Insperity, Inc. (NYSE:NSP) Q4 2017 Earnings Conference Call - Final Transcript

Feb 12, 2018 • 10:00 am ET

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Insperity, Inc. (NYSE:NSP) Q4 2017 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning. My name is Devin, and I will be your conference operator today. I would like to welcome everyone to the Insperity Fourth Quarter 2017 Earnings Conference Call. [Operator Instructions] Thank you.

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

Executive
Douglas S. Sharp

Thank you. 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 fourth quarter and full year 2017 financial results. Paul will then recap the 2017 year and discuss the major initiatives of our 2018 plan. I will return to provide our financial guidance for the first quarter and full year 2018. We will then end the call with a question-and-answer session, where Paul, Richard and I will be available.

Now, before we begin, I would like to remind you that Mr. Sarvadi, Mr. Rawson, or myself, may make forward-looking statements during today's call, which are subject to risks, uncertainties and assumptions. In addition, some of our discussion may include non-GAAP financial measures. For a more detailed discussions of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements and reconciliations of non-GAAP financial measures, please see the Company's public filings, including the Form 8-K filed today, which are available on our Website.

Now, let me begin today's call by discussing our record setting fourth quarter bottom line results as we executed our plan for a continued double-digit worksite employee growth, pricing strength and direct cost management. Adjusted EBITDA increased 67% over Q4 of 2016 to $38.5 million. Adjusted EPS totaled $0.55 after taking into account the recent two-for-one stock split. This is an increase of 90% over the fourth quarter of 2016 and above the high end of our guidance of $0.46 to $0.48 per share.

As for the details, average paid worksite employees increased by 10% over Q4 of 2016. Client retention remained strong, again averaging over 99% for the quarter, and as Paul will discuss in detail in a few minutes, we experienced a successful fall sales and retention campaign. These results will be reflected in our first quarter 2018 guidance as worksite employees sold in Q4 are typically enrolled and paid in January of the following year.

Net hiring by the client base was once again minimal as a net loss during the first month of the quarter was followed by slight gains in each of the following two months. Gross profit increased by 29% over Q4 of 2016 on the 10% worksite employee growth, continued pricing strength and favorable outcomes in our payroll tax, benefit and workers' compensation programs.

Our fourth quarter adjusted operating expenses increased 23% to $118 million and included a