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, 2019:
- Q2 net income and diluted EPS up 16% and 19%, to $29 million
and $0.69, respectively
- Q2 adjusted EPS up 22% to $0.83
- Q2 adjusted EBITDA up 22% to $57 million
- YTD net income and EPS up 41% and 44%, to $105 million and
$2.54, respectively
- YTD adjusted EBITDA up 21% to $158 million
Second Quarter Results
Second quarter 2019 net income and diluted earnings per share
(“EPS”) of $28.6 million and $0.69 represented increases of 16% and
19%, respectively, compared to the second quarter of 2018. Adjusted
EPS was $0.83, a 22% increase over the second quarter of 2018.
Adjusted EBITDA increased 22% over the second quarter of 2018 to
$56.7 million.
Revenues increased 13% over the second quarter of 2018 to $1.04
billion on a 14% increase in the average number of worksite
employees (“WSEEs”) paid per month. The continued double-digit WSEE
growth resulted from new client sales driven by an 11% increase in
the average number of Business Performance Advisors. Additionally,
client retention averaged just above 99%, near our historical high
level. Net gains in our client base were lower than expected,
particularly during the last month of the quarter, due primarily to
less hiring of full-time and seasonal employees.
“We are pleased with our solid sales and client retention in Q2
delivering 14% worksite employee growth in spite of lower than
expected hiring in our client base,” said Paul J. Sarvadi,
Insperity chief executive officer and chairman. “We expect to
continue our office expansion plan and increase the number of
Business Performance Advisors over the balance of the year to
continue double digit growth into 2020.”
Gross profit increased 12% over the second quarter of 2018 to
$173.7 million, and included higher than expected benefits costs,
driven by large claim activity. This was partially offset by
favorable claims development in our workers’ compensation program
and slightly higher pricing. Operating expenses increased 12% over
the second quarter of 2018, and included continued investments in
our growth, including costs associated with an increase in the
number of Business Performance Advisors and the opening of eight
new sales offices over the past four quarters. We have also
continued to invest in our technology and product and service
offerings.
Year-to-Date Results
For the six months ended Jun. 30, 2019, net income increased 41%
over the first six months of 2018 to $104.8 million, and diluted
EPS increased 44% to $2.54. Adjusted EPS increased 34% over the
first six months of 2018 to $2.81. Adjusted EBITDA increased 21% to
$158.1 million.
Revenues for the first six months of 2019 increased 13% to $2.2
billion, on a 14% increase in the average number of WSEEs paid per
month over the 2018 period. Gross profit for the first six months
of 2019 increased 13% to $400.5 million. Operating expenses
increased 8% to $276.3 million over the 2018 period and adjusted
operating expenses increased 12% over the 2018 period.
Net income per WSEE per month increased 23% from $62 in the 2018
period to $76 in the 2019 period. Adjusted EBITDA per WSEE per
month increased 6% from $109 in the 2018 period to $115 in the 2019
period.
Cash outlays in the first six months of 2019 included the
repurchase of approximately 315,000 shares of stock at a cost of
$38.8 million, dividends totaling $24.7 million and capital
expenditures of $17.2 million. Adjusted cash, cash equivalents and
marketable securities at Jun. 30, 2019 were $130.7 million.
“Our earnings outlook for 2019 is in line with our previous
forecast as we come off a strong performance in the first half of
the year and effectively manage our business in response to
emerging trends,” said Douglas S. Sharp, Insperity senior vice
president of finance, chief financial officer and treasurer. “We
expect to continue to generate over 20% growth in adjusted EPS, as
we effectively execute our long-term strategic plan.”
2019 Guidance
The company also announced its updated guidance for 2019,
including the third quarter of 2019. 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 2019
Full Year 2019
Average WSEEs paid
243,000
—
244,100
237,350
—
239,500
Year-over-year increase
13.0%
—
13.5%
13.5%
—
14.5%
Adjusted EPS
$1.00
—
$1.04
$4.59
—
$4.74
Year-over-year increase
4%
—
8%
22%
—
26%
Adjusted EBITDA (in millions)
$66.5
—
$69.0
$278
—
$286
Year-over-year increase
8%
—
12%
16%
—
19%
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 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 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 4585972. 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.
