What changed in this filing

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Item 1. Financial Statements

2022-08-02 compared with 2022-04-26 · 87 added, 73 removed, 308 unchanged (34% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands) March 31, 2022 December 31, 2021

(in thousands) June 30, 2022 December 31, 2021

Cash and cash equivalents $ 510,869 $ 575,812

23 unchanged sentences

Other accrued liabilities 83,599 69,303

Income taxes payable 3,784 —

Total current liabilities 1,246,600 1,128,573

12 unchanged sentences

See accompanying notes.

Insperity | 2022 First Quarter Form 10-Q

Insperity | 2022 Second Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands, except per share amounts) 2022 2021 2022 2021

25 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

3 unchanged sentences

See accompanying notes.

Insperity | 2022 First Quarter Form 10-Q

Insperity | 2022 Second Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2022 2021

12 unchanged sentences

Payroll taxes and other payroll deductions payable ( 164,247 ) ( 114,985 )

Accrued worksite employee payroll expense 235,970 168,498

Accrued worksite employee payroll costs 253,109 195,045

Accrued health insurance costs 12,642 ( 3,621 )

16 unchanged sentences

Net cash used in financing activities ( 91,632 ) ( 67,337 )

Net increase (decrease) in cash, cash equivalents and restricted cash 9,071 ( 52,502 )

Net decrease in cash, cash equivalents and restricted cash ( 77,493 ) ( 81,572 )

Cash, cash equivalents and restricted cash beginning of period 807,768 786,699

Cash, cash equivalents and restricted cash end of period $ 730,275 $ 705,127

Insperity | 2022 First Quarter Form 10-Q

Insperity | 2022 Second Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2022 2021

11 unchanged sentences

See accompanying notes.

Insperity | 2022 First Quarter Form 10-Q

Insperity | 2022 Second Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended March 31, 2022 and 2021

For the Six Months Ended June 30, 2022 and 2021

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

8 unchanged sentences

Net income — — — — 103,483 103,483

Balance at March 31, 2022 55,489 $ 555 $ 110,053 $ (681,625) $ 604,978 $ 33,961

Balance at June 30, 2022 55,489 $ 555 $ 125,622 $ ( 709,810 ) $ 618,765 $ 35,132

Balance at December 31, 2020 55,489 $ 555 $ 95,528 $ ( 626,984 ) $ 575,033 $ 44,132

7 unchanged sentences

Net income — — — — 87,076 87,076

Balance at June 30, 2021 55,489 $ 555 $ 94,396 $ ( 635,627 ) $ 627,938 $ 87,262

Insperity | 2022 Second Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

For the Three Months Ended June 30, 2022 and 2021

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

(in thousands) Shares Amount

Balance at March 31, 2022 55,489 $ 555 $ 110,053 $ ( 681,625 ) $ 604,978 $ 33,961

Insperity | 2022 First Quarter Form 10-Q

Purchase of treasury stock, at cost — — — ( 29,364 ) — ( 29,364 )

Issuance of equity based incentive awards and dividend equivalents — — ( 34 ) 34 — —

Stock-based compensation expense — — 14,952 679 — 15,631

Other — — 651 466 — 1,117

Dividends paid — — — — ( 19,853 ) ( 19,853 )

Unrealized gain on marketable securities, net of tax — — — — 41 41

Net income — — — — 33,599 33,599

Balance at June 30, 2022 55,489 $ 555 $ 125,622 $ ( 709,810 ) $ 618,765 $ 35,132

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

Purchase of treasury stock, at cost — — — ( 8,850 ) — ( 8,850 )

Stock-based compensation expense — — 12,588 1,193 — 13,781

Other — — 479 421 — 900

Dividends paid — — — — ( 17,367 ) ( 17,367 )

Net income — — — — 25,154 25,154

Balance at June 30, 2021 55,489 $ 555 $ 94,396 $ ( 635,627 ) $ 627,938 $ 87,262

See accompanying notes.

Insperity | 2022 Second Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4 unchanged sentences

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

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

We also offer a number of other business performance solutions, including Organizational Planning, Recruiting Services, Employment Screening, Retirement Services, and Insurance Services.

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

6 unchanged sentences

Our Condensed Consolidated Balance Sheet at December 31, 2021 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 March 31, 2022 and our Consolidated Statements of Operations for the three month periods ended March 31, 2022 and 2021, our Consolidated Statements of Cash Flows for the three month periods ended March 31, 2022 and 2021 and our Consolidated Statements of Stockholders’ Equity for the three month periods ended March 31, 2022 and 2021, have been prepared by us without audit.

Our Condensed Consolidated Balance Sheet at June 30, 2022 and our Consolidated Statements of Operations for the three and six month periods ended June 30, 2022 and 2021, our Consolidated Statements of Cash Flows for the six month periods ended June 30, 2022 and 2021 and our Consolidated Statements of Stockholders’ Equity for the three and six month periods ended June 30, 2022 and 2021, have been prepared by us without audit.

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

10 unchanged sentences

(1) the level of claims processed during the quarter;

(2) estimated completion rates based upon recent claim development patterns under

Insperity | 2022 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) estimated completion rates based upon recent claim development patterns under the plan;

and (3) the number of participants in the plan, including both active and COBRA enrollees.

Each reporting period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant demographics, and other factors are incorporated into the benefits costs, which requires a significant level of judgment.

Each reporting

Insperity | 2022 Second Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant demographics, and other factors are incorporated into the benefits costs, which requires a significant level of judgment.

Additionally, since the plan’s inception, under the terms of the contract, United establishes cash funding rates 90 days in advance of the beginning of a reporting quarter.

2 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 March 31, 2022, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets.

As of March 31, 2022, Plan Costs were less than the net premiums paid and owed to United by $ 13.3 million.

In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $ 6.5 million at June 30, 2022, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets.

As of June 30, 2022, Plan Costs were less than the net premiums paid and owed to United by $ 41.8 million.

As this amount is in excess of the agreed-upon $ 9.0 million surplus maintenance level, the $ 32.8 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 March 31, 2022 were $ 55.0 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 2022 included an increase of $ 0.8 million for changes in estimated run-off related to prior periods.

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.

The premiums, including the additional quarterly premiums, owed to United at June 30, 2022 were $ 55.9 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 six months of 2022 included an increase of $ 10.2 million for changes in estimated run-off related to prior periods.

Our benefits costs incurred in the first six months of 2021 included an increase of $ 5.7 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 three months ended March 31, 2022 and 2021, we reduced accrued workers’ compensation costs by $ 14.9 million and $ 13.2 million, respectively, for changes in estimated losses related to prior reporting periods.

During the six months ended June 30, 2022 and 2021, we reduced accrued workers’ compensation costs by $ 26.8 million and $ 23.0 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 2022 period was 2.0 % and in the 2021 period was 0.5 %) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

Insperity | 2022 First Quarter Form 10-Q

Insperity | 2022 Second 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:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2022 2021

7 unchanged sentences

Total accrued claims $ 227,003 $ 238,823

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at March 31, 2022 includes $ 3.9 million of workers’ compensation administrative fees.

As of March 31, 2022 and 2021, the undiscounted accrued workers’ compensation costs were $ 248.0 million and $ 253.2 million, respectively.

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at June 30, 2022 includes $ 4.8 million of workers’ compensation administrative fees.

As of June 30, 2022 and 2021, the undiscounted accrued workers’ compensation costs were $ 243.9 million and $ 254.8 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.

At March 31, 2022, we had restricted cash of $ 49.4 million and deposits – workers’ compensation of $ 190.8 million.

During the first six months of 2022, we received $ 30.2 million for the return of excess claim funds related to the workers’ compensation program, which resulted in a decrease to deposits - workers’ compensation.

At June 30, 2022, we had restricted cash of $ 53.3 million and deposits – workers’ compensation of $ 166.1 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 $ 655.3 million and $ 490.5 million at March 31, 2022 and December 31, 2021, respectively, are included in accounts receivable, net on our Condensed Consolidated Balance Sheets.

Revenues that have been recognized but unbilled of $ 674.4 million and $ 490.5 million at June 30, 2022 and December 31, 2021, respectively, are included in accounts receivable, net on our Condensed Consolidated Balance Sheets.

Pursuant to the “practical expedients” provided under Accounting Standards Update 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 | 2022 First Quarter Form 10-Q

Insperity | 2022 Second 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 March 31,

(in thousands) 2022 2021 % Change

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 % Change 2022 2021 % Change

Northeast $ 388,680 $ 329,016 18.1 % $ 838,602 $ 702,645 19.3 %

8 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(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 March 31, 2022 and December 31, 2021 included $ 338.3 million and $ 424.8 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes, and other payroll deductions, as well as $ 117.8 million and $ 20.1 million, respectively, in client prepayments.

Our cash, cash equivalents and marketable securities at June 30, 2022 and December 31, 2021 included $ 258.2 million and $ 424.8 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes, and other payroll deductions, as well as $ 116.6 million and $ 20.1 million, respectively, in client prepayments.

Fair Value Measurements

5 unchanged sentences

• Level 3 - significant unobservable inputs

Insperity | 2022 First Quarter Form 10-Q

Insperity | 2022 Second Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(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

March 31, 2022

June 30, 2022

Treasury bills $ 8,056 $ — $ ( 24 ) $ 8,032

3 unchanged sentences

Municipal bonds 26,017 — ( 8 ) 26,009

As of March 31, 2022, the contractual maturities of the marketable securities in our portfolio were less than one year.

As of June 30, 2022, the contractual maturities of the marketable securities in our portfolio were less than one year.

Fair Value of Other Financial Instruments

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 March 31, 2022, 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 June 30, 2022, 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.

Long-Term Debt

We have a revolving credit facility (the “Facility”) with borrowing capacity of up to $ 500 million.

We have a revolving credit facility (the “Facility”), which we amended in June 2022 to, among other things, increase our borrowing capacity from $ 500 million to $ 650 million.

The Facility may be further increased to $ 700 million based on the terms and subject to the conditions set forth in the agreement relating to the Facility (as amended, the “Credit Agreement”).

1 unchanged sentence

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 other than certain excluded subsidiaries.

At March 31, 2022, 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.

Insperity | 2022 First Quarter Form 10-Q

At June 30, 2022, 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 $ 279.6 million.

Insperity | 2022 Second Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Facility matures on September 13, 2024.

Borrowings under the Facility bear interest at an annual rate equal to an alternate base rate or LIBOR, at our option, plus an applicable margin.

Depending on our leverage ratio, the applicable margin varies (1) in the case of LIBOR loans, from 1.50 % to 2.25 % and (2) in the case of alternate base rate loans, from 0.00 % to 0.50 %.

The alternate base rate is the highest of (1) the prime rate most recently published in The Wall Street Journal, (2) the federal funds rate plus 0.50 % and (3) the 30-day LIBOR rate plus 2.00 %.

The Facility matures on June 30, 2027.

Borrowings under the Facility bear interest at an annual rate equal to, at our option, an alternate base rate for alternate base rate loans or Adjusted Term SOFR for term SOFR loans, in either case plus an applicable margin.

Adjusted Term SOFR is a forward-looking term rate based on the secured overnight financing rate plus a spread adjustment, which ranges from 0.10 % to 0.25 % depending on the interest period and type of loan.

Depending on our leverage ratio, the applicable margin varies (1) in the case of term SOFR loans, from 1.50 % to 2.25 % and (2) in the case of alternate base rate loans, from 0.00 % to 0.50 %.

The alternate base rate is the highest of (1) the prime rate most recently published in The Wall Street Journal, (2) the federal funds rate plus 0.50 % and (3) the Adjusted Term SOFR rate plus 2.00 %.

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 three month period ended March 31, 2022 was 1.9 %.

The average interest rate for the six month period ended June 30, 2022 was 2.2 %.

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

Following early opt-in by us or our lenders or such other time as LIBOR rates have permanently or indefinitely ceased to be published by the regulatory supervisory authority of LIBOR, then LIBOR will be replaced by a rate per annum equal to the secured overnight financing rate published by the Federal Reserve Bank of New York or such other benchmark as determined in accordance with the Credit Agreement.

The Facility contains both affirmative and negative covenants that we believe are customary for arrangements of this nature.

1 unchanged sentence

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 March 31, 2022.

We were in compliance with all financial covenants under the Credit Agreement at June 30, 2022.

Stockholders' Equity

During the first three months of 2022, we repurchased or withheld an aggregate of 308,057 shares of our common stock, as described below.

During the first six months of 2022, we repurchased or withheld an aggregate of 615,694 shares of our common stock, as described below.

Repurchase Program

1 unchanged sentence

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, 2022, 209,841 shares were repurchased under the Repurchase Program.

As of March 31, 2022, we were authorized to repurchase an additional 1,493,787 shares under the Repurchase Program.

During the six months ended June 30, 2022, 517,083 shares were repurchased under the Repurchase Program.

As of June 30, 2022, we were authorized to repurchase an additional 1,186,545 shares under the Repurchase Program.

Withheld Shares

During the three months ended March 31, 2022, we withheld 98,216 shares to satisfy tax withholding obligations for the vesting of long-term incentive and restricted stock awards.

During the six months ended June 30, 2022, we withheld 98,611 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 $ 0.45 $ 0.40

During the three months ended March 31, 2022 and 2021, we paid dividends totaling $ 17.2 million and $ 15.5 million, respectively.

Insperity | 2022 First Quarter Form 10-Q

Second quarter 0.52 0.45

During the six months ended June 30, 2022 and 2021, we paid dividends totaling $ 37.1 million and $ 32.8 million, respectively.

Insperity | 2022 Second Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7 unchanged sentences

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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

9 unchanged sentences

Commitments and Contingencies

Securities Class Action Lawsuit

In July 2020, a federal securities class action was filed against us and certain of our officers in the United States District Court for the Southern District of New York.

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

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 (“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.

The Lead Plaintiff filed its opposition to the motion to dismiss on June 10, 2021, and the defendants filed their reply in support of the motion to dismiss on July 12, 2021.

On March 15, 2022, the court granted the defendants’ motion to dismiss with prejudice and the deadline to appeal has passed.

Other Litigation

We are a defendant in various other lawsuits and claims arising in the normal course of business.

We are a defendant in various lawsuits and claims arising in the normal course of business.

Management believes it has valid defenses in these cases and is defending them vigorously.

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 | 2022 First Quarter Form 10-Q

Insperity | 2022 Second 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