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8-K - 8-K - TRINET GROUP, INC.tnet-8k_20150303.htm

Exhibit 99.1

 

TriNet Announces Fourth Quarter, Fiscal Year 2014 Results

 

25% Growth in Total Revenues and 4% Growth in Net Service Revenues for the Fourth Quarter

33% Growth in Total Revenues and 21% Growth in Net Service Revenues for the Full Year

25% Increase in Worksite Employees (WSEs), to 288,000

 

SAN LEANDRO, Calif. March 3, 2015 TriNet Group, Inc. (NYSE: TNET), a leading provider of a comprehensive human resources solution for small to medium-sized businesses, today announced financial results for the fourth fiscal quarter and year ended December 31, 2014.

 

Fourth quarter highlights include:

·

Total revenues increased 25% to $603.7 million and Net Service Revenues increased 4% to $126.9 million from the same period last year.  

·

Total WSEs at December 31, 2014 increased 25% from December 31, 2013, to approximately 288,000.

·

Net income was $7.0 million, or $0.10 per diluted share, compared to net income of $6.0 million, or $0.11 per diluted share, in the same period last year.

·

Adjusted Net Income was $19.2 million, or $0.26 per diluted share on a pro forma basis, compared to Adjusted Net Income of $17.1 million, or $0.24 per diluted share on a pro forma basis, in the same period last year.

·

Adjusted EBITDA was $40.1 million, an 8% decrease from the same period last year.

Full year highlights include:

·

Total revenues increased 33% to $2.2 billion and Net Service Revenues increased 21% to $507.2 million from fiscal 2013.  

·

Net income was $15.5 million, or $0.22 per diluted share, compared to net income of $13.1 million, or $0.24 per diluted share, in fiscal 2013.

·

Adjusted Net Income for fiscal 2014 was $74.4 million, or $1.03 per diluted share on a pro forma basis, compared to Adjusted Net Income of $57.5 million, or $0.81 per diluted share on a pro forma basis, in fiscal 2013.

·

Adjusted EBITDA was $165.3 million, a 22% increase from the same period last year.

 

“Capitalizing on the tremendous market opportunity, we leveraged our vertical go-to-market strategy to achieve a 25% organic increase in our WSE base,” said Burton M. Goldfield, TriNet’s President and CEO.  “Our differentiated bundled HR products continue to resonate with a broad range of companies as we grow our salesforce and deepen our presence within our target verticals.   Based on our strong momentum in the market and with January firmly in the books, we remain confident in our business outlook and believe we can achieve Net Service Revenue growth in excess of 15% for 2015.”

 

Mr. Goldfield added, “Notwithstanding strong fundamentals in our underlying business, our Q4 Net Insurance Service Revenues were below our estimate as a result of higher than expected large medical claims. We are working closely with our health insurance partners to identify these large claims earlier in the process to improve our ability to more accurately forecast our Net Insurance Services Revenues.”  

 

Results for the fourth quarter of 2014 reflect a net increase of 15,466 WSEs, representing 6% growth since September 30, 2014, as TriNet continued to leverage its growing salesforce to increase penetration of targeted customer verticals.  TriNet’s total revenues for the fourth quarter of 2014 increased 25% from the fourth quarter of 2013 to $603.7 million, while Net Service Revenues increased 4% from the fourth quarter of 2013 to $126.9 million.  Net Service Revenues consisted of professional service revenues of $90.1 million and Net Insurance Service Revenues of $36.8 million.  Net Insurance Service Revenues consisted of insurance service revenues of $513.6 million, less insurance costs of $476.8 million.  Professional service revenues for the fourth quarter of 2014 increased 18% and Net Insurance Service Revenues decreased 19% from the fourth quarter of 2013. TriNet ended the fourth quarter with 385 Total Sales Representatives, up from 300 at the end of the fourth quarter of 2013.

