What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-09 compared with 2023-02-10 · 165 added, 213 removed, 335 unchanged (53% of the section changed)

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• Approximately 26.1% and 24.9% of our average paid WSEEs were in our middle market sector for the years ended December 31, 2023 and 2022, respectively, which is generally defined as companies with 150 to 5,000 WSEEs.

• Gross profit increased 23.3% to $1.0 billion, primarily due to the 17.7% growth in the average number of WSEEs paid per month and a 4.8% increase in gross profit per WSEE.

• Our average gross profit per WSEE per month increased from $273 in 2021 to $286 in 2022.

• Operating expenses increased 17.7% in 2022 to $761.0 million, and included increases in salary and wages, marketing, travel and event costs and the implementation of a CRM solution.

On a per WSEE per month basis, operating expenses remained flat at $215 in both 2021 and 2022.

• Net income and diluted earnings per share (“Diluted EPS”) increased 44.5% to $179.4 million and 45.9% to $4.64, respectively.

• Gross profit increased 2.5% to $1.0 billion.

The increase was primarily due to the 5.8% growth in the average number of WSEEs paid per month, which was partially offset by a 3.1% decrease in gross profit per WSEE.

Gross profit per WSEE paid per month reflected, in part, a 3.2% pricing increase offset by a 4.5% increase in direct costs per WSEE.

The increase in direct costs per WSEE was primarily attributable to a 6.6% increase in benefits costs per participant.

• Operating expenses increased 7.5% in 2023 to $818.3 million, and included increases in travel and event costs, salary and wages, and the implementation of a CRM solution.

On a per WSEE per month basis, operating expenses increased from $215 in 2022 to $219 in 2023.

• Net income and diluted earnings per share (“Diluted EPS”) decreased 4.4% and 3.7% to $171.4 million and $4.47, respectively.

• Adjusted EBITDA increased 0.4% to $353.6 million.

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• Adjusted net income increased 40.2% to $215.9 million.

• Adjusted EPS increased 41.5% to $5.59.

• Our adjusted EBITDA per WSEE per month increased 17.6% from $85 in 2021 to $100 in 2022.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• Adjusted net income decreased 2.0% to $211.7 million.

• Adjusted EPS decreased 1.3% to $5.52.

• Our adjusted EBITDA per WSEE per month decreased 6.0% from $100 in 2022 to $94 in 2023.

• We ended 2023 with working capital of $159.0 million.

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Please read “ Non-GAAP Financial Measures ” for a reconciliation of adjusted EBITDA, adjusted net income and adjusted EPS to their most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”).

COVID-19 Pandemic

The effects of the COVID-19 pandemic, including actions taken by businesses and governments, have resulted in significant changes in U.S.

economic activity and to the workplace in general.

While uncertainties continue regarding the pandemic, including its duration, future variants, and its longer-term impacts we believe we are well-positioned to continue to adjust our business plans and workforce practices as conditions change.

In response to the pandemic’s impact on the workplace, we implemented flexible remote working arrangements for our employees.

To serve our clients, we have instituted a number of service offerings and developed COVID-19 resources to assist clients with obtaining government provided tax credits, tax deferrals, loans, and loan forgiveness and to provide guidance to assist clients with addressing the challenges faced by employers as a result of the pandemic.

These service offerings and guidance to assist clients with the impact of the pandemic include additional benefits support, remote workforce transition, monitoring and educating on regulatory changes, including vaccine mandates, return to the workplace and workplace safety.

We experienced a 1.2% increase in the year-over-year benefits costs per covered employee during 2022 compared to 2021, as the level of COVID-19 related claims decreased substantially.

During 2023 and possibly beyond 2023, benefits costs trends may continue to be affected by the dynamics of the pandemic, including the impact on healthcare utilization and COVID-19 testing, vaccination and treatment costs.

These costs have resulted and may continue to result in a higher or more volatile level of healthcare claims costs than our historical claim cost trends.

We have experienced a reduced frequency in workers’ compensation claims since the beginning of the pandemic, driven by the trend toward hybrid and remote work.

While certain COVID-19 cases are covered under workers’ compensation, they have not had a material impact on our workers’ compensation costs.

The extent to which our future results are affected by the COVID-19 pandemic will depend on various factors and consequences beyond our control, such as the scope, duration and magnitude of the pandemic, impacts of changes in or variants of the COVID-19 virus, actions by businesses and governments in response to the pandemic, including programs designed to assist small and medium-sized businesses with the economic impact of the pandemic;

and the speed and effectiveness of responses to combat the virus, including the development, availability, and acceptance of therapeutics and vaccines.

See Part I, Item 1A.

“Risk Factors” for additional information.

We account for our revenues in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers .

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Our revenues are primarily dependent on the number of clients enrolled, the resulting number of WSEEs paid each period and the number of WSEEs enrolled in our benefit plans.

Because our total markup is computed as a percentage of payroll

2022 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

cost, certain revenues are also affected by the payroll cost of WSEEs, which may fluctuate based on the composition of the WSEE base, inflationary effects on wage levels and differences in the local economies of our markets.

Because our total markup is computed as a percentage of payroll cost, certain revenues are also affected by the payroll cost of WSEEs, which may fluctuate based on the composition of the WSEE base, inflationary effects on wage levels and differences in the local economies of our markets.

