Financial Data and Key Metrics Changes - The company reported first quarter adjusted EPS of $1.57 and adjusted EBITDA of $102 million, which fell below guidance due to higher than expected benefits costs [5][6] - The average number of paid worksite employees increased by 0.7% year-over-year to 306,023, but growth was slightly below guidance due to delays and cancellations in new client starts [5][6] - Gross profit per worksite employee decreased to $338 per month from $378 in the prior year, attributed to an 8.4% increase in benefits costs per covered employee [6][10] Business Line Data and Key Metrics Changes - Client retention improved to 91% in Q1, a significant increase from 88% in the previous year, indicating strong client loyalty [18] - Client net hiring was slightly positive but remained weak compared to historical norms [6][33] Market Data and Key Metrics Changes - A client survey indicated that 66% of respondents expect the economic climate to negatively affect their business, up from 29% in January [15] - The percentage of clients expecting to add employees decreased to 34% from 43% [15] Company Strategy and Development Direction - The company is focusing on mitigating the impact of rising benefits costs through pricing adjustments and plan design changes, with a forecasted benefits cost per covered employee of 6.5% to 7.5% for the full year [9][34] - The strategic partnership with Workday is seen as a significant growth driver, with plans to launch a joint solution targeting mid-market businesses [25][29] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment over the unexpected rise in benefits costs but remains optimistic about future profitability improvements as pricing adjustments are implemented [10][36] - The company has reduced its worksite employee growth forecast for the year to 0.5% to 3% due to macroeconomic uncertainties [33][34] Other Important Information - Operating expenses increased slightly by 2% year-over-year, primarily due to investments in the Workday partnership [10][11] - The company returned $23 million in cash dividends and repurchased 224,000 shares at a cost of $19 million during the quarter [11] Q&A Session Summary Question: Can you elaborate on the onboarding pauses mentioned? - Management noted that optimism in the small business community reversed dramatically due to government actions, leading to delays and cancellations in onboarding new clients [40][41] Question: What is the expected cadence of spending for the Workday partnership? - The company anticipates stable spending throughout the year, with a gradual decrease in costs expected in years three to five of the partnership [45][48] Question: What actions from Washington could improve customer confidence? - Management believes that minor changes in tax policy or regulatory environments could significantly boost confidence among clients [54] Question: How quickly can pricing adjustments be made in response to healthcare costs? - Pricing changes are already being implemented, with expectations for improvements in gross margins as the year progresses [63][64] Question: Are there regional differences in healthcare costs or hiring hesitancy? - The company has seen better results in the Northeast, but overall trends appear to be consistent across the nation [70]

[Executive Summary & Q1 2025 Results](index=1&type=section&id=Executive%20Summary%20%26%20Q1%202025%20Results) Insperity's Q1 2025 results show revenue growth offset by declining gross profit and net income due to higher healthcare costs, with management initiating pricing adjustments and progressing on strategic partnerships [First Quarter 2025 Financial Highlights](index=1&type=section&id=First%20Quarter%202025%20Financial%20Highlights) Insperity reported a 1% increase in average worksite employees (WSEEs) and a 3% rise in revenues for Q1 2025, reaching $1.9 billion, but gross profit decreased by 10% to $310 million due to higher healthcare costs, leading to significant declines in net income and diluted EPS Q1 2025 Key Financial Highlights | Metric | Q1 2025 | Q1 2024 | Change | | :-------------------------------- | :------ | :------ | :----- | | Average WSEEs paid | 306,023 | 303,904 | 1% | | Revenues | $1.9 billion | $1.8 billion | 3% | | Gross profit | $310 million | $345 million | (10)% | | Operating expenses | $242 million | $237 million | 2% | | Net income | $51 million | $79 million | (35)% | | Diluted EPS | $1.35 | $2.08 | (35)% | | Adjusted EBITDA | $102 million | $142 million | (28)% | | Adjusted EPS | $1.57 | $2.27 | (31)% | - Gross profit decrease was primarily due to higher-than-expected benefits costs, specifically an acceleration in inpatient, outpatient, and pharmacy costs, and increased frequency of large claim activity, with healthcare costs including approximately **$12 million** of higher-than-expected runoff from claims related to prior periods[4](index=4&type=chunk) - Operating expenses included **$13 million** for the Workday strategic partnership in Q1 2025, up from **$5 million** in Q1 2024[5](index=5&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management acknowledged the impact of macro-economic turbulence and healthcare cost volatility on Q1 financial results but emphasized solid execution on building a foundation