Insperity Inc (NSP) 2015 Q2 法說會逐字稿

Good morning. My name is Kayla and I will be your conference operator today. At this time, I would like to welcome everyone to the Insperity second-quarter 2015 conference call. (Operator Instructions).

At this time, I would like to introduce today's speakers. Joining us are Paul Sarvadi, Chairman of the Board and Chief Executive Officer; Richard Rawson, President; and Douglas Sharp, Senior Vice President of Finance, Chief Financial Officer, and Treasurer.

At this time, I would like to turn the call over to Douglas Sharp. Mr. Sharp, please go ahead, sir.

Thank you. We appreciate you joining us this morning.

Let me begin by outlining our plan for this morning's call. First, I am going to discuss the details of our strong second-quarter financial results. Paul will then comment on our second-quarter achievements and our plans for the remainder of the year. I will return to provide our financial guidance for the third quarter and an update to our full-year 2015 guidance. We will then end the call with a question-and-answer session where Paul, Richard, and I will be available.

Now before we begin, I would like to remind you that Mr. Sarvadi, Mr. Rawson, or myself may make forward-looking statements during today's call, which are subject to risks, uncertainties, and assumptions. In addition, some of our discussion may include non-GAAP financial measures. For a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements and reconciliations of non-GAAP financial measures, please see the Company's public filings included in the Form 8-K filed today, which are available on our website.

Now let me begin today's call by discussing our second-quarter results, which included a continued acceleration in worksite employee growth and the effective management of our direct cost programs and operating costs to generate significant bottom-line growth.

For the second quarter, adjusted EBITDA increased 56% over Q2 of 2014 to $22.6 million. Adjusted earnings per share were $0.42, an increase of 110% over Q2 of the prior year. Revenues increased 11% over Q2 of 2014 to $628 million on a continued acceleration in paid worksite employees. Average paid worksite employees increased 12%, above forecasted levels and coming off of the 9% year-over-year growth generated in the previous quarter.

The recent growth in the number of Business Performance Advisors and improved effectiveness that comes with their increased tenure resulted in Q2 sales coming in at 125% of budget. Client retention was particularly strong, averaging 99.3% for the quarter as our client base continues to value both our high-touch core service model and the service-level options available in our MidMarket client segment.

Net hiring in our client base was also positive and included the typical seasonal hiring associated with summer help.

The increase in adjusted EBITDA of 56% on 9% gross profit growth reflects the effective management of operating expenses and the leverage in the business model with double-digit topline growth. This is demonstrated by a less than 1% increase in adjusted operating costs.

While we continue to grow our sales force leading into this year's fall selling season, other corporate headcount has been held relatively flat since the beginning of the year. Marketing costs declined by 12%, as we picked up savings when shifting some efforts from brand recognition to lead generation. And a continued focus on other costs throughout the Company resulted in a decrease of almost 6% in G&A costs when excluding shareholder advisory costs.

As for our balance sheet and cash flow, we generated approximately $20 million of free cash flow during the quarter, defined as adjusted EBITDA of $23 million less $3 million of capital expenditures. Q2 cash outlays included the repurchase of 532,000 shares of stock at a cost of $28 million and cash dividends totaling $6 million.

During the first half of 2015, we have repurchased 645,000 shares, and while we have recently been more aggressive in our share buybacks, our strong cash flow has resulted in an increase in adjusted working capital of $6 million over December 31, 2014, to $79 million.

So recapping our results for the first half of the year, gross profit has increased 16% on a 10% increase in average paid worksite employees. Effectively managing adjusted operating expenses to less than a 4% increase has generated adjusted EBITDA of $65 million, which is a 67% increase over the first half of 2014, and adjusted earnings per share have totaled $1.28 for the six months, which is 2 times that earned in the 2014 period.

On this positive note, I would like to turn the call over to Paul.

Thank you, Doug, and thanks to all of you for joining the call today.

I would like to highlight several areas of progress that are driving our planned growth acceleration and the operating leverage we're experiencing, both of which are evident from our second-quarter results. Our year-over-year unit growth rate in worksite employees over the last three quarters has increased from 5% in Q4 of last year to 9% in Q1 to 12% this quarter and, as announced today, is forecasted to be in the 13% to 14% range for the next quarter.

We believe the traction and momentum we have built in our sales effort, combined with historically high levels of client retention, have and will continue to drive this growth acceleration.

In Q2, the number of worksite employees sold increased 50% over the same period last year and came in at 125% of our internal sales budget. This was due to the step-up in sales activity, combined with a substantial improvement in sales efficiency.

The core market sales of accounts with fewer than 150 employees increased 32% over last year and came in 113% of budget. This was driven by a 27% improvement in sales efficiency and a 4% increase in trained Business Performance Advisors.

Activity levels have increased substantially over last year, with a 23% increase in discovery calls and a 24% increase in business profiles. Corporate leads from our successful marketing programs increased more than 50% over last year, helping to boost this activity.

Another factor driving activity and sales efficiency gain is our loyalty program, which provides a systematic way to obtain referrals from current clients and worksite employees, leveraging our high satisfaction rates in our client base. Referrals from current clients had the highest closing rates and margins than any other lead source. In Q2, we had a 78% increase in referrals that resulted in discovery calls and more than double the number of business profiles, due to our loyalty program.

These core sales metrics are demonstrating the traction we are gaining from our broad platform of services and our go-to-market cross-selling strategy we call the Insperity Selling System. This momentum is contributing to higher competence and proficiency levels and ultimately lower BPA turnover.

Newer BPAs are able to gain confidence and a feeling of success from the sale of our wide range of business performance solutions as they gain the knowledge and experience to sell our premium Workforce Optimization service. More BPAs are reaching a level of proficiency in a shorter time frame, leading to lower turnover in the sales organization. This metric was significantly lower last year at a rate of approximately 25%, down from our historical average of approximately 35% and is on track to repeat last year's results.

We believe this validates our BPA training and development program and bodes well for the ramp-up in BPAs that is currently underway and outlook for long-term growth.

We ended the quarter with 370 BPAs, on our way to a target of 390 to 400 by year-end. We averaged 305 trained BPAs in the second quarter, so this key metric is soon to increase substantially.

In Q2, the sales of other business performance solutions by BPAs along with Workforce Optimization and on a standalone basis increased 36% over last year. Momentum in the sale of these business performance solutions from our strategic business units through the BPA channel accomplishes several important goals.

These offerings are allowing us to cast a wider net and engage customers that are not quite ready for the full co-employment solution, expanding our client base for future upselling. These solutions sold with Workforce Optimization broaden the conversation, deepen our engagement with the client, and improves retention as part of our customer-for-life strategy.

We believe the strategy to offer a wide array of business performance solutions to enhance the sale of our core Workforce Optimization sales and expand our customer base is working and gaining traction.

In addition, the synergistic effect we have been expecting on our strategic business units is also emerging. The BPA sales force has become a successful channel for our strategic business units, contributing to their growth at a reduced customer acquisition cost. The strategic business unit portfolio grew the topline contribution by 19% year over year in the second quarter and reached an important milestone, contributing at the adjusted EBITDA line for the first time.

Client retention was also a highlight for the quarter, continuing the improvement we demonstrated earlier in the year. Our 99.3% retention rate for the quarter reflects 29% fewer worksite employees terminating from client attrition compared to Q2 of 2014.

This improvement in retention levels has been caused by several initiatives built around our broad product and service platform. Our customer-for-life strategy results in key relationship development and ongoing optimization of product mix, service models, and pricing. Improvements in the account review process and stewardship meetings with senior-level involvement are strengthening client relationships.

These initiatives, along with the close cooperation with our renewal team, has allowed for strategically modified pricing and client selection to improve retention on targeted accounts.

It is particularly noteworthy that these high levels of client engagement and retention have occurred while we're making dramatic improvements in operating efficiency, which leads me to the second topic I'd like to discuss today. Our 2015 plan included an operating cost containment focus, which we have successfully paired with our growth acceleration priority.

Although these priorities are usually at cross purposes, our plan for 2015 was to build off the cost-savings initiatives established in the first half -- in the last half of 2014 and continue this priority as we returned to double-digit unit growth.

Our successful execution against these objectives is clear in the 12% unit growth increase for Q2, juxtaposed against an operating cost reduction of more than 1%, after adjusting for incentive compensation in both periods.

During this period, we have made many systemic improvements to gain efficiency and lower costs without sacrificing the customer experience, which is central to our premium service positioning as a Company.

A shining example of this occurred over the course of the last year, mapping clients to the service model that best meets their need. This has allowed us to serve more worksite employees with fewer personnel, resulting in an increase in our worksite employee to service personnel ratio in Q2 from 2.06% to 2.38% year over year, an efficiency gain of 16%, while improving key customer satisfaction metrics.

Another example of balancing cost management and growth is in the marketing area. This year, we shifted costs from branding, which has been our focus since rebranding the Company, to more direct lead generation with an emphasis on digital marketing. This initiative has contributed to the 50% increase in leads I mentioned earlier and a 46% increase in unique visitors to insperity.com, while reducing advertising costs 16% year to date.

The last area of progress I would like to comment on today involves the results from the work of the Independent Advisory Committee of our Board of Directors, which was formed as a result of a settlement with Starboard Value earlier this year. You may recall Starboard Value became our largest shareholder in the first quarter of 2015 and we promptly worked together to negotiate a settlement to avoid a proxy contest.

This settlement provided for changes to the Insperity Board of Directors, including adding Peter Feld, one of Starboard's managing members, and two additional new Board members designated by Starboard and resignations of two Insperity incumbent directors.

In addition, the agreement called for the formation of an independent advisory committee to review the Company's business and make recommendations to the full Board regarding capital allocation and targeted ranges for adjusted EBITDA margin for 2015 and 2016, while taking into consideration the Company's risk profile and the potential impact of any recommended changes on the Company's business model and strategic plan.

Adjusted EBITDA margin is defined in the agreement with Starboard as adjusted EBITDA divided by the gross profit for such period.

The committee evaluated our historical capital allocation and provided recommendations regarding our ongoing dividend and share buyback program. These recommendations were adopted and resulted in an increase to the quarterly dividend and a significant increase in our share repurchase program beginning in the second quarter and continuing into this quarter.

The committee charter charges the committee to continue to evaluate the capital allocation on an ongoing basis through year-end and into the first quarter of 2016.

The Independent Advisory Committee, chaired by Mr. Feld, has also been working diligently to arrive at a recommendation of adjusted EBITDA margins to provide to the full Board. Since its first meeting on April 1, 2015, the Independent Advisory Committee has held 13 formal meetings and has had numerous other informal status calls. In addition, the IAC retained an outside consultant to review the baseline of 2014 operating costs and identify a range of cost-saving opportunities to consider.

The consultant delivered its final report to the Independent Advisory Committee on July 7, 2015. Throughout this period, management has also worked diligently to assist the Independent Advisory Committee in arriving at adjusted EBITDA margins to recommend to the Board, including responding to voluminous information requests, attending and preparing for IAC meetings as requested, and providing our full support to help the Independent Advisory Committee consulted to timely complete their work.

I am pleased to announce today the Independent Advisory Committee and management were able to make a joint recommendation for adjusted EBITDA margin target, which were promptly adopted by the full Board last Friday. The results of this effort have now been incorporated into our guidance for the balance of the year and will be part of our budgeting process for 2016.

From the baseline of 2014 expenses reviewed by the outside consultant, we have identified cost-savings initiatives totaling approximately $20 million, $12 million of which is incorporated in our 2015 guidance, an additional $8 million which will be incorporated into our 2016 budget. The savings will be generated across a variety of areas of the Company, including the elimination of our corporate aircraft, which were both sold in July; targeted reductions in advertising and marketing; and consolidation within our strategic business units, among others.

It is important to note this process was guided by the framework of our premium service business model, strategy, and risk profile. Our objective is to optimize service cost while continuing to set the highest standard in the industry for service and value to clients.

Many of these initiatives have been a work in progress and the savings have been a part of our success in the first half of this year. Some of these initiatives will take more time to execute and will be part of next year's plan.

The adjusted EBITDA margin range for 2015 implied by our guidance provided today is 25% to 26%, which is a substantial improvement of 400 to 500 basis points over our 2014 adjusted EBITDA margin of 21%. The targets for 2016 will be used in the 2016 budgeting process and discussed as part of our 2016 guidance, which will be provided in our normal course early next year as the specific growth and gross profit picture for next year emerges from our fall selling and retention season ahead.

Although this cost structure review was extensive, it did fit well into our 2015 plan for accelerating growth while carefully managing operating costs. We expect this initiative will feed into our efforts to drive continuous improvement in both topline and bottom-line results going forward.

We're heading into the important fall sales and retention period for Insperity with excellent momentum and clear objectives. Our goal is to repeat the successful fall campaign we had last year, which was the foundation for the rapid growth acceleration we experienced this year.

At this time, I would like to pass the call back to Doug.

Thanks, Paul.

Now before we open up the call for questions, I'd like to provide our financial guidance for the third quarter and an update to our full-year 2015 forecast. With the continued improvement in sales efficiency on a growing number of Business Performance Advisors and a consistent high level of client retention, we expect a continued acceleration in worksite employee growth. We are forecasting a year-over-year increase in average paid worksite employees of 13% to 14% in the third quarter. We expect the full-year average to now be at approximately 12%, which was the high end of our initial 2015 range.

We are now forecasting an increase in adjusted EBITDA of 36% to 39% over 2014 to a range of $114 million to $117 million. This is a significant improvement over our initial 2015 guidance of $101 million to $105 million. 2015 adjusted EPS is projected in a range of $2.20 to $2.29, an increase of 52% to 58% over 2014.

Our guidance takes into account the strong results for the first half of the year, continued acceleration in worksite employee growth, and the effective management of gross profit and operating expenses over the remainder of the year.

The improved worksite employee outlook causes some dampening in the gross profit area from our previous forecast, due to the restart of payroll taxes on new business. Although this issue has historically been a drag on our earnings, we just recently announced the passage of federal legislation that will allow for the avoidance of this payroll tax restart. Specific regulations and reporting requirements under the legislation are targeted to be in effect in 2016, so we are hopeful that this issue will soon be behind us and, in the future, strong midyear worksite employee growth won't result in a drag on gross profit.

Now as for Q3, we are forecasting adjusted EBITDA of $27 million to $29 million, which is a 20% to 28% increase over Q3 of 2014. Q3 adjusted EPS is projected in a range of $0.52 to $0.56 or an increase of 33% to 43% over Q3 of the prior year.

In conclusion, we are very pleased with our results through the first half of 2015 and the momentum in our growth and operations heading into our strong selling season. We look forward to updating you on our further progress.

Now at this time, I would like to open up the call for questions.

(Operator Instructions). Tobey Sommer, SunTrust.

Regarding the cost savings, the $20 million you identified, did you say $12 million will be folded into the P&L for the full-year 2015 and $8 million for next year? Did I catch that accurately?

That's correct. That's correct.

And is there a -- are there other actions that you anticipate the Board and the committee being involved in taking over the next several months or was establishing the internal EBITDA margin target the principal goal of the committee?

Yes, that was the principal stated goal of the committee, but we will be continuing to work, as I mentioned in my script, on both the topline and bottom-line optimization, so we have had an emphasis on, as you can see from our results, on both growing the topline and really gaining some operating leverage, very much so demonstrated in these very good results from the second quarter.

But we want to continue that and we intend to work continuously with the Board on making sure we optimize that structure as we continue to accelerate our unit growth.

How do you feel, Paul, about the Company's ability and your tolerance to carry debt as opposed to the pretty substantial still working capital balance that you have historically? Because, obviously, the margins are improving and it seems like you have got an engine which has got several cylinders working for it for growth as well. Thanks.

