INSPERITY, INC.

Previous wording

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

Current wording

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

Previous wording

Insperity, Inc. (“Insperity,” “we,” “our,” and “us”) provides an array of human resources (“HR”) and business solutions designed to help improve business performance. Our most comprehensive HR services offerings are provided through our professional employer organization (“PEO”) services, known as our Insperity® HR 360 solution (formerly our Workforce Optimization®solution) and Insperity® HR 360 Select Edition (formerly our Workforce Synchronization TM 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, along with our cloud-based human capital management solution, the Insperity Premier TMplatform.

Current wording

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® HR 360 solution, our Insperity® HR 360 Select Edition, and our Insperity HRScale TM 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 HR 360 solution and Insperity HR 360 Select Edition provide access to our web-based human capital management platform, the Insperity Premier TMplatform, while our Insperity HRScale solution provides access to the Workday Human Capital Management platform.

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•Average number of WSEEs paid per month increased 1%

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•Average number of WSEEs paid per month decreased 1%, which was partially impacted by our margin recovery efforts

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•Net income (loss) and diluted earnings per share (“EPS”) decreased to $(20) million and $(0.53), respectively

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•Net income and diluted earnings per share (“EPS”) both decreased 35% to $33 million and $0.88, respectively

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•During Q3 2025, average WSEEs paid increased 1% compared to Q3 2024. The number of WSEEs paid from new client sales and the net change in our client base slightly decreased compared with Q3 2024, while client retention remained consistent with Q3 2024.

Current wording

•During Q1 2026, average WSEEs paid decreased 1% compared to Q1 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 with Q1 2025.

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Our revenues for Q3 2025 were $1.6 billion, an increase of 4%, primarily due to the following:

Current wording

Our revenues for Q1 2026 were $1.9 billion, an increase of 2%, primarily due to the following:

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•Revenues per WSEE per month increased 3%, or $46.

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•Revenues per WSEE per month increased 3%, or $55, while the average WSEEs paid declined 1%

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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 3% during YTD 2025 compared to YTD 2024, representing approximately 26% of our total average paid WSEEs in both YTD 2025 and YTD 2024.

Current wording

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 9% during Q1 2026 compared to Q1 2025, representing approximately 29% and 26% of our total average paid WSEEs in Q1 2026 and Q1 2025, respectively.

Previous wording

Gross profit for Q3 2025 decreased 15% to $195 million compared to $229 million in Q3 2024. Gross profit per WSEE per month for Q3 2025 decreased $39 to $208 compared to $247 in Q3 2024 due primarily to higher direct costs, offset in part by higher average pricing, as discussed below.

Current wording

Gross profit for Q1 2026 decreased 3% to $302 million compared to $310 million in Q1 2025. Gross profit per WSEE per month for Q1 2026 decreased $6 to $332 compared to $338 in Q1 2025 due primarily to higher direct costs, offset in part by higher average pricing, as discussed below.

Previous wording

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 $46 due to higher average pricing of 3%.

Current wording

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 $55 due to higher average pricing of 3%.

Previous wording

The net increase in direct costs between Q3 2025 and Q3 2024 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $15 million as discussed below. The $85 per WSEE per month increase in direct costs is due primarily to the direct cost component changes as follows:

Current wording

The net decrease in direct costs between Q1 2026 and Q1 2025 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $12 million as discussed below. The $61 per WSEE per month increase in direct costs is due primarily to the direct cost component changes as follows:

Previous wording

•The cost of group health insurance and related employee benefits increased $60 per WSEE per month and increased 9.1% on a cost per covered employee basis driven by elevated inpatient, outpatient and pharmacy trends and frequency of large claim activity in Q3 2025 as compared to Q3 2024.

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•The cost of group health insurance and related employee benefits increased $28 per WSEE per month and increased 5.2% on a cost per covered employee basis in Q1 2026 as compared to Q1 2025.

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•The percentage of WSEEs covered under our health insurance plans was 63% in YTD 2025 compared to 64% in YTD 2024.

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•The percentage of WSEEs covered under our health insurance plans was 63% in Q1 2026 compared to 64% in Q1 2025.

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•Reported results include changes in estimated claims run-off related to prior periods, which was an increase in costs of $9 million, or $3 per WSEE per month, in YTD 2025 compared to a decrease in costs of $32 million, or $12 per WSEE per month, in YTD 2024.

Current wording

•Reported results include changes in estimated claims run-off related to prior periods, which was a reduction in costs of $2 million, or $2 per WSEE per month, in Q1 2026 compared to an increase in costs of $12 million, or $13 per WSEE per month, in Q1 2025.

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•Workers’ compensation costs increased 15%, or $3 per WSEE per month, in Q3 2025 compared to Q3 2024.

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•Workers’ compensation costs increased 30%, or $7 per WSEE per month, in Q1 2026 compared to Q1 2025.

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•As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.27% in Q3 2025 compared to 0.25% in Q3 2024.

Current wording

•As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.31% in Q1 2026 compared to 0.24% in Q1 2025.

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•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 $5 million, or 0.05% of non-bonus payroll costs in Q3 2025, compared to a reduction of $8 million, or 0.09% of non-bonus payroll costs in Q3 2024.

Current wording

•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 $5 million, or 0.05% of non-bonus payroll costs in Q1 2026, compared to a reduction of $7 million, or 0.08% of non-bonus payroll costs in Q1 2025.

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•Payroll taxes increased 5% on a 4% increase in payroll costs, or $24 per WSEE per month.

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•Payroll taxes increased 2% on a 0.3% decrease in payroll costs, or $27 per WSEE per month.

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•Payroll taxes as a percentage of payroll costs were 6% in both Q3 2025 and Q3 2024.

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•Payroll taxes as a percentage of payroll costs were 8% in both Q1 2026 and Q1 2025.

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Operating expenses for Q3 2025 decreased 4% to $220 million compared to $228 million in Q3 2024. Operating expenses per WSEE per month for Q3 2025 decreased 4% to $235 compared to $246 in Q3 2024.

Current wording

Operating expenses for Q1 2026 decreased 1% to $240 million compared to $242 million in Q1 2025. Operating expenses per WSEE per month for Q1 2026 remained flat compared to Q1 2025.

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•General and administrative expenses for Q3 2025 decreased 15% to $45 million, or $9 per WSEE per month, compared to Q3 2024. The decrease was primarily due to decreased professional services fees, which includes expenses related to the implementation of our Workday strategic partnership, travel and training expenses, partially offset by increases in software licensing and maintenance costs.

Current wording

•General and administrative expenses for Q1 2026 decreased 8% to $55 million, or $4 per WSEE per month, compared to Q1 2025. The decrease was primarily due to a decrease in professional services fees and travel and training expenses.

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Interest income decreased $4 million in YTD 2025 compared to YTD 2024 due to interest rate decreases on overnight, investment and deposit holdings.

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Interest income decreased $3 million in Q1 2026 compared to Q1 2025 due to lower interest rates on overnight, investment and deposit holdings.

Previous wording

For the nine months ended September 30, 2025, 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 nine months of 2025 we recognized a $1 million income tax expense related to the vesting of long-term incentive and restricted stock awards. During the first nine months of 2024 we did not recognize an income tax benefit or expense related to the vesting of long-term incentive and restricted stock awards.

Current wording

For the three months ended March 31, 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 three months of 2026, we recognized additional income tax of $10 million related to the vesting of long-term incentive and restricted stock awards, primarily due to the vesting date price being below the grant date price.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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 current borrowing capacity of $650 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.

Current wording

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.

Previous wording

We had $440 million in cash, cash equivalents and marketable securities at September 30, 2025, of which approximately $284 million was payable in October 2025 for withheld federal and state income taxes, employment taxes and other payroll deductions. Approximately $36 million represented client prepayments that were invoiced in October 2025. At September 30, 2025, we had working capital of $172 million compared to $155 million at December 31, 2024. We currently believe that our cash on hand, marketable securities, cash flows from operations, and availability under the Facility will be adequate to meet our liquidity requirements for the remainder of 2025. 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.

Current wording

We had $555 million in cash, cash equivalents and marketable securities at March 31, 2026, of which approximately $415 million was payable in April 2026 for withheld federal and state income taxes, employment taxes and other payroll deductions. Approximately $104 million represented client prepayments that were invoiced in April 2026. At March 31, 2026, we had working capital of $142 million compared to $102 million at December 31, 2025. We currently believe that our cash on hand, marketable securities, cash flows from operations, and availability under the Facility will be adequate to meet our liquidity requirements for the remainder of 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.

Previous wording

Net cash used in operating activities in the first nine months of 2025 was $533 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:

Current wording

Net cash used in operating activities in the first three months of 2026 was $67 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:

Previous wording

•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, 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. In the nine months ended September 30, 2024, the last business day of the reporting period was a Monday, client prepayments were $19 million and employment taxes and other deductions were $255 million. In addition, $440 million of client employee retention tax credits received on their behalf from the Internal Revenue Service during the fourth quarter of 2024 were distributed to clients in early 2025.

Current wording

•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 three months ended March 31, 2026, the last business day of the reporting period was a Tuesday, client prepayments were $104 million and employment taxes and other deductions were $415 million. In the three months ended March 31, 2025, the last business day of the reporting period was a Monday, client prepayments were $40 million and employment taxes and other deductions were $404 million.

Previous wording

•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, 2025, Plan Costs were less than the net premiums paid and owed to United by $19 million, which is $10 million in excess of our agreed-upon $9 million surplus maintenance level. The $10 million difference is therefore reflected as a current asset and $9 million is reflected as a long-term asset on our Condensed Consolidated Balance Sheets at September 30, 2025. In addition, the premiums owed to United at September 30, 2025, were $26 million, which is included in accrued health insurance costs, a current liability, on our Condensed Consolidated Balance Sheets.

Current wording

•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 March 31, 2026, Program Costs were less than the net premiums paid and owed to United by $41 million, which is included in prepaid insurance, a current asset, on our Consolidated Balance Sheet at March 31, 2026. In addition, the premiums owed to United at March 31, 2026, were $62 million, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheet.

Previous wording

•Operating results — Our adjusted net income has a significant impact on our operating cash flows. Our adjusted net income decreased 54% to $61 million in the first nine months of 2025, compared to $134 million in the first nine months of 2024. Please read “Results of Operations.”

Current wording

•Operating results — Our adjusted net income has a significant impact on our operating cash flows. Our adjusted net income decreased 15% to $50 million in the first three months of 2026, compared to $59 million in the first three months of 2025. Please read “Results of Operations.”

Previous wording

Net cash flows used in investing activities were $22 million for the nine months ended September 30, 2025, primarily due to property and equipment purchases.

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Net cash flows used in investing activities were $6 million for the three months ended March 31, 2026, primarily due to property and equipment purchases.

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Net cash flows used in financing activities were $101 million for the nine months ended September 30, 2025. We paid $68 million in dividends and repurchased or withheld $19 million in stock. In addition, client funds liability and other financing activities decreased by $14 million.

Current wording

Net cash flows used in financing activities were $46 million for the three months ended March 31, 2026. We paid $23 million in dividends and repurchased or withheld $4 million in stock. In addition, client funds liability and other financing activities decreased by $19 million.