What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-06 compared with 2024-05-01 · 145 added, 64 removed, 253 unchanged (45% of the section changed)

7 unchanged sentences

2024 Highlights

First Quarter 2024 Compared to First Quarter 2023

Second Quarter 2024 Compared to Second Quarter 2023

• Average number of WSEEs paid per month decreased 1%

• Net income and diluted earnings per share (“diluted EPS”) decreased 17% and 15% to $79 million and $2.08, respectively

• Net income and diluted earnings per share (“diluted EPS”) increased 50% and 45% to $18 million and $0.48, respectively

• Adjusted EPS increased 34% to $0.86

• Adjusted EBITDA increased 29% to $66 million

First Six Months 2024 Compared to First Six Months 2023

• Average number of WSEEs paid per month decreased 1%

• Net income and diluted EPS decreased 9% and 8% to $97 million and $2.56, respectively

• Adjusted EPS decreased 5% to $3.13

• Adjusted EBITDA decreased 7% to $142 million

• Adjusted EBITDA increased 2% to $208 million

Please read “ Non-GAAP Financial Measures ” for a reconciliation of adjusted EBITDA 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”).

Insperity | 2024 First Quarter Form 10-Q

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Key Financial and Statistical Data

(in millions, except per share, WSEE and statistical data)

Three Months Ended March 31,

2024 2023 % Change

(in millions, except per share, WSEE and statistical data) Three Months Ended June 30, Six Months Ended June 30,

2024 2023 % Change 2024 2023 % Change

Financial data:

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Operating expenses

257 224 15 % 259 226 15 %

Operating income

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

Three Months Ended March 31,

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

(per WSEE per month) 2024 2023 2024 2023

2 unchanged sentences

Revenues $ 1,743 $ 1,697 $ 1,859 $ 1,809

Insperity | 2024 First Quarter Form 10-Q

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

6 unchanged sentences

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

• During Q1 2024, WSEEs paid decreased 1% compared to Q1 2023.

The number of WSEEs paid from new client sales remained consistent compared to Q1 2023, while client retention and the net gain in our client base declined compared to Q1 2023.

• During Q2 2024, average WSEEs paid decreased 1% compared to Q2 2023.

The number of WSEEs paid from new client sales remained consistent with Q2 2023, while the net gain in our client base and client retention declined compared to Q2 2023.

• During the first six months of 2024 (“YTD 2024”), average WSEEs paid decreased 1% compared to the first six months of 2023 (“YTD 2023”).

The number of WSEEs paid from new client sales remained consistent with YTD 2023, while the net gain in our client base and client retention declined when compared to YTD 2023.

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Average WSEEs Paid and

Year-over-Year Growth Percentage

Insperity | 2024 First Quarter Form 10-Q

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

6 unchanged sentences

(amounts per share)

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our PEO HR Outsourcing Solutions revenues are primarily derived from our gross billings, which are based on (1) the payroll cost of our WSEEs and (2) a monthly markup component.

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Because our monthly markup is computed in part 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.

Insperity | 2024 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Year-over-Year Growth Percentage

(in millions)

First Quarter 2024 Compared to First Quarter 2023

Second Quarter 2024 Compared to Second Quarter 2023

Our revenues for Q2 2024 were $1.6 billion, an increase of 1%, primarily due to the following:

• Revenues per WSEE per month increased 3%, or $53.

• Revenues per WSEE per month increased 3%, or $46, partially offset by a 1% decrease in average WSEEs paid.

First Six Months 2024 Compared to First Six Months 2023

Our revenues for YTD 2024 were $3.4 billion, an increase of 2%, primarily due to the following:

• Revenues per WSEE per month increased 3%, or $50, partially offset by a 1% decrease in average WSEEs paid.

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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(1) The Southwest region includes Texas.

Insperity | 2024 First Quarter Form 10-Q

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

4 unchanged sentences

Currently, we have a dedicated sales management, service personnel, and consulting staff who concentrate solely on the middle market sector.

Our average number of WSEEs per month in our middle market sector decreased 4% during Q1 2024 compared to Q1 2023, representing approximately 25% and 26% of our total average paid WSEEs during Q1 2024 and Q1 2023, respectively.

