Insperity, Inc. (NSP) Q2 2015 Earnings Report, Transcript and Summary

Good morning. My name is Taylor [ph], and I will be your conference operator today. At this time, I would like to welcome everyone to the Insperity Second Quarter 2015 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 sir.

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 strong second quarter financial results. Paul will then comment on our second quarter achievements and our plans for the remainder of the year. I will return to provide our finance guidance for the third 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 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 and uncertainties that could cause actual results to differ materially from any forward-looking statements and reconciliations of non-GAAP financial measures please see the company's public filings including the Form 8-K filed today, which are available on our website. Now, let me begin today's call by discussing our second quarter results which included the continued acceleration and worksite employee growth and the effective management of our direct cost programs and operating costs to generate significant bottom line growth. For the second quarter, adjusted EBITDA increased 56% over Q2 of 2014 to $22.6 million. Adjusted earnings per share were $0.42, an increase of 110% over Q2 of the prior year. Revenues increased 11% over Q2 of 2014 to $628 million on a continued acceleration in paid worksite employees. Average paid worksite employees increased 12% above forecasted levels and coming off of the 9% year-over-year growth generated in the previous quarter. The recent growth in the number of business performance advisors and improved effectiveness that comes with their increased tenure resulted in Q2 sales coming in a 125% of budget. Client retention was particularly strong averaging 99.3% of the quarter as our client base continues to value both our high touch core service model and the service level options available in our mid market client segment. Net hiring in our client base came was also positive and included the typical seasonal hiring associated with summer help. The increase in adjusted EBITDA of 56% or 9% gross profit growth reflects the effective management of operating expenses and the leverage in the business model with double digit top line growth. This is demonstrated by a less than 1% increase in adjusted operating cost. While we continue to grow our sales force leading into this year’s fall of selling season, other corporate headcount has been held relatively flat since the beginning of the year. Margin cost declined by 12% as we picked up savings when shifting some efforts from brand recognitions to lead generation. And a continued focus on other cost throughout the company resulted in a decrease of almost 6% in G&A cost when excluding share holder advisory cost. As per our balance sheet and cash flow, we generated approximately $20 million of free cash flow during the quarter defined as adjusted EBITDA of $23 million less $3 million of capital expenditures. Q2 cash outlays included the repurchase of 532,000 shares of stock at a cost of $28 million and cash dividends totaling $6 million. During the first half of 2015, we have repurchased 645,000 shares and while we have recently been more aggressive in our share buybacks our strong cash flow has resulted in an increase in adjusted working capital of $6 million over December 31, 2014 to $79 million. So recapping our results for the first half of the year, gross profit has increased 16% on a 10% in average paid worksite employees affectively managing adjusted operating expenses to less than a 4% increase has generated adjusted EBITDA of $65 million which is a 67% increase over the first half of 2014, and adjusted earnings per share have totaled $1.28 for the six month, which is two times that earned in the 2014 period. On this positive note, I’d like to turn the call over to Paul.

