Good morning, ladies and gentlemen, my name is Ryan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Insperity Second Quarter 2014 Earnings Conference Call. [Operator Instructions] At this time, I would like to introduce our speakers for today. Joining us are Paul Sarvadi, Chairman of the Board and Chief Executive Officer; Richard Rawson, President; and Douglas Sharp, Senior Vice President of Finance, Chief Financial Officer and Treasurer. At this time, I'd like to turn our call over to Douglas Sharp. Mr. Sharp, please go ahead.

Thank you. We appreciate you joining us this morning. Before we begin, I would like to remind you that any statements made by Mr. Sarvadi, Mr. Rawson or myself, they are not historical facts are considered to be forward-looking statements within the meaning of the Federal Securities Laws, words such as expects, could, should, intends, projects, believe, likely, probably, goal, objective, outlook, guidance, appears, target and similar expressions are used to identify such forward-looking statements involve a number of risks and uncertainties that have been described in detail in the company's filings with the SEC. These risks and uncertainties may cause actual results to differ materially from those stated in such forward-looking statements. Now let me take a minute to outline our plan for this morning's call. First, I'm going to discuss the details of our second quarter 2014 financial results. Paul will then add his comments about the quarter and our plan for the remainder of 2014. Richard will discuss the Q2 gross profit results and our expectations for the remainder of the year. I will return to provide our financial guidance for the third quarter and an update to our full year 2014 guidance. We will then end the call with a question-and-answer session. Now let me begin today's call by discussing our second quarter results. Today, we reported adjusted second quarter earnings of $0.13 per share. These results were $0.02 per share above the midpoint of our forecasted range, as both paid worksite employees and gross profit for worksite employees were within our forecasted ranges, while operating expenses were managed below projected levels. Adjusted Q2 2014 earnings exclude an impairment charge of $0.06 per share, associated with reorganization of our Employment Screening business, which I will discuss in a few minutes. As for our key metrics, paid…

Thank you, Doug. Today, I will comment on our action plans we are implementing in the back half of 2014 to position Insperity for a strong 2015. Our central focus is to grow units through the year-end transition and reverse the pattern we have experienced the last couple of years that has limited our growth. Our second area of emphasis is continuing efforts to align operating cost with the array of lower-priced service offerings we introduced recently that are gaining traction in the marketplace. Our third priority setting us up for a strong 2015 is continuing the development of our portfolio of strategic business units. Our current forecast from now through the end -- the year end shows accelerating sequential unit growth and a year-over-year growth rate in worksite employees of 4% to 5% in Q4. In this scenario, the anticipated year-end number of worksite employees is approximately 10% unit growth over the low point of the year, which occurred in February. In order to achieve growth rates we want in 2015, the most important factor is to not give up the gains we've had and expect over the balance of the year as we go from Q4 into Q1 of 2015. In each of the last 2 years, we fell back considerably in paid worksite employees from the year-end transition of new and renewing accounts. So I'll direct my comments today toward what's different as we head into the last half of this year in sales and retention of accounts in both the mid-market and our core business. In our core business, the critical driver is the number of business performance advisors with 1 year or more experience under their belt. Last quarter, we reported a 5% increase over the same period in 2013. We also projected a gradual…

Thank you, Paul. This morning, I will comment briefly on the details of our second quarter gross profit results, and then I will give you our gross profit outlook for the balance of 2014 and a glimpse into 2015. Doug just reported that our gross profit per worksite employee per month for the second quarter was $248, which was on target with our forecast. Our gross profit consisted of $186 average markup, $45 of direct cost surplus and $17 from our adjacent businesses. Now let me give you the details of each component. The average markup was $2 per worksite employee per month lower than our forecast. The surplus was $2 per worksite employee per month better than forecast, and the contribution from our strategic businesses was right on the forecast. Now the $2 per worksite employee per month shortfall in the markup was the combination of slightly lower-priced new business, a slightly larger average client size and the traction we are gaining from the lower-priced, lower-cost services that we now offer. The $2 per worksite employee per month improvement in our surplus came from the combination of a $4 per worksite employee per month increase in the surplus from the payroll tax cost center and a $2 increase in the benefits cost center's deficit. The better-than-expected surplus in the payroll tax cost center was the result of the last group of states sending us final 2014 state unemployment tax rates. These rates were lower than what we had originally budgeted. As for the benefits cost center, the $2 increase in the deficit was the result of lower-than-expected allocations, partly offset by lower-than-expected health care costs. The lower allocations continue to be the result of employees selecting lower costs prior to deductible plans, which translates into lower cost trends for…

