Insperity, Inc. (NSP) Q1 2015 Earnings Report, Transcript and Summary

Good morning. My name is Sally, and I will be your conference operator today. I would like to welcome everyone to the Insperity first quarter 2015 earnings conference call. [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. Let me begin by outlining our plan for this morning's call. First, I'm going to discuss the details of our record high first quarter financial results. Paul will then comment on our first quarter achievements and our plans for the remainder of the year. I will return to provide our finance guidance for the second quarter and an update to our full year 2015 guidance. We will then end the call with the question-and-answer session where Paul, Richard and I will be available. Now, before we begin, I would like to remind you that Mr. Sarvadi, Mr. Rawson or myself may make look forward-looking statements during today's 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, uncertainties that could cause actual results to differ materially from any forward-looking statements and reconciliations of our 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 me begin today's call by discussing our strong first quarter results. In general, the growth of worksite employees continued to accelerate as we ended the quarter with a double-digit increase over the prior year. Additionally, operating cost to generate results, which significantly exceeded our Q1 plan. For the first quarter, adjusted EBITDA increased 74% over Q1 of 2014 to $42.3 million. Adjusted earnings per share were $0.86, an increase of 105% over Q1 of the prior year. Revenues increased 10% over Q1 of 2014 to $700 million on a 9% year-over-year increase in average paid worksite employees. Now, our successful fall sales campaign and yearend client retention efforts resulted in a step up in average paid worksite employees over the fourth quarter of 2014 to $137,959 for Q1. Client attrition averaged 10% for the quarter, a reduction from 13% in Q1 of each of the prior two years. Net hiring in our client base came in below both our forecast in Q1 of the prior year, reflecting the weak employment numbers early in the quarter. While this resulted in average worksite employees coming in slightly below our forecast, our recent sales and retention results drove us to 10% unit growth by the end of the quarter. As for our gross profit, we achieved a 22% increase over 2014 on the 9% increase in average paid worksite employees. This increase was the result of significant efforts throughout 2014 around optimizing pricing on both new and renewing business. Additionally, at yearend, we chose not to renew a smaller number of clients that had not met our gross profit targets. And last, but not least, we are positively impacted by continued low trend in healthcare costs, resulting from the management of plan design, lower COBRA participation, and generally lower healthcare utilization. The increase in adjusted EBITDA of 74% on the 22% gross profit growth also reflects the operating leverage in the business model. This was demonstrated by just the 2.9% increase in adjusted operating costs over Q1 of 2014, when excluding impairment charges, shareholder advisory expenses, and incentive compensation expense. Now, consistent with prior years, our incentive compensation program is directly tied to and fluctuates with our operating results, and therefore it typically results in a higher accrual during outperformance periods, such as this quarter. As for our balance sheet and cash flow, we generated approximately $40 million of free cash flow defined as adjusted EBITDA of $42.3 million, less $2.4 million of capital expenditures. Cash outlays also included the repurchase of 113,000 shares of stock at a cost of $5.7 million and cash dividends totaling $4.8 million. We ended the quarter with $91 million of adjusted working capital, up from $73 million at the end of 2014. At this time, I would like to turn the call over to Paul.

