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Item 1. Financial Statements

2024-08-01 compared with 2024-04-25 · 213 added, 78 removed, 421 unchanged (41% of the section changed)

55 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Revenue $ 420,012 $ 398,502 $ 914,309 $ 853,108

7 unchanged sentences

Other income, net 2,483 5,421 11,907 10,533

Total other income, net 4,913 1,570

Total other (expense) income, net ( 3,401 ) ( 113 ) 1,512 1,457

Income before income tax expense 28,193 38,609 132,207 138,176

8 unchanged sentences

Net income $ 19,793 $ 26,863 $ 96,677 $ 100,023

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

Other comprehensive (loss) income, net of tax ( 142 ) 1,537 876 324

Comprehensive income $ 19,651 $ 28,400 $ 97,553 $ 100,347

10 unchanged sentences

Comprehensive

Income (Loss) Totals

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

Net income — — — — 19,793 — — 19,793

Other comprehensive loss — — — — — — ( 142 ) ( 142 )

Restricted stock units and awards 16 — — — — — — —

Stock-based compensation — — — 2,378 — — — 2,378

Business acquisitions 34 — — 2,316 — — — 2,316

June 30, 2024 137,905 87,743 $ 1,379 $ 845,962 $ 951,761 $ ( 910,322 ) $ 2,654 $ 891,434

Shares Treasury

Shares Common

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Income Totals

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

Net income — — — — 26,863 — — 26,863

Other comprehensive income — — — — — — 1,537 1,537

Share repurchases — 547 — — — ( 27,737 ) — ( 27,737 )

Restricted stock units and awards 21 — — — — — — —

Stock options exercised 32 — 1 622 — — — 623

Stock-based compensation — — — 2,788 — — — 2,788

Business acquisitions 4 — — 210 — — — 210

Excise tax on share repurchases — — $ — $ 387 $ — $ ( 558 ) $ — $ ( 171 )

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

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

6 unchanged sentences

Business acquisitions 127 — 1 8,475 — — — 8,476

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

June 30, 2024 137,905 87,743 $ 1,379 $ 845,962 $ 951,761 $ ( 910,322 ) $ 2,654 $ 891,434

Shares Treasury

4 unchanged sentences

Stock Accumulated

Comprehensive

Income Totals

Comprehensive Income Totals

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

Net income — — — — 100,023 — — 100,023

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

Other comprehensive income — — — — — — 324 324

Share repurchases — 975 — — — ( 48,528 ) — ( 48,528 )

5 unchanged sentences

Business acquisitions 177 — 2 8,294 — — — 8,296

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

Excise tax on share repurchases — — $ — $ 387 $ — $ ( 558 ) $ — $ ( 171 )

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

See the accompanying notes to the unaudited condensed consolidated financial statements

AND SUBSIDIARIES

1 unchanged sentence

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Net income $ 96,677 $ 100,023

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

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

Depreciation and amortization expense 19,008 17,831

12 unchanged sentences

Other liabilities 4,116 5,450

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

Net cash provided by operating activities 24,439 29,729

Cash flows from investing activities:

15 unchanged sentences

Payment of contingent consideration for acquisitions and client lists ( 41,021 ) ( 29,973 )

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

Net cash (used in) provided by financing activities ( 11,920 ) 21,793

Net decrease in cash, cash equivalents and restricted cash ( 20,728 ) ( 14,095 )

24 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.

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.

During the six months ended June 30, 2024, we completed the acquisitions of Erickson, Brown & Kloster, LLC ("EBK") and CompuData, Inc.

("CompuData") in our Financial Services practice group and Educational & Institutional Insurance Administrator, Inc.'s EIIA Higher Education Benefit Trust ("EIIA") in our Benefits and Insurance practice group for a total aggregated purchase price of $ 40.1 million, including $ 15.2 million recorded as contingent consideration.

For the six months ended June 30, 2024, we recorded $ 12.6 million in total revenue from those acquisitions.

None of the acquisition are considered material, individually or in the aggregate.

