to see things reopen now, so I think that's going to help. They're not just going to rely on the loan itself. And I do think there's some changes in the loans that will help as well that we expect will be approved, you never know. But extending the period of the loan and also allowing them to use more of the loan for non-payroll needs and still get it forgiven. So I think there'll be more stimulus out there to help. How many are just kind of back running because of the loan? Really, it's hard to say at this point. And will that hold them over or not? Right now, they need the demand, but what you're seeing is virtually every state is opening things back up or starting to open things back up. So June will probably be a big month to see. Okay. Now as restaurants really start to get back to more full capacity or at least 50% to 75% capacity, restaurants, elective surgery offices, health offices, things like that, those are the ones that I think have a lot of pent-up demand. And if they can get back, open safely, I think we will see many of them survive that they've held in this long.

Our next question comes from the line of David Grossman of Stifel.

I know there's been a lot of questions asked about this already. But recognizing just how difficult it is to forecast in the current environment, can you share with us any more specifics on the various longer term leading indicators that you mentioned that at least may help us connect the dots to your optimism about a reacceleration in the second half of the year? And then also just a quick financial question. I saw that your revised guidance showed interest on clients' funds going positive versus negative, if I saw that right. And I'm just wondering, is that just the capital gains on the repositioning of the portfolio? And -- or should we expect a negative compare in fiscal '21?

With respect to question 2, very astute, David, yes, that's exactly right. That's -- on the first part, you're balancing a number of different factors. And when the crisis hit, we're trying to figure out speed, severity and duration, as I mentioned. And what that meant, what that translated to us was how quickly is this going to happen, how many clients don't process or do process in that period of time. But also the other important part that I think was part of that, we were in a demand environment that was very, very uncertain. So we saw leads dry up. We saw end user presentations and sales dry up. And that's where we were. That's where we were starting to see. It was pretty severe in the month of April. So what caused us to say, "Hey, we can see some reason for things looking better in the back half of the year?" Well, obviously, it's subject to a number of assumptions, I don't need to tell you that. But what we do know is, as Marty had said earlier, the demand environment looks better. It looks better than where we were 6 weeks ago. Our sales efforts seemed to be better than we were 6 weeks ago. We know what the amount of clients are not processing. Now we have to figure out, "Okay. How many of them are going to come back," and we know what the steepness of the decline was. You could very well see a situation where a number of those indicators just basically bottom and stay there, but the top of the funnel is getting better. So there would be reasons to be somewhat optimistic on the impact of that helping to improve results. Don't have it all together, but I do think that everything that we're seeing, at least as we hit a bottom, have had a modest stabilizing trend upward. That's a positive from where we weren't. On the demand environment, that's a positive from where we were 6 weeks ago. And now the question is, do clients start adding back more employees? When I look at verticals, by the way, David, I know where the verticals that are most impacted are. They're impacted in retail and they're impacted on accommodations and hospitality. Unless you take the position that the current depressed levels in both of those areas are going to -- or both of those verticals are going to remain that way for the -- back there, even if you have some improvement, you got to believe that things are going to start to improve at some point over the course of the year.

Right. And do you have any insight at all into the types of customers that are coming into the funnel? And back in, like any insight into what's driving them to make a decision at such a crazy point in time?

No, I think it's been -- we haven't seen anything specific like certain kinds of businesses, it's been kind of across the board. I think, David, it's those that want -- that I think they feel like they are going to survive, but it's just been too difficult for them or they need more HR support or just when you see the number of changing regulations, if anybody took a look at the loan forgiveness application that just came out, that would make you outsource, I think, right there if you had a loan. I mean it's 11 pages, it's extremely complex. And while the forgiveness application in the front end was pretty simple, and we applauded how simple it was, they could take our payroll report and file, the loan forgiveness is not. So I think it's across the board. It's not certain businesses. It's just more of them saying, "Hey, I'm going to outsource or my current provider of outsourcing is not -- does not look as strong as somebody I need." It's making them reassess.

Our next question comes from the line of Darrin Peller of Wolfe Research.

This is Conan, on for Darrin. So just had one quick one. Just wanted to ask if you could maybe point out, I don't know, maybe some areas that you could potentially lean on more around all of this, such that you could probably take some share or come out strongly -- structurally stronger on the other side of this?

Well, I think frankly, in most of the markets we're in, small businesses, we've mentioned a number of times, I think we definitely could come out stronger on that. I mean, it's early in this. We don't want to be too optimistic, but we certainly feel that at this point we're getting good lead generation from our advertising, and we're doing well in virtual or telephonic sales, both in the Flex Paychex side and SurePayroll. On the HR side, in the mid-market where there's HR needs, we have a very strong ASO and PEO HR support offering. And I do think that many more clients -- this makes you rethink, where do I need support? I think especially coming out of this, a lot of clients that thought, "Hey, I've got an employee handbook, I've got pretty stable business here. I don't really need to outsource;" now are looking at it saying, "Wow, there's a lot of things I may have to file for, for support. I may have payroll changes, I may have remote workforces, how am I going to handle all this? This is a good time to go with someone who's got a lot of experience and 600 HRs -- HR specialists across the country who can help me." So I think in a lot of markets retirement will be interesting. Right now, that one has struggled a bit because people are unsure about the market. But I think if people feel like it's a good time to jump into the market and put more funds, they get a little more stable, retirement, I think, as well, will come back and as well as insurance.

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

Just wanted to clarify something quickly because I've been getting a bunch of questions on it. I think the line might have cut out, and I didn't see any clarification there. But on the fiscal '21 revenue guide, I think you had said, Efrain, down low to mid-single digits? Or was that up?

No, no, down, down, down.

Okay. Great. Just wanted to quickly clarify that.

Our final question comes from the line of Pete Christiansen of Citi.

I was hoping you could tell us if you're seeing anything from interesting behavior from some of your clients who may be staffing firms or temp firms, and perhaps what implications that could be for the rebound here? Any thoughts there would be very helpful.

Yes. On the staffing front, as you may or may not know, we provide funding to staffing firms. And in the month of April, much like the rest of payroll, we saw staffing levels down. There was a pretty sharp contraction in terms of the number of employees that are member staffing firms employed. We think that's a little bit influenced by the fact that some of them drew from PPP, but there was some impact on staffing. And at this stage, that's what we've seen.

Okay. Well, looks like there's no further questions, is that correct?

There are no further questions, sir.

All right. Thank you. We want to thank you for joining us today. Our goal was to provide you with an update of what we've seen and the implications to our outlook going forward. We'll be back in a few weeks to close out our fiscal 2020 year. On behalf of Efrain and myself, we hope you stay safe and healthy. And we look forward to talking with you real soon. Thank you, have a good week.

Thank you. Ladies and gentleman, this does conclude today's conference call. You may now disconnect.