NSP — Insperity, Inc.

Summary of Insperity Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Adjusted EPS: $1.31, down 17% from $1.57 in Q1 2025.
• Adjusted EBITDA: $103 million, a 1% increase from $102 million in Q1 2025.
• Total Gross Profit: $302 million, a 3% decrease year-over-year, but a significant improvement from a 21% decline in Q4 2025.
• Average Paid Worksite Employees: 303,049, a 1% decrease compared to Q1 2025.
• Operating Expenses: Decreased by 1% to $240 million, including a $9 million restructuring charge.
• Dividends Paid: $23 million, with $4 million spent on share repurchases.
• Cash Position: $36 million in adjusted cash, down due to seasonal working capital fluctuations.

2. Strategic Updates and Business Highlights

• Margin Recovery Plan: Progress noted, with improvements in gross profit per worksite employee driven by lower benefit costs and a favorable client mix.
• HRScale Rollout: Initial beta clients onboarded, with nearly 6,000 worksite employees expected to be added within six months. This initiative aims to enhance client retention and attract larger accounts.
• AI Initiatives: Emphasis on leveraging AI to improve HR services and operational efficiency, with ongoing development of AI tools for client engagement and support.

3. Forward Guidance and Outlook

• Full Year 2026 Adjusted EBITDA Guidance: Maintained at $170 million to $230 million.
• Worksite Employee Growth Forecast: Revised to a range of 303,000 to 307,000, indicating a decline of 1% to 2.3% from 2025.
• Q2 2026 Expectations: Average paid worksite employees projected between 302,500 and 304,500, with adjusted EBITDA expected to range from $18 million to $46 million.

4. Bad News, Challenges, or Points of Concern

• Client Attrition: Increased to 11%, within historical ranges, but higher than desired, impacting overall profitability.
• Economic Sentiment: Small and medium-sized businesses are showing increased caution due to macroeconomic challenges, affecting sales and retention.
• Declining Sales: Booked sales fell below internal targets, particularly in HR360 and HRCore segments, attributed to the focus on margin recovery.
• Higher Effective Tax Rate: Increased to 41% for Q1 2026, negatively impacting adjusted EPS.

5. Notable Q&A Insights

• Sales Productivity: Adjustments in sales processes are expected to improve results moving forward, particularly with the HRScale initiative.
• Competitive Environment: Increased pressure on pricing due to market conditions, but Insperity maintains a competitive edge through differentiated offerings.
• Client Sentiment: Survey results indicate a decline in optimism among clients regarding economic conditions, which may affect future growth.
• Implementation Costs: Expected to decline in the second half of 2026 as HRScale ramps up, with a transition of resources from investment to service provision.

Overall, Insperity's Q2 2026 results reflect a mixed performance with progress in margin recovery and strategic initiatives, but challenges remain in client retention and economic sentiment affecting growth prospects.