CBIZ Inc

Previous wording

The following discussion is intended to assist in the understanding of our financial position at March 31, 2024 and December 31, 2023, results of operations for the three months ended March 31, 2024 and 2023, and cash flows for the three months ended March 31, 2024 and 2023, and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2023. This discussion and analysis contains forward-looking statements and should be read in conjunction with the disclosures and information contained in “Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q and in “Item 1A. Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

The following discussion is intended to assist in the understanding of our financial position at June 30, 2024 and December 31, 2023, results of operations for the three and six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023, and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2023. This discussion and analysis contains forward-looking statements and should be read in conjunction with the disclosures and information contained in “Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q and in “Item 1A. Risk Factors” included in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

Three months ended March 31, 2024 compared with March 31, 2023

Current wording

Revenue for the three months ended June 30, 2024 increased by $21.5 million, or 5.4%, to $420.0 million from $398.5 million for the same period in 2023. Same-unit revenue increased by approximately $11.0 million, or 2.8%, as compared to the same period in 2023. Revenue from newly acquired operations contributed $10.5 million, or 2.6%, of incremental revenue for the three months ended June 30, 2024 as compared to the same period in 2023.

Previous wording

Revenue for the three months ended March 31, 2024 increased by $39.7 million, or 8.7%, to $494.3 million from $454.6 million for the same period in 2023. Same-unit revenue increased by approximately $26.9 million, or 5.9%, as compared to the same period in 2023. Revenue from newly acquired operations, net of divestitures, contributed $12.8 million, or 2.8%, of incremental revenue for the three months ended March 31, 2024 as compared to the same period in 2023. A detailed discussion of revenue by practice group is included under "Operating Practice Groups".

Current wording

Revenue for the six months ended June 30, 2024 increased by $61.2 million, or 7.2%, to $914.3 million from $853.1 million for the same period in 2023. Same-unit revenue increased by approximately $37.9 million, or 4.4%, as compared to the same period in 2023. Revenue from newly acquired operations contributed $23.3 million, or 2.7%, of incremental revenue for the six months ended June 30, 2024 as compared to the same period in 2023. A detailed discussion of revenue by practice group is included under "Operating Practice Groups".

Previous wording

Net income was $76.9 million, or $1.53 per diluted share, in the first quarter of 2024, compared to $73.2 million, or $1.44 per diluted share, in the first quarter of 2023. Refer to “Results of Operations" for a detailed discussion of the components of net income.

Current wording

Net income was $19.8 million, or $0.39 per diluted share, in the second quarter of 2024, compared to $26.9 million, or $0.53 per diluted share, in the second quarter of 2023. For the six months ended June 30, 2024, net income was $96.7 million, or $1.92 per diluted share, compared to $100.0 million, or $1.98 per diluted share, for the same period in 2023. Refer to “Results of Operations" for a detailed discussion of the components of net income.

Previous wording

Our first priority for use of capital is to make strategic acquisitions. We also have the financing flexibility and the capacity to actively repurchase shares of our common stock. We believe that repurchasing shares of our common stock can be a prudent use of our financial resources, and that investing in our stock is an attractive use of capital and an efficient means to provide value to our stockholders. During the three months ended March 31, 2024, we completed two acquisitions for $21.3 million in cash. We also repurchased 0.2 million shares of our common stock for tax withholding purposes at a total cost of approximately $11.2 million in the three months ended March 31, 2024.

Current wording

Our first priority for use of capital is to make strategic acquisitions. We also have the financing flexibility and the capacity to actively repurchase shares of our common stock. We believe that repurchasing shares of our common stock can be a prudent use of our financial resources, and that investing in our stock is an attractive use of capital and an efficient means to provide value to our stockholders. During the six months ended June 30, 2024, we completed three acquisitions for $22.5 million in cash. We also repurchased 0.2 million shares of our common stock for tax withholding purposes at a total cost of approximately $11.2 million in the six months ended June 30, 2024.

Previous wording

The following tables summarize total revenue for the three months ended March 31, 2024 and 2023:

Current wording

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

Previous wording

We sponsor a non-qualified deferred compensation plan, under which a CBIZ employee’s compensation deferral is held in a rabbi trust and invested accordingly as directed by the employee. Income and expenses related to the non-qualified deferred compensation plan, which are recorded in "Corporate and Other" for segment reporting purposes, are included in “Operating expenses”, “Gross margin” and “Corporate general and administrative expenses” and are directly offset by deferred compensation gains or losses in “Other income (expense), net” in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income. The non-qualified deferred compensation plan has no impact on “Income before income tax expense” or diluted earnings per share.

