CBIZ, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures - Management has evaluated the effectiveness of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report. This evaluation (“Controls Evaluation”) was done with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Disclosure Controls are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure Controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Limitations on the Effectiveness of Controls - Management, including the Company’s CEO and CFO, does not expect that its Disclosure Controls or its internal control over financial reporting (“Internal Controls”) will prevent all errors and all fraud. Although our Disclosure Controls are designed to provide reasonable assurance of achieving their objective, a control system, no matter how well conceived and operated, can provide only reasonable, but not absolute, assurance that the objectives of a control system are met. Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of a control. A design of a control system is also based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. Conclusions - Based upon the Controls Evaluation, our CEO and CFO have concluded that as of the end of the period covered by this report, our Disclosure Controls are effective at the reasonable assurance level described above. Management’s Report on Internal Control Over Financial Reporting - Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision of management, including our CEO and CFO, we conducted an evaluation of our internal control over financial reporting based on the framework provided in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2024. 39 Table of Contents Management has excluded from the scope of its assessment of the effectiveness of internal control over financial reporting as of December 31, 2024 the operations and related assets of the following acquisitions completed in 2024: Acquisitions Date of Acquisition Erickson, Brown & Kloster, LLC February 1, 2024 CompuData, Inc. March 1, 2024 Educational & Institutional Insurance Administrators, Inc. June 1, 2024 Hoover Financial Advisors, Inc. October 1, 2024 Marcum LLP November 1, 2024 The aggregated total assets and revenue from the above acquisitions were $233.2 million and $137.6 million, respectively, of our respective consolidated total assets and total revenue as of and for the year ended December 31, 2024, respectively. Refer to Note 2, Business Combinations, for detailed disclosure of the acquisitions completed in 2024. Changes in Internal Control Over Financial Reporting - Except as discussed below, there has been no change in our internal controls over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. We are currently in the process of integrating the aforementioned acquisitions', control processes and information systems into our systems and control environment. We believe that we have taken the necessary steps to monitor and maintain appropriate internal controls over financial reporting during this integration. Our independent auditor, KPMG LLP, an independent registered public accounting firm, has issued an audit report on the effectiveness of our internal control over financial reporting which appears in Item 8 of this Annual Report. ITEM 9B. OTHER INFORMATION. During the quarter period ended December 31, 2024, none of the Company's directors or officers adopted or terminated a "Rule 10B5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement", as each term is defined in Item 408 of Regulation S-K. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The information relating to executive officers and key employees required by this item is included in Part I under the caption “Information about our Executive Officers and Key Employees” above. The following information with respect to this item not included herein appearing in our Definitive Proxy Statement for the 2025 Annual Stockholders’ Meeting to be filed with the SEC no later than 120 days after the end of CBIZ’s fiscal year, is incorporated herein by reference: • Information appearing under the heading "Proposal No. 1 – Election of Directors"; • Information appearing under the heading " Directors Meetings and Committees of the Board of Directors" regarding identification of the Audit Committee and Audit Committee financial experts; and • Information appearing under the heading "Delinquent Section 16(a) Reports" (if applicable). We have adopted a Code of Professional Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our Code of Professional Conduct and Ethics is available on the investor information page of our website, located at https://www.cbiz.com , and in print to any stockholder who requests them. Any waiver or amendment to the code will be posted on our website. 40 Table of Contents We have an insider trading policy governing the purchase, sale and other dispositions of CBIZ’s securities that applies to all personnel of CBIZ and its subsidiaries, including directors, officers and employees and other covered persons, as well as CBIZ itself. We believe that our insider trading policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, as well as applicable listing standards. A copy of CBIZ’s insider trading policy is filed as Exhibit 19.1 to this Annual Report. ITEM 11. EXECUTIVE COMPENSATION. Information with respect to this item is contained in our Definitive Proxy Statement for the 2025 Annual Stockholders’ Meeting to be filed with the SEC no later than 120 days after the end of our fiscal year, in the sections entitled “ Compensation Discussion and Analysis,” “Compensation Risk Assessment,” “Summary Compensation Table,” “Pay Ratio Disclosure,” “Pay Vs. Performance Disclosure,” “2024 Grants of Plan-Based Awards,” “ Outstanding Equity Awards At 2024 Fiscal Year-End,” “Option Exercises and Stock Vested in 2024,” “2024 Non-Qualified Deferred Compensation,” “ Potential Payments Upon Termination or Change in Control,” “ Director Compensation,” “2024 Director Compensation Table,” “Compensation and Human Capital Committee Report,” and information appearing under the heading “Directors Meetings and Committees of the Board of Directors" regarding the Compensation and Human Capital Committee, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Information with respect to this item is contained in our Definitive Proxy Statement for the 2025 Annual Stockholders’ Meeting to be filed with the SEC no later than 120 days after the end of our fiscal year, in the sections entitled “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management,” and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Information with respect to this item is contained in our Definitive Proxy Statement for the 2025 Annual Stockholders’ Meeting to be filed with the SEC no later than 120 days after the end of our fiscal year, in the sections entitled “Certain Relationships and Related Transactions” and “Director Independence,” and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Our independent registered public accounting firm is KPMG LLP , Cleveland, OH , Auditor Firm ID: 185 . Information with respect to this item is contained in our Definitive Proxy Statement for the 2025 Annual Stockholders’ Meeting to be filed with the SEC no later than 120 days after the end of our fiscal year, in the section entitled “Auditor Fees,” and is incorporated herein by reference. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) The following documents are filed as part of this Annual Report or incorporated by reference: 1. Financial Statements. As to financial statements and supplementary information, reference is made to “Index to Financial Statements” on page F-1 of this Annual Report. 2. Exhibits. The following documents are filed as exhibits to this Annual Report pursuant to Item 601 of Regulation S-K. Since its incorporation, CBIZ has operated under various names including: Republic Environmental Systems, Inc.; International Alliance Services, Inc.; Century Business Services, Inc.; and CBIZ, Inc. Exhibits listed below refer to these names collectively as the “Company”. 41 Table of Contents Exhibit No. Description 2.1 Purchase Agreement, dated January 6, 2022, among CBIZ, Inc., CBIZ Acquisition 42, LLC, Marks Paneth LLP and all of the individuals who are equity partners of Marks Paneth (filed as Exhibit 2.1 to the Company’s Report on Form 8-K, File No. 001-32961, dated January 10, 2022, and incorporated herein by reference). 2. 2 Agreement and Plan of Merger, dated July 30, 2024, among the Company, Marcum LLP, Marcum Advisory Group LLC, PMMS LLC, and Marcum Partners SPV LLC (filed as Exhibit 2.1 to the Company's Report on Form 8-K, File No. 001-32961, dated July 31, 2024, and incorporated herein by reference). 3.1 Amended and Restated Certificate of Incorporation of the Company, dated August 7, 2000 (filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-8, File No. 333-197284, dated May 24, 2019, and incorporated herein by reference). 3.2 Certificate of Amendment of the Certificate of Incorporation of the Company, effective August 1, 2005 (filed as Exhibit 3.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, File No. 000-25890, dated March 16, 2006, and incorporated herein by reference). 3.3 Amended and Restated Bylaws of the Company, dated July 31, 2000 (filed as Exhibit 3.3 to the Company’s Registration Statement on Form S-8, File No. 333-197284, dated May 24, 2019, and incorporated herein by reference). 3.4 Amendment to Amended and Restated Bylaws of the Company dated November 1, 2007 (filed as Exhibit 3.1 to the Company’s Report on Form 8-K, File No. 001-32961, dated November 1, 2007, and incorporated herein by reference). 4. 1 Form of Stock Certificate of Common Stock of the Company (filed as Exhibit 4.1 to the Company’s Annual Report Form 10-K for the year ended December 31, 1998, File No. 000-25890, dated March 4, 1999, and incorporated herein by reference). 4.2 Description of the Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed as Exhibit 4.3 to the Company's Annual Report Form 10-K for the year ended December 31, 2023, File No. 001-32961, dated February 23, 2024, and incorporated herein by reference). 10.1 † 2014 Stock Incentive Plan (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8, File No. 333-197284, dated July 7, 2014, and incorporated herein by reference). 10. 2 † 2019 CBIZ, Inc. Omnibus Incentive Plan (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-8, File No. 333-197284, dated May 24, 2019, and incorporated herein by reference). 10. 3 † Amendment No. 1 to the 2019 CBIZ, Inc. Omnibus Incentive Plan (filed as Exhibit 99.1 to the Company's Report on Form 8-K, File No. 001-32961, dated May 16, 2023, and incorporated herein by reference). 10.4 † Employee Stock Investment Plan (filed as Exhibit 4.4 to the Company’s Registration Statement on Form S-8, File No. 000-333-62148, dated June 1, 2001, and incorporated herein by reference). 10. 5 † Employment Agreement by and between the Company and Jerome P. Grisko, Jr., dated September 1, 2016 (filed as Exhibit 10.1 to the Company’s Report on Form 8-K, File No. 001-32961, dated September 8, 2016, and incorporated herein by reference). 10. 6 † Amended and Restated Employment Agreement by and between the Company and Ware H. Grove, dated March 30, 2017 (filed as Exhibit 10.1 to the Company’s Report on Form 8-K, File No. 001-32961, dated April 4, 2017, and incorporated herein by reference). 10. 7 † Employment Agreement by and between the Company and Brad S. Lakhia, dated November 27, 2024 (filed as Exhibit 10.1 to the Company’s Report on Form 8-K, File No. 001-32961, dated December 3, 2024, and incorporated herein by reference). 10. 8 Loan Agreement dated as of August 16, 2018 by and among CBIZ Benefits and Insurance Services, Inc. and The Huntington Bank (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, File No. 001-32961, on November 1, 2018, and incorporated herein by reference). 10. 9 Amended and Restated Credit Agreement, dated November 1, 2024, by and among the Company, CBIZ Operations, Inc., Bank of America, N.A., as administrative agent, and the other financial institutions party thereto (filed as Exhibit 10.1 to the Company's Report on Form 8-K, File No. 001-32961, on November 1, 2024, and incorporated herein by reference). 42 Table of Contents 10. 10 First Amendment to Loan Agreement, dated August 8, 2019, by and among CBIZ Benefit and Insurance Services, Inc. and the Huntington National Bank (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, File No. 001-32961, on November 1, 2019, and incorporated herein by reference). 10.11 Second Amendment to Loan Agreement, dated August 6, 2020, by and among CBIZ Benefit and Insurance Services, Inc. and the Huntington National Bank (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, File No. 001-32961, on November 1, 2020, and incorporated herein by reference). 10.12 Third Amendment to Loan Agreement, dated August 5, 2021, by and among CBIZ Benefit and Insurance Services, Inc. and the Huntington National Bank (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, File No. 001-32961, on October 29, 2021, and incorporated herein by reference). 10.13 Fourth Amendment to Loan Agreement, dated August 1, 2022, by and among CBIZ Benefit and Insurance Services, Inc. and the Huntington National Bank (filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 2022, File No. 001-32961, dated February 24, 2023, and incorporated herein by reference). 10.14 Fifth Amendment to Loan Agreement, dated August 3, 2023, by and among CBIZ Benefit and Insurance Services, Inc. and the Huntington National Bank (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, File No. 001-32961, on October 26, 2023, and incorporated herein by reference). 10.15 Sixth Amendment to Loan Agreement, dated August 1, 2024, by and among CBIZ Benefit and Insurance Services, Inc. and the Huntington National Bank (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, File No. 001-32961, on August 1, 2024, and incorporated herein by reference). 10.16 † Form of CBIZ Restricted Share Unit Agreement (filed as Exhibit 10.16 to the Company's Annual Report Form 10-K for the year ended December 31, 2023, File No. 001-32961, dated February 23, 2024, and incorporated herein by reference). 10.17† Form of CBIZ Performance Share Agreement (filed as Exhibit 10.17 to the Company's Annual Report Form 10-K for the year ended December 31, 2023, File No. 001-32961, dated February 23, 2024, and incorporated herein by reference). 19.1* CBIZ, Inc. Insider Trading Policy 21.1* List of Subsidiaries of CBIZ, Inc. 23.1* Consent of KPMG LLP 24* Powers of attorney (included on the signature page hereto). 31.1* Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1** Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2** Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 97.1 † CBIZ, Inc. Compensation Recoupment Policy (filed as Exhibit 97.1 to the Company's Annual Report Form 10-K for the year ended December 31, 2023, File No. 001-32961, dated February 23, 2024, and incorporated herein by reference). 101.INS XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document* 101.SCH Inline XBRL Taxonomy Extension Schema Document* 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document* 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document* 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document* 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments)* ______________________________________________________ * Indicates documents filed herewith. ** Indicates documents furnished herewith. 43 Table of Contents † Management contract or compensatory plan contract or arrangement filed pursuant to Item 601 of Regulation S-K. ITEM 16. FORM 10-K SUMMARY. None 44 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. CBIZ, INC. (REGISTRANT) By /s/ WARE H. GROVE Ware H. Grove Chief Financial Officer February 28, 2025 KNOW ALL MEN AND WOMEN BY THESE PRESENTS that each person whose signature appears below on this Annual Report hereby constitutes and appoints Jerome P. Grisko, Jr. and Ware H. Grove, and each of them, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution for him and her and his and her name, place and stead, in all capacities (until revoked in writing), to sign any and all amendments to this Annual Report of CBIZ, Inc. and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary fully to all intents and purposes as he might or could do in person, thereby ratifying and confirming all that each attorney-in-fact and agent, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. 