What changed in this filing

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Item 1. Financial Statements

2022-10-28 compared with 2022-07-29 · 122 added, 109 removed, 610 unchanged (27% of the section changed)

3 unchanged sentences

(In thousands)

September 30,

2022 December 31,

50 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

4 unchanged sentences

Legal settlement, net — — — 30,468

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

Operating income 41,352 31,356 187,756 91,062

Other income (expense):

33 unchanged sentences

Income (Loss) Totals

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

Net income — — — — 27,470 — — 27,470

1 unchanged sentence

Share repurchases — 744 — — — ( 32,422 ) — ( 32,422 )

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

Restricted stock units and awards 1 — — — — — — —

1 unchanged sentence

Stock-based compensation — — — 5,559 — — — 5,559

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

Business acquisitions 68 — 1 2,717 — — — 2,718

September 30, 2022 136,146 84,965 $ 1,361 $ 793,514 $ 745,614 $ ( 769,981 ) $ 3,617 $ 774,125

Shares Treasury

6 unchanged sentences

Income (Loss) Totals

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

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

Net income — — — — 21,691 — — 21,691

1 unchanged sentence

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

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

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

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

1 unchanged sentence

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

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

See the accompanying notes to the unaudited condensed consolidated financial statements

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

AND SUBSIDIARIES

19 unchanged sentences

Business acquisitions 87 — 1 3,424 — — — 3,425

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

September 30, 2022 136,146 84,965 $ 1,361 $ 793,514 $ 745,614 $ ( 769,981 ) $ 3,617 $ 774,125

Shares Treasury

15 unchanged sentences

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

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

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

See the accompanying notes to the unaudited condensed consolidated financial statements

AND SUBSIDIARIES

1 unchanged sentence

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

36 unchanged sentences

Other, net ( 2,072 ) ( 170 )

Net cash provided by (used in) financing activities 91,655 ( 42,582 )

Net increase (decrease) in cash, cash equivalents and restricted cash 30,407 ( 16,425 )

Net cash provided by financing activities 6,025 1,678

Net (decrease) increase in cash, cash equivalents and restricted cash ( 29,466 ) 11,896

Cash, cash equivalents and restricted cash at beginning of year 150,474 170,335

73 unchanged sentences

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.

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

ACCOUNTS RECEIVABLE, NET

4 unchanged sentences

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

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

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

September 30,

2022 December 31,

4 unchanged sentences

Accounts receivable, net $ 398,970 $ 242,168

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):

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

September 30,

2022 December 31,

14 unchanged sentences

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 financing costs are deferred and reported as a reduction of debt on the accompanying unaudited Condensed Consolidated Balance Sheets, are included as a component of cash flow from financing activities on the accompanying unaudited Condensed Consolidated Statements of 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 second quarter of 2022.

The balance outstanding under the 2022 credit facility was $ 271.1 million at September 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

Nine Months Ended

September 30,

Weighted average rates 2.29 % 1.89 %

1 unchanged sentence

1.06 % - 3.64 %

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.

We had approximately $ 310.9 million of available funds under the 2022 credit facility at September 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.

5 unchanged sentences

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.

As of September 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 June 30, 2022.

We intend to renew this line of credit.

The line of credit, which was renewed on August 1, 2022 and will terminate on August 3, 2023, did no t have a balance outstanding at September 30, 2022.

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

Three Months Ended June 30,

Three Months Ended September 30,

Credit facilities $ 2,301 $ 1,010

1 unchanged sentence

Total $ 2,305 $ 1,016

Six Months Ended June 30,

Nine Months Ended September 30,

Credit facilities $ 5,204 $ 2,833

2 unchanged sentences

COMMITMENTS AND CONTINGENCIES

Letters of Credit and Guarantees - We provide letters of credit to landlords (lessors) of our leased premises in lieu of cash security deposits, which totaled $ 5.7 million and $ 3.4 million at June 30, 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 June 30, 2022 and December 31, 2021, respectively.

The amount of license bonds outstanding was $ 2.3 million and $ 2.3 million at September 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.

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

The plaintiff claims that CBIZ Operations had a duty to disclose the fact,

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

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

held in October 2021.

Trial was held in October 2021.

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

7 unchanged sentences

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 unaudited Condensed Consolidated Balance Sheets.

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 par value of these investments totaled $ 45.3 million and $ 37.0 million at September 30, 2022 and December 31, 2021, respectively, and had maturity or callable dates ranging from October 2022 through November 2025.

At September 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 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

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

Nine Months Ended September 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 $ 44,373 $ 38,670

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.

In addition to the available-for-sale debt securities discussed above, we also held other depository assets in the amount of $ 1.7 million and $ 1.1 million at September 30, 2022 and December 31, 2021, respectively.

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

5 unchanged sentences

No other terms under the swap agreements were amended.

During the third quarter of 2022, we entered into a new 5-year interest rate swap with a notional value of $ 20 million and fixed rate of 2.45 %

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

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

September 30, 2022

Amount Fixed Rate Expiration Fair

3 unchanged sentences

Interest rate swap $ 30,000 1.186 % 12/14/2026 $ 3,020 Other non-current asset

Interest rate swap $ 20,000 2.450 % 8/14/2027 $ 1,147 Other non-current asset

December 31, 2021

6 unchanged sentences

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):

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 nine months ended September 30, 2022 and 2021 (in thousands):

Gain Recognized

in AOCI, net of tax Loss Reclassified

in AOCI, net of tax Gain (Loss) Reclassified

from AOCL into Expense

Three Months Ended

June 30, Three Months Ended

September 30, Three Months Ended

September 30,

2022 2021 2022 2021

Interest rate swaps $ 2,815 $ 66 $ 220 $ ( 285 )

Six Months Ended

June 30, Six Months Ended

Nine Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

1 unchanged sentence

FAIR VALUE MEASUREMENTS

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

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

Deferred compensation plan assets 1 $ 111,060 $ 136,321

4 unchanged sentences

Contingent purchase price liabilities 3 ( 141,208 ) ( 79,139 )

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):

During the nine months ended September 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 nine months ended September 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 ( 2,378 ) ( 1,263 )

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

Ending balance – September 30 $ ( 141,208 ) $ ( 84,628 )

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 unaudited Condensed Consolidated Balance Sheets.

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

6 unchanged sentences

Total other comprehensive income $ 2,179 $ 159 $ 4,584 $ 1,071

(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.

(1) Net of income tax benefit of $ 171 and income tax benefit of $ 44 for the three months ended September 30, 2022 and 2021, respectively, and net of income tax benefit of $ 604 and income tax benefit of $ 103 for the nine months ended September 30, 2022 and 2021, respectively.

(2) Net of income tax expense of $ 863 and income tax expense of $ 90 for the three months ended September 30, 2022 and 2021, respectively, and net of income tax expense of $ 2,041 and income tax expense of $ 436 for the nine months ended September 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.

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.

1 unchanged sentence

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

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

3 unchanged sentences

Total stock-based compensation expense $ 5,559 $ 2,905 $ 11,987 $ 8,359

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

Stock Options Restricted Stock Units and Awards

6 unchanged sentences

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

Outstanding at September 30, 2022 682 $ 20.04 277 $ 32.62

Exercisable at September 30, 2022 682 $ 20.04

(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 six months ended June 30, 2022 (in thousands, except per share data):

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

Share Units Weighted

2 unchanged sentences

Vested ( 211 ) $ 19.82

Adjustments for performance results (2)

Canceled ( 5 ) $ 33.21

Outstanding at June 30, 2022 360 $ 29.90

Outstanding at September 30, 2022 442 $ 29.12

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

PSUs are granted at no cost to the recipients.

(2) Represents the change in the number of performance awards earned based on performance achievement for the performance period.

EARNINGS PER SHARE

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

5 unchanged sentences

118 155 141 182

Performance share units 205 — 205 —

Contingent shares (2)

4 unchanged sentences

Diluted earnings per share from continuing operations $ 0.53 $ 0.41 $ 2.22 $ 1.50

(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.

(1) A total of 72 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for the nine months ended September 30, 2022, as their effect would be anti-dilutive.

No stock-based awards were exclude from the calculation of diluted earnings per share for the three months ended September 30, 2022, as their effect was dilutive.

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, 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 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.

The performance conditions associated with these performance share units were not met and consequently none of these performance share units were considered as issuable for the three and six months ended June 30, 2022 and 2021.

(3) The denominator used in calculating diluted earnings per share did not include 237 thousand performance share units for both the three and nine months ended September 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 nine months ended September 30, 2021.

BUSINESS COMBINATIONS

Business Combinations

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

During the nine months ended September 30, 2022, we completed the following acquisitions:

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

1 unchanged sentence

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

• 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.

Operating results are reported in the Financial Services practice group.

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

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

10 unchanged sentences

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 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):

• 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.

The acquisitions of Marks Paneth and Stinnett are expected to add approximately $ 154.5 million annualized revenue in 2022.

For the nine months ended September 30, 2022, we recorded approximately $ 9.3 million in non-recurring transaction, retention and integration related costs associated with the Marks Paneth 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 nine months ended September 30, 2022 and 2021, respectively.

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

Common stock issued (number) 42 207

14 unchanged sentences

Maximum potential contingent consideration $ 77,075 $ 40,126

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 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,

The following table summarizes the goodwill and intangible asset amounts resulting from those acquisitions for the nine months ended September 30, 2022 and 2021, respectively (in thousands):

Nine Months Ended September 30,

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

6 unchanged sentences

Goodwill related to these acquisitions is deductible for tax purposes.

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 from the aforementioned acquisitions have an expected life up to 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 and six months ended June 30, 2022 and 2021, respectively (in thousands):

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

The following table summarizes the changes in contingent purchase price consideration for previous acquisitions and contingent payments made for previous business acquisitions in the three and nine months ended September 30, 2022 and 2021, respectively (in thousands):

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

2022 2021 2022 2021

2 unchanged sentences

Shares issued (number) 26 13 45 66

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.

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 Condensed Consolidated Statements of Comprehensive Income.

During the nine months ended September 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.

In addition, during the three and nine months ended September 30, 2022, we sold one small book of business for $ 2.5 million in the Benefits and Insurance Services practice group and recorded a gain of $ 2.4 million.

This gain is recorded as “Other (expense) income, net” in the accompanying Condensed Consolidated Statements of Comprehensive Income.

Gain on book of business sales in the three and nine months ended September 30, 2021 was immaterial .

SEGMENT DISCLOSURES

18 unchanged sentences

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 and six months ended June 30, 2022 and 2021 is presented below.

Segment information for the three and nine months ended September 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 June 30, 2022

Three Months Ended September 30, 2022

Services Benefits and

7 unchanged sentences

Total revenue $ 259,998 $ 92,067 $ 11,197 $ 363,262

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Services Benefits and

7 unchanged sentences

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

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Services Benefits and

7 unchanged sentences

Total revenue $ 808,052 $ 276,261 $ 32,623 $ 1,116,936

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Services Benefits and

7 unchanged sentences

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

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

Three Months Ended June 30, 2022

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

Three Months Ended September 30, 2022

Services Benefits

2 unchanged sentences

Revenue $ 259,998 $ 92,067 $ 11,197 $ — $ 363,262

Operating expenses (income) 209,643 75,020 9,899 ( 4,826 ) 289,736

Operating expenses 220,337 73,321 9,743 2,616 306,017

Gross margin 39,661 18,746 1,454 ( 2,616 ) 57,245

7 unchanged sentences

Income (loss) from continuing operations before income tax expense $ 39,940 $ 21,144 $ 1,462 $ ( 25,941 ) $ 36,605

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Services Benefits

5 unchanged sentences

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

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

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

1 unchanged sentence

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

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

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

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

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

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

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

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

Six Months Ended June 30, 2022

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

Nine Months Ended September 30, 2022

Services Benefits

12 unchanged sentences

Income (loss) from continuing operations before income tax expense $ 168,857 $ 57,624 $ 3,414 $ ( 71,956 ) $ 157,939

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Services Benefits

7 unchanged sentences

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

Other income:

Other income (expense):

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

4 unchanged sentences

SUBSEQUENT EVENTS

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").

Annualized revenue is estimated to be approximately $ 16.4 million.

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

Subsequent to September 30, 2022 and up to October 26, 2022, we repurchased approximately 0.4 million shares of our common stock in the open market at a total cost of approximately $ 18.0 million.

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

What changed 10-Q

Item 1. Financial Statements