What changed in this filing

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Item 1. Financial Statements

2023-04-28 compared with 2022-10-28 · 153 added, 319 removed, 413 unchanged (53% of the section changed)

3 unchanged sentences

(In thousands)

September 30,

2023 December 31,

11 unchanged sentences

Assets of deferred compensation plan 128,892 118,862

Operating lease right-of-use assets, net 191,699 151,145

Right-of-use assets, net 193,907 184,043

Other non-current assets 12,734 10,907

19 unchanged sentences

Contingent purchase price liabilities 60,604 68,748

Operating lease liabilities 181,841 145,808

Lease liabilities 183,379 174,454

Other non-current liabilities 1,118 573

6 unchanged sentences

Treasury stock ( 853,793 ) ( 824,778 )

Accumulated other comprehensive income (loss) 3,617 ( 967 )

Accumulated other comprehensive income 2,391 3,604

Total stockholders’ equity 771,930 713,452

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Revenue $ 454,606 $ 391,722

2 unchanged sentences

Corporate general and administrative expenses 15,598 16,309

Legal settlement, net — — — 30,468

Operating income 97,997 85,114

2 unchanged sentences

Gain on sale of operations, net 99 —

Other (expense) income, net ( 2,618 ) ( 1,133 ) ( 24,919 ) 12,029

Total other (expense) income, net ( 4,747 ) ( 2,149 ) ( 29,817 ) 15,562

Income from continuing operations before income tax expense 36,605 29,207 157,939 106,624

Other income (expense), net 5,112 ( 6,407 )

Total other income (expense), net 1,570 ( 7,666 )

Income before income tax expense 99,567 77,448

Income tax expense 26,407 19,321

Income from continuing operations 27,474 21,695 116,865 80,524

Loss from discontinued operations, net of tax ( 4 ) ( 4 ) ( 13 ) ( 17 )

Net Income 73,160 58,127

Earnings per share:

Continuing operations $ 0.53 $ 0.41 $ 2.25 $ 1.52

Discontinued operations — — — —

Net income $ 0.53 $ 0.41 $ 2.25 $ 1.52

Continuing operations $ 0.53 $ 0.41 $ 2.22 $ 1.50

Discontinued operations — — — —

Net income $ 0.53 $ 0.41 $ 2.22 $ 1.50

Basic $ 1.45 $ 1.12

Diluted $ 1.44 $ 1.10

Basic weighted average shares outstanding 50,367 52,119

2 unchanged sentences

Net income $ 73,160 $ 58,127

Other comprehensive income, net of tax 2,179 159 4,584 1,071

Other comprehensive (loss) income, net of tax ( 1,213 ) 1,925

Comprehensive income $ 71,947 $ 60,052

10 unchanged sentences

Comprehensive

Income (Loss) Totals

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

Other comprehensive income — — — — — — 2,179 2,179

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

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

Stock options exercised 254 — 2 4,096 — — — 4,098

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

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

Shares Common

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Income (Loss) Totals

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

Net income — — — — 21,691 — — 21,691

Other comprehensive income — — — — — — 159 159

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

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

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

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

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

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

Income Totals

December 31, 2022 136,295 86,115 $ 1,363 $ 799,147 $ 734,116 $ ( 824,778 ) $ 3,604 $ 713,452

Net income — — — — 73,160 — — 73,160

Other comprehensive income — — — — — — 4,584 4,584

Other comprehensive loss — — — — — — ( 1,213 ) ( 1,213 )

Share repurchases — 428 — — — ( 20,791 ) — ( 20,791 )

5 unchanged sentences

Business acquisitions 173 — 2 8,084 — — — 8,086

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

March 31, 2023 137,024 86,712 $ 1,370 $ 814,686 $ 807,276 $ ( 853,793 ) $ 2,391 $ 771,930

Shares Treasury

4 unchanged sentences

Stock Accumulated

Comprehensive

Income (Loss) Totals

Comprehensive (Loss)

Income Totals

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

4 unchanged sentences

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

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

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

1 unchanged sentence

Business acquisitions 19 — — 707 — — — 707

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

See the accompanying notes to the unaudited condensed consolidated financial statements

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

See the accompanying notes to the unaudited condensed consolidated financial statement

AND SUBSIDIARIES

1 unchanged sentence

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net income $ 73,160 $ 58,127

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

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

Depreciation and amortization expense 8,625 8,173

12 unchanged sentences

Other liabilities 3,184 ( 9,626 )

Operating cash flows provided by continuing operations 60,072 80,964

Operating cash flows used in discontinued operations ( 13 ) ( 18 )

Net cash provided by operating activities 60,059 80,946

Net cash used in operating activities ( 44,511 ) ( 50,890 )

