Document
false0001000753 0001000753 2020-05-04 2020-05-04







UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): May 4, 2020

Insperity, Inc.
(Exact name of registrant as specified in its charter)

Delaware
 
1-13998
 
76-0479645
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)

19001 Crescent Springs Drive
Kingwood, Texas 77339
(Address of principal executive offices and zip code)


Registrant’s telephone number, including area code: (281) 358-8986

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Ticker symbol(s)
Name of each exchange on which registered
Common Stock, $.01 par value per share
NSP
New York Stock Exchange

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under The Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under The Exchange Act (17 CFR 240.13e-4(c))






Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.





Item 2.02. Results of Operations and Financial Condition

On May 4, 2020, Insperity, Inc. issued a press release announcing the Company’s financial and operating results for the quarter ended March 31, 2020. A copy of the press release is furnished as Exhibit 99.1 hereto and incorporated by reference.

Item 9.01. Financial Statements and Exhibits

(d)
Exhibits

99.1








SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

INSPERITY, INC.



By:     /s/ Daniel D. Herink     
Daniel D. Herink
Senior Vice President of Legal, General Counsel and Secretary


Date: May 4, 2020



Exhibit

Exhibit 99.1

Insperity Announces First Quarter Results
HOUSTON – May 4, 2020 – Insperity, Inc. (NYSE: NSP), a leading provider of human resources and business performance solutions for America’s best businesses, today reported results for the first quarter ended Mar. 31, 2020:
Q1 revenue increased 7% on worksite employee growth of 5.5%
Q1 diluted EPS and adjusted EPS of $1.58 and $1.70, respectively
Q1 net income and adjusted EBITDA of $62 million and $101 million, respectively
First Quarter Results
Revenues increased 7% over the first quarter of 2019 to $1.23 billion on a 5.5% increase in the average number of worksite employees (“WSEEs”) paid per month. This quarter’s growth reflected a higher than expected level of WSEEs paid from new sales coming off of the successful extension of our fall sales campaign, offset by lower growth in our client base.
“We are pleased with our solid first quarter results, but more importantly, our company-wide response to the COVID-19 pandemic in support of our small to medium size business clients. Small businesses, their employees and families have been deeply affected in every stage of this ongoing health and economic crisis. The Insperity mission of helping small businesses has never been more critical. We have and will continue to stand shoulder-to-shoulder helping businesses navigate these challenges and lead the recovery in the months ahead,” said Paul J. Sarvadi, Insperity chief executive officer and chairman. “Our outlook for the challenging year of 2020 reflects the relative strength and resiliency of our client base and our unique position in the marketplace. We will help our clients meet their objectives including taking care of their people and emerging from this crisis stronger than ever.”
Gross profit increased by 3.2% over the first quarter of 2019 to $234.0 million. The year over year comparison was impacted by a favorable benefit cost trend in Q1 of the prior year. However, we effectively managed overall gross profit for Q1 of this year above budgeted levels, as both benefits and workers’ compensation programs were favorable. Large healthcare claim activity continued to decline from the peak level we experienced during the second quarter of 2019 and the underlying claim cost trend was below our expectations. Operating expenses increased 5% over the first quarter of 2019, slightly below budgeted levels, as continued investments in our growth, including a 13% increase in the average number of trained Business Performance Advisors were partially offset by savings in other areas.
For the first quarter 2020, net income and diluted earnings per share (“EPS”) of $62 million and $1.58 represented decreases of 19% and 15%, respectively, compared to the first quarter of 2019. Adjusted EPS was $1.70, a 14% decrease from the first quarter of 2019, and included an increase in the effective tax rate from 12% in the first quarter of 2019 to 27% in the first quarter of 2020. Adjusted EBITDA remained consistent with the first quarter of 2019 at $101.3 million.
During the quarter, we repurchased a total of 878,000 shares at a cost of $61 million. We also paid $16 million in cash dividends under our regular dividend program and invested $16 million in capital expenditures.
“We expect our resilient business model to continue to generate strong cash flow in spite of the current economic environment associated with the COVID-19 pandemic,” said Douglas S. Sharp, Insperity senior vice president of finance, chief financial officer and treasurer. “We ended the quarter in a strong financial position with $167 million of adjusted cash and $130 million available under our $500 million credit facility.”
2020 Guidance
The company also announced its updated guidance for 2020, including the second quarter of 2020. 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.



