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 and six
months ended June 30, 2012. For the second quarter, the company
reported net income of $5.6 million and diluted earnings per share
of $0.22.
For the six months ended June 30, 2012, the company reported net
income of $19.5 million, a 25.6% increase over the $15.5 million
earned in the 2011 period. Diluted earnings per share were $0.75,
an increase of 27.1% over the 2011 period.
“We are pleased with the quarter and the first half of 2012,
especially against the backdrop of a slowing economy,” said Paul J.
Sarvadi, Insperity chairman and chief executive officer. “We are
positioned well to continue our business transformation, including
cross-selling current and new product offerings over the balance of
the year.”
Second Quarter Results
Revenues for the second quarter of 2012 increased 9.8% over the
second quarter of 2011 due to an 8.3% increase in the average
number of worksite employees paid per month and a 1.3% increase in
revenues per worksite employee per month. Gross profit increased
4.1% over the second quarter of 2011 to $87.3 million. The average
gross profit per worksite employee per month decreased $10, or 4.1%
to $234, compared to the second quarter of 2011. Gross profit
results included better than expected results from workers’
compensation and payroll taxes, including a $2.9 million
payroll-related tax credit, offset by an adjustment for higher than
expected runoff of health insurance claims incurred in prior
quarters.
Operating expenses increased 7.5% to $77.9 million compared to
the second quarter of 2011. This increase included costs associated
with the Insperity ChampionshipTM professional golf tournament,
moved from its historical fourth quarter date to the second
quarter. In addition, 2012 included higher salaries and wages due
in part to our adjacent businesses, partially offset by the
non-recurrence of expenses related to our 2011 rebranding
initiative. Operating expenses per worksite employee per month
decreased 0.9% to $209 in the 2012 quarter compared to $211 in the
2011 quarter.
Year-to-Date Results
Year-to-date revenues were $1.1 billion, an increase of 10.4%
over the 2011 period. Gross profit for the six months ended June
30, 2012, increased 8.9% to $190.3 million. The average gross
profit per worksite employee per month increased $1, or 0.4%, to
$258 in the 2012 period from $257 in the 2011 period.
Year-to-date operating expenses increased 6.5% over the first
six months of 2011 to $157.8 million. This increase was primarily
due to costs associated with the Insperity ChampionshipTM
professional golf tournament, which was moved into the first half
of the year; higher salaries and wages due in part to our adjacent
businesses; partially offset by the non-recurrence of expenses
related to our 2011 rebranding initiative. On a per worksite
employee per month basis, operating expenses decreased 1.8% to $214
in the 2012 period from $218 in the 2011 period.
EBITDA plus stock-based compensation increased 19.8% to $46.7
million compared to the first six months of 2011. In addition, the
company received a $2.5 million scheduled reimbursement from its
workers’ compensation program during the second quarter. Cash
outlays included dividends of $8.3 million, capital expenditures of
$8.3 million and the repurchase of 433,011 shares at a cost of
$11.7 million. Working capital at June 30, 2012, was $133.5
million, an increase of $6.9 million over December 31, 2011.
“Our continued strong cash flow allowed us to recently increase
our dividend rate and repurchase shares while continuing to invest
in our long-term growth objectives,” said Douglas S. Sharp, senior
vice-president of finance, chief financial officer and
treasurer.
Insperity will be hosting a conference call today at 10 a.m. ET
to discuss these results, give guidance for the third quarter and
update the full year 2012 guidance, and answer questions from
investment analysts. To listen in, call 877-651-0053 and use
conference i.d. number 99087999. The call will also be webcast at
http://ir.insperity.com. The conference call script and company
guidance 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. 99087999, for one week. The webcast will be
archived for one year.
Insperity, a trusted advisor to America’s best businesses for
more than 25 years, provides an array of human resources and
business solutions designed to help improve business performance.
InsperityTM Business Performance Advisors offer the most
comprehensive Workforce OptimizationTM solution in the marketplace
that delivers administrative relief, better benefits, reduced
liabilities and a systematic way to improve productivity.
Additional offerings include MidMarket SolutionsTM, Performance
Management, Expense Management, Time and Attendance, Organizational
Planning, Recruiting Services, Employment Screening, Retirement
Services and Insurance Services. Insperity business performance
solutions support more than 100,000 businesses with over 2 million
employees. With 2011 revenues of $2 billion, Insperity operates in
56 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) continued
effects of the economic recession and general 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 contracts at expiration of
current contracts; (iv) 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; (v) failure to manage growth of our
operations and the effectiveness of our sales and marketing
efforts; (vi) changes in the competitive environment in the PEO
industry, including the entrance of new competitors and our ability
to renew or replace client companies; (vii) our liability for
worksite employee payroll, payroll taxes and benefits costs; (viii)
our liability for disclosure of sensitive or private information;
(ix) our ability to integrate or realize expected returns on our
Adjacent Business strategy, including acquisitions; and (x) an
adverse final judgment or settlement of claims against Insperity.
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,
December 31,
2012 2011
(Unaudited) Assets Cash and cash equivalents $ 180,590 $
211,208 Restricted cash 44,580 44,737 Marketable securities 57,182
56,987 Accounts receivable 176,428 170,933 Prepaid insurance 18,152
21,300 Other current assets 8,133 11,488 Income taxes receivable
-
2,902 Deferred income taxes
2,851
3,233 Total current assets 487,916 522,788
Property and equipment, net 93,491 92,944 Prepaid health
insurance 9,000 9,000 Deposits 59,217 54,960 Goodwill and other
intangible assets, net 27,565 28,433 Other assets
4,868 4,134 Total
assets
$ 682,057 $
712,259 Liabilities and Stockholders’
Equity Accounts payable $ 2,873 $ 5,085 Payroll taxes and other
payroll deductions payable 122,590 168,652 Accrued worksite
employee payroll expense 144,885 130,317 Accrued health insurance
costs 9,868 9,427 Accrued workers’ compensation costs 45,320 46,548
Accrued corporate payroll and commissions 13,474 22,383 Other
accrued liabilities 14,008 13,814 Income taxes payable
1,429
-
Total current liabilities 354,447 396,226 Accrued
workers’ compensation costs 63,664 60,054 Deferred income taxes
11,414 10,772
Total noncurrent liabilities 75,078 70,826 Stockholders’
equity: Common stock 309 309 Additional paid-in capital 136,762
135,871 Treasury stock, cost (139,467 ) (134,647 ) Accumulated
other comprehensive income, net of tax 58 24 Retained earnings
254,870 243,650
Total stockholders’ equity
252,532
245,207 Total liabilities and
stockholders’ equity
$ 682,057
$ 712,259
Insperity, Inc. Summary Financial Information
(continued) (in thousands, except per share amounts and
statistical data) (Unaudited)
Three months ended
Six months ended June
30, June 30, 2012
2011
Change 2012
2011
Change Operating results: Revenues
(gross billings of $3.039 billion, $2.731 billion, $6.271 billion
and $5.619 billion, less worksite employee payroll cost of $2.520
billion, $2.258 billion, $5.156 billion and $4.610 billion,
respectively) $ 519,256 $ 472,903 9.8 % $ 1,114,433 $ 1,009,284
10.4 % Direct costs: Payroll taxes, benefits and workers’
compensation costs 431,962 389,062 11.0
% 924,135 834,484 10.7 % Gross profit
87,294 83,841 4.1 % 190,298 174,800 8.9 % Operating expenses:
Salaries, wages and payroll taxes 40,047 38,467 4.1 % 83,370 78,064
6.8 % Stock-based compensation 2,801 2,556 9.6 % 4,956 4,346 14.0 %
General and administrative expenses 18,494 17,023 8.6 % 40,572
38,916 4.3 % Commissions 3,506 3,255 7.7 % 6,941 6,351 9.3 %
Advertising 8,566 7,539 13.6 % 13,321 13,045 2.1 % Depreciation and
amortization
4,465
3,601 24.0 %
8,677
7,549 14.9 % Total operating expenses
77,879 72,441
7.5 %
