SUBSCRIBE TO TMCnet
TMCnet - World's Largest Communications and Technology Community

TMC NEWS

TMCNET eNEWSLETTER SIGNUP

Insperity Announces Record First Quarter Results
[April 30, 2018]

Insperity Announces Record First Quarter Results


Insperity, Inc. (NYSE: NSP), a leading provider of human resources and business performance solutions for America's best businesses, today reported results for the first quarter ended Mar. 31, 2018:

  • Revenues up 15% on worksite employee growth of 12%
  • Gross profit up 25% on strong pricing and direct cost trends
  • Net income up 40% to $50.0 million
  • Adjusted EBITDA up 34% to $83.8 million
  • EPS up 39% to $1.18; adjusted EPS up 53% to $1.41

First Quarter Results

First quarter 2018 net income and diluted earnings per share of $50.0 million and $1.18 represented increases of 40% and 39%, respectively, compared to the first quarter of 2017. Adjusted diluted earnings per share were $1.41, a 53% increase over the first quarter of 2017. Adjusted EBITDA increased 34% over the first quarter of 2017 to $83.8 million.

"We are pleased to report these outstanding record results reflecting our dynamic business model and strong execution all across the company," said Paul J. Sarvadi, Insperity chairman and chief executive officer. "Our key drivers to growth and profitability are in place setting up a fourth consecutive year of impressive earnings growth for 2018."

Revenues increased 15% over the first quarter of 2017 to $1.0 billion on a 12% increase in the average number of worksite employees paid per month. The continued double-digit worksite employee growth was the result of strong new client sales driven by an increase in the number of trained Business Performance Advisors, a continuing high level of client retention, and an improvement in the net hiring of worksite employees by our client base. Worksite employees paid from new sales increased 23% over the first quarter of 2017 on a 15% increase in the average number of trained Business Performance Advisors. Client attrition totaled only 8% during the heavy first quarter client renewal period, an improvement over the first quarter of 2017.

Gross profit for the first quarter of 2018 increased 25% over the first quarter of 2017 to $199.7 million. This increase was driven by the 12% worksite employee growth, lower cost trends in our benefits and workers' compensation programs and solid pricing. Operating expenses increased 28% over the first quarter of 2017 to $135.0 million, including one-time bonuses related to tax reform and additional accruals for incentive compensation tied to our outperformance during the quarter.

Net income and adjusted EBITDA per worksite employee per month increased 25% and 19%, respectively, over the first quarter of 2017 to $85 and $143, respectively.

The first quarter 2018 effective income tax rate of 23% was impacted by the enactment of tax reform in late 2017 and the benefit associated with the vesting of long-term incentive plan shares during the quarter.

"Our double-digit worksite employee growth, combined with the effective management of pricing and direct cost programs, continued to produce adjusted EBITDA at record levels," said Douglas S. Sharp, senior vice president of finance, chief financial officer and treasurer. "This strong cash flow positions us to continue to invest in the growth of our business while also providing excellent shareholder returns."

2018 Guidance

The company also announced its updated guidance for 2018, including the second 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.





 
        Q2 2018       Full Year 2018
       
Average WSEEs 202,000 - 203,700 206,400 - 208,400
Year-over-year increase 12% - 13% 13% - 14%
 
Adjusted EPS $0.59 - $0.63 $3.36 - $3.44
Year-over-year increase 44% - 54% 37% - 40%
 
Adjusted EBITDA (in millions) $41 - $43 $218 - $223
Year-over-year increase 23% - 29% 23% - 25%
 

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 second 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 6688618. 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. 6688618. 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 68 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)

 
         

March 31,

2018

     