Basis of Consolidation:

11 unchanged sentences

Changes in Accounting Policies:

We have consistently applied the accounting policies for the periods presented as described in Note 1, Basis of Presentation and Significant Accounting Policies, to the

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

We have consistently applied the accounting policies for the periods presented as described in Note 1, Basis of Presentation and Significant Accounting Policies, to the consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

NEW ACCOUNTING PRONOUNCEMENTS

2 unchanged sentences

We assess and review the impact of all issued ASUs.

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.

During the six months ended June 30, 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 March 31, 2024 and December 31, 2023 was as follows (in thousands):

Accounts receivable, net, at June 30, 2024 and December 31, 2023 was as follows (in thousands):

2024 December 31,

4 unchanged sentences

Accounts receivable, net $ 477,841 $ 380,152

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):

Changes to the allowance for doubtful accounts for the six months ended June 30, 2024 and twelve months ended December 31, 2023 were as follows (in thousands):

2024 December 31,

7 unchanged sentences

The 2022 credit facility matures on May 4, 2027.

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

The balance outstanding under the 2022 credit facility was $ 381.0 million and $ 312.4 million at June 30, 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 six months ended June 30, 2024 and 2023 were as follows:

Six Months Ended

Weighted average rates 5.41 % 4.94 %

1 unchanged sentence

1.93 % - 8.00 %

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.

We had approximately $ 209.8 million of available funds under the 2022 credit facility at June 30, 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 March 31, 2024, we are in compliance with all covenants.

As of June 30, 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.

2 unchanged sentences

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 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,

The line of credit did no t have a balance outstanding at June 30, 2024.

On August 1, 2024, we renewed the line of credit and it will terminate on July 31, 2025.

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 six months ended June 30, 2024 and 2023 was as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Credit facilities $ 5,881 $ 5,498 $ 10,392 $ 9,138

Other 3 36 3 37

Total $ 5,884 $ 5,534 $ 10,395 $ 9,175

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 $ 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 March 31, 2024 and December 31, 2023, respectively.

The amount of license bonds outstanding was $ 2.3 million and $ 2.3 million at June 30, 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.

24 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 $ 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 par value of these investments totaled $ 39.7 million and $ 40.0 million at June 30, 2024 and December 31, 2023, respectively, and these investments have maturity or callable dates ranging from July 2024 through January 2026.

At June 30, 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 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

The following table summarizes activities related to these investments for the six months ended June 30, 2024 and the twelve months ended December 31, 2023 (in thousands):

Six Months Ended June 30, 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 $ 39,212 $ 39,459

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.

In addition to the available-for-sale debt securities discussed above, we also held other depository assets in the amount of $ 1.6 million and $ 1.0 million at June 30, 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.

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

The following table summarizes our outstanding interest rate swaps and their classification in the accompanying unaudited Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023 (amounts in thousands):

June 30, 2024

Amount Fixed Rate Expiration Fair

Value Balance Sheet Location

Interest rate swap $ 50,000 0.834 % 4/14/2025 $ 2,089 Other non-current asset

Interest rate swap $ 50,000 0.834 % 4/14/2025 $ 1,654 Other current asset

Interest rate swap $ 30,000 1.186 % 12/14/2026 $ 2,227 Other non-current asset

11 unchanged sentences

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 months ended March 31, 2024 and 2023 (in thousands):

Gain (Loss) Recognized

The following table summarizes the effects of the interest rate swaps on the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023 (in thousands):

Gain Recognized

in AOCI, net of tax Gain Reclassified

1 unchanged sentence

Three Months Ended

March 31, Three Months Ended

June 30, Three Months Ended

2024 2023 2024 2023

Interest rate swaps $ 587 $ 2,187 $ 1,174 $ 1,073

Gain Recognized

in AOCI, net of tax Gain (Loss) Reclassified

from AOCI into Expense

Six Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Interest rate swaps $ 2,441 $ 1,472 $ 2,365 $ 1,970

FAIR VALUE MEASUREMENTS

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

The following table summarizes our assets and (liabilities) at June 30, 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 June 30, 2024 December 31, 2023

Deferred compensation plan assets 1 $ 162,133 $ 143,499

5 unchanged sentences

Contingent purchase price liabilities 3 ( 83,839 ) ( 114,946 )

