Insperity Inc.

07/30/2026 | Press release | Distributed by Public on 07/30/2026 04:02

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

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 HRScaleTM 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
Second Quarter 2026 Compared to Second Quarter 2025
•Average number of WSEEs paid per month decreased 1%
•Net income and diluted earnings per share ("EPS") increased 180% and 171% to $4 million and $0.10, respectively
•Adjusted EBITDA increased 13% to $36 million
•Adjusted net income and adjusted EPS increased 30% and 31% to $13 million and $0.34, respectively
First Six Months 2026 Compared to First Six Months 2025
•Average number of WSEEs paid per month decreased 1%
•Net income and diluted EPS both decreased 20% to $37 million and $0.97, respectively
•Adjusted EBITDA increased 4% to $139 million
•Adjusted net income and adjusted EPS decreased 9% and 10% to $63 million and $1.64, respectively
Please read "Non-GAAP Financial Measures" for a reconciliation of adjusted EBITDA, adjusted net income, 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 Second Quarter Form 10-Q
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 June 30, Six Months Ended June 30,
2026 2025 % Change 2026 2025 % Change
Financial data:
Revenues
$ 1,686 $ 1,658 2 % $ 3,581 $ 3,521 2 %
Gross profit 217 223 (3) % 519 533 (3) %
Operating expenses 211 230 (8) % 451 472 (4) %
Operating income 6 (7) 186 % 68 61 11 %
Other income (expense), net (1) 1 (200) % - 5 (100) %
Net income (loss) 4 (5) 180 % 37 46 (20) %
Diluted EPS
0.10 (0.14) 171 % 0.97 1.22 (20) %
Non-GAAP financial measures(1):
Adjusted net income $ 13 $ 10 30 % $ 63 $ 69 (9) %
Adjusted EBITDA 36 32 13 % 139 134 4 %
Adjusted EPS
0.34 0.26 31 % 1.64 1.83 (10) %
Average WSEEs paid 305,764 309,115 (1) % 304,407 307,569 (1) %
Statistical data (per WSEE per month):
Revenues(2)
$ 1,838 $ 1,788 3 % $ 1,961 $ 1,908 3 %
Gross profit 237 240 (1) % 284 289 (2) %
Operating expenses
230 248 (7) % 247 256 (4) %
Operating income 7 (8) 188 % 37 33 12 %
Net income (loss) 4 (5) 180 % 20 25 (20) %
____________________________________
(1)Please read "Non-GAAP Financial Measures" for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP.
(2)Revenues per WSEE per month are comprised of gross billings per WSEE per month less WSEE payroll costs per WSEE per month as follows:
Three Months Ended June 30, Six Months Ended June 30,
(per WSEE per month) 2026 2025 2026 2025
Gross billings $ 11,895 $ 11,385 $ 12,624 $ 12,302
Less: WSEE payroll cost 10,057 9,597 10,663 10,394
Revenues $ 1,838 $ 1,788 $ 1,961 $ 1,908
2026 Second Quarter Form 10-Q
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 Q2 2026, average WSEEs paid decreased 1% compared to Q2 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 Q2 2025.
•During the first six months of 2026 ("YTD 2026"), average WSEEs paid decreased 1% compared to the first six months of 2025 ("YTD 2025"). The number of WSEEs paid from new client sales and client retention decreased due in part to our margin recover 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 Second Quarter Form 10-Q
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 Second Quarter Form 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EPS and
Year-over-Year Growth Percentage
(amounts per share)
Adjusted EPS and
Year-over-Year Growth Percentage
(amounts per share)
2026 Second Quarter Form 10-Q
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)
Second Quarter 2026 Compared to Second Quarter 2025
Our revenues for Q2 2026 were $1.7 billion, an increase of 2%, primarily due to the following:
•Average WSEEs paid decreased 1%
•Revenues per WSEE per month increased 3%, or $50
First Six Months 2026 Compared to First Six Months 2025
Our revenues for YTD 2026 were $3.6 billion, an increase of 2%, primarily due to the following:
•Average WSEEs paid decreased 1%
•Revenues per WSEE per month increased 3%, or $53
2026 Second Quarter Form 10-Q
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. Currently, 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 Second Quarter Form 10-Q
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 Second Quarter Form 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Gross Profit per WSEE per Month and
Year-over-Year Growth Percentage
Second Quarter 2026 Compared to Second Quarter 2025
Gross profit for Q2 2026 decreased 3% to $217 million compared to $223 million in Q2 2025. Gross profit per WSEE per month for Q2 2026 decreased $3 to $237 compared to $240 in Q2 2025 due primarily to higher direct costs, offset in part by higher average pricing, as discussed below.
Our pricing objectives attempt to achieve a level of revenue per WSEE that matches or exceeds changes in primary direct costs and operating expenses. Our revenues per WSEE per month increased $50 due to higher average pricing of 3%.
The net increase in direct costs between Q2 2026 and Q2 2025 attributable to the changes in cost estimates for benefits and workers' compensation totaled $4 million 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 $25 per WSEE per month and increased 5.2% on a cost per covered employee basis in Q2 2026 as compared to Q2 2025.
•The percentage of WSEEs covered under our health insurance plans was 62% in Q2 2026 compared to 63% in Q2 2025.
•Reported results include changes in estimated claims run-off related to prior periods, which was a reduction in costs of $1 million, or $1 per WSEE per month, in Q2 2026, but did not impact costs in Q2 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 35%, or $8 per WSEE per month, in Q2 2026 compared to Q2 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 0.32% in Q2 2026 compared to 0.23% in Q2 2025.
2026 Second Quarter Form 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
•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 $3 million, or 0.03% of non-bonus payroll costs in Q2 2026, compared to a reduction of $8 million, or 0.09% of non-bonus payroll costs in Q2 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 4% increase in payroll costs, or $22 per WSEE per month.
•Payroll taxes as a percentage of payroll costs were 7% in both Q2 2026 and Q2 2025.
First Six Months 2026 Compared to First Six Months 2025
Gross profit for YTD 2026 decreased 3% to $519 million compared to $533 million in YTD 2025. Gross profit per WSEE per month for YTD 2026 decreased $5 to $284 compared to $289 in YTD 2025 due primarily to higher direct costs, offset in part by higher average pricing, as discussed below.
Our pricing objectives attempt to achieve a level of revenue per WSEE that matches or exceeds changes in primary direct costs and operating expenses. Our revenues per WSEE per month increased $53 due to higher average pricing of 3%.
The net decrease in direct costs between YTD 2026 and YTD 2025 attributable to the changes in cost estimates for benefits and workers' compensation totaled $8 million as discussed below. The $58 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 $27 per WSEE per month, or 5.2% 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 $2 per WSEE per month, in YTD 2026 compared to an increase in costs of $11 million, or $6 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 33%, 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 0.31% in YTD 2026 compared to 0.24% in YTD 2025.
•Our continued discipline around our client selection, workplace safely 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 0.04% of non-bonus payroll costs, in YTD 2026 compared to a reduction of $14 million, or 0.09% 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 $24 per WSEE per month.
2026 Second Quarter Form 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
•Payroll taxes as a percentage of payroll costs were 7% in both YTD 2026 and YTD 2025.
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 Second Quarter Form 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Second Quarter 2026 Compared to Second Quarter 2025
The following table presents certain information related to our operating expenses:
Three Months Ended June 30,
per WSEE
(in millions, except per WSEE) 2026 2025 % Change 2026 2025 % Change
Salaries
$ 115 $ 129 (11) % $ 125 $ 139 (10) %
Stock-based compensation 13 20 (35) % 14 22 (36) %
Commissions 10 10 - 11 11 -
Advertising 14 11 27 % 15 12 25 %
General and administrative:
Amortization of SaaS implementation costs
2 1 100 % 2 1 100 %
Workday SaaS licensing and implementation expense
4 7 (43) % 4 8 (50) %
All other general and administrative
43 41 5 % 48 43 12 %
Total general and administrative
49 49 - 54 52 4 %
Depreciation and amortization 10 11 (9) % 11 12 (8) %
Total operating expenses $ 211 $ 230 (8) % $ 230 $ 248 (7) %
Operating expenses for Q2 2026 decreased 8% to $211 million compared to $230 million in Q2 2025. Operating expenses per WSEE per month for Q2 2026 decreased 7% to $230 compared to $248 in Q2 2025.
•Salaries of corporate and sales staff for Q2 2026 decreased 11% to $115 million, or $14 per WSEE per month, compared to Q2 2025. The decrease was primarily due to a 6% decrease in BPA, service and support headcount and staff compensation levels in Q2 2026 compared to Q2 2025.
•Stock-based compensation expense for Q2 2026 decreased 35% to $13 million, or $8 per WSEE per month, compared to Q2 2025. The decrease was primarily due to lower value time-based restricted stock unit awards granted under our incentive plan in 2026.
•Advertising expense for Q2 2026 increased 27% to $14 million, or $3 per WSEE per month, compared to Q2 2025. The increase was primarily due to the timing of sponsorships and digital advertising.
2026 Second Quarter Form 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
First Six Months 2026 Compared to First Six Months 2025
The following table presents certain information related to our operating expenses:
Six Months Ended June 30,
per WSEE
(in millions, except per WSEE) 2026 2025 % Change 2026 2025 % Change
Salaries $ 246 $ 271 (9) % $ 135 $ 147 (8) %
Restructuring charges 9 - - 5 - -
Stock-based compensation 26 31 (16) % 14 17 (18) %
Commissions 20 21 (5) % 11 11 -
Advertising 25 18 39 % 14 10 40 %
General and administrative:
Amortization of SaaS implementation costs 3 3 - 2 2 -
Workday SaaS licensing and implementation expense 8 13 (38) % 4 7 (43) %
All other general and administrative 93 93 - 51 50 2 %
Total general and administrative 104 109 (5) % 57 59 (3) %
Depreciation and amortization 21 22 (5) % 11 12 (8) %
Total operating expenses $ 451 $ 472 (4) % $ 247 $ 256 (4) %
Operating expenses for YTD 2026 decreased 4% to $451 million compared to $472 million in YTD 2025. Operating expenses per WSEE per month for YTD 2026 decreased 4% to $247 compared to $256 in YTD 2025.
•Salaries of corporate and sales staff for YTD 2026 decreased 9% to $246 million, or $12 per WSEE per month, compared to YTD 2025. The decrease was primarily due to a 6% decrease in BPA, service and support headcount and staff compensation levels in YTD 2026 compared to YTD 2025.
•Stock-based compensation expense for YTD 2026 decreased 16% to $26 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.
•Advertising expense for YTD 2026 increased 39% to $25 million, or $4 per WSEE per month, compared to YTD 2025 due to a change in timing of advertising spend.
Other Income (Expense)
Interest income decreased $5 million in YTD 2026 compared to YTD 2025 primarily due to lower interest rates on overnight, investment and deposit holdings.
Interest expense was flat in YTD 2026 compared to YTD 2025.
Income Tax Expense
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Effective income tax rate 20% 17% 46% 30%
For the six months ended June 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. The decrease in net income without a corresponding change in non-deductible expenses resulted in a higher effective tax rate for the period. During the first six months of 2026 we recognized $9 million of income tax expense related to the vesting of
2026 Second Quarter Form 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
long-term incentive and restricted stock awards. During the first six 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 Second Quarter Form 10-Q
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
Represents net income computed in accordance with GAAP, excluding:
• non-cash stock-based compensation,
• restructuring charges, and
• the income tax effect at our effective tax rate of these pre-tax adjustments.(1)
Adjusted EPS
Represents diluted net income per share computed in accordance with GAAP, excluding:
• non-cash stock-based compensation,
• restructuring charges, and
• the income tax effect at our effective tax rate of these pre-tax adjustments.(1)
____________________________________
(1)Non-GAAP effective tax rate excludes the income tax impact from stock-based compensation, restructuring charges, and changes in uncertain tax positions, and nonrecurring benefits or expenses from federal legislative changes.
2026 Second Quarter Form 10-Q
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 June 30, Six Months Ended June 30,
2026 2025 2026 2025
Per WSEE Per WSEE Per WSEE Per WSEE
Payroll cost $ 9,225 $ 10,057 $ 8,900 $ 9,597 $ 19,476 $ 10,663 $ 19,181 $ 10,394
Less: Bonus payroll cost 980 1,069 705 760 3,098 1,696 2,948 1,598
Non-bonus payroll cost
$ 8,245 $ 8,988 $ 8,195 $ 8,837 $ 16,378 $ 8,967 $ 16,233 $ 8,796
Payroll cost % change period over period
4 % 5 % 2 % 1 % 2 % 3 % 4 % 3 %
Non-bonus payroll cost % change period over period
1 % 2 % 4 % 3 % 1 % 2 % 3 % 2 %
Following is a reconciliation of cash, cash equivalents and marketable securities (GAAP) to adjusted cash, cash equivalents and marketable securities (non-GAAP):
(in millions) June 30, 2026 December 31, 2025
Cash, cash equivalents and marketable securities $ 619 $ 660
Less:
Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions
481 468
Client prepayments
43 135
Adjusted cash, cash equivalents and marketable securities $ 95 $ 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 June 30, Six Months Ended June 30,
2026 2025 2026 2025
Per WSEE Per WSEE Per WSEE Per WSEE
Operating expenses
$ 211 $ 230 $ 230 $ 248 $ 451 $ 247 $ 472 $ 256
Less: Restructuring charges
- - - - 9 5 - -
Adjusted operating expenses
$ 211 $ 230 $ 230 $ 248 $ 442 $ 242 $ 472 $ 256
Operating expenses % change period over period
(8) % (7) % (3) % (4) % (4) % (4) % - (1) %
Adjusted operating expenses % change period over period
(8) % (7) % (3) % (4) % (6) % (6) % - (1) %
2026 Second Quarter Form 10-Q
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 June 30, Six Months Ended June 30,
(in millions, except per WSEE per month) 2026 2025 2026 2025
Per WSEE Per WSEE Per WSEE Per WSEE
Net income (loss) $ 4 $ 4 $ (5) $ (5) $ 37 $ 20 $ 46 $ 25
Income tax (benefit) expense 1 1 (1) (1) 31 17 20 10
Interest expense 6 7 6 6 12 7 12 7
Amortization of SaaS implementation costs 2 2 1 1 3 2 3 2
Depreciation and amortization
10 11 11 12 21 11 22 12
EBITDA 23 25 12 13 104 57 103 56
Stock-based compensation
13 14 20 22 26 14 31 17
Restructuring charges - - - - 9 5 - -
Adjusted EBITDA $ 36 $ 39 $ 32 $ 35 $ 139 $ 76 $ 134 $ 73
Net income (loss) % change period over period 180 % 180 % (128) % (125) % (20) % (20) % (53) % (53) %
Adjusted EBITDA % change period over period
13 % 11 % (52) % (51) % 4 % 4 % (36) % (36) %
Following is a reconciliation of net income (loss) (GAAP) to adjusted net income (non-GAAP):
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2026 2025 2026 2025
Net income (loss) $ 4 $ (5) $ 37 $ 46
Non-GAAP adjustments:
Stock-based compensation 13 20 26 31
Restructuring charges - - 9 -
Tax effect (4) (5) (9) (8)
Total non-GAAP adjustments, net 9 15 26 23
Adjusted net income $ 13 $ 10 $ 63 $ 69
Net income (loss) % change period over period 180 % (128) % (20) % (53) %
Adjusted net income % change period over period 30 % (70) % (9) % (42) %
2026 Second Quarter Form 10-Q
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
June 30, 		Six Months Ended
June 30,
(amounts per share) 2026 2025 2026 2025
Diluted EPS $ 0.10 $ (0.14) $ 0.97 $ 1.22
Non-GAAP adjustments:
Stock-based compensation 0.32 0.52 0.67 0.81
Restructuring charges - - 0.23 -
Tax effect (0.08) (0.12) (0.23) (0.20)
Total non-GAAP adjustments, net 0.24 0.40 0.67 0.61
Adjusted EPS $ 0.34 $ 0.26 $ 1.64 $ 1.83
Diluted EPS % change period over period 171 % (129) % (20) % (52) %
Adjusted EPS % change period over period 31 % (70) % (10) % (42) %
Liquidity and Capital Resources
We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of, among other things, our expansion plans, stock repurchases, potential acquisitions, debt service requirements and other operating cash needs. 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 $619 million in cash and cash equivalents at June 30, 2026, of which approximately $481 million was payable in July 2026 for withheld federal and state income taxes, employment taxes and other payroll deductions. Approximately $43 million represented client prepayments that were invoiced in July 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 June 30, 2026, we had working capital of $180 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 the remainder of 2026. 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 June 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 six months of 2026 was $19 million. Our primary source of cash from operations is the comprehensive service fee and payroll funding we collect from our clients. Our cash and cash equivalents, and thus our reported cash flows from operating activities, are significantly impacted by various external and internal factors, which are reflected in part by the changes in our balance sheet accounts. These include the following:
•Timing of client payments / payroll taxes - We typically collect our comprehensive service fee, along with the client's payroll funding, from clients 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 six months ended June 30, 2026, the last business day of the reporting period was a Tuesday, client prepayments were $43 million and employment taxes and other deductions were $481 million. In the six months ended June 30, 2025, the last business day of the reporting period was a Monday, client prepayments were $26 million and employment taxes and other deductions were $316 million.
2026 Second Quarter Form 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
•Medical plan funding - Our health care contract with United establishes participant cash funding rates 90 days in advance of the beginning of a reporting quarter. Therefore, changes in the participation level of the United plan have a direct impact on our operating cash flows. In addition, changes to the funding rates, which are solely determined by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows. As of June 30, 2026, Program Costs were less than the net premiums paid and owed to United by $40 million, which is included in prepaid insurance, a current asset, on our Consolidated Balance Sheet at June 30, 2026. In addition, the premiums owed to United at June 30, 2026, were $55 million, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheet.
•Operating results - Our adjusted net income has a significant impact on our operating cash flows. Our adjusted net income decreased 9% to $63 million in the first six months of 2026, compared to $69 million in the first six months of 2025. Please read "Results of Operations."
Cash Flows from Investing Activities
Net cash provided by investing activities was $5 million for the six months ended June 30, 2026, primarily due to proceeds from marketable securities dispositions.
Cash Flows from Financing Activities
Net cash used in financing activities was $21 million for the six months ended June 30, 2026. We borrowed $50 million under the Facility for general corporate purposes, paid $46 million in dividends, and withheld $4 million of vested shares to satisfy tax withholding obligations. In addition, client funds liability and other financing activities decreased by $21 million.
2026 Second Quarter Form 10-Q
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND CONTROLS AND PROCEDURES
Insperity Inc. published this content on July 30, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on July 30, 2026 at 10:07 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]