• Adjusted EPS (Q4 2024): $0.05 per share.
• Adjusted EBITDA (Q4 2024): $23 million.
• Average Paid Worksite Employees (Q4 2024): 309,093, a decrease of 2% from Q4 2023.
• Gross Profit per Worksite Employee (Q4 2024): $235 per month.
• Total Gross Profit (Q4 2024): Declined 2% from Q4 2023.
• Operating Expenses (Q4 2024): Increased 17% over Q4 2023.
• Adjusted EBITDA (Full Year 2024): $270 million.
• Adjusted EPS (Full Year 2024): $3.58.
• Cash Dividends Paid (Q4 2024): $22 million.
• Shares Repurchased (Q4 2024): 146,000 shares at a cost of $12 million.
• Adjusted Cash (End of Q4 2024): $134 million.
• Credit Facility Availability (End of Q4 2024): $280 million.
• Benefits Cost Trend (Full Year 2024): 4.3%.
• Operating Expenses (Full Year 2024): Increased 14% over 2023.
• Adjusted EBITDA Guidance (Full Year 2025): $240 million to $285 million.
• Adjusted EPS Guidance (Full Year 2025): $3.10 to $3.95.
• Adjusted EBITDA Guidance (Q1 2025): $121 million to $135 million.
• Adjusted EPS Guidance (Q1 2025): $1.89 to $2.15.
• Income Tax Rate (Q1 2025): 30%.
• Income Tax Rate (Remainder of 2025): 28.5%.

• Warning! GuruFocus has detected 3 Warning Signs with NSP.

Release Date: February 10, 2025

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

Positive Points

• Insperity Inc (NYSE:NSP) reported solid fourth quarter results with adjusted EPS of $0.05 per share and adjusted EBITDA of $23 million, exceeding the midpoint of their expected range.
• The fall campaign resulted in a 37% increase in worksite employees paid from new clients compared to Q4 2023, with client retention averaging 99% for the quarter.
• Gross profit per worksite employee in Q4 was $235 per month, slightly above expectations due to strong pricing.
• The company successfully executed a fall sales and client retention campaign, achieving a record-setting quarter in book sales, up 8% over the prior year.
• Insperity Inc (NYSE:NSP) continued to return capital to shareholders through dividends and share repurchases, paying $22 million in cash dividends and repurchasing 146,000 shares at a cost of $12 million in Q4.

Negative Points

• The average number of paid worksite employees was slightly above the low end of the forecasted range at 309,093, a decrease of 2% from Q4 2023 due to weak client hiring.
• Total gross profit declined 2% from Q4 2023 on the 2% decrease in paid worksite employees.
• Operating expenses increased 17% over Q4 2023, primarily due to investments in the Workday strategic partnership.
• The benefits cost trend for 2024 was 4.3%, which was just under the low end of the expected range, indicating higher costs.
• The weak hiring environment in 2024 resulted in nearly flat net growth in worksite employees, the lowest level of hiring by clients in at least the last 20 years, excluding recession years.

Q & A Highlights

Q: Can you discuss the progress and expectations for the Workday partnership, particularly regarding sales leads and client retention? A: Paul Sarvadi, CEO, explained that while initial lead flow was slower than anticipated, significant progress has been made in the go-to-market strategy. The partnership is now integrated into the incentive structures, which should enhance lead flow. The partnership has already positively impacted client retention, especially among larger accounts, by generating interest in the new joint solution.

Q: How are the operating expenses related to the Workday partnership expected to be distributed throughout the year? A: James Allison, CFO, stated that operating expenses related to Workday are expected to remain relatively steady throughout the year, with a slight drop-off after completing the corporate component. The guidance for 2026 remains consistent with previous estimates, with some internal resources expected to return to other projects.

Q: How do you anticipate the increase in healthcare cost trends will affect new sales and client retention? A: Paul Sarvadi, CEO, noted that Insperity has been conservative with pricing to anticipate market cost trends. Despite a more significant cost trend built in for this year, the company's pricing remains competitive, and they are well-positioned in the market.

Q: Can you elaborate on the sales optimization strategy and its expected impact? A: Paul Sarvadi, CEO, explained that the sales optimization strategy involves focusing business performance advisors (BPAs) on specific HR solutions, allowing for more targeted sales efforts. This specialization is expected to improve sales efficiency and accountability, with positive results anticipated this year.

Q: How did the Workday partnership influence mid-market retention during the fourth quarter? A: Paul Sarvadi, CEO, highlighted that the partnership significantly improved mid-market retention, with a 62% improvement over the previous year. The development of the Workday partnership and opportunities like beta testing have been key factors in retaining large accounts.

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