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, 2017:
- Q2 revenues up 12.5% to $796
million
- Q2 EPS up 47% to $0.66; Q2 adjusted EPS
up 37% to $0.82
- Q2 net income increases 44% to $14
million
- Q2 adjusted EBITDA increases 30% to $33
million
Second Quarter Results
Second quarter 2017 net income and diluted earnings per share of
$14.0 million and $0.66 represented increases of 44% and 47%,
respectively, compared to the second quarter of 2016. Adjusted
diluted earnings per share were $0.82, a 37% increase over the
second quarter of 2016. Adjusted EBITDA increased 30% over the
second quarter of 2016 to $33.3 million.
“Our strong second quarter results combined with continued
outstanding execution and growth momentum positions Insperity for
another record setting year in 2017,” said Paul J. Sarvadi,
Insperity chairman and chief executive officer. “These positive
trends demonstrate that our proven strategy is in place to
capitalize on our unique market opportunity, providing a high level
of confidence for 2018 and beyond.”
Revenues for the second quarter of 2017 increased 12.5% over the
second quarter of 2016 on a 10% increase in the average number of
worksite employees paid per month. All three drivers to worksite
employee growth improved over the second quarter of 2016. Worksite
employees paid from new sales increased by 26%, and was driven by a
13% increase in the average number of trained Business Performance
Advisors and the enrollment of recent midmarket sales. Client
retention averaged 99.5%, an improvement over the second quarter of
2016. The third driver to our worksite employee growth, net hiring
in our client base, was also positive for the quarter.
Gross profit increased 15% over the second quarter of 2016 to
$130.6 million. Better than expected results were achieved in each
of our direct cost programs, including benefits, workers’
compensation and payroll taxes. Operating expenses were managed to
budgeted levels, increasing 11% over the second quarter of 2016,
and included planned investments in our growth and technology
infrastructure, security and development. The second quarter 2017
effective income tax rate was 39%.
“Our substantial increases in cash flow over recent years,
combined with our solid balance sheet, allowed us to continue
providing a high level of shareholder return through our share
repurchase and dividend programs,” said Douglas S. Sharp, senior
vice president of finance, chief financial officer and treasurer.
“During the second quarter, we increased our quarterly dividend by
20% and repurchased 211,335 shares at a cost of $16.2 million.”
Year-to-Date Results
For the six months ended June 30, 2017, reported net income
was $49.6 million, or $2.35 per diluted share, and adjusted diluted
earnings per share increased 19% over the first six months of 2016
to $2.65. Adjusted EBITDA increased 11% to $96.0 million.
Revenues for the first six months of 2017 totaled $1.7 billion,
an increase of 11% over the 2016 period, on a 10% increase in the
average number of worksite employees paid per month. Gross profit
for the six months ended June 30, 2017 increased 10% to $289.9
million. Operating expenses increased 10% to $213.5 million in
2017, while operating expenses per worksite employee remained flat
when compared to the 2016 period.
Cash outlays in the first six months of 2017 included the
repurchase of 325,903 shares of common stock at a cost of $25.5
million, dividends totaling $11.6 million and capital expenditures
of $20.8 million.
2017 Guidance
The company also announced its updated guidance for 2017,
including the third 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.
Q3 2017 Full Year
2017
Average WSEEs 187,500 — 188,300 184,000 — 186,000 Year-over-year
increase 11.0% — 11.5% 11.0% — 12.0% Adjusted EPS $0.94 —
$1.00 $4.47 — $4.60 Year-over-year increase 20.5% — 28.2% 24.5% —
28.1% Adjusted EBITDA (in millions) $37.5 — $39.5 $169.0 —
$173.0 Year-over-year increase 19.8% — 26.2% 19.7% — 22.5%
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 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 53203561. 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.
