Q2 2020 TriNet Group Inc Earnings Call
[music].
Good day and welcome to the tried that second quarter twice 20 earnings conference call. All participants will be in listen only mode should you need assistance. Please signal top especially by pressing star keep followed by zero.
After today's presentation, there will be an opportunity to ask question.
Your question. Please press Star then one on your question.
Please note. This event is being recorded I'd now like turn the conference every two Alex <unk> Investor Relations. Please go.
Thank you operator, good afternoon, everyone and welcome to try to 2022nd quarter Conference call. Joining me today are burden M. goldfield, our president and CEO, Mike Murphy, our Chief Financial Officer.
<unk> remarks were pre recorded Burton will begin with an overview of our second quarter operating and financial performance.
Mike will then review our financial results in more detail and provide our forward looking guidance. We'll then open up the call for the couponing session. Before we begin please know that today's discussion will include.
2023rd quarter and for your guidance and other statements that are not historical in nature or predictive in nature.
And upon or refer to future events or conditions, such as our expectations estimates predictions strategies beliefs or other statements that might be considered forward. Looking these forward looking statements are based on management's current expectations and assumptions and are inherently subject to risks uncertainties and changes in circumstance.
That are difficult to predict and that may cause actual results to differ materially from statements be made today or in the future.
Except as may be required by law, we do not undertake to update any of these statements in light of new information future events or otherwise we encourage you to review our most recent public filings with the FCC, including our 10-K in 10-Q filings for more detailed discussion of the risks uncertainties and changes in circumstances that.
May affect our future results or the market price for stock. In addition, our discussion today will include non-GAAP financial measures, including our forward looking guidance for non-GAAP net service revenues adjusted EBITDA margin and adjusted net income per share.
For reconciliations for non-GAAP financial measures to our GAAP financial results. Please see our earnings release or 10-Q filing for second quarter, which is available on our website or through the FCC website. A reconciliation of our non-GAAP forward looking guidance to the most directly comparable GAAP measures is also available on our website.
With that I will turn the call over to Burton first opening remarks.
Thank you Alex as a result of co benign team and the subsequent economic downturn, the second quarter proved to be a complex operating environment.
I am pleased with our financial results, which are attributable to our strategy execution and the resiliency of our customers.
In the second quarter, we grew gap total revenues, 1% year over year to $948 million net service revenues grew 45% year over year to $335 million.
Professional service revenues decreased 5% year over year to $121 million.
During the second quarter insurance service revenues increased 2% year over year <unk> $827 million.
In the quarter insurance service revenues outperformed due to better than expected retention and health plan participation rate exceeding 70%. This is the highest recorded health participation rate.
We have experienced.
It is largely due to a mix shift in they try net customer base net insurance service revenues increased 106% year over year to $214 million.
The growth in our net insurance service revenues was the result of significantly lower insurance costs.
The drivers behind the decline in insurance costs were onetime in nature, and driven by lower health utilization as a result up a decrease in medical services, partially offset by coded cases, the cost savings in the second quarter worst significant.
And we intend to leverage the savings for the benefit of our customers. Our press release on July 16, announcing the return of certain administrative fees to our customers in the form a feed credit is one example of these savings. Additionally.
We are creating a recovery credit program.
Which we expect will have an even larger impact on our customers moving forward.
This program will support our incredible customers as we jointly commit to our ongoing relationship later in the call Mike will share additional details regarding this innovative and impactful program that we are announcing here today.
Our Q2 GAAP earnings per share grew 192% year over year to one dollar and 87 cents per share Q2, adjusted net income per share also grew 190% to $2.
And three cents per share from a cost perspective, we were able to actively manage our operating expenses during the quarter.
This is a direct result of previously described investments in process improvements over the last 18 months.
However, we continue to invest in these types of initiatives, including modularity and automation.
Additionally, these initiatives resulted in a significant improvement in our second quarter installed base net promoter score polling.
We realized a 33% improvement in our NPS score accelerating a multi quarter trend.
