Insperity, Inc. (NSP) Q3 2025 Earnings Call

Investor webinar replay

Replay transcript excerpt

Adjusted EPS for the quarter was minus 20 cents, and adjusted EBITDA was $10 million. These results fell below our forecasted ranges, primarily due to a further continuation of higher than expected benefits costs. Gross profit per worksite employee in Q3 2025 was $208 per month, down from $247 in Q3 of 2024, driven primarily by higher than expected benefits costs of $20 million. As you may recall from last quarter's call, we had expected our benefits cost trend to taper down over the second half of 2025 due to favorable demographic changes within our plan combined with the relative benefits cost patterns in the comparison period. which had been more favorable in the first half of 2024 and resulted in higher year-over-year cost trend in the first half of 2025 that we did not view as reflective of the underlying trend for the year. Unfortunately, while we benefited from those favorable impacts, Q3 claims data revealed that they were outpaced by higher than expected outpatient and inpatient utilization and pharmacy costs, including a significant increase in large claims frequency, both sequentially over Q2 and also year over year. These factors resulted in a benefits cost trend of 9.1% for Q3 2025 over Q3 2024. The issues that we have experienced with increased healthcare claims costs are not unique to Insperity. At a macro level, the health insurance industry has reported an unexpected rise in healthcare costs and loss ratios. From our discussions with our carriers and outside advisors, there are a number of factors driving a higher level of healthcare utilization, including the increased use of prescription drugs and outpatient procedures, the prevalence of high-cost conditions, and the introduction of new, higher-cost treatments and drugs. Additionally, we have recen...