Our average number of WSEEs per month in our middle market sector decreased 4% during YTD 2024 compared to YTD 2023, representing approximately 25% and 26% of our total average paid WSEEs during YTD 2024 and YTD 2023, respectively.

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.

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

Insperity | 2024 First Quarter Form 10-Q

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

First Quarter 2024 Compared to First Quarter 2023

Gross Profit and

3 unchanged sentences

Year-over-Year Growth Percentage

First Quarter 2024 Compared to First Quarter 2023

Second Quarter 2024 Compared to Second Quarter 2023

Gross profit for Q2 2024 increased 16% to $260 million compared to $225 million in Q2 2023.

Gross profit per WSEE per month for Q1 2024 increased $17 to $378 compared to $361 in Q1 2023 due primarily to higher average pricing, offset in part by higher direct costs, as discussed below.

Gross profit per WSEE per month for Q2 2024 increased $41 to $282 compared to $241 in Q2 2023 due primarily to higher average pricing and lower direct costs, as discussed below.

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

1 unchanged sentence

The net decrease in direct costs between Q2 2024 and Q2 2023 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $25 million as discussed below.

The $36 per WSEE per month increase in direct costs is due primarily to the direct cost components changes as follows:

Insperity | 2024 First Quarter Form 10-Q

The $5 per WSEE per month increase in direct costs

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

is due primarily to the direct cost component changes as follows:

Benefits costs

• The cost of group health insurance and related employee benefits increased $20 per WSEE per month and increased 4.6% on a cost per covered employee basis in Q1 2024 as compared to Q1 2023.

• The cost of group health insurance and related employee benefits decreased $18 per WSEE per month and decreased 0.4% on a cost per covered employee basis in Q2 2024 as compared to Q2 2023.

We did not experience the number and severity of large claims in Q2 2024 as compared to Q2 2023.

• The percentage of WSEEs covered under our health insurance plans was 64% in Q2 2024 compared to 65% in Q2 2023.

• Reported results include changes in estimated claims run-off related to prior periods, which was a reduction in costs of $18 million, or $20 per WSEE per month, in Q1 2024 compared to a decrease in costs of $9 million, or $10 per WSEE per month, in Q1 2023.

• Reported results include changes in estimated claims run-off related to prior periods, which was a reduction in costs of $25 million, or $27 per WSEE per month, in Q2 2024 compared to an increase in costs of $1 million, or $1 per WSEE per month, in Q2 2023.

Please read Note 2 to the Consolidated Financial Statements, “ Accounting Policies – Health Insurance Costs ,” for a discussion of our accounting for health insurance costs.

Workers’ compensation costs

Our continued discipline around our client selection, workplace safety and claims management has allowed for claims within our policy periods to be closed out at amounts below our original cost estimates.

• Workers’ compensation costs decreased $2 per WSEE per month in Q1 2024 compared to Q1 2023 while non-bonus payroll costs increased 2%.

• As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.22% in Q1 2024 and 0.25% in Q1 2023.

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 $1 per WSEE per month in Q2 2024 compared to Q2 2023 while non-bonus payroll costs increased 1%.

• As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.23% in both Q2 2024 and Q2 2023.

• We recorded a reduction in workers’ compensation costs of $7 million, or 0.09% of non-bonus payroll costs in Q2 2024, as a result of closing out claims at lower than expected costs.

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• Payroll taxes as a percentage of payroll costs were 7% in both Q2 2024 and Q2 2023.

First Six Months 2024 Compared to First Six Months 2023

Gross profit for YTD 2024 increased 9% to $605 million compared to $557 million in YTD 2023.

Gross profit per WSEE per month for YTD 2024 increased $30 to $330 compared to $300 in YTD 2023 due primarily to higher average pricing, offset in part by higher direct costs, as discussed below.

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 $50 due to higher average pricing of 3%.

The net decrease in direct costs between YTD 2024 and YTD 2023 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $18 million as discussed below.

The $20 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 $1 per WSEE per month, or 1.9% on a cost per covered employee basis.

We did not experience the number and severity of large claims in YTD 2024 as compared to YTD 2023.

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• The percentage of WSEEs covered under our health insurance plans was 64% in YTD 2024 compared to 65% in YTD 2023.

