• Adjusted EPS: $0.39 for Q3 2024.
• Adjusted EBITDA: $39 million for Q3 2024.
• Average Paid Worksite Employees: Just over 309,000, a 2% decline from Q3 2023.
• Client Retention Rate: 99% for Q3 2024.
• Gross Profit Decrease: 11% decrease from Q3 2023.
• Operating Expenses: Managed below plan with savings in G&A costs.
• Cash Dividends Paid: $23 million in Q3 2024.
• Shares Repurchased: 167,000 shares at a cost of $15 million in Q3 2024.
• Adjusted Cash: $212 million at the end of Q3 2024, an increase of about $40 million from December 31, 2023.
• Credit Facility Availability: $280 million available.
• Full Year 2024 Effective Tax Rate Forecast: 28%.
• Full Year 2024 Adjusted EPS Forecast: $3.42 to $3.66 per share.
• Full Year 2024 Adjusted EBITDA Forecast: $262 million to $274 million.
• Q4 2024 Adjusted EPS Forecast: Negative $0.10 to positive $0.12.
• Q4 2024 Adjusted EBITDA Forecast: $15 million to $27 million.

• Warning! GuruFocus has detected 4 Warning Signs with NSP.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Insperity Inc (NYSE:NSP) reported solid third quarter results with adjusted EPS of $0.39 and adjusted EBITDA of $39 million.
• The company achieved strong client retention of 99% for the quarter, despite a challenging macroeconomic environment.
• Insperity Inc (NYSE:NSP) has a strategic partnership with Workday, which is expected to enhance their HR technology and service offerings.
• The company is leveraging AI to improve efficiency and effectiveness in both sales and service operations.
• Insperity Inc (NYSE:NSP) has a robust marketing campaign and a strong mid-market pipeline, which are expected to drive growth in 2025.

Negative Points

• The average number of paid worksite employees declined by 2% from Q3 2023, impacted by softness in client hiring and loss of mid-market accounts.
• Gross profit decreased by 11% compared to Q3 2023, partly due to unfavorable healthcare claims development.
• The company's benefit cost trend was slightly above the high end of their forecasted range for Q3 2024.
• Insperity Inc (NYSE:NSP) adjusted its full-year outlook to the lower end of its previous guidance due to challenging worksite employee growth.
• The company is facing a competitive market environment, with some competitors undercutting on price.

Q & A Highlights

Q: Is the Workday partnership impacting client retention and market competitiveness this fall season? A: Paul Sarvadi, CEO: The Workday partnership has created a positive perception, especially in the mid-market space. While it's hard to pinpoint the exact impact, the partnership, along with new incentives, is helping with client retention and competitiveness. We believe our long-term pricing policy provides a stable cost structure, which is advantageous in the market.

Q: Can you elaborate on the savings in G&A expenses and the impact of AI investments on cost structure? A: Douglas Sharp, CFO: Savings were achieved by focusing on efficiency in slower growth areas, primarily in G&A. While we are investing in the Workday partnership, AI is still in early stages but shows potential for operating leverage. Paul Sarvadi added that AI will enhance efficiency and effectiveness, potentially reducing the need for additional staff as we grow.

Q: Has the timeline for the Workday corporate and client instances shifted? A: Paul Sarvadi, CEO: We haven't set a specific date to avoid premature commitments. The corporate instance is foundational for the client side, and both are progressing well. The timing is crucial, and we aim to align both deployments closely.

Q: How are healthcare trends affecting gross profit per worksite employee, and what is the outlook for pricing and retention? A: James Allison, CPO: Healthcare trends are slightly towards the higher end of historical ranges, driven by specialty drugs and new treatments. We anticipated elevated costs and adjusted pricing accordingly. Utilization increased slightly in Q3, but severity remains as expected. Our pricing strategy is designed to maintain competitiveness and retention.

Q: What is the expected timeline for the full implementation of AI efficiencies in 2025? A: Paul Sarvadi, CEO: AI will enhance service efficiency by providing instant, accurate information, reducing response times. The focus on operating efficiency is positive, and while it's too early to quantify bottom-line benefits, AI will be a significant emphasis in 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.