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Item 2. Management’s Discussion and Analysis

2025-04-25 compared with 2024-11-07 · 157 added, 324 removed, 171 unchanged (74% of the section changed)

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

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

The following discussion is intended to assist in the understanding of our financial position at March 31, 2025 and December 31, 2024, results of operations for the three months ended March 31, 2025 and 2024, and cash flows for the three months ended March 31, 2025 and 2024, and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2024.

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

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We deliver integrated services through three practice groups:

Financial Services, Benefits and Insurance Services, and National Practices.

Financial Services, Benefits and

Insurance Services, and National Practices.

Refer to Note 12, Segment Disclosures, to the accompanying unaudited condensed consolidated financial statements for a general description of services provided by each practice group.

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EXECUTIVE SUMMARY

Revenue for the three months ended September 30, 2024 increased by $28.3 million, or 6.9%, to $438.9 million from $410.5 million for the same period in 2023.

Same-unit revenue increased by approximately $20.8 million, or 5.1%, as compared to the same period in 2023.

Revenue from newly acquired operations contributed $8.4 million, or 1.9%, of incremental revenue for the three months ended September 30, 2024, as compared to the same period in 2023.

Revenue for the nine months ended September 30, 2024 increased by $89.5 million, or 7.1%, to $1,353.2 million from $1,263.6 million for the same period in 2023.

Same-unit revenue increased by approximately $58.7 million, or 4.6%, as compared to the same period in 2023.

Revenue from newly acquired operations contributed $31.7 million, or 2.3%, of incremental revenue for the nine months ended September 30, 2024, as compared to the same period in 2023.

Revenue for the three months ended March 31, 2025 increased by $343.7 million, or 69.5%, to $838.0 million from $494.3 million for the same period in 2024.

Revenue from newly acquired operations contributed $333.4 million, or 66.8%, of incremental revenue for the three months ended March 31, 2025, as compared to the same period in 2024.

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

Net income was $35.1 million, or $0.70 per diluted share, in the third quarter of 2024, compared to $33.7 million, or $0.67 per diluted share, in the third quarter of 2023.

For the nine months ended September 30, 2024, net income was $131.8 million, or $2.62 per diluted share, compared to $133.7 million, or $2.64 per diluted share, for the same period in 2023.

Net income was $122.8 million, or $1.91 per diluted share, in the first quarter of 2025, compared to $76.9 million, or $1.53 per diluted share, in the first quarter of 2024.

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

On November 1, 2024, we completed the previously announced Transaction.

In connection with the closing of the Transaction, we entered into the 2024 Credit Facilities.

Refer to Note 12.

Subsequent Events to the accompanying unaudited condensed consolidated financial statements for further discussion regarding the Transaction and related 2024 Credit Facilities.

The uncertainty in the current economic and geopolitical environment has already led to softness in the demand for the nonrecurring project-based services we offer.

We expect this softness in demand caused by the current economic and geopolitical environment could continue and may limit management's ability to forecast demand for the remainder of 2025.

Strategic Use of Capital

Our overall business objective continues to focus on making strategic acquisitions that allow us to strengthen our presence in existing markets, expand into high growth industries, and broaden our services to our existing offerings.

As a result of the Transaction and related 2024 Credit Facilities as described in Note 12.

Subsequent Events to the accompanying unaudited condensed consolidated financial statements, we have $1,465.5 million outstanding debt under the 2024 Credit Facilities as of November 1, 2024.

As a result of the Transaction and related 2024 Credit Facilities, we have $1,548.4 million outstanding debt under the 2024 Credit Facilities as of March 31, 2025.

To achieve our business objective of making strategic acquisitions, our current priority for use of capital is to maximize cash flow to pay down debt, which will allow us more liquidity to make strategic acquisitions in the future.

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

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

We also repurchased 0.2 million shares of our common stock for tax withholding purposes at a total cost of approximately $11.4 million in the nine months ended September 30, 2024.

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

During the three months ended March 31, 2025, we repurchased 0.1 million shares of our common stock for tax withholding purposes at a total cost of approximately $7.7 million.

On February 11, 2025, the CBIZ Board of Directors authorized the purchase of up to 5.0 million shares of our common stock under our share repurchase program (the “Share Repurchase Program”), which may be suspended or discontinued at any time and expires on March 31, 2026.

The shares may be purchased in the open market, in privately negotiated transactions, and pursuant to Rule 10b5-1 trading plans.

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RESULTS OF OPERATIONS

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

Three Months Ended September 30,

Total 2023 % of

(Amounts in thousands, except percentages)

Financial Services $ 322,295 73.4 % $ 298,372 72.7 % $ 23,923 8.0 %

Benefits and Insurance Services 104,040 23.7 % 100,287 24.4 % 3,753 3.7 %

National Practices 12,549 2.9 % 11,880 2.9 % 669 5.6 %

Total CBIZ $ 438,884 100.0 % $ 410,539 100.0 % $ 28,345 6.9 %

Nine Months Ended September 30,

The following tables summarize total revenue for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

Total 2024 % of

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

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

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

2024 2023 2024 2023

Income and expenses related to the deferred compensation plan for the three months ended March 31, 2025 and 2024 are as follows:

Three Months Ended March 31,

(Amounts in thousands)

Operating expense (income) $ 7,305 $ (3,009) $ 18,164 $ 6,853

Corporate general & administrative expense (income) 1,064 (452) 2,444 821

Other income (expenses), net 8,369 (3,461) 20,608 7,674

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

Three Months Ended September 30,

(Amounts in thousands, except percentages)

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

Gross margin $ 72,913 $ 7,305 $ 80,218 18.3 % $ 68,391 $ (3,009) $ 65,382 15.9 %

Operating income 49,686 8,369 58,055 13.2 % 55,255 (3,461) 51,794 12.6 %

Other income (expense), net 1,300 (8,369) (7,069) (1.6) % (2,288) 3,461 1,173 0.3 %

Income before income tax expense 50,971 — 50,971 11.6 % 47,196 — 47,196 11.5 %

Nine Months Ended September 30,

Operating (income) expense $ (2,432) $ 8,576

Corporate general & administrative (income) expense (119) 1,057

Other (expenses) income, net (2,551) 9,633

Excluding the impact of the above-mentioned income and expenses related to the deferred compensation plan, the operating results for the three months ended March 31, 2025 and 2024 are as follows:

Three Months Ended March 31,

(Amounts in thousands, except percentages)

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Operating income 200,032 (2,551) 197,481 23.6 % 99,101 9,633 108,734 22.0 %

Other income (expense), net 13,207 (20,608) (7,401) (0.5) % 8,245 (7,674) 571 — %

Other (expense) income , net (1,966) 2,551 585 0.1 % 9,424 (9,633) (209) — %

Income before income tax expense 172,910 — 172,910 20.7 % 104,014 — 104,014 21.0 %

Operating Expenses

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

Three Months Ended September 30,

(Amounts in thousands, except percentages)

Operating expenses by segment:

Financial Services $ 260,639 $ 249,680 $ 10,959 4.4 %

Benefits and Insurance Services 82,965 79,636 3,329 4.2 %

National Practices 11,101 10,667 434 4.1 %

Corporate and Other 11,266 2,165 9,101 N/M

Total Operating expenses $ 365,971 $ 342,148 $ 23,823 7.0 %

Operating expenses % of revenue 83.4 % 83.3 %

Operating expenses excluding deferred compensation $ 358,666 $ 345,157 $ 13,509 3.9 %

Operating expenses excluding deferred

compensation % of revenue 81.7 % 84.1 %

Nine Months Ended September 30,

The following tables summarize total operating expenses for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(Amounts in thousands, except percentages)

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compensation % of revenue 73.1 % 74.4 %

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

Total operating expenses for the three months ended September 30, 2024 increased by $23.8 million, or 7.0%, to $366.0 million as compared to $342.1 million in the same period of 2023.

