Q4 2020 Insperity Inc Earnings Call
[music].
Good evening, you may mention the and I'll be your conference operator today.
And I would like to walk and everyone's guidance pretty quiet for earnings call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session. If he would like to ask the question. During this time. Please press Star then the number one on your telephone keypad. If you would like to what's kind of your question Betsy Penske.
At this time all of the back to introduce the beef speakers joining.
Joining us are pulsar body chairman of the board and chief extra copies of officer and.
And Douglas Sharp senior Vice President of Finance, Chief Financial Officer, and Treasurer at this time I'd like to turn the call a bunch of Douglas Sharp Mr. Sharp. Please go ahead.
Thank you we appreciate you joining us.
Let me begin by outlining our plan for this evening's call.
The first Paul will recap, the 'twenty and 'twenty year and discuss the major initiatives of our 'twenty 'twenty one plan and.
And I will discuss the details of our fourth quarter and full year, 'twenty and 'twenty financial results.
And provide our financial guidance for the first quarter and full year 'twenty 'twenty one.
We will then end the call with the question and answer session.
Now before we begin I would like to remind you that Mr. <unk> body or I may make forward looking statements during todays 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.
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.
At this point I'll turn the call over to Paul.
Thank you Doug and thank you all for joining our call.
And my comments today will address three areas of interest for and sparing <unk> stockholders.
First I will discuss our strong Q4 and full year 2020 results highlighting our success throughout the pandemic.
Second I will address our year and transition into 2021 and the trends driving our game plan for this year on.
I'll finish my remarks with comments about the longer term and our efforts to begin a new five year run of unit and earnings growth for and Sperry.
Our financial results for 2020 were quite impressive with less and a 1% decline and worksite employees and the year over year increase of 15% and adjusted EBITDA, especially in light of the significant challenges faced throughout the year.
Ultimately the financial impact of shutdown related layoffs, and our client base was more than offset by lower direct costs due to the behavioral changes in response to the pandemic.
These results continue to demonstrate the resiliency of our small business client base the value of our HR services and the strength of our business model and client selection and risk management.
The highlight for the year was the way our and spare the employees immediately responded to challenges and delivered vital support to clients' worksite employees and their families. The dedicated service and personal touch from our people carrying for clients dramatically reinforced our tag.
Line HR that makes a difference and the.
Another highlight was our success transitioning to remote selling and increasing our capabilities throughout the year for both the full year and the fourth quarter, we achieved 81% of our pre COVID-19 budget and booked sales.
We believe this is excellent and considering how the budget increases each quarter throughout the year, especially in Q4, where we typically budget over 35% of our annual booked sales.
Another exceptional point and looking back at 'twenty and 'twenty is the pricing strength that continued throughout the year. This is particularly important and keeping up with long term trends and direct cost going forward.
It's also important to point out we were able to continue our technology development Roadmaps for feature improvements. While also completing many projects made necessary by legislative and regulatory changes overall I'm very pleased with our accomplishments in 'twenty and 'twenty and the agility, we displayed as an organization the.
These efforts position the company for a successful year and transition going into 'twenty and 'twenty, one and a solid plan for the new year.
Our year and transition refers to the seasonal churn in our client base between the large number of new accounts added from the fall selling campaign and client attrition in January and February from the concentration of renewal renewals that occur at this time of year.
This is especially important since the transition and sets the starting point and paid worksite employees for the new year and our recruit recurring revenue business model.
The bottom line for this year and transition as we had an excellent year and paid worksite employees from fall campaign bookings and.
And retention of all accounts are in all segments with one notable exception and that will discuss in a minute.
The paid Worksite employees added in January from previously booked new accounts was down only 6% from 2020, which is excellent considering last year was pre COVID-19 and.
When you add and accounts scheduled for first payroll and February we expect to be down only 2% and worksite employees from new accounts for the full year and transition period compared to last year.
Our year and retention was equally impressive under these conditions as paid worksite employees subtracted from terminating accounts was even with last year, among our smallest accounts and improved by double digits and our core emerging growth and mid market segments. This validates the value we delivered.
