INSPERITY, INC. 10-Q

Item 1. Financial Statements CONSOLIDATED BALANCE SHEETS (in millions) June 30, 2026 December 31, 2025 Assets Cash and cash equivalents $ 619 $ 642 Restricted cash 81 82 Marketable securities — 18 Accounts receivable, net 878 826 Prepaid insurance and related assets 57 6 Income taxes receivable 26 29 Funds held for clients and other current assets 106 119 Total current assets 1,767 1,722 Property and equipment, net of accumulated depreciation 170 177 Right-of-use (“ROU”) leased assets 57 63 Prepaid health insurance 9 9 Deposits – health insurance 8 8 Deposits – workers’ compensation 160 148 Goodwill and other intangible assets, net 13 13 Deferred income taxes, net — 22 Other assets 50 41 Total assets $ 2,234 $ 2,203 Liabilities and stockholders' equity Accounts payable $ 10 $ 6 Payroll taxes and other payroll deductions payable 534 544 Accrued worksite employee payroll costs 760 764 Accrued health insurance costs 61 30 Accrued workers’ compensation costs 83 84 Accrued corporate payroll and commissions 54 78 Client funds liability and other accrued liabilities 85 114 Total current liabilities 1,587 1,620 Accrued workers’ compensation costs, net of current 103 102 Long-term debt 419 369 Operating lease liabilities, net of current 59 66 Deferred income taxes, net 5 — Total noncurrent liabilities 586 537 Commitments and contingencies Common stock 1 1 Additional paid-in capital 255 257 Treasury stock, at cost ( 824 ) ( 850 ) Retained earnings 629 638 Total stockholders' equity 61 46 Total liabilities and stockholders’ equity $ 2,234 $ 2,203 See accompanying notes. 2026 Second Quarter Form 10-Q 6 FINANCIAL STATEMENTS (Unaudited) CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended June 30, Six Months Ended June 30, (in millions, except per share amounts) 2026 2025 2026 2025 Revenues $ 1,686 $ 1,658 $ 3,581 $ 3,521 Payroll taxes, benefits and workers’ compensation costs 1,469 1,435 3,062 2,988 Gross profit 217 223 519 533 Salaries, wages and payroll taxes 115 129 255 271 Stock-based compensation 13 20 26 31 Commissions 10 10 20 21 Advertising 14 11 25 18 General and administrative expenses 49 49 104 109 Depreciation and amortization 10 11 21 22 Total operating expenses 211 230 451 472 Operating income (loss) 6 ( 7 ) 68 61 Other income (expense): Interest income 5 7 12 17 Interest expense ( 6 ) ( 6 ) ( 12 ) ( 12 ) Income (loss) before income tax (benefit) expense 5 ( 6 ) 68 66 Income tax (benefit) expense 1 ( 1 ) 31 20 Net income (loss) $ 4 $ ( 5 ) $ 37 $ 46 Net income (loss) per share of common stock Basic $ 0.10 $ ( 0.14 ) $ 0.98 $ 1.22 Diluted $ 0.10 $ ( 0.14 ) $ 0.97 $ 1.22 See accompanying notes. 2026 Second Quarter Form 10-Q 7 FINANCIAL STATEMENTS (Unaudited) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the Six Months Ended June 30, 2026 and 2025 Common Stock Issued Additional Paid-In Capital Treasury Stock Retained Earnings and AOCI Total (in millions) Shares Amount Balance at December 31, 2025 55 $ 1 $ 257 $ ( 850 ) $ 638 $ 46 Purchase of treasury stock, at cost — — — ( 4 ) — ( 4 ) Issuance of equity-based incentive awards and dividend equivalents — — ( 26 ) 27 ( 1 ) — Stock-based compensation expense — — 26 — — 26 Other — — ( 2 ) 3 1 2 Dividends paid — — — — ( 46 ) ( 46 ) Net income — — — — 37 37 Balance at June 30, 2026 55 $ 1 $ 255 $ ( 824 ) $ 629 $ 61 Balance at December 31, 2024 55 $ 1 $ 222 $ ( 864 ) $ 738 $ 97 Purchase of treasury stock, at cost — — — ( 19 ) — ( 19 ) Issuance of equity-based incentive awards and dividend equivalents — — ( 25 ) 28 ( 3 ) — Stock-based compensation expense — — 30 1 — 31 Other — — 1 1 — 2 Dividends paid — — — — ( 45 ) ( 45 ) Net income — — — — 46 46 Balance at June 30, 2025 55 $ 1 $ 228 $ ( 853 ) $ 736 $ 112 2026 Second Quarter Form 10-Q 8 FINANCIAL STATEMENTS (Unaudited) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued) For the Three Months Ended June 30, 2026 and 2025 Common Stock Issued Additional Paid-In Capital Treasury Stock Retained Earnings and AOCI Total (in millions) Shares Amount Balance at March 31, 2026 55 $ 1 $ 244 $ ( 826 ) $ 648 $ 67 Stock-based compensation expense — — 13 — — 13 Other — — ( 2 ) 2 — — Dividends paid — — — — ( 23 ) ( 23 ) Net income — — — — 4 4 Balance at June 30, 2026 55 $ 1 $ 255 $ ( 824 ) $ 629 $ 61 Balance at March 31, 2025 55 $ 1 $ 209 $ ( 855 ) $ 764 $ 119 Issuance of equity-based incentive awards and dividend equivalents — — — 1 ( 1 ) — Stock-based compensation expense — — 19 1 — 20 Dividends paid — — — — ( 22 ) ( 22 ) Net loss — — — — ( 5 ) ( 5 ) Balance at June 30, 2025 55 $ 1 $ 228 $ ( 853 ) $ 736 $ 112 See accompanying notes. 