What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-04 compared with 2020-11-02 · 70 added, 116 removed, 336 unchanged (36% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands) September 30, 2020 December 31, 2019

(in thousands) March 31, 2021 December 31, 2020

Cash and cash equivalents $ 494,777 $ 554,846

23 unchanged sentences

Other accrued liabilities 61,105 60,777

Income taxes payable 6,286 —

Total current liabilities 1,044,351 904,924

13 unchanged sentences

See accompanying notes.

Insperity | 2020 Third Quarter Form 10-Q 4

Insperity | 2021 First Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except per share amounts) 2021 2020

25 unchanged sentences

(1) Revenues are comprised of gross billings less worksite employee (“WSEE”) payroll costs as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2021 2020

3 unchanged sentences

See accompanying notes.

Insperity | 2020 Third Quarter Form 10-Q 5

Insperity | 2021 First Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2021 2020

22 unchanged sentences

Purchases ( 10,585 ) ( 8,689 )

Proceeds from dispositions 484 5,799

Proceeds from maturities 10,580 24,000

7 unchanged sentences

Other 2,751 2,363

Net cash used in financing activities ( 31,436 ) ( 88,230 )

Net cash provided by (used in) financing activities ( 42,396 ) 25,603

Net increase (decrease) in cash, cash equivalents and restricted cash ( 52,502 ) 49,076

1 unchanged sentence

Cash, cash equivalents and restricted cash end of period $ 734,197 $ 641,626

Insperity | 2020 Third Quarter Form 10-Q 6

Insperity | 2021 First Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2021 2020

11 unchanged sentences

See accompanying notes.

Insperity | 2020 Third Quarter Form 10-Q 7

Insperity | 2021 First Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2020 and 2019

For the Three Months Ended March 31, 2021 and 2020

Common Stock Issued Additional Paid-In Capital Treasury Stock Retained Earnings and AOCI Total

2 unchanged sentences

Purchase of treasury stock, at cost — — — ( 29,686 ) — ( 29,686 )

Issuance of long-term incentive awards and dividend equivalents

— — ( 7,088 ) 7,898 ( 810 ) —

Issuance of equity-based incentive awards and dividend equivalents — — ( 25,085 ) 26,421 ( 1,336 ) —

Stock-based compensation expense — — 10,851 971 — 11,822

Exercise of stock options — — ( 329 ) 569 — 240

Other — — 364 318 — 682

Dividends paid — — — — ( 15,461 ) ( 15,461 )

Unrealized gain on marketable securities, net of tax

— — — — 19 19

Unrealized loss on marketable securities, net of tax — — — — ( 7 ) ( 7 )

Net income — — — — 61,922 61,922

Balance at September 30, 2020 55,489 $ 555 $ 74,598 $ ( 620,638 ) $ 586,124 $ 40,639

Balance at March 31, 2021 55,489 $ 555 $ 81,329 $ ( 628,391 ) $ 620,151 $ 73,644

Balance at December 31, 2019 55,489 $ 555 $ 48,141 $ ( 544,102 ) $ 499,485 $ 4,079

Purchase of treasury stock, at cost — — — ( 61,203 ) — ( 61,203 )

Issuance of long-term incentive awards and dividend equivalents

— — ( 7,695 ) 8,646 ( 951 ) —

Issuance of equity-based incentive awards and dividend equivalents — — ( 7,088 ) 7,898 ( 810 ) —

Stock-based compensation expense — — 4,893 1,659 — 6,552

4 unchanged sentences

Net income — — — — 62,092 62,092

Balance at September 30, 2019 55,489 $ 555 $ 46,401 $ ( 496,917 ) $ 490,949 $ 40,988

Insperity | 2020 Third Quarter Form 10-Q 8

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

For the Three Months Ended September 30, 2020 and 2019

Common Stock Issued Additional Paid-In Capital Treasury Stock Retained Earnings and AOCI Total

(in thousands) Shares Amount

Balance at June 30, 2020 55,489 $ 555 $ 54,783 $ ( 592,313 ) $ 581,613 $ 44,638

Purchase of treasury stock, at cost — — — ( 29,986 ) — ( 29,986 )

