Insperity (NSP) Q3 2024 earnings summary

Executive summary

• Q3 2024 adjusted EPS was $0.39 and adjusted EBITDA was $39 million, with net income at $3 million and diluted EPS at $0.07; average paid worksite employees declined 2% year-over-year to 309,088 due to client hiring softness and mid-market account losses.

• Revenues in Q3 2024 rose 1% to $1.56 billion, driven by a 3% increase in revenue per WSEE, offset by lower WSEE count.

• Booked sales increased 8% year-over-year, with a 2% increase in Business Performance Advisors.

• Client retention remained strong at 99% for the quarter, offsetting lower new sales and hiring activity.

• $119 million returned to shareholders year-to-date via $52 million in share repurchases and $67 million in dividends.

Financial highlights

• Q3 gross profit decreased 11% year-over-year to $229 million, impacted by higher benefit costs and a tough comparison to prior year’s favorable healthcare claims.

• Q3 operating expenses increased 15% year-over-year, mainly from Workday partnership implementation.

• Q3 operating income dropped 98% to $1 million; net income was $3 million, down from $45 million in Q3 2023.

• Q3 adjusted EPS declined 73% year-over-year; adjusted EBITDA down 59% year-over-year.

• YTD revenues up 1% to $5.0 billion; YTD gross profit up 2% to $834 million.

Outlook and guidance

• Full-year 2024 adjusted EPS forecasted at $3.42–$3.66 and adjusted EBITDA at $262–$274 million, both at the lower end of prior guidance.

• Q4 2024 guidance: adjusted EBITDA of $15–$27 million and adjusted EPS of -$0.10 to $0.12; paid worksite employees expected to decline 1–2% year-over-year.

• Full-year average paid worksite employees expected at 307,400–308,100, a 1.3–1.5% decline from 2023.

• Healthcare cost trends for 2024 and 2025 expected to remain at the higher end of historical ranges, driven by specialty drugs and new treatments.

• Effective tax rate for full year 2024 forecasted at 28%.