ý
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the quarterly period ended June 30, 2018.
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o
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
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For the transition period from _______________ to _______________
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Delaware
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|
76-0479645
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(State or other jurisdiction of incorporation or organization)
|
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(I.R.S. Employer Identification No.)
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|
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19001 Crescent Springs Drive
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Kingwood, Texas
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77339
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
ý
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging growth company
o
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TABLE OF CONTENTS
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Part I
|
|
|
|
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Item 1.
|
||
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|
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Item 2.
|
||
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Item 3.
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||
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Item 4.
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||
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Part II
|
||
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|
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Item 1.
|
||
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Item 1a.
|
||
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Item 2.
|
||
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Item 6.
|
|
|
June 30,
2018 |
|
December 31, 2017
|
||||
|
|
(Unaudited)
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
308,711
|
|
|
$
|
354,260
|
|
Restricted cash
|
|
41,827
|
|
|
41,137
|
|
||
Marketable securities
|
|
7,207
|
|
|
1,960
|
|
||
Accounts receivable, net:
|
|
|
|
|
|
|
||
Trade
|
|
4,066
|
|
|
12,292
|
|
||
Unbilled
|
|
344,685
|
|
|
318,431
|
|
||
Other
|
|
3,003
|
|
|
3,258
|
|
||
Prepaid insurance
|
|
17,648
|
|
|
10,782
|
|
||
Other current assets
|
|
22,640
|
|
|
26,991
|
|
||
Income taxes receivable
|
|
—
|
|
|
9,824
|
|
||
Total current assets
|
|
749,787
|
|
|
778,935
|
|
||
|
|
|
|
|
||||
Property and equipment:
|
|
|
|
|
|
|
||
Land
|
|
6,215
|
|
|
6,215
|
|
||
Buildings and improvements
|
|
98,332
|
|
|
95,615
|
|
||
Computer hardware and software
|
|
108,665
|
|
|
105,060
|
|
||
Software development costs
|
|
65,348
|
|
|
60,568
|
|
||
Furniture, fixtures and other
|
|
44,603
|
|
|
42,891
|
|
||
|
|
323,163
|
|
|
310,349
|
|
||
Accumulated depreciation and amortization
|
|
(224,135
|
)
|
|
(214,690
|
)
|
||
Total property and equipment, net
|
|
99,028
|
|
|
95,659
|
|
||
|
|
|
|
|
||||
Other assets:
|
|
|
|
|
|
|
||
Prepaid health insurance
|
|
9,000
|
|
|
9,000
|
|
||
Deposits – health insurance
|
|
5,300
|
|
|
5,300
|
|
||
Deposits – workers’ compensation
|
|
165,150
|
|
|
154,215
|
|
||
Goodwill and other intangible assets, net
|
|
12,732
|
|
|
12,762
|
|
||
Deferred income taxes, net
|
|
4,538
|
|
|
4,283
|
|
||
Other assets
|
|
5,533
|
|
|
3,541
|
|
||
Total other assets
|
|
202,253
|
|
|
189,101
|
|
||
Total assets
|
|
$
|
1,051,068
|
|
|
$
|
1,063,695
|
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
|
(Unaudited)
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
4,123
|
|
|
$
|
6,447
|
|
Payroll taxes and other payroll deductions payable
|
|
213,432
|
|
|
303,247
|
|
||
Accrued worksite employee payroll cost
|
|
295,596
|
|
|
267,402
|
|
||
Accrued health insurance costs
|
|
24,127
|
|
|
26,075
|
|
||
Accrued workers’ compensation costs
|
|
45,376
|
|
|
42,974
|
|
||
Accrued corporate payroll and commissions
|
|
41,059
|
|
|
52,595
|
|
||
Other accrued liabilities
|
|
24,094
|
|
|
27,741
|
|
||
Income taxes payable
|
|
6,984
|
|
|
—
|
|
||
Total current liabilities
|
|
654,791
|
|
|
726,481
|
|
||
|
|
|
|
|
||||
Noncurrent liabilities:
|
|
|
|
|
|
|||
Accrued workers’ compensation costs
|
|
174,017
|
|
|
166,493
|
|
||
Long-term debt
|
|
104,400
|
|
|
104,400
|
|
||
Total noncurrent liabilities
|
|
278,417
|
|
|
270,893
|
|
||
|
|
|
|
|
||||
Commitments and contingencies
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
|
|
|
||
Common stock
|
|
555
|
|
|
555
|
|
||
Additional paid-in capital
|
|
27,363
|
|
|
25,337
|
|
||
Treasury stock, at cost
|
|
(263,764
|
)
|
|
(256,363
|
)
|
||
Retained earnings
|
|
353,706
|
|
|
296,792
|
|
||
Total stockholders’ equity
|
|
117,860
|
|
|
66,321
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
1,051,068
|
|
|
$
|
1,063,695
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Revenues (gross billings of $5.550 billion, $4.742 billion, $11.473 billion and $9.758 billion, less worksite employee payroll cost of $4.628 billion $3.947 billion, $9.537 billion, and $8.080 billion, respectively)
|
|
$
|
922,295
|
|
|
$
|
795,552
|
|
|
$
|
1,936,667
|
|
|
$
|
1,678,216
|
|
|
|
|
|
|
|
|
|
|
||||||||
Direct costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Payroll taxes, benefits and workers’ compensation costs
|
|
767,751
|
|
|
664,999
|
|
|
1,582,403
|
|
|
1,388,317
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Gross profit
|
|
154,544
|
|
|
130,553
|
|
|
354,264
|
|
|
289,899
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries, wages and payroll taxes
