Gross profit up 17% at year-end 2017 for Insperity
Insperity, Inc. has reported results for the fourth quarter and year ended 31st December 2017.
The fourth quarter per share results reflect the two-for-one stock split effective 18th December 2017. Fourth quarter 2017 net income and diluted earnings per share of $15.6m and $0.36 represented increases of 63% and 57%, respectively, compared to the fourth quarter of 2016. Adjusted diluted earnings per share were $0.55, a 90% increase over the fourth quarter of 2016. Adjusted EBITDA increased 67% to $38.5m.
Paul J. Sarvadi, Insperity chairman and chief executive officer, said, “We are pleased with these record 2017 financial results capped off with a very strong fall sales and client retention campaign.
“A higher starting point of paid worksite employees in January positions Insperity for growth acceleration and continued exceptional financial performance in 2018.”
Revenues for the fourth quarter of 2017 increased 13% to $826.5m compared to the fourth quarter of 2016 primarily due to a 10% increase in the average number of worksite employees paid per month.
Gross profit for the fourth quarter of 2017 increased 29% over the fourth quarter of 2016 to $142.9m, primarily due to the 10% worksite employee growth, increases in overall pricing and improved results in our benefits, workers’ compensation and payroll tax areas. Operating expenses increased 24% over the fourth quarter of 2016 to $119.2m, and included additional accruals for incentive compensation programs tied to our outperformance and an acceleration of the vesting of restricted shares from the first quarter of 2018 to take advantage of higher tax deductibility.
Net income and adjusted EBITDA per worksite employee per month increased 50% and 51%, respectively, over the fourth quarter of 2016 to $27 and $68.
The fourth quarter and full year 2017 effective income tax rates were both 35% and included a charge associated with the enactment of U.S. tax reform of $2.5 million offset by tax benefits associated with the acceleration of restricted stock and other credits.
For the year ended 31st December 2017, reported net income increased 28% over 2016 to $84.4m, and diluted net income per share increased 31% to $2.01. Adjusted diluted earnings per share increased 37% over 2016 to $2.45. Adjusted EBITDA increased 26% to $177.7m.
Revenues in 2017 increased to $3.3 billion, on a 10% increase in the average number of worksite employees paid per month over 2016. This growth was driven by an increase in worksite employees paid from new sales on a 13% increase in the average number of trained business performance advisors. Additionally, worksite employee retention was 85% in 2017. Gross profit for the year increased 17% to $572.7m. Operating expenses increased 15% to $442.8m over 2016. Adjusted operating expenses increased 14% to $440.8m over 2016.
Adjusted EBITDA per worksite employee per month increased 14% from $71 in 2016 to a record high of $81 in 2017 primarily as a result of double-digit worksite employee growth, effective pricing and direct cost and operating expense management.
Cash outlays in 2017 included the repurchase of approximately 901,000 shares of stock at a cost of $38.7m, dividends totalling $65.8m, including both our regular quarterly dividend and the $1.00 per share special dividend declared in December. We also had capital expenditures of $33.3 million. Adjusted cash, cash equivalents and marketable securities at 31st December 2017 was $61.1m.
Douglas S. Sharp, senior vice president of finance, chief financial officer and treasurer, commented, “Our strong cash flow generated from our continued double-digit worksite employee growth and direct cost and operating expense management has allowed us to return just over $300 million to shareholders over the past two years in the form of dividends and share repurchases.
“With another strong year anticipated in 2018, we expect to continue to provide exceptional shareholder return while investing in our long-term plan for growth and profitability.”
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