What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-04-29 compared with 2024-10-31 · 80 added, 167 removed, 242 unchanged (51% of the section changed)

7 unchanged sentences

2025 Highlights

Third Quarter 2024 Compared to Third Quarter 2023

• Average number of WSEEs paid per month decreased 2%

• Net income and diluted earnings per share (“EPS”) decreased 93% and 94% to $3 million and $0.07, respectively

First Quarter 2025 Compared to First Quarter 2024

• Average number of WSEEs paid per month increased 1%

• Net income and diluted earnings per share (“EPS”) both decreased 35% to $51 million and $1.35, respectively

• Adjusted net income and adjusted EPS both decreased 31% to $59 million and $1.57, respectively

• Adjusted EBITDA decreased 28% to $102 million

First Nine Months 2024 Compared to First Nine Months 2023

• Average number of WSEEs paid per month decreased 1%

• Net income and diluted EPS decreased 34% and 33% to $100 million and $2.63, respectively

• Adjusted net income and adjusted EPS decreased 27% and 26% to $134 million and $3.53, respectively

• Adjusted EBITDA decreased 17% to $247 million

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

Insperity | 2024 Third Quarter Form 10-Q

Insperity | 2025 First 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 September 30, Nine Months Ended September 30,

2024 2023 % Change 2024 2023 % Change

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

Three Months Ended March 31,

2025 2024 % Change

Financial data:

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Operating expenses

246 210 17 % 254 221 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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(per WSEE per month) 2025 2024

2 unchanged sentences

Revenues $ 2,029 $ 1,977

Insperity | 2024 Third Quarter Form 10-Q

Insperity | 2025 First 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 Q3 2024, average WSEEs paid decreased 2% compared to Q3 2023.

The number of WSEEs paid from new client sales declined compared with Q3 2023, while client retention and the net change in our client base remained consistent with Q3 2023.

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

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

• During Q1 2025, average WSEEs paid increased 1% compared to Q1 2024.

The number of WSEEs paid from new client sales and client retention increased compared with Q1 2024, while the net change in our client base decreased compared with Q1 2024.

Average WSEEs Paid and

Year-over-Year Growth Percentage

Insperity | 2024 Third Quarter Form 10-Q

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

6 unchanged sentences

(in millions)

Insperity | 2024 Third Quarter Form 10-Q

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

7 unchanged sentences

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

Because our monthly markup is computed in part as a

Insperity | 2024 Third Quarter Form 10-Q

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 | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

Year-over-Year Growth Percentage

(in millions)

Third Quarter 2024 Compared to Third Quarter 2023

First Quarter 2025 Compared to First Quarter 2024

Our revenues for Q1 2025 were $1.9 billion, an increase of 3%, primarily due to the following:

• Revenues per WSEE per month increased 3%, or $44, partially offset by a 2% decrease in average WSEEs paid.

First Nine Months 2024 Compared to First Nine Months 2023

Our revenues for YTD 2024 were $5.0 billion, an increase of 1%, primarily due to the following:

• Revenues per WSEE per month increased 3%, or $48, partially offset by a 1% decrease in average WSEEs paid.

Insperity | 2024 Third Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• Average WSEEs paid increased 1%.

• Revenues per WSEE per month increased 3%, or $52.

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 | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The percentage of total PEO HR Outsourcing Solutions revenue in our significant markets includes the following:

Significant Markets

The middle market sector, which we generally define as those companies with approximately 150 to 5,000 WSEEs, includes smaller clients whose number of WSEEs has grown to approximately 150 or more WSEEs.

We generally define the middle market sector as those companies with approximately 150 to 5,000 WSEEs.

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 YTD 2024 compared to YTD 2023, representing approximately 26% of our total average paid WSEEs in both YTD 2024 and YTD 2023.

Insperity | 2024 Third Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our average number of WSEEs per month in our middle market sector increased 4% during Q1 2025 compared to Q1 2024, representing approximately 26% and 25% of our total average paid WSEEs in Q1 2025 and Q1 2024, 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.

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

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

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

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

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Gross Profit and

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(in millions)

Insperity | 2024 Third Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Gross Profit per WSEE per Month and

Year-over-Year Growth Percentage

Third Quarter 2024 Compared to Third Quarter 2023

First Quarter 2025 Compared to First Quarter 2024

Gross profit for Q1 2025 decreased 10% to $310 million compared to $345 million in Q1 2024.

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The $92 per WSEE per month increase in direct costs is due primarily to the direct cost component changes as follows:

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Benefits costs

• The cost of group health insurance and related employee benefits increased $45 per WSEE per month and increased 7.7% on a cost per covered employee basis in Q3 2024 as compared to Q3 2023.