|
|
68,748
|
|
|
61,458
|
|
|
155,934
|
|
|
123,915
|
|
||||
Stock-based compensation
|
|
5,752
|
|
|
5,303
|
|
|
8,887
|
|
|
9,806
|
|
||||
Commissions
|
|
6,979
|
|
|
5,664
|
|
|
13,045
|
|
|
10,140
|
|
||||
Advertising
|
|
6,585
|
|
|
6,175
|
|
|
10,150
|
|
|
10,147
|
|
||||
General and administrative expenses
|
|
27,419
|
|
|
24,610
|
|
|
57,271
|
|
|
50,802
|
|
||||
Depreciation and amortization
|
|
5,480
|
|
|
4,405
|
|
|
10,693
|
|
|
8,659
|
|
||||
|
|
120,963
|
|
|
107,615
|
|
|
255,980
|
|
|
213,469
|
|
||||
Operating income
|
|
33,581
|
|
|
22,938
|
|
|
98,284
|
|
|
76,430
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income
|
|
1,807
|
|
|
678
|
|
|
3,263
|
|
|
1,143
|
|
||||
Interest expense
|
|
(1,108
|
)
|
|
(803
|
)
|
|
(2,178
|
)
|
|
(1,426
|
)
|
||||
Income before income tax expense
|
|
34,280
|
|
|
22,813
|
|
|
99,369
|
|
|
76,147
|
|
||||
Income tax expense
|
|
9,720
|
|
|
8,795
|
|
|
24,818
|
|
|
26,501
|
|
||||
Net income
|
|
$
|
24,560
|
|
|
$
|
14,018
|
|
|
$
|
74,551
|
|
|
$
|
49,646
|
|
|
|
|
|
|
|
|
|
|
||||||||
Less distributed and undistributed earnings allocated to participating securities
|
|
(346
|
)
|
|
(248
|
)
|
|
(1,064
|
)
|
|
(909
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income allocated to common shares
|
|
$
|
24,214
|
|
|
$
|
13,770
|
|
|
$
|
73,487
|
|
|
$
|
48,737
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic net income per share of common stock
|
|
$
|
0.59
|
|
|
$
|
0.33
|
|
|
$
|
1.78
|
|
|
$
|
1.18
|
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted net income per share of common stock
|
|
$
|
0.58
|
|
|
$
|
0.33
|
|
|
$
|
1.77
|
|
|
$
|
1.18
|
|
|
|
Common Stock Issued
|
|
Additional Paid-In Capital
|
|
Treasury Stock
|
|
Retained Earnings and AOCI
|
|
Total
|
|||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2017
|
|
55,489
|
|
|
$
|
555
|
|
|
$
|
25,337
|
|
|
$
|
(256,363
|
)
|
|
$
|
296,792
|
|
|
$
|
66,321
|
|
Purchase of treasury stock, at cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,227
|
)
|
|
—
|
|
|
(16,227
|
)
|
|||||
Issuance of long-term incentive awards and dividend equivalents
|
|
—
|
|
|
—
|
|
|
(5,764
|
)
|
|
6,619
|
|
|
(855
|
)
|
|
—
|
|
|||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
7,005
|
|
|
1,882
|
|
|
—
|
|
|
8,887
|
|
|||||
Other
|
|
—
|
|
|
—
|
|
|
785
|
|
|
325
|
|
|
—
|
|
|
1,110
|
|
|||||
Dividends paid
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,786
|
)
|
|
(16,786
|
)
|
|||||
Unrealized gain on marketable securities, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74,551
|
|
|
74,551
|
|
|||||
Balance at June 30, 2018
|
|
55,489
|
|
|
$
|
555
|
|
|
$
|
27,363
|
|
|
$
|
(263,764
|
)
|
|
$
|
353,706
|
|
|
$
|
117,860
|
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2018
|
|
2017
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net income
|
|
$
|
74,551
|
|
|
$
|
49,646
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||
Depreciation and amortization
|
|
10,693
|
|
|
8,659
|
|
||
Stock-based compensation
|
|
8,887
|
|
|
9,806
|
|
||
Deferred income taxes
|
|
(255
|
)
|
|
8,465
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||
Accounts receivable
|
|
(17,773
|
)
|
|
8,715
|
|
||
Prepaid insurance
|
|
(6,866
|
)
|
|
(12,029
|
)
|
||
Other current assets
|
|
4,351
|
|
|
1,533
|
|
||
Other assets
|
|
(1,957
|
)
|
|
(2,375
|
)
|
||
Accounts payable
|
|
(2,324
|
)
|
|
(1,057
|
)
|
||
Payroll taxes and other payroll deductions payable
|
|
(89,815
|
)
|
|
(57,826
|
)
|
||
Accrued worksite employee payroll expense
|
|
28,194
|
|
|
13,342
|
|
||
Accrued health insurance costs
|
|
(1,948
|
)
|
|
219
|
|
||
Accrued workers’ compensation costs
|
|
9,926
|
|
|
12,832
|
|
||
Accrued corporate payroll, commissions and other accrued liabilities
|
|
(15,183
|
)
|
|
(11,974
|
)
|
||
Income taxes payable/receivable
|
|
16,808
|
|
|
(1,929
|
)
|
||
Total adjustments
|
|
(57,262
|
)
|
|
(23,619
|
)
|
||
Net cash provided by operating activities
|
|
17,289
|
|
|
26,027
|
|
||
|
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Marketable securities:
|
|
|
|
|
|
|
||
Purchases
|
|
(11,849
|
)
|
|
(919
|
)
|
||
Proceeds from dispositions
|
|
5,439
|
|
|
—
|
|
||
Proceeds from maturities
|
|
1,125
|
|
|
805
|
|
||
Property and equipment:
|
|
|
|
|
||||
Purchases
|
|
(14,025
|
)
|
|
(20,802
|
)
|
||
Net cash used in investing activities
|
|
(19,310
|
)
|
|
(20,916
|
)
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2018
|
|
2017
|
||||
Cash flows from financing activities:
|
|
|
|
|
||||
Purchase of treasury stock
|
|
$
|
(16,227
|
)
|
|
$
|
(25,528
|
)
|
Dividends paid
|
|
(16,786
|
)
|
|
(11,579
|
)
|
||
Other
|
|
1,110
|
|
|
830
|
|
||
Net cash used in financing activities
|
|
(31,903
|
)
|
|
(36,277
|
)
|
||
|
|
|
|
|
||||
Net decrease in cash, cash equivalents and restricted cash
|
|
(33,924
|
)
|
|
(31,166
|
)
|
||
Cash, cash equivalents and restricted cash beginning of period
|
|
549,612
|
|
|
472,609
|
|
||
Cash, cash equivalents and restricted cash end of period
|
|
$
|
515,688
|
|
|
$
|
441,443
|
|
Supplemental schedule of cash and cash equivalents and restricted cash:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
354,260
|
|
|
$
|
286,034
|
|
Restricted cash
|
|
41,137
|
|
|
42,637
|
|
||
Deposits – workers’ compensation
|
|
154,215
|
|
|
143,938
|
|
||
Cash, cash equivalents and restricted cash beginning of period
|
|
$
|
549,612
|
|
|
$
|
472,609
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
308,711
|
|
|
$
|
241,890
|
|
Restricted cash
|
|
41,827
|
|
|
41,703
|
|
||
Deposits – workers’ compensation
|
|
165,150
|
|
|
157,850
|
|
||
Cash, cash equivalents and restricted cash end of period
|
|
$
|
515,688
|
|
|
$
|
441,443
|
|
1.
|
Basis of Presentation
|
2.
|
Accounting Policies
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2018
|
|
2017
|
||||
|
|
(in thousands)
|
||||||
|
|
|
|
|
||||
Beginning balance, January 1,
|
|
$
|
207,630
|
|
|
$
|
183,928
|
|
Accrued claims
|
|
33,260
|
|
|
34,242
|
|
||
Present value discount
|
|
(3,360
|
)
|
|
(2,008
|
)
|
||
Paid claims
|
|
(21,686
|
)
|
|
(20,044
|
)
|
||
Ending balance
|
|
$
|
215,844
|
|
|
$
|
196,118
|
|
|
|
|
|
|
||||
Current portion of accrued claims
|
|
$
|
41,827
|
|
|
$
|
41,703
|
|
Long-term portion of accrued claims
|
|
174,017
|
|
|
154,415
|
|
||
|
|
$
|
215,844
|
|
|
$
|
196,118
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
(in thousands)
|
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
Northeast
|
|
$
|
239,278
|
|
|
$
|
204,285
|
|
|
$
|
511,642
|
|
|
$
|
440,385
|
|
Southeast
|
|
108,264
|
|
|
92,049
|
|
|
223,452
|
|
|
190,855
|
|
||||
Central
|
|
153,025
|
|
|
131,099
|
|
|
321,092
|
|
|
273,876
|
|
||||
Southwest
|
|
213,920
|
|
|
185,094
|
|
|
446,785
|
|
|
389,201
|
|
||||
West
|
|
194,986
|
|
|
170,452
|
|
|
407,605
|
|
|
357,896
|
|
||||
Other revenue
(1)
|
|
12,822
|
|
|
12,573
|
|
|
26,091
|
|
|
26,003
|
|
||||
Total revenue
|
|
$
|
922,295
|
|
|
$
|
795,552
|
|
|
$
|
1,936,667
|
|
|
$
|
1,678,216
|
|
3.
|
Cash, Cash Equivalents and Marketable Securities
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
|
(in thousands)
|
||||||
Overnight holdings
|
|
|
|
|
||||
Money market funds (cash equivalents)
|
|
$
|
282,337
|
|
|
$
|
338,112
|
|
Investment holdings
|
|
|
|
|
|
|
||
Money market funds (cash equivalents)
|
|
17,354
|
|
|
22,634
|
|
||
Marketable securities
|
|
7,207
|
|
|
1,960
|
|
||
|
|
306,898
|
|
|
362,706
|
|
||
Cash held in demand accounts
|
|
25,053
|
|
|
26,700
|
|
||
Outstanding checks
|
|
(16,033
|
)
|
|
(33,186
|
)
|
||
Total cash, cash equivalents and marketable securities
|
|
$
|
315,918
|
|
|
$
|
356,220
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
308,711
|
|
|
$
|
354,260
|
|
Marketable securities
|
|
7,207
|
|
|
1,960
|
|
||
Total cash, cash equivalents and marketable securities
|
|
$
|
315,918
|
|
|
$
|
356,220
|
|
4.
|
Fair Value Measurements
|
•
|
Level 1 - quoted prices in active markets using identical assets
|
•
|
Level 2 - significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs
|
•
|
Level 3 - significant unobservable inputs
|
|
|
Fair Value Measurements
|
||||||||||||||
|
|
(in thousands)
|
||||||||||||||
|
|
June 30,
2018 |
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
|
$
|
299,691
|
|
|
$
|
299,691
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Municipal bonds
|
|
7,207
|
|
|
—
|
|
|
7,207
|
|
|
—
|
|
||||
Total
|
|
$
|
306,898
|
|
|
$
|
299,691
|
|
|
$
|
7,207
|
|
|
$
|
—
|
|
|
|
Fair Value Measurements
|
||||||||||||||
|
|
(in thousands)
|
||||||||||||||
|
|
December 31,
2017 |
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
|
$
|
360,746
|
|
|
$
|
360,746
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Municipal bonds
|
|
1,960
|
|
|
—
|
|
|
1,960
|
|
|
—
|
|
||||
Total
|
|
$
|
362,706
|
|
|
$
|
360,746
|
|
|
$
|
1,960
|
|
|
$
|
—
|
|
5.
|
Long-Term Debt
|
6.
|
Stockholders' Equity
|
|
|
2018
|
|
2017
|
||||
|
|
(amounts per share)
|
||||||
|
|
|
|
|
||||
First quarter
|
|
$
|
0.20
|
|
|
$
|
0.125
|
|
Second quarter
|
|
0.20
|
|
|
0.150
|
|
7.
|
Net Income Per Share
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
(in thousands)
|
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
24,560
|
|
|
$
|
14,018
|
|
|
$
|
74,551
|
|
|
$
|
49,646
|
|
Less distributed and undistributed earnings allocated to participating securities
|
|
(346
|
)
|
|
(248
|
)
|
|
(1,064
|
)
|
|
(909
|
)
|
||||
Net income allocated to common shares
|
|
$
|
24,214
|
|
|
$
|
13,770
|
|
|
$
|
73,487
|
|
|
$
|
48,737
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding
|
|
41,377
|
|
|
41,258
|
|
|
41,301
|
|
|
41,194
|
|
||||
Incremental shares from assumed LTIP awards and conversions of common stock options
|
|
156
|
|
|
217
|
|
|
324
|
|
|
210
|
|
||||
Adjusted weighted average common shares outstanding
|
|
41,533
|
|
|
41,475
|
|
|
41,625
|
|
|
41,404
|
|
8.
|
Commitments and Contingencies
|
|
|
Three Months Ended
June 30, |
|||||||||
|
|
2018
|
|
2017
|
|
% Change
|
|||||
|
|
(in thousands, except per share and
statistical data) |
|||||||||
|
|
|
|
|
|
|
|||||
Revenues (gross billings of $5.550 billion and $4.742 billion, less worksite employee payroll cost of $4.628 billion and $3.947 billion, respectively)
|
|
$
|
922,295
|
|
|
$
|
795,552
|
|
|
15.9
|
%
|
Gross profit
|
|
154,544
|
|
|
130,553
|
|
|
18.4
|
%
|
||
Operating expenses
|
|
120,963
|
|
|
107,615
|
|
|
12.4
|
%
|
||
Operating income
|
|
33,581
|
|
|
22,938
|
|
|
46.4
|
%
|
||
Other income (expense)
|
|
699
|
|
|
(125
|
)
|
|
—
|
%
|
||
Net income
|
|
24,560
|
|
|
14,018
|
|
|
75.2
|
%
|
||
Diluted net income per share of common stock
(1)
|
|
0.58
|
|
|
0.33
|
|
|
75.8
|
%
|
||
Adjusted net income
(2)
|
|
28,681
|
|
|
17,277
|
|
|
66.0
|
%
|
||
Adjusted diluted net income per share of common stock
(2)
|
|
0.68
|
|
|
0.41
|
|
|
65.9
|
%
|
||
Adjusted EBITDA
(2)
|
|
46,620
|
|
|
33,324
|
|
|
39.9
|
%
|
||
|
|
|
|
|
|
|
|||||
Statistical Data:
|
|
|
|
|
|
|
|
|
|
||
Average number of worksite employees paid per month
|
|
203,950
|
|
|
180,276
|
|
|
13.1
|
%
|
||
Revenues per worksite employee per month
(3)
|
|
$
|
1,507
|
|
|
$
|
1,471
|
|
|
2.4
|
%
|
Gross profit per worksite employee per month
|
|
253
|
|
|
241
|
|
|
5.0
|
%
|
||
Operating expenses per worksite employee per month
|
|
198
|
|
|
199
|
|
|
(0.5
|
)%
|
||
Operating income per worksite employee per month
|
|
55
|
|
|
42
|
|
|
31.0
|
%
|
||
Net income per worksite employee per month
|
|
40
|
|
|
26
|
|
|
53.8
|
%
|
(1)
|
Amounts in 2017 adjusted to reflect the two-for-one split of our common stock effected on December 18, 2017 in the form of a stock dividend.
|
(2)
|
Please read “Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP.
|
(3)
|
Gross billings of
$9,071
and
$8,767
per worksite employee per month, less payroll cost of
$7,564
and
$7,296
per worksite employee per month, respectively.
|
|
|
Three Months Ended
June 30, |
|
Three Months Ended
June 30, |
|||||||||||||
|
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|||||||
|
|
(in thousands)
|
|
(% of total revenue)
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
Northeast
|
|
$
|
239,278
|
|
|
$
|
204,285
|
|
|
17.1
|
%
|
|
26.3
|
%
|
|
26.1
|
%
|
Southeast
|
|
108,264
|
|
|
92,049
|
|
|
17.6
|
%
|
|
11.9
|
%
|
|
11.8
|
%
|
||
Central
|
|
153,025
|
|
|
131,099
|
|
|
16.7
|
%
|
|
16.8
|
%
|
|
16.7
|
%
|
||
Southwest
|
|
213,920
|
|
|
185,094
|
|
|
15.6
|
%
|
|
23.5
|
%
|
|
23.6
|
%
|
||
West
|
|
194,986
|
|
|
170,452
|
|
|
14.4
|
%
|
|
21.5
|
%
|
|
21.8
|
%
|
||
|
|
909,473
|
|
|
782,979
|
|
|
16.2
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
||
Other revenue
(1)
|
|
12,822
|
|
|
12,573
|
|
|
2.0
|
%
|
|
|
|
|
||||
Total revenue
|
|
$
|
922,295
|
|
|
$
|
795,552
|
|
|
15.9
|
%
|
|
|
|
|
•
|
Benefits costs
– The cost of group health insurance and related employee benefits
increased
$17
per worksite employee per month, or
2.8%
on a cost per covered employee basis, compared to the
second
quarter of
2017
. Included in the
second
quarter of
2018
benefits costs is a charge of
$6.8 million
, or
$11
per worksite employee per month, for changes in estimated claims run-off related to prior periods. Included in the
second
quarter of
2017
benefits costs is
a reduction
of
$1.2 million
, or
$2
per worksite employee per month, for changes in estimated claims run-off related to prior periods. The percentage of worksite employees covered under our health insurance plans was
68.6%
in the
2018
period compared to
68.8%
in the
2017
period. Please read
Note 2
to the Consolidated Financial Statements, “
Accounting Policies
– Health Insurance Costs,” for a discussion of our accounting for health insurance costs.
|
•
|
Workers’ compensation costs
– Workers’ compensation costs
decreased
3.0%
, or
$6
on a per worksite employee per month basis, compared to the
second
quarter of
2017
. In the
second
quarter of
2018
, as a result of closing out claims at lower than expected costs, we recorded reductions in workers’ compensation costs of
$6.2 million
, or
0.14%
of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods as compared to a $2.5 million reduction to workers’ compensation costs in
2017
. Our continued discipline around our client selection, safety and claims management contributed to the reduction in our cost per worksite employee and, as a result, has allowed for claims within our policy periods to be closed out at amounts below our original cost estimates. As a percentage of non-bonus payroll cost, workers’ compensation costs were
0.48%
in the
2018
period compared to
0.58%
in the
2017
period. Please read
Note 2
to the Consolidated Financial Statements, “
Accounting Policies
– Workers’ Compensation Costs,” for a discussion of our accounting for workers’ compensation costs.
|
•
|
Payroll tax costs
– Payroll taxes
increased
16.2%
due primarily to a
17.3%
increase
in payroll costs, or
$14
per worksite employee per month, compared to the
second
quarter of
2017
. Payroll taxes as a percentage of payroll costs were
6.9%
in
2018
and
7.0%
in
2017
.
|
|
|
Three Months Ended
June 30, |
|
Three Months Ended
June 30, |
||||||||||||||||||
|
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
|
(per worksite employee per month)
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Salaries, wages and payroll taxes
|
|
$
|
68,748
|
|
|
$
|
61,458
|
|
|
11.9
|
%
|
|
$
|
112
|
|
|
$
|
114
|
|
|
(1.8
|
)%
|
Stock-based compensation
|
|
5,752
|
|
|
5,303
|
|
|
8.5
|
%
|
|
10
|
|
|
10
|
|
|
—
|
|
||||
Commissions
|
|
6,979
|
|
|
5,664
|
|
|
23.2
|
%
|
|
11
|
|
|
10
|
|
|
10.0
|
%
|
||||
Advertising
|
|
6,585
|
|
|
6,175
|
|
|
6.6
|
%
|
|
11
|
|
|
11
|
|
|
—
|
|
||||
General and administrative expenses
|
|
27,419
|
|
|
24,610
|
|
|
11.4
|
%
|
|
45
|
|
|
46
|
|
|
(2.2
|
)%
|
||||
Depreciation and amortization
|
|
5,480
|
|
|
4,405
|
|
|
24.4
|
%
|
|
9
|
|
|
8
|
|
|
12.5
|
%
|
||||
Total operating expenses
|
|
$
|
120,963
|
|
|
$
|
107,615
|
|
|
12.4
|
%
|
|
$
|
198
|
|
|
$
|
199
|
|
|
(0.5
|
)%
|
•
|
Salaries, wages and payroll taxes of corporate and sales staff
increased
$7.3 million
or
11.9%
, but decreased
$2
on a per worksite employee per month basis, compared to the
2017
period. This increase was primarily due to an
11.2%
increase
in corporate headcount, which includes a
19.4%
increase in the number of Business Performance Advisors.
