What changed in this filing

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Item 1. Financial Statements

2023-04-26 compared with 2022-10-31 · 81 added, 119 removed, 291 unchanged (41% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(in thousands) March 31, 2023 December 31, 2022

Cash and cash equivalents $ 696,588 $ 732,828

4 unchanged sentences

Other current assets 79,860 61,728

Income taxes receivable — 12,413

Total current assets 1,518,074 1,511,873

11 unchanged sentences

Payroll taxes and other payroll deductions payable 495,585 556,085

Accrued worksite employee payroll cost 494,986 409,653

Accrued worksite employee payroll costs 525,312 513,397

Accrued health insurance costs 78,722 53,402

1 unchanged sentence

Accrued corporate payroll and commissions 48,365 89,147

Other accrued liabilities 65,053 69,303

Income taxes payable 13,813 6,949

Other accrued liabilities 79,793 73,173

Total current liabilities 1,302,959 1,353,370

2 unchanged sentences

Operating lease liabilities, net of current 51,622 55,587

Deferred income taxes, net 1,196 —

Total noncurrent liabilities 603,582 604,616

4 unchanged sentences

Retained earnings 726,094 655,108

Total stockholders’ equity (deficit) 60,503 ( 1,774 )

Total stockholders’ equity 133,432 81,275

Total liabilities and stockholders’ equity $ 2,039,973 $ 2,039,261

See accompanying notes.

Insperity | 2022 Third Quarter Form 10-Q

Insperity | 2023 First Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS

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

Three Months Ended

(in thousands, except per share amounts) 2023 2022

17 unchanged sentences

Net income $ 94,595 $ 69,884

Less distributed and undistributed earnings allocated to participating securities

— ( 39 ) ( 27 ) ( 219 )

Net income allocated to common shares $ 37,669 $ 27,257 $ 141,125 $ 114,153

Net income per share of common stock

3 unchanged sentences

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

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

Three Months Ended

(in thousands) 2023 2022

3 unchanged sentences

See accompanying notes.

Insperity | 2022 Third Quarter Form 10-Q

Insperity | 2023 First Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2023 2022

31 unchanged sentences

Net cash used in financing activities ( 46,847 ) ( 43,886 )

Net decrease in cash, cash equivalents, restricted cash and funds held for clients ( 21,237 ) ( 62,729 )

Net increase (decrease) in cash, cash equivalents, restricted cash and funds held for clients ( 16,440 ) 9,071

Cash, cash equivalents, restricted cash and funds held for clients beginning of period 1,013,919 807,768

3 unchanged sentences

See accompanying notes.

Insperity | 2022 Third Quarter Form 10-Q

Insperity | 2023 First Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2022 and 2021

For the Three Months Ended March 31, 2023 and 2022

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

6 unchanged sentences

Dividends paid — — — — ( 19,896 ) ( 19,896 )

Unrealized loss on marketable securities, net of tax — — — — ( 85 ) ( 85 )

Unrealized gain on marketable securities, net of tax — — — — 59 59

Net income — — — — 94,595 94,595

Balance at September 30, 2022 55,489 $ 555 $ 139,370 $ ( 716,046 ) $ 636,624 $ 60,503

Balance at March 31, 2023 55,489 $ 555 $ 142,002 $ ( 735,219 ) $ 726,094 $ 133,432

Balance at December 31, 2021 55,489 $ 555 $ 109,179 $ ( 665,089 ) $ 553,581 $ ( 1,774 )

2 unchanged sentences

Stock-based compensation expense — — 9,575 271 — 9,846

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

Other — — 513 269 — 782

2 unchanged sentences

Net income — — — — 69,884 69,884

Balance at September 30, 2021 55,489 $ 555 $ 104,587 $ ( 645,993 ) $ 637,857 $ 97,006

Insperity | 2022 Third Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

For the Three Months Ended September 30, 2022 and 2021

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

(in thousands) Shares Amount

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

Purchase of treasury stock, at cost — — — ( 6,615 ) — ( 6,615 )

Issuance of equity based incentive awards and dividend equivalents — — ( 37 ) 44 ( 7 ) —

Stock-based compensation expense — — 13,339 2 — 13,341

Other — — 446 333 — 779

Dividends paid — — — — ( 19,769 ) ( 19,769 )

Unrealized loss on marketable securities, net of tax — — — — ( 34 ) ( 34 )

Net income — — — — 37,669 37,669

Balance at September 30, 2022 55,489 $ 555 $ 139,370 $ ( 716,046 ) $ 636,624 $ 60,503

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

Purchase of treasury stock, at cost — — — ( 11,234 ) — ( 11,234 )

Issuance of long-term incentive awards and dividend equivalents

— — ( 27 ) 28 ( 1 ) —

Stock-based compensation expense — — 9,827 535 — 10,362

Other — — 391 305 — 696

Dividends paid — — — — ( 17,369 ) ( 17,369 )

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

Net income — — — — 27,296 27,296

Balance at September 30, 2021 55,489 $ 555 $ 104,587 $ ( 645,993 ) $ 637,857 $ 97,006

See accompanying notes.

Insperity | 2022 Third Quarter Form 10-Q

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

Insperity | 2023 First 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 (our “Traditional Payroll Solution”).

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

We also offer a number of other business performance solutions, including 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, 2022 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, 2022 and our Consolidated Statements of Operations for the three and nine month periods ended September 30, 2022 and 2021, our Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2022 and 2021 and our Consolidated Statements of Stockholders’ Equity for the three and nine month periods ended September 30, 2022 and 2021, have been prepared by us without audit.

Our Condensed Consolidated Balance Sheet at March 31, 2023 and our Consolidated Statements of Operations for the three month periods ended March 31, 2023 and 2022, our Consolidated Statements of Cash Flows for the three month periods ended March 31, 2023 and 2022 and our Consolidated Statements of Stockholders’ Equity for the three month periods ended March 31, 2023 and 2022, 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.

2 unchanged sentences

Health Insurance Costs

We provide group health insurance coverage under a single-employer plan that covers both our WSEEs and our corporate employees and utilizes a national network of carriers, including UnitedHealthcare (“United”), UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii, and Tufts, all of which provide fully insured policies or service contracts.

The policy with United provides approximately 87 % of our participants’ health insurance coverage.

We provide group health insurance coverage under a single-employer plan that covers both our WSEEs in our PEO HR Outsourcing Solutions and our corporate employees and utilizes a national network of carriers, including UnitedHealthcare (“United”), UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii, and Tufts, all of which provide fully insured policies or service contracts.

Approximately 87 % of our costs related to health insurance coverage are provided under our policy with United.

While the policy with United is a fully insured plan, as a result of certain contractual terms, we have accounted for this plan since its inception using a partially self-funded insurance accounting model.

Effective January 1, 2020, under the amended agreement with United, we no longer have financial responsibilities for a participant’s annual claim costs that exceed $1 million.

Accordingly, we record the costs of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the “Plan Costs”), as benefits expense, which is a component of direct costs, in our Consolidated Statements of Operations.

The estimated incurred claims are based upon:

Accordingly, we record the cost of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the “Plan Costs”) as benefits expense, which is a component of direct costs, in our Consolidated Statements of Operations.

The estimated incurred but not reported claims are based upon:

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

(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

Insperity | 2022 Third Quarter Form 10-Q

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

Insperity | 2023 First 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.

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.

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.

1 unchanged sentence

On the other hand, if the Plan Costs for the reporting quarter are less than the premiums paid and owed to United, a surplus in the plan would be incurred and we would record an asset for the excess premiums in our Condensed Consolidated Balance Sheets.

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

As of September 30, 2022, Plan Costs were less than the net premiums paid and owed to United by $ 25.2 million.

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 health insurance.

In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $ 6.5 million at March 31, 2023 , and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets.

As of March 31, 2023 , Plan Costs were less than the net premiums paid and owed to United by $ 41.5 million.

As this amount is in excess of the agreed-upon $ 9.0 million surplus maintenance level, the $ 32.5 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, 2022 were $ 57.6 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 2022 included an increase of $ 12.8 million for changes in estimated run-off related to prior periods.

Our benefits costs incurred in the first nine months of 2021 included an increase of $ 4.5 million for changes in estimated run-off related to prior periods.

The premiums, including the additional quarterly premiums, owed to United at March 31, 2023 were $ 71.1 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 2023 included a decrease of $ 9.0 million for changes in estimated run-off related to prior periods.

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.

Workers’ Compensation Costs

Our workers’ compensation coverage for our WSEEs in our PEO HR Outsourcing Solutions is provided through an arrangement with the Chubb Group of Insurance Companies or its predecessors (the “Chubb Program”).

Our workers’ compensation coverage for our WSEEs in our PEO HR Outsourcing Solutions has been provided through an arrangement with the Chubb Group of Insurance Companies or its predecessors (the “Chubb Program”) since 2007.

The Chubb Program is fully insured in that Chubb has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities.

7 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, 2022 and 2021, we reduced accrued workers’ compensation costs by $ 35.3 million and $ 31.4 million, respectively, for changes in estimated losses related to prior reporting periods.

During the three months ended March 31, 2023 and 2022, we reduced accrued workers’ compensation costs by $ 7.6 million and $ 14.9 million, respectively, for changes in estimated losses related to prior 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 2023 period was 4.0 % and in the 2022 period was 1.5 %) 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 Third Quarter Form 10-Q

Insperity | 2023 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) 2023 2022

7 unchanged sentences

Total accrued claims $ 229,476 $ 232,317

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at September 30, 2022 includes $ 5.2 million of workers’ compensation administrative fees.

As of September 30, 2022 and 2021, the undiscounted accrued workers’ compensation costs were $ 245.5 million and $ 254.5 million, respectively.

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at March 31, 2023 includes $ 3.8 million of workers’ compensation administrative fees.

The undiscounted accrued workers’ compensation costs were $ 252.6 million as of March 31, 2023 and $ 248.0 million as of March 31, 2022.

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 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 September 30, 2022, we had restricted cash of $ 51.8 million and deposits – workers’ compensation of $ 179.0 million.

At March 31, 2023 , we had restricted cash of $ 48.1 million and deposits – workers’ compensation of $ 211.2 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.

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The term between invoicing and when our performance obligations are satisfied is not significant.

Payment terms are typically due concurrently with the invoicing of our PEO services.

Our payment terms typically require payment concurrently with the invoicing of our PEO services.

We do not have significant financing components or significant payment terms.

Our revenue is generally recognized ratably over the payroll period as WSEEs perform their service at the client worksite.

Our revenue is generally recognized ratably over the payroll period as WSEEs perform their service at the client worksite in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers .

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

Revenues that have been recognized but unbilled of $ 547.6 million and $ 490.5 million at September 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 Codification 606, Revenues from Contracts with Customers , we expense sales commissions when incurred because the terms of our contracts generally are cancellable by either party with a 30-day notice.

Revenues that have been recognized but not invoiced represent unbilled accounts receivable of $ 582.8 million and $ 600.4 million at March 31, 2023 and December 31, 2022, and are included in accounts receivable, net on our Condensed Consolidated Balance Sheets.

Pursuant to the “practical expedients” provided under ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers , we expense sales commissions when incurred because the terms of our contracts are cancellable by either party with a 30-day notice.

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

Insperity | 2022 Third Quarter Form 10-Q

Insperity | 2023 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) 2022 2021 % Change 2022 2021 % Change

Three Months Ended March 31,

(in thousands) 2023 2022 % Change

Northeast $ 492,290 $ 449,925 9.4 %

9 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

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

1 unchanged sentence

Investment holdings 55,546 35,535 91,081 56,963 33,068 90,031

Total financial assets 691,477 35,535 727,012 735,475 33,068 768,543

Cash in demand accounts 21,072 — 21,072 41,047 — 41,047

2 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, 2022 and December 31, 2021 included $ 321.9 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 $ 35.8 million and $ 20.1 million, respectively, in client prepayments.

Insperity | 2022 Third Quarter Form 10-Q

Our cash, cash equivalents and marketable securities at March 31, 2023 and December 31, 2022 included $ 457.8 million and $ 504.8 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes, and other payroll deductions, as well as $ 42.9 million and $ 36.8 million, respectively, in client prepayments.

Insperity | 2023 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash, Cash Equivalents, Restricted Cash and Funds Held for Clients

The following table summarized our cash, cash equivalents, restricted cash and funds held for clients as reported in our Consolidated Statements of Cash Flows:

Nine Months Ended September 30,

The following table summarizes our cash, cash equivalents, restricted cash and funds held for clients as reported in our Consolidated Statements of Cash Flows:

Three Months Ended March 31,

(in thousands) 2023 2022

11 unchanged sentences

____________________________________

(1) Funds held for clients represent amounts held on behalf of our Traditional Payroll solution customers that are restricted for the purpose of satisfying obligations to remit funds to client’s employees and various tax authorities.

(1) Funds held for clients represent amounts held on behalf of our Traditional Payroll Solution customers that are restricted for the purpose of satisfying obligations to remit funds to clients’ employees and various tax authorities.

(2) Beginning in the third quarter of 2022, we adjusted the presentation of our Consolidated Statements of Cash Flows to include changes in funds held for clients as a financing activity and to include funds held for clients in both the beginning and ending period amounts in our totals of cash, cash equivalents, restricted cash and funds held for clients.

11 unchanged sentences

• Level 3 - significant unobservable inputs

Insperity | 2022 Third Quarter Form 10-Q

Insperity | 2023 First 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:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

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

2 unchanged sentences

Municipal bonds — — — 3,365 — 3,365

Total $ 581,210 $ 570,646 $ 10,564 $ 610,896 $ 584,887 $ 26,009

Total financial assets $ 727,012 $ 727,012 $ — $ 768,543 $ 765,178 $ 3,365

The municipal bond securities valued as Level 2 are primarily pre-refunded municipal bonds that are secured by escrow funds containing U.S.

3 unchanged sentences

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

September 30, 2022

March 31, 2023

Treasury bills $ 35,558 $ 19 $ ( 42 ) $ 35,535

Municipal bonds 10,596 — ( 32 ) 10,564

December 31, 2022

1 unchanged sentence

Municipal bonds 3,369 — ( 4 ) 3,365

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

As of March 31, 2023 , 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 September 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.

As of March 31, 2023 , 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.

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 other than certain excluded subsidiaries.

At September 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 Third Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At March 31, 2023 , 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.

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 %.

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

Insperity | 2023 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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 nine month period ended September 30, 2022 was 2.8 %.

The average interest rate for the three month period ended March 31, 2023 was 6.35 %.

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

2 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, 2022.

We were in compliance with all financial covenants under the Credit Agreement at March 31, 2023 .

Stockholders' Equity

During the first nine months of 2022, we repurchased or withheld an aggregate of 679,129 shares of our common stock, as described below.

During the first three months of 2023 , we repurchased or withheld an aggregate of 288,502 shares of our common stock, as described below.

Repurchase Program

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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 nine months ended September 30, 2022, 580,183 shares were repurchased under the Repurchase Program.

As of September 30, 2022, we were authorized to repurchase an additional 1,123,445 shares under the Repurchase Program.

During the three months ended March 31, 2023 , 93,387 shares were repurchased under the Repurchase Program.

As of March 31, 2023 , we were authorized to repurchase an additional 938,773 shares under the Repurchase Program.

Withheld Shares

During the nine months ended September 30, 2022, we withheld 98,946 shares to satisfy tax withholding obligations for the vesting of long-term incentive and restricted stock awards.

During the three months ended March 31, 2023 , we withheld 195,115 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 $ 0.52 $ 0.45

Second quarter 0.52 0.45

Third quarter 0.52 0.45

During the nine months ended September 30, 2022 and 2021, we paid dividends totaling $ 56.9 million and $ 50.2 million, respectively.

Insperity | 2022 Third Quarter Form 10-Q

During the three months ended March 31, 2023 and 2022, we paid dividends totaling $ 19.9 million and $ 17.2 million, respectively.

Earnings Per Share

Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding during the period.

Diluted EPS is computed by dividing net income by the weighted average number of common shares outstanding during the period, plus the dilutive effect of time-vested and performance-based restricted stock units (“RSUs”).

Insperity | 2023 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net Income Per Share

We utilize the two-class method to compute net income per share.

The two-class method allocates a portion of net income to participating securities, which includes unvested awards of share-based payments with non-forfeitable rights to receive dividends.

Net income allocated to unvested share-based payments is excluded from net income allocated to common shares.

Any undistributed losses resulting from dividends exceeding net income are not allocated to participating securities.

Basic 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.

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 time-vested and performance-based restricted stock units (“RSUs”).

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,

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

Three Months Ended

(in thousands) 2023 2022

1 unchanged sentence

Less distributed and undistributed earnings allocated to participating securities

— ( 39 ) ( 27 ) ( 219 )

Net income allocated to common shares

8 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 | 2022 Third Quarter Form 10-Q

Insperity | 2023 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