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Insperity Inc  (NYSE:NSP)
Q4 2018 Earnings Conference Call
Feb. 11, 2019, 10:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Good morning. My name is Kyle and I'll be your conference operator for today. I would like to welcome everyone to the Insperity Fourth Quarter 2018 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. (Operator Instructions) At this time, I would like to introduce today's speakers. Joining us are Paul Sarvadi, Chairman of the Board and Chief Executive Officer; 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.

Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer & Treasurer

Thank you. We appreciate you joining us this morning. Let me begin by outlining our plan for this morning's call. First, I'm going to discuss the details of our fourth quarter and full year 2018 financial results. Paul will then recap the 2018 year and discuss the major initiatives of our 2019 plan. I will return to provide our financial guidance for the first quarter and full year 2019. 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 a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, and reconciliations 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 let's discuss the details behind our fourth quarter results. We once again achieved record high operating results, reporting a 25% increase in adjusted EPS over Q4 2017 to $0.69, and a 24% increase in adjusted EBITDA to $47.6 million. These results were driven by continued acceleration of worksite employee growth and effective management of pricing, direct cost programs and operating costs.

As for the fourth quarter details, average paid worksite employees increased by 17% over Q4 2017, at the high end of our forecasted range. Client retention remains strong, again averaging over 99% for the quarter. As for our sales efforts, worksite employees paid from new sales increased by 36% on a 13% increase in the average number of trained Business Performance Advisors on continued sales momentum in both our core and mid-market client segments.

As Paul will discuss in detail in a few minutes, this momentum continued through year-end with the successful fall sales campaign and client renewal period, leading to a strong starting point for 2019. Gross profit increased by 13% over Q4 of 2017, on continued pricing strength and favorable results in our workers' compensation and payroll tax direct cost areas. Positive results in these areas was partially offset by slightly higher than expected Q4 medical claims.

Our fourth quarter adjusted operating expenses increased 9% over Q4 of 2017 to $129 million and included a 13% increase in the number of Business Performance Advisors, the opening of seven new sales offices throughout 2018, additional sales commissions associated with higher Q4 sales volume and continued investment in our technology and product and service offerings. Our effective tax rate in Q4 came in at 27.5%, just slightly lower than our forecasted rate of 28%.

During the quarter, we repurchased 986,000 shares at a cost of approximately $97 million, taking advantage of the share price weakness during the recent period of market volatility and our transition from the Small Cap 600 to the Mid-Cap 400 index.

Now, before I turn the call over to Paul, let me summarize our record high full year 2018 operating results. Adjusted EPS increased 53% to $3.75, and adjusted EBITDA increased 35% over 2017 to $240 million. Average paid worksite employees increased by 14.5% over 2017, accelerating off of the prior year's growth rate of 10%. Our growth was driven by a 27% increase in worksite employees paid from new sales on a 16% increase in the average number of trained Business Performance Advisors and improved results in our mid-market segment.

Client retention remained at historical highs of 86% and net gains in the client base improved over 2017. Gross profit increased 19% on the 14.5% worksite employee growth, as we effectively managed changes in client mix, pricing and direct cost trends. The outcome of all three of our direct cost programs exceeded our initial expectations. We managed benefit cost increases in our health plan to just 2%, at the low end of our initial range for this metric.

Additionally, workers' compensation cost as a percentage of non-bonus payroll declined from 2017 levels, due to continued discipline around our client selection and safety and claims management. Adjusted operating expenses increased 12% over 2017 and declined on a per worksite employee per month basis from $201 in 2017 to $197 in 2018. Putting all the pieces together, our key profitability metric, adjusted EBITDA per worksite employee per month, increased 17% from $81 in 2017 to a record high of $95 in 2018.

Now a solid balance sheet, combined with our strong cash flow, allowed us to continue providing strong return to our shareholders in 2018 through our dividend and share repurchase programs. We've repurchased a total of 1.2 million shares during 2018 at a cost of $113 million.

Additionally, we increased our dividend rate by 33% in February of 2018 and paid out a total of $33 million in dividends. We ended the year with $129 million of adjusted cash and $205 million of availability under our credit facility. This level of liquidity and credit availability, combined with a continued forecast for strong cash flow, should allow us to continue to provide excellent return to our shareholders in 2019.

Now at this time, I'd like to turn the call over to Paul.

