Financial Data and Key Metrics Changes - Gross billings increased by 10.1% year-over-year to $2.23 billion in Q2 2025, compared to $2.03 billion in Q2 2024 [15] - PEO gross billings rose by 10.3% to $2.22 billion, while staffing revenues declined by 12% to $17 million [15] - Net income per diluted share increased to $0.70 from $0.62 in the prior year quarter, reflecting strong revenue growth and operating leverage [20] Business Line Data and Key Metrics Changes - The staffing business experienced an 11.5% decline year-over-year, attributed to macroeconomic uncertainty and client reluctance to fill staffing orders [6][15] - PEO worksite employees (WSEs) grew by 8%, driven by a record number of new client additions [15] - Average billing per WSE increased by 1.7%, influenced by rising wages but offset by lower average hours worked [20] Market Data and Key Metrics Changes - Southern California, the largest region, saw a 12% growth, while the Pacific Northwest declined by 4% [16] - Asset light markets experienced a significant growth of 100% [16] - Client hiring remained modest and below historical levels, impacting overall workforce growth [6][15] Company Strategy and Development Direction - The company is focusing on expanding its product offerings, particularly in health insurance, to capture a broader market, including white-collar businesses [10][40] - Investments in technology and product enhancements are aimed at improving client service and expanding the total addressable market [10][41] - The company plans to open one or two additional branches by the end of the year, following successful entries into Chicago and Dallas [8][62] Management's Comments on Operating Environment and Future Outlook - Management noted macroeconomic uncertainty has caused clients to pause hiring, but they remain optimistic about future growth driven by new client acquisitions [6][13] - The company has increased its growth outlook for the remainder of the year, expecting gross billings to rise between 9% and 10% [22] - Management emphasized the importance of controllable growth and client retention as key drivers of future performance [45] Other Important Information - The company has a strong balance sheet with $90 million in unrestricted cash and no debt [20] - A new $100 million stock repurchase program was approved, reflecting the company's commitment to returning value to shareholders [22] - The workers' compensation program continues to perform well, with favorable adjustments recognized in the quarter [17][18] Q&A Session Summary Question: Status of workers' compensation rate increase - The California regulatory board recommended an over 11% rate increase, but the approved rate was around 9%, expected to push pricing up [27][28] Question: Impact of workers' compensation adjustments - The $8.8 million adjustment was consistent with prior year adjustments, indicating normal performance [32] Question: Profit potential from workers' compensation renewal - The renewal is expected to improve profit potential, especially if claims continue to perform better than expected [36][38] Question: Technology enhancements and market positioning - The company aims to aggressively target the white-collar market with new technology offerings, expanding its total addressable market [40][41] Question: Performance of healthcare policies - The healthcare market is expected to see higher renewal rates, with the company viewing this as an opportunity for growth [42][44] Question: Considerations for raising guidance - Strong year-to-date performance and consistent controllable growth led to the decision to raise guidance for the remainder of the year [45][46]

Financial Data and Key Metrics Changes - Gross billings increased by 9.5% year-over-year to $2.09 billion in Q1 2025 compared to $1.91 billion in Q1 2024 [17] - PEO gross billings rose by 10% to $2.07 billion, while staffing revenues declined by 10% to $18 million [17] - Average billing per worksite employee (WSE) increased by 2.6% in the quarter [19] - The company reported a net loss per diluted share of $0.04, compared to a net loss of $0.01 per diluted share in the same quarter last year [24] Business Line Data and Key Metrics Changes - The number of worksite employees grew by 7.6% year-over-year, driven by a record number of new client additions [18] - Staffing operations experienced a decline of 10% compared to the prior year quarter [6] - The company added approximately 7,900 worksite employees from net new clients [5] Market Data and Key Metrics Changes - PEO gross billings growth by region showed varied performance: East Coast grew by 14%, Southern California by 11%, Mountain region by 9%, Northern California by 6%, and Pacific Northwest declined by 1% [20] - Southern California remains the largest region, achieving double-digit growth due to consistent client additions and hiring [20] Company Strategy and Development Direction - The company is focusing on geographic expansion with plans to open new physical locations in Chicago, Dallas, and Nashville by early Q3 2025 [8][32] - Investments in technology and product offerings are being prioritized, including the launch of a new applicant tracking system [12][63] - The company aims to enhance the employee life cycle experience through ongoing product launches throughout 2025 [12] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the economic environment, noting potential impacts from trade negotiations and government initiatives [14] - Despite a strong start to the year, the company is maintaining its outlook for billings growth and WSE growth due to economic uncertainty [25] - The company believes it is well-positioned to navigate macroeconomic dynamics, emphasizing the benefits of PEO relationships for small businesses [16] Other Important Information - The company repurchased $9 million of shares in Q1 2025 under its $75 million repurchase program [25] - The company paid $2.1 million in dividends during the quarter and reaffirmed its dividend for the following quarter [25] Q&A Session Summary Question: What percentage of clients have direct tariff exposure? - Management indicated that most clients are service businesses with indirect exposure to tariffs, primarily affecting material costs [29] Question: Is there an annual goal for new physical offices? - Management stated that the number of new physical locations depends on market development rather than a fixed annual target [32] Question: How much growth could come from geographic expansion over the next five years? - Management views geographic expansion as a long-term investment, expecting profitability to materialize in year three and beyond [34] Question: Are current healthcare partnerships sufficient? - Management confirmed that while Aetna and Kaiser Permanente are key partners, they also work with regional carriers in certain states [37] Question: What factors influenced the decision to maintain guidance despite Q1 performance? - Management considered both the strong Q1 results and potential macroeconomic headwinds when deciding to maintain guidance [40] Question: How is pricing trending in the current economic backdrop? - Management noted that workers' compensation pricing has moderated, with minimal fluctuations expected [56]