Financial Data and Key Metrics Changes - Total revenue for Q3 was down 2% year-over-year, reflecting a decline in WSE volume but supported by prudent benefit repricing and higher interest income [19][20] - Adjusted earnings per diluted share was $1.11, with GAAP earnings per share at $0.70, supported by improved cash flow [25][26] - Adjusted EBITDA for the quarter was $100 million, representing an adjusted EBITDA margin of 8.2% [25] Business Line Data and Key Metrics Changes - Total WSEs decreased by 7% year-over-year to approximately 332,000, with co-employed WSEs down 9% to 302,000 [20] - Professional services revenue declined by 8% year-over-year, primarily due to lower WSE volumes and the discontinuation of a specific client-level technology fee [21] - ASO conversion rates exceeded initial forecasts, indicating ongoing demand for services despite reduced PEO volume [23] Market Data and Key Metrics Changes - The company experienced elevated attrition rates due to repricing efforts, with health plan pricing cited as the primary reason for client terminations [12][24] - CIE (customer hiring) was flat compared to last year, with a slight year-to-date improvement driven mainly by the tech vertical [20][11] - The insurance cost ratio was slightly over 90%, which was flat compared to last year and better than embedded guidance [23] Company Strategy and Development Direction - The medium-term strategy aims for total revenue growth of 4 to 6% CAGR and adjusted EBITDA margins of 10 to 11%, targeting annualized value creation of 13 to 15% [8][17] - The company is focusing on building a high-quality client base and enhancing service delivery through AI-powered HR capabilities [12][13] - Simplified benefit offerings are seen as a crucial part of the growth strategy, with new benefit bundles launched to streamline the sales process [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to return to a targeted insurance cost ratio by 2026, despite challenging market conditions [16][28] - The outlook for Q4 is optimistic, with expectations for improved year-over-year performance in sales execution and a strong January pipeline [21][28] - Management acknowledged the ongoing challenges in the SMB hiring environment but noted a resilient client base [45][46] Other Important Information - The company repurchased stock and paid dividends totaling $45 million in the quarter, with a 10% increase in dividends year-over-year [26][17] - A leadership transition is underway, with a new CFO set to join the company, which is expected to support continued growth [5][6] Q&A Session Summary Question: Clarification on insurance cost ratio and assumptions for FY2026 - Management confirmed no notable one-time impacts in Q3 and indicated conservative assumptions for healthcare trends in FY2026 [31][36] Question: Update on sales headcount expectations for FY2025 - The company expects to grow sales headcount in FY2026, with a focus on experienced hires and improved productivity [37][38] Question: Rate increases and pricing relative to competition - Management noted that pricing is becoming more aligned with market trends, with evidence suggesting a tightening gap with competitors [41][43] Question: Client decision-making and business optimism - There has been a settling in among clients, with healthcare costs central to PEO buy decisions, and a slight improvement in CIE year-over-year [44][46] Question: Update on ASO offering and competitive landscape - The ASO offering is tracking better than expected, with a competitive advantage in combining strong technology and support [61][62] Question: Guidance and unknowns affecting revenue and EPS - Management does not expect unusual impacts in Q4, with a focus on maintaining guidance within the established range [64][65] Question: CIE growth and WSE outlook for 2026 - CIE is expected to show low single-digit positive growth, with management feeling bullish about revenue growth prospects in 2026 [68][70]