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	June 30, 2020
	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 July 27, 2020, 38,800,936 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	10
Part I, Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Part I, Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34
Part I, Item 4.	Controls and Procedures	34
Part II, Item 1.	Legal Proceedings	35
Part II, Item 1A.	Risk Factors	35
Part II, Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Part II, Item 6.	Exhibits	37

FINANCIAL STATEMENTS
(Unaudited)

PART I

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)	June 30, 2020		December 31, 2019
Assets
Cash and cash equivalents	$	459,399	$	367,342
Restricted cash	45,216		49,295
Marketable securities	31,952		34,728
Accounts receivable, net	473,935		465,779
Prepaid insurance	23,494		10,418
Other current assets	34,651		43,493
Income taxes receivable	—		3,691
Total current assets	1,068,647		974,746
Property and equipment, net of accumulated depreciation	177,762		147,706
Right-of-use leased assets	57,421		56,886
Prepaid health insurance	9,000		9,000
Deposits – health insurance	8,100		8,100
Deposits – workers’ compensation	177,944		175,913
Goodwill and other intangible assets, net	12,708		12,714
Deferred income taxes, net	—		3,956
Other assets	6,151		5,975
Total assets	$	1,517,733	$	1,394,996
Liabilities and stockholders' equity
Accounts payable	$	2,885	$	4,565
Payroll taxes and other payroll deductions payable	219,492		277,248
Accrued worksite employee payroll cost	409,068		401,859
Accrued health insurance costs	29,714		21,180
Accrued workers’ compensation costs	48,618		52,868
Accrued corporate payroll and commissions	41,507		52,612
Other accrued liabilities	60,742		58,713
Income taxes payable	28,537		—
Total current liabilities	840,563		869,045
Accrued workers’ compensation cost, net of current	197,501		193,609
Long-term debt	369,400		269,400
Operating lease liabilities, net of current	60,815		58,863
Deferred income taxes, net	712		—
Other accrued liabilities, net of current	4,104		—
Total noncurrent liabilities	632,532		521,872
Commitments and contingencies	—		—
Common stock	555		555
Additional paid-in capital	54,783		48,141
Treasury stock, at cost	(592,313)		(544,102)
Retained earnings	581,613		499,485
Total stockholders’ equity	44,638		4,079
Total liabilities and stockholders’ equity	$	1,517,733	$	1,394,996

See accompanying notes.

Insperity | 2020 Second Quarter Form 10-Q 4

FINANCIAL STATEMENTS
(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2020		2019		2020		2019
Revenues(1)	$	993,366	$	1,043,316	$	2,222,849	$	2,196,326
Payroll taxes, benefits and workers’ compensation costs	773,117		869,581		1,768,578		1,795,874
Gross profit	220,249		173,735		454,271		400,452
Salaries, wages and payroll taxes	90,710		74,696		177,211		158,076
Stock-based compensation	10,694		8,256		17,246		14,296
Commissions	7,475		7,741		15,935		14,693
Advertising	5,720		7,548		10,553		12,579
General and administrative expenses	24,755		29,866		59,608		63,028
Depreciation and amortization	7,908		6,908		15,510		13,599
Total operating expenses	147,262		135,015		296,063		276,271
Operating income	72,987		38,720		158,208		124,181
Other income (expense):
Interest income	369		2,802		2,248		6,047
Interest expense	(2,219)		(1,639)		(4,581)		(3,320)
Income before income tax expense	71,137		39,883		155,875		126,908
Income tax expense	19,286		11,327		41,932		22,063
Net income	$	51,851	$	28,556	$	113,943	$	104,845
Less distributed and undistributed earnings allocated to participating securities	(276)		(309)		(724)		(1,183)
Net income allocated to common shares	$	51,575	$	28,247	$	113,219	$	103,662
Net income per share of common stock
Basic	$	1.34	$	0.69	$	2.93	$	2.55
Diluted	$	1.33	$	0.69	$	2.91	$	2.54

 ____________________________________

⁽¹⁾Revenues are comprised of gross billings less worksite employee (“WSEE”) payroll costs as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2020		2019		2020		2019
Gross billings	$	6,355,683	$	6,377,014	$	13,792,437	$	13,248,684
Less: WSEE payroll cost	5,362,317		5,333,698		11,569,588		11,052,358
Revenues	$	993,366	$	1,043,316	$	2,222,849	$	2,196,326

See accompanying notes.

Insperity | 2020 Second Quarter Form 10-Q 5

FINANCIAL STATEMENTS
(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
(in thousands)	2020		2019
Cash flows from operating activities
Net income	$	113,943	$	104,845
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,510		13,599
Stock-based compensation	17,246		14,296
Deferred income taxes	4,668		8,260
Changes in operating assets and liabilities:
Accounts receivable	(8,156)		(23,512)
Prepaid insurance	(13,076)		(16,058)
Other current assets	8,842		(2,073)
Other assets and ROU assets	6,979		(2,033)
Accounts payable	(1,680)		(4,074)
Payroll taxes and other payroll deductions payable	(57,756)		(16,472)
Accrued worksite employee payroll expense	7,209		43,553
Accrued health insurance costs	8,534		(14,777)
Accrued workers’ compensation costs	(357)		2,133
Accrued corporate payroll, commissions and other accrued liabilities	(19,273)		(22,878)
Income taxes payable/receivable	32,228		(12,381)
Total adjustments	918		(32,417)
Net cash provided by operating activities	114,861		72,428
Cash flows from investing activities
Marketable securities:
Purchases	(25,438)		(60,609)
Proceeds from dispositions	484		5,499
Proceeds from maturities	27,625		55,110
Property and equipment:
Purchases	(39,466)		(17,207)
Net cash used in investing activities	(36,795)		(17,207)
Cash flows from financing activities
Purchase of treasury stock	(61,230)		(38,796)
Dividends paid	(31,074)		(24,740)
Borrowings under revolving line of credit	100,000		25,000
Other	4,247		3,763
Net cash provided by (used in) financing activities	11,943		(34,773)
Net increase in cash, cash equivalents and restricted cash	90,009		20,448
Cash, cash equivalents and restricted cash beginning of period	592,550		535,474
Cash, cash equivalents and restricted cash end of period	$	682,559	$	555,922

Insperity | 2020 Second Quarter Form 10-Q 6

FINANCIAL STATEMENTS
(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

	Six Months Ended June 30,
(in thousands)	2020		2019
Supplemental schedule of cash and cash equivalents and restricted cash
Cash and cash equivalents	$	367,342	$	326,773
Restricted cash	49,295		42,227
Deposits – workers’ compensation	175,913		166,474
Cash, cash equivalents and restricted cash beginning of period	$	592,550	$	535,474
Cash and cash equivalents	$	459,399	$	324,926
Restricted cash	45,216		43,268
Deposits – workers’ compensation	177,944		187,728
Cash, cash equivalents and restricted cash end of period	$	682,559	$	555,922
Supplemental operating lease cash flow information:
ROU assets obtained in exchange for lease obligations	$	10,196	$	11,894

See accompanying notes.

Insperity | 2020 Second Quarter Form 10-Q 7

FINANCIAL STATEMENTS
(Unaudited)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months Ended June 30, 2020 and 2019

	Common Stock Issued			Additional Paid-In Capital		Treasury Stock		Retained Earnings and AOCI		Total
(in thousands)	Shares	Amount
Balance at December 31, 2019	55,489	$	555	$	48,141	$	(544,102)	$	499,485	$	4,079
Purchase of treasury stock, at cost	—	—		—		(61,230)		—		(61,230)
Issuance of long-term incentive awards and dividend equivalents	—	—		(7,088)		7,898		(810)		—
Stock-based compensation expense	—	—		13,341		3,905		—		17,246
Other	—	—		389		1,216		—		1,605
Dividends paid	—	—		—		—		(31,074)		(31,074)
Unrealized gain on marketable securities, net of tax	—	—		—		—		69		69
Net income	—	—		—		—		113,943		113,943
Balance at June 30, 2020	55,489	$	555	$	54,783	$	(592,313)	$	581,613	$	44,638
Balance at December 31, 2018	55,489	$	555	$	36,752	$	(357,569)	$	397,938	$	77,676
Purchase of treasury stock, at cost	—	—		—		(38,796)		—		(38,796)
Issuance of long-term incentive awards and dividend equivalents	—	—		(7,695)		8,646		(951)		—
Stock-based compensation expense	—	—		10,776		3,520		—		14,296
Other	—	—		1,176		369		—		1,545
Dividends paid	—	—		—		—		(24,740)		(24,740)
Unrealized gain on marketable securities, net of tax	—	—		—		—		63		63
Net income	—	—		—		—		104,845		104,845
Balance at June 30, 2019	55,489	$	555	$	41,009	$	(383,830)	$	477,155	$	134,889

Insperity | 2020 Second Quarter Form 10-Q 8

FINANCIAL STATEMENTS
(Unaudited)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

For the Three Months Ended June 30, 2020 and 2019

	Common Stock Issued			Additional Paid-In Capital		Treasury Stock		Retained Earnings and AOCI		Total
(in thousands)	Shares	Amount
Balance at March 31, 2020	55,489	$	555	$	46,327	$	(595,487)	$	545,295	$	(3,310)
Purchase of treasury stock, at cost	—	—		—		(27)		—		(27)
Stock-based compensation expense	—	—		8,448		2,246		—		10,694
Other	—	—		8		955		—		963
Dividends paid	—	—		—		—		(15,517)		(15,517)
Unrealized loss on marketable securities, net of tax	—	—		—		—		(16)		(16)
Net income	—	—		—		—		51,851		51,851
Balance at June 30, 2020	55,489	$	555	$	54,783	$	(592,313)	$	581,613	$	44,638
Balance at March 31, 2019	55,489	$	555	$	33,833	$	(376,097)	$	460,903	$	119,194
Purchase of treasury stock, at cost	—	—		—		(9,759)		—		(9,759)
Stock-based compensation expense	—	—		6,436		1,820		—		8,256
Other	—	—		740		206		—		946
Dividends paid	—	—		—		—		(12,354)		(12,354)
Unrealized gain on marketable securities, net of tax	—	—		—		—		50		50
Net income	—	—		—		—		28,556		28,556
Balance at June 30, 2019	55,489	$	555	$	41,009	$	(383,830)	$	477,155	$	134,889

See accompanying notes.

