Company Quick10K Filing
Insperity
10-Q 2021-03-31 Filed 2021-05-04
10-K 2020-12-31 Filed 2021-02-12
10-Q 2020-09-30 Filed 2020-11-02
10-Q 2020-06-30 Filed 2020-08-04
10-Q 2020-03-31 Filed 2020-05-05
10-K 2019-12-31 Filed 2020-02-12
10-Q 2019-09-30 Filed 2019-11-04
10-Q 2019-06-30 Filed 2019-07-29
10-Q 2019-03-31 Filed 2019-04-29
10-K 2018-12-31 Filed 2019-02-11
10-Q 2018-09-30 Filed 2018-11-01
10-Q 2018-06-30 Filed 2018-08-01
10-Q 2018-03-31 Filed 2018-04-30
10-K 2017-12-31 Filed 2018-02-12
10-Q 2017-09-30 Filed 2017-11-01
10-Q 2017-06-30 Filed 2017-08-01
10-Q 2017-03-31 Filed 2017-05-01
10-K 2016-12-31 Filed 2017-02-13
10-Q 2016-09-30 Filed 2016-11-01
10-Q 2016-06-30 Filed 2016-08-01
10-Q 2016-03-31 Filed 2016-05-02
10-K 2015-12-31 Filed 2016-02-12
10-Q 2015-09-30 Filed 2015-11-02
10-Q 2015-06-30 Filed 2015-08-03
10-Q 2015-03-31 Filed 2015-05-01
10-K 2014-12-31 Filed 2015-02-10
10-Q 2014-09-30 Filed 2014-11-03
10-Q 2014-06-30 Filed 2014-08-01
10-Q 2014-03-31 Filed 2014-05-02
10-K 2013-12-31 Filed 2014-02-10
10-Q 2013-09-30 Filed 2013-11-01
10-Q 2013-06-30 Filed 2013-08-01
10-Q 2013-03-31 Filed 2013-04-29
10-K 2012-12-31 Filed 2013-02-11
10-Q 2012-09-30 Filed 2012-11-01
10-Q 2012-06-30 Filed 2012-07-31
10-Q 2012-03-31 Filed 2012-04-30
10-K 2011-12-31 Filed 2012-02-14
10-Q 2011-09-30 Filed 2011-11-01
10-Q 2011-06-30 Filed 2011-08-01
10-Q 2011-03-31 Filed 2011-05-02
10-K 2010-12-31 Filed 2011-02-14
10-Q 2010-09-30 Filed 2010-11-01
10-Q 2010-06-30 Filed 2010-08-02
10-Q 2010-03-31 Filed 2010-05-03
10-K 2009-12-31 Filed 2010-02-11
8-K 2020-11-02
8-K 2020-08-03
8-K 2020-05-22
8-K 2020-05-04
8-K 2020-04-08
8-K 2020-02-11
8-K 2020-01-03
8-K 2019-12-02
8-K 2019-11-04
8-K 2019-09-16
8-K 2019-07-29
8-K 2019-05-28
8-K 2019-04-29
8-K 2019-02-11
8-K 2018-05-29
8-K 2018-05-07
8-K 2018-04-30
8-K 2018-02-12
8-K 2018-01-08

NSP 10Q Quarterly Report

Part I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits
EX-10.2 a03312021-ex102.htm
EX-10.3 a03312021-ex103.htm
EX-31.1 a03312021-nspex311.htm
EX-31.2 a03312021-nspex312.htm
EX-32.1 a03312021-nspex321.htm
EX-32.2 a03312021-nspex322.htm

Insperity Earnings 2021-03-31

Balance SheetIncome StatementCash Flow

nsp-20210331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period endedMarch 31, 2021
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from  _______________ to _______________
Commission File No. 1-13998
nsp-20210331_g1.jpg
Insperity, Inc.

(Exact name of registrant as specified in its charter)
Delaware 76-0479645
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
19001 Crescent Springs Drive
Kingwood,Texas77339
(Address of principal executive offices)
(Registrant’s Telephone Number, Including Area Code):  (281) 358-8986
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTicker symbol(s)Name of each exchange on which registered
Common Stock, $.01 par value per shareNSPNew York Stock Exchange
Rights to Purchase Series A Junior Participating Preferred StockNSPNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.  See definition of “large accelerated filer,” “accelerated filer”, “non-accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerEmerging growth company
Smaller reporting company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   No

As of April 26, 2021, 38,674,991 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.


TABLE OF CONTENTS
Page
Part I, Item 1.
Financial Statements
Part I, Item 2.
Part I, Item 3.
Part I, Item 4.
Part II, Item 1.
Part II, Item 1A.
Part II, Item 2.
Part II, Item 6.


FINANCIAL STATEMENTS
(Unaudited)
PART I
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)March 31, 2021December 31, 2020
Assets
Cash and cash equivalents$494,777 $554,846 
Restricted cash46,353 45,522 
Marketable securities34,292 34,529 
Accounts receivable, net561,244 392,746 
Prepaid insurance57,670 10,164 
Other current assets53,718 39,461 
Income taxes receivable3,451  
Total current assets1,251,505 1,077,268 
Property and equipment, net of accumulated depreciation220,262 216,256 
Right-of-use (“ROU”) leased assets67,688 60,663 
Prepaid health insurance9,000 9,000 
Deposits – health insurance7,900 7,900 
Deposits – workers’ compensation193,067 186,331 
Goodwill and other intangible assets, net12,707 12,707 
Deferred income taxes, net 9,603 
Other assets6,955 4,548 
Total assets$1,769,084 $1,584,276 
Liabilities and stockholders' equity
Accounts payable$5,841 $6,203 
Payroll taxes and other payroll deductions payable310,519 377,960 
Accrued worksite employee payroll cost503,334 334,836 
Accrued health insurance costs72,136 32,685 
Accrued workers’ compensation costs49,696 48,186 
Accrued corporate payroll and commissions41,720 44,277 
Other accrued liabilities61,105 60,777 
Total current liabilities1,044,351 904,924 
Accrued workers’ compensation cost, net of current190,336 195,239 
Long-term debt369,400 369,400 
Operating lease liabilities, net of current71,716 64,289 
Deferred income taxes, net13,343  
Other accrued liabilities, net of current6,294 6,292 
Total noncurrent liabilities651,089 635,220 
Commitments and contingencies
Common stock555 555 
Additional paid-in capital81,329 95,528 
Treasury stock, at cost(628,391)(626,984)
Retained earnings620,151 575,033 
Total stockholders’ equity73,644 44,132 
Total liabilities and stockholders’ equity$1,769,084 $1,584,276 
See accompanying notes.
Insperity | 2021 First Quarter Form 10-Q
4

FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
(in thousands, except per share amounts)20212020
Revenues(1)
$1,286,835 $1,229,483 
Payroll taxes, benefits and workers’ compensation costs
1,035,390 995,461 
Gross profit251,445 234,022 
Salaries, wages and payroll taxes103,075 86,501 
Stock-based compensation11,822 6,552 
Commissions7,719 8,460 
Advertising5,322 4,833 
General and administrative expenses31,636 34,853 
Depreciation and amortization8,047 7,602 
Total operating expenses167,621 148,801 
Operating income83,824 85,221 
Other income (expense):  
Interest income543 1,879 
Interest expense(1,599)(2,362)
Income before income tax expense82,768 84,738 
Income tax expense20,846 22,646 
Net income$61,922 $62,092 
Less distributed and undistributed earnings allocated to participating securities
(197)(462)
Net income allocated to common shares$61,725 $61,630 
Net income per share of common stock
Basic$1.62 $1.59 
Diluted$1.59 $1.58 
 ____________________________________
(1)Revenues are comprised of gross billings less worksite employee (“WSEE”) payroll costs as follows:
Three Months Ended March 31,
(in thousands)20212020
Gross billings$8,050,422 $7,436,754 
Less: WSEE payroll cost$6,763,587 $6,207,271 
Revenues$1,286,835 $1,229,483 
See accompanying notes.
Insperity | 2021 First Quarter Form 10-Q
5

FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
(in thousands)20212020
Cash flows from operating activities
Net income$61,922 $62,092 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization8,047 7,602 
Stock-based compensation11,822 6,552 
Deferred income taxes22,946 12,560 
Changes in operating assets and liabilities:
Accounts receivable(168,498)(54,966)
Prepaid insurance(47,506)(35,107)
Other current assets(14,257)3,068 
Other assets and ROU assets1,508 3,403 
Accounts payable(362)1,675 
Payroll taxes and other payroll deductions payable(67,441)(9,003)
Accrued worksite employee payroll expense168,498 34,905 
Accrued health insurance costs39,451 25,661 
Accrued workers’ compensation costs(3,393)3,467 
Accrued corporate payroll, commissions and other accrued liabilities(5,421)(46,531)
Income taxes payable/receivable(5,345)8,409 
Total adjustments(59,951)(38,305)
Net cash provided by operating activities1,971 23,787 
Cash flows from investing activities  
Marketable securities:  
Purchases(10,585)(8,689)
Proceeds from maturities10,580 24,000 
Property and equipment:
Purchases(12,072)(15,625)
Net cash used in investing activities(12,077)(314)
Cash flows from financing activities
Purchase of treasury stock(29,686)(61,203)
Dividends paid(15,461)(15,557)
Borrowings under revolving line of credit 100,000 
Other2,751 2,363 
Net cash provided by (used in) financing activities(42,396)25,603 
Net increase (decrease) in cash, cash equivalents and restricted cash(52,502)49,076 
Cash, cash equivalents and restricted cash beginning of period786,699 592,550 
Cash, cash equivalents and restricted cash end of period$734,197 $641,626 
Insperity | 2021 First Quarter Form 10-Q
6

FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Three Months Ended March 31,
(in thousands)20212020
Supplemental schedule of cash and cash equivalents and restricted cash
Cash and cash equivalents$554,846 $367,342 
Restricted cash45,522 49,295 
Deposits – workers’ compensation186,331 175,913 
Cash, cash equivalents and restricted cash beginning of period$786,699 $592,550 
Cash and cash equivalents$494,777 $404,728 
Restricted cash46,353 48,349 
Deposits – workers’ compensation193,067 188,549 
Cash, cash equivalents and restricted cash end of period$734,197 $641,626 
Supplemental operating lease cash flow information:
ROU assets obtained in exchange for lease obligations$12,104 $6,787 
See accompanying notes.
Insperity | 2021 First Quarter Form 10-Q
7

FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Three Months Ended March 31, 2021 and 2020

Common Stock IssuedAdditional Paid-In CapitalTreasury StockRetained Earnings and AOCITotal
(in thousands)SharesAmount
Balance at December 31, 202055,489 $555 $95,528 $(626,984)$575,033 $44,132 
Purchase of treasury stock, at cost—   (29,686) (29,686)
Issuance of equity-based incentive awards and dividend equivalents—  (25,085)26,421 (1,336) 
Stock-based compensation expense—  10,851 971  11,822 
Exercise of stock options—  (329)569  240 
Other—  364 318  682 
Dividends paid—    (15,461)(15,461)
Unrealized loss on marketable securities, net of tax—    (7)(7)
Net income—    61,922 61,922 
Balance at March 31, 202155,489 $555 $81,329 $(628,391)$620,151 $73,644 
Balance at December 31, 201955,489 $555 $48,141 $(544,102)$499,485 $4,079 
Purchase of treasury stock, at cost—   (61,203) (61,203)
Issuance of equity-based incentive awards and dividend equivalents—  (7,088)7,898 (810) 
Stock-based compensation expense—  4,893 1,659  6,552 
Other—  381 261  642 
Dividends paid—    (15,557)(15,557)
Unrealized gain on marketable securities, net of tax
—    85 85 
Net income—    62,092 62,092 
Balance at March 31, 202055,489 $555 $46,327 $(595,487)$545,295 $(3,310)
Insperity | 2021 First Quarter Form 10-Q
8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.Basis of Presentation
Insperity, Inc., a Delaware corporation (“Insperity,” “we,” “our,” and “us”), provides an array of human resources (“HR”) and business solutions designed to help improve business performance. Our most comprehensive HR services offerings are provided through our professional employer organization (“PEO”) services, known as Workforce Optimization® and Workforce SynchronizationTM solutions (together, our “PEO HR Outsourcing solutions”), which encompass a broad range of HR 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 solution, the Insperity PremierTM platform.
In addition to our PEO HR Outsourcing solutions, we offer a comprehensive traditional payroll and human capital management solution, known as Workforce Acceleration. We also offer a number of other business performance solutions, including Comprehensive Traditional Payroll and Human Capital Management, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Retirement Services and Insurance Services, many of which are offered as a cloud-based software solution. These other products or services are offered separately or with our other solutions.
The Consolidated Financial Statements include the accounts of Insperity, Inc. and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
The accompanying Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements at and for the year ended December 31, 2020. Our Condensed Consolidated Balance Sheet at December 31, 2020 has been derived from the audited financial statements at that date, but does not include all of the information or footnotes required by GAAP for complete financial statements. Our Condensed Consolidated Balance Sheet at March 31, 2021 and our Consolidated Statements of Operations for the three month periods ended March 31, 2021 and 2020, our Consolidated Statements of Cash Flows for the three month periods ended March 31, 2021 and 2020 and our Consolidated Statements of Stockholders’ Equity for the three month periods ended March 31, 2021 and 2020, have been prepared by us without audit. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows, have been made.
The results of operations for the interim periods are not necessarily indicative of the operating results for a full year or of future operations.