2026 Second Quarter Form 10-Q 9 FINANCIAL STATEMENTS (Unaudited) CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, (in millions) 2026 2025 Cash flows from operating activities Net income $ 37 $ 46 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 21 22 Stock-based compensation 26 31 Deferred income taxes 27 12 Changes in operating assets and liabilities: Accounts receivable ( 52 ) ( 14 ) Prepaid insurance and related assets ( 51 ) ( 16 ) Other current assets ( 13 ) 1 Other assets and ROU assets — ( 6 ) Accounts payable 4 ( 4 ) Payroll taxes and other payroll deductions payable ( 10 ) ( 535 ) Accrued worksite employee payroll costs ( 4 ) ( 14 ) Accrued health insurance costs 31 38 Accrued workers’ compensation costs — ( 14 ) Accrued corporate payroll, commissions and other accrued liabilities ( 38 ) ( 40 ) Income taxes payable/receivable 3 ( 29 ) Total adjustments ( 56 ) ( 568 ) Net cash used in operating activities ( 19 ) ( 522 ) Cash flows from investing activities Marketable securities: Purchases ( 10 ) ( 10 ) Proceeds from maturities 6 12 Proceeds from dispositions 22 — Property and equipment purchases ( 13 ) ( 13 ) Net cash provided by (used in) investing activities 5 ( 11 ) Cash flows from financing activities Purchase of treasury stock ( 4 ) ( 19 ) Dividends paid ( 46 ) ( 45 ) Borrowings under revolving line of credit 50 — Client funds liability and other ( 21 ) ( 14 ) Net cash used in financing activities ( 21 ) ( 78 ) Net decrease in cash, cash equivalents, restricted cash, funds held for clients, and deposits – workers’ compensation ( 35 ) ( 611 ) Cash, cash equivalents, restricted cash, funds held for clients, and deposits - workers’ compensation beginning of period 945 1,344 Cash, cash equivalents, restricted cash, funds held for clients, and deposits - workers’ compensation end of period $ 910 $ 733 Supplemental cash flow information: ROU assets obtained in exchange for lease obligations $ 3 $ 10 See accompanying notes. 2026 Second Quarter Form 10-Q 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation Insperity, Inc., a Delaware corporation (“Insperity,” “we,” “our,” and “us”), provides an array of human resources (“HR”) and business solutions designed to help improve business performance. Our comprehensive HR services offerings are provided through our professional employer organization (“PEO”) services, known as our Insperity ® 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. In addition to our PEO HR Solutions, we offer a comprehensive traditional payroll and human capital management solution, known as our Insperity HR Core™ solution, which we refer to as our “Traditional HR Solution.” We also offer a number of other business performance solutions, including Talent Acquisition Services, Retirement Services, Insurance Services, Contractor Management, and Perks+. These other products and services are generally offered only with our other solutions. The Consolidated Financial Statements include the accounts of Insperity, Inc. and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The accompanying Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements at and for the year ended December 31, 2025. Our Consolidated Balance Sheet at December 31, 2025 has been derived from the audited financial statements at that date, but does not include all of the information or footnotes required by GAAP for complete financial statements. Our Consolidated Balance Sheet at June 30, 2026 and our Consolidated Statements of Operations for the three and six month periods ended June 30, 2026 and 2025, our Consolidated Statements of Cash Flows for the six month periods ended June 30, 2026 and 2025 and our Consolidated Statements of Stockholders' Equity for each of the three and six month periods ended June 30, 2026 and 2025, have been prepared by us without audit. In the opinion of management, all adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows have been made, and all such adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the operating results for a full year or of future operations. 