Current wording

We sponsor a non-qualified deferred compensation plan (the "deferred compensation plan"), under which a CBIZ employee’s compensation deferral is held in a rabbi trust and invested accordingly as directed by the employee. Income and expenses related to the deferred compensation plan, which are recorded in "Corporate and Other" for segment reporting purposes, are included in “Operating expenses”, “Gross margin” and “Corporate general and administrative expenses” and are directly offset by deferred compensation gains or losses in “Other (expense) income, net” in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income. The deferred compensation plan has no impact on “Income before income tax expense” or diluted earnings per share.

Previous wording

Income and expenses related to the deferred compensation plan for the three months ended March 31, 2024 and 2023 are as follows:

Current wording

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

Previous wording

Excluding the impact of the above-mentioned income and expenses related to the deferred compensation plan, the operating results for the three months ended March 31, 2024 and 2023 are as follows:

Current wording

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

Previous wording

Three months ended March 31, 2024 compared to March 31, 2023. Total operating expenses for the three months ended March 31, 2024 increased by $35.5 million, or 10.4%, to $376.5 million as compared to $341.0 million in the same period of 2023. The non-qualified deferred compensation plan increased operating expenses by $8.6 million for the three months ended March 31, 2024, and by $4.8 million during the same period in 2023. Excluding the non-qualified deferred compensation expenses, which were recorded in "Corporate and Other" for segment reporting purposes, operating expenses would have been $367.9 million and $336.3 million, or 74.4% and 74.0% of revenue, for the three months ended March 31, 2024 and 2023, respectively. In addition, operating expenses for the three months ended March 31, 2024 included approximately $0.1 million non-recurring integration costs associated with the two acquisitions completed in 2024, and operating expenses for the three months ended March 31, 2023 included $0.4 million non-recurring integration costs associated with the Somerset CPAs and Advisors ("Somerset") acquisition.

Current wording

Three months ended June 30, 2024 compared to June 30, 2023. Total operating expenses for the three months ended June 30, 2024 increased by $22.4 million, or 6.5%, to $366.4 million as compared to $344.0 million in the same period of 2023. The deferred compensation plan increased operating expenses by $2.3 million for the three months ended June 30, 2024, and by $5.1 million during the same period in 2023. Excluding the deferred compensation expenses, which were recorded in "Corporate and Other" for segment reporting purposes, operating expenses would have been $364.1 million and $338.9 million, or 86.7% and 85.0% of revenue, for the three months ended June 30, 2024 and 2023, respectively. In addition, operating expenses for the three months ended June 30, 2024 included approximately $0.2 million non-recurring integration costs associated with the acquisitions completed in 2024, and operating expenses for the three months ended June 30, 2023 included $0.6 million non-recurring integration costs associated with the Somerset CPAs and Advisors ("Somerset") acquisition.

Previous wording

The majority of our operating expenses relate to personnel costs, which include (i) salaries and benefits, (ii) commissions paid to producers, (iii) incentive compensation, and (iv) stock-based compensation. Excluding the impact of deferred compensation, which was recorded in "Corporate and Other" for segment reporting purposes, operating expenses increased by approximately $31.7 million during the three months ended March 31, 2024 as compared to the same period in 2023, driven by $23.0 million higher personnel costs (of which $7.5 million was the result of acquisitions), $2.0 million higher facility costs, $1.8 million higher professional services costs, $1.6 million higher technology related costs, $1.4 million higher direct costs, $1.3 million higher travel and entertainment costs, and $0.7 million higher depreciation and amortization expense, as well as $0.6 million higher discretionary spending to support business growth. Personnel costs are discussed in further detail under “Operating Practice Groups”.

Current wording

The majority of our operating expenses relate to personnel costs, which include (i) salaries and benefits, (ii) commissions paid to producers, (iii) incentive compensation, and (iv) stock-based compensation. Excluding the impact of deferred compensation, which was recorded in "Corporate and Other" for segment reporting purposes, operating expenses increased by approximately $25.2 million during the three months ended June 30, 2024 as compared to the same period in 2023, driven by $18.1 million higher personnel costs (of which $5.0 million was the result of acquisitions), $2.8 million higher direct costs, $2.1 million higher technology costs, $0.9 million higher professional service costs,$0.6 million higher travel and entertainment costs,$0.4 million higher facility costs, and

Previous wording

Three months ended March 31, 2024 compared to March 31, 2023. The deferred compensation plan increased G&A expenses by $1.1 million for the three months ended March 31, 2024, and increased G&A expenses by $0.6 million during the same period in 2023. G&A expenses, excluding the impact of the deferred compensation plan, would have been $17.7 million, or 3.6% of revenue, for the three months ended March 31, 2024, compared to $15.0 million, or 3.3% of revenue, for the same period in 2023, an increase of approximately $2.7 million. The increase was primarily driven by $2.2 million higher legal and other professional services costs, $0.2 million higher personnel costs, and $0.1 million higher depreciation costs, as well as $0.2 million higher other discretionary spending to support business growth. G&A expense for the three months ended March 31, 2024 included approximately $0.5 million non-recurring transaction and integration costs associated with the two acquisitions completed in 2024, and G&A expense for the three months ended March 31, 2023 included approximately $1.2 million non-recurring transaction and integration costs associated with the Somerset acquisition.