Thank you, Doug. Thank you everyone for joining us. Today I'll address the following topics. First, I'll comment on the outstanding results from Q1 and provide some color around the drivers of this substantial outperformance. Second, I'll address the positive trends we're experiencing and the ongoing initiatives we are implementing that are driving the upward revision to our adjusted EBITDA over the balance of 2015. And third, I'll comment on our competitive advantages driving the long-term prospects for growth and profitability of Insperity. From a big picture prospective, this is the third quarter in a row that we have significantly outperformed our expectations as we are gaining traction and momentum from our broad growth platform. Our persistence in implementing this improved business model is paying off. The first quarter financial results were directly driven by the successful yearend transition, fueled by the new platform. Improvements in sales, retention and client selection led to the combination of new accounts enrolled, renewing accounts that were repriced and direct cost benefit from terminated accounts to produce better results than expected. We had a 23% reduction in client attrition, which is largely attributable to providing more service alternatives for mid-market accounts and continued excellent service results in our core small business client base. The availability of two co-employment options coupled with our ability to customize a solution for mid-market accounts with additional business performance solutions are direct outcomes from the strategy we employed several years ago to broaden our array of services. This improvement resulted in less than 10% of our worksite employee base churning in Q1, which produced better pricing from the resulting mix of new and renewed accounts. New accounts are priced more aggressively than renewing accounts, so the mix affects the allocations for the per employee elements of our pricing like health insurance and HR service fees. So the bottomline to the first quarter financial results was the higher than expected allocations with a result of solid execution and client retention and lower than expected medical cost with a result of deliberate client selection and efforts to reduce COBRA related risk. During the quarter, we also experienced an expected ramp up of our year-over-year unit growth rate from 8% to 10% in spite of lower than expected net new hires from the client base. This growth momentum is expected to continue as we expect 10% to 11% year-over-year growth in Q2. Our confidence is high due to recent sales success and impressive improvement in key metric. Our core sales team produced a 41% year-over-year increase in these sales, which was a 103% of the significantly higher forecast for Q1 compared to last year. Sales efficiency increased 37% driven by a 12% increase in obtaining business profiles from discovery calls and an 18% improvement in the closing ratio. Discovery calls were up 25% and business profiles increased by 39%, resulting in the 41% increase in sales year-over-year. This was accomplished by sales team of 311 trained business performance advisors, which was only up four from the number we had in Q1 of 2014. This team is hitting their stride, as over 60%, now have a tenure greater than 18 months. We have previously announced and have begun to ramp up of new BPAs averaging 330 total higher BPAs in the quarter, and ending at 340. We intend to reach 390 to 400 in the latter part of this year with the trained BPA count of 350 by yearend. The sales team also made progress in selling additional business performance solutions bundled with workforce optimization and on a standalone basis. In Q1, this team achieved a 34% increase in the sales of these additional solutions, designed to increase client retention and to expand our customer base more rapidly. We also made important progress in the first quarter in the development of our mid-market sales and service initiative. We trained nine of our core market business performance advisors to fill the role of co-employment consultants on specific mid-market prospects engagements. This quickly expanded our capability to handle more mid-market leads. At the same time, we aligned incentives across the entire sales team, which immediately increased the number of sales leads for these larger accounts. The result is a much stronger pipeline for potential mid-market accounts and the ability to take these prospects through an improvement process to arrive at an appropriate customized solution. Another key initiative completed in Q1 was the definition and clarification of our project-based outcome driven strategic HR services that distinguish workforce optimization from workforce synchronization. These projects are now available on a standalone basis or coupled with other traditional employment services creating a new revenue stream for the company with excellent potential margins. One other important trends on the last three quarters that I would like to highlight for investors is the management of our operating expenses and the resulting operating leverage. As a service company, the primary driver of cost is a number of corporate employees we have. We ended the quarter with the company 10% larger than one year ago, and only 14 more corporate employees of 0.6% increase. In the service area specifically, many initiatives have been pursued to create operational efficiency gains, while elevating customer service. These include improvements in onboarding processes, leveraging technology to streamline manual processes, and optimizing by ensuring clients are in the most efficient service model to meet their needs. These resulted in a 13% improvement from one year ago in our ratio of the number of worksite employees per direct service personnel. An additional key contributed to the operating leverage is shifting the balance of our marketing spend from brand and product positioning to directly production activities. In Q1, we experienced a 40% increase in workforce optimization leads, a 16% increase in other business performance solution leads, and a 23% increase in unique visitors to the insperity.com site on a 25% reduction in advertising spend. Based on the first quarter financial results of these positive growth and cost trends we're experiencing, we are substantially increasing our guidance for adjusted EBITDA growth for 2015. In addition to the $8 million beat from Q1, we have built in approximately $2 million more of additional gross profit and another $2 million from lower operating cost from the original forecast. The last topic, I would like to discuss today is the competitive advantage we believe we have driving the momentum we are currently experiencing. Insperity's position as the premium HR services provider in the marketplace offering high-tech services on a robust high-tech platform. This premium service positioning helps us win in the marketplace, really due to three drivers: the breadth of services, the depth of service, and the level of care. Each of these elements yield higher value for the customer and higher pricing for us, as it distinguishes our services in the marketplace. The breadth of services of our broad platform allows us to meet the needs of a higher percentage of prospects we call out. We are now casting a wider net to bring in more new customers for the same sales activity. This wide array of services has provided the opportunity for creative packaging of service bundles and the capability to customize the solution for each client. We are able to deliver value commensurate with the client need and the price they're willing to play. Our breadth of services establishes Insperity as an advisor that can bring solutions to bear over the lifecycle of our clients business. The Customer for Life model we have in place is leading to higher retention and more cross selling opportunities. The depth of our service capability is unmatched in the marketplace allowing for the higher sharing of risk and greater value from the peace of mind we provide to the business owners we serve. Our deep expertise across all areas of employment combined with our deep understanding of what it takes for businesses to succeed offers lower risk and speed of execution to highly-valued advantages in today's marketplace. It's important to understand our risk-based growth model. We're growing at a targeted rate, adding the right risk profile clients creates more value for shareholders than growing faster without the capability to manage the risk. In the PEO model each new worksite employee is a unit of revenue and profitability, but also a unit of risk for costly employment-related claims. The third distinguishing factor across our service platform is the level of care delivered by Insperity employees. The quality, expertise and service mentality of our staff has been described by clients often as caring about their business and their people. This level of care will always be valued and worth a higher price point in the marketplace. These three competitive advantages are foundational for our long-term plan for growth and profitability and they are driving the demand and momentum we are seeing in the business today. One last item I'd like to discuss from Q1 is our efforts to be responsive to investor input. As you know, Starboard Value became our largest shareholder in January and we have expeditiously to develop the constructive process to work together. We've added one new Board member from Starboard and two independent directors from several candidates they provided. We have formed an independent advisory committee that is already working, reviewing the business to develop recommendation for the full Board to consider. We are hopeful this effort will build upon the excellent momentum we are seeing here at Insperity today. At this point, I'd like to pass the call back to Doug to provide guidance for Q2, and update the full year.