• Reported results include changes in estimated claims run-off related to prior periods, which was a decrease in costs of $26 million, or $14 per WSEE per month, in YTD 2024 compared to a decrease in costs of $10 million, or $5 per WSEE per month, in YTD 2023.

Please read Note 2 to the Consolidated Financial Statements, “ Accounting Policies – Health Insurance Costs ,” for a discussion of our accounting for health insurance costs.

Workers’ compensation costs

• Workers’ compensation costs decreased 5%, or $1 per WSEE per month, in YTD 2024 compared to YTD 2023.

• As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.23% in YTD 2024 and 0.24% in YTD 2023.

• We recorded a reduction in workers’ compensation costs of $17 million, or 0.11% of non-bonus payroll costs, in YTD 2024 compared to a reduction of $15 million, or 0.10% of non-bonus payroll costs, in YTD 2023, primarily as a result of closing out claims at lower than expected costs.

Please read Note 2 to the Consolidated Financial Statements, “ Accounting Policies – Workers' Compensation Costs ,” for a discussion of our accounting for health insurance costs.

Payroll tax costs

• Payroll taxes increased 2% on a 1% increase in payroll costs, or $19 per WSEE per month.

• Payroll taxes as a percentage of payroll costs was 7% in both YTD 2024 and YTD 2023.

Operating Expenses

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◦ outside professional service fees related to legal, consulting and accounting services

Insperity | 2024 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

◦ administrative costs, such as postage, printing and supplies

1 unchanged sentence

◦ facility costs, including repairs and maintenance

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

◦ technology costs, including software-as-a-service (“SaaS”) subscription costs, amortization of SaaS implementation costs and costs related to our strategic partnership with Workday, Inc.

• Depreciation and amortization — Depreciation and amortization expense is primarily a function of our capital investments in corporate facilities, service centers, sales offices, software development, and technology infrastructure.

First Quarter 2024 Compared to First Quarter 2023

Second Quarter 2024 Compared to Second Quarter 2023

The following table presents certain information related to our operating expenses:

Three Months Ended March 31,

Three Months Ended June 30,

(in millions, except per WSEE)

8 unchanged sentences

Workday SaaS licensing and implementation expense

4 — — % 4 — — %

All other general and administrative

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The increase was primarily due to a 6% increase in BPA, service and support headcount in Q2 2024 compared to Q2 2023 and higher incentive compensation accruals in Q2 2024.

• Stock-based compensation expense for Q2 2024 increased 33% to $20 million, or $6 per WSEE per month, compared to Q2 2023.

The increase was primarily due to an increase 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 higher than expected operating results in Q2 2024 and time-vested restricted stock unit awards issued under our incentive plan.

• Advertising expense for Q2 2024 decreased 29% to $12 million, or $5 per WSEE per month, compared to Q2 2023 due to a change in timing of advertising spend.

• General and administrative expenses for Q2 2024 increased 30% to $57 million, or $15 per WSEE per month, compared to Q2 2023.

The increase was primarily due to increased software licensing, maintenance costs, SaaS implementation expense, travel and training, and professional services fees.

The increase was primarily due to increased software licensing, maintenance costs, SaaS implementation expense, and professional services fees.

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

First Six Months 2024 Compared to First Six Months 2023

The following table presents certain information related to our operating expenses:

Six Months Ended June 30,

(in millions, except per WSEE) 2024 2023 % Change 2024 2023 % Change

Salaries $ 266 $ 235 13 % $ 145 $ 127 14 %

Stock-based compensation 30 26 15 % 16 14 14 %

Commissions 23 23 — 13 12 8 %

Advertising 19 23 (17) % 10 12 (17) %

General and administrative:

Amortization of SaaS implementation costs 6 3 100 % 3 1 200 %

Workday SaaS licensing and implementation expense 12 — — 7 — —

All other general and administrative 96 89 8 % 53 49 8 %

Total general and administrative 114 92 24 % 63 50 26 %

Depreciation and amortization 22 21 5 % 12 11 9 %

Total operating expenses 474 420 13 % $ 259 $ 226 15 %

Operating expenses for YTD 2024 increased 13% to $474 million compared to $420 million in YTD 2023.

