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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from________ to ________
Commission File Number 1-32961
CBIZ, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation
or organization)
6801 Brecksville Rd, Door N, Independence, Ohio
(Address of principal executive offices)
22-2769024
(I.R.S. Employer
Identification No.)
44131
(Zip Code)
(216) 447-9000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par ValueCBZNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes     No 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Class of Common StockOutstanding at April 25, 2022
Common Stock, par value $0.01 per share52,142,095



CBIZ, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
 
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2


PART I – FINANCIAL INFORMATION
Item 1.    Financial Statements
CBIZ, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
March 31,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$558 $1,997 
Restricted cash33,394 30,383 
Accounts receivable, net365,758 242,168 
Other current assets12,784 19,217 
Current assets before funds held for clients412,494 293,765 
Funds held for clients199,065 157,909 
Total current assets611,559 451,674 
Non-current assets:
Property and equipment, net43,184 43,423 
Goodwill and other intangible assets, net951,902 840,783 
Assets of deferred compensation plan132,284 136,321 
Operating lease right-of-use assets, net195,591 151,145 
Other non-current assets7,924 4,588 
Total non-current assets1,330,885 1,176,260 
Total assets$1,942,444 $1,627,934 
LIABILITIES
Current liabilities:
Accounts payable$70,431 $65,757 
Income taxes payable17,678 1,671 
Accrued personnel costs66,696 114,032 
Contingent purchase price liabilities49,976 34,373 
Operating lease liabilities34,910 30,586 
Other current liabilities18,070 18,755 
Current liabilities before client fund obligations257,761 265,174 
Client fund obligations200,614 158,115 
Total current liabilities458,375 423,289 
Non-current liabilities:
Bank debt298,900 155,300 
Debt issuance costs(359)(449)
Total long-term debt298,541 154,851 
Income taxes payable1,820 1,727 
Deferred income taxes, net18,960 15,440 
Deferred compensation plan obligations132,284 136,321 
Contingent purchase price liabilities86,558 44,766 
Operating lease liabilities185,122 145,808 
Other non-current liabilities936 1,184 
Total non-current liabilities724,221 500,097 
Total liabilities1,182,596 923,386 
STOCKHOLDERS' EQUITY
Common stock1,358 1,352 
Additional paid in capital777,731 770,117 
Retained earnings686,889 628,762 
Treasury stock(707,088)(694,716)
Accumulated other comprehensive income (loss)958 (967)
Total stockholders’ equity759,848 704,548 
Total liabilities and stockholders’ equity$1,942,444 $1,627,934 

See the accompanying notes to the unaudited condensed consolidated financial statements
3


CBIZ, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In thousands, except per share data)

Three Months Ended
March 31,
20222021
Revenue$391,722 $300,730 
Operating expenses290,299 223,971 
Gross margin101,423 76,759 
Corporate general and administrative expenses16,309 14,483 
Operating income85,114 62,276 
Other income (expense):
Interest expense(1,259)(877)
Other (expense) income, net(6,403)4,789 
Total other (expense) income, net(7,662)3,912 
Income from continuing operations before income tax
   expense
77,452 66,188 
Income tax expense19,321 15,972 
Income from continuing operations58,131 50,216 
Loss from discontinued operations, net of tax(4)(7)
Net income$58,127 $50,209 
Earnings per share:
Basic:
Continuing operations$1.12 $0.94 
Discontinued operations  
Net income$1.12 $0.94 
Diluted:
Continuing operations$1.10 $0.92 
Discontinued operations  
Net income$1.10 $0.92 
Basic weighted average shares outstanding52,119 53,366 
Diluted weighted average shares outstanding52,955 54,436 
Comprehensive income:
Net income$58,127 $50,209 
Other comprehensive income, net of tax1,925 854 
Comprehensive income$60,052 $51,063 

See the accompanying notes to the unaudited condensed consolidated financial statements
4


CBIZ, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
(In thousands)

