What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-07-30 compared with 2021-04-30 · 265 added, 145 removed, 426 unchanged (49% of the section changed)

55 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Revenue $ 278,648 $ 236,943 $ 579,378 $ 514,398

2 unchanged sentences

Corporate general and administrative expenses 13,816 11,160 28,299 21,649

Operating income 62,276 67,139

Legal settlement, net 30,468 — 30,468 —

Operating (loss) income ( 2,570 ) 16,767 59,706 83,906

Other income (expense):

33 unchanged sentences

Comprehensive

December 31, 2020 134,144 80,045 $ 1,341 $ 740,970 $ 557,875 $ ( 595,297 ) $ ( 2,269 ) $ 702,620

March 31, 2021 134,625 81,209 $ 1,346 $ 749,207 $ 608,084 $ ( 629,439 ) $ ( 1,415 ) $ 727,783

Net income — — — — 8,607 — — 8,607

1 unchanged sentence

Share repurchases — 919 — — — ( 30,759 ) — ( 30,759 )

Indirect repurchase of shares for minimum tax withholding — 45 — — — ( 1,574 ) — ( 1,574 )

Restricted stock units and awards 34 — — — — — — —

2 unchanged sentences

Business acquisitions 137 — 2 4,576 — — — 4,578

June 30, 2021 134,892 82,173 $ 1,349 $ 757,421 $ 616,691 $ ( 661,772 ) $ ( 1,357 ) $ 712,332

Shares Treasury

Shares Common

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

March 31, 2020 133,241 78,811 $ 1,332 $ 719,616 $ 516,424 $ ( 565,180 ) $ ( 1,932 ) $ 670,260

Net income — — — — 21,468 — — 21,468

Other comprehensive loss — — — — — — ( 377 ) ( 377 )

Share repurchases — — — — — — — —

Indirect repurchase of shares for minimum tax withholding — 70 — — — ( 1,582 ) — ( 1,582 )

Restricted stock 40 — — — — — —

Stock options exercised 211 — 2 2,212 — — — 2,214

Stock-based compensation — — — 2,257 — — — 2,257

Business acquisitions 44 — 1 979 — — — 980

June 30, 2020 133,536 78,881 $ 1,335 $ 725,064 $ 537,892 $ ( 566,762 ) $ ( 2,309 ) $ 695,220

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands)

Shares Treasury

7 unchanged sentences

Net income — — — — 58,816 — — 58,816

Other comprehensive income — — — — — — 912 912

Share repurchases — 2,036 — — — ( 63,438 ) — ( 63,438 )

Indirect repurchase of shares for minimum tax withholding — 92 — — — ( 3,037 ) — ( 3,037 )

Restricted stock units and awards 80 — 1 ( 1 ) — — — —

Stock options exercised 493 — 5 5,443 — — — 5,448

Stock-based compensation — — — 5,454 — — — 5,454

Business acquisitions 175 — 2 5,555 — — — 5,557

June 30, 2021 134,892 82,173 $ 1,349 $ 757,421 $ 616,691 $ ( 661,772 ) $ ( 1,357 ) $ 712,332

Shares Treasury

Shares Common

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

December 31, 2019 133,056 77,637 $ 1,331 $ 714,704 $ 479,576 $ ( 535,693 ) $ ( 680 ) $ 659,238

Net income — — — — 58,316 — — 58,316

Other comprehensive loss — — — — — — ( 1,629 ) ( 1,629 )

Share repurchases — 1,147 — — — ( 29,029 ) — ( 29,029 )

Indirect repurchase of shares for minimum tax withholding — 97 — — — ( 2,040 ) — ( 2,040 )

Restricted stock 40 — — — — — — —

Stock options exercised 327 — 3 3,224 — — — 3,227

1 unchanged sentence

Business acquisitions 113 — 1 2,856 — — — 2,857

March 31, 2020 133,241 78,811 $ 1,332 $ 719,616 $ 516,424 $ ( 565,180 ) $ ( 1,932 ) $ 670,260

June 30, 2020 133,536 78,881 $ 1,335 $ 725,064 $ 537,892 $ ( 566,762 ) $ ( 2,309 ) $ 695,220

See the accompanying notes to the condensed consolidated financial statements

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Net income $ 58,816 $ 58,316

Adjustments to reconcile net income to net cash used in operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization expense 12,876 11,491

Gain on sale of operations, net ( 6,385 ) ( 152 )

Bad debt expense, net of recoveries 265 3,234

11 unchanged sentences

Other liabilities 42,117 8,014

Operating cash flows used in continuing operations ( 14,821 ) ( 18,631 )

Operating cash flows provided by continuing operations 66,307 55,568

Operating cash flows used in discontinued operations ( 13 ) ( 45 )

Net cash used in operating activities ( 14,827 ) ( 18,647 )

Net cash provided by operating activities 66,294 55,523

Cash flows from investing activities:

2 unchanged sentences

Proceeds from the sales and maturities of client fund investments 7,965 25,316

Increase in funds held for clients 83 822

Proceeds from sales of divested operations 9,785 651

Change in funds held for clients ( 4,029 ) 3,125

Additions to property and equipment ( 3,258 ) ( 5,306 )

Other 472 356

Net cash provided by investing activities 229 4,355

Net cash (used in) provided by investing activities ( 40,137 ) 12,807

Cash flows from financing activities:

2 unchanged sentences

Payment for acquisition of treasury stock ( 64,506 ) ( 29,029 )

Indirect repurchase of shares for minimum tax withholding ( 3,037 ) ( 2,040 )

Decrease in client funds obligations ( 27,823 ) ( 50,793 )

2 unchanged sentences

Other, net ( 114 ) ( 226 )

Net cash (used in) provided by financing activities ( 2,960 ) 207,772

Net (decrease) increase in cash, cash equivalents and restricted cash ( 17,558 ) 193,480

Net cash used in financing activities ( 42,582 ) ( 70,560 )

Net decrease in cash, cash equivalents and restricted cash ( 16,425 ) ( 2,230 )

Cash, cash equivalents and restricted cash at beginning of year 170,335 146,505

24 unchanged sentences

Financial Services, Benefits and Insurance Services and National Practices.

