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 ended
September 30, 2022. Insperity will be hosting a conference call
today at 10:00 a.m. ET to discuss these results and our updated
2022 outlook, and has posted an accompanying presentation to its
investor website at http://ir.insperity.com.
- Q3 average number of WSEEs paid and revenues up 18% and 19%,
respectively
- Q3 net income and diluted EPS of $37.7 million and $0.98,
respectively
- Q3 adjusted EBITDA up 33% to $79.8 million and adjusted EPS up
38% to $1.23
- YTD average number of WSEEs paid and revenues up 19% and 21%,
respectively
- YTD net income and diluted EPS of $141.2 million and $3.66,
respectively
- YTD adjusted EBITDA up 22% to $273.4 million and adjusted EPS
up 21% to $4.38
Third Quarter Results
For the third quarter of 2022, reported net income and diluted
earnings per share (“EPS”) were $37.7 million and $0.98,
respectively. Adjusted EPS increased 38.2% over the third quarter
of 2021 to $1.23. Adjusted EBITDA increased 32.7% to $79.8
million.
The average number of worksite employees (“WSEEs”) paid per
month increased 17.8% over Q3 2021 to 303,347 WSEEs. WSEEs paid
from new client sales improved over Q3 2021 and client retention
remained strong, averaging 99% per month for the quarter. The net
gain in our client base continued, although at expected lower
levels than Q3 2021, a period when many clients were rehiring
employees as the pandemic conditions improved. Revenues in Q3 2022
increased 19.0% to $1.4 billion on the 17.8% increase in paid
WSEEs. Revenue per WSEE was up 1.0% as overall pricing was managed
to targeted levels given the current inflationary environment,
partially offset by a client and worksite employee mix change.
“We are pleased to report continuing strong growth and
profitability this quarter and year to date driven by a combination
of strong demand for our services and excellent execution by our
Insperity employees,” said Paul J. Sarvadi, Insperity chief
executive officer and chairman. “We have successfully launched our
fall selling and retention campaign, and are focused on finishing
an excellent first year of our five year plan and achieving a
strong start to 2023.”
Gross profit increased 23.2% over Q3 2021 to $244.6 million on
the 17.8% increase in paid WSEEs and a 4.7% increase in gross
profit per WSEE per month. Benefits costs were better than
expected, driven by lower utilization, including COVID related
costs. Gross profit contribution from our workers’ compensation
program improved over Q3 2021, further driving the increase in
gross profit per WSEE per month.
Operating expenses increased 20.8% over Q3 2021 on the 23.2%
increase in gross profit. Operating spend included continued
investment in our service personnel given our high growth and a
focus on hiring and retention in the current tight labor market.
Other Q3 2022 personnel costs included a higher incentive
compensation accrual tied to our outperformance. Travel and event
costs also increased over Q3 2021, which was more restrictive under
the pandemic conditions.
Year-to-Date Results
Revenues for the first nine months of 2022 increased 20.8% to
$4.4 billion on an 18.9% increase in paid WSEEs and a 1.7% increase
in revenue per WSEE. Gross profit for the first nine months of 2022
increased 18.6% to $770.2 million. Operating expenses increased
16.3% to $570.8 million compared to the 2021 period.
For the nine months ended September 30, 2022, reported net
income and diluted EPS were $141.2 million and $3.66, respectively.
Adjusted EPS increased 21.0% compared to the first nine months of
2021 to $4.38. Adjusted EBITDA increased 21.8% compared to the
first nine months of 2021 to $273.4 million.
Net income per WSEE per month increased 3.8% to $54 in the 2022
period from $52 in the 2021 period. Adjusted EBITDA per WSEE per
month was $104 in the 2022 period compared to $102 in the 2021
period.
Gross profit and earnings comparisons are impacted by the
non-recurrence of $16.8 million in federal payroll tax refunds
received in 2021 related to prior years.
Cash outlays in the first nine months of 2022 included the
repurchase of approximately 679,000 shares of stock at a cost of
$63.4 million, dividends totaling $56.9 million and capital
expenditures of $16.4 million. Adjusted cash totaled $239 million
at September 30, 2022 and $280 million is available under our
recently expanded $650 million credit facility.
“In spite of the lingering pandemic conditions and the recent
economic uncertainty, we have been able to achieve over a 20%
increase in Adjusted EBITDA and Adjusted EPS over the first three
quarters of this year,” said Douglas S. Sharp, Insperity executive
vice president of finance, chief financial officer and treasurer.
