Q4 2019 Investor Presentation FINAL - MeetMax
Transcript of Q4 2019 Investor Presentation FINAL - MeetMax
2019 Q4 Investor Presentation
February 11, 2020
Safe Harbor Statement
The statements contained herein that are not historical facts are forward-looking statements within the meaning of the federal securities laws (Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934). You can identify such forward-looking statements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,”“possibly,” “probably,” “goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions. Forward-looking statementsinvolve a number of risks and uncertainties. In the normal course of business, Insperity, Inc., in an effort to help keep our stockholders and the public informed about our operations, mayfrom time to time issue such forward-looking statements, either orally or in writing. Generally, these statements relate to business plans or strategies, projected or anticipated benefits orother consequences of such plans or strategies, or projections involving anticipated revenues, earnings, unit growth, profit per worksite employee, pricing, operating expenses or otheraspects of operating results. We base the forward-looking statements on our expectations, estimates and projections at the time such statements are made. These statements are notguarantees of future performance and involve risks and uncertainties that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions aboutfuture events that may prove to be inaccurate. Therefore, the actual results of the future events described in such forward-looking statements could differ materially from those stated insuch forward-looking statements. Among the factors that could cause actual results to differ materially are: (i) adverse economic conditions (ii) our liability for WSEE payroll, payroll taxesand benefits costs; (iii) increases in health insurance costs and workers’ compensation rates and underlying claims trends, and state unemployment tax rates; (iv) the inability to securecompetitive replacement contracts for health insurance and workers’ compensation insurance at expiration of current contracts or in the event of the insolvency of such carriers; (v)vulnerability to regional economic factors because of our geographic market concentration; (vi) cancellation of client contracts on short notice, or the inability to renew client contracts orattract new clients; (vii) our potential liability for client and employee actions due to the co-employment arrangement; (viii) regulatory and tax developments, including health care reform,and possible adverse application of various federal, state and local regulations; (ix) failure to manage growth of our operations and the effectiveness of our sales and marketing efforts; (x)the impact of the competitive environment and other developments in the human resources services industry, including the PEO industry, on our service and technology offerings, growthand/or profitability; (xi) disruptions of our information technology systems; (xii) the impact of data theft, cyberattacks or other security vulnerabilities on us or our vendors; (xiii) failure tocomply with privacy, data protection and cybersecurity laws; (xiv) failure of certain third-party providers, such as financial institutions, data centers or cloud-service providers; (xv) our abilityto integrate or realize expected returns on our acquisitions; (xvi) an adverse final judgment or settlement of claims against us; and (xvii) disruptions to our business resulting from theactions of certain stockholders. These factors are discussed in further detail in Insperity’ s filings with the U.S. Securities and Exchange Commission. Any of these factors, or a combinationof such factors, could materially affect the results of our operations and whether forward-looking statements we make ultimately prove to be accurate.
Except to the extent otherwise required by federal securities law, we do not undertake any obligation to update our forward-looking statements to reflect events or circumstances after thedate they are made or to reflect the occurrence of unanticipated events.
Review of Insperity
Co-Employment
Clients outsource entire HR function toa single strategic partner
Client enters into agreement with Insperity toestablish a relationship between themselves,
their employees and Insperity
Insperity assumes or shares certain HRresponsibilities and risks, empowering clients to
focus on operating and growing their corebusiness
Traditional Employment
Expands market opportunity beyondcore PEO model
Address clients who are not ready forco-employment and may prefer more flexibility
and autonomy in their Human CapitalManagement (HCM) strategy
Meet prospects at their point of need and addressdistinct elements of their HCM strategy
* Available for an additional fee.
† All insurance products are offered and sold only through a licensed insurance broker,such as Insperity Insurance Services LLC (CA license #OE22586), or their licensed agents.
A comprehensive solution
Insperity’s Co-Employment model incorporating Software with a Service has jumped the chasm to
Early Majority compared to the Late Majority stage of the HCM Software as a Service Solution.
PEO HCM
Software with a Service
Where is the PEO industry in the adoption life cycle?
5%
29%
32%
34%
Firms < 5 employees Firms 5 - 99 employeesFirms 100 - 4,999 employees Firms 5,000+ employees
What is Insperity’s market opportunity?
