CBZ - Earnings call transcript Q2 2021

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Operator

Good day, and welcome to the CBIZ' Second Quarter 2021 Results Conference Call. All participants will be in the listen-only mode. [Operator Instructions] Please note, that 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 and joining conference first and CBIZ' for call. everyone, quarter second half morning, you us for the Good XXXX results posted In release page call, this our to been of connection Relations the cbiz.com. today's website, Investor with has press

call as a well on and a webcast archived our be found replay and website. being link As is webcast the to this live also reminder, an as transcript, can

would press strategies certain Before include on call, our forward-looking and like financial prospects. and of our we business, we to website. also statements the the including these results discuss may presentation, our regarding that of today's call of found management release investor statements, you Reconciliations financial may in be in flows, non-GAAP tables Today's remind cash presentation measures. during can condition, conference operations, begin measures financial

the represent relate to yet as are statements give subject intended only to estimates statements are occurred, results. Forward-looking forward-looking of future on and call have inherently this not not matters that actual Because assurance conference any these date to uncertainties. description to and can obligation such factors risks Exchange and found to future note the update CBIZ Commission. to be statements. with the Securities of in filings factors forward-looking more A Please could differ materially. no results that, Many detailed cause assumes statements

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

Jerry Grisko

morning, everyone. Thank and good you, Lori,

the of the ways, But actuarial provided discuss legal valuation performance quarter like every across that end with a former recent plan on pertaining was another unusual of number to settlement by each the of the release years claims have There lawsuit nature These jury We June. created plaintiff major to, before verdict exceptional of liabilities. the to including report to our also precedent award both up to in the comment complex a unique guide to the in that nearly second I'd of claims large our elected their the million most proud could growth employee I'm parties. legal I suit results, the very several eight parties the settlement ago, related deliberations. services defenses regarding little a pension by This of of and With dollars, agreement. facts the service was The claims an line. hundred were was in resulted results, reached midst by trial related at in announced jury of many jury when damages. risks, technical the strong quarter and punitive the including of of to if

cash first claim to to of Within as improved to It's operations. first disclose the make coverage. six this our year-to-date and impact not our we seeing that of the fund and fully services. this With sentiment I complexity the flow, increased major is steady experience substantial the for limits also our amount the am pleased in also that and in past and a, our in relating And our Moreover, in uncertainty to for the over eight and years. view trials of are strong worth in non-recurring and that our strong our the us the we facts, for that our considerably that insurance company line, the the jury stock previously context events, of we particular, risk continue allow the sheet, performance buyback loss our exceeded Services errors nearly allows amount this this in one do are materially the was report from investments important of our an continue core exceptional accounting and the year our shareholders. first very access the acquisitions, and capital, Financial and insurance group, substantially grow in a to experienced limits responsible to we it over strategic the and decision XXXX. we complete case performance to for to our the through business. history that It's overshadow growth XX-year while the turn to service resulting noting, business, the not balance to legal claims omissions I most increase for disclosed have half believe settlement Given coverage of does debt, the seeing inherent revenue organic results we every to strongest that, of months performance decade. coverages, we've E&O not demand settlement of our want tax settling

our our divestitures. those project-oriented helping services, more to We particularly with return a for demand acquisitions clients are advisory related also seeing and of

In improve profitability. accounts leaders in takes and addition, assist to receivables. And over years we've to revenue systems our last the made accelerate the investments that collect and substantial several it tools time

results investments. most recent of Services outcome our within division Our those the Financial reflect

solid Our care business government also consulting enjoy continues has -- health growth. to

and with but and has holding may business as operations. work until through monitoring resume completed impact some business future, of somewhat on reopened are delays, in normal will remainder potential for this some the are work states more they we fully the growth be how off that been these Even more delays of year. the is Although, certain required by timing are at rate the the time impacted

we and commercial in is Benefits, advisory benefits of Employee in Retirement follow year saw of trend second growth. Casualty continues half casualty & last property our the businesses. what and the business, fueling and high very with our to demand group, our insurance the side Property Within business our to strong plan Turning

by than we others. program talked last some the of about we While throughout P&C our year impacted improvement pandemic are being on seeing side, the COVID-XX more also steady areas program business