Last year, and bodes very well for our growth going forward the <unk>.
And one exception and this year and transition as the unexpected loss of our largest account we've ever had in our enterprise segment that paid 6800 Worksite employees in December.
We expect this account to renew for 2021. However, we were notified and mid November they were taking the HR function back in house.
This account was the U S subsidiary of a large international firm that started with US with only 60 employees six years ago. We served this company very well and delivered the platform that supported their exceptional growth from an average of 240 employees and 2015 to of 4800.
And in 2020.
This account is actually a great success story for and Sperry, which we expect to use and future marketing efforts. We also learned a tremendous amount, we can leverage and the future regarding serving fast growing enterprise customers.
Also it's important to note the gross profit contribution per Worksite employee and our pricing model goes down as the account size goes up so even though this account represented about 2% of our Worksite employees and 2020 and represented only 1% of our gross profit contribution.
This account grew into one of the kind for us as our remaining enterprise accounts represent less than 3% of our Worksite employee base with no account exceeding 2000 employees today.
So our growth plan for 2021 includes the lower starting point and paid Worksite employees for Q1, followed by growth acceleration over the balance of the year driven by the current trends and sales retention.
And growth and our client base.
We expect to build on the sales momentum from the fall campaign and our recent virtual sales convention. We are beginning this year with some very positive underlying trends and our sales effort as we extend the best practices and remote selling across the business performance advisor team.
First even though the number of proposals for our flagship workforce optimization solution and the fourth quarter was down 13% from the same period and the prior year. The number of accounts and sold was up 2% due to a 17% improvement and our closing rate.
Secondly, as we enter the new year, we reset our BPA is into the perform into performance tiers. They they achieved through their production and the prior year, we build the overall budget for the new year off these individual production levels to set expectations for the year ahead.
Over the past year, we had significant movement up through the tears demonstrating the success of our long term plan of growing and training the BPA sales team.
And this has been occurring to some degree in recent years. However, the impact is expected to be larger this year as fewer of these b P. As with improving performance are flowing into management roles. As a result, we expect the sales efficiency gain this year just from the higher percentage of BP as that are in the higher tiers.
This maturity of our sales organization allows for sales growth and momentum without hiring as many new ppas.
We also are continuing to hold most of our meetings with prospects remotely through zoom meetings, we expect as the pandemic moderates our sales opportunities will increase and mixing and face to face meetings may have a positive effect on sales efficiency relative to our outlook for two other growth drivers we expect to continue.
To drive high levels of client retention over the balance of the year. However, the full year number will be weighed down by the large account that recently terminated.
We expect growth and the client base to be on par with the underlying trends, we experienced and the last half of last year in the new hires and regular terminations the.
This analysis excludes COVID-19 related furloughs and those employees that later returned to work.
This level of growth and the client base implied for 'twenty and 'twenty, one would be and improvement from last year. However, still of the lowest we've experienced and recent prior years.
Our plan for profitability for this year factors and some pressure at the gross profit line from normalization of health care claims and uptick and unemployment cost and following our normal practice and estimating workers' compensation expense, where we start the year with a conservative estimate and hopefully we'll earn some upside from our efforts and <unk>.
Safety and claims settlement over the course of the year.
We are comfortable that our strong pricing over the last 18 months or so.
And as effectively met our targets for matching price and cost and these programs, we expect to earn an appropriate fee with and our historical range for managing these programs.
Our priorities for our operating plan for 2021 are focused on initiatives needed to regain our growth momentum and post COVID-19.
Our goal is to lay the groundwork over the balance of this year for consistent predictable dudgeon and double digit unit and earnings growth like we experienced from 2015 to 2019.
We expect to continue to invest and growing the BPA team. However, mostly in the last half of the year as we benefit from the tier movement and the first half we are continuing to refine our marketing efforts to targeted prospects to drive lead generation of accounts more likely to be a good fit for and Sperry we made good progress.
Aggress on this front, increasing our digital spend and the fourth quarter and increasing the percentage of booked accounts coming from our marketing programs to 55%.