Insperity competes in a large, fragmented and highly attractive market
(1) U.S. Census Bureau Data; Insperity management estimates.(2) Represents businesses with less than 5,000 employees.
Total Workforce(1)
~115 Million EmployeesSmall To Midmarket(2) Workforce(1)
~71 Million Employees
95%
5%
Traditional employmentCo-employment
Who does Insperity target?
Insperity is focused on being a trusted advisor to the best small-to-midmarket businesses
EMPLOYMENT RISK
BU
SIN
ES
SS
UC
CE
SS
HIGH LOW
ST
RU
GG
LIN
GT
HR
IVIN
G
Workforce Optimization™
Workforce Acceleration™
Who are Insperity’s clients?
Insperity currently provides Workforce Optimization solutions for ~8,900 clients
15%
17%
15%6%
11%
4%
9%
7%
3%
7% 6%
Computer and information sciences
Finance, Insurance, Real Estate
Management, administration, consulting
Medical services
Manufactuing
Construction
Wholesale trade
Engineering, accounting, legal
Retail trade
Other
Not-for-profit and similar organizations
FY 2019 Average Paid Worksite Employees (“WSEs”): 235,547
How does Insperity serve its target market?
Insperity’s solutions address a diverse set of client types and needs
Small Business Core Emerging Growth MidMarket
Overview
Likely newly formed,require HR function
on an as needed basis
Small businesswith less than 50
employees; requiresHR function to evolve
Typically a growingorganization struggling
with HR complexityas their employee
base grows
Establishedorganization; requires
customizableHR function
WSEs < 20 21 - 49 50 - 149 150 – 5,000
Approach Essential Collaborative Integrated Strategic
Customization Low Low / Medium Medium / High High
Engagement Responsive Dedicated Proactive Engaged
How is Insperity different? Our breadth of services.
Bundled Solutions Providers Point Solutions Providers
Insperity Other Bundled Insurance Brokers Payroll Processors Payroll Processors
Complete HRSolution for Small
Business
MidMarket ServiceOfferings
High Touch / HighValue Solution
High Quality RiskManagement and
Cost Stability
Cloud Technology
Insperity sits at the nexus of Business,
Software and Insurance Services
SoftwareServices
Advisory Services
InsuranceServices
BusinessServices
How is Insperity different?Our depth of services.
Built upon Insperity’s extensive HR knowledge base, the Insperity Premier platform is a cloud-based human capitalmanagement system that maximizes the power of Workforce Optimization, our industry-leading co-employment solution.
HR Specialist
Safety Consultant
Performance Specialist
Recruiting Specialist
How is Insperity different? Our level of care.
Insperity Offers a High-Touch Service on a High-Tech Platform
Team Manager
Client Liaison
Contact Center
Payroll Specialist
Business PerformanceAdvisors
ChannelPartners
RewardsProgram
Cross-SellingPrograms
Quarterback for ourservices
Trusted advisor to thelocal business
community
Guiding clients to theright solutions; execute
bundle plus strategy
Partners in ProfessionalServices, Insurance and
Banking
Leverage partners forleads/referrals
Re-engage clients
Build value in theInsperity/Client
relationship
Gain referrals
Leverage investmentsin core sales &
marketing
Increase prospectawareness of our otherbusiness products and
services (BPS) offerings
How does Insperity go-to-market?
Key components of our strategy
How does Insperity go-to-market? (cont.)
National sales and
service infrastructure
2019 Revenue Contributionby Region
• Southeast 12%• Northeast 26%• Central 17%• West 21%• Southwest 24%
Bellevue
San Francisco
Los Angeles
San Diego
Phoenix
Austin
San Antonio
Dallas/Ft. Worth
Houston
Oklahoma City
Denver Kansas City
Minneapolis
St. Louis
Milwaukee
Chicago
Indianapolis
Columbus
Boston
New York
PhiladelphiaNew Jersey
Maryland
Washington D.C.
Raleigh
Charlotte
Atlanta
Nashville
Orlando
Ft. Lauderdale
Stamford
Pittsburg
San Jose
Portland
Tampa
Las Vegas
• Sales (75 Offices, 38 Markets)• Service Center (4 Locations)
Corporate Headquarters
Sacramento
Providence
Total Service Fee(quoted as a % of Employee’s Wages)
HR Services FeeSeparate Direct CostProgram Allocations
Bundle Plus / Add-on Serviceswith discounted pricing for Workforce Optimization
customers
Human ResourcesManagement
Recruiting and Selection
Training and Development
Policies and Practices
Payroll Administration
Government Compliance
Employee Benefits
Employer Payroll Taxes
Workers’ Compensation
Employer Liability
Management
Performance Management
Direct Placement Recruiting
Employment Screening
Retirement Services
Time and Attendance
Expense Management
Organizational Planning
Insurance Services
Payroll Services
Financial Services
Human Capital Management
How does Insperity price its Workforce Optimization service
Financial Results
Key financial metrics
Average Paid Worksite Employees Average Trained BPAs
Year-Over-Year Paid WorksiteEmployee Growth %
14% 10% 14% 13% 7%
*Amount represents midpoint of Financial guidance issued on February 11, 2020.
165,850
182,696
209,123
235,547
252,050
359
406
470
528
584
300
350
400
450
500
550
600
100,000
120,000
140,000
160,000
180,000
200,000
220,000
240,000
260,000
2016 2017 2018 2019 2020E*
Key financial metrics (in millions)
Adjusted EBITDA(1)
Year-Over-Year Growth %% of Gross Profit
$141
$178
$240$250
$262
$0
$50
$100
$150
$200
$250
$300
2016 2017 2018 2019 2020E*
*Amount represents midpoint of Financial guidance issued on February 11, 2020.
1) Please see reconciliation to GAAP measure in the Appendix. Adjusted EBITDA represents EBITDA adjusted to add back stock-basedcompensation expense, one-time tax reform bonus, charitable donations to Hurricane Harvey relief efforts and costs associated withstockholder advisory expenses.
28% 26% 35% 4% 5%29% 31% 35% 34% 33%
Key financial metrics
Adjusted EBITDA(1) Per Worksite Employee Per Month
$71
$81
$95
$88 $87
$25
$35
$45
$55
$65
$75
$85
$95
$105
2016 2017 2018 2019 2020E*
*Amount represents midpoint of Financial guidance issued on February 11, 2020.
1) Please see reconciliation to GAAP measure in the Appendix. Adjusted EBITDA represents EBITDA adjusted to add back stock-basedcompensation expense, one-time tax reform bonus, charitable donations to Hurricane Harvey relief efforts and costs associated withstockholder advisory expenses.
Key financial metrics
Adjusted EPS (1)
$1.79
$2.45
$3.75
$4.15$3.94
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
2016 2017 2018 2019 2020E*
Year-Over-Year Increase (Decrease) % 63% 37% 53% 11% -5%
*Amount represents midpoint of Financial guidance issued on February 11, 2020.
1) Please see reconciliation to GAAP measure in the Appendix. Adjusted EPS represents EPS adjusted to add back stock-basedcompensation expense, one-time tax reform bonus, charitable donations to Hurricane Harvey relief efforts, costs associated withstockholder advisory expenses, the enactment of U.S. tax reform and disaster credits.
2) 2020 adjusted EPS guidance includes a full year effective tax rate of 28% compared to 20% in 2019 due primarily to less tax benefitassociated with the vesting of long-term incentive plan and time-vested restricted shares. The higher effective tax rate is expected toreduce earnings by approximately $0.28 per share.
(2)
Return to investors from cash flow and debt (in millions)
$110
$141
$178
$240$250
$67
$176
$39
$113
$203
$21 $21
$66
$33$49
$0
$25
$50
$75
$100
$125
$150
$175
$200
$225
$250
$275
2015 2016* 2017** 2018 2019
Adjusted EBITDA Share repurchases Dividends
*2016 share repurchases includes a dutch auction tender offer that was completed in January 2016 resulting in the repurchase of six million sharesat a cost of $23.75 per share, plus transaction costs. The tender offer was funded with approximately $40 million of cash and $104 million of debt.
**2017 dividends includes a $1 per share special dividend paid in Q4 2017.
Appendix
Note: Financial guidance referenced above issued on February 11, 2020.
(1) Adjusted EBITDA represents EBITDA adjusted to add back stock-based compensation expense.(2) Adjusted EPS represents EPS adjusted to add back stock-based compensation expense.
Full year and Q1 guidance
FY 2020 Guidance Q1 2020 Guidance
Average paid WSEs 249,700 – 254,400 238,000 – 240,200
Implied y-o-y increase (decrease) in average paid WSEs 6% - 8% 5.5% - 6.5%
Adj. EBITDA(1) $250 - $274 $98 - $103
Implied y-o-y increase (decrease) in Adj. EBITDA 0% - 10% (3.4)% - 1.5%
Adj. EPS(2) $3.73 - $4.16 $1.61 - $1.70
Implied y-o-y increase (decrease) in Adj. EPS (10)% - 0% (18.7)% - (14.1)%
Adjusted EBITDA reconciliation (in millions)
Note: Insperity management believes adjusted EBITDA is often a useful measure of the company’s operating performance, as it allows for additional analysis of thecompany’s operating results separate from the impact of these items. Adjusted EBITDA should not be considered as a substitute for, or superior to, measures offinancial performance prepared in accordance with GAAP.
* Based on the midpoint of the guidance issued on February 11, 2020.
FY 2017 FY 2018 FY2019 2020E*
Net income (GAAP) $84.4 $135.4 $151.1 $136.5
Interest expense 3.2 4.7 7.7 10.7
Income tax expense 45.7 47.0 38.5 53.0
Depreciation and amortization 18.2 22.8 28.7 34.4
EBITDA 151.5 209.9 226.0 234.6
Stock-based compensation 24.4 20.4 24.0 27.6
Hurricane Harvey donations 2.0 - - -
One-time tax reform bonus - 9.3 - -
Other (0.2) - - -
Adjusted EBITDA $177.7 $239.6 $250.0 $262.2
Note: Insperity management believes adjusted net income is often a useful measure of the company’s operating performance, as it allows for additional analysis of thecompany’s operating results separate from the impact of these items. Adjusted Net Income should not be considered as a substitute for, or superior to, measuresof financial performance prepared in accordance with GAAP.
* Based on the midpoint of the guidance issued on February 11, 2020.
Adjusted net income (in millions)
FY 2017 FY 2018 FY 2019 FY 2020E*
Net income (GAAP) $84.4 $135.4 $151.1 $136.5
Stock-based compensation 24.4 20.4 24.0 27.6
Hurricane Harvey donations 2.0 - - -
One time tax reform bonus - 9.3 - -
Other (0.2) - - -
Total pretax non-GAAP adjustments 26.2 29.7 24.0 27.6
Tax effect on non-GAAP adjustments (9.4) (7.6) (5.6) (7.8)
Enactment of U.S. tax reform $2.5 - - -
Tax effect of disaster credit (0.7) - - -
Adjusted net income $103.0 $157.5 $169.5 $156.3
Adjusted EPS reconciliation
Note: Insperity management believes adjusted EPS is often a useful measure of the company’s operating performance, as it allows for additional analysis of the company’soperating results separate from the impact of these items. Adjusted EPS should not be considered as a substitute for, or superior to, measures of financialperformance prepared in accordance with GAAP.
* Based on the midpoint of the guidance issued on February 11, 2020.
(1) 2020 adjusted EPS guidance includes a full year effective tax rate of 28% compared to 20% in 2019 due primarily to less tax benefit associated with the vesting oflong-term incentive plan and time-vested restricted shares. The higher effective tax rate is expected to reduce earnings by approximately $0.28 per share.
FY 2017 FY 2018 FY 2019 FY 2020E*
EPS (GAAP) $2.01 $3.22 $3.70 $3.43
Stock based compensation 0.58 0.49 0.59 0.71
Hurricane Harvey donations 0.05 - - -
One-time tax reform bonus - 0.22 - -
Other (0.01) - - -
Total pretax non-GAAP adjustments 0.62 0.71 0.59 0.71
Tax effect on non-GAAP adjustments (0.22) (0.18) (0.14) (0.20)
Enactment of U.S. tax reform 0.06 - - -
Tax effect of disaster credit (0.02) - - -
Adjusted EPS(1) $2.45 $3.75 $4.15 $3.94
2019 Q4 Investor Presentation
February 11, 2020
Safe Harbor Statement
The statements contained herein that are not historical facts are forward-looking statements within the meaning of the federal securities laws (Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934). You can identify such forward-looking statements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,”“possibly,” “probably,” “goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions. Forward-looking statementsinvolve a number of risks and uncertainties. In the normal course of business, Insperity, Inc., in an effort to help keep our stockholders and the public informed about our operations, mayfrom time to time issue such forward-looking statements, either orally or in writing. Generally, these statements relate to business plans or strategies, projected or anticipated benefits orother consequences of such plans or strategies, or projections involving anticipated revenues, earnings, unit growth, profit per worksite employee, pricing, operating expenses or otheraspects of operating results. We base the forward-looking statements on our expectations, estimates and projections at the time such statements are made. These statements are notguarantees of future performance and involve risks and uncertainties that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions aboutfuture events that may prove to be inaccurate. Therefore, the actual results of the future events described in such forward-looking statements could differ materially from those stated insuch forward-looking statements. Among the factors that could cause actual results to differ materially are: (i) adverse economic conditions (ii) our liability for WSEE payroll, payroll taxesand benefits costs; (iii) increases in health insurance costs and workers’ compensation rates and underlying claims trends, and state unemployment tax rates; (iv) the inability to securecompetitive replacement contracts for health insurance and workers’ compensation insurance at expiration of current contracts or in the event of the insolvency of such carriers; (v)vulnerability to regional economic factors because of our geographic market concentration; (vi) cancellation of client contracts on short notice, or the inability to renew client contracts orattract new clients; (vii) our potential liability for client and employee actions due to the co-employment arrangement; (viii) regulatory and tax developments, including health care reform,and possible adverse application of various federal, state and local regulations; (ix) failure to manage growth of our operations and the effectiveness of our sales and marketing efforts; (x)the impact of the competitive environment and other developments in the human resources services industry, including the PEO industry, on our service and technology offerings, growthand/or profitability; (xi) disruptions of our information technology systems; (xii) the impact of data theft, cyberattacks or other security vulnerabilities on us or our vendors; (xiii) failure tocomply with privacy, data protection and cybersecurity laws; (xiv) failure of certain third-party providers, such as financial institutions, data centers or cloud-service providers; (xv) our abilityto integrate or realize expected returns on our acquisitions; (xvi) an adverse final judgment or settlement of claims against us; and (xvii) disruptions to our business resulting from theactions of certain stockholders. These factors are discussed in further detail in Insperity’ s filings with the U.S. Securities and Exchange Commission. Any of these factors, or a combinationof such factors, could materially affect the results of our operations and whether forward-looking statements we make ultimately prove to be accurate.
Except to the extent otherwise required by federal securities law, we do not undertake any obligation to update our forward-looking statements to reflect events or circumstances after thedate they are made or to reflect the occurrence of unanticipated events.
Review of Insperity
Co-Employment
Clients outsource entire HR function toa single strategic partner
Client enters into agreement with Insperity toestablish a relationship between themselves,
their employees and Insperity
Insperity assumes or shares certain HRresponsibilities and risks, empowering clients to
focus on operating and growing their corebusiness
Traditional Employment
Expands market opportunity beyondcore PEO model
Address clients who are not ready forco-employment and may prefer more flexibility
and autonomy in their Human CapitalManagement (HCM) strategy
Meet prospects at their point of need and addressdistinct elements of their HCM strategy
* Available for an additional fee.
† All insurance products are offered and sold only through a licensed insurance broker,such as Insperity Insurance Services LLC (CA license #OE22586), or their licensed agents.
A comprehensive solution
Insperity’s Co-Employment model incorporating Software with a Service has jumped the chasm to
Early Majority compared to the Late Majority stage of the HCM Software as a Service Solution.
PEO HCM
Software with a Service
Where is the PEO industry in the adoption life cycle?
5%
29%
32%
34%
Firms < 5 employees Firms 5 - 99 employeesFirms 100 - 4,999 employees Firms 5,000+ employees
What is Insperity’s market opportunity?
Insperity competes in a large, fragmented and highly attractive market
(1) U.S. Census Bureau Data; Insperity management estimates.(2) Represents businesses with less than 5,000 employees.
Total Workforce(1)
~115 Million EmployeesSmall To Midmarket(2) Workforce(1)
~71 Million Employees
95%
5%
Traditional employmentCo-employment
Who does Insperity target?
Insperity is focused on being a trusted advisor to the best small-to-midmarket businesses
EMPLOYMENT RISK
BU
SIN
ES
SS
UC
CE
SS
HIGH LOW
ST
RU
GG
LIN
GT
HR
IVIN
G
Workforce Optimization™
Workforce Acceleration™
Who are Insperity’s clients?
Insperity currently provides Workforce Optimization solutions for ~8,900 clients
15%
17%
15%6%
11%
4%
9%
7%
3%
7% 6%
Computer and information sciences
Finance, Insurance, Real Estate
Management, administration, consulting
Medical services
Manufactuing
Construction
Wholesale trade
Engineering, accounting, legal
Retail trade
Other
Not-for-profit and similar organizations
FY 2019 Average Paid Worksite Employees (“WSEs”): 235,547
How does Insperity serve its target market?
Insperity’s solutions address a diverse set of client types and needs
Small Business Core Emerging Growth MidMarket
Overview
Likely newly formed,require HR function
on an as needed basis
Small businesswith less than 50
employees; requiresHR function to evolve
Typically a growingorganization struggling
with HR complexityas their employee
base grows
Establishedorganization; requires
customizableHR function
WSEs < 20 21 - 49 50 - 149 150 – 5,000
Approach Essential Collaborative Integrated Strategic
Customization Low Low / Medium Medium / High High
Engagement Responsive Dedicated Proactive Engaged
How is Insperity different? Our breadth of services.
Bundled Solutions Providers Point Solutions Providers
Insperity Other Bundled Insurance Brokers Payroll Processors Payroll Processors
Complete HRSolution for Small
Business
MidMarket ServiceOfferings
High Touch / HighValue Solution
High Quality RiskManagement and
Cost Stability
Cloud Technology
Insperity sits at the nexus of Business,
Software and Insurance Services
SoftwareServices
Advisory Services
InsuranceServices
BusinessServices
How is Insperity different?Our depth of services.
Built upon Insperity’s extensive HR knowledge base, the Insperity Premier platform is a cloud-based human capitalmanagement system that maximizes the power of Workforce Optimization, our industry-leading co-employment solution.
HR Specialist
Safety Consultant
Performance Specialist
Recruiting Specialist
How is Insperity different? Our level of care.
Insperity Offers a High-Touch Service on a High-Tech Platform
Team Manager
Client Liaison
Contact Center
Payroll Specialist
Business PerformanceAdvisors
ChannelPartners
RewardsProgram
Cross-SellingPrograms
Quarterback for ourservices
Trusted advisor to thelocal business
community
Guiding clients to theright solutions; execute
bundle plus strategy
Partners in ProfessionalServices, Insurance and
Banking
Leverage partners forleads/referrals
Re-engage clients
Build value in theInsperity/Client
relationship
Gain referrals
Leverage investmentsin core sales &
marketing
Increase prospectawareness of our otherbusiness products and
services (BPS) offerings
How does Insperity go-to-market?
Key components of our strategy
How does Insperity go-to-market? (cont.)
National sales and
service infrastructure
2019 Revenue Contributionby Region
• Southeast 12%• Northeast 26%• Central 17%• West 21%• Southwest 24%
Bellevue
San Francisco
Los Angeles
San Diego
Phoenix
Austin
San Antonio
Dallas/Ft. Worth
Houston
Oklahoma City
Denver Kansas City
Minneapolis
St. Louis
Milwaukee
Chicago
Indianapolis
Columbus
Boston
New York
PhiladelphiaNew Jersey
Maryland
Washington D.C.
Raleigh
Charlotte
Atlanta
Nashville
Orlando
Ft. Lauderdale
Stamford
Pittsburg
San Jose
Portland
Tampa
Las Vegas
• Sales (75 Offices, 38 Markets)• Service Center (4 Locations)
Corporate Headquarters
Sacramento
Providence
Total Service Fee(quoted as a % of Employee’s Wages)
HR Services FeeSeparate Direct CostProgram Allocations
Bundle Plus / Add-on Serviceswith discounted pricing for Workforce Optimization
customers
Human ResourcesManagement
Recruiting and Selection
Training and Development
Policies and Practices
Payroll Administration
Government Compliance
Employee Benefits
Employer Payroll Taxes
Workers’ Compensation
Employer Liability
Management
Performance Management
Direct Placement Recruiting
Employment Screening
Retirement Services
Time and Attendance
Expense Management
Organizational Planning
Insurance Services
Payroll Services
Financial Services
Human Capital Management
How does Insperity price its Workforce Optimization service
Financial Results
Key financial metrics
Average Paid Worksite Employees Average Trained BPAs
Year-Over-Year Paid WorksiteEmployee Growth %
14% 10% 14% 13% 7%
*Amount represents midpoint of Financial guidance issued on February 11, 2020.
165,850
182,696
209,123
235,547
252,050
359
406
470
528
584
300
350
400
450
500
550
600
100,000
120,000
140,000
160,000
180,000
200,000
220,000
240,000
260,000
2016 2017 2018 2019 2020E*
Key financial metrics (in millions)
Adjusted EBITDA(1)
Year-Over-Year Growth %% of Gross Profit
$141
$178
$240$250
$262
$0
$50
$100
$150
$200
$250
$300
2016 2017 2018 2019 2020E*
*Amount represents midpoint of Financial guidance issued on February 11, 2020.
1) Please see reconciliation to GAAP measure in the Appendix. Adjusted EBITDA represents EBITDA adjusted to add back stock-basedcompensation expense, one-time tax reform bonus, charitable donations to Hurricane Harvey relief efforts and costs associated withstockholder advisory expenses.
28% 26% 35% 4% 5%29% 31% 35% 34% 33%
Key financial metrics
Adjusted EBITDA(1) Per Worksite Employee Per Month
$71
$81
$95
$88 $87
$25
$35
$45
$55
$65
$75
$85
$95
$105
2016 2017 2018 2019 2020E*
*Amount represents midpoint of Financial guidance issued on February 11, 2020.
1) Please see reconciliation to GAAP measure in the Appendix. Adjusted EBITDA represents EBITDA adjusted to add back stock-basedcompensation expense, one-time tax reform bonus, charitable donations to Hurricane Harvey relief efforts and costs associated withstockholder advisory expenses.
Key financial metrics
Adjusted EPS (1)
$1.79
$2.45
$3.75
$4.15$3.94
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
2016 2017 2018 2019 2020E*
Year-Over-Year Increase (Decrease) % 63% 37% 53% 11% -5%
*Amount represents midpoint of Financial guidance issued on February 11, 2020.
1) Please see reconciliation to GAAP measure in the Appendix. Adjusted EPS represents EPS adjusted to add back stock-basedcompensation expense, one-time tax reform bonus, charitable donations to Hurricane Harvey relief efforts, costs associated withstockholder advisory expenses, the enactment of U.S. tax reform and disaster credits.
2) 2020 adjusted EPS guidance includes a full year effective tax rate of 28% compared to 20% in 2019 due primarily to less tax benefitassociated with the vesting of long-term incentive plan and time-vested restricted shares. The higher effective tax rate is expected toreduce earnings by approximately $0.28 per share.
(2)
Return to investors from cash flow and debt (in millions)
$110
$141
$178
$240$250
$67
$176
$39
$113
$203
$21 $21
$66
$33$49
$0
$25
$50
$75
$100
$125
$150
$175
$200
$225
$250
$275
2015 2016* 2017** 2018 2019
Adjusted EBITDA Share repurchases Dividends
*2016 share repurchases includes a dutch auction tender offer that was completed in January 2016 resulting in the repurchase of six million sharesat a cost of $23.75 per share, plus transaction costs. The tender offer was funded with approximately $40 million of cash and $104 million of debt.
**2017 dividends includes a $1 per share special dividend paid in Q4 2017.
Appendix
Note: Financial guidance referenced above issued on February 11, 2020.