Cash flows from investing activities:

14 unchanged sentences

Proceeds from exercise of stock options 3,629 3,224

Payment of contingent consideration for acquisitions ( 12,408 ) ( 7,883 )

Other, net ( 2,072 ) ( 170 )

Payment of contingent consideration for acquisitions and client lists ( 28,600 ) ( 7,305 )

Net cash provided by financing activities 61,778 170,446

2 unchanged sentences

Cash, cash equivalents and restricted cash at end of period $ 131,516 $ 188,499

Reconciliation of cash, cash equivalents and restricted cash to the

Condensed Consolidated Balance Sheets:

Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets:

Cash and cash equivalents $ 2,265 $ 558

26 unchanged sentences

Unaudited Interim Financial Statements:

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

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

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

6 unchanged sentences

We have consistently applied the accounting policies for the periods presented as described in Note 1, Basis of Presentation and Significant Accounting Policies, to the consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

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

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

other payees.

CBIZ is the sole beneficial owner of the Trust.

The Trust is considered a variable interest entity in accordance with Accounting Standards Codification 810, Consolidation.

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

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

Reclassifications:

Certain prior period amounts have been reclassified to conform to current year's presentation.

NEW ACCOUNTING PRONOUNCEMENTS

The FASB ASC is the sole source of authoritative GAAP other than the SEC issued rules and regulations that apply only to SEC registrants.

The FASB issues an accounting standard to communicate changes to the FASB codification.

We assess and review the impact of all accounting standards.

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 Adopted in 2022

Reference Rate Reform :

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this ASU are effective for all entities through December 31, 2022.

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

2021-01, Reference Rate Reform (Topic 848):

Scope , which provides optional temporary guidance for entities transitioning away from the LIBOR and other interbank offered rates to new reference rates so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions within Topic 848.

This ASU clarifies that the derivative instruments affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions provided in Topic 848.

ASU 2021-01 is effective immediately for all entities.

Entities may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued.

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 further discussion of the transaction.

The FASB issues an ASU to communicate changes to the FASB ASC.

We assess and review the impact of all issued ASUs.

During the three months ended March 31, 2023, we have implemented all new ASUs that are in effect and that may impact our consolidated financial statements.

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.

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

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

September 30,

Accounts receivable, net, at March 31, 2023 and December 31, 2022 was as follows (in thousands):

2023 December 31,

4 unchanged sentences

Accounts receivable, net $ 442,781 $ 334,498

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,

Changes to the allowance for doubtful accounts for the three months ended March 31, 2023 and twelve months ended December 31, 2022 were as follows (in thousands):

2023 December 31,

4 unchanged sentences

DEBT AND FINANCING ARRANGEMENTS

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:

On May 4, 2022, we entered into a credit facility ( the "2022 credit facility" or the "credit facility"), which amended and restated the 2018 credit facility.

The 2022 credit facility increased our borrowing capacity from $ 400 million to $ 600 million, providing 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 included:

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

1 unchanged sentence

(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;

(iv) a swing line facility increase from $ 25 million to $ 50 million, providing 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 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:

Nine Months Ended

September 30,

The 2022 credit facility matures on May 4, 2027.

The balance outstanding under the 2022 credit facility was $ 403.7 million and $ 265.7 million at March 31, 2023 and December 31, 2022, respectively.

The combined effective interest rates under the 2018 and 2022 credit facilities, including the impact of interest rate swaps associated with those credit facilities, for the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended

Weighted average rates 4.54 % 1.79 %

1 unchanged sentence

1.08 % - 3.64 %

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.

We had approximately $ 190.0 million of available funds under the 2022 credit facility at March 31, 2023, net of outstanding letters of credit of $ 5.0 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.

2 unchanged sentences

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.

Historically, we have not paid cash dividends on our common stock.

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.

1 unchanged sentence

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 September 30, 2022, we are in compliance with all covenants.

As of March 31, 2023, 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 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 September 30,

Credit facilities $ 2,301 $ 1,010

Other line of credit 4 —

Total $ 2,305 $ 1,016

Nine Months Ended September 30,

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 March 31, 2023.

Interest Expense - Interest expense, including amortization of deferred financing costs, commitment fees, line of credit fees, and other applicable bank charges, for the three months ended March 31, 2023 and 2022 was as follows (in thousands):

Three Months Ended March 31,

Credit facilities $ 3,640 $ 1,259

Other line of credit 5 —

Total $ 3,641 $ 1,259

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 September 30, 2022 and December 31, 2021, respectively.

