Insperity Q3 2025 slides: Benefits costs weigh on earnings despite employee growth

Introduction & Market Context

Insperity Inc (NYSE:NSP) held its third-quarter 2025 earnings call on November 3, revealing significant profitability challenges despite modest growth in its client base. The professional employer organization (PEO) reported an adjusted earnings per share of -$0.20, falling well below analyst expectations of $0.22, as rising healthcare costs continued to pressure margins.

Following the earnings announcement, Insperity’s stock declined 0.54% in aftermarket trading to $43.88, hovering near its 52-week low of $42.11. The company’s shares have struggled throughout 2025, reflecting ongoing investor concerns about its ability to manage escalating benefits costs.

Quarterly Performance Highlights

Insperity reported a 1% year-over-year increase in average paid worksite employees for Q3 2025, reaching 312,842 compared to 309,088 in the same period last year. This modest growth came despite slightly lower new client sales and reduced net hiring within the existing client base.

As shown in the following chart of worksite employee growth:

However, this operational growth was overshadowed by a steep decline in profitability. Adjusted EBITDA plummeted 74% year-over-year to just $10 million, compared to $39 million in Q3 2024. Similarly, adjusted EPS fell 151% to -$0.20 from $0.39 in the prior-year quarter.

The following chart illustrates this dramatic earnings decline:

Detailed Financial Analysis

The primary driver behind Insperity’s earnings shortfall was higher-than-expected benefits costs. The company also noted that Q3 2024 had benefited from $12 million in favorable claims run-off, creating a challenging year-over-year comparison.

Year-to-date financial results through September 2025 showed similar trends. While average paid worksite employees increased 1% to 309,327, adjusted EBITDA fell 42% to $144 million and adjusted EPS declined 54% to $1.63.

This pattern of declining profitability despite worksite employee growth is illustrated in the following chart:

Insperity’s balance sheet remained relatively stable, with adjusted cash of $120 million as of September 30, 2025, compared to $134 million at the end of 2024. The company maintained its total debt at $369 million while returning $87 million to shareholders through dividends and share repurchases in the first nine months of 2025.

Strategic Initiatives

In response to these challenges, CEO Paul Sarvadi outlined several strategic initiatives aimed at driving profitability recovery in 2026. These include:

1. Renegotiating the company’s contract with UnitedHealthcare

2. Pricing and renewing clients at higher rates to reflect increased healthcare costs

3. Lowering the large claims pooling level to reduce volatility

The CEO also highlighted the Q3 rollout of HRScale with Workday, a new offering targeting mid-market companies that is expected to serve as a catalyst for future growth. Additionally, the company reported strong Q3 sales performance for its HR360 product.

Forward-Looking Statements

Insperity’s outlook for Q4 and full-year 2025 reflects continued pressure on profitability. For Q4, the company projects average worksite employees between 313,000 and 315,000, with adjusted EPS ranging from -$0.79 to -$0.16 and adjusted EBITDA between -$25 million and $9 million.

For the full year 2025, Insperity expects average worksite employees of 310,200 to 310,700, adjusted EPS of $0.84 to $1.47, and adjusted EBITDA of $119 million to $153 million.

The company also noted that while worksite employees from new sales, client retention, and net hiring all improved compared to 2024, net hiring in the client base remains below historical levels. Operating expenses for 2025 are expected to be approximately 3% below 2024 levels, including $48 million associated with the Workday strategic partnership investment.

Management emphasized that while 2025 has presented significant challenges due to elevated healthcare claims, they expect to recover the majority of the earnings shortfall in 2026 through their strategic initiatives. The success of these efforts will be crucial for Insperity to regain investor confidence and reverse its stock’s downward trend.

Full presentation:

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.