(1) Adjusted EBITDA represents EBITDA adjusted to add back stock-based compensation expense.(2) Adjusted EPS represents EPS adjusted to add back stock-based compensation expense.
Full year and Q1 guidance
FY 2020 Guidance Q1 2020 Guidance
Average paid WSEs 249,700 – 254,400 238,000 – 240,200
Implied y-o-y increase (decrease) in average paid WSEs 6% - 8% 5.5% - 6.5%
Adj. EBITDA(1) $250 - $274 $98 - $103
Implied y-o-y increase (decrease) in Adj. EBITDA 0% - 10% (3.4)% - 1.5%
Adj. EPS(2) $3.73 - $4.16 $1.61 - $1.70
Implied y-o-y increase (decrease) in Adj. EPS (10)% - 0% (18.7)% - (14.1)%
Adjusted EBITDA reconciliation (in millions)
Note: Insperity management believes adjusted EBITDA is often a useful measure of the company’s operating performance, as it allows for additional analysis of thecompany’s operating results separate from the impact of these items. Adjusted EBITDA should not be considered as a substitute for, or superior to, measures offinancial performance prepared in accordance with GAAP.
* Based on the midpoint of the guidance issued on February 11, 2020.
FY 2017 FY 2018 FY2019 2020E*
Net income (GAAP) $84.4 $135.4 $151.1 $136.5
Interest expense 3.2 4.7 7.7 10.7
Income tax expense 45.7 47.0 38.5 53.0
Depreciation and amortization 18.2 22.8 28.7 34.4
EBITDA 151.5 209.9 226.0 234.6
Stock-based compensation 24.4 20.4 24.0 27.6
Hurricane Harvey donations 2.0 - - -
One-time tax reform bonus - 9.3 - -
Other (0.2) - - -
Adjusted EBITDA $177.7 $239.6 $250.0 $262.2
Note: Insperity management believes adjusted net income is often a useful measure of the company’s operating performance, as it allows for additional analysis of thecompany’s operating results separate from the impact of these items. Adjusted Net Income should not be considered as a substitute for, or superior to, measuresof financial performance prepared in accordance with GAAP.
* Based on the midpoint of the guidance issued on February 11, 2020.
Adjusted net income (in millions)
FY 2017 FY 2018 FY 2019 FY 2020E*
Net income (GAAP) $84.4 $135.4 $151.1 $136.5
Stock-based compensation 24.4 20.4 24.0 27.6
Hurricane Harvey donations 2.0 - - -
One time tax reform bonus - 9.3 - -
Other (0.2) - - -
Total pretax non-GAAP adjustments 26.2 29.7 24.0 27.6
Tax effect on non-GAAP adjustments (9.4) (7.6) (5.6) (7.8)
Enactment of U.S. tax reform $2.5 - - -
Tax effect of disaster credit (0.7) - - -
Adjusted net income $103.0 $157.5 $169.5 $156.3
Adjusted EPS reconciliation
Note: Insperity management believes adjusted EPS is often a useful measure of the company’s operating performance, as it allows for additional analysis of the company’soperating results separate from the impact of these items. Adjusted EPS should not be considered as a substitute for, or superior to, measures of financialperformance prepared in accordance with GAAP.
* Based on the midpoint of the guidance issued on February 11, 2020.
(1) 2020 adjusted EPS guidance includes a full year effective tax rate of 28% compared to 20% in 2019 due primarily to less tax benefit associated with the vesting oflong-term incentive plan and time-vested restricted shares. The higher effective tax rate is expected to reduce earnings by approximately $0.28 per share.
FY 2017 FY 2018 FY 2019 FY 2020E*
EPS (GAAP) $2.01 $3.22 $3.70 $3.43
Stock based compensation 0.58 0.49 0.59 0.71
Hurricane Harvey donations 0.05 - - -
One-time tax reform bonus - 0.22 - -
Other (0.01) - - -
Total pretax non-GAAP adjustments 0.62 0.71 0.59 0.71
Tax effect on non-GAAP adjustments (0.22) (0.18) (0.14) (0.20)
Enactment of U.S. tax reform 0.06 - - -
Tax effect of disaster credit (0.02) - - -
Adjusted EPS(1) $2.45 $3.75 $4.15 $3.94