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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Insperity Inc | NYSE:NSP | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.42 | -0.45% | 93.01 | 93.7587 | 92.40 | 93.31 | 119,709 | 01:00:00 |
ý
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the quarterly period ended September 30, 2018.
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or
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o
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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|
|
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For the transition period from _______________ to _______________
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Delaware
|
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76-0479645
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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19001 Crescent Springs Drive
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Kingwood, Texas
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77339
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
ý
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging growth company
o
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TABLE OF CONTENTS
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Page
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Part I, Item 1.
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Part I, Item 2.
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Part I, Item 3.
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Part I, Item 4.
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Part II, Item 1.
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Part II, Item 1A.
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Part II, Item 2.
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Part II, Item 6.
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FINANCIAL STATEMENTS
(Unaudited)
|
(in thousands)
|
September 30, 2018
|
|
|
December 31, 2017
|
|
||
|
|
|
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
328,299
|
|
|
$
|
354,260
|
|
Restricted cash
|
42,257
|
|
|
41,137
|
|
||
Marketable securities
|
37,576
|
|
|
1,960
|
|
||
Accounts receivable, net:
|
|
|
|
||||
Trade
|
3,402
|
|
|
12,292
|
|
||
Unbilled
|
392,122
|
|
|
318,431
|
|
||
Other
|
4,477
|
|
|
3,258
|
|
||
|
400,001
|
|
|
333,981
|
|
||
|
|
|
|
||||
Prepaid insurance
|
13,755
|
|
|
10,782
|
|
||
Other current assets
|
24,274
|
|
|
26,991
|
|
||
Income taxes receivable
|
—
|
|
|
9,824
|
|
||
Total current assets
|
846,162
|
|
|
778,935
|
|
||
|
|
|
|
||||
Noncurrent assets:
|
|
|
|
|
|
||
Property and equipment, net of accumulated depreciation
|
100,681
|
|
|
95,659
|
|
||
Other assets:
|
|
|
|
||||
Prepaid health insurance
|
9,000
|
|
|
9,000
|
|
||
Deposits – health insurance
|
5,300
|
|
|
5,300
|
|
||
Deposits – workers’ compensation
|
152,268
|
|
|
154,215
|
|
||
Goodwill and other intangible assets, net
|
12,729
|
|
|
12,762
|
|
||
Deferred income taxes, net
|
4,874
|
|
|
4,283
|
|
||
Other assets
|
5,663
|
|
|
3,541
|
|
||
Total other assets
|
189,834
|
|
|
189,101
|
|
||
Total noncurrent assets
|
290,515
|
|
|
284,760
|
|
||
|
|
|
|
||||
Total assets
|
$
|
1,136,677
|
|
|
$
|
1,063,695
|
|
Insperity | 2018 Third Quarter Form 10-Q
|
3
|
FINANCIAL STATEMENTS
(Unaudited)
|
(in thousands)
|
September 30, 2018
|
|
|
December 31, 2017
|
|
||
|
|
|
|
||||
Liabilities and stockholders’ equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
5,316
|
|
|
$
|
6,447
|
|
Payroll taxes and other payroll deductions payable
|
204,086
|
|
|
303,247
|
|
||
Accrued worksite employee payroll cost
|
340,115
|
|
|
267,402
|
|
||
Accrued health insurance costs
|
33,458
|
|
|
26,075
|
|
||
Accrued workers’ compensation costs
|
45,773
|
|
|
42,974
|
|
||
Accrued corporate payroll and commissions
|
43,849
|
|
|
52,595
|
|
||
Other accrued liabilities
|
24,600
|
|
|
27,741
|
|
||
Income taxes payable
|
61
|
|
|
—
|
|
||
Total current liabilities
|
697,258
|
|
|
726,481
|
|
||
|
|
|
|
||||
Noncurrent liabilities:
|
|
|
|
|
|||
Accrued workers’ compensation costs
|
183,099
|
|
|
166,493
|
|
||
Long-term debt
|
104,400
|
|
|
104,400
|
|
||
Total noncurrent liabilities
|
287,499
|
|
|
270,893
|
|
||
|
|
|
|
||||
Commitments and contingencies
|
|
|
|
|
|
||
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
|
|
||
Common stock
|
555
|
|
|
555
|
|
||
Additional paid-in capital
|
32,047
|
|
|
25,337
|
|
||
Treasury stock, at cost
|
(262,187
|
)
|
|
(256,363
|
)
|
||
Retained earnings
|
381,505
|
|
|
296,792
|
|
||
Total stockholders’ equity
|
151,920
|
|
|
66,321
|
|
||
|
|
|
|
||||
Total liabilities and stockholders’ equity
|
$
|
1,136,677
|
|
|
$
|
1,063,695
|
|
Insperity | 2018 Third Quarter Form 10-Q
|
4
|
FINANCIAL STATEMENTS
(Unaudited)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30, |
||||||||||
(in thousands, except per share amounts)
|
2018
|
2017
|
|
2018
|
2017
|
||||||||
|
|
|
|
|
|
||||||||
Revenues
(1)
|
$
|
925,126
|
|
$
|
795,513
|
|
|
$
|
2,861,793
|
|
$
|
2,473,729
|
|
Payroll taxes, benefits and workers’ compensation costs
|
759,072
|
|
655,547
|
|
|
2,341,475
|
|
2,043,864
|
|
||||
Gross profit
|
166,054
|
|
139,966
|
|
|
520,318
|
|
429,865
|
|
||||
Salaries, wages and payroll taxes
|
70,552
|
|
65,223
|
|
|
226,486
|
|
189,138
|
|
||||
Stock-based compensation
|
5,769
|
|
6,584
|
|
|
14,656
|
|
16,390
|
|
||||
Commissions
|
6,818
|
|
5,675
|
|
|
19,863
|
|
15,815
|
|
||||
Advertising
|
3,846
|
|
3,476
|
|
|
13,996
|
|
13,623
|
|
||||
General and administrative expenses
|
25,294
|
|
24,513
|
|
|
82,565
|
|
75,315
|
|
||||
Depreciation and amortization
|
5,642
|
|
4,696
|
|
|
16,335
|
|
13,355
|
|
||||
Total operating expenses
|
117,921
|
|
110,167
|
|
|
373,901
|
|
323,636
|
|
||||
Operating income
|
48,133
|
|
29,799
|
|
|
146,417
|
|
106,229
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
||||
Interest income
|
2,028
|
|
1,015
|
|
|
5,291
|
|
2,158
|
|
||||
Interest expense
|
(1,174
|
)
|
(894
|
)
|
|
(3,352
|
)
|
(2,320
|
)
|
||||
Income before income tax expense
|
48,987
|
|
29,920
|
|
|
148,356
|
|
106,067
|
|
||||
Income tax expense
|
12,780
|
|
10,718
|
|
|
37,598
|
|
37,219
|
|
||||
Net income
|
$
|
36,207
|
|
$
|
19,202
|
|
|
$
|
110,758
|
|
$
|
68,848
|
|
Less distributed and undistributed earnings allocated to participating securities
|
(503
|
)
|
(337
|
)
|
|
(1,546
|
)
|
(1,233
|
)
|
||||
Net income allocated to common shares
|
$
|
35,704
|
|
$
|
18,865
|
|
|
$
|
109,212
|
|
$
|
67,615
|
|
|
|
|
|
|
|
||||||||
Net income per share of common stock
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.86
|
|
$
|
0.46
|
|
|
$
|
2.64
|
|
$
|
1.65
|
|
Diluted
|
$
|
0.86
|
|
$
|
0.46
|
|
|
$
|
2.63
|
|
$
|
1.64
|
|
(1)
|
Revenues are comprised of gross billings less worksite employee (“WSEE”) payroll costs as follows:
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
(in thousands)
|
2018
|
2017
|
|
2018
|
2017
|
||||||||
|
|
|
|
|
|
||||||||
Gross billings
|
$
|
5,810,779
|
|
$
|
4,898,333
|
|
|
$
|
17,284,477
|
|
$
|
14,655,545
|
|
Less: WSEE payroll cost
|
4,885,653
|
|
4,102,820
|
|
|
14,422,684
|
|
12,181,816
|
|
||||
Revenues
|
$
|
925,126
|
|
$
|
795,513
|
|
|
$
|
2,861,793
|
|
$
|
2,473,729
|
|
Insperity | 2018 Third Quarter Form 10-Q
|
5
|
FINANCIAL STATEMENTS
(Unaudited)
|
|
Nine Months Ended September 30,
|
||||||
(in thousands)
|
2018
|
|
2017
|
||||
|
|
|
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net income
|
$
|
110,758
|
|
|
$
|
68,848
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
16,335
|
|
|
13,355
|
|
||
Stock-based compensation
|
14,656
|
|
|
16,390
|
|
||
Deferred income taxes
|
(591
|
)
|
|
5,820
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(66,020
|
)
|
|
(32,007
|
)
|
||
Prepaid insurance
|
(2,973
|
)
|
|
(3,937
|
)
|
||
Other current assets
|
2,717
|
|
|
266
|
|
||
Other assets
|
(1,760
|
)
|
|
(3,195
|
)
|
||
Accounts payable
|
(1,131
|
)
|
|
(1,119
|
)
|
||
Payroll taxes and other payroll deductions payable
|
(99,161
|
)
|
|
(62,310
|
)
|
||
Accrued worksite employee payroll expense
|
72,713
|
|
|
41,488
|
|
||
Accrued health insurance costs
|
7,383
|
|
|
8,183
|
|
||
Accrued workers’ compensation costs
|
19,405
|
|
|
20,180
|
|
||
Accrued corporate payroll, commissions and other accrued liabilities
|
(11,887
|
)
|
|
(7,639
|
)
|
||
Income taxes payable/receivable
|
9,885
|
|
|
4,071
|
|
||
Total adjustments
|
(40,429
|
)
|
|
(454
|
)
|
||
Net cash provided by operating activities
|
70,329
|
|
|
68,394
|
|
||
|
|
|
|
||||
Cash flows from investing activities
|
|
|
|
|
|
||
Marketable securities:
|
|
|
|
|
|
||
Purchases
|
(54,754
|
)
|
|
(1,337
|
)
|
||
Proceeds from dispositions
|
16,299
|
|
|
—
|
|
||
Proceeds from maturities
|
2,650
|
|
|
1,181
|
|
||
Property and equipment:
|
|
|
|
||||
Purchases
|
(21,519
|
)
|
|
(26,518
|
)
|
||
Net cash used in investing activities
|
(57,324
|
)
|
|
(26,674
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities
|
|
|
|
||||
Purchase of treasury stock
|
(16,236
|
)
|
|
(27,172
|
)
|
||
Dividends paid
|
(25,170
|
)
|
|
(17,831
|
)
|
||
Other
|
1,613
|
|
|
1,177
|
|
||
Net cash used in financing activities
|
(39,793
|
)
|
|
(43,826
|
)
|
||
Net decrease in cash, cash equivalents and restricted cash
|
(26,788
|
)
|
|
(2,106
|
)
|
||
Cash, cash equivalents and restricted cash beginning of period
|
549,612
|
|
|
472,609
|
|
||
Cash, cash equivalents and restricted cash end of period
|
$
|
522,824
|
|
|
$
|
470,503
|
|
Insperity | 2018 Third Quarter Form 10-Q
|
6
|
FINANCIAL STATEMENTS
(Unaudited)
|
|
Nine Months Ended September 30,
|
||||||
(in thousands)
|
2018
|
|
2017
|
||||
|
|
|
|
||||
Supplemental schedule of cash and cash equivalents and restricted cash
|
|
|
|
||||
Cash and cash equivalents
|
$
|
354,260
|
|
|
$
|
286,034
|
|
Restricted cash
|
41,137
|
|
|
42,637
|
|
||
Deposits – workers’ compensation
|
154,215
|
|
|
143,938
|
|
||
Cash, cash equivalents and restricted cash beginning of period
|
$
|
549,612
|
|
|
$
|
472,609
|
|
|
|
|
|
||||
Cash and cash equivalents
|
$
|
328,299
|
|
|
$
|
285,934
|
|
Restricted cash
|
42,257
|
|
|
41,748
|
|
||
Deposits – workers’ compensation
|
152,268
|
|
|
142,821
|
|
||
Cash, cash equivalents and restricted cash end of period
|
$
|
522,824
|
|
|
$
|
470,503
|
|
Insperity | 2018 Third Quarter Form 10-Q
|
7
|
FINANCIAL STATEMENTS
(Unaudited)
|
|
Common Stock Issued
|
Additional Paid-In Capital
|
Treasury Stock
|
Retained Earnings and AOCI
|
Total
|
||||||||||||
(in thousands)
|
Shares
|
Amount
|
|||||||||||||||
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2017
|
55,489
|
|
$
|
555
|
|
$
|
25,337
|
|
$
|
(256,363
|
)
|
$
|
296,792
|
|
$
|
66,321
|
|
Purchase of treasury stock, at cost
|
—
|
|
—
|
|
—
|
|
(16,236
|
)
|
—
|
|
(16,236
|
)
|
|||||
Issuance of long-term incentive awards and dividend equivalents
|
—
|
|
—
|
|
(5,764
|
)
|
6,619
|
|
(855
|
)
|
—
|
|
|||||
Stock-based compensation expense
|
—
|
|
—
|
|
11,293
|
|
3,363
|
|
—
|
|
14,656
|
|
|||||
Other
|
—
|
|
—
|
|
1,181
|
|
430
|
|
—
|
|
1,611
|
|
|||||
Dividends paid
|
—
|
|
—
|
|
—
|
|
—
|
|
(25,170
|
)
|
(25,170
|
)
|
|||||
Unrealized loss on marketable securities, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
(20
|
)
|
(20
|
)
|
|||||
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
110,758
|
|
110,758
|
|
|||||
Balance at September 30, 2018
|
55,489
|
|
$
|
555
|
|
$
|
32,047
|
|
$
|
(262,187
|
)
|
$
|
381,505
|
|
$
|
151,920
|
|
Insperity | 2018 Third Quarter Form 10-Q
|
8
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
1.
|
Basis of Presentation
|
2.
|
Accounting Policies
|
Insperity | 2018 Third Quarter Form 10-Q
|
9
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
Insperity | 2018 Third Quarter Form 10-Q
|
10
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
Nine Months Ended September 30,
|
||||||
(in thousands)
|
2018
|
|
2017
|
||||
|
|
|
|
||||
Beginning balance, January 1,
|
$
|
207,630
|
|
|
$
|
183,928
|
|
Accrued claims
|
54,744
|
|
|
52,133
|
|
||
Present value discount
|
(5,372
|
)
|
|
(3,048
|
)
|
||
Paid claims
|
(31,645
|
)
|
|
(29,574
|
)
|
||
Ending balance
|
$
|
225,357
|
|
|
$
|
203,439
|
|
|
|
|
|
||||
Current portion of accrued claims
|
$
|
42,258
|
|
|
$
|
41,748
|
|
Long-term portion of accrued claims
|
183,099
|
|
|
161,691
|
|
||
Total accrued claims
|
$
|
225,357
|
|
|
$
|
203,439
|
|
Insperity | 2018 Third Quarter Form 10-Q
|
11
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||
(in thousands)
|
2018
|
2017
|
% Change
|
|
2018
|
2017
|
% Change
|
||||||||||
|
|
|
|
|
|
|
|
||||||||||
Northeast
|
$
|
237,076
|
|
$
|
204,318
|
|
16.0
|
%
|
|
$
|
748,717
|
|
$
|
644,703
|
|
16.1
|
%
|
Southeast
|
109,552
|
|
92,646
|
|
18.2
|
%
|
|
333,004
|
|
283,501
|
|
17.5
|
%
|
||||
Central
|
155,184
|
|
131,978
|
|
17.6
|
%
|
|
476,277
|
|
405,854
|
|
17.4
|
%
|
||||
Southwest
|
217,946
|
|
184,572
|
|
18.1
|
%
|
|
664,731
|
|
573,773
|
|
15.9
|
%
|
||||
West
|
192,011
|
|
169,321
|
|
13.4
|
%
|
|
599,617
|
|
527,217
|
|
13.7
|
%
|
||||
|
911,769
|
|
782,835
|
|
16.5
|
%
|
|
2,822,346
|
|
2,435,048
|
|
15.9
|
%
|
||||
Other revenue
|
13,357
|
|
12,678
|
|
5.4
|
%
|
|
39,447
|
|
38,681
|
|
2.0
|
%
|
||||
Total revenue
|
$
|
925,126
|
|
$
|
795,513
|
|
16.3
|
%
|
|
$
|
2,861,793
|
|
$
|
2,473,729
|
|
15.7
|
%
|
Insperity | 2018 Third Quarter Form 10-Q
|
12
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
3.
|
Cash, Cash Equivalents and Marketable Securities
|
|
September 30, 2018
|
|
December 31, 2017
|
||||||||||||||||
(in thousands)
|
Cash & Cash Equivalents
|
Marketable Securities
|
Total
|
|
Cash & Cash Equivalents
|
Marketable Securities
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
Overnight holdings
|
$
|
270,172
|
|
$
|
—
|
|
$
|
270,172
|
|
|
$
|
338,112
|
|
$
|
—
|
|
$
|
338,112
|
|
Investments holdings
|
43,989
|
|
37,576
|
|
81,565
|
|
|
22,634
|
|
1,960
|
|
24,594
|
|
||||||
Cash in demand accounts
|
29,585
|
|
—
|
|
29,585
|
|
|
26,700
|
|
—
|
|
26,700
|
|
||||||
Outstanding checks
|
(15,447
|
)
|
—
|
|
(15,447
|
)
|
|
(33,186
|
)
|
—
|
|
(33,186
|
)
|
||||||
Total
|
$
|
328,299
|
|
$
|
37,576
|
|
$
|
365,875
|
|
|
$
|
354,260
|
|
$
|
1,960
|
|
$
|
356,220
|
|
4.
|
Fair Value Measurements
|
•
|
Level 1 - quoted prices in active markets using identical assets
|
•
|
Level 2 - significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs
|
•
|
Level 3 - significant unobservable inputs
|
|
September 30, 2018
|
|
December 31, 2017
|
||||||||||||||||
(in thousands)
|
Total
|
Level 1
|
Level 2
|
|
Total
|
Level 1
|
Level 2
|
||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
Money market funds
|
$
|
314,161
|
|
$
|
314,161
|
|
$
|
—
|
|
|
$
|
360,746
|
|
$
|
360,746
|
|
$
|
—
|
|
U.S. Treasury bills
|
20,867
|
|
—
|
|
20,867
|
|
|
—
|
|
—
|
|
—
|
|
||||||
Municipal bonds
|
16,709
|
|
—
|
|
16,709
|
|
|
1,960
|
|
—
|
|
1,960
|
|
||||||
Total
|
$
|
351,737
|
|
$
|
314,161
|
|
$
|
37,576
|
|
|
$
|
362,706
|
|
$
|
360,746
|
|
$
|
1,960
|
|
Insperity | 2018 Third Quarter Form 10-Q
|
13
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
(in thousands)
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Estimated Fair Value
|
||||||||
|
|
|
|
|
||||||||
September 30, 2018
|
|
|
|
|
||||||||
U.S. Treasury bills
|
$
|
20,869
|
|
$
|
—
|
|
$
|
(2
|
)
|
$
|
20,867
|
|
Municipal bonds
|
16,732
|
|
—
|
|
(23
|
)
|
16,709
|
|
||||
Total
|
$
|
37,601
|
|
$
|
—
|
|
$
|
(25
|
)
|
$
|
37,576
|
|
|
|
|
|
|
||||||||
December 31, 2017
|
|
|
|
|
||||||||
U.S. Treasury bills
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Municipal bonds
|
1,965
|
|
—
|
|
(5
|
)
|
1,960
|
|
||||
Total
|
$
|
1,965
|
|
$
|
—
|
|
$
|
(5
|
)
|
$
|
1,960
|
|
(in thousands)
|
Amortized Cost
|
Estimated Fair Value
|
||||
|
|
|
||||
Less than one year
|
$
|
37,601
|
|
$
|
37,576
|
|
One to five years
|
—
|
|
—
|
|
||
Total
|
$
|
37,601
|
|
$
|
37,576
|
|
5.
