Insperity (NSP) Down 0.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Insperity (NSP). Shares have lost about 0.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Insperity due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Insperity Beats Q4 Earnings & Revenues Estimate

Insperity reported strong fourth-quarter 2018 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings per share of 69 cents beat the consensus mark by 4 cents and increased 25.5% year over year on worksite employee growth and effective management of pricing, direct cost programs and operating costs. The reported figure surpassed the guided range of 63-67 centsper share.

Total revenues of $966.8 million beat the consensus estimate by $3 million and increased 16.9% year over year. The top line benefited from 17% increase in average number of worksite employees paid per month. Average number of worksite employees paid per month was 221,809 at the end of the reported quarter.

In the reported quarter, worksite employee growth was driven by strong sales (36% growth in worksite employees paid from new sales on 13% increase in the average number of Business Performance Advisors in both core and mid-market clients segments), higher client retention (totaled over 99%) and rise in net hiring of worksite employees by the company’s client base.

Operating Results

Gross profit of $161.59 million increased 13.1% from the year-ago quarter on the back of improved pricing, effective management of direct cost programs and continuous investment in growth, technology and product and service offerings. These were, however, partially offset by slightly higher-than-expected fourth-quarter 2018 medical claims. Gross margin declined to 16.7% from 17.3% in the prior-year quarter. Gross profit per worksite employee per month decreased 3.2% year over year to $243.

Adjusted EBITDA was up 23.5% year over year to $47.59 million. Adjusted EBITDA per worksite employee per month increased 5.9% to $72.

Adjusted operating expenses increased 9% year over year to $128.97 million due to continuous investment in technology and product and service offerings. The company’s growth-related investments resulted in the opening of seven new sales offices in 2018, along with a 13% increase in average number of Business Performance Advisors and additional sales commissions associated with higher sales volume in fourth-quarter 2018. Adjusted operating expenses per worksite employee per month declined 6.7% to $194.

Operating income increased 37.6% year over year to $32.6 million. Operating income per worksite employee per month increased 16.7% to $49.

Balance Sheet & Cash Flow

Insperity exited fourth-quarter 2018 with adjusted cash, cash equivalents and marketable securities of $128.89 million compared with $166.50 million at the end of the prior quarter. Long- term debt was $144.40 million compared with $104.40 million at the end of prior quarter.

Capital expenditures were $13.8 million.

In 2018, Insperity repurchased almost 1,198,000 shares for $113.3 million and paid dividends totaling $33.4 million.

Guidance

Insperity unveiled its guidance for first-quarter and full-year 2019.

Q1 Guidance

For first-quarter 2019, Insperity projects adjusted earnings in the range of $1.85-$1.91 per share, indicating a year-over-year increase of 31-35%. Adjusted EBITDA is anticipated to increase 15-18% to a range of $96-$99 million. Average worksite employees (WSEs) is expected in the range of 224,000 to 226,000, indicating 14.5-15.5% growth.

2019 Guidance

For the full year, the company projects adjusted earnings between $4.37 per share and $4.69 per share, indicating growth of 17-25%. Adjusted EBITDA is projected to grow 12-19% to a range of $268-$285 million. Average WSEs are expected to be in the range of 238,400 to 242,600, indicating 14-16% growth.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months. The consensus estimate has shifted 23.05% due to these changes.