The primary direct costs associated with revenue-generating activities for our PEO HR Outsourcing Solutions are:

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We use gross profit per WSEE per month as our principal measurement of relative performance at the gross profit level.

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Operating Expenses

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◦ employee travel and training expenses

2022 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

◦ facility costs, including repairs and maintenance

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The discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP.

The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

expenses, and related disclosure of contingent assets and liabilities.

On an ongoing basis, we evaluate these estimates, including those related to health and workers’ compensation insurance claims experience, client bad debts, income taxes, property and equipment, goodwill and other intangibles, and contingent liabilities.

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We believe the following accounting policies are critical and/or require significant judgments and estimates used in the preparation of our Consolidated Financial Statements:

• Benefits costs — 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 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.

• Benefits costs — 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 United, UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii and Tufts (known as Harvard Pilgrim Health Care (HPHC) beginning in 2024), all of which provide fully insured policies or service contracts.

The health insurance contract with United provides the majority of our health insurance coverage.

As a result of certain contractual terms, we have accounted for this plan since its inception using a partially self-funded insurance accounting model.

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 in the Consolidated Statements of Operations.

The estimated incurred but not reported claims are based upon:

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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.

If the Plan Costs for

2022 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

a reporting quarter are greater than the premiums paid and owed to United, a deficit in the plan would be incurred and we would accrue a liability for the excess costs on our Consolidated Balance Sheets.

If the Plan Costs for a reporting quarter are greater than the premiums paid and owed to United, a deficit in the plan would be incurred and we would accrue a liability for the excess costs on our Consolidated Balance Sheets.

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 Consolidated Balance Sheets.

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2.5% 29,871 (22,744)

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• Workers’ compensation costs — Since 2007, our workers’ compensation coverage has been provided through an arrangement with Chubb.

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Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury.

Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment.

Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires judgment.

We utilize a third-party actuary to estimate our loss development rate, which is primarily based upon the nature of WSEEs’ job responsibilities, the location of WSEEs, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends.

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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 was 2.9% in 2022 and 0.6% in 2021) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

2022 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Treasury rates that correspond with the weighted average estimated claim payout period (the average discount rate was 4.3% in 2023 and 2.9% in 2022) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Income and Comprehensive Income.

Our claim trends could be greater than or less than our prior estimates, in which case we would revise our claims estimates and record an adjustment to workers’ compensation costs in the period such determination is made.

If we were to experience any significant changes in actuarial assumptions, our loss development rates could increase (or decrease), which would result in an increase (or decrease) in workers’ compensation costs and a resulting decrease (or increase) in net income reported in our Consolidated Statements of Operations.

The following table illustrates the sensitivity of changes in the loss development rate on our estimate of workers’ compensation costs totaling $74.1 million in 2023:

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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, a long-term asset in our Consolidated Balance Sheets.

In 2022, we received $30.2 million for the return of excess claim funds related to the workers’ compensation program, which decreased deposits.

As of December 31, 2022, we had restricted cash of $49.8 million and deposits of $196.4 million.

In 2023, we received $46.3 million for the return of excess claim funds related to the workers’ compensation program, which decreased deposits – workers’ compensation.

As of December 31, 2023, we had restricted cash of $57.4 million and deposits – workers’ compensation of $198.2 million.

We have estimated and accrued $220.3 million in incurred workers’ compensation claim costs as of December 31, 2023.

Our estimate of incurred claim costs expected to be paid within one year is recorded as accrued workers’ compensation costs and 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 in our Consolidated Balance Sheets.

• Contingent liabilities — We accrue and disclose contingent liabilities in our Consolidated Financial Statements in accordance with ASC 450-10, Contingencies .

GAAP requires accrual of contingent liabilities that are considered probable to occur and that can be reasonably estimated.

For contingent liabilities that are considered reasonably possible to occur, financial statement disclosure is required, including the range of possible loss if it can be reasonably determined.

From time to time, we disclose in our financial statements issues that we believe are reasonably possible to occur, although we cannot determine the range of possible loss in all cases.

As issues develop, we evaluate the probability of future loss and the potential range of such losses.

If such evaluation were to determine that a loss was probable and the loss could be reasonably estimated, we would be required to accrue our estimated loss, which would reduce net income in the period that such determination was made.

• Allowance for doubtful accounts — We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our clients to pay their comprehensive service fees.

We believe that the success of our business is heavily dependent on our ability to collect these comprehensive service fees for several reasons, including:

• the fact that we are at risk for the payment of our direct costs and WSEE payroll costs regardless of whether our clients pay their comprehensive service fees

• the large volume and dollar amount of transactions we process

• the periodic and recurring nature of payroll, upon which the comprehensive service fees are based

To mitigate this risk, we have established very tight credit policies.

We generally require our PEO HR Outsourcing Solutions clients to pay their comprehensive service fees no later than the same day as the applicable payroll date.

In addition, we generally maintain the right to terminate the CSA and associated WSEEs or to require prepayment, letters of credit or other collateral if a client’s financial position deteriorates or if the client does not pay the comprehensive service fee.

As a result of these efforts, losses related to client nonpayment have historically been low as a percentage of revenues.

However, if our clients’ financial conditions were to deteriorate rapidly, resulting in

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

nonpayment, our accounts receivable balances could grow and we could be required to provide for additional allowances, which would decrease net income in the period that such determination was made.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

New Accounting Pronouncements

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Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information.