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Thank you, Doug and thank each of you for being with us today. We're very pleased with the impressive results we are reporting today, demonstrating the strength of our business model and excellent execution of our strategic plan across Insperity. These results represent four years in a row increasing adjusted EBITDA by more than 25%, from $84 million to $240 million, including 35% growth in this key metric in 2018.

Today, I'd like to cover our successful fall campaign and year-end transition, which capped off our best year ever and set us up for continuing outstanding performance in 2019. I also want to discuss our priorities for this year, which are intended to continue our strong momentum in growth and profitability. I'll finish my comments with some color on how we view our vast market opportunity and how we are extending our competitive advantage in the marketplace.

Our fall selling and retention campaign was very successful in four key areas, including core and mid-market sales, client retention and pricing on both new and renewing accounts. We achieved 103% of our sales forecast for Q4 and 107% for the full year of 2018. This represents a 21% increase in worksite employees sold, as we successfully grew the trained Business Performance Advisor or BPA count by 16%, while improving sales efficiency 5%. This is quite an amazing accomplishment, clearly demonstrating the effectiveness of our sales training and management. Our mid-market sales results played a key role in 2018, as collaboration with our BPA channel provided a strong pipeline of qualified prospects in this segment. These efforts produced a 24% increase in proposals and a 77% increase in sold accounts and an increase of more than a 100% in worksite employees sold in this segment. Our three-pronged marketing approach, including digital, loyalty programs and channel programs also contributed to the strong fall campaign and full-year results, delivering an increase of more than 40% in leads to our BPAs.

Our retention for the full year of 2018 came in at 86%, which continued a very positive trend over the last several years. This is significantly better than the 80% level we experienced for many years as our standard. Systemic improvements in several key areas resulted in this step-up, which is now clearly the new normal. Our client retention results through our concentration of year-end renewals was also a highlight of our fall campaign. Some of the year-end attrition spills over into February, so final numbers are not complete yet. However, our January retention was in line with our record low levels of the prior few years.

The third factor contributing to our worksite employee growth is the net change within the current client base from new hires and layoffs. This metric was slightly down from December to January, similar to last year. However, other metrics, including overtime, wage increases and commissions paid to the sales staff of our clients are at levels pointing to continued hiring for this year.

Another important measure of a successful fall campaign for Insperity is the effect on pricing of the book of business, after accounting for the volume of new sales, client renewals and client terminations occurring at year-end. We are able to see the full picture of this change each year in the first week of February and we can confirm we are in excellent shape for the starting point for 2019. This view into pricing includes all the elements of our direct cost, including benefits, payroll tax and workers' compensation allocation, in addition to HR service fees and other smaller items. The other side of the equation to evaluate is the cost expectations for these major components, which determines our ultimate expected gross profit.

2018 was our strongest year ever in both total gross profit dollars and in gross profit per worksite employee, as our team managing pricing and direct cost did an excellent job driving favorable results over the course of last year. We are always conservative in our routine budget process, so we'll start this year with a lower expectation in our guidance for gross profit per employee than last year's results, and allow for upside as we continue to manage price and cost over the course of this year.

So when you put the entire picture together, our starting point in paid worksite employee supports our expectation for 14% to 16% unit growth for 2019. We expect continuing strong sales and retention are controllable factors and we have incorporated a slightly lower contribution from new hires and layoffs, just to be conservative. We also expect year-over-year growth to be more even each quarter this year, unlike the ramp-up experienced last year. This is largely due to the effect of adding our largest client with nearly 3,000 employees mid-year in 2018.

When you combine our starting point for gross profit and some operating leverage, we expect adjusted EBITDA to grow slightly faster than unit growth at the midpoint of our guidance. So, we are off to an excellent start for 2019 and have several important priorities to keep the momentum going. These priorities include continuing to fuel future growth, accelerating our growth of our traditional employment solutions and leveraging our data analytics capabilities in both sales and service.

This year, we expect to open nine new offices to support 14% growth in trained BPAs. We will enter new markets, including Portland, Tampa, Las Vegas, Sacramento and Providence with the balance adding new offices in existing markets. We're also entering this year with new confidence in our mid-market segment, coming off quite a step-up in effectiveness last year. Success in mid-market sales allows us to grow worksite employees at a faster rate than we grow the BPA team. This improvement in sales efficiency is important to the overall business model and our ability to improve our operating leverage in the future.

Our growth momentum was palpable at our recent annual sales convention in Houston last month. Our team of nearly 900 sales professionals, including sales, management, operations, marketing and 560 BPAs were all highly engaged and committed to building on our recent success. There was no sign of resting on our laurels, in fact, quite the opposite was readily apparent. Three days of training, recognition and sharing best practices resulted in an aligned and mobilized team for 2019.

