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Insperity First Quarter EPS Increases 64% To $0.54

Insperity, Inc. (NYSE: NSP), a leading provider of human resources and business performance solutions for America’s best businesses, today reported first quarter net income of $13.9 million, a 58.0% increase over the $8.8 million earned in the 2011 period. Diluted earnings per share increased 63.6% to $0.54 from $0.33 in the 2011 period.

“These are outstanding results, particularly in light of a weakening labor market and the amount of change involved in implementing our new growth strategy,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “We are on track with our implementation of fundamental changes that are directed toward accelerating growth in the years ahead.”

Revenues for the first quarter of 2012 increased 11.0% over the 2011 period primarily due to an 8.5% increase in the average number of worksite employees paid per month. Gross profit increased 13.2% to $103.0 million compared to the first quarter of 2011. The average gross profit per worksite employee per month increased $12, or 4.4%, to $282 in the first quarter of 2012 from $270 in the 2011 period. This increase was attributable to effective management within each of the company’s direct cost centers of the Insperity Workforce Optimization TM solution.

Operating expenses increased 5.4% to $80.0 million compared to $75.8 million in the first quarter of 2011. Operating expenses per worksite employee per month decreased $6, or 2.7%, to $219 in the first quarter of 2012 from $225 in the 2011 period. The year-over-year comparison includes rebranding costs incurred in the first quarter of 2011.

“Our strong first quarter results produced a record level of $29.8 million in EBITDA plus stock-based compensation,” said Douglas S. Sharp, senior vice-president of finance, chief financial officer and treasurer. “Working capital increased to $135.9 million and included cash outlays of $3.9 million in dividends, $3.4 million in capital expenditures and $3.3 million in stock repurchases.”

Insperity will be hosting a conference call today at 10 a.m. ET to discuss these results, give guidance for the second quarter and full year 2012 and answer questions from investment analysts. To listen in, call 877-650-3776 and use conference i.d. number 69276192. 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. 69276192, for one week. The webcast will be archived for one year.

Insperity, a trusted advisor to America’s best businesses for more than 25 years, provides an array of human resources and business solutions designed to help improve business performance. Insperity TM Business Performance Advisors offer the most comprehensive Workforce Optimization TM solution in the marketplace that delivers administrative relief, better benefits, reduced liabilities and a systematic way to improve productivity. Additional offerings include MidMarket Solutions TM, Performance Management, Expense Management, Time and Attendance, Organizational Planning, Recruiting Services, Employment Screening, Retirement Services and Insurance Services. Insperity business performance solutions support more than 100,000 businesses with over 2 million employees. With 2011 revenues of $2 billion, Insperity operates in 56 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: (i) continued effects of the economic recession and general 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 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 Adjacent Business strategy, including acquisitions; and (x) 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.

       

Insperity, Inc.

Summary Financial Information

(in thousands, except per share amounts and statistical data)

 
March 31, December 31,
2012 2011
(Unaudited)
Assets
Cash and cash equivalents $ 234,548 $ 211,208
Restricted cash 45,068 44,737
Marketable securities 56,981 56,987
Accounts receivable 175,961 170,933
Prepaid insurance 24,662 21,300
Other current assets 11,529 11,488
Income taxes receivable 617 2,902
Deferred income taxes  

-

    3,233  
Total current assets 549,366 522,788
 
Property and equipment, net 92,597 92,944
Prepaid health insurance 9,000 9,000
Deposits 58,505 54,960
Goodwill and other intangible assets, net 27,999 28,433
Other assets   4,163     4,134  
Total assets $ 741,630   $ 712,259  
 
Liabilities and Stockholders’ Equity
Accounts payable $ 3,437 $ 5,085
Payroll taxes and other payroll deductions payable 177,991 168,652
Accrued worksite employee payroll expense 144,840 130,317
Accrued health insurance costs 9,200 9,427
Accrued workers’ compensation costs 47,094 46,548
Accrued corporate payroll and commissions 13,703 22,383
Other accrued liabilities 14,092 13,814
Deferred income taxes   3,089    

-

 
Total current liabilities 413,446 396,226
 
Accrued workers’ compensation costs 61,895 60,054
Deferred income taxes   9,814     10,772  
Total noncurrent liabilities 71,709 70,826
 
Stockholders’ equity:
Common stock 309 309
Additional paid-in capital 136,670 135,871
Treasury stock, cost (134,198 ) (134,647 )
Accumulated other comprehensive income, net of tax 59 24
Retained earnings   253,635     243,650  
Total stockholders’ equity   256,475     245,207  
Total liabilities and stockholders’ equity $ 741,630   $ 712,259  
             

Insperity, Inc.

Summary Financial Information (continued)

(in thousands, except per share amounts and statistical data)

(Unaudited)

 
Three months ended

March 31,

2012 2011 Change
Operating results:

Revenues (gross billings of $3.231 billion and $2.888

billion, less worksite employee payroll cost of $2.636

billion and $2.352 billion, respectively) $ 595,177 $ 536,381 11.0 %
Direct costs:
Payroll taxes, benefits and workers’ compensation costs   492,173     445,422   10.5 %
Gross profit 103,004 90,959 13.2 %
Operating expenses:
Salaries, wages and payroll taxes 43,323 39,597 9.4 %
Stock-based compensation 2,155 1,790 20.4 %
General and administrative expenses 22,078 21,893 0.8 %
Commissions 3,435 3,096 10.9 %
Advertising 4,755 5,506 (13.6 )%
Depreciation and amortization   4,212     3,948   6.7 %
Total operating expenses   79,958     75,830   5.4 %
Operating income 23,046 15,129 52.3 %
Other income:
Interest income, net   288     284   1.4 %
Income before income tax expense 23,334 15,413 51.4 %
Income tax expense   9,450     6,627   42.6 %
Net income $ 13,884   $ 8,786   58.0 %
Less net income allocated to participating securities   (402 )   (264 ) 52.3 %
Net income allocated to common shares $ 13,482   $ 8,522   58.2 %
Diluted net income per share of common stock $ 0.54   $ 0.33   63.6 %
             

Insperity, Inc.

Summary Financial Information (continued)

(in thousands, except per share amounts and statistical data)

(Unaudited)

 
Three months ended
March 31,
2012 2011 Change
Statistical data:
Average number of worksite employees paid per month 121,938 112,409 8.5 %

Revenues per worksite employee per month (1)

$ 1,627 $ 1,591 2.3 %
Gross profit per worksite employee per month 282 270 4.4 %
Operating expenses per worksite employee per month 219 225 (2.7 )%
Operating income per worksite employee per month 63 45 40.0 %
Net income per worksite employee per month 38 26 46.2 %
 

(1)

Gross billings of $8,833 and $8,566 per worksite employee per month, less payroll cost of $7,206 and $6,975 per

worksite employee per month, respectively.

             

Insperity, Inc.

Summary Financial Information (continued)

(in thousands, except per share amounts and statistical data)

(Unaudited)

 

GAAP to Non-GAAP Reconciliation Tables

 
Three months ended
March 31,
2012 2011 Change
 
Payroll cost (GAAP) $ 2,636,129 $ 2,352,263 12.1 %
Less: Bonus payroll cost   (367,823 )   (304,849 ) 20.7 %
Non-bonus payroll cost $ 2,268,306   $ 2,047,414   10.8 %
 
Payroll cost per worksite employee (GAAP) $ 7,206 $ 6,975 3.3 %
Less: Bonus payroll cost per worksite employee   (1,005 )   (904 ) 11.2 %
Non-bonus payroll cost per worksite employee $ 6,201   $ 6,071   2.1 %
 

Non-bonus payroll cost represents payroll cost excluding the impact of bonus payrolls paid to the company’s worksite employees. Bonus payroll cost varies from period to period, but has no direct impact to the company’s ultimate workers’ compensation costs under the current program. As a result, Insperity management refers to non-bonus payroll cost in analyzing, reporting and forecasting the company’s workers’ compensation costs.

                 
Three months ended
March 31,
2012 2011 Change
Net income (GAAP) $ 13,884 $ 8,786 58.0 %
Income tax expense 9,450 6,627 42.6 %
Depreciation and amortization 4,212 3,948 6.7 %
Interest expense   88  

-

-

EBITDA 27,634 19,361 42.7 %
Stock-based compensation   2,155   1,790 20.4 %
$ 29,789 $ 21,151 40.8 %
 

EBITDA represents net income computed in accordance with GAAP, plus interest expense, income tax expense, and depreciation and amortization expense. Insperity management believes EBITDA plus stock-based compensation is often a useful measure of the company’s operating performance, as it allows for additional analysis of the company’s operating results separate from the impact of taxes, stock-based compensation and capital and financing transactions on earnings.

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