CBZ - Earnings call transcript Q3 2018

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Operator

Good morning, and welcome to the CBIZ’s Third Quarter and Nine Month 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, Sean. everyone. morning, Good for and you for CBIZ the And months joining XXXX quarter nine results third thank us conference call. this Investor our In posted with call, release press connection has on the www.cbiz.com. Relations website, of page today's been This call is webcast. being also the our And on well as be webcast, the a live as can replay link also to website. found

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

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

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

and President for today's 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,

Jerry Grisko

nine X% for growth our nine and and nine rate rates, revenue well the third Total our the Thank first Of quarter continued in to unit quarter, for represented of year. the the of same strong for months. and the to this revenue this growth Good third everyone. the revenue growth and Recently for year. by X.X% months grew first quarter quarter release, by those report nine we're to months are third first results the this morning, completed you, X.X% morning's for first Lori. months. pleased X.X% contributed and With X% X.X% performing for acquisitions third

a over XX.X% For the of year. $X.XX, last $X.XX share in the operations third continuing the third increase recorded earnings per was from quarter quarter

year ago. earnings XX.X% our the from a months, continuing of increase per over was $X.XX $X.XX, nine an recorded share the For operations,

margin national for XX.X% XX.X% come. planning first have continued to growth, for increased months. hiring make and of greater Among Financial which strong brand for we we and This and first demand third group,, within business. advisory in of developing investments, allows years healthcare total same revenue the at group investment our growth increasing our revenue our our strategic quarter allowed the increase – the months. nine we on we've Benefit new rates margin report climate The we in launched discussed basis our equity pretax at Insurance Financial to strong revenue remains advisory of very earnings cable organic experience months. As in XX future in improved Within the in our our income year campaign services. advertising in business nine and in for Same-unit favorable XX.X% and revenue third the the year, the the consulting private Services the even and and pretax that margins. and by by years, tax the nine to expect government also and growth Services growth Services pretax this X.X% model times enhance to leverage services, us And to group, our we aimed television has experienced in an points to continue producers first our our first quarter over see third strong investments ever the performance us Throughout time our quarter growth enhance awareness. those profit

high are results multiyear the and third expect producers slightly very quarter it and This more of time in year. we X.X% the of industry third first But Same senior this order of traction performing – are of declined unit total quarter increased period. grew many organic is growth, at need revenue number X.X% early X.X% we X.X% process to a the group, greater our growth in producers. very same while this our take and and our revenue against in greater nine to by level. peers, revenue a Turning to to Benefit encouraging, gain for rate the will the to from and some increase that Benchmarked the nine-month achieve for Insurance by business. see months organic by

year. of profitability, investments with Grove, As growth our those business a this growth made and magnitude year-to-date pleased Officer. expect be ramped revenue Because prior not to higher we year. greater With investments investment Ware those turn in And to future cost August expect Chief that new of producers throughout in to the comments, gradually in light and television the the up company we investments air ads has the somewhat our year have the Financial overall thus and we particularly in the into this our are the those I'll did even of over increase until would far our and our fourth continue quarter we in the than conclude XXXX. quarters it in of

Ware Grove

Jerry. good you, Thank And morning everyone.

year. of business performance the with happy very to this the are We date

strategic plenty position, with operations to our and million, $XXX measured on leveraging very strong million of is balance with at was at million We capacity The XXXX. solid levels opportunities. $XXX.X is year-end facility XX top our of growth are cash against line flow credit outstanding Leverage times. X.X% growth the a EBITDA, address comparing $XXX.X debt by debt September balance compared from as X.X in a

in $XX.X common nine end For approximately we we XX, continue level an share repurchase a to price of additional to through year used of million daily increase acquisition for the $X.X steady our the activity. approximately have to XX yesterday, to Since share XX,XXX months related September have for repurchased date a shares the business volume XXX,XXX we used payments. XXX,XXX in volatility this We're with of this of we total September the shares through And stock. opportunities repurchases find approximately repurchased of repurchase for look and the shares year. market to

million $X.X expect share diluted X.X is full to at Interest XX.X million for count ago. million five reported year as XX. in XX XXXX debt a have general concerns XX in you currently year-over-year, interest first make may of significant compared a times within represent radar nine recent months, balance does million, at rate on million year. floating capacity EBITDA, We comments observations this priced is LIBOR few a for have our a That facility months compared rate $XXX XX.X not points, unused The of CBIZ. shares million rates of With relative I range item the rise this September and with time. the at year financing we be on approximately fully And rate of shares, over this your effective outstanding September year to an $XXX.X at XXX But with million plus $X.X the expense to X.X% debt to risk a want with interest or screens. basis

fixed our combination of rate interest the debt impact will effectively of X.X%. we million of $XX at rate floating an hedged have hedges you Outlined through a all-in rates XX-Q, place rising in cost against this have effective actions. in note for of today We

increased client sheet has investment carry on connection in investments of cash on the payroll year. grade have with short-term we funds. investable these of held rate balance as clients. million average And daily this investments approximately floating assets held fund points the investment to balance by addition, $XXX a XX the basis In for We date of approximately yield

prior spending spending full of for The approximately nine $X.X in this actions, two this are XX in sales year, facilities we $XX.X $XX quarter September floating the and ago. million acquisitions for these revenue, is year on the various receivables, the first spending for our the on at basis expense this debt And was a million year XXXX. year. year. compared we the XXXX will year hedging rising million this ago. impact through XX points third on days be Capital was $X.X projected revenue approximately in $X.X approximately this capital nine year XXXX, of moves approximately countries. for million year amortization So months remainder months year $XX.X majority approximately this rates. $X.X and to a with Depreciation XX at Day XX year. that XX over $X.X expect outs the and facilities basis million of of expense points the Bad earn Acquisition in debt million was in million year, the spending was million cost this quarter our supports against rate effectively at $X.X around was this and XXXX, interest nine days for compared outstanding of months $XX.X

I shares of addition during included The future are earnings are revalued bonus in each held call, to common cash income share used price second consideration. plan with reflected the but along there our for as cash shares statement. primarily of other component shares number of the stock commented with our consideration earn-out at earn-out as our of to is equity-aligned As a of fixed, is these contingent end market quarter revaluation shares on in or The quarter. expense nonexecutive income payments payments, future price these associated adjustments

months cash a of September this share. price in expense by impact a the earnings XX, earn The number increase not to quarter. of the in compared incorporate expense With the basis a share of represents These third nine on change the $X.X nine-month basis and these approximately $XX margin the year, is and shares the end the charges And month do The the quarter in the guidance. results. income shares XX the at price increase beginning earnings held future with for into in $XX.XX the out future per and approximately of contingent matter of for practice, as of we share revaluation the price unpredictable. second the earnings for our accounting a in the and payments at anticipated This for nickel this in quarter, points reevaluation for third million. we points the associated of impact at flow $XXX,XXX impact. has share per recorded changes nine any an approximately is share by no of And impact quarter third $X.XX pretax not impact does with XX charge is in $XX.XX

this grant tax increase result And XX.X% of with a for effective stock year in months full basis deferred with As from between campaign General the stood this year. XX approximately effective favorable of year XX%. our administrative on the rate was difference year was year margin compensation, basis expense our exercise. impact at the of increased timing third tax an effective of investment ago, nine the is compensation months that price of a for our for option XXXX compared of unpredictable market losses accounting The compensation impact variable compared for also XXX with points. the accounting price administrative the is are and a approximately date the the we XX%. launched for nine of year this points. by a plan, XX now driven in and held in revenue year, expecting incentive compensation or the the quarter for exercises Eliminating expense of to rate impact for ago, general at of on year ago, X.X% was stock the marketing tax compared the rate future gross increase impact a XX.X%, the X.X% nine expense months this September an accounting The combined due gains spending future assets the the ended the to for increase

accounting Another impact reports. year. is that and new and is reported the footnotes the adopted this item schedules of within This item recognition worth revenue XX-Q noting the was

accounting. of or in The disclosed an is you'll lot reverse this million find normalized a impact months with approximately this was that the in year. increase detail So fourth timing there revenue expected to change of But for this is nine this there. associated $X.X of year, quarter in the first

there And this year be minimal compared will so year. year full impact prior the when with

quarter the quarter third fourth in year impact unusually occurred that ago. due and to year several the unique strong remember results may to You was fourth the last a factors

recognition accelerated of occurring we follows: anticipating the growth the impact we and the combined half to our of range high the of for year. expected pace the end investment is forward is second revenue factors fourth this the as outlook our to prior for look just year business as X% of normal all influence described, of over year in quarter these So I the seasonality year, near XXXX growth in the and the spending of accounting that expect our revenue full X% expectation be the total with

report factors that expect rate rate. tax of approximately the to full unpredictable could number volatility tax XX% for year, We in of there effective are recognizing effective an the a cause

Tax We the that increase can higher fully within XXXX. year revenue for And approximately expected over $X.XX for arrange and in the the full to Adjusting fourth to accounting variability to expect $X.XX count achieve full year million we are XX% quarter, XX% in share per including fourth recognition in year a of changes eliminate full there XX% reported factors, shares. share impact XX% adjusted to year XXXX. XX level a of we expect the there spending earnings diluted share the expect for range to reported the million of quarter the may of cause over projecting per a of XXXX, Recognizing full an share in XX. Reform per investment impact count. of the growth share the be the earnings Act of number within to share price of

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

Jerry Grisko

our Ware. I'd comments guidance. add Ware’s on like you, Thank to to

As from you for year that Please the that strong through nine think the fourth mind our and our keep our to about our quarter financial fourth cautioned of full we results projecting results difficult last work to months dependent more are predict. on in year, first XXXX. top heavily quarter this against the project of results performance be for our tends nine-month more on guidance year

Irma experienced factors quarter negatively recur unusual last in third not we Hurricane As half of September year addition, that our occurred may In recall, results you of in that the second will impacted year by and several event. were last

contract healthcare that on several impact temporary We delays a related also government within our results. also quarter negative third experienced had consulting business our

of it the the had anticipated, was our the unfavorable impact we revenue third to those in As events same periods fourth fourth quarter, the third much up quarters the made but year pacing and in the last this makes of year. difficult quarter of last in compare year

clarification, that and turn questions it with So I'll over to answers.

Operator

from Securities. [Operator session. question-and-answer Our ahead, Instructions] question Chris CJS Chris. Moore go the begin with now first comes will We Please

Chris Moore

my Hey, acquisitions? just we of skewed continue balanced of questions. that good reason start more the you the So same unit the morning any in can kind to guys. as growth Thanks just for I'm and trend or QX, taking likely it think in Maybe mix get a with obviously to was sense trying towards kind heavier XXXX will growth know, towards

Jerry Grisko

time. mix acquisitions. like may heavily Chris, It weighted XXXX, one very our is about think what now towards of acquired in our in that Yes. organic, to other. the is more period any towards seeing I much we're visibility half so right XXXX it's given or predict usually difficult half say We be

towards like this indicated weighted with it's point you to we'll that, of pleased it's in more outlook XXXX been XXXX, although this We're that going what organic. in year that we're activity economic period for to predict the bullish time. of As and hard amount about the very it's see at look heavily

Chris Moore

it. Got

end the any of or Practices side, that thoughts updates on any that? the the On Edward contract expires National Jones the year

Jerry Grisko

Yeah.

the signed terms signature not agreed point. just and all for way that its been it's the While process yet, working been through it's told been to have the we've at

Chris Moore

of enough share have you, to little Got was or mentioned the the the you any really on below bit was expense margin in line? revaluation, an operating adjusted significant and terms was the that for it operating impact a it. $XXX,XXX And Ware of

Ware Grove

be bit Yeah, in the income It cash not really in other expense, in contingent adjustment That's of would expense. majority it areas. other operating operating it the included in accrued Chris, There most for of of but little might the not is a bonus payouts. equity-aligned is a be the is. plan part where of most

Chris Moore

terms of I'm Consulting. you still Services, areas your some in really well Financial had that it. on the Healthcare in sure really performing comments the of talked Got are

have or grow of from the to to bit So that there a the been you have able contracts growth high-single guys that kind the been so digits, kind just little expanding that's is coming jewel, new a of you XXX above? or scope

Jerry Grisko

Its little bit Chris. above

the them, we We we've scope existing of provide new continue continue our as we picking to that to see expand to growth and been also up engagements. successful at within services clients

pretty engagement which most sizable is government. One of the with federal a recently

the working at success market we're we've and some for segment have So that there. been to time know, of as beginning you some

Chris Moore

it. of about at past in just this is growth know small kind Last point to-date? and about payrolls time service you've progress that question, bit kind Got talk developing organization what leveraging piece just employee and the like employer, and, I looks the maybe of little a in talked revenue of [indiscernible]

Jerry Grisko

I say the opportunity where the have Yes, be believe in to technology successful for believe that's you believe order is incredible that we to there, approach the right We We right us. that it's, an that's would going. the to including have solution. market market

tool believe then that that and we've of to strategy. provider solution. think value familiarize contracted our is contracted around themselves to trained the software out we with technology just there, a build and the to that salesforce demand the it's go-to piece team get the for are ESO proposition. our is but be and we on that last to service selling with that that it to that, going kind we for recently with in order we've take know pleased puzzle we going team We for found said some to going time national of us We a technology tremendous need in Having that, that market

come, more about we're here. optimistic So to but opportunities very the

Chris Moore

All It. Got right.

in back I come me line. Let it guys. appreciate

Operator

First Jim. comes from Please Our with go next Macdonald ahead question Analysis. Jim

Jim Macdonald

good morning guys. Hey,

Jerry Grisko

morning Good Jim.

Jim Macdonald

Just software existing following that require and of up on that will there? the all sort what's new last your accounts a conversion question, of process

Jerry Grisko

Jim, – don't it's of different believe there is so We really two segments market. the

solution serve that learned past good business used that what it clients is that. for the the So the the market years the actively just well suited very so for been needs, have able a is well we that of that we one we've although several clients find have with we've positioned contracted over that we've with. sophisticated to larger more segment software historically pleased in for searching to been wasn't within and

Jim Macdonald

to you'll be two operating just So, potentially platforms? on clarify,

Jerry Grisko

That's correct for the foreseeable future.

Jim Macdonald

And Okay. but there, you missed consulting kicked number that? and about I that talk a the to tax Maybe store the Services, going little it talk same number give back bit. – sounds Financial sales have may me like first, in could

Ware Grove

Yeah.

Financial So entered reform all, it's of while as very our as difficult business to, Services for it's act, first had specifically to tax related billing commented, we discretionary to the strong and a growth really person that where our on method and a they we've revenue in systems we have process behalf the of recording revenue.

amount So in revenue would from act, it's look in that although the fact very at receive growth tax believe with you the receive we difficult that our from to we initiative coming is of numbers. reform experienced, to The the expected that – we we've that amount revenue precision, that track of if that's

strong was, dollars believe the of to x hard that tax it dollars, a it's So reform and very y revenue. reflects growth good is we portion or it the act say but

Jim Macdonald

Great.

us growth you we it but maybe you producers we'll investing year. one benefits, can when a you've me? that know feel time, think been there's positive see in you when give reasonable know, go I and to some segment? back more, for Can start benefits takes, a Just just for all lag

Ware Grove

Yes.

see that return at – we've XX start that calls basically, about successful.. of after I if talked and XX about XX think you So of turns person about it a they're to this, cash-on-cash about then typically from in kind producer, productivity months, prior typically return months and new the

that performance we've number hired we've And goals of that we've what for the the They so We're that or excess in targeted are of the year. group. is group. obviously were people as tracking for the hired we the performing what done targets a

from some performance XX begin we're making there. see when But, pleased exact XX, next an within the that I that So expect the see months, to to-date, to it we're have with to, the date that very will and or although, XX really rate. don’t will time growth we U.S. investments return growth for would take rate the

Jim Macdonald

Thanks lot guys. Okay. a

Operator

Our comes Please from with McHugh Company. Tim & next Tim. ahead. Blair go William question

Tim McHugh

a know for TV I XXXX follow I bit the little the your target the TV and the expansion? on margin early, Thanks. the want normal for to XXXX margin change in it's or and/or at producers on contract just but up advertisements does terms question. of spending for all perspective insurance

Ware Grove

disproportionate a question. XX Tim, on a year, Ware is be you depending said be Yeah. saw this great points timing a may little basis may to XX I don't sometimes like less, think the a sometimes pace so, it the and here said, choppy, margins more and we've disproportionate basis and to points and described, but XX business. things third in quarter fourth the a in we impact invest see margin least points because the of basis the at impact strive year-over-year just would may at improve we still still quarter you the in

this and so to the the we that year-to-date spending and pleased maintain increased we XX I happy have months, pace nine have points Jerry year-to-date with year, the we'll improvement described still it XX ahead quarter, can in years still we're an fourth invest. So through but as some of and we're basis points basis improvement think probably

Tim McHugh

part think of you then be the see guess, of opened about always testing, TV of can us campaigns, it's marketing few not next I how you're may years kind should for just is And project, this normal kind the in or part to about frame of think that? how this we'll well the that the new kind advertising I of just spending,

Ware Grove

time, something to expect former, the that latter. it's initiatives, investment. type on and the been we future. and at now our marketing us while well office some that number considering make the is we really this been time for of would the competitors known very this of Tim, we cable. that, our continue allows not into brand those the to we building the but a is we're over period recognition in local really one, oftentimes We've to have marketing competitors similar The in receive investment follow some comment of our that those in a spend of investing strategy one office as don’t of This Yeah. have national that scale travel have, offices, areas including television

and we to and wanted has our stage able do profitability this that. we're at that So that be to our allowed pleased to do us growth

Tim McHugh

Thank you.

Operator

Instructions] ahead. Riddick Sidoti Company. go Marc with & Please [Operator

Marc Riddick

morning. good Very

Jerry Grisko

morning Good Marc.

Marc Riddick

any there getting. that if was see feedback were to you Wanted

that you've and to were are the You been position of election admitted from any feedback feeling any specific regulatory if be should a potential would bit the areas receiving advantage that there macroeconomic there of or that be concern little for that of positive lookout we of upcoming fairly customers that issues – take brief, a on wanted was to maybe about you to mentioned you it? are if type legislative the issues. I see

Jerry Grisko

Jerry. its Marc, Yeah.

a So our different get we sources. couple data from of

travel we their level ask optimism. client base our of what and their within of seeing as all, they're offices we First

With the where call all before then following on this very are, over difficulty no XX what middle to that said cetera. labor being experience sure the on really the business, from a correct. that data said, than hiring some the in And which the publications favorable is market tariffs, level regulatory that months. still in rising those we're level small of have the also months, different least around today that We a they our sometimes types past foreseeable market types are group high the we continues to around the that six generally With the labor, issues next in information make global our us. our optimistic that about future just that which is three pretty survey our based et them at at heard is concerns and all for serve that costs is environment of issues of that segment to clients concern higher we be and clients are

as at provide types people oftentimes to tightens hire it's outsource difficult we of more types favorable. them our complex, and least us becomes environment experiences our that's navigate provide, services – So even help fact those clients things us office the they'll in understand so that the more that look for complexity. to to If and regulatory of often our market labor more back to clients to the that turn

about So theme future. that a optimistic least the clients us, bit our sword at of a but two for the of remain edge it's overall kind is foreseeable

Marc Riddick

a bit any the you've want in on there pipeline? Certainly of differences seen Have you Okay, maybe quite that are great. pipeline changes the we've there? back stock a if of earlier the given summer. seen to overall Thank you thoughts any any the year, since a market the seen pull for the in the color there. Wanted to sense had shift gears get get and acquisition that you

Jerry Grisko

where Marc to past What the resources what fill several consistent our We'd pipeline. where our we're I'd with today years. with But with generally we've it pipeline in pleased be is say pipeline is making committing and it's consistent had investments we're to over is fuller been. again, like that in it and

to types market of really firms that stock as Our at the on relates we pipeline and, the seen the it acquire. of least performance haven't variability pipeline, businesses based in and we

Marc Riddick

or key you particularly And you were the of see or seeing a there well any regional that Okay. as concern then last are would strength, whether calling worth one it's be highlights any for was I that Thanks. far if states wondering performing that out? me, as its areas certain

Jerry Grisko

of and as bullish are in we experienced areas Yeah, growth across fact, all the is today interesting in concern year geographies is that has us makes offices. question, we've Marc, no the what come that throughout

the coming in particular at really markets when our segment very today, our favorable of it's and its past all encouraging results, all offices very in business larger geographies. are larger a particular performing geography oftentimes so, or a a in had So we've rates across

encouraging. So very it's

Marc Riddick

great. Okay, very you much. Thank

Operator

this [Operator there are time and like the Grisko, no to any Instructions]. question to President would Jerry At over for the now turn questions, CEO answer back concludes session, closing remarks. conference further this and and I

Jerry Grisko

strong, and Thanks investors very of the our awards been the best have to but their that team months and and businesses. to an across end look quarter to of Thank you by in Forbes, our to fourth industries Not outstanding receive analysts call our very work first to to Sean. number and results work recognition as members of very place with financial year-end thanking our congratulate our only and I'd day. report the support we recognition and continued we're places year. we the for recent is our speaking We for by individual like year Including nice for a the number country Fortune. continue best of within proud nine the in a to again our best work our including our by insurance, forward when prestigious publications inner the in fourth and results. row have you place a

Operator

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

CBIZ (CBZ) 31 Oct 182018 Q3 Earnings call transcript