Good morning, my name is Lisa, and I will be your conference operator today. I would like to welcome everyone to the Insperity Third Quarter 2014 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. (Operator Instructions). At this time, I would like to introduce today's speakers. Joining us are Paul Sarvadi, Chairman of the Board and Chief Executive Officer; Richard Rawson, President; and Douglas Sharp, Senior Vice President of Finance, Chief Financial Officer and Treasurer. At this time, I would like to turn the call over to Douglas Sharp. Mr. Sharp, please go ahead.

Thank you. We appreciate you joining us this morning. Before we begin, I would like to remind you that any statements made by Mr. Sarvadi, Mr. Rawson or myself, that are not historical facts are considered to be forward-looking statements within the meaning of the Federal Securities Laws. Words such as expects, could, should, intends, projects, believe, likely, probably, goal, objective, outlook, guidance, appears, target and similar expressions are used to identify such forward-looking statements involve a number of risks and uncertainties that have been described in detail in the company's filings with the SEC. These risks and uncertainties may cause actual results to differ materially from those stated in such forward-looking statements. Now let me take a minute to outline our plan for this morning's call. First, I'm going to discuss the details of our third quarter 2014 financial results. Richard will discuss the Q3 gross profit results and our fourth quarter outlook. Paul will then add his comments about the third quarter and our plan for the remainder of 2014. I will return to provide our financial guidance for the fourth quarter. We will then end the call with a question-and-answer session. Now let me begin today's call by discussing our third quarter results. Today, we reported third quarter earnings of $0.33 per share which were $0.09 per share above the midpoint of our forecasted range. Adjusted EBITDA totaled $23 million and exceeded the midpoint of our forecast by 20%. As for our key metrics average paid worksite employees increased 2.6% sequentially to a 131,545 for the quarter. Just below the low end of our forecasted range of 131,750 to 132,250. Gross profit per worksite employee per month averaged $255 above both the Q3 forecasted range of $243 to $245 and a $251 reported in Q3 of 2013.…

Thank you, Doug. This morning I will comment briefly on the details of our positive third quarter gross profit results and then I'll give you our gross profit outlook for the balance of 2014 and a big picture view of 2015. Doug just reported that our gross profit per worksite employee per month for the third quarter was $255, $10 per worksite employee better than our forecast. The gross profit consisted of $185 of average markup, $52 of direct cost surplus, and $18 from our strategic business units. Now let me give you the breakdown of the $10 per worksite employee per month additional contribution to gross profit. The average markup was $1 per worksite employee per month lower than our forecast. The surplus was $11 per worksite employee per month better than our forecast, and the contribution from our strategic businesses was right on forecast. Now the $11 per worksite employee per month additional surplus came from the combination of $2 per worksite employee per month decrease in the surplus from the payroll tax cost center, a $1 per worksite employee per month decrease in the workers compensation cost center, and a $14 per worksite employee per month improvement in the deficit of the benefits cost center. The shortfall in the payroll tax cost center was because the new business added during the quarter came in a little later than forecasted which always causes a short-term decline in the surplus until those worksite employees taxable wage -- unemployment wage limits are met. The $14 per worksite employee per month significant improvement in the benefits cost center was the combination of a $5 per worksite employee per month lower than expected allocation, completely offset by a $19 per worksite employee per month lower healthcare cost. The lower allocations continue to…

