10-Q

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 ended	March 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

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,	Texas	77339
(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 class	Ticker symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	NSP	New York Stock Exchange
Rights to Purchase Series A Junior Participating Preferred Stock	NSP	New 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 filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Emerging 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	4
	Condensed Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Cash Flows	6
	Consolidated Statements of Stockholders’ Equity	8
	Notes to Consolidated Financial Statements	9
Part I, Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Part I, Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Part I, Item 4.	Controls and Procedures	31
Part II, Item 1.	Legal Proceedings	32
Part II, Item 1A.	Risk Factors	32
Part II, Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Part II, Item 6.	Exhibits	34

FINANCIAL STATEMENTS
(Unaudited)

PART I

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)	March 31, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	494,777	$	554,846
Restricted cash	46,353		45,522
Marketable securities	34,292		34,529
Accounts receivable, net	561,244		392,746
Prepaid insurance	57,670		10,164
Other current assets	53,718		39,461
Income taxes receivable	3,451		—
Total current assets	1,251,505		1,077,268
Property and equipment, net of accumulated depreciation	220,262		216,256
Right-of-use (“ROU”) leased assets	67,688		60,663
Prepaid health insurance	9,000		9,000
Deposits – health insurance	7,900		7,900
Deposits – workers’ compensation	193,067		186,331
Goodwill and other intangible assets, net	12,707		12,707
Deferred income taxes, net	—		9,603
Other assets	6,955		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 payable	310,519		377,960
Accrued worksite employee payroll cost	503,334		334,836
Accrued health insurance costs	72,136		32,685
Accrued workers’ compensation costs	49,696		48,186
Accrued corporate payroll and commissions	41,720		44,277
Other accrued liabilities	61,105		60,777
Total current liabilities	1,044,351		904,924
Accrued workers’ compensation cost, net of current	190,336		195,239
Long-term debt	369,400		369,400
Operating lease liabilities, net of current	71,716		64,289
Deferred income taxes, net	13,343		—
Other accrued liabilities, net of current	6,294		6,292
Total noncurrent liabilities	651,089		635,220
Commitments and contingencies
Common stock	555		555
Additional paid-in capital	81,329		95,528
Treasury stock, at cost	(628,391)		(626,984)
Retained earnings	620,151		575,033
Total stockholders’ equity	73,644		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)	2021		2020
Revenues(1)	$	1,286,835	$	1,229,483
Payroll taxes, benefits and workers’ compensation costs	1,035,390		995,461
Gross profit	251,445		234,022
Salaries, wages and payroll taxes	103,075		86,501
Stock-based compensation	11,822		6,552
Commissions	7,719		8,460
Advertising	5,322		4,833
General and administrative expenses	31,636		34,853
Depreciation and amortization	8,047		7,602
Total operating expenses	167,621		148,801
Operating income	83,824		85,221
Other income (expense):
Interest income	543		1,879
Interest expense	(1,599)		(2,362)
Income before income tax expense	82,768		84,738
Income tax expense	20,846		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)	2021		2020
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)	2021		2020
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 amortization	8,047		7,602
Stock-based compensation	11,822		6,552
Deferred income taxes	22,946		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 assets	1,508		3,403
Accounts payable	(362)		1,675
Payroll taxes and other payroll deductions payable	(67,441)		(9,003)
Accrued worksite employee payroll expense	168,498		34,905
Accrued health insurance costs	39,451		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 activities	1,971		23,787
Cash flows from investing activities
Marketable securities:
Purchases	(10,585)		(8,689)
Proceeds from maturities	10,580		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
Other	2,751		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 period	786,699		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)	2021		2020
Supplemental schedule of cash and cash equivalents and restricted cash
Cash and cash equivalents	$	554,846	$	367,342
Restricted cash	45,522		49,295
Deposits – workers’ compensation	186,331		175,913
Cash, cash equivalents and restricted cash beginning of period	$	786,699	$	592,550
Cash and cash equivalents	$	494,777	$	404,728
Restricted cash	46,353		48,349
Deposits – workers’ compensation	193,067		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 Issued			Additional Paid-In Capital		Treasury Stock		Retained Earnings and AOCI		Total
(in thousands)	Shares	Amount
Balance at December 31, 2020	55,489	$	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, 2021	55,489	$	555	$	81,329	$	(628,391)	$	620,151	$	73,644
Balance at December 31, 2019	55,489	$	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, 2020	55,489	$	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)	2021		2020
Beginning balance, January 1,	$	240,761	$	242,904
Accrued claims	8,522		14,339
Present value discount, net of accretion	652		(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 claims	190,336		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)	2021		2020		% Change
Northeast	$	373,629	$	344,086	8.6	%
Southeast	156,260		140,678		11.1	%
Central	225,700		211,302		6.8	%
Southwest	256,979		272,130		(5.6)	%
West	261,354		246,853		5.9	%
	1,273,922		1,215,049		4.8	%
Other revenue	12,913		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, 2021						December 31, 2020
(in thousands)	Cash & Cash Equivalents		Marketable Securities		Total		Cash & Cash Equivalents		Marketable Securities		Total
Overnight holdings	$	432,607	$	—	$	432,607	$	503,221	$	—	$	503,221
Investment holdings	48,278		34,292		82,570		47,992		34,529		82,521
Cash in demand accounts	23,105		—		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, 2021						December 31, 2020
(in thousands)	Total		Level 1		Level 2		Total		Level 1		Level 2
Money market funds	$	480,885	$	480,885	$	—	$	551,213	$	551,213	$	—
U.S. Treasury bills	13,269		13,269		—		10,531		10,531		—
Municipal bonds	21,023		—		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 Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2021
U.S. Treasury bills	$	13,267	$	2	$	—	$	13,269
Municipal bonds	21,028		1		(6)		21,023
Total	$	34,295	$	3	$	(6)	$	34,292
December 31, 2020
U.S. Treasury bills	$	10,530	$	1	$	—	$	10,531
Municipal bonds	23,994		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 Cost		Estimated 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)	2021		2020
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)	2021		2020
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 outstanding	38,216		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 outstanding	38,839		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,
	2021		2020		% Change
Financial data:
Revenues	$	1,286,835	$	1,229,483	4.7	%
Gross profit	251,445		234,022		7.4	%
Operating expenses	167,621		148,801		12.6	%
Operating income	83,824		85,221		(1.6)	%
Other income (expense)	(1,056)		(483)		118.6	%
Net income	61,922		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 EBITDA	104,236		101,254		2.9	%
Adjusted EPS	1.82		1.70		7.1	%
Average WSEEs paid	233,170		238,014		(2.0)	%
Statistical data (per WSEE per month):
Revenues(2)	$	1,840	$	1,722	6.9	%
Gross profit	359		328		9.5	%
Operating expenses	240		208		15.4	%
Operating income	120		119		0.8	%
Net income	89		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)	2021		2020
Gross billings	$	11,509	$	10,415
Less: WSEE payroll cost	9,669		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

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)

Adjusted EPS and

Year-over-Year Growth Percentage

(amounts per share)

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)

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)

   

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

   

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)

Gross Profit per WSEE per Month and
Year-over-Year Growth Percentage

 

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)	2021		2020		% Change		2021		2020		% Change
Salaries	$	103,075	$	86,501	19.2	%	$	147	$	121	21.5	%
Stock-based compensation	11,822		6,552		80.4	%	17		9		88.9	%
Commissions	7,719		8,460		(8.8)	%	11		12		(8.3)	%
Advertising	5,322		4,833		10.1	%	8		7		14.3	%
General and administrative	31,636		34,853		(9.2)	%	45		48		(6.3)	%
Depreciation and amortization	8,047		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,
	2021	2020
Effective income tax rate	25.2%	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 Measure	Definition	Benefit 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,
	2021						2020
	$			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, 2021		December 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)	2021						2020
	$			WSEE			$			WSEE
Net income	$	61,922		$	89		$	62,092		$	87
Income tax expense	20,846			30			22,646			32
Interest expense	1,599			2			2,362			3
Depreciation and amortization	8,047			11			7,602			11
EBITDA	92,414			132			94,702			133
Stock-based compensation	11,822			17			6,552			9
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)	2021			2020
Net income	$	61,922		$	62,092
Non-GAAP adjustments:
Stock-based compensation	11,822			6,552
Total non-GAAP adjustments	11,822			6,552
Tax effect	(2,978)			(1,751)
Adjusted net income	$	70,766		$	66,893
% Change period over period	5.8		%	(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)	2021			2020
Diluted EPS	$	1.59		$	1.58
Non-GAAP adjustments:
Stock-based compensation	0.30			0.17
Total non-GAAP adjustments	0.30			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

Net cash flows used in financing activities were $42.4 million for the three months ended March 31, 2021. We paid $15.5 million in dividends and repurchased or withheld $29.7 million in stock.

Insperity | 2021 First Quarter Form 10-Q 30

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND CONTROLS AND PROCEDURES

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are primarily exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on the market values of our cash equivalent short-term investments, our available-for-sale marketable securities and our borrowings under our Facility, which bears interest at a variable market rate. As of March 31, 2021, we had outstanding letters 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.

The cash equivalent short-term investments consist primarily of overnight investments, which are not significantly exposed to interest rate risk, except to the extent that changes in interest rates will ultimately affect the amount of interest income earned on these investments. Our available-for-sale marketable securities are subject to interest rate risk because these securities generally include a fixed interest rate. As a result, the market values of these securities are affected by changes in prevailing interest rates.

We attempt to limit our exposure to interest rate risk primarily through diversification and low investment turnover. Our investment policy is designed to maximize after-tax interest income while preserving our principal investment. As a result, our marketable securities consist of tax-exempt short term and intermediate term debt securities, which are primarily U.S. Government Securities.

