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Good morning. My name is Jenny, and I will be your conference operator today. I would like to welcome everyone to the Insperity Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please note this conference is being recorded. At this time, I would like to introduce today's speakers. Joining us are Paul Sarvadi, Chairman of the Board and Chief Executive Officer, and Jim Allison, Executive Vice President of Finance, Chief Financial Officer, and Treasurer. At this time, I'd like to turn the call over to Jim Allison. Mr. Allison, please go ahead. Thank you. We appreciate you joining us today.

Let me begin by outlining our plan for this morning's call. First, I'm going to discuss the details behind our fourth quarter 2024 financial results. Paul will then comment on our recent accomplishments, including an update on our success, our key initiatives, and outlook for 2025, and the ongoing implementation of our Workday strategic partnership. I will return to provide our financial guidance for the first quarter and full year 2025. We will then end the call with a question and answer session. Before we begin, I would like to remind you that Paul or I 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. This morning, we reported solid fourth quarter results with adjusted EPS of $0.05 per share and adjusted EBITDA of $23 million, above the midpoint of our expected range. The average number of paid worksite employees was slightly above the low end of our forecasted range at 393,093, a decrease of 2% from Q4 of 2023, as client hiring continued to be weak during the quarter. Against this backdrop, early momentum from our fall campaign resulted in a 37% increase in worksite employees paid from new clients, versus Q4 of 2023, and client retention averaged 99% for the quarter. Paul will provide additional color around our excellent sales campaign results in a few minutes. Gross profit per worksite employee in Q4 was $235 per month, slightly above our expectations primarily due to strong pricing. Gross profit per worksite employee was in line with Q4 2023 results. As a result, total gross profit declined 2% from Q4 of 2023 on the 2% decrease in paid worksite employees.

Q4 operating expenses

were in line with our expectations, increased 17% over Q4 of 2023, primarily due to the investment we are making in our Workday strategic partnership. For the full year of 2024, we are pleased with our results, especially considering the macroeconomic conditions put a drag on growth. Despite a drop in paid worksite employees of 1.6% from 2023, gross profit increased by 1%. This was primarily driven by strong pricing performance throughout the year and favorable benefits claims experience in the first half of the year. Our benefits cost trend for the year was 4.3%, which was just under the low end of our expected range coming into the year. Gross profit per worksite employee per month was $285 in 2024, a 3% increase over 2023. Operating expenses, which increased 14% over 2023, were managed well below our initial plan as we adjusted to the lower worksite employee volume. Our 2024 operating expenses included third-party costs and allocated internal resources associated with our Workday strategic partnership beginning in February of 2024. In addition, operating expenses also included ongoing along with general inflationary impacts. As a result, adjusted EBITDA for the year was $270 million and adjusted EPS was $3.58, both above the midpoint of our initial guidance at the beginning of last year. During the fourth quarter, we continued to return capital to our shareholders through our regular dividend program and repurchase of our shares. We paid $22 million in cash dividends and repurchased 146,000 shares of stock at a cost of $12 million in Q4. Ended the quarter with $134 million of adjusted cash and we had $280 million available under our credit facility. Now at this time, I'd like to turn the call over to Paul.

