Insperity (NSP) Beats Q2 Earnings & Revenue Estimates

Insperity, Inc.NSP reported impressive second-quarter 2017 results with both earnings and revenues exceeding expectations. Adjusted diluted earnings of 66 cents per share surpassed the Zacks Consensus Estimate of 53 cents and increased 83.3% over the year-ago quarter.

Revenues of $795.6 million increased 12.5% on a year-over-year basis and topped the Zacks Consensus Estimate of $779.2 million. The year-over-year growth was driven by 10% increase in the average number of paid worksite employees. Revenues per worksite employee per month were up 2% to $1,471.

We note that shares of Insperity have risen 26.2% on a year-to-date basis, significantly outperforming the industry 's gain of meager 3.9%.

Quarter Details

Insperity's gross margin in the quarter was up 40 basis points (bps) from the year-ago quarter to 16.4%.

Adjusted EBITDA increased 30.3% year over year to $33.3 million, which came ahead of management's guided range of $27-$29 million. EBITDA per worksite employee per month increased 23.8% in the quarter to $52.

The company's operating expenses increased 10.7% year over year to $107.6 million due to increase in the average number of trained business performance advisors, and continuing investments in the company's technology infrastructure, security and development.

Insperity exited the quarter with cash, cash equivalents and marketable securities of $243.8 million compared with $287.9 million as on Dec 31, 2016.

During the second quarter, Insperity repurchased 211,335 shares at a cost of $16.2 million and increased quarterly dividend payout rate by 20%. It bought back 325,903 shares for $25.5 million and paid dividends totaling $11.6 million in the first six months of 2017.

Insperity, Inc. Price, Consensus and EPS Surprise

Insperity, Inc. Price, Consensus and EPS Surprise | Insperity, Inc. Quote


Insperity also provided outlook for the third-quarter and full year 2017.

For third-quarter 2017, Insperity projects adjusted earnings in a range of 94 cents to $1 per share. Adjusted EBITDA is projected in the range of $37.5-$39.5 million and average worksite employees (WSEs) are expected in the range of 187,500 to 188,300, representing growth of 11-11.5%.

For full-year 2017, the company projects adjusted earnings of $4.47-$4.6 per share and adjusted EBITDA in a range of $169-$173 million. Average WSEs are anticipated to be in the 184,000-186,000 bracket, representing growth of 11-12%.

Our Take

We believe Insperity is well placed to benefit from the booming professional employer organization (PEO) industry. Management claims that its flagship co-employment solution, Insperity Workforce Optimization, has been the most comprehensive business service in the marketplace for many years.

Moreover, improved client retention, diversified product portfolio, growth in worksite employees and strength in ancillary products are the other positives. Further, management stated that competitive positioning, gross profit contribution, and operational excellence would drive future growth.

However despite increasing average worksite employees, a sluggish global macro environment increases the risk of headcount reductions at client companies. Moreover, an increase in health care costs does not bode well for the company as it is one of the major components of operating expenses. Furthermore, intensifying competition remains a major concern.

Presently, Insperity carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the broader tech space are Applied Optoelectronics, Inc. AAOI , Kemet Corp. KEM and Vishay Intertechnology, Inc. VSH . All these three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank Stocks here.

In the trailing four quarters, Applied Optoelectronics, Kemet and Vishay delivered average positive earnings surprises of 118.33%, 72.92% and 1.86%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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