Issued
Common
Shares
Treasury
Shares
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
(Loss) Income
Totals
December 31, 2021135,187 83,149 $1,352 $770,117 $628,762 $(694,716)$(967)$704,548 
Net income— — — — 58,127 — — 58,127 
Other comprehensive income— — — — — — 1,925 1,925 
Share repurchases— 148 — — — (5,999)— (5,999)
Indirect repurchase of shares for minimum tax withholding— 165 — — — (6,373)— (6,373)
Restricted stock units and awards92 — 1 (1)— — —  
Performance share units 211 — 2 (2)— — —  
Stock options exercised247 — 3 3,221 — — — 3,224 
Stock-based compensation— — — 3,689 — — — 3,689 
Business acquisitions19 — — 707 — — — 707 
March 31, 2022135,756 83,462 $1,358 $777,731 $686,889 $(707,088)$958 $759,848 

Issued
Common
Shares
Treasury
Shares
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
(Loss) Income
Totals
December 31, 2020134,144 80,045 $1,341 $740,970 $557,875 $(595,297)$(2,269)$702,620 
Net income— — — — 50,209 — — 50,209 
Other comprehensive income— — — — — — 854 854 
Share repurchases— 1,117 — — — (32,678)— (32,678)
Indirect repurchase of shares for minimum tax withholding— 47 — — — (1,464)— (1,464)
Restricted stock units and awards46 — 1 (1)— — —  
Stock options exercised397 — 4 4,404 — — — 4,408 
Stock-based compensation— — — 2,855 — — — 2,855 
Business acquisitions38 — — 979 — — — 979 
March 31, 2021134,625 81,209 $1,346 $749,207 $608,084 $(629,439)$(1,415)$727,783 

See the accompanying notes to the unaudited condensed consolidated financial statements
5


CBIZ, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended March 31,
20222021
Cash flows from operating activities:  
Net income$58,127 $50,209 
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization expense8,173 6,252 
Bad debt expense, net of recoveries549 58 
Adjustment to contingent earnout liability642 660 
Stock-based compensation expense3,689 2,855 
Deferred income taxes2,944 3,348 
Other, net52 96 
Changes in assets and liabilities, net of acquisitions and divestitures:
Accounts receivable, net(93,222)(54,651)
Other assets(2,441)(997)
Accounts payable3,370 (4,873)
Income taxes payable16,100 11,805 
Accrued personnel costs(39,243)(29,755)
Other liabilities(9,626)172 
Operating cash flows used in continuing operations(50,886)(14,821)
Operating cash flows used in discontinued operations(4)(6)
Net cash used in operating activities(50,890)(14,827)
Cash flows from investing activities:
Business acquisitions and purchases of client lists, net of cash acquired(72,469)(2,012)
Purchases of client fund investments(8,450) 
Proceeds from the sales and maturities of client fund investments2,370 3,090 
Proceeds from sales of divested operations55  
Change in funds held for clients85 83 
Additions to property and equipment(833)(1,146)
Other, net(2,289)214 
Net cash (used in) provided by investing activities(81,531)229 
Cash flows from financing activities:
Proceeds from bank debt268,000 235,700 
Payment of bank debt(124,400)(181,700)
Payment for acquisition of treasury stock(5,199)(31,678)
Indirect repurchase of shares for minimum tax withholding(6,373)(1,464)
Changes in client funds obligations42,499 (26,499)
Proceeds from exercise of stock options3,224 4,408 
Payment of contingent consideration for acquisitions(7,305)(1,670)
Other, net (57)
Net cash provided by (used in) financing activities170,446 (2,960)
Net increase (decrease) in cash, cash equivalents and restricted cash38,025 (17,558)
Cash, cash equivalents and restricted cash at beginning of year150,474 170,335 
Cash, cash equivalents and restricted cash at end of period$188,499 $152,777 
Reconciliation of cash, cash equivalents and restricted cash to the
  Condensed Consolidated Balance Sheets:
Cash and cash equivalents$558 $6,778 
Restricted cash33,394 27,618 
Cash equivalents included in funds held for clients154,547 118,381 
Total cash, cash equivalents and restricted cash$188,499 $152,777 

See the accompanying notes to the unaudited condensed consolidated financial statements
6


CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Selected Terms Used in Notes to the Condensed Consolidated Financial Statements
ASA – Administrative Service Agreement
ASC – Accounting Standards Codification
ASU – Accounting Standards Update
CPA firm – Certified Public Accounting firm
FASB – The Financial Accounting Standards Board
GAAP – United States Generally Accepted Accounting Principles
LIBOR – London Interbank Offered Rate
SEC – United States Securities and Exchange Commission
Description of Business: CBIZ, Inc. is a diversified services company which, acting through its subsidiaries, has been providing professional business services since 1996, primarily 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. CBIZ, Inc. manages and reports its operations along three practice groups: Financial Services, Benefits and Insurance Services and National Practices. A further description of products and services offered by each of the practice groups is provided in Note 12, Segment Disclosures, to the accompanying unaudited condensed consolidated financial statements.
Basis of Consolidation: The accompanying unaudited condensed consolidated financial statements include the operations of CBIZ, Inc. and all of its wholly-owned subsidiaries (“CBIZ”, the “Company”, “we”, “us”, or “our”), after elimination of all intercompany balances and transactions. These 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.
Unaudited Interim Financial Statements: The unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and applicable rules and regulations of the SEC regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
In the opinion of CBIZ management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows for the interim periods presented, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2022.
Use of Estimates: The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Changes in circumstances could cause actual results to differ materially from these estimates.
Changes in Accounting Policies: We have consistently applied the accounting policies for the periods presented as described in Note 1, Basis of Presentation and Significant Accounting Policies, to the consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
In 2021, CBIZ formed a grantor trust (the “Trust”) with Wilmington Savings Funds Society, FSB, a Federal savings bank, serving as trustee. The Trust holds the majority of the funds provided by CBIZ’s clients for payroll processing pending remittance to employees of those clients, tax authorities, and other payees. CBIZ is the sole beneficial owner of the Trust. The Trust is considered a variable interest
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entity in accordance with Accounting Standards Codification 810, Consolidation. CBIZ has both the power to direct the activities that most significantly impact the economic performance of the Trust (including the power to make all investment decisions for the Trust) and the right to receive benefits that could potentially be significant to the Trust (in the form of investment returns). As a result, CBIZ consolidates the Trust in its unaudited condensed consolidated financial statements.
NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS
The FASB ASC is the sole source of authoritative GAAP other than the SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an accounting standard to communicate changes to the FASB codification. We assess and review the impact of all accounting standards. Any accounting standards not listed below were reviewed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements of the Company.
Accounting Standards Issued But Not Yet Adopted
Reference Rate Reform: In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU are effective for all entities through December 31, 2022. We are currently evaluating the effect of this new standard on our consolidated financial statements and have not adopted any of the transition relief available under the new guidance as of March 31, 2022.
Subsequently, in January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which provides optional temporary guidance for entities transitioning away from the LIBOR and other interbank offered rates to new reference rates so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions within Topic 848. This ASU clarifies that the derivative instruments affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions provided in Topic 848. ASU 2021-01 is effective immediately for all entities. Entities may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. The amendments provided in this ASU do not apply to contract modifications made, as well as new hedging relationships entered into, after December 31, 2022, and to existing hedging relationships evaluated for effectiveness for periods after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. We are currently evaluating the effect of this new standard on our consolidated financial statements and have not adopted any of the transition relief available under the new guidance as of March 31, 2022.

NOTE 3. ACCOUNTS RECEIVABLE, NET
Accounts receivable, less allowance for doubtful accounts, reflects the net realizable value of receivables and approximates fair value. Unbilled revenue is recorded at estimated net realizable value. Assessing the collectability of the receivables (billed and unbilled) requires management judgment based on a combination of factors, including but not limited to, an evaluation of our historical incurred loss experience, credit-worthiness of our clients, age of the trade receivable balance, current economic conditions that may affect a client’s ability to pay, and reasonable and supportable forecasts. Receivables are charged-off against the allowance when the balance is deemed uncollectible.






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Accounts receivable, net, at March 31, 2022 and December 31, 2021 was as follows (in thousands):

March 31,
2022
December 31,
2021
Trade accounts receivable$226,704 $190,710 
Unbilled revenue, at net realizable value155,176 67,616 
Total accounts receivable381,880 258,326 
Allowance for doubtful accounts(16,122)(16,158)
Accounts receivable, net$365,758 $242,168 

Changes to the allowance for doubtful accounts for the three months ended March 31, 2022 and twelve months ended December 31, 2021 are as follows (in thousands):
March 31,
2022
December 31,
2021
Balance at beginning of period$(16,158)$(14,894)
Provision(1,270)(9,422)
Charge-offs, net of recoveries1,306 8,158 
Allowance for doubtful accounts$(16,122)$(16,158)

