Core Insights - The company has undergone significant strategic decisions over the past year, focusing on profitable growth opportunities within the PEO and ASO business segments [1][2] - A decision was made to exit the SaaS-only business and streamline operations by trimming other segments, emphasizing a narrowed focus on SMB-focused PEO and ASO [3] Company Strategy - The company conducted a thorough and objective assessment of its business, identifying core areas for growth and improvement [2] - A collaborative approach was taken to build a strategic plan, leveraging the talent within the organization to enhance execution and discipline [3]

Financial Data and Key Metrics Changes - Gross billings increased by 8.6% year-over-year to $2.32 billion in Q3 2025 compared to $2.14 billion in Q3 2024 [11] - PEO gross billings rose by 8.8% to $2.3 billion, while staffing revenues declined by 10% to $19 million [11] - Net income per diluted share grew by 7% to $0.79 compared to $0.74 in the prior year [16] - Average billing per Worksite Employee (WSE) per day increased by 2.5% due to rising wages [11] Business Line Data and Key Metrics Changes - Staffing operations experienced a decline of 10.3% year-over-year, aligning with expectations amid macroeconomic uncertainty [4][5] - PEO Worksite employees grew by 6.1%, driven by a record number of new client additions [11] - The company added approximately 1,300 participants to its benefits products in Q3, with over 20,000 total participants by October [6][7] Market Data and Key Metrics Changes - Southern California saw a 9% growth, while Northern California grew by 3%. The Mountain region grew by 13%, and the East Coast by 14%. The Pacific Northwest declined by 3% [12] - Asset light markets experienced significant growth of 132% [12] Company Strategy and Development Direction - The company is focusing on expanding into new markets with an asset-light model, having opened new branches in Chicago and Dallas [5][51] - Investments in technology and product enhancements are aimed at improving client service and retention [9][54] - The company plans to launch new products in January and March, enhancing its comprehensive human resource information system [54] Management's Comments on Operating Environment and Future Outlook - Management noted a slowdown in client hiring, particularly in California, due to macroeconomic uncertainties [4][10] - The company remains optimistic about future growth, expecting gross billings growth between 8.5% and 9.5% for the year [17] - Management anticipates a strong controllable growth trend and an increase in WSEs between 6% and 8% for the year [17] Other Important Information - The company repurchased $8 million of shares in Q3 at an average price of $47 per share and paid $2.1 million in dividends [16] - The balance sheet remains strong with $110 million in unrestricted cash and no debt [16] Q&A Session Summary Question: How are BBSI benefits policies performing amid rising claims costs? - Management stated that they do not take on risk for health insurance and have de-risked their workers' compensation, noting that rates are increasing across the board [20][21] Question: How much is BBSI benefits driving the record WSE additions? - Management indicated that multiple factors contribute to growth, including technology, product offerings, and sales efforts [24] Question: What are the expectations for WSE growth in 2026? - Management expressed optimism about growth acceleration due to approved rate increases in California, but noted that the impact on WSE growth is still uncertain [28][31] Question: What key variables could affect gross billings in 2026? - Management highlighted controllable growth, wage inflation, and client workforce changes as key variables [34] Question: What is the outlook for new client pipeline compared to last year? - Management confirmed that the new client pipeline is healthier than the previous year, with more business in the funnel [40] Question: How did the openings in Chicago and Dallas perform? - Management reported successful grand openings with strong community engagement and client participation [51] Question: Are there specific areas of opportunity in IT product objectives? - Management emphasized the development of AI-enabled technology to enhance the employee life cycle experience [54]

Financial Data and Key Metrics Changes - The average number of paid worksite employees increased by 1.2% year-over-year to 312,842 in Q3 2025 [3] - Adjusted EPS for the quarter was minus $0.20, and adjusted EBITDA was $10 million, both below forecasted ranges due to higher-than-expected benefits costs [4][10] - Gross profit per worksite employee decreased from $247 in Q3 2024 to $208 in Q3 2025, primarily due to increased benefits costs of $20 million [4][10] Business Line Data and Key Metrics Changes - New client sales results were encouraging, with a significant increase in accounts queued for first payroll, despite a slight decline in worksite employees from new clients compared to Q3 2024 [3] - Client retention remained strong at an average of 99% per month, consistent with prior year results [3] Market Data and Key Metrics Changes - The overall hiring environment was challenging, with net hiring within the client base being negative in Q3 2025, slightly weaker than Q3 2024 [4] - The health insurance industry reported an unexpected rise in healthcare costs and loss ratios, impacting Insperity significantly [6][15] Company Strategy and Development Direction - The company is focused on attracting and retaining the right clients at competitive prices to achieve sustainable profitability [7][8] - The rollout of the new HR Scale solution is expected to enhance Insperity's PEO offerings and drive growth, particularly in the mid-market segment [20][26] - A new agreement with UnitedHealthcare aims to reduce claim costs and mitigate risks, which is projected to positively impact margins [18][34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unexpected increase in healthcare claims costs and its impact on financial performance, indicating that this trend is expected to persist into 2026 [15][33] - The company is optimistic about a rebound in 2026, driven by strategic pricing adjustments and the rollout of HR Scale [17][37] Other Important Information - Operating expenses decreased by 4% year-over-year in Q3 2025, with significant reductions in salaries and G&A costs [8] - The company returned $22 million in cash dividends to shareholders in Q3 2025, with a total of $68 million year-to-date [9] Q&A Session Summary Question: Clarification on earnings shortfall recovery - Management indicated that the earnings shortfall primarily relates to benefits costs and expects to recover a majority of this in 2026 [38][39] Question: Impact of cost trends on new sales - Management expressed confidence that pricing changes would not significantly impact new sales, citing strong sales performance and high renewal rates [40][41] Question: Initial responses from the joint marketing pod for HR Scale - Positive feedback was received regarding the unique solution developed, with early pipeline filling ahead of expectations [42][43] Question: Adjustments to benefits repricing - Management confirmed ongoing adjustments to pricing based on healthcare trends, with expectations for higher pricing in 2026 [44][45] Question: Healthcare pricing expectations for next year - Management anticipates a low double-digit increase in benefit costs on an apples-to-apples basis for 2026 [44] Question: Managing lower profitability clients - Management indicated that the focus is on retaining profitable clients while managing out lower profitability ones [48] Question: Investment framework for HR Scale - Management clarified that ongoing operating expenses for HR Scale would be lower than previous estimates, with a focus on balancing investment across projects [55][57] Question: AI's impact on employment and business creation - Management noted that while AI's impact on employment is uncertain, it could lead to new business creation, providing a buffer against employment efficiency [59][60]