One of the central elements of the sales convention was dedicated to our 2019 priority to ramp up sales of our traditional employment bundle, Workforce Xceleration, or WX. We delivered three deep-dive breakout sessions on the WX model to every BPA and district manager. The messaging was clear, reinforce consistently across sales and executive leadership and overall feedback has been very positive.

Another emphasis of the convention was training around our pricing transparency for our flagship Workforce Optimization offering. Insperity has the most sophisticated pricing and billing system in the PEO industry, offering deep insights helping our clients understand and manage total employment cost. We believe these new tools and training support will improve our already impressive win rate in competitive sales and renewal situations, potentially increasing the lifetime value of a client company.

Another priority for this year is to extend our HR technology leadership position, introducing new features and functionality within Insperity Premier. Insperity Premier is the only human capital management system specifically designed to support co-employment and collaboration between managers, supervisors and worksite employees at client companies and service providers at Insperity. In 2019, we will be introducing powerful HR data analytics, combined with training for our HR professionals to deliver a new level of software with the service, unique in the marketplace. Our service providers will be able to proactively offer powerful insights and actionable information for clients that I believe will be a game changer.

Specifically, our HR experts will have access to predictive data analytics and be able to monitor key HR metrics from headcount and turnover, to compensation and overtime, allowing Insperity to truly deliver on our new tag line introduced last month, HR That Makes a Difference. Insperity has a unique advantage over the myriad of HR technology and business service providers in our space. Our business model allows for real HR experts to learn our clients' businesses and objectives, then use leading technology to literally help their business succeed. Insperity provides software with the service, allowing client companies to actually realize the potential of the analytics and insights the latest technology can provide.

We believe HR from an HR company will win out over HR from a technology or business services company in the years ahead. Our market opportunity continues to increase as our capabilities and offerings expand our total addressable market. We have extended our competitive advantage in our core PEO, taken the leadership position in the mid-market space and set the stage for success, offering traditional employment solutions. With these three drivers poised for continued high growth, it's time we cast a wider net in our marketing effort and leverage the authority we've earned over 33 years proving HR makes a difference.

We believe in the direct link between an effective people strategy and the likelihood and degree of business success. An effective people strategy is a force multiplier for all the other areas of the business, from sales and operations to technology and finance. We know this from our own experience, achieving extraordinary results at Insperity, but also through delivery of our services to our clients, helping them do the same. Since we have written the book, figuratively speaking, on HR and business success, over the past year I made an effort to distill what we've learned into a roadmap for other businesses to follow. This resulted in a book recently released by ForbesBooks called, Take Care of Your People. This book is specifically designed to extend Insperity's thought leadership in the marketplace, elevate the conversation on how HR drives business success and ultimately increase qualified leads in order to capitalize on the growing demand for our services.

Over the last several years, Insperity is number one in total shareholder return among identified peer public companies. Our leadership position is directly attributable to the performance of our more than 3,000 dedicated Insperity employees. The discretionary effort, innovation and caring attitude of these amazing people drove our past success and provides our confidence in the future for Insperity. This formidable team is aligned around our plan for continuing to cast a wider net to help more businesses succeed, extend our competitive advantage in the marketplace and deliver extraordinary returns for our shareholders.

At this time, I'd like to pass the call back to Doug.

Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer & Treasurer

Thanks, Paul. Now let me provide our 2019 guidance, beginning with the full year. As Paul just mentioned, we are forecasting a 14% to 16% increase in average paid worksite employees over 2018, to a range of 238,400 to 242,600. Our forecast is based upon our successful year-end transition of new and renewing accounts, 15% growth in the average number of trained Business Performance Advisors, while maintaining recent sales efficiency levels and continued success in our mid-market client segment.

For the full year 2019, we are budgeting client retention consistent with 2018 and slightly less net hiring in our client base, as we intend to take a more conservative approach to this metric at the outset of the year. As for our gross profit area, we have gone through our usual budget process of analyzing client mix, pricing and direct costs, including healthcare and workers' compensation claim trends. Similar to prior years, our budget process is intended to begin the year with a conservative forecast for direct cost trends and leave the upside to favorable developments as we manage pricing and direct costs over the course of the year.

Our operating plan includes further investment in our growth, including the hiring of Business Performance Advisors, opening of nine new sales offices and incremental marketing programs. Also, as we execute our long-term growth plan, we will continue to invest in our software with a service model with personnel and technology infrastructure, security and development. The combination of improved worksite employee growth, stable gross profit and continued investment and operating leverage leads to our forecast of a 12% to 19% increase in adjusted EBITDA from $240 million in 2018 to a range of -- $268 million to $285 million for 2019.

We are forecasting a 17% to 25% increase in adjusted EPS from $3.75 in 2018 to a range of $4.37 to $4.69. This forecast assumes 41.5 million average outstanding shares and a full year effective tax rate of 23%, after giving effect to the tax benefit associated with the vesting of shares in our long-term incentive stock plan in Q1.

As for planned 2019 capital expenditures, we have budgeted for ongoing technology investments and sales and service expansion at an amount totaling approximately $40 million, just a slight increase over 2018 expenditures. Additionally, due to the recent and planned future growth of the Company, it is necessary to expand our corporate campus facilities. This expansion will include the construction of an additional building over a 24-month period, at an estimated cost of approximately $70 million; $22 million of which we expect to incur in 2019.

Now as for the first quarter, we are forecasting a 14.5% to 15.5% increase in average paid worksite employees over Q1 of 2018, resulting in a range of 224,000 to 226,000. We are forecasting Q1 adjusted EBITDA in a range of $96 million to $99 million, an increase of 15% to 18% over Q1 of 2018. And Q1 adjusted EPS from $1.85 to $1.91, an increase of 31% to 35%. Our Q1 adjusted EPS guidance includes an effective tax rate of 13.5%, which is lower than our forecasted full year tax rate, due to the tax benefit associated with the vesting -- performance-based and time-vested restricted shares, which occur during the first quarter of each year.

As for our quarterly earnings pattern, keep in mind that our Q1 earning results are typically higher than the subsequent quarters. In particular, we earn a high level of payroll tax surplus prior to worksite employees reaching their taxable wage limit, and benefit costs are lower in Q1 and step up over the remainder of the year as deductibles are met.

In conclusion, we are pleased with the record earnings results achieved in 2018 and our successful year-end sales and client renewal period, positioning us for another great year in 2019.

Now at this time, I'd like to open up the call for questions.

Questions and Answers:

Operator

(Operator Instruction) Your first question comes from the line of Tobey Sommer from SunTrust. Your line is now open.

Joseph -- SunTrust -- Analyst

Hey. This is Joseph (ph) on the line for Tobey this morning. My first question is about the growth you guys experienced in the mid-market this last quarter. What is driving this growth? Is it mainly related to the ramping of Workforce Xceleration? Or are you seeing more middle-market clients that are interested in Workforce Optimization? Thank you.

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Sure. Our our effectiveness in the ramp-up in the volume of sales in mid-market, really driven by two things. We -- first of all, the collaboration with our core sales team, is the group that serves up the prospects, and they did a great job last year of providing a higher volume of qualified prospects for us to follow up on. Then you combine that with the improved closing rates coming from our mid-market sales teams and that just produced a lot better results. But as always, all of that's based on the reality that we have really refined our offering to the mid-market customer in the co-employment space, both Workforce Optimization and Workforce Synchronization, and we are having tremendous service results and lot of really happy customers, we've really solved for the complexity of the mid-market customer and we're seeing those results and expect that to continue.

Joseph -- SunTrust -- Analyst

Thank you. And then one more from me. Which of your service bundles are growing the fastest and which of them are growing the slowest? And then how does the markup, or I guess service fee on stand-alone services grow up versus last year? Thank you.

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Sure. We have -- of the primary bundles that we have, our flagship Workforce Optimization continues to grow the fastest and we would expect that. And then the one that is, it's growing fast, but on a small base. So I still consider it kind of fallen -- behind the curve yet is our Workforce Xceleration. Now we expect to see excellent growth in that offering this year, based on the training results we just completed at our sales convention. So, we're really excited on all fronts that we've got a great target market for each of our offerings and expected growth across the board.

Joseph -- SunTrust -- Analyst

Thanks. I'll jump back in the queue.

Operator

Your next question comes from the line of Jim MacDonald from First Analysis. Your line is now open.

James MacDonald -- First Analysis -- Analyst

Yes, great quarter guys. Could you give us any more details on the net gains in your client account in 2018? And then, more specifically what you're expecting in 2019, how much of a deceleration, and are you seeing any signs of deceleration yet?

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Yes, it's really interesting. We obviously watch that really closely and we have -- over the -- our year-end transition the last couple of years, it's not unusual for us to have a slight decrease in the net gain from customers from December to January, and we saw that again this year, slight decrease. The only driver of that would -- we would consider have been a negative would have been the sentiment issues -- business sentiment kind of over the December- January period, pretty much around the market volatility and some of the things that were going on. But if you look at the underlying metrics, as I mentioned in my script, if you look at average paid, for example, was up over 5% on hourly employees, up over 3% for all employees. If you look at commissions that we pay to the clients -- to the sales staff of our client companies that was at a number double what we consider to be strong. So, was over 12%. Over time as a percentage of base pay, we consider if it's over 10% that new hiring is in the forefront and that was over 12%.

So, all the underlying metrics that drive the hiring are still positive. However, we think it's appropriate to be conservative. And so, we basically took down our expectation for a net gain from the client base by about 10% to maybe 12%, compared to last year. So maybe 1% total on the base. And we think that's appropriate to do, because -- it's the one thing we don't control, so might as well build in a little conservatism on that expectation.

Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer & Treasurer

Jim, the other factor we are seeing in that particular component of our growth is M&A activity. And so, as we're having more success, particularly in the mid-market segment, as we are experiencing more M&A activity from those clients, and so we saw that through 2018. I think looking at that with our existing client base and sort of what their plans are through 2019, that could also be a contributor to that growth in the existing base.

James MacDonald -- First Analysis -- Analyst

Great, just one quick follow-up. You had 2% growth in health benefits trend last year. What kind of rate you are thinking this year?

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

We're kind of looking at, again being conservative, beginning the year around 3%. So, look at a range around 2.5% to 3.5%, and start working on it from there and do what we can to, like we did last year, make that number try to come out of the low end of the range.

James MacDonald -- First Analysis -- Analyst

Great, thanks.

Operator

Your last question comes from the line of Mark Marcon from Baird. Please, go ahead.

Mark Marcon -- Baird -- Analyst

Good morning, and let me add my congratulations. So wondering with regards to the increased sales efficiency that you're seeing. Can you differentiate a little bit in terms of regions of the country, Paul, just in terms of where you're seeing the greatest uplift. Is it in the more mature markets where PEO has been established for a while? Or are you seeing a change in behavior in terms of some of the less mature states? And how did your new sales offices do over this last year?

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Yeah, I think -- I'll tell you that if you want to just really peel it back to what's the driver of our sales efficiency and effectiveness or efficiency gain, I really would have to go all the way to the training of our district managers, as we really not seen a geographic difference. What we've seen is that between the district managers training, so their ability to keep all the different sales team at whatever tier of production they are, keep them moving and progressing.

You combine that with the sales training in our new BPAs, as obviously we're hiring a lot of BPAs. But within the core BPA team, we've been able to grow at mid-double-digits and keep that efficiency the same. And then when you weigh in mid-market success, that's driving a higher total sales efficiency. So, those are things driving that and it's a lot of blocking and tackling down at the very training level, BPA by BPA level. The other thing I would say is that our marketing success in terms of serving up qualified leads, 40% increase last year, that means you're going to have our sales team is spending more time in front of qualified prospects, instead of trying to find those qualified prospects.

So, lot of those (ph) things together to be able to accomplish that kind of -- it really is amazing when you think about it growing your sales team that fast and having the sales efficiency increase.

Mark Marcon -- Baird -- Analyst

Yeah, it really is. I was wondering if there is -- if you're seeing any sort of change in terms of just the general acceptance of the PEO concept, particularly with some of the legislative changes that have occurred nationally?

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Yeah, I absolutely do. I really think we really have moved up that adoption curve in the marketplace, just the energy behind it. And I think it goes -- certainly the PEO acceptance has improved. But also I think behind that is just the recognition of HR as a driver to business success. And that's why we're really capitalizing on that theme, trying to cast a much wider net, really going after the thought leadership in this space and we think -- I can remember a time when we didn't really want to say HR, because it was kind of a Debbie Downer moment to talk about that, but it's front and center now, because people realize if we get the people strategy right it makes a huge difference.

Mark Marcon -- Baird -- Analyst

Well, you have certainly shown that and congratulations on your book, by the way.

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Thank you.

Mark Marcon -- Baird -- Analyst

I was wondering, can you talk a little bit about, as it relates to the first quarter and the full-year guidance, what are you expecting, particularly for the first quarter in terms of gross profit per worksite employee? You've got a really tough comp there.

Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer & Treasurer

Yes, I mean -- I think generally speaking, I think as you know Mark, the first quarter would always have most of our dollars generated during that quarter, because of all the payroll taxes and the medical. The medical trends work where you have deductibles still being met by the employees during that Q1. So I don't have the specific numbers in front of me, but you would expect somewhat of a similar step down from Q1 to Q2 because of that -- those drivers.

Mark Marcon -- Baird -- Analyst

I was just wondering how you were thinking about the Q1 number, in terms of -- that's embedded in your guide.

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Yes, I think if you just look at the EBITDA expectation and you look at the employee growth, and I think we've -- if you look at our expected growth on the operating expense side, you kind of back into that, but it will be strong, because the first quarter, in terms of seasonality, we always have those two components that make the first quarter strong at the gross profit line.

Mark Marcon -- Baird -- Analyst

Yes, I recognize that. I was just thinking about last year the severity and incidents on the healthcare side were really favorable. So, I was just wondering if we're assuming that the healthcare costs on a per employee basis are probably going to be a little bit, maybe a little bit higher than they were last year? Is that --

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Yeah, we look at the trend on that, that's with underlying claims in there and kind of build it on a year-over-year basis. So, yes, we would expect that be down a little bit, because it was so exaggerated last year. Does that make sense?

Mark Marcon -- Baird -- Analyst

It does. I just want to make sure that, that was in fact the case. And then..

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Yes, that's (multiple speakers).

Mark Marcon -- Baird -- Analyst

With regards to what you said about the growth geographically is -- so you're seeing as fast a level of growth out of Texas as you are out of some of the newer markets?

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Yeah, actually when you just evaluate the growth rates, I'd say we're probably growing little fast in the Northeast than we are in some areas, but it's really wherever we kind of grow the BPAs, it is where you're going to grow the business. So, we do try to even that out as to where we are -- as we look at the regions and where we're opening offices and where we're growing the BPA base.

Mark Marcon -- Baird -- Analyst

And then with the expanded client solution side, as well as enhanced training, are you actually seeing an increase in BPA retention rates?

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Yes, we've seen, what I'd call, a kind of a step-up improvement in retaining our BPAs for a long time, first 30 years in business, or 28, maybe, years in business we were north of 30%, around the 30% -- 30% to 35-mid -- sometimes even as high as that, and we're more in the 26%, 27% retention and I think we have room for improvement there, success breeds success, people are doing well and you're able to retain BPAs more effectively.

Mark Marcon -- Baird -- Analyst

And that 26% to 27% is the turnover rate and...

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

That's correct.

James MacDonald -- First Analysis -- Analyst

Your retention rate is running at 63% to 65% (ph) (multiple speakers).

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Yeah, sorry about that. Yeah, thinking in turnover rate, rather than retention, but yes.

Mark Marcon -- Baird -- Analyst

Great, terrific. Congratulations.

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Thank you.

Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer & Treasurer

Thanks.

Operator

(Operator Instruction) A follow-up question, comes from the line of Tobey Sommer from SunTrust. Your line is now open.

Joseph -- SunTrust -- Analyst

Hey, just one quick question about capital allocation. I see you repurchased a lot of stock in 4Q, how does -- how do repurchases rank as far as your plans for capital allocation going into 2019 with the stock price being significantly higher than the implied purchase price in the fourth quarter? Thank you.

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Sure. Obviously we weigh in all -- a variety of factors at each Board meeting every quarter and get outside input from advisors, et cetera. But in the fourth quarter last year, it was obvious to us that there was a -- we think a reduction in the stock price, didn't really relate to anything, and based on reality happening in the business, we increased our allocation of our capital toward buying back shares. And you'll see us from time to time emphasize different uses of our capital. So we went ahead and bought back a lot of shares and -- but we still have plenty on our authorization. We're generating a lot of cash and so we'll weigh that accordingly each quarter.

Joseph -- SunTrust -- Analyst

Thank you.

Operator

There are no further questions at this time. I'll now hand the call back to Mr. Paul Sarvadi.

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Once again, we really appreciate your interest in Insperity and we will be out on the road some this quarter and next, so we look forward to seeing you and talking to you some more about -- about our game plan for 2019. So, thank you again for participating, we'll see you out there.

Operator

This concludes today's conference call, you may now disconnect. Thanks.

Duration: 44 minutes

Call participants:

Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer & Treasurer

Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer

Joseph -- SunTrust -- Analyst

James MacDonald -- First Analysis -- Analyst

Mark Marcon -- Baird -- Analyst

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