Insperity(US:NSP)2021-08-02 22:59Financial Data and Key Metrics Changes - Adjusted earnings per share for Q2 2021 was $0.91, with adjusted EBITDA of $60 million, showing a rebound from pandemic lows [6] - Average number of paid worksite employees increased by 7% year-over-year and 4.3% sequentially from Q1 2021, exceeding forecasts [6] - Client retention rate reached a historical high of 99% in Q2 2021 [6] Business Line Data and Key Metrics Changes - Revenue per worksite employee increased due to a 6% rise in pricing and the non-recurrence of 2020 FICA deferral and customer service fee credits [7] - Gross profit declined by 9% year-over-year due to increased health care utilization and pandemic-related costs [7][8] - Payroll tax area showed favorable gross profit contributions, exceeding budget expectations due to lower-than-anticipated state unemployment tax rates [9][10] Market Data and Key Metrics Changes - The labor market is experiencing wage inflation, with average wages and bonuses up 7% and 44% respectively, leading to increased employee turnover [21] - The competition for qualified candidates is pronounced, impacting hiring dynamics and client retention [21][20] Company Strategy and Development Direction - The company aims to return to double-digit growth in paid worksite employees by Q3 2021, driven by strong sales momentum and client retention [16] - Strategic investments in sales and service capacity are planned, including hiring more business performance advisors and increasing marketing spend [23][24] - The company recognizes a significant market opportunity in the PEO industry, emphasizing the importance of HR functions for business success [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential in the PEO industry, highlighting the increasing recognition of HR's value [25] - There is caution regarding the ongoing pandemic's impact on costs, particularly in health care and unemployment taxes, leading to a wider range in earnings expectations [34][62] - The company plans to monitor labor market conditions closely, as candidate availability may affect hiring rates [20] Other Important Information - The company repurchased 98,000 shares at a cost of $9 million and raised its dividend rate by 12.5%, paying out $17 million in cash dividends [12] - Adjusted EBITDA guidance for Q3 is set between $52 million to $62 million, with adjusted EPS forecasted between $0.74 to $0.93 [35] Q&A Session Summary Question: Update on mid-market sales momentum - Management noted that the mid-market sales pipeline has strengthened and anticipates a good fall season for mid-market sales [39] Question: Guidance on worksite employee growth - Management indicated that the increase in guidance is due to strong hiring and sales performance, with expectations for continued growth despite a tightening labor market [41][42] Question: Pricing strategy and adjustments - Management explained that pricing adjustments are being made in response to market trends and lower unemployment tax rates, which will support sales and retention [44] Question: Client profile changes - Management reported that the average client size has partially recovered post-COVID, with potential for further growth [48] Question: Impact of potential lockdowns on tax rates - Management stated that mid-year changes to unemployment tax rates are highly unusual, and adjustments would likely be considered for 2022 [50][52] Question: Revenue per worksite employee sources - Management clarified that the increase in revenue per worksite employee is attributed to pricing increases and the absence of prior year government stimulus effects [55][56] Question: Client retention efforts - Management highlighted ongoing improvements in client interactions and retention strategies, expressing optimism for the year-end transition [57] Question: Healthcare cost trends - Management noted that healthcare costs have been higher than expected due to various pandemic-related factors, but remain within expected ranges [61][62] Question: Workforce Acceleration contributions - Management indicated that Workforce Acceleration is becoming a more routine part of the sales process, showing potential for future growth [66]