- Q3 EPS of $0.33 and adjusted EBITDA
of $22.6 million
- Gross profit contribution from
Strategic Business Units up 20%
- $35 million returned to stockholders
year-to-date through share repurchases and dividends
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 and nine
months ended Sept. 30, 2014. For the third quarter, the company
reported net income of $8.4 million and diluted earnings per share
of $0.33. Adjusted EBITDA totaled $22.6 million for the third
quarter.
“We are pleased with our recent financial results and the growth
acceleration that has unfolded over the past two quarters,” said
Paul J. Sarvadi, Insperity chairman and chief executive officer. “A
continuation of these trends, combined with a successful year-end
transition, would result in double-digit unit growth in 2015.”
Third Quarter Results
Revenues for the third quarter of 2014 increased 3.8% over the
third quarter of 2013 due to a 1.8% increase in the average number
of worksite employees paid per month and a 2.0% increase in
revenues per worksite employee per month. The average number of
paid worksite employees increased 2.6% sequentially over the second
quarter of 2014. Gross profit increased 3.5% compared to the third
quarter of 2013 to $100.8 million. Benefits costs per covered
employee increased 1.3%, less than expected, contributing to an
increase in the average gross profit per worksite employee per
month, from $251 in the third quarter of 2013 to $255 in the third
quarter of 2014. Included in gross profit in the third quarter of
2014 is an $18 per worksite employee per month contribution from
our Strategic Business Units, compared to $15 per worksite employee
per month in the third quarter of 2013.
Operating expenses increased to our forecasted level of $86.4
million and included $5.7 million in additional costs associated
with the development of our Human Capital Management product,
health care reform and an additional accrual for incentive
compensation based on better than expected operating results.
Excluding these items, operating expenses were flat compared to the
third quarter of 2013.
Year-to-Date Results
For the nine months ended Sept. 30, 2014, the company reported
adjusted net income of $21.4 million and adjusted diluted earnings
per share of $0.84. These earnings exclude after-tax costs of $1.6
million or $0.06 per share related to a second quarter non-cash
impairment charge associated with the reorganization of our
Employment Screening business. Reported net income for the nine
months ended Sept. 30, 2014 was $19.8 million, or $0.78 per diluted
share. Adjusted EBITDA totaled $61.5 million for this same
period.
Year-to-date revenues were $1.8 billion, an increase of 3.7%
over the 2013 period. Gross profit for the nine months ended Sept.
30, 2014 decreased to $302.4 million. The average gross profit per
worksite employee per month decreased 1.9%, to $261 in the 2014
period from $266 in the 2013 period.
Adjusted 2014 year-to-date operating expenses, excluding the
impact of the impairment charge, increased to $265.5 million from
$253.9 million in the 2013 period. Adjusted year-to-date operating
expenses increased by just 1.2% when excluding an additional $8.7
million of costs associated with the development of our Human
Capital Management product, health care reform, and the additional
accrual for incentive compensation based on better than expected
operating results.
“As a result of our focus on operating expense control
throughout 2014, we now expect approximately $16 million in cost
savings from our initial 2014 forecast,” said Douglas S. Sharp,
senior vice-president of finance, chief financial officer and
treasurer. “We intend to continue to focus on operating expense
control throughout 2015 to align with unit growth and customer
mix.”
Cash outlays in the first nine months of 2014 included the
repurchase of 693,262 shares of stock at a cost of $20.8 million,
dividends totaling $14.0 million and capital expenditures of $11.0
million. Working capital at Sept. 30, 2014 was $119.1 million.
Insperity will be hosting a conference call today at 10 a.m. ET
to discuss these results, give guidance for the fourth quarter and
answer questions from investment analysts. To listen in, call
877-651-0053 and use conference i.d. number 17729875. 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. 17729875. The webcast will be
archived for one year.
Insperity, a trusted advisor to America’s best businesses for
more than 28 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 Management,
Payroll Services, Time and Attendance, Performance Management,
Organizational Planning, Recruiting Services, Employment Screening,
Financial Services, Expense Management, Retirement Services and
Insurances Services. Insperity business performance solutions
support more than 100,000 businesses with over 2 million employees.
With 2013 revenues of $2.3 billion, Insperity operates in 57
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 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 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 and federal 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 acquisitions; (x)
failure of our information technology systems; and (xi) 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) September
30, December 31, 2014 2013
(Unaudited) Assets: Cash and cash equivalents $ 179,458 $
225,755 Restricted cash 57,222 51,928 Marketable securities 45,953
46,340 Accounts receivable, net 244,814 210,009 Prepaid insurance
30,613 10,638 Other current assets 12,851 12,053 Income taxes
receivable 2,740 409 Deferred income taxes
-
8,185 Total current assets 573,651 565,317
Property and equipment, net 82,765 86,415 Prepaid health insurance
9,000 9,000 Deposits 97,386 85,578 Goodwill and other intangible
assets, net 14,808 18,434 Other assets 1,748 1,816
Total assets $ 779,358 $ 766,560 Liabilities
and Stockholders’ Equity: Accounts payable $ 3,255 $ 2,678 Payroll
taxes and other payroll deductions payable 105,026 165,604 Accrued
worksite employee payroll cost 211,028 173,801 Accrued health
insurance costs 26,351 5,103 Accrued workers’ compensation costs
59,393 52,930 Accrued corporate payroll and commissions 26,474
21,611 Other accrued liabilities 23,008 14,960 Total
current liabilities 454,535 436,687 Accrued workers’
compensation costs 73,009 68,905 Deferred income taxes 3,806
7,696 Total noncurrent liabilities 76,815 76,601
Stockholders’ equity: Common stock 308 308 Additional paid-in
capital 136,972 135,653 Treasury stock, at cost (151,091 ) (138,688
) Accumulated other comprehensive income, net of tax 24 29 Retained
earnings 261,795 255,970 Total stockholders’ equity
248,008 253,272 Total liabilities and stockholders’
equity $ 779,358 $ 766,560
Insperity, Inc. Summary
Financial Information (continued) (in thousands, except per
share amounts and statistical data) (Unaudited)
Three Months Ended Nine Months Ended September
30, September 30, 2014 2013
Change 2014 2013
Change Operating results: Revenues (gross
billings of $3.362 billion, $3.236 billion, $10.231 billion and
$9.736 billion, less worksite employee payroll cost of $2.802
billion, $2.696 billion, $8.469 billion and $8.037 billion,
respectively) $ 560,303 $ 539,869 3.8 % $ 1,761,923 $ 1,698,979 3.7
% Direct costs: Payroll taxes, benefits and workers’ compensation
costs 459,486 442,460 3.8 %
1,459,477 1,395,706 4.6 % Gross profit 100,817
97,409 3.5 % 302,446 303,273 (0.3 )% Operating expenses: Salaries,
wages and payroll taxes 49,384 43,797 12.8 % 148,245 137,697 7.7 %
Stock-based compensation 2,701 2,749 (1.7 )% 8,346 8,351 (0.1 )%
Commissions 3,790 3,609 5.0 % 10,753 10,349 3.9 % Advertising 4,885
4,273 14.3 % 18,182 19,243 (5.5 )% General and administrative
expenses 20,295 20,567 (1.3 )% 64,143 62,592 2.5 % Depreciation and
amortization 5,302 5,302
-
15,827 15,692 0.9 % Impairment charge
-
-
-
2,485
-
100.0 % Total operating expenses 86,357
80,297 7.5 % 267,981 253,924 5.5
% Operating income 14,460 17,112 (15.5 )% 34,465 49,349 (30.2 )%
Other income (expense): Interest, net 9 26 (65.4 )% 80 155 (48.4 )%
Other, net 34 (1 )
-
20 (2,668 ) (100.7 )% Income before income tax
expense 14,503 17,137 (15.4 )% 34,565 46,836 (26.2 )% Income tax
expense 6,118 7,055 (13.3 )%
14,725 20,093 (26.7 )% Net income $ 8,385
$ 10,082 (16.8 )% $ 19,840 $ 26,743
(25.8 )% Less distributed and undistributed earnings allocated to
participating securities (243 ) (289 ) (15.9 )%
(576 ) (769 ) (25.1 )% Net income allocated to common
shares $ 8,142 $ 9,793 (16.9 )% $ 19,264 $
25,974 (25.8 )% Basic net income per share of common stock $
0.33 $ 0.39 (15.4 )% $ 0.78 $ 1.05
(25.7 )% Diluted net income per share of common stock $ 0.33
$ 0.39 (15.4 )% $ 0.78 $ 1.04 (25.0 )%
Insperity, Inc.
Summary Financial Information (continued) (in thousands,
except per share amounts and statistical data)
(Unaudited) Three Months Ended Nine Months
Ended September 30, September 30, 2014
2013 Change 2014
2013 Change
Statistical Data: Average number of worksite employees paid per
month 131,545 129,248 1.8 % 128,703 126,445 1.8 % Revenues per
worksite employee per month(1) $ 1,420 $ 1,392 2.0 % $ 1,521 $
1,493 1.9 %
Gross profit per worksite employee per
month
255 251 1.6 % 261 266 (1.9 )% Operating expenses per worksite
employee per month 218 207 5.3 % 231 223 3.6 % Operating income per
worksite employee per month 37 44 (15.9 )% 30 43 (30.2 )% Net
income per worksite employee per month 21 26 (19.2 )% 17 23 (26.1
)%
(1)
Gross billings of $8,519, $8,346, $8,832 and $8,555 per
worksite employee per month, less payroll cost of $7,099, $6,954,
$7,311 and $7,062 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 Nine
Months Ended September 30, September 30,
2014
2013
Change
2014
2013 Change
Payroll cost (GAAP) $ 2,801,722
$
2,696,330
3.9 %
$
8,468,804
$ 8,036,532 5.4 % Less: Bonus payroll cost 204,405
192,868
6.0 %
947,751
706,795 34.1 % Non-bonus payroll cost $ 2,597,317
$
2,503,462
3.7 %
$
7,521,053
$ 7,329,737 2.6 % Payroll cost per worksite employee per
month (GAAP) $ 7,099 $ 6,954 2.1 % $ 7,311 $ 7,062 3.5 % Less:
Bonus payroll cost per worksite employee per month 518
498 4.0 % 818 621 31.7 % Non-bonus payroll
cost per worksite employee per month $ 6,581 $ 6,456 1.9 % $ 6,493
$ 6,441 0.8 % 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 Nine
Months Ended September 30, September 30,
2014
2013
Change
2014 2013 Change Operating expenses
(GAAP)
$
86,357
$
80,297
7.5
%
$ 267,981 $ 253,924 5.5 % Impairment charge
-
-
-
2,485
-
100.0 % Adjusted operating expenses
$
86,357
$
80,297
7.5
%
$ 265,496 $ 253,924 4.6 %
Adjusted operating expenses represent
operating expenses excluding the impact of impairment charges.
Three Months Ended Nine Months
Ended September 30, September 30,
2014
2013
Change
2014 2013 Change Net income (GAAP)
$
8,385
$ 10,082
(16.8
)%
$ 19,840 $ 26,743 (25.8 )% Income tax expense
6,118
7,055
(13.3
)%
14,725 20,093 (26.7 )% Interest expense
104
88
18.2
%
281 264 6.4 % Depreciation and amortization
5,302
5,302
-
15,827 15,692 0.9 % EBITDA
19,909
22,527
(11.6
)%
50,673 62,792 (19.3 )% Impairment charges
-
-
-
2,485 2,679 (7.2 )% Stock-based compensation
2,701
2,749
(1.7
)%
8,346 8,351 (0.1 )% Adjusted EBITDA
$
22,610
$ 25,276
(10.5
)%
$ 61,504 $ 73,822 (16.7 )% 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 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 taxes and capital and financing transactions on earnings.
Three Months Ended Nine Months Ended
September 30, September 30,
2014
2013
Change
2014 2013 Change Net income (GAAP)
$
8,385
$ 10,082
(16.8
)%
$ 19,840 $ 26,743 (25.8 )% Impairment charges, net of tax -
- - 1,566 2,679 (41.5 )% Adjusted net income
$
8,385
$ 10,082
(16.8
)%
$
21,406
$ 29,422 (27.2 )%
Three Months Ended Nine
Months Ended September 30, September 30,
2014
2013
Change
2014
2013 Change Diluted net income per share of
common stock (GAAP) $ 0.33 $ 0.39 (15.4 )% $ 0.78 $ 1.04 (25.0 )%
Impairment charges, net of tax - - - 0.06
0.10 (40.0 )% Adjusted diluted net income per share of
common stock $ 0.33 $ 0.39 (15.4 )% $ 0.84 $ 1.14 (26.3 )%
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 the
impairment charge related to Employment Screening reporting unit in
2014 and the impairment charge related to The Receivables Exchange
in 2013. 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 the impairment.
Non-bonus payroll, 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, 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. Insperity
includes non-bonus payroll, EBITDA, adjusted EBITDA, adjusted net
income and adjusted diluted net income per share of common stock 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.
Insperity, Inc.Investor Relations Contact:Douglas
S. Sharp, (281) 348-3232Senior Vice President of Finance,Chief
Financial Officer and TreasurerorNews Media Contact:Jason
Cutbirth, (281) 312-3085Senior Vice President of
Marketingjason.cutbirth@insperity.com
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