Insperity, Inc 10-Q for FY2026 Q3
Insperity, Inc. (NSP)
10-Q
2026-10-29
For: 2026-09-30
View Original
Added on
October 29, 2026
About this 10-Q
Insperity, Inc filed this 10-Q on October 29, 2026, covering the quarter ended September 30, 2026 (FY2026 Q3).
Insperity reported Q3 2026 revenue of $1.7 billion, up 2%, net loss of $(1) million and adjusted EBITDA of $31 million, up 210%; YTD revenue rose 2% to $5.2 billion, net income reached $36 million and adjusted EBITDA reached $170 million. AI summary
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.65B
- up 1.7% from $1.62B a year earlier
- Net loss
- $1M
- compared with a net loss of $20M a year earlier
- Diluted EPS
- -$0.02
- compared with -$0.53 a year earlier
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, 2026
| 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
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (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 | ||||||
NYSE Texas | ||||||||
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.
| ☒ | 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 22, 2026, 38,096,106 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.
| TABLE OF CONTENTS | ||
| Page | ||||||||
| Part I, Item 1. | ||||||||
| Part I, Item 2. | ||||||||
| Part I, Item 3. | ||||||||
| Part I, Item 4. | ||||||||
| Part II, Item 1. | ||||||||
| Part II, Item 1A. | ||||||||
| Part II, Item 2. | ||||||||
| Part II, Item 5. | ||||||||
| Part II, Item 6. | ||||||||
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;
•disallowance of, or other liabilities associated with, employee retention tax credits under certain COVID-19 relief programs;
•labor shortages, increasing competition for highly skilled workers, and evolving employee expectations regarding the workplace;
•impact of inflation and changes in U.S. trade policy;
•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;
•bank failures or other events affecting financial institutions;
•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;
•financial solvency of workers’ compensation carriers, other insurers or financial institutions;
•the ability to adjust service fees for increases in state and local taxes, including state unemployment tax rates;
•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;
•disruption from healthcare reform or the inability 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;
| 2026 Third Quarter Form 10-Q | 4 | ||||||
FORWARD LOOKING STATEMENTS | ||
•disruptions of our information technology systems or failure to enhance our service and technology offerings to address new regulations or client expectations;
•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 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, 2025 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.
| 2026 Third Quarter Form 10-Q | 5 | ||||||
FINANCIAL STATEMENTS (Unaudited) | ||
PART I
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
| (in millions) | September 30, 2026 | December 31, 2025 | |||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Marketable securities | |||||||||||
| Accounts receivable, net | |||||||||||
| Prepaid insurance and related assets | |||||||||||
| Income taxes receivable | |||||||||||
Funds held for clients and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net of accumulated depreciation | |||||||||||
| Right-of-use (“ROU”) leased assets | |||||||||||
| Prepaid health insurance | |||||||||||
| Deposits – health insurance | |||||||||||
| Deposits – workers’ compensation | |||||||||||
| Goodwill and other intangible assets, net | |||||||||||
| Deferred income taxes, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and stockholders' equity | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Payroll taxes and other payroll deductions payable | |||||||||||
| Accrued worksite employee payroll costs | |||||||||||
| Accrued health insurance costs | |||||||||||
| Accrued workers’ compensation costs | |||||||||||
| Accrued corporate payroll and commissions | |||||||||||
Client funds liability and other accrued liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Accrued workers’ compensation costs, net of current | |||||||||||
| Long-term debt | |||||||||||
| Operating lease liabilities, net of current | |||||||||||
| Deferred income taxes, net | |||||||||||
| Total noncurrent liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Common stock | |||||||||||
| Additional paid-in capital | |||||||||||
| Treasury stock, at cost | ( | ( | |||||||||
| Retained earnings | |||||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes.
| 2026 Third Quarter Form | 6 | ||||||
FINANCIAL STATEMENTS (Unaudited) | ||
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
(in millions, except per share amounts) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
Revenues | $ | $ | $ | $ | |||||||||||||
Payroll taxes, benefits and workers’ compensation costs | |||||||||||||||||
| Gross profit | |||||||||||||||||
| Salaries, wages and payroll taxes | |||||||||||||||||
| Stock-based compensation | |||||||||||||||||
| Commissions | |||||||||||||||||
| Advertising | |||||||||||||||||
| General and administrative expenses | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Total operating expenses | |||||||||||||||||
| Operating income (loss) | ( | ( | |||||||||||||||
| Other income (expense): | |||||||||||||||||
| Interest income | |||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||
| Income (loss) before income tax (benefit) expense | ( | ( | |||||||||||||||
| Income tax (benefit) expense | ( | ||||||||||||||||
| Net income (loss) | $ | ( | $ | ( | $ | $ | |||||||||||
| Net income (loss) per share of common stock | |||||||||||||||||
| Basic | $ | ( | $ | ( | $ | $ | |||||||||||
| Diluted | $ | ( | $ | ( | $ | $ | |||||||||||
See accompanying notes.
| 2026 Third Quarter Form | 7 | ||||||
FINANCIAL STATEMENTS (Unaudited) | ||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 2026 and 2025
| Common Stock Issued | Additional Paid-In Capital | Treasury Stock | Retained Earnings and AOCI | Total | ||||||||||||||||
| (in millions) | Shares | Amount | ||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | ( | $ | $ | ||||||||||||||
| Purchase of treasury stock, at cost | — | ( | ( | |||||||||||||||||
| Issuance of equity-based incentive awards and dividend equivalents | — | ( | ( | |||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||
| Other | — | ( | ||||||||||||||||||
| Dividends paid | — | ( | ( | |||||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | ( | $ | $ | ||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | $ | $ | ||||||||||||||
| Purchase of treasury stock, at cost | — | ( | ( | |||||||||||||||||
| Issuance of equity-based incentive awards and dividend equivalents | — | ( | ( | |||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||
| Other | — | |||||||||||||||||||
| Dividends paid | — | ( | ( | |||||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | ( | $ | $ | ||||||||||||||
| 2026 Third Quarter Form | 8 | ||||||
FINANCIAL STATEMENTS (Unaudited) | ||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
For the Three Months Ended September 30, 2026 and 2025
| Common Stock Issued | Additional Paid-In Capital | Treasury Stock | Retained Earnings and AOCI | Total | ||||||||||||||||
| (in millions) | Shares | Amount | ||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | ( | $ | $ | ||||||||||||||
| Purchase of treasury stock, at cost | — | ( | ( | |||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||
| Other | — | |||||||||||||||||||
| Dividends paid | — | ( | ( | |||||||||||||||||
| Net loss | — | ( | ( | |||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | ( | $ | $ | ||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | $ | $ | ||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||
| Other | — | |||||||||||||||||||
| Dividends paid | — | ( | ( | |||||||||||||||||
| Net loss | — | ( | ( | |||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | ( | $ | $ | ||||||||||||||
See accompanying notes.
| 2026 Third Quarter Form | 9 | ||||||
FINANCIAL STATEMENTS (Unaudited) | ||
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended September 30, | ||||||||
| (in millions) | 2026 | 2025 | ||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | $ | ||||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Deferred income taxes | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ( | ||||||
| Prepaid insurance and related assets | ( | |||||||
| Other current assets | ( | |||||||
| Other assets and ROU assets | ( | ( | ||||||
| Accounts payable | ( | |||||||
| Payroll taxes and other payroll deductions payable | ( | ( | ||||||
| Accrued worksite employee payroll costs | ||||||||
| Accrued health insurance costs | ||||||||
| Accrued workers’ compensation costs | ( | ( | ||||||
| Accrued corporate payroll, commissions and other accrued liabilities | ( | ( | ||||||
| Income taxes payable/receivable | ( | ( | ||||||
| Total adjustments | ( | ( | ||||||
| Net cash used in operating activities | ( | ( | ||||||
| Cash flows from investing activities | ||||||||
| Marketable securities: | ||||||||
| Purchases | ( | ( | ||||||
| Proceeds from maturities | ||||||||
| Proceeds from dispositions | ||||||||
| Property and equipment purchases | ( | ( | ||||||
| Net cash used in investing activities | ( | ( | ||||||
| Cash flows from financing activities | ||||||||
| Purchase of treasury stock | ( | ( | ||||||
| Dividends paid | ( | ( | ||||||
| Borrowings under revolving line of credit | ||||||||
Client funds liability and other | ( | ( | ||||||
| Net cash used in financing activities | ( | ( | ||||||
| Net decrease in cash, cash equivalents, restricted cash, funds held for clients, and deposits – workers’ compensation | ( | ( | ||||||
| Cash, cash equivalents, restricted cash, funds held for clients, and deposits - workers’ compensation beginning of period | ||||||||
| Cash, cash equivalents, restricted cash, funds held for clients, and deposits - workers’ compensation end of period | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| ROU assets obtained in exchange for lease obligations | $ | $ | ||||||
See accompanying notes.
| 2026 Third Quarter Form | 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 comprehensive HR services offerings are provided through our professional employer organization (“PEO”) services, known as our Insperity® HR360 solution, our Insperity® HR360 Select Edition, and our Insperity HRScale® solution (together, our “PEO HR Solutions”), which we provide by entering into a co-employment relationship with our clients. Our PEO HR Solutions encompass a broad range of HR functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services. Our Insperity HR360 solution and Insperity HR360 Select Edition provide access to our web-based human capital management platform, the Insperity PremierTM platform, while our Insperity HRScale solution provides access to the Workday Human Capital Management platform.
In addition to our PEO HR Solutions, we offer a comprehensive traditional payroll and human capital management solution, known as our Insperity HRCore® solution, which we refer to as our “Traditional HR Solution.” We also offer a number of other business performance solutions, including Talent Acquisition Services, Retirement Services, Insurance Services, Contractor Management, and Perks+. These other products and services are generally offered only 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, 2025. Our Consolidated Balance Sheet at December 31, 2025 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 Consolidated Balance Sheet at September 30, 2026 and our Consolidated Statements of Operations for the three and nine month periods ended September 30, 2026 and 2025, our Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2026 and 2025 and our Consolidated Statements of Stockholders' Equity for each of the three and nine month periods ended September 30, 2026 and 2025, 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 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, all of which provide fully insured policies or service contracts.
Approximately 86 % of our costs related to health insurance coverage are incurred 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 through December 31, 2025, our financial responsibility for a participant’s annual claim costs was limited to $1 million (“Individual Claims Limit”). Beginning January 1, 2026, we have the option to annually elect to limit our responsibility for each participant’s claim costs to $500,000, $750,000, or $1,000,000 per year (“Selected Claims Limit”), which we elect based on the cost of the limit and
| 2026 Third Quarter Form | 11 | ||||||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
our estimate of the benefit to us at that level of limit. The cost of the Selected Claims Limit is recognized evenly over the year, whereas the claims recovery benefit on the Selected Claims Limit is expected to increase throughout the year, with the expected increase being more impactful at a lower Selected Claims Limit. For 2026, the Selected Claims Limit we have elected is the first $500,000 of paid claims per claimant per year. Accordingly, we record the cost of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the “Program Costs”), as benefits expense, which is a component of direct costs, in our Consolidated Statements of Operations. 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 patterns under the plan; and (3) the number of participants in the program, 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 Program 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 Consolidated Balance Sheets. On the other hand, if the Program 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 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 on our Consolidated Balance Sheets. In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $7 million at September 30, 2026, and is included in deposits - health insurance as a long-term asset on our Consolidated Balance Sheets. As of September 30, 2026, Program Costs were less than the net premiums paid and owed to United by $50 million, which is included in prepaid insurance, a current asset, on our Consolidated Balance Sheets at September 30, 2026. In addition, the premiums owed to United at September 30, 2026, were $63 million, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets. Our benefits costs incurred in the first nine months of 2026 included a decrease of $4 million for changes in estimated run-off related to prior periods. Our benefits costs incurred in the first nine months of 2025 included an increase of $9 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 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 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, 2026 and 2025, we reduced accrued workers’ compensation costs by $7 million and $20 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 was 4.0
| 2026 Third Quarter Form | 12 | ||||||
| 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) | 2026 | 2025 | |||||||||
| Beginning balance, January 1, | $ | $ | |||||||||
| Accrued claims, net | |||||||||||
| Present value discount, net of accretion | ( | ( | |||||||||
| Paid claims | ( | ( | |||||||||
| Ending balance | $ | $ | |||||||||
| Current portion of accrued claims | $ | $ | |||||||||
| Long-term portion of accrued claims | |||||||||||
| Total accrued claims | $ | $ | |||||||||
The current portion of accrued workers’ compensation costs on our Consolidated Balance Sheets at September 30, 2026 and 2025 includes $2
The undiscounted accrued workers’ compensation costs were $229 million as of September 30, 2026 and $227 million as of September 30, 2025.
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 primarily held as cash and money market funds (cash equivalents) and 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 Consolidated Balance Sheets. At September 30, 2026, we had restricted cash of $84 million and deposits – workers’ compensation of $132 million, of which $211 million was held in trust bank accounts.
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 Consolidated Balance Sheets.
Revenue and Direct Cost Recognition
We enter into contracts with our PEO HR Solutions customers for human resources services based on the rate and price stated 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 $900 million at September 30, 2026 and $810 million at December 31, 2025, and are included in accounts receivable, net on our 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 Operations.
| 2026 Third Quarter Form | 13 | ||||||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
Our revenue for our PEO HR 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) | 2026 | 2025 | % Change | 2026 | 2025 | % Change | |||||||||||||||||
| Northeast | $ | $ | (3) | % | $ | $ | (1) | % | |||||||||||||||
| Southeast | 3 | % | 4 | % | |||||||||||||||||||
| Central | 2 | % | 2 | % | |||||||||||||||||||
| Southwest | 3 | % | 1 | % | |||||||||||||||||||
| West | 5 | % | 4 | % | |||||||||||||||||||
| 1,634 | 1,608 | 2 | % | 5,181 | 5,091 | 2 | % | ||||||||||||||||
| Other revenue | 13 | % | (4) | % | |||||||||||||||||||
| Total revenue | $ | $ | 2 | % | $ | $ | 2 | % | |||||||||||||||
Our PEO HR Solutions revenues are primarily derived from our gross billings, which are based on (1) the payroll cost of our WSEEs; and (2) a 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) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Gross billings | $ | $ | $ | $ | |||||||||||||
| Less: WSEE payroll cost | |||||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||||
Consistent with our revenue recognition policy, our direct costs do not include the payroll cost of our WSEEs. Our direct costs associated with our revenue generating activities are primarily comprised of all other costs related to our WSEEs, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs.
Segment Reporting
ASC 280, Segment Reporting establishes standards for reporting information about operating segments on a basis consistent with our internal organizational structure as well as information about geographical areas and business segments. Based on management’s assessment, we determined that we have only one operating segment and therefore one reportable segment, HR Solutions, as defined by ASC 280.
The accounting policies of the HR Solutions segment are the same as those described in the summary of significant accounting policies. The measure of segment assets is reported on our Consolidated Balance Sheets as total assets, and the chief operating decision maker (“CODM”) assesses performance and decides how to allocate resources based on net income as reported in our Consolidated Statements of Operations.
