NSP — Insperity, Inc.

Summary of Insperity Q1 2026 Earnings Call

1. Key Financial Results and Metrics:

• Adjusted EPS: $1.31, a 17% decrease from $1.57 in Q1 2025.
• Adjusted EBITDA: $103 million, slightly up from $102 million in Q1 2025.
• Gross Profit: $302 million, down 3% year-over-year but improved from a 21% decline in Q4 2025.
• Average Paid Worksite Employees: 303,049, a 1% decrease from Q1 2025.
• Client Attrition Rate: 11%, within the historical range of 9% to 12%.
• Operating Expenses: $240 million, a 1% decrease; excluding a $9 million restructuring charge, expenses decreased by 5%.
• Dividends Paid: $23 million, with $4 million spent on share repurchases.
• Adjusted Cash: $36 million, down due to seasonal working capital fluctuations.

2. Strategic Updates and Business Highlights:

• Margin Recovery Plan: Progress noted with improved gross profit per worksite employee ($332/month) driven by lower benefit costs and a favorable client mix.
• HRScale Rollout: Initial beta clients onboarded, with a pipeline of nearly 6,000 worksite employees expected to be added in the next six months. This initiative aims to enhance growth and client retention.
• AI Initiatives: Emphasis on leveraging AI to improve HR services and operational efficiency, with plans to integrate AI tools into client offerings.

3. Forward Guidance and Outlook:

• Adjusted EBITDA Guidance for 2026: $170 million to $230 million.
• Worksite Employee Growth Forecast: 303,000 to 307,000 for the full year, representing a decline of 1% to 2.3% from 2025.
• Q2 2026 Guidance: Average paid worksite employees expected to be between 302,500 and 304,500; adjusted EBITDA projected at $18 million to $46 million; adjusted EPS forecasted in the range of $0.02 to $0.50.
• Effective Tax Rate: Expected to normalize to 36% for the full year.

4. Bad News, Challenges, or Points of Concern:

• Declining Worksite Employee Metrics: The average number of paid worksite employees fell to the low end of expectations, with a 7% decline in new client sales.
• Client Sentiment: A notable shift in small- and medium-sized business sentiment, with increased caution regarding economic conditions affecting hiring and compensation.
• Competitive Pressures: Increased competition in pricing and client retention, exacerbated by macroeconomic factors and international conflicts.
• Higher Effective Tax Rate: The tax rate for Q1 was significantly higher at 41%, impacting adjusted EPS negatively.

5. Notable Q&A Insights:

• Sales and Retention Dynamics: The company acknowledged that all three drivers of growth—sales, retention, and net change in client base—were lower than expected, prompting a revision in guidance.
• Competitive Environment: While competitive pricing pressures exist, Insperity believes its differentiation through HRScale will provide a significant advantage.
• Client Sentiment Impact: The company is adapting its go-to-market strategies based on client concerns about the economic environment, focusing on providing value to maintain share of wallet.
• Implementation Costs for HRScale: Costs associated with HRScale implementation are expected to decline as the company transitions from development to service provision.

Overall, while Insperity demonstrated progress in margin recovery and strategic initiatives, it faces challenges in client growth and economic sentiment that could impact future performance.