Good afternoon. My name is Lori, and I'll be your conference operator today. I would like to welcome everyone to the Insperity First Quarter 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. 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 Douglas Sharp, Senior Vice President of Finance, Chief Financial Officer and Treasurer. At this time, I'd like to turn the call over to Douglas Sharp. Mr. Sharp, please go ahead.

Thank you. We appreciate you joining us this evening. Let me begin by outlining our plans for this evening's call. First, Paul will provide an update on our business and operations including how the extraordinary effort of our corporate employees and our business model has benefited our clients and our work site employees and their families during the COVID-19 pandemic. He will also discuss the impact of both COVID-19 restrictions and the resulting stimulus packages on our business today and the potential impact going forward. This discussion will include the range of possible outcomes on the key metrics and drivers of our business. I will then briefly discuss our first quarter financial results, provide an update on our balance sheet and liquidity, and provide our guidance for Q2 and our updated guidance for the full year 2020. We will then end the call with a question and answer session now. Before we begin, I would like to remind you that Mr. Sarvadi 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 more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements and reconciliation 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. Now at this time, I'd like to turn the call over to Paul.

Thank you, Doug, and thank you all for joining us. Before I discuss our results and outlook for Insperity, I'd like to say our hearts go out to all those who have lost loved ones and are suffering the most from this sudden unexpected health crisis. Our thoughts and prayers are also with those feeling the severe economic effects that have ensued as this crisis continues to run its course. Insperity is able to see firsthand the impact of this health and economic calamity on the small and medium sized businesses we serve. Our mission to help them succeed, so communities prosper has never been more critical to these clients, their employees, and families. I'm extremely proud and thankful to all employees of Insperity for the way they have risen to the challenge by providing exemplary care and support during this time. So, I'll begin today's call with some brief comments about our solid first quarter results, highlighting two important outcomes which preceded the COVID-19 outbreak. I'll follow with a discussion of our quick and effective response to the health and economic crisis since mid-March including detailed metrics reflecting the effects on our client base. I'll finish my comments today describing the economic climate and considerations over the balance of the year that formed the basis for our updated guidance we are providing today. Our first quarter results represent a significant rebound from the fourth quarter, including strong sales and a welcome improvement in our benefit plan driven by improved pricing allocations and lower than budgeted costs. First quarter sales were 122% of budget representing a 25% increase over the same period last year. These results were driven by a 13% increase in trained business performance advisers and a 10% improvement in sales efficiency. Both core and mid-market sales were substantially over budget. Mid-market sales were particularly impressive throughout the period. Core sales exceeded forecast for the full quarter despite a fall-off in March to 83% of budget as the pandemic escalated. As a reminder, work site employees sold generally become paid work site employees and flow into revenues over the following few months. The other important development evidenced in the first quarter results is the improvement in our benefit plan as the elevated number of large claims we experienced last year continue to decline toward historical levels, and our benefits allocations continue to outpace our expectations. This combination means we came out of Q1 with our health plan in good shape as Doug will describe further in a few minutes. I'd like to provide some detail regarding our initial response in March as the COVID-19 health crisis emerged and quickly became an economic calamity. Our decisive response proved to be critically important for our clients, their employees, and families. We believe our rapid and pivotal reaction to the pandemic combined with the quality of our client base has caused Insperity to experience a relatively less severe impact in layoffs and ultimately in paid work site employees than would have otherwise occurred. The best empirical evidence is our paid work site employee decline in April, which was only 3.3% lower than March. Allow me to provide some context for this with a bit of a chronology. In mid-March as cancellations of public events were announced, it became evident that this COVID-19 pandemic was escalating and morphing into a significant economic disruption. We transitioned to a work from home environment in order to protect our own employees and their families. Our experience over the years with hurricanes and other disasters proved beneficial as we were totally prepared to work remotely on a broad basis with 93% of our employees working at home and only 7% of employees needing to be at the workplace to accomplish their responsibilities. Our workload with clients was increasing dramatically at this point. The initial efforts revolved around policy changes, helping clients transition to working from home, employee communication, and regulatory changes. The response to this health and economic emergency required prompt, thoughtful and well-executed HR solutions, which is right up our alley. As the gravity of this situation set in, it became apparent that our small and medium sized business clients would be facing a firestorm and would need immediate help evaluating alternatives to make operational changes. These options included reducing or furloughing staff, lowering pay rates, and adjusting benefit plans to name a few. We immediately began tracking these operational