• Adjusted EPS: Increased by 34% over Q2 2023 to $0.86.
• Adjusted EBITDA: Increased by 29% to $66 million in Q2 2024.
• Average Paid Worksite Employees: Approximately 307,000, with a sequential increase over Q1.
• Client Retention Rate: Remained at 99% for the second quarter.
• Gross Profit: Increased by 16% despite a 1% decline in paid worksite employees.
• Operating Expenses: Increased by 13% over Q2 2023, including $14 million for Workday partnership implementation.
• Effective Tax Rate: 28% in Q2 2024, up from 25% in Q2 2023.
• Cash Dividends and Share Repurchase: $23 million in dividends paid and 151,000 shares repurchased at $14 million.
• Adjusted Cash: Ended Q2 with $211 million, a $40 million increase from December 31, 2023.
• Credit Facility Availability: $280 million available.
• Full Year 2024 Adjusted EPS Guidance: Revised to $3.33 to $3.88.
• Full Year 2024 Adjusted EBITDA Guidance: Forecasted between $261 million to $290 million.
• Q3 2024 Adjusted EBITDA Guidance: Forecasted between $32 million to $45 million.
• Q3 2024 Adjusted EPS Guidance: Forecasted between $0.21 to $0.45.

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

Release Date: August 01, 2024

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

Positive Points

• Insperity Inc (NYSE:NSP) reported a 34% increase in adjusted EPS over Q2 of 2023, exceeding the high end of their forecasted range.
• The company achieved a 29% increase in Q2 adjusted EBITDA to $66 million, driven by lower than expected benefit costs and strong pricing.
• Gross profit increased by 16% despite a 1% decline in paid worksite employees, thanks to strong pricing and lower benefit costs.
• Insperity Inc (NYSE:NSP) maintained a high client retention rate of 99% for the second quarter.
• The strategic partnership with Workday is progressing well, with significant initiatives planned to enhance sales and retention performance.

Negative Points

• The average number of paid worksite employees increased sequentially but was significantly lower than Q2 of 2023 and below expectations for the typical summer hiring period.
• Net hiring within the client base weakened further than expected, reflecting a weak economic climate.
• The effective tax rate for Q2 2024 was 28%, higher than the 25% rate in Q2 2023.
• The starting point for paid worksite employees in the second half of 2024 is lower than desired, impacting growth expectations.
• The ongoing uncertainty in the economic and political environment is expected to impact the prospect and client base, leading to a lowered full-year outlook for average paid worksite employees.

Q & A Highlights

Q: Can you break out the lower second half outlook between reduced expectations for net client hiring versus softness on the new business side? A: The biggest impact on the outlook for unit growth is the starting point. We also reduced expectations for client hiring due to high uncertainty. The starting point in June was lower due to less hiring, especially as the quarter evolved compared to last year. Douglas Sharp, CFO

Q: Has the competitive environment gotten more aggressive, and how would you characterize your own participation in that? A: The competitive environment has been aggressive for a while, but we continue to win our share of accounts. We focus on accounts that fit us best and have maintained our win percentage. The overall activity level has affected volume more than competition. Paul Sarvadi, CEO

Q: How did you maintain or improve the EBITDA and EPS outlook despite lowering the worksite employee outlook? A: It's a combination of stronger pricing and favorable healthcare cost trends. Our healthcare costs have been trending at the low end of our initial range, and we remain conservative in our estimates. Douglas Sharp, CFO

Q: Can you discuss the quality of leads from the Workday partnership and any updates on spending? A: The quality of leads is improving as we refine our processes. We expect to spend around $60 million this year on the partnership, with similar investment levels anticipated for next year. Paul Sarvadi, CEO and Douglas Sharp, CFO

Q: Could the Workday partnership be a material driver of growth in early 2025? A: Yes, it can be. The potential is enormous, though the timing is harder to predict. We are optimistic about its impact on our January numbers and are working to ensure it is impactful in 2025. Paul Sarvadi, CEO

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