I'm very proud of this improvement in customer satisfaction, and I am thankful to our colleagues for their commitment to our customers in this difficult time.
We finished the quarter with approximately 313000, worksite employees down 3% year over year, our ending second quarter WSE count exceeded our forecast.
In late April when we reported our first quarter earnings we provided an inter quarter WSE count.
Which was between 300 and 305000 Wses.
In hindsight that volume count proved to be our intra quarter low.
In May and June with stage, three opening and the positive effects of the paycheck protection program being felt our installed base stabilized the rate of customer attrition way Austin Furloughs, all declined resulting in the trying to customer base being.
Apprised of nearly 80% white collar workers incredibly our customers returned to positive change in existing in June predominantly in our white collar verticals in the quarter, despite the difficult operating and.
Economic environment, our cash flow remained strong.
We spent $16 million repurchasing 1.4 million shares in accordance with our capital management strategy.
As previously mentioned, we experienced our highest level of health enrollment rates in Q2 at over 70%.
We found the customers who secure their health benefits through trying that are likely to staying longer with us.
Along with health benefits the challenges our customers phases resolve of Kogan 19 highlights the importance of our technology and service model for the last several years, we have been investing in our technology and service model.
The result of this investment is our omni channel service model, where we can efficiently service customers, how when and where they want to be served whether it's a high touch interaction with experts they call center transaction word chat box, we're there to risk.
Spawn too and address our customers' needs 24 hours a day.
Additionally, our mobile App is highly rated and well utilized.
We raised your way produced content, which addresses various employment benefits and government program related issues much of our content is posted on our co bid trying to business resiliency and preparedness center found on our website so far we post.
Evan Webinars with over 20000 attendees several webinars targeted the PPP Mone process as an example to date, we produce for Webinars on just PPP garnering over 10000 views.
Presently our PPP related efforts have pivoted to helping our customers generate the reports necessary to achieve PPP loan forgiveness.
Given the critical support provided by this program. We are hopeful the government will continue to support smbs through the remainder of this pandemic.
Trying to its customers are the small and medium sized businesses that are supporting our country through this crisis.
Customers might agree three D.
Re three D is a manufacturing start up which provides affordable threed printers for the global market. The re threed printer gigabyte is easily transportable.
Can use recycled plastic and allows its users to build products, where they are needed re three D. Is currently hiring full time engineering sales and manufacturing employees over the past several months in response to covert 19.
I mean re three de leveraged their internal R&D to design and prototype PPD and other life saving devices. The company mobilized its global customer base to produce necessary healthcare equipment on site, knowing regional supply gaps we.
Eliminating shipping delays working with customers like re three D. Is an example would be important role trying that plays in helping these amazing customers have a positive impact on our world.
We understand how wherever that many of our customers are still facing significant challenges as they navigate this uncertain and difficult environment. For example, our main street vertical has been hit the hardest with layoffs furloughs.
And customer attrition as we look forward uncertainty around the economic environment continues we remain cognizant that the economic recovery, maybe more drawn out than originally predicted with respect to new sales. We see continued interest in trying to.
Thats products and services the sales paradigm has shifted significantly with meetings being held remotely. This as a long dated the decision making process. However average deal size in the first half has nearly doubled year over year.
Here as we pivoted to larger customers, we expect to continue to make new sales through the balance of 2020, although at a significantly lower rate than in previous years that said, we do expect to leverage our improved customer satisfaction.
Action to drive growth through referrals as the economy rebounds. Finally, we continue to pursue inorganic growth where it makes sense for us that means exploring opportunities to expand into new geographies or into attractive.
Verticals as you saw today, we announced the acquisition of little Bird.
No bird represents our ability to identify industries, where our value proposition is particularly well suited.
Through this acquisition, we're expanding our footprint in an attractive area of our nonprofit vertical well, adding significant industry expertise, while the financial and volume impacts from this acquisition or limit is we're excited about this deal.
As it represents an expansion into one of our core verticals with a large attractive market opportunity the entire training team welcomes little bird to our company with that I will turn the call over to Mike for the financial review my.
Okay.
Thanks button.
As I review the financials.
Going to focus on the GAAP and non-GAAP numbers where appropriate.
But first on our last earnings call I previewed that our Q2 results and Twentytwenty guidance would be significantly impacted by timing is the result of Cabot 19 indices, what has happened and what we expect to happen.
Is timing includes timing of our insurance performance for the second quarter, we guided to a net insurance margin range of 19% to 23%.
And we delivered 26% as cost savings exceeded our forecast, we expect to see a rather slip. This in the second half of it 19 also impacted volume Wses as we exited the second quarter with higher wses than a full cost.
And insurance costs due to reduced utilization of health services.
Mostly offset by direct cost of credit cat.
Finally, our revenue as we began to accrue for applying recovery credit program.
Well I want separates out the Cobi 19 impact to let WSE volume I will reference how it impacted our revenue results.
As button referenced we finished the second quarter with approximately 313 Worksite employees.
A 3% decline you're ready yet.
Average WSE count for the second quarter was approximately 314000, a year or the decrease of 2% during the second quarter GAAP total revenues increased 1%, you're ready yet to $948 million.
Net service revenues grew 45% year idea to $335 million.
Yep total revenues offset by 6% of $56 million as the results of our initial accrual for recovery credit program professional service revenues for the second quarter decreased 5% year at the yen to $121 million.
While our professional service revenues in the quarter outperformed up focused figure of the decline was driven by a year or the decrease in WSE volumes and a 5% accrual for the recovery credit insurance service revenues for the second quarter increased 2% year after year to 827.
Million dollars the growth in insurance service revenues was also offset by the 6% recovery credits accrual net insurance service revenues increased 106% year at the yet to $214 million with a net insurance margin of 26% the growth in net insurance service revenues was the result.
We have reduced help utilization of all services as a result to shelter in place orders.
And lower coated 19 incidents at the shelter in place orders were effective and reducing initial positivity rates.
Combined with.
David 19 calls that was slightly lower per patient unless testing costs. As we have said on prior calls a pre cobot expectation for the net insurance margin was about 11% to 12%.
So we estimate that the net favorable impact of Kb 19 on our second quarter insurance costs with approximately $160 million.
When we exclude the impact of our recovery credit and our estimate of the favorable impact from Cobiz 19, we estimate our net service revenue was roughly flat year at the yet.
Second quarter gap effective tax rate was 26% for the quarter.
Our non-GAAP tax rate was 25.5% GAAP net income increased 174% year over year to $126 million or $1.87 cents per share compared to $46 million or 64 cents per share in the same quarter last year.
Net income increased 172% year over year to $136 million or $2.03 per share.
Compared to $50 million or 70 cents per share in the same quarter last year a.
Adjusted EBITDA for the second quarter increased 134% year over year to $199 million compared to $85 million during the prior year period for an adjusted EBITDA margin.
89% adjusted EBITDA benefited from but timing and prudent expense management as we carefully managed colleague related expenses, we closed the quarter with total cash up $637 million working capital was $364 million in the second quarter versus too.
Hundred $84 million in the first quarter of Twentytwenty through the six month ended June 30th Twentytwenty, we generated $350 million a positive corporate cash flow from operating activities and used $445 million primarily in settlement of WSE related.
Payroll tax obligations as a result total cash outflow from operations was $130 million, we spent approximately $60 million to repurchase 1.4 million shares of stock in the second quarter in accordance with capital management approach, we will continue to repurchase stock in.
The second half at a similar pace to the first half subject to the price above stoelk most of the E. P. S accretion benefit from a second half repurchases will be realized 2021, turning now to our Twentytwenty third quarter and full year outlook I will provide both GAAP and non-GAAP guidance.
And in an effort to be transparent given these unprecedented times I will provide a summary of the changes to our guidance before providing a more comprehensive review for the year, we are raising our GAAP total revenue guidance due to a higher than originally forecasted WSE count and our health.
Participation rate experienced in Q2.
Also raising the top end of our adjusted EBITDA margin range to reflect a full year opex expectations. As a result, the top end EPS guidance range is well also be raised please recognize that as we referenced previously there are significant timing differences between the first tough and the second half results.
Twentytwenty.
Just the health cost savings that we realized in the second quarter.
We expect it to reverse in the second half as we continue to the crew for the recovery credit and realize incremental Cobiz 19 insurance related costs, that's no longer offset by savings from healthcare utilization second you will see an increase in opex in the second half as we invest in growth.
And I T initiatives, we would characterize to spend as project based not permanent spending increases our top end of guidance premiums that U.S. policymakers, we'll continue to support employment and Smbs using programs like it's Paychex protection program for the balance of Twentytwenty the low.
And about guidance now it seems limited or no direct additional support of employment liquidity funding to Smbs.
GAAP revenue guidance is now informed by our volume growth assumptions under these two economic outlooks as well as our recovery credit approval when compared to our outlook last quarter, we have changed the shape WSE forecast from a steep decline followed by a rapid recovery to a shallow decline.
Which we realized in the second quarter to be followed by a much more flat recovery and later in the yes.
Also I believe new sales will continue to be low in the third and fourth quarters hindered by economic uncertainty and deferred decision, making overall, we assume the impact from the pandemic will be much more regionalized and fragmented with some areas were tending to business growth, while others were tending to various forms of business shutdown.
I'll get bread new guidance also be impacted by on recovery credit accrual, we expect to accrue most of the remainder of forecasted savings over the second half currently we anticipate this to be about 2% to 4% of GAAP revenue before we go any further let me talk through the mechanics of the recovery credit first.
The recovery credit will be accrued in financial year, Twentytwenty and payable beginning late twentytwenty through financial year 2021.
The time trying it and our clients choose to extend our relationship.
Second the accrual is classified on our balance sheet as restricted cash.
And the changes in cash flow through WSE related cash as a result of these assumptions, we now forecast up fully twentytwenty net insurance margin to be in the range of 12% to 14%.
And excluding the impact from the recovery credit and Cobiz 19 calls we have full costing us second half net insurance margin to be in the range of 10% to 11%. Finally, we expect to return to a more normalized net insurance margin in financial year 2021, now I'd like to sets out our financial guidance.
Which includes the acquisition of little but the acquisition did not materially alter our growth expectation that twentytwenty revenue all of EBITDA for the third quarter of Twentytwenty, we expect GAAP revenue to be down approximately 3%.
We expect net service revenues to be down in the range of down 22% to down 17% here I think yes.
And as I mentioned previously our third quarter net service revenue guidance is impacted by the timing of our recovery accrual and are expected cobot 19 insurance costs.
As a result, we expect our net insurance margin to be in the range of 6% to 8%.
We are forecasting an adjusted EBITDA margin in the range of 12% to 18% for the quarter.
Again, our adjusted EBITDA margin in the quota is impacted by timing related to the recovery credit accrual expected cobot 19 impacts on insurance costs, and one time Opex investments.
We expect Q3 GAAP earnings per share to be down year over year in the range of down 102% to down 93%.
Adjusted net income per share to be down here at the year in the range of down 90% to down 75%.
Turning to our full year Twentytwenty guidance.
Because of the outperformance of our volume in the second quarter.
The chain shape of us second half volume forecast.
The realized mix shift tool a white collar verticals.
And the cumulative first half financial performance, we're taking the top end about guidance higher.
Well get revenue, we now expect the year over year change to be in the range of flat to up 1%.
From a previous guidance down 8% to down 3% year I think yes.
We now full cost on net service revenue to be flat to up 5% you're ready yet. This is our previous guidance a flat to up 4% or the yes.
Our full year Twentytwenty adjusted EBITDA margin is now expected to be approximately 38% to 41% up two points at the top end.
GAAP earnings per share and now expected to be down 8% took growing 9% year over year raised from our previous guidance down 8% to down 1% Sarathy yet.
Adjusted net income per share is now expected to be down 3%.
14% race from our previous guidance down 3% to up 4% here at the yet.
With that I'll return the call to button for his closing remarks button I.
I'm very proud and be entire try and that team for the resolves the wherever in the second quarter in the face of co bid 19.
The positive results related to revenue profit cash flow client retention NPS surveys cost control and marketing impact reflect a strong outcome as we help our customers navigate these difficult times.
I am equally proud of the many resilient customers we serve every single day.
They are the innovators and entrepreneurs, who represent the backbone of our economy. These are the companies that will lead us through our nation's recovery.
With the recovery credit program, we've announced today, we will be please stand by them as they survive and thrive.
The current try net operating model is working well and we will continue to leverage it in the phase of the uncertainty that confronts us we're passionate about helping our customers navigate and implement new constructs like PPP loan forgiveness as they become a.
Mailable, regardless if this is the new normal we're short lived blip in our country's history trying to is well positioned to provide the resources necessary to help our customers pursue their business goals and secure futures.
Yes.
Operator.
We will now begin the question and answer session to ask your question your across all the long on your question.
If you're using a speakerphone please pick up your handset president Nicky.
Your question. Please press Star then too.
It's time to it'll be a freak out until the first question.
Your first question today will come from Kingdon loan with JP Morgan. Please go ahead.
Great. Thank you. Thanks, so much for all the detail as well I know there's a.
A lot of moving pieces, maybe I'll ask on.
Let me ask on retention.
Because I understand that sales is a little bit more difficult.
The retention so stood out to me here with you with the higher MPS scores you talked about.
Higher utilization, hoping automation, helping so where is it now has your thinking on how high it can go changed given what you've learned through this initial cold period.
Sure hike engine. This is Mike the way I think about it it's really two pieces that affect top the see volume. The first is attrition, which is client attrition and what we've seen is that our patent of attrition. This year compared to this time last year was about the same.
For the half year and I think the other aspect is our clients laying off their employees and that's really the driver of the force in the performance in the second quarter.
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Gotcha Gotcha, and then if I if I heard you correctly.
For the quarter you you talked to a net service revenue was roughly flat if we excluded the recovery credit.
Was the cobot impact here is that your your messaging on how we should consider the baseline assumption here for.
For the second quarter, what to cream baseline would be is that the.
Intent.
Yes, yes, that's right.
Understood and then lastly, maybe for you burn just on the be acquisition here I think you mentioned there was relatively small in terms of impact anything else you can share in terms of size or a number of diabetes the risk model what else do they bring that you lap.
Yes, so well engine. This is really exciting for me our vertical oriented business model is working very well in this economy and it's allowed us to focus on exactly what these verticals need and what these industries are asking for.
The little Bird acquisition represents exactly that you know I'm passionate about the nonprofit space the education space as well and they have expertise that's going to come on to try that and help us get even better in this particular space there based out of New York.
A stronghold for try that and I'm excited that they're on board. The size is very very small, but the impact I can have over time with them, helping us in this particular vertical is exciting.
And that's kinda financials overall engine, it's immaterial to our financials, but to give you some color, it's about 1% or the volume.
And we believe it will be accretive at the time.
No I don't doubt the chicken amplify the growth rate. Thank you for all the detail.
Hey, Thank you to engine we appreciate.
And once again.
Question. Please press Star then one and our next question will come from and U. Nicholas with William Blair. Please go ahead.
Hi, Good afternoon. Thank you for taking my question.
The first one I wanted to ask about.
Certain in your prepared remarks, you made a comment about the average deal size.
Because nearly doubled year over year.
I'm, just hoping you could parse that out a little bit further what's driving that change and and what does that mean CRE for your addressable market more broadly sales cycles growth outlook that sort of thing.
So the b.
Solution that we're delivering is landing very well with our customer base and we believe by going up market, which was a conscious decision on the part of trying that allows us to expand that value proposition for those particular customers. So what.
You will see overtime is that we will expand on the size of the customers that come to try and that and they will avail themselves of the medical that technology and the risk transfer that our unique model offers so we're focused on the customers that really.
I understand the direct value proposition and we find that as the customers grow that value proposition grows with the customers.
Got it got it makes sense and then just.
Just on the balance sheet.
Yep nearly $650 million in cash.
At quarter end, and obviously, what what seems to be a little bit more stable of a backdrop or at least less uncertain than it was last quarter. When you drew down on your credit facility as just hoping you could speak to near and medium term capital allocation priorities.
Where repurchases fit alongside M&A outlook. Thank you.
Sure. So this is that thank you.
So that's all I've said in my prepared remarks, our plan is unchanged as it regards to capital allocation and our plan is to buy in the second half the year roughly the same amount as we purchase in the first half of the subject to the stock price.
I think as regards to M&A. Our view is that nothing has changed we're always in the market for the right kind of transaction and as we looked at multiples and the fit we'll examine those opportunities.
Great. Thank you.
Thank you.
And our next question will come from Kevin Mcveigh with Credit Suisse. Please go ahead.
Great. Thanks, Hey.
Oh, you talked about 70%.
Participation rate on the health care side, yes screen that a little bit terms, where it's been historically what do you think you can go too and just I guess any thoughts around that if it start there.
So.
Let me take that one for you.
Thank you we have historically had about.
Mid Sixtys kind of performance previously and so it represents about a four or 5% mix shift to the favorable for us right now.
And we'll see you said Patton well, you'll see is a patent no white collar participants being much more enrolled flares up blue collar as much generally much lower enrollment.
And Kevin I'll add to that that the 80% white collar mix in our book is a direct you know that it 70% as a direct outcome of the mix shift.
It's good about that is that we are finding that customers, who take our medical insurance generally stay longer with try now and that's part of the comment I was trying to make about selling the whole value proposition and finding the verticals the industries and the right customer side.
Ways, where the entire value proposition.
Resonates bass.
No that makes sense and then it's your anyway to think about.
Within that 70% as much to teach workers comp as well.
So generally Kevin all of our customers off of workers compensation and take it.
Got it that's helpful and then mission to just Mike how.
We should get a WSE over over the third fourth quarter Sherman said that if you could.
So we don't actually give out volume full.
The the guide.
Our GAAP revenue for the full year is about zero to 5% and that's a reasonable proxy net of rate can mix for our volume.
Awesome. Thank you.
Thanks, Kevin.
Our next question comes from David Grossman Stifel Financial.
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Thank you good afternoon.
There's just so many moving pieces in this environment for you guys and I am I'm wondering if maybe just kind of help us think at a high level about.
Just the impact of retention.
Well it sounds like if I heard you ride is roughly flat year over year, maybe I got that wrong, but it sounded like it was flat.
We have some deferred to FID decision, making on the new bookings and Wses is probably in it but yes, but definitely trending better than we thought so.
As we and I know you don't want to comment beyond this year, but can you give us any kind of high level way to think about how each of these different.
Factors may impact next year, excluding of course that that insurance margin, which I think we all.
I understand will be going down year over year next year.
So we don't really give out of died said 2021 I would tell you that the way we think about exiting the year is that the recovery from where we are now is going to be flatter and longer we see that.
New sales will continue at lower levels through the second quarter and through the remainder of the year and our gotten guide is a reasonable proxy for volume net of rate and mix.
Got it and did I hear you right, though that attrition was flat year over year has or the end of June.
So for the six months this year versus six months last year. It was broadly similar.
Got it okay.
As we think about David.
David I would say about that is I'm, particularly pleased with the retention rates.
Particularly pleased as you think about it with the NPS scores, we have seen a direct correlation between customer satisfaction referrals and new business, which I believe will pay off overtime I think that the recovery credit program is particularly exciting as it relates to 2021.
One.
And the team is just performing very well in this cobot environment I believe they did distinguishes us from a cobbled together set of solutions, having a single provider that can provide the technology the service and the risk reduction is showing well in this call.
Let me.
Right. So thanks for that burden. So, let's just take a step further and think about you know the professional services revenue, which I think declined less than wses, probably because of the mix shift you know to white collar, but.
As you think about your pipeline and you gave some good detail about that previously should we expect that professional services revenue to start.
Distancing itself, we're seeing more significant increases relative to the WSE count just based on what's in your sales pipeline.
Yes.
Okay.
So what I would say is that we see that are great and mix continues threats. The from professional service revenues at the same raking pace and that they got died really gives you that fit the insight into how to think about volume for the rest of the yet.
Right, but I think I was talking about mix within the volumes. So you know white person low.
So I think I think the way we're thinking about it right. Now is we may see some down scenario, we may see some more increase in mix, but in our up scenario on mix would stay broadly stable.
Got it and then just one last thing just on the worse Tom side, you know is there any.
A significant adjustments year over year or sequentially today workers' comp accrual that we should think about or through the balance of the or that you have reflected in guide.
So in our results, we posted favorable developments of about $5 million to $6 million and we haven't seen a particular significant material impact from coded right yet workers' compensation develop slowly we don't see anything changing right now.
So you don't see any material risk based on what you're seeing right now people coming back in and claiming workers comp.
Corporate worker comp or covert related workers comp claims.
It's too early to tell I think that there are various legislative pressures in different locations that could swing it one way or the other and it remains uncertainty and that's to a certain extent why we've widened the range of all potential of our guidance that he had to capture more potential outcomes.
Got it our guys congratulations good luck.
Thank you, so much and and I am incredibly humbled by this customer base and their resilience in their focus David So hopefully that will continue.
And our next question will come from them, England with Baird Bird. Please go ahead.
Hi, guys to add just couple of May just around the new business pipeline can you give us an idea of what you've seen in transit assignments or cancellations in Q2 and can we expect there's been any work that maybe you got to aspire energy jumping in Skyone Q2 that will kick in in Q3 Q4.
So I have seen deferred decision, making what I would say is in its simplest form what I'm seeing is that prospects frankly, our most concerned about the front of the shop right now they're concerned about staying in business. So while we can help with that it's difficult for them to.
Hey, good decision to change the back end in the current environment.
So we're staying focused on servicing our customers and no. There's a direct correlation between this customer satisfaction referrals and the new business, which should pay off over time.
Additionally, the marketing efforts are paying off as well.
Okay, great. Thanks, and then I'd say.
The rest.
The rest this year how are you thinking about the times for new clients, given what's going on with might work is it taking longer to deploy with your clients now will kick things quickly it.
That's an awesome question. The team is doing the onboarding remote way and they're doing a very good job. We measure the NPS results immediately after implementation, which as you know is quite complex in moving.
Quiet overnight try that and I am really thrilled with the type of scores were getting and the teams adaptability to the onboarding in these new clients a lot of this is going to depend on how the curve ultimately forms but I believe that the team is doing a good job on the implementation.
Right.
Great. Thanks, and maybe just a little more im sorry.
You mentioned you mentioned some increase.
Investment in the back half of this year, what was that related to that investment.
So as we said on the last quarter, we were going to be prudent with expenses through the rest of the yet and as a result, we have definitely being castle without colleague related expenses. We we have pivoted and remain focused on some long term investments and button discussed prices improvement.
Platform modularity issues clearly, we got the financial levers to pull if we have any changes to the outcome, but for now we think it make sense to continue to focus on the long term.
And just to add to what might just said is we're planning to invest further in 2020, particularly in process improvements in automation. We believe that the Q2 performance indicates that these investments are paying off as evidenced by our ability to work remotely.
Okay, which I have 3000 people doing and servicing our customers how they want to be service. We're continuing these investments in the third quarter and in the second half.
To be clear the spend that Mike is talking about our project based investments not a ramp up in people.
Okay, great. Thanks, very much guys.
And ladies and gentlemen, this will conclude our question and answer session also concluding today's conference we'd like to thank you for attending today's presentation and at the time you may now disconnect your lines.
Good day.