2. Accounting Policies Health Insurance Costs We provide group health insurance coverage under a single-employer plan that covers both our WSEEs in our PEO HR Solutions and our corporate employees and utilizes a national network of carriers, including UnitedHealthcare (“United”), UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii, and Harvard Pilgrim Health Care, all of which provide fully insured policies or service contracts. Approximately 85 % of our costs related to health insurance coverage are incurred under our policy with United. While the policy with United is a fully insured plan, as a result of certain contractual terms, we have accounted for this plan since its inception using a partially self-funded insurance accounting model. Effective January 1, 2020 through December 31, 2025, our financial responsibility for a participant’s annual claim costs was limited to $1 million (“Individual Claims Limit”). Beginning January 1, 2026, we have the option to annually elect to limit our responsibility for each participant’s claim costs to $500,000, $750,000, or $1,000,000 per year, which we elect based on the cost of the limit (“Selected Claims Limit”) and 2026 Second Quarter Form 10-Q 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS our estimate of the benefit to us at that level of limit. The cost of the Selected Claims Limit is recognized evenly over the year, whereas, the claims recovery benefit on the Selected Claims Limit is expected to increase throughout the year, with the expected increase being more impactful at a lower Selected Claims Limit. For 2026, the Selected Claims Limit we have elected is the first $500,000 of paid claims per claimant per year. Accordingly, we record the cost of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the “Program Costs”), as benefits expense, which is a component of direct costs, in our Consolidated Statements of Operations. The estimated incurred but not reported claims are based upon: (1) the level of claims processed during each quarter; (2) estimated completion rates based upon recent claim development patterns under the plan; and (3) the number of participants in the program, including both active and COBRA enrollees. Each reporting period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant demographics, and other factors are incorporated into the benefits costs, which requires a significant level of judgment. Additionally, since the plan’s inception, under the terms of the contract, United establishes cash funding rates 90 days in advance of the beginning of a reporting quarter. If the Program Costs for a reporting quarter are greater than the premiums paid and owed to United, a deficit in the plan would be incurred and a liability for the excess costs would be accrued in our Consolidated Balance Sheets. On the other hand, if the Program Costs for the reporting quarter are less than the premiums paid and owed to United, a surplus in the plan would be incurred and we would record an asset for the excess premiums in our Consolidated Balance Sheets. The terms of the arrangement require us to maintain an accumulated cash surplus in the plan of $ 9 million, which is reported as long-term prepaid health insurance on our Consolidated Balance Sheets. In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $ 7 million at June 30, 2026, and is included in deposits - health insurance as a long-term asset on our Consolidated Balance Sheets. 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 Sheets 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 Sheets. Our benefits costs incurred in the first six months of 2026 included a decrease of $ 4 million for changes in estimated run-off related to prior periods. Our benefits costs incurred in the first six months of 2025 included an increase of $ 11 million for changes in estimated run-off related to prior periods, net of Individual Claims Limit. Workers’ Compensation Costs Our workers’ compensation coverage for our WSEEs in our PEO HR Solutions has been provided through arrangements with the Chubb Group of Insurance Companies or its predecessors (the “Chubb Program”) since 2007. The Chubb Program is fully insured in that Chubb has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities. Under the Chubb Program, for claims incurred on or before September 30, 2019, we have financial responsibility to Chubb for the first $ 1 million layer of claims per occurrence and, for claims over $ 1 million, up to a maximum aggregate amount of $ 6 million per policy year for claims that exceed $ 1 million. Chubb bears the financial responsibility for all claims in excess of these levels. Effective for claims incurred on or after October 1, 2019, we have financial responsibility to Chubb for the first $ 1.5 million layer of claims per occurrence and, for claims over $ 1.5 million, up to a maximum aggregate amount of $ 6 million per policy year for claims that exceed $ 1.5 million. Because we bear the financial responsibility for claims up to the levels noted above, such claims, which are the primary component of our workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment. We