Thank you, Jim, and thank you all for joining our call. Today, I'll begin with comments on our fourth quarter results, with an emphasis on regaining our growth momentum with the very successful fall sales and client retention campaign. I'll follow with a discussion of our plan for 2025, including significant initiatives underway, which we expect will drive growth acceleration and profitability. I'll also highlight the exciting milestones we expect to achieve this year within our Workday strategic partnership, which we believe has the potential to advance the long-term trajectory of growth and profitability of Insperity in 2026 and beyond. Our most critical objective in Q4 was executing a successful fall selling and retention campaign in order to reach a starting point in paid worksite employees in January that provides a foundation for year-over-year growth in Q1. We achieved this goal, which we believe is an important inflection point moving our year-over-year growth rate from a negative in Q4 to a positive in January, reestablishing growth momentum entering 2025. The combination of effective sales leadership, pricing strategy, marketing-generated opportunities, and most importantly, the grit and determination of our business performance advisers across the country resulted in a record-setting quarter in book sales up 8% over the prior year. At the same time, our client service and renewal teams coordinated an excellent client retention effort through our highest concentrated renewal period of the year. Our attrition of worksite employees related to terminating clients was dramatically improved over last year and even better than 2023, which was one of our best in recent history. The attrition from terminating accounts in terms of the number of worksite in January was 32% and 12% lower than 2024 and 2023, respectively. The most significant improvement over both periods was in our larger account segments, with attrition down 63% and 40% respectively over the prior two years. We believe this improvement is very significant and validates our service levels. Given the interest of our larger clients and our Workday-based solution under development, we believe it also reflects the benefit of our commitment to this target market through our Workday strategic partnership, even before our joint solution is available. Our financial results for the fourth quarter and the year were also solid. We exceeded the midpoint of our initial 2024 adjusted EBITDA guidance despite small business marketplace weakness, reflected by the low level of net hiring in our client base, which continued in Q4. Historically, the Insperity small to midsize business client base experiences annual net growth in the number of worksite employees in a mid-single-digit range. In 2024, net growth in our base was nearly flat for the year. Excluding recession years, this was the lowest level of hiring by clients we have seen in at least the last twenty years. The weak hiring in Q4 contributed to our worksite employee count for the year coming in at the low end of our guidance. In our cumulative business model, this has had the effect of somewhat masking the excellent sales and retention that led to positive year-over-year growth in worksite employees paid in January. By lowering the starting point for 2025, and expected growth rate by 130 basis points. Now the good news is we've seen the mindset of the small and midsize business decision-makers change since the election. Part of the success of our fall campaign was the post-election relief of the hesitation and uncertainty in our target market. Within days of the election, buying decisions accelerated and we were able to capitalize on the significant effort we had exerted to have a strong sales pipeline. We've also seen additional indications of small business optimism heading into the new year within our client base and in our target market. Our client survey completed in January indicated a step up in optimism about the US economic climate and their expectations to increase staffing levels in 2025. The National Federation of Independent Business January Small Business Optimism Index was at the highest level in six years. And expansion plans and sales outlook were the highest since January of 2020 pre-COVID. Vistage, whose membership of CEOs of small businesses align closely with our client base, reported the Q4 Vistage CEO confidence index soared 15.7 points, signaling the approach of the long-anticipated growth cycle. Also, 65% of CEOs responded they expect to increase employees, and only 5% expect a decrease this year. So as we look ahead to 2025, we are focused on key initiatives that drive our strategic priorities building on the growth momentum from recent results and capitalizing on renewed optimism in our target market. Our guidance for growth assumes some recovery in net hiring in our client base. However, we have yet to see this optimism produce a notable change. Therefore, we are conservatively assuming some improvement over 2024 but below the low end of our historical levels and weighted toward later in the year. Most of the growth acceleration we expect is due to continuing sales effectiveness and efficiency, building off the strong fall campaign and client retention at high levels. Our key initiatives for this year are centered around our product and target market specialization in sales and service. We recently implemented a role-based approach to optimize our sales organization with our offerings. This is to support our priority of growing all three of our primary service offerings including our long-standing PEO solution to the small business marketplace, our traditional employment business, and our significant mid-market. Based upon our mid-market success and our upcoming joint solution with Workday, we've selected a number of business performance advisers to expand the team of business performance consultants to capitalize on the mid-market opportunity. Another group of business performance advisers were selected to substantially increase the size of the sales team focused full-time on selling our traditional employment solution. We also established new levels of accountability for our BPAs and reduced staff by a number of BPAs not meeting standards. This allows our substantially improved marketing leads to flow into the hands of more seasoned BPAs focused on selling our PEO solution. We expect this product specialization and accountability will increase sales efficiency across each of our HR solutions with a more streamlined sales organization. We also plan for improved service efficiency this year beginning with the recent consolidation of the employment services organization, and our PEO service team under common leadership. We expect this will improve the consistency of service levels across all three of our key HR solutions