Insperity's Q4 2024 Earnings: A Mixed Bag of Results and Guidance

Insperity, Inc. (NYSE: NSP), a leading provider of human resources and business performance solutions, reported its fourth quarter and full year 2024 results on February 10, 2025. The company's earnings call provided insights into its performance and guidance for the coming year. Here's a breakdown of the key takeaways from the earnings call.

Q4 2024 Results

* Average number of paid worksite employees (WSEEs) decreased by 2% year-over-year (YoY) to 309,093.
* Revenue increased by 2% YoY to $1.6 billion, driven by a 4% increase in revenue per WSEE, offset by the decrease in paid WSEEs.
* Gross profit decreased by 2% YoY to $218 million, with gross profit per employee in line with the prior year period.
* Operating expenses increased by 17% YoY, primarily due to investments in the Workday strategic partnership.
* Net loss and diluted EPS were $9 million and $(0.22), respectively. Adjusted EBITDA and adjusted EPS were $23 million and $0.05, respectively.

Full Year 2024 Results

* Average number of paid WSEEs decreased by 2% YoY to 307,261.
* Revenue increased by 1% YoY to $6.6 billion, driven by a 3% increase in revenue per WSEE, offset in part by the decrease in paid WSEEs.
* Gross profit increased by 1% YoY, primarily due to increased pricing and more favorable results from benefits costs program and payroll taxes.
* Operating expenses increased by 14% YoY, driven by investments in sales, service, and technology areas, as well as the impact of the recent inflationary environment.
* Net income and diluted EPS were $91 million and $2.42, respectively. Adjusted EBITDA and adjusted EPS were $270 million and $3.58, respectively.

2025 Guidance

* Average number of paid WSEEs is expected to increase by 0.9% to 1.7% YoY in Q1 2025 and by 2.0% to 4.0% YoY for the full year.
* Adjusted EPS is expected to decrease by 17% to 5% YoY in Q1 2025 and by 13% to 10% YoY for the full year.
* Adjusted EBITDA is expected to decrease by 15% to 5% YoY in Q1 2025 and by 11% to 6% YoY for the full year.

Workday Partnership and Growth Strategies

Insperity's strategic partnership with Workday has had a positive impact on client retention, particularly among larger accounts. The company expects to reach significant milestones in this partnership in 2025, which should enhance its growth trajectory in 2026 and beyond. To maintain its growth momentum throughout the year, Insperity will focus on the following strategies:

1. Sales optimization strategy: Focusing business performance advisors (BPAs) on specific HR solutions to improve sales efficiency and accountability.
2. Workday partnership: Continuing to leverage the partnership to drive growth and improve client retention.
3. Pricing strategy: Maintaining competitive pricing despite a more significant cost trend built in for this year.
4. Investment in sales, service, and technology areas: Supporting the company's long-term business strategy and returns to shareholders through dividends and share repurchases.

In conclusion, Insperity's Q4 2024 earnings call provided a mixed bag of results and guidance. While the company faced challenges in its average number of paid WSEEs and gross profit, it also demonstrated resilience in its revenue and adjusted EBITDA. Insperity's strategic partnership with Workday has shown promise in improving client retention, and the company's growth strategies aim to maintain momentum throughout the year. As investors evaluate Insperity's prospects, they should consider the company's ability to execute on its growth initiatives and navigate the challenges in the current macroeconomic environment.