Market Risk Factors Changes in interest rates and interest rate risk: Funds held for clients are primarily comprised of short-term funds and AFS securities. Corporate investments are primarily comprised of AFS securities. As a result of our investing activities, we are exposed to changes in interest rates that may materially affect our results of operations and financial position. Changes in interest rates will impact the earnings potential of future investments and will cause fluctuations in the fair value of our long-term AFS 34 Table of Contents securities. We follow an investment strategy of protecting principal and optimizing liquidity. A substantial portion of our portfolios are invested in high credit quality securities with ratings of AA or higher, and A-1/P-1 ratings on short-term securities. We invest predominately in corporate bonds; U.S. government agency securities; municipal bonds; and VRDNs when available in the market. We limit the amounts that can be invested in any single issuer and invest primarily in short- to intermediate-term instruments whose fair value is less sensitive to interest rate changes. We manage the AFS securities to a benchmark duration of two to three and one-quarter years. During fiscal 2026, our primary short-term investment vehicles were U.S. government agency discount notes and bank demand deposit accounts. We have no exposure to high-risk or non-liquid investments. We have insignificant exposure to European investments. During fiscal 2026, the average interest rate earned on our combined funds held for clients and corporate cash equivalents and investment portfolios was 3.6%, compared to 3.7% for fiscal 2025. When interest rates are falling, the full impact of lower interest rates will not immediately be reflected in net income due to the interaction of short- and long-term interest rate changes. During a falling interest rate environment, earnings will decrease from our short-term investments, and over time, will decrease from our longer-term AFS securities. Earnings from the AFS securities, which as of May 31, 2026 had an average duration of 3.1 years, would not reflect decreases in interest rates until the investments are sold or mature and the proceeds are reinvested at lower rates. The amortized cost and fair value of AFS securities that had stated maturities as of May 31, 2026 are shown below by expected maturity. May 31, 2026 Amortized Fair In millions cost value Maturity date: Due in one year or less $ 912.6 $ 906.9 Due after one year through three years 1,426.5 1,407.7 Due after three years through five years 599.1 595.8 Due after five years 1,602.7 1,578.0 Total $ 4,540.9 $ 4,488.4 VRDNs, when held by us, are primarily categorized as due after five years in the table above as the contractual maturities on these securities are typically 20 to 30 years. Although these securities are issued as long-term securities, they are priced and traded as short-term instruments because of the liquidity provided through the tender feature. As of May 31, 2026, the Federal Funds rate was in the range of 3.50% to 3.75% and in the range of 4.25% to 4.50%, as of May 31, 2025. There continues to be uncertainty in the changing market and economic conditions, including the possibility of additional measures that could be taken by the U.S. President, the Federal Reserve and other government agencies related to the overall macroeconomic environment. We will continue to monitor the market and economic conditions. Calculating the future effects of changing interest rates involves many factors. These factors include, but are not limited to: •governmental action to address inflation and/or intervene to support financial markets; •daily interest rate changes; •seasonal variations in investment balances; •actual duration of short-term and AFS securities; •the proportion of taxable and tax-exempt investments; •changes in tax-exempt municipal rates versus taxable investment rates, which are not synchronized or simultaneous; and •financial market volatility and the resulting effect on benchmark and other indexing interest rates. Subject to these factors and under normal financial market conditions, a 25-basis-point change in taxable interest rates generally affects our tax-exempt interest rates by approximately 19 basis points. Under normal financial market conditions, the impact to earnings from a 25-basis-point change in short-term interest rates would be approximately $4.5 million to $5.0 million, after taxes, for a twelve-month period. Such a basis point change may or may not be tied to changes in the Federal Funds rate. 35 Table of Contents Our total investment portfolio (funds held for clients and corporate cash equivalents and investments) averaged approximately $7.4 billion for fiscal 2026. Our anticipated allocation is approximately 35% invested in short-term securities and VRDNs with an average duration of less than 30 days, and 65% invested in AFS securities with an average duration of two to three and one-quarter years. The combined funds held for clients and corporate AFS securities reflected net unrealized losses of $52.5 million and $53.6 million as of May 31, 2026 and 2025, respectively. Refer to Note H of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K for additional disclosures on fair value measurements. During fiscal 2026, the net unrealized gain or loss on our investment portfolios ranged from a net unrealized gain of $7.3 million to a net unrealized loss of $77.4 million. During fiscal 2025, the net unrealized loss on our investment portfolios ranged from $41.8 million to $162.5 million. The net unrealized loss on our investment portfolios was approximately $69.9 million as of July 15, 2026. As of May 31, 2026 and 2025, we had $4.5 billion and $3.8 billion, respectively, invested in AFS securities at fair value. The weighted-average yield-to-maturity was 3.7% and 3.3% as of May 31, 2026 and 2025, respectively. The weighted-average yield-to-maturity excludes AFS securities tied to short-term interest rates, such as VRDNs, when held. Assuming a hypothetical decrease in longer-term interest rates of 25 basis points, the resulting potential increase in fair value for our portfolio of AFS securities as of May 31, 2026, would be in a range of approximately $30.0 million to $35.0 million. Conversely, a corresponding increase in interest rates would result in a comparable decrease in fair value. This hypothetical decrease or increase in the fair value of the portfolio would be recorded as an adjustment to the portfolio’s recorded value, with an offsetting amount recorded in stockholders’ equity. These fluctuations in fair value would have no related or immediate impact on our results of operations unless any declines in fair value are due to credit related concerns and an impairment loss recognized. We are also exposed to interest rate risk through the use of our credit facilities as outlined in Liquidity and Capital Resources section of this Form 10-K. If interest rates were to increase, or we increase the frequency or amounts borrowed under these credit facilities, we could experience additional interest expense and a corresponding decrease in earnings. Credit risk: We are exposed to credit risk in connection with these investments through the possible inability of the borrowers to meet the terms of their bonds. We regularly review our investment portfolios to determine if any investment is impaired due to increased credit risk or other valuation concerns and we believe that the investments we held as of May 31, 2026 were not impaired as a result of the previously discussed reasons. While $3.0 billion of our AFS securities had fair values that were below amortized cost, we believe that it is probable that the principal and interest will be collected in accordance with the contractual terms, and that the gross unrealized losses of $59.8 million were due to changes in interest rates and were not due to increased credit risk or other valuation concerns. Most of the AFS securities in an unrealized loss position as of May 31, 2026 and 2025 held an AA rating or better. We do not intend to sell these investments until the recovery of their amortized cost basis or maturity, and further believe that it is not more-likely-than-not that we will be required to sell these investments prior to that time. Our assessment that an investment is not impaired due to increased credit risk or other valuation concerns could change in the future due to new developments, including changes in our strategies or assumptions related to any particular investment. We have some credit risk exposure relating to our purchase of customer accounts receivable under non-recourse arrangements. There is also credit risk exposure relating to our trade accounts receivable. These credit risk exposures are diversified among multiple customer arrangements and all such arrangements are regularly reviewed for potential write-off. No single customer is material in respect to total accounts receivable, service revenue, or results of operations. Market risk: We have an ongoing monitoring system for financial institutions we conduct business with and maintain cash balances at large well-capitalized (as defined by their regulators) financial institutions. We closely monitor market conditions and take appropriate measures, when necessary, to minimize potential risk exposure to our customer’s and our cash and investment balances. 36 Table of Contents