Thank you, Doug and thanks to all of you for joining the call today. I would like to highlight several areas of progress that are gliding our planned growth acceleration and the operating leverage we are experiencing both of which are evident from our second quarter results. Our year-over-year unit growth rate in worksite employees over the last three quarters has increased from 5% in Q4 of last year to 9% in Q1 to 12% this quarter and as announced today is forecasted to be in the 13% to 14% range for the next quarter. We believe the traction and momentum we have built in our sales effort combined with historically high levels of client retention have and will continue to drive this growth acceleration. In Q2, the number of worksite employees sold increased 50% over the same period last year and came in at 125% of our internal sales budget. This was due to a step up in sales activity combined with the substantial improvement in sales efficiency. The core market sales of accounts received in 150 employees increased 32% over last year and came in 113% of budget; this was driven by a 27% improvement in sales efficiency and a 4% increase in trained business performance advisors. Activity levels have increased substantially over last year with a 23% increase in discovery calls and a 24% increase in business profiles. Corporate leads from our successful marketing programs increased more than 50% over last year helping to boost this activity. Another factor driving activity in sales efficiency gain is our loyalty program which provides us systematic way to obtain referrals from current clients and worksite employees leveraging our high satisfaction rates in our client base. Referrals from current clients have the highest closing rates and margins than any other lead source. In Q2, we had a 78% in referrals that resulted in discovery calls and more than doubled the number of business profiles due to our loyalty program. These core sales metrics are demonstrating the traction we are gaining from our broad platform of services and our go-to-market cross selling strategy we call the Insperity selling system. This momentum is contributing to higher confidence in proficiency levels and ultimately lower BPA turnover. Newer BPAs are able to gain confidence and a feeling of success from the sale of our wide range of business performance solution as they gain the knowledge and experience to sell our premium workforce optimization service. More BPAs are reaching a level of proficiency in a shorter timeframe leading to lower turnover in the sales organization. This metric was significantly lower last year at a rate of approximately 25% down from our historical average of approximately 35% and is on track to repeat last year’s result. We believe this validates our BPA training and development program and bodes well for the ramp up in BPA that is currently underway and our outlook for long term growth. We ended the quarter with 370 BPAs on our way to a target of 390 to 400 by year end. We averaged 305 trained BPAs in the second quarter so this key metric is soon to increase substantially. In Q2, the sales of other business performance solutions by BPA along with workforce optimization and on a standalone basis increased 36% over the last year. Momentum in the sale of these business performance solutions from our strategic business units through the BPA channel accomplishes several important goals. These offerings are allowing us to cast a wider net and engage customers that are not quite ready for the Fulco [ph] employment solution expanding our client base for future up selling. These solutions sold with workforce optimization broadened the conversation deep in our engagement with the client and improves retention as part of our customer for life strategy. We believe the strategy to offer a wide array of business performance solutions to enhance the sale of our co-workforce optimization sales and expand our customer base is working and gaining traction. In addition, the synergistic effect we have been expecting on our strategic business units is also emerging. The BPA sales force has become a successful channel for our strategic business units contributing to the growth at a reduced customer acquisition cost. The strategic business unit portfolio grew the top line contribution by 19% year-over-year in the second quarter and reached an important milestone contributing at the adjusted EBITDA line for the first time. Client retention was also a highlight for the quarter continuing the improvement we demonstrated earlier in the year. Our 99.3% retention rate for the quarter reflects 29% fewer worksite employees terminating from client attrition compared to Q2 of 2014. This improvement in retention levels has been caused by several initiatives built around our broad product and service platform. Our customer for life strategy results in key relationship development and ongoing optimization of product mix, service models and pricing. Improvements in the account review process and stewardship meetings with senior level involvement are strengthening client relationship. These initiatives along with the close cooperation with our renewal team has allowed for strategically modified pricing and client selection to improve retention on target to the accounts. It is particularly noteworthy that these high levels of client engagement and retention have occurred while we are making dramatic improvements in operating efficiency which leads me to the second topic I’d like to discuss today. Our 2015 plan included an operating cost containment focus which we have successfully paired with our growth acceleration priority. Although these priorities are usually across purposes, our plan for 2015 was to build off the cost savings initiatives established in the first half -- within the last half of 2014, and continue this priority as we returned to double digit unit growth. Our successful execution against these objectives is clear in the 12% unit growth increase for Q2 just opposed against an operating cost reduction of more than 1% after adjusting for incentive compensation in both periods. During this period, we have made many systemic improvements to gain efficiency and lower cost without sacrificing the customer experience which is central to our premium service positioning as a company. A shining example of this occurred over the course of the last year mapping clients to the service model that best meets their need. This has allowed us to serve more worksite employees with fewer personnel resulting in an increase in our worksite employees to service personnel ratio in Q2 from 206 to 238 year-over-year, an efficiency gain of 16% while improving key customer satisfaction metric. Another example of balancing cost management and growth is in the marketing area. This year, we shifted cost from branding which has been our focus since rebranding the company to more direct lead generation with an emphasis on digital market. This initiative has contributed to the 50% increase in leads I have mentioned earlier and a 46% in unique visitors to insperity.com while reducing advertising cost 16% year-to-date. The last area of progress I would like to comment on today involves the results from the work of the independent advisory committee of our board of directors which was formed as a result of a settlement with Starboard Value earlier this year. You may recall Starboard Value became our largest shareholder in the first quarter of 2015 and we’ve promptly worked together to negotiate a settlement to avoid a proxy content. This settlement provided for changes to the Insperity Board of directors including adding Peter Feld, one of Starboards managing members and two additional new board members designated by Starboard and resignations of two Insperity incumbent directors. In addition the agreement called for the formation of an independent advisory committee to review the company’s business and make recommendations to the full board regarding capital allocation and targeted ranges for adjusted EBITDA margins for 2015 and 2016 while taking into consideration the company’s risk profile and the potential impact of any recommended changes on the company’s business model and strategic plan. Adjusted EBITDA margin has defined an agreement with Starboard as adjusted EBITDA divided by the gross profit over such period. The committee evaluated our historical capital allocation and provided recommendations regarding our ongoing dividend and share buyback program. These recommendations were adopted and resulted in an increase to the quarterly dividend and a significant increase in our share repurchase program beginning in the second quarter and continuing into this fourth. The committee charter charges the committee to continue to evaluate the capital allocation on an ongoing basis through year end and into the first quarter of 2016. The independent advisory committee chaired by Mr. Feld has also been working diligently to arrive at a recommendation of adjusted EBITDA margins that provided a full board. Since its first meeting on April 01, 2015, the independent advisory committee has held 13 formal meetings and has had numerous other informal status calls. In addition, the IAC which retained an outside consultant to reveal the baseline of 2014 operating cost and identify a range of cost saving opportunities to consider. The consultant delivered its final report to the independent advisory committee on July 07, 2015. Throughout this period the management has also worked diligently to assist the independent advisory committee in arriving at adjusted EBITDA margins to recommend to the board, including responding with aluminous information request, attending and preparing for IAC meetings as requested, and providing our full support to help the independent advisory committee consultant to timely complete their work. I am pleased to announce today the independent advisory committee and management were able to make a joint recommendation for adjusted EBITDA margin target which were promptly adopted by the full [ph] board last Friday. The results of this effort now been incorporated into our guidance for the balance of the year and will be part of our budgeting process for 2016. From the base line of 2014 expenses reviewed by the outside consultant, we have identified cost savings initiative totalling approximately $20 million, $12million of which is incorporated in our 2015guidance and additional $8 million which will be incorporated into 2016 budget. The savings will be generated across a variety of areas of the company including the elimination of our corporate aircraft which were both sold in July targeted reductions in advertising and marketing and consolidation within our strategic business units among others. It’s important to note this process was guided by the framework of our premium service business model, strategy and risk profile. Our objective is to optimize service cost while continuing to set the highest standard in the industry or service and value to client. Many of these initiatives have been working positives and the savings has been a part of our success in the first half of this year. Some of these initiatives will take more time to execute and will be part of next year’s plan. The adjusted EBIDA margin range for 2015 implied by our guidance provided today is 25% to 26% which is a substantial improvement of 400 to 500 basis points over our 2014 adjusted EBITDA margin of 21%. The targets for 2016 will be used in the 2016 budgeting process and discussed as part of 2016 guidance which will be provided in our normal course early next year as the specific growth and gross profit picture for next year emerges from our fall, selling and retention season ahead. Although this cost structure review was extensive, it did fit well into our 2015 plan for accelerating growth while carefully managing operating cost. We expect this initiative will feed into our efforts to drive continuous improvement in both topline and bottom-line results going forward. We are heading into the important fall sales and retention period for Insperity with excellent momentum and clear objective. Our goal is to repeat the successful fall campaign we had last year, which was the foundation for the rapid growth acceleration we experienced this year. At this time, I’d like to pass the call back to Doug.