Stock-based compensation expense — — 19,552 1,312 — 20,864

Other — — 263 349 — 612

Dividends paid — — — — ( 15,448 ) ( 15,448 )

Unrealized loss on marketable securities, net of tax

— — — — ( 50 ) ( 50 )

Net income — — — — 20,009 20,009

Balance at September 30, 2020 55,489 $ 555 $ 74,598 $ ( 620,638 ) $ 586,124 $ 40,639

Balance at June 30, 2019 55,489 $ 555 $ 41,009 $ ( 383,830 ) $ 477,155 $ 134,889

Purchase of treasury stock, at cost — — — ( 114,872 ) — ( 114,872 )

Stock-based compensation expense — — 4,880 1,637 — 6,517

Other — — 512 148 — 660

Dividends paid — — — — ( 12,037 ) ( 12,037 )

Unrealized loss on marketable securities, net of tax — — — — ( 28 ) ( 28 )

Net income — — — — 25,859 25,859

Balance at September 30, 2019 55,489 $ 555 $ 46,401 $ ( 496,917 ) $ 490,949 $ 40,988

See accompanying notes.

Insperity | 2020 Third Quarter Form 10-Q 9

Balance at March 31, 2020 55,489 $ 555 $ 46,327 $ ( 595,487 ) $ 545,295 $ ( 3,310 )

Insperity | 2021 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

Our most comprehensive HR services offerings are provided through our professional employer organization (“PEO”) services, known as Workforce Optimization ® and Workforce Synchronization TM solutions (together, our “PEO HR Outsourcing solutions”), which encompass a broad range of HR functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services, along with our cloud-based human capital management solution, the Insperity Premier TM platform.

In addition to our PEO HR Outsourcing solutions, we also offer a comprehensive traditional payroll and human capital management solution, known as Workforce Acceleration.

We also offer a number of other business performance solutions, including Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Expense Management Services, Retirement Services and Insurance Services, many of which are offered as a cloud-based software solution.

In addition to our PEO HR Outsourcing solutions, we offer a comprehensive traditional payroll and human capital management solution, known as Workforce Acceleration.

We also offer a number of other business performance solutions, including Comprehensive Traditional Payroll and Human Capital Management, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Retirement Services and Insurance Services, many of which are offered as a cloud-based software solution.

These other products or services are offered separately or with our other solutions.

6 unchanged sentences

Our Condensed Consolidated Balance Sheet at December 31, 2020 has been derived from the audited financial statements at that date, but does not include all of the information or footnotes required by GAAP for complete financial statements.

Our Condensed Consolidated Balance Sheet at September 30, 2020 and our Consolidated Statements of Operations for the three and nine month periods ended September 30, 2020 and 2019, our Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2020 and 2019 and our Consolidated Statements of Stockholders’ Equity for the nine month periods ended September 30, 2020 and 2019, have been prepared by us without audit.

Our Condensed Consolidated Balance Sheet at March 31, 2021 and our Consolidated Statements of Operations for the three month periods ended March 31, 2021 and 2020, our Consolidated Statements of Cash Flows for the three month periods ended March 31, 2021 and 2020 and our Consolidated Statements of Stockholders’ Equity for the three month periods ended March 31, 2021 and 2020, have been prepared by us without audit.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows, have been made.

12 unchanged sentences

Each reporting period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant

Insperity | 2020 Third Quarter Form 10-Q 10

Insperity | 2021 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4 unchanged sentences

The terms of the arrangement require us to maintain an accumulated cash surplus in the plan of $ 9.0 million, which is reported as long-term prepaid insurance.

In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $ 6.5 million at September 30, 2020, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets.

As of September 30, 2020, Plan Costs were less than the net premiums paid and owed to United by $ 32.8 million.

In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $ 6.5 million at March 31, 2021, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets.

As of March 31, 2021, Plan Costs were less than the net premiums paid and owed to United by $ 51.4 million.

As this amount is in excess of the agreed-upon $ 9.0 million surplus maintenance level, the $ 42.4 million difference is included in prepaid insurance, a current asset, in our Condensed Consolidated Balance Sheets.

The premiums, including the additional quarterly premiums, owed to United at September 30, 2020 were $ 38.3 million, which is included in accrued health insurance costs, a current liability in our Condensed Consolidated Balance Sheets.

