NSP
#Yes, that was the principal stated goal of the committee, but we will be continuing to work, as I mentioned in my script, on both the topline and bottom-line optimization, so we have had an emphasis on, as you can see from our results, on both growing the topline and really gaining some operating leverage, very much so demonstrated in these very good results from 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.
Yes, no question we have quite a cash machine here and operating in a nice way.
And historically, we have generated a lot of cash and we have, as you can see from the recent work in sales ---+ not sales, but share repurchases, we used our capital to continue to increase the dividend and buy shares back.
And as far as debt is concerned, we have a debt facility that is not drawn on today, but as we see reasons to do that going forward, we are 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.
This is <UNK>.
What we experienced this quarter is what we have been planning to see.
Our markup component of our service fee has continued to match the kind of business that we are bringing on.
We have got certainly a mix in customers.
In addition to that, our allocations for all of our direct costs have been in line and better than what we expected.
What you are seeing is a little bit of a dampening effect on the revenue side because we are 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 planned it to be for 2015.
No, I think what we are intending to do to have clear communication of the things that are most important for investors to focus on, we're going to continue to guide toward our unit growth number and then adjusted EBITDA, because, obviously, there is moving parts going up and down in the direct cost and then also aggressive operating expense management initiatives, and what's important is to drive that adjusted EBITDA growth.
And so, we are planning to continue to give you a flavor of what's going on in those areas, but not focus on specific numbers of any one of those metrics that help to make that up.
Yes, that was actually the core market up 32% and Mid<UNK>et was also up significantly, but it is that mix in both products and services that we are providing and size client that continues to be a part of our going-forward strategy.
And although that has, like <UNK> just mentioned, an effect on average markup and et cetera, but it also has a corresponding effect on cost.
The other thing that's affecting the gross profit for the balance of this year is what Doug mentioned.
Our growth is actually expected to be faster for the balance of the last half of the year than we had expected a quarter ago, and in our model, since there is the double taxation that occurs in payroll tax when you add new accounts as any other time other than January 1, you have a dampening effect to the gross profit that is 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 in our business that has been there for 29 years, we have successfully passed that piece of legislation last fall that is scheduled to eliminate that double taxation into next year.
That's correct.
Well, that is the ---+ we look at that portfolio contributing at that gross profit line and it was a 19% increase.
Yes, well, after the first quarter, I think at our May Board meeting, was when the committee first weighed in on capital allocation.
And as you saw, at that time we increased both the dividend and I believe increased 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 the first quarter of next year.
It's a lot of specific initiatives in sales, service.
There is all kinds of ---+ our SBUs.
It's truly a deep dive into specific initiatives and it is pretty widespread across different areas.
Yes, absolutely.
You know, <UNK>, 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 across the Company on operating cost, and so that's going to continue on, and those initiatives and more that have been identified are going to be implemented, very specific, down to specific line items that are affected by initiatives we intend to have in place.
Yes, remember that's ---+ 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, then we would have an offset at the gross profit line as the contribution from our other business performance solutions contribute at that line.
And that's really what has been happening, what's been working, and we expect that will continue.
No, it was actually ---+ costs 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 ---+ it didn't help like it has in some of the previous quarters.
But as usual, you have ups and downs in the gross profit area or the ---+ sorry, in the direct cost area, and in total, things have been very stable for us for quite a period now and it is tightly managed by <UNK>'s group and going well in that area.
We barely have a 1% trend in healthcare costs year over year.
No, what I said is when you look at our annual trend right now, year over year it is up about 1%.
And I don't think there is a lot of companies that can say that.
(multiple speakers) 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 has had a significant help on cost, and then we've continued to have migration onto lower cost plans, and all those things add up to a well-managed and stable program.
Yes, <UNK>.
I think, again, we are guiding more to the EBITDA, which is a combination of the gross profit and managing the operating expenses, so I think as we discussed in some previous calls, with the new model we have and the contributions from the SBUs and the PEOs and the different offerings within the Mid<UNK>et space, we are focusing more on those metrics going forward with our analysts and our shareholders.
I think on the gross profit per employee number ---+ relative to what comparison were you asking.
I can talk about some of the factors that go into it.
Q3, if you look at us historically, has been fairly level with Q2, but in Q4 it typically goes down as deductibles have been met by our worksite employees, those under the benefit plans.
And we're picking up more of the medical costs 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.
Sure, really didn't have a regional effect so much as ---+ which is good, in my view.
It is more the selling system really kicking in, the tenure of the sales team.
Obviously, we had a 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 is across the board.
And then, the game plan is as the core business sales have these kind of results, then your Mid<UNK>et effort can be icing on the cake and build in a permanent premium to our growth rate, which we would believe ultimately translates into higher valuation.
So, it's a good plan and it is working and we are excited about where we are going from here.
It has actually been nominal, but in our world as long as it is a tailwind instead of a headwind, obviously we are a lot better off.
But our growth is being driven much more so by exceeding our sales forecast and historically high retention levels.
And I think what we are trying to communicate is that typical hiring in the base has been very, very modest and less, really, than what we would have expected.
And every year, there is a little bit of 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 significant as we were hoping it would be, but it at least has not been a headwind.
We're really looking forward to finding out what it is like in that world, and we don't have the experience of it, but our expectation is that it should certainly even out the sales process.
And also, I think it does have the benefit of, I think, adding to the growth rate simply because anytime you have to sell something and then delay the start for a number of months, you can lose the wind in the sail when you do that, and we're expecting that with that going away, the whole throughput of that process should improve and should add to the picture.
So we are excited about figuring out what that means, but there's a lot of things that are driving our confidence right now in our growth plan and there is just tremendous upside.
I always like to let people realize our business, when you grow the worksite employees, you're also growing the risk.
You're growing the worksite employees unit of revenue, unit of profitability, and unit of risk, and it is so important to grow those units while you are managing the associated risk.
And so, yes, we want to continue to accelerate growth, but we also know it's a service business.
You can grow at a rate that is too fast to provide the service levels you need to provide, so there are other factors.
But we're excited about being back into the teams and the growth rate of 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.
Yes, that's what I really mean by evening things out some.
I think ---+ there will still be an emphasis, because it is 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 there is administrative reasons, but I believe this new law is going to help us really even things out.
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 will be looking forward to discussions with you next quarter.
Thank you very much.