Current wording

Three months ended June 30, 2024 compared to June 30, 2023. The deferred compensation plan increased G&A expenses by $0.3 million for the three months ended June 30, 2024, and increased G&A expenses by $0.6 million during the same period in 2023. G&A expenses, excluding the impact of the deferred compensation plan, would have been $21.7 million, or 5.2% of revenue, for the three months ended June 30, 2024, compared to $15.2 million, or 3.8% of revenue, for the same period in 2023, an increase of approximately $6.6 million. The increase was primarily driven by $5.6 million higher legal and other professional services costs largely associated with the announced Transaction, $0.4 millon higher travel and entertainment costs, $0.4 million higher technology costs, $0.2 million higher depreciation costs, and $0.7 million higher other discretionary spending to support the business growth. The increase in G&A expenses was partially offset by$0.7 million lower personnel costs and $0.1 million lower facilitiy related costs. G&A expense for the three months ended June 30, 2024 included approximately $0.1 million of non-recurring transaction and integration costs associated with the acquisitions completed in 2024, and G&A expense for the three months ended June 30, 2023 included approximately $0.3 million of non-recurring transaction and integration costs associated with the Somerset acquisition.

Previous wording

Three months ended March 31, 2024 compared with March 31, 2023. During the three months ended March 31, 2024, our average debt balance and weighted average effective interest rate was $325.6 million and 5.23%, compared to $302.2 million and 4.54% for the same period of 2023. The increase in interest expense for the three months ended March 31, 2024 as compared to the same period in 2023 was primarily driven by a higher average debt balance as well as a higher weighted average effective interest rate.

Current wording

Three and six months ended June 30, 2024 compared with June 30, 2023. During the three months ended June 30, 2024, our average debt balance and weighted average effective interest rate was $410.1 million and 4.85%, respectively, compared to $403.1 million and 5.24% for the same period of 2023. The increase in interest expense for the three months ended June 30, 2024 as compared to the same period in 2023 was primarily driven by a higher average debt balance.

Previous wording

Three months ended March 31, 2024 compared with March 31, 2023. For the three months ended March 31, 2024, other income, net includes a net gain of $9.6 million associated with the non-qualified deferred compensation plan. For the same period in 2023, other income, net includes a net gain of $5.4 million associated with the non-qualified deferred compensation plan. Excluding the impact of the deferred compensation plan, the three months ended March 31, 2024 and 2023 would have resulted in a net expense of $0.2 million and $0.3 million, respectively, primarily due to lower expenses associated with the net change in the fair value of contingent consideration related to prior acquisitions.

Current wording

Three and six months ended June 30, 2024 compared with June 30, 2023. For the three months ended June 30, 2024, other income, net includes a net gain of $2.6 million associated with the deferred compensation plan. For the same period in 2023, other income, net includes a net gain of $5.7 million associated with the deferred compensation plan. Excluding the impact of the deferred compensation plan, the decrease in other income, net for the three months ended June 30, 2024 was not material as compared to the same period in 2023.

Previous wording

Three months ended March 31, 2024 compared with March 31, 2023. The effective tax rate for the three months ended March 31, 2024 was 26.1%, compared to an effective tax rate of 26.5% for the comparable period in 2023. The decrease in the effective tax rate was primarily due to the tax effect of lower non-deductible expenses and lower state tax expenses relative to pre-tax income during the first quarter of 2024 as compared to the same period in 2023.

Current wording

Three and six months ended June 30, 2024 compared with June 30, 2023. The effective tax rate for the three months ended June 30, 2024 was 29.8%, compared to an effective tax rate of 30.4% for the comparable period in 2023. The decrease in the effective tax rate for the three month period ending June 30, 2024 was primarily due to the tax effect of lower non-deductible expenses and lower state tax expenses relative to pre-tax income during the second quarter of 2024 as compared to the same period in 2023.

Previous wording

The Financial Services practice group revenue for the three months ended March 31, 2024 grew by 8.6% to $372.6 million from $343.1 million during the same period in 2023. Same-unit revenue grew by $17.5 million, or 5.1%, across all product lines, primarily driven by those units that provide traditional accounting and tax-related services, which increased $10.1 million, an increase of approximately $4.7 million in government healthcare compliance business, and an increase of approximately $2.7 million in those units that provide project-oriented advisory services. The impact of acquired businesses contributed $12.1 million, or 3.2% of 2024 revenue.

Current wording

The Financial Services practice group revenue for the three months ended June 30, 2024 grew by 6.3% to $309.2 million from $290.9 million during the same period in 2023. Same-unit revenue grew by $8.8 million, or 3.0%, primarily driven by those units that provide government healthcare compliance business consulting, which increased by $8.3 million, and those units that provide project based advisory services, which increased by approximately$2.2 million. The increase was offset by a decrease in revenue of approximately $1.7 million from those units that provide traditional accounting and tax-related services for the three months ended June 30, 2024.The impact of acquired businesses contributed $9.5 million, or 3.1%, of 2024 revenue.

Previous wording

We provide a range of services to affiliated CPA firms under joint referral and administrative service agreements (“ASAs”). Fees earned under the ASAs are recorded as revenue in the accompanying Condensed Consolidated Statements of Comprehensive Income and were approximately $87.8 million and $84.8 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

We provide a range of services to affiliated CPA firms under joint referral and administrative service agreements (“ASAs”). Fees earned under the ASAs are recorded as revenue in the accompanying Condensed Consolidated Statements of Comprehensive Income and were approximately $68.9 million and $65.9 million for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Operating expenses increased by $21.1 million, or 8.6%, as compared to the same period last year. Personnel costs increased by $13.8 million, of which acquisitions contributed approximately $7.0 million to the increase. Compared to the same period in 2023, facility costs, direct costs, professional services costs, technology costs, depreciation and amortization costs, corporate allocated costs, travel and entertainment costs, bad debt costs, and marketing costs increased by approximately $1.7 million, $1.6 million, $1.1 million, $0.8 million, $0.6 million, $0.6 million, $0.5 million, $0.2 million, and $0.2 million, respectively. Operating expenses as a percentage of revenue increased slightly to 71.3% for the three months ended March 31, 2024 from 71.2% of revenue for the prior year quarter.

Current wording

Operating expenses increased by $19.4 million, or 8.0%, as compared to the same period last year. Personnel costs increased by $12.9 million, of which acquisitions contributed approximately $4.6 million to the increase. Compared to the same period in 2023, direct costs, technology costs, professional services costs, travel and entertainment costs, corporate allocated costs, facility costs, depreciation and amortization costs, and employee gifts and activities increased by approximately$2.6 million, $1.4 million, $0.8 million, $0.6 million, $0.4 million, $0.4 million, $0.2 million, and $0.1 million, respectively. Other discretionary costs, net increased by approximately $1.5 million. Operating expenses as a percentage of revenue increased slightly to 85.0% for the three months ended June 30, 2024 from 83.7% of revenue for the prior year quarter.

Previous wording

Operating expenses increased by $6.7 million, or 8.7%, when compared to the same period last year. Personnel costs increased by $6.0 million, of which acquisitions contributed approximately $0.4 million, primarily due to the impact of annual merit increases as well as investment in producers. Compared to the same period in 2023, professional services costs, corporate allocated costs, technology costs, direct costs, travel and entertainment cost, and facility costs increased by approximately $0.3 million, $0.2 million, $0.2 million, $0.1 million, $0.1 million, and $0.1 million, respectively, and was partially offset by $0.2 million lower bad debt expense as compared to the same period in 2023. In addition, other miscellaneous discretionary costs, net decreased by $0.1 million. Operating expenses as a percentage of revenue increased slightly to 77.2% for the quarter ended March 31, 2024 from 76.9% of revenue for the same period in 2023.

Current wording

Operating expenses increased by $4.9 million, or 6.2%, when compared to the same period last year. Personnel costs increased by $3.9 million, of which acquisitions contributed approximately $0.5 million, primarily due to the impact of annual merit increases as well as investment in producers. Compared to the same period in 2023, technology costs and bad debt costs increased by approximately $0.4 million and $0.3 million, respectively, and was partially offset by $0.1 million lower travel and entertainment costs as compared to the same period in 2023. Operating expenses as a percentage of revenue increased to 85.4% for the quarter ended June 30, 2024 from 81.8% of revenue for the same period in 2023, primarily due to decrease in revenue generated from the property and casualty services.

Previous wording

The Benefits and Insurance Services practice group revenue increased by $8.4 million, or 8.3%, to $108.4 million during the three months ended March 31, 2024 compared to $100.1 million for the same period in 2023. Same-unit revenue grew by $7.6 million, or 7.6%, across almost all of the major service lines, primarily driven by a $4.5 million increase in the employee benefit and retirement benefit services lines, a $2.6 million increase in the property and casualty services, and a $0.7 million increase in the payroll-related services, partially offset by an approximately $0.2 million decrease from other project-based services.

Current wording

The Benefits and Insurance Services practice group revenue increased by $9.9 million, or 5.1%, to $205.8 million, during the six months ended June 30, 2024 compared to $195.9 million for the same period in 2023. Same-unit revenue grew by $8.2 million, or 4.2%, across almost all of the major service lines, primarily driven by a $7.7 million increase in employee benefit and retirement benefit services lines, a $1.2 million increase in payroll related services, and a $0.5 million increase in the property and casualty services, partially offset by an approximately$1.0 million decrease in other project based services.

Previous wording

The National Practices group is primarily driven by a cost-plus contract with a single client, which has existed since 1999. The cost-plus contract is a five-year contract with the most recent renewal through December 31, 2028. Revenues from this single client accounted for approximately 75% of the National Practice group’s revenue. During the three months ended March 31, 2024, revenue increased by $1.8 million, or 15.6%, while operating expenses increased by $1.4 million, or 12.8%.

Current wording

The National Practices group is primarily driven by a cost-plus contract with a single client, which has existed since 1999. The cost-plus contract is a five-year contract with the most recent renewal through December 31, 2028. Revenues from this single client accounted for approximately 75% of the National Practice group’s revenue. During the three and six months ended June 30, 2024, revenue increased by $1.6 million, or 13.9%, and $3.4 million, or 14.7%, respectively, while operating expenses increased by $1.5 million, or 14.1%, and $2.8 million, or 13.4%, respectively.

Previous wording

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.

Current wording

Corporate and Other are operating expenses that are not directly allocated to the individual business units. These expenses primarily consist of certain health care costs, gains or losses attributable to assets held in our deferred compensation plan, stock-based compensation, consolidation and integration charges, certain professional fees, certain advertising costs and other various expenses.

Previous wording

Total corporate general and administrative expenses increased by $3.1 million, or 20.0%, during the three months ended March 31, 2024, as compared to the same period in 2023. The non-qualified deferred compensation plan increased corporate general and administrative expenses by $1.1 million for the three months ended March 31, 2024 and by $0.6 million during the same period in 2023. Excluding the non-qualified deferred compensation expenses, corporate general and administrative expense increased by approximately $2.7 million. The increase was primarily driven by $2.2 million higher legal and other professional services costs, $0.2 million higher personnel costs, and $0.1 million higher depreciation costs, as well as $0.2 million higher other discretionary spending to support business growth. G&A expense for the three months ended March 31, 2024 included approximately $0.5 million non-recurring transaction and integration costs associated with the two acquisitions completed in 2024, and G&A expense for the three months ended March 31, 2023 included approximately $1.2 million non-recurring transaction and integration costs associated with the Somerset acquisition.

Current wording

Total corporate general and administrative expenses increased by $6.3 million, or 39.6%, during the three months ended June 30, 2024, as compared to the same period in 2023. The deferred compensation plan increased corporate general and administrative expenses by $0.3 million for the three months ended June 30, 2024 and by $0.6 million during the same period in 2023. Excluding the deferred compensation expenses, corporate general and administrative expense increased by approximately $6.6 million. The increase was primarily driven by $5.6 million higher legal and other professional services costs largely associated with the announced Transaction, $0.4 millon higher travel and entertainment costs, $0.4 million higher technology costs, $0.2 million higher depreciation costs, and $0.7 million higher other discretionary spending to support the business growth. The increase in G&A expenses was partially offset by$0.7 million lower personnel costs and $0.1 million lower facility related costs. G&A expense for the three months ended June 30, 2024 included approximately $0.1 million non-recurring transaction and integration costs associated with the acquisitions completed in 2024, and G&A expense for the three months ended June 30, 2023 included approximately $0.3 million non-recurring transaction and integration costs associated with the Somerset acquisition.

Previous wording

Total operating expenses increased by $6.3 million during the three months ended March 31, 2024, as compared to the same period in 2023. The non-qualified deferred compensation plan increased operating expenses by $8.6 million for the three months ended March 31, 2024 and by $4.8 million during the same period in 2023. Excluding the non-qualified deferred compensation expenses, operating expenses increased by $2.5 million during the three months ended March 31, 2024, as compared to the same period in 2023. The increase was primarily driven by higher personnel costs.

Current wording

Total operating expenses increased by $3.0 million, or 14.3%, during the six months ended June 30, 2024, as compared to the same period in 2023. The deferred compensation plan increased operating expenses by $10.9 million for the six months ended June 30, 2024, and by $9.9 million during the same period in 2023. Excluding the deferred compensation expenses, operating expense increase by approximately$2.0 million during thesix months ended June 30, 2024, primarily driven by higher personnel related costs, as compared to the same period in 2023.

Previous wording

Total other income, net increased by $3.7 million during the three months ended March 31, 2024, as compared to the same period in 2023. For the three months ended March 31, 2024, total other income, net includes a net gain of $9.6 million associated with the non-qualified deferred compensation plan. For the same period in 2023, total other income, net includes a net gain of $5.4 million associated with the non-qualified deferred compensation plan. Excluding the impact of the non-qualified deferred compensation plan, total other income, net would have been $4.9 million of expense in 2024 and $4.4 million of expense in 2023, a net change of $0.5 million primarily attributed to $0.9 million higher interest expense in 2024 as compared to 2023, offset by $0.4 million decrease in expenses driven by $0.2 million lower net changes in the fair value of contingent consideration related to prior acquisitions.

Current wording

Total other income, net increased by $0.7 million during the six months ended June 30, 2024, as compared to the same period in 2023. Total other income, net for the six months ended June 30, 2024 includes a net gain of $12.2 million associated with the deferred compensation plan. For the same period in 2023, total other income, net includes a net gain of $11.1 million associated with the deferred compensation plan. Excluding the impact of the deferred compensation plan, total other income, net decreased by $0.4 million, primarily due to $1.2 million higher interest expense due to higher average outstanding balance and interest rates during 2024 as compared to 2023, offset by $0.8 million lower net changes in the fair value of contingent consideration related to prior acquisitions.

Previous wording

Accounts receivable balances increase in response to the first three months' revenue generated by the Financial Services practice group. A significant amount of this revenue is billed and collected in subsequent quarters. Days sales outstanding (“DSO”) represent accounts receivable and unbilled revenue (net of realization adjustments) at the end of the period, divided by trailing twelve months' daily revenue. We provide DSO data because such data is commonly used as a performance measure by analysts and investors and as a measure of our ability to collect on receivables in a timely manner. DSO was 101 days and 94 days at March 31, 2024 and 2023. DSO at December 31, 2023 was 78 days.

Current wording

Accounts receivable balances increase in response to the first six months' revenue generated by the Financial Services practice group. A significant amount of this revenue is billed and collected in subsequent quarters. Days sales outstanding (“DSO”) represent accounts receivable and unbilled revenue (net of realization adjustments) at the end of the period, divided by trailing twelve months' daily revenue. We provide DSO data because such data is commonly used as a performance measure by analysts and investors and as a measure of our ability to collect on receivables in a timely manner. Trailing-twelve-month DSO, including the impact of acquisitions, was 95 days and 94 days at June 30, 2024 and 2023, respectively. DSO at December 31, 2023 was 78 days.

Previous wording

Operating Activities -Cash used in operating activities was $63.7 million during the three months ended March 31, 2024, primarily consisted of working capital use of $155.9 million, which was offset by net income of $76.9 million and certain non-cash items, such as depreciation and amortization expense of $9.5 million, deferred income tax of $2.1 million, and stock-based compensation expense of $2.6 million. Cash used in operating activities was $44.5 million during the three months ended March 31, 2023 and primarily consisted of working capital use of $133.9 million, which was offset by net income of $73.2 million and certain non-cash items, such as depreciation and amortization expense of $8.6 million, deferred income tax of $2.6 million, and stock-based compensation expense of $3.8 million.

Current wording

Operating Activities -Cash provided by operating activities was $24.4 million during the six months ended June 30, 2024, primarily consisted of working capital use of $101.5 million, which was offset by net income of $96.7 million and certain non-cash items, such as depreciation and amortization expense of $19.0 million, deferred income tax of $3.1 million, and stock-based compensation expense of $5.0 million. Cash provided by operating activities was $29.7 million during the six months ended June 30, 2023 and primarily consisted of net income of $100.0 million and certain non-cash items, such as depreciation and amortization expense of $17.8 million, deferred income tax of $4.6 million, and stock-based compensation expense of $6.6 million. The cash inflow was offset by working capital use of $101.6 million during the six months ended June 30, 2023.

Previous wording

Investing Activities -Cash used in investing activities during the three months ended March 31, 2024 was $28.7 million and consisted primarily of $21.3 million used for business acquisitions, $5.1 million in capital expenditures, and $2.2 million in other investing activities primarily related to acquistion related working capital adjustment payments and notes receivable. The net cash flow related to funds held for clients and other activities were immaterial. Cash used in investing activities during the three months ended March 31, 2023 was $45.9 million and consisted primarily of $39.1 million used for business acquisitions, $3.6 million in capital expenditures, and $3.9 million in other investing activities primarily related to working capital payments and notes receivable. The use of cash was offset by $0.6 million net cash inflow related to funds held for clients and other activities.

Current wording

Investing Activities -Cash used in investing activities during the six months ended June 30, 2024 was $33.2 million and consisted primarily of $22.5 million used for business acquisitions, $7.0 million in capital expenditures, and $3.8 million in other investing activities primarily related to acquistion related working capital adjustment payments and notes receivable. The net cash flow related to funds held for clients and other activities were immaterial. Cash used in investing activities during the three months ended June 30, 2023 was $65.6 million and consisted primarily of $48.6 million used for business acquisitions, $11.7 million in capital expenditures, and $9.0 million in other investing activities primarily related to working capital payments and notes receivable. During the six months ended June 30, 2023, the use of cash was offset by $3.7 million net cash inflow related to funds held for clients and other activities.

Previous wording

Financing Activities -Cash provided by financing activities during the three months ended March 31, 2024 was $71.2 million and primarily consisted of $125.4 million in net proceeds from the credit facility, partially offset by $11.2 million cash used in share repurchases for tax withholding purposes, a $11.9 million net decrease in client fund obligations and $31.1 million in contingent consideration payments related to prior acquisitions. Cash provided by financing activities during the three months ended March 31, 2023 was $61.8 million and primarily consisted of $138.0 million in net proceeds from the credit facility and $3.6 million proceeds from exercise of stock options, partially offset by $28.0 million in share repurchases, a $23.3 million net decrease in client fund obligations and $28.6 million in contingent consideration payments related to prior acquisitions.

Current wording

Financing Activities -Cash used in financing activities during the six months ended June 30, 2024 was $11.9 million and primarily consisted of $68.6 million in net proceeds from the credit facility, partially offset by $11.2 million cash used in share repurchases for tax withholding purposes, a $28.3 million net decrease in client fund obligations and $41.0 million in contingent consideration payments related to prior acquisitions. Cash provided by financing activities during the six months ended June 30, 2023 was $21.8 million and primarily consisted of $144.9 million in net proceeds from the credit facility and $4.3 million proceeds from exercise of stock options, partially offset by $57.0 million in share repurchases, a $40.4 million net decrease in client fund obligations and $30.0 million in contingent consideration payments related to prior acquisitions.

Previous wording

Credit Facility -At March 31, 2024, we had $437.8 million outstanding under the 2022 credit facility as well as $3.2 million outstanding letters of credit. Available funds under the 2022 credit facility, based on the terms of the commitment, were approximately $147.9 million at March 31, 2024. The weighted average interest rate under the 2022 credit facility was 5.23% during the three months ended March 31, 2024, compared to 4.54% for the same period in 2023. The 2022 credit facility allows for the allocation of funds for future strategic initiatives, including acquisitions and the repurchase of our common stock, subject to the terms and conditions of the 2022 credit facility.

Current wording

Credit Facility -At June 30, 2024, we had $381.0 million outstanding under the 2022 credit facility as well as $3.2 million outstanding letters of credit. Available funds under the 2022 credit facility, based on the terms of the commitment, were approximately $209.8 million at June 30, 2024. The weighted average interest rate under the 2022 credit facility was 5.41% during the six months ended June 30, 2024, compared to 4.94% for the same period in 2023. The 2022 credit facility allows for the allocation of funds for future strategic initiatives, including acquisitions and the repurchase of our common stock, subject to the terms and conditions of the 2022 credit facility.

Previous wording

Use of Capital -Our first priority for use of capital is to make strategic acquisitions. We also have the financing flexibility and the capacity to actively repurchase shares of our common stock. We believe that repurchasing shares of our common stock can be a prudent use of our financial resources, and that investing in our stock is an attractive use of capital and an efficient means to provide value to our stockholders. During the three months ended March 31, 2024, we completed two acquisitions for $21.3 million in cash. We also repurchased 0.2 million shares of our common stock at a total cost of approximately $11.2 million during the three months ended March 31, 2024.

Current wording

Use of Capital -Our first priority for use of capital is to make strategic acquisitions. We also have the financing flexibility and the capacity to actively repurchase shares of our common stock. We believe that repurchasing shares of our common stock can be a prudent use of our financial resources, and that investing in our stock is an attractive use of capital and an efficient means to provide value to our stockholders. During the six months ended June 30, 2024, we completed three acquisitions for $22.5 million in cash. We also repurchased 0.2 million shares of our common stock at a total cost of approximately $11.2 million during the six months ended June 30, 2024.

Previous wording

From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Any or all of our forward-looking statements in this Quarterly Report on Form 10-Q and in any other public statements that we make, are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, but are not limited to: we may be more sensitive to revenue fluctuations than other companies, which could result in fluctuations in the market price of our common stock; payments on accounts receivable may be slower than expected, or amounts due on receivables or notes may not be fully collectible; we are dependent on the services of our executive officers, other key employees, producers and service personnel, the loss of whom may have a material adverse effect on our business, financial condition and results of operations; restrictions imposed by independence requirements and conflict of interest rules may limit our ability to provide services to clients of the attest firms with which we have contractual relationships and the ability of such attest firms to provide attestation services to our clients; our goodwill and intangible assets could become impaired, which could lead to material non-cash charges against earnings; certain liabilities resulting from acquisitions are estimated and could lead to a material non-cash impact on earnings; governmental regulations and interpretations are subject to changes, which could have a material adverse effect on our clients, our business, our business services operations, our business models, or our revenue; changes in the United States healthcare or public health environment, including new healthcare legislation or regulations, may adversely affect the revenue and margins in our or our clients’ businesses; we are subject to risks relating to processing customer transactions for our payroll and other transaction processing businesses; cyber-attacks or other security breaches involving our computer systems or the systems of one or more of our vendors or clients could materially and adversely affect our business; we are subject to risk as it relates to software that we license from third parties; we could be held liable for errors and omissions, contract claims, or other litigation judgments or expenses; the future issuance of additional shares could adversely affect the price of our common stock; our principal stockholders may have substantial control over our operations; we require a significant amount of cash for interest payments on our debt and to expand our business as planned; terms of our credit facility may adversely affect our ability to run our business and/or reduce stockholder returns; our failure to satisfy covenants in our debt instruments could cause a default under those instruments; we are reliant on information processing systems and any failure of these systems could have a ma…

Excerpt shortened here; the source contains the full paragraph.

Current wording

From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Any or all of our forward-looking statements in this Quarterly Report on Form 10-Q and in any other public statements that we make, are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, but are not limited to: we may be more sensitive to revenue fluctuations than other companies, which could result in fluctuations in the market price of our common stock; payments on accounts receivable may be slower than expected, or amounts due on receivables or notes may not be fully collectible; we are dependent on the services of our executive officers, other key employees, producers and service personnel, the loss of whom may have a material adverse effect on our business, financial condition and results of operations; restrictions imposed by independence requirements and conflict of interest rules may limit our ability to provide services to clients of the attest firms with which we have contractual relationships and the ability of such attest firms to provide attestation services to our clients; our goodwill and intangible assets could become impaired, which could lead to material non-cash charges against earnings; certain liabilities resulting from acquisitions are estimated and could lead to a material non-cash impact on earnings; governmental regulations and interpretations are subject to changes, which could have a material adverse effect on our clients, our business, our business services operations, our business models, or our revenue; changes in the United States healthcare or public health environment, including new healthcare legislation or regulations, may adversely affect the revenue and margins in our or our clients’ businesses; we are subject to risks relating to processing customer transactions for our payroll and other transaction processing businesses; cyber-attacks or other security breaches involving our computer systems or the systems of one or more of our vendors or clients could materially and adversely affect our business; we are subject to risk as it relates to software that we license from third parties; we could be held liable for errors and omissions, contract claims, or other litigation judgments or expenses; the future issuance of additional shares could adversely affect the price of our common stock; our principal stockholders may have substantial control over our operations; we require a significant amount of cash for interest payments on our debt and to expand our business as planned; terms of our credit facility may adversely affect our ability to run our business and/or reduce stockholder returns; our failure to satisfy covenants in our debt instruments could cause a default under those instruments; we are reliant on information processing systems and any failure of these systems could have a ma…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Consequently, no forward-looking statement can be guaranteed. A more detailed description of risk factors may be found in “Item 1A, Risk Factors” of this Quarterly Report on Form 10-Q and in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023. Except as required by the federal securities laws, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our filings with the SEC, such as quarterly, periodic and annual reports.

Current wording

Consequently, no forward-looking statement can be guaranteed. A more detailed description of risk factors may be found in “Item 1A, Risk Factors” of this Quarterly Report on Form 10-Q and in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023. Except as required by the federal securities laws, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You are advised, however, to consult any further disclosures we make on related subjects in our filings with the SEC, such as quarterly, periodic and annual reports.