The deferred compensation plan increased operating expenses by $7.3 million for the three months ended September 30, 2024, and decreased by $3.0 million during the same period in 2023.

Excluding the deferred compensation expenses, which were recorded in "Corporate and Other" for segment reporting purposes, operating expenses would have been $358.7 million and $345.2 million, or 81.7% and 84.1% of revenue, for the three months ended September 30, 2024 and 2023, respectively.

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

Three months ended March 31, 2025 compared to March 31, 2024.

Total operating expenses for the three months ended March 31, 2025 increased by $233.4 million, or 62.0%, to $609.9 million as compared to $376.5 million in the same period of 2024.

The deferred compensation plan decreased operating expenses by $2.4 million for the three months ended March 31, 2025 and increased operating expenses by $8.6 million in the same period in 2024.

Excluding the deferred compensation expenses, which were recorded in "Corporate and Other" for segment reporting purposes, operating expenses would have been $612.3 million and $367.9 million, or 73.1% and 74.4% of revenue, for the three months ended March 31, 2025 and 2024, respectively.

In addition, operating expenses for the three months ended March 31, 2025 included approximately $9.0 million of integration costs associated with the Transaction, and the operating expenses for the three months ended March 31, 2024 included approximately $0.1 million of non-recurring integration costs associated with the two acquisitions completed in 2024.

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

Excluding the impact of deferred compensation, which was recorded in "Corporate and Other" for segment reporting purposes, operating expenses increased by approximately $13.5 million during the three months ended September 30, 2024 as compared to the same period in 2023, driven by $7.8 million higher personnel costs (of which $4.7 million was the result of acquisitions), $3.2 million higher direct costs, $1.2 million higher travel and entertainment costs, $0.8

milli on higher professional service costs, a nd $0.4 million higher other discretionary spending to support business growth .

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

Nine months ended September 30, 2024 compared to September 30, 2023 .

Total operating expenses for the nine months ended September 30, 2024 increased by $81.7 million, or 8.0%, to $1,108.8 million as compared to $1,027.1 million in the same period of 2023.

The deferred compensation plan increased operating expenses by $18.2 million for the nine months ended September 30, 2024, and by $6.9 million during the same period in 2023.

Excluding the impact of deferred compensation, which was recorded in "Corporate and Other" for segment reporting purposes, operating expenses would have been $1,090.7 million and $1,020.3 million, or 80.6% and 80.7% of revenue, for the nine months ended September 30, 2024 and 2023, respectively, an increase of $70.4 million as compared to the same period in 2023.

In addition, operating expense for the nine months ended September 30, 2024 included approximately $0.9 million of non-recurring integration costs related to the Transaction and other acquisitions completed in 2024, and operating expenses for the nine months ended September 30, 2023 included $1.5 million of non-recurring integration and retention costs associated with the Somerset acquisition.

The increase in operating expense was driven by higher personnel costs of $49.0 million (of which $17.2 million was the result of acquisitions), $7.3 higher direct cost, $4.2 million higher technology costs, $3.4 million higher professional service costs, $3.2 million higher travel and entertainment costs, $1.2 higher depreciation and amortization expense, $1.1 million higher bad debt expense, and $0.9 million higher other discretionary spending to support business growth.

Excluding the impact of deferred compensation, which was recorded in "Corporate and Other" for segment reporting purposes, operating expenses increased by approximately $244.4 million during the three months ended March 31, 2025 as compared to the same period in 2024, driven by $194.1 million higher personnel costs (of which $193.7 million was attributed to the net impact of acquisitions and divestitures), $15.3 million higher depreciation and amortization costs, $11.4 million higher facility costs, $9.9 million higher direct costs, $5.7 million higher technology costs, $3.9 million higher travel and entertainment costs, $2.1 milli on higher professional service costs, a nd $1.9 million higher marketing costs .

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

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

Three Months Ended September 30,

(Amounts in thousands, except percentages)

G&A expenses $ 23,227 $ 13,136 $ 10,091 76.8 %

G&A expenses % of revenue 5.3 % 3.2 %

G&A expenses excluding deferred compensation $ 22,163 $ 13,588 $ 8,575 63.1 %

G&A expenses excluding deferred compensation % of revenue 5.0 % 3.3 %

Nine Months Ended September 30,

Three Months Ended March 31,

(Amounts in thousands, except percentages)

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G&A expenses excluding deferred compensation % of revenue 3.4 % 3.6 %

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

The deferred compensation plan increased G&A expenses by $1.1 million for the three months ended September 30, 2024, and decreased G&A expenses by $0.5 million during the same period in 2023.

The G&A expenses, excluding the impact of the deferred compensation plan, would have been $22.2 million, or 5.0% of revenue, for the three months ended September 30, 2024, compared to $13.6 million, or 3.3% of revenue, for the same period in 2023, an increase of approximately $8.6 million.

The increase was primarily driven by $6.9 million higher legal and other professional services costs largely associated with the Transaction, $1.3 million higher other discretionary spending to support business growth, and $0.4 million higher personnel costs.

The G&A expenses for the three months ended September 30, 2024 included approximately $7.7 million of non-recurring transaction and integration costs primarily associated with the Transaction.

For the three months ended September 30, 2023 there were no non-recurring transaction and integration costs associated with acquisitions.

Nine months ended September 30, 2024 compared to September 30, 2023.

The deferred compensation plan increased G&A expenses by $2.4 million for the nine months ended September 30, 2024, and increased G&A expenses by $0.8 million during the same period in 2023.

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

compensation plan, would have been $61.5 million, or 4.5% of revenue, for the nine months ended September 30, 2024, compared to $43.7 million, or 3.5% of revenue, for the same period in 2023, an increase of approximately $17.8 million.

The increase in G&A expenses was primarily driven by $14.8 million higher legal and other professional services costs largely associated with the Transaction, $2.3 millon higher other discretionary spending to support business growth, $0.4 million higher depreciation costs, and $0.3 million higher travel and entertainment costs.

In addition, G&A expenses for the nine months ended September 30, 2024 included $15.0 million of non-recurring transaction and integration costs primarily related to the Transaction.

The G&A expenses for the nine months ended September 30, 2023 included $1.5 million of non-recurring transaction and integration costs related to the Somerset acquisition.

Three months ended March 31, 2025 compared to March 31, 2024.

