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| 8-K - INSPERITY INC 8-K 11-1-2012 - INSPERITY, INC. | form8k.htm |
EXHIBIT 99.1
Insperity Announces Strong Third Quarter Results
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Q3 Operating income up 36%
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YTD Operating income up 27% on 10% revenue growth
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Working capital of $140 million and no debt
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HOUSTON – Nov. 1, 2012 – 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 and nine months ended Sept. 30, 2012. For the third quarter, the company reported net income of $11.5 million and diluted earnings per share of $0.45. For the nine months ended Sept. 30, 2012, the company reported net income of $31.0 million and diluted earnings per share of $1.20.
“We are pleased with our excellent third quarter and year-to-date financial results achieved while implementing a new growth strategy for Insperity,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “Now that all of the major elements of our business transformation are in place, we can focus our efforts and resources on the growth acceleration.”
Third Quarter Results
Revenues for the third quarter of 2012 increased 8.5% over the third quarter of 2011 due to a 7.5% increase in the average number of worksite employees paid per month and a 1.0% increase in revenues per worksite employee per month. Gross profit increased 13.1% over the third quarter of 2011 to $98.4 million. The average gross profit per worksite employee per month increased $13, or 5.3%, to $258 in the third quarter of 2012 from $245 in the 2011 period, primarily due to lower benefits costs.
Operating expenses increased 8.7% to $79.3 million compared to the third quarter of 2011. The 2012 quarter included higher salaries and wages due in part to higher incentive compensation accruals resulting from improved operating results. Operating expenses per worksite employee per month increased 1.0% to $208 in the 2012 quarter compared to $206 in the 2011 quarter.
| Insperity, Inc. |
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Year-to-Date Results
Year-to-date revenues were $1.6 billion, an increase of 9.8% over the 2011 period. Gross profit for the nine months ended Sept. 30, 2012, increased 10.3% to $288.7 million. The average gross profit per worksite employee per month increased $5, or 2.0%, to $258 in the 2012 period from $253 in the 2011 period.
Year-to-date operating expenses increased 7.2% over the first nine months of 2011 to $237.1 million. This increase was primarily due to costs associated with the Insperity ChampionshipTM professional golf tournament, which was moved into the first nine months of the year, and higher salaries and wages, partially offset by the non-recurrence of expenses related to our 2011 rebranding initiative. On a per worksite employee per month basis, operating expenses decreased 0.9% to $212 in the 2012 period from $214 in the 2011 period.
Adjusted EBITDA plus stock-based compensation increased 23.5% to $73.2 million compared to the first nine months of 2011, excluding $7.5 million in costs associated with two non-operational items in 2011. Cash outlays included the repurchase of 514,628 shares at a cost of $13.8 million, dividends of $12.6 million and capital expenditures of $12.0 million. Working capital at Sept. 30, 2012, was $140.0 million, an increase of $13.4 million over Dec. 31, 2011.
“Effective execution of our 2012 operating plan has resulted in both year-to-date earnings and cash flow exceeding our initial expectations,” said Douglas S. Sharp, senior vice-president of finance, chief financial officer and treasurer. “These results, combined with a solid balance sheet, provide for further investment in our long-term growth and value creation for our shareholders.”
Insperity will be hosting a conference call today at 10 a.m. ET to discuss these results, give guidance for the fourth quarter and answer questions from investment analysts. To listen in, call 877-651-0053 and use conference i.d. number 38163123. 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. 38163123, for one week. The webcast will be archived for one year.
Insperity, a trusted advisor to America’s best businesses for more than 26 years, provides an array of human resources and business solutions designed to help improve business performance. InsperityTM 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 OptimizationTM 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 Insurance Services. Insperity business performance solutions support more than 100,000 businesses with over 2 million employees. With 2011 revenues of $2 billion, Insperity operates in 56 offices throughout the United States. For more information, visit http://www.insperity.com.
| Insperity, Inc. |
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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) continued effects of the economic recession and general 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 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 Adjacent Business strategy, including acquisitions; and (x) 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. |
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Insperity, Inc.
