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What changed in INSPERITY, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of INSPERITY, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+225 added−231 removedSource: 10-K (2025-02-11) vs 10-K (2024-02-09)

Top changes in INSPERITY, INC.'s 2024 10-K

225 paragraphs added · 231 removed · 208 edited across 10 sections

Item 1. Business

Business — how the company describes what it does

79 edited+5 added−7 removed159 unchanged
Biggest changeWe offer numerous programs and benefits in furtherance of our human capital management objective, including: competitive compensation and benefits; corporate 401(k) retirement plan with a matching component; employee stock purchase program; leadership development programs; the Insperity MVP (Mission Values Performance) employee recognition program; flexible remote working arrangements; and employee benevolence programs to provide additional assistance to corporate employees in times of need. 17 2023 Form 10-K BUSINESS We monitor and evaluate the effectiveness of our human capital management efforts by seeking formal and informal feedback from our corporate employees, including periodic surveys of our corporate employees to obtain their opinions on key topics.
Biggest changeWe refer to BPAs who have been employed for two months and completed initial sales training as “trained BPAs.” During 2024 and 2023, the average number of BPAs were 769 and 748, respectively, while the average number of trained BPAs were 698 and 685, respectively. 16 2024 Form 10-K BUSINESS We offer numerous programs and benefits in furtherance of our human capital management objective, including: competitive compensation and benefits; corporate 401(k) retirement plan with a matching component; employee stock purchase program; leadership development programs; the Insperity MVP (Mission Values Performance) employee recognition program; flexible remote working arrangements; and employee well-being programs to provide additional assistance to corporate employees in times of need.
Although we are ultimately liable, as the employer for payroll purposes, to pay employees for work previously performed, we retain the ability to terminate immediately the CSA and associated WSEEs or to require prepayment, letters of credit, or other collateral upon deterioration in a client’s financial condition or upon non-payment by a client.
Although we are ultimately liable, as the employer for payroll purposes, to pay employees for work previously performed, we retain the ability to immediately terminate the CSA and associated WSEEs or to require prepayment, letters of credit, or other collateral upon deterioration in a client’s financial condition or upon non-payment by a client.
The specific division of applicable responsibilities under our CSAs generally is as follows: Insperity Responsibilities • Payment of wages and salaries as reported by the client and related tax reporting and remittance (local, state and federal withholding, FICA, FUTA, state unemployment) • Workers’ compensation compliance, procurement, management and reporting • Compliance with the Code, COBRA, ERISA and PPACA for Insperity-sponsored employee benefit plans, as well as monitoring changes in other governmental laws and regulations governing the employer/employee relationship and updating the client when necessary • Offering benefits under Insperity-sponsored employee benefit plans • Administration of Insperity-sponsored employee benefit plans Client Responsibilities • Payment, through Insperity, of commissions, bonuses, vacations, paid time off, sick pay, paid leaves of absence, and severance payments • Payment and related tax reporting and remittance of non-qualified deferred compensation and equity-based compensation • Products produced and/or services provided • Compliance with OSHA regulations, EPA regulations, FLSA, FMLA, WARN, USERRA, and state and local equivalents and compliance with government contracting provisions • Compliance with federal, state, and local pay or play health care mandates and all such other similar federal, state and local legislation • Compliance with the National Labor Relations Act (“NLRA”), including all organizing efforts and expenses related to a collective bargaining agreement and related benefits • Professional licensing requirements, fidelity bonding, and professional liability insurance • Ownership and protection of all client intellectual property rights • Compliance with the Code, COBRA, PPACA, and ERISA for client-sponsored employee benefit plans • For clients electing payroll tax deferrals and claiming tax credits under the FFCRA, the CARES Act, PPP, CAA, and ARPA (collectively, the “COVID Relief Programs”), the client has sole responsibility for determining eligibility under the programs and depositing deferred payroll tax amounts with the U.S.
The specific division of applicable responsibilities under our CSAs generally is as follows: Insperity Responsibilities • Payment of wages and salaries as reported by the client and related tax reporting and remittance (local, state and federal withholding, FICA, FUTA, state unemployment) • Workers’ compensation compliance, procurement, management and reporting • Compliance with the Code, COBRA, ERISA and PPACA for Insperity-sponsored employee benefit plans, as well as monitoring changes in other governmental laws and regulations governing the employer/employee relationship and updating the client when necessary • Offering benefits under Insperity-sponsored employee benefit plans • Administration of Insperity-sponsored employee benefit plans Client Responsibilities • Payment, through Insperity, of commissions, bonuses, vacations, paid time off, sick pay, paid leaves of absence, and severance payments • Payment and related tax reporting and remittance of non-qualified deferred compensation and equity-based compensation • Products produced and/or services provided • Compliance with OSHA regulations, EPA regulations, FLSA, FMLA, WARN, USERRA, and state and local equivalents and compliance with government contracting provisions • Compliance with federal, state, and local pay-or-play health care mandates and all such other similar federal, state and local legislation • Compliance with the National Labor Relations Act, including all organizing efforts and expenses related to a collective bargaining agreement and related benefits • Professional licensing requirements, fidelity bonding, and professional liability insurance • Ownership and protection of all client intellectual property rights • Compliance with the Code, COBRA, PPACA, and ERISA for client-sponsored employee benefit plans • For clients electing payroll tax deferrals and claiming tax credits under the FFCRA, the CARES Act, PPP, CAA, and ARPA (collectively, the “COVID Relief Programs”), the client has sole responsibility for determining eligibility under the programs and depositing deferred payroll tax amounts with the U.S.
Among the employment-related laws and regulations that may affect a client are the following: 4 2023 Form 10-K BUSINESS • Internal Revenue Code (the “Code”) • Occupational Safety and Health Act (OSHA) • Federal Income Contribution Act (FICA) • Worker Adjustment and Retraining Notification Act (WARN) • Federal Unemployment Tax Act (FUTA) • Uniformed Services Employment and Reemployment Rights Act (USERRA) • Fair Labor Standards Act (FLSA) • State unemployment and employment security laws • Employee Retirement Income Security Act, as amended (ERISA) • State workers’ compensation laws • Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) • Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act”) • Immigration Reform and Control Act (IRCA) • Patient Protection and Affordable Care Act (PPACA) • Title VII (Civil Rights Act of 1964) • State and local law equivalents of the foregoing • Health Insurance Portability and Accountability Act (HIPAA) • The Families First Coronavirus Response Act (FFCRA) • Age Discrimination in Employment Act (ADEA) • The Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act • Americans with Disabilities Act (ADA) • The Consolidated Appropriations Act, 2021 (CAA) • The Family and Medical Leave Act (FMLA) • The American Rescue Plan Act of 2021 (ARPA) • Genetic Information Nondiscrimination Act of 2008 • Paycheck Protection Program and Healthcare Enhancement Act (PPP) • Drug-Free Workplace Act • SECURE 2.0 Act of 2022, as part of The Consolidated Appropriations Act, 2023 These laws and regulations are complex, and in some instances overlapping.
Among the employment-related laws and regulations that may affect a client are the following: 4 2024 Form 10-K BUSINESS • Internal Revenue Code (the “Code”) • Occupational Safety and Health Act (OSHA) • Federal Income Contribution Act (FICA) • Worker Adjustment and Retraining Notification Act (WARN) • Federal Unemployment Tax Act (FUTA) • Uniformed Services Employment and Reemployment Rights Act (USERRA) • Fair Labor Standards Act (FLSA) • State unemployment and employment security laws • Employee Retirement Income Security Act, as amended (ERISA) • State workers’ compensation laws • Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) • Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act”) • Immigration Reform and Control Act (IRCA) • Patient Protection and Affordable Care Act (PPACA) • Title VII (Civil Rights Act of 1964) • State and local law equivalents of the foregoing • Health Insurance Portability and Accountability Act (HIPAA) • The Families First Coronavirus Response Act (FFCRA) • Age Discrimination in Employment Act (ADEA) • The Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act • Americans with Disabilities Act (ADA) • The Consolidated Appropriations Act, 2021 (CAA) • The Family and Medical Leave Act (FMLA) • The American Rescue Plan Act of 2021 (ARPA) • Genetic Information Nondiscrimination Act of 2008 • Paycheck Protection Program and Healthcare Enhancement Act (PPP) • Drug-Free Workplace Act • SECURE 2.0 Act of 2022, as part of The Consolidated Appropriations Act, 2023 These laws and regulations are complex, and in some instances overlapping.
Insperity Premier provides role-based access to a wide range of human capital management functions, along with personalized content to the managers, owners and WSEEs of our PEO HR Outsourcing Solutions clients, including: For managers and client owners: • WebPayroll for the submission, approval, and reporting of payroll data • mobile access to review and approve payroll transactions and employee time entry • tools to manage the onboarding of new employees • employee administration functions such as viewing or changing information about employees • access to client-specific compliance-related information relevant to many HR areas • reporting and analytics tools to create, view, save, and export reports and data about employees and to perform more complex analysis and visualization of their workforce data with the Insperity People Analytics solution • ability to manage employee time and attendance information, absences, and paid time off • access to talent management tools in the areas of recruiting, performance management, and learning management • access to a library of online human resources forms • access to a wide range of best-practices human resources management content For WSEEs: • access to view, edit, and change a range of employee profile information • online check stubs, pay history, W-2 forms, W-4 forms, and other state forms • employee-specific benefits content, including summary plan descriptions, enrollment status, and tools to assist with benefits selection for Insperity-sponsored plans • access to 401(k) retirement plan information for covered plans 6 2023 Form 10-K BUSINESS • e-learning web-based training • links to benefits providers and other key vendors • performance management tools including self-reviews and review history, if offered by client • ability to submit time and attendance information, absences, and paid time off requests, if offered by client • mobile access to perform a wide range of employee-specific activities such as reporting time and attendance and paid time off, view pay stubs, insurance coverage and ID cards, view 401(k) balances and other commonly accessed data People Management .
Insperity Premier provides role-based access to a wide range of human capital management functions, along with personalized content to the managers, owners and WSEEs of our PEO HR Outsourcing Solutions clients, including: For managers and client owners: • WebPayroll for the submission, approval, and reporting of payroll data • mobile access to review and approve payroll transactions and employee time entry • tools to manage the onboarding of new employees • employee administration functions such as viewing or changing information about employees • access to client-specific compliance-related information relevant to many HR areas • reporting and analytics tools to create, view, save, and export reports and data about employees and to perform more complex analysis and visualization of their workforce data with the Insperity People Analytics solution • ability to manage employee time and attendance information, absences, and paid time off • access to talent management tools in the areas of recruiting, performance management, and learning management • access to a library of online human resources forms • access to a wide range of best-practices human resources management content For WSEEs: • access to view, edit, and change a range of employee profile information • online check stubs, pay history, W-2 forms, W-4 forms, and other state forms • employee-specific benefits content, including summary plan descriptions, enrollment status, and tools to assist with benefits selection for Insperity-sponsored plans • access to 401(k) retirement plan information for covered plans 6 2024 Form 10-K BUSINESS • e-learning web-based training • links to benefits providers and other key vendors • performance management tools including self-reviews and review history, if offered by client • ability to submit time and attendance information, absences, and paid time off requests, if offered by client • mobile access to perform a wide range of employee-specific activities such as reporting time and attendance and paid time off, view pay stubs, insurance coverage and ID cards, view 401(k) balances and other commonly accessed data People Management .
The future impact and direction of healthcare reform, including future legislative actions, is unknown and, if any such developments were to reduce our ability to make health care benefits available to WSEEs or were to make our offerings less attractive to our clients, then our business, financial condition, and results of operations may be materially adversely affected.
The future impact and direction of healthcare reform, including future legislative or executive actions, is unknown and, if any such developments were to reduce our ability to make health care benefits available to WSEEs or were to make our offerings less attractive to our clients, then our business, financial condition, and results of operations may be materially adversely affected.
Both of our PEO HR Outsourcing Solutions offer the following: • payroll and benefits administration • general HR advice • health and workers’ compensation insurance programs • 401(k) retirement plan sponsored by us • employer liability management • assistance with government compliance • personnel records management • access to Insperity Premier for employees, managers, and client owners Our Workforce Optimization solution also provides additional services that our Workforce Synchronization clients can purchase for an additional fee, including the following: • employee recruiting and support • employee performance management • training and development services Our PEO HR Outsourcing Solutions are designed to attract and retain high-quality employees, while relieving client owners and key executives of many employer-related administrative and regulatory burdens.
Both of our PEO HR Outsourcing Solutions offer the following: • payroll and benefits administration • general HR advice • health and workers’ compensation insurance programs • 401(k) retirement plan sponsored by us • employer liability management • assistance with government compliance • personnel records management • access to Insperity Premier for employees, managers, and client owners Our Workforce Optimization solution also provides additional services that our Workforce Synchronization clients can purchase for an additional fee, including the following: • employee recruiting and support • employee performance management • training and development services • strategic HR projects Our PEO HR Outsourcing Solutions are designed to attract and retain high-quality employees, while relieving client owners and key executives of many employer-related administrative and regulatory burdens.
We have implemented a sales process that allows our BPAs to offer our PEO HR Outsourcing Solutions or Workforce Acceleration, our traditional payroll solution, to each prospective client with which they meet.
We have implemented a sales process that allows our BPAs to offer our PEO HR Outsourcing Solutions or refer our Workforce Acceleration, our traditional payroll solution, to each prospective client with which they meet.
We maintain numerous benefit plans for eligible WSEEs including the following: • a group health plan • a health savings account program • a health care flexible spending account plan • a 401(k) retirement plan • an employee well-being program • cafeteria plans for group health and health savings account contributions • short-term and long-term disability insurance 5 2023 Form 10-K BUSINESS • an educational assistance program • an adoption assistance program • group term life insurance • accidental death and dismemberment insurance • critical illness and accident insurance The group health plan includes medical, dental, vision and prescription drug coverage.
We maintain numerous benefit plans for eligible WSEEs including the following: • a group health plan • a health savings account program • a health care flexible spending account plan • a 401(k) retirement plan • an employee well-being program • cafeteria plans for group health and health savings account contributions • short-term and long-term disability insurance 5 2024 Form 10-K BUSINESS • an educational assistance program • an adoption assistance program • group term life insurance • accidental death and dismemberment insurance • critical illness and accident insurance The group health plan includes medical, dental, vision and prescription drug coverage.
Among the factors we consider are: • market size, in terms of small and medium-sized businesses engaged in selected industries that meet our risk profile • market receptivity to PEO services, including the regulatory environment and relevant history with other PEO providers • existing relationships within a given market, such as vendor or client relationships 12 2023 Form 10-K BUSINESS • expansion cost issues, such as advertising and overhead costs • direct cost issues that bear on our effectiveness in controlling and managing the cost of our services, such as workers’ compensation and health insurance costs, unemployment risks, and various legal and other factors • a comparison of the services we offer to alternatives available to small and medium-sized businesses in the relevant market, such as the cost to the target clients of procuring services directly or through other PEOs • long-term strategy issues, such as the general perception of markets and our estimate of the long-term revenue growth potential of the market We develop a mix of national and local advertising media and a placement strategy tailored to each individual market.
Among the factors we consider are: • market size, in terms of small and medium-sized businesses engaged in selected industries that meet our risk profile 11 2024 Form 10-K BUSINESS • market receptivity to PEO services, including the regulatory environment and relevant history with other PEO providers • existing relationships within a given market, such as vendor or client relationships • expansion cost issues, such as advertising and overhead costs • direct cost issues that bear on our effectiveness in controlling and managing the cost of our services, such as workers’ compensation and health insurance costs, unemployment risks, and various legal and other factors • a comparison of the services we offer to alternatives available to small and medium-sized businesses in the relevant market, such as the cost to the target clients of procuring services directly or through other PEOs • long-term strategy issues, such as the general perception of markets and our estimate of the long-term revenue growth potential of the market We develop a mix of national and local advertising media and a placement strategy tailored to each individual market.
The Chubb Program is a fully insured program whereby Chubb has the responsibility to pay all claims incurred under the policies regardless of whether we satisfy our responsibilities. The current workers’ compensation coverage with Chubb expires on September 30, 2024. In the event we are unable to secure replacement coverage on competitive terms, significant disruption to our business could occur.
The Chubb Program is a fully insured program whereby Chubb has the responsibility to pay all claims incurred under the policies regardless of whether we satisfy our responsibilities. The current workers’ compensation coverage with Chubb expires on September 30, 2025. In the event we are unable to secure replacement coverage on competitive terms, significant disruption to our business could occur.
Upon completion of a favorable employer risk evaluation, the BPA presents the bid and attempts to complete the sale and enroll the prospect. Our selling process typically takes approximately 90 days for clients with less than 150 employees, and 180 days or longer for middle market clients. The process can be extended during economic downturns.
Upon completion of a favorable employer risk evaluation, the BPA presents the bid and attempts to complete the sale and enroll the prospect. Our selling process typically takes approximately 90 days for clients with fewer than 150 employees, and 180 days or longer for middle market clients. The process can be extended during economic downturns.
The health insurance contract with United provides approximately 87% of our participants’ health insurance coverage and expires on December 31, 2026, subject to cancellation by either party upon 180 days’ notice. For a discussion of our contract with United, which is accounted for using a partially self-funded insurance accounting model, please read Item 7.
The health insurance contract with United provides approximately 86% of our participants’ health insurance coverage and expires on December 31, 2026, subject to cancellation by either party upon 180 days’ notice. For a discussion of our contract with United, which is accounted for using a partially self-funded insurance accounting model, please read Item 7.
Insperity and other industry leaders, in concert with the National Association of Professional Employer Organizations (“NAPEO”), have worked with the relevant governmental entities for the establishment of a regulatory framework that protects clients and employees, discourages 3 2023 Form 10-K BUSINESS unscrupulous and financially unsound PEOs, and promotes further development of the industry.
Insperity and other industry leaders, in concert with the National Association of Professional Employer Organizations (“NAPEO”), have worked with the relevant 3 2024 Form 10-K BUSINESS governmental entities for the establishment of a regulatory framework that protects clients and employees, discourages unscrupulous and financially unsound PEOs, and promotes further development of the industry.
We have an agreement with the Professional Golf Association Champions Tour to be the title sponsor of the Insperity Invitational ™ presented by UnitedHealthcare ® professional golf tournament held annually in The Woodlands, Texas (a suburb of Houston). In addition, we have an arrangement with Jim Nantz, a sports commentator, to serve as our national spokesperson.
We have an agreement with the PGA Tour Champions to be the title sponsor of the Insperity Invitational ™ presented by UnitedHealthcare ® professional golf tournament held annually in The Woodlands, Texas (a suburb of Houston). In addition, we have an arrangement with Jim Nantz, a sports commentator, to serve as our national spokesperson.
The spread of a highly infectious or contagious disease could create significant volatility, uncertainty and economic disruption, including as a result of actions taken by businesses and governments in response to such a pandemic that may result in a significant reduction in commercial activity, such as occurred during the COVID-19 pandemic that began in 2020.
The spread of a highly infectious or contagious disease could create significant volatility, uncertainty and economic disruption, including as a result of actions taken by businesses and governments in response to such a pandemic that may result in a significant reduction in commercial activity, such as occurred during the COVID-19 pandemic.
The comprehensive service fee consists of the payroll of our WSEEs plus an additional amount reflected as a percentage of the payroll cost of the WSEEs. 2 2023 Form 10-K BUSINESS We accomplish the objectives of our PEO HR Outsourcing Solutions through a “high-touch/high-tech” approach to service delivery.
The comprehensive service fee consists of the payroll of our WSEEs plus an additional amount reflected as a percentage of the payroll cost of the WSEEs. 2 2024 Form 10-K BUSINESS We accomplish the objectives of our PEO HR Outsourcing Solutions through a “high-touch/high-tech” approach to service delivery.
This solution combines a third-party cloud-based human resources software suite that provides integrated payroll, HR administration and employee onboarding, benefits administration, performance management, and time and attendance functionality with HR guidance and tools, as well as reporting and analytics.
This solution combines a third-party cloud-based human resources software suite that provides integrated payroll, HR administration and employee onboarding, benefits administration, performance management, and time and attendance functionality with HR guidance and tools, as well as reporting and analytics. Recruiting Services.
These systems manage a wide range of transactions and information specific to our PEO HR Outsourcing Solutions, to Insperity and to our clients and WSEEs, including: • WSEE enrollment • human resources management and employee administration • benefits and defined contribution plan administration • time and attendance collection and administration 14 2023 Form 10-K BUSINESS • payroll processing • client invoicing and collection • management information and reporting • sales bid calculations Central to these systems are transaction processing capabilities that allow us to process a high volume of employee enrollment, employee administration, payroll, invoice and bid transactions that meet the specific needs of our clients and prospects.
These systems manage a wide range of transactions and information specific to our PEO HR Outsourcing Solutions, to Insperity and to our clients and WSEEs, including: • WSEE enrollment • human resources management and employee administration 13 2024 Form 10-K BUSINESS • benefits and defined contribution plan administration • time and attendance collection and administration • payroll processing • client invoicing and collection • management information and reporting • sales bid calculations Central to these systems are transaction processing capabilities that allow us to process a high volume of employee enrollment, employee administration, payroll, invoice and bid transactions that meet the specific needs of our clients and prospects.
In addition, we also face competition from: (1) fee-for-service providers such as payroll processors and human resources consultants; (2) human resources technology solution companies; and (3) large regional PEOs in certain areas of the country. Vendor Relationships Insperity provides benefits to its WSEEs under arrangements with a variety of vendors.
In addition, we also face competition from: (1) fee-for-service providers such as payroll processors and human resources consultants; (2) human resources technology solution companies; and (3) large regional PEOs in certain areas of the country. Benefits and Workers’ Compensation Relationships Insperity provides benefits to its WSEEs under arrangements with a variety of vendors.
Our long-term strategy is to provide the best small and medium-sized businesses in the United States with our specialized human resources service offering and to leverage our buying power and expertise to provide additional valuable services to clients.
Our long-term strategy is to provide the best small and medium-sized businesses in the United States with our specialized human resources service offerings and to leverage our buying power and expertise to provide additional valuable services to clients.
We utilize a variety of information technology capabilities to deliver our PEO HR Outsourcing Solutions, including Insperity Premier through which we, along with our clients and WSEEs, manage employee administration, payroll, payroll tax, benefits, retirement solutions and other HR-related information, creating efficiencies for all parties. As of December 31, 2023, we had 83 physical office locations in 45 markets.
We utilize a variety of information technology capabilities to deliver our PEO HR Outsourcing Solutions, including Insperity Premier through which we, along with our clients and WSEEs, manage employee administration, payroll, payroll tax, benefits, retirement solutions and other HR-related information, creating efficiencies for all parties. As of December 31, 2024, we had 83 physical office locations in 48 markets.
These plans include: • a group health plan, which includes medical, dental, vision and prescription drug coverage 15 2023 Form 10-K BUSINESS • a 401(k) retirement plan • cafeteria plans under Code Section 125 • a health savings account program • a welfare benefits plan, which includes life, disability, accidental death and dismemberment, critical illness, and accident insurance, as well as an employee well-being program • a health care flexible spending account plan • an educational assistance program • an adoption assistance program • a commuter benefits program Generally, employee benefit plans are subject to provisions of the Code, ERISA, and COBRA.
These plans include: • a group health plan, which includes medical, dental, vision and prescription drug coverage • a 401(k) retirement plan • cafeteria plans under Code Section 125 • a health savings account program • a welfare benefits plan, which includes life, disability, accidental death and dismemberment, critical illness, and accident insurance, as well as an employee well-being program • a health care flexible spending account plan • an educational assistance program • an adoption assistance program • a commuter benefits program Generally, employee benefit plans are subject to provisions of the Code, ERISA, and COBRA.
Our obligations include responsibility for the following even if our costs to provide such benefits exceed the fees the client pays us and the amounts collected from WSEEs: • payment of the salaries and wages for work performed by WSEEs, regardless of whether the client timely pays us the associated service fee • withholding and payment of federal and state payroll taxes with respect to wages and salaries reported by Insperity • providing benefits to WSEEs 21 2023 Form 10-K RISK FACTORS • providing workers’ compensation coverage to WSEEs Further, the increase in remote work, including by WSEEs, has complicated the calculation of payroll and unemployment taxes applicable to those individuals.
Our obligations include responsibility for the following even if our costs exceed the fees the client pays us and the amounts collected from WSEEs: • payment of the salaries and wages for work performed by WSEEs, regardless of whether the client timely pays us the associated service fee • withholding and payment of federal and state payroll taxes with respect to wages and salaries reported by Insperity 20 2024 Form 10-K RISK FACTORS • providing benefits to WSEEs • providing workers’ compensation coverage to WSEEs Further, the increase in remote work, including by WSEEs, has complicated the calculation of payroll and unemployment taxes applicable to those individuals.
Our human capital management objective is to attract, develop, and retain qualified corporate employees as appropriate to support our growth, client service initiatives, and technology investments, while furthering our commitment to our culture, mission, and values. We had approximately 4,400 corporate employees as of December 31, 2023. We believe our relations with our corporate employees are good.
Our human capital management objective is to attract, develop, and retain qualified corporate employees as appropriate to support our growth, client service initiatives, and technology investments, while furthering our commitment to our culture, mission, and values. We had approximately 4,500 corporate employees as of December 31, 2024. We believe our relations with our corporate employees are good.
Subsequent changes resulting from action that may be taken at the federal or state level may impact our benefit plans, business model and future results of operations, including repeal or repeal and replacement of current healthcare reform provisions as has been advocated by some Congressional leaders.
Subsequent changes resulting from action that may be taken at the federal or state level may impact our benefit plans, business model and future results of operations, including repeal or repeal and replacement of current healthcare reform provisions as has been advocated by some in the new Presidential administration and Congressional leaders.
As macroeconomic conditions improved from 2021 through 2023, the labor market tightened, resulting in increased employee turnover and skilled labor shortages.
As macroeconomic conditions improved from 2021 through 2024, the labor market tightened, resulting in increased employee turnover and skilled labor shortages.
Treasury as they become due Concurrent Responsibilities • Implementation of policies and practices relating to the employee/employer relationship 9 2023 Form 10-K BUSINESS • Internal compliance with all federal, state and local employment laws, including Title VII of the Civil Rights Act of 1964, ADEA, Title I of ADA, the Consumer Credit Protection Act and immigration laws and regulations We maintain employment practice liability insurance coverages (including coverages for our clients) to manage our exposure for various employee-related claims.
Treasury as they become due Concurrent Responsibilities • Implementation of policies and practices relating to the employee/employer relationship • Internal compliance with all federal, state and local employment laws, including Title VII of the Civil Rights Act of 1964, ADEA, Title I of ADA, the Consumer Credit Protection Act and immigration laws and regulations We maintain employment practice liability insurance coverages (including coverages for our clients) to manage our exposure for various employee-related claims.
Geographic market concentration makes our results of operations vulnerable to regional economic factors. Our New York, California and Texas markets accounted for approximately 10%, 15% and 18% (including 7% in Houston), respectively, of our WSEEs for the year ended December 31, 2023.
Geographic market concentration makes our results of operations vulnerable to regional economic factors. Our New York, California and Texas markets accounted for approximately 10%, 15% and 17% (including 7% in Houston), respectively, of our WSEEs for the year ended December 31, 2024.
Employment Taxes As a co-employer, Insperity generally assumes responsibility and liability for the payment of federal and state employment taxes with respect to wages and salaries paid to our WSEEs.
Employment Taxes As a co-employer, and under the terms of the CSA, Insperity generally assumes responsibility and liability for the payment of federal and state employment taxes with respect to wages and salaries paid to our WSEEs.
All prospective PEO HR Outsourcing Solutions clients are evaluated on the basis of a comprehensive analysis of employer-related risks entailing many factors, including (where permitted) industry and operations, workplace safety and workers’ compensation, unemployment history, operating stability, group medical information, human resources practices and other employer risks.
All prospective PEO HR Outsourcing Solutions clients are evaluated on the basis of a comprehensive analysis of employer-related risks entailing many factors, including (where permitted) industry and operations, workplace safety and workers’ compensation, unemployment history, operating stability, group medical information, human resources practices 10 2024 Form 10-K BUSINESS and other employer risks.
We provide group health insurance coverage to our WSEEs through a national network of carriers including United, UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii and Tufts (known as Harvard Pilgrim Health Care (HPHC) beginning in 2024), all of which provide fully insured policies or service contracts.
We provide group health insurance coverage to our WSEEs through a national network of carriers including United, UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii, and Harvard Pilgrim Health Care, formerly known as Tufts, all of which provide fully insured policies or service contracts.
We believe the middle market sector, which we generally define as those companies with employee populations ranging from approximately 150 to 5,000 WSEEs, has historically been under-served by the PEO industry. Currently, we have a dedicated sales management, service personnel and consulting staff who concentrate 7 2023 Form 10-K BUSINESS solely on the middle market sector.
We believe the middle market sector, which we generally define as those companies with employee populations ranging from approximately 150 to 5,000 WSEEs, has historically been under-served by the PEO industry. Currently, we have a dedicated sales management, service personnel and consulting staff who concentrate solely on the middle market sector.
The client retains the employees’ services and remains liable for complying with certain government regulations that require control of the worksite or daily supervisory responsibility or is otherwise beyond our ability to assume. A third group of responsibilities and liabilities are assumed by both Insperity and the client where such concurrent responsibility is appropriate.
The client retains the employees’ services and remains liable for complying with certain government regulations that require control of the worksite or daily supervisory responsibility or is otherwise beyond our ability to assume. A third group of responsibilities and liabilities are assumed by both Insperity and the client 8 2024 Form 10-K BUSINESS where such concurrent responsibility is appropriate.
Through the investor relations section of our website, we make available electronic copies of the documents that we file or furnish to the SEC, the charters of the standing committees of our Board of Directors (“Board”) and other documents related to our corporate governance, including our Code of Conduct.
Through the investor relations section of our website, we make available electronic copies of the documents that we file or furnish to the SEC, the charters of the standing committees of our Board of Directors (“Board”) and other documents related to our corporate governance, including our Code of Conduct, and other information that could be deemed to be material.
This practice aligns clients’ payments to us with our obligations to make payments to tax authorities, which are higher in the earlier part of the year and decrease as limits on wages subject to payroll tax are reached. 8 2023 Form 10-K BUSINESS The CSA also establishes the division of responsibilities between us and the client as co-employers.
This practice aligns clients’ payments to us with our obligations to make payments to tax authorities, which are higher in the earlier part of the year and decrease as limits on wages subject to payroll tax are reached. The CSA also establishes the division of responsibilities between us and the client as co-employers.
As an employer, we are subject to federal statutes and regulations governing the employer/employee relationship. Subject to the issues discussed below, we believe that our operations are in compliance, in all material respects, with all applicable federal statutes and regulations. Employee Benefit Plans We offer various employee benefits plans to eligible employees, including our WSEEs.
As an employer, we are subject to federal statutes and regulations governing the employer/employee relationship. Subject to the issues discussed below, we believe that our operations are in compliance, in all material respects, with all applicable federal statutes and regulations. 14 2024 Form 10-K BUSINESS Employee Benefit Plans We offer various employee benefits plans to eligible employees, including our WSEEs.
Client attrition is attributable to a variety of factors, including: (1) client non-renewal due to price or service factors; (2) client business failure, sale, merger or disposition; (3) our termination of the CSA resulting from the client’s non-compliance or inability to make timely payments; and (4) competition from other PEOs or business services firms.
Client attrition is attributable to a variety of factors, including: (1) client non-renewal due to price or service factors; (2) client business failure, sale, merger or disposition; (3) our termination of the CSA resulting from the client’s non-compliance or inability to make timely payments; (4) competition from other PEOs or business services firms; and (5) clients electing to bring HR in-house.
We identify markets using a systematic market evaluation and selection process. We continue to evaluate a broad range of factors in the selection process, using a market selection model that weighs various criteria that, based on our experience, we believe are reliable predictors of successful penetration.
We continue to evaluate a broad range of factors in the selection process, using a market selection model that weighs various criteria that, based on our experience, we believe are reliable predictors of successful penetration.
At this time, the insurance market reforms have not had a material adverse impact on our 22 2023 Form 10-K RISK FACTORS business operations, and if any future changes impact our ability to attract and retain clients, or our ability to increase service fees to offset any increased costs, then our business may be materially adversely affected.
At this time, the insurance market reforms have not had a material adverse impact on our business operations, and if any future changes impact our ability to attract and retain clients, or our ability to increase service fees to offset any increased costs, then our business may be materially adversely affected.
Under our current arrangement with Chubb for claims incurred on or before September 30, 2019, we have a 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 the first $1 million.
Under our current arrangement with Chubb for claims incurred on or before September 30, 2019, we have a financial responsibility to 22 2024 Form 10-K RISK FACTORS 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 the first $1 million.
Effective for claims incurred on or after 23 2023 Form 10-K RISK FACTORS October 1, 2019, our financial responsibility increased as 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.
Effective for claims incurred on or after October 1, 2019, our financial responsibility increased as 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.
To take advantage of economic efficiencies, multiple sales offices may share a physical location. In addition, we had four regional service centers along with human resources and client service personnel located in a majority of our 45 sales markets, which serviced an average of 315,072 WSEEs per month in the fourth quarter of 2023.
To take advantage of economic efficiencies, multiple sales offices may share a physical location. In addition, we had four regional service centers along with human resources and client service personnel located in a majority of our 48 sales markets, which serviced an average of 309,093 WSEEs per month in the fourth quarter of 2024.
Economic Risks Adverse economic conditions could negatively affect our industry, business, and results of operations. The small and medium-sized business market is sensitive to changes in economic activity levels as well as the credit markets. As a result, the demand for the outsourced HR services we provide clients could be adversely impacted by weak economic conditions or difficulty obtaining credit.
The small and medium-sized business market is sensitive to changes in economic activity levels as well as the credit markets. As a result, the demand for the outsourced HR services we provide clients could be adversely impacted by weak economic conditions or difficulty obtaining credit.
As part of our comprehensive service, we also maintain employment practice liability insurance coverage for ourselves and our clients, monitor developments in HR-related laws and regulations, and notify clients of the potential effect of such changes on employer liability. MarketPlace SM provided by Insperity ® .
As part of our comprehensive service, we also maintain employment practice liability insurance coverage for ourselves and our clients, monitor developments in HR-related laws and regulations, and notify clients of the potential effect of such changes on employer liability. Middle Market Solutions.
Under the CSA, we become a co-employer of WSEEs and assume the obligations to pay the salaries, wages and related benefits costs and payroll taxes of such WSEEs. We assume such obligations as a principal, not as an agent of the client.