NOTE 4. DEBT AND FINANCING ARRANGEMENTS
2018 Credit Facility - Our primary financing arrangement is the $400 million unsecured credit facility (the “2018 credit facility” or the “credit facility”), which provides us with the capital necessary to meet our working capital needs as well as the flexibility to continue with our strategic initiatives, including business acquisitions and share repurchases. The 2018 credit facility matures in 2023. The balance outstanding under the 2018 credit facility was $298.9 million and $155.3 million at March 31, 2022 and December 31, 2021, respectively. Effective interest rates, including the impact of interest rate swaps associated with the 2018 credit facility, were as follows:
Three Months Ended
March 31,
20222021
Weighted average rates1.79%2.10%
Range of effective rates
1.08% - 3.64%
1.08% - 3.64%
We had approximately $94.8 million of available funds under the credit facility at March 31, 2022, net of outstanding letters of credit of $5.7 million. As of March 31, 2022, we were in compliance with our financial debt covenants.
Other Line of Credit - We have an unsecured $20.0 million line of credit by and among CBIZ Benefits and Insurance, Inc. and Huntington National Bank. We utilize this line to support our short-term funding requirements of payroll client fund obligations due to the investment of client funds, rather than liquidating client funds that have already been invested in available-for-sale securities. The line of credit, which was renewed on August 5, 2021 and will terminate on August 4, 2022, did not have a balance outstanding at March 31, 2022.
Refer to our Annual Report on Form 10-K for the year ended December 31, 2021 for additional details of our debt and financing arrangements.
Interest Expense - Interest expense, including amortization of deferred financing costs, commitment fees, line of credit fees, and other applicable bank charges, was as follows (in thousands):
Three Months Ended March 31,
20222021
2018 credit facility$1,259 $871 
Other 6 
Total$1,259 $877 
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NOTE 5. COMMITMENTS AND CONTINGENCIES
Letters of Credit and Guarantees - We provide letters of credit to landlords (lessors) of our leased premises in lieu of cash security deposits, which totaled $5.7 million and $3.4 million at March 31, 2022 and December 31, 2021, respectively. In addition, we provide license bonds to various state agencies to meet certain licensing requirements. The amount of license bonds outstanding was $2.3 million and $2.3 million at March 31, 2022 and December 31, 2021, respectively.
Legal Proceedings - On December 19, 2016, CBIZ Operations, Inc. (“CBIZ Operations”) was named as a defendant in a lawsuit filed by Zotec Partners, LLC (“Zotec”) in the Marion County Indiana Superior Court. After various amendments, the lawsuit asserts claims under Indiana law for securities, statutory and common law fraud or deception, unjust enrichment, breach of contract, and vicarious liability against CBIZ Operations and a former employee of CBIZ MMP in connection with the sale of the CBIZ MMP medical billing practice to Zotec. The plaintiff claims that CBIZ Operations had a duty to disclose the fact, unknown to employees of CBIZ Operations at the time of the transaction, that the former employee had a financial arrangement with a Zotec vendor at the time CBIZ Operations sold CBIZ MMP to Zotec. The plaintiff is seeking damages of up to $177.0 million out of the $200.0 million transaction price. Trial was held in October 2021. The jury found in favor of CBIZ on all fraud, contract and other claims before it. Zotec’s remaining claim for Indiana statutory securities fraud and CBIZ’s counterclaim for breach of contract against Zotec will be addressed by the trial Judge at a later date.
In addition to the item disclosed above, the Company is, from time to time, subject to claims and lawsuits arising in the ordinary course of business. We cannot predict the outcome of all such matters or estimate the possible loss, if any. Although the proceedings are subject to uncertainties in the litigation process and the ultimate disposition of these proceedings is not presently determinable, we intend to vigorously defend these matters.

NOTE 6. FINANCIAL INSTRUMENTS
Available-For-Sale Debt Securities - In connection with certain services provided by our payroll operations, we collect funds from our clients’ accounts in advance of paying client obligations. These funds held for clients are segregated and invested in accordance with our investment policy, which requires all investments carry an investment grade rating at the time of initial investment. These investments, primarily consisting of corporate and municipal bonds, are classified as available-for-sale and are included in the “Funds held for clients” line item on the accompanying Condensed Consolidated Balance Sheets. The par value of these investments totaled $43.1 million and $37.0 million at March 31, 2022 and December 31, 2021, respectively, and had maturity or callable dates ranging from April 2022 through November 2025.
At March 31, 2022, unrealized losses on the securities were not material and have not been recognized as a credit loss because the bonds are investment grade quality and management is not required or does not intend to sell prior to an expected recovery in value. The bond issuers continue to make timely principal and interest payments.
The following table summarizes activities related to these investments for the three months ended March 31, 2022 and the twelve months ended December 31, 2021 (in thousands):
Three Months Ended March 31, 2022Twelve Months Ended December 31, 2021
Fair value at beginning of period$38,670 $25,708 
Purchases8,450 26,980 
Redemptions(400)(6,530)
Maturities (1,970)(8,347)
Change in bond premium206 1,517 
Fair market value adjustment(1,291)(658)
Fair value at end of period$43,665 $38,670 
In addition to the available-for-sale debt securities discussed above, we also held other depository assets in the amount of $0.9 million and $1.1 million at March 31, 2022 and December 31, 2021, respectively. Those depository assets are classified as Level 1 in the fair value hierarchy.
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Interest Rate Swaps - We utilize interest rate swaps to manage interest rate risk exposure associated with our floating-rate debt under the 2018 credit facility, or the forecasted acquisition of such liability. We do not purchase or hold any derivative instruments for trading or speculative purposes. Refer to the Annual Report on Form 10-K for the year ended December 31, 2021 for further discussion on our interest rate swaps.
As of March 31, 2022, we have four interest rate swaps outstanding. Under the terms of the interest rate swaps, we pay interest at a fixed rate of interest plus applicable margin as stated in the agreements, and receive interest that varies with the one-month LIBOR. The notional value, fixed rate of interest and expiration date of each interest rate swap as of March 31, 2022 is (i) $20.0 million – 1.770% - May 2022, (ii) $15.0 million – 2.640% - June 2023, (iii) $50.0 million - 0.885% - April 2025 and (iv) $30.0 million - 1.249% - December, 2026. Refer to Note 7, Fair Value Measurements, for additional disclosures regarding fair value measurements.
The following table summarizes our outstanding interest rate swaps and their classification in the accompanying Condensed Consolidated Balance Sheets at March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022
Notional
Amount
Fair
Value
Balance Sheet Location
Interest rate swap$20,000 $(32)Other current liability
Interest rate swap$15,000 $(128)Other non-current liability
Interest rate swaps$80,000 $3,738 Other non-current assets
December 31, 2021
Notional
Amount
Fair
Value
Balance Sheet Location
Interest rate swap$20,000 $(120)Other current liability
Interest rate swaps$45,000 $(496)Other non-current liabilities
Interest rate swap$50,000 $405 Other non-current asset
The following table summarizes the effects of the interest rate swaps on the accompanying Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021 (in thousands):
Gain Recognized
in AOCI, net of tax
Loss Reclassified
from AOCL into Expense
Three Months Ended
March 31,
Three Months Ended
March 31,
2022202120222021
Interest rate swaps$2,607 $961 $(343)$(285)

NOTE 7. FAIR VALUE MEASUREMENTS
The following table summarizes our assets and (liabilities) at March 31, 2022 and December 31, 2021, respectively, that are measured at fair value on a recurring basis subsequent to initial recognition and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (in thousands):
LevelMarch 31, 2022December 31, 2021
Deferred compensation plan assets1$132,284 $136,321 
Available-for-sale debt securities143,665 38,670 
Other depository assets1853 1,144 
Deferred compensation plan liabilities1(132,284)(136,321)
Interest rate swaps23,578 (211)
Contingent purchase price liabilities3(136,534)(79,139)
During the three months ended March 31, 2022 and 2021, there were no transfers between the valuation hierarchy Levels 1, 2 and 3. The following table summarizes the change in Level 3 fair values
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of our contingent purchase price liabilities for the three months ended March 31, 2022 and 2021 (pre-tax basis) (in thousands):
20222021
Beginning balance – January 1$(79,139)$(54,391)
Additions from business acquisitions(64,648)(1,622)
Settlement of contingent purchase price liabilities7,895 2,443 
Change in fair value of contingencies80 (279)
Change in net present value of contingencies(722)(381)
Ending balance – March 31$(136,534)$(54,230)
Contingent purchase price liabilities result from our business acquisitions and are recorded at fair value at the time of acquisition and are presented as “Contingent purchase price liabilities — current” and “Contingent purchase price liabilities — non-current” in the accompanying Condensed Consolidated Balance Sheets. We estimate the fair value of our contingent purchase price liabilities using a probability-weighted discounted cash flow model. This fair value measure is based on significant inputs not observed in the market and thus represents a Level 3 measurement. Fair value measurements characterized within Level 3 of the fair value hierarchy are measured based on unobservable inputs that are supported by little or no market activity and reflect our own assumptions in measuring fair value.
We probability weight risk-adjusted estimates of future performance of acquired businesses, then calculate the contingent purchase price based on the estimates and discount them to present value representing management’s best estimate of fair value. The fair value of the contingent purchase price liabilities is reassessed quarterly based on assumptions provided by practice group leaders and business unit controllers together with our corporate finance department. Any change in the fair value estimate is recorded in the earnings of that period. Refer to Note 11, Business Combinations, for further discussion of our acquisitions and contingent purchase price liabilities.
The carrying amounts of our cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments, and the carrying value of bank debt approximates fair value as the interest rate on the bank debt is variable and approximates current market rates. As a result, the fair value measurement of our bank debt is considered to be Level 2 under the fair value hierarchy.

NOTE 8. OTHER COMPREHENSIVE INCOME
The following table is a summary of other comprehensive income and discloses the tax impact of each component of other comprehensive income for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended
March 31,
20222021
Net unrealized loss on available-for-sale
   securities, net of income taxes (1)
$(939)$(103)
Net unrealized gain on interest rate swaps, net of income taxes (2)
2,866 961 
Foreign currency translation(2)(4)
Total other comprehensive income $1,925 $854 

(1)Net of income tax benefit of $352 and income tax benefit of $39 for the three months ended March 31, 2022 and 2021, respectively.
(2)Net of income tax expense of $928 and income tax expense of $310 for the three months ended March 31, 2022 and 2021, respectively.

NOTE 9. EMPLOYEE STOCK PLANS
The 2019 Stock Omnibus Incentive Plan (the “2019 Plan”), which expires in 2029, permits the grant of various forms of stock-based awards. The terms and vesting schedules for the stock-based awards vary by type and date of grant. A maximum of 3.1 million stock options, restricted stock or other stock-
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based compensation awards may be granted. Shares subject to award under the 2019 Plan may be either authorized but unissued shares of our common stock or treasury shares. Refer to the Annual Report on Form 10-K for the year ended December 31, 2021 for further discussion on the 2019 Plan.
Compensation expense for stock-based awards recognized during the three months ended March 31, 2022 and 2021 was as follows (in thousands):
Three Months Ended
March 31,
20222021
Stock options$173 $301 
Restricted stock units and awards1,493 1,381 
Performance share units2,023 1,173 
Total stock-based compensation expense$3,689 $2,855 
Stock Options and Restricted Stock Units and Awards – The following table presents our stock options and restricted stock units and awards activity during the three months ended March 31, 2022 (in thousands, except per share data):
Stock OptionsRestricted Stock Units and Awards
Number of
Options
Weighted Average Exercise Price
Per Share
Number of
Shares
Weighted Average
Grant-Date
Fair Value (1)
Outstanding at beginning of year1,223 $17.71 389 $25.07 
Granted $ 101 $38.12 
Exercised or released(247)$13.05 (146)$24.04 
Outstanding at March 31, 2022976 $18.89 344 $29.34 
Exercisable at March 31, 2022828 $18.79 

(1)Represents weighted average market value of the shares; awards are granted at no cost to the recipients.
Performance Share Units (“PSUs”) – PSUs are earned based on our financial performance over a contractual term of three years and the associated expense is recognized over that period based on the fair value of the award. A three-year cliff vesting schedule of the PSUs is dependent upon the Company’s performance relative to pre-established goals based on an earnings per share target (weighted 70%) and total growth in revenue (weighted 30%). The fair value of PSUs is calculated using the market value of a share of our common stock on the date of grant. For performance achieved above specified levels, the recipient may earn additional shares of stock, not to exceed 200% of the number of PSUs initially granted.
The following table presents our PSU award activity during the three months ended March 31, 2022 (in thousands, except per share data):
Performance
Share Units
Weighted
Average
Grant-Date
Fair Value
Per Unit (1)
Outstanding at beginning of year473 $23.64 
Granted101 $38.12 
Vested(211)$19.82 
Outstanding at March 31, 2022363 $29.89 
(1)Represents weighted average market value of the performance share units; PSUs are granted at no cost to the recipients.




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NOTE 10. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share from continuing operations for the three months ended March 31, 2022 and 2021 (in thousands, except per share data):
Three Months Ended
March 31,
20222021
Numerator:
Income from continuing operations$58,131 $50,216 
Denominator:
Basic
Weighted average common shares outstanding52,119 53,366 
Diluted
Stock options (1)
619 776 
Restricted stock units and awards (1)
217 257 
Contingent shares (2)
 37 
Diluted weighted average common shares
   outstanding (3)
52,955 54,436 
Basic earnings per share from continuing operations$1.12 $0.94 
Diluted earnings per share from continuing operations$1.10 $0.92 

(1)A total of 55 thousand and 1 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2022 and 2021 respectively, as their effect would be anti-dilutive.
(2)Contingent shares represent additional shares to be issued for purchase price earned by former owners of businesses acquired by us once future considerations have been met. Refer to Note 11, Business Combinations, for further details.
(3)The denominator used in calculating diluted earnings per share did not include 363 thousand and 447 thousand performance share units for the three months ended March 31, 2022 and 2021, respectively. The performance conditions associated with these performance share units were not met and consequently none of these performance share units were considered as issuable for the three months ended March 31, 2022 and 2021.

NOTE 11. BUSINESS COMBINATIONS
Business Combinations
During the three months ended March 31, 2022, we completed the following acquisition:
Effective January 1, 2022, we acquired all of the non-attest assets of Marks Paneth LLP ("Marks Paneth"). Marks Paneth, based in New York City, is a provider of a full range of accounting, tax and consulting services to a wide range of industries. Marks Paneth is included as a component of our Financial Services practice group. Mayer Hoffman, an unrelated party, acquired the attest assets from Marks Paneth in a separate transaction. Operating results are reported in the Financial Services practice group.
During the three months ended March 31, 2021, we completed the following acquisition:
Effective January 1, 2021, we acquired substantially all the assets of Middle Market Advisory Group (“MMA”). MMA, based in Englewood, Colorado, is a provider of tax compliance and consulting services to middle market companies and family groups in the real estate, automotive, technology and SAAS, construction, and manufacturing industries. Operating results are reported in the Financial Services practice group.
The acquisition of Marks Paneth is expected to add approximately $138.0 million revenue in 2022. For the three months ended March 31, 2022, we recorded approximately $6.0 million non-recurring transaction, retention and integration related costs associated with this acquisition. Pro forma results of operations for these acquisitions have not been presented because the effects of these acquisitions
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were not material, either individually or in aggregate, to our total revenue, income from continuing operations, and net income for the three months ended March 31, 2022 and 2021, respectively.
The following table summarizes the consideration and preliminary purchase price allocation for the acquisitions completed during the three months ended March 31, 2022 and 2021, respectively (in thousands):
20222021
Cash paid 72,469 1,900 
Recorded contingent consideration64,648 1,622 
Total recorded purchase price$137,117 $3,522 
Accounts receivable acquired18,230  
Fixed assets acquired1,793  
Identifiable intangible assets acquired48,000 2,069 
Operating lease right-of-use asset acquired49,291  
Other assets acquired1,497  
Operating lease liability acquired - current(5,860) 
Other current liabilities acquired(909) 
Operating lease liability acquired - noncurrent(43,431) 
Goodwill 68,506 1,453 
Total net assets acquired$137,117 $3,522 
Maximum potential contingent consideration$67,115 $1,700 
Provisional estimates of fair value are established at the time of each acquisition and are subsequently reviewed within the first year of operations subsequent to the acquisition date to determine the necessity for adjustments. Fair value estimates of the Marks Paneth acquisition were provisional as of March 31, 2022, primarily related to the value established for certain identifiable intangible assets and contingent purchase price consideration.
The following table summarizes the goodwill and intangible asset amounts resulting from those acquisitions for the three months ended March 31, 2022 and 2021, respectively (in thousands):
Three Months Ended March 31,
20222021
Financial ServicesFinancial Services
Goodwill$68,506 $1,453 
Client list48,000 1,980 
Other intangibles 89 
Total $116,506 $3,522 
Goodwill is calculated as the difference between the aggregated purchase price and the fair value of the net assets acquired. Goodwill represents the value of expected future earnings and cash flows, as well as the synergies created by the integration of the new businesses within our organization, including cross-selling opportunities expected with our Financial Services practice group and the Benefits and Insurance Services practice group, to help strengthen our existing service offerings and expand our market position. Goodwill related to these acquisitions is deductible for tax purposes. Client lists have an expected life of 10 years, and other intangibles, primarily non-compete agreements, have an expected life of 3 years. Client lists and non-compete agreements are valued using a discounted cash flow technique based on management estimates of future cash flows from such assets.




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The following table summarizes the changes in contingent purchase price consideration for previous acquisitions and contingent payments made for previous business acquisitions in the three months ended March 31, 2022 and 2021, respectively (in thousands):
Three Months Ended March 31,
20222021
Net expense$642 $660 
Cash settlement paid$7,077 $1,463 
Shares issued (number) 1938

NOTE 12. SEGMENT DISCLOSURES
Our business units have been aggregated into three practice groups: Financial Services, Benefits and Insurance Services and National Practices. The business units have been aggregated based on the following factors: similarity of the products and services provided to clients; similarity of the regulatory environment in which they operate; and similarity of economic conditions affecting long-term performance. The business units are managed along these segment lines. A general description of services provided by each practice group is provided in the table below.
Financial ServicesBenefits and Insurance ServicesNational Practices
Accounting and TaxEmployee Benefits ConsultingInformation Technology Managed Networking and Hardware Services
Financial AdvisoryPayroll / Human Capital ManagementHealthcare Consulting
ValuationProperty and Casualty Insurance
Risk and Advisory ServicesRetirement and Investment Services
Government Healthcare Consulting
Corporate and Other - Included in Corporate and Other are operating expenses that are not directly allocated to the individual business units. These expenses primarily consist of certain health care costs, gains or losses attributable to assets held in our non-qualified deferred compensation plan, stock-based compensation, consolidation and integration charges, certain professional fees, certain advertising costs and other various expenses.
Accounting policies of the practice groups are the same as those described in Note 1, Basis of Presentation and Significant Accounting Policies, to the Annual Report on Form 10-K for the year ended December 31, 2021. Upon consolidation, intercompany accounts and transactions are eliminated, thus inter-segment revenue is not included in the measure of profit or loss for the practice groups. Performance of the practice groups is evaluated on income (loss) from continuing operations before income tax expense (benefit) excluding those costs listed above, which are reported in the “Corporate and Other”.
Segment information for the three months ended March 31, 2022 and 2021 is presented below. We do not manage our assets on a segment basis, therefore segment assets are not presented below.







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The following table disaggregates our revenue by source (in thousands):
Three Months Ended March 31, 2022
Financial
Services
Benefits and
Insurance Services
National
Practices
Consolidated
Accounting, tax, advisory and consulting$288,746 $288,746 
Core benefits and insurance services88,936 88,936 
Non-core benefits and insurance services3,550 3,550 
Managed networking, hardware services7,921 7,921 
National practices consulting2,569 2,569 
Total revenue$288,746 $92,486 $10,490 $391,722 

Three Months Ended March 31, 2021
Financial
Services
Benefits and
Insurance Services
National
Practices
Consolidated
Accounting, tax, advisory and consulting$204,149 $204,149 
Core benefits and insurance services84,070 84,070 
Non-core benefits and insurance services3,169 3,169 
Managed networking, hardware services6,895 6,895 
National practices consulting2,447 2,447 
Total revenue$204,149 $87,239 $9,342 $300,730 

Segment information for the three months ended March 31, 2022 and 2021 was as follows (in thousands):
Three Months Ended March 31, 2022
Financial
Services
Benefits
and
Insurance
Services
National
Practices
Corporate
and
Other
Total
Revenue$288,746 $92,486 $10,490 $ $391,722 
Operating expenses (income)209,800 72,657 9,576 (1,734)290,299 
Gross margin78,946 19,829 914 1,734 101,423 
Corporate general and administrative expenses   16,309 16,309 
Operating income (loss)78,946 19,829 914 (14,575)85,114 
Other income (expense):
Interest expense   (1,259)(1,259)