Q3 2024 Insperity Inc Earnings Call
Good morning, my name is Jenny and I will be your conference operator today. I would like to welcome everyone to the Insparity CERD Quarter 2024 earnings coverage call.
At this time, all participants are placed on a listen-only mode and we will open for questions following the presentation. If anyone should require operator assistance during the conference, please press star zero on your phone, keep at.
at this time I would like to introduce today's speakers.
Speaker Change: Joining us are Paul Sarvadi, Chairman of the Board and Chief Executive Officer, Douglas Sharp, Executive Vice President of Finance, Chief Financial Officer and Treasurer and Jim Allison.
Speaker Change: Executive Vice President, Comprehensive Benefit Solution and CPO. At this time, I'd like to turn the call over to Douglas Sharp. Mr Sharp, please go ahead.
Douglas Sharp: Thank you, we appreciate you joining us.
Douglas Sharp: Let me begin by outlining our plan for this morning's call.
Douglas Sharp: First, I'm going to discuss the details behind our third quarter, 2024 financial results. Paul will then comment on our recent accomplishments, including an update on the implementation of our Work Days Strategic Partnership solution, and on our outlook for the remainder of the year.
Douglas Sharp: and Jim Allison, who's succeeding me as CFO upon my retirement, will return to provide our financial guidance for the fourth quarter and an update to the full year guidance we will then end the call with a question and answer session.
Douglas Sharp: Before we begin, I would like to remind you that Mr. Savadi, Mr. Allison, or I may make forward looking statement during today's calls, which are subject to risk uncertainties and assumptions. In addition, some of our discussion may include non-gap financial measures.
Douglas Sharp: for a more detailed discussion of the risks on certainties that could cause actual results that differ materially from any forward-looking statements.
Douglas Sharp: and Reconciliation to Don Gap on National Measures. Please see the company's public filing, including the form 8K file today, which are available on our website.
Speaker Change: Now, before I discuss the third quarter results, I want to express my gratitude for the opportunity to serve as CFO of disparity over the past 25 years.
Speaker Change: As we announce a couple of months ago, I will be retiring at CFO on November 15th, and Jim Allison, the current executive BP of comprehensive benefit solutions and CPA will be my successor.
Speaker Change: I'm grateful to have played a role in the significant growth of the company over the years and helping the company achieve its mission of providing premium HR services and products to the small and mid-sized business community.
Speaker Change: I'm Retari, no one's fairity is in good hands with its current leadership team, including Jim, who brings significant experience in the company's operations and finances to the CFO role.
Speaker Change: So now let's discuss a solid third quarter results in which we reported a JSTPS of 39 cents and a JSTP without 39 million.
Speaker Change: As for our growth metric, the average number of paid work-siding employees of just over 309,000 was at the midpoint of our forecasted range.
Speaker Change: As expected, the 2% decline from Q3 of 2023 was impacted by the continuing softness in high-end-borrowed client-based and the loss of several mid-market accounts at the beginning of the year.
Speaker Change: Klein-Hirings continue to be week during two, three, a slight net gain in the first two months of the quarter. We're all set by a net decline in the third month.
Speaker Change: We believe the current macroeconomic environment continues to weigh on our clients and prospects and contributed to slightly lower work-side employees' aid from new sales. However, this was offset by strong client retention of 99% for the quarter.
Speaker Change: and 11% decrease in gross profit from Q3, 2020, on the 2% decrease in paid work side employees.
Speaker Change: Included a difficult comparison to the prior years quarter.
Speaker Change: which was positively impacted by favorable healthcare claims development.
Speaker Change: Our Q3, 2024 benefit cost trend was slightly above the high end of our forecasted range, but below our initial budget.
Speaker Change: And we combine with our overall pricing strategy, we believe we have effectively managed to our long-term goal of matching pricing cost.
Speaker Change: and a few minutes Jim will provide more color in this area including our expectations over the remainder of 2024.
Speaker Change: 2-3 operating expenses were managed below plan with various savings in our G&A costs. Our year-to-date operating expenses now include approximately $40 million associated with our work-day strategic partnership.
Speaker Change: 3rd quarter of 2024's effective tax rate was positively impacted by research and development credits.
Speaker Change: Wisconsin Tribunal just too sent for share in earnings above our Q3, 2024 forecast. And we continue to forecast the full year, 2024 effected income tax rate of 28%.
Speaker Change: [inaudible]
Speaker Change: During the quarter we continue to provide returns to our shareholders through our regular dividend program and the repurchase of our shares. We paid out $23 million in cash, dividends, and repurchase the $167,000 shares of stock at a cost of $15 million in Q3.
