Slides
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Earnings Call and Webcast Q1 2025 April 29, 2025
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Safe Harbor Statement The statements contained herein that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify such forward-looking statements by the words “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” "forecasts," “likely,” “possibly,” “probably,” “could,” “goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions. Forward-looking statements involve a number of risks and uncertainties. In the normal course of business, in an effort to help keep our stockholders and the public informed about our operations, from time to time, we may issue such forward-looking statements, either orally or in writing. Generally, these statements relate to business plans or strategies; including our strategic partnership with Workday, Inc.; projected or anticipated benefits or other consequences of such plans or strategies; or projections involving anticipated revenues, earnings, average number of worksite employees, benefits and workers’ compensation costs, or other operating results. We base these forward-looking statements on our current expectations, estimates and projections. We caution you that these statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Therefore, the actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are (i) adverse economic conditions; (ii) failure to comply with or meet client expectations regarding certain COVID-19 relief programs; (iii) bank failures or other events affecting financial institutions; (iv) labor shortages, increasing competition for highly skilled workers, and evolving employee expectations regarding the workplace; (v) impact of inflation; (vi) vulnerability to regional economic factors because of our geographic market concentration; (vii) failure to comply with covenants under our credit facility; (viii) impact of a future outbreak of highly infectious or contagious disease; (ix) our liability for WSEE payroll, payroll taxes and benefits costs, or other liabilities associated with actions of our client companies or WSEEs, including if our clients fail to pay us; (x) increases in health insurance costs and workers’ compensation rates and underlying claims trends, health care reform, financial solvency of workers’ compensation carriers, other insurers or financial institutions, state unemployment tax rates, liabilities for employee and client actions or payroll-related claims; (xi) an adverse determination regarding our status as the employer of our WSEEs for tax and benefit purposes and an inability to offer alternative benefit plans following such a determination; (xii) cancellation of client contracts on short notice, or the inability to renew client contracts or attract new clients; (xiii) the ability to secure competitive replacement contracts for health insurance and workers’ compensation insurance at expiration of current contracts; (xiv) regulatory and tax developments and possible adverse application of various federal, state and local regulations; (xv) failure to manage growth of our operations and the effectiveness of our sales and marketing efforts; (xvi) the impact of the competitive environment and other developments in the human resources services industry, including the PEO industry, on our growth and/or profitability; (xvi) an adverse final judgment or settlement of claims against Insperity; (xviii) disruptions of our information technology systems or failure to enhance our service and technology offerings to address new regulations or client expectations; (xix) our liability or damage to our reputation relating to disclosure of sensitive or private information as a result of data theft, cyberattacks or security vulnerabilities; (xx) failure of third-party providers, such as financial institutions, data centers or cloud service providers; (xxi) our ability to fully realize the anticipated benefits of our strategic partnership and plans to develop a joint solution with Workday, Inc.; and (xxii) our ability to integrate or realize expected returns on future product offerings, including through acquisitions, strategic partnerships, and investments. These factors are discussed in further detail in Insperity’s filings with the U.S. Securities and Exchange Commission. Any of these factors, or a combination of such factors, could materially affect the results of our operations and whether forward-looking statements we make ultimately prove to be accurate. Any forward-looking statements are made only as of the date hereof and, unless otherwise required by applicable securities laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Supplement to Earnings Release This presentation is a supplement to our press release announcing our first quarter 2025 results, which can be found in the investor relations area (http://ir.insperity.com) of our website. It is intended to be read in conjunction with, not as a substitute for, or in isolation from, our earnings release. Non-GAAP Financial Measures This presentation contains non-GAAP financial measures, such as Adjusted Cash, Adjusted EBITDA and Adjusted EPS. Please see the Appendix for a further discussion.
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CEO Commentary Q1 results reflecting macroeconomic turbulence and healthcare cost volatility in stark contrast with the solid execution of our game plan for building the foundation for future growth acceleration Three initiatives expected to mitigate the recent healthcare trend effects in 2026 include recently implemented pricing plan, 2026 health plan design changes, and early contract renewal negotiations with UnitedHealthcare. Continued focus on the Insperity/Workday strategic partnership expected to add a new driver to our growth in 2026 and beyond. Recent milestones achieved: Corporate Workday platform successfully launched Joint go-to-market plan adopted and in early stages of execution
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Q1 2025 Financial Results •Q1 average paid worksite employees increased 1% •Worksite employee growth was slightly below our original guidance as some new client starts were delayed or cancelled due to economic uncertainty •Worksite employees paid from new client sales increased 3% compared to Q1 2024 •Total client attrition for Q1 2025 improved to 9% compared to 12% in Q1 2024 •Net hiring by clients was minimal during Q1 2025 1%
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Adjusted EBITDA Adjusted EPS •Q1 2025 earnings declined from Q1 2024 and were below our expected range, primarily due to: •Higher-than-expected benefits costs in Q1 2025 compared to Q1 2024 where we experienced lower-than- expected benefits costs •Full quarter of investment in Workday strategic partnership in Q1 2025 compared to the initial ramp up in Q1 2024 (28)% (31)% Q1 2025 Financial Results ($ in millions, except per share amounts) Please refer to the Appendix slide at the end of this presentation for definitions of our non-GAAP financial measures.
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Balance Sheet and Cash Flow ($ in millions) •Continued solid cash and working capital position. •$42 million returned to shareholders in the first three months of 2025 through dividend program and share repurchases. December 31, 2024March 31, 2025 $134$124Adjusted Cash $369$369Total Debt $155$188Working Capital March 31, 2024March 31, 2025Year-to-Date Period Ended: $142$102Adjusted EBITDA $21$23Dividends Paid $23$19Cost of Shares Repurchased Please refer to the Appendix slide at the end of this presentation for definitions of our non-GAAP financial measures.
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Q2 and FY 2025 Outlook April 29, 2025 FY 2025 Outlook April 29, 2025 Q2 2025 Outlook 316,400—308,800311,000—308,000Average WSEEs paid 3.0%—0.5%1.3%—0.3%Year-over-year increase $3.28—$2.23$0.67—$0.29Adjusted EPS (8)%—(38)%(22)%—(66)%Year-over-year decrease $245—$190$53—$33Adjusted EBITDA (in millions) (9)%—(30)%(20)%—(50)%Year-over-year decrease Definition of Key Metrics Average WSEEs paid — Determined by calculating the company’s cumulative WSEEs paid during the period divided by the number of months in the period. Adjusted EPS — Represents diluted net income per share computed in accordance with GAAP, excluding the impact of non-cash stock-based compensation. Adjusted EBITDA — Represents net income computed in accordance with GAAP, plus interest expense, income taxes, depreciation and amortization expense, amortization of SaaS implementation costs and non-cash stock-based compensation. Please refer to the Appendix slide at the end of this presentation for definitions of our non-GAAP financial measures. •Average paid worksite employees ▪ Reduced expectations for worksite employees paid from sales and net client hiring due to the effects of the macroeconomic environment and small business sentiment •Earnings •Increased annual benefits cost trend based on elevated claims in Q1 2025 •Full year operating expenses expected to be slightly below 2024, including $62M associated with Workday strategic partnership investment •2025 earnings comparison to 2024 impacted by favorable benefits costs in prior year compared to a challenging environment this year
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Appendix – Non-GAAP Financial Measures Benefit of Non-GAAP MeasureDefinitionNon-GAAP Measure We believe that the exclusion of the identified items helps us reflect the fundamentals of our underlying business model and analyze results against our expectations, against prior periods, and to plan for future periods by focusing on our underlying operations. We believe that the adjusted results provide relevant and useful information for investors because they allow investors to view performance in a manner similar to the method used by management and improves their ability to understand and assess our operating performance. Adjusted EBITDA is used by our lenders to assess our leverage and ability to make interest payments. Excludes funds associated with: • federal and state income tax withholdings, • employment taxes, • other payroll deductions, and • client prepayments. Adjusted cash, cash equivalents and marketable securities Represents net income computed in accordance with GAAP, plus: • interest expense, • income tax expense, • depreciation and amortization expense, and • amortization of SaaS implementation costs. EBITDA Represents EBITDA plus: • non-cash stock-based compensation. Adjusted EBITDA Represents diluted net income per share computed in accordance with GAAP, excluding: • non-cash stock-based compensation. Adjusted EPS Non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of the non-GAAP financial measures as provided in the company’s press release announcing its first quarter 2025 results, which may be found on the investor relations area (http://ir.insperity.com) of the company’s website.