The deferred compensation plan decreased G&A expenses by $0.1 million for the three months ended March 31, 2025, and increased G&A expenses by $1.1 million during the same period in 2024.

The G&A expenses, excluding the impact of the deferred compensation plan, would have been $28.2 million, or 3.4% of revenue, for the three months ended March 31, 2025, compared to $17.7 million, or 3.6% of revenue, for the same period in 2024, an increase of approximately $10.5 million.

The increase was primarily driven by $4.1 million higher legal and other professional services costs largely associated with the Transaction, $2.1 million higher personnel costs, $2.0 million higher other discretionary spending to support business growth, $0.9 million higher insurance costs, $0.6 million higher marketing costs, $0.5 million higher technology costs, and $0.3 million higher travel and entertainment costs.

The G&A expenses for the three months ended March 31, 2025 included approximately $6.7 million of integration costs primarily associated with the Transaction.

For the three months ended March 31, 2024 there were approximately $0.5 million non-recurring transaction and integration costs associated with acquisitions.

Other Income (Expense), Net

Three Months Ended September 30,

Three Months Ended March 31,

(Amounts in thousands, except percentages)

Interest expense $ (25,156) $ (4,511) $ (20,645) 457.7 %

Gain on sale of operations, net 4,953 77 4,876 N/M

Other income (expense), net (1)

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Total other income (expense), net $ (27,122) $ 4,913 $ (32,035) (652.0) %

(1) Other income (expense), net includes a net gain of $8.4 million during the three months ended September 30, 2024, and a net loss of $3.5 million for the same period in 2023, associated with the value of investments held in a rabbi trust related to the deferred compensation plan, which were recorded in "Corporate and Other" for segment reporting purposes.

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

In addition, included in Other income, net for the three months ended September 30, 2024 and 2023, is expense of $5.7 million and $0.6 million, respectively, related to net changes in the fair value of contingent consideration related to prior acquisitions.

Nine Months Ended September 30,

(Amounts in thousands, except percentages)

Interest expense $ (15,363) $ (15,023) $ (340) 2.3 %

Gain on sale of operations, net 4,953 176 4,777 N/M

Other income, net (2)

13,207 8,245 4,962 60.2 %

Total other income, net $ 2,797 $ (6,602) $ 9,399 (142.4) %

(2) Other income, net includes a net gain of $20.6 million during the nine months ended September 30, 2024, and a net gain of $7.7 million for the same period in 2023, associated with the value of investments held in a rabbi trust related to the deferred compensation plan, which were recorded in "Corporate and Other" for segment reporting purposes.

(1) Other income (expense), net includes a net loss of $(2.6) million during the three months ended March 31, 2025, and a net gain of $9.6 million for the same period in 2024, associated with the value of investments held in a rabbi trust related to the deferred compensation plan, which were recorded in "Corporate and Other" for segment reporting purposes.

In addition, included in Other income, net for the nine months ended September 30, 2024 and 2023, is expense of $6.3 million and $2.1 million, respectively, related to net changes in the fair value of contingent consideration related to prior acquisitions.

In addition, included in Other income, net for the three months ended March 31, 2025 and 2024, is expense of $0.5 million and $0.4 million, respectively, related to net changes in the fair value of contingent consideration related to prior acquisitions.

Interest Expense

Three and nine months ended September 30, 2024 compared with September 30, 2023.

During the three months ended September 30, 2024, our average debt balance and weighted average effective interest rate were $350.7 million and 5.37%, respectively, compared to $398.3 million and 5.53% for the same period of 2023.

The decrease in interest expense for the three months ended September 30, 2024 as compared to the same period in 2023 was primarily driven by a lower interest rates and lower average debt balance.

During the nine months ended September 30, 2024, our average debt balance and interest rate were $362.1 million and 5.40%, respectively, compared to $368.2 million and 5.16% for the same period of 2023.

The increase in interest expense for the nine months ended September 30, 2024 as compared to the same period in 2023 was primarily driven by a higher weighted average effective interest rate.

Three months ended March 31, 2025 compared with March 31, 2024.

During the three months ended March 31, 2025, our average debt balance and weighted average effective interest rate were $1,443.4 million and 6.57%, respectively, compared to $325.6 million and 5.23%, respectively, for the same period of 2024.

The increase in interest expense for the three months ended March 31, 2025 as compared to the same period in 2024 was primarily driven by higher average debt balance associated with the 2024 Credit Facilities which was entered into on November 1, 2024.

Our indebtedness is further discussed in Note 5, Debt and Financing Arrangements, to the accompanying unaudited condensed consolidated financial statements.

Other Income (Expense), Net

Three and nine months ended September 30, 2024 compared with September 30, 2023.

For the three months ended September 30, 2024, other income (expense), net includes a net gain of $8.4 million associated with the deferred compensation plan.

For the same period in 2023, other income (expense), net includes a net loss of $3.5 million associated with the deferred compensation plan.

Excluding the impact of the deferred compensation plan from other income (expense), net would result in a decrease of $8.2 million for the three months ended September 30, 2024 compared to the same period in 2023.

The decrease is primarily due to higher expense related to contingent consideration fair value adjustments of $5.1 million, as a result of assuming $5.3 million contingent purchase price liabilities from CBIZ CPAs P.C., and higher other expenses of $1.7 million.

In addition, we recorded $1.4 million of gains from the sale of certain assets in 2023 which did not recur in 2024.

For the nine months ended September 30, 2024, other income (expense), net includes a net gain of $20.6 million associated with the deferred compensation plan.

Three months ended March 31, 2025 compared with March 31, 2024.

For the three months ended March 31, 2025, other income (expense), net includes a net loss of $(2.6) million associated with the deferred compensation plan.

For the same period in 2024, other income (expense), net includes a net gain of $9.6 million associated with the deferred compensation plan.

Excluding the impact of the deferred compensation plan from the other income (expense), net would result in a decrease of $8.0 million for the nine months ended September 30, 2024 compared to the same period in 2023.

The decrease is primarily due to higher expense related to contingent consideration fair value adjustments of $4.3 million, as a result of assuming $5.3 million contingent purchase price liabilities from CBIZ CPAs P.C, and higher other expenses of $2.1 million.

In addition, we recorded $1.6 million of gains from the sale of certain assets in 2023 which did not recur in 2024.

Excluding the impact of the deferred compensation plan from other income (expense), net would result in an increase of $0.8 million for the three months ended March 31, 2025 compared to the same period in 2024.

The increase was primarily due to higher expense related to contingent consideration fair value adjustments of $0.2 million, a $0.3 million gain on the sale of assets, and higher other expenses of $0.3 million.

Further discussion related to the fair value contingent consideration adjustment is included in Note 8, Fair Value Measurements, to the accompanying unaudited condensed financial statements.

Income Tax Expense

Three Months Ended September 30,

(Amounts in thousands, except percentages)

Income tax expense $ 15,887 $ 13,514 $ 2,373 17.6 %

Effective tax rate 31.2 % 28.6 %

Nine Months Ended September 30,

Three Months Ended March 31,

(Amounts in thousands, except percentages)

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Effective tax rate 29.0 % 26.1 %

Three and nine months ended September 30, 2024 compared with September 30, 2023.

