Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Insperity Announces Third Quarter Results By: Insperity, Inc. via Business Wire October 31, 2023 at 08:00 AM EDT 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 September 30, 2023. Insperity will be hosting a conference call today at 8:30 a.m. ET to discuss these results and our updated 2023 outlook and has posted an accompanying presentation to its investor website at http://ir.insperity.com. Q3 average number of WSEEs paid and revenues up 4% and 8%, respectively Q3 net income and diluted EPS up 18% to $44.3 million and $1.16, respectively Q3 adjusted EBITDA up 18% to $94.3 million; adjusted EPS up 19% to $1.46 YTD average number of paid WSEEs and revenues up 7% and 10%, respectively YTD net income and diluted EPS up 8% to $151.8 million and $3.94, respectively YTD adjusted EBITDA and adjusted EPS up 9% to $297.6 million and $4.76, respectively Return to shareholders of $194.4 million in YTD period through the repurchase of 1,259,000 shares at a cost of $131.4 million and $63.0 million in cash dividends Third Quarter Results The average number of worksite employees (“WSEE”) paid per month increased 4.0% over Q3 2022 to 315,340 WSEEs. Revenues in Q3 2023 increased 7.8% to $1.6 billion on the 4.0% increase in paid WSEEs and a 3.7% increase in revenue per WSEE. Sales and client retention over the course of the year have continued to drive the growth in paid WSEEs, despite the continued slowdown in hiring by our client base. For the nine months ended September 30, 2023, net hiring by our client base was approximately 35% of 2022’s level. “We are pleased with the strong rebound reflected in our third quarter financial performance and the ongoing solid execution of our operating plan year-to-date,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “Despite economic challenges facing many small to medium size businesses, we believe Insperity is well positioned to capitalize on the continuing strong demand for comprehensive human resource services in the marketplace.” Gross profit increased 5.5% over Q3 2022 to $257.9 million on the 4.0% increase in paid WSEEs and a 1.5% increase in gross profit per WSEE per month. Benefits costs were significantly lower than forecast, as the severity of large healthcare claim activity that we experienced in Q2 2023 returned to more normal levels in Q3. Additionally, other areas of gross profit, including pricing, workers’ compensation and payroll taxes combined to a favorable outcome when compared to our expectations. Operating expenses increased 3.4% over Q3 2022 and included continued investment in our growth, with a 13% increase in the average number of hired Business Performance Advisors, and in our technology and service offerings. Costs associated with these investments were partially offset by a lower incentive compensation accrual and a shift in timing of the quarterly marketing spend when compared to Q3 2022. Net income and diluted earnings per share (“EPS”) were $44.3 million and $1.16, respectively. Adjusted EPS increased 18.7% from the third quarter of 2022 to $1.46. Adjusted EBITDA increased 18.2% to $94.3 million. Year-to-Date Results The average number of WSEEs paid per month increased 7.0% over 2022 to 311,112 WSEEs. Revenues in 2023 increased by 10.3% to $4.9 billion on the 7.0% increase in paid WSEEs and a 3.1% increase in revenue per WSEE. Gross profit increased 5.8% on the increase in paid WSEEs, but decreased 1.0% on a per WSEE per month basis, due primarily to the higher healthcare costs incurred during the second quarter of 2023. Operating expenses increased 8.3% over the 2022 period. This increase included the impact of inflation on our costs in areas such as corporate salaries and wages, technology costs and travel and training costs. In addition to the increase in hired Business Performance Advisors, we increased the number of service and support personnel with the growth in the number of clients and WSEEs over the past couple of years. Reported net income and diluted EPS were $151.8 million and $3.94, respectively. Adjusted EPS increased 8.7% over 2022 to $4.76. Adjusted EBITDA increased 8.9% to $297.6 million. Cash outlays in the first nine months 2023 included the repurchase of approximately 1,259,000 shares of our common stock at a cost of $131.4 million, dividends totaling $63.0 million, and capital expenditures of $22.5 million. Adjusted cash at September 30, 2023 totaled $189.6 million and $280 million remains available under our $650 million credit facility. “During the third quarter, we took the opportunity to be more aggressive in our share repurchase program repurchasing 873,000 shares at a cost of $86 million,” said Douglas S. Sharp, executive vice president of finance, chief financial officer and treasurer. “We continue to focus on providing strong returns to our shareholders through our dividend and share repurchase programs while maintaining a solid financial position.” 2023 Guidance The company also announced its updated guidance for 2023, including the fourth quarter of 2023. 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 2023 Full Year 2023 Average WSEEs paid 316,750 — 318,250 312,600 — 312,800 Year-over-year increase 3.0% — 3.5% 6.0% — 6.0% Adjusted EPS $0.44 — $0.82 $5.20 — $5.60 Year-over-year decrease (64%) — (32%) (7%) — —% Adjusted EBITDA (in millions) $43 — $63 $340 — $360 Year-over-year increase (decrease) (45%) — (20%) (3%) — 2% 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, amortization of SaaS implementation costs and non-cash stock-based compensation. Conference Call and Webcast Insperity will be hosting a conference call today at 8:30 a.m. ET to discuss these results and the guidance discussed in this press release, and answer questions from investment analysts. To listen in, call 877-545-0523 and use conference i.d. number 464361. 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. 49268. 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 2022 revenues of $5.9 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 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 these 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, including if our clients fail to pay us; bank failures or other events affecting financial institutions; 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, such as financial institutions, data centers or cloud service providers; and our ability to integrate or realize expected returns on future product offerings, including through acquisition and investment. 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) September 30, Dec. 31, (in thousands) 2023 2022 Assets Cash and cash equivalents $ 678,588 $ 732,828 Restricted cash 51,263 49,779 Marketable securities 13,837 33,068 Accounts receivable, net 656,695 622,764 Prepaid insurance and related assets 21,260 11,706 Other current assets 56,037 61,728 Total current assets 1,477,680 1,511,873 Property and equipment, net 190,672 199,992 Right-of-use leased assets 53,949 56,532 Deposits and prepaid health insurance 214,366 213,270 Goodwill and other intangible assets, net 12,707 12,707 Deferred income taxes, net 10,066 15,533 Other assets 37,030 29,354 Total assets $ 1,996,470 $ 2,039,261 Liabilities and stockholders' equity Accounts payable $ 7,207 $ 7,732 Payroll taxes and other payroll deductions payable 518,061 556,085 Accrued worksite employee payroll cost 559,931 513,397 Accrued health insurance costs 50,760 53,402 Accrued workers’ compensation costs 55,005 53,485 Accrued corporate payroll and commissions 65,082 89,147 Other accrued liabilities 65,311 80,122 Total current liabilities 1,321,357 1,353,370 Accrued workers’ compensation costs, net of current 170,609 179,629 Long-term debt 369,400 369,400 Operating lease liabilities, net of current 51,985 55,587 Total noncurrent liabilities 591,994 604,616 Stockholders’ equity: Common stock 555 555 Additional paid-in capital 173,307 151,144 Treasury stock, at cost (830,988 ) (725,532 ) Accumulated other comprehensive loss, net of tax (5 ) (82 ) Retained earnings 740,250 655,190 Total stockholders' equity 83,119 81,275 Total liabilities and stockholders’ equity $ 1,996,470 $ 2,039,261 Insperity, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2023 2022 Change 2023 2022 Change Operating results: Revenues(1) $ 1,550,887 $ 1,439,160 7.8 % $ 4,905,668 $ 4,449,104 10.3 % Payroll taxes, benefits and workers’ compensation costs 1,292,956 1,194,607 8.2 % 4,090,952 3,678,909 11.2 % Gross profit 257,931 244,553 5.5 % 814,716 770,195 5.8 % Salaries, wages and payroll taxes 113,074 109,525 3.2 % 348,557 323,486 7.8 % Stock-based compensation 15,210 13,341 14.0 % 41,676 38,818 7.4 % Commissions 10,773 11,068 (2.7 )% 33,828 32,121 5.3 % Advertising 7,240 9,790 (26.0 )% 29,775 30,812 (3.4 %) General and administrative expenses 41,504 38,115 8.9 % 132,699 115,215 15.2 % Depreciation and amortization 10,666 10,083 5.8 % 31,903 30,367 5.1 % Total operating expenses 198,467 191,922 3.4 % 618,438 570,819 8.3 % Operating income 59,464 52,631 13.0 % 196,278 199,376 (1.6 %) Other income (expense): Interest income 7,950 2,808 183.1 % 24,693 3,901 — Interest expense (7,047 ) (4,082 ) 72.6 % (19,939 ) (8,698 ) 129.2 % Income before income tax expense 60,367 51,357 17.5 % 201,032 194,579 3.3 % Income tax expense 16,035 13,688 17.1 % 49,211 53,427 (7.9 %) Net income $ 44,332 $ 37,669 17.7 % $ 151,821 $ 141,152 7.6 % Net income per share of common stock Basic $ 1.17 $ 0.99 18.2 % $ 4.00 $ 3.70 8.1 % Diluted $ 1.16 $ 0.98 18.4 % $ 3.94 $ 3.66 7.7 % ____________________________________ (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) 2023 2022 2023 2022 Gross billings $ 10,067,191 $ 9,528,695 $ 31,762,946 $ 29,111,243 Less: WSEE payroll cost 8,516,304 8,089,535 26,857,278 24,662,139 Revenues $ 1,550,887 $ 1,439,160 $ 4,905,668 $ 4,449,104 Insperity, Inc. KEY FINANCIAL AND STATISTICAL DATA Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 Change 2023 2022 Change Average WSEEs paid 315,340 303,347 4.0 % 311,112 290,838 7.0 % Statistical data (per WSEE per month): Revenues(1) $ 1,639 $ 1,581 3.7 % $ 1,752 $ 1,700 3.1 % Gross profit 273 269 1.5 % 291 294 (1.0 %) Operating expenses 210 211 (0.5 )% 221 218 1.4 % Operating income 63 58 8.6 % 70 76 (7.9 %) Net income 47 41 14.6 % 54 54 — % ____________________________________ (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) 2023 2022 2023 2022 Gross billings $ 10,642 $ 10,470 $ 11,344 $ 11,122 Less: WSEE payroll cost 9,003 8,889 9,592 9,422 Revenues $ 1,639 $ 1,581 $ 1,752 $ 1,700 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 September 30, Nine Months Ended September 30, (in thousands, except per WSEE per month) 2023 2022 2023 2022 Per WSEE Per WSEE Per WSEE Per WSEE Payroll cost $ 8,516,304 $ 9,003 $ 8,089,535 $ 8,889 $ 26,857,278 $ 9,592 $ 24,662,139 $ 9,422 Less: Bonus payroll cost 529,456 560 583,703 641 3,344,656 1,195 3,236,059 1,236 Non-bonus payroll cost $ 7,986,848 $ 8,443 $ 7,505,832 $ 8,248 $ 23,512,622 $ 8,397 $ 21,426,080 $ 8,186 % Change period over period 6.4 % 2.4 % 23.9 % 5.2 % 9.7 % 2.6 % 25.6 % 5.7 % 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, 2023 December 31, 2022 Cash, cash equivalents and marketable securities $ 692,425 $ 765,896 Less: Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions 482,654 504,817 Client prepayments 20,172 36,800 Adjusted cash, cash equivalents and marketable securities $ 189,599 $ 224,279 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, 2023 2022 2023 2022 Per WSEE Per WSEE Per WSEE Per WSEE Net income $ 44,332 $ 47 $ 37,669 $ 41 $ 151,821 $ 54 $ 141,152 $ 54 Income tax expense 16,035 18 13,688 16 49,211 18 53,427 20 Interest expense 7,047 7 4,082 4 19,939 7 8,698 3 Amortization of SaaS implementation costs 1,025 1 948 1 3,072 1 948 — Depreciation and amortization 10,666 11 10,083 11 31,903 11 30,367 12 EBITDA 79,105 84 66,470 73 255,946 91 234,592 89 Stock-based compensation 15,210 16 13,341 15 41,676 15 38,818 15 Adjusted EBITDA $ 94,315 $ 100 $ 79,811 $ 88 $ 297,622 $ 106 $ 273,410 $ 104 % Change period over period 18.2 % 13.6 % 32.7 % 12.8 % 8.9 % 1.9 % 21.8 % 2.0 % 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) 2023 2022 2023 2022 Net income $ 44,332 $ 37,669 $ 151,821 $ 141,152 Non-GAAP adjustments: Stock-based compensation 15,210 13,341 41,676 38,818 Tax effect (3,960 ) (3,590 ) (10,202 ) (10,659 ) Total non-GAAP adjustments, net 11,250 9,751 31,474 28,159 Adjusted net income $ 55,582 $ 47,420 $ 183,295 $ 169,311 % Change period over period 17.2 % 36.3 % 8.3 % 20.2 % Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Diluted EPS $ 1.16 $ 0.98 $ 3.94 $ 3.66 Non-GAAP adjustments: Stock-based compensation 0.40 0.35 1.08 1.01 Tax effect (0.10 ) (0.10 ) (0.26 ) (0.29 ) Total non-GAAP adjustments, net 0.30 0.25 0.82 0.72 Adjusted EPS $ 1.46 $ 1.23 $ 4.76 $ 4.38 % Change period over period 18.7 % 38.2 % 8.7 % 21.0 % The following is a reconciliation of GAAP to non-GAAP financial measures for fourth quarter and full year 2023 guidance: Q4 2023 Full Year 2023 (in millions, except per share amounts) Guidance Guidance Net income $7 - $22 $158 - $173 Income tax expense 3 - 8 52 - 57 Interest expense 7 27 SaaS implementation amortization 3 6 Depreciation and amortization 11 43 EBITDA 31 - 51 286 - 306 Stock-based compensation 12 54 Adjusted EBITDA $43 - $63 $340 - $360 Diluted EPS $0.21 - $0.59 $4.14 - $4.54 Non-GAAP adjustments: Stock-based compensation 0.32 1.41 Tax effect (0.09) (0.35) Total non-GAAP adjustments, net 0.23 1.06 Adjusted EPS $0.44 - $0.82 $5.20 - $5.60 View source version on businesswire.com: https://www.businesswire.com/news/home/20231031062636/en/Contacts Investor Relations Contact: Douglas S. Sharp Executive Vice President of Finance, Chief Financial Officer and Treasurer 281-348-3232 Investor.Relations@Insperity.com News Media Contact: Cynthia Murga Director, Public Relations 713-324-1414 Media@insperity.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Insperity Announces Third Quarter Results By: Insperity, Inc. via Business Wire October 31, 2023 at 08:00 AM EDT 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 September 30, 2023. Insperity will be hosting a conference call today at 8:30 a.m. ET to discuss these results and our updated 2023 outlook and has posted an accompanying presentation to its investor website at http://ir.insperity.com. Q3 average number of WSEEs paid and revenues up 4% and 8%, respectively Q3 net income and diluted EPS up 18% to $44.3 million and $1.16, respectively Q3 adjusted EBITDA up 18% to $94.3 million; adjusted EPS up 19% to $1.46 YTD average number of paid WSEEs and revenues up 7% and 10%, respectively YTD net income and diluted EPS up 8% to $151.8 million and $3.94, respectively YTD adjusted EBITDA and adjusted EPS up 9% to $297.6 million and $4.76, respectively Return to shareholders of $194.4 million in YTD period through the repurchase of 1,259,000 shares at a cost of $131.4 million and $63.0 million in cash dividends Third Quarter Results The average number of worksite employees (“WSEE”) paid per month increased 4.0% over Q3 2022 to 315,340 WSEEs. Revenues in Q3 2023 increased 7.8% to $1.6 billion on the 4.0% increase in paid WSEEs and a 3.7% increase in revenue per WSEE. Sales and client retention over the course of the year have continued to drive the growth in paid WSEEs, despite the continued slowdown in hiring by our client base. For the nine months ended September 30, 2023, net hiring by our client base was approximately 35% of 2022’s level. “We are pleased with the strong rebound reflected in our third quarter financial performance and the ongoing solid execution of our operating plan year-to-date,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “Despite economic challenges facing many small to medium size businesses, we believe Insperity is well positioned to capitalize on the continuing strong demand for comprehensive human resource services in the marketplace.” Gross profit increased 5.5% over Q3 2022 to $257.9 million on the 4.0% increase in paid WSEEs and a 1.5% increase in gross profit per WSEE per month. Benefits costs were significantly lower than forecast, as the severity of large healthcare claim activity that we experienced in Q2 2023 returned to more normal levels in Q3. Additionally, other areas of gross profit, including pricing, workers’ compensation and payroll taxes combined to a favorable outcome when compared to our expectations. Operating expenses increased 3.4% over Q3 2022 and included continued investment in our growth, with a 13% increase in the average number of hired Business Performance Advisors, and in our technology and service offerings. Costs associated with these investments were partially offset by a lower incentive compensation accrual and a shift in timing of the quarterly marketing spend when compared to Q3 2022. Net income and diluted earnings per share (“EPS”) were $44.3 million and $1.16, respectively. Adjusted EPS increased 18.7% from the third quarter of 2022 to $1.46. Adjusted EBITDA increased 18.2% to $94.3 million. Year-to-Date Results The average number of WSEEs paid per month increased 7.0% over 2022 to 311,112 WSEEs. Revenues in 2023 increased by 10.3% to $4.9 billion on the 7.0% increase in paid WSEEs and a 3.1% increase in revenue per WSEE. Gross profit increased 5.8% on the increase in paid WSEEs, but decreased 1.0% on a per WSEE per month basis, due primarily to the higher healthcare costs incurred during the second quarter of 2023. Operating expenses increased 8.3% over the 2022 period. This increase included the impact of inflation on our costs in areas such as corporate salaries and wages, technology costs and travel and training costs. In addition to the increase in hired Business Performance Advisors, we increased the number of service and support personnel with the growth in the number of clients and WSEEs over the past couple of years. Reported net income and diluted EPS were $151.8 million and $3.94, respectively. Adjusted EPS increased 8.7% over 2022 to $4.76. Adjusted EBITDA increased 8.9% to $297.6 million. Cash outlays in the first nine months 2023 included the repurchase of approximately 1,259,000 shares of our common stock at a cost of $131.4 million, dividends totaling $63.0 million, and capital expenditures of $22.5 million. Adjusted cash at September 30, 2023 totaled $189.6 million and $280 million remains available under our $650 million credit facility. “During the third quarter, we took the opportunity to be more aggressive in our share repurchase program repurchasing 873,000 shares at a cost of $86 million,” said Douglas S. Sharp, executive vice president of finance, chief financial officer and treasurer. “We continue to focus on providing strong returns to our shareholders through our dividend and share repurchase programs while maintaining a solid financial position.” 2023 Guidance The company also announced its updated guidance for 2023, including the fourth quarter of 2023. 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 2023 Full Year 2023 Average WSEEs paid 316,750 — 318,250 312,600 — 312,800 Year-over-year increase 3.0% — 3.5% 6.0% — 6.0% Adjusted EPS $0.44 — $0.82 $5.20 — $5.60 Year-over-year decrease (64%) — (32%) (7%) — —% Adjusted EBITDA (in millions) $43 — $63 $340 — $360 Year-over-year increase (decrease) (45%) — (20%) (3%) — 2% 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, amortization of SaaS implementation costs and non-cash stock-based compensation. Conference Call and Webcast Insperity will be hosting a conference call today at 8:30 a.m. ET to discuss these results and the guidance discussed in this press release, and answer questions from investment analysts. To listen in, call 877-545-0523 and use conference i.d. number 464361. 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. 49268. 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 2022 revenues of $5.9 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 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 these 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, including if our clients fail to pay us; bank failures or other events affecting financial institutions; 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, such as financial institutions, data centers or cloud service providers; and our ability to integrate or realize expected returns on future product offerings, including through acquisition and investment. 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) September 30, Dec. 31, (in thousands) 2023 2022 Assets Cash and cash equivalents $ 678,588 $ 732,828 Restricted cash 51,263 49,779 Marketable securities 13,837 33,068 Accounts receivable, net 656,695 622,764 Prepaid insurance and related assets 21,260 11,706 Other current assets 56,037 61,728 Total current assets 1,477,680 1,511,873 Property and equipment, net 190,672 199,992 Right-of-use leased assets 53,949 56,532 Deposits and prepaid health insurance 214,366 213,270 Goodwill and other intangible assets, net 12,707 12,707 Deferred income taxes, net 10,066 15,533 Other assets 37,030 29,354 Total assets $ 1,996,470 $ 2,039,261 Liabilities and stockholders' equity Accounts payable $ 7,207 $ 7,732 Payroll taxes and other payroll deductions payable 518,061 556,085 Accrued worksite employee payroll cost 559,931 513,397 Accrued health insurance costs 50,760 53,402 Accrued workers’ compensation costs 55,005 53,485 Accrued corporate payroll and commissions 65,082 89,147 Other accrued liabilities 65,311 80,122 Total current liabilities 1,321,357 1,353,370 Accrued workers’ compensation costs, net of current 170,609 179,629 Long-term debt 369,400 369,400 Operating lease liabilities, net of current 51,985 55,587 Total noncurrent liabilities 591,994 604,616 Stockholders’ equity: Common stock 555 555 Additional paid-in capital 173,307 151,144 Treasury stock, at cost (830,988 ) (725,532 ) Accumulated other comprehensive loss, net of tax (5 ) (82 ) Retained earnings 740,250 655,190 Total stockholders' equity 83,119 81,275 Total liabilities and stockholders’ equity $ 1,996,470 $ 2,039,261 Insperity, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2023 2022 Change 2023 2022 Change Operating results: Revenues(1) $ 1,550,887 $ 1,439,160 7.8 % $ 4,905,668 $ 4,449,104 10.3 % Payroll taxes, benefits and workers’ compensation costs 1,292,956 1,194,607 8.2 % 4,090,952 3,678,909 11.2 % Gross profit 257,931 244,553 5.5 % 814,716 770,195 5.8 % Salaries, wages and payroll taxes 113,074 109,525 3.2 % 348,557 323,486 7.8 % Stock-based compensation 15,210 13,341 14.0 % 41,676 38,818 7.4 % Commissions 10,773 11,068 (2.7 )% 33,828 32,121 5.3 % Advertising 7,240 9,790 (26.0 )% 29,775 30,812 (3.4 %) General and administrative expenses 41,504 38,115 8.9 % 132,699 115,215 15.2 % Depreciation and amortization 10,666 10,083 5.8 % 31,903 30,367 5.1 % Total operating expenses 198,467 191,922 3.4 % 618,438 570,819 8.3 % Operating income 59,464 52,631 13.0 % 196,278 199,376 (1.6 %) Other income (expense): Interest income 7,950 2,808 183.1 % 24,693 3,901 — Interest expense (7,047 ) (4,082 ) 72.6 % (19,939 ) (8,698 ) 129.2 % Income before income tax expense 60,367 51,357 17.5 % 201,032 194,579 3.3 % Income tax expense 16,035 13,688 17.1 % 49,211 53,427 (7.9 %) Net income $ 44,332 $ 37,669 17.7 % $ 151,821 $ 141,152 7.6 % Net income per share of common stock Basic $ 1.17 $ 0.99 18.2 % $ 4.00 $ 3.70 8.1 % Diluted $ 1.16 $ 0.98 18.4 % $ 3.94 $ 3.66 7.7 % ____________________________________ (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) 2023 2022 2023 2022 Gross billings $ 10,067,191 $ 9,528,695 $ 31,762,946 $ 29,111,243 Less: WSEE payroll cost 8,516,304 8,089,535 26,857,278 24,662,139 Revenues $ 1,550,887 $ 1,439,160 $ 4,905,668 $ 4,449,104 Insperity, Inc. KEY FINANCIAL AND STATISTICAL DATA Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 Change 2023 2022 Change Average WSEEs paid 315,340 303,347 4.0 % 311,112 290,838 7.0 % Statistical data (per WSEE per month): Revenues(1) $ 1,639 $ 1,581 3.7 % $ 1,752 $ 1,700 3.1 % Gross profit 273 269 1.5 % 291 294 (1.0 %) Operating expenses 210 211 (0.5 )% 221 218 1.4 % Operating income 63 58 8.6 % 70 76 (7.9 %) Net income 47 41 14.6 % 54 54 — % ____________________________________ (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) 2023 2022 2023 2022 Gross billings $ 10,642 $ 10,470 $ 11,344 $ 11,122 Less: WSEE payroll cost 9,003 8,889 9,592 9,422 Revenues $ 1,639 $ 1,581 $ 1,752 $ 1,700 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 September 30, Nine Months Ended September 30, (in thousands, except per WSEE per month) 2023 2022 2023 2022 Per WSEE Per WSEE Per WSEE Per WSEE Payroll cost $ 8,516,304 $ 9,003 $ 8,089,535 $ 8,889 $ 26,857,278 $ 9,592 $ 24,662,139 $ 9,422 Less: Bonus payroll cost 529,456 560 583,703 641 3,344,656 1,195 3,236,059 1,236 Non-bonus payroll cost $ 7,986,848 $ 8,443 $ 7,505,832 $ 8,248 $ 23,512,622 $ 8,397 $ 21,426,080 $ 8,186 % Change period over period 6.4 % 2.4 % 23.9 % 5.2 % 9.7 % 2.6 % 25.6 % 5.7 % 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, 2023 December 31, 2022 Cash, cash equivalents and marketable securities $ 692,425 $ 765,896 Less: Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions 482,654 504,817 Client prepayments 20,172 36,800 Adjusted cash, cash equivalents and marketable securities $ 189,599 $ 224,279 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, 2023 2022 2023 2022 Per WSEE Per WSEE Per WSEE Per WSEE Net income $ 44,332 $ 47 $ 37,669 $ 41 $ 151,821 $ 54 $ 141,152 $ 54 Income tax expense 16,035 18 13,688 16 49,211 18 53,427 20 Interest expense 7,047 7 4,082 4 19,939 7 8,698 3 Amortization of SaaS implementation costs 1,025 1 948 1 3,072 1 948 — Depreciation and amortization 10,666 11 10,083 11 31,903 11 30,367 12 EBITDA 79,105 84 66,470 73 255,946 91 234,592 89 Stock-based compensation 15,210 16 13,341 15 41,676 15 38,818 15 Adjusted EBITDA $ 94,315 $ 100 $ 79,811 $ 88 $ 297,622 $ 106 $ 273,410 $ 104 % Change period over period 18.2 % 13.6 % 32.7 % 12.8 % 8.9 % 1.9 % 21.8 % 2.0 % 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) 2023 2022 2023 2022 Net income $ 44,332 $ 37,669 $ 151,821 $ 141,152 Non-GAAP adjustments: Stock-based compensation 15,210 13,341 41,676 38,818 Tax effect (3,960 ) (3,590 ) (10,202 ) (10,659 ) Total non-GAAP adjustments, net 11,250 9,751 31,474 28,159 Adjusted net income $ 55,582 $ 47,420 $ 183,295 $ 169,311 % Change period over period 17.2 % 36.3 % 8.3 % 20.2 % Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Diluted EPS $ 1.16 $ 0.98 $ 3.94 $ 3.66 Non-GAAP adjustments: Stock-based compensation 0.40 0.35 1.08 1.01 Tax effect (0.10 ) (0.10 ) (0.26 ) (0.29 ) Total non-GAAP adjustments, net 0.30 0.25 0.82 0.72 Adjusted EPS $ 1.46 $ 1.23 $ 4.76 $ 4.38 % Change period over period 18.7 % 38.2 % 8.7 % 21.0 % The following is a reconciliation of GAAP to non-GAAP financial measures for fourth quarter and full year 2023 guidance: Q4 2023 Full Year 2023 (in millions, except per share amounts) Guidance Guidance Net income $7 - $22 $158 - $173 Income tax expense 3 - 8 52 - 57 Interest expense 7 27 SaaS implementation amortization 3 6 Depreciation and amortization 11 43 EBITDA 31 - 51 286 - 306 Stock-based compensation 12 54 Adjusted EBITDA $43 - $63 $340 - $360 Diluted EPS $0.21 - $0.59 $4.14 - $4.54 Non-GAAP adjustments: Stock-based compensation 0.32 1.41 Tax effect (0.09) (0.35) Total non-GAAP adjustments, net 0.23 1.06 Adjusted EPS $0.44 - $0.82 $5.20 - $5.60 View source version on businesswire.com: https://www.businesswire.com/news/home/20231031062636/en/Contacts Investor Relations Contact: Douglas S. Sharp Executive Vice President of Finance, Chief Financial Officer and Treasurer 281-348-3232 Investor.Relations@Insperity.com News Media Contact: Cynthia Murga Director, Public Relations 713-324-1414 Media@insperity.com
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 September 30, 2023. Insperity will be hosting a conference call today at 8:30 a.m. ET to discuss these results and our updated 2023 outlook and has posted an accompanying presentation to its investor website at http://ir.insperity.com. Q3 average number of WSEEs paid and revenues up 4% and 8%, respectively Q3 net income and diluted EPS up 18% to $44.3 million and $1.16, respectively Q3 adjusted EBITDA up 18% to $94.3 million; adjusted EPS up 19% to $1.46 YTD average number of paid WSEEs and revenues up 7% and 10%, respectively YTD net income and diluted EPS up 8% to $151.8 million and $3.94, respectively YTD adjusted EBITDA and adjusted EPS up 9% to $297.6 million and $4.76, respectively Return to shareholders of $194.4 million in YTD period through the repurchase of 1,259,000 shares at a cost of $131.4 million and $63.0 million in cash dividends Third Quarter Results The average number of worksite employees (“WSEE”) paid per month increased 4.0% over Q3 2022 to 315,340 WSEEs. Revenues in Q3 2023 increased 7.8% to $1.6 billion on the 4.0% increase in paid WSEEs and a 3.7% increase in revenue per WSEE. Sales and client retention over the course of the year have continued to drive the growth in paid WSEEs, despite the continued slowdown in hiring by our client base. For the nine months ended September 30, 2023, net hiring by our client base was approximately 35% of 2022’s level. “We are pleased with the strong rebound reflected in our third quarter financial performance and the ongoing solid execution of our operating plan year-to-date,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “Despite economic challenges facing many small to medium size businesses, we believe Insperity is well positioned to capitalize on the continuing strong demand for comprehensive human resource services in the marketplace.” Gross profit increased 5.5% over Q3 2022 to $257.9 million on the 4.0% increase in paid WSEEs and a 1.5% increase in gross profit per WSEE per month. Benefits costs were significantly lower than forecast, as the severity of large healthcare claim activity that we experienced in Q2 2023 returned to more normal levels in Q3. Additionally, other areas of gross profit, including pricing, workers’ compensation and payroll taxes combined to a favorable outcome when compared to our expectations. Operating expenses increased 3.4% over Q3 2022 and included continued investment in our growth, with a 13% increase in the average number of hired Business Performance Advisors, and in our technology and service offerings. Costs associated with these investments were partially offset by a lower incentive compensation accrual and a shift in timing of the quarterly marketing spend when compared to Q3 2022. Net income and diluted earnings per share (“EPS”) were $44.3 million and $1.16, respectively. Adjusted EPS increased 18.7% from the third quarter of 2022 to $1.46. Adjusted EBITDA increased 18.2% to $94.3 million. Year-to-Date Results The average number of WSEEs paid per month increased 7.0% over 2022 to 311,112 WSEEs. Revenues in 2023 increased by 10.3% to $4.9 billion on the 7.0% increase in paid WSEEs and a 3.1% increase in revenue per WSEE. Gross profit increased 5.8% on the increase in paid WSEEs, but decreased 1.0% on a per WSEE per month basis, due primarily to the higher healthcare costs incurred during the second quarter of 2023. Operating expenses increased 8.3% over the 2022 period. This increase included the impact of inflation on our costs in areas such as corporate salaries and wages, technology costs and travel and training costs. In addition to the increase in hired Business Performance Advisors, we increased the number of service and support personnel with the growth in the number of clients and WSEEs over the past couple of years. Reported net income and diluted EPS were $151.8 million and $3.94, respectively. Adjusted EPS increased 8.7% over 2022 to $4.76. Adjusted EBITDA increased 8.9% to $297.6 million. Cash outlays in the first nine months 2023 included the repurchase of approximately 1,259,000 shares of our common stock at a cost of $131.4 million, dividends totaling $63.0 million, and capital expenditures of $22.5 million. Adjusted cash at September 30, 2023 totaled $189.6 million and $280 million remains available under our $650 million credit facility. “During the third quarter, we took the opportunity to be more aggressive in our share repurchase program repurchasing 873,000 shares at a cost of $86 million,” said Douglas S. Sharp, executive vice president of finance, chief financial officer and treasurer. “We continue to focus on providing strong returns to our shareholders through our dividend and share repurchase programs while maintaining a solid financial position.” 2023 Guidance The company also announced its updated guidance for 2023, including the fourth quarter of 2023. 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 2023 Full Year 2023 Average WSEEs paid 316,750 — 318,250 312,600 — 312,800 Year-over-year increase 3.0% — 3.5% 6.0% — 6.0% Adjusted EPS $0.44 — $0.82 $5.20 — $5.60 Year-over-year decrease (64%) — (32%) (7%) — —% Adjusted EBITDA (in millions) $43 — $63 $340 — $360 Year-over-year increase (decrease) (45%) — (20%) (3%) — 2% 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, amortization of SaaS implementation costs and non-cash stock-based compensation. Conference Call and Webcast Insperity will be hosting a conference call today at 8:30 a.m. ET to discuss these results and the guidance discussed in this press release, and answer questions from investment analysts. To listen in, call 877-545-0523 and use conference i.d. number 464361. 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. 49268. 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 2022 revenues of $5.9 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 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 these 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, including if our clients fail to pay us; bank failures or other events affecting financial institutions; 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, such as financial institutions, data centers or cloud service providers; and our ability to integrate or realize expected returns on future product offerings, including through acquisition and investment. 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) September 30, Dec. 31, (in thousands) 2023 2022 Assets Cash and cash equivalents $ 678,588 $ 732,828 Restricted cash 51,263 49,779 Marketable securities 13,837 33,068 Accounts receivable, net 656,695 622,764 Prepaid insurance and related assets 21,260 11,706 Other current assets 56,037 61,728 Total current assets 1,477,680 1,511,873 Property and equipment, net 190,672 199,992 Right-of-use leased assets 53,949 56,532 Deposits and prepaid health insurance 214,366 213,270 Goodwill and other intangible assets, net 12,707 12,707 Deferred income taxes, net 10,066 15,533 Other assets 37,030 29,354 Total assets $ 1,996,470 $ 2,039,261 Liabilities and stockholders' equity Accounts payable $ 7,207 $ 7,732 Payroll taxes and other payroll deductions payable 518,061 556,085 Accrued worksite employee payroll cost 559,931 513,397 Accrued health insurance costs 50,760 53,402 Accrued workers’ compensation costs 55,005 53,485 Accrued corporate payroll and commissions 65,082 89,147 Other accrued liabilities 65,311 80,122 Total current liabilities 1,321,357 1,353,370 Accrued workers’ compensation costs, net of current 170,609 179,629 Long-term debt 369,400 369,400 Operating lease liabilities, net of current 51,985 55,587 Total noncurrent liabilities 591,994 604,616 Stockholders’ equity: Common stock 555 555 Additional paid-in capital 173,307 151,144 Treasury stock, at cost (830,988 ) (725,532 ) Accumulated other comprehensive loss, net of tax (5 ) (82 ) Retained earnings 740,250 655,190 Total stockholders' equity 83,119 81,275 Total liabilities and stockholders’ equity $ 1,996,470 $ 2,039,261 Insperity, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2023 2022 Change 2023 2022 Change Operating results: Revenues(1) $ 1,550,887 $ 1,439,160 7.8 % $ 4,905,668 $ 4,449,104 10.3 % Payroll taxes, benefits and workers’ compensation costs 1,292,956 1,194,607 8.2 % 4,090,952 3,678,909 11.2 % Gross profit 257,931 244,553 5.5 % 814,716 770,195 5.8 % Salaries, wages and payroll taxes 113,074 109,525 3.2 % 348,557 323,486 7.8 % Stock-based compensation 15,210 13,341 14.0 % 41,676 38,818 7.4 % Commissions 10,773 11,068 (2.7 )% 33,828 32,121 5.3 % Advertising 7,240 9,790 (26.0 )% 29,775 30,812 (3.4 %) General and administrative expenses 41,504 38,115 8.9 % 132,699 115,215 15.2 % Depreciation and amortization 10,666 10,083 5.8 % 31,903 30,367 5.1 % Total operating expenses 198,467 191,922 3.4 % 618,438 570,819 8.3 % Operating income 59,464 52,631 13.0 % 196,278 199,376 (1.6 %) Other income (expense): Interest income 7,950 2,808 183.1 % 24,693 3,901 — Interest expense (7,047 ) (4,082 ) 72.6 % (19,939 ) (8,698 ) 129.2 % Income before income tax expense 60,367 51,357 17.5 % 201,032 194,579 3.3 % Income tax expense 16,035 13,688 17.1 % 49,211 53,427 (7.9 %) Net income $ 44,332 $ 37,669 17.7 % $ 151,821 $ 141,152 7.6 % Net income per share of common stock Basic $ 1.17 $ 0.99 18.2 % $ 4.00 $ 3.70 8.1 % Diluted $ 1.16 $ 0.98 18.4 % $ 3.94 $ 3.66 7.7 % ____________________________________ (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) 2023 2022 2023 2022 Gross billings $ 10,067,191 $ 9,528,695 $ 31,762,946 $ 29,111,243 Less: WSEE payroll cost 8,516,304 8,089,535 26,857,278 24,662,139 Revenues $ 1,550,887 $ 1,439,160 $ 4,905,668 $ 4,449,104 Insperity, Inc. KEY FINANCIAL AND STATISTICAL DATA Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 Change 2023 2022 Change Average WSEEs paid 315,340 303,347 4.0 % 311,112 290,838 7.0 % Statistical data (per WSEE per month): Revenues(1) $ 1,639 $ 1,581 3.7 % $ 1,752 $ 1,700 3.1 % Gross profit 273 269 1.5 % 291 294 (1.0 %) Operating expenses 210 211 (0.5 )% 221 218 1.4 % Operating income 63 58 8.6 % 70 76 (7.9 %) Net income 47 41 14.6 % 54 54 — % ____________________________________ (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) 2023 2022 2023 2022 Gross billings $ 10,642 $ 10,470 $ 11,344 $ 11,122 Less: WSEE payroll cost 9,003 8,889 9,592 9,422 Revenues $ 1,639 $ 1,581 $ 1,752 $ 1,700 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 September 30, Nine Months Ended September 30, (in thousands, except per WSEE per month) 2023 2022 2023 2022 Per WSEE Per WSEE Per WSEE Per WSEE Payroll cost $ 8,516,304 $ 9,003 $ 8,089,535 $ 8,889 $ 26,857,278 $ 9,592 $ 24,662,139 $ 9,422 Less: Bonus payroll cost 529,456 560 583,703 641 3,344,656 1,195 3,236,059 1,236 Non-bonus payroll cost $ 7,986,848 $ 8,443 $ 7,505,832 $ 8,248 $ 23,512,622 $ 8,397 $ 21,426,080 $ 8,186 % Change period over period 6.4 % 2.4 % 23.9 % 5.2 % 9.7 % 2.6 % 25.6 % 5.7 % 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, 2023 December 31, 2022 Cash, cash equivalents and marketable securities $ 692,425 $ 765,896 Less: Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions 482,654 504,817 Client prepayments 20,172 36,800 Adjusted cash, cash equivalents and marketable securities $ 189,599 $ 224,279 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, 2023 2022 2023 2022 Per WSEE Per WSEE Per WSEE Per WSEE Net income $ 44,332 $ 47 $ 37,669 $ 41 $ 151,821 $ 54 $ 141,152 $ 54 Income tax expense 16,035 18 13,688 16 49,211 18 53,427 20 Interest expense 7,047 7 4,082 4 19,939 7 8,698 3 Amortization of SaaS implementation costs 1,025 1 948 1 3,072 1 948 — Depreciation and amortization 10,666 11 10,083 11 31,903 11 30,367 12 EBITDA 79,105 84 66,470 73 255,946 91 234,592 89 Stock-based compensation 15,210 16 13,341 15 41,676 15 38,818 15 Adjusted EBITDA $ 94,315 $ 100 $ 79,811 $ 88 $ 297,622 $ 106 $ 273,410 $ 104 % Change period over period 18.2 % 13.6 % 32.7 % 12.8 % 8.9 % 1.9 % 21.8 % 2.0 % 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) 2023 2022 2023 2022 Net income $ 44,332 $ 37,669 $ 151,821 $ 141,152 Non-GAAP adjustments: Stock-based compensation 15,210 13,341 41,676 38,818 Tax effect (3,960 ) (3,590 ) (10,202 ) (10,659 ) Total non-GAAP adjustments, net 11,250 9,751 31,474 28,159 Adjusted net income $ 55,582 $ 47,420 $ 183,295 $ 169,311 % Change period over period 17.2 % 36.3 % 8.3 % 20.2 % Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Diluted EPS $ 1.16 $ 0.98 $ 3.94 $ 3.66 Non-GAAP adjustments: Stock-based compensation 0.40 0.35 1.08 1.01 Tax effect (0.10 ) (0.10 ) (0.26 ) (0.29 ) Total non-GAAP adjustments, net 0.30 0.25 0.82 0.72 Adjusted EPS $ 1.46 $ 1.23 $ 4.76 $ 4.38 % Change period over period 18.7 % 38.2 % 8.7 % 21.0 % The following is a reconciliation of GAAP to non-GAAP financial measures for fourth quarter and full year 2023 guidance: Q4 2023 Full Year 2023 (in millions, except per share amounts) Guidance Guidance Net income $7 - $22 $158 - $173 Income tax expense 3 - 8 52 - 57 Interest expense 7 27 SaaS implementation amortization 3 6 Depreciation and amortization 11 43 EBITDA 31 - 51 286 - 306 Stock-based compensation 12 54 Adjusted EBITDA $43 - $63 $340 - $360 Diluted EPS $0.21 - $0.59 $4.14 - $4.54 Non-GAAP adjustments: Stock-based compensation 0.32 1.41 Tax effect (0.09) (0.35) Total non-GAAP adjustments, net 0.23 1.06 Adjusted EPS $0.44 - $0.82 $5.20 - $5.60 View source version on businesswire.com: https://www.businesswire.com/news/home/20231031062636/en/
Investor Relations Contact: Douglas S. Sharp Executive Vice President of Finance, Chief Financial Officer and Treasurer 281-348-3232 Investor.Relations@Insperity.com News Media Contact: Cynthia Murga Director, Public Relations 713-324-1414 Media@insperity.com
