Q1 2021 Insperity Inc Earnings Call
[music].
Good afternoon. My name is Paul and I'll be your conference operator today I would like to welcome everyone to the spirit. The first quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background on <unk>.
After the Speakers' remarks, there will be a question you're on two session. If you would like to ask a question. During this time. Please press Star then the number one on your telephone keypad.
Would like to withdraw your question press the pound key.
I would like to introduce today's speakers joining us are poor Paul for body Chairman of the board and Chief Executive Officer, and Douglas Sharp Senior Vice President of Finance.
<unk> financial Officer, and Treasurer at this time I'd like to turn the call over to Douglas Sharp Sharp. Please go ahead.
Thank you. We appreciate you joining us let me begin are outlined on our plan for this evening's call for.
I'm going to discuss the details behind our first quarter 2021 financial results.
Paul will then comment on the key drivers behind our Q1 results and our plan for the remainder of the year.
I'll return to provide our financial guidance for the second quarter and an update to the full year guidance.
Then in the call with a question and answer session.
Now before I begin I would like to remind you that Mr. So 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 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.
Now, let's discuss our first quarter results, we achieved $1 82 in adjusted earnings per share a 7% increase over Q1 of 2020.
Adjusted EBITDA increased 3% to $104 million.
These results reflect the average number of paid Worksite employees in line with our expectation.
Pricing above targeted levels.
Outside in each of our direct cost programs and ongoing management of our operating costs.
As for our growth metric and as expected the average number of paid Worksite employees in Q1 on 2021 declined.
Declined by 2% compared to Q1 of 2020 and.
And included the loss of the one large enterprise accounts that we referred to in our previous earnings earnings call.
Excluding this accounts paid worksite employees would've been relatively flat sequentially from Q4, 'twenty 'twenty to Q1 of this year.
It is also important to note that during the challenges of the pandemic over the past year, we have increased the number of clients by 8%.
This was however, offset by a reduction in the average size of our clients due to pandemic related layoffs.
Now as most of you are aware the yearend transition from 'twenty to 'twenty to 'twenty, one in which we enroll new clients from our fall sales campaign.
And renew approximately 45% of our existing clients is important to our 2021 starting point and therefore, our full year growth expectations.
We are pleased to report a successful year end transition.
Worksite employees paid from new client sales were in line with our budget and we're 93% of Q1 of 'twenty 'twenty a period prior to the onset of the pandemic.
First quarter client attrition also came in on budget, including the loss of the large enterprise accounts.
When excluding this one account attrition attrition totaled 9% an improvement over Q1 of 2000 Twenty's attrition of 11%.
As for the third component of our growth the strength of our clients and the gradually improving operating environment helped.
It helped drive net hiring by our existing clients above budgeted levels.
Now, let's move on to gross profit, which increased by 7% over Q1 of 'twenty 'twenty on the 2% decline in Worksite employees.
This increase included higher than expected contributions from each of the three primary direct cost programs as.
As a result of both solid pricing and lower costs.
On the pricing side, we exceeded our targets on both the HR service fee component and each component of our direct cost pricing allocations.
As for the cost side, beginning with benefits, we continue to see a gradual return to normal levels of health care utilization coming off of the earlier stages of the pandemic how.
However, when combined with COVID-19 related vaccine testing and treatment costs overall.
Overall costs came in slightly below our expectations.
Our workers compensation program continues to perform well do per month, due primarily to our client selection and ongoing management of safety practices and claims.
When combined with some favorable impact from the reduction of claims due to the work from home status of many of our clients employees.
Q1 workers compensation costs also came in below budget.
As for the payroll tax area you may recall that at the time of our previous earnings call in which we first provided 2021 guidance, we had not yet received all state unemployment tax rates.
This was not typical as the delay with the various states still determining how pandemic related unemployment would impact their 2021 employment rates.
During Q1, we received our tax rates for most States Inc.
Collectively these rates came in below our projections.
This resulted in a higher than expected contribution to gross profit in the quarter.
In addition, the Q1 upside resulted from lower on.
Q1 upside, resulting from the lower sooner rate during the quarter, we received a $6 million federal payroll tax refund related to the prior year.
This also contributed to higher gross profit.
Now as for operating expenses, we continue to balance managing costs relative to the ongoing pandemic, while also investing in our current and long term growth plans.
We continue to grow our sales force at targeted levels with a 7% increase in the average number of trained business performance advisors.
We also increased our marketing spend related to lead generation activity and incurred costs related to our sales force implementation.
We upheld for other corporate head count relatively flat and managed other other areas, including travel related costs, and historically low levels as the economy and growth recovery from the pandemic.
In total operating expenses increased 13% over Q1 of 2021.
However were flat when excluding performance based compensation.
Now our financial position and liquidity remains strong as we continued our investment in our growth and profit.
High returns to our shareholders.
During the quarter, we repurchased 340000 shares of stock at a cost of $30 million paid out $15 million in cash dividends and invested $12 million in capital expenditures.
We ended Q1 with a $197 million of adjusted cash and $370 million of debt.
Now at this time I'd like to turn the call over to Paul.
Thank you Doug and thank you all for joining our call.
Today I'll start with some comments on our strong first quarter results and the momentum driving our outperformance leading us to raise our forecast for the year I'll for.
Follow with our view of the small and medium sized business marketplace, including recent trends in hiring in business owner sentiment, we are seeing in our client base.
I'll finish my comments with how we believe we are on a solid path.
For our return to double digit growth and profitability.
We're pleased with our strong first quarter results and the excellent execution driving many key metrics in the business from sales and retention to pricing and direct cost. In addition, hiring momentum within the client base has accelerated and appears the small and medium sized business community is primed for growth.
This quarter, our paid worksite employees from prior bookings reflected our solid Paul campaign sales and came in at <unk> 93 per cent of the same period in 2020, which was largely pre pandemic as a reminder, sales booked in a given quarter generally become paid worksite employees in a subsequent quarter as new clients and Worksite employees.
<unk> enrolled paid and then flow into revenues.
Our sales team is off to an impressive start for the year, achieving a 102% of our budgeted bookings in this quarter. The number of trained business performance advisors was up 7% and this team increased discovery calls by 16% and business profiles by 21%.
The number of new clients sold also increased 616% over the same period last year, which is notable since most of Q1 last year was pre pandemic.
However, the average number of Worksite employees per client was down reflecting the pandemic related downsizing that's occurred over the last year and also a light quarter for our mid market sales.
First quarter booked sales in mid market were below budget largely due to a strong fourth quarter that exhausted. The pipeline. However, the pipeline's rebuilding rapidly with a 27% increase in leads and a 13% increase in proposal opportunities over last year. Some of these have already converted the sold accounts.
But it was too late for them to be in the first quarter.
So I'm, particularly encouraged by recent activity and a strong workforce optimization sales pipeline across the board and we're also seeing an increase in activity related to WNS, our workforce acceleration traditional employment solution initiative.
Over the last year as we responded to the challenges of the pandemic W. Ex took somewhat of a back seat to our flagship workforce optimization co employment offering due to our focus on transitioning to remote selling we took this opportunity in the fourth quarter to tweak the product and pricing and tested these changes in <unk>.
Specific markets, we reintroduced WEX to the entire BPA team during our virtual sales convention early this year and impressive results followed W. Ex proposals increased 90% over the same period last year and book sales more than doubled in both the number of accounts and employee sold.
Our W. Ex initiatives, an important long term plan to increase sales efficiency, providing a traditional employment HR bundle alternatives at a lower price point is designed to capitalize on the investments we've already made in our team of more than 650 BP as across the country that are calling on more than 40.
<unk> thousand small businesses each year.
That'd be ex is on HR solution with excellent technology and a unique level of service intended to offer a starting point and improving the HR function for a company that's not quite ready for our comprehensive workforce optimization service.
Our goal over time is to convert some portion of the nine out of 10 prospects that we do not sell W. O into W. Ex clients and ultimately upgrade them to W. O increasing our sales efficiency, we expect to build upon this new momentum and continue our progress over the balance of the year.
Our work force optimization client retention was also a highlight this quarter improving by 15% over last year, excluding the large client loss discussed last quarter.
The strong underlying trends in this metric across our segments during the year and transition into the first quarter add to our confidence in our growth plans.
Now our performance on the gross profit area has been excellent throughout the pandemic. Despite the many moving parts and changing dynamics.
The typical mix change in accounts that occurs from Q4 to Q1 during our heavy sales and renewal campaign added to our strong pricing performance, which has been a theme throughout this period.
Clients that left in this quarter were lower price.
And contributed less to gross profit on average than the balance of our book of business, resulting in a slightly more favorable gross profit outlook. We are in a good position to meet our objective of managing price and cost to earn an appropriate management fee for administering our direct cost programs and taking some risk although there.
Still some continuing uncertainty around benefits and unemployment cost.
So our first quarter established a strong start to the new year, and we believe the underlying trends point toward growth acceleration and higher expectations for profitability for the full year.
Another reason for our confidence in the momentum in client hiring driving a recent uptick in the average number of Worksite employees per client as we entered the new year. Our average size client was down approximately 8% and the number of Worksite employees after trimming back during the Panther.
And we are now seeing a measurable recovery in this metric and a high degree of optimism from our small business client base.
Our client survey released today reflected small and medium sized company owners and Ceos with a high rate of optimism and focused on driving growth in the near term.
When asked how optimistic you are with the outlook for your business. This year, 86% were very or somewhat optimistic compared to 48% late last year and 72% in late 2019.
Further 81% of those surveyed expect organizational performance to be better than last year, and 53% expect to add employees and 35% expect to increased compensation only 3% expect to reduce staff and only 1% expect to decrease compensation.
This optimism in these expectations were not the result of coming off a bad ear. In fact, when asked about last year's results, 71% said, they were better or as expected and only 10%.
Their results were worse than expected, which we believe reflects the quality of our client base on the success of our strategy to target the best small and midsized businesses.
We also asked about top concerns and found driving growth to be the number one issue with the external uncertainty around the economy pandemic on political issues falling to second.
It's also telling that the top three HR issues on their minds, we're maintaining on building a strong culture recruiting and retaining talent and employee well being.
We also monitor many HR data points that demonstrate whether clients are acting on or are justified in their optimism, including actual hiring compensation changes overtime and commissions, we pay on behalf of clients, giving us some insight into recent client sales trends.
Most notable this quarter was commission up over 11% from the same period last year, a double digit increase for the second consecutive quarter. We generally see when commissions are up over 6% from the prior year hiring and compensation increases subsequently trend upwards.
He brings out optimism and business owners more than strong sales momentum anecdotally I can also further validate the client owner sentiment for many opportunities I had recently interacting directly with our clients. The theme of these interactions with somewhat was somewhat surprised and relieved with strong performance last year on.
Miss him about 2021 and gratitude for how inspired he supported them through the pandemic.
One of the many interesting outcomes from the intense period of HR needs from our clients last year was their discovery of the breadth and depth of our services and the level of care from our dedicated employees that has been there all along.
The result of this increase in awareness and understanding of how we can help their businesses succeed has been a continuation of an elevated level of service interactions directly with owners and top leaders in our client companies and the heightened depreciation for our services.
We are capitalists capitalizing on this with an emphasis on referrals and new advertising and marketing messages to drive sales.
As we look ahead to the balance of this year and into next considering our strong start to this year and trends we have seen so far we believe we are on a solid path to return to double digit growth and profitability.
Current trends in sales retention and hiring in our client base combined with the comparison to Q2 'twenty 'twenty shutdown related layoffs has us on track to move from minus two per say year over year growth in the first quarter, so 5% to 6% growth in the second quarter.
Our guidance for the full year implies the back half of 2021 growth rates in the high single digits, which positions us.
Two returned to double digit growth in 2022 with an effective fall campaign.
On a final note during the first quarter, we announced the retirement of Jay Mincks are executive Vice President of sales and marketing after an inspiring 31 current year career with inspire D. J played a pivotal role in the growth and development of asperity and his deep commitment to the success of the sales organization and the company.
We'll leave a tremendous legacy.
On behalf of the board of directors I want to extend our deep appreciation to Jay for his dedication and contributions to the success of inspire day over these many years and we wish him the very best in his well earned retirement at this point I'd like to pass the call back to Doug.
Thanks, Paul and let me brought on our guidance for the second quarter and an update for the full year 2021.
Based upon the details that Paul just shared including our successful start to the year and some improvement in the overall level of uncertainty, we have raised and narrowed our range of growth and earnings expectations for 2021.
We are now forecasting 4% to 6% Worksite employee growth for the full year and an improvement over our initial guidance of 2% for 6% growth.
This increase is based upon a higher starting point going into Q2.
The recent improvement in hiring trends and continuing momentum in sales and client retention.
We are forecasting Q2 paid worksite employee growth of five per cent to 6% over Q2 of 2020.
For a period, which was significantly impacted by the onset of the pandemic.
We now expect 2021 gross profit to be considerably higher than our initial budget.
Based upon our Q1 outperformance and the recent positive trends in both pricing and direct cost.
Although there continues to be some uncertainty as we come out of the pandemic.
Our forecast in these areas includes a slight improvement in our workers compensation cost trend.
Lower unemployment tax costs upon the receipt of lower than estimated rates in Q1 and.
In our benefit cost trend consistent with our initial budget.
Our operating costs continue to reflect our 2021 plan of balancing our growth initiatives with the ongoing management of costs as our growth accelerates.
So when taking into account. These factors we are forecasting adjusted EBITDA in a range of $250 million to $280 million.
Up from our initial guidance of 225 million to $275 million.
As for full year 2021 adjusted EPS, we are now forecasting a range of $3.83.
To $4 40.
Up from our previous guidance of $3.27.
$4 in 'twenty.
As for Q2, we are forecasting adjusted EBITDA in a range of 44 million to $49 million and adjusted EPS from 60 to 70.
As a reminder, our historical earnings pattern generally results in a decline from Q1 to Q2.
Q1 results are typically higher than subsequent quarters as we earn a higher level of payroll tax surplus.
For two employees, reaching their taxable wage limits.
And benefit costs are lower in Q1 and step up over the remainder of the year as deductibles are met.
Additionally, the Q2 year over year comparison is impacted by the onset of the pandemic, Inc. Q2 of 'twenty 'twenty.
And its favorable impact in our benefit plan in the prior year's period.
Now at this time I'd like to open up the call for questions.
Okay.
As a reminder, ladies and gentlemen to ask a question you will need to press star one on your telephone again star one on your telephone keypad. However, if your question has been answered and you wish to withdraw from the queue. Please press the pound key please standby, while we compile the Q&A roster.
Our first question is from the line of Tobey Sommer with tourists Securities. Your line is open.
Thank you I wanted to ask you what you're hearing from customers.
Your survey work et cetera.
What.
Net job growth could be an existing customer base, because I can recall, just two or three years ago, we were getting gosh almost for a five point works on worksite employee growth off of that measure.
Do you think there's an opportunity that's come back.
Yes, Tobey I really do I think what I'm hearing right now is that there.
There is definitely a growth mindset and theres a lot on a lot of energy and other.
You know business owners are ready to move on and they're moving on and I think theres, a theres room to recover.
The eight per cent or so.
The decline that you had in the average employees per client over that pandemic period. So I think those will recover and then you'll start to get new growth as well so.
We have we budgeted in the balance of the year for what we saw on the first quarter and move things up or some.
Not not up to the levels you were talking about that we saw back in the period you were discussing but yeah. It's definitely we've seen an uptick now in that average number beginning to move up again, and I think there's room for that to recover.
Okay, well, what kind of changes did you make to the traditional employment package that.
No provided kind of such a such a kick start after you did your.
Internal presentations for the sales force.
Yeah. So what we did basically is we.
We looked at what was in the package that wasn't getting much utilization.
Or.
It wasn't really adding as much value as we thought.
Based on what the customers were telling us and so we took some of those things out made them add ons that allowed us to reduce the price of the of that particular service.
And by doing so I think we just hit a price point that.
That was more comfortable for the for the R. V. P. A's as they compare this set of services to our comprehensive solution. So a lot of energy around it right now and hopefully we're going to build on that.
And you know.
Really start to see that strategy make.
Make a difference for us.
Thanks last one for me could you talk about.
Your your pricing and you kind of give us context for whatever the rate of changes versus recent quarters or years and maybe if you could also speak to the the normalization.
Our health care utilization and what Youre hearing and seeing about.
Acuity as well.
Sure well on the pricing side.
As you recall coming out of 2019, we were.
Or actually the last half of 2019 and throughout 2020, we were.
A little more aggressive on pricing to make sure that we had a good balance between price and cost trend.
For benefits and we were very successful throughout the course of last year in maintaining that even though as you know the cost side of the benefit program was lower because of the impact of the pandemic.
Lower utilization. So we've continued to build in the normal trend into our pricing and then the same is gone on for this year. So we're back on that for this year, we're in a very normal.
Price passing on price increases that fit with what that.
Trend.
Is implied over these last couple of years and I think we reported that last time, it's about three five per cent a year or so.
So that's what we would have built in <unk>.
We build in a little more than that in pricing to make sure. There is a cushion there. So the seven is a cost side, the three and a half per year.
Back to your second question, Doug If you want to talk a little bit about.
<unk>.
The trend compared to the cost and utilization.
Yeah, I mean, I think what we're seeing is the utilization, it's returning more toward normalized levels.
And we saw that a little bit in the prior quarter and going through to the first quarter.
But it's still probably not up to.
All the way up to the expectations I think we expect that to continue to normalize further over the second half for the year.
And we are seeing some obviously COVID-19 costs as it relates to vaccine treatment and testing costs.
Which to some extent you know are all set some of that lower utilization net that occurred this past quarter. So you.
I'll think on contains combine obviously when we went into the 2021 year and put a budget together on our on our expected benefit cost trend there was reasons to be a somewhat cautious with the uncertainty out there.
As it relates to both of those factors.
I think at the end of the day as it relates to Q1.
Our our benefit costs came in a little bit below that are below our budget.
But for the full year, you know I think we still see things trending consistent.
Consistent with the budget that we put together and the 2021 cost in the 6% to 7% range over 2020.
Thank you very much.
The next question is from the line of Josh Vogel with Sidoti Your line is on.
Thank you good afternoon, Paul on Doug Thanks for taking my questions.
Hmm.
Firstly on it you know net gains from hiring was strong in Q1, you also saw.
7% increase in revenue per Worksite employee.
The higher revenue.
Per worksite employee generally reflect higher compensation or are you seeing more hours worked on over time or I guess, it's just surprising to see net hiring gains, but also such a strong increase in revenue I'm curious are these trends sustainable.
Yeah, I think most of that revenue per.
Employee.
Comes from the fact that we have some components that day.
That go up faster like the health care component faster than inflation or even than wage inflation, but there may be also be a little bit of a mix up higher.
Higher paid employees because a lot of the layoffs for in lower paid employees. So he may have a mix change that affects that as well and keep in mind, we make our money more on a per employee per month basis. So that revenue per employee doesn't really make that big a difference to us.
That makes sense. Thank you.
I guess building off I guess, one of the earlier questions on price you know your workers comp program continues to see favorable trends and you mentioned the positive claims frequency from the work from home status.
As things return more to normal on these clients employees go back to the office setting and some is it fair to assume that frequency Canning will.
But also on the other side of it.
As clients may install a permanent work from home setting or go hybrid.
We continue to depress claims activity I'm, just curious does that change your strategy around pricing workers' comp, where the dialogue, you're having with those clients.
You know I don't think it changes our strategy any we are watching to just see what goes on in terms of behavior changes in the marketplace and see if that affects things in the long run, but you know for.
For the near term.
It's all price by what type of risk there is with given roles that employs a pay play.
In our company.
And.
Our whole book of business is.
Very very much more white collar and blue or even grey collar.
And so.
We really don't have any need to make any any changes there, but what we're keeping an eye on on anything that that may change.
Okay, Great and two more quick ones just curious are you still.
Mostly remotely selling and when you think about things getting back to normal will it become a hybrid type of approach on your end or are you going to go back more exclusively to face to face.
So first of all we are certainly still mostly.
On to remote selling however, we are starting to see more request and opportunities for face to face visit. So we're hoping that continues because I think we are.
I know we are more effective that way. If this is a trust based sale and trust is built more effectively face to face on.
I also.
<unk> us to be very proactive in how we are.
Integrated phase.
Sales to face and remote selling into our sales motion on a going forward basis I think it makes a lot of sense to hold our initial discovery call.
Remotely.
Where we can gather information and do an introductory and discovery call.
Accomplish those objectives.
Thank you can accomplish shows pretty effectively.
Totally and then also it would make your face to face call.
More effective when the first time, you're in the room together more specific to that client needs.
So if you do that that way and then you know maybe you can close it maybe it takes face to face maybe you can do that.
Remotely, but in any event I think you can squeeze the timeframe. Some we get it right and we can see more.
Prospects.
If we if this motion sales motion works, so we're going to be very proactive about.
You know trying to lead the client to this is how we should do this.
So it should take this amount of time between face to face and.
Remote selling visits.
Sure It makes sense and lastly, I apologize if I missed it in your prepared remarks.
Did you talk about BPA hiring plans in Q2 and the balance of the year.
Yeah. Thank you know based on where we are right now we have in our plan to add.
B P as at a pretty good clip over the balance of the year starting.
In the third quarter, we're at the point today, though I think we're basically saying go and push that button.
And let's let's start getting more BPH and as soon as possible I think it makes sense because everything's in shape and in line for.
Our growth acceleration and so now you're talking about investing in BPA as to make sure that a year from now.
Youre getting the right level of.
Effectiveness for 'twenty.
23.
Yes, it makes sense well thanks for taking my questions.
Thank you.
Once again, ladies and gentlemen, if you have a question. Please press star one at this time again at Star one on your telephone keypad.
The next question is from the line of Jeff Martin with Roth Capital Partners. Your line is open.
Thanks, Hi, Doug Hi, Paul Hope, you're both doing well, Jeff. Thank you just wanted to.
Wanted to dig in on the growth acceleration that you're up.
That line for the Worksite employee base as we move into the second half for this year and then as we transition into 2021. It appears to me as though you've got multiple levers driving that was just curious if you could kind of that which are the more impactful among them.
One being getting back to selling workforce acceleration to being the ppas are more efficient and effective three.
The sales efficiency numbers have ticked up nicely recently for you've got improved client pension hair I'm guessing the loyalty that's created from last year's efforts will continue to pay dividends for several years out of those four buckets or maybe I'm missing one or what are the most impactful to this growth.
And it works on employees as we move into next year.
Sure well I think in the model of course, the better your retention is a fewer new employees you have to.
Bring in from new sales.
Or even from growth in the client base, but so we always net retention number improving the underlying retention number without the large customer that went away unusually large customer.
An improvement of 15% and retention is significant.
And I do believe that this has been driven by the heightened awareness and appreciation for the services we're providing.
Better understanding of the breadth and depth of the services and the level of care.
We've provided and so I just think go into the next year and transition I'm confident we'll do well we don't have those large.
Lumpy customers that can kind of disrupt that.
Just don't we don't have they need like that at this point so.
I would say that's the first one but secondly, I mean the growth machine is the sales machine and so it's very important that these that's why I gave you some info about the underlying metrics in that.
Rate at which we're getting discovery calls and proposals that's the pipeline and the activity levels are good the attitudes are great and in.
And they are effective very effective and.
Working on how do we do know what can we do to help them more and increase their sales efficiency. So.
My expectations are built around <unk>.
Hitting the metrics that are that we've been able to rely on in the past.
We did tilt the budget a little bit just slightly.
Waiting of efficiency through the year, there is a normal pattern to that already but we are where we're hitting those basic metrics and not relying on an improvement in efficiency. We're always trying to work for sales efficiency gain but I don't want to rely on that and budgeting and forecasting and let that lead.
That to the upside so the other thing, though that that's given us confidence right. Now is the early boost from Worksite employees and the client base.
Net debt, they're adding.
And when I look at the underlying.
Commissions were paying to the sales staff of our customers that insight into their sales.
Sales pipeline is showing that there, they're doing well and they're acting on on what they're seeing in their optimism and they are expected to grow. So you know 53% are expected to add employees and only 3% expecting to reduce employees.
A big number.
And so it's on.
Hardest one to predict because you've been on how many and when.
And.
How fast you can find the right people, but generally speaking we just felt we had to factor in some higher level.
Of hiring than we had factored in in our original budget. So all those factors are important and we're definitely in it at all.
Systems go kind of mindset and expecting.
Growth acceleration to.
In the subsequent quarters.
That's helpful Insight I. Appreciate my other question is surrounding some of your investments that you've called out.
Sales force investment I believe it is still early in a couple of year process.
How that rollout is going if you're seeing any efficiencies in the early stages out of that and then secondly, if you could touch on.
Or elaborate a little more on your lead generation initiatives.
Sure. So first of all on the Salesforce implementation, we wouldn't expect to see any benefit yet because we basically just completed.
What they call what do we call that the bedrock phase where.
It's an amazing amount of work that has been done by a significant number of people across the company all across the company.
That have helped provide the information to detail out exactly how this implementation takes place in the coding has begun.
So where were right on track, where we want to be on that front and pleased to be able to report that.
This group, we're able to really.
Deeply.
And detail at a detailed level.
Put together this plan so that the whole company will be on the same page and how we look at customers how we.
How we all the different fields that relate to every customer and how we'll be able to.
All look at the same data the same way and be able to use the day to much more effectively. So we're confidence is up that we're going to be able to accomplish that because this space is so important if you don't have the right.
Blueprint.
For success, you won't be able to to have that successful implementation. So we're well on our way and like where we are on that front.
So on your question on the marketing side of the business. We did just released some new TV ads that just launched this past weekend.
They're really great at it.
There.
Help with some of the messaging about what the difference of what our company is able to do when were in place in that firm and it's done in a creative way.
For that debt.
That overarching marketing message from abroad.
PV approach will provide a little air cover for our BPA is out there, but that messaging is going throughout our marketing digital and all the things that work force to bring leads in every day. So our lead production is is in a good place we're always trying to do more and.
We will make some more strategic investments in that as we see fit.
To make sure you for gas on the fire in and take advantage of this opportunity to accelerate growth.
Thank you Paul for that and good to see the momentum on the business.
Thank you Jeff.
The next question is from the line of Mark Marcon with Baird. Your line is open.
Good afternoon, congratulations on the results and.
On the momentum that's building up I'm wondering if you can talk just a little bit more with regards to the.
Healthcare costs trending with initial expectations.
You gave some commentary on that.
The guidance range was pretty wide in terms of like what was framed as the initial expectations. So I'm wondering if you could just narrow that down a little bit or give any additional color. Both for the remainder of this year, but then how we should think about things for next year.
Well I think the main thing to focus in on there.
<unk> is of course our.
Position in terms of matching the price and the cost and that's why we're very comfortable we know we have built into the budget some expectation of what you'd call a little bit of a bubble of cost that may come from.
More utilization that was pent up due to the pandemic.
And although to the degree that we haven't seen we've seen things normalize, but we haven't seen it go beyond.
What you would expect and therefore for.
Since it's still below that normal level, it's offset some of the extra COVID-19 costs that we built in.
But it was modest in the first quarter. So we did come out under the expectation and cost, but it's pretty modest.
Compared to the size of the plan there wasn't really any need to change our view of what to expect for the balance of the year.
That bubble of cost.
Most think its still out there, although I havent heard anybody yet.
Point to specific evidence of it but it makes sense that theres pent up.
Utilization and possibly some deferral of care that could cause some higher cost types of care.
And then in the coming months, so I think it pays its we should be conservative there and we are in how we've forecasted that.
But in any event we have.
Built in our pricing to be able to accommodate that.
So now we're at that tweaking phase again, if it's a little higher you can build costs, a little faster a little lower well, maybe you don't have to build pricing quite as fast so.
We're just in an optimal phase for matching price and cost still uncertainty out there on that cost side, but I think we've been appropriately conservative.
That's great and then can you talk just a little bit more I mean, it sounded very helpful. With regards to how <unk> is doing in terms of workforce acceleration.
And in Q1.
Can you give a little bit more specificity with regards to like okay.
You know how uniform was it across the various regions.
Were there any distinctions between the types of Ppas that were that were selling it more how much did it end up boosting.
Their productivity by having that arrow in their quiver.
To what extent is this.
Success, but they're seeing filtering through to the rest of the BPA is how should we think about that.
Those are great questions.
Questions that I'm still asking over here.
There's a there's a lot of potential there and so I'm always wanted to kind of dig in and but it's kind of like keep plant. These seeds and plant seeds in the ground you got to dig them up to see if they're growing you've kind of ruined. It. So you have to kind of give this kind of think time to to really develop.
Develop a bit and because we kind of took a back seat there for the COVID-19 period and this is more of a restart I don't have a lot of.
Deeper information to really be able to pass on to you but.
As we see that we certainly will I'm just happy we've got.
Momentum again, and it's on the radar.
It was quite prevalent across the organization I can say that which.
That's part of what Youre looking for that people are on board with the strategy and see how it's going to benefit them in the long run so.
That part is good and we'll pass on more detail as we get it.
Great.
I mean would you say that you know maybe 5% 10 per cent of the incremental activity during the quarter was.
It was on acceleration or.
Any sort of color that you know.
Even from a small sample size.
Yeah, I don't really have it broken down that weighted too.
To give you anything that I would want you to rely on so.
I'd, rather wait to see it develop a little further in and.
And gave you some.
Some numbers that would.
It would be a trend that you could.
Gain a better understanding from rather than a.
Pace of one quarter and one point in time.
Got it and then can you talk a little bit Paul about.
For the competitive environment and how.
How you see the investments.
Unfolding across the industry with regards to the PEO space.
Obviously you came through.
And and you know really helped a lot of clients and you've got a lot of success stories. There. So I'm wondering you know and others have.
Express the same thing so now that.
On the economy is really opening up.
To what extent.
Can you.
Fully leverage the way that you were able to help other companies and really show them the.
Further penetration of the PEO concept across the U S.
Yeah, that's a great question and market outlook.
I will I believe the PEO option really.
Showed well during the pandemic.
For all the companies out there providing the service.
<unk> seen a better retention rates.
You have seen there's definitely the demand for the service is really out there, but I think where we have room to.
Increase the rate of penetration in the marketplace is just in the building of awareness and theirs.
You know I think that's really the only thing between going from 7% to 8% penetration for some significantly higher number. So it's all about opportunities it's about educating the marketplace and.
You know I think as as debt.
The messaging is so good right now that it's worth investing in that and I believe the investment will return in number of leads at the right level of interest where you can.
Close the business so.
Or is it really to me the only impediment at this point is broad awareness and.
It takes seeing customers one by one to actually convert them. So.
There is an investment to get the awareness up and then the investment to follow through on that but we're in a good position for that I think the whole industry.
As in the same shape is that Theres worth investing so maybe we will see that awareness build in.
See that penetration go up some substantially over the next several years that would be our hope.
Our last question is from the line of Tobey Sommer with Truest Securities. Your line is open.
Thanks, I just had a follow up.
With respect to your.
Additional health care coverage that you got for sort of extraordinary.
Extraordinarily large claims is that experience going on and is that something you're likely to.
Changed at all on a go forward basis.
So.
It was a good decision to make.
If you look at the economics.
You pay a lot for it and it's normally it's kind of a trick back because you don't want to have to you don't want it to be bad because your costs go up next year, but if your results are really good then you may be spend a little too much money on it but but you've limited risk. So in our case I think it's come out within the range that for the firm.
Last year that you feel like it's been a good deal for both companies. So that's probably the best place to end.
We will evaluate as we go through this year, we bought coverage at the same level that million dollar level for this year and we're going to evaluate whether theres. It makes any sense to have a different attachment point at a lower level than that or not.
But at this point I think we're in pretty decent shape, there and we will look at it and see as we go through the year to decide what to do for next year.
Thank you very much.
Good day.
Thank you.
And that concludes the Q&A session I will now turn the call back to Mr. Serge body for closing remarks.
Well once again, thank you everybody for participating on today's call. We appreciate your interest and we look forward to communicating with you in any other type of one on one or.
Or <unk>.
Conference setting and we're certainly here and available.
If you have any questions you can certainly give Doug the call. We're happy to set up for time, Tom. Thank you again.
Thank you.
This concludes today's conference call. Thank you for joining you may now disconnect.
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Paul.
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Good day.
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