Q3 2020 Earnings Call
Good morning mining Shannon Inovio corporates, operator at this time I would like to welcome everyone to 80 piece third quarter fiscal 2020 earnings call.
Well I can find it difficult to just be recorded and all lines have been placed on mute to prevent any background noise.
The speakers remarks, there will be a question answer session.
You are like that's the question. During this time separate press Star then the number one right telephone keypad.
To withdraw your question press the pound cake.
Well now turn the conference over to Mr., Daniel Senior Vice President Investor Relations. Please go ahead. Thank you Shannon good morning, everyone and thank you for joining <unk> third quarter fiscal 2020 earnings call and webcast.
Participating today, our Carlos Rodriguez, our President and Chief Executive Officer, and Kathleen Winters, Our Chief Financial Officer earlier. This morning, we released our results for the third quarter fiscal 2020 earnings materials are available on the Fccs website under Investor Relations website at investors that ATP Dot com, where you'll also find investor presentation that accompanies.
Today's call as well as our quarterly history of revenue and pre tax earnings our reportable segments.
During our call today, we will reference non-GAAP financial measures, which we believe to be useful for investors and that excluded the impact of certain items description and the timing of these items along with a reconciliation of non-GAAP measures to their most comparable GAAP measures can be found in our earnings release.
Today's call will also contain forward looking statements that referred to future events and involve some risk. We encourage you to review our filings with the FCC for additional information on factors that could cause actual results to differ materially from our current expectation.
As always please do not hesitate to reach out you have any questions with that let me now I'll turn the call over to Carlos.
Thank you Danny and thank everyone for joining our call.
Before we can I I want to first say that our thoughts and prayers are with those who had been or no someone who has been impacted by coping 19.
Every day, we hear about how much of a challenges has been for employers and workers alike, including our own.
I'd like to recognize our associates for rising to the challenge and delivering exceptional service to our clients. Despite the extraordinary circumstances they tried to face.
To them I want to see thank you.
For a discussion today, we'll spend a little less time talking about the third quarter and more time on a current operating climate and like the offer a couple of upfront points.
First is at 80 P is not immune to the global Pandemics impact on the labor markets. Although we may make tactical adjustments as we navigate through this crisis. We believe our long term strategy is unaffected and remain optimistic about how we're positioned over the coming years once the business environment and our clients returned to more normal operations.
The second point is that we'll continue to serve our clients and the way we know best.
Hi, offering the tools and resources and support they need to manage their business and their workforce to all types of operating environments, including this challenging one.
With that said this morning, we reported third quarter fiscal 2020 results with revenue of $4 billion up 6% reported and organic constant currency and inline with our expectations.
We expanded our adjusted EBIT margin by 60 basis points in the quarter was which was ahead of where expectations. Even though it included an unplanned $50 million global associate assistance payment in response to cope with 19.
And with the solid revenue and margin performance, we were pleased to deliver 8% adjusted diluted EPS growth, which was also slightly ahead of our expectations coming into the core.
Turning now to the current situation I'd like to take a few minutes to go deeper on how could 19 has affected our operations and what we've done to respond.
As a situation of all over the past couple of months, we focused first on the safety of our associates.
In March we took steps to quickly shift over 50000 of our associates to work from home and now have approximately 90% of our workforce working remotely in a secure manner.
In doing so we leveraged our previous investments in business resiliency and in addition, we ordered thousands of laptops expanded remote access capacity provided at home Internet and for those critical personnel that needed to work on site, we took steps to ensure their safety, while they perform that those essential onsite tasks.
This was a huge undertaking by our global IP security legal and each organizations and I'm extremely proud of their execution.
We also worked with our critical third party service providers to ensure they were positioned to continue to support us.
In March we also had our field sales force shifts from in person to a virtual sales model and well that's not an ideal circumstance for some of our quota carriers, they're making the most of the situation.
Well, we were executing on these businesses resiliency plans. We also worked nonstop to address our clients' needs to ensure uninterrupted service across our HCM solutions.
We providing mission critical service and process pivotal for one and six Americans in over 40 million workers around the world.
To offer immediate support we provided a number of online resources, including an employer preparedness tool kit and Webinars attended by tens of thousands of clients.
We also quickly made available for free.
<unk> costs and head count reports necessary to apply for forgivable loans under the Paycheck protection program of the cares Act and he's reports have been downloaded hundreds of thousands of times.
Service is more important than ever in times like this.
We saw a car volumes increased significantly beginning in March and had nearly 2 million inbound requests across our service channels in a matter of weeks with clients looking for help with a variety of issues, including adding custom P codes related to covert 19, redirecting chick checks to different locations and requesting new time tracking heart.
It doesn't require physical contact.
In many cases, they were simply six seeking general guidance in understanding you legislation.
To meet our clients' needs, we retrained and quickly redeployed hundreds of associates to where they were needed most in our service and I T teams worked quickly to digest and trend like you just new legislation from the many jurisdictions around the world into our global payroll time and attendance and other systems in a short period of time to Laura.
Clients to comply with and benefit from these changes in legislation.
As the environment for companies continues to evolve where there due to legislative changes or operational realities. We at ATP are committed to supporting our clients to help them best navigate those changes.
As we communicated in an open letter to U.S. policy leaders ATP stands ready to facilitate current and future initiatives that provide support to our clients and their workers.
And in support of our local communities ATP has made over $2 million and donations to relief efforts, including a dedicated relief fund for ATP associates that needed assistance as well as donations of medical supplies for hospitals food banks and their workers.
With all that said the significant impact of covert 19 is it is having on a broader economy isn't turn having an effect on a reported metrics.
And in a much more abrupt fashion as compared to previous macroeconomic slowdowns.
You can see this in our employer services new business bookings metric.
This quarter, we reported a decrease of 9%.
As we saw bookings declined significantly in rapidly in mid March when we typically would have expected to close many deals for the quarter.
These results were of course, well below our expectations coming into the quarter.
Well some of our businesses performed slightly better than others in March the weakness was generally broad based as the health crisis affecting companies of all sizes in regions, including internationally.
We believe the impact to bookings stems from two factors first the buying behavior of our clients and prospects.
As with prior uncertain economic environments, our clients and prospects have become time and resource constrained and are faced with reassessing their own operations. The best right out the impact of this health crisis.
And although our products support mission critical functions.
Making decisions about additional HCM services, we're making the decision to switch from another vendor to ATP can get off can can get put off to a later time.
Even in circumstances, where decisions have already been made clients are understandably delaying implementation, which can also cause us to adjust down the bookings we record.
The general changing behavior is common in recessionary periods, and we're certainly not surprised to see it this time.
It's clearly happen any more abrupt manner compared to what we've experienced in the past.
Second as I mentioned earlier, they have naturally been constraints that limited the activity of our sales force well, we have been able to lean more heavily on an inside sales strategy and virtual interactions by our field sales force there has still been a reduction in our sales force productivity.
Our sales organizations experienced and resilience and we'll continue to work hard in the fourth quarter.
Because of a variety of factors, which we believe will have an outsized impact on the fourth quarter bookings, including the effectiveness of the paycheck protection program in supporting small to midsize businesses and how quickly our clients can adapt to working in this new environment and resume more normal buying behavior, there's clearly a very wide range of outcomes.
But the calibrate your expectations, we are guiding for a full year, yes, new business bookings are right, yes, new business bookings to be down, 20%, which implies our fourth quarter bookings will be down by more than 50%.
With all that said, we remain confident in our product portfolio and optimistic about our ability to drive sustained growth and yes bookings any sounder economic environment.
I'd now like to spend a moment a minute or to.
And some of the other macro driven trends we've observed in our client base.
Our pays per control metric, which represents employee growth for a broad subset of our client base.
Solid through February, but decelerated to a slight negative growth by the end of March averaging 1.9% growth for the quarter.
Early in April we saw deteriorate further to a double digit negative decline with the steepest decline among smaller businesses.
For context, this level of pays per control decline significantly worse than even the worst quarter in the financial crisis.
Underscoring that it's hard to compare this environment even against past recessions.
Well, we hope that legislation aimed to preserving employment will drive a recovery in pays per control.
We had not seen it did in mid April.
On retention.
We were actually pleased with our performance in the third quarter.
With both third quarter and year to date retention performance better than our expectations and ahead of pace for our previous annual guidance.
We set all time third quarter retention records in our down market and Midmarket businesses as client satisfaction scores were at or near all time highs and as the benefits of our technology and migration strategy over the past several years continued to bear fruit.
But clearly out of business losses are a concern for the fourth quarter and beyond.
Although they had not yet meaningfully picked up by the end of March where even into April.
Early indicators of stress in our client base have shown up and we expect deterioration in retention in May and June.
Gasoline will share some of the assumptions for the fourth quarter when she goes through the outlook.
I'd like to pivot now from the current macro environment and focus on our strategy and what we're doing to drive longer term value for our clients.
At ATP, we remain steadfast in our commitment to lead in the HCM industry with best in class Technology and service.
Our February innovation day, we shared an update with many of you about the innovation, we are driving across our key strategic and next Gen solutions.
Hi, I'm industry is an exciting place with constant change.
We will continue to invest to position ourselves to meet evolving needs of our clients. We're not just the coming years, but the coming decades.
And innovation day, we covered several topics and I'd like to refrain a few of our key products against today's backdrop.
With ATP run, we helped small businesses manage their essential HR costs from basic payroll 24 HCM suite.
We highlighted our push to drive digital sales and onboarding capabilities, which is especially relevant in today's environment.
We also highlighted innovations and automating service and implementation, which released pressure on our service organization.
We discuss workforce now in our pub public cloud Native version that we are peering with our next Gen payroll engine, which utilizes a fully transparent policy based model for improved implementations maintenance and self service as well as continuous payroll calculations for clients looking for on demand pay options.
We also talked about wisely and the ease of use.
And the financial tools that make it attractive and attractive way to get paid.
And just this month, we made wisely direct available to our Midmarket workforce now clients, which we believe will be beneficial to the many workers and our base that's still get paid by the paper check.
And of course, we discussed our next Gen HCM, which we believe represents a big step ahead of current offerings in the market and for which we remain excited about scaling and selling more broadly.
Before I turn it over to Kathleen I'd like to take a moment to once again, thank our associates. This health crisis, and the resulting economic fallout hasn't been easy on anyone but our associates have really stepped up to ensure we continue to provide our clients with the support they need.
And our clients and I appreciate it.
Kathleen will turn it over to you know.
Thank you Carlos and good morning, everyone.
As Carlos mentioned, we're generally pleased with our execution in Q3.
And our financial results were not significantly impact impacted by cobot 19, with the exception of new business bookings.
We expect Q4, however to be challenging on a few fronts and I will cover this when I go through our guidance.
This quarter's revenue growth of 6% reported and organic constant currency was in line with our expectations.
Our adjusted EBIT margin was up 60 basis points compared to the third quarter fiscal 2019.
Even though it included a 50 million dollar cost of a global associate assistance payment related to covert 19, which we disclosed in an 8-K several weeks ago.
Excluding does our margin performance was even further ahead of our expectations and continued to benefit from a combination of cost savings related to our transformation initiatives and operating efficiencies as well as lower than expected incentive compensation expenses.
These benefits were partially offset by growth in P.O. zero margin benefits pass through expenses and amortization expense as well as certain other expenses related to cope with 19.
Our adjusted effective tax rate increased 30 basis points to 23.8% compared to the third quarter fiscal 2019.
And adjusted diluted earnings per share increased 8% to $1.92 driven by revenue growth and margin expansion.
As well as fewer shares outstanding compared to year ago.
Moving onto segment results.
In our employer services segment revenues grew 3% reported and 4% organic constant currency.
Reflecting study underlying performance with strong retention trends offset by continued FX pressure and a growing headwind from interest income.
Interest income unclaimed funds declined 5%, an average yield unclaimed funds declined 20 basis points to 2% offsetting growth in average client balances a 4% to $31.3 billion.
This growth in balances was driven by a combination of client rather.
Wage inflation and growth in our pays per control in the quarter.
Partially offset by lower so we collections and the closure of our Netherlands money on operation earlier this year.
Our employer services same store pays per control metrics in the U.S. was 1.9% for the third quarter.
And I'll talk a bit more about the trends we're seeing in a moment.
[noise] employer services margins increased 100 basis points in the quarter ahead of expectations and driven by many of the same factors I mentioned earlier when discussing our consolidated results.
Our P.O. segment margins grew 11% for the quarter.
To $1.2 billion, an average worksite employee 7% to 595000.
Ahead of our expectations and driven by strong year to date new business bookings.
We were pleased with this re acceleration you know worksite employee growth in the third quarter and believe we would have been position for further acceleration exiting the year if not for covert 19th.
Revenues, excluding zero margin benefits pastors grew 9% to 490 million and continue to include pressure from lower workers' compensation and to be costs and related pricing.
Pete No margin expanded 10 basis points in the quarter inline with our expectations.
Let me now turn to our outlook for the remainder of figure.
I'll start by discussing some of the specific macro driven factors that affect our financial performance.
I'll caviar by saying that we're clearly operating in an evolving and uncertain situation.
And we're using data currently available to us to make reasonable assumptions on which we're basing our guidance.
First out of business losses.
We expect our retention could be impacted by elevated out of business losses in Q4.
And although the federal government is providing stimulus to help companies continue operating.
Being clear strain on our client base and have observed certain leading indicator indicators such as companies going inactive and no holger running payroll.
Many of whom will restart their operations at some point, but some of whom we expect will not.
Based on our experience with these leading indicators we are building in an expectation for additional losses in our fourth quarter outlook.
As a result, we're lowering our full year retention guidance to be down 30 to 50 basis points. Despite running ahead of our expectations on a year to date basis.
Next pays per control.
We exited March with negative pays per control grows and in April it deteriorated deteriorated to double digit decline.
We were assuming a Q2, 2.5% pays per control decline for the full year, which implies a mid teens decline for Q4.
As a reminder, that's how this affects us we have varied contracts throughout our businesses that blends base fees and per employee fees.
We also often utilize tiered pricing and have certain annual revenues that are not as affected.
As a result, with our current mix of business. The direct revenue impact we expect to see it's about 25 basis points.
Yes revenue growth for every 1% change pp city.
Some of our businesses are more sensitive to pays per control than others.
And so the precise next with pays per control by business can drive the actual revenue impact higher or lower in any given period.
This direct impact also doesn't include the impact from our volume based businesses like recruiting or payment cards.
Finally on clients on the balances.
Through the combination of a challenging sales environment.
And anticipated increase in out of business losses.
Decline it pays per control.
And potential decline in wages and hours worked we expect to see pressure in our balances in the near term.
Furthermore, the cares act has a provision that allows companies to defer the payment of the employer part portion of payroll taxes.
This represents less than 5% of our average client on balance.
But depending on the actual take rate about provision we could see further pressure on our balance growth.
As a result of all these factors, we now expect 1% balanced growth for the full year.
Which implies a low double digit decline in the fourth quarter.
To just the size of our client fund investments to match expected changes in average client payroll tax volumes.
Beginning in March we halted all new reinvestment of maturity in our client long and extended portfolios.
And in April we took the additional step of selling approximately $1.2 billion.
Previously purchased securities in the client long and extended portfolios.
This decision to suspend new purchases means our Q4 interest income forecast reflects a slightly greater skew to overnight rate than previously forecasted.
Both the suspension of new purchases in the completed sale of securities is contemplated in our guidance.
To be clear these decisions represent tactical adjustments and do not represent a change to our overall client fund strategies.
Let's now turn to our revised outlook for the full year.
And start with the E.S. segment.
We are lowering our guidance to 1% to 2% revenue growth versus our prior outlook of 4%.
Driven mainly by an expectation of lower pays per control.
New business bookings client fund interest and retention versus our prior outlook.
Much of this lost revenue comes at high incremental margins.
And as a result, and also due to additional costs related to cope with 19.
We now expect our margin in the employer services segment to be down 25, two up 25 basis points.
For our PEO, we still good momentum up through the end of March and as I mentioned earlier, we believe we were on track for continued acceleration exiting the year.
What are now layering in our expectation for layoffs, and furloughs and additional out of business losses.
As a reminder, in our PEO segment, we earned revenues as a percent of the gross payroll we processed.
And as a result, we are more directly tied to changes in our clients head count in hours worked as compare to our employer services segment.
As a result of these assumptions and our expectations for lower Q4 PEO cells.
We are lowering our average worksite employee growth expectation to 3% to 5% from 7% to 8% previously.
We are likewise, lowering our revenue guidance and now expect 5% to 7% PEO revenue growth in fiscal 2020.
And 3% to 5% growth in Pete your revenues, excluding zero margin benefits pastors.
As we also discussed throughout the year, we continue to expect lower workers' compensation, and Soo Lee cost and related pricing to pressure, our total PEO revenue growth.
The we could see those trends change in the coming years.
For PEO margin.
We now expect to be down 102, 125 basis points in fiscal 2020.
As we noted in previous calls this outlook continues to include pressure from smaller favorable reserve adjustment that ATP indemnity.
Fiscal 2020 compared to fiscal 2019.
But we now expect about 75 basis points of pressure compared to our previous expectation of 50 basis points of pressure. So we still expect a slight benefit this year.
With these changes to the segments. We now anticipate total revenue growth of about 3% in fiscal 2020 as compared to our previous outlook of 6%.
This revenue outlook continues to assume like FX on favorability for fiscal 2020.
As I mentioned, we anticipate our growth in average client fund balances to be about 1% compared to our previous outlook of 4% and we expect the average yield earned on our client fund investments.
To be about 2.1% compared to a previous outlook of 2.2%.
We expect interest income unclaimed funds to be $540 million to $550 million.
And for interest income from our extended investment strategy to be $550 million to $560 million.
We anticipate our adjusted EBIT margin to be down 25 to up 25 basis points.
As the benefits from our workforce optimization and procurement transformation initiatives are now being offset by the impact of expected lost revenue due to cope with 19.
As well as incremental expenses related to cope with 19, including the $50 million in global Associate assistance payments.
We now anticipate or adjusted effective tax rate to be 22.9%.
The rate includes this quarter's unplanned tax benefit from stock based compensation related to stock option exercises.
It does not include any further estimated tax benefit related to potential future stock option exercises.
As a result of our lowered revenue and margin outlook. We now expect adjusted diluted earnings per share to grow 4% to 7% in fiscal 2020.
In light of this revised 2020 guy.
The multiple headwinds created by the global pandemic.
And the uncertain and evolving situation.
We are withdrawing the fiscal 2021 targets that we set out at our 2018 Investor day as they are no longer appropriate to the current circumstances.
However, we continue to believe in our long term strategy and a well position to continue to invest to execute this strategy.
Finally, before I conclude I'd like to talk about the strength of 80 People's model and balance sheet.
We have a highly cash generative business.
Low capital intensity.
And the HCM solutions, we provide critical support to our clients HR and management functions, especially at times like these.
In addition to having a resilient product in business model.
We also have a significant buffer between our free cash flow and a modest debt obligations and our cash dividend.
This enables us to absorb the impact of Downtimes and continue to prioritize investments aligned with our longer term strategy as well as our commitments to shareholder friendly actions.
So although our revenue growth can clearly be impacted by challenging macro conditions.
Our recurring revenue model and high retention rate positions us to continue that type of investments we highlighted at our innovation day, even when times are top.
We will Meanwhile, continue to manage our cost base prudently.
We have instituted hiring containment and started to execute on our recession playbook.
The preplanned set of areas.
We're we'll see some of our expenses self adjust.
Such as management and sales incentives.
And we will eliminate or defer non essential spot.
We're working through an evolving and on certain situation and all formulating our approach for next year.
And we will of course provide you with our expectations and outlook for fiscal 2021, when we report our fourth quarter results.
As always expect us to be balanced approach.
With that I will pass it back to Carlos for some comments before we go to Q alone.
Thanks, Kathleen before we move onto the acuity I just wanted to share with you next or.
Of one of the mini notes, we received from our clients that capture is how we want.
Good to find ourselves.
This one said.
We're a small business that has used ATP for quite a few years now.
Every time, we call Theres been a knowledgeable professional ATP that immediately solves the problem and answers the question.
We recently needed pivotal data to apply for the covert 19 password protection program.
Immediately went to 80 piece website to see how I should go about selecting and downloading the required payroll data.
Imagine the relief when opening the screen there was a covert 19 pop up the proactive we provided your clients with the pivotal data needed.
I was floored.
This type of customer service is unheard of these days.
We just wanted to perhaps to everyone ATP for a great job.
At this point suggest the value of a true each cm partner becomes even more critical at times like these and it continues to be our goal to exceed the expectations of our clients.
And with that I'll turn it over to the operator for today.
If you wish to ask a question. Please press star one please be aware of the allotted time for questions. Please ask one question with a brief follow up.
Your first question from the line of Renzi themselves.
With Barclays. Please go ahead.
Hi, Thanks, so much for taking my question I Hope you both are doing well.
I wanted to ask about your visibility on the paycheck protection loan program in terms of can you see that it's having the desired impact.
On businesses in the country are you seeing freeloader terminated workers that are or that are being brought back on book and I guess, just tying that back to you know to your own our performance or potential future performance are you seeing these leading indicators of bankruptcies sort of staved off a little bit and your book.
Yeah.
Great question, obviously, keeping our eye on that Unfortunately, we have is really kind of limited anecdotal.
Evidenced that people are beginning to get a money to be able to continue their their payrolls or continue to pay people. As an example, a few days ago I was forwarded a a letter that was sent to a where an email that was sent to a one of our associates from a client that was grateful for kind of the hope that we give them and applying for the.
For the loan and they sent a kind of a screen shot of their bank account that had $10. The previous day in the now had $84000 like indicating that they had gotten their money from the from the S.P.A. deposited into their into their commercial bank account, but I think as youve as you've heard a seem as Austin the.
In the in the press.
You know the process has been given the magnitude of the on the scale of the challenge.
<unk> been a difficult process, both for the S.P.A. and I think for the for the banks Weve tried to do our part to help.
And we're optimistic and we're hopeful that it will make a difference and that you know there will be retiring and that it will at least.
In in some respects.
Stop the the following in the elimination of jobs going forward, but unfortunately, it's just a little too early for us to give you any kind of concrete evidence other than some anecdotal stories that money is making its way into the bank account of small businesses.
Okay. That's helpful. Thank you and then just to follow up in terms of your overall product strategy in the context of this crisis are there any kind of adjustments you're having to make in terms of how you're thinking of.
You challenging is employees work from home thinking I think your time attendance offering and also just on some of your major Michigan initiatives like I left out.
You know how his time why the market's been impacted how are you thinking about the product set sort of evolving.
I mean, clearly we have to be nimble I think remain open to making further adjustments, but I think it's safe to say that.
If you go back over the course of decades, the the concept of quote unquote outsourcing and now what some people would call. The SaaS models, which I think ATP was kind of one of the pioneers of I think by definition lend themselves to these kind of remote work environments, whether it's for the technology people because we.
Generally, obviously coast and maintain and and update or the all of the systems for our clients.
But also through the variety of portals, we have for our clients in the employees of our clients all the information that anyone needs is available.
Online through through all the tools, we have to access that information, whether it's for the people practitioners or for the employees of our of our clients, including when you think about the app that we have for.
The employees or clients to be able to check where they've gotten paid that can check their hours. They can make changes before one k.. There's no really no need to move paper where for anyone to be in the office to do that kind of that kind of work. So.
Surely there will be things that we will learn and we'll probably here in the early early innings of this kind of a new challenge and how it might affect.
Our our products, but I think in general as an industry such as freed P. I think in general for us as an industry, we're pretty well positioned I think for this kind of work environments.
And I think you're here.
Yes, I could just after that I think you had asked about I couldn't quite here, but I think you had asked about look beyond and any update to that and changes to our view on go to market I would say over the longer term well you know certainly this year looks like things have slowed down at least for a little bit I'd say over the.
Long term no change to how we're thinking about that we've got a handful of life clients were continuing to sell clients on implement clients.
Let's see on.
You know we're encouraged about the long term prospects there yeah. It's it's clearly every time that we have a whether it's an economic downturn or now. This is obviously a new a new challenges there is always questions about.
This drives greater adoption I think intellectually it makes sense that this would drive greater outsourcing in greater adoption of a fast, but it's kind of hard to make that statement kind of where we are today, but theoretically in intellectually two to three years from now there should be more demand and more people using SaaS solutions and there are.
Today.
That makes a lot of such that so much for taking my questions.
Thank you. Our next question comes from the line of tens and Wang with Jpmorgan. Your line is open.
Hi, Thanks, so much appreciate the expanded disclosure here just on the.
Somewhat of a follow up to Randy's question just on the sales performance side, you mentioned productivity challenges. In addition to the man factor. So how quickly do you think you'll get your productivity back on track and align your your sales to where you see the PUC going next in terms of in terms of demand.
As it evolves. So we're trying to actually keep an eye on it week to week to get some sense of what levers. There are still there are we clearly still have our salesforce is still selling and they're selling a lot of a lot of business, but.
It's at lower levels, and obviously, we had expected and at lower levels and you compare to the previous a year. So unfortunately, given the nature of the situation.
It's kind of difficult to give you a kind of scientific or concrete answer I think as we as we generate more information I think probably for our guidance for next fiscal year, we'll be able to I know that's not helpful to you today, but it's it's really a very difficult thing to talk about we we have a lot of our sales force.
Was already what we call an inside sales force and so we've we've proven that we can sell through inside selling but we have.
Some products that are what I would call high involvement decision sales and it doesn't mean that those can't be done remotely, but it hasn't been the norm. So when you sell a very large complicated multinational solution or frankly, even when you. So the PEO historically, there's been a relationship that's built there.
On a trusted gets built.
Before that transaction gets consummated so.
Clearly this is these are new and different times. So I don't think everyone is going to sit and wait around for everything to go back to normal before making decisions, but I think it's safe to assume any common sense would tell us that it's safe to to assume that there'll be some level of hesitation and pull back in terms of decision, making even though.
He takes a good percentage of our of our sales force is still outselling as they have before although they're doing it virtually no.
Sure. So we'll check in with you on that again next quarter. So then my quick follow up both of you have talked about cost initiatives you guys.
Did much better than we thought on the margin side, even with the 50 million, but you've also built into that a pipeline of more cost takeout.
Potentially pre the pandemic. So I'm curious your your willingness to pull incremental expense sleepers.
Maybe some chunkier stuff.
Is that the available to you and are you willing to do that at this stage.
So we did have a number of transformation initiatives underway a lot of them, we're really around digital transformation efforts to kinda automate and improved the way you know our implementation or services is delivered which would create a better experience for our clients. The employees of our clients frankly also for our associates that we thought.
Would result in a in lower cost going going forward.
Part of the challenge we have is as and again every company may be different in terms of how they approach their level of support for their clients, but.
Based on our model and the way, we see ourselves playing a role in in and frankly in society and with our clients, we've actually experienced quite an increase in volume.
And in cost in the short term and so as an example.
As the government rolled out.
People protection program.
We saw 40% to 50% spikes in in inquiries right through whether his phone or chat or by.
By email and so we had to work people overtime, we had to work people on weekends, which were very grateful that people are willing to do because you can imagine they've got lots of other concerns and distractions.
This is all going going on and so.
You know we made a commitment that we're going to deliver to our clients through this and help them work through it whether it's for themselves are for their employees and Unfortunately, I would say in the short term, we actually have an increase in costs now realistically, that's not going to continue indefinitely, but every week.
That we've said, we think our call volumes in our and our work goes we're gonna go down there's a new government program or a change in the government program, which by the way. We think is great I think that the efforts by the fed and by policymakers I think to help.
Clients in there and their employees I think is the is the right thing to do and were very supportive, but as an example, there was just as you know there was an approval of an additional amount for the people protection program, which generates additional volume for us by the way I think the banks are in the same probably in the same situation in terms of have having to hand.
Total kinda increased volumes and so.
We expect these levels to normalize.
And then to be in a position, where we can reevaluate our cost structure, but again, given the timing of this call and where we are today.
We really can't tell you that theres been a meaningful decline in our workloads in fact, it's actually been an increase.
Got it thanks appreciate the work.
So if I could just let me just add a little bit more to that.
Some comments on our transformation efforts and I'll transformation work, even with the significant increase in service demand.
So even with this kind of very abrupt disruption and need to move our fire actually aren't fire workforce to work from home, we were able to do that you know.
Almost seamlessly I'm not worked really well through the huge huge effort of many.
But from Barclays.
Our technology group to our HR legal I mean, it was a huge effort, but it worked really well and so that said we've been able to continue our warhol processes. If you will around transformation work. There were certainly some projects that we have to look at NSS and say, okay because.
The big surface demands, we may need to slow down me, but our process in terms of.
Tracking progress.
Renewing to execute adjusting as necessary based on service demand and importantly, continuing to look at pipeline of projects that continues and I would just add one further comment the in particular in this environment the ability to look at procurement and fine.
Sherman opportunities is potentially even greater today than it was you know say three or four months ago.
I think if I can just one more just comment I think that the the part of the challenge here is that we are.
The nature of our company in our business and our board is to not focus on one month or for one quarter and I think when you look at what we're able to deliver just in this quarter in terms of margin improvement and we've been able to do in the last couple of years I think demonstrates very clearly our ability to I think achieve and take advantage of operating leverage and also to.
Manage our cost very effectively we've had.
A couple of years with a very modest if any cost true cost increases while revenues were growing at what for US is our very healthy rate. So I think we've demonstrated what we can we can do but unfortunately, we've been handed a a very abrupt change here in the environment and we're going to handle it first the take care.
Our associates next to take care of our clients and I think when we get through this transitory period, which we all know is transitory now we don't know is a transitory for a month or two was a transitory for six months, but either way, it's not multiple years and we want to make sure that we continue to invest in our business take care, where people and take care of our cloud.
And so that when we come out of this we come out of it as strong as we were before we went into it.
Yep.
Very clear I suppose that's the case thank you.
Your next question comes from the line of Kevin Mcveigh with Credit Suisse. Your line is open.
Great. Thank you and thanks for the guidance and obviously the tough environment.
Any thoughts on.
A question, we get a lot is how much of the layoffs, you're going to be for a little versus structural so just any sense within kind of the peace control how much of that would be potentially furloughed workers versus structural.
Let me start there.
It's a great. It's a great question. So we have as you know we operate in a in multiple countries and also multiple segments small business mid sized national accounts, but also and in many countries and also multinational companies.
And the policies that companies have around how they treat employees is going to vary from company to a company and generally also varies from segment. This segment, but what we can tell you is that way the way we count pays per control is is very straightforward, it's whether or not someone got paid during that period of time that were counting.
And so we would not probably be able to give you a from a number of how many people or furloughed versus how many people are laid off because we don't control necessarily that coating in the system and clients can exercise some discretion about how the.
How are they what how are they I guess tag some of their of their employees, but what we do know is that if somebody doesn't get paid they don't get counted in pays per control and if they do get paid even if it sort of reduced wage that does counts and so that creates.
A number of challenge is obviously, because you could have reduced wage levels.
Which then doesn't negatively impact pays per control, but impacts the employees themselves in may in some cases impact our fees would generally wouldn't other than in the PEO, but could impact our fees as well so I would say that.
The best thing to do is to stick to.
Trying to use the pays per control metric as a way of <unk> of a building your models and using the guidance that we provided around to around 25 basis points of revenue growth impact from each 1% change in pays per control I think that gives you a very.
We spent a lot of crime.
Pressure testing that assumption I think Danny did a lot of a work on it and I think that's a pretty solid way for you to look at things. So when you hear guidance from us about pays per control and you use that metric for your models I think that's a much cleaner and easier way than to try to separate how many are furloughs versus how many are layoffs et cetera et cetera.
That's super helpful. And then I guess just quick follow up would be.
Kind of coming out of this obviously when these type events you really.
Through in terms of the caliber the organization DC any change competitively, particularly is obviously coming unless cycle much more service oriented as opposed to shift to the cloud and this one but from a competitive perspective any changes where you look to you know even build on that.
Attrition number <unk> longer term in terms of improvement.
I think you do see some subtle differences in terms of you know a company cultures and and I think behavior. So as an example of one of the things that we have always I think tires talk about his willingness by us to really help our clients navigate things not just provide them the software solution.
We actually take some responsibility for the outcomes of what they're trying to accomplish and so the support we're providing around all these regulatory changes I think as an example of that that doesn't mean that other competitors aren't doing similar things, but as an example, some competitors would be more along the lines of providing tools online and directing.
Clients to third parties or directing them to resources, where they could get help versus in our case, we actually take the work on we help our clients get to where they need to get in order to get their retention credit tax credits in order to get their appeal protection loan.
In order to calculate you know in a few weeks and if we're at least in a couple of months people are going to be needing help with calculating how to get forgiveness on those loans I mean, there. This is a complicated environment by the way employment in general is always complicated.
This is a very complicated environment and having great tools and technology is incredibly important and we're totally committed to that but I think it's undeniable that you also need extra help in these situations to help with questions and to help you navigate through the all the various regulatory hurdles as an example.
Some of the rent legislation that was passed in the U.S.
You have to really understand the interplay like as an example.
You can't take advantage of the deferral sources security taxes, and the payroll protection loans, but if you you can take advantage of the social scurry deferrals up until you can so you can get a loan but then once its forgiven you can no longer differ your social security taxes. I mean, those are things that are typically not well understood by our CFO.
Clients.
Base and I think just directing them to web site or to a tool. We don't think is is really the is the best way to to help them.
That's awesome. Thank you.
Our next question comes from the line of Bryan Bergin with Cowen Your line is open.
Hi, Good morning, Thank you I'll be families role, while I wanted to try and outlook here I'm just understanding the material uncertainty can yet can you help us frame.
Some initial fiscal 21 Guy post and trying to think how we should be thinking about next year based on some of the implied Fourq you run rates really any sense of visibility out across the businesses are or maybe thinking across client size would be helpful. Thanks.
First of all thanks for asking about our families I hope yours as well as well so.
Unfortunately, I mean its of very fair question and I can understand why you're looking for any additional color.
Yes, it's as you can imagine we struggled with.
Even providing kind of fourth quarter metrics because.
234 weeks ago.
We had where people had a certain view of how long quote unquote. The issue is going to continue and when things were going to open up again and then it got more negative than now it feels like it's gotten more positive. So I think that it's very difficult for us to go really beyond the fourth quarter in there.
But we have to remain optimistic that things are going to.
According quote improve.
But I think that we all have to take advantage of the time, we have to wait and see how things play out whether it's with the clients where with GDP or with the economy with these government programs. So that we can make more informed I think decisions about.
What 2021, I think might might look out so I am I apologize for not being able to give you any additional color, but I think it would be a mistake to assume that the levels of activity that we've given you in the fourth quarter will continue into 2021, but it's also a mistake to assume that things are gonna go back to normal at the beginning of 2021.
So we're kinda.
Keep an eye on the on the data in the information and do our best as we gather more information to give you a good view of what kind of happened in 21, when we get there.
Yeah, maybe I could just add.
Comments around.
The process and what we're doing in the data that we're looking at.
And while Karla said, we can't really give you the right now where the exact guy.
At least if you.
I understand and know the process, we're going to help a little bit. So look things are as Karla said, it's extremely fluid right now we're spending a lot of time studying and watching developments every single day and kind of looking at you know I think about three steps if you will.
In terms of first understanding whats happening from a pandemic standpoint in the epidemiology, then understanding how that impacts the economy broadly around the world and then understanding how the impact each of the be years. So as we do that obviously, we're looking.
Numerous forecasts that I'm sure you all are looking at the same forecasts that are being put out, but we're really spending a lot of time and parsing through those and kind of eliminating outliers and really utilizing the ones that we feel makes the most sense and then applying that to you know as I said the implications.
For our business units and when you do that as we've said largely PBC is going to be.
Extremely significant driver for us and then certainly the shape of the recovery from a new business bookings standpoint, we'll be critically important so we're watching that as well.
Front regions and stays kind of formulating and attempting the return to work.
Okay I appreciate that I wanted to ask on retention the comments on the assumptions in for Q is the reduction wholly due to business closures Im curious if you're seeing any change in the competitive client loss.
Well I mean, I think based on the comments, we gave you about the third quarter in that year to date and they were doing pretty well competitively because our I think our retention was up Ah I mean, we don't talk about quarterly retention, but why not like everything everything is out the window and just kind of environment, but I think we were over 50 basis points improvement in the third quarter and through the year to date.
I think we were well ahead of both the guidance we had provided in our own internal expectations. So it's pretty clear that we were doing something right competitively. Our NPS scores are at record levels across most of our businesses. So.
Again that the problem is isn't at the time that the bragging talk about the third quarter, but we had we really had incredible momentum coming in the third quarter on a number of fronts, but that's a that's that and we're onto a no figuring out how to deal with a with a future challenges but.
I have no concerns about.
The solidity of our business on every front coming into the into the third quarter.
Thank you be well.
Our next question comes from the line of Kartik Mehta with most close research your line is open.
Hi, good morning.
So I was wondering based on the data you're seeing and I realize.
This is so early in but what kind of changes do you anticipate for the business permanent changes or at least over the next 12 to 18 months because it does current crisis.
Well over the next 12 to 18 months is probably the right focus.
Because.
I think it'd be naive to think there aren't some things are going to change permanently, but I'm not sure I have that that kind of crystal ball to be precise about that for the next 12 to 18 months.
Because of the the focus we have on our associates.
It's unlikely that we will be going back to business as usual here in the next few months now the good news is we've we've adapted to the current work environment. So.
But you know I kinda concrete change in terms of the next 12 to 18 months as we we don't anticipate having 100% of our workforce stock working in these when is one locations and some of these other.
Places, where we have large populations of associates and so that's a that's a change that we have to make sure that we stay on top of.
We support our people and lead them remotely and virtually and help them kind of navigate through what's a very different way.
Working now obviously, we plan on I Society kind of normalizes, we plan on coming along for the ride with without so we do our formulating plans.
As we speak very preliminary plans around how do we slowly get back into some are offices with limited number of personnel.
That's a a a change that we definitely going to have to continue to live with for the next 12 to 18 months.
That means is that impacts our sales force and so the question is if the demand equation improves significantly and our sales force is still.
Working remotely how can we make sure that they have the right tools in the right processes to continue.
To take advantage of of the demand that's that's out there because we don't anticipate having large numbers.
Sales people back in our in our offices, our salespeople by definition.
Many of them are inside sales, but many of them are out in face to face transactions and that's not something that's going to normalize. The next 12 to 18 months Sadly I'm sad to report that over the number of associates that we had impacted by Kuvin 19, we were disproportionately impacted in our in our Salesforce. So as we go back to normalization, we're gonna be.
Exceptionally careful about protecting ourselves force as well.
And then just finally, because what do you think the recovery will look like no. We've heard so much of B or you Oh I'm just interested in your perspective of what you're anticipating from a recovery.
Well I think the again, we're looking at we get information from all of the usual places like Morgan Stanley is obviously, our our bank. So theyve been very hopeful and giving us their information, but we have access to information from a number of other sources.
I don't want to senior the names so I don't hurt anybodys feelings, but all the usual banks, we get the information from them. We have information from Moodys by the way. We also worked with the fed we work with Treasury. We have a lot of sources of information to give us some sense of kind of where things are headed.
The challenges that I don't think anyone has is really a well not I don't think I know that no. One has ever been through this so there really aren't any great models other than using inputs like PMI is war consumer confidence and other metrics that tend to be many of the metrics that people use.
And these models are lagging indicators right and you have regression that gives you some sense of where the economy is headed but you know as I've seen myself in the last four to five weeks you have to take any forecast for the large grain of salt.
The best approach. We think you can have right now is to remain flexible and agile about how you're planning what you're planning for.
If I were if we had to make a about today.
We would say that you know, it's not going to be a V shaped.
Recovery.
And probably not going to be a you or an l., but it's going to be some other kind of shape, where we obviously already had the precipitous decline.
We're already seeing some signs of some stabilization. So we have metrics that we track like in our HR systems of our clients for example, new job postings or number of screenings that are done like background checks and some of those metrics have actually begun to stabilize so I think we.
We've had the abrupt.
Drop now the question is the the recovery it feels like dot recovery will be.
Not a v., but not an l. and so there's been a Vienna now is the checkmark like I think some people are out there.
They are quoting by the way, we haven't economist on our board and he referred to as a night because the Nike swish, but that's probably a copyright we're trademark violation. So I won't use the night, the Nike Swish, but you get the idea of RUPS drop and hopefully a climbed back up over some period of time hopefully that climate is over the course of.
Three to six months and not over the course of 12 18 months.
Thank you very much.
Next question comes from the line of David Grossman with Stifel. Your line is open.
Thank you.
Good morning, Carlos I think you've addressed this and in a couple of previous questions but.
Based on how this may play out.
You know coming out of the crisis. When you talk just a moment ago about some possible structural changes at least.
And the intermediate term being work from home or virtual sales.
How do you feel you know the we're positioned you know coming out of that versus where you were going into it and and how do you view your ability is related to leverage that's your advantage as it is that structural or is it based on execution I'm sure. It's a combination of both but if you could just give us.
A little more insight into how you're feeling about what you can do with this crisis.
To really enhance your position both competitively and operationally.
Well look I think that some of this is philosophical I think that I like everyone else. When we were entering this phase I was scared like everyone else is not just personally for myself and.
And my family, but also for the company and all of our associates on our clients to depend on us and what do you see the reaction and the ability of the organization to to kind of get through it and not just get through it but actually deliver higher level of service and help with very complicated.
Questions in a very complicated situation, which was changing in some cases on daily basis with the regulatory.
Landscape I think it tells you something about the strength.
Of the of the culture and of the company and so that gives me again. This is all intellectual philosophical but I think gives me great hope about how we emerged from this competitively.
We already had incredibly strong momentum going in to the third quarter. As you saw from retention. We think we have a strong product lineup that was beginning to get traction you know one of the things we didn't talk about when.
Someone asked the question about our competitive situation like we had really good growth in client counts.
Particularly in workforce now and specifically in our Midmarket business. So you know the combination of positive momentum and coming into this and then the reaction and the strength of the organization through this gives me great optimism and hope that we're going to come out of the stronger than any of our competitors.
Yes, so to answer that.
Yeah, I would just add to that in addition to the great service that we've been able to provide chart finds throughout this which.
The radically ideally should should sustain or drive even better retention going forward.
I would say the strength of our balance sheet and the ability to continue to invest.
A wind with what we laid out.
Our innovation day, so investing in our strategic products and workforce now in Ron in our next Gen product our ability to continue to do that throughout this should position us well.
Okay. That's it for me, thanks, very much and people.
Thank you.
Our next question comes from the line of Stephen walled with Morgan Stanley. Your line is open.
Yeah. Good morning, I Hope you guys are safe and well.
Thanks for the shot up from Morgan Stanley.
So.
Maybe just starting off on on some of the puts and takes up the segments.
<unk> 0.2, Worksite employee growth still PEO versus.
Lower pays per control and an employer services, just maybe run us through again, because it's come up a lot in recent conversations around why the PM, we should still be thought of as implement wise, a little bit more defensive and how you guys see that tracking this downturn versus prior ones.
I think the number one reason is really just structural in the sense that when you look at overall ATP, we have clients all the way from single employee all the way to a very large national accounts.
And so as we've said this we said this obviously over multiple decades, our downmarket business tends to be the most sensitive to out of business, but also to decreases in pays per control and so as we track. This pays per control data I think we've probably giving you some of the color that the pays per control numbers are down more in the down Mark.
But then they are in the mid and the up market. The PEO at least in our case the PEO tends to the average club size client just from practical standpoint is 45.
And we tend we try to stay away from clients that are under 10 employees.
We have some clients obviously that are between five and 10 employees, but in general the sweet spot of the of the PEO is kind of around 45, that's the the average and so it's just the nature of the structural difference of that business versus the others that.
The pays per control is not going to decline as much as the overall.
Average if you will where you have some of that average being in the small business and the small business market and then the second.
More anecdotal or comment would be the PEO clients are PEO clients not every peos clients are PEO clients tend to provide health benefits a retirement plan they tend to be kind of higher average wages in the average U.S. worker.
And that makes sense, because you're paying for the for the met for the for the hope that you get with maximizing in managing that salesforce with tends to be attractive to a higher average wage hike employer that is a very concerned with attracting the right people in retaining the right people. So that also tends to.
To lead you in the direction of.
Of clients that are a little bit larger or maybe a little bit more financially capable of may have paying those fees et cetera, so that but that's not not sure that we can have a scientific way of proving that one but for sure. The average size client of appeal of our PEO is larger than in our SBS business and hence the pays per control drop would lock.
Basically be smaller.
Got it that's it's very helpful color in terms of just a quick follow up on capital management dividend I know.
Both of you mentioned the strength of the balance sheet continued ongoing investment in cost cutting, but how we should think about things like the dividend.
Safety there are your willingness to raise that given the current environment or buybacks another funding.
Acquisition to lower valuations how are you guys thinking about that from a financial but also a strategic and sort of like a sensitivity to the time this type of prospective.
So I'm I'm glad you asked that question as I happened to talk to our chairman yesterday before this call because I figured somebody might ask that question.
It's a tricky question because as you know it's up to the board to decide on our on our dividends, but I can tell you. This that we had a board meeting on April the Ace and the board approved an increase and a payment of our dividend and they wouldn't have done that if they had concerns in the short or medium term.
About our capital position or about our dividends. So again without speaking for the board I think we have a very long 45 year track record of paying an increasing our dividend we have a strong balance sheet. We are a capital light business with strong cash generation.
Our payout ratio is 55% to 60%, which I think gives us.
Some room.
To to be able to continue even with increases.
Without running into any major capital constraints or we're going to restrictions on our testing and so I would feel.
Optimistic that our board would be supportive of continuing the long track record. The P. has of 45 years as it stands and I'll, let Kathleen maybe like a a common or two about that as well.
Yeah.
Thank you covered it really well Carla I would just say.
The port of enabling the board to make dividend decisions, we in a normal basis do ongoing analysis and stress testing and have.
Been continuing to do that through.
Through this environment. So we've been doing looking really closely at that stress testing so I.
I really don't have anything to add Carlos.
Carlos commented.
Great. Thank you.
We have tougher one more question that's from the line of Lisa Ellis with Moffettnathanson. Your line is open.
Thank you. Thank you for squeezing me in great to hear everybody's voices glad to hear your well.
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You just a little bit of a follow up on the PEO question I mean as you just highlighted the worksite employees and people are a bit more resilient because at the larger size of company, but the revenue guidance. There is down more significantly in Q4, maybe like a tactical question just around what drives that into short term, but maybe a bit.
Broader question.
Carlos for you coming from originally the PEO business, how should we think about how the PEO will act through a recession period do you expect increased demand for the CEO or some clients dropping out of the PEO. How how do you think about that dynamic. Thank you great question I'll, let Danny put the calculator to because I'm sure you're right about the dry.
Being greater there's no intention no signaling or anything intended there may be rounding or the math or something but theres no. There's no magic formula there.
We're trying to send some kinda message.
I mean, we think the PEO businesses is solid and strong and I think tends to weather.
Recessions better again every time you have a recession, it's a different kind of recession. So we had a financial crisis last time. This time, it's a health crisis, so I'm always cautious them of making kind of bold definitive statements, but historically, we've always worried about the PEO going in.
Into a recession or into a crisis being challenged because.
It does tend to be a a kind of a more expensive. If you will solution. If you will but it also provides an enormously higher amount of value right and during these types of situations like for example, our Peel handles. The question is not just of our clients but of the employees of our clients that's not what we Joe.
When we do for our our typical payroll.
That helps our clients a lot and we'll leave them of a big of a big burden and provides those employees a lot of a lot of conferences lot of.
Real positives and good reason.
Hi people want to stay on a p. or why or why they want to be on it you know even in a recessionary environment. So I would say that.
Yes.
In the prior recessions appeal was not immune just like it's not this time from pays per control decreases and from some short term disruption you bookings, but we've been impressed I've been through now I guess my third recession at ATP and at least the prior to the PEO perform.
And on a relative basis.
As well if not better than the rest of our of our business and we would expect no different on a go forward on a go forward basis at least this the Danny just add.
Because it's fairly and that leads which I love of course, but in addition to the impact from Worksite employees in the PEO, we charge as a percent of payroll and so wages themselves to the extent, we have some workers working fewer hours within the PEO base that could have an impact and then even further in the weeds is you can have a slight mix in.
Pack.
With respect to workers comp.
To the extent that certain industries, you have greater impact from pays per control and those had higher workers comp rate. So these are very subtle impacts the together they kind of inform that okay.
Wonderful. Thank you and then maybe my my last one and Carlos can you want to end on just as you're watching and maybe help us a little bit what are the top like literally one or two things that you are watching that you think are really going to impact as you're looking at your client base. The shape of the you know the solutia the checkmark or.
Over these next couple of months.
I think the of the first one that we're keeping our eye on is really these these kind of leading.
Indicators, if you will so this would be job postings and background checks and so that I think is those are I think the job postings is obvious in the sense that people are really going to post new positions. If they think that things are not going to at some point improve so.
That's a sign that people are doing the same thing were doing which is we're conservative and we're cautious but we have to be prepared for every eventuality, including the optimistic one and so.
This increase in postings and job postings to me means that people are starting to think of well if in 234 weeks.
You know this state or this industry has some kind of opening I need to make sure that I have the people available to handle that dot work. Because these are business owners that obviously have to run their businesses and then secondly, when they actually do that then they actually have to put that person through the new hiring process, which is the screening and selections we're going to keep an eye on those two.
On those two figures then closely behind that I think is a we have a very large workforce management business or what some people would call time and attendance and so that is also data that is very hopeful in terms of seeing number of hours worked.
Doesn't always help you a lot within exempt workforce, but for people who are paid hourly. It's a very good indicator that kind of cuts through the noise of furloughs and lay offs and so forth and so on and just kind of gives you. Some sense of quote unquote hours worked and whether that is increasing or not increasing so that that should show a an up.
Turn before we show, we see upturns and other things because.
People will take the existing people they have now and just have them work longer hours, rather than adding additional people. So. The addition of of people will probably be the final I think sign of a of recovery, but we have a number of other indicators that we can look at that gives us an earlier view of where we're headed.
Wonderful thanks, guys.
This concludes our question and answer pushing for today I'm pleased to handle program over the call those what it means for closing remarks.
So it's hard to kind of find the words to [laughter] to close the call. It and describe the situation that that were in but I mean are trying to end on an optimistic note here I've been now with the P. a 20 years.
And I've been through I just mentioned.
Two recessions. It is my third been through why two K., which most people in the call don't even remember Danny certainly doesn't remember why two games to young through 911.
We've been through wars, we've been through multiple changes in technology, Nobody was even talking about SAS when I joined.
ATP and every time, we had a challenge it looked like that was a challenge that we couldn't overcome.
But every time ATP overcame that challenge and it's no different I think for the rest of in this case humanity. Because this is affecting not just the U.S., but it's affecting the entire world.
People in ATP find a way to evolve and to adapt so I have to be optimistic we have a propensity to overcome if not we wouldn't be here talking to you today, whether its buses human beings.
For us as a as a company by the way as I've said multiple times and other calls were 70 years old and I think as a company.
And I think that tells you something we're very a part of a very long history of overcoming challenges and this one is going to be no different and I'll leave you with something that I shared with our associates at the beginning of the of the crisis, which is something that our founder Henry town I think established as a culture for that for the company that I think.
Is appropriate and he always told us and he told me because I knew him personally.
He told.
Me always take care of your associates and they will take care your clients.
And everything else will take care of itself.
So I really appreciate the support of all of you for ATP. Thank you for a calling in and asking your questions and my best wishes to all of you for health and safety for you and your families. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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