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

All right. Thanks. Thank you again. We're back again.

Great.

And Marty from Paychex, thank you for joining us. We have Marty Mucci, the CEO of Paychex; and Efrain Rivera, the CFO of Paychex, on audio. I will let them say hello, confirm, they're out there.

Hi. Good morning. It's Marty Mucci.

Hi. Efrain here.

Excellent. Thank you, guys. Thanks for joining us. And folks, apologies for a little bit of a delay. We're going to run this session close to the top of the hour. So we're getting started a little bit late. Why don't I start just by diving in, I mean, Paychex, you have been, Martin and Efrain, really a lifeline to a lot of your small business customers during the COVID-19 pandemic. Can you give some highlights of some of the actions you've been taking to support these small businesses that are under so much pressure in the current environment?

Sure, Lisa. This is Marty, and I'll start out. I think, one, we're very proud of that. That's, of course, our Paychex' history is being that lifeline to small and midsized businesses. And just to get right to it, I think when everything started with COVID-19, first, we had the safety of our employees, very important to us that they were able to be safe and then also serve our clients, our 670,000 clients. And so we moved -- we have now -- and moved immediately within about 5 to 6 days, 15 -- over 15,000 employees to a work-from-home environment of our 16,000. So about 95% of our employees have been since about day 5 working from home and are very proud to say that our service continues to be extremely strong from a Net Promoter Score standpoint as well as other customer feedback that we're receiving. And we're still offering 7/24/365 service. So always have someone available live, but also, there is a number of self-service alternatives that clients can have, and that has all helped us. One of the things that's very interesting, if you went back 5 or 10 years, most companies would have been in a completely different situation than where we are today. But given the investments we've made in both our employees and their support as well as our clients and what they can do themselves with the mobile app and self-service online, it's been a tremendous difference. To start out, we immediately created the payroll report that allowed the Paycheck Protection Loan Program to be facilitated. So you needed payroll data. We immediately -- working with compliance in our -- in the Treasury Department as -- and everything, we had those needs early. We were able to produce that report. We were the first to produce that report online, and it was available to our clients as soon as the application process was started that Friday. And even as they tweaked it a little bit over the weekend, the Treasury Department, we were able to adjust our payroll processing. We've now processed over 400,000 of these reports and also prepopulated them. So not only did we give them access to data but we gave our clients a prepopulated report as soon as they went in to their online position or if they needed us to send it to them, we did that as well. But many of our clients were able to go online. We had a link. They immediately went to the report. It was already prepopulated with the information, and they were able to file very quickly for the PPP loans that they were able to get. We also then, on our website, have continually updated our materials to give them the latest state-by-state information that is out there so that they can guide them through now, of course, reopening but what was happening when things were closing. And we also now have produced, and if they had out there, a loan forgiveness estimator. And we're about to release a very complex and complete loan forgiveness product that will basically -- anyone who has a PPP loan can basically go in and see that once again, a lot of information is prepopulated. Now on the front end, the loan program had a very simple application. Very impressed with what the federal government did there. Very simple to get the loans and so forth. I have to say, on the back end, if anyone is taking a look at this 11-page forgiveness application that you have to send in, it has become quite complicated for businesses to complete. We have produced something that will be available to clients that has basically much of the prepopulated information in it for payroll but also a place for them, clients, to put in their information on rent, mortgage payments and other costs so that they can completely almost fill out the report with this data that -- a little bit of what they enter and our information prepopulated. So we're very proud of the fact that at the front end and the back end of the loan program that we've been there to very much support our clients, I think, more completely and more systematically than anybody else. We have also worked with our partner for Pay-on-Demand at the very beginning of this, PayActiv, and have made Pay-on-Demand very accessible. That kind of need as I brought someone in possibly as a restaurant for 8 hours or 4 hours or 6 hours of work, they could pay them immediately on demand. That has been a big help to our clients. And we also partnered with 3 fintech lenders. So as people -- some small businesses, in particular, had difficulties getting the attention of their banks or didn't really have a bank relationship, we partnered with Biz2Credit and Lendio and Fundera to be able to help them facilitate, and they've done millions of dollars of loans through those 3 partners. So we really believe that not only our -- taking our current service level, including over 600 HR specialists across the country that help clients through these isolated issues that they have, but we were there with automated technology from the reports at the beginning to the loan forgiveness here toward the end of the forgiveness period to really help our clients maneuver through this, and we've gotten great feedback from our clients that we have been there for them.

