Core Insights - Insperity reported a significant decline in profitability in Q2 2025 despite stable revenue growth, with non-GAAP EPS dropping to $0.26, missing analyst estimates of $0.41 [1][6] - Revenue for the quarter was $1.7 billion, exceeding projections and reflecting a 3% year-over-year increase, driven by a modest rise in average paid worksite employees [1][5] - The company faced heavy margin pressure due to rising healthcare costs, resulting in a net loss of $5 million compared to a net income of $18 million in Q2 2024 [1][6] Financial Performance - Non-GAAP EPS fell by 70% year-over-year from $0.86 to $0.26 [2] - Adjusted EBITDA decreased by 52% to $32 million from $66 million [2] - Gross profit declined by 14% to $223 million [2] - Average worksite employees increased by 1% to 309,115 [2] Business Overview - Insperity operates as a professional employer organization (PEO), providing HR solutions including payroll, employee benefits, and regulatory compliance management [3] - The company emphasizes a high-touch and technology-enabled experience for its clients [3] Strategic Focus - Recent initiatives include expanding HR technology offerings, enhancing operational efficiency, and leveraging scale for competitive benefits [4] - Insperity's Certified Professional Employer Organization (CPEO) status aids in regulatory compliance and client eligibility for tax credits [4] Revenue and Margin Insights - Revenue growth was supported by effective pricing strategies, even amid subdued macroeconomic sentiment among small and medium-sized businesses [5] - Management noted that rising healthcare costs were driven by elevated pharmacy trends and large claim activity, severely impacting margins [6] Cost Management and Future Outlook - Management is implementing new pricing and benefit plan designs to mitigate cost inflation, with expectations for improvements in 2026 [7][10] - Insperity invested $14 million in Q2 2025 and $27 million in the first half of 2025 to advance its partnership with Workday, focusing on technology-driven HR solutions [8] - The company maintained cost discipline, with operating expenses declining by 3% despite ongoing investments [9] Guidance and Projections - For fiscal 2025, management revised guidance for adjusted EPS to a range of $1.81 to $2.51, a reduction of 30% to 49% compared to the previous year [10] - Adjusted EBITDA is expected to range from $170 million to $205 million, down between 24% and 37% [10] - Q3 2025 guidance indicates continued pressures, with adjusted EPS forecast between $0.06 and $0.49 [10]