Speaker Change: We ended the quarter with $212 million of adjusted cash and increase of about $40 million over December 31, 2023 balanced.
Speaker Change: and we had $280 million available under our credit facility.
Speaker Change: Now this time I'd like to turn the call over to Paul.
Paul Sarvadi: Thank you, Doug, and thank you all for joining our call.
Paul Sarvadi: Today I'll begin with remarks on our third quarter financial results. I'll follow with commentary on our plans to take advantage of our market opportunity in Q4 to move towards growth acceleration in 2025.
Paul Sarvadi: I'll finish with the discussion of sales and service initiatives we expect to implement over the course of the next year to drive long-term growth and profitability, including AI and our work days strategic partnership.
Paul Sarvadi: Now in 23, we weathered the continued heightened uncertainty in the small and medium size business marketplace with solid financial performance in the justice ediva dot and EPS.
Paul Sarvadi: We achieved our work-site employee average target for the quarter with good client retention. However, work-site employees from net hiring versus layoffs will show the low expectations and even slightly negative for the full quarter.
Paul Sarvadi: This factor included a net gain in the first two months, followed by a greater than expected reduction in September, beyond what's typical from just some or help going away. We believe this reflects continued stress in the small business marketplace and possibly some pre-election hesitancy.
Paul Sarvadi: This pressure continue to be evident from our real-time internal data beyond the normal higher reactivity, including low levels of overtime pay and commissions pay to sales personnel at the quiet companies.
Paul Sarvadi: Despite these difficult conditions, our book sales were up 8% over the same period last year on a 2% increase in business performance advisors in the marketplace.
Paul Sarvadi: In addition, pricing for our HR services was up 2%, reflecting continued adherence to our long-term pricing plan, even in the competitive environment.
Paul Sarvadi: Our pricing policy discipline also continued in our direct cost allocations including payroll taxes, workers compensation and employee benefits. This is our standard mode of operation and it's important to highlight in this setting.
Paul Sarvadi: For example, this quarter our benefit playing cost was slightly higher than expected after our first half of year with slightly favorable cost in this area. Our pricing allocation policy is not driven by these short term variances, but rather by our conservative view of long term trends.
Paul Sarvadi: Our pricing policy has continued our focus on transveb and higher in the marketplace, post-COVID. This approach to match price and cost over the long term.
Paul Sarvadi: allows us to provide our small business clients with what we believe is a more stable employment construction than other firms, providing us with a significant competitive advantage.
Paul Sarvadi: We are tweaking our guidance for the fourth quarter as you'll hear from Jim in a few minutes. So, factor in the slide increase in health, play, activity and the lower paid work side employees primarily from the lower net hiring in the client base.
Paul Sarvadi: Now for the balance of the year we believe we are well positioned to return to growth acceleration in 2025 with a successful Paul Sarvadi in the retention campaign.
Paul Sarvadi: This would be achieved by reaching a starting point in paid work-side employees in Q1 that is even with the average work-side employees we expect to pay in Q4
Paul Sarvadi: Our fall-selling and retention campaign is well underway, and we have several reasons to be encouraged.
Paul Sarvadi: We have over 700 trained business performance advisors in the field. A well trained, well designed, pricing and incentive strategy.
Paul Sarvadi: For each target market segment and a robust marketing campaign.
Paul Sarvadi: and in addition a strong mid-market pipeline. We also have reasons to believe there may be post-election relief of hesitation and uncertainty in the market. The elections over soon in both parties have highlighted support of the small to medium-sized business community.
Paul Sarvadi: Throughout our history we have seen some level of rebound from periods of uncertainty.
Paul Sarvadi: We have seen companies in our target market of the best small and midsize businesses in the country. Typically, we have a growth mindset and can't be held back for long.
Paul Sarvadi: As we focus on 2025, we believe we have an exceptional opportunity for growth acceleration. As we also lay the groundwork for greater effectiveness and efficiency in both sales and service.
Paul Sarvadi: We anticipate implementing a role-based approach to optimize our sales organization with our offerings, including our longstanding core PEO to the small business market place, our traditional employment business, and our significant mid-market opportunity.
Paul Sarvadi: We also expect to focus on improving effectiveness and efficiency on the service side of the business.
Paul Sarvadi: This is made possible by our dramatic progress.
Paul Sarvadi: Excuse me, leveraging our own bass HR content knowledge and data through AI after so many years delivering the most popular intensive HR service in the marketplace.
Paul Sarvadi: Our AI strategy is centered on creating efficiencies, leveraging our deep embedded HR expertise and enhancing not only placing the best in class service that disparities known for.
