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, 2017:
- Q1 worksite employee growth of 10%
- Q1 EPS up 10% to $1.69
- Adjusted EPS up 13% to a record high of
$1.84
First Quarter Results
First quarter 2017 net income and diluted earnings per share of
$35.6 million and $1.69 represented increases of 9% and 10%,
respectively, compared to the first quarter of 2016. Adjusted
diluted earnings per share were $1.84, a 13% increase over the
first quarter of 2016. Adjusted EBITDA increased 2% over the first
quarter of 2016 to $62.7 million.
“We are pleased with our first quarter results and the solid
execution driving our successful year-end transition,” said Paul J.
Sarvadi, Insperity chairman and chief executive officer. “This
strong start to the year, combined with a 13% increase in the
number of trained Business Performance Advisors, sets the stage for
another record setting year in 2017.”
Revenues for the first quarter of 2017 increased 10% over the
first quarter of 2016 on a 10% increase in the average number of
worksite employees paid per month. The worksite employee growth was
the result of strong new client sales, combined with a continuing
high level of client retention. For the third consecutive year,
client attrition was below our previous historical first quarter
levels of 10% to 12%. Net hiring of worksite employees by our
clients during the quarter continued to show weakness as net hiring
was 30% lower than the first quarter of 2016.
Gross profit increased 6% over the first quarter of 2016 to
$159.3 million, as higher than expected benefit costs were
partially offset by favorable results in our payroll tax and
workers’ compensation areas. Operating expenses increased 9.2% over
the first quarter of 2016, and included planned investments in our
growth and technology combined with operating leverage in other
areas of our business. Operating expense per worksite employee per
month declined from $204 in the first quarter of 2016 to $202 in
the 2017 period. The first quarter 2017 effective income tax rate
was 33% and was positively impacted by income tax benefits
associated with the vesting of restricted stock awards.
Cash outlays in the first three months of 2017 included the
repurchase of 114,568 shares of stock at a cost of $9.3 million,
dividends totaling $5.3 million and capital expenditures of $11.6
million.
“With continued high levels of cash flow generation, we remain
positioned to invest in our growth while providing exceptional
shareholder return,” said Douglas S. Sharp, senior vice president
of finance, chief financial officer and treasurer. “As announced
this morning, we have increased our quarterly dividend by 20% from
$0.25 to $0.30 and continue to execute on our share repurchase
plan.”
2017 Guidance
The company also announced its updated guidance for 2017,
including the second quarter of 2017. 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 2017
Full Year 2017
Average WSEEs 179,100 — 180,700 184,000 —
186,000 Year-over-year increase 9.5% — 10.5% 11% — 12%
Adjusted EPS $0.65 — $0.71 $4.30 — $4.44 Year-over-year increase 8%
— 18% 20% — 24% Adjusted EBITDA (in millions) $27.0 — $29.0
$162.0 — $166.0 Year-over-year increase 6% — 13% 15% — 18%
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
impairment and other charges, stockholder advisory expenses and
stock-based compensation.
Adjusted EBITDA - Represents net income computed in accordance
with GAAP, plus interest expense, income taxes, depreciation and
amortization expense, non-cash impairment and other charges, costs
associated with stockholder advisory expenses and stock-based
compensation.
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 6996114. 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.
6996114. The webcast will be archived for one year.
Insperity, a trusted advisor to America’s best businesses for
more than 31 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 Software, Time and Attendance, Performance Management,
Organizational Planning, Recruiting Services, Employment Screening,
Financial Services, Expense Management, Retirement Services and
Insurance Services. Insperity business performance solutions
support more than 100,000 businesses with over 2 million employees.
With 2016 revenues of $2.9 billion, Insperity operates in 61
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 in 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,
2017
December 31,
2016
(Unaudited) Assets: Cash and cash equivalents $ 303,850 $
286,034 Restricted cash 42,458 42,637 Marketable securities 1,841
1,851 Accounts receivable, net 264,135 270,284 Prepaid insurance
15,097 15,041 Other current assets 23,095 19,526 Income taxes
receivable — 4,949 Total current assets 650,476
640,322 Property and equipment, net 87,673 80,261 Prepaid health
insurance 9,000 9,000 Deposits 155,141 148,638 Goodwill and other
intangible assets, net 12,963 13,088 Deferred income taxes, net
10,297 14,025 Other assets 2,978 1,840 Total assets $
928,528 $ 907,174 Liabilities and stockholders’
equity: Accounts payable $ 4,542 $ 4,189 Payroll taxes and other
payroll deductions payable 249,847 247,766 Accrued worksite
employee payroll cost 217,188 215,214 Accrued health insurance
costs 24,043 26,360 Accrued workers’ compensation costs 44,283
44,231 Accrued corporate payroll and commissions 16,821 40,761
Other accrued liabilities 25,555 22,437 Income taxes payable 8,668
— Total current liabilities 590,947 600,958 Accrued
workers’ compensation cost 146,794 141,291 Long-term debt 104,400
104,400 Total noncurrent liabilities 251,194 245,691
Stockholders’ equity: Common stock 277 277 Additional paid-in
capital 11,817 9,240 Treasury stock, at cost (234,225 ) (227,152 )
Retained earnings 308,518 278,160 Total stockholders’
equity 86,387 60,525 Total liabilities and
stockholders’ equity $ 928,528 $ 907,174
Insperity, Inc.
Summary Financial Information
(continued)
(in thousands, except per share amounts
and statistical data)
(Unaudited)
Three Months Ended
March 31,
2017 2016 Change
Operating results:
Revenues (gross billings of $5.016 billion
and $4.564 billion less worksite employee
payroll cost of $4.133 billion
and $3.762 billion, respectively)
$ 882,664 $ 802,408 10.0 % Direct costs: Payroll taxes, benefits
and workers’ compensation costs 723,318 652,392 10.9
% Gross profit 159,346 150,016 6.2 % Operating expenses: Salaries,
wages and payroll taxes 62,457 58,015 7.7 % Stock-based
compensation 4,503 3,575 26.0 % Commissions 4,476 4,281 4.6 %
Advertising 3,972 3,047 30.4 % General and administrative expenses
26,192 23,784 10.1 % Depreciation and amortization 4,254
4,271 (0.4 )% Total operating expenses 105,854 96,973
9.2 % Operating income 53,492 53,043 0.8 % Other income
(expense): Interest income 465 299 55.5 % Interest expense (623 )
(637 ) (2.2 )% Income before income tax expense 53,334 52,705 1.2 %
Income tax expense 17,706 20,012 (11.5 )% Net income
$ 35,628 $ 32,693 9.0 % Less distributed and
undistributed earnings allocated to participating securities (781 )
(664 ) 17.6 % Net income allocated to common shares $ 34,847
$ 32,029 8.8 % Basic net income per share of common stock $
1.69 $ 1.53 10.5 % Diluted net income per share of
common stock $ 1.69 $ 1.53 10.5 %
Insperity, Inc.
Summary Financial Information
(continued)
(in thousands, except per share amounts
and statistical data)
(Unaudited)
Three Months Ended
March 31,
2017 2016 Change
Statistical Data: Average number of worksite employees paid
per month 174,354 158,391 10.1 % Revenues per worksite employee per
month(1) $ 1,687 $ 1,689 (0.1 )% Gross profit per worksite employee
per month 305 316 (3.5 )% Operating expenses per worksite employee
per month 202 204 (1.0 )% Operating income per worksite employee
per month 102 112 (8.9 )% Net income per worksite employee per
month 68 69 (1.4 )%
(1) Gross billings of $9,589 and $9,606 per worksite employee
per month, less payroll cost of $7,902 and $7,917 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,
2017 2016 Change
Payroll cost (GAAP) $ 4,132,992 $ 3,762,064 9.9 % Less:
Bonus payroll cost 615,258 582,312 5.7 % Non-bonus
payroll cost $ 3,517,734 $ 3,179,752 10.6 %
Payroll cost per worksite employee per month (GAAP) $ 7,902 $ 7,917
(0.2 )% Less: Bonus payroll cost per worksite employee per month
1,177 1,225 (3.9 )% Non-bonus payroll cost per
worksite employee per month $ 6,725 $ 6,692 0.5 %
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,
2017
December 31,
2016
Cash, cash equivalents and marketable securities (GAAP) $
305,691 $ 287,885
Less: Amounts payable for withheld federal
and state income taxes, employment taxes and
other
payroll deductions
232,372 221,710 Customer prepayments 10,457 21,256 Adjusted
cash, cash equivalents and marketable securities $ 62,862 $
44,919
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,
2017 2016
Change Net income (GAAP) $ 35,628 $ 32,693 9.0 %
Income tax expense 17,706 20,012 (11.5 )% Interest expense 623 637
(2.2 )% Depreciation and amortization 4,254 4,271
(0.4 )% EBITDA 58,211 57,613 1.0 % Stock-based compensation 4,503
3,575 26.0 % Adjusted EBITDA $ 62,714 $ 61,188
2.5 % Net income per worksite employee per month
(GAAP) $ 68 $ 69 (1.4 )% Income tax expense per worksite employee
per month 34 42 (19.0 )% Interest expense per worksite employee per
month 1 1 — Depreciation and amortization per worksite employee per
month 8 9 (11.1 )% EBITDA per worksite employee per
month 111 121 (8.3 )% Stock-based compensation per worksite
employee per month 9 8 12.5 % Adjusted EBITDA per
worksite employee per month $ 120 $ 129 (7.0 )%
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 non-cash impairment and
other charges, costs associated with stockholder advisory expenses
and 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.
Three Months Ended
March 31,
2017 2016
Change Net income (GAAP) $ 35,628 $ 32,693 9.0 %
Non-GAAP adjustments: Stock-based compensation 4,503 3,575 26.0 %
Tax effect (1,495 ) (1,357 ) 10.2 % Adjusted net income (non-GAAP)
$ 38,636 $ 34,911 10.7 %
Three Months Ended
March 31,
2017 2016
Change Diluted net income per share of common stock
(GAAP) $ 1.69 $ 1.53 10.5 % Non-GAAP adjustments: Stock-based
compensation 0.22 0.17 29.4 % Tax effect (0.07 ) (0.07 ) — Adjusted
diluted net income per share of common stock $ 1.84 $ 1.63
12.9 %
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
stock-based compensation. Insperity management believes adjusted
net income and adjusted diluted net income per share 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, 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, 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 2017 guidance (in
millions, except per share amounts):
Q2 2017
Guidance
Full Year 2017
Guidance
Net income (GAAP) $10 - $11 $78 - $81 Income tax expense 6 -
7 44 - 45 Interest expense 1 3 Depreciation and amortization 4
17 EBITDA 21 - 23 $142 - $146 Stock-based
compensation 6 20
Adjusted EBITDA
$27 - $29 $162 - $166 Diluted net income per
share of common stock (GAAP) $0.49 - $0.55 $3.70 - $3.84 Non-GAAP
adjustments: Stock-based compensation 0.26 0.94 Tax effect (0.10 )
(0.34 ) Adjusted EPS $0.65 - $0.71 $4.30 - $4.44
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version on businesswire.com: http://www.businesswire.com/news/home/20170501005308/en/
Insperity, Inc.Investor Relations:Douglas S.
Sharp, 281-348-3232Senior Vice President of Finance,Chief Financial
Officer and TreasurerorNews Media:Suzanne Haugen,
281-312-3543Public Relations
Managersuzanne.haugen@insperity.com
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