Insperity’s first quarter was marked by challenges stemming from higher-than-expected healthcare benefits costs and increased uncertainty among small and mid-sized business clients. Management attributed the underperformance to a unique combination of accelerated medical claims, large claim frequency, and payment timing issues. CEO Paul Sarvadi acknowledged, “This quarter’s higher-than-expected claim activity was due to a variety of factors rather than a primary root cause.” Additionally, delays and cancellations in new client onboarding—driven by shifts in government policy and tariffs—weighed on paid worksite employee growth. While client retention remained strong, these headwinds led to results that fell short of Wall Street’s profit expectations, prompting a cautious tone from leadership regarding the near-term outlook.
Is now the time to buy NSP? Find out in our full research report (it’s free).
Insperity (NSP) Q1 CY2025 Highlights:
- Revenue: $1.86 billion vs analyst estimates of $1.87 billion (3.4% year-on-year growth, in line)
- Adjusted EPS: $1.57 vs analyst expectations of $2.02 (22.4% miss)
- Adjusted EBITDA: $102 million vs analyst estimates of $127.8 million (5.5% margin, 20.2% miss)
- Management lowered its full-year Adjusted EPS guidance to $2.76 at the midpoint, a 21.8% decrease
- EBITDA guidance for the full year is $217.5 million at the midpoint, below analyst estimates of $259.4 million
- Operating Margin: 3.7%, down from 6% in the same quarter last year
- Market Capitalization: $2.26 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 Insperity’s Q1 Earnings Call
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Andrew Nicholas (William Blair) asked about the extent and duration of onboarding pauses. CEO Paul Sarvadi responded that the "shock factor" from policy changes caused a sudden pause, but some delayed accounts are now moving forward.
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Tobey Sommer (Truist) questioned how government actions could impact client sentiment. Sarvadi replied that even small regulatory or tax clarity could quickly restore confidence and drive renewed growth.
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Mark Marcon (Baird) inquired about the timing and impact of healthcare pricing adjustments. Sarvadi explained that most client renewals occur after the first quarter, so pricing changes are being implemented throughout the year to mitigate margin pressure in 2026.
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Jeff Martin (ROTH Capital Partners) asked about client receptivity to healthcare price increases. CFO Jim Allison noted that elevated costs are widespread across the industry, and Insperity is using a tailored approach to minimize attrition.
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Andrew Polkowitz (JPMorgan) sought details on net hiring assumptions and how current uncertainty compares to past cycles. Sarvadi said hiring growth is forecast to be minimal, and management is taking a conservative approach to ensure stability heading into 2026.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will be monitoring (1) the trajectory of medical claims and effectiveness of pricing adjustments in stabilizing margins, (2) the pace at which small and mid-sized business sentiment recovers and drives new client wins, and (3) progress toward commercializing the Workday joint HR solution, particularly early adopter feedback and sales execution. Updates on healthcare cost trends and incremental milestones in the Workday partnership will also be key indicators of strategic progress.
Insperity currently trades at $59.81, down from $78.48 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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