CBIZ(CBZ) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents the company's unaudited condensed consolidated financial statements and related notes for the reported periods Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of CBIZ, Inc. and its subsidiaries for the periods ended June 30, 2025, and December 31, 2024 (balance sheets), and for the three and six months ended June 30, 2025 and 2024 (income, equity, and cash flow statements). It also includes detailed notes explaining significant accounting policies, business combinations, debt arrangements, financial instruments, and segment disclosures Condensed Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Balance Sheet Summary | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (2025 vs 2024) | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | ASSETS | | | | | Cash and cash equivalents | $39,817 | $13,826 | +$25,991 | | Restricted cash | $49,145 | $38,661 | +$10,484 | | Accounts receivable, net | $676,054 | $534,858 | +$141,196 | | Total current assets | $966,035 | $835,726 | +$130,309 | | Goodwill and other intangible assets, net | $2,899,958 | $2,945,470 | -$45,512 | | Total assets | $4,537,973 | $4,470,883 | +$67,090 | | LIABILITIES | | | | | Accounts payable | $119,339 | $90,646 | +$28,693 | | Accrued personnel costs | $106,612 | $172,759 | -$66,147 | | Total current liabilities | $602,321 | $705,802 | -$103,481 | | Long-term debt | $1,488,215 | $1,333,755 | +$154,460 | | Total liabilities | $2,646,130 | $2,690,900 | -$44,770 | | STOCKHOLDERS' EQUITY | | | | | Total stockholders' equity | $1,891,843 | $1,779,983 | +$111,860 | Condensed Consolidated Statements of Comprehensive Income Details the company's financial performance, including revenue, operating expenses, and net income for the reported periods Comprehensive Income Summary | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Revenue | $683,496 | $420,012 | $1,521,510 | $914,309 | | Operating expenses | $595,587 | $366,368 | $1,205,499 | $742,853 | | Operating income | $60,272 | $31,594 | $260,304 | $130,695 | | Interest expense | $(27,867) | $(5,884) | $(53,023) | $(10,395) | | Net Income | $41,942 | $19,793 | $164,715 | $96,677 | | Basic EPS | $0.66 | $0.39 | $2.59 | $1.93 | | Diluted EPS | $0.66 | $0.39 | $2.58 | $1.92 | Condensed Consolidated Statements of Stockholders' Equity Outlines changes in stockholders' equity, including net income, share repurchases, and business acquisitions over the periods Stockholders' Equity Summary | Metric (in thousands) | March 31, 2025 | June 30, 2025 | March 31, 2024 | June 30, 2024 | | :-------------------------------- | :------------- | :------------ | :------------- | :------------ | | Total Stockholders' Equity | $1,914,701 | $1,891,843 | $867,089 | $891,434 | | Net income | $41,942 | $41,942 | $19,793 | $19,793 | | Share repurchases | $(71,321) | $(71,321) | $0 | $0 | | Business acquisitions | $2,068 | $2,068 | $2,316 | $2,316 | Stockholders' Equity Changes | Metric (in thousands) | December 31, 2024 | June 30, 2025 | December 31, 2023 | June 30, 2024 | | :-------------------------------- | :---------------- | :------------ | :---------------- | :------------ | | Total Stockholders' Equity | $1,779,983 | $1,891,843 | $791,618 | $891,434 | | Net income | $164,715 | $164,715 | $96,677 | $96,677 | | Share repurchases | $(71,321) | $(71,321) | $0 | $0 | | Indirect repurchase for tax withholding | $(7,758) | $(7,758) | $(11,229) | $(11,229) | | Business acquisitions | $17,335 | $17,335 | $8,476 | $8,476 | Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the reported periods Cash Flow Summary | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $24,880 | $24,439 | | Net cash used in investing activities | $(12,299) | $(33,247) | | Net cash used in financing activities | $(33,249) | $(11,920) | | Net decrease in cash, cash equivalents and restricted cash | $(20,668) | $(20,728) | | Cash, cash equivalents and restricted cash at end of period | $166,502 | $136,420 | Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the unaudited condensed consolidated financial statements. It covers significant accounting policies, recent accounting pronouncements, business combinations (including the Marcum acquisition), accounts receivable, debt and financing arrangements, commitments and contingencies, financial instruments, fair value measurements, other comprehensive income, common stock, employee stock plans, earnings per share, and segment disclosures NOTE 1. Summary of Significant Accounting Policies Describes CBIZ's business operations, organizational structure, and the key accounting principles applied in preparing the financial statements - CBIZ, Inc. is a diversified services company providing professional business services primarily to small and medium-sized businesses, individuals, governmental entities, and not-for-profit enterprises across the U.S. and parts of Canada. It operates through three practice groups: Financial Services, Benefits and Insurance Services, and National Practices[14] - In December 2024, the Company formed a Captive Insurance Company (CBIZ CC, LLC and CBIZ Campus One Cell, LLC) to provide stop-loss coverages to higher education institutions, commencing operations on January 1, 2025. Revenue from this entity was not material for the three and six months ended June 30, 2025[15][16] - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC interim financial reporting rules, and include operations of CBIZ, Inc. and its wholly-owned subsidiaries, with intercompany balances eliminated[17][18] NOTE 2. New Accounting Pronouncements Discusses recently issued FASB Accounting Standards Updates and their anticipated adoption dates by CBIZ - The FASB issued ASU No. 2023-09 (Income Taxes) effective for public companies with annual periods beginning after December 15, 2024, which CBIZ plans to adopt for fiscal year ending December 31, 2025[23] - The FASB issued ASU No. 2024-03 (Expense Disaggregation Disclosure) effective for public companies with annual periods beginning after December 15, 2026, which CBIZ plans to adopt for fiscal year ending December 31, 2027[24] - The FASB issued ASU No. 2025-03 (Determining the Accounting Acquirer in the Acquisition of a VIE) effective for public companies with annual periods beginning after December 15, 2026, which CBIZ plans to adopt for fiscal year ending December 31, 2027[25] NOTE 3. Business Combinations Details the financial impact and accounting treatment of significant business acquisitions, including the Marcum LLP acquisition - On November 1, 2024, CBIZ acquired Marcum LLP, which contributed $579.6 million in revenue and $119.1 million in operating income to the Company's condensed consolidated statement of comprehensive income for the six months ended June 30, 2025[26] - The total purchase price for Marcum LLP was $1,997.8 million, consisting of $1,063.0 million in cash and $934.7 million in common stock (13.6 million shares)[27] - During the six months ended June 30, 2025, measurement period adjustments resulted in a net $14.3 million reduction in goodwill, primarily due to a $21.0 million reduction in estimated settlement amounts for an acquired liability, partially offset by an $8.7 million increase for previously unrecognized accrued personnel obligations[30] NOTE 4. Accounts Receivable, Net Provides a breakdown of accounts receivable, including trade receivables, unbilled revenue, and the allowance for doubtful accounts Accounts Receivable Details | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Trade accounts receivable | $502,115 | $416,211 | +$85,904 | | Unbilled revenue | $223,856 | $150,362 | +$73,494 | | Total accounts receivable | $725,971 | $566,573 | +$159,398 | | Allowance for doubtful accounts | $(49,917) | $(31,715) | -$18,202 | | Accounts receivable, net | $676,054 | $534,858 | +$141,196 | Allowance for Doubtful Accounts | Allowance for Doubtful Accounts (in thousands) | Six Months Ended June 30, 2025 | Year Ended December 31, 2024 | | :--------------------------------------------- | :----------------------------- | :--------------------------- | | Balance at beginning of period | $(31,715) | $(25,598) | | Provision | $(19,323) | $(19,979) | | Charge-offs, net of recoveries | $1,121 | $13,862 | | Allowance for doubtful accounts (end of period) | $(49,917) | $(31,715) | NOTE 5. Debt and Financing Arrangements Outlines CBIZ's primary debt instruments, credit facilities, and compliance with financial covenants - CBIZ's primary debt financing is the 2024 Credit Facilities, providing $2.0 billion in senior secured credit facilities, including a $1.4 billion Term Loan and a $600.0 million Revolving Credit Facility, maturing on November 1, 2029[35][36] - As of June 30, 2025, CBIZ was in compliance with all debt covenants, including a Total Net Leverage Ratio not exceeding 5.00 to 1.00 and a Minimum Consolidated Interest Coverage Ratio of 3.00 to 1.00[39] Debt Summary | Debt Type (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Short-term debt | $66,274 | $66,177 | | Long-term debt | $1,488,215 | $1,333,755 | | Total outstanding debt | $1,554,489 | $1,399,932 | - The blended effective interest rate for the 2024 Credit Facilities was 6.67% for the six months ended June 30, 2025, up from 5.41% for the same period in 2024[40] NOTE 6. Commitments and Contingencies Discloses the company's various commitments, guarantees, and ongoing legal proceedings, including cyberattack litigation - CBIZ provides $3.2 million in letters of credit to landlords and $2.2 million in license bonds to state agencies as of June 30, 2025[44] - A lawsuit filed by Zotec Partners, LLC against CBIZ Operations, Inc. was finalized on April 8, 2025, with the Court of Appeals affirming the dismissal of securities fraud claims against CBIZ and reversing the $3.1 million award to CBIZ on its counterclaim[45] - CBIZ is a defendant in two putative class action lawsuits related to a May 31, 2023 cyberattack on its MOVEit Transfer server, which compromised PII. These cases are in early stages within a multidistrict litigation (MDL), and the ultimate outcome or potential losses cannot be determined[46][47][48][49] - In June 2025, CBIZ settled litigation against former employees, receiving a $12.5 million pre-tax gain recorded in "Other income, net"[50] NOTE 7. Financial Instruments Describes the company's financial assets and liabilities, including available-for-sale securities and interest rate swap derivatives - CBIZ holds available-for-sale debt securities (corporate and municipal bonds) totaling $38.9 million at June 30, 2025, primarily from client funds, with maturities ranging from July 2025 to February 2028. Unrealized losses were not material and not recognized as credit losses due to investment grade quality and management's intent not to sell[53][54] - CBIZ uses interest rate swaps to manage interest rate risk on floating-rate debt under the 2024 Credit Facilities, not for trading or speculative purposes[55] Interest Rate Swap Details | Interest Rate Swap (in thousands) | Notional Amount | Fixed Rate | Expiration | Fair Value (June 30, 2025) | Balance Sheet Location | | :-------------------------------- | :-------------- | :--------- | :--------- | :------------------------- | :--------------------- | | Interest rate swap 1 | $30,000 | 1.186% | 12/14/2026 | $1,027 | Other non-current asset | | Interest rate swap 2 | $20,000 | 2.450% | 8/14/2027 | $399 | Other non-current asset | | Interest rate swap 3 | $25,000 | 3.669% | 4/14/2028 | $(198) | Other non-current liability | | Interest rate swap 4 | $25,000 | 4.488% | 10/14/2028 | $(864) | Other non-current liability | | Interest rate swap 5 | $50,000 | 3.703% | 3/14/2030 | $(702) | Other non-current liability | | Interest rate swap 6 | $50,000 | 3.503% | 4/14/2030 | $(285) | Other non-current liability | | Interest rate swap 7 | $50,000 | 3.680% | 7/14/2030 | $(636) | Other non-current liability | | Interest rate swap 8 | $50,000 | 3.680% | 7/15/2030 | $(681) | Other non-current liability | NOTE 8. Fair Value Measurements Presents the fair value hierarchy and measurements for various financial assets and liabilities, including contingent purchase price liabilities Fair Value Measurement Summary | Asset/(Liability) (in thousands) | Level | June 30, 2025 | December 31, 2024 | | :------------------------------- | :---- | :------------ | :---------------- | | Assets of deferred compensation plan | 1 | $177,150 | $167,170 | | Available-for-sale debt securities | 1 | $38,911 | $40,999 | | Other depository assets | 1 | $2,428 | $176 | | Deferred compensation plan obligations | 1 | $(177,150) | $(167,170) | | Interest rate swaps | 2 | $(1,940) | $2,681 | | Bank debt | 2 | $(1,554,489) | $(1,399,932) | | Contingent purchase price liabilities | 3 | $(48,733) | $(96,967) | Contingent Purchase Price Liabilities | Contingent Purchase Price Liabilities (Level 3, in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------------- | :----------------------------- | :----------------------------- | | Beginning balance – December 31 | $(96,967) | $(114,946) | | Additions from business acquisitions | $(2,941) | $(15,184) | | Settlement of contingent purchase price liabilities | $52,662 | $46,929 | | Change in fair value of contingencies | $170 | $423 | | Change in net present value of contingencies | $(1,657) | $(1,061) | | Ending balance – June 30 | $(48,733) | $(83,839) | NOTE 9. Other Comprehensive Income Details components of other comprehensive income, including unrealized gains/losses on securities and interest rate swaps Other Comprehensive Income Details | Other Comprehensive (Loss) Income (in thousands, net of tax) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net unrealized gain on available-for-sale securities | $51 | $167 | $123 | $223 | | Net unrealized (loss) gain on interest rate swaps | $(2,164) | $(292) | $(3,465) | $668 | | Foreign currency translation | $(2) | $(17) | $(8) | $(15) | | Total other comprehensive (loss) income | $(2,115) | $(142) | $(3,350) | $876 | NOTE 10. Common Stock Provides information on common stock issuances, share repurchase programs, and the Right of First Refusal agreement - CBIZ issued 13.6 million shares of common stock as part of the total purchase price consideration for the Marcum acquisition[63] - The Company has a Right of First Refusal (ROFR) program until November 1, 2028, allowing it to repurchase common stock issued to selling shareholders from the Marcum merger[64] - CBIZ repurchased 1.0 million shares for $71.3 million under the ROFR Agreement and 0.1 million shares for $7.8 million for tax withholding during the six months ended June 30, 2025[67] NOTE 11. Employee Stock Plans Describes the company's stock-based compensation plans, including restricted stock units and performance share units - The 2019 Stock Omnibus Incentive Plan was amended on May 10, 2023, adding 1.5 million shares, allowing a maximum of 4.6 million stock options, restricted stock, or other stock-based awards[69] Stock-Based Compensation Expense | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Restricted stock units and awards | $5,289 | $1,552 | $10,148 | $2,903 | | Performance share units | $1,311 | $826 | $2,091 | $2,113 | | Total stock-based compensation expense | $6,600 | $2,378 | $12,239 | $5,016 | - As of June 30, 2025, CBIZ had 150 thousand stock options outstanding with a weighted average exercise price of $35.22 per share[70] NOTE 12. Earnings Per Share Presents basic and diluted earnings per share calculations and the impact of share issuances on weighted average shares outstanding Earnings Per Share Metrics | EPS Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (in thousands) | $41,942 | $19,793 | $164,715 | $96,677 | | Basic EPS | $0.66 | $0.39 | $2.59 | $1.93 | | Diluted EPS | $0.66 | $0.39 | $2.58 | $1.92 | | Basic weighted average shares outstanding (in thousands) | 63,542 | 50,111 | 63,692 | 50,079 | | Diluted weighted average shares outstanding (in thousands) | 63,784 | 50,276 | 63,960 | 50,248 | - The increase in weighted average common shares outstanding for the three and six months ended June 30, 2025, includes 13.6 million shares issued as consideration for the Marcum acquisition[73] NOTE 13. Segment Disclosures Provides financial performance data for CBIZ's operating segments: Financial Services, Benefits and Insurance Services, and National Practices - CBIZ operates through three practice groups: Financial Services, Benefits and Insurance Services, and National Practices, aggregated based on similarity of products, services, regulatory environment, and economic conditions[74] - "Corporate and Other" includes unallocated operating expenses such as health care costs, deferred compensation plan gains/losses, stock-based compensation, and integration charges[75] Segment Revenue | Segment Revenue (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Financial Services | $569,819 | $309,233 | $1,283,480 | $681,863 | | Benefits and Insurance Services | $101,929 | $97,419 | $214,905 | $205,827 | | National Practices | $11,748 | $13,360 | $23,125 | $26,619 | | Total CBIZ | $683,496 | $420,012 | $1,521,510 | $914,309 | Segment Income Before Tax | Segment Income Before Tax (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Financial Services | $85,335 | $46,552 | $288,688 | $153,707 | | Benefits and Insurance Services | $17,968 | $14,219 | $45,913 | $39,034 | | National Practices | $1,267 | $1,328 | $2,379 | $2,654 | | Consolidated income before income tax expense | $57,779 | $28,193 | $230,689 | $132,207 | NOTE 14. Subsequent Events Discloses significant events occurring after the reporting period, such as new legislation, interest rate swaps, and share repurchases - On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act of 2025, which includes changes to the U.S. corporate income tax system, effective for CBIZ beginning in 2025. The company is assessing its impact[81][82] - CBIZ entered into two new interest rate swaps in July 2025: one for $100 million at a fixed rate of 3.85% expiring January 14, 2027, and another for $100 million at a fixed rate of 4.047% expiring July 14, 2026[82][83] - Subsequent to June 30, 2025, and up to July 25, CBIZ repurchased approximately 0.3 million shares of common stock for $25.3 million under the ROFR Agreement[83] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a comprehensive analysis of CBIZ's financial performance, condition, and cash flows for the periods ended June 30, 2025, and 2024. It covers revenue, operating expenses, general and administrative expenses, other income/expense, income tax, and segment-specific results, highlighting the significant impact of the Marcum acquisition. The discussion also addresses liquidity, capital resources, and off-balance sheet arrangements Overview Provides a general description of CBIZ's business, its service offerings, and operating practice groups - CBIZ provides professional business services, products, and solutions to small and medium-sized businesses, individuals, governmental entities, and not-for-profit enterprises across the U.S. and parts of Canada[86] - Services are delivered through three practice groups: Financial Services, Benefits and Insurance Services, and National Practices[86] Executive Summary Summarizes key financial performance metrics, including revenue, net income, and diluted EPS, highlighting major drivers and strategic objectives Executive Summary Financials (Three Months) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | % Change | | :-------------------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Revenue | $683.5 million | $420.0 million | +$263.5 million | +62.7% | | Revenue from newly acquired operations (net of divestitures) | $256.2 million | N/A | N/A | +60.3% | | Net income | $41.9 million | $19.8 million | +$22.1 million | +111.6% | | Diluted EPS | $0.66 | $0.39 | +$0.27 | +69.2% | Executive Summary Financials (Six Months) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :----- | :------- | | Revenue | $1,521.5 million | $914.3 million | +$607.2 million | +66.4% | | Revenue from newly acquired operations (net of divestitures) | $589.6 million | N/A | N/A | +63.8% | | Net income | $164.7 million | $96.7 million | +$68.0 million | +70.3% | | Diluted EPS | $2.58 | $1.92 | +$0.66 | +34.4% | - The current economic and geopolitical environment has led to softness in demand for nonrecurring project-based services, which may continue and limit forecasting ability for the remainder of 2025[90] - CBIZ's strategic capital objective is to maximize cash flow to pay down debt, increasing liquidity for future strategic acquisitions, and considers share repurchases a prudent use of financial resources[91] Results of Operations This section details the financial performance across revenue, operating expenses, G&A, other income/expense, and income tax, providing a breakdown by segment. It highlights significant increases in revenue and net income, largely driven by the Marcum acquisition, and discusses the impact of deferred compensation plans and legal settlements on financial results Revenue Details the company's revenue performance, broken down by operating segment, and highlights growth drivers Revenue by Segment (Three Months) | Revenue by Segment (in thousands) | Three Months Ended June 30, 2025 | % of Total (2025) | Three Months Ended June 30, 2024 | % of Total (2024) | $ Change | % Change | | :-------------------------------- | :------------------------------- | :---------------- | :------------------------------- | :---------------- | :------- | :------- | | Financial Services | $569,819 | 83.4% | $309,233 | 73.6% | $260,586 | 84.3% | | Benefits and Insurance Services | $101,929 | 14.9% | $97,419 | 23.2% | $4,510 | 4.6% | | National Practices | $11,748 | 1.7% | $13,360 | 3.2% | $(1,612) | (12.1)% | | Total CBIZ | $683,496 | 100.0% | $420,012 | 100.0% | $263,484 | 62.7% | Revenue by Segment (Six Months) | Revenue by Segment (in thousands) | Six Months Ended June 30, 2025 | % of Total (2025) | Six Months Ended June 30, 2024 | % of Total (2024) | $ Change | % Change | | :-------------------------------- | :----------------------------- | :---------------- | :----------------------------- | :---------------- | :------- | :------- | | Financial Services | $1,283,480 | 84.4% | $681,863 | 74.6% | $601,617 | 88.2% | | Benefits and Insurance Services | $214,905 | 14.1% | $205,827 | 22.5% | $9,078 | 4.4% | | National Practices | $23,125 | 1.5% | $26,619 | 2.9% | $(3,494) | (13.1)% | | Total CBIZ | $1,521,510 | 100.0% | $914,309 | 100.0% | $607,201 | 66.4% | Non-qualified Deferred Compensation Plan Explains the accounting treatment and financial impact of the company's non-qualified deferred compensation plan - The deferred compensation plan's income and expenses are recorded in "Corporate and Other" and directly offset by deferred compensation gains or losses in "Other income, net," having no impact on "Income before income tax expense" or diluted EPS[94] Deferred Compensation Plan Impact | Deferred Compensation Plan Impact (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating (income) expense | $11,717 | $2,283 | $9,285 | $10,859 | | Corporate general & administrative (income) expense | $1,458 | $323 | $1,339 | $1,380 | | Other income, net | $13,175 | $2,606 | $10,624 | $12,239 | Operating Expenses Analyzes changes in operating expenses, including the impact of integration and retention costs from acquisitions Operating Expenses Analysis (Three Months) | Operating Expenses (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :-------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Total Operating expenses | $595,587 | $366,368 | $229,219 | 62.6% | | Operating expenses % of revenue | 87.1% | 87.2% | N/A | -0.1% | | Operating expenses excluding deferred compensation | $583,870 | $364,085 | $219,785 | 60.4% | | Operating expenses excluding deferred compensation % of revenue | 85.4% | 86.7% | N/A | -1.3% | Operating Expenses Analysis (Six Months) | Operating Expenses (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Total Operating expenses | $1,205,499 | $742,853 | $462,646 | 62.3% | | Operating expenses % of revenue | 79.2% | 81.2% | N/A | -2.0% | | Operating expenses excluding deferred compensation | $1,196,214 | $731,994 | $464,220 | 63.4% | | Operating expenses excluding deferred compensation % of revenue | 78.6% | 80.1% | N/A | -1.5% | - Operating expenses for the three months ended June 30, 2025, included approximately $11.1 million of integration costs associated with the Marcum acquisition[96] - For the six months ended June 30, 2025, operating expenses included approximately $20.1 million of integration and retention costs related to the Marcum acquisition[99] Corporate General & Administrative (G&A) Expenses Examines trends in corporate general and administrative expenses, including the effect of acquisition-related integration costs G&A Expenses Analysis (Three Months) | G&A Expenses (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | G&A expenses | $27,637 | $22,050 | $5,587 | 25.3% | | G&A expenses % of revenue | 4.0% | 5.2% | N/A | -1.2% | | G&A expenses excluding deferred compensation | $26,179 | $21,727 | $4,452 | 20.5% | | G&A expenses excluding deferred compensation % of revenue | 3.8% | 5.2% | N/A | -1.4% | G&A Expenses Analysis (Six Months) | G&A Expenses (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :-------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | G&A expenses | $55,707 | $40,761 | $14,946 | 36.7% | | G&A expenses % of revenue | 3.7% | 4.5% | N/A | -0.8% | | G&A expenses excluding deferred compensation | $54,368 | $39,381 | $14,987 | 38.1% | | G&A expenses excluding deferred compensation % of revenue | 3.6% | 4.3% | N/A | -0.7% | - G&A expenses for the three months ended June 30, 2025, included approximately $8.1 million of integration costs primarily associated with the Marcum acquisition[100] - G&A expenses for the six months ended June 30, 2025, included approximately $14.8 million of integration costs primarily associated with the Marcum acquisition[102] Other Income (Expense), Net Details components of other income and expense, including interest expense, deferred compensation gains, and legal settlements Other Income (Expense) Details (Three Months) | Other Income (Expense), Net (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :----------------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Interest expense | $(27,867) | $(5,884) | $(21,983) | N/M | | Other income, net | $25,374 | $2,483 | $22,891 | N/M | | Total other income (expense), net | $(2,493) | $(3,401) | $908 | (26.7)% | Other Income (Expense) Details (Six Months) | Other Income (Expense), Net (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :----------------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Interest expense | $(53,023) | $(10,395) | $(42,628) | N/M | | Other income, net | $23,408 | $11,907 | $11,501 | 96.6% | | Total other income (expense), net | $(29,615) | $1,512 | $(31,127) | N/M | - Other income, net for the three months ended June 30, 2025, included a $13.2 million net gain from the deferred compensation plan and a $12.5 million gain from a legal settlement[103] - Other income, net for the six months ended June 30, 2025, included a $10.6 million net gain from the deferred compensation plan and a $12.5 million gain from a legal settlement[104] Interest Expense Analyzes the drivers of interest expense, including changes in average debt balance and effective interest rates - Interest expense for the three months ended June 30, 2025, increased significantly due to a higher average debt balance ($1,542.4 million vs. $410.1 million) and a higher weighted average effective interest rate (6.75% vs. 4.85%) compared to the same period in 2024, primarily driven by the 2024 Credit Facilities[105][106] - For the six months ended June 30, 2025, the average debt balance was $1,493.2 million with a 6.67% interest rate, compared to $367.9 million and 5.41% in 2024, leading to increased interest expense[107] Income Tax Expense Discusses the company's income tax expense and effective tax rates, explaining factors influencing their fluctuations Income Tax Metrics (Three Months) | Income Tax Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :---------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Income tax expense (in thousands) | $15,837 | $8,400 | $7,438 | 88.5% | | Effective tax rate | 27.4% | 29.8% | N/A | -2.4% | Income Tax Metrics (Six Months) | Income Tax Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :---------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Income tax expense (in thousands) | $65,974 | $35,530 | $30,444 | 85.7% | | Effective tax rate | 28.6% | 26.9% | N/A | +1.7% | - The effective tax rate for the three months ended June 30, 2025, decreased to 27.4% from 29.8% in 2024, primarily due to lower non-deductible expenses and state income tax expenses relative to pre-tax income[112] - The effective tax rate for the six months ended June 30, 2025, increased to 28.6% from 26.9% in 2024, mainly due to lower tax benefits from stock-based compensation expense[113] Operating Practice Groups This section provides a detailed breakdown of the financial performance for each of CBIZ's three operating practice groups: Financial Services, Benefits and Insurance Services, and National Practices, including their respective revenues, operating expenses, and income before tax Financial Services Presents the financial performance of the Financial Services segment, detailing revenue, operating expenses, and income before tax Financial Services Performance (Three Months) | Financial Services (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :-------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Revenue | $569,819 | $309,233 | $260,586 | 84.3% | | Operating expenses | $484,458 | $262,809 | $221,649 | 84.3% | | Income before income tax expense | $85,335 | $46,552 | $38,783 | 83.3% | | Gross margin percent | 15.0% | 15.0% | N/A | 0.0% | Financial Services Performance (Six Months) | Financial Services (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Revenue | $1,283,480 | $681,863 | $601,617 | 88.2% | | Operating expenses | $994,951 | $528,370 | $466,581 | 88.3% | | Income before income tax expense | $288,688 | $153,707 | $134,981 | 87.8% | | Gross margin percent | 22.5% | 22.5% | N/A | 0.0% | - Financial Services revenue growth for the three months ended June 30, 2025, was primarily driven by a $196.6 million increase in traditional accounting and tax services (due to the Marcum acquisition) and a $48.1 million increase in advisory services[116] - Fees earned under Administrative Service Agreements (ASAs) were approximately $164.6 million and $398.9 million for the three and six months ended June 30, 2025, respectively[117][121] Benefits and Insurance Services Outlines the financial performance of the Benefits and Insurance Services segment, including revenue and operating expense trends Benefits and Insurance Services Performance (Three Months) | Benefits and Insurance Services (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Revenue | $101,929 | $97,419 | $4,510 | 4.6% | | Operating expenses | $84,007 | $83,243 | $764 | 0.9% | | Income before income tax expense | $17,968 | $14,219 | $3,749 | 26.4% | | Gross margin percent | 17.6% | 14.6% | N/A | +3.0% | Benefits and Insurance Services Performance (Six Months) | Benefits and Insurance Services (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :--------------------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Revenue | $214,905 | $205,827 | $9,078 | 4.4% | | Operating expenses | $169,365 | $166,880 | $2,485 | 1.5% | | Income before income tax expense | $45,913 | $39,034 | $6,879 | 17.6% | | Gross margin percent | 21.2% | 18.9% | N/A | +2.3% | - Revenue for Benefits and Insurance Services increased by $4.5 million (4.6%) for the three months ended June 30, 2025, driven by employee benefit/retirement services (+$3.6 million) and payroll-related services (+$2.5 million), partially offset by a decrease in property and casualty services[124][125] - Operating expenses as a percentage of revenue decreased to 82.4% for the quarter ended June 30, 2025, from 85.4% in 2024, primarily due to increased revenue from employee benefit and retirement benefit services[126] National Practices Reports the financial performance of the National Practices segment, highlighting revenue and operating expense changes National Practices Performance (Three Months) | National Practices (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :-------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Revenue | $11,748 | $13,360 | $(1,612) | (12.1)% | | Operating expenses | $10,481 | $12,028 | $(1,547) | (12.9)% | | Income before income tax expenses | $1,267 | $1,328 | $(61) | (4.6)% | | Gross margin percent | 10.8% | 10.0% | N/A | +0.8% | National Practices Performance (Six Months) | National Practices (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Revenue | $23,125 | $26,619 | $(3,494) | (13.1)% | | Operating expenses | $20,746 | $23,961 | $(3,215) | (13.4)% | | Income before income tax expenses | $2,379 | $2,658 | $(279) | (10.5)% | | Gross margin percent | 10.3% | 10.0% | N/A | +0.3% | - The National Practices group's revenue and operating expenses decreased by 12.1% and 12.9% respectively for the three months ended June 30, 2025, and by 13.1% and 13.4% respectively for the six months ended June 30, 2025, primarily driven by a cost-plus contract with a single client[130] Corporate and Other Details unallocated corporate operating expenses, G&A, and other income/expense, including integration charges - Corporate and Other expenses include unallocated operating expenses such as health care costs, deferred compensation plan gains/losses, stock-based compensation, and integration charges[131] Corporate and Other Financials (Three Months) | Corporate and Other (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :--------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Operating expenses | $16,641 | $8,288 | $8,353 | 100.8% | | Corporate general and administrative expenses | $27,637 | $22,050 | $5,587 | 25.3% | | Operating loss | $(44,278) | $(30,338) | $(13,940) | 45.9% | | Total other (expense) income, net | $(2,514) | $(3,568) | $1,054 | (29.5)% | | Loss before income tax expense | $(46,792) | $(33,906) | $(12,886) | 38.0% | Corporate and Other Financials (Six Months) | Corporate and Other (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :--------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Operating expenses | $20,437 | $23,642 | $(3,205) | (13.6)% | | Corporate general and administrative expenses | $55,707 | $40,761 | $14,946 | 36.7% | | Operating loss | $(76,144) | $(64,403) | $(11,741) | 18.2% | | Total other (expense) income, net | $(30,149) | $1,215 | $(31,364) | N/M | | Loss before income tax expense | $(106,293) | $(43,105) | $(63,188) | 68.2% | - Excluding deferred compensation, Corporate and Other operating expenses decreased by $1.1 million for the three months ended June 30, 2025, primarily due to lower personnel costs[133] - Excluding deferred compensation, Corporate G&A expenses increased by $4.5 million for the three months ended June 30, 2025, driven by higher facility, insurance, marketing, professional services, and technology costs, including $8.1 million in integration costs from the Marcum acquisition[134][135] Liquidity Discusses CBIZ's sources and uses of cash, focusing on operating, investing, and financing activities and their impact on liquidity - CBIZ's primary liquidity sources are cash from operating and financing activities, with a historical practice of maintaining low cash levels and using available cash to pay down outstanding debt[140] - The company typically experiences a use of cash for working capital in Q1 due to seasonal accounting and tax services and incentive payments, with cash provided by operations exceeding this use in subsequent quarters[141] Cash Flow Summary | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $24,880 | $24,439 | | Net cash used in investing activities | $(12,299) | $(33,247) | | Net cash used in financing activities | $(33,249) | $(11,920) | | Net decrease in cash, cash equivalents and restricted cash | $(20,668) | $(20,728) | - Cash used in financing activities for the six months ended June 30, 2025, was $33.2 million, primarily due to $79.1 million in share repurchases (including $71.3 million under the ROFR Agreement), a $57.2 million decrease in client fund obligations, and $48.8 million in contingent consideration payments, partially offset by $152.8 million in net proceeds from the credit facility[147] Capital Resources Describes the company's available capital, debt facilities, compliance with covenants, and capital allocation priorities - As of June 30, 2025, CBIZ had $1,573.7 million outstanding under the 2024 Credit Facilities and $3.2 million in outstanding letters of credit, with approximately $370.0 million in available funds[148] - CBIZ was in compliance with all financial covenants under the 2024 Credit Facilities as of June 30, 2025[150] - The company's capital allocation priority is to maximize cash flow to pay down debt to increase liquidity for future strategic acquisitions, while also considering share repurchases as a prudent use of financial resources[151] - Cash requirements for the remainder of 2025 and beyond include debt repayment, strategic acquisitions, working capital, contingent purchase price payments, income taxes, and capital expenditures, which are expected to be met by operating cash flow and available credit[152] Off-Balance Sheet Arrangements Discloses the company's off-balance sheet arrangements, including administrative service agreements and letters of credit - CBIZ maintains administrative service agreements with independent CPA firms that qualify as variable interest entities, but their operations are not materially reflected in the consolidated financial statements[153] - CBIZ has $3.2 million in letters of credit for leased premises and $2.2 million in license bonds outstanding as of June 30, 2025[154] - The company has various indemnification agreements in the normal course of business, but historically has not made material payments under these, and no material obligations are currently known[155] Critical Accounting Policies and Estimates States that the company's critical accounting policies and estimates remain unchanged from previous disclosures - The preparation of financial statements requires management to make estimates and judgments that affect reported amounts, which could differ materially from actual results[157] - CBIZ has not made any changes to its critical accounting policies and estimates as previously disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024[157] New Accounting Pronouncements Refers to Note 2 for details on recently issued accounting pronouncements and their potential impact - Refer to Note 2, New Accounting Pronouncements, for a discussion of recently issued accounting pronouncements[158] Forward-Looking Statements Highlights the presence of forward-looking statements in the report and the inherent risks and uncertainties associated with them - The report contains forward-looking statements regarding financial position, business strategy, and future performance, identifiable by terms like "will," "could," "may," "intend," "believe," "expect," and "anticipate"[159] - These statements are subject to risks and uncertainties that could cause actual results to differ materially, including slower-than-expected receivable payments, Marcum acquisition performance, loss of key employees, regulatory restrictions, goodwill impairment, and cybersecurity risks[160] - CBIZ undertakes no obligation to publicly update forward-looking statements, except as required by law, and advises consulting further SEC filings for detailed risk factors[163] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses CBIZ's exposure to market risks, primarily interest rate risk from its floating-rate debt under the 2024 Credit Facilities. It details the use of interest rate swaps to manage this risk and mentions investments in short-term, investment-grade debt securities related to payroll operations - CBIZ is exposed to interest rate risk from its $1,273.7 million floating-rate debt under the 2024 Credit Facilities as of June 30, 2025; a 100 basis point change in market rates would impact annual interest expense by approximately $12.7 million[164] - CBIZ uses interest rate swaps to convert portions of its floating-rate debt to a fixed-rate basis, not for trading or speculative purposes[165] - Funds collected from payroll clients are invested in short-term, investment-grade corporate and municipal bonds, classified as available-for-sale securities and adjusted to fair value[168] Item 4. Controls and Procedures This section outlines management's evaluation of CBIZ's disclosure controls and internal control over financial reporting. It concludes that disclosure controls were effective at a reasonable assurance level as of June 30, 2025, and notes ongoing integration of control processes related to the Marcum acquisition Disclosure Controls and Procedures Provides information on the effectiveness of CBIZ's disclosure controls and procedures - Management, including the CEO and CFO, evaluated the effectiveness of CBIZ's disclosure controls and procedures as of June 30, 2025[169] - Disclosure controls are designed to provide reasonable, not absolute, assurance of achieving their objectives, acknowledging inherent limitations such as human error, collusion, or management override[170][171] - Based on the evaluation, the CEO and CFO concluded that CBIZ's disclosure controls were effective at a reasonable assurance level as of June 30, 2025[172] Internal Control over Financial Reporting Discusses the company's internal control over financial reporting, including integration efforts related to acquisitions - CBIZ is actively integrating control processes and information systems related to the Marcum acquisition into its existing control environment, believing necessary steps have been taken to monitor and maintain appropriate internal controls[173] - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2025, other than those related to the Marcum acquisition integration[174] PART II. OTHER INFORMATION Contains additional disclosures including legal proceedings, risk factors, equity sales, and controls and procedures Item 1. Legal Proceedings CBIZ is involved in various legal proceedings arising in the ordinary course of business but is not currently engaged in any that are reasonably expected to have a material adverse effect on its financial condition or operations. Information on material proceedings is incorporated by reference from Note 6 - CBIZ is not currently engaged in any legal proceedings expected to have a material adverse effect on its business, financial condition, results of operations, or cash flows[176] - Information regarding certain material legal proceedings is incorporated by reference from Note 6, Commitments and Contingencies[176] Item 1A. Risk Factors This section refers readers to the "Risk Factors" discussion in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, noting that there have been no material changes to these factors - Readers should carefully consider the risk factors discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[177] - There have been no material changes to the previously disclosed risk factors[177] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the issuance of unregistered equity securities, including shares for contingent consideration and to selling shareholders of the Marcum acquisition. It also outlines the Company's share repurchase program, which was renewed in February 2025, and its activity during the second quarter Recent sales of unregistered securities Details the issuance of unregistered equity securities for contingent consideration and the Marcum acquisition - During Q2 2025, approximately 14 thousand shares of common stock were issued as payment for contingent consideration for previous acquisitions[178] - CBIZ delivered 0.9 million shares of common stock to selling shareholders as part of the Marcum acquisition, issued in reliance on the Section 4(a)(2) exemption from registration[178] Issuer purchases of equity securities Outlines the company's share repurchase program and the volume of shares repurchased during the quarter - On February 11, 2025, the Board of Directors authorized the continuation of the Share Repurchase Program, allowing the purchase of up to 5.0 million shares of common stock through March 31, 2026[179] - Repurchases can occur in the open market, privately negotiated transactions (including from former Marcum partners under the ROFR Agreement), or under Rule 10b5-1 trading plans[180][181] Second Quarter Share Purchases | Second Quarter Purchases (in thousands, except per share data) | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan | Maximum Number of Shares That May Yet Be Purchased Under the Plan | | :----------------------------------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------ | :---------------------------------------------------------------- | | April 1 – April 30, 2025 | — | $— | — | 5,000 | | May 1 – May 31, 2025 | 617 | $71.81 | 617 | 4,383 | | June 1 - June 30, 2025 | 374 | $72.24 | 374 | 4,009 | | Second Quarter Purchases Total | 991 | N/A | 991 | N/A | Item 3. Defaults Upon Senior Securities States that this item is not applicable, indicating no defaults on senior securities - Not applicable[184] Item 4. Mine Safety Disclosures States that this item is not applicable, indicating no mine safety disclosures are required - Not applicable[185] Item 5. Other Information Confirms that no directors or officers adopted or terminated Rule 10b5-1 trading plans during the quarter - No director or officer adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[186] Item 6. Exhibits Lists the various exhibits filed with the Form 10-Q, including amendments to loan agreements, certifications from the CEO and CFO, and XBRL-related documents - Exhibits include the Second Amendment to the Credit Agreement (April 29, 2025), Seventh Amendment to Loan Agreement (July 31, 2025), CEO and CFO certifications (Sarbanes-Oxley Act Sections 302 and 906), and various XBRL documents[187] Signature Indicates the report was signed by the Chief Financial Officer on a specific date - The report was signed by Brad Lakhia, Chief Financial Officer, on July 31, 2025[192]