Under the CSA, we become a co-employer of WSEEs and assume the obligations to pay the salaries, wages and related benefits costs and payroll taxes of such WSEEs.
Our CSA ordinarily addresses this issue by providing that the client will indemnify us for liability incurred to the extent the liability is attributable to conduct by the client.
Our CSA ordinarily addresses this issue by providing that the client will indemnify us for liability incurred to the extent the liability is attributable to conduct by 9 2024 Form 10-K BUSINESS the client.
The IRS has experienced significant backlogs in processing amended tax forms from employers seeking ERC refunds and we are currently awaiting IRS review of a number of ERC claims with respect to our PEO clients.
The IRS has experienced significant backlogs in processing amended tax forms from employers seeking ERC refunds and we are currently awaiting IRS review of a number of ERC claims with respect to our PEO clients. Currently, the deadline to submit any ERC claims for relevant periods in 2021 is April 2025.
Clients with an average number of WSEEs exceeding 1,000 paid WSEEs represented 5.5% and 5.4% of our total average paid WSEEs during 2023 and 2022, respectively. Other Product and Services Offerings We offer other product and services offerings on a stand-alone basis and to our PEO HR Outsourcing Solutions clients.
Clients exceeding 1,000 paid WSEEs represented 3% and 5% of our total average paid WSEEs during 2024 and 2023, respectively. 7 2024 Form 10-K BUSINESS Other Product and Services Offerings We offer other product and services offerings on a stand-alone basis and to our PEO HR Outsourcing Solutions clients.
Accordingly, unless we are successful in expanding in our current markets and into new markets, which we believe will take additional time, for the foreseeable future, a significant portion of our revenues may be subject to economic, statutory, and regulatory factors specific to New York, California, and Texas.
Accordingly, unless we are successful in expanding in our current markets and into new markets, which we believe will take additional time, for the foreseeable future, a significant portion of our revenues may be subject to economic, statutory, and regulatory factors specific to New York, California, and Texas. 19 2024 Form 10-K RISK FACTORS We are subject to covenants under our credit facility that may restrict our business and financing activities.
Marketing and Sales As of December 31, 2023, we had 98 sales offices located in 45 markets. Our sales offices typically consist of seven to nine Business Performance Advisors (“BPAs”), a district sales manager, and an office administrator. To take advantage of economic efficiencies, multiple sales offices may share a physical location.
Marketing and Sales As of December 31, 2024, we had 106 sales offices located in 48 markets. Our sales offices typically consist of Business Performance Advisors (“BPAs”), a district sales manager, and an office administrator. To take advantage of economic efficiencies, multiple sales offices may share a physical location. We identify markets using a systematic market evaluation and selection process.
Currently, the deadline to submit any ERC claims for relevant periods in 2020 is April 2024, and the deadline for relevant periods in 2021 is April 2025. A pending federal bill, The Tax Relief for American Families and Workers Act of 2024 (H.R. 7024), however, would retroactively accelerate the deadline for all claims to January 31, 2024.
A pending federal bill, The Tax Relief for American Families and Workers Act of 2024 (H.R. 7024), however, would retroactively accelerate the deadline for all claims to January 31, 2024.
Our average number of WSEEs per month in our middle market sector in 2023 increased 10.5% from 2022, and the middle market sector as a percentage of our overall WSEE count also increased over this period, representing approximately 26.1% and 24.9% of our total average paid WSEEs during 2023 and 2022, respectively.
Our average number of WSEEs per month in our middle market sector in 2024 decreased 3% from 2023, and the middle market sector as a percentage of our overall WSEE count remained consistent over this period, representing approximately 26% of our total average paid WSEEs during both 2024 and 2023.
“Risk Factors—PEO HR Outsourcing Solutions Risks—Health care reform could affect our health insurance plan and could lead to a significant disruption in our business.” 401(k) Retirement Plans.
For a discussion of the impact of the Patient Protection and Affordable Care Act on our business, please read Item 1A. “Risk Factors—PEO HR Outsourcing Solutions Risks—Health care reform could affect our health insurance plan and could lead to a significant disruption in our business.” 401(k) Retirement Plans.
Our failure to comply with these covenants may result in an acceleration of our indebtedness, which could have a material adverse effect on our business, financial condition or results of operations. 20 2023 Form 10-K RISK FACTORS Our credit facility contains, and any future indebtedness of ours likely would contain, covenants that, subject to certain exceptions, impose significant operating and financial restrictions, including restricting 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, • enter into new lines of business, • make investments, and • pay dividends.
Our credit facility contains, and any future indebtedness of ours likely would contain, covenants that, subject to certain exceptions, impose significant operating and financial restrictions, including restricting 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, • enter into new lines of business, • make investments, and • pay dividends.
As part of our client selection strategy, we strive to minimize offering our PEO HR Outsourcing Solutions to businesses falling within certain specified NAICS (North American Industry Classification System) codes for those industries that we believe present a higher employer risk such as employee injury, high turnover or litigation. 11 2023 Form 10-K BUSINESS Our PEO HR Outsourcing Solutions client base is broadly distributed throughout a wide variety of industries as follows: This diverse client base lowers our exposure to downturns or volatility in any particular industry.
As part of our client selection strategy, we strive to minimize offering our PEO HR Outsourcing Solutions to businesses falling within certain specified NAICS (North American Industry Classification System) codes for those industries that we believe present a higher employer risk such as employee injury, high turnover or litigation.
“Risk Factors – A determination that we are not the employer of our WSEEs and an inability to offer alternate benefit plans could have a material adverse effect on our business.” Patient Protection and Affordable Care Act. For a discussion of the impact of the Patient Protection and Affordable Care Act on our business, please read Item 1A.
Employer status is determined under various rules, regulations, and interpretations. While we believe that we qualify as employer under applicable laws, please read Item 1.A. “Risk Factors—A determination that we are not the employer of our WSEEs and an inability to offer alternate benefit plans could have a material adverse effect on our business.” Patient Protection and Affordable Care Act.
Our incurred costs in excess of annual premiums with respect to this exposure have historically been insignificant to our operating results. Because we are a co-employer with the client for some purposes, it is possible that we could incur liability for violations of such laws, even if we are not responsible for the conduct giving rise to such liability.
Because we are a co-employer with the client for some purposes, it is possible that we could incur liability for violations of such laws, even if we are not responsible for the conduct giving rise to such liability.
Based on an analysis of the 2020 through 2022 annual NAPEO surveys of the PEO industry, we have successfully leveraged our full-service approach into significantly higher returns for Insperity on a per WSEE per month basis. During the three-year period from 2020 through 2022, our staff support ratio averaged 57% higher than the PEO industry average.
Based on an analysis of the 2021 through 2023 annual NAPEO surveys of the PEO industry, we have successfully leveraged our full-service approach into significantly higher returns for Insperity on a per WSEE per month basis.
We serve clients and WSEEs located throughout the United States. 10 2023 Form 10-K BUSINESS By region, our revenue distribution for the year ended December 31, 2023, was as follows: Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information related to the change in revenues by region.
By region, our revenue distribution for the year ended December 31, 2024, was as follows: ________________________________________________________ (1) The Southwest region includes Texas. Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information related to the change in revenues by region.
We target successful businesses with approximately 10 to 5,000 employees that recognize the advantage in the strategic use of high-performance human resources practices. We have set a long-term goal to serve approximately 10% of the overall small and medium-sized business community in terms of WSEEs.
We target successful businesses with approximately 10 to 5,000 employees that recognize the advantage in the strategic use of high-performance human resources practices. We believe approximately 10% of the overall small and medium-sized business community in terms of WSEEs are “good fit” companies for our PEO services. We serve clients and WSEEs located throughout the United States.
These events could further adversely impact our PEO state licenses or registrations, or our CPEO status, as well as our ability to attract and retain clients. As a result of the foregoing, our business, results of operations and financial condition could be materially adversely affected.
These events could further adversely impact our PEO state licenses or registrations, or our CPEO status, as well as our ability to attract and retain clients.
Department of Health and Human Services (“HHS”) has not addressed or in some instances is unclear as to the application of certain aspects of federal health care reform laws in the PEO relationship or whether such provisions should be applied at the PEO or client level.
Department of Health and Human Services (“HHS”) has not addressed or in some instances is unclear as to the application of certain aspects of federal health care reform laws in the PEO relationship or whether such provisions should be applied at the PEO or client level. 21 2024 Form 10-K RISK FACTORS Various states have adopted or are considering reforms that may impact the requirements for or availability of PEO-sponsored health plans.
Services include criminal records checks; verification of employment history or education; driving record, civil record and credit history checks; and confirmation of extraordinary credentials. Retirement Services.
Our Employment Screening services offer a customized approach to background-check reporting for companies. Services include criminal records checks; verification of employment history or education; driving record, civil record and credit history checks; and confirmation of extraordinary credentials. Retirement Services.
Intellectual Property Insperity currently has registered trademarks, copyrights and other intellectual property. We believe that our trademarks as a whole are of considerable importance to our business. 18 2023 Form 10-K RISK FACTORS Item 1A. Risk Factors. The statements in this section describe the known material risks to our business and should be considered carefully.
We believe that our trademarks as a whole are of considerable importance to our business. 17 2024 Form 10-K RISK FACTORS Item 1A. Risk Factors. The statements in this section describe the known material risks to our business and should be considered carefully. Economic Risks Adverse economic conditions could negatively affect our industry, business, and results of operations.
If the IRS were to determine that any of our clients were not eligible for the ERC requested on their behalf and conclude that we are responsible for those claims, or if the IRS were to otherwise challenge the claims we requested, we could face penalties or other liabilities.
Further, if the IRS were to determine that any of our clients were not eligible for the ERC requested on their behalf or we do not perfect our filings on a timely basis, the IRS may conclude that we are responsible for those claims.
There are essentially three types of federal employment tax obligations included in Subtitle C — Employment Taxes of the Code: • withholding of income tax requirements governed by Code Section 3401, et seq. • obligations under FICA, governed by Code Section 3101, et seq. • obligations under FUTA, governed by Code Section 3301, et seq.
There are essentially three types of federal employment tax obligations included in Subtitle C — Employment Taxes of the Code: • withholding of income tax requirements governed by Code Section 3401, et seq. • obligations under FICA, governed by Code Section 3101, et seq. • obligations under FUTA, governed by Code Section 3301, et seq. 15 2024 Form 10-K BUSINESS Under these Code sections, employers have the obligation to withhold and remit the employer portion and, where applicable, the employee portion of these taxes.
Following are the key components of our other products and services, which are offered separately or as a bundle: Comprehensive Traditional Payroll and Human Capital Management Solution. Our Insperity Workforce Acceleration solution is a comprehensive human capital management and payroll services solution for clients that do not choose our PEO HR Outsourcing Solutions.
Our Workforce Acceleration solution is a comprehensive human capital management and payroll services solution for clients that do not choose our PEO HR Outsourcing Solutions.
In addition, we provide consulting services to assist in the creation and maintenance of consistent hiring practices and retention strategies. We also provide compensation services, behavior-based interview training and talent assessment. Employment Screening. Our Employment Screening services offer a customized approach to background-check reporting for companies.
Our Recruiting Services offer direct hire placement on an as-needed basis and provide outsourced support for individual requisitions or large-scale hiring projects. In addition, we provide consulting services to assist in the creation and maintenance of consistent hiring practices and retention strategies. We also provide compensation services, behavior-based interview training and talent assessment. Employment Screening.
The SBEA provides a CPEO shall be treated as the employer under Subtitle C – Employment Taxes of the Code and shall be responsible for reporting federal employment taxes on remuneration paid by the CPEO rather than the CPEO clients. 16 2023 Form 10-K BUSINESS For any client CSA that is not a CPEO contract, Code Section 3401, which applies to federal income tax withholding requirements, contains an exception to the general common law test applied to determine whether an entity is an “employer” for purposes of federal income tax withholding.
For any client CSA that is not a CPEO contract, Code Section 3401, which applies to federal income tax withholding requirements, contains an exception to the general common law test applied to determine whether an entity is an “employer” for purposes of federal income tax withholding.
For all PEO HR Outsourcing Solutions clients, the average annual retention rate over the last five years was approximately 85%.
We focus heavily on client retention. During 2024 and 2023, our retention rate was approximately 81% and 83%, respectively. For all PEO HR Outsourcing Solutions clients, the average annual retention rate over the last five years was approximately 84%.
We believe reputation, national presence, regulatory expertise, financial resources, risk management, and information technology capabilities distinguish leading PEOs from the rest of the industry. We also believe we compete favorably in these areas; however, other PEOs may offer their PEO services at lower prices than we offer.
Competition in the PEO industry revolves primarily around quality of services, scope of services, choice and quality of benefits packages, reputation, and price. We believe reputation, national presence, regulatory expertise, financial resources, risk management, and information technology capabilities distinguish leading PEOs from the rest of the industry.
Treasury-based funds, which are invested through brokerage firms affiliated with the banks at which our deposits are held.
Through various overnight “sweep account” programs, we also invest a significant portion of our cash balances in U.S. Treasury-based funds, which are invested through brokerage firms affiliated with the banks at which our deposits are held.
All of our cash deposits are held by Federal Deposit Insurance Corporation 19 2023 Form 10-K RISK FACTORS (“FDIC”) insured banks, which amounts exceed the FDIC insurance limits. Through various overnight “sweep account” programs, we also invest a significant portion of our cash balances in U.S.
We use a U.S.-based global systemically important bank (or G-SIB) for our PEO operations, including our cash balances associated with that portion of our business. All of our cash deposits are held by Federal Deposit Insurance Corporation (“FDIC”) insured banks, which amounts exceed the FDIC insurance limits.
During the same three-year period, our gross profit per WSEE and operating income per WSEE exceeded industry averages by 142% and 208%, respectively. 13 2023 Form 10-K BUSINESS Competition in the PEO industry revolves primarily around quality of services, scope of services, choice and quality of benefits packages, reputation, and price.
During 12 2024 Form 10-K BUSINESS the three-year period from 2021 through 2023, our staff support ratio averaged 57% higher than the PEO industry average. During the same three-year period, our gross profit per WSEE and operating income per WSEE exceeded industry averages by 119% and 146%, respectively.
However, our performance could be affected by a downturn in one of these industries or by general economic conditions within the small and medium-sized business community. We focus heavily on client retention. During 2023 and 2022, our retention rate was approximately 83% and 85%, respectively.
Our PEO HR Outsourcing Solutions client base is broadly distributed throughout a wide variety of industries as follows: This diverse client base lowers our exposure to downturns or volatility in any particular industry. However, our performance could be affected by a downturn in one of these industries or by general economic conditions within the small and medium-sized business community.
In either of those events, our clients may seek recourse against us or choose not to renew.
Furthermore,if the IRS were to otherwise challenge the claims we requested, we could face penalties or other liabilities. If any those events were to occur, our clients may seek recourse against us or choose not to renew.
We also strive to leverage our relationships with our customers to enable cross-selling of our various products and services. During 2023 and 2022, revenues from our other products and services offerings as a percentage of our total revenues were 0.8% and 0.7%, respectively.
We also strive to leverage our relationships with our customers to enable cross-selling of our various products and services. Following are the key components of our other products and services, which are offered separately or as a bundle: Comprehensive Traditional Payroll and Human Capital Management Solution.
Bank failures or other events affecting financial institutions could have a material adverse effect on our business, results of operations or financial condition, or have other adverse consequences. We use a U.S.-based global systemically important bank (or G-SIB) for our PEO operations, including our cash balances associated with that portion of our business.
As a result of the foregoing, our business, results of operations and financial condition could be materially adversely affected. 18 2024 Form 10-K RISK FACTORS Bank failures or other events affecting financial institutions could have a material adverse effect on our business, results of operations or financial condition, or have other adverse consequences.
Removed
Through our many alliances with best-in-class providers, Insperity’s MarketPlace is an e-commerce portal that brings a wide range of products and services to our clients, WSEEs and their families. Through MarketPlace, which is provided through Insperity Premier, our clients also have the opportunity to offer their products and services to other clients and WSEEs. Middle Market Solutions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFollowing is a reconciliation of payroll cost (GAAP) to non-bonus payroll costs (non-GAAP): (in thousands, except per WSEE per month) Year Ended December 31, 2023 2022 2021 Per WSEE Per WSEE Per WSEE Payroll cost $ 36,655,495 $ 9,787 $ 34,188,092 $ 9,657 $ 28,345,623 $ 9,420 Less: Bonus payroll cost 4,978,439 1,329 4,959,987 1,401 4,719,217 1,568 Non-bonus payroll cost $ 31,677,056 $ 8,458 $ 29,228,105 $ 8,256 $ 23,626,406 $ 7,852 % Change year over year 8.4 % 2.4 % 23.7 % 5.1 % 14.5 % 6.9 % 54 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Following is a reconciliation of cash, cash equivalents and marketable securities (GAAP) to adjusted cash, cash equivalents and marketable securities (non-GAAP): (in thousands) December 31, 2023 December 31, 2022 Cash, cash equivalents and marketable securities $ 708,778 $ 765,896 Less: Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions 510,092 504,817 Client prepayments 27,592 36,800 Adjusted cash, cash equivalents and marketable securities $ 171,094 $ 224,279 Following is a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP): Year Ended December 31, (in thousands, except per WSEE per month) 2023 2022 2021 Per WSEE Per WSEE Per WSEE Net income $ 171,382 $ 46 $ 179,350 $ 51 $ 124,080 $ 41 Income tax expense 53,696 14 66,075 19 44,238 15 Interest expense 27,137 7 14,207 4 7,458 2 Amortization of SaaS implementation costs 5,711 2 1,923 1 — — Depreciation and amortization 42,708 11 40,660 11 38,547 13 EBITDA 300,634 80 302,215 86 214,323 71 Stock-based compensation 52,996 14 50,080 14 40,623 14 Adjusted EBITDA $ 353,630 $ 94 $ 352,295 $ 100 $ 254,946 $ 85 % Change year over year 0.4 % (6.0) % 38.2 % 17.6 % (11.7) % (17.5) % Following is a reconciliation of net income (GAAP) to adjusted net income (non-GAAP): Year Ended December 31, (in thousands) 2023 2022 2021 Net income $ 171,382 $ 179,350 $ 124,080 Non-GAAP adjustments: Stock-based compensation 52,996 50,080 40,623 Tax effect (12,643) (13,483) (10,677) Total non-GAAP adjustments, net 40,353 36,597 29,946 Adjusted net income $ 211,735 $ 215,947 $ 154,026 % Change year over year (2.0) % 40.2 % (15.1) % 55 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP): Year Ended December 31, (amounts per share) 2023 2022 2021 Diluted EPS $ 4.47 $ 4.64 $ 3.18 Non-GAAP adjustments: Stock-based compensation 1.38 1.30 1.04 Tax effect (0.33) (0.35) (0.27) Total non-GAAP adjustments, net 1.05 0.95 0.77 Adjusted EPS $ 5.52 $ 5.59 $ 3.95 % Change year over year (1.3) % 41.5 % (14.9) % 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 repurchases, potential acquisitions, debt service requirements and other operating cash needs.
Biggest changeFollowing is a reconciliation of payroll cost (GAAP) to non-bonus payroll costs (non-GAAP): (in millions, except per WSEE per month) Year Ended December 31, 2024 2023 2022 Per WSEE Per WSEE Per WSEE Payroll cost $ 37,171 $ 10,081 $ 36,655 $ 9,787 $ 34,188 $ 9,657 Less: Bonus payroll cost 5,101 1,383 4,978 1,329 4,960 1,401 Non-bonus payroll cost $ 32,070 $ 8,698 $ 31,677 $ 8,458 $ 29,228 $ 8,256 Payroll cost % change year over year 1 % 3 % 7 % 1 % 21 % 3 % Non-bonus payroll cost % change year over year 1 % 3 % 8 % 2 % 24 % 5 % 51 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Following is a reconciliation of cash, cash equivalents and marketable securities (GAAP) to adjusted cash, cash equivalents and marketable securities (non-GAAP): (in millions) December 31, 2024 December 31, 2023 Cash, cash equivalents and marketable securities $ 1,055 $ 709 Less: Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions 830 510 Client prepayments 91 28 Adjusted cash, cash equivalents and marketable securities $ 134 $ 171 Following is a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP): Year Ended December 31, (in millions, except per WSEE per month) 2024 2023 2022 Per WSEE Per WSEE Per WSEE Net income $ 91 $ 25 $ 171 $ 46 $ 179 $ 51 Income tax expense 35 8 54 14 66 19 Interest expense 28 8 27 7 14 4 Amortization of SaaS implementation costs 11 3 6 2 2 1 Depreciation and amortization 44 12 43 11 41 11 EBITDA 209 56 301 80 302 86 Stock-based compensation 61 17 53 14 50 14 Adjusted EBITDA $ 270 $ 73 $ 354 $ 94 $ 352 $ 100 Net income % change year over year (47) % (46) % (4) % (10) % 44 % 24 % Adjusted EBITDA % change year over year (24) % (22) % 1 % (6) % 38 % 18 % Following is a reconciliation of net income (GAAP) to adjusted net income (non-GAAP): Year Ended December 31, (in millions) 2024 2023 2022 Net income $ 91 $ 171 $ 179 Non-GAAP adjustments: Stock-based compensation 61 53 50 Tax effect (17) (12) (13) Total non-GAAP adjustments, net 44 41 37 Adjusted net income $ 135 $ 212 $ 216 Net income % change year over year (47) % (4) % 44 % Adjusted net income % change year over year (36) % (2) % 40 % 52 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP): Year Ended December 31, (amounts per share) 2024 2023 2022 Diluted EPS $ 2.42 $ 4.47 $ 4.64 Non-GAAP adjustments: Stock-based compensation 1.61 1.38 1.30 Tax effect (0.45) (0.33) (0.35) Total non-GAAP adjustments, net 1.16 1.05 0.95 Adjusted EPS $ 3.58 $ 5.52 $ 5.59 Diluted EPS % change year over year (46) % (4) % 46 % Adjusted EPS % change year over year (35) % (1) % 42 % 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 repurchases, potential acquisitions, debt service requirements and other operating cash needs.
Our corporate employees include client services, sales and marketing, benefits, legal, finance, information technology, administrative support personnel and those associated with our other products and services. • 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 incentive plan awards. • Commissions — Commissions expense consists primarily of amounts paid to sales managers and other sales personnel, including BPAs as well as channel referral fees.
Our corporate employees include client services, sales and marketing, benefits, legal, finance, information technology, administrative support personnel and those associated with our other products and services. • Stock-based compensation — Our stock-based compensation relates to the recognition of non-cash compensation expense over the requisite service period of time-based and performance-based incentive plan awards. • Commissions — Commissions expense consists primarily of amounts paid to sales managers and other sales personnel, including BPAs as well as channel referral fees.
Gross Profit Our gross profit per WSEE is primarily determined by our ability to accurately estimate and control direct costs and our ability to incorporate changes in these costs into the gross billings charged to PEO HR Outsourcing Solutions clients, which are subject to pricing arrangements that are typically renewed annually.
Gross Profit Our gross profit per WSEE is primarily determined by our ability to accurately estimate direct costs and our ability to incorporate changes in these costs into the gross billings charged to PEO HR Outsourcing Solutions clients, which are subject to pricing arrangements that are typically renewed annually.
If we were to experience any significant changes in actuarial assumptions, our loss development rates could increase (or decrease), which would result in an increase (or decrease) in workers’ compensation costs and a resulting decrease (or increase) in net income reported in our Consolidated Statements of Income and Comprehensive Income.
If we were to experience any significant changes in actuarial assumptions, our loss development rates could increase (or decrease), which would result in an increase (or decrease) in workers’ compensation costs and a resulting decrease (or increase) in net income reported in our Consolidated Statements of Income.
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 in the Consolidated Statements of Income and Comprehensive Income.
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 in the Consolidated Statements of Income.
The increase was primarily due to commissions associated with our PEO HR Outsourcing Solutions, as well as an increase in the amount of sales channel referral fees paid during 2023. • General and administrative expenses for 2023 increased 13.8% to $177.7 million, or $4 per WSEE per month, compared to 2022.
The increase was primarily due to commissions associated with our PEO HR Outsourcing Solutions, as well as an increase in the amount of sales channel referral fees paid during 2023. • General and administrative expenses for 2023 increased 13% to $177 million, or $4 per WSEE per month, compared to 2022.
Our estimate of incurred claim costs expected to be paid within one year is recorded as accrued workers’ compensation costs and 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 in our Consolidated Balance Sheets. 44 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS New Accounting Pronouncements We believe that we have implemented the accounting pronouncements with a material impact on our financial statements and do not believe there are any new or pending pronouncements that will materially impact our financial position or results of operations.
Our estimate of incurred claim costs expected to be paid within one year is recorded as accrued workers’ compensation costs and 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 in our Consolidated Balance Sheets. 42 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS New Accounting Pronouncements We believe that we have implemented the accounting pronouncements with a material impact on our financial statements and do not believe there are any new or pending pronouncements that will materially impact our financial position or results of operations.
In 2023 and 2022, the increase in other income was due to an increase in interest rates on our marketable securities investments and workers’ compensation deposits, which was partially offset by an increase in interest expense related to higher average interest rates on borrowings under our credit facility.
In 2024 and 2023, the increase in other income was due to an increase in interest rates on our marketable securities investments and workers’ compensation deposits, which was partially offset by an increase in interest expense related to higher average interest rates on borrowings under our credit facility.
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, including the Insperity Invitational™ presented by UnitedHealthcare® sponsorship. • 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 ◦ administrative costs, such as postage, printing and supplies ◦ employee travel and training expenses ◦ facility costs, including repairs and maintenance ◦ technology costs, including software-as-a-service (“SaaS”) subscription costs and amortization of SaaS implementation costs • Depreciation and amortization — Depreciation and amortization expense is primarily a function of our capital investments in corporate facilities, service centers, sales offices, software development and technology infrastructure.
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, including the Insperity Invitational™ presented by UnitedHealthcare® sponsorship. • 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 ◦ administrative costs, such as postage, printing and supplies ◦ employee travel and training expenses ◦ facility costs, including repairs and maintenance ◦ technology costs, including software-as-a-service (“SaaS”) subscription costs, amortization of SaaS implementation costs, and costs associated with the development and implementation of the Workday joint solution. • Depreciation and amortization — Depreciation and amortization expense is primarily a function of our capital investments in corporate facilities, service centers, sales offices, software development and technology infrastructure.
We believe the following accounting policies are critical and/or require significant judgments and estimates used in the preparation of our Consolidated Financial Statements: • Benefits costs — We provide group health insurance coverage under a single-employer plan that covers both our WSEEs in our PEO HR Outsourcing Solutions and our corporate employees and utilizes a national network of carriers including United, UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii and Tufts (known as Harvard Pilgrim Health Care (HPHC) beginning in 2024), all of which provide fully insured policies or service contracts.
We believe the following accounting policies are critical and/or require judgments and estimates used in the preparation of our Consolidated Financial Statements: • Benefits costs — We provide group health insurance coverage under a single-employer plan that covers both our WSEEs in our PEO HR Outsourcing Solutions and our corporate employees and utilizes a national network of carriers including United, UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii, and Harvard Pilgrim Health Care, formerly known as Tufts, all of which provide fully insured policies or service contracts.
We use gross profit per WSEE per month as our principal measurement of relative performance at the gross profit level. 41 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 cash incentive compensation.
We use gross profit per WSEE per month as our principal measurement of relative performance at the gross profit level. 39 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 cash incentive compensation.
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. As of December 31, 2023, we had outstanding letters of credit and borrowings totaling $370.4 million under the Facility.
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. As of December 31, 2024, we had outstanding letters of credit and borrowings totaling $370 million under the Facility.
For further information related to our health insurance costs, please read “—Critical Accounting Policies and Estimates—Benefits Costs.” We believe the effects of inflation have not had a significant impact on our results of operations or financial condition; however, inflationary pressure could adversely impact our profitability in the future. 57 2023 Form 10-K QUANTITATIVE AND QUALITATIVE DISCLOSURES
For further information related to our health insurance costs, please read “—Critical Accounting Policies and Estimates—Benefits Costs.” We believe the effects of inflation have not had a significant impact on our results of operations or financial condition; however, inflationary pressure could adversely impact our profitability in the future. 54 2024 Form 10-K QUANTITATIVE AND QUALITATIVE DISCLOSURES
The increase was primarily due to an increase in BPA, service and support headcount and staff compensation levels, which was partially offset by lower incentive compensation expense in 2023 compared to 2022. • Stock-based compensation expense for 2023 increased 5.8% to $53.0 million, but remained flat on a per WSEE per month basis, compared to 2022.
The increase was primarily due to an increase in BPA, service and support headcount and staff compensation levels, which was partially offset by lower incentive compensation expense in 2023 compared to 2022. • Stock-based compensation expense for 2023 increased 6% to $53 million, but remained flat on a per WSEE per month basis, compared to 2022.
The terms of the arrangement with United require us to maintain an accumulated cash surplus in the plan of $9.0 million, which is reported as long-term prepaid insurance. As of December 31, 2023, Plan Costs were more than the net premiums paid and owed to United by $23.5 million.
The terms of the arrangement with United require us to maintain an accumulated cash surplus in the plan of $9 million, which is reported as long-term prepaid insurance. As of December 31, 2024, Plan Costs were more than the net premiums paid and owed to United by $5 million.
The increase was primarily due to increased travel and event costs, software licensing and maintenance costs, and amortization of SaaS implementation costs. • Depreciation and amortization expense for 2023 increased 5.0% to $42.7 million, but remained flat on a per WSEE per month basis, compared to 2022.
The increase was primarily due to increased travel and event costs, software licensing and maintenance costs, and amortization of SaaS implementation costs. • Depreciation and amortization expense for 2023 increased 5% to $43 million, but remained flat on a per WSEE per month basis, compared to 2022.
The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and 42 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS expenses, and related disclosure of contingent assets and liabilities.
The preparation of these financial statements requires 40 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
Please read Note 6 to the Consolidated Financial Statements, “ Long-Term Debt ,” for additional information. Cash Flows from Operating Activities Net cash provided by operating activities in 2023 was $198.5 million. Our primary source of cash from operations is the comprehensive service fee and payroll funding we collect from our clients.
Please read Note 6 to the Consolidated Financial Statements, “ Long-Term Debt ,” for additional information. Cash Flows from Operating Activities Net cash provided by operating activities in 2024 was $520 million. Our primary source of cash from operations is the comprehensive service fee and payroll funding we collect from our clients.
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 years ended December 31, 2023 and 2022, we reduced accrued workers’ compensation costs by $33.5 million and $42.2 million, respectively, for changes in estimated losses related to prior reporting periods.
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 years ended December 31, 2024 and 2023, we reduced accrued workers’ compensation costs by $32 million and $33 million, respectively, for changes in estimated losses related to prior reporting periods.
The $63 per WSEE per month increase in direct costs is due primarily to the direct cost components changes as follows: Benefits costs • The cost of group health insurance and related employee benefits increased $44 per WSEE per month, or 6.6% on a cost per covered employee basis. • The percentage of WSEEs covered under our health insurance plans was 65.0% in 2023 compared to 65.4% in 2022. • Reported results include changes in estimated claims run-off related to prior periods, which was a decrease in costs of $13.0 million, or $3 per WSEE per month, in 2023 compared to an increase in costs of $12.1 million, or $3 per WSEE per month, in 2022.
The $63 per WSEE per month increase in direct costs is due primarily to the direct cost component changes as follows: Benefits costs • The cost of group health insurance and related employee benefits increased $44 per WSEE per month, or 7% on a cost per covered employee basis. • The percentage of WSEEs covered under our health insurance plans was 65% in both 2023 and 2022. • Reported results include changes in estimated claims run-off related to prior periods, which was a decrease in costs of $13 million, or $3 per WSEE per month, in 2023 compared to an increase in costs of $12 million, or $3 per WSEE per month, in 2022.
As this amount is less than the agreed-upon $9.0 million surplus maintenance level, the $32.5 million difference is included in accrued health insurance costs, a current liability, in our Consolidated Balance Sheets.
As this amount is less than the agreed-upon $9 million surplus maintenance level, the $14 million difference is included in accrued health insurance costs, a current liability, in our Consolidated Balance Sheets.
In addition, the premiums owed to United at December 31, 2023, were $6.5 million, which is also included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets. We believe that recent claim development patterns are representative of incurred but not reported claims costs during the reporting period.
In addition, the premiums owed to United at December 31, 2024, were less than $1 million, which is also included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets. We believe that recent claim development patterns are representative of incurred but not reported claims costs during the reporting period.
At December 31, 2023, we had working capital of $159.0 million compared to $158.5 million at December 31, 2022. 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 2024.
At December 31, 2024, we had working capital of $155 million compared to $159 million at December 31, 2023. We currently believe that our cash on hand, marketable securities, cash flows from operations, and availability under the Facility will be adequate to meet our liquidity requirements for 2025.
Treasury rates that correspond with the weighted average estimated claim payout period (the average discount rate was 4.3% in 2023 and 2.9% in 2022) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Income and Comprehensive Income.
Treasury rates that correspond with the weighted average estimated claim payout period (the average discount rate was 4.3% in both 2024 and 2023) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Income.
In the year ended December 31, 2022, the last business day of the reporting period was also a Friday, client prepayments were $36.8 million and employment taxes and other deductions were $504.8 million. • Workers’ compensation plan funding — During 2023 and 2022, we received $46.3 million and $30.2 million, respectively, for the return of excess claim funds related to the workers’ compensation program, which resulted in an increase in working capital. 56 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Medical plan funding — Our health care contract with United establishes participant cash funding rates 90 days in advance of the beginning of a reporting quarter.
In the year ended December 31, 2023, the last business day of the reporting period was a Friday, client prepayments were $28 million and employment taxes and other deductions were $510 million. 53 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Workers’ compensation plan funding — During 2024 and 2023, we received $39 million and $46 million, respectively, 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.
As of December 31, 2023, Plan Costs were more than the net premiums paid and owed to United by $23.5 million, which is $32.5 million less than our agreed-upon $9.0 million surplus maintenance level.
As of December 31, 2024, Plan Costs were more than the net premiums paid and owed to United by $5 million, which is $14 million less than our agreed-upon $9 million surplus maintenance level.
(3) Revenues per WSEE per month are comprised of gross billings per WSEE per month less WSEE payroll costs per WSEE per month as follows: Year Ended December 31, (per WSEE per month) 2023 2022 2021 Gross billings $ 11,519 $ 11,335 $ 11,073 Less: WSEE payroll cost 9,787 9,657 9,420 Revenues $ 1,732 $ 1,678 $ 1,653 46 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Key Operating Metrics We monitor certain key metrics to measure our performance, including: • WSEEs • Adjusted EBITDA • Adjusted EPS Our growth in the number of WSEEs paid is affected by three primary sources: new client sales, client retention and the net change in WSEEs paid at existing clients through new hires and employee terminations. • During 2023, the average number of WSEEs paid from new client sales and the net gain (loss) in our client base declined compared to 2022.
(3) Revenues per WSEE per month are comprised of gross billings per WSEE per month less WSEE payroll costs per WSEE per month as follows: 43 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Year Ended December 31, (per WSEE per month) 2024 2023 2022 Gross billings $ 11,866 $ 11,519 $ 11,335 Less: WSEE payroll cost 10,081 9,787 9,657 Revenues $ 1,785 $ 1,732 $ 1,678 Key Operating Metrics We monitor certain key metrics to measure our performance, including: • WSEEs • Adjusted EBITDA • Adjusted EPS Our growth in the number of WSEEs paid is affected by three primary sources: new client sales, client retention and the net change in WSEEs paid at existing clients through new hires and employee terminations. • During 2024, the average number of WSEEs paid from new client sales increased 2% from 2023.
Operating expenses per WSEE per month for 2023 increased 1.9% to $219 compared to $215 in 2022. • Salaries of corporate and sales staff for 2023 increased 6.9% to $460.7 million, or $1 per WSEE per month, compared to 2022.
Operating expenses per WSEE per month for 2023 increased 2% to $219 compared to $215 in 2022. • Salaries of corporate and sales staff for 2023 increased 7% to $461 million, or $1 per WSEE per month, compared to 2022.
The following table illustrates the sensitivity of changes in the loss development rate on our estimate of workers’ compensation costs totaling $74.1 million in 2023: Change in Loss Development Rate Change in Workers’ Compensation Costs (in thousands) Change in Net Income (in thousands) (5.0)% $ (3,926) $ 2,987 (2.5)% (1,963) 1,494 2.5% 1,963 (1,494) 5.0% 3,926 (2,987) 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 following table illustrates the sensitivity of changes in the loss development rate on our estimate of workers’ compensation costs totaling $75 million in 2024: Change in Loss Development Rate Change in Workers’ Compensation Costs (in millions) Change in Net Income (in millions) (5.0)% $ (4) $ 3 (2.5)% (2) 1 2.5% 2 (1) 5.0% 4 (3) 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”).
Our revenues per WSEE per month increased $54 due to higher average pricing of 3.2%. The net decrease in direct costs between 2023 and 2022 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $16.4 million as discussed below.
Our revenues per WSEE per month increased $53 due to higher average pricing of 3%. The net decrease in direct costs between 2024 and 2023 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $15 million as discussed below.
The increase was primarily due to the 5.8% growth in the average number of WSEEs paid per month, which was partially offset by a 3.1% decrease in gross profit per WSEE. Gross profit per WSEE paid per month reflected, in part, a 3.2% pricing increase offset by a 4.5% increase in direct costs per WSEE.
The increase was primarily due to a 3% increase in gross profit per WSEE, which was partially offset by a 2% decline in the average number of WSEEs paid per month. Gross profit per WSEE paid per month reflected, in part, a 3% pricing increase offset by a 3% increase in direct costs per WSEE.
Please read “ — Critical Accounting Policies and Estimates — Benef its Costs ” for a discussion of our accounting for health insurance costs. 49 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Workers’ compensation costs Our continued discipline around our client selection, workplace safety and claims management contributed to the small increase in our cost per WSEE and, as a result, has allowed for claims within our policy periods to be closed out at amounts below our original cost estimates. • Workers’ compensation costs increased 12.1%, or $1 per WSEE per month, in 2023 compared to 2022. • As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.23% in both 2023 and 2022. • We recorded a reduction in workers’ compensation costs of $33.5 million, or 0.11% of non-bonus payroll costs, in 2023 compared to a reduction of $42.2 million, or 0.14% of non-bonus payroll costs, in 2022, primarily as a result of closing out claims at lower than expected costs.
Workers’ compensation costs Our continued discipline around our client selection, workplace safety and claims management has allowed for claims within our policy periods to be closed out at amounts below our original cost estimates. • Workers’ compensation costs increased 2%, or $1 per WSEE per month, in 2024 compared to 2023. • As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.24% in 2024 and 0.23% in 2023. • We recorded a reduction in workers’ compensation costs of $32 million, or 0.10% of non-bonus payroll costs, in 2024 compared to a reduction of $33 million, or 0.11% of non-bonus payroll costs, in 2023, primarily as a result of closing out claims at lower than expected costs. 47 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Please read “ —Critical Accounting Policies and Estimates—Workers' Compensation Costs ” for a discussion of our accounting for workers’ compensation costs.
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. Effective January 1, 2020, we entered into an arrangement whereby our financial responsibility is limited to the first $1 million of paid claims per claimant per year.
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 benefits costs. Our financial responsibility with United is limited to the first $1 million of paid claims per claimant per year.
The following table illustrates the sensitivity of changes in the completion rate on our estimate of total benefits costs of $3.0 billion in 2023: Change in Completion Rate Change in Benefits Costs (in thousands) Change in Net Income (in thousands) (2.5)% $ (29,871) $ 22,744 (1.0)% (11,948) 9,098 1.0% 11,948 (9,098) 2.5% 29,871 (22,744) 43 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Workers’ compensation costs — Since 2007, our workers’ compensation coverage has been provided through an arrangement with Chubb.
The following table illustrates the sensitivity of changes in the completion rate on our estimate of total benefits costs of $3.0 billion in 2024: Change in Completion Rate Change in Benefits Costs (in millions) Change in Net Income (in millions) (2.5)% $ (31) $ 22 (1.0)% (12) 9 1.0% 12 (9) 2.5% 31 (22) 41 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Workers’ compensation costs — Since 2007, our workers’ compensation coverage has been provided through an arrangement with Chubb.
Payroll tax costs • Payroll taxes increased 8.9% on a 7.2% increase in payroll costs, or $18 per WSEE per month. • Payroll taxes as a percentage of payroll costs increased to 6.5% in 2023 compared to 6.4% in 2022. 2022 Compared to 2021 The net increase in direct costs between 2022 and 2021 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $6.7 million as discussed below.
Payroll tax costs • Payroll taxes increased 2% on a 1% increase in payroll costs, or $24 per WSEE per month. • Payroll taxes as a percentage of payroll costs increased to 7% in 2024 compared to 6% in 2023. 2023 Compared to 2022 The net decrease in direct costs between 2023 and 2022 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $16 million as discussed below.
In addition, the premiums owed to United at December 31, 2023, were $6.5 million, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets. • Operating results — Our adjusted net income has a significant impact on our operating cash flows.
In addition, the premiums owed to United at December 31, 2024, were less than $1 million, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheet. • Operating results — Our net income and adjusted net income has a significant impact on our operating cash flows.
The percentage of total PEO HR Outsourcing Solutions revenues in our significant markets include the following: Significant Markets 48 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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.
The percentage of total PEO HR Outsourcing Solutions revenues in our significant markets include 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.
We have estimated and accrued $220.3 million in incurred workers’ compensation claim costs as of December 31, 2023.
We have estimated and accrued $204 million in incurred workers’ compensation claim costs as of December 31, 2024.
Workers’ compensation costs Our continued discipline around our client selection, safety and claims management contributed to the reduction 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 4.1%, or $4 per WSEE per month, in 2022 compared to 2021. • As a percentage of non-bonus payroll cost, workers’ compensation costs in 2022 were 0.23% compared to 0.29% in 2021. • As a result of closing out claims incurred in prior periods at lower than expected costs, we recorded a reduction in workers’ compensation costs of $42.2 million, or 0.14% of non-bonus payroll costs, in 2022 compared to a reduction of $41.7 million, or 0.18% of non-bonus payroll costs, in 2021.
Workers’ compensation costs Our continued discipline around our client selection, workplace safety and claims management contributed to the small increase in our cost per WSEE and, as a result, has allowed for claims within our policy periods to be closed out at amounts below our original cost estimates. • Workers’ compensation costs increased 12%, or $1 per WSEE per month, in 2023 compared to 2022. • As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.23% in both 2023 and 2022. • We recorded a reduction in workers’ compensation costs of $33 million, or 0.11% of non-bonus payroll costs, in 2023 compared to a reduction of $42 million, or 0.14% of non-bonus payroll costs, in 2022, primarily as a result of closing out claims at lower than expected costs.
Please read Note 2 to the Consolidated Financial Statements, “Other Balance Sheet Information,” for additional information. Income Tax Expense Our effective income tax rate was 23.9% in 2023, 26.9% in 2022 and 26.3% in 2021.
Please read Note 2 to the Consolidated Financial Statements, “Other Balance Sheet Information,” for additional information. Income Tax Expense Our effective income tax rate was 28% in 2024, 24% in 2023 and 27% in 2022.
Please read Note 1 “ Accounting Policies ” and Note 7 “Income Taxes,” to the Consolidated Financial Statements for additional information. 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.
Please read Note 1 “ Accounting Policies ” and Note 7 “Income Taxes,” to the Consolidated Financial Statements for additional information. 50 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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.
The increase was primarily due to awards issued under our long-term incentive and restricted stock unit programs. Please read Note 1 “Accounting Policies” and Note 9 “Incentive Plans,” to the Consolidated Financial Statements for additional information. • Commissions expense for 2022 increased 30.8% to $45.7 million, or $1 per WSEE per month, compared to 2021.
The increase was primarily due to awards issued under our long-term incentive and restricted stock unit programs. Please read Note 1 “Accounting Policies” and Note 9 “Incentive Plans,” to the Consolidated Financial Statements for additional information. • Commissions expense for 2023 increased 2% to $47 million, but remained flat on a per WSEE per month basis, compared to 2022.
The $32.5 million difference is therefore reflected as a current liability and $9.0 million is reflected as a long-term asset on our Consolidated Balance Sheets at December 31, 2023.
The $14 million difference is therefore reflected as a current liability and $9 million is reflected as a long-term asset on our Consolidated Balance Sheet at December 31, 2024.
The $12 per WSEE per month increase in direct costs is due primarily to the direct cost component changes as follows: Benefits costs • The cost of group health insurance and related employee benefits decreased $9 per WSEE per month, but increased 1.2% on a per covered employee basis. • The percentage of WSEEs covered under our health insurance plans was 65.4% in 2022 compared to 67.0% in 2021. • Reported results include changes in estimated claims run-off related to prior periods, which was an increase in costs of $12.1 million, or $3 per WSEE per month, in 2022 compared to an increase in costs of $4.9 million, or $2 per WSEE per month, in 2021.
The $45 per WSEE per month increase in direct costs is due primarily to the direct cost component changes as follows: Benefits costs • The cost of group health insurance and related employee benefits increased $20 per WSEE per month, or 4.3% on a cost per covered employee basis. • The percentage of WSEEs covered under our health insurance plans was 64% in 2024 compared to 65% in 2023. • Reported results include changes in estimated claims run-off related to prior periods, which was a decrease in costs of $29 million, or $8 per WSEE per month, in 2024 compared to a decrease in costs of $13 million, or $3 per WSEE per month, in 2023.
In 2023, we received $46.3 million for the return of excess claim funds related to the workers’ compensation program, which decreased deposits – workers’ compensation. As of December 31, 2023, we had restricted cash of $57.4 million and deposits – workers’ compensation of $198.2 million.
In 2024, we received $39 million for the return of excess claim funds related to the workers’ compensation program, which decreased deposits – workers’ compensation. As of December 31, 2024, we had restricted cash of $69 million and deposits – workers’ compensation of $178 million.
Payroll taxes and associated billings are computed based on an employee’s annual taxable wage base. The annual payroll tax wage bases are frequently met in the first two quarters of each year depending on the employee’s compensation levels.
We have also experienced variability on a quarterly basis in medical claims costs based on the unpredictable nature of large claims. Payroll taxes and associated billings are computed based on an employee’s annual taxable wage base. The annual payroll tax wage bases are frequently met in the first two quarters of each year depending on the employee’s compensation levels.
These other products or services generally are offered only with our other solutions. 2023 Highlights • Average number of WSEEs paid per month increased 5.8% to 312,102.
These other products or services generally are offered only with our other solutions. 2024 Highlights • Average number of WSEEs paid per month decreased 2% to 307,261.
The increase in direct costs per WSEE was primarily attributable to a 6.6% increase in benefits costs per participant. • Operating expenses increased 7.5% in 2023 to $818.3 million, and included increases in travel and event costs, salary and wages, and the implementation of a CRM solution.
The increase in direct costs per WSEE was primarily attributable to a 4% increase in benefits costs per participant. • Operating expenses increased 14% in 2024 to $935 million, and included increases in travel and event costs, salary and wages, and the implementation of our Workday strategic partnership.
Our provision for income taxes differed from the U.S. statutory rate of 21% primarily due to state income taxes and non-deductible expenses, offset by 53 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS excess tax benefits associated with the vesting of equity compensation of $4.9 million, $0.2 million and $2.6 million, in 2023, 2022 and 2021, respectively.
Our provision for income taxes differed from the U.S. statutory rate of 21% primarily due to state income taxes and non-deductible expenses, offset by excess tax benefits associated with the vesting of equity compensation of less than $1 million, $5 million and less than $1 million, in 2024, 2023 and 2022, respectively.
On a per WSEE per month basis, operating expenses increased from $215 in 2022 to $219 in 2023. • Net income and diluted earnings per share (“Diluted EPS”) decreased 4.4% and 3.7% to $171.4 million and $4.47, respectively. • Adjusted EBITDA increased 0.4% to $353.6 million. 40 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Adjusted net income decreased 2.0% to $211.7 million. • Adjusted EPS decreased 1.3% to $5.52. • Our adjusted EBITDA per WSEE per month decreased 6.0% from $100 in 2022 to $94 in 2023. • We ended 2023 with working capital of $159.0 million. • During 2023, we paid $84.2 million in dividends, repurchased approximately 1,259,000 shares of our common stock at a cost of $131.5 million and paid $40.1 million in capital expenditures.
On a per WSEE per month basis, operating expenses increased from $219 in 2023 to $253 in 2024. • Net income and diluted earnings per share (“Diluted EPS”) decreased 47% and 46% to $91 million and $2.42, respectively. • Adjusted net income and adjusted EPS decreased 36% and 35% to $135 million and $3.58, respectively. • Adjusted EBITDA decreased 24% to $270 million. 38 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Our net income per WSEE per month decreased 46% from $46 in 2023 to $25 in 2024. • Our adjusted EBITDA per WSEE per month decreased 22% from $94 in 2023 to $73 in 2024. • We ended 2024 with working capital of $155 million. • During 2024, we paid $89 million in dividends, repurchased approximately 697,000 shares of our common stock at a cost of $63 million and paid $38 million in capital expenditures.
Please read “ Results of Operations .” Cash Flows from Investing Activities Net cash flows used in investing activities were $21.7 million for the year ended December 31, 2023, primarily due to property and equipment purchases of $40.1 million, partially offset by $18.4 million of marketable securities maturities and dispositions, net of purchases.
Please read “ Results of Operations .” Cash Flows from Investing Activities Net cash flows used in investing activities were $38 million for the year ended December 31, 2024, primarily due to property and equipment purchases. Cash Flows from Financing Activities Net cash flows used in financing activities were $173 million for the year ended December 31, 2024.
Average WSEEs Paid and Year-over-Year Growth Percentage (in thousands) Adjusted EBITDA and Year-over-Year Growth Percentage (in thousands) Adjusted EPS and Year-over-Year Growth Percentage (amounts per share) Revenues 2023 Compared to 2022 Our revenues for 2023 were $6.5 billion, an increase of 9.2%, primarily due to the following: • Average WSEEs paid increased 5.8%. • Revenues per WSEE per month increased 3.2%, or $54. 47 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2022 Compared to 2021 Our revenues for 2022 were $5.9 billion, an increase of 19.4%, primarily due to the following: • Average WSEEs paid increased 17.7%. • Revenues per WSEE per month increased 1.5%, or $25.
Average WSEEs Paid and Year-over-Year Growth Percentage Net Income and Year-over-Year Growth Percentage (in millions) EPS and Year-over-Year Growth Percentage (amounts per share) 44 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Adjusted EBITDA and Year-over-Year Growth Percentage (in millions) Adjusted EPS and Year-over-Year Growth Percentage (amounts per share) Revenues 2024 Compared to 2023 Our revenues for 2024 were $6.6 billion, an increase of 1%, primarily due to the following: • Revenues per WSEE per month increased 3%, or $53, partially offset by a 2% decrease in average WSEEs paid. 2023 Compared to 2022 Our revenues for 2023 were $6.5 billion, an increase of 9%, primarily due to the following: • Average WSEEs paid increased 6%. • Revenues per WSEE per month increased 3%, or $54. 45 2024 Form 10-K 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 throughout the United States.
The increase was primarily due to the completion of a new facility on our corporate campus during 2021 and increased capital expenditures related to software development costs. Other Income (Expense) Other income (expense) was a net income of $6.5 million in 2023 and net expense of $4.8 million and $5.0 million in 2022 and 2021, respectively.
The increase was primarily due to increased capital expenditures related to computer hardware and software and software development costs. Other Income (Expense) Other income (expense) was net income of $9 million and $6 million in 2024 and 2023, respectively, and net expense of $5 million in 2022.
Gross Profit and Year-over-Year Growth Percentage (in thousands) Gross Profit per WSEE per Month and Year-over-Year Growth Percentage (per WSEE per month) 2023 Compared to 2022 Our pricing objectives attempt to achieve a level of revenue per WSEE that matches or exceeds changes in primary direct costs and operating expenses.
We use gross profit per WSEE per month as our principal measurement of relative performance at the gross profit level. 46 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Gross Profit and Year-over-Year Growth Percentage (in millions) Gross Profit per WSEE per Month and Year-over-Year Growth Percentage (per WSEE per month) 2024 Compared to 2023 Our pricing objectives attempt to achieve a level of revenue per WSEE that matches or exceeds changes in primary direct costs and operating expenses.
This trend is primarily the result of many WSEEs’ medical plan deductibles being fully met by the fourth quarter, which increases our liability with respect to those claims. We have also experienced variability on a quarterly basis in medical claims costs based on the unpredictable nature of large claims .
Typically, medical claims costs tend to increase throughout the year with the fourth quarter being the period with the highest costs, which has a negative impact on our fourth quarter earnings. This trend is primarily the result of many WSEEs’ medical plan deductibles being fully met by the fourth quarter, which increases our liability with respect to those claims.
We expect the average number of paid WSEEs per month to be between 318,350 and 321,500 for the full year 2024, an increase of 2% to 3%. • Approximately 26.1% and 24.9% of our average paid WSEEs were in our middle market sector for the years ended December 31, 2023 and 2022, respectively, which is generally defined as companies with 150 to 5,000 WSEEs. • Gross profit increased 2.5% to $1.0 billion.
Revenues increased 1% on a 3% increase in revenue per WSEE, partially offset by the 2% decrease in average WSEEs paid. • We ended 2024 averaging 309,093 paid WSEEs in the fourth quarter of 2024, which represents a 2% decrease over the fourth quarter of 2023. • Approximately 26% of our average paid WSEEs were in our middle market sector for the years ended December 31, 2024 and 2023, which is generally defined as companies with 150 to 5,000 WSEEs. • Gross profit increased 1% to $1.1 billion.
Payroll tax costs • Payroll taxes increased 23.0% on an 20.6% increase in payroll costs, or $27 per WSEE per month. • Payroll taxes as a percentage of payroll costs increased to 6.4% in 2022 compared to 6.3% in 2021. 51 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating Expenses 2023 Compared to 2022 The following table presents certain information related to our operating expenses: Year Ended December 31, per WSEE (in thousands, except per WSEE) 2023 2022 % Change 2023 2022 % Change Salaries $ 460,715 $ 430,945 6.9 % $ 123 $ 122 0.8 % Stock-based compensation 52,996 50,080 5.8 % 14 14 — Commissions 46,847 45,672 2.6 % 13 13 — Advertising 37,324 37,503 (0.5) % 10 11 (9.1) % General and administrative 177,664 156,134 13.8 % 48 44 9.1 % Depreciation and amortization 42,708 40,660 5.0 % 11 11 — Total operating expenses $ 818,254 $ 760,994 7.5 % $ 219 $ 215 1.9 % Operating expenses for 2023 increased 7.5% to $818.3 million compared to $761.0 million in 2022.
Payroll tax costs • Payroll taxes increased 9% on a 7% increase in payroll costs, or $18 per WSEE per month. • Payroll taxes as a percentage of payroll costs were 6% in both 2023 and 2022. 48 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating Expenses 2024 Compared to 2023 The following table presents certain information related to our operating expenses: Year Ended December 31, per WSEE (in millions, except per WSEE) 2024 2023 % Change 2024 2023 % Change Salaries $ 521 $ 461 13 % $ 141 $ 123 15 % Stock-based compensation 61 53 15 % 17 14 21 % Commissions 47 47 — 13 13 — Advertising 38 37 3 % 10 10 — General and administrative: Amortization of SaaS implementation costs 11 6 83 % 3 2 50 % Workday SaaS licensing and implementation expenses 29 — — 8 — — All other general and administrative 184 171 8 % 49 46 7 % Total general and administrative 224 177 27 % 60 48 25 % Depreciation and amortization 44 43 2 % 12 11 9 % Total operating expenses $ 935 $ 818 14 % $ 253 $ 219 16 % Operating expenses for 2024 increased 14% to $935 million compared to $818 million in 2023.
We provide our PEO HR Outsourcing Solutions to small and medium-sized businesses throughout the United States. PEO HR Outsourcing Solutions revenue distribution by region follows: PEO HR Outsourcing Solutions Revenue by Region (in thousands) ____________________________________ Note: Texas is included in the Southwest region.
PEO HR Outsourcing Solutions revenue distribution by region follows: PEO HR Outsourcing Solutions Revenue by Region (in millions) ____________________________________ Note: Texas is included in the Southwest region.
Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information. 45 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Key Financial and Statistical Data (in thousands, except per share, WSEE, and statistical data) Year Ended December 31, % Change 2023 2022 2021 2023 v 2022 2022 v 2021 Financial data: Revenues (1) $ 6,485,871 $ 5,938,818 $ 4,973,070 9.2 % 19.4 % Gross profit 1,036,803 1,011,233 820,102 2.5 % 23.3 % Operating expenses 818,254 760,994 646,773 7.5 % 17.7 % Operating income 218,549 250,239 173,329 (12.7) % 44.4 % Other income (expense), net 6,529 (4,814) (5,011) 235.6 % (3.9) % Net income 171,382 179,350 124,080 (4.4) % 44.5 % Diluted EPS 4.47 4.64 3.18 (3.7) % 45.9 % Non-GAAP financial measures (2) : Adjusted net income $ 211,735 $ 215,947 $ 154,026 (2.0) % 40.2 % Adjusted EBITDA 353,630 352,295 254,946 0.4 % 38.2 % Adjusted EPS 5.52 5.59 3.95 (1.3) % 41.5 % Average WSEEs paid 312,102 295,005 250,745 5.8 % 17.7 % Statistical data (per WSEE per month) : Revenues (3) $ 1,732 $ 1,678 $ 1,653 3.2 % 1.5 % Gross profit 277 286 273 (3.1) % 4.8 % Operating expenses 219 215 215 1.9 % — Operating income 58 71 58 (18.3) % 22.4 % Net income 46 51 41 (9.8) % 24.4 % Adjusted EBITDA (2) 94 100 85 (6.0) % 17.6 % ____________________________________ (1) Revenues are comprised of gross billings less WSEE payroll costs as follows: Year Ended December 31, (in thousands) 2023 2022 2021 Gross billings $ 43,141,366 $ 40,126,910 $ 33,318,693 Less: WSEE payroll cost 36,655,495 34,188,092 28,345,623 Revenues $ 6,485,871 $ 5,938,818 $ 4,973,070 (2) 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.
Results of Operations Key Financial and Statistical Data (in millions, except per share, WSEE, and statistical data) Year Ended December 31, % Change 2024 2023 2022 2024 v 2023 2023 v 2022 Financial data: Revenues (1) $ 6,581 $ 6,486 $ 5,939 1 % 9 % Gross profit 1,052 1,037 1,011 1 % 3 % Operating expenses 935 818 761 14 % 7 % Operating income 117 219 250 (47) % (12) % Other income (expense), net 9 6 (5) 50 % 220 % Net income 91 171 179 (47) % (4) % Diluted EPS 2.42 4.47 4.64 (46) % (4) % Non-GAAP financial measures (2) : Adjusted net income $ 135 $ 212 $ 216 (36) % (2) % Adjusted EBITDA 270 354 352 (24) % 1 % Adjusted EPS 3.58 5.52 5.59 (35) % (1) % Average WSEEs paid 307,261 312,102 295,005 (2) % 6 % Statistical data (per WSEE per month) : Revenues (3) $ 1,785 $ 1,732 $ 1,678 3 % 3 % Gross profit 285 277 286 3 % (3) % Operating expenses 253 219 215 16 % 2 % Operating income 32 58 71 (45) % (18) % Net income 25 46 51 (46) % (10) % Adjusted EBITDA (2) 73 94 100 (22) % (6) % ____________________________________ (1) Revenues are comprised of gross billings less WSEE payroll costs as follows: Year Ended December 31, (in millions) 2024 2023 2022 Gross billings $ 43,752 $ 43,141 $ 40,127 Less: WSEE payroll cost 37,171 36,655 34,188 Revenues $ 6,581 $ 6,486 $ 5,939 (2) 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.
Average client retention also declined from 85% in 2022 to 83% in 2023. • During 2022, the average number of WSEEs paid from new client sales increased 16.4% from 2021.
Average client retention also declined from 85% in 2022 to 83% in 2023.
We had $708.8 million in cash, cash equivalents and marketable securities at December 31, 2023, of which approximately $510.1 million was payable in early January 2024 for withheld federal and state income taxes, employment taxes and other payroll deductions, and approximately $27.6 million represented client prepayments that were payable in January 2024.
We had $1.1 billion in cash, cash equivalents and marketable securities at December 31, 2024, of which approximately $390 million was payable in early January 2025 for withheld federal and state income taxes, employment taxes and other payroll deductions, approximately $91 million represented client prepayments that were payable in January 2025, and $440 million of funds we received in late December 2024 from the Internal Revenue Service related to employee retention tax credits claimed by our PEO clients under COVID relief programs that are expected to be distributed to clients in early 2025.
The increase was primarily due to increased capital expenditures related to computer hardware and software and software development costs. 52 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2022 Compared to 2021 The following table presents certain information related to our operating expenses: Year Ended December 31, per WSEE (in thousands, except per WSEE) 2022 2021 % Change 2022 2021 % Change Salaries $ 430,945 $ 379,171 13.7 % $ 122 $ 126 (3.2) % Stock-based compensation 50,080 40,623 23.3 % 14 14 — Commissions 45,672 34,922 30.8 % 13 12 8.3 % Advertising 37,503 29,097 28.9 % 11 10 10.0 % General and administrative 156,134 124,413 25.5 % 44 40 10.0 % Depreciation and amortization 40,660 38,547 5.5 % 11 13 (15.4) % Total operating expenses $ 760,994 $ 646,773 17.7 % $ 215 $ 215 — Operating expenses for 2022 increased 17.7% to $761.0 million compared to $646.8 million in 2021.
The increase was primarily due to increased professional services fees, which includes expenses related to the implementation of our Workday strategic partnership, software licensing and maintenance costs, and amortization of SaaS implementation costs. 49 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2023 Compared to 2022 The following table presents certain information related to our operating expenses: Year Ended December 31, per WSEE (in millions, except per WSEE) 2023 2022 % Change 2023 2022 % Change Salaries $ 461 $ 431 7 % $ 123 $ 122 1 % Stock-based compensation 53 50 6 % 14 14 — Commissions 47 46 2 % 13 13 — Advertising 37 37 — 10 11 (9) % General and administrative 177 156 13 % 48 44 9 % Depreciation and amortization 43 41 5 % 11 11 — Total operating expenses $ 818 $ 761 7 % $ 219 $ 215 2 % Operating expenses for 2023 increased 7% to $818 million compared to $761 million in 2022.
The increase was primarily due to awards issued under our restricted stock unit program, partially offset by a decrease in the number of stock awards anticipated to be earned related to performance-based awards granted under our long-term incentive plans based on our lower than expected operating results in 2023.Please read Note 1 “Accounting Policies” and Note 9 “Incentive Plans,” to the Consolidated Financial Statements for additional information. • Commissions expense for 2023 increased 2.6% to $46.8 million, but remained flat on a per WSEE per month basis, compared to 2022.
The increase was primarily due to time-based restricted stock unit awards issued under our incentive plan. Please read Note 1 “Accounting Policies” and Note 9 “Incentive Plans,” to the Consolidated Financial Statements for additional information. • General and administrative expenses for 2024 increased 27% to $224 million, or $12 per WSEE per month, compared to 2023.
Operating expenses remained flat on a per WSEE per month basis compared to 2021. • Salaries of corporate and sales staff for 2022 increased 13.7% to $430.9 million, but decreased $4 on a per WSEE per month basis, compared to 2021 on a 17.7% increase in WSEEs paid per month.
Operating expenses per WSEE per month for 2024 increased 16% to $253 compared to $219 in 2023. • Salaries of corporate and sales staff for 2024 increased 13% to $521 million, or $18 per WSEE per month, compared to 2023.
The increase was primarily due to a 7.9% increase in corporate headcount, as well as higher incentive compensation accruals in 2022. • Stock-based compensation expense for 2022 increased 23.3% to $50.1 million, but remained flat on a per WSEE per month basis, compared to 2021.
The increase was primarily due to a 5% increase in BPA, service, technology and support headcount and staff compensation levels in 2024 compared to 2023. • Stock-based compensation expense for 2024 increased 15% to $61 million, or $3 per WSEE per month, compared to 2023.
In the year ended December 31, 2023, the last business day of the reporting period was a Friday, client prepayments were $27.6 million and employment taxes and other deductions were $510.1 million.
In the year ended December 31, 2024, the last business day of the reporting period was a Tuesday, client prepayments were $91 million and employment taxes and other deductions were $830 million, which included $440 million of funds related to client employee retention tax credits received on their behalf from the Internal Revenue Service that are expected to be distributed to clients in early 2025.
Our adjusted net income decreased 2.0% to $211.7 million in 2023, compared to $215.9 million in 2022.
Our net income and adjusted net income decreased 47% and 36% to $91 million and $135 million in 2024, respectively, compared to $171 million and $212 million in 2023, respectively.
Removed
Revenues increased 9.2% on the 5.8% WSEE growth and a 3.2% increase in revenue per WSEE. • We ended 2023 averaging 315,072 paid WSEEs in the fourth quarter of 2023, which represents a 2.5% increase over the fourth quarter of 2022.
Added
Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information.
Removed
Average client retention improved from 82% in 2021 to 85% in 2022, while the net gain in our client base continued, at higher than historical levels, although lower than 2021, a period when many clients were rehiring employees as the pandemic conditions improved.
Added
Average client retention declined from 83% in 2023 to 81% in 2024, while the net change in our client base remained positive, although lower than 2023. • During 2023, the average number of WSEEs paid from new client sales and the net change in our client base declined compared to 2022.
Removed
We use gross profit per WSEE per month as our principal measurement of relative performance at the gross profit level.
Added
Please read “ —Critical Accounting Policies and Estimates—Benefits Costs ” for a discussion of our accounting for health insurance costs.
Removed
The 2022 period costs include the impact of a 2.9% discount rate used to accrue workers’ compensation loss claims, compared to a 0.6% discount rate used in the 2021 period. 50 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Please read “ —Critical Accounting Policies and Estimates—Workers' Compensation Costs ” for a discussion of our accounting for workers’ compensation costs.
Added
In addition, the premiums owed to United at December 31, 2024, were less than $1 million, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheet.
Removed
The increase was primarily due to commissions associated with our PEO HR Outsourcing Solutions, including a new incentive program for our BPAs and sales managers, as well as an increase in the amount of sales channel referral fees paid during 2022. • Advertising expense for 2022 increased 28.9% to $37.5 million, or $1 per WSEE per month, compared to 2021.
Added
We paid $89 million in dividends and repurchased or withheld $63 million in stock. In addition, client funds liability and other financing activities decreased by $21 million. Seasonality, Inflation and Quarterly Fluctuations Our quarterly earnings are impacted by the seasonal nature of our medical claims costs and payroll taxes.
Removed
The increase was primarily due to increases in radio, print and digital advertising and sponsorship costs. • General and administrative expenses for 2022 increased 25.5% to $156.1 million, or $4 per WSEE per month, compared to 2021.
Removed
The increase was primarily due to increased travel, event and software licensing costs. • Depreciation and amortization expense for 2022 increased 5.5% to $40.7 million, but decreased $2 on a per WSEE per month basis, compared to 2021.
Removed
Cash Flows from Financing Activities Net cash flows used in financing activities were $155.0 million for the year ended December 31, 2023. We paid $84.2 million in dividends and repurchased or withheld $131.5 million in stock. In addition, client funds liability and other financing activities increased by $60.7 million.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThese processes include establishing a formal incident response team, penetration testing, system vulnerability scanning, phishing simulations, tabletop exercises, employee security and compliance training, disaster recovery planning, and other exercises to evaluate the effectiveness of our information security program and improve our security measures and planning. 31 2023 Form 10-K OTHER INFORMATION Engagement of Third Parties on Risk Management Recognizing the complexity and evolving nature of cybersecurity threats, we engage with a range of external experts, including cybersecurity consultants and systems auditors, in evaluating and testing our risk management systems.
Biggest changeThese processes include establishing a formal incident response team, penetration testing, system vulnerability scanning, phishing simulations, tabletop exercises, employee security and compliance training, disaster recovery planning, and other exercises to evaluate the effectiveness of our information security program and improve our security measures and planning. 30 2024 Form 10-K OTHER INFORMATION Engagement of Third Parties on Risk Management Recognizing the complexity and evolving nature of cybersecurity threats, we engage with a range of external experts, including cybersecurity consultants and systems auditors, in evaluating and testing our risk management systems.
“Risk Factors – Disruptions of our information technology systems could damage our reputation and materially disrupt our business operations ” and Item 1A. “Risk Factors - We could be subject to reduced revenues, increased costs, liability claims, or harm to our competitive position as a result of data theft, cyberattacks or other security vulnerabilities .” 32 2023 Form 10-K PROPERTIES
“Risk Factors – Disruptions of our information technology systems could damage our reputation and materially disrupt our business operations ” and Item 1A. “Risk Factors - We could be subject to reduced revenues, increased costs, liability claims, or harm to our competitive position as a result of data theft, cyberattacks or other security vulnerabilities .” 31 2024 Form 10-K PROPERTIES

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe hosting facilities house the majority of our business applications, telecommunications equipment and network equipment. The facilities, located in Allen, Texas, Austin, Texas, and Bryan, Texas, are under lease until 2028, 2030, and 2024, respectively. Service Centers We currently have four regional service centers located in Atlanta, Dallas, Houston and Los Angeles.
Biggest changeThe hosting facilities house the majority of our business applications, telecommunications equipment and network equipment. The facilities, located in Allen, Texas and Austin, Texas, are under lease until 2028 and 2030, respectively. Service Centers We currently have four regional service centers located in Atlanta, Dallas, Houston and Los Angeles.
In addition to the service center operations, the facility also contains sales operations. The Houston service center, which currently services approximately 22% of our WSEE base, is located on our corporate campus. The Los Angeles service center, which currently services approximately 21% of our WSEE base, is located in a 39,000 square foot facility under lease until 2029.
In addition to the service center operations, the facility also contains sales operations. The Houston service center, which currently services approximately 23% of our WSEE base, is located on our corporate campus. The Los Angeles service center, which currently services approximately 21% of our WSEE base, is located in a 39,000 square foot facility under lease until 2029.
In addition, we have placed certain client service personnel in a majority of our sales markets to provide high-quality, localized service to our clients in those major markets. We expect to continue placing client service personnel in sales markets as a critical mass of clients is attained in each market. 33 2023 Form 10-K LEGAL PROCEEDINGS
In addition, we have placed certain client service personnel in a majority of our sales markets to provide high-quality, localized service to our clients in those major markets. We expect to continue placing client service personnel in sales markets as a critical mass of clients is attained in each market. 32 2024 Form 10-K LEGAL PROCEEDINGS
In addition to the service center operations, the facility also contains sales operations. Sales and Service Offices As of December 31, 2023, we had sales and service personnel in 83 facilities located in 45 sales markets throughout the United States. All of the facilities are leased and some are shared by multiple sales offices and/or client service personnel.
In addition to the service center operations, the facility also contains sales operations. Sales and Service Offices As of December 31, 2024, we had sales and service personnel in 83 facilities located in 48 sales markets throughout the United States. All of the facilities are leased and some are shared by multiple sales offices and/or client service personnel.
This 33-acre company-owned office campus includes 700,000 square feet of office space and approximately 6 acres of undeveloped land for future expansion. Development and support operations are located in the Kingwood facility. We currently lease three hosting facilities, totaling approximately 2,300 square feet, that are in different locations.
This 33-acre company-owned office campus includes 700,000 square feet of office space and approximately 6 acres of undeveloped land for future expansion. Development and support operations are located in the Kingwood facility. We currently lease two hosting facilities, totaling approximately 1,800 square feet, that are in different locations.
The Atlanta service center, which currently services approximately 35% of our WSEE base, is located in a 47,800 square foot facility under lease until 2035. The Dallas service center, which currently services approximately 22% of our WSEE base, is located in a 45,000 square foot facility under lease until 2031.
The Atlanta service center, which currently services approximately 34% of our WSEE base, is located in a 50,600 square foot facility under lease until 2035. The Dallas service center, which currently services approximately 22% of our WSEE base, is located in a 45,000 square foot facility under lease until 2031.
As of December 31, 2023, we had 98 sales offices in these 45 markets. To take advantage of economic efficiencies, multiple sales offices may share a physical location. Each sales office is typically staffed by seven to nine BPAs, a district sales manager and an office administrator.
As of December 31, 2024, we had 106 sales offices in these 48 markets. To take advantage of economic efficiencies, multiple sales offices may share a physical location. Each sales office is typically staffed by BPAs, a district sales manager and an office administrator.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not a party to any material pending legal proceedings other than ordinary routine litigation incidental to our business that we believe would not have a material adverse effect on our financial condition or results of operations, except as discussed in Note 12 to the Consolidated Financial Statements, “Commitments and Contingencies,” which is incorporated herein by reference. 34 2023 Form 10-K MINE SAFETY DISCLOSURES
Biggest changeWe are not a party to any material pending legal proceedings other than ordinary routine litigation incidental to our business that we believe would not have a material adverse effect on our financial condition or results of operations, except as discussed in Note 12 to the Consolidated Financial Statements, “Commitments and Contingencies,” which is incorporated herein by reference. 33 2024 Form 10-K MINE SAFETY DISCLOSURES

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeArizpe graduated from Texas A&M University in 1979, earning his degree in Business Management. he currently serves as director of Somebody Cares America, a nonprofit organization that engages in disaster response, compassionate outreach and leadership development. Douglas S. Sharp has served as Executive Vice President of Finance, Chief Financial Officer & Treasurer since May 2022.
Biggest changeMr. Arizpe earned his Bachelor’s degree in Business Management from Texas A&M University. James D. Allison has served as Executive Vice President of Finance, Chief Financial Officer & Treasurer since November 2024. He previously served as Executive Vice President of Comprehensive Benefits Solutions and Chief Profitability Officer from May 2023 until his promotion to the current position. Mr.
Allison has served on the Accounting Practices Committee of NAPEO and, prior to joining Insperity, he worked in the audit practice of Ernst & Young LLP. Mr. Allison earned his Bachelor of Business Administration and Master in Professional Accounting degrees from the University of Texas and is a certified public accountant. Christian P.
Allison has served on the Accounting Practices Committee of NAPEO and, prior to joining Insperity, he worked in the audit practice of Ernst & Young LLP. Mr. Allison earned his Bachelor of Business Administration and Master in Professional Accounting degrees from The University of Texas at Austin and is a certified public accountant. Christian P.
Item 4. Mine Safety Disclosures. Not applicable. 35 2023 Form 10-K EXECUTIVE OFFICERS Item S-K 401 (b). Executive Officers of the Registrant. The following table sets forth the names, ages (as of February 1, 2024) and positions of Insperity’s executive officers: Name Age Position Paul J. Sarvadi 67 Chairman of the Board & Chief Executive Officer A.
Item 4. Mine Safety Disclosures. Not applicable. 34 2024 Form 10-K EXECUTIVE OFFICERS Item S-K 401 (b). Executive Officers of the Registrant. The following table sets forth the names, ages (as of February 3, 2025) and positions of Insperity’s executive officers: Name Age Position Paul J. Sarvadi 68 Chairman of the Board & Chief Executive Officer A.
He holds a Bachelor of Arts degree from The University of Texas at Austin and a Juris 36 2023 Form 10-K EXECUTIVE OFFICERS Doctor degree from Tulane University Law School, where he was senior managing editor of the Tulane Law Review and a member of The Order of the Coif. 37 2023 Form 10-K STOCK ACTIVITIES PART II
He holds a Bachelor of Arts degree from The University of Texas at Austin and a Juris Doctor degree from Tulane University Law School, where he was senior managing editor of the Tulane Law Review and a member of the Order of the Coif. 35 2024 Form 10-K STOCK ACTIVITIES PART II
He has also served as a director of the Texas Chapter of NAPEO, on the board of CultureShapers, an organization devoted to area high school students pursuing their interests in the visual and performing arts, and on the board of the Cynthia Woods Mitchell Pavilion. Mr.
He has also served as a director of the Texas Chapter of NAPEO, on the board of CultureShapers, an organization devoted to area high school students pursuing their interests in the visual and performing arts, on the board of the Cynthia Woods Mitchell Pavilion and Somebody Cares America, a nonprofit organization that engages in disaster response, compassions outreach and leadership development.
He joined Insperity in 1989 and has served in a variety of roles prior to those positions, including Houston Sales Manager, Regional Sales Manager and Vice President of Sales. Prior to joining Insperity, Mr. Arizpe served in sales and sales management roles for NCR Corporation and Clarke-American.
Arizpe joined Insperity in 1989 as Houston Sales Manager. Since then, he has served in various roles, including Regional Sales Manager, National Sales Manager, Vice President of Sales, and Executive Vice President of Client Services. Prior to joining Insperity, Mr. Arizpe served in sales and sales management roles for NCR Corporation and Clarke-American.
Sarvadi has served as Chairman of the Board & Chief Executive Officer since August 2003. Mr. Sarvadi co-founded Insperity in 1986 and served as Vice President and Treasurer of Insperity from its inception in 1986 through April 1987, as Vice President from April 1987 through 1989 and as President and Chief Executive Officer from 1989 to August 2003.
Sarvadi co-founded Insperity in 1986 and served as Vice President and Treasurer of Insperity from its inception in 1986 through April 1987, as Vice President from April 1987 through 1989 and as President and Chief Executive Officer from 1989 to August 2003. Prior to founding Insperity, Mr. Sarvadi started and operated several small businesses. Mr.
In May 2018, he was promoted to Senior Vice President of Gross Profit Operations and served in such capacity until his subsequent promotion to Executive Vice President of Gross Profit Operations in May 2022. Mr.
Allison was promoted to Senior Vice President of Gross Profit Operations and assumed responsibilities for the Company’s gross profit drivers, including pricing, benefit plans and workers’ compensation programs. He served in this capacity until his subsequent promotion to Executive Vice President of Gross Profit Operations in May 2022. Mr.
Steve Arizpe 66 President & Chief Operating Officer Douglas S. Sharp 62 Executive Vice President of Finance, Chief Financial Officer & Treasurer James D. Allison 55 Executive Vice President of Comprehensive Benefits Solutions & Chief Profitability Officer Christian P. Callens 52 Senior Vice President of Legal, General Counsel & Secretary Paul J.
Steve Arizpe 67 President & Chief Operating Officer James D. Allison 56 Executive Vice President of Finance, Chief Financial Officer & Treasurer Christian P. Callens 53 Senior Vice President of Legal, General Counsel & Secretary Paul J. Sarvadi has served as Chairman of the Board & Chief Executive Officer since August 2003. Mr.
Prior to founding Insperity, Mr. Sarvadi started and operated several small businesses. Mr. Sarvadi has served as President of NAPEO and was a member of its Board of Directors for five years. Mr. Sarvadi was selected as the 2001 National Ernst & Young Entrepreneur Of The Year ® for service industries.
Sarvadi has served as President of NAPEO and was a member of its Board of Directors for five years. Mr. Sarvadi was selected as the 2001 National Ernst & Young Entrepreneur Of The Year ® for service industries. In 2004, he received the Conn Family Distinguished New Venture Leader Award from Mays Business School at Texas A&M University.
Allison joined Insperity in 1997 and has held positions of increased responsibility, including Manager of Financial Reporting, Director of Accounting, Managing Director of Planning and Analysis, Managing Director of Finance, and Senior Vice President of Pricing and Cost Analysis.
Allison joined Insperity in 1997 and held various roles of increasing responsibility in the finance department until 2011. In that same year, he was promoted to Senior Vice President of Pricing and Cost Analysis. In May 2018, Mr.
Removed
In 2004, he received the Conn Family Distinguished New Venture Leader Award from Mays Business School at Texas A&M University. In 2007, he was inducted into the Texas Business Hall of Fame. A.
Added
In 2007, he was inducted into the Texas Business Hall of Fame. A. Steve Arizpe has served as President & Chief Operating Officer since May 2019. He is responsible for providing strategic leadership to sales, marketing, human resources, client services, traditional employment solutions and information technology to drive growth, customer satisfaction and client retention. Mr.
Removed
Steve Arizpe was promoted to President & Chief Operating Officer in May 2019 from the position of Executive Vice President of Client Services and Chief Operating Officer, which he had held since August 2003.
Removed
He served as Senior Vice President of Finance, Chief Financial Officer and Treasurer from May 2008 to May 2022. He served as Vice President of Finance, Chief Financial Officer and Treasurer from August 2003 until May 2008. Mr. Sharp joined Insperity in January 2000 as Vice President of Finance and Controller.
Removed
From July 1994 until he joined Insperity, he served as Chief Financial Officer for Rimkus Consulting Group, Inc. Prior to that, he served as Controller for a small publicly held company; as Controller for a software company; and as an Audit Manager for Ernst & Young LLP. Mr.
Removed
Sharp has served as a member of the Accounting Practices Committee of NAPEO. Mr. Sharp is also a certified public accountant. James D. Allison has served as Executive Vice President of Comprehensive Benefits Solutions & Chief Profitability Officer since May 2023. Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring the three months ended December 31, 2023, no shares were repurchased under the program. As of December 31, 2023, we were authorized to repurchase an additional 1,969,562 shares under the program.
Biggest changeDuring the three months ended December 31, 2024, 145,795 shares were repurchased under the program. On August 1, 2023, we announced our Board of Directors had authorized an increase of 2,000,000 shares that may be repurchased under the program. As of December 31, 2024, we were authorized to repurchase an additional 1,452,764 shares under the program.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Insperity, Inc., the S&P Smallcap 600 Index, the S&P Midcap 400 Index and the S&P Composite 1500 – Human Resource and Employment Services Index *$100 invested on 12/31/18 in Insperity stock or in the specified index, including reinvestment of dividends. Fiscal year ending December 31.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Insperity, Inc., the S&P Smallcap 600 Index, the S&P Midcap 400 Index and the S&P Composite 1500 – Human Resource and Employment Services Index *$100 invested on 12/31/19 in Insperity stock or in the specified index, including reinvestment of dividends. Fiscal year ending December 31.
The graph assumes that the value of the investment in our common stock and each index (including reinvestment of dividends) was $100 on December 31, 2018.
The graph assumes that the value of the investment in our common stock and each index (including reinvestment of dividends) was $100 on December 31, 2019.
This number does not include stockholders for whom shares were held in “nominee” or “street name.” Dividend Policy During 2023, we paid dividends of $84.2 million. The payment of dividends is made at the discretion of our Board and depends upon our operating results, financial condition, capital requirements, general business conditions and such other factors as our Board deems relevant.
This number does not include stockholders for whom shares were held in “nominee” or “street name.” Dividend Policy During 2024, we paid dividends of $89 million. The payment of dividends is made at the discretion of our Board and depends upon our operating results, financial condition, capital requirements, general business conditions and such other factors as our Board deems relevant.
Unless terminated earlier by resolution of our Board, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program. 38 2023 Form 10-K STOCK ACTIVITIES Performance Graph The following graph compares our cumulative total stockholder return since December 31, 2018, with the S&P Smallcap 600 Index, the S&P Midcap 400 Index, and the S&P Composite 1500 – Human Resource & Employment Services Index.
Unless terminated earlier by resolution of our Board, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program. 36 2024 Form 10-K STOCK ACTIVITIES Performance Graph The following graph compares our cumulative total stockholder return since December 31, 2019, with the S&P Smallcap 600 Index, the S&P Midcap 400 Index, and the S&P Composite 1500 – Human Resource & Employment Services Index.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Common Stock Our common stock is traded on the New York Stock Exchange under the symbol “NSP.” As of February 1, 2024, there were 61 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Common Stock Our common stock is traded on the New York Stock Exchange under the symbol “NSP.” As of February 3, 2025, there were 60 holders of record of our common stock.
Issuer Purchases of Equity Securities The following table provides information about purchases by Insperity during the three months ended December 31, 2023 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) 10/01/2023 — 10/31/2023 120 $ 98.29 — 1,969,562 11/01/2023 — 11/30/2023 — — — 1,969,562 12/01/2023 — 12/31/2023 287 116.80 — 1,969,562 Total 407 $ 111.34 — ____________________________________ (1) During the three months ended December 31, 2023, 407 shares of stock were withheld to satisfy tax-withholding obligations arising in conjunction with the vesting of restricted stock units.
Issuer Purchases of Equity Securities The following table provides information about purchases by Insperity during the three months ended December 31, 2024 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) 10/01/2024 — 10/31/2024 98 $ 88.91 — 1,598,559 11/01/2024 — 11/30/2024 40,000 78.24 40,000 1,558,559 12/01/2024 — 12/31/2024 105,815 80.92 105,795 1,452,764 Total 145,913 $ 80.19 145,795 ____________________________________ (1) During the three months ended December 31, 2024, 118 shares of stock were withheld to satisfy tax-withholding obligations arising in conjunction with the vesting of restricted stock units.
All rights reserved. 12/18 12/19 12/20 12/21 12/22 12/23 Insperity, Inc. 100.00 93.25 90.31 135.62 133.02 139.98 S&P Smallcap 600 100.00 122.78 136.64 173.29 145.39 168.73 S&P Midcap 400 100.00 126.20 143.44 178.95 155.58 181.15 S&P Composite 1500 – Human Resource & Employment Services 100.00 122.79 123.83 187.16 139.81 148.84 This graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, regardless of any general incorporation language in such filing.
All rights reserved. 12/19 12/20 12/21 12/22 12/23 12/24 Insperity, Inc. 100.00 96.84 145.44 142.65 150.11 101.83 S&P Smallcap 600 100.00 111.29 141.13 118.41 137.42 149.37 S&P Midcap 400 100.00 113.66 141.80 123.28 143.54 163.54 S&P Composite 1500 – Human Resource & Employment Services 100.00 100.85 152.43 113.87 121.22 143.93 This graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, regardless of any general incorporation language in such filing.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved]. 39 2023 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this annual report.
Biggest changeItem 6. [Reserved]. 37 2024 Form 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this annual report.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe occurrence of one or more of these events could result in our failure to achieve anticipated growth or revenues, or require us to devote additional resources to the strategic partnership or the development of the joint solution, any of which could result in a material adverse effect on our business, financial condition, and results of operations. 29 2023 Form 10-K RISK FACTORS Failure to integrate or realize the expected return on future product offerings, including through acquisitions, strategic partnerships, and investments, could have a material adverse impact on our financial condition or results of operations.
Biggest changeWe may also have conflicts or disagreements with Workday, which could disrupt the strategic partnership, could impact the development of the joint solution, and could lead to termination of the strategic partnership. 28 2024 Form 10-K RISK FACTORS The occurrence of one or more of these events could result in our failure to achieve anticipated growth or revenues, or require us to devote additional resources to the strategic partnership or the development of the joint solution, or to lose the investments made relating to the development of the joint solution, any of which could result in a material adverse effect on our business, financial condition, and results of operations, as well as reputational damage that could negatively impact our sales and retention efforts.
If any person, including any corporate employee, misappropriates or misuses such funds, documents or data, we may have liability for damages, and our reputation could be substantially harmed and we may have other liabilities that could have a material adverse effect on our business.
If any person, including any corporate employee or WSEE, misappropriates or misuses such funds, documents or data, we may have liability for damages, and our reputation could be substantially harmed and we may have other liabilities that could have a material adverse effect on our business.
Any cyberattack, unauthorized intrusion, malicious software infiltration, network disruption, denial of service attack, ransomware attack, corruption of data, theft of private or other sensitive information, or similar malicious act by a party (including our employees), or inadvertent acts or omissions by our vendors or our own employees, could result in the loss, disclosure or misuse of confidential or proprietary information, and could have a material adverse effect on our business operations or that of our clients, result in liability or regulatory sanction, or cause a loss of confidence in our ability to serve clients.
Any cyberattack, unauthorized intrusion, malicious software infiltration, network disruption, denial of service attack, ransomware attack, corruption of data, theft of private or other sensitive information, or similar malicious act by a party (including our corporate employees or WSEEs), or inadvertent acts or omissions by our vendors or clients, our own corporate employees or WSEEs, could result in the loss, disclosure or misuse of confidential or proprietary information, and could have a material adverse effect on our business operations or that of our clients, result in liability or regulatory sanction, or cause a loss of confidence in our ability to serve clients.
In addition, FUTA may be retroactively increased in certain states in the event the state fails to timely repay federal unemployment loans, as we recently experienced with California and New York in 2023. Generally, our contractual agreements allow us to incorporate such statutory increases into our service fees upon the effective date of the rate change.
In addition, FUTA may be retroactively increased in certain states in the event the state fails to timely repay federal unemployment loans, as we recently experienced with California and New York in 2024. Generally, our contractual agreements allow us to incorporate such statutory increases into our service fees upon the effective date of the rate change.
Further, if the overall pricing of our services includes cost assumptions based on inaccurate forecasts of our workers’ compensation costs, our profitability or our ability to attract and retain clients may be adversely impacted. The current workers’ compensation coverage with Chubb expires on September 30, 2024.
Further, if the overall pricing of our services includes cost assumptions based on inaccurate forecasts of our workers’ compensation costs, our profitability or our ability to attract and retain clients may be adversely impacted. The current workers’ compensation coverage with Chubb expires on September 30, 2025.
Further, if we were to be deemed to be subject to other regulatory requirements applicable to other businesses, such as rules or regulations applicable to new services that we may offer such as earned wage access, then we may need to hire additional personnel, incur additional costs in order to maintain compliance, or be subjected to fines, penalties, or other liabilities, which could be material. 26 2023 Form 10-K RISK FACTORS Competition and other developments in the HR services industry may impact our growth and/or profitability.
Further, if we were to be deemed to be subject to other regulatory requirements applicable to other businesses, such as rules or regulations applicable to new services that we may offer such as earned wage access, then we may need to hire additional personnel, incur additional costs in order to maintain compliance, or be subjected to fines, penalties, or other liabilities, which could be material. 25 2024 Form 10-K RISK FACTORS Competition and other developments in the HR services industry may impact our growth and/or profitability.
Our CSA establishes the contractual division of responsibilities between Insperity and our clients for various human capital management matters, including compliance with and liability under various governmental regulations. 25 2023 Form 10-K RISK FACTORS Because we act as a co-employer, we may be subject to liability for violations of various employment, payroll, discrimination, and workplace safety laws despite these contractual provisions, even if we do not participate in such violations.
Our CSA establishes the contractual division of responsibilities between Insperity and our clients for various human capital management matters, including compliance with and liability under various governmental regulations. 24 2024 Form 10-K RISK FACTORS Because we act as a co-employer, we may be subject to liability for violations of various employment, payroll, discrimination, and workplace safety laws despite these contractual provisions, even if we do not participate in such violations.
Any delays or failures resulting from network outages; planned upgrades, enhancements, or replacements of software, hardware, or other systems, including in connection with our CRM replacement project or any updated for compliance and modernization of systems; or other data processing disruptions, even for a brief period of time, could result in our inability to timely process transactions.
Any delays or failures resulting from network outages; planned upgrades, enhancements, or replacements of software, hardware, or other systems, including in connection with our project with Workday or any updated for compliance and modernization of systems; or other data processing disruptions, even for a brief period of time, could result in our inability to timely process transactions.
The speed with which we, or third-party vendors, are able to address significant cybersecurity incidents may be influenced by the cooperation of certain government agencies. We may also incur significant costs in the future to 27 2023 Form 10-K RISK FACTORS protect against damage or disruptions that could be caused by cybersecurity incidents.
The speed with which we, or third-party vendors, are able to address significant cybersecurity incidents may be influenced by the cooperation of certain government agencies. We may also 26 2024 Form 10-K RISK FACTORS incur significant costs in the future to protect against damage or disruptions that could be caused by cybersecurity incidents.
Other states have adopted or are currently contemplating additional privacy requirements. Generally, these laws do not address the coemployment relationship, which requires us to make determinations as to the requirements applicable to our 28 2023 Form 10-K RISK FACTORS WSEEs and our PEO Outsourcing Solutions clients.
Other states have adopted or are currently contemplating additional privacy requirements. Generally, these laws do not address the coemployment relationship, which requires us to make determinations as to the requirements applicable to our 27 2024 Form 10-K RISK FACTORS WSEEs and our PEO Outsourcing Solutions clients.
Our client attrition rate was approximately 17% in 2023. There can be no assurance that the number of contract cancellations will continue at these levels and such cancellations may increase in the future due to various factors, including economic conditions in the markets we operate.
Our client attrition rate was approximately 19% in 2024. There can be no assurance that the number of contract cancellations will continue at these levels and such cancellations may increase in the future due to various factors, including economic conditions in the markets we operate.
Other Operational Risks We may not fully realize the anticipated benefits of our strategic partnership and plans to develop a joint solution with Workday, Inc., which could have a material adverse impact on our financial condition or results of operations. We have announced a strategic partnership and plans to develop a joint solution with Workday, Inc. (“Workday”).
Other Operational Risks We may not fully realize the anticipated benefits of our strategic partnership and plans to develop a joint solution with Workday, which could have a material adverse impact on our financial condition or results of operations. We have announced a strategic partnership and are developing a joint solution with Workday.
Our middle market sector, which we generally define as those companies with employees ranging from approximately 150 to 5,000 WSEEs, represented 26% of our average paid WSEEs and clients with an average number of WSEEs that exceed 1,000 WSEEs represented 6% during 2023.
Our middle market sector, which we generally define as those companies with employees ranging from approximately 150 to 5,000 WSEEs, represented 26% of our average paid WSEEs, and clients with an average number of WSEEs that exceed 1,000 WSEEs represented 3% during 2024.
Offering new solutions involves a number of risks such as entering markets or businesses in which we have no prior experience and that may be highly regulated; failing to integrate the new solution into our product and service offerings; diversion of technology, service, compliance, marketing, sales, management and other teams from other business concerns; in the case of an investment or acquisition, over-valuation of the targeted business; and litigation or government action resulting from the activities of an acquired company or from offering the new solution in a non-compliant manner.
Offering new solutions involves a number of risks such as entering markets or businesses in which we have no prior experience and that may be highly regulated; failing to integrate the new solution into our product and service offerings; diversion of technology, service, compliance, marketing, sales, management and other teams from other business concerns; in the case of a partnership or reseller arrangement, reliance on the service and technology of the third party; in the case of an investment or acquisition, over-valuation of the targeted business; and litigation or government action resulting from the activities of an acquired company or of our partner or from offering the new solution in a non-compliant manner.
In response to budget shortfalls, such as those being experienced as a result of the COVID-19 pandemic, the federal government and many states and municipalities have in the past and may in the future increase or enact new taxes on businesses operating within their tax jurisdiction, including business activity taxes and income taxes.
In response to budget shortfalls, such as those experienced during the COVID-19 pandemic, the federal government and many states and municipalities have in the past and may in the future increase or enact new taxes on businesses operating within their tax jurisdiction, including business activity taxes and income taxes.
The success of the strategic partnership and joint solution will depend on many factors, and we may not realize all, or any, of the anticipated benefits. We expect to devote substantial resources and incur significant costs to develop the joint solution.
The success of the strategic partnership and joint solution will depend on many factors, and we may not realize all, or any, of the anticipated benefits. We have devoted substantial resources and incurred significant costs to develop the joint solution, and expect to continue to devote substantial resources and to incur significant costs.
The strategic partnership and plans to develop a joint solution involve numerous risks, including that we may be unable to complete the development and implementation of the joint solution, or that development and implementation of the joint solution may be more difficult, time-consuming, or costly than expected.
The strategic partnership and plans to develop a joint solution involve numerous risks, including that we may be unable to complete the development and implementation of the joint solution, or that development and implementation of the joint solution may be more difficult, time-consuming, or costly than expected, including due to difficulties with integrations with third party vendors.
In addition, we obtain insurance coverage for various commercial risks in our business such as property insurance, errors and 24 2023 Form 10-K RISK FACTORS omissions insurance, cyber liability insurance, general liability insurance, fiduciary liability insurance and ERISA bond coverage, automobile liability insurance, and directors’ and officers’ liability insurance.
In addition, we obtain insurance coverage for various commercial risks in our business such as property insurance, errors and omissions insurance, cyber liability insurance, general liability insurance, fiduciary liability insurance and ERISA bond coverage, automobile liability insurance, and directors’ and officers’ liability insurance.
Attacks on information technology systems continue to grow in frequency and sophistication, and we and our third-party vendors are targeted by unauthorized parties using malicious tactics, code and viruses.
Attacks on information technology systems continue to grow in frequency and sophistication (including the use of emerging artificial intelligence technologies), and we and our third-party vendors are targeted by unauthorized parties using malicious tactics, code and viruses.
As of December 2023, approximately 14% of our WSEEs were co-employed by Workforce Synchronization clients.
As of December 2024, approximately 15% of our WSEEs were co-employed by Workforce Synchronization clients.
Accordingly, the short-term nature of the CSA makes us vulnerable to potential cancellations by existing PEO HR Outsourcing solution clients, which could materially and adversely affect our financial condition or results of operations.
Our standard CSA can generally be canceled by us or the client with 30 days’ notice. Accordingly, the short-term nature of the CSA makes us vulnerable to potential cancellations by existing PEO HR Outsourcing solution clients, which could materially and adversely affect our financial condition or results of operations.
We have adopted a strategy to market and sell additional solutions within and outside of our PEO HR Outsourcing Solutions. As part of this strategy, periodically we make strategic long-term decisions to partner with, invest in and/or acquire new companies, business units or assets in order to offer new or enhanced solutions.
As part of this strategy, periodically we make strategic long-term decisions to partner with (including as a reseller arrangement), invest in and/or acquire new companies, business units or assets in order to offer new or enhanced solutions.
Further, our increased reliance on remote access to our information systems as our employees work remotely impacts our control over cybersecurity protection and service stability and performance, which increases our exposure to cybersecurity and privacy issues.
Further, increased reliance by us and our clients on remote workforces impacts our control over cybersecurity protection and service stability and performance, which increases our exposure to cybersecurity and privacy issues.
Many of our contracts for our PEO HR Outsourcing Solutions may be canceled on short notice. Our inability to renew client contracts or attract new clients could materially and adversely affect our financial conditions or results of operations. Our standard CSA can generally be canceled by us or the client with 30 days’ notice.
As a result, such increases could have a material adverse effect on our financial condition or results of operations. Many of our contracts for our PEO HR Outsourcing Solutions may be canceled on short notice. Our inability to renew client contracts or attract new clients could materially and adversely affect our financial condition or results of operations.
However, our ability to fully adjust service fees in our billing systems and collect such increases over the remaining term of the clients’ contracts could be limited, resulting in a potential increase not being fully recovered. As a result, such increases could have a material adverse effect on our financial condition or results of operations.
However, this right does not extend to our former clients and, even with respect to our existing clients, our ability to fully adjust service fees in our billing systems and collect such increases over the remaining term of the clients’ contracts could be limited, resulting in a potential increase not being fully recovered.
The occurrence of one or more of these events could result in the loss of existing or prospective clients or employees, not achieving anticipated revenues or profitability, impairment of acquired assets, and substantial liability. Such developments could have a material impact to our financial condition, results of operations, and future growth rates. 30 2023 Form 10-K OTHER INFORMATION Item 1B.
The occurrence of one or more of these events could result in the loss of existing or prospective clients or employees, not achieving anticipated revenues or profitability, impairment of acquired assets, and substantial liability.
In addition, federal, state and local taxing agencies may increase their audit activity in an effort to identify additional tax revenues. New tax assessments on our operations could result in increased costs. Further, the Biden Administration and Congressional leaders have expressed support for reviewing federal taxes and potential increases in federal tax rates for businesses.
In addition, federal, state and local taxing agencies may increase their audit activity in an effort to identify additional tax revenues. New tax assessments on our operations could result in increased costs. Our ability to adjust our service fees and incorporate additional tax assessments into our billing system could be limited.
Our loss of insurance coverage, the failure of our insurance carriers or increased insurance costs or deductibles could have a material adverse effect on us. As part of our PEO HR Outsourcing Solutions, in addition to our health insurance carriers, we contract with other insurance carriers to provide workers’ compensation insurance and employment practices liability insurance.
As part of our PEO HR Outsourcing Solutions, in addition to our health insurance carriers, we contract with other 23 2024 Form 10-K RISK FACTORS insurance carriers to provide workers’ compensation insurance and employment practices liability insurance.
As a co-employer in the PEO relationship, we assume or share many of the employer-related responsibilities and assist our clients in complying with many employment-related governmental regulations.
As a result, such higher taxes could have a material adverse impact on our financial condition or results of operations. We may be subject to liabilities for client and employee actions. As a co-employer in the PEO relationship, we assume or share many of the employer-related responsibilities and assist our clients in complying with many employment-related governmental regulations.
For example, we are currently working on a multi-year project to replace our sales force automation system and our customer relationship management (“CRM”) system with a single CRM solution to be used widely across the company. We continue to monitor and make changes to our proprietary system for our PEO HR Outsourcing Solutions for compliance and modernization.
We also continue to monitor and make changes to our proprietary system for our PEO HR Outsourcing Solutions for compliance and modernization.
Removed
Our ability to adjust our service fees and incorporate additional tax assessments into our billing system could be limited. As a result, such higher taxes could have a material adverse impact on our financial condition or results of operations. We may be subject to liabilities for client and employee actions.
Added
Our loss of insurance coverage, the failure of our insurance carriers or increased insurance costs or deductibles could have a material adverse effect on us.
Removed
We may also have conflicts or disagreements with Workday, which could disrupt the strategic partnership, could impact the development of the joint solution, and could lead to termination of the strategic partnership.
Added
For example, in connection with our strategic partnership with Workday, Inc. (“Workday”), we are currently working to develop a joint solution with Workday that requires integrations with third parties and with our proprietary systems for our PEO HR Outsourcing Solutions.
Added
In addition, the joint solution that we are developing with Workday will be based on Workday’s human capital management solution.
Added
The joint solution would involve, among other things, the offering of our PEO services using Workday’s human capital management solution, as well as joint marketing and sales efforts. The joint solution also requires integration with other third-party vendors and with our proprietary system for our PEO HR Outsourcing Solutions.
Added
Failure to integrate or realize the expected return on future product offerings, including through acquisitions, strategic partnerships, and investments, could have a material adverse impact on our financial condition or results of operations. We have adopted a strategy to market and sell additional solutions within and outside of our PEO HR Outsourcing Solutions.
Added
Such developments could have a material impact to our business, financial condition, results of operations, and future growth rates, and could also result in reputational damage that could negatively impact our sales and retention efforts. 29 2024 Form 10-K OTHER INFORMATION Item 1B. Unresolved Staff Comments. None.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs a result, our marketable securities consist of tax-exempt short and intermediate-term debt securities, which are primarily U.S. Treasury bills, as well as pre-refunded municipal bonds that are secured by escrow funds containing U.S. Government Securities.
Biggest changeAs a result, our marketable securities consist of tax-exempt short and intermediate-term debt securities, which are primarily U.S. Treasury bills and our workers’ compensation - deposits consist of cash and highly-liquid investments, primarily money market funds.
As of December 31, 2023, we had outstanding letters of credit and borrowings totaling $370.4 million under the Facility. Please read Note 6 to the Consolidated Financial Statements, “Long-Term Debt,” for additional information.
As of December 31, 2024, we had outstanding letters of credit and borrowings totaling $370 million under the Facility. Please read Note 6 to the Consolidated Financial Statements, “Long-Term Debt,” for additional information.

Other NSP 10-K year-over-year comparisons