for future growth, noting progress on the Workday strategic partnership and the initiation of a pricing plan to address rising healthcare costs - CEO Paul J. Sarvadi noted that Q1 financial results, reflecting macro-economic turbulence and healthcare cost volatility, contrasted with solid execution of the game plan for future growth acceleration[4](index=4&type=chunk) - Excellent progress was made on the Workday strategic partnership milestones, including an agreed-upon go-to-market plan anticipated to add a new growth driver in **2026** and beyond[4](index=4&type=chunk) - CFO James D. Allison stated that the company has made good progress with its operating plan, focusing on operating expense management and accelerating growth[6](index=6&type=chunk) - A pricing plan has been initiated to address the projected higher healthcare cost trend, and other options are under evaluation to contain or reduce costs and improve profitability in **2026**[6](index=6&type=chunk) [Shareholder Returns and Liquidity](index=1&type=section&id=Shareholder%20Returns%20and%20Liquidity) During the first three months of 2025, Insperity returned $42 million to shareholders through share repurchases and cash dividends, while maintaining a healthy liquidity position with $124 million in adjusted cash and $280 million available under its credit facility Q1 2025 Shareholder Returns & Liquidity | Metric | Amount | | :-------------------------------- | :----- | | Shares repurchased | 224,000 | | Cost of share repurchases | $19 million | | Dividends paid | $23 million | | Total return to shareholders | $42 million | | Adjusted cash (as of March 31, 2025) | $124 million | | Available under credit facility | $280 million | | Total credit facility | $650 million | [2025 Financial Guidance](index=2&type=section&id=2025%20Financial%20Guidance) The company's 2025 financial guidance projects modest WSEE growth but anticipates significant declines in Adjusted EPS and Adjusted EBITDA for Q2 and the full year, alongside definitions of key non-GAAP metrics [Q2 and Full Year 2025 Outlook](index=2&type=section&id=Q2%20and%20Full%20Year%202025%20Outlook) Insperity provided updated guidance for Q2 and the full year 2025, projecting modest WSEE growth but a significant year-over-year decrease in Adjusted EPS and Adjusted EBITDA for both periods, reflecting the challenges faced in Q1 2025 Financial Guidance | Metric | Q2 2025 Guidance | YoY Change (Q2) | Full Year 2025 Guidance | YoY Change (FY) | | :---------------------- | :--------------- | :-------------- | :---------------------- | :-------------- | | Average WSEEs paid | 308,000 - 311,000 | 0.3% - 1.3% | 308,800 - 316,400 | 0.5% - 3.0% | | Adjusted EPS | $0.29 - $0.67 | (66)% - (22)% | $2.23 - $3.28 | (38)% - (8)% | | Adjusted EBITDA (in millions) | $33 - $53 | (50)% - (20)% | $190 - $245 | (30)% - (9)% | [Definition of Key Metrics](index=2&type=section&id=Definition%20of%20Key%20Metrics) This section defines the key non-GAAP financial metrics used in the company's reporting and guidance, including Average WSEEs paid, Adjusted EPS, and Adjusted EBITDA, to provide clarity on how these figures are calculated - Average WSEEs paid is determined by calculating the company's cumulative WSEEs paid during the period divided by the number of months in the period[10](index=10&type=chunk) - Adjusted EPS represents diluted net income per share computed in accordance with GAAP, excluding the impact of non-cash stock-based compensation[10](index=10&type=chunk) - Adjusted EBITDA represents net income computed in accordance with GAAP, plus interest expense, income taxes, depreciation and amortization expense, amortization of SaaS implementation costs, and non-cash stock-based compensation[11](index=11&type=chunk) [Company Information](index=2&type=section&id=Company%20Information) This section provides an overview of Insperity's mission and comprehensive HR solutions, including its 2024 revenues, and details regarding the Q1 2025 earnings conference call and webcast [About Insperity](index=2&type=section&id=About%20Insperity) Insperity, founded in 1986, is a leading provider of human resources and business performance solutions, offering a comprehensive suite of scalable HR solutions to help businesses succeed through premium HR service and technology, reporting $6.6 billion in revenues in 2024 - Insperity's mission since **1986** has been to help businesses succeed so communities prosper, offering a comprehensive suite of scalable HR solutions[13](index=13&type=chunk) - The company delivers administrative relief, reduced liabilities, and better benefit solutions through an optimal blend of premium HR service and technology[13](index=13&type=chunk) Insperity 2024 Revenues | Metric | Amount | | :------- | :----------- | | Revenues | $6.6 billion | [Conference Call and Webcast](index=2&type=section&id=Conference%20Call%20and%20Webcast) Insperity hosted a conference call and webcast on April 29, 2025, to discuss the first quarter results and updated 2025 guidance, with replay and archived webcast available - A conference call was hosted on **April 29, 2025**, at **8:30 a.m. ET** to discuss results and guidance, with a webcast available at http://ir.insperity.com[12](index=12&type=chunk) - A replay of the conference call is available at **877-481-4010**, conference i.d. number **52321**, and the webcast will be archived for one year[12](index=12&type=chunk) [Forward-Looking Statements & Risk Factors](index=3&type=section&id=Forward-Looking%20Statements%20%26%20Risk%20Factors) This section outlines the disclaimer for forward-looking statements, emphasizing inherent risks and uncertainties, and details various factors that could materially impact Insperity's financial performance and operations [Forward-Looking Statements Disclaimer](index=3&type=section&id=Forward-Looking%20Statements%20Disclaimer) This section provides a disclaimer regarding forward-looking statements, identifying them by specific terminology and cautioning that they are not guarantees of future performance, highlighting that actual results could differ materially due to various risks and uncertainties - Statements not historical facts are forward-looking statements, identifiable by words like 'anticipates,' 'expects,' 'intends,' 'plans,' 'projects,' 'believes,' 'estimates,' 'forecasts,' 'likely,' 'possibly,' 'probably,' 'could,' 'goal,' 'opportunity,' 'objective,' 'target,' 'assume,' 'outlook,' 'guidance,' 'predicts,' 'appears,' 'indicator' and similar expressions[14](index=14&type=chunk) - Forward-looking statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that cannot be predicted, with actual results potentially differing materially from those stated[14](index=14&type=chunk) - The company undertakes no obligation to update or revise any forward-looking statements unless required by applicable securities laws[16](index=16&type=chunk) [Risk Factors](index=3&type=section&id=Risk%20Factors) The report outlines numerous risk factors that could materially affect Insperity's operations and financial results, including adverse economic conditions, volatility in healthcare and workers' compensation costs, regulatory changes, competitive pressures, and the ability to execute strategic partnerships - Key risk factors include adverse economic conditions, labor shortages, increasing competition for skilled workers, and the impact of inflation[14](index=14&type=chunk) - Increases in health insurance costs and workers' compensation rates, underlying claims trends, and health care reform pose significant risks[14](index=14&type=chunk) - The impact of the competitive environment and other developments in the human resources services industry, including the PEO industry, could affect growth and profitability[14](index=14&type=chunk) - Risks also include disruptions of information technology systems, failure to enhance service and technology offerings, and liability or damage to reputation from data theft or cyberattacks[14](index=14&type=chunk)[17](index=17&type=chunk) - The ability to fully realize the anticipated benefits of the strategic partnership and plans to develop a joint solution with Workday, Inc. is also a risk factor[17](index=17&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) This section presents Insperity's condensed consolidated balance sheets, statements of operations, and key financial data per WSEE, detailing asset and liability changes, revenue composition, and profitability metrics [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets from $2,597 million at December 31, 2024, to $2,143 million at March 31, 2025, primarily driven by a reduction in cash and cash equivalents, with total liabilities also decreasing while stockholders' equity saw a modest increase Condensed Consolidated Balance Sheets (in millions) | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Total assets | $2,143 | $2,597 | | Cash and cash equivalents | $551 | $1,039 | | Accounts receivable, net | $834 | $829 | | Total current assets | $1,654 | $2,085 | | Total liabilities | $2,024 | $2,500 | | Payroll taxes and other payroll deductions payable | $457 | $901 | | Accrued health insurance costs | $68 | $19 | | Total current liabilities | $1,466 | $1,930 | | Total stockholders' equity | $119 | $97 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2025, revenues increased by 3% year-over-year, but gross profit declined by 10% due to a 7% increase in payroll taxes, benefits, and workers' compensation costs, resulting in significant decreases in operating income and net income Consolidated Statements of Operations (Three Months Ended March 31, in millions) | Metric | 2025 | 2024 | Change | | :------------------------------------------ | :--- | :--- | :----- | | Revenues | $1,863 | $1,802 | 3% | | Payroll taxes, benefits and workers' compensation costs | $1,553 | $1,457 | 7% | | Gross profit | $310 | $345 | (10)% | | Total operating expenses | $242 | $237 | 2% | | Operating income | $68 | $108 | (37)% | | Net income | $51 | $79 | (35)% | | Diluted EPS | $1.35 | $2.08 | (35)% | Revenue Composition (Three Months Ended March 31, in millions) | Metric | 2025 | 2024 | | :------------------ | :----- | :----- | | Gross billings | $12,144 | $11,483 | | Less: WSEE payroll cost | $10,281 | $9,681 | | Revenues | $1,863 | $1,802 | [Key Financial and Statistical Data (Per WSEE)](index=7&type=section&id=Key%20Financial%20and%20Statistical%20Data%20%28Per%20WSEE%29) Per WSEE per month data for Q1 2025 shows a 3% increase in revenues but an 11% decrease in gross