So, I see this continuing to accelerate and where we feel that we need to be really conservative is in the CIE or the hiring in our installed base. It’s an area that is less under our control. It’s an area that will come back. There was strong sales in tech in January. It will take a matter of time, but controlling the cost and being realistic about the unwinding of the net new ACV into profitability is built into the guidance, and I’ll turn it over to Kelly.
Kelly Tuminelli: Yes, I mean I think the critical point, Andrew, is that at the level of ACV that we’re seeing in January, we’re really narrowing the gap that we’ve talked about between new sales and attrition of our customers. So, to Burton’s point, when hiring comes back, it’s going to be terrific, but we’re not planning on that right now. And in terms of what’s baked into our forecast, we were well aware of our January results when we created the guidance that we came through. So, that is fully baked into our professional service revenue forecast right now. But you’re seeing the growth year-over-year, if you dig into the underlying assumptions, we’re assuming low single-digit price increases. We’re assuming expansion of products and wallet share as we’re offering new things to the market. We’re looking at our broker channel as another source of value there. So, all of those things add up together to make our professional service revenue growth rate.
Andrew Nicholas: That’s really helpful. And then maybe as a follow-up to that, Kelly, specifically. It sounds like you’ve narrowed the gap in terms of new sales relative to attrition. Is the expectation, maybe not this year, but in 2025 and 2026 that that gap can be positive and then you can layer on kind of a normal CIE on top of that? I guess it goes to Burton’s kind of medium-term ambition high-single low-double?
Kelly Tuminelli: Yes. You get it exactly. That’s really our goal is to — as we’ve been investing cutting back our back office to be able to invest in the front office and our salesforce, we are trying to both narrow that gap so that new sales will actually more than cover attrition and CIE will be upside.
Andrew Nicholas: All right. Great. And if I could just squeeze in one more on the worksite employee trend. So, I know there’s some noise there with the reclassification and the platform user access fee. But just under the hood, like anything that you would say at the vertical level in terms of strength or stabilization relative to prior quarters as we think about maybe the things that are outside of your control?
Kelly Tuminelli: In terms of — we saw some favorability from seasonal hiring in certain verticals. As we’re looking forward to January as well, we are seeing a little bit of choppiness across them. No real clear signal at this point in time, and that’s why we wanted to be conservative on our CIE forecast and really trended towards the back half of the year.
Andrew Nicholas: Understood. Thank you.
Burton Goldfield: And Andrew, just to add one more point to that. We will continue to invest significantly in the sales engine and growth of sales reps. So, the way you phrased it is exactly where we’re headed. We need additional capacity. The additional capacity is coming on board not only at the same efficiency but at a higher efficiency. And as long as that’s the case, we will invest in the sales organization. We’re doing that at the same time keeping overall costs relatively flat. So, Kelly and the team have done an amazing job of reallocating dollars, keeping the service levels up, keeping referrals up, but we will continue to invest significantly into the sales channel throughout 2024 as long as the results continue the way they did in January.
Andrew Nicholas: Great. Thank you and congrats again, Burton.
Burton Goldfield: Thanks.
Operator: Thank you. [Operator Instructions] Our next question comes from Andrew [Indiscernible] with JPMorgan. Please go ahead.
Unidentified Analyst: Hey, good evening guys. First Burton I want to say congrats from myself, but also Tien-Tsin, is always in my head, the long run you’ve had, so I wanted to share his congratulations as well.
Burton Goldfield: Thank you.
Unidentified Analyst: [Indiscernible] No problem. So, I wanted to start with a question on the enrollment season. So, obviously, we’re through that. And I was just curious on what you guys saw as far as benefits attach rates? Were there any differences or improvements versus the last year or two?
Kelly Tuminelli: Yes, it’s a really good question. We’re seeing slightly lower benefit attach rates. I think it really is a signal of what’s going on in the economy right now, we’re seeing a little bit of buy down on plans as well, Andrew. But you are still seeing sort of the vertical differences that we normally see. Financial services has the highest benefit attach rate. Tech’s probably second when we think about it from a vertical perspective. But they’re all down maybe a point or two.
Unidentified Analyst: Okay. Makes sense. Thanks for that Kelly. And then just one follow-up from me. I wanted to ask, obviously, really strong ACV growth and I just wanted to see what you attributed most to. So, obviously, sales force tenure has been improving for a while now. And you called out better client onboarding. Is there anything in the demand environment maybe to call out to just basically the attribution analysis and that strong ACV growth would be great.
Burton Goldfield: So, great question. As you pointed out, first is just our sales capacity. We have more sales reps. Second is that, as we’ve talked about on earlier calls, the uncertainty in the business environment is driving people to the PEO solution. So, complexity and uncertainty is driving people to go to this type of model. And then finally, the vertical focus is resonating in the market and the technology backbone is providing the best service we have ever delivered in my tenure at TriNet. So, referrals are up, broker channel is up, direct sales is up and the market, I believe, will continue to give us this opportunity. And as you know, there’s about 40% of the revenue or the ACV generated in Q1. So, we’re pretty excited about where we are today to start ahead of the curve, and that’s one of the reasons I’m particularly excited about how the year pans out.
Additionally, you have the retention levels at record highs because people are appreciating the solution we’re delivering.
Unidentified Analyst: That’s great. Thank you for answering my questions. And again, congratulations, Burton.
Burton Goldfield: Thank you. Appreciate.
Operator: And our next question comes from David Grossman with Stifel. Please go ahead.
Burton Goldfield: Hey David.
David Grossman: Hey Burton, congratulations. Well, it’s been a fun run.
Burton Goldfield: It has. Thank you.
David Grossman: You’re my oldest friend in the industry. You’ll be missed.
Burton Goldfield: Hey, Mike is a lot nicer than I am and he’s smarter.
David Grossman: He couldn’t be nearly as enthusiastic. So — all right. We’ll have a chance to catch up. Mike, welcome as well. So, just I know it’s getting late here. So, thanks for squeezing in. I guess I have two questions. One is — there was a question asked earlier, I think, about the partnership with Workday by one of your competitors. And obviously, you went by buying the Zenefits platform and integrating that into your own business. And I’m just curious whether you saw this a couple of years ago when you initiated that transaction or whether you’re seeing things different today, what’s changed to the marketplace that may compel somebody that as they scale and achieve adequate scale to self-insure that they may decide to stay with the PEO longer today than they may have thought two years ago.
Burton Goldfield: So, it’s a really good question. The way I see it is the complexity of the environment, if you can continue to scale the larger customers, offer them services, as well as an alternative insurance construct other than just the single employer plan, which is awesome when you’re smaller, I believe you can keep the customers longer. I think the challenge that people are finding right now is that if you’re primarily people-driven, it’s really hard to scale. And if you combine the people-driven approach with inflation, it’s hard to maintain profits. So, what we’ve been able to do is build the platform, use the scale of the platform and service of the customers, but not have to add one new employee for every 10 new customers.
So, you’re seeing us break out of a model where our costs are climbing as a service complexity goes up because we’re tweaking the platform every single day, and we have a vision for the future of the platform. And it’s not only about running payroll. It’s about the knowledge base and the knowledge engine that’s behind it. It’s about the ability to pivot based on the complexity of each customer so that you can grow with them. And you and I have talked about it, the complexity around access controls, the complexity around union payroll, the complexity around all types of other asked by the customers is really important. What I’m particularly excited about with Denali is the API-first strategy allows us to connect with many partners out there not tied to a single closed platform.
David Grossman: And would you consider taking on somebody without offering health and workers’ comp?
Burton Goldfield: Well, that’s the vision, absolutely. I think that what we’re focused on is the professional service revenues. And what you’re seeing is in our forecast for 2024, we are going to grow professional service revenues in excess of the gross revenue, which includes insurance. And that’s what the barbell is about, and that’s where some of this professional service revenues will come from in 2024. But as you get into 2025 and beyond, I absolutely believe that the right answer is to provide the insurance construct that the companies choose and have multiple insurance constructs for those clients.
David Grossman: All right. Got it. And one other thing, and it’s really more probably a cyclical question, but your MCR has been strong for multiple years now, right? And this is the first year that I can remember that we’ve faced these kinds of year-over-year declines, which is industry-wide, of course, it’s not unique to try TriNet. So, is there anything that you want to remind us of that we should just keep in mind as we go into 2024 and 2025 that if we remain in this higher cost environment, things that maybe we haven’t seen for years, we should just keep in the back of our minds as we look forward?
Kelly Tuminelli: David, it’s a great question. As you know, we monitor very detailed health claims to make sure we’re understanding trends, and that’s one of the reasons we reprice a cohort of our business every single quarter so that we can see the trends and bake it into our insurance cost trends, et cetera. Really, as we think about things like COBRA. I think the COBRA we have today is very different than the COBRA that there was before because there’s Affordable Care Act plans available to everyone out there. And so we do see less COBRA uptake than had historically seen like during the financial crisis, et cetera. But I do expect as well there to be people buying down plans just due to the significant increase in health care costs.