Wonderful. Yes. I can give personal testimonial. A friend of mine is a Paychex customer and has said that the facilitation, the help with the PPP loans has been like absolutely extraordinary. You have a really unique view into employment trends, of course. Paychex sees employment trends well ahead of when all of the government data is being released. You just recently did a mid-quarter investor update call. What is your business telling you about what's happening in the employment environment in the United States right now?

Yes. I think what we're seeing from a positive standpoint is that while we had a sharp decrease, as everyone knows, with the closures of businesses and we saw a large drop-off in the number of checks that we processed and the number of clients that we're processing, any of their employees for payroll, et cetera, we saw that what we feel, at least at that point, bottomed out, and we've seen an improvement. Now we're still below certainly where we started pre-COVID, but we've definitely seen a stabilization and a recovery and improving situation over the last number of weeks in May that we've seen more checks processed, more clients. We had a number of clients that had suspended operations. So we worked with them not to leave us and go lost where they have to be resold and restarted, but we worked for them to kind of suspend their account. And so that when they could start up, even if it was on a partial basis, they could start up very quickly. We've seen a growing number of those clients come back from their suspended status and start processing payroll again as well as other services. We've seen time punch in our clock system and our time and attendance systems come back with more punches. More checks are being processed. More businesses are being active again. So we really feel, at least based on our data at this point, that late April, we saw -- mid to late April, we saw kind of a bottom, the lowest number. And then since the beginning of probably late, late April, the beginning of May, things have started to come back and improve each week, and we've seen that improvement. So we're not only in the payroll side but also in the PEO and ASO side. We've seen what we look at as work site employees, the same thing, payroll is being processed for individual employees, all coming back and as there's reopening of businesses and they're getting more business now. So we expect that to continue.

And do you have a sense at this point and, you mentioned, I mean, there's such a keen interest in the small business survival rates and how small businesses are going to fare. Can -- do you have a sense yet at this point in your small business base how many of the businesses are, like you said, sort of on a pause mode or even starting to come back versus whether you're actually yet seeing any sort of elevated closures amongst small businesses?

Yes. I think the good news is we really have not seen the elevated closures, complete closure and complete loss. In fact, our retention continued to be very strong if you continue to count the non -- the suspended accounts as well. And so we're very positive at the fact that if I think someone felt they were going to not be able to come back at all, our losses would be over what we had planned. They're actually not for our fiscal year as we -- for the year as we are closing up now and looking at the numbers, but we still have a number that are suspended. But again, that has come out of suspended and been positive. We have not seen an uptick in those suspended accounts where they've come back and said, "Okay, I'm going to actually close and stop the business." So we actually feel pretty positive at this point about what we're seeing. It's early, obviously, but we're pretty positive on what we're seeing there. You're also seeing nationally that new business starts are coming back. For the first time in the last 2 weeks now -- for the first time in the last 2 weeks, have seen a positive increase in new business starts over last year. Now the previous roughly 8 to 10 weeks has been negative versus last year on new business starts. So not only is the existing businesses look like for our clients coming back out of suspended status that we're in suspended adding employees, but also you're seeing new business starts start up. And a large percentage of our new sales come from brand-new businesses. So we're happy to see that as well.

All right. So this one might be one for Efrain. But of course, investors see the headline numbers around employment trends, unemployment levels, et cetera. How should they think about the relationship between employment levels and Paychex' revenues?

Yes. Good question. So Lisa, when we had our call in March, as you recall, I was asked something similar. And basically, it gets to the point of how much of our pricing is based on per employee charges versus base subscription fees. And in payroll, on average, our base subscription fee is about 2/3 of the pricing and then our per employee fee is about 1/3. So that 1/3 is the one to think about because the 1/3 is really sensitive to the amount of employees. So that's on the payroll side, and as you know, roughly about 50% of our revenue. If you extend that more broadly into PEO and also the rest of Management Solutions, that number is really kind of closer to about 40%. So a way to think about it is that changes in unemployment are going to affect our revenue by roughly about a 40% number. And that will change depending on which product line is affected. So there is an effect on unemployment -- or from unemployment, but we have a lot of our revenue that's really base subscription fees, so we don't get a 1:1 pass-through.

All right. Martin, maybe back over to you on, how is the PEO business fare through the pandemic and then maybe through a broader recession environment? That's maybe a piece of the business that folks are less familiar with. What trends are you seeing in the PEO side?