45 Table of Contents Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated above. Signature Title Date /s/ JEROME P. GRISKO, JR. President & Chief Executive Officer, Director (Principal Executive Officer) February 28, 2025 Jerome P. Grisko, Jr. /s/ WARE H. GROVE Chief Financial Officer (Principal Financial and Accounting Officer) February 28, 2025 Ware H. Grove /s/ RICK L. BURDICK Chairman February 28, 2025 Rick L. Burdick /s/ MICHAEL H. DE GROOTE Director February 28, 2025 Michael H. DeGroote /s/ GINA D. FRANCE Director February 28, 2025 Gina D. France /s/ TODD J. SLOTKIN Director February 28, 2025 Todd J. Slotkin /s/ A. HAAG SHERMAN Director February 28, 2025 A.Haag Sherman /s/ RICHARD T. MARABITO Director February 28, 2025 Richard T. Marabito /s/ BENAREE PRATT WILEY Director February 28, 2025 Benaree Pratt Wiley /s/ RODNEY A. YOUNG Director February 28, 2025 Rodney A. Young /s/ KATHY A. RAFFA Director February 28, 2025 Kathy A. Raffa 46 Table of Contents CBIZ, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets as of December 31, 202 4 and 202 3 F- 4 Consolidated Statements of Comprehensive Income for the years ended December 31, 202 4 , 202 3 and 202 2 F- 6 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 202 4 , 202 3 and 202 2 F- 7 Consolidated Statements of Cash Flows for the years ended December 31, 202 4 , 202 3 and 202 2 F- 8 Notes to the Consolidated Financial Statements F- 9 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors CBIZ, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of CBIZ, Inc. and subsidiaries (the Company) as of December 31, 2024 and December 31, 2023, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and December 31, 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company acquired Erickson, Brown & Kloster, LLC, CompuData, Inc., Educational & Institutional Insurance Administrator, Inc.’s EIIA Higher Education Benefit Trust, Hoover Financial Advisors, Inc., and Marcum LLP during 2024, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, Erickson, Brown & Kloster, LLC, CompuData, Inc., Educational & Institutional Insurance Administrator, Inc.’s EIIA Higher Education Benefit Trust, Hoover Financial Advisors, Inc., and Marcum LLP’s internal control over financial reporting associated with total assets of $233.2 million and total revenues of $137.6 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2024. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Erickson, Brown & Kloster, LLC, CompuData, Inc., Educational & Institutional Insurance Administrator, Inc.’s EIIA Higher Education Benefit Trust, Hoover Financial Advisors, Inc., and Marcum LLP. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the F-2 Table of Contents company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Acquisition date fair value of client list intangible asset As discussed in Note 2 to the consolidated financial statements, on November 1, 2024, the Company completed the acquisition of Marcum LLP for an aggregate purchase price of approximately $1,997.8 million. The Company applied the acquisition method of accounting and recognized assets acquired and liabilities assumed at their fair value as of the date of acquisition, with the excess purchase consideration recorded to goodwill. As a result of the transaction, the Company recorded a client list intangible asset at a preliminary fair value of $474.0 million valued using the excess earnings method. We identified the evaluation of the valuation of the client list intangible asset as a critical audit matter. A high degree of subjective auditor judgment was required to evaluate certain assumptions used to estimate the acquisition-date fair value of the client list intangible asset. We performed a sensitivity analysis to determine which assumptions used by management most significantly impacted the fair value of the client list intangible asset, and identified the revenue growth rates, discount rate, and client attrition rate as the key assumptions as changes in these assumptions could have had a significant impact on the acquisition-date fair value of the intangible asset. Additionally, evaluating the discount rate and the customer attrition rate required the involvement of valuation professionals with specialized skills and knowledge. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process to estimate the acquisition-date fair value of the client list intangible asset. This included controls over the determination of the revenue growth rates, customer attrition rate, and discount rate assumptions used in the Company’s model. We evaluated the revenue growth rates by comparing them to the historical financial results of the acquired company, historical financial results and forecasted revenue trends of certain peer companies, and relevant industry data. We evaluated the Company’s customer attrition rate assumption by comparing it to historical attrition rates used in comparable acquisitions completed by the Company and the acquiree. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in: • evaluating the discount rate by comparing it to (1) the transaction’s internal rate of return, and (2) a market participant discount rate independently developed using publicly available market data for comparable companies • evaluating the customer attrition rate by comparing it to the attrition rates implied by Marcum’s historical client revenue data and to attrition rates implied by similar transactions in the Company’s industry. /s/ KPMG LLP We have served as the Company’s auditor since 1996. Cleveland, Ohio February 28, 2025 F-3 Table of Contents CBIZ, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2024 AND 2023 (In thousands, except per share data) 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 13,826 $ 8,090 Restricted cash 38,661 30,362 Accounts receivable, net 534,858 380,152 Income tax receivable 4,051 — Other current assets 68,477 34,895 Current assets before funds held for clients 659,873 453,499 Funds held for clients 175,853 159,186 Total current assets 835,726 612,685 Non-current assets: Property and equipment, net 88,163 57,012 Goodwill and other intangible assets, net 2,945,470 1,008,604 Assets of deferred compensation plan 167,170 143,499 Right-of-use asset 393,512 211,024 Other non-current assets 40,842 10,768 Total non-current assets 3,635,157 1,430,907 Total assets $ 4,470,883 $ 2,043,592 LIABILITIES Current liabilities: Accounts payable $ 90,646 $ 82,831 Income taxes payable — 2,097 Accrued personnel costs 172,759 133,593 Contingent purchase price liability 61,164 66,287 Lease liability 60,549 36,283 Current portion of Term Loan 70,000 — Current portion debt issuance costs, Term Loan ( 3,823 ) — Total short-term debt 66,177 — Other current liabilities 78,579 30,937 Current liabilities before client fund obligations 529,874 352,028 Client fund obligations 175,928 159,893 Total current liabilities 705,802 511,921 Non-current liabilities: Revolver Facility 20,900 312,400 Debt issuance costs, Revolver ( 7,160 ) ( 1,574 ) Long-term portion, Term Loan 1,330,000 — Long-term portion debt issuance costs, Term Loan ( 9,985 ) — Total long-term debt 1,333,755 310,826 Income taxes payable 2,193 1,984 Deferred income taxes, net 10,880 29,287 Deferred compensation plan obligations 167,170 143,499 Contingent purchase price liability 35,803 48,659 Lease liability 372,586 203,905 Other non-current liabilities 62,711 1,893 Total non-current liabilities 1,985,098 740,053 Total liabilities 2,690,900 1,251,974 F-4 Table of Contents 2024 2023 STOCKHOLDER EQUITY Common stock, par value $ 0.01 per share; shares authorized 250,000 ; shares issued 137,945 and 137,387 ; shares outstanding 50,198 and 49,814 $ 1,380 $ 1,374 Additional paid-in capital 1,791,863 832,475 Retained earnings 896,122 855,084 Treasury stock, 87,747 and 87,573 shares ( 910,601 ) ( 899,093 ) Accumulated other comprehensive income 1,219 1,778 Total stockholders’ equity 1,779,983 791,618 Total liabilities and stockholders’ equity $ 4,470,883 $ 2,043,592 See the accompanying notes to the consolidated financial statements F-5 Table of Contents CBIZ, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2024, 2023 AND 2022 (In thousands, except per share data) 2024 2023 2022 Revenue $ 1,813,472 $ 1,591,194 $ 1,411,979 Operating expenses 1,631,003 1,367,990 1,188,612 Gross margin 182,469 223,204 223,367 Corporate general and administrative expenses 108,753 57,965 55,023 Operating income 73,716 165,239 168,344 Other income (expense): Interest expense ( 34,379 ) ( 20,131 ) ( 8,039 ) Gain on sale of operations, net 4,932 176 413 Other income (expense), net 13,538 21,019 ( 19,243 ) Total other income (expense), net ( 15,909 ) 1,064 ( 26,869 ) Income before income tax expense 57,807 166,303 141,475 Income tax expense 16,769 45,335 36,121 Net income 41,038 120,968 105,354 Earnings per share: Basic $ 0.78 $ 2.42 $ 2.05 Diluted $ 0.78 $ 2.39 $ 2.01 Basic weighted average common shares outstanding 52,375 49,989 51,502 Diluted weighted average common shares outstanding 52,661 50,557 52,388 Comprehensive income: Net income $ 41,038 $ 120,968 $ 105,354 Other comprehensive income (loss): Net unrealized gain (loss) on available-for-sale securities, net of income tax expense (benefit) of $ 182 , $ 403 and $( 520 ) 457 1,013 ( 1,391 ) Net unrealized (loss) gain on interest rate swaps, net of income tax (benefit) expense of $( 287 ), $( 952 ) and $ 1,965 ( 989 ) ( 2,821 ) 5,986 Foreign currency translation ( 27 ) ( 18 ) ( 24 ) Total other comprehensive (loss) income ( 559 ) ( 1,826 ) 4,571 Total comprehensive income $ 40,479 $ 119,142 $ 109,925 See the accompanying notes to the consolidated financial statements F-6 Table of Contents CBIZ, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY YEARS ENDED DECEMBER 31, 2024, 2023 AND 2022 (In thousands) Issued Common Shares Treasury Shares Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive (Loss) Income Totals December 31, 2021 135,187 83,149 $ 1,352 $ 770,117 $ 628,762 $ ( 694,716 ) $ ( 967 ) $ 704,548 Net income — — — — 105,354 — — 105,354 Other comprehensive income — — — — — — 4,571 4,571 Share repurchases — 2,778 — — — ( 122,773 ) — ( 122,773 ) Indirect repurchase of shares for minimum tax withholding — 188 — — — ( 7,289 ) — ( 7,289 ) Restricted stock units and awards 120 — 1 ( 1 ) — — — — Performance share units 211 — 2 ( 2 ) — — — — Stock options exercised 670 — 7 10,028 — — — 10,035 Share-based compensation — — — 14,689 — — — 14,689 Business acquisitions 107 — 1 4,316 — — — 4,317 December 31, 2022 136,295 86,115 1,363 799,147 734,116 ( 824,778 ) 3,604 713,452 Net income — — — — 120,968 — — 120,968 Other comprehensive loss — — — — — — ( 1,826 ) ( 1,826 ) Share repurchases — 1,285 — — — ( 65,142 ) — ( 65,142 ) Indirect repurchase of shares for minimum tax withholding — 173 — — — ( 8,448 ) — ( 8,448 ) Restricted stock units and awards 153 — 2 ( 2 ) — — — — Performance share units 244 — 2 ( 2 ) — — — — Stock options exercised 453 — 5 8,759 — — — 8,764 Share-based compensation — — — 12,286 — — — 12,286 Business acquisitions 242 — 2 11,733 — — — 11,735 Excise tax on share repurchases — — — 554 — ( 725 ) — ( 171 ) December 31, 2023 137,387 87,573 1,374 832,475 855,084 ( 899,093 ) 1,778 791,618 Net income — — — — 41,038 — — 41,038 Other comprehensive loss — — — — — — ( 559 ) ( 559 ) Indirect repurchase of shares for minimum tax withholding — 174 — — — ( 11,508 ) — ( 11,508 ) Restricted stock units and awards 126 — 1 ( 1 ) — — — — Performance share units 273 3 ( 3 ) — Share-based compensation — — — 13,836 — — — 13,836 Business acquisitions 159 — 2 945,556 — — — 945,558 December 31, 2024 137,945 87,747 $ 1,380 $ 1,791,863 $ 896,122 $ ( 910,601 ) $ 1,219 $ 1,779,983 See the accompanying notes to the consolidated financial statements F-7 Table of Contents CBIZ, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2024, 2023 AND 2022 (In thousands) 2024 2023 2022 Cash flows from operating activities: Net income $ 41,038 $ 120,968 $ 105,354 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of operations, net of tax ( 4,932 ) ( 176 ) ( 413 ) Depreciation and amortization expense 48,060 36,269 32,895 Bad debt expense, net of recoveries 3,792 1,551 1,173 Adjustment to contingent earnout liability, net 6,993 2,743 2,435 Deferred income taxes ( 8,621 ) 11,273 13,877 Stock-based compensation expense 13,836 12,286 14,689 Other, net 130 ( 2,365 ) ( 1,835 ) Changes in assets and liabilities, net of acquisitions and divestitures: Accounts receivable, net 48,218 ( 36,093 ) ( 61,106 ) Other assets 2,809 ( 6,626 ) ( 11,855 ) Accounts payable ( 18,846 ) 2,210 14,363 Income taxes payable ( 7,544 ) ( 5,918 ) ( 5,578 ) Accrued personnel costs ( 5,830 ) 2,711 24,009 Other liabilities 4,589 14,674 ( 1,876 ) Net cash provided by operating activities 123,692 153,507 126,132 Cash flows from investing activities: Business acquisitions and purchases of client lists, net of cash acquired ( 1,087,521 ) ( 53,110 ) ( 79,141 ) Purchases of client fund investments ( 23,210 ) ( 14,122 ) ( 19,771 ) Proceeds from the sales and maturities of client fund investments 21,923 18,465 12,400 Proceeds from sales of assets and divested operations 7,131 3,059 3,022 Additions to property and equipment ( 12,914 ) ( 23,052 ) ( 8,641 ) Other, net ( 34,692 ) ( 10,633 ) ( 6,987 ) Net cash used in investing activities ( 1,129,283 ) ( 79,393 ) ( 99,118 ) Cash flows from financing activities: Proceeds from Term Loan 1,400,000 — — Proceeds from Revolver 1,087,900 1,224,000 824,900 Payments on Revolver ( 1,379,400 ) ( 1,177,300 ) ( 714,500 ) Deferred financing costs ( 20,654 ) — ( 2,072 ) Payment for acquisition of treasury stock — ( 65,378 ) ( 122,538 ) Indirect repurchase of shares for minimum tax withholding ( 11,508 ) ( 8,448 ) ( 7,289 ) Changes in client funds obligations 16,035 ( 13,574 ) 15,352 Payment of contingent consideration of acquisitions and client lists ( 56,760 ) ( 45,175 ) ( 21,231 ) Proceeds from exercise of stock options — 8,764 10,035 Net cash provided by (used in) financing activities 1,035,613 ( 77,111 ) ( 17,343 ) Net increase (decrease) in cash, cash equivalents and restricted cash 30,022 ( 2,997 ) 9,671 Cash, cash equivalents and restricted cash at beginning of year 157,148 160,145 150,474 Cash, cash equivalents and restricted cash at end of year $ 187,170 $ 157,148 $ 160,145 Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets: Cash and cash equivalents $ 13,826 $ 8,090 $ 4,697 Restricted cash 38,661 30,362 28,487 Cash equivalents included in funds held for clients 134,683 118,696 126,961 Cash, cash equivalents and restricted cash at end of year $ 187,170 $ 157,148 $ 160,145 Supplemental disclosures of cash flow information: Cash paid for interest $ 25,686 $ 19,127 $ 7,421 Cash paid for income taxes, net of income tax refunds $ 37,537 $ 39,976 $ 27,815 See the accompanying notes to the consolidated financial statements F-8 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Selected Terms Used in Notes to Consolidated Financial Statements ASA - Administrative Service Agreement. ASC - Accounting Standards Codification. ASU - Accounting Standards Update. CPA firm - Certified Public Accounting firm. FASB - The Financial Accounting Standards Board. GAAP - United States Generally Accepted Accounting Principles. LIBOR - London Interbank Offered Rate. SOFR - The Secured Overnight Financing Rate. ROU - Right of Use. SEC - United States Securities & Exchange Commission. Marcum Acquisition - the Transaction Organization - CBIZ, Inc. is a leading provider of financial, insurance and advisory services to businesses throughout the United States and parts of Canada. Acting through its subsidiaries, it has been serving small and medium-sized businesses, as well as individuals, governmental entities, and not-for-profit enterprises. CBIZ, Inc. manages and reports its operations along three practice groups: Financial Services, Benefits and Insurance Services and National Practices. A further description of products and services offered by each of the practice groups is provided in Note 19, Segment Disclosures, to the accompanying consolidated financial statements. In July 2024, CBIZ announced the acquisition of Marcum LLP, representing the largest transaction in the Company’s history. That acquisition closed on November 1, 2024, augmenting the Company’s services across the three practice groups. Refer to Note 2. Business Combination for further discussion of the Marcum Acquisition (the "Transaction"). Effective April 1, 2023, CBIZ, Inc. formed Rockside Insurance Company, Inc. ("Rockside"), a captive insurance company licensed in Vermont. Rockside, wholly owned by CBIZ, Inc., provides insurance coverages for a portion of the retention deductibles from CBIZ, Inc.'s certain insurance programs with third party insurers. Basis of Presentation - The accompanying consolidated financial statements reflect the operations of CBIZ, Inc. and all of its wholly-owned subsidiaries (“CBIZ,” the “Company,” “we,” “us” or “our”), after elimination of all intercompany accounts and transactions. We have prepared the accompanying consolidated financial statements in accordance with United States Generally Accepted Accounting Principles ("GAAP") and pursuant to the rules and regulations of the United States Securities & Exchange Commission ("SEC"). We have determined that our relationship with certain CPA firms with whom we maintain ASAs qualify as variable interest entities ("VIEs"), and we are the primary beneficiary of such VIE. The accompanying consolidated financial statements do not reflect the results of operations or the financial position of the VIEs as the impact is not material to our consolidated financial condition, results of operations or cash flows. F-9 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Fees earned by us under the ASAs are recorded at net realizable value as a component of “Revenue” in the accompanying Consolidated Statements of Comprehensive Income and were approximately $ 306.5 million, $ 259.6 million and $ 235.4 million for the years ended December 31, 2024, 2023 and 2022, respectively, the majority of which was related to services rendered to privately-held clients. As of December 31, 2024, we have $ 22.2 million in notes receivable from CBIZ CPAs. Certain prior period amounts have been reclassified to conform to current year's presentation. Significant Accounting Policies - We consider the following policies to be beneficial in understanding the judgments that are involved in the preparation of our consolidated financial statements and the uncertainties that could impact our financial condition, results of operations and cash flows. Use of Estimates - The preparation of consolidated financial statements in conformity with GAAP and pursuant to the rules and regulations of the SEC requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management’s estimates and assumptions are derived