What changed in this filing

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Item 1. Financial Statements

2022-07-29 compared with 2022-05-02 · 270 added, 102 removed, 449 unchanged (45% of the section changed)

33 unchanged sentences

Debt issuance costs ( 2,282 ) ( 449 )

Total long-term debt 298,541 154,851

Total long-term debt, net 263,718 154,851

Income taxes payable 1,893 1,727

19 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Revenue $ 361,952 $ 278,648 $ 753,674 $ 579,378

2 unchanged sentences

Corporate general and administrative expenses 10,926 13,816 27,235 28,299

Operating income 85,114 62,276

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

Operating income (loss) 61,290 ( 2,570 ) 146,404 59,706

Other income (expense):

Interest expense ( 1,645 ) ( 959 ) ( 2,904 ) ( 1,836 )

Gain on sale of operations, net 135 6,385 135 6,385

Other (expense) income, net ( 15,898 ) 8,373 ( 22,301 ) 13,162

Total other (expense) income, net ( 17,408 ) 13,799 ( 25,070 ) 17,711

Income from continuing operations before income tax

expense 77,452 66,188

Income from continuing operations before income tax expense 43,882 11,229 121,334 77,417

Income tax expense 12,622 2,616 31,943 18,588

26 unchanged sentences

Comprehensive

(Loss) Income Totals

Income (Loss) Totals

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

Net income — — — — 31,255 — — 31,255

Other comprehensive income — — — — — — 480 480

Share repurchases — 736 — — — ( 29,555 ) — ( 29,555 )

Indirect repurchase of shares for minimum tax withholding — 23 — — — ( 916 ) — ( 916 )

Restricted stock units and awards 27 — — — — — — —

Stock options exercised 40 — — 672 — — — 672

Stock-based compensation — — — 2,739 — — — 2,739

June 30, 2022 135,823 84,221 $ 1,358 $ 781,142 $ 718,144 $ ( 737,559 ) $ 1,438 $ 764,523

Shares Treasury

Shares Common

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Income (Loss) Totals

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

Net income — — — — 8,607 — — 8,607

Other comprehensive income — — — — — — 58 58

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

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

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

Stock options exercised 96 — 1 1,039 — — — 1,040

Stock-based compensation — — — 2,599 — — — 2,599

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

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

See the accompanying notes to the unaudited condensed consolidated financial statements

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands)

Shares Treasury

Shares Common

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Income (Loss) Totals

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

8 unchanged sentences

Business acquisitions 19 — — 707 — — — 707

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

June 30, 2022 135,823 84,221 $ 1,358 $ 781,142 $ 718,144 $ ( 737,559 ) $ 1,438 $ 764,523

Shares Treasury

5 unchanged sentences

Comprehensive

(Loss) Income Totals

Income (Loss) Totals

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

7 unchanged sentences

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

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

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

AND SUBSIDIARIES

1 unchanged sentence

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Net income $ 89,382 $ 58,816

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

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

Depreciation and amortization expense 16,465 12,876

Gain on sale of operations, net ( 135 ) ( 6,385 )

Bad debt expense, net of recoveries 1,263 265

10 unchanged sentences

Other liabilities ( 8,822 ) 42,117

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

Operating cash flows provided by continuing operations 28,517 66,307

Operating cash flows used in discontinued operations ( 9 ) ( 13 )

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

Net cash provided by operating activities 28,508 66,294

Cash flows from investing activities:

6 unchanged sentences

Other, net ( 1,603 ) 472

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

Net cash used in investing activities ( 89,756 ) ( 40,137 )

Cash flows from financing activities:

28 unchanged sentences

GAAP – United States Generally Accepted Accounting Principles

SOFR – Secured Overnight Financing Rate

LIBOR – London Interbank Offered Rate

20 unchanged sentences

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.

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.

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).

5 unchanged sentences

Any accounting standards not listed below were reviewed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements of the Company.

Accounting Standards Issued But Not Yet Adopted

Accounting Standards Adopted in 2022

Reference Rate Reform :

3 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 March 31, 2022.

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.

On May 4, 2022, we entered into a Second Amended and Restated Credit Agreement (the "2022 credit facility" or the "credit facility"), by and among CBIZ Operations, Inc.

("CBIZ Operations"), and Bank of America, N.A., as administrative agent, and other financial institutions.

The 2022 credit facility amends the Amended and Restated Credit Agreement, dated as of April 3, 2018 (the "2018 credit facility").