 

Results for full year 2014 reflect an increase of 57,109 WSEs, to a total of 288,312 WSEs as of December 31, 2014, representing 25% growth since December 31, 2013.  TriNet’s total revenues increased 33% to $2.2 billion, while Net Service Revenues increased 21% to $507.2 million for the full year.   Net Service Revenues consisted of professional service revenues of $342.1 million and Net Insurance Service Revenues of $165.1 million.  Net Insurance Service Revenues consisted of insurance service revenues of $1.9 billion, less insurance costs of $1.7 billion.  Professional service revenues increased 26% and Net Insurance Service Revenues increased 14% over the full year of 2013.

 

At December 31, 2014, TriNet had cash and equivalents of $134.3 million and total debt of $544.9 million.

1

 


Earnings Conference Call and Audio Webcast

TriNet will host a conference call at 2:00 p.m. PT (5:00 p.m. ET) today to discuss its quarterly and annual results and provide annual financial guidance for 2015. TriNet encourages participants to pre-register for the conference call. Callers who pre-register will be given a unique PIN to gain immediate access to the call and bypass the live operator. To pre-register, go to: http://dpregister.com/10058919. For those who would like to join the call but have not pre-registered, they can do so by dialing +1 (412) 902-6510 and requesting the “TriNet Conference Call.”  The live webcast of the conference call can be accessed on the Investor Relations section of TriNet’s website at http://investor.trinet.com. A replay of the webcast will be available on this site for approximately one year. A telephonic replay will be available for one week following the conference call at +1 (412) 317-0088 conference ID: 10058919.

 

About TriNet

TriNet is a leading provider of a comprehensive human resources solution for small to medium-sized businesses, or SMBs. We enhance business productivity by enabling our clients to outsource their human resources, or HR, function to one strategic partner and allowing them to focus on operating and growing their core businesses. Our HR solution includes services such as payroll processing, human capital consulting, employment law compliance and employee benefits, including health insurance, retirement plans and workers compensation insurance. Our services are delivered by our expert team of HR professionals and enabled by our proprietary, cloud-based technology platform, which allows our clients and their employees to efficiently conduct their HR transactions anytime and anywhere. For more information, please visit http://www.trinet.com.

 

Use of Non-GAAP Financial Measures

Reconciliations of non-GAAP financial measures to TriNets financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled “Non-GAAP Financial Measures.”

 

Forward-Looking Statements

This press release contains, and statements made during the above referenced conference call will contain, forward-looking statements including, among other things, TriNet’s expectations regarding the growth of its salesforce and its customer base; its ability to generate returns through penetration of the SMB market; and future total revenues, Net Service Revenues, professional service revenues, insurance service revenues, insurance costs, Net Insurance Service Revenues, expenses, net income, Adjusted Net Income and Adjusted EBITDA. These statements are not guarantees of future performance, but are based on management’s expectations as of the date hereof and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements. Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include: risks associated with the market acceptance of outsourcing the HR function, and the anticipated benefits associated with the use of a bundled HR solution; our ability to continue to expand our direct sales force and the efficacy of our sales and marketing efforts; our ability to gain new clients, and our clients’ ability to grow and gain more employees; our ability to effectively acquire and integrate new businesses; the effects of seasonal trends on our results of operations; the unpredictable nature of our costs and operating expenses, in particular our insurance costs; changes to and our ability to comply with laws and regulations, including both those applicable to the co-employment relationship as well as those applicable to our clients’ businesses and their employees; the implementation of the Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act, and its application to the co-employer relationship; our ability to effectively manage our growth; the effects of increased competition and our ability to compete effectively; and our ability to comply with the restrictions of our credit facility and meet our debt obligations.

 

Further information on risks that could affect TriNets results is included in our filings with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q filed with the Commission on November 6, 2014, which could cause actual results to vary from expectations. Except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements.

 

Contacts:

 

Investors:

Media:

Alex Bauer

Jock Breitwieser

TriNet

TriNet

Investorrelations@TriNet.com

Jock.Breitwieser@TriNet.com

(510) 875-7201

(510) 875-7250

 

TriNet, Ambitions Realized and the TriNet logo are registered trademarks of TriNet.

2

 


 

TriNet Group, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

 

2014

 

 

 

2013

 

 

 

2014

 

 

 

2013

 

Professional service revenues

 

$

90,075

 

 

$

76,420

 

 

$

342,074

 

 

$

272,372

 

Insurance service revenues

 

 

513,587

 

 

 

405,236

 

 

 

1,851,457

 

 

 

1,371,903

 

Total revenues

 

 

603,662

 

 

 

481,656

 

 

 

2,193,531

 

 

 

1,644,275

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance costs

 

 

476,779

 

 

 

359,992

 

 

 

1,686,315

 

 

 

1,226,585

 

Cost of providing services (exclusive of depreciation and

   amortization of intangible assets)

 

 

34,004

 

 

 

32,619

 

 

 

134,256

 

 

 

106,661

 

Sales and marketing

 

 

35,772

 

 

 

29,796

 

 

 

139,997

 

 

 

109,183

 

General and administrative

 

 

13,141

 

 

 

12,634

 

 

 

53,926

 

 

 

52,455

 

Systems development and programming costs

 

 

6,866

 

 

 

4,808

 

 

 

26,101

 

 

 

19,948

 

Amortization of intangible assets

 

 

12,743

 

 

 

15,443

 

 

 

52,302

 

 

 

51,369

 

Depreciation

 

 

4,118

 

 

 

2,829

 

 

 

13,843

 

 

 

11,737

 

Total costs and operating expenses

 

 

583,423

 

 

 

458,121

 

 

 

2,106,740

 

 

 

1,577,938

 

Operating income

 

 

20,239

 

 

 

23,535

 

 

 

86,791

 

 

 

66,337

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense and bank fees

 

 

(5,019

)

 

 

(13,633

)

 

 

(54,193

)

 

 

(45,724

)

Other, net

 

 

221

 

 

 

162

 

 

 

478

 

 

 

471

 

Income before provision for income taxes

 

 

15,441

 

 

 

10,064

 

 

 

33,076

 

 

 

21,084

 

Provision for income taxes

 

 

8,430

 

 

 

4,057

 

 

 

17,579

 

 

 

7,937

 

Net income

 

$

7,011

 

 

$

6,007

 

 

$

15,497

 

 

$

13,147

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.10

 

 

$

0.11

 

 

$

0.24

 

 

$

0.26

 

Diluted

 

$

0.10

 

 

$

0.11

 

 

$

0.22

 

 

$

0.24

 

Weighted average shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

69,678,331

 

 

 

14,907,457

 

 

 

56,160,539

 

 

 

12,353,047

 

Diluted

 

 

73,252,127

 

 

 

17,338,044

 

 

 

59,566,773

 

 

 

15,731,807

 

 

 


3

 


TriNet Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

December 31,

 

 

December 31,

 

 

 

2014

 

 

2013

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

134,341

 

 

$

94,356

 

Restricted cash

 

 

14,543

 

 

 

15,267

 

Prepaid income taxes

 

 

26,711

 

 

 

3,331

 

Deferred income taxes

 

 

 

 

 

68

 

Prepaid expenses

 

 

9,336

 

 

 

7,849

 

Deferred loan costs and other current assets

 

 

4,271

 

 

 

5,238

 

Worksite employee related assets

 

 

1,635,136

 

 

 

772,437

 

Total current assets

 

 

1,824,338

 

 

 

898,546

 

Workers compensation receivable

 

 

31,905

 

 

 

25,381

 

Restricted cash and investments

 

 

69,447

 

 

 

36,968

 

Property and equipment, net

 

 

32,298

 

 

 

25,690

 

Goodwill

 

 

288,857

 

 

 

288,857

 

Other intangible assets, net

 

 

81,718

 

 

 

134,020

 

Deferred income taxes

 

 

7,184

 

 

 

1,000

 

Deferred loan costs and other assets

 

 

12,017

 

 

 

24,276

 

Total assets

 

$

2,347,764

 

 

$

1,434,738

 

Liabilities and stockholders’ deficit

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

12,273

 

 

$

7,315

 

Accrued corporate wages

 

 

29,179

 

 

 

26,264

 

Deferred income taxes

 

 

65,713

 

 

 

16,535

 

Current portion of notes payable and borrowings under capital leases

 

 

20,738

 

 

 

6,669

 

Other current liabilities

 

 

10,303

 

 

 

9,078

 

Worksite employee related liabilities

 

