INSPERITY, INC. (NSP)

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® HR360 solution, our Insperity® HR360 Select Edition, and our Insperity HRScaleTM solution (together, our “PEO HR Solutions”), which we provide by entering into a co-employment relationship with our clients. Our PEO HR Solutions encompass a broad range of HR functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services. Our Insperity HR360 solution and Insperity HR360 Select Edition provide access to our web-based human capital management platform, the Insperity PremierTM platform, while our Insperity HRScale solution provides access to the Workday Human Capital Management platform.

2026 Highlights

Second Quarter 2026 Compared to Second Quarter 2025

•Average number of WSEEs paid per month decreased 1%

•Net income and diluted earnings per share (“EPS”) increased 180% and 171% to $4 million and $0.10, respectively

•Adjusted EBITDA increased 13% to $36 million

•Adjusted net income and adjusted EPS increased 30% and 31% to $13 million and $0.34, respectively

First Six Months 2026 Compared to First Six Months 2025

•Average number of WSEEs paid per month decreased 1%

•Net income and diluted EPS both decreased 20% to $37 million and $0.97, respectively

•Adjusted EBITDA increased 4% to $139 million

•Adjusted net income and adjusted EPS decreased 9% and 10% to $63 million and $1.64, respectively

Please read “Non-GAAP Financial Measures” for a reconciliation of adjusted EBITDA, adjusted net income, and adjusted EPS to their most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”).

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

Results of Operations

Key Financial and Statistical Data

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(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:

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

Key Operating Metrics

We monitor certain key metrics to measure our performance, including:

•WSEEs

•Adjusted EBITDA

•Adjusted EPS

Our growth in the number of WSEEs paid is affected by three primary sources: new client sales, client retention and the net change in WSEEs paid at existing clients through new hires and employee terminations.

•During Q2 2026, average WSEEs paid decreased 1% compared to Q2 2025. The number of WSEEs paid from new client sales and client retention decreased due in part to our margin recovery efforts, while the net change in our client base increased compared to Q2 2025.

•During the first six months of 2026 (“YTD 2026”), average WSEEs paid decreased 1% compared to the first six months of 2025 (“YTD 2025”). The number of WSEEs paid from new client sales and client retention decreased due in part to our margin recover efforts, while the net change in our client base increased when compared to YTD 2025.

Average WSEEs Paid and

Year-over-Year Growth Percentage

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

Net Income (Loss) andYear-over-Year Growth Percentage(in millions)

Adjusted EBITDA andYear-over-Year Growth Percentage(in millions)

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

EPS andYear-over-Year Growth Percentage(amounts per share)

Adjusted EPS andYear-over-Year Growth Percentage(amounts per share)

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

Revenues

Our PEO HR Solutions revenues are primarily derived from our gross billings, which are based on (1) the payroll cost of our WSEEs and (2) a monthly markup component.

Our revenues are primarily dependent on the number of clients enrolled, the resulting number of WSEEs paid each period and the number of WSEEs enrolled in our benefit plans. Because our monthly markup is computed in part as a percentage of payroll cost, certain revenues are also affected by the payroll cost of WSEEs, which may fluctuate based on the composition of the WSEE base, inflationary effects on wage levels and differences in the local economies of our markets.

Revenue and

Year-over-Year Growth Percentage

(in millions)

Second Quarter 2026 Compared to Second Quarter 2025

Our revenues for Q2 2026 were $1.7 billion, an increase of 2%, primarily due to the following:

•Average WSEEs paid decreased 1%

•Revenues per WSEE per month increased 3%, or $50

First Six Months 2026 Compared to First Six Months 2025

Our revenues for YTD 2026 were $3.6 billion, an increase of 2%, primarily due to the following:

•Average WSEEs paid decreased 1%

•Revenues per WSEE per month increased 3%, or $53

MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL 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)

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(1)The Southwest region includes Texas.

The percentage of total PEO HR Solutions revenue in our significant markets includes the following:

Significant Markets

We generally define the middle market sector as those companies with approximately 150 to 5,000 WSEEs. Currently, we have a dedicated sales management, service personnel, and consulting staff who concentrate solely on the middle market sector. Our average number of WSEEs per month in our middle market sector increased 10% during YTD 2026 compared to YTD 2025, representing approximately 29% and 26% of our total average paid WSEEs in YTD 2026 and YTD 2025, respectively.

MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL 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)

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

Gross Profit per WSEE per Month andYear-over-Year Growth Percentage

Second Quarter 2026 Compared to Second Quarter 2025

Gross profit for Q2 2026 decreased 3% to $217 million compared to $223 million in Q2 2025. Gross profit per WSEE per month for Q2 2026 decreased $3 to $237 compared to $240 in Q2 2025 due primarily to higher direct costs, offset in part by higher average pricing, as discussed below.

Our pricing objectives attempt to achieve a level of revenue per WSEE that matches or exceeds changes in primary direct costs and operating expenses. Our revenues per WSEE per month increased $50 due to higher average pricing of 3%.

The net increase in direct costs between Q2 2026 and Q2 2025 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $4 million as discussed below. The $53 per WSEE per month increase in direct costs is due primarily to the direct cost component changes as follows:

Benefits costs

•The cost of group health insurance and related employee benefits increased $25 per WSEE per month and increased 5.2% on a cost per covered employee basis in Q2 2026 as compared to Q2 2025.

•The percentage of WSEEs covered under our health insurance plans was 62% in Q2 2026 compared to 63% in Q2 2025.

•Reported results include changes in estimated claims run-off related to prior periods, which was a reduction in costs of $1 million, or $1 per WSEE per month, in Q2 2026, but did not impact costs in Q2 2025.

Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Health Insurance Costs,” fo

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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this annual report. Historical results are not necessarily indicative of trends in operating results for any future period.

The statements contained in this annual report that are not historical facts are forward-looking statements that involve a number of risks and uncertainties. The actual results of the future events described in such forward-looking statements in this annual report could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are the risks and uncertainties discussed in Item 1A. Risk Factors and the uncertainties set forth from time to time in our other public reports and filings and public statements.

Executive Summary

Overview

Our long-term strategy is to provide the best small and medium-sized businesses in the United States with our specialized human resources service offerings and to leverage our buying power and expertise to provide additional valuable services to clients.

Our comprehensive HR services offerings are provided through our Insperity® HR360 solution (formerly Workforce Optimization®), our Insperity® HR360 Select Edition solution (formerly Workforce SynchronizationTM), and our Insperity® HRScale solution (together, our “PEO HR Solutions”) which encompass a broad range of HR functions as discussed in Item 1. Business — Service Offerings — PEO HR Solutions.

HR360. Insperity’s HR360 solution, our largest source of revenue, is offered to small and medium-sized businesses seeking a comprehensive people strategy. From payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management to training and development, our HR360 solution offers a full range of services empowering clients to achieve a sophisticated HR function. HR360 provides access to our web-based human capital management platform, Insperity PremierTM.

HR360 Select Edition. Insperity’s HR360 Select Edition solution, which generally is offered only to our middle market client segment, is a lower cost offering with a typically longer commitment that includes the same compliance and administrative services as HR360 and allows those clients to select, for an additional fee, from the strategic HR products and services that are included with HR360. HR360 Select Edition provides access to our web-based human capital management platform, Insperity Premier.

HRScale. Insperity’s HRScale solution is our newest service offering that we jointly developed through our strategic partnership with Workday, Inc. (“Workday”). Insperity’s HRScale solution is intended for growing and middle market companies and provides access to the advanced capabilities of Workday Human Capital Management (“HCM”). Our HRScale solution, which is priced higher than our HR360 offering, is designed to combine the HR expertise of our HR360 solution with the advanced capabilities of Workday HCM, with a focus on affordability, ease and speed of deployment, and agility as companies scale. Insperity’s HRScale solution is under development and we expect an initial group of clients to begin using our HRScale solution in the first quarter of 2026.

HRCore. We also offer a comprehensive traditional payroll and human capital management solution, known as Insperity HRCoreTM (formerly Workforce AccelerationTM), which we refer to as our “Traditional HR Solution” as discussed in Item 1. Business — Other Product and Services Offerings — Comprehensive Traditional Payroll and Human Capital Management 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 generally are offered only with our other solutions as discussed in Item 1. Business — Other Product and Services Offerings.

2025 Performance

•Average number of WSEEs paid per month increased 1% to 310,089. Revenues increased 4% on a 3% increase in revenue per WSEE.

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

•We ended 2025 averaging 312,377 paid WSEEs in the fourth quarter of 2025, which represents a 1% increase over the fourth quarter of 2024.

•Approximately 26% of our average paid WSEEs were in our middle market sector for both the years ended December 31, 2025 and 2024, which is generally defined as companies with 150 to 5,000 WSEEs.

•Gross profit decreased 14% to $900 million. The decrease was primarily due to a 15% decrease in gross profit per WSEE, which was partially offset by a 1% increase in the average number of WSEEs paid per month. Gross profit per WSEE paid per month reflected, in part, a 3% pricing increase offset by a 6% increase in direct costs per WSEE. The increase in direct costs per WSEE was primarily attributable to a 9% increase in benefits costs per participant.

•Operating expenses decreased 3% in 2025 to $910 million, and included decreases in professional services, travel and event costs, and salary and wages. On a per WSEE per month basis, operating expenses decreased from $253 in 2024 to $245 in 2025.

•Net income (loss) and diluted earnings (loss) per share (“Diluted EPS”) both decreased 108% to $(7) million and $(0.19), respectively.

•Adjusted net income and adjusted EPS both decreased 71% to $39 million and $1.03, respectively.

•Adjusted EBITDA decreased 51% to $131 million.

•Our net income (loss) per WSEE per month decreased 108% from $25 in 2024 to $(2) in 2025.

•Our adjusted EBITDA per WSEE per month decreased 52% from $73 in 2024 to $35 in 2025.

•We ended 2025 with working capital of $102 million.

•During 2025, we paid $90 million in dividends, repurchased approximately 232,000 shares of our common stock at a cost of $19 million and paid $31 million in capital expenditures.

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”).

Revenues

We account for our revenues in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Our PEO HR Solutions gross billings to clients include the payroll cost of each WSEE at the client location and a markup computed as a percentage of each WSEEs payroll cost. We invoice the gross billings 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. This markup includes pricing components associated with our estimates of payroll taxes, benefits and workers’ compensation costs, plus a separate component related to our HR services. Revenues that have been recognized but not invoiced represent unbilled accounts receivable included in accounts receivable, net on our Consolidated Balance Sheets.

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 total markup is computed 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.

Direct Costs

The primary direct costs associated with revenue-generating activities for our PEO HR Solutions are:

•employment-related taxes (“payroll taxes”)

•costs of employee benefit plans

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

•workers’ compensation costs

Payroll taxes consist of the employer’s portion of Social Security and Medicare taxes under FICA, federal unemployment taxes and state unemployment taxes. Payroll taxes are generally paid as a percentage of payroll cost. The federal unemployment tax rates are defined by federal regulations. State unemployment tax rates are subject to claim histories and vary from state to state.

Employee benefits costs are comprised primarily of health insurance premiums and claims costs (including dental and pharmacy costs), but also include costs of other employee benefits such as life insurance, vision care, disability insurance, education assistance, adoption assistance, a flexible spending account program and an employee well-being program.

Workers’ compensation costs include administrative and risk charges paid to the insurance carrier, and claims costs, which are driven primarily by the frequency and severity of claims.

Gross Profit

Our gross profit per WSEE is primarily determined 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.

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. Our corporate employees include client services, sales and marketing, benefits, legal, finance, information technology, administrative support personnel and those associated with our other products and services.

•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 incentive plan awards.

•Commissions — Commissions expense consists primarily of amounts paid to sales managers and other sales personnel, including 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, including the Insperity Invitational™ presented by UnitedHealthcare® sponsorship.

•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 costs associated with the development and implementation of Insperity HRScale, our joint solution with Workday.

•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.

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

Other Income (Expense)

Other income (expense) includes interest charges incurred in connection with borrowings under our credit facility and interest inc

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