CBZ - Earnings call transcript Q4 2019

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Operator

Good morning, and welcome to the CBIZ Fourth Quarter 2019 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 Investor Relations. Lori, please go ahead.

Lori Novickis

Good morning, everyone, and thank you for joining us for the CBIZ Fourth Quarter and Full Year 2019 Results Conference Call. call, Relations release www.cbiz.com. page this on been with Investor the of connection today's has press posted In our website, call webcast. is This being the found to can link the webcast well A live also our on as be website. as replay

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

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

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

for Joining Ware Officer. Chief Financial today's Jerry CEO; and are and us Grisko, Grove, call President

over I opening call will for now Jerry? his remarks. turn the to Jerry

Jerry Grisko

everyone. compared you, report that quarter XXXX, continuing to the $X.XX full and pleased Thank year. for Lori, results were XX.X% year. per for XXXX we That With good share by full this year operations for and from earnings of with the for fourth $X.XX release morning's increased prior being morning,

We income also our before in growth reported and X.X%. XXX basis profit tax revenue margin point improvement of and total

of was lower revenue full than was year much growth important at X.X% the growth in that quarter to third it's stronger. revenue remember While quarter, fourth growth, reported X.X%,

in fourth in expected a quarter. half the be we of revenue as quarter, any could softer. the occurred certain to second third project-related result, in As of time that we have completed And advised the somewhat the the work at quarter year was third end at the

in half to nature, on more we've by second commented any the work, us for far project-oriented predict. times very is the of difficult dependent year is past, revenue which, many in As its

is that half consider in that of of year first internally, second half year. one given trends the a of the growth same rate the So we the of to compared

the XXXX, revenue half X.X%. by half third second dynamic combined, half second several half revenue was grew for X.X% quarters with factors. In driven by and first growth versus of growth This compared fourth first revenue

our start, half delays tax growth was at Services was group first To caught This revenue up encountered stronger in the impacted quarter reflected during Financial third was connection time. by the negatively largely reform. with in in and that revenue

resulting our from than continued growth. as and second, that gain Insurance second half businesses to being Benefits in growth group considerably momentum, expected, And in investments higher are continuing half first

Our issues. reported numbers revenue up the were full the year same growth same X.X% Fourth by quarter revenue for unit impacted was X%. and quarter fourth same unit same unit was revenue

was half of considerably revenue X% half of I for second reasons the same growth than unit first our Our X.X% growth higher outlined earlier.

additional million existing throughout date, pleased XXXX, annualized were contribute our X February approximately an the we three newly $XX.X our to announce to this revenue. of operations, Adding revenue. will operations acquisitions we've already XXXX. totaling of These approximately to effective annualized X, To in acquired year closed $X.X million closing acquisitions

that we've As completed candidates the acquisition various process, recent potential at long stages have in we than are a including transactions that of list the typical past, that a number the somewhat of in is years. larger

have opportunities desire themselves, the and that year and right we processes, if when the predict close, to capacity those of transactions if to early too we add and, resources, present the transactions number increase size well. those of transactions the may each it's as While

revenue X.X%, declined the same quarter unit fourth group. and by Turning Financial Services to for our X.X%. Total by revenue grew

full unit up revenue year, same X.X%. revenue with X.X%, the total For by grew

the expectations, very business. practices, including core strong business was consulting number to tax rate of national this reduced our care our While by our within and be health equity a growth to continues lower of is growth from consulting accounting revenue government our our consulting and private group and performing business

this quarter, care in third the the consulting expected Those encountered within after be growth commence in historically return commented contracts. range, lower government historic large been first to in contracts business due and them has levels. health which, or growth work we to the to the revenue shortly, the to have business our high rate was either several but quarter, we with in expect administrative XXXX delays been As signed sometime signed of than for for single-digit should

private our in strong of very XXXX, rates experienced Since its equity business growth. has formation

the commented also one flat. softness we offerings in revenue and of of As the full XXXX some group, essentially this experienced service third at primary from the of we the was within quarter, for year end demand

quarter, the now as this projects pipeline of During a fourth a we stronger strengthen demand and saw business has result.

experienced into stronger a year this ago. business we XXXX, to Going from expect we than revenue achieve growth

care and revenue health and services to achieve softness businesses businesses, government within able leadership job outstanding we're profit consulting equity managing in some of private target our costs, Despite an the within those teams our did margins.

and Benefits by group. quarter Revenue Insurance the for X.X%, fourth while X.X%. declined same revenue grew our to by unit Turning

It's to for continues investments full to This considerably, and note in margins, For X.X%. total of to the decline X.X% that compared very grew the line second with same of revenue half half unit with business make the growth. profit improved revenue first half in growth of growth top year. year same by revenue X.X% accelerate important year, X.X% a generate strong XXXX of to continuing second the growth revenue the to we're unit at

order a be to producers attract, be effort, within is Benefits and to strategic intentional The and group producers new and and investments develop in multiyear we successful. Insurance new train our continue in to

our retention paying those the expectations appear efforts spent off. group Our improving a and production. our regards on stewardship to past the of increase outpacing performance the year be results focused are client much that to producers Likewise, new efforts encouraging, given is especially in to as we of rates,

Looking of but place, continuing we're rates build the the consistent XXXX, the new are outlined versus this manage with new seeing group we're first actively investment. results that producer and to half the growth in capabilities in and investment is factors I ahead, a second with for Benefits half producers. There in Insurance number

our clients. platform us of payroll complex continue clients business, our management more XXXX more as Within to capital sophisticated comprehensive was year serve introduced a meet us a new allows the transitional larger, while to and midsized our with This needs, legacy allows small human platform needs we platform. to

size was But revenue new since few the clients this put positive prospects and the product market, schedule year. introducing is for new a of response behind encouraging. has The platform months product to new XXXX, which for the and this very launch delayed for of very early offering pipeline us from been the in

results Demand To of and recap, be for services financial our for stronger business. and earnings our private we strong, steady XXXX. equity more are year core continues we're pleased full recorded with pipeline project-oriented the very to a seeing

additional with acquisition stronger of to are off the group, to improved same We're half XXXX. pleased XXXX we unit transactions under very to a expect expectation activity strong with trends and for Insurance our robust these We revenue second positive pipeline see start contribute within growth. expect an in review. growth Benefits we XXXX Coupled continue will revenue, in rates and a

few and more over it we'll to back the Ware I to our comments, Grove, for that, Ware? with CFO, will then So year be about turn ahead. a talk

Ware Grove

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

business investments is As tax income I margin think strive we sign a a about from before strength our our to over as is to XXX in full an what real we the improvement X XXXX, improvement margin year has for continued will a the in XX business. impact in operations goal timing pretax on margin. on highlights of points XX year basis for annual time. basis The in point any say of But continue that

we improvement be flow with EBITDA further continue was the Adjusted Cash prior and EBITDA, or expect XXXX XXXX. We a the growth year. business in the is to for improvement nearly revenue. points basis $XXX.X million adjusted compared in to XX.X% continues of XX That can in leverage strong.

XX, financing $XXX.X year over outstanding XXXX, unsecured our $XXX.X $XXX represents of million. facility XXXX. This on million December unused at year-end At prior million a was reduction million the leaving capacity balance credit $XX

During reflect net we acquisitions, that client for $XX.X will statement cash of XXXX, million used flow cash our acquired.

of Aside for million from the time, a connection acquired acquisition payroll client small $XX.X pay in operation cash was that our in with acquired XXXX. used in we acquisition July, payments

cash on earn-out million we as payments of future XXXX, As look XXXX million XXXX, million approximately $X.X expect for we $XX.X $X.X approximately for in ahead of XXXX. and year-end obligations, acquisition

share actively XXXX. We repurchases conducted throughout

repurchased stock, the approximately shares including of million For used $XX.X fourth approximately repurchase during the shares which quarter, million. we year, our to a we of at full in $X.X activity common cost approximately X.X XXX,XXX million approximately

through up repurchase was actively our address as to X XX years, this opportunities room of $X.X shares With shares repurchase repurchase is this the have renewed to to million at the XXbX shares Earlier year. plenty We approximately the both of XXX,XXX $XXX acquisition we since million unused to Utilizing to continue we strategic million. the program year. shares. of end capacity, and February upcoming for continued additional authorization have actively recent pattern an cost financing have of nearly month, in repurchased a year, a

million count we XXXX, full weighted for we share of year expect XX to diluted shares. look As fully a approximately the average

we this expected Of count. course, we update repurchase the share progress through activity as continuing as impacts will year, the share

prior days receivables with on year-end, the XX at December that year. days outstanding and XXXX, XX at sales compares was Days XX,

or items, During capital facility majority XXXX, renewals capital CBIZ computer the $X.X IT-related plus fourth spending personal moves, at other approximately million equipment associated in on The focused is with or lease office, we for million improvements $XX.X used purchases. quarter. of

Depreciation for the the year was $XX.X million $XX.X to expense XXXX compared full prior million and amortization year.

flow business, debt share this during also the repurchases. using and recap, million $XX million cash acquisitions XXXX for performance continued reflects strong to $XX of roughly by while all So the reducing

a expected, effective many favorable the in the on impact of to stock full of lower rate Our of the accounting due of with with difficult fourth options, exercise tax much effective occurred in variables there XX.X% quarter. came in the associated than primarily the XXXX year impact are at was which for and fourth associated stock predict, quarter. compensation favorable significant the for tax to impact accounting the The and compensation rate

As be XXXX, the we we to expecting are approximately effective year tax full XX%. look to rate

higher can be As will progress the expectation of variables, number unpredictable year. quarterly rate could always, and update tax lower a by we we the and so be through the effective as either impacted or this

on you to our in these held XXXX $XXX of income losses deferred important to results gains December the compared are at you aware full approximately the or of adjusted Many for for the plan, eliminate eliminate with the it compensation reported year the assets, accounting prior operating year. was were accounting assets on impact or the adjust for of million that is XX. losses When XX.X% gains for margin which X.X%

As earnings in outlined of our is XX-K includes our practice, that will information to the enable will make be you course, these this adjustments. also And upcoming filing. information release

the approximately with the XXXX year. It expense other compared you difference see a is losses losses the compensation for income, worth million with gains other expense of gains would compared captured also deferred other XXXX is in Eliminating on large or of for adjusted prior $X.X other year-over-year accounting million represent prior in approximately or amount the and year. the income assets reported or for the noting $X.X plan expense, other

As Reported reported there margins year X.X% before reported of a for XXXX XXXX. the no reminder, on continuing is the full is tax. compared X.X% year the for full operations from income with impact

softness oriented the plus numbers performing within that growth the several by year-over-year and service divestitures from businesses. revenue business XXXX The important the impact lines is takeaway reported highly core transactionally comparison most The were for several of is well. impacted

accelerated half growth margin everything full with second XXXX, expansion. continued the XXXX reported in opportunities rates points year for to revenue With for stronger growth

includes acquisitions of So the at reported revenue closed the grow X were X% range This several to for which this to date, to XXXX, over effective summarize, as we announced X% ahead we million small within total to a $XXX.X year. expect February look to XXXX.

We XXXX year expect effective XX%. approximately a rate tax at full

either higher depending As unpredictable mentioned earlier, upon be lower the a number rate effective can factors. or of tax

share impacted We approximately repurchase be number will diluted will as through the impact the fully million we future for This year we progress including XXXX. XX weighted XXXX could count of expect average share each shares. updates a factors, and be quarter provide by full activity, of

for XX% a XX% We from XXXX. the to share per to expect share continuing of $X.XX fully per diluted from reported operations grow earnings within range

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

Jerry Grisko

Thank you, Ware.

to a just on few a additional like moments we for to Before few comments. move I'd take Q&A,

of Ware his for X% remarks, year, to revenue to within our total in growth we're stated as outlook expecting First, the relative X% range the in XXXX.

components of from guiding more that continued predict we're demand strong certain within we're forecasted difficult range our based While than certain and that historic to others, of for to consulting experiencing are businesses. comfortable rate a revenue return services project-oriented growth core the on our more today

completed expands complements full-service Pension located adviser a our This retirement and Francisco advisory footprint We've the area. start plan in a to deals turning Already in retirement with stronger Now of capacity in acquisition existing on acquisitions. Dynamics, San already Bay our recent experienced West and acquisition the this process along benefit the Coast. much more in further year, we've than XXXX years. our plan

Inc., completed of the and serving have this insurance strong added proven market already the track with casualty exceptional property need of in agency in a of also a where acquisition. Services, mid-market the and small we talent Insurance D.C. are we much and Metro that area, a We record through Alliance a businesses acquisition presence

talked earlier management platform to clients. a capital payroll more about comprehensive Finally, to more and serve I human and larger transition our complex

of provides new Systems are service. capacity Sunshine of platform be strong can responsive provide exceptional that to the acquisition ensure recent client while we seeing will client expertise pipeline Our this implementation we in to that continuing interest and that

of take our CBIZ, Last, pride, culture. incredible defining a of all our we on is the which amount culture. an note Perhaps characteristic in

is what culture. and values that ties foundation together team culture are of our Our our the

who We a industries. people most XXXX professionals are and the in are nearly team our truly business, among the make our up talented

awards, In important our we measure and work Work workforce with most their Best awards. the Place commitment the and organizations. metrics to recognized why was members I'm we to demonstrates new XX through each prioritize our XXXX, various to is external record a we by to of CBIZ is This many our progress including our our clients culture. conducted workplace team for use commitment surveys their receive feedback grateful company One to and around other. from our

over Q&A. I'd turn that, like to to With it

Operator

you. Thank

The will ahead. first We comes Please question-and-answer the now begin Blair. Andrew Instructions] today session. go question William with [Operator Nicholas from

Andrew Nicholas

Hi. Good Thanks morning. for taking questions. my

if firms. wondering a go trend? And skewing pipeline on if a bigger about towards Or your the You market that effort some there's bit talked to more your M&A to large after anything that's I'm concentrated driving unique part players?

Jerry Grisko

market. Thank you, Andrew. This is Jerry. It's really not unique to the

We effort into have, the of time, really a transactions. long increasing for put we sourcing amount that been

I a been of that recent of a the have years. transactions just are larger what completed you what number complete in These that but CBIZ, have outside band we've years may than increase, the the years. historically past seen has As volume than over are virtue in recent able aren't result in certainly And larger by have we of we transactions that, several think volume increased our of to

Andrew Nicholas

institutionalizing a initiative. progress I'm then could efforts pricing it. past, yields if your contribute businesses. wondering to growth in And you variety improve that to of think expect about to Got of same-store you pricing you the talked across in your how to XXXX? speak I the And much just

Jerry Grisko

Another That's good continuing something is we ago. a effort. initiated That about X really question. that years

those tell What you at pretty is group here of of a I office the to with We've say corporate So kind made investments office-by-office. we're dedicated of working are would it's would innings offices. resources there. early with I in that still that each the

process have and pricing and some support the The visibility to better actually combination to tools with that have have work efforts It's offices profitability, some well a them external very client been able resources. of received. into give, and line. help have, client We with been also service we've by

continue some so even that impact even believe impact years that. on efforts will impact innings, but seen expect those we we in that early to 'XX. And see expect into 'XX, again, that we from in greater we've beyond And

Operator

Chris comes CJS with next from Securities. question Moore The

Stefanos Crist

Is Crist Can the XXXX? that you any This be there time management a of provide specific rolled out? there on program? other human more fully Chris. And detail are rollout capital milestones for calling is Stefanos some will for the

Jerry Grisko

Yes.

within historically So clients, platform we've that our But smaller for that found, suited we, needs we well as certainly What the legacy had our complex payroll sophisticated prospects, or needs, product very our system Stefanos, that is suited platform now wasn't was of level had legacy those for fully business. well mid-sized we clients. needs, operational that and some that that of is larger were the them with always larger, more clients. more

We probably had them in signed platform would months that XXXX. that a have XX early identified anticipated contract ago. with we So we

from It took us on have strong had is contract months teams very signed. get the of we we we more encouraging capabilities of we've second forward prospects for But what clients, the trained reception the get to and that strong seen a pipeline will of contract our even that and of platform, coming opportunities stronger. once very is to XXXX that What few our going momentum a that. from reception expect continue signed, half that the seen throughout we've very a out

and very to encouraged opportunities what And on very continue there. so we've bullish the be we're seen by

Stefanos Crist

year? drive a maybe biggest And And on for the And other XXXX? what also drive what M&A, uncertainties what would more weaker-than-expected? side, are a the beyond specifically, stronger-than-expected would

Jerry Grisko

Yes.

their the economies always recent that business. outlook are year, to we the continue as get will there's we're SMB, impact state be They're the which least going There So years, I, around then be optimistic or prospects the look that their about our let's in very for to for economic XXXX, the in be, you at the clients, SMB question is picture. into optimistic what in optimism is principally start clients more we the if optimism. said our where with seeing election quite about our And comments at uncertainty their on clients, our of for the global and economies. their local market

anything cetera, election certainly uncertainty and may the to how So globally, et I happen think market that real unfolding coronavirus, tariffs, outcomes. is the reacts the

Operator

comes Next MacDonald question First with Analysis. Jim from

Jim MacDonald

revenue, talk that? assuming done so acquisitions that Could any is -- Or what you've just bit are for far? so your in you in more guidance little a you

Ware Grove

this Jim, Yes, Ware. is

acquisitions for guidance in Just the those acquisitions the X, guidance. are we've in announced future February that effective not the Any XXXX. included included are

So update it's we time. at warranted in we can guidance, that close acquisitions, as point if future

Jim MacDonald

Okay. have guidance, can your leverage And you where -- those what that's comment seem to earnings XXXX -- where good continued about in coming from? you

Ware Grove

office-related want Yes. per We back we Thanks, the costs expenses. yield and pricing Jim. improves we that Ware, margin, sources our people, rent hour again. Same talked improving facilities staffing and our typically office look and to. to That's This source. getting up those is utilize the different always the about with and initiative fixed

Now against different investments. that, do we time

great we to over annually little time. choppy say XX ability some target a basis XX terms a will our is modest or it's in of leverage. bit points good So to But leverage gain

Jim MacDonald

follow-up in on might in in are there? the module? to -- And that some about module. just question payroll those -- more HCM that addition Okay. applications a little what And talk new included Could the bit what's that of you a be

Jerry Grisko

plan and comprehensive Yes. is us complete to payroll services. familiar HRIS with know really along Thanks, retirement employee with That benefits Jim. also I and allows and space. a integrate HCM this you're system, module

platform. into that So some XXX

So a that system of, kind our clients. it product A to ability our for offerings very with to other integrate well Z true, is HRIS works

Operator

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

Marc Riddick

this share cadence thoughts year, bit if of background it what the and I and tax far was you what some a the if sort year. and bit as the to But seeing could you're far much views seeing as filings what wondering level you year, sort of give complexities, a of has give of as as was what cadence -- I of of to -- I you IRS as last could and guidelines wanted complexity, as expect hopefully little returned of little of to if could how we you're as far timing a of this normalcy. should wondering

Jerry Grisko

Yes, Marc, thank you.

right. You're

for, the XXXX. when I that's kind see what what that's on describe of we're of reform is to now. nothing that do a right magnitude of you think to it we're There we normalcy, the hoping tax and as expecting horizon return

from year outside on be and become we that a -- will tax we efficient throughout there, that the standpoint anything again, familiar But at norm, don't with is, see that least the we horizon the that X into much and hoping help will As time. we're requirements obviously, reform, at XXXX. would this profitability more us,

Marc Riddick

update if of you -- acquisitions, great. wondering just Okay, and on looking give a And could busy could priorities at focus Thank priorities that other was headcount, than to brief investment the talk target you've maybe some maybe with you then been about XXXX. personnel, areas so you. if certainly, I for sort you're on

Jerry Grisko

Yes.

a So capital to business, with, we're we're So start right? always human on be focused to obviously, going talent.

our increasing -- high-value, they many number provide of on to commented sure services times clients. on the Insurance we these of the have calls, we've continuing side products Benefits have that and the differentiated producers the make to making then investments and that high-quality, business tools and right and increase to As

are So things obviously, ongoing system, be to going the like HCM investments.

bring -- us the We Same those investments to been there's P&L. country understand opportunity our Services really We've been PMO talents is side, profitability that able thing, which better in the costly management -- office on lateral is for those always and call and top office, pricing. helps in But offices, the our Financial year things. absorb our each understand client we to what we've mentioned practice able that of they talent on within that our certainly oftentimes the I budgeted to find guess, the for us. around join

with expect there. at into to levels then, years mentioned, received. we continue very resources about we're XXXX. our national and the some using branding And same As been well campaign, outside those ago I would several of course, efforts That's started we

last of, service the with you of to budgeting. and as and we lines the right, of offices heads work groups last came would -- out We end the the needs. expect, course, So practice understand year, investment the very their just closely of

are to able that numbers continue and needs that we're we feel to pleased that guiding in guiding produce very meet to seeing We been results to and you're the like XXXX the the results those say we're we've for that to.

Operator

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

Jerry Grisko

to team results. and you, look Yes. close I quarter We Thank XXXX their thanking for just also to members Anita. Thank by you thanking nice continued have support want speaking our our you, we our and day. yet and investors after forward year another again for outstanding and analysts first report a to confidence.

Operator

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

You may now disconnect.

CBIZ (CBZ) 21 Feb 202019 Q4 Earnings call transcript