Insperity | 2020 Second Quarter Form 10-Q 9

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 Synchronization^TM 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 Premier^TM platform.

In addition to our PEO HR Outsourcing solutions, we also 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 Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Expense Management Services, 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, 2019. Our Condensed Consolidated Balance Sheet at December 31, 2019 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 June 30, 2020 and our Consolidated Statements of Operations for the three and six month periods ended June 30, 2020 and 2019, our Consolidated Statements of Cash Flows for the six month periods ended June 30, 2020 and 2019 and our Consolidated Statements of Stockholders’ Equity for the six month periods ended June 30, 2020 and 2019, 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 | 2020 Second Quarter Form 10-Q 10

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 June 30, 2020, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets. As of June 30, 2020, Plan Costs were less than the net premiums paid and owed to United by $19.5 million. As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $10.5 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 June 30, 2020 were $23.4 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 six months of 2020 included a reduction of $3.0 million for changes in estimated run-off related to prior periods. Our benefits costs incurred in the first six months of 2019 included a charge of $3.5 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 six months ended June 30, 2020 and 2019, we reduced accrued workers’ compensation costs by $22.2 million and $19.0 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 2020 period was 0.8% and in the 2019 period was 2.3%) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

Insperity | 2020 Second Quarter Form 10-Q 11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

	Six Months Ended June 30,
(in thousands)	2020		2019
Beginning balance, January 1,	$	242,904	$	229,639
Accrued claims	21,888		27,299
Present value discount, net of accretion	223		(2,703)
Paid claims	(22,298)		(22,727)
Ending balance	$	242,717	$	231,508
Current portion of accrued claims	$	45,216	$	43,267
Long-term portion of accrued claims	197,501		188,241
Total accrued claims	$	242,717	$	231,508

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at June 30, 2020 includes $3.4 million of workers’ compensation administrative fees.

As of June 30, 2020 and 2019, the undiscounted accrued workers’ compensation costs were $261.4 million and $250.9 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. During the first six months of 2020, we received $24.8 million for the return of excess claim funds related to the workers’ compensation program, which resulted in a net decrease to deposits – workers’ compensation. During the first six months of 2019, we funded a collateral deposit of $6.4 million for policy years prior to 2017, which increased deposits – workers’ compensation. At June 30, 2020, we had restricted cash of $45.2 million and deposits – workers’ compensation of $177.9 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 $463.1 million and $448.1 million at June 30, 2020 and December 31, 2019, 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 | 2020 Second Quarter Form 10-Q 12

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 June 30,						Six Months Ended June 30,
(in thousands)	2020		2019		% Change		2020		2019		% Change
Northeast	$	273,543	$	270,475	1.1	%	$	617,401	$	581,422	6.2	%
Southeast	117,013		120,148		(2.6)	%	258,175		250,054		3.2	%
Central	177,022		179,443		(1.3)	%	388,314		375,196		3.5	%
Southwest	222,734		244,462		(8.9)	%	494,658		514,294		(3.8)	%
West	192,310		215,639		(10.8)	%	439,121		448,842		(2.2)	%
	982,622		1,030,167		(4.6)	%	2,197,669		2,169,808		1.3	%
Other revenue	10,744		13,149		(18.3)	%	25,180		26,518		(5.0)	%
Total revenue	$	993,366	$	1,043,316	(4.8)	%	$	2,222,849	$	2,196,326	1.2	%

Recently Adopted Accounting Standards

We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) effective January 1, 2020 with no material impact. Under this standard, we estimate our reserves using information about past events, current conditions and risk characteristics of our customer when assessing risk associated with the collectability of accounts receivables, including unbilled accounts receivables. We require clients to pay invoices for service fees not later than the same day as the applicable payroll date. As such, we generally do not require collateral. As of June 30, 2020, allowance for bad debts was immaterial.

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:

	June 30, 2020						December 31, 2019
(in thousands)	Cash & Cash Equivalents		Marketable Securities		Total		Cash & Cash Equivalents		Marketable Securities		Total
Overnight holdings	$	398,668	$	—	$	398,668	$	349,857	$	—	$	349,857
Investment holdings	43,278		31,952		75,230		13,218		34,728		47,946
Cash in demand accounts	29,378		—		29,378		36,521		—		36,521
Outstanding checks	(11,925)		—		(11,925)		(32,254)		—		(32,254)
Total	$	459,399	$	31,952	$	491,351	$	367,342	$	34,728	$	402,070

Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles. Our cash, cash equivalents and marketable securities at June 30, 2020 and December 31, 2019 included $190.9 million and $234.6 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $31.5 million and $59.6 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:

Insperity | 2020 Second Quarter Form 10-Q 13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

•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:

	June 30, 2020						December 31, 2019
(in thousands)	Total		Level 1		Level 2		Total		Level 1		Level 2
Money market funds	$	439,496	$	439,496	$	—	$	363,075	$	363,075	$	—
U.S. Treasury bills	11,197		11,197		—		34,728		34,728		—
Municipal bonds	23,205		—		23,205		—		—		—
Total	$	473,898	$	450,693	$	23,205	$	397,803	$	397,803	$	—

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
June 30, 2020
U.S. Treasury bills	$	11,170	$	27	$	—	$	11,197
Municipal bonds	20,700		56		(1)		20,755
Total	$	31,870	$	83	$	(1)	$	31,952
December 31, 2019
U.S. Treasury bills	$	34,716	$	13	$	(1)	$	34,728
Total	$	34,716	$	13	$	(1)	$	34,728

As of June 30, 2020, the contractual maturities of our marketable securities were as follows:

(in thousands)	Amortized Cost		Estimated Fair Value
Less than one year	$	31,870	$	31,952
One to five years	—		—
Total	$	31,870	$	31,952

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.

Insperity | 2020 Second Quarter Form 10-Q 14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

As of June 30, 2020, 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.

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 June 30, 2020, 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 six month period ended June 30, 2020 was 2.82%. 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 June 30, 2020.

6. Stockholders' Equity

During the first six months of 2020, we repurchased or withheld an aggregate of 878,884 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 are to 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 six months ended June 30, 2020, 728,000 shares were repurchased under the Repurchase Program. As of June 30, 2020, we were authorized to repurchase an additional 685,833 shares under the Repurchase Program.

Withheld Shares

During the six months ended June 30, 2020, we withheld 150,884 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)	2020		2019
First quarter	$	0.40	$	0.30
Second quarter	0.40		0.30

Insperity | 2020 Second Quarter Form 10-Q 15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

During the six months ended June 30, 2020 and 2019, we paid dividends totaling $31.1 million and $24.7 million, respectively.

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 entitles the registered holder to purchase from us a unit consisting of one one-hundredth of a share (a “Fractional Share”) of Series A Junior Participating Preferred Stock, par value $0.01 per share, at a purchase price of $255.00 per Fractional Share, subject to adjustment. Initially, the Rights are attached to all outstanding shares of our common stock. The Rights will be separate from our common stock and a “Distribution Date” will occur, with certain exceptions, upon the earlier of (i) ten days following a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has acquired, or obtained the right to acquire, beneficial ownership of 10% (or 20% in the case of a “13G Investor,” as defined in the Rights Plan) or more of the outstanding shares of our common stock, or (ii) ten business days following the commencement of a tender offer or exchange offer that would result in a person’s becoming an Acquiring Person. The Rights are not exercisable until the Distribution Date and will expire at the close of business on May 20, 2021, unless earlier redeemed or exchanged by us. If the rights become exercisable, each holder other than the Acquiring Person (and certain related parties) will be entitled to acquire shares of our common stock at a 50% discount or we may exchange each right held by such holders for one share of common stock.

7. Incentive Plans

The Insperity, Inc. 2001 Incentive Plan, as amended, and the 2012 Incentive Plan, as amended (collectively, the “Incentive Plans”) provide for options and other stock-based awards that have been and may be granted to our eligible employees and non-employee directors. The 2012 Incentive Plan is currently the only plan under which new stock-based awards may be granted. Beginning with stock-based awards granted in 2020, employees who attain a minimum of age 62 and have provided 15 years or more of continuous service may continue to vest in awards following a qualifying retirement as defined under the 2012 Incentive Plan, as though he or she were still an employee, provided the grant date of the award is six months or more before the employees last day of employment. For a termination following a qualifying retirement, time-vested awards will continue to vest in the normal course. For a termination following a qualifying retirement, performance-based awards with completed or in-process performance periods are adjusted for achievement of the performance criteria, prorated through the date of termination and paid in the normal course, while performance-based awards for performance periods that have not started are forfeited. Stock-based compensation expense related to time-vested and performance-based awards is accelerated for employees who meet the requirements for continued vesting.

8. 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.

Insperity | 2020 Second Quarter Form 10-Q 16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 June 30,				Six Months Ended June 30,
(in thousands)	2020		2019		2020		2019
Net income	$	51,851	$	28,556	$	113,943	$	104,845
Less distributed and undistributed earnings allocated to participating securities	(276)		(309)		(724)		(1,183)
Net income allocated to common shares	$	51,575	$	28,247	$	113,219	$	103,662
Weighted average common shares outstanding	38,567		40,771		38,684		40,640
Incremental shares from assumed time-vested and performance-based RSU awards and conversions of common stock options	79		145		173		140
Adjusted weighted average common shares outstanding	38,646		40,916		38,857		40,780

9. 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 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 alleges 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, and we are now awaiting judgment from the court. We believe we presented meritorious defenses, and we intend to continue to vigorously defend this litigation in the post-trial proceedings. As a result of uncertainty regarding the outcome of this matter, no provision has been made in the accompanying Consolidated Financial Statements.

Securities Class Action Lawsuit

In July 2020, the Building Trades Pension Fund of Western Pennsylvania, individually and on behalf of all others similarly situated, filed a federal securities class action against us and certain officers in the United States District Court for the Southern District of New York. The complaint alleges that we made materially false and misleading statements regarding our business and operations in violation of the federal securities laws and seeks unspecified damages, the payment of reasonable attorneys’ fees, expert fees and other costs, and such other relief that may be deemed proper. We believe these allegations 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 | 2020 Second Quarter Form 10-Q 17

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, 2019, 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 Synchronization^TM 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 Premier^TM platform.