changes daily through new reporting, which has been invaluable in providing a clear picture of how clients reacted to this crisis. This reporting has also been vital to inform our forecasting of future scenarios. Our daily reporting from March 9th forward provides real-time information on how our clients have responded to the pandemic and adjusted staffing levels. Since that time, we have been watching daily changes in layoffs, temporary layoffs or furloughs, and rehires directly associated with the economic disruption. We've also observed trends in more routine, voluntary and involuntary employee terminations and hiring within the client base. On Monday, March 16th, we decided to form the Insperity business continuity support team to address escalated complex client requests. Within days, this team comprised of professionals from human resources, finance, regulatory, and other disciplines was fully functional, helping clients quickly and effectively make operational changes and obtain critical resources to navigate through the current health and economic crisis. Due to our ongoing government affairs efforts, Insperity was on the ground involved in Washington as the Senate and the administration were addressing the needs of small businesses devising and drafting the CARES Act. Our government affairs team was closely monitoring the CARES Act and providing valuable real-time feedback to us as the Paycheck Protection Program was developed. Our involvement at this level allowed us to be ahead of the curve, which enabled us to meet our goal of helping our clients be in a position to apply for paycheck protection loans when the program was launched on April 3rd. One key element in this effort was providing the reports required with the loan application to substantiate and validate the eligible loan amount. The CARES Act was signed into law by the President on Friday, March 27th and on Sunday the 29th I was reviewing the first version of these complicated reports. Two days later, these reports became available on Insperity premier and by Friday, the first day the banks began accepting applications, over 67% of Insperity clients had run the necessary reports to submit their applications. Last week, we conducted a client survey to obtain important feedback on business owners' sentiments and on their outlook for the near term in the balance of the year. In this survey also released today, we also included questions regarding applications and funding of these loans because of the direct effect on temporary layoffs and expected rehires. According to our survey, approximately 80% of our clients applied for a loan under the Paycheck Protection Program. We are very pleased for our clients when survey results indicated 59% of these applicants received their PPP funding in the first round before funds ran out on April 16th. This compares very favorably against the National Federation of Independent Business survey, which reported 20% of respondents had received their funding. It appears our goal to help our clients obtain these funds to sustain their employees and businesses was very successful. Our daily tracking data also aligns with our survey results since March 9th through the end of April, 25% of our clients have reported layoffs totaling approximately 22,000 employees or about 9% of the total work site employee base. 35% of these layoffs were processed as permanent layoffs, and 65% as furloughs or temporary layoffs expecting to be rehired in the coming months. Approximately 15,000 of these layoffs were reported before the end of March with the remaining 7,000 in April as layoffs moderated. Over the same period, we've already seen approximately 2,200 employees or 10% of the total rehired, which we believe is somewhat due to our early success with clients in the Paycheck Protection Program. Keep in mind, these terminated employees typically get a final paycheck after the reported layoffs and rehires get paid on the next pay date, so there's a lag in the paid work site employee impact from both types of these reported changes. You also have to factor in paid work site employees, pluses and minuses from terminating clients, new clients, voluntary and involuntary terminations and regular hiring in the base. With all these factors in and finalized at the end of April, the result was the 3.3% reduction in paid work site employees for the one quarter that I mentioned earlier. We expect a similar reduction in May based upon a comparable analysis as the balance of layoffs and furloughs from April come out of the paid work site employee count. During this period, we also converted our entire sales team of business performance advisers to sell from home. It's been amazing to watch this value and effort to keep sales moving through virtual discovery and closing calls. While sales activity has decreased significantly, those that are going through the process seem to be more qualified and appear to have a greater sense of urgency. Another aspect of our business that we watched very closely was client terminations and bad debts from financial defaults. We're very pleased to say at this time we've not seen a material increase in these key metrics, although it stands to reason that these issues could increase if the recovery is weak or delayed. Now at this point, I'd like to address the economic climate and considerations we've worked through driving the range of our expectations implied within the guidance we're providing today. The impact of this ongoing pandemic on Insperity will be driven largely by the staffing levels maintained by our small business client base since we earn our fees on a per work site employee, per month basis. Over the balance of the year, we expect staffing levels in our client base to be primarily driven in the near term by the effectiveness of the Paycheck Protection Program combined with how successful and widespread the restart of the economy turns out to be. The second significant effect we expect will come from a change in the pattern of our direct costs due to healthcare and to a lesser extent, workers' compensation trends. We expect an unusual pattern within our direct costs, which we believe will begin with lower costs near term while many employees are working from home, deferring elective procedures and using telemedicine. We then expect potentially higher than normal costs once employees are back at work, catch up on elective procedures and have possible worsened chronic conditions from a period of lack of care or treatment. Our outlook determining the range of our guidance is based upon a range of economic conditions that does not include a V shape recovery in our high case nor does it include a second wave of COVID-19 causing a second shutdown in the low case. So the high end of our range is appropriately conservative, assuming a slow but steady improvement in the economy as States reopen and activity resumes over several months. We also assume the Paycheck Protection Program has a positive effect on rehiring of furloughed employees. However, at a level reflecting the uncertainty our clients are facing, in this case, we assume about 65% of the furloughed employees would be rehired over the next couple of months and time for clients to include them in their calculation for loan forgiveness of their PPP loan. Even though this is the high case, we're assuming 35% of furloughed employees do not return within that period as business leaders stretch out their funds allowing time for the economic activity to increase. New client sales considered within the high end of our guidance assumes sales at 80% of our original budget over the balance of the year. This includes lower sales in Q2 and Q3 and improving to more normalized levels in the fourth quarter. Client terminations are assumed to be slightly elevated over the balance of this year. Even in this high case scenario, we have included an approximately 15% increase in work site employee attrition from client terminations over our original budget. Now in our low case scenario, we're assuming an economic environment where government-mandated shutdowns continue longer, reopening proves more difficult, and it takes longer for demand to resume. In this environment, we assume layoffs persist through the second quarter and our only margin we offset by rehires related to the Paycheck Protection Program. This case assumes clients most affected by the pandemic stretch out their PPP funds and don't re-hire most of the furloughed staff and eventually convert a high number of these employees into permanent layoffs. At the low end of our range, we also assume this slower recovery leads to delayed decisions on new sales and efficiency is lower throughout the balance of the year. In this case, sales results are assumed to be approximately 60% of our original budget over the last three quarters of the year. The low end of our range also anticipates a 20% higher level of work site employee attrition due to the client terminations above our original budget. Full year retention is expected to be 80% in this scenario. Both scenarios include a higher gross profit per work site employee than our original budget due to the outperformance in the first quarter. Combined with a pattern of direct cost, we expect due to COVID-19, we expect direct costs could be materially lower in the short term, but it is unclear how these costs will rebound or what unexpected costs may arise thereafter. Therefore, these scenarios represent more of a shift of costs from the second into the third and fourth quarters and only a relatively small reduction in total costs over the balance of the year. Our operating plan for the balance of the year anticipated a continued elevated level of services needed by our clients, managing through a safe return to work plan or responding to whatever this situation serves up next. At this point, our plan is to maintain our current corporate staff level to handle the increased workload. We also intend to continue to add to our business performance advisor team over the balance of the year, however, allowing the growth rate to moderate to high single digits. So we believe we've weathered this unprecedented storm well primarily due to our quality client base made up of the best small to medium sized businesses in America and an amazing team of employees at Insperity. Now, before I pass the call on to Doug, I'd like to tell a quick story that explains why I'm so passionate about small business owners and the role they play in a recovery like the one we need right now. All four of my grandparents immigrated to the United States during the early 1900s from Romania. Their families pulled their funds together to send each of them to the land of opportunity, which was not uncommon at that time. They arrived with little or no money, spoken very little English, but had the dream of a better life and a work ethic to go with it. One of my grandfathers was only 16 years old when he arrived in 1909. He was very entrepreneurial and told me about many businesses he started from a grocery store with a hair salon above to a great farm in Pennsylvania. But my favorite story about him I only learned at his funeral when an elderly woman I did not know, grabbed my arm to tell me about my grandfather's heroism during the depression. It appears my grandfather played a major role in his community, keeping people alive with his grocery store, extending credit to hungry families and working with his suppliers to stretch every dollar. She said mine was one of those families. When I watch our clients today, I'm reminded that the entrepreneurial spirit is alive and well. Our clients' survey routinely asks our clients major concerns. It was no surprise to see the top concern and this survey was sustaining a business due to this economic slowdown. But right behind that was employee wellbeing, next was returning to work safely followed by employee engagement, sustaining relationships and culture. Strikingly, quite a bit further down the list was meeting terms for loan forgiveness. We are here at Insperity to support these incredible people that play such an important role in our communities and our nation as a whole. If our recovery from this pandemic and its aftereffects is dependent on these small and medium sized business owners, and it is, my money is on them and we will be here helping every step of the way. At this time, I'd like to pass the call on to Doug.

