NSP Insperity Inc

• Q3 adjusted EPS up 46% to $0.57 on 12% revenue growth
• Q3 adjusted EBITDA increases 25% to $28.3 million
• Q3 operating expenses up less than 1% over 2014 on 13% unit growth
• YTD adjusted EBITDA and adjusted EPS up 52% and 81%, respectively
• YTD return to stockholders through share repurchases and dividends of $75 million

Insperity, Inc. (NYSE: NSP), a leading provider of human resources and business performance solutions for America’s best businesses, today reported third quarter adjusted EBITDA of $28.3 million, a 25.1% increase over the third quarter of 2014. Adjusted net income was $14.2 million and adjusted diluted earnings per share were $0.57, a 46.2% increase over the third quarter of 2014. Reported third quarter GAAP net income and diluted earnings per share were $12.0 million and $0.48, respectively.

“We are pleased with our third quarter and year-to-date results, which demonstrate solid execution of our plan to accelerate unit growth while controlling operating costs,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “We have significant momentum to continue strong sales and retention through year end, which would set the stage for another year of double-digit worksite employee growth and operating leverage in 2016.”

Third Quarter Results

Revenues for the third quarter of 2015 increased 11.8% over the third quarter of 2014. The average number of worksite employees paid per month increased 13.3% during the quarter, a continued acceleration from the 11.6% year-over-year growth in the second quarter and 9.2% in first quarter of 2015. All three drivers to worksite employee growth, including sales, client retention and net hiring in our client base, improved over the third quarter of 2014.

“Our direct cost programs, including benefits, payroll taxes and workers’ compensation costs, continue to remain stable and trend favorably, as demonstrated by a benefits cost increase of only 1.9% in the third quarter,” said Richard G. Rawson, Insperity president. “In addition, gross profit increased 13%, in line with worksite employee growth when excluding the $6.4 million benefits credit related to lower than expected claims run-off in the third quarter of 2014.”

While reported gross profit increased 5.9% over the third quarter of 2014, operating expenses increased less than 1% and included costs associated with continued growth in the number of Business Performance Advisors and targeted reductions in advertising and general and administrative costs.

Year-to-Date Results

For the nine months ended Sept. 30, 2015, adjusted EBITDA increased 51.6% to $93.2 million and adjusted diluted earnings per share increased 80.6% to $1.86. Reported 2015 GAAP net income was $33.1 million, or diluted earnings per share of $1.32.

Revenues in the first nine months of 2015 were $2.0 billion, an increase of 10.9% over the 2014 period on an 11.4% increase in the average number of worksite employees paid per month. Gross profit for the nine months ended Sept. 30, 2015 increased 12.7% to $340.8 million, while adjusted operating expenses increased only 2.6% to $272.5 million.

“We have repurchased 1.2 million shares of stock at a cost of $59 million and paid dividends totaling $16 million through the third quarter,” said Douglas S. Sharp, Insperity senior vice president of finance, chief financial officer and treasurer. “Our strong cash flow has led to a $3 million increase in working capital after returning $75 million to stockholders so far this year.”

2015 Guidance

The company also announced its updated guidance for 2015, including the fourth quarter of 2015.

      Q4 2015 Full Year 2015         Average WSEEs 153,000

-

154,000 145,800

-

146,000   Adjusted EPS $0.40

-

$0.42 $2.26

-

$2.28   Adjusted EBITDA (in millions) $21.0

-

$22.0 $114.0

-

$115.0  

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 impairment and other charges, stockholder advisory expenses and stock-based compensation. Note that beginning in 2015, the company began excluding stock-based compensation when reporting Adjusted EPS.

Adjusted EBITDA - Represents net income computed in accordance with GAAP, plus interest expense, income taxes, depreciation, amortization, stock-based compensation, non-cash impairment and other charges and stockholder advisory expenses.

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.

Insperity will be hosting a conference call today at 10 a.m. ET to discuss these results, provide guidance for the fourth quarter and answer questions from investment analysts. To listen in, call 877-651-0053 and use conference i.d. number 56772990. 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. 56772990. The webcast will be archived for one year.

Insperity, a trusted advisor to America’s best businesses for more than 29 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 Software, 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 2014 revenues of $2.4 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 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) 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) the impact of the competitive environment in the PEO industry on our growth and/or profitability; (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; (xi) an adverse final judgment or settlement of claims against Insperity; and (xii) 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)

 

September 30,2015

December 31,2014

(Unaudited) Assets: Cash and cash equivalents $ 201,085 $ 276,456 Restricted cash 43,056 44,040 Marketable securities 9,754 28,631 Accounts receivable, net 273,421 175,116 Prepaid insurance 20,177 21,301 Other current assets 15,279 17,649 Deferred income taxes 5,692   6,316   Total current assets 568,464 569,509 Property and equipment, net 58,023 84,345 Prepaid health insurance 9,000 9,000 Deposits 124,872 117,634 Goodwill and other intangible assets, net 13,780 14,457 Deferred income taxes 4,466

-

Other assets 1,488   1,725   Total assets $ 780,093   $ 796,670   Liabilities and Stockholders’ Equity: Accounts payable $ 2,613 $ 4,674 Payroll taxes and other payroll deductions payable 116,257 176,341 Accrued worksite employee payroll cost 251,966 192,396 Accrued health insurance costs 12,661 18,329 Accrued workers’ compensation costs 45,798 45,592 Accrued corporate payroll and commissions 34,654 32,644 Other accrued liabilities 23,139 22,444 Income taxes payable 4,976   4,031   Total current liabilities 492,064 496,451 Accrued workers’ compensation costs 112,088 92,048 Deferred income taxes

-

  4,075   Total noncurrent liabilities 112,088 96,123 Stockholders’ equity: Common stock 308 308 Additional paid-in capital 143,951 137,769 Treasury stock, at cost (200,043 ) (148,465 ) Accumulated other comprehensive income, net of tax 5 3 Retained earnings 231,720   214,481   Total stockholders’ equity 175,941   204,096   Total liabilities and stockholders’ equity $ 780,093   $ 796,670        

Insperity, Inc.

Summary Financial Information (continued)

(in thousands, except per share amounts and statistical data)

(Unaudited)

 

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2015   2014   Change 2015   2014   Change Operating results:

Revenues (gross billings of $3.826 billion, $3.362

billion, $11.469 billion and $10.231 billion less

worksite employee payroll cost of $3.200 billion,

$2.802 billion, $9.515 billion and $8.469 billion,

respectively)

$ 626,286 $ 560,303 11.8 % $ 1,953,603 $ 1,761,923 10.9 % Direct costs:

Payroll taxes, benefits and workers’ compensation

costs

519,543   459,486   13.1 % 1,612,781   1,459,477   10.5 % Gross profit 106,743 100,817 5.9 % 340,822 302,446 12.7 % Operating expenses: Salaries, wages and payroll taxes 51,329 49,384 3.9 % 158,311 148,245 6.8 % Stock-based compensation 3,710 2,701 37.4 % 10,174 8,346 21.9 % Commissions 4,516 3,790 19.2 % 12,923 10,753 20.2 % Advertising 3,574 4,885 (26.8 )% 14,681 18,182 (19.3 )% General and administrative expenses 19,191 20,295 (5.4 )% 63,578 64,143 (0.9 )% Depreciation and amortization 4,487 5,302 (15.4 )% 14,362 15,827 (9.3 )% Impairment charges and other

-

 

-

 

-

11,120   2,485   347.5 % Total operating expenses 86,807   86,357   0.5 % 285,149   267,981   6.4 % Operating income 19,936 14,460 37.9 % 55,673 34,465 61.5 % Other income (expense): Interest, net 3 9 (66.7 )% 2 80 (97.5 )% Other, net 16   34   (52.9 )% (16 ) 20   (180.0 )% Income before income tax expense 19,955 14,503 37.6 % 55,659 34,565 61.0 % Income tax expense 8,005   6,118   30.8 % 22,608   14,725   53.5 % Net income $ 11,950   $ 8,385   42.5 % $ 33,051   $ 19,840   66.6 %

Less distributed and undistributed earnings allocated

to participating securities

(303 ) (243 ) 24.7 % (822 ) (576 ) 42.7 % Net income allocated to common shares $ 11,647   $ 8,142   43.0 % $ 32,229   $ 19,264   67.3 % Basic net income per share of common stock $ 0.48   $ 0.33   45.5 % $ 1.32   $ 0.78   69.2 % Diluted net income per share of common stock $ 0.48   $ 0.33   45.5 % $ 1.32   $ 0.78   69.2 %      

Insperity, Inc.

Summary Financial Information (continued)

(in thousands, except per share amounts and statistical data)

(Unaudited)

 

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2015   2014   Change 2015   2014   Change   Statistical Data:

Average number of worksite employees paid per

month

149,086 131,545 13.3 % 143,392 128,703 11.4 % Revenues per worksite employee per month(1) $ 1,400 $ 1,420 (1.4 )% $ 1,514 $ 1,521 (0.5 )% Gross profit per worksite employee per month 239 255 (6.3 )% 264 261 1.1 % Operating expenses per worksite employee per month 194 218 (11.0 )% 221 231 (4.3 )% Operating income per worksite employee per month 45 37 21.6 % 43 30 43.3 % Net income per worksite employee per month 27 21 28.6 % 26 17 52.9 %  

(1)

Gross billings of $8,555, $8,519, $8,887 and $8,832 per worksite employee per month, less payroll cost of $7,155, $7,099, $7,373 and $7,311 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 September 30, Nine Months Ended September 30, 2015   2014   Change 2015   2014   Change   Payroll cost (GAAP) $ 3,199,788 $ 2,801,722 14.2 % $ 9,515,662 $ 8,468,804 12.4 % Less: Bonus payroll cost 262,445   204,405   28.4 % 1,038,315   947,751   9.6 % Non-bonus payroll cost $ 2,937,343   $ 2,597,317   13.1 % $ 8,477,347   $ 7,521,053   12.7 %   Payroll cost per worksite employee per month (GAAP) $ 7,155 $ 7,099 0.8 % $ 7,373 $ 7,311 0.8 % Less: Bonus payroll cost per worksite employee per month 588   518   13.5 % 805   818   (1.6 )% Non-bonus payroll cost per worksite employee per month $ 6,567   $ 6,581   (0.2 )% $ 6,568   $ 6,493   1.2 %  

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.

    September 30, 2015   December 31, 2014   Cash, cash equivalents and marketable securities (GAAP) $ 210,839 $ 305,087 Less: Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions 99,382 152,132 Customer prepayments 40,533   87,887 Adjusted cash, cash equivalents and marketable securities $ 70,924   $ 65,068  

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 September 30,   Nine Months Ended September 30, 2015   2014   Change   2015   2014   Change   Operating expenses (GAAP) $ 86,807 $ 86,357 0.5 % $ 285,149 $ 267,981 6.4

%

Less: Impairment charges and other

-

-

-

11,120 2,485 347.5

%

Stockholder advisory expenses

-

 

-

 

-

1,546  

-

-

Adjusted operating expenses $ 86,807   $ 86,357   0.5 % $ 272,483   $ 265,496 2.6

%

  Adjusted operating expenses represent operating expenses excluding the impact of impairment

and other charges related to the sale of two aircraft and stockholder advisory expenses in

2015 and an impairment charge associated with the Employment Screening reporting unit in

2014. 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 September 30, Nine Months Ended September 30, 2015 2014 Change 2015   2014 Change   Net income (GAAP) $ 11,950 $ 8,385 42.5 % $ 33,051 $ 19,840 66.6 % Income tax expense 8,005 6,118 30.8 % 22,608 14,725 53.5 % Interest expense 126 104 21.2 % 350 281 24.6 % Depreciation and amortization 4,487   5,302 (15.4 )% 14,362 15,827 (9.3 )% EBITDA 24,568 19,909 23.4 % 70,371 50,673 38.9 % Impairment charges and other

-

-

-

11,120 2,485 347.5 % Stock-based compensation 3,710 2,701 37.4 % 10,174 8,346 21.9 % Stockholder advisory expenses

-

 

-

-

1,546

-

-

Adjusted EBITDA $ 28,278   $ 22,610 25.1 % $ 93,211 $ 61,504 51.6 %   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 non-cash impairment and other charges,

costs associated with stockholder advisory expenses and 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.

            Three Months Ended September 30, Nine Months Ended September 30, 2015   2014   Change 2015   2014   Change   Net income (GAAP) $ 11,950 $ 8,385 42.5 % $ 33,051 $ 19,840 66.6 % Impairment charges and other, net of tax

-

-

-

6,572 1,566 319.7 % Stock-based compensation, net of tax 2,221 1,561 42.3 % 6,041 4,791 26.1 % Stockholder advisory expenses, net of tax

-

 

-

 

-

914  

-

 

-

Adjusted net income $ 14,171   $ 9,946   42.5 % $ 46,578   $ 26,197   77.8 %     Three Months Ended September 30, Nine Months Ended September 30, 2015 2014   Change 2015   2014 Change   Diluted net income per share of common stock (GAAP) $ 0.48 $ 0.33

45.5

%

 

$ 1.32 $ 0.78   69.2 % Impairment charges and other, net of tax

-

-

-

0.26 0.06 333.3 % Stock-based compensation, net of tax 0.09 0.06

50.0

%

 

0.24 0.19 26.3 % Stockholder advisory expenses, net of tax

-

 

-

 

-

0.04  

-

 

-

Adjusted diluted net income per share of common stock $ 0.57   $ 0.39  

46.2

%

 

$ 1.86   $ 1.03   80.6 %  

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 impairment and other charges related to the sale of two aircraft in 2015 and an impairment charge associated with the Employment Screening reporting unit in 2014, stock-based compensation and costs associated with stockholder advisory expenses. 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 these items.

Non-bonus payroll, 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, 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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151102005349/en/

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