CBZ - Earnings call transcript Q2 2019

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Operator

Good day and welcome to the CBIZ Second Quarter 2019 Results Conference Call. All participants today will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. At this time, I would like to turn the conference over to Lori Novickis, Director of Corporate Relations. Please go ahead.

Lori Novickis

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

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

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

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

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

Jerome Grisko

you, Lori release the in morning, for six second per earnings first months for operations up everyone. and With continuing are of XXXX, quarter ended quarter this XX.X% the the the pleased the morning's second June of months for report to good results six and XX, Thank were Yes. this we year. share XX.X% from

X.X% revenue up was grew the For months, second by revenue and for six by the quarter, X.X%.

quite practice lines it's groups note of both within core well. rates, our to recurring growth these important Within continue to perform businesses that

the first year-over-year in this factors extraordinary are earlier levels several achieved year year over we more that ago. there the caused this revenue the a As of reflect growth to we that modest had outlined comparisons half year,

our second several recorded of XXXX. non-core you project-oriented first and unusually as quarters in revenue of the may businesses recall, First, high

this again with well are more businesses year, While these are in line the results. historic contributions performing revenue

on knew Next, two a that we we result of also there small impact divestiture announced businesses earlier the be the financial services that an revenue as unfavorable year. this would of

were While results, material half larger the in a did contribution relative of revenue full they first have year the XXXX. businesses those to not contributors

the Finally, reduction contingent we this there carrier variety variability is within year some same year. payments commissions insurance and of commissions compared are benefits in in year in based received that group of amount also and of half receive a factors, the contingent carrier experienced that first mostly These with a a the we on unpredictable our ago. each we period

to the important solid several the our it's the and Financial more Services Insurance these businesses Benefits group. cloud impact may So, items recurring of within our of performance that and understand

six two months. by the Financial within second months X.X% quarter for some six revenue the second specific same-unit this Now, groups. group, grew growth, this X.X% year. X.X% revenue increased first by Within Services our and of and comments Of for first revenue our X.X% turning to total practice primary quarter in for the the

that Consulting Tax six the strong. months for year. our growth business unusually the X.X% business was project-oriented and this our X.X% the very for an quarter in of our contribution Core the Adjusted business of high remains and first to eliminate and Accounting Performance estate same-unit of Healthcare this group impact first advisory the of real revenue in revenue XXXX, half had Government

from ongoing we residual work call, impact As first delays revenue the our Act. Reform our month quarter reflects first noted Tax associated the with on and six

half approximately performed to of completed work, this is the XX% first of in which expected is As be filings a result, normally That is quarters and the extensions number the second by tax in second this year. year. up

second also its is recent project-oriented softness which that in Our at a but some XX% are primary years, year. the of number historically Equity half the transactions That in experienced appears high private service result reported of offering Advisory decline grown in of this the did first during has business, rates excess slowdown equity of the quarter. in very to in the Private be

Despite growth, in to volume business deals top-line strong private the equity remains of increasing. and of performance the some very softness margin appears this the be

Insurance months. months second Turning in X.X% quarter and and declined to Benefits total quarter X.X% six year. the for revenue in the the declined Same-unit X.X% and the first by of revenue our six by by this group, X.X% first for

revenue a comparisons result a as high difficult a first the half half expected of number project-oriented businesses year. unusually of from in the first contribution We revenue last our of

revenues the addition, the for last year commission six mentioned trailed as period earlier, this of the months amounts same first received contingent year. for In

organic are are returns of This this to a group. revenue take the but to business investments We make will continuing increase is the process impact very to some time number early within growth, producers new and favorable. materially multi-year

those XX we year, hired to alone the Benefits to This and new add within our through continue remainder producers numbers to expect the of Employee we segment have year.

we within group in when second in of half improved In strong the of half very Benefits year this addition, growth year. and with new rates retention client first and higher Insurance coupled business expect is the rates, this our production

Grove, our comments to Ware it Officer. Chief with those Ware? Financial let So, over me turn

Ware Grove

good morning, you, Thank everyone. and Jerry Yes.

As reflect there this in half Jerry we of described, went growth first in rate were into revenue known the our higher year. the to as ability year, headwinds this

the second to the of X.X% months, and growth these the adjusted normalize adjusted for growth impact revenue was X.X%. the the impact an you was eliminate six a including revenue ago, items non-recurring quarter year of year-over-year If the divestitures,

year. reported pleased the our this half will now share the the tax of growth to what half, are expectations. is report growth margin of first portion in revenue half extremely normally modest higher with in the A at in we service Despite high-end first per the come second earnings revenue

our are production client group. retention business Benefits within and Insurance New very Services positive trends and

of rates growth we expect growth the to for the our will XX% we revenue result, will earnings range. our share As think accelerate be and half XX% high-end second in year growth per near full a

addition to have share we we this continued have for year, to the repurchases. acquisitions In announced use three capital to-date

second six common million the and repurchased we of we at XXX,XXX a have repurchased our cost shares months, one approximately the a for total total stock approximately of approximately quarter of shares In a total $XX.X million. of

are reducing XX year As share of million a estimated activity, million full average this to a half count range first within of we to now XX.X result weighted shares. our

facility X.X% revenue, a up first or million had first outstanding and leverage an continue At share year $XX.X and actively June X.X when of on from our the EBITDA compared Cash we adjusted borrowed XX, six balance and a times flow was that half XX.X% to ago. in results unused track is XX% approximately million for unsecured EBITDA for months evaluate the up on of $XXX by repurchases with will capital. is $XXX we of borrowed credit capacity $XXX.X and of use the million as to million

and million approximately payments half million million previously we in in X.X We first transactions. the remainder XXXX; of XXXX. year; million In $XX.X earn use including this this the the $XX.X project closed year, million approximately XXXX; $X.X for for in $XX.X of used for on outs approximately acquisitions,

in can a year sales that and attributed a XX measure year days filing yet Days at XX processed. tax for been small tax June to increase has The the stood compares work on portion days at with ago. this the outstanding extensions receivables of at this as be XX not June billings

on million routine replacements. and approximately and was spending with $X.X the $X.X tenant approximately facility, it from was renewals purchasing equipment some for to reflects second plus leasing for spending quarter This moves, Capital associated six months, our lease IT transition improvements the million.

both approximately equal This year, is an our sheet. on there at Full June approximately expected $XX spending compensation is million this reflected deferred At held asset is and an balance year plan. in million. liability capital $XXX our XX as

As X.X% with was for we a operating on and ago. compared operating eliminating is already X.X%, of there a six XX.X%, the adjusted with year XX.X% losses to accounting the gains account losses our ago impact for second margin months, know, margin impact was for and compared of on income, most the income, year quarter gains investment pre-tax the no you but these assets, and

quarter The for and tax six rate tax rate was effective the the was XX.X% XX.X%. months, the effective in second

The We stock for the continue approximately tax to rate lower project XX%. either a the effective accounting could as be balance is of year higher or full year unpredictable. tax effective of rate impact compensation the of or

income a reported points increase months significant pre-tax an the XX.X%, to last in XXX six basis increase this XX.X% margin year. of compared from year, with the For we

the related $X.X six of mark-to-market improvement Now, a is due million to was reported a that of for share basis XXX ago. the the year points of charge price this months non-recurring nature portion

The of for XX basis about points improvement. non-recurring accounts charge this

points leveraging basis is of XX margin being and driven expenses. another is improved by that there operating So, efficiencies

continuing the We in to our are producer the and Benefits Insurance media make this commented, the Jerry marketing year, spending half including group. the business plus investment first spend within and in investments new as

see results are of these Even margin very pricing that pleased other our initiatives improvements. the in cost resulting with investments, now are we to and within business

performing our commented, core in expectations. business line steady and is Jerry is with As

very New business this retention production positive and are to-date measures client year.

half the second versus year So But a range of midpoint half full in of seasonal revenue to this revenue for expect that, year to expectations a full higher rate our X%. of half second all, year. the revenue year, our at we looking in nature are are, considering we first X% in of first recap, growth the growth mix this

we good. As the very is the of commented earlier, performance business

margin of of with the in for full to we to XX% full growth XX.X% the are and looking our improvement We high-end report up per the half near and year. share earnings growth to are by pleased range year XX% first EPS

is year XX%. expected approximately effective full tax Our rate at

share shares, I forecasted reduction XX But expecting lower of initially shares XX a to half full year diluted of be With this and repurchased a to earlier range we're shares a we explained that's today, impact or the this from higher the year. XX.X the earlier. reasons million count could a within million XX.X million fully for first either million

comments, will these and with back will over So it Jerry. to conclude turn I now

Jerome Grisko

Ware. I rest of our you, the the Thank and outlook about a minutes spend just couple for to acquisitions talking of year. wanted

full although year this acquisitions, $XX.X XXXX to of to Turning new so results. a revenue impact approximately bringing companies amount that million, will team, total we've portion only our year, of welcomed CBIZ far three

added Colorado, of also in accounting addition practice the to Denver, practitioners Among we our On tax a Group first Xst, two Winner announced with quarter. additional acquisitions. of the them, July growing group we strong the

Plan Retirement here in located advisors Memphis, business Gavion group our talent Tennessee specific platform our alternative to other including expertise funds. and an professionals equity, to Paytime, and Northeast increased our team investments, real payroll in software private and Ohio, hedge brings relating estate, Services of new to brings located outstanding with with expertise growing and

to excited these CBIZ joining family. are have teams We our

prospective we $XXX acquisitions with candidates funds million deals and capacity Our on of facility. credit close pipeline plenty have to of strong of our over available remained $XXX million

remainder to our of turning year. outlook Now the for the

our on to level the more was remainder and While generally and middle heavily XXXX about business for compared of among the near-record optimism of and our optimistic officers the prospects albeit, year half and reliant quarter the small remains work, are year. of executives project-oriented tampered the the owners first certainly second discretionary highs, somewhat market

questions-and-answers. over At it I'll turn for point, this

Operator

from Instructions] Analysis. First [Operator question Today's MacDonald comes Please of proceed. Jim first

Jim MacDonald

morning, Good guys. Yes.

Jerome Grisko

Jim. Morning, Good

Ware Grove

Hi, Jim.

Jim MacDonald

– would've for clarify, been you said just divestiture growth the that the want adjusted divestiture? items was I for or one-time to Yes, for just – where X.X%, the adjusted you and that

Ware Grove

the for transactional extraordinary the it year-over-year those on plus, call Jim, That’s, businesses. I'll divestiture comparison

when business the those a divestitures. So, take transactional it's you include and normalize about and adjustment those X.X%

Jim MacDonald

with increased expect Okay. And growth positive benefit go terms positive you group Benefits this your later activity. year? it the in sounds Do to of advisor

Jerome Grisko

going and Yes, this third is to quarters. fourth really going to Jim. We turn think start that the into

fourth Although see had I the growth, But in I the flat. early third relatively think indicated for directional quarters. we improvement and as think year, organic you'll year, in

Jim MacDonald

your that business. on a we but payroll payroll-related while, for bought and haven't about And are what just us a the for plans your Tell general talked company. business you thoughts it Great.

Jerome Grisko

payroll like the Jim. business, we Yes,

clients. I our think those with not aren't our a combine to our in approach the with part provide to that And it’s, many to providing. the real of technology offering but of benefits with us just an is the clients particularly it payroll, to environment opportunity only bring who ability in – bring that others with benefits it and employee package that in market combine value

with of So clients. the have platforms This also this we business use like very new us that table share our general. specific two in allowed They platform the we to are core in software. business. acquisition familiar about nice also things. a do same software They They

us the of new a recently jumpstart had we platform on for bit they that portfolio. to a so, And our added using

to their leverage platform. expect we that – able that be So to expertise in with

a So, up lined of for us. lot it kind of ways in different

Jim MacDonald

just one for And Okay. more me.

So obviously bit having producers you what's Are to lower that? better margins I Are this you or a accounting climate? expected. economic leading maintaining are trouble hiring OpEx was having you for than – in

Jerome Grisko

on We areas reading It's headlines. about the else of and specifically, are keep the much No. side Everybody producer some reading labor our seeing – the in as I is some certainly market that funny. we other don't think of tight as not of business.

out-of-college hire pretty and made in lateral recruiting we've our in recruiting. But considerable both investments

our the needs so been to side. we've fill And meet pipeline to recruiting on able our

hiring in pressures are from So, that the really significant market. no the impact

Jim MacDonald

what's any explanation for there the this lower sort of is – expenses? So, operating

Ware Grove

expense a higher of Benefits Insurance the initiatives. and Jim, utilization just controls call, It's what Services we'll with of of Yes, levels. Financial And and staffing on offshoring combined a some, the result on it's rates combination side side.

we in the we've the focused past is, and And talked I thing, on are think pricing third yield. really that about

both combination so improvement. the us and of gets that a expenses pricing And it's margin

Jim MacDonald

lot. a Thanks Okay.

Operator

comes question and next William McHugh Company. Our proceed. from of Tim Blair Please

Tim McHugh

one. following now, forward guess, the will I talking unusually little performance? an at on last about year just this back is be as strong period looking I think up we Thanks. this to margin we bit how a a from guess,

unusual of are right, there at kind we're it's I revenue of comp of tough kind now like a sort back factors, looking some guess. Or and

the Just year improvement that of the sustainability to future. shown trying as to you've understand the in margin think this we forward

Ware Grove

incremental No, within don't this expenses. this the we will some expense I campaign media year marketing we that have structure, the and Tim Ware. Yes, first think is understand half

this investment will high both marketing extraordinarily back which also we'll watermark. programs, investments, We have as will think some look continue But at don't incremental continue. and producers I an

Tim McHugh

it, great. And healthcare, I talked you is healthcare about didn't within Financial piece then, just for you the but missed doing guys? I Okay, maybe – if Services, how the it,

Jerome Grisko

very, it government perform healthcare sorry many strong. Continues yes. yes, to the very am very as for for Tim, consulting, Well, years. has strong I us,

Tim McHugh

Okay, had. great. Thanks. That's all I

Operator

next The Moore from CJS Please of comes Securities. question Chris proceed.

Stefanos Crist

Good Hey. calling morning. This is Chris. Crist Stefanos for

Ware Grove

Good morning.

Jerome Grisko

morning. Good

Stefanos Crist

in pricing to compared three year. to How deals to so the four you M&A, three the last Back mentioned years? this is these on other acquisitions

Jerome Grisko

on tax casualty recall a conversations said one payroll, this, you These property we've insurance pricing on segments accounting point. this was prior was side office tick brokerage was of is, and and that quite three if practice, at certain Yes, what continues one in our the benefit high in up to businesses, side, an acquisitions, RPS. particularly it’s one

less think, I areas. earlier we've price We receiving actually those pressure far signaled, that in

the our we provide we competitive our that market in and areas pricing fit. So, found lot believe see and be and Where business we're in strategic that other reasonable them growth at areas really shareholders in well. looking that of opportunities we still and believe we of where areas we where can great a see returns these three exists back as to we

at we – as as some So pipeline in are that far that a indicated, – we transactions larger have well. this I still very looking so the of as of year you as a ones saw attractive well the character

Stefanos Crist

about Got free can this versus you talk bit year? a cash it. for last also year little Thanks. And expectations more flow

Ware Grove

flow. at $X.XX in a million can exactly you non-cash effectively per to Yes. you a our amortization, But led probably given EBITDA indicative $X.XX the any comes course add non-cash minus net cash charges free $XX to largest, back cash And translates is depreciation, $XX is the by if parameter. that It's an million. capital which on another up. from That's spending, good share basis income free which flow. plus to not other look the get charges, year, to of is

think it. given on a goes up compensation be expenses bit and other It Hopefully, variable any But that's down way year-to-year. that's year a I to can enough. about in good that and think accrued depending

Stefanos Crist

guys. All thanks right,

Operator

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

Marc Riddick

Hey, good morning.

Jerome Grisko

Marc. morning Good

Marc Riddick

you I you little I what said on it – the am if touch the are a think about extension could you a on rate. bit as, seeing as wondering around XX% far commentary was filing

you give maybe on of sort And seeing? far how if could you more a us as color little that provides as, what maybe are

potential that that How of it on did you going as that. fourth that bleeding third you or contributions of might into is get some far believe? – our sense play up out have quarter? fourth contribution I quarter follow-ups – might And a into the the then be to going a mostly Or general as third into do end the couple

Jerome Grisko

Yes.

So an of think about think date, Mark, filing quarter, I probably fourth and third October if XXth you deadline kind it's right.

to into was the impacted and only providers time So us of as Tax but indicated industry of that, entire some of industry, new be provided a both that in well relative that guidance software result the periods based guidance, their delays first the the the really right? the it's it'll on to as quarter, as of Reform as those not Act the have we in the code

we those of number extensions an – it. to to think we're all or prior seeing that incremental periods compared So, year, years this contributed of and things and prior

in We quarter in really I has number part are the done of well. small work and as extensions. seeing part, to get think fourth in quarter That it third

Marc Riddick

timing what and about this the that – we versus just how last and a And a might bit the sort you did might helpful. that of you thing? plan doing think impact expenses and touch of campaign type rollout how advertising on, what a of okay, if Okay, year then little reminder it’s wondering you year could on I of as was

Jerome Grisko

Yes.

So, the year. Marc, for reasons. this budgeted year we two money we same from impact this it budgeted But amount we'll of about year last more get that

last that of First pay had all, the we for campaign. to year, to the production design and the the in airtime just paid for, addition we of

rolling dollars them and those taking into are We right. airtime,

So, what evenly fourth we This we’re air – of you the mostly more because in the air year started end really third the to really last expense saw – advertisements second the believe year. larger last in and I of was distributed. those quarter quarter a year, half,

dollars, front-ended the we've same So taken them.

So that, half, second we're split really evenly half. first

forward, of about think see evenly amount what same I the year. continuation this is of So, from kind more throughout spend the a spread you'll the point of only quarters, throughout

Marc Riddick

you. Okay, there Okay. you if worth to makes anything strength see that of a and areas quarter of the I that lot wanted And saw there's wanted was guess, regional would be Just that. over? going sort any That Thank sense. then, particular particular any during on callouts touch I like if of weakness to

Jerome Grisko

Yes. But we any would offices are of give of our period, it Not course, stronger to type specific to trends than a of given a or any that us the that kind I looking guidance can't attribute of some attribute of in can't at it results - perform in geographic directional region any others. client. profile a

we as results businesses step the indicated comparative accounting, compared and consulting annual our of that So, they this kind core of tax results and has the business if year. are more and way XXXX and and project-oriented we we healthcare in anomaly really to the performed at looked first government pleased, the our way at results, do to our benefits the core the with half the insurance, back from receiving you quarterly with are very the

Marc Riddick

the of sort year the of me. the growth, contributions Thanks. half kind you last of revenue look a if can the gave sort versus ballpark one the about organic with thinking numbers, – I about give of how and I you at I thinking of thinking acquisition kind back you about announced Okay. acquisitions you was and a as runrate And was then, contributions. for between us are think of

Ware Grove

Ware. is Marc. This Yes,

we organic in was this sources organic first half it year all the to half, accelerate from growth As first and the the expect of the reasons rate. sources from most growth coming we for outlined, the is

impact this is rate acquisition growth the to The total nominal. year revenue fairly

We and They are are three revenue year. this a relatively small rate impact year have minor the happy will to relatively growth for full all on the acquisitions. make

Marc Riddick

much. Okay, great. you Thank very

Operator

our Grisko the any to This turn At to conference concludes I back Jerry session. like question-and-answer time, closing over remarks. this for would

Jerome Grisko

that team is to Thank that close a results. We you continued with our Yes. thanking our to members look providing do clients. our service industries creating for like our I'd after best-in-class none exceptional you, in our forward and quarter investors you by our job again Chris. and for in the their analysts support second for we and to report culture to third speaking

a Thank have you and nice day.

Operator

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

may You disconnect. now

CBIZ (CBZ) 4 Aug 192019 Q2 Earnings call transcript