We expect to continue to invest and technology development to support our client base and implement sales force to improve our already best in class sales and service results.
Sales force is a significant and important investment for the company, which we believe will provide and enhanced platform to support our continuous improvement and service excellent standards.
Ultimately, we expect to capture more data and more information more easily providing the opportunity to leverage and optimize the use of our data to the benefit of our clients.
Applying the sales force analytics and AI against our data on a consolidated platform will give us the best view, we've ever had across all products prospects and customers.
One final observation and important to note is the step up and interactions with our clients initially caused by the pandemic. Our total inquiries per week from our clients more than doubled last April and has not receded to previous levels. I believe this new level of ongoing interaction and support of our clients.
Is one of the primary reasons for the double digit improvement and retention we are experiencing across most of our client segments. Our clients are relying more heavily on our services and experiencing HR that makes the difference from our unique premium service model.
In addition, we are beginning this year with 8% more clients and we had a year ago, while our average account size is down by about one and a half we're excited employees largely due to the pandemic and our view it's evident demand for our service is substantial and the small business community is positioned for a rebound.
In summary, I believe where and in excellent position for 2020 want to set the stage for growth acceleration this year.
And for sustained growth and the long term. This reminds me of 2014, when we are putting the finishing touches on our refined sales motion with our V P A's and improving our mid market sales and service models to improve retention.
Those refinements led to a strong five year run beginning in 2015, nearly doubling the size of the company tripling the adjusted EBITDA and increasing the valuation of the company five fold.
And I'm certainly not promising a repeat of those impressive results or guiding to those growth levels. However, I do believe we are and are positioned to take our learnings and improvements from this challenging past year and set up another impressive run of unit and earnings growth for and sparingly at this point I'd like to pay.
The call back to Doug.
Thanks, Paul.
Now, let's discuss the details behind our fourth quarter results.
We reported Q4, adjusted EPS of <unk>, 49, and adjusted EBITDA of $38 million.
These results reflect outperformance and the level of paid worksite employees compared to our expectations and the continued uncertain and challenging business environment ups.
Upside and our direct cost programs brought about by the structure and the ongoing management of these programs and some dynamics related to the pandemic and continued management of our operating costs.
As for our growth we continued the sequential increase in paid Worksite employees since the low point and may of 'twenty and 'twenty when the impact of the pandemic caused many of our clients to furlough of permanently lay off their employees.
On a recovery and the level of paid Worksite employees. Since this period was driven by the return to work of many of the many of these employees.
And effective selling and client retention.
Q4 average paid worksite employees increased 3% sequentially over the Q3 period coming off the 2% sequential increase and Q3 over Q2.
During Q for all three growth drivers exceeded our expectations.
Gross profit increased by three 5% over Q4 of 2019, despite one 8% fewer paid worksite employees.
Due to improved pricing and the higher than expected contributions from our benefit and workers' compensation programs.
During Q4 total benefit costs returned closer to pre pandemic levels as lower health care utilization was largely the offs largely offset by COVID-19 testing and treatment costs.
However, previously deferred care costs did not materialize at the forecasted level.
Our workers compensation program continue to perform well due to ongoing management of safety practices and claims.
And to a lesser degree of favorable net impact from the reduction of workers' comp and workers' compensation claims associated with the work from home status of many of our clients' employees.
Now turning to operating expenses, we continue to manage cost commensurate with the current operating environment, while also investing and our long term growth plan.
Operating expenses, excluding stock based compensation and depreciation and amortization increased just 5% over Q4 of 2019.
Fourth quarter operating expenses included costs associated with the 9% increase and the average number of trains trained business performance advisors and.
And the opening of six new sales offices throughout 2020.
We held the other corporate employee head count flat over the past year, due and a large part to the effort and the effectiveness of our staff and the face of increased HR service demands from within our client base.
Cost savings continue to be realized and other areas of the business both through effective management and because of the pandemic related cancellations of shutdowns.
These areas include G&A costs, such as travel and training and costs associated with certain sales and marketing events.
The Q4 year over year increase and total operating expenses of 19% was impacted by increased stock based compensation costs.
This increase was driven primarily by our outperformance and the level of paid Worksite employees and earnings and the face of the significant challenges brought about by the pandemic.
Now turning to our full year 2020 operating results adjusted EBITDA increased 15% over 2019, 202 hundred $89 million.
And adjusted EPS increased 12% to $4 64.
The average number of paid Worksite employees for the full year 2020 declined by less than 1% and a very challenging environment.
Worksite employees paid from new sales declined by only one 5% from 2019 largely on the success of our remote selling.
Client retention averaged 82% due to the resilient and resiliency of our clients and our quick and effective response to assist our clients with our premium level of HR services.
These same factors contributed to our clients the ability to return a significant amount of their initially furloughed staff to a full time status and.
And clients and certain industries, adding to their employee base over the course of the year.
Gross profit increased 10% over 2019 as improved pricing and the favorable impact of our benefit and workers' compensation programs.
More than offset the slight decline in paid worksite employees and the comprehensive service fee credits.
And provided to our clients during Q2.
Lower health care utilization and brought about by the pandemic resulted in 2020 benefit costs per covered employee being relatively flat compared to 2019 the.
This compares to our original pre pandemic, 'twenty and 'twenty budget, which anticipated a cost increase of approximately 3%.
And as you may recall, we were targeting benefit pricing increases slightly above the 'twenty and 'twenty budgeted cost trend to address increased costs associated with 2019 as elevated large claim activity.
We ended 2020 slightly exceeding these pricing targets.
Now operating expenses, excluding stock based comp and depreciation and amortization increased by just five and 5% and 2020 over 2019 as.
And as growth product and technology investments were partially offset by cost savings and the other areas that I mentioned and a few minutes ago.
Total operating expenses increased 12% over 2019 and included the increase and stock based comp tied to our outperformance.
Our execution combined with the dynamics of the pandemic produced strong cash flow over the course of 2020.
We ended the year with a solid balance sheet, while continuing to invest and the business and providing strong return to our shareholders.
We invested 90 890.
$98 million and capital expenditures during the year to support the support our recent and future growth.
And returned $161 million to shareholders through our dividend and share repurchase programs.
We repurchased a total of one 4 million shares during 2020 at a cost of $99 million increased our dividend rate by 33% and February and paid out of total of $62 million and dividends.
We ended the year with $212 million of adjusted cash and the $130 million available under our $500 million credit facilities.
Now, let me provide our 2021 guidance, which incorporates wider than usual growth and earnings range is given the ongoing uncertainty and the macro environment.
As for our growth metric, we are forecasting of 2% the 6% increase and the average number of paid worksite employees for the full year 2021.
We expect to begin this year with of one 5% the two 5% decline in Q1.
And when compared to the pre pre pandemic 'twenty and 'twenty period.
The sequential decline from Q4 of 2020 includes the loss of the large account, which Paul just mentioned.
And our subsequent subsequent to Q1, our growth is expected to be driven by the recent growth and tenure and the number of trained business performance advisors.
Continuing solid core client retention and modest net hiring and our client base brought about by our gradual improvement and the business environment.
And our range of forecasted growth is largely dictated by the timing and degree of such an improvement and its impact on the three drivers of our growth.
As for our gross profit area you may recall that our key metric is gross profit per worksite employee per month.
Which takes into account our co employment service fee pricing, the pricing and cost management of our direct cost programs, including benefits workers' compensation and payroll taxes, along with contributions from our traditional employment and the other products.
And may be helpful to begin our discussion with the review of recent history. The game some perspective on how we are currently reviewing.
'twenty one.
This metric average $261 in 2017, $272, and 2018, $259 and 2019 and $287 and 2020.
Now, let's take a few minutes to break down some of the details as we look at and our expectations for 2021.
Our co employment service fee pricing as expected is impacted by new and renewal pricing and any changes and client mix.
This pricing remained strong throughout 2020 and throughout the recent sales and renewal period.
And when combined with our pricing targets of a range of 2021, and a favorable client mix impact from the loss of the larger lower price. The count we expect our overall service free pricing to improve over 'twenty and 'twenty.
Also you may recall that comprehensive service fee credits were provided to our clients and Q2 of 2020, which slowly the prior years overall service fee.
We expect the more normal overall benefit cost trend in 2021, when taking into account the expected increase and health care utilization over the course of course of the year and our best estimate of Covid vaccination and treatment costs.
When you consider the flat cost trend in 2020, this would equate to an expected 2021 cost increase of 6% 7%.
This includes an outsized Q2 year over year increase given the extraordinary low claims and Q2 of 2020.
Now if you take the step back the 2019 this equates annualized cost trends of approximately 3% from 2019 through 2021.
Since we have taken of steady approach to pricing over the last two years, we believe we have effectively matched our pricing.
With this two year cost trends.
However, this is still there is still a considerable amount of uncertainty around benefit utilization and Covid case count treatments and vaccines.
This uncertainty contributes to a wide and normal range and our earnings guidance.
As far of workers' compensation cost area.
Experienced improving cost trends over recent years from ongoing management of client selection safety and claims.
Similar to prior years, we intend to budget 2021, and conservatively and allow for these factors the possibly drive additional cost benefit throughout the year.
As for the payroll tax area, we are projecting an increase and state unemployment tax rates as a result of the pandemic impact on unemployment.
Many states of issued rules to exclude COVID-19 related on unemployment claims from the employers 'twenty 'twenty one suite of rate.
However, as we sit here today the majority of the states have not yet finalized their rates.
Accordingly, and in effort to estimate our 'twenty and 'twenty and rate 2021 rates, we have communicated with certain larger states to verify their intentions and reform detail analysis and modeling.
We have incorporated these of these estimated rates and our outlook and.
And we expect this area to have of $1 reduction and gross profit per worksite employee per month for the full year 2021.
And the five dollar reduction in Q1 2021 due to the seasonality of our unemployment taxes.
So from a bottom line when you combine and each of these factors we are budgeting and gross profit per worksite employee at a level closer to the 2018 and ease of the high point of 2020 all of that.
And the low point of 2019.
Now as I mentioned earlier in addition to the upside and the gross profit area and 2020, we also managed operating cost significantly below our 2020 budget.
Our overall 'twenty and 'twenty 'twenty 'twenty, one operating plan balance is maintaining certain costs at 2020 levels with investing and targeted initiatives important to our long term growth.
With the growth in the number of BPA and throughout 2020 and their increased tenure, we intend to manage the growth and a number of hard BPA as to about 4% for just 4% in 'twenty and 'twenty one.
We intend to manage the other corporate head count to a 2% increase.
We are budgeting for a return in 'twenty and 'twenty, one of a portion of marketing and business promotion costs, which were not incurred in 2020 due to due to the pandemic shutdown.
We have also increased on lead generation and budget.
As for our G&A costs, we experienced significant savings during 2020, particularly in the area of travel and training.
We plan to continue to manage these costs at the slower level and we will assess the opportunity and need for any increased activity as pandemic conditions improve.
And as Paul just mentioned and an important initiative. This year is the purchase and implementation of sales force.
Our 'twenty 'twenty one budget includes the product and estimated implementation costs associated with this effort.
During the implementation phase, we will experience some duplication and cost while still using our current sales and service software.
However, after implementation any incremental cost over and above our current software solutions are expected to be minimal.
As for 'twenty and 'twenty, one we are budgeting for approximately $6 million and incremental costs related to the sales Force initiative.
So when considering all of these factors we are budgeting for a 4% increase and cash operating costs and 'twenty 'twenty, one over 'twenty and 'twenty.
As for our non cash items, we have budgeted for a decrease and stock based compensation when compared to 2020 due to the to the performance based feature of our stock Awards and.
The setting of new targets for the 2021 year.
We have budgeted for a $10 million increase and depreciation and amortization over 2020 associated with software development costs related to the recent improvements and our payroll and HCM system, which were previously capitalized and the <unk>.
Recent expansion of our corporate facilities.
So in conclusion, we are forecasting improved worksite employee growth of 2% the 6% and.
And bind with lower gross profit per Worksite employee and a slight increase in cash operating costs per worksite employee.
Given the continued uncertainty and the macro business environment. We believe it's prudent to forecast of wider than typical range of 225 million to 275 million and adjusted EBITDA.
As for adjusted EPS, we are forecasting full year 2021, and a range of $3 27 to $4 20.
This assumes an estimated tax rate of 26, 5% generally consistent with our 'twenty and 'twenty right.
And the increase in depreciation and amortization amortization that I just discussed.
We are forecasting Q1, adjusted EBITDA and a range of $84 million to $103 million and adjusted EPS from a dollar of 37 to $1 72.
As for our quarterly earnings pattern and keep in mind that our Q1 earnings results are typically higher than subsequent quarters. In particular, we arent, we typically earn a higher level of payroll tax surplus prior to worksite employees, reaching their taxable wage limits and benefit costs are lower in Q1 and step up over the remainder of the year and.
The <unk> are met.
Now at this time I'd like to open up the call for questions.
Thank you.
As a reminder, if you would like to ask the question you May Press Star one on your telephone keypad.
Your first question from Josh embargo.
Your line is now open.
Thank you good afternoon Paul.
You guys are doing well.
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The question I had the wrong.
And from the <unk>.
Sales force implementation can you just give a sense of when you think the implementation will be complete and then you can eliminate the true.
Costs.
Yes, sure Jess and welcome and thanks for your questions.
We expect the Salesforce implementation to go.
Over this year and next year.
And we're starting and the sales and marketing areas and then moving over into the service and balance of the company next year. So the kind of bubble of expense will be and this year and next and after that you kind of and our normal run rate.
Alright, great and.
You had some comments around.
Utilizing client data and analytic insights and.
I'm curious is that something that you can package and.
Price.
Or is it included in and the client relationship.
So you cut out a little bit and the in the question you want to say that one more time, yes, so I'm sorry about that so it.
And data and analytic insights and gain from sales force I'm curious is that the ancillary.
Product and <unk>.
But and to your clients or is that and that theyre just kind of automatically get.
No actually we're going to be the biggest the customer is going to benefit from how we're able to access all of the data and information on their behalf. So it really isn't product ties.
So much for the customer it just becomes ingrained and how we serve them and also how we target new customers and bring them in and through the whole lifecycle of being of client we expect it to be of much more.
Cohesive experience for the customer.
With less effort for our <unk>.
Service providers to achieve those high service standards that we put out for the client so for our clients. So.
We expect it will have a tremendous benefit internally and will translate into.
Better service experience for our clients.
And the next question from Mark Marcon.
Your line is now open.
Good afternoon, and thanks for taking my question.
And one of them.
Alright can you talk a little bit more about your.
The pricing.
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The.
Plans for for your clients for this year.
And it sounds like Youre expecting the cost to go up by 6% to 7%, but I'm wondering.
How does the pricing look and.
And the and the case that there is.
Higher increase usage of kind of the deferred electives.
How do we how do we think about the variance there.
Obviously, you've got a pretty wide range in terms of your guidance and your accounting for that but just wondering if you could kind of set the parameters in terms of kind of high low and how youre thinking about guidance.
Absolutely I think it's important to note that where you have to really look at the benefit programs over a longer term, especially because of these last couple of years 19 and 20.
And.
And then as you look into 2021, youre coming off of that flat trend of year that is up and our view artificially flat because of the onset of the pandemic and the shutdowns and the behavior that came out of that so the underlying trends have continued and so that's kind of how how we.
Have baked it into the cost side and as you know so that kind of translates to a couple of three to three 5% increases back to back in 'twenty and then again in 'twenty one.
That's why it's 6% to 7% off of last year's flat level over 2019 now on the pricing side as we've mentioned.
Over the last 18 months or so we've continued to move pricing at a level to make sure that there's a good match.
And we earn.
The the appropriate have the appropriate level of allocation I should say to make sure you're covering and the cost escalation. So we did that very effectively last year and so for this year going forward, our pricing would look like possibly around the 4%.
Level, and then customers make decisions.
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To bring those costs down individuals' make decisions et cetera to bring their pricing down but.
So we feel like we're really in great shape matching price and cost.
Most of the kind of wider range.
It relates to just the dynamic it's just hard to tell how and when these COVID-19 costs come back in or whether there.
Our further.
And possibly vaccination cost or.
It could even go the other way with shutdowns and and.
And limiting.
Utilization. So there's just a lot of variables and there this year, but in terms of.
Accounting for and pricing in a proper level of trend and the bigger picture.
We feel real strong where and we're in good shape there.
And then I'm wondering if you could talk a little bit about any sort of cap on the on a per claim basis, and then with regards to the existing client base.
To what extent are you baking and the potential for some of your existing clients to bring back employees that they havent brought back yet from from for a lower oil.
Yeah from our point of view the pretty much the.
We turned to work from furloughs, we've pretty much past that at this point.
People either came back to work or moved on to what I'd call a.
Layoffs.
And there may be a small amount that of that left but.
In terms of the change it and growth in the client base that we've kind of implied and budgeted in for this year.
We look to the underlying dynamic of kind of regular new hires and regular.
Layoffs that were going on.
Over the last.
Half of the year and into this year and kind of built off of that.
So we think that's a good conservative way to look at and if things improve and the business climate that may be some upside there.
And then the first part of your question was about the benefits and.
In terms of the cap and as you may remember, we put in a 1 million dollar stop loss, if you will or pooling limit.
And our plan with our carrier last year.
And we continued that into this year over the course of this year, we will likely.
And run some numbers and investigate what it's like for us on the going forward.
And at that level, and maybe some lower some lower and limit levels, but we like the way things worked out last year.
And.
We will continue to evaluate it and see if there is an appropriate if theres more risk to offload thats appropriate for and the right spot.
Your next question from Jeff Martin Your line is now open.
Thanks, Good afternoon guys.
Hi, Jeff.
Hi, I wanted to touch on growth acceleration throughout the balance of year of the year, if things go to plan and what kind of.
Growth rate or are we looking at exiting the year in terms of the Worksite employee base you get into high single digits.
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Seven 8% or so as you get into the latter part of the year.
And you really and a good position if you can.
Kind of have a good year and transition where youre about EBIT as you go across the year and you are in a great position to ramp right up to double digit growth. That's that's the plan.
And it's.
Minds of AEP can think back to that's why I kind of think about the 2014 period.
Kind of did that we went from pretty flat relative to 3% and this and the third quarter and 6% and the.
Fourth and then nine and the first the following year on year up to double digit growth.
And then had a really nice extended run at that level. So that's where I'm focused where we've got these pieces in place there is a little tweaking here and there get sales force in place.
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Continue the BPA training and the remote selling and and.
And mixing in some face to face visits and optimizing that process and I think we're in really good shape with also the recent improvement that we've seen kind of the way the customers are valuing our service and and <unk>.
Double digit improvements in retention over the year and transition and our core emerging growth and mid market segments. So that reminds me of that period, when we had a step up and improvement in retention and it was part of fuel and that.
The extended run of pretty high growth rates, So that's where I see us today.
So you have this growth acceleration across the balance of the year and.
And pretty good shape to see that come about.
Okay. That's encouraging one thing we haven't heard much of N of while as you know the ancillary.
Service products.
And that are either of lead generation source or and enhancement to our.
On the offering and how is.
Is that tracking and could you give us maybe some qualitative and quantitative sense of of.
How that part of the business is running right now sure.
Making some good progress, especially with our.
With our workforce acceleration offering which is the traditional our traditional employment solutions division and of.
When the when Covid hit.
What was kind of all hands on deck at the core business, but shortly thereafter as remote selling went into place and start to become effective we started to see and.
Improvement and then we had a very strong fourth quarter recovery and and the sale of our workforce acceleration offering and so we're kind of back on track on that front, where I didn't talk about it much this time, but I'll probably include that in our our next visit.
And the last question from Tobey Sommer of your line is now open.
Hi, Thanks.
Could you discuss your sales pipeline of efficiency metrics and how they are kind of evolving from through the pandemic until now and what you maybe toggle and differently in 2021 based on what you've learned and kind of what you expect from the next few quarters.
Sure Tobey. Thank you for the question.
It's really interesting right now because I think what happened through the pandemic.
First of all when it came about because we sell a complicated service offering directly to small and medium sized business client owners.
It was.
I wondered how that was really going to work and for us to achieve over 80% of our pre COVID-19 budget throughout that period was really impressive to me and we are proud of our team for adapting and being able to do that but what we saw from the funnel metrics during that period was the.
A significant drop off in the number of.
Leads the lead flow the inquiries coming in and folks who are in the.
Ready to talk about.
Out of new product or service.
And as an example, and the fourth quarter, we were 13% down at that top of the funnel metric, but what we also saw as the ones who were ready to talk to of seem to be more serious so closing rates were.
We're a little better and got significantly better as we went through the.
The year, and even to up to 17% improvement and our.
The closing for a rate of the ones that we actually proposed offering.
And that was a great step up also what was going on was further refinement of our targeting of accounts to try and get more customers in the funnel that are more serious and more closer to being ready there are better fit closer to being ready for.
And for taking action and we've made some progress there and that's why I think we have more progress to make that's where I think sales force is going to really help us even.
Refine that further.
And so all of those kind of come into the mix, but also think as the economy improves.
Or as the pandemic waned or lightens up.
You'll get more Todd.
Top of the funnel flow.
And hopefully.
We're able to continue to add more at the top of that that fit this profile of that we're that we're working on it.
And from a client segmentation and offering perspective sort of PEO non PEO.
Services, what is growing more quickly and or more slowly and.
How would you explain those differentials sort of with one of the drivers.
Yes, well.
At this point.
We're seeing this period of growth acceleration.
Parents for on the on the co employment side and on the other offerings.
We're really focused on leading the way with our traditional services bundle that's.
It gets people in the tent and.
And.
We've done some optimizing.
For the taking the information from the year and into the new year.
And kind of went over everything with R V.
BPA team at our.
Virtual convention.
And so we're I think we're on a good place to really build that.
Feeder system. If you will on that we've been trying to put into place and so we're really focused on that we do have the other.
Items for example are our four one K offering has just been we've had a really good year there.
And not only current accounts coming in but also on the new accounts and what percentage of those came on.
We did also make important move I think during the pandemic, we made our recruiting services.
Part of the deal to help the customer during this downtime and and that helped us to get some accounts and helps to.
Demonstrate how we were supporting customers through the period, we're continuing that right now and we will see when we reverse that back out to charging for it again so.
The different offerings that we have.
We used to.
And at different times too.
To support the clients.
And.
Expand that that base of traditional solutions.
Thanks last one could you catch us up on.
What client activity and success was like and the second PPP round compared to the first.
Yeah.
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That didn't have near the visibility here that it did and the first round, but I think that's because people were.
Knew what to do knew how to do it and.
And all of our reporting and stuff was ready to rock and roll.
So and keep in mind and our client base.
And as we spoke about earlier, we have we don't have that big of base in the most severely.
Heart as of.
Industries out there and the travel and.
Restaurants, those kind of things.
So I would say we had a lot fewer clients get in line and take the second round.
But they were certainly able to do it quickly and effectively and for many customers that's certainly helping.
There are no question there are no other questions at this time.
I would like to turn it back to you.
On the call over to Mr. Sir Bobby.
Thank you very much and once again, thank everybody for participating on our call today, and we look forward to interacting with you too with you.
Two conference calls the zoom meetings, and maybe eventually even face to face. So thank you again for participating.
Ladies and gentlemen, this concludes today's conference call. Thank you everyone for participating you may now disconnect.
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