Insperity (NSP) Tops Q4 EPS by 19c; Offers 1Q & FY21 EPS Outlook

Insperity (NYSE: NSP) reported Q4 EPS of $0.49, $0.19 better than the analyst estimate of $0.30. Revenue for the quarter came in at $1.06 billion versus the consensus estimate of $1.05 billion.

• 2020 net income and diluted EPS of $138.2 million and $3.54, respectively
• 2020 adjusted EPS up 12% to $4.64
• 2020 adjusted EBITDA up 15% to $288.6 million
• Q4 net income and diluted EPS of $4.3 million and $0.11, respectively
• Q4 adjusted EPS of $0.49
• Q4 adjusted EBITDA of $37.9 million

“We are pleased with our excellent fourth quarter and full year results, and the outstanding performance of our entire Insperity team, in the face of an unprecedented and challenging year,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “The proven value of our HR services offering and the resiliency of our targeted small business client base, combined with continuing momentum in sales and core client retention, bodes well for growth acceleration as we progress through 2021 and beyond.”

The average number of worksite employees (“WSEEs”) paid per month declined by just 1% in the face of the significant impact of the pandemic on our clients, prospects and the broader economy. Revenues in 2020 also decreased by 1% to $4.3 billion. Average pricing increased 3% for the full year 2020 over 2019, more than offsetting the decline in average paid WSEEs; however, the FICA deferral program instituted as part of the CARES Act further reduced revenues. This program had no impact on our gross profit.

Gross profit for the year ended Dec. 31, 2020 increased 10% to $806.9 million. The average gross profit per WSEE per month increased from $259 in 2019 to $287 in 2020, due to improved pricing while experiencing lower benefits and workers’ compensation cost trends. Lower healthcare utilization during the pandemic, particularly associated with office visits and elective procedures, outweighed any incremental COVID-19 testing and treatment costs and drove the lower cost trend. Workers’ compensation costs trended lower on the ongoing management of safety practices and claims. The reported increase in gross profit was net of comprehensive service fee credits provided to our clients as a result of negotiated savings with our vendors.

Operating expenses increased 12% over 2019 to $612.2 million, and included continued investments in our growth, products and technology. These investments were partially offset by cost savings in other areas of our business, both through effective management and as a result of pandemic related cancellations and shutdowns. An increase in stock-based compensation was driven by our outperformance in the level of earnings throughout 2020. Operating expenses, excluding stock-based compensation and depreciation and amortization, increased by 6% over the 2019 period.

“Our 2020 results reflect a strong company response to the pandemic-related challenges to our growth combined with some unexpected benefit in our direct cost programs,” said Douglas S. Sharp, senior vice president of finance, chief financial officer and treasurer. “Our outlook for 2021 includes growth acceleration with modest growth within our client base as the small business climate gradually improves, combined with normalization of our direct costs and continued investment in our future growth.”

GUIDANCE:

Insperity sees Q1 2021 EPS of $1.37-$1.72, versus the consensus of $1.58.

Insperity sees FY2021 EPS of $3.27-$4.20, versus the consensus of $3.91.

The company also announced its guidance for 2021, including the first quarter of 2021, which reflects solid sales and improved core client retention through the year-end transition offset by the loss of a large enterprise account. 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.

For earnings history and earnings-related data on Insperity (NSP) click here.

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