Insperity Inc (NSP -3.59%)
Q1Â 2019 Earnings Call
April 29, 2019, 10:00 a.m. ET
Contents:
Image source: The Motley Fool.
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning. My name is Colandra and I will be your conference operator today. At this time, I would like to welcome everyone to the Insperity First Quarter 2019 Earnings Conference Call. All lines have 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 CEO; and Douglas Sharp, Senior Vice President of Finance, CFO and Treasurer.
And 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 and 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 behind our first quarter 2019 financial results. Paul will then comment on the key drivers behind our Q1 results and our plans for the remainder of the year. I will return to provide our financial guidance for the second quarter and an update to the full year 2019 guidance. 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 myself 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 discussions 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 another strong quarter in which we achieved record highs of $1.98 in adjusted EPS, a 40% increase over Q1 of 2018, and adjusted EBITDA of $101 million, an increase of 21%. These results were driven by worksite employee growth in the mid-teens and effective management of pricing, direct cost programs and operating costs.
Average paid worksite employees increased 15.3% over Q1 of 2018, slightly above the midpoint of our forecasted range. This quarter's growth was driven by both the enrollment of new clients coming off of our successful 2018 fall sales campaign and a low level of client attrition during our heavy Q1 client renewal period.
Client attrition totaled only 7.9% during the quarter, which is consistent with the prior year. Additionally, we experienced net hiring by our client base during the quarter, although at lower levels than that experienced in Q1 of 2018. Gross profit increased by 14% over Q1 of 2018 and included favorable results achieved in our workers' compensation and benefit cost areas, and stronger pricing. A slight decrease in gross profit per worksite employee per month from the $340 reported in Q1 of 2018 to $335 in Q1 of 2019 was expected due to the low benefit costs reported in the prior period.
First quarter adjusted operating expenses increased 12% and included continued investments in our growth, including costs associated with the increase in the number of Business Performance Advisors and new sales offices. We have also continued to invest in service personnel with client growth and in our client-facing, back office and cybersecurity technology.
As Paul will discuss further in a few minutes, recent technology investments included spend associated with a robust data analytics tool to leverage our significant amount of HR data as we further enhance our service offering. Operating leverage in other areas of the business resulted in a decrease in adjusted operating expense per worksite employee per month from $214 in Q1 to 2018 to $209 in Q1 of 2019.
Our effective tax rate in Q1 came in at 12%, slightly below our forecasted rate at 13.5% and keep in mind that our Q1 tax rate is typically lower than our full year rate due to the tax benefit associated with the vesting of long-term incentive stock awards during the quarter. For the remaining quarters, we continue to estimate a tax rate of 29%, which then equates to a full year rate of 22%.
As per our balance sheet and cash flow, we ended the quarter with $141 million of adjusted cash. This is up from $129 million at December 31, 2018 after the repurchase of 230,000 shares of stock at a cost of $29 million and the payment of $12 million in cash dividends, further reflecting the strong cash flow inherent in our business model.
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 you all for joining us today. Today, I'll provide comments covering three topics. First, I'll provide some color surrounding our strong first quarter results and our subsequent increase to our guidance for the year. Second, I'll provide an update on progress of our two of our key 2019 initiatives. And I'll finish with a discussion of the sustainability of the outstanding results we've been delivering over the last several years.
Our excellent first quarter was set up by strong Q4 sales converting to paid worksite employees and continuing our historical highs in client retention. This year end transition during our heaviest renewal period went very well driving an increase of more than 15% year-over-year in this key unit growth metric. In our model, high levels of retention for the first two months of the year sets the stage for the full year due to the concentration of renewals at year end. The number Doug reported for Q1 of 7.9% attrition is the same as Q1 of 2018. Our full year 2018 retention ultimately came in at an historically high level of 86%. So with a solid Q1, we are on track for another good year in this metric.
