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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-04-25 · 274 added, 105 removed, 209 unchanged (64% of the section changed)

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Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to “we”, “us”, “our”, "CBIZ" or the "Company" shall mean CBIZ, Inc., a Delaware corporation, and its operating subsidiaries.

The following discussion is intended to assist in the understanding of our financial position at March 31, 2024 and December 31, 2023, results of operations for the three months ended March 31, 2024 and 2023, and cash flows for the three months ended March 31, 2024 and 2023, and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2023.

The following discussion is intended to assist in the understanding of our financial position at June 30, 2024 and December 31, 2023, results of operations for the three and six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023, and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2023.

This discussion and analysis contains forward-looking statements and should be read in conjunction with the disclosures and information contained in “Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q and in “Item 1A.

Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2023.

Risk Factors” included in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K for the year ended December 31, 2023.

We provide professional business services, products and solutions that help our clients grow and succeed by better managing their finances and employees.

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EXECUTIVE SUMMARY

Revenue for the three months ended March 31, 2024 increased by $39.7 million, or 8.7%, to $494.3 million from $454.6 million for the same period in 2023.

Revenue for the three months ended June 30, 2024 increased by $21.5 million, or 5.4%, to $420.0 million from $398.5 million for the same period in 2023.

Same-unit revenue increased by approximately $11.0 million, or 2.8%, as compared to the same period in 2023.

Revenue from newly acquired operations, net of divestitures, contributed $12.8 million, or 2.8%, of incremental revenue for the three months ended March 31, 2024 as compared to the same period in 2023.

Revenue from newly acquired operations contributed $10.5 million, or 2.6%, of incremental revenue for the three months ended June 30, 2024 as compared to the same period in 2023.

Revenue for the six months ended June 30, 2024 increased by $61.2 million, or 7.2%, to $914.3 million from $853.1 million for the same period in 2023.

Same-unit revenue increased by approximately $37.9 million, or 4.4%, as compared to the same period in 2023.

Revenue from newly acquired operations contributed $23.3 million, or 2.7%, of incremental revenue for the six months ended June 30, 2024 as compared to the same period in 2023.

A detailed discussion of revenue by practice group is included under "Operating Practice Groups".

Net income was $76.9 million, or $1.53 per diluted share, in the first quarter of 2024, compared to $73.2 million, or $1.44 per diluted share, in the first quarter of 2023.

Net income was $19.8 million, or $0.39 per diluted share, in the second quarter of 2024, compared to $26.9 million, or $0.53 per diluted share, in the second quarter of 2023.

For the six months ended June 30, 2024, net income was $96.7 million, or $1.92 per diluted share, compared to $100.0 million, or $1.98 per diluted share, for the same period in 2023.

Refer to “Results of Operations" for a detailed discussion of the components of net income.

On July 30, 2024, we entered into a Merger Agreement to acquire the non-attest business of Marcum for a total consideration of approximately 2.3 billion.

The Merger and the transactions contemplated by the Merger Agreement are referred to herein as the “Transaction".

Subject to the satisfaction of closing conditions, the Transaction is expected to close in the fourth quarter of 2024.

Refer to Note 12.

Subsequent Events to the accompanying unaudited condensed consolidated financial statements for further discussion regarding the Transaction.

Strategic Use of Capital

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We believe that repurchasing shares of our common stock can be a prudent use of our financial resources, and that investing in our stock is an attractive use of capital and an efficient means to provide value to our stockholders.

During the three months ended March 31, 2024, we completed two acquisitions for $21.3 million in cash.

We also repurchased 0.2 million shares of our common stock for tax withholding purposes at a total cost of approximately $11.2 million in the three months ended March 31, 2024.

During the six months ended June 30, 2024, we completed three acquisitions for $22.5 million in cash.

We also repurchased 0.2 million shares of our common stock for tax withholding purposes at a total cost of approximately $11.2 million in the six months ended June 30, 2024.

During the first quarter of 2024, the CBIZ Board of Directors authorized the purchase of up to 5.0 million shares of our common stock under our Share Repurchase Program (the “Share Repurchase Program”), which may be suspended or discontinued at any time and expires on March 31, 2025.

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RESULTS OF OPERATIONS

The following tables summarize total revenue for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The following tables summarize total revenue for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30,

Total 2023 % of

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Total CBIZ $ 420,012 100.0 % $ 398,502 100.0 % $ 21,510 5.4 %

Six Months Ended June 30,

Total 2023 % of

(Amounts in thousands, except percentages)

Financial Services $ 681,863 74.6 % $ 634,016 74.3 % $ 47,847 7.5 %

Benefits and Insurance Services 205,827 22.5 % 195,892 23.0 % 9,935 5.1 %

National Practices 26,619 2.9 % 23,200 2.7 % 3,419 14.7 %

Total CBIZ $ 914,309 100.0 % $ 853,108 100.0 % $ 61,201 7.2 %

A detailed discussion of same-unit revenue by practice group is included under “Operating Practice Groups.”

Non-qualified Deferred Compensation Plan

We sponsor a non-qualified deferred compensation plan, under which a CBIZ employee’s compensation deferral is held in a rabbi trust and invested accordingly as directed by the employee.

Income and expenses related to the non-qualified deferred compensation plan, which are recorded in "Corporate and Other" for segment reporting purposes, are included in “Operating expenses”, “Gross margin” and “Corporate general and administrative expenses” and are directly offset by deferred compensation gains or losses in “Other income (expense), net” in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income.

The non-qualified deferred compensation plan has no impact on “Income before income tax expense” or diluted earnings per share.

Income and expenses related to the deferred compensation plan for the three months ended March 31, 2024 and 2023 are as follows:

Three Months Ended March 31,

We sponsor a non-qualified deferred compensation plan (the "deferred compensation plan"), under which a CBIZ employee’s compensation deferral is held in a rabbi trust and invested accordingly as directed by the employee.

Income and expenses related to the deferred compensation plan, which are recorded in "Corporate and Other" for segment reporting purposes, are included in “Operating expenses”, “Gross margin” and “Corporate general and administrative expenses” and are directly offset by deferred compensation gains or losses in “Other (expense) income, net” in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income.

The deferred compensation plan has no impact on “Income before income tax expense” or diluted earnings per share.

Income and expenses related to the deferred compensation plan for the three and six months ended June 30, 2024 and 2023 are as follows:

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

2024 2023 2024 2023

(Amounts in thousands)

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Other income, net 2,606 5,733 12,239 11,135

Excluding the impact of the above-mentioned income and expenses related to the deferred compensation plan, the operating results for the three months ended March 31, 2024 and 2023 are as follows:

Three Months Ended March 31,

Excluding the impact of the above-mentioned income and expenses related to the deferred compensation plan, the operating results for the three and six months ended June 30, 2024 and 2023 are as follows:

Three Months Ended June 30,

(Amounts in thousands, except percentages)

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Income before income tax expense 28,193 — 28,193 6.7 % 38,609 — 38,609 9.7 %

Six Months Ended June 30,

(Amounts in thousands, except percentages)

As Reported Deferred Compensation Plan Adjusted % of Revenue As Reported Deferred Compensation Plan Adjusted % of Revenue

Gross margin $ 171,456 $ 10,859 $ 182,315 19.9 % $ 168,110 $ 9,862 $ 177,972 20.9 %

Operating income 130,695 12,239 142,934 15.6 % 136,719 11,135 147,854 17.3 %

Other income (expense), net 11,907 (12,239) (332) — % 10,533 (11,135) (602) (0.1) %

Income before income tax expense 132,207 — 132,207 14.5 % 138,176 — 138,176 16.2 %

Operating Expenses

Three Months Ended March 31,

The following tables summarize total operating expenses for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30,

(Amounts in thousands, except percentages)

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compensation % of revenue 86.7 % 85.0 %

Three months ended March 31, 2024 compared to March 31, 2023.

Total operating expenses for the three months ended March 31, 2024 increased by $35.5 million, or 10.4%, to $376.5 million as compared to $341.0 million in the same period of 2023.

The non-qualified deferred compensation plan increased operating expenses by $8.6 million for the three months ended March 31, 2024, and by $4.8 million during the same period in 2023.

Excluding the non-qualified deferred compensation expenses, which were recorded in "Corporate and Other" for segment reporting purposes, operating expenses would have been $367.9 million and $336.3 million, or 74.4% and 74.0% of revenue, for the three months ended March 31, 2024 and 2023, respectively.

In addition, operating expenses for the three months ended March 31, 2024 included approximately $0.1 million non-recurring integration costs associated with the two acquisitions completed in 2024, and operating expenses for the three months ended March 31, 2023 included $0.4 million non-recurring integration costs associated with the Somerset CPAs and Advisors ("Somerset") acquisition.

Six Months Ended June 30,

(Amounts in thousands, except percentages)

Operating expenses by segment:

Financial Services $ 528,370 $ 487,888 $ 40,482 8.3 %

Benefits and Insurance Services 166,880 155,297 $ 11,583 7.5 %

National Practices 23,961 21,128 $ 2,833 13.4 %

Corporate and Other 23,642 20,685 $ 2,957 14.3 %

Total Operating expenses $ 742,853 $ 684,998 $ 57,855 8.4 %

Operating expenses % of revenue 81.2 % 80.3 %

Operating expenses excluding deferred compensation $ 731,994 $ 675,136 $ 56,858 8.4 %

Operating expenses excluding deferred

compensation % of revenue 80.1 % 79.1 %

Three months ended June 30, 2024 compared to June 30, 2023.

Total operating expenses for the three months ended June 30, 2024 increased by $22.4 million, or 6.5%, to $366.4 million as compared to $344.0 million in the same period of 2023.

The deferred compensation plan increased operating expenses by $2.3 million for the three months ended June 30, 2024, and by $5.1 million during the same period in 2023.

Excluding the deferred compensation expenses, which were recorded in "Corporate and Other" for segment reporting purposes, operating expenses would have been $364.1 million and $338.9 million, or 86.7% and 85.0% of revenue, for the three months ended June 30, 2024 and 2023, respectively.

In addition, operating expenses for the three months ended June 30, 2024 included approximately $0.2 million non-recurring integration costs associated with the acquisitions completed in 2024, and operating expenses for the three months ended June 30, 2023 included $0.6 million non-recurring integration costs associated with the Somerset CPAs and Advisors ("Somerset") acquisition.

The majority of our operating expenses relate to personnel costs, which include (i) salaries and benefits, (ii) commissions paid to producers, (iii) incentive compensation, and (iv) stock-based compensation.

Excluding the impact of deferred compensation, which was recorded in "Corporate and Other" for segment reporting purposes, operating expenses increased by approximately $31.7 million during the three months ended March 31, 2024 as compared to the same period in 2023, driven by $23.0 million higher personnel costs (of which $7.5 million was the result of acquisitions), $2.0 million higher facility costs, $1.8 million higher professional services costs, $1.6 million higher technology related costs, $1.4 million higher direct costs, $1.3 million higher travel and entertainment costs, and $0.7 million higher depreciation and amortization expense, as well as $0.6 million higher discretionary spending to support business growth.

Excluding the impact of deferred compensation, which was recorded in "Corporate and Other" for segment reporting purposes, operating expenses increased by approximately $25.2 million during the three months ended June 30, 2024 as compared to the same period in 2023, driven by $18.1 million higher personnel costs (of which $5.0 million was the result of acquisitions), $2.8 million higher direct costs, $2.1 million higher technology costs, $0.9 milli on higher professional service costs, $0.6 million higher travel and entertainment costs, $0.4 million higher facility costs, and

$0.3 million hig her discretionary spending to support business growth.

Personnel costs are discussed in further detail under “Operating Practice Groups”.

Six months ended June 30, 2024 compared to June 30, 2023 .

Total operating expenses for the six months ended June 30, 2024 increased by $57.9 million, or 8.4%, to $742.9 million as compared to $685.0 million in the same period of 2023.

The deferred compensation plan increased operating expenses by $10.9 million for the six months ended June 30, 2024, and by $9.9 million during the same period in 2023.

Excluding the impact of deferred compensation, which was recorded in "Corporate and Other" for segment reporting purposes, operating expenses would have been $732.0 million and $675.1 million, or 80.1% and 79.1% of revenue, for the six months ended June 30, 2024 and 2023, respectively, an increase of $56.9 million as compared to the same period in 2023.

In addition, operating expense for the six months ended June 30, 2024 included approximately $0.3 million non-recurring integration costs related to the acquisitions completed in 2024, and operating expenses for the six months ended June 30, 2023 included $1.0 million non-recurring integration and retention costs associated with the Somerset acquisition.

The increase in operating expense was driven by personnel costs increase of $41.2 million (of which $12.5 million was the result of acquisitions), $4.1 higher direct cost, $3.7 million higher technology costs, $2.7 million higher professional service costs, $2.3 million higher facility costs, $1.9 higher travel and entertainment costs, $0.9 million higher depreciation and amortization expense, and $0.1 million higher other discretionary spending to support business growth.

Personnel costs are discussed in further detail under “Operating Practice Groups”.

Corporate General & Administrative (“G&A”) Expenses

Three Months Ended March 31,

Three Months Ended June 30,

(Amounts in thousands, except percentages)

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G&A expenses excluding deferred compensation % of revenue 5.2 % 3.8 %

Three months ended March 31, 2024 compared to March 31, 2023.

The deferred compensation plan increased G&A expenses by $1.1 million for the three months ended March 31, 2024, and increased G&A expenses by $0.6 million during the same period in 2023.

G&A expenses, excluding the impact of the deferred compensation

plan, would have been $17.7 million, or 3.6% of revenue, for the three months ended March 31, 2024, compared to $15.0 million, or 3.3% of revenue, for the same period in 2023, an increase of approximately $2.7 million.

The increase was primarily driven by $2.2 million higher legal and other professional services costs, $0.2 million higher personnel costs, and $0.1 million higher depreciation costs, as well as $0.2 million higher other discretionary spending to support business growth.

G&A expense for the three months ended March 31, 2024 included approximately $0.5 million non-recurring transaction and integration costs associated with the two acquisitions completed in 2024, and G&A expense for the three months ended March 31, 2023 included approximately $1.2 million non-recurring transaction and integration costs associated with the Somerset acquisition.

Other Income (Expense), Net

Three Months Ended March 31,

Six Months Ended June 30,

(Amounts in thousands, except percentages)

G&A expenses $ 40,761 $ 31,391 $ 9,370 29.8 %

G&A expenses % of revenue 4.5 % 3.7 %

G&A expenses excluding deferred compensation $ 39,381 $ 30,118 $ 9,263 30.8 %

G&A expenses excluding deferred compensation % of revenue 4.3 % 3.5 %

Three months ended June 30, 2024 compared to June 30, 2023.

The deferred compensation plan increased G&A expenses by $0.3 million for the three months ended June 30, 2024, and increased G&A expenses by $0.6 million during the same period in 2023.

G&A expenses, excluding the impact of the deferred compensation plan, would have been $21.7 million, or 5.2% of revenue, for the three months ended June 30, 2024, compared to $15.2 million, or 3.8% of revenue, for the same period in 2023, an increase of approximately $6.6 million.

The increase was primarily driven by $5.6 million higher legal and other professional services costs largely associated with the announced Transaction, $0.4 millon higher travel and entertainment costs, $0.4 million higher technology costs, $0.2 million higher depreciation costs, and $0.7 million higher other discretionary spending to support the business growth.

The increase in G&A expenses was partially offset by $0.7 million lower personnel costs and $0.1 million lower facilitiy related costs.

G&A expense for the three months ended June 30, 2024 included approximately $0.1 million of non-recurring transaction and integration costs associated with the acquisitions completed in 2024, and G&A expense for the three months ended June 30, 2023 included approximately $0.3 million of non-recurring transaction and integration costs associated with the Somerset acquisition.

Six months ended June 30, 2024 compared to June 30, 2023.

The deferred compensation plan increased G&A expense by $1.4 million for the six months ended June 30, 2024, and increased G&A expenses by $1.3 million during the same period in 2023.

G&A expenses, excluding the impact of the deferred compensation plan, would have been $39.4 million, or 4.3% of revenue, for the six months ended June 30, 2024, compared to $30.1 million, or 3.5% of revenue, for the same period in 2023.

The increase in G&A expenses was primarily driven by $7.8 million higher legal and other professional services costs largely associated with the announced Transaction, $0.4 millon higher travel and entertainment costs, $0.3 million higher technology costs, $0.3 million higher depreciation costs, and $1.0 million higher other discretionary spending to support the business growth.

The increase in G&A expenses for the six months ended June 30, 2024 was partially offset by $0.5 million lower personnel costs and $0.1 million lower facilitiy related costs.

In addition, G&A expense for the six months ended June 30, 2024 included a $0.6 million non-recurring transaction and integration costs related to the aquistions completed in 2024 .

G&A expense for the six months ended June 30, 2023 included a $1.5 million non-recurring transaction and integration costs related to the Somerset acquisition.

Other (Expense) Income, Net

Three Months Ended June 30,

(Amounts in thousands, except percentages)

Interest expense $ (5,884) $ (5,534) $ (350) 6.3 %

Other income, net (1)

2,483 5,421 (2,938) (54.2) %

Total other expense, net $ (3,401) $ (113) $ (3,288) N/M

(1) Other income, net includes a net gain of $2.6 million during the three months ended June 30, 2024, and a net gain of $5.7 million for the same period in 2023, associated with the value of investments held in a rabbi trust related to the deferred compensation plan, which were recorded in "Corporate and Other" for segment reporting purposes.

The adjustments to the investments held in a rabbi trust related to the deferred compensation plan are offset by a corresponding increase or decrease to compensation expense, which is recorded as “Operating expenses” and “G&A expenses.” The deferred compensation plan has no impact on “Income before income tax expense” or diluted earnings per share.

In addition, included in Other income, net for the three months ended June 30, 2024 and 2023, is expense of $0.2 million and $0.8 million, respectively, related to net changes in the fair value of contingent consideration related to prior acquisitions.

Six Months Ended June 30,

(Amounts in thousands, except percentages)

Interest expense $ (10,395) $ (9,175) $ (1,220) 13.3 %

Gain on sale of operations, net — 99 (99) (100.0) %

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11,907 10,533 1,374 13.0 %

Total other income, net $ 4,913 $ 1,570 $ 3,343 N/M

(1) Other income, net includes a net gain of $9.6 million during the three months ended March 31, 2024, and a net gain of $5.4 million for the same period in 2023, associated with the value of investments held in a rabbi trust related to the deferred compensation plan, which were recorded in "Corporate and Other" for segment reporting purposes.

Total other income, net $ 1,512 $ 1,457 $ 55 3.8 %

(2) Other income, net includes a net gain of $12.2 million during the six months ended June 30, 2024, and a net gain of $11.1 million for the same period in 2023, associated with the value of investments held in a rabbi trust related to the deferred compensation plan, which were recorded in "Corporate and Other" for segment reporting purposes.

In addition, included in Other income, net for the three months ended March 31, 2024 and 2023, is expense of $0.4 million and $0.6 million, respectively, related to net changes in the fair value of contingent consideration related to prior acquisitions.

In addition, included in Other income, net for the six months ended June 30, 2024 and 2023, is expense of $0.6 million and $1.4 million, respectively, related to net changes in the fair value of contingent consideration related to prior acquisitions.

Interest Expense

Three months ended March 31, 2024 compared with March 31, 2023.

During the three months ended March 31, 2024, our average debt balance and weighted average effective interest rate was $325.6 million and 5.23%, compared to $302.2 million and 4.54% for the same period of 2023.

The increase in interest expense for the three months ended March 31, 2024 as compared to the same period in 2023 was primarily driven by a higher average debt balance as well as a higher weighted average effective interest rate.

Three and six months ended June 30, 2024 compared with June 30, 2023.

During the three months ended June 30, 2024, our average debt balance and weighted average effective interest rate was $410.1 million and 4.85%, respectively, compared to $403.1 million and 5.24% for the same period of 2023.

The increase in interest expense for the three months ended June 30, 2024 as compared to the same period in 2023 was primarily driven by a higher average debt balance.

During the six months ended June 30, 2024, our average debt balance and interest rate was $367.9 million and 5.41% compared to $352.9 million and 4.94% for the same period of 2023.

The increase in interest expense for the

six months ended June 30, 2024 as compared to the same period in 2023 was primarily driven by a higher average debt balance as well as a higher weighted average effective interest rate.

Our indebtedness is further discussed in Note 4, Debt and Financing Arrangements, to the accompanying unaudited condensed consolidated financial statements.

Other Income, Net

Three months ended March 31, 2024 compared with March 31, 2023.

For the three months ended March 31, 2024, other income, net includes a net gain of $9.6 million associated with the non-qualified deferred compensation plan.

For the same period in 2023, other income, net includes a net gain of $5.4 million associated with the non-qualified deferred compensation plan.

Excluding the impact of the deferred compensation plan, the three months ended March 31, 2024 and 2023 would have resulted in a net expense of $0.2 million and $0.3 million, respectively, primarily due to lower expenses associated with the net change in the fair value of contingent consideration related to prior acquisitions.

Three and six months ended June 30, 2024 compared with June 30, 2023.

For the three months ended June 30, 2024, other income, net includes a net gain of $2.6 million associated with the deferred compensation plan.

For the same period in 2023, other income, net includes a net gain of $5.7 million associated with the deferred compensation plan.

Excluding the impact of the deferred compensation plan, the decrease in other income, net for the three months ended June 30, 2024 was not material as compared to the same period in 2023.

For the six months ended June 30, 2024, other income, net includes a net gain of $12.2 million associated with the deferred compensation plan.

For the same period in 2023, other income, net includes a net gain of $11.1 million associated with the deferred compensation plan.

Excluding the impact of the deferred compensation plan, other income, net decreased b y $0.3 million i n 2024 as compared to 2023.

Income Tax Expense

Three Months Ended March 31,

Three Months Ended June 30,

(Amounts in thousands, except percentages)

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Effective tax rate 29.8 % 30.4 %

Three months ended March 31, 2024 compared with March 31, 2023.

The effective tax rate for the three months ended March 31, 2024 was 26.1%, compared to an effective tax rate of 26.5% for the comparable period in 2023.

The decrease in the effective tax rate was primarily due to the tax effect of lower non-deductible expenses and lower state tax expenses relative to pre-tax income during the first quarter of 2024 as compared to the same period in 2023.

Six Months Ended June 30,

(Amounts in thousands, except percentages)

Income tax expense $ 35,530 $ 38,153 $ (2,623) (6.9) %

Effective tax rate 26.9 % 27.6 %

Three and six months ended June 30, 2024 compared with June 30, 2023.

The effective tax rate for the three months ended June 30, 2024 was 29.8%, compared to an effective tax rate of 30.4% for the comparable period in 2023.

The decrease in the effective tax rate for the three month period ending June 30, 2024 was primarily due to the tax effect of lower non-deductible expenses and lower state tax expenses relative to pre-tax income during the second quarter of 2024 as compared to the same period in 2023.

The effective tax rate for the six months ended June 30, 2024 was 26.9%, compared to an effective tax rate of 27.6% for the same period in 2023.

The decrease in the effective tax rate for the six month period ending June 30, 2024 was primarily due to the tax effect of lower non-deductible expenses and lower state tax expenses relative to pre-tax income during the six months ended June 30, 2024 as compared to the same period in 2023.

Operating Practice Groups

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Financial Services

Three Months Ended March 31,

Three Months Ended June 30,

(Amounts in thousands, except percentages)

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Gross margin / Operating income $ 46,424 $ 47,485 $ (1,061) (2.2) %

Total other income, net 86 354 (268) N/M

Total other income, net 128 235 (107) (45.5) %

Income before income tax expense 46,552 47,720 (1,168) (2.4) %

Gross margin percent 15.0 % 16.3 %

Three months ended March 31, 2024 compared to March 31, 2023

The Financial Services practice group revenue for the three months ended March 31, 2024 grew by 8.6% to $372.6 million from $343.1 million during the same period in 2023.

Same-unit revenue grew by $17.5 million, or 5.1%, across all product lines, primarily driven by those units that provide traditional accounting and tax-related services, which increased $10.1 million, an increase of approximately $4.7 million in government healthcare compliance business, and an increase of approximately $2.7 million in those units that provide project-oriented advisory services.

The impact of acquired businesses contributed $12.1 million, or 3.2% of 2024 revenue.

Six Months Ended June 30,

(Amounts in thousands, except percentages)

Same-unit $ 660,257 $ 634,016 $ 26,241 4.1 %

Acquired businesses 21,606 — 21,606 N/M

Total revenue $ 681,863 $ 634,016 $ 47,847 7.5 %

Operating expenses 528,370 487,888 40,482 8.3 %

Gross margin / Operating income $ 153,493 $ 146,128 $ 7,365 5.0 %

Total other income, net 214 589 (375) (63.7) %

Income before income tax expenses 153,707 146,717 6,990 4.8 %

Gross margin percent 22.5 % 23.0 %

Three months ended June 30, 2024 compared to June 30, 2023

The Financial Services practice group revenue for the three months ended June 30, 2024 grew by 6.3% to $309.2 million from $290.9 million during the same period in 2023.

Same-unit revenue grew by $8.8 million, or 3.0%, primarily driven by those units that provide government healthcare compliance business consulting, which increased by $8.3 million, and those units that provide project based advisory services, which increased by approximately $2.2 million .

The increase was offset by a decrease in revenue of approximately $1.7 million from those units that provide traditional accounting and tax-related services for the three months ended June 30, 2024.The impact of acquired businesses contributed $9.5 million, or 3.1%, of 2024 revenue.

We provide a range of services to affiliated CPA firms under joint referral and administrative service agreements (“ASAs”).

Fees earned under the ASAs are recorded as revenue in the accompanying Condensed Consolidated Statements of Comprehensive Income and were approximately $87.8 million and $84.8 million for the three months ended March 31, 2024 and 2023, respectively.

Fees earned under the ASAs are recorded as revenue in the accompanying Condensed Consolidated Statements of Comprehensive Income and were approximately $68.9 million and $65.9 million for the three months ended June 30, 2024 and 2023, respectively.

Operating Expenses

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Personnel costs increased by $12.9 million, of which acquisitions contributed approximately $4.6 million to the increase.

Compared to the same period in 2023, facility costs, direct costs, professional services costs, technology costs, depreciation and amortization costs, corporate allocated costs, travel and entertainment costs, bad debt costs, and marketing costs increased by approximately $1.7 million, $1.6 million, $1.1 million, $0.8 million, $0.6 million, $0.6 million, $0.5 million, $0.2 million, and $0.2 million, respectively.

Operating expenses as a percentage of revenue increased slightly to 71.3% for the three months ended March 31, 2024 from 71.2% of revenue for the prior year quarter.

Compared to the same period in 2023, direct costs, technology costs, professional services costs, travel and entertainment costs, corporate allocated costs, facility costs, depreciation and amortization costs, and employee gifts and activities increased by approximately $2.6 million, $1.4 million, $0.8 million, $0.6 million, $0.4 million, $0.4 million, $0.2 million, and $0.1 million, respectively.

Other discretionary costs, net increased by approximately $1.5 million.

Operating expenses as a percentage of revenue increased slightly to 85.0% for the three months ended June 30, 2024 from 83.7% of revenue for the prior year quarter.

Six months ended June 30, 2024 compared to June 30, 2023

Revenue for the six months ended June 30, 2024 grew by 7.5% to $681.9 million from $634.0 million during the same period in 2023.

Same-unit revenue grew by $26.2 million, or 4.1%, across almost all service lines, primarily driven by those units that provide government healthcare compliance business consulting, which increased by $13.0 million, the units that provide traditional accounting and tax-related services, which increased $9.0 million, and by those units that provide project-oriented advisory services, which increased by approximately $4.2 million .The impact of acquired businesses contributed a total of $21.6 million, or 3%, of Financial Services practice group's revenue for the six months ended June 30, 2024.

Fees earned under the ASAs, as described above, were approximatel y $156.8 million and $150.7 million f or the six months ended June 30, 2024 and 2023, respectively.

Operating Expenses

Operating expenses increased by $40.5 million, or 8.3%, as compared to the same period last year.

Personnel costs increased by $27.0 million, of which acquisitions contributed approximately $11.6 million to the increase.

Compared to the same period in 2023, direct costs, technology costs, facility costs, professional services costs, travel and entertainment costs, corporate allocated costs, depreciation and amortization costs, bad debt, and marketing costs increased by approximately $4.2 million, $2.2 million, $2.1 million, $1.9 million, $1.2 million, $1 million, $0.8 million, $0.3 million, and $0.3 million respectively.

Other discretionary cost s, net increased by approximately $1.5 million.

Operating expense as a percentage of revenue increased to 77.5% during the six months ended June 30, 2024 from 77.0% of revenue during the same period in 2023.

Benefits and Insurance Services

Three Months Ended March 31,

Three Months Ended June 30,

(Amounts in thousands, except percentages)

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Gross margin percent 14.6 % 18.2 %

Three months ended March 31, 2024 compared to March 31, 2023

The Benefits and Insurance Services practice group revenue increased by $8.4 million, or 8.3%, to $108.4 million during the three months ended March 31, 2024 compared to $100.1 million for the same period in 2023.

Same-unit revenue grew by $7.6 million, or 7.6%, across almost all of the major service lines, primarily driven by a $4.5 million increase in the employee benefit and retirement benefit services lines, a $2.6 million increase in the property and casualty services, and a $0.7 million increase in the payroll-related services, partially offset by an approximately $0.2 million decrease from other project-based services.

Six Months Ended June 30,

(Amounts in thousands, except percentages)

Same-unit $ 204,121 $ 195,892 $ 8,229 4.2 %

Acquired businesses 1,706 — 1,706

Total revenue $ 205,827 $ 195,892 $ 9,935 5.1 %

Operating expenses 166,880 155,297 11,583 7.5 %

Gross margin/ Operating income $ 38,947 $ 40,595 $ (1,648) (4.1) %

Total other income, net 87 329 (242) (4.1) %

Income before income tax expenses 39,034 40,924 (1,890) (4.6) %

Gross margin percent 18.9 % 20.7 %

Three months ended June 30, 2024 compared to June 30, 2023

The Benefits and Insurance Services practice group revenue increased by $1.6 million, or 1.6%, to $97.4 million during the three months ended June 30, 2024 compared to $95.8 million for the same period in 2023.

Same-unit revenue grew by $0.6 million, or 0.7%, primarily driven by a $3.2 million increase in the employee benefit and retirement benefit services lines, and a $0.5 million i ncrease in the payroll-related services, partially offset by a $2.2 million decrease in property and casualty services.

During the three months ended June 30, 2024, property and casualty service line experienced the departure of a small group of producers and support staff and a loss of clients served by this group, which contributed to the $2.2 million decrease in revenue generated by the property and casualty services.

Operating Expenses

Operating expenses increased by $4.9 million, or 6.2%, when compared to the same period last year.

Personnel costs increased by $3.9 million, of which acquisitions contributed approximately $0.5 million, primarily due to the impact of annual merit increases as well as investment in producers.

Compared to the same period in 2023, professional services costs, corporate allocated costs, technology costs, direct costs, travel and entertainment cost, and facility costs increased by approximately $0.3 million, $0.2 million, $0.2 million, $0.1 million, $0.1 million, and $0.1 million, respectively, and was partially offset by $0.2 million lower bad debt expense as compared to the same period in 2023.

In addition, other miscellaneous discretionary costs, net decreased by $0.1 million.

Operating expenses as a percentage of revenue increased slightly to 77.2% for the quarter ended March 31, 2024 from 76.9% of revenue for the same period in 2023.

Compared to the same period in 2023, technology costs and bad debt costs increased by approximate ly $0.4 million and $0.3 million, respectively, and was partially offset by $0.1 million lower travel and entertainment costs as compared to the same period in 2023.

Operating expenses as a percentage of revenue increased to 85.4% for the quarter ended June 30, 2024 from 81.8% of revenue for the same period in 2023, primarily due to decrease in revenue generated from the property and casualty services.

Six months ended June 30, 2024 compared to June 30, 2023

The Benefits and Insurance Services practice group revenue increased by $9.9 million, or 5.1%, to $205.8 million, during the six months ended June 30, 2024 compared to $195.9 million for the same period in 2023.

Same-unit revenue grew by $8.2 million, or 4.2%, across almost all of the major service lines, primarily driven b y a $7.7 million inc rease in employee benefit and retirement benefit services lines, a $1.2 million i ncrease in payroll related services, and a $0.5 million increase in the property and casualty services, partially offset by an approximately $1.0 million decrease in other project based services.

Operating Expenses

Operating expenses increased by $11.6 million, or 7.5%, when compared to the same period last year.

Personnel cost increased by $9.9 million primarily due to timing of annual merit increases, bonus accrual, as well as investment in producers.

Compared to the same period in 2023, technology costs, direct costs, bad debt costs, as well as facility costs increased by approximately $0.6 million, $0.3 million, $0.2 million, and $0.2 million, respectively.

Operating expense as a percentage of revenue slightly increased to 81.1% during the six months ended June 30, 2024 from 79.3% of revenue for the same period in 2023.

National Practices

Three Months Ended March 31,

Three Months Ended June 30,

(Amounts in thousands, except percentages)

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Gross margin / Operating income $ 1,332 $ 1,189 $ 143 12.0 %

Total other (expense) income, net (4) 1 (5) N/M

Income before income tax expense 1,328 1,190 138 11.6 %

Gross margin percent 10.0 % 10.1 %

Three months ended March 31, 2024 compared with March 31, 2023

Six Months Ended June 30,

(Amounts in thousands, except percentages)

Same-unit revenue $ 26,619 $ 23,200 $ 3,419 14.7 %

Operating expenses 23,961 21,128 2,833 13.4 %

Gross margin / Operating income $ 2,658 $ 2,072 $ 586 28.3 %

Total other (expense) income, net (4) 1 (5) N/M

Income before income tax expenses 2,654 2,073 581 28.0 %

Gross margin percent 10.0 % 8.9 %

Three and six months ended June 30, 2024 compared with June 30, 2023

Revenue and Operating Expenses

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Revenues from this single client accounted for approximately 75% of the National Practice group’s revenue.

the three months ended March 31, 2024, revenue increased by $1.8 million, or 15.6%, while operating expenses increased by $1.4 million, or 12.8%.

During the three and six months ended June 30, 2024, revenue increased by $1.6 million, or 13.9%, and $3.4 million, or 14.7%, respectively, while operating expenses increased by $1.5 million, or 14.1%, and $2.8 million, or 13.4%, respectively.

Corporate and Other

Corporate and Other are operating expenses that are not directly allocated to the individual business units.

These expenses primarily consist of certain health care costs, gains or losses attributable to assets held in our non-qualified deferred compensation plan, stock-based compensation, consolidation and integration charges, certain professional fees, certain advertising costs and other various expenses.

Three Months Ended March 31,

These expenses primarily consist of certain health care costs, gains or losses attributable to assets held in our deferred compensation plan, stock-based compensation, consolidation and integration charges, certain professional fees, certain advertising costs and other various expenses.

Three Months Ended June 30,

(Amounts in thousands, except percentages)

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Operating loss (30,338) (27,416) (2,922) 10.7 %

Total other income, net 4,783 1,040 3,743 359.9 %

Total other expense, net (3,568) (502) (3,066) 610.8 %

Loss before income tax expense (33,906) (27,918) (5,988) 21.4 %

Three months ended March 31, 2024 compared to March 31, 2023

Total operating expenses increased by $6.3 million during the three months ended March 31, 2024, as compared to the same period in 2023.

The non-qualified deferred compensation plan increased operating expenses by $8.6 million for the three months ended March 31, 2024 and by $4.8 million during the same period in 2023.

Excluding the non-qualified deferred compensation expenses, operating expenses increased by $2.5 million during the three months ended March 31, 2024, as compared to the same period in 2023.

The increase was primarily driven by higher personnel costs.

Total corporate general and administrative expenses increased by $3.1 million, or 20.0%, during the three months ended March 31, 2024, as compared to the same period in 2023.

The non-qualified deferred compensation plan increased corporate general and administrative expenses by $1.1 million for the three months ended March 31, 2024 and by $0.6 million during the same period in 2023.

Excluding the non-qualified deferred compensation expenses, corporate general and administrative expense increased by approximately $2.7 million.

Total other income, net increased by $3.7 million during the three months ended March 31, 2024, as compared to the same period in 2023.

For the three months ended March 31, 2024, total other income, net includes a net gain of $9.6 million associated with the non-qualified deferred compensation plan.

For the same period in 2023, total other income, net includes a net gain of $5.4 million associated with the non-qualified deferred compensation plan.

Excluding the impact of the non-qualified deferred compensation plan, total other income, net would have been $4.9 million of expense in 2024 and $4.4 million of expense in 2023, a net change of $0.5 million primarily attributed to $0.9 million higher interest expense in 2024 as compared to 2023, offset by $0.4 million decrease in expenses driven by $0.2 million lower net changes in the fair value of contingent consideration related to prior acquisitions.

Six Months Ended June 30,

(Amounts in thousands, except percentages)

Operating expenses $ 23,642 $ 20,685 2,957 14.3 %

Corporate general and administrative expenses 40,761 31,391 9,370 29.8 %

Operating loss (64,403) (52,076) (12,327) 23.7 %

Total other income, net 1,215 538 677 126 %

Loss before income tax expenses (63,188) (51,538) (11,650) 22.6 %

Three months ended June 30, 2024 compared to June 30, 2023

Total operating expenses decreased by $3.3 million during the three months ended June 30, 2024, as compared to the same period in 2023.

The deferred compensation plan increased operating expenses by $2.3 million for the three months ended June 30, 2024 and by $5.1 million during the same period in 2023.

Excluding the deferred compensation expenses, operating expenses decreased by $0.5 million during the three months ended June 30, 2024, as compared to the same period in 2023.

The decrease was primarily driven by lower marketing as well as facility related costs.

Total corporate general and administrative expenses increased by $6.3 million, or 39.6%, during the three months ended June 30, 2024, as compared to the same period in 2023.

The deferred compensation plan increased corporate general and administrative expenses by $0.3 million for the three months ended June 30, 2024 and by $0.6 million during the same period in 2023.

Excluding the deferred compensation expenses, corporate general and administrative expense increased by approximately $6.6 million.

The increase in G&A expenses was partially offset by $0.7 million lower personnel costs and $0.1 million lower facility related costs.

G&A expense for the three months ended June 30, 2024 included approximately $0.1 million non-recurring transaction and integration costs associated with the acquisitions completed in 2024, and G&A expense for the three months ended June 30, 2023 included approximately $0.3 million non-recurring transaction and integration costs associated with the Somerset acquisition.

Total other expense, net increased by $3.1 million during the three months ended June 30, 2024, as compared to the same period in 2023.

For the three months ended June 30, 2024, total other expense, net includes a net gain of $2.6 million associated with the deferred compensation plan.

For the same period in 2023, total other expense, net includes a net gain of $5.7 million associated with the deferred compensation plan.

Excluding the impact of the deferred compensation plan, total other expense, net would have been $6.2 million in 2024 and $6.2 million in 2023, relatively unchanged.

Six months ended June 30, 2024 compared to June 30, 2023

Total operating expenses increased by $3.0 million, or 14.3%, during the six months ended June 30, 2024, as compared to the same period in 2023.

The deferred compensation plan increased operating expenses by $10.9 million for the six months ended June 30, 2024, and by $9.9 million during the same period in 2023.

Excluding the deferred compensation expenses, operating expense increase by approximately $2.0 million during the six months ended June 30, 2024 , primarily driven by higher personnel related costs, as compared to the same period in 2023.

Total G&A expenses increased by $9.4 million, or 29.8%, during the six months ended June 30, 2024, as compared to the same period in 2023.

The deferred compensation plan increased G&A expenses by $1.4 million for the six months ended June 30, 2024, and by $1.3 million during the same period in 2023.

Excluding the deferred compensation expenses, G&A expense increased by approximately $9.3 million during the six months ended June 30, 2024, compared to the same period in 2023.

The increase in G&A expenses was primarily driven by $7.8 million higher legal and other professional services costs largely associated with the announced Transaction, $0.4 million higher travel and entertainment costs, $0.3 million higher technology costs, $0.3 million higher depreciation costs, and $1.0 million higher other discretionary spending to support the business growth.

The increase in G&A expenses was partially offset by $0.5 million lower personnel costs and $0.1 million lower facility related costs.

In addition, G&A expense for the six months ended June 30, 2024 included a $0.6 million non-recurring transaction and integration costs related to the acquisitions completed in 2024.

G&A expense for the six months ended June 30, 2023 included a $1.5 million non-recurring transaction and integration costs related to the Somerset acquisition.

Total other income, net increased by $0.7 million during the six months ended June 30, 2024, as compared to the same period in 2023.

Total other income, net for the six months ended June 30, 2024 includes a net gain of $12.2 million associated with the deferred compensation plan.

For the same period in 2023, total other income, net includes a net gain of $11.1 million associated with the deferred compensation plan.

Excluding the impact of the deferred compensation plan, total other income, net decreased by $0.4 million, primarily due to $1.2 million higher interest expense due to higher average outstanding balance and interest rates during 2024 as compared to 2023, offset by $0.8 million lower net changes in the fair value of contingent consideration related to prior acquisitions.

Our principal sources of liquidity are cash generated from operating activities and financing activities.

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Upon completion of the seasonal accounting and tax services period, cash provided by operations during the remaining three quarters of the fiscal year substantially exceeds the use of cash in the first quarter of the fiscal year.

Accounts receivable balances increase in response to the first three months' revenue generated by the Financial Services practice group.

Accounts receivable balances increase in response to the first six months' revenue generated by the Financial Services practice group.

A significant amount of this revenue is billed and collected in subsequent quarters.

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We provide DSO data because such data is commonly used as a performance measure by analysts and investors and as a measure of our ability to collect on receivables in a timely manner.

DSO was 101 days and 94 days at March 31, 2024 and 2023.

Trailing-twelve-month DSO, including the impact of acquisitions, was 95 days and 94 days at June 30, 2024 and 2023, respectively.

DSO at December 31, 2023 was 78 days.

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For additional details, refer to the accompanying Condensed Consolidated Statements of Cash Flows.

Three Months Ended March 31,

Six Months Ended June 30,

(Amounts in thousands)

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

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

Net cash used in investing activities (33,247) (65,617)

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)

Operating Activities - Cash used in operating activities was $63.7 million during the three months ended March 31, 2024, primarily consisted of working capital use of $155.9 million, which was offset by net income of $76.9 million and certain non-cash items, such as depreciation and amortization expense of $9.5 million, deferred income tax of $2.1 million, and stock-based compensation expense of $2.6 million.

Cash used in operating activities was $44.5 million during the three months ended March 31, 2023 and primarily consisted of working capital use of $133.9 million, which was offset by net income of $73.2 million and certain non-cash items, such as depreciation and amortization expense of $8.6 million, deferred income tax of $2.6 million, and stock-based compensation expense of $3.8 million.

Investing Activities - Cash used in investing activities during the three months ended March 31, 2024 was $28.7 million and consisted primarily of $21.3 million used for business acquisitions, $5.1 million in capital expenditures, and $2.2 million in other investing activities primarily related to acquistion related working capital adjustment payments and notes receivable.

Operating Activities - Cash provided by operating activities was $24.4 million during the six months ended June 30, 2024, primarily consisted of working capital use of $101.5 million, which was offset by net income of $96.7 million and certain non-cash items, such as depreciation and amortization expense of $19.0 million, deferred income tax of $3.1 million, and stock-based compensation expense of $5.0 million.

Cash provided by operating activities was $29.7 million during the six months ended June 30, 2023 and primarily consisted of net income of $100.0 million and certain non-cash items, such as depreciation and amortization expense of $17.8 million, deferred income tax of $4.6 million, and stock-based compensation expense of $6.6 million.

The cash inflow was offset by working capital use of $101.6 million during the six months ended June 30, 2023.

Investing Activities - Cash used in investing activities during the six months ended June 30, 2024 was $33.2 million and consisted primarily of $22.5 million used for business acquisitions, $7.0 million in capital expenditures, and $3.8 million in other investing activities primarily related to acquistion related working capital adjustment payments and notes receivable.

The net cash flow related to funds held for clients and other activities were immaterial.

Cash used in investing activities during the three months ended March 31, 2023 was $45.9 million and consisted primarily of $39.1 million used for business acquisitions, $3.6 million in capital expenditures, and $3.9 million in other investing activities primarily related to working capital payments and notes receivable.

The use of cash was offset by $0.6 million net cash inflow related to funds held for clients and other activities.

Cash used in investing activities during the three months ended June 30, 2023 was $65.6 million and consisted primarily of $48.6 million used for business acquisitions, $11.7 million in capital expenditures, and $9.0 million in other investing activities primarily related to working capital payments and notes receivable.

During the six months ended June 30, 2023, the use of cash was offset by $3.7 million net cash inflow related to funds held for clients and other activities.

The balances in funds held for clients and client fund obligations can fluctuate with the timing of cash receipts and the related cash payments.

The nature of these accounts is further described in Note 1, Basis of Presentation and Significant Accounting Policies, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Financing Activities - Cash provided by financing activities during the three months ended March 31, 2024 was $71.2 million and primarily consisted of $125.4 million in net proceeds from the credit facility, partially offset by $11.2 million cash used in share repurchases for tax withholding purposes, a $11.9 million net decrease in client fund obligations and $31.1 million in contingent consideration payments related to prior acquisitions.

Cash provided by financing activities during the three months ended March 31, 2023 was $61.8 million and primarily consisted of $138.0 million in net proceeds from the credit facility and $3.6 million proceeds from exercise of stock options, partially offset by $28.0 million in share repurchases, a $23.3 million net decrease in client fund obligations and $28.6 million in contingent consideration payments related to prior acquisitions.

Financing Activities - Cash used in financing activities during the six months ended June 30, 2024 was $11.9 million and primarily consisted of $68.6 million in net proceeds from the credit facility, partially offset by $11.2 million cash used in share repurchases for tax withholding purposes, a $28.3 million net decrease in client fund obligations and $41.0 million in contingent consideration payments related to prior acquisitions.

Cash provided by financing activities during the six months ended June 30, 2023 was $21.8 million and primarily consisted of $144.9 million in net proceeds from the credit facility and $4.3 million proceeds from exercise of stock options, partially offset by $57.0 million in share repurchases, a $40.4 million net decrease in client fund obligations and $30.0 million in contingent consideration payments related to prior acquisitions.

CAPITAL RESOURCES

Credit Facility - At March 31, 2024, we had $437.8 million outstanding under the 2022 credit facility as well as $3.2 million outstanding letters of credit.

Available funds under the 2022 credit facility, based on the terms of the commitment, were approximately $147.9 million at March 31, 2024.

The weighted average interest rate under the 2022 credit facility was 5.23% during the three months ended March 31, 2024, compared to 4.54% for the same period in 2023.

Credit Facility - At June 30, 2024, we had $381.0 million outstanding under the 2022 credit facility as well as $3.2 million outstanding letters of credit.

Available funds under the 2022 credit facility, based on the terms of the commitment, were approximately $209.8 million at June 30, 2024.

The weighted average interest rate under the 2022 credit facility was 5.41% during the six months ended June 30, 2024, compared to 4.94% for the same period in 2023.

The 2022 credit facility allows for the allocation of funds for future strategic initiatives, including acquisitions and the repurchase of our common stock, subject to the terms and conditions of the 2022 credit facility.

Debt Covenant Compliance - Under the 2022 credit facility, we are required to meet certain financial covenants with respect to (i) total leverage ratio and (ii) minimum interest charge coverage ratio.

We are in compliance with our financial covenants as of March 31, 2024.

We are in compliance with our financial covenants as of June 30, 2024.

Our ability to service our debt and to fund future strategic initiatives will depend upon our ability to generate cash in the future.

For further discussion regarding our 2022 credit facility and debt, refer to Note 4, Debt and Financing Arrangements, to the accompanying unaudited condensed consolidated financial statements.

For further discussion regarding our 2022 credit facility and

debt, refer to Note 4, Debt and Financing Arrangements, to the accompanying unaudited condensed consolidated financial statements.

Use of Capital - Our first priority for use of capital is to make strategic acquisitions.

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During the three months ended March 31, 2024, we completed two acquisitions for $21.3 million in cash.

We also repurchased 0.2 million shares of our common stock at a total cost of approximately $11.2 million during the three months ended March 31, 2024.

During the six months ended June 30, 2024, we completed three acquisitions for $22.5 million in cash.

We also repurchased 0.2 million shares of our common stock at a total cost of approximately $11.2 million during the six months ended June 30, 2024.

Cash Requirements - Cash requirements for the remainder of 2024 and beyond will include acquisitions, interest payments on debt, seasonal working capital requirements, contingent purchase price payments for previous acquisitions, share repurchases, income tax payments, and capital expenditures.

We believe that cash provided by operations, as well as available funds under our 2022 credit facility will be sufficient to meet cash requirements for the remainder of 2024 and beyond.

In addition, the Company has obtained committed financing to, among other things, fund the cash portion of the purchase price of the announced acquisition of Marcum 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.

Refer to Note 12.

Subsequent Events, to the accompanying unaudited condensed consolidated financial statements for further discussion of the announced acquisition.

OFF-BALANCE SHEET ARRANGEMENTS

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The accompanying unaudited condensed consolidated financial statements do not reflect the operations or accounts of variable interest entities as the impact is not material to the financial condition, results of operations, or cash flows of CBIZ.

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.

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 June 30, 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.

We have various agreements under which we may be obligated to indemnify the other party with respect to certain matters.

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Historically, we have not made any payments under these agreements that have been material individually or in the aggregate.

As of March 31, 2024, we are not aware of any material obligations arising under indemnification agreements that would require payment.

As of June 30, 2024, we are not aware of any material obligations arising under indemnification agreements that would require payment.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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there is volatility in our stock price.

With respect to the pending Transaction as described in Note 12.

Subsequent Events, to the accompanying unaudited condensed consolidated financial statements, such risks and uncertainties include, but are not limited to:

the ability of the parties to consummate the Transaction in a timely manner or at all;

satisfaction of the conditions precedent to consummation of the Transaction, including the ability to secure regulatory approvals in a timely manner or at all, and the approval by Marcum's partners and the approval by the Company’s stockholders;

the possibility of litigation related to the Transaction and the effects thereof;

the possibility that anticipated benefits and/or synergies of the Transaction will not be achieved in a timely manner or at all;

the possibility that the costs of the Transaction and/or liabilities assumed will be more significant than anticipated;

the possibility that integration will prove more costly and/or time consuming than anticipated;

the possibility that the Transaction could disrupt ongoing plans and operations of the parties or their respective relationships with clients, other business partners and employees;

the possibility that the financing will not be obtained as anticipated and the effects of the increased leverage of the Company following the Transaction;

and other risks described in under Item 1A.

Risk Factors of this Quarterly Report on Form 10-Q.

Such forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties.

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Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023.

Except as required by the federal securities laws, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

Except as required by the federal securities laws, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You are advised, however, to consult any further disclosures we make on related subjects in our filings with the SEC, such as quarterly, periodic and annual reports.

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 2. Management’s Discussion and Analysis