Insperity, Inc. (NYSE: NSP), a leading provider of human
resources and business performance solutions for America’s best
businesses, today reported results for the third quarter ended Sep.
30, 2021:
- Q3 average number of WSEEs paid and revenues up 11% and 20%,
respectively
- Q3 net income and diluted EPS of $27.3 million and $0.70,
respectively
- Q3 adjusted EBITDA and adjusted EPS of $60.1 million and $0.89,
respectively
- YTD net income and diluted EPS of $114.4 million and $2.94,
respectively
- YTD adjusted EBITDA and adjusted EPS of $224.6 million and
$3.62, respectively
Third Quarter Results
The average number of worksite employees (“WSEEs”) paid per
month in Q3 2021 increased 11% to 257,560 WSEEs. Net gains from
hiring in our client base, combined with WSEEs paid from new sales
and client retention at our historical high level of 99% for the
quarter, drove the accelerated growth above the high end of our
expectations. Revenues in Q3 2021 increased 20% to $1.2 billion on
the 11% increase in paid worksite employees and an 8% increase in
revenue per WSEE, which reflects a 4% increase in pricing and the
non-recurrence of the 2020 FICA deferral credits instituted as part
of the CARES Act.
“We are pleased with our solid financial results and our return
to double-digit unit growth in Q3,” said Paul J. Sarvadi, Insperity
chief executive officer and chairman. “Strong demand for our
services, combined with solid execution from our dedicated
employees, positions Insperity to continue growth acceleration into
2022.”
Gross profit increased 7.3% over Q3 2020 to $198.5 million. This
higher than expected increase resulted from the higher than
anticipated paid WSEEs and pricing, combined with favorable results
from our workers’ compensation program and payroll tax area. In Q3
2021, benefits costs continued to reflect the dynamics of the
pandemic, including increased utilization of our health plan and
COVID-19 related vaccination, testing and treatment costs.
Operating expenses in Q3 2021 increased only 2% over Q3 2020 and
included a decrease in stock-based compensation from a change in
our annual incentive plan. Cash operating expenses increased 9% and
included an increase in marketing costs associated with lead
generation activity and SalesForce implementation costs, combined
with ongoing operating expense management.
For Q3 2021, reported net income and diluted earnings per share
(“EPS”) were $27.3 million and $0.70, respectively. Adjusted EBITDA
increased 4% to $60.1 million and adjusted EPS decreased 2% to
$0.89.
Year-to-Date Results
Revenues for the first nine months of 2021 increased 14% to $3.7
billion on a 5% increase in paid worksite employees and an 8%
increase in revenue per WSEE. Gross profit for the first nine
months of 2021 increased 2% to $649.5 million. Operating expenses
increased 9% to $490.8 million compared to the 2020 period.
For the nine months ended September 30, 2021, reported net
income and diluted EPS were $114.4 million and $2.94, respectively.
Adjusted EPS decreased 13% compared to the first nine months of
2020 to $3.62 reflecting the unusually low benefits costs in the
prior year due primarily to the deferral of care at the onset of
the pandemic. Adjusted EBITDA decreased 10% compared to the first
nine months of 2020 to $224.6 million.
Net income per WSEE per month decreased 19% from $64 in the 2020
period to $52 in the 2021 period. Adjusted EBITDA per WSEE per
month decreased 15% from $120 in the 2020 period to $102 in the
2021 period.
“The acceleration to double-digit worksite employee growth ahead
of our 2021 plan, combined with our management of pricing, direct
cost programs and operating costs has resulted in significant
outperformance in earnings through the first three quarters of this
year,” said Douglas S. Sharp, Insperity senior vice president of
finance, chief financial officer and treasurer. “Our solid
operating results, even through the pandemic, positions us to
continue to provide strong shareholder return though our share
repurchase and dividend programs.”
Cash outlays in the first nine months of 2021 included the
repurchase of approximately 544,000 shares of stock at a cost of
$49.8 million, dividends totaling $50.2 million and capital
expenditures of $23.6 million. Adjusted cash totaled $228 million
at September 30, 2021 and $130 million remains available under our
$500 million credit facility.