Thanks, Paul. Now, before we open up the call for questions, I'd like to provide our financial guidance for the third quarter, and an update to our full year 2015 forecast. With a continued improvement in sales efficiency on a growing number of business performance advisors and a consistent high level of client retention, we expect to continue the acceleration in worksite employee growth. We are forecasting a year-over-year increase in average paid worksite employees of 13% to 14% in the third quarter. We expect the full year average to now be at approximately 12% which was the high end of our initial 2015 range. We are now forecasting an increase in adjusted EBITDA of 36% to 39% over 2014 to a range of $114 million to $117 million. This is a significant improvement over our initial 2015 guidance of $101 million to $105 million. 2015 adjusted EPS is projected in a range of $2.20 to $2.29, an increase of 52% to 58% over 2014. Our guidance takes into account the strong results for the first half of the year, continued acceleration and worksite employee growth and the effective management of gross profit and operating expenses over the remainder of the year. The improved worksite employee outlook causes some dampening in the gross profit area from our previous forecast due to the restart of payroll taxes on new business. Although this issue has historically been a drag on our earnings we just recently announced the passage of federal legislation that will allow for the avoidance of this payroll tax restart. Specific regulations and reporting requirements under legislation are targeted to be in effect in 2016, so we are hopeful that this issue will soon be behind us and in the future strong midyear worksite employee growth won’t result in a drag on gross profit. Now as for Q3, we are forecasting adjusted EBITDA of $27 million to $29 million, which is a 20%, 28% increase over Q3 of 2014. Q3 adjusted EPS is projected in a range of $0.52 to $0.56 or an increase of 33% to43% over Q3 of the prior year. In conclusion, we are very pleased with our results during the first half of 2015 and the momentum in our growth and operations heading into our strong selling season. We look forward to updating you on our further progress. Now at this time, I’d like to open up the call for questions.

[Operator Instructions] And our first question comes from Tobey Sommer from SunTrust.

Thank you. Regarding the cost savings, the $20 million you identified. Did you say $12 million will be folded in to the P&L sort of for the full year 2015 and $8 million for next? Did I catch that right?

That’s right.

And is there – are there other actions that you anticipate, the Board and the committee being involved and taking over the next several months or was establishing the internal EBITDA margin target sort of the principle goal of the committee?

Yes. That was the principle stated goal of the committee. But what we’re continuing to work as I mentioned in my script, on both these top-line and bottom-line optimization. So, we’ve had an emphasis on as you can see from our results on both grow on the top-line and really gaining some operating leverage, very much so demonstrated in these very good results in the second quarter. But we want to continue that and we intend to work continuously with the Board on making sure we optimize that structure as we continue to accelerate our unit growth.

How do you feel Paul about the company’s ability and sort of your tolerance to carry debt as oppose to the pretty substantial still working capital balance that you have historically because obviously the margins are improving and it seems like you’ve got an engine which has got a several cylinders working for growth as well? Thank

Yes. No question we have quite a cash machine here and operating in a nice way. And historically we’ve generate a lot of cash and we have, as you can see from the recent work in sales – not sales, but purchase share repurchases, we used our capital to continue to increase the dividend and by shares back. And as far as debt is concern we have a debt facility that is not drawn on to-date, but as we see reasons to do that going forward we’re certainly capable of doing that and wouldn’t be reluctant to do that as long as we’re adding value to our shareholders. That’s what it’s about.

Okay. Then last two questions from me and I’ll go back in the queue. One is about pricing for sort of the traditional core bundle, kind of wondering what the markup and any kind of change year-over-year. And I was also wondering if you could comment about the – just using a formal jargon and the surplus associated with healthcare and worker’s comp, and how that may have changed in the quarter? Thank you.

Yes. This is Richard. What we experienced this quarter is what we’ve been planning to see our markup component of our service fee has continued to match the kind of business that we’re bringing on. We’ve got a certainly a mix in customers. In addition to that our allocation for all of our direct costs have been in line and better than what we expected. What you’re seeing a little bit of a dampening affect on the revenue side, because we’re seeing continued migration of participants into lower cost plans and so that automatically reduces our revenue component. But on the other side of the coin, we also have lower costs. So, it’s all working just like we’ve planned it to be for 2015.

Okay. I guess, are you going to sort of on ongoing basis describe markup in those kind of trends in context with -- or you’re going to provide numbers for those?

No. I think what we are intending to do to act clear communication of the things that are important for investors to focus on. We’re going to continue to guide towards our unit growth and then adjusted EBITDA, because obviously there’s moving parts going up and down in the direct cost and then also on aggressive operating expense management initiatives. And what’s important is to drive that adjusted EBITDA growth and so we are planning continue to give you a flavor on what’s going on in those areas, but not focus on specific numbers of any one of those metrics to make that up.

Okay. Thank you very much. I’ll get back in the queue.

Your next question comes from Jim Macdonald from First Analysis.

Yes. Good morning, guys.

Good morning.

Good morning, Jim.

Yes. Just to follow-up on Tobey’s question. So, is it fair to say that the drop in gross profit per worksite employee compared to last year’s mostly due to mix issue with more mid-market business, and I think you gave a number, I don’t know if this is a revenue number, an employee number that the mid-market was up 32%, maybe I miss heard that?

Yes. No, it’s actually the core market up 32%, and mid-market was also up significantly. But it is that mix in both products and services that were providing and size client that continues to be a part of our going forward strategy. And although that has like Richard just mentioned, it has affect on average markup and et cetera, but it also has a corresponding affect on costs. The other thing its affecting the gross profit for the balance of this year is what Doug mentioned, our growth is actually expected to be faster where the balance for last half for that year that we had expected a quarter ago and in our model since there is a double taxation that occurs in payroll tax when you add new account any other time other than January 1st, you have a dampening affect to the gross profit that caused by the growth which of course is good for next year as you get larger as you go into the next period. And as Doug mentioned that phenomenon on our business that has been there for 49 years, we have successful passed that piece of legislation last fall that is scheduled to eliminate that double taxation in the next year.

