CBIZ, INC. Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to "we", "us", "our", "CBIZ" or the "Company" shall meanCBIZ, Inc. , aDelaware corporation, and its operating subsidiaries. The following discussion is intended to assist in the understanding of our financial position atJune 30, 2020 andDecember 31, 2019 , results of operations for the three months and six months endedJune 30, 2020 and 2019, and cash flows for the six months endedJune 30, 2020 and 2019, and should be read in conjunction with the 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 endedDecember 31, 2019 . This discussion and analysis contains forward-looking statements and should also 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 the Annual Report on Form 10-K for the year endedDecember 31, 2019 .
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 provided to businesses of various sizes, as well as individuals, governmental entities and not-for-profit enterprises throughoutthe United States and parts ofCanada . We deliver integrated services through three practice groups: Financial Services, Benefits and Insurance Services, and National Practices. Refer to Note 13, Segment Disclosures, to the accompanying consolidated financial statements for a general description of services provided by each practice group.
Refer to the Annual Report on Form 10-K for the year ended
InMarch 2020 , theWorld Health Organization declared the outbreak of COVID-19 a pandemic as the disease spread throughout the world. As a provider of essential services, our primary concern is protecting the health and safety of our employees and the communities in which we operate while assuring the continuity of our business operations to serve our clients' needs. We announced a variety of measures to ensure the ongoing performance of our services to our clients while taking the necessary health and safety actions consistent with CDC guidelines starting in late February. As the COVID-19 situation evolved, these actions ultimately included bans on business travel, a migration to remote work conditions and multi-stage plans to bring our employees safely back to our offices. Our workforce is accustomed to remote work conditions and is equipped to continue to serve client needs throughout this period of time. The widespread nature of these health related actions and the impact of these measures on the economy will create financial distress within our small and medium-size business client base and could cause a slowdown, write-down or write-off in client payments to us as a result. OnMarch 25, 2020 , we borrowed$210.0 million of the available capacity on our 2018 credit facility as a precautionary measure to preserve flexibility during this period of disruption and uncertainty. OnMay 21, 2020 , we repaid$210.0 million that was borrowed during the first quarter and as a result, atJune 30, 2020 , we have unrestricted cash and cash equivalents of$9.6 million , a balance outstanding under our credit facility of$120.0 million and available funds under credit facility of approximately$270.4 million . We have taken a number of measures to control costs and expenditures including suspension of share repurchase activity. The high degree of uncertainty, coupled with the challenges of remote work conditions, has caused a slowdown in acquisition activity as we work with potential acquisition candidates to assess next steps. We believe that we have ample liquidity, and we believe we are in strong financial condition atJune 30, 2020 ; however, depending upon the severity and duration, the COVID-19 pandemic presents potential new risks to our business, which could have a material adverse effect on our results of operation and financial condition. The recurring and essential nature of the majority of our business services provides stability to our financial results, and through the second quarter of 2020, there has been no material adverse impact on our financial results. The deferral of tax-related filing deadlines as a result of the enactment of Coronavirus Aid, Relief, and Economic Security ("CARES") Act will cause some tax compliance work to be delayed into third quarter. The sharp increase in unemployment within our client base will impact volumes and demand for certain of our services. 22
-------------------------------------------------------------------------------- The conditions surrounding the COVID-19 pandemic remain highly uncertain. The longer the pandemic and the governmental response remains impactful to economic activities inthe United States and globally, the higher the possibility for a material adverse effect on our company. For this reason, we cannot reasonably estimate with any degree of certainty the future impact the COVID-19 pandemic may have on our results of operations, financial position, and liquidity.