The CODM reviews revenues and expenses at the consolidated level as disclosed in our Consolidated Statements of Operations and uses net income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into our HR Solutions segment or into other areas of the entity, such as for acquisitions or to
| 2026 Third Quarter Form | 14 | ||||||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
pay dividends. Net income is also used to monitor budget versus actual results and in competitive analysis by benchmarking to our competitors. The competitive analysis and the monitoring of budgeted versus actual results are used in assessing the segment’s performance and in establishing management’s compensation.
Recently Adopted Accounting Pronouncements
In September 2025, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 removes all references to software development stages and requires capitalization of software costs when management has committed to the software project and it is probable the software will be completed and perform its intended use. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and for interim periods within those annual periods, with early adoption permitted. We early adopted ASU 2025-06 effective January 1, 2026 on a prospective basis and the impact of the adoption was not material to our Consolidated Financial Statements.
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, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (in millions) | Cash & Cash Equivalents | Marketable Securities | Total | Cash & Cash Equivalents | Marketable Securities | Total | |||||||||||||||||
| Overnight holdings | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| Investment holdings | |||||||||||||||||||||||
| 597 | — | 597 | 660 | 18 | 678 | ||||||||||||||||||
| Cash in demand accounts | |||||||||||||||||||||||
| Outstanding checks | ( | ( | ( | ( | |||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||
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, 2026 and December 31, 2025 included $426 million and $468 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes, and other payroll deductions, as well as $54 million and $135 million, respectively, in client prepayments.
| 2026 Third Quarter Form | 15 | ||||||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
Cash, Cash Equivalents, Restricted Cash, Funds Held for Clients, and Deposits - Workers’ Compensation
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) | 2026 | 2025 | |||||||||
| Supplemental schedule of cash and cash equivalents, restricted cash, funds held for clients, and deposits - workers’ compensation | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
Other current assets – funds held for clients(1) | |||||||||||
| Deposits – workers’ compensation | |||||||||||
| Cash, cash equivalents, restricted cash, funds held for clients, and deposits - workers’ compensation beginning of period | $ | $ | |||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
Other current assets – funds held for clients(1) | |||||||||||
| Deposits – workers’ compensation | |||||||||||
| Cash, cash equivalents, restricted cash, funds held for clients, and deposits - workers’ compensation end of period | $ | $ | |||||||||
(1)Funds held for clients represent amounts held on behalf of our Traditional HR Solution customers that are restricted for the purpose of satisfying obligations to remit funds to clients’ employees and various tax authorities.
4. | Fair Value Measurements | ||||
We account for our financial assets in accordance with ASC 820, Fair Value Measurement. This standard defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The fair value measurement disclosures are grouped into three levels based on valuation factors:
•Level 1 - quoted prices in active markets using identical assets
•Level 2 - significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs
•Level 3 - significant unobservable inputs
| 2026 Third Quarter Form | 16 | ||||||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
Fair Value of Instruments Measured and Recognized at Fair Value
The following table summarizes the levels of fair value measurements of our financial assets:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (in millions) | Total | Level 1 | Total | Level 1 | |||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| U.S. Treasury bills | |||||||||||||||||||||||
| 597 | 597 | 678 | 678 | ||||||||||||||||||||
Deposits - money market funds | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
The following is a summary of our available-for-sale marketable securities:
| (in millions) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||
| September 30, 2026 | ||||||||||||||
| U.S. Treasury bills | $ | $ | $ | $ | ||||||||||
| December 31, 2025 | ||||||||||||||
| U.S. Treasury bills | $ | $ | $ | $ | ||||||||||
Fair Value of Other Financial Instruments
The carrying amounts of cash, cash equivalents, restricted cash, accounts receivable, deposits and accounts payable approximate their fair values due to the short-term maturities of these instruments.
As of September 30, 2026, the carrying value of borrowings under our revolving credit facility approximates fair value and was classified as Level 2 in the fair value hierarchy. Please read Note 5, “Long-Term Debt,” for additional information.
5. | Long-Term Debt | ||||
We have a revolving credit facility (the “Facility”) with a revolving credit commitment of $750 million. The Facility may be further increased to $800 million based on the terms and subject to the conditions set forth in the agreement relating to the Facility (as amended, the “Credit Agreement”). The Facility is available for working capital and general corporate purposes, including acquisitions, stock repurchases and issuances of letters of credit. Our obligations under the Facility are secured by 100 % of the stock of our captive insurance subsidiary and are guaranteed by all of our subsidiaries other than our captive insurance subsidiary and certain other excluded subsidiaries. At September 30, 2026, our outstanding balance on the Facility was $419 million, and we had an outstanding $1 million letter of credit issued under the Facility, resulting in unused commitment of $330 million.
The Facility contains both affirmative and negative covenants that we believe are customary for arrangements of this nature. Covenants include, but are not limited to, limitations on our ability to incur additional indebtedness, sell material assets, retire, redeem or otherwise reacquire our capital stock, acquire the capital stock or assets of another business, make investments and pay dividends. In addition, the Credit Agreement requires us to comply with financial covenants limiting our total funded debt, minimum interest coverage ratio, and maximum leverage ratio. We were in compliance with all financial covenants under the Credit Agreement at September 30, 2026.
| 2026 Third Quarter Form | 17 | ||||||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
| 6. | Income Taxes | ||||
7. | Stockholders' Equity | ||||
During the nine months ended September 30, 2026, we repurchased or withheld an aggregate of 302,258 shares of our common stock, as described below.
Repurchase Program
Our Board of Directors (the “Board”) has authorized a program to repurchase shares of our outstanding common stock (“Repurchase Program”). The purchases may be made from time to time in the open market or directly from stockholders at prevailing market prices based on market conditions and other factors. During the nine months ended September 30, 2026, 130,000 shares were repurchased under the Repurchase Program. As of September 30, 2026, we were authorized to repurchase an additional 1,277,764 shares under the Repurchase Program.
Withheld Shares
During the nine months ended September 30, 2026, we withheld 172,258 shares to satisfy tax withholding obligations for the vesting of long-term incentive and restricted stock unit awards.
Dividends
The Board declared and paid quarterly dividends as follows:
| (amounts per share) | 2026 | 2025 | |||||||||
| First quarter | $ | $ | |||||||||
| Second quarter | |||||||||||
| Third quarter | |||||||||||
During the nine months ended September 30, 2026 and 2025, we declared and paid dividends totaling $69 million and $68 million, respectively.
8. | Earnings Per Share | ||||
Basic EPS is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period, plus the dilutive effect of time-based and performance-based restricted stock units (“RSUs”).
| 2026 Third Quarter Form | 18 | ||||||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
The following table summarizes net income (loss) and basic and diluted shares used in the earnings per share computations:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net income (loss) | $ | ( | $ | ( | $ | $ | |||||||||||
| Weighted average common shares outstanding | |||||||||||||||||
| Incremental shares from assumed time-based and performance-based RSU awards | |||||||||||||||||
| Adjusted weighted average common shares outstanding | |||||||||||||||||
Potentially dilutive securities not included in weighted average shares calculation due to anti-dilutive effect | |||||||||||||||||
9. | Commitments and Contingencies | ||||
Litigation
We are a defendant in various lawsuits and claims arising in the normal course of business. Management believes it has valid defenses in these cases and is defending them vigorously. While the results of litigation cannot be predicted with certainty, management believes the final outcome of such litigation will not have a material adverse effect on our financial position or results of operations.
| 2026 Third Quarter Form | 19 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025, as well as our Consolidated Financial Statements and notes thereto included in this Quarterly Report on Form 10-Q.
Executive Summary
Overview
Insperity, Inc. (“Insperity,” “we,” “our,” and “us”) provides an array of human resources (“HR”) and business solutions designed to help improve business performance. Our comprehensive HR services offerings are provided through our professional employer organization (“PEO”) services, known as our Insperity® HR360 solution, our Insperity® HR360 Select Edition, and our Insperity HRScale® solution (together, our “PEO HR Solutions”), which we provide by entering into a co-employment relationship with our clients. Our PEO HR Solutions encompass a broad range of HR functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services. Our Insperity HR360 solution and Insperity HR360 Select Edition provide access to our web-based human capital management platform, the Insperity PremierTM platform, while our Insperity HRScale solution provides access to the Workday Human Capital Management platform.
2026 Highlights
Third Quarter 2026 Compared to Third Quarter 2025
•Average number of WSEEs paid per month decreased 2%
•Net income (loss) and diluted earnings (loss) per share (“EPS”) increased 95% and 96% to $(1) million and $(0.02), respectively
•Adjusted EBITDA increased 210% to $31 million
•Adjusted net income (loss) and adjusted EPS increased 200% and 210% to $8 million and $0.22, respectively
First Nine Months 2026 Compared to First Nine Months 2025
•Average number of WSEEs paid per month decreased 1%
•Net income and diluted EPS both increased 38% to $36 million and $0.95, respectively
•Adjusted EBITDA increased 18% to $170 million
•Adjusted net income (loss) and adjusted EPS increased 16% and 13% to $71 million and $1.85, respectively
Please read “Non-GAAP Financial Measures” for a reconciliation of adjusted EBITDA, adjusted net income (loss), and adjusted EPS to their most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”).
| 2026 Third Quarter Form 10-Q | 20 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
Results of Operations
Key Financial and Statistical Data
| (in millions, except per share, WSEE and statistical data) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2026 | 2025 | % Change | 2026 | 2025 | % Change | ||||||||||||||||||
| Financial data: | |||||||||||||||||||||||
Revenues | $ | 1,651 | $ | 1,623 | 2 | % | $ | 5,232 | $ | 5,144 | 2 | % | |||||||||||
| Gross profit | 207 | 195 | 6 | % | 726 | 728 | — | ||||||||||||||||
| Operating expenses | 209 | 220 | (5) | % | 660 | 692 | (5) | % | |||||||||||||||
| Operating income (loss) | (2) | (25) | 92 | % | 66 | 36 | 83 | % | |||||||||||||||
| Other income | 1 | 1 | — | 1 | 6 | (83) | % | ||||||||||||||||
| Net income (loss) | (1) | (20) | 95 | % | 36 | 26 | 38 | % | |||||||||||||||
Diluted EPS | (0.02) | (0.53) | 96 | % | 0.95 | 0.69 | 38 | % | |||||||||||||||
Non-GAAP financial measures(1): | |||||||||||||||||||||||
| Adjusted net income (loss) | $ | 8 | $ | (8) | 200 | % | $ | 71 | $ | 61 | 16 | % | |||||||||||
| Adjusted EBITDA | 31 | 10 | 210 | % | 170 | 144 | 18 | % | |||||||||||||||
Adjusted EPS | 0.22 | (0.20) | 210 | % | 1.85 | 1.63 | 13 | % | |||||||||||||||
| Average WSEEs paid | 307,265 | 312,842 | (2) | % | 305,359 | 309,327 | (1) | % | |||||||||||||||
Statistical data (per WSEE per month): | |||||||||||||||||||||||
Revenues(2) | $ | 1,791 | $ | 1,729 | 4 | % | $ | 1,904 | $ | 1,848 | 3 | % | |||||||||||
| Gross profit | 225 | 208 | 8 | % | 264 | 261 | 1 | % | |||||||||||||||
Operating expenses | 227 | 235 | (3) | % | 240 | 248 | (3) | % | |||||||||||||||
| Operating income (loss) | (2) | (27) | 93 | % | 24 | 13 | 85 | % | |||||||||||||||
| Net income (loss) | (1) | (21) | 95 | % | 13 | 9 | 44 | % | |||||||||||||||
____________________________________
(1)Please read “Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP.
(2)Revenues per WSEE per month are comprised of gross billings per WSEE per month less WSEE payroll costs per WSEE per month as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| (per WSEE per month) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Gross billings | $ | 11,997 | $ | 11,432 | $ | 12,414 | $ | 12,009 | |||||||||
| Less: WSEE payroll cost | 10,206 | 9,703 | 10,510 | 10,161 | |||||||||||||
| Revenues | $ | 1,791 | $ | 1,729 | $ | 1,904 | $ | 1,848 | |||||||||
| 2026 Third Quarter Form 10-Q | 21 | ||||||
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 Q3 2026, average WSEEs paid decreased 2% compared to Q3 2025. The number of WSEEs paid from new client sales and client retention decreased due in part to our margin recovery efforts, while the net change in our client base increased compared to Q3 2025.
•During the first nine months of 2026 (“YTD 2026”), average WSEEs paid decreased 1% compared to the first nine months of 2025 (“YTD 2025”). The number of WSEEs paid from new client sales and client retention decreased due in part to our margin recovery efforts, while the net change in our client base increased when compared to YTD 2025.
Average WSEEs Paid and
Year-over-Year Growth Percentage
| 2026 Third Quarter Form 10-Q | 22 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
Net Income (Loss) and
Year-over-Year Growth Percentage
(in millions)
Adjusted EBITDA and Year-over-Year Growth Percentage (in millions) | |||||
| 2026 Third Quarter Form 10-Q | 23 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
EPS and Year-over-Year Growth Percentage (amounts per share) | |||||
| 2026 Third Quarter Form 10-Q | 24 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
Adjusted EPS and Year-over-Year Growth Percentage (amounts per share) | |||||
| 2026 Third Quarter Form 10-Q | 25 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
Revenues
Our PEO HR Solutions revenues are primarily derived from our gross billings, which are based on (1) the payroll cost of our WSEEs and (2) a monthly markup component.
Our revenues are primarily dependent on the number of clients enrolled, the resulting number of WSEEs paid each period and the number of WSEEs enrolled in our benefit plans. Because our monthly markup is computed in part as a percentage of payroll cost, certain revenues are also affected by the payroll cost of WSEEs, which may fluctuate based on the composition of the WSEE base, inflationary effects on wage levels and differences in the local economies of our markets.
Revenue and
Year-over-Year Growth Percentage
(in millions)
Third Quarter 2026 Compared to Third Quarter 2025
Our revenues for Q3 2026 were $1.7 billion, an increase of 2%, primarily due to the following:
•Revenues per WSEE per month increased 4%, or $62, while the average WSEEs paid decreased 2%
First Nine Months 2026 Compared to First Nine Months 2025
Our revenues for YTD 2026 were $5.2 billion, an increase of 2%, primarily due to the following:
•Revenues per WSEE per month increased 3%, or $56, while the average WSEEs paid decreased 1%
| 2026 Third Quarter Form 10-Q | 26 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
We provide our PEO HR Solutions to small and medium-sized businesses throughout the United States. Our PEO HR Solutions revenue distribution by region follows:
PEO HR Solutions Revenue by Region
(in millions)
________________________________________________________
(1)The Southwest region includes Texas.
The percentage of total PEO HR Solutions revenue in our significant markets includes the following:
Significant Markets
We generally define the middle market sector as those companies with approximately 150 to 5,000 WSEEs. We have a dedicated sales management, service personnel, and consulting staff who concentrate solely on the middle market sector. Our average number of WSEEs per month in our middle market sector increased 10% during YTD 2026 compared to YTD 2025, representing approximately 29% and 26% of our total average paid WSEEs in YTD 2026 and YTD 2025, respectively.
| 2026 Third Quarter Form 10-Q | 27 | ||||||
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.
Our gross profit per WSEE and operating results are significantly impacted by our ability to accurately estimate direct costs and our ability to incorporate changes in these costs into the gross billings charged to PEO HR Solutions clients, which are subject to pricing arrangements that are typically renewed annually. We use gross profit per WSEE per month as our principal measurement of relative performance at the gross profit level.
Gross Profit and Year-over-Year Growth Percentage (in millions) | |||||
| 2026 Third Quarter Form 10-Q | 28 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
Gross Profit per WSEE per Month and Year-over-Year Growth Percentage | |||||
Third Quarter 2026 Compared to Third Quarter 2025
Gross profit for Q3 2026 increased 6% to $207 million compared to $195 million in Q3 2025. Gross profit per WSEE per month for Q3 2026 increased $17 to $225 compared to $208 in Q3 2025 due to higher average pricing, offset in part by higher direct costs.
Our pricing objectives attempt to achieve a level of revenue per WSEE that matches or exceeds changes in primary direct costs and operating expenses. Our revenues per WSEE per month increased $62 due to higher average pricing of 4%.
The net increase in direct costs between Q3 2026 and Q3 2025 attributable to the changes in cost estimates related to prior periods for benefits and workers’ compensation totaled $5 million as discussed below.
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 $12 per WSEE per month and increased 3.7% on a cost per covered employee basis in Q3 2026 as compared to Q3 2025.
•The percentage of WSEEs covered under our health insurance plans was 61% in Q3 2026 compared to 62% in Q3 2025.
Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Health Insurance Costs,” for a discussion of our accounting for health insurance costs.
Workers’ compensation costs
•Workers’ compensation costs increased 27%, or $7 per WSEE per month, in Q3 2026 compared to Q3 2025 and has been impacted, in part, by elevated health care cost trends.
•As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.34% in Q3 2026 compared to 0.27% in Q3 2025.
•Our continued discipline around our client selection, workplace safety and claims management has at times allowed for claims to be closed out at amounts below our original cost estimates. In Q3 2026 there was no change in
| 2026 Third Quarter Form 10-Q | 29 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
estimate in workers’ compensation; however, in Q3 2025, there was a reduction of $5 million, or 0.05% of non-bonus payroll costs.
Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Workers’ Compensation Costs,” for a discussion of our accounting for workers’ compensation costs.
Payroll tax costs
•Payroll taxes increased 2% on a 3% increase in payroll costs, or $25 per WSEE per month.
•Payroll taxes as a percentage of payroll costs were 6% in both Q3 2026 and Q3 2025.
First Nine Months 2026 Compared to First Nine Months 2025
Gross profit for YTD 2026 decreased to $726 million compared to $728 million in YTD 2025. Gross profit per WSEE per month for YTD 2026 increased $3 to $264 compared to $261 in YTD 2025 due to higher average pricing, offset in part by higher direct costs.
Our pricing objectives attempt to achieve a level of revenue per WSEE that matches or exceeds changes in primary direct costs and operating expenses. Our revenues per WSEE per month increased $56 due to higher average pricing of 3%.
There was no net change in direct costs between YTD 2026 and YTD 2025 attributable to the changes in cost estimates related to prior periods for benefits and workers’ compensation as discussed below. The $53 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 $22 per WSEE per month, or 4.6% on a cost per covered employee basis in YTD 2026 as compared to YTD 2025.
•The percentage of WSEEs covered under our health insurance plans was 62% in YTD 2026 compared to 63% in YTD 2025.
•Reported results include changes in estimated claims run-off related to prior periods, which was a decrease in costs of $4 million, or $1 per WSEE per month, in YTD 2026 compared to an increase in costs of $9 million, or $3 per WSEE per month, in YTD 2025.
Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Health Insurance Costs,” for a discussion of our accounting for health insurance costs.
Workers’ compensation costs
•Workers’ compensation costs increased 30%, or $7 per WSEE per month, in YTD 2026 compared to YTD 2025.
•As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.32% in YTD 2026 compared to 0.25% in YTD 2025.
•Our continued discipline around our client selection, workplace safety and claims management has allowed for claims to be closed out at amounts below our original cost estimates, resulting in a reduction in workers’ compensation costs of $7 million, or 0.03% of non-bonus payroll costs, in YTD 2026 compared to a reduction of $20 million, or 0.08% of non-bonus payroll costs, in YTD 2025.
Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Workers' Compensation Costs,” for a discussion of our accounting for workers’ compensation costs.
Payroll tax costs
•Payroll taxes increased 2% on a 2% increase in payroll costs, or $25 per WSEE per month.
•Payroll taxes as a percentage of payroll costs were 7% in both YTD 2026 and YTD 2025.
| 2026 Third Quarter Form 10-Q | 30 | ||||||
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.
•Restructuring charges — Primarily due to severance costs, which were related to a reduction in our non-sales headcount.
•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 awards.
•Commissions — Commissions expense consists primarily of amounts paid to sales managers and other sales personnel, including business performance advisors (“BPAs”), as well as channel referral fees. Commissions are based on new accounts sold and a percentage of revenue generated by such personnel.
•Advertising — Advertising expense primarily consists of media advertising and other business promotions in our current and anticipated sales markets.
•General and administrative expenses — Our general and administrative expenses primarily include:
◦rent expenses related to our service centers and sales offices
◦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 third-party costs related to our strategic partnership with Workday, Inc.
•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.
| 2026 Third Quarter Form 10-Q | 31 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
Third Quarter 2026 Compared to Third Quarter 2025
The following table presents certain information related to our operating expenses:
| Three Months Ended September 30, | |||||||||||||||||||||||
| per WSEE | |||||||||||||||||||||||
| (in millions, except per WSEE) | 2026 | 2025 | % Change | 2026 | 2025 | % Change | |||||||||||||||||
Salaries | $ | 119 | $ | 125 | (5) | % | $ | 129 | $ | 133 | (3) | % | |||||||||||
| Stock-based compensation | 12 | 16 | (25) | % | 13 | 17 | (24) | % | |||||||||||||||
| Commissions | 10 | 13 | (23) | % | 11 | 14 | (21) | % | |||||||||||||||
| Advertising | 11 | 10 | 10 | % | 12 | 11 | 9 | % | |||||||||||||||
General and administrative: | |||||||||||||||||||||||
Amortization of SaaS implementation costs | 3 | 1 | 200 | % | 3 | 1 | 200 | % | |||||||||||||||
Workday SaaS licensing and implementation expense | 4 | 4 | — | 4 | 4 | — | |||||||||||||||||
All other general and administrative | 40 | 40 | — | 44 | 43 | 2 | % | ||||||||||||||||
Total general and administrative | 47 | 45 | 4 | % | 51 | 48 | 6 | % | |||||||||||||||
| Depreciation and amortization | 10 | 11 | (9) | % | 11 | 12 | (8) | % | |||||||||||||||
| Total operating expenses | $ | 209 | $ | 220 | (5) | % | $ | 227 | $ | 235 | (3) | % | |||||||||||
Operating expenses for Q3 2026 decreased 5% to $209 million compared to $220 million in Q3 2025. Operating expenses per WSEE per month for Q3 2026 decreased 3% to $227 compared to $235 in Q3 2025.
•Salaries of corporate and sales staff for Q3 2026 decreased 5% to $119 million, or $4 per WSEE per month, compared to Q3 2025. The decrease was primarily due to a 6% decrease in BPA, service and support headcount in Q3 2026 compared to Q3 2025.
•Stock-based compensation expense for Q3 2026 decreased 25% to $12 million, or $4 per WSEE per month, compared to Q3 2025. The decrease was primarily due to lower value time-based restricted stock unit awards granted under our incentive plan in 2026.
•Commissions expense for Q3 2026 decreased 23% to $10 million, or $3 per WSEE per month, compared to Q3 2025. The decrease was primarily due to lower manager commissions associated with our PEO HR Solutions paid during Q3 2026.
| 2026 Third Quarter Form | 32 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
First Nine Months 2026 Compared to First Nine Months 2025
The following table presents certain information related to our operating expenses:
| Nine Months Ended September 30, | |||||||||||||||||||||||
| per WSEE | |||||||||||||||||||||||
| (in millions, except per WSEE) | 2026 | 2025 | % Change | 2026 | 2025 | % Change | |||||||||||||||||
| Salaries | $ | 365 | $ | 396 | (8) | % | $ | 133 | $ | 142 | (6) | % | |||||||||||
| Restructuring charges | 9 | — | — | 3 | — | — | |||||||||||||||||
| Stock-based compensation | 38 | 47 | (19) | % | 14 | 17 | (18) | % | |||||||||||||||
| Commissions | 30 | 34 | (12) | % | 11 | 12 | (8) | % | |||||||||||||||
| Advertising | 36 | 28 | 29 | % | 13 | 10 | 30 | % | |||||||||||||||
| General and administrative: | |||||||||||||||||||||||
| Amortization of SaaS implementation costs | 6 | 4 | 50 | % | 2 | 1 | 100 | % | |||||||||||||||
| Workday SaaS licensing and implementation expense | 12 | 17 | (29) | % | 4 | 6 | (33) | % | |||||||||||||||
| All other general and administrative | 133 | 133 | — | 49 | 48 | 2 | % | ||||||||||||||||
| Total general and administrative | 151 | 154 | (2) | % | 55 | 55 | — | ||||||||||||||||
| Depreciation and amortization | 31 | 33 | (6) | % | 11 | 12 | (8) | % | |||||||||||||||
| Total operating expenses | $ | 660 | $ | 692 | (5) | % | $ | 240 | $ | 248 | (3) | % | |||||||||||
Operating expenses for YTD 2026 decreased 5% to $660 million compared to $692 million in YTD 2025. Operating expenses per WSEE per month for YTD 2026 decreased 3% to $240 compared to $248 in YTD 2025.
•Salaries of corporate and sales staff for YTD 2026 decreased 8% to $365 million, or $9 per WSEE per month, compared to YTD 2025. The decrease was primarily due to a 6% decrease in BPA, service and support headcount in YTD 2026 compared to YTD 2025.
•Restructuring charges for YTD 2026 were $9 million, or $3 per WSEE per month, primarily due to severance costs related to a workforce realignment.
•Stock-based compensation expense for YTD 2026 decreased 19% to $38 million, or $3 per WSEE per month, compared to YTD 2025. The decrease was primarily due to lower value time-based restricted stock unit awards granted under our incentive plan in 2026, offset in part by an increase in LTIP awards expense.
•Commissions expense for YTD 2026 decreased 12% to $30 million, or $1 per WSEE per month, compared to YTD 2025. The decrease was primarily due to lower commissions associated with our PEO HR Solutions, as well as a decrease in the amount of sales channel referral fees paid during YTD 2026.
•Advertising expense for YTD 2026 increased 29% to $36 million, or $3 per WSEE per month, compared to YTD 2025 primarily due to a change in timing of advertising spend.
Other Income (Expense)
Interest income decreased $4 million in YTD 2026 compared to YTD 2025 primarily due to lower interest rates on overnight, investment and deposit holdings.
Interest expense increased $1 million in YTD 2026 compared to YTD 2025.
| 2026 Third Quarter Form 10-Q | 33 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
Income Tax Expense
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||
| Effective income tax rate | — | 17% | 46% | 38% | |||||||||||||
For the nine months ended September 30, 2026, our provision for income taxes differed from the U.S. statutory rate primarily due to state income taxes, non-deductible expenses and vesting of restricted and long-term incentive stock awards. During the first nine months of 2026 we recognized $9 million of income tax expense related to the vesting of certain long-term incentive and restricted stock awards, primarily due to the vesting date price being below the grant date price. During the first nine months of 2025, we recognized $1 million of income tax expense related to the vesting of long-term incentive and restricted stock awards.
On July 4, 2025, H.R.1, which is known as the “One Big Beautiful Bill Act,” was signed into federal law. This law includes significant changes to federal tax law and other regulatory provisions that may impact us. ASC 740, “Income Taxes”, requires the effect of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. We have evaluated the provisions of H.R.1 and the potential effects on our financial position, results of operations, and cash flows. Although there is no impact to our effective tax rate, we are accelerating tax deductions for unamortized software development costs.
| 2026 Third Quarter Form 10-Q | 34 | ||||||
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. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of the non-GAAP financial measures used to their most directly comparable GAAP financial measures as provided in the tables below.
| Non-GAAP Measure | Definition | Benefit of Non-GAAP Measure | ||||||
| Non-bonus payroll cost | Non-bonus payroll cost is a non-GAAP financial measure that excludes the impact of bonus payrolls paid to our WSEEs. | Our management refers to non-bonus payroll cost in analyzing, reporting and forecasting our workers’ compensation costs. Bonus payroll cost varies from period to period, but has no direct impact to our ultimate workers’ compensation costs under the current program. We include these non-GAAP financial measures because we believe they are useful to investors in allowing for greater transparency related to the costs incurred under our current workers’ compensation program. | ||||||
| Adjusted cash, cash equivalents and marketable securities | Excludes funds associated with: • federal and state income tax withholdings, • employment taxes, • other payroll deductions, and • client prepayments. | We believe that the exclusion of the identified items helps us reflect the fundamentals of our underlying business model and analyze results against our expectations, against prior periods, and to plan for future periods by focusing on our underlying operations. We believe that the adjusted results provide relevant and useful information for investors because they allow investors to view performance in a manner similar to the method used by management and improves their ability to understand and assess our operating performance. Adjusted EBITDA is used by our lenders to assess our leverage and ability to make interest payments. | ||||||
| Adjusted operating expenses | Represents operating expenses excluding the impact of the following: • restructuring charges. | |||||||
| EBITDA | Represents net income computed in accordance with GAAP, plus: • interest expense, • income tax expense, • depreciation and amortization expense, and • amortization of SaaS implementation costs. | |||||||
| Adjusted EBITDA | Represents EBITDA plus: • non-cash stock-based compensation, and • restructuring charges. | |||||||
| Adjusted net income (loss) | Represents net income computed in accordance with GAAP, excluding: • non-cash stock-based compensation, • restructuring charges, and • non-GAAP effective tax rate.(1) | |||||||
| Adjusted EPS | Represents diluted net income per share computed in accordance with GAAP, excluding: • non-cash stock-based compensation, • restructuring charges, and • non-GAAP effective tax rate.(1) | |||||||
____________________________________ | |||||
(1)Non-GAAP effective tax rate excludes the income tax impact from stock-based compensation, restructuring charges, changes in uncertain tax positions, and nonrecurring benefits or expenses from federal legislative changes. | |||||
| 2026 Third Quarter Form 10-Q | 35 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
Following is a reconciliation of payroll cost (GAAP) to non-bonus payroll costs (non-GAAP):
| (in millions, except per WSEE per month) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||
| Per WSEE | Per WSEE | Per WSEE | Per WSEE | ||||||||||||||||||||||||||||||||
| Payroll cost | $ | 9,408 | $ | 10,206 | $ | 9,106 | $ | 9,703 | $ | 28,884 | $ | 10,510 | $ | 28,287 | $ | 10,161 | |||||||||||||||||||
| Less: Bonus payroll cost | 989 | 1,073 | 729 | 777 | 4,087 | 1,487 | 3,677 | 1,321 | |||||||||||||||||||||||||||
Non-bonus payroll cost | $ | 8,419 | $ | 9,133 | $ | 8,377 | $ | 8,926 | $ | 24,797 | $ | 9,023 | $ | 24,610 | $ | 8,840 | |||||||||||||||||||
Payroll cost % change period over period | 3 | % | 5 | % | 4 | % | 3 | % | 2 | % | 3 | % | 4 | % | 3 | % | |||||||||||||||||||
Non-bonus payroll cost % change period over period | 1 | % | 2 | % | 4 | % | 3 | % | 1 | % | 2 | % | 4 | % | 3 | % | |||||||||||||||||||
Following is a reconciliation of cash, cash equivalents and marketable securities (GAAP) to adjusted cash, cash equivalents and marketable securities (non-GAAP):
| (in millions) | September 30, 2026 | December 31, 2025 | |||||||||
| Cash, cash equivalents and marketable securities | $ | 599 | $ | 660 | |||||||
Less: | |||||||||||
Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions | 426 | 468 | |||||||||
Client prepayments | 54 | 135 | |||||||||
| Adjusted cash, cash equivalents and marketable securities | $ | 119 | $ | 57 | |||||||
Following is a reconciliation of operating expenses (GAAP) to adjusted operating expenses (non-GAAP):
| (in millions, except per WSEE per month) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||
| Per WSEE | Per WSEE | Per WSEE | Per WSEE | ||||||||||||||||||||||||||||||||
Operating expenses | $ | 209 | $ | 227 | $ | 220 | $ | 235 | $ | 660 | $ | 240 | $ | 692 | $ | 248 | |||||||||||||||||||
Less: Restructuring charges | — | — | — | — | 9 | 3 | — | — | |||||||||||||||||||||||||||
Adjusted operating expenses | $ | 209 | $ | 227 | $ | 220 | $ | 235 | $ | 651 | $ | 237 | $ | 692 | $ | 248 | |||||||||||||||||||
Operating expenses % change period over period | (5) | % | (3) | % | (4) | % | (4) | % | (5) | % | (3) | % | (1) | % | (2) | % | |||||||||||||||||||
Adjusted operating expenses % change period over period | (5) | % | (3) | % | (4) | % | (4) | % | (6) | % | (4) | % | (1) | % | (2) | % | |||||||||||||||||||
| 2026 Third Quarter Form | 36 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
Following is a reconciliation of net income (loss) (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| (in millions, except per WSEE per month) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||
| Per WSEE | Per WSEE | Per WSEE | Per WSEE | ||||||||||||||||||||||||||||||||
| Net income (loss) | $ | (1) | $ | (1) | $ | (20) | $ | (21) | $ | 36 | $ | 13 | $ | 26 | $ | 9 | |||||||||||||||||||
| Income tax (benefit) expense | — | — | (4) | (4) | 31 | 12 | 16 | 7 | |||||||||||||||||||||||||||
| Interest expense | 7 | 8 | 6 | 6 | 19 | 7 | 18 | 6 | |||||||||||||||||||||||||||
| Amortization of SaaS implementation costs | 3 | 3 | 1 | 1 | 6 | 2 | 4 | 1 | |||||||||||||||||||||||||||
Depreciation and amortization | 10 | 11 | 11 | 12 | 31 | 11 | 33 | 12 | |||||||||||||||||||||||||||
| EBITDA | 19 | 21 | (6) | (6) | 123 | 45 | 97 | 35 | |||||||||||||||||||||||||||
Stock-based compensation | 12 | 13 | 16 | 17 | 38 | 14 | 47 | 17 | |||||||||||||||||||||||||||
| Restructuring charges | — | — | — | — | 9 | 3 | — | — | |||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 31 | $ | 34 | $ | 10 | $ | 11 | $ | 170 | $ | 62 | $ | 144 | $ | 52 | |||||||||||||||||||
| Net income (loss) % change period over period | 95 | % | 95 | % | (767) | % | (800) | % | 38 | % | 44 | % | (74) | % | (75) | % | |||||||||||||||||||
Adjusted EBITDA % change period over period | 210 | % | 209 | % | (74) | % | (74) | % | 18 | % | 19 | % | (42) | % | (42) | % | |||||||||||||||||||
Following is a reconciliation of net income (loss) (GAAP) to adjusted net income (loss) (non-GAAP):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net income (loss) | $ | (1) | $ | (20) | $ | 36 | $ | 26 | |||||||||
| Non-GAAP adjustments: | |||||||||||||||||
| Stock-based compensation | 12 | 16 | 38 | 47 | |||||||||||||
| Restructuring charges | — | — | 9 | — | |||||||||||||
| Tax effect | (3) | (4) | (12) | (12) | |||||||||||||
| Total non-GAAP adjustments, net | 9 | 12 | 35 | 35 | |||||||||||||
| Adjusted net income (loss) | $ | 8 | $ | (8) | $ | 71 | $ | 61 | |||||||||
| Net income (loss) % change period over period | 95 | % | (767) | % | 38 | % | (74) | % | |||||||||
| Adjusted net income (loss) % change period over period | 200 | % | (153) | % | 16 | % | (54) | % | |||||||||
| 2026 Third Quarter Form 10-Q | 37 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| (amounts per share) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Diluted EPS | $ | (0.02) | $ | (0.53) | $ | 0.95 | $ | 0.69 | |||||||||
| Non-GAAP adjustments: | |||||||||||||||||
| Stock-based compensation | 0.32 | 0.43 | 0.98 | 1.25 | |||||||||||||
| Restructuring charges | — | — | 0.23 | — | |||||||||||||
| Tax effect | (0.08) | (0.10) | (0.31) | (0.31) | |||||||||||||
| Total non-GAAP adjustments, net | 0.24 | 0.33 | 0.90 | 0.94 | |||||||||||||
| Adjusted EPS | $ | 0.22 | $ | (0.20) | $ | 1.85 | $ | 1.63 | |||||||||
| Diluted EPS % change period over period | 96 | % | (857) | % | 38 | % | (74) | % | |||||||||
| Adjusted EPS % change period over period | 210 | % | (151) | % | 13 | % | (54) | % | |||||||||
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. To meet short-term liquidity requirements, which are primarily the payment of direct costs and operating expenses, we rely primarily on cash from operations. Longer-term projects, large stock repurchases or significant acquisitions may be financed with public or private debt or equity. We have a revolving credit facility (“Facility”) with a syndicate of financial institutions with a revolving credit commitment of $750 million. The Facility is available for working capital and general corporate purposes, including acquisitions and stock repurchases. We have in the past sought, and may in the future seek, to raise additional capital or take other steps to increase or manage our liquidity and capital resources.
We had $599 million in cash and cash equivalents at September 30, 2026, of which approximately $426 million was payable in October 2026 for withheld federal and state income taxes, employment taxes and other payroll deductions. Approximately $54 million represented client prepayments that were invoiced in October 2026. During the second quarter 2026, we borrowed $50 million under the Facility for working capital purposes related to fluctuations in the timing of funding our direct cost programs. At September 30, 2026, we had working capital of $179 million compared to $102 million at December 31, 2025. We currently believe that our cash on hand, cash flows from operations, and availability under the Facility will be adequate to meet our liquidity requirements for at least the next 12 months and thereafter for the foreseeable future. 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 September 30, 2026, we had outstanding letters of credit and borrowings totaling $420 million under the Facility. Please read Note 5 to the Consolidated Financial Statements, “Long-Term Debt,” for additional information.
Cash Flows from Operating Activities
Net cash used in operating activities in the first nine months of 2026 was $23 million. Our primary source of cash from operations is the comprehensive service fee and payroll funding we collect from our clients. Our cash and cash equivalents, and thus our reported cash flows from operating activities, are significantly impacted by various external and internal factors, which are reflected in part by the changes in our balance sheet accounts. These include the following:
| 2026 Third Quarter Form 10-Q | 38 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
•Timing of client payments / payroll taxes — We typically collect our comprehensive service fee, along with the client’s payroll funding, from clients no later than the same day as the payment of WSEE payrolls and associated payroll taxes. Therefore, the last business day of a reporting period has a substantial impact on our reporting of operating cash flows. For example, many WSEEs are paid on Fridays; therefore, operating cash flows decrease in the reporting periods that end on a Friday or a Monday. In the nine months ended September 30, 2026, the last business day of the reporting period was a Wednesday, client prepayments were $54 million and employment taxes and other deductions were $426 million. In the nine months ended September 30, 2025, the last business day of the reporting period was a Tuesday, client prepayments were $36 million and employment taxes and other deductions were $284 million.
•Workers’ compensation plan funding — During YTD 2026 and YTD 2025, we received $27 million and $28 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. Therefore, changes in the participation level of the United plan have a direct impact on our operating cash flows. In addition, changes to the funding rates, which are solely determined by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows. As of September 30, 2026, Program Costs were less than the net premiums paid and owed to United by $50 million, which is included in prepaid insurance, a current asset, on our Consolidated Balance Sheet at September 30, 2026. In addition, the premiums owed to United at September 30, 2026, were $63 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 (loss) have a significant impact on our operating cash flows. Our net income increased 38% to $36 million and adjusted net income (loss) increased 16% to $71 million in the first nine months of 2026, respectively, compared to $26 million and $61 million in the first nine months of 2025, respectively. Please read “Results of Operations.”
Cash Flows from Investing Activities
Net cash used in investing activities was $8 million for the nine months ended September 30, 2026, primarily due to $26 million of property and equipment purchases, offset by marketable securities dispositions of $22 million.
Cash Flows from Financing Activities
Net cash used in financing activities was $55 million for the nine months ended September 30, 2026. We borrowed $50 million under the Facility for general corporate purposes, paid $69 million in dividends, and repurchased or withheld $10 million in stock. In addition, client funds liability and other financing activities decreased by $26 million.
| 2026 Third Quarter Form 10-Q | 39 | ||||||
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND CONTROLS AND PROCEDURES | ||
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are primarily exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on the market values of our cash equivalent short-term investments, and any available-for-sale marketable securities held by us. In addition, borrowings under our Facility, bear interest at a variable market rate. As of September 30, 2026, we had outstanding letters of credit and borrowings totaling $420 million under the Facility. Please read Note 5 to the Consolidated Financial Statements, “Long-Term Debt,” for additional information.
Our cash equivalent short-term investments consist primarily of overnight investments, which are not significantly exposed to interest rate risk, except to the extent that changes in interest rates will ultimately affect the amount of interest income earned on these investments.
We attempt to limit our exposure to interest rate risk primarily through diversification and low investment turnover. Our investment policy is designed to maximize after-tax interest income while preserving our principal investment. As a result, our workers’ compensation - deposits consist of cash and highly-liquid investments, primarily money market funds.
Item 4. Controls and Procedures
In accordance with Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2026.
There has been no change in our internal control over financial reporting that occurred during the three months ended September 30, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 2026 Third Quarter Form 10-Q | 40 | ||||||
OTHER INFORMATION | ||
PART II
Item 1. Legal Proceedings
Please read Note 9 to the Consolidated Financial Statements, “Commitments and Contingencies,” which is incorporated herein by reference.
Item 1A. Risk Factors
There have been no material changes in our risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information about purchases by Insperity during the three months ended September 30, 2026 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) | |||||||||||||
| 07/01/2026 — 07/31/2026 | 611 | $ | 45.37 | — | 1,407,764 | ||||||||||||
| 08/01/2026 — 08/31/2026 | — | — | — | 1,407,764 | |||||||||||||
| 09/01/2026 — 09/30/2026 | 130,099 | 47.93 | 130,000 | 1,277,764 | |||||||||||||
| Total | 130,710 | $ | 47.91 | 130,000 | |||||||||||||
____________________________________
(1)During the three months ended September 30, 2026, 710 shares of stock were withheld to satisfy tax-withholding obligations arising in conjunction with the vesting of restricted stock units. The required withholding is calculated using the closing sales price reported by the New York Stock Exchange on the date prior to the applicable vesting date. These shares are not subject to the repurchase program.
(2)Our Board of Directors has approved a program to repurchase shares of our outstanding common stock, which was originally announced on January 28, 1999. From time to time, our Board of Directors has increased the number of shares authorized to be repurchased under the program. On August 1, 2023, we announced that our Board of Directors had authorized an increase of 2,000,000 shares that may be repurchased under the program. As of September 30, 2026, we were authorized to repurchase an additional 1,277,764 shares under the program. Unless terminated earlier by resolution of our Board of Directors, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program.
Item 5. Other Information
Trading Plans
During the third quarter of 2026, none of our directors or executive officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408 of Regulation S-K).
| 2026 Third Quarter Form 10-Q | 41 | ||||||
OTHER INFORMATION | ||
Item 6. Exhibits
| Exhibit No | Exhibit | |||||||
| 31.1 | * | |||||||
| 31.2 | * | |||||||
| 32.1 | ** | |||||||
| 32.2 | ** | |||||||
| 101.INS | * | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||||
| 101.SCH | * | Inline XBRL Taxonomy Extension Schema Document. | ||||||
| 101.CAL | * | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||||||
| 101.DEF | * | Inline XBRL Extension Definition Linkbase Document. | ||||||
| 101.LAB | * | Inline XBRL Taxonomy Extension Label Linkbase Document. | ||||||
| 101.PRE | * | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||||||
| 104 | Cover Page Interactive Data File (embedded with the Inline XBRL document). | |||||||
| ____________________________________ | |||||||||||
| * | Filed with this report. | ||||||||||
| ** | Furnished with this report. | ||||||||||
| 2026 Third Quarter Form 10-Q | 42 | ||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| INSPERITY, INC. | ||||||||
| Date: October 29, 2026 | By: | /s/ James D. Allison | ||||||
| James D. Allison | ||||||||
| Executive Vice President of Finance, Chief Financial Officer & Treasurer | ||||||||
| (Principal Financial Officer) | ||||||||
| By: | /s/ Sean P. Duffy | |||||||
| Sean P. Duffy | ||||||||
| Senior Vice President of Finance and Accounting | ||||||||
| (Principal Accounting Officer) | ||||||||
| 2026 Third Quarter Form 10-Q | 43 | ||||||
Exhibit 31.1
CERTIFICATION
I, Paul J. Sarvadi, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Insperity, Inc.; | ||||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||||
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | ||||
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | ||||
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 29, 2026
| /s/ Paul J. Sarvadi | |||||
| Paul J. Sarvadi | |||||
| Chairman of the Board & Chief Executive Officer | |||||
Exhibit 31.2
CERTIFICATION
I, James D. Allison, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Insperity, Inc.; | ||||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||||
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | ||||
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | ||||
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 29, 2026
| /s/ James D. Allison | |||||
| James D. Allison | |||||
| Executive Vice President of Finance, Chief Financial Officer & Treasurer | |||||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Insperity, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2026, (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Paul J. Sarvadi, Chairman of the Board & Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Paul J. Sarvadi | |||||
| Paul J. Sarvadi | |||||
| Chairman of the Board & Chief Executive Officer | |||||
| October 29, 2026 | |||||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Insperity, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2026, (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, James D. Allison, Executive Vice President of Finance, Chief Financial Officer & Treasurer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ James D. Allison | |||||
| James D. Allison | |||||
| Executive Vice President of Finance, Chief Financial Officer & Treasurer | |||||
| October 29, 2026 | |||||