Item 4. Controls and Procedures

In accordance with Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2021.

There has been no change in our internal controls over financial reporting that occurred during the three months ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Insperity | 2021 First Quarter Form 10-Q 31

OTHER INFORMATION

PART II

Item 1. Legal Proceedings

Please read Note 8 to the Consolidated Financial Statements, “Commitments and Contingencies,” which is incorporated herein by reference.

Item 1A. Risk Factors

Forward-Looking Statements

The statements contained herein that are not historical facts are forward-looking statements within the meaning of the federal securities laws (Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act). You can identify such forward-looking statements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,” “probably,” “goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions. Forward-looking statements involve a number of risks and uncertainties. In the normal course of business, in an effort to help keep our stockholders and the public informed about our operations, from time to time, we may issue such forward-looking statements, either orally or in writing. Generally, these statements relate to business plans or strategies; projected or anticipated benefits or other consequences of such plans or strategies; or projections involving anticipated revenues, earnings, average number of worksite employees, benefits and workers’ compensation costs, or other operating results. We base the forward-looking statements on our current expectations, estimates and projections. We caution you that these statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Therefore, the actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are:

•adverse economic conditions;

•impact of the COVID-19 pandemic, or other future pandemics, including the scope, severity and duration of the pandemic; government responses; regulatory developments; and the related disruptions and economic impact to our business and the small and medium-sized businesses that we serve;

•vulnerability to regional economic factors because of our geographic market concentration;

•failure to comply with covenants under our credit facility;

•our liability for worksite employee payroll, payroll taxes and benefits costs;

•increases in health insurance costs and workers’ compensation rates and underlying claims trends, health care reform, financial solvency of workers’ compensation carriers, other insurers or financial institutions, state unemployment tax rates, liabilities for employee and client actions or payroll-related claims;

•cancellation of client contracts on short notice, or the inability to renew client contracts or attract new clients;

•the ability to secure competitive replacement contracts for health insurance and workers’ compensation insurance at expiration of current contracts;

•regulatory and tax developments and possible adverse application of various federal, state and local regulations;

•failure to manage growth of our operations and the effectiveness of our sales and marketing efforts;

•the impact of the competitive environment and other developments in the human resources services industry, including the PEO industry, on our growth and/or profitability;

•an adverse final judgment or settlement of claims against Insperity;

•disruptions of our information technology systems;

Insperity | 2021 First Quarter Form 10-Q 32

OTHER INFORMATION

•our liability or damage to our reputation relating to disclosure of sensitive or private information;

•failure of third-party providers, data centers or cloud service providers; and

•our ability to integrate or realize expected returns on our acquisitions.

These factors are discussed in further detail in our Annual Report on Form 10-K for the year ended December 31, 2020 under “Item 1A. Risk Factors” in Part I and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, and elsewhere in this report. Any of these factors, or a combination of such factors, could materially affect the results of our operations and whether forward-looking statements we make ultimately prove to be accurate.

Any forward-looking statements are made only as of the date hereof and, unless otherwise required by applicable securities laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about purchases by Insperity during the three months ended March 31, 2021 of equity securities that are registered by Insperity pursuant to Section 12 of the Exchange Act:

Period	Total Number of Shares Purchased(1)(2)	Average Price Paid per Share		Total Number of Shares Purchased Under Announced Program(2)	Maximum Number of Shares Available for Purchase under Announced Program(2)
01/01/2021 – 01/31/2021	45,764	$	79.07	45,734	1,082,403
02/01/2021 – 02/28/2021	29,501	79.14		4,170	1,078,233
03/01/2021 – 03/31/2021	265,052	89.54		—	1,078,233
Total	340,317	$	87.23	49,904

____________________________________

(1)During the three months ended March 31, 2021, 290,413 shares of stock were withheld to satisfy tax-withholding obligations arising in conjunction with the vesting of restricted stock, restricted stock units, short-term and long-term incentive compensation awards. The required withholding is calculated using the closing sales price reported by the New York Stock Exchange on the date prior to the applicable vesting date. These shares are not subject to the repurchase program.

(2)As of March 31, 2021, we were authorized to repurchase an additional 1,078,233 shares under the program. Unless terminated earlier by resolution of the Board, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program.

Item 5. Other Information

On April 28, 2021, we entered into the Third Amendment to Amended and Restated Credit Agreement (the “Third Amendment”) with Zions Bancorporation, N.A. dba Amegy Bank, as administrative agent, and certain financial institutions, as lenders. The Third Amendment amends the Company’s existing credit agreement, dated as of February 6, 2018, to, among other things, lower the required interest coverage ratio that we must maintain.

The foregoing summary is qualified in its entirety by reference to the Third Amendment, a copy of which is filed as Exhibit 10.3 to this Form 10-Q and is incorporated in this Item 5 by reference.

Insperity | 2021 First Quarter Form 10-Q 33

OTHER INFORMATION

Item 6. Exhibits

Exhibit No		Exhibit
31.1	*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	**	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	**	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
10.1		Consulting agreement between Insperity, Inc. and Jay E. Mincks dated February 25, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on February 26, 2021).
10.2	*	Second Amendment to Amended and Restated Credit Agreement dated March 9, 2021.
10.3	*	Third Amendment to Amended and Restated Credit Agreement dated April 28, 2021.
101.INS	*	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	*	Inline XBRL Extension Definition Linkbase Document.
101.LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (embedded with the Inline XBRL document).

____________________________________
*	Filed with this report.
**	Furnished with this report.

Insperity | 2021 First Quarter Form 10-Q 34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

	INSPERITY, INC.
Date: May 3, 2021	By:	/s/ Douglas S. Sharp
		Douglas S. Sharp
		Senior Vice President of Finance,
		Chief Financial Officer and Treasurer
		(Principal Financial Officer)

Insperity | 2021 First Quarter Form 10-Q 35

EX-10.2

Exhibit 10.2

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment"), dated as of March 9, 2021, is by and among INSPERITY, INC., a Delaware corporation ("Borrower"), each of the financial institutions which is or may from time to time become a party to the Agreement (hereinafter defined) (collectively, "Lenders", and each a "Lender"), and ZIONS BANCORPORATION, N.A. dba AMEGY BANK, a national banking association, as agent for Lenders ("Agent").

RECITALS:

A.    Borrower, Agent and Lenders entered into that certain Amended and Restated Credit Agreement dated as of February 6, 2018, as amended by that certain First Amendment to Amended and Restated Credit Agreement dated as of September 13, 2019 (the "First Amendment"), entered into by Borrower, Agent and Lenders (as amended, the "Agreement").

B.    Pursuant to the Agreement INSPERITY HOLDINGS, INC., a Delaware corporation, ADMINISTAFF COMPANIES, INC., a Delaware corporation, ADMINISTAFF PARTNERSHIPS HOLDING, INC., a Delaware corporation, ADMINISTAFF PARTNERSHIPS HOLDING II, INC., a Delaware corporation, ADMINISTAFF PARTNERSHIPS HOLDING III, INC., a Delaware corporation, INSPERITY BUSINESS SERVICES, L.P., a Delaware limited partnership, INSPERITY EMPLOYMENT SCREENING, L.L.C., a Delaware limited liability company, INSPERITY ENTERPRISES, INC., a Texas corporation, INSPERITY EXPENSE MANAGEMENT, INC., a California corporation, INSPERITY GP, INC., a Delaware corporation, INSPERITY INSURANCE SERVICES, L.L.C., a Delaware limited liability company, INSPERITY PAYROLL SERVICES, L.L.C., a Delaware limited liability company, INSPERITY PEO SERVICES, L.P., a Delaware limited partnership, INSPERITY RETIREMENT SERVICES, L.P., a Delaware limited partnership, INSPERITY SERVICES, L.P., a Delaware limited partnership, and INSPERITY SUPPORT SERVICES, L.P., a Delaware limited partnership (collectively, "Guarantors"), executed that certain Amended and Restated Guaranty Agreement dated as of February 6, 2018 (the "Guaranty Agreement"), pursuant to which Guarantors guaranteed to Agent, for the ratable benefit of Agent, Issuing Bank and Lenders, the payment and performance of the Guaranteed Indebtedness (as therein defined).

C.    Zions Bancorporation, N.A. dba Amegy Bank, Bank of America, N.A., Wells Fargo Bank, N.A., Truist Securities, Inc., and U.S. Bank National Association have been appointed Joint Lead Arrangers for the credit facilities described in the Agreement. There are no longer any Co-Syndication Agents or Documentation Agents under the Agreement.

D.    Borrower, Agent and Lenders now desire to amend the Agreement as herein set forth.

SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND

RESTATED CREDIT AGREEMENT

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I.

Definitions

Section 1.1    Definitions. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the meanings given to such terms in the Agreement, as amended hereby.

ARTICLE II.

Amendments

Section 2.1    Amendment to Certain Definitions. Effective as of the date hereof, (a) the definition of the following term contained in Section 1.1 of the Agreement is amended to read in its entirety as follows:

"Excluded Subsidiary" means (a) the Trust Subsidiary and (b) subject to Section 8.18, any Subsidiary that has annual cash flow less than $1,000,000.00 as of the end of the immediately preceding fiscal year of Borrower.

(b)    the following definition shall be added to Section 1.1 of the Agreement in proper alphabetical order:

"Trust Subsidiary " means IPS Client Trust, a statutory business trust formed under the laws of the State of Delaware, all of the beneficial interests of which are owned, directly or indirectly, by Borrower, and that holds only depository accounts which are used to hold client-related payroll and payroll tax funds of Borrower and its Subsidiaries.