 

1,630,555

 

 

 

767,624

 

Total current liabilities

 

 

1,768,761

 

 

 

833,485

 

Notes payable and borrowings under capital leases, less current portion

 

 

524,412

 

 

 

812,208

 

Workers compensation liabilities

 

 

75,448

 

 

 

45,309

 

Deferred income taxes

 

 

 

 

 

8,888

 

Other liabilities

 

 

4,902

 

 

 

5,210

 

Total liabilities

 

 

2,373,523

 

 

 

1,705,100

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Series G convertible preferred stock, $.0001 per share stated value

   (aggregate liquidation preference of $59,306); no shares authorized,

   issued and outstanding at December 31, 2014; 5,391,441 shares authorized,

   issued and outstanding at December 31, 2013

 

 

 

 

 

59,059

 

Series H convertible preferred stock, $.0001 per share stated value

   (aggregate liquidation preference of $60,000); no shares authorized,

   issued and outstanding at December 31, 2014; 4,124,986 shares authorized,

   issued and outstanding at December 31, 2013

 

 

 

 

 

63,819

 

Stockholders’ deficit:

 

 

 

 

 

 

 

 

Preferred stock, $.000025 per share stated value; 20,000,000 shares authorized;

   no shares issued and outstanding at December 31, 2014 and 2013

 

 

 

 

 

 

Common stock, $.000025 per share stated value; 750,000,000 shares authorized at

   December 31, 2014; 69,811,326 and 15,259,540 shares issued and outstanding at

   December 31, 2014 and 2013

 

 

442,682

 

 

 

74,160

 

Accumulated deficit

 

 

(468,127

)

 

 

(467,209

)

Accumulated other comprehensive loss

 

 

(314

)

 

 

(191

)

Total stockholders’ deficit

 

 

(25,759

)

 

 

(393,240

)

Total liabilities and stockholders’ deficit

 

$

2,347,764

 

 

$

1,434,738

 

 

 

 

4

 


 

TriNet Group, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Year Ended December 31,

 

 

 

 

2014

 

 

 

2013

 

Operating activities

 

 

 

 

 

 

 

 

Net income

 

$

15,497

 

 

$

13,147

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

84,403

 

 

 

73,838

 

Deferred income taxes

 

 

43,842

 

 

 

(6,680

)

Stock-based compensation

 

 

10,960

 

 

 

6,113

 

Excess tax benefit from equity incentive plan activity

 

 

(9,663

)

 

 

(15,610

)

Accretion of workers compensation and leases fair value adjustment

 

 

(1,090

)

 

 

(1,427

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Restricted cash

 

 

(6,880

)

 

 

(6,118

)

Prepaid expenses and other current assets

 

 

(7,389

)

 

 

(7,723

)

Workers compensation receivables

 

 

(5,413

)

 

 

9,876

 

Other assets

 

 

8,004

 

 

 

4,052

 

Accounts payable

 

 

5,212

 

 

 

976

 

Income tax payable/receivable

 

 

(21,448

)

 

 

6,394

 

Other current liabilities

 

 

7,449

 

 

 

13,186

 

Other liabilities

 

 

30,122

 

 

 

4,149

 

Worksite employee related assets

 

 

(862,699

)

 

 

(304,265

)

Worksite employee related liabilities

 

 

862,931

 

 

 

310,813

 

Net cash provided by operating activities

 

 

153,838

 

 

 

100,721

 

Investing activities

 

 

 

 

 

 

 

 

Acquisition of businesses

 

 

 

 

 

(194,998

)

Purchase of debt securities

 

 

(24,875

)

 

 

(7,750

)

Purchase of property and equipment

 

 

(20,552

)

 

 

(10,690

)

Proceeds from sale and maturity of debt securities

 

 

 

 

 

1,000

 

Net cash used in investing activities

 

 

(45,427

)

 

 

(212,438

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

217,796

 

 

 

 

Proceeds from issuance of common stock on exercised options

 

 

2,193

 

 

 

7,109

 

Proceeds from issuance of common stock for employee stock purchase plan

 

 

3,393

 

 

 

 

Excess tax benefit from equity incentive plan activity

 

 

9,663

 

 

 

15,610

 

Borrowings under notes payable

 

 

 

 

 

970,000

 

Repayment of notes payable

 

 

(273,550

)

 

 

(451,679

)

Payment of debt issuance costs

 

 

(11,060

)

 

 

(25,697

)

Payments of special dividend

 

 

 

 

 

(357,582

)

Repayments under capital leases

 

 

(306

)

 

 

(778

)

Repurchase of common stock

 

 

(16,440

)

 

 

(14,606

)

Net cash (used in) provided by financing activities

 

 

(68,311

)

 

 

142,377

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(115

)

 

 

(53

)

Net increase in cash and cash equivalents

 

 

39,985

 

 

 

30,607

 

Cash and cash equivalents at beginning of period

 

 

94,356

 

 

 

63,749

 

Cash and cash equivalents at end of period

 

$

134,341

 

 

$

94,356

 

 


5

 


Key Operating Metrics

We regularly review certain key operating metrics to evaluate growth trends, measure our performance and make strategic decisions. Our key operating metrics were as follows:

 

Three Months Ended

 

 

Year Ended

 

 

December 31,

 

 

December 31,

 

Key Operating Metrics:

2014

 

 

2013

 

 

2014

 

 

2013

 

Net Insurance Service Revenues (in thousands)

$

36,808

 

 

$

45,244

 

 

$

165,142

 

 

$

145,318

 

Net Service Revenues (in thousands)

$

126,883

 

 

$

121,664

 

 

$

507,216

 

 

$

417,690

 

Total WSEs

 

288,312

 

 

 

231,203

 

 

 

288,312

 

 

 

231,203

 

Total Sales Representatives

 

385

 

 

 

300

 

 

 

385

 

 

 

300

 

 

Non-GAAP Financial Measures

 

We use Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and, in 2014, pro forma Adjusted Net Income per share – diluted to provide an additional view of our operational performance. Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and pro forma Adjusted Net Income per share – diluted are financial measures that are not prepared in accordance with GAAP. We define Net Insurance Service Revenues as insurance service revenues less insurance costs, which include the premiums we pay to insurance carriers for the health and workers compensation insurance coverage provided to our clients and WSEs and the reimbursements we pay to the insurance carriers for claim payments within our insurance deductible layer. We define Net Service Revenues as the sum of professional service revenues and Net Insurance Service Revenues. We define Adjusted EBITDA as net income (loss), excluding the effects of our income tax provision (benefit), interest expense, depreciation, amortization of intangible assets, stock-based compensation expense and, in 2014, the expenses of the registered secondary offering of our common stock that was completed in September 2014. We define Adjusted Net Income as net income (loss), excluding the effects of stock-based compensation, amortization of intangible assets, non-cash interest expense and, in 2014, a debt prepayment premium paid in connection with the repayment of our second lien debt facility using proceeds from our initial public offering, as well as the expenses of the registered secondary offering of our common stock that was completed in September 2014 and the income tax effect of these pre-tax adjustments at our effective tax rate. In 2014, the effective tax rate is adjusted to 39.5% to exclude income tax on non-deductible stock-based compensation and discrete items including the cumulative effect of state law changes. Non-cash interest expense represents amortization and write-off of our debt issuance costs and, in 2014, a debt prepayment premium. We define pro forma Adjusted Net Income per share – diluted as Adjusted Net Income per basic share adjusted to reflect our equity structure as if our initial public offering and associated conversion of preferred stock had occurred at the beginning of the period and all option exercises that occurred during the period occurred at the beginning of the period, and then giving effect to all remaining potential shares of common stock issuable upon exercise of options or settlement of restricted stock units, to the extent dilutive.

We believe that the use of Net Insurance Service Revenues provides useful information as it presents a measure of revenues from our provision of insurance services to our clients that eliminates the cost to us of that insurance. We believe that Net Service Revenues provides a useful measure of total revenues for the two main components of our revenues calculated on a consistent basis. We believe that the use of Adjusted EBITDA, Adjusted Net Income and pro forma Adjusted Net Income per share – diluted provides additional period-to-period comparisons and analysis of trends in our business, as they exclude certain one-time and non-cash expenses. We believe that Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income, and pro forma Adjusted Net Income per share – diluted are useful for our stockholders and board of directors by helping them to identify trends in our business and understand how our management evaluates our business. We use Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and pro forma Adjusted Net Income per share – diluted to monitor and evaluate our operating results and trends on an ongoing basis and internally for operating, budgeting and financial planning purposes, in addition to allocating our resources to enhance the financial performance of our business and evaluating the effectiveness of our business strategies. We also use Net Service Revenues and Adjusted EBITDA in determining the incentive compensation for management.

Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and pro forma Adjusted Net Income per share – diluted are not prepared in accordance with, and should not be considered in isolation of, or as an alternative to, measurements required by GAAP. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. As non-GAAP measures, Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and pro forma Adjusted Net Income per share – diluted have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. In particular:

• Net Insurance Service Revenues and Net Service Revenues are reduced by the insurance costs that we pay to the insurance carriers;

• Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

• Adjusted EBITDA does not reflect the amounts we paid in taxes or other components of our tax provision;

6

 


• Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

• Adjusted EBITDA and Adjusted Net Income do not reflect changes in, or cash requirements for, our working capital needs;

• Adjusted EBITDA and Adjusted Net Income do not reflect the expenses we incurred in connection with the registered offering of our common stock during the third quarter of 2014;

• Adjusted EBITDA, Adjusted Net Income and pro forma Adjusted Net Income per share – diluted do not reflect the non-cash component of employee compensation;

• Although depreciation and amortization of intangible assets are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and

 

• Other companies in our industry may calculate these measures or similar measures differently than we do, limiting their usefulness as a comparative measure.

 

Because of these limitations, you should consider Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and pro forma Adjusted Net Income per share – diluted alongside other financial performance measures, including total revenues, net income (loss) and our financial results presented in accordance with GAAP.

 

The table below sets forth a reconciliation of GAAP insurance service revenues to Net Insurance Service Revenues:

 

 

 

Three months ended

 

 

Change

 

Year Ended

 

 

Change

 

 

 

December 31,

 

 

2014 vs. 2013

 

December 31,

 

 

2014 vs. 2013

 

 

 

2014

 

 

2013

 

 

$

 

 

%

 

2014

 

 

2013

 

 

$

 

 

%

 

 

 

(in thousands, except percentages)

 

Insurance service revenues

 

$

513,587

 

 

$

405,236

 

 

$

108,351

 

 

27%

 

$

1,851,457

 

 

$

1,371,903

 

 

$

479,554

 

 

 

35%

 

Less:  Insurance costs

 

 

476,779

 

 

 

359,992

 

 

 

116,787

 

 

32%

 

 

1,686,315

 

 

 

1,226,585

 

 

 

459,730

 

 

 

37%

 

Net Insurance Service Revenues

 

$

36,808

 

 

$

45,244

 

 

$

(8,436

)

 

(19%)

 

$

165,142

 

 

$

145,318

 

 

$

19,824

 

 

 

14%

 

 

The table below sets forth a reconciliation of GAAP total revenues to Net Service Revenues:

 

 

 

Three months ended

 

 

Change

 

 

Year Ended

 

 

Change

 

 

 

December 31,

 

 

2014 vs. 2013

 

 

December 31,

 

 

2014 vs. 2013

 

 

 

2014

 

 

2013

 

 

$

 

 

%

 

 

2014

 

 

2013

 

 

$

 

 

%

 

 

 

(in thousands, except percentages)

 

Total revenues

 

$

603,662

 

 

$

481,656

 

 

$

122,006

 

 

 

25%

 

 

$

2,193,531

 

 

$

1,644,275

 

 

$

549,256

 

 

 

33%

 

Less:  Insurance costs

 

 

476,779

 

 

 

359,992

 

 

 

116,787

 

 

 

32%

 

 

 

1,686,315

 

 

 

1,226,585

 

 

 

459,730

 

 

 

37%

 

Net Service Revenues

 

$

126,883

 

 

$

121,664

 

 

$

5,219

 

 

 

4%

 

 

$

507,216

 

 

$

417,690

 

 

$

89,526

 

 

 

21%

 

 

The table below sets forth a reconciliation of GAAP net income to Adjusted EBITDA:

 

 

Three Months Ended

 

 

Year Ended

 

 

December 31,

 

 

December 31,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

 

(in thousands)

 

Net income

$

7,011

 

 

$

6,007

 

 

$

15,497

 

 

$

13,147

 

Provision for income taxes

 

8,430

 

 

 

4,057

 

 

 

17,579

 

 

 

7,937

 

Stock-based compensation

 

2,709

 

 

 

1,753

 

 

 

10,960

 

 

 

6,113

 

Interest expense and bank fees

 

5,019

 

 

 

13,633

 

 

 

54,193

 

 

 

45,724

 

Depreciation

 

4,118

 

 

 

2,829

 

 

 

13,843

 

 

 

11,737

 

Amortization of intangible assets

 

12,743

 

 

 

15,443

 

 

 

52,302

 

 

 

51,369

 

Secondary offering costs

 

87

 

 

 

-

 

 

 

945

 

 

 

-

 

Adjusted EBITDA

$

40,117

 

 

$

43,722

 

 

$

165,319

 

 

$

136,027

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


7

 


The table below sets forth a reconciliation of GAAP net income to Adjusted Net Income:

 

 

Three Months Ended

 

 

Year Ended

 

 

December 31,

 

 

December 31,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

 

(in thousands)

 

Net income

$

7,011

 

 

$

6,007

 

 

$

15,497

 

 

$

13,147

 

Effective income tax rate adjustment

 

2,331

 

 

 

-

 

 

 

4,514

 

 

 

-

 

Stock-based compensation

 

2,709

 

 

 

1,753

 

 

 

10,960

 

 

 

6,113

 

Amortization of intangible assets

 

12,743

 

 

 

15,443

 

 

 

52,302

 

 

 

51,369

 

Non-cash interest expense

 

792

 

 

 

1,135

 

 

 

21,880

 

 

 

13,577

 

Debt prepayment premium

 

-

 

 

 

-

 

 

 

3,800

 

 

 

-

 

Secondary offering costs

 

87

 

 

 

-

 

 

 

945

 

 

 

-

 

Income tax impact of pre-tax adjustments at 39.5%

 

(6,451

)

 

 

(7,241

)

 

 

(35,506

)

 

 

(26,750

)

Adjusted Net Income

$

19,222

 

 

$

17,097

 

 

$

74,392

 

 

$

57,456

 

The table below sets forth a reconciliation of GAAP weighted average shares of common stock – basic to pro forma weighted average shares of common stock - diluted and Adjusted Net Income per share – diluted as if the equity structure had been in place at the beginning of the periods presented:

 

Three Months Ended

 

 

Year Ended

 

 

December 31,

 

 

December 31,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

 

(in thousands, except per share amount)

 

GAAP Weighted average shares of common stock - basic

 

69,678

 

 

 

14,907

 

 

 

56,161

 

 

 

12,353

 

Effect of IPO, conversion of preferred stock and

  exercise of stock options during the period included above

 

(295

)

 

 

(73

)

 

 

(41,082

)

 

 

(1,657

)

Adjustments as if the equity structure had occurred at the beginning of the periods:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of preferred stock

 

 

 

 

38,066

 

 

 

38,066

 

 

 

38,066

 

Common stock issued in connection with IPO

 

 

 

 

15,000

 

 

 

15,000

 

 

 

15,000

 

Common stock issued in connection with stock-based compensation

 

428

 

 

 

425

 

 

 

1,486

 

 

 

4,550

 

Dilutive effect of outstanding stock options and restricted stock units

 

3,465

 

 

 

2,785

 

 

 

2,762

 

 

 

2,397

 

Pro forma weighted average shares of common stock - diluted

 

73,276

 

 

 

71,110

 

 

 

72,393

 

 

 

70,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income

$

19,222

 

 

$

17,097

 

 

$

74,392

 

 

$

57,456

 

Pro forma Adjusted Net Income per share - diluted

$

0.26

 

 

$

0.24

 

 

$

1.03

 

 

$

0.81

 

 

8