What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-02-09 compared with 2023-02-10 · 224 added, 228 removed, 800 unchanged (36% of the section changed)

9 unchanged sentences

Other Information.

Trading Plans

During the fourth quarter of 2023 , none of our directors or executive officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408 of Regulation S-K).

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

26 unchanged sentences

3.2 Amended and Restated Bylaws of Insperity, Inc.

dated February 17, 2014 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 18, 2014).

dated November 15, 2023 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 17, 2023).

4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 (No.

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2001 Incentive Plan, as amended and restated (incorporated by reference to Appendix A to the Registrant’s definitive proxy statement on Schedule 14A filed on March 18, 2009 (No.

10.2 † Form of Restricted Stock Award Agreement for awards granted to executive officers on or after November 10, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2017).

10.3 † Form of Restricted Stock Award Agreement for awards granted to certain senior personnel on or after November 10, 2017 (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended September 30, 2017).

10.4 † Form of Restricted Stock Award Agreement for awards granted to other employees on or after November 10, 2017 (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended September 30, 2017).

† Form of Restricted Stock Unit Agreement for awards granted to executive officers on or after December 30, 2019 (incorporated by reference to Exhibit 10.18 to the Registrant’s Form 10-K for the year ended December 31, 2019).

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† Form of Restricted Stock Unit Agreement for awards granted to other employees on or after December 30, 2019 (incorporated by reference to Exhibit 10.20 to the Registrant’s Form 10-K for the year ended December 31, 2019).

Form of Restricted Stock Unit Agreement for awards granted to executive officers on or after January 29, 2024.

Form of Restricted Stock Unit Agreement for awards granted to certain senior personnel on or after January 29, 2024.

Form of Restricted Stock Unit Agreement for awards granted to certain other employees on or after January 29, 2024.

† Form of Employee Award Notice and Agreement under LTIP granted on or after December 30, 2019 (incorporated by reference to Exhibit 10.22 to the Registrant’s Form 10-K for the year ended December 31, 2019).

*† Form of Employee Award Notice and Agreement under LTIP granted on or after January 29, 2024.

2023 Form 10-K

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

10.8 † Form of Employee Award Notice and Agreement under LTIP granted on or after December 30, 2019 (incorporated by reference to Exhibit 10.22 to the Registrant’s Form 10-K for the year ended December 31, 2019).

† Directors Compensation Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q for the quarter ended September 30, 2012).

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10.21 Insperity, Inc.

Incentive Plan (incorporated by reference to the Registrant’s definitive proxy statement on Schedule 14A filed on April 14, 2023 (No.

10.22 Insperity, Inc.

Long-Term Incentive Program (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 2, 2015).

I nsperity, Inc.

Long-Term Incentive Program, as amended and res tated January 29, 2024.

10.24 † Insperity, Inc.

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10.45 Fourth Amendment to the Amended and Restated Credit Agreement dated June 30, 2022 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on July 6, 2022).

10.43 Standard Form of Agreement Between Owner and Contractor dated February 8, 2019 between Insperity Service, L.P.

Harvey Builders, Inc.

(incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended March 31, 2019).

10.44 Consulting agreement between Insperity, Inc.

Mincks dated February 25, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on February 26, 2021).

10.46 Fifth Amendment to the Amended and Restated Credit Agreement dated September 28, 2023 (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q for the quarter ended September 30, 2023).

21.1 * Subsidiaries of Insperity, Inc.

2023 Form 10-K

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

21.1 * Subsidiaries of Insperity, Inc.

23.1 * Consent of Independent Registered Public Accounting Firm.

4 unchanged sentences

32.2 ** Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97 * Insperity, Inc.

Policy for Recovery of Erroneously Awarded Compensation Applicable to Executive Officers.

101.INS * Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Insperity, Inc.

has duly caused this report to be signed in its behalf by the undersigned, thereunto duly authorized, on February 9, 2023.

has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 8, 2024.

INSPERITY, INC.

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Executive Vice President of Finance,

Chief Financial Officer and Treasurer

Chief Financial Officer & Treasurer

(Principal Financial Officer and

Principal Accounting Officer)

2023 Form 10-K

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Sharp Executive Vice President of Finance,

Chief Financial Officer and Treasurer

(Principal Financial Officer)

Chief Financial Officer & Treasurer

(Principal Financial Officer and

Principal Accounting Officer)

Timothy Clifford

Latha Ramchand

/s/ Daniel D.

Herink, attorney-in-fact

/s/ Christian P.

Callens, attorney-in-fact

2023 Form 10-K

6 unchanged sentences

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Income and Comprehensive Income

Consolidated Statements of Stockholders’ Equity and (Deficit)

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of Insperity, Inc.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of income and comprehensive income, stockholders' equity and (deficit), and cash flows for each of the three years in the period ended December 31, 2023 , and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 , in conformity with U.S.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

2023 Form 10-K

3 unchanged sentences

While the policy with United is a fully insured plan, as a result of certain contractual terms, the Company accounts for this plan using a partially self-funded insurance accounting model.

Accordingly, the Company records the cost of the United plan, including an estimate of the incurred claims, taxes and administrative fees, as benefits expense, which is a component of Payroll taxes, benefits and workers’ compensation costs in the consolidated statement of operations.

The estimated incurred but not reported claims under the Company’s United insurance policy are based upon:

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

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

and (iii) the number of participants in the plan.