COVID-19 Pandemic

The effects of the COVID-19 pandemic, including actions taken by businesses and governments, have resulted in a significant reduction in U.S. economic activity. As the duration of which remains 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 of corporate facilities. To serve our clients, we have instituted a number of service offerings and developed COVID-19 resources to assist clients to obtain government provided tax credits, tax deferrals, loans and loan forgiveness as well as to provide guidance to assist clients 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 workforce and workplace safety.

The COVID-19 pandemic did not have a significant impact to our first quarter 2020 financial results due to the increased spread of, and related government and business responses to, the COVID-19 pandemic not occurring until late in the quarter. However, towards the end of the first quarter, clients began layoffs and temporary leaves of absence, which resulted in a 1.8% year-over-year decline in the average number of paid WSEEs in the second quarter of 2020. We expect the average number of paid WSEEs per month to decline between 4.5% and 5.6% in the third quarter of 2020 as compared to the third quarter of 2019, which equates to the average number of paid worksite employees per month staying flat to growing 1% sequentially from the second quarter of 2020. We expect overall reduced employment levels to have a negative impact on our financial results for at least the remainder of 2020 as compared to 2019.

We experienced a 10.7% decrease in benefits cost per covered employee due primarily to a decrease in non-essential claims as a result of the lower utilization and deferral or cancellations associated with the COVID-19 pandemic during the second quarter of 2020. We currently expect, however, to experience higher costs related to COVID-19 and certain non-essential elective healthcare procedures in the second half of 2020 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 trends. In addition, 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. As the impact of the COVID-19 pandemic emerges, such impact, 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 the virus. See Part II, Item 1A. “Risk Factors” for additional information.

Insperity | 2020 Second Quarter Form 10-Q 18

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

2020 Highlights

Second Quarter 2020 Compared to Second Quarter 2019

•Average number of WSEEs paid per month decreased 1.8%

•Net income and diluted earnings per share (“diluted EPS”) increased 81.6% and 92.8%, to $51.9 million and $1.33, respectively

•Adjusted EPS increased 85.5% to $1.54

•Adjusted EBITDA increased 62.2% to $92.0 million

First Six Months 2020 Compared to First Six Months 2019

•Average number of WSEEs paid per month increased 1.8%

•Net income and diluted EPS increased 8.7% and 14.6% to $113.9 million and $2.91, respectively

•Adjusted EPS increased 15.3% to $3.24

•Adjusted EBITDA increased 22.2% to $193.2 million

Please read “Non-GAAP Financial Measures” for a reconciliation of adjusted EBITDA and adjusted EPS to their most directly comparable financial measures calculated and presented in accordance with GAAP.

Insperity | 2020 Second Quarter Form 10-Q 19

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 June 30,						Six Months Ended June 30,
	2020		2019		% Change		2020		2019		% Change
Financial data:
Revenues	$	993,366	$	1,043,316	(4.8)	%	$	2,222,849	$	2,196,326	1.2	%
Gross profit	220,249		173,735		26.8	%	454,271		400,452		13.4	%
Operating expenses	147,262		135,015		9.1	%	296,063		276,271		7.2	%
Operating income	72,987		38,720		88.5	%	158,208		124,181		27.4	%
Other income (expense)	(1,850)		1,163		(259.1)	%	(2,333)		2,727		(185.6)	%
Net income	51,851		28,556		81.6	%	113,943		104,845		8.7	%
Diluted EPS	1.33		0.69		92.8	%	2.91		2.54		14.6	%
Non-GAAP financial measures(1):
Adjusted net income	$	59,646	$	34,467	73.1	%	$	126,539	$	116,051	9.0	%
Adjusted EBITDA	91,958		56,686		62.2	%	193,212		158,123		22.2	%
Adjusted EPS	1.54		0.83		85.5	%	3.24		2.81		15.3	%
Average WSEEs paid	227,894		232,010		(1.8)	%	232,954		228,768		1.8	%
Statistical data (per WSEE per month):
Revenues(2)	$	1,453	$	1,499	(3.1)	%	$	1,590	$	1,600	(0.6)	%
Gross profit	322		250		28.8	%	325		292		11.3	%
Operating expenses	215		194		10.8	%	212		201		5.5	%
Operating income	107		56		91.1	%	113		90		25.6	%
Net income	76		41		85.4	%	82		76		7.9	%

 ____________________________________

⁽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 June 30,				Six Months Ended June 30,
(per WSEE per month)	2020		2019		2020		2019
Gross billings	$	9,296	$	9,162	$	9,868	$	9,652
Less: WSEE payroll cost	7,843		7,663		8,278		8,052
Revenues	$	1,453	$	1,499	$	1,590	$	1,600

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:

•WSEE

•Adjusted EBITDA

•Adjusted EPS

Insperity | 2020 Second Quarter Form 10-Q 20

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 second quarter of 2020 (“Q2 2020”), the number of WSEEs paid from new client sales and net gain (loss) in our client base declined over the second quarter of 2019 (“Q2 2019”), due primarily to layoffs and furloughs of WSEEs by our clients resulting from the effects of the on-going COVID-19 pandemic. However, client retention remained consistent compared to Q2 2019.

•During the first six months of 2020 (“YTD 2020”), the number of WSEEs paid from new client sales and net gain (loss) in our client base declined over the first six months of 2019 (“YTD 2019”), due primarily to layoffs and furloughs of WSEEs by our clients resulting from the effects of the on-going COVID-19 pandemic. Client retention also declined compared to YTD 2019.

Average WSEEs Paid and

Year-over-Year Growth Percentage

Insperity | 2020 Second Quarter Form 10-Q 21

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 | 2020 Second Quarter Form 10-Q 22

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Revenue and

Year-over-Year Growth Percentage

(in thousands)

Second Quarter 2020 Compared to Second Quarter 2019

Our revenues for Q2 2020 were $1.0 billion, a decrease of 4.8%, primarily due to the following:

•Average WSEEs paid decreased 1.8%.

•Revenues per WSEE per month decreased 3.1%, or $46, primarily due to $44.8 million in FICA deferral elections by clients and credits pursuant to the CARES Act and the Families First Coronavirus Response Act, which also reduced our direct costs and therefore has no net effect on our gross profit. In addition, we provided clients with $11.6 million of comprehensive service fee credits applied generally on a WSEE basis across our active client base to assist clients in addressing the unprecedented economic impact of the COVID-19 pandemic.

First Six Months 2020 Compared to First Six Months 2019

Our revenues for YTD 2020 were $2.2 billion, an increase of 1.2%, primarily due to the following:

•Average WSEEs paid increased 1.8%.

•Revenues per WSEE per month decreased 0.6%, or $10 primarily due to $44.8 million in FICA deferral elections by clients and credits pursuant to the CARES Act and the Families First Coronavirus Response Act, which also reduced our direct costs and therefore has no net effect on our gross profit. In addition, we provided clients with $11.6 million of comprehensive service fee credits applied generally on a WSEE basis across our active client base to assist clients in addressing the unprecedented economic impact of the COVID-19 pandemic.

Insperity | 2020 Second Quarter Form 10-Q 23

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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)

   

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

Insperity | 2020 Second Quarter Form 10-Q 24

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

Gross Profit and
Year-over-Year Growth Percentage
(in thousands)

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

 

Second Quarter 2020 Compared to Second Quarter 2019

Gross profit for Q2 2020 increased 26.8% to $220.2 million compared to $173.7 million in Q2 2019. Gross profit per WSEE per month for Q2 2020 increased $72 to $322 compared to $250 in Q2 2019.

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 decreased $46 and $118, respectively, due in part to FICA deferral elections by clients pursuant to the CARES Act in Q2 2020. The net decrease in costs between Q2 2020 and Q2 2019 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $19.8 million as discussed below. The primary direct cost components changed as follows:

Benefits costs

•The cost of group health insurance and related employee benefits decreased $48 per WSEE per month and decreased 10.7% on a cost per covered employee basis due primarily to a decrease in claims as a result of the

Insperity | 2020 Second Quarter Form 10-Q 25

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

lower utilization and deferral of non-essential healthcare procedures in response to COVID-19 governmental requirements or guidance.

•The percentage of WSEEs covered under our health insurance plans was 69.3% in Q2 2020 compared to 66.6% in Q2 2019.

•Reported results include changes in estimated claims run-off related to prior periods which was a decrease in costs of $10.4 million, or $15 per WSEE per month, in Q2 2020 compared to an increase in costs of $7.3 million, or $10 per WSEE per month, in Q2 2019.

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 15.7%, or $3 per WSEE per month, in Q2 2020 compared to Q2 2019.

•As a percentage of non-bonus payroll cost, workers’ compensation costs in Q2 2020 were 0.29% compared to 0.34% in Q2 2019.

•We recorded a reduction in workers’ compensation costs of $13.9 million, or 0.28% of non-bonus payroll costs, in Q2 2020 compared to a reduction of $11.8 million, or 0.24% of non-bonus payroll costs, in Q2 2019, 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 decreased 14.0% on a 0.5% increase in payroll costs, or $66 per WSEE per month, primarily due to $44.8 million of FICA deferral elections by clients pursuant to the CARES Act and Internal Revenue Service self-employed owner tax reporting changes for PEOs in 2020.

•Payroll taxes as a percentage of payroll costs decreased to 5.9% in Q2 2020 compared to 6.9% in Q2 2019, primarily due to $44.8 million of FICA deferral elections by clients pursuant to the CARES Act and Internal Revenue Service self-employed owner tax reporting changes for PEOs in 2020.

First Six Months 2020 Compared to First Six Months 2019

Gross profit for YTD 2020 increased 13.4% to $454.3 million compared to $400.5 million in YTD 2019. Gross profit per WSEE per month for YTD 2020 increased $33 to $325 compared to $292 in YTD 2019.

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 decreased $10 and $43, respectively, due primarily to FICA deferral elections by clients pursuant to the CARES Act in YTD 2020. The net decrease in costs between YTD 2020 and YTD 2019 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $9.7 million as discussed below. The primary direct cost components changed as follows:

Benefits costs

•The cost of group health insurance and related employee benefits decreased $8 per WSEE per month and decreased 2.8% on a cost per covered employee basis due primarily to a decrease in claims as a result of lower utilization and the deferral of non-essential healthcare procedures in response to COVID-19 governmental requirements or guidance.

Insperity | 2020 Second Quarter Form 10-Q 26

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•The percentage of WSEEs covered under our health insurance plans was 68.1% in YTD 2020 compared to 67.0% in YTD 2019.

•Reported results include changes in estimated claims run-off related to prior periods which was a decrease in costs of $3.0 million, or $2 per WSEE per month, in YTD 2020 compared to an increase in costs of $3.5 million, or $3 per WSEE per month, in YTD 2019.

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 decrease 6.0%, or $2 on a per WSEE per month basis, in YTD 2020 compared to YTD 2019.

•As a percentage of non-bonus payroll cost, workers’ compensation costs in YTD 2020 were 0.34% compared to 0.38% in YTD 2019.

•We recorded a reduction in workers’ compensation costs of $22.2 million, or 0.22% of non-bonus payroll costs, in YTD 2020 compared to a reduction of $19.0 million, or 0.20% of non-bonus payroll costs, in YTD 2019, 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 decreased 3.7% on a 4.7% increase in payroll costs, or $33 per WSEE per month, primarily due to $44.8 million of FICA deferral elections by clients pursuant to the CARES Act and Internal Revenue Service self-employed owner tax reporting changes for PEOs in 2020.

•Payroll taxes as a percentage of payroll costs decreased to 6.9% in YTD 2020 compared to 7.5% in YTD 2019, primarily due to $44.8 million of FICA deferral elections by clients pursuant to the CARES Act and Internal Revenue Service self-employed owner tax reporting changes for PEOs in 2020.

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 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

◦outside professional service fees related to legal, consulting and accounting services

Insperity | 2020 Second Quarter Form 10-Q 27

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

◦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.

Second Quarter 2020 Compared to Second Quarter 2019

The following table presents certain information related to our operating expenses:

	Three Months Ended June 30,
	$						WSEE
(in thousands, except per WSEE)	2020		2019		% Change		2020		2019		% Change
Salaries	$	90,710	$	74,696	21.4	%	$	133	$	107	24.3	%
Stock-based compensation	10,694		8,256		29.5	%	16		11		45.5	%
Commissions	7,475		7,741		(3.4)	%	11		11		—
Advertising	5,720		7,548		(24.2)	%	8		11		(27.3)	%
General and administrative	24,755		29,866		(17.1)	%	35		43		(18.6)	%
Depreciation and amortization	7,908		6,908		14.5	%	12		11		9.1	%
Total operating expenses	$	147,262	$	135,015	9.1	%	$	215	$	194	10.8	%

Operating expenses for Q2 2020 increased 9.1% to $147.3 million compared to $135.0 million in Q2 2019. Operating expenses per WSEE per month for Q2 2020 increased 10.8% to $215 compared to $194 in Q2 2019.

•Salaries of corporate and sales staff for Q2 2020 increased 21.4% to $90.7 million, or $26 per WSEE per month, compared to Q2 2019. This increase was primarily due to a 6.2% increase in corporate headcount, including a 14.4% increase in total BPAs in Q2 2020 compared to Q2 2019, and included an acceleration in the timing of a portion of incentive compensation into the second quarter and paid-time off accruals associated with higher than normal unused vacation hours.

•Stock based compensation expense for Q2 2020 increased 29.5% to $10.7 million, or $5 per WSEE per month, compared to Q2 2019. The increase was primarily due to awards issued under our incentive plan and the acceleration of expense for employees who meet the retirement eligibility requirements for continued vesting. Please read Note 7 to the Consolidated Financial Statements, “Incentive Plans,” for additional information.

•Commissions expense for Q2 2020 decreased 3.4% to $7.5 million, but remained flat on a per WSEE per month basis, compared to Q2 2019. The decrease was primarily due to reductions in commissions associated with our other business performance solutions offerings and PEO HR Outsourcing solutions, partially offset by an increase in the amount of sales channel referral fees paid during Q2 2020.

•Advertising expense for Q2 2020 decreased 24.2% to $5.7 million, or $3 per WSEE per month, compared to Q2 2019. The decrease was primarily due to the cancellation of the 2020 Insperity Invitational and decreases in trade shows and events due to COVID-19, partially offset by an increase in internet advertising.

•General and administrative expenses for Q2 2020 decreased 17.1% to $24.8 million, or $8 per WSEE per month, compared to Q2 2019. The decrease was primarily due to reductions in travel and training costs in response to the COVID-19 pandemic, partially offset by increases in technology licensing costs, rent and professional services.

•Depreciation and amortization expense for Q2 2020 increased 14.5% to $7.9 million, or $1 per WSEE per month, compared to Q2 2019. The increase was primarily due to increased capital expenditures related to software development costs and sales office expansions.

Insperity | 2020 Second Quarter Form 10-Q 28

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

First Six Months 2020 Compared to First Six Months 2019

	Six Months Ended June 30,
	$						WSEE
(in thousands, except per WSEE)	2020		2019		% Change		2020		2019		% Change
Salaries	$	177,211	$	158,076	12.1	%	$	127	$	115	10.4	%
Stock-based compensation	17,246		14,296		20.6	%	12		10		20.0	%
Commissions	15,935		14,693		8.5	%	11		11		—
Advertising	10,553		12,579		(16.1)	%	8		9		(11.1)	%
General and administrative	59,608		63,028		(5.4)	%	43		45		(4.4)	%
Depreciation and amortization	15,510		13,599		14.1	%	11		11		—
Total operating expenses	$	296,063	$	276,271	7.2	%	$	212	$	201	5.5	%

Operating expenses for YTD 2020 increased 7.2% to $296.1 million compared to $276.3 million in YTD 2019. Operating expenses per WSEE per month for YTD 2020 increased 5.5% to $212 compared to $201 in YTD 2019.

•Salaries of corporate and sales staff for YTD 2020 increased 12.1% to $177.2 million, or $12 per WSEE per month, compared to YTD 2019. This increase was primarily due to a 6.4% increase in corporate headcount, including a 12.8% increase in total BPAs in YTD 2020 compared to YTD 2019 and an acceleration in the timing of a portion of incentive compensation into the second quarter and paid-time off accruals associated with higher than normal unused vacation hours.

•Stock based compensation expense for YTD 2020 increased 20.6% to $17.2 million or $2 per WSEE per month, compared to YTD 2019. The increase was primarily due to awards issued under our incentive plan and the acceleration of expense for employees who meet the retirement eligibility requirements for continued vesting. Please read Note 7 to the Consolidated Financial Statements, “Incentive Plans,” for additional information.

•Commissions expense for YTD 2020 increased 8.5% to $15.9 million, but remained flat on a per WSEE per month basis, compared to YTD 2019. The increase was primarily due to commissions associated with growth in our PEO HR Outsourcing solutions, including an increase in the amount of sales channel referral fees paid during 2020. Additionally, as a result of the extension of our fall campaign into Q1 2020, the bonuses paid to sales managers increased in YTD 2020 compared to YTD 2019.

•Advertising expense for YTD 2020 decreased 16.1% to $10.6 million, or $1 per WSEE per month, compared to YTD 2019. The decrease was primarily due to the cancellation of the 2020 Insperity Invitational and decreases in trade shows and events due to COVID-19, partially offset by an increase in internet advertising.

•General and administrative expenses for YTD 2020 decreased 5.4% to $59.6 million, or $2 per WSEE per month, compared to YTD 2019. The decrease was primarily due to decreased travel and training expenses in response to the COVID-19 pandemic, partially offset by increases in technology licensing costs, rent and professional services.

•Depreciation and amortization expense for YTD 2020 increased 14.1% to $15.5 million, but remained flat on a per WSEE per month basis, compared to YTD 2019. The increase was primarily due to increased capital expenditures related to software development costs and sales office expansions.

Other Income (Expense)

Other Income (expense) for Q2 2020 was an expense of $1.9 million compared to income of $1.2 million in Q2 2019, and an expense of $2.3 million in YTD 2020 compared to income of $2.7 million in YTD 2019. The net decrease was primarily due to decreased interest income on our marketable securities investments and increased interest expense related to the higher outstanding balance on our credit facility. Please read Note 5 to the Consolidated Financial Statements, “Long-Term Debt,” for additional information.

Insperity | 2020 Second Quarter Form 10-Q 29

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Income Tax Expense

	Three Months Ended June 30,		Six Months Ended June 30,
	2020	2019	2020	2019
Effective income tax rate	27.1%	28.4%	26.9%	17.4%

For the six months ended June 30, 2020, our provision for income taxes differed from the U.S. statutory rate primarily due to state income taxes, non-deductible expenses and vesting of restricted and long-term incentive stock awards. During the first six months of 2020 and 2019, we recognized an income tax benefit of $2.0 million and $14.5 million, respectively, related to the vesting of 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 | 2020 Second Quarter Form 10-Q 30

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):

	Three Months Ended June 30,												Six Months Ended June 30,
(in thousands, except per WSEE per month)	2020						2019						2020						2019
	$			WSEE			$			WSEE			$			WSEE			$			WSEE
Payroll cost	$	5,362,317		$	7,843		$	5,333,698		$	7,663		$	11,569,588		$	8,278		$	11,052,358		$	8,052
Less: Bonus payroll cost	453,121			662			451,828			649			1,504,089			1,076			1,442,406			1,051
Non-bonus payroll cost	$	4,909,196		$	7,181		$	4,881,870		$	7,014		$	10,065,499		$	7,202		$	9,609,952		$	7,001
% Change period over period	0.6		%	2.4		%	14.7		%	0.8		%	4.7		%	2.9		%	15.3		%	0.7		%

Following is a reconciliation of cash, cash equivalents and marketable securities (GAAP) to adjusted cash, cash equivalents and marketable securities (non-GAAP):

(in thousands)	June 30, 2020		December 31, 2019
Cash, cash equivalents and marketable securities	$	491,351	$	402,070
Less:
Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions	190,909		234,553
Client prepayments	31,470		59,612
Adjusted cash, cash equivalents and marketable securities	$	268,972	$	107,905

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

	Three Months Ended June 30,												Six Months Ended June 30,
(in thousands, except per WSEE per month)	2020						2019						2020						2019
	$			WSEE			$			WSEE			$			WSEE			$			WSEE
Net income	$	51,851		$	76		$	28,556		$	41		$	113,943		$	82		$	104,845		$	76
Income tax expense	19,286			28			11,327			16			41,932			30			22,063			16
Interest expense	2,219			3			1,639			2			4,581			3			3,320			2
Depreciation and amortization	7,908			12			6,908			11			15,510			11			13,599			11
EBITDA	81,264			119			48,430			70			175,966			126			143,827			105
Stock-based compensation	10,694			16			8,256			11			17,246			12			14,296			10
Adjusted EBITDA	$	91,958		$	135		$	56,686		$	81		$	193,212		$	138		$	158,123		$	115
% Change period over period	62.2		%	66.7		%	21.6		%	6.6		%	22.2		%	20.0		%	21.2		%	5.5		%

