CBIZ, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures - Management has evaluated the effectiveness of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report. This evaluation (“Controls Evaluation”) was done with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Disclosure Controls are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure Controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Limitations on the Effectiveness of Controls - Management, including the Company’s CEO and CFO, does not expect that its Disclosure Controls or its internal control over financial reporting (“Internal Controls”) will prevent all errors and all fraud. Although our Disclosure Controls are designed to provide reasonable assurance of achieving their objective, a control system, no matter how well conceived and operated, can provide only reasonable, but not absolute, assurance that the objectives of a control system are met. Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of a control. A design of a control system is also based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. Conclusions - Based upon the Controls Evaluation, our CEO and CFO have concluded that as of the end of the period covered by this report, our Disclosure Controls are effective at the reasonable assurance level described above. There were no changes in our Internal Controls that occurred during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our Internal Controls. Management’s Report on Internal Control Over Financial Reporting - Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision of management, including our CEO and CFO, we conducted an evaluation of our internal control over financial reporting based on the framework provided in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2023. Management has excluded from the scope of its assessment of the effectiveness of internal control over financial reporting as of December 31, 2023 the operations and related assets of the following acquisitions completed In 2023: 33 Table of Contents Acquisitions Date of Acquisition Danenhauer and Danenhauer, Inc. January 1, 2023 Somerset CPAs and Advisors February 1, 2023 Pivot Point Security June 1, 2023 Ickovic and Co. PC June 1, 2023 American Pension Advisors, Ltd. July 1, 2023 The aggregated total assets and revenue from the above acquisitions were $46.3 million and $64.9 million, respectively, which represent approximately 2.3% and 4.1% of our respective consolidated total assets and total revenue as of and for the year ended December 31, 2023, respectively. Our independent auditor, KPMG LLP, an independent registered public accounting firm, has issued an audit report on the effectiveness of our internal control over financial reporting which appears in Item 8 of this Annual Report. ITEM 9B. OTHER INFORMATION. During the quarter period ended December 31, 2023, none of the Company's directors or officers adopted or terminated a "Rule 10B5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement", as each term is defined in Item 408 of Regulation S-K. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Information with respect to this item not included below is incorporated by reference from our Definitive Proxy Statement for the 2024 Annual Stockholders’ Meeting to be filed with the SEC no later than 120 days after the end of CBIZ’s fiscal year. We have adopted a Code of Professional Conduct and Ethics Guide that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our Code of Professional Conduct and Ethics Guide is available on the investor information page of our website, located at https://www.cbiz.com , and in print to any stockholder who requests them. Any waiver or amendment to the code will be posted on our website. Information about our Executive Officers, Directors and Key Employees - The following table sets forth certain information regarding the directors, executive officers and certain key employees of CBIZ. Each executive officer and director of CBIZ named in the following table has been elected to serve until his/her successor is duly appointed or elected or until his/her earlier removal or resignation from office. No arrangement or understanding exists between any executive officer of CBIZ and any other person pursuant to which he or she was selected as an officer. 34 Table of Contents Name Age Position(s) Executive Officers and Directors: Rick L. Burdick (2)(3) 72 Chairman Jerome P. Grisko, Jr. 62 President & Chief Executive Officer, Director Michael H. DeGroote (2) 63 Director Gina D. France (1)(2) 65 Director Todd J. Slotkin (1)(3) 70 Director A. Haag Sherman (1) 58 Director Richard T. Marabito (1) 60 Director Benaree Pratt Wiley (2)(3) 77 Director Rodney A. Young 68 Director Ware H. Grove 73 Senior Vice President and Chief Financial Officer Chris Spurio 58 President, Financial Services Michael P. Kouzelos 55 President, Benefits and Insurance Services Other Key Employees: Jaileah X. Huddleston 46 Senior Vice President, Chief Legal Officer and Corporate Secretary John A. Fleischer 62 Senior Vice President and Chief Information Officer Elizabeth A. Newman 46 Senior Vice President, Chief Administrative Officer and Chief Human Resources Officer (1) Member of Audit Committee (2) Member of Nominating & Governance Committee (3) Member of Compensation & Human Capital Committee Rick L. Burdick has served as a Director of CBIZ since October 1997, when he was elected as an independent director. On August 11, 2022, Mr. Burdick was appointed by the Board as its independent Chairman of the Board. Previously, in May 2007, Mr. Burdick was elected by the Board as its Lead Director, a non-officer position, and in October 2002, he was elected by the Board as Vice Chairman, a non-officer position. Mr. Burdick was a Partner at the law firm of Akin Gump Strauss Hauer & Feld LLP, and was a Partner in the firm from 1988 until his retirement in 2019. Mr. Burdick serves a non-executive Chairman on the Board of Directors of AutoNation, Inc. Jerome P. Grisko, Jr . was appointed to the CBIZ Board in November, 2015. Mr. Grisko was appointed Chief Executive Officer in March 2016, and has served as President since February 2000. He was also Chief Operating Officer from February 2000 until his appointment as Chief Executive Officer. Mr. Grisko joined CBIZ as Vice President, Mergers & Acquisitions in September 1998 and was promoted to Senior Vice President, Mergers & Acquisitions and Legal Affairs in December of 1998. Prior to joining CBIZ, Mr. Grisko was associated with the law firm of Baker & Hostetler LLP, where he practiced from September 1987 until September 1998, serving as a partner of such firm from January 1995 to September 1998. While at Baker & Hostetler, Mr. Grisko concentrated his practice in the area of mergers and acquisitions and general corporate law. Michael H. DeGroote, son of CBIZ founder Michael G. DeGroote, was appointed a Director of CBIZ in November 2006. Mr. DeGroote currently serves as President of Westbury International, a full-service real estate development company, specializing in commercial/industrial land, residential development and property management. Prior to joining Westbury, Mr. DeGroote was Vice President of MGD Holdings and previously held a management position with Cooper Corporation, and previously served on the Board of Directors of Progressive Waste Solutions Ltd. He served on the Board of Governors of McMaster University in Hamilton, Ontario. Gina D. France was appointed to the CBIZ Board in February, 2015. Ms. France founded France Strategic Partners, LLC, a strategy and transaction advisory firm, and has served as its President and Chief Executive Officer since 2003. Ms. France has over 40 years of experience in strategy, investment banking and corporate finance. Prior to founding France Strategic Partners, Ms. France was a Managing Director with Ernst & Young, LLP and directed the Firm’s Center for Strategic Transactions. Prior to her work with Ernst & Young, Ms. France was a Senior Vice President with Lehman Brothers, Inc. Ms. France serves on the boards of Huntington Bancshares, Inc. and the BNY 35 Table of Contents Mellon Family of Funds. Ms. France has previously served on the boards of FirstMerit Corporation, Dawn Food Products, Inc., Mack Industries, and Cedar Fair, L.P.. Todd J. Slotkin has served as a Director of CBIZ since September 2003, when he was elected as an independent director. Mr. Slotkin was President & COO of KMP Music LLC, a music publishing firm from 2000 to 2023. He was also a Senior Advisor at Alvarez & Marsal from 2020 to 2021, and between 2014 and 2020 he served as the Global Business Head of Alvarez & Marsal’s Asset Management Services. Mr. Slotkin is also an independent director of the Apollo Closed End Fund Complex (Apollo Floating Rate Fund, Apollo Tactical Income Fund). In 2011, Mr. Slotkin was appointed the Managing Partner of Newton Pointe LLC, an advisory firm, a position he also held during the period of 2007 to 2008. Mr. Slotkin served on the Board of Martha Stewart Living Omnimedia from 2008 to 2012, and was head of its Audit Committee and Special Committee. Between 2008 and 2010, Mr. Slotkin was a Senior Managing Director of Irving Place Capital. From 2006 to 2007 Mr. Slotkin served as a Managing Director of Natixis Capital Markets. From 1992 to 2006, Mr. Slotkin served as a SVP (1992-1998) and EVP and Chief Financial Officer (1998-2006) of MacAndrews & Forbes Holdings Inc. Additionally, he was the Executive Vice President and Chief Financial Officer of publicly owned M&F Worldwide (1998-2006). Prior to 1992, Mr. Slotkin spent 17 years with Citigroup, ultimately serving as Senior Managing Director and Senior Credit Officer. He was the Global Head of Citigroup’s Leveraged Capital Group. Mr. Slotkin is a co-founder of the Food Allergy Research & Education, Inc., formerly known as the Food Allergy Initiative. A. Haag Sherman has served as a Director of CBIZ since August 2020, when he was elected as an independent director. Mr. Sherman has served as the Chief Executive Officer and a director of Tectonic Financial, Inc. (and its predecessor), a banking and financial holding company with a preferred stock quoted on Nasdaq Global Markets, since February 2015. Prior thereto, Mr. Sherman co-founded Salient Partners, LP, a Houston-based investment firm, in 2002 and served in various executive positions, including Chief Executive Officer and Chief Investment Officer, through October 2011. In addition, he previously served as an executive officer and partner of The Redstone Companies from 1998 to 2002 where he, among other things, managed a private equity portfolio. Mr. Sherman has served as a director of Hilltop Holdings, Inc. since its acquisition of PlainsCapital Corporation in November 2012. He previously served as a director of PlainsCapital from September 2009 to November 2012. Mr. Sherman has served as an adjunct professor of law at The University of Texas School of Law. Mr. Sherman previously practiced corporate law at Akin Gump Strauss Hauer & Feld LLP from 1992 to 1996 and was an auditor at Price Waterhouse, a public accounting firm, from 1988 to 1989. Mr. Sherman is an attorney and certified public accountant. Richard T. Marabito has served as a Director of CBIZ since August 2021, when he was appointed as an independent director. Mr. Marabito is Chief Executive Officer of Olympic Steel, a national metals service center headquartered in Cleveland, Ohio that focuses on the direct sale of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel, aluminum, tin plate, and metal-intensive branded products. Mr. Marabito became CEO in 2019 after serving as the Chief Financial Officer. He joined the company in 1994 as Corporate Controller. He is also a director and the past Chairman of the Metal Services Center Institute (MSCI) and has also served on the Board of Trustees for the University of Mount Union since 2021. He served on the Board of Directors and as Audit Committee Chairman for Hawk Corporation from 2008 until the company’s sale in November 2010. Mr. Marabito has served on numerous non-profit boards over the course of his career including as a Trustee of Hawken School and Chair of the Northeast Ohio Regional Board for the Make-A-Wish Foundation. Benaree Pratt Wiley has served as a Director of CBIZ since May 2008, when she was elected as an independent director. Ms. Wiley is a Principal of The Wiley Group, a firm specializing in personnel strategy, talent management, and leadership development primarily for global insurance and consulting firms. Ms. Wiley served as the President and Chief Executive Officer of The Partnership, Inc., a talent management organization for multicultural professionals in the greater Boston region for fifteen years before retiring in 2005. Ms. Wiley is currently a director on the boards of the BNY Mellon Family of Funds and Blue Cross and Blue Shield of Massachusetts. Her civic activities include serving on the boards of the Efficacy Institute, Howard University, Dress for Success Boston, Partners Continuing Care and Spaulding Hospital. Rodney A. Young has served as a Director since February 2023, when he was appointed as an independent director. Mr. Young is the Chief Executive Officer of Delta Dental of Minnesota, one of the nation's largest oral health insurance companies. Mr. Young has held this role since 2012. Prior to joining Delta Dental of Minnesota, Mr. Young was the Chief Executive Officer and President of Angeion Corporation (now MGC Diagnostics Corporation), a public medical technology cardio-pulmonary diagnostic and consumer health management company. Mr. Young also previously held the Chair for the Board of Directors, Director, Chief Executive Officer and President roles for LecTec Corporation, a public disposable medical products and over-the-counter pharmaceuticals company. Mr. Young 36 Table of Contents currently serves as a Board Director and the Diversity, Equity and Inclusion Committee Chair of the Minnesota Business Partnership. Mr. Young received The Sanneh Foundation's Business Honoree Award in 2019 in recognition of his business leadership and community impact. Ware H. Grove has served as Senior Vice President and Chief Financial Officer of CBIZ since December 2000. Before joining CBIZ, Mr. Grove served as Senior Vice President and Chief Financial Officer of Bridgestreet Accommodations, Inc., which he joined in early 2000 to restructure financing, develop strategic operating alternatives, and assist with merger negotiations. Prior to joining Bridgestreet, Mr. Grove served for three years as Vice President and Chief Financial Officer of LESCO, Inc. Since beginning his career in corporate finance in 1972, Mr. Grove has held various financial positions with large companies representing a variety of industries, including Revco D.S., Inc., Computerland/Vanstar, Manville Corporation, The Upjohn Company, and First of America Bank. Mr. Grove served on the Board of Directors for Applica, Inc. (NYSE: APN) from September 2004 through January 2007, at which time the company was sold to a private equity firm. Chris Spurio was appointed Senior Vice President of CBIZ and President of CBIZ’s Financial Services practice group, effective January 1, 2014. Mr. Spurio joined CBIZ in January 1998 and served as Corporate Controller until July 1999. He then served as Vice President of Finance from July 1999 until September 2008. Mr. Spurio served as Executive Managing Director of the Financial Services Group’s Midwest Region from September 2008 through March 2010, and as the Group’s Chief Operating Officer from March 2010 through December 2013. Mr. Spurio was associated with KPMG LLP, an international accounting firm, from July 1988 to January 1998. Mr. Spurio is a CPA, CGMA and a member of the American Institute of Certified Public Accountants and the Ohio Society of Certified Public Accountants. Michael P. Kouzelos joined CBIZ in June 1998 and has held several