Insperity, Inc.NSP reported mixed third-quarter 2018 results wherein the company's earnings surpassed the Zacks Consensus Estimate but revenues missed the same.
Adjusted earnings per share of 96 cents beat the consensus mark by 14 cents and increased 68.4% year over year on worksite employee growth, lower effective tax rateeffective management of pricing, direct cost programs and operating costs. The reported figure surpassed the guided range of 80-84 centsper share.
Total revenues of $925.1 million lagged the consensus estimate by $15 million but increased 16.3% year over year. The top line benefited from a 15.2% increase in average number of worksite employees paid per month and 0.9% increase in revenues per worksite employee per month. Average number of worksite employees paid per month was 215,051 and revenueper worksite employee per month came in at $1,434.
In the reported quarter, worksite employee growth was driven by strong sales (26% growth in worksite employees paid from new sales in client segment on 16% increase in the average number of Business Performance Advisors), higher client retention (totaled over 99%) and rise in net hiring of worksite employees by the company's client base.
So far this year, shares of Insperity have gained 93.9% against 1.5% decline of the industry it belongs to.
Gross profit of $166.05 million increased 18.6% from the year-ago quarter on the back of 15% worksite employee growth, effective pricing and management of direct cost programs. Gross margin climbed to 17.9% from 17.6% in the prior-year quarter. Gross profit per worksite employee per month increased 2.8% year over year to $257.
Adjusted EBITDA was up 42.8% year over year to $61.57 million. Adjusted EBITDA per worksite employee per month increased 23.4% to $95.
Adjusted operating expenses increased 8.2% year over year to $117.92 million due to the continuous investment in growth, technology and product and service offerings. The company's growth-related investments resulted in the opening of six sales offices in 2018, along with a 16% increase in the average number of Business Performance Advisors. Adjusted operating expenses per worksite employee per month declined 6.3% to $183.
Operating income increased 61.5% year over year to $48.13 million. Operating income per worksite employee per month increased 41.5% to $75.
Insperity, Inc. Price, Consensus and EPS Surprise
Insperity, Inc. Price, Consensus and EPS Surprise | Insperity, Inc. Quote
Balance Sheet & Cash Flow
Insperity exited third-quarter 2018 with adjusted cash, cash equivalents and marketable securities of $166.50 million compared with $110.07 million at the end of the prior quarter. Long- term debt of $104.4 million was flat sequentially.
The company generated $53 million of net cash from operating activities in the reported quarter. Capital expenditures were $7.5 million.
In the first nine months of 2018, Insperity repurchased almost 212,000 shares for $16.2 million and paid dividends totaling $25.2 million.
For fourth-quarter 2018, Insperity projects adjusted earnings in the range of 63-67 cents per share, indicating a year-over-year increase of 15-22%. The guided range is well above the Zacks Consensus Estimate of 61 cents.
Adjusted EBITDA is anticipated to increase 14-19% to a range of $44-$46 million. Average worksite employees (WSEs) are expected in a range of 219,800 to 221,700, indicating 16-17% growth.
Insperity raised its guidance for 2018. The company now projects adjusted earnings between $3.69 per share and $3.73 per share, indicating growth of 51-52%, above the previously guided range of $3.49-$3.53 per share. The Zacks Consensus Estimate is pegged lower at $3.55.
Adjusted EBITDA is projected to grow 33-34% to a range of $236-$238 million. The prior guided range was $225 million to $229 million.
Average WSEs are expected to be in the 208,300 to 209,200 bracket, indicating 14-14.5% growth. The earlier expected range was between 207,400 and 209,200.
Effective tax rate is anticipated to be around 26%.
Zacks Rank & Upcoming Releases
Insperity currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Investors interested in the broader Business Services sector are keenly awaiting third-quarter earnings reports from key players like Genpact G , Delphi Technologies DLPH and Green Dot GDOT . While Genpact will report on Nov 6, Delphi Technologies and Green Dot will release their quarterly results on Nov 7.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportDelphi Technologies PLC (DLPH): Free Stock Analysis ReportInsperity, Inc. (NSP): Free Stock Analysis ReportGenpact Limited (G): Free Stock Analysis ReportGreen Dot Corporation (GDOT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research