Alex Bauer - TriNet Group, Inc. Burton M. Goldfield - TriNet Group, Inc. William Porter - TriNet Group, Inc. Richard J. Beckert - TriNet Group, Inc..

Tien-Tsin Huang - JPMorgan Securities LLC Danyal Hussain - Morgan Stanley & Co. LLC Timothy McHugh - William Blair & Co. LLC David Grossman - Stifel, Nicolaus & Co., Inc. Kevin McVeigh - Deutsche Bank Securities, Inc..

Good day, and welcome to the TriNet Group Incorporated First Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

I would now like to turn the conference over to Alex Bauer, Executive Director, Investor Relations. Sir, please, go ahead..

Thank you, operator. Good afternoon, everyone, and welcome to TriNet's 2017 first quarter conference call. Joining me today are Burton M. Goldfield, our President and CEO, and Bill Porter, our Chief Financial Officer, as well as Richard Beckert, our Senior Vice President of Finance.

Burton will begin with an overview of our first quarter operating and financial performance. Bill will then review our financial results in more detail. Bill, Burton, and I will then open up the call for the Q&A session.

Before I hand the call over to Burton, please note that today's discussion will include our 2017 second quarter and full year guidance and other statements that are not historical in nature, are predictive in nature, or depend upon or refer to future events or conditions, such as our expectations, estimates, predictions, strategy, or other statements that might be considered forward-looking.

These forward-looking statements are inherently subject to risks, uncertainties, and assumptions that may cause actual results to differ materially from statements being made today or in the future. Except as maybe required by law, we do not undertake to update any of these statements in light of new information, future events or otherwise.

We encourage you to review our most recent public filings with the SEC for a more detailed discussion of these risks and uncertainties that may affect our future results or the market price of our stock.

In addition, our discussion today will include non-GAAP financial measures, including our forward outlook for non-GAAP net service revenues, adjusted EBITDA, and adjusted net income.

For reconciliations of our non-GAAP financial measures to our GAAP financial results, please see the company's earnings release available on our website or through the SEC website. A reconciliation of our non-GAAP forward outlook to the most directly comparable GAAP measures is available on our website.

With that, I will turn the call over to Burton for his opening remarks..

Thank you, Alex. Before discussing our results and operating progress, I would like to formally welcome Richard Beckert, who, as previously announced, will become TriNet's Chief Financial Officer effective upon filing of the 10-Q later today.

Richard previously served as CFO of CA Technologies and has more than 25 years of leadership experience at CA and IBM in all aspects of finance, including accounting and reporting, treasury, risk management, tax, internal audit, pricing, and management processes. Richard is a strong addition to TriNet and our executive team.

His experience leading financial functions at large, complex organizations will be invaluable as we scale TriNet for continued growth and market penetration. I would also like to formally thank Bill Porter, our outgoing CFO, for his outstanding service and contributions to TriNet over the past seven years.

Bill has played a vital role in supporting our successful entry into the public markets and guiding us through a period of rapid growth and expansion. We are grateful that Bill will be continuing as an advisor to TriNet as we transition his role and responsibilities to Richard and ensure a smooth handoff.

Turning to our results, I am pleased to report first quarter financial and operating performance. In Q1, we grew GAAP revenue 10% year-over-year to $808 million and grew our net service revenue by 22% year-over-year to $199 million. We grew professional service revenue 7% year-over-year to $120 million.

Net insurance service revenue increased 55% year-over-year to $79 million. In Q1, our net insurance service revenue benefited from lower administrative cost, and we saw improved health and workers' compensation experience.

Our first quarter GAAP EPS grew 156% year-over-year to $0.41, and our Q1 adjusted net income per share exceeded the top end of our guidance by $0.11 at $0.45 per share. We finished the quarter with 330,731 worksite employees, up 2% year-over-year. Our long-term focus remains to grow revenues year-over-year in the mid-teens.

We are committed to leveraging scale across our organization to improve efficiencies and deliver better value to our clients with our vertical products. As anticipated, volume during the quarter was impacted by two primary factors. First, we had higher attrition resulting from our disciplined approach to migrating our SOI clients.

Second, we have moderated the growth around the Main Street vertical due to the new platform becoming available in Q3. These two factors were anticipated and are accounted for in our forecast. As we look to 2018 and beyond, we expect our investments to position us to grow professional service revenue in a disciplined and profitable manner.

