INSPERITY INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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:

Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles. Our cash, cash equivalents and marketable securities at December 31, 2023 and December 31, 2022 included $510.1 million and $504.8 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes, and other payroll deductions, as well as $27.6 million and $36.8 million, respectively, in client prepayments.

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

The following table summarizes our cash, cash equivalents, restricted cash and funds held for clients as reported in our Consolidated Statements of Cash Flows:

(1)Funds held for clients represent amounts held on behalf of our Traditional Payroll Solution customers that are restricted for the purpose of satisfying obligations to remit funds to clients’ employees and various tax authorities.

(2)Beginning in the third quarter of 2022, we adjusted the presentation of our Consolidated Statements of Cash Flows to include changes in funds held for clients as a financing activity and to include funds held for clients in both the beginning and ending period amounts in our totals of cash, cash equivalents, restricted cash and funds held for clients. Prior period amounts have not been adjusted to this presentation as the amounts are immaterial to our Consolidated Financial Statements. Previously, the changes in funds held for clients and the related client fund liabilities were

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

presented within operating activities in our Consolidated Statements of Cash Flows. Funds held for clients are held in a trust separate from our company funds and we do not use these funds held for clients for any corporate activity.

Please read Note 1. “Accounting Policies,” for a discussion of our accounting policies for deposits — workers’ compensation and restricted cash.

We account for our financial assets in accordance with ASC 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

Fair Value of Instruments Measured and Recognized at Fair Value

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

Please read Note 2 “Other Balance Sheet Information,” for additional information.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2023, the carrying value of borrowings under our revolving credit facility approximates fair value and was classified as Level 2 in the fair value hierarchy. Please read Note 6, “Long-Term Debt,” for additional information.

Accounts receivable, net consisted of the following:

Our accounts receivable is primarily composed of trade receivables and unbilled receivables. Our trade receivables, which represent outstanding gross billings to clients, are reported net of allowance for doubtful accounts of $1.1 million and $1.0 million as of December 31, 2023 and 2022, respectively. We establish an allowance for doubtful accounts based on management’s assessment of the collectability of specific accounts and by making a general provision for other potentially uncollectible amounts.

We make an accrual at the end of each accounting period for our obligations associated with the earned but unpaid wages of our WSEEs and for the accrued gross billings associated with such wages. These accruals are included in accrued worksite employee payroll cost and unbilled accounts receivable; however, these amounts are presented net in the Consolidated Statements of Income and Comprehensive Income. We generally require clients to pay invoices for service fees no later than the same day as the applicable payroll date. As such, we generally do not require collateral. Client prepayments directly attributable to accrued worksite employee payroll costs and unbilled revenues have been netted as we have the legal right of offset for these amounts. Unbilled accounts receivable consisted of the following:

Deposits and prepaid health insurance consisted of the following:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The contractual arrangement with United for health insurance coverage requires us to maintain an accumulated cash surplus in the plan of $9.0 million, which is reported as deposits and prepaid health insurance in our Consolidated Balance Sheets. Please read Note 1,“Accounting Policies,” for a discussion of our accounting policies forhealth insurance costs andworkers’ compensation costs.