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, 2021:
- Q1 revenue increased 5% to $1.3 billion
- Q1 net income and diluted EPS of $61.9 million and $1.59,
respectively
- Q1 adjusted EPS up 7% to $1.82
- Q1 adjusted EBITDA up 3% to $104.2 million
First Quarter Results
For the first quarter of 2021, reported net income and diluted
earnings per share (“EPS”) were $61.9 million and $1.59,
respectively. Adjusted EBITDA increased 3% to $104.2 million and
adjusted EPS increased 7% to $1.82 over the first quarter of 2020,
significantly above our expectations.
The average number of worksite employees (“WSEEs”) paid per
month in Q1 2021 was 233,170 WSEEs, which was at the mid-point of
our expected range. As for the three drivers of our growth, WSEEs
paid from new sales and client retention were both in line with our
forecast, while net gains from hiring in our client base exceeded
our expectations. Revenue in Q1 2021 increased 5% to $1.3 billion
on a 7% increase in revenue per WSEE, partially offset by an
expected 2% decline in the average number of paid WSEEs.
“We are pleased with our strong Q1 results and our growth
momentum driven by solid sales, client retention and growth in the
client base in the face of the ongoing pandemic,” said Paul J.
Sarvadi, Insperity chief executive officer and chairman. “The
diligent and effective support provided by Insperity employees has
helped our resilient client base weather the storm of the pandemic
and emerge with confidence in the future. The combination of solid
execution and strong demand for our services positions Insperity
well for growth acceleration over the balance of the year, as we
lay the foundation to return to double-digit unit growth and
profitability.”
Gross profit increased by 7% over Q1 2020 to $251.4 million.
This increase exceeded our forecast, as pricing was above targeted
levels and each of our direct costs areas experienced lower than
expected cost trends. As for benefit costs, healthcare utilization
continued to gradually return to normal coming off of the earlier
stages of the pandemic. However, when combined with COVID-19
related vaccination, testing and treatment costs, overall costs
came in slightly below our Q1 budget. Our workers’ compensation
program continued to produce favorable results on our ongoing
claims management and, to a lesser degree, a favorable impact on
the frequency of claims from the recent “work from home” status of
many of our clients’ employees. The payroll tax area also produced
gross profit contributions above budget, due to state unemployment
tax rates received during Q1 coming in lower than our estimates and
the receipt of a $5.5 million federal payroll tax refund related to
a prior year.
Operating expenses increased 13% over Q1 2020, however, were
flat when excluding performance-based compensation. First quarter
2021 operating costs reflected continued growth investments,
including a 7% increase in the number of trained Business
Performance Advisors, initial costs related to our SalesForce
implementation and an increase in marketing costs associated with
lead generation activity. These investments were partially offset
by pandemic-related cost reductions, including reduced travel
expenses.
Cash outlays during Q1 2021 included the repurchase of 340,000
shares of stock at a cost of $29.7 million, cash dividends totaling
$15.5 million and capital expenditures of $12.1 million. We ended
the quarter with $196.7 million of adjusted cash, cash equivalents
and marketable securities, and $369.4 million outstanding under our
$500 million credit facility.
“With our strong Q1 results, and positive trends in our growth,
pricing and direct costs, we are raising our earnings outlook for
the remainder of 2021,” said Douglas S. Sharp, Insperity senior
vice president of finance, chief financial officer and treasurer.
“With our solid balance sheet and the expectation for continued
strong cash flow, we plan to continue to invest in our growth,
while providing attractive returns to our shareholders through our
dividend and share repurchase programs.”