53203561. 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 Consulting,
Payroll & Human Capital Management, 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)
June 30, 2017
December 31, 2016
(Unaudited) Assets: Cash and cash equivalents $ 241,890 $
286,034 Restricted cash 41,703 42,637 Marketable securities 1,929
1,851 Accounts receivable, net 261,569 270,284 Prepaid insurance
27,070 15,041 Other current assets 17,993 19,526 Income taxes
receivable 6,878 4,949 Total current assets
599,032 640,322 Property and equipment, net 92,658 80,261 Prepaid
health insurance 9,000 9,000 Deposits 163,150 148,638 Goodwill and
other intangible assets, net 12,838 13,088 Deferred income taxes,
net 5,560 14,025 Other assets 3,650 1,840
Total assets $ 885,888 $ 907,174 Liabilities and
stockholders’ equity: Accounts payable $ 3,132 $ 4,189 Payroll
taxes and other payroll deductions payable 189,940 247,766 Accrued
worksite employee payroll cost 228,556 215,214 Accrued health
insurance costs 26,579 26,360 Accrued workers’ compensation costs
43,939 44,231 Accrued corporate payroll and commissions 28,566
40,761 Other accrued liabilities 22,658 22,437
Total current liabilities 543,370 600,958 Accrued workers’
compensation cost 154,415 141,291 Long-term debt 104,400
104,400 Total noncurrent liabilities 258,815 245,691
Stockholders’ equity: Common stock 277 277 Additional paid-in
capital 15,462 9,240 Treasury stock, at cost (248,266 ) (227,152 )
Retained earnings 316,230 278,160 Total
stockholders’ equity 83,703 60,525 Total
liabilities and stockholders’ equity $ 885,888 $ 907,174
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, 2017
2016 Change 2017
2016 Change Operating results:
Revenues (gross billings of $4.742
billion, $4.163 billion, $9.758 billion and $8.727 billion less
worksite employee payroll cost of $3.947 billion, $3.456
billion, $8.080 billion and $7.217 billion,
respectively)
$ 795,552 $ 707,332 12.5 % $ 1,678,216 $ 1,509,740 11.2 % Direct
costs: Payroll taxes, benefits and workers’ compensation costs
664,999 594,073 11.9 % 1,388,317 1,246,465
11.4 % Gross profit 130,553 113,259 15.3 % 289,899 263,275
10.1 % Operating expenses: Salaries, wages and payroll taxes 61,458
55,998 9.8 % 123,915 114,013 8.7 % Stock-based compensation 5,303
4,761 11.4 % 9,806 8,336 17.6 % Commissions 5,664 4,335 30.7 %
10,140 8,616 17.7 % Advertising 6,175 6,712 (8.0 )% 10,147 9,759
4.0 % General and administrative expenses 24,610 21,254 15.8 %
50,802 45,038 12.8 % Depreciation and amortization 4,405
4,176 5.5 % 8,659 8,447 2.5 % Total operating
expenses 107,615 97,236 10.7 % 213,469 194,209
9.9 % Operating income 22,938 16,023 43.2 % 76,430 69,066
10.7 % Other income (expense): Interest income 678 293 131.4 %
1,143 592 93.1 % Interest expense (803 ) (650 ) 23.5 % (1,426 )
(1,287 ) 10.8 % Income before income tax expense 22,813 15,666 45.6
% 76,147 68,371 11.4 % Income tax expense 8,795 5,953
47.7 % 26,501 25,965 2.1 % Net income $ 14,018
$ 9,713 44.3 % $ 49,646 $ 42,406 17.1 %
Less distributed and undistributed
earnings allocated to participating securities
(248 ) (229 ) 8.3 % (909 ) (962 ) (5.5 )% Net income allocated to
common shares $ 13,770 $ 9,484 45.2 % $ 48,737
$ 41,444 17.6 % Basic net income per share of common stock $
0.67 $ 0.45 48.9 % $ 2.37 $ 1.98 19.7 %
Diluted net income per share of common stock $ 0.66 $ 0.45
46.7 % $ 2.35 $ 1.98 18.7 %
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, 2017
2016 Change 2017
2016 Change Statistical Data:
Average number of worksite employees paid per month 180,276 163,521
10.2 % 177,315 160,956 10.2 % Revenues per worksite employee per
month(1) $ 1,471 $ 1,442 2.0 % $ 1,577 $ 1,563 0.9 % Gross profit
per worksite employee per month 241 231 4.3 % 272 273 (0.4 )%
Operating expenses per worksite employee per month 199 198 0.5 %
201 201 — Operating income per worksite employee per month 42 33
27.3 % 72 72 — Net income per worksite employee per month 26 20
30.0 % 47 44 6.8 %
(1)
Gross billings of $8,767, $8,485, $9,171 and
$9,036 per worksite employee per month, less payroll cost of