December 31,

2017

(Unaudited)
Assets:
Cash and cash equivalents $ 354,641 $ 354,260
Restricted cash 41,137 41,137
Marketable securities 1,928 1,960
Accounts receivable, net 336,548 333,981
Prepaid insurance 35,679 10,782
Other current assets 28,385 26,991
Income taxes receivable 2,695   9,824  
Total current assets 801,013 778,935
Property and equipment, net 97,060 95,659
Prepaid health insurance 9,000 9,000
Deposits 166,140 159,515
Goodwill and other intangible assets, net 12,741 12,762
Deferred income taxes, net - 4,283
Other assets 5,513   3,541  
Total assets $ 1,091,467   $ 1,063,695  
Liabilities and stockholders' equity:
Accounts payable $ 5,517 $ 6,447
Payroll taxes and other payroll deductions payable 276,573 303,247
Accrued worksite employee payroll cost 281,474 267,402
Accrued health insurance costs 46,795 26,075
Accrued workers' compensation costs 43,788 42,974
Accrued corporate payroll and commissions 27,785 52,595
Other accrued liabilities 27,697   27,741  
Total current liabilities 709,629 726,481
Accrued workers' compensation cost 171,773 166,493
Long-term debt 104,400 104,400
Deferred income taxes, net 2,833   -  
Total noncurrent liabilities 279,006 270,893
Stockholders' equity:
Common stock 555 555
Additional paid-in capital 22,648 25,337
Treasury stock, at cost (257,898 ) (256,363 )
Retained earnings 337,527   296,792  
Total stockholders' equity 102,832   66,321  
Total liabilities and stockholders' equity $ 1,091,467   $ 1,063,695  
 
 

Insperity, Inc.

Summary Financial Information (continued)

(in thousands, except per share amounts and statistical data)

(Unaudited)

 
       

Three Months Ended

March 31,

2018     2017     Change
Operating results:

Revenues (gross billings of $5.923 billion and $5.016 billion, less worksite employee

  payroll cost of $4.909 billion and $4.133 billion, respectively)

$ 1,014,372 $ 882,664 14.9 %
Direct costs:
Payroll taxes, benefits and workers' compensation costs 814,652   723,318   12.6 %
Gross profit 199,720 159,346 25.3 %
Operating expenses:
Salaries, wages and payroll taxes 87,186 62,457 39.6 %
Stock-based compensation 3,135 4,503 (30.4 )%
Commissions 6,066 4,476 35.5 %
Advertising 3,565 3,972 (10.2 )%
General and administrative expenses 29,852 26,192 14.0 %
Depreciation and amortization 5,213   4,254   22.5 %
Total operating expenses 135,017   105,854   27.6 %
Operating income 64,703 53,492 21.0 %
Other income (expense):
Interest income 1,456 465 213.1 %
Interest expense (1,070 ) (623 ) 71.7 %
Income before income tax expense 65,089 53,334 22.0 %
Income tax expense 15,098   17,706   (14.7 )%
Net income $ 49,991   $ 35,628   40.3 %
Less distributed and undistributed earnings allocated to participating securities (585 ) (781 ) (25.1 )%
Net income allocated to common shares $ 49,406   $ 34,847   41.8 %
Basic net income per share of common stock $ 1.20   $ 0.85   41.2 %
Diluted net income per share of common stock $ 1.18   $ 0.85   38.8 %
 
 

Insperity, Inc.

Summary Financial Information (continued)

(in thousands, except per share amounts and statistical data)

(Unaudited)

 
       

Three Months Ended

March 31,

2018     2017     Change
 
Statistical Data:
Average number of worksite employees paid per month 195,683 174,354 12.2 %
Revenues per worksite employee per month(1) $ 1,728 $ 1,687 2.4 %
Gross profit per worksite employee per month 340 305 11.5 %
Operating expenses per worksite employee per month 230 202 13.9 %
Operating income per worksite employee per month 110 102 7.8 %
Net income per worksite employee per month 85 68 25.0 %
 

(1) Gross billings of $10,090 and $9,589 per worksite employee per month, less payroll cost of $8,362 and $7,902 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

March 31,

2018     2017     Change
 
Payroll cost (GAAP) $ 4,908,984 $ 4,132,992 18.8 %
Less: Bonus payroll cost 830,861   615,258   35.0 %
Non-bonus payroll cost $ 4,078,123   $ 3,517,734   15.9 %
 
Payroll cost per worksite employee per month (GAAP) $ 8,362 $ 7,902 5.8 %
Less: Bonus payroll cost per worksite employee per month 1,415   1,177   20.2 %
Non-bonus payroll cost per worksite employee per month $ 6,947   $ 6,725   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.

 
         

March 31,

2018

   

December 31,

2017

 
Cash, cash equivalents and marketable securities (GAAP) $ 356,569 $ 356,220

Less: Amounts payable for withheld federal and state income taxes, employment taxes and

      other payroll deductions

254,202 271,547
Client prepayments 14,863   23,603
Adjusted cash, cash equivalents and marketable securities $ 87,504   $ 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

March 31,

2018     2017     Change
 
Operating expenses (GAAP) $ 135,017 $ 105,854 27.6 %
Less:
One-time tax reform bonus 9,306   -   -
Adjusted operating expenses $ 125,711   $ 105,854   18.8 %
 
Operating expenses per worksite employee per month (GAAP) $ 230 $ 202 13.9 %
Less:
One-time tax reform bonus per worksite employee per month 16   -   -
Adjusted operating expenses per worksite employee per month $ 214   $ 202   5.9 %
 

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

March 31,

2018     2017     Change
 
Net income (GAAP) $ 49,991 $ 35,628 40.3 %
Income tax expense 15,098 17,706 (14.7 )%
Interest expense 1,070 623 71.7 %
Depreciation and amortization 5,213   4,254   22.5 %
EBITDA 71,372 58,211 22.6 %
Stock-based compensation 3,135 4,503 (30.4 )%
One-time tax reform bonus 9,306   -   -
Adjusted EBITDA $ 83,813   $ 62,714   33.6 %
 
Net income per worksite employee per month (GAAP) $ 85 $ 68 25.0 %
Income tax expense per worksite employee per month 26 34 (23.5 )%
Interest expense per worksite employee per month 2 1 100.0 %
 
Depreciation and amortization per worksite employee per month 9   8   12.5 %
EBITDA per worksite employee per month 122 111 9.9 %
Stock-based compensation per worksite employee per month 5 9 (44.4 )%
One-time tax reform bonus per worksite employee per month 16   -   -
Adjusted EBITDA per worksite employee per month $ 143   $ 120   19.2 %
 

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

March 31,

2018     2017     Change
 
Net income (GAAP) $ 49,991 $ 35,628 40.3 %
Non-GAAP adjustments:
Stock-based compensation 3,135 4,503 (30.4 )%
One-time tax reform bonus 9,306   -   -
Total non-GAAP adjustments 12,441 4,503 176.3 %
Tax effect (2,886 ) (1,495 ) 93.0 %
Adjusted net income $ 59,546   $ 38,636   54.1 %
 
         

Three Months Ended

March 31,

2018     2017     Change
 
Diluted net income per share of common stock (GAAP) $ 1.18 $ 0.85 38.8 %
Non-GAAP adjustments:
Stock-based compensation 0.07 0.11 (36.4 )%
One-time tax reform bonus 0.22   -   -
Total non-GAAP adjustments 0.29 0.11 163.6 %
Tax effect (0.06 ) (0.04 ) 50.0 %
Adjusted diluted net income per share of common stock $ 1.41   $ 0.92   53.3 %
 

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 second quarter and full year 2018 guidance (in millions, except per share amounts):

         

Q2 2018

Guidance

     

Full Year 2018

Guidance

 
Net income (GAAP) $21 - $22 $120 - $124
Income tax expense 8 - 9 43 - 44
Interest expense 1 4
Depreciation and amortization 5   22  
EBITDA 35 - 37 189 - 194
One-time tax reform bonus - 9
Stock-based compensation 6   20  
Adjusted EBITDA $41 - 43   $218 - $223  
 
Diluted net income per share of common stock (GAAP) $0.50 - $0.54 $2.85 - $2.93
Non-GAAP adjustments:
One-time tax reform bonus - 0.22
Stock-based compensation 0.13   0.47  
Total non-GAAP adjustments 0.13 0.69
Tax effect (0.04 ) (0.18 )
Adjusted EPS $0.59 - $0.63   $3.36 - $3.44  
 


[ Back To TMCnet.com's Homepage ]







Technology Marketing Corporation

35 Nutmeg Drive Suite 340, Trumbull, Connecticut 06611 USA
Ph: 800-243-6002, 203-852-6800
Fx: 203-866-3326

General comments: tmc@tmcnet.com.
Comments about this site: webmaster@tmcnet.com.

STAY CURRENT YOUR WAY

© 2018 Technology Marketing Corporation. All rights reserved | Privacy Policy