2021 Guidance
The company also announced its updated guidance for 2021,
including the second quarter of 2021. 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 2021
Full Year 2021
Average WSEEs paid(a)
239,300
—
241,600
243,600
—
248,300
Year-over-year increase
5%
—
6%
4%
—
6%
Adjusted EPS(b)
$0.60
—
$0.70
$3.83
—
$4.40
Year-over-year decrease
(61)%
—
(55)%
(17)%
—
(5)%
Adjusted EBITDA (in millions)(b)
$44
—
$49
$250
—
$280
Year-over-year decrease
(52)%
—
(47)%
(13)%
—
(3)%
____________________________________
(a)
Q2 2021 guidance for average WSEEs paid represents 2.6% to 3.6%
sequential growth compared to Q1 2021.
(b)
Q2 2021 Adjusted EPS and Adjusted EBITDA
comparisons to Q2 2020 reflect the unusually low benefits costs
incurred during Q2 2020 due to health care deferrals and stay at
home orders during the COVID-19 pandemic onset.
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.
Adjusted EBITDA - Represents net income computed in accordance
with GAAP, plus interest expense, income taxes, depreciation and
amortization expense and non-cash stock-based compensation.
Conference Call and Webcast
Insperity will be hosting a conference call today at 5 p.m. ET
to discuss these results, and the guidance discussed in this press
release, and answer questions from investment analysts. To listen
in, call 877-651-0053 and use conference i.d. number 4536156. 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. 4536156. The webcast will be archived
for one year.
About Insperity
Since 1986, Insperity’s mission has been to help businesses
succeed so communities prosper. Offering the most comprehensive
suite of scalable HR solutions available in the marketplace,
Insperity is defined by an unrivaled breadth and depth of services
and level of care. Through an optimal blend of premium HR service
and technology, Insperity delivers the administrative relief,
reduced liabilities and better benefit solutions that businesses
need for sustained growth. With 2020 revenues of $4.3 billion and
more than 80 offices throughout the U.S., Insperity is currently
making a difference in thousands of businesses and communities
nationwide. 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 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, in an effort
to help keep our stockholders and the public informed about our
operations, from time to time, we may 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, average number of worksite employees, benefits and
workers’ compensation costs, or other operating results. We base
the forward-looking statements on our current expectations,
estimates and projections. We caution you that these statements are
not guarantees of future performance and involve risks,
uncertainties and assumptions 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;
- impact of the COVID-19 pandemic, or other future pandemics,
including the scope, severity and duration of the pandemic;
government responses; regulatory developments; and the related
disruptions and economic impact to our business and the small and
medium-sized businesses that we serve;
- vulnerability to regional economic factors because of our
geographic market concentration;
- failure to comply with covenants under our credit
facility;
- our liability for worksite employee payroll, payroll taxes and
benefits costs;
- 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;
- cancellation of client contracts on short notice, or the
inability to renew client contracts or attract new clients;
- the ability to secure competitive replacement contracts for
health insurance and workers’ compensation insurance at expiration
of current contracts;
- regulatory and tax developments and possible adverse
application of various federal, state and local regulations;
- 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;
- an adverse final judgment or settlement of claims against
Insperity;
- disruptions of our information technology systems;
- our liability or damage to our reputation relating to
disclosure of sensitive or private information;
- failure of third-party providers, data centers or cloud service
providers; and
- our ability to integrate or realize expected returns on our
acquisitions.
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.
