Insperity's 2Q Earnings Beat Estimates
Insperity Inc.’s (NSP) adjusted second-quarter 2013 earnings per share of 24 cents beat the Zacks Consensus Estimate of 21 cents. The quarter’s earnings were 9.1% higher than 22 cents reported in the year-earlier quarter.
Revenues
Insperity’s second quarter revenues of $547.3 million increased 5.4% from $519.3 million in the year-ago quarter and were above the Zacks Consensus Estimate of $543.0 million. The year-over-year improvement was attributed to higher worksite employees and higher revenues per employee.
Operating Results
Gross profit increased 12.0% from the year-ago quarter to $97.7 million. Gross margin was 17.9%, up from 16.8% in the year-ago quarter. The improvement was led by higher gross profit per worksite employee per month.
Total operating expenses surged 12.4% year over year, mainly due to increase in hirings and continuous investments (for expanding the Business Performance Advisors group and implementing health care reform strategy). Operating margin was 1.9%, slightly up from 1.8% in the year-ago period. Earnings before interest, tax, depreciation and amortization (:EBITDA) were $12.9 million, down from $14.1 million in the year-ago quarter.
Insperity reported net income of $3.5 million or 14 cents per share compared with $5.6 million or 22 cents in the year-ago quarter. Excluding the impairment charge, adjusted earnings per share were 24 cents. There were no one-time items recorded in the year-ago quarter.
Balance Sheet & Share Repurchase
Insperity exited the second quarter with cash, marketable securities and restricted cash of $278.6 million, down from $326.2 million in the previous quarter. Accounts receivable were roughly flat at $200.4 million.
During the quarter, the company repurchased 60,000 shares worth $1.6 million and paid dividends worth $4.3 million.
Guidance
Insperity expects gross profit per worksite employee per month in the range of $260.0–$262.0 for the third quarter of 2013 and in the range of $261.0–$263.0 (previously $260.0–$263.0) for fiscal 2013.
The company expects operating expenses in the range of $84.0–$85.0 million for the third quarter and in the range of $338.5–$339.5 million for fiscal 2013 (previously $340.5–$342.5 million).
For fiscal 2013, the company expects earnings per share in the range of $1.52–$1.61 (previously $1.51–$1.61), given a tax rate of 40.0% and shares outstanding of 25.6 million.
Conclusion
Insperity provides human resources (HR) as well as business solutions to small and medium business (SMBs) to help them perform better. Insperity’s second quarter results were encouraging with both the top and bottom lines beating the Zacks Consensus Estimate. Though third quarter guidance seems weak on seasonality, we are encouraged by a better visibility into fiscal 2013.
We believe that management’s initiatives to expand the number of Business Performance Advisors and implement health care reform strategy will help it achieve its fiscal 2013 guidance.
In an internal survey, Insperity found that most of the SMBs are willing to add employees in order to expand business activities. This will have a positive impact on Insperity’s fundamentals.
A debt-free balance sheet, share repurchases and dividend payouts are positive, but increasing expenses, stiff competition from Automatic Data Processing Inc. (ADP), Paychex Inc. (PAYX) and Manpower Group Inc. (MAN) are concerns.
Currently, Insperity has a Zacks Rank #2 (Buy).
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