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Item 1. Financial Statements

2024-04-25 compared with 2023-10-26 · 106 added, 337 removed, 393 unchanged (53% of the section changed)

3 unchanged sentences

(In thousands)

September 30,

2024 December 31,

50 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Revenue $ 494,297 $ 454,606

6 unchanged sentences

Gain on sale of operations, net — 99

Other (expense) income, net ( 2,288 ) ( 2,622 ) 8,245 ( 24,932 )

Total other expense, net ( 8,059 ) ( 4,751 ) ( 6,602 ) ( 29,830 )

Other income, net 9,424 5,112

Total other income, net 4,913 1,570

Income before income tax expense 104,014 99,567

8 unchanged sentences

Net income $ 76,884 $ 73,160

Other comprehensive income, net of tax 487 2,179 811 4,584

Other comprehensive income (loss), net of tax 1,018 ( 1,213 )

Comprehensive income $ 77,902 $ 71,947

11 unchanged sentences

Income Totals

June 30, 2023 137,081 87,259 $ 1,371 $ 818,693 $ 834,139 $ ( 882,088 ) $ 3,928 $ 776,043

Net income — — — — 33,682 — — 33,682

Other comprehensive income — — — — — — 487 487

Share repurchases — 176 — — — ( 9,472 ) — ( 9,472 )

Indirect repurchase of shares for minimum tax withholding — 4 — — — ( 224 ) — ( 224 )

Restricted stock units and awards 9 — 1 ( 1 ) — — — —

Stock options exercised 212 — 1 4,122 — — — 4,123

Stock-based compensation — — — 3,102 — — — 3,102

Business acquisitions 54 — 1 2,798 — — — 2,799

Excise tax on share repurchases — — — 150 — ( 96 ) — 54

September 30, 2023 137,356 87,439 $ 1,374 $ 828,864 $ 867,821 $ ( 891,880 ) $ 4,415 $ 810,594

Shares Treasury

Shares Common

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Income Totals

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

Net income — — — — 27,470 — — 27,470

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

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

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

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

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

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

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

See the accompanying notes to the unaudited condensed consolidated financial statement

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands)

Shares Treasury

Shares Common

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Income Totals

December 31, 2023 137,387 87,573 $ 1,374 $ 832,475 $ 855,084 $ ( 899,093 ) $ 1,778 $ 791,618

1 unchanged sentence

Other comprehensive income — — — — — — 1,018 1,018

Share repurchases — 1,151 — — — ( 58,000 ) — ( 58,000 )

Indirect repurchase of shares for minimum tax withholding — 170 — — — ( 11,229 ) — ( 11,229 )

1 unchanged sentence

Performance share units 273 — 3 ( 3 ) — — — —

Stock options exercised 433 — 4 8,371 — — — 8,375

Stock-based compensation — — — 2,638 — — — 2,638

Business acquisitions 93 — 1 6,159 — — — 6,160

Excise tax on share repurchases — — — 537 — ( 654 ) — ( 117 )

September 30, 2023 137,356 87,439 $ 1,374 $ 828,864 $ 867,821 $ ( 891,880 ) $ 4,415 $ 810,594

March 31, 2024 137,855 87,743 $ 1,379 $ 841,268 $ 931,968 $ ( 910,322 ) $ 2,796 $ 867,089

Shares Treasury

5 unchanged sentences

Comprehensive

(Loss) Income Totals

Income Totals

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

Net income — — — — 73,160 — — 73,160

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

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

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

5 unchanged sentences

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

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

See the accompanying notes to the unaudited condensed consolidated financial statements

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

See the accompanying notes to the unaudited condensed consolidated financial statement

AND SUBSIDIARIES

1 unchanged sentence

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net income $ 76,884 $ 73,160

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

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

Depreciation and amortization expense 9,468 8,625

12 unchanged sentences

Other liabilities 53 3,184

Net cash provided by operating activities 57,254 60,059

Net cash used in operating activities ( 63,720 ) ( 44,511 )

Cash flows from investing activities:

15 unchanged sentences

Payment of contingent consideration for acquisitions and client lists ( 31,124 ) ( 28,600 )

Other, net — ( 2,072 )

Net cash (used in) provided by financing activities ( 18,442 ) 6,025

Net cash provided by financing activities 71,188 61,778

Net decrease in cash, cash equivalents and restricted cash ( 21,234 ) ( 28,629 )

18 unchanged sentences

SOFR – Secured Overnight Financing Rate

LIBOR – London Interbank Offered Rate

SEC – United States Securities and Exchange Commission

4 unchanged sentences

A further description of products and services offered by each of the practice groups is provided in Note 11, Segment Disclosures, to the accompanying unaudited condensed consolidated financial statements.