157,837
148,271 6.5 % Operating income 9,415 11,400
(17.4 )% 32,461 26,529 22.4 % Other income: Interest income, net
176 304 (42.1
)%
464 588
(21.1 )% Income before income tax expense 9,591 11,704 (18.1 )%
32,925 27,117 21.4 % Income tax expense
3,970
4,963 (20.0 )%
13,420 11,590 15.8 %
Net income
$ 5,621 $
6,741 (16.6 )%
$
19,505 $ 15,527
25.6 % Less net income allocated to participating securities
(162 ) (199 ) (18.6 )% (564 ) (463 )
21.8 % Net income allocated to common shares
$
5,459 $ 6,542
(16.6 )%
$ 18,941 $
15,064 25.7 % Basic net income per share of
common stock
$ 0.22 $
0.25 (12.0 )%
$ 0.75
$ 0.59 27.1 % Diluted net
income per share of common stock $ 0.22 $ 0.25 (12.0
)% $ 0.75 $ 0.59 27.1 %
Insperity,
Inc. Summary Financial Information (continued) (in
thousands, except per share amounts and statistical data)
(Unaudited)
Three
months ended
Six months ended June
30, June 30, 2012
2011 Change
2012
2011 Change
Statistical data: Average number of worksite employees paid per
month 124,219 114,656 8.3 % 123,079 113,533 8.4 % Revenues per
worksite employee
per month(1)
$ 1,393 $ 1,375 1.3 % $ 1,509 $ 1,482 1.8 % Gross profit per
worksite employee per month 234 244 (4.1 )% 258 257 0.4 % Operating
expenses per worksite employee per month 209 211 (0.9 )% 214 218
(1.8 )% Operating income per worksite employee per month 25 33
(24.2 )% 44 39 12.8 % Net income per worksite employee per month 15
20 (25.0 )% 26 23 13.0 %
(1)
Gross billings of $8,156, $7,938, $8,491 and $8,249
per worksite employee per month, less payroll cost of $6,763,
$6,563, $6,982 and $6,767 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 Six months ended June 30,
June 30, 2012 2011
Change 2012
2011 Change Payroll
cost (GAAP) $ 2,520,058 $ 2,257,602 11.6 % $ 5,156,187 $ 4,609,865
11.9 % Less: Bonus payroll cost
204,042
164,612 24.0 %
571,865
469,461 21.8 % Non-bonus payroll cost
$
2,316,016 $ 2,092,990 10.7 %
$ 4,584,322 $
4,140,404 10.7 % Payroll cost per worksite
employee per month (GAAP) $ 6,763 $ 6,563 3.0 % $ 6,982 $ 6,767 3.2
% Less: Bonus payroll cost per worksite employee per month
548 478 14.6 % 774 689 12.3 % Non-bonus
payroll cost per worksite employee per month $ 6,215 $ 6,085 2.1 %
$ 6,208 $ 6,078 2.1 %
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.
Three months ended Six months ended June
30, June 30, 2012
2011
Change 2012
2011
Change Net income (GAAP) $ 5,621 $ 6,741 (16.6
)% $ 19,505 $ 15,527 25.6 % Income tax expense 3,970 4,963 (20.0 )%
13,420 11,590 15.8 % Interest expense 88
-
-
176
-
-
Depreciation and amortization
4,465
3,601 24.0 %
8,677
7,549 14.9 % EBITDA 14,144 15,305 (7.6 )% 41,778
34,666 20.5 % Stock-based compensation
2,801
2,556 9.6 %
4,956
4,346 14.0 %
$ 16,945
$ 17,861 (5.1 )%
$
46,734 $ 39,012 19.8 %
EBITDA represents net income computed in accordance with
generally accepted accounting principles (“GAAP”), plus interest
expense, income tax expense, depreciation and amortization expense.
Insperity management believes EBITDA is often a useful measure of
the company’s operating performance, as it allows for additional
analysis of the company’s operating results separate from the
impact of taxes and capital and financing transactions on
earnings.
Non-bonus payroll and EBITDA are not financial measures prepared
in accordance with GAAP and may be different from similar measures
used by other companies. Non-bonus payroll and EBITDA should not be
considered as a substitute for, or superior to, measures of
financial performance prepared in accordance with GAAP. Insperity
includes non-bonus payroll and EBITDA in this press release because
the company believes they are useful to investors in allowing for
greater transparency related to the costs incurred under the
company’s workers’ compensation program and the company’s operating
performance during the periods presented. 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.
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