What changed in this filing

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Item 1. Financial Statements

2021-10-29 compared with 2021-07-30 · 156 added, 135 removed, 556 unchanged (34% of the section changed)

3 unchanged sentences

(In thousands)

September 30,

2021 December 31,

45 unchanged sentences

Total liabilities and stockholders’ equity $ 1,712,768 $ 1,513,754

See the accompanying notes to the condensed consolidated financial statements

See the accompanying notes to the unaudited condensed consolidated financial statements

AND SUBSIDIARIES

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

4 unchanged sentences

Legal settlement, net — — 30,468 —

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

Operating income 31,356 22,290 91,062 106,196

Other income (expense):

Interest expense ( 1,016 ) ( 974 ) ( 2,852 ) ( 4,167 )

Gain on sale of operations, net 6,385 57 6,385 152

Other income (expense), net 8,373 13,336 13,162 ( 2,464 )

Total other income (expense), net 13,799 11,319 17,711 ( 5,505 )

Gain (loss) on sale of operations, net — ( 74 ) 6,385 78

Other (expense) income, net ( 1,133 ) 5,914 12,029 3,450

Total other (expense) income, net ( 2,149 ) 4,866 15,562 ( 639 )

Income from continuing operations before income tax

17 unchanged sentences

Comprehensive income $ 21,850 $ 19,891 $ 81,578 $ 76,578

See the accompanying notes to the condensed consolidated financial statements

See the accompanying notes to the unaudited condensed consolidated financial statements

AND SUBSIDIARIES

8 unchanged sentences

Comprehensive

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

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

Net income — — — — 21,691 — — 21,691

1 unchanged sentence

Share repurchases — 650 — — — ( 21,445 ) — ( 21,445 )

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

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

Stock options exercised 142 — 1 1,694 — — — 1,695

1 unchanged sentence

Business acquisitions 99 — 1 3,309 — — — 3,310

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

September 30, 2021 135,133 82,823 $ 1,351 $ 765,329 $ 638,382 $ ( 683,217 ) $ ( 1,198 ) $ 720,647

Shares Treasury

5 unchanged sentences

Comprehensive

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

Net income — — — — 20,077 — — 20,077

1 unchanged sentence

Share repurchases — 165 — — — ( 3,742 ) — ( 3,742 )

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

Restricted stock 40 — — — — — —

Stock options exercised 115 — 2 1,490 — — — 1,492

1 unchanged sentence

Business acquisitions 108 — 1 2,657 — — — 2,658

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

September 30, 2020 133,759 79,046 $ 1,338 $ 731,696 $ 557,969 $ ( 570,504 ) $ ( 2,495 ) $ 718,004

AND SUBSIDIARIES

17 unchanged sentences

Business acquisitions 274 — 3 8,864 — — — 8,867

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

September 30, 2021 135,133 82,823 $ 1,351 $ 765,329 $ 638,382 $ ( 683,217 ) $ ( 1,198 ) $ 720,647

Shares Treasury

14 unchanged sentences

Business acquisitions 221 — 2 5,513 — — — 5,515

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

September 30, 2020 133,759 79,046 $ 1,338 $ 731,696 $ 557,969 $ ( 570,504 ) $ ( 2,495 ) $ 718,004

See the accompanying notes to the unaudited condensed consolidated financial statements

AND SUBSIDIARIES

1 unchanged sentence

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

26 unchanged sentences

Additions to property and equipment ( 6,451 ) ( 9,486 )

Other 472 356

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

Other, net 51 356

Net cash used in investing activities ( 70,728 ) ( 9,491 )

Cash flows from financing activities:

3 unchanged sentences

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

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

Changes in client funds obligations 8,375 ( 57,517 )

Proceeds from exercise of stock options 7,143 4,719

1 unchanged sentence

Other, net ( 170 ) ( 395 )

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

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

Net cash provided by (used in) financing activities 1,678 ( 94,058 )

