What changed in this filing

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Item 1A. Risk Factors

2023-02-24 compared with 2022-02-25 · 24 added, 39 removed, 202 unchanged (24% of the section changed)

11 unchanged sentences

Our success depends in large part upon the abilities and continued services of our executive officers, our business unit presidents, other key employees, and our staff members.

In the course of business operations,

employees may retire, resign and seek employment elsewhere, particularly in the current employment environment, given wage pressures and worker shortages.

In the course of business operations, employees may retire, resign and seek employment elsewhere, particularly in the current employment environment,

given wage pressures and worker shortages.

While most employees are bound in writing to agreements containing non-compete, non-solicit, confidentiality, and other restrictive covenants barring competitive employment, client acceptance, and solicitation of employees for a period of between one and ten years following their resignation, not all employees are subject to such restrictions, especially in jurisdictions that disfavor restrictive employment covenants.

27 unchanged sentences

nor can there be any assurance that state, United States Government Accountability Office or United States Department of Labor accountancy authorities will not impose additional restrictions on the profession.

To the extent that the CPA firms for whom we provide staffing, administrative and other services are affected, we may experience a decline in fee revenue from these businesses as well as expenses related to

addressing independence concerns.

To date, revenues derived from providing services in connection with attestation engagements of the attest firms performed for SEC-reporting clients have not been material.

26 unchanged sentences

Specifically, legislation or other changes could afford our clients and their employees the ability to seek insurance coverage through other means, including, but not limited to, direct access with insurance carriers or other similar avenues, which could eliminate or adversely alter the remuneration brokers receive from insurance carriers for their services.

Furthermore, statutory or regulatory

changes may result in establishing alternatives to employer-sponsored healthcare insurance or replace it with government-sponsored health insurance programs.

These changes could materially alter the healthcare in the United States and our ability to provide effective services in these areas may be substantially limited and adversely affect revenue and margins in our healthcare benefit business.

Furthermore, statutory or regulatory changes may result in establishing alternatives to employer-sponsored healthcare insurance or replace it with government-sponsored health insurance programs.

These changes could materially alter the healthcare in the

United States and our ability to provide effective services in these areas may be substantially limited and adversely affect revenue and margins in our healthcare benefit business.

Higher rates of unemployment in the United States could result in a general reduction in the number of individuals with employer-sponsored healthcare coverage.

27 unchanged sentences

In addition, we cannot be certain that the different insurance carriers which provide errors and omissions coverage for different lines of our business will not dispute their obligation to cover a particular claim.

significant, but contractual arrangements with clients may constrain our ability to incorporate such increases into service fees.

Insurance rate increases, disputes by carriers over coverage questions, payments by us within deductible or self-retention limits, as well as any underlying claims or settlement of such claims, could have a material adverse effect on our business, financial condition and results of operations.

If we have a large claim, or a large number of claims, on our insurance, the rates for such insurance may increase, and amounts expended in defense or settlement of these claims prior to exhaustion of deductible or self-retention levels may become significant, but contractual arrangements with clients may constrain our ability to incorporate such increases into service fees.

Insurance rate increases, disputes by carriers over coverage questions, payments by us within

deductible or self-retention limits, as well as any underlying claims or settlement of such claims, could have a material adverse effect on our business, financial condition and results of operations.

We are not a CPA firm and we do not perform any attest services for clients.

15 unchanged sentences

Given our levels of share-based compensation, our tax rate may vary significantly depending on our stock price.

We apply FASB Accounting Standards Codification 718, Compensation - Stock Compensation under which the tax effects of the accounting for share-based compensation may significantly impact our effective tax rate from period to period.

We apply FASB ASC 718, Compensation - Stock Compensation under which the tax effects of the accounting for share-based compensation may significantly impact our effective tax rate from period to period.

In periods in which our stock price is higher than the grant date fair value of the share-based compensation vesting or exercises in that period, we will recognize excess tax benefits that will decrease our effective tax rate.

15 unchanged sentences

The professional business services industry has been and continues to be impacted by significant technological changes and innovation, enabling companies to offer services competitive with ours.

Those technological changes may (i) reduce demand for our services, (ii) enable the development of competitive products or services, or (iii) enable our current customers to reduce or bypass the use of our services.

technological changes may (i) reduce demand for our services, (ii) enable the development of competitive products or services, or (iii) enable our current customers to reduce or bypass the use of our services.

Additionally, rapid changes in artificial intelligence, block chain-based technology, automation and related innovations are increasing the competitiveness landscape.

4 unchanged sentences

Climate change legislation or regulations restricting emissions of Greenhouse Gases could result in increased operating costs.

In 2009, the EPA published its findings that emissions of carbon dioxide, methane, and other greenhouse gases (“GHGs”), present an endangerment to public health and the environment because emissions of such gases are, according to the EPA, contributing to the warming of the earth's atmosphere and other climate changes.

In 2009, the Environmental Protection Agency ("EPA") published its findings that emissions of carbon dioxide, methane, and other greenhouse gases (“GHGs”), present an endangerment to public health and the environment because emissions of such gases are, according to the EPA, contributing to the warming of the earth's atmosphere and other climate changes.

These findings allow the EPA to adopt and implement regulations that would restrict emissions of GHGs under existing provisions of the federal Clean Air Act.

17 unchanged sentences

We may not be able to acquire and finance additional businesses which may limit our ability to pursue our business strategy.

We acquired six businesses and one client list during 2021, and maintain a healthy pipeline of potential businesses for acquisition.