I am pleased with the progress we have made during the first quarter executing on our 2017 operational objectives. We remain excited about the market opportunity and our growth potential as we work to further strengthen and differentiate our vertical product offerings and complete the consolidation of our common technology platform.

Technology will continue to be a significant differentiator to penetrate this market. The consolidation of our legacy SOI platform onto the TriNet common platform will allow us to focus our investment on a single technology platform and improve our ability to scale the business.

We have increased our investment in systems development and programming by 73% Q1 over Q1 to $11 million. These investments reflect our priority to deliver exceptional products with enhanced usability and functionality to the market.

We have made progress with the rollout of our new, more intuitive user interface with over two thirds of our WSEs having access to this function today, and we expect the rollout to be completed by the end of the second quarter. We have also made significant progress on the API-first architecture.

With this architecture, we can improve our client experience by integrating our platform with third-party products requested by our clients and prospects. This is an important step for TriNet's platform as we become a larger part of our clients' business ecosystem.

We are seeing positive responses to our ability to integrate TriNet alongside our clients' other software tools. For example, we now offer prepackaged integrations with third-party software popular in our client base, like QuickBooks Online and TurboTax.

During the recent tax season, we saw over one quarter of our WSEs successfully download W-2s through our TurboTax integration. Since we launched our QuickBooks Online integration in January 2017, we already have over 400 client companies using QuickBooks Online seamlessly through the TriNet platform.

With respect to our vertical products, I am pleased to report that we started to quote TriNet Main Street to new prospects in April with a third quarter general availability. TriNet Main Street is our new vertical product replacing the legacy SOI platform and business model.

TriNet Main Street is a full-service HR solution designed to meet the demands of flexible work forces found in industries like hospitality, manufacturing, and retail.

This vertical product will address the critical needs of our Main Street clients with intuitive payroll, robust time and attendance, comprehensive workers' compensation, cost-effective employee benefits, and expert compliance support.

To summarize, in 2017, we are committed to consolidating our platform, improving our UI, rolling out our API-first architecture, and launching the TriNet Main Street product. These initiatives are well underway and will improve our client experience and drive professional service revenue growth.

I am particularly excited about the future as we leverage the relative demand in each vertical by providing the right product at the right price with the right service model. Turning to our sales efforts, I remain pleased with the progress of our sales force, headed by our national vertical sales VPs.

These leaders are focused on building share and delivering a superior sales experience within their verticals. As previously announced, our Senior Vice President of Sales left in early April to pursue other opportunities. We are well underway with a national search for the new sales leader.

We are building a team that is needed for our next phase of growth. If you look at our executive hires over the past two years, a consistent theme across our new team members is proven success working for scaled organizations. While we search, I will be overseeing our sales team.

My focus during this interim period will be to further develop our vertical ecosystems, help launch our new products to the field, and improve sales force productivity. As of the end of the first quarter, we had 465 quota-carrying sales representatives.

As a reminder, on February 1, our sales team began quoting all new technology prospects solely on our new TriNet technology product. On April 1, the team began quoting all new financial services prospects on our new financial services product. I look forward to discussing the adoption of our new products as the year progresses.

As we build upon the Q1 successes, I believe that we are well positioned to deliver on our 2017 revenue and profit targets. And with that, I'll turn the call over to Bill for his review of our financial performance..

Thank you, Burton. As we review the financials, I will focus on the GAAP and discuss non-GAAP numbers when appropriate. During the first quarter, GAAP revenue increased 10.2% year-over-year to $807.6 million. Net service revenue increased 21.9% year-over-year to $199 million. The average WSEs for the quarter were 327,803, up 3% year-over-year.

Professional service revenue for the first quarter increased 6.9% year-over-year to $120.1 million. Net insurance service revenue for the first quarter increased 55.1% year-over-year to $78.8 million. The increase in net insurance service revenue was the result of lower administrative costs as well as improved health and workers' comp experience.

Total adjusted EBITDA for the first quarter increased 50.3% year-over-year to $63.3 million compared to $42.2 million during the prior year period. GAAP net income increased 148.2% year-over-year to $28.7 million or $0.41 per share compared to $11.6 million or $0.16 per share in the same quarter last year.

Adjusted net income increased 61.7% year-over-year to $31.6 million or $0.45 per share compared to $19.5 million or $0.27 per share in the same quarter last year. In Q1, our 2017 GAAP and non-GAAP tax rate decreased by approximately 2% due to lower state income taxes.

As a result of this change, GAAP net income benefited by $0.02 per share, and adjusted net income benefited by $0.02 per share.

