Insperity (NSP) 26 Apr 232023 Q1 Earnings call transcript

Good morning. My name is Holly and I will be your conference operator today. I would like to welcome everyone to the Insperity First Quarter 2023 Earnings Conference Call. All participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. this being note Please Instructions] conference recorded. is [Operator

like today's speakers. this time, introduce would I At to

Joining Joining Douglas Board and and President us, of Finance, Treasurer. Chief Chairman are of Executive us are Officer; Financial and Chief Sharp, Vice Sarvadi, Executive Officer Paul the

Mr. At Sharp. like to I'd ahead. go time, turn the please this over call to Douglas Sharp,

Thank you. We appreciate you joining us.

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

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

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

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

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

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

double-digit first earnings our per discuss QX share to XX% adjusted quarter employee which let's operating These earnings to our strong in worksite $XXX reflect costs above growth, costs forecast. XXXX line of and our with Now in adjusted reported XX% in a expectations. in increase we a achieved pricing, over We results, increase EBITDA million operating results and $X.XX.

from our campaign client of with near client year-end increased sales levels. client metric, XXXX, our were number our reflects a associated paid forecasted by QX successful new and over worksite renewal worksite guidance. recent growth paid growth average employees our for sales employees Both heavy the This As which retention period. and was within transition XX% of

XXXX the hiring was As about and of expected, by net level. XX% our QX slowed clients

was the of current XX% environment. XX% and given profit through employee over growth pricing Gross prior key QX strong worksite which the the year by increased a transition, objective on year-end inflationary the

quarter The compensation, and our with were cost including benefits first programs, our contribution expectations. in workers' from line direct

As forecasted, personnel increased average continued Advisors, an growth. our for necessary hired The our maintain the Business number as of increase level included operating period XX% in expenses we of to Performance service and also additional increase a in operating XX% support and plan QX premium service future included growth. expense

to our implementation the also invest Salesforce. in including technology, ongoing of We continue

XXXX higher invested Net interest income of on QX and balances. interest rates increased $X over million

is the In rate effective expected of XX.X%, first year benefit during awards tax was QX. due which vesting stock quarter, associated tax the with full lower rate employee than to our

liquidity returns shareholders. position our strong our remains invest and Our while to as continue financial to in providing growth, we

During the at $XXX cash We XXX,XXX quarter, $XX with cost of and out of we cash ended million a stock shares and million paid $XXX in dividends. of of repurchased adjusted million debt. million QX $XX

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

our regarding on plans to on opportunity, year how detail continue for some perspective five-year with balance all Doug, community. our our of challenges the quarter finish to the call. business the some year current the results I'll first thank medium the this for to in and I'll comment you, the provide observed I'll capitalize and our into regarding Thank plan. joining you small and excellent sized also Today, market in we fits

achieve double-digit results and employees. quarter, within some selling of both base factor our strong to is a key period client hiring and with heaviest successful were a when first point the starting every on the growth. completion This our to quarter over year solid fronts, to worksite retention the and achieve year for year led One combined us paid

We for factor climate. The a This position highlight the other in combination was puts us growth solid pricing the year first in a key current also is in both despite and quarter. factors these transition the the strong is profitability in completed. quarter every once important believe reflected year-end of the two economic

were These community. rising medium-sized small the a costs, uncertainty in changing economy against results weakening a strong to the due in persistent backdrop the marketplace dynamic elevated inflation, of to borrowing and business

optimization system, reflected Bank budget. booked Bank. below hesitation A sparked QX, Signature with dynamic workforce In reflected coinciding in was country our of and and to in collapse the decision-making California a and by the degree Valley Silicon in the greater across this new financial of coming the sales degree process turmoil

impact in This Federation survey. was National client in client optimism March. Independent survey One the expected Businesses declined less also outlook expecting was reflected over alignment from from reported climate economic The economic impact and negative than were These with now was XX%. results XX% impact expecting change of internal significant a ago, positive our XX%. Those in the of climate. quarter the most to the our base those impact dropped is a in recently XX%

client recent some in first in in mid-single monitor to our a pay XX% pay couple in average we quarter slowdown dropped dropped employees below threshold years. X% double below pipeline reflects as year-over-year in the a time economy. which reflects strong of in data our base second were seen digits the for companies, for increase overtime and clients, percentage quarters. a digits the client row compared internal payroll of a also sales total of the to down commissions the in strength of the Our prior pay worksite The our we to Both

we're base are experience. medium-sized and us to XX in our sophisticated this solutions are marketplace in over change and these business our We Now years their none unfamiliar environment. needs HR small client our what how of overall to experiencing, clients seeing the for and of understand developments prospects

of most growth these factor know drive to types this of environment also have meet sales sales, challenges service to is the make that opportunities generate. The number and in business organizations for critical important before tweaks most of we the shape performance solid we what We the in and and growth growth the most to of excellent our number of on are are performance. business And profitability advisers number driver discovery factor we continued believe important long-term advisers. performance calls. company, for number two in the support The drivers worked the and this

we've this currently, mentioned, in to BPAs, Doug last XXX an increase As ramped metric more than up key year. over XX%

the up driving on is to in calls focus board our our and bid numbers across the discovery activity services. opportunities Now

marketing XX% in of discovery XX%, excellent up up QX an off Our we're these and marketing start calls an efforts year-over-year. important to opportunities, driver year is with this leads

spring growth all of campaign our month, combination us market-specific our activity our number media confidence on launched The in also markets focus balance year the country. continue levels early BPAs, for to We the momentum in of growth our in includes plans mid-June. of which gives and This the brand management this across the our designed sales marketing awareness our this plan continues into and plans beyond.

you we're for provide position in believe guidance also We see, minutes. as in few profitability a specific excellent will for the Doug as solid year,

in the in our the long-term Our key guidance driver progress term raised our our outlook. our and near strong to is of contributing Workforce is Acceleration offering pricing

year-over-year organization on Acceleration sales the this New sales reflecting XX% QX, our were booked offering. increased up of Workforce in focus

programs sales successfully Recent have enhanced this our compensation recognition effort. adjustments and to

improve significant XX,XXX for our life further Workforce to current long-term the model process to customer us offering nearly has potential face to efficiency, BPA retention. Acceleration and potential Workforce Our enhance our for year. by has owners face business that lower sales Acceleration our turnover to our enhance client allows leveraging strategy see business each sales

have look two to and metrics, targets So as EBITDA we paid on single-digit at growth in our year employees adjusted potential the double-digit high challenging for environment, year. in economic Even this our the employees plan, context in our we two growth five-year on remain worksite exceed and year a worksite and this track EBITDA. in meet adjusted of key we

at HR and services model provided Insperity team XX% that worksite demonstrates likelihood every strength are these our and pandemic and XX% client. employee provide compound adjusted annual are key rates premium our at the during XX-year here sophisticated of in We on A rates with history, success in the even dedicated period. to look business growth elevate professionals best-in-class with that small incredible of this mid-sized growth metrics EBITDA, of the of These their success. solutions an of by degree with companies the back

our We shareholders. excellent clients, continue and expect this to to employees, level of results communities worksite produce commitment for

call I'd point, pass specific like to our provide this the back to guidance. to At Doug

Thanks, Paul.

refining our employee expectations. guidance our we to Now QX growth earnings an forecast which guidance, and let raising year our our in full me XXXX are paid worksite to update and provide

to the for growth guidance We forecasting compared are worksite our X.X% XXXX, employee X% growth. to of initial X% to year now full XX.X%

high what to in single-digit points sentiment employee a and period be in caution and appears still to negative guidance some worksite of the growth marketplace. updated economic Our uncertainty

As to are year-over-year EBITDA the adjusted XXXX and the in range $X.XX. worksite to forecasting employee We're $XXX growth for $XXX X% EPS QX, of adjusted X%. of range million forecasting we full to year now in of million $X.XX

interest an to We our QX strong improvement with midpoint outperformance direct operating budget in year. of trends income rising remainder upon this rates. in and include profitability updated generally line and have profitability our expected recent on guidance the of higher the is and our over pricing, based increased cost the This expenses in interest improvement

plan the personnel technology continues necessary investments. BPAs planning operating to including the meet marketing and investments our to growth and Our the five-year in objectives, include service and necessary

