CBZ - Earnings call transcript Q4 2018

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Operator

Good morning, and welcome to the CBIZ Fourth Quarter and Full-Year 2018 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [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. ahead. go Please

Lori Novickis

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

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

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

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

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

Jerome Grisko

and Thank morning, good you, Lori, everyone.

number we in Insurance for strong demand morning, our our Services and climate press acquired increase XX.X% X.X% at per X.X% year-ago. that in very experienced experienced This resulted $X.XX strong our As reflects XXXX I from our we and an for And and growth resulted the total per referenced sent The a of provide performance, share share this our operations was full-year. over Growth demand business favorable that a the the core growth to was release for $X.XX, of Benefits for of year strong contributed our out earlier that another newly our to clients, revenue growth. CBIZ. for of an exceptional total revenue many throughout we organic X.X% accounting full-year financial also more revenue project-oriented and including the reported the in year services. of earnings

discussed we've we of again that for some seasonally the slower this in fourth As the and quarter experienced year. normally slowdown us is past,

occurred For this grew which the combined were $X.XX loss total quarter unique fourth factors unit the our operations X.X%. and stronger the X%, The contributed per that that normal. in revenue to caused year, our seasonally quarter be of year. newly fourth quarter, X.X% with several in a same a fourth than that of resulted relatively by investments the this remember contributed spending revenues strategic share XXXX lower year-ago there impact revenue of Please acquired in

our profit our in growth our of investments brand quarter compared XXXX fourth allowed our comparing to number be and the significant be awareness the fourth As experienced reflects of will of to to to our Benefits investments to was period. the pretax results and same of XXXX, to were us half The campaign. Group financial able the maintain television add and throughout increase future margins second pleased in information businesses. to stronger and launch to the for included the that glean of still We year-over-year. be first-ever a which XXXX those spending national quarter investments incremental make strong result, it by A producers profitability any considerably of to second XXXX. XXXX meaningful XXXX more the to Insurance considerable of Those the branding useful difficult make comparison would half

equity services, our two healthcare our every major including and and strong core in our advisory the the performance X.X% revenue our full-year Services our in fourth quarter. quarter. specific we of to revenue and business. X.X% by within practice for advisory Financial Same-unit the total some full-year performance service experienced comments consulting and the an X.X% impressive in turning by fourth for private an line, groups. XX.X% Within Now tax, for government business virtually increase this produced That Group, group accounting within grew

Same-unit our Insurance for grew Benefits in X% by fourth X.X% and to quarter. revenue the X.X% Group. for fourth X.X% full-year by declined in and by and full-year the Turning Total the by declined grew the quarter. revenue

this we improvement are we at the line expect will result this in in rate expectations within the steady of a in group. achieving making from and in organic the with While are of the were we are of that group, rate this results growth we that confident businesses generally number ultimately, not the that within point XXXX yet growth for investments business

slowdown. Looking experience our we ahead the come, clients to year may this signs to compared unknown we that from in the a said, the year are is time conditions continue and the this the CBIZ. for work that another if to very business of for are services to potential project-oriented XXXX, provide we shift XXXX we good a at very have pronounced will that confidence going economic that be for level early With favorable that that experience and XXXX should

Officer. Ware turn our to these to I Grove, So with comments, Chief Financial it would over like

Ware Grove

were well. very and very throughout performed XXXX Economic the favorable you, Jerry, business and good Thank conditions morning, everyone.

share ago. to earnings year. share prior X.X% growth translated for As spending and compared the reported $X.XX margin a to throughout into per during revenue past a the commented, $X.XX initiatives, important year X.X% share pretax maintained Jerry compared on stable the of we year The per we strategic growth in to also year per year of year, a this XX.X% this an increased number supported

XX.X% the you one-time for earnings XXXX. an the XXXX, eliminate adjusted reform in per If of over impact favorable up in tax share was growth $X.XX

the the which to occurred initiatives media in and As fourth mind quarter related results year. year, third half in branding the of in quarters, on spending the the campaign, results accelerated including with this primarily prior pattern you the bear compare particularly second year, this fourth the the spending

comparisons revenue accounting recognition standards fourth the the a and initiatives, year. casualty impacts reporting resulted quarter also and the business the in year. in the Beyond with revenue $XXX,XXX the impact adopted spending change prior impact impacts property with of This primarily in impact the on accounting decline our in compared in revenue prior newly of of

find You will was credit upcoming $XXX.X At in very outlining was balance against from impact make adoption outstanding strategic was want to December the priority. million the the standards capacity continues XXXX. Using year-end find XX, acquisitions, flow related in revenue XXXX, recognition share further strong as and $XXX facility report. shares details capital when also accounting volatility. we Cash leverage, to measured $XXX.X borrowing million. the EBITDA, X.Xx. repurchase was price million our to acquisitions new highest be Unused XX-K with the opportunities we our to at on of Balanced

nearly XXXX. repurchased of outstanding program. $XX.X approximately for of additional XXX,XXX the used additional stock. and in shares through we approximately we the shares XXbX-X year XXXX, Since million close through the shares our During December to million shares have spending, XX, XXXX. common XXX,XXX repurchase end of through business an total, used beginning of since of our have X% yesterday, we a acquisition-related In And $XX.X the we repurchased

current repurchase the to for will XXXX year-end million of in time, volatility to within diluted At XX.X shares be increase million we to to a We million share XXXX. share XX fully with compared expect at repurchases or count XX.X opportunities share price additional the to and in find share share activity. continue explore we'll to look range diluted price shares, continue fully

the days in Depreciation Board days million the year, For XX expense X year-ago. renewed points full-year shares. XXXX sales $XX.X XX for basis a revenue with CBIZ in points a XX $XX.X approximately receivables ago. repurchase your for year-end was compared the million information, XX and million on was compared Bad XXXX authorization at February year-ago. year approximately amortization basis to debt the this a full-year with was compared outstanding annual this year with on on Day X expense

other are $XX.X range $X.X as spending drivers $XX.X the needs a was office-related the These on in to of shift quarter. for expect level combined to Looking IT-related full-year, million in number with spending leasing approximately which we of spending million CBIZ, to million personnel ahead, million from approximately and of Capital fourth earn-out key $X.X million in already be higher a XXXX, at million million capital payments increased million for equipment are year. of XXXX, spending purchasing $XX result resulted to $XX future a an the within and to capital the closed $X.X year in the two in moves, XXXX $XX approximately was a for factors future computers as approximately in XXXX. estimated acquisitions cash and

the of were lower unpredictable For estimated the of compensation full-year tax year, for impact tax plus year. than the an this the in onetime due stock reported is benefits effective in year we've half some rate to that the of past of This favorable initial earlier accounting recorded XXXX, we rate the XX.X%. second XX%

assets the impact in accounting a we As you general the accounting offsetting The impact expense. deferred there other the of the effective have exercises and held amount an tax tax value. of compared has the date impact rate price Most reported compensation stock rate and of option an pretax fully favorable of reported to expect there with on administration approximately XXXX. in our losses we margin compensation no aware XX% on on the of either that The is nature for included an date an look forward, could income. impact level grant on the in future impact as of gross unpredictable income or depending unfavorable plan on and reported of exercise gains are

points for accounting our past With the the in relates business this notes our in transactional services. XX to compensation XXXX seen of small level will was general of businesses gains compensation deferred for reported divested Very office in impact compensation for quarter small consulting of that fourth XXXX. note the one businesses two divested year. typically by year basis the projecting Eliminating rates year however, significant X.X% advisory should margin these market these in impact in strong prior revenue and the look And growth XXXX the And media on was approximately quarter of the to on was and XX fourth basis spending revenue to businesses, a this their Also we in X.X% XXXX. take including gross the the driven year losses increased several to amounts increase X.X% recruiting that compared was year into more approach performance market will find significant variable these are full-year contributed their of XX.X% businesses XXXX. office services outlined our Together, was $X.X secondary with the in forward another in by noted this occurred we approximately XXXX, the the ahead. and revenue that growth the XXXX. businesses a assets, the compared you the campaign, earnings tenant we the million, with expense the want largely on total divestitures or demand the in quarter impact expense financial combined of January plan G&A our incentive administrative These due was point of XXXX. a any project-driven growth you year. real and release. to are nature, growth In reduce in with as branding revenue in the prior The XX.X% and strong volatility fourth quarter have mid-XXXX, higher a to that base going expense recording to of in of estate strong these same-unit non-recurring cautious similar

capital key Now from aggressive $XXX growth strategic approximately element strong to we a operations financing our of there our plenty making unused the is an acquisitions of with million cash our organic model, growth as strengthen continue continues seek to combined flow to and program. of to complement acquisition core business capacity, be With business.

