CBIZ, Inc. 10-Q

Item 1. Financial Statements CBIZ, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) September 30, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 1,415 $ 4,697 Restricted cash 38,229 28,487 Accounts receivable, net 465,848 334,498 Other current assets 37,879 29,431 Current assets before funds held for clients 543,371 397,113 Funds held for clients 122,531 171,313 Total current assets 665,902 568,426 Non-current assets: Property and equipment, net 55,291 45,184 Goodwill and other intangible assets, net 1,014,607 951,702 Assets of deferred compensation plan 130,284 118,862 Right-of-use assets, net 193,552 184,043 Other non-current assets 14,858 10,907 Total non-current assets 1,408,592 1,310,698 Total assets $ 2,074,494 $ 1,879,124 LIABILITIES Current liabilities: Accounts payable $ 80,609 $ 80,725 Income taxes payable 16,184 1,607 Accrued personnel costs 118,289 130,456 Contingent purchase price liabilities 70,129 63,262 Operating lease liabilities 36,488 36,358 Other current liabilities 28,837 26,532 Current liabilities before client fund obligations 350,536 338,940 Client fund obligations 123,910 173,467 Total current liabilities 474,446 512,407 Non-current liabilities: Bank debt 394,700 265,700 Debt issuance costs ( 1,692 ) ( 2,046 ) Total long-term debt, net 393,008 263,654 Income taxes payable 2,029 2,211 Deferred income taxes, net 31,749 24,763 Deferred compensation plan obligations 130,284 118,862 Contingent purchase price liabilities 49,885 68,748 Lease liabilities 181,834 174,454 Other non-current liabilities 665 573 Total non-current liabilities 789,454 653,265 Total liabilities 1,263,900 1,165,672 STOCKHOLDERS' EQUITY Common stock 1,374 1,363 Additional paid in capital 828,864 799,147 Retained earnings 867,821 734,116 Treasury stock ( 891,880 ) ( 824,778 ) Accumulated other comprehensive income 4,415 3,604 Total stockholders’ equity 810,594 713,452 Total liabilities and stockholders’ equity $ 2,074,494 $ 1,879,124 See the accompanying notes to the unaudited condensed consolidated financial statements 3 CBIZ, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenue $ 410,539 $ 363,262 $ 1,263,647 $ 1,116,936 Operating expenses 342,148 306,017 1,027,146 886,052 Gross margin 68,391 57,245 236,501 230,884 Corporate general and administrative expenses 13,136 15,893 44,527 43,128 Operating income 55,255 41,352 191,974 187,756 Other (expense) income: Interest expense ( 5,848 ) ( 2,305 ) ( 15,023 ) ( 5,209 ) Gain on sale of operations, net 77 176 176 311 Other (expense) income, net ( 2,288 ) ( 2,622 ) 8,245 ( 24,932 ) Total other expense, net ( 8,059 ) ( 4,751 ) ( 6,602 ) ( 29,830 ) Income before income tax expense 47,196 36,601 185,372 157,926 Income tax expense 13,514 9,131 51,667 41,074 Net Income 33,682 27,470 133,705 116,852 Earnings per share: Basic $ 0.68 $ 0.53 $ 2.67 $ 2.25 Diluted $ 0.67 $ 0.53 $ 2.64 $ 2.22 Basic weighted average shares outstanding 49,838 51,457 50,054 51,827 Diluted weighted average shares outstanding 50,371 52,238 50,644 52,720 Comprehensive income: Net income $ 33,682 $ 27,470 $ 133,705 $ 116,852 Other comprehensive income, net of tax 487 2,179 811 4,584 Comprehensive income $ 34,169 $ 29,649 $ 134,516 $ 121,436 See the accompanying notes to the unaudited condensed consolidated financial statements 4 CBIZ, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (In thousands) Issued Common Shares Treasury Shares Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income Totals June 30, 2023 137,081 87,259 $ 1,371 $ 818,693 $ 834,139 $ ( 882,088 ) $ 3,928 $ 776,043 Net income — — — — 33,682 — — 33,682 Other comprehensive income — — — — — — 487 487 Share repurchases — 176 — — — ( 9,472 ) — ( 9,472 ) Indirect repurchase of shares for minimum tax withholding — 4 — — — ( 224 ) — ( 224 ) Restricted stock units and awards 9 — 1 ( 1 ) — — — — Stock options exercised 212 — 1 4,122 — — — 4,123 Stock-based compensation — — — 3,102 — — — 3,102 Business acquisitions 54 — 1 2,798 — — — 2,799 Excise tax on share repurchases — — — 150 — ( 96 ) — 54 September 30, 2023 137,356 87,439 $ 1,374 $ 828,864 $ 867,821 $ ( 891,880 ) $ 4,415 $ 810,594 Issued Common Shares Treasury Shares Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income 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 See the accompanying notes to the unaudited condensed consolidated financial statement 5 CBIZ, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (In thousands) Issued Common Shares Treasury Shares Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income Totals December 31, 2022 136,295 86,115 $ 1,363 $ 799,147 $ 734,116 $ ( 824,778 ) $ 3,604 $ 713,452 Net income — — — — 133,705 — — 133,705 Other comprehensive income — — — — — — 811 811 Share repurchases — 1,151 — — — ( 58,000 ) — ( 58,000 ) Indirect repurchase of shares for minimum tax withholding — 173 — — — ( 8,448 ) — ( 8,448 ) Restricted stock units and awards 153 — 2 ( 2 ) — — — — Performance share units 244 — 2 ( 2 ) — — — — Stock options exercised 433 — 4 8,371 — — — 8,375 Stock-based compensation — — — 9,721 — — — 9,721 Business acquisitions 231 — 3 11,092 — — — 11,095 Excise tax on share repurchases — — — 537 — ( 654 ) — ( 117 ) September 30, 2023 137,356 87,439 $ 1,374 $ 828,864 $ 867,821 $ ( 891,880 ) $ 4,415 $ 810,594 Issued Common Shares Treasury Shares Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive (Loss) Income Totals December 31, 2021 135,187 83,149 $ 1,352 $ 770,117 $ 628,762 $ ( 694,716 ) $ ( 967 ) $ 704,548 Net income — — — — 116,852 — — 116,852 Other comprehensive income — — — — — — 4,584 4,584 Share repurchases — 1,628 — — — ( 67,976 ) — ( 67,976 ) Indirect repurchase of shares for minimum tax withholding — 188 — — — ( 7,289 ) — ( 7,289 ) Restricted stock units and awards 120 — 1 ( 1 ) — — — — Performance share units 211 — 2 ( 2 ) — — — — Stock options exercised 541 — 5 7,989 — — — 7,994 Stock-based compensation — — — 11,987 — — — 11,987 Business acquisitions 87 — 1 3,424 — — — 3,425 September 30, 2022 136,146 84,965 $ 1,361 $ 793,514 $ 745,614 $ ( 769,981 ) $ 3,617 $ 774,125 See the accompanying notes to the unaudited condensed consolidated financial statements 6 CBIZ, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended September 30, 2023 2022 Cash flows from operating activities: Net income $ 133,705 $ 116,852 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 26,965 24,707 Gain on sale of operations, net ( 176 ) ( 311 ) Bad debt expense, net of recoveries 1,011 1,295 Adjustment to contingent earnout liability 2,071 1,917 Stock-based compensation expense 9,721 11,987 Deferred income taxes 6,689 5,690 Other, net ( 1,156 ) ( 2,096 ) Changes in assets and liabilities, net of acquisitions and divestitures: Accounts receivable, net ( 121,249 ) ( 125,700 ) Other assets ( 8,222 ) ( 2,610 ) Accounts payable ( 1,057 ) 6,203 Income taxes payable 14,414 12,709 Accrued personnel costs ( 12,593 ) 18,863 Other liabilities 7,131 ( 9,447 ) Net cash provided by operating activities 57,254 60,059 Cash flows from investing activities: Business acquisitions and purchases of client lists, net of cash acquired ( 53,110 ) ( 79,289 ) Purchases of client fund investments ( 2,472 ) ( 19,771 ) Proceeds from the sales and maturities of client fund investments 6,815 11,500 Proceeds from sales of divested operations 1,696 2,906 Change in funds held for clients 875 ( 171 ) Additions to property and equipment ( 19,035 ) ( 6,030 ) Other, net ( 11,399 ) ( 4,695 ) Net cash used in investing activities ( 76,630 ) ( 95,550 ) Cash flows from financing activities: Proceeds from bank debt 975,300 655,500 Payment of bank debt ( 846,300 ) ( 539,700 ) Payment for acquisition of treasury stock ( 57,736 ) ( 65,976 ) Indirect repurchase of shares for minimum tax withholding ( 8,448 ) ( 7,289 ) Changes in client funds obligations ( 49,557 ) ( 30,024 ) Proceeds from exercise of stock options 8,375 7,994 Payment of contingent consideration for acquisitions and client lists ( 40,076 ) ( 12,408 ) Other, net — ( 2,072 ) Net cash (used in) provided by financing activities ( 18,442 ) 6,025 Net decrease in cash, cash equivalents and restricted cash ( 37,818 ) ( 29,466 ) Cash, cash equivalents and restricted cash at beginning of year 160,145 150,474 Cash, cash equivalents and restricted cash at end of period $ 122,327 $ 121,008 Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets: Cash and cash equivalents $ 1,415 $ 2,040 Restricted cash 38,229 39,555 Cash equivalents included in funds held for clients 82,683 79,413 Total cash, cash equivalents and restricted cash $ 122,327 $ 121,008 See the accompanying notes to the unaudited condensed consolidated financial statements 7 CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Selected Terms Used in Notes to the Condensed Consolidated Financial Statements ASA – Administrative Service Agreement ASC – Accounting Standards Codification ASU – Accounting Standards Update CPA firm – Certified Public Accounting firm FASB – The Financial Accounting Standards Board GAAP – United States Generally Accepted Accounting Principles SOFR – Secured Overnight Financing Rate LIBOR – London Interbank Offered Rate SEC – United States Securities and Exchange Commission Description of Business: CBIZ, Inc. is a diversified services company which, acting through its subsidiaries, has been providing professional business services since 1996, primarily to small and medium-sized businesses, as well as individuals, governmental entities, and not-for-profit enterprises throughout the United States and parts of Canada. CBIZ, Inc. manages and reports its operations along three practice groups: Financial Services, Benefits and Insurance Services and National Practices. A further description of products and services offered by each of the practice groups is provided in Note 12, Segment Disclosures, to the accompanying unaudited condensed consolidated financial statements. Effective April 1, 2023, CBIZ formed Rockside Insurance Company, Inc. ("Rockside"), a captive insurance company licensed in Vermont. Rockside, wholly owned by CBIZ, provides insurance coverages for a portion of the retention deductibles from CBIZ's certain insurance programs with third party insurers. Basis of Consolidation: The accompanying unaudited condensed consolidated financial statements include the operations of CBIZ, Inc. and all of its wholly-owned subsidiaries (“CBIZ”, the “Company”, “we”, “us”, or “our”), after elimination of all intercompany balances and transactions. These unaudited condensed consolidated financial statements do not reflect the operations or accounts of variable interest entities as the impact is not material to the financial condition, results of operations or cash flows of CBIZ. Unaudited Interim Financial Statements: 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. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. In the opinion of CBIZ management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows for the interim periods presented, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2023. Use of Estimates: The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Changes in circumstances could cause actual results to differ materially from these estimates. Changes in Accounting Policies: 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 8 consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Reclassifications: Certain prior period amounts have been reclassified to conform to current year's presentation. NOTE 2. 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 ASU to communicate changes to the FASB ASC. We assess and review the impact of all issued ASUs. During the nine months ended September 30, 2023, we have implemented all new ASUs that are in effect and that may impact our consolidated financial statements. Accounting Standards Adopted in 2023 In August 2023, the FASB issued ASU No. 2023-04, Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 121 , which amended and added various SEC paragraphs in the ASC to reflect the issuance of SEC Staff Bulletin No. 121. We adopted ASU No. 2023-04 upon issuance and the adoption had no material impact on our condensed consolidated financial statements and related disclosures. In July 2023, the FASB issued ASU No. 2023-03, Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock, which amended and added various SEC paragraphs in the ASC to reflect the issuance of SEC Staff Bulletin No. 120. We adopted ASU No. 2023-04 upon issuance and the adoption had no material impact on our condensed consolidated financial statements and related disclosures. NOTE 3. ACCOUNTS RECEIVABLE, NET Accounts receivable, less allowance for doubtful accounts, reflects the net realizable value of receivables and approximates fair value. 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, 2023 and December 31, 2022 was as follows (in thousands): September 30, 2023 December 31, 2022 Trade accounts receivable $ 301,331 $ 267,409 Unbilled revenue, at net realizable value 189,287 87,890 Total accounts receivable 490,618 355,299 Allowance for doubtful accounts ( 24,770 ) ( 20,801 ) Accounts receivable, net $ 465,848 $ 334,498 Changes to the allowance for doubtful accounts for the nine months ended September 30, 2023 and twelve months ended December 31, 2022 were as follows (in thousands): 9 September 30, 2023 December 31, 2022 Balance at beginning of period $ ( 20,801 ) $ ( 16,158 ) Provision ( 8,867 ) ( 13,545 ) Charge-offs, net of recoveries 4,898 8,902 Allowance for doubtful accounts $ ( 24,770 ) $ ( 20,801 ) NOTE 4. DEBT AND FINANCING ARRANGEMENTS 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; (ii) no change in pricing from the 2018 credit facility; (iii) upsizing of baskets and various sublimits to reflect the increased size of the Company's business; (iv) a swing line facility increase from $ 25 million to $ 50 million, 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 matures on May 4, 2027. The balance outstanding under the 2022 credit facility was $ 394.7 million and $ 265.7 million at September 30, 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 nine months ended September 30, 2023 and 2022 were as follows: Nine Months Ended September 30, 2023 2022 Weighted average rates 5.16 % 2.29 % Range of effective rates 1.93 % - 8.00 % 1.08 % - 4.18 % We had approximately $ 195.0 million of available funds under the 2022 credit facility at September 30, 2023, net of outstanding letters of credit of $ 4.4 million. Available funds under the credit facility are based on a multiple of earnings before interest, taxes, depreciation and amortization as defined in the credit facility, and are reduced by letters of credit, other indebtedness and outstanding borrowings under the credit facility. Under the 2022 credit facility, loans are charged an interest rate consisting of a base rate or Term SOFR rate plus an applicable margin, letters of credit are charged based on the same applicable margin, and a commitment fee is charged on the unused portion of the credit facility. The 2022 credit facility contains certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens or other encumbrances, making certain payments, investments, or to sell or otherwise dispose of a substantial portion of assets, or to merge or consolidate with an unaffiliated entity. The 2022 credit facility also limits our ability to make dividend payments. Historically, we have not paid cash dividends on our common stock. Our Board of Directors has discretion over the payment and level of dividends on common stock, subject to the limitations of the credit facility and applicable law. The credit facility contains a provision that, in the event of a defined change in control, the credit facility may be terminated. In addition, the 2022 credit facility contains financial covenants that require us to meet certain requirements with respect to (i) a total leverage ratio and (ii) minimum interest coverage ratio which may limit our ability to borrow up to the total commitment amount. As of September 30, 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. and Huntington National Bank. 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 3, 2023 and will terminate on August 1, 2024, did no t have a balance outstanding at September 30, 2023. 10 Interest Expense - Interest expense, including amortization of deferred financing costs, commitment fees, line of credit fees, and other applicable bank charges, for the three and nine months ended September 30, 2023 and 2022 was as follows (in thousands): Three Months Ended September 30, 2023 2022 Credit facilities $ 5,848 $ 2,301 Other line of credit — 4 Total $ 5,848 $ 2,305 Nine Months Ended September 30, 2023 2022 Credit facilities $ 14,986 $ 5,204 Other line of credit — 5 Other 37 — Total $ 15,023 $ 5,209 NOTE 5. 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 $ 4.4 million and $ 5.0 million at September 30, 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, 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. 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 has scheduled a hearing for November 2, 2023, to consider evidence regarding the amount of damages owed by Zotec to CBIZ on the counterclaim. In addition to the item disclosed above, the Company is, from time to time, subject to claims and lawsuits arising in the ordinary course of business. We cannot predict the outcome of all such matters or estimate the possible loss, if any. Although the proceedings are subject to uncertainties in the litigation process and the ultimate disposition of these proceedings is not presently determinable, we intend to vigorously defend these matters. NOTE 6. FINANCIAL INSTRUMENTS Available-For-Sale Debt Securities - In connection with certain services provided by our payroll operations, we collect funds from our clients’ accounts in advance of paying client obligations. These funds held for clients are segregated and invested in accordance with our investment policy, which requires all investments carry an investment grade rating at the time of initial investment. These investments, primarily consisting of corporate and municipal bonds, are classified as available-for-sale and are included in the “Funds held for clients” line item on the accompanying unaudited Condensed Consolidated Balance Sheets. The par value of these investments totaled $ 40.0 million and $ 44.4 million at September 30, 2023 and December 31, 2022, respectively, and these investments have maturity or callable dates ranging from October 2023 through November 2025. 11 At September 30, 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, 2023 and the twelve months ended December 31, 2022 (in thousands): Nine Months Ended September 30, 2023 Twelve Months Ended December 31, 2022 Fair value at beginning of period $ 43,485 $ 38,670 Purchases 2,472 19,771 Redemptions ( 3,310 ) ( 5,630 ) Maturities ( 3,505 ) ( 6,770 ) Change in bond premium ( 527 ) ( 645 ) Fair market value adjustment 713 ( 1,911 ) Fair value at end of period $ 39,328 $ 43,485 In addition to the available-for-sale debt securities discussed above, we also held other depository assets in the amount of $ 0.5 million and $ 0.9 million at September 30, 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 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. 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 %. During the second quarter of 2023, one interest rate swap expired with a notional value of $ 15.0 million. As of September 30, 2023, we have four interest rate swaps outstanding. Under the terms of the interest rate swaps, we pay interest at a fixed rate of interest plus applicable margin as stated in the 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, 2023 and December 31, 2022 (amounts in thousands): September 30, 2023 Notional Amount Fixed Rate Expiration Fair Value Balance Sheet Location Interest rate swap $ 50,000 0.834 % 4/14/2025 $ 3,139 Other non-current asset Interest rate swap $ 30,000 1.186 % 12/14/2026 $ 2,973 Other non-current asset Interest rate swap $ 20,000 2.450 % 8/14/2027 $ 1,390 Other non-current asset Interest rate swap $ 25,000 3.669 % 4/14/2028 $ 681 Other non-current asset December 31, 2022 Notional Amount Fixed Rate Expiration Fair Value Balance Sheet Location 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 1.186 % 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 12 September 30, 2023 and 2022 (in thousands): Gain Recognized in AOCI, net of tax Gain (Loss) Reclassified from AOCI into Expense Three Months Ended September 30, Three Months Ended September 30, 2023 2022 2023 2022 Interest rate swaps $ 1,163 $ 2,815 $ 1,122 $ 220 Nine Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Interest rate swaps $ 2,635 $ 6,009 $ 3,092 $ ( 278 ) NOTE 7. FAIR VALUE MEASUREMENTS The following table summarizes our assets and (liabilities) at September 30, 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 September 30, 2023 December 31, 2022 Deferred compensation plan assets 1 $ 130,284 $ 118,862 Available-for-sale debt securities 1 39,328 43,485 Other depository assets 1 519 868 Deferred compensation plan liabilities 1 ( 130,284 ) ( 118,862 ) Interest rate swaps 2 8,183 7,809 Contingent purchase price liabilities 3 ( 120,014 ) ( 132,010 ) During the nine months ended September 30, 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 nine months ended September 30, 2023 and 2022 (pre-tax basis) (in thousands): 2023 2022 Beginning balance – December 31 $ ( 132,010 ) $ ( 79,139 ) Additions from business acquisitions ( 32,142 ) ( 74,199 ) Settlement of contingent purchase price liabilities 46,209 14,047 Change in fair value of contingencies 58 461 Change in net present value of contingencies ( 2,129 ) ( 2,378 ) Ending balance – September 30 $ ( 120,014 ) $ ( 141,208 ) 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. We estimate the fair value of our contingent purchase price liabilities using a probability-weighted discounted cash flow model. This fair value measure is based on significant inputs not observed in the market and thus represents a Level 3 measurement. Fair value measurements characterized within Level 3 of the fair value hierarchy are measured based on unobservable inputs that are supported by little or no market activity and reflect our own assumptions in measuring fair value. We probability weight risk-adjusted estimates of future performance of acquired businesses, then calculate the contingent purchase price based on the estimates and discount them to present value representing management’s best estimate of fair value. The fair value of the contingent purchase price liabilities is reassessed quarterly based on assumptions provided by practice group leaders and business unit controllers together with our corporate finance department. Any change in the fair value estimate is recorded in the earnings of that period. Refer to Note 11, Business Combinations, for further discussion of our acquisitions and contingent purchase price liabilities. 13 The carrying amounts of our cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments, and the carrying value of bank debt approximates fair value as the interest rate on the bank debt is variable and approximates current market rates. As a result, the fair value measurement of our bank debt is considered to be Level 2 under the fair value hierarchy. NOTE 8. 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, 2023 and 2022 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net unrealized gain (loss) on available-for-sale securities, net of income taxes (1) $ 172 $ ( 457 ) $ 510 $ ( 1,614 ) Net unrealized gain on interest rate swaps, net of income taxes (2) 321 2,647 316 6,218 Foreign currency translation ( 6 ) ( 11 ) ( 15 ) ( 20 ) Total other comprehensive income $ 487 $ 2,179 $ 811 $ 4,584 (1) Net of income tax expense of $ 68 and income tax benefit of $ 171 for the three months ended September 30, 2023 and 2022, respectively, and net of income tax expense of $ 203 and income tax benefit of $ 604 for the nine months ended September 30, 2023 and 2022, respectively. (2) Net of income tax expense of $ 108 and income tax expense of $ 863 for the three months ended September 30, 2023 and 2022, respectively, and net of income tax expense of $ 94 and income tax expense of $ 2,041 for the nine months ended September 30, 2023 and 2022, respectively. NOTE 9. EMPLOYEE STOCK PLANS On May 10, 2023, the shareholders of the Company approved an amendment to the 2019 Stock Omnibus Incentive Plan (the “2019 Plan”). The amendment added 1.5 million shares to the total number of shares that may be issued under the 2019 Plan. All other respects of the Plan remain unchanged. The 2019 Plan, which expires in 2029, permits the grant of various forms of stock-based awards. A maximum of 4.6 million stock options, restricted stock or other stock-based compensation awards may be granted. The terms and vesting schedules for the stock-based awards vary by type and date of grant. 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, 2023 and 2022 was as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Stock options $ — $ — $ 768 $ 248 Restricted stock units and awards 1,452 1,188 4,066 4,015 Performance share units 1,650 4,371 4,887 7,724 Total stock-based compensation expense $ 3,102 $ 5,559 $ 9,721 $ 11,987 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, 2023 (in thousands, except per share data): 14 Stock Options Restricted Stock Units and Awards Number of Options Weighted Average Exercise Price Per Share Number of Shares Weighted Average Grant-Date Fair Value (1) Outstanding at beginning of year 553 $ 21.03 277 $ 32.62 Granted 50 $ 48.40 109 $ 48.64 Exercised or released ( 433 ) $ 19.34 ( 163 ) $ 31.63 Outstanding at September 30, 2023 170 $ 33.36 223 $ 41.19 Exercisable at September 30, 2023 170 $ 33.36 (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: Nine Months Ended September 30, 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 %). 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 PSUs activity during the nine months ended September 30, 2023 (in thousands, except per share data): Performance Share Units Weighted Average Grant-Date Fair Value Per Unit (1) Outstanding at beginning of year 482 $ 28.84 Granted 88 $ 48.40 Vested ( 244 ) $ 25.75 Adjustments for performance results (2) 138 $ 27.68 Outstanding at September 30, 2023 464 $ 33.84 15 (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. NOTE 10. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022 (in thousands, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Numerator: Net Income $ 33,682 $ 27,470 $ 133,705 $ 116,852 Denominator: Basic Weighted average common shares outstanding 49,838 51,457 50,054 51,827 Diluted Stock options (1) 148 434 206 523 Restricted stock units and awards (1) 96 118 95 141 Performance share units 277 205 277 205 Contingent shares (2) 12 24 12 24 Diluted weighted average common shares outstanding (3) 50,371 52,238 50,644 52,720 Basic earnings per share $ 0.68 $ 0.53 $ 2.67 $ 2.25 Diluted earnings per share $ 0.67 $ 0.53 $ 2.64 $ 2.22 (1) A total of 60 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for nine months ended September 30, 2023, as their effect would be anti-dilutive. 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 excluded from the calculation of diluted earnings per share for the three months ended September 30, 2023 and 2022, as their effect was dilutive. (2) Contingent shares represent additional shares to be issued for purchase price earned by former owners of businesses acquired by us once future considerations have been met. Refer to Note 11, Business Combinations, for further details. (3) The denominator used in calculating diluted earnings per share did not include 187 thousand PSUs for both the three and nine months ended September 30, 2023, and the denominator used in calculating diluted earnings per share did not include 237 thousand PSUs for both the three and nine months ended September 30, 2022. The performance conditions associated with these performance share units were not met and consequently none of these PSUs were considered as issuable for the three and nine months ended September 30, 2023 and 2022. NOTE 11. BUSINESS COMBINATIONS Business Combinations During the nine months ended September 30, 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. Operating results for Danenhauer and Danenhauer are reported in the Financial Services practice group. 16 • Effective February 1, 2023, we acquired the non-attest assets of Somerset CPAs and Advisors ("Somerset"). Somerset, based in Indianapolis, Indiana, is a provider of a full range of accounting, tax, and financial advisory services to clients in a wide array of industries. Operating results for Somerset are reported in the Financial Services practice group. • Effective June 1, 2023, we acquired all of the assets of Pivot Point Security ("PPS"). PPS, based in Hamilton, New Jersey, is a provider of cyber and information security, and compliance services for small and middle market businesses. Operating results for PPS are reported in the Financial Services practice group. • Effective June 1, 2023, we acquired all of the assets of Ickovic and Co. PC ("Ickovic and Co."). Ickovic and Co., based in Denver, Colorado, is a provider of bespoke services and solutions for high-net-worth individuals, business owners and executives. Operating results for Ickovic and Co. are reported in the Financial Services practice group. • Effective July 1, 2023, we acquired all of the assets of American Pension Advisors, Ltd. ("APA"). APA, based in Indianapolis, Indiana, is a provider of full-service retirement plan consulting and administration assisting more than 1,200 clients in the design, implementation, and administration of all types of retirement plans including 401(k), 403(b), 457(b), defined benefit and cash balance. Operating results for APA are reported in the Benefits and Insurance Services practice group. During the nine months ended September 30, 2022, we completed the following acquisition: • Effective January 1, 2022, we acquired all of the non-attest assets of Marks Paneth LLP ("Marks Paneth"). Marks Paneth, based in New York City, is a provider of a full range of accounting, tax and consulting services to a wide range of industries. Marks Paneth is included as a component of our Financial Services practice group. Operating results are reported in the Financial Services practice group. • 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. The acquisitions of Danenhauer and Danenhauer, Somerset, PPS, Ickovic and Co., and APA (together, the “2023 Acquisitions”) are expected to add approximately $ 67.3 million annualized revenue in 2023. For the nine months ended September 30, 2023, we recorded approximately $ 3.1 million in non-recurring transaction, retention and integration related costs associated with the Somerset 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 and net income for the three and nine months ended September 30, 2023 and 2022, respectively. 17 The following table summarizes the consideration and purchase price allocation for the acquisitions completed during the nine months ended September 30, 2023 and 2022, respectively (in thousands): 2023 2022 Common stock issued (number) 102 42 Common stock value $ 4,796 $ 1,668 Cash paid 53,027 79,141 Recorded contingent consideration 32,142 74,199 Total recorded purchase price $ 89,965 $ 155,008 Accounts receivable acquired 8,539 20,429 Fixed assets acquired 1,108 1,933 Identifiable intangible assets acquired 35,267 53,400 Operating lease right-of-use asset acquired 14,972 49,291 Other assets acquired 1,163 1,693 Operating lease liability acquired - current ( 1,080 ) ( 5,860 ) Other current liabilities acquired ( 1,366 ) ( 1,594 ) Operating lease liability acquired - non-current ( 13,892 ) ( 43,431 ) Goodwill 45,254 79,147 Total net assets acquired $ 89,965 $ 155,008 Maximum potential contingent consideration $ 33,845 $ 77,075 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 2023 Acquisitions were provisional as of September 30, 2023, 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 nine months ended September 30, 2023 and 2022, respectively (in thousands): Nine Months Ended September 30, 2023 2022 Financial Services Benefits and Insurance Services Financial Services Benefits and Insurance Services Goodwill $ 41,322 $ 3,932 $ 79,147 $ — Client list 33,196 2,053 53,400 — Other intangibles 18 — — — Total $ 74,536 $ 5,985 $ 132,547 $ — Goodwill is calculated as the difference between the aggregated purchase price and the fair value of the net assets acquired. Goodwill represents the value of expected future earnings and cash flows, as well as the synergies created by the integration of the new businesses within our organization, including cross-selling opportunities expected with our Financial Services practice group and the Benefits and Insurance Services practice group, to help strengthen our existing service offerings and expand our market position. Goodwill related to these acquisitions is deductible for tax purposes. Client lists 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 model 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 nine months ended September 30, 2023 and 2022, respectively (in thousands): 18 Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net expense $ 626 $ 440 $ 2,071 $ 1,917 Cash settlement paid $ 10,103 $ 4,167 $ 39,910 $ 12,289 Shares issued (number) 54 26 129 45 Divestitures and Sales of Assets Sales of assets are recorded as "Other (expense) income, net” in the accompanying Consolidated Statements of Comprehensive Income. During the three and nine months ended September 30, 2023, we recorded a gain of $ 1.4 million and $ 1.5 million, respectively, related to the sale of one technology asset in the Financial Services practice group. During the three and nine months ended September 30, 2022, we sold one book of business for $ 2.5 million in the Benefits and Insurance Services practice group and recorded a gain of $ 2.4 million. NOTE 12. SEGMENT DISCLOSURES Our business units have been aggregated into three practice groups: Financial Services, Benefits and Insurance Services and National Practices. The business units have been aggregated based on the following factors: similarity of the products and services provided to clients; similarity of the regulatory environment in which they operate; and similarity of economic conditions affecting long-term performance. The business units are managed along these segment lines. A general description of services provided by each practice group is provided in the table below. Financial Services Benefits and Insurance Services National Practices Accounting and Tax Employee Benefits Consulting Information Technology Managed Networking and Hardware Services Financial Advisory Payroll / Human Capital Management Healthcare Consulting Valuation Property and Casualty Insurance Risk and Advisory Services Retirement and Investment Services Government Healthcare Consulting Corporate and Other - Included in Corporate and Other are operating expenses that are not directly allocated to the individual business units. These expenses primarily consist of certain health care costs, gains or losses attributable to assets held in our non-qualified deferred compensation plan, stock-based compensation, consolidation and integration charges, certain professional fees, certain advertising costs and other various expenses. Accounting policies of the practice groups are the same as those described in Note 1, Basis of Presentation and Significant Accounting Policies, to the Annual Report on Form 10-K for the year ended December 31, 2022. Upon consolidation, intercompany accounts and transactions are eliminated, thus inter-segment revenue is not included in the measure of profit or loss for the practice groups. Performance of the practice groups is evaluated on income (loss) before income tax expense (benefit) excluding those costs listed above, which are reported in the “Corporate and Other”. Segment information for the three and nine months ended September 30, 2023 and 2022 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): 19 Three Months Ended September 30, 2023 Financial Services Benefits and Insurance Services National Practices Consolidated Accounting, tax, advisory and consulting $ 298,372 — — $ 298,372 Core benefits and insurance services — 95,951 — 95,951 Non-core benefits and insurance services — 4,336 — 4,336 Managed networking, hardware services — — 9,205 9,205 National practices consulting — — 2,675 2,675 Total revenue $ 298,372 $ 100,287 $ 11,880 $ 410,539 Three Months Ended September 30, 2022 Financial Services Benefits and Insurance Services National Practices Consolidated Accounting, tax, advisory and consulting $ 259,998 — — $ 259,998 Core benefits and insurance services — 88,364 — 88,364 Non-core benefits and insurance services — 3,703 — 3,703 Managed networking, hardware services — — 8,514 8,514 National practices consulting — — 2,683 2,683 Total revenue $ 259,998 $ 92,067 $ 11,197 $ 363,262 Nine Months Ended September 30, 2023 Financial Services Benefits and Insurance Services National Practices Consolidated Accounting, tax, advisory and consulting $ 932,388 — — $ 932,388 Core benefits and insurance services — 283,599 — 283,599 Non-core benefits and insurance services — 12,580 — 12,580 Managed networking, hardware services — — 27,226 27,226 National practices consulting — — 7,854 7,854 Total revenue $ 932,388 $ 296,179 $ 35,080 $ 1,263,647 Nine Months Ended September 30, 2022 Financial Services Benefits and Insurance Services National Practices Consolidated Accounting, tax, advisory and consulting $ 808,052 — — $ 808,052 Core benefits and insurance services — 264,666 — 264,666 Non-core benefits and insurance services — 11,595 — 11,595 Managed networking, hardware services — — 24,768 24,768 National practices consulting — — 7,855 7,855 Total revenue $ 808,052 $ 276,261 $ 32,623 $ 1,116,936 20 Segment information for the three months ended September 30, 2023 and 2022 was as follows (in thousands): Three Months Ended September 30, 2023 Financial Services Benefits and Insurance Services National Practices Corporate and Other Total Revenue $ 298,372 $ 100,287 $ 11,880 $ — $ 410,539 Operating expenses 249,680 79,636 10,667 2,165 342,148 Gross margin 48,692 20,651 1,213 ( 2,165 ) 68,391 Corporate general and administrative expenses — — — 13,136 13,136 Operating income (loss) 48,692 20,651 1,213 ( 15,301 ) 55,255 Other income (expense): Interest expense — — — ( 5,848 ) ( 5,848 ) Gain on sale of operations, net 77 — — — 77 Other income (expense), net 1,497 267 — ( 4,052 ) ( 2,288 ) Total other income (expense), net 1,574 267 — ( 9,900 ) ( 8,059 ) Income (loss) before income tax expense $ 50,266 $ 20,918 $ 1,213 $ ( 25,201 ) $ 47,196 Three Months Ended September 30, 2022 Financial Services Benefits and Insurance Services National Practices Corporate and Other Total Revenue $ 259,998 $ 92,067 $ 11,197 $ — $ 363,262 Operating expenses 220,337 73,321 9,743 2,616 306,017 Gross margin 39,661 18,746 1,454 ( 2,616 ) 57,245 Corporate general and administrative expenses — — — 15,893 15,893 Operating income (loss) 39,661 18,746 1,454 ( 18,509 ) 41,352 Other income (expense): Interest expense — ( 4 ) — ( 2,301 ) ( 2,305 ) Gain on sale of operations, net 176 — — — 176 Other income (expense), net 103 2,402 8 ( 5,135 ) ( 2,622 ) Total other income (expense), net 279 2,398 8 ( 7,436 ) ( 4,751 ) Income (loss) before income tax expense $ 39,940 $ 21,144 $ 1,462 $ ( 25,945 ) $ 36,601 Segment information for the nine months ended September 30, 2023 and 2022 was as follows (in thousands): 21 Nine Months Ended September 30, 2023 Financial Services Benefits and Insurance Services National Practices Corporate and Other Total Revenue $ 932,388 $ 296,179 $ 35,080 $ — $ 1,263,647 Operating expenses 737,568 234,933 31,795 22,850 1,027,146 Gross margin 194,820 61,246 3,285 ( 22,850 ) 236,501 Corporate general and administrative expenses — — — 44,527 44,527 Operating income (loss) 194,820 61,246 3,285 ( 67,377 ) 191,974 Other income (expense): Interest expense — ( 1 ) — ( 15,022 ) ( 15,023 ) Gain on sale of operations, net 176 — — — 176 Other income, net 1,987 597 1 5,660 8,245 Total other income (expense), net 2,163 596 1 ( 9,362 ) ( 6,602 ) Income (loss) before income tax expense $ 196,983 $ 61,842 $ 3,286 $ ( 76,739 ) $ 185,372 Nine Months Ended September 30, 2022 Financial Services Benefits and Insurance Services National Practices Corporate and Other Total Revenue $ 808,052 $ 276,261 $ 32,623 $ — $ 1,116,936 Operating expenses (income) 639,780 220,998 29,218 ( 3,944 ) 886,052 Gross margin 168,272 55,263 3,405 3,944 230,884 Corporate general and administrative expenses — — — 43,128 43,128 Operating income (loss) 168,272 55,263 3,405 ( 39,184 ) 187,756 Other income (expense): Interest expense — ( 5 ) — ( 5,204 ) ( 5,209 ) Gain on sale of operations, net 311 — — — 311 Other income (expense), net 274 2,366 9 ( 27,581 ) ( 24,932 ) Total other income (expense), net 585 2,361 9 ( 32,785 ) ( 29,830 ) Income (loss) before income tax expense $ 168,857 $ 57,624 $ 3,414 $ ( 71,969 ) $ 157,926 NOTE 13. SUBSEQUENT EVENTS Subsequent to September 30, 2023, and up to October 24, 2023, we repurchased approximately 0.1 million shares of our common stock in the open market at a total cost of approximately $ 4.3 million. Effective October 16, 2023, we entered into a new 5-year interest rate swap with a notional value of $ 25 million and fixed rate of 4.488 %. 22