0001000753-26-000050
SEC filingQ1 revenue grew modestly 1.7% to $1.9B from pricing strength, but profitability declined with gross profit down 2.6% to $302M and net income falling 35.3% to $33M due to elevated direct costs and operating pressures, amid seasonally weak cash flows.
Insperity delivered Q1 revenue of $1.9 billion, up 1.7% from $1.86 billion in the prior year quarter. This growth occurred despite gross profit declining 2.6% to $302 million from $310 million, as higher direct costs pressured the 15.9% gross margin. The company's PEO business model relies on managing worksite employee (WSEE) benefits and payroll, where revenue stability from pricing helped counterbalance cost headwinds.
Net income declined sharply 35.3% to $33 million, with diluted EPS at $0.88 versus $1.35 year-over-year. This reflects the combined impact of lower operating income and other factors, underscoring the quarter's profitability challenges despite top-line progress.
Cash flows showed seasonal weakness, with net cash from operating activities at -$67 million, improved from -$443 million last year. This variance arises because many WSEEs are paid on Fridays, causing operating cash flows to decrease in periods ending on Fridays or Mondays; Q1 2026 ended on a Tuesday versus Monday prior year. Capital expenditures remained steady at $6 million, yielding free cash flow of -$73 million. To meet short-term liquidity needs for direct costs and operating expenses, Insperity relies primarily on cash from operations, supplemented by available credit facilities for working capital, acquisitions, and stock repurchases. Depreciation and amortization ties to ongoing investments in facilities, service centers, sales offices, software, and technology infrastructure, supporting long-term operational capacity.