Our benefits costs incurred in the first nine months of 2020 included a reduction of $ 1.9 million for changes in estimated run-off related to prior periods.

Our benefits costs incurred in the first nine months of 2019 included a charge of $ 2.9 million for changes in estimated run-off related to prior periods.

The premiums, including the additional quarterly premiums, owed to United at March 31, 2021 were $ 66.0 million, which is included in accrued health insurance costs, a current liability in our Condensed Consolidated Balance Sheets.

Our benefits costs incurred in the first three months of 2021 included an increase of $ 5.5 million for changes in estimated run-off related to prior periods.

Our benefits costs incurred in the first three months of 2020 included a reduction of $ 1.5 million for changes in estimated run-off related to prior periods.

Workers’ Compensation Costs

9 unchanged sentences

Each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into our workers’ compensation claims cost estimates.

During the nine months ended September 30, 2020 and 2019, we reduced accrued workers’ compensation costs by $ 32.4 million and $ 26.0 million, respectively, for changes in estimated losses related to prior reporting periods.

During the three months ended March 31, 2021 and 2020, we reduced accrued workers’ compensation costs by $ 13.2 million and $ 10.1 million, respectively, for changes in estimated losses related to prior reporting periods.

Workers’ compensation cost estimates are discounted to present value at a rate based upon the U.S.

Treasury rates that correspond with the weighted average estimated claim payout period (the average discount rate utilized in the 2021 period was 0.5 % and in the 2020 period was 1.0 %) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

Insperity | 2020 Third Quarter Form 10-Q 11

Insperity | 2021 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides the activity and balances related to incurred but not paid workers’ compensation claims:

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2021 2020

7 unchanged sentences

Total accrued claims $ 236,689 $ 245,922

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at September 30, 2020 includes $ 2.7 million of workers’ compensation administrative fees.

As of September 30, 2020 and 2019, the undiscounted accrued workers’ compensation costs were $ 259.4 million and $ 255.3 million, respectively.

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at March 31, 2021 includes $ 3.3 million of workers’ compensation administrative fees.

As of March 31, 2021 and 2020, the undiscounted accrued workers’ compensation costs were $ 253.2 million and $ 265.6 million, respectively.

At the beginning of each policy period, the workers’ compensation insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim funds”).

1 unchanged sentence

Monies funded into the program for incurred claims expected to be paid within one year are recorded as restricted cash, a short-term asset, while the remainder of claim funds are included in deposits – workers’ compensation, a long-term asset in our Condensed Consolidated Balance Sheets.

During the first nine months of 2020 and 2019, we received $ 24.8 million and $ 16.7 million, respectively, for the return of excess claim funds related to the workers’ compensation program, which resulted in a decrease to deposits – workers’ compensation.

At September 30, 2020, we had restricted cash of $ 45.3 million and deposits – workers’ compensation of $ 181.6 million.

At March 31, 2021, we had restricted cash of $ 46.4 million and deposits – workers’ compensation of $ 193.1 million.

Our estimate of incurred claim costs expected to be paid within one year is included in short-term liabilities, while our estimate of incurred claim costs expected to be paid beyond one year is included in long-term liabilities on our Condensed Consolidated Balance Sheets.

8 unchanged sentences

Customers are invoiced concurrently with each periodic payroll of its WSEEs.

Revenues that have been recognized but unbilled of $ 520.9 million and $ 448.1 million at September 30, 2020 and December 31, 2019, respectively, are included in accounts receivable, net on our Condensed Consolidated Balance Sheets.

Revenues that have been recognized but unbilled of $ 549.0 million and $ 380.8 million at March 31, 2021 and December 31, 2020, respectively, are included in accounts receivable, net on our Condensed Consolidated Balance Sheets.

Pursuant to the “practical expedients” provided under Accounting Standards Update (“ASU”) No 2014-09, we expense sales commissions when incurred because the terms of our contracts generally are cancellable by either party with a 30-day notice.

These costs are recorded in commissions in our Consolidated Statements of Operations.

Insperity | 2020 Third Quarter Form 10-Q 12

Insperity | 2021 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our revenue for our PEO HR Outsourcing solutions by geographic region and for our other products and services offerings are as follows:

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2020 2019 % Change 2020 2019 % Change

Three Months Ended March 31,

(in thousands) 2021 2020 % Change

Northeast $ 373,629 $ 344,086 8.6 %

6 unchanged sentences

Total revenue $ 1,286,835 $ 1,229,483 4.7 %

Recently Adopted Accounting Standards

We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) effective January 1, 2020 with no material impact.

Under this standard, we estimate our reserves using information about past events, current conditions and risk characteristics of our customer when assessing risk associated with the collectability of accounts receivables, including unbilled accounts receivables.

We require clients to pay invoices for service fees not later than the same day as the applicable payroll date.

As such, we generally do not require collateral.

As of September 30, 2020, allowance for bad debts was immaterial.

Cash, Cash Equivalents and Marketable Securities

The following table summarizes our cash and investments in cash equivalents and marketable securities held by investment managers and overnight investments:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

(in thousands) Cash & Cash Equivalents Marketable Securities Total Cash & Cash Equivalents Marketable Securities Total

5 unchanged sentences

Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles.

Our cash, cash equivalents and marketable securities at September 30, 2020 and December 31, 2019 included $ 147.1 million and $ 234.6 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $ 46.5 million and $ 59.6 million, respectively, in client prepayments.

Our cash, cash equivalents and marketable securities at March 31, 2021 and December 31, 2020 included $ 273.5 million and $ 342.0 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $ 58.9 million and $ 35.3 million, respectively, in client prepayments.

Fair Value Measurements

3 unchanged sentences

• Level 1 - quoted prices in active markets using identical assets

Insperity | 2020 Third Quarter Form 10-Q 13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Level 2 - significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs

• Level 3 - significant unobservable inputs

Insperity | 2021 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Instruments Measured and Recognized at Fair Value

The following table summarizes the levels of fair value measurements of our financial assets:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

(in thousands) Total Level 1 Level 2 Total Level 1 Level 2

8 unchanged sentences

(in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

September 30, 2020

March 31, 2021

Treasury bills $ 13,267 $ 2 $ — $ 13,269

3 unchanged sentences

Treasury bills $ 10,530 $ 1 $ — $ 10,531

Municipal bonds 23,994 8 ( 4 ) 23,998

Total $ 34,524 $ 9 $ ( 4 ) $ 34,529

As of September 30, 2020, the contractual maturities of our marketable securities were as follows:

As of March 31, 2021, the contractual maturities of our marketable securities were as follows:

(in thousands) Amortized Cost Estimated Fair Value

4 unchanged sentences

The carrying amounts of cash, cash equivalents, restricted cash, accounts receivable, deposits and accounts payable approximate their fair values due to the short-term maturities of these instruments.

As of September 30, 2020, the carrying value of borrowings under our revolving credit facility approximates fair value and was classified as Level 2 in the fair value hierarchy.

As of March 31, 2021, the carrying value of borrowings under our revolving credit facility approximates fair value and was classified as Level 2 in the fair value hierarchy.

Please read Note 5, “Long-Term Debt,” for additional information.

Insperity | 2020 Third Quarter Form 10-Q 14

Insperity | 2021 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4 unchanged sentences

Our obligations under the Facility are secured by 65 % of the stock of our captive insurance subsidiary and are guaranteed by all of our domestic subsidiaries.

At September 30, 2020, our outstanding balance on the Facility was $ 369.4 million, and we had an outstanding $ 1.0 million letter of credit issued under the Facility, resulting in an available borrowing capacity of $ 129.6 million.

At March 31, 2021, our outstanding balance on the Facility was $ 369.4 million, and we had an outstanding $ 1.0 million letter of credit issued under the Facility, resulting in an available borrowing capacity of $ 129.6 million.

The Facility matures on September 13, 2024.

3 unchanged sentences

We also pay an unused commitment fee on the average daily unused portion of the Facility at a rate of 0.25 % per year.

The average interest rate for the nine month period ended September 30, 2020 was 2.52 %.

The average interest rate for the three month period ended March 31, 2021 was 1.88 %.

Interest expense and unused commitment fees are recorded in other income (expense).

3 unchanged sentences

In addition, the Credit Agreement requires us to comply with financial covenants limiting our total funded debt, minimum interest coverage ratio and maximum leverage ratio.

We were in compliance with all financial covenants under the Credit Agreement at September 30, 2020.

We were in compliance with all financial covenants under the Credit Agreement at March 31, 2021.

Stockholders' Equity

During the first nine months of 2020, we repurchased or withheld an aggregate of 1,336,884 shares of our common stock, as described below.

During the first three months of 2021, we repurchased or withheld an aggregate of 340,317 shares of our common stock, as described below.

Repurchase Program

Our Board of Directors (the “Board”) has authorized a program to repurchase shares of our outstanding common stock (“Repurchase Program”).

The purchases are to be made from time to time in the open market or directly from stockholders at prevailing market prices based on market conditions and other factors.

During the nine months ended September 30, 2020, 1,186,000 shares were repurchased under the Repurchase Program.

As of September 30, 2020, we were authorized to repurchase an additional 227,833 shares under the Repurchase Program.

The purchases may be made from time to time in the open market or directly from stockholders at prevailing market prices based on market conditions and other factors.

During the three months ended March 31, 2021, 49,904 shares were repurchased under the Repurchase Program.

As of March 31, 2021, we were authorized to repurchase an additional 1,078,233 shares under the Repurchase Program.

Withheld Shares

During the nine months ended September 30, 2020, we withheld 150,884 shares to satisfy tax withholding obligations for the vesting of long-term incentive and restricted stock awards.

During the three months ended March 31, 2021, we withheld 290,413 shares to satisfy tax withholding obligations for the vesting of long-term incentive and restricted stock awards.

The Board declared quarterly dividends as follows:

1 unchanged sentence

First quarter $ 0.40 $ 0.40

Second quarter 0.40 0.30

Third quarter 0.40 0.30

Insperity | 2020 Third Quarter Form 10-Q 15

During the three months ended March 31, 2021 and 2020, we paid dividends totaling $ 15.5 million and $ 15.6 million, respectively.

Insperity | 2021 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the nine months ended September 30, 2020 and 2019, we paid dividends totaling $ 46.5 million and $ 36.8 million, respectively.

On May 21, 2020, the Board declared a dividend of one right (“Right”) for each outstanding share of common stock to common stockholders of record at the close of business on June 1, 2020 (the “Rights Plan”).

2 unchanged sentences

The Rights are not currently exercisable and the Rights Plan will expire at the close of business on May 20, 2021 , unless the Rights are earlier redeemed or exchanged by us.

Incentive Plans

The Insperity, Inc.

2001 Incentive Plan, as amended, and the 2012 Incentive Plan, as amended (collectively, the “Incentive Plans”) provide for options and other stock-based awards that have been and may be granted to our eligible employees and non-employee directors.

The 2012 Incentive Plan is currently the only plan under which new stock-based awards may be granted.

Beginning with stock-based awards granted in 2020, employees who attain a minimum of age 62 and have provided 15 years or more of continuous service may continue to vest in awards following a qualifying retirement as defined under the 2012 Incentive Plan, as though he or she were still an employee, provided the grant date of the award is six months or more before the employees last day of employment.

For a termination following a qualifying retirement, time-vested awards will continue to vest in the normal course.

For a termination following a qualifying retirement, performance-based awards with completed or in-process performance periods are adjusted for achievement of the performance criteria, prorated through the date of termination and paid in the normal course, while performance-based awards for performance periods that have not started are forfeited.

Stock-based compensation expense related to time-vested and performance-based awards is accelerated for employees who meet the requirements for continued vesting.

Net Income Per Share

5 unchanged sentences

Diluted net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options.

Insperity | 2020 Third Quarter Form 10-Q 16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the net income allocated to common shares and the basic and diluted shares used in the net income per share computations:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2021 2020

6 unchanged sentences

Incremental shares from assumed time-vested and performance-based RSU awards and conversions of common stock options

234 149 193 143

Adjusted weighted average common shares outstanding 38,839 39,068

Insperity | 2021 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

1 unchanged sentence

In December 2015, a class action lawsuit was filed against us and a third-party who served as the discretionary trustee (the “Co-Defendant”) of the Insperity 401(k) retirement plan that is available to eligible worksite employees (the “Plan”) in the United States District Court for the Northern District of Georgia, Atlanta Division, on behalf of Plan participants.