Thanks Paul. Now let's discuss some of the details of our first quarter results. We reported Q1 adjusted EPS of $0.70 at the high end of our forecasted range. Adjusted EBITDA totaled $101 million for the quarter. Average paid work site employees increased by 5.5% over Q1 of 2019 to just over 238,000. This quarter’s growth reflected a higher than expected level of work site employees paid from new sales coming off of the successful extension of our fall sales campaign. However, our Q1 growth was dampened by lower than expected net gains in our client base. Gross profit increased by 3.2% over the first quarter of 2019 and as you may recall from our earlier discussions, the year-over-year comparison was impacted by our favorable benefit cost trend in Q1 of the prior year. However, we effectively managed overall gross profit for Q1 of this year above budgeted levels. As a result from both our benefits and workers' compensation programs were favorable. As the large healthcare claim activity, we continue to see a decline in the number of claims over $100,000 since the initial spike in the second quarter of 2019 although still slightly elevated from a historical perspective. Also, our Q1 claims trend associated with normal smaller healthcare claims came in near targeted levels. Now an outlier in Q1 was a shift in the timing of approximately $4 million of pharmacy costs into the quarter. As you may be aware, as a result of the COVID-19 stay at home orders, many benefit plan participants across the country accelerated their pharmacy refills with many extending the refill period from 30 to 90 days. The impact of insurance companies relaxing their normal requirements around this area ultimately impacted the cost for all plan sponsors in a health plan like ours, this essentially accelerated what would have been Q2 and Q3 pharmacy costs into Q1. Other than this factor, we do not believe our Q1 benefit costs were impacted by COVID-19 due to its occurrence late in the quarter. So all things combined, the good news is that benefit costs for Q1 of 2020 came in favorably when compared to our budget in spite of the additional $4 million in pharmacy costs. Now on the pricing side, our benefit allocations were also favorable. So in conclusion, we exited the quarter ahead of plan in our benefits areas. Our first quarter adjusted operating expenses increased 5.3% over Q1 2019 at low budget levels. It's important to note that we continue to invest in our growth as we increased our trained BPA count by 13% over Q1 of 2019 and in a few minutes I'll provide more detail behind our current thoughts on our operating plan in light of the current business environment. Finally, our Q1 effective tax rate came in at an expected 27%, which was significantly higher than the 12% rate in Q1 of 2019 due to a lower tax benefit associated with the dusting of long-term incentive stock awards in Q1 of this year. Now let's discuss our cash flow and liquidity. During the quarter, we repurchased a total of 878,000 shares at a cost of $61 million. These repurchases included those shares bought in the open market and under our corporate 10b51 plan in mid-February and early March and shares repurchased in connection with tax withholdings upon the vesting of employee restricted shares. We also paid $16 million in cash dividends under our regular dividend program and invested $60 million in capital expenditures. While we continue to have a strong balance sheet and liquidity position in the latter part of the quarter, we drew down $100 million from our credit facility to provide further flexibility in this uncertain business environment. So we ended the quarter with $167 million in adjusted cash and $130 million available under our $500 million credit facility. Now as far as our guidance for the remainder of 2020, let's begin by putting it into context. As you know, events continue to unfold almost daily, and there remains a high level of uncertainty on the short term and long-term impact of the pandemic on the economy and the small business community. As a result, this guidance will reflect a wider range of possibilities than that provided in the past. Based on the details that Paul just shared on our expected work site employee levels, we are now forecasting a 1% to 5% decrease in the average number of paid work site employees for the Q2 standalone quarter and a 1% to 6% decrease for the full year 2020 as compared to the 2019 periods. For the full year 2020, we are forecasting adjusted EBITDA in a range of $215 million to $250 million, which is flat to down 14% from 2019. As for our adjusted EPS, we are forecasting a range of $3.19 to $3.86, and this assumes an effective tax rate of 28% in 2020 as compared to a rate of 20% in 2019. Now the quarterly earnings pattern is expected to be different this year due to the factors surrounding the COVID-19 pandemic. The second quarter is expected to be positively impacted because we believe the stay-at-home orders will result in lower healthcare utilization including the delay or cancellation of elective procedures and a lower level of office and emergency room visits. However, over the latter half of 2020 as stay-at-home orders are relaxed, costs may be elevated to include the restoration of some of the deferred elective care costs associated with participants with chronic conditions that miss treatments, COVID-related testing and treatment costs, and a potential increase in COBRA participation. As far as our workers' compensation area, we also expect to see a similar quarterly pattern, although at a much smaller level that will develop over a longer period of time. As for our operating costs, our guidance reflects the following actions based upon our current expectations of the impact of the COVID-19 pandemic and the related economic recovery. We intend to continue to grow the number of business performance advisors as we position ourselves to both muscle through this challenging time and position ourselves for the long term. We have currently decided to postpone the opening of two sales offices into 2021 which will now allow the opening of five sales offices in 2020. Marketing costs have been reduced due to the reduction in cancellation of promotional events, including the Insperity Invitational. In addition to the cancellation of travel due to the stay-at-home orders, we have replaced a significant portion of our in-person training with online meetings and at this point, with the exception of business performance advisers, we intend to hold our corporate headcount flat as increased service demands offset any reductions that would have been commensurate with the lower work site employee level. Now as far as Q2 earnings guidance, we are forecasting adjusted EBITDA range of $65 million to $79 million, a 15% to 39% increase over Q2 of 2019, and adjusted EPS in a range of $2 to $2.29, an increase of 23% to 55%. Now at this time, I'd like to open up the call for questions.

We have a question from Mark Marcon from Baird. Your line is now open.

Good afternoon, hope everybody that you know personally is well and safe. Just wondering, if you could talk a little bit more about some of the sensitivities around the guidance and specifically, if you could talk a little bit about what happens to your SG&A in terms of sales commissions? And how that flexes with sales performance? And how we should think about that just in terms of those levels of sensitivity? And then second part of my question has to do with what sort of regional differences are you currently seeing? Obviously, the virus has hit in a different manner across the country. So wondering, if you can just tell us what you're seeing from a regional perspective and how you expect some of the areas that haven't been hit yet, like expected to be, how that would end up flowing through or how you're thinking about that?

Thank you, Mark. Hope you and yours are doing well also. So certainly, I'm going to kind of start with the last part of your question. I'll let Doug go back to the first part of the question. But from a regional perspective, it's what you would expect, we've seen a disproportionate effect in terms of how many of the layoffs in the Northeast and the West have come from those locations compared to the percentage of our total base that's in those locations. You know, just as an example, 21% of the West accounts for 21% of our work site employee base and had 28% of the impact on layoffs. Similarly in the Northeast, about 26% of the base there was actually about a 30% of the impact. So that's where you saw the most in, I think that fits in and makes sense.

And Mark as far as your question on the sales commissions, you're probably referring to the first quarter in your initial thoughts there, is it up about 22% over the prior year. The reason for that was the successful extension of our fall sales campaign into the first quarter. So you've got some year-over-year comparisons related to that particular metric. But obviously, going over the course of the year based upon some of the discussion that Paul had relative to what we're forecasting on sales as a percentage of our initial budget, we would expect it to be lower year-over-year, particularly in the second and third quarters. Then taking out this picking up in the fourth quarter is, we are expecting somewhat of a rebound in the fourth quarter in our mid-case.

Right. And then you've been through a number of cycles, I mean the client retention. How would you expect that to kind of flow through? I mean, this hits so fast that probably companies are hanging on, but if this lasts for a while, how would you expect that to impact?

We had many discussions about this because we haven't noticed an increase in client terminations at all during this period. It's fascinating how both health and economic issues require significant HR consideration and execution. The way we've supported our clients and their appreciation for our efforts highlights the value Insperity provides to businesses, helping them thrive in both good and challenging times. I believe we will see a sustained demand for our services going forward, as we have a strong story to share about our experiences. However, in our forecasting, we felt it necessary to account for a potential rise in client terminations in the future. We included a 15% increase in our best-case scenario. Instead of the original budgeted retention rate of 83%, we now project 81% in the high case and 80% in the low case. The latter figure reflects the typical low period for terminations in the remaining part of the year. Although we haven't experienced this increase yet, we acknowledge that if the recovery is slow or delayed, some client terminations could occur, which is why we've built this projection into our forecasts.

Great. Can you just talk about like any requests from client pricing concessions? Are you seeing that? How are you handling it?

Yes, we have certainly seen some of that come through, which is normal in a time like this. Part of our effort with our business continuity support team was to really dig in and understand what clients' needs were. So, we've made some accommodations where we felt like it was important to do. So, we were always standing ready to help customers, but we've also were able to help them make adjustments within what we're doing for them that would help lower cost all the way through, that were for us and them. And I think those who were generally more significant to helping them deal with what they were trying to deal with right away. On a going forward basis, we'll see how things play out. But right now, we're expecting some; there may be some short-term benefit, but it's unclear how much of that really will end up going back out in other types of costs in the not too distant future.

And your next question is from Jeff Martin from Roth Capital Partners. Your line is now open.

Thank you. Good evening guys.

Hello, Jeff.

And congrats to you and your team for all you've done for this client base. Those are pretty impressive numbers coming out of the survey. Wanted to get a sense, do you have a feel for what percentage of your client base is considered essential service versus non-essential?

It's interesting because 88% of our customers said they had been affected, 36% said they were severely affected or considerably, I forget what the word was, significantly affected, I think was the right word. But as far as the essential, it was hard to tell, my best guess is around 40%.

Okay. And then with respect to your fall sales campaign, I would imagine there's still quite a bit of uncertainty that would allow you to kind of shape what changes might come, but can you give us kind of a first glance at, what things you might be doing differently with the fall sales campaign this year?

Well, we have learned a lot during this period and where sales is particularly difficult because it's so normal to you to go out and build a trust relationship with a customer. And that takes face-to-face interaction. But in spite of that, we have really seen our sales team adapt and do way better than I thought, based on how we've sold in the past. But what I like about what I'm seeing now is even though we were seeing a significant reduction in their amount of sales activity, the ones that are going through the process have a much higher rate of engagement. And I think our closing rates are going to the higher, that's good for the short term. But the other thing that's been interesting is how our sales team are setting things up with our prospect base for as soon as you can get out and come see these customers again. So in some ways I feel like we're starting the fall campaign with this major prospecting effort among our sales team to start driving that activity as we get through the summer and are able to come out and see them.

Okay. And then my final question is you alluded to some of the clients shifting their healthcare plans or making adjustments to them. Just curious if you could go into any detail on that and if there's any direct implication with respect to your plan costs or your benefits costs going forward?

Yes, the kind of changes we're talking about, some were at renewal, some were not at renewal, but customers wanting to shift to a lower cost plan, and that shows up in our business model through migration into lower cost programs that usually happens over a longer period. So if you had an increase in that, we would see some lower costs show up eventually. But the corresponding reality is that you see an immediate effect in the lower allocation that are with clients and that's what lowers their fee structure right off the bat. So, we saw some of that where it was appropriate. I don't consider that to be much of a factor. It was more isolated.

Your next question is from Tobey Sommer. Your line is now open.

Can you give us a glimpse as to how the arc of the benefits cost centers has kind of played out in the year following the big economic events to prior recession? Just so we would start to formulate a cadence and expectation for the trajectories next year?

Yes, it's a little early for us to be, I mean, we've thought about that, but we really haven't put a lot of thoughts to paper. As I look at the longer-term, first of all, nothing fundamentally has changed in our business, and we'll be cranking along as soon as things are back to normal out there. So, I would expect us to see our growth engine re-engage in a significant way. But you do have some longer-term things like, on the payroll tax side, you have unemployment claims and that is a pretty slow and retrospective process that will flow through the whole system. So, you'll have some increasing rates there. On the benefits side, I think there will be this short-term interruption that we'll be able to look back and see pretty clearly, but I don't expect really any long-term change that would come out of this situation. There isn't any reason to believe there would be some long-term change to our overall picture as we go forward.

How the playbook that you're executing now differed from maybe what you would have envisioned in a non-pandemic driven recession 6 months or 18 months ago?

Yes, that's a really good question, Toby. When we ran our models for what we would do in the next recession based on how the last one happened. The last one, the financial crisis-driven recession, was a financial calamity followed by an extended period really 15 months of layoffs exceeding new hires and kind of a long and painful. This one has been an immediate impact and really shutting things down dramatically. And then hopefully, we'll see how things look as things are going along. But I think the difference would be, we had anticipated the next one looked like this. We probably would have, we have planned to, and we are going to keep adding business performance advisors because I think we've proven out that that helps us muscle through the downtime and brings us out much faster as things get better. And we also have talked about in the past about reacting earlier on managing operating expenses differently. Now this time we have seen a lot of operating expenses that are coming out just because you can't travel, some of our events are canceled and all of that stuff. But the need for our services is so great that we're hanging tight on making sure we have the right service levels. We've got to meet our commitments to our customers, and this is a time for us to shine and we're definitely going to shine throughout this period. We're going to be there for our client base. So, I think those two things kind of offset a bit and we'll see how that looks as the months go on here and hopefully we'll be forecasting a good response here and growing out of that, and then continuing to grow our staff accordingly beyond that point.

Thank you. Just two little things. One, do you have a BPA gross figure that you're targeting for the end of the year? I apologize if you already mentioned it. And then, are there any legislative changes either at the state level or federal level that you're looking at as a possible curveball with respect to employer obligations and benefits like in the last downturn?

Yes, so the first question is that we've kind of we were at 13% growth in BPA for the first quarter. We don't need to be at that level to be in a strong position as we go through this. And we're looking at having that number be high single digits by the time we get to the end of the year, maybe 8% or 9% or you know, maybe even 10, but somewhere around 9%. We think that puts us in a really strong position going into next year. On your other question, this whole dilemma or this whole calamity has been full of regulatory changes that have been coming fast and furious and we have been responding in an incredible way to changes that have to happen in the system and all types of things. You know, as we look at where we are today, there's still a lot on the table in Washington DC. We're keeping our eye on things like the COBRA possibility and we have seen a dialogue about that. And there have been sometimes recently when a localized disaster, for example, in Puerto Rico, they put in a rule relating to extending COBRA that was different than what's happened years ago. And I think, we wouldn't be surprised if that or something like it came down the pipe, but there's other kinds of things. But I think we've accounted for some of that in our whole goal and forward plan in both staffing side to be able to deal with things and also unexpected costs that could flow in. I know Doug kind of highlighted a laundry list of potential things, but as best we can, I think we're ready for what may come on left field.

Thanks Paul. Now let's discuss some of the details of our first quarter results. We reported Q1 adjusted EPS of $0.70 at the high end of our forecasted range. Adjusted EBITDA totaled $101 million for the quarter. Average paid work site employees increased by 5.5% over Q1 of 2019 to just over 238,000. This quarter’s growth reflected a higher than expected level of work site employees paid from new sales coming off of the successful extension of our fall sales campaign. However, our Q1 growth was dampened by lower than expected net gains in our client base. Gross profit increased by 3.2% over the first quarter of 2019 and this comparison was impacted by our favorable benefit cost trend. However, we effectively managed overall gross profit for Q1 of this year above budgeted levels. As a result, the large healthcare claim activity continued to see a decline in a number of claims over $100,000, although still slightly elevated from a historical perspective. Also, our Q1 claims trend associated with normal smaller healthcare claims came in near targeted levels.

And there are no further questions at this time. I'd like to turn the call over to Mr. Sarvadi for closing remarks.

Once again, we want to thank everybody for participating today, and we look forward to updating you after another quarter. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.