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):

During the six months ended June 30, 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 six months ended June 30, 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 ( 1,061 ) ( 1,430 )

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,

Ending balance – June 30 $ ( 83,839 ) $ ( 130,465 )

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 six months ended June 30, 2024 and 2023, respectively (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net expense $ 204 $ 815 $ 638 $ 1,445

3 unchanged sentences

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 months ended March 31, 2024 and 2023 (in thousands):

The following table is a summary of other comprehensive income and discloses the tax impact of each component of other comprehensive (loss) income for the three and six months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

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

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

$ 167 $ 159 $ 223 $ 338

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

( 292 ) 1,383 668 ( 5 )

Foreign currency translation ( 17 ) ( 5 ) ( 15 ) ( 9 )

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.

Total other comprehensive (loss) income $ ( 142 ) $ 1,537 $ 876 $ 324

(1) Net of income tax expense of $ 68 and $ 64 for the three months ended June 30, 2024 and 2023, respectively.

Net of income tax expense of $ 89 and $ 135 for the six months ended June 30, 2024 and 2023, respectively.

(2) Net of income tax benefit of $ 99 and income tax expense of $ 449 for the three months ended June 30, 2024 and 2023, respectively.

Net of income tax expense of $ 223 and income tax benefit of $ 14 for the six months ended June 30, 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 months ended March 31, 2024 and 2023 was as follows (in thousands):

Compensation expense for stock-based awards recognized during the three and six months ended June 30, 2024 and 2023 was as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Stock options $ — $ — $ — $ 768

2 unchanged sentences

Total stock-based compensation expense $ 2,378 $ 2,788 $ 5,016 $ 6,619

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):

Stock Options and Restricted Stock Units and Awards – The Company did not grant any stock options during the six months ended June 30, 2024.

The following table presents our restricted stock units and awards activity during the six months ended June 30, 2024 (in thousands, except per share data):

Restricted Stock Units and Awards

5 unchanged sentences

Expired or canceled ( 3 ) $ 38.52

Outstanding at March 31, 2024 194 $ 53.14

Exercisable at March 31, 2024

Outstanding at June 30, 2024 189 $ 56.04

Exercisable at June 30, 2024 189 $ 56.04

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

4 unchanged sentences

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 three months ended March 31, 2024 (in thousands, except per share data):

The following table presents our PSUs activity during the six months ended June 30, 2024 (in thousands, except per share data):

Share Units Weighted

3 unchanged sentences

Canceled ( 7 ) $ 39.09

Outstanding at March 31, 2024 254 $ 49.42

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

Outstanding at June 30, 2024 254 $ 49.42

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

PSUs are granted at no cost to the recipients.

EARNINGS PER SHARE

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):

The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended June 30, 2024 and 2023 (in thousands, except per share data):

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net Income $ 19,793 $ 26,863 $ 96,677 $ 100,023

1 unchanged sentence

Stock options (1)

80 198 77 235

Restricted stock units and awards (1)

Performance share units — 106 — 106

Contingent shares (2)

4 unchanged sentences

Diluted earnings per share $ 0.39 $ 0.53 $ 1.92 $ 1.98

(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.

(1) A total of 9 thousand and 96 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for three and six months ended June 30, 2024, respectively, as their effect would be anti-dilutive.

A total of 12 thousand and 53 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for three and six months ended June 30, 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.

(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.

(3) The denominator used in calculating diluted earnings per share did not include 254 thousand PSUs for both the three and six months ended June 30, 2024.

T he denominator used in calculating diluted earnings per share did not include 220 thousand PSUs for both the three and six months ended June 30, 2023.The performance conditions associated with these PSUs were not met and consequently none of these PSUs were considered as issuable for the three and six months ended June 30, 2024 and 2023.

SEGMENT DISCLOSURES

18 unchanged sentences

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 months ended March 31, 2024 and 2023 is presented below.

Segment information for the three and six months ended June 30, 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 March 31, 2024

Three Months Ended June 30, 2024

Services Benefits and

7 unchanged sentences

Total revenue $ 309,233 $ 97,419 $ 13,360 $ 420,012

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Services Benefits and

7 unchanged sentences

Total revenue $ 290,930 $ 95,838 $ 11,734 $ 398,502

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

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

Services Benefits and

Insurance Services National

Practices Consolidated

Accounting, tax, advisory and consulting $ 681,863 — — $ 681,863

Core benefits and insurance services — 198,738 — 198,738

Non-core benefits and insurance services — 7,089 — 7,089

Managed networking, hardware services — — 20,438 20,438

National practices consulting — — 6,181 6,181

Total revenue $ 681,863 $ 205,827 $ 26,619 $ 914,309

Six Months Ended June 30, 2023

Services Benefits and

Insurance Services National

Practices Consolidated

Accounting, tax, advisory and consulting $ 634,016 — — $ 634,016

Core benefits and insurance services — 187,648 — 187,648

Non-core benefits and insurance services — 8,244 — 8,244

Managed networking, hardware services — — 18,021 18,021

National practices consulting — — 5,179 5,179

Total revenue $ 634,016 $ 195,892 $ 23,200 $ 853,108

Segment information for the three months ended June 30, 2024 and 2023 was as follows (in thousands):

Three Months Ended June 30, 2024

Services Benefits

9 unchanged sentences

Other income, net 128 43 ( 4 ) 2,316 2,483

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

Total other income (expense), net 128 43 ( 4 ) ( 3,568 ) ( 3,401 )

Income (loss) before income tax expense $ 46,552 $ 14,219 $ 1,328 $ ( 33,906 ) $ 28,193

Three Months Ended June 30, 2023

Services Benefits

8 unchanged sentences

Interest expense — — — ( 5,534 ) ( 5,534 )

Gain on sale of operations, net 99 — — — 99

Other income, net 235 153 1 5,032 5,421

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

Total other income (loss), net 235 153 1 ( 502 ) ( 113 )

Income (loss) before income tax expense $ 47,720 $ 17,617 $ 1,190 $ ( 27,918 ) $ 38,609

Segment information for the six months ended June 30, 2024 and 2023 was as follows (in thousands):

Six Months Ended June 30, 2024

Services Benefits

Services National

Practices Corporate

Revenue $ 681,863 $ 205,827 $ 26,619 $ — $ 914,309

Operating expenses 528,370 166,880 23,961 23,642 742,853

Gross margin 153,493 38,947 2,658 ( 23,642 ) 171,456

Corporate general and administrative expenses — — — 40,761 40,761

Operating income (loss) 153,493 38,947 2,658 ( 64,403 ) 130,695

Other income (expense):

Interest expense — — — ( 10,395 ) ( 10,395 )

Other income, net 214 87 ( 4 ) 11,610 11,907

Total other income (expense), net 214 87 ( 4 ) 1,215 1,512

Income (loss) before income tax expense $ 153,707 $ 39,034 $ 2,654 $ ( 63,188 ) $ 132,207

Six Months Ended June 30, 2023

Services Benefits

Services National

Practices Corporate

Revenue $ 634,016 $ 195,892 $ 23,200 $ — $ 853,108

Operating expenses (income) 487,888 155,297 21,128 20,685 684,998

Gross margin 146,128 40,595 2,072 ( 20,685 ) 168,110

Corporate general and administrative expenses — — — 31,391 31,391

Operating income (loss) 146,128 40,595 2,072 ( 52,076 ) 136,719

Other income (expense):

Interest expense — ( 1 ) — ( 9,174 ) ( 9,175 )

Gain on sale of operations, net 99 — — — 99

Other income (expense), net 490 330 1 9,712 10,533

Total other income (expense), net 589 329 1 538 1,457

Income (loss) before income tax expense $ 146,717 $ 40,924 $ 2,073 $ ( 51,538 ) $ 138,176

SUBSEQUENT EVENTS

On July 30, 2024, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Marcum LLP, a New York registered limited liability partnership (“Marcum”), Marcum Advisory Group LLC, a Delaware limited liability company and wholly owned subsidiary of Marcum (“MAG”), PMMS LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Merger Sub”), and Marcum Partners SPV LLC, a Delaware limited liability company.

Under the terms of the Merger Agreement, Merger Sub will merge with and into MAG, with MAG continuing as the surviving entity and as a wholly owned subsidiary of the Company (the “Merger”).

Prior to the closing of the Merger, Marcum will contribute substantially all of its non-attest business assets to MAG and MAG will assume substantially all of Marcum’s liabilities, in each case subject to certain exclusions.

In a separate transaction, Mayer Hoffman McCann P.C., a national independent Certified Public Accounting firm with which the Company has an existing Administrative Service Agreement, will purchase from Marcum substantially all of Marcum’s attest business assets (the “Attest Purchase”).

The Merger and the transactions contemplated by the Merger Agreement are referred to herein as the “Transaction.” Subject to the satisfaction of the conditions described below and other customary closing conditions, the Transaction is expected to close in the fourth quarter of 2024.

The aggregate consideration to be paid by the Company in connection with the Transaction is approximately $ 2.3 billion, on a cash-free and debt-free basis and subject to calculation and adjustments as provided in the Merger Agreement, of which approximately $ 1.1 billion is expected to be paid in cash and the remainder is expected to be paid in approximately 14.4 million shares of the Company's Common Stock, par value $ 0.01 per share (the "Common Stock") (based on $ 76.84 per share as specified in the Merger Agreement, which was the 30-day volume weighted average price of our Common Stock as of three business days prior to the date of the Merger Agreement.

The consideration payable in shares of common stock (the “Shares”) will be delivered as follows:

(i) approximately 5 % of the Shares will be subject to continued service requirements and, subject to satisfaction of those requirements, be delivered on the fourth anniversary of the closing (“performance shares”);

(ii) excluding those performance shares, approximately 25 % of the Shares will be delivered on the later of three business days following closing and January 2, 2025;

and (iii) the remaining approximately 75 % of the Shares, excluding performance shares, will be delivered in 36 monthly installments after the initial delivery.

The Shares, once fully issued, will constitute approximately 22 % of the Company's outstanding shares, without giving effect to any subsequent issuances, repurchases or other changes in the number of shares outstanding.

Each of the Company, Merger Sub, Marcum and MAG has provided customary representations, warranties and covenants in the Merger Agreement.

The completion of the Merger is subject to various closing conditions, including, among others, (a) the expiration of all waiting periods and receipt of all approvals required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976;

(b) the Company obtaining stockholder approval of the issuance of the Shares in connection with the Transaction as required by the rules of the New York Stock Exchange;

(d) the Company obtaining debt financing as contemplated by the commitment letter described below;

and (e) the completion of the Attest Purchase.

The Merger Agreement contains customary termination rights for both the Company and Marcum.

Both the Company and Marcum have the right to terminate the Merger Agreement if the Transaction is not consummated on or prior to May 1, 2025, subject to certain exceptions.

In the case of certain terminations under the circumstances described in the Merger Agreement, the Company may be required to pay a termination fee to Marcum of $ 48.0 million if debt financing is not obtained or $ 25.0 million if approval of the Company’s stockholders is not obtained or the Company’s board changes its recommendation with respect to the Transaction.

Marcum may be required to pay a termination fee to the Company of $ 22.0 million if the requisite approval of Marcum partners is not obtained within the time period specified in the Merger Agreement.

The Company has obtained committed financing to, among other things, fund the cash portion of the purchase price pursuant to a commitment letter (the “Commitment Letter”) entered into on July 30, 2024, with Bank of America, N.A.

and BofA Securities, Inc., which provides commitments for senior secured credit facilities (the “Senior Credit Facilities”) in an aggregate principal amount of $ 2.0 billion, consisting of (x) a $ 600 million five year senior secured revolving credit facility and (y) a $ 1.4 billion five year senior secured term loan facility.

The funding of the Senior Credit Facilities is contingent on the satisfaction of customary conditions, including (i) execution and delivery of definitive documentation with

respect to the Senior Credit Facilities in accordance with the terms set forth in the Commitment Letter and (ii) consummation of the acquisition of Marcum.

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