INSPERITY INC

Previous wording

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 our Workforce Optimization® and Workforce Synchronization TM solutions (together, our “PEO HR Outsourcing Solutions”), which we provide by entering into a co-employment relationship with our clients. Our PEO HR Outsourcing Solutions 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 Premier TMplatform.

Current wording

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 our Insperity® HR 360 solution (formerly our Workforce Optimization®solution) and Insperity® HR 360 Select Edition (formerly our Workforce Synchronization TM solution) (together, our “PEO HR Solutions”), which we provide by entering into a co-employment relationship with our clients. Our PEO HR Solutions 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 Premier TMplatform.

Previous wording

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

Current wording

•Net income (loss) and diluted earnings per share (“EPS”) decreased 128% and 129% to $(5) million and $(0.14), respectively

Previous wording

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

Current wording

•Adjusted net income and adjusted EPS both decreased 70% to $10 million and $0.26, respectively

Previous wording

•During Q1 2025, average WSEEs paid increased 1% compared to Q1 2024. The number of WSEEs paid from new client sales and client retention increased compared with Q1 2024, while the net change in our client base decreased compared with Q1 2024.

Current wording

•During Q2 2025, average WSEEs paid increased 1% compared to Q2 2024. The number of WSEEs paid from new client sales and the net change in our client base increased compared with Q2 2024, while client retention remained consistent with Q2 2024.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Our revenues for Q2 2025 were $1.7 billion, an increase of 3%, primarily due to the following:

Previous wording

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

Current wording

•Revenues per WSEE per month increased 3%, or $45.

Previous wording

We provide our PEO HR Outsourcing Solutions to small and medium-sized businesses throughout the United States. Our PEO HR Outsourcing Solutions revenue distribution by region follows:

Current wording

We provide our PEO HR Solutions to small and medium-sized businesses throughout the United States. Our PEO HR Solutions revenue distribution by region follows:

Previous wording

PEO HR Outsourcing Solutions Revenue by Region

Current wording

PEO HR Solutions Revenue by Region

Previous wording

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

Current wording

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

Previous wording

We generally define the middle market sector as those companies with approximately 150 to 5,000 WSEEs. Currently, we have a dedicated sales management, service personnel, and consulting staff who concentrate solely on the middle market sector. Our average number of WSEEs per month in our middle market sector increased 4% during Q1 2025 compared to Q1 2024, representing approximately 26% and 25% of our total average paid WSEEs in Q1 2025 and Q1 2024, respectively.

Current wording

We generally define the middle market sector as those companies with approximately 150 to 5,000 WSEEs. Currently, we have a dedicated sales management, service personnel, and consulting staff who concentrate solely on the middle market sector. Our average number of WSEEs per month in our middle market sector increased 3% during YTD 2025 compared to YTD 2024, representing approximately 26% and 25% of our total average paid WSEEs in YTD 2025 and YTD 2024, respectively.

Previous wording

Our gross profit per WSEE and operating results are significantly impacted by our ability to accurately estimate direct costs and our ability to incorporate changes in these costs into the gross billings charged to PEO HR Outsourcing Solutions clients, which are subject to pricing arrangements that are typically renewed annually. We use gross profit per WSEE per month as our principal measurement of relative performance at the gross profit level.

Current wording

Our gross profit per WSEE and operating results are significantly impacted by our ability to accurately estimate direct costs and our ability to incorporate changes in these costs into the gross billings charged to PEO HR 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.

Previous wording

Gross profit for Q1 2025 decreased 10% to $310 million compared to $345 million in Q1 2024. Gross profit per WSEE per month for Q1 2025 decreased $40 to $338 compared to $378 in Q1 2024 due primarily to higher direct costs, offset in part by higher average pricing, as discussed below.

Current wording

Gross profit for Q2 2025 decreased 14% to $223 million compared to $260 million in Q2 2024. Gross profit per WSEE per month for Q2 2025 decreased $42 to $240 compared to $282 in Q2 2024 due primarily to higher direct costs, offset in part by higher average pricing, as discussed below.