Our GAAP effective tax rate decreased by 8.4% to 36% for the quarter, primarily driven by changes to the income tax accounting treatment for employee-based equity compensation and the previously discussed 2% reduction for our state income tax rate.

During the first quarter, we generated $75.9 million in operating cash flow, representing a year-over-year increase of 87.7%, and spent $10.5 million on CapEx, representing 5.3% of net service revenue, for net cash generation of $65.4 million.

In the quarter, our operating cash flow benefited from increased operating income, a reduction in our workers' comp collateral, and a reduction to our cash taxes paid. We closed the quarter with total debt of $449.8 million, representing a debt-to-EBITDA ratio of 2.2 times trailing 12 months EBITDA.

We spent $27.6 million to repurchase 1.1 million shares of stock during the first quarter. We finished the quarter with total cash of $216.1 million and working capital of $159.9 million. Included in our professional service revenue for Q1 is approximately $5 million in seasonal items. These items will not be included in our Q2 run rate.

In the first quarter of 2016, we had approximately $7 million in seasonal items. Turning to our second quarter and 2017 full year outlook, I will provide both GAAP and non-GAAP guidance.

We expect our second quarter GAAP revenue in the range of $780 million to $800 million, which represents year-over-year growth of 4.6% to 7.3%, and our net service revenue in the range of $165 million to $170 million, which represents year-over-year growth of 10.6% to 14%.

We expect second quarter adjusted EBITDA in the range of $40 million to $45 million, representing an adjusted EBITDA margin of 24.2% to 26.5%.

Our second quarter GAAP net income is expected to be in the range of $11 million to $14 million or $0.15 to $0.20 per share, and we expect second quarter adjusted net income in the range of $17 million to $20 million or $0.24 to $0.28 per share. Turning to the full year, our 2017 revenue and adjusted EBITDA guidance are unchanged.

We forecast GAAP revenue in the range of $3.3 billion to $3.4 billion, which represents year-over-year growth of 7.8% to 11.1%. We expect net service revenue to be in the range of $705 million to $720 million, representing year-over-year growth of 9% to 11.4%.

For the year, we expect adjusted EBITDA in the range of $198 million to $208 million, representing an adjusted EBITDA margin of 28% to 29%, unchanged from our previously provided guidance.

We now expect GAAP net income in the range of $72 million to $78 million, or $1.01 to $1.10 per share, and adjusted net income in the range of $97 million to $103 million or $1.37 to $1.45 per share. The increases from our prior guidance is due to our lower GAAP and non-GAAP tax rates.

Our revised 2017 guidance now assumes a GAAP tax rate of 40% and pro forma effective tax rate of 40.5%. As we discussed during the first quarter, net insurance service revenue benefited from lower administrative costs and improved health and workers' comp experience in the quarter.

This outperformance leaves us well positioned to achieve our 2017 financial plan. However, we are now entering into our seasonally weaker insurance experience quarters, and as such, we thought it prudent to leave our existing full year guidance unchanged.

In addition, we are planning for higher expenses for the rest of the year due to our platform migration and ongoing process improvements in controls remediation. This change represents a reduction of approximately $0.03 per share in the second quarter and is accounted for in our current full year forecast.

This concludes the first quarter financial results overview. I'd like to thank Burton, the Board, and my TriNet colleagues for their support over the years. TriNet is well-positioned to build on its solid financial foundation and strategy. I look forward to working with Richard in assuring a smooth transition in the months ahead.

Let me turn the call over to Richard for some brief remarks..

Thanks, Bill. I'm excited for the opportunity to serve as TriNet's next CFO, working closely with the management team and the Board to support the next phase of TriNet's growth and development.

I believe the company's strategic plan to address the needs of small and mid-sized business through client-centered, vertical products of scale is what makes this such an interesting story and makes me excited to be here. I look forward to working directly with Bill during the transition and meeting many of you in the months ahead.

I will now turn the call back to Burton for his concluding remarks..

Thank you, Richard. I am very pleased with our financial performance in the first quarter. I am excited about the market opportunity, and I am confident that we are making the right investments in technology, products, and people that will pave the way to our future successes.

We are executing our strategic plan, which is aimed at further strengthening our product offerings by leveraging our scale and experience while bolstering our ability to deliver sustainable, profitable growth over the long term. I look forward to reporting to you on our successes, as our investments bear fruit over the coming months and quarters.

Finally, I am very appreciative of Bill's contributions, and I look forward to working with Richard in the coming years. With that, we will open up the line for questions.

Operator?.

Thank you. We will now begin the question-and-answer session. And our first question comes from Tien-Tsin Huang with JPMorgan. Please, go ahead..

Hi. Good afternoon. Thanks to Bill, and welcome to Richard. Just, I guess just big picture, I wanted to just clarify the decision to not raise revenue and EBITDA.

Is it just being conservative on the insurance performance outlook? And is there any kind of change in the unit growth or your investments in the quarter or base business from what you thought a quarter ago?.

Hi. This is Rich. How are you? It was a strong quarter, which leaves us well positioned to deliver on our financial forecast for the rest of the year. We believe, though, that it will be a little bit historically weaker as the quarter goes on for insurance.

That being said, we plan on spending more in our platform migration, process improvements, and our control remediation, so we're confident with where we are, and we think it's a prudent time to stay with our current full year forecast..

Got it. Got it. So, it makes sense to invest in some of the changes. I'm curious, though, just with the WSE growth of 2% in the quarter – professional service revenue is obviously solid, you're getting a lot of high throughput on revenue per – I think that was up seven.

But I'm curious, how did the unit growth come in versus plan? And any suggestions on how that will change as the Main Street piece comes on, et cetera? Thank you..

Yeah, Tien-Tsin, this is Bill. So, I don't think there's any new drivers from what we have previously talked about. So, the things we did experience in the quarter, we did see higher attrition resulting from our disciplined approach to migrating our clients as we prepared for the SOI migration.

And as many of you know, it's a really good time to do a deep dive in your entire install base when these events occur. The second thing affecting volumes is we've moderated the growth around Main Street because the new platform really isn't available until Q3.

So, those are the two biggest things that really affected the volume, as we had planned coming into the year..

keeping our clients longer and wowing them in the sales process. So, I think you'll see the growth in volume occur based on those three areas..

Understood. Thanks for that..

And our next question comes from Danyal Hussain with Morgan Stanley. Please, go ahead..

Thanks for taking the question, and thank you, Bill, for all the help and welcome to Richard. I just wanted to ask first about the, again, the experience on the health and workers' comp.

Was there anything, I guess, isolated or one time about the performance? Maybe you can talk about the region or anything else that you think might be helpful? And then on workers' comp, maybe you can just explain the mechanics of how workers' comp might inflect one way or another, because obviously it's very long tail risk that you're trying to price for us.

Was there any change in methodology? Thanks..

Sure, Danyal. So, I don't think there's any one time elements here. So, this is really the result of continued focus from adding the team.

We did have good administrative relief, and that's been something, administrative cost reduce – reduction, and that's going to be ongoing, but we did also see some good cost and claims trend in the quarter, both for workers' compensation and for health.

And the thing I would just note on that is when we do see this type of claims experience that runs lower than we're expecting, of course, we see our net insurance revenue trending up, and then over the long term, we're seeking to match price to the client risk and to market trends.

So, what this tells us that as volume grows, we continue to get reduction in administrative costs by the carriers, and we should be able to have our clients get the benefit of better pricing over time..

Okay..

In terms of second question, on workers' comp, and again, this has been a focused effort, and we've had to focus a little bit more of our effort on the SOI book, and that's happened also as we prepared for the migration, and as you take a look at our 10-Q, which will be filed later today, you'll notice that our prior period development is going down, which is a good indication that we think we're getting a handle around any prior period development that has come out of that book..

So, I mean, I don't understand insurance that well, but if you have a development like that, is it sort of a true-up that shows up in the quarter? Or does it have sort of go-forward implications on how you recognize the accrual?.

Well, basically you're recognizing your current period development and any prior period development for older years every quarter as that happens, and, theoretically, you're always trying to make sure you have very little prior period development.

That means that you've pretty much understood, and you've got all of that in your current period estimates, but generally, it's a better thing to have as small prior period development as possible..

Okay. Thank you.

And then just on the Main Stream (sic) (29:31) [Main Street] product, it sounds like because you're not selling it now, proactively, do you effectively expect to have this pent-up demand and a spike in demand in the third quarter? Or is it more just that you've missed out, but it should look more normal going forward?.

Yes. So, we're not going to see really any impact until the product is released, which is in the third quarter, but I do think it's going to be generally it will come up over time, and it's something that I would not describe as a spike. We are seeing the bumps (30:04) are starting to quote the product, so that's a good thing.

