What changed in this filing

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Item 1. Financial Statements

2022-05-02 compared with 2021-10-29 · 130 added, 291 removed, 421 unchanged (50% of the section changed)

3 unchanged sentences

(In thousands)

September 30,

2022 December 31,

42 unchanged sentences

Treasury stock ( 707,088 ) ( 694,716 )

Accumulated other comprehensive loss ( 1,198 ) ( 2,269 )

Accumulated other comprehensive income (loss) 958 ( 967 )

Total stockholders’ equity 759,848 704,548

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Revenue $ 391,722 $ 300,730

2 unchanged sentences

Corporate general and administrative expenses 16,309 14,483

Legal settlement, net — — 30,468 —

Operating income 85,114 62,276

1 unchanged sentence

Interest expense ( 1,259 ) ( 877 )

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

Other (expense) income, net ( 6,403 ) 4,789

17 unchanged sentences

Net income $ 58,127 $ 50,209

Other comprehensive income (loss), net of tax 159 ( 186 ) 1,071 ( 1,815 )

Other comprehensive income, net of tax 1,925 854

Comprehensive income $ 60,052 $ 51,063

10 unchanged sentences

Comprehensive

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

Other comprehensive income — — — — — — 159 159

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

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

Stock-based compensation — — — 2,905 — — — 2,905

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

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

Shares Treasury

Shares Common

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

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

Other comprehensive loss — — — — — — ( 186 ) ( 186 )

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

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

Stock-based compensation — — — 2,485 — — — 2,485

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

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

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands)

Shares Treasury

Shares Common

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

(Loss) Income Totals

December 31, 2021 135,187 83,149 $ 1,352 $ 770,117 $ 628,762 $ ( 694,716 ) $ ( 967 ) $ 704,548

4 unchanged sentences

Restricted stock units and awards 92 — 1 ( 1 ) — — — —

Performance share units 211 — 2 ( 2 ) — — — —

Stock options exercised 247 — 3 3,221 — — — 3,224

1 unchanged sentence

Business acquisitions 19 — — 707 — — — 707

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

March 31, 2022 135,756 83,462 $ 1,358 $ 777,731 $ 686,889 $ ( 707,088 ) $ 958 $ 759,848

Shares Treasury

5 unchanged sentences

Comprehensive

(Loss) Income Totals

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

Net income — — — — 50,209 — — 50,209

Other comprehensive loss — — — — — — ( 1,815 ) ( 1,815 )

Other comprehensive income — — — — — — 854 854

Share repurchases — 1,117 — — — ( 32,678 ) — ( 32,678 )

Indirect repurchase of shares for minimum tax withholding — 47 — — — ( 1,464 ) — ( 1,464 )

Restricted stock 40 — — — — — — —

Restricted stock units and awards 46 — 1 ( 1 ) — — — —

Stock options exercised 397 — 4 4,404 — — — 4,408

1 unchanged sentence

Business acquisitions 38 — — 979 — — — 979

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

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

See the accompanying notes to the unaudited condensed consolidated financial statements

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net income $ 58,127 $ 50,209

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

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

Depreciation and amortization expense 8,173 6,252

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

Bad debt expense, net of recoveries 549 58

1 unchanged sentence

Stock-based compensation expense 3,689 2,855

Excess tax benefits from share based payment arrangements ( 4,114 ) ( 1,674 )

Deferred income taxes 2,944 3,348

7 unchanged sentences

Other liabilities ( 9,626 ) 172

Operating cash flows provided by continuing operations 80,964 81,862

Operating cash flows used in continuing operations ( 50,886 ) ( 14,821 )

Operating cash flows used in discontinued operations ( 4 ) ( 6 )

Net cash provided by operating activities 80,946 81,796

Net cash used in operating activities ( 50,890 ) ( 14,827 )

Cash flows from investing activities:

6 unchanged sentences

Other, net ( 2,289 ) 214

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

Net cash (used in) provided by investing activities ( 81,531 ) 229

Cash flows from financing activities:

25 unchanged sentences

ASU – Accounting Standards Update

CECL– Current expected credit losses

CPA firm – Certified Public Accounting firm

13 unchanged sentences

Unaudited Interim Financial Statements:

The condensed consolidated financial statements have been prepared in accordance with GAAP and applicable rules and regulations of the SEC regarding interim financial reporting.

The unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and applicable rules and regulations of the SEC regarding interim financial reporting.

Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

2 unchanged sentences

Use of Estimates:

The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes.

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes.

Changes in circumstances could cause actual results to differ materially from these estimates.

1 unchanged sentence

We have consistently applied the accounting policies for the periods presented as described in Note 1, Basis of Presentation and Significant Accounting Policies, to the consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

In 2021, CBIZ formed a grantor trust (the “Trust”) with Wilmington Savings Funds Society, FSB, a Federal savings bank, serving as trustee.

The Trust holds the majority of the funds provided by CBIZ’s clients for payroll processing pending remittance to employees of those clients, tax authorities, and other payees.

CBIZ is the sole beneficial owner of the Trust.

The Trust is considered a variable interest

entity in accordance with Accounting Standards Codification 810, Consolidation.

CBIZ has both the power to direct the activities that most significantly impact the economic performance of the Trust (including the power to make all investment decisions for the Trust) and the right to receive benefits that could potentially be significant to the Trust (in the form of investment returns).

As a result, CBIZ consolidates the Trust in its unaudited condensed consolidated financial statements.

NEW ACCOUNTING PRONOUNCEMENTS

9 unchanged sentences

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 September 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

3 unchanged sentences

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

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

September 30,

Accounts receivable, net, at March 31, 2022 and December 31, 2021 was as follows (in thousands):

2022 December 31,

4 unchanged sentences

Accounts receivable, net $ 365,758 $ 242,168

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,

Changes to the allowance for doubtful accounts for the three months ended March 31, 2022 and twelve months ended December 31, 2021 are as follows (in thousands):

2022 December 31,

6 unchanged sentences

The 2018 credit facility matures in 2023.

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.

The balance outstanding under the 2018 credit facility was $ 298.9 million and $ 155.3 million at March 31, 2022 and December 31, 2021, respectively.

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

Nine Months Ended

September 30,

Three Months Ended

Weighted average rates 1.79 % 2.10 %

1 unchanged sentence

1.08 % - 3.64 %

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.

We had approximately $ 94.8 million of available funds under the credit facility at March 31, 2022, net of outstanding letters of credit of $ 5.7 million.

As of March 31, 2022, 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 5, 2021 and will terminate on August 4, 2022, did no t have a balance outstanding at September 30, 2021.

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 March 31, 2022.

Refer to our Annual Report on Form 10-K for the year ended December 31, 2021 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 September 30,

2018 credit facility $ 1,010 $ 955

Total $ 1,016 $ 974

Nine Months Ended September 30,

Three Months Ended March 31,

2018 credit facility $ 1,259 $ 871

Other line of credit — 1

Total $ 1,259 $ 877

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 $ 3.4 million and $ 1.7 million at September 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 $ 5.7 million and $ 3.4 million at March 31, 2022 and December 31, 2021, 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 September 30, 2021 and December 31, 2020, respectively.

Legal Proceedings - In 2010, CBIZ, Inc.

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.

The federal court case is captioned Robert Facciola, et al v.

Greenberg Traurig LLP, et al, and the state court cases are captioned Victims Recovery, LLC v.

Greenberg Traurig LLP, et al, Roger Ashkenazi, et al v.

Greenberg Traurig LLP, et al, Mary Marsh, et al v.

Greenberg Traurig LLP, et al;

and ML Liquidating Trust v.

Mayer Hoffman McCann, P.C.

(“Mayer Hoffman”), et al.

Prior to these suits CBIZ MHM, LLC was named as a defendant in Jeffrey C.

Greenberg Traurig LLP, et al.

These lawsuits arose out of the bankruptcy of Mortgages Ltd., a mortgage lender to developers in the Phoenix, Arizona area.

Various other professional firms and individuals not related to the Company were also named defendants in these lawsuits.

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.

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.

The amount of license bonds outstanding was $ 2.3 million and $ 2.3 million at March 31, 2022 and December 31, 2021, respectively.

Legal Proceedings - On December 19, 2016, CBIZ Operations, Inc.

(“CBIZ Operations”) was named as a defendant in a lawsuit filed by Zotec Partners, LLC (“Zotec”) in the Marion County Indiana Superior Court.

5 unchanged sentences

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 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.

In addition to the item disclosed above, the Company is, from time to time, subject to claims and lawsuits arising in the ordinary course of business.

We cannot predict the outcome of all such matters or estimate the possible loss, if any.

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

FINANCIAL INSTRUMENTS

1 unchanged sentence

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.

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 $ 43.1 million and $ 37.0 million at March 31, 2022 and December 31, 2021, respectively, and had maturity or callable dates ranging from April 2022 through November 2025.

