nsp-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2024



or
☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

			For the transition period from _______________ to _______________

Commission File No. 1-13998

Insperity, Inc.

(Exact name of registrant as specified in its charter)


Delaware						76-0479645
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


19001 Crescent Springs Drive
Kingwood,	Texas	77339
(Address of principal executive offices)

(Registrant’s Telephone Number, Including Area Code): (281) 358-8986


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	NSP	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Emerging growth company	☐
Smaller reporting company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of October 24, 2024, 37,383,189 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.


TABLE OF CONTENTS


		Page

	Forward Looking Statements	4
Part I, Item 1.	Financial Statements	6
	Condensed Consolidated Balance Sheets	6
	Consolidated Statements of Income	7
	Consolidated Statements of Cash Flows	8
	Consolidated Statements of Stockholders’ Equity	9
	Notes to Consolidated Financial Statements	11
Part I, Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Part I, Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Part I, Item 4.	Controls and Procedures	37
Part II, Item 1.	Legal Proceedings	38
Part II, Item 1A.	Risk Factors	38
Part II, Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Part II, Item 5.	Other Information	38
Part II, Item 6.	Exhibits	39


FORWARD LOOKING STATEMENTS

The statements contained herein that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify such forward-looking statements by the words “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “forecasts,” “likely,” “possibly,” “probably,” “could,” “goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions. Forward-looking statements involve a number of risks and uncertainties. In the normal course of business, in an effort to help keep our stockholders and the public informed about our operations, from time to time, we may issue such forward-looking statements, either orally or in writing. Generally, these statements relate to business plans or strategies; including our strategic partnership with Workday, Inc.; projected or anticipated benefits or other consequences of such plans or strategies; or projections involving anticipated revenues, earnings, average number of worksite employees (“WSEEs”), benefits and workers’ compensation costs, or other operating results. We base these forward-looking statements on our current expectations, estimates and projections. We caution you that these statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Therefore, the actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are:

•adverse economic conditions;

•failure to comply with or meet client expectations regarding certain COVID-19 relief programs;

•bank failures or other events affecting financial institutions; labor shortages, increasing competition for highly skilled workers, and evolving employee expectations regarding the workplace;

•impact of inflation;

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

•failure to comply with covenants under our credit facility;

•impact of a future outbreak of highly infectious or contagious disease;

•our liability for WSEE payroll, payroll taxes and benefits costs, or other liabilities associated with actions of our client companies or WSEEs, including if our clients fail to pay us;

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

•an adverse determination regarding our status as the employer of our WSEEs for tax and benefit purposes and an inability to offer alternative benefit plans following such a determination;

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

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

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

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

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

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

•disruptions of our information technology systems or failure to enhance our service and technology offerings to address new regulations or client expectations;


Insperity \| 2024 Third Quarter Form 10-Q			4


FORWARD LOOKING STATEMENTS

•our liability or damage to our reputation relating to disclosure of sensitive or private information as a result of data theft, cyberattacks or security vulnerabilities;

•failure of third-party providers, such as financial institutions, data centers or cloud service providers;

•our ability to fully realize the anticipated benefits of our strategic partnership and plans to develop a joint solution with Workday, Inc.; and

•our ability to integrate or realize expected returns on future product offerings, including through acquisitions, strategic partnerships, and investments.

These factors are discussed in further detail in our Annual Report on Form 10-K for the year ended December 31, 2023 under “Item 1A. Risk Factors” in Part I and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, and elsewhere in this report. Any of these factors, or a combination of such factors, could materially affect the results of our operations and whether forward-looking statements we make ultimately prove to be accurate.

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


Insperity \| 2024 Third Quarter Form 10-Q			5


FINANCIAL STATEMENTS (Unaudited)

PART I

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS


(in millions)	September 30, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	470	$	693
Restricted cash	67		57
Marketable securities	16		16
Accounts receivable, net	765		694
Prepaid insurance and related assets	31		7


Funds held for clients and other current assets	84		128
Total current assets	1,433		1,595
Property and equipment, net of accumulated depreciation	190		197
Right-of-use (“ROU”) leased assets	66		57
Prepaid health insurance	9		9
Deposits – health insurance	8		8
Deposits – workers’ compensation	175		198
Goodwill and other intangible assets, net	13		13
Deferred income taxes, net	19		20
Other assets	20		23
Total assets	$	1,933	$	2,120

Liabilities and stockholders' equity
Accounts payable	$	6	$	11
Payroll taxes and other payroll deductions payable	297		566
Accrued worksite employee payroll costs	650		559
Accrued health insurance costs	46		46
Accrued workers’ compensation costs	70		60
Accrued corporate payroll and commissions	79		64
Income taxes payable	8		3
Client funds liability and other accrued liabilities	77		127
Total current liabilities	1,233		1,436
Accrued workers’ compensation costs, net of current	140		163
Long-term debt	369		369
Operating lease liabilities, net of current	66		58


Total noncurrent liabilities	575		590
Commitments and contingencies
Common stock	1		1
Additional paid-in capital	208		185
Treasury stock, at cost	(853)		(831)
Retained earnings	769		739
Total stockholders' equity	125		94
Total liabilities and stockholders’ equity	$	1,933	$	2,120

See accompanying notes.


Insperity \| 2024 Third Quarter Form 10-Q			6


FINANCIAL STATEMENTS (Unaudited)

CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions, except per share amounts)	2024		2023		2024		2023

Revenues	$	1,561	$	1,551	$	4,968	$	4,906
Payroll taxes, benefits and workers’ compensation costs	1,332		1,293		4,134		4,091
Gross profit	229		258		834		815
Salaries, wages and payroll taxes	127		114		393		349
Stock-based compensation	17		16		47		42
Commissions	11		11		34		34
Advertising	9		7		28		30
General and administrative expenses	53		40		167		132
Depreciation and amortization	11		11		33		32
Total operating expenses	228		199		702		619
Operating income	1		59		132		196
Other income (expense):
Interest income	9		9		28		25
Interest expense	(7)		(7)		(21)		(20)
Income before income tax expense	3		61		139		201
Income tax expense	—		16		39		49
Net income	$	3	$	45	$	100	$	152

Net income per share of common stock
Basic	$	0.07	$	1.17	$	2.65	$	4.00
Diluted	$	0.07	$	1.16	$	2.63	$	3.94

See accompanying notes.


Insperity \| 2024 Third Quarter Form 10-Q			7


FINANCIAL STATEMENTS (Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended September 30,
(in millions)	2024		2023

Cash flows from operating activities
Net income	$	100	$	152
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	33		32
Stock-based compensation	47		42
Deferred income taxes	1		6
Changes in operating assets and liabilities:
Accounts receivable	(71)		(34)
Prepaid insurance and related assets	(24)		(9)
Other current assets	(7)		—
Other assets and ROU assets	13		3
Accounts payable	(5)		(1)
Payroll taxes and other payroll deductions payable	(269)		(38)
Accrued worksite employee payroll costs	91		47
Accrued health insurance costs	—		(2)
Accrued workers’ compensation costs	(13)		(7)
Accrued corporate payroll, commissions and other accrued liabilities	—		(44)
Income taxes payable/receivable	5		(7)
Total adjustments	(199)		(12)
Net cash provided by (used in) operating activities	(99)		140

Cash flows from investing activities
Marketable securities:
Purchases	(17)		(40)
Proceeds from maturities	17		32
Proceeds from dispositions	—		28
Property and equipment purchases	(25)		(22)
Net cash used in investing activities	(25)		(2)

Cash flows from financing activities
Purchase of treasury stock	(52)		(131)
Dividends paid	(67)		(63)
Client funds liability and other	(44)		(1)
Net cash used in financing activities	(163)		(195)
Net decrease in cash, cash equivalents, restricted cash and funds held for clients	(287)		(57)
Cash, cash equivalents, restricted cash and funds held for clients beginning of period	1,035		1,014
Cash, cash equivalents, restricted cash and funds held for clients end of period	$	748	$	957


Supplemental cash flow information:
ROU assets obtained in exchange for lease obligations	$	24	$	12
Excise tax liability accrued for common stock repurchases	—		1

See accompanying notes.


Insperity \| 2024 Third Quarter Form 10-Q			8


FINANCIAL STATEMENTS (Unaudited)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Nine Months Ended September 30, 2024 and 2023


	Common Stock Issued			Additional Paid-In Capital		Treasury Stock		Retained Earnings and AOCI		Total
(in millions)	Shares	Amount

Balance at December 31, 2023	55	$	1	$	185	$	(831)	$	739	$	94
Purchase of treasury stock, at cost	—	—		—		(52)		—		(52)
Issuance of equity-based incentive awards and dividend equivalents	—	—		(24)		27		(3)		—
Stock-based compensation expense	—	—		46		1		—		47
Other	—	—		1		2		—		3
Dividends paid	—	—		—		—		(67)		(67)

Net income	—	—		—		—		100		100
Balance at September 30, 2024	55	$	1	$	208	$	(853)	$	769	$	125

Balance at December 31, 2022	55	$	1	$	151	$	(726)	$	655	$	81
Purchase of treasury stock, at cost	—	—		—		(132)		—		(132)
Issuance of equity-based incentive awards and dividend equivalents	—	—		(21)		25		(4)		—
Stock-based compensation expense	—	—		41		1		—		42
Other	—	—		2		1		—		3
Dividends paid	—	—		—		—		(63)		(63)

Net income	—	—		—		—		152		152
Balance at September 30, 2023	55	$	1	$	173	$	(831)	$	740	$	83


Insperity \| 2024 Third Quarter Form 10-Q			9


FINANCIAL STATEMENTS (Unaudited)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)

For the Three Months Ended September 30, 2024 and 2023


	Common Stock Issued			Additional Paid-In Capital		Treasury Stock		Retained Earnings and AOCI		Total
(in millions)	Shares	Amount

Balance at June 30, 2024	55	$	1	$	191	$	(838)	$	788	$	142
Purchase of treasury stock, at cost	—	—		—		(15)		—		(15)
Issuance of equity-based incentive awards and dividend equivalents	—	—		—		(1)		1		—
Stock-based compensation expense	—	—		17		—		—		17
Other	—	—		—		1		—		1
Dividends paid	—	—		—		—		(23)		(23)

Net income	—	—		—		—		3		3
Balance at September 30, 2024	55	$	1	$	208	$	(853)	$	769	$	125

Balance at June 30, 2023	55	$	1	$	158	$	(745)	$	717	$	131
Purchase of treasury stock, at cost	—	—		—		(87)		—		(87)
Issuance of equity-based incentive awards and dividend equivalents	—	—		—		—		—		—
Stock-based compensation expense	—	—		15		1		—		16
Other	—	—		—		—		(1)		(1)
Dividends paid	—	—		—		—		(21)		(21)

Net income	—	—		—		—		45		45
Balance at September 30, 2023	55	$	1	$	173	$	(831)	$	740	$	83

See accompanying notes.


Insperity \| 2024 Third Quarter Form 10-Q			10


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.			Basis of Presentation

Insperity, Inc., a Delaware corporation (“Insperity,” “we,” “our,” and “us”), provides an array of human resources (“HR”) and business solutions designed to help improve business performance. Our most comprehensive HR services offerings are provided through our professional employer organization (“PEO”) services, known as our Workforce Optimization® and Workforce SynchronizationTM solutions (together, our “PEO HR Outsourcing Solutions”), which we provide by entering into a co-employment relationship with our clients. Our PEO HR Outsourcing Solutions encompass a broad range of HR functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services, along with our cloud-based human capital management solution, the Insperity PremierTM platform.

In addition to our PEO HR Outsourcing Solutions, we offer a comprehensive traditional payroll and human capital management solution, known as our Workforce AccelerationTM solution (our “Traditional Payroll Solution”). We also offer a number of other business performance solutions, including Recruiting Services, Employment Screening, Retirement Services, and Insurance Services. These other products or services are offered separately or with our other solutions.

The Consolidated Financial Statements include the accounts of Insperity, Inc. and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

The accompanying Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements at and for the year ended December 31, 2023. Our Condensed Consolidated Balance Sheet at December 31, 2023 has been derived from the audited financial statements at that date, but does not include all of the information or footnotes required by GAAP for complete financial statements. Our Condensed Consolidated Balance Sheet at September 30, 2024 and our Consolidated Statements of Income for the three and nine month periods ended September 30, 2024 and 2023, our Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2024 and 2023 and our Consolidated Statements of Stockholders' Equity for the three and nine month periods ended September 30, 2024 and 2023, have been prepared by us without audit. In the opinion of management, all adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows have been made, and all such adjustments are of a normal recurring nature.

The results of operations for the interim periods are not necessarily indicative of the operating results for a full year or of future operations.


2.			Accounting Policies

Health Insurance Costs

We provide group health insurance coverage 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 UnitedHealthcare (“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.

Approximately 87% of our costs related to health insurance coverage are provided under our policy with United. While the policy with United is a fully insured plan, as a result of certain contractual terms, we have accounted for this plan since its inception using a partially self-funded insurance accounting model. Effective January 1, 2020, under the amended agreement with United, we no longer have financial responsibilities for a participant’s annual claim costs that exceed $1 million (“Individual Claims Limit”). Accordingly, we record the cost of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the “Plan Costs”), as benefits expense, which is a component of direct costs, in our Consolidated Statements of Income. The estimated incurred but not reported claims are based upon: (1) the level of claims processed during each quarter; (2) estimated completion rates based upon recent claim development


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

patterns under the plan; and (3) the number of participants in the plan, including both active and COBRA enrollees. Each reporting period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant demographics, and other factors are incorporated into the benefits costs, which requires a significant level of judgment.

Additionally, since the plan’s inception, under the terms of the contract, United establishes cash funding rates 90 days in advance of the beginning of a reporting quarter. If the Plan Costs for a reporting quarter are greater than the premiums paid and owed to United, a deficit in the plan would be incurred and a liability for the excess costs would be accrued in our Condensed Consolidated Balance Sheets. On the other hand, if the Plan Costs for the reporting quarter are less than the premiums paid and owed to United, a surplus in the plan would be incurred and we would record an asset for the excess premiums in our Condensed Consolidated Balance Sheets. The terms of the arrangement require us to maintain an accumulated cash surplus in the plan of $9 million, which is reported as long-term prepaid health insurance. In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $7 million at September 30, 2024, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets. As of September 30, 2024, Plan Costs were less than the net premiums paid and owed to United by $28 million. As this amount is in excess of the agreed-upon $9 million surplus maintenance level, the $19 million difference is included in prepaid insurance, a current asset, in our Condensed Consolidated Balance Sheets. The premiums, including the additional quarterly premiums, owed to United at September 30, 2024 were $39 million, which is included in accrued health insurance costs, a current liability in our Condensed Consolidated Balance Sheets. Our benefits costs incurred in the first nine months of 2024 included a decrease of $32 million for changes in estimated run-off related to prior periods, net of Individual Claims Limit. Our benefits costs incurred in the first nine months of 2023 included a decrease of $14 million for changes in estimated run-off related to prior periods, net of Individual Claims Limit.

Workers’ Compensation Costs

Our workers’ compensation coverage for our WSEEs in our PEO HR Outsourcing Solutions has been provided through arrangements with the Chubb Group of Insurance Companies or its predecessors (the “Chubb Program”) since 2007. The Chubb Program is fully insured in that Chubb has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities. Under the Chubb Program, for claims incurred on or before September 30, 2019, we have financial responsibility to Chubb for the first $1 million layer of claims per occurrence and, for claims over $1 million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed $1 million. Chubb bears the financial responsibility for all claims in excess of these levels. Effective for claims incurred on or after October 1, 2019, we have financial responsibility to Chubb for the first $1.5 million layer of claims per occurrence and, for claims over $1.5 million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed $1.5 million.

Because we bear the financial responsibility for claims up to the levels noted above, such claims, which are the primary component of our workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment.

We utilize a third-party actuary to estimate our loss development rate, which is primarily based upon the nature of WSEEs’ job responsibilities, the location of WSEEs, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. Each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into our workers’ compensation claims cost estimates. During the nine months ended September 30, 2024 and 2023, we reduced accrued workers’ compensation costs by $25 million and $26 million, respectively, for changes in estimated losses related to prior periods. Workers’ compensation cost estimates are discounted to present value at a rate based upon the U.S. Treasury rates that correspond with the weighted average estimated claim payout period (the average discount rate utilized in the 2024 period was 4.3% and in the 2023 period was 4.2%) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Income.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


	Nine Months Ended September 30,
(in millions)	2024		2023

Beginning balance, January 1,	$	220	$	229
Accrued claims	48		44
Present value discount, net of accretion	(10)		(10)
Paid claims	(51)		(41)
Ending balance	$	207	$	222

Current portion of accrued claims	$	67	$	51
Long-term portion of accrued claims	140		171
Total accrued claims	$	207	$	222

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at September 30, 2024 and 2023 includes $3 million and $4 million, respectively, of workers’ compensation administrative fees.

The undiscounted accrued workers’ compensation costs were $242 million as of September 30, 2024 and $250 million as of September 30, 2023.

At the beginning of each policy period, the workers’ compensation insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim funds”). The level of claim funds is primarily based upon anticipated WSEE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are recorded as restricted cash, a short-term asset, while the remainder of claim funds are included in deposits – workers’ compensation, a long-term asset in our Condensed Consolidated Balance Sheets. At September 30, 2024, we had restricted cash of $67 million and deposits – workers’ compensation of $175 million, of which $233 million was held in a trust account.

Our estimate of incurred claim costs expected to be paid within one year is included in short-term liabilities, while our estimate of incurred claim costs expected to be paid beyond one year is included in long-term liabilities on our Condensed Consolidated Balance Sheets.

Revenues

We enter into contracts with our customers for human resources services based on a stated rate and price in the contract. Our contracts generally establish pricing for a period of 12 months and are generally cancellable at any time by either party with 30-days’ notice. Our performance obligations are satisfied as services are rendered each month. The term between invoicing and when our performance obligations are satisfied is not significant. Our payment terms typically require payment concurrently with the invoicing of our PEO services. We do not have significant financing components or significant payment terms.

Our revenue is generally recognized ratably over the payroll period as WSEEs perform their service at the client worksite in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Customers are invoiced concurrently with each periodic payroll of its WSEEs. Revenues that have been recognized but not invoiced represent unbilled accounts receivable of $754 million and $669 million at September 30, 2024 and December 31, 2023, respectively, and are included in accounts receivable, net on our Condensed Consolidated Balance Sheets.

Pursuant to the “practical expedients” provided under ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers, we expense sales commissions when incurred because the terms of our contracts are cancellable by either party with a 30-day notice. These costs are recorded in commissions in our Consolidated Statements of Income.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our revenue for our PEO HR Outsourcing Solutions by geographic region and for our other products and services offerings are as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2024		2023		% Change		2024		2023		% Change

Northeast	$	419	$	415	1	%	$	1,365	$	1,333	2	%
Southeast	223		222		—		694		682		2	%
Central	286		282		1	%	902		886		2	%
Southwest	294		295		—		938		943		(1)	%
West	321		321		—		1,016		1,014		—
	1,543		1,535		1	%	4,915		4,858		1	%
Other revenue	18		16		13	%	53		48		10	%
Total revenue	$	1,561	$	1,551	1	%	$	4,968	$	4,906	1	%

Our PEO HR Outsourcing Solutions revenues are primarily derived from our gross billings, which are based on (1) the payroll cost of our WSEEs; and (2) a markup computed as a percentage of the payroll cost. The gross billings are invoiced concurrently with each periodic payroll of our WSEEs. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of the markup, are recognized ratably over the payroll period as WSEEs perform their service at the client worksite.

In determining the pricing of the markup component of our gross billings, we take into consideration our estimates of the costs directly associated with our WSEEs, including payroll taxes, benefits and workers’ compensation costs, plus an acceptable gross profit margin. As a result, our operating results are significantly impacted by our ability to accurately estimate our direct costs relative to the revenues derived from the markup component of our gross billings.

Revenues are comprised of gross billings less WSEE payroll costs as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2024		2023		2024		2023

Gross billings	$	10,291	$	10,067	$	32,135	$	31,763
Less: WSEE payroll cost	8,730		8,516		27,167		26,857
Revenues	$	1,561	$	1,551	$	4,968	$	4,906


3.			Other Balance Sheet Information

Cash, Cash Equivalents and Marketable Securities

The following table summarizes our cash and investments in cash equivalents and marketable securities held by investment managers and overnight investments:


	September 30, 2024						December 31, 2023
(in millions)	Cash & Cash Equivalents		Marketable Securities		Total		Cash & Cash Equivalents		Marketable Securities		Total

Overnight holdings	$	365	$	—	$	365	$	611	$	—	$	611
Investment holdings	110		16		126		119		16		135
	475		16		491		730		16		746
Cash in demand accounts	11		—		11		27		—		27
Outstanding checks	(16)		—		(16)		(64)		—		(64)
Total	$	470	$	16	$	486	$	693	$	16	$	709


Insperity \| 2024 Third Quarter Form 10-Q			14


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles. Our cash, cash equivalents and marketable securities at September 30, 2024 and December 31, 2023 included $255 million and $510 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes, and other payroll deductions, as well as $19 million and $28 million, respectively, in client prepayments.

Cash, Cash Equivalents, Restricted Cash and Funds Held for Clients

The following table summarizes our cash, cash equivalents, restricted cash, funds held for clients, and deposits - workers’ compensation as reported in our Consolidated Statements of Cash Flows:


	Nine Months Ended September 30,
(in millions)	2024		2023

Supplemental schedule of cash and cash equivalents, restricted cash and funds held for clients
Cash and cash equivalents	$	693	$	733
Restricted cash	57		50
Other current assets – funds held for clients(1)	87		35
Deposits – workers’ compensation	198		196
Cash, cash equivalents, restricted cash and funds held for clients beginning of period	$	1,035	$	1,014

Cash and cash equivalents	$	470	$	679
Restricted cash	67		51
Other current assets – funds held for clients(1)	36		30
Deposits – workers’ compensation	175		197
Cash, cash equivalents, restricted cash and funds held for clients end of period	$	748	$	957

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(1)Funds held for clients represent amounts held on behalf of our Traditional Payroll Solution customers that are restricted for the purpose of satisfying obligations to remit funds to clients’ employees and various tax authorities.

Please read Note 2. “Accounting Policies,” for a discussion of our accounting policies for deposits – workers’ compensation and restricted cash.

SEC Form 10-Q filed by Insperity Inc.