Insperity’s fourth quarter results missed Wall Street expectations, reflecting ongoing challenges in the small- and medium-sized business sector and elevated healthcare claims costs. Management attributed the performance to persistently weak client net hiring and higher benefits expenses, which squeezed gross profit margins. CEO Paul Sarvadi described 2025 as “exceptionally challenging,” citing external macroeconomic headwinds and an industry-wide rise in health plan costs as primary factors behind the quarter’s underwhelming financial outcome. Operating expense reductions and client retention efforts provided some stability, but top-line growth remained pressured.

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While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Insperity’s Q4 Earnings Call

• Andrew Nicholas (William Blair): Asked about HRScale’s adoption path and its effect on profitability in 2026. CEO Paul Sarvadi said that while larger current accounts are being prioritized for HRScale, the allocation between current and new clients has not been specifically determined yet, and there is significant energy around both upgrading existing clients and attracting new accounts. The main financial impact is expected in future years rather than 2026.
• Jeff Martin (ROTH Capital Partners): Inquired about the strategic significance of client-sponsored health plans. Sarvadi explained this reduces Insperity’s benefits risk and offers flexibility, especially for larger clients, positioning it as both a market trend and a strategic initiative.
• Mark Marcon (Baird): Queried about the impact of pricing changes and upcoming renewals. CFO James Allison noted average price increases are in the “teens” for renewing clients, with about 60% of the client base still to be repriced through 2026.
• Tobey Sommer (Truist): Sought clarity on cash flow dynamics as HRScale investment shifts from operating expenses to capitalized costs. Allison projected capital expenditure returning to historical levels, with some flexibility to fund growth initiatives as needed.
• Andrew Polkowitz (JPMorgan): Asked about the long-term margin profile as HRScale and the new UnitedHealthcare contract scale. Sarvadi said the company expects continued improvement in gross profit per worksite employee through 2027 as margin recovery initiatives mature.

Catalysts in Upcoming Quarters

In the coming quarters, our team will focus on (1) the pace and profitability of HRScale adoption as new clients come online, (2) the progression of client repricing and retention rates as the margin recovery plan continues, and (3) the trajectory of healthcare cost trends following recent contract renegotiations. Updates on operational efficiency efforts and signs of renewed net hiring among clients will also serve as key indicators of Insperity’s recovery momentum.

Insperity currently trades at $25.56, down from $33.66 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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