Section 2.2    Amendment to Section 8.4. Effective as of the date hereof, subclause (v) shall be added to clause (a) contained in Section 8.4 of the Agreement as follows:

(v) Notwithstanding any provision herein to the contrary, Borrower and its Subsidiaries may create the Trust Subsidiary and the Trust Subsidiary shall be an Excluded Subsidiary hereunder.

Section 2.3    Amendment to Section 8.7. Effective as of the date hereof, Section 8.7 of the Agreement is amended by (a) replacing the text “and” at the end of clause (k)(vi) thereof, (b) re-lettering the existing clause (l) as a new clause (m) and (c) inserting the following text as a new clause (l) to read in its entirety as follows:

SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND

RESTATED CREDIT AGREEMENT

(l) investments (valued at the time made) in the Trust Subsidiary in an aggregate outstanding amount which does not exceed $10,000,000.00; and

Section 2.4    Amendments to Section 8.18. (a) Effective as of the date hereof, clause (a) contained in Section 8.18 of the Agreement is amended to read in its entirety as follows:

    (a)    In the event the aggregate annual cash flow of all Excluded Subsidiaries (other than the Trust Subsidiary) exceeds $1,000,000.00 as of the end of any fiscal year of Borrower, Borrower shall, by notice to Agent, designate an Excluded Subsidiary (or Excluded Subsidiaries as necessary and, in each case, other than the Trust Subsidiary) that will cease to qualify as an “Excluded Subsidiary” on the date Agent receives Borrower’s annual audited financial statements required by Section 7.1(a) and such Subsidiary (or Subsidiaries) shall comply with Section 8.18(c)(i) or (ii) below, as applicable, so that after giving effect thereto, the aggregate annual cash flow of all remaining Excluded Subsidiaries (other than the Trust Subsidiary) as of the end of such fiscal year was equal to or less than $1,000,000.00.

(b)    Effective as of the date hereof, clause (d) shall be added to Section 8.18 of the Agreement as follows:

    (d)    Trust Subsidiary shall not, at any time, hold or own any Proprietary Accounts. The only assets Trust Subsidiary will hold and own are (i) depository accounts which are used to hold client-related payroll and payroll tax funds of Borrower and its Subsidiaries and (ii) assets received in connection with an investment permitted pursuant to Section 8.7(l) and (m).

Section 2.5    Amendment to Schedules. Effective as of the date hereof, Schedule 6.14 (Subsidiaries) is amended to include the Trust Subsidiary.

ARTICLE III.

Condition Precedent

Section 3.1    Conditions. The effectiveness of this Amendment is subject to the receipt by Agent of a counterpart of this Amendment executed by Borrower and Lenders.

Section 3.2    Post Closing Deliveries. Borrower will deliver to Agent not later than five (5) Business Days from the date of formation of the Trust Subsidiary:

(a)    (i) If Trust Subsidiary is an irrevocable trust, the tax identification number of Trust Subsidiary, and (ii) a complete W-9 for Trust Subsidiary.

(b)    The certificate of trust of the Trust Subsidiary.

SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND

RESTATED CREDIT AGREEMENT

ARTICLE IV.

Ratifications, Representations, and Warranties

Section 4.1    Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. Borrower, Agent and Lenders agree that the Agreement as amended hereby and the other Loan Documents shall continue to be the legal, valid and binding obligation of such Persons enforceable against such Persons in accordance with its terms.

Section 4.2    Representations, Warranties and Agreements. Borrower hereby represents and warrants to Agent and Lenders that (a) the execution, delivery, and performance of this Amendment and any and all other Loan Documents executed or delivered in connection herewith have been authorized by all requisite corporate action on the part of Borrower and will not violate the Organizational Documents of Borrower, (b) the representations and warranties contained in the Agreement as amended hereby, and all other Loan Documents are true and correct on and as of the date hereof as though made on and as of the date hereof, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case such representations and warranties shall continue to be true and correct as of such earlier date, (c) no Event of Default or Unmatured Event of Default has occurred and is continuing, and (d) to the knowledge of the Authorized Representatives and Financial Officers of Borrower, Borrower has no claims, credits, offsets, defenses or counterclaims arising from the Loan Documents or Agent's or any Lender's performance under the Loan Documents. Borrower hereby represents and warrants to Agent and Lenders that this Amendment and all Loan Documents executed in connection herewith have not been executed in the state of Florida.

Section 4.3    Representation Regarding Resolutions. Borrower hereby represents and warrants to Agent and Lenders that the resolutions attached as Exhibit "B" to the Omnibus Secretary's Certificate executed and delivered to Agent in connection with the First Amendment have not been amended or revoked and remain in full force and effect as of the date of this Amendment.

SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND

RESTATED CREDIT AGREEMENT

ARTICLE V.

Miscellaneous

Section 5.1    Survival of Representations and Warranties. All representations and warranties made in this Amendment or any other Loan Documents including any Loan Document furnished in connection with this Amendment shall fully survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Agent or any Lender or any closing shall affect the representations and warranties or the right of Agent or any Lender to rely on them.

Section 5.2    Reference to Agreement. Each of the Loan Documents, including the Agreement and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Agreement, as amended hereby, are hereby amended so that any reference in such Loan Documents to the Agreement shall mean a reference to the Agreement, as amended hereby.

Section 5.3    Expenses; Indemnification. Borrower agrees that this Amendment is a Loan Document to which Sections 12.1 and 12.2 of the Agreement shall apply.

Section 5.4    Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid, illegal or unenforceable shall not impair or invalidate the remaining provisions hereof and the effect of such invalidity, illegality or unenforceability shall be confined to the provision held to be invalid, illegal or unenforceable.

Section 5.5    APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AMENDMENT HAS BEEN ENTERED INTO IN HARRIS COUNTY, TEXAS AND IT SHALL BE PERFORMABLE FOR ALL PURPOSES IN HARRIS COUNTY, TEXAS.

Section 5.6    Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of Agent, Issuing Bank, each Lender and Borrower and their respective successors and assigns, except that (a) Borrower may not assign or transfer any of its rights or obligations hereunder without prior written consent of Agent and Lenders, and (b) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with Section 12.19 of the Agreement or as required under Section 2.21 of the Agreement.

Section 5.7    Counterparts. This Amendment and the other Loan Documents furnished in connection herewith may be executed in one or more counterparts, each of which when executed shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an executed signature page of this Amendment and/or any other Loan Document furnished in connection herewith by facsimile transmission or other electronic means shall be effective as delivery of a manually executed counterpart hereof.

SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND

RESTATED CREDIT AGREEMENT

Section 5.8    Effect of Waiver. No consent or waiver, express or implied, by Agent or any Lender to or for any breach of or deviation from any covenant, condition or duty by Borrower shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition or duty.

Section 5.9    Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

Section 5.10    Dispute Resolution. The terms of Section 12.25 (Dispute Resolution) of the Agreement are incorporated herein by reference, mutatis mutandis, and the parties hereto agree to such terms.

Section 5.11    ENTIRE AGREEMENT. THIS AMENDMENT, THE AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL OTHER INSTRUMENTS, DOCUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT AND THE AGREEMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, THE AGREEMENT OR THE OTHER LOAN DOCUMENTS AND THE OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT AND THE AGREEMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

Executed as of the date first written above.

BORROWER:

INSPERITY, INC.

By:

    Douglas S. Sharp

    Sr. Vice President of Finance, Chief

    Financial Officer and Treasurer

SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND

RESTATED CREDIT AGREEMENT

AGENT:

ZIONS BANCORPORATION, N.A. dba

AMEGY BANK, as Agent

By: /s/ Tim Neuhaus    

    Tim Neuhaus

    Senior Vice President

LENDERS:

ZIONS BANCORPORATION, N.A. dba

AMEGY BANK

By: /s/ Ryan K. Hightower    

    Ryan K. Hightower

    Senior Vice President

BANK OF AMERICA, N.A.

By: /s/ Jennifer Textus    

Name:    Jennifer Textus    

Title: Vice President    

WELLS FARGO BANK, N.A.

By: /s/ Benita V. Reyes    

Name: Benita V. Reyes    

Title: Senior Vice President    

TRUIST BANK (f/k/a Branch Banking and Trust Company)

By: /s/ David Miller    

Name: David Miller    

SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND

RESTATED CREDIT AGREEMENT

Title: Director    

U.S. BANK NATIONAL ASSOCIATION

By: /s/ Steven L. Sawyer    

Name: Steven L. Sawyer    

Title: Senior Vice President    

WOODFOREST NATIONAL BANK

By: /s/ Zack Frewin    

Name: Zack Frewin    

Title: Vice President    

Each of the undersigned Guarantors hereby consents and agrees to this Amendment and agrees that the Guaranty Agreement executed by Guarantors shall remain in full force and effect and shall continue to be the legal, valid and binding obligations of such Guarantor, enforceable against such Guarantor in accordance with its terms and shall evidence such Guarantor's guaranty of the Guaranteed Indebtedness (as therein defined), as renewed, extended, and increased from time to time, including, without limitation, the renewal, extension, and increase of the indebtedness evidenced by the Notes.

INSPERITY HOLDINGS, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

ADMINISTAFF COMPANIES, INC.

By: /s/ Douglas S. Sharp    

SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND

RESTATED CREDIT AGREEMENT

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

ADMINISTAFF PARTNERSHIPS HOLDING, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

ADMINISTAFF PARTNERSHIPS HOLDING II, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

ADMINISTAFF PARTNERSHIPS HOLDING III, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY BUSINESS SERVICES, L.P.

By: /s/ Douglas S. Sharp    

SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND

RESTATED CREDIT AGREEMENT

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY EMPLOYMENT SCREENING, L.L.C.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY ENTERPRISES, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY EXPENSE MANAGEMENT, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY GP, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND

RESTATED CREDIT AGREEMENT

INSPERITY INSURANCE SERVICES, L.L.C.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY PAYROLL SERVICES, L.L.C.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY PEO SERVICES, L.P.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY RETIREMENT SERVICES, L.P.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY SERVICES, L.P.

SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND

RESTATED CREDIT AGREEMENT

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY SUPPORT SERVICES, L.P.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND

RESTATED CREDIT AGREEMENT

EX-10.3

Exhibit 10.3

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment"), dated as of April 28, 2021, is by and among INSPERITY, INC., a Delaware corporation ("Borrower"), each of the financial institutions which is or may from time to time become a party to the Agreement (hereinafter defined) (collectively, "Lenders", and each a "Lender"), and ZIONS BANCORPORATION, N.A. dba AMEGY BANK, a national banking association, as agent for Lenders ("Agent").

RECITALS:

A.    Borrower, Agent and Lenders entered into that certain Amended and Restated Credit Agreement dated as of February 6, 2018, as amended by that certain First Amendment to Amended and Restated Credit Agreement dated as of September 13, 2019, and that certain Second Amendment to Amended and Restated Credit Agreement dated as of March 9, 2021 (as amended, the "Agreement").

B.    Pursuant to the Agreement, INSPERITY HOLDINGS, INC., a Delaware corporation, ADMINISTAFF COMPANIES, INC., a Delaware corporation, ADMINISTAFF PARTNERSHIPS HOLDING, INC., a Delaware corporation, ADMINISTAFF PARTNERSHIPS HOLDING II, INC., a Delaware corporation, ADMINISTAFF PARTNERSHIPS HOLDING III, INC., a Delaware corporation, INSPERITY BUSINESS SERVICES, L.P., a Delaware limited partnership, INSPERITY EMPLOYMENT SCREENING, L.L.C., a Delaware limited liability company, INSPERITY ENTERPRISES, INC., a Texas corporation, INSPERITY EXPENSE MANAGEMENT, INC., a California corporation, INSPERITY GP, INC., a Delaware corporation, INSPERITY INSURANCE SERVICES, L.L.C., a Delaware limited liability company, INSPERITY PAYROLL SERVICES, L.L.C., a Delaware limited liability company, INSPERITY PEO SERVICES, L.P., a Delaware limited partnership, INSPERITY RETIREMENT SERVICES, L.P., a Delaware limited partnership, INSPERITY SERVICES, L.P., a Delaware limited partnership, and INSPERITY SUPPORT SERVICES, L.P., a Delaware limited partnership (collectively, "Guarantors"), executed that certain Amended and Restated Guaranty Agreement dated as of February 6, 2018 (the "Guaranty Agreement"), pursuant to which Guarantors guaranteed to Agent, for the ratable benefit of Agent, Issuing Bank and Lenders, the payment and performance of the Guaranteed Indebtedness (as therein defined).

C.    Zions Bancorporation, N.A. dba Amegy Bank, Bank of America, N.A., Wells Fargo Bank, N.A., Truist Securities, Inc., and U.S. Bank National Association have been appointed Joint Lead Arrangers for the credit facilities described in the Agreement. There are no longer any Co-Syndication Agents or Documentation Agents under the Agreement.

D.    Borrower, Agent and Lenders now desire to amend the Agreement as herein set forth.

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I.

Definitions

Section 1.1    Definitions. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the meanings given to such terms in the Agreement, as amended hereby.

ARTICLE II.

Amendments

Section 2.1    Amendment to Certain Definitions. (a) Effective as of the date hereof, the definition of each of the following terms contained in Section 1.1 of the Agreement is amended to read in its respective entirety as follows:

"EBITDA" means for Borrower and its Subsidiaries, on a consolidated basis for any period, the sum of (a) Operating Income for such period, plus (b) depreciation and amortization for such period, plus (c) non-cash stock based compensation expense for such period, plus (d) Interest Income for such period, plus (e) extraordinary or non-recurring expenses or charges, in an aggregate amount not to exceed $10,000,000.00 during any consecutive four (4) quarter period, plus (f) any non-cash write-off for impairment of long lived assets (including goodwill, intangible assets and fixed assets such as property, plant and equipment), or of deferred financing fees or investments in debt and equity securities during such period, plus (g) any non-cash impact of accounting changes or restatements during such period, plus (h) expenses associated with prepaid software-as-a-service (SaaS) product implementations during such period, provided such amount shall not exceed $4,000,000.00 during any consecutive four (4) quarter period, plus (i) transaction costs and synergies approved by Agent for such period; provided, however, that the amounts of each of the items set forth in the clauses above shall include, for the first twelve (12) months after any Acquisition, the actual historical amounts of such items for any Person which is acquired by Borrower or any Subsidiary in such Acquisition.

"Floating Thirty Day LIBOR Rate" means, as of any day, the rate per annum offered for Dollar deposits in an amount comparable to the principal amount of the outstanding Alternate Base Rate Loans for a period of thirty (30) days as of 11:00 a.m. City of London, England time two (2) Business Days prior to such day as calculated by Intercontinental Exchange Group (ICE) Benchmark

Administration Limited ("ICE") (or the successor thereto) for such Dollar deposits. Notwithstanding the foregoing, under no circumstances will the Floating Thirty Day LIBOR Rate be less than zero percent (0.0%) per annum (the "Floating Thirty Day LIBOR Interest Rate Floor"), provided, however, if Borrower has entered into a Rate Management Transaction with a Lender for purposes of hedging the interest rate floor on any Note, then no Floating Thirty Day LIBOR Interest Rate Floor shall be applicable for such Note during the period(s) such Rate Management Transaction is in effect.

"Interest Period" means, with respect to any LIBOR Loan, the period commencing on the date such Loan is made or Converted from Loans of another Type or, in the case of each subsequent, successive Interest Period applicable to a LIBOR Loan, each period commencing on the last day of the immediately preceding Interest Period with respect to such LIBOR Loan, and in each case ending on the numerically corresponding day in the calendar month that is one, three or six months thereafter, as Borrower may select as provided in Sections 2.5 or 3.7; provided, however, that (a) each Interest Period that would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day, unless such extension would cause the last day of such Interest Period to occur in the next following calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month in which it would have ended if there were a numerically corresponding day in such calendar month, (c) no Interest Period for any LIBOR Loan may extend beyond the Termination Date (and any proposed LIBOR Loan with an Interest Period which would extend beyond the Termination Date shall be an Alternate Base Rate Loan), (d) for all LIBOR Loans no more than eight (8) Interest Periods shall be in effect at the same time and (e) no Interest Period shall have a duration of less than thirty (30) days and, if the Interest Period for any LIBOR Loan would otherwise be a shorter period, such Loan shall be an Alternate Base Rate Loan.

"LIBOR Rate" means, for any LIBOR Loan, for any Interest Period therefor, (a) the rate per annum offered for Dollar deposits in an amount comparable to the outstanding principal amount of such LIBOR Loan for a period of time equal to such Interest Period as of 11:00 a.m. City of London, England time two (2) London Business Days prior to the first date of such Interest Period as calculated by ICE (or the successor thereto), divided by (b) one (1) minus the Reserve Requirement. Notwithstanding the foregoing, under no circumstances will the LIBOR Rate be less than zero percent (0.0%) per annum (the "LIBOR Interest Rate Floor"), provided, however, if Borrower has entered into a Rate Management Transaction with a Lender for purposes of hedging the interest rate floor on any Note, then no LIBOR Interest Rate Floor shall be

applicable for such Note during the period(s) such Rate Management Transaction is in effect.

(b)    Effective as of the date hereof, the definition of the term "Fall-Back Rate" shall be deleted from Section 1.1 of the Agreement.

Section 2.2    Addition of Section 3.11.    Effective as of the date hereof, Section 3.11 shall be added to the Agreement and shall read in its entirety as follows:

Section 3.11    LIBOR Replacement. Notwithstanding anything to the contrary herein or in any other Loan Document (for the purpose of clarity, any agreement executed in connection with a Rate Management Transaction, including Rate Management Transaction Documents, shall be deemed not to be a "Loan Document" for purposes of this Section):

(a)    Replacing USD LIBOR. On March 5, 2021, the Financial Conduct Authority ("FCA"), the regulatory supervisor of USD LIBOR’s administrator ("IBA"), announced in a public statement the future cessation or loss of representativeness of overnight/Spot Next, 1-month, 3-month, 6-month and 12- month USD LIBOR tenor settings. On the earlier of (i) the date that all Available Tenors of USD LIBOR have either permanently or indefinitely ceased to be provided by IBA or have been announced by the FCA pursuant to public statement or publication of information to be no longer representative and (ii) the Early Opt-in Effective Date, if the then-current Benchmark is USD LIBOR, the Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of any setting of such Benchmark on such day and all subsequent settings without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document. If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a quarterly basis on the last day of each March, June, September, and December.

(b)    Replacing Future Benchmarks. Upon the occurrence of a Benchmark Transition Event, the Benchmark Replacement will replace the then-current Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark setting at or after 5:00 p.m. on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to Lenders without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document so long as Agent has not received, by such time, written notice of objection to such Benchmark Replacement from Lenders comprising the Majority Lenders. At any time that the administrator of the then-current Benchmark has permanently or indefinitely ceased to provide such Benchmark or such Benchmark has been announced by the regulatory supervisor for the administrator of such Benchmark pursuant to public statement or publication of information to be no longer representative of the underlying market and economic reality that such Benchmark is intended to measure and that

representativeness will not be restored, Borrower may revoke any request for a borrowing of, conversion to or continuation of Loans to be made, Converted or Continued that would bear interest by reference to such Benchmark until Borrower’s receipt of notice from Agent that a Benchmark Replacement has replaced such Benchmark, and, failing that, the Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to Alternate Base Rate Loans. During the period referenced in the foregoing sentence, the component of Alternate Base Rate based upon the Benchmark will not be used in any determination of Alternate Base Rate.

(c)    Benchmark Replacement Conforming Changes. In connection with the implementation and administration of a Benchmark Replacement, Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.

(d)    Notices; Standards for Decisions and Determinations. Agent will promptly notify Borrower and Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or election that may be made by Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section.

(e)    Unavailability of Tenor of Benchmark. At any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including USD LIBOR), then Agent may remove any tenor of such Benchmark that is unavailable or non-representative for Benchmark (including Benchmark Replacement) settings and (ii) Agent may reinstate any such previously removed tenor for Benchmark (including Benchmark Replacement) settings.

(f)    Certain Defined Terms. As used in this Section:

"Available Tenor" means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (i) if the then-current Benchmark is a term rate, any tenor for such Benchmark that is or may be used for determining the length of an Interest Period (provided that, for purposes of clarity and for this definition only, the Interest Period for the Floating Thirty Day LIBOR shall be deemed to be thirty (30) days) or (ii) otherwise, any payment period for interest

calculated with reference to such Benchmark, as applicable, pursuant to this Agreement as of such date.

"Benchmark" means, initially, for purposes of calculating LIBOR Loans, the LIBOR Rate and, for purposes of calculating Alternate Base Rate Loans, Floating Thirty Day LIBOR Rate; provided that if a replacement of the Benchmark has occurred pursuant to this Section titled "Benchmark Replacement Setting", then "Benchmark" means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate. Any reference to "Benchmark" shall include, as applicable, the published component used in the calculation thereof.

"Benchmark Replacement"means, for any Available Tenor:

(i)    for purposes of Section 3.11(a), the sum of: (A) Daily Simple SOFR and (B) the spread adjustment selected or recommended by the Relevant Governmental Body for the replacement of the tenor of USD LIBOR with a SOFR-based rate having approximately the same length as the interest payment period specified in clause (a) of this Section 3.11; and

(ii)    for purposes of Section 3.11(b), the sum of (A) the alternate benchmark rate and (B) an adjustment (which may be a positive or negative value or zero), in each case, that has been selected by Agent and Borrower as the replacement for such Available Tenor of such Benchmark giving due consideration to any evolving or then-prevailing market convention, including any applicable recommendations made by the Relevant Governmental Body, for Dollar-denominated syndicated credit facilities at such time;

provided that, if the Benchmark Replacement as determined pursuant to clause (i) or (ii) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.

"Benchmark Replacement Conforming Changes" means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of "Alternate Base", the definition of "Business Day", the definition of "Interest Period", timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, Conversion or Continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by Agent in a manner substantially consistent with market practice (or, if Agent decides that adoption of any portion of such

market practice is not administratively feasible or if Agent determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).

"Benchmark Transition Event"means, with respect to any then-current Benchmark other than USD LIBOR, the occurrence of a public statement or publication of information by or on behalf of the administrator of the then-current Benchmark, the regulatory supervisor for the administrator of such Benchmark, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark, a resolution authority with jurisdiction over the administrator for such Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark, announcing or stating that (a) such administrator has ceased or will cease on a specified date to provide all Available Tenors of such Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark or (b) all Available Tenors of such Benchmark are or will no longer be representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored.

"Daily Simple SOFR" means, for any day, SOFR, with the conventions for this rate (which will include a lookback) being established by Agent in accordance with the conventions for this rate recommended by the Relevant Governmental Body for determining "Daily Simple SOFR" for syndicated business loans; provided, that if Agent decides that any such convention is not administratively feasible for Agent, then Agent may establish another convention in its reasonable discretion.

"Early Opt-in Effective Date"means, with respect to any Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to Lenders, so long as Agent has not received, by 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to Lenders, written notice of objection to such Early Opt-in Election from Majority Lenders.

    "Early Opt-in Election"means the occurrence of:

(i)     a notification by Agent to (or the request by Borrower to Agent to notify) each of the other parties hereto that at least five currently outstanding Dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed) a SOFR-based rate (including SOFR, a term SOFR, or any other rate

based upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such notice and are publicly available for review), and

(ii)    the joint election by Agent and the Borrower to trigger a fallback from USD LIBOR and the provision by Agent of written notice of such election to the Lenders.

"Floor" means zero percent (0.0%) per annum.

"Relevant Governmental Body"means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.

"SOFR"means a rate per annum equal to the secured overnight financing rate for such Business Day published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) on the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org (or any successor source for the secured overnight financing rate identified as such by the administrator of the secured overnight financing rate from time to time).

"USD LIBOR"means the London interbank offered rate for Dollars.

Section 2.3    Amendment to Section 8.3(a)(iv)(A). Effective as of the date hereof, clause (a)(iv)(A) contained in Section 8.3 of the Agreement is amended to read in its entirety as follows:

    (A)    Borrower has an Interest Coverage Ratio of not less than 2.50to 1.00 as of the last day of the fiscal quarter most recently ended for which financial statements are available, calculated on a pro forma basis assuming that such Acquisition and all other Acquisitions made since the last day of the fiscal quarter most recently ended for which financial statements are available had been made on the first day of the four consecutive fiscal quarter period then ended (but without any adjustment for projected cost savings or other synergies (except with the consent of Agent)),

Section 2.4    Amendment to Section 8.7(k)(iii). Effective as of the date hereof, clause (k)(iii) contained in Section 8.7 of the Agreement is amended to read in its entirety as follows:

    (iii)    Borrower has an Interest Coverage Ratio of not less than 2.50 to 1.00 as of the last day of the fiscal quarter most recently ended for which financial statements are available,

Section 2.5    Amendment to Section 9.1. Effective as of the date hereof, Section 9.1 of the Agreement is amended to read in its entirety as follows:

Section 9.1    Interest Coverage Ratio

. Borrower will at all times maintain an Interest Coverage Ratio of not less than 2.50 to 1.00. The Interest Coverage Ratio will be calculated and tested quarterly as of the last day of each fiscal quarter of Borrower, commencing with the fiscal quarter ending June 30, 2021, for the period of four consecutive fiscal quarters ended as of such date (a “rolling or trailing four quarter” basis).

Section 2.6    Amendment to Section 12.7. Effective as of the date hereof, Section 12.7 of the Agreement is amended to read in its entirety as follows:

    Section 12.7.    Amendments

. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or any Note shall in any event be effective unless the same shall be in writing and signed and delivered by the Majority Lenders and Borrower, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given, provided that neither Borrower nor any Lender consent shall be required for any amendment done in accordance with Section 3.11 (except as expressly provided for in such Section). No amendment, modification, waiver or consent shall change the Commitment of any Lender without the consent of such Lender. No amendment, modification, waiver or consent shall (i) increase the Combined Commitments (other than pursuant to Section 2.8), (ii) extend the date for payment of any principal of or interest on the Revolving Advances or any fees payable hereunder, (iii) extend any Lender’s Commitment, (iv) reduce the principal amount of any Revolving Advance, (v) release any guaranty (except as permitted in Section 8.4(b)), or (vi) reduce the aggregate percentage of holders of the Combined Commitments required to effect an amendment, modification, waiver or consent without, in each case, the consent of all Lenders. If any amendment, modification, waiver or consent relates only to the Revolving Advances, the applicable percentage for consent shall be calculated only from the holders of the Combined Commitments, provided that if either the Combined Commitments are fully funded or the Termination Date has occurred, then such applicable percentage for consent shall be calculated from the holders of the outstanding Revolving Advances and the Letter of Credit Liabilities. No amendment, modification, waiver or consent shall reduce any principal of or interest on the Revolving Advances or any fees payable hereunder without the consent of each Lender affected thereby, provided that no Lender consent shall be required for any amendment done in accordance with Section 3.11 (except as expressly provided for in such Section). No provision of Article XI or any other provision of this Agreement affecting Agent in its capacity as such shall be amended, modified or waived without the consent of Agent. No provision of this

Agreement relating to the rights or duties of Issuing Bank in its capacity as such shall be amended, modified or waived without the consent of Issuing Bank. No provision of this Agreement relating to the rights or duties of the Swing Lender in its capacity as such shall be amended, modified or waived without the consent of the Swing Lender.

Section 2.7    Amendment to Schedules. Effective as of the date hereof, (a) Exhibit "C" (Form of Revolving Advance Request Form) to the Agreement is amended to conform in its entirety to Annex "A" to this Amendment, and (b) Exhibit "D" (No Default Certificate) to the Agreement is amended to conform in its entirety to Annex "B" to this Amendment.

ARTICLE III.

Condition Precedent

Section 3.1    Conditions. The effectiveness of this Amendment is subject to the receipt by Agent of the following in form and substance satisfactory to Agent:

(a)    Certificates.

(i)    A certificate of the Secretary or Assistant Secretary of Borrower (or another officer of Borrower acceptable to Agent) certifying (A) resolutions of the board of directors of Borrower which authorize the execution, delivery and performance by Borrower of this Amendment and the other Loan Documents to which Borrower is or is to be a party in connection herewith, and (B) the names of the officers of Borrower authorized to sign this Amendment and each of the other Loan Documents to which Borrower is or is to be a party as of the date of this Amendment, together with specimen signatures of such officers.

(ii)    A certificate of the Chief Financial Officer of Borrower certifying (A) that all representations and warranties in this Amendment and the other Loan Documents are true and correct on the date hereof, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case such representations and warranties are true and correct as of such earlier date, (B) that no Event of Default or Unmatured Event of Default has occurred and is continuing, (C) that no Material Adverse Effect has occurred since December 31, 2018, and (D) that no event has occurred and no condition exists which could reasonably be expected to have a Material Adverse Effect.

(b)    Governmental Certificates. Certificates issued by the appropriate government officials of the state of incorporation or organization, as applicable, of Borrower and each Guarantor as to the existence and good standing of Borrower and such Guarantor in such state.

(c)    Fees and Expenses. Evidence that the costs and expenses (including reasonable attorneys' fees) referred to in Section 12.1 of the Agreement, to the extent invoiced prior to the closing of this Amendment, have been paid in full by Borrower.

Section 3.2    Additional Conditions. The effectiveness of this Amendment is also subject to the satisfaction of the additional conditions precedent that (a) the representations and warranties contained herein and in all other Loan Documents, as amended hereby, shall be true and correct as of the date hereof as if made on the date hereof, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case such representations and warranties shall continue to be true and correct as of such earlier date, and (b) no Event of Default or Unmatured Event of Default shall have occurred and be continuing.

ARTICLE IV.

Ratifications, Representations, and Warranties

Section 4.1    Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. Borrower, Agent and Lenders agree that the Agreement as amended hereby and the other Loan Documents shall continue to be the legal, valid and binding obligation of such Persons enforceable against such Persons in accordance with its terms.

Section 4.2    Representations and Warranties. Borrower hereby represents and warrants to Agent and Lenders that (a) the execution, delivery, and performance of this Amendment and any and all other Loan Documents executed or delivered in connection herewith have been authorized by all requisite corporate action on the part of Borrower and will not violate the Organizational Documents of Borrower, (b) the representations and warranties contained in the Agreement as amended hereby, and all other Loan Documents are true and correct on and as of the date hereof as though made on and as of the date hereof, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case such representations and warranties shall continue to be true and correct as of such earlier date, (c) no Event of Default or Unmatured Event of Default has occurred and is continuing, and (d) to the knowledge of the Authorized Representatives and Financial Officers of Borrower, Borrower has no claims, credits, offsets, defenses or counterclaims arising from the Loan Documents or Agent's or any Lender's performance under the Loan Documents. Borrower hereby represents and warrants to Agent and Lenders that this Amendment and all Loan Documents executed in connection herewith have not been executed in the state of Florida.

ARTICLE V.

Miscellaneous

Section 5.1    Survival of Representations and Warranties. All representations and warranties made in this Amendment or any other Loan Documents including any Loan Document furnished in connection with this Amendment shall fully survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Agent or any Lender or any closing shall affect the representations and warranties or the right of Agent or any Lender to rely on them.

Section 5.2    Reference to Agreement. Each of the Loan Documents, including the Agreement and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Agreement, as amended hereby, are hereby amended so that any reference in such Loan Documents to the Agreement shall mean a reference to the Agreement, as amended hereby.

Section 5.3    Expenses; Indemnification. Borrower agrees that this Amendment is a Loan Document to which Sections 12.1 and 12.2 of the Agreement shall apply.

Section 5.4    Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid, illegal or unenforceable shall not impair or invalidate the remaining provisions hereof and the effect of such invalidity, illegality or unenforceability shall be confined to the provision held to be invalid, illegal or unenforceable.

Section 5.5    APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AMENDMENT HAS BEEN ENTERED INTO IN HARRIS COUNTY, TEXAS AND IT SHALL BE PERFORMABLE FOR ALL PURPOSES IN HARRIS COUNTY, TEXAS.

Section 5.6    Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of Agent, Issuing Bank, each Lender and Borrower and their respective successors and assigns, except that (a) Borrower may not assign or transfer any of its rights or obligations hereunder without prior written consent of Agent and Lenders, and (b) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with Section 12.19 of the Agreement or as required under Section 2.21 of the Agreement.

Section 5.7    Counterparts. This Amendment and the other Loan Documents furnished in connection herewith may be executed in one or more counterparts, each of which when executed shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an executed signature page of this Amendment and/or any other Loan Document furnished in connection herewith by facsimile transmission or other electronic means shall be effective as delivery of a manually executed counterpart hereof.

Section 5.8    Effect of Waiver. No consent or waiver, express or implied, by Agent or any Lender to or for any breach of or deviation from any covenant, condition or duty by Borrower shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition or duty.

Section 5.9    Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

Section 5.10    Dispute Resolution. The terms of Section 12.25 (Dispute Resolution) of the Agreement are incorporated herein by reference, mutatis mutandis, and the parties hereto agree to such terms.

Section 5.11    ENTIRE AGREEMENT. THIS AMENDMENT, THE AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL OTHER INSTRUMENTS, DOCUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT AND THE AGREEMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, THE AGREEMENT OR THE OTHER LOAN DOCUMENTS AND THE OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT AND THE AGREEMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

Executed as of the date first written above.

BORROWER:

INSPERITY, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Sr. Vice President of Finance, Chief

    Financial Officer and Treasurer

AGENT:

ZIONS BANCORPORATION, N.A. dba

AMEGY BANK, as Agent

By: /s/ Tim Neuhaus    

    Tim Neuhaus

    Senior Vice President

LENDERS:

ZIONS BANCORPORATION, N.A. dba

AMEGY BANK

By: /s/ Ryan K. Hightower    

    Ryan K. Hightower

    Senior Vice President

BANK OF AMERICA, N.A.

By: /s/ Julie Castano    

Name:    Julie Castano    

Title:    SVP    

WELLS FARGO BANK, N.A.

By: /s/ Robert Corder    

Name:    Robert Corder    

Title:    Vice President    

TRUIST BANK (f/k/a Branch Banking and Trust Company)

By: /s/ David Miller    

Name:    David Miller    

Title:    Director    

U.S. BANK NATIONAL ASSOCIATION

By: /s/ Steven L. Sawyer    

Name:    Steven L. Sawyer    

Title:    Senior Vice President    

WOODFOREST NATIONAL BANK

By: /s/ Zack Frewin    

Name:    Zack Frewin    

Title:    Vice President    

Each of the undersigned Guarantors hereby consents and agrees to this Amendment and agrees that the Guaranty Agreement executed by Guarantors shall remain in full force and effect and shall continue to be the legal, valid and binding obligations of such Guarantor, enforceable against such Guarantor in accordance with its terms and shall evidence such Guarantor's guaranty of the Guaranteed Indebtedness (as therein defined), as renewed, extended, and increased from time to time.

INSPERITY HOLDINGS, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

ADMINISTAFF COMPANIES, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

ADMINISTAFF PARTNERSHIPS HOLDING, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

ADMINISTAFF PARTNERSHIPS HOLDING II, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

ADMINISTAFF PARTNERSHIPS HOLDING III, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY BUSINESS SERVICES, L.P.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY EMPLOYMENT SCREENING, L.L.C.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY ENTERPRISES, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY EXPENSE MANAGEMENT, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY GP, INC.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY INSURANCE SERVICES, L.L.C.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY PAYROLL SERVICES, L.L.C.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY PEO SERVICES, L.P.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY RETIREMENT SERVICES, L.P.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY SERVICES, L.P.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

INSPERITY SUPPORT SERVICES, L.P.

By: /s/ Douglas S. Sharp    

    Douglas S. Sharp

    Senior Vice President of Finance,

    Chief Financial Officer and Treasurer

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Paul J. Sarvadi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Insperity, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2021
	/s/ Paul J. Sarvadi
	Paul J. Sarvadi
	Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Douglas S. Sharp, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Insperity, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2021
	/s/ Douglas S. Sharp
	Douglas S. Sharp
	Senior Vice President of Finance, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Insperity, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2021 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Paul J. Sarvadi, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Paul J. Sarvadi

Paul J. Sarvadi

Chairman of the Board and Chief Executive Officer

May 3, 2021

EX-32.2

 Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Insperity, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2021 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Douglas S. Sharp, Senior Vice President of Finance, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Douglas S. Sharp

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

May 3, 2021

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2021	Apr. 26, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2021
Document Transition Report	false
Entity File Number	1-13998
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	76-0479645
Entity Address, Address Line One	19001 Crescent Springs Drive
Entity Address, City or Town	Kingwood,
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77339
City Area Code	281
Local Phone Number	358-8986
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		38,674,991
Entity Registrant Name	INSPERITY, INC.
Entity Central Index Key	0001000753
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Amendment Flag	false
Common Stock [Member]
Entity Information [Line Items]
Title of 12(b) Security	Common Stock, $.01 par value per share
Trading Symbol	NSP
Security Exchange Name	NYSE
Rights [Member]
Entity Information [Line Items]
Title of 12(b) Security	Rights to Purchase Series A Junior Participating Preferred Stock
Trading Symbol	NSP
Security Exchange Name	NYSE

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Assets
Cash and cash equivalents	$ 494,777	$ 554,846
Restricted cash	46,353	45,522
Marketable securities	34,292	34,529
Accounts receivable, net	561,244	392,746
Prepaid insurance	57,670	10,164
Other current assets	53,718	39,461
Nontrade Receivables	3,451	0
Total current assets	1,251,505	1,077,268
Property and equipment, net of accumulated depreciation	220,262	216,256
Right-of-use (“ROU”) leased assets	67,688	60,663
Prepaid health insurance	9,000	9,000
Deposits – health insurance	7,900	7,900
Deposits – workers’ compensation	193,067	186,331
Goodwill and other intangible assets, net	12,707	12,707
Deferred income taxes, net	0	9,603
Other assets	6,955	4,548
Total assets	1,769,084	1,584,276
Current liabilities:
Accounts payable	5,841	6,203
Payroll taxes and other payroll deductions payable	310,519	377,960
Accrued worksite employee payroll cost	503,334	334,836
Accrued health insurance costs	72,136	32,685
Accrued workers’ compensation costs	49,696	48,186
Accrued corporate payroll and commissions	41,720	44,277
Other accrued liabilities	61,105	60,777
Total current liabilities	1,044,351	904,924
Noncurrent liabilities:
Accrued workers’ compensation costs	190,336	195,239
Long-term debt	369,400	369,400
Operating lease liabilities, net of current	71,716	64,289
Deferred income taxes, net	13,343	0
Other accrued liabilities, net of current	6,294	6,292
Total noncurrent liabilities	651,089	635,220
Commitments and contingencies
Stockholders’ equity:
Common stock	555	555
Additional paid-in capital	81,329	95,528
Treasury stock, at cost	(628,391)	(626,984)
Retained earnings	620,151	575,033
Total stockholders’ equity	73,644	44,132
Total liabilities and stockholders’ equity	$ 1,769,084	$ 1,584,276

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Income Statement [Abstract]
Revenues(1)	$ 1,286,835	$ 1,229,483
Payroll taxes, benefits and workers’ compensation costs	1,035,390	995,461
Gross profit	251,445	234,022
Salaries, wages and payroll taxes	103,075	86,501
Stock-based compensation	11,822	6,552
Commissions	7,719	8,460
Advertising	5,322	4,833
General and administrative expenses	31,636	34,853
Depreciation and amortization	8,047	7,602
Total operating expenses	167,621	148,801
Operating income	83,824	85,221
Other income (expense):
Interest income	543	1,879
Interest expense	(1,599)	(2,362)
Income before income tax expense	82,768	84,738
Income tax expense	20,846	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
Basic net income per share of common stock (in dollars per share)	$ 1.62	$ 1.59
Diluted net income per share of common stock (in dollars per share)	$ 1.59	$ 1.58
Revenue Composition [Abstract]
Gross billings	$ 8,050,422	$ 7,436,754
Worksite employee payroll cost	6,763,587	6,207,271
Revenues(1)	$ 1,286,835	$ 1,229,483

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
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 amortization	8,047	7,602
Stock-based compensation	11,822	6,552
Deferred income taxes	22,946	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
Increase (Decrease) in Other Noncurrent Assets	(1,508)	(3,403)
Accounts payable	(362)	1,675
Payroll taxes and other payroll deductions payable	(67,441)	(9,003)
Accrued worksite employee payroll expense	168,498	34,905
Accrued health insurance costs	39,451	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 activities	1,971	23,787
Marketable securities:
Purchases	(10,585)	(8,689)
Proceeds from maturities	10,580	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	0	100,000
Other	(2,751)	(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 period	786,699	592,550
Cash, cash equivalents and restricted cash end of period	734,197	641,626
Supplemental Cash Flow Information [Abstract]
Cash and cash equivalents	494,777	404,728
Restricted cash	46,353	48,349
Deposits workers compensation	193,067	188,549
ROU assets obtained in exchange for lease obligations	$ 12,104	$ 6,787

XML

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]
Balance at Dec. 31, 2019	$ 4,079	$ 555	$ 48,141	$ (544,102)	$ 499,485
Balance (shares) at Dec. 31, 2019		55,489
Purchase of treasury stock, at cost	(61,203)	$ 0	0	61,203	0
Shares Issued, Value, Share-based Payment Arrangement, before Forfeiture	0	0	(7,088)	7,898	(810)
Stock-based compensation expense	6,552	0	4,893	1,659	0
Other	642	0	381	261	0
Dividends paid	(15,557)	0	0	0	(15,557)
Unrealized gain (loss) on marketable securities, net of tax	85	0	0	0	85
Net income	62,092	0	0	0	62,092
Balance at Mar. 31, 2020	(3,310)	$ 555	46,327	(595,487)	545,295
Balance (shares) at Mar. 31, 2020		55,489
Balance at Dec. 31, 2020	44,132	$ 555	95,528	(626,984)	575,033
Balance (shares) at Dec. 31, 2020		55,489
Purchase of treasury stock, at cost	(29,686)	$ 0	0	29,686	0
Shares Issued, Value, Share-based Payment Arrangement, before Forfeiture	0	0	(25,085)	26,421	(1,336)
Stock-based compensation expense	11,822	0	10,851	971	0
Stock Issued During Period, Value, Stock Options Exercised	(240)	0	(329)	(569)	0
Other	682	0	364	318	0
Dividends paid	(15,461)	0	0	0	(15,461)
Unrealized gain (loss) on marketable securities, net of tax	(7)	0	0	0	(7)
Net income	61,922	0	0	0	61,922
Balance at Mar. 31, 2021	$ 73,644	$ 555	$ 81,329	$ (628,391)	$ 620,151
Balance (shares) at Mar. 31, 2021		55,489

XML

Basis of Presentation (Notes)

3 Months Ended

Mar. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

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.

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Accounting Policies (Notes)

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Accounting Policies

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

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.

The following table provides the activity and balances related to incurred but not paid workers’ compensation claims:

	Three Months Ended March 31,
(in thousands)	2021		2020
Beginning balance, January 1,	$	240,761	$	242,904
Accrued claims	8,522		14,339
Present value discount, net of accretion	652		(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 claims	190,336		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.

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)	2021		2020		% Change
Northeast	$	373,629	$	344,086	8.6	%
Southeast	156,260		140,678		11.1	%
Central	225,700		211,302		6.8	%
Southwest	256,979		272,130		(5.6)	%
West	261,354		246,853		5.9	%
	1,273,922		1,215,049		4.8	%
Other revenue	12,913		14,434		(10.5)	%
Total revenue	$	1,286,835	$	1,229,483	4.7	%

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Cash, Cash Equivalents and Marketable Securities (Notes)

3 Months Ended

Mar. 31, 2021

Cash, Cash Equivalents and Marketable Securities [Abstract]

Cash, Cash Equivalents and Marketable Securities

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, 2021						December 31, 2020
(in thousands)	Cash & Cash Equivalents		Marketable Securities		Total		Cash & Cash Equivalents		Marketable Securities		Total
Overnight holdings	$	432,607	$	—	$	432,607	$	503,221	$	—	$	503,221
Investment holdings	48,278		34,292		82,570		47,992		34,529		82,521
Cash in demand accounts	23,105		—		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.

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Fair Value Measurements Fair Value Measurements (Notes)

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

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

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, 2021						December 31, 2020
(in thousands)	Total		Level 1		Level 2		Total		Level 1		Level 2
Money market funds	$	480,885	$	480,885	$	—	$	551,213	$	551,213	$	—
U.S. Treasury bills	13,269		13,269		—		10,531		10,531		—
Municipal bonds	21,023		—		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 Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2021
U.S. Treasury bills	$	13,267	$	2	$	—	$	13,269
Municipal bonds	21,028		1		(6)		21,023
Total	$	34,295	$	3	$	(6)	$	34,292
December 31, 2020
U.S. Treasury bills	$	10,530	$	1	$	—	$	10,531
Municipal bonds	23,994		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 Cost		Estimated 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.

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Long-term Debt (Notes)

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Revolving Credit Facility

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.

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Stockholders' Equity (Notes)

3 Months Ended

Mar. 31, 2021

Stockholders' Equity Note [Abstract]

Stockholders Equity

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)	2021		2020
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.

Rights PlanOn 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.

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Net Income Per Share (Notes)

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Net Income per Share

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)	2021		2020
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 outstanding	38,216		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 outstanding	38,839		39,068

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Commitments and Contingencies (Notes)

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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.

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Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Health Insurance Costs

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

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

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.

The following table provides the activity and balances related to incurred but not paid workers’ compensation claims:

	Three Months Ended March 31,
(in thousands)	2021		2020
Beginning balance, January 1,	$	240,761	$	242,904
Accrued claims	8,522		14,339
Present value discount, net of accretion	652		(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 claims	190,336		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 Recognition

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.

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)	2021		2020		% Change
Northeast	$	373,629	$	344,086	8.6	%
Southeast	156,260		140,678		11.1	%
Central	225,700		211,302		6.8	%
Southwest	256,979		272,130		(5.6)	%
West	261,354		246,853		5.9	%
	1,273,922		1,215,049		4.8	%
Other revenue	12,913		14,434		(10.5)	%
Total revenue	$	1,286,835	$	1,229,483	4.7	%

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Fair Value Measurements Fair Vlue Measurements (Policies)

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments, Policy [Policy Text Block]

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

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Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Activity and balances related to incurred but not paid workers' compensation claims

The following table provides the activity and balances related to incurred but not paid workers’ compensation claims:

	Three Months Ended March 31,
(in thousands)	2021		2020
Beginning balance, January 1,	$	240,761	$	242,904
Accrued claims	8,522		14,339
Present value discount, net of accretion	652		(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 claims	190,336		197,633
Total accrued claims	$	236,689	$	245,922

Disaggregation of Revenue [Table Text Block]

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.