positions in the Company. He was appointed President of the Benefits & Insurance practice group in May 2015, and was appointed Senior Vice President of Strategic Initiatives in September 2005. Mr. Kouzelos also served as the Chief Operating Officer of the Benefits & Insurance division between April 2007 and May 2015, as Vice President of Strategic Initiatives from April 2001 through August 2005, as Vice President of Shared Services from August 2000 to March 2001, and as Director of Business Integration from June 1998 to July 2000. Mr. Kouzelos was associated with KPMG LLP, an international accounting firm, from 1990 to September 1996 and received his Master of Business Administration degree from The Ohio State University in May of 1998. Other Key Employees: Jaileah X. Huddleston joined CBIZ in December 2023 as Senior Vice President, Chief Legal Officer and Corporate Secretary. Prior to joining CBIZ, Ms. Huddleston held various legal roles of increasing responsibility at Brown-Forman Corporation, a leading global spirits company based in Louisville, Kentucky, including Vice President – Associate General Counsel, Regional, Securities and Governance and Corporate Secretary from October 2022 to November 2023; Vice President, Associate General Counsel and Corporate Secretary from September 2020 to October 2022; Vice President, Assistant General Counsel and Assistant Secretary from March 2019 to September 2020; and Managing Attorney and Assistant Secretary from July 2018 to March 2019. Prior to joining Brown-Forman Corporation, Ms. Huddleston served as Assistant Secretary and Corporate Counsel, Securities and Finance at Evergy, Inc., a publicly traded energy company based in Kansas City, Missouri, from 2010 to 2018. Ms. Huddleston earned a bachelor’s degree in English from the University of Michigan, a juris doctor from Vanderbilt University School of Law, and a Master of Business Administration from the University of Missouri – Kansas City. John A. Fleischer has served as Senior Vice President and Chief Information Officer of CBIZ since August 2014. Prior to joining CBIZ, Mr. Fleischer held CIO roles at TTT Holdings (a Talisman Capital Partners company), Ferro Corporation, The Goodyear Tire & Rubber Company, and T-Systems. Prior to these roles, he held senior IT roles at Volkswagen and Federal-Mogul Corporation. While at T-Systems, Mr. Fleischer also ran the U.S. consulting practice, which provided IT services to clients in a variety of industries. He began his career as a commissioned officer in the United States Army and served twelve years on active duty in numerous roles, which included directing large-scale systems development and integration projects in communications and computing. He is a Distinguished Military Graduate of Princeton University and received his Master of Business Administration degree from The Ohio State University. Mr. Fleischer serves on the Board of Trustees of the Lakeside Chautauqua Association. Elizabeth A. Newman was appointed Senior Vice President, Chief Administrative Officer (CAO) and Chief Human Resources Officer (CHRO) in December 2022 after joining CBIZ in 2019 as Chief of Staff. Prior to CBIZ, Ms. 37 Table of Contents Newman was a non-profit executive leading a large, regional organization in Northeast Ohio. Ms. Newman’s career has spanned the private, public and non-profit sectors including professional services experience with KPMG LLP which she joined through an acquisition. Ms. Newman received a Master of Business Administration degree from The Ohio State University in 2011. ITEM 11. EXECUTIVE COMPENSATION. Information with respect to this item is incorporated by reference from our Definitive Proxy Statement for the 2024 Annual Stockholders’ Meeting to be filed with the SEC no later than 120 days after the end of our fiscal year. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Information with respect to this item is incorporated by reference from our Definitive Proxy Statement for the 2024 Annual Stockholders’ Meeting to be filed with the SEC no later than 120 days after the end of our fiscal year. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Information with respect to this item is incorporated by reference from our Definitive Proxy Statement for the 2024 Annual Stockholders’ Meeting to be filed with the SEC no later than 120 days after the end of our fiscal year. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. Our independent registered public accounting firm is KPMG LLP , Cleveland, OH , Auditor Firm ID: 185 . Information with respect to this item is incorporated by reference from our Definitive Proxy Statement for the 2024 Annual Stockholders’ Meeting to be filed with the SEC no later than 120 days after the end of our fiscal year. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) The following documents are filed as part of this Annual Report or incorporated by reference: 1. Financial Statements. As to financial statements and supplementary information, reference is made to “Index to Financial Statements” on page F-1 of this Annual Report. 2. Exhibits. The following documents are filed as exhibits to this Form 10-K pursuant to Item 601 of Regulation S-K. Since its incorporation, CBIZ has operated under various names including: Republic Environmental Systems, Inc.; International Alliance Services, Inc.; Century Business Services, Inc.; and CBIZ, Inc. Exhibits listed below refer to these names collectively as the “Company”. Exhibit No. Description 3.1 Amended and Restated Certificate of Incorporation of the Company, dated August 7, 2000 (filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-8, File No. 333-197284, dated May 24, 2019, and incorporated herein by reference). 3.2 Certificate of Amendment of the Certificate of Incorporation of the Company, effective August 1, 2005 (filed as Exhibit 3.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, File No. 000-25890, dated March 16, 2006, and incorporated herein by reference). 3.3 Amended and Restated Bylaws of the Company, dated July 31, 2000 (filed as Exhibit 3.3 to the Company’s Registration Statement on Form S-8, File No. 333-197284, dated May 24, 2019, and incorporated herein by reference). 3.4 Amendment to Amended and Restated Bylaws of the Company dated November 1, 2007 (filed as Exhibit 3.1 to the Company’s Report on Form 8-K, File No. 001-32961, dated November 1, 2007, and incorporated herein by reference). 38 Table of Contents 4.1 Form of Stock Certificate of Common Stock of the Company (filed as Exhibit 4.1 to the Company’s Annual Report Form 10-K for the year ended December 31, 1998, File No. 000-25890, dated March 4, 1999, and incorporated herein by reference). 4.2 † Employee Stock Investment Plan (filed as Exhibit 4.4 to the Company’s Registration Statement on Form S-8, File No. 000-333-62148, dated June 1, 2001, and incorporated herein by reference). 4. 3* Description of the Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. 10.1 † 2002 Stock Incentive Plan (filed as Appendix A to the Company’s Proxy Statement for the 2002 Annual Meeting of Stockholders, File No. 000-25890, dated April 1, 2002, and incorporated herein by reference). 10.2 † CBIZ, Inc. 2002 Amended and Restated Stock Incentive Plan (Amended and Restated as of May 12, 2011), (filed as Exhibit 10.1 to the Company’s Report on Form 10-Q, File No. 001-32961, dated August 9, 2011, and incorporated herein by reference). 10.3 † 2014 Stock Incentive Plan (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8, File No. 333-197284, dated July 7, 2014, and incorporated herein by reference). 10. 4 † Employment Agreement by and between the Company and Jerome P. Grisko, Jr., dated September 1, 2016 (filed as Exhibit 10.1 to the Company’s Report on Form 8-K, File No. 001-32961, dated September 8, 2016, and incorporated herein by reference). 10. 5 † Amended and Restated Employment Agreement by and between the Company and Ware H. Grove, dated March 30, 2017 (filed as Exhibit 10.1 to the Company’s Report on Form 8-K, File No. 001-32961, dated April 4, 2017, and incorporated herein by reference). 10. 6 Loan Agreement dated as of August 16, 2018 by and among CBIZ Benefits and Insurance Services, Inc. and The Huntington Bank (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, File No. 001-32961, on November 1, 2018, and incorporated herein by reference). 10 . 7 Second Amended and Restated Credit Agreement, dated May 4, 2022, by and among CBIZ Operations, Inc., CBIZ, Inc., and Bank of America, N.A., as administrative agent, and the other financial institutions from time to time party thereto (filed as Exhibit 10.1 to the Company's Report on Form 8-K, File No. 001-32961, on May 6, 2022, and incorporated herein by reference). 10. 8 † 2019 CBIZ, Inc. Omnibus Incentive Plan (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-8, File No. 333-197284, dated May 24, 2019, and incorporated herein by reference). 10. 9 † Amendment No. 1 to the 2019 CBIZ, Inc. Omnibus Incentive Plan (filed as Exhibit 99.1 to the Company's Report on Form 8-K, File No. 001-32961, dated May 16, 2023, and incorporated herein by reference). 10. 10 First Amendment to Loan Agreement, dated August 8, 2019, by and among CBIZ Benefit and Insurance Services, Inc. and the Huntington National Bank (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, File No. 001-32961, on November 1, 2019, and incorporated herein by reference). 10. 1 1 Second Amendment to Loan Agreement, dated August 6, 2020, by and among CBIZ Benefit and Insurance Services, Inc. and the Huntington National Bank (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, File No. 001-32961, on November 1, 2020, and incorporated herein by reference). 10. 12 Third Amendment to Loan Agreement, dated August 5, 2021, by and among CBIZ Benefit and Insurance Services, Inc. and the Huntington National Bank (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, File No. 001-32961, on October 29, 2021, and incorporated herein by reference). 10. 13 Fourth Amendment to Loan Agreement, dated August 1, 2022, by and among CBIZ Benefit and Insurance Services, Inc. and the Huntington National Bank (filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 2022, File No. 001-32961, dated February 24, 2023, and incorporated herein by reference). 10. 14 Fifth Amendment to Loan Agreement, dated August 3, 2023, by and among CBIZ Benefit and Insurance Services, Inc. and the Huntington National Bank (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, File No. 001-32961, on October 26, 2023, and incorporated herein by reference). 39 Table of Contents 10. 15 Purchase Agreement, dated January 6, 2022, among CBIZ, Inc., CBIZ Acquisition 42, LLC, Marks Paneth LLP and all of the individuals who are equity partners of Marks Paneth (filed as Exhibit 2.1 to the Company’s Report on Form 8-K, File No. 001-32961, dated January 10, 2022, and incorporated herein by reference). 10.16* † Form of CBIZ Restricted Share Unit Agreement 10.17* † Form of CBIZ Performance Share Agreement 21.1* List of Subsidiaries of CBIZ, Inc. 23 .1 * Consent of KPMG LLP 24* Powers of attorney (included on the signature page hereto). 31.1* Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1** Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2** Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 97 .1 † * CBIZ, Inc. Compensation Recoupment Policy 101.INS XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document* 101.SCH Inline XBRL Taxonomy Extension Schema Document* 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document* 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document* 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document* 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments)* ______________________________________________________ * Indicates documents filed herewith. ** Indicates documents furnished herewith. † Management contract or compensatory plan contract or arrangement filed pursuant to Item 601 of Regulation S-K. ITEM 16. FORM 10-K SUMMARY. None 40 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. CBIZ, INC. (REGISTRANT) By /s/ WARE H. GROVE Ware H. Grove Chief Financial Officer February 23, 2024 KNOW ALL MEN AND WOMEN BY THESE PRESENTS that each person whose signature appears below on this Annual Report hereby constitutes and appoints Jerome P. Grisko, Jr. and Ware H. Grove, and each of them, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution for him and her and his and her name, place and stead, in all capacities (until revoked in writing), to sign any and all amendments to this Annual Report of CBIZ, Inc. and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary fully to all intents and purposes as he might or could do in person, thereby ratifying and confirming all that each attorney-in-fact and agent, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. 41 Table of Contents Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated above. Signature Title Date /s/ JEROME P. GRISKO, JR. President & Chief Executive Officer, Director (Principal Executive Officer) February 23, 2024 Jerome P. Grisko, Jr. /s/ WARE H. GROVE Chief Financial Officer (Principal Financial and Accounting Officer) February 23, 2024 Ware H. Grove /s/ RICK L. BURDICK Chairman February 23, 2024 Rick L. Burdick /s/ MICHAEL H. DE GROOTE Director February 23, 2024 Michael H. DeGroote /s/ GINA D. FRANCE Director February 23, 2024 Gina D. France /s/ TODD J. SLOTKIN Director February 23, 2024 Todd J. Slotkin /s/ A. HAAG SHERMAN Director February 23, 2024 A.Haag Sherman /s/ RICHARD T. MARABITO Director February 23, 2024 Richard T. Marabito /s/ BENAREE PRATT WILEY Director February 23, 2024 Benaree Pratt Wiley /s/ RODNEY A. YOUNG Director February 23, 2024 Rodney A. Young 42 Table of Contents CBIZ, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets as of December 31, 202 3 and 20 2 2 F- 4 Consolidated Statements of Comprehensive Income for the years ended December 31, 20 2 3 , 202 2 and 202 1 F- 5 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 202 3 , 202 2 and 202 1 F- 6 Consolidated Statements of Cash Flows for the years ended December 31, 202 3 , 202 2 and 202 1 F- 7 Notes to the Consolidated Financial Statements F- 8 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors CBIZ, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of CBIZ, Inc. and subsidiaries (the Company) as of December 31, 2023 and December 31, 2022, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company acquired Danenhauer and Danenhauer, Inc., Somerset CPAs and Advisors, Pivot Point Security, Ickovic and Co. PC and American Pension Advisors, Ltd. during 2023, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, Danenhauer and Danenhauer, Inc., Somerset CPAs and Advisors, Pivot Point Security, Ickovic and Co. PC and American Pension Advisors, Ltd.’s internal control over financial reporting associated with total assets of $46.3 million and total revenues of $64.9 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2023. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Danenhauer and Danenhauer, Inc., Somerset CPAs and Advisors, Pivot Point Security, Ickovic and Co. PC and American Pension Advisors, Ltd. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. F-2 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Estimation of losses on certain trade accounts receivable As discussed in Note 1 to the consolidated financial statements, the Company maintains an allowance for doubtful accounts for estimated losses on trade accounts receivable. As of December 31, 2023, the allowance for doubtful accounts was $25.6 million, a portion of which related to the Financial Services practice group. The allowance for doubtful accounts is recorded based on the Company’s historical experience, client credit-worthiness, age of receivables, and economic trends and conditions. We have identified the evaluation of the Company’s estimation of losses related to trade accounts receivable of the Financial Services practice group as a critical audit matter. A high degree of subjective auditor judgment was required to assess the assumptions used in estimating losses related to trade accounts receivable. The assumptions included the probability of the Company’s collection of receivables based on historical experience and the consideration of economic conditions that may affect the ability of clients to pay. The following are the primary procedures we performed to address the critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to develop the assumptions used to estimate losses related to trade accounts receivable. On a total and per unit basis, we calculated certain key performance indicators using the allowance for doubtful accounts and compared them to our established expectations based on the Company’s historical experience. For any results which were outside the established expectations, we performed the following additional procedures to evaluate the reasonableness of the allowance for doubtful accounts determined by the Company: • we inquired of relevant Company personnel • we evaluated the Company’s cash collections, historical trends, and age of receivables • we evaluated industry, economic, and other external factors as applicable • we inspected relevant underlying documents, including contractual documents with clients. /s/ KPMG LLP We have served as the Company’s auditor since 1996. Cleveland, Ohio February 23, 2024 F-3 Table of Contents CBIZ, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2023 AND 2022 (In thousands, except per share data) 2023 2022 ASSETS Current assets: Cash and cash equivalents $ 8,090 $ 4,697 Restricted cash 30,362 28,487 Accounts receivable, net 380,152 334,498 Other current assets 34,895 29,431 Current assets before funds held for clients 453,499 397,113 Funds held for clients 159,186 171,313 Total current assets 612,685 568,426 Non-current assets: Property and equipment, net 57,012 45,184 Goodwill and other intangible assets, net 1,008,604 951,702 Assets of deferred compensation plan 143,499 118,862 Right-of-use asset 211,024 184,043 Other non-current assets 10,768 10,907 Total non-current assets 1,430,907 1,310,698 Total assets $ 2,043,592 $ 1,879,124 LIABILITIES Current liabilities: Accounts payable $ 82,831 $ 80,725 Income taxes payable 2,097 1,607 Accrued personnel costs 133,593 130,456 Contingent purchase price liability 66,287 63,262 Lease liability 36,283 36,358 Other current liabilities 30,937 26,532 Current liabilities before client fund obligations 352,028 338,940 Client fund obligations 159,893 173,467 Total current liabilities 511,921 512,407 Non-current liabilities: Bank debt 312,400 265,700 Debt issuance costs ( 1,574 ) ( 2,046 ) Total long-term debt 310,826 263,654 Income taxes payable 1,984 2,211 Deferred income taxes, net 29,287 24,763 Deferred compensation plan obligations 143,499 118,862 Contingent purchase price liability 48,659 68,748 Lease liability 203,905 174,454 Other non-current liabilities 1,893 573 Total non-current liabilities 740,053 653,265 Total liabilities 1,251,974 1,165,672 STOCKHOLDERS’ EQUITY Common stock, par value $ 0.01 per share; shares authorized 250,000 ; shares issued 137,387 and 136,295 ; shares outstanding 49,814 and 50,180 1,374 1,363 Additional paid-in capital 832,475 799,147 Retained earnings 855,084 734,116 Treasury stock, 87,573 and 86,115 shares ( 899,093 ) ( 824,778 ) Accumulated other comprehensive income 1,778 3,604 Total stockholders’ equity 791,618 713,452 Total liabilities and stockholders’ equity $ 2,043,592 $ 1,879,124 See the accompanying notes to the consolidated financial statements F-4 Table of Contents CBIZ, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 (In thousands, except per share data) 2023 2022 2021 Revenue $ 1,591,194 $ 1,411,979 $ 1,104,925 Operating expenses 1,367,990 1,188,612 945,635 Gross margin 223,204 223,367 159,290 Corporate general and administrative expenses 57,965 55,023 56,150 Legal settlement, net — — 30,468 Operating income 165,239 168,344 72,672 Other income (expense): Interest expense ( 20,131 ) ( 8,039 ) ( 3,868 ) Gain on sale of operations, net 176 413 5,995 Other income (expense), net 21,019 ( 19,243 ) 18,217 Total other income (expense), net 1,064 ( 26,869 ) 20,344 Income before income tax expense 166,303 141,475 93,016 Income tax expense 45,335 36,121 22,129 Net income 120,968 105,354 70,887 Earnings per share: Basic $ 2.42 $ 2.05 $ 1.35 Diluted $ 2.39 $ 2.01 $ 1.32 Basic weighted average common shares outstanding 49,989 51,502 52,637 Diluted weighted average common shares outstanding 50,557 52,388 53,723 Comprehensive income: Net income $ 120,968 $ 105,354 $ 70,887 Other comprehensive income (loss): Net unrealized gain (loss) on available-for-sale securities, net of income tax expense (benefit) of $ 403 , $( 520 ) and $( 179 ) 1,013 ( 1,391 ) ( 478 ) Net unrealized (loss) gain on interest rate swaps, net of income tax (benefit) expense of $( 952 ), $ 1,965 and $ 577 ( 2,821 ) 5,986 1,799 Foreign currency translation ( 18 ) ( 24 ) ( 19 ) Total other comprehensive (loss) income ( 1,826 ) 4,571 1,302 Total comprehensive income $ 119,142 $ 109,925 $ 72,189 See the accompanying notes to the consolidated financial statements F-5 Table of Contents CBIZ, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 (In thousands) Issued Common Shares Treasury Shares Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive (Loss) Income Totals December 31, 2020 134,144 80,045 $ 1,341 $ 740,970 $ 557,875 $ ( 595,297 ) $ ( 2,269 ) $ 702,620 Net income — — — — 70,887 — — 70,887 Other comprehensive income — — — — — — 1,302 1,302 Share repurchases — 3,012 — — — ( 96,382 ) — ( 96,382 ) Indirect repurchase of shares for minimum tax withholding — 92 — — — ( 3,037 ) — ( 3,037 ) Restricted stock units and awards 80 — 1 ( 1 ) — — — — Stock options exercised 647 — 7 7,304 — — — 7,311 Share-based compensation — — — 11,407 — — — 11,407 Business acquisitions 316 — 3 10,437 — — — 10,440 December 31, 2021 135,187 83,149 1,352 770,117 628,762 ( 694,716 ) ( 967 ) 704,548 Net income — — — — 105,354 — — 105,354 Other comprehensive income — — — — — — 4,571 4,571 Share repurchases — 2,778 — — — ( 122,773 ) — ( 122,773 ) 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 670 — 7 10,028 — — — 10,035 Share-based compensation — — — 14,689 — — — 14,689 Business acquisitions 107 — 1 4,316 — — — 4,317 December 31, 2022 136,295 86,115 1,363 799,147 734,116 ( 824,778 ) 3,604 713,452 Net income — — — — 120,968 — — 120,968 Other comprehensive loss — — — — — — ( 1,826 ) ( 1,826 ) Share repurchases — 1,285 — — — ( 65,142 ) — ( 65,142 ) 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 453 — 5 8,759 — — — 8,764 Share-based compensation — — — 12,286 — — — 12,286 Business acquisitions 242 — 2 11,733 — — — 11,735 Excise tax on share repurchases — — — 554 — ( 725 ) ( 171 ) December 31, 2023 137,387 87,573 $ 1,374 $ 832,475 $ 855,084 $ ( 899,093 ) $ 1,778 $ 791,618 See the accompanying notes to the consolidated financial statements F-6 Table of Contents CBIZ, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 (In thousands) 2023 2022 2021 Cash flows from operating activities: Net income $ 120,968 $ 105,354 $ 70,887 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of operations, net of tax ( 176 ) ( 413 ) ( 5,995 ) Depreciation and amortization expense 36,269 32,895 27,078 Bad debt expense, net of recoveries 1,551 1,173 3,054 Adjustment to contingent earnout liability, net 2,743 2,435 2,367 Deferred income taxes 11,273 13,877 9,234 Stock-based compensation expense 12,286 14,689 11,407 Other, net ( 2,365 ) ( 1,835 ) ( 150 ) Changes in assets and liabilities, net of acquisitions and divestitures: Accounts receivable, net ( 36,093 ) ( 61,106 ) ( 17,040 ) Other assets ( 6,626 ) ( 11,855 ) 3,474 Accounts payable 2,210 14,363 3,312 Income taxes payable ( 5,918 ) ( 5,578 ) ( 4,108 ) Accrued personnel costs 2,711 24,009 24,525 Other liabilities 14,674 ( 1,876 ) 3,109 Net cash provided by operating activities 153,507 126,132 131,154 Cash flows from investing activities: Business acquisitions and purchases of client lists, net of cash acquired ( 53,110 ) ( 79,141 ) ( 66,734 ) Purchases of client fund investments ( 14,122 ) ( 19,771 ) ( 26,980 ) Proceeds from the sales and maturities of client fund investments 18,465 12,400 14,877 Proceeds from sales of assets and divested operations 3,059 3,022 9,710 Additions to property and equipment ( 23,052 ) ( 8,641 ) ( 8,984 ) Other, net ( 10,633 ) ( 6,987 ) ( 3,899 ) Net cash used in investing activities ( 79,393 ) ( 99,118 ) ( 82,010 ) Cash flows from financing activities: Proceeds from bank debt 1,224,000 824,900 852,100 Payment of bank debt ( 1,177,300 ) ( 714,500 ) ( 804,800 ) Payment for acquisition of treasury stock ( 65,378 ) ( 122,538 ) ( 97,450 ) Indirect repurchase of shares for minimum tax withholding ( 8,448 ) ( 7,289 ) ( 3,037 ) Changes in client funds obligations ( 13,574 ) 15,352 ( 8,874 ) Payment of contingent consideration of acquisitions and client lists ( 45,175 ) ( 21,231 ) ( 14,084 ) Proceeds from exercise of stock options 8,764 10,035 7,311 Other, net — ( 2,072 ) ( 171 ) Net cash used in financing activities ( 77,111 ) ( 17,343 ) ( 69,005 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 2,997 ) 9,671 ( 19,861 ) Cash, cash equivalents and restricted cash at beginning of year 160,145 150,474 170,335 Cash, cash equivalents and restricted cash at end of year $ 157,148 $ 160,145 $ 150,474 Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets: Cash and cash equivalents $ 8,090 $ 4,697 $ 1,997 Restricted cash 30,362 28,487 30,383 Cash equivalents included in funds held for clients 118,696 126,961 118,094 Cash, cash equivalents and restricted cash at end of year $ 157,148 $ 160,145 $ 150,474 Supplemental disclosures of cash flow information: Cash paid for interest $ 19,127 $ 7,421 $ 3,350 Cash paid for income taxes, net of income tax refunds $ 39,976 $ 27,815 $ 16,998 See the accompanying notes to the consolidated financial statements F-7 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Selected Terms Used in Notes to 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. LIBOR - London Interbank Offered Rate. SOFR - The Secured Overnight Financing Rate. ROU- Right of Use. SEC - United States Securities & Exchange Commission. Organization - CBIZ, Inc. is a leading provider of financial, insurance and advisory services to businesses throughout the United States and parts of Canada. Acting through its subsidiaries, it has been serving small and medium-sized businesses, as well as individuals, governmental entities, and not-for-profit enterprises. 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 19, Segment Disclosures, to the accompanying consolidated financial statements. Effective April 1, 2023, CBIZ, Inc. formed Rockside Insurance Company, Inc. ("Rockside"), a captive insurance company licensed in Vermont. Rockside, wholly owned by CBIZ, Inc., provides insurance coverages for a portion of the retention deductibles from CBIZ, Inc.'s certain insurance programs with third party insurers. Basis of Presentation - The accompanying consolidated financial statements reflect the operations of CBIZ, Inc. and all of its wholly-owned subsidiaries (“CBIZ,” the “Company,” “we,” “us” or “our”), after elimination of all intercompany accounts and transactions. We have prepared the accompanying consolidated financial statements in accordance with GAAP and pursuant to the rules and regulations of the SEC. We have determined that our relationship with certain CPA firms with whom we maintain ASAs qualify as variable interest entities. The accompanying consolidated financial statements do not reflect the operations or accounts of variable interest entities as the impact is not material to our consolidated financial condition, results of operations or cash flows. Fees earned by us under the ASAs are recorded at net realizable value as a component of “Revenue” in the accompanying Consolidated Statements of Comprehensive Income and were approximately $ 259.6 million, $ 235.4 million and $ 174.8 million for the years ended December 31, 2023, 2022 and 2021, respectively, the majority of which was related to services rendered to privately-held clients. In the event that accounts receivable and unbilled work in process become uncollectible by the CPA firms, the service fee due to us is typically reduced on a proportional basis. Although the ASAs do not constitute control, we are one of the beneficiaries of the agreements and may bear certain economic risks. Refer to Note 17, Related Parties, for further discussion regarding the ASAs. F-8 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) 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 ASC 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 condensed consolidated financial statements. Certain prior period amounts have been reclassified to conform to current year's presentation. Significant Accounting Policies - We consider the following policies to be beneficial in understanding the judgments that are involved in the preparation of our consolidated financial statements and the uncertainties that could impact our financial condition, results of operations and cash flows. Use of Estimates - The preparation of consolidated financial statements in conformity with GAAP and pursuant to the rules and regulations of the SEC requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management’s estimates and assumptions are derived from and are continually evaluated based upon available information, judgment and experience. Actual results may differ materially from these estimates. Revenue Recognition - We account for revenue in accordance with Topic 606, Revenue from Contracts with Customers. We recognize revenue based on the five-step model; (i) identify the contract with the customer; (ii) identify the performance obligation in the contract; (iii) determine the contract price; (iv) allocate the transaction price; and (v) recognize revenue as each performance obligation is satisfied. If we determine that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable contract are met. For further information on our various streams of revenue, refer to Note 2, Revenue, to the accompanying consolidated financial statements. Operating Expenses - Operating expenses represent costs of service and other costs incurred to operate our business units and are primarily comprised of personnel costs and occupancy related expenses. Personnel costs include (i) salaries and benefits; (ii) commissions paid to producers; (iii) incentive compensation; and (iv) share-based compensation. Incentive compensation costs and share-based compensation are estimated and accrued. The final determination of incentive compensation is made after year-end results are finalized. The largest components of occupancy costs are rent expense and utilities. Base rent expense is recognized over respective lease terms, while utilities and common area maintenance charges are recognized as incurred. Share-Based Compensation - The measurement of all share-based compensation arrangements is based on their respective grant date fair value. The grant date fair value of stock options is based on the Black-Scholes-Merton pricing model, which incorporates assumptions regarding the expected volatility, the expected option life, the risk-free interest rate and the expected dividend yield. The grant date fair value of restricted stock awards and restricted stock units is based on the closing price of the underlying stock on the date of issuance. The grant date fair value of the performance share units is based on the closing price of the underlying stock on the date of issuance and recorded based on achievement of target performance metrics. The expense related to stock options, restricted stock awards, and restricted stock units is recognized over the requisite service period which is generally three to four years . The expense related to performance share units is recorded over the three-year performance period based on the fair value on the grant date and adjusted each reporting period for the achievement of the performance metrics, based on our best estimate using available information. Share-based compensation expense is recorded in the accompanying Consolidated Statements of Comprehensive Income as “Operating expenses” or “Corporate general and administrative expenses,” depending on where the respective individual’s compensation is recorded. For additional discussion regarding share-based awards, refer to Note 14, Employee Share Plans, to the accompanying consolidated financial statements. Operating Leases - We determine if a contract is a lease at inception. We have leases for office space and facilities, automobiles, and certain information technology equipment. Certain of these leases include options to extend the F-9 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) lease and some include options to terminate the lease early. As an accounting policy election, we elected not to apply the recognition requirements to short term leases (a lease at commencement date that has a lease term of 12 months or less and does not contain a purchase option that we are reasonably certain to exercise). The ROU assets and lease liabilities are recognized as of the commencement date based on the present value of the lease payments over the lease term. The discount rate utilized for the measurement purpose is based on our secured fixed rate to borrow over a comparable term for the lease because the rate implicit in the lease is not determinable. The lease term may include the options to extend or terminate the lease when it is reasonably certain that we will exercise the applicable option. Related rent expense under such leases is recognized evenly throughout the term of the lease when the total lease commitment is a known amount, and recorded on an as incurred basis when future rent payment increases under the obligation are unknown due to rent escalations being tied to factors that are not currently measurable (such as increases in the consumer price index). Differences between rent expense recognized and the cash payments required under these leases are recorded as a component of “Lease liability” in the current and non-current liabilities sections of the accompanying Consolidated Balance Sheets. We may receive incentives to lease office facilities in certain areas. Such incentives are recorded as a change in lease payments and may require us to remeasure the lease liability to reflect the change in lease payments. Cash and Cash Equivalents - Cash and cash equivalents consist of cash on hand and investments with an original maturity of three months or less when purchased. Restricted Cash - Restricted cash consists of funds held by us in relation to our capital and investment advisory services as those funds are restricted in accordance with applicable Financial Industry Regulatory Authority regulations. Restricted cash also consists of funds on deposit from clients in connection with the pass-through of insurance premiums to the carrier with the related liability for these funds recorded in “Accounts payable” in the accompanying Consolidated Balance Sheets. Accounts Receivable and Allowance for Doubtful Accounts - Accounts receivable, less allowances for doubtful accounts, reflects the net realizable value of receivables and approximates fair value. Unbilled revenues are recorded at estimated net realizable value. Assessing the collectability of receivables (billed and unbilled) requires management judgment based on a combination of factors. When evaluating the adequacy of the allowance for doubtful accounts and the overall probability of collecting on receivables, we analyze historical experience, client credit-worthiness, the age of the trade receivable balances, current economic conditions that may affect a client’s ability to pay and current and projected economic trends and conditions at the balance sheet date. At December 31, 2023 and 2022, the allowance for doubtful accounts was $ 25.6 million and $ 20.8 million, respectively, in the accompanying Consolidated Balance Sheets. Funds Held for Clients and Client Fund Obligations - Services provided by our payroll operations include the preparation of payroll checks, federal, state, and local payroll tax returns, and flexible spending account administration. In relation to these services, as well as other similar service offerings, we collect funds from our clients’ accounts in advance of paying client obligations. These funds, collected before they are due, 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 and U.S. treasury bills, are classified as available-for-sale and are included in the “Funds held for clients” line item on the accompanying Consolidated Balance Sheets. The underlying obligation is recorded as “Client fund obligations” on the Consolidated Balance Sheets. The balances in these accounts fluctuate with the timing of cash receipts and the related cash payments and may vary significantly during the year based on the timing of client’s payroll periods. Other than certain federal and state regulations pertaining to flexible spending account administration, there are no regulatory or other contractual restrictions placed on these funds. Refer to Note 6, Financial Instruments, to the accompanying consolidated financial statements for further discussion of investments related to funds held for clients. Property and Equipment - Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are provided on a straight-line basis over the following estimated useful lives: F-10 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Buildings 25 to 40 years Furniture and fixtures 5 to 10 years Capitalized software 3 to 5 years Equipment 3 to 7 years Leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful lives or the remaining respective lease term. The cost of software purchased or developed for internal use is capitalized and amortized using the straight-line method over an estimated useful life not to exceed five years . We periodically review long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. Under those circumstances, if the fair value were less than the carrying amount of the asset, we would recognize a loss for the difference. Goodwill and Other Intangible Assets - Goodwill represents the excess of the purchase price of the acquired businesses and the related fair value of the net assets acquired. At December 31, 2023, the carrying value of goodwill totaled $ 865.2 million, compared to total assets of $ 2.0 billion and total stockholders’ equity of $ 791.6 million. Intangible assets consist of identifiable intangibles other than goodwill. Identifiable intangible assets other than goodwill include client lists and non-compete agreements which require significant judgments in determining the fair value. We carry client lists and non-compete agreements at cost, less accumulated amortization, in the accompanying Consolidated Balance Sheets. Goodwill is reviewed for impairment annually during the fourth quarter or more frequently in the event of an impairment indicator. We are required to consider whether it is more likely than not (defined as a likelihood of more than 50%) that the fair value of each reporting unit has fallen below its carrying value, thus requiring us to perform an interim goodwill impairment test. Intangible assets with definite lives, such as client lists and non-compete agreements, are amortized using the straight-line method over their estimated useful lives (generally ranging from three to fifteen years ). We review these assets for impairment whenever events or changes in circumstances indicate an asset’s carrying value may not be recoverable. Recoverability is assessed based on a comparison of the undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value determined by a discounted cash flow analysis, market comparable method or a combination thereof as determined to be appropriate in the circumstances. The goodwill impairment test is performed at a reporting unit level. A reporting unit is an operating segment of a business or one level below an operating segment. At December 31, 2023, we had six reporting units, of which five carry goodwill balances. We may use either a qualitative or quantitative approach when testing a reporting unit’s goodwill for impairment. Under the qualitative assessment, we are not required to calculate the fair value of a reporting unit unless we determine that it is more likely than not that its fair value is less than its carrying amount. If under the quantitative assessment the fair value of a reporting unit is less than its carrying amount, then the amount of the impairment loss, if any, must be measured. Any such impairment charge would reduce earnings and could be material. After considering changes to assumptions used in our most recent quantitative testing for each reporting unit, including the capital market environment, economic and market conditions, industry competition and trends, our weighted average cost of capital, changes in management and key personnel, the price of our common stock, changes in our results of operations, the magnitude of the excess of fair value over the carrying amount of each reporting unit as determined in our most recent quantitative testing, and other factors, we concluded that it was more likely than not that the fair values of each of our reporting units exceeded their respective carrying values and, therefore, did not perform a quantitative impairment analysis. For further information regarding our goodwill balances, refer to Note 5, Goodwill and Other Intangible Assets, net, to the accompanying consolidated financial statements. Income Taxes - Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently payable and deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and operating losses and tax credit carryforwards. State income tax credits are accounted for using the flow-through method. F-11 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) A valuation allowance is provided when it is more-likely-than-not that all or some portion of a deferred tax asset will not be realized. We determine valuation allowances based on all available evidence. Such evidence includes historical results, the reversal of deferred tax liabilities, expectations of future consolidated and/or separate company profitability and the feasibility of tax-planning strategies. Determining valuation allowances includes significant judgment by management, and different judgments could yield different results. Accounting for uncertain tax positions requires a more-likely-than-not threshold for recognition in the consolidated financial statements. We recognize a tax benefit based on whether it is more-likely-than-not that a tax position will be sustained. We record a liability to the extent that a tax position taken or expected to be taken on a tax return exceeds the amount recognized in the consolidated financial statements. Business Combinations - We recognize and measure identifiable tangible and intangible assets acquired and liabilities assumed as of the acquisition date at fair value. Fair value measurements require extensive use of estimates and assumptions, including estimates of future cash flows to be generated by the acquired assets. The operating results of acquired businesses are included in our consolidated financial statements beginning on the date of acquisition. The purchase price is equivalent to the fair value of consideration transferred. Goodwill is recognized for the excess of purchase price over the net fair value of assets acquired and liabilities assumed. Contingent Purchase Price Liabilities - Contingent purchase price liabilities consisting of cash payments and common stock issuances result from our business acquisitions and are recorded at fair value at the time of acquisition as “Contingent purchase price liability - current” and “Contingent purchase price liability - non-current” in the accompanying Consolidated Balance Sheets. We estimate the fair value of our contingent purchase price liabilities using a probability-weighted discounted cash flow model. 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, which is considered a Level 3 unobservable input, is reassessed on a quarterly basis 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, including the revaluation of common stock, is recorded in the earnings of that period. For the years ended December 31, 2023, 2022 and 2021, we recorded other expense of $ 2.7 million, $ 2.4 million and $ 2.4 million, respectively, related to net changes in the fair value of contingent consideration. Refer to Note 7, Fair Value Measurements, and Note 18, Business Combinations, for further discussion of our contingent purchase price liabilities and acquisitions. Interest Rate Derivative Instruments - We maintain interest rate swaps that are designated as cash flow hedges to manage the market risk from changes in interest rates on our floating-rate debt under our $ 600.0 million unsecured credit facility, by and among CBIZ Operations, Inc., CBIZ, Inc. and Bank of America, N.A., as administrative agent and bank, and other participating banks. The designation of a derivative instrument as a hedge and its ability to meet the hedge accounting criteria determine how we reflect the change in fair value of the derivative instrument. A derivative qualifies for hedge accounting treatment if, at inception, it meets defined correlation and effectiveness criteria. These criteria require that the anticipated cash flows and/or changes in fair value of the hedging instrument substantially offset those of the position being hedged. We utilize derivative instruments to manage interest rate risk associated with our floating-rate debt under the credit facility. Interest rate swap contracts mitigate the risk associated with the underlying hedged item. If the contract is designated as a cash flow hedge, the mark-to-market gains or losses on the swap are deferred and included as a component of accumulated other comprehensive income, net of tax, to the extent effective, and reclassified to interest expense in the same period during which the hedged transaction affects earnings. For further discussion regarding derivative financial instruments, refer to Note 6, Financial Instruments, to the accompanying consolidated financial statements. Recent 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 codification. We assess and review the impact of all ASUs. ASUs not listed below were F-12 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) reviewed and determined to be either not applicable or are not expected to have a material impact on the 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 did not have a material impact on our 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. 2023-03 upon issuance and the adoption did not have a material impact on our consolidated financial statements and related disclosures. Accounting Standards Issued But Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about an entity's effective tax rate reconciliation as well as information on income tax paid. The guidance in this ASU is effective for public companies with annual periods beginning after December 15, 2024. We plan to adopt the guidance for the fiscal year ending December 31, 2025. We are currently evaluating the effect adoption of this ASU will have on our consolidated financial statements. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosure about significant segment expenses. The guidance in this ASU is effective for public companies with annual periods beginning after December 15, 2023, and interim periods within the annual period beginning after December 15, 2024. We plan to adopt the guidance for the fiscal year ending December 31, 2024. We are currently evaluating the effect adoption of this ASU will have on our consolidated financial statements. NOTE 2. REVENUE The following tables disaggregate our revenue by source (in thousands): For the Year Ended December 31, 2023 Financial Services Benefits and Insurance Services National Practices Consolidated Accounting, tax, advisory and consulting $ 1,160,686 $ — $ — $ 1,160,686 Core Benefits and Insurance Services — 365,848 — 365,848 Non-core Benefits and Insurance Services — 16,757 — 16,757 Managed networking, hardware services — — 36,984 36,984 National Practices consulting — — 10,919 10,919 Total revenue $ 1,160,686 $ 382,605 $ 47,903 $ 1,591,194 F-13 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) For the Year Ended December 31, 2022 Financial Services Benefits and Insurance Services National Practices Consolidated Accounting, tax, advisory and consulting $ 1,010,068 $ — $ — $ 1,010,068 Core Benefits and Insurance Services — 342,063 — 342,063 Non-core Benefits and Insurance Services — 15,944 — 15,944 Managed networking, hardware services — — 33,503 33,503 National Practices consulting — — 10,401 10,401 Total revenue $ 1,010,068 $ 358,007 $ 43,904 $ 1,411,979 For the Year Ended December 31, 2021 Financial Services Benefits and Insurance Services National Practices Consolidated Accounting, tax, advisory and consulting $ 734,026 $ — $ — $ 734,026 Core Benefits and Insurance Services — 319,684 — 319,684 Non-core Benefits and Insurance Services — 12,639 — 12,639 Managed networking, hardware services — — 28,456 28,456 National Practices consulting — — 10,120 10,120 Total revenue $ 734,026 $ 332,323 $ 38,576 $ 1,104,925 Financial Services Revenue primarily consists of professional service fees derived from traditional accounting services, tax return preparation, administrative services, financial and risk advisory, consulting and valuation services. Clients are billed for these services based upon a fixed-fee, an hourly rate, or an outcome-based fee. Time related to the performance of all services is maintained in a time and billing system. Revenue for fixed-fee arrangements is recognized over time with the performance obligation measured in hours worked and anticipated realization. Anticipated realization is defined as the fixed fee divided by the product of the hours anticipated to complete a performance obligation and the standard billing rate. Anticipated realization rates are applied to hours charged to a contract when recognizing revenue. At the end of each reporting period, we evaluate the work performed to date to ensure that the amount of revenue recognized in each reporting period for the client arrangement is equal to the performance obligations met. Time and expense arrangement revenue is recognized over time with progress measured towards completion with value being transferred through our hourly fee arrangement at expected net realizable rates per hour, plus agreed-upon out-of-pocket expenses. The cumulative impact on any subsequent revision in the estimated realizable value of unbilled fees for a particular client project is reflected in the period in which the change becomes known. Prior to recognizing revenue for outcome-based arrangement, we estimate the transaction price, including variable consideration that is subject to a constraint based on risks specific to the arrangement. We evaluate the estimate in each reporting period and recognize revenue to the extent it is probable that a significant reversal of revenue will not occur. Revenue is recognized when the constraint is lifted at a point in time when the value is determined and verified by a third party. Benefits and Insurance Services Benefits and Insurance Services provides brokerage and consulting along lines of service which include group health benefits consulting and brokerage, property and casualty brokerage, retirement plan advisory, payroll, human capital management, actuarial, life insurance and other related services. Revenue consists primarily of fee income for administering health and retirement plans and brokerage commissions. Revenue also includes investment income related to client payroll funds that are held in CBIZ accounts, as is industry practice. We pay commissions monthly and require the recipient of the commission to be employed as of the end of the month in which the commissions are earned (as opposed to at the time of actual payment). Failure to remain employed at the date the F-14 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) commission is payable results in the forfeiture of commissions that would otherwise be due. Therefore, we have determined that the requirement of continued employment is substantive and accordingly, do not consider the commissions to be incremental costs of obtaining the customer contract and consequently a contract acquisition cost is not recognized for those commissions. Revenue related to group health benefits consulting consists of (i) commissions, (ii) fee income which can be fixed or variable based on a price per participant and (iii) contingent revenue. • Commission revenue and fee income are recognized over the contract period as these services are provided to clients continuously throughout the term of the arrangement. Our customers benefit from each month of service on its own and although volume and the number of participants may differ month to month, our obligation to perform substantially remains the same. • Contingent revenue arrangements are related to carrier-based performance targets. Due to the uncertainty of the outcome and the probability that a change in estimate would result in a significant reversal of revenue, we have applied a constraint on recording contingent revenue. Revenue is recognized when the constraint has been lifted which is the earlier of written notification from a carrier that the target has been achieved or cash collection. Contingent revenue is not a significant revenue stream to our consolidated financial position or results of operations. Revenue related to property and casualty consists of (i) commissions and (ii) contingent revenue. • Commissions relating to agency billing arrangements (pursuant to which we bill the insured, collect the funds and forward the premium to the insurance carrier less our commission) and direct billing arrangements (pursuant to which the insurance carrier bills the insured directly and forwards the commission to us) are both recognized on the effective date of the policy. Commission revenue is reported net of reserves for estimated policy cancellations and terminations. The cancellation and termination reserve is based upon estimates and assumptions using historical cancellation and termination experience and other current factors to project future experience. • Contingent revenue arrangements related to carrier-based performance targets include claim loss experience and other factors. Due to the uncertainty of the outcome and the probability that a change in estimate would result in a significant reversal of revenue, we have applied a constraint on recording contingent revenue. Revenue is recognized when the constraint has been lifted which is the earlier of written notification from a carrier that the target has been achieved or cash collection. Contingent revenue is not a significant revenue stream to our consolidated financial position or results of operations. Revenue related to retirement plan services consist of advisory, third party administration and actuarial services. • Advisory revenue is either (i) based on the value of assets under management, as provided by a third party, multiplied by an agreed upon rate, (ii) fee based, or (iii) a combination of fixed fee and value of assets under management. Advisory services revenue, derived from the value of assets under management, is calculated monthly or quarterly based on the estimated value of assets under management, as it is earned over the duration of the reporting period and relates to performance obligations satisfied during that period. The variability related to the estimated asset values used to recognize revenue during the reporting period is resolved and the amount of related revenue recognized is adjusted when the actual value of assets under management is known. Fee based Advisory revenue is recognized over the contract period as these services are provided to clients continuously throughout the term of the arrangement. Our clients benefit from each month of service on its own, and although the volume of tasks may differ month to month, our obligation to perform substantially remains the same. • Third party administration revenue is recognized over the contract period as these services are provided to clients continuously throughout the term of the arrangement. Our clients benefit from each F-15 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) month of service on its own, and although the volume of tasks may differ month to month, our obligation to perform substantially remains the same. • Actuarial revenue is recognized over the contract period with performance measured in hours in relation to the expected total hours. Under certain defined benefit plan administration arrangements, we charge new clients an initial, non-refundable, set-up fee as part of a multi-year service agreement. Revenue and costs related to the set-up fees are deferred and recognized over the life of the contract or the expected customer relationship, whichever is longer. Revenue related to payroll processing consists of a (i) fixed fee or (ii) variable fee based on a price per employee or check processed. Revenue is recognized when the actual payroll processing occurs. Our customers benefit from each month of service on its own and although volume and the variability may differ month to month, our obligation to perform substantially remains the same. Non-core Benefits and Insurance Services consists of transactional businesses that tend to fluctuate. These include life insurance, talent and compensation services. National Practices Managed networking, hardware services revenue consists of installation, maintenance and repair of computer hardware. These services are charged to a single customer based on cost plus an agreed-upon markup percentage, which has existed since 1999. National Practices consulting revenue is based upon a fixed fee, an hourly rate, or outcome-based. Revenue for fixed fee and time and expense arrangements is recognized over the performance period based upon actual hours incurred, while revenue for outcome-based arrangements is recognized similar to the outcome-based arrangements in the Financial Services practice group. Transaction Price Allocated to Future Obligations - The revenue recognition standard requires the disclosure of the aggregate amount of transaction price allocated to performance obligations that have not yet been satisfied as of the reporting date. The guidance provides certain practical expedients that limit this requirement, including performance obligations that are part of a contract that is one year or less. Since the majority of our contracts are one year or less, we have applied this practical expedient related to quantifying remaining performance obligations. In regards to contracts with terms in excess of one year, certain contract periods related to our government healthcare consulting, group health and benefits consulting, and property and casualty insurance businesses have an original specified contract duration in excess of one year, however, the agreements provide CBIZ and the client with the right to cancel or terminate the contract with no substantial penalty. We have applied the provisions of Topic 606 and the FASB Transition Resource Group memo number 10-14, and note that the definition of contract duration does not extend beyond the goods and services already transferred for contracts that provide both the Company and the client with the right to cancel or terminate the contract with no substantial penalty. NOTE 3. ACCOUNTS RECEIVABLE, NET Accounts receivable, net balances at December 31, 2023 and 2022 were as follows (in thousands): 2023 2022 Trade accounts receivable $ 309,640 $ 267,409 Unbilled revenue, at net realizable value 96,110 87,890 Total accounts receivable 405,750 355,299 Allowance for doubtful accounts ( 25,598 ) ( 20,801 ) Accounts receivable, net $ 380,152 $ 334,498 F-16 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Changes in the allowance for doubtful accounts on accounts receivable are as follows (in thousands): 2023 2022 2021 Balance at beginning of period $ ( 20,801 ) $ ( 16,158 ) $ ( 14,894 ) Provision ( 13,681 ) ( 13,545 ) ( 9,422 ) Charge-offs, net of recoveries 8,884 8,902 8,158 Balance at end of period $ ( 25,598 ) $ ( 20,801 ) $ ( 16,158 ) NOTE 4. PROPERTY AND EQUIPMENT, NET Property and equipment, net at December 31, 2023 and 2022 consisted of the following (in thousands): 2023 2022 Buildings and leasehold improvements $ 58,537 $ 47,300 Furniture and fixtures 36,039 30,369 Capitalized software 34,635 34,735 Equipment 39,398 32,927 Total property and equipment 168,609 145,331 Accumulated depreciation ( 111,597 ) ( 100,147 ) Property and equipment, net $ 57,012 $ 45,184 Depreciation expense for property and equipment was $ 12.5 million, $ 11.2 million and $ 10.8 million in 2023, 2022 and 2021, respectively. NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET A summary of changes in the carrying amount of goodwill by operating segment for the years ended December 31, 2023 and 2022 were as follows (in thousands): Financial Services Benefits and Insurance Services National Practices Total Goodwill Gross $ 470,732 $ 320,125 $ 33,873 $ 824,730 Accumulated impairment $ ( 44,047 ) $ ( 7,733 ) $ ( 32,207 ) $ ( 83,987 ) Net at December 31, 2021 $ 426,685 $ 312,392 $ 1,666 $ 740,743 Additions 79,147 — — 79,147 Divestitures and other adjustments 27 — — 27 Gross 549,906 320,125 33,873 903,904 Accumulated impairment ( 44,047 ) ( 7,733 ) ( 32,207 ) ( 83,987 ) Net at December 31, 2022 $ 505,859 $ 312,392 $ 1,666 $ 819,917 Additions 41,322 3,932 — 45,254 Divestitures and other adjustments 9 — — 9 Gross 591,237 324,057 33,873 949,167 Accumulated impairment ( 44,047 ) ( 7,733 ) ( 32,207 ) ( 83,987 ) Net at December 31, 2023 $ 547,190 $ 316,324 $ 1,666 $ 865,180 We review goodwill at the reporting unit level at least annually, as of November 1, for impairment. We had five reporting units at November 1, 2023. No goodwill impairment was recognized as a result of the annual evaluation. F-17 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) The components of goodwill and other intangible assets, net at December 31, 2023 and 2022 were as follows (in thousands): 2023 2022 Goodwill $ 865,180 $ 819,917 Intangibles : Client lists 338,237 302,822 Other intangibles 11,481 11,463 Total intangibles 349,718 314,285 Total goodwill and other intangibles assets 1,214,898 1,134,202 Accumulated amortization: Client lists ( 196,412 ) ( 173,286 ) Other intangibles ( 9,882 ) ( 9,214 ) Total accumulated amortization ( 206,294 ) ( 182,500 ) Goodwill and other intangible assets, net $ 1,008,604 $ 951,702 Amortization expense for client lists and other intangible assets was $ 23.8 million, $ 21.7 million and $ 16.3 million in 2023, 2022 and 2021, respectively. The weighted-average useful lives of total intangible assets, client lists and other intangible assets were 7.4 years, 7.4 years and 5.2 years, respectively, as of December 31, 2023. Other intangible assets are amortized over periods ranging from 3 to 15 years. Based on the amount of intangible assets subject to amortization at December 31, 2023, the estimated amortization expense is $ 22.8 million for 2024, $ 21.4 million for 2025, $ 19.4 million for 2026, $ 18.3 million for 2027, $ 16.3 million for 2028, and $ 45.1 million thereafter. NOTE 6. FINANCIAL INSTRUMENTS 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 are classified as Level 1 in the fair value hierarchy. 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 classified as Level 2 in the fair value hierarchy. Concentrations of Credit Risk - Financial instruments that may subject us to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. We place our cash and cash equivalents with highly-rated financial institutions, limiting the amount of credit exposure with any one financial institution. Our client base consists of large numbers of geographically diverse customers dispersed throughout the United States; thus, concentration of credit risk with respect to accounts receivable is not significant. Available-For-Sale Debt Securities - Available-for-sale debt securities consist primarily of corporate and municipal bonds. The net par values of these securities total $ 40.0 million and $ 44.4 million at December 31, 2023 and 2022, respectively. The bonds have maturity dates or callable dates ranging from January 2024 through December 2025, and are included in “Funds held for clients — current” in the accompanying Consolidated Balance Sheets based on our intent and ability to sell these investments at any time under favorable conditions. At December 31, 2023 and December 31, 2022, unrealized losses on the securities were not material and have not been recognized as a credit loss because the bonds are investment grade quality and management is not required or does not intend to sell prior to an expected recovery in value. The bond issuers continue to make timely principal and interest payments. F-18 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) The following table summarizes our bond activity for the years ended December 31, 2023 and 2022 (in thousands): 2023 2022 Fair value at January 1 $ 43,485 $ 38,670 Purchases 14,122 19,771 Redemptions ( 3,310 ) ( 5,630 ) Maturities ( 15,155 ) ( 6,770 ) Change in bond premium ( 1,099 ) ( 645 ) Fair market value adjustment 1,416 ( 1,911 ) Fair value at December 31 $ 39,459 $ 43,485 In addition to the available-for-sale securities discussed above, we also held other depository assets in the amount of $ 1.0 million and $ 0.9 million at December 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 the 2022 credit facility, or the forecasted acquisition of such liability. To mitigate counterparty credit risk, we only enter into contracts with selected major financial institutions with investment grade ratings and continually assess their creditworthiness. There are no credit risk-related contingent features in our interest rate swaps nor do the swaps contain provisions under which we would be required to post collateral. We do not purchase or hold any derivative instruments for trading or speculative purposes. The designation of a derivative instrument as a hedge and its ability to meet the hedge accounting criteria determine how we reflect the change in fair value of the derivative instrument. A derivative qualifies for hedge accounting treatment if, at inception, it meets defined correlation and effectiveness criteria. These criteria require that the anticipated cash flows and/or changes in fair value of the hedging instrument substantially offset those of the position being hedged. We had no fair value hedging instruments at December 31, 2023 or 2022. Our interest rate swaps are designated as cash flow hedges. Accordingly, the interest rate swaps are recorded as either an asset or liability in the accompanying Consolidated Balance Sheets at fair value. The mark-to-market gains or losses on the swaps are deferred and included as a component of accumulated other comprehensive income (“AOCI”), net of tax, to the extent the hedge is determined to be effective, and reclassified to interest expense in the same period during which the hedged transaction affects earnings. The interest rate swaps are assessed for effectiveness and continued qualification for hedge accounting on a quarterly basis. For the years ended December 31, 2023 and 2022, the interest rate swaps were deemed to be effective. 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. As of December 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 Consolidated Balance Sheets at December 31, 2023 and 2022 (in thousands). Refer to Note 7, Fair Value Measurements, to the accompanying consolidated financial statements for additional disclosures regarding fair value measurements. F-19 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) December 31, 2023 Notional Amount Fixed Rate Expiration Fair Value Balance Sheet Location Interest rate swap $ 50,000 0.834 % 4/14/2025 $ 2,282 Other non-current asset Interest rate swap $ 30,000 1.186 % 12/14/2026 $ 2,125 Other non-current asset Interest rate swap $ 20,000 2.450 % 8/14/2027 $ 784 Other non-current asset Interest rate swap (1) $ 25,000 3.669 % 4/14/2028 $ ( 129 ) Other non-current liability Interest rate swap (2) $ 25,000 4.488 % 10/14/2028 $ ( 1,063 ) Other non-current liability (1) Entered into during the first quarter of 2023. (2) Entered into during the fourth quarter of 2023. December 31, 2022 Notional Amount Fixed Rate Expiration Fair Value Balance Sheet Location Interest rate swap (3) $ 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 (3) Expired during the second quarter of 2023. During the next twelve months, the amount of the December 31, 2023 AOCI balance that will be reclassified to earnings is expected to be immaterial. The following table summarizes the effects of the interest rate swap on our accompanying Consolidated Statements of Comprehensive Income for the years ended December 31, 2023 and 2022 (in thousands): Gain recognized in AOCI, net of tax Gain reclassified from AOCI into expense Twelve Months Ended December 31, Twelve Months Ended December 31, Location 2023 2022 2023 2022 Interest rate swaps $ 393 $ 6,255 $ 4,285 $ 357 Interest expense NOTE 7. FAIR VALUE MEASUREMENTS FASB ASC Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy: • Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities • Level 2 — Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability • Level 3 — Unobservable inputs for the asset or liability We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As circumstances change, we will reassess the level in which the inputs are included in the fair value hierarchy. F-20 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) For the years ended December 31, 2023 and 2022, there were no transfers between the valuation hierarchy Levels 1, 2 and 3. The following table summarizes our assets and (liabilities) at December 31, 2023 and 2022 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 December 31, 2023 December 31, 2022 Deferred compensation plan assets 1 143,499 118,862 Available-for-sale debt securities 1 39,459 43,485 Other depository assets 1 1,031 868 Deferred compensation plan liabilities 1 ( 143,499 ) ( 118,862 ) Interest rate swaps, net 2 3,999 7,809 Bank debt 2 ( 310,826 ) ( 263,654 ) Contingent purchase price liabilities 3 ( 114,946 ) ( 132,010 ) Contingent Purchase Price Liabilities - During the years ended December 31, 2023 and 2022, we recorded expense of $ 2.7 million and expense of $ 2.4 million, respectively, due to accretion, adjusting for expected results of acquired businesses and the revaluation of stock related to contingent payments. These changes are included in Other income (expense), net in the accompanying Consolidated Statements of Comprehensive Income. Refer to Note 18, Business Combinations, for further discussion of our acquisitions and contingent purchase price liabilities. The following table summarizes the change in fair value of our contingent purchase price liabilities identified as Level 3 for the years ended December 31, 2023 and 2022 (pre-tax basis, in thousands): Contingent Purchase Price Liabilities Beginning balance — December 31, 2021 $ ( 79,139 ) Additions from business acquisitions ( 74,199 ) Settlement of contingent purchase price payable 23,763 Change in fair value of contingency 662 Change in net present value of contingency ( 3,097 ) Balance — December 31, 2022 $ ( 132,010 ) Additions from business acquisitions ( 32,142 ) Settlement of contingent purchase price payable 51,949 Change in fair value of contingency 62 Change in net present value of contingency ( 2,805 ) Balance — December 31, 2023 $ ( 114,946 ) NOTE 8. INCOME TAXES For financial reporting purposes, income before income taxes includes the following components (in thousands): 2023 2022 2021 United States $ 165,869 $ 141,288 $ 92,823 Foreign (Canada) 434 187 193 Total $ 166,303 $ 141,475 $ 93,016 F-21 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Income tax expense included in the accompanying Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021 was as follows (in thousands): 2023 2022 2021 Current: Federal $ 29,835 $ 20,910 $ 12,369 Foreign 116 50 52 State and local 10,298 7,299 3,397 Total 40,249 28,259 15,818 Deferred: Federal 3,978 5,667 5,029 State and local 1,108 2,195 1,282 Total 5,086 7,862 6,311 Total income tax expense 45,335 36,121 22,129 The provision for income taxes attributable to income operations differed from the amount obtained by applying the federal statutory income tax rate to income before income taxes, as follows (in thousands, except percentages): 2023 2022 2021 Tax at U.S. federal statutory rates $ 34,924 $ 29,714 $ 19,538 State taxes (net of federal benefit) 10,576 9,019 4,498 Reserves for uncertain tax positions ( 241 ) 337 ( 104 ) Share-based compensation ( 5,820 ) ( 6,832 ) ( 4,187 ) Non-deductible officers' compensation 5,485 2,507 1,267 Other, net 411 1,376 1,117 Provision for income taxes $ 45,335 $ 36,121 $ 22,129 Effective income tax rate 27.3 % 25.5 % 23.8 % The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022, were as follows (in thousands): 2023 2022 Deferred tax assets: Net operating loss carryforwards $ 1,515 $ 1,473 Allowance for doubtful accounts 4,876 4,682 Employee benefits and compensation 38,137 37,075 Lease costs 7,398 6,871 Other deferred tax assets 1,888 574 Total gross deferred tax assets 53,814 50,675 Less: valuation allowance ( 2,721 ) ( 3,156 ) Total deferred tax assets, net 51,093 47,519 Deferred tax liabilities: Goodwill and other intangibles 77,005 68,306 Property and equipment 836 1,185 Other deferred tax liabilities 2,539 2,791 Total gross deferred tax liabilities 80,380 72,282 Deferred income taxes, net $ ( 29,287 ) $ ( 24,763 ) We have established valuation allowances for deferred tax assets related to certain employee benefits and compensation and state net operating loss (“NOL”) carryforwards at December 31, 2023 and December 31, 2022. F-22 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) The net decrease in the valuation allowance of $ 0.4 million for the year ended December 31, 2023 related to changes in the valuation allowance for NOLs and certain employee benefits and compensation. In assessing the realization of deferred tax assets, management considers all available positive and negative evidence, including projected future taxable income, scheduled reversal of deferred tax liabilities, historical financial operations and tax planning strategies. Based upon review of these items, management believes it is more-likely-than-not that the Company will realize the benefits of these deferred tax assets, net of the existing valuation allowances. We file income tax returns in the United States, Canada, and most state jurisdictions. CBIZ's federal income tax returns for years ending prior to January 1, 2020 are no longer subject to examination. With limited exceptions, our state and local income tax returns and non-U.S. income tax returns are no longer subject to tax authority examinations for years ending prior to January 1, 2019 and January 1, 2018, respectively. The availability of NOLs and state tax credits are reported as a component of deferred tax assets, net of applicable valuation allowances, in the accompanying Consolidated Balance Sheets. At December 31, 2023, we had state net operating loss carryforwards of $ 50.8 million and a state tax credit carryforward of $ 0.1 million. The state net operating loss carryforwards expire on various dates between 2025 and 2044 and the state tax credit carryforward expires in 2028. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): 2023 2022 2021 Balance at January 1 $ 2,111 $ 1,594 $ 1,536 Additions for tax positions of the current year 178 175 161 Additions for positions of prior years 103 486 400 Settlements of prior year positions — — ( 374 ) Lapse of statutes of limitation ( 545 ) ( 144 ) ( 129 ) Balance at December 31 $ 1,847 $ 2,111 $ 1,594 Included in the balance of unrecognized tax benefits at December 31, 2023 are $ 1.1 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate. We believe it is reasonably possible that certain of these unrecognized tax benefits could change in the next twelve months. We expect reductions in the liability for unrecognized tax benefits of approximately $ 0.2 million within the next twelve months due to expiration of statutes of limitation. Given the number of years that are currently subject to examination, we are unable to estimate the range of potential adjustments to the remaining balance of unrecognized tax benefits at this time. We recognize interest expense and penalties related to unrecognized tax benefits as a component of income tax expense. During 2023, we recorded an immaterial increase in accrued interest, and, as of December 31, 2023, we had recognized a liability for interest expense and penalties of $ 0.3 million and $ 0.2 million, respectively, relating to unrecognized tax benefits. During 2022, we recorded an immaterial increase in accrued interest, and, as of December 31, 2022, we had recognized a liability for interest expense and penalties of $ 0.3 million and $ 0.2 million, respectively, relating to unrecognized tax benefits. NOTE 9. DEBT AND FINANCING ARRANGEMENTS 2022 credit facility 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 F-23 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) $ 50 million, providing for same-day funds to cover daily liquidity needs; and (v) base interest rate amended from LIBOR to Term SOFR. 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 Consolidated Balance Sheets, are included as a component of cash flow from financing activities on the accompanying 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 2022 credit facility matures on May 4, 2027. The balance outstanding under the 2022 credit facility was $ 312.4 million and $ 265.7 million for the year ended December 31, 2023 and 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, were as follows: 2023 2022 Weighted average rates 5.23 % 2.67 % Range of effective rates 1.93 % - 8.00 % 1.08 % - 5.44 % We had approximately $ 272.0 million of available funds under the 2022 credit facility at December 31, 2023, based on the terms of the commitment. 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 charge coverage ratio which may limit our ability to borrow up to the total commitment amount. As of December 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., our wholly owned subsidiary, and the Huntington Bank. We utilize this line of credit 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. Refer to Note 6, Financial Instruments, for further discussion regarding these investments. 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 December 31, 2023 and 2022. Borrowings under the line of credit bear interest at the prime rate. 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): F-24 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) 2023 2022 2021 Credit facilities $ 20,093 $ 8,033 $ 3,843 Other line of credit 1 6 — Other 37 — 25 $ 20,131 $ 8,039 $ 3,868 NOTE 10. ACCUMULATED OTHER COMPREHENSIVE INCOME The components of accumulated other comprehensive income at December 31, 2023 and 2022 were as follows (in thousands): 2023 2022 Net unrealized loss on available-for-sale securities, net of income tax benefit of $ 168 and $ 571 , respectively $ ( 505 ) $ ( 1,518 ) Net unrealized gain on interest rate swap, net of income tax expense of $ 972 and $ 1,924 , respectively 3,064 5,885 Foreign currency translation ( 781 ) ( 763 ) Accumulated other comprehensive income $ 1,778 $ 3,604 NOTE 11. COMMITMENTS AND CONTINGENCIES Acquisitions - The purchase price that we normally pay for businesses and client lists consists of two components: an up-front non-contingent portion, and a portion which is contingent upon the acquired businesses or client lists’ future performance. The fair value of the contingent purchase price consideration is recorded at the date of acquisition and re-measured each reporting period until the liability is settled. Shares of our common stock that are issued in connection with acquisitions may be contractually restricted from sale for periods up to one year . Acquisitions are further disclosed in Note 18, Business Combinations. Indemnifications - We have various agreements in which we may be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification clauses are included in contracts arising in the normal course of business under which the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations, warranties, covenants or agreements, related to matters such as title to assets sold and certain tax matters. Payment by us under such indemnification clauses are generally conditioned upon the other party making a claim. Such claims are typically subject to challenge by us and to dispute resolution procedures specified in the particular contract. Further, our obligations under these agreements may be limited in terms of time and/or amount and, in some instances, we may have recourse against third parties for certain payments made by us. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each particular agreement. Historically, we have not made any payments under these agreements that have been material individually or in the aggregate. As of December 31, 2023, we were not aware of any obligations arising under indemnification agreements that would require material payments, and therefore have not recorded a liability. Employment Agreements - We maintain severance and employment agreements with certain of our executive officers, whereby such officers may be entitled to payment in the event of termination of their employment. We also have arrangements with certain non-executive employees which may include severance and other employment provisions. We accrue for amounts payable under these contracts and arrangements as triggering events occur and obligations become known. During the years ended December 31, 2023, 2022 and 2021, payments under such contracts and arrangements were not material. 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 $ 3.5 million and $ 5.0 million at December 31, 2023 and 2022, respectively. F-25 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) 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 December 31, 2023 and 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 conducted a hearing on December 12, 2023, to consider evidence regarding the amount of damages owed by Zotec to CBIZ on the counterclaim. On November 10, 2023, CBIZ was named as a defendant in a putative class action lawsuit in the United States District Court for the District of Massachusetts by an individual claiming to be an employee of a CBIZ client whose personally identifiable information (“PII”) was compromised and stolen during a cyberattack CBIZ experienced on or about May 31, 2023. As a result of this incident, hackers were able to access and download certain files from CBIZ’s MOVEit Transfer server. The lawsuit alleges that CBIZ and Progress Software Corporation, the owner of MOVEit Transfer, failed to adequately secure and safeguard the individual’s, and similarly situated employees of CBIZ’s clients, PII from unauthorized access. The lawsuit seeks various remedies, including actual, compensatory, and punitive damages, along with injunctive relief, costs, and attorneys’ fees. On December 8, 2023, CBIZ was named as a defendant in a second putative class action lawsuit in the United States District Court for the District of Massachusetts by an individual making similar claims and seeking similar remedies as in the first lawsuit. Both cases were transferred into a multidistrict litigation, styled as In Re: MOVEit Customer Data Security Breach Litigation , pending in the United States District Court for the District of Massachusetts (the “MDL”). To date, the MDL has over 180 cases against over 100 different defendants, all with claims arising out of the cyberbreach by hackers of Progress Software Corporation’s MOVEit Transfer software. The cases in the MDL, including the cases against CBIZ, are in their earliest stages, with a stay in place until the MDL Court issues a scheduling order. Due to the early stage of litigation, the Company is not able to determine or predict the ultimate outcome of these lawsuits nor reasonably provide an estimate or range of the possible outcome or losses, if any. 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 12. EMPLOYEE BENEFITS Employee Savings Plan - We sponsor a qualified 401(k) defined contribution plan that covers substantially all of our employees. Participating employees may elect to contribute, on a tax-deferred basis, up to 80 % of their pre-tax annual compensation (subject to a maximum permissible contribution under Section 401(k) of the Internal Revenue Code). Matching contributions by us are 50 % of the first 6 % of base compensation that the participant contributes, and additional amounts may be contributed at the discretion of the Board of Directors. Participants may elect to invest their contributions in various funds including: equity, fixed income, stable value, and balanced-lifecycle funds. Employer contributions (net of forfeitures) made to the plan during the years ended December 31, 2023, 2022 and 2021 were approximately $ 18.5 million, $ 16.1 million and $ 13.2 million, respectively. Non-qualified Deferred Compensation Plan - We sponsor a non-qualified deferred compensation plan, under which certain members of management and other highly compensated employees may elect to defer receipt of a portion of their annual compensation, subject to maximum and minimum percentage limitations. The amount of F-26 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) compensation deferred under the plan is credited to each participant’s deferral account and a non-qualified deferred compensation plan obligation is established by us. An amount equal to each participant’s compensation deferral is transferred into a rabbi trust and invested in various debt and equity securities as directed by the participants. The assets of the rabbi trust are held by us and recorded as “Assets of deferred compensation plan” in the accompanying Consolidated Balance Sheets. Assets of the non-qualified deferred compensation plan consist primarily of investments in mutual funds, money market funds and equity securities. The values of these investments are based on published market prices at the end of the period. Adjustments to the fair value of these investments are recorded in “Other (expense) income, net,” offset by the same adjustments to compensation expense (recorded as “Operating expenses” or “G&A expenses” in the accompanying Consolidated Statements of Comprehensive Income). We recorded income of $ 19.5 million related to those investments for the year ended December 31, 2023. For the year ended December 31, 2022, we recorded a loss of $ 19.6 million and income of $ 19.5 million for the year ended December 31, 2021, related to these investments. These investments are specifically designated as available to us solely for the purpose of paying benefits under the non-qualified deferred compensation plan. However, the investments in the rabbi trusts would be available to all unsecured general creditors in the event that we become insolvent. Deferred compensation plan obligations represent amounts due to plan participants and consist of accumulated participant deferrals and changes in fair value of investments thereon since the inception of the plan, net of withdrawals. This liability is an unsecured general obligation of ours and is recorded as “Deferred compensation plan obligations” in the accompanying Consolidated Balance Sheets. The assets and liabilities related to the non-qualified deferred compensation plan at December 31, 2023 and 2022 were $ 143.5 million and $ 118.9 million, respectively. NOTE 13. COMMON STOCK Share Repurchase Program - Our Board of Directors approved various share repurchase programs that were effective during the years ended December 31, 2023 and 2022. Under these programs, shares may be purchased in the open market or in privately negotiated transactions according to SEC rules. The Share Repurchase Program does not obligate us to acquire any specific number of shares and may be suspended at any time. Repurchased shares are held in treasury and may be reserved for future use in connection with acquisitions, employee share plans and other general purposes. Under the 2022 credit facility, described in Note 9, Debt and Financing Arrangements, share repurchases are unlimited when total leverage is less than 3.0 . When leverage is greater than 3.0 , the annual share repurchase is limited to $ 35.0 million. Under the Share Repurchase Program, we repurchased 1.3 million and 2.8 million shares on the open market at a cost (including fees and commissions) of $ 65.1 million and $ 122.8 million during the years ended December 31, 2023 and 2022, respectively. Shares repurchased to settle statutory employee withholding related to vesting of stock awards were 0.2 million shares at a cost of $ 8.4 million during the year ended December 31, 2023 and 0.2 million shares at a cost of $ 7.3 million during the year ended December 31, 2022. NOTE 14. EMPLOYEE STOCK PLANS Employee Stock Purchase Plan - The 2007 Employee Stock Purchase Plan (“ESPP”), which has a termination date of June 30, 2024, allows qualified employees to purchase shares of common stock through payroll deductions up to a limit of $ 25,000 of stock per calendar year. The price an employee pays for shares is 85 % of the fair market value of our common stock on the last day of the purchase period. Purchase periods begin on the sixteenth day of the month and end on the fifteenth day of the subsequent month. Other than a one-year holding period from the date of purchase, there are no vesting or other restrictions on the stock purchased by employees under the ESPP. The total number of shares of common stock that can be purchased under the ESPP shall not exceed 2.0 million shares. F-27 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Stock Awards - We granted various stock-based awards through the year ended December 31, 2023 under the CBIZ, Inc. 2019 Stock Omnibus Incentive Plan (“2019 Plan”). On May 10, 2023, the stockholders of the Company approved an amendment to the 2019 Plan. The amendment added 1.5 million shares to the total number of shares that may be issued under the 2019 Plan. The 2019 Plan, which expires in 2029, permits the grant of various forms of stock-based awards. The terms and vesting schedules for the share-based awards vary by type and date of grant. Under the 2019 Plan, a maximum of 4.6 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. At December 31, 2023, approximately 2.9 million shares were available for future grant under the 2019 Plan. Effective January 1, 2020, the 2019 Plan replaced and superseded the CBIZ, Inc. 2014 Stock Incentive Plan (“2014 Plan”). The terms and vesting schedule for the stock-based awards vary by type and date of grant. During the years ended December 31, 2023, 2022 and 2021, we recognized compensation expense (before income tax expense) for these awards as follows (in thousands): 2023 2022 2021 Stock options $ 768 $ 248 $ 1,291 Restricted stock units and awards 5,258 5,204 5,603 Performance share units 6,260 9,237 4,513 Total share-based compensation expense $ 12,286 $ 14,689 $ 11,407 Stock Options - Certain employees and non-employee directors were granted stock options. Stock options awarded to non-employee directors have generally been granted with immediate vesting. Stock options awarded to employees are generally subject to a 25 % incremental vesting schedule over a four-year period commencing from the date of grant. At the discretion of the Compensation Committee of the Board of Directors, options awarded under the 2019 Plan may vest in a time period shorter than four years . Stock options expire six years from the date of grant and are awarded with an exercise price equal to the market value of our common stock on the date of grant. Stock options may be granted alone or in addition to other awards and may be of two types: incentive stock options and non-qualified stock options. During the year ended December 31, 2023 and 2021, we granted 50 thousand and 50 thousand stock options to non-employee directors, respectively. We did no t grant any stock options during the year ended December 31, 2022. Stock option activity during the year ended December 31, 2023 was as follows (number of options in thousands): Number of Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in millions) Outstanding at December 31, 2022 553 $ 21.03 Granted 50 $ 48.40 Exercised ( 453 ) $ 19.35 Outstanding at December 31, 2023 150 $ 35.22 3.77 years $ 4.1 Vested and exercisable at December 31, 2023 150 $ 35.22 3.77 years $ 4.1 • The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2023 and 2021 was $ 0.8 million and $ 0.4 million, respectively. • The aggregate intrinsic value of stock options exercised during each of the years ended December 31, 2023, 2022 and 2021 was $ 15.0 million, $ 19.1 million and $ 13.6 million, respectively. The intrinsic value is calculated as the difference between our stock price on the exercise date and the exercise price of each option exercised. • At December 31, 2023, we didn't have any unrecognized compensation cost for stock options. F-28 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) We utilized the Black-Scholes-Merton option-pricing model to determine the fair value of stock options on the date of grant. The fair value of stock options granted during the years ended December 31, 2023 and 2021 were $ 15.35 and $ 8.10 , respectively. The following weighted average assumptions were utilized: 2023 2021 Expected volatility (1) 28.57 % 27.49 % Expected option life (years) (2) 4.74 4.71 Risk-free interest rate (3) 3.89 % 0.74 % Expected dividend yield (4) — % — % (1) The expected volatility assumption was determined based upon the historical volatility of our stock price, using daily price intervals. (2) The expected option life was determined based upon our 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 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 our historical and estimated dividend payouts. Restricted Stock Units and Awards - Under the 2019 Plan, certain employees and non-employee directors were granted restricted stock units and awards. Restricted stock units and awards are independent of option grants and vest at no cost to the recipients. Restricted stock units and awards are subject to forfeiture if employment terminates prior to the release of restrictions, generally one to four years from the date of grant. Recipients of restricted stock units and awards are entitled to the same dividend and voting rights as holders of other CBIZ common stock, subject to certain restrictions during the vesting period, and these are considered to be issued and outstanding from the date of grant. Shares granted under the 2019 Plan cannot be sold, pledged, transferred or assigned during the vesting period . Restricted stock units and awards activity during the year ended December 31, 2023 was as follows (in thousands, except per share data): Number of Shares Weighted Average Grant-Date Fair Value (1) Non-vested at December 31, 2022 277 $ 32.62 Granted 109 $ 48.64 Vested ( 163 ) $ 31.63 Non-vested at December 31, 2023 223 $ 41.19 (1) Represents weighted average market value of the shares as the awards are granted at no cost to the recipients. • At December 31, 2023, we had unrecognized compensation cost for restricted stock units and awards of $ 5.2 million to be recognized over a weighted average period of approximately 0.72 years. • The total fair value of shares vested during the years ended December 31, 2023, 2022 and 2021 was approximately $ 5.1 million, $ 5.6 million and $ 4.9 million, respectively. • The market value of shares awarded during the years ended December 31, 2023, 2022 and 2021 was $ 5.3 million, $ 5.0 million and $ 5.0 million, respectively. This market value was recorded as unearned compensation and is recognized as expense ratably over the periods which the restrictions lapse. • Awards outstanding at December 31, 2023 will be released from restrictions at dates ranging from February, 2024 through February, 2026. F-29 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) 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 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 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 award activity during the twelve months ended December 31, 2023 (in thousands, except per share data): Performance Share Units Weighted Average Grant-Date Fair Value Per Unit (1) Outstanding at December 31, 2022 482 $ 28.84 Granted 88 $ 48.40 Vested ( 244 ) $ 25.75 Adjustments for performance results (2) 138 $ 27.68 Outstanding at December 31, 2023 464 $ 33.84 ( 1) Represents weighted average market value of the shares; awards 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 15. EARNINGS PER SHARE The following table sets forth the reconciliation of the numerator and the denominator of basic earnings per share and diluted earnings per share for the years ended December 31, 2023, 2022 and 2021 (in thousands, except per share data): Year Ended December 31, 2023 2022 2021 Numerator: Net income $ 120,968 $ 105,354 $ 70,887 Denominator: Basic Weighted average common shares outstanding 49,989 51,502 52,637 Diluted Stock options (1) 172 487 683 Restricted stock awards 98 141 192 Contingent shares (2) 21 14 — Performance share units (3) 277 244 211 Diluted weighted average common shares outstanding 50,557 52,388 53,723 Earnings Per Share: Basic earnings per share $ 2.42 $ 2.05 $ 1.35 Diluted earnings per share $ 2.39 $ 2.01 $ 1.32 (1) For the years ended December 31, 2023, 2022 and 2021, a total of 58 thousand, 68 thousand and 23 thousand stock based awards, respectively, were excluded from the calculation of diluted earnings per share as their exercise prices would render them anti-dilutive. F-30 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) (2) Contingent shares represent additional shares to be issued for purchase price earned by former owners of businesses acquired by us once future conditions have been met. For further details, refer to Note 18, Business Combinations . (3) The denominator used in calculating diluted earnings per share did not include 0.2 million, 0.2 million and 0.3 million performance share units for the twelve months ended December 31, 2023, 2022 and 2021 respectively. The performance conditions associated with these performance share units were not met and consequently none of these performance share units were considered as issuable for the years ended December 31, 2023, 2022 and 2021. NOTE 16. LEASES We determine if a contract is a lease at inception. We have leases for office space and facilities, automobiles and certain information technology equipment. All of our leases are classified as operating leases and the majority of which are for office space and facilities. Supplemental balance sheet information related to the Company’s operating leases as of December 31, 2023 and 2022 was as follows (in thousands): December 31, 2023 December 31, 2022 Weighted-average remaining lease term 7.3 years 6.3 years Weighted-average discount rate 5.51 % 4.14 % The components of lease cost and other lease information as of and during the year ended December 31, 2023 and 2022 are as follows (in thousands): December 31, 2023 December 31, 2022 Operating lease cost $ 45,088 $ 43,716 Cash paid for amounts included in measurement of lease liabilities Operating cash flows for operating leases $ 46,936 $ 45,378 Our leases have remaining lease terms ranging from 1 to 20 years. These leases generally contain renewal options for periods ranging from two to five years . Because the Company is not reasonably certain to exercise these renewal options, the options are not included in the lease term, and associated potential option payments are excluded from lease payments. Maturities of operating lease liabilities at December 31, 2023 and minimum cash commitments under operating leases at December 31, 2022 were as follows (in thousands): December 31, 2023 2024 $ 47,446 2025 46,623 2026 43,131 2027 40,678 2028 29,261 Thereafter 90,535 Total undiscounted lease payments 297,674 Less: imputed interest ( 57,486 ) Total lease liabilities $ 240,188 F-31 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) December 31, 2022 2023 $ 44,595 2024 40,516 2025 38,978 2026 35,205 2027 31,230 Thereafter 51,756 Total undiscounted lease payments 242,280 Less: imputed interest ( 31,468 ) Total lease liabilities $ 210,812 NOTE 17. RELATED PARTIES The following is a summary of certain agreements and transactions between or among us and certain related parties. Management reviews these transactions as they occur and monitors them for compliance with our Code of Conduct, internal procedures and applicable legal requirements. The Audit Committee reviews and ratifies such transactions annually, or as they are more frequently brought to the attention of the Audit Committee by our Director of Internal Audit, General Counsel or other members of Management. A number of the businesses acquired by us are located in properties owned indirectly by and leased from persons employed by us, none of whom are members of our senior management. In the aggregate, we paid approximately $ 1.2 million, $ 1.9 million and $ 2.3 million during the years ended December 31, 2023, 2022 and 2021, respectively, under such leases. Jerome Grisko, President and CEO of CBIZ, is a board member of Global Prairie PBC, Inc. ("Global Prairie"). Global Prairie performed consulting work for us during the year ended December 31, 2023 and 2022 for which we paid approximately $ 0.2 million and $ 0.2 million, respectively. NOTE 18. BUSINESS COMBINATIONS Our acquisition strategy focuses on businesses with a leadership team that is committed to best in class culture, extraordinary client service and cross-serving potential. CBIZ has a long history of acquiring businesses that share common cultural values with us and provide value-added services to the small and midsize business market. The valuation of any business is a subjective process and includes industry, geography, profit margins, expected cash flows, client retention, nature of recurring or non-recurring project-based work, growth rate assumptions and competitive market conditions. During the year ended December 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. Operating results for Danenhauer and Danenhauer are reported in the Financial Services practice group. ◦ 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. F-32 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) ◦ 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 year ended December 31, 2022, we completed the following acquisitions: ◦ 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") added approximately $ 64.9 million in incremental revenue in 2023. During the year ended December 31, 2023, we recorded approximately $ 3.4 million in non-recurring transaction, retention and integration related costs associated with the Somerset acquisition. During the year ended December 31, 2022, we recorded approximately $ 10.5 million in non-recurring transaction, retention and integration related costs associated with the Marks Paneth acquisition. Pro forma results of operations for these acquisitions are not provided due to limitations in retrospective application of estimates to historical financial information as well as the immateriality of such information as compared to our total revenue and net income for year ended December 31, 2023 and 2022, respectively. The following table summarizes the aggregated consideration and purchase price allocation for the acquisitions completed during the year ended December 31, 2023 and 2022, respectively (in thousands): F-33 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) 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, net $ 8,544 $ 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 ( 1,371 ) ( 1,594 ) Operating lease liability acquired - noncurrent ( 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 The following table summarizes the aggregated goodwill and intangible asset amounts resulting from those acquisitions for the twelve months ended December 31, 2023 and 2022, respectively (in thousands): Twelve Months Ended December 31, 2023 2022 Financial Services Benefits & Insurance Financial Services Benefits & Insurance 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 generally have an expected life of 10 years, and other intangibles, primarily non-compete agreements, have an expected life of 3 years. Client lists and non-compete agreements are valued using a discounted cash flow technique based on management estimates of future cash flows from such assets. The following table summarizes the changes in contingent purchase price consideration for previous acquisitions and contingent payments made for previous business acquisitions during the year ended December 31, 2023 and 2022, respectively (in thousands): 2023 2022 Net expense 2,743 2,435 Cash settlement paid 45,010 21,113 Shares issued (number) 140 65 F-34 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Divestitures and Sale of Assets Sales of assets are recorded as "Other income (expense), net" in the accompanying Consolidated Statements of Comprehensive Income. During the year ended December 31, 2023, we recorded a gain of $ 1.5 million related to the sale of one technology asset in the Financial Services practice group and a gain of $ 1.4 million related to contingent payments from a prior book of business sale in the Benefits and Insurance Services practice group. In 2022, we sold one small book of business for $ 2.5 million in the Benefits and Insurance Services practice group and recorded a gain of $ 2.4 million. This gain is recorded as "Other income (expense), net" in the accompanying Consolidated Statements of Comprehensive Income. NOTE 19. SEGMENT DISCLOSURES Our business units have been aggregated into three practice groups: (i) Financial Services, (ii) Benefits and Insurance Services and (iii) National Practices, 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 practice groups 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 Health Care 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 healthcare 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. The discrete financial information of those practice groups are available and regularly reviewed by the Chief Operating Decision Maker ("CODM"). The CODM, who is our CEO, allocates resources to and assesses the performance of each practice group using information about their respective revenue and income (loss) before income tax expense (benefit), excluding those costs listed above, which are reported in the “Corporate and Other”. 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. The CODM does not evaluate practice groups using discrete asset information, and we do not identify or allocate assets by practice groups. We operate in the United States and Canada and revenue generated from such operations during the years ended December 31, 2023, 2022 and 2021 was as follows (in thousands): Year Ended December 31, 2023 2022 2021 United States $ 1,589,478 $ 1,410,255 $ 1,103,183 Canada 1,716 1,724 1,742 Total revenue $ 1,591,194 $ 1,411,979 $ 1,104,925 There is no one customer that represents a significant portion of our revenue. F-35 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Segment information for the years ended December 31, 2023, 2022 and 2021 is presented below (in thousands). We do not manage our assets on a segment basis, therefore segment assets are not presented below. For the Year Ended December 31, 2023 Financial Services Benefits and Insurance Services National Practices Corporate and Other Total Revenue $ 1,160,686 $ 382,605 $ 47,903 $ — $ 1,591,194 Operating expenses 975,076 310,510 43,060 39,344 1,367,990 Gross margin 185,610 72,095 4,843 ( 39,344 ) 223,204 Corporate general and administrative expenses — — — 57,965 57,965 Operating income (loss) 185,610 72,095 4,843 ( 97,309 ) 165,239 Other income (expense): Interest expense — ( 2 ) — ( 20,129 ) ( 20,131 ) Gain on sale of operations, net 176 — — — 176 Other income, net 2,042 2,060 1 16,916 21,019 Total other income (expense) 2,218 2,058 1 ( 3,213 ) 1,064 Income (loss) before income tax expense $ 187,828 $ 74,153 $ 4,844 $ ( 100,522 ) $ 166,303 For the Year Ended December 31, 2022 Financial Services Benefits and Insurance Services National Practices Corporate and Other Total Revenue $ 1,010,068 $ 358,007 $ 43,904 $ — $ 1,411,979 Operating expenses 850,038 290,387 39,201 8,986 1,188,612 Gross margin 160,030 67,620 4,703 ( 8,986 ) 223,367 Corporate general and administrative expenses — — — 55,023 55,023 Operating income (loss) 160,030 67,620 4,703 ( 64,009 ) 168,344 Other income (expense): Interest expense — ( 6 ) — ( 8,033 ) ( 8,039 ) Gain on sale of operations, net 413 — — — 413 Other income (expense), net 269 2,392 10 ( 21,914 ) ( 19,243 ) Total other income (expense) 682 2,386 10 ( 29,947 ) ( 26,869 ) Income (loss) before income tax expense $ 160,712 $ 70,006 $ 4,713 $ ( 93,956 ) $ 141,475 F-36 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) For the Year Ended December 31, 2021 Financial Services Benefits and Insurance Services National Practices Corporate and Other Total Revenue $ 734,026 $ 332,323 $ 38,576 $ — $ 1,104,925 Operating expenses 608,238 271,650 34,494 31,253 945,635 Gross margin 125,788 60,673 4,082 ( 31,253 ) 159,290 Corporate general and administrative expenses — — — 56,150 56,150 Legal settlement, net — — — 30,468 30,468 Operating income (loss) 125,788 60,673 4,082 ( 117,871 ) 72,672 Other income (expense): Interest expense — — — ( 3,868 ) ( 3,868 ) (Loss) gain on sale of operations, net ( 289 ) 6,284 — — 5,995 Other income, net 263 827 3 17,124 18,217 Total other (expense) income ( 26 ) 7,111 3 13,256 20,344 Income (loss) before income tax expense $ 125,762 $ 67,784 $ 4,085 $ ( 104,615 ) $ 93,016 NOTE 20. SUBSEQUENT EVENTS Acquistion Effective February 1, 2024, we acquired the tax and accounting service provider, Erickson, Brown & Kloster, LLC ("EBK"). EBK, based in Colorado Springs, CO, offers tax and accounting services to a diverse mix of business including automotive, wholesale, medical services, real estate, manufacturing, and non-profit. Annualized revenue from EBK is estimated at $ 8.9 million. EBK is included as a component of our Financial Services practice group. Share Repurchase Program On February 7, 2024, our Board of Directors authorized the continuation of the Share Repurchase Program, which has been renewed annually for the past twenty years . It is effective beginning March 31, 2024, to which the amount of shares to be purchased will be reset to 5.0 million, and expires one year from the respective effective date. This authorization allows us to purchase shares of our common stock (i) in the open market, (ii) in privately negotiated transactions, or (iii) under Rule 10b5-1trading plans. F-37