from and are continually evaluated based upon available information, judgment and experience. Actual results may differ materially from these estimates. Revenue Recognition - We account for revenue in accordance with Topic 606, Revenue from Contracts with Customers. We recognize revenue based on the five-step model; (i) identify the contract with the customer; (ii) identify the performance obligation in the contract; (iii) determine the contract price; (iv) allocate the transaction price; and (v) recognize revenue as each performance obligation is satisfied. If we determine that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable contract are met. For further information on our various streams of revenue, refer to Note 3, Revenue, to the accompanying consolidated financial statements. Operating Expenses - Operating expenses represent costs of service and other costs incurred to operate our business units and are primarily comprised of personnel costs and occupancy related expenses. Personnel costs include (i) salaries and benefits; (ii) commissions paid to producers; (iii) incentive compensation; and (iv) share-based compensation. Incentive compensation costs and share-based compensation are estimated and accrued. The final determination of incentive compensation is made after year-end results are finalized. The largest components of occupancy costs are rent expense and utilities. Base rent expense is recognized over respective lease terms, while utilities and common area maintenance charges are recognized as incurred. Share-Based Compensation - The measurement of all share-based compensation arrangements is based on their respective grant date fair value. The grant date fair value of restricted stock awards and restricted stock units is based on the closing price of the underlying stock on the date of issuance. The grant date fair value of the performance share units is based on the closing price of the underlying stock on the date of issuance and recorded based on achievement of target performance metrics. The expense related to restricted stock awards and restricted stock units is recognized over the requisite service period which is generally three to four years . The expense related to performance share units is recorded over the performance period based on the fair value on the grant date and adjusted each reporting period for the achievement of the performance metrics, based on our best estimate using available information. Share-based compensation expense is recorded in the accompanying Consolidated Statements of Comprehensive Income as “Operating expenses” or “Corporate general and administrative expenses,” depending on where the respective individual’s compensation is recorded. For additional discussion regarding share-based awards, refer to Note 15, Employee Stock Plans, to the accompanying consolidated financial statements. Operating Leases - We determine if a contract is a lease at inception. We have leases for office space and facilities, automobiles, and certain information technology equipment. Certain of these leases include options to extend the lease and some include options to terminate the lease early. As an accounting policy election, we elected not to apply the recognition requirements to short term leases (a lease at commencement date that has a lease term of 12 months or less and does not contain a purchase option that we are reasonably certain to exercise). The ROU assets and lease liabilities are recognized as of the commencement date based on the present value of the lease payments over the lease term. The discount rate utilized for the measurement purpose is based on our secured F-10 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) fixed rate to borrow over a comparable term for the lease because the rate implicit in the lease is not determinable. The lease term may include the options to extend or terminate the lease when it is reasonably certain that we will exercise the applicable option. Related rent expense under such leases is recognized evenly throughout the term of the lease when the total lease commitment is a known amount, and recorded on an as incurred basis when future rent payment increases under the obligation are unknown due to rent escalations being tied to factors that are not currently measurable (such as increases in the consumer price index). Differences between rent expense recognized and the cash payments required under these leases are recorded as a component of “Lease liability” in the current and non-current liabilities sections of the accompanying Consolidated Balance Sheets. We may receive incentives to lease office facilities in certain areas. Such incentives are recorded as a change in lease payments and may require us to remeasure the lease liability to reflect the change in lease payments. Cash and Cash Equivalents - Cash and cash equivalents consist of cash on hand and investments with an original maturity of three months or less when purchased. Restricted Cash - Restricted cash consists of funds held by us in relation to our capital and investment advisory services as those funds are restricted in accordance with applicable Financial Industry Regulatory Authority regulations. Restricted cash also consists of funds on deposit from clients in connection with the pass-through of insurance premiums to the carrier with the related liability for these funds recorded in “Accounts payable” in the accompanying Consolidated Balance Sheets. Accounts Receivable and Allowance for Doubtful Accounts - Accounts receivable, less allowances for doubtful accounts, reflects the net realizable value of receivables and approximates fair value. Unbilled revenues are recorded at estimated net realizable value. Assessing the collectability of receivables (billed and unbilled) requires management judgment based on a combination of factors. When evaluating the adequacy of the allowance for doubtful accounts and the overall probability of collecting on receivables, we analyze historical experience, client credit-worthiness, the age of the trade receivable balances, current economic conditions that may affect a client’s ability to pay and current and projected economic trends and conditions at the balance sheet date. At December 31, 2024 and 2023, the allowance for doubtful accounts was $ 31.7 million and $ 25.6 million, respectively, in the accompanying Consolidated Balance Sheets. Funds Held for Clients and Client Fund Obligations - Services provided by our payroll operations include the preparation of payroll checks, federal, state, and local payroll tax returns, and flexible spending account administration. In relation to these services, as well as other similar service offerings, we collect funds from our clients’ accounts in advance of paying client obligations. These funds, collected before they are due, are segregated and invested in accordance with our investment policy, which requires all investments carry an investment grade rating at the time of initial investment. These investments, primarily consisting of corporate and municipal bonds and U.S. treasury bills, are classified as available-for-sale and are included in the “Funds held for clients” line item on the accompanying Consolidated Balance Sheets. The underlying obligation is recorded as “Client fund obligations” on the Consolidated Balance Sheets. The balances in these accounts fluctuate with the timing of cash receipts and the related cash payments and may vary significantly during the year based on the timing of client’s payroll periods. Other than certain federal and state regulations pertaining to flexible spending account administration, there are no regulatory or other contractual restrictions placed on these funds. Refer to Note 7, Financial Instruments, to the accompanying consolidated financial statements for further discussion of investments related to funds held for clients. Property and Equipment - Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are provided on a straight-line basis over the following estimated useful lives: Buildings 25 to 40 years Furniture and fixtures 5 to 10 years Capitalized software 3 to 5 years Equipment 3 to 7 years F-11 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful lives or the remaining respective lease term. The cost of software purchased or developed for internal use is capitalized and amortized using the straight-line method over an estimated useful life not to exceed five years . We periodically review long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. Under those circumstances, if the fair value were less than the carrying amount of the asset, we would recognize a loss for the difference. Goodwill and Other Intangible Assets - Goodwill represents the excess of the purchase price of the acquired businesses over the related fair value of the net assets acquired. At December 31, 2024, the carrying value of goodwill totaled $ 2.3 billion, compared to total assets of $ 4.5 billion and total stockholders’ equity of $ 1.8 billion. Intangible assets consist of identifiable intangibles other than goodwill. Identifiable intangible assets other than goodwill include client lists and non-compete agreements which require significant judgments in determining the fair value. We carry client lists and non-compete agreements at cost, less accumulated amortization, in the accompanying Consolidated Balance Sheets. Goodwill is reviewed for impairment annually during the fourth quarter or more frequently in the event of an impairment indicator. We are required to consider whether it is more likely than not (defined as a likelihood of more than 50%) that the fair value of each reporting unit has fallen below its carrying value, thus requiring us to perform an interim goodwill impairment test. Intangible assets with definite lives, such as client lists and non-compete agreements, are amortized using the straight-line method over their estimated useful lives (generally ranging from three to fifteen years ). We review these assets for impairment whenever events or changes in circumstances indicate an asset’s carrying value may not be recoverable. Recoverability is assessed based on a comparison of the undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value determined by a discounted cash flow analysis, market comparable method or a combination thereof as determined to be appropriate in the circumstances. The goodwill impairment test is performed at a reporting unit level. A reporting unit is an operating segment of a business or one level below an operating segment. At December 31, 2024, we had six reporting units carrying goodwill balances, of which one is a new reporting unit resulting from the Transaction. The new reporting unit was added to align the internal reporting structure with services provided by the three practice groups. As of December 31, 2024, the amount of goodwill assigned to this reporting unit is subject to change upon the finalization of the purchase price allocation. Refer to Note. 2 Business Combinations for detailed discussion of the Transaction. We may use either a qualitative or quantitative approach when testing a reporting unit’s goodwill for impairment. Under the qualitative assessment, we are not required to calculate the fair value of a reporting unit unless we determine that it is more likely than not that its fair value is less than its carrying amount. If under the quantitative assessment the fair value of a reporting unit is less than its carrying amount, then the amount of the impairment loss, if any, must be measured. Any such impairment charge would reduce earnings and could be material. After considering changes to assumptions used in our most recent quantitative testing for each reporting unit, including the capital market environment, economic and market conditions, industry competition and trends, our weighted average cost of capital, changes in management and key personnel, the price of our common stock, changes in our results of operations, the magnitude of the excess of fair value over the carrying amount of each reporting unit as determined in our most recent quantitative testing, and other factors, we concluded that it was more likely than not that the fair values of each of our reporting units exceeded their respective carrying values and, therefore, did not perform a quantitative impairment analysis. For further information regarding our goodwill balances, refer to Note 6, Goodwill and Other Intangible Assets, net, to the accompanying consolidated financial statements. Income Taxes - Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently payable and deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and operating losses and tax credit carryforwards. State income tax credits are accounted for using the flow-through method. F-12 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) A valuation allowance is provided when it is more-likely-than-not that all or some portion of a deferred tax asset will not be realized. We determine valuation allowances based on all available evidence. Such evidence includes historical results, the reversal of deferred tax liabilities, expectations of future consolidated and/or separate company profitability and the feasibility of tax-planning strategies. Determining valuation allowances includes significant judgment by management, and different judgments could yield different results. Accounting for uncertain tax positions requires a more-likely-than-not threshold for recognition in the consolidated financial statements. We recognize a tax benefit based on whether it is more-likely-than-not that a tax position will be sustained. We record a liability to the extent that a tax position taken or expected to be taken on a tax return exceeds the amount recognized in the consolidated financial statements. Business Combinations - We recognize and measure identifiable tangible and intangible assets acquired and liabilities assumed as of the acquisition date at fair value. Fair value measurements require extensive use of estimates and assumptions, including estimates of future cash flows to be generated by the acquired assets. The operating results of acquired businesses are included in our consolidated financial statements beginning on the date of acquisition. The purchase price is equivalent to the fair value of consideration transferred. Goodwill is recognized for the excess of purchase price over the net fair value of assets acquired and liabilities assumed. Contingent Purchase Price Liabilities - Contingent purchase price liabilities consisting of cash payments and common stock issuances resulting from our business acquisitions are recorded at fair value at the time of acquisition as “Contingent purchase price liability - current” and “Contingent purchase price liability - non-current” in the accompanying Consolidated Balance Sheets. We estimate the fair value of our contingent purchase price liabilities using a probability-weighted discounted cash flow model. We probability weight risk-adjusted estimates of future performance of acquired businesses, then calculate the contingent purchase price based on the estimates and discount them to present value representing management’s best estimate of fair value. The fair value of the contingent purchase price liabilities, which is considered a Level 3 unobservable input, is reassessed on a quarterly basis based on assumptions provided by practice group leaders and business unit controllers together with our corporate finance department. Any change in the fair value estimate, including the revaluation of common stock, is recorded in the earnings of that period. For the years ended December 31, 2024, 2023 and 2022, we recorded other expense of $ 7.0 million, $ 2.7 million and $ 2.4 million, respectively, related to net changes in the fair value of contingent consideration. Refer to Note 8, Fair Value Measurements, and Note 2, Business Combinations, for further discussion of our contingent purchase price liabilities and acquisitions. Interest Rate Derivative Instruments - We maintain interest rate swaps that are designated as cash flow hedges to manage the market risk from changes in interest rates on our floating-rate debt under our $ 2.0 billion unsecured credit facility, by and among CBIZ Operations, Inc., CBIZ, Inc. and Bank of America, N.A., as administrative agent and bank, and other participating banks. The designation of a derivative instrument as a hedge and its ability to meet the hedge accounting criteria determine how we reflect the change in fair value of the derivative instrument. A derivative qualifies for hedge accounting treatment if, at inception, it meets defined correlation and effectiveness criteria. These criteria require that the anticipated cash flows and/or changes in fair value of the hedging instrument substantially offset those of the position being hedged. We utilize derivative instruments to manage interest rate risk associated with our floating-rate debt under the credit facility. Interest rate swap contracts mitigate the risk associated with the underlying hedged item. If the contract is designated as a cash flow hedge, the mark-to-market gains or losses on the swap are deferred and included as a component of accumulated other comprehensive income, net of tax, to the extent effective, and reclassified to interest expense in the same period during which the hedged transaction affects earnings. For further discussion regarding derivative financial instruments, refer to Note 7, Financial Instruments, to the accompanying consolidated financial statements. Recent Accounting Pronouncements - The FASB ASC is the sole source of authoritative GAAP other than the SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an ASU to communicate changes to the FASB codification. We assess and review the impact of all ASUs. ASUs not listed below were F-13 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) reviewed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements. Accounting Standards Adopted in 2024 In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosure about significant segment expenses. We adopted ASU No. 2023-07 for the annual reporting period ending December 31, 2024, and disclosure of the significant segment expenses can be found in Note 19, Segment Disclosure, for the years ended December 31, 2024, 2023 and 2022. Accounting Standards Issued But Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about an entity's effective tax rate reconciliation as well as information on income tax paid. The guidance in this ASU is effective for public companies with annual periods beginning after December 15, 2024. We plan to adopt the guidance for the fiscal year ending December 31, 2025. We are currently evaluating the effect adoption of this ASU will have on our consolidated financial statements In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disaggregated disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements. The guidance in this ASU is effective for public companies with annual periods beginning after December 15, 2026, and interim periods within the annual period beginning after December 15, 2027. We plan to adopt the guidance for the fiscal year ending December 31, 2027. We are currently evaluating the effect of adopting this ASU will have on our consolidated financial statements. NOTE 2. BUSINESS COMBINATIONS Acquisition of Marcum LLP On November 1, 2024, the Company completed the acquisition of Marcum LLP (“Marcum”), an accounting and advisory services firm headquartered in New York City with offices in major markets throughout the United States, to expand the breadth and depth of the Company’s professional services portfolio in the U.S. Pursuant to the Agreement and Plan of Merger dated July 30, 2024 (the “Merger Agreement”), a wholly owned subsidiary of the Company (“Merger Sub”) merged with and into Marcum Advisory Group, a wholly owned subsidiary of Marcum ("MAG"), to which Marcum contributed substantially all of its non-attest business assets and liabilities, (the “Merger”), resulting in MAG surviving the Merger and becoming a wholly owned subsidiary of the Company. In a separate transaction, CBIZ CPAs P.C., with which the Company has an existing ASA, purchased from Marcum substantially all of Marcum’s attest business assets, subject to certain exclusions (the "Attest Purchase"). As noted in Note 1, Basis of Presentation and Significant Accounting Policies, the Company does not consolidate certain CPA firms with whom we maintain ASAs, including CBIZ CPAs P.C., therefore, the Merger solely is referred to herein as the “Transaction”. During the period from the acquisition date of Transaction through December 31, 2024, the Company's consolidated results of operations included $ 108.9 million of revenues and $ 57.1 million of operating losses, including $ 8.9 million of intangible assets amortization associated with the results of operations of Marcum. Summary of Consideration Transferred At closing, the purchase price for the purpose of the Merger consisted of an aggregate of $ 1,063.0 million of net cash consideration and $ 934.7 million of the Company’s common stock, which represents a fair value of 13.6 million shares issued as stock consideration. F-14 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Fair Value of Purchase Consideration Cash consideration (1) $ 1,063,037 Share consideration (2) 934,744 Total $ 1,997,781 (1) Reflects the amount of cash consideration, which is equal to the Cash Payment Amount of $ 1,142.4 million as defined in the Merger Agreement, adjusted for the assumed indebtedness as outlined in the Merger Agreement, consisting of contingent consideration expected to be paid within 18 months of close, earned bonuses for Marcum employees, certain specific deferred revenue balances, and adjustments for certain lease liabilities, plus Marcum's finance lease obligations settled by the Company at close. (2) Reflects the fair value of 13.6 million shares to be issued as Transaction consideration. As defined in the Merger Agreement, the total number of shares to be issued was calculated on November 1, 2024, using the Base Purchase Price of $ 2,247.7 million less the Cash Payment Amount, assumed liabilities expected to be paid subsequent to 18-months after the closing date, and an adjustment for net working capital and deposit balances divided by $ 76.84 , to arrive at 14.3 million shares. The total number of shares is fixed on November 1, 2024, the closing date of the Transaction. Of the 14.3 million shares, approximately 0.7 million shares represent the share-based compensation awards which are subject to continued service requirements and therefore are not included in Transaction consideration. The remaining 13.6 million shares constitute the share consideration and are included in Transaction consideration, of which approximately 3.1 million shares were delivered on January 2, 2025 and 0.3 million shares were delivered on February 3, 2025. The remaining 10.2 million shares will be delivered in 34 monthly installments starting on March 3, 2025. The estimated fair value of this deferred share consideration was estimated using a Monte Carlo simulation (“MC Simulation”). In the MC Simulation, the stock price is assumed to follow a Geometric Brownian Motion, using the following key assumptions: term of 3.1 years consistent with the issuance schedule outlined in the Merger Agreement, risk-free rate, stock price as of October 31, 2024, and volatility of 35 % based on the weekly historic volatility observed in the Company and guideline companies. The Company fully financed the Cash consideration for the Transaction by borrowing under its 2024 Credit Facilities, as described in Note 10, Debt and Financing Arrangements. The Company has applied the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”) and recognized assets acquired and liabilities assumed at their fair value as of the date of acquisition, with the excess purchase consideration recorded to goodwill. As the Company finalizes the estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (a period not to exceed 12 months from the acquisition date). The following table summarizes the preliminary acquisition date fair value of net tangible and intangible assets acquired, net of liabilities assumed from Marcum, with the excess recorded as goodwill (in thousands): F-15 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) On November 1, 2024 Fair Value Total consideration transferred $ 1,997,781 Asset acquired: Account receivable 170,139 Unbilled revenue 23,247 Other current assets 25,914 Property and equipment 31,292 Other intangible assets 490,000 Right-of- use asset 164,970 Deferred income taxes, net 3,427 Total identifiable asset acquired 908,989 Liabilities assumed: Account payable 25,370 Accrued personnel costs 44,650 Other current liabilities 27,267 Contingent purchase price assumed (current and non-current) 24,232 Lease liabilities (current and non-current) 172,792 Other non-current liabilities 61,967 Total liabilities assumed 356,278 Net asset acquired 552,711 Goodwill $ 1,445,070 The preliminary purchase price allocation is subject to further refinement and may require adjustments to arrive at the final purchase price allocation. The above fair values of assets acquired and liabilities assumed are preliminary and are based on the information that was available as of the reporting date. The final determination of the fair value of certain assets and liabilities will be completed as soon as the necessary information, such as final working capital adjustments, becomes available but no later than one year from the acquisition date. Goodwill Goodwill is calculated as the difference between the aggregated purchase price and the fair value of the net assets acquired. Goodwill represents the value of expected future earnings and cash flows, as well as the synergies created by the integration of the new businesses within our organization, including cross-selling opportunities expected with our Financial Services practice group and the Benefits and Insurance Services practice group, to help strengthen our existing service offerings and expand our market position, the enhanced expertise and experiences from the assembled workforce acquired, as well as operating efficiencies and cost savings. As of November 1, 2024, the amount of goodwill deductible for income tax purposes was approximately $ 379.5 million. The amount of goodwill deductible for tax purposes is expected to fluctuate as the share considerations are delivered to the sellers. As of November 1, 2024, we recognized $ 1,445.1 million goodwill of which $ 1,433.5 million was allocated to the Financial Services practice group and $ 11.6 million was allocated to the Benefit and Insurance Services practice group on a provisional basis. Identifiable Intangible Assets Acquired The following table summarizes key information underlying identifiable intangible assets related to the Transaction (in thousands): F-16 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Weighted Average Useful Life (in years) Fair Value Client lists 10.0 $ 474,000 Non-competition agreements 3.0 16,000 Unfavorable leaseholds, net 7.9 ( 7,822 ) Total $ 482,178 The preliminary estimate of the fair value of the identifiable intangible assets was determined using the methods described below. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement of the fair value hierarchy as defined in ASC 820, Fair Value Measurements (“ASC 820”). Intangible assets consist of acquired customer relationships and non-competition agreements. ◦ Client list intangible assets were valued using the excess earnings method. The excess earning method of valuation is an approach where the net earnings attributable to the asset being measured are isolated from other “contributory assets” over the intangible asset’s remaining economic life. ◦ Non-competition agreements intangible assets were valued using the discounted earnings method, specifically the with and without method. The with and without method of valuation is an approach that considers the hypothetical impact to the projected cash flows of the business if the intangible asset was not in place. ◦ Unfavorable leaseholds, net are valued using the discounted cash flow approach. The discounted cash flow approach method of valuation is an approach that compares the future contract rents of acquired leases with the projected market rents. If the lease terms are favorable compared to the market, the Company records an asset. If the lease terms are unfavorable as compared to the market, the Company records a liability. Deferred Income Taxes The preliminary purchase allocation includes net deferred tax assets of $ 3.4 million, primarily related to the deferred taxes established on the right-of-use asset and lease liabilities associated with the operating leases, deferred revenue liabilities, and deferred performance obligations. Pro Forma Financial Information The following table summarizes, on an unaudited pro forma basis, the condensed combined results of operations of the Company for the year ended December 31, 2024 and 2023, assuming the Transaction had occurred on January 1, 2023 (in thousands). For the year ended December 31, 2024 2023 Net Sales $ 2,790,091 $ 2,698,828 Net Income $ 111,015 $ 88,371 The foregoing unaudited pro forma amounts have been presented for informational purposes only and are not necessarily indicative of what CBIZ’s results of operations actually would have been had the Transaction been completed on January 1, 2023. In addition, the unaudited pro forma income statements do not intend to project the future operating results of the Company. The unaudited pro-forma information for all periods presented includes the following adjustments, where applicable, for business combination accounting effects resulting from the Transaction: i. additional amortization expense related to intangible assets acquired and net unfavorable leases, ii. additional salary and bonus for Marcum’s partners which have been recognized in equity historically iii. incremental interest expense as a result of Transaction financing and pay down of historical debt of Marcum and the Company F-17 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) iv. adjustment to conform Marcum's process of estimating unbilled revenue at net realizable value to the accounting policy utilized by the Company, v. incremental expense for the performance bonuses and the tail insurance policy as a result of the Transaction, vi. the related tax effects assuming that the Transaction occurred on January 1, 2023. Additionally, the pro forma adjustments also include acquisition related transaction costs of $ 28.7 million incurred by the Company. These expenses are included in Corporate general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income for the year ended December 31, 2024 and are reflected in pro forma earnings for the year ended December 31, 2023 in the table above. The majority of the operating results of Marcum are reported in the Financial Services Practice group and the remainder of the operating results are reported in the Benefit and Insurance Services practice group. Other Acquisitions During the years ended December 31, 2024 and 2023, in addition to the Transaction discussed above, we also completed the following immaterial acquisitions: • Effective February 1, 2024, we acquired all of the assets of Erickson, Brown & Kloster LLC ("EBK"). EBK, based in Colorado Springs, Colorado, is a provider of a full range of accounting, tax, and financial advisory services to clients in a wide array of industries. Operating results for EBK are reported in the Financial Services practice group. • Effective March 1, 2024, we acquired all the assets of CompuData, Inc ("CompuData"). CompuData, based in Philadelphia, Pennsylvania, is a provider of technology services and solutions, such as Cloud Hosting, ERP Solutions, IT Security and Managed IT Services. Operating results for CompuData are reported in the Financial Services practice group. • Effective June 1, 2024, we acquired all of the assets of Educational & Institutional Insurance Administrators, Inc ("EIIA"). EIIA, based in Chicago, Illinois, is a provider of private higher education specific insurance and risk management programs and services. Operating results for EIIA are reported in the Benefits and Insurance practice group. • Effective October 1, 2024, we acquired all of the assets of Hoover Financial Advisors, Inc ("Hoover"). Hoover, based in Indianapolis, Indiana, is a provider of financial planning advice for individuals, families, and small businesses. Operating results of Hoover are reported in the Benefits and Insurance Services practice group. • Effective January 1, 2023, we acquired all of the assets of Danenhauer and Danenhauer, Inc. ("Danenhauer and Danenhauer"). Danenhauer and Danenhauer, based in California, is a provider of forensic accounting, business valuation, expert witness testimony, and other services for businesses and individuals. Operating results for Danenhauer and Danenhauer are reported in the Financial Services practice group. ◦ Effective February 1, 2023, we acquired the non-attest assets of Somerset CPAs and Advisors ("Somerset"). Somerset, based in Indianapolis, Indiana, is a provider of a full range of accounting, tax, and financial advisory services to clients in a wide array of industries. Operating results for Somerset are reported in the Financial Services practice group. ◦ Effective June 1, 2023, we acquired all of the assets of Pivot Point Security ("PPS"). PPS, based in Hamilton, New Jersey, is a provider of cyber and information security, and compliance services for small and middle market businesses. Operating results for PPS are reported in the Financial Services practice group. ◦ Effective June 1, 2023, we acquired all of the assets of Ickovic and Co. PC ("Ickovic and Co."). Ickovic and Co., based in Denver, Colorado, is a provider of bespoke services and solutions for high-net-worth individuals, business owners and executives. Operating results for Ickovic and Co. are reported in the Financial Services practice group. ◦ Effective July 1, 2023, we acquired all of the assets of American Pension Advisors, Ltd. ("APA"). APA, based in Indianapolis, Indiana, is a provider of full-service retirement plan consulting and F-18 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) administration assisting more than 1,200 clients in the design, implementation, and administration of all types of retirement plans including 401(k), 403(b), 457(b), defined benefit and cash balance. Operating results for APA are reported in the Benefits and Insurance Services practice group. Total purchase price consideration for the acquisitions of EBK, CompuData, EIIA, and Hoover (together, the “Other 2024 Acquisitions”) was $ 42.2 million, of which $ 24.0 million was paid in cash, $ 2.4 million in our Common Stock, and $ 15.8 million in contingent purchase considerations. The Other 2024 Acquisitions added approximately $ 28.7 million incremental revenue in 2024. Total purchase price consideration for the acquisitions of Danenhauer and Danenhauer, Somerset, PPS, Ickovic and Co., and APA (together, the "2023 Acquisitions") was $ 90.0 million, of which $ 53.0 million was paid in cash, $ 4.8 million in our Common Stock, and $ 32.1 million in contingent purchase considerations. The 2023 Acquisitions