The effective tax rate for the three months ended September 30, 2024 was 31.2%, compared to an effective tax rate of 28.6% for the comparable period in 2023.

The increase in the effective tax rate for the three month period ended September 30, 2024 was primarily due to a lower tax benefit recognized related to stock-based compensation expense during the third quarter of 2024 compared to the same period in 2023, which adversely affected the effective tax rate as related to pre-tax income.

The effective tax rate for the nine months ended September 30, 2024 was 28.1%, compared to an effective tax rate of 27.9% for the same period in 2023.

The slight increase in the effective tax rate for the nine month period ended September 30, 2024 was primarily due to a lower tax benefit recognized related to stock-based compensation expense during the third quarter of 2024 compared to the same period in 2023, which adversely affected the effective tax rate as related to pre-tax income.

This increase in the effective tax rate was partially offset by the tax effect of lower non-deductible expenses and lower state expenses during the nine months ended September 30, 2024 as compared to the same period in 2023.

Three months ended March 31, 2025 compared with March 31, 2024.

The effective tax rate for the three months ended March 31, 2025 was 29.0%, compared to an effective tax rate of 26.1% for the comparable period in 2024.

The increase in the effective tax rate for the three month period ended March 31, 2025 was primarily due to a lower tax benefit recognized related to stock-based compensation expense during the first quarter of 2025 compared to the same period in 2024, which adversely affected the effective tax rate as related to pre-tax income.

The increase in income tax expense in the first three months of 2025 compared to the same period in the prior year was primarily driven by the increase in pre-tax income in 2025.

Operating Practice Groups

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A description of these groups' operating results and factors affecting their businesses is provided below.

Same-unit revenue represents total revenue adjusted to reflect comparable periods of activity for acquisitions and divestitures.

Divested operations represent operations that did not meet the criteria for treatment as discontinued operations.

Financial Services

Three Months Ended September 30,

Three Months Ended March 31,

(Amounts in thousands, except percentages)

Same-unit $ 313,861 $ 298,372 $ 15,489 5.2 %

Acquired businesses 8,434 — 8,434 N/M

Total revenue $ 322,295 $ 298,372 $ 23,923 8.0 %

Revenue $ 713,661 $ 372,630 $ 341,031 91.5 %

Operating expenses 510,493 265,561 244,932 92.2 %

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Gross margin percent 28.5 % 28.7 %

Nine Months Ended September 30,

(Amounts in thousands, except percentages)

Same-unit $ 974,118 $ 932,388 $ 41,730 4.5 %

Acquired businesses 30,040 — 30,040 N/M

Total revenue $ 1,004,158 $ 932,388 $ 71,770 7.7 %

Operating expenses 789,009 737,568 51,441 7.0 %

Gross margin / Operating income $ 215,149 $ 194,820 $ 20,329 10.4 %

Total other income, net 229 2,163 (1,934) (89.4) %

Income before income tax expenses 215,378 196,983 18,395 9.3 %

Gross margin percent 21.4 % 20.9 %

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

The Financial Services practice group revenue for the three months ended September 30, 2024 grew by 8.0% to $322.3 million from $298.4 million during the same period in 2023.

Same-unit revenue grew by $15.5 million, or 5.2%, primarily driven by those units that provide traditional accounting and tax-related services, which increased by $8.5 million, the units that provide advisory services, which increased by approximately $4.3 million, and the units that provide government healthcare compliance business consulting, which increased by approximately $2.7 million.

The impact of acquired businesses contributed $8.4 million, or 2.6%, of 2024 revenue.

Three months ended March 31, 2025 compared to March 31, 2024

The Financial Services practice group revenue for the three months ended March 31, 2025 grew by 91.5% to $713.7 million from $372.6 million during the same period in 2024.

This increase is primarily driven by those units that provide traditional accounting and tax-related services, which increased $315.6 million as a result of the acquistion, the units that provide national technology services, which increased $12.9 million all attributed to the acquisition, the units that provide advisory services, which increased by $8.6 million, and the units that provide government healthcare compliance business consulting, which increased by approximately $3.9 million.

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

Fees earned under the ASAs are recorded as revenue in the accompanying Condensed Consolidated Statements of Comprehensive Income and were approximately $60.9 million and $60.5 million for the three months ended September 30, 2024 and 2023, respectively.

Operating Expenses

Operating expenses increased by $11.0 million, or 4.4%, as compared to the same period last year.

Personnel costs increased by $5.6 million, of which acquisitions contributed approximately $4.7 million to the increase.

Compared to the same period in 2023, direct costs, professional services costs, and facility costs increased by approximately $4.2 million, $0.8 million, and $0.4 million, respectively.

Operating expenses as a percentage of revenue decreased slightly to 80.9% for the three months ended September 30, 2024 from 83.7% of revenue for the prior year quarter.

Nine months ended September 30, 2024 compared to September 30, 2023

Revenue for the nine months ended September 30, 2024 grew by 7.7% to $1,004.2 million from $932.4 million during the same period in 2023.

Same-unit revenue grew by $41.7 million, or 4.5%, across almost all service lines, primarily driven by the units that provide traditional accounting and tax-related services, which increased $17.5 million, the units that provide government healthcare compliance business consulting, which increased by $15.6 million, and the units that provide advisory services, which increased by approximately $8.6 million .

The impact of acquired businesses contributed a total of $30.0 million, or 3.0%, of Financial Services practice group's revenue for the nine months ended September 30, 2024.

Fees earned under the ASAs, as described above, were approximatel y $217.7 million and $211.2 million f or the nine months ended September 30, 2024 and 2023, respectively.

Fees earned under the ASAs are recorded as revenue in the accompanying Condensed Consolidated Statements of Comprehensive Income and were approximately $234.3 million and $87.8 million for the three months ended March 31, 2025 and 2024, respectively.

Operating Expenses

Operating expenses increased by $51.4 million, or 7.0%, as compared to the same period last year.

Operating expenses for the three months ended March 31, 2025 increased by $244.9 million, or 92.2%, as compared to the same period last year.

Personnel costs increased by $194.7 million, of which acquisitions contributed approximately $194.4 million to the increase.

Compared to the same period in 2023, direct costs, professional services costs, facility costs, technology costs, corporate allocated costs, depreciation and amortization costs, and bad debt increased by approximately $8.3 million, $2.7 million, $2.5 million, $2.3 million, $1.4 million, $1.2 million, and $0.7 million, respectively.

Other discretionary cost s, net, increased by approximately $0.2 million.

Operating expense as a percentage of revenue decreased to 78.6% during the nine months ended September 30, 2024 from 79.1% of revenue during the same period in 2023.

Compared to the same period in 2024, depreciation and amortization costs, direct costs, facility costs, technology costs, marketing costs, and professional services costs increased by approximately $15.7 million, $12.6 million, and $11.4 million, $5.4 million, $2.0 million, and $1.1 million, respectively.

Additionally, there was $2.1 million higher other discretionary spending to support business growth.

Operating expenses as a percentage of revenue increased slightly to 71.5% for the three months ended March 31, 2025 from 71.3% of revenue for the prior year quarter.