Insperity | 2020 Second Quarter Form 10-Q 31

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2020			2019			2020			2019
Net income	$	51,851		$	28,556		$	113,943		$	104,845
Non-GAAP adjustments:
Stock-based compensation	10,694			8,256			17,246			14,296
Total non-GAAP adjustments	10,694			8,256			17,246			14,296
Tax effect	(2,899)			(2,345)			(4,650)			(3,090)
Adjusted net income	$	59,646		$	34,467		$	126,539		$	116,051
% Change period over period	73.1		%	20.2		%	9.0		%	31.5		%

Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP):

	Three Months Ended June 30,						Six Months Ended June 30,
(amounts per share)	2020			2019			2020			2019
Diluted EPS	$	1.33		$	0.69		$	2.91		$	2.54
Non-GAAP adjustments:
Stock-based compensation	0.27			0.20			0.44			0.35
Total non-GAAP adjustments	0.27			0.20			0.44			0.35
Tax effect	(0.06)			(0.06)			(0.11)			(0.08)
Adjusted EPS	$	1.54		$	0.83		$	3.24		$	2.81
% Change period over period	85.5		%	22.1		%	15.3		%	34.4		%

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 $491.4 million in cash, cash equivalents and marketable securities at June 30, 2020, of which approximately $190.9 million was payable in early July 2020 for withheld federal and state income taxes, employment taxes and other payroll deductions, and approximately $31.5 million represented client prepayments that were payable in July 2020. In March 2020, we borrowed $100.0 million under the Facility, which increased working capital. At June 30, 2020, we had working capital of $228.1 million compared to $105.7 million at December 31, 2019. 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 2020. 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 June 30, 2020, 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.

Insperity | 2020 Second Quarter Form 10-Q 32

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cash Flows from Operating Activities

Net cash provided by operating activities in the first six months of 2020 was $114.9 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 June 30, 2020, the last business day of the reporting period was a Tuesday, client prepayments were $31.5 million and employment taxes and other deductions were $190.9 million. In the period ended June 30, 2019, the last business day of the reporting period was a Friday, client prepayments were $37.4 million and employment taxes and other deductions were $218.0 million.

•Workers’ compensation plan funding – During YTD 2020, we received $24.8 million for the return of excess claim funds related to the workers’ compensation program, which resulted in an increase in working capital.

•Medical plan funding – Our health care contract with United establishes participant cash funding rates 90 days in advance of the beginning of a reporting quarter. Therefore, changes in the participation level of the United plan have a direct impact on our operating cash flows. In addition, changes to the funding rates, which are solely determined by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows. As of June 30, 2020, premiums owed and cash funded to United have exceeded the costs of the United plan, resulting in a $19.5 million surplus, $10.5 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 June 30, 2020, were $23.4 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 9.0% to $126.5 million in the first six months ended June 30, 2020, compared to $116.1 million in the first six months ended June 30, 2019. Please read “Results of Operations – First Six Months 2020 Compared to First Six Months 2019.”

Cash Flows from Investing Activities

Net cash flows used in investing activities were $36.8 million for the six months ended June 30, 2020, primarily due to property and equipment purchases of $39.5 million partially offset by $2.7 million of marketable securities maturities, net of purchases.

Cash Flows from Financing Activities

Net cash flows provided by financing activities were $11.9 million for the six months ended June 30, 2020. We borrowed $100.0 million under the Facility for general corporate purposes, repurchased or withheld $61.2 million in stock and paid $31.1 million in dividends. During Q2 2020, we elected not to repurchase any shares in light of the economic uncertainties created by the COVID-19 pandemic.

Insperity | 2020 Second Quarter Form 10-Q 33

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 June 30, 2020, 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 June 30, 2020.

There has been no change in our internal controls over financial reporting that occurred during the three months ended June 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Insperity | 2020 Second Quarter Form 10-Q 34

OTHER INFORMATION

PART II

Item 1. Legal Proceedings

Please read Note 9 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, Insperity, Inc., in an effort to help keep our stockholders and the public informed about our operations, may from time to time 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, unit growth, profit per worksite employee, pricing, operating expenses, benefits and workers’ compensation costs, or other aspects of operating results. We base the forward-looking statements on our expectations, estimates and projections at the time such statements are made. These statements are not guarantees of future performance and involve risks and uncertainties 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;

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

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

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

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

•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;

•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;

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

•our liability for disclosure of sensitive or private information;

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

Insperity | 2020 Second Quarter Form 10-Q 35

OTHER INFORMATION

•failure of our information technology systems;

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

•disruptions to our business resulting from the actions of certain stockholders.

These factors are discussed in further detail in our Annual Report on Form 10-K for the year ended December 31, 2019 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 in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, under “Item 1A. Risk Factors” 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 June 30, 2020 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)
04/01/2020 – 04/30/2020	370	$	38.67	—	685,833
05/01/2020 – 05/31/2020	46	50.75		—	685,833
06/01/2020 – 06/30/2020	163	61.50		—	685,833
Total	579	$	46.05	—

____________________________________

⁽¹⁾During the three months ended June 30, 2020, 579 shares of stock were withheld to satisfy tax-withholding obligations arising in conjunction with the vesting of restricted stock, restricted stock units 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 June 30, 2020, we were authorized to repurchase an additional 685,833 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.

Insperity | 2020 Second Quarter Form 10-Q 36

OTHER INFORMATION

Item 6. Exhibits

Exhibit No		Exhibit
3.1		Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 29, 2018).
3.2		Certificate of Designations of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 22, 2020).
4.1		Rights Agreement dated as of May 21, 2020 between Insperity, Inc. and Computershare Trust Company, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on May 22, 2020).
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.
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 | 2020 Second Quarter Form 10-Q 37

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: August 3, 2020	By:	/s/ Douglas S. Sharp
		Douglas S. Sharp
		Senior Vice President of Finance,
		Chief Financial Officer and Treasurer
		(Principal Financial Officer)

Insperity | 2020 Second Quarter Form 10-Q 38

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: August 3, 2020
	/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: August 3, 2020
	/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 June 30, 2020 (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

August 3, 2020

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 June 30, 2020 (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

August 3, 2020

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Jul. 27, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2020
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		38,800,936
Entity Registrant Name	INSPERITY, INC.
Entity Central Index Key	0001000753
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
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	Jun. 30, 2020	Dec. 31, 2019
Assets
Cash and cash equivalents	$ 459,399	$ 367,342
Restricted cash	45,216	49,295
Marketable securities	31,952	34,728
Accounts receivable, net	473,935	465,779
Prepaid insurance	23,494	10,418
Other current assets	34,651	43,493
Income taxes receivable	0	3,691
Total current assets	1,068,647	974,746
Property and equipment, net of accumulated depreciation	177,762	147,706
Right-of-use leased assets	57,421	56,886
Prepaid health insurance	9,000	9,000
Deposits – health insurance	8,100	8,100
Deposits – workers’ compensation	177,944	175,913
Goodwill and other intangible assets, net	12,708	12,714
Deferred income taxes, net	0	3,956
Other assets	6,151	5,975
Total assets	1,517,733	1,394,996
Current liabilities:
Accounts payable	2,885	4,565
Payroll taxes and other payroll deductions payable	219,492	277,248
Accrued worksite employee payroll cost	409,068	401,859
Accrued health insurance costs	29,714	21,180
Accrued workers’ compensation costs	48,618	52,868
Accrued corporate payroll and commissions	41,507	52,612
Other accrued liabilities	60,742	58,713
Income taxes payable	28,537	0
Total current liabilities	840,563	869,045
Noncurrent liabilities:
Accrued workers’ compensation costs	197,501	193,609
Long-term debt	369,400	269,400
Operating lease liabilities, net of current	60,815	58,863
Deferred income taxes, net	712	0
Other accrued liabilities, net of current	4,104	0
Total noncurrent liabilities	632,532	521,872
Commitments and contingencies	0	0
Stockholders’ equity:
Common stock	555	555
Additional paid-in capital	54,783	48,141
Treasury stock, at cost	(592,313)	(544,102)
Retained earnings	581,613	499,485
Total stockholders’ equity	44,638	4,079
Total liabilities and stockholders’ equity	$ 1,517,733	$ 1,394,996

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Income Statement [Abstract]
Revenues(1)	$ 993,366	$ 1,043,316	$ 2,222,849	$ 2,196,326
Payroll taxes, benefits and workers’ compensation costs	773,117	869,581	1,768,578	1,795,874
Gross profit	220,249	173,735	454,271	400,452
Salaries, wages and payroll taxes	90,710	74,696	177,211	158,076
Stock-based compensation	10,694	8,256	17,246	14,296
Commissions	7,475	7,741	15,935	14,693
Advertising	5,720	7,548	10,553	12,579
General and administrative expenses	24,755	29,866	59,608	63,028
Depreciation and amortization	7,908	6,908	15,510	13,599
Total operating expenses	147,262	135,015	296,063	276,271
Operating income	72,987	38,720	158,208	124,181
Other income (expense):
Interest income	369	2,802	2,248	6,047
Interest expense	(2,219)	(1,639)	(4,581)	(3,320)
Income before income tax expense	71,137	39,883	155,875	126,908
Income tax expense	19,286	11,327	41,932	22,063
Net income	51,851	28,556	113,943	104,845
Less distributed and undistributed earnings allocated to participating securities	(276)	(309)	(724)	(1,183)
Net income allocated to common shares	$ 51,575	$ 28,247	$ 113,219	$ 103,662
Basic net income per share of common stock (in dollars per share)	$ 1.34	$ 0.69	$ 2.93	$ 2.55
Diluted net income per share of common stock (in dollars per share)	$ 1.33	$ 0.69	$ 2.91	$ 2.54
Revenue Composition [Abstract]
Gross billings	$ 6,355,683	$ 6,377,014	$ 13,792,437	$ 13,248,684
Worksite employee payroll cost	5,362,317	5,333,698	11,569,588	11,052,358
Revenues(1)	$ 993,366	$ 1,043,316	$ 2,222,849	$ 2,196,326