Thank you, Richard. We’ve been working throughout this year to position Insperity for a breakout year in 2015, to demonstrate the growth and profitability potential of our long term strategic plan. Today I would like to provide an update on the three critical initiatives underway which will drive our results for 2015 to achieve this objective. First I will address the unit growth acceleration we are experiencing as a result of improving sales. Second, I will provide some color around our fall selling and retention campaign which is critical in determining our starting point and ultimate growth rate for next year. And third, I will discuss our continuing efforts to align operating cost to allow for operating leverage as we ramp up our growth rate. We had some recent success driving our most important growth metric which is the number of paid worksite employees using our co-employment solution. If you look at Q2, Q3, and our forecast for Q4, you will see a nice trend in sequential unit growth acceleration from 1.6% to 2.6% and 3.5% respectively. This growth acceleration is the result of improving sales. We achieved a 100% of our budget for sales in the third quarter exceeding 10,400 employees sold up 38% sequentially over Q2 and 29% over the same period last year. These results included a record number of mid-market worksite employees sold, exceeding 3000 for the quarter. Sales efficiency increased by 32% from 0.69 to 0.91 sales per sales person per month. Year-to-date sales are 106% of forecast and 15% over 2013. Core sales are 93% of budget year-to-date and our mid-market success in Q3 made up the difference in exceeding the total year-to-date sales forecast. In addition core sales activity metrics are showing some serious momentum as business performance advisors gain experience. In Q3…

Thanks Paul. I’d like to now provide our guidance for the fourth quarter. We are forecasting the 3% to 4% sequential increase in average paid worksite employees over Q3 to a range of 135,750 to 136,250 for Q4. And as Richard mentioned we now expect gross profit per worksite employee per month to be in the range of $230 to $234 for Q4 which is a slight increase over the prior year. As for our Q4 operating expenses, we are forecasting a range of $83 million to $83.5 million, which is a $3 million sequential decrease from Q3. We are estimating 25.3 million average outstanding shares and an effective income tax rate of 42% for Q4. In summary, our updated key metrics guidance implies a range of 2014 full earnings per share of $1.08 to $1.11 and adjusted EBITDA of $81 million. The midpoint of this updated guidance is now near our initial forecast coming in for the year. As Paul mentioned, we are now focused on closing out a successful fall sales campaign and year-end renewal period such as an improvement in our starting point for unit growth combined with the lower operating expense levels exiting 2014 will point to a strong operating results in 2015. We will be providing detailed 2015 guidance in our next earnings call. At this time I'd like to open up the call for questions.

(Operator Instructions) And our first question comes from Jim MacDonald from First Analysis your line is open.

Yeah, good morning guys.

Good morning Jim.

So can we talk about the 10,400 new sales and when those are expected to start, is there anything different this year or more starting in December 1st versus January 1st because of the ACA or any changes this year or when are those expected to start?

Well you know normally at this time of the year you have people kind of to further start until Jan 1. We still see most of them there but we still have some coming in as the year progresses and we have such a full pipeline of core sales opportunities, it's still a little hard to tell if we are going to have a surge in December relative to the ACA that wouldn’t surprise me but we are not counting on it.

Okay. And can we talk about the ACA in general, what are you seeing, what are customers saying about the ACA how is your positioning?

Yeah, we are definitely getting into doors to have the opportunities for discussion based on a variety of factors. One being that the employer reporting responsibilities are going into effect on January 1st for certain customers. We also have as you are probably aware that on a state-by-state basis various elements of pricing and plan changes, etc are going into effect. There is a lot of the small business sector that are -- their renewals have been shifted into this fourth quarter. So there is a lot of activity there. And it is helping us increase our opportunities and with our favorable management of the benefit plan, that Richard referred to, our extension with UnitedHealthcare, we are comparing very favorably and we are excited about where that leads us.

Okay. And switching gears to the markup, and the 185 markup. Can you talk a little bit about that keeps trending down as there -- is that due to the higher mix of midmarket employees or some of the new bundles you have and can we expect that go -- you know start trending back up again?

Well there are combination of things that are affecting that number. Mostly it’s the offering of new lower price but also lower cost offerings. So the mix of both midmarket and what I call product mix work for synchronization versus optimization will have some pressure on that number. But as you know, the midmarket customers have always had a lower gross profit per worksite employee but at least the same and many times a better operating income or worksite employee. So as we manage through the pricing and cost metrics on those different products in the customer mix, we will be as Richard said, watching that very closely throughout year-end and planning our operating model around that.

Great. I’ll let someone else ask, thanks.

(Operator Instructions). Our next question comes from Jeff Martin from Roth Capital Partners. Your line is open.

Thanks, good morning guys.

Good morning.

Richard you mentioned with UnitedHealthcare and the renewal once you reach certain membership levels there is potential for some administrative cost savings. I was just wondering if you could detail what kind of levels will start to trigger and what kind of savings there is potentially?

Actually Jeff I am not allowed to do that.

Okay.

It’s a good question. You just have to trust me this time.

And then Doug could you give us a sense of how operating expenses transitioned, because there is there definitely are efforts to save operating expenses this year to maintain certain earnings levels. But say we get back to 12% growth in the worksite employee base, how does operating expense come back into normal and what is the impact there on ability to leverage profitability next year?

Yes, I mean we don’t want to get into detailed guidance for next year. I think you’d have to look at some of our historical guidance when we get in. I mean our historical results when we get back into this high single-digit, mid double-digit unit growth and see the impact on the operating expenses. We’ve talked before and we’ve done some -- a little bit of a recent dive on the detail of our operating expenses and how they split between fixed and variable. And the variable obviously with the sales reps that you are adding before you get the unit growth and the service reps with the unit growth and so we’ll be looking at and how we come out at year-end, what our unit growth forecasted, and how that effects the variable piece. And I think what Paul mentioned there is really getting the leverage on the fixed side of the business which I think we’ve done a fairly good job controlling this year. Particularly in the G&A area and so that will continue to be a focus there. So while I can’t give you any specifics on numbers, we do expect leverage overall and you’ll have to look at some of our recent results and I think that proves that out once we are hitting these double-digit unit growth numbers.

Okay and then can you give us a sense of whether the markup on the business just being effected by some of these alternative plans to the middle market clients?

Yes, we touched on that. We have definitely seen that and we’ve had over the time we’ve had success in the third quarter over the second quarter of adding about a thousand employees into our workforce synchronization above the second quarter. That will affect that markup component of our service fee and we will drag it down a little bit. So this $185 level that we’re seeing right now we’re going to be certainly looking at that to see how our year-end selling plays out, how much the mix goes into that workforce synchronization offering, and then make an adjustment for 2015 at the rest of the gross profit -- in other cost centers.

I would also add though that I just remind everybody that someone who selects workforce synchronization has a pure services that are included in the bundle. But they are able to buy those services on an as needed basis, paying additional fees above what they have contracted to on an ongoing basis. And we have begun to see that customers have those same needs and we are starting to quote various projects that otherwise would have been included in workforce optimization but are now on a fee for service level. And so that’s going to chase this process a little bit. Customers coming on workforce synchronization, then there is a time period for evaluation of what their ongoing needs are for some of the added services, and people make buying decisions but there should be -- we have a group that are now focused on quoting these projects on a fee basis and going in and executing on those and we are seeing some uptake in those.

Great, thanks guys and good luck with the fall sales campaign.

Thank you.

Thanks.

Our next question comes from Mark Marcon from R.W. Baird. Your line is open. Mark Marcon, your line is open.

We cannot hear Mark.

Okay our next question comes from Jim Macdonald from First Analysis. Your line is open.

Yeah, I guess I will follow-up while Mark gets on his phone. Couple more questions on the COBRA impact, you said it was down 25%, how much more impact you think you can get, can you give us a feel for where you expect that to go?

Well Jim I will tell you what I think because COBRA participation last 18 months and then there was an extinction that people can have in certain state. So I think we are going to continue to see it decline but I don’t think we are -- I think we are probably going to be at nominal. I don’t think we will be seeing 25% increases in 2015 over 2014, decreases I mean. So, I think the decreases will be smaller incrementally as we go through 2015 compared to 2014 but still think we are going to be -- they will declining as there are other options out there that are cheaper than COBRA.

Okay, and back to the comment sort of following up on what Paul said, how -- when I think one of the original concepts of the whole ABU is getting customers and then converting them into the PEO structure and Paul sort of hinted about that and about some of them adding extra services, how was your experience, have we seen any kind of examples and success in converting people from buying products to moving to the full PEO offering?

Yes, we have and it is great to see that start to really happen where we can actually look at the broader customer base which is over 100,000 actual businesses that we serve with some products or services. And in some areas, it takes a specific game plan. For example there is a step up from someone using one our software as a service product. It will only work for optimization, involves establishing a relationship and going through a process of understanding what other things we offer and how we can affect their operation. And so it will take a little but we definitely have seen successes that we are going to be able to capitalize on going forward. One example though is if you look at customers that we have in our overall business that have more than 150 employees, there are now over 4200 of those customers. We added almost 300 (inaudible) of that size in the third quarter. And we only have 150 customers using the workforce optimization or synchronization co-employment model. So that is a nice book of business that we now have a strategy for going in and harvesting and getting on to various, whether it is workforce administration or collaboration or onto one of our co-employment solution. So a lot going on there but that is a longer-term component of the strategy of the cross selling game plan but it is nice to see progress like that in that area.

Okay, great. Thanks.

(Operator Instructions). Our next question comes from the line of Michael Baker from Raymond James. Your line is open. Michael Baker - Raymond James & Associates: Yeah, thanks a lot. I got on late so I may have missed this but I was wondering if you could give us some flavor of the pickup in demand that you are seeing in terms of size of employer given the phase in nature of the mandate?

Well, we are seeing good demand kind of across the book of business. But you have different things happening in different segments. In the small business segment, less than 50, you have the issue of kind of the concentration of the renewals into the fourth quarter. So that’s driving some activity in that group on customers that are larger you have the employer mandates or employer reporting coming on next year and that’s driving some activity in that segment and then of course we have some things we are doing specifically around product offerings that cast a wider net especially in the emerging growth and mid markets space. And we’re seeing excellent demand for those service, I think we have hit the mark in terms of devising these service bundles to fit what customers are looking for. So we feel pretty good about the demand for the services, the way they are laid out and it’s kind of going across all segments but for different reasons. Michael Baker - Raymond James & Associates: Okay and then I just had a question somewhat related but you were one of the first ones to kind of hint or give a sense of price competitiveness picking up and clearly that’s played through even with one of the larger players kind of changing your insurance structure in the State of Florida. So what I was wondering is with this kind of pickup in demand have you seen any change yet or sense any change yet around that dynamic and if you could just make some broad comments around geographical differences that you see?

Well, I really do see something that's to me is very exciting about the business overall. And that we’ve looked for a long time hoping that there would be enough of us out there to really cause more of a broad base demand for co-employment services and outsourcing the HR function to a greater degree. And I think that trend is really taking hold. So that’s a positive I think for everybody. I think what you’ll start to see happening now is more product differentiation and service level differentiation. More quantification of what services and what service levels have or how they have -- has an effect on price and how that turns into value for customers. And so I think there is kind of another level of education that automatically happens in the marketplace as you have growing demand and more of a variety of offerings available. I think we are very well positioned to be a delivery to a distribution system or even for that communication because of the quality of the sales organization. Our average age for our business performance advisors is in their 40s. Lot of our business performance advisors are former business owners. So our ability to communicate to business owners I think is unparalleled in the industry and I believe that will play well for us going forward. Michael Baker - Raymond James & Associates: Thanks for your thoughts.

We have no further questions in queue; I’d like to turn the call back to Mr. Sarvadi for closing remarks.

Well, thank you very much for participating today. We appreciate your interest. And we plan on being out on the road to visit with investors over the next quarter. So we are very helpful to have an opportunity to visit with you while we are out on the road. Thank you for participating today.