Benefits and Insurance Services

Three Months Ended September 30,

Three Months Ended March 31,

(Amounts in thousands, except percentages)

Same-unit $ 104,040 $ 100,287 $ 3,753 3.7 %

Acquired businesses — — N/M

Total revenue $ 104,040 $ 100,287 $ 3,753 3.7 %

Revenue $ 112,976 $ 108,408 $ 4,568 4.2 %

Operating expenses 85,358 83,637 1,721 2.1 %

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Gross margin percent 24.4 % 22.8 %

Nine Months Ended September 30,

(Amounts in thousands, except percentages)

Same-unit $ 308,161 $ 296,179 $ 11,982 4.0 %

Acquired businesses 1,706 — 1,706 N/M

Total revenue $ 309,867 $ 296,179 $ 13,688 4.6 %

Operating expenses 249,845 234,933 14,912 6.3 %

Gross margin/ Operating income $ 60,022 $ 61,246 $ (1,224) (2.0) %

Total other income, net 89 596 (507) (85.1) %

Income before income tax expenses 60,111 61,842 (1,731) (2.8) %

Gross margin percent 19.4 % 20.7 %

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

The Benefits and Insurance Services practice group revenue increased by $3.8 million, or 3.7%, to $104.0 million during the three months ended September 30, 2024 compared to $100.3 million for the same period in 2023.

Same-unit revenue grew by $3.8 million, or 3.7%, across almost all of the major service lines, primarily driven by a $2.9 million increase in the employee benefit and retirement benefit services lines, a $0.6 million i ncrease in the property and casualty services, and a $0.7 million increase in payroll-related services.

The increase was offset by a $0.4 million decrease in project based services revenue.

Operating Expenses

Operating expenses increased by $3.3 million, or 4.2%, when compared to the same period last year.

Personnel costs increased by $2.1 million, primarily due to the impact of annual merit increases as well as investment in client service personnel.

Compared to the same period in 2023, travel and entertainment costs, direct costs, technology costs, and bad debt increased by approximate ly $0.6 million, $0.3 million, $0.2 million, and $0.1 million, respectively.

Operating expenses as a percentage of revenue increased to 79.7% for the quarter ended September 30, 2024 from 79.4% of revenue for the same period in 2023, primarily due to decrease in revenue generated from the property and casualty services.

Nine months ended September 30, 2024 compared to September 30, 2023

The Benefits and Insurance Services practice group revenue increased by $13.7 million, or 4.6%, to $309.9 million, during the nine months ended September 30, 2024 compared to $296.2 million for the same period in 2023.

Same-unit revenue grew by $12.0 million, or 4.0%, across almost all of the major service lines, primarily driven b y a $10.6 million inc rease in employee benefit and retirement benefit services lines, a $2.0 million i ncrease in payroll related

services, and a $1.0 million increase in the property and casualty services, partially offset by an approximately $1.2 million decrease in other project based services.

Three months ended March 31, 2025 compared to March 31, 2024

The Benefits and Insurance Services practice group revenue increased by $4.6 million, or 4.2%, to $113.0 million during the three months ended March 31, 2025 compared to $108.4 million for the same period in 2024.

The increase is primarily driven by a $5.5 million increase in payroll-related services and a $3.1 million increase in the employee benefit and retirement benefit services lines.

The increase was offset by a $4.0 million decrease in the property and casualty services revenue.

Operating Expenses

Operating expenses increased by $14.9 million, or 6.3%, when compared to the same period last year.

Personnel cost increased by $12.0 million primarily due to timing of annual merit increases, bonus accrual, as well as investment in client service personnel.

Compared to the same period in 2023, technology costs, direct costs, travel and entertainment costs, facility costs, as well as professional service costs increased by approximately $0.8 million, $0.6 million, $0.5 million, $0.4 million, and $0.4 million, respectively.

Other discretionary costs, net increased by approximately $0.2 million.

Operating expense as a percentage of revenue slightly increased to 80.6% during the nine months ended September 30, 2024 from 79.3% of revenue for the same period in 2023.

Operating expenses for the three months ended March 31, 2025 increased by $1.7 million, or 2.1%, when compared to the same period last year.

Personnel costs increased by $0.9 million, of which acquisitions contributed $1.6 million, offset by lower compensation related costs.

Compared to the same period in 2024, direct cost increased by approximate ly $1.4 million .

The increase was offset with a decrease of approximately $0.7 million in other discretionary spending to support business growth.

Operating expenses as a percentage of revenue decreased to 75.6% for the quarter ended March 31, 2025 from 77.2% of revenue for the same period in 2024, primarily due to increase in revenue generated from the employee benefit and retirement benefit services.

National Practices

Three Months Ended September 30,

(Amounts in thousands, except percentages)

Same-unit revenue $ 12,549 $ 11,008 $ 1,541 14.0 %

Divested operations $ — 872 $ (872) (100.0) %

Total Revenue $ 12,549 $ 11,880 $ 669 5.6 %

Operating expenses 11,101 10,667 434 4.1 %

Gross margin / Operating income $ 1,448 $ 1,213 $ 235 19.4 %

Total other (expense) income, net 4,953 — 4,953 N/M

Income before income tax expenses 6,401 1,213 5,188 427.7 %

Gross margin percent 11.5 % 10.2 %

Nine Months Ended September 30,

Three Months Ended March 31,

(Amounts in thousands, except percentages)

Same-unit revenue $ 39,168 $ 34,208 $ 4,960 14.5 %

Divested operations — 872 (872) (100.0) %

Total Revenue $ 39,168 $ 35,080 $ 4,088 11.7 %

Revenue $ 11,377 $ 13,259 $ (1,882) (14.2) %

Operating expenses 10,265 11,933 (1,668) (14.0) %

Gross margin / Operating income 1,112 1,326 (214) (16.1) %

Total other (expense) income, net 4,949 1 4,948 N/M

Income before income tax expenses $ 1,112 $ 1,326 $ (214) (16.1) %

Gross margin percent 9.8 % 10.0 %

Three and nine months ended September 30, 2024 compared with September 30, 2023

Three months ended March 31, 2025 compared with March 31, 2024

Revenue and Operating Expenses

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

During the three and nine months ended September 30, 2024, revenue increased by $1.5 million, or 14.0%, and $5.0 million, or 14.5%, respectively, while operating expenses increased by $0.4 million, or 4.1%, and $3.3 million, or 10.3%, respectively.

During the three months ended March 31, 2025, revenue decreased by $1.9 million, or 14.2% due to the divestiture in the same period in 2024.

The operating expenses decreased by $1.7 million or 14.0%, primarily driven by lower personnel costs due to the impact of divestiture.