less result long very fully As Due of timing close recent we recently look activity, year acquisition X.X% period XXXX. into the of contribution five XXXX, more size time, uncertainty activity to businesses acquired have the impact forward timing of the our potential three least over a we to revenue the a X% acquisitions acquisitions of in the a with second year and as of as of from than included look is contribution contribution the in a at year over to expect the ahead. that This from long this expectations to time. ahead. as revenue occurred to done to growth and we expect revenue of acquisitions compares half growth we modest acquisition a Simply that normally past we acquisition from activity characteristic of not is future future in

Now generally expect in there uncertainty are through economic that conditions a the favorable continuation but the of looking some XXXX, ahead to we outlook, XXXX. existed

performance continued Insurance in continued business, business well. investment As in improved our financial Benefits a and result, expect with and services strong we Group results within that as we our expect core

our XXXX. the $XXX to So this businesses. with we of growth expect to for within these year Projected organic core range growth coming growth come strong recap, largely of from the X% result outlined, of XXXX compared a X% will a continued factors I as revenue in reported of that revenue million

XXXX As XXXX reasons we for higher the XX.X% which XX%, be earlier. is tax will in I expect, the approximately rate in the than outlined effective

be unpredictable to per number the expect a expected of range finally, the XXXX. $XX.X be be full-year XXXX $X.XX growth of of XX% by tax always, As to for XXXX projected per Fully million rate share reported weighted the And shares. to share factors. million over within a impacted count share we full-year of earnings diluted range average in XX XX% we could within that is a of in to the for

these comments, Jerry comments. for it and So back conclude, with to additional turn I'll I'll

Jerome Grisko

a Q&A. like turn before additional couple just you, comments we to Thank Ware. over make it I'd to of

good continue M&A. related will strengthen Making for acquisitions priority First, growth our us. to organic has to complement be to business a and high and to

With within We including and sizable are throughout we contribution closing revenue difficult least we total XXXX. the reasonably the in very timing acquisitions and With four acquisitions at in than growth pipeline nature joined achieved growth year. to of companies the transactions of three current a closed said, the these with timing we the pleased with a the compared us that relatively would acquisitions, the rate that But that XXXX transactions, those more in there high from of XXXX. time. size the of our predict, expect close to can given from modest transactions to be past to time of mortality five expect is coming year, to potential

is in the develop of important ability brief in Best strength our comment our Brightest create success environment culture. team a attract, industry. Next, The us our just that on an the to and most element of professionals business to our the the allows and retain and

the over we of for One workforce organizations members, and Work. environment our survey year, who come over the to Fortune we thank recognition each and including results that to Best that I an at is work recognition to measure as if day of industries. such and in from of ways With to to our such culture the that those awards, said, have it have This CBIZ. various creating best us to Forbes we X,XXX are Places contribute in by receive I'd like proud won that list are publicize turn amazing over the every Q&A. here to we to Best to the Work our magazines want among Places team XX

Operator

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

Christopher Moore

Hey. Good morning, guys.

Jerome Grisko

Good morning, Chris.

Ware Grove

Hi, Chris.

Christopher Moore

we - to Maybe looking improvement that kind seen could basis or kind of incremental normal catch-up expansion. by leverage. XXXX the of XXXX, that you about of any was expect with flat you've at point in we know historically? margin, we should we're Typically start XX-plus should kind talk expect XXXX. earnings morning. from When measured Good it as fiscal pretax I XX

Ware Grove

the Ware ahead, if Hi, a Yes. into you investment Grove. year year was spending resumption that improvement. very see despite we keep were Yes, margin happy This so should Chris. look an was flat so of spending, year that But yes, last the us. did some it good margin year-over-year the is year a for we we to

Christopher Moore

Got you.

time to at X% I make year it's X% - if think X% am now but guidance I was at was revenue - this understand, looking just growth, I last the to so that sure, for the it's year it of only Really year. X.X% percentage X That's correct? kind you're was there acquisitions difference X%. assuming are this were here, to the - last points and if of X%

Ware Grove

correct. That's

Christopher Moore

Okay. then you that that are the mean, And in know but I versus year for, are a seeing that are I more looking people terms the little I acquisitions, today ago would of bit becoming reasonable? think, a valuations they don't

Jerome Grisko

going you thought go the other actually were I to way.

going in they and the brokerage continue that the business, be the within sides able help types a really months. on valuations In other changed the we XX, up to the valuations haven't opportunities The - down. side either us for far in lot grow. past we on seen high, multiples, that much to are hard of insurance as be organizations space bring As XX our movement to look or of to of haven't

of with a multiples provide today that organizations, really us today's said us, for be at levels would to that's reasonable think more in you say organizations, be really space, high-quality in acquisitions. reasonable, for going acquire competitive okay they high-quality But and purchase reasonable return. we we when price never target and bargain to for what our a rather So to kind there and provide we'd is are price allow a the the generally environment, really are is shareholders that sellers

Christopher Moore

Got it. And last question for me.

little a more terms on increased side, of you producer producers? that's kind increase metrics In in how terms of can give going. specifics investment sense any the us Just of the the terms of in enhanced there, in

Ware Grove

This Chris. Ware. Hi, is Yes.

Today in of a another of, the level people fully producers new XX stages to we producers. are curve. XX coming Our also XX that XX have productivity I'll various have target of are range that we up be fully But what XXX the achieve call, considered to of productive, validated call productive. we it, is to relatively to in

succeeds. three people XXX you are hiring about in bat ultimately when maybe You one so

So get to a there to increasing the there is level producers takes of investment to that validated investment XXX. the target net of level some

invested. we've So

XXX would us XX-month we we'll new I fully to through that. of are XXX layer productive build as as take from now, that got what unvalidated a have to producers, We or today climb think about we get towards XX gradually it producing we'll of program characterize halfway producers. we and

Jerome Grisko

couple more Chris. around A - little bit that a color

that group employee the So group. Ware referring benefits is our is to

We are plan our also services casualty group. producers our within building property group and and retirement

segment So that all in the the business, lines service first. of really

The of it's the expectations relatively them is XX% although new, our on employee within have them. second outperforming group that thing like group, note are the for XX% positive we that benefits are

the while and level, producing disciplines validated only but the, yet they I that not and development group. processes what are So are we team and and that credit into consider there mentoring for the putting recruiting, training they we our put at strong not other producing in in,

Christopher Moore

I'll very back Got it. helpful. in jump That's line. Thanks guys.

Operator

question ahead. William next The with go Please from Tim McHugh comes Blair.

Timothy McHugh

Thanks.

guess look are for. of I XX to the growth, campaign? I Is things Thanks. that the I wrong? Just leverage or that's on from guess math the is guess basis benefit right, here you a points is and probably that my to to I'd And question that? the there expansion basis rough XX pretax growth if right point than guidance. one need cost I the EPS more get revenue margin points I to branding guess, little initially - leverage follow-up, normally margin the other Or about that of guess

Jerome Grisko

question, Tim. Great Yes.

to into guidance, XX% When Let a have clear. to the and bake there. me translates little earnings tax XX% that be ahead XX% higher you revenue to you in also a rate guidance look more

you points that have talk XX points probably So do target basis about. than basis slightly higher we XX the to

higher XXXX. target for You have slightly a

Timothy McHugh

follow-up. And have I another Okay.

Jerome Grisko

ahead. Go

Timothy McHugh

Yes, that's helpful.

kind guess, I sales much a the of helpful. not - I Insurance mature force I people, look in bigger is insurance guess, Benefits, versus gave you on side if you the this at just many how broadly, your the how On sales understand year-ago but color at point? was the total,

Jerome Grisko

it Tim, to it's year-ago. today point, of will and will that a come closer, in don't There group stabilize we producers it a that perform will replacing Jerry. higher It's then and getting it than question be probably are where expectations. was XX% just a

where longer So will XXXX, to in investment. we get degradation and be investment point comes have the made will a that the period-over-period margin incremental that consistent from no in that we've will we

Timothy McHugh

Okay, the UK Big in the guess of the maybe change my in enough a it's of of X of last your business. outside the that accounting - but scrutiny some could market, It's question. the the and world. UK big and I drive that changes

Or all, that serving any think I other we going thinking about or at guess. for broader market But any You're target about acquisitions does here, change as have forward not that you? opportunities impacts?

Jerome Grisko

at what's mean market Not the I keep eye what environment. later. with, oftentimes they're The down we faced comes the two and a an landscape on or Big Tim. present, year X obviously,

keeping So at seen we impact in types that foreseeable things but an facing you're the sign to, things are types in really and of future. least referring Europe would we that they're the of us it not any have the eye

Timothy McHugh

you. Thank great. Okay,

Operator

comes question next & with go Marc Please Riddick Company. Sidoti The Instructions] [Operator from ahead.

Marc Riddick

Hi, good morning.

Jerome Grisko

Marc. morning, Good

Ware Grove

Hi, Marc.

Marc Riddick

the maybe where I sort thoughts put Campaign like what - about if some look going that the over flow about sort time and views might what and experiences of wanted you think can National would look how talking some XXXX stands for as maybe you go your Or on your you - well? with to spend like? should on of could forward and color we

Jerome Grisko

Marc. Sure,

that question success? expense we is far how far as answering you as as me I'm - you're or sure is, as are asking Let the make answering measure

Marc Riddick

Yes.

Jerome Grisko

right. Both,

Okay.

are should expense, in give basically because that expense the extra to a XXXX production some XXXX. expense we repeat would the bit the in That I that actually won't be plan to say similar little what us for XXXX, coverage in cost we had So XXXX. we is in

about the year-over-year budgeted regard. same we've in amount that So

is so we surveyed commenced to this even effectiveness know as as and the recognition baseline. as have you far As markets we long-term is to a brand and our investment awareness we before surveyed concerned, brand and the establish campaign,

and the group we've while in and have very early out that positive it's game. We resurveyed and since improvement the directional gone in received outcome,

pleased there's so forward the joining that we that we're the an This to continuing but not our it the results recognition company as committed and that of with pleased that have also internal to-date. our we're And were is very being only that an to received kind alliance, with looking externally investment the markets workforce well. brand prospects, to feedback and are we've people who are we there and provides,

Marc Riddick

wanted Okay. a I That's to hear. give gears, to bit about some and great thoughts. talk little Shifting

You maybe around mentioned work. uncertainty of project-related the some the -

tariff kind if of sense markets a you're lines lot general any type give those customer was planning delays standpoint on any if there's along area, ties shutdown customer concerns farmers into and impact receiving I had in you're - getting a I that are dependent wondering that feedback can any particularly if if the that whether or there you of on - from thing. so any getting wondering around of And of are planning? that you and/or in of that if company related a thought was are the feedback

Jerome Grisko

Right.

offices, from we haven't who go specific you preparation our very closely have our offices, Marc, that we throughout heard So will and really our clients the ask on industry about And CBIZ for or information, our it's that of touching kind tariffs lot most clients. just those But if they're receiving things. course, impacted we shutdown, back questions of it of and back not to of about inevitably offices, have not certain be for by performance the our planning people a certain of a certainly to that me the do year to what really we're for be our comments XXXX. going these in the little are risen should own material impact a some which tells really nothing enough through really government and that the voice in from of

was project-oriented On candidly the just year. XXXX topic our exceptional work, of an

a for experience and normally XXXX with But in the perform. our consistent planning have they and XXXX. typically and to all come that are strong year way that the they are project-oriented above in stars that We align sometimes, in experience beyond our things work, was what

Marc Riddick

me, might refunds, the similar then XX% be expected that level, forward? that might less something great. experiencing things for out filings opportunity thing of anything along or when somewhere there the wondering you the types on negative, be that tax that for at reports there would between X% will. of be forms business last seeing like that surprises, individual look you or of Okay, an might sort related of small business folks various if of you if the going that positive looking it's in or lines be impact some are a And you. any could either of that for outcomes, Thank or benefit was the you was that. was getting one things reports saying you I back-end I wondering

Jerome Grisko

Right.

you the individual paper we today we don't those As in read the or is executives do a return lot support businesses tax described, business the what other that of really around businesses. the of you and probably owners than work, of support

performed about will We say of is entities that in and is a refund be in tax reform. - haven't lot we our levels. XXXX really awful going in XXXX. work pass-through to opportunity the an clients to lot don't have we around we represent those concerns that entities connected I heard from part So about large

we group continue we different very reform, in within while a our work, that improvement generated that in tax in nice of believe revenue XXXX. of saw nice we type So in tax see to amount to albeit a specifically believe, the the uplift and related, category we

Marc Riddick

Thank very you much. Okay. Great.

Jerome Grisko

You're welcome.

Operator

[Operator Instructions] remarks. questions. would our closing for no conference over to the I'm concludes This I Grisko further showing question-and-answer session. Jerry any to back turn like

Jerome Grisko

Gary. you, Thank

in and your Company. and thank First like for our our shareholders members truly team also XXXX. I'd for of like a to confidence continued all congratulate outstanding team support our to in our I'd

take that great in pride You should accomplished. we all

exceptional of an mission speaking value with you, the on and had We have forward with next have again never brighter. our externally power talent, our our day. We scale, our look our vision team provides a been to truly values, that call. to you our Thank clients earnings great feature has and

Operator

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

You may disconnect. now

CBIZ (CBZ) 13 Feb 192018 Q4 Earnings call transcript