Insperity, Inc. (NYSE:NSP) Q1 2015 Earnings Conference Call - Final Transcript

May 01, 2015 • 10:00 am ET


Insperity, Inc. (NYSE:NSP) Q1 2015 Earnings Conference Call - Final Transcript


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Good morning. My name is Sally, and I will be your conference operator today. I would like to welcome everyone to the Insperity first quarter 2015 earnings conference call. (Operator Instructions) At this time, I would like to introduce today's speakers. Joining us are Paul Sarvadi, Chairman of the Board and Chief Executive Officer; Richard Rawson, President; and Douglas Sharp, Senior Vice President of Finance, Chief Financial Officer and Treasurer.

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

Douglas Sharp

We appreciate you joining us this morning. Let me begin by outlining our plan for this morning's call. First, I'm going to discuss the details of our record high first quarter financial results. Paul will then comment on our first quarter achievements and our plans for the remainder of the year.

I will return to provide our finance guidance for the second quarter and an update to our full year 2015 guidance. We will then end the call with the question-and-answer session where Paul, Richard and I will be available.(Forward-Looking Cautionary Statements)

Now, let me begin today's call by discussing our strong first quarter results. In general, the growth of worksite employees continued to accelerate as we ended the quarter with a double-digit increase over the prior year. Additionally, operating cost to generate results, which significantly exceeded our Q1 plan.

For the first quarter, adjusted EBITDA increased 74% over Q1 of 2014 to $42.3 million. Adjusted earnings per share were $0.86, an increase of 105% over Q1 of the prior year. Revenues increased 10% over Q1 of 2014 to $700 million on a 9% year-over-year increase in average paid worksite employees.

Now, our successful fall sales campaign and yearend client retention efforts resulted in a step up in average paid worksite employees over the fourth quarter of 2014 to $137,959 for Q1. Client attrition averaged 10% for the quarter, a reduction from 13% in Q1 of each of the prior two years.

Net hiring in our client base came in below both our forecast in Q1 of the prior year, reflecting the weak employment numbers early in the quarter. While this resulted in average worksite employees coming in slightly below our forecast, our recent sales and retention results drove us to 10% unit growth by the end of the quarter.

As for our gross profit, we achieved a 22% increase over 2014 on the 9% increase in average paid worksite employees. This increase was the result of significant efforts throughout 2014 around optimizing pricing on both new and renewing business. Additionally, at yearend, we chose not to renew a smaller number of clients that had not met our gross profit targets.

And last, but not least, we are positively impacted by continued low trend in healthcare costs, resulting from the management of plan design, lower COBRA participation, and generally lower healthcare utilization. The increase in adjusted EBITDA of 74% on the 22% gross profit growth also reflects the operating leverage in the