2021 Guidance
The company also announced its updated guidance for 2021,
including the fourth quarter of 2021. 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.
Q4 2021
Full Year 2021
Average WSEEs paid
265,500 — 268,000
250,100 — 250,600
Year-over-year increase
11% — 12%
6.8% — 7%
Adjusted EPS
$0.61 — $0.81
$4.25 — $4.46
Year-over-year increase (decrease)
24% — 65%
(8)% — (4)%
Adjusted EBITDA (in millions)
$45 — $56
$271 — $282
Year-over-year increase (decrease)
19% — 48%
(6)% — (2)%
Definition of Key Metrics
Average WSEEs paid - 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.
Adjusted EBITDA - Represents net income computed in accordance
with GAAP, plus interest expense, income taxes, depreciation and
amortization expense and non-cash stock-based compensation.
Conference Call and Webcast
Insperity will be hosting a conference call today at 5 p.m. ET
to discuss these results, and the guidance discussed in this press
release, and answer questions from investment analysts. To listen
in, call 877-651-0053 and use conference i.d. number 6566878. 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. 6566878. The webcast will be archived
for one year.
About Insperity
Since 1986, Insperity’s mission has been to help businesses
succeed so communities prosper. Offering the most comprehensive
suite of scalable HR solutions available in the marketplace,
Insperity is defined by an unrivaled breadth and depth of services
and level of care. Through an optimal blend of premium HR service
and technology, Insperity delivers the administrative relief,
reduced liabilities and better benefit solutions that businesses
need for sustained growth. With 2020 revenues of $4.3 billion and
more than 80 offices throughout the U.S., Insperity is currently
making a difference in thousands of businesses and communities
nationwide. For more information, visit
http://www.insperity.com.
Forward-Looking Statements
The statements contained herein that are not historical facts
are forward-looking statements within the meaning of the 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 “anticipates,” “expects,” “intends,”
“plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,”
“probably,” “could,” “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, in an effort to help keep our stockholders and the public
informed about our operations, from time to time, we may 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, average number of worksite employees, benefits and
workers’ compensation costs, or other operating results. We base
the forward-looking statements on our current expectations,
estimates and projections. We caution you that these statements are
not guarantees of future performance and involve risks,
uncertainties and assumptions 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:
- adverse economic conditions;
- impact of the COVID-19 pandemic, or other future pandemics,
including the scope, severity and duration of the pandemic;
government responses; regulatory developments; and the related
disruptions and economic impact to our business and the small and
medium-sized businesses that we serve;
- vulnerability to regional economic factors because of our
geographic market concentration;
- failure to comply with covenants under our credit
facility;
- our liability for worksite employee payroll, payroll taxes and
benefits costs;
- 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;
- cancellation of client contracts on short notice, or the
inability to renew client contracts or attract new clients;
- the ability to secure competitive replacement contracts for
health insurance and workers’ compensation insurance at expiration
of current contracts;
- regulatory and tax developments and possible adverse
application of various federal, state and local regulations;
- failure to manage growth of our operations and the
effectiveness of our sales and marketing efforts;
- 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;
- an adverse final judgment or settlement of claims against
Insperity;
- disruptions of our information technology systems;
- our liability or damage to our reputation relating to
disclosure of sensitive or private information as a result of data
theft, cyberattacks or security vulnerabilities;
- failure of third-party providers, data centers or cloud service
providers; and
- our ability to integrate or realize expected returns on our
acquisitions.
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.
Any forward-looking statements are made only as of the date
hereof and, unless otherwise required by applicable securities
laws, we undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Insperity, Inc.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(in thousands)
September 30, 2021
December 31, 2020
Assets
Cash and cash equivalents
$
467,921
$
554,846
Restricted cash
47,813
45,522
Marketable securities
32,697
34,529
Accounts receivable, net
579,503
392,746
Prepaid insurance
19,657
10,164
Other current assets
53,293
39,461
Income taxes receivable
5,584
—
Total current assets
1,206,468
1,077,268
Property and equipment, net
212,322
216,256
Right of use leased assets
63,673
60,663
Prepaid health insurance
9,000
9,000
Deposits
216,136
194,231
Goodwill and other intangible assets,
net
12,707
12,707
Deferred income taxes, net
1,653
9,603
Other assets
12,093
4,548
Total assets
$
1,734,052
$
1,584,276
Liabilities and stockholders'
equity
Accounts payable
$
4,250
$
6,203
Payroll taxes and other payroll deductions
payable
232,862
377,960
Accrued worksite employee payroll cost
534,890
334,836
Accrued health insurance costs
40,366
32,685
Accrued workers’ compensation costs
51,368
48,186
Accrued corporate payroll and
commissions
69,621
44,277
Other accrued liabilities
70,824
60,777
Total current liabilities
1,004,181
904,924
Accrued workers’ compensation cost, net of
current
191,193
195,239
Long-term debt
369,400
369,400
Operating lease liabilities, net of
current
65,979
64,289
Other accrued liabilities, net of
current
6,293
6,292
Total noncurrent liabilities
632,865
635,220
Stockholders’ equity:
Common stock
555
555
Additional paid-in capital
104,587
95,528
Treasury stock, at cost
(645,993
)
(626,984
)
Retained earnings
637,857
575,033
Total stockholders’ equity
97,006
44,132
Total liabilities and stockholders’
equity
$
1,734,052
$
1,584,276
Insperity, Inc.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(in thousands, except per share
amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
Change
2021
2020
Change
Operating results:
Revenues(1)
$
1,209,628
$
1,007,820
20.0
%
$
3,681,834
$
3,230,669
14.0
%
Payroll taxes, benefits and workers’
compensation costs
1,011,149
822,787
22.9
%
3,032,356
2,591,365
17.0
%
Gross profit
198,479
185,033
7.3
%
649,478
639,304
1.6
%
Salaries, wages and payroll taxes
89,232
89,429
(0.2)
%
286,669
266,640
7.5
%
Stock-based compensation
10,362
20,864
(50.3)
%
35,965
38,110
(5.6)
%
Commissions
8,724
7,722
13.0
%
24,694
23,657
4.4
%
Advertising
9,507
4,781
98.8
%
23,804
15,334
55.2
%
General and administrative expenses
31,134
25,646
21.4
%
91,981
85,254
7.9
%
Depreciation and amortization
9,917
7,819
26.8
%
27,715
23,329
18.8
%
Total operating expenses
158,876
156,261
1.7
%
490,828
452,324
8.5
%
Operating income
39,603
28,772
37.6
%
158,650
186,980
(15.2)
%
Other income (expense):
Interest income
251
103
143.7
%
2,230
2,351
(5.1)
%
Interest expense
(1,963)
(1,731)
13.4
%
(5,537)
(6,312)
(12.3)
%
Income before income tax
expense
37,891
27,144
39.6
%
155,343
183,019
(15.1)
%
Income tax expense
10,595
7,135
48.5
%
40,971
49,067
(16.5)
%
Net income
$
27,296
$
20,009
36.4
%
$
114,372
$
133,952
(14.6)
%
Less distributed and undistributed
earnings allocated to participating securities
(39)
(104)
(62.5)
%
(219)
(792)
(72.3)
%
Net income allocated to common
shares
$
27,257
$
19,905
36.9
%
$
114,153
$
133,160
(14.3)
%
Net income per share of common
stock
Basic
$
0.71
$
0.52
36.5
%
$
2.97
$
3.45
(13.9)
%
Diluted
$
0.70
$
0.51
37.3
%
$
2.94
$
3.43
(14.3)
%
___________________________________
(1) Revenues are comprised of gross billings less WSEE payroll
costs as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)
2021
2020
2021
2020
Gross billings
$
7,994,006
$
6,563,727
$
23,682,279
$
20,356,164
Less: WSEE payroll cost
6,784,378
5,555,907
20,000,445
17,125,495
Revenues
$
1,209,628
$
1,007,820
$
3,681,834
$
3,230,669
Insperity, Inc.
KEY FINANCIAL AND STATISTICAL
DATA
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
Change
2021
2020
Change
Average WSEEs paid
257,560
231,750
11.1
%
244,667
232,553
5.2
%
Statistical data (per WSEE per
month):
Revenues(1)
$
1,565
$
1,450
7.9
%
$
1,672
$
1,544
8.3
%
Gross profit
257
266
(3.4
)
%
295
305
(3.3
)
%
Operating expenses
206
225
(8.4
)
%
223
216
3.2
%
Operating income
51
41
24.4
%
72
89
(19.1
)
%
Net income
35
29
20.7
%
52
64
(18.8
)
%
____________________________________
(1) Revenues per WSEE per month are comprised of gross billings
per WSEE per month less WSEE payroll costs per WSEE per month
follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(per WSEE per month)
2021
2020
2021
2020
Gross billings
$
10,346
$
9,441
$
10,755
$
9,726
Less: WSEE payroll cost
8,781
7,991
9,083
8,182
Revenues
$
1,565
$
1,450
$
1,672
$
1,544
Insperity, Inc.
Non-GAAP Financial Measures
(Unaudited)
Non-GAAP financial measures are not prepared in accordance with
GAAP and may be different from non-GAAP financial measures used by
other companies. Non-GAAP financial measures 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 to their most directly comparable GAAP
financial measures as provided in the tables below.
Non-GAAP Measure
Definition
Benefit of Non-GAAP Measure
Non-bonus payroll cost
Non-bonus payroll cost is a non-GAAP
financial measure that excludes the impact of bonus payrolls paid
to our WSEEs.
Bonus payroll cost varies from period to
period, but has no direct impact to our ultimate workers’
compensation costs under the current program.
Our management refers to non-bonus payroll
cost in analyzing, reporting and forecasting our workers’
compensation costs.
We include these non-GAAP financial
measures because we believe they are useful to investors in
allowing for greater transparency related to the costs incurred
under our current workers’ compensation program.
Adjusted cash, cash equivalents and
marketable securities
Excludes funds associated with:
• federal and state income tax
withholdings,
• employment taxes,
• other payroll deductions, and
• client prepayments.
We believe that the exclusion of the
identified items helps us reflect the fundamentals of our
underlying business model and analyze results against our
expectations, against prior periods, and to plan for future periods
by focusing on our underlying operations. We believe that the
adjusted results provide relevant and useful information for
investors because they allow investors to view performance in a
manner similar to the method used by management and improves their
ability to understand and assess our operating performance.
Adjusted EBITDA is used by our lenders to assess our leverage and
ability to make interest payments.
Adjusted operating expenses
Represents operating expenses excluding
the impact of the following:
• non-cash stock-based compensation,
and
• depreciation and amortization
expense.
EBITDA
Represents net income computed in
accordance with GAAP, plus:
• interest expense,
• income tax expense, and
• depreciation and amortization
expense.
Adjusted EBITDA
Represents EBITDA plus:
• non-cash stock-based compensation.
Adjusted net income
Represents net income computed in
accordance with GAAP, excluding:
• non-cash stock-based compensation.
Adjusted EPS
Represents diluted net income per share
computed in accordance with GAAP, excluding:
• non-cash stock-based compensation.
Following is a reconciliation of payroll
cost (GAAP) to non-bonus payroll costs (non-GAAP):
Three Months Ended September
30,
Nine Months Ended September
30,
(in thousands, except per WSEE per
month)
2021
2020
2021
2020
Per
WSEE
Per
WSEE
Per
WSEE
Per
WSEE
Payroll cost
$
6,784,378
$
8,781
$
5,555,907
$
7,991
$
20,000,445
$
9,083
$
17,125,495
$
8,182
Less: Bonus payroll cost
726,187
940
431,861
621
2,942,817
1,337
1,935,950
925
Non-bonus payroll cost
$
6,058,191
$
7,841
$
5,124,046
$
7,370
$
17,057,628
$
7,746
$
15,189,545
$
7,257
% Change period over period
18.2
%
6.4
%
0.4
%
4.4
%
12.3
%
6.7
%
3.2
%
3.4
%
Following is a reconciliation of cash,
cash equivalents and marketable securities (GAAP) to adjusted cash,
cash equivalents and marketable securities (non-GAAP):
(in thousands)
September 30, 2021
December 31, 2020
Cash, cash equivalents and marketable
securities
$
500,618
$
589,375
Less:
Amounts payable for withheld federal and
state income taxes, employment taxes and other payroll
deductions
198,405
341,988
Client prepayments
74,646
35,328
Adjusted cash, cash equivalents and
marketable securities
$
227,567
$
212,059
Following is a reconciliation of net
income (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA
(non-GAAP):
(in thousands, except per WSEE per
month)
Three Months Ended September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Per
WSEE
Per
WSEE
Per
WSEE
Per
WSEE
Net income
$
27,296
$
35
$
20,009
$
29
$
114,372
$
52
$
133,952
$
64
Income tax expense
10,595
14
7,135
10
40,971
19
49,067
23
Interest expense
1,963
3
1,731
2
5,537
3
6,312
3
Depreciation and amortization
9,917
12
7,819
12
27,715
12
23,329
12
EBITDA
49,771
64
36,694
53
188,595
86
212,660
102
Stock-based compensation
10,362
14
20,864
30
35,965
16
38,110
18
Adjusted EBITDA
$
60,133
$
78
$
57,558
$
83
$
224,560
$
102
$
250,770
$
120
% Change period over period
4.5
%
(6.0
)
%
12.5
%
16.9
%
(10.5
)
%
(15.0
)
%
19.8
%
20.0
%
Following is a reconciliation of net
income (GAAP) to adjusted net income (non-GAAP):
Three Months Ended September
30,
Nine Months Ended September
30,
(in thousands)
2021
2020
2021
2020
Net income
$
27,296
$
20,009
$
114,372
$
133,952
Non-GAAP adjustments:
Stock-based compensation
10,362
20,864
35,965
38,110
Tax effect
(2,865
)
(5,484
)
(9,486
)
(10,134
)
Total non-GAAP adjustments, net
7,497
15,380
26,479
27,976
Adjusted net income
$
34,793
$
35,389
$
140,851
$
161,928
% Change period over period
(1.7
)
%
15.5
%
(13.0
)
%
10.4
%
Following is a reconciliation of diluted
EPS (GAAP) to adjusted EPS (non-GAAP):
Three Months Ended September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Diluted EPS
$
0.70
$
0.51
$
2.94
$
3.43
Non-GAAP adjustments:
Stock-based compensation
0.27
0.54
0.92
0.98
Tax effect
(0.08
)
(0.14
)
(0.24
)
(0.26
)
Total non-GAAP adjustments, net
$
0.19
$
0.40
$
0.68
$
0.72
Adjusted EPS
$
0.89
$
0.91
$
3.62
$
4.15
% Change period over period
(2.2
)
%
21.3
%
(12.8
)
%
16.2
%
Following is a reconciliation of GAAP to
non-GAAP financial measures for fourth quarter and full year 2021
guidance:
(in millions, except per share
amounts)
Q4 2021 Guidance
Full Year 2021
Guidance
Net income
$18 - $26
$133- $141
Income tax expense
7 - 10
48 - 51
Interest expense
2
8
Depreciation and amortization
10
38
EBITDA
37 - 48
227 - 238
Stock-based compensation
8
44
Adjusted EBITDA
$45 - $56
$271 - $282
Diluted net income per share of common
stock
$0.46 - $0.66
$3.42 - $3.63
Non-GAAP adjustments:
Stock-based compensation
0.21
1.13
Tax effect
(0.06)
(0.30)
Total non-GAAP adjustments, net
0.15
0.83
Adjusted EPS
$0.61 - $0.81
$4.25 - $4.46
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211101005795/en/
Investor Relations Contact: Douglas S. Sharp Senior Vice
President of Finance, Chief Financial Officer and Treasurer
281-348-3232 Investor.Relations@Insperity.com News Media
Contact: Larry Shaffer SVP of Marketing and Business
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