 
Q2 2020
 
Full Year 2020
 
 
 
 
 
 
 
 
Average WSEEs paid
220,400
229,700
 
221,400
233,200
Year-over-year increase (decrease)
(5)%
(1)%
 
(6)%
(1)%
 
 
 
 
 
 
 
 
Adjusted EPS
$1.02
$1.29
 
$3.19
$3.86
Year-over-year increase (decrease)
23%
55%
 
(23)%
(7)%
 
 
 
 
 
 
 
 
Adjusted EBITDA (in millions)
$65
$79
 
$215
$250
Year-over-year increase (decrease)
15%
39%
 
(14)%
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.
Insperity will be hosting a conference call today at 5 p.m. ET to discuss these results, provide guidance for the second quarter and an update to the full year guidance, and answer questions from investment analysts. To listen in, call 877-651-0053 and use conference i.d. number 3074809. 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. 3074809. The webcast will be archived for one year.
About Insperity
Insperity, a trusted advisor to America’s best businesses for more than 34 years, provides an array of human resources and business solutions designed to help improve business performance. Insperity® Business Performance Advisors offer the most comprehensive suite of products and services available in the marketplace. Insperity delivers administrative relief, better benefits, reduced liabilities and a systematic way to improve productivity through its premier Workforce Optimization® solution. Additional company offerings include Traditional Payroll and Human Capital Management, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Expense Management, Retirement Services and Insurance Services. Insperity business performance solutions support more than 100,000 businesses with over 2 million employees. With 2019 revenues of $4.3 billion, Insperity operates in 83 offices throughout the United States. 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 federal securities laws (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). You can identify such forward-looking statements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,” “probably,” “goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions. Forward-looking statements involve a number of risks and uncertainties. In the normal course of business, Insperity, Inc., in an effort to help keep our stockholders and the public informed about our operations, may from time to time issue such forward-looking statements, either orally or in writing. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies, or projections involving anticipated revenues, earnings, unit growth, profit per worksite employee, pricing, operating expenses or other aspects of operating results. We base the forward-looking statements on our expectations, estimates and projections at the time such statements are made. These statements are not guarantees of future performance and involve risks and uncertainties that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Therefore, the actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are:
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;
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.
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)
March 31, 2020

 
December 31, 2019

 
 
 
 
Assets
 
 
 
Cash and cash equivalents
$
404,728

 
$
367,342

Restricted cash
48,349

 
49,295

Marketable securities
19,508

 
34,728

Accounts receivable, net
520,745

 
465,779

Prepaid insurance
45,525

 
10,418

Other current assets
40,425

 
43,493

Income taxes receivable

 
3,691

Total current assets
1,079,280

 
974,746

Property and equipment, net
160,297

 
147,706

Right of use leased assets
58,461

 
56,886

Prepaid health insurance
9,000

 
9,000

Deposits
196,649

 
184,013

Goodwill and other intangible assets, net
12,711

 
12,714

Deferred income taxes, net

 
3,956

Other assets
6,010

 
5,975

Total assets
$
1,522,408

 
$
1,394,996

 
 
 
 
Liabilities and stockholders’ equity
 
 
 
Accounts payable
$
6,240

 
$
4,565

Payroll taxes and other payroll deductions payable
268,245

 
277,248

Accrued worksite employee payroll cost
436,764

 
401,859

Accrued health insurance costs
46,841

 
21,180

Accrued workers’ compensation costs
52,311

 
52,868

Accrued corporate payroll and commissions
21,610

 
52,612

Other accrued liabilities
51,729

 
58,713

Income taxes payable
4,718

 

Total current liabilities
888,458

 
869,045

Accrued workers’ compensation cost, net of current
197,633

 
193,609

Long-term debt
369,400

 
269,400

Operating lease liabilities, net of current
61,623

 
58,863

Deferred income taxes, net
8,604

 

Total noncurrent liabilities
637,260

 
521,872

Stockholders’ equity:
 
 
 
Common stock
555

 
555

Additional paid-in capital
46,327

 
48,141

Treasury stock, at cost
(595,487
)
 
(544,102
)
Retained earnings
545,295

 
499,485

Total stockholders’ equity (deficit)
(3,310
)
 
4,079

Total liabilities and stockholders’ equity (deficit)
$
1,522,408

 
$
1,394,996



SUMMARY FINANCIAL INFORMATION

Insperity, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three Months Ended 
 March 31,
(in thousands, except per share amounts)
2020
2019
Change
Operating results:
 
 
 
Revenues(1)
$
1,229,483

$
1,153,010

6.6
 %
Payroll taxes, benefits and workers’ compensation costs
995,461

926,293

7.5
 %
Gross profit
234,022

226,717

3.2
 %
Salaries, wages and payroll taxes
86,501

83,380

3.7
 %
Stock-based compensation
6,552

6,040

8.5
 %
Commissions
8,460

6,952

21.7
 %
Advertising
4,833

5,031

(3.9
)%
General and administrative expenses
34,853

33,162

5.1
 %
Depreciation and amortization
7,602

6,691

13.6
 %
Total operating expenses
148,801

141,256

5.3
 %
Operating income
85,221

85,461

(0.3
)%
Other income (expense):
 
 
 
Interest income
1,879

3,245

(42.1
)%
Interest expense
(2,362
)
(1,681
)
40.5
 %
Income before income tax expense
84,738

87,025

(2.6
)%
Income tax expense
22,646

10,736

110.9
 %
Net income
$
62,092

$
76,289

(18.6
)%
Less distributed and undistributed earnings allocated to participating securities
(462
)
(1,031
)
(55.2
)%
Net income allocated to common shares
$
61,630

$
75,258

(18.1
)%
 
 
 
 
Net income per share of common stock
 
 
 
Basic
$
1.59

$
1.86

(14.5
)%
Diluted
$
1.58

$
1.85

(14.6
)%
 ____________________________________
(1) 
Revenues are comprised of gross billings less WSEE payroll costs as follows:
 
Three Months Ended 
 March 31,
(in thousands)
2020
2019
 
 
 
Gross billings
$
7,436,754

$
6,871,670

Less: WSEE payroll cost
6,207,271

5,718,660

Revenues
$
1,229,483

$
1,153,010




SUMMARY FINANCIAL INFORMATION

Insperity, Inc.
KEY FINANCIAL AND STATISTICAL DATA
(Unaudited)
 
Three Months Ended 
 March 31,
 
2020
2019
Change
 
 
 
 
Average WSEEs paid
238,014

225,525

5.5
 %
Statistical data (per WSEE per month):
 
 
 
Revenues(1)
$
1,722

$
1,704

1.1
 %
Gross profit
328

335

(2.1
)%
Operating expenses
208

209

(0.5
)%
Operating income
119

126

(5.6
)%
Net income
87

113

(23.0
)%
____________________________________
(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 
 March 31,
(per WSEE per month)
2020
2019
Gross billings
$
10,415

$
10,157

Less: WSEE payroll cost
8,693

8,453

Revenues
$
1,722

$
1,704




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 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, 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 March 31,
(in thousands, except per WSEE per month)
2020
 
2019
$
WSEE
 
$
WSEE
 
 
 
 
 
 
Payroll cost
$
6,207,271

$
8,693

 
$
5,718,660

$
8,453

Less: Bonus payroll cost
1,050,968

1,472

 
990,578

1,465

Non-bonus payroll cost
$
5,156,303

$
7,221

 
$
4,728,082

$
6,988

% Change period over period
9.1
%
3.3
%
 
15.9
%
0.6
%


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)
March 31, 2020

 
December 31, 2019

 
 
 
 
Cash, cash equivalents and marketable securities
$
424,236

 
$
402,070

Less:
 
 
 
Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions
235,203

 
234,553

Client prepayments
22,143

 
59,612

Adjusted cash, cash equivalents and marketable securities
$
166,890

 
$
107,905

Following is a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP):
 
Three Months Ended March 31,
(in thousands, except per WSEE per month)
2020
 
2019
$
WSEE
 
$
WSEE
 
 
 
 
 
 
Net income
$
62,092

$
87

 
$
76,289

$
113

Income tax expense
22,646

32

 
10,736

16

Interest expense
2,362

3

 
1,681

2

Depreciation and amortization
7,602

11

 
6,691

10

EBITDA
94,702

133

 
95,397

141

Stock-based compensation
6,552

9

 
6,040

9

Adjusted EBITDA
$
101,254

$
142

 
$
101,437

$
150

% Change period over period
(0.2
)%
(5.3
)%
 
21.0
%
4.9
%
Following is a reconciliation of net income (GAAP) to adjusted net income (non-GAAP):
 
Three Months Ended March 31,
(in thousands)
2020
2019
 
 
 
Net income
$
62,092

$
76,289

Non-GAAP adjustments:
 
 
Stock-based compensation
6,552

6,040

Total non-GAAP adjustments
6,552

6,040

Tax effect
(1,751
)
(745
)
Adjusted net income
$
66,893

$
81,584

% Change period over period
(18.0
)%
37.0
%


NON-GAAP FINANCIAL MEASURES

Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP):
 
Three Months Ended March 31,
 
2020
2019
 
 
 
Diluted EPS
$
1.58

$
1.85

Non-GAAP adjustments:
 
 
Stock-based compensation
0.17

0.15

Total non-GAAP adjustments
0.17

0.15

Tax effect
(0.05
)
(0.02
)
Adjusted EPS
$
1.70

$
1.98

% Change period over period
(14.1
)%
40.4
%
Following is a reconciliation of GAAP to non-GAAP financial measures for second quarter and full year 2020 guidance:
(in millions, except per share amounts)
 
Q2 2020 
  Guidance
 
Full Year 2020 
  Guidance
 
 
 
 
 
Net income
 
$32 - $42

 
$102 - $127

Income tax expense
 
13 - 17

 
39 - 49

Interest expense
 
2

 
9

Depreciation and amortization
 
8

 
33

EBITDA
 
55 - 69

 
183 - 218

Stock-based compensation
 
10

 
32

Adjusted EBITDA
 
$65 - $79

 
$215 - $250

 
 
 
 
 
Diluted net income per share of common stock
 
$0.83 - $1.10

 
$2.60 - $3.27

Non-GAAP adjustments:
 
 
 
 
Stock-based compensation
 
0.26

 
0.82

Total non-GAAP adjustments
 
0.26

 
0.82

Tax effect
 
(0.07
)
 
(0.23
)
Adjusted EPS
 
$1.02 - $1.29

 
$3.19 - $3.86


###

v3.20.1
DEI Document
May 04, 2020
Cover [Abstract]  
Document Type 8-K
Document Period End Date May 04, 2020
Entity Registrant Name Insperity, Inc.
Entity Incorporation, State or Country Code DE
Entity File Number 1-13998
Entity Tax Identification Number 76-0479645
Entity Address, Address Line One 19001 Crescent Springs Drive
Entity Address, City or Town Kingwood
Entity Address, State or Province TX
Entity Address, Postal Zip Code 77339
City Area Code 281
Local Phone Number 358-8986
Title of 12(b) Security Common Stock, $.01 par value per share
Trading Symbol NSP
Security Exchange Name NYSE
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Entity Central Index Key 0001000753
Amendment Flag false