Insperity, Inc. (NYSE: NSP), a leading provider of human
resources and business performance solutions for America’s best
businesses, today reported results for the second quarter ended
Jun. 30, 2018:
- Q2 worksite employee growth accelerates
to 13%, driving 18% gross profit increase
- Q2 net income and EPS up 75% and 76%,
to $25 million and $0.58, respectively
- Q2 adjusted EPS up 66% to $0.68
- Q2 adjusted EBITDA up 40% to $47
million
- YTD EPS and adjusted EPS up 50% and
57%, respectively
Second Quarter Results
Second quarter 2018 net income and diluted earnings per share of
$24.6 million and $0.58 represented increases of 75% and 76%,
respectively, compared to the second quarter of 2017. Adjusted
diluted earnings per share were $0.68, a 66% increase over the
second quarter of 2017. Adjusted EBITDA increased 40% over the
second quarter of 2017 to $46.6 million.
“Our dynamic business model is continuing to generate impressive
financial results,” said Paul J. Sarvadi, Insperity chairman and
chief executive officer. “Insperity is poised for growth
acceleration over the balance of the year and continued
double-digit growth into 2019.”
Revenues increased 16% over the second quarter of 2017 to $922.3
million on a 13% increase in the average number of worksite
employees paid per month. The continued double-digit worksite
employee growth was the result of increased new client sales, a
continued high level of client retention and an improvement in net
hiring of worksite employees by our client base.
Gross profit for the second quarter of 2018 increased 18% over
the second quarter of 2017 to $154.5 million. This increase was
driven by the 13% worksite employee growth and effective management
of pricing and our direct cost programs. Operating expenses
increased 12% over the second quarter of 2017 to $121.0 million,
and included continued investment in our growth, technology and
product and service offerings, offset by operating leverage in
other areas of the business. Operating expense per worksite
employee per month declined from $199 in the second quarter of 2017
to $198.
“We once again had a strong quarter with accelerating worksite
employee growth and effective management of gross profit and
operating costs driving significant earnings growth,” said Douglas
S. Sharp, senior vice president of finance, chief financial officer
and treasurer. “Our momentum coming off of consecutive quarters of
record high earnings results puts us in a position to raise our
guidance for full year adjusted EPS growth to 42% to 44% over
2017.”
Year-to-Date Results
For the six months ended Jun. 30, 2018, reported net income
increased 50% over the first six months of 2017 to $74.6 million,
and diluted net income per share increased 50% to $1.77. Adjusted
diluted earnings per share increased 57% over the first six months
of 2017 to $2.09. Adjusted EBITDA increased 36% to $130.4
million.
Revenues for the first six months of 2018 increased 15% to $1.9
billion, on a 13% increase in the average number of worksite
employees paid per month over the 2017 period. Gross profit for the
first six months of 2018 increased 22% to $354.3 million. Operating
expenses increased 20% to $256.0 million over the 2017 period.
Adjusted operating expenses increased 16% to $246.7 million over
the 2017 period and included additional accruals for incentive
compensation tied to our outperformance during the first half of
the year.
Net income per worksite employee per month increased 32% from
$47 in the 2017 period to $62 in the 2018 period. Adjusted EBITDA
per worksite employee per month increased 21% from $90 in the 2017
period to $109 in the 2018 period.
Cash outlays in the first six months of 2018 included the
repurchase of approximately 212,000 shares of stock at a cost of
$16.2 million, dividends totaling $16.8 million and capital
expenditures of $14.0 million. Adjusted cash, cash equivalents and
marketable securities at Jun. 30, 2018 was $110.1 million.
2018 Guidance
The company also announced its updated guidance for 2018,
including the third quarter of 2018. Please refer to the
accompanying financial tables at the end of this press release for
the reconciliation of non-GAAP financial measures to the comparable
GAAP financial measures.
