Shares of Insperity (NSP -0.05%) slumped on Monday after the provider of human resources outsourcing solutions reported second-quarter results that were in line with analysts' expectations. The stock was down about 22.5% at 1:55 p.m. EDT.
Insperity reported second-quarter revenue of $1.04 billion, up 13% year over year. The average number of work site employees (WSEEs) paid per month rose 14%, with 11% growth in the average number of business performance advisers driven by new client sales. While client retention was above 99%, net gains in the client base were lower than expected due to less hiring of full-time and seasonal employees.
Non-GAAP (adjusted) earnings per share came in at $0.83, up from $0.68 in the prior-year period. Gross profit grew by 12%; it was hurt by higher than expected benefits costs driven by large claim activity. Operating expenses also grew by 12%, driven by investments in growth, the opening of eight new sales offices over the past year, and the larger number of business performance advisers.
"We expect to continue our office expansion plan and increase the number of business performance advisers over the balance of the year to continue double-digit growth into 2020," said CEO Paul J. Sarvadi.
For the third quarter, Insperity expects 13% to 13.5% year-over-year growth in average WSEEs paid, 4% to 8% growth in non-GAAP EPS, and 8% to 12% growth in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
For the full year, the company sees average WSEEs paid growth of 13.5% to 14.5%, non-GAAP EPS growth between 22% and 26%, and adjusted EBITDA growth between 16% and 19%.
While Insperity's second-quarter results matched analyst expectations, weaker hiring from clients toward the end of the quarter may have investors worried about a prolonged slowdown.