INSPERITY, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL 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.

____________________________________

(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.

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

Following is a reconciliation of payroll cost (GAAP) to non-bonus payroll costs (non-GAAP):

Following is a reconciliation of cash, cash equivalents and marketable securities (GAAP) to adjusted cash, cash equivalents and marketable securities (non-GAAP):

Following is a reconciliation of operating expenses (GAAP) to adjusted operating expenses (non-GAAP):

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

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

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

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

Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP):

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:

MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL 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.