Our new sales in Q1 came in at 112% of budget with both core and mid-market outperforming expectations. Activity was strong with a 17% increase in business profiles or opportunities to bid our services, driven by a 10% increase in trained Business Performance Advisors. The size and maturity of our sales organization combined with our mid-market sales success is now allowing us to grow the number of worksite employees at a faster rate than the growth rate of the number of BPAs. This more efficient growth model as we continue -- this is a more efficient growth model as we continue to get leveraged in the sales side of our business.
We expect to continue to ramp up the number of BPAs, as we open up nine new offices this year, targeting an average increase in trained BPAs of 13% for the full year. Our marketing programs continue to be effective helping to drive consistency in our sales effort. Marketing source discovery calls increased 30% in Q1 and were 2.8 times more efficient converting to sales than self-generated leads.
Digital, loyalty programs and channel partners are the three most productive programs. In addition to these three staples of our marketing plan, we are adding an authority of marketing program and new targeted advertising to our mix. Authority marketing leverages the expertise we have at Insperity in a variety of ways from social media and blogs to the use of the recently released book, Take Care of Your People.
Our goal with this initiative is to cast a wider net and reach prospects in a different way, starting the conversation on a higher level. Our new advertising focuses on the value of an effective people strategy is a force multiplier in business success. These two marketing initiatives are designed to continue to ramp up lead flow to support our growing sales team and establish our new tag line, HR that Makes a Difference.
Net hiring within the client base in Q1 continued, however, at a slightly slower pace than the period last year. Other metrics we follow closely, including average pay increases, overtime as a percentage of base pay and commissions paid to the sales staff of our clients continue to show strength compared to historical levels, although slightly down from recent highs. Another important data point for the health of the small and medium sized business marketplace is owner sentiment.
In personal interaction at our largest annual client entertainment event in early April, we found a decidedly positive tone around current business conditions and the outlook for 2019. Although this was an anecdotal, rather than a scientific survey, this included a wide geographic representation from among a wide spectrum in terms of types of companies.
From a growth perspective, we're operating in an environment with strong sales and retention, combined with solid -- a solid economic climate in the small and medium sized business community. Our first quarter results were also solid in the management of pricing, direct costs and operating expenses. Effective management of these factors drive our ability to grow adjusted EBITDA at a higher rate than the unit growth as we did once again this quarter. So we are increasing our guidance for the year, simply due to an excellent start in the first quarter and updating the corresponding trends we are seeing in the business.
Two of our key initiatives for 2019 are our WX or workforce acceleration ramp up and the introduction of our new HR analytics tool, integrating Visier (ph) into in Insperity Premier. Our WX initiative was launched at our sales convention in January and our early read on the sales pipeline is encouraging. Our BPAs are embracing the introduction of the two optional bundles WO and WX early in the sales process, which allows for a more natural process to recommend WX in the event the prospect does not qualify or is just not ready for workforce optimization.
We expect the increase in WX sales activity to continue to ramp up throughout the balance of the year and begin converting to sales at a higher rate as BPAs, yet more at best selling this new bundle.
Last quarter, we announced a beta test with selected clients of our new HR data analytics engine. We view this powerful new tool as a game changer in highlighting our unique capability to provide instant insights, coupled with consultative support from capable HR experts to help clients act on this information. We believe this software with a service approach is a tremendous competitive advantage for Insperity and this new tool drives home the point.
We are continuing training of our HR professionals this quarter on the use of the tool and the information to support clients. This predictive data analytics capability is built into our Insperity Premier HCM platform, a first for the Visier offering. In addition, Insperity clients have no setup, administration, data management or additional cost as this new capability just shows up with single sign on and seamless navigation within Premier. This adds substantial and demonstrable value to our offering and reinforces our premium service positioning.
Late in the first quarter, we've been adding the data analytics discussion to the technology demo for prospective mid-market clients. Our plan for monetizing this new technology is through increasing our win rate in sales of mid-market accounts and improving retention, increasing the lifetime value of clients within the segment. We are very excited about the early reaction from prospective enterprise and mid-market clients from anecdotal response to our HR analytics demo.
Comments and immediate action taken by these prospects to move the sales process forward have been very encouraging. These two initiatives are important because they contribute to our potential to continue the impressive run we are on in growth and profitability. After four years in a row increasing our adjusted EBITDA by more than 25%, a natural question is how sustainable are these strong results.
There are four pillars to our business model, supporting the sustainability of our high performance; consistent predictable growth, management of price and cost, operating leverage and the sheer size of our market opportunity. Our proven capability to generate consistent predictable double-digit unit growth is the platform for sustaining this level of performance. This competency comes from the combination of a professional dedicated service organization, delivering on our promises and achieving exemplary retention results, and a high performance sales organization hiring, training and supporting BPAs to drive sales success at targeted levels.
We've also proven over many years our proficiency at managing employment costs and effectively matching pricing to clients to achieve targeted levels of profitability, while providing a more stable cost environment for clients. This is also a central element to the sustainability of the high performance of our business model.
Our business model also has operating leverage built in as approximately 55% of our expenses are variable, increasing along with our growth, while the other 45% are fixed or semi-variable. Investments in growth, service, technology or compliance can be readily managed to balance growth and profitability.
Our vast market opportunity is the fourth pillar, allowing for continuing exemplary high growth and profitability. Over 60% or 70 million people in the United States work for companies in our addressable market. Demand for our services has been growing in recent years and Insperity is in a unique position to capitalize on this opportunity.
At this time, I'd like to pass the call back to Doug.
Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Thanks, Paul. Now before we open up the call for questions, I'd like to provide our financial guidance for the second quarter and begin with an update to our full year 2019 forecast. As Paul just mentioned, we continue to forecast our full year growth in average paid worksite employees in a range of 14% to 16%, consistent with first quarter's growth in the mid-teens.
We are increasing our full year's earnings guidance based upon the outperformance in Q1 and the execution of our growth and operating plan over the remainder of the year. While the first quarter's results included some upside from favorable direct cost trends, we intend to take our typical approach to conservatively forecasting our benefits and workers' compensation costs over the remainder of the year. We are now forecasting full year 2019 adjusted EBITDA in a range of $276 million to $289 million; an increase of 15% to 21% over 2018. This is an improvement of approximately $6 million over our initial outlook of 12% to 19% adjusted EBITDA growth.
We are forecasting full year 2019 adjusted EPS of $4.55 to $4.80, a 21% to 28% increase over 2018. And this is up from our initial guidance of 17% to 25% growth with the low end of our updated guidance slightly exceeding our initial budget. As for the second quarter, we are forecasting 14% to 15% growth in average paid worksite employees over Q2 of 2018. We are forecasting adjusted EBITDA of $55 million to $58 million, an increase of 18% to 24% over Q2 of 2018 and down sequentially from Q1 due to the typical seasonality in our gross profit. Q2 adjusted EPS is projected in a range of $0.81 to $0.86, an increase of 19% to 26% over Q2 of the prior year.
In conclusion, we're encouraged by a strong start to our year and we look forward to updating you on our progress throughout the year.
Now at this time, I'd like to open up the call for questions.
Questions and Answers:
Operator
(Operator Instructions) And your first question comes from the line of Jim MacDonald.
Jim MacDonald -- First Analysis Securities Corporation -- Analyst
Good morning, guys. Good quarter.
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Thank you, Jim.
Jim MacDonald -- First Analysis Securities Corporation -- Analyst
Could you talk a little bit about the relative contribution of workers' comp benefits and pricing to the improved gross profit?
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Well. I'd say as we reported last quarter, pricing came in nicely for the year, and we did have a little bit of benefit from both workers' comp and benefits. You always have some movement up and down on certain factors in there. Payroll taxes came a little higher, but generally speaking, it was just a good quarter all around and the gross profit side slightly better than expected.
Jim MacDonald -- First Analysis Securities Corporation -- Analyst
Okay. And on the BPAs, could you kind of give us an update of where we are now in terms of trained BPAs and total BPAs since kind of where you're going and then I'll get back in the queue?
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Sure. Yeah, it's first quarter of the year. Of course, we have our sales convention and you do a little bit of house-cleaning, if you will, on the BPA count, but in the first quarter, we're basically where we intend to be. We're on the total BPA count in that a little around 550 or 560 (ph) and then trained BPAs are always about 90% of that. We will ramp up over the course of the year to where our average for the year we're expecting around 13% increase year-over-year.
Jim MacDonald -- First Analysis Securities Corporation -- Analyst
Great. Thanks.
Operator
And your next question comes from the line of Jeff Martin.
Jeff Martin -- Roth Capital Partners, LLC -- Analyst
Thanks. Good morning, guys.
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Hi, Jeff.
Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Good morning.
Jeff Martin -- Roth Capital Partners, LLC -- Analyst
Paul, could you elaborate on the timing of the roll out of a HR data analytics engine. It sounds like you're taking that to the mid-market and you're nearing the commercialization stage, but just kind of want to get a sense of how that plays out through the course of this year.
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Sure. Jeff. That's -- it's been going really well. We've picked a group of beta accounts of different sizes went through conversations and demos and explanations of specific insights that came out of their information. That all kind of happened in the first quarter. We were able to glean out of that. Some of the training we wanted to extend across our team. And a bit -- lot of that training kind of started will continue through May. So as we get toward that end of the second quarter, we should have rolled this out to more substantial number of our enterprise clients. We'll start at that group and work out through the balance of the year, setting ties with individual clients, all the way through our mid-market second -- segment. I do expect throughout the course of this year, all of our mid-market accounts will have this type of discussion.
Jeff Martin -- Roth Capital Partners, LLC -- Analyst
Okay. Any early stab at what kind of impact this could have on retention? I assume mid-market has some ability to improve retention there as a result of this effort.
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Yes. It's really -- it's hard to because it's brand new, but there's no question about it. Once you have this type of information, you're going to want it. So whether you have access to it some other way that would be pretty hard to do and costly. So intuitively, it should really benefit retention in this key segment. And that's -- we believe in that enough, that's where counting on or monetizing this really from the retention and in selling new business.
It also is true that the long you're with us, the more data you have then and the more information and insights you have to run your business. I mean we've connected the system for our own corporate staff, the 3,200, 3,300 people we have here in Insperity and it's been interesting for us as well. So we know it's valuable and we think we're going to see retention benefit and bringing on new larger accounts.
Jeff Martin -- Roth Capital Partners, LLC -- Analyst
Okay. That's helpful. Thanks. And then last question is more for Doug on the gross profit per worksite employee per month. Should we expect that to trend down slightly year-over-year for each quarter compared to 2018? A little help with the guidance there would be useful.
Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Yeah. The way the typical seasonality works in that gross profit per employee metric is, I'll talk about the fact that sequentially is down from -- second quarter is down from Q1. With the third quarter being -- it's generally been fairly consistent with Q2, but Q4 is when it -- Q4 is typically lower than Q3, because that's when you're picking up more of the medical costs due to the plans in the month -- and the participants in each of the plans that we have. So --
Jeff Martin -- Roth Capital Partners, LLC -- Analyst
Right. But relative to faith, second quarter this year relative to second quarter last year, should we expect that to trend down a little bit using Q1 as a guide?
Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Yes, correct.
Jeff Martin -- Roth Capital Partners, LLC -- Analyst
Okay. Thanks. Appreciate it, guys.
Operator
(Operator Instructions) And your next question comes from Mark Marcon.
Mark Marcon -- Robert W. Baird & Co., Inc. -- Analyst
Good morning. I think it was a good quarter. I'm wondering if you can talk a little bit about what you're seeing with regards to the employee growth within your client base. You mentioned it's a little bit slower than it was a year ago. How should we think about that? What are you seeing in terms of overtime and sales commissions?
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Sure. We went ahead and budgeted for the year for a little bit lower contribution from in terms of growth from within the existing client base. And we saw that come to fruition in the quarter, but it's not much, it's not a lot, but it's kind of what we were expecting and glad, we kind of built that in. But as far as the other underlying metrics in terms of what we should expect going forward, everything looks still quite strong.
Overtime as a percentage of base pay is running around 11%. Average commissions that we pay to the sales staff of clients, which is strong, if it's over 6%. I think the highest we've ever seen is 12%, it's running 10.5% or so. So that's very strong. Compensation on a year-over-year basis all-in, 4.5% a little over that. So those are really strong.
And then once we use that data, the next thing you look at is really business owners' sentiment. And I think early in the first quarter, the sentiment was a little bit -- there's a little bit of uncertainty I think around the government's shutdown and other things that were going on, a lot of talk about what the economy may be doing or what may be coming. And I think a lot of that's past the sentiment we had from our large client entertainment event that we had in April, it was really the most positive vibe I've heard it, pretty much ever so. We think we're in a strong position for certainly for the balance of this year and moving full steam ahead.
Mark Marcon -- Robert W. Baird & Co., Inc. -- Analyst
Great. And then can you talk a little bit about what you're seeing from a regional perspective in terms of any differences, any areas that where you're seeing an acceleration with regards to PEO acceptance?
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Not really on a geographic basis. I mean we do just see generally stronger demand, acceptability of the idea, the industry is growing at a decent rate. We're growing at a higher rate than I guess the average of the industry. So we're growing at rates that are part of our game plan and where we want to be. But I do think that demand has been strong and just such a huge market opportunity, really no-end in sight to keep growing.
Mark Marcon -- Robert W. Baird & Co., Inc. -- Analyst
Okay great. And then one thing that perhaps is confusing to some is your net revenue increased 13.7% on a 15.3% increase in WSEEs. Can you talk a little bit about the dynamics around that?
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Well, last year, we had a very strong quarter from a benefits perspective. And so you've got kind of a comparison going on in there at that net revenue line. That is really not meaningful in the big picture. So if you look at where we're targeting for the full year on that measure, on the -- for the total adjusted EBITDA, it's -- business working as it typically does. We'll grow our units in the mid-teens, you kind of grow your adjusted EBITDA at higher rates. And as you can see from the guidance today, we're looking at a range for the full year of 15% to 21%, which of course is up from 12% to 19% in our original budget.
Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Another thing, Mark, impacting the revenue line item is, we've seen some migration in participants taking higher deductible health plans in today's environment. So when they're picking that, higher deductible health plans, obviously the pricing allocations are lower, but that's part of the reasons why our healthcare cost trends are lower too. In addition, I think we're effectively managing that area. So you've got those type of costs running through the revenue line item. So just keep -- bear that in mind also.
Mark Marcon -- Robert W. Baird & Co., Inc. -- Analyst
Really appreciate that, Doug. And then with regards to just the workforce administration as it relates to rolling that out to the core. What are you seeing there? How do you think that's going? What's your anticipation for the year? Is that based on the early results?
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Yeah, I think we're going to be watching closely. The first quarter was, did the activity begin? Did we get a step up in activity? We got that. So now you're looking at sustaining and actually continuing to see that ramp up more pervasive across or prevalent across the BPA team, that's what we'll be looking at for the second quarter and we'll be starting to watch convergent rates more closely here in the second quarter. But what I'm really after is, by the time we get to the fourth quarter our fall campaign, I want it really working on all cylinders. We want to have the metrics we can -- by the time, we get to the fall campaign, so we can set really concrete objectives across the organization is what our expectation should be.
So I think we're on track as we roll this out and ramp it up and we're excited that other really good news to me is, whenever you put in a new service offering, or new bundle, you want to make sure not only can you sell it and can you sell at the rate you want to and can you get the interest in the prospects, but you also want to know can you sell it at the right price. And pricing as we ramping up is in line with what we set out as a target. So I like where we are.
Mark Marcon -- Robert W. Baird & Co., Inc. -- Analyst
Great. And with regards your client retention, you mentioned what the first quarter is. In terms of the midpoint of your guidance, where would you anticipate client retention coming out for the next three quarters?
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Well, as you know the balance of the year, you generally have less than 1% a month. And so, it's looking at, I think, probably a year that looks similar to last year in total, which was the 7.9% or a little bit below 8% for the first quarter and then a little less than 1% a year. That's kind of how you end up at that 85% to 87% range.
Operator
And your next question comes from the line of Tobey Sommer.
Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst
Thanks. I was wondering if you could update us on what the impact has been over the last couple of years, since the IRS changed the rules and allowed for a little bit easier selling throughout the year, kind of where we are, how you learned how to do it? If it really has been an impact, it's been notable from your perspective.
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Yeah, there's no question that the issue not having a double payment on the payroll tax, which is what was avoided by passing the SBEA, Small Business Efficiency Act, especially on larger customers or any customer with a lot of higher paid people, where you had to restart the payroll taxes. It's just a big number and we were -- in order to keep selling customers throughout the year, we were actually offsetting some of that cost, so you'd have a lower margin in the first year on those accounts -- those new accounts.
So with that eliminated, I think it has helped both the -- it's -- you don't have an impediment in the process that slows it down or that you have to do a work around. Especially in larger accounts, I think you can just keep -- it doesn't really matter what month a company comes on, whenever you get all the information you get it, get everybody on board, put a sensible transition plan in place, wherever that falls in the year, really don't make any difference. So that is a positive and we're seeing a benefit from that.
Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst
Thanks. In the mid-market, is there any changes in the sales cycle? Are you -- how are you sourcing those leads and prospects differently than your legacy customer target?
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Well, it's not a lot different. We're still trying to go after the same psychographic profile of an account. And the 90% of our leads for mid-market are coming from the BPAs in the field. So we've really got the mid-market team and the core team working together to surface those larger accounts that are more complex, have more buyers and influencers. It takes a strategic sales effort over a little bit longer period to bring these on and so the sales team works really well together on that with the core team surfacing the opportunities. And then our SWAT team and our mid-market going in and demonstrating what we can do for a company of that size and bringing them on.
So this is where -- there's a lot of steps in that process and there's a lot of meetings that go on to bring that to fruition. In any time, you can remove impediments or accelerate the process or increase the enthusiasm around the offering. That's a benefit. And that's one of the reasons this demo of the HR analytics tool is just another nice way for customers to see how we can help. It's a great way for us to describe how this combination of great technology and great people expertise, HR professionals can work together to not just bring the insights, but bring plans to improve the operation, help the clients reach their objectives.
Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst
Paul, last question for me. What factors do you see is potentially driving upside to your results versus your enhanced guidance today and potentially downside as you -- as we work our way through the balance of 2019?
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Yeah. So you always have the way we operate the business. Early in the year, we set our targets and objectives and you have to earn your management fee for managing the benefit programs and the payroll taxes and the workers' compensation program and as you manage those effectively throughout the year, you create more leverage and more profitability at the gross profit line.
At the same time, we always have the risk of the benefit plan. It's not really an overall total cost risk over the year, but you can have volatility within it from quarter-to-quarter, if you have a concentration of high claims. But beyond that, the execution that level that we're at right now in terms of growing the business, selling the right accounts, renewing the right accounts at the right prices, that's all full steam ahead.
And if you look back over the last few years, we've come out with the budget first quarter, see what happens in the first quarter and that kind of validate your plan. And when you're ahead, you can move guides up, which we have every year now for the last few. And then those trends are in place and absent, something out of left (ph) field area in the benefits plan or somewhere -- you basically go earn the rest of that differential and that's how the model works.
Operator
And your next question comes from the line of Jim MacDonald.
Jim MacDonald -- First Analysis Securities Corporation -- Analyst
Just a quick follow-up. So we don't talk about SBUs anymore and I guess we're talking about workforce administration things like that, but maybe a little bit of an update on -- is that non-PEO area growing faster than the core? So is it additive or how should we think about that? And how do you think about the success besides being something that leads to maybe having a pool to sell and up sell to PEO later?
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Yeah. Thanks for the question. Yeah, we had a -- we were -- we had a good contribution from those individual components. More the growth from there is going to come in the bundle we put together, which is workforce acceleration. And so we haven't emphasized as much separate selling of separate components. We think there's a much bigger upside to selling the bundle together in a concerted effort across our entire BPA sales force. So that's kind of the transition we're in. But in the meantime, that's still going on and made a nice contribution in the quarter.
Jim MacDonald -- First Analysis Securities Corporation -- Analyst
And just a technical question. So what sort of CapEx do you expect for the year and your depreciation level sort of went up last year. Do you expect that to sort of hang at these levels now?
Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Yeah. I think we mentioned the CapEx for the year is about $35 million, $40 million. We also mentioned the fact that we were having to expand our campus facilities on top of that. So yeah, we would expect the depreciation and amortization to go up in line with that, with that additional capital -- CapEx expenditure.
Jim MacDonald -- First Analysis Securities Corporation -- Analyst
Okay. Thanks a lot, guys.
Operator
And your next question comes from the line of Mark Marcon.
Mark Marcon -- Robert W. Baird & Co., Inc. -- Analyst
Can you talk a little bit about the gross profit per worksite employee trends that you would expect over the balance of the year? Obviously, you were going up against a really tough comp here in the first quarter, but how do you see that year-over-year on the balance of the year? We recognize the seasonal pattern.
Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Yeah. I mean I think we generally -- as you know, we generally say starting out going into the year. As Paul just mentioned, as we go through the year end, we've renewed -- gone through every renewal cycle. We've got a good sort of snapshot for those accounts of where our pricing is. So to a large extent, that dictates the pricing even though we're going to be renewing further accounts over the remainder of the year, but that looks very well going through the renewal period.
I would say if you look at the direct costs, I talked about the fact that there in Q1, those costs came in favorable to our budget. We talked about the difficult comparison on the benefit relative to the first quarter of the last year, which was very low. But when we look over the course of the year, we're still looking at a benefit cost trend.
I think we said initially maybe 2% to 3%, but where we look today is more toward the low end of that. And then the workers' comp continues that program, continues to work very effectively. That's an area where we did have some favorable results in the first quarter. And as I mentioned in my prepared remarks, we let that sort of develop through over the remainder of the year as we are successful in closing out claims and settling claims. We've got a good history of doing that. So basically in summarizing, 2019 is looking fairly consistent with the previous year. And hopefully we could have some upside there.
Mark Marcon -- Robert W. Baird & Co., Inc. -- Analyst
Okay, great. And then on the Visier a tool, what are you learning with regards to your own folks that you are applying?
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Yeah. That's good question. There's been a lot of interesting observations at that surface. One of the areas that I think is really interesting is to look at your workforce from a generational perspective and from a tenure perspective. And one of the things it did for us was just kind of look at that big picture. More in a movie than a snapshot and kind of look at what happens in the next 10 years for the Company in terms of from tenure and retirements and other things that can happen and it makes you think about things.
We have a very good program internally that it's somewhat informal for mentoring and helping people develop. But I would expect that we'll see more formalization of some things. So that's an example of just something that you look at and say you maybe haven't paid that much attention. You know it's going on, but then when you see all the data, the information and you see where you're at you say, hey, there's something we can do now that can be helpful. So that's an example. There are other areas too that were particularly interesting, but I think that gives you a feel for it.
Operator
At this time, there are no further questions. I would now like to turn the call back over to Mr. Sarvadi for his closing remarks.
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
All right. Once again, thank you all for joining us today and being part of the call. And we look forward to continuing to deliver on these results and hopefully see you out on the road or next quarter. Thank you all once again.
Operator
This does conclude today's conference call and you may now disconnect.
Duration: 46 minutes
Call participants:
Douglas S. Sharp -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Paul J. Sarvadi -- Management Director, Chairman and Chief Executive Officer
Jim MacDonald -- First Analysis Securities Corporation -- Analyst
Jeff Martin -- Roth Capital Partners, LLC -- Analyst
Mark Marcon -- Robert W. Baird & Co., Inc. -- Analyst
Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst
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