Auditing management’s estimate of the cost of incurred but not reported health insurance claims was subjective and judgmental due to the significant estimation required in determining the medical reserve.

1 unchanged sentence

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the estimation process, including, among others, controls over the completeness and accuracy of the data used to estimate the cost of incurred health insurance claims and the review and approval processes that management has in place for the assumptions applied and the calculation of the cost of incurred health insurance claims.

Our audit procedures included, among others, assessing (i) the Company’s health insurance cost estimation methodologies, (ii) significant assumptions used to develop the medical completion rates, which includes the incurred but not reported component, (iii) the accuracy and completeness of the claims processed data and the number of plan participants used in the Company’s computation, as well as (iv) the historical accuracy of management’s estimates of the cost of incurred health insurance claims.

Our audit procedures included, among others, assessing (i) the Company’s health insurance cost estimation methodology, (ii) significant assumptions used to develop the medical completion rates, which includes the incurred but not reported component, (iii) the accuracy and completeness of the claims processed data used in the Company’s computation, as well as (iv) the historical accuracy of management’s estimates of the cost of incurred health insurance claims.

Our testing of the medical completion rate assumptions included comparing the completion rate assumptions used by management to the completion rates experienced in historical periods and assessing whether contrary evidence exists with respect to the completion rate assumptions utilized by the Company to estimate the cost of incurred health insurance claims.

Furthermore, we involved our actuarial specialists to assist in our evaluation of the Company’s methodologies and compared the Company’s estimate to a range developed by our actuarial specialists based on the historical claim data and independently selected assumptions.

2022 Form 10-K

CONSOLIDATED FINANCIAL STATEMENTS

Estimation of the Cost of Incurred Workers’ Compensation Claims

Description of the Matter As discussed in Note 1 of the consolidated financial statements under “Workers’ Compensation Costs”, the Company provides workers’ compensation insurance, including ongoing health care and indemnity coverage, to its employees whereby claims are paid over numerous years following the date of injury.

Under the Company’s insurance program, the Company has financial responsibility for a significant portion of the workers’ compensation claims.

Accordingly, the accrual related to incurred costs, which is recorded in accrued workers’ compensation costs in the consolidated balance sheets, includes estimates that take into account the ongoing development of claims and therefore requires a significant level of judgment.

The estimated accrued claims are based on (i) the loss development rate which is primarily based upon the historical frequency and severity of workers’ compensation claims and (ii) discount rates which correspond to the weighted-average estimated claim payout period.

Auditing management’s estimate of the cost of incurred workers’ compensation claims was subjective and judgmental due to the significant estimation required in determining the workers’ compensation reserve.

Estimating accrued claims is subjective given the nature of the inputs to the underlying actuarial model as referenced above.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the estimation process, including, among others, controls over the completeness and accuracy of data used to estimate the cost of incurred workers’ compensation claims and the review and approval processes that management has in place for the assumptions applied and the calculation of the cost of incurred workers’ compensation claims.

Our audit procedures included, among others, assessing (i) the Company’s workers’ compensation reserve methodologies, (ii) significant assumptions used to develop the loss development rate, as well as (iii) the historical accuracy of management’s estimates of the cost of incurred workers’ compensation claims.

Our audit procedures included testing the completeness and accuracy of the underlying claims and payroll data provided to management’s third-party actuaries and reviewing the Company's insurance contracts to assess the Company's self-insured retentions, deductibles, and coverage limits.

Furthermore, we involved our actuarial specialists to assist in our evaluation of the methodologies utilized by management‘s third-party actuaries in developing the reserves recorded by the Company and compared the Company's estimate to a range developed by our actuarial specialists based on the historical loss data and independently selected assumptions.

We have served as the Company’s auditor since 1991.

Furthermore, we involved our actuarial specialists to assist in our evaluation of the Company’s methodology and compared the Company’s estimate to a range developed by our actuarial specialists based on the historical claim data and independently selected assumptions.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1991.

Houston, Texas

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Sarvadi Douglas S.

Chairman of the Board and

Chief Executive Officer Executive Vice President of Finance,

Chief Financial Officer and Treasurer

Chairman of the Board &

Chief Executive Officer Executive Vice President, Finance,

Chief Financial Officer & Treasurer

2023 Form 10-K

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023 , based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 9, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income and comprehensive income, stockholders’ equity and (deficit), and cash flows for each of the three years in the period ended December 31, 2023 , and the related notes and our report dated February 8, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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Accounts receivable, net 693,878 622,764

Prepaid insurance 11,706 11,285

Income taxes receivable — 12,413

Other current assets 61,728 53,312

Prepaid insurance and related assets 7,013 11,706

Funds held for clients and other current assets 128,220 61,728

Total current assets 1,595,292 1,511,873

Property and equipment, net 199,992 210,723

Property and equipment, net of accumulated depreciation 197,424 199,992

Right-of-use (“ROU”) leased assets 57,438 56,532

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Payroll taxes and other payroll deductions payable 566,373 556,085

Accrued worksite employee payroll cost 513,397 409,653

Accrued worksite employee payroll costs 559,194 513,397

Accrued health insurance costs 46,460 53,402

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Accrued corporate payroll and commissions 64,286 89,147

Other accrued liabilities 80,122 69,303

Client funds liability and other accrued liabilities 128,808 80,122

Total current liabilities 1,436,289 1,353,370

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Commitments and contingencies

Stockholders’ equity (deficit):

Stockholders' equity:

Preferred stock ($ 0.01 per share par value;

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Retained earnings 738,553 655,190

Total stockholders’ equity (deficit) 81,275 ( 1,774 )

Total stockholders' equity 93,624 81,275

Total liabilities and stockholders’ equity $ 2,119,659 $ 2,039,261

3 unchanged sentences

INSPERITY, INC.

— CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Year Ended December 31,

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

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

Payroll taxes, benefits and workers’ compensation costs

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Total operating expenses 818,254 760,994 646,773

760,994 646,773 612,165

Operating income 218,549 250,239 173,329

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Net income $ 171,382 $ 179,350 $ 124,080

Unrealized gain (loss) on available-for-sale securities, net of tax 91 ( 73 ) ( 14 )

Comprehensive income $ 171,473 $ 179,277 $ 124,066

Net income per share of common stock

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Diluted $ 4.47 $ 4.64 $ 3.18

____________________________________

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

Year ended December 31,

(in thousands)

2022 2021 2020

Gross billings

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

WSEE payroll cost

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

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

See accompanying notes.

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INSPERITY, INC.

— CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31,

(in thousands) 2022 2021 2020

Net income $ 179,350 $ 124,080 $ 138,237

Other comprehensive loss:

Unrealized loss on available-for-sale securities, net of tax ( 73 ) ( 14 ) ( 7 )

Comprehensive income $ 179,277 $ 124,066 $ 138,230

See accompanying notes.

2022 Form 10-K

CONSOLIDATED FINANCIAL STATEMENTS

INSPERITY, INC.

— CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands) Common Stock

Issued Additional Paid

In Capital Treasury

Stock Accumulated

Comprehensive

Income (Loss) Retained

Earnings Total

Shares Amount

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND (DEFICIT)

Common Stock Issued Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings Total

(in thousands) Shares Amount

Balance at December 31, 2020 55,489 $ 555 $ 95,528 $ ( 626,984 ) $ 5 $ 575,028 $ 44,132

Purchase of treasury stock, at cost — — — ( 69,725 ) — — ( 69,725 )

Issuance of long-term incentive awards and dividend equivalents — — ( 7,140 ) 7,953 — ( 813 ) —

Issuance of equity-based incentive awards and dividend equivalents — — ( 25,140 ) 26,479 — ( 1,339 ) —

Stock-based compensation expense — — 37,381 3,242 — — 40,623

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

Other — — 1,739 1,330 — — 3,069

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Purchase of treasury stock, at cost — — — ( 73,285 ) — — ( 73,285 )

Issuance of long-term incentive awards and dividend equivalents — — ( 25,140 ) 26,479 — ( 1,339 ) —

Issuance of equity-based incentive awards and dividend equivalents — — ( 9,285 ) 10,443 — ( 1,158 ) —

Stock-based compensation expense — — 49,124 956 — — 50,080

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

Other — — 2,126 1,443 — — 3,569

4 unchanged sentences

Purchase of treasury stock, at cost — — — ( 132,063 ) — — ( 132,063 )

Issuance of long-term incentive awards and dividend equivalents — — ( 9,285 ) 10,443 — ( 1,158 ) —

Issuance of equity-based incentive awards and dividend equivalents — — ( 21,285 ) 25,085 — ( 3,800 ) —

Stock-based compensation expense — — 52,678 318 — — 52,996

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Dividends paid — — — — — ( 84,219 ) ( 84,219 )

Unrealized loss on marketable securities, net of tax — — — — ( 73 ) — ( 73 )

Unrealized gain on marketable securities, net of tax — — — — 91 — 91

Net income — — — — — 171,382 171,382

7 unchanged sentences

(in thousands) 2023 2022 2021

2022 2021 2020

Cash flows from operating activities

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Depreciation and amortization 42,708 40,660 38,547

Amortization of marketable securities 843 884 783

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

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Accounts receivable ( 71,114 ) ( 109,458 ) ( 120,560 )

Prepaid insurance ( 421 ) ( 1,121 ) 254

Prepaid insurance and related assets 4,693 ( 421 ) ( 1,121 )

Other current assets ( 14,215 ) ( 5,206 ) ( 13,851 )

2 unchanged sentences

Payroll taxes and other payroll deductions payable 10,288 88,193 89,932

Accrued worksite employee payroll expense 103,744 74,817 ( 67,023 )

Accrued worksite employee payroll costs 45,797 103,744 74,817

Accrued health insurance costs ( 6,942 ) 3,401 17,316

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Dividends paid ( 84,219 ) ( 76,592 ) ( 144,179 )

Borrowings under long-term debt agreement — — 100,000

Other 8,727 5,831 7,701

Client funds liability and other 60,726 8,727 5,831

Net cash used in financing activities ( 155,012 ) ( 141,150 ) ( 208,073 )

Net increase in cash, cash equivalents, restricted cash and funds held for clients 21,746 174,419 21,069

Cash, cash equivalents, restricted cash and funds held for clients at beginning of year 839,500 786,699 592,550

Cash, cash equivalents, restricted cash and funds held for clients at end of year $ 1,013,919 $ 807,768 $ 786,699

Cash, cash equivalents, restricted cash and funds held for clients beginning of year

1,013,919 839,500 786,699

Cash, cash equivalents, restricted cash and funds held for clients end of year

$ 1,035,665 $ 1,013,919 $ 807,768

See accompanying notes.