Letters of Credit and Guarantees - We provide letters of credit to landlords (lessors) of our leased premises in lieu of cash security deposits, which totaled $ 5.0 million and $ 5.0 million at March 31, 2023 and December 31, 2022, 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 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 is seeking damages of up to $ 177.0 million out of the $ 200.0 million transaction price.

The amount of license bonds outstanding was $ 2.2 million and $ 2.3 million at March 31, 2023 and December 31, 2022, 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.

After various amendments, the lawsuit asserted 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 claimed 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 sought damages of up to $ 177.0 million out of the $ 200.0 million transaction price.

Trial was held in October 2021.

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

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

On November 14, 2022, the trial court ruled in favor of CBIZ and against Zotec’s claim for statutory securities fraud.

The court also ruled in favor of CBIZ on its counterclaim for indemnification under contract.

The trial court is expected to set further proceedings to determine the amount of damages owed by Zotec to CBIZ.

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

5 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 $ 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 par value of these investments totaled $ 43.9 million and $ 44.4 million at March 31, 2023 and December 31, 2022, respectively, and had maturity or callable dates ranging from April 2023 through November 2025.

At March 31, 2023, unrealized losses on the securities were not material and have not been recognized as a credit loss because the bonds are investment grade quality and management is not required or does not intend to sell prior to an expected recovery in value.

The bond issuers continue to make timely principal and interest payments.

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

Nine Months Ended September 30, 2022 Twelve Months Ended December 31, 2021

The following table summarizes activities related to these investments for the three months ended March 31, 2023 and the twelve months ended December 31, 2022 (in thousands):

Three Months Ended March 31, 2023 Twelve Months Ended December 31, 2022

Fair value at beginning of period $ 43,485 $ 38,670

5 unchanged sentences

Fair value at end of period $ 43,144 $ 43,485

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.

In addition to the available-for-sale debt securities discussed above, we also held other depository assets in the amount of $ 1.0 million and $ 0.9 million at March 31, 2023 and December 31, 2022, 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 our 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 the 2022 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, 2022 for further discussion on our interest rate swaps.

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.

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 %

During the first quarter of 2023, we entered into a new 5-year interest rate swap with a notional value of $ 25.0 million and fixed rate of 3.669 %.

As of March 31, 2023, we have five 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 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 September 30, 2022 and December 31, 2021 (amounts in thousands):

September 30, 2022

The following table summarizes our outstanding interest rate swaps and their classification in the accompanying unaudited Condensed Consolidated Balance Sheets at March 31, 2023 and December 31, 2022 (amounts in thousands):

March 31, 2023

Amount Fixed Rate Expiration Fair

4 unchanged sentences

Interest rate swap $ 20,000 2.450 % 8/14/2027 $ 768 Other non-current asset

Interest rate swap $ 25,000 3.669 % 4/14/2028 $ ( 394 ) Other non-current liability

December 31, 2022

1 unchanged sentence

Value Balance Sheet Location

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

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

Interest rate swap $ 15,000 2.571 % 6/1/2023 $ 133 Other current asset

Interest rate swap $ 50,000 0.834 % 4/14/2025 $ 3,726 Other non-current asset

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

Interest rate swap $ 30,000 1.186 % 12/14/2026 $ 2,871 Other non-current asset

Interest rate swap $ 20,000 2.450 % 8/14/2027 $ 1,079 Other non-current asset

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

Gain Recognized

The following table summarizes the effects of the interest rate swaps on the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2023 and 2022 (in thousands):

(Loss) Gain Recognized

in AOCI, net of tax Gain (Loss) Reclassified

from AOCL into Expense

from AOCI into Expense

Three Months Ended

September 30, Three Months Ended

September 30,

2022 2021 2022 2021

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

Nine Months Ended

September 30, Nine Months Ended

September 30,

March 31, Three Months Ended

2023 2022 2023 2022

1 unchanged sentence

FAIR VALUE MEASUREMENTS

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

The following table summarizes our assets and (liabilities) at March 31, 2023 and December 31, 2022, 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, 2023 December 31, 2022

Deferred compensation plan assets 1 $ 128,892 $ 118,862

4 unchanged sentences

Contingent purchase price liabilities 3 ( 125,756 ) ( 132,010 )

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 )

During the three months ended March 31, 2023 and 2022, 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, 2023 and 2022 (pre-tax basis) (in thousands):

Beginning balance – December 31 $ ( 132,010 ) $ ( 79,139 )

Additions from business acquisitions ( 24,840 ) ( 64,648 )

2 unchanged sentences

Change in net present value of contingencies ( 620 ) ( 722 )

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

Ending balance – March 31 $ ( 125,756 ) $ ( 136,534 )

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.

8 unchanged sentences

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

OTHER COMPREHENSIVE INCOME

The following table is a summary of other comprehensive income and discloses the tax impact of each component of other comprehensive income for the three and nine months ended September 30, 2022 and 2021 (in thousands):

OTHER COMPREHENSIVE (LOSS) INCOME

The following table is a summary of other comprehensive (loss) income and discloses the tax impact of each component of other comprehensive (loss) income for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net unrealized loss on available-for-sale

securities, net of income taxes (1)

Net unrealized gain (loss) on available-for-sale securities, net of income taxes (1)

$ 179 $ ( 939 )

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

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

( 1,388 ) 2,866

Foreign currency translation ( 4 ) ( 2 )

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

(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.

Total other comprehensive (loss) income $ ( 1,213 ) $ 1,925

(1) Net of income tax expense of $ 71 and income tax benefit of $ 352 for the three months ended March 31, 2023 and 2022, respectively.

(2) Net of income tax benefit of $ 463 and income tax expense of $ 928 for the three months ended March 31, 2023 and 2022, respectively.

EMPLOYEE STOCK PLANS

1 unchanged sentence

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

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

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

based compensation awards may be granted.

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

Refer to the Annual Report on Form 10-K for the year ended December 31, 2022 for further discussion on the 2019 Plan.

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

Compensation expense for stock-based awards recognized during the three months ended March 31, 2023 and 2022 was as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Stock options $ 768 $ 173

2 unchanged sentences

Total stock-based compensation expense $ 3,831 $ 3,689

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 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, 2023 (in thousands, except per share data):

Stock Options Restricted Stock Units and Awards

5 unchanged sentences

Exercised or released ( 189 ) $ 19.20 ( 123 ) $ 29.87

Expired or canceled — $ — ( 4 ) $ 34.04

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

Exercisable at September 30, 2022 682 $ 20.04

Outstanding at March 31, 2023 414 $ 25.16 242 $ 39.76

Exercisable at March 31, 2023 414 $ 25.16

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

awards are granted at no cost to the recipients.

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

The per-share fair value of stock options granted on February 8, 2023 was $ 15.35 .

The following weighted average assumptions were utilized:

Three Months Ended March 31, 2023

Expected volatility (1) 28.57 %

Expected option life (years) (2) 4.74

Risk-free interest rate (3) 3.89 %

Expected dividend yield (4) — %

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

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

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

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

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

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

A three-year cliff vesting schedule of the PSUs is dependent upon the Company’s performance relative to pre-established goals based on an earnings per share target (weighted 70 %) and total growth in revenue (weighted 30 %).

A three-year cliff vesting schedule of the PSUs is dependent upon the Company’s performance relative to pre-established goals based on an earnings per share target

(weighted 70 %) and total growth in revenue (weighted 30 %).

The fair value of PSUs is calculated using the market value of a share of our common stock on the date of grant.

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

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

The following table presents our PSU award activity during the three months ended March 31, 2023 (in thousands, except per share data):

Share Units Weighted

2 unchanged sentences

Vested ( 244 ) $ 25.75

Adjustments for performance results (2)

Canceled ( 5 ) $ 33.21

Outstanding at September 30, 2022 442 $ 29.12

Outstanding at March 31, 2023 326 $ 36.46

(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 nine months ended September 30, 2022 and 2021 (in thousands, except per share data):

The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2023 and 2022 (in thousands, except per share data):

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Income from continuing operations $ 27,474 $ 21,695 $ 116,865 $ 80,524

Net Income $ 73,160 $ 58,127

Weighted average common shares outstanding 50,367 52,119

Stock options (1)

434 609 523 692

Restricted stock units and awards (1)

118 155 141 182

Performance share units 205 — 205 —

Contingent shares (2)

2 unchanged sentences

50,762 52,955

Basic earnings per share from continuing operations $ 0.53 $ 0.41 $ 2.25 $ 1.52

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

(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.

Basic earnings per share $ 1.45 $ 1.12

Diluted earnings per share $ 1.44 $ 1.10

(1) A total of 80 thousand and 55 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2023 and 2022, 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 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.

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

(3) The denominator used in calculating diluted earnings per share did not include 326 thousand and 363 thousand performance share units for both the three months ended March 31, 2023 and 2022, respectively.

BUSINESS COMBINATIONS

Business Combinations

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

During the three months ended March 31, 2023, we completed the following acquisitions:

• Effective January 1, 2023, we acquired all of the assets of Danenhauer and Danenhauer, Inc, ("Danenhauer and Danenhauer").

Danenhauer and Danenhauer, based in California, is a provider of forensic accounting, business valuation, expert witness testimony, and other services for businesses and individuals.

Danenhauer and Danenhauer is included as a component of our Financial Services practice group.