Insperity announces strong 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 and nine months ended sept. 30, 2014. for the third quarter, the company reported net income of $8.4 million and diluted earnings per share of $0.33. adjusted ebitda totaled $22.6 million for the third quarter. “we are pleased with our recent financial results and the growth acceleration that has unfolded over the past two quarters,” said paul j. sarvadi, insperity chairman and chief executive officer. “a continuation of these trends, combined with a successful year-end transition, would result in double-digit unit growth in 2015.” third quarter results revenues for the third quarter of 2014 increased 3.8% over the third quarter of 2013 due to a 1.8% increase in the average number of worksite employees paid per month and a 2.0% increase in revenues per worksite employee per month. the average number of paid worksite employees increased 2.6% sequentially over the second quarter of 2014. gross profit increased 3.5% compared to the third quarter of 2013 to $100.8 million. benefits costs per covered employee increased 1.3%, less than expected, contributing to an increase in the average gross profit per worksite employee per month, from $251 in the third quarter of 2013 to $255 in the third quarter of 2014. included in gross profit in the third quarter of 2014 is an $18 per worksite employee per month contribution from our strategic business units, compared to $15 per worksite employee per month in the third quarter of 2013. operating expenses increased to our forecasted level of $86.4 million and included $5.7 million in additional costs associated with the development of our human capital management product, health care reform and an additional accrual for incentive compensation based on better than expected operating results. excluding these items, operating expenses were flat compared to the third quarter of 2013. year-to-date results for the nine months ended sept. 30, 2014, the company reported adjusted net income of $21.4 million and adjusted diluted earnings per share of $0.84. these earnings exclude after-tax costs of $1.6 million or $0.06 per share related to a second quarter non-cash impairment charge associated with the reorganization of our employment screening business. reported net income for the nine months ended sept. 30, 2014 was $19.8 million, or $0.78 per diluted share. adjusted ebitda totaled $61.5 million for this same period. year-to-date revenues were $1.8 billion, an increase of 3.7% over the 2013 period. gross profit for the nine months ended sept. 30, 2014 decreased to $302.4 million. the average gross profit per worksite employee per month decreased 1.9%, to $261 in the 2014 period from $266 in the 2013 period. adjusted 2014 year-to-date operating expenses, excluding the impact of the impairment charge, increased to $265.5 million from $253.9 million in the 2013 period. adjusted year-to-date operating expenses increased by just 1.2% when excluding an additional $8.7 million of costs associated with the development of our human capital management product, health care reform, and the additional accrual for incentive compensation based on better than expected operating results. “as a result of our focus on operating expense control throughout 2014, we now expect approximately $16 million in cost savings from our initial 2014 forecast,” said douglas s. sharp, senior vice-president of finance, chief financial officer and treasurer. “we intend to continue to focus on operating expense control throughout 2015 to align with unit growth and customer mix.” cash outlays in the first nine months of 2014 included the repurchase of 693,262 shares of stock at a cost of $20.8 million, dividends totaling $14.0 million and capital expenditures of $11.0 million. working capital at sept. 30, 2014 was $119.1 million. 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 17729875. 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. 17729875. the webcast will be archived for one year. insperity, a trusted advisor to america’s best businesses for more than 28 years, provides an array of human resources and business solutions designed to help improve business performance. insperity® business performance advisors offer the most comprehensive suite of products and services available in the marketplace. insperity delivers administrative relief, better benefits, reduced liabilities and a systematic way to improve productivity through its premier workforce optimization® solution. additional company offerings include human capital management, payroll services, time and attendance, performance management, organizational planning, recruiting services, employment screening, financial services, expense management, retirement services and insurances services. insperity business performance solutions support more than 100,000 businesses with over 2 million employees. with 2013 revenues of $2.3 billion, insperity operates in 57 offices throughout the united states. for more information, visit http://www.insperity.com. the statements contained herein that are not historical facts are forward-looking statements within the meaning of the federal securities laws (section 27a of the securities act of 1933 and section 21e of the securities exchange act of 1934). you can identify such forward-looking statements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,” “probably,” “goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions. forward-looking statements involve a number of risks and uncertainties. in the normal course of business, insperity, inc., in an effort to help keep our stockholders and the public informed about our operations, may from time to time issue such forward-looking statements, either orally or in writing. generally, these statements relate to business plans or strategies, projected or anticipated revenues, earnings, unit growth, profit per worksite employee, pricing, operating expenses or other aspects of operating results. we base the forward-looking statements on our expectations, estimates and projections at the time such statements are made. these statements are not guarantees of future performance and involve risks and uncertainties that we cannot predict. in addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be 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 contracts at expiration of current contracts; (iv) increases in health insurance costs and workers’ compensation rates and underlying claims trends, health care reform, financial solvency of workers’ compensation carriers, other insurers or financial institutions, state and federal unemployment tax rates, liabilities for employee and client actions or payroll-related claims; (v) failure to manage growth of our operations and the effectiveness of our sales and marketing efforts; (vi) changes in the competitive environment in the peo industry, including the entrance of new competitors and our ability to renew or replace client companies; (vii) our liability for worksite employee payroll, payroll taxes and benefits costs; (viii) our liability for disclosure of sensitive or private information; (ix) our ability to integrate or realize expected returns on our acquisitions; (x) failure of our information technology systems; and (xi) an adverse final judgment or settlement of claims against insperity. these factors are discussed in further detail in insperity’s filings with the u.s. securities and exchange commission. any of these factors, or a combination of such factors, could materially affect the results of our operations and whether forward-looking statements we make ultimately prove to be accurate. except to the extent otherwise required by federal securities law, we do not undertake any obligation to update our forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events. - - - - - - - gross profit per worksite employee per month (1) insperity, inc. summary financial information (continued) (in thousands, except per share amounts and statistical data) (unaudited) gaap to non-gaap reconciliation tables 2013 2014 $ 2,696,330 $ 8,468,804 192,868 947,751 $ 2,503,462 $ 7,521,053 2014 2013 change $ 86,357 $ 80,297 7.5 % - - - - $ 86,357 $ 80,297 7.5 % adjusted operating expenses represent operating expenses excluding the impact of impairment charges. 2014 change $ 8,385 (16.8 )% 6,118 (13.3 )% 104 18.2 % 5,302 - 19,909 (11.6 )% - - - 2,701 (1.7 )% $ 22,610 (10.5 )% 2014 change $ 8,385 (16.8 )% $ 8,385 (16.8 )% $ 21,406 2014 change 2014 adjusted net income and adjusted diluted net income per share of common stock represent net income and diluted net income per share computed in accordance with gaap, excluding the impact of the impairment charge related to employment screening reporting unit in 2014 and the impairment charge related to the receivables exchange in 2013. insperity management believes adjusted net income and adjusted diluted net income per share are useful measures of the company’s operating performance in this period, as they allow for additional analysis of the company’s operating results separate from the impact of the impairment. non-bonus payroll, 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.
