NSP
#Sure.
Happy to do that.
We have built into the model with such a great starting point, and also since we ramped up sales staff substantially last year, we are expecting trained sales BPAs to be up about 13% or 14% this year over last year although we expect total BP's hired will go up closer to the 10% level.
So we're at that point where you have a bunch in the hopper that are coming into the trained count, and so as we go through this year, we are in really good shape on having the right number of BPAs with the rate efficiency level or tenure and what we call tiers in terms of performance tiers.
We feel strong about our growth.
We expect that growth in terms of looking at our growth model for this year, the way we have looked at it is because of the potential of the economic climate, we have built a range for the balance of the year once you get through this year-end transition for the new growth to be in the range of what it was last year from March through the end of the year to an increase of 300 or 400 employees per month based on the larger sales staff and their tenure.
We are comfortable with that range, but we have used the low end to be the same as last year's number.
And that's simply because you want to be cautious about the economic climate and the potential for weakness in the net gain and customer base between new hires and layoffs, although we also factored that number down in our model.
Point is we are off to such a great start this year.
We have been I believe reasonably conservative for the balance of the year, and I think our 13% to 15% unit growth number is a great place to start for the year.
I think obviously our benefit program is always an important component of what we provide to customers, the administrative relief, the better benefits, reduced liability.
And having a systematic way to improve productivity is why customers come to Insperity.
But the benefit plan is always a part of that mix, and there's no question that was well received in this campaign.
I mentioned it in my prepared remarks that we had a really great year in terms of managing the risk that we take.
And <UNK> and his group, to have the benefit program going up at such a low trend rate, balancing all the factors that go into that definitely put us in the position to be very competitive and demonstrate what I think is a key value that we provide to customers, which is some cost ability in one of the most vulnerable cost areas for a small business to have to live with.
That's always valuable.
We have been in a period of relative stability in that area for quite some time, and it really is a value add for our customer.
On the trained BPAs, that number is going up about 14%.
We should be around the 350 level was where we ended up in the year.
I think you will look at average for last year was below that.
But the numbers are built off around a 370 or so trained reps for the 2016 full year.
And we should end up with around 425 or 430, somewhere in that range at the end of the year in total reps.
I guess you are referring to the Small Business Efficiency Act that was passed a year and a half ago for a little over a year ago.
The impact of that is, when we bring new customers on through the year as soon as the act as implemented, we won't have to have a double taxation.
And we will actually be able to pick the customer up with successor employer status for unemployment tax purposes, which will lower our price to the customer to transition to us.
There is no question in my mind that's going to be favorable, but it has to be implemented first.
The Internal Revenue Service was supposed to pass rules to certify PDOS to be able to take advantage of this new tax treatment, and they were supposed to pass those regulations in July of 2015.
The latest from the Internal Revenue Service is they do expect to meet their new self-imposed deadline of July 1 of this year.
Once that happens, then we will be able to actually submit our information to be certified and then begin to operate under those new rules.
So we haven't built any of that into our model for this year.
If that happens fast enough that we can do it, we certainly believe that is upside, but when you are waiting on the government to do something, I don't think it's wise to build it into your going forward plan.
I will let give you some specific numbers on that.
In terms of the backdrop, if you will, in Houston we say this is not our first rodeo.
And we've gone through many cycles in the business community here around the oil prices, and it does have a significant effect.
As you know from our business model, we are not ---+ we don't do a lot of business with the oil industry in terms of the ---+ over the hole or exploration because the risk is too high.
So we don't have a lot of dependency there, but there is a ripple effect that goes out from there.
The oil business provides a lot of great paying jobs, et cetera, so there is a ripple effect.
We still have quite a bit of business in Texas.
So we factored that in although because it's such a small part of our total business, we don't think it will have a dramatic effect.
Doug, can you pass on some numbers in that regard.
As far as ending 2015, Houston worksite employees were about 12% of the total.
Obviously not all of Houston is energy, oil and gas related.
When we look at oil and gas related and some even ancillary type services related to the oil and gas industry, it totals about 2% of our worksite employees, about 3500.
Okay.
It's a small number, and I think we've seen over the past month or so we've seen some clients take some initial steps.
I wouldn't say anything significant as respect to net layoffs in those particular client spaces.
But I think the takeaway is the oil and gas related worksite employees are only about 2% of the base.
That's been happening throughout last year too.
Once you got to about March of last year, companies began some serious restructuring.
So a lot of that has already been taking place.
We had our sales convention already this year.
We actually moved it up and had it earlier in our cycle.
In the third week of January, I guess we had our sales staff from all over the country.
And when I was walking the halls and talking to folks, I was trying to get a feel for how much that was a factor.
I would have to say it wasn't as much a factor as I thought it should have been.
Certainly the complexity and compliance around healthcare reform and other things is always a backdrop, and the requirements for these customers with more than 50 employees was definitely on people's minds.
But I would have thought it would have been more.
Maybe <UNK> can comment a little bit on that as well.
I was going to say the fact that we started early in building the infrastructure for the reporting that took place at the end of December of 2015 for the year, that had to be reported out in 2016 in January.
What we saw is the very first day that the IRS report was required to be put out, we put it out online because we have been building this infrastructure platform for our clients, and we had over 1000 clients that morning come online and look at their data for the year.
So our sales force is definitely using that information to communicate that we have a superior platform for giving clients the information that they need to do their own income tax return reporting.
It was all for the large employers in a group of 100 or more, but a lot of them went online just to see the data even though they weren't required to report on it.
But we had it available for all 6000 plus clients.
I don't have the percentage in front of me, <UNK>.
Maybe you could give Doug a call and he could look that up for you.
I just don't recall off the top of my head
In 2016 they are.
It was over 100 for 2015, and it's 50 to 100 for 2016.
That's correct.
So let's talk about first of all the service fee component.
It's going to be pretty close to flat from last year, maybe down a buck or so, and that's because of the continued mix of customers we have especially in the mid-market area that have gone to our newly created workforce synchronization offering which is obviously a lower-priced offering.
When we look at our benefits cost, the trend across the board for 2016 over 2015 is going to be a whopping 2.5%.
And we are excited about that because things we have been doing for the last couple of years continue to support a very low trend along with the migration of prospects and customers migrating to the lower cost, higher deductible plans throughout the year.
And our strategic business unit operations, they are going to be growing gross profit about 17% or so in 2016.
But because we are growing so much in the worksite employee base, it's going to look like only about a dollar per worksite employee per month, but it's serious money at the gross profit wide.
The big picture there, <UNK>, is I think it was wise for us to look at gross profit per worksite employee to be about in the same range as it was last year.
And as we always do, we try to start out somewhat conservatively and let the results in claims management and all the things ' group and our service team do to manage cost, claims cost, safety and all that kind of stuff, we let that emerge as the year goes on.
That should give you the big picture on that.
I would stop going that deep into the weeds on that because as you know, you have moving parts in there between the three direct cost items.
But if you look at the total picture, we have provided it all the way down to the EBITDA line where you can see we are expecting 22% to 28% increase in adjusted EBITDA as our starting point for the year.
I would say the most significant thing on that front from my view and talking with our sales team is what I mentioned in my prepared remarks about the value of the high touch services that we provide our customers.
I mean, we are involved with our customers at a completely different level than others in our space.
That makes it a differentiated product.
And I described how that service dynamic, it is hard to do it well, and it's costly.
You have to be able to charge more to do it.
You have to have a higher-quality sales team that can sell value-added services, and you have to service teams that have a high level of expertise because they are talking straight to business owners about their real issues that are going on in their company.
All that together is what I've always talked about as a premium service provider, positioning Insperity really as a category of one out there in terms of what we're really able to do to help small and midsize businesses to succeed.
And there really isn't anyone else out there like that.
And I think what someone would have to do to try to challenge us in that space is enormous, and I don't even see anybody really trying.
That would be how I would frame it.
I'm really happy about the industry as a whole relative to the Small Business Efficiency Act that was passed a year and a half ago.
I said I thought that would really cause some momentum across the industry, and I believe it has.
I think you we're seeing good growth and more customers and advisers to customers that are really open to co-employment as a way to solve their complexity and compliance and cost issues around being an employer.
I do see some great macro trends that are good for us in our industry.
What I really like about it is that in our target customer base, customers that would appreciate the value add that we can deliver, people that really want to take their business to the next level that have a definitive getting better agenda and understand the role people play to get there, that group is growing and we are a hand in glove fit for them.
So I really see a lot of runway for the Company in front of us.
Yes it is, and the transition expense is insignificant.
They're not far from here.
It's a matter of moving cost, and so it is factored into the guidance.
It's not a significant cost.
I don't have the exact numbers in front of me.
The point I wanted to make is we were currently leasing the Houston service center, and when you compare a lease rate and paying the landlord, his share of things versus constructing the building here on campus where you have those savings and also with the campus land already being owned, we ran the numbers.
And it was clearly more beneficial from an EBITDA perspective.
And typically the way a shareholder would look at it would be more advantageous to consolidate them here money-wise, economic-wise but also in getting efficiencies by having personnel, service personnel here on campus and working together.
I think that's a better move for the Company.
We analyzed it quite a bit, and it will be beneficial to EBITDA numbers.
The construction is not expected to get completed until the first quarter of 2017.
And so you will have some of this interim construction cost going into the capital numbers throughout 2016, but it doesn't get put in place until 2017.
No.
As a matter fact, it was pretty flat this year.
We had some going into the very beginning of 2015.
We had some fairly large claims that are experienced throughout the remainder of 2015.
Really created on environment that was pretty smooth in total.
<UNK>, I think we historically talked about the reserve adjustments from prior periods as claims runoff.
And there's only $1.3 million this year compared to about $3 million last year.
So those numbers are much lower than they were earlier in the workers' compensation program quite a few years.
Yes, we will continue to have a lot of growth in the time of the tenants business.
We are doing well on our retirement services business.
We actually have had, believe it or not, really good growth in our recruiting business even though you wouldn't think against the economic backdrop that your recruiting division would be doing well, but we are.
And we have this young but growing payroll operation, payroll service that is starting to gain some steam, and we think that's really good long haul because obviously that's a beginner outsourcer service.
Right.
We think we can build a nice sized customer base that will be up sold over time similar to some other models that are out there in our business.
We had a good year overall in mid-market, and as I mentioned in my remarks, we actually felt like we were far enough along in incubating that mid-market in operation that we brought it all together from under one ---+ into one division.
And we think our plan for that going forward to me is very exciting, and we are off to a good start this year.
Well in 2015, I think it was more associated with the corporate aircraft that we sold and then going through that process and carrying value versus what we ultimately sold it at.
I think that was the only instance in 2015.
It's broken out on the income statement obviously.
When we look at our adjusted EBITDA number, the impact at EBITDA numbers that we report versus our target.
Once again, thank you all so much for participating on today's call.
We look forward to updating you as the year progresses.
Thank you.