2023 Form 10-K

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(in thousands) 2023 2022 2021

Supplemental disclosures of cash flow information

Supplemental cash flow information:

Income taxes, net $ 62,879 $ 57,354 $ 53,835

1 unchanged sentence

ROU assets obtained in exchange for lease obligations 22,177 9,736 19,572

Excise tax liability accrued for common stock repurchases 544 — —

See accompanying notes.

2023 Form 10-K

Notes to the Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting Policies

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

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.

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 Recruiting Services, Employment Screening, Retirement Services, and Insurance Services.

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Revenue and Direct Cost Recognition

We enter into contracts with our customers for HR services based on a stated rate and price in the contract.

We enter into contracts with our customers for human resources services based on a stated rate and price in the contract.

Our contracts generally establish pricing for a period of 12 months and are generally cancellable at any time by either party with 30-days’ notice.

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

Revenues that have been recognized but not invoiced represent unbilled accounts receivable included in accounts receivable, net on our Consolidated Balance Sheets.

Revenues that have been recognized but not invoiced

2023 Form 10-K

Notes to the Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

represent unbilled accounts receivable of $ 668.9 million and $ 600.4 million at December 31, 2023 and December 31, 2022, and are included in accounts receivable, net on our 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.

These costs are recorded in commissions in our Consolidated Statements of Income and Comprehensive Income.

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

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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 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.

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.

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

Year Ended December 31,

(in thousands) 2023 2022 2021

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

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

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

Consistent with our revenue recognition policy, our direct costs do not include the payroll cost of our WSEEs.

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We operate one reportable segment under ASC 280, Segment Reporting .

2023 Form 10-K

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Principles of Consolidation

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Financial instruments that could potentially subject us to concentration of credit risk include accounts receivable and marketable securities.

2022 Form 10-K

Notes to the Consolidated Financial Statements

Cash, Cash Equivalents and Marketable Securities

23 unchanged sentences

Property and equipment, net $ 197,424 $ 199,992

2023 Form 10-K

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated useful lives of property and equipment for purposes of computing depreciation are as follows:

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ASC 360-10 requires that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed to not be recoverable.

If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would assess recoverability based on the estimated undiscounted future cash

2022 Form 10-K

Notes to the Consolidated Financial Statements

flows to be generated from the applicable asset or asset group.

If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset or asset group.

In addition, we may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value of the asset.

Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset.

Cloud Computing Arrangements

We incur costs to implement cloud computing arrangements that are hosted by third party vendors.

SaaS implementation costs associated with cloud computing arrangements are capitalized when incurred during the application development phase.

The capitalized costs are recorded in our short-term and long-term other assets on our Consolidated Balance Sheets.

Amortization is calculated on a straight-line basis over the contractual term of the cloud computing arrangement, typically a two to five year period.

We recognized $5.7 million and $1.9 million in amortization of SaaS implementation costs in 2023 and 2022, respectively.

Unamortized SaaS implementation costs were $23.7 million and $20.2 million at December 31, 2023 and 2022, respectively.

We determine if an arrangement is a lease at inception of a contract in accordance with ASC 842, Leases, as well as the Financial Accounting Standards Board issued Accounting Standards Updates clarifying the lease guidance.

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Based on the results of our analysis, no impairment loss was recognized in 2023 , 2022 or 2021 .

2023 Form 10-K

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Health Insurance 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 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.

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 (known as Harvard Pilgrim Health Care (HPHC) beginning in 2024), 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 participant’s annual claim costs that exceed $1 million.

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.

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 (“Pooling Limit”).

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 Income and Comprehensive Income.

The estimated incurred but not reported claims are based upon:

6 unchanged sentences

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.

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 as of December 31, 2022, and is reported as a long-term asset.

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 December 31, 2023, and is included in deposits - health insurance as a long-term asset on our Consolidated Balance Sheets.

As of December 31, 2023, Plan Costs were more than the net premiums paid and owed to United by $ 23.5 million.

As this amount is less than the agreed-upon $ 9.0 million surplus maintenance level, the $ 32.5 million difference is included in accrued health insurance costs, a current liability, in our Consolidated Balance Sheets.

The premiums,

2022 Form 10-K

Notes to the Consolidated Financial Statements

including the additional quarterly premiums, owed to United at December 31, 2022, were $ 46.4 million, which is also included in accrued health insurance costs, a current liability in our Consolidated Balance Sheets.

Our benefits costs incurred included an increase of $ 12.1 million in 2022, an increase of $ 4.9 million in 2021, and a reduction of $ 0.2 million in 2020 for changes in estimated run-off related to prior periods.

The premiums, including the additional quarterly premiums, owed to United at December 31, 2023 were $ 6.5 million, which is included in accrued health insurance costs, a current liability in our Consolidated Balance Sheets.

Our benefits costs incurred in 2023 included a decrease of $ 13.0 million for changes in estimated run-off related to prior periods, net of Pooling Limit.

Our benefits costs incurred in 2022 included an increase of $ 12.1 million for changes in estimated run-off related to prior periods.

Our benefits costs incurred in 2021 included an increase of $4.9 million for changes in estimated run-off related to prior periods.

Workers’ Compensation Costs

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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.

2023 Form 10-K

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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 years ended December 31, 2022, 2021 and 2020, we reduced accrued workers’ compensation costs by $ 42.2 million, $ 41.7 million, and $ 42.1 million, respectively, for changes in estimated losses related to prior reporting periods.

During the years ended December 31, 2023, 2022, and 2021, we reduced accrued workers’ compensation costs by $ 33.5 million, $ 42.2 million and $ 41.7 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 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.

Treasury rates that correspond with the weighted average estimated claim payout period (the average discount rate utilized in 2023 was 4.3 % and in 2022 was 2.9 %) 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.

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

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(in thousands) 2023 2022

Beginning balance $ 239,623 $ 240,761

Beginning balance, January 1, $ 229,408 $ 239,623

Accrued claims 61,720 49,121

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Total accrued claims $ 220,255 $ 229,408

The current portion of accrued workers’ compensation costs on the Consolidated Balance Sheets at December 31, 2022 and 2021 includes $ 3.7 million and $ 3.6 million, respectively, of workers’ compensation administrative fees.

The current portion of accrued workers’ compensation costs on our Consolidated Balance Sheets at December 31, 2023 and 2022 includes $ 3.1 million and $ 3.7 million, respectively, of workers’ compensation administrative fees.

The undiscounted accrued workers’ compensation costs were $ 250.0 million as of December 31, 2023 and $ 250.5 million as of December 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”).

2022 Form 10-K

Notes to the Consolidated Financial Statements

of claim funds is primarily based upon anticipated WSEE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier.

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.

Our estimate of incurred claim costs expected to be paid within one year is included in current liabilities, while our estimate of incurred claim costs expected to be paid beyond one year is included in noncurrent liabilities on our Consolidated Balance Sheets.

The level of claim funds is primarily based upon anticipated WSEE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier.

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 Consolidated Balance Sheets.

During 2023, we received $ 46.3 million for the return of excess claim funds related to the workers’ compensation program, which resulted in a decrease to deposits – workers’ compensation.

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

Stock-Based Compensation

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Restricted stock unit grants to officers and other employees generally vest over a period of three years from the date of grant.

Restricted stock units are valued based on the fair value on date of grant and the associated expense, net of estimated forfeitures, and are recognized over the requisite service period.

Restricted stock units are valued based on the fair value on date of grant and the associated expense, net of estimated forfeitures, and are

2023 Form 10-K

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

recognized over the requisite service period.

Stock grants issued to non-employee directors are 100% vested on the grant date.

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Company-Sponsored 401(k) Retirement Plans

Under our 401(k) retirement plan for corporate employees (the “Corporate Plan”), we matched 100 % of eligible corporate employees’ contributions, up to 6 % of the employees’ eligible compensation in 2022, ranging from 3 % to 6 % of the employees’ eligible compensation in 2021, and up to 6 % of the employees’ eligible compensation in 2020.

Under our 401(k) retirement plan for corporate employees (the “Corporate Plan”), we matched 100 % of eligible corporate employees’ contributions, up to 6 % of the employees’ eligible compensation in 2023 and 2022, and ranging from up to 3% to up to 6 % of the employees’ eligible compensation in 2021.

Matching contributions under the Corporate Plan are immediately vested.

During 2022, 2021 and 2020, we made matching contributions on behalf of corporate employees to the Corporate Plan of $ 14.4 million, $ 8.2 million, and $ 12.6 million, respectively, and are included in salaries, wages and payroll taxes in our Consolidated Statements of Operations.

During 2023 , 2022 and 2021, we made matching contributions on behalf of corporate employees to the Corporate Plan of $ 16.9 million, $ 14.4 million, and $ 8.2 million, respectively, and are included in salaries, wages and payroll taxes in our Consolidated Statements of Income and Comprehensive Income.

Under our separate 401(k) retirement plan for WSEEs (the “Worksite Employee Plan”), the match percentage for WSEEs ranges from 0 % to 6 %, as determined by each client company.

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Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and income tax carrying amounts of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse.

Please read Note 7, “Income Taxes,” for additional information .

Recent Accounting Pronouncements

In November 2023, the Financial Standards Accounting Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

ASU 2023-07 expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 14, 2024, with early adoption permitted.

We are currently evaluating the guidance and have not determined the impact this standard may have on our Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topics 740):

Improvements to Income Tax Disclosures.

ASU2023-09 expands the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted.

We are currently evaluating the guidance and have not determined the impact this standard may have on our Consolidated Financial Statements.

2023 Form 10-K

Notes to the Consolidated Financial Statements

Note 7, “ Income Taxes ,” for additional information.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Balance Sheet Information

Cash, Cash Equivalents and Marketable Securities

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

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

December 31, 2023 December 31, 2022

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

Overnight holdings $ 611,100 $ — $ 611,100 $ 678,512 $ — $ 678,512

Investments holdings 56,963 33,068 90,031 88,951 31,791 120,742

Total financial assets 735,475 33,068 768,543 579,105 31,791 610,896

Investment holdings 119,408 15,905 135,313 56,963 33,068 90,031

730,508 15,905 746,413 735,475 33,068 768,543

Cash in demand accounts 26,931 — 26,931 41,047 — 41,047

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Total $ 692,873 $ 15,905 $ 708,778 $ 732,828 $ 33,068 $ 765,896

Our cash and overnight holdings fluctuate based on the timing of the client’s payroll processing cycle.

Included in the cash balance as of December 31, 2022 and December 31, 2021, are $ 504.8 million and $ 424.8 million, respectively, in withholdings associated with federal and state income taxes, employment taxes and other payroll deductions, as well as $36.8 million and $20.1 million, respectively, in client prepayments.

2022 Form 10-K

Notes to the Consolidated Financial Statements

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

Our cash, cash equivalents and marketable securities at December 31, 2023 and December 31, 2022 included $ 510.1 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 $ 27.6 million and $ 36.8 million, respectively, in client prepayments.

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

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(in thousands) 2023 2022 2021

Supplemental schedule of cash, cash equivalents, restricted cash and funds held for clients

Supplemental schedule of cash and cash equivalents, restricted cash and funds held for clients

Cash and cash equivalents $ 732,828 $ 575,812 $ 554,846

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Cash, cash equivalents, restricted cash and funds held for clients beginning of year

Supplemental schedule of cash, cash equivalents, restricted cash and funds held for clients

$ 1,013,919 $ 839,500 $ 786,699

Cash and cash equivalents $ 692,873 $ 732,828 $ 575,812

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Deposits – workers’ compensation 198,170 196,370 185,027

Cash, cash equivalents, restricted cash end of year and funds held for clients $ 1,013,919 $ 807,768 $ 786,699

Cash, cash equivalents, restricted cash and funds held for clients end of year

$ 1,035,665 $ 1,013,919 $ 807,768

(1) Funds held for clients represent amounts held in trust for the benefit of our customers of Workforce Acceleration, our traditional payroll solution, 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.

Prior period amounts have not been adjusted to this presentation as the amounts are immaterial to our Consolidated Financial Statements.

Previously, the changes in funds held for clients and the related client fund liabilities were presented within operating activities in our Consolidated Statements of Cash Flows.

Previously, the changes in funds held for clients and the related client fund liabilities were

2023 Form 10-K

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

presented within operating activities in our Consolidated Statements of Cash Flows.

Funds held for clients are held in a trust separate from our company funds and we do not use these funds held for clients for any corporate activity.

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• Level 3 - significant unobservable inputs

2022 Form 10-K

Notes to the Consolidated Financial Statements

Fair Value of Instruments Measured and Recognized at Fair Value

The following tables summarize the levels of fair value measurements of our financial assets:

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

December 31, 2023 December 31, 2022

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Municipal bonds — — — 3,365 — 3,365

Total financial assets $ 768,543 $ 765,178 $ 3,365 $ 610,896 $ 584,887 $ 26,009

Please read Note 2.

“ Other Balance Sheet Information ,” for additional information.

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

746,413 746,413 — 768,543 765,178 3,365

Deposits - money market funds

22,292 22,292 — — — —

$ 768,705 $ 768,705 $ — $ 768,543 $ 765,178 $ 3,365

Please read Note 2 “ Other Balance Sheet Informat i o n ,” for additional information.

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

government securities.

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The following is a summary of our available-for-sale marketable securities:

(in thousands) Amortized

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

December 31, 2023

Treasury bills $ 15,896 $ 9 $ — $ 15,905

Municipal bonds 3,369 — ( 4 ) 3,365

December 31, 2022

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As of December 31, 2023, the contractual maturities of all marketable securities in our portfolio were less than one year.

2023 Form 10-K

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Other Financial Instruments

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

At December 31, 2022, the carrying value of our borrowings under our revolving credit facility approximates fair value and was classified as Level 2 in the fair value hierarchy.

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 December 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 6, “ Long-Term Debt ,” for additional information.

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Accounts receivable, net $ 693,878 $ 622,764

2022 Form 10-K

Notes to the Consolidated Financial Statements

Our accounts receivable is primarily composed of trade receivables and unbilled receivables.

Our trade receivables, which represent outstanding gross billings to clients, are reported net of allowance for doubtful accounts of $ 1.0 million as of December 31, 2022 and 2021.

Our trade receivables, which represent outstanding gross billings to clients, are reported net of allowance for doubtful accounts of $ 1.1 million and $ 1.0 million as of December 31, 2023 and 2022, respectively.

We establish an allowance for doubtful accounts based on management’s assessment of the collectability of specific accounts and by making a general provision for other potentially uncollectible amounts.

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These accruals are included in accrued worksite employee payroll cost and unbilled accounts receivable;

however, these amounts are presented net in the Consolidated Statements of Operations.

however, these amounts are presented net in the Consolidated Statements of Income and Comprehensive Income.

We generally require clients to pay invoices for service fees no later than the same day as the applicable payroll date.

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Deposits and prepaid health insurance $ 215,070 $ 213,270

2023 Form 10-K

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The contractual arrangement with United for health insurance coverage requires us to maintain an accumulated cash surplus in the plan of $ 9.0 million, which is reported as deposits and prepaid health insurance in our Consolidated Balance Sheets.

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Long-Term Debt

We have a $ 650 million revolving credit facility (the “Facility”) which is available for working capital and general corporate purposes, including acquisitions, stock repurchases and issuances of letters of credit.

Borrowings 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”).

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.

In addition, as of December 31, 2022, we had an outstanding $ 1.0 million letter of credit issued under the Facility.

As of December 31, 2022, our outstanding balance on the Facility was $ 369.4 million and is due when the Facility matures on June 30, 2027 .

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

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

Our obligations under the Facility are secured by 100 % of the stock of our captive insurance subsidiary and are guaranteed by all of our subsidiaries other than our captive insurance subsidiary and certain other excluded subsidiaries.

At December 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 an alternate base rate or Adjusted Term SOFR for term SOFR loans, in either case plus an applicable margin.

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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

2022 Form 10-K

Notes to the Consolidated Financial Statements

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 during 2022 was 3.5 %.

The average interest rate for 2023 was 6.88 %.

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

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

2023 Form 10-K

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes.

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Accrued rent 1,781 1,790

Software development costs

Stock-based compensation 14,332 12,255

Operating lease liabilities 20,007 19,508

Minority investment impairment 675 681

Cares act deferral — 1,626

Other 1,010 972

4 unchanged sentences

2023 Form 10-K

Notes to the Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of income tax expense are as follows:

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The tax years 2019 through 2022 remain open to examination by various state tax authorities.

Stockholders’ Equity (Deficit)

Stockholders' Equity

During 2023, we repurchased or withheld an aggregate of 1,259,109 shares of our common stock, as described below.

Repurchase Program

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

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

We repurchased 671,468 shares under the Repurchase Program during 2022.

In addition, 99,001 shares were withheld during 2022 to satisfy minimum tax withholding obligations for the vesting of long-term incentive, restricted stock awards and restricted stock units, which are not subject to the Repurchase Program.

During 2021, we repurchased 424,509 shares under the Repurchase Program and 291,129 shares were withheld to satisfy minimum tax withholding obligations for the vesting of long-term incentive and restricted stock awards.

At December 31, 2022, we were authorized to repurchase an additional 1,032,160 shares under the Repurchase Program.

Shares repurchased under the Repurchase Program are recorded in treasury.

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 2023, 1,062,598 shares were repurchased under the Repurchase Program.

On August 1, 2023, we announced that our Board authorized an increase of 2,000,000 shares that may be repurchased under the Repurchase Program.

As of December 31, 2023, we were authorized to repurchase an additional 1,969,562 shares under the Repurchase Program.

The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposes a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022.

During 2023, we recorded the applicable excise tax in treasury stock as part of the cost basis of stock repurchased and recorded a corresponding

2023 Form 10-K

Notes to the Consolidated Financial Statements

The Board declared quarterly dividends as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

liability for the excise tax payable in other accrued liabilities in our Consolidated Balance Sheets.

Withheld Shares

During 2023, we withheld 196,511 shares to satisfy tax withholding obligations for the vesting of long-term incentive and restricted stock unit awards.

The Board declared and paid quarterly dividends as follows:

(amounts per share) 2023 2022

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Fourth quarter 0.57 0.52

____________________________________

(1) Includes a $2.00 per share special dividend .

During 2022 and 2021, we paid a total of $ 76.6 million and $ 144.2 million, respectively, in dividends.

The dividends paid in 2021 includes a special dividend of $ 76.7 million.

During 2023 and 2022, we declared and paid dividends totaling $ 84.2 million and $ 76.6 million, respectively.

Preferred Stock

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We granted performance units under the LTIP to our named executive officers and certain other officers in 2023 , 2022 and 2021.

Employees who attain a minimum age of 62 and have provided 15 years or more of continuous service may continue to vest in awards following a qualifying retirement as defined under the 2012 Incentive Plan award agreement, as though he or she were still an employee, provided the grant date of the award is six months or more before the employee’s last day of employment, the employee provides the Company with six months advance notice of retirement, the employee continues to work full-time during such six (6) month period, and the employee signs a waiver and release of claims.

In addition, in order to avoid forfeiting any outstanding award, a retired employee must refrain from providing any services, including but not limited to, as an employee, director, advisor, or independent contractor to a business engaged in providing any services offered by the Company and its subsidiaries and affiliates at the time of the employee’s retirement, including but not limited to PEO services, payroll services, retirement services or insurances services.

For a termination

Employees who attain a minimum age of 62 and have provided 15 years or more of continuous service may continue to vest in awards following a qualifying retirement as defined under the Incentive Plan award agreement, as though they were still an employee, provided the grant date of the award is six months or more before the employee’s last day of employment, the employee provides the Company with six months advance notice of retirement, the employee continues to work full-time during such six (6) month period, and the employee signs a waiver and release of claims.

2023 Form 10-K

Notes to the Consolidated Financial Statements

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

services offered by the Company and its subsidiaries and affiliates at the time of the employee’s retirement, including but not limited to PEO services, payroll services, retirement services or insurances services.

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

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

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Income tax benefit realized from stock-based compensation expense 12,643 13,483 10,677

Time-Based Restricted Stock Awards and Time-Based Restricted Stock Units

Time-based restricted stock awards (“RSAs”) and time-based restricted stock units (“RSUs”), under equity plan accounting, are generally measured at fair value on the date of grant based on the number of shares granted, estimated forfeitures and the quoted price of the common stock.

Time-Based Restricted Stock Units

Time-based restricted stock units (“RSUs”), under equity plan accounting, are generally measured at fair value on the date of grant based on the number of shares granted, estimated forfeitures and the quoted price of the common stock.

Such value is recognized as compensation expense over the corresponding vesting period, generally three years to five years for awards currently outstanding.

However, for some RSUs currently outstanding, compensation expense is accelerated over the shortened requisite service period for employees who meet the requirements for continued vesting.

The following is a summary of time-based RSAs and time-based RSUs award activity for 2022:

The following is a summary of time-based RSUs award activity for 2023 :

(in thousands)

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Non-vested — December 31, 2023 1,038 $ 106.98

Additional disclosures for time-based RSAs and time-based RSUs:

Additional disclosures for time-based RSUs:

Year Ended December 31,

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58.7 30.4 28.7

As of December 31, 2022, unrecognized compensation expense associated with the unvested RSAs and RSUs outstanding was $ 44.0 million and is expected to be recognized over a weighted average period of 23 months.

As of December 31, 2023, unrecognized compensation expense associated with the unvested RSUs outstanding was $ 59.3 million and is expected to be recognized over a weighted average period of 22 months.

Long-Term Incentive Program Awards

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A performance unit may be comprised of either a performance-based award or a market-based award.

For performance-based awards, performance units have a vesting schedule of three years and compensation expense is recognized based on the number of common shares expected to be issued and the market price per common share on the date of grant.

Over the performance period, the number of shares expected to be issued is adjusted upward or downward based upon the probability of achievement of the performance targets.

For market-based awards, performance units vest at the end of a three-year period assuming continued employment and achievement of market-based

2023 Form 10-K

Notes to the Consolidated Financial Statements

performance goals.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the date of grant.

Over the performance period, the number of shares expected to be issued is adjusted upward or downward based upon the probability of achievement of the performance targets.

For market-based awards, performance units vest at the end of a three-year period assuming continued employment and achievement of market-based performance goals.

The fair value of market-based performance awards was determined through the use of the Monte Carlo simulation method.

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The following is a summary of LTIP award activity, at 100% of targeted amount, for 2023 :

(in thousands)

Weighted Average

Number of Performance Units Weighted Average

Grant Date Fair

(in thousands)

Non-vested — December 31, 2022 272 $ 85.37

Granted 67 133.08

Vested ( 107 ) 70.05

Canceled ( 5 ) 114.34

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Earnings Per Share

From 2009 through 2021, we used the two-class method to compute basic earnings per share (“Basic EPS”) and diluted earnings per share ("Diluted EPS").

Under the accounting guidance for the calculation of earnings per share for share-based payment awards with rights to dividends or dividend equivalents, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of Basic EPS and Diluted EPS using the two-class method.

In 2022, our share-based payment awards with non-forfeitable rights to dividends became fully vested.

As a result, we are no longer required to use the two-class method and, at December 31, 2022, we used the treasury stock method to calculate 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 RSUs.

2022 Form 10-K

Notes to the Consolidated Financial Statements

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”).

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

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Net income $ 171,382 $ 179,350 $ 124,080

Less distributed and undistributed earnings allocated to participating securities — ( 210 ) ( 782 )

Net income allocated to common shares $ 179,350 $ 123,870 $ 137,455

Weighted average common shares outstanding 37,807 38,115 38,431

Incremental shares from assumed time-vested and performance-based RSU awards and conversions of common stock options 501 471 317

Incremental shares from assumed time-vested and performance-based RSU awards 535 501 471

Adjusted weighted average common shares outstanding 38,342 38,616 38,902

Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect 6 10 —

2023 Form 10-K

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We have operating leases for office space, other operating facilities, vehicles and office equipment.

Our fixed operating lease costs for 2022, 2021 and 2020 were $ 18.7 million, $ 18.2 million, and $ 17.3 million, respectively, and are included in general and administrative expenses on our Consolidated Statements of Operations.

Our fixed operating lease costs for 2023 , 2022 and 2021 were $ 19.5 million, $ 18.7 million, and $ 18.2 million, respectively, and are included in general and administrative expenses on our Consolidated Statements of Income and Comprehensive Income.

During 2023 , cash paid for amounts included in the measurement of operating lease liabilities was $ 22.9 million.

The following table presents the lease balances within our Consolidated Balance Sheets, weighted average lease term and weighted average discount rates related to our operating leases:

(dollars in thousands) Classification in Consolidated Balance Sheets December 31, 2022

(dollars in thousands) Classification in Consolidated Balance Sheets

December 31, 2023

Lease liabilities:

5 unchanged sentences

Operating lease ROU assets Right-of-use leased assets $ 57,438

Weighted average remaining lease term (years) 4

Weighted average remaining lease term

Weighted average discount rate 4.2 %

2022 Form 10-K

Notes to the Consolidated Financial Statements

The following presents the maturity of our operating leases liabilities as of December 31, 2023 :

5 unchanged sentences

Present value of lease liabilities $ 77,310

As of December 31, 2022, we have additional operating leases that have not yet commenced of $ 11.4 million with lease terms between one and seven years .

As of December 31, 2023 , we have additional operating leases that have not yet commenced of $ 29.7 million with lease terms between three and eleven years .

Commitments and Contingencies

2 unchanged sentences

At December 31, 2023, future purchase and service obligations greater than $100,000 and one year were as follows:

2023 Form 10-K

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

1 unchanged sentence

Total obligations $ 68,918

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.

2 unchanged sentences

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 9A. Controls and Procedures