Insperity Inc (NSP) 2023 Q2 法說會逐字稿

Good morning. My name is Jenny, and I will be your conference operator today. I would like to welcome everyone to the Insperity Second Quarter 2023 Earnings Conference Call. (Operator Instructions) Please note, this conference is being recorded. At this time, I would like to introduce today's speakers. Joining us are Paul Sarvadi, Chairman of the Board and Chief Executive Officer; and Douglas Sharp, Executive Vice President of Finance, Chief Financial Officer and Treasurer. At this time, I'd like to turn the call over to Douglas Sharp. Mr. Sharp, please go ahead.

早上好。我叫珍妮，今天我將擔任你們的會議操作員。歡迎大家參加 Insperity 2023 年第二季度收益電話會議。 （操作員說明）請注意，本次會議正在錄製中。這時我想介紹一下今天的演講嘉賓。加入我們的還有董事會主席兼首席執行官 Paul Sarvadi；財務執行副總裁、首席財務官兼財務主管道格拉斯·夏普 (Douglas Sharp)。此時，我想將電話轉給道格拉斯·夏普。夏普先生，請繼續。

Thank you. We appreciate you joining us. Let me begin by outlining our plan for this morning's call. First, I'm going to discuss the details behind our second quarter 2023 financial results. Paul will then comment on the quarter and our plan over the remainder of the year. I will return to provide our financial guidance for the third quarter and an update to the full year guidance, and then we will end the call with a question-and-answer session.

謝謝。我們感謝您加入我們。首先讓我概述一下我們今天上午電話會議的計劃。首先，我將討論 2023 年第二季度財務業績背後的細節。然後保羅將對本季度和我們今年剩餘時間的計劃發表評論。我將返回提供第三季度的財務指導和全年指導的更新，然後我們將以問答環節結束電話會議。

Now before we begin, I would like to remind you that Mr. Sarvadi or I 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, including the Form 8-K filed today, which are available on our website.

現在，在我們開始之前，我想提醒大家，薩爾瓦迪先生或我可能會在今天的電話會議中發表前瞻性聲明，這些聲明受到風險、不確定性和假設的影響。此外，我們的一些討論可能包括非公認會計準則財務指標。有關可能導致實際結果與非公認會計原則財務指標的任何前瞻性陳述和調節表存在重大差異的風險和不確定性的更詳細討論，請參閱該公司的公開文件，包括今天提交的8-K 表格，其中可以在我們的網站上找到。

Now let's discuss our second quarter '23 financial results in which we effectively executed on our plan in sales, service, pricing and other areas of the business, however, experienced a shortfall from our forecasted earnings due to substantially higher healthcare costs. We reported adjusted EPS of $0.64 and adjusted EBITDA of $51 million for the quarter. As for our growth metric, the average number of paid worksite employees increased by 7.2% over Q2 of 2022, which was just below the midpoint of our guidance as net hiring by our clients came in slightly lower than expected. Worksite employees paid from a combination of sales and client retention came in on target.

現在讓我們討論一下 23 年第二季度的財務業績，我們在銷售、服務、定價和其他業務領域有效地執行了我們的計劃，但是，由於醫療保健成本大幅上升，我們的預期收益出現了短缺。我們報告本季度調整後每股收益為 0.64 美元，調整後 EBITDA 為 5100 萬美元。至於我們的增長指標，帶薪工作場所員工的平均人數比 2022 年第二季度增長了 7.2%，略低於我們指導的中點，因為我們客戶的淨招聘人數略低於預期。現場員工的工資來自銷售和客戶保留的結合，達到了目標。

Moving to gross profit. We continue to achieve pricing above targeted levels, and we combined with our workers' compensation program, payroll tax area and traditional employment offering, we experienced a favorable outcome. However, Q2 healthcare costs came in approximately $42 million higher than expected. This was primarily due to both the number and the severity of large claims up to our $1 million per person insurance claim limit.

轉向毛利潤。我們繼續實現高於目標水平的定價，並結合我們的工人補償計劃、工資稅範圍和傳統就業服務，我們取得了良好的成果。然而，第二季度的醫療保健費用比預期高出約 4200 萬美元。這主要是由於我們的每人保險索賠限額高達 100 萬美元的大額索賠的數量和嚴重程度。

Large claim activity accounted for approximately 75% of the higher costs with claims over $750,000 being the primary driver of this increase. The remaining 25% related to higher-than-expected pharmacy costs. And as for the higher pharmacy costs, we experienced an increase in utilization of specialty drugs, including a significant step-up in the use of diabetes and weight loss drugs, and behavioral health drugs.

大額索賠活動約佔成本上漲的 75%，其中超過 750,000 美元的索賠是這一增長的主要驅動力。其餘 25% 與高於預期的藥品成本有關。至於較高的藥房成本，我們經歷了特殊藥物的使用增加，包括糖尿病和減肥藥物以及行為健康藥物的使用顯著增加。

Now while large claim activity persisting over more than 1 consecutive quarter has been rare over the course of our history, our updated range of earnings guidance incorporates a continued high level of large claim activity over the remainder of the year on the low earnings side and a return to more normal activity on the high earnings side. In both cases, we anticipate that pharmacy costs will remain elevated. When considering these factors, along with our results over the first half of the year, we are now forecasting a benefit cost trend of 7% to 8.5% for 2023, up from our prior estimates in a range around 5%.

現在，雖然大額索賠活動持續超過連續一個季度以上的情況在我們的歷史上很少見，但我們更新後的盈利指導範圍包含了今年剩餘時間內持續高水平的大額索賠活動，在低收益方面以及高收入方面恢復更正常的活動。在這兩種情況下，我們預計藥品成本將保持較高水平。考慮到這些因素以及我們上半年的結果，我們現在預測 2023 年福利成本趨勢為 7% 至 8.5%，高於我們之前估計的 5% 左右。

On top of the pricing improvements that we have achieved, we intend to further adjust our pricing to mitigate the impact of this potential increased cost trend. And Paul will provide additional comments on our benefit pricing and cost trends in a few minutes.