Yes, no question we have quite a cash machine here and operating in a nice way. And historically, we have generated a lot of cash and we have, as you can see from the recent work in sales -- not sales, but share repurchases, we used our capital to continue to increase the dividend and buy shares back.

And as far as debt is concerned, we have a debt facility that is not drawn on today, but as we see reasons to do that going forward, we are certainly capable of doing that and wouldn't be reluctant to do that as long as we're adding value to our shareholders. That's what it's about.

Okay, the last two questions for me and I will get back in the queue. One is about pricing for the traditional core bundle, wondering what the markup was and any kind of change year over year, and was also wondering if you could comment about, I guess using the former jargon, the surplus associated with healthcare and workers' comp and how that may have changed in the quarter. Thank you.

This is Richard. What we experienced this quarter is what we have been planning to see. Our markup component of our service fee has continued to match the kind of business that we are bringing on. We have got certainly a mix in customers.

In addition to that, our allocations for all of our direct costs have been in line and better than what we expected. What you are seeing is a little bit of a dampening effect on the revenue side because we are seeing continued migration of participants into lower-cost plans, and so that automatically reduces our revenue component.

But on the other side of the coin, we also have lower costs, so it's all working just like we planned it to be for 2015.

Okay, I guess, are you going to on an ongoing basis describe markup in those kind of trends in context with -- or are you going to provide numbers for those?

No, I think what we are intending to do to have clear communication of the things that are most important for investors to focus on, we're going to continue to guide toward our unit growth number and then adjusted EBITDA, because, obviously, there is moving parts going up and down in the direct cost and then also aggressive operating expense management initiatives, and what's important is to drive that adjusted EBITDA growth.

And so, we are planning to continue to give you a flavor of what's going on in those areas, but not focus on specific numbers of any one of those metrics that help to make that up.

Okay, thank you very much. I will get back in the queue.

Jim Macdonald, First Analysis.

Just to follow up on Tobey's question, so is it fair to say that the drop in gross profit per worksite employee compared to last year is mostly due to a mix issue with more MidMarket business? And I think you gave a number -- I don't know if this was revenue number or an employee number -- that the MidMarket was up 32%. Maybe I misheard that.

Yes, that was actually the core market up 32% and MidMarket was also up significantly, but it is that mix in both products and services that we are providing and size client that continues to be a part of our going-forward strategy. And although that has, like Richard just mentioned, an effect on average markup and et cetera, but it also has a corresponding effect on cost.

The other thing that's affecting the gross profit for the balance of this year is what Doug mentioned. Our growth is actually expected to be faster for the balance of the last half of the year than we had expected a quarter ago, and in our model, since there is the double taxation that occurs in payroll tax when you add new accounts as any other time other than January 1, you have a dampening effect to the gross profit that is caused by the growth, which, of course, is good for next year as you get larger as you go into the next period.

And as Doug mentioned, that phenomenon in our business that has been there for 29 years, we have successfully passed that piece of legislation last fall that is scheduled to eliminate that double taxation into next year.

So just to sum up, you are saying that the drop in gross profit was mostly due to mix and this faster growth issue, not the other cost centers, and is that right?

That's correct.

And just one more on gross profit, you said the SBU's, I believe, revenue was up 19%. Can you give us a number of what the SBU gross profit was for the quarter?

Well, that is the -- we look at that portfolio contributing at that gross profit line and it was a 19% increase.

Okay. Great. Just one more for me, the strategic committee, was there any repurchase -- share repurchase goal or new authorization or any thoughts on repurchase levels out of the committee report and agreement?

Yes, well, after the first quarter, I think at our May Board meeting, was when the committee first weighed in on capital allocation. And as you saw, at that time we increased both the dividend and I believe increased the share authorization, and then executed on that throughout the second quarter and into the third.

So their role is to continue to monitor and make recommendations in that regard through the end of the year and into the first quarter of next year.

Okay, thanks very much.

Mark Marcon, Robert W. Baird.

With regards to the expense reduction for next year, what's that primarily going to be composed of, that $8 million that is incremental to this year?

It's a lot of specific initiatives in sales, service. There is all kinds of -- our SBUs. It's truly a deep dive into specific initiatives and it is pretty widespread across different areas.

Okay, so it's not just one or two big line items; it's a whole bunch of areas that are being optimized.

Yes, absolutely. You know, Mark, as you can see from our results, you don't grow the business 12% in one year with a reduction in operating expense without a pretty intense focus across the Company on operating cost, and so that's going to continue on, and those initiatives and more that have been identified are going to be implemented, very specific, down to specific line items that are affected by initiatives we intend to have in place.

Got it. And then, it sounds like the SBUs actually helped in terms of the gross profits for this quarter. Is that right?

Yes, remember that's -- the strategy is that as we have other offerings that have a lower price per customer, so we can retain more customers and add new customers, then we would have an offset at the gross profit line as the contribution from our other business performance solutions contribute at that line. And that's really what has been happening, what's been working, and we expect that will continue.

Okay. And then, with -- the last few quarters, the healthcare benefits has been a really big help. Was that a help this quarter?

No, it was actually -- costs were just a little bit higher because we had some large loss claims in the quarter that were a little bit higher than what we were expecting, so it really didn't -- it didn't help like it has in some of the previous quarters.

But as usual, you have ups and downs in the gross profit area or the -- sorry, in the direct cost area, and in total, things have been very stable for us for quite a period now and it is tightly managed by Richard's group and going well in that area.

We barely have a 1% trend in healthcare costs year over year.

So it was probably up 1% this quarter, but (multiple speakers)

No, what I said is when you look at our annual trend right now, year over year it is up about 1%.

Okay.

And I don't think there is a lot of companies that can say that.

(multiple speakers) remember, that's driven by the -- we had the strong reduction in the number of people on COBRA that occurred over the last year because of health reform and that certainly has had a significant help on cost, and then we've continued to have migration onto lower cost plans, and all those things add up to a well-managed and stable program.

That's great. And can you give us a sense for what the gross profit per worksite employee would likely -- what the likely range would be that is implied by the overall EBITDA guidance?

Yes, Mark. I think, again, we are guiding more to the EBITDA, which is a combination of the gross profit and managing the operating expenses, so I think as we discussed in some previous calls, with the new model we have and the contributions from the SBUs and the PEOs and the different offerings within the MidMarket space, we are focusing more on those metrics going forward with our analysts and our shareholders.

I appreciate that, but just for help in terms of modeling it out, is there any guidance you could give us?

I think on the gross profit per employee number -- relative to what comparison were you asking?

Just in terms of the third quarter and the fourth quarter, just getting to the implied numbers for Q3 EBITDA and full-year EBITDA?

I can talk about some of the factors that go into it. Q3, if you look at us historically, has been fairly level with Q2, but in Q4 it typically goes down as deductibles have been met by our worksite employees, those under the benefit plans. And we're picking up more of the medical costs in that area on Q4, so I think if you look at 2014, you're going to see a fairly similar pattern along those lines.

So I think that can help you out if you look at what happened last year, maybe some previous years, on the seasonality of that metric.

Great. And then with regards to the strong growth in the worksite employees, any regions that particularly stand out or any other color that you can give us in terms of the strong performance there?

Sure, really didn't have a regional effect so much as -- which is good, in my view. It is more the selling system really kicking in, the tenure of the sales team.

Obviously, we had a successful fall selling campaign last year and that feeds into a higher confidence level. Then you couple that with boosting activity, lead generation activity, et cetera, it's a momentum and traction story that is across the board.

And then, the game plan is as the core business sales have these kind of results, then your MidMarket effort can be icing on the cake and build in a permanent premium to our growth rate, which we would believe ultimately translates into higher valuation. So, it's a good plan and it is working and we are excited about where we are going from here.

That's great to hear. Just two related questions and then I will jump back in the queue. Can you talk a little bit about the impact of increased regulations, how much that is helping and driving things, number one?

Number two, can you talk a little bit about the competitive environment and what you are seeing there, any sort of price competition or any sort of moves that you are seeing from them on that aspect?

Sure. As far as the regulatory environment, we've talked about how the healthcare reform is cascading down from the federal level to states to carriers to localities and ultimately to individual companies and that that's going to continue for a couple of years.

And it is incredibly complex and I would just say that health reform, as business owners have to focus on that, it's a deep reminder of the complexity, compliance, and cost of all regulation of being an employer, which has always been one of the key drivers to why customers realize this is a better way to do business, and I think that's helping to drive growth in the whole industry and will continue to do that.

As far as the competitive environment, I think our response over the last couple of years to have a wider array of offerings puts us in a great position against the competition. It has allowed us to bundle different packages of services to customize and meet a customer need, and we are finding that to be a differentiating factor.

In the MidMarket, both our service model and our go-to-market team selling approach, I think, puts us in a unique position against the marketplace. But I got to tell you the exciting part is the addressable market is so large and coming our way. As we have added products and services that are customized for these customers with 150 to several thousand employees, that literally doubled our addressable market in this model and really bodes well for our long-term growth plan.

That's great to hear. Thank you.

Tobey Sommer, SunTrust.

Just a couple of follow-ups. You mentioned net hiring making a contribution to growth and also summer hiring. What sort of magnitude did each of those comprise, because I don't recall summer hiring being cited all that much previously? Thanks.

It has actually been nominal, but in our world as long as it is a tailwind instead of a headwind, obviously we are a lot better off.

But our growth is being driven much more so by exceeding our sales forecast and historically high retention levels. And I think what we are trying to communicate is that typical hiring in the base has been very, very modest and less, really, than what we would have expected.

And every year, there is a little bit of summer help comes on in May and June and goes away in August and September, but that's all factored in, and basically the net change in the customer base has not been as significant as we were hoping it would be, but it at least has not been a headwind.

Okay, and Paul, how big a catalyst is the removal of acquired payroll tax reset for growth? How should we think about that in the context of what you have already reaccelerated in terms of WSEE growth?

We're really looking forward to finding out what it is like in that world, and we don't have the experience of it, but our expectation is that it should certainly even out the sales process.

And also, I think it does have the benefit of, I think, adding to the growth rate simply because anytime you have to sell something and then delay the start for a number of months, you can lose the wind in the sail when you do that, and we're expecting that with that going away, the whole throughput of that process should improve and should add to the picture.

So we are excited about figuring out what that means, but there's a lot of things that are driving our confidence right now in our growth plan and there is just tremendous upside. I always like to let people realize our business, when you grow the worksite employees, you're also growing the risk. You're growing the worksite employees unit of revenue, unit of profitability, and unit of risk, and it is so important to grow those units while you are managing the associated risk.

And so, yes, we want to continue to accelerate growth, but we also know it's a service business. You can grow at a rate that is too fast to provide the service levels you need to provide, so there are other factors. But we're excited about being back into the teams and the growth rate of worksite employees. This model just is beautiful when you get into that level, and we expect -- the main goal is to be able to do that over and over, year after year after year, and really unlock value for shareholders by doing so.

Is it fair that perhaps the change to their payroll reset tax, at least at the margin, reduces a little bit of the emphasis in the risk associated with year-end sales programs? I know people are still thinking about these things on a year-end basis, by and large, but maybe just on a relative basis this takes a little bit of the edge off?

Yes, that's what I really mean by evening things out some.

Okay. Yes.

I think -- there will still be an emphasis, because it is just a matter of people want to do first of the year doing something different, start fresh, you know?

Sure.

Some of the filing issues around being an employer, if you can avoid it for the full year, that's a benefit. So there is administrative reasons, but I believe this new law is going to help us really even things out.

And there are no more questions at this time. I hand the call back over to Mr. Sarvadi.

Once again, we want to thank everyone for participating today, and we look forward to continuing to work and improve on both topline and bottom-line results and we will be looking forward to discussions with you next quarter. Thank you very much.

This is the end of today's call. You may now disconnect.