Insperity(US:NSP)2019-07-29 17:25Financial Data and Key Metrics Changes - Adjusted EPS for Q2 2019 was $0.83, a 22% increase compared to Q2 2018 [6] - Adjusted EBITDA reached $56.7 million, also reflecting a 22% increase year-over-year [6] - Average paid worksite employees increased by 14% compared to Q2 2018 [6] - Client retention averaged just above 99%, near historical highs [6] - Gross profit increased by over 12% year-over-year, despite higher than forecasted benefit costs [8] Business Line Data and Key Metrics Changes - Net gains in the client base were down by 15% from Q2 2018, attributed to less hiring by clients [7] - Adjusted operating expenses increased by 12%, driven by investments in growth and new sales offices [10] - New sales were 101% of forecast for the first half of the year, indicating strong sales efficiency [15] Market Data and Key Metrics Changes - Total worksite employees sold for marketing leads increased by 25% year-over-year [16] - Total website visitors increased by 13%, with organic search traffic up by 22% [16] - Unique visitors to the company blog rose by 25%, supporting the goal of expanding authority in the HR space [17] Company Strategy and Development Direction - The company plans to continue expanding its office locations, with five new offices expected in the second half of the year [18] - Focus on mid-market and enterprise segments, leveraging new HR analytics technology to differentiate services [29] - The company aims to balance growth and profitability by making operational adjustments in line with revised growth expectations [33] Management's Comments on Operating Environment and Future Outlook - Management noted challenges in hiring due to a tight labor market, with a ratio of recruiter interviews to hires at 14:1 [22] - Despite challenges, the business model showed resilience, with expectations for continued growth in worksite employees [27] - Full year 2019 adjusted EBITDA is forecasted to be between $278 million and $286 million, reflecting a 16% to 19% increase over 2018 [39] Other Important Information - The effective tax rate for Q2 was 28%, with an estimated full year rate of 22% [11] - The company ended Q2 with $131 million in adjusted cash, up from $129 million at the end of 2018 [12] - The company repurchased 315,000 shares at a total cost of $39 million, with $10 million spent in Q2 [12] Q&A Session Summary Question: Was the sales result in the second quarter in line with expectations? - Management confirmed that sales in Q2 were good and no signs of a slowdown were observed [44] Question: How is the mid-market performing compared to the core business? - The mid-market channel is strong, with a significant pipeline and sales above last year [45] Question: Has the failed acquisition impacted worksite employee guidance? - Yes, the failed acquisition resulted in the removal of approximately 700-800 employees from guidance [48] Question: What are the expectations for worksite employee growth acceleration from Q3 to Q4? - Growth acceleration is expected based on normal sales plans and increased sales per salesperson [49] Question: Are there challenges in talent acquisition due to the tight labor market? - Yes, it is challenging, but the company is leveraging its reputation as a great workplace to attract talent [50] Question: What is the client retention rate for mid-market clients? - Client retention has been good, targeting 85% to 86% for the full year [53] Question: What insights does payroll data provide about customer attitudes? - Payroll data indicates a positive outlook among clients, with no negative sentiment detected [56] Question: How does pricing contribute to guidance? - Pricing has helped offset large claims, and overall claims were below trend [62]