At March 31, 2022, 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 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

The following table summarizes activities related to these investments for the three months ended March 31, 2022 and the twelve months ended December 31, 2021 (in thousands):

Three Months Ended March 31, 2022 Twelve Months Ended December 31, 2021

Fair value at beginning of period $ 38,670 $ 25,708

5 unchanged sentences

Fair value at end of period $ 43,665 $ 38,670

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.

In addition to the available-for-sale debt securities discussed above, we also held other depository assets in the amount of $ 0.9 million and $ 1.1 million at March 31, 2022 and December 31, 2021, respectively.

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

2 unchanged sentences

Refer to the Annual Report on Form 10-K for the year ended December 31, 2021 for further discussion on our interest rate swaps.

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

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 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.

As of March 31, 2022, we have four 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 agreements, 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, 2022 is (i) $ 20.0 million – 1.770 % - May 2022, (ii) $ 15.0 million – 2.640 % - June 2023, (iii) $ 50.0 million - 0.885 % - April 2025 and (iv) $ 30.0 million - 1.249 % - December, 2026.

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 September 30, 2021 and December 31, 2020 (in thousands):

September 30, 2021

The following table summarizes our outstanding interest rate swaps and their classification in the accompanying Condensed Consolidated Balance Sheets at March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022

Value Balance Sheet Location

Interest rate swap $ 20,000 $ ( 32 ) Other current liability

Interest rate swaps $ 65,000 $ ( 575 ) Other non-current liabilities

Interest rate swap $ 15,000 $ ( 128 ) Other non-current liability

Interest rate swaps $ 80,000 $ 3,738 Other non-current assets

December 31, 2021

2 unchanged sentences

Interest rate swaps $ 45,000 $ ( 496 ) 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 nine months ended September 30, 2021 and 2020 (in thousands):

Gain (Loss) Recognized

in AOCL, net of tax Loss Reclassified

Interest rate swap $ 50,000 $ 405 Other non-current asset

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, 2022 and 2021 (in thousands):

Gain Recognized

in AOCI, net of tax Loss Reclassified

from AOCL into Expense

Three Months Ended

September 30, Three Months Ended

September 30,

2021 2020 2021 2020

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

Nine Months Ended

September 30, Nine Months Ended

September 30,

March 31, Three Months Ended

2022 2021 2022 2021

1 unchanged sentence

FAIR VALUE MEASUREMENTS

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

The following table summarizes our assets and (liabilities) at March 31, 2022 and December 31, 2021, 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, 2022 December 31, 2021

Deferred compensation plan assets 1 $ 132,284 $ 136,321

4 unchanged sentences

Contingent purchase price liabilities 3 ( 136,534 ) ( 79,139 )

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):

During the three months ended March 31, 2022 and 2021, 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, 2022 and 2021 (pre-tax basis) (in thousands):

Beginning balance – January 1 $ ( 79,139 ) $ ( 54,391 )

3 unchanged sentences

Change in net present value of contingencies ( 722 ) ( 381 )

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

Ending balance – March 31 $ ( 136,534 ) $ ( 54,230 )

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.

3 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 is 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.

1 unchanged sentence

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.

As a result, the fair value measurement of our bank debt is considered to be Level 2.

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

As a result, the fair value measurement of our bank debt is considered to be Level 2 under the fair value hierarchy.

OTHER COMPREHENSIVE INCOME

The following table is a summary of other comprehensive income and discloses the tax impact of each component of other comprehensive income for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net unrealized loss on available-for-sale

1 unchanged sentence

$ ( 939 ) $ ( 103 )

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

281 ( 136 ) 1,359 ( 1,796 )

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

Foreign currency translation ( 2 ) ( 4 )

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

(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.

Total other comprehensive income $ 1,925 $ 854

(1) Net of income tax benefit of $ 352 and income tax benefit of $ 39 for the three months ended March 31, 2022 and 2021, respectively.

(2) Net of income tax expense of $ 928 and income tax expense of $ 310 for the three months ended March 31, 2022 and 2021, respectively.

EMPLOYEE STOCK PLANS

1 unchanged sentence

The terms and vesting schedules for the stock-based awards vary by type and date of grant.

A maximum of 3.1 million stock options, restricted stock or other stock-based compensation awards may be granted.

A maximum of 3.1 million stock options, restricted stock or other stock-

based compensation awards may be granted.

Shares subject to award under the 2019 Plan may be either authorized but unissued shares of our common stock or treasury shares.

Refer to the Annual Report on Form 10-K for the year ended December 31, 2021 for further discussion on the 2019 Plan.

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

Compensation expense for stock-based awards recognized during the three months ended March 31, 2022 and 2021 was as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Stock options $ 173 $ 301

2 unchanged sentences

Total stock-based compensation expense $ 3,689 $ 2,855

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 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, 2022 (in thousands, except per share data):

Stock Options Restricted Stock Units and Awards

5 unchanged sentences

Exercised or released ( 247 ) $ 13.05 ( 146 ) $ 24.04

Expired or canceled — $ — — $ —

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

Exercisable at September 30, 2021 1,087 $ 17.43

Outstanding at March 31, 2022 976 $ 18.89 344 $ 29.34

Exercisable at March 31, 2022 828 $ 18.79

(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 nine months ended September 30, 2021 (in thousands, except per share data):

The following table presents our PSU award activity during the three months ended March 31, 2022 (in thousands, except per share data):

Share Units Weighted

1 unchanged sentence

Granted 101 $ 38.12

Adjustments for performance results — $ —

Canceled — $ —

Outstanding at September 30, 2021 447 $ 23.86

Vested ( 211 ) $ 19.82

Outstanding at March 31, 2022 363 $ 29.89

(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 nine months ended September 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 months ended March 31, 2022 and 2021 (in thousands, except per share data):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Income from continuing operations $ 58,131 $ 50,216

1 unchanged sentence

Stock options (1)

609 738 692 825

Restricted stock units and awards (1)

155 135 182 192

Contingent shares (2)

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Diluted earnings per share from continuing operations $ 1.10 $ 0.92

(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.

(1) A total of 55 thousand and 1 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2022 and 2021 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 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.

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 nine months ended September 30, 2021 and 2020.

(3) The denominator used in calculating diluted earnings per share did not include 363 thousand and 447 thousand performance share units for the three months ended March 31, 2022 and 2021, respectively.

BUSINESS COMBINATIONS

Business Combinations

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

During the three months ended March 31, 2022, we completed the following acquisition:

• Effective January 1, 2022, we acquired all of the non-attest assets of Marks Paneth LLP ("Marks Paneth").

Marks Paneth, based in New York City, is a provider of a full range of accounting, tax and consulting services to a wide range of industries.

Marks Paneth is included as a component of our Financial Services practice group.

Mayer Hoffman, an unrelated party, acquired the attest assets from Marks Paneth in a separate transaction.

Operating results are reported in the Financial Services practice group.

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

• 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.

• 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.

• 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.

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 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 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 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

Common Stock Value $ 6,940 $ 3,543

The acquisition of Marks Paneth is expected to add approximately $ 138.0 million revenue in 2022.

For the three months ended March 31, 2022, we recorded approximately $ 6.0 million non-recurring transaction, retention and integration related costs associated with this acquisition.

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 months ended March 31, 2022 and 2021, respectively.

The following table summarizes the consideration and preliminary purchase price allocation for the acquisitions completed during the three months ended March 31, 2022 and 2021, respectively (in thousands):

Cash paid 72,469 1,900

Other Payable — 59

Recorded contingent consideration 64,648 1,622

Total recorded purchase price $ 137,117 $ 3,522

Other Assets Acquired, net 10,179 1,940

Accounts receivable acquired 18,230 —

Fixed assets acquired 1,793 —

Identifiable intangible assets acquired 48,000 2,069

Operating lease right-of-use asset acquired 49,291 —

Other assets acquired 1,497 —

Operating lease liability acquired - current ( 5,860 ) —

Other current liabilities acquired ( 909 ) —

Operating lease liability acquired - noncurrent ( 43,431 ) —

Goodwill 68,506 1,453

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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 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

Fair value estimates of the Marks Paneth acquisition were provisional as of March 31, 2022, primarily related to the value established for certain identifiable intangible assets and contingent purchase price consideration.

The following table summarizes the goodwill and intangible asset amounts resulting from those acquisitions for the three months ended March 31, 2022 and 2021, respectively (in thousands):

Three Months Ended March 31,

Financial Services Financial Services

Goodwill $ 68,506 $ 1,453

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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.

Goodwill related to these acquisitions is deductible for tax purposes.

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 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

Net Expense (Income) $ 846 $ 74 $ 1,599 $ ( 80 )

Client lists and non-compete agreements are valued using a discounted cash flow technique based on management estimates of future cash flows from such assets.

The following table summarizes the changes in contingent purchase price consideration for previous acquisitions and contingent payments made for previous business acquisitions in the three months ended March 31, 2022 and 2021, respectively (in thousands):

Three Months Ended March 31,

Net expense $ 642 $ 660

Cash settlement paid $ 7,077 $ 1,463

Shares issued (number) 19 38

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 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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Financial Services Benefits and Insurance Services National Practices

Accounting and Tax Group Health Benefits Consulting Managed Networking and Hardware Services

Government Healthcare Consulting Payroll Healthcare Consulting

Financial Advisory Property and Casualty

Valuation Retirement Plan Services

Risk & Advisory Services

Accounting and Tax Employee Benefits Consulting Information Technology Managed Networking and Hardware Services

Financial Advisory Payroll / Human Capital Management Healthcare Consulting

Valuation Property and Casualty Insurance

Risk and Advisory Services Retirement and Investment Services

Government Healthcare Consulting

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

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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 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 nine months ended September 30, 2021 and 2020 is presented below.

Segment information for the three months ended March 31, 2022 and 2021 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 September 30, 2021

Services Benefits &

Insurance National

Practices Consolidated

Accounting, tax, advisory and consulting $ 187,232 — — $ 187,232

Core benefits and insurance services — 83,009 — 83,009

Non-core benefits and insurance services — 2,788 — 2,788

Managed networking, hardware services — — 7,088 7,088

National practices consulting — — 2,602 2,602

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

Three Months Ended September 30, 2020

Services Benefits &

Insurance National

Practices Consolidated

Accounting, tax, advisory and consulting $ 155,499 — — $ 155,499

Core benefits and insurance services — 71,497 — 71,497

Non-core benefits and insurance services — 2,384 — 2,384

Managed networking, hardware services — — 6,592 6,592

National practices consulting — — 2,417 2,417

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

Nine Months Ended September 30, 2021

Services Benefits &

Insurance National

Three Months Ended March 31, 2022

Services Benefits and

Insurance Services National

Practices Consolidated

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Total revenue $ 288,746 $ 92,486 $ 10,490 $ 391,722

Nine Months Ended September 30, 2020

Services Benefits &

Insurance National

Three Months Ended March 31, 2021

Services Benefits and

Insurance Services National

Practices Consolidated

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Total revenue $ 204,149 $ 87,239 $ 9,342 $ 300,730

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

Three Months Ended September 30, 2021

Segment information for the three months ended March 31, 2022 and 2021 was as follows (in thousands):

Three Months Ended March 31, 2022

Services Benefits

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Revenue $ 288,746 $ 92,486 $ 10,490 $ — $ 391,722

Operating expenses 156,178 69,039 8,514 4,597 238,328

Operating expenses (income) 209,800 72,657 9,576 ( 1,734 ) 290,299

Gross margin 78,946 19,829 914 1,734 101,423

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Income (loss) from continuing operations before income tax expense $ 79,032 $ 19,805 $ 914 $ ( 22,299 ) $ 77,452

Three Months Ended September 30, 2020

Services Benefits

Services National

Practices Corporate

Revenue $ 155,499 $ 73,881 $ 9,009 $ — $ 238,389

Operating expenses 129,922 62,013 8,070 4,755 204,760

Gross margin 25,577 11,868 939 ( 4,755 ) 33,629

Corporate general and administrative expenses — — — 11,339 11,339

Operating income (loss) 25,577 11,868 939 ( 16,094 ) 22,290

Other income (expense):

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

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

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2021

Services Benefits

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Corporate general and administrative expenses — — — 14,483 14,483

Legal settlement, net 30,468 30,468

Operating income (loss) 62,403 20,306 801 ( 21,234 ) 62,276

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Interest expense — — — ( 877 ) ( 877 )

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

Other income, net 98 174 — 4,517 4,789

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Income (loss) from continuing operations before income tax expense $ 62,501 $ 20,480 $ 801 $ ( 17,594 ) $ 66,188

Nine Months Ended September 30, 2020

Services Benefits

Services National

Practices Corporate

Revenue $ 498,359 $ 227,433 $ 26,995 $ — $ 752,787

Operating expenses 395,937 188,519 24,343 4,804 613,603

Gross margin 102,422 38,914 2,652 ( 4,804 ) 139,184

Corporate general and administrative expenses — — — 32,988 32,988

Operating income (loss) 102,422 38,914 2,652 ( 37,792 ) 106,196

Other (expense) income:

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

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.

Subsequent to March 31, 2022 and up to April 27, 2022, we repurchased approximately 0.2 million shares of our common stock in the open market at a total cost of approximately $ 7.2 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