“While some uncertainty surrounding these factors continues to
exist, we remain focused on taking advantage of the ongoing market
opportunity and executing our long-term plan as we head into
2023.”
2022 Guidance
The company also announced its updated guidance for 2022,
including the fourth quarter of 2022. 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.
Q4 2022
Full Year 2022
Average WSEEs paid
308,000
—
310,700
295,100
—
295,800
Year-over-year increase
14.5%
—
15.5%
17.7%
—
18.0%
Adjusted EPS
$0.87
—
$0.98
$5.23
—
$5.37
Year-over-year increase
156%
—
188%
32%
—
36%
Adjusted EBITDA (in millions)
$62
—
$68
$335
—
$342
Year-over-year increase
104%
—
124%
31%
—
34%
Definition of Key Metrics
Average WSEEs paid - Determined by calculating the company’s
cumulative WSEEs 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, amortization of SaaS implementation costs and
non-cash stock-based compensation.
Conference Call and Webcast
Insperity will be hosting a conference call today at 10:00 a.m.
ET to discuss these results, and the guidance discussed in this
press release, and answer questions from investment analysts. To
listen in, call 888-506-0062 and use conference i.d. number 274789.
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
877-481-4010, with pass code 46882, for one week after the call.
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 2021 revenues of $5.0 billion and
more than 90 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 “anticipates,” “expects,” “intends,”
“plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,”
“probably,” “could,” “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;
- labor shortages and increasing competition for highly skilled
workers;
- vulnerability to regional economic factors because of our
geographic market concentration;
- failure to comply with covenants under our credit
facility;
- our liability for WSEE payroll, payroll taxes and benefits
costs, or other liabilities associated with actions of our client
companies or WSEEs;
- 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;
- an adverse determination regarding our status as the employer
of our WSEEs for tax and benefit purposes and an inability to offer
alternative benefit plans following such a determination;
- 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 or failure to
enhance our service and technology offerings to address new
regulations or client expectations;
- our liability or damage to our reputation relating to
disclosure of sensitive or private information as a result of data
theft, cyberattacks or security vulnerabilities;
- 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)
September 30, 2022
December 31, 2021
Assets
Cash and cash equivalents
$
562,143
$
575,812
Restricted cash
51,829
46,929
Marketable securities
34,493
31,791
Accounts receivable, net
558,700
513,306
Prepaid insurance
30,368
11,285
Other current assets
51,473
53,312
Income taxes receivable
—
12,413
Total current assets
1,289,006
1,244,848
Property and equipment, net
196,601
210,723
Right of use leased assets
56,626
62,830
Prepaid health insurance
9,000
9,000
Deposits
186,914
192,927
Goodwill and other intangible assets,
net
12,707
12,707
Deferred income taxes, net
748
4,892
Other assets
29,904
15,158
Total assets
$
1,781,506
$
1,753,085
Liabilities and stockholders'
equity
Accounts payable
$
5,466
$
6,412
Payroll taxes and other payroll deductions
payable
352,129
467,892
Accrued worksite employee payroll cost
494,986
409,653
Accrued health insurance costs
64,858
50,001
Accrued workers’ compensation costs
57,023
50,534
Accrued corporate payroll and
commissions
81,278
74,778
Other accrued liabilities
65,053
69,303
Income taxes payable
455
—
Total current liabilities
1,121,248
1,128,573
Accrued workers’ compensation costs, net
of current
174,664
192,694
Long-term debt
369,400
369,400
Operating lease liabilities, net of
current
55,691
64,192
Total noncurrent liabilities
599,755
626,286
Stockholders’ equity:
Common stock
555
555
Additional paid-in capital
139,370
109,179
Treasury stock, at cost
(716,046
)
(665,089
)
Retained earnings
636,624
553,581
Total stockholders’ equity
(deficit)
60,503
(1,774
)
Total liabilities and stockholders’
equity
$
1,781,506
$
1,753,085
Insperity, Inc.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(in thousands, except per share
amounts)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
Change
2022
2021
Change
Operating results:
Revenues(1)
$
1,439,160
$
1,209,628
19.0
%
$
4,449,104
$
3,681,834
20.8
%
Payroll taxes, benefits and workers’
compensation costs
1,194,607
1,011,149
18.1
%
3,678,909
3,032,356
21.3
%
Gross profit
244,553
198,479
23.2
%
770,195
649,478
18.6
%
Salaries, wages and payroll taxes
109,525
89,232
22.7
%
323,486
286,669
12.8
%
Stock-based compensation
13,341
10,362
28.7
%
38,818
35,965
7.9
%
Commissions
11,068
8,724
26.9
%
32,121
24,694
30.1
%
Advertising
9,790
9,507
3.0
%
30,812
23,804
29.4
%
General and administrative expenses
38,115
31,134
22.4
%
115,215
91,981
25.3
%
Depreciation and amortization
10,083
9,917
1.7
%
30,367
27,715
9.6
%
Total operating expenses
191,922
158,876
20.8
%
570,819
490,828
16.3
%
Operating income
52,631
39,603
32.9
%
199,376
158,650
25.7
%
Other income (expense):
Interest income
2,808
251
1,018.7
%
3,901
2,230
74.9
%
Interest expense
(4,082
)
(1,963
)
107.9
%
(8,698
)
(5,537
)
57.1
%
Income before income tax
expense
51,357
37,891
35.5
%
194,579
155,343
25.3
%
Income tax expense
13,688
10,595
29.2
%
53,427
40,971
30.4
%
Net income
$
37,669
$
27,296
38.0
%
$
141,152
$
114,372
23.4
%
Less distributed and undistributed
earnings allocated to participating securities
—
(39
)
(100.0
)%
(27
)
(219
)
(87.7
)%
Net income allocated to common
shares
$
37,669
$
27,257
38.2
%
$
141,125
$
114,153
23.6
%
Net income per share of common
stock
Basic
$
0.99
$
0.71
39.4
%
$
3.70
$
2.97
24.6
%
Diluted
$
0.98
$
0.70
40.0
%
$
3.66
$
2.94
24.5
%
____________________________________
(1) Revenues are comprised of
gross billings less WSEE payroll costs as follows:
Three Months Ended September
30,
Nine Months Ended September
30,
(in thousands)
2022
2021
2022
2021
Gross billings
$
9,528,695
$
7,994,006
$
29,111,243
$
23,682,279
Less: WSEE payroll cost
8,089,535
6,784,378
24,662,139
20,000,445
Revenues
$
1,439,160
$
1,209,628
$
4,449,104
$
3,681,834
Insperity, Inc.
KEY FINANCIAL AND STATISTICAL
DATA
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
Change
2022
2021
Change
Average WSEEs paid
303,347
257,560
17.8
%
290,838
244,667
18.9
%
Statistical data (per WSEE per
month):
Revenues(1)
$
1,581
$
1,565
1.0
%
$
1,700
$
1,672
1.7
%
Gross profit
269
257
4.7
%
294
295
(0.3
)%
Operating expenses
211
206
2.4
%
218
223
(2.2
)%
Operating income
58
51
13.7
%
76
72
5.6
%
Net income
41
35
17.1
%
54
52
3.8
%
____________________________________
(1) Revenues per WSEE per month are
comprised of gross billings per WSEE per month less WSEE payroll
costs per WSEE per month as follows:
Three Months Ended September
30,
Nine Months Ended September
30,
(per WSEE per month)
2022
2021
2022
2021
Gross billings
$
10,470
$
10,346
$
11,122
$
10,755
Less: WSEE payroll cost
8,889
8,781
9,422
9,083
Revenues
$
1,581
$
1,565
$
1,700
$
1,672
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.
Bonus payroll cost varies from period to
period, but has no direct impact to our ultimate workers’
compensation costs under the current program.
Our management refers to non-bonus payroll
cost in analyzing, reporting and forecasting our workers’
compensation costs.
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.
EBITDA
Represents net income computed in
accordance with GAAP, plus:
• interest expense,
• income tax expense,
• depreciation and amortization expense,
and
• amortization of SaaS implementation
costs.
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 September
30,
Nine Months Ended September
30,
(in thousands, except per WSEE per
month)
2022
2021
2022
2021
Per WSEE
Per WSEE
Per WSEE
Per WSEE
Payroll cost
$
8,089,535
$
8,889
$
6,784,378
$
8,781
$
24,662,139
$
9,422
$
20,000,445
$
9,083
Less: Bonus payroll cost
583,703
641
726,187
940
3,236,059
1,236
2,942,817
1,337
Non-bonus payroll cost
$
7,505,832
$
8,248
$
6,058,191
$
7,841
$
21,426,080
$
8,186
$
17,057,628
$
7,746
% Change period over period
23.9
%
5.2
%
18.2
%
6.4
%
25.6
%
5.7
%
12.3
%
6.7
%
Following is a reconciliation of cash, cash equivalents and
marketable securities (GAAP) to adjusted cash, cash equivalents and
marketable securities (non-GAAP):
(in thousands)
September 30, 2022
December 31, 2021
Cash, cash equivalents and marketable
securities
$
596,636
$
607,603
Less:
Amounts payable for withheld federal and
state income taxes, employment taxes and other payroll
deductions
321,930
424,800
Client prepayments
35,794
20,054
Adjusted cash, cash equivalents and
marketable securities
$
238,912
$
162,749
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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Per WSEE
Per WSEE
Per WSEE
Per WSEE
Net income
$
37,669
$
41
$
27,296
$
35
$
141,152
$
54
$
114,372
$
52
Income tax expense
13,688
15
10,595
14
53,427
20
40,971
19
Interest expense
4,082
4
1,963
3
8,698
3
5,537
3
Amortization of SaaS implementation
costs
948
1
—
—
948
—
—
—
Depreciation and amortization
10,083
12
9,917
12
30,367
13
27,715
12
EBITDA
66,470
73
49,771
64
234,592
90
188,595
86
Stock-based compensation
13,341
15
10,362
14
38,818
14
35,965
16
Adjusted EBITDA
$
79,811
$
88
$
60,133
$
78
$
273,410
$
104
$
224,560
$
102
% Change period over period
32.7
%
12.8
%
4.5
%
(6.0
)%
21.8
%
2.0
%
(10.5
)%
(15.0
)%
Following is a reconciliation of net income (GAAP) to adjusted
net income (non-GAAP):
Three Months Ended September
30,
Nine Months Ended September
30,
(in thousands)
2022
2021
2022
2021
Net income
$
37,669
$
27,296
$
141,152
$
114,372
Non-GAAP adjustments:
Stock-based compensation
13,341
10,362
38,818
35,965
Total non-GAAP adjustments
13,341
10,362
38,818
35,965
Tax effect
(3,590
)
(2,865
)
(10,659
)
(9,486
)
Total non-GAAP adjustments, net
9,751
7,497
28,159
26,479
Adjusted net income
$
47,420
$
34,793
$
169,311
$
140,851
% Change period over period
36.3
%
(1.7
)%
20.2
%
(13.0
)%
Following is a reconciliation of diluted EPS (GAAP) to adjusted
EPS (non-GAAP):
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Diluted EPS
$
0.98
$
0.70
$
3.66
$
2.94
Non-GAAP adjustments:
Stock-based compensation
0.35
0.27
1.01
0.92
Total non-GAAP adjustments
0.35
0.27
1.01
0.92
Tax effect
(0.10
)
(0.08
)
(0.29
)
(0.24
)
Total non-GAAP adjustments, net
$
0.25
$
0.19
$
0.72
$
0.68
Adjusted EPS
$
1.23
$
0.89
$
4.38
$
3.62
% Change period over period
38.2
%
(2.2
)%
21.0
%
(12.8
)%
Following is a reconciliation of GAAP to non-GAAP financial
measures for fourth quarter and full year 2022 guidance:
(in millions, except per share
amounts)
Q4 2022 Guidance
Full Year 2022
Guidance
Net income
$26 - $30
$166 - $171
Income tax expense
9 - 11
63 - 65
Interest expense
5
13
Amortization of SaaS implementation
costs
1
2
Depreciation and amortization
11
41
EBITDA
52 - 58
285 - 292
Stock-based compensation
10
50
Adjusted EBITDA
$62 - $68
$335 - $342
Diluted net income per share of common
stock
$0.68 - $0.79
$4.28 - $4.42
Non-GAAP adjustments:
Stock-based compensation
0.26
1.30
Tax effect
(0.07)
(0.35)
Total non-GAAP adjustments, net
0.19
0.95
Adjusted EPS
$0.87 - $0.98
$5.23 - $5.37
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221031005153/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: Cynthia Murga Director of Public
Relations (713) 324-1414 Media@Insperity.com
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