Among other things, the 2022 Credit Facility amended the base interest rate from LIBOR to Term SOFR.

Consequently, we amended the interest rate swap agreements with respect to the existing swaps.

Effective May 16, 2022, the scheduled reset date, the interest rate of the swaps were set to one-month Term SOFR to align the swaps to Term SOFR in the 2022 credit facility.

No other terms under the swap agreements were amended.

As a result, we early adopted ASC Topic 848, Reference Rate Reform.

This adoption had immaterial impact on our consolidated financial statements.

Refer to Note 4, Debt and Financing Arrangements and Note 6, Financial Instruments, for detail discussion of the transaction.

ACCOUNTS RECEIVABLE, NET

1 unchanged sentence

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.

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 March 31, 2022 and December 31, 2021 was as follows (in thousands):

Accounts receivable, net, at June 30, 2022 and December 31, 2021 was as follows (in thousands):

2022 December 31,

4 unchanged sentences

Accounts receivable, net $ 410,481 $ 242,168

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):

Changes to the allowance for doubtful accounts for the six months ended June 30, 2022 and twelve months ended December 31, 2021 are as follows (in thousands):

2022 December 31,

4 unchanged sentences

DEBT AND FINANCING ARRANGEMENTS

2018 Credit Facility - Our primary financing arrangement is the $ 400 million unsecured credit facility (the “2018 credit facility” or the “credit facility”), which provides us with the capital necessary to meet our working capital needs as well as the flexibility to continue with our strategic initiatives, including business acquisitions and share repurchases.

The 2018 credit facility matures in 2023.

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:

Three Months Ended

On May 4, 2022, we entered into the 2022 credit facility, which amends the 2018 credit facility.

The 2022 credit facility increased our borrowing capacity from $ 400 million to $ 600 million, which provides us with the capital necessary to meet our working capital needs as well as the flexibility to continue with our strategic initiatives, including business acquisitions and share repurchases.

Other important key terms of the 2022 credit facility include:

(i) an accordion feature that permits lenders to extend an additional $ 200 million at later date;

(ii) no change in pricing from the 2018 credit facility;

(iii) upsizing of baskets and various sublimits to reflect the increased size of the Company's business;

(iv) a swing line facility increase from $ 25 million to $ 50 million, which provides for same-day funds to cover daily liquidity needs;

and (v) base interest rate amended from LIBOR to Term SOFR.

The 2022 credit facility extends the maturity date from 2023 to 2027.

In connection with our 2022 credit facility, we incurred approximately $ 2.1 million of financing costs during the second quarter of 2022.

The financing costs are deferred and reported as a reduction of debt on the accompanying unaudited Condensed Consolidated Balance Sheet, are included as a component of cash flow from financing activities on the accompanying unaudited Condensed Consolidated Cash Flows, and are being amortized as interest expense over the term of the 2022 credit facility.

In addition, we wrote-off approximately $ 41 thousand of unamortized deferred cost associated with the 2018 credit facility as additional interest expense in the quarter ended June 30, 2022.

The balance outstanding under the 2022 credit facility was $ 266.0 million at June 30, 2022.

The balance outstanding under the 2018 credit facility was $ 155.3 million at December 31, 2021.

The combined effective interest rates under the 2018 and 2022 credit facilities, including the impact of interest rate swaps associated with those credit facilities, were as follows:

Six Months Ended

Weighted average rates 1.93 % 1.95 %

1 unchanged sentence

1.06 % - 3.64 %

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.

We had approximately $ 323.2 million of available funds under the 2022 credit facility at June 30, 2022, net of outstanding letters of credit of $ 5.7 million.

Available funds under the credit facility are based on a multiple of earnings before interest, taxes, depreciation and amortization as defined in the credit facility,

and are reduced by letters of credit, other indebtedness and outstanding borrowings under the credit facility.

Under the 2022 credit facility, loans are charged an interest rate consisting of a base rate or Term SOFR rate plus an applicable margin, letters of credit are charged based on the same applicable margin, and a commitment fee is charged on the unused portion of the credit facility.

The 2022 credit facility contains certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens or other encumbrances, making certain payments, investments, or to sell or otherwise dispose of a substantial portion of assets, or to merge or consolidate with an unaffiliated entity.

The 2022 credit facility also limits our ability to make dividend payments.

Historically, we have not paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.

Our Board of Directors has discretion over the payment and level of dividends on common stock, subject to the limitations of the credit facility and applicable law.

