Insperity announces Q3 net income of $8.4m
For the third quarter, the company reported net income of $8.4 million and diluted earnings per share of $0.33. Adjusted EBITDA totaled $22.6 million for the third quarter.
“We are pleased with our recent financial results and the growth acceleration that has unfolded over the past two quarters,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “A continuation of these trends, combined with a successful year-end transition, would result in double-digit unit growth in 2015.”
Third Quarter Results
Revenues for the third quarter of 2014 increased 3.8% over the third quarter of 2013 due to a 1.8% increase in the average number of worksite employees paid per month and a 2.0% increase in revenues per worksite employee per month. The average number of paid worksite employees increased 2.6% sequentially over the second quarter of 2014.
Gross profit increased 3.5% compared to the third quarter of 2013 to $100.8 million. Benefits costs per covered employee increased 1.3%, less than expected, contributing to an increase in the average gross profit per worksite employee per month, from $251 in the third quarter of 2013 to $255 in the third quarter of 2014. Included in gross profit in the third quarter of 2014 is an $18 per worksite employee per month contribution from our Strategic Business Units, compared to $15 per worksite employee per month in the third quarter of 2013.
Operating expenses increased to our forecasted level of $86.4 million and included $5.7 million in additional costs associated with the development of our Human Capital Management product, health care reform and an additional accrual for incentive compensation based on better than expected operating results. Excluding these items, operating expenses were flat compared to the third quarter of 2013.
For the nine months ended Sept. 30, 2014, the company reported adjusted net income of $21.4 million and adjusted diluted earnings per share of $0.84. These earnings exclude after-tax costs of $1.6 million or $0.06 per share related to a second quarter non-cash impairment charge associated with the reorganization of our Employment Screening business. Reported net income for the nine months ended Sept. 30, 2014 was $19.8 million, or $0.78 per diluted share. Adjusted EBITDA totalled $61.5 million for this same period.
Year-to-date revenues were $1.8 billion, an increase of 3.7% over the 2013 period. Gross profit for the nine months ended Sept. 30, 2014 decreased to $302.4 million. The average gross profit per worksite employee per month decreased 1.9%, to $261 in the 2014 period from $266 in the 2013 period.
Adjusted 2014 year-to-date operating expenses, excluding the impact of the impairment charge, increased to $265.5 million from $253.9 million in the 2013 period. Adjusted year-to-date operating expenses increased by just 1.2% when excluding an additional $8.7 million of costs associated with the development of our Human Capital Management product, health care reform, and the additional accrual for incentive compensation based on better than expected operating results.
“As a result of our focus on operating expense control throughout 2014, we now expect approximately $16 million in cost savings from our initial 2014 forecast,” said Douglas S. Sharp, senior vice-president of finance, chief financial officer and treasurer. “We intend to continue to focus on operating expense control throughout 2015 to align with unit growth and customer mix.”
Cash outlays in the first nine months of 2014 included the repurchase of 693,262 shares of stock at a cost of $20.8 million, dividends totalling $14.0 million and capital expenditures of $11.0 million. Working capital at Sept. 30, 2014 was $119.1 million.