Well, sure, we certainly saw at the beginning of this that as businesses closed and we're PEO clients that we lost the number of work site employees, they were suspended, they weren't processing, and so the change in the employee base, the work site employee base, did go down. We're -- again, we're continuing to see that improve now over the last, I'd say, 3 weeks. And so we're seeing growth there. The other strength of the PEO business, just like our ASO business where it's not co-employment, is the strength of that HR has never been greater. If you're a smaller midsized business and you're getting bombarded with these changes in support items that are coming out of the federal and state governments right now, you need HR support more than ever. So the value of our HR specialists, the 600 across the country, has actually come on very strongly. 3 months ago, they were being -- their biggest issues were how to handle exempt, nonexempt classification, how to hire more people and find them. Now it's been about -- really about survival. And I think the value of our HR model and our HR support -- our HR specialists have an average tenure of 7 years, and they are mostly certified from SHRM. They know the needs that they have, and we provided them with great tools from a marketing and support training perspective that has constantly kept up with all of the regulations. And so the value of the HR support and the insurance support, but I would say the HR piece of it even more, has become even more valuable than it was pre-COVID.

And so how is retention bearing in the PEO business? Similar to what you were saying about management solutions or are you actually seeing also an uptick of like new sales activity or people that want to upsell out of the -- out of Management Solutions or out of just core payroll into the PEO?

Yes. We have seen -- I would say, first, we saw the same kind of thing where we didn't lose the clients. We're still pretty good -- pretty strong on what we expected and below that from a loss of the client. We saw some going -- a number of them going to a suspended status and the number of checks or work site employees drop, but -- which is now coming back, as I mentioned. And you are finding that more companies that were even upselling from payroll or other products into the HR space, PEO or ASO, because of the strength of that HR bundle. It's not so much an insurance play that is convincing them. It's more of the need for HR support and the strength of being a co-employment in the PEO side. So -- and we actually shifted a number of our retirement sales resources because retirement, and let's face it, over the last couple of months, has not been as interesting from a value proposition. It's on a back burner. We shifted a number of our retirement sales folks over to referring HR and looking for more HR in the base, and that has worked extremely well. Our new par sales have gone up 40%, 50% from those referrals in just the last 2 months. And so I think that's -- there's a -- it shows a great need for the HR specialists that we bring to the client, particularly in this hour of need. And that's going to go on. Do I furlough or layoff? How do I handle those kind of people? How do I bring them back? How do I start safely? With OSHA rules, how do I do a number of things? Small and midsized businesses just do not have those resources. And so the value of what we bring is becoming even more important than it's always been.

Efrain, back over to you while we're talking about the PEO and insurance businesses. Paychex does have a small amount of exposure to help in workers' compensation risk in the PEO. Can you just comment on how the at-risk health portfolio has been performing through the pandemic just to...

Yes. So...

Yes, off the table, I guess.

Yes. So by the way, just if someone heard Marty say par, par is our term for bookings. It's just an internal Paychex annualized revenue. That's what it meant, so -- in case we get a question later about that. But yes, the first thing I'd say is we disclosed the direct cost of insurances in our -- in the 10-K. We'll update that in -- when we file our 10-K at the end of this fiscal year. Just to remind everyone, we just finished the fiscal year a couple of days ago. So -- and the cost of direct insurances has been running around $300 million, of which about roughly 2/3 or so of that is health care. And just to level set even further, that's the health care on which we take risk, and it's almost entirely in the state of Florida. So with all that prefaced, actually, the performance has been good, and actually, it's been very good. And the reason for that is somewhat counterintuitive. Although we have seen some elevated claims expense coming from COVID-related claims, again, primarily in the state of Florida, state of Florida at this point has not been hit anywhere near as hard as New York, we don't anticipate that will happen. And so we have not seen that level of utilization of services. But the flip side of that is that we've also seen a pretty significant decline in the amount of elective procedures that clients have -- that employees have taken. And so a little bit elevated COVID claims but a lot less elective procedures amounts to less utilization of insurance and you generate more profitability in that situation, in this case, more reserves. So the result has been positive. And we're not expecting any spike in the next several months, although we'll have to monitor closely what happens when we now get back to more normalized demand patterns for health care insurance. It's a relatively small number, as you say, Lisa. And we watch it very closely. We don't make money on health care insurance, and we reserve very adequately and have had no issues.