in addition to the efficiency gains. Another strategic priority for the coming year is to focus our development resources on projects that either create operating efficiencies, improve the customer experience, or that leverage the expected growth of the client and worksite employee base with targeted support services providing additional revenue streams. We already have additional products and services for clients and worksite employees in place and are planning to roll out a couple of new ones. Our sales specialization plan will include an aftermarket sales team focused on this priority. Our AI strategy is a key example of development resources centered on creating efficiencies. We plan to use this technology to leverage our deep embedded HR expertise as a means of enhancing, not replacing, our best-in-class services that Insperity is known for. So as we begin 2025, we believe that the fundamentals of our core business are performing well and expect key initiatives to drive growth acceleration, generate operating efficiencies, and achieve our strategic priorities. This sets the stage for our new catalyst for long-term growth and profitability, our strategic partnership with Workday. We're very excited about our excellent progress advancing our strategic partnership with Workday. We are at the point where we believe significant milestones are on the horizon in each of the four areas we expect to make the partnership successful. The four defined pillars of work include our Insperity corporate tenant, our exclusive client tenant, our deployment and enablement services, and our joint go-to-market plan. I'd like to provide a brief update on milestones we expect to achieve this year setting us up to begin earning a return on our investment as planned next year. We are pleased to announce the Insperity corporate tenant is scheduled for a launch date of April the first. This is a very significant milestone for two reasons. First, we're very excited to be on the Workday platform for our own benefit. But this is also an opportunity for all Insperity to become a strong advocate for the joint new solution offering to clients. Secondly, this is a very significant milestone because there are many integrations and other aspects of this corporate tenant that we expect will be incorporated into the exclusive client tenant. So this is a big step in the right direction for the exclusive client tenant. We are also excited about other milestones expected in the development by both companies the exclusive client tenant. This includes significant platform architecture enhancements that dramatically improve the deliverable to the target market of our new PEO service. Enhancements to the Workday platform are expected to be included in both of the two scheduled platform updates in March and September. Once these milestones are achieved, we plan to set the launch date for the new joint offering. Our deployment and enablement team has their milestones clearly in view as well. This team is participating in the corporate tenant launch which we expect will help them complete the playbook that will be critical for launch for enrolling either current Insperity clients or new Insperity clients. Progress in this area has also led to further potential ways for the two partners to penetrate the target market of small and midsize businesses. We believe our expertise in working with the small business community to improve their management of the HR function in their business is unparalleled and recognition of this has opened up more possibilities. Coming milestones in our go-to-market plan are also straight ahead. Including announcing the product name and training sales staff of both firms with product knowledge and messaging. Another key milestone will be the official start of co-selling target prospects, our joint solution. We expect this to happen later this year for clients to come on board in 2026. For those of you new to Insperity and as a reminder to all of us, focusing on the big picture of this strategic partnership is important. Workday and Insperity are committed to jointly developing, marketing, selling, and supporting the preeminent solution for targeted small and medium-sized businesses that combines Workday's HR technology, with Insperity's HR services. We expect to offer this unique PEO solution including Workday technology, to the target market for less upfront capital cost, ongoing expense, complexity, and implementation time, than currently available to those businesses. We believe this new solution has the potential to be competitively disruptive. We believe that our joint solution will provide the target market of small businesses ranging from 100 employees to several thousand employees with a new scalable HR solution with the potential to greatly enhance their likelihood, degree, and speed of success. Our go-to-market plan for this strategic partnership is centered on co-selling, co-marketing, and co-branding to this target market. The reason this strategic partnership could be such a game changer for Insperity is that this partnership has the potential to improve all three of our most significant drivers of our financial model. New sales, client retention, and pricing of our services. The effect on new sales should build as the two sales teams go to market together, to find the right solution for clients. This has begun in a small way, but is expected to ramp up this year as milestones are achieved. Results from this activity are not built into our growth expectations for this year and represent upside potential. However, we believe it could have a significant contribution in 2026 in our efforts to return to double-digit growth. We believe our customer for life strategy will be enhanced by this strategic partnership by providing a solution that should reduce large client terminations and we believe it's already having this effect. We expect this potential solution to our historical success penalty would have a significant effect on the likelihood, degree, and speed of growth for Insperity into the future. We expect this joint solution will be highly scalable for clients and a premium product consistent with the historical market positioning of Insperity and Workday. The premium pricing expectation has been validated through our initial research and has the potential to contribute to margins going forward. So we believe this investment represents an incredible opportunity to elevate our long-term trajectory for growth and profitability as a catalyst for our historically proven business model. As we focus on achieving these milestones straight ahead, we are enthusiastic about the potential value creation for Insperity and our ultimate return to shareholders in the future. At this point, I'd like to pass the call back to Jim to provide our specific guidance for 2025.

Thanks, Paul. Our full-year 2025 outlook incorporates several key assumptions, including renewed growth momentum, generated through our successful fall campaign and a higher level of optimism in the small business, a continuation of benefits cost trends at the higher end of the historical range, the continued investment in our Workday strategic partnership, and an emphasis on operating expense control. As Paul discussed, we believe our successful fall campaign and year-end transition has generated growth momentum for 2025. Compared to the prior year trend year-end transition, our January 2025 starting point in paid worksite employees reflects improvements in the two growth drivers over which we have the most control. Worksite employees paid from new sales and client retention. We believe the alignment between our sales, service, and pricing teams is strong. And the strategies developed in the second half of last year will continue to drive results. Regarding net hiring within our client base, we have seen some improvement in both internal and external measures of small business economic sentiment since the election. As a reminder, excluding recession years, the 2024 net hiring in our client base was the lowest we have seen over the last twenty years. So while we anticipate improved client hiring as we progress through the year, we continue to forecast net client hiring at a level below our normal historical range. For Q1 of 2025, we expect the average paid worksite employees to be in a range of 306,500 to 309,000, which represents an increase of 0.9% to 1.7% over Q1 of 2024. For the full year, we are forecasting worksite employee growth of 2% to 4% over 2024, reflecting sequential quarterly growth beyond Q1, of 1.5% to 2%. As per gross profit, our 2024 results included favorable benefit costs in the first half of the year and a return to expected levels in the second half. As we look to 2025, we believe that a conservative approach is appropriate so our guidance does not assume a similar level of favorability this year. We currently expect benefits cost trends to remain at the higher end of historical levels. As a result, we are forecasting a benefits cost trend of 5% to 6.5% compared to 4.3% in 2024. Other direct costs are expected to be at a similar level as last year. We continue to focus on our long-term strategy of matching our pricing increases to our direct cost trends. We believe that our pricing remains in a solid position. We have made minor upward adjustments to our price targets for 2025 and will continue to closely monitor health care and other direct cost trends along with the competitive landscape. Operating expense management for 2025 was a key objective in our budgeting process, particularly in light of the lower worksite employee volume last year and significant investments in our strategic priorities. We went through an extensive process that resulted in an operating plan that is essentially flat compared to 2024. The plan provides for optimizing staffing levels in line with our growth, and aligning resources with strategic priorities. This includes planned spending on the implementation of the Workday strategic partnership which we expect to total approximately $62 million in 2025, versus $57 million in 2024. As for interest income and expense, our 2025 budget includes the impact of interest rate reductions in the second half of 2024, and does not anticipate further rate reductions in 2025. We estimate a $4 million reduction provided from the interest income we earn on our cash and investments including the funds in our workers' compensation program. We are estimating an income tax rate of 30% for Q1 and 28.5% for the remainder of the year. This increase from the prior year, which is primarily driven by the impact of the lower stock price on our tax deductions for stock-based compensation, is expected to reduce adjusted EPS by about $0.06 per share for both Q1 of 2025 and the full year. Based on all of these factors, we are forecasting full-year adjusted EBITDA in a range of $240 million to $285 million. We are forecasting full-year 2025 adjusted EPS in a range of $3.10 to $3.95. As for Q1, we are forecasting adjusted EBITDA in a range of $121 million to $135 million and adjusted EPS in a range of $1.89 to $2.15. Comparisons of these earnings forecasts to Q1 of 2024 are significantly impacted by the favorable benefit costs in the 2024 period, a full quarter of expenses related to the Workday strategic partnership in the 2025 period, and the higher estimated income tax rate. So beyond the first quarter, our quarterly earnings pattern should be more balanced this year than in 2024. As you may recall, our earnings are typically higher early in the year and then decline as health insurance deductibles and payroll tax wage limits are met. That pattern was tightened last year due to the favorability of benefits cost trends in the first half of the year. In addition, we expect sequential declines in our operating expenses during 2025, as targeted savings opportunities are realized. As we start the year, we are pleased to see improvements in our core PEO fundamentals, which we expect will result in a return to worksite employee growth and overall earnings generally in line with our 2024 results while continuing our investment in our strategic priorities. At this time, I'd like to open up the call for questions.

Thank you very much, Jim. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star one on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove your question from the queue. Before you press the keys. Thank you. Your first question is coming from Mark Marcon of Baird. Mark, your line is live.

Good morning, and thanks for taking my questions. So lots of great detail in there. I was wondering with regards to the Workday partnership, two questions there. One, can you talk a little bit more about what you're seeing in terms of the sales leads, Paul? How they're coming together, how pleased are you with them at this level, and how much you expect that to accelerate as the year unfolds and particularly going into next year, a little bit of comments with regards to exactly how that ended up impacting the improved client retention with regards to the upper part of your market. And how intrigued your clients were. And then, Jim, if you could talk a little bit about the expenses, how are they going to be layered in over the course of the year? You mentioned $62 million. Is that going to be relatively even over the course of the year or does it fall off towards the back end? And any sort of preliminary ideas with regards to next year in terms of the spend? Thank you.

Great. Thank you. I appreciate the question. I'll let Jim handle the operating expense questions, and I'll start with a couple of questions you have around the go-to-market strategy. We've really made incredible progress on the go-to-market plan. The question that you had about the lead flow, there's more to the whole picture than just the lead flow. But I would say that looking back a year, I kind of anticipated potentially greater lead flow early but without having all of the other elements of the go-to-market strategy in place, it wasn't nearly as beneficial to try to drive that as significantly. Now as we go into this year, we are in a different position because we are ready as I mentioned, for announcing the joint solution and the go-to-market messaging, the training for sales teams on both sides, and that will make it a much more natural thing for the lead flow to happen. Now in addition to that, a significant obstacle was for us to get this built into the compensation or incentive structure on both sides of the fence. And that was a significant issue last year since we started this. After our partner was already solidly in play. I'm there incentive game plan. And we were able to build it in a little bit in ours. But at this point, we've spent the time and effort to really be on a good foundation for ramping that up as we hit these milestones. So that's good. Now relative to client retention, we literally have specific clients that are now in the line for the beta testing when that comes up. We've got significant interest in the new joint solution that will be coming out in the reasonable future now. And that's exciting, and it definitely made a difference. I know on some specific accounts, just being in that queue. Where accounts that were strongly considering the need for the type of technology that we'll be bringing to the market on top of our compliance platform. So we already see that happening. And we're really excited about how that's going to, I think, fundamentally change our retention of large accounts going forward. Jim, would you like to handle the operating expense side?

Absolutely, Mark, on the operating costs related to Workday, we obviously, last year, had a little bit of a ramp-up as we went through those first couple of quarters. Got to a pretty steady run rate. And we'd expect it to be relatively steady this year. There's a very small drop-off after we finish the corporate component, but generally speaking, it's pretty flat.

And any ideas for next year? For 2026?

Yes. I think the guidance that we've given before still remains a good estimate of what we're thinking. Obviously, there are some reallocated internal resources that would then return to other projects and priorities. But as we get closer to the launch date and kind of find out exactly when that's going to be, I think that's going to be the key driver for 2026 investment.

Great. Can I squeeze one more in?

Sure.

Thank you. You mentioned the cost trend on the medical. How are you thinking if you're going to match the price? And, Paul, you've been doing this forever, and you know more about this than anybody. How do you think that the slight increase in terms of the percentage rate on price on the health cost trends is going to end up impacting new sales as well as retention?

Yeah. So from my point of view, we've really done a great job of kind of being conservative on that front and having strong pricing, especially in anticipation of what we were expecting in the marketplace on cost trends. And so we've got a more significant cost trend built in for this year, but our pricing is in good shape. And we are seeing now in the marketplace pricing increases that are significant to where we still look really good. So we're excited about where we stand on that front.

Okay. Thank you very much. Your next question is coming from Jeff Martin of Roth Capital. Jeff, your line is live.

Thanks. Good morning. I wanted to dive into the sales optimization strategy that you

talked a bit about. Help us understand the genesis of this plan. Has it been in the works for quite a while? And when do you expect the benefits to really start to come in there? And then wanted to ask a second part question on the corporate tenant when how long do you think once that's up and running, you will kind of learn the lessons that you need to fully develop the client tenant. Thanks.

Thank you both. Good questions. Yeah. I'll start with the corporate tenants and client tenant side. As I mentioned in my remarks, there's a lot within our corporate tenant site that are integrations of. And remember, we're talking about this Workday platform being integrated into our compliance platform, which makes this an incredible deliverable to our target market for this. And quite a bit of that is in the corporate tenant, a lot of key integrations. That we had to work through. And so this coming out on April the first is exciting. It will only take, I think, a relatively short time to validate certain things, and I'll be but with the client tenant. So, you know, I would look at about a full quarter to be the time period for very key learnings to be pulled out of that and being kind of passed along to the team working on the other site. So let's see. The first question that I've forgotten is I'm going to bump you this one. Was on what was it about? Sales optimization. Oh, the sale oh, yeah. This is an exciting subject too. The sales optimization is really all about the fact that we've had a large number of BPAs and that we're basically in the marketplace and really trying to be in the selling process on all three of our key HR solutions. Which have a little bit different target market and a little bit different messaging and a little bit different effort to go through and process and understanding. And so what we have found that we had two groups, obviously, our mid-market sales team, which has been very successfully been aware of that, and we've had a traditional employment solutions small sales team that we've been able to use as a pilot to see how those two groups do when they're strictly focused on mid-market. So to convert our BPAs to where they are really only going through the full sales process on our core PEO solution and handing off the leads from both mid-market and traditional employment solutions to other sales personnel that are fully focused on those offerings. We believe based on what we proven up in those two other organizations, we believe this is really going to make a big difference. And so we've been able to staff up both of those two because, of course, the Workday solution is primarily in that mid-market space, and so we need to ramp that up, and then also we had a very good year on the workforce acceleration or traditional employment side, and we are expecting to really ramp that up some more by really focusing on this new sales team in that area. Now we also by doing this, we're able to really improve the focus and accountability for our sales management as well, because now there's management on those in those two other areas, and the management dealing with BPAs and our PEO solution are totally 100% focused on that. And as I mentioned on the call, we also reduced staff on some of those that were not meeting standards and put new standards in place. We've already seen the energy level, the commitment level, the activity level, to where we're pretty excited about how this is going for this year.

Thank you very much. Your next question is coming from Tobey Sommer of Truist Securities. Tobey, your line is live.

Hey. Good morning, everyone. This is Jasper Bivon for Tobey. Just curious if you could drill down into your experience with mid-market retention during the fourth quarter. How much of a difference maker would you say in the development of the Workday partnership? And some of the opportunities, like, the beta testing you mentioned out in this conversation?

Yeah. So, you know, the improvement was so dramatic. You know, 62% better than last year. Of course, last year, we had a number of large accounts leave and but even 40% better than the year before when we had an excellent year, that just shows you an early signal. And, you know, I know of a couple of, you know, of our largest accounts that work. A part of that picture that, you know, they're in the run for our beta test. And you know, they were candidates that would have been likely in that other category had we not been moving this direction. So you know, I also see that just the dialogue, the communication with our mid-market are aware of what we're doing. And the energy level on that front is high.

Got it. And then, yeah, I think you mentioned the Outlook improvement, assume some improvement in net hiring from 2024 was basically flat. Is there any way to frame what the improvement in that hiring would look like for 2025, and does that assume a pickup through the year or maybe differently said, do you think the hiring growth you're assuming would be disproportionately in the back half?

Yes. What I mentioned in my remarks is that typically, we see a mid-single-digit growth rate in net hiring in our client base, say, 4% to 6%. Last year, we saw, you know, so we're talking about the high end of our growth range being, you know, that's more at the approaching the low end of our historical range. So we're not building in like a snapback, and it's also weighted toward the last half of the year. So starting in the second quarter. Because what happens is you've got the mindset of the business owner right now is already well on the way. But it does take time for hiring to ramp up. So that's kind of what we built into the model.

Thank you very much. Your next question is coming from Andrew Nicholas of William Blair. Andrew, your line is live.

Hi. Good morning. Paul, I'm going to start with the drill down on one of the comments that you made in your prepared remarks about premium pricing having been validated a bit with your research in that? Is that a new comment based on recent conversation with clients, or is that a continuation of pretty consistently positive feedback since you announced the Workday partnership at the outset?

Yeah. We did an initial study fairly early on that, you know, with outside consultants that are in that world deeply, and that information came out very solid. And the dialogue we're continuing to have with our clients still fits that picture. And, you know, we'll know more about that as the milestones are hit over the course of this year. But, no, I'm still very excited about that. I believe that our upfront, what we call our enrollment fee, will be an enrollment fee that includes what's historically viewed in the deployment enablement world. And so there's I believe, a significant increase will be very well received there because it'll be so much lower than the upfront cost that clients have to put in. And then also, need to understand that when somebody comes on to a product like Workday or others, there's a significant investment in staff, both HR and technology staff to run it for the long haul. And, you know, that will be part of what's internal in our organization, and we believe we'll get that our per employee markup that we will be charging will be also more than offset by what their investment would have been without us just for this component. So when you add that together, you know, our markup on these accounts, we expect to be higher because that value is significant more than what will be paying in subscription fees for those employees to be on the platform. So you know, it's an exciting picture about how that affects us going forward in our margin outlook.

Understood. That's helpful. And then for my follow-up, just to ask about the pricing environment broadly. During the bulk campaign. It sounds like you're very comfortable with how you priced to risk for 2025. Can you talk about competitors in the market? How aggressive they were or weren't over the past couple of months and just kind of you know, the soundness of the activity from other players. Thank you.

Yes. As I mentioned, I think, on the last few calls, the competitive environment when you have low net client growth, the competitive environment is significant. And so we had that in the pricing, but what we figured out I'd say late summer, is some really great ways for us to compete with some incentives that, you know, would it would more like a try and buy for us because we didn't want to affect our long-term premium pricing in the marketplace, but we didn't want to lose good business because of a short-term incentive. And so we were able to come up with approaches to that that were actually unique for the different sized clients. Because we start to understand what was more significant to those customers. And we were able to, of course, also incent our sales organization effectively along that front and that fit really well. And that helped us a lot over the balance of the year. And at the same time, kept our long-term pricing strategy in place.

Thank you very much. And your next question is coming from Andrew Polkowitz of JPMorgan. Andrew, your line is live.

Good morning, guys, and congrats on the solid quarter. I wanted to ask a question on plan mix. It sounds like the retention from the fall campaign was really good. I know on the earnings call, one of your PEO competitors, they mentioned a little bit of adverse plan mix, and other competitors said they didn't really see any of that. So I was just curious if there are any costs in the fall campaign on the mix of benefits plans that you guys were selling, both to new and in retention clients as well.

Andrew, I would say that we've seen a movement over a consistent period of time, long period of time, continuing to see new business elect into plan offerings that are a little bit less expensive, have a little bit more cost sharing with the participants. Then the overall book, and I think that that continued this year. We've continued to add into our portfolio plan offerings consistent with that theme. And we've seen good uptake rates there. So we don't see that being adverse in any way. We see that just kind of being a way that the cost of health care gets shared between the employer and the employee. But overall, it looks pretty good from a demographic perspective.

Okay. That's great. It makes sense. My one quick follow-up, as far as the net hiring, a little bit more of a macro question. I was curious if there are any callouts that you could share as far as hiring across client sides, so more of the traditional PEO or down market client versus mid-market, and then if there are any vertical pockets that you serve, that were stronger, weaker in the fourth quarter.

Yeah. You know, the interesting part is that it was pretty much across the board. I would say very much across the board in the small business. That's where I think more pressure was over the last year, year and a half. In the economic environment, I think there were certain things that helped big companies more. And then also, if you look at employment in the broad picture, and you look at our client base of more white-collar than blue, professional than nonprofessional, you know, most of the growth in the marketplace was in other areas, you know, really ranging from government to hospitality and things of that nature. So just by industry category, we kind of were in the industry emphasis that, you know, we also didn't have a lot of growth even, you know, nationwide. So but as far as in the fourth quarter, I think this was more of the exhaustion of this coming out of that period pre-election, where things were the, you know, hatches were battened down, so to speak, and there was quite a release that we really saw in results from post-election I think was just related to okay, the uncertainties behind us, at least on the election side. So we're excited about the way the mindset is of our client base and our prospect base. And we believe that with that mindset there, more focused on really moving their businesses forward. And so we're hopeful that that's what we see this year.

Got it. Thank you both. Thank you very much. We have reached the end of our question and answer session. I will now turn the call back over to Mr. Sarvadi for his closing remarks.

So once again, I just want to thank everyone for participating today and your interest in Insperity. And we look forward to being out in the marketplace more this year. Look forward to spending more time with you. Thank you very much.