profit, reflecting the higher benefits costs, with operating income and net income per WSEE also experiencing significant declines of 37% and 36%, respectively Key Financial and Statistical Data (Per WSEE per month, Three Months Ended March 31) | Metric | 2025 | 2024 | Change | | :---------------------- | :----- | :----- | :----- | | Average WSEEs paid | 306,023 | 303,904 | 1% | | Revenues | $2,029 | $1,977 | 3% | | Gross profit | $338 | $378 | (11)% | | Operating expenses | $264 | $260 | 2% | | Operating income | $74 | $118 | (37)% | | Net income | $56 | $87 | (36)% | Revenues per WSEE per month composition (Three Months Ended March 31) | Metric | 2025 | 2024 | | :---------------------- | :----- | :----- | | Gross billings | $13,228 | $12,595 | | Less: WSEE payroll cost | $11,199 | $10,618 | | Revenues | $2,029 | $1,977 | [Non-GAAP Financial Measures & Reconciliations](index=8&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) This section defines Insperity's non-GAAP financial measures and provides detailed reconciliations from GAAP to non-GAAP figures for Q1 2025 results and 2025 guidance [Non-GAAP Measures Overview and Definitions](index=8&type=section&id=Non-GAAP%20Measures%20Overview%20and%20Definitions) This section provides an overview of Insperity's non-GAAP financial measures, emphasizing that they are not GAAP-compliant and should not be considered substitutes, including definitions for non-bonus payroll cost, adjusted cash, EBITDA, adjusted EBITDA, adjusted net income, and adjusted EPS, explaining their utility for investors and management - Non-GAAP financial measures are not prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP measures[21](index=21&type=chunk) - Non-bonus payroll cost excludes bonus payrolls paid to WSEEs, used by management for analyzing, reporting, and forecasting workers' compensation costs[22](index=22&type=chunk) - Adjusted cash, cash equivalents, and marketable securities exclude funds associated with federal and state income tax withholdings, employment taxes, other payroll deductions, and client prepayments[22](index=22&type=chunk) - Adjusted EBITDA represents GAAP net income plus interest expense, income taxes, depreciation and amortization expense, amortization of SaaS implementation costs, and non-cash stock-based compensation, used by management and lenders to assess performance and leverage[22](index=22&type=chunk) - Adjusted EPS represents diluted net income per share computed in accordance with GAAP, excluding non-cash stock-based compensation[22](index=22&type=chunk) [Reconciliations of Q1 2025 Non-GAAP Measures](index=9&type=section&id=Reconciliations%20of%20Q1%202025%20Non-GAAP%20Measures) This section provides detailed reconciliations of GAAP to non-GAAP financial measures for the first quarter of 2025 and 2024, showing the adjustments made to payroll cost, cash, net income, and diluted EPS to arrive at their respective non-GAAP counterparts, highlighting the impact of items like bonus payroll and stock-based compensation Reconciliation of Payroll Cost (GAAP) to Non-bonus Payroll Costs (non-GAAP) (in millions) | Metric | 2025 | 2024 | | :-------------------- | :----- | :----- | | Payroll cost | $10,281 | $9,681 | | Less: Bonus payroll cost | $2,243 | $1,862 | | Non-bonus payroll cost | $8,038 | $7,819 | | Payroll cost % change YoY | 6% | — | | Non-bonus payroll cost % change YoY | 3% | 2% | Reconciliation of Cash, Cash Equivalents and Marketable Securities (GAAP) to Adjusted Cash (non-GAAP) (in millions) | Metric | March 31, 2025 | December 31, 2024 | | :------------------------------------------ | :------------- | :---------------- | | Cash, cash equivalents and marketable securities | $568 | $1,055 | | Less: Amounts payable for withheld taxes & deductions | $404 | $830 | | Less: Client prepayments | $40 | $91 | | Adjusted cash, cash equivalents and marketable securities | $124 | $134 | Reconciliation of Net Income (GAAP) to Adjusted EBITDA (non-GAAP) (in millions) | Metric | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Net income | $51 | $79 | | EBITDA | $91 | $132 | | Stock-based compensation | $11 | $10 | | Adjusted EBITDA | $102 | $142 | | Net income % change YoY | (35)% | (17)% | | Adjusted EBITDA % change YoY | (28)% | (7)% | Reconciliation of Diluted EPS (GAAP) to Adjusted EPS (non-GAAP) | Metric | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Diluted EPS | $1.35 | $2.08 | | Non-GAAP adjustments, net | $0.22 | $0.19 | | Adjusted EPS | $1.57 | $2.27 | | Diluted EPS % change YoY | (35)% | (15)% | | Adjusted EPS % change YoY | (31)% | (15)% | [Reconciliations of 2025 Guidance Non-GAAP Measures](index=11&type=section&id=Reconciliations%20of%202025%20Guidance%20Non-GAAP%20Measures) This section provides the reconciliation of GAAP to non-GAAP financial measures specifically for the second quarter and full year 2025 guidance, detailing the adjustments made to projected net income and diluted EPS to arrive at the adjusted EBITDA and adjusted EPS guidance figures Reconciliation of GAAP to Non-GAAP Financial Measures for Q2 and Full Year 2025 Guidance (in millions, except per share amounts) | Metric | Q2 2025 Guidance | Full Year 2025 Guidance | | :-------------------------- | :--------------- | :---------------------- | | Net income (loss) | $(3) - $11 | $42 - $81 | | EBITDA | $14 - $34 | $130 - $185 | | Stock-based compensation | $19 | $60 | | Adjusted EBITDA | $33 - $53 | $190 - $245 | | Diluted EPS | $(0.07) - $0.31 | $1.10 - $2.15 | | Non-GAAP adjustments, net | $0.36 | $1.13 | | Adjusted EPS | $0.29 - $0.67 | $2.23 - $3.28 |

Company Overview - Insperity, Inc. (NSP) shares have increased by approximately 4.8% over the past month, outperforming the S&P 500 [1] - Recent earnings report indicates important drivers for the stock's performance [1] Earnings Estimates - Fresh estimates for Insperity have trended upward in the past month [2] - The overall direction and magnitude of estimate revisions appear promising [4] VGM Scores - Insperity has a strong Growth Score of A, but a low Momentum Score of F [3] - The stock received an A grade on the value side, placing it in the top 20% for this investment strategy [3] - The aggregate VGM Score for Insperity is A, which is significant for investors not focused on a single strategy [3] Industry Performance - Insperity is part of the Zacks Staffing Firms industry, where ManpowerGroup (MAN) has gained 6.2% over the past month [5] - Manpower reported revenues of $4.4 billion for the last quarter, reflecting a year-over-year decline of 5% [5] - Manpower's EPS for the same period was $1.02, down from $1.45 a year ago [5] Future Outlook - For the current quarter, Manpower is expected to post earnings of $0.59 per share, indicating a year-over-year change of -37.2% [6] - The Zacks Consensus Estimate for Manpower has changed by -1.1% over the last 30 days [6] - Manpower holds a Zacks Rank 5 (Strong Sell), and its VGM Score is C [6]

Core Insights - Insperity, Inc. reported strong fourth-quarter 2024 results, with earnings and revenues exceeding the Zacks Consensus Estimate [1][2] Financial Performance - Adjusted earnings were 5 cents per share, surpassing the consensus estimate by over 100%, but down 93.3% year over year [2] - Revenues reached $1.6 billion, beating the Zacks Consensus Estimate by 1% and increasing 2.1% from the previous year [2] - Gross profit declined 2% year over year to $218 million, with a gross margin of 13.5%, down 60 basis points from Q4 2023 [4] - Operating expenses rose 17% year over year to $233 million, with operating expenses per worksite employee per month increasing 19% to $251 [4] - The company reported an operating loss of $15 million compared to an operating income of $23 million in the same quarter last year [5] - Adjusted EBITDA for the quarter was $23 million, a decrease of 41% year over year [5] Employee Metrics - The average number of worksite employees paid per month decreased by 2% year over year to 309,093 [3] - Revenue per worksite employee per month increased by 4% from the previous year to $1,739 [3] Balance Sheet & Cash Flow - Insperity ended Q4 2024 with cash and cash equivalents of $1 billion, up from $470 million in the previous quarter [6] - Long-term debt remained flat at $369 million [6] - The company distributed $22 million in cash dividends during the quarter, with capital expenditures totaling $13 million [6] Guidance - For Q1 2025, Insperity's earnings guidance is set at $1.89-$2.15 per share, with the midpoint slightly above the Zacks Consensus Estimate of $2.01 [7] - For the full year 2025, the company expects adjusted EPS to be in the range of $3.10-$3.95, with the midpoint lower than the Zacks Consensus Estimate of $3.57 [8] - Adjusted EBITDA guidance for 2025 is projected at $240-$285 million [8]

Core Viewpoint - Insperity, Inc. reported strong fourth-quarter 2024 results with earnings and revenues exceeding expectations, yet the stock declined significantly post-release due to market reactions [1][2]. Financial Performance - Adjusted earnings were 5 cents per share, surpassing the consensus estimate by over 100%, but down 93.3% year over year [2]. - Revenues reached $1.6 billion, beating the Zacks Consensus Estimate by 1% and increasing 2.1% from the previous year [2]. - Gross profit decreased by 2% year over year to $218 million, with a gross margin of 13.5%, down 60 basis points from Q4 2023 [4]. - Operating expenses rose 17% year over year to $233 million, with operating expenses per worksite employee per month increasing 19% to $251 [4]. Operational Metrics - The average number of worksite employees paid per month fell by 2% year over year to 309,093, while revenue per worksite employee per month increased by 4% to $1,739 [3]. - The company reported an operating loss of $15 million compared to an operating income of $23 million in the same quarter last year [5]. Cash Flow and Balance Sheet - Insperity ended Q4 2024 with cash and cash equivalents of $1 billion, up from $470 million in the previous quarter, while long-term debt remained stable at $369 million [6]. - The company distributed $22 million in cash dividends during the quarter, with capital expenditures totaling $13 million [6]. Guidance - For Q1 2025, Insperity's earnings guidance is set at $1.89-$2.15 per share, with the midpoint of $2.02 exceeding the Zacks Consensus Estimate of $1.98 [7]. - For the full year 2025, the company expects adjusted EPS to be in the range of $3.10-$3.95, with the midpoint of $3.53 lower than the consensus estimate of $3.80 [8].

Supplement to Earnings Release Safe Harbor Statement The statements contained herein that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify such forward-looking statements by the words "anticipates," "expects," "intends," "plans," "projects," "believes," "estimates," "forecasts," "likely," "possibly," "probably," "could," "goal," "opportunity," "objective," "target," ...

Company Operations - As of December 31, 2024, the company serviced an average of 309,093 worksite employees (WSEEs) per month through its regional service centers[16]. - The company operates 83 physical office locations across 48 markets, enhancing its service delivery capabilities[16]. - The company has 106 sales offices located in 48 markets as of December 31, 2024[56]. - The company serves clients and WSEEs throughout the United States, targeting businesses with approximately 10 to 5,000 employees[50]. - The company has four regional service centers servicing approximately 34%, 22%, 23%, and 21% of its WSEE base, respectively[170][171]. Service Offerings - The PEO HR Outsourcing Solutions are designed to relieve small and medium-sized businesses of administrative burdens, allowing them to focus on core competencies[14]. - The company’s Workforce Optimization solution is its primary offering, providing comprehensive HR outsourcing services[14]. - The company offers a cloud-based human capital management platform, Insperity Premier, which provides role-based access to HR functions for clients and WSEEs[28]. - The company offers a comprehensive human capital management and payroll services solution for clients not choosing PEO HR Outsourcing Solutions, integrating various HR functionalities[37]. - The company offers a lower-priced PEO service called Workforce Synchronization to meet middle market client needs[137]. Financial Performance - In 2024, the company paid dividends totaling $89 million, reflecting its financial condition and operating results[182]. - Net income decreased by 47% to $91 million, and diluted earnings per share (EPS) fell by 46% to $2.42[194]. - Adjusted EBITDA decreased by 24% to $270 million, with adjusted net income and adjusted EPS down by 36% and 35% to $135 million and $3.58, respectively[194]. - The company ended 2024 with working capital of $155 million[202]. - The company recorded a client attrition rate of approximately 19% in 2024, indicating potential challenges in client retention[125]. Market and Client Dynamics - The client retention rate for PEO HR Outsourcing Solutions was approximately 81% in 2024, down from 83% in 2023, with a five-year average retention rate of 84%[55]. - Clients exceeding 1,000 paid WSEEs represented 3% of total average paid WSEEs in 2024, compared to 5% in 2023[35]. - The average number of Worksite Employees (WSEEs) in the middle market sector decreased by 3% from 2023 to 2024, maintaining approximately 26% of the total average paid WSEEs[35]. - The middle market sector, defined as companies with 150 to 5,000 WSEEs, represented 26% of the average paid WSEEs in 2024[125]. Regulatory and Compliance - The company has received its designation as a Certified Professional Employer Organization (CPEO) from the IRS, clarifying its role in payroll tax reporting[21]. - The company’s services include compliance assistance with complex employment-related laws and regulations, enhancing the value proposition of its offerings[22]. - Insperity is subject to various federal, state, and local laws affecting its PEO HR Outsourcing Solutions operations[75]. - Compliance with the California Privacy Rights Act has required the company to reallocate resources and incur additional costs[144]. Risk Factors - The company faces risks from adverse economic conditions that could negatively impact demand for its outsourced HR services, particularly during periods of weak economic conditions or tight labor markets[94]. - Labor shortages and increasing competition for skilled workers have resulted in higher turnover and could adversely affect the company's growth plans and client service delivery[100]. - Inflationary pressures have increased operating costs, which may not be fully offset by price increases for services, potentially impacting profit margins[102]. - The company is dependent on its PEO clients to properly report the locations of WSEEs, and any miscalculations could lead to fines or penalties[110]. - The company faces potential disruptions in its business due to health care reform, which may affect its ability to provide health care benefits to WSEEs[114]. Insurance and Benefits - The health insurance contract with United provides approximately 86% of participants' health insurance coverage, expiring on December 31, 2026[67]. - Workers' compensation coverage through Chubb is fully insured and expires on September 30, 2025[67]. - The company has a financial responsibility with United limited to the first $1 million of paid claims per claimant per year[210]. - Estimated total benefits costs for 2024 are projected to be $3.0 billion[212]. Cybersecurity and Technology - The Board's Finance, Risk Management and Audit Committee oversees major risk exposures, including cybersecurity risks, to ensure effective governance[157]. - The company has established a formal incident response team and conducts regular cybersecurity training and exercises to enhance its security measures[162]. - The company faces risks from cybersecurity incidents, which could lead to significant financial losses and reputational damage[141]. - The company may incur substantial costs to comply with evolving regulations related to data privacy and cybersecurity[145]. Strategic Initiatives - The company is developing a joint solution with Workday, which involves significant resource allocation and integration challenges[149]. - The success of the strategic partnership with Workday depends on effective integration and cooperation, with potential risks of not achieving anticipated benefits[150]. - The company has adopted a strategy to market and sell additional solutions within and outside of its PEO HR Outsourcing Solutions, which may involve partnerships, investments, or acquisitions[152].

Financial Data and Key Metrics Changes - The company reported adjusted EPS of $0.05 per share and adjusted EBITDA of $23 million for Q4 2024, exceeding the midpoint of the expected range [5] - The average number of paid worksite employees was 393,093, a decrease of 2% from Q4 2023, reflecting weak client hiring [6] - Total gross profit declined by 2% from Q4 2023 due to the decrease in paid worksite employees, despite gross profit per worksite employee remaining stable at $235 per month [7][10] - Operating expenses increased by 17% over Q4 2023, primarily due to investments in the Workday strategic partnership [9] Business Line Data and Key Metrics Changes - Gross profit per worksite employee per month was $285 in 2024, a 3% increase over 2023, despite a 1.6% drop in paid worksite employees [10] - Client retention averaged 99% for the quarter, with a 37% increase in worksite employees paid from new clients compared to Q4 2023 [6][12] Market Data and Key Metrics Changes - The company experienced nearly flat net growth in its client base for 2024, the lowest level of hiring in the last twenty years, with a significant impact from macroeconomic conditions [19][22] - The National Federation of Independent Business reported the highest Small Business Optimism Index in six years, indicating potential for increased staffing levels in 2025 [22] Company Strategy and Development Direction - The company aims to regain growth momentum through successful sales and client retention campaigns, with a focus on the Workday strategic partnership expected to enhance long-term growth and profitability [14][30] - Key initiatives for 2025 include product specialization, optimizing sales organization, and improving service efficiency across HR solutions [25][27] Management's Comments on Operating Environment and Future Outlook - Management noted a shift in small and midsize business decision-makers' mindsets post-election, leading to increased optimism and potential hiring [21][24] - The company conservatively forecasts a 2% to 4% growth in worksite employees for 2025, with expectations of sequential quarterly growth beyond Q1 [48][54] Other Important Information - The company plans to invest approximately $62 million in the Workday strategic partnership in 2025, up from $57 million in 2024 [52] - Adjusted EBITDA for 2025 is forecasted to be between $240 million and $285 million, with adjusted EPS expected to range from $3.10 to $3.95 [54] Q&A Session Summary Question: Can you talk about the sales leads from the Workday partnership? - Management indicated significant progress in the go-to-market strategy and expects lead flow to improve as the year unfolds, with specific clients already interested in beta testing the new solution [60][65] Question: How will the $62 million in expenses be layered throughout the year? - Operating costs related to Workday are expected to be relatively steady throughout the year, with a small drop-off after completing the corporate component [67] Question: How do you expect the increase in health cost trends to impact new sales and retention? - Management believes strong pricing strategies will mitigate the impact of increased health costs, maintaining a competitive position in the market [72][73] Question: Can you elaborate on the sales optimization strategy? - The sales optimization plan focuses on aligning sales teams with specific HR solutions, improving accountability and efficiency, and is expected to yield significant benefits [79][82] Question: What is the outlook for mid-market retention and the impact of the Workday partnership? - Management reported a dramatic improvement in mid-market retention, attributing it to the Workday partnership and increased client engagement [85][86] Question: What are the expectations for net hiring in 2025? - The company anticipates a gradual improvement in net hiring, weighted towards the latter half of the year, as business owners' mindsets shift positively [88][90]

Insperity, Inc. (NSP) came out with quarterly earnings of $0.05 per share, beating the Zacks Consensus Estimate of $0.02 per share. This compares to earnings of $0.75 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 150%. A quarter ago, it was expected that this company would post earnings of $0.32 per share when it actually produced earnings of $0.39, delivering a surprise of 21.88%.Over the last four quarters, the company has ...

Financial Data and Key Metrics Changes - The company reported adjusted EPS of $0.05 per share and adjusted EBITDA of $23 million for Q4 2024, exceeding the midpoint of expectations [5] - The average number of paid worksite employees was 309,093, a decrease of 2% from Q4 2023, reflecting weak client hiring [5][6] - Total gross profit declined by 2% from Q4 2023 due to the decrease in paid worksite employees, while gross profit per worksite employee was $235 per month, slightly above expectations [5][6] - For the full year 2024, adjusted EBITDA was $270 million and adjusted EPS was $3.58, both above initial guidance [9] Business Line Data and Key Metrics Changes - The company experienced a 37% increase in worksite employees paid from new clients compared to Q4 2023, indicating strong performance in client acquisition [5] - Client retention averaged 99% for the quarter, demonstrating effective retention strategies [5] - Operating expenses increased by 17% over Q4 2023, primarily due to investments in the Workday strategic partnership [6][9] Market Data and Key Metrics Changes - The small to mid-sized business client base experienced nearly flat net growth in worksite employees for 2024, the lowest level in two decades excluding recession years [14] - The National Federation of Independent Business January Small Business Optimism Index reached its highest level in six years, indicating improved sentiment among small business owners [16] Company Strategy and Development Direction - The company aims to regain growth momentum through a successful fall sales and client retention campaign, with a focus on key initiatives for 2025 [11][17] - The strategic partnership with Workday is expected to enhance long-term growth and profitability, with significant milestones anticipated in 2025 [21][29] - The company is implementing a role-based approach to optimize its sales organization and improve service efficiency across its HR solutions [18][19] Management's Comments on Operating Environment and Future Outlook - Management noted a shift in small and mid-sized business decision-makers' mindsets post-election, leading to increased optimism and hiring expectations for 2025 [15][16] - The company conservatively forecasts net client hiring to improve in 2025 but remains below historical levels, with expected worksite employee growth of 2% to 4% over 2024 [31][32] - Management emphasized the importance of aligning sales, service, and pricing teams to drive results in 2025 [30] Other Important Information - The company plans to spend approximately $62 million on the Workday strategic partnership in 2025, up from $57 million in 2024 [34] - The expected benefits cost trend for 2025 is forecasted to be between 5% to 6.5%, compared to 4.3% in 2024 [32][33] Q&A Session Summary Question: Can you talk about the sales leads from the Workday partnership and their impact on client retention? - Management indicated significant progress in the go-to-market strategy and expects improved lead flow and client retention as the joint solution is developed [40][42] Question: How will the operating expenses related to Workday be structured throughout the year? - Operating expenses are expected to be relatively steady throughout the year, with a small drop-off after completing the corporate component [43] Question: What is the outlook for net hiring in 2025? - Management anticipates a gradual improvement in net hiring, weighted towards the second half of the year, with expectations of a return to mid-single-digit growth rates [60][61] Question: How is the competitive pricing environment affecting new sales and retention? - Management noted that while the competitive environment is significant, they have maintained strong pricing and developed unique incentives to attract clients without compromising long-term pricing strategies [66][68] Question: Can you elaborate on the sales optimization strategy and its expected benefits? - The sales optimization strategy focuses on streamlining sales efforts across different HR solutions, which is expected to enhance accountability and improve sales efficiency [54][55]