Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to "we," "us," "our," "CBIZ" or the "Company" shall mean CBIZ, Inc., and its operating subsidiaries.

The following discussion is intended to assist in the understanding of our financial position at September 30, 2026 and December 31, 2025, results of operations for the three and nine months ended September 30, 2026 and 2025, and cash flows for the nine months ended September 30, 2026 and 2025, 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, 2025, as amended. 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 our Annual Report on Form 10-K for the year ended December 31, 2025, as amended.

OVERVIEW

We provide professional business services, products and solutions that help our clients grow and succeed by better managing their finances and employees. These services are primarily provided to small and medium-sized businesses, as well as individuals, governmental entities, and not-for-profit enterprises throughout the United States and parts of Canada. As discussed in Note 13, Goodwill, the National Practices practice group, which consisted of a single reporting unit, is now included in the Financial Services practice group to align our internal management and reporting structure with the services provided. As a result of these changes, we now operate with two reportable segments: Financial Services and Benefits and Insurances Services. Financial results of the Financial Service Practice Group for the three and nine months ended September 30, 2025 were adjusted to reflect the change in reportable segments.

Refer to the Annual Report on Form 10-K for the year ended December 31, 2025, as amended, for further discussion of our business and strategies, as well as the external relationships and regulatory factors that currently impact our operations.

PROPOSED MERGER

As previously announced, on July 28, 2026, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement"), by and among the Company, Viking Parent Co., Inc. a Delaware corporation ("Parent"), and Viking Merger Co, Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent ("Merger Sub"), pursuant to which, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company (the "Merger"), with the Company surviving the proposed Merger as a direct wholly owned subsidiary of Parent.

Pursuant to the Merger Agreement, upon the consummation of the proposed Merger transaction, each share of common stock, par value $0.01 per share, of the Company (the "Shares" and each a "Share") issued and outstanding immediately prior to the effective time of the Merger (other than certain excluded shares as set forth in the Merger Agreement) will be converted into the right to receive $55.00 per share in cash, without interest thereon (the "Merger Consideration"). The Merger Agreement also provides for the treatment of the Company's outstanding equity awards in accordance with its terms upon consummation of the proposed Merger.

On October 27, 2026, the Company held a virtual special meeting of stockholders (the "Special Meeting"). At the Special Meeting, among other matters, the proposal to adopt the Merger Agreement was approved, having received "for" votes from holders of a majority of the outstanding shares entitled to vote on the Merger Agreement proposal.

The Company expects to close the proposed Merger on or about November 2, 2026, in accordance with, and subject to the terms of, the Merger Agreement.

See Note 1, "Summary of Significant Accounting Polices" in Item 1 of this Form 10-Q for further details regarding the proposed Merger. See the section titled, "Risk Factors" included under Part II, Item 1A of this Report for more information regarding risks associated with the proposed Merger.

EXECUTIVE SUMMARY

Revenue for the three months ended September 30, 2026 increased by $8.4 million, or 1.2%, to $702.2 million from $693.8 million for the same period in 2025. Same-unit revenue increased by approximately $5.9 million, or 0.8%, as compared to the same period in 2025. Revenue from newly acquired operations contributed $2.5 million of incremental revenue for the three months ended September 30, 2026, as compared to the same period in 2025. A detailed discussion of revenue for the three months ended September 30, 2026 by practice group is included under "Operating Practice Groups."

Revenue for the nine months ended September 30, 2026 increased by $17.7 million, or 0.8%, to $2,233.0 million from $2,215.3 million for the same period in 2025. Same-unit revenue increased by approximately $10.8 million or 0.5%, as compared to the same period in 2025. Revenue from newly acquired operations contributed $6.9 million of incremental revenue for the nine months ended September 30, 2026, as compared to the same period in 2025. A detailed discussion of revenue for the nine months ended September 30, 2026 by practice group is included under "Operating Practice Groups."

For the three months ended September 30, 2026, net income was $36.8 million, or $0.61 per diluted share, compared to $30.1 million, or $0.48 per diluted share, for the same period in 2025. For the nine months ended September 30, 2026, net income was $208.2 million, or $3.45 per diluted share, compared to $194.9 million, or $3.06 per diluted share, for the same period in 2025. Refer to "Results of Operations" for a detailed discussion of the components of net income.

Strategic Use of Capital

Our primary business objective is funding organic growth acceleration and meeting working capital needs. This includes investments in client service delivery and emerging technology that support revenue growth and enhance operational excellence. Following the completion of the Marcum Transaction, our second priority is to pay down debt to be at a net leverage ratio of less than 2.5x over time. As a result of the Marcum Transaction and related 2024 Credit Facilities, we have $1,454.0 million of outstanding debt under the 2024 Credit Facilities as of September 30, 2026. In addition, we believe that repurchasing shares of our common stock can be an attractive use of capital and an efficient means to provide value to our stockholders. We will also remain focused on making strategic acquisitions that allow us to strengthen our presence in existing markets, expand into high growth industries, and broaden our services to our clients.

During the nine months ended September 30, 2026, we repurchased 0.2 million shares of our common stock for a total cost of $7.5 million under the ROFR Agreement, 0.1 million shares of our common stock for a total cost of $7.3 million under a rescission offer, and 2.1 million shares of our common stock in the open market for $60.1 million pursuant to our Share Repurchase Program (defined below). Additionally, to settle statutory employee withholdings related to vesting of stock awards, we repurchased 0.1 million shares of our common stock at a cost of $3.0 million during the nine months ended September 30, 2026. During the nine months ended September 30, 2025, we repurchased 1.4 million shares of our common stock for a cost of $102.8 million under the ROFR Agreement and no share repurchases from the open market. To settle statutory employee withholdings related to vesting of stock awards, we repurchased 0.1 million shares at a cost of $7.8 million during the nine months ended September 30, 2025. Refer to Note 10, Common Stock, to the accompanying unaudited condensed consolidated financial statements for further details.