Great. And staying on that, on the workers' compensation side, I know that's always a question, hard to give a short answer because the impact on your business sits in a couple of places. You have the insurance business, but then also some exposure on the PEO side. What's the kind of short answer on how the exposure to workers' comp is impacted by this sort of sudden shock to the system?

Yes. So a relatively complex answer that I will boil down quickly. So there's 2 pieces of that. What's the impact of workers' comp on the PEO side where, again, it's part of this direct insurance that I mentioned where we take risk and then what's the impact on the agency side, which is where we broke our workers' comp policies for clients that may have another one of the Paychex services that isn't necessarily PEO. So starting first where the -- where we brokered the business, that market continues to be very soft. And what soft means is that the value of the premium dollar has declined significantly. And so while our volumes have held up, the rate has been quite low now going on about 1 year, 1.5 years. We anticipate that, that will start to firm up some time next year, in which case, when rates rise like that, we should get better revenue performance. But certainly, in the first half of the year, we don't anticipate that. On the PEO side, it's a little bit different, and it has 2 pieces. You get a revenue impact because the amount you can charge a client for workers' comp, even though you're taking risk on it, is also lower. It's dictated by what's happening in the states and what's happening in the insurance markets. But on the other side, claims for workers' comp have been down. And so as a consequence, similar to what I was saying on health care, the performance of the workers' comp book for the company has been positive. And we anticipate that, that trend will continue, at least while state unemployment insurance continues at these generous levels. Workers' comp always act as -- acts as a -- or act -- frequently act as a secondary form of social insurance. And so until people have burned through their state unemployment insurance, they won't think about the possibility of making a workers' comp claim. And so it's been positive from a claims perspective. We anticipate that will continue as we go into next year.

All right. Marty, I wanted to switch back over to you. You mentioned and talked a little bit about sales and sales in the current environment. You mentioned that you're seeing some uptick in some of the HR services and other services that Paychex provides. But obviously, you've had all the salespeople move to a remote model, and many small businesses are sort of struggling for their own survival. What does the sales environment currently look like?

Well, the good news, Lisa, is that we've been selling remote for a number of years. So we've had a team telesales inside Paychex for a number of years, and that has been continually growing, and we expected that to continue to grow. And so we had a lot of good training and expertise and technology that we have been able to retrain the field reps quite quickly to say, "Hey, look, you can contact these prospects. You can reach them and do a demo online. You can basically sell -- buy online with our ability to do electronic signatures and so forth," which, by the way, are the same products that we offer our clients through Flex as well, including online and electronic approvals and signature, et cetera. So we were able to train the team remotely while they're working from home and then train them to be able to get to prospects. So it certainly was difficult, particularly in April and early May, to get to prospects. They weren't very interested. They weren't able to necessarily reach them. But we now have seen an uptick in web leads, particularly on the micro side, I would say, our SurePayroll offering and our Flex offerings. There's been a lot of activity on that side for web leads, which we then are able to sell over the phone because we can demo, sell, complete the sale and set up the client all remotely. And so I think, actually, we'll be doing even more remote selling over time because you'll see that expand because it's worked out better than even expected. But we did have a number of years of experience in it already. So if you look at the other services, I think the only one, as I mentioned, retirement, who had been having a fantastic year, really slowed down in April and May. But again, we shifted those sales folks over to getting leads for HR and that helped as well. So a lot of things are coming back. And now we're starting to get requests for in-person appointments. And if the client or the prospect and the rep want to meet in person, we've established procedures for them to be able to do that. And we're finding more calls where businesses want to do that, but they also can do everything online. And I think we're seeing a good increase there. Plus, we have a lot of technology out there, like our mobile app. You can go on and demo the mobile app yourself. It's a 5-star app. And people can go in, see it, test it, use it before they even call us. We also, at the same time, geared up TV advertising for the first time, frankly, in Paychex' history where we had TV commercials that we were ready to roll out pre-COVID. We adjusted those to be more fitting to the environment -- to that environment and rolled those out and got some nice feedback and increase in website activity and leads from that as well.

All right. I know a topic we're going to come back to later, but just while you're on the topic of sales, are you seeing a lot of competitive takeouts essentially when you're getting like inbounds on sales? Or are these like new business formation type of situations, like what does the competitive environment look like?