XX%. full a of estimating now are XXXX We effective tax income rate year

we wage of are as earnings range and and than reaching typical typically adjusted QX are higher level are prior EPS higher are employees subsequent lower million may recall, QX their worksite from to to in results payroll up As $X.XX. surplus adjusted over pattern. forecasting the we quarterly for $XX taxable remainder costs guidance as EBITDA the our year the $XX earn met. typically benefit considers This our QX and to step million quarters tax of earnings, And $X.XX you in deductibles a of as limits,

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

will this for first a Martin is be today conducting Jeff session. Your At [Operator ROTH time, coming at question question-and-answer Certainly. we MKM. Instructions] from

doing well. morning, Good you're Doug. Thanks. Hope

morning. Good

material Wondering was to a to employees some respect California detail any with loss result turmoil? Thanks. California period? worksite if in as the in impacted financial And of there Were can additional sales provide the you the market.

Sure, thank Appreciate question. for that. your you

this of describe case, in one. significant or as effect a in is making just shock Now would March what that And what to there's that decisions. was we in our market like of decision industry service And up. financial the issues environment of happens the more a came I experienced the is the month course, PEO use what just in hesitation the banking

almost framework they make. the a more And so it's in like capital fact, decision

So it's there's happens. of very something significant natural a have kind that hesitation if to

seen So bit. does did, we've type than area out York it already that across that And wane, bit companies, the as and in California, once it happen things we little even which rest in a of begin New usually financial the well. a saw there's and did the technology more heavier but we where settled to have country

see high a So a in for front. blip, single-digit one. that's on we're and can good shape year, still of this and expectations in really our rest we're I'd growth, double-digit the still it And unit great expecting quarter brief that year. We had a and consider growth why the you

trend any of question second of change And -- actually a is, Great. progress notice April the you secondly my quarter now? even throughout then question. as through January part the second And hiring most two-part. is in we then the the One from that's did

it leave at Thanks. just that. we'll So

Yeah.

have even compared we we really to last rate in year. a third in So And the quarter expected slowed dramatically. seen and reduced then the fourth down significantly quarter hiring it

quarter that's And around and XX% the we in. where first of of so came we the were level expecting year, last

our that's it met lower significantly expectations, year, continue expect the it's to So what of than the for year. and we but certainly last rest

client with organization the hiring base bit over number that their year a number same. to and we of expectations, as the have have our it's expect stay that about little lot little to of about that base employees small in their than a usual bigger the more and progresses half do expect still expect less still a We research client a and

of directly was the there anything then the my with to other part pricing, strong respect question trend? Great. attributed to pricing is And

wage direction, went entire environment, business. the or really we renewing So to you your effort year just And our new on on focus We especially important was in like best the total is cost. -- drive to going have a organization had we across that have year. and to right people, over group that a your and and own service year that, need a inflation it's in run retain pricing did numbers home full really because want the cost really just when this XX% hire those good strength. on you an an for labor out-of-the-park And and focus when in the your last inflationary did of

when And to be of perfect a of for of period want our position this us and it's And to well to But to pricing in be, time of the right knows we that's environment out to point, so the this the a marketing a with and challenging some strong grow strong of degree. We've where continue for this, the to this a is growth have we weakens be be notes, before. foundation, middle facing a what a we can BPAs, at us in. our out these this you And clients having business end and to profitability. like so absolutely economy do front to turns down be slowdown there. positions is the best you're in double-digit fairway improve number in been for the through continue us position on effort who the but support know kind

from Truist Your next Tobey Sommer today question is for at coming Securities.

pulling how year? levers morning. of marketing Good productivity well over if think those about talk the could to And and/or wondering trending? I about how you. us the the as the sales the you increasing force Salesforce was are Thank of course as measures, you Thanks.

Yeah. you, Tobey. Thank

staff line that with at our of some your been closing your have in the et sales yeah, the when brief quarter. metrics, exception drag of where So have the in of with efficiency, on all you grow sales But faster, those you cetera. some end the expectations pause are

a the that long So we're are everything drive and like over the blip, in I on right said, I to things feel the right believe like we doing metrics that's those direction term. front,

there the focus levels you period of history now small throughout we've the through of medium-sized So our tougher business community. learned need the is, where opportunities. course, is a We go activity one to things on some is in because mindset of when just the more hesitancy

mentioned campaign just month. the marketing that the that successful we're beginning So at we've had replicating. efforts very this I we spring initiated of

And to drive invest heavily effort going opportunities. marketing so in to we're those our

-- because we're the we to have relationships, your driving We're course, of able our environment, ways of environment, growth and what And do Of And we we lot other opportunities. that the through to are a activity, other that that's doing partnership in program. on focus things drive through this metrics some of expect our more of really that in will economic lower environment. kind expecting. loyalty

this excellent others is we Now we've way less it before, do do other news keep down growing. the and seen because we only not those organization. go turn all into these opportunities for the periods good is, And than the we sales reason experience when training because

much We also the faster sales this. a growing sooner, number team opportunities. double the is and And emphasis because just of a way that growing come like out great the to much go period through of of

us to what economy of we So position, opportunity show about our we excited an and a don't that tougher situation is really do but know get I it kind this the strength. because in like to in gives

question to I about Thanks. Workforce Acceleration. wanted ask a

you point it that Is would to any way us good make it three either way You've changes that you or sense over make to years. the last manage the which seen growth report two externally? there a there at really or to

to enough Yeah. really and now, can once directly. great be getting that steps some of now, making That's we we we and in we're level consistency up adoption of there. entire have we're get changes period metrics some across place believe really a will I that the more a track the that process measure in have organization. are the time Right on where them stage sales this the taking so and

us differently like be correct a see as model. at discussing silver we'll bullet won't we managing We a the because we think this that business the reporting the it And to but point, lot to we're And sense be managing way more a differently. we understanding. probably for be of there information it drive in in I want, everybody makes be know will results for will have more that good

the talking managed patient the loss more some How healthcare cost one, If in the more companies center. talking last year-to-date? care so from levels, in your hospital of activity does it trend for medical heard of I What's about of terms year? could volume public balance one companies ratios. benefit expectation the far about We've higher ask

Yeah.

into quarter. and So year, of those going the out that factors quarter, into obviously, in we benefit But a first of little stronger. work the take pricing our in some we expectations. in the mentioned as and we hair was bit remarks, the above call of for just the them first we UnitedHealthcare, prepared account cost with of same information give The side things came on our

first as in total, that program in ran So expected. the quarter

remainder remainder of as of it we And But over I now, of can obviously, see that say, as the have are. we the sort would with what stuck things change. year, year, over the our look we the expectations

has bit up really a to to bumped expectations little helped in favorable benefit relative that. coming the but the we've offset just cost pricing trend bit, So our a

just to our of following And program program. managed workers' workers' out contribution And expectations. be you're nice getting our to still comp up on continues the compensation

Marcon at Mark Baird. today Your next question from for coming is

Childress Mark. Good morning. This for is on Andre

as little Could give brand more initiatives taking of actually you're about of from some a and as well the early So, campaign? awareness quite color you the you've your trends a some some that on spring spoken awareness marketing maybe initiatives bit that campaign.

that just the plan had last at course, programs we successful the because year. It's a you beginning of that reflects -- spring it's of started, early can the tell this whole little for the in that But I month.

got The first the across time ours we that from marketing we that. campaigns did then market media very results repeated And every of fall, the in country. specific and in excellent

that even celebrities So what by localized, I it's mean very done local is radio are ads and voices. by

plans another the whether community. environment, So work in on us different cetera. et environment, involved work in the it shows don't really in being based And local one are billboards

lot in how understand expect to work coordination we're very results will, we believe marketplaces, great have why in of they And based there's with of it's successful, we doing team and a marketplace, on each So it. we're our before. each to in working and be those proven has doing we what that that

that switching And for are the how acceleration you thinking to demand. this optimization? seeing of year? Great. the a over environment, for greater remainder you about preference In And workforce over are

evaluating that. and really that We're but nothing that level. There's see move ready It's to when don't all prospect stop to I that, interesting client is them. a to

both company basis. Acceleration? a model take they where kind appropriate and an whether or into on -- of step go That's are what as So to is approach. presenting And to Workforce apparent full then an client-by-client is the a right the initial timing

the do more drop situation then back clients go long that need to come to Acceleration, And of the to environment if haul, over place to also good many on. move is, for And up into see optimization. years a there's in we a then as Workforce Expect that. workforce into their news or a have that those the

needs the competing see time. support both with what of kind don't them as support. the a we one So based other. of at are it client on the their It's to way Actually,

the really dealing environment, the for demand -- properly they're sure this in So making affect. HR and issues with

So track on a of important they're difficult keep through doing it what a to period. becomes very element the business

keep to I people don't do they tough So business a going -- be demand through period. need understanding see and their to I continue the what to strong

of workforce the okay? And I'd this, but give our okay? total clarify, our we to that we employee profit acceleration then get out gross may to worksite like product guidance is specific -- to And you gross the is know PEO incremental also PEO, profit, gross that

So to some employees people report a definitely but PEO specific little the worksite is bit offering. our differently,

over good nearly program are Yeah, Doug. in in point, XXX,XXX the so mean a employees that's that is model. clients worksite Acceleration XX,XXX or we on employees PEO are that Workforce the What not our

Great. for one And me. just last

you point? quarter. you XXX,XXX first Could your capital shares So repurchased update the on provide on thoughts this in an at allocation

really direction. We move and to mindset. same the the We dividend advantage to take the of the of in opportunity to market are right continue like kind

have shares our dilution a cetera, for et yield shareholders. payout at to our what we should of target of We any buying for to dividend and back what have then also from And have like least be, ratio policy teams. incenting we offset kind enough a potential

in more is to look that. And if at you history, that, But bought than machine. shares about that a the cash lot back our fact flow we've addition a all is this this

that And we The would of the the is shareholders priority. highest is so that's for say this doing to important. to modest we still capital need with amount cash, invest the model. return right the things And

and lot of So side expectation available expect have to plenty we us that on don't that gives of increases continued do. cash a

at Blair. for William coming Andrew Nicholas is question next from today Your

the question. Hi, end like existing QX? Is does a good that expected. worksite range. as on employee lower my hiring a as of bit growth client on a was was in you like your look previous you start taking within retention to wanted seems guidance. being It I the primarily expected, Thanks lower morning. for touch with it's It one function

function a any figure start? baking the to there if kind it's other headwinds are if that there out trying of QX incremental lower of in or you're solely Just

the it's the QX issue. minor. the biggest on of range. we just our are and just you were some the weighing The low And in side, is Yeah. but -- just sales we of number also When then year lower But down year, on effects range end had from of X%. full to a We I the we We're -- to wider had range. it a we're because X% out within this there. still guess, the now range. at X.X% And XX.X% over uncertainty we're look the the

down goes The on end because being the So of the to first into the the bulk timing and that all X% is at come about to of from when the model. midpoint due range X%. quarter people low it's

you so that hesitation in. a little out all little to that have you pushes it when And got a bit, factor

Makes Are catch-up part the realize support terms sense. in side. picture, I bit small the on growth staffing? just I strong in do past spot big to do the pretty hiring side, service some need follow-up, And of growth over make Yeah, then a on given my operating it's expense to still change. up for several a about staffing the years? sure. wanted you on good latter BPA and you the in and talked you Or quite personnel

back this So front, first that really people last able a joined we We what just there digesting expectations. lot quarter to growth to would we're a the managing last were level of great half have had our we had we and of call routine of a organization. of up strong a And increased significantly. month a against and our year year, two, catch on new just that we're I the now pause for or on hair

ago. for year. the the front on said, kind then position we'll at also which And much I the that a better than don't in think, we're BPA of is, year-to-date, front, XX% that year expense good we growth we're staff. So both of level, in like a position. on We service We're On a shape any solid we be were now that. see support any and dramatic based operating solid changes in

Thank That's you. helpful.

now the over Sarvadi of turn the session, closing reached have to We Mr. call I will question-and-answer end for the remarks. and

Once very for everyone to again, thank on again next participating you to today. We you much. quarter. I'd look Thank like updating the forward call

conference, for may at you your disconnect lines your Thank this today's participation. concludes This you and time.