Q2 2025 Insperity Inc Earnings Call
Good morning. My name is Tom, and I will be your conference operator today.
I would like to welcome everyone to the Insperity second quarter 2025 earnings conference call.
At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.
If anyone should require operator assistance during the conference, please press *0 on your telephone keypad.
At this time, I would like to introduce today's speakers joining us are Paul servati, chairman of the board and chief executive officer, and Jim Allison Executive, Vice President of Finance Chief Financial Officer and treasurer.
At this time I'd like to turn the call over to Jim Allison Mr. Allison. Please. Go ahead.
Thank you. We appreciate you joining us today.
Let me begin by outlining our plan for this morning's call.
First, I'm going to discuss the details behind our second quarter, 2025 Financial results.
Improved profitability in 2026.
I will return to provide our financial guidance for the third quarter and full year 2025.
We will then end the call with a question and answer session.
Before we begin, I would like to remind you that Paul, or I, may make forward-looking statements during today's call, which are subject to risks, uncertainties, and assumptions.
In addition, some of our discussion may include non-gaap Financial measures.
for a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from such forward-looking statements,
And reconciliations of non-gaap financial measures to their comparable, gaap measures.
Please see the company's public filings including the Form 8K file today, which are available on our website.
This morning, we reported second-quarter EPS of $0.26.
And adjusted ebit da of 32 million.
These results fell slightly under the low end of our forecasted range by 3 cents per share and 1 million dollars, respectively, primarily due to a continuation of higher than expected benefits costs.
I will provide additional details in just a minute.
Our unit growth was within our forecasted range, with an average number of Works, paid worksite employees, increasing 0.7% over Q2 of 2025.
To 309,115.
Our sales force, demonstrated, resiliency, and solid productivity in a market that continued to face many economic uncertainties.
Worksite employees were paid for new sales, which increased by 2% over Q2 of 2024.
Reflecting an increase in sales efficiency from a team that is smaller, and more tenured than it was a year ago.
Our client renewals and service teams. Collaborated well to produce strong client retention.
Averaging 99% per month and in line with our prior year results.
Net hiring within the client base, showed some improvement throughout the quarter.
Slightly exceeding, both our expectations and Q2 2024 levels but remaining well below historical norms.
gross profit per worksite employee in Q2 2025 was 240 per month down from 282,
In Q2 of 2024.
You may recall that Q2 2024 results were positively impacted by favorable, development of healthcare claims.
Which had totaled 25 million in contrast.
benefits costs in Q2, 2025 continued to Trend negatively exceeding, our forecast by 12 million
Of this amount 8 million related to higher than expected, Pharmacy costs.
Driven by higher utilization of specialty, drugs, such as the glp 1's.
And a related acceleration in the unit cost of Pharmacy on a prescript basis.
Due to a change in the mix of prescriptions towards higher cost, drugs.
the remaining 4 million was primarily attributable to a modest increase in incurred, but not reported claims that we expect to pay in the future based on recent claims payment patterns
We have not seen further, develop deterioration in claim, development related to older periods, like we did in q1.
And we have seen some indications that the previously discussed acceleration and inpatient and outpatient service. Utilization has moderated somewhat but remains elevated
We did see large claim frequency continue at an elevated level with cancer and heart related conditions showing the largest year-over-year increases.
However, we have not seen signs of adverse selection among new clients, as that large claim, activity remains in a, normal historical range.
As reported benefits cost per covered employee increased 9.6% year-over-year in Q2 and by 9% on a year-to-date basis.
These results are skewed somewhat Higher by the timing of recording. Favorable claims experience in the 2024 period and unfavorable claims experience in the 2025 period.
But the fact remains that benefits cost continue to Trend at a higher year-over-year rate, even slightly higher than the top end of our prior forecasted range.
Significant profitability Improvement in 2026.
Through a careful combination of pricing increases plan, design changes and the negotiation of the anticipated renewal of our contract with UHC. As to pricing, we have and continue to implement higher, pricing targets for both new and renewing business in a strategic and methodical way as we discussed in our q1 call.
We have been putting those bids out for a few months now.
And our renewal discussions with clients do not appear to have changed in any meaningful way.
We expect that the impact of these pricing measures.
Will start to accumulate during the second half of this year and continued into 2026.
As expected, we continue to see clients and plan, participants migrate to lower cost plan options, which is a normal response to help offset the impact of higher prices.
