Insperity - $NSP - Earnings Analysis: Successful sales and client retention campaign.

Business Model

Insperity generates revenue by providing human resources and business performance solutions, primarily through a co-employment model (PEO) where they become the employer of record for their clients' employees. They also offer traditional employment services and solutions for the mid-market.

Revenue Sources

• Professional Employer Organization (PEO) solution: Long-standing solution to the small business marketplace.
• Traditional employment business.
• Mid-market opportunity: Solutions tailored for businesses with larger employee counts.

Income Statement Analysis

• Revenue increased by 2% year-over-year, driven by a 4% increase in revenue per WSEE, offset by a 2% decrease in paid WSEEs.
• Gross profit decreased by 2% year-over-year, with gross profit per employee in line with the prior year period.
• Operating expenses increased by 17% year-over-year, including approximately $19 million associated with the Workday strategic partnership.
• Operating income decreased by 165% year-over-year, from 23 million to -15 million.
• Net income decreased by 147% year-over-year, from 19 million to -9 million.

Balance Sheet Analysis

• Total assets increased from $2,120 million to $2,597 million.
• Total stockholders' equity increased from $94 million to $97 million.

Cash Flow Analysis

• Adjusted EBITDA declined compared to 2023 primarily due to macroeconomic factors impacting worksite employee growth and operating expenses growth related to investments in sales, service and technology, including investments in Workday Strategic Partnership

Capital Allocation

In 2024, Insperity returned $152 million to shareholders through dividends ($89 million) and share repurchases ($63 million).

Management Commentary

Successful fall sales and client retention campaign leads to achievement of what we believe to be an important inflection point, moving our year over year growth rate from a negative in Q4 to a positive in January, reestablishing growth momentum entering 2025.

As we begin 2025, we believe that the fundamentals of our core business are performing well, and expect key initiatives to drive growth acceleration, generate operating efficiencies, and achieve our strategic priorities.

Macroeconomic uncertainty in the small business community impacting growth

Overall Sentiment: Optimistic about future growth due to sales and retention efforts, and excited about the Workday strategic partnership and its potential for long term trajectory of growth and profitability.

Recommendation

Rating: Hold

Reason for Rating: Given the mixed financial results with strong sales and retention efforts balanced against macroeconomic challenges and increased operating expenses.

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 2/11/2025, 6:11:14 AM