CBIZ, Inc. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to “we," “us," “our," "CBIZ" or the "Company" shall mean CBIZ, Inc., and its operating subsidiaries. The following discussion is intended to assist in the understanding of our financial position at March 31, 2026 and December 31, 2025, results of operations for the three months ended March 31, 2026 and 2025, and cash flows for the three months ended March 31, 2026 and 2025, and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2025. This discussion and analysis contains forward-looking statements and should be read in conjunction with the disclosures and information contained in “Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q and in “Item 1A. Risk Factors” included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2025. OVERVIEW We provide professional business services, products and solutions that help our clients grow and succeed by better managing their finances and employees. These services are primarily provided to small and medium-sized businesses, as well as individuals, governmental entities, and not-for-profit enterprises throughout the United States and parts of Canada. As discussed in Note 13, Goodwill, the National Practices practice group, which consisted of a single reporting unit, is now included in the Financial Services practice group to align our internal management and reporting structure with the services provided. As a result of these changes, we now operate with two reportable segments: Financial Services and Benefits and Insurances Services. Financial results of the Financial Service Practice Group for the three months ended March 31, 2025 were adjusted to reflect the change in reportable segments. Refer to the Annual Report on Form 10-K for the year ended December 31, 2025 for further discussion of our business and strategies, as well as the external relationships and regulatory factors that currently impact our operations. EXECUTIVE SUMMARY Revenue for the three months ended March 31, 2026 increased by $10.6 million, or 1.3%, to $848.6 million from $838.0 million for the same period in 2025. Same-unit revenue increased by approximately $8.4 million, or 1.0%, as compared to the same period in 2025. Revenue from newly acquired operations contributed $2.1 million of incremental revenue for the three months ended March 31, 2026, as compared to the same period in 2025. A detailed discussion of revenue by practice group is included under "Operating Practice Groups." For the three months ended March 31, 2026, net income was $161.6 million, or $2.63 per diluted share, compared to $122.8 million, or $1.91 per diluted share, for the same period in 2025. Refer to “Results of Operations" for a detailed discussion of the components of net income. The uncertainty in the current economic and geopolitical environment may lead to softness in the demand for the nonrecurring project-based services we offer. We expect this softness in demand caused by the current economic and geopolitical environment could continue and may limit management's ability to accurately forecast demand for the remainder of 2026. Strategic Use of Capital Our primary business objective is funding organic growth acceleration and meeting working capital needs. This includes investments in client service delivery and emerging technology that support revenue growth and enhance operational excellence. Following the completion of the Transaction, our second priority is to pay down debt to be at a net leverage ratio of less than 2.5x over time. As a result of the Transaction and related 2024 Credit Facilities, we have $1,551.5 million of outstanding debt under the 2024 Credit Facilities as of March 31, 2026. In addition, we believe that repurchasing shares of our common stock can be an attractive use of capital and an efficient means to provide value to our stockholders. We will also remain focused on making strategic acquisitions that allow us to strengthen our presence in existing markets, expand into high growth industries, and broaden our services to our clients. During the three months ended March 31, 2026, we repurchased 0.1 million shares of our common stock for a total cost of $3.5 million under the ROFR Agreement and 1.0 million shares of our common stock in the open market for $25.5 million pursuant to our Share Repurchase Program (defined below). Additionally, to settle statutory employee withholdings related to vesting of stock awards, we repurchased 0.1 million shares of our common stock at a cost of 20 $2.6 million during the three months ended March 31, 2026. During the three months ended March 31, 2025, we made no share repurchases under the ROFR Agreement or in the open market. To settle statutory employee withholdings related to vesting of stock awards, we repurchased 0.1 million shares at a cost of $7.7 million during the three months ended March 31, 2025. Refer to Note 10, Common Stock, to the accompanying unaudited condensed consolidated financial statements for further details. On February 11, 2026, the CBIZ Board of Directors authorized the purchase of up to 5.0 million shares of our common stock under our share repurchase program (the “Share Repurchase Program”), which may be suspended or discontinued at any time and expires on March 31, 2027. The shares may be purchased in the open market, in privately negotiated transactions, and pursuant to Rule 10b5-1 trading plans. Privately negotiated transactions may include purchases from our employees, officers and directors, in accordance with the Securities and Exchange Commission ("SEC") rules. CBIZ management will determine the timing and amount of the purchases based on its evaluation of market conditions and other factors. RESULTS OF OPERATIONS Revenue The following tables summarize total revenue for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, 2026 % of Total 2025 (1) % of Total $ Change % Change (Amounts in thousands, except percentages) Financial