Effective April 1, 2023, CBIZ formed Rockside Insurance Company, Inc.

("Rockside"), a captive insurance company licensed in Vermont.

Rockside, wholly owned by CBIZ, provides insurance coverages for a portion of the retention deductibles from CBIZ's certain insurance programs with third party insurers.

During the three months ended March 31, 2024, we completed the acquisitions of Erickson, Brown & Kloster, LLC ("EBK") and ComputData, Inc.

("CompuData") in our Financial Services practice group for a total aggregated purchase price of $ 37.3 million, including $ 13.5 million recorded as contingent consideration.

For the three months ended March 31, 2024, we recorded $ 4.6 million in total revenue from those acquisitions.

Neither acquisition is considered material, individually or in the aggregate.

Basis of Consolidation:

3 unchanged sentences

Unaudited Interim Financial Statements:

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

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

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

7 unchanged sentences

consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Reclassifications:

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

NEW ACCOUNTING PRONOUNCEMENTS

2 unchanged sentences

We assess and review the impact of all issued ASUs.

During the nine months ended September 30, 2023, we have implemented all new ASUs that are in effect and that may impact our consolidated financial statements.

Accounting Standards Adopted in 2023

In August 2023, the FASB issued ASU No.

2023-04, Liabilities (Topic 405):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

121 , which amended and added various SEC paragraphs in the ASC to reflect the issuance of SEC Staff Bulletin No.

We adopted ASU No.

2023-04 upon issuance and the adoption had no material impact on our condensed consolidated financial statements and related disclosures.

In July 2023, the FASB issued ASU No.

2023-03, Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock, which amended and added various SEC paragraphs in the ASC to reflect the issuance of SEC Staff Bulletin No.

We adopted ASU No.

2023-04 upon issuance and the adoption had no material impact on our condensed consolidated financial statements and related disclosures.

During the three months ended March 31, 2024, we have implemented all new ASUs that are in effect and that may impact our consolidated financial statements.

ACCOUNTS RECEIVABLE, NET

3 unchanged sentences

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

Accounts receivable, net, at September 30, 2023 and December 31, 2022 was as follows (in thousands):

September 30,

Accounts receivable, net, at March 31, 2024 and December 31, 2023 was as follows (in thousands):

2024 December 31,

4 unchanged sentences

Accounts receivable, net $ 504,107 $ 380,152

Changes to the allowance for doubtful accounts for the nine months ended September 30, 2023 and twelve months ended December 31, 2022 were as follows (in thousands):

September 30,

Changes to the allowance for doubtful accounts for the three months ended March 31, 2024 and twelve months ended December 31, 2023 were as follows (in thousands):

2024 December 31,

4 unchanged sentences

DEBT AND FINANCING ARRANGEMENTS

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

The 2022 credit facility increased our borrowing capacity from $ 400 million to $ 600 million, providing us with the capital necessary to meet our working capital needs as well as the flexibility to continue with our strategic initiatives, including business acquisitions and share repurchases.

Other important key terms of the 2022 credit facility included:

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

(ii) no change in pricing from the 2018 credit facility;

(iii) upsizing of baskets and various sublimits to reflect the increased size of the Company's business;

(iv) a swing line facility increase from $ 25 million to $ 50 million, providing for same-day funds to cover daily liquidity needs;

and (v) base interest rate amended from LIBOR to Term SOFR.

2022 Credit Facility - Our primary financing arrangement is the 2022 credit facility.

The 2022 credit facility has a borrowing capacity of $ 600 million and provides us with the capital necessary to meet our working capital needs as well as the flexibility to continue with our strategic initiatives, including business acquisitions and share repurchases.

The 2022 credit facility matures on May 4, 2027.

The balance outstanding under the 2022 credit facility was $ 394.7 million and $ 265.7 million at September 30, 2023 and December 31, 2022, respectively.

The combined effective interest rates under the 2018 and 2022 credit facilities, including the impact of interest rate swaps associated with those credit facilities, for the nine months ended September 30, 2023 and 2022 were as follows:

Nine Months Ended

September 30,

The balance outstanding under the 2022 credit facility was $ 437.8 million and $ 312.4 million at March 31, 2024 and December 31, 2023, respectively.

The effective interest rates under the 2022 credit facility, including the impact of interest rate swaps associated with the 2022 credit facility, for the three months ended March 31, 2024 and 2023 was as follows:

Three Months Ended

Weighted average rates 5.23 % 4.54 %

1 unchanged sentence

1.93 % - 8.00 %

We had approximately $ 195.0 million of available funds under the 2022 credit facility at September 30, 2023, net of outstanding letters of credit of $ 4.4 million.

We had approximately $ 147.9 million of available funds under the 2022 credit facility at March 31, 2024, net of outstanding letters of credit of $ 3.2 million.

Available funds under the 2022 credit facility are based on a multiple of earnings before interest, taxes, depreciation and amortization as defined in the 2022 credit facility, and are reduced by letters of credit, other indebtedness and outstanding borrowings under the 2022 credit facility.

6 unchanged sentences

In addition, the 2022 credit facility contains financial covenants that require us to meet certain requirements with respect to (i) a total leverage ratio and (ii) minimum interest coverage ratio which may limit our ability to borrow up to the total commitment amount.

As of September 30, 2023, we are in compliance with all covenants.

As of March 31, 2024, we are in compliance with all covenants.

Refer to the Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion on the 2022 credit facility.

Other Line of Credit - We have an unsecured $ 20.0 million line of credit by and among CBIZ Benefits and Insurance, Inc.

1 unchanged sentence

We utilize this line to support our short-term funding requirements of payroll client fund obligations due to the investment of client funds, rather than liquidating client funds that have already been invested in available-for-sale securities.

The line of credit, which was renewed on August 3, 2023 and will terminate on August 1, 2024, did no t have a balance outstanding at September 30, 2023.

Interest Expense - Interest expense, including amortization of deferred financing costs, commitment fees, line of credit fees, and other applicable bank charges, for the three and nine months ended September 30, 2023 and 2022 was as follows (in thousands):

Three Months Ended September 30,

Credit facilities $ 5,848 $ 2,301

Other line of credit — 4

Total $ 5,848 $ 2,305

Nine Months Ended September 30,

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 March 31, 2024.

Interest Expense - Interest expense, including amortization of deferred financing costs, commitment fees, line of credit fees, and other applicable bank charges, for the three months ended March 31, 2024 and 2023 was as follows (in thousands):

Three Months Ended March 31,

Credit facilities $ 4,511 $ 3,640

Other line of credit — 5

Total $ 4,511 $ 3,641

COMMITMENTS AND CONTINGENCIES

Letters of Credit and Guarantees - We provide letters of credit to landlords (lessors) of our leased premises in lieu of cash security deposits, which totaled $ 4.4 million and $ 5.0 million at September 30, 2023 and December 31, 2022, respectively.

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 $ 3.2 million and $ 3.5 million at March 31, 2024 and December 31, 2023, respectively.

In addition, we provide license bonds to various state agencies to meet certain licensing requirements.

The amount of license bonds outstanding was $ 2.3 million and $ 2.3 million at September 30, 2023 and December 31, 2022, respectively.

The amount of license bonds outstanding was $ 2.3 million and $ 2.3 million at March 31, 2024 and December 31, 2023, respectively.

Legal Proceedings - On December 19, 2016, CBIZ Operations, Inc.

1 unchanged sentence

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 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.

3 unchanged sentences

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

The trial court has scheduled a hearing for November 2, 2023, to consider evidence regarding the amount of damages owed by Zotec to CBIZ on the counterclaim.

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

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 March 12, 2024, the court awarded CBIZ $ 3.1 million on its counterclaim.

On April 10, 2024, Zotec filed a notice of appeal.

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 regarding the cyberattack CBIZ experienced on or about May 31, 2023.

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 items 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.

Refer to the Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion on the Company's commitments and contingencies.

FINANCIAL INSTRUMENTS

2 unchanged sentences

These investments, primarily consisting of corporate and municipal bonds, are classified as available-for-sale and are included in the “Funds held for clients” line item on the accompanying unaudited Condensed Consolidated Balance Sheets.

The par value of these investments totaled $ 40.0 million and $ 44.4 million at September 30, 2023 and December 31, 2022, respectively, and these investments have maturity or callable dates ranging from October 2023 through November 2025.

At September 30, 2023, unrealized losses on the securities were not material and have not been recognized as a credit loss because the bonds are investment grade quality and management is not required or does not intend to sell prior to an expected recovery in value.

The par value of these investments totaled $ 39.0 million and $ 40.0 million at March 31, 2024 and December 31, 2023, respectively, and these investments have maturity or callable dates ranging from April 2024 through January 2026.

At March 31, 2024, unrealized losses on the securities were not material and have not been recognized as a credit loss because the bonds are investment grade quality and management is not required or does not intend to sell prior to an expected recovery in value.

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

The following table summarizes activities related to these investments for the nine months ended September 30, 2023 and the twelve months ended December 31, 2022 (in thousands):

Nine Months Ended September 30, 2023 Twelve Months Ended December 31, 2022

The following table summarizes activities related to these investments for the three months ended March 31, 2024 and the twelve months ended December 31, 2023 (in thousands):

Three Months Ended March 31, 2024 Twelve Months Ended December 31, 2023

Fair value at beginning of period $ 39,459 $ 43,485

5 unchanged sentences

Fair value at end of period $ 38,509 $ 39,459

In addition to the available-for-sale debt securities discussed above, we also held other depository assets in the amount of $ 0.5 million and $ 0.9 million at September 30, 2023 and December 31, 2022, respectively.

In addition to the available-for-sale debt securities discussed above, we also held other depository assets in the amount of $ 2.1 million and $ 1.0 million at March 31, 2024 and December 31, 2023, respectively.

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

2 unchanged sentences

Refer to the Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion on our interest rate swaps.

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

During the second quarter of 2023, one interest rate swap expired with a notional value of $ 15.0 million.

As of September 30, 2023, we have four interest rate swaps outstanding.

Under the terms of the interest rate swaps, we pay interest at a fixed rate of interest plus applicable margin as stated in the amended agreements, and receive interest that varies with the one-month Term SOFR.

The following table summarizes our outstanding interest rate swaps and their classification in the accompanying unaudited Condensed Consolidated Balance Sheets at September 30, 2023 and December 31, 2022 (amounts in thousands):

September 30, 2023

The following table summarizes our outstanding interest rate swaps and their classification in the accompanying unaudited Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023 (amounts in thousands):

March 31, 2024

Amount Fixed Rate Expiration Fair

4 unchanged sentences

Interest rate swap $ 25,000 3.669 % 4/14/2028 $ 322 Other non-current asset

Interest rate swap $ 25,000 4.488 % 10/14/2028 $ ( 538 ) Other non-current liability

December 31, 2023

1 unchanged sentence

Value Balance Sheet Location

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

Interest rate swap $ 50,000 0.834 % 4/14/2025 $ 2,282 Other non-current asset

1 unchanged sentence

Interest rate swap $ 20,000 2.450 % 8/14/2027 $ 784 Other non-current asset

Interest rate swap $ 25,000 3.669 % 4/14/2028 $ ( 129 ) Other non-current liability

Interest rate swap $ 25,000 4.488 % 10/14/2028 $ ( 1,063 ) Other non-current liability

Refer to Note 7, Fair Value Measurements, for additional disclosures regarding fair value measurements.

The following table summarizes the effects of the interest rate swaps on the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended

September 30, 2023 and 2022 (in thousands):

Gain Recognized

in AOCI, net of tax Gain (Loss) Reclassified

The following table summarizes the effects of the interest rate swaps on the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023 (in thousands):

Gain (Loss) Recognized

in AOCI, net of tax Gain Reclassified

from AOCI into Expense

Three Months Ended

September 30, Three Months Ended

September 30,

2023 2022 2023 2022

Interest rate swaps $ 1,163 $ 2,815 $ 1,122 $ 220

Nine Months Ended

September 30, Nine Months Ended

September 30,

March 31, Three Months Ended

2024 2023 2024 2023

1 unchanged sentence

FAIR VALUE MEASUREMENTS

The following table summarizes our assets and (liabilities) at September 30, 2023 and December 31, 2022, respectively, that are measured at fair value on a recurring basis subsequent to initial recognition and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (in thousands):

Level September 30, 2023 December 31, 2022

The following table summarizes our assets and (liabilities) at March 31, 2024 and December 31, 2023, respectively, that are measured at fair value on a recurring basis subsequent to initial recognition and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (in thousands):

Level March 31, 2024 December 31, 2023

Deferred compensation plan assets 1 $ 157,709 $ 143,499

3 unchanged sentences

Interest rate swaps 2 5,281 3,999

Bank debt 2 ( 436,344 ) ( 310,826 )

Contingent purchase price liabilities 3 ( 94,186 ) ( 114,946 )

During the nine months ended September 30, 2023 and 2022, there were no transfers between the valuation hierarchy Levels 1, 2 and 3.

The following table summarizes the change in Level 3 fair values of our contingent purchase price liabilities for the nine months ended September 30, 2023 and 2022 (pre-tax basis) (in thousands):

During the three months ended March 31, 2024 and 2023, there were no transfers between the valuation hierarchy Levels 1, 2 and 3.

The following table summarizes the change in Level 3 fair values of our contingent purchase price liabilities for the three months ended March 31, 2024 and 2023 (pre-tax basis, in thousands):

Beginning balance – December 31 $ ( 114,946 ) $ ( 132,010 )

3 unchanged sentences

Change in net present value of contingencies ( 504 ) ( 620 )

Ending balance – September 30 $ ( 120,014 ) $ ( 141,208 )

Contingent purchase price liabilities result from our business acquisitions and are recorded at fair value at the time of acquisition and are presented as “Contingent purchase price liabilities — current” and “Contingent purchase price liabilities — non-current” in the accompanying unaudited Condensed Consolidated Balance Sheets.

We estimate the fair value of our contingent purchase price liabilities using a probability-weighted discounted cash flow model.

This fair value measure is based on significant inputs not observed in the market and thus represents a Level 3 measurement.

Fair value measurements characterized within Level 3 of the fair value hierarchy are measured based on unobservable inputs that are supported by little or no market activity and reflect our own assumptions in measuring fair value.

We probability weight risk-adjusted estimates of future performance of acquired businesses, then calculate the contingent purchase price based on the estimates and discount them to present value representing management’s best estimate of fair value.

The fair value of the contingent purchase price liabilities is reassessed quarterly based on assumptions provided by practice group leaders and business unit controllers together with our corporate finance department.

Any change in the fair value estimate is recorded in the earnings of that period.

Refer to Note 11, Business Combinations, for further discussion of our acquisitions and contingent purchase price liabilities.

The carrying amounts of our cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments, and the carrying value of bank debt approximates fair value as the interest rate on the bank debt is variable and approximates current market rates.

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

Ending balance – March 31 $ ( 94,186 ) $ ( 125,756 )

The following table summarizes the changes in contingent purchase price consideration for previous acquisitions and contingent payments made for previous business acquisitions in the three months ended March 31, 2024 and 2023, respectively (in thousands):

Three Months Ended March 31,

Net expense $ 434 $ 630

Cash settlement paid $ 30,957 $ 28,434

Shares issued (number) 60 70

Refer to the Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion on the fair value measurements and classification of our financial assets and liabilities.

OTHER COMPREHENSIVE INCOME

The following table is a summary of other comprehensive income and discloses the tax impact of each component of other comprehensive income for the three and nine months ended September 30, 2023 and 2022 (in thousands):

The following table is a summary of other comprehensive income and discloses the tax impact of each component of other comprehensive income for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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

$ 172 $ ( 457 ) $ 510 $ ( 1,614 )

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

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

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

960 ( 1,388 )

Foreign currency translation 2 ( 4 )

Total other comprehensive income $ 487 $ 2,179 $ 811 $ 4,584

(1) Net of income tax expense of $ 68 and income tax benefit of $ 171 for the three months ended September 30, 2023 and 2022, respectively, and net of income tax expense of $ 203 and income tax benefit of $ 604 for the nine months ended September 30, 2023 and 2022, respectively.

(2) Net of income tax expense of $ 108 and income tax expense of $ 863 for the three months ended September 30, 2023 and 2022, respectively, and net of income tax expense of $ 94 and income tax expense of $ 2,041 for the nine months ended September 30, 2023 and 2022, respectively.

Total other comprehensive income (loss) $ 1,018 $ ( 1,213 )

(1) Net of income tax expense of $ 21 and $ 71 for the three months ended March 31, 2024 and 2023, respectively.

(2) Net of income tax expense of $ 322 and income tax benefit of $ 463 for the three months ended March 31, 2024 and 2023, respectively.

EMPLOYEE STOCK PLANS

7 unchanged sentences

Refer to the Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion on the 2019 Plan.

Compensation expense for stock-based awards recognized during the three and nine months ended September 30, 2023 and 2022 was as follows (in thousands):

Compensation expense for stock-based awards recognized during the three months ended March 31, 2024 and 2023 was as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Stock options $ — $ 768

2 unchanged sentences

Total stock-based compensation expense $ 2,638 $ 3,831

Stock Options and Restricted Stock Units and Awards – The following table presents our stock options and restricted stock units and awards activity during the nine months ended September 30, 2023 (in thousands, except per share data):

Stock Options Restricted Stock Units and Awards

Options Weighted Average Exercise Price

Stock Options and Restricted Stock Units and Awards – The Company did not grant any stock options during the three months ended March 31, 2024.

The following table presents our restricted stock units and awards activity during the three months ended March 31, 2024 (in thousands, except per share data):

Restricted Stock Units and Awards

Shares Weighted Average

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Exercised or released ( 102 ) $ 36.50

Outstanding at September 30, 2023 170 $ 33.36 223 $ 41.19

Exercisable at September 30, 2023 170 $ 33.36

Expired or canceled ( 3 ) $ 38.52

Outstanding at March 31, 2024 194 $ 53.14

Exercisable at March 31, 2024

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

awards are granted at no cost to the recipients.

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

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

The following weighted average assumptions were utilized:

Nine Months Ended September 30, 2023

Expected volatility (1) 28.57 %

Expected option life (years) (2) 4.74

Risk-free interest rate (3) 3.89 %

Expected dividend yield (4) — %

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

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

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

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

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

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

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

The following table presents our PSUs activity during the nine months ended September 30, 2023 (in thousands, except per share data):

The following table presents our PSUs activity during the three months ended March 31, 2024 (in thousands, except per share data):

Share Units Weighted

2 unchanged sentences

Vested ( 273 ) $ 27.51

Adjustments for performance results (2)

Outstanding at September 30, 2023 464 $ 33.84

Canceled ( 7 ) $ 39.09

Outstanding at March 31, 2024 254 $ 49.42

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

PSUs are granted at no cost to the recipients.

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

EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022 (in thousands, except per share data):

The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023 (in thousands, except per share data):

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net Income $ 76,884 $ 73,160

1 unchanged sentence

Stock options (1)

148 434 206 523

Restricted stock units and awards (1)

96 118 95 141

Performance share units 277 205 277 205

Contingent shares (2)

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Diluted earnings per share $ 1.53 $ 1.44

(1) A total of 60 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for nine months ended September 30, 2023, as their effect would be anti-dilutive.

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

No stock-based awards were excluded from the calculation of diluted earnings per share for the three months ended September 30, 2023 and 2022, as their effect was dilutive.

(1) A total of 40 thousand and 80 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for three months ended March 31, 2024 and 2023, respectively, as their effect would be anti-dilutive.

(2) Contingent shares represent additional shares to be issued for purchase price earned by former owners of businesses acquired by us once future considerations have been met.

Refer to Note 11, Business Combinations, for further details.

(3) The denominator used in calculating diluted earnings per share did not include 187 thousand PSUs for both the three and nine months ended September 30, 2023, and the denominator used in calculating diluted earnings per share did not include 237 thousand PSUs for both the three and nine months ended September 30, 2022.

The performance conditions associated with these performance share units were not met and consequently none of these PSUs were considered as issuable for the three and nine months ended September 30, 2023 and 2022.

BUSINESS COMBINATIONS

Business Combinations

During the nine months ended September 30, 2023, we completed the following acquisitions:

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

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

Operating results for Danenhauer and Danenhauer are reported in the Financial Services practice group.

• Effective February 1, 2023, we acquired the non-attest assets of Somerset CPAs and Advisors ("Somerset").

Somerset, based in Indianapolis, Indiana, is a provider of a full range of accounting, tax, and financial advisory services to clients in a wide array of industries.

Operating results for Somerset are reported in the Financial Services practice group.

• Effective June 1, 2023, we acquired all of the assets of Pivot Point Security ("PPS").

PPS, based in Hamilton, New Jersey, is a provider of cyber and information security, and compliance services for small and middle market businesses.

Operating results for PPS are reported in the Financial Services practice group.

• Effective June 1, 2023, we acquired all of the assets of Ickovic and Co.

PC ("Ickovic and Co.").

Ickovic and Co., based in Denver, Colorado, is a provider of bespoke services and solutions for high-net-worth individuals, business owners and executives.

Operating results for Ickovic and Co.

are reported in the Financial Services practice group.

• Effective July 1, 2023, we acquired all of the assets of American Pension Advisors, Ltd.

APA, based in Indianapolis, Indiana, is a provider of full-service retirement plan consulting and administration assisting more than 1,200 clients in the design, implementation, and administration of all types of retirement plans including 401(k), 403(b), 457(b), defined benefit and cash balance.

Operating results for APA are reported in the Benefits and Insurance Services practice group.

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

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

Marks Paneth, based in New York City, is a provider of a full range of accounting, tax and consulting services to a wide range of industries.

Marks Paneth is included as a component of our Financial Services practice group.

Operating results are reported in the Financial Services practice group.

• Effective July 1, 2022, we acquired substantially all the assets of Stinnett & Associates, LLC ("Stinnett").

Stinnett, located in Tulsa, Oklahoma, is a professional advisory firm and certified Women's Business Enterprise providing internal audit, Sarbanes-Oxley compliance, cybersecurity reviews, business continuity and disaster recovery, and fraud investigations to businesses of all sizes including Fortune 1000 organizations in a variety of industries.

Operating results are reported in the Financial Services practice group.

The acquisitions of Danenhauer and Danenhauer, Somerset, PPS, Ickovic and Co., and APA (together, the “2023 Acquisitions”) are expected to add approximately $ 67.3 million annualized revenue in 2023.

For the nine months ended September 30, 2023, we recorded approximately $ 3.1 million in non-recurring transaction, retention and integration related costs associated with the Somerset acquisition.

Pro forma results of operations for these acquisitions have not been presented because the effects of these acquisitions were not material, either individually or in aggregate, to our total revenue and net income for the three and nine months ended September 30, 2023 and 2022, respectively.

The following table summarizes the consideration and purchase price allocation for the acquisitions completed during the nine months ended September 30, 2023 and 2022, respectively (in thousands):

Common stock issued (number) 102 42

Common stock value $ 4,796 $ 1,668

Cash paid 53,027 79,141

Recorded contingent consideration 32,142 74,199

Total recorded purchase price $ 89,965 $ 155,008

Accounts receivable acquired 8,539 20,429

Fixed assets acquired 1,108 1,933

Identifiable intangible assets acquired 35,267 53,400

Operating lease right-of-use asset acquired 14,972 49,291

Other assets acquired 1,163 1,693

Operating lease liability acquired - current ( 1,080 ) ( 5,860 )

Other current liabilities acquired ( 1,366 ) ( 1,594 )

Operating lease liability acquired - non-current ( 13,892 ) ( 43,431 )

Goodwill 45,254 79,147

Total net assets acquired $ 89,965 $ 155,008

Maximum potential contingent consideration $ 33,845 $ 77,075

Provisional estimates of fair value are established at the time of each acquisition and are subsequently reviewed within the first year of operations subsequent to the acquisition date to determine the necessity for adjustments.

Fair value estimates of the 2023 Acquisitions were provisional as of September 30, 2023, primarily related to the value established for certain identifiable intangible assets and contingent purchase price consideration.

The following table summarizes the goodwill and intangible asset amounts resulting from those acquisitions for the nine months ended September 30, 2023 and 2022, respectively (in thousands):

Nine Months Ended September 30,

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

Goodwill $ 41,322 $ 3,932 $ 79,147 $ —

Client list 33,196 2,053 53,400 —

Other intangibles 18 — — —

Total $ 74,536 $ 5,985 $ 132,547 $ —

Goodwill is calculated as the difference between the aggregated purchase price and the fair value of the net assets acquired.

Goodwill represents the value of expected future earnings and cash flows, as well as the synergies created by the integration of the new businesses within our organization, including cross-selling opportunities expected with our Financial Services practice group and the Benefits and Insurance Services practice group, to help strengthen our existing service offerings and expand our market position.

Goodwill related to these acquisitions is deductible for tax purposes.

Client lists from the aforementioned acquisitions have an expected life up to 10 years, and other intangibles, primarily non-compete agreements, have an expected life of 3 years.

Client lists and non-compete agreements are valued using a discounted cash flow model based on management estimates of future cash flows from such assets.

The following table summarizes the changes in contingent purchase price consideration for previous acquisitions and contingent payments made for previous business acquisitions in the three and nine months ended September 30, 2023 and 2022, respectively (in thousands):

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

2023 2022 2023 2022

Net expense $ 626 $ 440 $ 2,071 $ 1,917

Cash settlement paid $ 10,103 $ 4,167 $ 39,910 $ 12,289

Shares issued (number) 54 26 129 45

Divestitures and Sales of Assets

Sales of assets are recorded as "Other (expense) income, net” in the accompanying Consolidated Statements of Comprehensive Income.

During the three and nine months ended September 30, 2023, we recorded a gain of $ 1.4 million and $ 1.5 million, respectively, related to the sale of one technology asset in the Financial Services practice group.

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

(3) The denominator used in calculating diluted earnings per share did not include 254 thousand and 326 thousand PSUs for both the three months ended March 31, 2024, and 2023, respectively.

The performance conditions associated with these PSUs were not met and consequently none of these PSUs were considered as issuable for the three months ended March 31, 2024 and 2023.

SEGMENT DISCLOSURES

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Performance of the practice groups is evaluated on income (loss) before income tax expense (benefit) excluding those costs listed above, which are reported in the “Corporate and Other”.

Segment information for the three and nine months ended September 30, 2023 and 2022 is presented below.

Segment information for the three months ended March 31, 2024 and 2023 is presented below.

We do not manage our assets on a segment basis, therefore segment assets are not presented below.

The following table disaggregates our revenue by source (in thousands):

Three Months Ended September 30, 2023

Services Benefits and

Insurance Services National

Practices Consolidated

Accounting, tax, advisory and consulting $ 298,372 — — $ 298,372

Core benefits and insurance services — 95,951 — 95,951

Non-core benefits and insurance services — 4,336 — 4,336

Managed networking, hardware services — — 9,205 9,205

National practices consulting — — 2,675 2,675

Total revenue $ 298,372 $ 100,287 $ 11,880 $ 410,539

Three Months Ended September 30, 2022

Services Benefits and

Insurance Services National

Practices Consolidated

Accounting, tax, advisory and consulting $ 259,998 — — $ 259,998

Core benefits and insurance services — 88,364 — 88,364

Non-core benefits and insurance services — 3,703 — 3,703

Managed networking, hardware services — — 8,514 8,514

National practices consulting — — 2,683 2,683

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

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Services Benefits and

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Total revenue $ 372,630 $ 108,408 $ 13,259 $ 494,297

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Services Benefits and

7 unchanged sentences

Total revenue $ 343,086 $ 100,054 $ 11,466 $ 454,606

Segment information for the three months ended September 30, 2023 and 2022 was as follows (in thousands):

Three Months Ended September 30, 2023

Services Benefits

Services National

Practices Corporate

Revenue $ 298,372 $ 100,287 $ 11,880 $ — $ 410,539

Operating expenses 249,680 79,636 10,667 2,165 342,148

Gross margin 48,692 20,651 1,213 ( 2,165 ) 68,391

Corporate general and administrative expenses — — — 13,136 13,136

Operating income (loss) 48,692 20,651 1,213 ( 15,301 ) 55,255

Other income (expense):

Interest expense — — — ( 5,848 ) ( 5,848 )

Gain on sale of operations, net 77 — — — 77

Other income (expense), net 1,497 267 — ( 4,052 ) ( 2,288 )

Total other income (expense), net 1,574 267 — ( 9,900 ) ( 8,059 )

Income (loss) before income tax expense $ 50,266 $ 20,918 $ 1,213 $ ( 25,201 ) $ 47,196

Three Months Ended September 30, 2022

Segment information for the three months ended March 31, 2024 and 2023 was as follows (in thousands):

Three Months Ended March 31, 2024

Services Benefits

8 unchanged sentences

Interest expense — — — ( 4,511 ) ( 4,511 )

Gain on sale of operations, net 176 — — — 176

Other income (expense), net 103 2,402 8 ( 5,135 ) ( 2,622 )

Total other income (expense), net 279 2,398 8 ( 7,436 ) ( 4,751 )

Income (loss) before income tax expense $ 39,940 $ 21,144 $ 1,462 $ ( 25,945 ) $ 36,601

Segment information for the nine months ended September 30, 2023 and 2022 was as follows (in thousands):

Nine Months Ended September 30, 2023

Other income, net 86 44 — 9,294 9,424

Total other income, net 86 44 — 4,783 4,913

Income before income tax expense $ 107,155 $ 24,815 $ 1,326 $ ( 29,282 ) $ 104,014

Three Months Ended March 31, 2023

Services Benefits

10 unchanged sentences

Other income, net 255 177 — 4,680 5,112

Total other income (expense), net 2,163 596 1 ( 9,362 ) ( 6,602 )

Income (loss) before income tax expense $ 196,983 $ 61,842 $ 3,286 $ ( 76,739 ) $ 185,372

Nine Months Ended September 30, 2022

Services Benefits

Services National

Practices Corporate

Revenue $ 808,052 $ 276,261 $ 32,623 $ — $ 1,116,936

Operating expenses (income) 639,780 220,998 29,218 ( 3,944 ) 886,052

Gross margin 168,272 55,263 3,405 3,944 230,884

Corporate general and administrative expenses — — — 43,128 43,128

Operating income (loss) 168,272 55,263 3,405 ( 39,184 ) 187,756

Other income (expense):

Interest expense — ( 5 ) — ( 5,204 ) ( 5,209 )

Gain on sale of operations, net 311 — — — 311

Other income (expense), net 274 2,366 9 ( 27,581 ) ( 24,932 )

Total other income (expense), net 585 2,361 9 ( 32,785 ) ( 29,830 )

Total other income, net 354 176 — 1,040 1,570

Income (loss) before income tax expense $ 98,997 $ 23,307 $ 883 $ ( 23,620 ) $ 99,567

SUBSEQUENT EVENTS

Subsequent to September 30, 2023, and up to October 24, 2023, we repurchased approximately 0.1 million shares of our common stock in the open market at a total cost of approximately $ 4.3 million.

Effective October 16, 2023, we entered into a new 5-year interest rate swap with a notional value of $ 25 million and fixed rate of 4.488 %.

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

What changed 10-Q

Item 1. Financial Statements