Insperity Q2 Earnings Call Highlights

Key Points

• Insperity exceeded Q2 expectations: Adjusted EPS rose 31% year over year to $0.34, while adjusted EBITDA increased 13% to $36 million, reflecting progress in pricing, benefits-plan changes and expense controls.
• Workforce and margins remain under pressure but are improving: Average paid worksite employees declined 1.1% to 305,764, while gross profit per employee fell 1%—an improvement from Q1. Healthcare costs remained elevated, although operating expenses dropped 8%.
• Management raised its focus on future growth: Insperity launched its HRScale solution with Workday and entered Q3 with nearly 8,000 worksite employees in sold accounts. Full-year guidance calls for adjusted EBITDA of $185 million to $225 million and adjusted EPS of $1.88 to $2.43, despite continued uncertainty around benefits costs.

Insperity NYSE: NSP reported second-quarter 2026 adjusted earnings per share of $0.34 and adjusted EBITDA of $36 million, exceeding the midpoint of its projected ranges. Adjusted EPS rose 31% from a year earlier, while adjusted EBITDA increased 13%, as the professional employer organization continued its margin recovery plan.

Chief Financial Officer Jim Allison said the company’s second-quarter performance reflected progress on pricing, benefits-plan changes and operating-expense controls. The company is maintaining its focus on recovering profitability after healthcare claims trends and related margin pressure in 2025.

“We believe these results reflect the significant progress we have made in our ongoing margin recovery plan,” Allison said.

Worksite employee count modestly lower

Average paid worksite employees totaled 305,764 in the second quarter, above the high end of Insperity’s guidance range but down 1.1% from the second quarter of 2025. Allison attributed the better-than-expected result primarily to net hiring within the existing client base, which offset anticipated pressure on sales and retention from the company’s pricing actions.

Client retention and worksite employees from new clients were in line with the company’s forecast, according to Allison. Chief Executive Officer Paul Sarvadi said sales and retention landed at the lower end of Insperity’s typical ranges during the first half as the company implemented pricing and process changes.

Still, Sarvadi characterized the 1% decline in paid worksite employees as evidence of the company’s resilience amid its margin-recovery efforts. He said Insperity has expanded the benefit options available to clients through its insurance agency operation.

At the end of the quarter, 7% of Insperity’s client base obtained benefits outside the company’s plan, including 14% of clients added during the previous 12 months. Sarvadi said clients may choose to retain plans through third-party brokers or use plans offered through Insperity’s agency, while the company expects most clients to continue participating in the Insperity plan.

Margins, benefits and expenses

Total gross profit declined 3% year over year to $217 million. Gross profit per worksite employee fell 1% to $237 per month, an improvement from the 2% decline reported in the first quarter and in line with the company’s expectations.

Allison said pricing and benefit-plan actions improved the matching of pricing and costs in the company’s benefits business. However, the benefit was largely offset by a year-over-year change in workers’ compensation costs, as favorable actuarial reserve adjustments for prior policy years declined.

Benefits cost per covered employee rose 5.2% from the prior-year quarter, consistent with first-quarter trends and the company’s expectations. Insperity cited favorable effects from client-mix changes, plan-design changes and modifications to its UnitedHealthcare contract that took effect at the beginning of 2026.

The UnitedHealthcare agreement lowered the pooling level to $500,000 per covered member annually from $1 million. Allison said the change increased fixed premiums paid evenly throughout the year, while the favorable impact on claims costs is expected to be weighted toward later quarters, particularly the fourth quarter.

Total operating expenses decreased 8% to $211 million, driven primarily by lower headcount-related costs and stock compensation expense. Cash operating expenses declined 6%. The company increased advertising expense to add leads to its sales pipeline.

Insperity invested $8 million in development of its Insperity HRScale offering during the quarter, including $5 million that was capitalized. The company said beta clients were live on the platform during the period, reducing certain investment costs while moving some onboarding and service costs into operating expenses.

The company paid $23 million in regular dividends during the quarter and ended the period with $95 million in adjusted cash, compared with $36 million at the end of the first quarter. It borrowed $50 million under its credit facility for working-capital purposes, largely related to timing of funding for direct-cost programs.

HRScale launch and AI initiatives

Insperity formally launched Insperity HRScale, its joint solution with Workday designed for mid-market companies with 150 to 5,000 employees. The company entered the third quarter with nearly 8,000 worksite employees in sold HRScale accounts, including more than 5,000 already live and roughly 3,000 in implementation.

Sarvadi said the initial group includes existing clients and new accounts, with some clients exceeding 1,000 employees. The company is prioritizing current-client migrations while building reference accounts for prospective customers.

Management said it expects HRScale profitability over the next several years to be as good as or better than that of its HR360 offering. Allison said the company expects pricing to rise as the product moves beyond the beta phase and expects greater efficiency as it serves more clients on the platform.

Insperity is also expanding its artificial-intelligence efforts. Sarvadi said 63% of surveyed clients are either piloting AI or incorporating it into their strategies, while 8% reported no plans to use the technology. The company’s HR360 agent is currently helping clients and worksite employees find answers, resources and service support, and Insperity plans to add conversational reporting and real-time business insights.

Updated 2026 outlook

For the full year, Insperity forecast average paid worksite employees of 305,000 to 307,000, representing a decline of 1% to 1.6% from 2025. The company expects adjusted EBITDA of $185 million to $225 million, up 41% to 72% from 2025, and adjusted EPS of $1.88 to $2.43, up 83% to 136%.

The outlook incorporates a wider-than-usual range of potential outcomes for benefits costs during the second half because of elevated healthcare-cost trends in the market. Allison said Insperity’s EBITDA guidance range is broader than historical norms to account for that uncertainty.

• Third-quarter worksite employees: 305,500 to 307,500, down 1.7% to 2.3% year over year.
• Third-quarter adjusted EBITDA: $14 million to $41 million, up 40% to 310% year over year.
• Third-quarter adjusted EPS: a loss of $0.09 to earnings of $0.41 per share, compared with a year earlier increase of 55% to 305% across the range.

Sarvadi said the company is preparing for the fall sales and retention season with expanded marketing activity, additional business performance advisors, HRScale and broader benefits options. He said Insperity’s priorities remain margin recovery in 2026 and establishing a foundation to regain growth momentum in 2027.

About Insperity (NYSE:NSP)

Insperity, Inc is a leading provider of human resources and business performance solutions designed to help small and midsize businesses operate more efficiently. Headquartered in Kingwood, Texas, the company offers a comprehensive suite of products and services that span workforce management, payroll administration, employee benefits, risk management, and talent development. By leveraging its proprietary technology platform and team of HR experts, Insperity enables clients to focus on core business objectives while outsourcing complex administrative functions.

The company's flagship offering is its Professional Employer Organization (PEO) service, which allows clients to outsource critical HR tasks such as payroll processing, workers' compensation administration, and compliance with employment regulations.

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