Operating expenses per WSEE per month for YTD 2024 increased 15% to $259 compared to $226 in YTD 2023.

• Salaries of corporate and sales staff for YTD 2024 increased 13% to $266 million, or $18 per WSEE per month, compared to YTD 2023.

The increase was primarily due to a 6% increase in BPA, service and support headcount and staff compensation levels, and higher incentive compensation expense in YTD 2024 compared to YTD 2023.

• Stock-based compensation expense for YTD 2024 increased 15% to $30 million, or $2 per WSEE per month, compared to YTD 2023.

The increase was primarily due to time-vested restricted stock unit awards issued under our incentive plan.

• Advertising expense for YTD 2024 decreased 17% to $19 million, or $2 per WSEE per month, compared to YTD 2023 due to a change in timing of advertising spend.

• General and administrative expenses for YTD 2024 increased 24% to $114 million, or $13 per WSEE per month, compared to YTD 2023.

The increase was primarily due to increased professional services fees, software licensing and maintenance costs and amortization of SaaS implementation costs.

• Depreciation and amortization expense for YTD 2024 increased 5% to $22 million, or $1 per WSEE per month, compared to YTD 2023.

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

Income Tax Expense

Three Months Ended March 31,

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

2024 2023 2024 2023

Effective income tax rate 28% 25% 29% 24%

For the three months ended March 31, 2024, our provision for income taxes differed from the U.S.

For the six months ended June 30, 2024, our provision for income taxes differed from the U.S.

statutory rate primarily due to state income taxes, non-deductible expenses and vesting of restricted and long-term incentive stock awards.

Insperity | 2024 First Quarter Form 10-Q

During the first six months of 2024 we did not recognize an income tax benefit as compared to an income tax benefit of $5 million for the first six months of 2023, related to the vesting of long-term incentive and restricted stock awards.

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

During the first three months of 2024 and 2023, we recognized an income tax benefit of $0 and $5 million, respectively, related to the vesting of long-term incentive and restricted stock awards.

Non-GAAP Financial Measures

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

(in millions, except per WSEE per month)

Three Months Ended March 31,

Per WSEE Per WSEE

(in millions, except per WSEE per month) Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Per WSEE Per WSEE Per WSEE Per WSEE

Payroll cost $ 8,756 $ 9,508 $ 8,660 $ 9,272 $ 18,437 $ 10,061 $ 18,341 $ 9,893

5 unchanged sentences

1 % 2 % 10 % 3 % 1 % 2 % 12 % 3 %

Insperity | 2024 First Quarter Form 10-Q

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

2 unchanged sentences

(in millions)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Cash, cash equivalents and marketable securities $ 692 $ 709

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

Three Months Ended March 31,

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

(in millions, except per WSEE per month) 2024 2023 2024 2023

Per WSEE Per WSEE

Per WSEE Per WSEE Per WSEE Per WSEE

Net income $ 18 $ 20 $ 12 $ 14 $ 97 $ 53 $ 107 $ 58

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Depreciation and amortization

11 12 11 12 22 12 21 11

EBITDA 46 50 36 38 178 98 177 96

Stock-based compensation

20 22 15 16 30 16 26 14

Adjusted EBITDA $ 66 $ 72 $ 51 $ 54 $ 208 $ 114 $ 203 $ 110

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Three Months Ended

June 30, Six Months Ended

(in millions) 2024 2023 2024 2023

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% Change period over period 32 % (45) % (7) % 5 %

Insperity | 2024 First Quarter Form 10-Q

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(amounts per share) 2024 2023 2024 2023

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% Change period over period

34 % (45) % (5) % 5 %

Liquidity and Capital Resources

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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 $683 million in cash, cash equivalents and marketable securities at March 31, 2024, of which approximately $443 million was payable in early April 2024 for withheld federal and state income taxes, employment taxes and other payroll deductions, and approximately $34 million represented client prepayments that were payable in April 2024.

At March 31, 2024, we had working capital of $213 million compared to $159 million at December 31, 2023.

