EX-99.1 2 a09302021-ex991earningsrel.htm EX-99.1 Document

Exhibit 99.1

Insperity Announces Third Quarter Results
HOUSTON – Nov. 1, 2021 – 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 Sep. 30, 2021:
•Q3 average number of WSEEs paid and revenues up 11% and 20%, respectively
•Q3 net income and diluted EPS of $27.3 million and $0.70, respectively
•Q3 adjusted EBITDA and adjusted EPS of $60.1 million and $0.89, respectively
•YTD net income and diluted EPS of $114.4 million and $2.94, respectively
•YTD adjusted EBITDA and adjusted EPS of $224.6 million and $3.62, respectively
Third Quarter Results
The average number of worksite employees (“WSEEs”) paid per month in Q3 2021 increased 11% to 257,560 WSEEs. Net gains from hiring in our client base, combined with WSEEs paid from new sales and client retention at our historical high level of 99% for the quarter, drove the accelerated growth above the high end of our expectations. Revenues in Q3 2021 increased 20% to $1.2 billion on the 11% increase in paid worksite employees and an 8% increase in revenue per WSEE, which reflects a 4% increase in pricing and the non-recurrence of the 2020 FICA deferral credits instituted as part of the CARES Act.
“We are pleased with our solid financial results and our return to double-digit unit growth in Q3,” said Paul J. Sarvadi, Insperity chief executive officer and chairman. “Strong demand for our services, combined with solid execution from our dedicated employees, positions Insperity to continue growth acceleration into 2022.”

Gross profit increased 7.3% over Q3 2020 to $198.5 million. This higher than expected increase resulted from the higher than anticipated paid WSEEs and pricing, combined with favorable results from our workers’ compensation program and payroll tax area. In Q3 2021, benefits costs continued to reflect the dynamics of the pandemic, including increased utilization of our health plan and COVID-19 related vaccination, testing and treatment costs.
Operating expenses in Q3 2021 increased only 2% over Q3 2020 and included a decrease in stock-based compensation from a change in our annual incentive plan. Cash operating expenses increased 9% and included an increase in marketing costs associated with lead generation activity and SalesForce implementation costs, combined with ongoing operating expense management.

For Q3 2021, reported net income and diluted earnings per share (“EPS”) were $27.3 million and $0.70, respectively. Adjusted EBITDA increased 4% to $60.1 million and adjusted EPS decreased 2% to $0.89.

Year-to-Date Results
Revenues for the first nine months of 2021 increased 14% to $3.7 billion on a 5% increase in paid worksite employees and an 8% increase in revenue per WSEE. Gross profit for the first nine months of 2021 increased 2% to $649.5 million. Operating expenses increased 9% to $490.8 million compared to the 2020 period.
For the nine months ended September 30, 2021, reported net income and diluted EPS were $114.4 million and $2.94, respectively. Adjusted EPS decreased 13% compared to the first nine months of 2020 to $3.62 reflecting the unusually low benefits costs in the prior year due primarily to the deferral of care at the onset of the pandemic. Adjusted EBITDA decreased 10% compared to the first nine months of 2020 to $224.6 million.
Net income per WSEE per month decreased 19% from $64 in the 2020 period to $52 in the 2021 period. Adjusted EBITDA per WSEE per month decreased 15% from $120 in the 2020 period to $102 in the 2021 period.


“The acceleration to double-digit worksite employee growth ahead of our 2021 plan, combined with our management of pricing, direct cost programs and operating costs has resulted in significant outperformance in earnings through the first three quarters of this year,” said Douglas S. Sharp, Insperity senior vice president of finance, chief financial officer and treasurer. “Our solid operating results, even through the pandemic, positions us to continue to provide strong shareholder return though our share repurchase and dividend programs.”

Cash outlays in the first nine months of 2021 included the repurchase of approximately 544,000 shares of stock at a cost of $49.8 million, dividends totaling $50.2 million and capital expenditures of $23.6 million. Adjusted cash totaled $228 million at September 30, 2021 and $130 million remains available under our $500 million credit facility.

2021 Guidance
The company also announced its updated guidance for 2021, including the fourth quarter of 2021. 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 2021Full Year 2021
Average WSEEs paid265,500—268,000250,100—250,600
Year-over-year increase11%—12%6.8%—7%
Adjusted EPS$0.61—$0.81$4.25—$4.46
Year-over-year increase (decrease)24%—65%(8)%—(4)%
Adjusted EBITDA (in millions)$45—$56$271—$282
Year-over-year increase (decrease)19%—48%(6)%—(2)%
Definition of Key Metrics
Average WSEEs paid - Determined by calculating the company’s cumulative worksite employees 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 and non-cash stock-based compensation.
Conference Call and Webcast
Insperity will be hosting a conference call today at 5 p.m. ET to discuss these results, and the guidance discussed in this press release, and answer questions from investment analysts. To listen in, call 877-651-0053 and use conference i.d. number 6566878. The call will also be webcast at http://ir.insperity.com. The conference call script will be available at the same website later today. A replay of the conference call will be available at 855-859-2056, conference i.d. 6566878. 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 2020 revenues of $4.3 billion and more than 80 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 the 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 the 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;
•vulnerability to regional economic factors because of our geographic market concentration;
•failure to comply with covenants under our credit facility;
•our liability for worksite employee payroll, payroll taxes and benefits costs;
•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;
•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;
•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, data centers or cloud service providers; and
•our ability to integrate or realize expected returns on our acquisitions.
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.

SUMMARY FINANCIAL INFORMATION
Insperity, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)September 30, 2021December 31, 2020
Assets
Cash and cash equivalents$467,921 $554,846 
Restricted cash47,813 45,522 
Marketable securities32,697 34,529 
Accounts receivable, net579,503 392,746 
Prepaid insurance19,657 10,164 
Other current assets53,293 39,461 
Income taxes receivable5,584 — 
Total current assets1,206,468 1,077,268 
Property and equipment, net212,322 216,256 
Right of use leased assets63,673 60,663 
Prepaid health insurance9,000 9,000 
Deposits216,136 194,231 
Goodwill and other intangible assets, net12,707 12,707 
Deferred income taxes, net1,653 9,603 
Other assets12,093 4,548 
Total assets$1,734,052 $1,584,276 
Liabilities and stockholders' equity
Accounts payable$4,250 $6,203 
Payroll taxes and other payroll deductions payable232,862 377,960 
Accrued worksite employee payroll cost534,890 334,836 
Accrued health insurance costs40,366 32,685 
Accrued workers’ compensation costs51,368 48,186 
Accrued corporate payroll and commissions69,621 44,277 
Other accrued liabilities70,824 60,777 
Total current liabilities1,004,181 904,924 
Accrued workers’ compensation cost, net of current191,193 195,239 
Long-term debt369,400 369,400 
Operating lease liabilities, net of current65,979 64,289 
Other accrued liabilities, net of current6,293 6,292 
Total noncurrent liabilities632,865 635,220 
Stockholders’ equity:
Common stock555 555 
Additional paid-in capital104,587 95,528 
Treasury stock, at cost(645,993)(626,984)
Retained earnings637,857 575,033 
Total stockholders’ equity97,006 44,132 
Total liabilities and stockholders’ equity$1,734,052 $1,584,276 

SUMMARY FINANCIAL INFORMATION
Insperity, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)Three Months Ended September 30,Nine Months Ended September 30,
20212020Change20212020Change
Operating results:
Revenues(1)
$1,209,628 $1,007,820 20.0 %$3,681,834 $3,230,669 14.0 %
Payroll taxes, benefits and workers’ compensation costs
1,011,149 822,787 22.9 %3,032,356 2,591,365 17.0 %
Gross profit198,479 185,033 7.3 %649,478 639,304 1.6 %
Salaries, wages and payroll taxes89,232 89,429 (0.2)%286,669 266,640 7.5 %
Stock-based compensation10,362 20,864 (50.3)%35,965 38,110 (5.6)%
Commissions8,724 7,722 13.0 %24,694 23,657 4.4 %
Advertising9,507 4,781 98.8 %23,804 15,334 55.2 %
General and administrative expenses31,134 25,646 21.4 %91,981 85,254 7.9 %
Depreciation and amortization9,917 7,819 26.8 %27,715 23,329 18.8 %
Total operating expenses
158,876 156,261 1.7 %490,828 452,324 8.5 %
Operating income39,603 28,772 37.6 %158,650 186,980 (15.2)%
Other income (expense):
Interest income251 103 143.7 %2,230 2,351 (5.1)%
Interest expense(1,963)(1,731)13.4 %(5,537)(6,312)(12.3)%
Income before income tax expense37,891 27,144 39.6 %155,343 183,019 (15.1)%
Income tax expense10,595 7,135 48.5 %40,971 49,067 (16.5)%
Net income$27,296 $20,009 36.4 %$114,372 $133,952 (14.6)%
Less distributed and undistributed earnings allocated to participating securities
(39)(104)(62.5)%(219)(792)(72.3)%
Net income allocated to common shares
$27,257 $19,905 36.9 %$114,153 $133,160 (14.3)%
Net income per share of common stock
Basic
$0.71 $0.52 36.5 %$2.97 $3.45 (13.9)%
Diluted
$0.70 $0.51 37.3 %$2.94 $3.43 (14.3)%
 ____________________________________
(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)
2021202020212020
Gross billings
$7,994,006 $6,563,727 $23,682,279 $20,356,164 
Less: WSEE payroll cost
6,784,378 5,555,907 20,000,445 17,125,495 
Revenues
$1,209,628 $1,007,820 $3,681,834 $3,230,669 

SUMMARY FINANCIAL INFORMATION
Insperity, Inc.
KEY FINANCIAL AND STATISTICAL DATA
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
20212020Change20212020Change
Average WSEEs paid257,560 231,750 11.1 %244,667 232,553 5.2 %
Statistical data (per WSEE per month):
Revenues(1)
$1,565 $1,450 7.9 %$1,672 $1,544 8.3 %
Gross profit
257 266 (3.4)%295 305 (3.3)%
Operating expenses
206 225 (8.4)%223 216 3.2 %
Operating income
51 41 24.4 %72 89 (19.1)%
Net income
35 29 20.7 %52 64 (18.8)%
____________________________________
(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 September 30,Nine Months Ended September 30,
(per WSEE per month)2021202020212020
Gross billings$10,346 $9,441 $10,755 $9,726 
Less: WSEE payroll cost8,781 7,991 9,083 8,182 
Revenues$1,565 $1,450 $1,672 $1,544 

NON-GAAP FINANCIAL MEASURES
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 MeasureDefinitionBenefit 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.
Adjusted operating expenses
Represents operating expenses excluding the impact of the following:
•  non-cash stock-based compensation, and
•  depreciation and amortization expense.
EBITDA
Represents net income computed in accordance with GAAP, plus:
•  interest expense,
•  income tax expense, and
•  depreciation and amortization expense.
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)
2021202020212020
Per WSEEPer WSEEPer WSEEPer WSEE
Payroll cost$6,784,378 $8,781 $5,555,907 $7,991 $20,000,445 $9,083 $17,125,495 $8,182 
Less: Bonus payroll cost
726,187 940 431,861 621 2,942,817 1,337 1,935,950 925 
Non-bonus payroll cost
$6,058,191 $7,841 $5,124,046 $7,370 $17,057,628 $7,746 $15,189,545 $7,257 
% Change period over period
18.2 %6.4 %0.4 %4.4 %12.3 %6.7 %3.2 %3.4 %

NON-GAAP FINANCIAL MEASURES
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, 2021December 31, 2020
Cash, cash equivalents and marketable securities$500,618 $589,375 
Less:
Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions
198,405 341,988 
Client prepayments
74,646 35,328 
Adjusted cash, cash equivalents and marketable securities$227,567 $212,059 

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,
2021202020212020
Per WSEEPer WSEEPer WSEEPer WSEE
Net income
$27,296 $35 $20,009 $29 $114,372 $52 $133,952 $64 
Income tax expense
10,595 14 7,135 10 40,971 19 49,067 23 
Interest expense
1,963 3 1,731 2 5,537 3 6,312 3 
Depreciation and amortization
9,917 12 7,819 12 27,715 12 23,329 12 
EBITDA
49,771 64 36,694 53 188,595 86 212,660 102 
Stock-based compensation
10,362 14 20,864 30 35,965 16 38,110 18 
Adjusted EBITDA
$60,133 $78 $57,558 $83 $224,560 $102 $250,770 $120 
% Change period over period
4.5 %(6.0)%12.5 %16.9 %(10.5)%(15.0)%19.8 %20.0 %

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)2021202020212020
Net income$27,296 $20,009 $114,372 $133,952 
Non-GAAP adjustments:
Stock-based compensation10,362 20,864 35,965 38,110 
Tax effect(2,865)(5,484)(9,486)(10,134)
Total non-GAAP adjustments, net7,497 15,380 26,479 27,976 
Adjusted net income$34,793 $35,389 $140,851 $161,928 
% Change period over period(1.7)%15.5 %(13.0)%10.4 %

NON-GAAP FINANCIAL MEASURES
Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Diluted EPS$0.70 $0.51 $2.94 $3.43 
Non-GAAP adjustments:
Stock-based compensation0.27 0.54 0.92 0.98 
Tax effect(0.08)(0.14)(0.24)(0.26)
Total non-GAAP adjustments, net$0.19 $0.40 $0.68 $0.72 
Adjusted EPS$0.89 $0.91 $3.62 $4.15 
% Change period over period
(2.2)%21.3 %(12.8)%16.2 %

Following is a reconciliation of GAAP to non-GAAP financial measures for fourth quarter and full year 2021 guidance:
(in millions, except per share amounts)Q4 2021 GuidanceFull Year 2021 Guidance
Net income$18 - $26$133- $141
Income tax expense7 - 1048 - 51
Interest expense28
Depreciation and amortization1038
EBITDA37 - 48227 - 238
Stock-based compensation844
Adjusted EBITDA$45 - $56$271 - $282
Diluted net income per share of common stock
$0.46 - $0.66$3.42 - $3.63
Non-GAAP adjustments:
Stock-based compensation0.21 1.13 
Tax effect(0.06)(0.30)
Total non-GAAP adjustments, net0.150.83
Adjusted EPS$0.61 - $0.81$4.25 - $4.46
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