INSPERITY, INC. 10-Q

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 ® HR 360 solution, our Insperity ® HR 360 Select Edition, and our Insperity HR Scale 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 TM platform, while our Insperity HR Scale solution provides access to the Workday Human Capital Management platform. 2026 Highlights First Quarter 2026 Compared to First Quarter 2025 • Average number of WSEEs paid per month decreased 1%, which was partially impacted by our margin recovery efforts • Net income and diluted earnings per share (“EPS”) both decreased 35% to $33 million and $0.88, respectively • Adjusted EBITDA increased 1% to $103 million • Adjusted net income and adjusted EPS decreased 15% and 17% to $50 million and $1.31, respectively, due in part to a higher effective tax rate associated with vesting of stock awards below the grant date value 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”). Insperity | 2026 First Quarter Form 10-Q 19 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 March 31, 2026 2025 % Change Financial data: Revenues $ 1,895 $ 1,863 2 % Gross profit 302 310 (3) % Operating expenses 240 242 (1) % Operating income 62 68 (9) % Other income (expense), net 1 4 (75) % Net income 33 51 (35) % Diluted EPS 0.88 1.35 (35) % Non-GAAP financial measures (1) : Adjusted net income $ 50 $ 59 (15) % Adjusted EBITDA 103 102 1 % Adjusted EPS 1.31 1.57 (17) % Average WSEEs paid 303,049 306,023 (1) % Statistical data (per WSEE per month) : Revenues (2) $ 2,084 $ 2,029 3 % Gross profit 332 338 (2) % Operating expenses 264 264 — Operating income 68 74 (8) % Net income 36 56 (36) % ____________________________________ (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 March 31, (per WSEE per month) 2026 2025 Gross billings $ 13,360 $ 13,228 Less: WSEE payroll cost 11,276 11,199 Revenues $ 2,084 $ 2,029 Insperity | 2026 First Quarter Form 10-Q 20 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 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. Average WSEEs Paid and Year-over-Year Growth Percentage Insperity | 2026 First Quarter Form 10-Q 21 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net Income and Year-over-Year Growth Percentage (in millions) Adjusted EBITDA and Year-over-Year Growth Percentage (in millions) Insperity | 2026 First Quarter Form 10-Q 22 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) Insperity | 2026 First Quarter Form 10-Q 23 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) First Quarter 2026 Compared to First Quarter 2025 Our revenues for Q1 2026 were $1.9 billion, an increase of 2%, primarily due to the following: • Revenues per WSEE per month increased 3%, or $55, while the average WSEEs paid declined 1% Insperity | 2026 First Quarter Form 10-Q 24 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 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. Insperity | 2026 First Quarter Form 10-Q 25 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) Gross Profit per WSEE per Month and Year-over-Year Growth Percentage Insperity | 2026 First Quarter Form 10-Q 26 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS First Quarter 2026 Compared to First Quarter 2025 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. 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%. 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: Benefits costs • 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. • The percentage of WSEEs covered under our health insurance plans was 63% in Q1 2026 compared to 64% in Q1 2025. • 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. 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 Q1 2026 compared to Q1 2025. • As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.31% in Q1 2026 compared to 0.24% in Q1 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 $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. 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 0.3% decrease in payroll costs, or $27 per WSEE per month. • Payroll taxes as a percentage of payroll costs were 8% in both Q1 2026 and Q1 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. Insperity | 2026 First Quarter Form 10-Q 27 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • 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. First Quarter 2026 Compared to First Quarter 2025 The following table presents certain information related to our operating expenses: Three Months Ended March 31, per WSEE (in millions, except per WSEE) 2026 2025 % Change 2026 2025 % Change Salaries $ 131 $ 142 (8) % $ 144 $ 155 (7) % Restructuring charges 9 — — 10 — — Stock-based compensation 13 11 18 % 14 12 17 % Commissions 10 11 (9) % 11 12 (8) % Advertising 11 7 57 % 12 8 50 % General and administrative: Amortization of SaaS implementation costs 1 2 (50) % 1 2 (50) % Workday SaaS licensing and implementation expense 4 6 (33) % 4 7 (43) % All other general and administrative 50 52 (4) % 56 56 — Total general and administrative 55 60 (8) % 61 65 (6) % Depreciation and amortization 11 11 — 12 12 — Total operating expenses $ 240 $ 242 (1) % $ 264 $ 264 — 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. • Salaries of corporate and sales staff for Q1 2026 decreased 8% to $131 million, or $11 per WSEE per month, compared to Q1 2025. The decrease was primarily due to an 8% decrease in BPA, service and support headcount in Q1 2026 compared to Q1 2025. Insperity | 2026 First Quarter Form 10-Q 28 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Restructuring charges for Q1 2026 were $9 million, or $10 per WSEE per month, primarily due to severance costs, which were related to a workforce realignment. • Stock-based compensation expense for Q1 2026 increased 18% to $13 million, or $2 per WSEE per month, compared to Q1 2025. The increase was primarily due to additional compensation expense related to performance-based restricted stock unit awards, partially offset by lower compensation expense related to time-based restricted stock unit awards. • Commissions expense for Q1 2026 decreased 9% to $10 million, or $1 per WSEE per month, compared to Q1 2025. The decrease was primarily due to lower channel commissions. • Advertising expense for Q1 2026 increased 57% to $11 million, or $4 per WSEE per month, compared to Q1 2025. The increase was primarily due to increased sponsorships and digital advertising. • 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. Other Income (Expense) Interest income decreased $3 million in Q1 2026 compared to Q1 2025 due to lower interest rates on overnight, investment and deposit holdings. Interest expense was flat in Q1 2026 compared to Q1 2025. Income Tax Expense Three Months Ended March 31, 2026 2025 Effective income tax rate 48% 29% 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. Insperity | 2026 First Quarter Form 10-Q 29 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. Insperity | 2026 First Quarter Form 10-Q 30 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 March 31, 2026 2025 Per WSEE Per WSEE Payroll cost $ 10,251 $ 11,276 $ 10,281 $ 11,199 Less: Bonus payroll cost 2,118 2,330 2,243 2,444 Non-bonus payroll cost $ 8,133 $ 8,946 $ 8,038 $ 8,755 Payroll cost % change period over period — 1 % 6 % 5 % Non-bonus payroll cost % change period over period 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) March 31, 2026 December 31, 2025 Cash, cash equivalents and marketable securities $ 555 $ 660 Less: Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions 415 468 Client prepayments 104 135 Adjusted cash, cash equivalents and marketable securities $ 36 $ 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 March 31, 2026 2025 Per WSEE Per WSEE Operating expenses $ 240 $ 264 $ 242 $ 264 Less: Restructuring charges 9 10 — — Adjusted operating expenses $ 231 $ 254 $ 242 $ 264 Operating expenses % change period over period (1) % — 2 % 2 % Adjusted operating expenses % change period over period (5) % (4) % 2 % 2 % Insperity | 2026 First Quarter Form 10-Q 31 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Following is a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP): Three Months Ended March 31, (in millions, except per WSEE per month) 2026 2025 Per WSEE Per WSEE Net income $ 33 $ 36 $ 51 $ 56 Income tax expense 30 33 21 22 Interest expense 6 7 6 7 Amortization of SaaS implementation costs 1 1 2 2 Depreciation and amortization 11 12 11 12 EBITDA 81 89 91 99 Stock-based compensation 13 14 11 12 Restructuring charges 9 10 — — Adjusted EBITDA $ 103 $ 113 $ 102 $ 111 Net income % change period over period (35) % (36) % (35) % (36) % Adjusted EBITDA % change period over period 1 % 2 % (28) % (29) % Following is a reconciliation of net income (GAAP) to adjusted net income (non-GAAP): Three Months Ended March 31, (in millions) 2026 2025 Net income $ 33 $ 51 Non-GAAP adjustments: Stock-based compensation 13 11 Restructuring charges 9 — Total non-GAAP adjustments 22 11 Tax effect (5) (3) Total non-GAAP adjustments, net 17 8 Adjusted net income $ 50 $ 59 Net income % change period over period (35) % (35) % Adjusted net income % change period over period (15) % (31) % Insperity | 2026 First Quarter Form 10-Q 32 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 March 31, (amounts per share) 2026 2025 Diluted EPS $ 0.88 $ 1.35 Non-GAAP adjustments: Stock-based compensation 0.35 0.30 Restructuring charges 0.23 — Total non-GAAP adjustments 0.58 0.30 Tax effect (0.15) (0.08) Total non-GAAP adjustments, net 0.43 0.22 Adjusted EPS $ 1.31 $ 1.57 Diluted EPS % change period over period (35) % (35) % Adjusted EPS % change period over period (17) % (31) % 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 $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. As of March 31, 2026, we had outstanding letters of credit and borrowings totaling $370 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 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: • 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. Insperity | 2026 First Quarter Form 10-Q 33 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 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. • 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 .” Cash Flows from Investing Activities 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. Cash Flows from Financing Activities 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. Insperity | 2026 First Quarter Form 10-Q 34 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND CONTROLS AND PROCEDURES