Gary Kramer: I guess I had my Forrest Gump moment there. But the way we’re looking at the economy, there was no material change in Q1 versus Q4. And when we’re looking ahead, we’re saying if the economy trades the way, behaves the way it is now, we still anticipate greater growth, billings growth in ’24 than in ’23, which is obviously reflected in our higher guide for ’24 than what we realized for ’23.
Vincent Colicchio: And a follow-up on the asset-light model. Of the remaining programs that are not moving to an office, if I heard you right, two are moving to an office, right? Do you expect any of them to also move to that next stage this year?
Gary Kramer: Good. I mean, ultimately we expect all of them to graduate to a BBSI branch. It’s just a question of when. And that has to do with what their profitability and sell-through rate is. I have to get back to — I’ll speak to that next quarter. Maybe I’ll lay out a better projection for how we think the end of ’24 and ’25 is going to go for fiscal branch building.
Vincent Colicchio: And I think you said last quarter you would add three more asset-light markets. Is that accurate?
Gary Kramer: It’s an evolving number because we hire two and one doesn’t make it type of thing. So really it’s a fluid number where we hire everybody. We have a good compensation package. We train folks, we give them immersion training. We go into the market and help them. And ultimately we try to make sure that they’re successful. But it’s a tough job and there’s some that are successful and we’ve had a few that haven’t been, but when they’re not, we backfill and start again. So it’s — sometimes it’s three steps forward, one step back.
Vincent Colicchio: And last question. As you roll out this health care product, are you getting better at adding large clients? What does that progression look like?
Gary Kramer: It’s — if you don’t mind, ask me that next quarter when I actually have this — when we have 7/1 under our belt. Right now, I’m still looking ahead and we don’t — most of the folks don’t make their buying decision for 7/1 until May or middle of May. So we have a lot of folks that we presented to that we think we have a chance to win, but ultimately they haven’t given us the order yet. When we get to next quarter, we’ll have a true tally of what our 7/1 results were.
Vincent Colicchio: Okay. Thank you.
Operator: [Operator Instructions] Our next question is a follow-up Jeff Martin with Roth Capital Partners. Please proceed.
Jeff Martin: Thank you. I wanted to ask about payroll taxes. I know state unemployment rates had remained low for an unusually sizable period of time, and it appears that states are catching up to that now. I’m looking at gross margin down about 25 basis points year-over-year. You did comment that it was in line with your internal budget expectations. But just curious, with strong pricing that you’re experiencing, this would imply that you get more of a trampoline effect in the later part of the year when you hit the two caps. Just curious if you could comment on that.
Gary Kramer: Yeah, you’re spot on there. So higher payroll tax really across every region for us and our clients, just the trend you had said that was — and we’ve seen payroll tax rates coming down with this strong economy the last couple of years and even after COVID, a lot of states put policies in place to really update a lot of the effects of the COVID layoffs, right? But now with the turn we are seeing higher rates. We do bake that into our pricing, but as you noted, that’ll flow through over the course of the year. So we’ll be somewhat of a trampoline effect as you noted. A little more margin than usual this quarter and that will rebound over the next three quarters.
Jeff Martin: Great. Thanks for clarifying.
Operator: At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Kramer for closing remarks.
Gary Kramer: I want to thank everybody for dialing in. I would like to thank all the BBSI professionals for their hard work. We had a great quarter and a great start to the year, and just thank you, everybody.
Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.