• The percentage of WSEEs covered under our health insurance plans was 63% in Q3 2024 compared to 65% in Q3 2023.

• Reported results include changes in estimated claims run-off related to prior periods, which was a reduction in costs of $12 million, or $13 per WSEE per month, in Q3 2024 compared to a decrease in costs of $23 million, or $24 per WSEE per month, in Q3 2023.

• The cost of group health insurance and related employee benefits increased $56 per WSEE per month and increased 8.4% on a cost per covered employee basis driven by an acceleration in inpatient, outpatient, and pharmacy costs and in the frequency of large claim activity in Q1 2025 as compared to Q1 2024.

• The percentage of WSEEs covered under our health insurance plans was 64% in both Q1 2025 and Q1 2024.

• Reported results include changes in estimated claims run-off related to prior periods, which was an increase in costs of $12 million, or $13 per WSEE per month, in Q1 2025 compared to a decrease in costs of $18 million, or $20 per WSEE per month, in Q1 2024.

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 contributed to the 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 $4 per WSEE per month in Q3 2024 compared to Q3 2023 while non-bonus payroll costs remained flat.

Insperity | 2024 Third Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• Workers’ compensation costs increased 13%, or $2 per WSEE per month, in Q1 2025 compared to Q1 2024.

• As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.24% in Q1 2025 compared to 0.22% in Q1 2024.

• We recorded a reduction in workers’ compensation costs of $8 million, or 0.09% of non-bonus payroll costs in Q3 2024, as a result of closing out claims at lower than expected costs.

In Q3 2023, we recorded a reduction of $11 million, or 0.13% of non-bonus payroll costs.

• Our continued discipline around our client selection, workplace safely and claims management has allowed for claims to be closed out at amounts below our original cost estimates, resulting in a reduction in workers’ compensation costs of $7 million, or 0.08% of non-bonus payroll costs in Q1 2025, compared to a reduction of $9 million, or 0.11% of non-bonus payroll costs in Q1 2024.

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

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• Payroll taxes as a percentage of payroll costs were 8% in both Q1 2025 and Q1 2024.

First Nine Months 2024 Compared to First Nine Months 2023

Gross profit for YTD 2024 increased 2% to $834 million compared to $815 million in YTD 2023.

Gross profit per WSEE per month for YTD 2024 increased $11 to $302 compared to $291 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 $48 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 $17 million as discussed below.

The $37 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 $16 per WSEE per month, or 3.9% on a cost per covered employee basis.

• 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 $32 million, or $12 per WSEE per month, in YTD 2024 compared to a decrease in costs of $14 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

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 increased 2%, 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 both YTD 2024 and YTD 2023.

• We recorded a reduction in workers’ compensation costs of $25 million, or 0.11% of non-bonus payroll costs, in YTD 2024 compared to a reduction of $26 million, or 0.11% 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.

Insperity | 2024 Third Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Payroll tax costs

• Payroll taxes increased 2% on a 1% increase in payroll costs, or $20 per WSEE per month.

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

Operating Expenses

• Salaries, wages and payroll taxes — Salaries, wages and payroll taxes (“Salaries”) are primarily a function of the number of corporate employees, their associated average pay and any additional cash incentive compensation.

• Stock-based compensation — Our stock-based compensation relates to the recognition of non-cash compensation expense over the requisite service period of time-vested and performance-based awards.

• Stock-based compensation — Our stock-based compensation relates to the recognition of non-cash compensation expense over the requisite service period of time-based and performance-based awards.

• Commissions — Commissions expense consists primarily of amounts paid to sales managers and other sales personnel, including business performance advisors (“BPAs”), as well as channel referral fees.

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◦ employee travel and training expenses

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

◦ facility costs, including repairs and maintenance

1 unchanged sentence

• 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.

Insperity | 2024 Third Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Third Quarter 2024 Compared to Third Quarter 2023

First Quarter 2025 Compared to First Quarter 2024

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

Three Months Ended September 30,

Three Months Ended March 31,

(in millions, except per WSEE)

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Amortization of SaaS implementation costs

2 3 (33) % 2 3 (33) %

Workday SaaS licensing and implementation expense

6 4 50 % 7 4 75 %

All other general and administrative

6 unchanged sentences

Operating expenses per WSEE per month for Q1 2025 increased 2% to $264 compared to $260 in Q1 2024.

• Salaries of corporate and sales staff for Q3 2024 increased 11% to $127 million, or $17 per WSEE per month, compared to Q3 2023.

The increase was primarily due to a 6% increase in BPA, service and support headcount in Q3 2024 compared to Q3 2023.

• Stock-based compensation expense for Q3 2024 increased 6% to $17 million, or $2 per WSEE per month, compared to Q3 2023.

The increase was primarily due to time-vested restricted stock unit awards issued under our incentive plan, partially offset by a decrease in the stock awards anticipated to be earned related to performance-based awards granted under our long-term incentive plans in Q3 2024.

• Advertising expense for Q3 2024 increased 29% to $9 million, or $2 per WSEE per month, compared to Q3 2023 primarily due to an increase in internet and radio advertising.

• General and administrative expenses for Q3 2024 increased 33% to $53 million, or $13 per WSEE per month, compared to Q3 2023.

The increase was primarily due to increased professional services fees, which includes expenses related to the implementation of our Workday strategic partnership, software licensing and maintenance costs, and amortization of SaaS implementation costs.

Insperity | 2024 Third Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

First Nine Months 2024 Compared to First Nine Months 2023

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

Nine Months Ended September 30,

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

Salaries $ 393 $ 349 13 % $ 142 $ 124 15 %

Stock-based compensation 47 42 12 % 17 15 13 %

Commissions 34 34 — 12 12 —

Advertising 28 30 (7) % 10 11 (9) %

General and administrative:

Amortization of SaaS implementation costs 7 3 133 % 3 1 200 %

Workday SaaS licensing and implementation expense 21 — — 8 — —

All other general and administrative 139 129 8 % 50 47 6 %

Total general and administrative 167 132 27 % 61 48 27 %

Depreciation and amortization 33 32 3 % 12 11 9 %

Total operating expenses 702 619 13 % $ 254 $ 221 15 %

Operating expenses for YTD 2024 increased 13% to $702 million compared to $619 million in YTD 2023.

Operating expenses per WSEE per month for YTD 2024 increased 15% to $254 compared to $221 in YTD 2023.

• Salaries of corporate and sales staff for YTD 2024 increased 13% to $393 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 in YTD 2024 compared to YTD 2023.

• Stock-based compensation expense for YTD 2024 increased 12% to $47 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 7% to $28 million, or $1 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 27% to $167 million, or $13 per WSEE per month, compared to YTD 2023.

Income Tax Expense

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

2024 2023 2024 2023

Three Months Ended March 31,

Effective income tax rate 29% 29%

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

For the three months ended March 31, 2025, 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.

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

During Q3 2024, we recognized a $1 million, or $0.02 per share, tax benefit related to research and development activities pertaining to the 2023 tax year.

Insperity | 2024 Third Quarter Form 10-Q

During the first three months of 2025, we recognized additional income tax of $1 million related to the vesting of long-term incentive and restricted stock awards, primarily due to the vesting date price being below the grant date price.

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

6 unchanged sentences

Non-bonus payroll cost Non-bonus payroll cost is a non-GAAP financial measure that excludes the impact of bonus payrolls paid to our WSEEs.

Bonus payroll cost varies from period to period, but has no direct impact to our ultimate workers’ compensation costs under the current program.

Our management refers to non-bonus payroll cost in analyzing, reporting and forecasting our workers’ compensation costs.

Bonus payroll cost varies from period to period, but has no direct impact to our ultimate workers’ compensation costs under the current program.

We include these non-GAAP financial measures because we believe they are useful to investors in allowing for greater transparency related to the costs incurred under our current workers’ compensation program.

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• non-cash stock-based compensation.

Insperity | 2024 Third Quarter Form 10-Q

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

1 unchanged sentence

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 September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Per WSEE Per WSEE Per WSEE Per WSEE

(in millions, except per WSEE per month)

Three Months Ended March 31,

Per WSEE Per WSEE

Payroll cost $ 10,281 $ 11,199 $ 9,681 $ 10,618

Bonus payroll cost

2,243 2,444 1,862 2,042

Non-bonus payroll cost

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Payroll Cost % change period over period 6 % 5 % — 1 %

3 % 5 % 5 % 1 % 1 % 3 % 9 % 2 %

Non-bonus payroll cost % change period over period 3 % 2 % 2 % 3 %

— 3 % 6 % 2 % 1 % 3 % 10 % 3 %

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

(in millions)

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Cash, cash equivalents and marketable securities $ 568 $ 1,055

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Adjusted cash, cash equivalents and marketable securities $ 124 $ 134

Insperity | 2024 Third Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

Three Months Ended March 31,

(in millions, except per WSEE per month)

Per WSEE Per WSEE Per WSEE Per WSEE

Per WSEE Per WSEE

Net income $ 51 $ 56 $ 79 $ 87

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Depreciation and amortization

11 12 11 11 33 12 32 11

EBITDA 91 99 132 145

Stock-based compensation

17 18 16 16 47 17 42 15

Adjusted EBITDA $ 102 $ 111 $ 142 $ 156

Net income % change period over period (35) % (36) % (17) % (16) %

(93) % (94) % 18 % 15 % (34) % (33) % 8 % —

Adjusted EBITDA % change period over period (28) % (29) % (7) % (5) %

(59) % (58) % 18 % 14 % (17) % (16) % 9 % 2 %

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Three Months Ended

September 30, Nine Months Ended

September 30,

Three Months Ended March 31,

(in millions)

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Net income % change period over period (35) % (17) %

(93) % 18 % (34) % 8 %

Adjusted net income % change period over period (31) % (17) %

(73) % 17 % (27) % 8 %

Insperity | 2024 Third Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Three Months Ended

September 30, Nine Months Ended

September 30,

Three Months Ended March 31,

(amounts per share) 2025 2024

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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 $486 million in cash, cash equivalents and marketable securities at September 30, 2024, of which approximately $255 million was payable in early October 2024 for withheld federal and state income taxes, employment taxes and other payroll deductions, approximately $19 million represented client prepayments that were payable in October 2024.

At September 30, 2024, we had working capital of $200 million compared to $159 million at December 31, 2023.

We had $568 million in cash, cash equivalents and marketable securities at March 31, 2025, of which approximately $404 million was payable in April 2025 for withheld federal and state income taxes, employment taxes and other payroll deductions.

Approximately $40 million represented client prepayments that were invoiced in April 2025.

At March 31, 2025, we had working capital of $188 million compared to $155 million at December 31, 2024.

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 2025.

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

As of March 31, 2025, 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.

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cash Flows from Operating Activities

Net cash used in operating activities in the first nine months of 2024 was $99 million.

Net cash used in operating activities in the first three months of 2025 was $443 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 nine months ended September 30, 2024, the last business day of the reporting period was a Monday, client prepayments were $19 million and employment taxes and other deductions were $255 million.

In the nine months ended September 30, 2023, the last business day of the reporting period was a Friday, client prepayments were $20 million and employment taxes and other deductions were $483 million, which included $149 million of funds related to client employee retention tax credits received on their behalf from the Internal Revenue Service that were distributed to clients in early October 2023.

Insperity | 2024 Third Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• 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.

In the three months ended March 31, 2025, the last business day of the reporting period was a Monday, client prepayments were $40 million and employment taxes and other deductions were $404 million.

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 addition, $440 million of client employee retention tax credits received on their behalf from the Internal Revenue Service during the fourth quarter of 2024 were distributed to clients in early 2025.

• 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 September 30, 2024, Plan Costs were less than the net premiums paid and owed to United by $28 million, which is $19 million in excess of our agreed-upon $9 million surplus maintenance level.

The $19 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 September 30, 2024.

In addition, the premiums owed to United at September 30, 2024, were $39 million, which is included in accrued health insurance costs, a current liability, on our Condensed Consolidated Balance Sheet.

As of March 31, 2025, Plan Costs were less than the net premiums paid and owed to United by $52 million, which is $43 million in excess of our agreed-upon $9 million surplus maintenance level.

The $43 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, 2025.

In addition, the premiums owed to United at March 31, 2025, were $64 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 27% to $134 million in the first nine months of 2024, compared to $183 million in the first nine months of 2023.

Our adjusted net income decreased 31% to $59 million in the first three months of 2025, compared to $86 million in the first three months of 2024.

Please read “ Results of Operations .”

Cash Flows from Investing Activities

Net cash flows used in investing activities were $25 million for the nine months ended September 30, 2024, primarily due to property and equipment purchases.

Net cash flows used in investing activities were $6 million for the three months ended March 31, 2025, primarily due to property and equipment purchases.

Cash Flows from Financing Activities

Net cash flows used in financing activities were $163 million for the nine months ended September 30, 2024.

Net cash flows used in financing activities were $49 million for the three months ended March 31, 2025.

We paid $23 million in dividends and repurchased or withheld $19 million in stock.

In addition, client funds liability and other financing activities decreased by $7 million.

Insperity | 2024 Third Quarter Form 10-Q

Insperity | 2025 First Quarter Form 10-Q

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND CONTROLS AND PROCEDURES

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What changed 10-Q

Item 2. Management’s Discussion and Analysis