The suit generally alleges the third-party discretionary trustee of the Plan and Insperity breached their fiduciary duties to plan participants by selecting an Insperity subsidiary to serve as the recordkeeper for the Plan, by causing participants in the Plan to pay excessive recordkeeping fees to the Insperity subsidiary, by failing to monitor other fiduciaries, and by making imprudent investment choices.

The suit generally alleged the third-party discretionary trustee of the Plan and Insperity breached their fiduciary duties to plan participants by selecting an Insperity subsidiary to serve as the recordkeeper for the Plan, by causing participants in the Plan to pay excessive recordkeeping fees to the Insperity subsidiary, by failing to monitor other fiduciaries, and by making imprudent investment choices.

The court certified a class defined as “all participants and beneficiaries of the Insperity 401(k) Plan from December 22, 2009 through September 30, 2017.” The court dismissed the breach of fiduciary duty claims relating to the selection of an Insperity subsidiary to serve as the recordkeeper of the Plan.

On March 28, 2019, the court partially granted Insperity’s motion for summary judgment, resulting in the dismissal of the claims concerning allegations of excessive recordkeeping fees.

The court denied the plaintiffs’ request for a jury trial and set a bench trial, which was held from March 2, 2020 to March 13, 2020.

At trial, the plaintiffs alleged damages up to approximately $ 146 million against all defendants.

The court denied plaintiffs’ request for a jury trial and set a bench trial, which was held from March 2, 2020 to March 13, 2020.

At trial, plaintiffs alleged damages up to approximately $ 146 million against all defendants.

All parties filed proposed findings of fact and conclusions of law on June 15, 2020.

2 unchanged sentences

In connection with the settlement, the Plaintiffs and Co-Defendant filed a motion to extend the class period to March 31, 2019, which the court granted.

The court has also granted preliminary approval of the settlement and has set the final approval hearing on March 5, 2021.

As a result of the uncertainty regarding the outcome of this matter and the subsequent settlement agreement that, if approved by the court, will end the case with no financial contribution from Insperity, no provision has been made in the accompanying Consolidated Financial Statements.

The court granted final approval of the settlement on March 9, 2021.

Securities Class Action Lawsuit

1 unchanged sentence

The name of the case is Building Trades Pension Fund of Western Pennsylvania v.

Insperity, Inc., et al., Case No.

Insperity, Inc.

1:20-cv-05635-NRB.

On October 23, 2020, the court issued an order appointing Oakland County Employees’ Retirement System and Oakland County Voluntary Employees’ Beneficiary Association Trust as lead plaintiff.

The complaint alleges that we made materially false and misleading statements regarding our business and operations in violation of the federal securities laws and seeks unspecified damages, the payment of reasonable attorneys’ fees, expert fees and other costs, and such other relief that may be deemed proper.

On October 23, 2020, the court issued an order appointing Oakland County Employees’ Retirement System and Oakland County Voluntary Employees’ Beneficiary Association Trust as lead plaintiff (“Lead Plaintiff”).

On December 22, 2020, the lead plaintiff filed its consolidated complaint alleging that we made materially false and misleading statements regarding our business and operations in violation of the federal securities laws and seeking unspecified damages, attorneys’ fees, costs, equitable/injunctive relief, and such other relief that may be deemed proper.

On April 26, 2021, the defendants moved to dismiss the consolidated complaint with prejudice.

Plaintiff’s opposition is due June 10, 2021.

We believe the allegations in the action are without merit, and we intend to vigorously defend this litigation.

As a result of uncertainty regarding the outcome of this matter, no provision has been made in the accompanying Consolidated Financial Statements.

Insperity | 2020 Third Quarter Form 10-Q 17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Litigation

2 unchanged sentences

While the results of litigation cannot be predicted with certainty, management believes the final outcome of such litigation will not have a material adverse effect on our financial position or results of operations.

Insperity | 2020 Third Quarter Form 10-Q 18

Insperity | 2021 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements