Insperity, Inc.

What they do

Insperity provides outsourced human resources and business performance solutions, an industry it pioneered as a PEO since its 1986 formation. Its PEO HR Solutions bundle payroll and employment administration, employee benefits, workers' compensation, government compliance, performance management, and training and development. Services are delivered through Insperity HR 360, HR 360 Select Edition, and HR Scale, the latter developed through a strategic partnership with Workday using Workday HCM.

Revenue drivers

• Insperity HR 360 — The largest source of revenue; a comprehensive PEO offering for small and medium-sized businesses covering payroll, benefits, workers' compensation, compliance and training, with access to the Insperity Premier platform.
• HR 360 Select Edition — A lower-cost offering generally limited to the middle market client segment, with longer commitments; includes the same compliance and administrative services as HR 360 and allows clients to buy strategic HR products for an additional fee.
• HR Scale — The newest offering, jointly developed with Workday and priced higher than HR 360, targeting growing and middle market companies with Workday HCM capabilities plus Insperity HR expertise.
• Worksite employee count and pricing — Revenue scales with the average number of worksite employees paid per month and revenue per WSEE; Q2 2026 revenue rose 2% on a 3% increase in revenue per WSEE, partly offset by a 1% decline in paid WSEEs.

Recent performance

Q2 2026 revenues rose 2% to $1.7 billion on a 3% increase in revenue per WSEE, partly offset by a 1% decline in average paid WSEEs to 305,764. Gross profit fell 3% to $217 million and gross profit per WSEE declined 1% to $237, with benefits costs per covered employee up 5%. Operating expenses fell 8% to $211 million, including $8 million for the Workday partnership versus $14 million a year earlier. Net income rose 180% to $4 million and diluted EPS rose 171% to $0.10; adjusted EBITDA rose 13% to $36 million and adjusted EPS rose 31% to $0.34. Year to date, revenue rose 2% to $3.6 billion, net income fell 20% to $37 million, and adjusted EBITDA rose 4% to $139 million.

Strategy

Management's stated top 2026 priority is margin recovery, built on three components: pricing and client retention, benefit plan and policy changes, and operating expense management. The company is investing in its Workday partnership for the HR Scale offering ($16 million of expense in the first half of 2026) and in AI initiatives. It also cites a refined sales motion intended to regain worksite employee growth momentum. Capital deployment in the first half of 2026 included $46 million of dividends, $4 million of share repurchases, and $13 million of capital expenditures.

Risks

• Economic and employment sensitivity — Demand for outsourced HR services is sensitive to economic activity; weak conditions or tight labor markets can reduce client hiring, employment levels, and benefit levels, directly affecting worksite employee counts.
• AI-driven hiring displacement — The 10-K states that emerging technologies including AI may reduce client hiring for certain roles or automate tasks, which would slow growth in worksite employees.
• Employee retention tax credit exposure — The 10-K states that if claims made for employee retention tax credits under COVID relief programs are disallowed, business, financial condition, and results of operations could be materially adversely affected.
• Health insurance cost inflation — Benefits costs per covered employee increased 5% over both Q2 2025 and the first half of 2025, pressuring gross profit per WSEE.

Outlook

Updated 2026 guidance calls for average paid WSEEs of 305,000 to 307,000, a year-over-year decrease of 1.0% to 1.6%. Full-year adjusted EPS is guided to $1.88 to $2.43 (up 83% to 136%) and adjusted EBITDA to $185 million to $225 million (up 41% to 72%). For Q3 2026, guidance is 305,500 to 307,500 average paid WSEEs, adjusted EPS of $(0.09) to $0.41, and adjusted EBITDA of $14 million to $41 million. Management expects the cumulative margin recovery efforts to produce significant profit recovery in 2026 and a solid foundation entering 2027.