The credit facility contains a provision that, in the event of a defined change in control, the credit facility may be terminated.

In addition, the 2022 credit facility contains financial covenants that require us to meet certain requirements with respect to (i) a total leverage ratio and (ii) minimum interest coverage ratio which may limit our ability to borrow up to the total commitment amount.

As of June 30, 2022, we are in compliance with all 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 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.

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 June 30, 2022.

We intend to renew this line of credit.

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

Three Months Ended March 31,

2018 credit facility $ 1,259 $ 871

Three Months Ended June 30,

Credit facilities $ 1,644 $ 952

Other line of credit 1 —

Total $ 1,645 $ 959

Six Months Ended June 30,

Credit facilities $ 2,903 $ 1,823

Other line of credit 1 —

Total $ 2,904 $ 1,836

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 $ 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 $ 2.3 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.

The amount of license bonds outstanding was $ 2.3 million and $ 2.3 million at June 30, 2022 and December 31, 2021, respectively.

Legal Proceedings - On December 19, 2016, CBIZ Operations was named as a defendant in a lawsuit filed by Zotec Partners, LLC (“Zotec”) in the Marion County Indiana Superior Court.

After various amendments, the lawsuit asserts claims under Indiana law for securities, statutory and common law fraud or deception, unjust enrichment, breach of contract, and vicarious liability against CBIZ Operations and a former employee of CBIZ MMP in connection with the sale of the CBIZ MMP medical billing practice to Zotec.

1 unchanged sentence

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.

held in October 2021.

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

6 unchanged sentences

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.

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 par value of these investments totaled $ 46.8 million and $ 37.0 million at June 30, 2022 and December 31, 2021, respectively, and had maturity or callable dates ranging from July 2022 through November 2025.

At June 30, 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 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

The following table summarizes activities related to these investments for the six months ended June 30, 2022 and the twelve months ended December 31, 2021 (in thousands):

Six Months Ended June 30, 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 $ 46,665 $ 38,670

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.

In addition to the available-for-sale debt securities discussed above, we also held other depository assets in the amount of $ 3.8 million and $ 1.1 million at June 30, 2022 and December 31, 2021, respectively.

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

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

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

We do not purchase or hold any derivative instruments for trading or speculative purposes.

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

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 March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022

As a result of the 2022 credit facility, CBIZ amended the interest rate swap agreements with respect to the existing swaps.

Effective May 16, 2022, the scheduled reset date, the interest rate of the swaps are set to one-month Term SOFR to align the swaps to Term SOFR in the 2022 credit facility as a result of reference rate reform.

No other terms under the swap agreements were amended.

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

The following table summarizes our outstanding interest rate swaps and their classification in the accompanying unaudited Condensed Consolidated Balance Sheets at June 30, 2022 and December 31, 2021 (amounts in thousands):

June 30, 2022

Amount Fixed Rate Expiration Fair

Value Balance Sheet Location

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

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

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

Interest rate swap $ 15,000 2.571 % 6/1/2023 $ 27 Other current asset

Interest rate swap $ 50,000 0.834 % 4/14/2025 $ 2,646 Other non-current asset

Interest rate swap $ 30,000 1.186 % 12/14/2026 $ 1,925 Other non-current asset

December 31, 2021

Amount Fixed Rate Expiration Fair

Value Balance Sheet Location

Interest rate swap $ 20,000 1.770 % 5/14/2022 $ ( 120 ) Other current liability

Interest rate swaps $ 45,000 $ ( 496 ) Other non-current liabilities

Interest rate swap $ 15,000 2.640 % 6/1/2023 $ ( 432 ) Other non-current liability

Interest rate swap $ 50,000 0.885 % 4/14/2025 $ 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):

Interest rate swap $ 30,000 1.249 % 12/14/2026 $ ( 64 ) Other non-current liability

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

The following table summarizes the effects of the interest rate swaps on the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021 (in thousands):

Gain Recognized

2 unchanged sentences

Three Months Ended

March 31, Three Months Ended

June 30, Three Months Ended

2022 2021 2022 2021

Interest rate swaps $ 587 $ 117 $ ( 155 ) $ ( 280 )

Six Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Interest rate swaps $ 3,194 $ 1,078 $ ( 498 ) $ ( 565 )

FAIR VALUE MEASUREMENTS

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

The following table summarizes our assets and (liabilities) at June 30, 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 June 30, 2022 December 31, 2021

Deferred compensation plan assets 1 $ 118,779 $ 136,321

4 unchanged sentences

Contingent purchase price liabilities 3 ( 136,435 ) ( 79,139 )

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):

During the six months ended June 30, 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 six months ended June 30, 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 ( 1,595 ) ( 770 )

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.