Thanks, Richard. Before we open up the call for questions, I'd like to provide our financial guidance for the third quarter and an update to our full year 2014 forecast, which excludes the impact of the Q2 impairment charge. As Paul just mentioned, our efforts at this time of the year are focused on our fall selling season and year-end renewals, which impact the starting point of paid worksite employees at the beginning of 2015. Our guidance for the remainder of 2014 considers the plans to make this happen, recent trends in client mix and associated new and renewal pricing, expected direct cost trends and continued management of our operating costs. So as for our key metrics guidance, we have updated our full year guidance for average paid worksite employees to a range of 130,600 to 131,100, a decrease of approximately 1,000 worksite employees from our prior forecast. Our forecast assumes slightly higher client attrition related to the increase in M&A activity, maintaining recent sales efficiency levels for our core business and the onboarding of recently sold mid-market clients. Net hiring in our client base is expected to remain at recent levels over the remainder of the year. As for Q3, we are forecasting average paid worksite employees in a range of 131,750 to 132,250, which is a sequential increase of 3% over Q2 of 2014. We expect Q3 gross profit per worksite employee per month to be in a range of $243 to $245, and as Richard just mentioned, the full year to be in the range of $250 to $253. This is a $4 decline from our previous full year forecast and is due primarily to a lower average service fee and higher estimated workers' compensation costs. The impact of the lower average service fee on our 2014…

[Operator Instructions] Your first question comes from the line of Michael Baker from Raymond James. Michael J. Baker - Raymond James & Associates, Inc., Research Division: Richard, I was wondering if you could comment in general, from a geographic standpoint, what you're seeing in terms of competition. I know you guys were one of the early ones to point out an increase in competitive dynamics. It sounds like paychecks has adjusted in their health care offering in at least one market. Just trying to get a better sense of how that is shaping up.

Well, we have seen in several of the markets, certainly out on the West Coast, we've seen quite a bit of competitive pressure out there, and of course, we always have a certain amount from ADP. So it's not any more or less in one area than another at this stage of the game.

I would say that the health care-related environment has a lot of moving parts going on it right now. And so it's a little tougher to kind of align things to see, apples-to-apples, what's going on in the marketplace. So I think there's quite a bit of confusion around health care in the marketplace, and that's weighing in also. Michael J. Baker - Raymond James & Associates, Inc., Research Division: Okay. And then, Richard, on the health care benefits side, I was wondering if you could comment on hep C, whether or not you think you guys have any meaningful exposure there?

No, I don't think we do actually.

Your next question comes from the line of Jim Macdonald from First Analysis.

It sounds like your estimate for service fees continue to go down. I think, a couple of years ago, you thought you could get those to go up. Is all this mix? Or how do you see this playing out over the longer term?

Yes, it's a combination of mix, is the biggest factor right now because of our new lower-cost -- lower-price, lower-cost offerings. As I mentioned, Workforce Synchronization is getting a lot of traction faster than we expected. So that's a good sign. However, I think another factor is just the maturity of the sales staff. New sales have come in at a lower price, and that does reflect 2 things: some of the competitive pressure we're talking about in the marketplace and also the maturity of the sales staff. And our experience is, is that as our business performance advisors mature and move into that 12- to 18-month and post 18-month period, they not only move up in volume of sales, but also their confidence rate is higher, success breeds success and they start actually selling higher prices as well. So there are 2 factors in there contributing to that, and we've just -- well, actually 3. And so we've just built all that into the going-forward scenario.

Okay. And then, are you having any indications yet of what price increases will be hitting the market for health care later in the year and for people that may want to migrate to your plans? Or is that just too early to see yet?

No. I mean, Jim, it is quite early to see what the rest of the marketplace is going to be producing. From our side of the fence, just because of our cost trends, we're doing so well, prospects and renewing customers are not going to see very significant increases. But there are so many -- as Paul said a minute ago, there are so many different plans out there right now with so many different options that when you got kind of a steady state base of plan, designs and offerings, there's a lot -- it's a lot more difficult to do an apples-to-apples comparison. So I expect because of the things that have driven the cost of health care reform that we have seen in the marketplace so far, it's way in the double digits. But those prospects are going to have to either stick with the plan that they've got for another year whether they like it or not, or else start to move into something that makes more sense. And when you think about it from our perspective, a prospect that's looking at 25% increase in benefits, what kind of dollars does that mean as it relates to our offering, and how much more they could get by being with us, it starts to change the mindset of the business some.

Yes, what we have seen in the most recent comparisons of prospects coming through the pipeline and what we're watching the most closely are companies who are staying in their old plan. So to try to get a feel for those increases I think is going to be critical. And it is early, but what we've seen, they look like they're in the 12% to 15%, 16% range. We'll be watching that closely. But if they're anywhere in that range, we should compare very favorably and be able to overcome that in this big renewal period that's been concentrated into the fourth quarter. If that's the range we're going to compare very favorably, and I think, can really get some movement coming to us.

And could you -- just one last one, could you give us your current level of trained salespeople and kind of how you expect that to trend over the rest of the year and next year?

Yes. As I mentioned in my script, we got to a 20% -- over 25% increase in number of trained advisors that are us over a year. And right at that 300 number where we've been focusing on and making sure we stay at that number. And so their maturity rate is a little faster. Turnover rate has been lower, which is very good. If we can maintain that, we're positioned really well for a strong selling season, so...