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities
Net income	$ 113,943	$ 104,845
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,510	13,599
Stock-based compensation	17,246	14,296
Deferred income taxes	4,668	8,260
Changes in operating assets and liabilities:
Accounts receivable	(8,156)	(23,512)
Prepaid insurance	(13,076)	(16,058)
Other current assets	8,842	(2,073)
Other assets and ROU assets	6,979	(2,033)
Accounts payable	(1,680)	(4,074)
Payroll taxes and other payroll deductions payable	(57,756)	(16,472)
Accrued worksite employee payroll expense	7,209	43,553
Accrued health insurance costs	8,534	(14,777)
Accrued workers’ compensation costs	(357)	2,133
Accrued corporate payroll, commissions and other accrued liabilities	(19,273)	(22,878)
Income taxes payable/receivable	32,228	(12,381)
Total adjustments	918	(32,417)
Net cash provided by operating activities	114,861	72,428
Marketable securities:
Purchases	(25,438)	(60,609)
Proceeds from dispositions	484	5,499
Proceeds from maturities	27,625	55,110
Property and equipment:
Purchases	(39,466)	(17,207)
Net cash used in investing activities	(36,795)	(17,207)
Cash flows from financing activities:
Purchase of treasury stock	(61,230)	(38,796)
Dividends paid	(31,074)	(24,740)
Borrowings under revolving line of credit	100,000	25,000
Other	(4,247)	(3,763)
Net cash provided by (used in) financing activities	11,943	(34,773)
Net increase in cash, cash equivalents and restricted cash	90,009	20,448
Cash, cash equivalents and restricted cash beginning of period	592,550	535,474
Cash, cash equivalents and restricted cash end of period	682,559	555,922
Supplemental Cash Flow Information [Abstract]
Cash and cash equivalents	459,399	324,926
Restricted cash	45,216	43,268
Deposits workers compensation	177,944	187,728
ROU assets obtained in exchange for lease obligations	$ 10,196	$ 11,894

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, 2018	$ 77,676	$ 555	$ 36,752	$ (357,569)	$ 397,938
Balance (shares) at Dec. 31, 2018		55,489
Purchase of treasury stock, at cost	(38,796)	$ 0	0	(38,796)	0
Issuance of long-term incentive awards and dividend equivalents	0	0	(7,695)	8,646	(951)
Stock-based compensation expense	14,296	0	10,776	3,520	0
Other	1,545	0	1,176	369	0
Dividends paid	(24,740)	0	0	0	(24,740)
Unrealized gain (loss) on marketable securities, net of tax	63	0	0	0	63
Net income	104,845	0	0	0	104,845
Balance at Jun. 30, 2019	134,889	$ 555	41,009	(383,830)	477,155
Balance (shares) at Jun. 30, 2019		55,489
Balance at Mar. 31, 2019	119,194	$ 555	33,833	(376,097)	460,903
Balance (shares) at Mar. 31, 2019		55,489
Purchase of treasury stock, at cost	(9,759)	$ 0	0	(9,759)	0
Stock-based compensation expense	8,256	0	6,436	1,820	0
Other	946	0	740	206	0
Dividends paid	(12,354)	0	0	0	(12,354)
Unrealized gain (loss) on marketable securities, net of tax	50	0	0	0	50
Net income	28,556	0	0	0	28,556
Balance at Jun. 30, 2019	134,889	$ 555	41,009	(383,830)	477,155
Balance (shares) at Jun. 30, 2019		55,489
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	(61,230)	$ 0	0	(61,230)	0
Issuance of long-term incentive awards and dividend equivalents	0	0	(7,088)	7,898	(810)
Stock-based compensation expense	17,246	0	13,341	3,905	0
Other	1,605	0	389	1,216	0
Dividends paid	(31,074)	0	0	0	(31,074)
Unrealized gain (loss) on marketable securities, net of tax	69	0	0	0	69
Net income	113,943	0	0	0	113,943
Balance at Jun. 30, 2020	44,638	$ 555	54,783	(592,313)	581,613
Balance (shares) at Jun. 30, 2020		55,489
Balance at Mar. 31, 2020	(3,310)	$ 555	46,327	(595,487)	545,295
Balance (shares) at Mar. 31, 2020		55,489
Purchase of treasury stock, at cost	(27)	$ 0	0	(27)	0
Stock-based compensation expense	10,694	0	8,448	2,246	0
Other	963	0	8	955	0
Dividends paid	(15,517)	0	0	0	(15,517)
Unrealized gain (loss) on marketable securities, net of tax	(16)	0	0	0	(16)
Net income	51,851	0	0	0	51,851
Balance at Jun. 30, 2020	$ 44,638	$ 555	$ 54,783	$ (592,313)	$ 581,613
Balance (shares) at Jun. 30, 2020		55,489

XML

Basis of Presentation (Notes)

6 Months Ended

Jun. 30, 2020

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 Synchronization^TM 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 Premier^TM platform.

In addition to our PEO HR Outsourcing solutions, we also 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 Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Expense Management Services, 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, 2019. Our Condensed Consolidated Balance Sheet at December 31, 2019 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 June 30, 2020 and our Consolidated Statements of Operations for the three and six month periods ended June 30, 2020 and 2019, our Consolidated Statements of Cash Flows for the six month periods ended June 30, 2020 and 2019 and our Consolidated Statements of Stockholders’ Equity for the six month periods ended June 30, 2020 and 2019, 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.

XML

Accounting Policies (Notes)

6 Months Ended

Jun. 30, 2020

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 June 30, 2020, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets. As of June 30, 2020, Plan Costs were less than the net premiums paid and owed to United by $19.5 million. As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $10.5 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 June 30, 2020 were $23.4 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 six months of 2020 included a reduction of $3.0 million for changes in estimated run-off related to prior periods. Our benefits costs incurred in the first six months of 2019 included a charge of $3.5 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 six months ended June 30, 2020 and 2019, we reduced accrued workers’ compensation costs by $22.2 million and $19.0 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 2020 period was 0.8% and in the 2019 period was 2.3%) 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:

	Six Months Ended June 30,
(in thousands)	2020		2019
Beginning balance, January 1,	$	242,904	$	229,639
Accrued claims	21,888		27,299
Present value discount, net of accretion	223		(2,703)
Paid claims	(22,298)		(22,727)
Ending balance	$	242,717	$	231,508
Current portion of accrued claims	$	45,216	$	43,267
Long-term portion of accrued claims	197,501		188,241
Total accrued claims	$	242,717	$	231,508

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at June 30, 2020 includes $3.4 million of workers’ compensation administrative fees.

As of June 30, 2020 and 2019, the undiscounted accrued workers’ compensation costs were $261.4 million and $250.9 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. During the first six months of 2020, we received $24.8 million for the return of excess claim funds related to the workers’ compensation program, which resulted in a net decrease to deposits – workers’ compensation. During the first six months of 2019, we funded a collateral deposit of $6.4 million for policy years prior to 2017, which increased deposits – workers’ compensation. At June 30, 2020, we had restricted cash of $45.2 million and deposits – workers’ compensation of $177.9 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 $463.1 million and $448.1 million at June 30, 2020 and December 31, 2019, 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 June 30,						Six Months Ended June 30,
(in thousands)	2020		2019		% Change		2020		2019		% Change
Northeast	$	273,543	$	270,475	1.1	%	$	617,401	$	581,422	6.2	%
Southeast	117,013		120,148		(2.6)	%	258,175		250,054		3.2	%
Central	177,022		179,443		(1.3)	%	388,314		375,196		3.5	%
Southwest	222,734		244,462		(8.9)	%	494,658		514,294		(3.8)	%
West	192,310		215,639		(10.8)	%	439,121		448,842		(2.2)	%
	982,622		1,030,167		(4.6)	%	2,197,669		2,169,808		1.3	%
Other revenue	10,744		13,149		(18.3)	%	25,180		26,518		(5.0)	%
Total revenue	$	993,366	$	1,043,316	(4.8)	%	$	2,222,849	$	2,196,326	1.2	%

Recently Adopted Accounting Standards

We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) effective January 1, 2020 with no material impact. Under this standard, we estimate our reserves using information about past events, current conditions and risk characteristics of our customer when assessing risk associated with the collectability of accounts receivables, including unbilled accounts receivables. We require clients to pay invoices for service fees not later than the same day as the applicable payroll date. As such, we generally do not require collateral. As of June 30, 2020, allowance for bad debts was immaterial.

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Cash, Cash Equivalents and Marketable Securities (Notes)

6 Months Ended

Jun. 30, 2020

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:

	June 30, 2020						December 31, 2019
(in thousands)	Cash & Cash Equivalents		Marketable Securities		Total		Cash & Cash Equivalents		Marketable Securities		Total
Overnight holdings	$	398,668	$	—	$	398,668	$	349,857	$	—	$	349,857
Investment holdings	43,278		31,952		75,230		13,218		34,728		47,946
Cash in demand accounts	29,378		—		29,378		36,521		—		36,521
Outstanding checks	(11,925)		—		(11,925)		(32,254)		—		(32,254)
Total	$	459,399	$	31,952	$	491,351	$	367,342	$	34,728	$	402,070

Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles. Our cash, cash equivalents and marketable securities at June 30, 2020 and December 31, 2019 included $190.9 million and $234.6 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $31.5 million and $59.6 million, respectively, in client prepayments.

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Fair Value Measurements Fair Value Measurements (Notes)

6 Months Ended

Jun. 30, 2020

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:

	June 30, 2020						December 31, 2019
(in thousands)	Total		Level 1		Level 2		Total		Level 1		Level 2
Money market funds	$	439,496	$	439,496	$	—	$	363,075	$	363,075	$	—
U.S. Treasury bills	11,197		11,197		—		34,728		34,728		—
Municipal bonds	23,205		—		23,205		—		—		—
Total	$	473,898	$	450,693	$	23,205	$	397,803	$	397,803	$	—

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
June 30, 2020
U.S. Treasury bills	$	11,170	$	27	$	—	$	11,197
Municipal bonds	20,700		56		(1)		20,755
Total	$	31,870	$	83	$	(1)	$	31,952
December 31, 2019
U.S. Treasury bills	$	34,716	$	13	$	(1)	$	34,728
Total	$	34,716	$	13	$	(1)	$	34,728

As of June 30, 2020, the contractual maturities of our marketable securities were as follows:

(in thousands)	Amortized Cost		Estimated Fair Value
Less than one year	$	31,870	$	31,952
One to five years	—		—
Total	$	31,870	$	31,952

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 June 30, 2020, 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)

6 Months Ended

Jun. 30, 2020

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 June 30, 2020, 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 six month period ended June 30, 2020 was 2.82%. 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 June 30, 2020.

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Stockholders' Equity (Notes)

6 Months Ended

Jun. 30, 2020

Stockholders' Equity Note [Abstract]

Stockholders Equity

6. Stockholders' Equity

During the first six months of 2020, we repurchased or withheld an aggregate of 878,884 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 are to 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 six months ended June 30, 2020, 728,000 shares were repurchased under the Repurchase Program. As of June 30, 2020, we were authorized to repurchase an additional 685,833 shares under the Repurchase Program.

Withheld Shares

During the six months ended June 30, 2020, we withheld 150,884 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)	2020		2019
First quarter	$	0.40	$	0.30
Second quarter	0.40		0.30

During the six months ended June 30, 2020 and 2019, we paid dividends totaling $31.1 million and $24.7 million, respectively.

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 entitles the registered holder to purchase from us a unit consisting of one one-hundredth of a share (a “Fractional Share”) of Series A Junior Participating Preferred Stock, par value $0.01 per share, at a purchase price of $255.00 per Fractional Share, subject to adjustment. Initially, the Rights are attached to all outstanding shares of our common stock. The Rights will be separate from our common stock and a “Distribution Date” will occur, with certain exceptions, upon the earlier of (i) ten days following a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has acquired, or obtained the right to acquire, beneficial ownership of 10% (or 20% in the case of a “13G Investor,” as defined in the Rights Plan) or more of the outstanding shares of our common stock, or (ii) ten business days following the commencement of a tender offer or exchange offer that would result in a person’s becoming an Acquiring Person. The Rights are not exercisable until the Distribution Date and will expire at the close of business on May 20, 2021, unless earlier redeemed or exchanged by us. If the rights become exercisable, each holder other than the Acquiring Person (and certain related parties) will be entitled to acquire shares of our common stock at a 50% discount or we may exchange each right held by such holders for one share of common stock.

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incentive Plans Incentive Plans (Notes)

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

7. Incentive Plans

The Insperity, Inc. 2001 Incentive Plan, as amended, and the 2012 Incentive Plan, as amended (collectively, the “Incentive Plans”) provide for options and other stock-based awards that have been and may be granted to our eligible employees and non-employee directors. The 2012 Incentive Plan is currently the only plan under which new stock-based awards may be granted. Beginning with stock-based awards granted in 2020, employees who attain a minimum of age 62 and have provided 15 years or more of continuous service may continue to vest in awards following a qualifying retirement as defined under the 2012 Incentive Plan, as though he or she were still an employee, provided the grant date of the award is six months or more before the employees last day of employment. For a termination following a qualifying retirement, time-vested awards will continue to vest in the normal course. For a termination following a qualifying retirement, performance-based awards with completed or in-process performance periods are adjusted for achievement of the performance criteria, prorated through the date of termination and paid in the normal course, while performance-based awards for performance periods that have not started are forfeited. Stock-based compensation expense related to time-vested and performance-based awards is accelerated for employees who meet the requirements for continued vesting.

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Net Income Per Share (Notes)

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Net Income per Share

8. 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 June 30,				Six Months Ended June 30,
(in thousands)	2020		2019		2020		2019
Net income	$	51,851	$	28,556	$	113,943	$	104,845
Less distributed and undistributed earnings allocated to participating securities	(276)		(309)		(724)		(1,183)
Net income allocated to common shares	$	51,575	$	28,247	$	113,219	$	103,662
Weighted average common shares outstanding	38,567		40,771		38,684		40,640
Incremental shares from assumed time-vested and performance-based RSU awards and conversions of common stock options	79		145		173		140
Adjusted weighted average common shares outstanding	38,646		40,916		38,857		40,780

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Commitments and Contingencies (Notes)

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

9. 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 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 alleges 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, and we are now awaiting judgment from the court. We believe we presented meritorious defenses, and we intend to continue to vigorously defend this litigation in the post-trial proceedings. As a result of uncertainty regarding the outcome of this matter, no provision has been made in the accompanying Consolidated Financial Statements.

Securities Class Action Lawsuit

In July 2020, the Building Trades Pension Fund of Western Pennsylvania, individually and on behalf of all others similarly situated, filed a federal securities class action against us and certain officers in the United States District Court for the Southern District of New York. The complaint alleges that we made materially false and misleading statements regarding our business and operations in violation of the federal securities laws and seeks unspecified damages, the payment of reasonable attorneys’ fees, expert fees and other costs, and such other relief that may be deemed proper. We believe these allegations 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)

6 Months Ended

Jun. 30, 2020

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 June 30, 2020, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets. As of June 30, 2020, Plan Costs were less than the net premiums paid and owed to United by $19.5 million. As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $10.5 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 June 30, 2020 were $23.4 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 six months of 2020 included a reduction of $3.0 million for changes in estimated run-off related to prior periods. Our benefits costs incurred in the first six months of 2019 included a charge of $3.5 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 six months ended June 30, 2020 and 2019, we reduced accrued workers’ compensation costs by $22.2 million and $19.0 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 2020 period was 0.8% and in the 2019 period was 2.3%) 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:

	Six Months Ended June 30,
(in thousands)	2020		2019
Beginning balance, January 1,	$	242,904	$	229,639
Accrued claims	21,888		27,299
Present value discount, net of accretion	223		(2,703)
Paid claims	(22,298)		(22,727)
Ending balance	$	242,717	$	231,508
Current portion of accrued claims	$	45,216	$	43,267
Long-term portion of accrued claims	197,501		188,241
Total accrued claims	$	242,717	$	231,508

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at June 30, 2020 includes $3.4 million of workers’ compensation administrative fees.

As of June 30, 2020 and 2019, the undiscounted accrued workers’ compensation costs were $261.4 million and $250.9 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. During the first six months of 2020, we received $24.8 million for the return of excess claim funds related to the workers’ compensation program, which resulted in a net decrease to deposits – workers’ compensation. During the first six months of 2019, we funded a collateral deposit of $6.4 million for policy years prior to 2017, which increased deposits – workers’ compensation. At June 30, 2020, we had restricted cash of $45.2 million and deposits – workers’ compensation of $177.9 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 $463.1 million and $448.1 million at June 30, 2020 and December 31, 2019, 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 June 30,						Six Months Ended June 30,
(in thousands)	2020		2019		% Change		2020		2019		% Change
Northeast	$	273,543	$	270,475	1.1	%	$	617,401	$	581,422	6.2	%
Southeast	117,013		120,148		(2.6)	%	258,175		250,054		3.2	%
Central	177,022		179,443		(1.3)	%	388,314		375,196		3.5	%
Southwest	222,734		244,462		(8.9)	%	494,658		514,294		(3.8)	%
West	192,310		215,639		(10.8)	%	439,121		448,842		(2.2)	%
	982,622		1,030,167		(4.6)	%	2,197,669		2,169,808		1.3	%
Other revenue	10,744		13,149		(18.3)	%	25,180		26,518		(5.0)	%
Total revenue	$	993,366	$	1,043,316	(4.8)	%	$	2,222,849	$	2,196,326	1.2	%

Recently Adopted Accounting Standards

We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) effective January 1, 2020 with no material impact. Under this standard, we estimate our reserves using information about past events, current conditions and risk characteristics of our customer when assessing risk associated with the collectability of accounts receivables, including unbilled accounts receivables. We require clients to pay invoices for service fees not later than the same day as the applicable payroll date. As such, we generally do not require collateral. As of June 30, 2020, allowance for bad debts was immaterial.

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Fair Value Measurements Fair Vlue Measurements (Policies)

6 Months Ended

Jun. 30, 2020

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)

6 Months Ended

Jun. 30, 2020

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:

	Six Months Ended June 30,
(in thousands)	2020		2019
Beginning balance, January 1,	$	242,904	$	229,639
Accrued claims	21,888		27,299
Present value discount, net of accretion	223		(2,703)
Paid claims	(22,298)		(22,727)
Ending balance	$	242,717	$	231,508
Current portion of accrued claims	$	45,216	$	43,267
Long-term portion of accrued claims	197,501		188,241
Total accrued claims	$	242,717	$	231,508

Disaggregation of Revenue [Table Text Block]

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 June 30,						Six Months Ended June 30,
(in thousands)	2020		2019		% Change		2020		2019		% Change
Northeast	$	273,543	$	270,475	1.1	%	$	617,401	$	581,422	6.2	%
Southeast	117,013		120,148		(2.6)	%	258,175		250,054		3.2	%
Central	177,022		179,443		(1.3)	%	388,314		375,196		3.5	%
Southwest	222,734		244,462		(8.9)	%	494,658		514,294		(3.8)	%
West	192,310		215,639		(10.8)	%	439,121		448,842		(2.2)	%
	982,622		1,030,167		(4.6)	%	2,197,669		2,169,808		1.3	%
Other revenue	10,744		13,149		(18.3)	%	25,180		26,518		(5.0)	%
Total revenue	$	993,366	$	1,043,316	(4.8)	%	$	2,222,849	$	2,196,326	1.2	%

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Cash, Cash Equivalents and Marketable Securities (Tables)

6 Months Ended

Jun. 30, 2020

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:

	June 30, 2020						December 31, 2019
(in thousands)	Cash & Cash Equivalents		Marketable Securities		Total		Cash & Cash Equivalents		Marketable Securities		Total
Overnight holdings	$	398,668	$	—	$	398,668	$	349,857	$	—	$	349,857
Investment holdings	43,278		31,952		75,230		13,218		34,728		47,946
Cash in demand accounts	29,378		—		29,378		36,521		—		36,521
Outstanding checks	(11,925)		—		(11,925)		(32,254)		—		(32,254)
Total	$	459,399	$	31,952	$	491,351	$	367,342	$	34,728	$	402,070

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Fair Value Measurements Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2020

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:

	June 30, 2020						December 31, 2019
(in thousands)	Total		Level 1		Level 2		Total		Level 1		Level 2
Money market funds	$	439,496	$	439,496	$	—	$	363,075	$	363,075	$	—
U.S. Treasury bills	11,197		11,197		—		34,728		34,728		—
Municipal bonds	23,205		—		23,205		—		—		—
Total	$	473,898	$	450,693	$	23,205	$	397,803	$	397,803	$	—

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
June 30, 2020
U.S. Treasury bills	$	11,170	$	27	$	—	$	11,197
Municipal bonds	20,700		56		(1)		20,755
Total	$	31,870	$	83	$	(1)	$	31,952
December 31, 2019
U.S. Treasury bills	$	34,716	$	13	$	(1)	$	34,728
Total	$	34,716	$	13	$	(1)	$	34,728

Investments Classified by Contractual Maturity Date [Table Text Block]

As of June 30, 2020, the contractual maturities of our marketable securities were as follows:

(in thousands)	Amortized Cost		Estimated Fair Value
Less than one year	$	31,870	$	31,952
One to five years	—		—
Total	$	31,870	$	31,952

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Stockholders' Equity Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2020

Stockholders' Equity Attributable to Parent [Abstract]

Quarterly dividends declared [Table Text Block]

The Board declared quarterly dividends as follows:

(amounts per share)	2020		2019
First quarter	$	0.40	$	0.30
Second quarter	0.40		0.30

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Net Income per Share (Tables)

6 Months Ended

Jun. 30, 2020

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 June 30,				Six Months Ended June 30,
(in thousands)	2020		2019		2020		2019
Net income	$	51,851	$	28,556	$	113,943	$	104,845
Less distributed and undistributed earnings allocated to participating securities	(276)		(309)		(724)		(1,183)
Net income allocated to common shares	$	51,575	$	28,247	$	113,219	$	103,662
Weighted average common shares outstanding	38,567		40,771		38,684		40,640
Incremental shares from assumed time-vested and performance-based RSU awards and conversions of common stock options	79		145		173		140
Adjusted weighted average common shares outstanding	38,646		40,916		38,857		40,780

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Accounting Policies (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019	Oct. 01, 2019	Dec. 31, 2018
Health Insurance Costs [Abstract]
Percentage of our health insurance coverage provided by United	87.00%		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	$ 9,000,000.0		$ 9,000,000.0		$ 9,000,000
Required deposit equal to approximately one day of claims funding activity	6,500,000		6,500,000
Amount which plan costs were less than the net premiums paid and owed	19,500,000		19,500,000
Prepaid health insurance, current	10,500,000		10,500,000
Premiums owed to United	23,400,000		23,400,000
Benefits costs incurred (reduced) related to run-off	3,000,000.0	$ (3,500,000)	3,000,000.0	$ (3,500,000)
Workers' Compensation Costs [Abstract]
Company's maximum economic burden for the first layer of claims per occurrence	1,000,000		1,000,000			$ 1,500,000
Company's maximum aggregate economic burden for claims in excess of 1 million per policy year	6,000,000		6,000,000			$ 6,000,000
Decrease Increase in accrued workers' compensation costs for changes in estimated losses			$ 22,200,000	$ 19,000,000.0
U.S. Treasury rates that correspond with the weighted average estimated claim payout period (in hundredths)			0.80%	2.30%
Incurred but not paid workers compensation liabilities [Abstract]
Liability for Unpaid Claims and Claims Adjustment Expense, Adjustments					242,904,000		$ 229,639,000
Workers' Compensation Expense			$ 21,888,000	$ 27,299,000
Present value discount, net of accretion			223,000	(2,703,000)
Paid claims			(22,298,000)	(22,727,000)
WorkersCompensationLiabilityNetOfAdminFeesCurrent	45,216,000	43,267,000	45,216,000	43,267,000
Long-term portion of accrued claims	197,501,000	188,241,000	197,501,000	188,241,000	193,609,000
Ending balance	242,717,000	231,508,000	242,717,000	231,508,000
Workers compensation administrative fees accrued	3,400,000		3,400,000
Undiscounted accrued workers' compensation costs			$ 261,400,000	250,900,000
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	45,216,000	43,268,000	$ 45,216,000	43,268,000	49,295,000		42,227,000
Deposits workers compensation	177,944,000	187,728,000	$ 177,944,000	187,728,000	175,913,000		$ 166,474,000
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
ReturnofExcessClaimFunds			$ 24,800,000
Revenue from Contract with Customer [Abstract]
Unbilled	463,100,000		463,100,000		$ 448,100,000
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	993,366,000	1,043,316,000	2,222,849,000	2,196,326,000
Northeast [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	273,543,000	270,475,000	617,401,000	581,422,000
Southeast [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	117,013,000	120,148,000	258,175,000	250,054,000
Central [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	177,022,000	179,443,000	388,314,000	375,196,000
Southwest [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	222,734,000	244,462,000	494,658,000	514,294,000
West [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	192,310,000	215,639,000	439,121,000	448,842,000
Other Revenues [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 10,744,000	$ 13,149,000	$ 25,180,000	$ 26,518,000

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Cash, Cash Equivalents and Marketable Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Cash and Cash Equivalents [Line Items]
Overnight Holdings	$ 398,668	$ 349,857
Short-term Investments	75,230	47,946
Cash	29,378	36,521
Drafts Payable	(11,925)	(32,254)
Cash, Cash Equivalents, and Short-term Investments	491,351	402,070
Payroll Withholdings Included in Cash Balance	190,900	234,600
Client Prepayments Included in Cash Balance	(31,500)	(59,600)
Money Market Funds [Member]
Cash and Cash Equivalents [Line Items]
Overnight Holdings	0	0
Short-term Investments	31,952	34,728
Cash	0	0
Drafts Payable	0	0
Cash, Cash Equivalents, and Short-term Investments	31,952	34,728
Cash and Cash Equivalents [Member]
Cash and Cash Equivalents [Line Items]
Overnight Holdings	398,668	349,857
Short-term Investments	43,278	13,218
Cash	29,378	36,521
Drafts Payable	(11,925)	(32,254)
Cash, Cash Equivalents, and Short-term Investments	$ 459,399	$ 367,342

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Fair Value Measurements Fair Value Measurements (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	$ 439,496	$ 363,075
US Government Securities, at Carrying Value	11,197	34,728
Municipal bonds	23,205	0
Total	473,898	397,803
Available-for-sale Securities, Amortized Cost Basis	31,870	34,716
Available-for-sale Securities, Gross Unrealized Gain	83	13
Available-for-sale Securities, Gross Unrealized Loss	(1)	(1)
Available-for-sale Securities	31,952	34,728
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	31,870
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	31,952
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	11,170	34,716
Available-for-sale Securities, Gross Unrealized Gain	27	13
Available-for-sale Securities, Gross Unrealized Loss	0	(1)
Available-for-sale Securities	11,197	34,728
Municipal Bond [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Amortized Cost Basis	20,700
Available-for-sale Securities, Gross Unrealized Gain	56
Available-for-sale Securities, Gross Unrealized Loss	(1)
Available-for-sale Securities	20,755
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	439,496	363,075
US Government Securities, at Carrying Value	11,197	34,728
Municipal bonds	0	0
Total	450,693	397,803
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	23,205	0
Total	$ 23,205	$ 0

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Long-term Debt (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
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	$ 269,400
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	2.82%
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		6 Months Ended
	Jun. 30, 2020 $ / shares shares	Jun. 30, 2019 $ / shares	Jun. 30, 2020 USD ($) conversionRatio $ / shares shares	Jun. 30, 2019 USD ($)
Stockholders' Equity Note [Abstract]
Aggregate number of shares repurchased during the period (in shares)			878,884
Shares repurchased under the program (in shares)			728,000
Authorized to repurchased additional shares under repurchase program (in shares)	685,833		685,833
Shares withheld for tax withholding obligations for the vesting of restricted stock awards (in shares)			150,884
Dividends declared per share of common stock (in dollars per share) | $ / shares	$ 0.40	$ 0.30
Payments of Ordinary Dividends, Common Stock | $			$ (31,074)	$ (24,740)
Warrants and Rights Note Disclosure [Abstract]
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares	$ 255.00		$ 255.00
ClassOfWarrantRightConversionRatioOfWarrantorRightsToShareOfStock | conversionRatio			0.010
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right	1.00		1.00
StockPurchaseRightExercisableUponIndividualStockOwnershipPercentage			10.00%
StockPurchaseRightExercisableUponIndividualStockOwnershipPercentage13GInvestor			20.00%
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 entitles the registered holder to purchase from us a unit consisting of one one-hundredth of a share (a “Fractional Share”) of Series A Junior Participating Preferred Stock, par value $0.01 per share, at a purchase price of $255.00 per Fractional Share, subject to adjustment. Initially, the Rights are attached to all outstanding shares of our common stock. The Rights will be separate from our common stock and a “Distribution Date” will occur, with certain exceptions, upon the earlier of (i) ten days following a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has acquired, or obtained the right to acquire, beneficial ownership of 10% (or 20% in the case of a “13G Investor,” as defined in the Rights Plan) or more of the outstanding shares of our common stock, or (ii) ten business days following the commencement of a tender offer or exchange offer that would result in a person’s becoming an Acquiring Person. The Rights are not exercisable until the Distribution Date and will expire at the close of business on May 20, 2021, unless earlier redeemed or exchanged by us. If the rights become exercisable, each holder other than the Acquiring Person (and certain related parties) will be entitled to acquire shares of our common stock at a 50% discount or we may exchange each right held by such holders for one share of common stock.
Warrants and Rights Outstanding, Maturity Date	May 20, 2021		May 20, 2021

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Net Income per Share (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings Per Share [Abstract]
Net income	$ 51,851	$ 28,556	$ 113,943	$ 104,845
Less distributed and undistributed earnings allocated to participating securities	276	309	724	1,183
Net Income (Loss) Available to Common Stockholders, Basic	$ 51,575	$ 28,247	$ 113,219	$ 103,662
Weighted average common shares outstanding basic (in shares)	38,567	40,771	38,684	40,640
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements	79	145	173	140
Weighted Average Number of Shares Outstanding, Diluted	38,646	40,916	38,857	40,780

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Commitments and Contingencies Commitments and Contingencies (Details)	6 Months Ended
	Jun. 30, 2020 USD ($)
Commitments and Contingencies Disclosure (Details) [Abstract]
Loss Contingency, Damages Sought	$ 146,000,000
Loss Contingency Accrual, Provision	$ 0