Q3 2018 Full Year
2018 Average WSEEs 213,700 —
215,600 207,400 — 209,200 Year-over-year increase 14.5% — 15.5%
13.5% — 14.5% Adjusted EPS $0.80 — $0.84 $3.49 — $3.53
Year-over-year increase 40.4% — 47.4% 42.4% — 44.1% Adjusted
EBITDA (in millions) $53 — $56 $225 — $229 Year-over-year increase
22.9% — 29.9% 26.6% — 28.9%
Definition of Key Metrics
Average WSEEs - Determined by calculating the company’s
cumulative worksite employees paid during the period divided by the
number of months in the period.
Adjusted EPS - Represents diluted net income per share computed
in accordance with GAAP, excluding the impact of non-cash
stock-based compensation and costs associated with a one-time tax
reform bonus paid to corporate employees.
Adjusted EBITDA - Represents net income computed in accordance
with GAAP, plus interest expense, income taxes, depreciation and
amortization expense, non-cash stock-based compensation and costs
associated with a one-time tax reform bonus paid to corporate
employees.
Insperity will be hosting a conference call today at 10 a.m. ET
to discuss these results, provide guidance for the third quarter
and an update to the full year guidance, and answer questions from
investment analysts. To listen in, call 877-651-0053 and use
conference i.d. number 6994006. The call will also be webcast at
http://ir.insperity.com. The conference call script will be
available at the same website later today. A replay of the
conference call will be available at 855-859-2056, conference i.d.
6994006. The webcast will be archived for one year.
Insperity, a trusted advisor to America’s best businesses for
more than 32 years, provides an array of human resources and
business solutions designed to help improve business performance.
Insperity® Business Performance Advisors offer the most
comprehensive suite of products and services available in the
marketplace. Insperity delivers administrative relief, better
benefits, reduced liabilities and a systematic way to improve
productivity through its premier Workforce Optimization® solution.
Additional company offerings include Human Capital Management,
Payroll Services, Time and Attendance, Performance Management,
Organizational Planning, Recruiting Services, Employment Screening,
Expense Management Services, Retirement Services and Insurance
Services. Insperity business performance solutions support more
than 100,000 businesses with over 2 million employees. With 2017
revenues of $3.3 billion, Insperity operates in 69 offices
throughout the United States. For more information, visit
http://www.insperity.com.
The statements contained herein that are not historical facts
are forward-looking statements within the meaning of the federal
securities laws (Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934). You can
identify such forward-looking statements by the words “expects,”
“intends,” “plans,” “projects,” “believes,” “estimates,” “likely,”
“possibly,” “probably,” “goal,” “opportunity,” “objective,”
“target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,”
“indicator” and similar expressions. Forward-looking statements
involve a number of risks and uncertainties. In the normal course
of business, Insperity, Inc., in an effort to help keep our
stockholders and the public informed about our operations, may from
time to time issue such forward-looking statements, either orally
or in writing. Generally, these statements relate to business plans
or strategies, projected or anticipated benefits or other
consequences of such plans or strategies, or projections involving
anticipated revenues, earnings, unit growth, profit per worksite
employee, pricing, operating expenses or other aspects of operating
results. We base the forward-looking statements on our
expectations, estimates and projections at the time such statements
are made. These statements are not guarantees of future performance
and involve risks and uncertainties that we cannot predict. In
addition, we have based many of these forward-looking statements on
assumptions about future events that may prove to be inaccurate.
Therefore, the actual results of the future events described in
such forward-looking statements could differ materially from those
stated in such forward-looking statements. Among the factors that
could cause actual results to differ materially are: (i) adverse
economic conditions; (ii) regulatory and tax developments and
possible adverse application of various federal, state and local
regulations; (iii) the ability to secure competitive replacement
contracts for health insurance and workers’ compensation insurance
at expiration of current contracts; (iv) cancellation of client
contracts on short notice, or the inability to renew client
contracts or attract new clients; (v) vulnerability to regional
economic factors because of our geographic market concentration;
(vi) increases in health insurance costs and workers’ compensation
rates and underlying claims trends, health care reform, financial
solvency of workers’ compensation carriers, other insurers or
financial institutions, state unemployment tax rates, liabilities
for employee and client actions or payroll-related claims; (vii)
failure to manage growth of our operations and the effectiveness of
our sales and marketing efforts; (viii) the impact of the
competitive environment and other developments in the human
resources services industry, including the PEO industry, on our
growth and/or profitability; (ix) our liability for worksite
employee payroll, payroll taxes and benefits costs; (x) our
liability for disclosure of sensitive or private information; (xi)
our ability to integrate or realize expected returns on our
acquisitions; (xii) failure of our information technology systems;
(xiii) an adverse final judgment or settlement of claims against
Insperity; and (xiv) disruptions to our business resulting from the
actions of certain stockholders. These factors are discussed in
further detail in Insperity’s filings with the U.S. Securities and
Exchange Commission. Any of these factors, or a combination of such
factors, could materially affect the results of our operations and
whether forward-looking statements we make ultimately prove to be
accurate.
Except to the extent otherwise required by federal securities
law, we do not undertake any obligation to update our
forward-looking statements to reflect events or circumstances after
the date they are made or to reflect the occurrence of
unanticipated events.
Insperity, Inc.
Summary Financial Information
(in thousands, except per share amounts
and statistical data)
June 30, 2018 December 31, 2017
(Unaudited) Assets: Cash and cash equivalents $ 308,711 $
354,260 Restricted cash 41,827 41,137 Marketable securities 7,207
1,960 Accounts receivable, net 351,754 333,981 Prepaid insurance
17,648 10,782 Other current assets 22,640 26,991 Income taxes
receivable — 9,824 Total current assets 749,787
778,935 Property and equipment, net 99,028 95,659 Prepaid health
insurance 9,000 9,000 Deposits 170,450 159,515 Goodwill and other
intangible assets, net 12,732 12,762 Deferred income taxes, net
4,538 4,283 Other assets 5,533 3,541
Total assets
$ 1,051,068 $ 1,063,695 Liabilities and stockholders’
equity: Accounts payable $ 4,123 $ 6,447 Payroll taxes and other
payroll deductions payable 213,432 303,247 Accrued worksite
employee payroll cost 295,596 267,402 Accrued health insurance
costs 24,127 26,075 Accrued workers’ compensation costs 45,376
42,974 Accrued corporate payroll and commissions 41,059 52,595
Other accrued liabilities 24,094 27,741 Income taxes payable 6,984
— Total current liabilities 654,791 726,481 Accrued
workers’ compensation cost 174,017 166,493 Long-term debt 104,400
104,400 Total noncurrent liabilities 278,417 270,893
Stockholders’ equity: Common stock 555 555 Additional paid-in
capital 27,363 25,337 Treasury stock, at cost (263,764 ) (256,363 )
Retained earnings 353,706 296,792 Total stockholders’
equity 117,860 66,321 Total liabilities and
stockholders’ equity $ 1,051,068 $ 1,063,695
Insperity, Inc.
Summary Financial Information
(continued)
(in thousands, except per share amounts
and statistical data)
(Unaudited)
Three Months Ended June 30, Six Months
Ended June 30, 2018
2017 Change 2018
2017 Change
Operating results:
Revenues (gross billings of $5.550
billion, $4.742 billion, $11.473 billion and $9.758 billion, less
worksite employee payroll cost of $4.628 billion $3.947 billion,
$9.537 billion, and $8.080 billion, respectively)
$ 922,295 $ 795,552 15.9 % $ 1,936,667 $ 1,678,216 15.4 % Direct
costs: Payroll taxes, benefits and workers’ compensation costs
767,751 664,999 15.5 % 1,582,403 1,388,317
14.0 % Gross profit 154,544 130,553 18.4 % 354,264 289,899
22.2 % Operating expenses: Salaries, wages and payroll taxes 68,748
61,458 11.9 % 155,934 123,915 25.8 % Stock-based compensation 5,752
5,303 8.5 % 8,887 9,806 (9.4 )% Commissions 6,979 5,664 23.2 %
13,045 10,140 28.6 % Advertising 6,585 6,175 6.6 % 10,150 10,147 —
General and administrative expenses 27,419 24,610 11.4 % 57,271
50,802 12.7 % Depreciation and amortization 5,480 4,405
24.4 % 10,693 8,659 23.5 % Total operating
expenses 120,963 107,615 12.4 % 255,980
213,469 19.9 % Operating income 33,581 22,938 46.4 % 98,284
76,430 28.6 % Other income (expense): Interest income 1,807 678
166.5 % 3,263 1,143 185.5 % Interest expense (1,108 ) (803 ) 38.0 %
(2,178 ) (1,426 ) 52.7 % Income before income tax expense 34,280
22,813 50.3 % 99,369 76,147 30.5 % Income tax expense 9,720
8,795 10.5 % 24,818 26,501 (6.4 )% Net income
$ 24,560 $ 14,018 75.2 % $ 74,551 $ 49,646
50.2 % Less distributed and undistributed earnings allocated
to participating securities (346 ) (248 ) 39.5 % (1,064 ) (909 )
17.1 % Net income allocated to common shares $ 24,214 $
13,770 75.8 % $ 73,487 $ 48,737 50.8 % Basic
net income per share of common stock $ 0.59 $ 0.33
78.8 % $ 1.78 $ 1.18 50.8 % Diluted net income per
share of common stock $ 0.58 $ 0.33 75.8 % $ 1.77
$ 1.18 50.0 %
Insperity, Inc.
Summary Financial Information
(continued)
(in thousands, except per share amounts
and statistical data)
(Unaudited)
Three Months Ended June 30, Six Months
Ended June 30, 2018 2017
Change 2018 2017 Change
Statistical Data: Average number of worksite employees paid
per month 203,950 180,276 13.1 % 199,816 177,315 12.7 % Revenues
per worksite employee per month(1) $ 1,507 $ 1,471 2.4 % $ 1,615 $
1,577 2.4 % Gross profit per worksite employee per month 253 241
5.0 % 295 272 8.5 % Operating expenses per worksite employee per
month 198 199 (0.5 )% 214 201 6.5 % Operating income per worksite
employee per month 55 42 31.0 % 82 72 13.9 % Net income per
worksite employee per month 40 26 53.8 % 62 47 31.9 %
(1) Gross billings of $9,071, $8,767, $9,570 and $9,171 per
worksite employee per month, less payroll cost of $7,564, $7,296,
$7,955 and $7,594 per worksite employee per month,
respectively.
Insperity, Inc.
Summary Financial Information
(continued)
(in thousands, except per share amounts
and statistical data)
(Unaudited)
GAAP to Non-GAAP Reconciliation
Tables
Three Months Ended June 30, Six Months
Ended June 30, 2018 2017
Change 2018 2017
Change Payroll cost (GAAP) $ 4,628,047
$ 3,946,005 17.3 % $ 9,537,032 $ 8,078,997 18.0 % Less: Bonus
payroll cost 372,225 306,340 21.5 % 1,203,086
921,598 30.5 % Non-bonus payroll cost $ 4,255,822 $
3,639,665 16.9 % $ 8,333,946 $ 7,157,399 16.4
%
Payroll cost per worksite employee per
month (GAAP)
$ 7,564 $ 7,296 3.7 % $ 7,955 $ 7,594 4.8 % Less: Bonus payroll
cost per worksite employee per month 608 566 7.4 %
1,003 866 15.8 % Non-bonus payroll cost per worksite
employee per month $ 6,956 $ 6,730 3.4 % $ 6,952
$ 6,728 3.3 %
Non-bonus payroll cost represents payroll cost excluding the
impact of bonus payrolls paid to the company’s worksite employees.
Bonus payroll cost varies from period to period, but has no direct
impact to the company’s ultimate workers’ compensation costs under
the current program. As a result, Insperity management refers to
non-bonus payroll cost in analyzing, reporting and forecasting the
company’s workers’ compensation costs.
June 30, 2018 December
31, 2017 Cash, cash equivalents and marketable
securities (GAAP) $ 315,918 $ 356,220 Less: Amounts payable for
withheld federal and state income taxes, employment taxes and other
payroll deductions 191,893 271,547 Client prepayments 13,952
23,603 Adjusted cash, cash equivalents and marketable securities $
110,073 $ 61,070
Adjusted cash, cash equivalents and marketable securities
excludes funds associated with federal and state income tax
withholdings, employment taxes and other payroll deductions, as
well as client prepayments. Insperity management believes adjusted
cash, cash equivalents and marketable securities is a useful
measure of the company’s available funds.
Three Months Ended
June 30, Six Months Ended June 30, 2018
2017 Change 2018
2017 Change
Operating expenses (GAAP) $ 120,963 $ 107,615 12.4 % $ 255,980 $
213,469 19.9 % Less: One-time tax reform bonus — — —
9,306 — — Adjusted operating expenses $ 120,963
$ 107,615 12.4 % $ 246,674 $ 213,469
15.6 % Operating expenses per worksite employee per month
(GAAP) $ 198 $ 199 (0.5 )% $ 214 $ 201 6.5 % Less: One-time tax
reform bonus per worksite employee per month — — — 8
— — Adjusted operating expenses per worksite employee
per month $ 198 $ 199 (0.5 )% $ 206 $ 201
2.5 %
Adjusted operating expenses represent operating expenses
excluding the impact of the one-time tax reform bonus. Insperity
management believes adjusted operating expenses is a useful measure
of the company’s operating costs, as it allows for additional
analysis of the company’s operating expenses separate from the
impact of these items.
Three Months Ended June
30,
Six Months Ended June 30, 2018
2017 Change 2018
2017 Change Net
income (GAAP) $ 24,560 $ 14,018 75.2 % $ 74,551 $ 49,646 50.2 %
Income tax expense 9,720 8,795 10.5 % 24,818 26,501 (6.4 )%
Interest expense 1,108 803 38.0 % 2,178 1,426 52.7 % Depreciation
and amortization 5,480 4,405 24.4 % 10,693
8,659 23.5 % EBITDA 40,868 28,021 45.8 % 112,240 86,232 30.2
% Stock-based compensation 5,752 5,303 8.5 % 8,887 9,806 (9.4 )%
One-time tax reform bonus — — — 9,306 —
— Adjusted EBITDA $ 46,620 $ 33,324 39.9 % $ 130,433
$ 96,038 35.8 % Net income per worksite
employee per month (GAAP) $ 40 $ 26 53.8 % $ 62 $ 47 31.9 % Income
tax expense per worksite employee per month 16 16 — 21 25 (16.0 )%
Interest expense per worksite employee per month 2 1 100.0 % 2 1
100.0 % Depreciation and amortization per worksite employee per
month 9 9 — 9 8 12.5 % EBITDA per
worksite employee per month 67 52 28.8 % 94 81 16.0 % Stock-based
compensation per worksite employee per month 9 10 (10.0 )% 7 9
(22.2 )% One-time tax reform bonus per worksite employee per month
— — — 8 — — Adjusted EBITDA per
worksite employee per month $ 76 $ 62 22.6 % $ 109
$ 90 21.1 %
EBITDA represents net income computed in accordance with
generally accepted accounting principles (“GAAP”), plus interest
expense, income tax expense, depreciation and amortization expense.
Adjusted EBITDA represents EBITDA plus costs associated with a
one-time tax reform bonus paid to corporate employees and non-cash
stock-based compensation. Insperity management believes EBITDA and
adjusted EBITDA are often useful measures of the company’s
operating performance, as they allow for additional analysis of the
company’s operating results separate from the impact of these items
and Adjusted EBITDA is used by our lenders to assess our leverage
and ability to make interest payments.
Three Months Ended
June 30, Six Months Ended June 30, 2018
2017 Change 2018
2017 Change Net
income (GAAP) $ 24,560 $ 14,018 75.2 % $ 74,551 $ 49,646 50.2 %
Non-GAAP adjustments: Stock-based compensation 5,752 5,303 8.5 %
8,887 9,806 (9.4 )% One-time tax reform bonus — — —
9,306 — — Total non-GAAP adjustments 5,752 5,303 8.5
% 18,193 9,806 85.5 % Tax effect (1,631 ) (2,044 ) (20.2 )% (4,517
) (3,539 ) 27.6 % Adjusted net income $ 28,681 $ 17,277
66.0 % $ 88,227 $ 55,913 57.8 %
Three Months Ended June 30, Six Months Ended
June 30, 2018 2017 Change 2018
2017 Change Diluted net income per share of
common stock (GAAP) $ 0.58 $ 0.33 75.8 % $ 1.77 $ 1.18 50.0 %
Non-GAAP adjustments: Stock-based compensation 0.14 0.13 7.7 % 0.21
0.24 (12.5 )% One-time tax reform bonus — — — 0.22
— — Total non-GAAP adjustments 0.14 0.13 7.7 % 0.43
0.24 79.2 % Tax effect (0.04 ) (0.05 ) (20.0 )% (0.11 ) (0.09 )
22.2 % Adjusted diluted net income per share of common stock $ 0.68
$ 0.41 65.9 % $ 2.09 $ 1.33 57.1 %
Adjusted net income and adjusted diluted net income per share of
common stock represent net income and diluted net income per share
computed in accordance with GAAP, excluding the impact of non-cash
stock-based compensation and costs associated with a one-time tax
reform bonus paid to corporate employees. Insperity management
believes adjusted net income and adjusted diluted net income per
share of common stock are useful measures of the company’s
operating performance in this period, as they allow for additional
analysis of the company’s operating results separate from the
impact of these items.
Non-bonus payroll cost, adjusted cash, cash equivalents and
marketable securities, adjusted operating expenses, EBITDA,
adjusted EBITDA, adjusted net income and adjusted diluted net
income per share of common stock are not financial measures
prepared in accordance with GAAP and may be different from similar
measures used by other companies. Non-bonus payroll cost, adjusted
cash, cash equivalents and marketable securities, adjusted
operating expenses, EBITDA, adjusted EBITDA, adjusted net income
and adjusted diluted net income per share of common stock should
not be considered as a substitute for, or superior to, measures of
financial performance prepared in accordance with GAAP. Investors
are encouraged to review the reconciliation of the non-GAAP
financial measures used in this press release to their most
directly comparable GAAP financial measures as provided in the
tables above.
The following is a reconciliation of GAAP to non-GAAP financial
measures for third quarter and full year 2018 guidance (in
millions, except per share amounts):
Q3 2018 Guidance
Full Year 2018 Guidance Net income (GAAP) $29
- $31 $125 - $128 Income tax expense 11 - 12 44 - 45 Interest
expense 1 5 Depreciation and amortization 6 22 EBITDA 47 - 50 196 -
200 One-time tax reform bonus — 9 Stock-based compensation 6 20
Adjusted EBITDA
$53 - $56
$225 - $229 Diluted net income per share of common stock
(GAAP) $0.70 - $0.74 $2.98 - $3.02 Non-GAAP adjustments: One-time
tax reform bonus — 0.22 Stock-based compensation 0.14 0.47 Total
non-GAAP adjustments 0.14 0.69 Tax effect (0.04) (0.18) Adjusted
EPS $0.80 - $0.84 $3.49 - $3.53
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version on businesswire.com: https://www.businesswire.com/news/home/20180801005177/en/
Insperity, Inc.Investor Relations Contact:Douglas
S. Sharp, (281) 348-3232Senior Vice President of Finance,Chief
Financial Officer and
TreasurerInvestor.Relations@Insperity.comorNews Media
Contact:Suzanne Haugen, (281) 312-3543Public Relations
ManagerMedia@Insperity.com
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