added approximately $ 64.9 million in incremental revenue in 2023. Pro forma results of operations for both the Other 2024 Acquisitions and the 2023 Acquisitions are not provided due to limitations in retrospective application of estimates to historical financial information as well as the immateriality of such information as compared to our total revenue and net income for year ended December 31, 2024 and 2023, respectively. The following table summarizes the aggregated goodwill and intangible asset amounts resulting from the Other 2024 Acquisitions and the 2023 Acquisitions for the twelve months ended December 31, 2024 and 2023, respectively (in thousands): Twelve Months Ended December 31, 2024 2023 Financial Services Benefits & Insurance Financial Services Benefits & Insurance Goodwill $ 25,237 $ 2,345 $ 41,322 $ 3,932 Client list 10,514 2,644 33,196 2,053 Other intangibles — — 18 — Total $ 35,751 $ 4,989 $ 74,536 $ 5,985 Goodwill from the Other 2024 Acquisitions and 2023 Acquisitions is calculated as the difference between the aggregated purchase price and the fair value of the net assets acquired. Goodwill represents the value of expected future earnings and cash flows, as well as the synergies created by the integration of the new businesses within our organization, including cross-selling opportunities expected with our Financial Services practice group and the Benefits and Insurance Services practice group, to help strengthen our existing service offerings and expand our market position, the enhanced expertise and experiences from the assembled workforce acquired, as well as operating efficiencies and cost savings. Client lists generally have an expected life of 10 years, and other intangibles, primarily non-compete agreements, have an expected life of 3 years. Client lists and non-compete agreements are valued using a discounted cash flow technique based on management estimates of future cash flows from such assets. Other Disclosures The following table summarizes the changes in contingent purchase price consideration for previous acquisitions and contingent payments made for previous business acquisitions during the year ended December 31, 2024 and 2023, respectively (in thousands): 2024 2023 Net expense 6,994 2,743 Cash settlement paid 56,594 45,010 Shares issued (number) 126 140 F-19 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) NOTE 3. REVENUE The following tables disaggregate our revenue by source (in thousands): For the Year Ended December 31, 2024 Financial Services Benefits and Insurance Services National Practices Consolidated Accounting, tax, advisory and consulting $ 1,362,539 $ — $ — $ 1,362,539 Core Benefits and Insurance Services — 383,550 — 383,550 Non-core Benefits and Insurance Services — 17,498 — 17,498 Managed networking, hardware services — — 41,526 41,526 National Practices consulting — — 8,359 8,359 Total revenue $ 1,362,539 $ 401,048 $ 49,885 $ 1,813,472 For the Year Ended December 31, 2023 Financial Services Benefits and Insurance Services National Practices Consolidated Accounting, tax, advisory and consulting $ 1,160,686 $ — $ — $ 1,160,686 Core Benefits and Insurance Services — 365,848 — 365,848 Non-core Benefits and Insurance Services — 16,757 — 16,757 Managed networking, hardware services — — 36,984 36,984 National Practices consulting — — 10,919 10,919 Total revenue $ 1,160,686 $ 382,605 $ 47,903 $ 1,591,194 For the Year Ended December 31, 2022 Financial Services Benefits and Insurance Services National Practices Consolidated Accounting, tax, advisory and consulting $ 1,010,068 $ — $ — $ 1,010,068 Core Benefits and Insurance Services — 342,063 — 342,063 Non-core Benefits and Insurance Services — 15,944 — 15,944 Managed networking, hardware services — — 33,503 33,503 National Practices consulting — — 10,401 10,401 Total revenue $ 1,010,068 $ 358,007 $ 43,904 $ 1,411,979 Financial Services Revenue primarily consists of professional service fees derived from traditional accounting services, tax return preparation, administrative services, financial and risk advisory, consulting, valuation, and IT services. Clients are billed for these services based upon a fixed-fee, an hourly rate, or an outcome-based fee. Time related to the performance of all services is maintained in a time and billing system. Revenue for fixed-fee arrangements is recognized over time with the performance obligation measured in hours worked and anticipated realization. Anticipated realization is defined as the fixed fee divided by the product of the hours anticipated to complete a performance obligation and the standard billing rate. Anticipated realization rates are applied to hours charged to a contract when recognizing revenue. At the end of each reporting period, we evaluate the work performed to date to ensure that the amount of revenue recognized in each reporting period for the client arrangement is equal to the performance obligations met. Time and expense arrangement revenue is recognized over time with progress measured towards completion with value being transferred through our hourly fee arrangement at expected net realizable rates per hour, plus agreed-upon out-of-pocket expenses. The cumulative impact on any subsequent revision in the estimated realizable value of unbilled fees for a particular client project is reflected in the period in which the change becomes known. F-20 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Prior to recognizing revenue for outcome-based arrangement, we estimate the transaction price, including variable consideration that is subject to a constraint based on risks specific to the arrangement. We evaluate the estimate in each reporting period and recognize revenue to the extent it is probable that a significant reversal of revenue will not occur. Revenue is recognized when the constraint is lifted at a point in time when the value is determined and verified by a third party. Benefits and Insurance Services Benefits and Insurance Services provides brokerage and consulting along lines of service which include group health benefits consulting and brokerage, property and casualty brokerage, retirement plan advisory, payroll, human capital management, actuarial, life insurance and other related services. Revenue consists primarily of fee income for administering health and retirement plans and brokerage commissions. Revenue also includes investment income related to client payroll funds that are held in CBIZ accounts, as is industry practice. We pay commissions monthly and require the recipient of the commission to be employed as of the end of the month in which the commissions are earned (as opposed to at the time of actual payment). Failure to remain employed at the date the commission is payable results in the forfeiture of commissions that would otherwise be due. Therefore, we have determined that the requirement of continued employment is substantive and accordingly, do not consider the commissions to be incremental costs of obtaining the customer contract and consequently a contract acquisition cost is not recognized for those commissions. Revenue related to group health benefits consulting consists of (i) commissions, (ii) fee income which can be fixed or variable based on a price per participant and (iii) contingent revenue. • Commission revenue and fee income are recognized over the contract period as these services are provided to clients continuously throughout the term of the arrangement. Our customers benefit from each month of service on its own and although volume and the number of participants may differ month to month, our obligation to perform substantially remains the same. • Contingent revenue arrangements are related to carrier-based performance targets. Due to the uncertainty of the outcome and the probability that a change in estimate would result in a significant reversal of revenue, we have applied a constraint on recording contingent revenue. Revenue is recognized when the constraint has been lifted which is the earlier of written notification from a carrier that the target has been achieved or cash collection. Contingent revenue is not a significant revenue stream to our consolidated financial position or results of operations. Revenue related to property and casualty consists of (i) commissions and (ii) contingent revenue. • Commissions relating to agency billing arrangements (pursuant to which we bill the insured, collect the funds and forward the premium to the insurance carrier less our commission) and direct billing arrangements (pursuant to which the insurance carrier bills the insured directly and forwards the commission to us) are both recognized on the effective date of the policy. Commission revenue is reported net of reserves for estimated policy cancellations and terminations. The cancellation and termination reserve is based upon estimates and assumptions using historical cancellation and termination experience and other current factors to project future experience. • Contingent revenue arrangements related to carrier-based performance targets include claim loss experience and other factors. Due to the uncertainty of the outcome and the probability that a change in estimate would result in a significant reversal of revenue, we have applied a constraint on recording contingent revenue. Revenue is recognized when the constraint has been lifted which is the earlier of written notification from a carrier that the target has been achieved or cash collection. Contingent revenue is not a significant revenue stream to our consolidated financial position or results of operations. Revenue related to retirement plan services consist of advisory, third party administration and actuarial services. F-21 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) • Advisory revenue is either (i) based on the value of assets under management, as provided by a third party, multiplied by an agreed upon rate, (ii) fee based, or (iii) a combination of fixed fee and value of assets under management. Advisory services revenue, derived from the value of assets under management, is calculated monthly or quarterly based on the estimated value of assets under management, as it is earned over the duration of the reporting period and relates to performance obligations satisfied during that period. The variability related to the estimated asset values used to recognize revenue during the reporting period is resolved and the amount of related revenue recognized is adjusted when the actual value of assets under management is known. Fee based Advisory revenue is recognized over the contract period as these services are provided to clients continuously throughout the term of the arrangement. Our clients benefit from each month of service on its own, and although the volume of tasks may differ month to month, our obligation to perform substantially remains the same. • Third party administration revenue is recognized over the contract period as these services are provided to clients continuously throughout the term of the arrangement. Our clients benefit from each month of service on its own, and although the volume of tasks may differ month to month, our obligation to perform substantially remains the same. • Actuarial revenue is recognized over the contract period with performance measured in hours in relation to the expected total hours. Under certain defined benefit plan administration arrangements, we charge new clients an initial, non-refundable, set-up fee as part of a multi-year service agreement. Revenue and costs related to the set-up fees are deferred and recognized over the life of the contract or the expected customer relationship, whichever is longer. Revenue related to payroll processing consists of a (i) fixed fee or (ii) variable fee based on a price per employee or check processed. Revenue is recognized when the actual payroll processing occurs. Our customers benefit from each month of service on its own and although volume and the variability may differ month to month, our obligation to perform substantially remains the same. Non-core Benefits and Insurance Services consists of transactional businesses that tend to fluctuate. These include life insurance, talent and compensation services. National Practices Managed networking, hardware services revenue consists of installation, maintenance and repair of computer hardware. These services are charged to a single customer based on cost plus an agreed-upon markup percentage, which has existed since 1999. National Practices consulting revenue is based upon a fixed fee, an hourly rate, or outcome-based. Revenue for fixed fee and time and expense arrangements is recognized over the performance period based upon actual hours incurred, while revenue for outcome-based arrangements is recognized similar to the outcome-based arrangements in the Financial Services practice group. Transaction Price Allocated to Future Obligations - The revenue recognition standard requires the disclosure of the aggregate amount of transaction price allocated to performance obligations that have not yet been satisfied as of the reporting date. The guidance provides certain practical expedients that limit this requirement, including performance obligations that are part of a contract that is one year or less. Since the majority of our contracts are one year or less, we have applied this practical expedient related to quantifying remaining performance obligations. In regards to contracts with terms in excess of one year, certain contract periods related to our government healthcare consulting, group health and benefits consulting, and property and casualty insurance businesses have an original specified contract duration in excess of one year, however, the agreements provide CBIZ and the client with the right to cancel or terminate the contract with no substantial penalty. We have applied the provisions of Topic 606 and the FASB Transition Resource Group memo number 10-14, and note that the definition of contract duration does not extend beyond the goods and services already transferred for contracts that provide both the Company and the client with the right to cancel or terminate the contract with no substantial penalty. F-22 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) NOTE 4. ACCOUNTS RECEIVABLE, NET Accounts receivable, net balances at December 31, 2024 and 2023 were as follows (in thousands): 2024 2023 Trade accounts receivable $ 416,211 $ 309,640 Unbilled revenue, at net realizable value 150,362 96,110 Total accounts receivable 566,573 405,750 Allowance for doubtful accounts ( 31,715 ) ( 25,598 ) Accounts receivable, net $ 534,858 $ 380,152 Changes in the allowance for doubtful accounts on accounts receivable are as follows (in thousands): 2024 2023 2022 Balance at beginning of period $ ( 25,598 ) $ ( 20,801 ) $ ( 16,158 ) Provision ( 19,979 ) ( 13,681 ) ( 13,545 ) Charge-offs, net of recoveries 13,862 8,884 8,902 Balance at end of period $ ( 31,715 ) $ ( 25,598 ) $ ( 20,801 ) NOTE 5. PROPERTY AND EQUIPMENT, NET Property and equipment, net at December 31, 2024 and 2023 consisted of the following (in thousands): 2024 2023 Buildings and leasehold improvements $ 81,753 $ 58,537 Furniture and fixtures 44,192 36,039 Capitalized software 32,906 34,635 Equipment 45,365 39,398 Total property and equipment 204,216 168,609 Accumulated depreciation ( 116,053 ) ( 111,597 ) Property and equipment, net $ 88,163 $ 57,012 Depreciation expense for property and equipment was $ 15.3 million, $ 12.5 million and $ 11.2 million in 2024, 2023 and 2022, respectively. NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET A summary of changes in the carrying amount of goodwill by operating segment for the years ended December 31, 2024 and 2023 were as follows (in thousands): F-23 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Financial Services Benefits and Insurance Services National Practices Total Goodwill Gross $ 549,906 $ 320,125 $ 33,873 $ 903,904 Accumulated impairment ( 44,047 ) ( 7,733 ) ( 32,207 ) ( 83,987 ) Net at December 31, 2022 $ 505,859 $ 312,392 $ 1,666 $ 819,917 Additions 41,322 3,932 — 45,254 Divestitures and other adjustments 9 — — 9 Gross 591,237 324,057 33,873 949,167 Accumulated impairment ( 44,047 ) ( 7,733 ) ( 32,207 ) ( 83,987 ) Net at December 31, 2023 $ 547,190 $ 316,324 $ 1,666 $ 865,180 Additions 1,458,747 13,905 — 1,472,652 Divestitures and other adjustments ( 6,371 ) — — ( 6,371 ) Gross 2,043,613 337,962 33,873 2,415,448 Accumulated impairment ( 44,047 ) ( 7,733 ) ( 32,207 ) ( 83,987 ) Net at December 31, 2024 $ 1,999,566 $ 330,229 $ 1,666 $ 2,331,461 We review goodwill at the reporting unit level at least annually, as of November 1, for impairment. We had six reporting units at November 1, 2024. No goodwill impairment was recognized as a result of the annual evaluation. As a result of the Transaction, we recognized $ 1,445.1 million goodwill of which $ 1,433.5 million was allocated to the Financial Services practice group and $ 11.6 million was allocated to the Benefit and Insurance Services practice group on a provisional basis. The components of goodwill and other intangible assets, net at December 31, 2024 and 2023 were as follows (in thousands): 2024 2023 Goodwill $ 2,331,461 $ 865,180 Intangibles : Client lists 820,564 338,237 Other intangibles 32,481 11,481 Total intangibles 853,045 349,718 Total goodwill and other intangibles assets 3,184,506 1,214,898 Accumulated amortization: Client lists ( 227,943 ) ( 196,412 ) Other intangibles ( 11,093 ) ( 9,882 ) Total accumulated amortization ( 239,036 ) ( 206,294 ) Goodwill and other intangible assets, net $ 2,945,470 $ 1,008,604 Amortization expense for client lists and other intangible assets was $ 32.7 million, $ 23.8 million and $ 21.7 million in 2024, 2023 and 2022, respectively. The weighted-average useful lives of total intangible assets, client lists and other intangible assets were 9.1 years, 9.2 years and 6.3 years, respectively, as of December 31, 2024. Other intangible assets are amortized over periods ranging from 3 to 15 years. Based on the amount of intangible assets subject to amortization at December 31, 2024, the estimated amortization expense is $ 75.1 million for 2025, $ 73.1 million for 2026, $ 71.1 million for 2027, $ 64.6 million for 2028, $ 64.0 million for 2029, and $ 266.1 million thereafter. NOTE 7. FINANCIAL INSTRUMENTS The carrying amounts of our cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments and are classified as Level 1 in the fair value hierarchy. F-24 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) The carrying value of bank debt approximates fair value, as the interest rate on the bank debt is variable and approximates current market rates. As a result, the fair value measurement of our bank debt is classified as Level 2 in the fair value hierarchy. Concentrations of Credit Risk - Financial instruments that may subject us to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. We place our cash and cash equivalents with highly-rated financial institutions, limiting the amount of credit exposure with any one financial institution. Our client base consists of large numbers of geographically diverse customers dispersed throughout the United States; thus, concentration of credit risk with respect to accounts receivable is not significant. Available-For-Sale Debt Securities - Available-for-sale debt securities consist primarily of corporate and municipal bonds. The net par values of these securities total $ 41.3 million and $ 40.0 million at December 31, 2024 and 2023, respectively. The bonds have maturity dates or callable dates ranging from January 2025 through November 2027, and are included in “Funds held for clients — current” in the accompanying Consolidated Balance Sheets based on our intent and ability to sell these investments at any time under favorable conditions. At December 31, 2024 and December 31, 2023, unrealized losses on the securities were not material and have not been recognized as a credit loss because the bonds are investment grade quality and management is not required or does not intend to sell prior to an expected recovery in value. The bond issuers continue to make timely principal and interest payments. The following table summarizes our bond activity for the years ended December 31, 2024 and 2023 (in thousands): 2024 2023 Fair value at January 1 $ 39,459 $ 43,485 Purchases 23,210 14,122 Redemptions ( 500 ) ( 3,310 ) Maturities ( 21,423 ) ( 15,155 ) Change in bond premium ( 386 ) ( 1,099 ) Fair market value adjustment 639 1,416 Fair value at December 31 $ 40,999 $ 39,459 In addition to the available-for-sale securities discussed above, we also held other depository assets in the amount of $ 0.2 million and $ 1.0 million at December 31, 2024 and December 31, 2023, respectively. Those depository assets are classified as Level 1 in the fair value hierarchy. Interest Rate Swaps - We utilize interest rate swaps to manage interest rate risk exposure associated with our floating-rate debt under the 2024 Credit Facilities, or the forecasted acquisition of such liability. To mitigate counterparty credit risk, we only enter into contracts with selected major financial institutions with investment grade ratings and continually assess their creditworthiness. There are no credit risk-related contingent features in our interest rate swaps nor do the swaps contain provisions under which we would be required to post collateral. We do not purchase or hold any derivative instruments for trading or speculative purposes. The designation of a derivative instrument as a hedge and its ability to meet the hedge accounting criteria determine how we reflect the change in fair value of the derivative instrument. A derivative qualifies for hedge accounting treatment if, at inception, it meets defined correlation and effectiveness criteria. These criteria require that the anticipated cash flows and/or changes in fair value of the hedging instrument substantially offset those of the position being hedged. We had no fair value hedging instruments at December 31, 2024 or 2023. Our interest rate swaps are designated as cash flow hedges. Accordingly, the interest rate swaps are recorded as either an asset or liability in the accompanying Consolidated Balance Sheets at fair value. The mark-to-market gains or losses on the swaps are deferred and included as a component of accumulated other comprehensive income (“AOCI”), net of tax, to the extent the hedge is determined to be effective, and reclassified to interest expense in the same period during which the hedged transaction affects earnings. The interest rate swaps are assessed for effectiveness and continued F-25 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) qualification for hedge accounting on a quarterly basis. For the years ended December 31, 2024 and 2023, the interest rate swaps were deemed to be effective. CBIZ did not amend the interest rate swap agreements from under the 2024 Credit Facilities. The interest rate of the swaps are set to one-month term SOFR to align the swaps to term SOFR in the 2024 Credit Facilities. As of December 31, 2024, we have five interest rate swaps outstanding. Under the terms of the interest rate swaps, we pay interest at a fixed rate of interest plus applicable margin as stated in the amended agreements, and receive interest that varies with the one-month term SOFR. The following table summarizes our outstanding interest rate swaps and their classification in the accompanying Consolidated Balance Sheets at December 31, 2024 and 2023 (in thousands). Refer to Note 8, Fair Value Measurements, for additional disclosures regarding fair value measurements. December 31, 2024 Notional Amount Fixed Rate Expiration Fair Value Balance Sheet Location Interest rate swap $ 50,000 0.834 % 4/14/2025 $ 495 Other current asset Interest rate swap $ 30,000 1.186 % 12/14/2026 $ 1,604 Other non-current asset Interest rate swap $ 20,000 2.450 % 8/14/2027 $ 776 Other non-current asset Interest rate swap $ 25,000 3.669 % 4/14/2028 $ 243 Other non-current asset Interest rate swap $ 25,000 4.488 % 10/14/2028 $ ( 437 ) Other non-current liability December 31, 2023 Notional Amount Fixed Rate Expiration Fair Value Balance Sheet Location Interest rate swap $ 50,000 0.834 % 4/14/2025 $ 2,282 Other current asset Interest rate swap $ 30,000 1.186 % 12/14/2026 $ 2,125 Other non-current asset Interest rate swap $ 20,000 2.450 % 8/14/2027 $ 784 Other non-current asset Interest rate swap $ 25,000 3.669 % 4/14/2028 $ ( 129 ) Other non-current liability Interest rate swap $ 25,000 4.488 % 10/14/2028 $ ( 1,063 ) Other non-current liability During the next twelve months, the amount of the December 31, 2024, AOCI balance that will be reclassified to earnings is expected to be immaterial. The following table summarizes the effects of the interest rate swap on our accompanying Consolidated Statements of Comprehensive Income for the years ended December 31, 2024 and 2023 (in thousands): Gain recognized in AOCI, net of tax Gain reclassified from AOCI into expense Twelve Months Ended December 31, Twelve Months Ended December 31, Location 2024 2023 2024 2023 Interest rate swaps $ 2,396 $ 393 $ 4,513 $ 4,285 Interest expense NOTE 8. FAIR VALUE MEASUREMENTS FASB ASC Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy: • Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities F-26 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) • Level 2 — Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability • Level 3 — Unobservable inputs for the asset or liability We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As circumstances change, we will reassess the level in which the inputs are included in the fair value hierarchy. For the years ended December 31, 2024 and 2023, there were no transfers between the valuation hierarchy Levels 1, 2 and 3. The following table summarizes our assets and (liabilities) at December 31, 2024 and 2023 that are measured at fair value on a recurring basis subsequent to initial recognition and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (in thousands): Level December 31, 2024 December 31, 2023 Deferred compensation plan assets 1 167,170 143,499 Available-for-sale debt securities 1 40,999 39,459 Other depository assets 1 176 1,031 Deferred compensation plan liabilities 1 ( 167,170 ) ( 143,499 ) Interest rate swaps, net 2 2,681 3,999 Bank debt 2 ( 1,399,932 ) ( 310,826 ) Contingent purchase price liabilities 3 ( 96,967 ) ( 114,946 ) Contingent Purchase Price Liabilities - During the years ended December 31, 2024 and 2023, we recorded expense of $ 7.0 million and expense of $ 2.7 million, respectively, due to accretion, adjusting for expected results of acquired businesses and the revaluation of stock related to contingent payments. These changes are included in Other income (expense), net in the accompanying Consolidated Statements of Comprehensive Income. Refer to Note 2, Business Combinations, for further discussion of our acquisitions and contingent purchase price liabilities. The following table summarizes the change in fair value of our contingent purchase price liabilities identified as Level 3 for the years ended December 31, 2024 and 2023 (pre-tax basis, in thousands): Contingent Purchase Price Liabilities Beginning balance — December 31, 2022 $ ( 132,010 ) Additions from business acquisitions ( 32,142 ) Settlement of contingent purchase price payable 51,949 Change in fair value of contingency 62 Change in net present value of contingency ( 2,805 ) Balance — December 31, 2023 $ ( 114,946 ) Additions from business acquisitions ( 40,034 ) Settlement of contingent purchase price payable 65,007 Change in fair value of contingency ( 4,710 ) Change in net present value of contingency ( 2,284 ) Balance — December 31, 2024 $ ( 96,967 ) NOTE 9. INCOME TAXES For financial reporting purposes, income before income taxes includes the following components (in thousands): F-27 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) 2024 2023 2022 United States $ 57,521 $ 165,869 $ 141,288 Foreign (Canada) 286 434 187 Total $ 57,807 $ 166,303 $ 141,475 Income tax expense included in the accompanying Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022 was as follows (in thousands): 2024 2023 2022 Current: Federal $ 23,362 $ 29,835 $ 20,910 Foreign 76 116 50 State and local 8,164 10,298 7,299 Total 31,602 40,249 28,259 Deferred: Federal ( 10,920 ) 3,978 5,667 State and local ( 3,913 ) 1,108 2,195 Total ( 14,833 ) 5,086 7,862 Total income tax expense 16,769 45,335 36,121 The provision for income taxes attributable to income operations differed from the amount obtained by applying the federal statutory income tax rate to income before income taxes, as follows (in thousands, except percentages): 2024 2023 2022 Tax at U.S. federal statutory rates $ 12,139 $ 34,924 $ 29,714 State taxes (net of federal benefit) 3,182 10,576 9,019 Reserves for uncertain tax positions 209 ( 241 ) 337 Share-based compensation ( 3,907 ) ( 5,820 ) ( 6,832 ) Meals and entertainment 1,193 1,168 337 Non-deductible officers' compensation 3,762 5,485 2,507 Other, net 191 ( 757 ) 1,039 Provision for income taxes $ 16,769 $ 45,335 $ 36,121 Effective income tax rate 29.0 % 27.3 % 25.5 % F-28 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2024 and 2023, were as follows (in thousands): 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 2,912 $ 1,515 Allowance for doubtful accounts 7,596 4,876 Employee benefits and compensation 45,122 38,137 Acquisition-related costs 9,110 — Deferred revenue 4,446 — Property and equipment 141 — Lease liabilities 116,080 7,398 Other deferred tax assets 1,103 1,888 Total gross deferred tax assets 186,510 53,814 Less: valuation allowance ( 2,941 ) ( 2,721 ) Total deferred tax assets, net 183,569 51,093 Deferred tax liabilities: Goodwill and other intangibles 85,771 77,005 Right of Use assets 105,478 — Property and equipment — 836 Other deferred tax liabilities 3,200 2,539 Total gross deferred tax liabilities 194,449 80,380 Deferred income taxes, net $ ( 10,880 ) $ ( 29,287 ) We have established valuation allowances for deferred tax assets related to certain employee benefits and compensation and state net operating loss (“NOL”) carryforwards at December 31, 2024 and December 31, 2023. The net increase in the valuation allowance of $ 0.2 million for the year ended December 31, 2024, related to changes in the valuation allowance for NOLs and certain employee benefits and compensation. In assessing the realization of deferred tax assets, management considers all available positive and negative evidence, including projected future taxable income, scheduled reversal of deferred tax liabilities, historical financial operations and tax planning strategies. Based upon review of these items, management believes it is more-likely-than-not that the Company will realize the benefits of these deferred tax assets, net of the existing valuation allowances. We file income tax returns in the United States, Canada, and most state jurisdictions. Beginning in 2024, we will file tax returns in the Philippines. In general, the examination of our material tax returns is complete for years ending prior to January 1, 2021. In the fourth quarter of 2024, the Internal Revenue Service selected our 2022 federal tax return for examination. As we are in the early stages of the examination, we have received no indications of material adjustments that will be assessed as a result of the examination. With limited exceptions, our state and local income tax returns for years ending prior to January 1, 2020, and non-U.S. income tax returns for years ending prior to January 1, 2021, are no longer subject to tax authority examinations. The availability of NOLs and state tax credits are reported as a component of deferred tax assets, net of applicable valuation allowances, in the accompanying Consolidated Balance Sheets. At December 31, 2024, we had state net operating loss carryforwards of $ 84.6 million and a state tax credit carryforward of $ 0.1 million. The state net operating loss carryforwards expire on various dates between 2026 and 2045 and the state tax credit carryforward expires in 2028. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): F-29 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) 2024 2023 2022 Balance at January 1 $ 1,847 $ 2,111 $ 1,594 Additions for tax positions of the current year 197 178 175 Additions for positions of prior years 168 103 486 Lapse of statutes of limitation ( 174 ) ( 545 ) ( 144 ) Balance at December 31 $ 2,038 $ 1,847 $ 2,111 Included in the balance of unrecognized tax benefits at December 31, 2024 are $ 1.3 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate. We believe it is reasonably possible that certain of these unrecognized tax benefits could change in the next twelve months. We expect reductions in the liability for unrecognized tax benefits of approximately $ 0.2 million within the next twelve months due to expiration of statutes of limitation. Given the number of years that are currently subject to examination, we are unable to estimate the range of potential adjustments to the remaining balance of unrecognized tax benefits at this time. We recognize interest expense and penalties related to unrecognized tax benefits as a component of income tax expense. During 2024, we recorded an immaterial increase in accrued interest, and, as of December 31, 2024, we had recognized a liability for interest expense and penalties of $ 0.3 million and $ 0.2 million, respectively, relating to unrecognized tax benefits. During 2023, we recorded an immaterial increase in accrued interest, and, as of December 31, 2023, we had recognized a liability for interest expense and penalties of $ 0.3 million and $ 0.2 million, respectively, relating to unrecognized tax benefits. NOTE 10. DEBT AND FINANCING ARRANGEMENTS 2024 Credit Facilities On November 1, 2024, the Company and CBIZ Operations, Inc., a wholly owned subsidiary of the Company, as the borrower (“CBIZ Operations”), Bank of America, N.A., as administrative agent, and the other financial institutions party thereto entered into an amended and restated credit agreement (the “2024 Credit Facilities”) providing for $ 2.0 billion in senior secured credit facilities, consisting of a $ 1.4 billion term loan (the “Term Loan”) and $ 600.0 million revolving credit facility (the “Revolving Credit Facility”). The 2024 Credit Facilities amend and restate the 2022 credit facility entered into on May 4, 2022 (the "2022 Credit Facility"). The proceeds of the Term Loan were used to pay the cash consideration and make certain other payments in connection with the closing of the Transaction and to repay outstanding amounts under the 2022 Credit Facility. Th e 2024 Credit Facilities mature on November 1, 2029. The Term Loan provides for scheduled annual principal amortization payments of 5 % in the first two years following closing, 7.5 % annually in the third and fourth year following closing and 10 % in the fifth year following closing, with the balance due at maturity. The commitments under the 2024 Credit Facilities may be increased in the form of incremental term facilities and/or increased commitments under the Revolving Credit Facility in an aggregate principal amount of up to the sum of (a) the greater of (i) $ 465.0 million and (ii) 100 % of EBITDA, plus (b) an unlimited amount, so long as Total Net Leverage Ratio (“TNLR”) is no more than the lesser of 3.50 to 1.00 and TNLR at the closing after giving pro forma effect to the Transaction. The Company may elect an interest rate for the Term Loan and the Revolving Credit Facility based on the Base Rate or Term SOFR, plus an applicable spread. The Base Rate option is the highest of: (i) the Bank of America prime rate; (ii) the federal funds rate plus 0.50 % ; or (iii) Term SOFR plus 1.0 % . Term SOFR is the forward-looking term rate based on the secured overnight financing rate that is published by CME Group Benchmark Administration Limited (or a successor administrator of such rate) plus a 0.10 % SOFR Adjustment. The applicable spreads under the 2024 Credit Facilities will be 0.375 % to 1.50 % and 1.375 % to 2.50 % above the Base Rate and Term SOFR, respectively. The 2024 Credit Facilities contains certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens or other encumbrances, making certain payments, investments, or to sell or otherwise dispose of a substantial portion of assets, or to merge or consolidate with an unaffiliated entity. The 2024 Credit Facilities also limits our ability to make dividend payments. Historically, we have not paid cash dividends on F-30 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) our common stock. Our Board of Directors has discretion over the payment and level of dividends on common stock, subject to the limitations of the 2024 Credit Facilities and applicable law. The 2024 Credit Facilities contain a provision that, in the event of a defined change in control, the 2024 Credit Facilities may be terminated. In addition, the 2024 Credit Facilities include a financial covenant requiring that TNLR not exceed 5.00 to 1.00 initially, stepping down in increments to 3.75 to 1.00 during and after the seventh fiscal quarter after the closing (with a limited ability to temporarily increase in connection with material acquisitions commencing in the sixth fiscal quarter after the closing). The 2024 Credit Facilities also require a Minimum Consolidated Interest Coverage Ratio of 3.00 to 1.00 and affirmative and negative covenants that are in each case generally similar to those contained in the 2022 Credit Facility, but with increases to certain baskets and caps and certain other exceptions. As of December 31, 2024, we are in compliance with all covenants. In connection with our 2024 Credit Facilities, we incurred $ 20.7 million of financing costs during the year ended December 31, 2024. The financing costs are deferred and reported as a reduction of debt on the accompanying Consolidated Balance Sheets, are included as a component of cash flow from financing activities on the accompanying Consolidated Statements of Cash Flows, and are being amortized as interest expense over the term of the 2024 Credit Facilities. As of December 31, 2024, the borrowings outstanding under the 2024 Credit Facilities was $ 1.42 billion, consisting of $ 1.4 billion of the Term Loan and $ 20.9 million of borrowings under the Revolving Credit Facility. As of December 31, 2023 the outstanding debt balance was $ 312.4 million under the 2022 Credit Facility. The blended interest rates under the 2024 Credit Facilities and 2022 Credit Facility, including the impact of interest rate swaps associated with those credit facilities, were as follows: 2024 2023 Weighted average blended interest rate 6.00 % 5.23 % Range of blended interest rates 1.93 % - 6.84 % 1.93 % - 8.00 % We had approximately $ 556.0 million of available funds under the 2024 Credit Facilities at December 31, 2024, based on the terms of the commitment. Available funds under the 2024 Credit Facilities are based on a multiple of earnings before interest, taxes, depreciation and amortization as defined in the 2024 Credit Facilities, and are reduced by letters of credit, other indebtedness and outstanding borrowings under the 2024 Credit Facilities. Under the 2024 Credit Facilities, loans are charged an interest rate consisting of a base rate or term SOFR rate plus an applicable margin, letters of credit are charged based on the same applicable margin, and a commitment fee is charged on the unused portion of the 2024 Credit Facilities. Other line of credit We have an unsecured $ 20.0 million line of credit by and among CBIZ Benefits and Insurance, Inc., our wholly owned subsidiary, and the Huntington Bank. We utilize this line of credit to support our short-term funding requirements of payroll client fund obligations due to the investment of client funds, rather than liquidating client funds that have already been invested in available-for-sale securities. Refer to Note 7, Financial Instruments, for further discussion regarding these investments. The line of credit did no t have a balance outstanding at December 31, 2024 and 2023. On August 1, 2024, we renewed the line of credit and it will now terminate on July 31, 2025. Borrowings under the line of credit bear interest at the prime rate. Interest expense Interest expense, including amortization of deferred financing costs, commitment fees, line of credit fees, and other applicable bank charges, was as follows (in thousands): F-31 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) 2024 2023 2022 Credit facilities $ 34,376 $ 20,093 $ 8,033 Other line of credit — 1 6 Other 3 37 — $ 34,379 $ 20,131 $ 8,039 NOTE 11. ACCUMULATED OTHER COMPREHENSIVE INCOME The components of accumulated other comprehensive income at December 31, 2024 and 2023 were as follows (in thousands): 2024 2023 Net unrealized loss of available-for-sale securities, net of income tax expense of $ 14 and income tax benefit of $ 168 , respectively $ ( 48 ) $ ( 505 ) Net unrealized gain on interest rate swap, net of income tax expense of $ 685 and $ 972 , respectively 2,075 3,064 Foreign currency translation ( 808 ) ( 781 ) Accumulated other comprehensive income $ 1,219 $ 1,778 NOTE 12. COMMITMENTS AND CONTINGENCIES Acquisitions - The purchase price that we normally pay for businesses and client lists consists of two components: an up-front non-contingent portion, and a portion which is contingent upon the acquired businesses or client lists’ future performance. The fair value of the contingent purchase price consideration is recorded at the date of acquisition and re-measured each reporting period until the liability is settled. Shares of our common stock that are issued in connection with acquisitions may be contractually restricted from sale for periods up to one year . Acquisitions are further disclosed in Note 2, Business Combinations. Indemnifications - We have various agreements in which we may be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification clauses are included in contracts arising in the normal course of business under which the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations, warranties, covenants or agreements, related to matters such as title to assets sold and certain tax matters. Payment by us under such indemnification clauses are generally conditioned upon the other party making a claim. Such claims are typically subject to challenge by us and to dispute resolution procedures specified in the particular contract. Further, our obligations under these agreements may be limited in terms of time and/or amount and, in some instances, we may have recourse against third parties for certain payments made by us. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each particular agreement. Historically, we have not made any payments under these agreements that have been material individually or in the aggregate. As of December 31, 2024, we were not aware of any obligations arising under indemnification agreements that would require material payments, and therefore have not recorded a liability. Employment Agreements - We maintain severance and employment agreements with certain of our executive officers, whereby such officers may be entitled to payment in the event of termination of their employment. We also have arrangements with certain non-executive employees which may include severance and other employment provisions. We accrue for amounts payable under these contracts and arrangements as triggering events occur and obligations become known. During the years ended December 31, 2024, 2023, and 2022, payments under such contracts and arrangements were not material. Letters of Credit and Guarantees - We provide letters of credit to landlords (lessors) of our leased premises in lieu of cash security deposits, which totaled $ 3.2 million and $ 3.5 million at December 31, 2024 and 2023, respectively. In addition, we provide license bonds to various state agencies to meet certain licensing requirements. The amount of license bonds outstanding was $ 2.2 million and $ 2.3 million at December 31, 2024 and 2023, respectively. F-32 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Legal Proceedings - On December 19, 2016, CBIZ Operations, Inc. ("CBIZ Operations") was named as a defendant in a lawsuit filed by Zotec Partners, LLC (“Zotec”) in the Marion County Indiana Superior Court. After various amendments, the lawsuit asserted claims under Indiana law for securities, statutory and common law fraud or deception, unjust enrichment, breach of contract, and vicarious liability against CBIZ Operations and a former employee of CBIZ MMP in connection with the sale of the CBIZ MMP medical billing practice to Zotec. The plaintiff claimed that CBIZ Operations had a duty to disclose the fact, unknown to employees of CBIZ Operations at the time of the transaction, that the former employee had a financial arrangement with a Zotec vendor at the time CBIZ Operations sold CBIZ MMP to Zotec. The plaintiff sought damages of up to $ 177.0 million out of the $ 200.0 million transaction price. Trial was held in October 2021. The jury found in favor of CBIZ on all fraud, contract and other claims before it. On November 14, 2022, the trial court ruled in favor of CBIZ and against Zotec’s claim for statutory securities fraud. The court also ruled in favor of CBIZ on its counterclaim for indemnification under contract. The trial court conducted a hearing on December 12, 2023, to consider evidence regarding the amount of damages owed by Zotec to CBIZ on the counterclaim. On March 12, 2024, the court awarded CBIZ $ 3.1 million on its counterclaim. On April 10, 2024, Zotec filed a notice of appeal. On November 10, 2023, CBIZ was named as a defendant in a putative class action lawsuit in the United States District Court for the District of Massachusetts by an individual claiming to be an employee of a CBIZ client whose personally identifiable information (“PII”) was compromised and stolen during a cyberattack CBIZ experienced on or about May 31, 2023. As a result of this incident, hackers were able to access and download certain files from CBIZ’s MOVEit Transfer server. The lawsuit alleges that CBIZ and Progress Software Corporation, the owner of MOVEit Transfer, failed to adequately secure and safeguard the individual’s, and similarly situated employees of CBIZ’s clients, PII from unauthorized access. The lawsuit seeks various remedies, including actual, compensatory, and punitive damages, along with injunctive relief, costs, and attorneys’ fees. On December 8, 2023, CBIZ was named as a defendant in a second putative class action lawsuit in the United States District Court for the District of Massachusetts by an individual making similar claims and seeking similar remedies as in the first lawsuit. Both cases were transferred into a multidistrict litigation, styled as In Re: MOVEit Customer Data Security Breach Litigation , pending in the United States District Court for the District of Massachusetts (the “MDL”). To date, the MDL has over 180 cases against over 100 different defendants, all with claims arising out of the cyberbreach by hackers of Progress Software Corporation’s MOVEit Transfer software. Due to the early stage of litigation, the Company is not able to determine or predict the ultimate outcome of these lawsuits nor reasonably provide an estimate or range of the possible outcome or losses, if any. In addition to the item disclosed above, the Company is, from time to time, subject to claims and lawsuits arising in the ordinary course of business. We cannot predict the outcome of all such matters or estimate the possible loss, if any. Although the proceedings are subject to uncertainties in the litigation process and the ultimate disposition of these proceedings is not presently determinable, we intend to vigorously defend these matters. NOTE 13. EMPLOYEE BENEFITS Employee Savings Plan - We sponsor a qualified 401(k) defined contribution plan that covers substantially all of our employees. Participating employees may elect to contribute, on a tax-deferred basis, up to 80 % of their pre-tax annual compensation (subject to a maximum permissible contribution under Section 401(k) of the Internal Revenue Code). Matching contributions by us are 50 % of the first 6 % of base compensation that the participant contributes, and additional amounts may be contributed at the discretion of the Board of Directors. Participants may elect to invest their contributions in various funds including: equity, fixed income, stable value, and balanced-lifecycle funds. Employer contributions (net of forfeitures) made to the plan during the years ended December 31, 2024, 2023, and 2022 were approximately $ 22.9 million, $ 18.5 million and $ 16.1 million, respectively. Non-qualified Deferred Compensation Plan - We sponsor a non-qualified deferred compensation plan, under which certain members of management and other highly compensated employees may elect to defer receipt of a portion of their annual compensation, subject to maximum and minimum percentage limitations. The amount of compensation deferred under the plan is credited to each participant’s deferral account and a non-qualified deferred compensation plan obligation is established by us. An amount equal to each participant’s compensation deferral is transferred into a rabbi trust and invested in various debt and equity securities as directed by the participants. The F-33 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) assets of the rabbi trust are held by us and recorded as “Assets of deferred compensation plan” in the accompanying Consolidated Balance Sheets. Assets of the non-qualified deferred compensation plan consist primarily of investments in mutual funds, money market funds and equity securities. The values of these investments are based on published market prices at the end of the period. Adjustments to the fair value of these investments are recorded in “Other (expense) income, net,” offset by the same adjustments to compensation expense (recorded as “Operating expenses” or “G&A expenses” in the accompanying Consolidated Statements of Comprehensive Income). We recorded income of $ 21.1 million related to those investments for the year ended December 31, 2024. For the year ended December 31, 2023, we recorded income of $ 19.5 million and a loss of $ 19.6 million for the year ended December 31, 2022, related to these investments. These investments are specifically designated as available to us solely for the purpose of paying benefits under the non-qualified deferred compensation plan. However, the investments in the rabbi trusts would be available to all unsecured general creditors in the event that we become insolvent. Deferred compensation plan obligations represent amounts due to plan participants and consist of accumulated participant deferrals and changes in fair value of investments thereon since the inception of the plan, net of withdrawals. This liability is an unsecured general obligation of ours and is recorded as “Deferred compensation plan obligations” in the accompanying Consolidated Balance Sheets. The assets and liabilities related to the non-qualified deferred compensation plan at December 31, 2024 and 2023 were $ 167.2 million and $ 143.5 million, respectively. NOTE 14. COMMON STOCK Share Repurchase Program - Our Board of Directors approved various share repurchase programs that were effective during the years ended December 31, 2024 and 2023. Under these programs, shares may be purchased in the open market or in privately negotiated transactions according to SEC rules. The Share Repurchase Program does not obligate us to acquire any specific number of shares and may be suspended at any time. Repurchased shares are held in treasury and may be reserved for future use in connection with acquisitions, employee share plans and other general purposes. Under the 2024 Credit Facilities, described in Note 10, Debt and Financing Arrangements, share repurchases are unlimited when total leverage is less than 3.0 x on a proforma basis including such share repurchases. When leverage is greater than 3.0 x but less than the Adjusted Total Leverage Ratio (defined as the maximum leverage ration less 0.25 x) on a proforma basis including share repurchases, the annual share repurchase is limited to the greater of $ 50.0 million and 10 percent of Pro Forma EBITDA. Under the Share Repurchase Program, we repurchased no shares on the open market during the year ended December 31, 2024. We repurchased 1.3 million shares on the open market at a cost (including fees and commissions) of $ 65.1 million during the year ended December 31, 2023. Shares repurchased to settle statutory employee withholding related to vesting of stock awards were 0.2 million shares at a cost of $ 11.5 million during the year ended December 31, 2024 and 0.2 million shares at a cost of $ 8.4 million during the year ended December 31, 2023. Common Stock Issued for Marcum Acquisition - Pursuant to the Merger Agreement and as part of the total purchase price consideration, on January 2, 2025 and February 3, 2025, we issued and delivered approximately 3.1 million and 0.3 million shares of our Common Stock, respectively, to the selling shareholders in the Transaction. The remaining 10.2 million shares will be issued and delivered in 34 monthly installments starting March 3, 2025. NOTE 15. EMPLOYEE STOCK PLANS Employee Stock Purchase Plan - The 2007 Employee Stock Purchase Plan (“ESPP”), which has a termination date of June 30, 2026, allows qualified employees to purchase shares of common stock through payroll deductions up to a limit of $ 25,000 of stock per calendar year. The price an employee pays for shares is 85 % of the fair market F-34 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) value of our common stock on the last day of the purchase period. Purchase periods begin on the sixteenth day of the month and end on the fifteenth day of the subsequent month. Other than a one-year holding period from the date of purchase, there are no vesting or other restrictions on the stock purchased by employees under the ESPP. The total number of shares of common stock that can be purchased under the ESPP shall not exceed 2.0 million shares. Stock Awards - We granted various stock-based awards through the year ended December 31, 2024 under the CBIZ, Inc. 2019 Stock Omnibus Incentive Plan (“2019 Plan”). On May 10, 2023, the stockholders of the Company approved an amendment to the 2019 Plan. The amendment added 1.5 million shares to the total number of shares that may be issued under the 2019 Plan. The 2019 Plan, which expires in 2029, permits the grant of various forms of stock-based awards. The terms and vesting schedules for the share-based awards vary by type and date of grant. Under the 2019 Plan, a maximum of 4.6 million stock options, restricted stock or other stock based compensation awards may be granted. Shares subject to award under the 2019 Plan may be either authorized but unissued shares of our common stock or treasury shares. At December 31, 2024, approximately 2.0 million shares were available for future grant under the 2019 Plan. During the years ended December 31, 2024, 2023 and 2022, we recognized compensation expense (before income tax expense) for these awards as follows (in thousands): 2024 2023 2022 Stock options $ — $ 768 $ 248 Restricted stock units and awards 7,771 5,258 5,204 Performance share units 6,065 6,260 9,237 Total share-based compensation expense $ 13,836 $ 12,286 $ 14,689 Stock Options - Certain employees and non-employee directors were granted stock options. During the year ended December 31, 2024, there were no stock options granted or exercised. As of December 31, 2024, we have 150 thousand stock options outstanding with a weighted average exercise price per share of $ 35.22 . Restricted Stock Units and Awards - Under the 2019 Plan, certain employees, non-employee directors, and third-party service providers were granted restricted stock units and awards. Restricted stock units and awards vest at no cost to the recipients. Restricted stock units and awards are subject to forfeiture if employment terminates prior to the release of restrictions, generally one to four years from the date of grant. Recipients of restricted stock units and awards are entitled to the same dividend and voting rights as holders of other CBIZ common stock, subject to certain restrictions during the vesting period, and these are considered to be issued and outstanding from the date of grant. Shares granted under the 2019 Plan cannot be sold, pledged, transferred or assigned during the vesting period . Restricted stock units and awards activity during the year ended December 31, 2024 was as follows (in thousands, except per share data): Number of Shares Weighted Average Grant-Date Fair Value (1) Non-vested at December 31, 2023 223 $ 41.19 Granted (2) 810 $ 69.46 Vested ( 131 ) $ 38.76 Forfeited ( 3 ) $ 38.52 Non-vested at December 31, 2024 899 $ 67.01 (1) Represents weighted average market value of the shares as the awards are granted at no cost to the recipients. (2) As a result of the Transaction approximately 713 thousand shares were granted to certain employees and third-party providers. F-35 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) • At December 31, 2024, we had unrecognized compensation cost for restricted stock units and awards of $ 53.6 million to be recognized over a weighted average period of approximately 3.20 years. • The total fair value of shares vested during the years ended December 31, 2024, 2023, and 2022 was approximately $ 5.1 million, $ 5.1 million and $ 5.6 million, respectively. • The market value of shares awarded during the years ended December 31, 2024, 2023, and 2022 was $ 56.2 million, $ 5.3 million and $ 5.0 million, respectively. This market value was recorded as unearned compensation and is recognized as expense ratably over the periods which the restrictions lapse. • Awards outstanding at December 31, 2024 will be released from restrictions at dates ranging from February, 2025 through November, 2028. Performance Share Units (“PSUs”) - PSUs are earned based on our financial performance over a contractual term of three years and the associated expense is recognized over that period based on the fair value of the award. A three-year cliff vesting schedule of the PSUs is dependent upon the Company’s performance relative to pre-established goals based on earnings per share target (weighted 70 %) and total growth in revenue (weighted 30 %). The fair value of PSUs is calculated using the market value of our common stock on the date of grant. For performance achieved above specified levels, the recipient may earn additional shares of stock, not to exceed 200 % of the number of PSUs initially granted. The following table presents our PSUs award activity during the twelve months ended December 31, 2024 (in thousands, except per share data): Performance Share Units Weighted Average Grant-Date Fair Value Per Unit (1) Outstanding at December 31, 2023 464 $ 33.84 Granted 70 $ 66.07 Vested ( 273 ) $ 27.51 Adjustments for performance results (2) 31 $ 38.12 Forfeited ( 7 ) $ 39.09 Outstanding at December 31, 2024 285 $ 48.18 ( 1) Represents weighted average market value of the shares; awards are granted at no cost to the recipients. (2) Represents the change in the number of performance awards earned based on performance achievement for the performance period. NOTE 16. EARNINGS PER SHARE The following table sets forth the reconciliation of the numerator and the denominator of basic earnings per share and diluted earnings per share for the years ended December 31, 2024, 2023, and 2022 (in thousands, except per share data): F-36 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) Year Ended December 31, 2024 2023 2022 Numerator: Net income $ 41,038 $ 120,968 $ 105,354 Denominator: Basic Weighted average common shares outstanding 52,375 49,989 51,502 Diluted Stock options 78 172 487 Restricted stock awards (1) 78 98 141 Contingent shares (2) 3 21 14 Performance share units (3) 127 277 244 Diluted weighted average common shares outstanding 52,661 50,557 52,388 Earnings Per Share: Basic earnings per share $ 0.78 $ 2.42 $ 2.05 Diluted earnings per share $ 0.78 $ 2.39 $ 2.01 (1) For the years ended December 31, 2024, 2023 and 2022, a total of 173 thousand, 58 thousand and 68 thousand stock based awards, respectively, were excluded from the calculation of diluted earnings per share as their exercise prices would render them 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 conditions have been met. For further details, refer to Note 2, Business Combinations . (3) The denominator used in calculating diluted earnings per share did not include 0.2 million, 0.2 million and 0.2 million performance share units for the twelve months ended December 31, 2024, 2023 and 2022, respectively. The performance conditions associated with these performance share units were not met and consequently none of these performance share units were considered as issuable for the years ended December 31, 2024, 2023 and 2022. NOTE 17. LEASES We determine if a contract is a lease at inception. We have leases for office space and facilities, automobiles and certain information technology equipment. All of our leases are classified as operating leases and the majority of which are for office space and facilities. Supplemental balance sheet information related to the Company’s operating leases as of December 31, 2024 and 2023 was as follows (in thousands): December 31, 2024 December 31, 2023 Weighted-average remaining lease term 7.5 years 7.3 years Weighted-average discount rate 5.91 % 5.51 % The components of lease cost and other lease information as of and during the year ended December 31, 2024 and 2023 are as follows (in thousands): December 31, 2024 December 31, 2023 Operating lease cost $ 51,783 $ 45,088 Cash paid for amounts included in measurement of lease liabilities Operating cash flows for operating leases $ 52,483 $ 46,936 Our leases have remaining lease terms ranging from less than 1 year to approximately 19 years. These leases generally contain renewal options for periods ranging from two to five years . Because the Company is not F-37 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) reasonably certain to exercise these renewal options, the options are not included in the lease term, and associated potential option payments are excluded from lease payments. Maturities of operating lease liabilities at December 31, 2024 and minimum cash commitments under operating leases at December 31, 2023 were as follows (in thousands): December 31, 2024 2025 $ 84,270 2026 83,995 2027 80,062 2028 63,907 2029 55,120 Thereafter 178,389 Total undiscounted lease payments 545,743 Less: imputed interest ( 112,608 ) Total lease liabilities $ 433,135 December 31, 2023 2024 $ 47,446 2025 46,623 2026 43,131 2027 40,678 2028 29,261 Thereafter 90,535 Total undiscounted lease payments 297,674 Less: imputed interest ( 57,486 ) Total lease liabilities $ 240,188 NOTE 18. RELATED PARTIES The following is a summary of certain agreements and transactions between or among us and certain related parties. Management reviews these transactions as they occur and monitors them for compliance with our Code of Conduct, internal procedures and applicable legal requirements. The Audit Committee reviews and ratifies such transactions annually, or as they are more frequently brought to the attention of the Audit Committee by our Director of Internal Audit, General Counsel or other members of Management. A number of the businesses acquired by us are located in properties owned indirectly by and leased from persons employed by us, none of whom are members of our senior management. In the aggregate, we paid approximately $ 1.6 million, $ 1.2 million and $ 1.9 million during the years ended December 31, 2024, 2023 and 2022, respectively, under such leases. NOTE 19. SEGMENT DISCLOSURES Our business units have been aggregated into three practice groups: (i) Financial Services, (ii) Benefits and Insurance Services and (iii) National Practices, based on the following factors: similarity of the products and F-38 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) services provided to clients, similarity of the regulatory environment in which they operate; and similarity of economic conditions affecting long-term performance. The business units are managed along these segment lines. A general description of services provided by practice groups is provided in the table below. Financial Services Benefits and Insurance Services National Practices Accounting and Tax Employee Benefits Consulting Information Technology Managed Networking and Hardware Services Financial Advisory Payroll / Human Capital Management National Technology Property and Casualty Insurance Government Heath Care Consulting Retirement and Investment Services Corporate and Other - Included in Corporate and Other are operating expenses that are not directly allocated to the individual business units. These expenses primarily consist of certain healthcare costs, gains or losses attributable to assets held in our non-qualified deferred compensation plan, stock-based compensation, consolidation and integration charges, certain professional fees, certain advertising costs and other various expenses. The discrete financial information of those practice groups are available and regularly reviewed by the Chief Operating Decision Maker ("CODM"). The CODM, who is our CEO, allocates resources to and assesses the performance of each practice group using information about their respective revenue and income (loss) before income tax expense (benefit), excluding those costs listed above, which are reported in the “Corporate and Other”. Upon consolidation, intercompany accounts and transactions are eliminated, thus inter-segment revenue is not included in the measure of profit or loss for the practice groups. The CODM does not evaluate practice groups using discrete asset information, and we do not identify or allocate assets by practice groups. We operate in the United States and Canada and revenue generated from such operations during the years ended December 31, 2024, 2023 and 2022 was as follows (in thousands): Year Ended December 31, 2024 2023 2022 United States $ 1,811,113 $ 1,589,478 $ 1,410,255 Canada 2,359 1,716 1,724 Total revenue $ 1,813,472 $ 1,591,194 $ 1,411,979 There is no one customer that represents a significant portion of our revenue. The practice groups respective revenue and pre-tax income, significant segment expenses, and a reconciliation of segment profit or loss measure to the consolidated income before income tax expense for the years ended December 31, 2024, 2023 and 2022 are presented below (in thousands). F-39 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) For the Year Ended December 31, 2024 Financial Services Benefits and Insurance Services National Practices Total Revenue from external customers $ 1,362,539 $ 401,048 $ 49,885 $ 1,813,472 Significant expenses: Personnel costs 972,730 257,166 42,913 1,272,809 Facility costs 55,178 12,481 177 67,836 Other costs, gains, and losses, net (1) 185,091 58,476 ( 3,394 ) 240,173 Total segment expense 1,212,999 328,123 39,696 1,580,818 Segment income before income tax expenses 149,540 72,925 10,189 232,654 Corporate & other: Unallocated corporate operating expenses 44,485 General & administrative expenses 108,753 Interest expense 34,374 Other income, net ( 12,765 ) Consolidated income before income tax expenses $ 57,807 For the Year Ended December 31, 2023 Financial Services Benefits and Insurance Services National Practices Total Revenue from external customers $ 1,160,686 $ 382,605 $ 47,903 $ 1,591,194 Significant expenses: Personnel costs 793,791 242,340 40,949 1,077,080 Facility costs 44,444 12,196 250 56,890 Other costs, gains, and losses, net (1) 134,623 53,916 1,860 190,399 Total segment expense 972,858 308,452 43,059 1,324,369 Segment income before income tax expenses 187,828 74,153 4,844 266,825 Corporate & other: Unallocated corporate operating expenses 39,344 General & administrative expenses 57,965 Interest expense 20,129 Other income, net ( 16,916 ) Consolidated income before income tax expenses $ 166,303 F-40 Table of Contents CBIZ, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued) For the Year Ended December 31, 2022 Financial Services Benefits and Insurance Services National Practices Total Revenue from external customers $ 1,010,068 $ 358,007 $ 43,904 $ 1,411,979 Significant expenses: Personnel costs 688,555 225,871 36,832 951,258 Facility costs 42,617 12,831 250 55,698 Other costs, gains, and losses, net (1) 118,184 49,299 2,109 169,592 Total segment expense 849,356 288,001 39,191 1,176,548 Segment income before income tax expenses 160,712 70,006 4,713 235,431 Corporate & other: Unallocated corporate operating expenses 8,986 General & administrative expenses 55,023 Interest expense 8,033 Other expense, net 21,914 Consolidated income before income tax expenses $ 141,475 (1) - Other costs, gains, and losses, net primarily consist of travel and entertainment costs, computer and technology related costs, depreciation and amortization expenses, and other discretionary costs. NOTE 20. SUBSEQUENT EVENTS Share Repurchase Program On February 11, 2025, our Board of Directors authorized the continuation of the Share Repurchase Program, which has been renewed annually for the past twenty years . It is effective beginning March 31, 2025, to which the amount of shares to be purchased will be reset to 5.0 million, and expires one year from the respective effective date. The Share Repurchase Program allows the Company to purchase shares of its common stock (i) in the open market, (ii) in privately negotiated transactions, or (iii) under Rule 10b5-1 trading plans. Privately negotiated transactions may include purchases from employees, officers and directors, in accordance with SEC rules. Privately negotiated transactions may also include purchases from former partners of Marcum LLP pursuant to the Company’s right, but not obligation, to repurchase any shares issued to such former partners as consideration for the Company’s recent acquisition, in the event that the former partner intends to sell the shares in a market transaction in the four years following closing. Rule 10b5-1 trading plans allow for repurchases during periods when the Company would not normally be active in the trading market due to regulatory restrictions. The Share Repurchase Program does not obligate the Company to acquire any specific number of shares and may be suspended at any time. Any repurchases would only be made to the extent permitted under the Company’s current or any future credit facility. F-41