2.Accounting Policies
Health Insurance Costs
We provide group health insurance coverage to our WSEEs in our PEO HR Outsourcing solutions through a national network of carriers, including UnitedHealthcare (“United”), UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii, and Tufts, all of which provide fully insured policies or service contracts.
The policy with United provides approximately 87% of our health insurance coverage. While the policy with United is a fully-insured plan, as a result of certain contractual terms, we have accounted for this plan since its inception using a partially self-funded insurance accounting model. Effective January 1, 2020, under the amended agreement with United, we no longer have financial responsibilities for a participant’s annual claim costs that exceed $1 million. Accordingly, we record the costs of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the “Plan Costs”) as benefits expense, which is a component of direct costs, in our Consolidated Statements of Operations. The estimated incurred claims are based upon: (1) the level of claims processed during the quarter; (2) estimated completion rates based upon recent claim development patterns under the plan; and (3) the number of participants in the plan, including both active and COBRA enrollees. Each reporting period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant
Insperity | 2021 First Quarter Form 10-Q
9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
demographics and other factors are incorporated into the benefits costs, which requires a significant level of judgment.
Additionally, since the plan’s inception, under the terms of the contract, United establishes cash funding rates 90 days in advance of the beginning of a reporting quarter. If the Plan Costs for a reporting quarter are greater than the premiums paid and owed to United, a deficit in the plan would be incurred and a liability for the excess costs would be accrued in our Condensed Consolidated Balance Sheets. On the other hand, if the Plan Costs for the reporting quarter are less than the premiums paid and owed to United, a surplus in the plan would be incurred and we would record an asset for the excess premiums in our Condensed Consolidated Balance Sheets. The terms of the arrangement require us to maintain an accumulated cash surplus in the plan of $9.0 million, which is reported as long-term prepaid insurance. In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $6.5 million at March 31, 2021, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets. As of March 31, 2021, Plan Costs were less than the net premiums paid and owed to United by $51.4 million. As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $42.4 million difference is included in prepaid insurance, a current asset, in our Condensed Consolidated Balance Sheets. The premiums, including the additional quarterly premiums, owed to United at March 31, 2021 were $66.0 million, which is included in accrued health insurance costs, a current liability in our Condensed Consolidated Balance Sheets. Our benefits costs incurred in the first three months of 2021 included an increase of $5.5 million for changes in estimated run-off related to prior periods. Our benefits costs incurred in the first three months of 2020 included a reduction of $1.5 million for changes in estimated run-off related to prior periods.
Workers’ Compensation Costs
Our workers’ compensation coverage for our WSEEs in our PEO HR Outsourcing solutions has been provided through an arrangement with the Chubb Group of Insurance Companies or its predecessors (the “Chubb Program”) since 2007. The Chubb Program is fully insured in that Chubb has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities. Under the Chubb Program for claims incurred on or before September 30, 2019, we have financial responsibility to Chubb for the first $1 million layer of claims per occurrence and, for claims over $1 million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed $1 million. Chubb bears the financial responsibility for all claims in excess of these levels. Effective for claims incurred on or after October 1, 2019, we have financial responsibility to Chubb for the first $1.5 million layer of claims per occurrence and, for claims over $1.5 million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed $1.5 million.
Because we bear the financial responsibility for claims up to the levels noted above, such claims, which are the primary component of our workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment.
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 three months ended March 31, 2021 and 2020, we reduced accrued workers’ compensation costs by $13.2 million and $10.1 million, respectively, for changes in estimated losses related to prior reporting periods. Workers’ compensation cost estimates are discounted to present value at a rate based upon the U.S. Treasury rates that correspond with the weighted average estimated claim payout period (the average discount rate utilized in the 2021 period was 0.5% and in the 2020 period was 1.0%) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.
Insperity | 2021 First Quarter Form 10-Q
10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table provides the activity and balances related to incurred but not paid workers’ compensation claims:
Three Months Ended March 31,
(in thousands)20212020
Beginning balance, January 1,$240,761 $242,904 
Accrued claims8,522 14,339 
Present value discount, net of accretion652 (200)
Paid claims(13,246)(11,121)
Ending balance$236,689 $245,922 
Current portion of accrued claims$46,353 $48,289 
Long-term portion of accrued claims190,336 197,633 
Total accrued claims$236,689 $245,922 
The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at March 31, 2021 includes $3.3 million of workers’ compensation administrative fees.
As of March 31, 2021 and 2020, the undiscounted accrued workers’ compensation costs were $253.2 million and $265.6 million, respectively.
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”). 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 Condensed Consolidated Balance Sheets. At March 31, 2021, we had restricted cash of $46.4 million and deposits – workers’ compensation of $193.1 million.
Our estimate of incurred claim costs expected to be paid within one year is included in short-term liabilities, while our estimate of incurred claim costs expected to be paid beyond one year is included in long-term liabilities on our Condensed Consolidated Balance Sheets.
Revenue and Direct Cost Recognition
We enter into contracts with our customers for human resources services based on a stated rate and price in the contract. Our contracts generally have a term of 12 months, but are cancellable at any time by either party with 30-days’ notice. Our performance obligations are satisfied as services are rendered each month. The term between invoicing and when our performance obligations are satisfied is not significant. Payment terms are typically due concurrently with the invoicing of our PEO services. We do not have significant financing components or significant payment terms.
Our revenue is generally recognized ratably over the payroll period as WSEEs perform their service at the client worksite. Customers are invoiced concurrently with each periodic payroll of its WSEEs. Revenues that have been recognized but unbilled of $549.0 million and $380.8 million at March 31, 2021 and December 31, 2020, respectively, are included in accounts receivable, net on our Condensed Consolidated Balance Sheets.
Pursuant to the “practical expedients” provided under Accounting Standards Update (“ASU”) No 2014-09, we expense sales commissions when incurred because the terms of our contracts generally are cancellable by either party with a 30-day notice. These costs are recorded in commissions in our Consolidated Statements of Operations.
Insperity | 2021 First Quarter Form 10-Q
11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Our revenue for our PEO HR Outsourcing solutions by geographic region and for our other products and services offerings are as follows:
Three Months Ended March 31,
(in thousands)20212020% Change
Northeast$373,629 $344,086 8.6 %
Southeast156,260 140,678 11.1 %
Central225,700 211,302 6.8 %
Southwest256,979 272,130 (5.6)%
West261,354 246,853 5.9 %
1,273,922 1,215,049 4.8 %
Other revenue12,913 14,434 (10.5)%
Total revenue$1,286,835 $1,229,483 4.7 %

3.Cash, Cash Equivalents and Marketable Securities
The following table summarizes our cash and investments in cash equivalents and marketable securities held by investment managers and overnight investments:
March 31, 2021December 31, 2020
(in thousands)Cash & Cash EquivalentsMarketable SecuritiesTotalCash & Cash EquivalentsMarketable SecuritiesTotal
Overnight holdings$432,607 $ $432,607 $503,221 $ $503,221 
Investment holdings48,278 34,292 82,570 47,992 34,529 82,521 
Cash in demand accounts23,105  23,105 33,692  33,692 
Outstanding checks(9,213) (9,213)(30,059) (30,059)
Total$494,777 $34,292 $529,069 $554,846 $34,529 $589,375 
Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles. Our cash, cash equivalents and marketable securities at March 31, 2021 and December 31, 2020 included $273.5 million and $342.0 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $58.9 million and $35.3 million, respectively, in client prepayments.

4.Fair Value Measurements
We account for our financial assets in accordance with Accounting Standard Codification 820, Fair Value Measurement. This standard defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The fair value measurement disclosures are grouped into three levels based on valuation factors:
Level 1 - quoted prices in active markets using identical assets
Level 2 - significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs
Level 3 - significant unobservable inputs
Insperity | 2021 First Quarter Form 10-Q
12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Fair Value of Instruments Measured and Recognized at Fair Value
The following table summarizes the levels of fair value measurements of our financial assets:
March 31, 2021December 31, 2020
(in thousands)TotalLevel 1Level 2TotalLevel 1Level 2
Money market funds$480,885 $480,885 $ $551,213 $551,213 $ 
U.S. Treasury bills13,269 13,269  10,531 10,531  
Municipal bonds21,023  21,023 23,998  23,998 
Total$515,177 $494,154 $21,023 $585,742 $561,744 $23,998 

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. Our valuation techniques used to measure fair value for these securities during the period consisted primarily of third-party pricing services that utilized actual market data such as trades of comparable bond issues, broker/dealer quotations for the same or similar investments in active markets and other observable inputs.
The following is a summary of our available-for-sale marketable securities:
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
March 31, 2021
U.S. Treasury bills$13,267 $2 $ $13,269 
Municipal bonds21,028 1 (6)21,023 
Total$34,295 $3 $(6)$34,292 
December 31, 2020
U.S. Treasury bills$10,530 $1 $ $10,531 
Municipal bonds23,994 8 (4)23,998 
Total$34,524 $9 $(4)$34,529 

As of March 31, 2021, the contractual maturities of our marketable securities were as follows:
(in thousands)Amortized CostEstimated Fair Value
Less than one year$34,295 $34,292 
One to five years  
Total$34,295 $34,292 
Fair Value of Other Financial Instruments
The carrying amounts of cash, cash equivalents, restricted cash, accounts receivable, deposits and accounts payable approximate their fair values due to the short-term maturities of these instruments.
As of March 31, 2021, the carrying value of borrowings under our revolving credit facility approximates fair value and was classified as Level 2 in the fair value hierarchy. Please read Note 5, “Long-Term Debt,” for additional information.

Insperity | 2021 First Quarter Form 10-Q
13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5.Long-Term Debt
We have a revolving credit facility (the “Facility”) with borrowing capacity of up to $500 million. The Facility may be further increased to $550 million based on the terms and subject to the conditions set forth in the agreement relating to the Facility (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 65% of the stock of our captive insurance subsidiary and are guaranteed by all of our domestic subsidiaries. At March 31, 2021, 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 $129.6 million.
The Facility matures on September 13, 2024. Borrowings under the Facility bear interest at an annual rate equal to an alternate base rate or LIBOR, at our option, plus an applicable margin. Depending on our leverage ratio, the applicable margin varies (1) in the case of LIBOR loans, from 1.50% to 2.25% and (2) in the case of alternate base rate loans, from 0.00% to 0.50%. The alternate base rate is the highest of (1) the prime rate most recently published in The Wall Street Journal, (2) the federal funds rate plus 0.50% and (3) the 30-day LIBOR rate plus 2.00%. We also pay an unused commitment fee on the average daily unused portion of the Facility at a rate of 0.25% per year. The average interest rate for the three month period ended March 31, 2021 was 1.88%. Interest expense and unused commitment fees are recorded in other income (expense). Upon the discontinuation of LIBOR, the Facility provides that we and the agent will negotiate in good faith to amend the agreement to address such discontinuation and to place the parties in substantially the same economic position.
The Facility contains both affirmative and negative covenants that we believe are customary for arrangements of this nature. Covenants include, but are not limited to, limitations on our ability to incur additional indebtedness, sell material assets, retire, redeem or otherwise reacquire our capital stock, acquire the capital stock or assets of another business, make investments and pay dividends. In addition, the Credit Agreement requires us to comply with financial covenants limiting our total funded debt, minimum interest coverage ratio and maximum leverage ratio. We were in compliance with all financial covenants under the Credit Agreement at March 31, 2021.

6.Stockholders' Equity
During the first three months of 2021, we repurchased or withheld an aggregate of 340,317 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 may be made from time to time in the open market or directly from stockholders at prevailing market prices based on market conditions and other factors. During the three months ended March 31, 2021, 49,904 shares were repurchased under the Repurchase Program. As of March 31, 2021, we were authorized to repurchase an additional 1,078,233 shares under the Repurchase Program.
Withheld Shares
During the three months ended March 31, 2021, we withheld 290,413 shares to satisfy tax withholding obligations for the vesting of long-term incentive and restricted stock awards.
Dividends
The Board declared quarterly dividends as follows:
(amounts per share)20212020
First quarter$0.40 $0.40 
During the three months ended March 31, 2021 and 2020, we paid dividends totaling $15.5 million and $15.6 million, respectively.
Insperity | 2021 First Quarter Form 10-Q
14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Rights Plan
On May 21, 2020, the Board declared a dividend of one right (“Right”) for each outstanding share of common stock to common stockholders of record at the close of business on June 1, 2020 (the “Rights Plan”). Each Right, if and when it becomes exercisable, entitles the registered holder to purchase from us one unit consisting of one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share. Initially, the Rights are attached to all outstanding shares of our common stock. The Rights are not currently exercisable and the Rights Plan will expire at the close of business on May 20, 2021, unless the Rights are earlier redeemed or exchanged by us.

7.Net Income Per Share
We utilize the two-class method to compute net income per share. The two-class method allocates a portion of net income to participating securities, which includes unvested awards of share-based payments with non-forfeitable rights to receive dividends. Net income allocated to unvested share-based payments is excluded from net income allocated to common shares. Any undistributed losses resulting from dividends exceeding net income are not allocated to participating securities. Basic net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options.
The following table summarizes the net income allocated to common shares and the basic and diluted shares used in the net income per share computations:
Three Months Ended March 31,
(in thousands)20212020
Net income$61,922 $62,092 
Less distributed and undistributed earnings allocated to participating securities
(197)(462)
Net income allocated to common shares
$61,725 $61,630 
Weighted average common shares outstanding38,216 38,802 
Incremental shares from assumed time-vested and performance-based RSU awards and conversions of common stock options
623 266 
Adjusted weighted average common shares outstanding38,839 39,068 

Insperity | 2021 First Quarter Form 10-Q
15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8.Commitments and Contingencies
Worksite Employee 401(k) Retirement Plan Class Action Litigation
In December 2015, a class action lawsuit was filed against us and a third-party who served as the discretionary trustee (the “Co-Defendant”) of the Insperity 401(k) retirement plan that is available to eligible worksite employees (the “Plan”) in the United States District Court for the Northern District of Georgia, Atlanta Division, on behalf of Plan participants. The suit generally alleged the third-party discretionary trustee of the Plan and Insperity breached their fiduciary duties to plan participants by selecting an Insperity subsidiary to serve as the recordkeeper for the Plan, by causing participants in the Plan to pay excessive recordkeeping fees to the Insperity subsidiary, by failing to monitor other fiduciaries, and by making imprudent investment choices. The court certified a class defined as “all participants and beneficiaries of the Insperity 401(k) Plan from December 22, 2009 through September 30, 2017.” The court dismissed the breach of fiduciary duty claims relating to the selection of an Insperity subsidiary to serve as the recordkeeper of the Plan. On March 28, 2019, the court partially granted Insperity’s motion for summary judgment, resulting in the dismissal of the claims concerning allegations of excessive recordkeeping fees. The court denied plaintiffs’ request for a jury trial and set a bench trial, which was held from March 2, 2020 to March 13, 2020. At trial, plaintiffs alleged damages up to approximately $146 million against all defendants. All parties filed proposed findings of fact and conclusions of law on June 15, 2020. On September 18, 2020, the plaintiffs and Co-Defendant informed the court that they reached an agreement in principle to settle the entire case, including a full and final release of all claims against Insperity. Insperity did not participate in the settlement discussions and will make no financial contribution to the settlement. In connection with the settlement, the Plaintiffs and Co-Defendant filed a motion to extend the class period to March 31, 2019, which the court granted. The court granted final approval of the settlement on March 9, 2021.
Securities Class Action Lawsuit
In July 2020, a federal securities class action was filed against us and certain of our officers in the United States District Court for the Southern District of New York. The name of the case is Building Trades Pension Fund of Western Pennsylvania v. Insperity, Inc. et al., Case No. 1:20-cv-05635-NRB. On October 23, 2020, the court issued an order appointing Oakland County Employees’ Retirement System and Oakland County Voluntary Employees’ Beneficiary Association Trust as lead plaintiff (“Lead Plaintiff”). On December 22, 2020, the lead plaintiff filed its consolidated complaint alleging that we made materially false and misleading statements regarding our business and operations in violation of the federal securities laws and seeking unspecified damages, attorneys’ fees, costs, equitable/injunctive relief, and such other relief that may be deemed proper. On April 26, 2021, the defendants moved to dismiss the consolidated complaint with prejudice. Plaintiff’s opposition is due June 10, 2021. We believe the allegations in the action are without merit, and we intend to vigorously defend this litigation. As a result of uncertainty regarding the outcome of this matter, no provision has been made in the accompanying Consolidated Financial Statements.
Other Litigation
We are a defendant in various other lawsuits and claims arising in the normal course of business. Management believes it has valid defenses in these cases and is defending them vigorously. While the results of litigation cannot be predicted with certainty, management believes the final outcome of such litigation will not have a material adverse effect on our financial position or results of operations.
Insperity | 2021 First Quarter Form 10-Q
16

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020, as well as our Consolidated Financial Statements and notes thereto included in this Quarterly Report on Form 10-Q.
Executive Summary
Overview
Insperity, Inc. (“Insperity,” “we,” “our,” and “us”) provides an array of human resources (“HR”) and business solutions designed to help improve business performance. Our most comprehensive HR services offerings are provided through our professional employer organization (“PEO”) services, known as Workforce Optimization® and Workforce SynchronizationTM solutions (together, our “PEO HR Outsourcing solutions”), which encompass a broad range of HR 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 solution, the Insperity PremierTM platform.
COVID-19 Pandemic
The effects of the COVID-19 pandemic, including actions taken by businesses and governments, have resulted in a significant changes in U.S. economic activity. As the duration of the pandemic and such economic impacts remain uncertain, we have planned for a range of scenarios and have modified certain business and workforce practices. To conform to government restrictions and best practices, we have taken steps designed to keep our staff safe while continuing to serve clients, including implementing remote working for all non-essential employees and providing extra safety measures at corporate facilities. To serve our clients, we have instituted a number of service offerings and developed COVID-19 resources to assist clients with obtaining government provided tax credits, tax deferrals, loans and loan forgiveness and to provide guidance to assist clients with addressing the challenges faced by employers as a result of the pandemic. These service offerings and guidance to assist clients during the pandemic included additional benefits support, remote workforce transition, monitoring and educating on regulatory changes, return to the workplace and workplace safety.
In the first quarter of 2021, the average number of WSEEs paid per month declined 2.0% year-over-year and 2.5% sequentially as year-end client attrition exceeded new sales. We expect the average number of paid WSEEs per month to increase between 5% and 6% in the second quarter of 2021 as compared to the second quarter of 2020, which equates to the average number of paid worksite employees per month growing 2.6% to 3.6% sequentially from the first quarter of 2021.
We experienced a 1.8% increase in the year-over-year benefits costs per covered employee during the first quarter of 2021. We currently expect to experience higher costs related to COVID-19 and certain non-essential elective healthcare procedures during the remainder of 2021 and possibly beyond 2021 that had been deferred in response to COVID-19 governmental requirements or guidance related to shelter in place and similar orders. As a result, we expect that our healthcare claim costs will not be reflective of our historical quarterly claim cost trends. Further, the American Rescue Plan Act, which was enacted in March 2021, provides subsidies to qualifying individuals to cover the cost of healthcare benefits for up to six months under the COBRA program. At this time, we are unable to determine the impact, if any, that these COBRA subsidies, and the potential costs of claims by individuals electing such subsidized coverages, will have on our claim costs. While the COVID-19 pandemic has resulted in a reduced frequency in workers’ compensation claims, we have experienced an increase in the number of COVID-19 workers’ compensation claims. As a result, the COVID-19 pandemic has not had a material impact on our workers’ compensation cost estimate; however, the ultimate impact of COVID-19 on our workers’ compensation program remains uncertain. Accordingly, the impact of the COVID-19 pandemic, if any, on our workers’ compensation program will be reflected in future reporting periods.
The extent to which our future results are affected by the COVID-19 pandemic will depend on various factors and consequences beyond our control, such as the scope, duration and magnitude of the pandemic, actions by businesses and governments in response to the pandemic, including programs designed to assist small and medium-sized businesses with the economic impact of the pandemic; and the speed and effectiveness of responses to combat
Insperity | 2021 First Quarter Form 10-Q
17

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
the virus, including the development and availability of therapeutics and vaccines. See Part II, Item 1A. “Risk Factors” for additional information.
2021 Highlights
First Quarter 2021 Compared to First Quarter 2020
Average number of WSEEs paid per month decreased 2.0%
Net income decreased 0.3% and diluted earnings per share (“diluted EPS”) increased 0.6%, to $61.9 million and $1.59, respectively
Adjusted EPS increased 7.1% to $1.82
Adjusted EBITDA increased 2.9% to $104.2 million
Insperity | 2021 First Quarter Form 10-Q
18

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Key Financial and Statistical Data
(in thousands, except per share, WSEE and statistical data)
Three Months Ended March 31,
20212020% Change
Financial data:
Revenues
$1,286,835 $1,229,483 4.7 %
Gross profit251,445 234,022 7.4 %
Operating expenses167,621 148,801 12.6 %
Operating income83,824 85,221 (1.6)%
Other income (expense)(1,056)(483)118.6 %
Net income61,922 62,092 (0.3)%
Diluted EPS
1.59 1.58 0.6 %
Non-GAAP financial measures(1):
Adjusted net income$70,766 $66,893 5.8 %
Adjusted EBITDA104,236 101,254 2.9 %
Adjusted EPS
1.82 1.70 7.1 %
Average WSEEs paid233,170 238,014 (2.0)%
Statistical data (per WSEE per month):
Revenues(2)
$1,840 $1,722 6.9 %
Gross profit359 328 9.5 %
Operating expenses
240 208 15.4 %
Operating income
120 119 0.8 %
Net income89 87 2.3 %
 ____________________________________
(1)Please read “Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP.
(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,
(per WSEE per month)20212020
Gross billings$11,509 $10,415 
Less: WSEE payroll cost9,669 8,693 
Revenues$1,840 $1,722 

New Accounting Pronouncements
Please read Note 2 to the Consolidated Financial Statements, "Accounting Policies – Recently Adopted Accounting Standards," for new accounting pronouncements information.
Results of Operations
Key Operating Metrics
We monitor certain key metrics to measure our performance, including:
WSEEs
Insperity | 2021 First Quarter Form 10-Q
19

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Adjusted EBITDA
Adjusted EPS
Our growth in the number of WSEEs paid is affected by three primary sources: new client sales, client retention and the net change in existing clients through WSEE new hires and layoffs.

During the first quarter of 2021 (“Q1 2021”), WSEEs paid declined 2.0% compared to the first quarter of 2020 (“Q1 2020”). The number of WSEEs paid from new client sales in Q1 2021 was 93% of the 2020 period. Client attrition, as a percentage of the beginning of the year paid WSEE count, increased from 11% in Q1 2020 to 12% in Q1 2021, primarily due to the recent loss of a large enterprise client with 6,800 WSEEs. Net gains in our client base improved over the Q1 2020 period as clients continue to recover from the effects of the pandemic.

Average WSEEs Paid and
Year-over-Year Growth Percentage
nsp-20210331_g2.jpg
Insperity | 2021 First Quarter Form 10-Q
20

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Adjusted EBITDA and
Year-over-Year Growth Percentage
(in thousands)
nsp-20210331_g3.jpg
Adjusted EPS and
Year-over-Year Growth Percentage
(amounts per share)
nsp-20210331_g4.jpg
Revenues
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 markup computed as a percentage of the payroll cost.
Our revenues are primarily dependent on the number of clients enrolled, the resulting number of WSEEs paid each period and the number of WSEEs enrolled in our benefit plans. Because our total markup is computed as a percentage of payroll 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 | 2021 First Quarter Form 10-Q
21

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Revenue and
Year-over-Year Growth Percentage
(in thousands)
nsp-20210331_g5.jpg
First Quarter 2021 Compared to First Quarter 2020
Our revenues for Q1 2021 were $1.3 billion, an increase of 4.7%, primarily due to the following:
Revenues per WSEE per month increased 6.9%, or $118, primarily due to higher average pricing.
Average WSEEs paid decreased 2.0%.
We provide our PEO HR Outsourcing solutions to small and medium-sized businesses in strategically selected markets throughout the United States. Our PEO HR Outsourcing solutions revenue distribution by region follows:
PEO HR Outsourcing Solutions Revenue by Region
(in thousands)
nsp-20210331_g6.jpg   nsp-20210331_g7.jpg

Insperity | 2021 First Quarter Form 10-Q
22

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
nsp-20210331_g8.jpg   nsp-20210331_g9.jpg
Gross Profit
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.
Our gross profit per WSEE is primarily determined by our ability to accurately estimate and control 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 | 2021 First Quarter Form 10-Q
23

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Gross Profit and
Year-over-Year Growth Percentage
(in thousands)
nsp-20210331_g10.jpg
Gross Profit per WSEE per Month and
Year-over-Year Growth Percentage
nsp-20210331_g11.jpg 
First Quarter 2021 Compared to First Quarter 2020
Gross profit for Q1 2021 increased 7.4% to $251.4 million compared to $234.0 million in Q1 2020. Gross profit per WSEE per month for Q1 2021 increased $31 to $359 compared to $328 in Q1 2020 due primarily to the relative changes in higher 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. Our revenues and direct costs per WSEE per month increased $118 and $87, respectively, due to higher average pricing and changes in the primary direct cost components, respectively.
The net increase in costs between Q1 2021 and Q1 2020 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $3.9 million as discussed below. The primary direct cost components changed as follows:
Insperity | 2021 First Quarter Form 10-Q
24

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 $22 per WSEE per month and increased 1.8% on a cost per covered employee basis.
The percentage of WSEEs covered under our health insurance plans was 67.8% in Q1 2021 compared to 66.9% in Q1 2020.
Reported results include changes in estimated claims run-off related to prior periods, which was an increase in costs of $5.5 million, or $8 per WSEE per month, in Q1 2021 compared to a decrease in costs of $1.5 million, or $2 per WSEE per month, in Q1 2020.
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, safety and claims management contributed to the decrease 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 decreased 30.1%, or $8 per WSEE per month, in Q1 2021 compared to Q1 2020.
As a percentage of non-bonus payroll cost, workers’ compensation costs in Q1 2021 were 0.26% compared to 0.39% in Q1 2020.
We recorded a reduction in workers’ compensation costs of $13.2 million, or 0.25% of non-bonus payroll costs, in Q1 2021 compared to a reduction of $10.1 million, or 0.20% of non-bonus payroll costs, in Q1 2020, 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 workers’ compensation costs.
Payroll tax costs
Payroll taxes increased 8.2% on an 9.0% increase in payroll costs, or $71 per WSEE per month, as well as an increase in state unemployment tax rates, offset by the collection of a $5.5 million federal payroll tax refund related to a prior year.
Payroll taxes as a percentage of payroll costs remained flat at 7.8% in both Q1 2021 and Q1 2020.
In certain states, including Texas, we have experienced delays in the receipt of final 2021 state unemployment tax rates. As a result, we have estimated the 2021 rate for each of the outstanding states.
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 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.
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. Commissions are based on new accounts sold and a percentage of revenue generated by such personnel.
Advertising — Advertising expense primarily consists of media advertising and other business promotions in our current and anticipated sales markets.
General and administrative expenses — Our general and administrative expenses primarily include:
rent expenses related to our service centers and sales offices
Insperity | 2021 First Quarter Form 10-Q
25

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
outside professional service fees related to legal, consulting and accounting services
administrative costs, such as postage, printing and supplies
employee travel and training expenses
technology and facility repairs and maintenance costs
Depreciation and amortization — Depreciation and amortization expense is primarily a function of our capital investments in corporate facilities, service centers, sales offices and technology infrastructure.
First Quarter 2021 Compared to First Quarter 2020
The following table presents certain information related to our operating expenses:
Three Months Ended March 31,
$WSEE
(in thousands, except per WSEE)20212020% Change20212020% Change
Salaries$103,075 $86,501 19.2 %$147 $121 21.5 %
Stock-based compensation11,822 6,552 80.4 %17 88.9 %
Commissions7,719 8,460 (8.8)%11 12 (8.3)%
Advertising5,322 4,833 10.1 %14.3 %
General and administrative31,636 34,853 (9.2)%45 48 (6.3)%
Depreciation and amortization8,047 7,602 5.9 %12 11 9.1 %
Total operating expenses$167,621 $148,801 12.6 %$240 $208 15.4 %
Operating expenses for Q1 2021 increased 12.6% to $167.6 million compared to $148.8 million in Q1 2020. Operating expenses per WSEE per month for Q1 2021 increased 15.4% to $240 compared to $208 in Q1 2020.
Salaries of corporate and sales staff for Q1 2021 increased 19.2% to $103.1 million, or $26 per WSEE per month, compared to Q1 2020. This increase was primarily due to a 2.5% increase in corporate headcount, including a 7.3% increase in total BPAs in Q1 2021 compared to Q1 2020 and higher incentive compensation accruals in Q1 2021 related to better than expected operating results.
Stock based compensation expense for Q1 2021 increased 80.4% to $11.8 million, or $8 per WSEE per month, compared to Q1 2020. The increase was primarily due to awards issued under our incentive plan and the increase in the number of stock awards anticipated to be earned related to our long-term incentive plans based on our higher than expected operating results in 2021.
Commissions expense for Q1 2021 decreased 8.8% to $7.7 million, or $1 per WSEE per month, compared to Q1 2020, due primarily to lower sales management commissions.
Advertising expense for Q1 2021 increased 10.1% to $5.3 million, or $1 per WSEE per month, compared to Q1 2020. The increase was primarily due to increases in television and digital advertising and sponsorships, partially offset by reductions in radio advertising and trade shows and events.
General and administrative expenses for Q1 2021 decreased 9.2% to $31.6 million, or $3 per WSEE per month, compared to Q1 2020. The decrease was primarily due to reductions in travel costs in response to the COVID-19 pandemic, partially offset by increases in technology licensing costs and professional services related to our SalesForce implementation.
Depreciation and amortization expense for Q1 2021 increased 5.9% to $8.0 million, or $1 per WSEE per month, compared to Q1 2020. The increase was primarily due to increased capital expenditures related to software development costs and sales office expansions.
Insperity | 2021 First Quarter Form 10-Q
26

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Other Income (Expense)
Other Income (expense) for Q1 2021 was net expense of $1.1 million compared to net expense of $0.5 million in Q1 2020. The increase in expense was primarily due to decreased interest income on our cash, cash equivalents and marketable securities investments.
Income Tax Expense
Three Months Ended March 31,
20212020
Effective income tax rate25.2%26.7%
For the three months ended March 31, 2021, 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 three months of 2021 and 2020, we recognized an income tax benefit of $2.2 million and $2.0 million, respectively, related to the vesting of short-term, long-term incentive and restricted stock awards.

Non-GAAP Financial Measures
Non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of the non-GAAP financial measures used to their most directly comparable GAAP financial measures as provided in the tables below.
Non-GAAP MeasureDefinitionBenefit of Non-GAAP Measure
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.

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.
Adjusted cash, cash equivalents and marketable securities
Excludes funds associated with:
•  federal and state income tax withholdings,
•  employment taxes,
•  other payroll deductions, and
•  client prepayments.
We believe that the exclusion of the identified items helps us reflect the fundamentals of our underlying business model and analyze results against our expectations, against prior periods, and to plan for future periods by focusing on our underlying operations. We believe that the adjusted results provide relevant and useful information for investors because they allow investors to view performance in a manner similar to the method used by management and improves their ability to understand and assess our operating performance. Adjusted EBITDA is used by our lenders to assess our leverage and ability to make interest payments.
EBITDA
Represents net income computed in accordance with GAAP, plus:
•  interest expense,
•  income tax expense, and
•  depreciation and amortization expense.
Adjusted EBITDA
Represents EBITDA plus:
•  non-cash stock-based compensation.
Adjusted net income
Represents net income computed in accordance with GAAP, excluding:
•  non-cash stock-based compensation.
Adjusted EPS
Represents diluted net income per share computed in accordance with GAAP, excluding:
•  non-cash stock-based compensation.
Insperity | 2021 First Quarter Form 10-Q
27

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Following is a reconciliation of payroll cost (GAAP) to non-bonus payroll costs (non-GAAP):
(in thousands, except per WSEE per month)
Three Months Ended March 31,
20212020
$WSEE$WSEE
Payroll cost$6,763,587 $9,669 $6,207,271 $8,693 
Less: Bonus payroll cost
1,420,475 2,031 1,050,968 1,472 
Non-bonus payroll cost
$5,343,112 $7,638 $5,156,303 $7,221 
% Change period over period
3.6 %5.8 %9.1 %3.3 %
Following is a reconciliation of cash, cash equivalents and marketable securities (GAAP) to adjusted cash, cash equivalents and marketable securities (non-GAAP):
(in thousands)March 31, 2021December 31, 2020
Cash, cash equivalents and marketable securities$529,069 $589,375 
Less:
Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions
273,499 341,998 
Client prepayments
58,918 35,328 
Adjusted cash, cash equivalents and marketable securities$196,652 $212,049 
Following is a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP):
Three Months Ended March 31,
(in thousands, except per WSEE per month)
20212020
$WSEE$WSEE
Net income$61,922 $89 $62,092 $87 
Income tax expense20,846 30 22,646 32 
Interest expense1,599 2,362 
Depreciation and amortization
8,047 11 7,602 11 
EBITDA92,414 132 94,702 133 
Stock-based compensation
11,822 17 6,552 
Adjusted EBITDA$104,236 $149 $101,254 $142 
% Change period over period
2.9 %4.9 %(0.2)%(5.3)%
Following is a reconciliation of net income (GAAP) to adjusted net income (non-GAAP):
Three Months Ended March 31,
(in thousands)20212020
Net income$61,922 $62,092 
Non-GAAP adjustments:
Stock-based compensation11,822 6,552 
Total non-GAAP adjustments11,822 6,552 
Tax effect(2,978)(1,751)
Adjusted net income$70,766 $66,893 
% Change period over period5.8 %(18.0)%
Insperity | 2021 First Quarter Form 10-Q
28

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 March 31,
(amounts per share)20212020
Diluted EPS$1.59 $1.58 
Non-GAAP adjustments:
Stock-based compensation0.30 0.17 
Total non-GAAP adjustments0.30 0.17 
Tax effect(0.07)(0.05)
Adjusted EPS$1.82 $1.70 
% Change period over period
7.1 %(14.1)%

Liquidity and Capital Resources
We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of, among other things, our expansion plans, stock repurchase, potential acquisitions, debt service requirements and other operating cash needs. To meet short-term liquidity requirements, which are primarily the payment of direct costs and operating expenses, we rely primarily on cash from operations. Longer-term projects, large stock repurchases or significant acquisitions may be financed with debt or equity. We have a $500 million revolving credit facility (“Facility”) with a syndicate of financial institutions. The Facility is available for working capital and general corporate purposes, including acquisitions and stock repurchases. We have in the past sought, and may in the future seek, to raise additional capital or take other steps to increase or manage our liquidity and capital resources.
We had $529.1 million in cash, cash equivalents and marketable securities at March 31, 2021, of which approximately $273.5 million was payable in early April 2021 for withheld federal and state income taxes, employment taxes and other payroll deductions, and approximately $58.9 million represented client prepayments that were payable in April 2021. At March 31, 2021, we had working capital of $207.2 million compared to $172.3 million at December 31, 2020. 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 2021. 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, which we are carefully monitoring in light of the significant uncertainty created by the COVID-19 pandemic.
As of March 31, 2021, we had an outstanding letter of credit and borrowings totaling $370.4 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 2021 was $2.0 million. Our primary source of cash from operations is the comprehensive service fee and payroll funding we collect from our clients. Our cash and cash equivalents, and thus our reported cash flows from operating activities, are significantly impacted by various external and internal factors, which are reflected in part by the changes in our balance sheet accounts. These include the following:
Timing of client payments / payroll taxes – We typically collect our comprehensive service fee, along with the client’s payroll funding, from clients at least one day prior to the payment of WSEE payrolls and associated payroll taxes. Therefore, the last business day of a reporting period has a substantial impact on our reporting of operating cash flows. For example, many WSEEs are paid on Fridays; therefore, operating cash flows decrease in the reporting periods that end on a Friday or a Monday. In the period ended March 31, 2021, the last business day of the reporting period was a Wednesday, client prepayments were $58.9 million and employment taxes and other deductions were $273.5 million. In the period ended March 31, 2020, the last business day of the reporting period was a Tuesday, client prepayments were $22.1 million and employment taxes and other deductions were $235.2 million.
Insperity | 2021 First Quarter Form 10-Q
29

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Medical plan funding – Our health care contract with United establishes participant cash funding rates 90 days in advance of the beginning of a reporting quarter. Therefore, changes in the participation level of the United plan have a direct impact on our operating cash flows. In addition, changes to the funding rates, which are 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, 2021, premiums owed and cash funded to United have exceeded the costs of the United plan, resulting in a $51.4 million surplus, $42.4 million of which is reflected as a current asset, and $9.0 million of which is reflected as a long-term asset on our Condensed Consolidated Balance Sheets. The premiums, including an additional quarterly premium, owed to United at March 31, 2021, were $66.0 million, which is included in accrued health insurance costs, a current liability, on our Condensed Consolidated Balance Sheets.
Operating results – Our net income has a significant impact on our operating cash flows. Our adjusted net income increased 5.8% to $70.8 million in the first three months ended March 31, 2021, compared to $66.9 million in the first three months ended March 31, 2020. Please read “Results of Operations – First Nine Months 2020 Compared to First Nine Months 2019.”
Cash Flows from Investing Activities
Net cash flows used in investing activities were $12.1 million for the three months ended March 31, 2021, primarily due to property and equipment purchases of $12.1 million.
Cash Flows from Financing Activities