Insperity, Inc. (NYSE: NSP), a leading provider of human
resources and business performance solutions for America’s best
businesses, today reported results for the fourth quarter and year
ended Dec. 31, 2022. Insperity will be hosting a conference call
today at 9 a.m. ET to discuss these results and our 2023 outlook,
and has posted an accompanying presentation to its investor website
at http://ir.insperity.com.
- Q4 average number of WSEEs paid and revenues up 14% and 15%,
respectively
- Q4 net income and diluted EPS of $38.2 million and $0.99,
respectively
- Q4 adjusted EBITDA and adjusted EPS of $78.9 million and $1.21,
respectively
- 2022 average number of paid WSEEs and revenues up 18% and 19%,
respectively
- 2022 net income up 45% to $179.4 million; diluted EPS up 46% to
$4.64
- 2022 adjusted EBITDA up 38% to $352.3 million; adjusted EPS up
42% to $5.59
Fourth Quarter Results
Reported net income and diluted earnings per share (“EPS”) were
$38.2 million and $0.99, respectively. Adjusted EBITDA and adjusted
EPS were $78.9 million and $1.21, respectively.
“We are very pleased to report record results in growth and
profitability in 2022 reflecting our proven business model, our
balanced approach and our outstanding execution across the
company,” said Paul J. Sarvadi, Insperity chairman and chief
executive officer. “While there is some economic uncertainty on the
horizon, we believe that we are positioned well to achieve our 2023
targets and continue to capitalize on the strong demand for our
services.”
The average number of worksite employees (“WSEE”) paid per month
increased 14.3% over Q4 2021 to 307,506 WSEEs. Client retention
remained strong, averaging 99% per month for the quarter and new
client sales improved over Q4 2021. The net gain in our client base
continued, although below expected levels and significantly below
Q4 2021, a period when many clients were rehiring employees as the
pandemic conditions improved. Revenues in Q4 2022 increased 15.4%
to $1.5 billion on the 14.3% increase in paid WSEEs. Revenue per
WSEE was up 0.9% as overall pricing was managed to targeted
levels.
Gross profit increased 41.3% over Q4 2021 to $241.0 million on
the 14.3% increase in paid WSEEs and a 23.7% increase in gross
profit per WSEE per month, driven primarily by lower benefit costs.
COVID-related costs continued to decline, while also not
experiencing a notable increase in healthcare utilization
associated with any previously deferred care. Other areas of gross
profit, including pricing and contributions from our payroll tax
and workers’ compensation areas came in near expected levels.
Operating expenses increased 22.0% over Q4 2021 on the 41.3%
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.
Additionally, we experienced an increase in sales commissions tied
to programs surrounding our Q4 2022 sales volume and pricing and
costs associated with recruiting, travel, training and our ongoing
SalesForce implementation.
Full Year Results
Reported net income and diluted EPS were $179.4 million and
$4.64, respectively. Adjusted EPS increased 41.5% over 2021 to
$5.59. Adjusted EBITDA increased 38.2% to $352.3 million.
The average number of WSEEs paid per month increased 17.7% over
2021 to 295,005 WSEEs. These strong results were driven by a 16.4%
increase in paid WSEEs from new sales, an improvement in full year
client retention to 85%, partially offset by lower net hiring in
our client base when compared to 2021 when clients were rehiring
coming off of the pandemic. Revenues in 2022 increased by 19.4% to
$5.9 billion on the 17.7% increase in paid WSEEs and a 1.5%
increase in revenue per WSEE.
Gross profit increased 23.3% on the increase in paid WSEEs and a
4.8% increase on a per WSEE per month basis, from $273 in 2021 to
$286 in 2022 on a combination of higher pricing and lower than
anticipated benefits costs.
Net income per WSEE per month increased 24.4% to $51 in 2022
from $41 in 2021. Adjusted EBITDA per WSEE per month increased
17.6% to $100 in 2022 compared to $85 in 2021.
Cash outlays in 2022 included the repurchase of approximately
770,000 shares of our common stock at a cost of $73.3 million,
dividends totaling $76.6 million, and capital expenditures of $30.4
million. Adjusted cash totaled $224.3 million and $280 million is
available under our $650 million credit facility.
“This past year highlighted the earnings strength, cash flow and
capital efficiency of our business model,” said Douglas S. Sharp,
executive vice president of finance, chief financial officer and
treasurer. “We continue to make key investments in our growth,
service and technology to drive the achievement of our long-term
objectives and meet clients’ changing human resource needs.”
2023 Guidance
The company also announced its guidance for 2023, including the
first quarter of 2023. 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.
Q1 2023
Full Year 2023(2)
Average WSEEs paid
306,500
—
309,300
317,000
—
326,000
Year-over-year increase
10%
—
11%
7.5%
—
10.5%
Adjusted EPS
$2.40
—
$2.60
$5.24
—
$6.30
Year-over-year increase (decrease)(1)
21%
—
31%
(6)%
—
13%
Adjusted EBITDA (in millions)
$143
—
$153
$353
—
$409
Year-over-year increase(1)
21%
—
29%
0%
—
16%
____________________________________
(1)
Q1 2023 and full year 2023 year-over-year
comparisons are impacted by elevated COVID-19 medical claims in Q1
2022, as well as higher interest income expectations in the first
three quarters of 2023.
(2)
Year-over-year 2023 adjusted EPS
comparisons are impacted by higher interest, depreciation and
amortization expense expectations in 2023, which are not included
in adjusted EBITDA.
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.
Insperity will be hosting a conference call today at 9 a.m. ET
to discuss these results, provide guidance for the first quarter
and full year 2023 and answer questions from investment analysts.
To listen in, call 888-506-0062 and use conference i.d. number
422538. 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, conference i.d. 47544. 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 2022 revenues of $5.9 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 future
product offerings, including through acquisition and
investment.
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
Dec. 31,
Dec. 31,
(in thousands)
2022
2021
Assets
Cash and cash equivalents
$
732,828
$
575,812
Restricted cash
49,779
46,929
Marketable securities
33,068
31,791
Accounts receivable, net
622,764
513,306
Prepaid insurance
11,706
11,285
Income taxes receivable
—
12,413
Other current assets
61,728
53,312
Total current assets
1,511,873
1,244,848
Property and equipment, net
199,992
210,723
Right-of-use leased assets
56,532
62,830
Deposits and prepaid health insurance
213,270
201,927
Goodwill and other intangible assets,
net
12,707
12,707
Deferred income taxes, net
15,533
4,892
Other assets
29,354
15,158
Total assets
$
2,039,261
$
1,753,085
Liabilities and stockholders'
equity
Accounts payable
$
7,732
$
6,412
Payroll taxes and other payroll deductions
payable
556,085
467,892
Accrued worksite employee payroll cost
513,397
409,653
Accrued health insurance costs
53,402
50,001
Accrued workers’ compensation costs
53,485
50,534
Accrued corporate payroll and
commissions
89,147
74,778
Other accrued liabilities
80,122
69,303
Total current liabilities
1,353,370
1,128,573
Accrued workers’ compensation costs, net
of current
179,629
192,694
Long-term debt
369,400
369,400
Operating lease liabilities, net of
current
55,587
64,192
Total noncurrent liabilities
604,616
626,286
Stockholders’ equity (deficit):
Common stock
555
555
Additional paid-in capital
151,144
109,179
Treasury stock, at cost
(725,532
)
(665,089
)
Accumulated other comprehensive loss, net
of tax
(82
)
(9
)
Retained earnings
655,190
553,590
Total stockholders' equity
(deficit)
81,275
(1,774
)
Total liabilities and stockholders’
equity
$
2,039,261
$
1,753,085
Insperity, Inc.
CONSOLIDATED STATEMENTS OF
OPERATIONS
Three Months Ended Dec.
31,
Year Ended Dec. 31,
(in thousands, except per share
amounts)
2022
2021
Change
2022
2021
Change
Operating results:
Revenues(1)
$
1,489,714
$
1,291,236
15.4
%
$
5,938,818
$
4,973,070
19.4
%
Payroll taxes, benefits and workers’
compensation costs
1,248,676
1,120,612
11.4
%
4,927,585
4,152,968
18.7
%
Gross profit
241,038
170,624
41.3
%
1,011,233
820,102
23.3
%
Salaries, wages and payroll taxes
107,459
92,502
16.2
%
430,945
379,171
13.7
%
Stock-based compensation
11,262
4,658
141.8
%
50,080
40,623
23.3
%
Commissions
13,551
10,228
32.5
%
45,672
34,922
30.8
%
Advertising
6,691
5,293
26.4
%
37,503
29,097
28.9
%
General and administrative expenses
40,919
32,432
26.2
%
156,134
124,413
25.5
%
Depreciation and amortization
10,293
10,832
(5.0
)%
40,660
38,547
5.5
%
Total operating expenses
190,175
155,945
22.0
%
760,994
646,773
17.7
%
Operating income
50,863
14,679
246.5
%
250,239
173,329
44.4
%
Other income (expense):
5,492
217
2,430.9
%
9,393
2,447
283.9
%
(5,509
)
(1,921
)
186.8
%
(14,207
)
(7,458
)
90.5
%
Income before income tax
expense
50,846
12,975
291.9
%
245,425
168,318
45.8
%
Income tax expense
12,648
3,267
287.1
%
66,075
44,238
49.4
%
Net income
$
38,198
$
9,708
293.5
%
$
179,350
$
124,080
44.5
%
Net income per share of common
stock
Basic
$
1.01
$
0.25
304.0
%
$
4.70
$
3.22
46.0
%
Diluted
$
0.99
$
0.25
296.0
%
$
4.64
$
3.18
45.9
%
____________________________________ (1)
Revenues are comprised of gross billings
less WSEE payroll costs as follows:
Three Months Ended Dec.
31,
Year Ended Dec. 31,
(in thousands)
2022
2021
2022
2021
Gross billings
$
11,015,667
$
9,636,414
$
40,126,910
$
33,318,693
Less: WSEE payroll cost
9,525,953
8,345,178
34,188,092
28,345,623
Revenues
$
1,489,714
$
1,291,236
$
5,938,818
$
4,973,070
Insperity, Inc.
KEY FINANCIAL AND STATISTICAL
DATA
Three Months Ended Dec.
31,
Year Ended Dec. 31,
2022
2021
Change
2022
2021
Change
Average WSEEs paid
307,506
268,978
14.3
%
295,005
250,745
17.7
%
Statistical data (per WSEE per
month):
Revenues(1)
$
1,615
$1,600
0.9
%
$
1,678
$
1,653
1.5
%
Gross profit
261
211
23.7
%
286
273
4.8
%
Operating expenses
206
193
6.7
%
215
215
—
Operating income
55
18
205.6
%
71
58
22.4
%
Net income
41
12
241.7
%
51
41
24.4
%
____________________________________
(1)
Revenues per WSEE per month are comprised
of gross billings per WSEE per month less WSEE payroll costs per
WSEE per month follows:
Three Months Ended Dec.
31,
Year Ended Dec. 31,
(per WSEE per month)
2022
2021
2022
2021
Gross billings
$
11,941
11,942
$
11,335
$
11,073
Less: WSEE payroll cost
10,326
10,342
9,657
9,420
Revenues
$
1,615
1,600
$
1,678
$
1,653
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,
and
• impact of dividends exceeding earnings
under the two-class earnings per share method.
Following is a reconciliation of payroll cost (GAAP) to
non-bonus payroll costs (non-GAAP):
Three Months Ended Dec.
31,
Year Ended Dec. 31,
(in thousands, except per WSEE per
month)
2022
2021
2022
2021
Per WSEE
Per WSEE
Per WSEE
Per WSEE
Payroll cost
$
9,525,953
$
10,326
$
8,345,178
$
10,342
$
34,188,092
$
9,657
$
28,345,623
$
9,420
Less: Bonus payroll cost
1,723,928
1,869
1,776,400
2,202
4,959,987
1,401
4,719,217
1,568
Non-bonus payroll cost
$
7,802,025
$
8,457
$
6,568,778
$
8,140
$
29,228,105
$
8,256
$
23,626,406
$
7,852
% Change period over period
18.8
%
3.9
%
20.4
%
7.1
%
23.7
%
5.1
%
14.5
%
6.9
%
Following is a reconciliation of cash, cash equivalents and
marketable securities (GAAP) to adjusted cash, cash equivalents and
marketable securities (non-GAAP):
(in thousands)
December 31,
2022
December 31,
2021
Cash, cash equivalents and marketable
securities
$
765,896
$
607,603
Less:
Amounts payable for withheld federal and
state income taxes, employment taxes and other payroll
deductions
504,817
424,800
Client prepayments
36,800
20,054
Adjusted cash, cash equivalents and
marketable securities
$
224,279
$
162,749
Following is a reconciliation of net income (GAAP) to EBITDA
(non-GAAP) and adjusted EBITDA (non-GAAP):
Three Months Ended Dec.