utilize a third-party actuary to estimate our loss development rate, which is primarily based upon the nature of WSEEs’ job responsibilities, the location of WSEEs, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. Each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into our workers’ compensation claims cost estimates. During the six months ended June 30, 2026 and 2025, we reduced accrued workers’ compensation costs by $ 7 million and $ 14 million, respectively, for changes in estimated losses related to prior periods. Workers’ compensation cost estimates are discounted to present value at a rate based upon the U.S. Treasury rates that correspond with the weighted average estimated claim payout period (the average discount rate utilized was 3.8 % in the 2026 period and 4.0 % in the 2025 period) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations. 2026 Second Quarter Form 10-Q 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table provides the activity and balances related to incurred but not paid workers’ compensation claims: Six Months Ended June 30, (in millions) 2026 2025 Beginning balance, January 1, $ 184 $ 204 Accrued claims, net 44 32 Present value discount, net of accretion ( 5 ) ( 6 ) Paid claims ( 39 ) ( 41 ) Ending balance $ 184 $ 189 Current portion of accrued claims $ 81 $ 76 Long-term portion of accrued claims 103 113 Total accrued claims $ 184 $ 189 The current portion of accrued workers’ compensation costs on our Consolidated Balance Sheets at June 30, 2026 and 2025 includes $ 2 million and $ 3 million, respectively, of workers’ compensation administrative fees. The undiscounted accrued workers’ compensation costs were $ 228 million as of June 30, 2026 and 2025. At the beginning of each policy period, the workers’ compensation insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim funds”). The level of claim funds is primarily based upon anticipated WSEE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are primarily held as cash and money market funds (cash equivalents) and are recorded as restricted cash, a short-term asset, while the remainder of claim funds are included in deposits – workers’ compensation, a long-term asset in our Consolidated Balance Sheets. At June 30, 2026, we had restricted cash of $ 81 million and deposits – workers’ compensation of $ 160 million, of which $ 236 million was held in trust bank accounts. Our estimate of incurred claim costs expected to be paid within one year is included in short-term liabilities, while our estimate of incurred claim costs expected to be paid beyond one year is included in long-term liabilities on our Consolidated Balance Sheets. Revenue and Direct Cost Recognition We enter into contracts with our PEO HR Solutions customers for human resources services based on the rate and price stated in the contract. Our contracts generally establish pricing for a period of 12 months and are generally cancellable at any time by either party with 30-days’ notice. Our performance obligations are satisfied as services are rendered each month. The term between invoicing and when our performance obligations are satisfied is not significant. Our payment terms typically require payment concurrently with the invoicing of our PEO services. We do not have significant financing components or significant payment terms. Our revenue is generally recognized ratably over the payroll period as WSEEs perform their service at the client worksite in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers . Customers are invoiced concurrently with each periodic payroll of its WSEEs. Revenues that have been recognized but not invoiced represent unbilled accounts receivable of $ 867 million at June 30, 2026 and $ 810 million at December 31, 2025, and are included in accounts receivable, net on our Consolidated Balance Sheets. Pursuant to the “practical expedients” provided under ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers , we expense sales commissions when incurred because the terms of our contracts are cancellable by either party with a 30-day notice. These costs are recorded in commissions in our Consolidated Statements of Operations. 