CBIZ, Inc. [CBZ] Filings

10-Q 1 cbz-20240630.htm 10-Q cbz-20240630

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 June 30, 2024


☐			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)

5959 Rockside Woods, N. Suite 600 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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	CBZ	New 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 filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller 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 Stock			Outstanding at July 29, 2024
Common Stock, $0.01 per share			50,161,633

CBIZ, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


PART I.	FINANCIAL INFORMATION:		Page

	Item 1.	Financial Statements	3

		Condensed Consolidated Balance Sheets (Unaudited) – J une 30 , 2024 and December 31, 2023	3

		Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Three and Six Months Ended June 30 , 2024 and 2023	4

		Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) – Three and Six Months Ended June 30 , 2024 and 2023	5

		Condensed Consolidated Statements of Cash Flows (Unaudited) – Six Months Ended June 30 , 2024 and 2023	7

		Notes to the Condensed Consolidated Financial Statement s (Unaudited)	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

	Item 3.	Quantitative and Qualitative Disclosures A bout Market Risk	39

	Item 4.	Controls and Procedures	39

PART II.	OTHER INFORMATION:

	Item 1.	Legal Proceedings	41

	Item 1A.	Risk Factors	41

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

	Item 3.	Defaults Upon Senior Securities	43

	Item 4.	Mine Safety Disclosures	43

	Item 5.	Other Information	43

	Item 6.	Exhibits	44

	Signature		45

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CBIZ, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands)


	June 30, 2024		December 31, 2023

ASSETS
Current assets:
Cash and cash equivalents	$	1,128	$	8,090
Restricted cash	44,947		30,362
Accounts receivable, net	477,841		380,152
Other current assets	38,892		34,895
Current assets before funds held for clients	562,808		453,499
Funds held for clients	131,128		159,186
Total current assets	693,936		612,685
Non-current assets:
Property and equipment, net	56,667		57,012
Goodwill and other intangible assets, net	1,035,148		1,008,604
Assets of deferred compensation plan	162,133		143,499
Right-of-use assets, net	203,972		211,024
Other non-current assets	8,949		10,768
Total non-current assets	1,466,869		1,430,907
Total assets	$	2,160,805	$	2,043,592
LIABILITIES
Current liabilities:
Accounts payable	$	109,253	$	82,831
Income taxes payable	7,374		2,097
Accrued personnel costs	95,267		133,593
Contingent purchase price liabilities	54,780		66,287
Operating lease liabilities	38,077		36,283
Other current liabilities	31,389		30,937
Current liabilities before client fund obligations	336,140		352,028
Client fund obligations	131,623		159,893
Total current liabilities	467,763		511,921
Non-current liabilities:
Bank debt	381,000		312,400
Debt issuance costs	(1,340)		(1,574)
Total long-term debt, net	379,660		310,826
Income taxes payable	2,149		1,984
Deferred income taxes, net	32,726		29,287
Deferred compensation plan obligations	162,133		143,499
Contingent purchase price liabilities	29,059		48,659
Lease liabilities	194,704		203,905
Other non-current liabilities	1,177		1,893
Total non-current liabilities	801,608		740,053
Total liabilities	1,269,371		1,251,974
STOCKHOLDERS' EQUITY
Common stock	1,379		1,374
Additional paid in capital	845,962		832,475
Retained earnings	951,761		855,084
Treasury stock	(910,322)		(899,093)
Accumulated other comprehensive income	2,654		1,778
Total stockholders’ equity	891,434		791,618
Total liabilities and stockholders’ equity	$	2,160,805	$	2,043,592

See the accompanying notes to the unaudited condensed consolidated financial statements

CBIZ, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue	$	420,012	$	398,502	$	914,309	$	853,108
Operating expenses	366,368		343,987		742,853		684,998
Gross margin	53,644		54,515		171,456		168,110
Corporate general and administrative expenses	22,050		15,793		40,761		31,391


Operating income	31,594		38,722		130,695		136,719
Other (expense) income:
Interest expense	(5,884)		(5,534)		(10,395)		(9,175)
Gain on sale of operations, net	—		—		—		99

Other income, net	2,483		5,421		11,907		10,533
Total other (expense) income, net	(3,401)		(113)		1,512		1,457
Income before income tax expense	28,193		38,609		132,207		138,176
Income tax expense	8,400		11,746		35,530		38,153
Net Income	19,793		26,863		96,677		100,023


Earnings per share:



Basic	$	0.39	$	0.54	$	1.93	$	1.99



Diluted	$	0.39	$	0.53	$	1.92	$	1.98
Basic weighted average shares outstanding	50,111		49,963		50,079		50,164
Diluted weighted average shares outstanding	50,276		50,385		50,248		50,639
Comprehensive income:
Net income	$	19,793	$	26,863	$	96,677	$	100,023
Other comprehensive (loss) income, net of tax	(142)		1,537		876		324
Comprehensive income	$	19,651	$	28,400	$	97,553	$	100,347

See the accompanying notes to the unaudited condensed consolidated financial statements

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 Income (Loss)		Totals
March 31, 2024	137,855	87,743	$	1,379	$	841,268	$	931,968	$	(910,322)	$	2,796	$	867,089
Net income	—	—	—		—		19,793		—		—		19,793
Other comprehensive loss	—	—	—		—		—		—		(142)		(142)


Restricted stock units and awards	16	—	—		—		—		—		—		—


Stock-based compensation	—	—	—		2,378		—		—		—		2,378
Business acquisitions	34	—	—		2,316		—		—		—		2,316

June 30, 2024	137,905	87,743	$	1,379	$	845,962	$	951,761	$	(910,322)	$	2,654	$	891,434


	Issued Common Shares	Treasury Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income		Totals
March 31, 2023	137,024	86,712	$	1,370	$	814,686	$	807,276	$	(853,793)	$	2,391	$	771,930
Net income	—	—	—		—		26,863		—		—		26,863
Other comprehensive income	—	—	—		—		—		—		1,537		1,537
Share repurchases	—	547	—		—		—		(27,737)		—		(27,737)

Restricted stock units and awards	21	—	—		—		—		—		—		—

Stock options exercised	32	—	1		622		—		—		—		623
Stock-based compensation	—	—	—		2,788		—		—		—		2,788
Business acquisitions	4	—	—		210		—		—		—		210
Excise tax on share repurchases	—	—	$	—	$	387	$	—	$	(558)	$	—	$	(171)
June 30, 2023	137,081	87,259	$	1,371	$	818,693	$	834,139	$	(882,088)	$	3,928	$	776,043

See the accompanying notes to the unaudited condensed consolidated financial statement

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 Income		Totals
December 31, 2023	137,387	87,573	$	1,374	$	832,475	$	855,084	$	(899,093)	$	1,778	$	791,618
Net income	—	—	—		—		96,677		—		—		96,677
Other comprehensive income	—	—	—		—		—		—		876		876

Indirect repurchase of shares for minimum tax withholding	—	170	—		—		—		(11,229)		—		(11,229)
Restricted stock units and awards	118	—	1		(1)		—		—		—		—
Performance share units	273	—	3		(3)		—		—		—		—

Stock-based compensation	—	—	—		5,016		—		—		—		5,016
Business acquisitions	127	—	1		8,475		—		—		—		8,476

June 30, 2024	137,905	87,743	$	1,379	$	845,962	$	951,761	$	(910,322)	$	2,654	$	891,434


	Issued Common Shares	Treasury Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income		Totals
December 31, 2022	136,295	86,115	$	1,363	$	799,147	$	734,116	$	(824,778)	$	3,604	$	713,452
Net income	—	—	—		—		100,023		—		—		100,023
Other comprehensive income	—	—	—		—		—		—		324		324
Share repurchases	—	975	—		—		—		(48,528)		—		(48,528)
Indirect repurchase of shares for minimum tax withholding	—	169	—		—		—		(8,224)		—		(8,224)
Restricted stock units and awards	144	—	1		(1)		—		—		—		—
Performance share units	244	—	2		(2)		—		—		—		—
Stock options exercised	221	—	3		4,249		—		—		—		4,252
Stock-based compensation	—	—	—		6,619		—		—		—		6,619
Business acquisitions	177	—	2		8,294		—		—		—		8,296
Excise tax on share repurchases	—	—	$	—	$	387	$	—	$	(558)	$	—	$	(171)
June 30, 2023	137,081	87,259	$	1,371	$	818,693	$	834,139	$	(882,088)	$	3,928	$	776,043

See the accompanying notes to the unaudited condensed consolidated financial statements

CBIZ, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income	$	96,677	$	100,023
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	19,008		17,831
Gain on sale of operations, net	—		(99)
Bad debt expense, net of recoveries	1,244		805
Adjustment to contingent earnout liability	638		1,445
Stock-based compensation expense	5,016		6,619

Deferred income taxes	3,128		4,571
Other, net	273		100
Changes in assets and liabilities, net of acquisitions and divestitures:
Accounts receivable, net	(95,997)		(111,792)
Other assets	(1,663)		(11,594)
Accounts payable	25,058		45,350
Income taxes payable	5,443		11,913
Accrued personnel costs	(38,502)		(40,893)
Other liabilities	4,116		5,450


Net cash provided by operating activities	24,439		29,729
Cash flows from investing activities:
Business acquisitions and purchases of client lists, net of cash acquired	(22,493)		(48,630)
Purchases of client fund investments	(12,100)		—
Proceeds from the sales and maturities of client fund investments	12,421		3,190
Proceeds from sales of divested operations	—		245
Change in funds held for clients	(301)		305
Additions to property and equipment	(6,973)		(11,726)
Other, net	(3,801)		(9,001)
Net cash used in investing activities	(33,247)		(65,617)
Cash flows from financing activities:
Proceeds from bank debt	619,800		661,800
Payment of bank debt	(551,200)		(516,900)
Payment for acquisition of treasury stock	—		(48,764)
Indirect repurchase of shares for minimum tax withholding	(11,229)		(8,224)
Changes in client funds obligations	(28,270)		(40,398)
Proceeds from exercise of stock options	—		4,252
Payment of contingent consideration for acquisitions and client lists	(41,021)		(29,973)

Net cash (used in) provided by financing activities	(11,920)		21,793
Net decrease in cash, cash equivalents and restricted cash	(20,728)		(14,095)
Cash, cash equivalents and restricted cash at beginning of year	157,148		160,145
Cash, cash equivalents and restricted cash at end of period	$	136,420	$	146,050

Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets:
Cash and cash equivalents	$	1,128	$	3,692
Restricted cash	44,947		52,314
Cash equivalents included in funds held for clients	90,345		90,044
Total cash, cash equivalents and restricted cash	$	136,420	$	146,050

See the accompanying notes to the unaudited condensed consolidated financial statements

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

SOFR – Secured Overnight Financing 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 11, Segment Disclosures, to the accompanying unaudited condensed consolidated financial statements.

During the six months ended June 30, 2024, we completed the acquisitions of Erickson, Brown & Kloster, LLC ("EBK") and CompuData, Inc. ("CompuData") in our Financial Services practice group and Educational & Institutional Insurance Administrator, Inc.'s EIIA Higher Education Benefit Trust ("EIIA") in our Benefits and Insurance practice group for a total aggregated purchase price of $40.1 million, including $15.2 million recorded as contingent consideration. For the six months ended June 30, 2024, we recorded $12.6 million in total revenue from those acquisitions. None of the acquisition are considered material, individually or in the aggregate.

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, 2023.

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, 2024.

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, 2023.

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 ASU to communicate changes to the FASB ASC. We assess and review the impact of all issued ASUs. During the six months ended June 30, 2024, we have implemented all new ASUs that are in effect and that may impact our consolidated financial statements.

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.

Accounts receivable, net, at June 30, 2024 and December 31, 2023 was as follows (in thousands):


	June 30, 2024		December 31, 2023
Trade accounts receivable	$	365,199	$	309,640
Unbilled revenue, at net realizable value	147,040		96,110
Total accounts receivable	512,239		405,750
Allowance for doubtful accounts	(34,398)		(25,598)
Accounts receivable, net	$	477,841	$	380,152

Changes to the allowance for doubtful accounts for the six months ended June 30, 2024 and twelve months ended December 31, 2023 were as follows (in thousands):


	June 30, 2024		December 31, 2023
Balance at beginning of period	$	(25,598)	$	(20,801)
Provision	(11,119)		(13,681)
Charge-offs, net of recoveries	2,319		8,884
Allowance for doubtful accounts	$	(34,398)	$	(25,598)

NOTE 4. DEBT AND FINANCING ARRANGEMENTS

2022 Credit Facility - Our primary financing arrangement is the 2022 credit facility. The 2022 credit facility has a borrowing capacity of $600 million and 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 2022 credit facility matures on May 4, 2027. The balance outstanding under the 2022 credit facility was $381.0 million and $312.4 million at June 30, 2024 and December 31, 2023, respectively.

The effective interest rates under the 2022 credit facility, including the impact of interest rate swaps associated with the 2022 credit facility, for the six months ended June 30, 2024 and 2023 were as follows:


	Six Months Ended June 30,
	2024	2023
Weighted average rates	5.41%	4.94%
Range of effective rates	1.93% - 6.83%	1.93% - 8.00%

We had approximately $209.8 million of available funds under the 2022 credit facility at June 30, 2024, net of outstanding letters of credit of $3.2 million. Available funds under the 2022 credit facility are based on a multiple of earnings before interest, taxes, depreciation and amortization as defined in the 2022 credit facility, and are reduced by letters of credit, other indebtedness and outstanding borrowings under the 2022 credit facility. Under the 2022 credit facility, loans are charged an interest rate consisting of a base rate or term SOFR rate plus an applicable margin, letters of credit are charged based on the same applicable margin, and a commitment fee is charged on the unused portion of the 2022 credit facility.

The 2022 credit facility contains certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens or other encumbrances, making certain payments, investments, or to sell or otherwise dispose of a substantial portion of assets, or to merge or consolidate with an unaffiliated entity. The 2022 credit facility also limits our ability to make dividend payments. Historically, we have not paid cash dividends on our common stock. Our Board of Directors has discretion over the payment and level of dividends on common stock, subject to the limitations of the 2022 credit facility and applicable law. The 2022 credit facility contains a provision that, in the event of a defined change in control, the 2022 credit facility may be terminated. In addition, the 2022 credit facility contains financial covenants that require us to meet certain requirements with respect to (i) a total leverage ratio and (ii) minimum interest coverage ratio which may limit our ability to borrow up to the total commitment amount. As of June 30, 2024, we are in compliance with all covenants.

Refer to the Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion on the 2022 credit facility.

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 did not have a balance outstanding at June 30, 2024. On August 1, 2024, we renewed the line of credit and it will terminate on July 31, 2025.

Interest Expense - Interest expense, including amortization of deferred financing costs, commitment fees, line of credit fees, and other applicable bank charges, for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Credit facilities	$	5,881	$	5,498	$	10,392	$	9,138

Other	3		36		3		37
Total	$	5,884	$	5,534	$	10,395	$	9,175

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 $3.2 million and $3.5 million at June 30, 2024 and December 31, 2023, respectively. In addition, we provide license bonds to various state agencies to meet certain licensing requirements. The amount of license bonds outstanding was $2.3 million and $2.3 million at June 30, 2024 and December 31, 2023, 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 asserted claims under Indiana law for securities, statutory and common law fraud or deception, unjust enrichment, breach of contract, and vicarious liability against CBIZ Operations and a former employee of CBIZ MMP in connection with the sale of the CBIZ MMP medical billing practice to Zotec. The plaintiff claimed that CBIZ Operations had a duty to disclose the fact, unknown to employees of CBIZ Operations at the time of the transaction, that the former employee had a financial arrangement with a Zotec vendor at the time CBIZ Operations sold CBIZ MMP to Zotec. The plaintiff sought damages of up to $177.0 million out of the $200.0 million transaction price. Trial was held in October 2021. The jury found in favor of CBIZ on all fraud, contract and other claims before it. On November 14, 2022, the trial court ruled in favor of CBIZ and against Zotec’s claim for statutory securities fraud. The court also ruled in favor of CBIZ on its counterclaim for indemnification under contract. The trial court conducted a hearing on December 12, 2023, to consider evidence regarding the amount of damages owed by Zotec to CBIZ on the counterclaim. On March 12, 2024, the court awarded CBIZ $3.1 million on its counterclaim. On April 10, 2024, Zotec filed a notice of appeal.

On November 10, 2023, CBIZ was named as a defendant in a putative class action lawsuit in the United States District Court for the District of Massachusetts by an individual claiming to be an employee of a CBIZ client whose personally identifiable information (“PII”) was compromised and stolen during a cyberattack CBIZ experienced on or about May 31, 2023. As a result of this incident, hackers were able to access and download certain files from CBIZ’s MOVEit Transfer server. The lawsuit alleges that CBIZ and Progress Software Corporation, the owner of MOVEit Transfer, failed to adequately secure and safeguard the individual’s, and similarly situated employees of CBIZ’s clients, PII from unauthorized access. The lawsuit seeks various remedies, including actual, compensatory, and punitive damages, along with injunctive relief, costs, and attorneys’ fees.

On December 8, 2023, CBIZ was named as a defendant in a second putative class action lawsuit in the United States District Court for the District of Massachusetts by an individual making similar claims and seeking similar remedies as in the first lawsuit regarding the cyberattack CBIZ experienced on or about May 31, 2023.

Both cases were transferred into a multidistrict litigation, styled as In Re: MOVEit Customer Data Security Breach Litigation, pending in the United States District Court for the District of Massachusetts (the “MDL”). To date, the MDL has over 180 cases against over 100 different defendants, all with claims arising out of the cyberbreach by hackers of Progress Software Corporation’s MOVEit Transfer software. The cases in the MDL, including the cases against CBIZ, are in their earliest stages, with a stay in place until the MDL Court issues a scheduling order. Due to the early stage of litigation, the Company is not able to determine or predict the ultimate outcome of these lawsuits nor reasonably provide an estimate or range of the possible outcome or losses, if any.

In addition to the items 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.

Refer to the Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion on the Company's commitments and contingencies.

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 unaudited Condensed Consolidated Balance Sheets. The par value of these investments totaled $39.7 million and $40.0 million at June 30, 2024 and December 31, 2023, respectively, and these investments have maturity or callable dates ranging from July 2024 through January 2026.

At June 30, 2024, 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 six months ended June 30, 2024 and the twelve months ended December 31, 2023 (in thousands):


	Six Months Ended June 30, 2024		Twelve Months Ended December 31, 2023
Fair value at beginning of period	$	39,459	$	43,485
Purchases	12,100		14,122
Redemptions	(500)		(3,310)
Maturities	(11,921)		(15,155)
Change in bond premium	(238)		(1,099)
Fair market value adjustment	312		1,416
Fair value at end of period	$	39,212	$	39,459

In addition to the available-for-sale debt securities discussed above, we also held other depository assets in the amount of $1.6 million and $1.0 million at June 30, 2024 and December 31, 2023, respectively. Those depository assets are classified as Level 1 in the fair value hierarchy.

Interest Rate Swaps - We utilize interest rate swaps to manage interest rate risk exposure associated with our floating-rate debt under the 2022 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, 2023 for further discussion on our interest rate swaps.

The following table summarizes our outstanding interest rate swaps and their classification in the accompanying unaudited Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023 (amounts in thousands):


	June 30, 2024
	Notional Amount		Fixed Rate		Expiration	Fair Value		Balance Sheet Location
Interest rate swap	$	50,000	0.834	%	4/14/2025	$	1,654	Other current asset
Interest rate swap	$	30,000	1.186	%	12/14/2026	$	2,227	Other non-current asset
Interest rate swap	$	20,000	2.450	%	8/14/2027	$	1,039	Other non-current asset
Interest rate swap	$	25,000	3.669	%	4/14/2028	$	388	Other non-current asset
Interest rate swap	$	25,000	4.488	%	10/14/2028	$	(418)	Other non-current liability


	December 31, 2023
	Notional Amount		Fixed Rate		Expiration	Fair Value		Balance Sheet Location
Interest rate swap	$	50,000	0.834	%	4/14/2025	$	2,282	Other non-current asset
Interest rate swap	$	30,000	1.186	%	12/14/2026	$	2,125	Other non-current asset
Interest rate swap	$	20,000	2.450	%	8/14/2027	$	784	Other non-current asset
Interest rate swap	$	25,000	3.669	%	4/14/2028	$	(129)	Other non-current liability
Interest rate swap	$	25,000	4.488	%	10/14/2028	$	(1,063)	Other non-current liability

Refer to Note 7, Fair Value Measurements, for additional disclosures regarding fair value measurements.

The following table summarizes the effects of the interest rate swaps on the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023 (in thousands):


	Gain Recognized in AOCI, net of tax				Gain Reclassified from AOCI into Expense
	Three Months Ended June 30,				Three Months Ended June 30,
	2024		2023		2024		2023
Interest rate swaps	$	587	$	2,187	$	1,174	$	1,073

	Gain Recognized in AOCI, net of tax				Gain (Loss) Reclassified from AOCI into Expense
	Six Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Interest rate swaps	$	2,441	$	1,472	$	2,365	$	1,970

NOTE 7. FAIR VALUE MEASUREMENTS

The following table summarizes our assets and (liabilities) at June 30, 2024 and December 31, 2023, 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):


	Level	June 30, 2024		December 31, 2023
Deferred compensation plan assets	1	$	162,133	$	143,499
Available-for-sale debt securities	1	39,212		39,459
Other depository assets	1	1,571		1,031
Deferred compensation plan liabilities	1	(162,133)		(143,499)
Interest rate swaps	2	4,890		3,999
Bank debt	2	(379,660)		(310,826)
Contingent purchase price liabilities	3	(83,839)		(114,946)

During the six months ended June 30, 2024 and 2023, there were no transfers between the valuation hierarchy Levels 1, 2 and 3.

The following table summarizes the change in Level 3 fair values of our contingent purchase price liabilities for the six months ended June 30, 2024 and 2023 (pre-tax basis, in thousands):


	2024		2023
Beginning balance – December 31	$	(114,946)	$	(132,010)
Additions from business acquisitions	(15,184)		(30,317)
Settlement of contingent purchase price liabilities	46,929		33,307
Change in fair value of contingencies	423		(15)
Change in net present value of contingencies	(1,061)		(1,430)
Ending balance – June 30	$	(83,839)	$	(130,465)

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 and six months ended June 30, 2024 and 2023, respectively (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net expense	$	204	$	815	$	638	$	1,445
Cash settlement paid	$	9,898	$	1,373	$	40,855	$	29,808
Shares issued (number)	34		4		94		75

Refer to the Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion on the fair value measurements and classification of our financial assets and liabilities.

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 (loss) income for the three and six months ended June 30, 2024 and 2023 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net unrealized gain on available-for-sale securities, net of taxes (1)	$	167	$	159	$	223	$	338
Net unrealized (loss) gain on interest rate swaps, net of taxes(2)	(292)		1,383		668		(5)
Foreign currency translation	(17)		(5)		(15)		(9)
Total other comprehensive (loss) income	$	(142)	$	1,537	$	876	$	324

(1)Net of income tax expense of $68 and $64 for the three months ended June 30, 2024 and 2023, respectively. Net of income tax expense of $89 and $135 for the six months ended June 30, 2024 and 2023, respectively.

(2)Net of income tax benefit of $99 and income tax expense of $449 for the three months ended June 30, 2024 and 2023, respectively. Net of income tax expense of $223 and income tax benefit of $14 for the six months ended June 30, 2024 and 2023, respectively.

NOTE 9. EMPLOYEE STOCK PLANS

On May 10, 2023, the shareholders of the Company approved an amendment to the 2019 Stock Omnibus Incentive Plan (the “2019 Plan”). The amendment added 1.5 million shares to the total number of shares that may be issued under the 2019 Plan. All other respects of the 2019 Plan remain unchanged. The 2019 Plan, which expires in 2029, permits the grant of various forms of stock-based awards. A maximum of 4.6 million stock options, restricted stock or other stock-based compensation awards may be granted. The terms and vesting schedules for the stock-based awards vary by type and date of grant. 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, 2023 for further discussion on the 2019 Plan.

Compensation expense for stock-based awards recognized during the three and six months ended June 30, 2024 and 2023 was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Stock options	$	—	$	—	$	—	$	768
Restricted stock units and awards	1,552		1,355		2,903		2,614
Performance share units	826		1,433		2,113		3,237
Total stock-based compensation expense	$	2,378	$	2,788	$	5,016	$	6,619

Stock Options and Restricted Stock Units and Awards – The Company did not grant any stock options during the six months ended June 30, 2024.

The following table presents our restricted stock units and awards activity during the six months ended June 30, 2024 (in thousands, except per share data):


	Restricted Stock Units and Awards
		Number of Shares	Weighted Average Grant-Date Fair Value (1)
Outstanding at beginning of year		223	$	41.19
Granted		91	$	67.49
Exercised or released		(122)	$	37.93
Expired or canceled		(3)	$	38.52
Outstanding at June 30, 2024		189	$	56.04
Exercisable at June 30, 2024		189	$	56.04

(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 PSUs activity during the six months ended June 30, 2024 (in thousands, except per share data):


	Performance Share Units	Weighted Average Grant-Date Fair Value Per Unit (1)
Outstanding at beginning of year	464	$	33.84
Granted	70	$	66.07
Vested	(273)	$	27.51

Canceled	(7)	$	39.09
Outstanding at June 30, 2024	254	$	49.42

(1)Represents weighted average market value of the PSUs; PSUs are granted at no cost to the recipients.

NOTE 10. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended June 30, 2024 and 2023 (in thousands, except per share data):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerator:
Net Income	$	19,793	$	26,863	$	96,677	$	100,023
Denominator:
Basic
Weighted average common shares outstanding	50,111		49,963		50,079		50,164
Diluted
Stock options (1)	80		198		77		235
Restricted stock units and awards (1)	73		79		80		95
Performance share units	—		106		—		106
Contingent shares (2)	12		39		12		39
Diluted weighted average common shares outstanding (3)	50,276		50,385		50,248		50,639
Basic earnings per share	$	0.39	$	0.54	$	1.93	$	1.99
Diluted earnings per share	$	0.39	$	0.53	$	1.92	$	1.98

(1)A total of 9 thousand and 96 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for three and six months ended June 30, 2024, respectively, as their effect would be anti-dilutive. A total of 12 thousand and 53 thousand shares of stock-based awards were excluded from the calculation of diluted earnings per share for three and six months ended June 30, 2023, 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.

(3)The denominator used in calculating diluted earnings per share did not include 254 thousand PSUs for both the three and six months ended June 30, 2024. The denominator used in calculating diluted earnings per share did not include 220 thousand PSUs for both the three and six months ended June 30, 2023.The performance conditions associated with these PSUs were not met and consequently none of these PSUs were considered as issuable for the three and six months ended June 30, 2024 and 2023.

NOTE 11. 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 Services

Benefits and Insurance Services

National Practices

Accounting and Tax

Employee Benefits Consulting

Information Technology Managed Networking and Hardware Services

Financial Advisory

Payroll / Human Capital Management

Healthcare Consulting

Valuation

Property and Casualty Insurance

Risk and Advisory Services

Retirement 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, 2023. 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) before income tax expense (benefit) excluding those costs listed above, which are reported in the “Corporate and Other”.

Segment information for the three and six months ended June 30, 2024 and 2023 is presented below. We do not manage our assets on a segment basis, therefore segment assets are not presented below.

The following table disaggregates our revenue by source (in thousands):


	Three Months Ended June 30, 2024
	Financial Services		Benefits and Insurance Services		National Practices		Consolidated
Accounting, tax, advisory and consulting	$	309,233	—		—		$	309,233
Core benefits and insurance services	—		93,533		—		93,533
Non-core benefits and insurance services	—		3,886		—		3,886
Managed networking, hardware services	—		—		10,250		10,250
National practices consulting	—		—		3,110		3,110
Total revenue	$	309,233	$	97,419	$	13,360	$	420,012


	Three Months Ended June 30, 2023
	Financial Services		Benefits and Insurance Services		National Practices		Consolidated
Accounting, tax, advisory and consulting	$	290,930	—		—		$	290,930
Core benefits and insurance services	—		91,031		—		91,031
Non-core benefits and insurance services	—		4,807		—		4,807
Managed networking, hardware services	—		—		9,067		9,067
National practices consulting	—		—		2,667		2,667
Total revenue	$	290,930	$	95,838	$	11,734	$	398,502



	Six Months Ended June 30, 2024
	Financial Services		Benefits and Insurance Services		National Practices		Consolidated
Accounting, tax, advisory and consulting	$	681,863	—		—		$	681,863
Core benefits and insurance services	—		198,738		—		198,738
Non-core benefits and insurance services	—		7,089		—		7,089
Managed networking, hardware services	—		—		20,438		20,438
National practices consulting	—		—		6,181		6,181
Total revenue	$	681,863	$	205,827	$	26,619	$	914,309



	Six Months Ended June 30, 2023
	Financial Services		Benefits and Insurance Services		National Practices		Consolidated
Accounting, tax, advisory and consulting	$	634,016	—		—		$	634,016
Core benefits and insurance services	—		187,648		—		187,648
Non-core benefits and insurance services	—		8,244		—		8,244
Managed networking, hardware services	—		—		18,021		18,021
National practices consulting	—		—		5,179		5,179
Total revenue	$	634,016	$	195,892	$	23,200	$	853,108

Segment information for the three months ended June 30, 2024 and 2023 was as follows (in thousands):


	Three Months Ended June 30, 2024
	Financial Services		Benefits and Insurance Services		National Practices		Corporate and Other		Total
Revenue	$	309,233	$	97,419	$	13,360	$	—	$	420,012
Operating expenses	262,809		83,243		12,028		8,288		366,368
Gross margin	46,424		14,176		1,332		(8,288)		53,644
Corporate general and administrative expenses	—		—		—		22,050		22,050


Operating income (loss)	46,424		14,176		1,332		(30,338)		31,594
Other income (expense):
Interest expense	—		—		—		(5,884)		(5,884)


Other income, net	128		43		(4)		2,316		2,483
Total other income (expense), net	128		43		(4)		(3,568)		(3,401)
Income (loss) before income tax expense	$	46,552	$	14,219	$	1,328	$	(33,906)	$	28,193


	Three Months Ended June 30, 2023
	Financial Services		Benefits and Insurance Services		National Practices		Corporate and Other		Total
Revenue	$	290,930	$	95,838	$	11,734	$	—	$	398,502
Operating expenses	243,445		78,374		10,545		11,623		343,987
Gross margin	47,485		17,464		1,189		(11,623)		54,515
Corporate general and administrative expenses	—		—		—		15,793		15,793

Operating income (loss)	47,485		17,464		1,189		(27,416)		38,722
Other income (expense):
Interest expense	—		—		—		(5,534)		(5,534)

Other income, net	235		153		1		5,032		5,421
Total other income (loss), net	235