Insperity announces third 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 third quarter ended sep. 30, 2021: q3 average number of wsees paid and revenues up 11% and 20%, respectively q3 net income and diluted eps of $27.3 million and $0.70, respectively q3 adjusted ebitda and adjusted eps of $60.1 million and $0.89, respectively ytd net income and diluted eps of $114.4 million and $2.94, respectively ytd adjusted ebitda and adjusted eps of $224.6 million and $3.62, respectively third quarter results the average number of worksite employees (“wsees”) paid per month in q3 2021 increased 11% to 257,560 wsees. net gains from hiring in our client base, combined with wsees paid from new sales and client retention at our historical high level of 99% for the quarter, drove the accelerated growth above the high end of our expectations. revenues in q3 2021 increased 20% to $1.2 billion on the 11% increase in paid worksite employees and an 8% increase in revenue per wsee, which reflects a 4% increase in pricing and the non-recurrence of the 2020 fica deferral credits instituted as part of the cares act. “we are pleased with our solid financial results and our return to double-digit unit growth in q3,” said paul j. sarvadi, insperity chief executive officer and chairman. “strong demand for our services, combined with solid execution from our dedicated employees, positions insperity to continue growth acceleration into 2022.” gross profit increased 7.3% over q3 2020 to $198.5 million. this higher than expected increase resulted from the higher than anticipated paid wsees and pricing, combined with favorable results from our workers’ compensation program and payroll tax area. in q3 2021, benefits costs continued to reflect the dynamics of the pandemic, including increased utilization of our health plan and covid-19 related vaccination, testing and treatment costs. operating expenses in q3 2021 increased only 2% over q3 2020 and included a decrease in stock-based compensation from a change in our annual incentive plan. cash operating expenses increased 9% and included an increase in marketing costs associated with lead generation activity and salesforce implementation costs, combined with ongoing operating expense management. for q3 2021, reported net income and diluted earnings per share (“eps”) were $27.3 million and $0.70, respectively. adjusted ebitda increased 4% to $60.1 million and adjusted eps decreased 2% to $0.89. year-to-date results revenues for the first nine months of 2021 increased 14% to $3.7 billion on a 5% increase in paid worksite employees and an 8% increase in revenue per wsee. gross profit for the first nine months of 2021 increased 2% to $649.5 million. operating expenses increased 9% to $490.8 million compared to the 2020 period. for the nine months ended september 30, 2021, reported net income and diluted eps were $114.4 million and $2.94, respectively. adjusted eps decreased 13% compared to the first nine months of 2020 to $3.62 reflecting the unusually low benefits costs in the prior year due primarily to the deferral of care at the onset of the pandemic. adjusted ebitda decreased 10% compared to the first nine months of 2020 to $224.6 million. net income per wsee per month decreased 19% from $64 in the 2020 period to $52 in the 2021 period. adjusted ebitda per wsee per month decreased 15% from $120 in the 2020 period to $102 in the 2021 period. “the acceleration to double-digit worksite employee growth ahead of our 2021 plan, combined with our management of pricing, direct cost programs and operating costs has resulted in significant outperformance in earnings through the first three quarters of this year,” said douglas s. sharp, insperity senior vice president of finance, chief financial officer and treasurer. “our solid operating results, even through the pandemic, positions us to continue to provide strong shareholder return though our share repurchase and dividend programs.” cash outlays in the first nine months of 2021 included the repurchase of approximately 544,000 shares of stock at a cost of $49.8 million, dividends totaling $50.2 million and capital expenditures of $23.6 million. adjusted cash totaled $228 million at september 30, 2021 and $130 million remains available under our $500 million credit facility. 2021 guidance the company also announced its updated guidance for 2021, including the fourth quarter of 2021. 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. q4 2021 full year 2021 average wsees paid 265,500 — 268,000 250,100 — 250,600 year-over-year increase 11% — 12% 6.8% — 7% adjusted eps $0.61 — $0.81 $4.25 — $4.46 year-over-year increase (decrease) 24% — 65% (8)% — (4)% adjusted ebitda (in millions) $45 — $56 $271 — $282 year-over-year increase (decrease) 19% — 48% (6)% — (2)% definition of key metrics average wsees paid - 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 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 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 877-651-0053 and use conference i.d. number 6566878. 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. 6566878. 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 2020 revenues of $4.3 billion and more than 80 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; vulnerability to regional economic factors because of our geographic market concentration; failure to comply with covenants under our credit facility; our liability for worksite employee payroll, payroll taxes and benefits costs; 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; 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; 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) september 30, 2021 december 31, 2020 assets cash and cash equivalents $ 467,921 $ 554,846 restricted cash 47,813 45,522 marketable securities 32,697 34,529 accounts receivable, net 579,503 392,746 prepaid insurance 19,657 10,164 other current assets 53,293 39,461 income taxes receivable 5,584 — total current assets 1,206,468 1,077,268 property and equipment, net 212,322 216,256 right of use leased assets 63,673 60,663 prepaid health insurance 9,000 9,000 deposits 216,136 194,231 goodwill and other intangible assets, net 12,707 12,707 deferred income taxes, net 1,653 9,603 other assets 12,093 4,548 total assets $ 1,734,052 $ 1,584,276 liabilities and stockholders' equity accounts payable $ 4,250 $ 6,203 payroll taxes and other payroll deductions payable 232,862 377,960 accrued worksite employee payroll cost 534,890 334,836 accrued health insurance costs 40,366 32,685 accrued workers’ compensation costs 51,368 48,186 accrued corporate payroll and commissions 69,621 44,277 other accrued liabilities 70,824 60,777 total current liabilities 1,004,181 904,924 accrued workers’ compensation cost, net of current 191,193 195,239 long-term debt 369,400 369,400 operating lease liabilities, net of current 65,979 64,289 other accrued liabilities, net of current 6,293 6,292 total noncurrent liabilities 632,865 635,220 stockholders’ equity: common stock 555 555 additional paid-in capital 104,587 95,528 treasury stock, at cost (645,993 ) (626,984 ) retained earnings 637,857 575,033 total stockholders’ equity 97,006 44,132 total liabilities and stockholders’ equity $ 1,734,052 $ 1,584,276 insperity, inc. consolidated statements of operations (unaudited) (in thousands, except per share amounts) three months ended september 30, nine months ended september 30, 2021 2020 change 2021 2020 change operating results: revenues(1) $ 1,209,628 $ 1,007,820 20.0 % $ 3,681,834 $ 3,230,669 14.0 % payroll taxes, benefits and workers’ compensation costs 1,011,149 822,787 22.9 % 3,032,356 2,591,365 17.0 % gross profit 198,479 185,033 7.3 % 649,478 639,304 1.6 % salaries, wages and payroll taxes 89,232 89,429 (0.2) % 286,669 266,640 7.5 % stock-based compensation 10,362 20,864 (50.3) % 35,965 38,110 (5.6) % commissions 8,724 7,722 13.0 % 24,694 23,657 4.4 % advertising 9,507 4,781 98.8 % 23,804 15,334 55.2 % general and administrative expenses 31,134 25,646 21.4 % 91,981 85,254 7.9 % depreciation and amortization 9,917 7,819 26.8 % 27,715 23,329 18.8 % total operating expenses 158,876 156,261 1.7 % 490,828 452,324 8.5 % operating income 39,603 28,772 37.6 % 158,650 186,980 (15.2) % other income (expense): interest income 251 103 143.7 % 2,230 2,351 (5.1) % interest expense (1,963) (1,731) 13.4 % (5,537) (6,312) (12.3) % income before income tax expense 37,891 27,144 39.6 % 155,343 183,019 (15.1) % income tax expense 10,595 7,135 48.5 % 40,971 49,067 (16.5) % net income $ 27,296 $ 20,009 36.4 % $ 114,372 $ 133,952 (14.6) % less distributed and undistributed earnings allocated to participating securities (39) (104) (62.5) % (219) (792) (72.3) % net income allocated to common shares $ 27,257 $ 19,905 36.9 % $ 114,153 $ 133,160 (14.3) % net income per share of common stock basic $ 0.71 $ 0.52 36.5 % $ 2.97 $ 3.45 (13.9) % diluted $ 0.70 $ 0.51 37.3 % $ 2.94 $ 3.43 (14.3) % ___________________________________ (1) revenues are comprised of gross billings less wsee payroll costs as follows: three months ended september 30, nine months ended september 30, (in thousands) 2021 2020 2021 2020 gross billings $ 7,994,006 $ 6,563,727 $ 23,682,279 $ 20,356,164 less: wsee payroll cost 6,784,378 5,555,907 20,000,445 17,125,495 revenues $ 1,209,628 $ 1,007,820 $ 3,681,834 $ 3,230,669 insperity, inc. key financial and statistical data (unaudited) three months ended september 30, nine months ended september 30, 2021 2020 change 2021 2020 change average wsees paid 257,560 231,750 11.1 % 244,667 232,553 5.2 % statistical data (per wsee per month): revenues(1) $ 1,565 $ 1,450 7.9 % $ 1,672 $ 1,544 8.3 % gross profit 257 266 (3.4 ) % 295 305 (3.3 ) % operating expenses 206 225 (8.4 ) % 223 216 3.2 % operating income 51 41 24.4 % 72 89 (19.1 ) % net income 35 29 20.7 % 52 64 (18.8 ) % ____________________________________ (1) revenues per wsee per month are comprised of gross billings per wsee per month less wsee payroll costs per wsee per month follows: three months ended september 30, nine months ended september 30, (per wsee per month) 2021 2020 2021 2020 gross billings $ 10,346 $ 9,441 $ 10,755 $ 9,726 less: wsee payroll cost 8,781 7,991 9,083 8,182 revenues $ 1,565 $ 1,450 $ 1,672 $ 1,544 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. adjusted operating expenses represents operating expenses excluding the impact of the following: • non-cash stock-based compensation, and • depreciation and amortization expense. ebitda represents net income computed in accordance with gaap, plus: • interest expense, • income tax expense, and • depreciation and amortization expense. 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 september 30, nine months ended september 30, (in thousands, except per wsee per month) 2021 2020 2021 2020 per wsee per wsee per wsee per wsee payroll cost $ 6,784,378 $ 8,781 $ 5,555,907 $ 7,991 $ 20,000,445 $ 9,083 $ 17,125,495 $ 8,182 less: bonus payroll cost 726,187 940 431,861 621 2,942,817 1,337 1,935,950 925 non-bonus payroll cost $ 6,058,191 $ 7,841 $ 5,124,046 $ 7,370 $ 17,057,628 $ 7,746 $ 15,189,545 $ 7,257 % change period over period 18.2 % 6.4 % 0.4 % 4.4 % 12.3 % 6.7 % 3.2 % 3.4 % following is a reconciliation of cash, cash equivalents and marketable securities (gaap) to adjusted cash, cash equivalents and marketable securities (non-gaap): (in thousands) september 30, 2021 december 31, 2020 cash, cash equivalents and marketable securities $ 500,618 $ 589,375 less: amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions 198,405 341,988 client prepayments 74,646 35,328 adjusted cash, cash equivalents and marketable securities $ 227,567 $ 212,059 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 september 30, nine months ended september 30, 2021 2020 2021 2020 per wsee per wsee per wsee per wsee net income $ 27,296 $ 35 $ 20,009 $ 29 $ 114,372 $ 52 $ 133,952 $ 64 income tax expense 10,595 14 7,135 10 40,971 19 49,067 23 interest expense 1,963 3 1,731 2 5,537 3 6,312 3 depreciation and amortization 9,917 12 7,819 12 27,715 12 23,329 12 ebitda 49,771 64 36,694 53 188,595 86 212,660 102 stock-based compensation 10,362 14 20,864 30 35,965 16 38,110 18 adjusted ebitda $ 60,133 $ 78 $ 57,558 $ 83 $ 224,560 $ 102 $ 250,770 $ 120 % change period over period 4.5 % (6.0 ) % 12.5 % 16.9 % (10.5 ) % (15.0 ) % 19.8 % 20.0 % following is a reconciliation of net income (gaap) to adjusted net income (non-gaap): three months ended september 30, nine months ended september 30, (in thousands) 2021 2020 2021 2020 net income $ 27,296 $ 20,009 $ 114,372 $ 133,952 non-gaap adjustments: stock-based compensation 10,362 20,864 35,965 38,110 tax effect (2,865 ) (5,484 ) (9,486 ) (10,134 ) total non-gaap adjustments, net 7,497 15,380 26,479 27,976 adjusted net income $ 34,793 $ 35,389 $ 140,851 $ 161,928 % change period over period (1.7 ) % 15.5 % (13.0 ) % 10.4 % following is a reconciliation of diluted eps (gaap) to adjusted eps (non-gaap): three months ended september 30, nine months ended september 30, 2021 2020 2021 2020 diluted eps $ 0.70 $ 0.51 $ 2.94 $ 3.43 non-gaap adjustments: stock-based compensation 0.27 0.54 0.92 0.98 tax effect (0.08 ) (0.14 ) (0.24 ) (0.26 ) total non-gaap adjustments, net $ 0.19 $ 0.40 $ 0.68 $ 0.72 adjusted eps $ 0.89 $ 0.91 $ 3.62 $ 4.15 % change period over period (2.2 ) % 21.3 % (12.8 ) % 16.2 % following is a reconciliation of gaap to non-gaap financial measures for fourth quarter and full year 2021 guidance: (in millions, except per share amounts) q4 2021 guidance full year 2021 guidance net income $18 - $26 $133- $141 income tax expense 7 - 10 48 - 51 interest expense 2 8 depreciation and amortization 10 38 ebitda 37 - 48 227 - 238 stock-based compensation 8 44 adjusted ebitda $45 - $56 $271 - $282 diluted net income per share of common stock $0.46 - $0.66 $3.42 - $3.63 non-gaap adjustments: stock-based compensation 0.21 1.13 tax effect (0.06) (0.30) total non-gaap adjustments, net 0.15 0.83 adjusted eps $0.61 - $0.81 $4.25 - $4.46