Thanks, Paul. Now, before we open up the call for questions, I'd like to provide our financial guidance for the second quarter, and an update to our full year 2015 forecast. We expect to continue the acceleration in average paid worksite employees from a 9% year-over-year increase in Q1 to a range of 10% to 11% in the second quarter. As for the full year, we continue to expect a 10% to 12% increase in average paid worksite employees over 2014. We are forecasting significantly higher adjusted EBITDA from our initial guidance based upon the strong first quarter results and some further improvement in gross profit and operating leverage over the remainder of the year. So we are now forecasting an increase in adjusted EBITDA of 33% to 38% over 2014 to a range of $112 million to $116 million. As for Q2, we are forecasting adjusted EBITDA of $20 million to $22 million, which is down sequentially from Q1 of this year due to the typical seasonality in our gross profit, however is a 38% to 52% increase over Q2 of 2014. We are forecasting 2015 adjusted EPS of $2.15 to $2.24, an increase of 48% to 54% over '14. The Q2 adjusted EPS is projected in a range of $0.36 to $0.40 or an increase of 71% to 90% over Q2 of the prior year. In conclusion, we are very encouraged by strong start to 2015. And we look forward to updating you on our further progress throughout the year. So at this time, I'd like to open up the call for questions.

[Operator Instructions] Your first question comes from the line of Jim Macdonald with First Analysis.

Could you talk a little bit about the components that led gross profit be as high as it is? I mean, if you had to divvy that up between lower utilization, higher pricing, other kinds of impacts, may be lower suite of rates?

We can think about it in a couple of different ways, but obviously, because of the as Paul mentioned, our business, the customers that renewed at the end of the year, the pricing of those customers contributed about 35% of the improved gross profit results and the benefits cost center. And the other 65% would be based on lower utilization, which translates from lower COBRA participation, because of the changes that we made in the fall of 2013, and continuing offering customers better options in the healthcare exchanges. And so if you think about the 35%, 65%, I think that's probably a good way to really talk about it. I guess last, but not least, our client selection because of our customer philosophy now, and the way that we deliver the services and the suite of services that we have, it really allows us to take the right kind of customers and move them out of one solution into another that benefits both, them and us. And then in the fall of 2014, that's exactly what we did. So the combination of all of those efforts will continue to produce really good trends for 2015 on the healthcare side.

Just continuing that thought of how it looks going forward, so the pricing I would imagine would continue the lower utilization trends. Do you expect that to continue or is that more going to bounce around?

