Insperity (NSP) Q2 FY26 earnings call: guidance and Q&A

What is the makeup of the 8,000 worksite employees on HRScale, where did they come from, what are their sizes, and what is the pipeline for onboarding?

The 8,000 WSEs include both current clients migrating and new accounts, with a variety of client sizes, including some over 1,000 employees. The focus is on building a referenceable client base and momentum, with strong enthusiasm and receptivity in the market.

“Good news is we have in this pipeline that I mentioned on the 8,000. Of course, we prioritize current clients moving first, but we also will have employees or new accounts as we go through the year. So we're very pleased about that. And we have different size clients, including some over that 1,000 employee level, which is excellent.”

asked by Andrew Nicholas · answered by Paul Sarvadi

What is driving clients to find healthcare plans outside Insperity's plan, and how does this impact Insperity's economics, particularly benefits costs per WSE?

Clients are choosing external plans due to the higher pricing environment for healthcare. Insperity's expanded agency operation provides options, integrating external plans into its PEO offering. This means Insperity does not take on the risk for these clients, and their costs are not included in Insperity's reported benefits costs per covered employee.

“But if they're in a situation where their costs are going up a lot, if we can find coverage for them through our agency, integrated into our offering for them in the PEO offering, hey, that's great. If it's better for them, we're happy to do that. And in that case, we're actually not taking the risk. They're not adding into the risk pool of the large plan.”

asked by Andrew Nicholas · answered by Paul Sarvadi

Given more conservative health care assumptions, what would the EBITDA guidance have been if historical patterns were followed, and what is the primary driver of the wider range?

The wider $40 million EBITDA range reflects elevated healthcare trends in the marketplace, compared to a historical range of $25-$30 million. This prudence acknowledges potential movement in benefits costs, despite current favorability from margin recovery actions.

“At this time of the year, the $40 million range on EBITDA is a little bigger than what we would normally have. I'd say in the past, we probably would be closer to $25 million or $30 million. So we just wanted to reflect the fact that there are these escalated trends out there in the marketplace.”

asked by Tobey Sommer · answered by James Allison

How important is this year's fall selling season, especially with the new HRScale platform and expanded healthcare offerings?

The fall selling season is always critical for the business model. This year, it's particularly exciting due to the successful navigation of sales motion changes related to margin recovery, leading to increased confidence. The new HRScale offering is expected to ignite sales for both HRScale and larger HR360 clients, providing new options and driving lead flow.

“This year, the point I was really happy to be able to make is that we went through quite a bit of what I call sales motion changes. over this last 6 to 8 months or so related to our margin recovery plan. And the reason I call the sales motion change is because it's far beyond the sales organization.”

asked by Tobey Sommer · answered by Paul Sarvadi

How should investors think about the profitability of worksite employees shifted to HRScale, including expense sharing with Workday?

HRScale clients are currently on multiyear contracts with favorable terms, typically at or better than large HR360 clients, with embedded price increases post-beta phase. The expectation is that HRScale profitability will be as good or better than HR360 over the next several years, driven by increasing pricing and efficiency gains as more clients are onboarded.

“Our expectation over the next several years is that the profitability on HRScale looks as good or better than what it is on HR360. I think there are 2 factors that go into that. One is increasing pricing as we get from beta to early adopter and more mature phases. And then also the level of efficiency gains that we get as we bring more clients onto the platform and service more clients.”

asked by Mark Marcon · answered by James Allison

Are new lead generation initiatives being adopted for HRScale, and what are Workday's commitments regarding the go-to-market strategy?

Insperity has a powerful, multi-front marketing effort for the fall, including product-related marketing and a joint marketing plan with Workday. AI is being leveraged to target customers effectively. Workday is actively involved through the Pod relationship and joint marketing initiatives, providing strong support for sales teams and lead production.

“We have a very powerful marketing effort coming along this fall on a lot of different fronts. And it's across the board, but there's also byproduct-related marketing and including a joint marketing plan that includes things that both Insperity and Workday are doing and doing together, continuing through our Pod relationship.”

asked by Jeff Martin · answered by Paul Sarvadi