NSP Insperity Inc

Insperity, Inc. (NYSE: NSP), a leading provider human resources and business performance solutions for America’s best businesses, today reported results for the fourth quarter and year ended December 31, 2023. Insperity will be hosting a conference call today at 8:30 a.m. ET to discuss these results and our 2024 outlook and will be posting an accompanying presentation to its investor website at http://ir.insperity.com.

• Q4 average number of WSEEs paid and revenues up 2.5% and 6%, respectively

• Q4 net income of $19.6 million; diluted EPS of $0.52

• Q4 adjusted EBITDA of $56.0 million; adjusted EPS of $0.75

• 2023 average number of paid WSEEs and revenues up 6% and 9%, respectively

• 2023 net income and diluted EPS of $171.4 million and $4.47, respectively

• 2023 adjusted EBITDA and adjusted EPS of $353.6 million and $5.52, respectively

• Return to shareholders of $215.7 million in 2023 through the repurchase of 1,259,000 shares at a cost of $131.5 million and $84.2 million in cash dividends

Fourth Quarter Results

The average number of worksite employees (“WSEE”) paid per month increased 2.5% over Q4 2022 to 315,072 WSEEs. Revenues in Q4 2023 increased 6.1% to $1.6 billion on the 2.5% increase in paid WSEEs and a 3.5% increase in revenue per WSEE. Macro-economic headwinds continued to impact worksite employee growth in our client base as a minimum level of hiring in our client base over the course of 2023 turned into a low level of net reductions in Q4 2023.

“We were pleased with the results reflecting a solid year in a more difficult environment in the small business community,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “We are excited about our new strategic partnership with Workday, announced today, and the potential to accelerate Insperity’s long-term trajectory for growth, profitability and value creation.”

Gross profit decreased 7.9% over Q4 2022 to $222.1 million on the 2.5% increase in paid WSEEs and a 10.0% decrease in gross profit per WSEE per month, primarily due to a comparison to a period of unusually low benefits costs in Q4 2022. Relative to our expectations, pricing, benefits costs and contributions from our payroll tax area were all favorable.

Operating expenses increased 5.1% over Q4 2022 and included continued investment in our growth, with an 8% increase in the average number of hired Business Performance Advisors, and investments in our technology and service offerings.

Net income and diluted earnings per share (“EPS”) were $19.6 million and $0.52, respectively. Adjusted EPS and adjusted EBITDA were $0.75 and $56.0 million, respectively.

Full Year Results

The average number of WSEEs paid per month increased 5.8% over 2022 to 312,102 WSEEs. Revenues increased by 9.2% to $6.5 billion on the 5.8% increase in paid WSEEs and a 3.2% increase in revenue per WSEE.

Gross profit increased 2.5% on the increase in paid WSEEs, but decreased 3.1% on a per WSEE per month basis, primarily due to the elevated healthcare costs resulting from large claim activity in Q2 2023 and higher prescription drug costs throughout the year. Pricing exceeded our targets over the course of 2023, which was an important objective in the current inflationary environment.

Operating expenses increased 7.5% over 2022. 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, with the growth in the number of clients and WSEEs over the past couple of years, we increased the number of service and support personnel. Our 2023 operating expenses also included costs associated with our implementation of SalesForce across both our sales and service organizations.

Reported net income and diluted EPS were $171.4 million and $4.47, respectively. Adjusted EPS and Adjusted EBITDA were $5.52 and $353.6 million, respectively.

Cash outlays in 2023 included the repurchase of approximately 1,259,000 shares of our common stock at a cost of $131.5 million, dividends totaling $84.2 million, and capital expenditures of $40.1 million. Adjusted cash at December 31, 2023 totaled $171.1 million and $280 million remains available under our $650 million credit facility.

“We are excited about the strategic partnership with Workday and over the course of 2024 will be developing the solution and our go-to-market strategy ,” said Douglas S. Sharp, executive vice president of finance, chief financial officer and treasurer. “We look forward to hosting an analyst and investor day in the latter half of May this year to discuss this potential in further detail.”

2024 Guidance

The company will be discussing both Q1 and full year 2024 guidance, including the impact of the new strategic partnership with Workday, on its earnings conference call. We will post the guidance promptly after the call to our investor website at http://ir.insperity.com.

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 888-506-0062 and use conference i.d. number 607399. 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. 49708. 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 2023 revenues of $6.5 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; including our strategic partnership with Workday, Inc.; 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;

• failure to comply with or meet client expectations regarding certain COVID-19 relief programs;

• bank failures or other events affecting financial institutions; labor shortages, increasing competition for highly skilled workers, and evolving employee expectations regarding the workplace;

• impact of inflation;

• vulnerability to regional economic factors because of our geographic market concentration;

• failure to comply with covenants under our credit facility;

• impact of a future outbreak of highly infectious or contagious disease;

• 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;

• 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;

• our ability to fully realize the anticipated benefits of our strategic partnership and plans to develop a joint solution with Workday, Inc.; and

• our ability to integrate or realize expected returns on future product offerings, including through acquisitions, strategic partnerships, and investments.

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

 

December 31, 2023

December 31, 2022

(in thousands)

 

 

 

Assets

 

 

Cash and cash equivalents

$

692,873

 

$

732,828

 

Restricted cash

 

57,403

 

 

49,779

 

Marketable securities

 

15,905

 

 

33,068

 

Accounts receivable, net

 

693,878

 

 

622,764

 

Prepaid insurance and related assets

 

7,013

 

 

11,706

 

Other current assets

 

128,220

 

 

61,728

 

Total current assets

 

1,595,292

 

 

1,511,873

 

Property and equipment, net

 

197,424

 

 

199,992

 

Right-of-use leased assets

 

57,438

 

 

56,532

 

Deposits and prepaid health insurance

 

215,070

 

 

213,270

 

Goodwill and other intangible assets, net

 

12,707

 

 

12,707

 

Deferred income taxes, net

 

20,347

 

 

15,533

 

Other assets

 

21,381

 

 

29,354

 

Total assets

$

2,119,659

 

$

2,039,261

 

 

 

 

Liabilities and stockholders' equity

 

 

Accounts payable

$

10,693

 

$

7,732

 

Payroll taxes and other payroll deductions payable

 

566,373

 

 

556,085

 

Accrued worksite employee payroll cost

 

559,194

 

 

513,397

 

Accrued health insurance costs

 

46,460

 

 

53,402

 

Accrued workers’ compensation costs

 

60,475

 

 

53,485

 

Accrued corporate payroll and commissions

 

64,286

 

 

89,147

 

Other accrued liabilities

 

128,808

 

 

80,122

 

Total current liabilities

 

1,436,289

 

 

1,353,370

 

Accrued workers’ compensation costs, net of current

 

162,852

 

 

179,629

 

Long-term debt

 

369,400

 

 

369,400

 

Operating lease liabilities, net of current

 

57,494

 

 

55,587

 

Total noncurrent liabilities

 

589,746

 

 

604,616

 

Stockholders’ equity:

 

 

Common stock

 

555

 

 

555

 

Additional paid-in capital

 

185,031

 

 

151,144

 

Treasury stock, at cost

 

(830,524

)

 

(725,532

)

Accumulated other comprehensive loss, net of tax

 

9

 

 

(82

)

Retained earnings

 

738,553

 

 

655,190

 

Total stockholders' equity

 

93,624

 

 

81,275

 

Total liabilities and stockholders’ equity

$

2,119,659

 

$

2,039,261

 

Insperity, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

Three Months Ended December 31,

 

Year Ended December 31,

(in thousands, except per share amounts)

2023

2022

Change

 

2023

2022

Change

 

 

 

 

 

 

 

 

Operating results:

 

 

 

 

 

 

 

Revenues(1)

$

1,580,203

 

$

1,489,714

 

6.1

%

 

$

6,485,871

 

$

5,938,818

 

9.2

%

Payroll taxes, benefits and workers’ compensation costs

 

1,358,116

 

 

1,248,676

 

8.8

%

 

 

5,449,068

 

 

4,927,585

 

10.6

%

Gross profit

 

222,087

 

 

241,038

 

(7.9

)%

 

 

1,036,803

 

 

1,011,233

 

2.5

%

Salaries, wages and payroll taxes

 

112,158

 

 

107,459

 

4.4

%

 

 

460,715

 

 

430,945

 

6.9

%

Stock-based compensation

 

11,320

 

 

11,262

 

0.5

%

 

 

52,996

 

 

50,080

 

5.8

%

Commissions

 

13,019

 

 

13,551

 

(3.9

)%

 

 

46,847

 

 

45,672

 

2.6

%

Advertising

 

7,549

 

 

6,691

 

12.8

%

 

 

37,324

 

 

37,503

 

(0.5

%)

General and administrative expenses

 

44,965

 

 

40,919

 

9.9

%

 

 

177,664

 

 

156,134

 

13.8

%

Depreciation and amortization

 

10,805

 

 

10,293

 

5.0

%

 

 

42,708

 

 

40,660

 

5.0

%

Total operating expenses

 

199,816

 

 

190,175

 

5.1

%

 

 

818,254

 

 

760,994

 

7.5

%

Operating income

 

22,271

 

 

50,863

 

(56.2

)%

 

 

218,549

 

 

250,239

 

(12.7

%)

Other income (expense):

 

 

 

 

 

 

 

Interest income

 

8,973

 

 

5,492

 

63.4

%

 

 

33,666

 

 

9,393

 

258.4

%

Interest expense

 

(7,198

)

 

(5,509

)

30.7

%

 

 

(27,137

)

 

(14,207

)

91.0

%

Income before income tax expense

 

24,046

 

 

50,846

 

(52.7

)%

 

 

225,078

 

 

245,425

 

(8.3

%)

Income tax expense

 

4,485

 

 

12,648

 

(64.5

)%

 

 

53,696

 

 

66,075

 

(18.7

%)

Net income

$

19,561

 

$

38,198

 

(48.8

)%

 

$

171,382

 

$

179,350

 

(4.4

%)

 

 

 

 

 

 

 

 

Net income per share of common stock

 

 

 

 

 

 

 

Basic

$

0.52

 

$

1.01

 

(48.5

)%

 

$

4.53

 

$

4.70

 

(3.6

%)

Diluted

$

0.52

 

$

0.99

 

(47.5

)%

 

$

4.47

 

$

4.64

 

(3.7

%)

____________________________________

(1)

Revenues are comprised of gross billings less WSEE payroll costs as follows:

 

Three Months Ended December 31,

 

Year Ended December 31,

(in thousands)

2023

2022

 

2023

2022

 

 

 

 

 

 

Gross billings

$

11,378,420

$

11,015,667

 

$

43,141,366

$

40,126,910

Less: WSEE payroll cost

 

9,798,217

 

9,525,953

 

 

36,655,495

 

34,188,092

Revenues

$

1,580,203

$

1,489,714

 

$

6,485,871

$

5,938,818

Insperity, Inc.

KEY FINANCIAL AND STATISTICAL DATA

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2023

2022

Change

 

2023

2022

Change

 

 

 

 

 

 

 

 

Average WSEEs paid

 

315,072

 

307,506

2.5

%

 

 

312,102

 

295,005

5.8

%

 

 

 

 

 

 

 

 

Statistical data (per WSEE per month):

 

 

 

 

 

 

 

Revenues(1)

$

1,672

$

1,615

3.5

%

 

$

1,732

$

1,678

3.2

%

Gross profit

 

235

 

261

(10.0

)%

 

 

277

 

286

(3.1

%)

Operating expenses

 

211

 

206

2.4

%

 

 

219

 

215

1.9

%

Operating income

 

24

 

55

(56.4

)%

 

 

58

 

71

(18.3

%)

Net income

 

21

 

41

(48.8

)%

 

 

46

 

51

(9.8

%)

____________________________________

(1)

Revenues per WSEE per month are comprised of gross billings per WSEE per month less WSEE payroll costs per WSEE per month follows:

 

Three Months Ended December 31,

 

Year Ended December 31,

(per WSEE per month)

2023

2022

 

2023

2022

 

 

 

 

 

 

Gross billings

$

12,038

$

11,941

 

$

11,519

$

11,335

Less: WSEE payroll cost

 

10,366

 

10,326

 

 

9,787

 

9,657

Revenues

$

1,672

$

1,615

 

$

1,732

$

1,678

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 December 31,

 

Year Ended December 31,

(in thousands, except per WSEE per month)

2023

 

2022

 

2023

 

2022

 

Per WSEE

 

 

Per WSEE

 

 

Per WSEE

 

 

Per WSEE

 

 

 

 

 

 

 

 

 

 

 

 

Payroll cost

$

9,798,217

 

$

10,366

 

 

$

9,525,953

 

$

10,326

 

 

$

36,655,495

 

$

9,787

 

 

$

34,188,092

 

$

9,657

 

Less: Bonus payroll cost

 

1,633,783

 

 

1,728

 

 

 

1,723,928

 

 

1,869

 

 

 

4,978,439

 

 

1,329

 

 

 

4,959,987

 

 

1,401

 

Non-bonus payroll cost

$

8,164,434

 

$

8,638

 

 

$

7,802,025

 

$

8,457

 

 

$

31,677,056

 

$

8,458

 

 

$

29,228,105

 

$

8,256

 

% Change period over period

 

4.6

%

 

2.1

%

 

 

18.8

%

 

3.9

%

 

 

8.4

%

 

2.4

%

 

 

23.7

%

 

5.1

%

Following is a reconciliation of cash, cash equivalents and marketable securities (GAAP) to adjusted cash, cash equivalents and marketable securities (non-GAAP):

(in thousands)

December 31, 2023

 

December 31, 2022

 

 

Cash, cash equivalents and marketable securities

$

708,778

 

$

765,896

Less:

 

 

 

Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions

 

510,092

 

 

504,817

Client prepayments

 

27,592

 

 

36,800

Adjusted cash, cash equivalents and marketable securities

$

171,094

 

$

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 December 31,

 

Year Ended December 31,

2023

 

2022

 

2023

 

2022

 

Per WSEE

 

 

Per WSEE

 

 

Per WSEE

 

 

Per WSEE

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

19,561

 

$

21

 

 

$

38,198

 

$

41

 

 

$

171,382

 

$

46

 

 

$

179,350

 

$

51

 

Income tax expense

 

4,485

 

 

4

 

 

 

12,648

 

 

15

 

 

 

53,696

 

 

14

 

 

 

66,075

 

 

19

 

Interest expense

 

7,198

 

 

8

 

 

 

5,509

 

 

6

 

 

 

27,137

 

 

7

 

 

 

14,207

 

 

4

 

Amortization of SaaS implementation costs

 

2,639

 

 

3

 

 

 

975

 

 

1

 

 

 

5,711

 

 

2

 

 

 

1,923

 

 

1

 

Depreciation and amortization

 

10,805

 

 

11

 

 

 

10,293

 

 

11

 

 

 

42,708

 

 

11

 

 

 

40,660

 

 

11

 

EBITDA

 

44,688

 

 

47

 

 

 

67,623

 

 

74

 

 

 

300,634

 

 

80

 

 

 

302,215

 

 

86

 

Stock-based compensation

 

11,320

 

 

12

 

 

 

11,262

 

 

12

 

 

 

52,996

 

 

14

 

 

 

50,080

 

 

14

 

Adjusted EBITDA

$

56,008

 

$

59

 

 

$

78,885

 

$

86

 

 

$

353,630

 

$

94

 

 

$

352,295

 

$

100

 

% Change period over period

 

(29.0

)%

 

(31.4

)%

 

 

159.6

%

 

126.3

%

 

 

0.4

%

 

(6.0

%)

 

 

38.2

%

 

17.6

%

Following is a reconciliation of net income (GAAP) to adjusted net income (non-GAAP):

 

Three Months Ended December 31,

 

Year Ended December 31,

(in thousands)

2023

2022

 

2023

2022

 

 

 

 

 

 

Net income

$

19,561

 

$

38,198

 

 

$

171,382

 

$

179,350

 

Non-GAAP adjustments:

 

 

 

 

 

Stock-based compensation

 

11,320

 

 

11,262

 

 

 

52,996

 

 

50,080

 

Tax effect

 

(2,441

)

 

(2,824

)

 

 

(12,643

)

 

(13,483

)

Total non-GAAP adjustments, net

 

8,879

 

 

8,438

 

 

 

40,353

 

 

36,597

 

Adjusted net income

$

28,440

 

$

46,636

 

 

$

211,735

 

$

215,947

 

% Change period over period

 

(39.0

)%

 

254.0

%

 

 

(2.0

%)

 

40.2

%

Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP):

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2023

2022

 

2023

2022

 

 

 

 

 

 

Diluted EPS

$

0.52

 

$

0.99

 

 

$

4.47

 

$

4.64

 

Non-GAAP adjustments:

 

 

 

 

 

Stock-based compensation

 

0.30

 

 

0.29

 

 

 

1.38

 

 

1.30

 

Tax effect

 

(0.07

)

 

(0.07

)

 

 

(0.33

)

 

(0.35

)

Total non-GAAP adjustments, net

 

0.23

 

 

0.22

 

 

 

1.05

 

 

0.95

 

Adjusted EPS

$

0.75

 

$

1.21

 

 

$

5.52

 

$

5.59

 

% Change period over period

 

(38.0

)%

 

255.9

%

 

 

(1.3

%)

 

41.5

%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240208862722/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