|
Long-Term Debt
|
Insperity | 2018 Third Quarter Form 10-Q
|
14
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
6.
|
Stockholders' Equity
|
(amounts per share)
|
2018
|
|
|
2017
|
|
||
|
|
|
|
||||
First quarter
|
$
|
0.20
|
|
|
$
|
0.125
|
|
Second quarter
|
0.20
|
|
|
0.150
|
|
||
Third quarter
|
0.20
|
|
|
0.150
|
|
7.
|
Net Income Per Share
|
Insperity | 2018 Third Quarter Form 10-Q
|
15
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||
(in thousands)
|
2018
|
2017
|
|
2018
|
2017
|
||||||||
|
|
|
|
|
|
||||||||
Net income
|
$
|
36,207
|
|
$
|
19,202
|
|
|
$
|
110,758
|
|
$
|
68,848
|
|
Less distributed and undistributed earnings allocated to participating securities
|
(503
|
)
|
(337
|
)
|
|
(1,546
|
)
|
(1,233
|
)
|
||||
Net income allocated to common shares
|
$
|
35,704
|
|
$
|
18,865
|
|
|
$
|
109,212
|
|
$
|
67,615
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding
|
41,330
|
|
40,946
|
|
|
41,311
|
|
41,110
|
|
||||
Incremental shares from assumed LTIP awards and conversions of common stock options
|
218
|
|
296
|
|
|
283
|
|
238
|
|
||||
Adjusted weighted average common shares outstanding
|
41,548
|
|
41,242
|
|
|
41,594
|
|
41,348
|
|
8.
|
Commitments and Contingencies
|
Insperity | 2018 Third Quarter Form 10-Q
|
16
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Average number of WSEEs
paid per month increased
15.2%
to
215,051
, driving an
18.6%
gross profit increase
|
•
|
Net income
and diluted earnings per share (“diluted
EPS”)
increased
88.6%
and
87.0%
, to
$36.2 million
and
$0.86
, respectively
|
•
|
Adjusted EBITDA
increased
42.8%
to
$61.6 million
|
•
|
Adjusted EPS
increased
68.4%
to
$0.96
|
•
|
Average number of WSEEs
paid per month increased
13.6%
to
204,895
, driving a
21.0%
gross profit increase
|
•
|
Net income
and diluted
EPS
increased
60.9%
and
60.4%
, to
$110.8 million
and
$2.63
, respectively
|
•
|
Adjusted EBITDA
increased
38.0%
to
$192.0 million
|
•
|
Adjusted EPS
increased
61.1%
to
$3.06
|
Insperity | 2018 Third Quarter Form 10-Q
|
17
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
(in thousands, except per share and WSEE data)
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||
2018
|
2017
|
% Change
|
|
2018
|
2017
|
% Change
|
|||||||||||
|
|
|
|
|
|
|
|
||||||||||
Financial data:
|
|
|
|
|
|
|
|
||||||||||
Revenues
|
$
|
925,126
|
|
$
|
795,513
|
|
16.3
|
%
|
|
$
|
2,861,793
|
|
$
|
2,473,729
|
|
15.7
|
%
|
Gross profit
|
166,054
|
|
139,966
|
|
18.6
|
%
|
|
520,318
|
|
429,865
|
|
21.0
|
%
|
||||
Operating expenses
|
117,921
|
|
110,167
|
|
7.0
|
%
|
|
373,901
|
|
323,636
|
|
15.5
|
%
|
||||
Operating income
|
48,133
|
|
29,799
|
|
61.5
|
%
|
|
146,417
|
|
106,229
|
|
37.8
|
%
|
||||
Other income (expense)
|
854
|
|
121
|
|
—
|
|
|
1,939
|
|
(162
|
)
|
—
|
|
||||
Net income
|
36,207
|
|
19,202
|
|
88.6
|
%
|
|
110,758
|
|
68,848
|
|
60.9
|
%
|
||||
Diluted EPS
(1)
|
0.86
|
|
0.46
|
|
87.0
|
%
|
|
2.63
|
|
1.64
|
|
60.4
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||||
Non-GAAP financial measures
(2)
:
|
|
|
|
|
|
|
|||||||||||
Adjusted net income
|
$
|
40,471
|
|
$
|
24,081
|
|
68.1
|
%
|
|
$
|
128,698
|
|
$
|
79,994
|
|
60.9
|
%
|
Adjusted EBITDA
|
61,572
|
|
43,112
|
|
42.8
|
%
|
|
192,005
|
|
139,150
|
|
38.0
|
%
|
||||
Adjusted EPS
|
0.96
|
|
0.57
|
|
68.4
|
%
|
|
3.06
|
|
1.90
|
|
61.1
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||||
Average WSEE
|
215,051
|
|
186,641
|
|
15.2
|
%
|
|
204,895
|
|
180,424
|
|
13.6
|
%
|
||||
Statistical data (per WSEE per month):
|
|
|
|
|
|
|
|||||||||||
Revenues
(3)
|
$
|
1,434
|
|
$
|
1,421
|
|
0.9
|
%
|
|
$
|
1,552
|
|
$
|
1,523
|
|
1.9
|
%
|
Gross profit
|
257
|
|
250
|
|
2.8
|
%
|
|
282
|
|
265
|
|
6.4
|
%
|
||||
Operating expenses
|
183
|
|
197
|
|
(7.1
|
)%
|
|
203
|
|
199
|
|
2.0
|
%
|
||||
Operating income
|
75
|
|
53
|
|
41.5
|
%
|
|
79
|
|
65
|
|
21.5
|
%
|
||||
Net income
|
56
|
|
34
|
|
64.7
|
%
|
|
60
|
|
42
|
|
42.9
|
%
|
(1)
|
Amounts in 2017 adjusted to reflect the two-for-one split of our common stock effected on December 18, 2017 in the form of a stock dividend.
|
(2)
|
Please read “Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP.
|
(3)
|
Revenues per WSEE per month are comprised of gross billings per WSEE per month less WSEE payroll costs per WSEE per month as follows:
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
(per WSEE per month)
|
2018
|
2017
|
|
2018
|
2017
|
||||||||
Gross billings
|
$
|
9,007
|
|
$
|
8,748
|
|
|
$
|
9,373
|
|
$
|
9,025
|
|
Less: WSEE payroll cost
|
7,573
|
|
7,327
|
|
|
7,821
|
|
7,502
|
|
||||
Revenues
|
$
|
1,434
|
|
$
|
1,421
|
|
|
$
|
1,552
|
|
$
|
1,523
|
|
Insperity | 2018 Third Quarter Form 10-Q
|
18
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
WSEE
|
•
|
Adjusted EBITDA
|
•
|
Adjusted EPS
|
•
|
During the
third
quarter of
2018
(“
Q3 2018
”), the number of WSEEs paid from new client sales increased 57.5% over the
third
quarter of
2017
(“
Q3 2017
”) on a
16.5%
increase in the average number of Business Performance Advisors (“BPAs”). In addition, the net change in existing clients and client retention improved as compared to
Q3 2017
.
|
•
|
During the first
nine
months of
2018
(“
YTD 2018
”), the number of WSEEs paid from new client sales and the net change in existing clients improved as compared to the first
nine
months of
2017
(“
YTD 2017
”), while client retention remained consistent with
YTD 2017
.
|
Insperity | 2018 Third Quarter Form 10-Q
|
19
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
(1)
|
Amounts in 2017 adjusted to reflect the two-for-one split of our common stock effected on December 18, 2017 in the form of a stock dividend.
|
Insperity | 2018 Third Quarter Form 10-Q
|
20
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Average WSEEs paid
increased
15.2%
|
•
|
Revenues per WSEE
per month increased
0.9%
, or
$13
|
•
|
Average WSEEs paid
increased
13.6%
|
•
|
Revenues per WSEE
per month increased
1.9%
, or
$29
|
Insperity | 2018 Third Quarter Form 10-Q
|
21
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Insperity | 2018 Third Quarter Form 10-Q
|
22
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Th
e cost of group health insurance and related employee benefits
decreased
$2
per WSEE per month, but
increased
1.7%
on a cost per covered employee basis.
|
•
|
The percentage of WSEEs covered under our health insurance plans was
66.7%
in
Q3 2018
compared to
68.1%
in
Q3 2017
.
|
•
|
Changes in estimated claims run-off related to prior periods was
a reduction
of
$0.7 million
, or
$1
per WSEE per month, in
Q3 2018
compared to
a reduction
of
$5.0 million
, or
$9
per WSEE per month, in
Q3 2017
.
|
Insperity | 2018 Third Quarter Form 10-Q
|
23
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Workers’ compensation costs
increased
20.9%
, or
$2
on a per WSEE per month basis, in
Q3 2018
compared to
Q3 2017
, on a
17.4%
increase
in non-bonus payroll costs.
|
•
|
As a percentage of non-bonus payroll cost, workers’ compensation costs in
Q3 2018
were
0.55%
compared to
0.53%
in
Q3 2017
.
|
•
|
As a result of closing out claims at lower than expected costs, we recorded
a reduction
in workers’ compensation costs of
$2.4 million
, or
0.05%
of non-bonus payroll costs, in
Q3 2018
compared to
a reduction
of
$2.9 million
, or
0.08%
of non-bonus payroll costs, in
Q3 2017
.
|
•
|
Payroll taxes
increased
16.8%
, or
$6
per WSEE per month, primarily due to a
19.1%
increase
in payroll costs.
|
•
|
Payroll taxes as a percentage of payroll costs were
6.2%
in
Q3 2018
compared to
6.3%
in
Q3 2017
.
|
•
|
Th
e cost of group health insurance and related employee benefits
increased
$2
per WSEE per month, or
1.1%
on a cost per covered employee basis.
|
•
|
The percentage of WSEEs covered under our health insurance plans was
68.3%
in
YTD 2018
compared to
68.8%
in
YTD 2017
.
|
•
|
Changes in estimated claims run-off related to prior periods was
a reduction
of
$1.3 million
, or
$1
per WSEE per month, in
YTD 2018
compared to
an increase
of
$1.0 million
in
YTD 2017
.
|
•
|
Workers’ compensation costs
increased
6.6%
, but
decreased
$2
on a per WSEE per month basis, in
YTD 2018
compared to YTD 2017, on a
16.8%
increase
in non-bonus payroll costs.
|
•
|
As a percentage of non-bonus payroll cost, workers’ compensation costs were
0.51%
in
YTD 2018
compared to
0.56%
in
YTD 2017
.
|
Insperity | 2018 Third Quarter Form 10-Q
|
24
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
As a result of closing out claims at lower than expected costs, we recorded
a reduction
in workers’ compensation costs of
$13.4 million
, or
0.10%
of non-bonus payroll costs, in
YTD 2018
compared to
a reduction
of
$11.0 million
, or
0.10%
of non-bonus payroll costs, in
YTD 2017
.
|
•
|
Payroll taxes
increased
15.8%
,or
$11
per WSEE per month, due primarily to an
18.4%
increase
in payroll costs.
|
•
|
Payroll taxes as a percentage of payroll costs were
7.1%
in
YTD 2018
compared to
7.3%
in
YTD 2017
.
|
•
|
Salaries, wages and payroll taxes
— Salaries, wages and payroll taxes (“Salaries”) are primarily a function of the number of corporate employees, their associated average pay and any additional incentive compensation.
|
•
|
Stock-based compensation
— Our stock-based compensation relates to the recognition of non-cash compensation expense over the vesting period of restricted stock and long-term incentive plan awards.
|
•
|
Commissions
— Commissions expense consists primarily of channel referral fees and amounts paid to sales managers and BPAs. Commissions are based on new accounts sold and a percentage of revenue generated by such personnel.
|
•
|
Advertising
— Advertising expense primarily consists of media advertising and other business promotions in our current and anticipated sales markets.
|
•
|
General and administrative expenses
— Our general and administrative expenses primarily include:
|
•
|
rent expenses related to our service centers and sales offices
|
•
|
outside professional service fees related to legal, consulting and accounting services
|
•
|
administrative costs, such as postage, printing and supplies
|
•
|
employee travel and training expenses
|
•
|
technology and facility repairs and maintenance costs
|
•
|
Depreciation and amortization
— Depreciation and amortization expense is primarily a function of our capital investments in corporate facilities, service centers, sales offices, technology infrastructure and expenses associated with our acquisitions.
|
Insperity | 2018 Third Quarter Form 10-Q
|
25
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Three Months Ended September 30,
|
||||||||||||||||
|
$
|
|
WSEE
|
||||||||||||||
(in thousands, except per WSEE)
|
2018
|
2017
|
% Change
|
|
2018
|
2017
|
% Change
|
||||||||||
|
|
|
|
|
|
|
|
||||||||||
Salaries
|
$
|
70,552
|
|
$
|
65,223
|
|
8.2
|
%
|
|
$
|
109
|
|
$
|
116
|
|
(6.0
|
)%
|
Stock-based compensation
|
5,769
|
|
6,584
|
|
(12.4
|
)%
|
|
9
|
|
12
|
|
(25.0
|
)%
|
||||
Commissions
|
6,818
|
|
5,675
|
|
20.1
|
%
|
|
11
|
|
10
|
|
10.0
|
%
|
||||
Advertising
|
3,846
|
|
3,476
|
|
10.6
|
%
|
|
6
|
|
6
|
|
—
|
|
||||
General and administrative
|
25,294
|
|
24,513
|
|
3.2
|
%
|
|
39
|
|
44
|
|
(11.4
|
)%
|
||||
Depreciation and amortization
|
5,642
|
|
4,696
|
|
20.1
|
%
|
|
9
|
|
9
|
|
—
|
|
||||
Total operating expenses
|
$
|
117,921
|
|
$
|
110,167
|
|
7.0
|
%
|
|
$
|
183
|
|
$
|
197
|
|
(7.1
|
)%
|
•
|
Salaries
of corporate and sales staff for
Q3 2018
increased
8.2%
to
$70.6 million
, but
decreased
$7
on a per WSEE per month basis, compared to
Q3 2017
. This increase was primarily due to an
11.1%
increase
in corporate headcount, which includes a
16.5%
increase in the number of BPAs.
|
•
|
Stock based compensation expense for
Q3 2018
decreased
12.4%
to
$5.8 million
, or
$3
per WSEE per month compared to
Q3 2017
. The decrease was primarily due to performance adjustments made in 2017 related to our long-term incentive awards.
|
•
|
Commissions expense for
Q3 2018
increased
20.1%
to
$6.8 million
, or
$1
per WSEE per month, compared to
Q3 2017
. The increase was primarily due to commissions associated with growth in our PEO HR Outsourcing solutions, including an increase in the amount of sales channel referral fees paid during 2018.
|
•
|
General and administrative
expenses for
Q3 2018
increased
3.2%
to
$25.3 million
, but
decreased
$5
on a per WSEE per month basis, compared to
Q3 2017
. The increase was primarily due to increased travel and training expenses associated with the increase in BPAs, rent, office expenses and maintenance costs, partially offset by the non-recurrence of charitable contributions made in 2017 related to Hurricane Harvey relief efforts.
|
•
|
Depreciation and amortization expense for
Q3 2018
increased
20.1%
to
$5.6 million
, but remained flat on a per WSEE per month basis, compared to
Q3 2017
. The increase was primarily due to increased capital expenditures related to software development costs.
|
|
Nine Months Ended September 30,
|
||||||||||||||||
|
$
|
|
WSEE
|
||||||||||||||
(in thousands, except per WSEE)
|
2018
|
2017
|
% Change
|
|
2018
|
2017
|
% Change
|
||||||||||
|
|
|
|
|
|
|
|
||||||||||
Salaries
|
$
|
226,486
|
|
$
|
189,138
|
|
19.7
|
%
|
|
$
|
123
|
|
$
|
116
|
|
6.0
|
%
|
Stock-based compensation
|
14,656
|
|
16,390
|
|
(10.6
|
)%
|
|
8
|
|
10
|
|
(20.0
|
)%
|
||||
Commissions
|
19,863
|
|
15,815
|
|
25.6
|
%
|
|
11
|
|
10
|
|
10.0
|
%
|
||||
Advertising
|
13,996
|
|
13,623
|
|
2.7
|
%
|
|
8
|
|
8
|
|
—
|
|
||||
General and administrative
|
82,565
|
|
75,315
|
|
9.6
|
%
|
|
44
|
|
46
|
|
(4.3
|
)%
|
||||
Depreciation and amortization
|
16,335
|
|
13,355
|
|
22.3
|
%
|
|
9
|
|
9
|
|
—
|
|
||||
Total operating expenses
|
$
|
373,901
|
|
$
|
323,636
|
|
15.5
|
%
|
|
$
|
203
|
|
$
|
199
|
|
2.0
|
%
|
Insperity | 2018 Third Quarter Form 10-Q
|
26
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Salaries
of corporate and sales staff for
YTD 2018
increased
19.7%
to
$226.5 million
, or
$7
per WSEE per month, compared to
YTD 2017
. This increase was primarily due to a $9.3 million charge related to a one-time tax reform bonus paid to corporate employees, a
10.8%
increase in corporate headcount, which includes a
17.6%
increase in the number of BPAs, and additional incentive compensation expense as a result of strong operating results.
|
•
|
Stock-based compensation for
YTD 2018
decreased
10.6%
to
$14.7 million
, or
$2
per WSEE per month, compared to
YTD 2017
. This decrease was primarily due to the acceleration of restricted stock awards and associated expense in the fourth quarter of 2017 that were originally scheduled to vest in the first quarter of 2018.
|
•
|
Commissions expense for
YTD 2018
increased
25.6%
to
$19.9 million
, or
$1
per WSEE per month, compared to
YTD 2017
. The increase was primarily due to commissions associated with growth in our PEO HR Outsourcing solutions, including an increase in the amount of sales channel referral fees paid during 2018.
|
•
|
General and administrative
expenses for
YTD 2018
increased
9.6%
to
$82.6 million
, but
decreased
$2
on a per WSEE per month basis, compared to
YTD 2017
. The increase was primarily due to increased travel and training expenses associated with the increase in BPAs, professional services, rent and office expenses partially offset by the non-recurrence of charitable contributions made in 2017 related to Hurricane Harvey relief efforts.
|
•
|
Depreciation and amortization expense for
YTD 2018
increased
22.3%
to
$16.3 million
, but remained flat on a per WSEE per month basis, compared to
YTD 2017
. The increase was primarily due to increased capital expenditures related to software development costs.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||
|
2018
|
2017
|
|
2018
|
2017
|
|
|
|
|
|
|
Effective income tax rate
|
26.1%
|
35.8%
|
|
25.3%
|
35.1%
|
Insperity | 2018 Third Quarter Form 10-Q
|
27
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Insperity | 2018 Third Quarter Form 10-Q
|
28
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||
(in thousands, except per WSEE per month)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||||||
$
|
WSEE
|
|
$
|
WSEE
|
|
$
|
WSEE
|
|
$
|
WSEE
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Payroll cost
|
$
|
4,885,653
|
|
$
|
7,573
|
|
|
$
|
4,102,820
|
|
$
|
7,327
|
|
|
$
|
14,422,684
|
|
$
|
7,821
|
|
|
$
|
12,181,816
|
|
$
|
7,502
|
|
Less: Bonus payroll cost
|
434,942
|
|
674
|
|
|
312,230
|
|
557
|
|
|
1,638,028
|
|
888
|
|
|
1,233,827
|
|
760
|
|
||||||||
Non-bonus payroll cost
|
$
|
4,450,711
|
|
$
|
6,899
|
|
|
$
|
3,790,590
|
|
$
|
6,770
|
|
|
$
|
12,784,656
|
|
$
|
6,933
|
|
|
$
|
10,947,989
|
|
$
|
6,742
|
|
% Change period over period
|
17.4
|
%
|
1.9
|
%
|
|
12.9
|
%
|
2.2
|
%
|
|
16.8
|
%
|
2.8
|
%
|
|
12.0
|
%
|
1.5
|
%
|
(in thousands)
|
September 30, 2018
|
|
|
December 31, 2017
|
|
||
|
|
|
|
||||
Cash, cash equivalents and marketable securities
|
$
|
365,875
|
|
|
$
|
356,220
|
|
Less:
|
|
|
|
||||
Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions
|
181,329
|
|
|
271,547
|
|
||
Client prepayments
|
18,043
|
|
|
23,603
|
|
||
Adjusted cash, cash equivalents and marketable securities
|
$
|
166,503
|
|
|
$
|
61,070
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||
(in thousands, except per WSEE per month)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||||||
$
|
WSEE
|
|
$
|
WSEE
|
|
$
|
WSEE
|
|
$
|
WSEE
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Operating expenses
|
$
|
117,921
|
|
$
|
183
|
|
|
$
|
110,167
|
|
$
|
197
|
|
|
$
|
373,901
|
|
$
|
203
|
|
|
$
|
323,636
|
|
$
|
199
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
One-time tax reform bonus
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
9,306
|
|
5
|
|
|
—
|
|
—
|
|
||||||||
Charitable donations to Hurricane Harvey relief efforts
|
—
|
|
—
|
|
|
1,218
|
|
2
|
|
|
—
|
|
—
|
|
|
1,218
|
|
1
|
|
||||||||
Adjusted operating expenses
|
$
|
117,921
|
|
$
|
183
|
|
|
$
|
108,949
|
|
$
|
195
|
|
|
$
|
364,595
|
|
$
|
198
|
|
|
$
|
322,418
|
|
$
|
198
|
|
% Change period over period
|
8.2
|
%
|
(6.2
|
)%
|
|
14.7
|
%
|
4.3
|
%
|
|
13.1
|
%
|
—
|
|
|
11.6
|
%
|
0.5
|
%
|
Insperity | 2018 Third Quarter Form 10-Q
|
29
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||
(in thousands, except per WSEE per month)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||||||
$
|
WSEE
|
|
$
|
WSEE
|
|
$
|
WSEE
|
|
$
|
WSEE
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net income
|
$
|
36,207
|
|
$
|
56
|
|
|
$
|
19,202
|
|
$
|
34
|
|
|
$
|
110,758
|
|
$
|
60
|
|
|
$
|
68,848
|
|
$
|
42
|
|
Income tax expense
|
12,780
|
|
20
|
|
|
10,718
|
|
19
|
|
|
37,598
|
|
20
|
|
|
37,219
|
|
23
|
|
||||||||
Interest expense
|
1,174
|
|
2
|
|
|
894
|
|
2
|
|
|
3,352
|
|
2
|
|
|
2,320
|
|
1
|
|
||||||||
Depreciation and amortization
|
5,642
|
|
8
|
|
|
4,696
|
|
8
|
|
|
16,335
|
|
9
|
|
|
13,355
|
|
9
|
|
||||||||
EBITDA
|
55,803
|
|
86
|
|
|
35,510
|
|
63
|
|
|
168,043
|
|
91
|
|
|
121,742
|
|
75
|
|
||||||||
Stock-based compensation
|
5,769
|
|
9
|
|
|
6,584
|
|
12
|
|
|
14,656
|
|
8
|
|
|
16,390
|
|
10
|
|
||||||||
Charitable donations to Hurricane Harvey relief efforts
|
—
|
|
—
|
|
|
1,218
|
|
2
|
|
|
—
|
|
—
|
|
|
1,218
|
|
1
|
|
||||||||
Other
|
—
|
|
—
|
|
|
(200
|
)
|
—
|
|
|
—
|
|
—
|
|
|
(200
|
)
|
—
|
|
||||||||
One-time tax reform bonus
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
9,306
|
|
5
|
|
|
—
|
|
—
|
|
||||||||
Adjusted EBITDA
|
$
|
61,572
|
|
$
|
95
|
|
|
$
|
43,112
|
|
$
|
77
|
|
|
$
|
192,005
|
|
$
|
104
|
|
|
$
|
139,150
|
|
$
|
86
|
|
% Change period over period
|
42.8
|
%
|
23.4
|
%
|
|
37.5
|
%
|
24.2
|
%
|
|
38.0
|
%
|
20.9
|
%
|
|
17.8
|
%
|
7.5
|
%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
(in thousands)
|
2018
|
2017
|
|
2018
|
2017
|
||||||||
|
|
|
|
|
|
||||||||
Net income
|
$
|
36,207
|
|
$
|
19,202
|
|
|
$
|
110,758
|
|
$
|
68,848
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
||||||||
Stock-based compensation
|
5,769
|
|
6,584
|
|
|
14,656
|
|
16,390
|
|
||||
Charitable donations to Hurricane Harvey relief efforts
|
—
|
|
1,218
|
|
|
—
|
|
1,218
|
|
||||
Other
|
—
|
|
(200
|
)
|
|
—
|
|
(200
|
)
|
||||
One-time tax reform bonus
|
—
|
|
—
|
|
|
9,306
|
|
—
|
|
||||
Total non-GAAP adjustments
|
5,769
|
|
7,602
|
|
|
23,962
|
|
17,408
|
|
||||
Tax effect
|
(1,505
|
)
|
(2,723
|
)
|
|
(6,022
|
)
|
(6,262
|
)
|
||||
Adjusted net income
|
$
|
40,471
|
|
$
|
24,081
|
|
|
$
|
128,698
|
|
$
|
79,994
|
|
% Change period over period
|
68.1
|
%
|
44.3
|
%
|
|
60.9
|
%
|
24.1
|
%
|
Insperity | 2018 Third Quarter Form 10-Q
|
30
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
(amounts per share)
|
2018
|
2017
|
|
2018
|
2017
|
||||||||
|
|
|
|
|
|
||||||||
Diluted EPS
|
$
|
0.86
|
|
$
|
0.46
|
|
|
$
|
2.63
|
|
$
|
1.64
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
||||||||
Stock-based compensation
|
0.14
|
|
0.16
|
|
|
0.35
|
|
0.39
|
|
||||
Charitable donations to Hurricane Harvey relief efforts
|
—
|
|
0.03
|
|
|
—
|
|
0.03
|
|
||||
Other
|
—
|
|
(0.01
|
)
|
|
—
|
|
(0.01
|
)
|
||||
One-time tax reform bonus
|
—
|
|
—
|
|
|
0.22
|
|
—
|
|
||||
Total non-GAAP adjustments
|
0.14
|
|
0.18
|
|
|
0.57
|
|
0.41
|
|
||||
Tax effect
|
(0.04
|
)
|
(0.07
|
)
|
|
(0.14
|
)
|
(0.15
|
)
|
||||
Adjusted EPS
|
$
|
0.96
|
|
$
|
0.57
|
|
|
$
|
3.06
|
|
$
|
1.90
|
|
% Change period over period
|
68.4
|
%
|
46.2
|
%
|
|
61.1
|
%
|
26.2
|
%
|
(1)
|
Amounts in 2017 adjusted to reflect the two-for-one split of our common stock effected on December 18, 2017 in the form of a stock dividend.
|
•
|
Timing of client payments / payroll levels
–
We typically collect our comprehensive service fee, along with the client’s payroll funding, from clients at least one day prior to the payment of WSEE payrolls and associated payroll taxes. Therefore, the last business day of a reporting period has a substantial impact on our reporting of operating cash flows. For example, many WSEEs are paid on Fridays; therefore, operating cash flows decrease in the reporting periods that end on a Friday or a Monday. In the period ended
September 30, 2018
,
|
Insperity | 2018 Third Quarter Form 10-Q
|
31
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Workers’ compensation plan funding
–
During YTD 2018 and YTD 2017, we received
$19.4 million
and
$22.7 million
, respectively, for the return of excess claim funds related to the workers’ compensation program, which resulted in an increase in working capital.
|
•
|
Medical plan funding
–
Our health care contract with United establishes participant cash funding rates
90
days in advance of the beginning of a reporting quarter. Therefore, changes in the participation level of the United plan have a direct impact on our operating cash flows. In addition, changes to the funding rates, which are solely determined by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows. As of
September 30, 2018
, premiums owed and cash funded to United have exceeded the costs of the United plan, resulting in an
$18.9 million
surplus,
$9.9 million
of which is reflected as a current asset, and
$9.0 million
of which is reflected as a long-term asset on our Consolidated Balance Sheets. The premiums, including an additional quarterly premium, owed to United at
September 30, 2018
, were
$28.5 million
, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets.
|
•
|
Operating results
– Our net income has a significant impact on our operating cash flows. Our adjusted net income
increased
60.9%
to
$128.7 million
in the first
nine months ended September 30, 2018
, compared to
$80.0 million
in the first
nine months ended September 30, 2017
, due to higher gross profit. Please read “Results of Operations
– First
Nine Months Ended September 30, 2018
Compared to First
Nine Months Ended September 30, 2017
.”
|
Insperity | 2018 Third Quarter Form 10-Q
|
32
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND CONTROLS AND PROCEDURES
|
Insperity | 2018 Third Quarter Form 10-Q
|
33
|
OTHER INFORMATION
|
•
|
adverse economic conditions;
|
•
|
regulatory and tax developments and possible adverse application of various federal, state and local regulations;
|
•
|
the ability to secure competitive replacement contracts for health insurance and workers’ compensation insurance at expiration of current contracts;
|
•
|
cancellation of client contracts on short notice, or the inability to renew client contracts or attract new clients;
|
•
|
vulnerability to regional economic factors because of our geographic market concentration;
|
•
|
increases in health insurance costs and workers’ compensation rates and underlying claims trends, health care reform, financial solvency of workers’ compensation carriers, other insurers or financial institutions, state unemployment tax rates, liabilities for employee and client actions or payroll-related claims;
|
•
|
failure to manage growth of our operations and the effectiveness of our sales and marketing efforts;
|
•
|
the impact of the competitive environment and other developments in the human resources services industry, including the PEO industry, on our growth and/or profitability;
|
•
|
our liability for worksite employee payroll, payroll taxes and benefits costs;
|
•
|
our liability for disclosure of sensitive or private information;
|
•
|
our ability to integrate or realize expected returns on our acquisitions;
|
•
|
failure of our information technology systems;
|
•
|
an adverse final judgment or settlement of claims against Insperity; and
|
•
|
disruptions to our business resulting from the actions of certain stockholders.
|
Insperity | 2018 Third Quarter Form 10-Q
|
34
|
OTHER INFORMATION
|
Period |
Total Number of Shares Purchased
(1)
|
Average Price Paid per Share
|
Total Number of Shares Purchased Under Announced Program
(2)
|
Maximum Number of Shares Available for Purchase under Announced Program
(2)
|
|||||
07/01/2018 – 07/31/2018
|
96
|
|
$
|
97.00
|
|
—
|
|
2,597,564
|
|
08/01/2018 – 08/31/2018
|
—
|
|
—
|
|
—
|
|
2,597,564
|
|
|
09/01/2018 – 09/30/2018
|
—
|
|
—
|
|
—
|
|
2,597,564
|
|
|
Total
|
96
|
|
$
|
97.00
|
|
—
|
|
|
(1)
|
During the three months ended
September 30, 2018
,
96
shares of stock were withheld to satisfy tax-withholding obligations arising in conjunction with the vesting of restricted stock awards. The required withholding is calculated using the closing sales price reported by the New York Stock Exchange on the date prior to the applicable vesting date. These shares are not subject to the repurchase program described above.
|
(2)
|
Our Board of Directors (the “Board”) has approved a program to repurchase shares of our outstanding common stock. As of
September 30, 2018
, we were authorized to repurchase an additional
2,597,564
shares under the program. Unless terminated earlier by resolution of the Board, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program.
|
Insperity | 2018 Third Quarter Form 10-Q
|
35
|
OTHER INFORMATION
|
Exhibit No
|
|
Exhibit
|
31.1
|
*
|
|
31.2
|
*
|
|
32.1
|
**
|
|
32.2
|
**
|
|
101.INS
|
*
|
XBRL Instance Document.
(1)
|
101.SCH
|
*
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
*
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
*
|
XBRL Extension Definition Linkbase Document.
|
101.LAB
|
*
|
XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE
|
*
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
____________________________________
|
|
|
|
*
|
Filed with this report.
|
|
|
|
|
|
|
**
|
Furnished with this report.
|
(1)
|
Attached as exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (1) the Consolidated Statements of Operations for the
three and nine
month periods ended
September 30, 2018
and
2017
; (2) the Consolidated Balance Sheets at
September 30, 2018
and
December 31, 2017
; (3) the Consolidated Statement of Stockholders’ Equity for the
nine
month period ended
September 30, 2018
; (4) the Consolidated Statements of Cash Flows for the
nine
month periods ended
September 30, 2018
and
2017
; and (5) Notes to the Consolidated Financial Statements.
|
Insperity | 2018 Third Quarter Form 10-Q
|
36
|
|
INSPERITY, INC.
|
|
|
|
|
Date: November 1, 2018
|
By:
|
/s/ Douglas S. Sharp
|
|
|
Douglas S. Sharp
|
|
|
Senior Vice President of Finance,
|
|
|
Chief Financial Officer and Treasurer
|
|
|
(Principal Financial Officer)
|
Insperity | 2018 Third Quarter Form 10-Q
|
37
|
1 Year Insperity Chart |
1 Month Insperity Chart |
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