Insperity (NSP) Q2 2024 earnings summary

Executive summary

• Q2 2024 delivered strong financial results, with adjusted EPS up 34% to $0.86 and adjusted EBITDA up 29% to $66 million, both exceeding guidance, despite a 1% year-over-year decline in average paid worksite employees due to lower net hiring and SMB market challenges.

• Client retention remained high at 99% in Q2 2024 and Q2 2023.

• Sales and marketing initiatives generated solid new and previously booked business, though paid worksite employee growth lagged expectations.

• Strategic partnership with Workday advanced, with significant investments and operational milestones achieved.

• Year-to-date, net income fell 9% to $97 million and diluted EPS decreased 8% to $2.56, while adjusted EBITDA rose 2% to $208 million.

Financial highlights

• Q2 2024 revenues increased 1% year-over-year to $1.61 billion; gross profit rose 16% to $260 million, driven by strong pricing and lower benefit costs.

• Adjusted EPS for Q2 2024 was $0.86, up 34% year-over-year and above guidance; adjusted EBITDA reached $66 million, up 29%.

• Operating expenses rose 13% year-over-year, reflecting investments in the Workday partnership and growth initiatives.

• Effective tax rate for Q2 was 28%, up from 25% in Q2 2023.

• Adjusted cash at June 30, 2024 was $211 million, up from $171 million at year-end 2023, with $280 million available under the credit facility.

Outlook and guidance

• Full-year 2024 adjusted EPS guidance is $3.33–$3.88, with the midpoint above prior guidance, but outlook revised downward due to macroeconomic and political uncertainty.

• Adjusted EBITDA for 2024 expected at $261–$290 million.

• Average paid worksite employees for 2024 revised to 307,400–310,600, a 0.5%–1.5% decline year-over-year; Q3 2024 guidance anticipates a 2.5%–1.5% year-over-year decrease in average WSEEs paid.

• Q3 2024 adjusted EPS guidance: $0.21–$0.45; adjusted EBITDA: $32–$45 million, both reflecting significant year-over-year declines.

• Management expects liquidity needs to be met for the remainder of 2024.