Summary Financial Information
(in thousands, except per share amounts and statistical data)
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Sept. 30,
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Dec. 31,
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2012
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2011
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(Unaudited)
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Assets
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Cash and cash equivalents
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$ | 202,218 | $ | 211,208 | ||||
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Restricted cash
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46,069 | 44,737 | ||||||
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Marketable securities
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51,702 | 56,987 | ||||||
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Accounts receivable
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203,108 | 170,933 | ||||||
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Prepaid insurance
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23,739 | 21,300 | ||||||
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Other current assets
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8,133 | 11,488 | ||||||
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Income taxes receivable
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— | 2,902 | ||||||
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Deferred income taxes
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940 | 3,233 | ||||||
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Total current assets
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535,909 | 522,788 | ||||||
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Property and equipment, net
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92,927 | 92,944 | ||||||
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Prepaid health insurance
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9,000 | 9,000 | ||||||
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Deposits
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60,588 | 54,960 | ||||||
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Goodwill and other intangible assets, net
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27,131 | 28,433 | ||||||
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Other assets
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4,879 | 4,134 | ||||||
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Total assets
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$ | 730,434 | $ | 712,259 | ||||
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Liabilities and Stockholders’ Equity
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Accounts payable
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$ | 3,088 | $ | 5,085 | ||||
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Payroll taxes and other payroll deductions payable
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107,932 | 168,652 | ||||||
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Accrued worksite employee payroll expense
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174,264 | 130,317 | ||||||
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Accrued health insurance costs
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22,522 | 9,427 | ||||||
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Accrued workers’ compensation costs
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48,369 | 46,548 | ||||||
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Accrued corporate payroll and commissions
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21,819 | 22,383 | ||||||
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Other accrued liabilities
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13,975 | 13,814 | ||||||
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Income taxes payable
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3,987 | — | ||||||
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Total current liabilities
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395,956 | 396,226 | ||||||
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Accrued workers’ compensation costs
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63,463 | 60,054 | ||||||
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Deferred income taxes
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10,768 | 10,772 | ||||||
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Total noncurrent liabilities
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74,231 | 70,826 | ||||||
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Stockholders’ equity:
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Common stock
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309 | 309 | ||||||
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Additional paid-in capital
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136,688 | 135,871 | ||||||
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Treasury stock, cost
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(138,784 | ) | (134,647 | ) | ||||
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Accumulated other comprehensive income, net of tax
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70 | 24 | ||||||
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Retained earnings
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261,964 | 243,650 | ||||||
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Total stockholders’ equity
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260,247 | 245,207 | ||||||
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Total liabilities and stockholders’ equity
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$ | 730,434 | $ | 712,259 | ||||
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Insperity, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
(Unaudited)
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Three months ended
Sept. 30,
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Nine months ended
Sept. 30,
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2012
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2011
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Change
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2012
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2011
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Change
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Operating results:
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Revenues (gross billings of $3.068 billion, $2.835 billion, $9.339 billion and $8.454 billion, less worksite employee payroll cost of $2.556 billion, $2.363 billion, $7.712 billion and $6.973 billion, respectively)
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$ | 511,953 | $ | 471,821 | 8.5 | % | $ | 1,626,386 | $ | 1,481,105 | 9.8 | % | ||||||||||||
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Direct costs:
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Payroll taxes, benefits and workers’ compensation costs
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413,533 | 384,792 | 7.5 | % | 1,337,668 | 1,219,276 | 9.7 | % | ||||||||||||||||
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Gross profit
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98,420 | 87,029 | 13.1 | % | 288,718 | 261,829 | 10.3 | % | ||||||||||||||||
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Operating expenses:
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Salaries, wages and payroll taxes
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44,032 | 39,494 | 11.5 | % | 127,402 | 117,558 | 8.4 | % | ||||||||||||||||
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Stock-based compensation
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2,429 | 2,109 | 15.2 | % | 7,385 | 6,455 | 14.4 | % | ||||||||||||||||
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Commissions
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3,358 | 3,399 | (1.2 | )% | 10,299 | 9,750 | 5.6 | % | ||||||||||||||||
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Advertising
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3,680 | 5,235 | (29.7 | )% | 17,001 | 18,280 | (7.0 | )% | ||||||||||||||||
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General and administrative expenses
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21,122 | 18,912 | 11.7 | % | 61,694 | 57,828 | 6.7 | % | ||||||||||||||||
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Depreciation and amortization
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4,659 | 3,786 | 23.1 | % | 13,336 | 11,335 | 17.7 | % | ||||||||||||||||
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Total operating expenses
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79,280 | 72,935 | 8.7 | % | 237,117 | 221,206 | 7.2 | % | ||||||||||||||||
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Operating income
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19,140 | 14,094 | 35.8 | % | 51,601 | 40,623 | 27.0 | % | ||||||||||||||||
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Other income (expense):
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Interest income, net
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142 | 245 | (42.0 | )% | 462 | 829 | (44.3 | )% | ||||||||||||||||
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Other, net
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(3 | ) | (7,501 | ) | (100.0 | )% | 141 | (7,497 | ) | (101.9 | )% | |||||||||||||
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Income before income tax expense
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19,279 | 6,838 | 181.9 | % | 52,204 | 33,955 | 53.7 | % | ||||||||||||||||
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Income tax expense
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7,827 | 2,739 | 185.8 | % | 21,247 | 14,329 | 48.3 | % | ||||||||||||||||
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Net income
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$ | 11,452 | $ | 4,099 | 179.4 | % | $ | 30,957 | $ | 19,626 | 57.7 | % | ||||||||||||
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Less net income allocated to participating securities
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(334 | ) | (120 | ) | 178.3 | % | (898 | ) | (582 | ) | 54.3 | % | ||||||||||||
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Net income allocated to common shares
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$ | 11,118 | $ | 3,979 | 179.4 | % | $ | 30,059 | $ | 19,044 | 57.8 | % | ||||||||||||
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Basic net income per share of common stock
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$ | 0.45 | $ | 0.16 | 181.3 | % | $ | 1.20 | $ | 0.75 | 60.0 | % | ||||||||||||
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Diluted net income per share of
common stock
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$ | 0.45 | $ | 0.16 | 181.3 | % | $ | 1.20 | $ | 0.74 | 62.2 | % | ||||||||||||
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Insperity, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
(Unaudited)
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Three months ended
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Nine months ended
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Sept. 30,
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Sept. 30,
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2012
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2011
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Change
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2012
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2011
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Change
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Statistical data:
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Average number of worksite employees paid per month
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127,096 | 118,226 | 7.5 | % | 124,418 | 115,097 | 8.1 | % | ||||||||||||||||
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Revenues per worksite employee per month (1)
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$ | 1,343 | $ | 1,330 | 1.0 | % | $ | 1,452 | $ | 1,430 | 1.5 | % | ||||||||||||
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Gross profit per worksite employee per month
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258 | 245 | 5.3 | % | 258 | 253 | 2.0 | % | ||||||||||||||||
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Operating expenses per worksite employee per month
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208 | 206 | 1.0 | % | 212 | 214 | (0.9 | )% | ||||||||||||||||
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Operating income per worksite employee per month
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50 | 40 | 25.0 | % | 46 | 39 | 17.9 | % | ||||||||||||||||
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Net income per worksite employee per month
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30 | 12 | 150.0 | % | 28 | 19 | 47.4 | % | ||||||||||||||||
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(1)
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Gross billings of $8,047, $7,992, $8,340 and $8,161 per worksite employee per month, less payroll cost of $6,704, $6,662, $6,888 and $6,731 per worksite employee per month, respectively.
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Insperity, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
(Unaudited)
GAAP to Non-GAAP Reconciliation Tables
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Three months ended
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Nine months ended
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Sept. 30,
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Sept. 30,
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2012
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2011
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Change
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2012
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2011
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Change
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Payroll cost (GAAP)
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$ | 2,556,114 | $ | 2,362,941 | 8.2 | % | $ | 7,712,302 | $ | 6,972,806 | 10.6 | % | ||||||||||||
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Less: Bonus payroll cost
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156,723 | 174,668 | (10.3 | )% | 728,589 | 644,129 | 13.1 | % | ||||||||||||||||
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Non-bonus payroll cost
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$ | 2,399,391 | $ | 2,188,273 | 9.6 | % | $ | 6,983,713 | $ | 6,328,677 | 10.4 | % | ||||||||||||
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Payroll cost per worksite employee per month (GAAP)
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$ | 6,704 | $ | 6,662 | 0.6 | % | $ | 6,888 | $ | 6,731 | 2.3 | % | ||||||||||||
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Less: Bonus payroll cost per worksite employee per month
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411 | 492 | (16.5 | )% | 651 | 621 | 4.8 | % | ||||||||||||||||
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Non-bonus payroll cost per worksite employee per month
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$ | 6,293 | $ | 6,170 | 2.0 | % | $ | 6,237 | $ | 6,110 | 2.1 | % | ||||||||||||
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.
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Three months ended
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Nine months ended
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Sept. 30,
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Sept. 30,
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2012
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2011
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Change
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2012
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2011
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Change
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Net income (GAAP)
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$ | 11,452 | $ | 4,099 | 179.4 | % | $ | 30,957 | $ | 19,626 | 57.7 | % | ||||||||||||
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Income tax expense
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7,827 | 2,739 | 185.8 | % | 21,247 | 14,329 | 48.3 | % | ||||||||||||||||
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Interest expense
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89 | 19 | 368.4 | % | 265 | 19 | — | |||||||||||||||||
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Depreciation and amortization
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4,659 | 3,786 | 23.1 | % | 13,336 | 11,335 | 17.7 | % | ||||||||||||||||
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EBITDA
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24,027 | 10,643 | 125.8 | % | 65,805 | 45,309 | 45.2 | % | ||||||||||||||||
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Stock-based compensation
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2,429 | 2,109 | 15.2 | % | 7,385 | 6,455 | 14.4 | % | ||||||||||||||||
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Non-operational items
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— | 7,496 | (100.0 | )% | — | 7,496 | (100.0 | )% | ||||||||||||||||
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Adjusted EBITDA
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$ | 26,456 | $ | 20,248 | 30.7 | % | $ | 73,190 | $ | 59,260 | 23.5 | % | ||||||||||||
EBITDA represents net income computed in accordance with generally accepted accounting principles (“GAAP”), plus interest expense, income tax expense, depreciation and amortization expense. Insperity management believes 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.
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| Page 8 |
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Three Months Ended
Sept. 30,
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Nine Months Ended
Sept. 30,
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2012
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2011
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Change
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2012
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2011
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Change
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Net income (GAAP)
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$ | 11,452 | $ | 4,099 | 179.4 | % | $ | 30,957 | $ | 19,626 | 57.7 | % | ||||||||||||
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Non-operational items, net of tax
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— | 4,493 | (100.0 | )% | — | 4,493 | (100.0 | )% | ||||||||||||||||
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Adjusted net income
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$ | 11,452 | $ | 8,592 | 33.3 | % | $ | 30,957 | $ | 24,119 | 28.4 | % | ||||||||||||
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Three Months Ended
Sept. 30,
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Nine Months Ended
Sept. 30,
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2012
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2011
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Change
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2012
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2011
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Change
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Diluted net income per share of common stock (GAAP)
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$ | 0.45 | $ | 0.16 | 181.3 | % | $ | 1.20 | $ | 0.74 | 62.2 | % | ||||||||||||
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Non-operational items, net of tax
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— | 0.17 | (100.0 | )% | — | 0.17 | (100.0 | )% | ||||||||||||||||
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Adjusted diluted net income per share of common stock
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$ | 0.45 | $ | 0.33 | 36.4 | % | $ | 1.20 | $ | 0.91 | 31.9 | % | ||||||||||||
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 two non-operational items (loss on aircraft exchange and California settlement), net of tax. Insperity management believes adjusted net income is a useful measure of the company’s operating performance in this period, as it allows for additional analysis of the company’s operating results separate from the impact of these items.
Non-bonus payroll, 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, 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, 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.