We had $692 million in cash, cash equivalents and marketable securities at June 30, 2024, of which approximately $459 million was payable in early July 2024 for withheld federal and state income taxes, employment taxes and other payroll deductions, approximately $22 million represented client prepayments that were payable in July 2024, and includes $97 million of funds we received in late June 2024 from the Internal Revenue Service related to employee retention tax credits claimed by our PEO clients under the COVID relief programs that were distributed to clients in early July 2024.

At June 30, 2024, we had working capital of $238 million compared to $159 million at December 31, 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 the remainder of 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.

As of March 31, 2024, we had outstanding letters of credit and borrowings totaling $370 million under the Facility.

As of June 30, 2024, we had outstanding letters of credit and borrowings totaling $370 million under the Facility.

Please read Note 5 to the Consolidated Financial Statements, “ Long-Term Debt ,” for additional information.

Cash Flows from Operating Activities

Net cash provided by operating activities in the first three months of 2024 was $31 million.

Net cash provided by (used in) operating activities in the first six months of 2024 was $51 million.

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

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

In the three months ended March 31, 2024, the last business day of the reporting period was a Friday, client prepayments were $34 million and employment taxes and other deductions were $443 million.

In the three months ended March 31, 2023, the last business day of the reporting period was also a Friday, client prepayments were $44 million and employment taxes and other deductions were $458 million.

Insperity | 2024 First Quarter Form 10-Q

In the six months ended June 30, 2024, the last business day of the reporting period was a Friday, client prepayments were $22 million and employment taxes and other deductions were $459 million, which includes $97 million of funds we received in late June 2024 from the Internal Revenue Service related to employee retention tax credits claimed by our PEO clients under the COVID relief programs that were distributed to clients in early July 2024.

In the six months ended June 30, 2023, the last business day of the

Insperity | 2024 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

reporting period was also a Friday, client prepayments were $31 million and employment taxes and other deductions were $366 million.

• Workers’ compensation plan funding — During YTD 2024, we received $38 million for the return of excess claim funds related to the workers’ compensation program, which resulted in an increase in working capital.

• 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.

1 unchanged sentence

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 March 31, 2024, Plan Costs were less than the net premiums paid and owed to United by $33 million, which is $24 million in excess of our agreed-upon $9 million surplus maintenance level.

The $24 million difference is therefore reflected as a current asset and $9 million is reflected as a long-term asset on our Condensed Consolidated Balance Sheet at March 31, 2024.

In addition, the premiums owed to United at March 31, 2024, were $63 million, which is included in accrued health insurance costs, a current liability, on our Condensed Consolidated Balance Sheet.

As of June 30, 2024, Plan Costs were less than the net premiums paid and owed to United by $27 million, which is $18 million in excess of our agreed-upon $9 million surplus maintenance level.

The $18 million difference is therefore reflected as a current asset and $9 million is reflected as a long-term asset on our Condensed Consolidated Balance Sheet at June 30, 2024.

In addition, the premiums owed to United at June 30, 2024, were $35 million, which is included in accrued health insurance costs, a current liability, on our Condensed Consolidated Balance Sheet.

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

Our adjusted net income decreased 17% to $86 million in the first three months of 2024, compared to $103 million in the first three months of 2023.

Please read “ Results of Operations – First Quarter 2024 Compared to First Quarter 2023.”

Our adjusted net income decreased 7% to $119 million in the first six months of 2024, compared to $128 million in the first six months of 2023.

Please read “ Results of Operations – Second Quarter 2024 Compared to Second Quarter 2023.”

Cash Flows from Investing Activities

Net cash flows used in investing activities were $5 million for the three months ended March 31, 2024, primarily due to property and equipment purchases of $5 million.

Net cash flows used in investing activities were $11 million for the six months ended June 30, 2024, primarily due to property and equipment purchases of $11 million.

Cash Flows from Financing Activities

Net cash flows used in financing activities were $83 million for the three months ended March 31, 2024.

Net cash flows used in financing activities were $127 million for the six months ended June 30, 2024.

We paid $44 million in dividends and repurchased or withheld $37 million in stock.

In addition, client funds liability and other financing activities decreased by $46 million.

Insperity | 2024 First Quarter Form 10-Q

Insperity | 2024 Second Quarter Form 10-Q

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND CONTROLS AND PROCEDURES

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis