News Column

Insperity Announces Second Quarter Results

August 1, 2014

HOUSTON--(BUSINESS WIRE)-- Insperity, Inc. (NYSE:NSP), a leading provider of human resources and business performance solutions for America’s best businesses, today reported results for the second quarter and six months ended June 30, 2014. For the second quarter, the company reported adjusted net income of $3.5 million and adjusted diluted earnings per share of $0.13. Adjusted net income excludes an after-tax non-cash impairment charge of $1.6 million, or $0.06 per share, associated with the reorganization of our Employment Screening business. Reported second quarter net income and earnings per share were $1.9 million and $0.07, respectively.

“We are pleased with our second quarter results and the traction we are gaining in sales of several of our new service offerings,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “We are well positioned for accelerating unit growth over the balance of the year and into 2015.”

Second Quarter Results

Revenues for the second quarter of 2014 increased 3.2% over the second quarter of 2013 to $564.6 million, due to a 1.2% increase in the average number of worksite employees paid per month and a 1.9% increase in revenues per worksite employee per month. Gross profit decreased 2.3% as expected compared to the second quarter of 2013 to $95.5 million. Benefits costs per covered employee per month increased by 5.0% over the second quarter of 2013 and included increased taxes associated with the Affordable Care Act.

Adjusted operating expenses excluding the impact of the $2.5 million impairment charge increased 2.3% over the second quarter of 2013 to $89.6 million.

Year-to-Date Results

For the six months ended June 30, 2014, the company reported adjusted net income of $13.0 million and adjusted diluted earnings per share of $0.51. These earnings exclude after-tax costs of $1.6 million or $0.06 per share associated with the non-cash impairment charge. Reported net income for the six months ended June 30, 2014 was $11.5 million, or $0.45 per diluted share.

Year-to-date revenues were $1.2 billion, an increase of 3.7% compared to the 2013 period. Gross profit for the six months ended June 30, 2014 decreased 2.1% to $201.6 million. The average gross profit per worksite employee per month decreased $10, or 3.6%, to $264 in the 2014 period from $274 in the 2013 period.

Adjusted year-to-date operating expenses excluding the impact of the impairment charge, increased 3.2% over the first six months of 2013 to $179.1 million, approximately $6 million below initial 2014 guidance provided by the company. These expenses include investments made over the course of 2013, including a 15.6% year-over-year increase in the average number of trained Business Performance Advisors, and a $2.0 million investment in human capital management technology.

“We continue to invest in areas important to our long-term strategy, including sales, technology and product development, while managing other areas of the business to better align operating costs with projected unit growth,” said Douglas S. Sharp, senior vice-president of finance, chief financial officer and treasurer.

Adjusted EBITDA was $38.9 million in the first six months of 2014. Cash outlays included the repurchase of 496,226 shares at a cost of $14.7 million, dividends of $9.2 million and capital expenditures of $6.6 million. Working capital at June 30, 2014 was $121.6 million.

Insperity will be hosting a conference call today at 10 a.m. ET to discuss these results, give guidance for the third quarter and full year 2014 and answer questions from investment analysts. To listen in, call 877-651-0053 and use conference i.d. number 65075498. 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. 65075498. 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 in accurate.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)
 
June 30,December 31,
20142013
(Unaudited)
Assets:
Cash and cash equivalents $ 168,889 $ 225,755
Restricted cash 53,441 51,928
Marketable securities 43,431 46,340
Accounts receivable, net 222,895 210,009
Prepaid insurance 24,813 10,638
Other current assets 13,076 12,053
Income taxes receivable 7,730 409
Deferred income taxes

-

  8,185  
Total current assets 534,275 565,317
 
Property and equipment, net 83,252 86,415
Prepaid health insurance 9,000 9,000
Deposits 93,732 85,578
Goodwill and other intangible assets, net 15,152 18,434
Other assets 1,845   1,816  
Total assets $ 737,256   $ 766,560  
 
Liabilities and Stockholders' Equity:
Accounts payable $ 1,821 $ 2,678
Payroll taxes and other payroll deductions payable 109,164 165,604
Accrued worksite employee payroll cost 188,640 173,801
Accrued health insurance costs 21,324 5,103
Accrued workers’ compensation costs 54,744 52,930
Accrued corporate payroll and commissions 17,477 21,611
Other accrued liabilities 19,460   14,960  
Total current liabilities 412,630 436,687
 
Accrued workers’ compensation costs 72,963 68,905
Deferred income taxes 4,293   7,696  
Total noncurrent liabilities 77,256 76,601
 
Stockholders’ equity:
Common stock 308 308
Additional paid-in capital 136,505 135,653
Treasury stock, at cost (147,706 ) (138,688 )
Accumulated other comprehensive income, net of tax 41 29
Retained earnings 258,222   255,970  
Total stockholders’ equity 247,370   253,272  
Total liabilities and stockholders’ equity $ 737,256   $ 766,560  
 
                               
Insperity, Inc.
Summary Financial Information
(in thousands, except per share amounts and statistical data)
(Unaudited)

 

Three Months Ended June 30,Six Months Ended June 30,
2014       2013Change20142013Change
Operating results:
Revenues (gross billings of
$3.281 billion, $3.167
billion, $6.869 billion and
$6.499 billion less
worksite employee payroll
cost of $2.716 billion,
$2.620 billion, $5.667
billion and $5.340 billion,
respectively) $ 564,621 $ 547,274 3.2 % $ 1,201,620 $ 1,159,110 3.7 %
 
Direct costs:
Payroll taxes, benefits and
workers’ compensation
costs 469,168   449,528   4.4 % 999,991   953,246   4.9 %
Gross profit 95,453 97,746 (2.3 )% 201,629 205,864 (2.1 )%
Operating expenses:
Salaries, wages and payroll
taxes 47,829 45,689 4.7 % 98,861 93,900 5.3 %
Stock-based compensation 3,245 3,292 (1.4 )% 5,645 5,602 0.8 %
Commissions 3,717 3,533 5.2 % 6,963 6,740 3.3 %
Advertising 8,356 9,720 (14.0 )% 13,297 14,970 (11.2 )%
General and administrative
expenses 21,116 20,039 5.4 % 43,848 42,025 4.3 %
Impairment charge 2,485

-

-

2,485

-

-

Depreciation and
amortization 5,291   5,245   0.9 % 10,525   10,390   1.3 %
Total operating expenses 92,039   87,518   5.2 % 181,624   173,627   4.6 %
Operating income 3,414 10,228 (66.6 )% 20,005 32,237 (37.9 )%
Other income (expense):
Interest, net 24 60 (60.0 )% 71 129 (45.0 )%
Other, net 12   (2,676 ) (100.4 )% (14 ) (2,667 ) (99.5 )%
Income before income tax
expense 3,450 7,612 (54.7 )% 20,062 29,699 (32.4 )%
Income tax expense 1,559   4,124   (62.2 )% 8,607   13,038   (34.0 )%
Net income $ 1,891   $ 3,488   (45.8 )% $ 11,455   $ 16,661   (31.2 )%
Less distributed and
undistributed earnings
allocated to participating
securities (139 ) (124 ) 12.1 % (333 ) (481 ) (31.3 )%
Net income allocated to
common shares $ 1,752   $ 3,364   (47.9 )% $ 11,122   $ 16,180   (31.3 )%
Basic net income per share
of common stock $ 0.07   $ 0.14   (50.0 )% $ 0.45   $ 0.65   (30.8 )%
Diluted net income per share
of common stock $ 0.07   $ 0.14   (50.0 )% $ 0.45   $ 0.65   (30.8 )%
 
                                     
Insperity, Inc.
Summary Financial Information
(in thousands, except per share amounts and statistical data)
(Unaudited)
 
Three Months Ended June 30,Six Months Ended June 30,
20142013Change20142013Change
Statistical data:
Average number of worksite employees
paid per month 128,274 126,696 1.2 % 127,281 125,044 1.8 %
Revenues per worksite employee per

month(1)

$ 1,467 $ 1,440 1.9 % $ 1,573 $ 1,545 1.8 %
Gross profit per worksite employee per
month 248 257 (3.5 )% 264 274 (3.6 )%
Operating expenses per worksite employee
per month 239 230 3.9 % 238 231 3.0 %
Operating income per worksite employee
per month 9 27 (66.7 )% 26 43 (39.5 )%
Net income per worksite employee per
month 5 9 (44.4 )% 15 22 (31.8 )%
 

(1) Gross billings of $8,526, $8,332, $8,994 and $8,663 per worksite employee per month, less payroll cost of $7,059, $6,892,

$7,421 and $7,118 per worksite employee per month, respectively.
 
         
Insperity, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
(Unaudited)
 
Three Months Ended June 30,Six Months Ended June 30,
2014     2013     Change2014     2013     Change
 
Payroll cost (GAAP) $ 2,716,514 $ 2,619,690 3.7 % $ 5,667,082 $ 5,340,202 6.1 %
Less: Bonus payroll cost 222,005 171,362 29.6 % 743,346 513,927 44.6 %
Non-bonus payroll cost $ 2,494,509 $ 2,448,328 1.9 % $ 4,923,736 $ 4,826,275 2.0 %
 
Payroll cost per worksite
employee per month
(GAAP) $ 7,059 $ 6,892 2.4 % $ 7,421 $ 7,118 4.3 %
Less: Bonus payroll cost
per worksite employee
per month 577 451 27.9 % 973 685 42.0 %
Non-bonus payroll cost
per worksite employee
per month $ 6,482 $ 6,441 0.6 % $ 6,448 $ 6,433 0.2 %
 
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.
 
      Three Months Ended June 30,     Six Months Ended June 30,
2014     2013     Change2014     2013     Change
 
Operating expenses (GAAP) $ 92,039 $ 87,518 5.2

%

$ 181,624 $ 173,627 4.6

%

Impairment charge 2,485

-

-

2,485

-

-

Adjusted operating expenses $ 89,554 $ 87,518 2.3

%

$ 179,139 $ 173,627 3.2

%

 

Adjusted operating expenses represent operating expenses excluding the impact of impairment charges.

 
Three Months Ended June 30,Six Months Ended June 30,
20142013Change20142013Change
 
Net income (GAAP) $ 1,891 $ 3,488 (45.8 )% $ 11,455 $ 16,661 (31.2 )%
Income tax expense 1,559 4,124 (62.2 )% 8,607 13,038 (34.0 )%
Depreciation and amortization 5,291 5,245 0.9 % 10,525 10,390 1.3 %
Interest expense 88 88

-

177 176 0.6 %
EBITDA 8,829 12,945 (31.8 )% 30,764 40,265 (23.6 )%
Impairment charges 2,485 2,679 (7.2 )% 2,485 2,679 (7.2 )%
Stock-based compensation 3,245 3,292 (1.4 )% 5,645 5,602 0.8 %
Adjusted EBITDA $ 14,559 $ 18,916 (23.0 )% $ 38,894 $ 48,546 (19.9 )%
 
             
Adjusted EBITDA represents net income computed in accordance with generally accepted accounting
principles (“GAAP”), plus interest expense, income tax expense, depreciation and amortization expense, and
stock-based compensation. Insperity management believes adjusted EBITDA is often a useful measure of the
company’s operating performance, as it allows 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 June 30,Six Months Ended June 30,
2014       2013       Change2014       2013       Change
 
Net income (GAAP) $ 1,891 $ 3,488 (45.8 )% $ 11,455 $ 16,661 (31.2 )%
Impairment charges, net of tax 1,566 2,679 (41.5 )% 1,566 2,679 (41.5 )%
Adjusted net income $ 3,457 $ 6,167 (43.9 )% $ 13,021 $ 19,340 (32.7 )%
 
 
Three Months Ended June 30,Six Months Ended June 30,
20142013Change20142013Change
 
Diluted net income per share of common
stock (GAAP) $ 0.07 $ 0.14 (50.0 )% $ 0.45 $ 0.65 (30.8 )%
Impairment charges, net of tax 0.06 0.10 (40.0 )% 0.06 0.10 (40.0 )%
Adjusted diluted net income per share of
common stock $ 0.13 $ 0.24 (45.8 )% $ 0.51 $ 0.75 (32.0 )%
 
 
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, 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 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. Insperity includes non-bonus payroll, adjusted
operating expenses, 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) 348-3232

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

or

News Media Contact:

Jason Cutbirth, (281) 312-3085

Senior Vice President of Marketing

jason.cutbirth@insperity.com

Source: Insperity, Inc.


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