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Insperity (NSP) Beats on Q3 Earnings, Misses on Revenues
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Insperity Inc. (NSP - Free Report) reported mixed third-quarter 2016 numbers with earnings coming ahead of expectations but revenues falling short of the same. Earnings of 66 cents per share beat the Zacks Consensus Estimate of 63 cents. Earnings increased 37.5% on a year-over-year basis.
Insperity’s revenues of $702.5 million increased 12.2% on a year-over-year basis but lagged the Zacks Consensus Estimate of $710 million. The year-over-year growth was driven by a 13% increase in average paid worksite employees.
Quarterly Numbers in Details
Insperity’s gross margin in the quarter was down 20 basis points (bps) from the year-ago period to 17%.
The company’s operating expenses increased 9.4% year over year to $95 million. Operating margin was 3.2%, flat on a year-over-year basis.
Insperity exited the quarter with cash, marketable securities and restricted cash of $223.6 million compared with $269.5 million as on Dec 31, 2015.
Guidance
Insperity also provided an outlook for the fourth quarter and raised its full year 2016 guidance.
For the fourth quarter of 2016, Insperity projects adjusted earnings in a range of 52 cents to 57 cents a share. Adjusted EBITDA is projected to be $22.5 million to $24.5 million and average worksite employees (WSEs) are expected in a range of 173,000 - 173,750, representing growth of 13% to 13.5%.
For full year 2016, the company projects adjusted earnings of $3.53- $3.58 compared with $3.50 - $3.60 a share projected earlier. Adjusted EBITDA is expected to be in the range of $141 million - $143 million. Average WSEs are now expected to be 166,000 -166,100 compared with the earlier projection of 166,000 -168,000.
The company is well placed to benefit from the booming professional employer organization (PEO) industry, strong client retention and growth in worksite employees in the long run.
However, Insperity has not achieved the desired levels despite increasing average worksite employees (WSEs), which remain a major concern. In addition, a sluggish global macro environment can lead to headcount reductions at client companies. An increase in health care costs does not bode well for Insperity as it is one of the major components of operating expenses. Furthermore, client attrition amid increasing competition from the likes of Automatic Data Processing Inc. (ADP - Free Report) , Paylocity Holding Corporation (PCTY - Free Report) and TriNet Group, Inc. (TNET - Free Report) remains a concern.
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Insperity (NSP) Beats on Q3 Earnings, Misses on Revenues
Insperity Inc. (NSP - Free Report) reported mixed third-quarter 2016 numbers with earnings coming ahead of expectations but revenues falling short of the same. Earnings of 66 cents per share beat the Zacks Consensus Estimate of 63 cents. Earnings increased 37.5% on a year-over-year basis.
Insperity’s revenues of $702.5 million increased 12.2% on a year-over-year basis but lagged the Zacks Consensus Estimate of $710 million. The year-over-year growth was driven by a 13% increase in average paid worksite employees.
Quarterly Numbers in Details
Insperity’s gross margin in the quarter was down 20 basis points (bps) from the year-ago period to 17%.
The company’s operating expenses increased 9.4% year over year to $95 million. Operating margin was 3.2%, flat on a year-over-year basis.
Insperity exited the quarter with cash, marketable securities and restricted cash of $223.6 million compared with $269.5 million as on Dec 31, 2015.
Guidance
Insperity also provided an outlook for the fourth quarter and raised its full year 2016 guidance.
For the fourth quarter of 2016, Insperity projects adjusted earnings in a range of 52 cents to 57 cents a share. Adjusted EBITDA is projected to be $22.5 million to $24.5 million and average worksite employees (WSEs) are expected in a range of 173,000 - 173,750, representing growth of 13% to 13.5%.
For full year 2016, the company projects adjusted earnings of $3.53- $3.58 compared with $3.50 - $3.60 a share projected earlier. Adjusted EBITDA is expected to be in the range of $141 million - $143 million. Average WSEs are now expected to be 166,000 -166,100 compared with the earlier projection of 166,000 -168,000.
INSPERITY INC Price and EPS Surprise
INSPERITY INC Price and EPS Surprise | INSPERITY INC Quote
Conclusion
The company is well placed to benefit from the booming professional employer organization (PEO) industry, strong client retention and growth in worksite employees in the long run.
However, Insperity has not achieved the desired levels despite increasing average worksite employees (WSEs), which remain a major concern. In addition, a sluggish global macro environment can lead to headcount reductions at client companies. An increase in health care costs does not bode well for Insperity as it is one of the major components of operating expenses. Furthermore, client attrition amid increasing competition from the likes of Automatic Data Processing Inc. (ADP - Free Report) , Paylocity Holding Corporation (PCTY - Free Report) and TriNet Group, Inc. (TNET - Free Report) remains a concern.
Currently, Insperity has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>