CBIZ, Inc. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 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. Risk Factors” included in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K for the year ended December 31, 2024. OVERVIEW We provide professional business services, products and solutions that help our clients grow and succeed by better managing their finances and employees. These services are primarily provided to small and medium-sized businesses, as well as individuals, governmental entities, and not-for-profit enterprises throughout the United States and parts of Canada. We deliver integrated services through three practice groups: Financial Services, Benefits and 21 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. Refer to the Annual Report on Form 10-K for the year ended December 31, 2024 for further discussion of our business and strategies, as well as the external relationships and regulatory factors that currently impact our operations. EXECUTIVE SUMMARY 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 $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. 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, 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 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. Privately negotiated transactions may include purchases from our employees, officers and directors, in accordance with the Securities and Exchange Commission (the “SEC”) rules. CBIZ management will determine the timing and amount of the purchases based on its evaluation of market conditions and other factors. 22 RESULTS OF OPERATIONS Revenue The following tables summarize total revenue for the three months ended March 31, 2025 and 2024: Three Months Ended March 31, 2025 % of Total 2024 % of Total $ Change % Change (Amounts in thousands, except percentages) Financial Services $ 713,661 85.1 % $ 372,630 75.4 % $ 341,031 91.5 % Benefits and Insurance Services 112,976 13.5 % 108,408 21.9 % 4,568 4.2 % National Practices 11,377 1.4 % 13,259 2.7 % (1,882) (14.2) % Total CBIZ $ 838,014 100.0 % $ 494,297 100.0 % $ 343,717 69.5 % A detailed discussion of same-unit revenue by practice group is included under “Operating Practice Groups.” Non-qualified Deferred Compensation Plan We sponsor a Non-qualified Deferred Compensation Plan (the "deferred compensation plan"), under which a CBIZ employee’s compensation deferral is held in a rabbi trust and invested accordingly as directed by the employee. Income and expenses related to the deferred compensation plan, which are recorded in "Corporate and Other" for segment reporting purposes, are included in “Operating expenses”, “Gross margin” and “Corporate general and administrative expenses” and are directly offset by deferred compensation gains or losses in “Other (expense) income, net” in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income. The deferred compensation plan has no impact on “Income before income tax expense” or diluted earnings per share. Income and expenses related to the deferred compensation plan for the three months ended March 31, 2025 and 2024 are as follows: Three Months Ended March 31, 2025 2024 (Amounts in thousands) 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, 2025 2024 (Amounts in thousands, except percentages) As Reported Deferred Compensation Plan Adjusted % of Revenue As Reported Deferred Compensation Plan Adjusted % of Revenue Gross margin $ 228,102 $ (2,432) $ 225,670 26.9 % $ 117,812 $ 8,576 $ 126,388 25.6 % Operating income 200,032 (2,551) 197,481 23.6 % 99,101 9,633 108,734 22.0 % 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 % 23 Operating Expenses The following tables summarize total operating expenses for the three months ended March 31, 2025 and 2024: Three Months Ended March 31, 2025 2024 $ Change % Change (Amounts in thousands, except percentages) Operating expenses by segment: Financial Services $ 510,493 $ 265,561 $ 244,932 92.2 % Benefits and Insurance Services 85,358 83,637 1,721 2.1 % National Practices 10,265 11,933 (1,668) (14.0) % Corporate and Other 3,796 15,354 (11,558) (75.3) % Total Operating expenses $ 609,912 $ 376,485 $ 233,427 62.0 % Operating expenses % of revenue 72.8 % 76.2 % Operating expenses excluding deferred compensation $ 612,344 $ 367,909 $ 244,435 66.4 % Operating expenses excluding deferred compensation % of revenue 73.1 % 74.4 % 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 $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. 24 Corporate General & Administrative (“G&A”) Expenses Three Months Ended March 31, 2025 2024 $ Change % Change (Amounts in thousands, except percentages) G&A expenses $ 28,070 $ 18,711 $ 9,359 50.0 % G&A expenses % of revenue 3.3 % 3.8 % G&A expenses excluding deferred compensation $ 28,189 $ 17,654 $ 10,535 59.7 % G&A expenses excluding deferred compensation % of revenue 3.4 % 3.6 % 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 March 31, 2025 2024 $ Change % Change (Amounts in thousands, except percentages) Interest expense $ (25,156) $ (4,511) $ (20,645) 457.7 % Other income (expense), net (1) (1,966) 9,424 (11,390) (120.9) % Total other income (expense), net $ (27,122) $ 4,913 $ (32,035) (652.0) % (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. 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 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 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. 25 Other Income (Expense), Net 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 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 March 31, 2025 2024 $ Change % Change (Amounts in thousands, except percentages) Income tax expense $ 50,137 $ 27,130 $ 23,007 84.8 % Effective tax rate 29.0 % 26.1 % 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 We deliver our integrated services through three practice groups: Financial Services, Benefits and Insurance Services, and National Practices. A description of these groups' operating results and factors affecting their businesses is provided below. 26 Financial Services Three Months Ended March 31, 2025 2024 $ Change % Change (Amounts in thousands, except percentages) Revenue $ 713,661 $ 372,630 $ 341,031 91.5 % Operating expenses 510,493 265,561 244,932 92.2 % Gross margin / Operating income 203,168 107,069 96,099 89.8 % Total other income, net 185 86 99 115.1 % Income before income tax expense $ 203,353 $ 107,155 $ 96,198 89.8 % Gross margin percent 28.5 % 28.7 % Three months ended March 31, 2025 compared to March 31, 2024 Revenue 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 $234.3 million and $87.8 million for the three months ended March 31, 2025 and 2024, respectively. Operating Expenses 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 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. 27 Benefits and Insurance Services Three Months Ended March 31, 2025 2024 $ Change % Change (Amounts in thousands, except percentages) Revenue $ 112,976 $ 108,408 $ 4,568 4.2 % Operating expenses 85,358 83,637 1,721 2.1 % Gross margin / Operating income 27,618 24,771 2,847 11.5 % Total other income, net 327 44 283 643.2 % Income before income tax expense $ 27,945 $ 24,815 $ 3,130 12.6 % Gross margin percent 24.4 % 22.8 % Three months ended March 31, 2025 compared to March 31, 2024 Revenue 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 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. 28 National Practices Three Months Ended March 31, 2025 2024 $ Change % Change (Amounts in thousands, except percentages) 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) % Income before income tax expenses $ 1,112 $ 1,326 $ (214) (16.1) % Gross margin percent 9.8 % 10.0 % Three months ended March 31, 2025 compared with March 31, 2024 Revenue and Operating Expenses The National Practices group is primarily driven by a cost-plus contract with a single client, which has existed since 1999. The cost-plus contract is a five-year contract with the most recent renewal through December 31, 2028. Revenues from this single client accounted for approximately 75% of the National Practice group’s revenue. 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. 29 Corporate and Other Corporate and Other are operating expenses that are not directly allocated to the individual business units. These expenses primarily consist of certain health care costs, gains or losses attributable to assets held in our deferred compensation plan, stock-based compensation, consolidation and integration charges, certain professional fees, certain advertising costs, and other various expenses. Three Months Ended March 31, 2025 2024 $ Change % Change (Amounts in thousands, except percentages) Operating expenses $ 3,796 $ 15,354 $ (11,558) (75.3) % Corporate general and administrative expenses 28,070 18,711 9,359 50.0 % Operating loss (31,866) (34,065) 2,199 (6.5) % 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 % 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 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 $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. 30 LIQUIDITY Our principal sources of liquidity are cash generated from operating activities and financing activities. Our cash flows from operating activities are driven primarily by our operating results and changes in our working capital requirements while our cash flows from financing activities are dependent upon our ability to access credit or other capital. We historically maintain low cash levels and apply any available cash to pay down the outstanding debt balance. We historically experience a use of cash to fund working capital requirements during the first quarter of each fiscal year. This is primarily due to the seasonal accounting and tax services period under the Financial Services practice group, as well as payment of accrued employees' incentives programs. Upon completion of the seasonal accounting and tax services period, cash provided by operations during the remaining three quarters of the fiscal year substantially exceeds the use of cash in the first quarter of the fiscal year. Accounts receivable balances increase in response to the first three months' revenue generated by the Financial Services practice group. A significant amount of this revenue is billed and collected in subsequent quarters. Days sales outstanding (“DSO”) represent accounts receivable and unbilled revenue (net of realization adjustments) at the end of the period, divided by trailing twelve months' daily revenue. 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 96 days and 101 days at March 31, 2025 and 2024, respectively. DSO at December 31, 2024 was 73 days. The following table presents selected cash flow information. For additional details, refer to the accompanying Condensed Consolidated Statements of Cash Flows. Three Months Ended March 31, 2025 2024 (Amounts in thousands) Net cash used in operating activities $ (88,266) $ (63,720) Net cash used in investing activities (4,961) (28,702) 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 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 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 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 31 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 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 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 we have $1,548.4 million of outstanding debt 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 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. OFF-BALANCE SHEET ARRANGEMENTS We maintain administrative service agreements with independent CPA firms (as described more fully under Item 1. “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 $3.2 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 $2.2 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 32 matters. Payment by us under such indemnification clauses is 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 March 31, 2025, we are not aware of any material obligations arising under indemnification agreements that would require payment. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The SEC defines critical accounting policies as those that are most important to the portrayal of a company’s financial condition and results and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our discussion and analysis of our results of operations, financial condition and liquidity is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets and liabilities, revenues and expenses and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements. As more information becomes known, these estimates and assumptions could change, which would have an impact on actual results that may differ materially from these estimates and judgments under different assumptions. We have not made any changes to our critical accounting policies and estimates as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. NEW ACCOUNTING PRONOUNCEMENTS Refer to Note 2, New Accounting Pronouncements, to the accompanying unaudited condensed consolidated financial statements for a discussion of recently issued accounting pronouncements. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including, without limitation, "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding our financial position, business strategy and plans and objectives for future performance are forward-looking statements. 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 “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: payments on accounts receivable may be slower than expected, or amounts due on receivables or notes may not be fully collectible; 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 33 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; 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 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 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; 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, 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 our Annual Report on Form 10-K for the year ended December 31, 2024. 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. 34