Net increase (decrease) in cash, cash equivalents and restricted cash 11,896 ( 21,753 )

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

1 unchanged sentence

Reconciliation of cash, cash equivalents and restricted cash to the

Consolidated Balance Sheets:

Condensed Consolidated Balance Sheets:

Cash and cash equivalents $ 2,749 $ 6,113

2 unchanged sentences

Total cash, cash equivalents and restricted cash $ 182,231 $ 124,752

See the accompanying notes to the condensed consolidated financial statements

See the accompanying notes to the unaudited condensed consolidated financial statements

AND SUBSIDIARIES

15 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 unaudited condensed consolidated financial statements.

Basis of Consolidation:

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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 June 30, 2021.

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

5 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

Accounts receivable, less allowance for doubtful accounts, reflects the net realizable value of receivables and approximates fair value.

Unbilled revenues are recorded at estimated net realizable value.

Unbilled revenue is recorded at estimated net realizable value.

Assessing the collectability of the receivables (billed and unbilled) requires management judgment based on a combination of factors, including but not limited to, an evaluation of our historical incurred loss experience, credit-worthiness of our clients, age of the trade receivable balance, current economic conditions that may affect a client’s ability to pay, and reasonable and supportable forecasts.

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

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

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

September 30,

2021 December 31,

4 unchanged sentences

Accounts receivable, net $ 293,890 $ 216,175

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):

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

September 30,

2021 December 31,

6 unchanged sentences

The 2018 credit facility matures in 2023.

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.

The balance outstanding under the 2018 credit facility was $ 190.2 million and $ 108.0 million at September 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:

Six Months Ended

Nine Months Ended

September 30,

Weighted average rates 1.89 % 2.46 %

1 unchanged sentence

1.10 % - 4.75 %

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.

We had approximately $ 201.6 million of available funds under the credit facility at September 30, 2021, net of outstanding letters of credit of $ 3.4 million.

As of September 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 June 30, 2021.

We intend to renew this line of credit.

The line of credit, which was renewed on August 5, 2021 and will terminate on August 4, 2022, did no t have a balance outstanding at September 30, 2021.

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 June 30,

Three Months Ended September 30,

2018 credit facility $ 1,010 $ 955

Total $ 1,016 $ 974

Six Months Ended June 30,

Nine Months Ended September 30,

2018 credit facility $ 2,833 $ 4,112

2 unchanged sentences

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 June 30, 2021 and December 31, 2020, respectively.

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 $ 3.4 million and $ 1.7 million at September 30, 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 June 30, 2021 and December 31, 2020, respectively.

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

Legal Proceedings - In 2010, CBIZ, Inc.

14 unchanged sentences

The lawsuits asserted claims for, among others things, violations of the Arizona Securities Act, common law fraud, and negligent misrepresentation, and sought to hold the CBIZ Parties vicariously liable for Mayer Hoffman’s conduct as Mortgage Ltd.’s auditor, as either a statutory control person under the Arizona Securities Act or a joint venturer under Arizona common law.

With the exception of claims being pursued by two plaintiffs from the Ashkenazi lawsuit (“Baldino Group”), all other related matters have been dismissed or settled without payment by the CBIZ Parties.

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 27, 2021, the Superior Court for Maricopa County, Arizona, granted the CBIZ Parties' motion to dismiss with prejudice all of the remaining claims being pursued by two plaintiffs from the Ashkenazi lawsuit.

Therefore, all litigation related to these matters has been dismissed or settled without payment by the CBIZ Parties.

On December 19, 2016, CBIZ Operations, Inc.

2 unchanged sentences

The plaintiff claims that CBIZ Operations had a duty to disclose the fact, unknown to employees of CBIZ Operations at the time of the transaction, that the former employee had a financial arrangement with a Zotec vendor at the time CBIZ Operations sold CBIZ MMP to Zotec.

The plaintiff is now seeking damages of up to $ 177.0 million out of the $ 200.0 million transaction price.