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 $52 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 $45 due to higher average pricing of 3%.

Previous wording

The net increase in direct costs between Q1 2025 and Q1 2024 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $32 million as discussed below. The $92 per WSEE per month increase in direct costs is due primarily to the direct cost component changes as follows:

Current wording

The net increase in direct costs between Q2 2025 and Q2 2024 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $24 million as discussed below. The $87 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 $56 per WSEE per month and increased 8.4% on a cost per covered employee basis driven by an acceleration in inpatient, outpatient, and pharmacy costs and in the frequency of large claim activity in Q1 2025 as compared to Q1 2024.

Current wording

•The cost of group health insurance and related employee benefits increased $65 per WSEE per month and increased 9.6% on a cost per covered employee basis driven by continued elevated pharmacy trends and frequency of large claim activity in Q2 2025 as compared to Q2 2024.

Previous wording

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

Current wording

•The percentage of WSEEs covered under our health insurance plans was 63% in Q2 2025 compared to 64% in Q2 2024.

Previous wording

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

Current wording

•Workers’ compensation costs increased 4%, or $1 per WSEE per month, in Q2 2025 compared to Q2 2024.

Previous wording

•Payroll taxes increased 5% on a 6% increase in payroll costs, or $33 per WSEE per month.

Current wording

•Payroll taxes increased 4% on a 2% increase in payroll costs, or $21 per WSEE per month.

Previous wording

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

Current wording

•Payroll taxes as a percentage of payroll costs were 7% in both Q2 2025 and Q2 2024.

Previous wording

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

Current wording

•Reported results include changes in estimated claims run-off related to prior periods, which was an increase in costs of $11 million, or $6 per WSEE per month, in YTD 2025 compared to a decrease in costs of $26 million, or $14 per WSEE per month, in YTD 2024.

Previous wording

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

Current wording

•As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.24% in YTD 2025 and 0.23% in YTD 2024.

Previous wording

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

Current wording

•Our continued discipline around our client selection, workplace safely and claims management has allowed for claims to be closed out at amounts below our original cost estimates, resulting in a reduction in workers’ compensation costs of $14 million, or 0.09% of non-bonus payroll costs, in YTD 2025 compared to a reduction of $17 million, or 0.11% of non-bonus payroll costs, in YTD 2024.

Previous wording

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

Current wording

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

Previous wording

Operating expenses for Q1 2025 increased 2% to $242 million compared to $237 million in Q1 2024. Operating expenses per WSEE per month for Q1 2025 increased 2% to $264 compared to $260 in Q1 2024.

Current wording

Operating expenses for Q2 2025 decreased 3% to $230 million compared to $237 million in Q2 2024. Operating expenses per WSEE per month for Q2 2025 decreased 4% to $248 compared to $257 in Q2 2024.

Previous wording

For the three months ended March 31, 2025, our provision for income taxes differed from the U.S. statutory rate primarily due to state income taxes, non-deductible expenses and vesting of restricted and long-term incentive stock awards. During the first three months of 2025, we recognized additional income tax of $1 million related to the vesting of long-term incentive and restricted stock awards, primarily due to the vesting date price being below the grant date price.

Current wording

For the six months ended June 30, 2025, our provision for income taxes differed from the U.S. statutory rate primarily due to state income taxes, non-deductible expenses and vesting of restricted and long-term incentive stock awards. During the first six months of 2025 we recognized a $1 million income tax expense related to the vesting of long-term incentive and restricted stock awards. During the first six months of 2024 we did not recognize an income tax benefit or expense related to the vesting of long-term incentive and restricted stock awards.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

We had $568 million in cash, cash equivalents and marketable securities at March 31, 2025, of which approximately $404 million was payable in April 2025 for withheld federal and state income taxes, employment taxes and other payroll deductions. Approximately $40 million represented client prepayments that were invoiced in April 2025. At March 31, 2025, we had working capital of $188 million compared to $155 million at December 31, 2024. We currently believe that our cash on hand, marketable securities, cash flows from operations, and availability under the Facility will be adequate to meet our liquidity requirements for the remainder of 2025. We intend to rely on these same sources, as well as public and private debt or equity financing, to meet our longer-term liquidity and capital needs.

Current wording

We had $456 million in cash, cash equivalents and marketable securities at June 30, 2025, of which approximately $316 million was payable in July 2025 for withheld federal and state income taxes, employment taxes and other payroll deductions. Approximately $26 million represented client prepayments that were invoiced in July 2025. At June 30, 2025, we had working capital of $160 million compared to $155 million at December 31, 2024. We currently believe that our cash on hand, marketable securities, cash flows from operations, and availability under the Facility will be adequate to meet our liquidity requirements for the remainder of 2025. We intend to rely on these same sources, as well as public and private debt or equity financing, to meet our longer-term liquidity and capital needs.

Previous wording

Net cash used in operating activities in the first three months of 2025 was $443 million. Our primary source of cash from operations is the comprehensive service fee and payroll funding we collect from our clients. 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 used in operating activities in the first six months of 2025 was $522 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, 2025, the last business day of the reporting period was a Monday, client prepayments were $40 million and employment taxes and other deductions were $404 million. In the three months ended March 31, 2024, the last business day of the reporting period was a Friday, client prepayments were $34 million and employment taxes and other deductions were $443 million. In addition, $440 million of client employee retention tax credits received on their behalf from the Internal Revenue Service during the fourth quarter of 2024 were distributed to clients in early 2025.

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, 2025, the last business day of the reporting period was a Monday, client prepayments were $26 million and employment taxes and other deductions were $316 million. 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. In addition, $440 million of client employee retention tax credits received on their behalf from the Internal Revenue Service during the fourth quarter of 2024 were distributed to clients in early 2025.

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, 2025, Plan Costs were less than the net premiums paid and owed to United by $52 million, which is $43 million in excess of our agreed-upon $9 million surplus maintenance level. The $43 million difference is therefore reflected as a current asset and $9 million is reflected as a long-term asset on our Condensed Consolidated Balance Sheet at March 31, 2025. In addition, the premiums owed to United at March 31, 2025, were $64 million, which is included in accrued health insurance costs, a current liability, on our Condensed Consolidated Balance Sheet.

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, 2025, Plan Costs were less than the net premiums paid and owed to United by $35 million, which is $26 million in excess of our agreed-upon $9 million surplus maintenance level. The $26 million difference is therefore reflected as a current asset and $9 million is reflected as a long-term asset on our Condensed Consolidated Balance Sheets at June 30, 2025. In addition, the premiums owed to United at June 30, 2025, were $53 million, which is included in accrued health insurance costs, a current liability, on our Condensed Consolidated Balance Sheets.

Previous wording

•Operating results — Our adjusted net income has a significant impact on our operating cash flows. Our adjusted net income decreased 31% to $59 million in the first three months of 2025, compared to $86 million in the first three months of 2024. Please read “Results of Operations.”

Current wording

•Operating results — Our adjusted net income has a significant impact on our operating cash flows. Our adjusted net income decreased 42% to $69 million in the first six months of 2025, compared to $119 million in the first six months of 2024. Please read “Results of Operations.”

Previous wording

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

Current wording

Net cash flows used in investing activities were $11 million for the six months ended June 30, 2025, primarily due to property and equipment purchases.

Previous wording

Net cash flows used in financing activities were $49 million for the three months ended March 31, 2025. We paid $23 million in dividends and repurchased or withheld $19 million in stock. In addition, client funds liability and other financing activities decreased by $7 million.

Current wording

Net cash flows used in financing activities were $78 million for the six months ended June 30, 2025. We paid $45 million in dividends and repurchased or withheld $19 million in stock. In addition, client funds liability and other financing activities decreased by $14 million.