Paul Sarvadi: Our technology investment in recent years have focused on modernizing our data platform and elevating our capabilities with data strategy, governance, engineering and analytics. The ETHE NISTANIS laid the groundwork for our efforts to capitalize on AI investments.
Paul Sarvadi: As examples, the implementation of Salesforce as our CRM and the creation of a modern data hub enable us to scale and be more nimble with business priorities like powering the marketing funnel and developing our own internal AI2.
Paul Sarvadi: Lincoln also quickly ingest and transform new data sources as well as our own vast body of HR thought leadership content in knowledge.
Paul Sarvadi: by leveraging enterprise AI solutions to process our proprietary information. We are building and testing an internal tool that we believe will drive both efficiencies and deeper knowledge for our service and sales teams to further enhance the client experience.
Paul Sarvadi: Service Aries like the Contact Center and Payroll, lend themselves naturally to AI support. We believe use of AI will increase the speed and efficiency of our service teams.
Paul Sarvadi: As we design and test our AI solution, we're measuring the benefits in these areas and believe that it will help us with operational capacity management and optimization.
Paul Sarvadi: Longer term we are targeting a client-based inversion of our tool that would allow clients to get answers to common questions more easily.
Paul Sarvadi: We're also expanding our use of machine learning and AI to drive predictive insights that we believe can directly impact growth and retention.
Paul Sarvadi: Sigmund, the Department of Health and Health, has also been made advancing our strategic partnership with workday. I spoke and previously about the four defined pillars of work, including our disparity corporate tenants, our exclusive client tenant.
Paul Sarvadi: Our deployment and enablements services and our joint go to Market Plan.
Paul Sarvadi: I'd like to provide a brief update on the execution of each of those.
Paul Sarvadi: As a reminder, through this strategic partnership, Workday and Spariety are committed to jointly developing marketing.
Paul Sarvadi: Selling and Supporting the Pre-Emanent Solutions for targeted small meeting-sized businesses that combines work-days HR technology with disparities HR services.
Paul Sarvadi: We expect to offer this unique PEO solutions to the target market using Workfade Technology for less upfront capital costs on going expense complexity and implementation time than currently available in the marketplace.
Paul Sarvadi: Our Go to Market Plan for this strategic partnership is centered on co-selling, co-branding, and co-marketing to the target market.
Paul Sarvadi: of companies with fewer than 3,500 employees.
Paul Sarvadi: Previsstablis an incentive program in concert with work agency, increased opportunities for sales. We are currently focused on the integration of this go-to-market plan into the 20-25 business plans for both firms.
Paul Sarvadi: We are progressing well in our co-branding co-marketing efforts as both workday and the disparities market in change.
Paul Sarvadi: R&GAES, and building out a mutual approach to generate awareness, excitement, and interest for the New Joint Solution.
Paul Sarvadi: We plan to deploy the Workday platform for our disparities corporate use first.
Paul Sarvadi: To better understand the implementation process and how to configure and integrate the systems we will use across both tenants.
Paul Sarvadi: We've made excellent progress and we believe we are now on track to deploy this solution the first half of 2025. Our strategy to deploy the Workday solution for our own corporate use, before taking our new joint solution.
Paul Sarvadi: to the market is proving out. Many of the nuances of integration and configuration that are part of the implementation are directly applicable to the development of the joint solution.
Paul Sarvadi: We're also progressing well on the development of the joint solution client tenant. We have an agreed upon development plan well underway with work day that we believe would make the technology platform fit our PGO business model.
Paul Sarvadi: We continue to refine the definition of differentiation of the product offering, where you may focus on delivering a comprehensive HR and technology solution with speed to value and total cost of ownership is key drivers, as well as the pricing methodology that will apply to the new joint solution.
Paul Sarvadi: We're well underway establishing our deployment and enablement organization as well. This is not new to us since we already deployed and enabled new clients onto our own Premier HR technology platform and our current PO offering and onto another HCM platform for our traditional employment clients.
Paul Sarvadi: Throughout this year, our service operation group has been completing advanced training of certifications for specific roles while establishing our playbooks for customer support for the new joint solution.
Paul Sarvadi: They've had the advantage of being able to use the corporate tenant deployment to provide the basis for much of this effort. These playbooks will include processes similar to the approach used in our current fast deployment onto our current system.
Paul Sarvadi: We're also well along the path of identifying an initial group of clients that will be migrating to the new platform ahead of launching the Joint Solutions to new clients.
Paul Sarvadi: In summary, we're focused on a successful Paul Selling and Attention season to achieve a solid starting point for 2025.
Paul Sarvadi: We also see an opportunity for growth acceleration next year with sales and service improvements as we leverage our data infrastructure with AI and our Workday Strategic Partnership.
Speaker Change: Now before I pass the call on to Jim for our guidance discussion, I'd like to publicly thank Doug for his outstanding performance in his key role here at InSparity for so many years.
Speaker Change: had an excellent career demonstrating dedication, commitment, and making a significant contribution to the success of disparity.
Speaker Change: I'm also very excited to execute an effective succession plan having Jim Allison as our new CFO.
Speaker Change: Jim is uniquely qualified and experienced to immediately take over this role. We look forward to the opportunity for you to meet and work with Jim going forward. At this point, I'd like to call a past call on to Jim.
Jim Allison: Thanks Paul.
Jim Allison: Our outlook for full year 2024 earnings remains within the range of our prior guidance. I'll be at the lower end of that range.
Jim Allison: As Doug and Paul have mentioned, the environment for worksite employee growth continues to be challenging due to the economic climate and labor market in our target customer segments.
Jim Allison: We are cautiously optimistic that recent and anticipated interest rate decline, along with the completion of the current election cycle, could provide improvement over time. But we have not incorporated a change in the short term.
Jim Allison: Given these factors, combined with the starting point going into the fourth quarter, we have adjusted our full year outlook to the lower end of our previous guidance, and now expect average paid workside employees in a range of 307,400 to 308,100.
Jim Allison: which is a decline of 1.3 to 1.5% compared to 2023.
Jim Allison: On a year to date basis, our pricing and benefit costs have been slightly favorable when compared to our initial budget.
Jim Allison: Our benefits cost in Q3 returned closer to our original budget due to a slight increase in utilization. And we have assumed a similar level in our Q4 forecast.
Jim Allison: We expect that our full year benefits cost-trend will remain near the low end of our initial 2024 expectations of 4.5 to 6%.
Jim Allison: We expected somewhat elevated health.
Jim Allison: Health Care Cost Trends for both 2024 and 2025. And we did not adjust our pricing targets based on the favorability we experienced in the first half of the year. As a result, we believe that our pricing remains in a solid position at this point.
Jim Allison: We continue to closely monitor healthcare and other direct cost trends, along with the competitive landscape. And if necessary, we would adjust our pricing targets next year, consistent with our long-term pricing strategy.
Jim Allison: Operating Extension Management, remains to keep focused due to the lower work-side employees.
Jim Allison: We've worked as with energy savings in Q3 and we have refined our plan for Q4.
Jim Allison: That's that we continue to focus efforts and plans spending on the implementation of the workday strategic partnership. And we expect total spend on this initiative of around 60 million for the full year as originally estimated.
Jim Allison: Based on these factors, we are now forecasting full year 2024 adjusted EPS in a range of $3.42.
Jim Allison: to $3.66 per share.
Jim Allison: within the range of our previous guidance of $3.33 to $3.88.
Jim Allison: We are now forecasting adjusted EBITDA in a range of 262 million to 274 million.
Jim Allison: As for Q4.
Jim Allison: We are forecasting paid work site employees down 1% to 2% compared to Q4 of 2023.
Jim Allison: for Q4 earnings.
Jim Allison: We are forecasting a gestative EBITDA in a range of 15 million to 27 million and adjusted EPS from negative 10 cents to positive 12 cents.
Jim Allison: Learning's comparisons to Q4 of 2023 will be significantly impacted primarily by the planned investments in the Workday Strategic Partnership in 2024.
Jim Allison: At this time I'd like to open up the call for questions.
Speaker Change: Thank you very much. We will be conducting our question and answer session. If you would like to ask a question, please press star one on your phone keypad now. A confirmation tone will indicate that your line is in the key.
Speaker Change: You may press start too if you would like to remove your question from the key. For anyone using speaker equipment, it may be necessary to pick up the handset before you press the keys. Please wait a moment while we pull for questions.
Speaker Change: Thank you, your first question is coming from Andrew Nicholas of William Blair and you're your line of life
Speaker Change: Thank you in good morning.
Andrew Nicholas: I wanted to first ask client retention and just maybe market competitiveness overall. It's fall season. I know you're still in the midst of it and the next couple months will make a big difference. But I guess two part question is, is the work day?
Andrew Nicholas: Partnership for the plans to launch that in first half of next year.
Andrew Nicholas: Having any noticeable impact on large client retention.
Andrew Nicholas: To this point
Andrew Nicholas: and then again just on market competitiveness.
Andrew Nicholas: Seems like you price your book very effectively relative to cost trends, just wondering if that's giving you any sort of advantage in the market or if there's still quite a bit of a grassland that's from competitors in terms of undercutting on price.
Speaker Change: Yeah, thank you for that question. Certainly, you know, there has been a competitive environment that we've talked to many quarters. We've responded to that in a very exceptional way I believe in that we have created.
Speaker Change: Incentives for our...
Speaker Change: and the National Health Service.
Speaker Change: and the difference in each segment, knowing what...
Speaker Change: and the government really highlights their incentive for coming on. But what we've done is we've created these incentives that are shorter term. They don't affect the long term pricing of the client. And that has worked and has been favorable.
Speaker Change: because we believe some of the pricing that's going on in the marketplace has been
Speaker Change: and Deathmore Desperation.
Speaker Change: and we believe that our long term pricing policy really is the better answer, especially for the clients because it allows us to give them a more stable cost structure into the future. So we've been successful on that front.
Speaker Change: Now, relative to...
Speaker Change: You know client retention of
Speaker Change: and the have been applied in a renewal process with clients. So, yes, we're well under the way of.
Speaker Change: of having some success there.
Speaker Change: But you are also correcting your questions, kind of been the middle. So all the balls are in the air, so we still got to do a really effective job for the next.
Speaker Change: and a couple of months. And you know, the fact that we have a work-day relationship, we know, has certainly created a different perception within our client-based, especially in that mid-market space.
Speaker Change: You know, it's kind of hard to tell at this stage, you know, which type of factors are, you know, making the difference these new incentives or the work-day relationship, you know, hey, all of its helping.
Speaker Change: and we're looking forward to doing our very best over these next couple of months.
Speaker Change: Great, thank you. And then for my follow-up switching gears a little bit, I just want to talk about expenses. Looks like, you know, really.
Speaker Change: really nice job managing the DNA line this quarter can you talk a little bit about where those savings are coming from and then you know you talked about.
Speaker Change: Your AI investments and some of the opportunities to drive efficiency there is that. Are the efficiencies there enough to kind of offset?
Speaker Change: the cost of implementing them in the near term. Just just trying to understand if that is incremental to the cost structure. Looking ahead to 25. Thank you again.
Speaker Change: Yeah, let's say for the recent quarter of the saves in the gen in the GNA area, we're really just focusing in a period of slower work-side employee growth on where we can get most efficiency out of certain areas.
Speaker Change: in this past quarter, they primarily were in the GNA area. As we mentioned, we are in destiny to work day partnership that obviously adds needing to add some personnel and redeploy personnel.
Speaker Change: [inaudible]
Speaker Change: We're looking at other areas of the business where we can create more efficiencies. I would say, I'm a third of Paul along this.
Speaker Change: Fairly earlier on in the A.O. in getting any efficiencies out of AI, we see a lot of potential there and both the sales and the service organization and we think that that can create operating leverage.
Speaker Change: I'm going forward, but I would say we're still at the fairly early stages of that.
Speaker Change: Yes, that's why let me just add to that on the AI front. It is very exciting and what is exciting to me is that the...
Speaker Change: Thought Leadership that we've had for so many years as the most comprehensive service in the marketplace, we have incredible knowledge-based data information that is going to be highly an averageable.
Speaker Change: That will help us be more efficient and more effective.
Speaker Change: and what we look forward to that is that our ability to grow the client base and not have to add as many.
Speaker Change: People because people will be able to do their jobs more efficiently, more effectively.
Speaker Change: and the already, but this is all still in this careful.
Speaker Change: You know, development and then we will spend more time talking about it specifically what will be, I don't want to really say piloting because it's maybe it's beyond piloting but it will be testing and making sure things are working properly.
Speaker Change: because we believe we can elevate the client experience and our own corporate staff experience.
Speaker Change: and be more consistent.
Speaker Change: and more accurate in our communication. So that's going to be a significant emphasis for 2025.
Speaker Change: Now, how quickly that turns into, you know, benefit at the bottom line, you know, that's too early to tell that. But we definitely see that that's part of the picture for a company like ours going forward.
Speaker Change: Thank you very much. Your next question is coming from Toby Summer of Truist. Toby, your line is live.
Toby Summer: Thank you. I wanted to start out on the corporate instance of work day as well as the client facing. Has the timeline shifted at all? Is it pushed out to the right and if so, what might be the driver of that?
Speaker Change: Yes, so what we've done, you know, we have never put in even to this day, I'm not ready to pinpoint a date.
Speaker Change: Because when you're developing like we are together on this project, I don't want to pinpoint a date too early that moves out or pinpoint a date too far out that relaxes people.
Speaker Change: So we are progressing.
Speaker Change: Very well, very diligently at a very detailed and specific level.
Speaker Change: But we also relative to the corporate instance and the crime instance. As I mentioned in my script, our work to go live on the corporate instance is part of a process.
Speaker Change: That is almost like the beta for going on to the client site. There's a lot of...
Speaker Change: and Integrations and things of that nature on the compliance front that also are part of what goes into being.
Speaker Change: Crime site. Now it's not exactly the same as the client site, obviously and there are just other significant developments to do.
Speaker Change: You know, but it is foundational to where, you know, where we're going. So the timing of those two being relatively close together is important as well. So, um...
Speaker Change: You know, it's been planned for the corporate side for that first half of the year could have been earlier, could be a little later, but that's, you know, it needs to be time just right with the whole process.
Speaker Change: Now hope that helps you.
Speaker Change: It's us, it's us, thank you. And how do you think about in this selling season?
Speaker Change: of the puts and cakes.
Speaker Change: and as far as a perspective of customers.
Speaker Change: Maybe looking at transitioning to your existing HR platform and then eventually to work they platform as maybe more than they want to bite off in a relatively compressed amount of time.
Speaker Change: [inaudible]
Speaker Change: The benefit to retention of existing customers who may be looking for some more features and see you know on the horizon you're going to be able to offer them.
Speaker Change: Yeah, I'll tell you the understanding and expectation that is created that we are going to have this solution coming. It has actually been really good at both.
Speaker Change: Clark Prospects and Climes.
Speaker Change: On the prospect side, you know, we spent some time really thinking through, hey, would this be an issue about customers and hey, I'll just hold off. But you know, the reality here is...
Speaker Change: is that there's a lot of other things that happen when a customer comes on that makes a big difference in that client's business and it's they're able to see that and coming on to our...
Speaker Change: System, which takes a short period of time.
Speaker Change: We have not seen that being an issue for companies. They might come on our system and then be in the second wave on the new one.
Speaker Change: for their own timing reasons, that's perfectly fine. But we haven't had anybody that I'm aware of that just said, hey, we're going to wait. And in fact, I actually think we're getting closer and closer to the point at which a prospect.
Speaker Change: who goes through the normal process that's going to take AP months. Hey, they're about to get in a situation where they're within the same time frame here or less. They're going to be on this system. So the decision that we want.
Speaker Change: Prospects to make is to look at their whole business and see if they need a.
Speaker Change: Technology and Service Illusion, if they want to, you know, completely deal with their scalability issues and because we're going to be that answer.
Speaker Change: So, you know, I'm excited about our go-to-market strategy and next year because we literally will be together talking to prospective clients and helping them.
Speaker Change: Navigate their best path forward.
Speaker Change: Well, whether it's a, you know, workday solution apart from us.
Speaker Change: and I said, take the considerable length of time or coming on to our joint solution, which gives them a broader set of solutions to really help their business grow and develop.
Speaker Change: Thank you very much. Your next question is coming from Mark Mark on of Bad Mark your line is life.
Mark Mark: Good morning and first of all, Doug, it's been a pleasure working with you for 20 years. So really appreciate all of the help over the years and look forward to working with Jim.
Mark Mark: We regard to the quarter.
Mark Mark: and a guide for the fourth quarter. Can you talk just a little bit more about what you're seeing with regards to the...
Mark Mark: to the healthcare trends, you know, obviously, you know, trying that and that up.
Mark Mark: Reporting, you know, that severity was up. When you take a look at your gross profit for work site employee, you know, reporting, you know, that severity was up. When you take a look at your gross profit for work site employee, you know,
Speaker Change: Are you seeing an increase in terms of the number of claims? Is it severity? Is it general inflation?
Speaker Change: How are you thinking about that with regards to the fourth quarter and then, you know, for next year and how we should think about pricing and what sort of impact could that end up having with regards to.
Speaker Change: You know retention as well as new bookings in the core selling season.
Speaker Change: Yeah, this is your mouth happy to take that one knee.
Speaker Change: Right now we're probably seeing that trend is running a little bit towards the higher end of that historical range.
Speaker Change: and Pauli the biggest driver of St.康er a lot of this specialty drugs.
Speaker Change: that are out on the marketplace now. The GLP-1's being at the most recent example of...
Speaker Change: of that.
Speaker Change: but they're also a fair number of new.
Speaker Change: High Cost Treatments, different kinds of cancer treatments and things like that that continue to come to market. So those are the things that are kind of driving a little towards the top end of the range. From our perspective, we went into 24 and...
Speaker Change: and also 25, you know, expecting that you're going to have some level of elevated healthcare cost strength, trim, and put in a pricing strategy for that.
Speaker Change: I would say that things have come in a little bit better than our expectations, particularly in the first half of this year.
Speaker Change: and...
Speaker Change: from a severity standpoint, things are pretty much in line with where we expected them to be. We did see just a little bit more utilization in the third quarter.
Speaker Change: of 24th and we had seen in the first half. So it's a little bit more utilization.
Speaker Change: and not significant change in severity at this point.
Speaker Change: Great, I appreciate that. And then with regards to the workday partnership at what point.
Speaker Change: You know, I know it's still early, but do you feel like by the time we get to the selling seasons for...
Speaker Change: You know end of 25 going into 26 that everything will be fully in place. Just trying to get a sense for when you know.
Speaker Change: and I fully appreciate that sometimes work day implementations can take a while but just wondering
Speaker Change: Do you think it'll be all set up so that you feel like it'll be really smooth by the time we get out to 25, 26. And also any sort of indications with regards to what you're seeing in terms of referrals from the workday pipeline. Thank you.
Speaker Change: Yeah, sure, so let's talk about the big picture, you know, as we go into the, you know, next year obviously the development is the key.
Speaker Change: and Traking toward a launch of the joint solution. But the other thing that I remember is that the go-to market effort will be ongoing.
Speaker Change: So when you first started asking the question, we talked about that fall period in in 25.
Speaker Change: I'm saying us, be absolutely ready and out there.
Speaker Change: Literally.
Speaker Change: being able to fully inform the prospect about what's coming.
Speaker Change: Demos, what's out there, what we have coming, and customers being able to make that decision to come on board. So, you know, I'm not ready to pin down a law state of the actual...
Speaker Change: Product but I know we're going to be on the track and it's going to be within such a time frame that selling will be happening. That's I'm confident.
Speaker Change: So hopefully that helps with that question. I know there was a second part of that question that I can't remember that was. Oh no, no, I've got that. Also the, um...
Speaker Change: You're really talking about the go-to-market effort of passing leads back and forth to things of that nature. That has begun the keys to make them that work I mentioned in my.
Speaker Change: In my script is that having...
Speaker Change: A.
Speaker Change: and a go-to-market plan that is in both companies business plans. So it's not off to the side. But just the timing this year, when we put all this in place, it was beyond the point.
Speaker Change: To really have it as an essential element to peoples.
Speaker Change: and Central. We have worked through all that.
Speaker Change: We have a significant go-to-market strategy team meeting to lock everything down about what's in the 2025 business plans for both companies and so I anticipate some no acceleration over time on that level.
Speaker Change: Thank you very much. Your next question is coming from Jeff Martin of Ross Capital Partners. Jeff, your line is life.
Speaker Change: Thanks for the morning and Doug Congratulations on your time.
Jeff Martin: One of the digging a little bit more sounds like you're expecting your end transition to be favorable, you know, coming out Q1, WSEs, relatively consistent with Q1, just curious if you can learn that. And if there's anything specific to that that you expect to be different from the years past.
Jeff Martin: that will drive a positive transition.
Speaker Change: Yeah, so, you know, I do expect it to be favorable. We got work to do this, you know, that we're in the middle of it.
Speaker Change: I say, favorite, we've gone up compared to last year we had it, you know, seven customers go away at cost us, you know, 8,000 employees and you know, 40 million bucks.
Speaker Change: You know, of a Justin Bieber doctor of the year. By the way, while I mentioned that, just keep in mind as we talk about the work day solution. We're talking about a nominal number of clients that makes a huge difference.
Speaker Change: in our model.
Speaker Change: So I really want people to understand that.
Speaker Change: So again, a little bit better ability to keep some good-sized customers because of that at least it's in the hop-o-to-coming down the road. We're hopeful that that is part of the picture for this year, but there's still a lot of work to do and you know, we don't, I think it's important also to have a context.
Speaker Change: that, you know, to have growth of acceleration, to turn the corner, to go from, you know, nominal reduction and work site employees to a positive number. You know, we just need to have a decent year end.
Speaker Change: and the number we pay in the first quarter about the same as the number we pay in the fourth quarter. And then we're in the positive and you know based on the...
Speaker Change: Sales effort that we have right now in the specifics that we have planned for a more role-based
Speaker Change: Approach for next year, specific to each product that we offer in the marketplace. We think that also is going to...
Speaker Change: Health Us Reemor Effective next year. So, you know, even this year has been a tough year with...
Speaker Change: The climate out there, but in an environment like that is when you really roll up the sleeves, people work hard and you learn things.
Speaker Change: and we've learned a lot of good things I think we're ready to make some tweets, make some changes that we're really looking forward to solid 2025.
Speaker Change: and then on the AI side, could you talk to 2025 how that may progress, something there's a lot of potential efficiencies.
Speaker Change: You know, do you expect that to be fully implemented by certain timeframe in 2025 and how much efficiency, you know, operating energy you may be able to get out of that.
Speaker Change: Well, I think what's really exciting is that the excitement around AI and the way it works in our business, you know, in terms of individual service providers being able to instantly have really good information.
Speaker Change: Hack your information, the best answer we have to question.
Speaker Change: and be able to do that, you know, instantaneously instead of a process of...
Speaker Change: Gathering information, thinking through things, you know, that could take a day or two and then going up to different folks are going across our organization Because a lot of times answers to the question, don't come out of one department, it's beautiful information from across.
Speaker Change: the Organization. So having that information, the best answer available immediately. And then still doing the work to make sure that this specific.
Speaker Change: Case that is the best answer. There's still work to do but it's much faster.
Speaker Change: Now, you know, the fact that there's so much energy around this where I'm excited about it.
Speaker Change: in his work. It has brought to the surface for our corporate staff and our leadership to really focus on our operating costs on these things.
Speaker Change: and it's not just the service side but I'm not just focused on that, even in the sail side.
Speaker Change: Even in some of the other support parts of the organization, their is efficient to gain. And it's great when you have when you...
Speaker Change: Company's always want to have some focus on operating expense control and trying to build leverage in an organization. But usually there's negative energy around that.
Speaker Change: When I'm excited is that AI gets positive energy around.
Speaker Change: Opera Unification Party.
Speaker Change: and so that's going to be a highlight in our cultural mindset for 2025.
Speaker Change: Thank you very much and your next question is coming from Andrew Polkowitz of JP Morgan Andrew your line of life
Andrew Polkowitz: Good morning and I also wanted to extend my congrats to Doug on the upcoming retirement and also Jim on the new role. My first question, I was encouraged that you call that good BPA leverage, the thing it was 8% book sales growth.
on 2% VP Agaroth. Most curious if you could call it just anything structural driving that or any details on air pipeline that have you feeling good.
Speaker Change: Yeah, so you know as far as looking forward, you know, I mentioned, you know, four things that really give me some, you know, confidence and encouragement about going forward. I got to tell you that third quarter effort was basically rolling up the sleeves and...
Really a lot of hard work in the Netherlands.
Speaker Change: and Environment where there's quite a bit of hesitation out there.
Speaker Change: and we even think almost pre-election stuff as things have gotten kind of crazy on that front. And thankfully that should be hopefully over a fairly soon. But it was really rolling up the sleeves and also testing some of our incentive based approach.
Speaker Change: During the third quarter, we were able to confirm something and then tweak things a little further as we had gone into this fall campaign. So, you know, the number of trained BTAs out there.
Speaker Change: the incentive plans that I just spoke about. And there's just other good things that, you know, pipeline and I'm new to market is strong. So we're really...
Speaker Change: Working hard to have an effective fall campaign.
That's great. I said one follow-up. I'm related to work today and I mentioned that you have a process underway for IDN, initial group of clients to get onto the genu-joint solution before full launch. I was just curious as far as identifying this client. So they're been clients that have actively reached out to you guys interested in being part of the beta. And just any details on how you idea those clients. Thank you.
Yeah, actually, we did, we have a client base that is informed and we were able to kind of target particular mid-market customers that we felt would be the variety and be the best.
and we were able to work through that. And we have a list of specific clients that are actively in communication about this process. And we're with Good Shape on that, front.
Yeah, well, so we started with a number of about, you know, 60 or 70, reduce that to around 30 and then.
You know, I have highlighted a group of customers that we believe would be the best.
Speaker Change: You know, as the very initial beta loop.
Great, thank you.
Speaker Change: Thank you very much. While we appear to have reached the end of our question in answer session, I will now turn the call back over to Mr Sarvadi for closing remarks.
Paul Sarvadi: Well, thank you again, all of us all with us today and once again, I just want to say a final thank you last call with our CFO Doug Sharp with us.
Paul Sarvadi: Once again, really thankful for a great job done all these years and hoping for all the best for you going forward and Jim looking forward to.
[inaudible] And we have the chance to meet a lot of great people out here that are our investors in the business. So thank you once again everybody for being here and we look forward to seeing you out on the road.
Thank you very much. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.