Insperity was created in 1986 in Texas, USA; the brain child of co-founder Paul Sarvadi, who remains the chairman and CEO today and owns 6.3% of the company. He envisaged making business owners’ lives easier by taking HR and administrative burdens off their plates. The company now serves more than 100,000 businesses, which have a combined total of over two million employees and come from a wide range of industries. Most clients are small businesses, pay comparatively low levels of wages and are in white collar or skilled blue collar industries.
Sarvadi started the company with a 600 square foot office space and just one telephone. Although it has grown exponentially since then, the business model remains a simple one; help businesses succeed by taking care of the things that distract from the bigger picture, thus enabling them to focus on where they can really add value. Their solutions help control expenses, minimize risk exposures and maximize opportunities for revenue generation.
This is a business with real longevity; the aim is to build strong and sustainable businesses both for themselves and for their clients. They have a strong corporate governance culture which is well articulated for a company of their size. They also work hard to help clients with their culture through a series of blogs and articles. Adding further to the feel-good factor, employees are encouraged (and are given time by the company) to contribute to good causes and last year clocked up a total of 62,000 hours of volunteering.
Insperity’s latest results highlighted the strong momentum the company is experiencing in its business. At their Q2 2018 earnings release, they once again beat market expectations and raised year end guidance. Traditional HR results were strong and, in addition, the money they have invested in web services is also beginning to bear fruit.
Perhaps most importantly, the drivers for future growth appear to be in place. The company expect strong momentum into 2019 and have significantly increased their total addressable market by developing their capabilities in what they term the “mid-market” segment over the past couple of years. This development means they are now targeting businesses with up to 5,000 employees, having previously only catered for those with up to 150. Growth has historically been held back as Insperity would help a smaller company grow; which would then create its own HR department. By widening the net to target these larger companies as well, Insperity can now expect to keep clients for longer and improve their already high retention rate.
The US economy is in rude health and optimism among small businesses (Insperity’s main customers) has rarely been higher. Coupled with this supportive backdrop, Insperity’s business continues to go from strength to strength thanks to their three main drivers: excellent retention of customers, net hiring at existing customers and growth in new sales.
Opinions and views from the Equities team at Kames Capital are not an investment recommendation, research or advice and should not be considered as such. Content discussing investment strategies and stocks is derived from and solely relates to the investment management activities of Kames Capital.
About the author
Neil Goddin is Head of Equity Quantitative Analysis and also has joint responsibility for managing funds within the Global Equities team. In addition to investment management responsibilities, he leads the team responsible for building and maintaining the Kames equity investment screen, which is used across the equity team, and advising on optimising risk levels in the funds. Neil’s role differs from most typical quant professionals as he sits within the fundamental team, has joint responsibility for managing funds and is an integral part of the equity team; rather than the more traditional model where quant teams sit separately, away from investors. Neil joined us in 2012 from LV Asset Management where he was Head of Investment Risk. Prior to that, he worked for WestLB Mellon Asset Management and Deutsche Asset Management in various risk-management roles. He has 19 years’ industry experience and is a Certified Risk Manager by the Global Association of Risk Professionals*.
*As at 28 February 2018.