Trial is scheduled for October 2021.

We cannot predict the outcome of the above matters or estimate the possible loss or range of possible loss, if any.

Although the proceedings are subject to uncertainties inherent in the litigation process and the ultimate disposition of these proceedings is not presently determinable, we intend to vigorously defend these cases.

The plaintiff is seeking damages of up to $ 177.0 million out of the $ 200.0 million transaction price.

Trial was held in October 2021.

The jury found in favor of CBIZ on all fraud, contract and other claims before it.

Zotec’s remaining claim for Indiana statutory securities fraud and CBIZ’s counterclaim for breach of contract against Zotec will be addressed by the trial Judge at a later date.

We cannot predict the outcome of the above matter or estimate the possible loss or range of possible loss, if any.

Although the proceeding is subject to uncertainties inherent in the litigation process and the ultimate disposition of this proceeding is not presently determinable, we intend to vigorously defend this case.

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.

On June 24, 2021, CBIZ settled the case previously brought by UPMC, d/b/a University of Pittsburgh Medical Center, and a health system it acquired in connection with actuarial services provided by the Company.

Under the terms of the settlement, CBIZ paid a total settlement amount of $ 41.5 million and recorded a settlement loss of $ 30.5 million.

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.

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 $ 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.

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.

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 $ 27.1 million and $ 24.9 million at September 30, 2021 and December 31, 2020, respectively, and had maturity or callable dates ranging from October 2021 through November 2025.

At September 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 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

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

Nine Months Ended September 30, 2021 Twelve Months Ended December 31, 2020

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

Purchases 13,050 3,447

Sales ( 5,550 ) ( 22,078 )

Maturities and calls ( 2,415 ) ( 15,409 )

Redemptions ( 6,280 ) ( 22,078 )

Maturities ( 4,520 ) ( 15,409 )

Change in bond premium 874 ( 857 )

1 unchanged sentence

Fair value at end of period $ 28,455 $ 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.

In addition to the available-for-sale debt securities discussed above, we also held other depository assets in the amount of $ 4.8 million as of September 30, 2021.

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

4 unchanged sentences

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

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

As of September 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 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.

The notional value, fixed rate of interest and expiration date of each interest rate swap as of September 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

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

September 30, 2021

Value Balance Sheet Location

5 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 and six months ended June 30, 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 nine months ended September 30, 2021 and 2020 (in thousands):

Gain (Loss) Recognized

2 unchanged sentences

Three Months Ended

June 30, Three Months Ended

September 30, Three Months Ended

September 30,

2021 2020 2021 2020

Interest rate swaps $ 66 $ ( 136 ) $ ( 285 ) $ ( 293 )

Six Months Ended

June 30, Six Months Ended

Nine Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

1 unchanged sentence

FAIR VALUE MEASUREMENTS

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

The following table summarizes our assets and (liabilities) at September 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 September 30, 2021 December 31, 2020

Deferred compensation plan assets 1 $ 136,059 $ 127,332

Available-for-sale debt securities 1 28,455 25,708

Other depository assets 1 4,834 —

Deferred compensation plan liabilities 1 ( 136,059 ) ( 127,332 )

1 unchanged sentence

Contingent purchase price liabilities 3 ( 84,628 ) ( 54,391 )

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):

During the nine months ended September 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 nine months ended September 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 ( 1,263 ) ( 532 )

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

Ending balance – September 30 $ ( 84,628 ) $ ( 34,108 )

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.

10 unchanged sentences

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 and six months ended June 30, 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 nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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

Net unrealized loss on available-for-sale

securities, net of income taxes (1)

4 unchanged sentences

Total other comprehensive income (loss) $ 159 $ ( 186 ) $ 1,071 $ ( 1,815 )

(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.

(1) Net of income tax benefit of $ 44 and $ 17 for the three months ended September 30, 2021 and 2020, respectively, and net of income tax benefit of $ 103 and income tax expense of $ 2 for the nine months ended September 30, 2021 and 2020, respectively.

(2) Net of income tax expense of $ 90 and income tax benefit of $ 45 for the three months ended September 30, 2021 and 2020, respectively, and net of income tax expense of $ 436 and income tax benefit of $ 579 for the nine months ended September 30, 2021 and 2020, respectively.

EMPLOYEE STOCK PLANS

4 unchanged sentences

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

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

3 unchanged sentences

Total stock-based compensation expense $ 2,905 $ 2,485 $ 8,359 $ 6,765

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

Stock Options Restricted Stock Units and Awards

6 unchanged sentences

Expired or canceled — $ — — $ —

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

Exercisable at June 30, 2021 1,179 $ 16.13

Outstanding at September 30, 2021 1,235 $ 17.68 389 $ 25.07

Exercisable at September 30, 2021 1,087 $ 17.43

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

awards are granted at no cost to the recipients.

CBIZ utilized the Black-Scholes-Merton options pricing model to determine the fair value of stock options on the date of grant.

The per-share fair value of stock options granted on August 12, 2021 was $ 8.10 .

The following weighted average assumptions were utilized:

Nine Months Ended September 30, 2021

Expected volatility (1) 27.49 %

Expected option life (years) (2) 4.71

Risk-free interest rate (3) 0.74 %

Expected dividend yield (4) — %

(1) The expected volatility assumption was determined based upon the historical volatility of CBIZ's stock price using daily price intervals.

(2) The expected option life was determined based upon CBIZ's historical data using a midpoint scenario, which assumes all options are exercised halfway between the expiration date and the weighted average time it takes the option to vest.

(3) The risk-free interest rate assumption was based upon zero-coupon U.S.

treasury bonds with a term approximating the expected life of the respective options.

(4) The expected dividend yield assumption was determined in view of CBIZ's historical and estimated dividend payouts.

CBIZ does not expect to change its dividend payout policy in the foreseeable future.

Performance Share Units (“PSUs”) – PSUs are earned based on our financial performance over a contractual term of three years and the associated expense is recognized over that period based on the fair value of the award.

2 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 six months ended June 30, 2021 (in thousands, except per share data):

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

Share Units Weighted

3 unchanged sentences

Canceled — $ —

Outstanding at June 30, 2021 447 $ 23.86

Outstanding at September 30, 2021 447 $ 23.86

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

1 unchanged sentence

EARNINGS PER SHARE

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).

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

3 unchanged sentences

609 738 692 825

Restricted stock awards (1)

Restricted stock units and awards (1)

155 135 182 192

5 unchanged sentences

Diluted earnings per share from continuing operations $ 0.41 $ 0.36 $ 1.50 $ 1.41

(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.

(1) A total of 44 thousand and 106 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2021, respectively, and a total of 274 thousand and 240 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for the three and nine months ended September 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 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.

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

BUSINESS COMBINATIONS

Business Combinations

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

During the nine months ended September 30, 2021, we completed the following acquisitions:

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

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Operating results are reported in the Financial Services practice group.

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

• Effective September 1, 2021, we acquired all of the non-attest assets of Shea Labagh Dobberstein ("SLD").

SLD, based in San Francisco, California, is a provider of professional accounting, tax and advisory services to privately held businesses, individuals and nonprofit organizations.

Operating results are reported in the Financial Services practice group.

During the nine months ended September 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.

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

• Effective July 1, 2020, we acquired substantially all the assets of Prince-Wood Insurance, LLC, a provider of financial, insurance and advisory services based in Woodbridge, Virginia.

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

• Effective September 1, 2020, we acquired substantially all the assets of ARC Consulting LLC and ARC Placement Group LLC, a provider of financial, insurance and advisory services based in San Francisco, California.

Operating results are reported in the Financial Services practice group.

Aggregated annualized revenue is estimated to be approximately $ 71.9 million and $ 24.6 million from the aforementioned 2021 and 2020 acquisitions, respectively.

Aggregated annualized income before tax is estimated to be approximately $ 6.1 million and $ 5.9 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):

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 nine months ended September 30, 2021 and 2020, respectively.

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

Common Stock Issued (number) 207 141

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Total Recorded Purchase Price $ 111,139 $ 55,313

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

Other Assets Acquired, net 10,179 1,940

Identifiable Intangible Assets Acquired 40,753 4,807

Goodwill 60,207 48,565

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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

Fair value estimates were provisional for some of the 2021 acquisitions as of September 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 nine months ended September 30, 2021 and 2020, respectively (in thousands):

Nine Months Ended September 30,

Financial Services Benefits & Insurance Financial Services Benefits & Insurance

Goodwill $ 58,409 $ 1,798 $ 34,766 $ 13,799

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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.

Goodwill represents the value of expected future earnings and cash flows, as well as the synergies created by the integration of the new businesses 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,

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 nine months ended September 30, 2021 and 2020, respectively (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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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.

During the nine months ended September 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.

During the nine months ended September 30, 2020, we recorded a gain of $ 0.1 million related to a small book of business in the Benefits and Insurance practice group and a small accounting firm in the Financial Services practice group.

SEGMENT DISCLOSURES

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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.

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.

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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.

Segment information for the three and nine months ended September 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 June 30, 2021

Three Months Ended September 30, 2021

Services Benefits &

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Total revenue $ 187,232 $ 85,797 $ 9,690 $ 282,719

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Services Benefits &

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Total revenue $ 155,499 $ 73,881 $ 9,009 $ 238,389

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Services Benefits &

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Total revenue $ 577,970 $ 255,656 $ 28,471 $ 862,097

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Services Benefits &

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Total revenue $ 498,359 $ 227,433 $ 26,995 $ 752,787

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

Three Months Ended June 30, 2021

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

Three Months Ended September 30, 2021

Services Benefits

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Corporate general and administrative expenses — — — 13,035 13,035

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

Operating income (loss) 31,054 16,758 1,176 ( 17,632 ) 31,356

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Interest expense — — — ( 1,016 ) ( 1,016 )

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

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

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

Other income (expense), net 18 ( 9 ) 1 ( 1,143 ) ( 1,133 )

Total other income (expense), net 18 ( 9 ) 1 ( 2,159 ) ( 2,149 )

Income (loss) from continuing operations before income tax expense $ 31,072 $ 16,749 $ 1,177 $ ( 19,791 ) $ 29,207

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Services Benefits

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Interest expense — ( 10 ) — ( 964 ) ( 974 )

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

Gain (loss) on sale of operations, net ( 76 ) 2 — — ( 74 )

Other (expense) income, net ( 14 ) ( 36 ) — 5,964 5,914

Total other (expense) income, net ( 90 ) ( 44 ) — 5,000 4,866

Income (loss) from continuing operations before income tax expense $ 25,487 $ 11,824 $ 939 $ ( 11,094 ) $ 27,156

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

Six Months Ended June 30, 2021

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

Nine Months Ended September 30, 2021

Services Benefits

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Operating income (loss) 129,126 51,908 2,929 ( 92,901 ) 91,062

Other income:

Other income (expense):

Interest expense — — — ( 2,852 ) ( 2,852 )

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Income (loss) from continuing operations before income tax expense $ 129,436 $ 59,156 $ 2,930 $ ( 84,898 ) $ 106,624

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Services Benefits

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Interest expense — ( 30 ) — ( 4,137 ) ( 4,167 )

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

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

Gain (loss) on sale of operations, net ( 25 ) 103 — — 78

Other income, net 32 190 1 3,227 3,450

Total other income (expense), net 7 263 1 ( 910 ) ( 639 )

Income (loss) from continuing operations before income tax expense $ 102,429 $ 39,177 $ 2,653 $ ( 38,702 ) $ 105,557

SUBSEQUENT EVENTS

Subsequent to September 30, 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.

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