On February 11, 2026, the CBIZ Board of Directors authorized the purchase of up to 5.0 million shares of our common stock under our share repurchase program (the "Share Repurchase Program"), which may be suspended or discontinued at any time and expires on March 31, 2027. The shares may be purchased in the open market, in privately negotiated transactions, and pursuant to Rule 10b5-1 trading plans. Privately negotiated transactions may include purchases from our employees, officers and directors, in accordance with the Securities and Exchange Commission ("SEC") rules. CBIZ management will determine the timing and amount of the purchases based on its evaluation of market conditions and other factors.

RESULTS OF OPERATIONS

Revenue

The following tables summarize total revenue for the three and nine months ended September 30, 2026 and 2025:

Non-qualified Deferred Compensation Plan

We sponsor a Non-qualified Deferred Compensation Plan (the "deferred compensation plan"), under which a CBIZ employee's compensation deferral is held in a rabbi trust and invested accordingly as directed by the employee. The activities related to the deferred compensation plan are recorded in "Corporate and Other" for segment reporting purposes. Gains and losses resulting from the adjustments to the fair value of the invested assets in the deferred compensation plan are recorded as an increase or decrease to the "Other income (expense), net", are directly offset by the same adjustments as an increase or decrease to compensation expense (recorded as "Operating expense" or "Corporate general and administrative expense") 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.

Refer to Note 13, Employee Benefits, to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2025, as amended, for further discussion on the Non-qualified Deferred Compensation Plan.

Income and expenses related to the deferred compensation plan assets for the three and nine months ended September 30, 2026 and 2025 were recorded as follows (in thousands, except percentages):

Excluding the impact of the above-mentioned income and expenses related to the deferred compensation plan, the operating results for the three and nine months ended September 30, 2026 and 2025 were as follows:

Operating Expenses

The following tables summarize total operating expenses for the three and nine months ended September 30, 2026 and 2025:

Three months ended September
30, 2026 compared to September
30, 2025. Total operating expenses for the three months ended September 30, 2026 decreased by $15.5 million, or 2.6%, to $588.2 million as compared to $603.7 million in the same period in 2025. The deferred compensation plan decreased operating expenses by $0.6 million for the three months ended September 30, 2026 and increased operating expenses by $7.8 million in the same period in 2025. Excluding the deferred compensation expenses, which were recorded in "Corporate and Other" for segment reporting purposes, operating expenses would have been $588.8 million and $595.8 million, or 83.8% and 85.9% of revenue, for the three months ended September 30, 2026 and 2025, respectively. In addition, operating expenses for the three months ended September 30, 2026 included approximately $13.3 million of integration costs associated with the Marcum Transaction, and the operating expenses for the three months ended September 30, 2025 included approximately $23.2 million of integration costs associated with the Marcum Transaction.

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 decreased by approximately $7.1 million during the three months ended September 30, 2026 as compared to the same period in 2025, driven by $8.0 million decrease in personnel costs related to variable compensation plans, $2.3 lower professional service costs, and $1.2 million lower depreciation and amortization costs, partially offset by approximately $2.3 million higher facility costs and $2.1 million higher other operating expenses. Personnel costs are discussed in further detail under "Operating Practice Groups" below.

Nine months ended September
30, 2026 compared to September
30, 2025. Total operating expenses for the nine months ended September 30, 2026 increased by $11.3 million, or 0.6%, to $1,820.5 million as compared to $1,809.2 million in the same period in 2025. The deferred compensation plan increased operating expenses by $13.5 million for the nine months ended September 30, 2026 and by $17.1 million during the same period in 2025. Excluding the impact of deferred compensation, which was recorded in "Corporate and Other" for segment reporting purposes, operating expenses would have been $1,807.0 million and $1,792.1 million, or 80.9% and 80.9% of revenue, for the nine months ended September 30, 2026 and 2025, respectively. In addition, operating expense for the nine months ended September 30, 2026 and 2025, included approximately $44.3 million and $43.3 million, respectively, of integration costs associated with the Marcum Transaction.

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 $15.0 million during the nine months ended September 30, 2026 as compared to the same period in 2025, driven by $5.3 million in higher personnel costs, $4.9 million higher direct costs, $4.7 million other operating costs, $3.9 million higher facility costs, $3.2 million higher technology costs, and $1.5 million higher travel and entertainment costs, partially offset by $5.1 million lower professional service costs and $3.9 million lower depreciation and amortization costs.

Corporate General & Administrative ("G&A") Expenses

Three months ended September
30, 2026 compared to September
30, 2025. The deferred compensation plan decreased G&A expenses by $0.2 million for the three months ended September 30, 2026, and increased G&A expense by $1.1 million during the same period in 2025. The G&A expenses, excluding the impact of the deferred compensation plan, would have been $38.7 million, or 5.5% of revenue, for the three months ended September 30, 2026, compared to $30.2 million, or 4.4% of revenue, for the same period in 2025, an increase of approximately $8.5 million. The increase was primarily driven by $13.2 million higher professional fees to support on-going corporate projects and $1.2 million higher facility costs. The increase was partially offset by $5.6 million lower personnel costs driven by the adjustment to the liabilities associated with the ESPP correction and $1.6 million lower in other discretionary costs. The G&A expenses for the three months ended September 30, 2026 and 2025 included approximately $4.0 million and $5.4 million of integration costs primarily associated with the Marcum Transaction.

Nine months ended September
30, 2026 compared to September
30, 2025. The deferred compensation plan increased G&A expenses by $1.8 million for the nine months ended September 30, 2026, and increased G&A expenses by $2.4 million during the same period in 2025. G&A expenses, excluding the impact of the deferred compensation plan, would have been $116.6 million, or 5.2% of revenue, for the nine months ended September 30, 2026, compared to $84.6 million, or 3.8% of revenue, for the same period in 2025, an increase of $32.1 million. The increase in G&A expenses was primarily driven by $15.3 million higher professional fees to support on-going corporate projects, approximately $11.0 million higher personnel costs driven by $5.6 million impact of the ESPP correction and $5.4 million higher compensation, $2.4 million higher technology costs, $1.8 million higher facility costs, and $1.6 million higher other discretionary costs. The G&A expenses for the nine months ended September 30, 2026 and 2025, included approximately $11.6 million and $20.2 million, respectively, of integration costs primarily associated with the Marcum Transaction.

Other Income (Expense), Net

Interest Expense

Three and nine months ended September
30, 2026 compared with September
30, 2025. During the three months ended September 30, 2026, our average debt balance and weighted average effective interest rate were $1,447.0 million and 6.07%, respectively, compared to $1,554.7 million and 6.62%, respectively, for the same period in 2025. The decrease in interest expense for the three months ended September 30, 2026 as compared to the same period in 2025 was primarily driven by the lower average debt balance and interest rates.

During the nine months ended September 30, 2026, our average debt balance and interest rate were $1,472.8 million and 6.06%, respectively, compared to $1,513.9 million and 6.64%, respectively, for the same period in 2025. The decrease in interest expense for the nine months ended September 30, 2026 as compared to the same period in 2025 was $8.7 million. This was primarily driven by the lower average debt balance and interest rates.

Our indebtedness is further discussed in Note 5, Debt and Financing Arrangements, to the accompanying unaudited condensed consolidated financial statements.

Gain from acquisition related adjustment, net

Three and nine months ended September
30, 2026 compared with September
30, 2025. During the nine months ended September 30, 2026, our gain from acquisition related adjustment, net was $58.0 million, compared to no gain for the same periods in 2025. As stated in Note 3, Business Combinations, to the accompanying unaudited condensed consolidated financial statements, the Company recorded a $57.2 million working capital adjustment and related purchase price settlement, which was recognized as a gain within acquisition related adjustments in Total other income (expense), net in the condensed consolidated statements of comprehensive income. Additionally, the Company also recorded an adjustment related to acquisitions of $0.8 million within gains from acquisition related adjustments during the nine months ended September 30, 2026.

Other Income, Net

Three and nine months ended September 30, 2026 compared with September 30, 2025.

For the three months ended September 30, 2026, Other income, net includes a net loss of $0.8 million associated with the non-qualified deferred compensation plan. For the same period in 2025, Other income, net includes a net gain of $8.9 million associated with the non-qualified deferred compensation plan. Excluding the impact of the deferred compensation plan from Other income, net for the three months ended September 30, 2026 would have been income of $2.2 million as compared to a loss of $0.5 million in the same period in 2025, an increase of income of approximately $2.8 million, primarily due to a $2.6 million favorable impact associated with the net changes in the fair value of contingent consideration related to prior acquisitions.

For the nine months ended September 30, 2026, Other expense, net includes a net gain of $15.3 million associated with the non-qualified deferred compensation plan. For the same period in 2025, Other income,net includes a net gain of $19.5 million associated with the non-qualified deferred compensation plan. Excluding the impact of the deferred compensation plan, the other income, net for the nine months ended September 30, 2026 would have been an expense of approximately $3.9 million, as compared to income of $12.2 million during the same period in 2025, a decrease of income of approximately $16.1 million. The decrease was primarily due to a $7.2 million legal settlement loss recorded in the nine months ended September 30, 2026 as compared to a $12.5 million gain from a legal settlement recorded in the same period in 2025, offset partially by a $4.6 million favorable impact associated with the net changes in the fair value of contingent consideration related to prior acquisitions.

Income Tax Expense

Three and nine months ended September
30, 2026 compared with September
30, 2025. The effective tax rate for the three months ended September 30, 2026 was 30.6%, compared to 25.4% for the same period in 2025. The increase in the effective tax rate is primarily due to higher state income tax expense in the current period compared to the prior year. The increase in income tax expense of $6.0 million for the three months ended September 30, 2026, when compared to the same period in 2025, was primarily driven by higher pre-tax income and higher state income tax expense in 2026.

The effective tax rate for the nine months ended September 30, 2026 was 28.5%, compared to 28.1% for the same period in 2025. The increase in the effective tax rate is primarily attributed to tax expense related to stock-based compensation, partially offset by a tax benefit recognized in the current period related to the purchase of certain transferrable tax credits. Income tax expense increased by $6.8 million for the nine months ended September 30, 2026, when compared to the same period in 2025, primarily due to higher pre-tax income and tax expense related to stock-based compensation, partially offset by the tax benefit recognized from the purchase of certain transferrable tax credits.

Operating Practice Groups

During the nine months ended September 30, 2026, the National Practice practice group was combined with the Financial Service practice group to better align with internal management and reporting structure. As a result of these changes, we now operate with two reportable segments: Financial Services and Benefits and Insurances Services. Financial results of the Financial Service Practice Group for the three and nine months ended September 30, 2025, were adjusted to reflect the change in reportable segments. A description of these groups' operating results and factors affecting their businesses is provided below.

Same-unit revenue represents total revenue adjusted to reflect comparable periods of activity for acquisitions and divestitures. Divested operations represent operations that did not meet the criteria for treatment as discontinued operations.

Financial Services

Three months ended September 30, 2026 compared to September 30, 2025.

Revenue

The Financial Services practice group revenue for the three months ended September 30, 2026 increased by 1.2% to $597.8 million from $590.4 million during the same period in 2025. Same-unit revenue increased by $4.8 million, or 0.8%, primarily driven by $5.2 million increase in government healthcare consulting services, $4.6 million in national advisory services, and $0.2 million increase in national technology services. The increase was offset by $5.2 million lower revenue from units that provide traditional accounting and tax services.

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 $129.8 million and $130.3 million for the three months ended September 30, 2026 and 2025, respectively.

Operating Expenses

Operating expenses for the three months ended September 30, 2026 decreased by $6.7 million, or 1.3%, as compared to the same period in 2025. The decrease is primarily driven by approximately $10.6 million net decrease in personnel and allocated costs and other discretionary spending, partially offset by $1.9 million increase in bad debt expense, $1.3 million increase in travel and entertainment costs, and $1.1 million increase in recruiting costs. Operating expenses as a percentage of revenue decreased slightly to 81.6% for the three months ended September 30, 2026 from 83.8% of revenue for the same period in 2025.

Nine months ended September 30, 2026 compared to September 30, 2025.

Revenue

Revenue for the nine months ended September 30, 2026 grew by 1.1% to $1,918.4 million from $1,897.0 million during the same period in 2025. Same-unit revenue increased by $14.5 million, or 0.8%, This increase was primarily driven by $10.5 million increase in national advisory services, $9.2 million increase in government healthcare consulting services, and $2.8 million increase in national technology services. The increase was offset by $7.9 million lower revenue from units that provide traditional accounting and tax services.

Fees earned under the ASAs, as described above, were approximately $497.8 million and $529.1 million for the nine months ended September 30, 2026 and 2025, respectively.

Operating Expenses

Operating expenses for the nine months ended September 30, 2026 increased by $8.2 million, or 0.5%, as compared to the same period in 2025. Compared to the same period in 2025, the increase in operating expenses was primarily driven by $9.8 million net increase in personnel and allocated costs, $2.6 million higher travel and entertainment costs, $2.3 million increase in facility costs, $1.9 million higher bad debt expense, and $1.1 million higher recruiting fees. The increase was partially offset by $7.1 million lower professional fees, $3.4 million lower depreciation and amortization costs, and $2.4 million lower computer and technology costs. In addition, other discretionary costs increased by $3.4 million. Operating expense as a percentage of revenue was 79.1% and 79.6% during the nine months ended September 30, 2026 and 2025, respectively.

Benefits and Insurance Services

Three months ended September 30, 2026 compared to September 30, 2025.

Revenue

The Benefits and Insurance Services practice group revenue growth was relatively flat at $104.4 million during the three months ended September 30, 2026 as compared to $103.4 million for the same period in 2025. Revenue generated by the units that provide employee benefits, retirement, and other related services increased by $2.7 million, offset by $1.6 million decrease in the property and casualty services.

Operating Expenses

Operating expenses for the three months ended September 30, 2026 increased by $2.1 million, or 2.5%, when compared to the same period in 2025. The increase was not material, and operating expenses within the Benefits and Insurance practice group remained generally consistent period over period. Operating expenses as a percentage of revenue increased slightly to 82.5% for the quarter ended September 30, 2026 from 81.3% of revenue for the same period in 2025.

Nine months ended September 30, 2026 compared to September 30, 2025.

Revenue

The Benefits and Insurance Services practice group revenue decreased by $3.7 million, or 1.2%, to $314.6 million during the nine months ended September 30, 2026 compared to $318.3 million for the same period in 2025. The decrease was primarily driven by a $5.0 million decrease in property and casualty services and $0.8 million from human capital related services, and a $0.3 million decrease in retirement benefit and other services. These decreases were partially offset by a $2.4 million increase in Employee Benefit Services revenue.

Operating Expenses

Operating expenses for the nine months ended September 30, 2026 increased by $4.2 million, or 1.7%, when compared to the same period in 2025. The increase was not material, and operating expenses within the Benefits and Insurance practice group remained generally consistent period over period. Operating expense as a percentage of revenue increased to 81.9% during the nine months ended September 30, 2026 as compared to 79.6% of revenue for the same period in 2025 due to decrease in revenue.

Corporate and Other

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

Three months ended September 30, 2026 compared to September 30, 2025.

Total operating expenses decreased by $10.9 million during the three months ended September 30, 2026, as compared to the same period in 2025. The non-qualified deferred compensation plan decreased operating expenses by $0.6 million for the three months ended September 30, 2026 and increased operating expenses by $7.8 million during the same period in 2025. Excluding the impact of non-qualified deferred compensation plan, Corporate operating expenses decreased by $2.5 million during the three months ended September 30, 2026, as compared to the same period in 2025. The decrease was primarily driven by $7.3 million lower personnel costs net of allocations, partially offset by $3.1 million higher facility costs, $2.1 million higher technology costs, $0.3 million higher depreciation costs, and $0.7 million increase in other discretionary costs.

Total corporate G&A expenses increased by $7.3 million, or 23.2%, during the three months ended September 30, 2026, as compared to the same period in 2025. The deferred compensation plan decreased G&A expenses by $0.2 million for the three months ended September 30, 2026, and increased G&A expense by $1.1 million during the same period in 2025. The G&A expenses, excluding the impact of the deferred compensation plan, would have been $38.7 million, or 5.5% of revenue, for the three months ended September 30, 2026, compared to $30.2 million, or 4.4% of revenue, for the same period in 2025, an increase of approximately $8.5 million. The increase was primarily driven by $13.2 million higher professional fees to support on-going corporate projects and $1.2 million higher facility costs. The increase was partially offset by $5.6 million lower personnel costs driven by the adjustment to the liabilities associated with the ESPP correction and $1.6 million lower in other discretionary costs. The G&A expenses for the three months ended September 30, 2026 and 2025 included approximately $4.0 million and $5.4 million of integration costs primarily associated with the Marcum Transaction.

Total other expense, net increased by $4.1 million during the three months ended September 30, 2026, as compared to the same period in 2025. For the three months ended September 30, 2026, total other expense, net included a net gain of $0.8 million associated with the non-qualified deferred compensation plan. For the same period in 2025, total other expense, net included a net gain of $8.9 million associated with the non-qualified deferred compensation plan. Excluding the impact of the non-qualified deferred compensation plan, total other expense, net decreased by $5.6 million for the three months ended September 30, 2026 as compared to the same period in 2025. The decrease was primarily due to $4.0 million lower interest expense and $2.6 million favorable adjustment to the fair value of contingent consideration related to prior acquisitions, partially offset by $1.1 million higher miscellaneous expenses.

Nine months ended September 30, 2026 compared to September 30, 2025.

Total operating expenses decreased by $1.1 million, or 2.5%, during the nine months ended September 30, 2026, as compared to the same period in 2025. The deferred compensation plan increased operating expenses by $13.5 million for the nine months ended September 30, 2026, and increased operating expense by $17.1 million during the same period in 2025. Excluding the deferred compensation expenses, operating expense increased by approximately $2.5 million during the nine months ended September 30, 2026, as compared to the same period in 2025, primarily driven by $4.9 million higher technology costs, $2.7 million higher facility costs, $1.4 million higher professional services costs, $0.8 million higher depreciation costs, and $0.8 million increase in other discretionary costs, partially offset by $8.1 million lower personnel costs net of allocations,

Total corporate general and administrative expenses increased by $31.4 million, or 36.1%, during the nine months ended September 30, 2026, as compared to the same period in 2025. The deferred compensation plan increased G&A expenses by $1.8 million for the nine months ended September 30, 2026, and increased G&A expenses by $2.4 million during the same period in 2025. G&A expenses, excluding the impact of the deferred compensation plan, would have been $116.6 million, or 5.2% of revenue, for the nine months ended September 30, 2026, compared to $84.6 million, or 3.8% of revenue, for the same period in 2025, an increase of $32.1 million. The increase in G&A expenses was primarily driven by $15.3 million higher professional fees to support on-going corporate projects, approximately $11.0 million higher personnel costs driven by $5.6 million impact of the ESPP correction and $5.4 million higher compensation, $2.4 million higher technology costs, $1.8 million higher facility costs, and $1.6 million higher other discretionary costs. The G&A expenses for the nine months ended September 30, 2026 and 2025, included approximately $11.6 million and $20.2 million, respectively, of integration costs primarily associated with the Marcum Transaction.

Total other expense, net decreased by $46.2 million during the nine months ended September 30, 2026, as compared to the same period in 2025. Total other income, net for the nine months ended September 30, 2026 includes a net gain of $15.3 million associated with the deferred compensation plan. For the same period in 2025, total other income, net includes a net gain of $19.5 million associated with the deferred compensation plan. Excluding the impact of the deferred compensation plan, total other expense, net decreased by $50.5 million for the nine months ended September 30, 2026 compared to the same period in 2025. The increase in income was primarily attributed to a $58.0 million gain on acquisition related adjustments, $8.9 million lower interest expense, and $4.6 million favorable adjustment to the fair value of contingent consideration related to prior acquisitions, partially offset by $1.1 million higher miscellaneous expenses. In addition, the other expense, net included a $7.2 million estimated legal loss recorded in the nine months ended September 30, 2026 as compared to a $12.5 million gain from a legal settlement recorded in the same period in 2025.

See Note 3, Business Combinations, to the accompanying unaudited condensed consolidated financial statements in the nine months ended September 30, 2026 for further detail.

LIQUIDITY

Our principal sources of liquidity are cash generated from operating activities and financing activities. Our cash flows from operating activities are driven primarily by our operating results and changes in our working capital requirements while our cash flows from financing activities are dependent upon our ability to access credit or other capital. We historically maintain low cash levels and apply any available cash to pay down the outstanding debt balance.

We historically experience a use of cash to fund working capital requirements during the first quarter of each fiscal year. This is primarily due to the seasonal nature of the Financial Services practice group's accounting and tax services, as well as payment of accrued employees' incentives programs. Upon completion of the seasonal accounting and tax services period, cash provided by operations during the remaining three quarters of the fiscal year substantially exceeds the use of cash in the first quarter of the fiscal year.

Accounts receivable balances increase in response to the first three months' revenue generated by the Financial Services practice group. A significant amount of this revenue is billed and collected in subsequent quarters. Days sales outstanding ("DSO") represent accounts receivable and unbilled revenue (net of realization adjustments) at the end of the period, divided by trailing twelve months' daily revenue. We provide DSO data because such data is commonly used as a performance measure by analysts and investors and as a measure of our ability to collect on receivables in a timely manner. Trailing-twelve-month DSO, including the impact of acquisitions, was 99 days and 94 days at September 30, 2026 and 2025, respectively. DSO at December 31, 2025 was 71 days.

The following table presents selected cash flow information. For additional details, refer to the accompanying Condensed Consolidated Statements of Cash Flows.

Operating Activities - Cash provided by operating activities was $147.1 million during the nine months ended September 30, 2026, primarily consisted of net income of $208.2 million and certain non-cash items, such as depreciation and amortization expense of $70.4 million, deferred income tax of $22.9 million, stock-based compensation expense of $22.2 million, bad debt expense of $5.1 million, and other non-cash activities of $5.5 million, offset by $2.6 million non-cash income primarily due to favorable fair value adjustments to contingent purchase price considerations. Cash provided by operating activities for the nine months ended September 30, 2026 was partially offset by of $184.5 million use of cash for working capital purposes. Cash provided by operating activities was $48.8 million during the nine months ended September 30, 2025, primarily consisted of net income of $194.9 million and certain non-cash items, such as depreciation and amortization expense of $74.3 million, deferred income tax of $8.8 million, stock-based compensation expense of $19.6 million, and an adjustment to contingent purchase price considerations of $2.0 million, partially offset by $258.5 million use of cash for working capital purposes.

Investing Activities - Cash used in investing activities during the nine months ended September 30, 2026 was $29.3 million and consisted primarily of $13.9 million used for business acquisitions and $21.8 million in capital expenditures, partially offset by $4.6 million of collections on the notes from Marcum, and $1.2 million in net client fund investment activity, and $0.6 million related to other immaterial investing activities. Cash used in investing activities during the nine months ended September 30, 2025 was $16.9 million and consisted primarily of $15.0 million in capital expenditures and $4.0 million in net client fund investment activity, partially offset by $1.4 million received from sale of operations and $0.7 million in other investing activities primarily related to acquisition related working capital adjustment payments and notes receivable. The net cash flow related to funds held for clients and other activities was immaterial.

The balances in funds held for clients and client fund obligations can fluctuate with the timing of cash receipts and the related cash payments. The nature of these accounts is further described in Note 1, Basis of Presentation and Significant Accounting Policies, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025, as amended.

Financing Activities - Cash used in financing activities during the nine months ended September 30, 2026 was $185.9 million and consisted of $77.9 million of cash used in share repurchases, of which $60.1 million were open market purchases, $7.5 million was used under the ROFR Agreement, $7.3 million was used in connection of share repurchases under a rescission offer, and $3.0 million was to settle statutory employee withholdings related to vesting of stock awards. Additionally, $71.4 million was paid to reduce client fund obligations, $18.5 million was paid as contingent consideration payments related to prior acquisitions, and $18.4 was used to pay down debt under the 2024 Credit Facilities. Cash used in financing activities during the nine months ended September 30, 2025 was $75.2 million and primarily consisted of $135.6 million of cash used in share repurchases, of which $102.8 million was under the ROFR Agreement, $25.0 million were open market purchases, and $7.8 million was to settle statutory employee withholdings related to vesting of stock awards. Additionally, $48.3 million was paid to reduce client fund obligations and $55.8 million was paid as contingent consideration payments related to prior acquisitions. The use of cash was partially offset by $165.9 million in net proceeds from the credit facility.

CAPITAL RESOURCES

Credit Facilities - At September 30, 2026, we had $1,454.0 million outstanding under the 2024 Credit Facilities as well as $3.2 million of outstanding letters of credit. Available funds under the 2024 Credit Facilities, based on the terms of the commitment, were approximately $419.8 million at September 30, 2026. The weighted average interest rate under the 2024 Credit Facilities was 6.06% during the nine months ended September 30, 2026, compared to 6.64% for the same period in 2025. The 2024 Credit Facilities 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 2024 Credit Facilities.

Debt Covenant Compliance - Under the 2024 Credit Facilities, we are required to meet certain financial covenants with respect to (i) total leverage ratio and (ii) minimum interest charge coverage ratio. We were in compliance with our financial covenants as of September 30, 2026. Our ability to service our debt and to fund future strategic initiatives will depend upon our ability to generate cash in the future. For further discussion regarding our 2024 Credit Facilities, refer to Note 5, Debt and Financing Arrangements, to the accompanying unaudited condensed consolidated financial statements.

Use of Capital - Our overall business objective continues to focus on funding organic growth acceleration and meeting working capital needs. This includes investments in client service delivery and emerging technology that supports revenue growth and improves operational excellence. Following the completion of the Marcum Transaction, our second priority is to pay down debt to have a net leverage ratio of less than 2.5x over time. As a result of the Marcum Transaction and related 2024 Credit Facilities, we have $1,454.0 million of outstanding debt as of September 30, 2026. In addition, we believe that repurchasing shares of our common stock can be 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. We will also remain focused on making strategic acquisitions that allow us to strengthen our presence in existing markets, expand into high growth industries, and broaden our services to our clients.

During the nine months ended September 30, 2026, we completed two acquisitions and other asset purchases for approximately $13.9 million. During the nine months ended September 30, 2026, we repurchase 2.1 million shares of our common stock in the open market for $60.1 million, 0.2 million shares of our common stock at a cost of $7.5 million under the ROFR Agreement, and 0.1 million shares under a rescission offer $7.3 million. Additionally, to settle statutory employee withholdings related to vesting of stock awards, we repurchased 0.1 million shares of our common stock at a cost of $3.0 million during the nine months ended September 30, 2026. During the nine months ended September 30, 2025 we repurchased 1.4 million of our common stock for a cost of $102.8 million under the ROFR Agreement and 0.4 million shares of our common stock in the open market for $25.0 million. To settle statutory employee withholdings related to the vesting of stock awards, we repurchased 0.1 million shares at a cost of $7.8 million during the nine months ended September 30, 2025.

Cash Requirements - Cash requirements for the remainder of 2026 and beyond will include the repayment of outstanding debt and related interest, share repurchases through both our ROFR Agreement and open market purchases, funding seasonal working capital requirements, making contingent purchase price payments for previous acquisitions, income tax payments, and capital expenditures. We believe that cash provided by operations, as well as available funds under our 2024 Credit Facilities, will be sufficient to meet cash requirements for the remainder of 2026 and beyond.

OFF-BALANCE SHEET ARRANGEMENTS

We maintain administrative service agreements with independent CPA firms (as described more fully under Item 1. "Business - Financial Services" and in Note 1, Basis of Presentation and Significant Accounting Policies, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025, as amended), which qualify as variable interest entities. The accompanying unaudited condensed consolidated financial statements do not reflect the operations or accounts of variable interest entities as the impact is not material to the financial condition, results of operations, or cash flows of CBIZ.

We provide letters of credit to landlords (lessors) of our leased premises in lieu of cash security deposits, which totaled $3.2 million at both September 30, 2026 and December 31, 2025. In addition, we provide license bonds to various state agencies to meet certain licensing requirements. The amount of license bonds outstanding was $2.1 million at both September 30, 2026 and December 31, 2025.

We have various agreements under which we may be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification clauses are included in contracts arising in the normal course of business under which we customarily agree to hold the other party harmless against losses arising from a breach of representations, warranties, covenants or agreements, related to matters such as title to assets sold and certain tax matters. Payment by us under such indemnification clauses is generally conditioned upon the other party making a claim. Such claims are typically subject to challenge by us and to dispute resolution procedures specified in the particular contract. Further, our obligations under these agreements may be limited in terms of time and/or amount and, in some instances, we may have recourse against third parties for certain payments made by us. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each particular agreement. Historically, we have not made any payments under these agreements that have been material individually or in the aggregate. As of September 30, 2026, we are not aware of any material obligations arising under indemnification agreements that would require payment.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The SEC defines critical accounting policies as those that are most important to the portrayal of a company's financial condition and results and that require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Our discussion and analysis of our results of operations, financial condition and liquidity is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets and liabilities, revenues and expenses and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements. As more information becomes known, these estimates and assumptions could change, which would have an impact on actual results that may differ materially from these estimates and judgments under different assumptions. We have not made any changes to our critical accounting policies and estimates as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as amended.

As disclosed in Note 13, Goodwill, during the first quarter of 2026, we performed a quantitative assessment of the goodwill associated with our reporting units. Based on the results of the quantitative assessment, we concluded that the estimated fair values of our reporting units immediately after the change in reporting units were in excess of their respective carrying values, and as such, goodwill is not impaired. During the first quarter of 2026, we experienced a decline in the Company's market capitalization. This decline, along with increases in discount rates used in the aforementioned quantitative impairment analysis, reduced the excess of fair value over carrying value of our Financial Accounting Services reporting unit within the Financial Services practice group and of our Property and Casualty reporting unit within our Benefits and Insurance Services practice group as of March 31, 2026. During the second quarter of 2026, the Company's market capitalization improved, and we performed a qualitative assessment of its goodwill and concluded that it was more likely than not the fair values of the Company's reporting units exceeded their respective carrying value, and therefore, goodwill related to the Company's reporting units was determined to not be impaired. During the third quarter of 2026, the Company monitored internal and external macro factors and concluded that no goodwill impairment triggering events occurred. Accordingly, no interim qualitative or quantitative goodwill impairment testing was required, and no goodwill impairment losses were recognized during the three and nine months ended September 30, 2026.

It is possible, depending upon a number of factors that are not determinable at this time or within our control, that the fair values of one or more of our reporting units could decrease in the future and result in an impairment to goodwill, including failure to achieve the anticipated benefits of the Marcum Transaction, significant negative industry or economic trends, disruptions to our business, adverse changes resulting from new governmental regulations, negative impact on client list due to loss of customers, impact on client list due to declining revenue of existing customers, or divestitures. Additionally, further declines in our market capitalization may trigger the need for future impairment tests where the conclusions may differ and could result in the recognition of an impairment charge. Further, any significant adverse change in our near or long-term projections or macroeconomic conditions could result in future impairment charges, which could be material.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 2, New Accounting Pronouncements, to the accompanying unaudited condensed consolidated financial statements for a discussion of recently issued accounting pronouncements.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including, without limitation, our financial position, business strategy, plans and objectives for future performance, and statements about the proposed Merger are forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements are commonly identified by the use of such terms and phrases as "will," "could," "can," "may," "strive," "hope," "intend," "believe," "estimate," "continue," "plan," "expect," "project," "anticipate," "outlook," "foreseeable future," "seek" and words or phrases of similar import in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated services, sales efforts, expenses, and financial results.

From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Any or all of our forward-looking statements in this Quarterly Report on Form 10-Q and in any other public statements that we make are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, but are not limited to: that one or more closing conditions to the proposed Merger, including certain regulatory approvals, may not be satisfied or waived, on a timely basis or otherwise; the risk that the proposed Merger may not be completed on the terms or in the time frame expected by CBIZ and Parent, or at all; unexpected costs, charges or expenses resulting from the proposed Merger; uncertainty of the expected financial performance and results of operations of the combined company following completion of the proposed Merger; failure to realize the anticipated benefits of the proposed Merger, including as a result of delay in completing the proposed Merger or integrating the businesses of CBIZ and Parent, on the expected timeframe or at all; the ability of the combined company to implement its business strategy; difficulties and delays in the combined company achieving revenue and cost synergies; inability of the combined company to retain and hire key personnel; the occurrence of any event that could give rise to termination of the proposed Merger; the risk that shareholder litigation in connection with the proposed Merger or other litigation, settlements or investigations may affect the timing or completion of the proposed Merger or result in significant costs of defense, indemnification and liability; evolving legal, regulatory and tax regimes; changes in general economic, competitive, technological and/or industry-specific conditions affecting the businesses and industries in which CBIZ and Parent operate; actions by third parties, including government agencies and rating agencies, relating to the proposed Merger; risks that any debt financing anticipated in connection with the proposed Merger is not obtained or that such financing cannot be obtained on the anticipated timing or terms or unexpected costs or expenses in connection therewith; risks related to the disruption of management time from ongoing business operations due to the pendency of the proposed Merger, or other effects of the pendency of the proposed Merger on the relationship of any of the parties to the transaction with their employees, customers, partners, or other counterparties; risks that any announcements relating to the proposed Merger could have adverse effects on the market price of CBIZ's common stock, credit rating, or operating results, and may have an adverse effect on the ability of CBIZ to retain and hire key personnel, retain customers, and maintain relationships with business partners, suppliers and customers; the risk that the market price of CBIZ's common stock may decline if the proposed Merger is not completed; our ability to maintain effective internal control over financial reporting and disclosure controls and procedures, including ability to remediate our material weaknesses in our internal control over financial reporting; payments on accounts receivable may be slower than expected, or amounts due on receivables or notes may not be fully collectible; our business could be adversely affected if the non-attest business assets we acquired, or the attest assets CBIZ CPAs acquired, from Marcum do not perform to our expectations or we underestimate the liabilities we have assumed; we are dependent on the services of our executive officers, and other key employees, the loss of any of whom may have a material adverse effect on our business, financial condition and results of operations; our profitability could suffer if we are not able to effectively utilize our employees, maintain operational efficiencies or manage our cost structure; restrictions imposed by independence requirements and conflict of interest rules, as well as the nature and terms of our current administrative service agreements, limit our ability to provide services to clients of the attest firms with which we have contractual relationships and the ability of such attest firms to provide attestation services to our clients; our goodwill and other intangible assets could become impaired, which could lead to material non-cash charges against earnings and a material impact on our results of operations and financial condition; certain liabilities resulting from acquisitions are estimated and could lead to a material impact on our results of operations; we may fail to realize the anticipated benefits of acquisitions, or they may prove disruptive and could result in the combined business failing to meet our expectations; claims or adverse publicity could harm our brand, reputation and ability to compete and attract and retain clients, talent and future acquisition targets; we may not be able to acquire and finance additional businesses, which could limit our ability to pursue our business strategy; we will incur transaction, integration, and restructuring costs in connection with our acquisition program; governmental regulations and interpretations are subject to changes, which could have a material adverse effect on our financial condition; uncertainty in the current economic and geopolitical environment could lead to declines in demand for certain of our services; changes in the United States healthcare environment, including new healthcare legislation, may adversely affect the revenue and margins in our healthcare benefit business; we are subject to risks relating to processing customer transactions for our payroll and other transaction processing businesses; cyberattacks or other security breaches involving our computer systems or the systems of one or more of our vendors could materially and adversely affect our business; we are subject to risk as it relates to software that we license from third parties; we are reliant on information processing systems and any failure or disruptions of these systems could have a material adverse effect on our business, financial condition and results of operations; we could be held liable for errors and omissions; the business services industry is competitive and fragmented, if we are unable to compete effectively, our business, financial condition and results of operations could be negatively impacted; failure to maintain our reputation and brand could impact our ability to attract and retain clients, employees and future acquisition targets, and may have a material adverse effect on our business, financial condition and results of operations; we are dependent on our existing client base and our ability to retain and expand our relationships with those clients; our clients may terminate our engagements with little or no notice and without penalty, which may result in unexpected declines in our revenue or unexpected costs; given our levels of share-based compensation, our tax rate may vary significantly depending on our stock price; we may be subject to the actions of activist stockholders; rapid technological changes could significantly impact our competitive position, client relationships and operating results and our ability to realize the anticipated benefits of the Marcum Transaction; the widespread outbreak of a communicable illness or any other public health crisis could adversely affect our business, financial condition and results of operations; we require a significant amount of cash for interest payments on our debt and to expand our business as planned; terms of the 2024 Credit Facilities could adversely affect our ability to run our business and/or reduce stockholder returns; our failure to satisfy covenants in our debt instruments could cause a default under those instruments; our increased leverage following the Marcum Transaction may adversely impact our business; we may be more sensitive to revenue fluctuations than other companies, which could result in fluctuations in the market price of our common stock; the significant number of shares issuable as the stock consideration in the Marcum Transaction may adversely impact our stock price; the future issuance of additional shares could adversely affect the price of our common stock; and there is volatility in our stock price.

Such forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Should one or more of these risks materialize, or should the underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, projected or implied. 

Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially. All forward-looking statements made in this Quarterly Report on Form 10-Q are made only as of the date hereof, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You are advised, however, to consult any further disclosures we make on related subjects in the current, quarterly, periodic and annual reports we file with the Securities and Exchange Commission ("SEC"). Also note that we provide a cautionary discussion of the risks, uncertainties and possibly inaccurate assumptions relevant to our businesses in "Item 1. Business" and "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, as amended. These are factors that we think could cause our actual results to differ materially from expected and historical results. Other factors besides those described could also adversely affect our operating or financial performance.