CBZ - Earnings call transcript Q2 2018

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Operator

Good morning, and welcome to the CBIZ Second Quarter and First Half 2018 Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Lori Novickis, Director of Corporate Relations. Please go ahead.

Lori Novickis

Thank you, Andrea. thank and joining conference first and CBIZ for call. everyone, quarter second half morning, you us for the Good XXXX results posted In release page call, this our on been of connection Relations the www.cbiz.com. today's website, Investor with has press being call This webcast. also is link as as can live the website. webcast on be found our the to replay A well also

can certain we be of the call, during begin you remind that reconciliation tables financial our Before in a may found presentation, non-GAAP discuss of to these release. measures, we measures would like press financial management today's

management Such performance. date future that and and on remember management's may are information guarantee not Finally, also make statements. current this do statements forward-looking expectations of as based

predict. more and Actual materially. in can, do, involve differ description be uncertainties with sometimes detailed the results risks, Securities Exchange Forward-looking assumptions statements that to certain and A such and company's filings found can Commission. uncertainties risks of the and can difficult be

and President today's for call Jerry us Joining opening now Grisko turn for I remarks. over CEO; call Chief the to his Jerry Grisko, Financial Officer. will Jerry? and Ware are Grove,

Jerome Grisko

revenue acquisitions half grew X.X% growth total Recent quarter growth, revenue acquisition-related represents Thank second report second six first to higher unit pleased We're to into year-to-date. our be Of continuing of able XXXX. the for growth first this X.X% and well, of our which the same earnings first services, contributed which $X.XX second the the six advisory first continued growth pleased estate services. report months XX.X% results some by within tenant including that With months and businesses, climate the for the of up over leverage morning, quarter for by in half. the revenue for quarter share strong to of second X.X% per strong transactional into be this real and year, the of is year. XX.X% our X.X% for first margins half grew morning's to in to recovery this and contributing to business for restructuring demand in with to release, The are ago. and perform recruiting, favorable, strong more the Total good you, demand this corporate XX.X% Lori, continues we're has quarter year as everyone. such and the same a

first quarter in the revenue group, the by the second year. of by increased the total of for first year, grew the second and X% XX.X% first unit growth services XX.X% the by our increased has same group the unit this of Within by improved this half X.X% X% for and of of total in the revenue transactional year. in growth business for accounted six months X.X% services financial company. quarter For half this our approximately within Same

First half government servicing and core business same-unit revenue as our accounting growth was tax as consulting business. strong in healthcare both well our

be year our as and also business. market last a [indiscernible] coordinated this of And of into going now acquired services in to which we've this equity year very call in is we in our financial first Associates, to also acquired group included was on performance private services in business, strong. June earnings our our of which As commented quarter, continues advisory CMF advisory Advisors resources integrated February CBIZ are which the Laurus team. Transaction transaction was existing

growth new that improved by Total core business overtime see services in that to grew X.X% the our years. we the by should to organic onboarding and second to benefits and continue unit within continuing We're acquired with quarter half X.X% second for also our revenue of that four the year. has service the been of group of pleased half the insurance in with quarter the in and was the lines X% the direction businesses, up benefits, made in group. first year. and health within and pleased to revenue X.X% this producers retirement plan businesses We're Turning the improvement Same grew the improve training to integrate our property group. by which investments We're in within we've continue and make hiring, casualty the growth. recent our progress systems operations, and processes first in

and line very we're of year. first half and summary, of strong the bottom in second So the businesses performance growth this with quarter topline for in our pleased the

As for experience that to to year-over-year. we use improved the And strong the has a whole, we metrics services. operating demand our important very business continue the measure strength of

over these comments, Financial with Officer. So Chief our to I'll it Grove, now Ware turn

Ware Grove

Thank you, Jerry. Good morning, everyone.

with performance half of XXXX. basis XX.X% strong a flow for pretax in business increase income XX operations with the strong half first reported the we of improvement cash very points margin is first from in revenue, The

share million million of $XXX our million plenty balance outstanding have address was year repurchases. XXXX. year-end We a for strategic to on at financing strengthen pursue credit XX and balance capacity opportunities acquisitions our $XXX.X at of $XXX.X June The business with this to compared facility

approximately For cost X a related of XX,XXX have XXX,XXX a And acquisition of XXX,XXX stock this common repurchased this for June repurchased payments. of through additional million approximately the approximately approximately at million. $X.X six our we shares million. first through August months Since repurchased XX total cost a total shares this we of year $X.X June an at XX, approximately shares year, $XX.X we used year, for

award been shares look a our volatility or to offset repurchase grants. continue with price find opportunities to repurchase at recent activity to a issued of continue the to to of dilutive steady We levels with level to in in sufficient level for the activity. we impact goal repurchase in acquisitions increase share shares new We've connection the and have months of market equity in

a X.X million year approximately we shares. As for XXXX, the full reminder, repurchased

approximately was capacity compared June XX, with June XX XX.X XX facility. count XX X.Xx shares a at debt the at receivables We quarter. days on with ago. million months fully $X.X our and XX% Most a six approximately was of approximately points of facilities year, approximately and basis second lease with revenue, million to expense amortization expect for associated six this renewals. points first days for related was approximately XXXX. the Days with for a which And ago. $X.X of at expense credit the the in is XX, for this shares $X.X diluted revenue year XXXX XX borrowing million for be months months fully of year, EBITDA year diluted there compared Depreciation unused moves and share at first With capital debt $XXX full sales the year June for approximately compared Bad year amortization expense spending expenses six stood million. this on basis is spending for million. was XX was $XX.X the quarter million, outstanding half first depreciation the million Capital second approximately at for this year

revaluation XXXX a For liabilities $X our half earn future alignment likely prior small we we portion in of aware year quarter. $XX in with revaluation Acquisitions capital achieved is June this a $XX other a at mark-to-market you outs year are stock, income outlined in of common spending is approximately $X.X earn-out performance a this recorded your XXXX. million to financial in million in XXXX, on to payments acquisitions also are achieve statement. year, Most second million XXXX. notes earn-out in have million prior estimated million liability, of targets scheduled held $X.X any acquisitions. projected earn way that this in of paid These within $XX the cash to contingent is year, million on or recorded approximately that $X expense, including approximately for required a is Approximately consideration for at adjustment shareholders. information range earn-out as total million of future in and full XX shares adjustment is our year each million for the This the contingent XXXX, outs the expect year. With shares of and in $X.X as on pending the are

a associated equivalents In addition held the outlined bonus is reflected earn-out equity adjustment plan. cash aligned is to for revaluing share revalue This to are nonexecutive of also share mark-to-market there our adjustment was expense. liabilities, the that the issued adjustment price share that with operating shares contingent portion release the this of a in small adjustment in represents portion this and morning price

charge With as we full XX.X%, practice, not estimate approximately no of of the that the increase. the shares related and per share any this as is tax XX, ended half equivalent impact for or CBIZ million future in earn-out with charge to that XX X-month at impacted is to basis the margin share impacted result include a guidance. future the in share that by on unpredictable. to worth or pretax impact by $X.XX value cause to the share there reported pretax and effective is matter year a the XX approximately number this is impact to income important change It result share This $X.X nearly price XX%. price quarter, of The of six of our as expectation for basis second of share we $X.X XX% held know liabilities. impact increase is for changes earnings the per June changes, points is nor it or any million and and points do of of our adjustments XXXX; changes margin noting Also the contingent earnings consideration of $X.XX second changes first recorded year, outlook quarter our for the this ended cash earnings June the And first year. price a share price months through share not close reported of the XX year very price price the in results in half does that rate a

effective expected, As activity closer reduce for full our compensation second rate expectations. stock the to served year with our tax to quarter accounting expense associated

rate, exercises, effective of of again, our a we as the to result option shares of compensation number tax a XX% on remind you These second for but want accounting full of rate that the can unpredictable second continue exercised effective a number factors tax expect price. We unpredictable tax alter year effective to, was quarter, and in of quarter the the As stock such of this the the approximately the timing variables, effective in activity XX.X%. rate impact rate has XXXX. exercised our

in that the XXXX the that assets in new was half recognized points recognition in basis XXX when impact the would compared accounting XX-Q in revenue the our the we margin revenue this on the held $X million deferred be you new first compared the first outlined year. with impact revenue half with gains half half this normalize the And expect this filing. revenue of for a will schedules approximately impact. year. was half of XX.X% increase compared The minimal in with the related General compared an for first January general year. quarter under with in accounting second there the with or this you'll of compensation and of in X% first this second year incentive standard year In ago. related gross and administrative had X.X% a for year increase eliminating standard first ago. information this was associated this the year, revenue plan, The prior an accounting compare expense The was of of the footnotes year administrative losses an timing with Now XX.X%, in to a higher the adjusted adopted half year for expense year, additional the relative small our find is prior compensation expense full and

business the positive. XXXX, at remain conditions very second we look As half of

balance As demand that earlier, the through predict transactional the first has our over been demand client we are year. described of half, businesses the in more including strong to difficult

related earlier be the in to the that initiatives second expect also spending half. higher described were investment We may

in hiring of campaign that branding producers, rate year quarter is the marketing half. onboarding and plus accelerate third the the of new to fourth scheduled occur plan, a for this first intend and and we not example, is For that there did

the in So look end X% XXXX, to our the the of growth of to outlook growth the year range higher year revenue for expect at near as be for year. full for entire X% the we total we

lower effective recognizing an rate report approximately the than XX% to there year, or of for factors expectations. that expect be a We tax full are of number to could higher rate unpredictable effective the either cause tax

in year full in number may investment share cause share expect half second eliminate variability the that earnings price. a achieve Recognizing the an approximately diluted achieve within there in there share a count factors share year the range expect share we full this Tax to We growth XX% to expect and XX% one-time XXXX. of a fully in the of spending Act level for XXXX. of per XX% higher are reported over XX count, XXXX, over of to the XX% we Adjusted for $X.XX including growth can Reform adjusted be reported million the per in of shares, earnings to $X.XX to of for year, impact

So to conclude. Jerry. over with it will back those And I comments, turn I'll

Jerome Grisko

couple of that add I the Ware. touched items just upon. you, Thank wanted to little Ware around color a a

a us the even that as first of it's the noncore services. the similar expect year generated of of from the tempering to of results relates year, to results revenue factors our are that in Given the half first of would strong year. half for remainder And that you difficult are some guiding the the portion higher, for was transactional the predict

We by $X.X income first pretax approximately benefited from year. that half non-recurring the the in of increased also items two million

very half be performed the while during project our about of we're that period to for more prospects the much and tends business second the year, And the optimistic difficult so that oriented predict. to in work of

markets been otherwise greater funding the of to within Including group acceleration has that in benefits we're national also that our cable-TV of will We're would that a the business believe hiring the later the date. as made would throughout major the the in strengthen United to and begin at brandy of improvement is you number is for prospects even our tax working States in earnings insurance that well. growth to our scheduled on certain savings a number of in pleased of the Now expect business third as year-to-date And reflected our of us plans new investments long-term in some for turning campaign rate investments federal year, have portion a tax producers we the the the the accelerate airing our other quarterly and of quarter. and a of business. rate tax allowed our year-over-year

may have. it said, back for that questions So I'll with turn that now you

Operator

CJS [Operator Chris comes first question Instructions] Securities. And from our of Moore

Christopher Moore

side. we Maybe could start M&A on the

talk bit potential the Just days? acquisitions that about is Or environment looking business going? a you're the higher kind seeing? of How for little these multiples that piece of

Jerome Grisko

It out pipeline for doing Yes, as people and investments of external making sure periods. on really Chris. We're working continues from resources. No that have opportunities competitive we we searching What change full opportunities. be those in as in to those have is for internal real well the in enough a assets a that high-quality by market. that resources both market we engaging are prior environment making the

a even marked and over year. seen the to be we need sure or in -- one very at past we out [indiscernible] or last quarter are continues the six really remain pricing uptick or things. our to So months just haven't that these there competitive we It getting the multiples make

Christopher Moore

a some feel to Just you from areas growth three for trying hidden expect from kind fastest for standpoint, stage? that now say a to now? might change, areas growth at -- from to I'm have, years geographic get would five and growing what this of, the potential

Jerome Grisko

and sectors certain really, not I coming within back course that we're year within our where practice of geographically progressive CBIZ, industry. And is throughout what we indicated, is and growth And discovered or the market. pleasingly, businesses. Yes, was, to sector that, across all the both geographic growth looked both the and is Chris, coming we of the did nothing really. within of in we've groups growth particular markets, seeing core the specific from we've there insightful, I nice a think, gone when as What obviously, at

offices, to the hearing So our same we things. we're talked

optimism business sectors. for strong favorable strong among all very our of kind Just demand across climate, services clients, our

that generally seen to markets, within attractive And strong into markets expand markets have those geographic so there trying those years, the driving if So that's enter you've footprint already don't five year-to-date what's look just or three to and demographic we CBIZ. markets you if foothold you really continue to mentioned or on forward, growth -- a there. concentrate we or a

Christopher Moore

sense the of terms kind the a terms assume you how there's you marketing In side. Would have in how that? on results? mid-fiscal would that Or good as lag new is do tangible see increased would the producers, and sometime of on that going? program be when of view to you of expect investment investment make when before in a 'XX kind you that I to

Jerome Grisko

a couple lenses. Yes, a in different of we're different at couple -- it looking through of

First them. about period are their of that return lag really hire would is you all, the ago, starting it a we new producers this program. the time year cost of validate, are and producing carrying that That's between than to which XX- you're they to now a that more We started you to we expect a what up. and right, XX-month time, committed call an ramp -- there that is the time about

we're the Ware those some indicated, half this second of hirings actually As year. accelerating into of

levels the the said the we they kind or that expectations or is, will hire to organization. producing we and far so of for within group, validate a not, hire kind this and still whether of, going this as this a will that be they lens as -- well, are of year that the remainder Having that they're into there at look other for people at the So this question XXXX. hired above year through we've that, at year,

group bringing to very by And by are of we we're certainly for far. on our as that goals signs that so year. the we're the the the to and expect be efforts of into all program, the the quality and productivity very recruiting end promising encouraged of people hires, new So

Christopher Moore

end assume in normally you at that this contract month would The that Is to Edward year. Or Jones work? does renewal of expires two it reasonable how advance? the announce a or

Jerome Grisko

received would contract. to legal of we we issues from but be we crossed, that T's out that of signals will Edward first very of we've there Jones Yes, no certainly we will when all, that end get some and year. that announcement through dot renewal with working the send -- an We're we positive will well the would the And expect complete. that I's before get finalize terms

Operator

next question Our comes Jim of from First MacDonald Analysis.

James MacDonald

growth, business, So strong you called quarter that Any I onetime X% this out some you last also mentioned them out? for items transactional the said. to you I has you quarter, other onetime items that this added guess, believe quarter call of want

Jerome Grisko

a is a remember No, On that acceleration of through recognition the Jim. half. second the topline half revenue first basis, will revenue normalize

about So continued items Jerry that's million half. other that additional first the about quarter of $X from talked three second quarter. And to revenue then first in the

first kind second synopsis, the predict half. commented, in that's Jerry was organic And that's that first And the half. accounted of difficult the a strong. very half X% that to in of So of growth kind for as

things. are So two those the

about. are, we expense items course, talked other The of items the

James MacDonald

much And -- about gain quarter? that, second of of was first just you're in half, $X.X how the the million clarifying talking that pretax

Ware Grove

first a about first quarter will also item, related a that both first sale Hurricane business book a And in Irma was our settlement of in quarter. businesses therefore talked the item. small of the of to disruption, remember that and occurred we and half the one a Yes, you

James MacDonald

are reform And of work, much tax that the your then, related about thoughts how currently. on how additional of possibility

Jerome Grisko

about we bit this Jim, a earlier so, Yes, little commented too.

in quarter the April time you us of gave Reform little was of for and, and that, if timing into us. last quarter of time passed XX year, -- December course, Act in think first work through busy to a the week much So the about the first third Tax very it is very do the

to now, little professionals we So repatriation, working on that Then are to to There's the were season into come what time fourth there heads about they and clients our than Tax was they'll to and off, it's able what with impact of then the just clients the done -- relative some forward in to bit after opportunities the to third stages just be now of of XXXX. probably that. in that quarter, amount Reform work describing of year the out planning. down, restructurings of our a They right busy continue done work is, our and on of the of working and naturally busy through needed right lots Act. quarter that complete reorganizations move are, talking this busy very clients opportunities early happened and relating season. really was will in work are early take then year if then and But kind

So to we're although that certainty difficult work very might very encouraged by may the it's that amount that, of out what predict come be. of with

James MacDonald

seen much it though. really haven't sounds you like of it So yet

Jerome Grisko

haven't we of early the a since it, certainly seen of part quarter. the lot first No,

James MacDonald

accounting bouncing for shares, EPS your earn-out this contingent And around. that's

calculation, it it and -- tax First, $X.XXX, my is to you -- also or see, it by positive, rate. $X.XX I I And in was positive negative. mean, -- wanted then a was then said

So between counting I or somehow. sous two right am I those $X.XXX in net thinking am items like double it

Ware Grove

$X.XX have the I'd year-to-date and related roughly back, adjustments. tax of to the price there right, charge piece $X.XX But of Yes, that. and quarter, go reconcile was kind the of a for share Jim, to you're

James MacDonald

clarify? Is that to pretax, just

Ware Grove

is yes. That's net pennies, no, the charge, Jim. sorry, tax. net, of line, bottom pretax, the I'm That are

James MacDonald

related those was and tax Okay, -- that's the But to items? to was of what I trying calculate. -- rate most impact

Ware Grove

to rate related things. tax is impact The two No.

the reduction compensation stock then the all, the rate and impact of statutory secondly the accounting. federal First of in

of shares typically the remember may exercised activity and dates, a in anniversary quarter, have therefore In the of a the we lot bit. shares you kind restricted and first the we don't quarter spikes So lapsed. second grant

a in but the That's impact Reform piece of on statutory the the it, second Tax Act. quarter bigger bigger is a the was reduction there. piece there So

James MacDonald

And about just moving maybe it adjusted hard-to-predict question; EPS kind given one you I to do of to philosophical would think forma pro this out? item, mean, a take

Ware Grove

Well, to to that. do ability, given of you the the allow we've you best our information to

don't to if or easy for reconciled what it EPS that, want a you try do. we adjusted accomplish have fully So that's but make number, you stated we to to

Operator

[Operator Our & comes of question Company. Instructions] next Riddick from Marc Sidoti

Marc Riddick

if I you spend little the talking marketing was a and what time expect far. what's planning wondering been And so we could would about implemented forward? and strategy to see going

Jerome Grisko

the talked this one long that in, for we've we've in just markets branding our recognition. out that knew called our our visibility so Yes, in cable and TV brand national thing Mark, that to just here, that's time is needed campaign we a It to is invest improve about something -- we here.

perception with to a brand the so of to -- non-clients in the virtually prepare help here clients the going number that should campaign. be tax And a company these that, in We've an all agency running be to markets in rate and the that agencies, ready baseline from our our engaged the of surveyed of where we came the help we're year, the major portion we've market us to We we launch hired a of savings believe campaigns. to shortly. markets recognition get us that good this proceeds advisers and to as on

that what's I think it's bring us. we're to for for or going actually about scheduled excited And August September.

Marc Riddick

looking market bit room and to what there, you -- or I type transactional then that one thing. you're wanted the to kind little dive a -- integration as mentioned little the of acquisition. more that, acquisitions encouraging that from the you're for going seeing either into when shift just markets, wanted I at of maybe gears to is of and get a or that sort upside, bit;

Jerome Grisko

both right. Both Both, upside. for encouraging room and

step back little a let's bit. So

national areas space in within to we almost of opportunity one was plan accelerated and offering service leadership. year, on business vision industry transaction not where fortunate our areas organization those geographically, -- internal last advisory to and strategic sufficient with services acquired business much out did equity scale. were not vision growth. were an there with those was identify outstanding that our ago have came of a that focus. provided a highly we We strategy, together two then June CMF with -- services, was our but that Associates It's for Some a years and and valued with of Private resources we leadership outstanding identifying as of pull that which in our being

were we those put break to resources them CMF. umbrella So together, with able one under

also Advisors, we for us. We bill year, transaction, was that there; well. additional space the been terrific And has for team addition that identified a to in they've resources need fit in that the Laurus as who there part acquired early of this a

team of with national take Terrific advantage constraint trained national now qualified we last did to well. opportunities opposed have businesses national serving seen very CMF results enough a so The the acquisition of year, there resources as just And -- of the year, focus, through have with again, one terrific year-to-date -- see. we is results. now as to the equity private a great strategy. having all last future geographically we've and bright as we And, prior latter to with prospects part the for candidly, we the

Operator

[Operator turn Grisko for Instructions] to This concludes our to session. I over back the question-and-answer conference closing remarks. like any would Jerry

Jerome Grisko

participating have look appreciate team first in year. and I want the day. our continued our congratulate you you. and call thank support. half again an we Okay. exceptional for Thank talking also call. nice investors And a today. to quarter exceptional of forward you on to Well, Thank I'd And our to another the members I analysts to our And quarterly next you. for their like

Operator

today's now conference Thank The has for presentation. attending concluded. you

disconnect. now may You

CBIZ (CBZ) 5 Aug 182018 Q2 Earnings call transcript