Strategic acquisitions are part of our growth strategy, and it is our intention to selectively acquire businesses or client lists that are complementary to existing service offerings in our target markets.

We acquired two businesses during 2022, and maintain a robust pipeline of potential businesses for acquisition.

new and attractive markets.

However, we cannot be certain that we will be able to continue identifying appropriate acquisition candidates and acquire them on satisfactory terms, and we cannot be assured that such acquisitions, even if completed, will perform as expected or will contribute significant synergies, revenues or profits.

In addition, we may also face increased competition for acquisition opportunities, which may inhibit our ability to complete transactions on terms that are favorable to us.

As discussed above, there are certain provisions under our credit facility that may limit our ability to acquire additional businesses.

In the event that we are not in compliance with certain covenants as specified in our credit facility, we could be restricted from making acquisitions, restricted from borrowing funds from our credit facility for other uses, or required to pay down the outstanding balance on the line of credit.

As discussed above, there are certain provisions under the 2022 credit facility that may limit our ability to acquire additional businesses.

In the event that we are not in compliance with certain covenants as specified in the 2022 credit facility, we could be restricted from making acquisitions, restricted from borrowing funds from the 2022 credit facility for other uses, or required to pay down the outstanding balance on the line of credit.

However, management believes that funds available under the credit facility, along with cash generated from operations, will be sufficient to meet our liquidity needs, including planned acquisition activity in the foreseeable future.

6 unchanged sentences

Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

Our business may not generate sufficient cash flow from operations and future borrowings may not be available to us under our credit facility in an amount sufficient to enable us to fund our other liquidity needs.

Our business may not generate sufficient cash flow from operations and future borrowings may not be available to us under the 2022 credit facility in an amount sufficient to enable us to fund our other liquidity needs.

Volatility in interest rates from monetary policy or economic conditions could increase expenses, cause uncertainty and impact our ability to pay interest on our indebtedness.

Refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, for further information regarding interest rate risk.

The interest rates under our 2018 credit facility and related interest rate swaps may be impacted by the phase-out of LIBOR.

The London Interbank Offered Rate (“LIBOR”) was historically the basic rate of interest used in lending between banks on the London interbank market and was widely used as a reference for setting the interest rates on loans globally.

We currently use LIBOR as a reference rate to calculate interest rates under our credit facility.

In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced its intention to phase out LIBOR by the end of 2021.

In 2021, the ICE Benchmark Administration announced that publication of 1-week and 2-month LIBOR would cease on December 31, 2021, with all other tenors to cease by June 30, 2023.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S.

financial institutions, has recommended the use of the Secured Overnight Financing Rate (“SOFR”) as an alternative reference rate to replace LIBOR.

SOFR is calculated using short-term repurchase agreements backed by Treasury securities.

SOFR is observed and backward looking, unlike LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members.

Given that SOFR is a secured rate backed by government securities, it will be a rate that does not take into account bank credit risk (as is the case with LIBOR).

SOFR also may be more volatile than LIBOR.

Other alternative rates, such as Bloomberg Short-Term Bank Yield Index ("BSBY"), are gaining market traction.

When LIBOR ceases to exist, we may need to amend our 2018 credit facility and related interest rate swaps to replace LIBOR with an agreed upon replacement index, and certain of the interest rates under our 2018 credit facility may change.

The new rates may not be as favorable to us as those in effect prior to any LIBOR phase-out.

We may also find it desirable to engage in more frequent interest rate hedging transactions.

Terms of our credit facility may adversely affect our ability to run our business and/or reduce stockholder returns.

The terms of our credit facility, as well as the guarantees of our subsidiaries, could impair our ability to operate our business effectively and may limit our ability to take advantage of business opportunities.

For example, our credit facility may (i) restrict our ability to repurchase or redeem our capital stock or debt, or merge or consolidate with another entity;

Terms of the 2022 credit facility may adversely affect our ability to run our business and/or reduce stockholder returns.

The terms of the 2022 credit facility, as well as the guarantees of our subsidiaries, could impair our ability to operate our business effectively and may limit our ability to take advantage of business opportunities.

For example, the 2022 credit facility may (i) restrict our ability to repurchase or redeem our capital stock or debt, or merge or consolidate with another entity;

(ii) limit our ability to borrow additional funds or to obtain other financing in the future for working capital, capital expenditures, acquisitions, investments and general corporate purposes;

(iii) limit our ability to dispose of our assets, to create liens on our assets, to extend credit or to issue dividends to our

stockholders;

(iii) limit our ability to dispose of our assets, to create liens on our assets, to extend credit or to issue dividends to our stockholders;

and (iv) make us more vulnerable to economic downturns and reduce our flexibility in responding to changing business and economic conditions.

14 unchanged sentences

A substantial number of these shares have been issued in connection with acquisitions.

As part of many acquisition transactions, shares are contractually restricted from sale for a one-year period, and as of January 31, 2022, approximately 0.1 million shares of our common stock were under lock-up contractual restrictions that expire by December 31, 2022.

As part of many acquisition transactions, shares are contractually

restricted from sale for a one-year period, and as of January 31, 2023, approximately 12 thousand shares of our common stock were under lock-up contractual restrictions that expire by December 31, 2023.

We cannot be sure when sales by holders of our stock will occur, how many shares will be sold or the effect that sales may have on the market price of our common stock.

15 unchanged sentences

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-K

Item 1A. Risk Factors