So, just to sum up here saying that drop in gross profit mostly due to mix and this faster growth issue not the other cost centers and is that right?

That’s correct.

And just one more on gross profit, you said the SPUs, I believe revenue was up 19%, can you give us a number of what the SPU gross profit was for the quarter?

We look at that -- that portfolio contributing at that gross profit line and it was a 19% increase.

Okay, great. And just one more from me, the strategic committee – was there any repurchase -- share repurchase goal or new authorization or any thoughts on repurchase levels out of the committee report and agreement?

Yes. After the first quarter I think in our May Board Meeting was when the committee first weighted in on capital allocation. And as you saw that time we increased both the dividend and I believe increase the share authorization and then executed on that throughout the second quarter and into the third. So their role is to continue to monitor and make recommendations in that regard through the end of the year and into next – into the first quarter of next year.

Okay. Thanks very much.

Our next question comes from Mark Marcon from Robert W. Baird.

Good morning. With regards to the expense reduction for next year what’s that primarily going to be composed of that $8 million that’s incremental to this year?

It’s a lot of specific initiatives in sales service, all kinds of SPUs, it’s truly a deep dive into specific initiatives and it’s pretty widespread across different areas.

Okay. So its not just one or two big line items. It’s a whole bunch of areas that are been optimized?

Yes. Absolutely, Mark, as you can see from our results, you don’t grow the business 12% in one year with a reduction in operating expense without a pretty intense focus on across the company on operating cost. And so that’s going to continue on those initiatives and more that have been identified or going to be implemented very specific down to specific line items that are affected by initiatives we intend to have in place.

Got it. And then, it sounds like the SPUs actually helped in terms of the gross profits for this quarter. Is that right?

Yes. Remember that the strategy is that as we have other offerings that have a lower price per customer, so we can retain more customers and add new customers than we would have an offset at the gross profit line as the contribution from our other business performance solution contributed that line. And that’s really what’s been happening, what’s been working and we expect that will continue?

Okay. And then for the last few quarters the healthcare benefits has been a really big help, was that a help this quarter?

No. It was actually -- cost were just a little bit higher because we had some large loss claims in the quarter that were a little bit higher than what we were expecting. So, it really didn’t help like it has in some of the previous quarters. But as usually it had kind of ups and downs in the gross profit area or the – I’m sorry in the direct cost area. And in total things have been very stable for us for quite a period now and its tightly managed by Richard’s group and going well in that area. We barely have a 1% trend in healthcare cost year-over-year.

So, it was probably up 1% this quarter, but I mean…?

No. What I said is when you look at our annual trend right now year-over-year, its up about 1%.

Okay.

And I don’t think there’s a lot of companies that can say that. But remember that’s driven by the – we had the strong reduction in the number of people on COBRA that occurred over the last year because of health reform, and that certainly had a significant help on cost. And then we continue to have migration on to lower cost plans and all those things add up to well manage and stable program.

That’s great. And can you give us a sense for what the gross profit for worksite employee would likely – what the likely range would be that’s implied by the overall EBITDA guidance?

Yes, Mark. I think again we’re guiding more to the EBITDA which is combination of the gross profit and managing the operating expenses, so I think as we’ve discussed in some previous calls with the new model we have and the contributions from the SPUs and the PEOs and the different operating within the mid-market space. We’re focusing more on those metrics going forward with our analysts and our shareholders.

I appreciate that, but just for help in terms of modeling it out, is there any guidance you can give us?

I think on the gross profit for employee number, relative to what comparison were you asking?

Just in terms of the third quarter and the fourth quarter just getting to the implied numbers for Q3 EBITDA and for year EBITDA?

I can talk about some of the factors that go into Q3.

Sure.

Q3 if you look at historically it has been fairly level with Q2. But in Q4 it typically goes down, its deductibles have been met by our worksite employees. Those under the benefit plans and we’re picking up more of the medical cost in that area on Q4. So, I think if you look at 2014 you’re going to see a fairly similar pattern along those lines. So I think that can help you out if you look at what happened last year maybe some previous years on the seasonality of that metric.

Great. And then with regards to the strong growth in the worksite employees any regions that particularly stand out or any other color that you can give us in terms of the strong performance there?

Sure. We really didn’t have a regional effect so much which is good. In my views it’s more the selling system really kicking in, the tenure of the sales team. Obviously, we had successful fall selling campaign last year and that feeds into a higher confidence level. Then you couple that with boosting activity lead-generation activity et cetera. It’s a momentum and traction story that’s kind of across the board. And then the game plan is as the core business sales have these kind of results than your mid-market effort can be icing on the cake and kind of build in a permanent premium to our growth rate, which we would believe ultimately translates into higher valuations, so it’s a good plan and its working and we’re excited by where we’re going from here.

That’s great to hear. Can just two related questions and then I’ll jump back in the queue. Can you talk a little bit about the impact of increased regulations, how much that’s helping and driving things, number one? Number two, can you talk a little bit about the competitive environment and what you’re seeing there any sort of price competition or any sort of moves that you’re seeing from them on that aspect?

Sure. As far as the regulatory environment we’ve talked about how the healthcare reform is cascading down from the federal level to states, to carriers and to localities and ultimately to the individual companies and that’s going to continue for couple of years. And it is incredibly complex and I would just say that health reform has business owners have to focus on that. It’s a deep reminder of the complexity, compliance and cost of all regulation of been an employer which is always been where the key drivers to why customers realize this is a better way to do business. And I think that’s helping to drive growth in the whole industry and we’ll continue to do that. As far as the competitive environment, I think our response over the last couple of years to have a wider array of offerings puts us in a great position against the competition to allowed us to bundled different packages of services to customized and meet the customer need. We’re finding that to be a differentiating factor. In the mid-market our both our service model and our go-to-market team selling approach I think puts us in a unique position against the marketplace. So, I can say, the exciting part is the addressable market, it’s so large and coming our way. As we have added products and services that our customized for these customers with the 150 to several thousand employees that literally doubled our addressable market in this model and really bodes well for our long term growth plan.

That’s great to hear. Thank you.

And our final question comes from Tobey Sommer from SunTrust.

Thanks. Just a couple of follow-ups. You mentioned net hiring making contribution to growth and also summer hiring. What sort of magnitude did each of those comprise, because I don’t recall summer hiring being cited all that much previously? Thanks.

Hi. It’s actually been nominal, but in our world as long as it’s a tailwind instead of a headwind obviously we’re a lot better off. But our growth has been driven much more so by exceeding our sales forecast and historically high retention levels. And I think we’re trying to communicate is that typical hiring in the base has been very, very modest unless they really than what we would have expected. In every year there is a little bit a summer help comes on in May and June and goes away in August and September, but that’s all factored in. And basically the net change in the customer base has not been as significantly as we were hoping it would be, but at least has not been a headwind.

Okay. Paul, how big a catalyst is the removal of acquired payroll tax reset for growth. How should we think about that in the context of what you’ve already reaccelerated in terms of WSEE growth?

We are really looking forward to finding out what it’s like in that world. And we don’t have the experience of it. But our expectation is that it should certainly even after sales process. And also I think it does have the benefit of I think adding to the growth rate simply because any time you have to sell something and then delay the start for a number of months you can lose the wind in the sale when you do that and we’re expecting that with that going way the whole throughput of that process should improve and should add to the picture. So, we’re excited about figuring out what that means. But there’s a lot of things driving our confidence right now in our growth plan and there’s just tremendous upside. I always like to let people realize our business when you grow the worksite employees you are also growth the risk, you’re growing the worksite employees unit revenue, unit of profitability and unit of risk in its so important to grow those units while you are managing the associated risk and so yeah we want to continue to accelerate growth but we also know it’s a service business you can grow at a rate that’s too fast to provide the service levels you need to provide, so they are other factors, but we’re excited about being back into the team and the growth rate and worksite employees. This model just is beautiful when you get into that level. And we expect -- the main goal is to be able to do that over and over, year after year after year and really unlock value for shareholders by doing so.

Is it fair that perhaps the change to the payroll reset tax, that these type of margin reduces a little bit of the emphasis and the risk associated with year-end sales programs, I know people are still thinking about these things on a year-end basis by and large, but maybe just on a relative basis this takes a bit of the edge off?

Yes, that’s what I really mean by evening things out some.

Okay.

There will still be an emphasis, because it’s just a matter of people want to do first of the year doing something different, start fresh, you know some of the filing issues around being an employer, if you can avoid it for the full year that’s a benefit, so these are administrative reasons, but I believe this new law is going to help us really even things out.

And there are no more questions at this time. I’ll hand the call back over to Mr. Sarvadi.

Well, once again, we want to thank everyone for participating today. And we look forward to continuing to work and improve on both topline and bottom line results and we’ll be looking forward to discussions with you next quarter. Thank you very much.