$7,296, $7,043, $7,594 and $7,473 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, 2017
2016 Change 2017
2016 Change Payroll cost (GAAP)
$ 3,946,005 $ 3,455,077 14.2 % $ 8,078,997 $ 7,217,142 11.9 % Less:
Bonus payroll cost 306,340 213,224 43.7 % 921,598
795,537 15.8 % Non-bonus payroll cost $ 3,639,665
$ 3,241,853 12.3 % $ 7,157,399 $ 6,421,605
11.5 % Payroll cost per worksite employee per month
(GAAP) $ 7,296 $ 7,043 3.6 % $ 7,594 $ 7,473 1.6 % Less: Bonus
payroll cost per worksite employee per month 566 436
29.8 % 866 824 5.1 % Non-bonus payroll cost per
worksite employee per month $ 6,730 $ 6,607 1.9 % $
6,728 $ 6,649 1.2 %
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, 2017
December 31, 2016 Cash, cash equivalents and
marketable securities (GAAP) $ 243,819 $ 287,885
Less: Amounts payable for withheld federal
and state income taxes, employment taxes and other payroll
deductions
173,259 221,710 Customer prepayments 22,313 21,256 Adjusted cash,
cash equivalents and marketable securities $ 48,247 $ 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
June 30, Six Months Ended June 30, 2017
2016 Change 2017
2016 Change Net
income (GAAP) $ 14,018 $ 9,713 44.3 % $ 49,646 $ 42,406 17.1 %
Income tax expense 8,795 5,953 47.7 % 26,501 25,965 2.1 % Interest
expense 803 650 23.5 % 1,426 1,287 10.8 % Depreciation and
amortization 4,405 4,176 5.5 % 8,659 8,447 2.5 % EBITDA 28,021
20,492 36.7 % 86,232 78,105 10.4 % Stock-based compensation 5,303
4,761 11.4 % 9,806 8,336 17.6 % Stockholder advisory expenses — 323
(100.0 )% — 323 (100.0 )% Adjusted EBITDA $ 33,324 $ 25,576 30.3 %
$ 96,038 $ 86,764 10.7 % Net income per worksite employee
per month (GAAP) $ 26 $ 20 30.0 % $ 47 $ 44 6.8 % Income tax
expense per worksite employee per month 16 12 33.3 % 25 27 (7.4 )%
Interest expense per worksite employee per month 1 1 — 1 1 —
Depreciation and amortization per worksite employee per month 9 9 —
8 9 (11.1 )% EBITDA per worksite employee per month 52 42 23.8 % 81
81 — Stock-based compensation per worksite employee per month 10 9
11.1 % 9 8 12.5 % Stockholder advisory expenses per worksite
employee per month — 1 (100.0 )% — 1 (100.0 )% Adjusted EBITDA per
worksite employee per month $ 62 $ 52 19.2 % $ 90 $ 90 —
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
June 30, Six Months Ended June 30, 2017
2016 Change 2017
2016 Change Net
income (GAAP) $ 14,018 $ 9,713 44.3 % $ 49,646 $ 42,406 17.1 %
Non-GAAP adjustments: Stock-based compensation 5,303 4,761 11.4 %
9,806 8,336 17.6 % Stockholder advisory expenses — 323
(100.0 )% — 323 (100.0 )% Total non-GAAP
adjustments 5,303 5,084 4.3 % 9,806 8,659 13.2 % Tax effect (2,044
) (1,933 ) 5.7 % (3,539 ) (3,290 ) 7.6 % Adjusted net income $
17,277 $ 12,864 34.3 % $ 55,913 $ 47,775
17.0 %
Three
Months Ended June 30, Six Months Ended June
30, 2017 2016
Change 2017 2016
Change Diluted net income per share of common stock
(GAAP) $ 0.66 $ 0.45 46.7 % $ 2.35 $ 1.98 18.7 % Non-GAAP
adjustments: Stock-based compensation 0.26 0.22 18.2 % 0.47 0.39
20.5 % Stockholder advisory expenses — 0.02 (100.0 )%
— 0.02 (100.0 )% Total non-GAAP adjustments 0.26 0.24
8.3 % 0.47 0.41 14.6 % Tax effect (0.10 ) (0.09 ) 11.1 % (0.17 )
(0.16 ) 6.3 % Adjusted diluted net income per share of common stock
$ 0.82 $ 0.60 36.7 % $ 2.65 $ 2.23 18.8
%
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 third quarter and full year 2017 guidance (in
millions, except per share amounts):
Q3 2017 Guidance
Full Year 2017 Guidance Net income (GAAP)
$16.5 - $17.5 $82 - $84 Income tax expense 10 - 11 46 - 48 Interest
expense 1 3 Depreciation and amortization 5 18 EBITDA
32.5 - 34.5 149 - 153 Stock-based compensation 5 20
Adjusted EBITDA $37.5 - $39.5 $169 - $173
Diluted net income per share of common stock (GAAP) $0.80 - $0.86
$3.88 - $4.01 Non-GAAP adjustments: Stock-based compensation 0.23
0.92 Tax effect (0.09 ) (0.33 ) Adjusted EPS $0.94 - $1.00
$4.47 - $4.60
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170801005415/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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