Yes. I'd say the competitive environment is roughly the same. The interesting thing on the low-end payroll, small business payroll, what we're seeing is a number of clients that appears that they may not even be new businesses, but they are businesses that have always done it themselves and not necessarily with an outsourced competitor, and they're looking for someone now to help them. And we took advantage of the opportunity that -- "Hey, if you're looking for -- if you're a small business that has done your own payroll and HR and maybe insurance, if you're looking for a PPP loan now, it's really hard to put all that together on your own. Come to Paychex. You look at the website." They went to the website to see what we were doing and what support we could give them, and that became a prospect for us that said, "Okay, I've had enough. I'm not going to outsource my payroll and HR to someone because I need the help. It's just too complex right now for the survival of my business." We also picked up a number of leads through webinars. We've always had webinars for CPAs and current clients and prospects to talk about various HR issues, et cetera. I would say these webinars typically had a few hundred to 500 participants. We had a webinar last week on the most recent regulation changes and the reopening, and we had 26,000 registered for the webinar, and that includes thousands of CPAs as well. This has opened up or, I guess, I would say, improved and enhanced a channel that we always had to now get leads from that as they see the expertise that we have. And I would tell you that a company like us, with our over 200 compliance people are talking to the Treasury, to the federal government, to the state governments every day, and we tend to get things even early and are more prepared to implement things very quickly. So that is all the webinars, the website, the offerings that we've had, the ability to sell -- to reach clients, demo and sell online has helped us tremendously in a work-from-home environment.

And so is your view that, that may be a silver lining of what is a very difficult situation that it's creating a lot of like secular demand essentially for Paychex' business in a market that's maybe slowly been moving in this direction of more outsourcing and more digitization? But is this driving more of an uptick, do you think? Or is it too early to tell?

I think it's early, but it is certainly driving an uptick in more -- in businesses who had not outsourced to a professional provider of payroll and HR to now go that step. They just -- regulations have always been tough. But when regulations really get tough right now and you need it to survive your business to file for a small business loan or to forgive that loan or to -- how to handle furloughs and layoffs for the first time or how to handle insurance claims with people, that has pushed a number of businesses that did not outsource to say -- from what we're seeing, to say, "Hey, I need to go to a professional." And because of the work that we've been doing and the investments and the website, I think, it has driven some. So while the demand has come down because of the COVID situation, there has been, I guess, as you'd say, a silver lining or a positive side that it has pushed a number of businesses not necessarily from competitors. There's been some of that, but more from the standpoint that I never outsourced, and now it's time for me to do it.

All right. Let's switch gears. You mentioned against the backdrop, of course, of a challenged overall economic environment. No one has a crystal ball, but at Paychex, you have one of the better ones, I think. What is your current view in terms of the recovery path that you're baking in or maybe options or scenarios, realizing it's uncertain, of course?

Yes, I think it is hard to see. I do think everyone was pretty right about how deep it went to begin with. So people were going through this V or U and all these -- everybody was pretty deep on the front end, and that definitely came true. Now it's all about the recovery time frame, and it is somewhat of a guess. But based on what we're seeing now, not knowing if there's a second wave or how prepared we are to handle a second wave and whether that requires closures and so forth of businesses, we do think that this will be -- this -- as we're now into our first quarter, this will be a tough quarter. Next quarter, I think there'll be -- it'll still be difficult, and we see it more toward the end of the year and into next calendar year, that's, as it starts to improve. But seeing improvement all along, but it was a pretty deep drop to start with. But as I've already mentioned, May, we've seen improvement. So if that improvement continues, and it certainly appears to as more states are reopening more businesses and at a pretty short time frame, here in New York, you see these 4 stages that they're talking about. I mean they expect to be to the last phase, I think, in the next 30 days or so if things go well, 30 to 45 days. That means most things have opened back up at least to some degree, and we do think there's some pent-up demand. So we do see improvement, slow improvement. It's probably -- I think Efrain's used -- we have kind of maybe not a checkmark on that second half, but it's a swoosh or whatever, it's kind of a slow but continuous improvement over the next couple of quarters, this quarter, our fiscal first and second quarter.

Got it. And maybe compare -- and I don't know if this is a Marty question or an Efrain question. You've obviously been with Paychex for a long time. Paychex has the benefit of 50 years of history, living through a lot of economic shocks. Maybe compare how you're thinking about this one compared to some of the ones in more recent memory like the financial crisis or 9/11 or hurricanes or...

