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, 2017:
- Worksite employee growth up 10.5% in
spite of hurricane disruptions
- Net income increases 37% to $19
million
- Adjusted EBITDA increases 38% to $43
million
- EPS up 38% to $0.91; Adjusted EPS up
46% to $1.14
Third Quarter Results
Third quarter 2017 net income and diluted earnings per share of
$19.2 million and $0.91 represented increases of 37% and 38%,
respectively, compared to the third quarter of 2016. Adjusted
diluted earnings per share were $1.14, a 46% increase over the
third quarter of 2016. Adjusted EBITDA increased 38% over the third
quarter of 2016 to $43.1 million.
“We are pleased with the excellent results of the third quarter
in spite of the disruption caused by Hurricane Harvey in our home
state of Texas,” said Paul J. Sarvadi, Insperity chairman and chief
executive officer. “We are well on our way to a successful fall
selling and retention campaign giving us confidence to continue our
strong performance into 2018.”
Revenues for the third quarter of 2017 increased 13.2% over the
third quarter of 2016 on a 10.5% increase in the average number of
worksite employees paid per month. The worksite employee growth was
the result of new client sales driven by a 12% increase in the
average number of trained Business Performance Advisors, and a
continuing high level of client retention, which averaged 99% in
the third quarter. The net effect of employment by our client base
during the quarter was slightly negative as employee terminations
exceeded new hires.
Gross profit increased 19% over the third quarter of 2016 to
$140.0 million, due primarily to 10.5% worksite employee growth and
improved results in our benefits and workers’ compensation programs
and increases in our overall pricing. Operating expenses increased
16% over the third quarter of 2016 to $110.2 million. Adjusted
operating expenses increased 15% over the third quarter of 2016 and
included an additional accrual for incentive compensation tied to
our outperformance during the quarter. Net income per worksite
employee per month increased 21% over the third quarter of 2016 to
$34. Adjusted EBITDA per worksite employee per month increased 24%
over the third quarter of 2016 to $77. The lower third quarter 2017
effective income tax rate of 36% was primarily attributable to
favorable adjustments related to research and development
credits.
“Our continued growth, strong operating results and cash flow
generation has positioned 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. “We ended the third quarter
with over $100 million in available cash, more than double the cash
level at the end of 2016, while repurchasing 349,000 shares of
common stock and paying $18 million in cash dividends during the
first nine months of 2017.”
Year-to-Date Results
For the nine months ended September 30, 2017, net income
was $68.8 million, or $3.27 per diluted share, and adjusted diluted
earnings per share increased 26% over the first nine months of 2016
to $3.80. Adjusted EBITDA increased 18% to $139.2 million.
Revenues for the first nine months of 2017 totaled $2.5 billion,
an increase of 12% over the 2016 period, on a 10% increase in the
average number of worksite employees paid per month. Gross profit
for the nine months ended September 30, 2017 increased 13% to
$429.9 million. Operating expenses increased 12% to $323.6 million
in 2017, while operating expenses per worksite employee increased
only 1% when compared to the 2016 period. Net income per worksite
employee per month increased 11% over the 2016 period to $42.
Adjusted EBITDA per worksite employee per month increased 8% to
$86.
Cash outlays in the first nine months of 2017 included the
repurchase of 348,957 shares of common stock at a cost of $27.2
million, dividends totaling $17.8 million and capital expenditures
of $26.5 million.
2017 Guidance
The company also announced its updated guidance for 2017,
including the fourth 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.
Q4 2017 Full Year 2017
Average WSEEs 189,800 — 191,600 182,800
— 183,200 Year-over-year increase 10% — 11% 10% — 10.5%
Adjusted EPS $0.91 — $0.95 $4.71 — $4.75 Year-over-year increase
57% — 64% 31% — 32% Adjusted EBITDA (in millions) $36 — $38
$175 — $177 Year-over-year increase 56% — 65% 24% — 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
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 fourth 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 98782439. 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.
98782439. 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)
September 30, 2017 December 31,
2016 (Unaudited) Assets: Cash and cash equivalents $
285,934 $ 286,034 Restricted cash 41,748 42,637 Marketable
securities 1,950 1,851 Accounts receivable, net 302,291 270,284
Prepaid insurance 18,978 15,041 Other current assets 19,260 19,526
Income taxes receivable 878 4,949 Total current
assets 671,039 640,322 Property and equipment, net 93,740 80,261
Prepaid health insurance 9,000 9,000 Deposits 148,121 148,638
Goodwill and other intangible assets, net 12,783 13,088 Deferred
income taxes, net 8,205 14,025 Other assets 4,484 1,840
Total assets $ 947,372 $ 907,174 Liabilities
and stockholders’ equity: Accounts payable $ 3,070 $ 4,189 Payroll
taxes and other payroll deductions payable 185,456 247,766 Accrued
worksite employee payroll cost 256,702 215,214 Accrued health
insurance costs 34,543 26,360 Accrued workers’ compensation costs
44,011 44,231 Accrued corporate payroll and commissions 34,703
40,761 Other accrued liabilities 20,856 22,437 Total
current liabilities 579,341 600,958 Accrued workers’ compensation
cost 161,691 141,291 Long-term debt 104,400 104,400
Total noncurrent liabilities 266,091 245,691 Stockholders’ equity:
Common stock 277 277 Additional paid-in capital 20,439 9,240
Treasury stock, at cost (247,956 ) (227,152 ) Retained earnings
329,180 278,160 Total stockholders’ equity 101,940
60,525 Total liabilities and stockholders’ equity $
947,372 $ 907,174
Insperity, Inc.
Summary Financial Information
(continued)
(in thousands, except per share amounts
and statistical data)
(Unaudited)
Three Months Ended September 30, Nine
Months Ended September 30, 2017
2016 Change 2017
2016 Change Operating results:
Revenues (gross billings of $4.898
billion, $4.314 billion, $14.656 billion and $13.040 billion
less
worksite employee payroll cost of $4.102
billion, $3.611 billion, $12.182 billion and $10.828 billion,
respectively)
$ 795,513 $ 702,538 13.2 % $ 2,473,729 $ 2,212,278 11.8 % Direct
costs: Payroll taxes, benefits and workers’ compensation costs
655,547 584,742 12.1 % 2,043,864 1,831,207
11.6 % Gross profit 139,966 117,796 18.8 % 429,865 381,071
12.8 % Operating expenses: Salaries, wages and payroll taxes 65,223
56,897 14.6 % 189,138 170,910 10.7 % Stock-based compensation 6,584
4,191 57.1 % 16,390 12,527 30.8 % Commissions 5,675 5,030 12.8 %
15,815 13,646 15.9 % Advertising 3,476 3,540 (1.8 )% 13,623 13,299
2.4 % General and administrative expenses 24,513 21,318 15.0 %
75,315 66,356 13.5 % Depreciation and amortization 4,696
4,047 16.0 % 13,355 12,494 6.9 % Total
operating expenses 110,167 95,023 15.9 % 323,636
289,232 11.9 % Operating income 29,799 22,773 30.9 %
106,229 91,839 15.7 % Other income (expense): Interest income 1,015
335 203.0 % 2,158 927 132.8 % Interest expense (894 ) (628 ) 42.4 %
(2,320 ) (1,915 ) 21.1 % Income before income tax expense 29,920
22,480 33.1 % 106,067 90,851 16.7 % Income tax expense 10,718
8,415 27.4 % 37,219 34,380 8.3 % Net
income $ 19,202 $ 14,065 36.5 % $ 68,848 $
56,471 21.9 % Less distributed and undistributed earnings
allocated to participating securities (337 ) (330 ) 2.1 % (1,233 )
(1,283 ) (3.9 )% Net income allocated to common shares $ 18,865
$ 13,735 37.3 % $ 67,615 $ 55,188 22.5
% Basic net income per share of common stock $ 0.92 $ 0.66
39.4 % $ 3.29 $ 2.64 24.6 % Diluted net income
per share of common stock $ 0.91 $ 0.66 37.9 % $ 3.27
$ 2.64 23.9 %
Insperity, Inc.
Summary Financial Information
(continued)
(in thousands, except per share amounts
and statistical data)
(Unaudited)
Three Months Ended September 30, Nine
Months Ended September 30, 2017
2016 Change 2017
2016 Change Statistical Data:
Average number of worksite employees paid per month 186,641 168,909
10.5 % 180,424 163,607 10.3 % Revenues per worksite employee per
month(1) $ 1,421 $ 1,386 2.5 % $ 1,523 $ 1,502 1.4 % Gross profit
per worksite employee per month 250 232 7.8 % 265 259 2.3 %
Operating expenses per worksite employee per month 197 187 5.3 %
199 197 1.0 % Operating income per worksite employee per month 53
45 17.8 % 65 62 4.8 % Net income per worksite employee per month 34
28 21.4 % 42 38 10.5 % (1) Gross billings of $8,748, $8,513,
$9,025 and $8,856 per worksite employee per month, less payroll
cost of $7,327, $7,127, $7,502 and $7,354 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 September 30, Nine
Months Ended September 30, 2017
2016 Change 2017
2016 Change Payroll cost (GAAP)
$ 4,102,820 $ 3,611,159 13.6 % $ 12,181,816 $ 10,828,301 12.5 %
Less: Bonus payroll cost 312,230 255,112 22.4 % 1,233,827 1,050,649
17.4 % Non-bonus payroll cost $ 3,790,590 $ 3,356,047 12.9 % $
10,947,989 $ 9,777,652 12.0 % Payroll cost per worksite
employee per month (GAAP) $ 7,327 $ 7,127 2.8 % $ 7,502 $ 7,354 2.0
% Less: Bonus payroll cost per worksite employee per month 557 504
10.5 % 760 714 6.4 % Non-bonus payroll cost per worksite employee
per month $ 6,770 $ 6,623 2.2 % $ 6,742 $ 6,640 1.5 %
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.
September 30,
2017 December 31, 2016 Cash, cash
equivalents and marketable securities (GAAP) $ 287,884 $ 287,885
Less: Amounts payable for withheld federal and state income taxes,
employment taxes and other payroll deductions 168,334 221,710
Customer prepayments 14,167 21,256 Adjusted cash, cash
equivalents and marketable securities $ 105,383 $ 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 September
30, Nine Months Ended September 30, 2017
2016 Change 2017
2016 Change
Operating expenses (GAAP) $ 110,167 $ 95,023 15.9 % $ 323,636 $
289,232 11.9 % Less: Charitable donations to Hurricane Harvey
relief efforts 1,218 — — 1,218 — — Stockholder advisory expenses —
— — — 323 — Adjusted operating expenses $ 108,949 $ 95,023 14.7 % $
322,418 $ 288,909 11.6 % Operating expenses per worksite
employee per month (GAAP) $ 197 $ 187 5.3 % $ 199 $ 197 1.0 % Less:
Charitable donations to Hurricane Harvey relief efforts per
worksite employee per month 2 — — 1 — — Stockholder advisory
expenses per worksite employee per month — — — — — — Adjusted
operating expenses per worksite employee per month $ 195 $ 187 4.3
% $ 198 $ 197 0.5 %
Adjusted operating expenses represent operating expenses
excluding the impact of charitable contributions related to
Hurricane Harvey recovery efforts and stockholder advisory
expenses. 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 September
30,
Nine Months Ended September
30,
2017 2016 Change
2017 2016 Change
Net income (GAAP) $ 19,202 $ 14,065 36.5 % $ 68,848 $ 56,471
21.9 % Income tax expense 10,718 8,415 27.4 % 37,219 34,380 8.3 %
Interest expense 894
628 42.4 % 2,320 1,915 21.1 % Depreciation and amortization 4,696
4,047 16.0 % 13,355 12,494 6.9 % EBITDA 35,510 27,155
30.8 % 121,742 105,260 15.7 % Stock-based compensation 6,584 4,191
57.1 % 16,390 12,527 30.8 % Charitable donations to Hurricane
Harvey relief efforts 1,218 — — 1,218 — — Other (200 ) — — (200 ) —
— Stockholder advisory expenses — — — — 323 —
Adjusted EBITDA $ 43,112 $ 31,346 37.5 % $ 139,150 $
118,110 17.8 % Net income per worksite employee per month
(GAAP) $ 34 $ 28 21.4 % $ 42 $ 38 10.5 % Income tax expense per
worksite employee per month 19 17 11.8 % 23 23 — Interest expense
per worksite employee per month 2 1 100.0 % 1 1 — Depreciation and
amortization per worksite employee per month 8 8 — 9
9 — EBITDA per worksite employee per month 63 54 16.7 % 75 71 5.6 %
Stock-based compensation per worksite employee per month 12 8 50.0
% 10 9 11.1 % Charitable donations to Hurricane Harvey relief
efforts per worksite employee per month 2 — — 1 — — Other per
worksite employee per month — — — — — — Stockholder advisory
expenses per worksite employee per month — — — — — —
Adjusted EBITDA per worksite employee per month $ 77 $ 62
24.2 % $ 86 $ 80 7.5 %
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, charitable contributions related to Hurricane Harvey
recovery efforts, 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
September 30, Nine Months Ended September 30,
2017 2016 Change
2017 2016 Change
Net income (GAAP) $ 19,202 $ 14,065 36.5 % $ 68,848 $ 56,471
21.9 % Non-GAAP adjustments: Stock-based compensation 6,584 4,191
57.1 % 16,390 12,527 30.8 % Charitable donations to Hurricane
Harvey relief efforts 1,218 — — 1,218 — — Other (200 ) — — (200 ) —
— Stockholder advisory expenses — — — — 323
— Total non-GAAP adjustments 7,602 4,191 81.4 % 17,408
12,850 35.5 % Tax effect (2,723 ) (1,569 ) 73.6 % (6,262 ) (4,858 )
28.9 % Adjusted net income $ 24,081 $ 16,687 44.3 % $
79,994 $ 64,463 24.1 %
Three Months
Ended September 30, Nine Months Ended
September 30, 2017 2016 Change
2017 2016 Change Diluted net income per
share of common stock (GAAP) $ 0.91 $ 0.66 37.9 % $ 3.27 $ 2.64
23.9 % Non-GAAP adjustments: Stock-based compensation 0.31 0.20
55.0 % 0.78 0.59 32.2 % Charitable donations to Hurricane Harvey
relief efforts 0.06 — — 0.06 — — Other (0.01 ) — — (0.01 ) — —
Stockholder advisory expenses — — — — 0.02
— Total non-GAAP adjustments 0.36 0.20 80.0 % 0.83 0.61 36.1
% Tax effect (0.13 ) (0.08 ) 62.5 % (0.30 ) (0.24 ) 25.0 % Adjusted
diluted net income per share of common stock $ 1.14 $ 0.78
46.2 % $ 3.80 $ 3.01 26.2 %
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 and other charges and charitable
contributions related to Hurricane Harvey recovery efforts.
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, 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 fourth quarter and full year 2017 guidance (in
millions, except per share amounts):
Q4 2017 Guidance
Full Year 2017 Guidance Net income (GAAP) $16
- $17 $86 - $87 Income tax expense 9 - 10 46 - 47 Interest expense
1 3 Depreciation and amortization 5 18 EBITDA 31 - 33 153 - 155
Stock-based compensation 5 22 Adjusted EBITDA $36 - 38 $175 - $177
Diluted net income per share of common stock (GAAP) $0.75 -
$0.79 $4.05 - $4.09 Non-GAAP adjustments: Stock-based compensation
0.25 1.03 Tax effect (0.09) (0.37) Adjusted EPS $0.91 - $0.95 $4.71
- $4.75
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version on businesswire.com: http://www.businesswire.com/news/home/20171101005342/en/
Insperity, Inc.Investor Relations Contact:Douglas
S. Sharp, (281) 348-3232Senior Vice President of Finance,Chief
Financial Officer and TreasurerorNews Media Contact:Suzanne
Haugen, (281) 312-3543Public Relations
Managersuzanne.haugen@insperity.com
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