4585972. The webcast will be archived for one year.
About Insperity
Insperity, a trusted advisor to America’s best businesses for
more than 33 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 Traditional Payroll and Human
Capital Management, Time and Attendance, Performance Management,
Organizational Planning, Recruiting Services, Employment Screening,
Expense Management, Retirement Services and Insurance Services.
Insperity business performance solutions support more than 100,000
businesses with over 2 million employees. With 2018 revenues of
$3.8 billion, Insperity operates in 77 offices throughout the
United States. 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 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:
- adverse economic conditions;
- regulatory and tax developments and possible adverse
application of various federal, state and local regulations;
- the ability to secure competitive replacement contracts for
health insurance and workers’ compensation insurance at expiration
of current contracts;
- cancellation of client contracts on short notice, or the
inability to renew client contracts or attract new clients;
- vulnerability to regional economic factors because of our
geographic market concentration;
- 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;
- 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;
- our liability for worksite employee payroll, payroll taxes and
benefits costs;
- our liability for disclosure of sensitive or private
information;
- our ability to integrate or realize expected returns on our
acquisitions;
- failure of our information technology systems;
- an adverse final judgment or settlement of claims against
Insperity; and
- 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.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(in thousands)
June 30, 2019
December 31, 2018
Assets
Cash and cash equivalents
$
324,926
$
326,773
Restricted cash
43,268
42,227
Marketable securities
61,129
60,781
Accounts receivable, net
424,135
400,623
Prepaid insurance
24,469
8,411
Other current assets
29,794
27,721
Income taxes receivable
11,456
—
Total current assets
919,177
866,536
Property and equipment, net
120,828
117,213
Right of use leased assets
54,189
—
Prepaid health insurance
9,000
9,000
Deposits
194,328
172,674
Goodwill and other intangible assets,
net
12,720
12,726
Deferred income taxes, net
556
8,816
Other assets
6,197
4,851
Total assets
$
1,316,995
$
1,191,816
Liabilities and stockholders’
equity
Accounts payable
$
6,548
$
10,622
Payroll taxes and other payroll deductions
payable
244,694
261,166
Accrued worksite employee payroll cost
373,532
329,979
Accrued health insurance costs
20,376
35,153
Accrued workers’ compensation costs
47,122
45,818
Accrued corporate payroll and
commissions
37,820
60,704
Other accrued liabilities
39,756
28,890
Total current liabilities
769,848
772,332
Accrued workers’ compensation cost, net of
current
188,241
187,412
Long-term debt
169,400
144,400
Operating lease liabilities, net of
current
54,617
—
Other accrued liabilities, net of
current
—
9,996
Total noncurrent liabilities
412,258
341,808
Stockholders’ equity:
Common stock
555
555
Additional paid-in capital
41,009
36,752
Treasury stock, at cost
(383,830
)
(357,569
)
Retained earnings
477,155
397,938
Total stockholders’ equity
134,889
77,676
Total liabilities and stockholders’
equity
$
1,316,995
$
1,191,816
Insperity, Inc.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
(in thousands, except per share
amounts)
2019