A further description of products and services offered by each of the practice groups is provided in Note 12.

Segment Disclosures, to the accompanying condensed consolidated financial statements.

A further description of products and services offered by each of the practice groups is provided in Note 12, Segment Disclosures, to the accompanying condensed consolidated financial statements.

Basis of Consolidation:

1 unchanged sentence

and all of its wholly-owned subsidiaries (“CBIZ”, the “Company”, “we”, “us”, or “our”), after elimination of all intercompany balances and transactions.

These 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.

These 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.

Unaudited Interim Financial Statements:

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As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

In the opinion of CBIZ management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows for the interim periods presented, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2021.

In the opinion of CBIZ management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows for the interim periods presented, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2021.

Use of Estimates:

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The FASB ASC is the sole source of authoritative GAAP other than the SEC issued rules and regulations that apply only to SEC registrants.

The FASB issues an accounting standard to

communicate changes to the FASB codification.

The FASB issues an accounting standard to communicate changes to the FASB codification.

We assess and review the impact of all accounting standards.

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The amendments in this ASU are effective for all entities through December 31, 2022.

We are currently evaluating the effect of this new standard on our consolidated financial statements and have not adopted any of the transition relief available under the new guidance as of March 31, 2021.

Subsequently, in January 2021, the FASB issued ASU No.

2021-01, Reference Rate Reform (Topic 848):

Scope , which provides optional temporary guidance for entities transitioning away from the LIBOR and other interbank offered rates to new references rates so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions within Topic848.

Scope , which provides optional temporary guidance for entities transitioning away from the LIBOR and other interbank offered rates to new reference rates so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions within Topic 848.

This ASU clarifies that the derivative instruments affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions provided in Topic 848.

2 unchanged sentences

The amendments provided in this ASU do not apply to contract modifications made, as well as new hedging relationships entered into, after December 31, 2022, and to existing hedging relationships evaluated for effectiveness for periods after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship.

ACCOUNTS RECEIVABLE, NET

3 unchanged sentences

Receivables are charged-off against the allowance when the balance is deemed uncollectible.

Accounts receivable, net, at March 31, 2021 and December 31, 2020 were as follows (in thousands):

Accounts receivable, net, at June 30, 2021 and December 31, 2020 were as follows (in thousands):

2021 December 31,

4 unchanged sentences

Accounts receivable, net $ 292,496 $ 216,175

Changes to the allowance for doubtful accounts for the three months ended March 31, 2021 and twelve months ended December 31, 2020 are as follows (in thousands):

Changes to the allowance for doubtful accounts for the six months ended June 30, 2021 and twelve months ended December 31, 2020 are as follows (in thousands):

2021 December 31,

6 unchanged sentences

The 2018 credit facility matures in 2023.

The balance outstanding under the 2018 credit facility was $ 162.0 million and $ 108.0 million at March 31, 2021 and December 31, 2020, respectively.

The balance outstanding under the 2018 credit facility was $ 163.3 million and $ 108.0 million at June 30, 2021 and December 31, 2020, respectively.

Effective interest rates, including the impact of interest rate swaps associated with the 2018 credit facility, were as follows:

Three Months Ended

Six Months Ended

Weighted average rates 1.95 % 2.43 %

1 unchanged sentence

1.11 % - 4.75 %

We had approximately $ 228.7 million of available funds under the credit facility at March 31, 2021, net of outstanding letters of credit of $ 3.0 million.

As of March 31, 2021, we were in compliance with our debt covenants.

We had approximately $ 233.4 million of available funds under the credit facility at June 30, 2021, net of outstanding letters of credit of $ 3.0 million.

As of June 30, 2021, we were in compliance with our financial debt covenants.

Other Line of Credit - We have an unsecured $ 20.0 million line of credit by and among CBIZ Benefits and Insurance, Inc.

1 unchanged sentence

We utilize this line to support our short-term funding requirements of payroll client fund obligations due to the investment of client funds, rather than liquidating client funds that have already been invested in available-for-sale securities.

The line of credit, which was renewed on August 6, 2020 and will terminate on August 5, 2021, did no t have a balance outstanding at March 31, 2021.

The line of credit, which was renewed on August 6, 2020 and will terminate on August 5, 2021, did no t have a balance outstanding at June 30, 2021.

We intend to renew this line of credit.

Refer to our Annual Report on Form 10-K for the year ended December 31, 2020 for additional details of our debt and financing arrangements.

Interest Expense - Interest expense, including amortization of deferred financing costs, commitment fees, line of credit fees, and other applicable bank charges, was as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

2018 credit facility $ 952 $ 2,056

Total $ 959 $ 2,074

Six Months Ended June 30,

2018 credit facility $ 1,823 $ 3,157

Other line of credit — 1

1 unchanged sentence

COMMITMENTS AND CONTINGENCIES

Letters of Credit and Guarantees - We provide letters of credit to landlords (lessors) of our leased premises in lieu of cash security deposits, which totaled $ 3.0 million and $ 1.7 million at March 31, 2021 and December 31, 2020, respectively.

In addition, we provide license bonds to various state agencies to meet certain licensing requirements.

The amount of license bonds outstanding was $ 2.3 million and $ 2.2 million at March 31, 2021 and December 31, 2020, respectively.

