Insperity’s second quarter was marked by a significant market reaction to its results, as investors focused on the company’s declining operating margins and higher-than-expected benefits costs. Management cited a 9.6% year-over-year increase in benefits expenses, driven by higher utilization of specialty drugs and an uptick in large medical claims, particularly for cancer and heart-related conditions. CEO Paul Sarvadi acknowledged the company’s “resilience and agility” in maintaining client retention and sales efficiency in a challenging economic environment, but also described the margin pressure as a direct result of continued healthcare cost escalation and unfavorable claims development.
Is now the time to buy NSP? Find out in our full research report (it’s free).
Insperity (NSP) Q2 CY2025 Highlights:
- Revenue: $1.66 billion vs analyst estimates of $1.66 billion (3.3% year-on-year growth, in line)
- Adjusted EPS: $0.26 vs analyst expectations of $0.41 (36.3% miss)
- Adjusted EBITDA: $32 million vs analyst estimates of $39.46 million (1.9% margin, 18.9% miss)
- Management lowered its full-year Adjusted EPS guidance to $2.16 at the midpoint, a 21.6% decrease
- EBITDA guidance for the full year is $187.5 million at the midpoint, below analyst estimates of $200.8 million
- Operating Margin: -0.4%, down from 1.4% in the same quarter last year
- Market Capitalization: $1.89 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Insperity’s Q2 Earnings Call
- Andrew Owen Nicholas (William Blair) asked about the financial impact of the Workday partnership in 2026. CEO Paul Sarvadi said it was “too early to lock down” projections, but highlighted strong early pricing validation and growing market interest.
- Tobey O'Brien Sommer (Truist) questioned whether the $150 million Workday investment would decrease post-launch. CFO Jim Allison responded that expenses should decline as more costs become capitalizable, though early-phase operational costs will persist during client onboarding.
- Mark Steven Marcon (Baird) inquired about the mix of pricing, plan design, and carrier negotiations to address health cost trends. Allison explained that pricing will drive most of the cost offset, with plan changes and contract terms providing further mitigation.
- Jeffrey Michael Martin (ROTH Capital Partners) asked about the timing and scale of joint marketing for HRScale. Sarvadi described strong market receptivity and said that broader client onboarding will depend on successful beta phases.
- Andrew David Polkowitz (JPMorgan) pressed for details on the health care cost outlook and renegotiations with UnitedHealthcare. Sarvadi and Allison described ongoing discussions focused on aligning incentives and managing participant-centric outcomes.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will monitor (1) execution and client adoption of the HRScale beta launch and subsequent expansion, (2) measurable progress in offsetting healthcare cost inflation through pricing and benefit design, and (3) continued improvements in sales efficiency and client retention. Sustained operating expense discipline and further integration of technology investments will also be key indicators of Insperity’s ability to deliver on its long-term profitability targets.
Insperity currently trades at $50.38, down from $59.61 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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