Right. I would say, well, certainly, we've been through a lot of things like the hurricanes, fires in California, things like that, that caused regional closures and impacts. And we've handled those extremely well because we can move calls. We have a technology to move calls and demand all over the country from a service perspective. And the only difficulty would be those who get physical delivery of checks or something like that because as far as direct deposits and serving the client, it can be done all over the country, and we've had that back up for many years -- that ability for many years. I would say if you compare it to the financial crisis in 2008 and '09, that was a lot longer and a more deeper financial problem with the banks and hurt a lot of businesses that were involved, and it was a longer period of time. This was much deeper quickly, and now we'll recover more over time. So I think we have if -- this is an early period of time in this. But I think we have a handle on how deep it's going to get. The financial crisis in '08 and '09, it took 18 months to figure out kind of how deep it was going. And while we did recover, certainly, over time, it took a while. I think this will be a quicker recovery because it's more about vaccine -- about being able to have a vaccine, about people feeling healthier, about -- feeling better about their health and getting back to business. And I think if we're right, based on what people are telling us, that would be -- that should be over the next 12 months kind of thing roughly where people start feeling better about that and safer about it and, I think, much more prepared to deal with it should there be a second wave and so forth. You won't find as much of the shortage in hospital systems, et cetera. And I think people will just be calmer because they've been through it. When you're not through something, there's kind of chaos at the beginning. Once you get through something, people are a little bit more -- understand what the problem is and how to deal with it. So I think this one was deeper than the financial crisis and much faster, obviously. And then the recovery will be continual but a little slow coming back. Efrain, do you want to...

Lisa, let me just build on what Marty said because, obviously, that's what we've incorporated in our thought process. The 2 points that say the look of this crisis is more akin to what we saw at 9/11 than '08, '09. The 2 points that are interesting is, one, Marty mentioned earlier that we see new business formation recovering more quickly than, frankly, we expected. So weekly new business formation has been on a positive trend recently. That was a marker that took many, many quarters before it turned positive in '08, '09. So that marked a departure -- or that marks a departure from what we saw in '08, '09. The second thing I'd say is that to the point that Marty made earlier, the duration and the slope of the curve in terms of the recovery is something that's very difficult to call. But when we look at the top 10 markets that were -- our 10 largest markets and all the usual suspects are there, New York is the most heavily impacted. What's interesting -- what's striking to me over the last 3 weeks is that the rate of recovery, meaning the improvement from the lows all look fairly similar, which is to say they're all moving at roughly the same rate moderately in the same direction. Now I can't tell. I can't connect the dots because to do a good regression analysis, I need more information, but at least the early signs of the data suggests that we're in a -- already starting to see a moderate improvement from the depths. And the question becomes, does that continue? Or do we get to a point where we hit a plateau? We'll know that as we go through this summer. I will say that it's encouraging that the data seems to be pointing that we're getting, I would say, moderate, steady improvement across certainly our top 10 markets. And our expectation at this point, until we see differently, is that, that will continue. Now the trough, as we all know, is very deep. And it will take a while to climb out. But at least we're moving in the right direction, which all points more to it looking like where we were in 9/11, albeit with a tremendously more severe impact at the beginning of all of this.

All right. Then let me translate that into what changes you're making to Paychex' business to deal with the current environment and emerge from it even stronger maybe across investments. So are you reprioritizing some of your investments, maybe pulling some things forward or pushing other things out? And then how do you put that against the backdrop of your ongoing expense management and capital allocation plans over the next 12 months or so?