Corporate and Other

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

Three Months Ended September 30,

Three Months Ended March 31,

(Amounts in thousands, except percentages)

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Operating loss (31,866) (34,065) 2,199 (6.5) %

Total other expense, net (3,685) (9,900) 6,215 (62.8) %

Total other (expense) income, net (27,634) 4,783 (32,417) (677.8) %

Loss before income tax expense $ (59,500) $ (29,282) $ (30,218) 103.2 %

Nine Months Ended September 30,

(Amounts in thousands, except percentages)

Operating expenses $ 34,908 $ 22,850 12,058 52.8 %

Corporate general and administrative expenses 63,988 44,527 19,461 43.7 %

Operating loss (98,896) (67,377) (31,519) 46.8 %

Total other expense, net (2,470) (9,362) 6,892 (73.6) %

Loss before income tax expenses (101,366) (76,739) (24,627) 32.1 %

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

Total operating expenses increased by $9.1 million during the three months ended September 30, 2024, as compared to the same period in 2023.

The deferred compensation plan increased operating expenses by $7.3 million for the three months ended September 30, 2024 and decreased operating expenses by $3.0 million during the same period in 2023.

Excluding the deferred compensation expenses, operating expenses decreased by $1.1 million during the three months ended September 30, 2024, as compared to the same period in 2023.

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

Total corporate general and administrative expenses increased by $10.1 million, or 76.8%, during the three months ended September 30, 2024, as compared to the same period in 2023.

The deferred compensation plan increased corporate general and administrative expenses by $1.1 million for the three months ended September 30, 2024 and decreased corporate general and administrative expenses by $0.5 million during the same period in 2023.

Excluding the deferred compensation expenses, corporate general and administrative expense increased by approximately $8.6 million during the three months ended September 30, 2024, as compared to the same period in 2023.

G&A expenses for the three months ended September 30, 2024 included approximately $7.7 million of non-recurring transaction and integration costs primarily associated with the Transaction.

For the three months ended September 30, 2023, there were no non-recurring transaction and integration costs associated with acquisitions.

Total other income (expense), net increased by $6.2 million during the three months ended September 30, 2024, as compared to the same period in 2023.

For the three months ended September 30, 2024, total other expense, net includes a net gain of $8.4 million associated with the deferred compensation plan.

For the same period in 2023, total other expense, net includes a net loss of $3.5 million associated with the deferred compensation plan.

Excluding the impact of the deferred compensation plan, total other income (expense), net decreased by $5.6 million, primarily due to higher expense related to contingent consideration fair value adjustments of $5.1 million, as a result of assuming $5.3 million contingent purchase price liabilities from CBIZ CPAs P.C., and $1.3 million higher other expenses, and partially offset by a decrease of $0.8 million in interest expense.

Nine months ended September 30, 2024 compared to September 30, 2023

Total operating expenses increased by $12.1 million, or 52.8%, during the nine months ended September 30, 2024, as compared to the same period in 2023.

The deferred compensation plan increased operating expenses by $18.2 million for the nine months ended September 30, 2024, and by $6.9 million during the same period in 2023.

Excluding the deferred compensation expenses, operating expense increased by approximately $0.8 million during the nine months ended September 30, 2024 , primarily driven by higher personnel related costs, as compared to the same period in 2023.

Total G&A expenses increased by $19.5 million, or 43.7%, during the nine months ended September 30, 2024, as compared to the same period in 2023.

The deferred compensation plan increased G&A expenses by $2.4 million for the nine months ended September 30, 2024, and by $0.8 million during the same period in 2023.

Excluding the deferred compensation expenses, G&A expenses increased by approximately $17.8 million during the nine months ended September 30, 2024, compared to the same period in 2023.

In addition, G&A expenses for the nine months ended September 30, 2024 included $15.0 million of non-recurring transaction and integration costs primarily related to the Transaction.

G&A expenses for the nine months ended September 30, 2023 included $1.5 million of non-recurring transaction and integration costs related to the Somerset acquisition.

Total other income (expense), net increased by $6.9 million during the nine months ended September 30, 2024, as compared to the same period in 2023.

Total other income (expense), net for the nine months ended September 30, 2024 includes a net gain of $20.6 million associated with the deferred compensation plan.

For the same period in 2023, total other income, net includes a net gain of $7.7 million associated with the deferred compensation plan.

Excluding the impact of the deferred compensation plan, total other income (expense), net decreased by $6.0 million, primarily due to higher expense related to contingent consideration fair value adjustments of $4.3 million, as a result of assuming $5.3 million contingent purchase price liabilities from CBIZ CPAs P.C., $1.4 million higher other expenses, and $0.3 million higher interest expense.

Three months ended March 31, 2025 compared to March 31, 2024

Total operating expenses increased by $11.6 million during the three months ended March 31, 2025, as compared to the same period in 2024.

The deferred compensation plan increased operating expenses by $2.4 million for the three months ended March 31, 2025 and increased operating expenses by $8.6 million during the same period in 2024.

Excluding the deferred compensation expenses, operating expenses decreased by $0.5 million during the three months ended March 31, 2025, as compared to the same period in 2024.

The decrease was primarily driven by lower personnel costs.

Total corporate general and administrative expenses increased by $9.4 million, or 50.0%, during the three months ended March 31, 2025, as compared to the same period in 2024.

The deferred compensation plan decreased corporate general and administrative expenses by $0.1 million for the three months ended March 31, 2025 and increased corporate general and administrative expenses by $1.1 million during the same period in 2024.

Excluding the deferred compensation expenses, corporate general and administrative expense increased by approximately $10.5 million during the three months ended March 31, 2025, as compared to the same period in 2024.

The G&A expenses for the three months ended March 31, 2025 included approximately $7.7 million integration costs primarily associated with the Transaction.

For the three months ended March 31, 2024, there were approximately $0.5 million non-recurring transaction and integration costs associated with acquisitions.

Total other (expense) income, net increased by $32.4 million during the three months ended March 31, 2025, as compared to the same period in 2024.

For the three months ended March 31, 2025, total other (expense) income, net includes a net loss of $2.6 million associated with the deferred compensation plan.

For the same period in 2024, total other expense, net includes a net gain of $9.6 million associated with the deferred compensation plan.

Excluding the impact of the deferred compensation plan, total other income (expense), net decreased by $20.2 million, primarily due to higher interest expense of $20.6 million, partially offset by a decrease of $0.3 million in interest income.

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

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

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

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

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

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

Trailing-twelve-month DSO, including the impact of acquisitions, was 97 days and 96 days at September 30, 2024 and 2023, respectively.

Trailing-twelve-month DSO, including the impact of acquisitions, was 96 days and 101 days at March 31, 2025 and 2024, respectively.

DSO at December 31, 2024 was 73 days.

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

Nine Months Ended September 30,

Three Months Ended March 31,

(Amounts in thousands)

Net cash provided by operating activities $ 68,168 $ 57,254

Net cash used in operating activities $ (88,266) $ (63,720)

Net cash used in investing activities (4,961) (28,702)

Net cash used in financing activities (85,222) (18,442)

Net cash provided by financing activities 55,363 71,188

Net decrease in cash, cash equivalents and restricted cash $ (37,864) $ (21,234)

Operating Activities - Cash provided by operating activities was $68.2 million during the nine months ended September 30, 2024, primarily consisted of working capital use of $108.4 million, which was offset by net income of $131.8 million and certain non-cash items, such as depreciation and amortization expense of $28.6 million, deferred income tax of $4.8 million, stock-based compensation expense of $7.4 million, and an adjustment to contingent earnout liability of $6.3 million.