31,
(in thousands, except per WSEE per
month)
2022
2021
Per WSEE
Per WSEE
Net income
$
38,198
$
41
$
9,708
$
12
Income tax expense
12,648
15
3,267
5
Interest expense
5,509
6
1,921
2
Amortization of SaaS implementation
costs
975
1
—
—
Depreciation and amortization
10,293
11
10,832
13
EBITDA
67,623
74
25,728
32
Stock-based compensation
11,262
12
4,658
6
Adjusted EBITDA
$
78,885
$
86
$
30,386
$
38
% Change period over period
159.6
%
126.3
%
(19.7
)%
(28.3
)%
(in thousands, except per WSEE per
month)
Year Ended December
31,
2022
2021
Per WSEE
Per WSEE
Net income
$
179,350
$
51
$
124,080
$
41
Income tax expense
66,075
19
44,238
15
Interest expense
14,207
4
7,458
2
Amortization of SaaS implementation
costs
1,923
1
—
—
Depreciation and amortization
40,660
11
38,547
13
EBITDA
302,215
86
214,323
71
Stock-based compensation
50,080
14
40,623
14
Adjusted EBITDA
$
352,295
$
100
$
254,946
$
85
% Change year over year
38.2
%
17.6
%
(11.7
)%
(17.5
)%
Following is a reconciliation of net income (GAAP) to adjusted
net income (non-GAAP):
Three Months Ended Dec.
31,
Year Ended Dec. 31,
(in thousands)
2022
2021
2022
2021
Net income
$
38,198
$
9,708
$
179,350
$
124,080
Non-GAAP adjustments:
Stock-based compensation
11,262
4,658
50,080
40,623
Tax effect
(2,824
)
(1,191
)
(13,483
)
(10,677
)
Total non-GAAP adjustments, net
8,438
3,467
36,597
29,946
Adjusted net income
$
46,636
$
13,175
$
215,947
$
154,026
% Change period over period
254.0
%
(32.0
)%
40.2
%
(15.1
)%
Following is a reconciliation of diluted EPS (GAAP) to adjusted
EPS (non-GAAP):
Three Months Ended
Dec. 31,
Year Ended
Dec. 31,
2022
2021
2022
2021
Diluted EPS
$
0.99
$
0.25
$
4.64
$
3.18
Non-GAAP adjustments:
Stock-based compensation
0.29
0.12
1.30
1.04
Impact of dividends exceeding earnings
—
0.01
—
—
Tax effect
(0.07
)
(0.04
)
(0.35
)
(0.27
)
Total non-GAAP adjustments, net
0.22
0.09
0.95
0.77
Adjusted EPS
$
1.21
$
0.34
$
5.59
$
3.95
% Change period over period
255.9
%
(30.6
)%
41.5
%
(14.9
)%
The following is a reconciliation of GAAP to non-GAAP financial
measures for first quarter and full year 2023 guidance:
Q1 2023
Full Year 2023
(in millions, except per share
amounts)
Guidance
Guidance
Net income
$85 - $92
$163 - $204
Income tax expense
29 - 32
59 - 74
Interest expense
6
24
SaaS implementation amortization
1
6
Depreciation and amortization
11
46
EBITDA
132 - 142
298 - 354
Stock-based compensation
11
55
Adjusted EBITDA
$143 - $153
$353 - $409
Diluted EPS
$2.18 - $2.38
$4.20 - $5.26
Non-GAAP adjustments:
Stock-based compensation
0.29
1.42
Tax effect
(0.07)
(0.38)
Total non-GAAP adjustments, net
0.22
1.04
Adjusted EPS
$2.40 - $2.60
$5.24 - $6.30
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230209005182/en/
Investor Relations Contact: Douglas S. Sharp Executive
Vice President of Finance, Chief Financial Officer and Treasurer
281-348-3232 Investor.Relations@Insperity.com
News Media Contact: Cynthia Murga Director, Public
Relations 713-324-1414 Media@insperity.com
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