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)	2021		2020		% Change
Northeast	$	373,629	$	344,086	8.6	%
Southeast	156,260		140,678		11.1	%
Central	225,700		211,302		6.8	%
Southwest	256,979		272,130		(5.6)	%
West	261,354		246,853		5.9	%
	1,273,922		1,215,049		4.8	%
Other revenue	12,913		14,434		(10.5)	%
Total revenue	$	1,286,835	$	1,229,483	4.7	%

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Cash, Cash Equivalents and Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2021

Cash, Cash Equivalents and Marketable Securities [Abstract]

Summary of investments in 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, 2021						December 31, 2020
(in thousands)	Cash & Cash Equivalents		Marketable Securities		Total		Cash & Cash Equivalents		Marketable Securities		Total
Overnight holdings	$	432,607	$	—	$	432,607	$	503,221	$	—	$	503,221
Investment holdings	48,278		34,292		82,570		47,992		34,529		82,521
Cash in demand accounts	23,105		—		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

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Fair Value Measurements Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Table Text Block]

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

	March 31, 2021						December 31, 2020
(in thousands)	Total		Level 1		Level 2		Total		Level 1		Level 2
Money market funds	$	480,885	$	480,885	$	—	$	551,213	$	551,213	$	—
U.S. Treasury bills	13,269		13,269		—		10,531		10,531		—
Municipal bonds	21,023		—		21,023		23,998		—		23,998
Total	$	515,177	$	494,154	$	21,023	$	585,742	$	561,744	$	23,998

Available-for-sale Securities [Table Text Block]

The following is a summary of our available-for-sale marketable securities:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2021
U.S. Treasury bills	$	13,267	$	2	$	—	$	13,269
Municipal bonds	21,028		1		(6)		21,023
Total	$	34,295	$	3	$	(6)	$	34,292
December 31, 2020
U.S. Treasury bills	$	10,530	$	1	$	—	$	10,531
Municipal bonds	23,994		8		(4)		23,998
Total	$	34,524	$	9	$	(4)	$	34,529

Investments Classified by Contractual Maturity Date [Table Text Block]

As of March 31, 2021, the contractual maturities of our marketable securities were as follows:

(in thousands)	Amortized Cost		Estimated Fair Value
Less than one year	$	34,295	$	34,292
One to five years	—		—
Total	$	34,295	$	34,292

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Stockholders' Equity Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2021

Stockholders' Equity Attributable to Parent [Abstract]

Quarterly dividends declared [Table Text Block]

The Board declared quarterly dividends as follows:

(amounts per share)	2021		2020
First quarter	$	0.40	$	0.40

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Net Income per Share (Tables)

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Summary of the net income allocated to common shares and the basic and diluted shares used in the net income per share computations

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)	2021		2020
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 outstanding	38,216		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 outstanding	38,839		39,068

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Accounting Policies (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Dec. 31, 2019	Oct. 01, 2019
Health Insurance Costs [Abstract]
Percentage of our health insurance coverage provided by United	87.00%
Number of days in advance of the beginning of a reporting quarter United establishes cash funding rates	90 days
Required accumulated cash surplus	$ 9,000		$ 9,000
Required deposit equal to approximately one day of claims funding activity	6,500
Amount which plan costs were less than the net premiums paid and owed	51,400
Prepaid health insurance, current	42,400
Premiums owed to United	66,000
Benefits costs incurred (reduced) related to run-off	5,500	$ (1,500)
Workers' Compensation Costs [Abstract]
Company's maximum economic burden for the first layer of claims per occurrence	1,000				$ 1,500
Company's maximum aggregate economic burden for claims in excess of 1 million per policy year	6,000				$ 6,000
Decrease Increase in accrued workers' compensation costs for changes in estimated losses	$ 13,200	$ 10,100
U.S. Treasury rates that correspond with the weighted average estimated claim payout period (in hundredths)	0.50%	1.00%
Incurred but not paid workers compensation liabilities [Abstract]
Liability for Unpaid Claims and Claims Adjustment Expense, Adjustments			240,761	$ 242,904
Workers' Compensation Expense	$ 8,522	$ 14,339
Present value discount, net of accretion	652	(200)
Paid claims	(13,246)	(11,121)
WorkersCompensationLiabilityNetOfAdminFeesCurrent	46,353	48,289
Long-term portion of accrued claims	190,336	197,633	195,239
Ending balance	236,689	245,922
Workers compensation administrative fees accrued	3,300
Undiscounted accrued workers' compensation costs	$ 253,200	265,600
Time period incurred claims expected to be paid recorded as restricted cash	1 year
Time period incurred claims expected to be paid, included in deposits, a long-term asset	Greater than 1 year
Restricted cash	$ 46,353	48,349	45,522	49,295
Deposits workers compensation	$ 193,067	188,549	186,331	$ 175,913
Time period estimate of incurred claim costs to be paid included in short-term liabilities	1 year
Time period incurred claims expected to be paid, included in long-term liabilities	Greater than 1 year
Revenue from Contract with Customer [Abstract]
Unbilled	$ 549,000		$ 380,800
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	1,286,835	1,229,483
Northeast [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	373,629	344,086
Southeast [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	156,260	140,678
Central [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	225,700	211,302
Southwest [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	256,979	272,130
West [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	261,354	246,853
Other Revenues [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 12,913	$ 14,434

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Cash, Cash Equivalents and Marketable Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Cash and Cash Equivalents [Line Items]
Overnight Holdings	$ 432,607	$ 503,221
Short-term Investments	82,570	82,521
Cash	23,105	33,692
Drafts Payable	(9,213)	(30,059)
Cash, Cash Equivalents, and Short-term Investments	529,069	589,375
Payroll Withholdings Included in Cash Balance	273,500	342,000
Client Prepayments Included in Cash Balance	(58,900)	(35,300)
Money Market Funds [Member]
Cash and Cash Equivalents [Line Items]
Overnight Holdings	0	0
Short-term Investments	34,292	34,529
Cash	0	0
Drafts Payable	0	0
Cash, Cash Equivalents, and Short-term Investments	34,292	34,529
Cash and Cash Equivalents [Member]
Cash and Cash Equivalents [Line Items]
Overnight Holdings	432,607	503,221
Short-term Investments	48,278	47,992
Cash	23,105	33,692
Drafts Payable	(9,213)	(30,059)
Cash, Cash Equivalents, and Short-term Investments	$ 494,777	$ 554,846

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Fair Value Measurements Fair Value Measurements (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	$ 480,885	$ 551,213
US Government Securities, at Carrying Value	13,269	10,531
Municipal bonds	21,023	23,998
Total	515,177	585,742
Available-for-sale Securities, Amortized Cost Basis	34,295	34,524
Available-for-sale Securities, Gross Unrealized Gain	3	9
Available-for-sale Securities, Gross Unrealized Loss	(6)	(4)
Available-for-sale Securities	34,292	34,529
Debt Securities, Available-for-sale, Amortized Cost, Fiscal Year Maturity [Abstract]
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, within One Year, Amortized Cost	34,295
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, after One Through Five Years, Amortized Cost	0
Debt Securities, Available-for-sale, Fair Value, Fiscal Year Maturity [Abstract]
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, within One Year, Fair Value	34,292
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, after One Through Five Years, Fair Value	0
US Treasury Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Amortized Cost Basis	13,267	10,530
Available-for-sale Securities, Gross Unrealized Gain	2	1
Available-for-sale Securities, Gross Unrealized Loss	0	0
Available-for-sale Securities	13,269	10,531
Municipal Bond [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Amortized Cost Basis	21,028	23,994
Available-for-sale Securities, Gross Unrealized Gain	1	8
Available-for-sale Securities, Gross Unrealized Loss	(6)	(4)
Available-for-sale Securities	21,023	23,998
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	480,885	551,213
US Government Securities, at Carrying Value	13,269	10,531
Municipal bonds	0	0
Total	494,154	561,744
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	0	0
US Government Securities, at Carrying Value	0	0
Municipal bonds	21,023	23,998
Total	$ 21,023	$ 23,998

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Long-term Debt (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Line of Credit Facility [Line Items]
Current borrowing capacity	$ 500,000
Maximum borrowing capacity	$ 550,000
Percentage Of Subsidiary Stock Securing Debt	0.65
Long-term debt	$ 369,400	$ 369,400
Letters of Credit Outstanding, Amount	1,000
Line of Credit Facility, Remaining Borrowing Capacity	$ 129,600
Applicable Margin Federal Funds Rate	0.50%
Applicable Margin 30 Day Libor	2.00%
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	0.25%
Line of Credit Facility, Interest Rate During Period	1.88%
London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.50%
London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	2.25%
Base Rate [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.00%
Base Rate [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.50%

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Stockholders' Equity (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($) conversionRatio $ / shares shares	Mar. 31, 2020 USD ($) $ / shares
Stockholders' Equity Note [Abstract]
Aggregate number of shares repurchased during the period (in shares)	340,317
Shares repurchased under the program (in shares)	49,904
Authorized to repurchased additional shares under repurchase program (in shares)	1,078,233
Shares withheld for tax withholding obligations for the vesting of restricted stock awards (in shares)	290,413
Dividends declared per share of common stock (in dollars per share) | $ / shares	$ 0.40	$ 0.40
Payments of Ordinary Dividends, Common Stock | $	$ (15,461)	$ (15,557)
Warrants and Rights Note Disclosure [Abstract]
ClassOfWarrantRightConversionRatioOfWarrantorRightsToShareOfStock | conversionRatio	0.010
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right	1
Warrant or Right, Reason for Issuance, Description	Rights PlanOn 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.
Warrants and Rights Outstanding, Maturity Date	May 20, 2021

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Net Income per Share (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Earnings Per Share [Abstract]
Net income	$ 61,922	$ 62,092
Less distributed and undistributed earnings allocated to participating securities	197	462
Net Income (Loss) Available to Common Stockholders, Basic	$ 61,725	$ 61,630
Weighted average common shares outstanding basic (in shares)	38,216	38,802
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements	623	266
Weighted Average Number of Shares Outstanding, Diluted	38,839	39,068

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Commitments and Contingencies Commitments and Contingencies (Details)	3 Months Ended
	Mar. 31, 2021 USD ($)
Commitments and Contingencies Disclosure (Details) [Abstract]
Loss Contingency, Damages Sought	$ 146,000,000
Loss Contingency Accrual, Provision	$ 0