2026 Second Quarter Form 10-Q 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Our revenue for our PEO HR Solutions by geographic region and for our other products and services offerings are as follows: Three Months Ended June 30, Six Months Ended June 30, (in millions) 2026 2025 % Change 2026 2025 % Change Northeast $ 446 $ 452 (1) % $ 973 $ 978 (1) % Southeast 250 238 5 % 521 495 5 % Central 308 301 2 % 650 636 2 % Southwest 314 311 1 % 664 658 1 % West 353 339 4 % 739 716 3 % 1,671 1,641 2 % 3,547 3,483 2 % Other revenue 15 17 (12) % 34 38 (11) % Total revenue $ 1,686 $ 1,658 2 % $ 3,581 $ 3,521 2 % Our PEO HR Solutions revenues are primarily derived from our gross billings, which are based on (1) the payroll cost of our WSEEs; and (2) a markup computed as a percentage of the payroll cost. The gross billings are invoiced concurrently with each periodic payroll of our WSEEs. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of the markup, are recognized ratably over the payroll period as WSEEs perform their service at the client worksite. In determining the pricing of the markup component of our gross billings, we take into consideration our estimates of the costs directly associated with our WSEEs, including payroll taxes, benefits and workers’ compensation costs, plus an acceptable gross profit margin. As a result, our operating results are significantly impacted by our ability to accurately estimate our direct costs relative to the revenues derived from the markup component of our gross billings. Revenues are comprised of gross billings less WSEE payroll costs as follows: Three Months Ended June 30, Six Months Ended June 30, (in millions) 2026 2025 2026 2025 Gross billings $ 10,911 $ 10,558 $ 23,057 $ 22,702 Less: WSEE payroll cost 9,225 8,900 19,476 19,181 Revenues $ 1,686 $ 1,658 $ 3,581 $ 3,521 Consistent with our revenue recognition policy, our direct costs do not include the payroll cost of our WSEEs. Our direct costs associated with our revenue generating activities are primarily comprised of all other costs related to our WSEEs, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs. Segment Reporting ASC 280, Segment Reporting establishes standards for reporting information about operating segments on a basis consistent with our internal organizational structure as well as information about geographical areas and business segments. Based on management’s assessment, we determined that we have only one operating segment and therefore one reportable segment, HR Solutions, as defined by ASC 280. The accounting policies of the HR Solutions segment are the same as those described in the summary of significant accounting policies. The measure of segment assets is reported on our Consolidated Balance Sheets as total assets, and the chief operating decision maker (“CODM”) assesses performance and decides how to allocate resources based on net income as reported in our Consolidated Statements of Operations. The CODM reviews revenues and expenses at the consolidated level as disclosed in our Consolidated Statements of Operations and uses net income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into our HR Solutions segment or into other areas of the entity, such as for acquisitions or to 2026 Second Quarter Form 10-Q 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS pay dividends. Net income is also used to monitor budget versus actual results and in competitive analysis by benchmarking to our competitors. The competitive analysis and the monitoring of budgeted versus actual results are used in assessing the segment’s performance and in establishing management’s compensation. Recently Adopted Accounting Pronouncements In September 2025, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 removes all references to software development stages and requires capitalization of software costs when management has committed to the software project and it is probable the software will be completed and perform its intended use. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and for interim periods within those annual periods, with early adoption permitted. We early adopted ASU 2025-06 effective January 1, 2026 on a prospective basis and the impact of the adoption was not material to our Consolidated Financial Statements. 3. Other Balance Sheet Information Cash, Cash Equivalents and Marketable Securities The following table summarizes our cash and investments in cash equivalents and marketable securities held by investment managers and overnight investments: June 30, 2026 December 31, 2025 (in millions) Cash & Cash Equivalents Marketable Securities Total Cash & Cash Equivalents Marketable Securities Total Overnight holdings $ 591 $ — $ 591 $ 638 $ — $ 638 Investment holdings 36 — 36 22 18 40 627 — 627 660 18 678 Cash in demand accounts 9 — 9 22 — 22 Outstanding checks ( 17 ) — ( 17 ) ( 40 ) — ( 40 ) Total $ 619 $ — $ 619 $ 642 $ 18 $ 660 Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles. Our cash, cash equivalents and marketable securities at June 30, 2026 and December 31, 2025 included $ 481 million and $ 468 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes, and other payroll deductions, as well as $ 43 million and $ 135 million, respectively, in client prepayments. 