Executive Summary
Revenue for the three months endedJune 30, 2020 increased$1.4 million , or 0.6%, to$236.9 million from$235.5 million for the same period in 2019. The increase was driven primarily by revenue from newly acquired operations, net of divestitures, of$4.6 million , or 2.0%, which was offset by lower same-unit revenue of$3.2 million , or 1.4%. Revenue for the six months endedJune 30, 2020 increased$8.9 million , or 1.8%, to$514.4 million from$505.5 million for the same period in 2019. The increase was driven primarily by revenue from newly acquired operations, net of divestitures, of$9.8 million , or 1.9%, which was offset by lower same-unit revenue of$0.9 million , or 0.1%. A detailed discussion of revenue by practice group is included under "Operating Practice Groups." Income from continuing operations was$21.5 million , or$0.39 per diluted share, in the second quarter of 2020, compared to$16.6 million , or$0.30 per diluted share, in the second quarter of 2019. For the first half of 2020, income from continuing operations was$58.3 million , or$1.05 per diluted share, compared to$54.2 million , or$0.97 per diluted share, for the same period in 2019. Refer to "Results of Operations - Continuing Operations" for a detailed discussion of the components of income from continuing operations.
Strategic Use of Capital
We completed three acquisitions during the first half of 2020. Refer to Note 11, Business Combinations, to the accompanying consolidated financial statements for further discussion of 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. We repurchased 1.2 million shares of our common stock at a total cost of approximately$31.1 million in the first half of 2020, but suspended further repurchase activity in mid-March as the COVID-19 pandemic began to have a severe impact on macroeconomic conditions. During the first quarter of 2020, 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 onApril 1, 2021 . The shares may be purchased in open market, privately negotiated or Rule 10b5-1 trading plan purchases, which may include purchases from our employees, officers and directors, in accordance with theSecurities and Exchange Commission (the "SEC") rules. CBIZ management will determine the timing and amount of the transactions based on its evaluation of market conditions and other factors.
Results of Operations - Continuing Operations
Revenue
The following tables summarize total revenue for the three and six months ended
Three Months Ended June 30,
% of % of $ %
2020 Total 2019 Total Change Change
Financial Services $ 154,083 65.0 % $ 154,373 65.6 % $ (290 ) (0.2 )%
Benefits and Insurance Services 73,940 31.2 % 72,127 30.6 % 1,813 2.5 %
National Practices 8,920 3.8 % 8,998 3.8 % (78 ) (0.9 )%
Total CBIZ $ 236,943 100.0 % $ 235,498 100.0 % $ 1,445 0.6 %
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Six Months Ended June 30,
% of % of $ %
2020 Total 2019 Total Change Change
Financial Services $ 342,860 66.6 % $ 339,517 67.1 % $ 3,343 1.0 %
Benefits and Insurance Services 153,552 29.9 % 148,382 29.4 % 5,170 3.5 %
National Practices 17,986 3.5 % 17,597 3.5 % 389 2.2 %
Total CBIZ $ 514,398 100.0 % $ 505,496 100.0 % $ 8,902 1.8 %
A detailed discussion of same-unit revenue by practice group is included under "Operating Practice Groups."
Non-qualified Deferred Compensation Plan
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 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 Consolidated Statements of Comprehensive
Income. The non-qualified deferred compensation plan has no impact on "Income
from continuing operations before income tax expense" or diluted earnings per
share from continuing operations.
Operating Expenses
Three Months Ended June 30,
$ %
2020 2019 Change Change
(In thousands, except percentages)
Operating expenses $ 209,016 $ 198,149 $ 10,867 5.5 %
Operating expenses % of revenue 88.2 % 84.1 %
Operating expenses excluding deferred
compensation $ 196,784 $ 201,156 $ (4,372 ) (2.2 )%
Operating expenses excluding deferred
compensation % of revenue 83.1 % 85.4 %
Six Months Ended June 30,
$ %
2020 2019 Change Change
(In thousands, except percentages)
Operating expenses $ 408,843 $ 413,644 $ (4,801 ) (1.2 )%
Operating expenses % of revenue 79.5 % 81.8 %
Operating expenses excluding deferred
compensation $ 411,411 $ 408,434 $ 2,977 0.7 %
Operating expenses excluding deferred
compensation % of revenue 80.0 % 80.8 %
Three months ended June 30, 2020 compared to June 30, 2019 . Total operating
expenses for the second quarter of 2020 increased by $10.9 million , or 5.5%, to
$209.0 million as compared to $198.1 million in the second quarter of 2019. The
non-qualified deferred compensation increased operating expense by $12.2 million
in the second quarter of 2020 compared to a reduction of $3.0 million of expense
during the same period in 2019.
The majority of our operating expenses relate to personnel costs, which includes
(i) salaries and benefits, (ii) commissions paid to producers (iii) incentive
compensation and (iv) stock-based compensation. Excluding the impact of deferred
compensation, operating expenses decreased as compared to the same period in
2019 due to lower travel and discretionary spending of $6.8 million and other
professional fees of $1.0 million , offset by approximately $3.4 million increase
in personnel costs. Employee benefits, a component of personnel costs, decreased
by approximately $4.3 million primarily due to lower healthcare related costs.
Personnel costs are discussed in further detail under "Operating Practice
Groups."
24
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Six months ended June 30, 2020 compared to June 30, 2019 . Total operating
expenses for the first half of 2020 decreased by $4.8 million , or 1.2%, to
$408.8 million as compared to $413.6 million in the same period of 2019. The
non-qualified deferred compensation decreased operating expenses $2.6 million
for the first half of 2020 and increased operating expenses $5.2 million during
the same period in 2019.
Personnel costs increased $8.1 million , primarily due to the impact of
acquisitions. Employee benefits, a component of personnel costs, decreased by
approximately $3.2 million primarily due to lower healthcare related costs. The
increase in personnel cost was offset by lower travel and discretionary spending
of $7.6 million . In addition, bad debt expense increased by $1.7 million
primarily attributable to $2.2 million COVID-19 related adjustments for the
first half of 2020.
Corporate General & Administrative ("G&A") Expenses
Three Months Ended June 30,
$ %
2020 2019 Change Change
(In thousands, except percentages)
G&A expenses $ 11,161 $ 10,566 $ 595 5.6 %
G&A expenses % of revenue 4.7 % 4.5 %
G&A expenses excluding deferred
compensation $ 9,687 $ 10,909 $ (1,222 ) (11.2 )%
G&A expenses excluding deferred
compensation % of revenue 4.1 % 4.6 %
Six Months Ended June 30,
$ %
2020 2019 Change Change
(In thousands, except percentages)
G&A expenses $ 21,649 $ 22,246 $ (597 ) (2.7 )%
G&A expenses % of revenue 4.2 % 4.4 %
G&A expenses excluding deferred
compensation $ 21,979 $ 21,712 $ 267 1.2 %
G&A expenses excluding deferred
compensation % of revenue 4.3 % 4.3 %
Three months ended June 30, 2020 compared to June 30, 2019 . The decrease in our
G&A expenses excluding deferred compensation is primarily due to lower personnel
costs of $0.9 million Six months ended
Other Income (Expense), Net
Three Months Ended June 30,
$ %
2020 2019 Change Change
(In thousands, except percentages)
Interest expense $ (2,074 ) $ (1,587 ) $ (487 ) 30.7 %
Gain on sale of operations, net 57 50 7 14.0 %
Other income (expense), net (1) 13,336 (3,311 ) 16,647 NM
Total other income (expense), net
NM
Six Months Ended June 30,
$ %
2020 2019 Change Change
(In thousands, except percentages)
Interest expense $ (3,193 ) $ (2,988 ) $ (205 ) 6.9 %
Gain on sale of operations, net 152 547 (395 ) (72.2 )%
Other (expense) income, net (2) (2,464 ) 5,949 (8,413 ) NM
Total other (expense) income, net
NM
25
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(1) Other income (expense), net includes a net gain of
second quarter of 2020, compared to a net loss of
period in 2019, associated with the value of investments held in a rabbi
trust related to the deferred compensation plan. The adjustments to theinvestments held in a rabbi trust related to the deferred compensation plan
are offset by a corresponding increase or decrease to compensation expense,
which is recorded as "Operating expenses" and "G&A expenses" in the
accompanying Consolidated Statements of Comprehensive Income. The deferred
compensation plan has no impact on "Income from continuing operations
before income tax expense" or diluted earnings per share from continuing
operations.
(2) Other (expense) income, net includes a net loss of
six months ended
the same period in 2019, associated with the value of investments held in a
rabbi trust related to the deferred compensation plan. The adjustments to
the investments held in a rabbi trust related to the deferred compensation
plan are offset by a corresponding increase or decrease to compensation
expense, which is recorded as "Operating expenses" and "G&A expenses" in
the accompanying Consolidated Statements of Comprehensive Income. The
deferred compensation plan has no impact on "Income from continuing
operations before income tax expense" or diluted earnings per share from
continuing operations.
Interest Expense
Three and six months ended June 30, 2020 compared with June 30, 2019 . Our
primary financing arrangement is the 2018 credit facility. For the second
quarter of 2020, our average debt balance and interest rate was $260.8 million
and 2.39%, compared to $171.7 million and 3.21% for the second quarter of 2019.
For the first half of 2020, our average debt balance and interest rate was
$203.0 million and 2.43%, compared to $161.5 million and 3.20% for the first
half of 2019. The increase in interest expense for the quarter and six months
ended June 30, 2020 as compared to the same periods in 2019 was primarily driven
by higher average debt balances. Our indebtedness is further discussed in Note
4, Debt and Financing Arrangements, to the accompanying consolidated financial
statements.
Gain on Sale of Operations, Net
Three and six months endedJune 30, 2020 compared withJune 30, 2019 . We sold a small book of business in the Benefits and Insurance practice group during the first half of 2020 for a net gain of$0.1 million and$0.2 million for the three and six months endedJune 30, 2020 , respectively. We sold a small accounting firm in the Financial Services practice group during the first half of 2019 for a net gain of$0.1 million and$0.5 million for the three and six months endedJune 30, 2019 , respectively. Other Income (Expense), Net Three and six months endedJune 30, 2020 compared withJune 30, 2019 . For the second quarter of 2020, other income (expense), net, includes a net gain of$13.7 million associated with the non-qualified deferred compensation plan as well as a$0.5 million net increase to the fair value of our contingent purchase price liability related to prior acquisitions. For the same period in 2019, other income (expense), net, includes a net loss of$3.4 million associated with the non-qualified deferred compensation plan as well as a$0.1 million net increase to the fair value of our contingent purchase price liability related to prior acquisitions. For the first half of 2020, other income (expense), net, includes a net loss of$2.9 million associated with the non-qualified deferred compensation plan as well as a$0.2 million net decrease to the fair value of our contingent purchase price liability related to prior acquisitions. For the same period in 2019, other income (expense), net, includes a net gain of$5.7 million associated with the non-qualified deferred compensation plan as well as a$0.2 million net decrease to the fair value of our contingent purchase price liability related to prior acquisitions. Income Tax Expense Three Months Ended June 30, $ % 2020 2019 Change Change (In thousands, except percentages) Income tax expense$ 6,607 $ 5,322 $ 1,285 24.1 % Effective tax rate 23.5 % 24.3 % Six Months Ended June 30, $ % 2020 2019 Change Change (In thousands, except percentages)
Income tax expense
26
-------------------------------------------------------------------------------- Three and six months endedJune 30, 2020 compared withJune 30, 2019 . Income tax expense for the second quarter of 2020 was$6.6 million , which resulted in an effective tax rate of 23.5%, compared to income tax expense of$5.3 million , which resulted in an effective tax rate of 24.3%, for the second quarter of 2019. Income tax expense for the first half of 2020 was$20.1 million , which resulted in an effective tax rate of 25.6%, compared to income tax expense of$18.9 million , which resulted in an effective tax rate of 25.9%, for the first half of 2019. Operating Practice Groups We deliver our integrated services through three practice groups: Financial Services, Benefits and Insurance Services, and National Practices. 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 June 30,
$ %
2020 2019 Change Change
(In thousands, except percentages)
Revenue
Same-unit $ 152,836 $ 154,373 $ (1,537 ) (1.0 )%
Acquired businesses 1,247 - 1,247
Total revenue $ 154,083 $ 154,373 $ (290 ) (0.2 )%
Operating expenses 127,417 128,158 (741 ) (0.6 )%
Gross margin $ 26,666 $ 26,215 $ 451 1.7 %
Gross margin percent 17.3 % 17.0 %
Six Months Ended June 30,
$ %
2020 2019 Change Change
(In thousands, except percentages)
Revenue
Same-unit $ 340,221 $ 339,517 $ 704 0.2 %
Acquired businesses 2,639 - 2,639
Total revenue $ 342,860 $ 339,517 $ 3,343 1.0 %
Operating expenses 266,015 262,616 3,399 1.3 %
Gross margin $ 76,845 $ 76,901 $ (56 ) (0.1 )%
Gross margin percent 22.4 % 22.7 %
Three months ended
Revenue
The Financial Services practice group revenue during the second quarter of 2020 decreased by 0.2% to$154.1 million from$154.4 million in the second quarter of 2019, primarily reflecting lower same-unit revenue of$1.5 million , or 1.0%. Same-unit revenue decreased$4.0 million in those units that provide project work and consulting services while those units providing traditional accounting and tax related services increased by$2.5 million . Acquired businesses contributed approximately$1.2 million of incremental revenue. 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 Consolidated Statements of Comprehensive Income and were approximately$39.7 million and$41.8 million for the three months endedJune 30, 2020 and 2019, respectively. 27 --------------------------------------------------------------------------------
Operating Expenses
Operating expenses decreased by$0.7 million , or 0.6%, during the second quarter of 2020. Operating expense as a percentage of revenue decreased to 82.7% from 83.0% for the prior year period, primarily due to approximately$4.5 million lower travel and discretionary spending, offset by$3.6 million higher personnel cost driven by an increase in traditional accounting and tax related services, of which$0.9 million was contributed by acquired businesses.
Six months ended
Revenue
Revenue for the first half of 2020 grew by 1.0% to$342.9 million from$339.5 million in 2019. Same-unit growth of$0.7 million , or 0.2%, was driven by units providing traditional accounting and tax related services which increased by$2.2 million . Same-unit revenue decreased$1.5 million in those units that provide project work and consulting services. Acquired businesses contributed approximately$2.6 million incremental revenue.
Fees earned under the ASAs, as described above, were
Operating Expenses
Operating expenses increased by$3.4 million , or 1.3%, for the six months endedJune 30, 2020 . Operating expense as a percentage of revenue increased to 77.6% from 77.3% for the prior year period, primarily due to higher personnel costs of$4.8 million . The increase in personnel costs was attributable to an increase in traditional accounting and tax related services, of which$1.9 million was contributed by acquired businesses. Operating expenses also included higher bad debt expense of$2.2 million as a result of COVID-19 which was offset by lower professional services, travel and discretionary spending of$3.6 million .
Benefits and Insurance Services
Three Months Ended June 30,
$ %
2020 2019 Change Change
(In thousands, except percentages)
Revenue
Same-unit $ 70,320 $ 71,876 $ (1,556 ) (2.2 )%
Acquired businesses 3,577 - 3,577
Divested operations 43 251 (208 )
Total revenue $ 73,940 $ 72,127 $ 1,813 2.5 %
Operating expenses 61,283 61,075 208 0.3 %
Gross margin $ 12,657 $ 11,052 $ 1,605 14.5 %
Gross margin percent 17.1 % 15.3 %
Six Months Ended June 30,
$ %
2020 2019 Change Change
(In thousands, except percentages)
Revenue
Same-unit $ 146,104 $ 148,131 $ (2,027 ) (1.4 )%
Acquired businesses 7,405 - 7,405
Divested operations 43 251 (208 )
Total revenue $ 153,552 $ 148,382 $ 5,170 3.5 %
Operating expenses 126,506 122,446 4,060 3.3 %
Gross margin $ 27,046 $ 25,936 $ 1,110 4.3 %
Gross margin percent 17.6 % 17.5 %
28
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Three months ended
Revenue
The Benefits and Insurance Services practice group revenue during the second quarter of 2020 increased by$1.8 million , or 2.5%, to$73.9 million compared to$72.1 million for the same period in 2019. Acquired businesses, net of divestures, contributed$3.4 million in incremental revenue with same-unit revenue decreasing$1.6 million due to lower non-recurring transactional revenue for the second quarter of 2020.
Operating Expenses
Operating expenses increased by$0.2 million , or 0.3%, during the second quarter of 2020. Operating expense as a percentage of revenue decreased to 82.9% from 84.7% of revenue for the same period in 2019, primarily due to higher revenue. Personnel costs increased by$2.2 million which was attributed to acquired businesses. The increase in personnel cost was offset by a decrease of$2.0 million in other professional services, travel and discretionary spending.
Six months ended
Revenue
Revenue for the first half of 2020 increased by$5.2 million , or 3.5%, to$153.6 million compared to$148.4 million for the same period in 2019. The increase is primarily due to acquired businesses, net of divestitures, contributing$7.2 million in incremental revenue for the first half of 2020, offset by a decrease in same-unit revenue of$2.0 million , or 1.4%, caused by a decrease in non-recurring transactional revenue as well as decrease from our core benefit and insurance services. Operating Expenses Operating expenses increased by$4.1 million , or 3.3%, for the six months endedJune 30, 2020 . Operating expense as a percentage of revenue decreased to 82.4% from 82.5% of revenue for the prior year due to the same factors as discussed above in the quarterly section. Personnel costs increased by$5.8 million with acquisitions contributing$4.1 million to personnel costs. The increase in personnel costs was offset by a decrease of$1.7 million in other professional services, travel and discretionary expenses. National Practices Three Months Ended June 30, $ % 2020 2019 Change Change (In thousands, except percentages) Same-unit revenue$ 8,920 $ 8,998 $ (78 ) (0.9 )% Operating expenses 7,990 8,204 (214 ) (2.6 )% Gross margin$ 930 $ 794 $ 136 17.1 % Gross margin percent 10.4 % 8.8 % Six Months Ended June 30, $ % 2020 2019 Change Change (In thousands, except percentages) Same-unit revenue$ 17,986 $ 17,597 $ 389 2.2 % Operating expenses 16,273 16,204 69 0.4 % Gross margin$ 1,713 $ 1,393 $ 320 23.0 % Gross margin percent 9.5 % 7.9 %
Three and six months ended
Revenue and Operating Expenses
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 throughDecember 31, 2023 . Revenues from this single client accounted for approximately 75% of the National Practice group's revenue. For the second quarter and first half of 2020, revenue decreased by$0.1 million , or 0.9%, and increased$0.4 million , or 2.2%, respectively, while operating expenses decreased$0.2 million , or 2.6%, and increased$0.1 million , or 0.4%. 29 --------------------------------------------------------------------------------
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. During the first quarter 2020, we drew$210.0 million on our existing line of credit in response to the evolving COVID-19 pandemic and the uncertainty related to macroeconomic conditions and financial markets. We repaid the$210.0 million in the second quarter as we were generating sufficient cash flow to support our working capital, ongoing operating needs and other general corporate purposes. 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 accounting and tax services period under the Financial Services practice group. 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 increase in first quarter revenue generated by the Financial Services practice group. A significant amount of this revenue is billed and collected in subsequent quarters. During the three and six months endedJune 30, 2020 , we recorded$0.2 million and$2.2 million , respectively, of additional bad debt expense due to the impact caused by the COVID-19 pandemic. Days sales outstanding ("DSO") from continuing operations represent accounts receivable and unbilled revenue (net of realization adjustments) at the end of the period, divided by trailing twelve months daily revenue. We provide DSO data because such data is commonly used as a performance measure by analysts and investors and as a measure of our ability to collect on receivables in a timely manner. DSO was 87 days and 90 days atJune 30, 2020 and 2019, respectively. DSO atDecember 31, 2019 was 75 days. The following table presents selected cash flow information (in thousands). For additional details, refer to the accompanying Consolidated Statements of Cash Flows: Six Months Ended June 30, 2020 2019 Net cash provided by operating activities$ 55,523 $ 19,580 Net cash provided by (used in) investing activities 12,807 (10,879 ) Net cash used in financing activities (70,560 ) (42,076 )
Net decrease in cash, cash equivalents and restricted cash
Operating Activities Cash provided by operating activities was$55.5 million during the six months endedJune 30, 2020 primarily due to$58.3 million of net income and certain non-cash items, such as depreciation and amortization expense, totaling$18.5 million . This cash inflow was offset by$21.3 million cash used to fund working capital needs. Cash provided by operating activities was$19.6 million during the six months endedJune 30, 2019 primarily due to$54.1 million of net income and certain non-cash items, such as depreciation and amortization expense, totaling approximately$15.8 million . This cash inflow was offset by$50.1 million cash used to fund working capital needs.
Investing Activities
Cash provided by investing activities for the first half of 2020 consisted primarily of proceeds from the sales and maturities of client fund investments of$25.3 million and a net increase in funds held for clients of 3.1 million. This was offset by net cash used in investing activities for business acquisitions of$7.9 million , purchases of client fund investments of$3.4 million and capital expenditures of$5.3 million . Cash used in investing activities for the first half of 2019 consisted primarily of$6.9 million capital expenditures,$3.0 million net activity related to funds held for clients and$1.3 million used for business acquisitions. 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, Organization and Summary of Significant Accounting Policies, to the consolidated financial statements included in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . 30 --------------------------------------------------------------------------------
Financing Activities
Cash used in financing activities for the first half of 2020 primarily consisted of$50.8 million net decrease in client fund obligations,$31.1 million used to repurchase our common stock, as well as$6.2 million in contingent consideration payments related to prior acquisitions, partially offset by$14.5 million in net proceeds from additional borrowings under our 2018 credit facility. Cash used in financing activities for the first half of 2019 primarily consisted of$34.9 million net decrease in client fund obligations,$21.7 million used to repurchase our common stock, as well as$11.7 million in contingent consideration payments related to prior acquisitions, partially offset by$23.5 million in net proceeds from additional borrowings under our 2018 credit facility. Capital Resources 2018 Credit Facility AtJune 30, 2020 , we had$120.0 million outstanding under the 2018 credit facility as well as letters of credit and performance guarantees totaling$3.6 million . Available funds under the 2018 credit facility, based on the terms of the commitment, were approximately$270.4 million atJune 30, 2020 . The weighted average interest rate under the 2018 credit facility was 2.43% in the first half of 2020, compared to 3.20% for the same period in 2019. The 2018 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 2018 credit facility.
Debt Covenant Compliance
We are required to meet certain financial covenants with respect to (i) total leverage ratio and (ii) a minimum fixed charge coverage ratio. We are in compliance with our covenants as ofJune 30, 2020 . 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 credit facility and debt, refer to Note 4. Debt and Financing Arrangements, to the accompanying consolidated financial statements.
Use of Capital
During the first half of 2020, we completed three acquisitions. Refer to Note 11, Business Combinations, to the accompanying consolidated financial statements for further discussion on 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 is 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 first half of 2020, we repurchased 1.2 million shares of our common stock at a total cost of approximately$31.1 million , but suspended further repurchase activities in mid-March as the COVID-19 pandemic began to have a severe impact on macroeconomic conditions.
Off-Balance Sheet Arrangements
We maintain administrative service agreements with independent CPA firms (as described more fully under "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 endedDecember 31, 2019 ), which qualify as variable interest entities. The accompanying 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$1.3 million at bothJune 30, 2020 andDecember 31, 2019 . In addition, we provide license bonds to various state agencies to meet certain licensing requirements. The amount of license bonds outstanding at bothJune 30, 2020 andDecember 31, 2019 totaled$2.3 million . We have various agreements under which it 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 31 -------------------------------------------------------------------------------- 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 ofJune 30, 2020 , we are not aware of any material obligations arising under indemnification agreements that would require payment.
Critical Accounting Policies
TheSEC 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 are based upon our consolidated financial statements, which have been prepared in accordance withU.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 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 in estimates or judgments that have had a significant effect on the reported amounts as previously disclosed in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 .
New Accounting Pronouncements
Refer to Note 2. New Accounting Pronouncements, to the accompanying 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, including without limitation, "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding our financial position, business strategy and plans and objectives for future performance 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 "intends", "believes", "estimates", "expects", "projects", "anticipates", "foreseeable future", "seeks", 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 also may 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, the impact of COVID-19 on the Company's business and operations and those of our clients; the Company's ability to adequately manage and sustain its growth; the Company's dependence on the current trend of outsourcing business services; the Company's dependence on the services of its CEO and other key employees; competitive pricing pressures; general business and economic conditions; and changes in governmental regulation and tax laws affecting the Company's insurance business or its business service operations. 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 or assumptions materialize, or should the underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. 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 our Annual Report on Form 10-K for the year endedDecember 31, 2019 . 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 theSEC , such as quarterly, periodic and annual reports. 32
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