OREANDA-NEWS. Insperity, Inc. (NYSE: NSP), a leading provider of human resources and business performance solutions for America’s best businesses, today reported results for the fourth quarter and year ended Dec. 31, 2015. For the year ended Dec. 31, 2015, adjusted diluted earnings per share increased 53.1% over 2014 to $2.19. Adjusted EBITDA increased 30.8% over 2014 to $110.0 million. Reported 2015 GAAP net income was $39.4 million, or $1.58 per share. For the fourth quarter, the company reported adjusted EBITDA of $16.8 million. Adjusted net income was $8.0 million and adjusted diluted earnings per share were $0.33. Reported fourth quarter GAAP net income and earnings per share were $6.3 million and $0.26, respectively.

“We are pleased with our 2015 results and especially our successful year-end sales and renewal campaign, which sets us up for a strong 2016,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “This recent strong performance across the company is expected to result in continued acceleration in worksite employee growth and substantial operating leverage, which positions Insperity for another record year in 2016.”

Fourth Quarter Results

Revenues for the fourth quarter of 2015 increased 9.1% over the fourth quarter of 2014 on a 12.0% increase in the average number of worksite employees paid per month. Worksite employees paid from new client sales increased 25% over the fourth quarter of 2014, and worksite employee retention remained above 99%. Net hiring in our client base declined slightly compared to the fourth quarter of 2014.

Gross profit decreased by 4.3% from the fourth quarter of 2014, due primarily to large medical claim activity during the quarter. Costs associated with these fourth quarter claims exceeded the average of the previous three quarters of 2015 by approximately $5 million.

“Adjusted EBITDA for the quarter was below expected levels primarily as a result of the large medical claims,” said Richard G. Rawson, Insperity president. “Large medical claim activity in a health plan of our size can negatively impact a stand-alone quarter. However, on an annual basis, large medical claim costs increased less than 6% on a 10% increase in participants compared to 2014. Additionally, when combined with favorable underlying trends in benefit plan migration and the general utilization of our plans, benefits costs per covered employee increased only 1.4% in 2015 over 2014.”

Adjusted operating expenses increased less than 1% compared to the fourth quarter of 2014 as a result of continued operating efficiencies and targeted cost savings. We continued to invest in the growth of the company, including an 11.8% increase in the number of Business Performance Advisors.

Full Year Results

Revenues in 2015 were $2.6 billion. The average number of worksite employees paid per month increased 11.6% over 2014 on a 31% increase in worksite employees paid from new sales and an improvement in worksite employee retention from 80% in 2014 to a historical high of 84% in 2015. Gross profit for the year ended Dec. 31, 2015 increased 8.4%, while adjusted operating expenses increased only 2.1%.

Cash outlays in 2015 included the repurchase of approximately 1.4 million shares at a cost of $67.1 million, regular cash dividends totaling $21.2 million, and capital expenditures totaling $17.8 million. Adjusted cash, cash equivalents and marketable securities at Dec. 31, 2015 was $76.7 million.

Other Matters

In December 2015, the company launched a modified Dutch auction tender offer. The offer concluded on Jan. 7, 2016 with the repurchase of over 3 million shares of common stock at a purchase price of $47.50 per share. Aggregate transaction costs of the tender offer totaled $144.2 million, which was funded with approximately $40 million in cash and $104 million of debt.

“With our strong balance sheet and a 31% increase in adjusted EBITDA during 2015, we were in a position to provide significant stockholder return through our dividend program and share repurchases,” said Douglas S. Sharp, senior vice president of finance, chief financial officer and treasurer. “A total of $231 million has been returned to stockholders since January 2015 through our dividend program, which included a 16% increase in the dividend rate in May 2015, and the repurchase of approximately 4.4 million shares including the recent tender offer.”

                 

2016 Guidance

                
                 
        Q1 2016       Full Year 2016
                                 
Average WSEEs       155,900  

-

   157,300       164,800  

-

   167,700
Year-over-year increase       13%  

-

   14%       13%  

-

   15%
                                 
Adjusted EPS       $1.44  

-

   $1.52       $3.19  

-

   $3.36
Year-over-year increase       67%  

-

   77%       46%  

-

   53%
                                 
Adjusted EBITDA (in millions)       $57  

-

   $60       $134  

-

   $141
Year-over-year increase       35%  

-

   42%       22%  

-

   28%
                                 

Definition of Key Metrics

Average WSEEs - 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 impairment charges and stock-based compensation.

Adjusted EBITDA - Represents net income computed in accordance with GAAP, plus interest expense, income taxes, depreciation, amortization, stock-based compensation and non-cash impairment charges.

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.