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, 2018:
- Revenues up 15% on worksite employee
growth of 12%
- Gross profit up 25% on strong pricing
and direct cost trends
- Net income up 40% to $50.0 million
- Adjusted EBITDA up 34% to $83.8
million
- EPS up 39% to $1.18; adjusted EPS up
53% to $1.41
First Quarter Results
First quarter 2018 net income and diluted earnings per share of
$50.0 million and $1.18 represented increases of 40% and 39%,
respectively, compared to the first quarter of 2017. Adjusted
diluted earnings per share were $1.41, a 53% increase over the
first quarter of 2017. Adjusted EBITDA increased 34% over the first
quarter of 2017 to $83.8 million.
“We are pleased to report these outstanding record results
reflecting our dynamic business model and strong execution all
across the company,” said Paul J. Sarvadi, Insperity chairman and
chief executive officer. “Our key drivers to growth and
profitability are in place setting up a fourth consecutive year of
impressive earnings growth for 2018.”
Revenues increased 15% over the first quarter of 2017 to $1.0
billion on a 12% increase in the average number of worksite
employees paid per month. The continued double-digit worksite
employee growth was the result of strong new client sales driven by
an increase in the number of trained Business Performance Advisors,
a continuing high level of client retention, and an improvement in
the net hiring of worksite employees by our client base. Worksite
employees paid from new sales increased 23% over the first quarter
of 2017 on a 15% increase in the average number of trained Business
Performance Advisors. Client attrition totaled only 8% during the
heavy first quarter client renewal period, an improvement over the
first quarter of 2017.
Gross profit for the first quarter of 2018 increased 25% over
the first quarter of 2017 to $199.7 million. This increase was
driven by the 12% worksite employee growth, lower cost trends in
our benefits and workers’ compensation programs and solid pricing.
Operating expenses increased 28% over the first quarter of 2017 to
$135.0 million, including one-time bonuses related to tax reform
and additional accruals for incentive compensation tied to our
outperformance during the quarter.
Net income and adjusted EBITDA per worksite employee per month
increased 25% and 19%, respectively, over the first quarter of 2017
to $85 and $143, respectively.
The first quarter 2018 effective income tax rate of 23% was
impacted by the enactment of tax reform in late 2017 and the
benefit associated with the vesting of long-term incentive plan
shares during the quarter.
“Our double-digit worksite employee growth, combined with the
effective management of pricing and direct cost programs, continued
to produce adjusted EBITDA at record levels,” said Douglas S.
Sharp, senior vice president of finance, chief financial officer
and treasurer. “This strong cash flow positions us to continue to
invest in the growth of our business while also providing excellent
shareholder returns.”
2018 Guidance
The company also announced its updated guidance for 2018,
including the second quarter of 2018. 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 2018
Full Year 2018 Average
WSEEs 202,000 — 203,700 206,400 — 208,400 Year-over-year increase
12% — 13% 13% — 14% Adjusted EPS $0.59 — $0.63 $3.36 — $3.44
Year-over-year increase 44% — 54% 37% — 40% Adjusted EBITDA
(in millions) $41 — $43 $218 — $223 Year-over-year increase 23% —
29% 23% — 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
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 second 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 6688618. 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.
6688618. The webcast will be archived for one year.
Insperity, a trusted advisor to America’s best businesses for
more than 32 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,
Expense Management Services, Retirement Services and Insurance
Services. Insperity business performance solutions support more
than 100,000 businesses with over 2 million employees. With 2017
revenues of $3.3 billion, Insperity operates in 68 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 and other developments in the human
resources services industry, including 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)
March 31,
2018
December 31,
2017
(Unaudited) Assets: Cash and cash equivalents $ 354,641 $
354,260 Restricted cash 41,137 41,137 Marketable securities 1,928
1,960 Accounts receivable, net 336,548 333,981 Prepaid insurance
35,679 10,782 Other current assets 28,385 26,991 Income taxes
receivable 2,695 9,824 Total current assets 801,013
778,935 Property and equipment, net 97,060 95,659 Prepaid health
insurance 9,000 9,000 Deposits 166,140 159,515 Goodwill and other
intangible assets, net 12,741 12,762 Deferred income taxes, net —
4,283 Other assets 5,513 3,541 Total assets $
1,091,467 $ 1,063,695 Liabilities and stockholders’
equity: Accounts payable $ 5,517 $ 6,447 Payroll taxes and other
payroll deductions payable 276,573 303,247 Accrued worksite
employee payroll cost 281,474 267,402 Accrued health insurance
costs 46,795 26,075 Accrued workers’ compensation costs 43,788
42,974 Accrued corporate payroll and commissions 27,785 52,595
Other accrued liabilities 27,697 27,741 Total current
liabilities 709,629 726,481 Accrued workers’ compensation cost
171,773 166,493 Long-term debt 104,400 104,400 Deferred income
taxes, net 2,833 — Total noncurrent liabilities
279,006 270,893 Stockholders’ equity: Common stock 555 555
Additional paid-in capital 22,648 25,337 Treasury stock, at cost
(257,898 ) (256,363 ) Retained earnings 337,527 296,792
Total stockholders’ equity 102,832 66,321
Total liabilities and stockholders’ equity $ 1,091,467 $
1,063,695
Insperity, Inc.