2018
Change
2019
2018
Change
Operating results:
Revenues(1)
$
1,043,316
$
922,295
13.1
%
$
2,196,326
$
1,936,667
13.4
%
Payroll taxes, benefits and workers’
compensation costs
869,581
767,751
13.3
%
1,795,874
1,582,403
13.5
%
Gross profit
173,735
154,544
12.4
%
400,452
354,264
13.0
%
Salaries, wages and payroll taxes
74,696
68,748
8.7
%
158,076
155,934
1.4
%
Stock-based compensation
8,256
5,752
43.5
%
14,296
8,887
60.9
%
Commissions
7,741
6,979
10.9
%
14,693
13,045
12.6
%
Advertising
7,548
6,585
14.6
%
12,579
10,150
23.9
%
General and administrative expenses
29,866
27,419
8.9
%
63,028
57,271
10.1
%
Depreciation and amortization
6,908
5,480
26.1
%
13,599
10,693
27.2
%
Total operating expenses
135,015
120,963
11.6
%
276,271
255,980
7.9
%
Operating income
38,720
33,581
15.3
%
124,181
98,284
26.3
%
Other income (expense):
Interest income
2,802
1,807
55.1
%
6,047
3,263
85.3
%
Interest expense
(1,639
)
(1,108
)
47.9
%
(3,320
)
(2,178
)
52.4
%
Income before income tax
expense
39,883
34,280
16.3
%
126,908
99,369
27.7
%
Income tax expense
11,327
9,720
16.5
%
22,063
24,818
(11.1
)%
Net income
$
28,556
$
24,560
16.3
%
$
104,845
$
74,551
40.6
%
Less distributed and undistributed
earnings allocated to participating securities
(309
)
(346
)
(10.7
)%
(1,183
)
(1,064
)
11.2
%
Net income allocated to common
shares
$
28,247
$
24,214
16.7
%
$
103,662
$
73,487
41.1
%
Net income per share of common
stock
Basic
$
0.69
$
0.59
16.9
%
$
2.55
$
1.78
43.3
%
Diluted
$
0.69
$
0.58
19.0
%
$
2.54
$
1.77
43.5
%
____________________________________
(1) Revenues are comprised of gross
billings less WSEE payroll costs as follows:
Three Months Ended June
30,
Six Months Ended June
30,
(in thousands)
2019
2018
2019
2018
Gross billings
$
6,377,014
$
5,550,342
$
13,248,684
$
11,473,698
Less: WSEE payroll cost
5,333,698
4,628,047
11,052,358
9,537,031
Revenues
$
1,043,316
$
922,295
$
2,196,326
$
1,936,667
Insperity, Inc.
KEY FINANCIAL AND STATISTICAL
DATA
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
Change
2019
2018
Change
Average WSEEs paid
232,010
203,950
13.8
%
228,768
199,816
14.5
%
Statistical data (per WSEE per
month):
Revenues(1)
$
1,499
$
1,507
(0.5
)%
$
1,600
$
1,615
(0.9
)%
Gross profit
250
253
(1.2
)%
292
295
(1.0
)%
Operating expenses
194
198
(2.0
)%
201
214
(6.1
)%
Operating income
56
55
1.8
%
90
82
9.8
%
Net income
41
40
2.5
%
76
62
22.6
%
____________________________________
(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 June
30,
Six Months Ended June
30,
(per WSEE per month)
2019
2018
2019
2018
Gross billings
$
9,162
$
9,071
$
9,652
$
9,570
Less: WSEE payroll cost
7,663
7,564
8,052
7,955
Revenues
$
1,499
$
1,507
$
1,600
$
1,615
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 period, 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 operating expense
Represents operating expenses excluding
the impact of the following:
• costs associated with a one-time tax
reform bonus paid to corporate employees.
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,
and
• costs associated with a one-time tax
reform bonus paid to corporate employees.
Adjusted Net Income
Represents net income computed in
accordance with GAAP, excluding:
• non-cash stock based compensation,
and
• costs associated with a one-time tax
reform bonus paid to corporate employees.
Adjusted EPS
Represents diluted net income per share
computed in accordance with GAAP, excluding:
• non-cash stock based compensation,
and
• costs associated with a one-time tax
reform bonus paid to corporate employees.
Following is a reconciliation of payroll cost (GAAP) to
non-bonus payroll costs (non-GAAP):
Three Months Ended June
30,
Six Months Ended June
30,
(in thousands, except per WSEE per
month)
2019
2018
2019
2018
$
WSEE
$
WSEE
$
WSEE
$
WSEE
Payroll cost
$
5,333,698
$
7,663
$
4,628,047
$
7,564
$
11,052,358
$
8,052
$
9,537,031
$
7,955
Less: Bonus payroll cost
451,828
649
372,225
608
1,442,406
1,051
1,203,086
1,003
Non-bonus payroll cost
$
4,881,870
$
7,014
$
4,255,822
$
6,956
$
9,609,952
$
7,001
$
8,333,945
$
6,952
% Change period over period
14.7
%
0.8
%
16.9
%
3.4
%
15.3
%
0.7
%
16.4
%
3.3
%
Following is a reconciliation of cash, cash equivalents and
marketable securities (GAAP) to adjusted cash, cash equivalents and
marketable securities (non-GAAP):
(in thousands)
June 30, 2019
December 31, 2018
Cash, cash equivalents and marketable
securities
$
386,055
$
387,554
Less:
Amounts payable for withheld federal and
state income taxes, employment taxes and other payroll
deductions
218,037
224,487
Client prepayments
37,357
34,177
Adjusted cash, cash equivalents and
marketable securities
$
130,661
$
128,890
Following is a reconciliation of operating expenses (GAAP) to
adjusted operating expenses (non-GAAP):
Six Months Ended June
30,
(in thousands, except per WSEE per
month)
2019
2018
$
WSEE
$
WSEE
Operating expenses
$
276,271
$
201
$
255,980
$
214
Less:
One-time tax reform bonus
—
—
9,306
8
Adjusted operating expenses
$
276,271
$
201
$
246,674
$
206
% Change period over period
12.0
%
(2.4
)%
15.6
%
2.5
%
Following is a reconciliation of net income (GAAP) to EBITDA
(non-GAAP) and adjusted EBITDA (non-GAAP):
Three Months Ended June
30,
Six Months Ended June
30,
(in thousands, except per WSEE per
month)
2019
2018
2019
2018
$
WSEE
$
WSEE
$
WSEE
$
WSEE
Net income
$
28,556
$
41
$
24,560
$
40
$
104,845
$
76
$
74,551
$
62
Income tax expense
11,327
16
9,720
16
22,063
16
24,818
21
Interest expense
1,639
2
1,108
2
3,320
2
2,178
2
Depreciation and amortization
6,908
11
5,480
9
13,599
11
10,693
9
EBITDA
48,430
70
40,868
67
143,827
105
112,240
94
Stock-based compensation
8,256
11
5,752
9
14,296
10
8,887
7
One-time tax reform bonus
—
—
—
—
—
—
9,306
8
Adjusted EBITDA
$
56,686
$
81
$
46,620
$
76
$
158,123
$
115
$
130,433
$
109
% Change period over period
21.6
%
6.6
%
39.9
%
22.6
%
21.2
%
5.5
%
35.8
%
21.1
%
Following reconciliation of net income (GAAP) to adjusted net
income (non-GAAP):
Three Months Ended June
30,
Six Months Ended June
30,
(in thousands)
2019
2018
2019
2018
Net income
$
28,556
$
24,560
$
104,845
$
74,551
Non-GAAP adjustments:
Stock-based compensation
8,256
5,752
14,296
8,887
One-time tax reform bonus
—
—
—
9,306
Total non-GAAP adjustments
8,256
5,752
14,296
18,193
Tax effect
(2,345
)
(1,631
)
(3,090
)
(4,517
)
Adjusted net income
$
34,467
$
28,681
$
116,051
$
88,227
% Change period over period
20.2
%
66.0
%
31.5
%
57.8
%
Following is a reconciliation of diluted EPS (GAAP) to adjusted
EPS (non-GAAP):
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Diluted EPS
$
0.69
$
0.58
$
2.54
$
1.77
Non-GAAP adjustments:
Stock-based compensation
0.20
0.14
0.35
0.21
One-time tax reform bonus
—
—
—
0.22
Total non-GAAP adjustments
0.20
0.14
0.35
0.43
Tax effect
(0.06
)
(0.04
)
(0.08
)
(0.11
)
Adjusted EPS
$
0.83
$
0.68
$
2.81
$
2.09
% Change period over period
22.1
%
65.9
%
34.4
%
57.1
%
The following is a reconciliation of GAAP to non-GAAP financial
measures for third quarter and full year 2019 guidance:
(in millions, except per share
amounts)
Q3 2019 Guidance
Full Year 2019
Guidance
Net income
$36.5 - $38.0
$167 - $174
Income tax expense
14 - 15
47 - 48
Interest expense
2
7
Depreciation and amortization
7
28
EBITDA
59.5 - 62.0
249 - 257
Stock-based compensation
7
29
Adjusted EBITDA
$66.5 - $69.0
$278 - $286
Diluted net income per share of common
stock
$0.88 - $0.92
$4.05 - $4.20
Non-GAAP adjustments:
Stock-based compensation
0.17
0.69
Total non-GAAP adjustments
0.17
0.69
Tax effect
(0.05
)
(0.15
)
Adjusted EPS
$1.00 - $1.04
$4.59 - $4.74
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190729005161/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: Suzanne Haugen Public Relations
Manager (281) 312-3543 Media@Insperity.com
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