NSP - Earnings call transcript Q2 2021

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Operator

Good afternoon, everyone. My name is Erica, and I will be your conference operator for today. I would like to welcome everyone to the Insperity Second Quarter 2021 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Instructions]. [Operator that being advised conference today's be recorded. is Please Instructions]. [Operator today's I would introduce to like speakers.

Paul the Sharp, of Chairman Executive us to like Sarvadi, Joining are call the of ahead. Officer Treasurer. Douglas over Senior to turn Financial Sharp. Officer; Sharp, Board go Vice Chief President Mr. Finance, Douglas and I'd please and Chief and

Douglas Sharp

you. Thank We appreciate you joining us.

outlining our call. evening's plan this by for begin me Let

guidance. behind the our will I'm drivers second to XXXX I for First, the quarter an guidance going results Paul on discuss will the financial financial over of and QX then our update details comment plan the key year to behind results. return our the the to our third quarter and provide remainder year. full

the a then with will session. question-and-answer We end call

begin, uncertainties to call, during assumptions. statements that Now remind make I risks, would today's or before like to you and may subject we Sarvadi Mr. forward-looking which are I

measures. discussion In our addition, some of non-GAAP may financial include

of website. uncertainties For statements detailed risks differ non-GAAP available filed reconciliations from including today, any Form the public the that results our actual which filings, financial a to of company's discussion on could and please forward-looking cause X-K see materially more the measures, are and

the Now lows adjusted adjusted and from achieved $XX ahead a our EBITDA, rebounding quarter million year with $X.XX let's pandemic discuss earnings results. plan We of of second ago. in per share our growth

XX%. client sequential worksite of our in from in Both second X%, client above for targets. to XXXX. our historical forecasted of increased As was of the worksite client our the X.X% of paid came X% new sales this employees end net and gains range over exceeded and of of hiring our metric, number level retention average of QX a And quarter high high our base by QX at employees XXXX, growth increase paid X% over from

exceeded in increase employee, customer per with deferral X% included of the XXXX our non-recurrence Now FICA which our a pricing growth, worksite fee and revenue expectations. employee and credits worksite the along service

workers' these experienced program from decline dynamics of produce continues XXXX results. Our factors, we pandemic. profit in spite X% with gross associated favorable the to the of related also a to QX compensation In of X

QX pandemic, First, experienced our unusually of with benefit of the onset during XXXX, health utilization we in therefore, and the low plan costs. lower

state Ultimately, we treatment the We rates to our elected along coming on into their year, and have received in costs. rate our an by favorable tax COVID-XX-related area associated with states a mix patterns during we QX. high rates had anticipated at XXXX coming the many increase unemployment with of been prudently raise seen and claims. elective we our payment off unemployment profit, these carrier increase testing change client care that budgeted Over impact taxes, in utilization, for that levels. experienced health half of including gross SUTA a to not levels, was XXXX. costs, previously favorable changes claim first in whose an Also, Texas, A care including has relative second deferred this vaccination in unemployment expectations of

So half the first of the XXXX. payroll from budget our tax through gross area has profit exceeded contribution our

costs to budgeted have appropriately and our spread Moving pricing our benefit second while cost. year, prospects price half forward targeting of into between this allow our initial clients still from the we and to lowered SUTA our lower

we We further pricing determine SUTA will for enter need as rates the closely adjustments. XXXX to any monitor

during a area QX tax payroll the was federal years. to of prior million in outcome $XX receipt tax refunds positive of payroll another Now related

in while growth relative plans. to to current continue ongoing the QX our investing also for balance long-term As we our costs pandemic operating and expenses, managing

implementation. force incurred XXXX. have related increased half flat We our marketing headcount first Other remained corporate has to costs of employee lead generation and our activity related spend in sales have relatively to the

and have travel certain employees events. for We reinstituted

continue at with managed pandemic. G&A growth However, along other costs, our costs, from historically to the low these recovers the be economy levels and as

financial as growth in liquidity remain strong continue provide shareholders. our returns we to our and investment position Our and

repurchased During XX.X%, $X QX the out We of shares and adjusted of invested $XXX quarter, in of $X stock cost million capital million and in $XX ended we XX,XXX dividend our cash million $XXX a with rate raised at dividends million million, debt. by expenditures. of paying cash

like I'd Paul. to time, this over at call the to Now turn

Paul Sarvadi

and Thank today. call you, all our thank joining Doug, for you

thoughts in the face about of sector. we HR had the and opportunity first ahead finish PEO overall Insperity, begin ongoing discussion execution with the comments the exciting XXXX by of first year. see of for the me and We've acceleration. excellent some solid for I'll this half market balance growth And color industry I'll our Let the uncertainty half some the providing pandemic. follow an the strong services priorities and of driving effects from results quarter these considerable the second our around of with

Our priority as paid accelerate through employees growth soon the this to year as was worksite growth to possible and as momentum entered double-digit in uncertainty. return we managing our while

client, began, optimistic we X% of would employee XXXX which worksite represented base. we were achieve early or year this the of despite by loss year-end the our just our growth As rate largest under

hiring solid our momentum, Our and improvement underlying client retention steady confidence base. the was in sales based client upon

schedule, and we the client growth now growth. provided paid our in our drivers. worksite acceleration strong unit produce client to in high in guidance sales, from rapid trends quarter, previous a X expect all Outperformance combined our of of hiring stronger-than-expected employees in retention ahead with base the indicates booked recent within historically third to today return to double-digit building growth off well Our unit

in worksite X months our the up over by In X% point fact, February. employees end June in paid year the of were of low

fuel sales worksite given employees us clients typically the quarter in sales employees worksite a This second to third up become new the since met and over for following paid well booked with booked in targets respectively, quarter. sales year. quarter quarter XX%, New last XX% growth our and positions from

achieved highlight quarter of XX% organization booked was our Another Acceleration, from traditional Workforce forecast. for sales our which employment this sales solution,

decent are traction to period offering QX increasing with same from year. the contribution in this gross We profit offering see this last significantly beginning over with

Although we are offering bodes substantial. gross believe this small contributors relative future the numbers is this to for profit, the trend other for to the well still since potential

acceleration and at in end first over our businesses driver in succeed. year this retention the a in base to help dramatically half by recede more our off the interactions have our this the year, client our the rapid to it team's most budgeted was the of we The historically base capability HR Our levels to their would depth for balance to the our levels even at above high year. client low to rates level We continued the We the at service growth discovered service of and quarter metric interactions range growth the of our sophisticated some pre-pandemic appears near potential expected significant service now, function the second likely in but of end have cooling up historically appears normal levels. continued historical end, client above of hiring are client our of more has with of high it as expertise expectations.

respectively. wages candidates competition against of immediate of Optimization dynamic in client and advantages hiring functions for address availability The a a is much tightening that some showing of the of pronounced, advantage. bonuses HR We this pandemic. the quite This over stress and within could offering compete inflation, reprioritization is is also of Workforce to increased to and gain year larger dampen XX%, represents own half the considerable back pursue effects significant expect market to year, Once candidates sophisticated the level to of career opportunity a major out the needed wage for average to capability market's some the but around opportunities. leading again, retirements these turnover reflecting labor better since the marketplace a up these decisions personal bonuses coming The competitive Insperity signing with rate. employees of base firms. labor our continued one result changes the data employee qualified increase an the respond saw for to our We and X% in

and this X of by pandemic and that also of parts care costs. health year direct are affected will the moving reflected in areas unemployment volatility areas settle The in cost expected second There wanes. half time many take to most the our first as out simply the taxes quarter pandemic, X some these specifically

in than normal ranges wider our expectations areas. set for to continue these will we So

includes So delivered solid year. stage profitability, we our for the plan have sales the strategic continue balance set a in good and to for and plan year-to-date capacity. the profitability of service investments and long-term growth To we have

around into advisors performance business month of number of XXX the the up XX go a ramping country. begin at approximately BPAs and per to expect across We at rate XXXX

with early are We across reinstituting September the country simultaneous remotely. in and linked fall together events our campaign kickoff held

have spend, also in increase of have qualified digital leads. campaigns several an We marketing radio extending dollars and successful million been budgeted generating that

in add investment reached our growth expect the client invest target capacity organization and has the management. with to in Insperity than experiencing months optimism throughout adoption likelihood core ahead. the continue different ahead. stage our and and achieve years the to upon our services objectives. schedule has At consultative interactions of tremendous successful optimism force we to is support team sales the build XX pandemic years never for the spring. in implement Demand of XXXX. long-term function for addressable company to The growth future the recognition is continuing My this owners the of I've a I retention higher. dynamic market has the C-level rollout length mentioned average our increase we the also rooted on of rapid will to are recent a market and been have importantly, a to selling service and the And campaign the industry. for HR intend our the in is building business next opportunity a time fall the and We industry need believe importance number recognition the in and large. double-digit of total and We our of PEO seen the increase the of HR are more sales for and of success and most are of into value

and in distinct for center even more and small the premium minds Insperity's of and value the advantage general so, C-suite. the and PEO firms highlights in the strategy service of of offering. business reality to retention. is the at and inclusion, element change communication apparent acquisition most that maybe and discussed emotional significant diversity an culture, Another this and note and people topics talent support corporate implementing is is level, and the ongoing including It the employee front and being This option owners midsized competitive developing

gas growth So pour believe and potential prepare the years in it's ahead. we for time to the the on fire

expanding provide We market offerings. point, best-of-class We of the value are our drive will exceptional in ways of deliver to a a in top wave value wave communities shareholders. intend to of like a growing I'd to Insperity to so of great Insperity's this HR us and the this investing designed third top service At We back the innovative succeed helping with a call to our prosper the by position awareness continue our businesses to recognized the to the solution second Doug. awareness to and mission PEO pass allow believe of deliver opportunity of of function model. capitalize ride on can superior to on on wave sophisticated this of returns continue adoption of on

Douglas Sharp

Thanks, Paul.

growth Now for into forecasting full is the now to year, of the We're third X% previous starting growth. an year, for half year over hiring for X.X% client X.X% quarter our higher retention increase sales full and the continuing leading the outperformance an and update let clients. our to our the XXXX. going momentum provide to during in by continued QX, our based This employee me guidance of some guidance a first X% upon worksite point improvement and

XXXX. of We paid quarter. X.X% are QX the the prior XX.X% of QX off employee growth is in to X% coming This growth year-over-year forecasting worksite over

clients corporate approach These this of campaign, upside of the sales to include in and investment fall our mentioned campaign over advertising strong of and pass sales Also, goals. retention SUTA we to it half and our the renewing savings further few retention a pricing to a As sales hiring of latter XXXX annual business opportunity we event. our invested have upon in increased and our rates in earnings allocations support anticipated, we fall have momentum. prospects our to created in initiatives as and taken minutes lower during ago, client initiatives result as XXXX the the coming SUTA advisors, year a portion first build than I through taken of performance continued designed reinstituting the lower half sales the

to million This earnings to expectations. the year, from EBITDA now the factor potential where up When does the there $XXX COVID-related million. half pandemic are factors. of considering is previous first care, a the of our continue in and direct uncertainty earnings $XXX higher its our to a be in a and the the Delta programs, around particularly Now range of adopting impact cost we guidance take of upside our investment million this benefits we seem for range acuity forecasting the deferred $XXX wider-than-usual continued area approach and costs, Therefore, $XXX surrounding variant potential of million. are on portion our to of adjusted

year $X guidance full forecasting $X.XX $X.XX. EPS, for of from up to we range are to XXXX now of our $X.XX, As a adjusted previous

we As in forecasting QX, of million $XX from for million are and EPS $X.XX. to adjusted adjusted to a $X.XX $XX range EBITDA

to I'd like up call questions. at the open this Now time, for

Operator

Instructions]. [Operator

the question first [Andrew Anthony William from Nicholas] Your from (sic) Blair. line of Nicholas comes

Andrew Nicholas

this one, on could mid-market. you just remarks, I I an first hoping provide I and update missed My apologize if the the in prepared was but

Specifically, any the momentum on conversion color on there, commentary rates, pipeline, cetera. et sales

Paul Sarvadi

year out mention And on at sales had I the course, quarter. a last into this problem. of of wrung pipeline really report forward this mid-market course that the They're, year. to no built mid-market And mentioned Sure, didn't it's mid-market toward this we sales the we're that really growth in really quarter of time. end the over but the not and fall total numbers. looking else I strong good front to embedded much

Andrew Nicholas

that to obviously, pretty understand of of how guidance, sales? dimensionalize is much Is new increase consequence employees, how Got big any versus specifically stronger market? a it. then the in And the from function there. of terms trying there of much base change a way of the hiring better kind a and the end around worksite in to Just is

Paul Sarvadi

would had to remarks this that less full year, end in base of prepared in typically, that our than for low hiring Well, the range at year. be which over I And certainly, the so. -- And the we gain generally or mentioned the in range. -- for of use the the maybe Yes. over the client of of in the around a our we we end have or X% net course range, X% a to be high we budgeted the of X% in be range course would year

over year. terms over going you estimate back had color in the gives that bit sales. look in end half, the the first So from the of outperformance end high a low you to the -- of little our certainly, as full you for But

which is levels, net what from to be change exactly the upside which the clients historically for at base retention incredible high you, had form the happened. You for

good for this year. part So the very of

budgeted We we not simply expectations. that these of in year the nice building that know our some. that's tightening up what in continue haven't labor we've kind at that market's of balance the really seen Be the rates if because could like we're but for

Operator

of next line Securities. Truist Tobey comes from the Your question Sommer from

Tobey Sommer

could into dig you if wondering was I the pricing.

said on kind out reaction about you up to if being go-forward basis? some then the those How we some but of that of pricing in customers. X% X should your of a maybe think situation I alleviating net payroll to we pieces better sort think

Paul Sarvadi

question, Tobey. Yes. Thanks the for

marketplace. are trends we're price underlying we in seeing the appropriately with to move continuing So

you've going that employee in seen revenue increase the so of up that reflect the of what we're what for does in the doing. And total ultimate allocations out. of come pricing each per course, costs strong manage each And we

from be the the through. had passed the not So of rates that did year, would come on additional the we that early tax, relative to pandemic. unemployment A boosted during costs in layoffs lot anticipating

another have we the this managing contribute as manage to within of next aspect of to some And then cost. of profit. ongoing reduce we year year's potential look cost insight each take is for get allocation rates price opted and the balance buckets that so But the we the that and gross the into

Tobey Sommer

terms a growth. us give From Could at incremental areas you about where in what growth year-end? investments you perspective, stimulate puts you're increased BPA color year-over-year some then investments? And some help upside about investing of would to XXX the sort applying the of you're you talked and

Paul Sarvadi

targets maturing hit allowing of of the year first growth to number We've absolutely. plan us half without our a great sales net was staff, our BPAs, of sales which a the the began. with the lot in for Yes, had as

ramp the to which over of As of in around be we'll that's investing, of and of us get last up helping XXX the ahead in benefit effective marketing radio year dollars put additional gain. front the X% also the some we're should prior, number, to the we the so leads. digital number efficiency sales BPAs, continuing in But be both proven advertising qualified year, half of us from

So of and balance sales targets strong on hitting company little in the the sit insurance the that policy today. sales over have momentum is continuing the to investment a we as year on build we of bit those

months starting both it -- because So it growth to XX That's BPAs. increasing train your investment back makes XXXX in go XX BPAs. number sense the head to takes to really of to

support the having. moving of are that BPAs in So the our success in up count year, meantime, the number. back right of we'll half current up help half investing and to the And BPA over more year ramping this next trained be the to we're that first

Operator

line from Josh Vogel of Sidoti. question next from Your the comes

Joshua Vogel

Last reduction a client by offset of quarter, talked a was bit you've size about little in clients. question, first increasing it My the average count. the

was like existing client I to at prospects look curious, the and today, looking average pipeline just relative what when base? So the wins we're your profile does

Paul Sarvadi

Yes.

the half last the of the average consistent customer base. base that both course year, coming COVID. So over about -- prospect pretty to come the seen And of decline of it's it's between and out of size the we in average back. interesting watch about how an saw, X% And been we've the

prospect through size, would be there's say half on it back maybe So XX% me, level. in be to more back before also average the some the there I gained base, flowing we're means, seems That in we're to and still at to to both base. that

So But there. there more that may consider found businesses be bit of room some may other have a just to their tightened little you efficiencies. also, have and belt often kind

So to company It beyond growth to growth get may that. within their -- that level. take new new not back would for go

Joshua Vogel

and and appreciate change I if now the retention. the on or you're the see year that point along lockdowns to event? further which this sales silly fly, changes savings, expectations you? be stimulus of the tax we And potentially those be can done support insights. some And at had may a any unemployment rates pass these to rates XXXX at squeeze Great, this be only but lower a could extended rates those how in have using and state efforts, I year, come looking apologize, would states once Or at can below you and beginning

Paul Sarvadi

midyear. unemployment to would kind It's unusual change be highly be of but -- impossible It would be there for highly unusual. that'd Yes. I not some

the more this side. We've at for those have the we'll what's just at looking what in to XXXX, and cost is side, about on the good look more year. pricing. going a through. in adjusted flow really, with point, And into that ahead you pricing pricing is that this for we this cost prepared adjusting occur so And both for didn't XXXX tax about into system, on news right rates changes the the insight when change unemployment happening And

the the match to cost in tax easier area. much it's So unemployment and pricing

Operator

Partners. of next from Jeffrey ROTH Martin Capital from line Your comes question the

Jeffrey Martin

out on the the what significantly, us a of on both features sources to that being -- and employee you year-over-year, Acceleration parse per offer? well, get higher -- additional sense so. kind versus Could Wanted your the some gross profit Software-as-a-Service or up like dollars Is worksite of it's but employee, are? revenue $XXX within pretty worksite platforms Workforce contribute maybe in the ancillary it wage inflation count commissions not help versus

Douglas Sharp

Yes.

the X%, I left number, it's per XX% So employee at if total well, obviously, increase in And looking revenues, volumes first, revenue employee you're then increase year-over-year in about a QX in that you're payments. And XX%. for worksite think, stimulus other is we with talked number. the so with back passing that X% with of XX% so pricing about FICA XXXX and what has happening to that do X% the or and the of in through, been we've was deferral the fact increase government was that in

didn't so that significantly. issue, So money been revenue had has you since your last you flowing employee and per a comparison have lessened that year through

so fee and And then -- back service QX in credits we year. customer gave of last

the piece And that that's revenue number. so per other employee of

Jeffrey Martin

then that also to things Okay, X.X years great. today pandemic? ago pre years, any speak could you Are there doing X weren't doing your retention maybe And you're client you unique efforts?

Paul Sarvadi

are as there year-end in few mentioned. a things terms on and subtleties year the the the this in with there in going transition, look down way are it. we excited about to processes I'm interactions I've the clients forward that But of like more Well, quite that really

in clients think how like we processes that jumbo right we're couple of in could have of a to large those the that retention terms now don't this or last work. we in kind the place year, attrition continue And of of I or type affect and good year-ends. had have

feel good is way about but to So optimistic retention about it's point going the year. this the balance early and the of we

Operator

Marcon from is have from The Mark next question Baird. that we

Mark Marcon

talk fully between sequential aware just talk of just trend I when quarter? course lag cost. of the trends you're when One, little are costs what cost in that elective couple about bit wondering as then unfolds? a of we did bit of you seeing the seeing and it seeing How about the and should expanding. length interactions could and a aspect them. the those infrastructure think what on know and a over terms are it to of what year gross you you in as the of relates there's interactions particularly aspect the X group thinking healthcare of if service Just how and you're terms second a elements. about little about the can become the you That's the you're procedures of is, it incurred how But it. And service and

Paul Sarvadi

If want the benefit moving Sure. really and side interesting there as the components to watch about we because and moving talk you parts they down first, really play this been have have was a out on to to monitor. you the that as -- pandemic of it's lot know, parts, dig dynamics of

so that deferral have lowers you some care, obviously, of cost. you have -- if your And

actual the come pandemic, have claim because in start have we buy extended or through costs. then and costs COVID addition up more that periods, pharmacy potential you had to deferred. in you And year, If a -- of coming allowing for of costs vaccine for the people deferral early of costs. And dramatically go testing they was were the had care to chronic care course, this you have you then

dug certainly, quarter detail. costs this at to the COVID really So were look in we higher. And

lab and relate levels it's and plan. MRIs the and year and half -- first COVID plays to deferral of early mentioned, time, things remember, the nature. over the to the little But some plays We you in being the over all like higher you of because work care -- inside part started that possible so If story. hospitalizations as the pieces map interesting that of out see of certainly out of benefit bits peak over all of just that it's things

all we in, a of expected range little our higher but we the or that of expectations. would not have So than expect did outside

I have we've appropriately So year, to wider a why that's to we and our conservative, targets. think continued around range be continue earnings for the full

So that's benefit the side.

based budgeted. way service is we needs have and faster in service level, time at than capacity has a service Now it our to on the continued definitely growth the high invest on originally accelerated side,

important clients, unique services, and we that the of depth, breadth, provide our and it's breadth care is unique So effectively services in our of make our we factor staff maintain we our level model of the of sure and up sure marketplace. that make the the care level with to distinguishing depth service

got to those And that investment ready make always maintain sure that make the to when service you so that's you've manage and levels. definitely you're something

Mark Marcon

to great. and And of bit from That's X going about both of terms and lot seeing with regards so little a then you perspective revenue that half? the in couple what occurred regions worksite we out to pricing the what's forward, then model we a talk efforts, year? obviously see the to factor in as a pricing and change we see of tax rates can relative in stimulus can in far but half addition dynamics? the in the decline of employee in a growth, words, second when in sort better the should other particularly to from Workforce One, we and just might the regards working certain expectations contribution In of second Acceleration successes then should Workforce the with gaining lower how traction. half And the that it Acceleration, first can you're where states total be factors,

Paul Sarvadi

Yes.

it effect we'll the incurred tax, us people the building the in have for And for help on a which will rates the unemployment because lot quarter minimal So of collected these be remember, in the on rates taxes. it will their second new the -- year, business. of allocations also, adjusted many we've for really the though, limits even and actual taxes of of it's though a are balance most first lower your hit But quarter. next year, will unemployment -- so add

to a we -- have for the effect year. don't that's dramatic revenue lowering balance our that, of the So that's going see on

an routinely it's the more to option ingrained we not and of the and presented full seeing your they're it's It's because sales becoming mention being other part I'm I step. when interesting happen. because happening being Now more question Workforce Workforce quarter hoping just felt taking for for part Workforce are process, were beginning this what I needed rate. of that ready is is Administration, Acceleration more like That's on and really what the people an to is at the of a the acceptable Optimization

like get a on the XX number, small continue felt in I I a our across such a the basis, increased do contribution, potential I lot for we'll months, And even has think to year-over-year I really though time. total potential. look adoption base. and to when gross long to at it because needed profit it it BPA a mention it has that it's

We see of the same adoption to in base. continue trends the

we're employees unit about really unit metric much is and to adjusted factors is worksite per risk, drive key unit us make worksite are really So what that of And how for key gross per our unit bright it's flow future EBITDA a expense the business, continue in like is so risk what you that business about primary of it employee. cash these you to because employee -- profit the the revenue, allows per spot worksite and take.

the future. that anything tremendous that think drives has potential equation, So for we

Operator

Mr. would now Thank I Sarvadi. you. the ahead, The like turn closed. over to to back go back call to Q&A Please is sir.

Paul Sarvadi

in and to for look to and any the call questions today. coming I'd at we'll you once Thank we your company appreciate next quarter. again, We point the fall. some the forward seeing joining for interest forward like Doug again, to this see you days. follow-up in Well, And look you thank everybody

Operator

and today's conference Thank you joining concludes call. disconnect. all now you This for may

Insperity (NSP) 2 Aug 212021 Q2 Earnings call transcript