Ending balance – June 30 $ ( 136,435 ) $ ( 66,187 )

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

8 unchanged sentences

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):

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 and six months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net unrealized loss on available-for-sale

2 unchanged sentences

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

705 117 3,571 1,078

Foreign currency translation ( 7 ) ( 4 ) ( 9 ) ( 8 )

Total other comprehensive income $ 480 $ 58 $ 2,405 $ 912

(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.

(1) Net of income tax benefit of $ 81 and income tax benefit of $ 20 for the three months ended June 30, 2022 and 2021, respectively, and net of income tax benefit of $ 433 and income tax benefit of $ 59 for the six months ended June 30, 2022 and 2021, respectively.

(2) Net of income tax expense of $ 250 and income tax expense of $ 36 for the three months ended June 30, 2022 and 2021, respectively, and net of income tax expense of $ 1,178 and income tax expense of $ 346 for the six months ended June 30, 2022 and 2021, respectively.

EMPLOYEE STOCK PLANS

The 2019 Stock Omnibus Incentive Plan (the “2019 Plan”), which expires in 2029, permits the grant of various forms of stock-based awards.

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.

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.

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 months ended March 31, 2022 and 2021 was as follows (in thousands):

Compensation expense for stock-based awards recognized during the three and six months ended June 30, 2022 and 2021 was as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Stock options $ 75 $ 232 $ 248 $ 533

2 unchanged sentences

Total stock-based compensation expense $ 2,739 $ 2,599 $ 6,428 $ 5,454

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

Stock Options Restricted Stock Units and Awards

5 unchanged sentences

Exercised or released ( 287 ) $ 13.58 ( 238 ) $ 23.47

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

Exercisable at March 31, 2022 828 $ 18.79

Expired or canceled — $ — ( 4 ) $ 34.04

Outstanding at June 30, 2022 936 $ 18.98 277 $ 32.62

Exercisable at June 30, 2022 936 $ 18.98

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

4 unchanged sentences

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

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

The following table presents our PSU award activity during the six months ended June 30, 2022 (in thousands, except per share data):

Share Units Weighted

2 unchanged sentences

Vested ( 211 ) $ 19.82

Outstanding at March 31, 2022 363 $ 29.89

Canceled ( 5 ) $ 33.21

Outstanding at June 30, 2022 360 $ 29.90

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

The following table sets forth the computation of basic and diluted earnings per share from continuing operations for the three and six months ended June 30, 2022 and 2021 (in thousands, except per share data):

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Income from continuing operations $ 31,260 $ 8,613 $ 89,391 $ 58,829

1 unchanged sentence

Stock options (1)

508 676 564 733

Restricted stock units and awards (1)

112 182 157 220

Contingent shares (2)

4 unchanged sentences

Diluted earnings per share from continuing operations $ 0.60 $ 0.16 $ 1.70 $ 1.09

(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.

(1) A total of 17 thousand and 86 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for the three and six months ended June 30, 2022, respectively, as their effect would be anti-dilutive.

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 did not 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.

(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 363 thousand and 447 thousand performance share units for the three months ended March 31, 2022 and 2021, respectively.

The performance conditions associated with these performance share units were not met and consequently none of these performance share units were considered as issuable for the three months ended March 31, 2022 and 2021.

(3) The denominator used in calculating diluted earnings per share did not include 360 thousand performance share units for both the three and six months ended June 30, 2022, and 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.

BUSINESS COMBINATIONS

Business Combinations

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

During the six months ended June 30, 2022, we completed the following acquisition:

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

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Operating results are reported in the Financial Services practice group.

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

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

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

1 unchanged sentence

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 Berntson 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 specialties 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.

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):

For the six months ended June 30, 2022, we recorded approximately $ 8.1 million in 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 and six months ended June 30, 2022 and 2021, respectively.

The following table summarizes the consideration and preliminary purchase price allocation for the acquisitions completed during the six months ended June 30, 2022 and 2021, respectively (in thousands):

Common stock issued (number) — 122

Common stock value $ — $ 4,060

Cash paid 72,469 43,104

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Other current liabilities acquired ( 909 ) ( 971 )

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

Operating lease liability acquired - non-current ( 43,431 ) ( 12,343 )

Goodwill 67,506 39,017

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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 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

Fair value estimates of the Marks Paneth acquisition were provisional as of June 30, 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 six months ended June 30, 2022 and 2021, respectively (in thousands):

Six Months Ended June 30,

Financial Services Benefits and Insurance Services Financial Services Benefits and Insurance Services

Goodwill $ 67,506 $ — $ 37,222 $ 1,795

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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.

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

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,

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 and six months ended June 30, 2022 and 2021, respectively (in thousands):

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

2022 2021 2022 2021

Net expense $ 836 $ 93 $ 1,478 $ 753

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Shares issued (number) — 16 19 53

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

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

SEGMENT DISCLOSURES

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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 in the “Corporate and Other”.

Segment information for the three months ended March 31, 2022 and 2021 is presented below.

Segment information for the three and six months ended June 30, 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 March 31, 2022

Three Months Ended June 30, 2022

Services Benefits and

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Total revenue $ 259,308 $ 91,708 $ 10,936 $ 361,952

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Services Benefits and

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

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

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

Services Benefits and

Insurance Services National

Practices Consolidated

Accounting, tax, advisory and consulting $ 548,054 — — $ 548,054

Core benefits and insurance services — 176,302 — 176,302

Non-core benefits and insurance services — 7,892 — 7,892

Managed networking, hardware services — — 16,254 16,254

National practices consulting — — 5,172 5,172

Total revenue $ 548,054 $ 184,194 $ 21,426 $ 753,674

Six Months Ended June 30, 2021

Services Benefits and

Insurance Services National

Practices Consolidated

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

Core benefits and insurance services — 163,358 — 163,358

Non-core benefits and insurance services — 6,501 — 6,501

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

National practices consulting — — 4,917 4,917

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

Segment information for the three months ended June 30, 2022 and 2021 was as follows (in thousands):

Three Months Ended June 30, 2022

Services Benefits

8 unchanged sentences

Interest expense — ( 1 ) — ( 1,644 ) ( 1,645 )

Gain on sale of operations, net 135 — — — 135

Other income (expense), net 85 ( 12 ) 1 ( 15,972 ) ( 15,898 )

1 unchanged sentence

Income (loss) from continuing operations before income tax expense $ 49,885 $ 16,675 $ 1,038 $ ( 23,716 ) $ 43,882

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Services Benefits

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

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

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

1 unchanged sentence

Interest expense — — — ( 959 ) ( 959 )

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

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

1 unchanged sentence

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

Segment information for the six months ended June 30, 2022 and 2021 was as follows (in thousands):

Six Months Ended June 30, 2022

Services Benefits

Services National

Practices Corporate

Revenue $ 548,054 $ 184,194 $ 21,426 $ — $ 753,674

Operating expenses (income) 419,443 147,677 19,475 ( 6,560 ) 580,035

Gross margin 128,611 36,517 1,951 6,560 173,639

Corporate general and administrative expenses — — — 27,235 27,235

Operating income (loss) 128,611 36,517 1,951 ( 20,675 ) 146,404

Other income (expense):

Interest expense — ( 1 ) — ( 2,903 ) ( 2,904 )

Gain on sale of operations, net 135 — — — 135

Other income (expense), net 171 ( 36 ) 1 ( 22,437 ) ( 22,301 )

Total other income (expense), net 306 ( 37 ) 1 ( 25,340 ) ( 25,070 )

Income (loss) from continuing operations before income tax expense $ 128,917 $ 36,480 $ 1,952 $ ( 46,015 ) $ 121,334

Six Months Ended June 30, 2021

Services Benefits

Services National

Practices Corporate

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

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

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

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

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

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

Other income:

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

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

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

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

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

SUBSEQUENT EVENTS

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.

Subsequent to June 30, 2022 and up to July 27, 2022, we repurchased approximately 0.2 million shares of our common stock in the open market at a total cost of approximately $ 8.1 million.

Effective July 1, 2022, we acquired substantially all the assets of Stinnett & Associates, LLC ("Stinnett").

Stinnett, located in Tulsa, Oklahoma, is a professional advisory firm and certified Women's Business Enterprise providing internal audit, Sarbanes-Oxley compliance, cybersecurity reviews, business continuity and disaster recovery, and fraud investigations to businesses of all sizes including Fortune 1000 organizations in a variety of industries.

Annualized revenue is estimated to be approximately $ 16.4 million.

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

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

What changed 10-Q

Item 1. Financial Statements