For adventure are areas travel example, to leisure payroll the of related starting experienced that in the as In impacted early specifically to and last number comeback, their in reduction continue These pandemic spending, workforce. drop we a during pays sports. quarter, second recover. the in these business business, we as our clients industries parts of saw the year like our reduced

creates this points later While the clients trend opportunities in seeing upwards among off of our leveled to this again we eventually trend business. pays are now and XXXX, for which number additional recovery

Similar the services also business of our remains our pre-pandemic services. experiencing project-based demand levels not for trends. our we Client to there optimism many reasons While has benefits to within increasing the financial number are for pays insurance business given strong. current retention returned are of and

executive improving I highlight the look our recruitment sales compensation investment as additional example, want and many businesses is in within and critical growth new driving add For our consulting to producers. to One talent area and practices, economy is roles. fill

property our pleased in the Our And also our to to our good plan that on our attract, in projections. of and area. retain accelerate benefits to report, number progress outperform essential ability continue and to to in And we business to we producers this make employee retirement I and develop is continue The am brought producers producers organic we growth. new our added services have in recent businesses. casualty years

talent. and recruiting be We capacity to, that, his for accelerate have turn more also to outreach secure I efforts added in comments. it team, our Ware our our With to to targeted within the over will

Ware Grove

talk we morning you, want we and Jerry, two of the highlights I good second expect released the half go numbers this of the and minutes for Thank items. everyone. reported to a few results morning, quarter for full we about first include The the nonrecurring take and to the year. major impact over what

talked Jerry exclude those But matter the clarity $XX.X numbers the impact in on reached quarter coverage. million continuing order As impact reported the we insurance the also results we presented on settlement and operations, net of UPMC adjusted required, we of of the the to greater about items. of the reflect those to reported charge numbers have from second that GAAP items. fully provide

earnings and non-core includes nonrecurring from recorded at share wholesale earnings numbers. reconciliation insurance operation to per a during result addition, million of we the The quarter divested of as those arrive gain the a transaction. items we adjusted release $X.X presentation a GAAP of that In second a small

course, further we useful our may business. But have period our following comments and going can as these here numbers. Q&A you to the adjusted health the questions are during ongoing any you of most further answer numbers comments. items Of detail, on adjusted you on We into focus two the without performance my nonrecurring think assess the will I

we growth is have growth of XX.X% of We unit XX.X% and XXth. the of total in driven to report six a revenue and and last contributed are have X.X% service to second first business that the growth half growth declines The X.X% first reflected six recorded XX.X% by months of Revenue in June XXXX for were unit months. quarter in growth half now recovering of growth made total are the in growth this year six very quarter The second impacted revenue strong and this quarter and same the and ended contributed second acquisitions same through year of in lines X.X% strong for the the months. more the the to through in year. pleased growth combination being COVID revenue

XX% I of for finished of Collectively same revenue we businesses commented half As unit those growth total recorded year had the line for in is first about these collectively compared year, the businesses first full this half revenue XX.X% represented growth. which XXXX, consolidated with XXXX, with XXXX. declined that X.X%

well strong by growth, component recorded core year an the our growth continuing very unit that to in perform the evidenced last consolidated to same strategy. first Acquisitions are XXXX continue As be important half half this revenue first of businesses growth year. very this X.X%

made of Through are newly XX.X% in $XX As first to pipeline potential and year year seven XXXX in contribute million this up months are we second reminder, our annualized annualized Financial a with an the in The that Services six compared acquisitions are performing with revenue. Total by same to that announced number $XX ago. a very businesses with active by review. evaluate well XX.X% revenue under acquired group of expected of we continue last revenue. unit contribute acquisitions four increased acquisitions a revenue additional million quarter to year, the we expected

months, unit six revenue the same For revenue by XX.X% X.X%. grew up total by with

up second total revenue to by with In Benefits and the group. Turning revenue quarter, XX.X% same Insurance the unit by X.X%. grew

the up There For in have the total The benefits revenue by producer investments been has grew with revenue XX.X% revenue unit made been and years. X.X%. stronger this by fueled recent same by teams. to build growth significant year recorded we within tools six months, insurance and have investments

within engagements a new on services. client We of to boost efforts stronger is of focused Plus pipeline our marketing financial we resulting focus have to importantly, activity. have And acquisition in developed tools optimize profitability digital resources potential business.

to pre-tax are revenue and XX.X%, in XX.X% achieving to nonrecurring over initiatives income a a the these improve enhance represent gaining with ago. of All concerted basis up was operating time. traction growth, leverage points second Eliminating two compared the effort margin margin while items, XX year quarter,

with year. For was income ago. margin XXX months, first XX.X% year seasonal the year XX.X% a early six in experienced With half pre-tax the tailwinds last this year, compared work this compared with we up basis tax points

the lower half on of margins. second higher A our and reflect heavily The may growth performing with cost half learned half reliant pandemic revenue structure experience that business seasonally work. reflected half more from continues is less first but very second be is the well, lessons in year in this certain. year to The is first the project

we pressure selectively commented As of the are quarter, that and may half headwinds year. margin I items the discretionary present end the second at restoring some first the of in

we may than lower to media first the items, of a through report ago, XXXX. continued from $X.XX compared year half low the are a our the elected costs are nonrecurring $X.XX more have share in costs clients have increase levels we With and benefit levels. visits year are expense year. prospects, half marketing that we and get through run to level costs, per ago. to of related in as half for activity campaign after As later campaign suspending headwinds a current considering to quarter, second beginning back Eliminating extraordinarily we first in Within begin elective normal to this T&E programs of front all second benefits of are resume up a begin costs adjusted expecting quarter low procedures medical seeing XXXX we year expected after continued and Healthcare not to highly the of pleased this short second year. second be controllable in XX.X% compared impact in earnings a healthcare with the and conduct are

a months, six with $XXX.X liquidity $XXX year million facility. $X.XX flow up to At there was with million compared in the $XXX Cash giving times earnings of approximately capacity. leverage slightly per XX credit million unused with at payment this the $X.XX For XX.X% UPMC This times measure and share, the be results outstanding a approximately million was X.X to June adjusted year, After our on June unused capacity. settlement increase to continue will remaining strong. reported X.XX ago. $XXX over for leverage effect of amount, XX EBITDA upcoming of EBITDA

previous acquisitions in year, including years. closed six payments months acquisitions this million acquisitions first we for used four new closed During earn-out for and the $XX.X

XXXX repurchased market obligations, in have The XXXX. million over June approximately ample approximately million a to future actively year $XX.X through XX. strong following flexibility of and cash respect the repurchases. XXXX in conduct we We $XX.X strong and With balance in and shares open the sheet in million deploy $XX.X estimate and approximately to balance XXXX approximately million another $XX.X to earn-out payment million to strategically the year shares repurchase this acquisitions used actively we pursue also with $X.X capital $XXX,XXX flow in share two we approximately million

using have $XXX months million XX through time XX of acquisitions January cash from of we challenging year during through XX back XXXX today purposes. for approximately closed of acquisition or this this Looking June period

approximately same XX-month also is used which the to we've million shares Over shares, of X% million period outstanding. Capital repurchase $XXX time X.X nearly spending.

for June year, spending in clients day XX, on $X.X quarter. million for The years receivables industries attributes sales XX was have ago. diverse and This at first spending decisions will In expect $X.X perform receivables that At improvement. With may sales XX, the outstanding with with million. Day this at in have and higher approximately days facility-related capital deferral six to capital expect set we well. compared XX reflect in million or days of as XXXX normal no intentional June approximately months year such lower come at travel the $XX continued we in a XXXX. our this reflects is recent than $X But of a continue second spending of to outstanding year in million. hospitality, stood entertainment year risk concentration a

This million or first a only XX% the months revenue. points. months in basis You may year first six was this five over year of revenue. XX.X% recall first bad six with the year expense points first of we for is recorded a a this debt the expense $X at million year basis months provision the EBITDA first quarter for for half six debt XX for $XXX.X Bad million bad the Adjusted debt represents ago ago. year $XX.X a a increase in ago

XX.XX%. first this effective year, the was months tax the rate six For

there continue full-year of continue are Looking effective and -- that tax of the XXXX, approximately to full-year a factors expect rate can up effective down we number of XX%. tax unpredictable or either to expect impact to rate the a we

the share to through XX million With to fully count half diluted be activity full-year first XXXX shares. repurchase weighted expect we share approximately average the date

we total guidance up full-year XX% activity, to acquisition range revenue prior of that half X% growth revenue result are the XX% is from a previously. a we XX% and of this and now to As year over expect first raising in our growth

growth, per very fact in is the earnings adjusted the reflects that half healthy. First share business

to our restore expectations weighing enhance the per incur level are activities the for other in benefit client-related or costs marketing full-year share, higher time. selectively coupled we care to over to set adjusted we half second potential desire health with growth revenue earnings uncertain As of designed some

the those reasons balance the achieved sustainable the improvement of the likely year for level this margin not is of For half in first year.

also of the higher of $X.XX uncertainty we per and near this cognizant continuing in over grow adjusted We for of range be environment. prudently reported XXXX. end a point, EPS At expect to to XXXX XX% to the share, XX% volatility the full-year the potential need earnings

this end have the Of will course, at quarter. revisit of an guidance the we opportunity third to

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

Jerry Grisko

we I'd M&A touch Thank before it over like you, Ware. to activity, turn our to on Q&A.

and a CBIZ in beyond, I As strongest we last strategy recent potential key CBIZ's a as seen growth the M&A a will M&A in us quarter, partner. discussed we remain in started XXXX to year of and this see be pipeline increasing top with continues interest as priority especially for we've our history. component

year the the of Our pandemic value business model. and of performance last over demonstrates the backdrop our the on stability

of We position to to services. Moreover, given our the in make with that sheet also to various in of our us strong to competitors simply know continue resonate businesses these of firms and the messages each capital continue to eager emphasize cannot steady expertise breadth are our and fund. in cash investments and flow, these market our We our unique that balance business access opportunities. the our depth many we allows and explore

far of quarter. coming in four acquisitions this three we've the second with year, So completed those

Northwest, acquisition in of the national acquisition During a turn opportunities call. located will Berntson which Most our based support it to acquisition the services core the clients completed consulting Porter, the in our government Optumas, business accounting with existing With assist acquisition recently and we with I long discussed that a Scottsdale quarter, of retirement June, allow of to services to these infrastructure. Medicaid of last and we Q&A. relationship enable one plan through I will in specializes another history expand our over a in this, scale has beginning us second Optumas CBIZ to at this Arizona, agencies our completed care and the firm firm earnings Pacific in actuarial health to administration programs. of providing partnering for and the services

Operator

Thank you.

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

Chris Moore

for couple Hey, of a taking good guys. morning Thanks questions.

So, yes, of gains, better volume cross-selling in think the same-store X.X% in share between get how mix talk was and first to Can increases pricing growth a cetera? just I'm up half. that. maybe a bit et you the works sense little increased terms I trying increases price from in

Ware Grove

is this of aligned side some talked the some a property are on efforts to Chris, efficiencies did of hi side. with price and insurance and Yes, strong or casualty engagement the we and about market. Ware. And yield some course, get higher increases services We the it's increase on then market -- the conditions financial improve

increased are We this first pricing increases. to think there about anything the as and is is half unusual activity whereas year well. for the So, say to about and due due some would just typically is it of this increases volume half there half I don't of increase

I the half here think year. case first that's this for the

Chris Moore

Got Very insurance XX-month divested much How basis? was trailing revenue business? wholesale helpful. on it. that the kind of a generating How did much

Ware Grove

Slightly Yes than $X is It's non-core Ware less our Chris. million. This piece again. business. pretty of actually a small

Chris Moore

just me. for it. last Got one And

of Pittsburgh University the On settlement.

compare to maybe So, University kind there other active there's you the Pittsburgh. Zotec Partners. that I case one of I’m wondering out know if of and contrast could

Kind For any of the Pittsburgh Zotec example thoughts risk was legal side. University complicated. about on big no you on of precedent talked a very factor real which

Jerry Grisko

that actuarial was purchaser that we very actually if of pension and provide vigorously compared case as relating will Hey, facts very medical believe Zotec. How very by we've comments on UPMC work and did What I ago. is facts business at a an the we to its The relating couple we and a that. circumstances say billing we different on did a are pursue The claims, we are you Zotec Chris errors circumstances UPMC claim Yes, our work recall, and very defenses. omissions some would those strong announced I'll core this to years claim to you? different complex claim again, is Jerry. And plan. of defenses claim different to and have

Chris Moore

it leave Got it. Thanks line. there I turn back in the guys. and will

Operator

Instructions] line [Operator ahead. muted. perhaps & come Next with on your Please Mr. Marc Riddick will are go now the is from podium, Sidoti Riddick, question Company. you

Marc Riddick

good morning. Hi,

Jerry Grisko

Good morning Marc.

Marc Riddick

could are discuss around So, wondering frame of you things of know bit the that a was how that next around around sort going But expect and little bit you and announcements to that I flow. that the pressures September. give a might a about into and some I there? was new sort maybe I talked from if and of can the wondering we what could headquarters color the of time if that little

Jerry Grisko

to been at the for years workforce is with it an we and XX work way within for the and office to over this tenant anchor helping new way on we're to collaborate we in were a are while. enjoyed other to been the each So, and are acre we while just that design that -- our we existing facilities what we work collaborate next each with changed work other happy we us for We've that opportunity be actually our and about enter a allow the workspaces as the the comes including the that really facility. very prepare XX design way that will comes And working technology facility the with our way table the the state-of-the-art where facility at and the that with state-of-the-art way that clients period that brand something the and spent collaborate way workforce here candidly, that in tenant to of really and that has certainly we've years. excited time. to we our the time the about And we are workflow

So, great to do really the us board that. just across a kind for of, opportunity

well. and from we saw also the local of that that State really appreciative and partnership Ohio from probably as governments received support the considerable You we're of

we're for kind us us going that do means together everything to of, and what forward. came this about allow So, excited to

Marc Riddick

remember we seasonal but for it the looking the I it -- doesn't year? are next take -- at to year. certainly guess should would we're a sort disruptions is those from timing And next fall of on we If going about I potential if be any so think was of into I more or standpoint, consideration wondering anything after-tax targeting correctly season, lines then

Jerry Grisko

right. time some there in leave through gap available working time existing But will our local space fall the remote light exact the of next be over that the space time this the and don't and we be it you're gap. year. that and in in kind The fall next that the -- but continued we're year. base the of pretty work next available. kind that will It's in Marc, Yes, potential I We year between date, of is have be it's to is move Flex learned will market what will past think allow of us disruption space of combination our of only which in insignificant, some now that particularly we've the the bridge

on material bearing the see the no can we business really in now. So, bearing right move that

Marc Riddick

are during you're getting should pandemic of it's numbers because the then as the the certainly some seems your of of be and from maybe maybe as it the progressed a from a Okay, wondering expand that was local then you're we're we benefit course contracts? But digital benefits that's of a And positive. share of was you you. on you that new some marketing if Thank up seeing the commentary, little has bit of challenges your if that but the programs -- you time whether making on how ramped about you this of though how outreach spend progress about maybe those of certainly wondering feel -- the your great. you made about it as I well progress bit was talk the also or could pandemic? little And talking further could I think during the market sort could in prepared touched some the

Jerry Grisko

unique us of think experienced see like learned months, of before and We over really Thanks our services is which to breadth Marc. Sure. many in the our things most businesses. the lot value, one that been past We a way that this provide right? haven't candidly, a ability beneficial is has our I to of depth And COVID. value proposition we expertise XX

our So fly the have needs, pre-pandemic of to sit an client people with our a multidisciplinary example around would oftentimes experts we in country matter from have subject when and and our the to that working we've we solve that easier to the sit virtual or Today with with that's to to adopt challenges learned team whatever the all on. much the is clients was client tools opportunities through sit clients experts do.

Our more we're and to way. far that that services providing receptive clients are in far comfortable more

channels top to anticipate pipeline earlier mind was sales to reached as the of As We've well. effort in full frequent has programs out calls were has our our concerned, follow-up clients webinar of what we as of our the many, continued. with in far result digital also as effort with pandemic And what continued a learned of for the greatest that during that ways and putting in has front many them. that of front digital not those programs years. clients trying digital to is about outreach and And their been outside for this the funnel needs pandemic in using many, as them very that talked in we

sales a only hybrid to approach have certainly the top to of opportunities also but and virtual. some in some in funnel, not to more them those we identify the convert but So put face-to-face, opportunities learned

So -- and we're learning to close those opportunities as well.

So a we've learned lot.

all very looks learn, those the but regards. promising continue We to in future

Marc Riddick

Very encouraging. you much. Thank very

Operator

queue. question questions Jerry [Operator for to the Instructions] Grisko further At session. the remarks. I question-and-answer are to would today's any like no in this over back time conference there will This closing conclude turn And

Jerry Grisko

Thank you, Sean.

I to of half and year rest the this and today, conclude year our mean our for of the in I beyond. put want believe the first context these the for of the model Before call we performance results business what

the including terms geographic fundamental and and I've business Over of retention essential the client the client of nature and of the emphasized broad our high quarters, base year-over-year, our our in footprint. last size our attributes diversity services, industry several model, of our level recurring of

demonstrated about XX we've months, economic in unique the be to position multidisciplinary reported services favorable and because over of both us our responsive testament forward. allow model, of our are moving a less Moreover uncertain in they also conditions. importance the when our but a to to perform today require depth economic strength I've coordinated these offers clients' needs, it the attributes a potential business talked last and approach. the and demonstrate the of puts results conditions. As our well good of breadth we us even especially to in extraordinary model stability this The

and XXXX, value the solutions year-over-year. team we seeing half our the services the behind Based our rate the first and investments our also previously and team what long-term continues increased and performance. guiding clients what XX% in lines of I'm we in The commitment of ahead. accomplished And bring half our to driving systems. growth high course revenue of on our our evident is our strong have year. and we and that are each we of on experienced clients on the made we of go For all excited are We're today willingness our the to to we've beyond new In at force more but above not in in even many XX% to these and their range proud as results. we guidance our rely year-to-date, ways, be possible the for EPS we've people, to other they and in about our energy incredibly announced. are the the adjusted performance first look also both in results, service tools of growing nearly is return we end seeing these

I'd the our as For the addition we to be earlier to like optimistic thanking and dives end shareholders our revisiting of operations EPS include close in yet prepared participate business our to to in I are And given I but the business by reasons, investor virtual held That at forward always look third to were in into this adjusted September. outlined some want of to our the not we analysts and we momentum quarter. also increase and business and our investors our support. our and this remain do leaders. continued for with deeper invite take analysts your Q&A to our and will conference in culture to Ware opportunity guidance,

and and be information the day. in more your great receiving invitation Thank weeks. have an you You’ll time a for coming

Operator

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

CBIZ (CBZ) 1 Aug 212021 Q2 Earnings call transcript