The amount of license bonds outstanding was $ 2.3 million and $ 2.2 million at June 30, 2021 and December 31, 2020, respectively.

Legal Proceedings - In 2010, CBIZ, Inc.

and its subsidiary, CBIZ MHM, LLC (fka CBIZ Accounting, Tax & Advisory Services, LLC) (the “CBIZ Parties”), were named as defendants in lawsuits filed in the U.S.

and its subsidiary, CBIZ MHM, LLC (formerly, CBIZ Accounting, Tax & Advisory Services, LLC) (the “CBIZ Parties”), were named as defendants in lawsuits filed in the U.S.

District Court for the District of Arizona and the Superior Court for Maricopa County, Arizona.

14 unchanged sentences

The Baldino Group’s claims, which allege damages of approximately $ 16.0 million, are currently pending, though no trial date has been set.

On September 16, 2016, CBIZ, Inc.

and its subsidiary CBIZ Benefits & Insurance Services, Inc.

(“CBIZ Benefits”) were named as defendants in a lawsuit filed in the U.S.

District Court for the Western District of Pennsylvania.

The federal court case is brought by UPMC, d/b/a University of Pittsburgh Medical Center, and a health system it acquired, UPMC Altoona (formerly, Altoona Regional Health System).

The lawsuit asserts professional negligence, breach of contract, and negligent misrepresentation claims against CBIZ, CBIZ Benefits and a former employee of CBIZ Benefits in connection with actuarial services provided by CBIZ Benefits to Altoona Regional Health System.

The plaintiff now seeks compensatory damages of between $ 124.0 million and $ 266.0 million, plus punitive damages.

The Court denied CBIZ Benefits’ motion for a summary judgment and trial is set for June 2021.

On December 19, 2016, CBIZ Operations, Inc.

7 unchanged sentences

In addition to those items disclosed above, we are, from time to time, subject to claims and lawsuits arising in the ordinary course of business.

On September 16, 2016, CBIZ, Inc.

and its subsidiary CBIZ Benefits & Insurance Services, Inc.

(“CBIZ Benefits”) were named as defendants in a lawsuit filed in the U.S.

District Court for the Western District of Pennsylvania.

The federal court case is brought by UPMC, d/b/a University of Pittsburgh Medical Center, and a health system it acquired, UPMC Altoona (formerly, Altoona Regional Health System).

The lawsuit asserted professional negligence, breach of contract, and negligent misrepresentation claims against CBIZ, CBIZ Benefits and a former employee of CBIZ Benefits in connection with actuarial services provided by CBIZ Benefits.

On June 24, 2021, CBIZ settled the case with UPMC.

Under the terms of the settlement, CBIZ will pay a total settlement amount of $ 41.5 million.

As a result, we recorded a one-time settlement loss of $ 30.5 million in the accompanying Condensed Consolidated Statements of Comprehensive Income.

FINANCIAL INSTRUMENTS

Available-For-Sale Debt Securities - In connection with certain services provided by our payroll operations, we collect funds from our clients’ accounts in advance of paying client obligations.

These funds held for clients are segregated and invested in accordance with our investment policy, which requires all investments carry an investment grade rating at the time of initial investment.

funds held for clients are segregated and invested in accordance with our investment policy, which requires all investments carry an investment grade rating at the time of initial investment.

These investments, primarily consisting of corporate and municipal bonds, are classified as available-for-sale and are included in the “Funds held for clients” line item on the accompanying Condensed Consolidated Balance Sheets.

The par value of these investments totaled $ 21.8 million and $ 24.9 million at March 31, 2021 and December 31, 2020, respectively, and had maturity or callable dates ranging from April 2021 through November 2024.

At March 31, 2021, unrealized losses on the securities were not material and have not been recognized as a credit loss because the bonds are investment grade quality and management is not required or does not intend to sell prior to an expected recovery in value.

The par value of these investments totaled $ 24.8 million and $ 24.9 million at June 30, 2021 and December 31, 2020, respectively, and had maturity or callable dates ranging from July 2021 through November 2025.

At June 30, 2021, unrealized losses on the securities were not material and have not been recognized as a credit loss because the bonds are investment grade quality and management is not required or does not intend to sell prior to an expected recovery in value.

The bond issuers continue to make timely principal and interest payments.

The following table summarizes activities related to these investments for the three months ended March 31, 2021 and the twelve months ended December 31, 2020 (in thousands):

Three Months Ended March 31, 2021 Twelve Months Ended December 31, 2020

The following table summarizes activities related to these investments for the six months ended June 30, 2021 and the twelve months ended December 31, 2020 (in thousands):

Six Months Ended June 30, 2021 Twelve Months Ended December 31, 2020

Fair value at beginning of period $ 25,708 $ 60,659

5 unchanged sentences

Fair value at end of period $ 26,017 $ 25,708

In addition to the available-for-sale debt securities discussed above, we also held other depository assets in the amount of $ 3.4 million.

We did no t have any depository items at December 31, 2020.

Those depository assets are classified as Level 1 in the fair value hierarchy.

Interest Rate Swaps - We utilize interest rate swaps to manage interest rate risk exposure associated with our floating-rate debt under the 2018 credit facility, or the forecasted acquisition of such liability.

2 unchanged sentences

During the first quarter of 2021, one interest rate swap expired with a notional value of $ 10.0 million.

As of March 31, 2021, we have three interest rate swaps outstanding.

As of June 30, 2021, we have three interest rate swaps outstanding.

Under the terms of the interest rate swaps, we pay interest at a fixed rate of interest plus applicable margin as stated in the agreement, and receive interest that varies with the one-month LIBOR.