2026 Second Quarter Form 10-Q 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Cash, Cash Equivalents, Restricted Cash, Funds Held for Clients, and Deposits - Workers’ Compensation The following table summarizes our cash, cash equivalents, restricted cash, funds held for clients, and deposits - workers’ compensation as reported in our Consolidated Statements of Cash Flows: Six Months Ended June 30, (in millions) 2026 2025 Supplemental schedule of cash and cash equivalents, restricted cash, funds held for clients, and deposits - workers’ compensation Cash and cash equivalents $ 642 $ 1,039 Restricted cash 82 69 Other current assets – funds held for clients (1) 73 58 Deposits – workers’ compensation 148 178 Cash, cash equivalents, restricted cash, funds held for clients, and deposits - workers’ compensation beginning of period $ 945 $ 1,344 Cash and cash equivalents $ 619 $ 441 Restricted cash 81 76 Other current assets – funds held for clients (1) 50 42 Deposits – workers’ compensation 160 174 Cash, cash equivalents, restricted cash, funds held for clients, and deposits - workers’ compensation end of period $ 910 $ 733 ____________________________________ (1) Funds held for clients represent amounts held on behalf of our Traditional HR Solution customers that are restricted for the purpose of satisfying obligations to remit funds to clients’ employees and various tax authorities. Please read Note 2. “ Accounting Policies ,” for a discussion of our accounting policies for deposits – workers’ compensation and restricted cash. 4. Fair Value Measurements We account for our financial assets in accordance with ASC 820, Fair Value Measurement . This standard defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The fair value measurement disclosures are grouped into three levels based on valuation factors: • Level 1 - quoted prices in active markets using identical assets • Level 2 - significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs • Level 3 - significant unobservable inputs 2026 Second Quarter Form 10-Q 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fair Value of Instruments Measured and Recognized at Fair Value The following table summarizes the levels of fair value measurements of our financial assets: June 30, 2026 December 31, 2025 (in millions) Total Level 1 Total Level 1 Money market funds $ 627 $ 627 $ 660 $ 660 U.S. Treasury bills — — 18 18 627 627 678 678 Deposits - money market funds 236 236 230 230 Total $ 863 $ 863 $ 908 $ 908 Please read Note 3. “ Other Balance Sheet Information ,” for additional information. Our valuation techniques used to measure fair value for these securities during the period consisted primarily of third-party pricing services that utilized actual market data such as trades of comparable bond issues, broker/dealer quotations for the same or similar investments in active markets and other observable inputs. The following is a summary of our available-for-sale marketable securities: (in millions) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value June 30, 2026 U.S. Treasury bills $ — $ — $ — $ — December 31, 2025 U.S. Treasury bills $ 18 $ — $ — $ 18 Fair Value of Other Financial Instruments The carrying amounts of cash, cash equivalents, restricted cash, accounts receivable, deposits and accounts payable approximate their fair values due to the short-term maturities of these instruments. As of June 30, 2026, the carrying value of borrowings under our revolving credit facility approximates fair value and was classified as Level 2 in the fair value hierarchy. Please read Note 5, “ Long-Term Debt ,” for additional information. 5. Long-Term Debt We have a revolving credit facility (the “Facility”) with a revolving credit commitment of $ 750 million. The Facility may be further increased to $ 800 million based on the terms and subject to the conditions set forth in the agreement relating to the Facility (as amended, the “Credit Agreement”). The Facility is available for working capital and general corporate purposes, including acquisitions, stock repurchases and issuances of letters of credit. Our obligations under the Facility are secured by 100 % of the stock of our captive insurance subsidiary and are guaranteed by all of our subsidiaries other than our captive insurance subsidiary and certain other excluded subsidiaries. At June 30, 2026, our outstanding balance on the Facility was $ 419 million, and we had an outstanding $ 1 million letter of credit issued under the Facility, resulting in unused commitment of $ 330 million. 