But generally, there's just one of those things that will come up over time as the product gets introduced into the market..

Got it.

And maybe just a quick one for Richard, but any – I know it's early, any thoughts to pivot or change in strategy, either capital allocation or anything else?.

Not at this time..

Okay. Great. Thank you so much..

Thank you..

And our next question comes from Timothy McHugh with William Blair. Please, go ahead..

Yes. Thanks. I guess, just trying one of the earlier questions differently.

Maybe the improvement, how much of the improvement in the insurance revenue would be an improvement in the administrative kind of fees versus, I guess, claims experience? Could you ballpark that at all for us?.

Yeah, Tim, I think we've seen improvements on both, and I'd say they're both probably equally contributing to what we saw in the quarter..

Okay.

Equally on a year-over-year basis contributing to that?.

Yes..

Okay.

And then the attrition comments, is it limited to the SOI platform? Or I guess how was attrition on the other platforms relative to your history?.

I think it was in the norm with our normal history. So, we did, as you know, have had some impact from medical pricing, particularly over the last year, because we've had to increase the pricing, but I think that has started to mitigate.

And really the thing that we're seeing right now is mostly in the blue-and-gray book as we prepare for the migration..

Okay. And then just strategically, they are kind of, I guess, strategically, if I look at kind of overall your net insurance revenue per WSE, it's kind of hitting back towards the highs you saw a couple of years ago. Does that make you – do you turn around? You kind of hinted at it.

Do you get more aggressive with pricing as you think about trying to grow the WSEs now?.

Yeah, I wouldn't say aggressive in pricing, Tim. What I would say is that we do focus, and the team has a very disciplined I'd say data-driven approach to how we price our products. And as we look at that, and as we get the experience that comes in, that's all taken in by the team.

And to the extent we do have better experience, that should lead us, and you would expect it would lead us to have lower pricing, but it's all based on the data that we get and analyze to make sure that it is something that we expect to continue..

I guess the claims experience, does it feel like sustainable trends to – I guess what – as you peel back the layer on why the claims experience was better, what did that kind of tell you? Was it – or can you tell? Is it just lumpiness? Is it something changing in more permanently?.

Yeah, I think, it's, again, it's – we're seeing I'd say moderation in the larger claims, which is what we had the adverse experience before. But in general, we're not seeing what I'd say is any dramatic increases in either pharmacy or run rate claims. They're coming in pretty much as trend, as we're expecting. And so that's a good thing.

And as that comes in and if it comes in slightly lower than what we're expecting, then that affects pricing in a positive way..

Okay..

So, Tim, this is a really good example of where scale matters, where we can address the administrative costs based on the scale of our book of business. And you and I have talked a lot about insurance.

And I think coming to fruition is the ability to leverage our scale as it relates to both the cost to administer the insurance, but also to ultimately be able to pass it along to our clients..

Okay. Great. Thank you..

Thank you..

And our next question comes from David Grossman with Stifel. Please, go ahead..

Hey, David..

Thanks. Hey, Burton. Good afternoon. So, I'm just going to step back and look at the dynamic in the quarter. I think if we go back to the fourth quarter of 2016, we had better admin fees back then. And, obviously, you had repriced the book to get the costs and the pricing more in line, as well as the claims.

So, as you think about the surprise in the quarter, can you help us understand how much of that really was you just trying to be as conservative and reasonable as possible, given what had happened over the last 24 months as opposed to any really change in business? Just asked another way, does this feel like we're more at a steady state recognizing quarter to quarter you can always have these big kind of lumpiness in claims in a given year? But generally speaking, do you feel more comfortable that that pricing and claims dynamic is more in sync than it's ever been?.

Yes, David. This is Bill. So, I think the point I would say as the takeaway is that the team has worked very hard both on forecasting as well as pricing. And I think that's been ongoing over the past year and a half.

And I think we are starting to see the benefits of I'd say significantly better data, and I'd say tightened disciplined way to both forecast and price. And so, I think we're seeing some of the results of that. As Burton mentioned, the ability to continue to get scale and reduce administrative costs makes it more predictable for that component.

And then as we look ahead, we expect if we do see, Q1 is generally a better seasonal quarter for us, as you know. Both Q1 and Q4 generally are the best seasonal quarters for our insurance business. Q2 and Q3 generally have a little bit more of the slower or weaker quarters, and I would expect that to continue this year.

But all in all, I think we have a good handle on the business, and I think it's showing that..

And in terms of the admin fees, is the admin fee – is there some seasonality to that reset, or are you constantly getting adjustments based on volumes of business?.

Generally, that admin fee changes on an annual basis as a result of negotiations, and then, of course, it comes to us based on what percentage of our business renews in a particular quarter.

But Ed and his team will negotiate, and so when the plan year starts, that's when the new rate is in effect, and then it starts to hit the business as the clients renew in the quarter and get the benefit of that lower administrative rate..

So that kind of benefit, if you will, would be seasonally strongest in the fourth and the first quarter then?.

Yes. Generally, we have the higher amount of renewals in the fourth quarter and in the first quarter, and we have a lower percentage of renewing in Q2 and Q3..

Right. Got it. So, and then one more question for you, Burton. It sounds like you're quoting now in health care, the health care bundle, the financial services bundle.

Is there any experience you can share with us in terms of – I know it's probably a little bit early in terms of closes, but what the revenue per client is looking like on a relative basis compared to the historic book of business?.

So, David, it continues we talked about the verticals around life science where we have a little bit more experience. You can do the math and see that the PEPM was very strong in Q1. I'm pleased with the preliminary results, which will have an impact as the year goes on as it relates to the vertical products and the PEPM per client.

So particularly strong in Q1. As the mix changes and we bring in the Main Street product, as I talked about earlier, volume will go up. Average PEPM will go down because of the lower priced heads, but they're equally as profitable per dollar.

So, I am really comfortable that the tailoring of the product to the verticals and the profitability of each product will give us the chance to optimize both the service model and product but also the insurance bundle that goes along with it. It's all about scale and configuration as we move forward over the next year or so..

Right.

And is there any profitability impact we should be thinking about as it relates to the rollout of the Main Street product?.

Is there any – I couldn't hear – did you hear that?.

No. It's factored into our current forecast. So we're on track with that change as Burton described the product mix..

Got it. Okay. Great. Thank you..

Thanks, David..

And our next question comes from Kevin McVeigh with Deutsche Bank. Please go ahead..

Great. Thanks. Hey. Great job on the quarter.

I wanted to just, Burton, or whomever would be the best answer, in terms of the admin fee, is there any way to think about as you scale up the WSEs, are there certain kind of ranges that would really enable you to offer much better economics in terms of negotiations, not only with the providers, but also with the clients you're selling into? I guess, is there kind of any threshold you look for that would really imply kind of another really meaningful step up in leverage based on those certain WSE levels?.

Yeah, Kevin, this is Bill..

Hey, Bill..

There isn't a step function. It's really something that happens when Ed and his team has discussions and looks at the different elements of the admin fees charged by the carriers.

And to the extent we do see an opportunity with a particular carrier and can take advantage of that, then normally he's able to then share that experience generically and see if he can get a similar arrangement with another carrier. So, it's an evolution as opposed to a step.

But I think the progress that he's making as we continue to get higher volumes, it makes the discussions a little bit more meaningful with the carriers and impactful, because I think they all want to participate in picking up good risk. And I think they see us as an opportunity to do that..

And on the service fee side, I think we're in the beginning of the journey to leverage our scale. Until we get on the single platform, it's very hard for us to predict how that will impact as we get to 0.5 million, or even 1 million people running payroll on the platform.

So, over the next couple of years, we are going to figure out ways to use the scale as a competitive weapon relating to price and profitability. Insurance is one bucket, but the other bucket is the operational scale with providing the scale of service that we expect to be able to do..

And, Burton, just along those lines, would that make maybe a tuck-in acquisition more attractive, just given the function of the step up and the WSEs? Or it would take longer to kind of weave them into the leverage on the admin side?.

Absolutely. Look, we have some very specific targets of what we can pay for a WSE if we can transition them to one of our existing vertical products and give them an excellent client experience. And that scale, hopefully, will have an activation price that is at or below what the market will charge us for those heads.

So, as time goes on, particularly as we move forward with the SOI migration, my expectation is we're going to complete our PhD in migration with our fourth migration with SOI and be able to bring on acquisitions to the new platform. So that's coming as we complete the SOI migration to the single platform.

That's coming as we have the unique vertical products that are fully functioning so that we could bring in a book of business that may be geography-based but transfer them to the vertical products that fit their unique needs and delight them with the service..

Awesome. Again, nice job. Thanks..

Thanks. I appreciate it..

And this concludes our question-and-answer session for today. Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation, and you may now disconnect..