Your next question comes from the line of Mark Marcon from Robert W. Baird & Co. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: I was wondering, could you elaborate a little bit more with regards to some of the strategies to improve retention as we transition to the new calendar year? It sounded like there was going to be an emphasis with regards to preserving units. And I didn't know if that implied that maybe the service markup would potentially be altered further in order to achieve that target.

Yes, thanks. What we factored in are several things in terms of what we're doing for the retention of business over that year-end period. Most importantly is the level of connectivity that we expect to have with our customer base early in the process, both in the core business and in emerging and mid-market. So we are -- we've already begun concentrated effort of engaging those customers, and making sure they're aware of the variety of options that we have available in both co-employment and traditional employment options. And in the core business, we've got a new loyalty program that involves an interaction at the client location and -- with all the worksite employees and we've already seen in our early testing of that, that not only does it gin up referrals for new business, but it really tightens the relationship with that customer, and so we believe there's going to be some nice retention benefits to that as well. Now also in the markup component, we have factored in mix and the recent pricing on new business. So we've been more aggressive. We will be more aggressive over the course of the fall. I think your lowest-cost customer that you have for next year is the one that stays with you. So we'll be monitoring those things and managing this mix issue going forward. Fortunately, we have the offset to the pricing pressure in the new strategic business units, and the potential for growth there that was part of the original strategy being able to add the gross profit per employee by having other product and services that are available. So we will also be pushing those buttons with new and renewing accounts and helping to combat some of the pricing pressure that way. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: And then so between the SBUs relative to the service markup mix, how do you think that would end up trending?

What we're showing just for the balance of this year is you're moving up to about $18 on the ABU contribution, and we've got a couple of bucks coming out on the -- due to the mix and pricing issues. So you're seeing some balance in there, and hopefully over time, that will be even better.

But you're also seeing some increase in the surplus for the payroll tax cost center. And we'll be offsetting that, too. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Yes. Okay. So does that mean relatively stable, do you think?

Yes, I think, in gross profit where your -- the issue in terms of the gross profit line really ends up being the recent workers' comp changes. The rest of the picture, you have moving parts up and down in there, but that's fairly stable. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: So even with the potentially lower mix on the service side just because you are going to be discussing the other alternatives that you have with your existing clients, we could still see the GP per WSE remain relatively stable to this year's level?

Yes, correct, oh yes.

Your next question comes from the line of Tobey Sommer from SunTrust Robinson Humphrey.

I know the pricing environment has been discussed a little bit already, but I'm curious from your perspective, given the multiple services and bundles adjacent business units that you're currently involved in, is it primarily pricing pressure on the legacy premium bundle? Any kind of color you could give on the pricing environment kind of across the service offerings would be helpful.

Sure. Yes, I can do that, yes. And I'm pretty much talking about a transition we've gone through from the one product offering to a host of offering. And in terms of the pricing environment on our core bundle, the price pressure has come from a combination of the competitive environment, but then also, as I mentioned earlier, I think it's the maturity of our sales team gaining momentum will help to offset some of that. But that's, I would say, yes, we're talking more in the core bundle than we are others. Also it's the fact that you have now additional co-employment offerings in the mid-market and it's factoring in the mix change related to that. So for the customer, that Workforce Optimization is their solution. Pricing is not the reason that someone either does or doesn't do it because it makes perfect economic sense. We do have some things going on in the marketplace that I mentioned last quarter around -- actually I mentioned last couple of quarters, around some competitors out there really slashing price. So we're responding to that to some degree, but I think in an appropriate and balanced way.

Okay. And Paul, historically, there's been a pretty tight relationship, albeit on a lag, between an increase in trained salespeople and ultimately, the direction, either acceleration or deceleration, in the worksite employee growth. The relationship appears to, at least for now, have more of a lag than it has historically. Can you comment about that, and kind of how you're thinking of the relationship now and going forward?

Yes, I think the reality is that the year-end transition that I referred to in my comments having a setback to that level at year end is the answer to your question. There's a tight relationship between growing -- we've grown through the year each year, but then at year end, didn't have a satisfactory transition. And the reason for that is very clear. With the size -- first year, the size of the sales staff was not enough to offset the mid-market attrition. You lose a large account, you got to replace them with a lot of small accounts. And if your size of your base isn't big enough, if the size of your sales staff isn't big enough, you're not going to do it. So in the second year, we also had -- if you go back to this year, the setback wasn't as bad, but it was still more than you could resolve with such a young sales staff even though it was larger, and mid-market sales were not enough to offset mid-market attrition. So that's what we've attacked, and we're really excited about the balance of this year because we're hitting all the right buttons. We have a detailed plan relating to every element of that equation that goes after a more successful year-end transition. So obviously as we grow, our forecast, as I mentioned in my script, as we get to the latter part of this year, you have 10% unit growth from February to December. So the big issue is, can you hang on to those gains as you go across into the year end, and that's what we're focused on, and it's what gives us a lot of confidence about 2015.

We have no further questions in the queue. I would now like to turn our call back over to Mr. Sarvadi.

Once again, thank you for your participation today. We appreciate your interest. We look forward to seeing you out in the marketplace over the next quarter. Thank you very much.

This concludes today's conference call. You may now disconnect.