The notional value, fixed rate of interest and expiration date of each interest rate swap as of March 31, 2021 was (i) $ 20.0 million – 1.770 % - May 2022, (ii) $ 15.0 million – 2.640 % - June 2023 and (iii) $ 50.0 million - 0.885 % - April 2025.

Refer to Note 7.

Fair Value Measurements, for additional disclosures regarding fair value measurements.

The following table summarizes our outstanding interest rate swaps and their classification in the accompanying Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021

The notional value, fixed rate of interest and expiration date of each interest rate swap as of June 30, 2021 was (i) $ 20.0 million – 1.770 % - May 2022, (ii) $ 15.0 million – 2.640 % - June 2023 and (iii) $ 50.0 million - 0.885 % - April 2025.

Refer to Note 7, Fair Value Measurements, for additional disclosures regarding fair value measurements.

The following table summarizes our outstanding interest rate swaps and their classification in the accompanying Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021

Value Balance Sheet Location

Interest rate swap $ 20,000 $ ( 292 ) Other current liability

Interest rate swaps $ 65,000 $ ( 859 ) Other non-current liabilities

3 unchanged sentences

Interest rate swaps $ 85,000 $ ( 2,552 ) Other non-current liabilities

The following table summarizes the effects of the interest rate swaps on the accompanying Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020 (in thousands):

The following table summarizes the effects of the interest rate swaps on the accompanying Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020 (in thousands):

Gain (Loss) Recognized

2 unchanged sentences

Three Months Ended

March 31, Three Months Ended

June 30, Three Months Ended

2021 2020 2021 2020

Interest rate swap $ 961 $ ( 653 ) $ ( 285 ) $ ( 34 )

Interest rate swaps $ 117 $ ( 1,007 ) $ ( 280 ) $ ( 350 )

Six Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Interest rate swaps $ 1,078 $ ( 1,660 ) $ ( 565 ) $ ( 383 )

FAIR VALUE MEASUREMENTS

The following table summarizes our assets and (liabilities) at March 31, 2021 and December 31, 2020, respectively, that are measured at fair value on a recurring basis subsequent to initial recognition and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (in thousands):

Level March 31, 2021 December 31, 2020

The following table summarizes our assets and (liabilities) at June 30, 2021 and December 31, 2020, respectively, that are measured at fair value on a recurring basis subsequent to initial recognition and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (in thousands):

Level June 30, 2021 December 31, 2020

Deferred compensation plan assets 1 $ 142,330 $ 127,332

3 unchanged sentences

Contingent purchase price liabilities 3 ( 66,187 ) ( 54,391 )

During the three months ended March 31, 2021 and 2020, there were no transfers between the valuation hierarchy Levels 1, 2 and 3.

The following table summarizes the change in Level 3 fair values of our contingent purchase price liabilities for the three months ended March 31, 2021 and 2020 (pre-tax basis) (in thousands):

During the six months ended June 30, 2021 and 2020, there were no transfers between the valuation hierarchy Levels 1, 2 and 3.

The following table summarizes the change in Level 3 fair values of our contingent purchase price liabilities for the six months ended June 30, 2021 and 2020 (pre-tax basis) (in thousands):

Beginning balance – January 1 $ ( 54,391 ) $ ( 32,089 )

3 unchanged sentences

Change in net present value of contingencies ( 770 ) ( 343 )

Ending balance – March 31 $ ( 54,230 ) $ ( 32,681 )

Contingent purchase price liabilities result from our business acquisitions and are recorded at fair value at the time of acquisition and are presented as “Contingent purchase price liability — current” and “Contingent purchase price liability — non-current” in the accompanying Condensed Consolidated Balance Sheets.

Ending balance – June 30 $ ( 66,187 ) $ ( 27,461 )

Contingent purchase price liabilities result from our business acquisitions and are recorded at fair value at the time of acquisition and are presented as “Contingent purchase price liabilities — current” and “Contingent purchase price liabilities — non-current” in the accompanying Condensed Consolidated Balance Sheets.

We estimate the fair value of our contingent purchase price liabilities using a probability-weighted discounted cash flow model.

2 unchanged sentences

We probability weight risk-adjusted estimates of future performance of acquired businesses, then calculate the contingent purchase price based on the estimates and discount them to present value representing management’s best estimate of fair value.

The fair value of the contingent purchase price liabilities are reassessed quarterly based on assumptions provided by practice group leaders and business unit controllers together with our corporate finance department.

The fair value of the contingent purchase price liabilities is reassessed quarterly based on assumptions provided by practice group leaders and

business unit controllers together with our corporate finance department.

Any change in the fair value estimate is recorded in the earnings of that period.

Refer to Note 11.

Business Combinations, for further discussion of our acquisitions and contingent purchase price liabilities.

Refer to Note 11, Business Combinations, for further discussion of our acquisitions and contingent purchase price liabilities.

The carrying amounts of our cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments, and the carrying value of bank debt approximates fair value as the interest rate on the bank debt is variable and approximates current market rates.

1 unchanged sentence

OTHER COMPREHENSIVE INCOME (LOSS)

The following table is a summary of other comprehensive income (loss) and discloses the tax impact of each component of other comprehensive income (loss) for the three months ended March 31, 2021 and 2020 (in thousands):

The following table is a summary of other comprehensive income (loss) and discloses the tax impact of each component of other comprehensive income (loss) for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended

Net unrealized loss on available-for-sale

June 30, Six Months Ended

2021 2020 2021 2020

Net unrealized (loss) gain on available-for-sale

securities, net of income taxes (1)

$ ( 55 ) $ 632 $ ( 158 ) $ 45

Net unrealized gain (loss) on interest rate swaps, net

of income taxes (2)

Net unrealized gain (loss) on interest rate swaps, net of income taxes (2)

117 ( 1,007 ) 1,078 ( 1,660 )

Foreign currency translation ( 4 ) ( 2 ) ( 8 ) ( 14 )

Total other comprehensive income (loss) $ 58 $ ( 377 ) $ 912 $ ( 1,629 )

(1) Net of income tax benefit of $ 39 and $ 210 for the three months ended March 31, 2021 and 2020, respectively.

(2) Net of income tax expense of $ 310 and income tax benefit of $ 210 for the three months ended March 31, 2021 and 2020, respectively.

(1) Net of income tax benefit of $ 20 and income tax expense of $ 228 for the three months ended June 30, 2021 and 2020, respectively, and net of income tax benefit of $ 59 and income tax expense of $ 19 for the six months ended June 30, 2021 and 2020, respectively.

(2) Net of income tax expense of $ 36 and income tax benefit of $ 324 for the three months ended June 30, 2021 and 2020, respectively, and net of income tax expense of $ 346 and income tax benefit of $ 534 for the six months ended June 30, 2021 and 2020, respectively.

EMPLOYEE STOCK PLANS

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Refer to the Annual Report on Form 10-K for the year ended December 31, 2020 for further discussion on the 2019 Plan.

Compensation expense for stock-based awards recognized during the three months ended March 31, 2021 and 2020 was as follows (in thousands):

Compensation expense for stock-based awards recognized during the three and six months ended June 30, 2021 and 2020 was as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Stock options $ 232 $ 367 $ 533 $ 788

2 unchanged sentences

Total stock-based compensation expense $ 2,599 $ 2,257 $ 5,454 $ 4,280

Stock Options and Restricted Stock Units and Awards – The following table presents our stock options and restricted stock units and awards activity during the three months ended March 31, 2021 (in thousands, except per share data):

Stock Options and Restricted Stock Units and Awards – The following table presents our stock options and restricted stock units and awards activity during the six months ended June 30, 2021 (in thousands, except per share data):

Stock Options Restricted Stock Units and Awards

6 unchanged sentences

Expired or canceled — $ — — $ —

Outstanding at March 31, 2021 1,423 $ 16.12 502 $ 22.58

Exercisable at March 31, 2021 978 $ 15.19

Outstanding at June 30, 2021 1,327 $ 16.50 389 $ 25.07

Exercisable at June 30, 2021 1,179 $ 16.13

(1) Represents weighted average market value of the shares;

4 unchanged sentences

For performance achieved above specified levels, the recipient may earn additional shares of stock, not to exceed 200 % of the number of PSUs initially granted.

The following table presents our PSU award activity during the three months ended March 31, 2021 (in thousands, except per share data):

The following table presents our PSU award activity during the six months ended June 30, 2021 (in thousands, except per share data):

Share Units Weighted

3 unchanged sentences

Canceled — $ —

Outstanding at March 31, 2021 447 $ 23.86

Outstanding at June 30, 2021 447 $ 23.86

(1) Represents weighted average market value of the performance share units;

PSUs are granted at no cost to the recipients.

EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share from continuing operations for the three months ended March 31, 2021 and 2020 (in thousands, except per share data).

The following table sets forth the computation of basic and diluted earnings per share from continuing operations for the three and six months ended June 30, 2021 and 2020 (in thousands, except per share data).

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Income from continuing operations $ 8,613 $ 21,479 $ 58,829 $ 58,341

1 unchanged sentence

Stock options (1)

676 760 733 869

Restricted stock awards (1)

182 146 220 222

Contingent shares (2)

4 unchanged sentences

Diluted earnings per share from continuing operations $ 0.16 $ 0.39 $ 1.09 $ 1.05

(1) A total of 1 thousand and 33 thousand stock-based awards were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2021 and 2020.

respectively, as their effect would be anti-dilutive.

(1) A total of 5 thousand stock-based awards were excluded from the calculation of diluted earnings per share for the six months ended June 30, 2021.

We didn't exclude any stock-based awards from the calculation of diluted earnings per share for the three months ended June 30, 2021, as their effect was dilutive.

A total of 400 thousand and 400 thousand stock-based awards were excluded from the calculation of diluted earnings per share for the three and six months ended June 30, 2020, respectively, as their effect would be anti-dilutive.

(2) Contingent shares represent additional shares to be issued for purchase price earned by former owners of businesses acquired by us once future considerations have been met.

Refer to Note 11.

Business Combinations, for further details.

(3) The denominator used in calculating diluted earnings per share did not include 447 thousand and 332 thousand performance share units for the three months ended March 31, 2021 and 2020, respectively.

The performance conditions associated with these performance share

units were not met and consequently none of these performance share units were considered as issuable for the three months ended March 31, 2021 and 2020.

Refer to Note 11, Business Combinations, for further details.

(3) The denominator used in calculating diluted earnings per share did not include 447 thousand performance share units for both the three and six months ended June 30, 2021, and the denominator used in calculating diluted earnings per share did not include 324 thousand performance share units for both the three and six months ended June 30, 2020.

The performance conditions associated with these performance share units were not met and consequently none of these performance share units were considered as issuable for the three and six months ended June 30, 2021 and 2020.

BUSINESS COMBINATIONS

Our acquisition strategy focuses on businesses with a leadership team that is committed to best in class culture, extraordinary client service and cross-serving potential.

CBIZ has a long history of acquiring businesses that share common cultural values with us and provide value-added services to the small and midsize business market.

The valuation of any business is a subjective process and includes industry, geography, profit margins, expected cash flows, client retention, nature of recurring or non-recurring project-based work, growth rate assumptions and competitive market conditions.

During the three months ended March 31, 2021, we completed the following acquisition:

Business Combinations

During the six months ended June 30, 2021, we completed the following acquisitions:

• Effective January 1, 2021, we acquired substantially all the assets of Middle Market Advisory Group (“MMA”).

MMA, based in Englewood, CO, is a provider of tax compliance and consulting services to middle market companies and family groups in the real estate, automotive, technology and SAAS, construction, and manufacturing industries.

Operating results will be reported in the Financial Services practice group.

Aggregate consideration for the acquisition consisted of approximately $ 1.9 million in cash and $ 1.6 million in contingent consideration.

Under the terms of the acquisition agreement, a portion of the purchase price is contingent on future performance of the business acquired.

The maximum potential undiscounted amount of all future payments for the 2021 acquisition that we could be required to make under the contingent arrangements is $ 1.7 million.

As of March 31, 2021, the aggregated fair value of contingent consideration related to this acquisition was $ 1.6 million, of which $ 0.6 million was recorded in Contingent purchase price liability – current and $ 1.0 million was recorded in Contingent purchase price liability – non-current in the accompanying Condensed Consolidated Balance Sheets at March 31, 2021.

Refer to Note 7.

Fair Value Measurements, for additional information regarding contingent purchase price liability fair value and fair value adjustments.

Annualized revenue from the acquired business is estimated to be approximately $ 3.6 million.

Pro forma results of operations for this acquisition has not been presented because the effects of the acquisitions were not significant to our Income from continuing operations before income taxes.

During the three months ended March 31, 2020, we have acquired substantially all of the assets of the following businesses:

MMA, based in Englewood, Colorado, is a provider of tax compliance and consulting services to middle market companies and family groups in the real estate, automotive, technology and SAAS, construction, and manufacturing industries.

Operating results are reported in the Financial Services practice group.

• Effective April 1, 2021, we acquired substantially all the assets of Wright Retirement Services, LLC ("Wright").

Wright, located in Valdosta, Georgia, specializes in third party administration services for retirement plan sponsors.

Operating results are reported in the Benefits and Insurance practice group.

• Effective May 1, 2021, we acquired substantially all of the non-attest assets of Bernston Porter & Company, PLLC ("BP").

BP, based in Bellevue, Washington is a provider of comprehensive accounting and financial consulting services including tax, forensic, economic and valuation services and transaction services to a wide range of industries with specialities including construction, real estate, hospitality, manufacturing and technology.

Operating results are reported in the Financial Services practice group.

• Effective June 1, 2021, we acquired all of the issued and outstanding membership interests of Schramm Health Partners, LLC dba Optumas ("Optumas").

Optumas, based in Scottsdale, Arizona, is a provider of actuarial services to state government health care agencies to assist in the administration of Medicaid programs.

Operating results are reported in the Financial Services practice group.

During the six months ended June 30, 2020, we completed the following acquisitions:

• Effective February 1, 2020, we acquired substantially all the assets of Alliance Insurance Services, Inc., a provider of insurance and advisory services based in Washington, DC.

Operating results will be reported in the Benefits and Insurance Services practice group.

Operating results are reported in the Benefits and Insurance Services practice group.

• Effective February 1, 2020, we acquired substantially all the assets of Pension Dynamics Company, LLC, a full-service retirement and benefits plan advisor based in Pleasant Hill, California.

Operating results will be reported in the Benefits and Insurance Services practice group.

Operating results are reported in the Benefits and Insurance Services practice group.

• Effective February 1, 2020, we acquired substantially all the assets of Sunshine Systems, a payroll solutions provider based in Massachusetts.

Operating results will be reported in the Benefits and Insurance Services practice group.

Aggregated consideration for these acquisitions consisted of approximately $ 9.4 million in cash, $ 0.9 million in our common stock, and $ 4.8 million in contingent considerations.

Under the terms of the acquisition agreements, a portion of the purchase price is contingent on future performance of the business acquired.

The maximum potential undiscounted amount of all future payments that we could be required to make under the contingent arrangements is $ 6.2 million.

As of March 31, 2020, the aggregated fair value of the contingent considerations related to these acquisitions was $ 4.7 million, of which $ 2.0 million was recorded in "Contingent purchase price liability – current" and $ 2.7 million was recorded in "Contingent purchase price liability – non-current" in the accompanying Condensed Consolidated Balance Sheets at March 31, 2020.

Refer to Note 7.

Fair Value Measurements, for additional information regarding contingent purchase price liability fair value and fair value adjustments.

Annualized revenue from the acquired businesses is estimated to be approximately $ 6.1 million.

Pro forma results of operations for these acquisitions have not been presented because the effects of these acquisitions were not material to our "Income from continuing operations before income taxes."

The goodwill of $ 1.5 million and $ 11.2 million arising from the acquisitions for the three months ended March 31, 2021 and 2020, respectively, primarily results from expected future earnings and cash flows from the existing management team, as well as the synergies created by the integration of the new business within our organization, including cross-selling opportunities expected with our Financial Services practice group and the Benefits and Insurance Services practice group, to help strengthen our existing service offerings and expand our market position.

All of the goodwill is deductible for income tax purposes.

Acquisition of Client Lists - During the three months ended March 31, 2021, we purchased one client list reported in the Benefits and Insurance Services practice group for $ 0.2 million, of which $ 0.1 million is contingent.

During the three months ended March 31, 2020, we purchased two client lists, reported in the Benefits and Insurance Services practice group, for total consideration of $ 0.5 million, of which $ 0.3 million is contingent.

Change in Contingent Purchase Price Liability for Previous Acquisitions - During the three months ended March 31, 2021 and 2020, the fair value of the contingent purchase price liability related to prior acquisitions increased by $ 0.7 million and decreased by $ 0.7 million, respectively.

The change in fair value during the three months ended March 31, 2021 is mostly attributable to the change in stock price related to the mark-to-market adjustment of future common stock issuances and net present value adjustments.

The change in fair value during the three months ended March 31, 2020 is due to the change in stock price related to the mark-to-market adjustment of future common stock issuances offset by net present value adjustments.

These adjustments are included in "Other income (expense), net" in the accompanying Condensed Consolidated Statements of Comprehensive Income.

Contingent Payments for Previous Business Acquisitions and Client Lists - We paid $ 1.5 million in cash and issued approximately 0.1 million shares of our common stock during the three months ended March 31, 2021 for previous acquisitions.

For the same period in 2020, we paid $ 2.4 million in cash and issued approximately 0.1 million shares of our common stock for previous acquisitions.

During the three months ended March 31, 2021 and 2020, we paid approximately $ 0.1 million and $ 0.3 million, respectively, in cash for previous client list purchases.

Operating results are reported in the Benefits and Insurance Services practice group.

Aggregated annualized revenue is estimated to be approximately $ 41.9 million and $ 6.1 million from the aforementioned 2021 and 2020 acquisitions, respectively.

Aggregated annualized income before tax is estimated to be approximately $ 6.1 million and $ 1.5 million from the aforementioned 2021 and 2020 acquisitions, respectively.

Pro forma results of operations for these acquisitions have not been presented because the effects of these acquisitions were not material, either individually or in aggregate, to our total revenue, income from continuing operations, and net income for the three and six months ended June 30, 2021 and 2020, respectively.

The following table summarizes the aggregated consideration and preliminary purchase price allocation for the acquisitions completed during the six months ended June 30, 2021 and 2020, respectively (in thousands):

Common Stock Issued (number) 122 33

Common Stock Value $ 4,060 $ 885

Cash Paid 43,104 9,443

Other Payable — 59

Recorded Contingent Consideration 20,124 4,670

Total Recorded Purchase Price $ 67,288 $ 15,057

Identifiable Intangible Assets Acquired $ 22,393 $ 3,629

Other Assets Acquired, net 5,878 270

Goodwill 39,017 11,158

Total Net Assets Acquired $ 67,288 $ 15,057

Maximum Potential Contingent Consideration $ 21,115 $ 6,202

Provisional estimates of fair value are established at the time of each acquisition and are subsequently reviewed within the first year of operations subsequent to the acquisition date to determine the necessity for adjustments.

Fair value estimates were provisional for some of the 2021 acquisitions as of June 30, 2021, primarily related to the value established for certain identifiable intangible assets and contingent purchase price consideration associated with those acquisitions.

The following table summarizes the aggregated goodwill and intangible asset amounts resulting from those acquisitions for the six months ended June 30, 2021 and 2020, respectively (in thousands):

Six Months Ended June 30,

Financial Services Benefit & Insurance Financial Services Benefit & Insurance

Goodwill $ 37,222 $ 1,795 $ — $ 11,158

Client List 20,220 1,290 — 3,430

Other Intangibles 837 46 — 199

Total $ 58,279 $ 3,131 $ — $ 14,787

Goodwill is calculated as the difference between the aggregated purchase price and the fair value of the net assets acquired.

Goodwill represents the value of expected future earnings and cash flows, as well as the synergies created by the integration of the new business within our organization, including cross-selling opportunities expected with our Financial Services practice group and the Benefits and Insurance Services practice group, to help strengthen our existing service offerings and expand our market position.

Client lists have an expected life of 10 years, and other intangibles, primarily non-compete agreements, have an expected life of 3 years.

The following table summarizes the changes in contingent purchase price consideration for previous acquisitions and continent payments made for previous business acquisitions in the three and six months ended June 30, 2021 and 2020, respectively (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net Expense (Income) $ 93 $ 530 $ 753 $ ( 154 )

Cash Settlement Paid $ 6,122 $ 3,485 $ 7,584 $ 5,886

Shares Issued (number) 16 44 53 81

Divested operations and assets that do not qualify for the treatment as discontinued operations are recorded as “gain on sale of operations, net” in the accompanying Condensed Consolidated Statements of Comprehensive Income.

During the six months ended June 30, 2021, we sold one business for $ 9.7 million in the Benefit and Insurance practice group and recorded a gain of $ 6.4 million.

SEGMENT DISCLOSURES

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Risk & Advisory Services

Corporate and Other .

Included in “Corporate and Other” are operating expenses that are not directly allocated to the individual business units.

These expenses are primarily comprised of certain health care costs, gains or losses attributable to assets held in our non-qualified deferred compensation plan, stock-based compensation, consolidation and integration charges, certain professional fees, certain advertising costs and other various expenses.

Accounting policies of the practice groups are the same as those described in Note 1.

Basis of Presentation and Significant Accounting Policies, to the Annual Report on Form 10-K for the year ended December 31, 2020.

Corporate and Other - Included in “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 non-qualified deferred compensation plan, stock-based compensation, consolidation and integration charges, certain professional fees, certain advertising costs and other various expenses.

Accounting policies of the practice groups are the same as those described in Note 1, Basis of Presentation and Significant Accounting Policies, to the Annual Report on Form 10-K for the year ended December 31, 2020.

Upon consolidation, intercompany accounts and transactions are eliminated, thus inter-segment revenue is not included in the measure of profit or loss for the practice groups.

Performance of the practice groups is evaluated on operating income excluding those costs listed above, which are reported in the “Corporate and Other” segment.

Segment information for the three months ended March 31, 2021 and 2020 is presented below.

Performance of the practice groups is evaluated on income (loss) from continuing operations before income tax expense (benefit) excluding those costs listed above, which are reported as “Corporate and Other”.

Segment information for the three and six months ended June 30, 2021 and 2020 is presented below.

We do not manage our assets on a segment basis, therefore segment assets are not presented below.

The following table disaggregates our revenue by source (in thousands):

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Services Benefits &

7 unchanged sentences

Total revenue $ 186,589 $ 82,620 $ 9,439 $ 278,648

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Services Benefits &

7 unchanged sentences

Total revenue $ 154,083 $ 73,940 $ 8,920 $ 236,943

Segment information for the three months ended March 31, 2021 and 2020 was as follows (in thousands):

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

Services Benefits &

Insurance National

Practices Consolidated

Accounting, tax, advisory and consulting $ 390,738 — — $ 390,738

Core Benefits and Insurance Services — 163,358 — 163,358

Non-core Benefits and Insurance Services — 6,501 — 6,501

Managed networking, hardware services — — 13,864 13,864

National Practices consulting — — 4,917 4,917

Total revenue $ 390,738 $ 169,859 $ 18,781 $ 579,378

Six Months Ended June 30, 2020

Services Benefits &

Insurance National

Practices Consolidated

Accounting, tax, advisory and consulting $ 342,860 — — $ 342,860

Core Benefits and Insurance Services — 147,865 — 147,865

Non-core Benefits and Insurance Services — 5,687 — 5,687

Managed networking, hardware services — — 13,156 13,156

National Practices consulting — — 4,830 4,830

Total revenue $ 342,860 $ 153,552 $ 17,986 $ 514,398

Segment information for the three months ended June 30, 2021 and 2020 was as follows (in thousands):

Three Months Ended June 30, 2021

Services Benefits

Services National

4 unchanged sentences

Corporate general and administrative expenses — — — 13,816 13,816

Legal settlement, net — — — 30,468 30,468

Operating income (loss) 35,669 14,844 952 ( 54,035 ) ( 2,570 )

1 unchanged sentence

Interest expense — — — ( 959 ) ( 959 )

Gain on sale of operations, net — 6,385 — — 6,385

Other income, net 194 698 — 7,481 8,373

Total other income (expense), net 98 174 — 3,640 3,912

Total other income, net 194 7,083 — 6,522 13,799

Income (loss) from continuing operations before income tax expense $ 35,863 $ 21,927 $ 952 $ ( 47,513 ) $ 11,229

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Services Benefits

9 unchanged sentences

Gain on sale of operations, net 11 46 — — 57

Other income, net 27 130 — 13,179 13,336

Total other income, net 38 167 — 11,114 11,319

Income (loss) from continuing operations before income tax expense $ 26,704 $ 12,824 $ 930 $ ( 12,372 ) $ 28,086

Segment information for the six months ended June 30, 2021 and 2020 was as follows (in thousands):

Six Months Ended June 30, 2021

Services Benefits

Services National

Practices Corporate

Revenue $ 390,738 $ 169,859 $ 18,781 $ — $ 579,378

Operating expenses 292,666 134,709 17,028 16,502 460,905

Gross margin 98,072 35,150 1,753 ( 16,502 ) 118,473

Corporate general and administrative expenses — — — 28,299 28,299

Legal settlement, net — — — 30,468 30,468

Operating income (loss) 98,072 35,150 1,753 ( 75,269 ) 59,706

Other income:

Interest expense — — — ( 1,836 ) ( 1,836 )

Gain on sale of operations, net — 6,385 — — 6,385

Other income, net 292 872 — 11,998 13,162

Total other income, net 292 7,257 — 10,162 17,711

Income (loss) from continuing operations before income tax expense $ 98,364 $ 42,407 $ 1,753 $ ( 65,107 ) $ 77,417

Six Months Ended June 30, 2020

Services Benefits

Services National

Practices Corporate

Revenue $ 342,860 $ 153,552 $ 17,986 $ — $ 514,398

Operating expenses 266,015 126,506 16,273 49 408,843

Gross margin 76,845 27,046 1,713 ( 49 ) 105,555

Corporate general and administrative expenses — — — 21,649 21,649

Operating income (loss) 76,845 27,046 1,713 ( 21,698 ) 83,906

Other (expense) income:

Interest expense — ( 20 ) — ( 3,173 ) ( 3,193 )

Gain on sale of operations, net 51 101 — — 152

Other income (expense), net 46 226 1 ( 2,737 ) ( 2,464 )

1 unchanged sentence

Income (loss) from continuing operations before income tax expense $ 76,942 $ 27,353 $ 1,714 $ ( 27,608 ) $ 78,401

SUBSEQUENT EVENTS

Subsequent to March 31, 2021 up to April 27, 2021, we repurchased approximately 0.3 million shares of our common stock in the open market at a total cost of approximately $ 9.0 million.

Effective April 1, 2021, we acquired substantially all the assets of Wright Retirement Services, LLC ("Wright").

Wright, located in Valdosta, Georgia, specializes in third party administration services for retirement plan sponsors.

Annualized revenue is estimated to be approximately $ 1.2 million.

Wright will be included as a component of our Benefits and Insurance practice group.

On April 29, 2021, we announced the acquisition of the non-attest assets of Berntson Porter & Company, PLLC ("BP").

The acquisition is effective on May 1, 2021.

Concurrent with this transaction, Mayer Hoffman McCann P.C., a national independent CPA firm with whom we maintain joint-referral relationship and administrative service agreement, acquires the attest assets of BP.

Located in Bellevue, Washington, BP provides comprehensive accounting and financial consulting services including tax, forensic, economic and valuation services and transaction services.

BP serves a wide range of industries with specialities including construction, real estate, hospitality, manufacturing and technology.

Annualized revenue is estimated to be approximately $ 26.0 million.

BP will be included as a component of our Financial Services practice group.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements