HOUSTON--(BUSINESS WIRE)--Feb 11, 2019--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, 2018.
2018 WSEE growth accelerates to 14%2018 net income and EPS each up 60%2018 adjusted EPS and adjusted EBITDA up 53% and 35%, respectivelyQ4 net income and EPS up 59% and 64%, to $25 million and $0.59, respectivelyQ4 adjusted EPS up 25% to $0.69Q4 repurchase of 986,000 shares
Full Year Results
For the year ended Dec. 31, 2018, reported net income increased 60% over 2017 to $135.4 million, and diluted net income per share increased 60% to $3.22. Adjusted EPS increased 53% over 2017 to $3.75. Adjusted EBITDA increased 35% to $239.6 million.
“These results reflect our fourth year in a row with growth in adjusted EBITDA above 25%, increasing from $84 million to $240 million demonstrating effective execution of our strategic plan,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “As a result of our successful fall selling and retention campaign, we are starting 2019 with 15% worksite employee growth and are well positioned to continue our strong financial performance.”
Revenues in 2018 increased 16% to $3.8 billion, on a 14% increase in the average number of worksite employees (“WSEEs”) paid per month over 2017. This growth was primarily driven by an increase in WSEEs paid from new sales on a 16% increase in the average number of trained Business Performance Advisors. Additionally, WSEE retention was maintained at recent historical highs of 86% and we experienced an improvement in net hiring within our client base in 2018.
Gross profit for the year ended Dec. 31, 2018 increased 19% to $681.9 million on improved pricing and effective management of our direct cost programs. Operating expenses increased 14% to $502.9 million over 2017 and adjusted operating expenses increased 12% to $493.6 million over 2017.
Net income per WSEE per month increased 42% from $38 in 2017 to $54 in 2018. Adjusted EBITDA per WSEE per month increased 17% from $81 in 2017 to $95 in 2018.
“Acceleration of worksite employee growth into the mid-teens, improved pricing and effective management of our direct costs and operating expenses has resulted in significant improvement in our profitability over the past four years,” said Douglas S. Sharp, senior vice president of finance, chief financial officer and treasurer. “This is demonstrated by an increase in adjusted EBITDA per worksite employee per month in each of the past four years, from $54 in 2014 to $95 in 2018.”
Cash outlays in 2018 included the repurchase of approximately 1,198,000 shares of stock at a cost of $113.3 million, dividends totaling $33.4 million and capital expenditures of $35.3 million offset by borrowings of $40.0 million under our facility. Adjusted cash, cash equivalents and marketable securities at Dec. 31, 2018 was $128.9 million.
Fourth Quarter Results
Fourth quarter 2018 net income and diluted earnings per share of $24.7 million and $0.59 represented increases of 59% and 64%, respectively, compared to the fourth quarter of 2017. Adjusted EPS was $0.69, a 25% increase over the fourth quarter of 2017. Adjusted EBITDA increased 24% over the fourth quarter of 2017 to $47.6 million.
Revenues increased 17% over the fourth quarter of 2017 to $966.8 million on a 17% increase in the average number of WSEEs paid per month. An acceleration of WSEE growth throughout 2018 has been the result of increased new client sales in both our core and midmarket client segments, a continued high level of client retention and an improvement in net hiring of WSEEs by our client base.
Gross profit increased 13% over the fourth quarter of 2017 to $161.6 million, while operating expenses increased only 8%. These results reflect improved pricing, effective management of our direct cost programs, and continued investment in our growth, technology and product and service offerings, while leveraging other areas of the business. Our growth investment has included the opening of seven new sales offices in 2018, along with a 13% increase in the average number of trained Business Performance Advisors over the fourth quarter of 2017.
Share repurchases during the fourth quarter totaled 986,000 shares at a cost of $97.1 million.
The company also announced its guidance for 2019, including the first quarter of 2019. 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.
Definition of Key Metrics
Average WSEEs - 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 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 2019 and answer questions from investment analysts. To listen in, call 877-651-0053 and use conference i.d. number 4355906. 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. 4355906. The webcast will be archived for one year.
Insperity, a trusted advisor to America’s best businesses for more than 32 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 Traditional Payroll and Human Capital Management, 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 2018 revenues of $3.8 billion, Insperity operates in 73 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:
adverse economic conditions;regulatory and tax developments and possible adverse application of various federal, state and local regulations;the ability to secure competitive replacement contracts for health insurance and workers’ compensation insurance at expiration of current contracts;cancellation of client contracts on short notice, or the inability to renew client contracts or attract new clients;vulnerability to regional economic factors because of our geographic market concentration;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;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;our liability for WSEE payroll, payroll taxes and benefits costs;our liability for disclosure of sensitive or private information;our ability to integrate or realize expected returns on our acquisitions;failure of our information technology systems;an adverse final judgment or settlement of claims against Insperity; anddisruptions 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.
Non-GAAP Financial Measures
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.
Following is a reconciliation of payroll cost (GAAP) to non-bonus payroll costs (non-GAAP):
Following is a reconciliation of cash, cash equivalents and marketable securities (GAAP) to adjusted cash, cash equivalents and marketable securities (non-GAAP):
Following is a reconciliation of operating expenses (GAAP) to adjusted operating expenses (non-GAAP):
Following is a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP):
Following reconciliation of net income (GAAP) to adjusted net income (non-GAAP):
Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP) (1):
The following is a reconciliation of GAAP to non-GAAP financial measures for first quarter and full year 2019 guidance:
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CONTACT: Investor Relations Contact:
Douglas S. Sharp
Senior Vice President of Finance,
Chief Financial Officer and Treasurer
News Media Contact:
Public Relations Manager
KEYWORD: UNITED STATES NORTH AMERICA TEXAS
INDUSTRY KEYWORD: PROFESSIONAL SERVICES HUMAN RESOURCES INSURANCE
SOURCE: Insperity, Inc.
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PUB: 02/11/2019 07:00 AM/DISC: 02/11/2019 07:00 AM