Services $ 740,330 87.2 % $ 725,038 86.5 % $ 15,292 2.1 % Benefits and Insurance Services 108,249 12.8 % 112,976 13.5 % (4,727) (4.2) % Total CBIZ $ 848,579 100.0 % $ 838,014 100.0 % $ 10,565 1.3 % (1) During the three months ended March 31, 2026, the National Practice practice group was combined with the Financial Service practice group to better align with internal management and reporting structure. As a result, the Financial Services revenue for the three months ended March 31, 2025 was adjusted to reflect this change. Non-qualified Deferred Compensation Plan We sponsor a Non-qualified Deferred Compensation Plan (the "deferred compensation plan"), under which a CBIZ employee’s compensation deferral is held in a rabbi trust and invested accordingly as directed by the employee.The activities related to the deferred compensation plan are recorded in "Corporate and Other" for segment reporting purposes. Gains and losses resulting from the adjustments to the fair value of the invested assets in the deferred compensation plan are recorded as an increase or decrease to the "Other income (expense), net", are directly offset by the same adjustments as an increase or decrease to compensation expense (recorded as "Operating expense" or "Corporate general and administrative expense") in the accompanying Unaudited Condensed Consolidated Statements of Comprehensive Income. The deferred compensation plan has no impact on “Income before income tax expense” or diluted earnings per share. Refer to Note 13, Employee Benefits, to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2025 for further discussion on the Non-qualified Deferred Compensation Plan. Losses related to the deferred compensation plan assets for the three months ended March 31, 2026 and 2025 were recorded as follows (in thousands, except percentages): Three Months Ended March 31, Income statement line items: 2026 2025 Operating expense $ (3,069) $ (2,432) Corporate general & administrative expense (319) (119) Other expense, net 3,388 2,551 21 Excluding the impact of the above-mentioned income and expenses related to the deferred compensation plan, the operating results for the three months ended March 31, 2026 and 2025 were as follows: Three Months Ended March 31, 2026 2025 (Amounts in thousands, except percentages) As Reported Deferred Compensation Plan Adjusted % of Revenue As Reported Deferred Compensation Plan Adjusted % of Revenue Gross margin $ 226,017 $ (3,069) $ 222,948 26.3 % $ 228,102 $ (2,432) $ 225,670 26.9 % Operating income 196,449 (3,388) 193,061 22.8 % 200,032 (2,551) 197,481 23.6 % Other expense, net (4,016) 3,388 (628) (0.1) % (1,966) 2,551 585 0.1 % Income before income tax expense 226,472 — 226,472 26.7 % 172,910 — 172,910 20.6 % Operating Expenses The following tables summarize total operating expenses for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, 2026 2025 (1) $ Change % Change (Amounts in thousands, except percentages) Operating expenses by segment: Financial Services 530,770 $ 520,758 $ 10,012 1.9 % Benefits and Insurance Services 85,234 85,358 (124) (0.1) % Corporate and Other 6,558 3,796 2,762 72.8 % Total Operating expenses $ 622,562 $ 609,912 $ 12,650 2.1 % Operating expenses % of revenue 73.4 % 72.8 % Operating expenses excluding deferred compensation $ 625,631 $ 612,344 $ 13,287 2.2 % Operating expenses excluding deferred compensation % of revenue 73.7 % 73.1 % (1) During the three months ended March 31, 2026, the National Practice practice group was combined with the Financial Service practice group to better align with internal management and reporting structure. As a result, the Financial Services operating expenses for the three months ended March 31, 2025 was adjusted to reflect this change. Three months ended March 31, 2026 compared to March 31, 2025 . Total operating expenses for the three months ended March 31, 2026 increased by $12.7 million, or 2.1%, to $622.6 million as compared to $609.9 million in the same period in 2025. The deferred compensation plan decreased operating expenses by $3.1 million for the three months ended March 31, 2026 and by $2.4 million during the same period in 2025. Excluding the impact of deferred compensation, which was recorded in "Corporate and Other" for segment reporting purposes, operating expenses would have been $625.6 million and $612.3 million, or 73.7% and 73.1% of revenue, for the three months ended March 31, 2026 and 2025, respectively. In addition, operating expense for the three months ended March 31, 2026 and 2025, included approximately $20.7 million and $9.0 million, respectively, of integration costs associated with the Transaction. The majority of our operating expenses relate to personnel costs, which include (i) salaries and benefits, (ii) commissions paid to producers, (iii) incentive compensation, and (iv) stock-based compensation. Excluding the impact of deferred compensation, which was recorded in "Corporate and Other" for segment reporting purposes, operating expenses increased by approximately $13.3 million during the three months ended March 31, 2026 as compared to the same period in 2025, driven by $4.6 million higher facility costs, $2.7 million higher technology costs, $2.5 million higher direct costs, $1.8 million higher personnel costs, $1.1 million higher travel and entertainment costs, and $0.6 million higher professional service costs. 22 Corporate General & Administrative (“G&A”) Expenses Three Months Ended March 31, 2026 2025 $ Change % Change (Amounts in thousands, except percentages) G&A expenses $ 29,568 $ 28,070 $ 1,498 5.3 % G&A expenses % of revenue 3.5 % 3.3 % G&A expenses excluding deferred compensation $ 29,887 $ 28,189 $ 1,698 6.0 % G&A expenses excluding deferred compensation % of revenue 3.5 % 3.4 % Three months ended March 31, 2026 compared to March 31, 2025. The deferred compensation plan decreased G&A expenses by $0.3 million for the three months ended March 31, 2026, and by $0.1 million during the same period in 2025. G&A expenses, excluding the impact of the deferred compensation plan, would have been $29.9 million, or 3.5% of revenue, for the three months ended March 31, 2026, compared to $28.2 million, or 3.4% of revenue, for the same period in 2025, an increase of $1.7 million. The increase in G&A expenses was primarily due to approximately $1.2 million higher technology costs, $0.4 million higher facility costs, and $0.1 million higher other discretionary spending to support business growth. The G&A expenses for the three months ended March 31, 2026 and 2025, included approximately $3.1 million and $6.7 million, respectively, of integration costs primarily associated with the Transaction. Other Income (Expense), Net Three Months Ended March 31, 2026 2025 $ Change % Change (Amounts in thousands, except percentages) Interest expense $ (23,916) $ (25,156) $ 1,240 (4.9) % Gain from acquisition related adjustment, net 57,955 — 57,955 N/M Other expense, net (1) (4,016) (1,966) (2,050) 104.3 % Total other income (expense), net $ 30,023 $ (27,122) $ 57,145 (210.7) % (1) Other expense, net includes a net loss of $3.4 million during the three months ended March 31, 2026, compared to a net loss of $2.6 million for the same period in 2025, associated with the value of investments held in a rabbi trust related to the deferred compensation plan, which were recorded in "Corporate and Other" for segment reporting purposes. The adjustments to the investments held in a rabbi trust related to the deferred compensation plan are offset by a corresponding increase or decrease to compensation expense, which is recorded as “Operating expenses” and “G&A expenses.” The deferred compensation plan has no impact on “Income before income tax expense” or diluted earnings per share. In addition, included in other expense, net for the three months ended March 31, 2026 and 2025, is expense of $0.2 million and $0.5 million, respectively, related to net changes in the fair value of contingent consideration related to prior acquisitions. Interest Expense Three months ended March 31, 2026 compared with March 31, 2025. During the three months ended March 31, 2026, our average debt balance and interest rate were $1,466.6 million and 6.11%, respectively, compared to $1,443.4 million and 6.57%, respectively, for the same period in 2025. The decrease in interest expense for the three months ended March 31, 2026 as compared to the same period in 2025 was $1.2 million. This was primarily driven by the lower interest rates. Our indebtedness is further discussed in Note 5, Debt and Financing Arrangements, to the accompanying unaudited condensed consolidated financial statements. Gain from acquisition related adjustment, net Three months ended March 31, 2026 compared with March 31, 2025. During the three months ended March 31, 2026, our gain from acquisition related adjustment, net was $58.0 million compared to no gain for the same period 23 in 2025. As stated in Note 3, Business Combinations, to the accompanying unaudited condensed consolidated financial statements, the Company recorded a $57.2 million working capital adjustment and related purchase price settlement, which was recognized as a gain within acquisition related adjustments in Total other income (expense), net in the consolidated statements of operations. Additionally, the Company also recorded another adjustment related to acquisitions of $0.8 million within gains from acquisition related adjustments. Other Expense, Net Three months ended March 31, 2026 compared with March 31, 2025. For the three months ended March 31, 2026, other expense, net includes a net loss of $3.4 million associated with the non-qualified deferred compensation plan. For the same period in 2025, other expense, net includes a net loss of $2.6 million associated with the non-qualified deferred compensation plan. Excluding the impact of the deferred compensation plan, the other expense, net for the three months ended March 31, 2026 would have been a loss of $0.6 million, as compared to a gain of $0.6 million during the same period in 2025. The change was primarily due to a $1.1 million higher loss on sale of assets and a $0.1 million increase of other miscellaneous expense. Income Tax Expense Three Months Ended March 31, 2026 2025 $ Change % Change (Amounts in thousands, except percentages) Income tax expense $ 64,860 $ 50,137 $ 14,723 29.4 % Effective tax rate 28.6 % 29.0 % Three months ended March 31, 2026 compared with March 31, 2025. The effective tax rate for the three months ended March 31, 2026 was 28.6%, compared to an effective tax rate of 29.0% for the same period in 2025. The decrease in the effective tax rate is primarily due to a lower effective state tax rate in the current period compared to the same period in 2025 reduced by tax expense in the current period related to stock-based compensation. The increase in income tax expense of $14.7 million for the three months ended March 31, 2026, when compared to the same period in 2025, was primarily driven by the increase in pre-tax income in 2026. Operating Practice Groups During the three months ended March 31, 2026, the National Practice practice group was combined with the Financial Service practice group to better align with internal management and reporting structure. As a result of these changes, we now operate with two reportable segments: Financial Services and Benefits and Insurances Services. Financial results of the Financial Service Practice Group for the three months ended March 31, 2025 were adjusted to reflect the change in reportable segments. A description of these groups' operating results and factors affecting their businesses is provided below. Same-unit revenue represents total revenue adjusted to reflect comparable periods of activity for acquisitions and divestitures. Divested operations represent operations that did not meet the criteria for treatment as discontinued operations. 24 Financial Services Three Months Ended March 31, 2026 2025 $ Change % Change (Amounts in thousands, except percentages) Revenue Same-unit $ 738,195 $ 725,038 $ 13,157 1.8 % Acquired businesses 2,135 — 2,135 N/M Total revenue $ 740,330 $ 725,038 $ 15,292 2.1 % Operating expenses 530,770 520,758 10,012 1.9 % Gross margin / Operating income 209,560 204,280 5,280 2.6 % Total other (expense) income, net (873) 185 (1,058) N/M Income before income tax expense $ 208,687 $ 204,465 $ 4,222 2.1 % Gross margin percent 28.3 % 28.2 % Three months ended March 31, 2026 compared to March 31, 2025. Revenue The Financial Services practice group revenue for the three months ended March 31, 2026 grew by 2.1% to $740.3 million from $725.0 million during the same period in 2025. Same-unit revenue grew by $13.2 million, or 1.8%, primarily driven by those units that provide advisory services, which increased by approximately $7.3 million, the units that provide traditional accounting and tax-related services, which increased $5.2 million, the units that provide government healthcare compliance business consulting, which increased by approximately $0.5 million, and the units that provide technology services, which increased $0.2 million. We provide a range of services to affiliated CPA firms under joint referral and administrative service agreements (“ASAs”). Fees earned under the ASAs are recorded as revenue in the accompanying Condensed Consolidated Statements of Comprehensive Income and were approximately $219.4 million and $234.3 million for the three months ended March 31, 2026 and 2025, respectively. Operating Expenses Operating expenses for the three months ended March 31, 2026 increased by $10.0 million, or 1.9%, as compared to the same period in 2025. Compared to the same period in 2025, facility costs, subscription costs, travel and entertainment costs, technology costs, direct costs, and other discretionary spending to support business growth increased by approximately $4.7 million, $1.9 million, $1.2 million, $1.1 million, $0.9 million, and $0.2 million, respectively. Operating expenses as a percentage of revenue decreased slightly to 71.7% for the three months ended March 31, 2026 from 71.8% of revenue for the same period in 2025. Benefits and Insurance Services Three Months Ended March 31, 2026 2025 $ Change % Change (Amounts in thousands, except percentages) Revenue $ 108,249 $ 112,976 $ (4,727) (4.2) % Operating expenses 85,234 85,358 (124) (0.1) % Gross margin / Operating income 23,015 27,618 (4,603) (16.7) % Total other income, net 375 327 48 14.7 % Income before income tax expense $ 23,390 $ 27,945 $ (4,555) (16.3) % Gross margin percent 21.3 % 24.4 % 25 Three months ended March 31, 2026 compared to March 31, 2025. Revenue The Benefits and Insurance Services practice group revenue decreased by $4.7 million, or 4.2%, to $108.2 million during the three months ended March 31, 2026 compared to $113.0 million for the same period in 2025. The decrease was primarily driven by a $1.4 million decrease from human capital related services, a $1.4 million decrease in life insurance services, a $1.3 million decrease in property and casualty services revenue, and a $0.9 million decrease in retirement benefit services lines revenue. These decreases were partially offset by a $0.3 million increase in Employee Benefit Services revenue. Operating Expenses Operating expenses for the three months ended March 31, 2026 decreased by $0.1 million, or 0.1%, when compared to the same period in 2025. The decrease was not material, and operating expenses within the Benefits and Insurance practice group remained generally consistent period over period. Operating expenses as a percentage of revenue increased to 78.7% for the quarter ended March 31, 2026 from 75.6% of revenue for the same period in 2025. Corporate and Other Corporate and Other are operating expenses that are not directly allocated to the individual business units. These expenses primarily consist of certain health care costs, gains or losses attributable to assets held in our deferred compensation plan, stock-based compensation, consolidation and integration charges, certain professional fees, certain advertising costs, and other various expenses. Three Months Ended March 31, 2026 2025 $ Change % Change (Amounts in thousands, except percentages) Operating expenses $ 6,558 $ 3,796 $ 2,762 72.8 % Corporate general and administrative expenses 29,568 28,070 1,498 5.3 % Operating loss (36,126) (31,866) (4,260) 13.4 % Total other income (expense), net 30,521 (27,634) 58,155 N/M Loss before income tax expense $ (5,605) $ (59,500) $ 53,895 (90.6) % Three months ended March 31, 2026 compared to March 31, 2025. Total operating expenses increased by $2.8 million during the three months ended March 31, 2026, as compared to the same period in 2025. The non-qualified deferred compensation plan decreased operating expenses by $3.1 million for the three months ended March 31, 2026 and by $2.4 million during the same period in 2025. Excluding the impact of non-qualified deferred compensation plan, operating expenses increased by $3.4 million during the three months ended March 31, 2026, as compared to the same period in 2025. The increase was primarily driven by $1.4 million higher technology costs, $1.2 million higher professional service costs, $0.3 million higher depreciation costs, $0.3 million higher travel and entertainment costs, $0.1 million higher marketing costs, and $0.1 million higher facility costs. Total corporate G&A expenses increased by $1.5 million, or 5.3%, during the three months ended March 31, 2026, as compared to the same period in 2025. The non-qualified deferred compensation plan decreased corporate G&A expenses by $0.3 million for the three months ended March 31, 2026 and by $0.1 million during the same period in 2025. Excluding the impact of the non-qualified deferred compensation plan, corporate G&A expense increased by approximately $1.7 million during the three months ended March 31, 2026, as compared to the same period in 2025. The increase in corporate G&A expenses was primarily due to approximately $1.2 million higher technology costs, $0.4 million higher facility costs, and $0.1 million higher other discretionary spending to support business growth. The corporate G&A expenses for the three months ended March 31, 2026 and 2025, included approximately $3.1 million and $6.7 million, respectively, of integration costs primarily associated with the Transaction. Total other income (expense), net increased by $58.2 million during the three months ended March 31, 2026, as compared to the same period in 2025. For the three months ended March 31, 2026, total other income (expense), net included a net loss of $3.4 million associated with the non-qualified deferred compensation plan. For the same period in 2025, total other income (expense), net included a net loss of $2.6 million associated with the non-qualified 26 deferred compensation plan. Excluding the impact of the non-qualified deferred compensation plan, total other income (expense), net increased by $59.0 million for the three months ended March 31, 2026 as compared to the same period in 2025. The increase was primarily due to a $57.2 million gain related to the final working capital settlement and other acquisition related adjustments of $0.8 million, as well as $1.0 million lower interest expense. See Note 3, Business Combinations, to the accompanying unaudited condensed consolidated financial statements in the three months ended March 31, 2026 for further detail. LIQUIDITY Our principal sources of liquidity are cash generated from operating activities and financing activities. Our cash flows from operating activities are driven primarily by our operating results and changes in our working capital requirements while our cash flows from financing activities are dependent upon our ability to access credit or other capital. We historically maintain low cash levels and apply any available cash to pay down the outstanding debt balance. We historically experience a use of cash to fund working capital requirements during the first quarter of each fiscal year. This is primarily due to the seasonal nature of the Financial Services practice group's accounting and tax services, as well as payment of accrued employees' incentives programs. Upon completion of the seasonal accounting and tax services period, cash provided by operations during the remaining three quarters of the fiscal year substantially exceeds the use of cash in the first quarter of the fiscal year. Accounts receivable balances increase in response to the first three months' revenue generated by the Financial Services practice group. A significant amount of this revenue is billed and collected in subsequent quarters. Days sales outstanding (“DSO”) represent accounts receivable and unbilled revenue (net of realization adjustments) at the end of the period, divided by trailing twelve months' daily revenue. We provide DSO data because such data is commonly used as a performance measure by analysts and investors and as a measure of our ability to collect on receivables in a timely manner. Trailing-twelve-month DSO, including the impact of acquisitions, was 99 days and 96 days at March 31, 2026 and 2025, respectively. DSO at December 31, 2025 was 71 days. The following table presents selected cash flow information. For additional details, refer to the accompanying Condensed Consolidated Statements of Cash Flows. Three Months Ended March 31, 2026 2025 (Amounts in thousands) Net cash used in operating activities (25,515) (88,266) Net cash used in investing activities (2,919) (4,961) Net cash (used in) provided by financing activities (12,578) 55,363 Net decrease in cash, cash equivalents and restricted cash $ (41,012) $ (37,864) Operating Activities - Cash used in operating activities was $25.5 million during the three months ended March 31, 2026, primarily consisted of working capital use of $236.9 million, which was offset by net income of $161.6 million and certain non-cash items, such as depreciation and amortization expense of $23.8 million, deferred income tax of $14.7 million, stock-based compensation expense of $7.5 million, bad debt expense of $1.4 million, amortization of deferred financing fees of $1.3 million, and other, net and an adjustment to contingent earnout liability of $1.0 million. Cash used in operating activities was $88.3 million during the three months ended March 31, 2025, primarily consisted of working capital use of $247.7 million, which was offset by net income of $122.8 million and certain non-cash items, such as depreciation and amortization expense of $24.8 million, deferred income tax of $4.3 million, stock-based compensation expense of $5.6 million, amortization of deferred financing fees of $1.3 million, and an adjustment to contingent earnout liability of $0.5 million. In addition, as discussed in Note 3, Business Combinations, we received $46.5 million cash as a result of the final working capital adjustment associated with the Transaction during the first quarter of 2026. Investing Activities - Cash used in investing activities during the three months ended March 31, 2026 was $2.9 million and consisted primarily of $3.5 million used for a business acquisition, $3.0 million in capital expenditures and $0.5 million in net client fund investment activity, partially offset by $3.2 million of other investing activities primarily related to $3.5 million received related to the final working capital adjustment payments under certain notes receivable and $0.3 million from additional earnout proceeds received from previous sales of businesses. The net cash flow related to funds held for clients and other activities was immaterial. Cash used in investing activities during the three months ended March 31, 2025 was $5.0 million and consisted primarily of $5.2 million in capital 27 expenditures, and $0.1 million in other investing activities primarily related to acquisition related working capital adjustment payments and notes receivable. The net cash flow related to funds held for clients and other activities was immaterial. The balances in funds held for clients and client fund obligations can fluctuate with the timing of cash receipts and the related cash payments. The nature of these accounts is further described in Note 1, Basis of Presentation and Significant Accounting Policies, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. Financing Activities - Cash used in financing activities during the three months ended March 31, 2026 was $12.6 million and consisted of $29.0 million of cash used in share repurchases, of which $3.5 million was used under the ROFR Agreement and $25.5 million were open market purchases. Additionally, $53.8 million was paid to reduce client fund obligations and $6.3 million was paid as contingent consideration payments related to prior acquisitions. The use of cash was partially offset by $79.1 million in net proceeds from borrowings under the 2024 Credit Facilities. Cash provided by financing activities during the three months ended March 31, 2025 was $55.4 million and primarily consisted of $127.5 million in net proceeds from borrowings under the 2024 Credit Facilities, partially offset by $7.6 million of cash used in share repurchases for tax withholding purposes, a $35.1 million net decrease in client fund obligations and $29.5 million in contingent consideration payments related to prior acquisitions. CAPITAL RESOURCES Credit Facilities - At March 31, 2026, we had $1,551.5 million outstanding under the 2024 Credit Facilities as well as $3.2 million of outstanding letters of credit. Available funds under the 2024 Credit Facilities, based on the terms of the commitment, were approximately $333.4 million at March 31, 2026. The weighted average interest rate under the 2024 Credit Facilities was 6.11% during the three months ended March 31, 2026, compared to 6.57% for the same period in 2025. The 2024 Credit Facilities allows for the allocation of funds for future strategic initiatives, including acquisitions and the repurchase of our common stock, subject to the terms and conditions of the 2024 Credit Facilities. Debt Covenant Compliance - Under the 2024 Credit Facilities, we are required to meet certain financial covenants with respect to (i) total leverage ratio and (ii) minimum interest charge coverage ratio. We were in compliance with our financial covenants as of March 31, 2026. Our ability to service our debt and to fund future strategic initiatives will depend upon our ability to generate cash in the future. For further discussion regarding our 2024 Credit Facilities, refer to Note 5, Debt and Financing Arrangements, to the accompanying unaudited condensed consolidated financial statements. Use of Capital - Our overall business objective continues to focus on funding organic growth acceleration and meeting working capital needs. This includes investments in client service delivery and emerging technology that supports revenue growth and improves operational excellence. Following the completion of the Transaction, our second priority is to pay down debt to have a net leverage ratio of less than 2.5x over time. As a result of the Transaction and related 2024 Credit Facilities, we have $1,551.5 million of outstanding debt as of March 31, 2026. In addition, we believe that repurchasing shares of our common stock can be prudent use of our financial resources, and that investing in our stock is an attractive use of capital and an efficient means to provide value to our stockholders. We will also remain focused on making strategic acquisitions that allow us to strengthen our presence in existing markets, expand into high growth industries, and broaden our services to our clients. During the three months ended March 31, 2026, we completed one acquisition. During the three months ended March 31, 2026, we repurchased 0.1 million shares of our common stock at a cost of $3.5 million under the ROFR Agreement and 1.0 million shares of our common stock in the open market for $25.5 million. Additionally, to settle statutory employee withholdings related to vesting of stock awards, we repurchased 0.1 million shares of our common stock at a cost of $2.6 million during the three months ended March 31, 2026. During the three months ended March 31, 2025, we made no share repurchases under the ROFR Agreement or in the open market. To settle statutory employee withholdings related to vesting of stock awards, we repurchased 0.1 million shares at a cost of $7.7 million during the three months ended March 31, 2025. Cash Requirements - Cash requirements for the remainder of 2026 and beyond will include the repayment of outstanding debt and related interest, share repurchases through both our ROFR Agreement and open market purchases, funding seasonal working capital requirements, making contingent purchase price payments for previous acquisitions, income tax payments, and capital expenditures. We believe that cash provided by operations, 28 as well as available funds under our 2024 Credit Facilities, will be sufficient to meet cash requirements for the remainder of 2026 and beyond. OFF-BALANCE SHEET ARRANGEMENTS We maintain administrative service agreements with independent CPA firms (as described more fully under Item 1. “Business – Financial Services” and in Note 1, Basis of Presentation and Significant Accounting Policies, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025), which qualify as variable interest entities. The accompanying unaudited condensed consolidated financial statements do not reflect the operations or accounts of variable interest entities as the impact is not material to the financial condition, results of operations, or cash flows of CBIZ. We provide letters of credit to landlords (lessors) of our leased premises in lieu of cash security deposits, which totaled $3.2 million and $3.2 million at March 31, 2026 and December 31, 2025, respectively. In addition, we provide license bonds to various state agencies to meet certain licensing requirements. The amount of license bonds outstanding was $2.2 million and $2.1 million at March 31, 2026 and December 31, 2025, respectively. We have various agreements under which we may be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification clauses are included in contracts arising in the normal course of business under which we customarily agree to hold the other party harmless against losses arising from a breach of representations, warranties, covenants or agreements, related to matters such as title to assets sold and certain tax matters. Payment by us under such indemnification clauses is generally conditioned upon the other party making a claim. Such claims are typically subject to challenge by us and to dispute resolution procedures specified in the particular contract. Further, our obligations under these agreements may be limited in terms of time and/or amount and, in some instances, we may have recourse against third parties for certain payments made by us. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each particular agreement. Historically, we have not made any payments under these agreements that have been material individually or in the aggregate. As of March 31, 2026, we are not aware of any material obligations arising under indemnification agreements that would require payment. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The SEC defines critical accounting policies as those that are most important to the portrayal of a company’s financial condition and results and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our discussion and analysis of our results of operations, financial condition and liquidity is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets and liabilities, revenues and expenses and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements. As more information becomes known, these estimates and assumptions could change, which would have an impact on actual results that may differ materially from these estimates and judgments under different assumptions. We have not made any changes to our critical accounting policies and estimates as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. As disclosed in Note 13, Goodwill, we performed a quantitative assessment of the goodwill associated with our reporting units. Based on the results of the quantitative assessment, we concluded that the estimated fair values of our reporting units immediately after the change in reporting units were in excess of their respective carrying values, and as such, goodwill is not impaired. We have experienced a decline in the Company's market capitalization. This decline, along with increases in discount rates used in the impairment analysis, reduced the excess of fair value over carrying value of our Financial Accounting Services reporting unit within the Financial Services practice group, which exceeded its carrying value by approximately 7.4%, and of our Property and Casualty reporting unit within our Benefits and Insurance Services practice group, which exceeded its carrying value by approximately 14.5%. As of March 31, 2026, the carrying value of Financial Accounting Services' goodwill was $1,679.9 million and the carrying value of Property and Casualty's goodwill was $78.8 million. It is possible, depending upon a number of factors that are not determinable at this time or within our control, that the fair values of one or more of our reporting units could decrease in the future and result in an impairment to goodwill, including failure to achieve the anticipated benefits of the Transaction, significant negative industry or 29 economic trends, disruptions to our business, adverse changes resulting from new governmental regulations, negative impact on client list due to loss of customers, impact on client list due to declining revenue of existing customers, or divestitures. Additionally, further declines in our market capitalization may trigger the need for future impairment tests where the conclusions may differ and could result in the recognition of an impairment charge. Further, any significant adverse change in our near or long-term projections or macroeconomic conditions could result in future impairment charges, which could be material. NEW ACCOUNTING PRONOUNCEMENTS Refer to Note 2, New Accounting Pronouncements, to the accompanying unaudited condensed consolidated financial statements for a discussion of recently issued accounting pronouncements. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including, without limitation, our financial position, business strategy, plans and objectives for future performance, are forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements are commonly identified by the use of such terms and phrases as “will,” “could,” “can,” “may,” “strive,” “hope,” “intend,” “believe,” “estimate,” “continue,” “plan,” “expect,” “project,” “anticipate,” “outlook,” “foreseeable future,” “seek” and words or phrases of similar import in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated services, sales efforts, expenses, and financial results. From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Any or all of our forward-looking statements in this Quarterly Report on Form 10-Q and in any other public statements that we make are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, but are not limited to: payments on accounts receivable may be slower than expected, or amounts due on receivables or notes may not be fully collectible; our business could be adversely affected if the non-attest business assets we acquired, or the attest assets CBIZ CPAs acquired, from Marcum do not perform to our expectations or we underestimate the liabilities we have assumed; we are dependent on the services of our executive officers, and other key employees, the loss of any of whom may have a material adverse effect on our business, financial condition and results of operations; our profitability could suffer if we are not able to effectively utilize our employees, maintain operational efficiencies or manage our cost structure; restrictions imposed by independence requirements and conflict of interest rules, as well as the nature and terms of our current administrative service agreements, limit our ability to provide services to clients of the attest firms with which we have contractual relationships and the ability of such attest firms to provide attestation services to our clients; our goodwill and other intangible assets could become impaired, which could lead to material non-cash charges against earnings and a material impact on our results of operations and financial condition; certain liabilities resulting from acquisitions are estimated and could lead to a material impact on our results of operations; we may fail to realize the anticipated benefits of acquisitions, or they may prove disruptive and could result in the combined business failing to meet our expectations; claims or adverse publicity could harm our brand, reputation and ability to compete and attract and retain clients, talent and future acquisition targets; we may not be able to acquire and finance additional businesses, which could limit our ability to pursue our business strategy; we will incur transaction, integration, and restructuring costs in connection with our acquisition program; governmental regulations and interpretations are subject to changes, which could have a material adverse effect on our financial condition; uncertainty in the current economic and geopolitical environment could lead to declines in demand for certain of our services; changes in the United States healthcare environment, including new healthcare legislation, may adversely affect the revenue and margins in our healthcare benefit business; we are subject to risks relating to processing customer transactions for our payroll and other transaction processing businesses; cyberattacks or other security breaches involving our computer systems or the systems of one or more of our vendors could materially and adversely affect our business; we are subject to risk as it relates to software that we license from third parties; we are reliant on information processing systems and any failure or disruptions of these systems could have a material adverse effect on our business, financial condition and results of operations; we could be held liable for errors and omissions; the business services industry is competitive and fragmented, if we are unable to compete effectively, our business, financial condition and results of operations could be negatively impacted; failure to maintain our reputation and brand could impact our ability to attract and retain clients, employees and future acquisition targets, and may have a material adverse effect on our business, financial condition and results of operations; we are dependent on our existing client base and our ability to retain and expand our relationships with those clients; our clients may terminate our engagements with little or no notice and without penalty, which may result in unexpected declines in our revenue or unexpected costs; given our levels of share-based compensation, our tax rate may vary significantly depending on our stock price; we may be subject to the actions of activist 30 stockholders; rapid technological changes could significantly impact our competitive position, client relationships and operating results and our ability to realize the anticipated benefits of the Transaction; the widespread outbreak of a communicable illness or any other public health crisis could adversely affect our business, financial condition and results of operations; we require a significant amount of cash for interest payments on our debt and to expand our business as planned; terms of the 2024 Credit Facilities could adversely affect our ability to run our business and/or reduce stockholder returns; our failure to satisfy covenants in our debt instruments could cause a default under those instruments; our increased leverage following the Transaction may adversely impact our business; we may be more sensitive to revenue fluctuations than other companies, which could result in fluctuations in the market price of our common stock; the significant number of shares issuable as the stock consideration in the Transaction may adversely impact our stock price; the future issuance of additional shares could adversely affect the price of our common stock; there is volatility in our stock price; and the price of our common stock could be adversely impacted if we do not perform to expectations following the Transaction. Such forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Should one or more of these risks materialize, or should the underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, projected or implied. Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially. All forward-looking statements made in this Quarterly Report on Form 10-Q are made only as of the date hereof, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You are advised, however, to consult any further disclosures we make on related subjects in the current, quarterly, periodic and annual reports we file with the Securities and Exchange Commission (“SEC”). Also note that we provide a cautionary discussion of the risks, uncertainties and possibly inaccurate assumptions relevant to our businesses in “Item 1. Business” and “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. These are factors that we think could cause our actual results to differ materially from expected and historical results. Other factors besides those described could also adversely affect our operating or financial performance.