INSPERITY INC
For the period ended Jun 30, 2024. Filed Aug 6, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 6, 2024
NSP$49.82-2.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-01.
0001000753-24-000034
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial MeasuresCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0001000753-24-000046
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial MeasuresThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 116 previous paragraphs and 155 current paragraphs.
87 unchanged; 26 reworded; 24 added; 2 removed; 1 previous and 18 current paragraphs rearranged.
Tables are not compared: 23 previous and 28 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (24)
Current report
•Adjusted EPS increased 34% to $0.86
Current report
•Adjusted EBITDA increased 29% to $66 million
Current report
•Net income and diluted EPS decreased 9% and 8% to $97 million and $2.56, respectively
Current report
•Adjusted EPS decreased 5% to $3.13
Current report
•Adjusted EBITDA increased 2% to $208 million
Current report
•During the first six months of 2024 (“YTD 2024”), average WSEEs paid decreased 1% compared to the first six months of 2023 (“YTD 2023”). The number of WSEEs paid from new client sales remained consistent with YTD 2023, while the net gain in our client base and client retention declined when compared to YTD 2023.
Current report
•Revenues per WSEE per month increased 3%, or $50, partially offset by a 1% decrease in average WSEEs paid.
Current report
Gross profit for Q2 2024 increased 16% to $260 million compared to $225 million in Q2 2023. Gross profit per WSEE per month for Q2 2024 increased $41 to $282 compared to $241 in Q2 2023 due primarily to higher average pricing and lower direct costs, as discussed below.
Current report
Benefits costs
Current report
Workers’ compensation costs
Current report
•Workers’ compensation costs decreased 5%, or $1 per WSEE per month, in YTD 2024 compared to YTD 2023.
Current report
•As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.23% in YTD 2024 and 0.24% in YTD 2023.
Current report
Payroll tax costs
Current report
•Payroll taxes increased 2% on a 1% increase in payroll costs, or $19 per WSEE per month.
Current report
•Payroll taxes as a percentage of payroll costs was 7% in both YTD 2024 and YTD 2023.
Current report
•Stock-based compensation expense for Q2 2024 increased 33% to $20 million, or $6 per WSEE per month, compared to Q2 2023. The increase was primarily due to an increase in the number of stock awards anticipated to be earned related to performance-based awards granted under our long-term incentive plans based on our higher than expected operating results in Q2 2024 and time-vested restricted stock unit awards issued under our incentive plan.
Current report
•Advertising expense for Q2 2024 decreased 29% to $12 million, or $5 per WSEE per month, compared to Q2 2023 due to a change in timing of advertising spend.
Current report
Operating expenses for YTD 2024 increased 13% to $474 million compared to $420 million in YTD 2023. Operating expenses per WSEE per month for YTD 2024 increased 15% to $259 compared to $226 in YTD 2023.
Current report
•Salaries of corporate and sales staff for YTD 2024 increased 13% to $266 million, or $18 per WSEE per month, compared to YTD 2023. The increase was primarily due to a 6% increase in BPA, service and support headcount and staff compensation levels, and higher incentive compensation expense in YTD 2024 compared to YTD 2023.
Current report
•Stock-based compensation expense for YTD 2024 increased 15% to $30 million, or $2 per WSEE per month, compared to YTD 2023. The increase was primarily due to time-vested restricted stock unit awards issued under our incentive plan.
Current report
•Advertising expense for YTD 2024 decreased 17% to $19 million, or $2 per WSEE per month, compared to YTD 2023 due to a change in timing of advertising spend.
Current report
•General and administrative expenses for YTD 2024 increased 24% to $114 million, or $13 per WSEE per month, compared to YTD 2023. The increase was primarily due to increased professional services fees, software licensing and maintenance costs and amortization of SaaS implementation costs.
Current report
•Depreciation and amortization expense for YTD 2024 increased 5% to $22 million, or $1 per WSEE per month, compared to YTD 2023. The increase was primarily due to increased capital expenditures related to computer hardware and software and software development costs.
Current report
•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.
Removed paragraphs (2)
Previous report
•Adjusted EPS decreased 15% to $2.27
Previous report
•Adjusted EBITDA decreased 7% to $142 million
Reworded paragraphs (26)
Previous wording
•Net income and diluted earnings per share (“diluted EPS”) decreased 17% and 15% to $79 million and $2.08, respectively
Current wording
•Net income and diluted earnings per share (“diluted EPS”) increased 50% and 45% to $18 million and $0.48, respectively
Previous wording
•During Q1 2024, WSEEs paid decreased 1% compared to Q1 2023. The number of WSEEs paid from new client sales remained consistent compared to Q1 2023, while client retention and the net gain in our client base declined compared to Q1 2023.
Current wording
•During Q2 2024, average WSEEs paid decreased 1% compared to Q2 2023. The number of WSEEs paid from new client sales remained consistent with Q2 2023, while the net gain in our client base and client retention declined compared to Q2 2023.
Previous wording
•Revenues per WSEE per month increased 3%, or $53.
Current wording
•Revenues per WSEE per month increased 3%, or $46, partially offset by a 1% decrease in average WSEEs paid.
Previous wording
Our revenues for Q1 2024 were $1.8 billion, an increase of 2%, primarily due to the following:
Current wording
Our revenues for YTD 2024 were $3.4 billion, an increase of 2%, primarily due to the following:
Previous wording
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. Currently, we have a dedicated sales management, service personnel, and consulting staff who concentrate solely on the middle market sector. Our average number of WSEEs per month in our middle market sector decreased 4% during Q1 2024 compared to Q1 2023, representing approximately 25% and 26% of our total average paid WSEEs during Q1 2024 and Q1 2023, respectively.
Current wording
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. 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 25% and 26% of our total average paid WSEEs during YTD 2024 and YTD 2023, respectively.
Previous wording
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 $53 due to higher average pricing of 3%.
Current wording
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 $46 due to higher average pricing of 3%.
Previous wording
•Workers’ compensation costs decreased $2 per WSEE per month in Q1 2024 compared to Q1 2023 while non-bonus payroll costs increased 2%.
Current wording
•Workers’ compensation costs increased $1 per WSEE per month in Q2 2024 compared to Q2 2023 while non-bonus payroll costs increased 1%.
Previous wording
•As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.22% in Q1 2024 and 0.25% in Q1 2023.
Current wording
•As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.23% in both Q2 2024 and Q2 2023.
Previous wording
•We recorded a reduction in workers’ compensation costs of $9 million, or 0.11% of non-bonus payroll costs in Q1 2024, as a result of closing out claims at lower than expected costs. In Q1 2023, we recorded a reduction of $8 million, or 0.10% of non-bonus payroll costs.
Current wording
•We recorded a reduction in workers’ compensation costs of $7 million, or 0.09% of non-bonus payroll costs in Q2 2024, as a result of closing out claims at lower than expected costs. In Q2 2023, we recorded a reduction of $8 million, or 0.10% of non-bonus payroll costs.
Previous wording
•Payroll taxes increased 1%, or $18 per WSEE per month, while payroll costs remained flat.
Current wording
•Payroll taxes increased 2%, or $20 per WSEE per month, while payroll costs remained flat.
Previous wording
•Payroll taxes as a percentage of payroll costs were 8% in both Q1 2024 and Q1 2023.
Current wording
•Payroll taxes as a percentage of payroll costs were 7% in both Q2 2024 and Q2 2023.
Previous wording
Gross profit for Q1 2024 increased 4% to $345 million compared to $332 million in Q1 2023. Gross profit per WSEE per month for Q1 2024 increased $17 to $378 compared to $361 in Q1 2023 due primarily to higher average pricing, offset in part by higher direct costs, as discussed below.
Current wording
Gross profit for YTD 2024 increased 9% to $605 million compared to $557 million in YTD 2023. Gross profit per WSEE per month for YTD 2024 increased $30 to $330 compared to $300 in YTD 2023 due primarily to higher average pricing, offset in part by higher direct costs, as discussed below.
Previous wording
The net decrease in direct costs between Q1 2024 and Q1 2023 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $10 million as discussed below. The $36 per WSEE per month increase in direct costs is due primarily to the direct cost components changes as follows:
Current wording
The net decrease in direct costs between YTD 2024 and YTD 2023 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $18 million as discussed below. The $20 per WSEE per month increase in direct costs is due primarily to the direct cost component changes as follows:
Previous wording
•The cost of group health insurance and related employee benefits increased $20 per WSEE per month and increased 4.6% on a cost per covered employee basis in Q1 2024 as compared to Q1 2023.
Current wording
•The cost of group health insurance and related employee benefits increased $1 per WSEE per month, or 1.9% on a cost per covered employee basis. We did not experience the number and severity of large claims in YTD 2024 as compared to YTD 2023.
Previous wording
•Reported results include changes in estimated claims run-off related to prior periods, which was a reduction in costs of $18 million, or $20 per WSEE per month, in Q1 2024 compared to a decrease in costs of $9 million, or $10 per WSEE per month, in Q1 2023.
Current wording
•Reported results include changes in estimated claims run-off related to prior periods, which was a decrease in costs of $26 million, or $14 per WSEE per month, in YTD 2024 compared to a decrease in costs of $10 million, or $5 per WSEE per month, in YTD 2023.
Previous wording
Operating expenses for Q1 2024 increased 12% to $237 million compared to $211 million in Q1 2023. Operating expenses per WSEE per month for Q1 2024 increased 14% to $260 compared to $229 in Q1 2023.
Current wording
Operating expenses for Q2 2024 increased 13% to $237 million compared to $209 million in Q2 2023. Operating expenses per WSEE per month for Q2 2024 increased 15% to $257 compared to $224 in Q2 2023.
Previous wording
•Salaries of corporate and sales staff for Q1 2024 increased 12% to $140 million, or $18 per WSEE per month, compared to Q1 2023. The increase was primarily due to a 5% increase in BPA, service and support headcount in Q1 2024 compared to Q1 2023 and higher incentive compensation accruals in Q1 2024.
Current wording
•Salaries of corporate and sales staff for Q2 2024 increased 15% to $126 million, or $18 per WSEE per month, compared to Q2 2023. The increase was primarily due to a 6% increase in BPA, service and support headcount in Q2 2024 compared to Q2 2023 and higher incentive compensation accruals in Q2 2024.
Previous wording
•General and administrative expenses for Q1 2024 increased 19% to $57 million, or $11 per WSEE per month, compared to Q1 2023. The increase was primarily due to increased software licensing, maintenance costs, SaaS implementation expense, travel and training, and professional services fees.
Current wording
•General and administrative expenses for Q2 2024 increased 30% to $57 million, or $15 per WSEE per month, compared to Q2 2023. The increase was primarily due to increased software licensing, maintenance costs, SaaS implementation expense, and professional services fees.
Previous wording
For the three months ended March 31, 2024, our provision for income taxes differed from the U.S. statutory rate primarily due to state income taxes, non-deductible expenses and vesting of restricted and long-term incentive stock awards.
Current wording
For the six months ended June 30, 2024, our provision for income taxes differed from the U.S. statutory rate primarily due to state income taxes, non-deductible expenses and vesting of restricted and long-term incentive stock awards. During the first six months of 2024 we did not recognize an income tax benefit as compared to an income tax benefit of $5 million for the first six months of 2023, related to the vesting of long-term incentive and restricted stock awards.
Previous wording
We had $683 million in cash, cash equivalents and marketable securities at March 31, 2024, of which approximately $443 million was payable in early April 2024 for withheld federal and state income taxes, employment taxes and other payroll deductions, and approximately $34 million represented client prepayments that were payable in April 2024. At March 31, 2024, we had working capital of $213 million compared to $159 million at December 31, 2023. We currently believe that our cash on hand, marketable securities, cash flows from operations, and availability under the Facility will be adequate to meet our liquidity requirements for the remainder of 2024. We intend to rely on these same sources, as well as public and private debt or equity financing, to meet our longer-term liquidity and capital needs.
Current wording
We had $692 million in cash, cash equivalents and marketable securities at June 30, 2024, of which approximately $459 million was payable in early July 2024 for withheld federal and state income taxes, employment taxes and other payroll deductions, approximately $22 million represented client prepayments that were payable in July 2024, and includes $97 million of funds we received in late June 2024 from the Internal Revenue Service related to employee retention tax credits claimed by our PEO clients under the COVID relief programs that were distributed to clients in early July 2024. At June 30, 2024, we had working capital of $238 million compared to $159 million at December 31, 2023. We currently believe that our cash on hand, marketable securities, cash flows from operations, and availability under the Facility will be adequate to meet our liquidity requirements for the remainder of 2024. We intend to rely on these same sources, as well as public and private debt or equity financing, to meet our longer-term liquidity and capital needs.
Previous wording
Net cash provided by operating activities in the first three months of 2024 was $31 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:
Current wording
Net cash provided by (used in) operating activities in the first six months of 2024 was $51 million. Our primary source of cash from operations is the comprehensive service fee and payroll funding we collect from our clients. 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:
Previous wording
•Timing of client payments / payroll taxes — We typically collect our comprehensive service fee, along with the client’s payroll funding, from clients no later than the same day as 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 three months ended March 31, 2024, the last business day of the reporting period was a Friday, client prepayments were $34 million and employment taxes and other deductions were $443 million. In the three months ended March 31, 2023, the last business day of the reporting period was also a Friday, client prepayments were $44 million and employment taxes and other deductions were $458 million.
Current wording
•Timing of client payments / payroll taxes — We typically collect our comprehensive service fee, along with the client’s payroll funding, from clients no later than the same day as 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 six months ended June 30, 2024, the last business day of the reporting period was a Friday, client prepayments were $22 million and employment taxes and other deductions were $459 million, which includes $97 million of funds we received in late June 2024 from the Internal Revenue Service related to employee retention tax credits claimed by our PEO clients under the COVID relief programs that were distributed to clients in early July 2024. In the six months ended June 30, 2023, the last business day of the
Previous wording
•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, 2024, Plan Costs were less than the net premiums paid and owed to United by $33 million, which is $24 million in excess of our agreed-upon $9 million surplus maintenance level. The $24 million difference is therefore reflected as a current asset and $9 million is reflected as a long-term asset on our Condensed Consolidated Balance Sheet at March 31, 2024. In addition, the premiums owed to United at March 31, 2024, were $63 million, which is included in accrued health insurance costs, a current liability, on our Condensed Consolidated Balance Sheet.
Current wording
•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 June 30, 2024, Plan Costs were less than the net premiums paid and owed to United by $27 million, which is $18 million in excess of our agreed-upon $9 million surplus maintenance level. The $18 million difference is therefore reflected as a current asset and $9 million is reflected as a long-term asset on our Condensed Consolidated Balance Sheet at June 30, 2024. In addition, the premiums owed to United at June 30, 2024, were $35 million, which is included in accrued health insurance costs, a current liability, on our Condensed Consolidated Balance Sheet.
Previous wording
•Operating results — Our adjusted net income has a significant impact on our operating cash flows. Our adjusted net income decreased 17% to $86 million in the first three months of 2024, compared to $103 million in the first three months of 2023. Please read “Results of Operations – First Quarter 2024 Compared to First Quarter 2023.”
Current wording
•Operating results — Our adjusted net income has a significant impact on our operating cash flows. Our adjusted net income decreased 7% to $119 million in the first six months of 2024, compared to $128 million in the first six months of 2023. Please read “Results of Operations – Second Quarter 2024 Compared to Second Quarter 2023.”
Previous wording
Net cash flows used in investing activities were $5 million for the three months ended March 31, 2024, primarily due to property and equipment purchases of $5 million.
Current wording
Net cash flows used in investing activities were $11 million for the six months ended June 30, 2024, primarily due to property and equipment purchases of $11 million.
Previous wording
Net cash flows used in financing activities were $83 million for the three months ended March 31, 2024. We paid $21 million in dividends and repurchased or withheld $23 million in stock. In addition, client funds liability and other financing activities decreased by $39 million.
Current wording
Net cash flows used in financing activities were $127 million for the six months ended June 30, 2024. We paid $44 million in dividends and repurchased or withheld $37 million in stock. In addition, client funds liability and other financing activities decreased by $46 million.
Rearranged current paragraphs (18)
Current report — wording carried from elsewhere
•Average number of WSEEs paid per month decreased 1%
Current report — wording carried from elsewhere
Our revenues for Q2 2024 were $1.6 billion, an increase of 1%, primarily due to the following:
Current report — wording carried from elsewhere
The net decrease in direct costs between Q2 2024 and Q2 2023 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $25 million as discussed below. The $5 per WSEE per month increase in direct costs
Current report — wording carried from elsewhere
is due primarily to the direct cost component changes as follows:
Current report — wording carried from elsewhere
•The cost of group health insurance and related employee benefits decreased $18 per WSEE per month and decreased 0.4% on a cost per covered employee basis in Q2 2024 as compared to Q2 2023. We did not experience the number and severity of large claims in Q2 2024 as compared to Q2 2023.
Current report — wording carried from elsewhere
•Reported results include changes in estimated claims run-off related to prior periods, which was a reduction in costs of $25 million, or $27 per WSEE per month, in Q2 2024 compared to an increase in costs of $1 million, or $1 per WSEE per month, in Q2 2023.
Current report — wording carried from elsewhere
Our continued discipline around our client selection, workplace safety and claims management contributed to the small increase in our cost per WSEE and, as a result, has allowed for claims within our policy periods to be closed out at amounts below our original cost estimates.
Current report — wording carried from elsewhere
Our pricing objectives attempt to achieve a level of revenue per WSEE that matches or exceeds changes in primary direct costs and operating expenses. Our revenues per WSEE per month increased $50 due to higher average pricing of 3%.
Current report — wording carried from elsewhere
•The percentage of WSEEs covered under our health insurance plans was 64% in YTD 2024 compared to 65% in YTD 2023.
Current report — wording carried from elsewhere
Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies –Health Insurance Costs,” for a discussion of our accounting for health insurance costs.
Current report — wording carried from elsewhere
•We recorded a reduction in workers’ compensation costs of $17 million, or 0.11% of non-bonus payroll costs, in YTD 2024 compared to a reduction of $15 million, or 0.10% of non-bonus payroll costs, in YTD 2023, primarily as a result of closing out claims at lower than expected costs.
Current report — wording carried from elsewhere
Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies –Workers' Compensation Costs,” for a discussion of our accounting for health insurance costs.
Current report — wording carried from elsewhere
The following table presents certain information related to our operating expenses:
Current report — wording carried from elsewhere
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Current report — wording carried from elsewhere
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Current report — wording carried from elsewhere
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Current report — wording carried from elsewhere
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Current report — wording carried from elsewhere
reporting period was also a Friday, client prepayments were $31 million and employment taxes and other deductions were $366 million.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
During the first three months of 2024 and 2023, we recognized an income tax benefit of $0 and $5 million, respectively, related to the vesting of long-term incentive and restricted stock awards.