|
•
|
Stock-based compensation
increased
$0.4 million
or
8.5%
, but remained flat on a per worksite employee per month basis, compared to the
2017
period.
|
•
|
Commissions expense
increased
$1.3 million
or
23.2%
, or
$1
per worksite employee per month, compared to the
2017
period, primarily due to commissions associated with growth in our PEO HR Outsourcing solutions worksite employees, including an increase in the amount of sales channel referral fees paid during 2018.
|
•
|
General and administrative expenses
increased
$2.8 million
or
11.4%
, but decreased
$1
on a per worksite employee per month basis, compared to the
2017
period. The increase was primarily due to increased travel and training expenses associated with the increase in Business Performance Advisors and professional services.
|
|
|
Six Months Ended
June 30, |
|||||||||
|
|
2018
|
|
2017
|
|
% Change
|
|||||
|
|
(in thousands, except per share and statistical data)
|
|||||||||
|
|
|
|
|
|
|
|||||
Revenues (gross billings of $11.473 billion and $9.758 billion, less worksite employee payroll cost of $9.537 billion and $8.080 billion, respectively)
|
|
$
|
1,936,667
|
|
|
$
|
1,678,216
|
|
|
15.4
|
%
|
Gross profit
|
|
354,264
|
|
|
289,899
|
|
|
22.2
|
%
|
||
Operating expenses
|
|
255,980
|
|
|
213,469
|
|
|
19.9
|
%
|
||
Operating income
|
|
98,284
|
|
|
76,430
|
|
|
28.6
|
%
|
||
Other income (expense)
|
|
1,085
|
|
|
(283
|
)
|
|
—
|
%
|
||
Net income
|
|
74,551
|
|
|
49,646
|
|
|
50.2
|
%
|
||
Diluted net income per share of common stock
(1)
|
|
1.77
|
|
|
1.18
|
|
|
50.0
|
%
|
||
Adjusted net income
(2)
|
|
88,227
|
|
|
55,913
|
|
|
57.8
|
%
|
||
Adjusted diluted net income per share of common stock
(2)
|
|
2.09
|
|
|
1.33
|
|
|
57.1
|
%
|
||
Adjusted EBITDA
(2)
|
|
130,433
|
|
|
96,038
|
|
|
35.8
|
%
|
||
|
|
|
|
|
|
|
|||||
Statistical Data:
|
|
|
|
|
|
|
|
|
|
||
Average number of worksite employees paid per month
|
|
199,816
|
|
|
177,315
|
|
|
12.7
|
%
|
||
Revenues per worksite employee per month
(3)
|
|
$
|
1,615
|
|
|
$
|
1,577
|
|
|
2.4
|
%
|
Gross profit per worksite employee per month
|
|
295
|
|
|
272
|
|
|
8.5
|
%
|
||
Operating expenses per worksite employee per month
|
|
214
|
|
|
201
|
|
|
6.5
|
%
|
||
Operating income per worksite employee per month
|
|
82
|
|
|
72
|
|
|
13.9
|
%
|
||
Net income per worksite employee per month
|
|
62
|
|
|
47
|
|
|
31.9
|
%
|
(1)
|
Amounts in 2017 adjusted to reflect the two-for-one split of our common stock effected on December 18, 2017 in the form of a stock dividend.
|
(2)
|
Please read “—Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP.
|
(3)
|
Gross billings of
$9,570
and
$9,171
per worksite employee per month, less payroll cost of
$7,955
and
$7,594
per worksite employee per month, respectively.
|
|
|
Six Months Ended
June 30, |
|
Six Months Ended
June 30, |
|||||||||||||
|
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|||||||
|
|
(in thousands)
|
|
(% of total revenue)
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
Northeast
|
|
$
|
511,642
|
|
|
$
|
440,385
|
|
|
16.2
|
%
|
|
26.8
|
%
|
|
26.7
|
%
|
Southeast
|
|
223,452
|
|
|
190,855
|
|
|
17.1
|
%
|
|
11.7
|
%
|
|
11.6
|
%
|
||
Central
|
|
321,092
|
|
|
273,876
|
|
|
17.2
|
%
|
|
16.8
|
%
|
|
16.6
|
%
|
||
Southwest
|
|
446,785
|
|
|
389,201
|
|
|
14.8
|
%
|
|
23.4
|
%
|
|
23.6
|
%
|
||
West
|
|
407,605
|
|
|
357,896
|
|
|
13.9
|
%
|
|
21.3
|
%
|
|
21.5
|
%
|
||
|
|
1,910,576
|
|
|
1,652,213
|
|
|
15.6
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
||
Other revenue
(1)
|
|
26,091
|
|
|
26,003
|
|
|
0.3
|
%
|
|
|
|
|
||||
Total revenue
|
|
$
|
1,936,667
|
|
|
$
|
1,678,216
|
|
|
15.4
|
%
|
|
|
|
|
•
|
Benefits costs
– The cost of group health insurance and related employee benefits
increased
$5
per worksite employee per month, or
0.7%
on a cost per covered employee basis, compared to the first
six
months of
2017
. Included in
2018
benefits costs is
a reduction
of
$1.9 million
, or
$2
per worksite employee per month for changes in estimated claims run-off related to prior periods. Benefits costs incurred in the first
six
months of
2017
reflect an increase in estimated claims run-off related to prior periods of
$0.5 million
. The percentage of worksite employees covered under our health insurance plans was
69.1%
in both the
2018
and
2017
periods. Please read
Note 2
to the Consolidated Financial Statements, “
Accounting Policies
– Health Insurance Costs,” for a discussion of our accounting for health insurance costs.
|
•
|
Workers’ compensation costs
– Workers’ compensation costs
decreased
0.6%
, or
$5
per worksite employee per month, compared to the first
six
months of
2017
. In the first
six
months of
2018
, we recorded reductions in workers’ compensation costs of
$10.9 million
, or
0.13%
of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods. In the first
six
months of
2017
, we recorded reductions in workers’ compensation costs of
$8.0 million
, or
0.11%
of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods. Our continued discipline around our client selection, safety and claims management contributed to the reduction in our cost per worksite employee and, as a result, has allowed for claims within our policy periods to be closed out at amounts below our original cost estimates. As a percentage of non-bonus payroll cost, workers’ compensation costs were
0.49%
in the
2018
period compared to
0.57%
in the
2017
period. Please read
Note 2
to the Consolidated Financial Statements, “
Accounting Policies
– Workers’ Compensation Costs,” for a discussion of our accounting for workers’ compensation costs.
|
•
|
Payroll tax costs
– Payroll taxes
increased
15.5%
due primarily to an
18.0%
increase
in payroll costs, or
$15
per worksite employee per month, compared to the first
six
months of
2017
. Payroll taxes as a percentage of payroll costs were
7.6%
in
2018
and
7.8%
in
2017
.
|
|
|
Six Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
|
(per worksite employee per month)
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Salaries, wages and payroll taxes
|
|
$
|
155,934
|
|
|
$
|
123,915
|
|
|
25.8
|
%
|
|
$
|
130
|
|
|
$
|
116
|
|
|
12.1
|
%
|
Stock-based compensation
|
|
8,887
|
|
|
9,806
|
|
|
(9.4
|
)%
|
|
7
|
|
|
9
|
|
|
(22.2
|
)%
|
||||
Commissions
|
|
13,045
|
|
|
10,140
|
|
|
28.6
|
%
|
|
11
|
|
|
10
|
|
|
10.0
|
%
|
||||
Advertising
|
|
10,150
|
|
|
10,147
|
|
|
—
|
|
|
9
|
|
|
10
|
|
|
(10.0
|
)%
|
||||
General and administrative expenses
|
|
57,271
|
|
|
50,802
|
|
|
12.7
|
%
|
|
48
|
|
|
48
|
|
|
—
|
|
||||
Depreciation and amortization
|
|
10,693
|
|
|
8,659
|
|
|
23.5
|
%
|
|
9
|
|
|
8
|
|
|
12.5
|
%
|
||||
Total operating expenses
|
|
$
|
255,980
|
|
|
$
|
213,469
|
|
|
19.9
|
%
|
|
$
|
214
|
|
|
$
|
201
|
|
|
6.5
|
%
|
•
|
Salaries, wages and payroll taxes of corporate and sales staff
increased
$32.0 million
or
25.8%
, or
$14
per worksite employee per month, compared to the
2017
period. This increase was primarily due to a $9.3 million charge related to a one-time tax reform bonus paid to corporate employees, a
10.6%
increase in corporate headcount, which includes a
17.4%
increase in the number of Business Performance Advisors, and additional incentive compensation expense as a result of strong operating results.
|
•
|
Stock-based compensation
decreased
$0.9 million
or
9.4%
, or
$2
per worksite employee per month, compared to the
2017
period. This decrease was primarily due to the acceleration of restricted stock awards and associated expense in the fourth quarter of 2017 that were originally scheduled to vest in the first quarter of 2018.
|
•
|
Commissions expense
increased
$2.9 million
or
28.6%
, or
$1
per worksite employee per month, compared to the
2017
period, primarily due to commissions associated with growth in our PEO HR Outsourcing solutions, including an increase in the amount of sales channel referral fees paid during 2018.
|
•
|
General and administrative expenses
increased
$6.5 million
or
12.7%
, but remained flat on a per worksite employee per month basis, compared to the
2017
period. The increase was primarily due to increased travel and training expenses associated with the increase in Business Performance Advisors.
|
•
|
Depreciation and amortization expense
increased
$2.0 million
or
23.5%
, or
$1
on a per worksite employee per month basis, compared to the
2017
period.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||
|
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
||||||||||
|
|
(in thousands, except per worksite employee per month data)
|
||||||||||||||||||||
GAAP to non-GAAP reconciliation:
|
|
|
|
|
|
|
|
|
||||||||||||||
Payroll cost (GAAP)
|
|
$
|
4,628,047
|
|
|
$
|
3,946,005
|
|
|
17.3
|
%
|
|
$
|
9,537,032
|
|
|
$
|
8,078,997
|
|
|
18.0
|
%
|
Less: Bonus payroll cost
|
|
372,225
|
|
|
306,340
|
|
|
21.5
|
%
|
|
1,203,086
|
|
|
921,598
|
|
|
30.5
|
%
|
||||
Non-bonus payroll cost
|
|
$
|
4,255,822
|
|
|
$
|
3,639,665
|
|
|
16.9
|
%
|
|
$
|
8,333,946
|
|
|
$
|
7,157,399
|
|
|
16.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Payroll cost per worksite employee per month (GAAP)
|
|
$
|
7,564
|
|
|
$
|
7,296
|
|
|
3.7
|
%
|
|
$
|
7,955
|
|
|
$
|
7,594
|
|
|
4.8
|
%
|
Less: Bonus payroll cost per worksite employee per month
|
|
608
|
|
|
566
|
|
|
7.4
|
%
|
|
1,003
|
|
|
866
|
|
|
15.8
|
%
|
||||
Non-bonus payroll cost per worksite employee per month
|
|
$
|
6,956
|
|
|
$
|
6,730
|
|
|
3.4
|
%
|
|
$
|
6,952
|
|
|
$
|
6,728
|
|
|
3.3
|
%
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
|
(in thousands)
|
||||||
|
|
|
|
|
||||
Cash, cash equivalents and marketable securities (GAAP)
|
|
$
|
315,918
|
|
|
$
|
356,220
|
|
Less: Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions
|
|
191,893
|
|
|
271,547
|
|
||
Client prepayments
|
|
13,952
|
|
|
23,603
|
|
||
Adjusted cash, cash equivalents and marketable securities
|
|
$
|
110,073
|
|
|
$
|
61,070
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||
|
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
||||||||||
|
|
(in thousands, except per worksite employee per month data)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating expenses (GAAP)
|
|
$
|
120,963
|
|
|
$
|
107,615
|
|
|
12.4
|
%
|
|
$
|
255,980
|
|
|
$
|
213,469
|
|
|
19.9
|
%
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
One-time tax reform bonus
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,306
|
|
|
—
|
|
|
—
|
|
||||
Adjusted operating expenses (non-GAAP)
|
|
$
|
120,963
|
|
|
$
|
107,615
|
|
|
12.4
|
%
|
|
$
|
246,674
|
|
|
$
|
213,469
|
|
|
15.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating expenses per worksite employee per month (GAAP)
|
|
$
|
198
|
|
|
$
|
199
|
|
|
(0.5
|
)%
|
|
$
|
214
|
|
|
$
|
201
|
|
|
6.5
|
%
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
One-time tax reform bonus
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
||||
Adjusted operating expenses per worksite employee per month (non-GAAP)
|
|
$
|
198
|
|
|
$
|
199
|
|
|
(0.5
|
)%
|
|
$
|
206
|
|
|
$
|
201
|
|
|
2.5
|
%
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||
|
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
||||||||||
|
|
(in thousands, except per worksite employee per month data)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (GAAP)
|
|
$
|
24,560
|
|
|
$
|
14,018
|
|
|
75.2
|
%
|
|
$
|
74,551
|
|
|
$
|
49,646
|
|
|
50.2
|
%
|
Income tax expense
|
|
9,720
|
|
|
8,795
|
|
|
10.5
|
%
|
|
24,818
|
|
|
26,501
|
|
|
(6.4
|
)%
|
||||
Interest expense
|
|
1,108
|
|
|
803
|
|
|
38.0
|
%
|
|
2,178
|
|
|
1,426
|
|
|
52.7
|
%
|
||||
Depreciation and amortization
|
|
5,480
|
|
|
4,405
|
|
|
24.4
|
%
|
|
10,693
|
|
|
8,659
|
|
|
23.5
|
%
|
||||
EBITDA
|
|
40,868
|
|
|
28,021
|
|
|
45.8
|
%
|
|
112,240
|
|
|
86,232
|
|
|
30.2
|
%
|
||||
Stock-based compensation
|
|
5,752
|
|
|
5,303
|
|
|
8.5
|
%
|
|
8,887
|
|
|
9,806
|
|
|
(9.4
|
)%
|
||||
One-time tax reform bonus
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,306
|
|
|
—
|
|
|
—
|
|
||||
Adjusted EBITDA
|
|
$
|
46,620
|
|
|
$
|
33,324
|
|
|
39.9
|
%
|
|
$
|
130,433
|
|
|
$
|
96,038
|
|
|
35.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income per worksite employee per month (GAAP)
|
|
$
|
40
|
|
|
$
|
26
|
|
|
53.8
|
%
|
|
$
|
62
|
|
|
$
|
47
|
|
|
31.9
|
%
|
Income tax expense per worksite employee per month
|
|
16
|
|
|
16
|
|
|
—
|
|
|
21
|
|
|
25
|
|
|
(16.0
|
)%
|
||||
Interest expense per worksite employee per month
|
|
2
|
|
|
1
|
|
|
100.0
|
%
|
|
2
|
|
|
1
|
|
|
100.0
|
%
|
||||
Depreciation and amortization per worksite employee per month
|
|
9
|
|
|
9
|
|
|
—
|
|
|
9
|
|
|
8
|
|
|
12.5
|
%
|
||||
EBITDA per worksite employee per month
|
|
67
|
|
|
52
|
|
|
28.8
|
%
|
|
94
|
|
|
81
|
|
|
16.0
|
%
|
||||
Stock-based compensation per worksite employee per month
|
|
9
|
|
|
10
|
|
|
(10.0
|
)%
|
|
7
|
|
|
9
|
|
|
(22.2
|
)%
|
||||
One-time tax reform bonus per worksite employee per month
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
||||
Adjusted EBITDA per worksite employee per month
|
|
$
|
76
|
|
|
$
|
62
|
|
|
22.6
|
%
|
|
$
|
109
|
|
|
$
|
90
|
|
|
21.1
|
%
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||
|
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted net income per share of common stock (GAAP)
|
|
$
|
0.58
|
|
|
$
|
0.33
|
|
|
75.8
|
%
|
|
$
|
1.77
|
|
|
$
|
1.18
|
|
|
50.0
|
%
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Stock-based compensation
|
|
0.14
|
|
|
0.13
|
|
|
7.7
|
%
|
|
0.21
|
|
|
0.24
|
|
|
(12.5
|
)%
|
||||
One-time tax reform bonus
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.22
|
|
|
—
|
|
|
—
|
|
||||
Total non-GAAP adjustments
|
|
0.14
|
|
|
0.13
|
|
|
7.7
|
%
|
|
0.43
|
|
|
0.24
|
|
|
79.2
|
%
|
||||
Tax effect
|
|
(0.04
|
)
|
|
(0.05
|
)
|
|
(20.0
|
)%
|
|
(0.11
|
)
|
|
(0.09
|
)
|
|
22.2
|
%
|
||||
Adjusted diluted net income per share of common stock
|
|
$
|
0.68
|
|
|
$
|
0.41
|
|
|
65.9
|
%
|
|
$
|
2.09
|
|
|
$
|
1.33
|
|
|
57.1
|
%
|
(1)
|
Amounts in 2017 adjusted to reflect the two-for-one split of our common stock effected on December 18, 2017 in the form of a stock dividend.
|
•
|
Timing of client payments / payroll levels –
We typically collect our comprehensive service fee, along with the client’s payroll funding, from clients at least one day prior to the payment of worksite employee payrolls and associated payroll taxes. Therefore, the last business day of a reporting period has a substantial impact on our reporting of operating cash flows. For example, many worksite employees are paid on Fridays; therefore, operating cash flows decrease in the reporting periods that end on a Friday or a Monday. In the period ended
June 30, 2018
, the last business day of the reporting period was a
Friday
, client prepayments were
$14.0 million
and accrued worksite employee payroll was
$295.6 million
. In the period ended June 30, 2017, the last business day of the reporting period was a Friday, client prepayments were
$22.3 million
and accrued worksite employee payroll was
$228.6 million
.
|
•
|
Medical plan funding –
Our health care contract with United establishes participant cash funding rates
90
days in advance of the beginning of a reporting quarter. Therefore, changes in the participation level of the United plan have a direct impact on our operating cash flows. In addition, changes to the funding rates, which are solely determined by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows. As of
June 30, 2018
, premiums owed and cash funded to United have exceeded the costs of the United plan, resulting in a
$12.3 million
surplus,
$3.3 million
of which is reflected as a current asset, and
$9.0 million
of which is reflected as a long-term asset on our Consolidated Balance Sheets. The premiums, including an additional quarterly premium, owed to United at
June 30, 2018
, were
$19.0 million
, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets.
|
•
|
Operating results
– Our net income has a significant impact on our operating cash flows. Our net income
increased
50.2%
to
$74.6 million
in the
six months ended June 30, 2018
, compared to
$49.6 million
in the
six months ended June 30, 2017
, due to higher gross profit. Please read “Results of Operations
–
Six Months Ended June 30, 2018
Compared to
Six Months Ended June 30, 2017
.”
|
Period |
|
Total Number of Shares Purchased
(1)(2)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Announced Programs
(2)
|
|
Maximum Number of Shares Available for Purchase under Announced Program
(2)
|
|||||
|
|
|
|
|
|
|
|
|
|||||
04/01/2018 – 04/30/2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
2,677,564
|
|
05/01/2018 – 05/31/2018
|
|
13,632
|
|
|
92.38
|
|
|
13,000
|
|
|
2,664,564
|
|
|
06/01/2018 – 06/30/2018
|
|
67,091
|
|
|
95.43
|
|
|
67,000
|
|
|
2,597,564
|
|
|
Total
|
|
80,723
|
|
|
$
|
94.92
|
|
|
80,000
|
|
|
|
(1)
|
During the three months ended
June 30, 2018
,
723
shares of stock were withheld to satisfy tax-withholding obligations arising in conjunction with the vesting of long-term incentive and restricted stock awards. The required withholding is calculated using the closing sales price reported by the New York Stock Exchange on the date prior to the applicable vesting date. These shares are not subject to the repurchase program described above.
|
(2)
|
Our Board of Directors (the “Board”) has approved a program to repurchase shares of our outstanding common stock. As of
June 30, 2018
, we were authorized to repurchase an additional
2,597,564
shares under the program. Unless terminated earlier by resolution of the Board, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program.
|
|
(a)
|
List of Exhibits
|
|
3.1
|
|
|
10.1(+)
|
*
|
|
31.1
|
*
|
|
31.2
|
*
|
|
32.1
|
**
|
|
32.2
|
**
|
|
101.INS
|
*
|
XBRL Instance Document.
(1)
|
101.SCH
|
*
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
*
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
*
|
XBRL Extension Definition Linkbase Document.
|
101.LAB
|
*
|
XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE
|
*
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
____________________________________
|
|
|
|
(+)
|
Confidential treatment has been requested for this exhibit and confidential portions have been filed with the Securities and Exchange Commission.
|
|
|
|
|
|
|
*
|
Filed with this report.
|
|
|
|
|
|
|
**
|
Furnished with this report.
|
(1)
|
Attached as exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Operations for the
three and six
month periods ended
June 30, 2018
and
2017
; (ii) the Consolidated Balance Sheets at
June 30, 2018
and
December 31, 2017
; (iii) the Consolidated Statement of Stockholders’ Equity for the
six
month period ended
June 30, 2018
; (iv) the Consolidated Statements of Cash Flows for the
six
month periods ended
June 30, 2018
and
2017
; and (v) Notes to the Consolidated Financial Statements.
|
|
INSPERITY, INC.
|
|
|
|
|
Date: August 1, 2018
|
By:
|
/s/ Douglas S. Sharp
|
|
|
Douglas S. Sharp
|
|
|
Senior Vice President of Finance,
|
|
|
Chief Financial Officer and Treasurer
|
|
|
(Principal Financial Officer)
|
1)
|
In keeping with previous agreements, UHC’s suggested language is as follows: "Competitive" means that either (i) the Company and the Employer agree or (ii) an independent consultant chosen by mutual agreement of the parties has determined, that such product ranks either *** or *** as compared to competing products of other vendors in the designated market. In making any determination of the rank of a product in a market, such consultant shall apply such criteria relating to *** and *** as it shall determine appropriate. All fees and expenses of any such consultant shall be paid by the Employer.
|
a.
|
The exclusivity provisions shall not apply to any Client of Insperity where a state or municipality requires issuance of small business policies directly to Clients and/or Employees, nor shall it apply to Clients and/or Employees who elect coverage under a federal, state or private exchange. Insperity and UnitedHealthcare will work together to find mutually agreeable parameters for any Insperity ***.
|
b.
|
Barring *** or ***, existing UHC membership is grandfathered for the remainder of the contractual period from the time a competing carrier is introduced into a market.
|
c.
|
When a new carrier is added to a UHC market, the *** is made at the *** and not the ***.
|
d.
|
If there is a *** to the Company *** network in a Market, if no group health insurance or similar product is offered by the Company in the Market, or if no group health insurance or similar product offered by the Company is Competitive in that Market, the Employer may offer, subject to the existing terms of our agreement, the health insurance or similar products of a Competing Vendor in such market. Only *** will be introduced into a limited number of Markets, not to exceed *** Markets, through December 31, 2022. The *** market cap does not apply if changes are *** by *** or ***.
|
e.
|
*** and *** will remain exclusive markets. If agreed to by both parties, the exclusivity requirement will be modified if changes are *** by *** or *** (to the extent not previously addressed in subparagraph a, of this section 1).
|
f.
|
UnitedHealthcare will be the exclusive Vendor for *** coverage offered in the *** markets. If changes are *** by *** or *** (to the extent not previously addressed in this section 1, subparagraph a): and if agreed to by both parties, the exclusivity requirement can be modified.
|
g.
|
UHC will be notified at least 90 days prior to the introduction of a competing carrier into a market.
|
2)
|
Renew UHC Dental coverage with *** renewal in 2020, *** renewal in 2021, *** renewal *** in 2022. *** and *** applicable to UHC Dental coverage will continue to be a *** of *** expenses.
|
3)
|
Renew OptumHealth (OH) Care24 w/ Worklife Solutions at *** through 2022.
|
4)
|
*** and *** will continue to be a *** of *** expenses.
|
5)
|
The "***" shall consist of an *** portion and a *** portion, where *** shall be measured each December 15
th
and June 15
th
and shall be the *** that is used to determine the *** and *** for the following six (6) months of the MP Financial Agreement period.
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Insperity, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 1, 2018
|
|
|
|
|
/s/ Paul J. Sarvadi
|
|
Paul J. Sarvadi
|
|
Chairman of the Board and Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Insperity, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 1, 2018
|
|
|
|
|
/s/
Douglas S. Sharp
|
|
Douglas S. Sharp
|
|
Senior Vice President of Finance, Chief Financial Officer and Treasurer
|
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/
Paul J. Sarvadi
|
|
Paul J. Sarvadi
|
|
Chairman of the Board and Chief Executive Officer
|
|
August 1, 2018
|
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/
Douglas S. Sharp
|
|
Douglas S. Sharp
|
|
Senior Vice President of Finance,
|
|
Chief Financial Officer and Treasurer
|
|
August 1, 2018
|