Insperity Reports 3% Revenue Growth but Declines in Gross Profit and Net Income for Q1 2025

Insperity, Inc. reported its financial results for the first quarter of 2025, revealing a revenue increase of 3% to $1.863 billion compared to $1.802 billion in the same period last year. The company's gross profit, however, decreased by 10% to $310 million, down from $345 million in the first quarter of 2024. Operating income also saw a significant decline, falling 37% to $68 million from $108 million year-over-year. Net income for the quarter was $51 million, a decrease of 35% from $79 million in the prior year, resulting in diluted earnings per share of $1.35, down from $2.08.

The financial performance reflects several operational challenges, including increased direct costs associated with employee benefits and workers' compensation. The average number of worksite employees (WSEEs) paid per month increased by 1% to 306,023, contributing to the revenue growth. However, the gross profit per WSEE decreased by $40 to $338, primarily due to rising costs in health insurance and workers' compensation. The company reported a notable increase in health insurance costs, which rose by 8.4% on a per-covered-employee basis, driven by higher inpatient and outpatient costs.

In terms of strategic developments, Insperity continues to focus on its core human resources services, particularly through its Professional Employer Organization (PEO) offerings. The company has maintained its commitment to geographic expansion and client retention, although the net change in its client base has decreased compared to the previous year. Insperity's operational metrics indicate a stable client engagement, with revenues per WSEE per month increasing by 3%, reflecting a successful pricing strategy despite the challenges in managing direct costs.

Looking ahead, Insperity's management expressed cautious optimism regarding its financial outlook, emphasizing the importance of adapting to market conditions and client needs. The company has a revolving credit facility with a borrowing capacity of $650 million, which it plans to utilize for working capital and potential acquisitions. Insperity's liquidity position remains strong, with $568 million in cash, cash equivalents, and marketable securities as of March 31, 2025. However, the company acknowledged the risks associated with economic conditions, labor shortages, and regulatory changes that could impact future performance.