除了我們已經實現的定價改進之外，我們還打算進一步調整定價，以減輕這種潛在成本增加趨勢的影響。保羅將在幾分鐘內就我們的福利定價和成本趨勢提供更多評論。

Now moving to operating expenses. Costs increased 9% over Q2 of 2022 and included continued investment in our sales, service and technology, and the impact of the inflationary environment on our costs. Our growth investment included a 15% increase in the number of hired Business Performance Advisors, putting us in a good position as we approach our fall selling season. Net interest income increased by $3 million over Q2 of 2022 on higher interest rates and invested balances. Second quarter's effective tax rate was 25%, which we are also now forecasting as our full year rate.

現在轉向運營費用。成本比 2022 年第二季度增加了 9%，其中包括對銷售、服務和技術的持續投資，以及通脹環境對我們成本的影響。我們的增長投資包括將聘請的業務績效顧問數量增加 15%，這使我們在秋季銷售季節臨近時處於有利地位。由於利率和投資餘額上升，淨利息收入比 2022 年第二季度增加了 300 萬美元。第二季度的有效稅率為 25%，我們現在也將其預測為全年稅率。

Our financial position and liquidity remains strong, and we continue investment in our growth while providing returns to our shareholders. During the quarter, we repurchased 98,000 shares of stock at a cost of $11 million and paid out $22 million in cash dividends. We ended Q2 with $219 million of adjusted cash and $370 million of debt. And as announced this morning, we have increased our share repurchase authorization by 2 million shares and intend to be more aggressive than our typical repurchase activity, depending on market conditions. Now at this time, I'd like to turn the call over to Paul.

我們的財務狀況和流動性仍然強勁，我們將繼續投資於我們的增長，同時為股東提供回報。本季度，我們以 1100 萬美元的成本回購了 98,000 股股票，並支付了 2200 萬美元的現金股息。第二季度結束時，我們調整後的現金為 2.19 億美元，債務為 3.70 億美元。正如今天上午所宣布的，我們已將股票回購授權增加了 200 萬股，並打算根據市場狀況，比我們的典型回購活動更加激進。現在這個時候，我想把電話轉給保羅。

Thank you, Doug, and thank you all for joining our call. Today, I'd like to provide comments on the following 3 topics: First, I'll comment on the second quarter, excellent execution and the results across key long-term performance drivers in our business. Second, I'll discuss how Insperity is positioned to capitalize on our vast market opportunity with a focus on the future of the workplace and the corresponding changing needs in our target markets. I'll finish with comments on the outlook for the company into next year and beyond despite the unexpected large healthcare claims in the recent quarter.

謝謝你，道格，也感謝大家加入我們的電話會議。今天，我想就以下三個主題發表評論：首先，我將評論第二季度、出色的執行力以及我們業務中關鍵長期績效驅動因素的結果。其次，我將討論 Insperity 如何定位以利用我們巨大的市場機會，重點關注工作場所的未來以及目標市場相應變化的需求。儘管最近一個季度出現了意外的大額醫療保健索賠，但我仍將對公司明年及以後的前景發表評論。

Our most important key drivers for long-term success in growth and profitability more within our control, are new sales, pricing, client service and retention. All these areas were strong in Q2 and contribute toward a positive outlook for the future. Our Workforce Optimization booked sales were solid, driven by an outstanding effort in our mid-market business performance consultant team. This team experienced one of their strongest quarters in history in booked sales in both deal count and worksite employees sold. In addition to substantial booked sales, excellent progress was made by our BPAs driving sales activity, which was a priority coming into the quarter. Our 15% higher number of BPAs increased discovery calls, nearly 30% over Q2 of last year, making our prospective client pipeline significantly stronger as we go into the second half of the year.

我們在控制範圍內實現長期成功增長和盈利的最重要的關鍵驅動因素是新銷售、定價、客戶服務和保留。所有這些領域在第二季度都表現強勁，並為未來的積極前景做出了貢獻。在我們的中端市場業務績效顧問團隊的出色努力的推動下，我們的勞動力優化預訂銷售非常穩定。該團隊的預訂銷售量（無論是交易數量還是現場員工銷售量）都經歷了歷史上最強勁的季度之一。除了大量的預訂銷售之外，我們的 BPA 推動銷售活動也取得了出色的進展，這是本季度的首要任務。我們的 BPA 數量增加了 15%，發現電話數量增加了近 30%，比去年第二季度增加了近 30%，這使得我們的潛在客戶渠道在進入今年下半年時顯著增強。

One of the other highlights of the quarter was Workforce Acceleration, or WX, continuing to gain traction across the sales organization and coming in well above budget in booked sales. One of the reasons this is exciting is the opportunity to test one of our assumptions regarding WX. At this level of WX adoption and incentives, and the large number of new BPAs over the last 12 months, we can begin to assess the potential for WX to lower BPA turnover.

本季度的其他亮點之一是勞動力加速（WX），它繼續在整個銷售組織中獲得關注，並且預訂銷售量遠高於預算。令人興奮的原因之一是有機會測試我們關於 WX 的假設之一。在 WX 採用和激勵的這種水平，以及過去 12 個月內大量新 BPA 的情況下，我們可以開始評估 WX 降低 BPA 周轉率的潛力。

Historically, the 18 months ramp-up period for training BPAs and workforce optimization sales has resulted in a level of frustration from the complexity of the sale and relatively few closes over the learning period. This caused higher turnover rates in less tenured Tier 1 and Tier 2 BPAs. WX is a less complex sale and provides opportunity for earlier success as the ultimate WO sales training is accomplished.

從歷史上看，培訓 BPA 和勞動力優化銷售的 18 個月的準備期導致了銷售複雜性帶來的一定程度的挫敗感，並且在學習期間完成的交易相對較少。這導致任期較短的一級和二級 BPA 的流動率較高。 WX 是一種不太複雜的銷售，並且隨著最終 WO 銷售培訓的完成，提供了早期成功的機會。

The early read for this first half of the year appears to be validating as the WX sales adoption has considerably lowered turnover in both tiers. Now sales efficiency is down somewhat year-to-date, which is to be expected with a high number of new BPAs in the mix in a different economic climate in the first half of the year. Our refined sales compensation incentive programs are encouraging exactly the behavior we want to drive efficiency going forward.

今年上半年的早期數據似乎得到了驗證，因為 WX 銷售的採用大大降低了兩層的營業額。現在，銷售效率今年迄今有所下降，這是預料之中的，因為在今年上半年不同的經濟環境下，新的 BPA 數量很大。我們完善的銷售薪酬激勵計劃正在鼓勵我們希望提高未來效率的行為。

Not only does strong WX sales by Tier 1 and Tier 2 BPAs create a client base to upgrade to WO over time, but they also provide an opportunity for sales efficiency to improve sooner if this lower BPA turnover continues.

1 級和 2 級 BPA 強勁的 WX 銷售不僅可以創造一個隨著時間的推移升級到 WO 的客戶群，而且如果 BPA 營業額持續下降，它們還提供了更快提高銷售效率的機會。

Now our strong pricing allocations were also a highlight this quarter. This is particularly critical considering the higher-than-expected claim cost in Q2. In a few minutes, I'll address how this pricing trend and our plans going forward will contribute to offset cost trends.

現在，我們強勁的定價分配也是本季度的一大亮點。考慮到第二季度的索賠成本高於預期，這一點尤其重要。幾分鐘後，我將討論這種定價趨勢和我們未來的計劃將如何有助於抵消成本趨勢。

Q2 was also another strong quarter in execution reflected in our client service and retention results. Retention was 99% each month of the quarter, at historically high levels. Our success in our recruiting and training efforts of corporate staff over the last few quarters has resulted in appropriate client service ratios to support our changing client needs.

第二季度也是執行力強勁的一個季度，這反映在我們的客戶服務和保留結果中。該季度每個月的留存率為 99%，處於歷史最高水平。過去幾個季度，我們在企業員工招聘和培訓方面取得了成功，從而形成了適當的客戶服務比例，可以支持我們不斷變化的客戶需求。

So through the first half of the year, we've experienced solid execution of our plans across the company, and we believe the business is on sound footing for growth going forward. As we look ahead, we are seeing fundamental changes to the future of the workplace and therefore, the needs for small and medium-sized businesses to compete as an employer of choice. This was clear to us more than a year ago, and we established a new division in the company and a new role on our executive leadership team.

因此，今年上半年，我們整個公司的計劃得到了紮實的執行，我們相信該業務為未來的增長奠定了良好的基礎。展望未來，我們看到工作場所的未來發生根本性變化，因此，中小型企業需要作為首選雇主進行競爭。一年多前我們就清楚這一點，我們在公司設立了一個新部門，並在執行領導團隊中任命了新角色。

Our strategic planning and development organization, led by Executive Vice President, Kathy Johnson, is focused on strategic corporate and organizational development to continue our industry leadership position in the breadth and depth of services provided and the level of care for our clients. This team is focused on purposeful transformation to the changing HR environment, including everything from data analytics and artificial intelligence to employee generational and psychological demands for flexibility and resources to support personal wellness and development.

我們的戰略規劃和發展組織由執行副總裁凱西·約翰遜(Kathy Johnson) 領導，專注於戰略性企業和組織發展，以繼續我們在所提供服務的廣度和深度以及對客戶的關懷水平方面的行業領導地位。該團隊專注於針對不斷變化的人力資源環境進行有目的的轉型，包括從數據分析和人工智能到員工對靈活性和資源的代際和心理需求，以支持個人健康和發展。

Examples of these critical drivers to employee engagement include adjustments to work mode and locations, changes to payroll and access to wages and inclusion of mental, physical and financial wellness offerings. We are planning upgrades to many of these areas over the last half of the year to support our clients' changing needs. I believe with our focus and innovation in these areas, we are well positioned to meet small and medium-sized employer needs to remain competitive in the tight labor market, and succeed in the marketplace. These demands require cultural changes in companies to attract and retain the best people. Our history of working with clients on these issues, combined with our efforts to provide the appropriate benefits and dynamic employee experience platform for these businesses, positions Insperity as the provider of choice into the future.

這些影響員工敬業度的關鍵驅動因素包括工作模式和地點的調整、工資單和工資獲取方式的變化以及納入心理、身體和財務健康服務。我們計劃在今年下半年對其中許多領域進行升級，以支持客戶不斷變化的需求。我相信，憑藉我們在這些領域的專注和創新，我們有能力滿足中小型雇主的需求，在緊張的勞動力市場中保持競爭力，並在市場上取得成功。這些需求要求公司進行文化變革，以吸引和留住最優秀的人才。我們在這些問題上與客戶合作的歷史，加上我們為這些企業提供適當福利和動態員工體驗平台的努力，使 Insperity 成為未來的首選提供商。

So we believe that our long-term outlook remains very strong, driven by effective ongoing execution and enhanced strategic planning and development. Our level of confidence is not impeded at all by the recent large claims and the effect on the quarter or the projected year. The best place to start to put this claim quarter in proper perspective is to look at our 5-year compounded annual growth rates in both pricing and cost of our benefits plan with this year's estimate included.

因此，我們相信，在有效的持續執行和加強的戰略規劃和發展的推動下，我們的長期前景仍然非常強勁。我們的信心水平完全沒有受到最近的大額索賠以及對本季度或預計年份的影響的影響。正確看待本索賠季度的最佳起點是查看我們的福利計劃定價和成本的 5 年復合年增長率，其中包括今年的估計。

Our estimated benefits cost compound annual growth rate is 4.2% to 4.6%, including the wide range of potential claims we've estimated for the full year. Our compound annual growth rate for benefits allocations over the same period is 4.1%. Now these rates demonstrate effective healthcare cost management compared to the marketplace and achieving our goal of aligning our pricing with cost increases over time. Our long-term historical cost trends are solid, and our pricing strategy has performed well. Now this year we're running ahead of target allocation increases, and we've already initiated a plan to add a moderate incremental amount of pricing for 2024 of approximately 1% to 1.5%, which we believe is in line with marketplace trends and should put us in a solid position to align our pricing and costs going forward.

我們估計的福利成本複合年增長率為 4.2% 至 4.6%，其中包括我們估計的全年各種潛在索賠。我們同期福利分配的複合年增長率為 4.1%。現在，與市場相比，這些費率表明了有效的醫療保健成本管理，並實現了我們的目標，即使我們的定價與隨著時間的推移而增加的成本保持一致。我們的長期歷史成本趨勢是穩固的，我們的定價策略也表現良好。現在，今年我們超額完成了分配增長的目標，並且我們已經啟動了一項計劃，在 2024 年增加約 1% 至 1.5% 的適度增量定價，我們認為這符合市場趨勢，並且應該使我們處於有利地位，能夠調整未來的定價和成本。

When we look ahead to next year and beyond, we believe we'll be able to continue to appropriately align our pricing strategy to our cost trends over time like we have in the past. We are in year 2 of our current 5-year plan, and this quarter's results do not change our strategy to achieve our goals. Throughout our history from time to time, we've had quarters in which we experienced unexpected large claims. In each such instance, we've successfully managed through the situation and continued our long-term growth and profitability.

當我們展望明年及以後時，我們相信我們將能夠像過去一樣，隨著時間的推移，繼續根據成本趨勢適當調整我們的定價策略。我們正處於當前五年計劃的第二年，本季度的業績不會改變我們實現目標的策略。縱觀我們的歷史，我們有時會遇到意想不到的大額索賠。在每次這樣的情況下，我們都成功地應對了這種情況，並繼續我們的長期增長和盈利能力。

For the company to stay on plan, the most important focus is on our growth drivers over the balance of the year. Our focus includes continuing the investment in BPA hiring and training and additional marketing to drive sales over the balance of the year. We also have the organization ready, willing and able to continue solid execution on our pricing and client service and retention strategy. We remain confident in our ability to achieve these goals, which we believe will drive future performance and position us well to continue our history of superior returns to shareholders.

為了讓公司按計劃進行，最重要的重點是我們今年剩餘時間的增長動力。我們的重點包括繼續投資 BPA 招聘和培訓以及額外的營銷，以推動今年剩餘時間的銷售。我們還讓組織做好準備、願意並且能夠繼續紮實執行我們的定價、客戶服務和保留策略。我們對實現這些目標的能力仍然充滿信心，我們相信這將推動未來的業績，並使我們能夠繼續為股東提供卓越回報的歷史。

At this point, I'd like to pass the call back to Doug to provide our specific guidance.

此時，我想將電話轉回給 Doug，以提供我們的具體指導。

Thanks, Paul. Now let me provide our guidance for Q3 and an update for the full year 2023. Our updated earnings guidance includes assumptions around a possible range of outcomes in our benefit costs over the remainder of the year. Outside of this area, we continue to expect favorable trends in our pricing in other areas of gross profit and are forecasting slightly lower paid worksite employees and operating expenses. As for the details, we are now forecasting 6.5% to 7% worksite employee growth for the full year 2023, slightly lower than our previous guidance and a tighter range since we are now more than halfway through the year. The lower growth outlook is primarily a result of Q2's average paid worksite employees coming in a little light due to lower hiring in our client base and an assumption that this lower hiring continues over the remainder of the year.

謝謝，保羅。現在讓我提供第三季度的指導以及 2023 年全年的更新。我們更新的收益指導包括圍繞今年剩餘時間裡我們的福利成本可能出現的結果範圍的假設。在該領域之外，我們繼續預計其他毛利潤領域的定價將呈現有利趨勢，並預測工地員工的薪酬和運營費用將略有下降。至於細節，我們現在預測 2023 年全年工作場所員工增長率為 6.5% 至 7%，略低於我們之前的指導，而且範圍更窄，因為現在已經過半了。較低的增長前景主要是由於我們的客戶群招聘量減少以及假設今年剩餘時間這種較低的招聘量持續下去，第二季度的平均帶薪工作場所員工的情況略有下降。

As for Q3, we are forecasting year-over-year worksite employee growth of 4% to 4.5%. Now this is lower than our full year growth forecast due to our assumption of significantly less hiring in Q3 of 2023 compared to Q3 of 2022. However, this guide reflects continuing sequential worksite employee growth over the remaining 2 quarters of 2023 and improving year-over-year growth in Q4.

至於第三季度，我們預計工作場所員工人數將同比增長 4% 至 4.5%。現在，這低於我們的全年增長預測，因為我們假設2023 年第三季度的招聘人數比2022 年第三季度大幅減少。然而，本指南反映了2023 年剩餘2 個季度工作場所員工的持續連續增長，並且同比有所改善第四季度同比增長。

We have revised our earnings guidance based upon our results through the first half of 2023 and our updated outlook for worksite employee growth, and the range of expectations around our benefit costs, as previously discussed. So after putting together the pieces, we are now forecasting full year 2023 adjusted EBITDA in a range of $300 million to $350 million and adjusted EPS in the range of $4.35 to $5.32. As for Q3 earnings, we are forecasting adjusted EBITDA in a range of $57 million to $81 million and adjusted EPS from $0.69 to $1.14. Now at this time, I'd like to open up the call for questions.

如前所述，我們根據 2023 年上半年的業績、對工作場所員工增長的最新展望以及對福利成本的預期範圍，修訂了盈利指引。因此，在綜合考慮之後，我們現在預測 2023 年全年調整後 EBITDA 在 3 億至 3.5 億美元之間，調整後每股收益在 4.35 至 5.32 美元之間。至於第三季度收益，我們預計調整後 EBITDA 為 5700 萬美元至 8100 萬美元，調整後每股收益為 0.69 美元至 1.14 美元。現在這個時候，我想開始提問。

(Operator Instructions) Your first question is coming from Andrew Nicholas of William Blair.

（操作員說明）您的第一個問題來自威廉·布萊爾的安德魯·尼古拉斯。

I wanted to ask on the benefits-cost side first. I was hoping you could provide a little bit more color on the benefit cost trend, particularly on the $750,000-plus side. Is there anything to pinpoint in terms of the underwriting approach or the risk management approach that would help to explain that? Or is it just some noise? And then I guess maybe the bigger picture question is, do quarters like this change your appetite for risk on the health care side or any kind of long-term amplifications to this kind of quarter.

我想先問效益成本方面。我希望您能提供更多關於福利成本趨勢的信息，特別是在 750,000 美元以上的方面。在承保方法或風險管理方法方面有什麼需要指出的可以幫助解釋這一點嗎？或者只是一些噪音？然後我想也許更大的問題是，像這樣的季度是否會改變您對醫療保健方面的風險偏好或對此類季度的任何長期放大。

Yes. I think when you look at a little bit more of the detail behind the cost, obviously, we investigated some of the detailed claims data that was provided from our healthcare carrier very diligently. I think one thing that came out of that was that there was not a higher concentration of large claims from new clients, which would indicate that through our fall selling season and our year-end renewal, this is not the situation where there has been adverse client selection. That's obviously one of the first things that you want to rule out. When you look at the types of claims, it's really across the board as far as the $750,000 and above. You've got some cancer, you've got some heart attacks, you've got some accidents. And so it's really varied and diversified over as far as the nature of the type of claims. And so I think it was -- from what we can see thus far, yes, we did have a claim -- a period of large claim activity. It has happened in our history. But I think we still feel -- particularly when you look at Paul's comments with respect to over the long term in the 5-year compounded rates that we're still managing the healthcare cost trends even with the forecasted higher costs over the remainder of the year, within a range at a tolerable range and really within a range where our pricing with being above target recently and maybe some adjustment and some adjustment to that, we feel like the matching of pricing cost is still in play.

是的。我認為，當您更多地了解成本背後的細節時，顯然，我們非常努力地調查了我們的醫療保健運營商提供的一些詳細索賠數據。我認為由此產生的一件事是，新客戶的大額索賠並沒有更加集中，這表明在我們的秋季銷售季節和年終續約期間，這並不是出現不利情況的情況。客戶選擇。這顯然是您首先要排除的事情之一。當您查看索賠類型時，您會發現，只要 750,000 美元及以上，索賠類型就非常廣泛。你得了一些癌症，你得了一些心髒病，你發生了一些事故。因此，就索賠類型的性質而言，它確實是多種多樣的。所以我認為，從目前我們所看到的情況來看，是的，我們確實提出了索賠——這是一個大規模索賠活動的時期。這在我們的歷史上曾經發生過。但我認為我們仍然感到——特別是當你看到保羅關於長期 5 年復合利率的評論時，我們仍然在管理醫療保健成本趨勢，即使預計剩餘時間的成本會更高。今年，在一個可容忍的範圍內，實際上在我們的定價最近高於目標的範圍內，可能會進行一些調整和一些調整，我們覺得定價成本的匹配仍在發揮作用。

So let me address the second half of that question about the kind of appetite for risk because I think there's 2 different ways you have to look at it. First of all, we are comfortable with the way we have structured our program to align price and cost over the long term, and we know that it provides advantage to grow the business and it provides a more profitable long-term structure. But at the same time, we sure don't like when we have a large claim quarter like this. And as you know, when we did this in 2019, we did purchase a coverage limit on individuals at the $1 million level. We also will continue to look and evaluate that as this year goes by. We've quoted lower limits before. Sure, we'll take a look at that like we do every year. And I would just say also that we, on an ongoing basis, look at other possibilities to take out some of the volatility that relates to this type of quarter and how that affects us in the public markets. So we continue to pursue those things. So I would say our appetite to -- we still want to run the business this way. But certainly, as we can find other ways to reduce the volatility that's caused by these occasions, we'll continue to pursue that.

因此，讓我來談談這個問題的後半部分，即風險偏好的類型，因為我認為你必須從兩種不同的角度來看待它。首先，我們對長期調整價格和成本的計劃結構方式感到滿意，我們知道它為業務增長提供了優勢，並提供了更有利可圖的長期結構。但與此同時，我們肯定不喜歡這樣一個大的索賠季度。如您所知，當我們在 2019 年這樣做時，我們確實為個人購買了 100 萬美元的保險限額。隨著今年的過去，我們還將繼續審視和評估這一點。我們之前已經引用過下限。當然，我們會像每年一樣對此進行研究。我還要說的是，我們會持續研究其他可能性，以消除與此類季度相關的一些波動性，以及這對我們在公開市場上的影響。所以我們繼續追求這些事情。所以我想說的是，我們仍然希望以這種方式經營業務。但當然，由於我們可以找到其他方法來減少這些事件造成的波動，因此我們將繼續追求這一目標。

That's helpful. I guess for my follow-up question, I wanted to ask on capital allocation and maybe the capacity you have for repurchases in 2023, especially in light of the increased authorization and I think, Doug, your comments on your intention to be a bit more aggressive there. Can you just flesh out the type of capacity you have this year to put back into buying the stock?

這很有幫助。我想對於我的後續問題，我想問一下資本配置，也許還有您在 2023 年回購的能力，特別是考慮到授權的增加，我認為道格，您對您打算多做一點的評論那裡有侵略性。您能否具體說明今年您有哪些能力可以重新購買該股票？

Well, I think you see from the increased authorization of 2 million shares, that would give you some indication as to where the Board is currently feeling with respect to repurchase authorization, which would indicate a higher level than what we have done typically. But even if you look at it over the course of our history, we've always been a big purchaser of shares. I think if you go back to the 2019 events where we had some quarters of high elevated large claim activity, we were quite aggressive because we felt that over the long term, the business model remains very much intact. I think we obviously feel very confident in that today. So with the increased authorization, it does allow us to be more aggressive should opportunities present themselves coming off of this quarter's activity. Again, strong confidence that our long-term plans are still in place and still reasonable targets for us.

好吧，我認為您從增加 200 萬股授權中看到，這會讓您了解董事會目前對回購授權的感受，這將表明比我們通常所做的水平更高。但即使你縱觀我們的歷史，我們也一直是股票的大買家。我認為，如果你回顧一下 2019 年的事件，我們在某些季度出現了高額的大額索賠活動，我們非常激進，因為我們認為從長遠來看，商業模式仍然完好無損。我想我們今天顯然對此非常有信心。因此，隨著授權的增加，如果本季度的活動出現機會，我們確實可以更加積極主動。再次強調，我們對我們的長期計劃仍然有效並且仍然是合理的目標充滿信心。

Your next question is coming from Tobey Sommer from Truist.

您的下一個問題來自 Truist 的托比·索默 (Tobey Sommer)。

I was wondering if you could share with us your expectations and what you're hearing from your healthcare provider about whether the higher healthcare expense level may continue into 2024. I think it's been a theme and concern that people had sort of in the post-pandemic era.

我想知道您是否可以與我們分享您的期望以及您從醫療保健提供者那裡聽到的關於較高的醫療費用水平是否會持續到2024 年的信息。我認為這是人們在2024 年之後的一個主題和擔憂。大流行時代。

Yes. I think we do continue these conversations on an ongoing basis. And Tobey, as you heard from our discussion here, we did go ahead and build in just a higher pharmacy trend because there's things in there that seem they're likely -- more likely to continue than be a short-term bubble. So we do continue to monitor those things. I think that's different from this -- the large claim component. However, since we had a difficult long difficult period in 2019, that covered multiple quarters. We just used a wider range of the expectation for this year. But we -- in the conversation with our advisers and outside the company, we think we're properly managing and aligning our cost and price with the underlying trends.

是的。我認為我們確實會持續進行這些對話。托比，正如您從我們在這裡的討論中聽到的那樣，我們確實繼續推進了更高的製藥趨勢，因為其中的一些東西似乎更有可能持續下去，而不是短期泡沫。所以我們確實會繼續監控這些事情。我認為這與大額索賠部分不同。然而，由於 2019 年我們經歷了一段漫長的困難時期，涵蓋了多個季度。我們只是使用了更廣泛的今年預期。但在與顧問和公司外部的對話中，我們認為我們正在正確管理成本和價格，並使其與基本趨勢保持一致。

And for my follow-up, I'll make it two-pronged, if I could. The midyear price hike, you talked about, 1.5%. Is that applicable to all clients? Or is that sort of a new and renewing client only? And then maybe you could talk about and dig into your experience with BPA retention and maybe talk about something a little more exciting on the sales front, away from the benefits.

對於我的後續行動，如果可以的話，我將雙管齊下。你提到的年中價格上漲 1.5%。這適用於所有客戶嗎？或者這只是一種新的、更新的客戶？然後，也許您可​​以談論並深入探討您在 BPA 保留方面的經驗，也許還可以談論一些在銷售方面更令人興奮的事情，而不是好處。

Sure. So we -- when we look at -- remember, we are looking at pricing every day in our operations based on the trends that we're seeing. And we're pricing new and renewing business every day. And so when we talk about raising that -- adding another 1% to 1.5%, that began immediately when we decided that. And that adds to the typical trend increases we've been building into clients. Clients typically get an increase from us. It varies based on their experience with us. But generally speaking, customers will get an increase in the high single digits. Some will get double digits. But most of the time, it's on average, I would say, in high single digits. And then they will make their own decisions on how to lower that cost by plan, selection or how they might share cost with employees or other issues that they'll look at. So what we're saying now is we'll continue to drive that higher than the average its been, but it appears to us to be very much in line with what is going on in the marketplace at large. So we're not in a position where we've got to raise price considerably. And in response to what we see going on, we think we're comfortable with where we are and what we're able to pass on. And as you can see, we've just come off of 1.5 years of really strong pricing success with our client base. So we're very comfortable with that going forward.

當然。因此，當我們考慮時，請記住，我們每天都會根據我們所看到的趨勢來考慮我們運營中的定價。我們每天都會對新業務和續訂業務進行定價。因此，當我們談論提高這一點時——再增加 1% 到 1.5%，當我們做出決定時，就立即開始了。這增加了我們一直在客戶中建立的典型趨勢。客戶通常會從我們這裡得到增加。這取決於他們與我們合作的經驗。但一般來說，客戶會獲得高個位數的增長。有些人會得到兩位數。但我想說，大多數時候，平均而言，它是高個位數。然後他們將自行決定如何通過計劃、選擇或如何與員工分攤成本或他們將考慮的其他問題來降低成本。因此，我們現在所說的是，我們將繼續推動這一水平高於平均水平，但在我們看來，這與整個市場的情況非常一致。因此，我們沒有必要大幅提高價格。針對我們所看到的情況，我們認為我們對自己所處的位置以及我們能夠傳遞的內容感到滿意。正如您所看到的，我們剛剛在客戶群中取得了 1.5 年真正強勁的定價成功。所以我們對未來的發展感到非常滿意。

So now on to the exciting part on the growth side, yes, I'm very excited about really, everything we're doing in our organization around the core business and the incentives that we've changed to direct behavior at the appropriate things at the appropriate time. Also the WX element that we also incented in such a way that we're seeing the lower turnover year-to-date, and that has a dramatic potential effect. And then, of course, the other factor that I always want to focus on is how successful we were in mid-market, and we are building that team and building that pipeline for more consistent and predictable growth on the mid-market front. So all 3 of those pieces together really point to a positive growth outlook for the company. even though we've been in a period of time when growth in the business is below the double-digit number, we still had the highest growth rate in the industry. But I think as these things really take effect, there's this long-term potential for improved sales efficiency from less turnover. And in addition to that, it's also lower cost, dramatically lower cost, when you have lower turnover. So that kind of has a double dip positive effect, and we're excited about where we are on that front. Still a lot of work to do, but we're really poised for an excellent second half.

現在，關於增長方面令人興奮的部分，是的，我真的非常興奮，我們在我們的組織中圍繞核心業務所做的一切，以及我們已經改變的激勵措施，以指導在適當的事情上的行為適當的時間。此外，我們還以這樣的方式刺激了 WX 元素，我們看到今年迄今為止的營業額較低，這具有巨大的潛在影響。當然，我一直想關注的另一個因素是我們在中端市場的成功程度，我們正在組建團隊並建立管道，以實現中端市場更加一致和可預測的增長。因此，所有這三個部分確實表明了公司的積極增長前景。儘管我們曾經經歷過業務增長低於兩位數的一段時間，但我們仍然是行業中最高的增長率。但我認為，隨著這些事情真正生效，從長遠來看，通過減少營業額來提高銷售效率是有潛力的。除此之外，當營業額較低時，成本也會降低，顯著降低。因此，這會產生二次探底的積極影響，我們對我們在這方面的進展感到興奮。還有很多工作要做，但我們已經做好了下半場出色表現的準備。

Your next question is coming from Mark Marcon of Baird.

您的下一個問題來自貝爾德 (Baird) 的馬克·馬孔 (Mark Marcon)。

I've got a couple of questions. The first one just basically relates again to a little bit more detail with regards to the higher healthcare claims. And what I'm wondering specifically is can you talk a little bit more about what's going on on the pharmaceutical side, which seems like it will be an ongoing trend. And then on the larger claims, did you find that it's just that you had more severe incidents? Or is there also some inflation for some higher incidents. In other words, is treating the same type of cancer significantly more expensive today than it used to be or are heart attacks more expensive than they used to be. Obviously, labor costs are going up within hospital systems. So I'm wondering if that's part of what we're seeing.

我有幾個問題。第一個基本上再次涉及有關更高醫療保健索賠的更多細節。我特別想知道的是，您能否多談談製藥方面正在發生的事情，這似乎將是一個持續的趨勢。然後在更大的索賠上，您是否發現只是您遇到了更嚴重的事件？或者是否也存在一些較高事件的通貨膨脹。換句話說，現在治療同類型癌症的費用是否比以前高得多，或者心髒病發作的費用是否比以前高。顯然，醫院系統內的勞動力成本正在上升。所以我想知道這是否是我們所看到的一部分。

Well, I think on that front, that's a good point, and we do monitor exactly that. And that's generally more in the typical year-to-year trend numbers. And we work, of course, with our outside advisers and of course, with our carriers to monitor those things. But what we're really talking about this quarter, I don't think that factor is an underlying factor all the time and not different this quarter. But on the pharmacy side, I think most people have heard and you see in the marketplace, a lot of discussion about various drugs that are being used, especially more recently on the weight loss front, some of the diabetes drugs and other drugs that maybe weren't originally designed for that but are being used that way, more of a fad-type thing. And I think that's -- that may wane also because there are some long-term effects that are not positive for people. But it takes time for that to run through. And so there's also, I think, an increase in behavioral health needs, and that is also a factor that if you think about being 2 years into a period of high inflation and kind of the squeeze of the wallet for a lot of people, that has a mental and nervous effect. It has a behavioral health cost effect. And so those are the things we kind of saw underlying here. And we said look, now that is most important to build in as we see it. So we've done that. And like I said, we've done stuff on the pricing side to make sure that's all aligned going forward.

嗯，我認為在這方面，這是一個很好的觀點，我們確實對此進行了監控。這通常更多地體現在典型的逐年趨勢數字中。當然，我們與外部顧問以及我們的運營商合作來監控這些事情。但我們本季度真正談論的是，我認為這個因素並不是一直都是潛在因素，本季度也沒有什麼不同。但在藥房方面，我認為大多數人都聽說過，並且在市場上看到過，關於正在使用的各種藥物的大量討論，特別是最近在減肥方面，一些糖尿病藥物和其他藥物可能最初並不是為此設計的，但現在卻以這種方式使用，更像是一種時尚。我認為這可能會減弱，因為存在一些對人們不利的長期影響。但這需要時間才能完成。因此，我認為，行為健康需求也有所增加，這也是一個因素，如果你考慮到兩年後將進入高通脹時期，並且很多人的錢包會受到擠壓，那麼具有精神和神經作用。它具有行為健康成本效應。這些就是我們在這裡看到的一些東西。我們說看，現在這是我們認為最重要的構建。所以我們已經做到了。正如我所說，我們已經在定價方面做了一些工作，以確保未來一切都保持一致。

Great. And then with regards to implementing a modest price increase, which can be mitigated to a certain effect by the behaviors of the clients. What sort of impact would that have on sales? And then offsetting that, to what extent, Paul, can you accelerate WX to an even greater effect and take out some of the healthcare risk from the initial pricing discussion.

偉大的。然後是實施適度的提價，可以通過客戶的行為在一定程度上減輕提價的影響。這會對銷售產生什麼樣的影響？然後抵消這一點，Paul，您可以在多大程度上加速 WX 以獲得更大的效果，並從最初的定價討論中消除一些醫療風險。

Yes, that's good. We definitely -- on the WX front, one of the advantages, of course, of growing that business is it's not -- there is no medical risk in that business. So we do see that as a nice enhancement and we are intending to drive that considerably as time goes forward. It makes sense to do that. And we are -- what's happening right now is the sales team is really getting on board. We incented their effort to close WX business. And that has so many strong effects. They're adding a client base of their own that can upgrade to WO as time goes on, and they're feeling more successful early in their tenure, and that's what's lowering the turnover. So we just see a lot of advantages for WX and we are definitely moving that ball forward and expect that it can be much larger. There's other things that we're doing there that deal with some of these change in the workplace issues that I was discussing. For example, access to wages and things of that nature, other tools that can be provided to employees for wellness. We're doing that both in WX and WO on the financial wellness and other types of services that employees are demanding more and more kind of post-COVID. So we are moving ahead there. And I think looking forward to some dramatic success in WX.

是的，那很棒。當然，在 WX 方面，我們發展該業務的優勢之一是，該業務不存在醫療風險。因此，我們確實認為這是一個很好的增強，並且我們打算隨著時間的推移大力推動這一進步。這樣做是有道理的。我們現在正在發生的事情是，銷售團隊正在真正參與其中。我們鼓勵他們努力關閉 WX 業務。這有很多強大的影響。他們正在增加自己的客戶群，隨著時間的推移，這些客戶群可以升級到 WO，並且他們在任職初期感覺更加成功，這就是降低營業額的原因。所以我們看到了 WX 的很多優勢，我們肯定會向前推進，並期望它能變得更大。我們正在做其他一些事情來處理我正在討論的工作場所問題中的一些變化。例如，獲得工資和類似的東西，以及可以為員工提供的其他健康工具。我們在 WX 和 WO 都在財務健康和其他類型的服務方面這樣做，員工在疫情后越來越需要這些服務。所以我們正在那裡繼續前進。我認為期待 WX 取得一些巨大的成功。

Tobey (sic) [Mark], I think your other question with respect to the pricing adjustments that we're going to be making on the healthcare side, as we mentioned earlier, the good news is we've been above our targets on the medical pricing allocations over the course of this year. And when we look at our forecast and assuming a wide range and that some of this large claim activity continues, we're looking at making incremental pricing changes in the range of 1% to 1.5%. And looking out there in the marketplace, it's very much in line with the marketplace trends. So we don't think that pricing is going to be outside of the marketplace trends and will be very consistent and shouldn't put us at a disadvantage.

托比（原文如此）[馬克]，我認為你的另一個問題是關於我們將在醫療保健方面進行的定價調整，正如我們之前提到的，好消息是我們已經超出了我們的目標今年的醫療定價分配。當我們查看我們的預測並假設範圍很廣並且某些大型索賠活動仍在繼續時，我們正在考慮進行 1% 至 1.5% 範圍內的增量定價變化。從市場來看，它非常符合市場趨勢。因此，我們認為定價不會超出市場趨勢，並且會非常一致，不會讓我們處於不利地位。

Speaker 0

發言者 0

Thank you very much. Your next question is coming from Jeff Martin of Roth Capital Partners.

非常感謝。您的下一個問題來自羅斯資本合夥公司的傑夫·馬丁。

Doug, I wanted to get a sense when you think the potential price increases for the benefit cost allocation may be fully implemented? Is that early next year? Or is that going to be sooner than that?

道格，我想了解一下，您認為福利成本分配的潛在價格上漲可能會完全實施嗎？是明年初嗎？或者會比這更早嗎？

Yes, a significant chunk of it happens through the year-end transition and then they'll continue on through the first quarter or so of the year. But that's just that one -- that's the increased component. And we've been having strong pricing increases that are flowing in every month.

是的，其中很大一部分發生在年底過渡期間，然後它們將持續到今年第一季度左右。但僅此而已——這就是增加的部分。我們每個月的價格都在大幅上漲。

Got it. Okay. And then on the new initiative in terms of helping small businesses position for the current environment and attracting and retaining employees. Is that an added component in terms of an additional service charge? Or is that lumped in with the workforce optimization product.

知道了。好的。然後是幫助小企業適應當前環境以及吸引和留住員工的新舉措。這是額外服務費的附加組成部分嗎？或者是與勞動力優化產品混在一起。

I'm sorry, can you repeat that for me?

抱歉，您能幫我重複一遍嗎？

Well, I was just curious if that new service offering for small businesses where you hired Kathy Johnson or you brought -- elevated her to lead that effort. Is that going to be an offering that you specifically charge for as part of workforce optimization? Or is that built into the product itself?

好吧，我只是好奇你僱傭凱西·約翰遜或你帶來的為小企業提供的新服務是否會提升她領導這項工作。這是否會成為您作為勞動力優化的一部分而專門收費的一項服務？或者說這是產品本身內置的？

That's good that you bring that up because what this strategic planning and development group is all about is carefully evaluating any new things that are offered to determine the appropriate the appropriate structure for that addition. And so there will be things that will be charged for because they're outside of -- for us, we don't want to just keep adding to the bundle, so to speak, and there's certain services or products that people want to have outside of that bundle. So we'll be looking at a variety of things on every product service, every improvement that we're going to make to that group. We'll be looking at those as financial investments and looking for the return on those investments.

您提出這個問題是件好事，因為這個戰略規劃和開發小組的職責就是仔細評估所提供的任何新事物，以確定添加的適當結構。因此，有些東西會被收費，因為它們不屬於我們的範圍，可以這麼說，我們不想只是不斷地添加到捆綁包中，而且人們想要擁有某些服務或產品在該包之外。因此，我們將關注每項產品服務的各個方面，以及我們要對該群體做出的每一項改進。我們將把這些視為金融投資，並尋找這些投資的回報。

Thank you very much. We have reached the end of our question-and-answer session. I will now turn the call over to Mr. Sarvadi for any closing remarks.

非常感謝。我們的問答環節已經結束。現在，我將把電話轉交給薩爾瓦迪先生，讓他發表結束語。

Once again, we do want to thank everyone for participating today, and we look forward to a strong second half, continue to focus on our growth into the future and continuing our strong second year in our 5-year plan. So thank you once again for being a part of this today, and we look forward to talking to you next quarter. Thank you.

我們再次感謝大家今天的參與，我們期待下半年的強勁發展，繼續專注於我們未來的增長，並繼續我們五年計劃中強勁的第二年。再次感謝您今天參與其中，我們期待下個季度與您交談。謝謝。

Thank you, everybody. This does conclude today's conference call. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.

謝謝大家。今天的電話會議到此結束。此時您可以斷開線路，度過美好的一天。感謝您的參與。