Any forward-looking statements are made only as of the date
hereof and, unless otherwise required by applicable securities
laws, we undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Insperity, Inc.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(in thousands)
March 31, 2021
December 31, 2020
Assets
Cash and cash equivalents
$
494,777
$
554,846
Restricted cash
46,353
45,522
Marketable securities
34,292
34,529
Accounts receivable, net
561,244
392,746
Prepaid insurance
57,670
10,164
Other current assets
53,718
39,461
Income taxes receivable
3,451
—
Total current assets
1,251,505
1,077,268
Property and equipment, net
220,262
216,256
Right of use leased assets
67,688
60,663
Prepaid health insurance
9,000
9,000
Deposits
200,967
194,231
Goodwill and other intangible assets,
net
12,707
12,707
Deferred income taxes, net
—
9,603
Other assets
6,955
4,548
Total assets
$
1,769,084
$
1,584,276
Liabilities and stockholders'
equity
Accounts payable
$
5,841
$
6,203
Payroll taxes and other payroll deductions
payable
310,519
377,960
Accrued worksite employee payroll cost
503,334
334,836
Accrued health insurance costs
72,136
32,685
Accrued workers’ compensation costs
49,696
48,186
Accrued corporate payroll and
commissions
41,720
44,277
Other accrued liabilities
61,105
60,777
Total current liabilities
1,044,351
904,924
Accrued workers’ compensation cost, net of
current
190,336
195,239
Long-term debt
369,400
369,400
Operating lease liabilities, net of
current
71,716
64,289
Deferred income taxes, net
13,343
—
Other accrued liabilities, net of
current
6,294
6,292
Total noncurrent liabilities
651,089
635,220
Stockholders’ equity:
Common stock
555
555
Additional paid-in capital
81,329
95,528
Treasury stock, at cost
(628,391
)
(626,984
)
Retained earnings
620,151
575,033
Total stockholders’ equity
73,644
44,132
Total liabilities and stockholders’
equity
$
1,769,084
$
1,584,276
Insperity, Inc.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(in thousands, except per share
amounts)
Three Months Ended March
31,
2021
2020
Change
Operating results:
Revenues(1)
$
1,286,835
$
1,229,483
4.7
%
Payroll taxes, benefits and workers’
compensation costs
1,035,390
995,461
4.0
%
Gross profit
251,445
234,022
7.4
%
Salaries, wages and payroll taxes
103,075
86,501
19.2
%
Stock-based compensation
11,822
6,552
80.4
%
Commissions
7,719
8,460
(8.8
)%
Advertising
5,322
4,833
10.1
%
General and administrative expenses
31,636
34,853
(9.2
)%
Depreciation and amortization
8,047
7,602
5.9
%
Total operating expenses
167,621
148,801
12.6
%
Operating income
83,824
85,221
(1.6
)%
Other income (expense):
Interest income
543
1,879
(71.1
)%
Interest expense
(1,599
)
(2,362
)
(32.3
)%
Income before income tax
expense
82,768
84,738
(2.3
)%
Income tax expense
20,846
22,646
(7.9
)%
Net income
$
61,922
$
62,092
(0.3
)%
Less distributed and undistributed
earnings allocated to participating securities
(197
)
(462
)
(57.4
)%
Net income allocated to common
shares
$
61,725
$
61,630
0.2
%
Net income per share of common
stock
Basic
$
1.62
$
1.59
1.9
%
Diluted
$
1.59
$
1.58
0.6
%
____________________________________
(1)
Revenues are comprised of gross billings
less WSEE payroll costs as follows:
Three Months Ended March
31,
(in thousands)
2021
2020
Gross billings
$
8,050,422
$
7,436,754
Less: WSEE payroll cost
6,763,587
6,207,271
Revenues
$
1,286,835
$
1,229,483
Insperity, Inc.
KEY FINANCIAL AND STATISTICAL
DATA
(Unaudited)
Three Months Ended March
31,
2021
2020
Change
Average WSEEs paid
233,170
238,014
(2.0)
%
Statistical data (per WSEE per
month):
Revenues(1)
$
1,840
$
1,722
6.9
%
Gross profit
359
328
9.5
%
Operating expenses
240
208
15.4
%
Operating income
120
119
0.8
%
Net income
89
87
2.3
%
____________________________________
(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 March
31,
(per WSEE per month)
2021
2020
Gross billings
$
11,509
$
10,415
Less: WSEE payroll cost
9,669
8,693
Revenues
$
1,840
$
1,722
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.
Our management refers to non-bonus payroll
cost in analyzing, reporting and forecasting our workers’
compensation costs.
Bonus payroll cost varies from period to
period, but has no direct impact to our ultimate workers’
compensation costs under the current program.
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 periods, 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 EBITDA is used by our lenders to assess our leverage and
ability to make interest payments.
Adjusted operating expenses
Represents operating expenses excluding
the impact of the following:
• non-cash stock-based compensation,
and
• depreciation and amortization
expense.
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.
Adjusted net income
Represents net income computed in
accordance with GAAP, excluding:
• non-cash stock-based compensation.
Adjusted EPS
Represents diluted net income per share
computed in accordance with GAAP, excluding:
• non-cash stock-based compensation.
Following is a reconciliation of payroll
cost (GAAP) to non-bonus payroll costs (non-GAAP):
Three Months Ended March
31,
(in thousands, except per WSEE per
month)
2021
2020
$
WSEE
$
WSEE
Payroll cost
$
6,763,587
$
9,669
$
6,207,271
$
8,693
Less: Bonus payroll cost
1,420,475
2,031
1,050,968
1,472
Non-bonus payroll cost
$
5,343,112
$
7,638
$
5,156,303
$
7,221
% Change period over period
3.6
%
5.8
%
9.1
%
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)
March 31, 2021
December 31, 2020
Cash, cash equivalents and marketable
securities
$
529,069
$
589,375
Less:
Amounts payable for withheld federal and
state income taxes, employment taxes and other payroll
deductions
273,499
341,998
Client prepayments
58,918
35,328
Adjusted cash, cash equivalents and
marketable securities
$
196,652
$
212,049
Following is a reconciliation of net
income (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA
(non-GAAP):
(in thousands, except per WSEE per
month)
Three Months Ended March
31,
2021
2020
$
WSEE
$
WSEE
Net income
$
61,922
$
89
$
62,092
$
87
Income tax expense
20,846
30
22,646
32
Interest expense
1,599
2
2,362
3
Depreciation and amortization
8,047
11
7,602
11
EBITDA
92,414
132
94,702
133
Stock-based compensation
11,822
17
6,552
9
Adjusted EBITDA
$
104,236
$
149
$
101,254
$
142
% Change period over period
2.9
4.9
%
(0.2
)%
(5.3
)%
Following is a reconciliation of net
income (GAAP) to adjusted net income (non-GAAP):
Three Months Ended March
31,
(in thousands)
2021
2020
Net income
$
61,922
$
62,092
Non-GAAP adjustments:
Stock-based compensation
11,822
6,552
Total non-GAAP adjustments
11,822
6,552
Tax effect
(2,978
)
(1,751
)
Adjusted net income
$
70,766
$
66,893
% Change period over period
5.8
%
(18.0
) %
Following is a reconciliation of diluted
EPS (GAAP) to adjusted EPS (non-GAAP):
Three Months Ended March
31,
2021
2020
Diluted EPS
$
1.59
$
1.58
Non-GAAP adjustments:
Stock-based compensation
0.30
0.17
Total non-GAAP adjustments
0.30
0.17
Tax effect
(0.07
)
(0.05
)
Adjusted EPS
$
1.82
$
1.70
% Change period over period
7.1
%
(14.1
) %
Following is a reconciliation of GAAP to
non-GAAP financial measures for second quarter and full year 2021
guidance:
(in millions, except per share
amounts)
Q2 2021 Guidance
Full Year 2021
Guidance
Net income
$14 - $18
$118 - $139
Income tax expense
5 - 6
42 - 51
Interest expense
2
7
Depreciation and amortization
10
40
EBITDA
31 - 36
207 - 237
Stock-based compensation
13
43
Adjusted EBITDA
$44 - $49
$250 - $280
Diluted net income per share of common
stock
$0.36 - $0.46
$3.03 - $3.60
Non-GAAP adjustments:
Stock-based compensation
0.33
1.10
Total non-GAAP adjustments
0.33
1.10
Tax effect
(0.09)
(0.30)
Adjusted EPS
$0.60 - $0.70
$3.83 - $4.40
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210503005660/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: Larry Shaffer SVP of Marketing and
Business Development 281-312-3020 Media@Insperity.com
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