Plan. Migration has historically helped to mitigate the impact of higher cost Trends over time.
In addition.
We have determined and are in the process of implementing a Benefit Plan design, with changes effective January 2026.
That are designed to further mitigate future cost Trend and maintain our plan competitiveness in the marketplace.
Our contract extension discussions with UHC are ongoing.
Addressing the elevated pharmacy cost trends and the expanding use of specialty drugs is a high priority.
As we execute this plan a key takeaway is that the challenges we are facing are not unique to Insperity. And we believe that the approach we are taking to address them are commonplace to address current market conditions.
Operating expense management continues to be a keen area of focus.
And we have seen a companywide alignment and execution that continued to successfully manage operating expenses below budget across all expense categories.
Um, while continuing to invest in our strategic priorities.
On a year-over-year basis, operating expenses decreased by 3%, with the most significant reductions in travel, professional fees, and other GNA costs.
During the second quarter, we invested millions in our Workday strategic partnership, which was consistent with Q2 of 2024.
Our effective tax rate was impacted by the amount of non-deductible expenses as a proportion of pre-tax income.
During the second quarter, we continued to return Capital to our shareholders, through a regular dividend program, paying 22 million in cash, dividends.
On a year to date basis. We have paid cash, dividends of, 45 million, and repurchased, 224,000 shares of stock at a cost of 19 million.
We ended the quarter with 114 million of adjusted cash.
And we had $280 million available under our credit facility.
Now at this time, I'd like to turn the call over to Paul.
Thank you, Jim. And thank you all for joining our call.
Despite our reported Q2 results and the lower guidance for this year, we remain confident in our outlook for Accelerated growth and improved profitability in 2026.
This is due to several reasons. I'll cover it today starting with the growth momentum recently achieved and the drivers we expect to continue growth acceleration over the balance of the year and into 2026.
I'll also cover our updated HR solution. Portfolio announced yesterday in our excellent progress. On Insperity HR. Scale. Our new joint offering being developed through our strategic partnership with workday.
I'll finish with the robust plan. We are executing over the balance of the year and continuing into next year. Leading to our positive outlook
The first half of 2025 is the resilience agility and focus on sales and retention amid a complex and shifting Market landscape.
We successfully addressed the evolving uncertainty experienced by small and medium-sized businesses resulting from macroeconomic tariff and policy developments in the first half of the year and challenges. From stemming from uh specific insurance carrier, publicity issues in Q2
Through the end of July, all 3 growth drivers, including sales client retention and net hiring with the existing client base. Contributed to this growth acceleration and were stronger than last year. Booked sales also showed relative strength in the face of some significant headwinds, which we accomplished with 11% fewer trained business performance advisors selling a slightly greater number of work site employees than in the same period last year.
This sales efficiency Improvement of 13% in Q2 validated, the sales organization changes put in place early in the year and is encouraging as we approach the fall selling season.
A key driver of these booked sales results, results in the quarter was our successful marketing. Programs, that achieved our qualified lead goal, and converted a solid number of leads into Discovery, calls and opportunities to bid for our business performance advisors
Our marketing team. Also completed, our new product architecture and updated our HR Solutions portfolio, to Rebrand our Flagship peo Service as Insperity 3, hr360, our traditional employment solution, as Insperity HR core
And working with our strategic partner. Workday to name our joint solution appropriately. Insperity HR scale
Each solution is tailored to address specific aspects of human resource management. Offering unrivaled, comprehensive support for businesses at every stage of growth and development.
Together. These 3, Premium HR Solutions expand the total addressable Market of smbs and employees that can be served by Insperity.
Our portfolio of add-on products is dedicated to solving complex challenges for these companies and improving the lives of business owners and their employees.
Over time, we believe that offering solutions to these clients such as our recent edition of Insperity contractor management, powered by wingspan and to eligible employees such as our Insperity perks. Plus program may add significant revenue streams to the company or increase the stickiness of our Solutions.
Now, I would like to focus on Insperity HR scale and the excellent progress we've made on the way to bringing this unique solution to the marketplace.
The 4 defines ship have included our Insperity corporate tenant. Our exclusive peo client tenant, our deployment and enablement services and our joint go to market plan.
Our corporate tenant was successfully launched earlier this year and important Milestones were achieved in all 3 of our remaining major initiatives in the second quarter.
Our exclusive peo client tenant is the major project deliverable embedding workday human Capital Management as the client-facing technology into the Insperity 360, comprehensive HR service and Technology platform to create Insperity HR scale.
We are pleased to announce today that a detailed work and testing plan developed an agreed upon by both workday and Insperity teams have established a Target go live date for Insperity HR scale beta clients early next year, this is an important step and our enablement and deployment team is ready to work with the selected beta clients for the ramp up to the anticipated. Go live date.
Although this plan is detailed precise and very well thought out there are remaining risks that could cause the date to move out a bit further. But, in any event, we have a direct line of sight to launch Insperity HR scale.
We have agreed on a plan for the beta clients. We are actively working to define a timeline for a number of new clients.
And an additional group of current Insperity clients to become Insperity HR scale clients later in 2026.
I mentioned last quarter, the completion of the go to market plan for HR scale with workday.
Senior leadership and other key personnel from both companies agreed upon a plan and methodology to take our joint solution to the market. Together, we are aligned on the target market, the product name messaging, and competitive positioning the sales motion, and most importantly,
We formed a new pod or a product oriented delivery team focused on achieving the objectives set by the leadership of both companies.
We achieved our goal of establishing this team in Q2 and began co-selling. Discovery calls with Target prospects in July.
This team is focused on identifying suitable early adopter candidates.
Sales motion and selling the First new and sparity HR scale clients.
Obviously this effort has just begun. However, in our view, it's often very exciting start the receptivity by prospects of the investment and commitment of Insperity and workday to a strategic partnership focused on this underserved Target Market has been strong and encouraging.
Our market research has shown conceptual buy-in by mid-market companies to Insperity's HR scale, which is designed to focus on affordability, ease, and speed of deployment—reducing complexity and enhancing agility as companies scale.
1 of the most exciting. Milestones achieved recently is the completion of the Insperity HR scale pricing strategy provided by a leading consultancy firm based upon extensive market research.
These results of firmed, the target markets, intense need for both HR services, and technology, and validating the premium product fit of Insperity HR scale.
This research specifically identified, how components of Insperity HR scale, our valued by the target market and determine their willingness to pay at various levels.
The research supports HR scale premium pricing potential compared to historical HR 360 pricedale.
This is provided what we need to establish. Our initial pricing framework, including upfront deployment and enablement fees, ongoing monthly HR service and Technology support fees at the level exceeding. Our expectation yet, within the value range that we believe the target market is willing and expecting to pay this also, provided valuable information to determine a pricing roadmap to align with the Insperity HR, scale product roadmap into the future.
Now, let me provide some context for our growth and profitability outlook for 2026 based upon executing our plans for the balance of the Year. This plan has 3, key elements, including continuing growth acceleration. Recovering, our gross profit margin and leveraging, our operating expense management trend
Every year, the success of our fall sales and retention, campaign is pivotal to achieving the desired. Starting point for the coming year and paid work site employees. Setting, the stage for continued growth acceleration.
This year we are starting earlier offering strong incentives and investing more to increase the likelihood and degree of success in the, in sales and retention.
We are officially launching the campaign in just a few weeks, which is approximately one month earlier than in previous years.
We have strong incentives for employees and prospective clients for sales and retention activity and results.
We've also allocated a portion of of the year to date, operating expense savings to invest in marketing opportunities. We expect to drive an increase in sales, leads and opportunities.
We expect to be making announcements and increasing advertising soon that will reveal significant potential return on this added investment.
Another input to growth expectations is the state of the small to medium-sized business community, which we believe is at an important inflection point compared to the last few years of macroeconomic speed bumps—one after another—from inflation and interest rates to government policy and tariffs.
The recent Federal legislation signed into law is validating of support for the small business Community especially on the tax and investment Outlook.
We believe this may play out to be a catalyst for expansion in the SMB community, which could move the hiring trend back to historical levels next year.
The second key element in our game plan for the balance of the year is execution of our gross profit margin recovery. Plans in the healthcare pricing and cost framework.
Jim has described three critical incentive initiatives, including a pricing allocations plan, design changes, and our contract negotiation with our insurance carrier.
All 3 have moved forward rapidly in the last quarter and despite the benefits cost Trend being slightly worse than expected. Our recovery plan is progressing along and we believe we are in a position to see Improvement as we execute the recovery plan this year and heading into 2026.
Another aspect of our positive outlook for next year is continuing the recent operating expense management. Our focus is to ensure operating leverage can be a part of our three-year plan beginning in 2026.
Down our AI path which we believe can be significant in our business model.
Development of our AI capabilities, as I've discussed in the past is well underway, and in use by our client facing HR, profession professionals.
Our AI focus is to improve the efficiency, value, productivity, and quality of our services to the benefit of our customers and our internal operations.
Our strategy is to leverage the comb combination of our own proprietary tool to optimize disparities HR and Service. Delivery expertise with other specific. AI capabilities native to platforms that we use across the company.
So, in summary, we have responded well to the challenges we have faced this year. Our plan for the balance of the year is on course toward accelerating growth and improved profitability in 2026 and beyond. At this point, I'd like to pass the call back to Jim.
Thanks, Paul. Now, let me provide an update to our full year 2025 outlook as Paul discussed. We have started to see some modest worksite employee growth acceleration in recent months. In addition, there are indications that clarity around tax policy has improved small business economic sentiment. At the same time, we remain cautious about the level of net hiring in the existing client base.
For the full year. We are now forecasting worksite employee growth of 1% to 2% over 2024.
given the higher benefits cost Trends experienced in the first half of the year and more broadly, seen in the marketplace at large, we are raising our forecasted range of benefits cost per covered employee by 75 to 100 basis points for the full year,
we anticipate that the benefits cost Trend will taper down from the 9%. We have experienced in the first half of the year for 2 primary reasons.
First year-over-year comparisons in the first half of 2025 were impacted by last year's favorable claims development.
And that impact should subside in the second half of the year.
In addition, we continue to see favorable changes in our plan de demographics and plan. Migration, that historically have helped to favorably impact benefits cost trends.
We continue to expect that operating expenses will decline slightly sequentially eat in each of the remaining quarters.
For the full year, we expect that operating expenses will be an overall reduction compared to 2024.
This includes plan spending on the implementation of the workday strategic partnership, which we expect to Total approximately 58 million in 2025 versus 57 million in 2024.
And additional marketing spend for our fall sales campaign.
For purposes of adjusted EPS. We are forecasting. An effective tax rate of 29% for the full year 2025
The of the effective tax rate on gaap, EPS is expected to be somewhat higher and could fluctuate based on the level of non-deductible expenses. As a proportion of pre-tax income, based on all of these factors, we are forecasting, full year, adjusted, EV that die and range of 170 million to 205 million.
We are forecasting full year, adjusted EPS in a range of a $1.81 to $2.51.
As for Q3, we are forecasting. The average paid work site employees to be in a range of 312200 to 315,300 which represents an increase of 1 to 2% over Q3 of 2024.
We are forecasting. Adjusted ebit da in a range of 24, to 44 million and adjusted EPS in a range of 6 cents to 49 cents.
As economic concerns show signs of stabilizing business owners continue to see employee retention engagement benefits and cost of compliance as significant concerns.
We believe that these are positive trends as we approach our first sales and client renewal season.
We are executing a pricing plan and implementing plan, design, changes in 2026 that we believe will address the elevated benefits cost Trend environment.
Profitability in 2026 and Beyond.
At this time, I'd like to open up the call for questions.
Thank you.
The floor is now open for questions. If you'd like to join the queue to ask a question at this time. Please press star 1 on your telephone keypad to join the queue. We do ask if listening on speakerphone today that you pick up your handset while asking your questions provide optimal sound quality. Once again, please press star 1 on your keypad at this time, if you wish to join the queue to ask a question, please. Hold a moment while we pull for questions.
And your first question this morning is coming from Andrew. Nicholas from William. Blair Andrew, your line is live. Please go ahead.
Great. Thank you and and good morning. Um I wanted to first ask about workday appreciate all the updates there. Uh and and also the the new kind of branding of all the solutions. I'm just curious in terms of with the beta timing. Now seemingly locked in just wondering if if you could speak to maybe a line of sight for 2026,
Financial impact or or anything on that front that you could share to give us a sense for for how much could could benefit profitability and growth next year.
Yeah, thank you for the question, Andrew. I appreciate that and we are super excited about our progress that direction, but it's a little early to lock down into, you know, precisely predict, uh, the actual
Uh, revenue and profitability impact, you know, we are starting with the beta group that I'm really excited to announce today is as a Target date. Early in the year, we will have. Um, you know, our next step is to have
2, what? I'll call waves of additional client groups being added throughout the year next year a group of new clients.
That I'll even call new beta clients, because that's kind of the way we need to look at that. And then another group of current clients that will be identified and will roll in sometime later in the year.
