Attached files
| file | filename |
|---|---|
| EX-10.1 - EXHIBIT 10.1 - INSPERITY, INC. | ex101amendedandrestatecred.htm |
| 8-K - 8-K - INSPERITY, INC. | a12312017-8xkearningsrelea.htm |
Exhibit 99.1
Insperity Announces Record Fourth Quarter and Full Year 2017 Results
HOUSTON – Feb. 12, 2018 – 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, 2017.
Fourth Quarter and Full Year 2017 Results (reflecting a 2-for-1 stock split in Q4):
• | Q4 EPS up 57% to $0.36; adjusted EPS up 90% to $0.55 |
• | Q4 net income increased 63% to $15.6 million |
• | Q4 adjusted EBITDA up 67% to $38.5 million |
• | 2017 EPS increased 31% to $2.01; adjusted EPS up 37% to $2.45 |
• | 2017 net income increased 28% to $84.4 million |
• | 2017 adjusted EBITDA up 26% over 2016 to $177.7 million |
Fourth Quarter Results
The fourth quarter per share results reflect the two-for-one stock split effective December 18, 2017. Fourth quarter 2017 net income and diluted earnings per share of $15.6 million and $0.36 represented increases of 63% and 57%, respectively, compared to the fourth quarter of 2016. Adjusted diluted earnings per share were $0.55, a 90% increase over the fourth quarter of 2016. Adjusted EBITDA increased 67% to $38.5 million.
“We are pleased with these record 2017 financial results capped off with a very strong fall sales and client retention campaign,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “A higher starting point of paid worksite employees in January positions Insperity for growth acceleration and continued exceptional financial performance in 2018.”
Revenues for the fourth quarter of 2017 increased 13% to $826.5 million compared to the fourth quarter of 2016 primarily due to a 10% increase in the average number of worksite employees paid per month. The worksite employee growth was the result of new client sales driven by an increase in the number of trained Business Performance Advisors, combined with a continuing high level of client retention. Net hiring of worksite employees by our clients was minimal, as a net loss during the first month of the quarter was followed by slight gains in each of the following two months.
Gross profit for the fourth quarter of 2017 increased 29% over the fourth quarter of 2016 to $142.9 million, primarily due to the 10% worksite employee growth, increases in overall pricing and improved results in our benefits, workers’ compensation and payroll tax areas. Operating expenses increased 24% over the fourth quarter of 2016 to $119.2 million, and included additional accruals for incentive compensation programs tied to our outperformance and an acceleration of the vesting of restricted shares from the first quarter of 2018 to take advantage of higher tax deductibility.
Net income and adjusted EBITDA per worksite employee per month increased 50% and 51%, respectively, over the fourth quarter of 2016 to $27 and $68.
The fourth quarter and full year 2017 effective income tax rates were both 35% and included a charge associated with the enactment of U.S. tax reform of $2.5 million offset by tax benefits associated with the acceleration of restricted stock and other credits.
Full Year Results
For the year ended Dec. 31, 2017, reported net income increased 28% over 2016 to $84.4 million, and diluted net income per share increased 31% to $2.01. Adjusted diluted earnings per share increased 37% over 2016 to $2.45. Adjusted EBITDA increased 26% to $177.7 million.
Revenues in 2017 increased to $3.3 billion, on a 10% increase in the average number of worksite employees paid per month over 2016. This growth was driven by an increase in worksite employees paid from new sales on a 13% increase in the average number of trained Business Performance Advisors. Additionally, worksite employee retention was 85% in 2017. Gross profit for the year ended Dec. 31, 2017 increased 17% to $572.7 million. Operating expenses increased 15% to $442.8 million over 2016. Adjusted operating expenses increased 14% to $440.8 million over 2016.
Adjusted EBITDA per worksite employee per month increased 14% from $71 in 2016 to a record high of $81 in 2017 primarily as a result of double-digit worksite employee growth, effective pricing and direct cost and operating expense management.
Cash outlays in 2017 included the repurchase of approximately 901,000 shares of stock at a cost of $38.7 million, dividends totaling $65.8 million, including both our regular quarterly dividend and the $1.00 per share special dividend declared in December. We also had capital expenditures of $33.3 million. Adjusted cash, cash equivalents and marketable securities at Dec. 31, 2017 was $61.1 million.
“Our strong cash flow generated from our continued double-digit worksite employee growth and direct cost and operating expense management has allowed us to return just over $300 million to shareholders over the past two years in the form of dividends and share repurchases,” said Douglas S. Sharp, senior vice president of finance, chief financial officer and treasurer. “With another strong year anticipated in 2018, we expect to continue to provide exceptional shareholder return while investing in our long-term plan for growth and profitability.”
Other Matters
Today, we also announced the renewal and expansion of our credit facility. The facility has been increased to $350 million, increasing our borrowing ability by $150 million and extending the maturity date to February 2023. The credit facility is available for general corporate purposes and is subject to various covenants that are customary for facilities of this nature.
2018 Guidance
The company also announced its guidance for 2018, including the first quarter of 2018. 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 2018 | Full Year 2018 | ||||||
Average WSEEs | 193,500 | — | 195,300 | 203,700 | — | 207,400 | |
Year-over-year increase | 11% | — | 12% | 11.5% | — | 13.5% | |
Adjusted EPS | $1.12 | — | $1.16 | $2.96 | — | $3.08 | |
Year-over-year increase | 22% | — | 26% | 21% | — | 26% | |
Adjusted EBITDA (in millions) | $69 | — | $71 | $197 | — | $204 | |
Year-over-year increase | 10% | — | 13% | 11% | — | 15% | |
Definition of Key Metrics
Average WSEEs - Determined by calculating the company’s cumulative worksite employees paid during the period divided by the number of months in the period.
Adjusted EPS - Represents diluted net income per share computed in accordance with GAAP, excluding the impact of non-cash impairment and other charges, one-time tax reform bonus and stock-based compensation.
Adjusted EBITDA - Represents net income computed in accordance with GAAP, plus interest expense, income taxes, depreciation and amortization expense, non-cash impairment and other charges, one-time tax reform bonus and stock-based compensation.
Insperity will be hosting a conference call today at 10 a.m. ET to discuss these results, provide guidance for the first quarter and full year 2018 and answer questions from investment analysts. To listen in, call 877-651-0053 and use conference i.d. number 6087858. The call will also be webcast at http://ir.insperity.com. The conference call script will be available at the same website later today. A replay of the conference call will be available at 855-859-2056, conference i.d. 6087858. The webcast will be archived for one year.
Insperity, a trusted advisor to America’s best businesses for more than 31 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, Expense Management, Retirement Services and Insurance Services. Insperity business performance solutions support more than 100,000 businesses with over
2 million employees. With 2017 revenues of $3.3 billion, Insperity operates in 68 offices throughout the United States. For more information, visit http://www.insperity.com.
The statements contained herein that are not historical facts are forward-looking statements within the meaning of the federal securities laws (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). You can identify such forward-looking statements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,” “probably,” “goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions. Forward-looking statements involve a number of risks and uncertainties. In the normal course of business, Insperity, Inc., in an effort to help keep our stockholders and the public informed about our operations, may from time to time issue such forward-looking statements, either orally or in writing. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies, or projections involving anticipated revenues, earnings, unit growth, profit per worksite employee, pricing, operating expenses or other aspects of operating results. We base the forward-looking statements on our expectations, estimates and projections at the time such statements are made. These statements are not guarantees of future performance and involve risks and uncertainties that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Therefore, the actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: (i) adverse economic conditions; (ii) regulatory and tax developments and possible adverse application of various federal, state and local regulations; (iii) the ability to secure competitive replacement contracts for health insurance and workers’ compensation insurance at expiration of current contracts; (iv) cancellation of client contracts on short notice, or the inability to renew client contracts or attract new clients; (v) vulnerability to regional economic factors because of our geographic market concentration; (vi) 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; (vii) failure to manage growth of our operations and the effectiveness of our sales and marketing efforts; (viii) the impact of the competitive environment in the PEO industry on our growth and/or profitability; (ix) our liability for worksite employee payroll, payroll taxes and benefits costs; (x) our liability for disclosure of sensitive or private information; (xi) our ability to integrate or realize expected returns on our acquisitions; (xii) failure of our information technology systems; (xiii) an adverse final judgment or settlement of claims against Insperity; and (xiv) disruptions to our business resulting from the actions of certain stockholders. These factors are discussed in further detail in Insperity’s filings with the U.S. Securities and Exchange Commission. Any of these factors, or a combination of such factors, could materially affect the results of our operations and whether forward-looking statements we make ultimately prove to be accurate.
Except to the extent otherwise required by federal securities law, we do not undertake any obligation to update our forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events.
Insperity, Inc.
Summary Financial Information
(in thousands, except per share amounts and statistical data)
Dec. 31, | Dec. 31, | |||||||
2017 | 2016 | |||||||
Assets: | ||||||||
Cash and cash equivalents | $ | 354,260 | $ | 286,034 | ||||
Restricted cash | 41,137 | 42,637 | ||||||
Marketable securities | 1,960 | 1,851 | ||||||
Accounts receivable, net | 333,981 | 270,284 | ||||||
Prepaid insurance | 10,782 | 15,041 | ||||||
Other current assets | 26,991 | 19,526 | ||||||
Income taxes receivable | 9,824 | 4,949 | ||||||
Total current assets | 778,935 | 640,322 | ||||||
Property and equipment, net | 95,659 | 80,261 | ||||||
Prepaid health insurance | 9,000 | 9,000 | ||||||
Deposits | 159,515 | 148,638 | ||||||
Goodwill and other intangible assets, net | 12,762 | 13,088 | ||||||
Deferred income taxes, net | 4,283 | 14,025 | ||||||
Other assets | 3,541 | 1,840 | ||||||
Total assets | $ | 1,063,695 | $ | 907,174 | ||||
Liabilities and stockholders' equity: | ||||||||
Accounts payable | $ | 6,447 | $ | 4,189 | ||||
Payroll taxes and other payroll deductions payable | 303,247 | 247,766 | ||||||
Accrued worksite employee payroll cost | 267,402 | 215,214 | ||||||
Accrued health insurance costs | 26,075 | 26,360 | ||||||
Accrued workers’ compensation costs | 42,974 | 44,231 | ||||||
Accrued corporate payroll and commissions | 52,595 | 40,761 | ||||||
Other accrued liabilities | 27,741 | 22,437 | ||||||
Total current liabilities | 726,481 | 600,958 | ||||||
Accrued workers’ compensation costs | 166,493 | 141,291 | ||||||
Long-term debt | 104,400 | 104,400 | ||||||
Total noncurrent liabilities | 270,893 | 245,691 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 555 | 555 | ||||||
Additional paid-in capital | 25,337 | 8,962 | ||||||
Treasury stock, at cost | (256,363 | ) | (227,152 | ) | ||||
Accumulated other comprehensive income, net of tax | (5 | ) | (3 | ) | ||||
Retained earnings | 296,797 | 278,163 | ||||||
Total stockholders’ equity | 66,321 | 60,525 | ||||||
Total liabilities and stockholders’ equity | $ | 1,063,695 | $ | 907,174 | ||||
Insperity, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
Three months ended Dec. 31, | Year ended Dec. 31, | |||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Operating results: | ||||||||||||||||||||||
Revenues (gross billings of $5.518 billion, $4.892 billion, $20.174 billion and $17.933 billion, less worksite employee payroll cost of $4.692 billion, $4.163 billion, $16.874 billion and $14.992 billion, respectively) | $ | 826,494 | $ | 729,069 | 13.4 | % | $ | 3,300,223 | $ | 2,941,347 | 12.2 | % | ||||||||||
Direct costs: | ||||||||||||||||||||||
Payroll taxes, benefits and workers’ compensation costs | 683,628 | 618,530 | 10.5 | % | 2,727,492 | 2,449,737 | 11.3 | % | ||||||||||||||
Gross profit | 142,866 | 110,539 | 29.2 | % | 572,731 | 491,610 | 16.5 | % | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||
Salaries, wages and payroll taxes | 70,393 | 58,679 | 20.0 | % | 259,531 | 229,589 | 13.0 | % | ||||||||||||||
Stock-based compensation | 7,955 | 4,116 | 93.3 | % | 24,345 | 16,643 | 46.3 | % | ||||||||||||||
Commissions | 6,958 | 5,642 | 23.3 | % | 22,773 | 19,288 | 18.1 | % | ||||||||||||||
Advertising | 3,063 | 3,148 | (2.7 | )% | 16,686 | 16,447 | 1.5 | % | ||||||||||||||
General and administrative expenses | 25,958 | 20,337 | 27.6 | % | 101,273 | 86,693 | 16.8 | % | ||||||||||||||
Depreciation and amortization | 4,827 | 4,150 | 16.3 | % | 18,182 | 16,644 | 9.2 | % | ||||||||||||||
Total operating expenses | 119,154 | 96,072 | 24.0 | % | 442,790 | 385,304 | 14.9 | % | ||||||||||||||
Operating income | 23,712 | 14,467 | 63.9 | % | 129,941 | 106,306 | 22.2 | % | ||||||||||||||
Other income (expense): | ||||||||||||||||||||||
Interest income | 1,255 | 340 | 269.1 | % | 3,413 | 1,267 | 169.4 | % | ||||||||||||||
Interest expense | (893 | ) | (481 | ) | 85.7 | % | (3,213 | ) | (2,396 | ) | 34.1 | % | ||||||||||
Income before income tax expense | 24,074 | 14,326 | 68.0 | % | 130,141 | 105,177 | 23.7 | % | ||||||||||||||
Income tax expense | 8,520 | 4,806 | 77.3 | % | 45,739 | 39,186 | 16.7 | % | ||||||||||||||
Net income | $ | 15,554 | $ | 9,520 | 63.4 | % | $ | 84,402 | $ | 65,991 | 27.9 | % | ||||||||||
Less distributed and undistributed earnings allocated to participating securities | (827 | ) | (222 | ) | 272.5 | % | (1,517 | ) | (1,496 | ) | 1.4 | % | ||||||||||
Net income allocated to common shares | $ | 14,727 | $ | 9,298 | 58.4 | % | $ | 82,885 | $ | 64,495 | 28.5 | % | ||||||||||
Basic net income per share of common stock | $ | 0.36 | $ | 0.23 | 56.5 | % | $ | 2.02 | $ | 1.55 | 30.3 | % | ||||||||||
Diluted net income per share of common stock | $ | 0.36 | $ | 0.23 | 56.5 | % | $ | 2.01 | $ | 1.54 | 30.5 | % | ||||||||||
Insperity, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
Three months ended Dec. 31, | Year ended Dec. 31, | |||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Statistical Data: | ||||||||||||||||||||||
Average number of worksite employees paid per month | 189,513 | 172,578 | 9.8 | % | 182,696 | 165,850 | 10.2 | % | ||||||||||||||
Revenues per worksite employee per month (1) | $ | 1,454 | $ | 1,408 | 3.3 | % | $ | 1,505 | $ | 1,478 | 1.8 | % | ||||||||||
Gross profit per worksite employee per month | 251 | 214 | 17.3 | % | 261 | 247 | 5.7 | % | ||||||||||||||
Operating expenses per worksite employee per month | 209 | 186 | 12.4 | % | 202 | 194 | 4.1 | % | ||||||||||||||
Operating income per worksite employee per month | 42 | 28 | 50.0 | % | 59 | 53 | 11.3 | % | ||||||||||||||
Net income per worksite employee per month | 27 | 18 | 50.0 | % | 38 | 33 | 15.2 | % | ||||||||||||||
(1) | Gross billings of $9,706, $9,449, $9,202 and $9,011 per worksite employee per month, less payroll cost of $8,252, $8,041, $7,697 and $7,533 per worksite employee per month, respectively. |
Insperity, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
(Unaudited)
GAAP to Non-GAAP Reconciliation Tables
Three months ended | Year ended | |||||||||||||||||||||
Dec. 31, | Dec. 31, | |||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Payroll cost (GAAP) | $ | 4,691,773 | $ | 4,163,210 | 12.7 | % | $ | 16,873,589 | $ | 14,991,510 | 12.6 | % | ||||||||||
Less: Bonus payroll cost | 725,226 | 598,288 | 21.2 | % | 1,959,053 | 1,648,936 | 18.8 | % | ||||||||||||||
Non-bonus payroll cost | $ | 3,966,547 | $ | 3,564,922 | 11.3 | % | $ | 14,914,536 | $ | 13,342,574 | 11.8 | % | ||||||||||
Payroll cost per worksite employee per month (GAAP) | $ | 8,252 | $ | 8,041 | 2.6 | % | $ | 7,697 | $ | 7,533 | 2.2 | % | ||||||||||
Less: Bonus payroll cost per worksite employee per month | 1,275 | 1,156 | 10.3 | % | 894 | 829 | 7.8 | % | ||||||||||||||
Non-bonus payroll cost per worksite employee per month | $ | 6,977 | $ | 6,885 | 1.3 | % | $ | 6,803 | $ | 6,704 | 1.5 | % | ||||||||||
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. Insperity includes these non-GAAP financial measures because it believes they are useful to investors in allowing for greater transparency related to the costs incurred under the company’s workers’ compensation program.
December 31, 2017 | December 31, 2016 | |||||||
Cash, cash equivalents and marketable securities (GAAP) | $ | 356,220 | $ | 287,885 | ||||
Less: Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions | 271,547 | 221,710 | ||||||
Customer prepayments | 23,603 | 21,256 | ||||||
Adjusted cash, cash equivalents and marketable securities | $ | 61,070 | $ | 44,919 | ||||
Adjusted cash, cash equivalents and marketable securities excludes funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as client prepayments. Insperity management believes adjusted cash, cash equivalents and marketable securities is a useful measure of the company’s available funds.
Three months ended | Year ended | |||||||||||||||||||||
Dec. 31, | Dec. 31, | |||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Operating expenses (GAAP) | $ | 119,154 | $ | 96,072 | 24.0 | % | $ | 442,790 | $ | 385,304 | 14.9 | % | ||||||||||
Less: | ||||||||||||||||||||||
Charitable donations to Hurricane Harvey relief efforts | 782 | — | — | 2,000 | — | — | ||||||||||||||||
Stockholder advisory expenses | — | — | — | — | 323 | — | ||||||||||||||||
Adjusted operating expenses (non-GAAP) | $ | 118,372 | $ | 96,072 | 23.2 | % | $ | 440,790 | $ | 384,981 | 14.5 | % | ||||||||||
Operating expenses per worksite employee per month (GAAP) | $ | 209 | $ | 186 | 12.4 | % | $ | 202 | $ | 194 | 4.1 | % | ||||||||||
Less: | ||||||||||||||||||||||
Charitable donations to Hurricane Harvey relief efforts per worksite employee per month | 1 | — | — | 1 | — | — | ||||||||||||||||
Stockholder advisory expenses per worksite employee per month | — | — | — | — | 1 | — | ||||||||||||||||
Adjusted operating expenses per worksite employee per month (non-GAAP) | $ | 208 | $ | 186 | 11.8 | % | $ | 201 | $ | 193 | 4.1 | % | ||||||||||
Adjusted operating expenses represent operating expenses excluding the impact of charitable contributions related to Hurricane Harvey relief efforts and stockholder advisory expenses. Insperity management believes adjusted operating expenses is a useful measure of the company’s operating costs, as it allows for additional analysis of the company’s operating expenses separate from the impact of these items.
Three months ended | Year ended | |||||||||||||||||||||
Dec. 31, | Dec. 31, | |||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Net income (GAAP) | $ | 15,554 | $ | 9,520 | 63.4 | % | $ | 84,402 | $ | 65,991 | 27.9 | % | ||||||||||
Income tax expense | 8,520 | 4,806 | 77.3 | % | 45,739 | 39,186 | 16.7 | % | ||||||||||||||
Interest expense | 893 | 481 | 85.7 | % | 3,213 | 2,396 | 34.1 | % | ||||||||||||||
Depreciation and amortization | 4,827 | 4,150 | 16.3 | % | 18,182 | 16,644 | 9.2 | % | ||||||||||||||
EBITDA | 29,794 | 18,957 | 57.2 | % | 151,536 | 124,217 | 22.0 | % | ||||||||||||||
Stock-based compensation | 7,955 | 4,116 | 93.3 | % | 24,345 | 16,643 | 46.3 | % | ||||||||||||||
Charitable donations to Hurricane Harvey relief efforts | 782 | — | — | 2,000 | — | — | ||||||||||||||||
Other | — | — | — | (200 | ) | — | — | |||||||||||||||
Stockholder advisory expenses | — | — | — | — | 323 | — | ||||||||||||||||
Adjusted EBITDA (non-GAAP) | $ | 38,531 | $ | 23,073 | 67.0 | % | $ | 177,681 | $ | 141,183 | 25.9 | % | ||||||||||
Net income per worksite employee per month (GAAP) | $ | 27 | $ | 18 | 50.0 | % | $ | 38 | $ | 33 | 15.2 | % | ||||||||||
Income tax expense per worksite employee per month | 15 | 10 | 50.0 | % | 21 | 19 | 10.5 | % | ||||||||||||||
Interest expense per worksite employee per month | 2 | 1 | 100.0 | % | 1 | 1 | — | |||||||||||||||
Depreciation and amortization per worksite employee per month | 8 | 8 | — | 9 | 9 | — | ||||||||||||||||
EBITDA per worksite employee per month | 52 | 37 | 40.5 | % | 69 | 62 | 11.3 | % | ||||||||||||||
Stock-based compensation per worksite employee per month | 15 | 8 | 87.5 | % | 11 | 8 | 37.5 | % | ||||||||||||||
Charitable donations to Hurricane Harvey relief efforts per worksite employee per month | 1 | — | — | 1 | — | — | ||||||||||||||||
Other per worksite employee per month | — | — | — | — | — | — | ||||||||||||||||
Stockholder advisory expenses per worksite employee per month | — | — | — | — | 1 | — | ||||||||||||||||
Adjusted EBITDA per worksite employee per month (non-GAAP) | $ | 68 | $ | 45 | 51.1 | % | $ | 81 | $ | 71 | 14.1 | % | ||||||||||
EBITDA represents net income computed in accordance with generally accepted accounting principles (“GAAP”), plus interest expense, income tax expense, depreciation and amortization expense. Adjusted EBITDA, which represents EBITDA plus charitable donations related to Hurricane Harvey relief efforts, other credits, costs associated with stockholder advisory expenses and stock-based compensation is based on our definition in our credit facility. Insperity management believes EBITDA and Adjusted EBITDA are often useful measures of the company’s operating performance, as they allow for additional analysis of the company’s operating results separate from the impact of these items and Adjusted EBITDA is used by our lenders to assess our leverage and ability to make interest payments.
Three Months Ended Dec. 31, | Year Ended Dec. 31, | |||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Net income (GAAP) | $ | 15,554 | $ | 9,520 | 63.4 | % | $ | 84,402 | $ | 65,991 | 27.9 | % | ||||||||||
Stock-based compensation | 7,955 | 4,116 | 93.3 | % | 24,345 | 16,643 | 46.3 | % | ||||||||||||||
Charitable donations to Hurricane Harvey relief efforts | 782 | — | — | 2,000 | — | — | ||||||||||||||||
Other | — | — | — | (200 | ) | — | — | |||||||||||||||
Stockholder advisory expenses | — | — | — | — | 323 | — | ||||||||||||||||
Total non-GAAP adjustments | 8,737 | 4,116 | 112.3 | % | 26,145 | 16,966 | 54.1 | % | ||||||||||||||
Tax effect of non-GAAP adjustments | (3,092 | ) | (1,381 | ) | 123.9 | % | (9,354 | ) | (6,239 | ) | 49.9 | % | ||||||||||
Enactment of U.S. tax reform | 2,481 | — | — | 2,481 | — | — | ||||||||||||||||
Tax effect of disaster credit | (669 | ) | — | — | (669 | ) | — | — | ||||||||||||||
Adjusted net income (non-GAAP) | $ | 23,011 | $ | 12,255 | 87.8 | % | $ | 103,005 | $ | 76,718 | 34.3 | % | ||||||||||
Three Months Ended Dec. 31, | Year Ended Dec. 31, | |||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Diluted net income per share of common stock (GAAP) | $ | 0.36 | $ | 0.23 | 56.5 | % | $ | 2.01 | $ | 1.54 | 30.5 | % | ||||||||||
Stock-based compensation | 0.19 | 0.09 | 111.1 | % | 0.58 | 0.39 | 48.7 | % | ||||||||||||||
Charitable donations to Hurricane Harvey relief efforts | 0.02 | — | — | 0.05 | — | — | ||||||||||||||||
Other | — | — | — | (0.01 | ) | — | — | |||||||||||||||
Impact of dividends exceeding earnings | 0.02 | — | — | — | — | — | ||||||||||||||||
Stockholder advisory expenses | — | — | — | — | 0.01 | — | ||||||||||||||||
Total non-GAAP adjustments | 0.23 | 0.09 | 155.6 | % | 0.62 | 0.40 | 55.0 | % | ||||||||||||||
Tax effect on non-GAAP adjustments | (0.08 | ) | (0.03 | ) | 166.7 | % | (0.22 | ) | (0.15 | ) | 46.7 | % | ||||||||||
Enactment of U.S. tax reform | 0.06 | — | — | 0.06 | — | — | ||||||||||||||||
Tax effect of disaster credit | (0.02 | ) | — | — | (0.02 | ) | — | — | ||||||||||||||
Adjusted diluted net income per share of common stock (non-GAAP) | $ | 0.55 | $ | 0.29 | 89.7 | % | $ | 2.45 | $ | 1.79 | 36.9 | % | ||||||||||
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 stock-based compensation, enactment of U.S. tax reform, and disaster credits and charitable contributions related to Hurricane Harvey relief efforts, other credits and stockholder advisory expenses. Insperity management believes adjusted net income and adjusted diluted net income per share of common stock are useful measures of the company’s operating performance in this period, as they allow for additional analysis of the company’s operating results separate from the impact of these items.
Non-bonus payroll, adjusted cash, cash equivalents and marketable securities, adjusted operating expenses, EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted net income per share of common stock are not financial measures prepared in accordance with GAAP and may be different from similar measures used by other companies. Non-bonus payroll, adjusted cash, cash equivalents and marketable securities, adjusted
operating expenses, EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted net income per share of common stock should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of the non-GAAP financial measures used in this press release to their most directly comparable GAAP financial measures as provided in the tables above.
The following is a reconciliation of GAAP to non-GAAP financial measures for first quarter and full year 2018 guidance (in millions, except per share amounts):
Q1 2018 | Full Year 2018 | |||
Guidance | Guidance | |||
Net income (GAAP) | $37 - $39 | $105 - $110 | ||
Income tax expense | 12 | 39 - 41 | ||
Interest expense | 1 | 5 | ||
Depreciation and amortization | 5 | 22 | ||
EBITDA | 55 - 57 | 171 - 178 | ||
Stock-based compensation | 5 | 17 | ||
One-time tax reform bonus | 9 | 9 | ||
Adjusted EBITDA (non-GAAP) | $69 - $71 | $197 - $204 | ||
Diluted net income per share of common stock (GAAP) | $0.89 - $0.93 | $2.50 - $2.62 | ||
Stock-based compensation | 0.11 | 0.42 | ||
One-time tax reform bonus | 0.21 | 0.21 | ||
Total non-GAAP adjustments | 0.32 | 0.63 | ||
Tax effect on non-GAAP adjustments | 0.09 | 0.17 | ||
Adjusted EPS (non-GAAP) | $1.12 - $1.16 | $2.96 - $3.08 | ||