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

The following table summarizes our key financial and statistical information related to our results of operations:

(in thousands, except per share and statistical data)

Year Ended December 31, % Change

2022 2021 2020 2022 v 2021 2021 v 2020

Key Financial and Statistical Data

(in thousands, except per share, WSEE, and statistical data) Year Ended December 31, % Change

2023 2022 2021 2023 v

Financial data:

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Operating income 218,549 250,239 173,329 (12.7) % 44.4 %

Other income (expense) (4,814) (5,011) (5,419) (3.9) % (7.5) %

Other income (expense), net 6,529 (4,814) (5,011) 235.6 % (3.9) %

Net income 171,382 179,350 124,080 (4.4) % 44.5 %

Diluted EPS 4.64 3.18 3.54 45.9 % (10.2) %

4.47 4.64 3.18 (3.7) % 45.9 %

Non-GAAP financial measures (2) :

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Adjusted EBITDA 353,630 352,295 254,946 0.4 % 38.2 %

Adjusted EPS 5.59 3.95 4.64 41.5 % (14.9) %

Average WSEEs paid

5.52 5.59 3.95 (1.3) % 41.5 %

Average WSEEs paid 312,102 295,005 250,745 5.8 % 17.7 %

Statistical data (per WSEE per month) :

$ 1,732 $ 1,678 $ 1,653 3.2 % 1.5 %

286 273 287 4.8 % (4.9) %

Gross profit 277 286 273 (3.1) % 4.8 %

Operating expenses

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58 71 58 (18.3) % 22.4 %

51 41 49 24.4 % (16.3) %

Net income 46 51 41 (9.8) % 24.4 %

Adjusted EBITDA (2)

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(in thousands) 2023 2022 2021

2022 2021 2020

Gross billings $ 43,141,366 $ 40,126,910 $ 33,318,693

$ 40,126,910 $ 33,318,693 $ 28,168,611

WSEE payroll cost 36,655,495 34,188,092 28,345,623

34,188,092 28,345,623 23,881,607

$ 5,938,818 $ 4,973,070 $ 4,287,004

Revenues $ 6,485,871 $ 5,938,818 $ 4,973,070

(2) Please read “ Non-GAAP Financial Measures ” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP.

(3) Revenues per WSEE per month are comprised of gross billings per WSEE per month less WSEE payroll costs per WSEE per month as follows:

2022 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Year Ended December 31,

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WSEE payroll cost 9,787 9,657 9,420

9,657 9,420 8,497

Revenues $ 1,732 $ 1,678 $ 1,653

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Key Operating Metrics

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Our growth in the number of WSEEs paid is affected by three primary sources:

new client sales, client retention and the net change in existing clients through WSEE new hires and terminations.

• During 2022, the average number of WSEEs paid from new client sales increased 16.4% from 2021.

Average client retention improved from 82% in 2021 to 85% in 2022, while the net gain in our client base continued, although at lower levels than 2021, a period when many clients were rehiring employees as the pandemic conditions improved.

new client sales, client retention and the net change in WSEEs paid at existing clients through new hires and employee terminations.

• During 2023 , the average number of WSEEs paid from new client sales and the net gain (loss) in our client base declined compared to 2022.

Average client retention also declined from 85% in 2022 to 83% in 2023 .

• During 2022, the average number of WSEEs paid from new client sales increased 16.4% from 2021.

The net gain (loss) in our client base also improved compared to 2020.

Average client retention remained flat at 82% in both 2020 and 2021.

Average client retention improved from 82% in 2021 to 85% in 2022, while the net gain in our client base continued, at higher than historical levels, although lower than 2021, a period when many clients were rehiring employees as the pandemic conditions improved.

Average WSEEs Paid and

Year-over-Year Growth Percentage

(in thousands)

Adjusted EBITDA and

Year-over-Year Growth Percentage

(in thousands)

Adjusted EPS and

Year-over-Year Growth Percentage

(amounts per share)

2023 Compared to 2022

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2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

2022 Compared to 2021

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• Average WSEEs paid increased 17.7%.

• Revenues per WSEE per month increased 8.4%, or $128, primarily due to 5.1% higher average pricing, as well as the non-recurrence of the 2020 FICA deferral credits of $121.3 million, or $43 per WSEE per month, and the 2020 comprehensive service fee credits of $11.6 million, or $4 per WSEE per month.

• Revenues per WSEE per month increased 1.5%, or $25.

We provide our PEO HR Outsourcing Solutions to small and medium-sized businesses throughout the United States.

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2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In determining the pricing of the markup component of our gross billings, we take into consideration our estimates of the costs directly associated with our WSEEs, including payroll taxes, benefits and workers’ compensation costs, plus an acceptable gross profit margin.

As a result, our gross profit per WSEE and our operating results are significantly impacted by our ability to accurately estimate, control and manage our direct costs relative to the revenues derived from the markup component of our gross billings.

Our gross billings charged to our PEO HR Outsourcing Solutions clients are subject to pricing arrangements that are typically renewed annually.

As a result, our operating results are significantly impacted by our ability to accurately estimate our direct costs relative to the revenues derived from the markup component of our gross billings.

Our gross profit per WSEE is primarily determined by our ability to accurately estimate direct costs and our ability to incorporate changes in these costs into the gross billings charged to PEO HR Outsourcing Solutions clients, which are subject to pricing arrangements that are typically renewed annually.

We use gross profit per WSEE per month as our principal measurement of relative performance at the gross profit level.

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Year-over-Year Growth Percentage

(per WSEE per month)

2023 Compared to 2022

Our pricing objectives attempt to achieve a level of revenue per WSEE that matches or exceeds changes in primary direct costs and operating expenses.

Our revenues per WSEE per month increased $25 due to higher average pricing.

Our direct costs per WSEE per month increased $12 due primarily to changes in our direct costs components as described below.

The net increase in direct costs between 2022 and 2021 attributable to changes in cost estimates for benefits and workers’ compensation totaled $6.7 million as discussed below.

The primary direct cost components changed as follows:

Our revenues per WSEE per month increased $54 due to higher average pricing of 3.2%.

The net decrease in direct costs between 2023 and 2022 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $16.4 million as discussed below.

The $63 per WSEE per month increase in direct costs is due primarily to the direct cost components changes as follows:

Benefits costs

• The cost of group health insurance and related employee benefits decreased $9 per WSEE per month, but increased 1.2% on a per covered employee basis.

• The percentage of WSEEs covered under our health insurance plan was 65.4% in 2022 and 67.0% in 2021.

• Reported results include changes in estimated claims run-off related to prior periods, which was an increase in costs of $12.1 million, or $3 per WSEE per month, in 2022 compared to an increase in costs of $4.9 million, or $2 per WSEE per month, in 2021.

Please read “—Critical Accounting Policies and Estimates—Benefits Costs” for a discussion of our accounting for health insurance costs.

• The cost of group health insurance and related employee benefits increased $44 per WSEE per month, or 6.6% on a cost per covered employee basis.

• The percentage of WSEEs covered under our health insurance plans was 65.0% in 2023 compared to 65.4% in 2022.

• Reported results include changes in estimated claims run-off related to prior periods, which was a decrease in costs of $13.0 million, or $3 per WSEE per month, in 2023 compared to an increase in costs of $12.1 million, or $3 per WSEE per month, in 2022.

Please read “ — Critical Accounting Policies and Estimates — Benef its Costs ” for a discussion of our accounting for health insurance costs.

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Workers’ compensation costs

Our continued discipline around our client selection, safety and claims management contributed to the reduction in our cost per WSEE and, as a result, has allowed for claims within our policy periods to be closed out at amounts below our original costs estimates.

• Workers’ compensation costs decreased 4.1%, or $4 per WSEE per month, in 2022 compared to 2021.

• As a percentage of non-bonus payroll cost, workers’ compensation costs in 2022 were 0.23% compared to 0.29% in 2021.

• As a result of closing out claims incurred in prior periods at lower than expected costs, we recorded a reduction in workers’ compensation costs of $42.2 million, or 0.14% of non-bonus payroll costs, in 2022 compared to a reduction of $41.7 million, or 0.18% of non-bonus payroll costs, in 2021.

The 2022 period costs include the impact of a 2.9% discount rate used to accrue workers’ compensation loss claims, compared to a 0.6% discount rate used in the 2021 period.

Our continued discipline around our client selection, workplace safety and claims management contributed to the small increase in our cost per WSEE and, as a result, has allowed for claims within our policy periods to be closed out at amounts below our original cost estimates.

• Workers’ compensation costs increased 12.1%, or $1 per WSEE per month, in 2023 compared to 2022.

• As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.23% in both 2023 and 2022.

• We recorded a reduction in workers’ compensation costs of $ 33.5 million, or 0.11% of non-bonus payroll costs, in 2023 compared to a reduction of $42.2 million, or 0.14% of non-bonus payroll costs, in 2022, primarily as a result of closing out claims at lower than expected costs.

Please read “ —Critical Accounting Policies and Estimates—Workers' Compensation Costs ” for a discussion of our accounting for workers’ compensation costs.

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• Payroll taxes increased 8.9% on a 7.2% increase in payroll costs, or $18 per WSEE per month.

• Payroll taxes as a percentage of payroll cost increased to 6.4% in 2022 compared to 6.3% in 2021.

• Payroll taxes as a percentage of payroll costs increased to 6.5% in 2023 compared to 6.4% in 2022.

2022 Compared to 2021

The net increase in direct costs between 2021 and 2020 attributable to changes in cost estimates for benefits and workers’ compensation totaled $5.5 million as discussed below.

The primary direct cost components changed as follows:

The net increase in direct costs between 2022 and 2021 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $6.7 million as discussed below.

The $12 per WSEE per month increase in direct costs is due primarily to the direct cost component changes as follows:

Benefits costs

• The cost of group health insurance and related employee benefits increased $58 per WSEE per month, or 9.8% on a per covered employee basis, due primarily to an increase in claims in 2021 compared to 2020, which had lower claims as a result of lower utilization and the deferral of non-essential health care procedures, primarily in the second quarter of 2020, in connection with the COVID-19 pandemic and related government requirements or guidance.

Our healthcare claim activity in 2021 included a continued variability in claim incurral patterns, combined with incremental costs related to COVID-19 testing, vaccination administration, and treatment costs, which were driven by further COVID-19 variants.

• The percentage of WSEEs covered under our health insurance plan was 67.0% in 2021 and 67.9% in 2020.

• Reported results include changes in estimated claims run-off related to prior periods, which was an increase in costs of $4.9 million, or $2 per WSEE per month, in 2021 compared to a decrease in costs of $0.2 million, while remaining flat on a per WSEE per month basis, in 2020.

• The cost of group health insurance and related employee benefits decreased $9 per WSEE per month, but increased 1.2% on a per covered employee basis.

• The percentage of WSEEs covered under our health insurance plans was 65.4% in 2022 compared to 67.0% in 2021.

• Reported results include changes in estimated claims run-off related to prior periods, which was an increase in costs of $ 12.1 million, or $3 per WSEE per month, in 2022 compared to an increase in costs of $4.9 million, or $2 per WSEE per month, in 2021.

Please read “ —Critical Accounting Policies and Estimates—Benefits Costs ” for a discussion of our accounting for health insurance costs.

Workers’ compensation costs

• Workers’ compensation costs increased 4.7%, but remained flat on a per WSEE per month basis, in 2021 compared to 2020.

2022 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• Workers’ compensation costs decreased 4.1%, or $4 per WSEE per month, in 2022 compared to 2021.

• As a percentage of non-bonus payroll cost, workers’ compensation costs in 2022 were 0.23% compared to 0.29% in 2021.

Both the 2021 and 2020 periods costs include the impact of a 0.6% discount rate used to accrue workers’ compensation loss claims.

The 2022 period costs include the impact of a 2.9 % discount rate used to accrue workers’ compensation loss claims, compared to a 0.6% discount rate used in the 2021 period.

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Please read “ —Critical Accounting Policies and Estimates—Workers' Compensation Costs ” for a discussion of our accounting for workers’ compensation costs.

Payroll tax costs

• Payroll taxes increased 24.9% on an 18.7% increase in payroll costs, or $84 per WSEE per month, due primarily to the non-recurrence of $121.3 million in client FICA deferral elections and tax credits pursuant to the CARES Act and FFCRA in 2020, partially offset by the 2021 collection of $16.8 million in federal payroll tax refunds related to prior years.

• Payroll taxes as a percentage of payroll cost increased to 6.3% in 2021 compared to 6.0% in 2020.

• Payroll taxes increased 23.0% on an 20.6% increase in payroll costs, or $27 per WSEE per month.

• Payroll taxes as a percentage of payroll costs increased to 6.4% in 2022 compared to 6.3% in 2021.

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Operating Expenses

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Operating expenses for 2023 increased 7.5% to $818.3 million compared to $761.0 million in 2022.

Operating expenses remained flat on a per WSEE per month basis compared to 2021.

• Salaries of corporate and sales staff increased 13.7% to $430.9 million, but decreased $4 on a per WSEE per month basis, compared to 2021 on a 17.7% increase in WSEEs paid per month.

The increase was primarily due to a 7.9% increase in corporate headcount, as well as higher incentive compensation accruals in 2022.

• Stock-based compensation increased 23.3% to $50.1 million, but remained flat on a per WSEE per month basis, compared to 2021.

The increase was primarily due to awards issued under our long-term incentive and restricted stock programs.

Please read Note 1 “ Accounting Policies ” and Note 9 “ Incentive Plans ,” to the Consolidated Financial Statements for additional information.

• Commissions expense increased 30.8% to $45.7 million, or $1 per WSEE per month, compared to 2021.

The increase was primarily due to commissions associated with our PEO HR Outsourcing Solutions, including a new incentive program for our BPAs and sales managers, as well as an increase in the amount of sales channel referral fees paid during 2022.

• Advertising expense increased 28.9% to $37.5 million, or $1 per WSEE per month, compared to 2021.

The increase was primarily due to increases in radio, print and digital advertising and sponsorship costs.

Operating expenses per WSEE per month for 2023 increased 1.9% to $219 compared to $215 in 2022.

• Salaries of corporate and sales staff for 2023 increased 6.9% to $460.7 million, or $1 per WSEE per month, compared to 2022.

The increase was primarily due to an increase in BPA, service and support headcount and staff compensation levels, which was partially offset by lower incentive compensation expense in 2023 compared to 2022.

• Stock-based compensation expense for 2023 increased 5.8% to $53.0 million, but remained flat on a per WSEE per month basis, compared to 2022.

The increase was primarily due to awards issued under our restricted stock unit program, partially offset by a decrease in the number of stock awards anticipated to be earned related to performance-based awards granted under our long-term incentive plans based on our lower than expected operating results in 2023.Please read Note 1 “Accounting Policies” and Note 9 “Incentive Plans,” to the Consolidated Financial Statements for additional information.

• Commissions expense for 2023 increased 2.6% to $46.8 million, but remained flat on a per WSEE per month basis, compared to 2022.

The increase was primarily due to commissions associated with our PEO HR Outsourcing Solutions, as well as an increase in the amount of sales channel referral fees paid during 2023.

• General and administrative expenses for 2023 increased 13.8% to $177.7 million, or $4 per WSEE per month, compared to 2022.

The increase was primarily due to increased travel and event costs, software licensing and maintenance costs, and amortization of SaaS implementation costs.

• Depreciation and amortization expense for 2023 increased 5.0% to $42.7 million, but remained flat on a per WSEE per month basis, compared to 2022.

The increase was primarily due to increased capital expenditures related to computer hardware and software and software development costs.

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• General and administrative expenses increased 25.5% to $156.1 million, or $4 per WSEE per month, compared to 2021.

The increase was primarily due to increased travel, event and software licensing costs.

• Depreciation and amortization expense increased 5.5% to $40.7 million, but decreased $2 on a per WSEE per month basis, compared to 2021.

The increase was primarily due to the completion of a new facility on our corporate campus during 2021 and increased capital expenditures related to software development costs.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

2022 Compared to 2021

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Operating expenses for 2022 increased 17.7% to $761.0 million compared to $646.8 million in 2021.

Operating expenses per WSEE per month for 2021 decreased 1.4% to $215 compared to $218 in 2020.

• Salaries of corporate and sales staff increased 7.3% to $379.2 million, but remained flat on a per WSEE per month basis, compared to 2020.

The increase was primarily due to higher incentive compensation expense.

• Stock-based compensation decreased 32.5% to $40.6 million, or $7 per WSEE per month, compared to 2020.

The decrease was primarily due to the non-recurrence of stock-based compensation expense related to our 2020 short-term performance based awards.

Operating expenses remained flat on a per WSEE per month basis compared to 2021.

• Salaries of corporate and sales staff for 2022 increased 13.7% to $430.9 million, but decreased $4 on a per WSEE per month basis, compared to 2021 on a 17.7% increase in WSEEs paid per month.

The increase was primarily due to a 7.9% increase in corporate headcount, as well as higher incentive compensation accruals in 2022.

• Stock-based compensation expense for 2022 increased 23.3% to $50.1 million, but remained flat on a per WSEE per month basis, compared to 2021.

The increase was primarily due to awards issued under our long-term incentive and restricted stock unit programs.

Please read Note 1 “Accounting Policies” and Note 9 “Incentive Plans,” to the Consolidated Financial Statements for additional information.

• Commissions expense increased 6.4% to $34.9 million, but remained flat on a per WSEE per month basis, compared to 2020.

Commissions are primarily due to commissions associated with our PEO HR Outsourcing Solutions, including an increase in the amount of sales channel referral fees paid during 2021.

• Advertising expense increased 35.0% to $29.1 million, or $2 per WSEE per month, compared to 2020.

The increase was due to the resumption of the Insperity Invitational in 2021, which was canceled in 2020 due to the COVID-19 pandemic, as well as increases in television, radio and digital advertising and sponsorship costs.

• General and administrative expenses increased 9.9% to $124.4 million, but remained flat on a per WSEE per month basis, compared to 2020.

The increase was primarily due to technology SaaS licensing costs and professional services related to the implementation of a CRM solution, partially offset by decreases in travel costs.

• Depreciation and amortization expense increased 23.6% to $38.5 million, or $2 per WSEE per month, compared to 2020.

The increase was primarily due to the completion of a new facility on our corporate campus and increased capital expenditures related to software development costs.

2022 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• Commissions expense for 2022 increased 30.8% to $45.7 million, or $1 per WSEE per month, compared to 2021.

• Advertising expense for 2022 increased 28.9% to $37.5 million, or $1 per WSEE per month, compared to 2021.

The increase was primarily due to increases in radio, print and digital advertising and sponsorship costs.

• General and administrative expenses for 2022 increased 25.5% to $156.1 million, or $4 per WSEE per month, compared to 2021.

The increase was primarily due to increased travel, event and software licensing costs.

• Depreciation and amortization expense for 2022 increased 5.5% to $40.7 million, but decreased $2 on a per WSEE per month basis, compared to 2021.

The increase was primarily due to the completion of a new facility on our corporate campus during 2021 and increased capital expenditures related to software development costs.

Other Income (Expense)

Other income (expense) was a net expense of $4.8 million, $5.0 million, and $5.4 million in 2022, 2021 and 2020, respectively.

In 2022, the increase in other income was due to an increase in interest income on our marketable securities investments and workers’ compensation deposits, which was offset by an increase in interest expense related to higher average interest rates on borrowings under our credit facility.

In 2021, the decrease in interest expense was due to a decrease in the average interest rate.

Other income (expense) was a net income of $6.5 million in 2023 and net expense of $4.8 million and $5.0 million in 2022 and 2021, respectively.

In 2023 and 2022, the increase in other income was due to an increase in interest rates on our marketable securities investments and workers’ compensation deposits, which was partially offset by an increase in interest expense related to higher average interest rates on borrowings under our credit facility.

Please read Note 2 to the Consolidated Financial Statements, “Other Balance Sheet Information,” for additional information.

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Our provision for income taxes differed from the U.S.

statutory rate of 21% primarily due to state income taxes and non-deductible expenses, offset by excess tax benefits associated with the vesting of equity compensation of $0.2 million, $2.6 million and $2.1 million, in 2022, 2021 and 2020, respectively.

statutory rate of 21% primarily due to state income taxes and non-deductible expenses, offset by

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

excess tax benefits associated with the vesting of equity compensation of $4.9 million, $0.2 million and $2.6 million, in 2023, 2022 and 2021, respectively.

Please read Note 1 “ Accounting Policies ” and Note 7 “Income Taxes,” to the Consolidated Financial Statements for additional information.

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• non-cash stock-based compensation.

2022 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Following is a reconciliation of payroll cost (GAAP) to non-bonus payroll costs (non-GAAP):

Year Ended December 31,

(in thousands, except per WSEE per month) 2022 2021 2020

(in thousands, except per WSEE per month) Year Ended December 31,

2023 2022 2021

Per WSEE Per WSEE Per WSEE

1 unchanged sentence

Bonus payroll cost

4,978,439 1,329 4,959,987 1,401 4,719,217 1,568

Non-bonus payroll cost

$ 31,677,056 $ 8,458 $ 29,228,105 $ 8,256 $ 23,626,406 $ 7,852

% Change year over year 8.4 % 2.4 % 23.7 % 5.1 % 14.5 % 6.9 %

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Following is a reconciliation of cash, cash equivalents and marketable securities (GAAP) to adjusted cash, cash equivalents and marketable securities (non-GAAP):

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

Cash, cash equivalents and marketable securities $ 708,778 $ 765,896

Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions

510,092 504,817

Following is a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP):

(in thousands, except per WSEE per month) Year Ended December 31,

Client prepayments

27,592 36,800

Adjusted cash, cash equivalents and marketable securities $ 171,094 $ 224,279

Following is a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP):

Year Ended December 31,

(in thousands, except per WSEE per month) 2023 2022 2021

Per WSEE Per WSEE Per WSEE

4 unchanged sentences

Depreciation and amortization

42,708 11 40,660 11 38,547 13

EBITDA 300,634 80 302,215 86 214,323 71

Stock-based compensation

52,996 14 50,080 14 40,623 14

Adjusted EBITDA $ 353,630 $ 94 $ 352,295 $ 100 $ 254,946 $ 85

% Change year over year 0.4 % (6.0) % 38.2 % 17.6 % (11.7) % (17.5) %

Following is a reconciliation of cash, cash equivalents and marketable securities (GAAP) to adjusted cash, cash equivalents and marketable securities (non-GAAP):

(in thousands) 2022 2021

Cash, cash equivalents and marketable securities $ 765,896 $ 607,603

Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions 504,817 424,800

Client prepayments 36,800 20,054

Adjusted cash, cash equivalents and marketable securities $ 224,279 $ 162,749

2022 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Following is a reconciliation of net income (GAAP) to adjusted net income (non-GAAP):

4 unchanged sentences

Stock-based compensation 52,996 50,080 40,623

Tax effect of non-GAAP adjustments (13,483) (10,677) (17,068)

Tax effect (12,643) (13,483) (10,677)

Total non-GAAP adjustments, net 40,353 36,597 29,946

1 unchanged sentence

% Change year over year (2.0) % 40.2 % (15.1) %

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP):

4 unchanged sentences

Stock-based compensation 1.38 1.30 1.04

Tax effect of non-GAAP adjustments (0.35) (0.27) (0.44)

Tax effect (0.33) (0.35) (0.27)

Total non-GAAP adjustments, net 1.05 0.95 0.77

1 unchanged sentence

% Change year over year (1.3) % 41.5 % (14.9) %

41.5 % (14.9) % 11.8 %

Liquidity and Capital Resources

2 unchanged sentences

Longer-term projects, large stock repurchases or significant acquisitions may be financed with public or private debt or equity.

We have a $650 million revolving credit facility (“Facility”) with a syndicate of financial institutions.

We have a revolving credit facility (“Facility”) with a syndicate of financial institutions with a current borrowing capacity of $650 million.

The Facility is available for working capital and general corporate purposes, including acquisitions and stock repurchases.

We have in the past sought, and may in the future seek, to raise additional capital or take other steps to increase or manage our liquidity and capital resources.

We had $765.9 million in cash, cash equivalents and marketable securities at December 31, 2022, of which approximately $504.8 million was payable in early January 2023 for withheld federal and state income taxes, employment taxes and other payroll deductions, and $36.8 million were client prepayments that were payable in January 2023.

We had $708.8 million in cash, cash equivalents and marketable securities at December 31, 2023, of which approximately $510.1 million was payable in early January 2024 for withheld federal and state income taxes, employment taxes and other payroll deductions, and approximately $27.6 million represented client prepayments that were payable in January 2024.

At December 31, 2023, we had working capital of $159.0 million compared to $158.5 million at December 31, 2022.

The increase in working capital reflects, in part, cash flow from operations offset by share repurchases, dividends and capital expenditures.

We currently believe that our cash on hand, marketable securities, cash flows from operations and availability under our Facility will be adequate to meet our liquidity requirements for 2023.

We currently believe that our cash on hand, marketable securities, cash flows from operations, and availability under the Facility will be adequate to meet our liquidity requirements for 2024.

We intend to rely on these same sources, as well as public and private debt or equity financing, to meet our longer-term liquidity and capital needs.

At December 31, 2022, we had outstanding letters of credit and borrowings totaling $370.4 million under the Facility.

As of December 31, 2023, we had outstanding letters of credit and borrowings totaling $370.4 million under the Facility.

Please read Note 6 to the Consolidated Financial Statements, “ Long-Term Debt ,” for additional information.

2022 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cash Flows from Operating Activities

Our net cash flows from operating activities in 2022 were $347.7 million.

Our primary source of cash from operations is the comprehensive service fee and payroll funding we collect from our PEO HR Outsourcing Solutions clients.

Cash and cash equivalents, and thus our reported cash flows from operating activities, are significantly impacted by various external and internal factors, which are reflected in part by the changes in our balance sheet accounts.

Net cash provided by operating activities in 2023 was $198.5 million.

Our primary source of cash from operations is the comprehensive service fee and payroll funding we collect from our clients.

Our cash and cash equivalents, and thus our reported cash flows from operating activities, are significantly impacted by various external and internal factors, which are reflected in part by the changes in our balance sheet accounts.

These include the following:

1 unchanged sentence

Therefore, the last business day of a reporting period has a substantial impact on our reporting of operating cash flows.

For example, many WSEEs are paid on Fridays and at month-end;

therefore, operating cash flows decrease in the reporting periods that end on a Friday.

In the year ended December 31, 2022, the last business day of the reporting period ended on a Friday, client prepayments were $36.8 million and amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions was $504.8 million.

In the year ended December 31, 2021, which ended on a Friday, client prepayments were $20.1 million and amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions was $424.8 million.

• Workers’ compensation plan funding — In 2022 and 2021, we received $30.2 million and $35.1 million, respectively, for the return of excess claim funds related to the workers’ compensation program, which resulted in an increase in working capital.

For example, many WSEEs are paid on Fridays;

therefore, operating cash flows decrease in the reporting periods that end on a Friday or a Monday.

In the year ended December 31, 2023, the last business day of the reporting period was a Friday, client prepayments were $27.6 million and employment taxes and other deductions were $510.1 million.

In the year ended December 31, 2022, the last business day of the reporting period was also a Friday, client prepayments were $36.8 million and employment taxes and other deductions were $504.8 million.

• Workers’ compensation plan funding — During 2023 and 2022, we received $ 46.3 million and $30.2 million, respectively, for the return of excess claim funds related to the workers’ compensation program, which resulted in an increase in working capital.

2023 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• Medical plan funding — Our health care contract with United establishes participant cash funding rates 90 days in advance of the beginning of a reporting quarter.

Therefore, changes in the participation level of the United plan have a direct impact on our operating cash flows.

In addition, changes to the funding rates, which are determined solely by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows.

In addition, changes to the funding rates, which are solely determined by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows.

As of December 31, 2023, Plan Costs were more than the net premiums paid and owed to United by $23.5 million, which is $32.5 million less than our agreed-upon $9.0 million surplus maintenance level.

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• Operating results — Our adjusted net income has a significant impact on our operating cash flows.

Our adjusted net income increased 40.2% to $215.9 million in 2022 from $154.0 million in 2021.

Our adjusted net income decreased 2.0% to $211.7 million in 2023, compared to $215.9 million in 2022.

Please read “ Results of Operations .”

Cash Flows from Investing Activities

Our net cash flows used in investing activities were $32.1 million during 2022, primarily due to $30.4 million in property and equipment purchases.

Net cash flows used in investing activities were $21.7 million for the year ended December 31, 2023, primarily due to property and equipment purchases of $40.1 million, partially offset by $18.4 million of marketable securities maturities and dispositions, net of purchases.

Cash Flows from Financing Activities

Our net cash flows used in financing activities were $141.2 million during 2022.

We repurchased $73.3 million in stock and paid $76.6 million in dividends.

Net cash flows used in financing activities were $155.0 million for the year ended December 31, 2023.

We paid $84.2 million in dividends and repurchased or withheld $131.5 million in stock.

In addition, client funds liability and other financing activities increased by $60.7 million.

Seasonality, Inflation and Quarterly Fluctuations

2 unchanged sentences

This trend is primarily the result of many WSEEs’ medical plan deductibles being fully met by the fourth quarter, which increases our liability with respect to those claims.

We have also experienced variability on a quarterly basis in medical claims costs based on the unpredictable nature of large claims and the COVID-19 pandemic effect on health care utilization patterns, as well as incremental costs related to COVID-19 testing, vaccination administration and treatment, which were driven by further COVID-19 variants in 2021.

We have also experienced variability on a quarterly basis in medical claims costs based on the unpredictable nature of large claims .

Payroll taxes and associated billings are computed based on an employee’s annual taxable wage base.

The annual payroll tax wage bases are frequently met in the first two quarters of each year depending on the employee’s compensation levels.

As a result, the gross profit contribution from payroll taxes is typically higher in the first two quarters and declines in the latter

2022 Form 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

half of each year.

As a result, the gross profit contribution from payroll taxes is typically higher in the first two quarters and declines in the latter half of each year.

These historical trends may change and other seasonal trends may develop in the future.

For further information related to our health insurance costs, please read “—Critical Accounting Policies and Estimates—Benefits Costs.”

We believe the effects of inflation have not had a significant impact on our results of operations or financial condition, however, inflationary pressure could adversely impact our profitability in the future.

We believe the effects of inflation have not had a significant impact on our results of operations or financial condition;

however, inflationary pressure could adversely impact our profitability in the future.

2023 Form 10-K

QUANTITIVE AND QUALITATIVE DISCLOSURES

QUANTITATIVE AND QUALITATIVE DISCLOSURES

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-K

Item 7. Management’s Discussion and Analysis