Ceridian HCM Holding Inc

NYSE:DAY

Earnings Call Transcript 2020-Q1

[Operator]

Greetings, and welcome to the Ceridian First Quarter 2020 Earnings Conference Call. As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Jeremy Johnson, Vice President of Finance and Investor Relations at Ceridian. Thank you, sir. Please begin.

[Jeremy Johnson, VP, Finance & IR]

Thank you, and good evening. On the call today, we have Ceridian's CEO, David Ossip; and our CFO, Arthur Gitajn. Today, we are going to modify the format of our call from what we have previously done. As you likely saw, we posted a stockholder letter, along with our press release and 10-Q. The stockholder letter has all of the key highlights we would have previously provided in our prepared remarks on our quarterly earnings call. We will not read the stockholder letter on this call. Instead, after some brief remarks from David, we plan to move directly to Q&A.

Before we begin, however, allow me to provide a disclaimer regarding forward-looking statements. This call may include forward-looking statements about our current and future outlook, guidance, plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments. These statements are based on management's reasonable assumptions and beliefs in light of information currently available to us. Listeners are cautioned not to place undue reliance on such statements.

Each forward-looking statement is subject to risks and uncertainty that could cause actual results to differ materially from those set forth in such statements. We refer you to our previous filings with the SEC for information regarding the significant assumptions underlying forward-looking statements and certain risks and other factors that could affect our future performance and ability to deliver on these statements. We undertake no obligation to update or to revise any forward-looking statements made on this call, except as may be required by law.

The first quarter stockholder letter, earnings release and quarterly report on Form 10-Q have been furnished or filed with the SEC and will be available in the SEC EDGAR database in the U.S. and the SEDAR database in Canada as well as on the Ceridian Investor Relations website at investors.ceridian.com.

And with that, I'll turn over the call to David.

[David Ossip, Chairman & CEO]

Thanks, Jeremy. Good evening, everyone, and thank you for joining our earnings call. I hope that everyone is staying healthy and safe during this time of uncertainty. Before we go to Q&A, I want to spend a few minutes on some important points from our stockholder letter. First, we had a strong quarter. Dayforce revenue, excluding float and on a constant currency basis, grew by 31.9% as compared to 25.3% in the same period last year. The Cloud recurring services gross margin increased by 2.5% to 72.6% and in Cloud professional services and other, gross margin improved by 10.8% to negative 3.4%. Adjusted EBITDA margin increased by 40 basis points year-over-year to 24.8%.

Second, Dayforce continues to see strong demand. We have moved to virtual summits and more digital marketing activities, and pipeline has grown. Based on what we've seen, our virtual marketing methods have expanded our ability to reach potential customers.

Third, we are continuing to sell Dayforce in this economic environment. In our stockholder letter, we highlighted a number of wins during the third quarter as well as the momentum we continue to see in April. In the first 4 months of 2020, we had sales across the globe, including in North America, U.K., Australia, Germany and Mauritius.

Fourth, The demand for Dayforce Wallet is meeting our expectations. We launched dayforcewallet.com, and the launch comes at a time when we believe workers need it most. We have a broad spectrum of customers across industries looking to implement Dayforce Wallet to support their work during this unprecedented time. On April 9, we activated our first customer, Danone. We will provide updates on Dayforce Wallet usage in future quarters, and we continue to expect to have more than 100 organizations live by the end of the year.

Finally, we announced an agreement to acquire Excelity. Building on our recent investments in Australia and New Zealand, we believe that this acquisition, which is expected to close in the second quarter, will position Ceridian as a leading HCM provider in the Asia Pacific region. Excelity works with more than 300 clients, which is more than 1.2 million payslips and operates its major payroll platform in 13 countries, including India, China, Singapore, Hong Kong, Japan, Indonesia, South Korea, Malaysia, the Philippines, Taiwan, Thailand, Australia and New Zealand. This acquisition provides us an opportunity to land and expand in the Asia Pacific region, accelerating market presence and pave the way to extend the Dayforce native payroll platform to the Asia Pacific region.

In addition to the Excelity acquisition, we began development of major payroll engines with Germany, Mexico and Mauritius, which are expected to be completed in the next 18 months.

I would now like to hand it back to the operator to open the call for questions.

[Operator]

[Operator Instructions]. The first question comes from the line of Daniel Jester with Citi.

[Daniel Jester, Citigroup]

Great. Hope everyone is safe and healthy. So on Dayforce specifically, can you just comment a little bit more about sort of the pipeline building efforts? I know in your shareholder letter, you talked a little bit about what you're seeing in April, but maybe can you dive in a little bit more and talk about what you and your customers are talking about and how that pipeline building is going?

[David Ossip, Chairman & CEO]

So thanks for the -- Daniel, thanks for the question. Look, in Q1, we saw, obviously, very strong Dayforce revenue growth. As mentioned, Dayforce recurring grew by 30.4% on a constant currency ex-float basis. The Dayforce total revenue grew by 31.9%, ex-float and on a constant currency basis.

In the first quarter, we continued to see sales towards the end of March. And as mentioned, and as outlined in the stockholder letter, we will continue to see sales in the month of April. We're seeing sales really across the industry, obviously, a little bit more impacted in the hospitality and the retail area. But other than that, it appears that there is still strong demand for human capital management solutions.

[Daniel Jester, Citigroup]

Great. And then on the acquisition that you announced today, those are a lot of countries. Beyond sort of the few countries that you talked about building native payroll for, how do you see this transition happening? You've got both the acquisition you made last year and this new acquisition. Can you just frame how we should be thinking about how this could -- the moving pieces over the next year or two for all these different countries you're moving into?

[David Ossip, Chairman & CEO]

Sure. So Daniel, we've spoken a lot about this in the past. Our goal is to be in more than 20 countries with native payroll engines within the next few years. And so this acquisition, obviously, is very consistent with that. Excelity positions us as a leading provider in the APJ region almost immediately. It is also consistent with what we've spoken about from an M&A strategy, which is effectively to seek out players in particular regions to require effectively around a 2 to 3x multiple of revenue and, over a period of time, leverage their know-how and their market presence to accelerate the launch of native Dayforce into those particular regions. So on a several year basis, you'll see the expansion of Dayforce into those regions, obviously, with the full HCM suite capacity.

[Operator]

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

[Mark Marcon, Robert W. Baird & Co.]

Congratulations. Hope everyone's safe. With regards to -- it's obviously early in April, but can you talk a little bit about what you're seeing in your client base, the existing client base, just in terms of the number of employees that they're laying off or furloughing, and how, from a temporary perspective, we should think about the impact of that both in terms of, like, is there a difference between a furlough versus a layoff? And how we should think about base subscription fees versus a direct PEPM relationship?

[David Ossip, Chairman & CEO]

Thanks a lot, Mark. So I'm going to break it up into Dayforce and into Powerpay separately. Just as a reminder, Powerpay accounts for a little bit less than 10% of total revenue.

On the Dayforce side, we get paid for both active and inactive employees. Furloughed employees count as inactive employees. And so we still do receive the recurring revenue on furloughed employees. In the stockholder letter, we provided quite a lot of detail. We explained that up to April 15, the employees part of Dayforce systems had increased 17% year-over-year, but it was 5% less than the amount that we had expected at the beginning of the year. When I look at the employee count, and we monitor these obviously on a daily basis, it appears that beyond the Dayforce side and on the Powerpay side, it looks like the layoffs or the furloughing of employees has really flattened out, and we've seen a little bit of increase over the last week on both of the actual products. So on the Dayforce side, we're impacted only when employees get terminated, not when they get furloughed.

On the Powerpay side, slightly different. We get paid on a per paycheck basis. About 40% of the Powerpay revenue is recurring. The other 60% is early monthly fees that is not dependent on headcount. Up until April 15, we've seen a 13% decline in terms of headcount. So we're more impacted on Powerpay. But again, Powerpay accounts for just less than 10% of the revenue.

[Mark Marcon, Robert W. Baird & Co.]

That's great. And then with regards to just the wallet, it sounds like that's going really well. Can you elaborate a little bit more in terms of the latest thoughts in terms of how the business model's going to work from a revenue recognition perspective and what take-up's going to be like within the clients and what you've seen internally with your own workforce?

[David Ossip, Chairman & CEO]

So again, very early days, given that we just supplied the first customer demand on April 9. We spent effectively the first quarter getting ready for launch, and that's not only the product and all of the marketing assets and implementation assets as well. We have a backlog of clients that are waiting now to go live with wallet. We waited really until the 1st of April because of some quarter end processes we wanted to get through. And then there was a slight delay in getting the apps published on the Google App Store and on the Apple App Store, but the application can now be downloaded in the U.S. on both of those.

The reaction from our own employees, who've been using the system, is very, very positive. It's a very clean experience in terms of activating the wallet. Very similar to the Dayforce app. When you download the Dayforce Wallet, it's almost like if you have Facebook and you load Instagram, it shares the same type of authentication method and such. So it's really very easy to use. The -- we do personalization of the actual plastic, which comes and looks really, really sharp. And then we also have the touch-less capability through either the phone or if you have a Apple Watch and such. The reactions have been very, very positive.

[Operator]

The next question comes from the line of Raimo Lenschow with Barclays.

[Raimo Lenschow, Barclays Bank]

I hope you guys stay safe. Can you just -- the one thing that was a focus for you guys in recent quarters was to kind of highlight the strengths you have with continuous payroll around the integration or, like, time and attendance and payroll. And there you had some very interesting wins in the U.K., for example, with the coffee chain, et cetera, like the rural industries that kind of hourly workers. And so now that moves off the screens that came up, like, what's your footprint there in terms of your pipeline for the current customers? Does that kind of create a bigger impact for you compared to other HR players? Or is it that just like a growth opportunity, and the customers that you guys have is much more broad-based? Maybe just give us some color on that because that would help us a lot.

[David Ossip, Chairman & CEO]

I'm sorry, Raimo. Are you asking what percentage of employees we have in a certain industry? Or what exactly are you asking?

[Raimo Lenschow, Barclays Bank]

Yes, yes. It's for -- if you look at -- yes. Wherever you're in the installed base. And if you look at the pipeline, like, was that kind of -- because you've talked a lot about it, but it doesn't mean that they all have to be in that page. Just give a little bit more color there.

[David Ossip, Chairman & CEO]

I'm still -- I'm not following. So what exactly is the question?

[Raimo Lenschow, Barclays Bank]

Yes. The breakdown of the customer base, as far as you can give it to us in the installed base, but also in the pipeline.

[David Ossip, Chairman & CEO]

So the pipeline, obviously, has shifted. So it's not going to be reflective of historical sales. We obviously are spending much more effort now in developing pipeline in what we term surge industries. And we're still seeing growth in many of those industries. When it comes to the actual historical, Jeremy can correct me, but I believe probably about 14%. Is that correct, Jeremy? Of the employee base would be in kind of, I'll call it, retail or hospitality that will be impacted by COVID. We do have a larger footprint in retail, but those would be in groceries and such, some fast foods that haven't already been impacted. Even across the retail group, we haven't seen massive layoffs. We've seen furloughed employees. And as you know, we do get paid for those furloughed employees.

[Raimo Lenschow, Barclays Bank]

Okay, that's really helpful. Okay, that's really helpful. And then maybe a follow-up like on float. If you think about it like, obviously, the fab rate came down. Like can you remind us of how your investment on the float side is structured at the moment, and how that might change with the current kind of rate environment?

[David Ossip, Chairman & CEO]

Sure. The way we do the float is we effectively break it up between a core portfolio and a liquidity portfolio. In the liquidity portfolio, we basically keep the money in overnight. And in the core portfolio, we obviously use a laddering strategy. So you're typically an average life of about 2.5 to 3 years. The -- just the impact of the change in the Fed rate, as you know, has gone down by about 150 basis points, about 25 basis points. On a full year basis, that's an $18 million headwind for us. We are -- obviously, we can't do much changes between how we do the investments as the trust funds are AAA-rated. That's the point system that we have to use investment side. So that effectively determines what percent your governments and what types of corps we're allowed to invest in.

[Operator]

The next question comes from the line of Alex Zukin with RBC.

[Robert Simmons, RBC Capital Markets]

This is Robert Simmons on for Alex. Can you give us some color around how your bookings trended from mid-March through now either compared to planned or on a year-over-year basis?

[David Ossip, Chairman & CEO]

So, Robert, we actually don't provide details actually to quarterly sales or to pipeline sales. Obviously, there has been some impact. But as I mentioned, we continue to see momentum.

[Robert Simmons, RBC Capital Markets]

Got it. And then can you talk about what you're seeing in the competitive landscape? Are you seeing anything unusual to call out from competitors being more aggressive on price or considering how they do the market, anything like that?

[David Ossip, Chairman & CEO]

We haven't seen any changes.

[Operator]

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

[Samad Samana, Jefferies]

I hope everybody is doing well. David, maybe first question. Just in the shareholder letter, I saw the comment about rolling in more minimums into the contracts. Could you maybe remind us what the current minimum threshold is on average for the customer base and how that currently works? And I have one follow-up.

[David Ossip, Chairman & CEO]

Sure. On current contracts, there is no minimum. We charge on the number of active and inactive employees typically on the 15th of the month. And we charge 1 month in advance. So we are making some changes to contracting going forward to provide a minimum, which is obviously a percentage of the employees at time of contracting.

[Samad Samana, Jefferies]

Great. Very helpful. And then maybe just on the Bureau business. I know there are plans to maybe accelerate some of the -- the end of lifing. Obviously, payroll departments are dealing with a lot of challenges right now. I'm curious if you're seeing customers accelerate the shift off of Bureau and maybe increasingly going to Dayforce? Or what are your plans on the Bureau side? And how is that benefiting or impacting Dayforce?

[David Ossip, Chairman & CEO]

Again, the strategy on Bureau hasn't changed. As you know, we aggressively are now trying to end of life the Bureau products with the exception of the tax. Tax is probably about a $50 million business of the remaining Bureau. Every quarter, we move around about $5 million from Bureau to Dayforce, and then there's probably an equal amount that just goes away as we don't really have a home for it in the Dayforce type of world. There hasn't been any change to each of the pace of approaching customers or the pace of us end of lifing. but as we mentioned prior, by the end of the year, we already expect the aggregate business to be here, and Jeremy can kind of provide updates, by probably under $100 million.

[Jeremy Johnson, VP, Finance & IR]

That's exactly right. And $5.8 million was the Bureau impact this month, which is right in line with that kind of $5 million to $6 million that we've been talking about every quarter.

[Samad Samana, Jefferies]

Okay, great. And we appreciate the 2Q guidance and how resilient the business is.

[Operator]

The next question comes from the line of Scott Berg with Needham.

[Joshua Reilly, Needham & Company]

This is Josh on for Scott. Do you anticipate any impact to your partner strategy upmarket from COVID-19 given that was just getting launched for new business in 2021? Or do these relationships remain on track?

[David Ossip, Chairman & CEO]

If anything, there's an opportunity to lean in and strengthen these types of relationships. So in one way, it allows us to basically, in professional services, rely much more on taxing through the use of a larger hire size as opposed to hiring directly professional services people.

[Joshua Reilly, Needham & Company]

Okay. Great. And then just a follow-up. Do you expect any delayed impact to business trends in Canada, given that they implemented social distancing after the United States, which has implications for their curve of infection rate?

[David Ossip, Chairman & CEO]

I honestly don't see much of a difference between the U.S. and Canada. I'm not sure who actually did social distancing first. I can't remember it. As an organization, we probably did a few weeks ahead of both the U.S. and Canada. What I'll point out again is that our business is largely non-touch. From a sales perspective, from a marketing perspective, implementation, customer support, all of that, even in times of non-COVID, is usually done on a non-ouch basis. So it doesn't really make much of a difference.

As I mentioned beforehand, we monitor the employee headcount at all of our customers. And when I look at both Canada and the U.S., we've seen a slight increase in employees and customers over the last week. So nothing really to get overly excited about, but there seems to be evidence that the impact of COVID has kind of bottomed out.

[Operator]

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

[Bryan Bergin, Cowen and Company]

Hope you're all doing well. I wanted to ask on implementations. Can you give us a sense of the mix of customers that might be delaying implementations here? And then any difference in the behavior of the clients that have already started the implementations as far as pauses or whether most are still moving forward?

[David Ossip, Chairman & CEO]

Look, it's a mix. If I look at the impact of implementations in Q1, remember, your credit risk temporarily during the period that we typically would take live all of the customers from Q1. The overall impact of COVID in Q1 was probably about $1 million to $2 million in terms of the amount of recurring revenue we would have activated in that particular quarter. So there was some impact, but it definitely wasn't a material amount. We did also see some of the kickoffs of new projects get pushed a little bit, but we're confident that they'll get restarted relatively soon if they haven't been restarted already.

In terms of the impact from the industry, obviously, it's probably in line with what you would expect. If it was a specialty retail -- retailer, it probably was more impacted than, say, if it was an extended care living facility.

[Bryan Bergin, Cowen and Company]

Okay. And then as far as the demand environment, can you comment on just buying behavior you might be seeing between -- for Dayforce between major markets and enterprise customers? And any modules or functionalities within the existing base that are seeing increasing uptake as a result of this?

[David Ossip, Chairman & CEO]

Yes, yes. So let me just add another step that I actually mentioned before. 88% of Dayforce employees are our customers above 500 employees. The vast majority of Dayforce accounts really would be in major markets or in enterprise. I haven't really seen a material difference between behaviors between major markets and enterprise. Now that may be because we have moved upmarket quite significantly over the last year. And you see that in some of the numbers we spoke about in the stockholder letter. For instance, the incremental revenue per Dayforce account increased 63% to $213,196 from $130,998 a year before. So most of our -- obviously, a larger proportion of our customers will be towards the upper end of major markets in the enterprise side.

[Bryan Bergin, Cowen and Company]

Okay. Anything on the functionality difference?

[David Ossip, Chairman & CEO]

No, not really at all as far as I can see.

[Operator]

The next question comes from the line of Mark Murphy with JPMorgan.

[Matthew Coss, JPMorgan Chase & Co.]

This is Matt Cross on behalf of Mark Murphy. David, you said that furloughing of employees seems to have stabilized, and some have even come back. What is your sense for how many furloughed employees might eventually come back -- or excuse me, terminated employees might eventually return to full-time position based on conversations with your customers?

[David Ossip, Chairman & CEO]

Look, Matt, and nice to hear from you. I don't have the answer to that. In terms of furloughed employees, again, we get paid for furloughed employees. What I can say is when I look at furloughed employees versus active employees at our customer base, the percentage of furloughed employees seems to be going down. So there seems to be a movement of our customer base in activating inactive employees. In terms of employees that they have let go, I don't know what -- if they will come back to the levels they had previously, but I think we'll probably get a bit more clarity over the next six months or so.

[Matthew Coss, JPMorgan Chase & Co.]

Okay. And you also mentioned the sales cycle had extended in some cases. And are those cases mostly in the heavily impacted industry? And if the sales cycle are extending, are they sort of -- are some of these deals off the table? Or are they just going to come later? Or what is your sense for how many will ultimately return to you?

[David Ossip, Chairman & CEO]

Sure. So there's a few questions in there. First, we've seen very few projects get canceled. The pattern seems to be that there's a push into later quarters. In terms of industry, I don't know if that was the primary reason for pushes. I believe that in the end of March, it was effectively everyone's getting ready to work from home and some organizations like us has the maturity and has policy to make it very easy, others didn't. And so the same people that would have made decisions on systems like ours were quite busy in helping their employees get productive and get up to speed from working from home. At the moment, I think there's kind of a return to work effort that's going on in a lot of the clients. And so that also created a little bit of distraction. But I think we're actually feeling positive that we'll go back to usual sales cycle, and I'm very encouraged by the kind of the volume and the momentum of sales that we saw even in the first month of this quarter.

[Operator]

The next question comes from the line of Stephanie Price with CIBC.

[Stephanie Price, CIBC Capital Markets]

I was just wondering whether customers have been requesting any new functionality or solution sets in the current environment and whether you're seeing any interest in add-on sales as customer needs change.

[David Ossip, Chairman & CEO]

Great question. So we were quite proactive in this. So very early on in COVID, we made some enhancements to the Dayforce product. The first was we added a COVID tracker, which effectively allows employees to register which offices they've been to. And then if there is a suspected case of COVID or positive case or COVID, our system can generate a list of people who may have come into contact with the person. And we also enhanced the messaging engine to make it easy to be broadcast via SMS or personal e-mail, so that people could get notified in a very efficient way.

The second thing we did is that we loaded into learning management system a lot of information around COVID. So how do you work from home? How do you manage employees at home? How do you stay safe? How do you wash your hands? And other pieces of really important information. And we added that to all Dayforce instances whether people had the learning management system or not. And we also launched or we activated a public version of Dayforce Learning. That's available for any organization to use. They can just simply go on, register, load their employees and such, and that provides all the COVID pieces. In the near term, you'll see us launch a lot of kind of features and communications about return to work and about helping companies prepare to get people back into the offices and as such.

In terms of add-on sales, as you know, add-on sales has always been 20% of what we sell. Obviously, there is a strong demand for learning management. There's obviously -- the other pieces of the application do apply quite nicely in this environment.

[Stephanie Price, CIBC Capital Markets]

Great. And then just one more for me on the M&A outlook. So congrats on the Excelity acquisition. Just wondering if you've seen -- what you're seeing in the M&A market right now, if you've seen any impact of valuations or the number of prospects that are out there.

[David Ossip, Chairman & CEO]

We're quite laser-focused when we try to do these things. We have started to work on Excelity in 2019. And yes, COVID obviously did have some impact to timing, but I can't say that I've actually seen any real change in M&A activity in the marketplace.

[Operator]

The next question comes from the line of Brad Zelnick with Crédit Suisse.

[Yao Chew, Crédit Suisse]

This is Yao Chew on for Brad Zelnick. I hope everyone is staying safe. Just wanted to dive a bit more into the go-to-market strategy and sort of a 2-part question within this. I'm just glad that I'm seeing you managed to adapt to the virtual go-to-market motion with the seminars and summits. But there's always a lot of steps between the top of funnel between website traffic and qualified leads and final implementation. It's new to everyone involved here. I guess, can you point out where the bottlenecks are, if there are any major ones to call out, and how receptive customers are to this approach? And on that, does this change any longer-term views on traditional go-to-market given the new resources and ROI or effectiveness that you may be seeing here?

[David Ossip, Chairman & CEO]

Yes. Look, as you can probably gather from the stockholder letter or even from today's talk, we've been chosen to lean in into the current environment to strengthen our organization. And in terms of marketing, we moved very quickly to more of a digital marketing focus. And we started off with our first virtual summit, which effectively had about 2, 3x the attendance that we typically would see on physical. And the reactions we got from it was very positive. And so from that, we obviously extended that. We did one in Australia. We did one in the U.K. We did another one in North America last week. I believe we have one coming up in the U.K. and Ireland in a couple of weeks. And we seem to be able to come up with a format that's very engaging. This involves customer speakers. We did a very thorough demonstration of the actual product. We answered questions live. We still do now virtual one-on-ones with prospective customers and such, and it seems to be going very nicely.

The second part about the digital marketing is that because we really are experts when it comes to payroll and tax. And as you know, with the various government programs in the U.S. and Canada, there's been a lot of complexity that the customers have tapped to have understood. And we've done a lot of very informative webinars, leveraging outside speakers and our own experts, and I think that has improved the brand of Ceridian. In other words, reinforcing how important it is to be experts and to be able to do the compliance calculations correctly and have the internal compliance teams that really can help customers adjust as they need to, to remain compliant and to help their employees. A lot of the -- I think that the Dayforce Wallet launch comes really at a great time. We're now living in a world where people really would like to do touchless transactions. They really do need to be able to get their earned wages as quickly as possible. And having a mechanism that allows organizations to really get money into the hands of their employees when they need them is obviously a great feature.

[Operator]

[Operator Instructions]. The next question comes from the line of Keith Bachman with BMO.

[Keith Bachman, BMO Capital Markets]

I had two questions. The first is when you mentioned the competitive landscape, I wanted to ask about pricing in really in 2 dimensions. Are you seeing any changes in price discovery when there's new work to be done and/or new bids out there, I meant, and/or are you seeing any customers coming back and asking for price relief, particularly in the most affected industries? So are you seeing any broad primers or any kind of changes in pricing?

[David Ossip, Chairman & CEO]

So I don't think we've seen any changes in pricing. And as we've mentioned, we're making some changes to future contracts in terms of adding minimums to the actual contract on a go-forward basis. In reality, the fact that we get paid for furloughed employees really has provided us with a lot of insulation from COVID. So we are quite fortunate in that regard.

In terms of the customers and impacted industries, we've been quite proactive. We look at our customers as very long-term partnerships, and we want to be able to support them in any way that we obviously can. So in serving industries, we did do a reach out to help them more from a financing perspective during this particular period. That's not really on a rate reduction basis.

[Keith Bachman, BMO Capital Markets]

Okay. So maybe financing helped, okay. The second is on wallet. You did previously comment that you've had a backlog build in a very short period of time. I was just wondering if you could revisit on what you think the metrics might be for the maturing of wallet, when we might see some revenues? Previously you talked about next fiscal year you were going to see kind of the first wallet revenues. But could you just revisit on when investors might see some of the potential of wallet? And could there indeed be some revenues as we get towards the end of this fiscal year?

[David Ossip, Chairman & CEO]

Well, we're doing the rollout of this stuff now. And as much of this stuff is, obviously, are going to be activated in the second half of the year, I think that will be a fair statement. I don't think you'll see a material impact from revenue in 2020. As we get more experience with the product, as we mentioned inside the stockholder letter, we will share that with everyone, so people can start to model. And we'll start to talk more about the business as we have for information about it.

[Operator]

Ladies and gentlemen, there are no further questions at this time. This concludes today's conference call. You may now disconnect. Thank you.

[David Ossip, Chairman & CEO]

Thank you, everyone.