Summary Financial Information
(continued)
(in thousands, except per share amounts
and statistical data)
(Unaudited)
Three Months Ended
March 31,
2018 2017 Change
Operating results:
Revenues (gross billings of $5.923 billion
and $5.016 billion, less worksite employee
payroll cost of $4.909 billion
and $4.133 billion, respectively)
$ 1,014,372 $ 882,664 14.9 % Direct costs: Payroll taxes, benefits
and workers’ compensation costs 814,652 723,318 12.6
% Gross profit 199,720 159,346 25.3 % Operating expenses: Salaries,
wages and payroll taxes 87,186 62,457 39.6 % Stock-based
compensation 3,135 4,503 (30.4 )% Commissions 6,066 4,476 35.5 %
Advertising 3,565 3,972 (10.2 )% General and administrative
expenses 29,852 26,192 14.0 % Depreciation and amortization 5,213
4,254 22.5 % Total operating expenses 135,017
105,854 27.6 % Operating income 64,703 53,492 21.0 % Other
income (expense): Interest income 1,456 465 213.1 % Interest
expense (1,070 ) (623 ) 71.7 % Income before income tax expense
65,089 53,334 22.0 % Income tax expense 15,098 17,706
(14.7 )% Net income $ 49,991 $ 35,628 40.3 % Less
distributed and undistributed earnings allocated to participating
securities (585 ) (781 ) (25.1 )% Net income allocated to common
shares $ 49,406 $ 34,847 41.8 % Basic net income per
share of common stock $ 1.20 $ 0.85 41.2 % Diluted
net income per share of common stock $ 1.18 $ 0.85
38.8 %
Insperity, Inc.
Summary Financial Information
(continued)
(in thousands, except per share amounts
and statistical data)
(Unaudited)
Three Months Ended
March 31,
2018 2017 Change
Statistical Data: Average number of worksite employees paid
per month 195,683 174,354 12.2 % Revenues per worksite employee per
month(1) $ 1,728 $ 1,687 2.4 % Gross profit per worksite employee
per month 340 305 11.5 % Operating expenses per worksite employee
per month 230 202 13.9 % Operating income per worksite employee per
month 110 102 7.8 % Net income per worksite employee per month 85
68 25.0 %
(1) Gross billings of $10,090 and $9,589 per worksite employee
per month, less payroll cost of $8,362 and $7,902 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
March 31,
2018 2017 Change
Payroll cost (GAAP) $ 4,908,984 $ 4,132,992 18.8 % Less:
Bonus payroll cost 830,861 615,258 35.0 % Non-bonus
payroll cost $ 4,078,123 $ 3,517,734 15.9 %
Payroll cost per worksite employee per month (GAAP) $ 8,362 $ 7,902
5.8 % Less: Bonus payroll cost per worksite employee per month
1,415 1,177 20.2 % Non-bonus payroll cost per
worksite employee per month $ 6,947 $ 6,725 3.3 %
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.
March 31,
2018
December 31,
2017
Cash, cash equivalents and marketable securities (GAAP) $
356,569 $ 356,220
Less: Amounts payable for withheld federal
and state income taxes, employment taxes and
other
payroll deductions
254,202 271,547 Client prepayments 14,863 23,603 Adjusted
cash, cash equivalents and marketable securities $ 87,504 $
61,070
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
March 31,
2018 2017 Change
Operating expenses (GAAP) $ 135,017 $ 105,854 27.6 % Less:
One-time tax reform bonus 9,306 — — Adjusted
operating expenses $ 125,711 $ 105,854 18.8 %
Operating expenses per worksite employee per month (GAAP) $ 230 $
202 13.9 % Less: One-time tax reform bonus per worksite employee
per month 16 — — Adjusted operating expenses per
worksite employee per month $ 214 $ 202 5.9 %
Adjusted operating expenses represent operating expenses
excluding the impact of the one-time tax reform bonus. 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
March 31,
2018 2017 Change
Net income (GAAP) $ 49,991 $ 35,628 40.3 % Income tax
expense 15,098 17,706 (14.7 )% Interest expense 1,070 623 71.7 %
Depreciation and amortization 5,213 4,254 22.5 %
EBITDA 71,372 58,211 22.6 % Stock-based compensation 3,135 4,503
(30.4 )% One-time tax reform bonus 9,306 — — Adjusted
EBITDA $ 83,813 $ 62,714 33.6 % Net income per
worksite employee per month (GAAP) $ 85 $ 68 25.0 % Income tax
expense per worksite employee per month 26 34 (23.5 )% Interest
expense per worksite employee per month 2 1 100.0 %
Depreciation and amortization per worksite employee per month 9
8 12.5 % EBITDA per worksite employee per month 122
111 9.9 % Stock-based compensation per worksite employee per month
5 9 (44.4 )% One-time tax reform bonus per worksite employee per
month 16 — — Adjusted EBITDA per worksite employee
per month $ 143 $ 120 19.2 %
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 costs associated with a
one-time tax reform bonus paid to corporate employees and non-cash
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
and Adjusted EBITDA is used by our lenders to assess our leverage
and ability to make interest payments.
Three Months Ended
March 31,
2018 2017 Change
Net income (GAAP) $ 49,991 $ 35,628 40.3 % Non-GAAP
adjustments: Stock-based compensation 3,135 4,503 (30.4 )% One-time
tax reform bonus 9,306 — — Total non-GAAP adjustments
12,441 4,503 176.3 % Tax effect (2,886 ) (1,495 ) 93.0 % Adjusted
net income $ 59,546 $ 38,636 54.1 %
Three Months Ended
March 31,
2018 2017 Change
Diluted net income per share of common stock (GAAP) $ 1.18 $
0.85 38.8 % Non-GAAP adjustments: Stock-based compensation 0.07
0.11 (36.4 )% One-time tax reform bonus 0.22 — —
Total non-GAAP adjustments 0.29 0.11 163.6 % Tax effect (0.06 )
(0.04 ) 50.0 % Adjusted diluted net income per share of common
stock $ 1.41 $ 0.92 53.3 %
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 non-cash
stock-based compensation and costs associated with a one-time tax
reform bonus paid to corporate employees. Insperity management
believes adjusted net income and adjusted diluted net income per
share of common stock 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 second quarter and full year 2018 guidance (in
millions, except per share amounts):
Q2 2018
Guidance
Full Year 2018
Guidance
Net income (GAAP) $21 - $22 $120 - $124 Income tax expense 8
- 9 43 - 44 Interest expense 1 4 Depreciation and amortization 5
22 EBITDA 35 - 37 189 - 194 One-time tax reform bonus
— 9 Stock-based compensation 6 20 Adjusted EBITDA $41
- 43 $218 - $223 Diluted net income per share
of common stock (GAAP) $0.50 - $0.54 $2.85 - $2.93 Non-GAAP
adjustments: One-time tax reform bonus — 0.22 Stock-based
compensation 0.13 0.47 Total non-GAAP adjustments
0.13 0.69 Tax effect (0.04 ) (0.18 ) Adjusted EPS $0.59 - $0.63
$3.36 - $3.44
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version on businesswire.com: https://www.businesswire.com/news/home/20180430005228/en/
Insperity, Inc.Investor Relations Contact:Douglas
S. Sharp, (281) 348-3232Senior Vice President of Finance,Chief
Financial Officer and
TreasurerInvestor.Relations@Insperity.comorNews Media
Contact:Suzanne Haugen, (281) 312-3543Public Relations
ManagerMedia@Insperity.com
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