But we also have just now received all of the information that we need for the ficing elements and that is also super important. And it was it, as I mentioned, in my remarks, it exceeded our expectations on how different different elements are valued. Uh, frankly the value of the service component was even higher than expected and the ability for the client to look at the different pieces of what we're offering and our ability to price those accordingly including upfront fees.
Ongoing service fees ongoing Technology, support fees, uh, fees for adding uh uh technology elements over time.
Uh, there's a lot of pieces to it, and now we are in the process that will happen over this next quarter.
We will lock down. What will you know would be called our Q2.
I guess I'd call it like a recommended, uh, pricing uh, for clients at different sizes, different levels, Etc.
And then, uh, we'll be able to, uh, more closely.
Uh, determine what we will actually apply in pricing to these groups of clients that are, you know, being such an important part of our launch path.
And obviously, we won't, we will be give advantages to those clients to come on. But the reality is, you know, this is validating. Our long-term plan for really solving our
success penalty of having companies grow out of our business model and having a great new Avenue for new clients that are much larger coming into the company. So we'll be working on how this will be modeled in the future because I know that's an issue for, uh, for you all as well. But we still have to go through some other processes.
Uh, to start to give some direction on that.
Continues to improve over the course of the next couple quarters.
Yeah, so the, the good news is that we, you know, have seen underlying hiring at a higher level than what has been happening. Now, some of what happens this time of year is a natural summer, help element and other things. Uh, but we, we can, uh, in our analysis. We see that underlying there. There is movement the right direction. It's still well below historical levels. Uh, but I also believe the confidence level we're already hearing and seeing
Uh, even post the legislation.
You know, I really feel like we're about to see a release there. Now, we haven't budgeted a lot of that in to our model going forward. The balance of the year, but uh, we we do believe that things are already better. Uh, you know, out of that this first half of the year, you know, there was only 1 month that was, you know, somewhat of a negative. So
That's good. That's, that's moving the right direction. And uh, we're going to, uh, do all we can to help our customers.
Uh, you know, continue to grow.
Thank you. Your next question is coming from Toby Summer from truist. Toby, your line is live. Please go ahead.
Thanks, uh, at this juncture. Do you think that the the original 150 million dollar investment is is
Is still the right number.
and um,
Do you?
At this juncture have uh better visibility into how much of that workday Associated expense.
Will go away entirely and fall back to the bottom line.
So Toby, thanks for the question. Um, I do think that uh, you know, the 150 million dollar um,
Expense. You know, when we put that out there I I think largely our Focus was on the cost.
um,
Not only to get to go live but to think about kind of the the what was going to hit the income statement. I do think we're going to get to a point where, um, we do see that there's going to be a product development roadmap Beyond launch, but we also believe that, um, we're going to be at a point where, um,
You know, those expenses become capitalizable. Um, as we get closer to launch. So, um, I would say over, you know, the 5 year period.
Um, the overall um investment in the product is is likely to continue to be um a little bit over the 150 million dollars. But um, I also think that the impact on the income statement, um, will reduce
Uh, pretty significantly.
um, at the same time, I think it's important to uh recognize that
when we move into this, uh, launched this, this launch phase, the beta phase, I would call it, you know, you expect,
That you're going to have to muscle through.
um, you know, some level of, uh,
Of kind of working, you know, issues with the beta clients, 1 of the reasons. You're you're going through this process is to make sure um, that you're building out. You know, very um, smooth processes and stuff but we're not expecting that those are going to be
Um you know perfect in that first beta launch. So we do think that from an operating um cost standpoint. There's a little muscle in through that will happen in those in those early phases and then that there will be um you know growing operating um efficiency on that front over, you know, the first several years of of the of the launch.
Appreciate that. Thank you. Um, I'm
on the margin profile of the business and I kind of want to ask a question that'll allow you to
Incorporate your what you've learned about pricing opportunities?
Um without necessarily giving us the numbers. Uh, Paul do you do you feel like
at the end of this exercise and we can call it, you know, 2 years from now, 3 years from now, whenever we're like, kind of up and humming,
Um, that the margin profile.
On a per work site employee basis as well as margin profile at the corporate level, on the income statement.
Is better than it has been historically, the same or lower.
I believe, you know, this is my opinion, based on what I understand that in terms of the progress we're making and even this new information we have, but I would expect it to be better.
And, you know, we are literally seeing validation of the premise of this.
Uh investment. And what I mean by that is obviously retention is your lowest cost new business.
and that retention, um,
Step up that I see from this.
Effective execution, over the next few years is going to be significant in my view.
now, in addition to that, though,
Specific to margin, you're looking at bringing on much, larger clients.
um, at
Pricing, that is even.
Higher than I I presumed in, you know, just the penciling of the possibilities.
Now, it will take a little time to ramp up to that as as we develop the the solution and and, uh, but I, but I see that happening as well.
And so, you know, like I say, it's the trifecta for our business model, it's growing the company faster.
In bigger chunks at a time. Uh, at at higher prices.
You know, that means our, you know, historical operating leverage that we've had because the technology is better. I think that ultimately
Uh enhances our business model as well. Uh it's just at an early stage for us to, you know, lock some of that stuff down. But I appreciate the question and I I I will just say that that's exactly what what I see ahead and what we're working to accomplish.
Thank you.
Your next question is coming from Jeff Martin from Roth Capital partners.
Jeff. Your line is live. Please go ahead.
Thanks.
Oh, I wanted to dive in a little bit to, you know, the launch of the joint marketing here. I mean it it just it seems like you're going to be spending a good portion of your time and resources in 2026. So I'm getting these bit of clients
Launched and and you know, things smoothed out bringing on some new clients. But how do you, how do you look at the Joint marketing? Go live versus the ability to sell and turn. Those clients on, in, in the time frame, that makes sense.
Yeah. So you know, if you think about um, the typical scenario for a company who's having these types of needs,
Let me just remind you. What we have validated is. There's a deep need in this target Marketplace.
For both, uh, Services HR services, having a better HR function, a strategic HR function, that's really working.
And the technology to help make that happen. Efficiently. And effectively.
and so, if you are such a client out there today,
In order to to, to move that direction.
the amount of time that it takes the amount of investment, it takes the amount of complexity,
Uh it it's it's it's all very difficult takes a long time.
And most companies have a mixed bag or a hodgepodge of components that they're trying to make all this happen. And we're bringing them a rifle to to nail this down and have ultimate scalability on both the service and the technology side Insperity HR.
Scale is the perfect name for this. Now, if I'm 1 of those prospects,
And I look at wait a minute, you're telling me that Insperity and workday.
Are totally committed investing significantly to having this solved for me long term.
Hey, I want on, I want on that ship.
and if it takes me, you know,
even 18 months from now. Well, that's how long it would take me to try to do it myself and piecemeal this thing together.
And and it would cost more and it would be a lot harder.
And I don't really have the people to make that happen myself. Anyway, I'm telling you, this is what we're seeing in the marketplace.
And I'm fully you can hear me. I'm excited about the fact that we get to, we've been talking to prospects already.
They connect immediately conceptually to having these 2, great companies.
And, you know, to be a part of it and to get in this queue.
I think is going to be.
A, you know, a desirable thing for these prospects. Now, now that we're going to be able to lock down
Uh, how we can price and offer. The right kind of incentives to be a part earlier, maybe part be the early adopters. That's great. You know, that's a that's an excellent step. In addition to that
but, you know, I I just believe we see the demand out there and the need
I wouldn't even call it demand because they don't know this solutions out there yet. But the need for what we're bringing to, the table is clear and the value of it, perceived value of it, we believe is going to be high.
so, you know, that's why being out there now, having our
team already out there, having these conversations and, and being able to um,
Get this on people's plate to put in their plan for the future. Uh, is very appropriate even though we're launching the beta group early next year.
Great. And then uh, 1 other here, if I could uh I think you said the the sales force BP account is down 11% year-over-year sales, efficiency you know, drove a 13%, you know, sales efficiency ratio, which is encouraging. How are you thinking about growth in the BPA base? Over the next, you know, 12 to 24 months as this joint solution becomes, you know, uh really more more prominent in the sales effort,
Yeah I I I believe you know, this is the first time that we we're going to have what I would call operating. Leverage on the sales side of the business. We are going to grow the
The BPA base but uh nominally uh, you know, not near at the pace. We had to in the past. Once we get this in place uh you know, we're already having good success in the mid-market space.
and uh, this is going to enhance that and uh, allow for us to grow the
You know, the business, the work side, employee growth, the unit growth, uh, more rapidly with fewer BPA, so that's that's the game plan. There will be some growth that you know,
pretty nominal for the balance of the year, uh, and in the next year, but the efficiency gain
Uh that is evident is why another reason why we are really ready to Market more heavily and get more opportunities into the hands of these bpas whose Effectiveness uh is at a high level.
Thank you, your next question is coming from Marc. Maron from beard Mark, your line is live. Please go ahead.
Good morning. Um, I have a couple of questions so, um, Paul and Jim. Thanks a lot for all the detail with regards to the, um, the healthcare costs. Obviously everybody is
Seeing the same thing and facing the same pressures. Um, I'm wondering, um, if you have any preliminary Thoughts with regards to, um, you know, when you, when you look at a combination of plan design, change versus pricing, uh, versus uh, you know, getting some, uh, more favorable treatment from, uh, United Healthcare, how do you think of that combination? Um, and, and how much and and specifically, you know, how much would come from plan design change and how much would come from? Um, from pricing? I know it's early days and perhaps, if there's any sort of regional differences, um, how should we think about?
About those. And then I have a follow-up with regards to workday
Yeah, thanks Mark. Um, appreciate the question. Um, what I would say is um
you know, when you're when the trends are running the way that they're running, um,
You know, the the primary way that that you're going to uh keep up and catch up um on on the trends that are out there, um is through pricing.
um, what you're looking to do with plan design changes,
um, and trying to influence, um, you know,
Participant um, you know, in client behavior on what plans uh they're selecting into.
those are designed to, um,
Limit the impact of the overall cost trend.
But most most of it, the majority of it is through um you know the the pricing changes.
Okay. Um, you you mentioned um you mentioned, you know Regional um differences there's always uh,
there's always some, you know, local and Regional um differences you know, different carriers are stronger and different parts of the country and
Um, you know, people have their eyes set on, you know, growth targets that may vary from um, from state to state. Um, so you know the process that that we look at as we're going through things is is dynamic from that standpoint, but I would not say that.
um, there's a part of the country right now that, you know, is not seeing
um, you know, the impact of higher of higher trends
And Mark I would add 1 more thing to what, Mark, I would add 1 more thing to what Jim is saying. Uh, because it isn't important that, you know, pricing is the appropriate methodology to balance price and cost when the claim cost is what you're addressing. Now the
Uh, contract discussions though are really important because if there's anything structural that needs to be changed to handle how we're affected by these things in the future, that is really important. And that's a, a central element of what we're dealing with and that what we're working on, uh, with, uh, United Healthcare. And, um, now it does have, you know, once you make such a change, it can have a early term benefit, you know, to the picture that you have for. But but what's most important is that you are able to structure things in a way that
Helped to mitigate against this on in the future.
Really appreciate that. And then just with regards to workday, if I'm hearing things correctly and or interpreting things correctly, it sounds like, you know, we'll have, you know, essentially 3 waves of beta. Um, do you think
Does that mean that what when we really start marketing in a broad scale to um, you know, new clients or or existing clients that that probably would occur? You know, more towards the fall of 2026? I'm just trying to get a sense for that and then with regards to the expenses associated with with workday, um, from a cash perspective,
Um, would you expect?
Um, it sounds like you're not expecting uh, you know, a big drop off.
In terms of the expenses around that, because you'd still be at the relatively early stages of onboarding clients, testing things, optimizing, etc., I'm just trying to understand that element as well. I appreciate any comments on those two elements.
Sure. Well, first of all on the waves.
I'm not going to get out ahead of the, amazing team of that of people that are, you know,
Going to Great Lengths to.
Uh, go into great detail to determine the exact times for these other 2 waves. Uh, I have my thoughts about it. I have my uh, feelings about but I, you know, I owe it to them to to go through the work and to, you know, see the plan for this. Um, now on, on the other side that you're talking, even though. Yes, there's costs that are going to be incurred, Jim talked a little bit about how we, you know, when you're doing it this way, you got a muscle through the first ones, you want to make sure the that the experience of the these early new customers is really good. So you're going to you know, definitely invest to make that happen. However um you know all this investment that you know I'm not an accountant in my view a lot of this should never be going through the income statement.
it's an investment for the long term of of capital, but it's running through the income statement out there is a time when that
gets mitigated.
through the through the rules once you have a new product that, you know is is um,
So, I'm not the accountant, but between revenue coming in and um, being able to account for it, uh, for the expense side.
I believe more appropriately. I think we have, you know, some some nice upside coming hopefully sooner than later.
Thank you. And if I, if I add on, if I add on to that, just for a second, I would say, um, you know, and and I've said said this before, you know, you've got costs coming from a couple of different categories, there are clearly third-party outside specifically implementation costs. You also have
a, pretty significant amount of
costs that are related to internal resources that are working on the project.
Um, and you know, historically, uh, when they were working on projects, they...
You know, likely were working on things that were capitalizable and we are not capitalizing them right now.
Um and then there's a third part of the cost that are going on right now which are kind of the pre-build of operational um expenses on boarding in and enablement teams as an example that are going to kind of transition over.
to uh to working on actual um you know, setting up new customers the difference between now and then is that we will have uh
You know.
Implementation fees, um, that will be associated with that activity.
Um, you know, once we once we get to launch. So um
That helps.
Thank you. Your next question is coming from. Andrew powitz from JP Morgan. Andrew. Your line is live. Please go ahead.
Morning, Paul, Jim, and thanks for all the color. Um, I had two questions. The first one I just wanted to ask, um, in terms of the Q3 and 2025 outlook, um, what's the range of outcomes embedded from a healthcare cost trend perspective, kind of hitting at the, you know, low and high ends of your EBITDA and EPS guidance.
Um, you know, we have focused, uh, obviously more on what we where we think we're headed for the year, the year-over-year comparison to last year.
we'll have a lot more to do with, um,
You know, that trajectory towards that number compared to what happened last year. So we think it's going to normalize a little bit from the 9% year to date that we've seen um in the quarter uh or or in 2025 so far but um
I I personally um don't get too caught up in what the actual specific quarterly trend is but what do we? What do we aiming towards on the
on the annual Trend and, um, compared to our prior forecast, you know, we're looking at 75 to 100 basis points higher than that,
yeah, I think I would just add, if you remember a quarter ago,
we kind of
We said that the low end of our range related to kind of a continuation of...
The elements that we're driving costs up in that first quarter.
Now the the stuff related to last year, you know, that all kind of got washed through. But when we looked at the numbers from this quarter we said hey
You know, that that can't be that, that that, uh, high end of our range is the way it came in. And so you've got to adjust for that, uh, for the balance of the year. And that's what we did by adding the 75 to 100 additional basis points.
Okay, that's um, super helpful. Um, and then the my follow-up question, I wanted to ask a little bit about, you know, renegotiations with United Health. Um, just wanted to get some color on. Kind of what has been the outcomes in the past. Is it, is it really about plan design? Um you know visibility or earlier visibility into Data Trends price risk sharing just wanted to kind of understand what the the range of potential outcomes for Insperity can be. Thank you.
well, if I just look at the big picture of our history and Jim is been the person in the
Hot seat on that front for a long time and has done a great job with United Healthcare. But I would say that we've gone from, you know, being just an amazing client for them.
and we've, you know, seen our actual
A very, uh, solid.
Um, Channel partner for them and have worked toward, uh, you know, other aspects to the relationship to, where we're more aligned on doing what we can together to grow. Now, that was
You know, interrupted with some of these, you know, the things happening in the marketplace at large, but I think that's what we're looking to.
Um,
to make sure that we've got this relationship structured, where both of our incentives are aligned around what we do together and, uh, that we
Uh, benefit accordingly, uh, as we grow in.
And manage these costs going forward together.
and if I can add on to that, I I think 1 of the real keys in the middle of this is um
When we have discussions like that around alignment, it is very often about what is the best situation for our plan.
um,
You know, when we do things that are beneficial and advantageous to plan participants.
Um not only is that a fiduciary responsibility we have but that sets an environment that is good for us and good for United Healthcare. Um as we approach the market because
You know, it's no different than what we talked about from a cultural perspective of having a people-centric approach and a customer-centric approach.
In this world, we have a persistent participant-centric approach.
Um, it's good for everybody, it's good for our participants, it's good for us in the long run. It's good for United Healthcare in the long run.
Thank you. This does conclude our question and answer session for today. I would now like to hand the call back to Mr. Servati for closing remarks,
Once again, we would just like to thank all of you for joining us today and we appreciate uh, the questions and the detail questions. And we hope we have provided information for you to see, uh, why we are so excited about the future and how we're looking forward to executing a important game plan for the balance of the year and looking forward to growth acceleration and improved profitability in 2026 and Beyond. Thank you very much for participating today.
Thank you. This does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day. Thank you once again for your participation.
Goodbye.