2026 Second Quarter Form 10-Q 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Facility contains both affirmative and negative covenants that we believe are customary for arrangements of this nature. Covenants include, but are not limited to, limitations on our ability to incur additional indebtedness, sell material assets, retire, redeem or otherwise reacquire our capital stock, acquire the capital stock or assets of another business, make investments and pay dividends. In addition, the Credit Agreement requires us to comply with financial covenants limiting our total funded debt, minimum interest coverage ratio, and maximum leverage ratio. During 2025, we amended the Facility to exclude dividends from the interest coverage ratio financial covenant and increase the maximum leverage ratio. We were in compliance with all financial covenants under the Credit Agreement at June 30, 2026. The Facility matures on December 15, 2028 . Borrowings under the Facility bear interest at an annual rate equal to an alternate base rate or Term SOFR for term SOFR loans, in either case plus an applicable margin. Term SOFR is a forward-looking term rate based on the secured overnight financing rate. Depending on our leverage ratio, the applicable margin varies (1) in the case of SOFR loans, from 1.50 % to 2.50 % and (2) in the case of alternate base rate loans, from 0.50 % to 1.50 %. The alternate base rate is the highest of (1) the prime rate most recently published in The Wall Street Journal, (2) the federal funds rate plus 0.50 %; and (3) the Term SOFR rate plus 2.00 %. We also pay an unused commitment fee on the average daily unused portion of the Facility at a rate of 0.25 % per year. The average interest rate for the six month period ended June 30, 2026 was 5.7 %. Interest expense and unused commitment fees are recorded in other income (expense). 6. Stockholders' Equity During the six months ended June 30, 2026, we repurchased or withheld an aggregate of 171,548 shares of our common stock, as described below. Repurchase Program Our Board of Directors (the “Board”) has authorized a program to repurchase shares of our outstanding common stock (“Repurchase Program”). The purchases may be made from time to time in the open market or directly from stockholders at prevailing market prices based on market conditions and other factors. During the six months ended June 30, 2026, no shares were repurchased under the Repurchase Program. As of June 30, 2026, we were authorized to repurchase an additional 1,407,764 shares under the Repurchase Program. Withheld Shares During the six months ended June 30, 2026, we withheld 171,548 shares to satisfy tax withholding obligations for the vesting of long-term incentive and restricted stock unit awards. Dividends The Board declared and paid quarterly dividends as follows: (amounts per share) 2026 2025 First quarter $ 0.60 $ 0.60 Second quarter 0.60 0.60 During the six months ended June 30, 2026 and 2025, we declared and paid dividends totaling $ 46 million and $ 45 million, respectively. 7. Earnings Per Share Basic EPS is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period, plus the dilutive effect of time-based and performance-based restricted stock units (“RSUs”). 2026 Second Quarter Form 10-Q 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes net income and basic and diluted shares used in the earnings per share computations: Three Months Ended June 30, Six Months Ended June 30, (in millions) 2026 2025 2026 2025 Net income (loss) $ 4 $ ( 5 ) $ 37 $ 46 Weighted average common shares outstanding 38 38 38 38 Incremental shares from assumed time-based and performance-based RSU awards 1 — — — Adjusted weighted average common shares outstanding 39 38 38 38 Potentially dilutive securities not included in weighted average shares calculation due to anti-dilutive effect 1 1 1 1 8. Commitments and Contingencies Litigation We are a defendant in various lawsuits and claims arising in the normal course of business. Management believes it has valid defenses in these cases and is defending them vigorously. While the results of litigation cannot be predicted with certainty, management believes the final outcome of such litigation will not have a material adverse effect on our financial position or results of operations. 2026 Second Quarter Form 10-Q 19 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS