Insperity announces strong second quarter results
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 ended june 30, 2022. insperity will be hosting a conference call today at 5:00 p.m. et to discuss these results and our updated 2022 outlook, and has posted an accompanying presentation to its investor website at http://ir.insperity.com. q2 average number of wsees paid and revenues up 19% and 21%, respectively q2 net income and diluted eps of $33.6 million and $0.87, respectively q2 adjusted ebitda up 25% to $75.0 million q2 adjusted eps up 27% to $1.16 second quarter results for the second quarter of 2022, reported net income and diluted earnings per share (“eps”) were $33.6 million and $0.87, respectively. adjusted eps increased 27.5% compared to the second quarter of 2021 to $1.16. adjusted ebitda increased 24.6% over the second quarter of 2021 to $75.0 million. the average number of worksite employees (“wsees”) paid per month increased 19.4% over q2 2021 to 290,507 wsees. wsees paid from new client sales and the net gain (loss) in our client base improved over q2 2021. client retention remained strong, averaging 99% per month for the quarter and our clients continued to experience robust hiring through q2 in spite of the tight labor market. revenues in q2 2022 increased 20.8% to $1.4 billion on the 19.4% increase in paid wsees and a 1.2% increase in revenue per wsee. “our impressive 19% growth in paid worksite employees over the first half of 2021 reflects strong demand for our services, combined with excellent sales and service execution and has led to achieving a milestone of over 300,000 paid worksite employees as we begin q3,” said paul j. sarvadi, insperity chief executive officer and chairman. “these results represent a very strong start to our recently adopted five-year plan for growth, profitability, and exceptional shareholder returns. we believe that insperity is well positioned to support the small and medium size business community through whatever economic conditions are experienced in the years ahead.” gross profit increased 20.2% over q2 2021 to $239.9 million on the 19.4% increase in paid wsees, combined with higher-than-expected contributions from each of our direct cost programs and our traditional employment offering. covid related costs and overall utilization of our health plan fell below forecasted levels. workers’ compensation costs also declined on effective claims management, and to a lesser extent, on the favorable impact of higher interest rates. as expected, payroll taxes increased on higher payroll volume and the non-recurrence of the q2 2021 collection of $11.3 million in federal payroll tax refunds related to prior years. operating expenses increased 16.5% over q2 2021 and included continued investment in our personnel given our high growth and a focus on hiring and retention in the current tight labor market. other operating spend included continued investment in marketing initiatives and technology. travel and event costs also increased over the prior year’s period which was more restrictive under the pandemic conditions. operating expense per wsee per month decreased from $225 in q2 2021 to $220 in q2 2022 demonstrating overall operating leverage while further investing in the growth of the business. year-to-date results revenues for the first six months of 2022 increased 21.8% to $3.0 billion on a 19.5% increase in paid worksite employees and a 1.9% increase in revenue per wsee. gross profit for the first six months of 2022 increased 16.6% to $525.6 million. operating expenses increased 14.1% to $378.9 million compared to the 2021 period. for the six months ended june 30, 2022, reported net income and diluted eps were $103.5 million and $2.68, respectively. adjusted eps increased 15.8% compared to the first six months of 2021 to $3.15. adjusted ebitda increased 17.7% compared to the first six months of 2021 to $193.6 million. net income per wsee per month was $61 in both periods. adjusted ebitda per wsee per month was $113 in the 2022 period compared to $115 in the 2021 period. gross profit and earnings comparisons are impacted by the non-recurrence of $16.8 million in federal payroll tax refunds received in 2021 related to prior years. cash outlays in the first six months of 2022 included the repurchase of approximately 616,000 shares of stock at a cost of $56.8 million, dividends totaling $37.1 million and capital expenditures of $9.0 million. adjusted cash totaled $167 million at june 30, 2022 and $280 million is available under our recently expanded $650 million credit facility. “we have raised our earnings outlook coming off of our outperformance over the first half of the year and continued growth momentum driving our positive outlook,” said douglas s. sharp, insperity executive vice president of finance, chief financial officer and treasurer. “we continue to closely monitor the impact of the pandemic, the tight labor market and the possibility of an economic slowdown on our business. at this point, our key internal client metrics remain strong.” 2022 guidance the company also announced its updated guidance for 2022, including the third quarter of 2022. please refer to the accompanying financial tables at the end of this press release for the reconciliation of non-gaap financial measures to the comparable gaap financial measures. q3 2022 full year 2022 average wsees paid 301,300 — 303,900 294,600 — 297,200 year-over-year increase 17% — 18% 17.5% — 18.5% adjusted eps $0.83 — $1.06 $4.68 — $5.25 year-over-year increase (decrease) (7)% — 19% 18% — 33% adjusted ebitda (in millions) $59 — $71 $305 — $335 year-over-year increase (decrease) (2)% — 18% 20% — 31% 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 and non-cash stock-based compensation. conference call and webcast insperity will be hosting a conference call today at 5:00 p.m. et to discuss these results, and the guidance discussed in this press release, and answer questions from investment analysts. to listen in, call 888-506-0062 and use conference i.d. number 990230. 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. 46200, for one week after the call. the webcast will be archived for one year. about insperity since 1986, insperity’s mission has been to help businesses succeed so communities prosper. offering the most comprehensive suite of scalable hr solutions available in the marketplace, insperity is defined by an unrivaled breadth and depth of services and level of care. through an optimal blend of premium hr service and technology, insperity delivers the administrative relief, reduced liabilities and better benefit solutions that businesses need for sustained growth. with 2021 revenues of $5.0 billion and more than 90 offices throughout the u.s., insperity is currently making a difference in thousands of businesses and communities nationwide. for more information, visit http://www.insperity.com. forward-looking statements the statements contained herein that are not historical facts are forward-looking statements within the meaning of the section 27a of the securities act of 1933 and section 21e of the securities exchange act of 1934. you can identify such forward-looking statements by the words “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,” “probably,” “could,” “goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions. forward-looking statements involve a number of risks and uncertainties. in the normal course of business, in an effort to help keep our stockholders and the public informed about our operations, from time to time, we may issue such forward-looking statements, either orally or in writing. generally, these statements relate to business plans or strategies; projected or anticipated benefits or other consequences of such plans or strategies; or projections involving anticipated revenues, earnings, average number of worksite employees, benefits and workers’ compensation costs, or other operating results. we base the forward-looking statements on our current expectations, estimates and projections. we caution you that these statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. in addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. therefore, the actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. among the factors that could cause actual results to differ materially are: adverse economic conditions; impact of the covid-19 pandemic, or other future pandemics, including the scope, severity and duration of the pandemic; government responses; regulatory developments; and the related disruptions and economic impact to our business and the small and medium-sized businesses that we serve; labor shortages and increasing competition for highly skilled workers; impact of inflation; vulnerability to regional economic factors because of our geographic market concentration; failure to comply with covenants under our credit facility; our liability for wsee payroll, payroll taxes and benefits costs, or other liabilities associated with actions of our client companies or wsees; increases in health insurance costs and workers’ compensation rates and underlying claims trends, health care reform, financial solvency of workers’ compensation carriers, other insurers or financial institutions, state unemployment tax rates, liabilities for employee and client actions or payroll-related claims; an adverse determination regarding our status as the employer of our wsees for tax and benefit purposes and an inability to offer alternative benefit plans following such a determination; cancellation of client contracts on short notice, or the inability to renew client contracts or attract new clients; the ability to secure competitive replacement contracts for health insurance and workers’ compensation insurance at expiration of current contracts; regulatory and tax developments and possible adverse application of various federal, state and local regulations; failure to manage growth of our operations and the effectiveness of our sales and marketing efforts; the impact of the competitive environment and other developments in the human resources services industry, including the peo industry, on our growth and/or profitability; an adverse final judgment or settlement of claims against insperity; disruptions of our information technology systems or failure to enhance our service and technology offerings to address new regulations or client expectations; our liability or damage to our reputation relating to disclosure of sensitive or private information as a result of data theft, cyberattacks or security vulnerabilities; failure of third-party providers, data centers or cloud service providers; and our ability to integrate or realize expected returns on our acquisitions. these factors are discussed in further detail in insperity’s filings with the u.s. securities and exchange commission. any of these factors, or a combination of such factors, could materially affect the results of our operations and whether forward-looking statements we make ultimately prove to be accurate. any forward-looking statements are made only as of the date hereof and, unless otherwise required by applicable securities laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. insperity, inc. condensed consolidated balance sheets (unaudited) (in thousands) june 30, 2022 december 31, 2021 assets cash and cash equivalents $ 510,869 $ 575,812 restricted cash 53,329 46,929 marketable securities 30,781 31,791 accounts receivable, net 685,857 513,306 prepaid insurance 52,939 11,285 other current assets 71,186 53,312 income taxes receivable 5,684 12,413 total current assets 1,410,645 1,244,848 property and equipment, net 199,322 210,723 right of use leased assets 59,149 62,830 prepaid health insurance 9,000 9,000 deposits 173,977 192,927 goodwill and other intangible assets, net 12,707 12,707 deferred income taxes, net — 4,892 other assets 28,106 15,158 total assets $ 1,892,906 $ 1,753,085 liabilities and stockholders' equity accounts payable $ 6,034 $ 6,412 payroll taxes and other payroll deductions payable 303,645 467,892 accrued worksite employee payroll cost 662,762 409,653 accrued health insurance costs 62,643 50,001 accrued workers’ compensation costs 58,142 50,534 accrued corporate payroll and commissions 69,775 74,778 other accrued liabilities 83,599 69,303 total current liabilities 1,246,600 1,128,573 accrued workers’ compensation cost, net of current 173,686 192,694 long-term debt 369,400 369,400 operating lease liabilities, net of current 58,916 64,192 deferred income taxes, net 9,172 — total noncurrent liabilities 611,174 626,286 stockholders’ equity: common stock 555 555 additional paid-in capital 125,622 109,179 treasury stock, at cost (709,810 ) (665,089 ) retained earnings 618,765 553,581 total stockholders’ equity (deficit) 35,132 (1,774 ) total liabilities and stockholders’ equity $ 1,892,906 $ 1,753,085 insperity, inc. consolidated statements of operations (unaudited) (in thousands, except per share amounts) three months ended june 30, six months ended june 30, 2022 2021 change 2022 2021 change operating results: revenues(1) $ 1,432,107 $ 1,185,371 20.8 % $ 3,009,944 $ 2,472,206 21.8 % payroll taxes, benefits and workers’ compensation costs 1,192,239 985,817 20.9 % 2,484,302 2,021,207 22.9 % gross profit 239,868 199,554 20.2 % 525,642 450,999 16.6 % salaries, wages and payroll taxes 106,522 94,362 12.9 % 213,961 197,437 8.4 % stock-based compensation 15,631 13,781 13.4 % 25,477 25,603 (0.5 )% commissions 10,743 8,251 30.2 % 21,053 15,970 31.8 % advertising 12,427 8,975 38.5 % 21,022 14,297 47.0 % general and administrative expenses 36,095 29,211 23.6 % 77,100 60,847 26.7 % depreciation and amortization 10,100 9,751 3.6 % 20,284 17,798 14.0 % total operating expenses 191,518 164,331 16.5 % 378,897 331,952 14.1 % operating income 48,350 35,223 37.3 % 146,745 119,047 23.3 % other income (expense): interest income 945 1,436 (34.2 )% 1,093 1,979 (44.8 )% interest expense (2,691 ) (1,975 ) 36.3 % (4,616 ) (3,574 ) 29.2 % income before income tax expense 46,604 34,684 34.4 % 143,222 117,452 21.9 % income tax expense 13,005 9,530 36.5 % 39,739 30,376 30.8 % net income $ 33,599 $ 25,154 33.6 % $ 103,483 $ 87,076 18.8 % less distributed and undistributed earnings allocated to participating securities (1 ) (37 ) (97.3 )% (31 ) (193 ) (83.9 )% net income allocated to common shares $ 33,598 $ 25,117 33.8 % $ 103,452 $ 86,883 19.1 % net income per share of common stock basic $ 0.88 $ 0.65 35.4 % $ 2.70 $ 2.26 19.5 % diluted $ 0.87 $ 0.65 33.8 % $ 2.68 $ 2.24 19.6 % ____________________________________ (1) revenues are comprised of gross billings less wsee payroll costs as follows: three months ended june 30, six months ended june 30, (in thousands) 2022 2021 2022 2021 gross billings $ 9,224,643 $ 7,637,851 $ 19,582,548 $ 15,688,273 less: wsee payroll cost 7,792,536 6,452,480 16,572,604 13,216,067 revenues $ 1,432,107 $ 1,185,371 $ 3,009,944 $ 2,472,206 insperity, inc. key financial and statistical data (unaudited) three months ended june 30, six months ended june 30, 2022 2021 change 2022 2021 change average wsees paid 290,507 243,270 19.4 % 284,583 238,220 19.5 % statistical data (per wsee per month): revenues(1) $ 1,643 $ 1,624 1.2 % $ 1,763 $ 1,730 1.9 % gross profit 275 273 0.7 % 308 316 (2.5 )% operating expenses 220 225 (2.2 )% 222 232 (4.3 )% operating income 55 48 14.6 % 86 83 3.6 % net income 39 34 14.7 % 61 61 — ____________________________________ (1) revenues per wsee per month are comprised of gross billings per wsee per month less wsee payroll costs per wsee per month as follows: three months ended june 30, six months ended june 30, (per wsee per month) 2022 2021 2022 2021 gross billings $ 10,585 $ 10,466 $ 11,469 $ 10,976 less: wsee payroll cost 8,942 8,842 9,706 9,246 revenues $ 1,643 $ 1,624 $ 1,763 $ 1,730 insperity, inc. non-gaap financial measures (unaudited) non-gaap financial measures are not prepared in accordance with gaap and may be different from non-gaap financial measures used by other companies. non-gaap financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with gaap. investors are encouraged to review the reconciliation of the non-gaap financial measures used to their most directly comparable gaap financial measures as provided in the tables below. non-gaap measure definition benefit of non-gaap measure non-bonus payroll cost non-bonus payroll cost is a non-gaap financial measure that excludes the impact of bonus payrolls paid to our wsees. bonus payroll cost varies from period to period, but has no direct impact to our ultimate workers’ compensation costs under the current program. our management refers to non-bonus payroll cost in analyzing, reporting and forecasting our workers’ compensation costs. we include these non-gaap financial measures because we believe they are useful to investors in allowing for greater transparency related to the costs incurred under our current workers’ compensation program. adjusted cash, cash equivalents and marketable securities excludes funds associated with: • federal and state income tax withholdings, • employment taxes, • other payroll deductions, and • client prepayments. we believe that the exclusion of the identified items helps us reflect the fundamentals of our underlying business model and analyze results against our expectations, against prior periods, and to plan for future periods by focusing on our underlying operations. we believe that the adjusted results provide relevant and useful information for investors because they allow investors to view performance in a manner similar to the method used by management and improves their ability to understand and assess our operating performance. adjusted ebitda is used by our lenders to assess our leverage and ability to make interest payments. ebitda represents net income computed in accordance with gaap, plus: • interest expense, • income tax expense, • depreciation and amortization expense, and • amortization of saas implementation costs. adjusted ebitda represents ebitda plus: • non-cash stock-based compensation. adjusted net income represents net income computed in accordance with gaap, excluding: • non-cash stock-based compensation. adjusted eps represents diluted net income per share computed in accordance with gaap, excluding: • non-cash stock-based compensation. following is a reconciliation of payroll cost (gaap) to non-bonus payroll costs (non-gaap): three months ended june 30, six months ended june 30, (in thousands, except per wsee per month) 2022 2021 2022 2021 per wsee per wsee per wsee per wsee payroll cost $ 7,792,536 $ 8,942 $ 6,452,480 $ 8,842 $ 16,572,604 $ 9,706 $ 13,216,067 $ 9,246 less: bonus payroll cost 668,503 767 796,154 1,092 2,652,356 1,553 2,216,629 1,551 non-bonus payroll cost $ 7,124,033 $ 8,175 $ 5,656,326 $ 7,750 $ 13,920,248 $ 8,153 $ 10,999,438 $ 7,695 % change period over period 25.9 % 5.5 % 15.2 % 7.9 % 26.6 % 6.0 % 9.3 % 6.8 % following is a reconciliation of cash, cash equivalents and marketable securities (gaap) to adjusted cash, cash equivalents and marketable securities (non-gaap): (in thousands) june 30, 2022 december 31, 2021 cash, cash equivalents and marketable securities $ 541,650 $ 607,603 less: amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions 258,180 424,800 client prepayments 116,646 20,054 adjusted cash, cash equivalents and marketable securities $ 166,824 $ 162,749 following is a reconciliation of net income (gaap) to ebitda (non-gaap) and adjusted ebitda (non-gaap): (in thousands, except per wsee per month) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 per wsee per wsee per wsee per wsee net income $ 33,599 $ 39 $ 25,154 $ 34 $ 103,483 $ 61 $ 87,076 $ 61 income tax expense 13,005 15 9,530 13 39,739 23 30,376 21 interest expense 2,691 3 1,975 3 4,616 3 3,574 3 depreciation and amortization 10,100 11 9,751 14 20,284 11 17,798 12 ebitda 59,395 68 46,410 64 168,122 98 138,824 97 stock-based compensation 15,631 18 13,781 18 25,477 15 25,603 18 adjusted ebitda $ 75,026 $ 86 $ 60,191 $ 82 $ 193,599 $ 113 $ 164,427 $ 115 % change period over period 24.6 % 4.9 % (34.5 )% (39.3 )% 17.7 % (1.7 )% (14.9 )% (16.7 )% following is a reconciliation of net income (gaap) to adjusted net income (non-gaap): three months ended june 30, six months ended june 30, (in thousands) 2022 2021 2022 2021 net income $ 33,599 $ 25,154 $ 103,483 $ 87,076 non-gaap adjustments: stock-based compensation 15,631 13,781 25,477 25,603 total non-gaap adjustments 15,631 13,781 25,477 25,603 tax effect (4,345 ) (3,643 ) (7,069 ) (6,621 ) total non-gaap adjustments, net 11,286 10,138 18,408 18,982 adjusted net income $ 44,885 $ 35,292 $ 121,891 $ 106,058 % change period over period 27.2 % (40.8 )% 14.9 % (16.2 )% following is a reconciliation of diluted eps (gaap) to adjusted eps (non-gaap): three months ended june 30, six months ended june 30, 2022 2021 2022 2021 diluted eps $ 0.87 $ 0.65 $ 2.68 $ 2.24 non-gaap adjustments: stock-based compensation 0.41 0.35 0.66 0.66 total non-gaap adjustments 0.41 0.35 0.66 0.66 tax effect (0.12 ) (0.09 ) (0.19 ) (0.18 ) total non-gaap adjustments, net $ 0.29 $ 0.26 $ 0.47 $ 0.48 adjusted eps $ 1.16 $ 0.91 $ 3.15 $ 2.72 % change period over period 27.5 % (40.9 )% 15.8 % (16.0 )% following is a reconciliation of gaap to non-gaap financial measures for third quarter and full year 2022 guidance: (in millions, except per share amounts) q3 2022 guidance full year 2022 guidance net income $23 - $32 $145 - $167 income tax expense 9 - 12 56 - 64 interest expense 3 11 depreciation and amortization 10 42 amortization of saas implementation costs 1 2 ebitda 46 - 58 256 - 286 stock-based compensation 13 49 adjusted ebitda $59 - $71 $305 - $335 diluted net income per share of common stock $0.58 - $0.81 $3.76 - $4.33 non-gaap adjustments: stock-based compensation 0.34 1.27 tax effect (0.09) (0.35) total non-gaap adjustments, net 0.25 0.92 adjusted eps $0.83 - $1.06 $4.68 - $5.25