No, I think at this stage of the ball game, when we talk to our carriers about what they are seeing in their trend increases for 2015, plus the fact that we can continue this, as I said, to move customers out of one option into another, if they are not contributing at our targets at the gross profit line. We do see a very nice trend and we have actually reduced our forecast for 2015 from about a 2% year-over-year trend in the costs, down to about 1%.

And just technical one and I'll get back in. The impairment, was that for the airplanes? And have they've been sold and how will that impact the P&L and everything?

Well, the impairment was taken upon entering into a formal brokering agreement to place the aircraft up for sale. So the accounting guidance under that is you do market to fair market value, so we obtained an appraisal at that point and marked the planes to fair market value. The planes are on the market to be sold, but have not been sold currently.

And what expense line items will that lower the D&A and what else?

Yes, so once they are held for sale you no longer depreciate the assets. So it will lower depreciation in that respect. And to some extent the rest of the OpEx is dependent upon any utilization or offset by any chartering of the planes during this sales period.

Your next question comes from the line of Tobey Sommer with SunTrust.

Let's start out by just asking a question about Starboard. To what extent, have the results so far, maybe from the first quarter been influenced by their involvement, or is this, at least so far primarily the result of last year's efforts internally by the company?

Well, obviously Starboard made their investment in January. We were well past the yearend transition by that point took another couple months to negotiate and come to upon agreement on how we would move forward together. So it would be pretty mature to think that there is anything in these results that would be the result of our working together. We're hopeful that that our working together will build upon the momentum we had. This is three quarters in a row. As I've mentioned that we've significantly outperformed even our own expectations, and it's because the platform for growth that we've put into place that took longer than we thought it was going to, but felt very strongly about once it's in place that the synergistic effect was going to be strong. And frankly, we're just now getting a glimpse of it. And so we're really excited about the platform that's in place. And actually the timing of having a new large shareholder come in and bring some additional perspective to the Board, we think can be a very good thing, and that's what we're hopeful about.

I had a question for you about, I think you mentioned in the prepared remarks, shedding some lower margin customers, lower priced customers perhaps. Was that done at yearend or early January or is that kind of subsequent kind of within the quarter after you had the fourth quarter call and gave guidance?

It actually started in the fall of last year and has continued through the customers that we renewed at the end of the year, and it will be continuing throughout 2015.

And can you give us sense for how many or any sort of quantification, however, you'd like to what order of magnitude that represents on a go-forward basis?

It is a small number. You would hardly recognize it in our client account.

It's a small number of accounts that can have a big impact. And Richard made a very good point earlier that it's the new ability for us to put the customer in the right solution that really is driving that ability to optimize for us and the customer. And so that's going to pay dividends on an ongoing basis.

One numbers question and I'll get back in the queue. You mentioned the sales force headcount in your plans to grow it, but I missed it. If you could repeat that that'd be great.

We ended the quarter, I believe, at 340 hired BPAs. And we're going to grow that to 390 to 400 over the rest of the year. And our target is to be at 350 trained BPAs later this year.

Your next question comes from the line of Mike Baker with Raymond James.

I was wondering if you could talk a little bit more about the middle market initiative, give us a rough sense of size? And historically, as you know, at some point those employers believe that they can kind of in essence buy on their own. And from what we're hearing, the middle market is also open to more self-funding solutions. So I'm just trying to get a general sense of your excitement, and what dynamics you think that that segment of the market is focusing in on to win business there?

We have really cracked the coder in my opinion on both selling and serving mid-market customers. They are relatively complex accounts, because of the number of influencers and buyers involved. And the process is that they go through at the other end in terms of due diligence and approval processes. So it is a complex world to sell into. It's also a complex world to serve, because once again, you have multiple constituencies to set and exceed expectation. But we really figured out on both fronts how to connect with the team selling approach, to bring on more customers that have 150 to 2,000 or 3,000 employees. We also now have a proactive process, as customers grow, to put them into a new model that connects at those multiple points in their organization and ours to improve the value proposition for them and obviously their satisfaction level. So that was a part of the retention story going 23% improvement, and a reduction actually in client attrition, and that played a big part of that. So your comment about self-funding options -- the whole idea with mid-market is they want some flexibility, they want a customized model that suits their needs. And the fact that we now have a broad array of services that our service model for each mid-market customer feels very customized, because there is a tremendous amount of analysis to figure out where their most important needs are at the time, when we first engage. But it's also the ongoing process of reevaluating that service package, if you will, and changing it, maybe taking some things out, putting other things in over the course of that relationship, what we refer to as our Customer for Life strategy. That's where I think we have quite a competitive advantage, and we've improved that what we use to call our success penalty. Now, you still have that happen when customers leave, because there's been a transaction and that has been -- these great results have been in spite of high activity level and M&A activity. But that also helps us some on the other side of fence, on the sale side. So that whole segment for our business, we feel very strongly about. We're also making a very concerted effort towards the private equity community and have several channel based activities going in that area, and we think that's going to fuel both mid-market and even our core business.

And I had a question, another question as it's related to the relationship with Starboard. Ultimately, as you guys kind of work through the process, should we expect that you'll set a long-term target around operating margin?

Well, that's one of the thing we'll work through together to decide, what are the best metrics, what's the best way to communicate, where the business is going from an operating standpoint. So there is work to be done before recommendations are made to the full board. And then once and whatever is adopted, we'll certainly communicate to the Street at that point.

And then, we should assume right now is that what changes we've seen so far, even related to claims or what's in the press release, the additional disclosures, more a function of you reaching out to investors and addressing some of those dynamics. And that what we should look for is whatever you and Starboard decide in the process. Is there any sense of how long the process might take or is there any timeframe around the process?

Well, yes. We are again working together and very active, working to plan together and we're hopeful to have a good substantive update on our next quarterly call. I think it's important to note, on the operating cost side of our business that when we first start to receive some input from investors over a year ago, that we took a proactive approach to start working on the operating structure and it's really evident today, here we are a year later with 10% unit growth, but basically the same number of corporate staff we had a year ago. You can see in the number some good operating leverage. There has been some tightening around and shifting of expenditure in the advertising and marketing area. We've seen some great efficiency gains from the hard work, digging in and especially optimizing, putting customers in the right model that equates to the -- that meets their need and gives them the value they want, and lowers our service cost. Our workforce synchronization service, which is a lower price and lower cost model, has gained a lot of traction. And so that's being weighed in and factored in. And so we've made great progress within the last 12 months, and we're continuing to focus on making sure we have the right cost structure. We're incenting the right behaviors in the company to be very aware of the operating cost and trying to improve the model. So we are well into that process and looking forward to working all the way through it, and making sure that investors can be confident that we have an operating cost structure that's creating value for shareholders.

Your next question comes from the line of Mark Marcon with Robert W. Baird & Company.

With regards to the growth in the average worksite employees, can you talk a little bit about the productivity levels that you've seen in terms of where we are in terms of quotas at this point, with the trained BPAs?

Yes, sure. Again, we're slightly above budget.

I mean, where is budget?

Well, I'll just we were like a 103% of our budget for the first quarter on the sales side of the business. And I mentioned the dramatic improvement in some of the key metrics, in the sales organization. But we also have 60% of the BPAs that now have 18 months or more of tenure. And as you all know, we have been around the model for a while, there is a real nice efficiency gain with sales staff get passed that point. We also had a very successful fall campaign, which means that you had a lot of reps repetitions throughout that period. And then success in actually converting and closing business, that great success in sales and momentum is really important. And so we are starting the year with a strong team. We had a great sales convention in the first quarter, in the month of February. It was very focused. There's not a lot of new stuff to be introducing. And it's basically improving skills and the blocking and tackling of getting in front of customers and bringing them on board in the right solutions that fit their needs. So we are at a point now where it's back to what we've done really, really well for 29 years, which is getting out in the marketplace and meeting business owners and figuring out how we can help their business to succeed. Now, we have more ways than ever to do that, and we're expecting that synergy to continue to really be beneficial.

And then with regards to the gross profit, can you give us the details that you normally give with regards to what the change in benefits cost were and the percentage that are covered, and where workers comp and payroll taxes came in as a percentage of payroll?

I understand kind of the desire to get in the kitchen and see what's going into the mix. But I think what we are trying to focus on with our shareholders are the key metrics, growth of worksite employees. And I know everybody put some revenue numbers out there, but the revenue number itself is not meaningful model to the growth and the number of worksite employees, and what adjusted EBITDA we get out of that. And gross profit is obviously an important part of that mix.

That was a huge part of that mix this quarter.

Well, sure. It always will be.

It always has been.

That's why I wanted to get under the hood.

Well, I understand that, but the key is that for all these years, in every quarter some things go pretty well, some things don't go very well, and it all mixes together. And then we manage the operating expenses to make sure we do as good as we can in each given quarter. And that's kind of where we want to go is we want to be focusing on what we end up with at the bottomline to grow the business at some. We believe we have a model that can grow the adjusted EBITDA line very strongly for a long period to come. And that's where we believe we're going to drive shareholder value. We're not trying to hide anything. Obviously, we've been super-transparent. All the numbers are in our filings. In this quarter, I think it was clear what took place on the gross profit side. I don't know, Rich, if you want to answer anymore deeply than that. I don't know, if that's, what you want to do.

I mean, we talked about the trends and all that kind of stuff. And what we're seeing, we already talked about the fact that we're seeing lower healthcare cost trends that will translate into the effective amount of pricing and allocations. From our workers comp program, it was right in line with what we budgeted for the quarter. Employer-related payroll taxes were a little bit better than expected. And then our contribution from our strategic business units was also from last year. So --

Can you give us that, in terms of how much that was up?

Let's see, in terms of on per worksite employee per month it was up about $2 on the strategic business units, on a per worksite employee per month over last year.

And then the healthcare costs, were they down about the same magnitude, as they were in the fourth quarter?

They were actually down more in the first quarter than in the fourth quarter.

So more like 3%, 4%?

Yes. In 3% range, yes.

And is that sustainable through the balance of the year?

Well, it would be sustainable if you consider the fact that the things that we've done to help redrive that cost down is about the proper kind of client selection that we have. The pricing of those customers, and the fact that -- the Affordable Care Act has continued to allow us to give customers options, especially COBRA participants, an option to go into a public exchange, as opposed to our very expensive COBRA plan. And so as you all know and we've talked about for years, a COBRA participant's cost are about two times that of a regular participant's cost. So when you can offer an option to a person who is now unemployed and going on COBRA, and it's a lower cost and they get the basic, the same kind of coverage, why wouldn't they take that and leave our plan.

And, Mark, one other thing I would add on that is, because if your question is, are we expecting another 3% lower in the second quarter sequentially, no, we wouldn't. But of course, once you get through the year and transition period, you then have your starting point for the year on the mix of business that you have, and which customers you retain and which ones left, what the pricing is. So obviously the pricing component is baked in now on that group. And then the cost side becomes kind of a new starting point for the year, for the base of business that you have. So to that degree, it's certainly sustainable. And then the things that the team are working on, they'll continue to improve the book of business. Well, they'll have lessen effect in the second quarter, because you don't have as many new and renewing accounts in second, third, fourth quarters, you do in the first.

And just two quick follow-up questions. One, can you give us the gross profit for worksite employee that's implied within the guidance, both for the second quarter and for the year? And secondly, does the guidance already presume the sale of the aircraft and some reduction in operating expenses due to that? And if so, how much is that?

I think in answering your first question on gross profit per employee, probably the better way to look at it is I think you've seen the updated guidance for the full year versus our initial guidance on the EBITDA side, so that's an extra $12 million or so. I think you can see where we beat the first quarter by about $8 million, because the incremental gone from $8 million to the $12 million is pretty much equal between further improvement in gross profit over the remaining three quarters and lower OpEx over the remaining three quarters. So hopefully that should give you some help as to what's contributing to the improved guidance for the full year.

And you were going to say about the second part?

As far as the aircraft, I think I answered in an earlier question. The aircrafts that have been placed for sale, we got a broker agreement out there that we've just implemented. The guidance itself would consider some form of travel, as it relates to either utilizing that corporate aircraft or utilizing some alternative means in the expense. And obviously, the one piece that does go away is depreciation on the aircraft. Again, as it's held for resale at this point. But the OpEx guidance will consider some travel cost still associated with moving corporate executives and others employee that utilize travel going forward.

There are no further questions at this time. Mr. Sarvadi, I'll turn the call back over to you. End of Q&A

Well, once again, thank you everyone for participating today. And we look forward to updating you again next quarter, and continuing the strong momentum that we're seeing in the business. So thank you, again, and we'll see you out on the road.

This concludes today's conference call. You may now disconnect.