Sure. I'll take a shot at that, and then if Efrain has anything to add to it as well. I'm very proud of the fact and very glad that we made the investments in technology that we have been making over the last -- particularly the last 8 to 10 years. Very strong from a mobile standpoint, mobile app, our online. Those investments have made it a much better product for our clients and has -- and the investment in the technology and the full integration -- there aren't very many companies that a client can come to where everything -- we can provide everything from one source, from your payroll, your HR, your insurance, your retirement, and do it in a very SaaS manner, Software-as-a-Service manner, with great use of artificial intelligence to help our clients. So we also have moved to providing them a lot of data online where they can do comparisons. There's just a lot of strength in the technology. And those investments have positioned us well for this where clients need a lot more flexibility to be able to handle their employees remotely, to be able to handle them through technology, to allow them to do much more self-service. Employees of our clients can change -- they don't have to worry about passing paper to their employer and then to us and back. They can do things themselves. They can check when in the app, can change their own direct deposit numbers. They can see their check stub. They can download a number of things, and they can get to all of their information with usually 1 to 2 clicks. So that, on the top of -- from that investment and just the recent offering of real-time payments, so I believe we're the only human capital management company offering real-time payments at this point. What that does is allow you to pay your payroll and get it into your employees' hands within minutes. And that's pretty critical right now as employees need the money right away. And we are -- we have already just -- we have just introduced this in the last 30 to 45 days and have had thousands of uses of this already and very popular from a standpoint of giving our clients a lot of flexibility in the way they do things in the use of our technology and so forth. From that -- the investments also -- so we have the investments in our product from our client standpoint. The investments inside have allowed us to sell and service remotely. As I mentioned, I can't imagine this 10 years ago having to have 15,000-plus employees working from home, selling remotely, servicing remotely and maintaining or improving even some of the levels of satisfaction from our clients. I couldn't imagine it 10 years ago, but the investments we've made internally to the company have positioned us very well to do that, and they will continue. I don't see a lot of investments delaying necessarily. We're always reprioritizing, and we've continued to go through that, and that's a lot about technology and artificial intelligence and getting more data and self-service to our clients will be a lot of it. From an expense standpoint, we are looking at, can we continue to have more of our employees working from home? The employees like it. They've been very successful. We found it to be better than we even thought from a training and a performance perspective. So I think physical locations will become less critical, and we're looking at a number of those, and also being sure that we can keep our employees safe, productive, and we're looking at a number of things from that standpoint. So there'll be some things that we're doing from an expense standpoint because our profit margins are very important to us. Obviously, we, by far, have the highest profit margin in the industry. And that's important to us. The dividend is very important to us and to the Board and to our investors. And we don't see those things changing. We'll be pushing as hard as we can to have very strong profit margins, continue to do that and also the stability of our dividend as a company. So I think we're well positioned to do that. We're going to have to do some things that will be different from our past, but we think we're very well positioned to do it.

Yes. Lisa, just to build on that. Everyone obviously is going -- taking the testing of the standard playbook in terms of hiring freezes and expense management, the process of watching all of the variable expenses, cutting anything that you don't think is important. In our businesses, the challenge is that we think that we see recover -- we assume that we will see a recovery in the back half of the year, and it would be really counterproductive to get expenses and then not be in a position to take advantage of a rebound. And so we're trying to balance all of that. But specifically to the question you asked. Whenever you're looking at potential projects, you're arraying them against a number of criteria, and some of them -- some of that criteria has to do with either more revenue, less expense, time frames, et cetera. I would say as we have gone through this process, we have shuffled the deck a little bit and put a bit more emphasis on projects that maybe we were going to get to in 2 or 3 years, but that brought some expense savings and maybe we would have accommodated in the context of a normal operating plan process. We've tried to move those forward so that we could get the benefit of some of those ideas and weigh those against other options. So I think that a little bit more emphasis on projects that can deliver cost savings more quickly that they'd moved up the list in terms of importance.

Yes. Terrific. All right. We are going to have to wrap it up because we're right at the top of the hour, but Martin, I'll let you have the final word, like what are the #1 or 2 things that are your big priorities as we're entering a challenging but also exciting year, I think, for Paychex?

I think it's being able to get in front of the prospects and our clients to -- of what we're offering. I think that we have put tremendous investment in there. And I think, if anything, Paychex has probably been a little too quiet in advertising what a leadership position we have and what we can offer our clients. And we're very excited -- in such a difficult time, we are excited about the opportunity to say we are a different company from a technology perspective. We are an HR leader, and we lead with HR -- human resource services now. We have the compliance teams that no one else has and the IT investments as well. And we have 600 HR specialists that provide a unique service that is a combination of technology and people service that is there for them to help them through the difficult times. And I think I'm excited about the time -- the fact that we will shine in a time when clients need help the most and that our 16,000 employees are ready to do that and excited to help small businesses and midsized businesses get back on their feet.

Wonderful. Thank you. Well, Marty and Efrain, thank you very much for joining us at what is a crazy time and difficult and challenging time. So thanks for joining us today. And I think with that, we will close the session. For folks watching, we're going to start right back with the next one in just a minute or 2. All right. Thanks, guys. Thanks for joining us.

All right, Lisa. Thank you the opportunity.

Okay. Bye-bye. Stay safe.