Cash provided by operating activities was $57.3 million during the nine months ended September 30, 2023 and primarily consisted of net income of $133.7 million and certain non-cash items, such as depreciation and amortization expense of $27.0 million, deferred income tax of $6.7 million, and stock-based compensation expense of $9.7 million.

The cash inflow was offset by working capital use of $121.6 million during the nine months ended September 30, 2023.

Investing Activities - Cash used in investing activities during the nine months ended September 30, 2024 was $24.9 million and consisted primarily of $22.9 million used for business acquisitions, $9.7 million in capital expenditures, and $2.2 million in other investing activities primarily related to acquistion related working capital adjustment payments and notes receivable.

Operating Activities - Cash used in operating activities was $88.3 million during the three months ended March 31, 2025, primarily consisted of working capital use of $247.7 million, which was offset by net income of $122.8 million and certain non-cash items, such as depreciation and amortization expense of $24.8 million, deferred income tax of $4.3 million, stock-based compensation expense of $5.6 million, and an adjustment to contingent earnout liability of $0.5 million.

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

Investing Activities - Cash used in investing activities during the three months ended March 31, 2025 was $5.0 million and consisted primarily of $5.2 million in capital expenditures, and $0.1 million in other investing activities primarily related to acquisition related working capital adjustment payments and notes receivable.

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

Cash used in investing activities during the nine months ended September 30, 2023 was $76.6 million and consisted primarily of $53.1 million used for business acquisitions, $19.0 million in capital expenditures, and $11.4 million in other investing activities primarily related to working capital payments and notes receivable.

During the nine months ended September 30, 2023, the use of cash was offset by $5.2 million net cash inflow related to funds held for clients and other activities, $1.5 million related to the sale of one technology asset and $0.2 million in other cash payments related to certain prior divestitures.

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

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

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

The nature of these accounts is further described in Note 1, Basis of Presentation and Significant Accounting Policies, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Financing Activities - Cash used in financing activities during the nine months ended September 30, 2024 was $85.2 million and primarily consisted of $24.9 million in net proceeds from the credit facility, partially offset by $11.4 million cash used in share repurchases for tax withholding purposes, a $47.6 million net decrease in client fund obligations and $50.9 million in contingent consideration payments related to prior acquisitions.

Cash used in financing activities during the nine months ended September 30, 2023 was $18.4 million and primarily consisted of $66.2 million in share repurchases, a $49.6 million net decrease in client fund obligations and $40.1 million in contingent consideration payments related to prior acquisitions.

The use of cash was partially offset by $129.0 million in net proceeds from the credit facility and $8.4 million in proceeds from the exercise of stock options.

Financing Activities - Cash provided by financing activities during the three months ended March 31, 2025 was $55.4 million and primarily consisted of $127.5 million in net proceeds from the credit facility, partially offset by $7.6 million of cash used in share repurchases for tax withholding purposes, a $35.1 million net decrease in client fund obligations and $29.5 million in contingent consideration payments related to prior acquisitions.

Cash provided by

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

CAPITAL RESOURCES

Credit Facility - At September 30, 2024, we had $337.3 million outstanding under the 2022 credit facility as well as $3.2 million outstanding letters of credit.

Available funds under the 2022 credit facility, based on the terms of the commitment, were approximately $252.0 million at September 30, 2024.

The weighted average interest rate under the 2022 credit facility was 5.40% during the nine months ended September 30, 2024, compared to 5.16% for the same period in 2023.

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

As a result of the Transaction and related 2024 Credit Facilities as described in Note 12.

Subsequent Events, to the accompanying unaudited condensed consolidated financial statements, we have $1,465.5 million of outstanding debt under the 2024 Credit Facilities as of November 1, 2024.

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

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

Credit Facility - At March 31, 2025, we had $1,548.4 million outstanding under the 2024 Credit Facilities as well as $3.2 million of outstanding letters of credit.

Available funds under the 2024 Credit Facilities, based on the terms of the commitment, were approximately $384.0 million at March 31, 2025.

The weighted average interest rate under the 2024 Credit Facilities was 6.57% during the three months ended March 31, 2025, compared to 5.23% for the same period in 2024.

The 2024 Credit Facilities allow for the allocation of funds for future strategic initiatives, including acquisitions and the repurchase of our common stock, subject to the terms and conditions of the 2024 Credit Facilities.

Debt Covenant Compliance - Under the 2024 Credit Facilities, we are required to meet certain financial covenants with respect to (i) total leverage ratio and (ii) minimum interest charge coverage ratio.

We are in compliance with our financial covenants as of March 31, 2025.

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

For further discussion regarding our 2022 credit facility and debt as well as our 2024 Credit Facilities, refer to Note 4, Debt and Financing Arrangements and Note 12, Subsequent Events, respectively, to the accompanying unaudited condensed consolidated financial statements.

For further discussion regarding our 2024 Credit Facilities, refer to Note 5, Debt and Financing Arrangements, to the accompanying unaudited condensed consolidated financial statements.

Use of Capital - Our overall business objective continues to focus on making strategic acquisitions that allow us to strengthen our presence in existing markets, expand into high growth industries, and broaden our services to our existing offerings.

As a result of the Transaction and related 2024 Credit Facilities as described in Note 12.

Subsequent Events to the accompanying unaudited condensed consolidated financial statements, we have $1,465.5 million of outstanding debt under the 2024 Credit Facilities as of November 1, 2024.

As a result of the Transaction and related 2024 Credit Facilities we have $1,548.4 million of outstanding debt as of March 31, 2025.

In addition, we also have the financing flexibility and the capacity to actively repurchase shares of our common stock.

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

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

During the nine months ended September 30, 2024, we also repurchased 0.2 million shares of our common stock for tax withholding purposes at a total cost of approximately $11.4 million.

During the three months ended March 31, 2025 we completed no acquisitions.

During the three months ended March 31, 2025, we also repurchased 0.1 million shares of our common stock for tax withholding purposes at a total cost of approximately $7.7 million.

Cash Requirements - Cash requirements for the remainder of 2025 and beyond will include the repayment of outstanding debt and related interest, making strategic acquisitions, funding seasonal working capital requirements, making contingent purchase price payments for previous acquisitions, share repurchases, income tax payments, and capital expenditures.

We believe that cash provided by operations, as well as available funds under our 2025 Credit Facilities will be sufficient to meet cash requirements for the remainder of 2025 and beyond.

Refer to Note 12.

Subsequent Events to the accompanying unaudited condensed consolidated financial statements for further discussion of the 2024 Credit Facilities.

OFF-BALANCE SHEET ARRANGEMENTS

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“Business – Financial Services” and in Note 1, Basis of Presentation and Significant Accounting Policies, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024), which qualify as variable interest entities.

The accompanying unaudited condensed consolidated financial

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

We provide letters of credit to landlords (lessors) of our leased premises in lieu of cash security deposits, which totaled $3.2 million and $3.5 million at September 30, 2024 and December 31, 2023, respectively.

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

We provide letters of credit to landlords (lessors) of our leased premises in lieu of cash security deposits, which totaled $3.2 million and $3.2 million at March 31, 2025 and December 31, 2024, 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 September 30, 2024 and December 31, 2023, respectively.

The amount of license bonds outstanding was $2.2 million and $2.2 million at March 31, 2025 and December 31, 2024, respectively.

We have various agreements under 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 we customarily agree 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 is generally conditioned upon the other party making a claim.

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

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

As of March 31, 2025, we are not aware of any material obligations arising under indemnification agreements that would require payment.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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You can identify these statements by the fact that they do not relate strictly to historical or current facts.

Forward-looking statements are commonly identified by the use of such terms and phrases as "intends", "believes", "estimates", "expects", "projects", "anticipates", "foreseeable future", "seeks", and words or phrases of similar import in connection with any discussion of future operating or financial performance.

Forward-looking statements are commonly identified by the use of such terms and phrases as “will,” “could,” “can,” “may,” “strive,” “hope,” "intend," "believe," "estimate," ”continue,” “plan,” "expect," "project," "anticipate," “outlook,” "foreseeable future," "seek" and words or phrases of similar import in connection with any discussion of future operating or financial performance.

In particular, these include statements relating to future actions, future performance or results of current and anticipated services, sales efforts, expenses, and financial results.

From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public.

Any or all of our forward-looking statements in this Quarterly Report on Form 10-Q and in any other public statements that we make, are subject to certain risks and uncertainties that could cause actual results to

differ materially from those projected.

Such risks and uncertainties include, but are not limited to:

we may be more sensitive to revenue fluctuations than other companies, which could result in fluctuations in the market price of our common stock;

payments on accounts receivable may be slower than expected, or amounts due on receivables or notes may not be fully collectible;

we are dependent on the services of our executive officers, other key employees, producers and service personnel, the loss of whom may have a material adverse effect on our business, financial condition and results of operations;

restrictions imposed by independence requirements and conflict of interest rules may limit our ability to provide services to clients of the attest firms with which we have contractual relationships and the ability of such attest firms to provide attestation services to our clients;

our goodwill and intangible assets could become impaired, which could lead to material non-cash charges against earnings;

certain liabilities resulting from acquisitions are estimated and could lead to a material non-cash impact on earnings;

governmental regulations and interpretations are subject to changes, which could have a material adverse effect on our clients, our business, our business services operations, our business models, or our revenue;

changes in the United States healthcare or public health environment, including new healthcare legislation or regulations, may adversely affect the revenue and margins in our or our clients’ businesses;

our business could be adversely affected if Marcum does not perform to our expectations or we underestimate the liabilities we have assumed;

we are dependent on the services of our executive officers, and other key employees, the loss of whom may have a material adverse effect on our business, financial condition and results of operations;

restrictions imposed by independence requirements and conflict of interest rules, as well as the nature and terms of our current Administrative Service Agreements, limit our ability to provide services to clients of the attest firms with which we have contractual relationships and the ability of such attest firms to provide attestation services to our clients;

our goodwill and other intangible assets could become impaired, which could lead to material non-cash charges against earnings and a material impact on our results of operations and financial condition;

certain liabilities resulting from acquisitions are estimated and could lead to a material impact on our

results of operations;

we may fail to realize the anticipated benefits of acquisitions, or they may prove disruptive and could result in the combined business failing to meet our expectations;

recent Securities & Exchange Commission ("SEC") and Public Company Accounting Oversight Board ("PCAOB") sanctions against Marcum may adversely impact our performance and reputation;

if we are unable to implement and maintain effective internal control over financial reporting following the Transaction, we may fail to prevent or detect material misstatements in our financial statements, in which case investors could lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may decline;

we may not be able to acquire and finance additional businesses, which could limit our ability to pursue our business strategy;

we will incur transaction, integration, and restructuring costs in connection with our acquisition program;

governmental regulations and interpretations are subject to changes, which could have a material adverse effect on our financial condition;

changes in the United States healthcare environment, including new healthcare legislation, may adversely affect the revenue and margins in our healthcare benefit business;

we are subject to risks relating to processing customer transactions for our payroll and other transaction processing businesses;

cyber-attacks or other security breaches involving our computer systems or the systems of one or more of our vendors or clients could materially and adversely affect our business;

cyberattacks or other security breaches involving our computer systems or the systems of one or more of our vendors could materially and adversely affect our business;

we are subject to risk as it relates to software that we license from third parties;

we could be held liable for errors and omissions, contract claims, or other litigation judgments or expenses;

the future issuance of additional shares could adversely affect the price of our common stock;

our principal stockholders may have substantial control over our operations;

we are reliant on information processing systems and any failure or disruptions of these systems could have a material adverse effect on our business, financial condition and results of operations;

we could be held liable for errors and omissions;

the business services industry is competitive and fragmented, if we are unable to compete effectively, our business, financial condition and results of operations could be negatively impacted;

given our levels of share-based compensation, our tax rate may vary significantly depending on our stock price;

rapid technological changes could significantly impact our competitive position, client relationships and operating results and our ability to realize the anticipated benefits of the Transaction;

climate change legislation or regulations restricting emissions of greenhouse gases could result in increased operating costs;

the widespread outbreak of a communicable illness or any other public health crisis could adversely affect our business, financial condition and results of operations;

we require a significant amount of cash for interest payments on our debt and to expand our business as planned;

terms of our credit facility may adversely affect our ability to run our business and/or reduce stockholder returns;

terms of our amended and restated credit agreement the 2024 Credit Facilities could adversely affect our ability to run our business and/or reduce stockholder returns;

our failure to satisfy covenants in our debt instruments could cause a default under those instruments;

we are reliant on information processing systems and any failure of these systems could have a material adverse effect on our business, financial condition and results of operations;

we may not be able to acquire and finance additional businesses which may limit our ability to pursue our business strategy;

the business services industry is competitive and fragmented;

if we are unable to compete effectively, our business, financial condition and results of operations may be negatively impacted;

and there is volatility in our stock price.

With respect to the recently completed Transaction as described in Note 12.

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

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

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

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

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

the effects of the increased leverage of the Company following the Transaction;

and the other risks described in Item 1A.

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

our increased leverage following the Transaction may adversely impact our business;

we may be more sensitive to revenue fluctuations than other companies, which could result in fluctuations in the market price of our common stock;

the significant number of shares issuable as the stock consideration in the Transaction may adversely impact our stock price;

the future issuance of additional shares could adversely affect the price of our common stock;

there is volatility in our stock price;

and the price of our common stock could be adversely impacted if we do not perform to expectations following the Transaction.

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

Should one or more of these risks materialize, or should the underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected.

Should one or more of these risks materialize, or should the underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, projected or implied.

Consequently, no forward-looking statement can be guaranteed.

A more detailed description of risk factors may be found in our periodic filings with the SEC, including in “Item 1A, Risk Factors” of this Quarterly Report on Form 10-Q and in “Item 1A.

A more detailed description of risk factors may be found in our periodic filings with the SEC, including in “Item 1A.

Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024.

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

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

All forward-looking statements made in this Quarterly Report on Form 10-Q are made only as of the date hereof, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis