Earnings call transcript Q1 2023

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Operator

Hello, and welcome to the CBIZ Q1 2023 Earnings Call [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Lori Novickis, Director of Corporate Relations. Please go ahead.

Lori Novickis

Good morning, everyone, and thank you for joining us for the CBIZ First Quarter 2023 Results Conference Call. call, posted release page to website, this presentation quarterly of with cbiz.com. been have the connection today's and press investor our In Investor Relations

to being reminder, on found made An transcript and call available a and site. webcast is replay also As a also this our link will the archived be following live can call. webcast be the

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

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

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

Jerry Grisko

joining thank and for morning, us today's Good you Lori. you, call. for Thank

outlook We year. the the performance XXXX remainder are for and to pleased to for discuss our our share quarter first of

compared that of into were to To XXXX EPS growth results record has another measurable both with started performance exceptional increased call, the growth From from revenue perspective, year a share major provided That outstanding the XX.X%, year results year going our of continued our a proud this our is XX.X% during performance quarter, adjusted and second strong strong and period nearly I our business. this to for outlined I'm our our to ago. start As earnings the our up quarter every is highlight of we year. first total result year. last for same last momentum divisions. our following

experienced Services growth and in total XX.X% organic first division growth revenue quarter. Financial the of revenue of XX.X% Our

As for our is you those first and are aware, quarter traditional the season the robust. remained and businesses, busy demand services for tax accounting

increases, acquisition, Advisors, revenue the Our growth quarter the an X. in which continue and reflects in volume work contribution the Somerset us ability price CPA to joined effective recent our most our first to and February of capture increase of

We our also retention focused and benefited accounting services. as services, from demand number demand as clients continued with our credit, across emerging advisory our such as employee valuation services, including of provide services on major we our nearly assist risk tax well equity opportunities, for project-oriented strong a private that and to services, industry advisory our the services of all our forensic the

consulting growth experienced health within also year business. care government over We last our the

timing this on those that discussed pause get back we projects particular we long-term to those project track projects be year. timing impact but through start fact, this sizable those in delays any see so revenue for first period. delays a some and quarter, did the And in a of multiyear we in short-lived expect up As on the later in component calls, business, of can prior growth and contracts make on work to

those rate which have had couple Over has that demand of services. more of high reduced meet the been labor occurred would the growth experienced the industry capacity somewhat accounting past available the for years, constraints, to

have team more the investments recent recruitment in our that several over that happy we've a in appears to to the top to that talent We team. years readily are made in attract be pleased our position us we're available months, put the talent see past to and

very to prior X our off period. Benefits within to Insurance this were division fueled The from production strong growth we with strong growth our the to rates. client turning came where lines, also division, retention and Now the of major start all X.X% to sales revenue service year, and of favorable by a compared total largely

our We work and our Investment for increased Retirement from our service business. within Services rising embedded employee benefits property the and insurance increased also benefited actuarial premiums services project pricing and our within payroll group casualty lines, within and

turn before make that range remind results XX% year we within XXXX. range. a we and to the full XX% we at end in our in growth performance first exceptionally Based a To year, I of of of EPS that full the adjusted results come you, full X% over few full year our to year guidance on February. on in the to February, in growth like it this delivered range that I'd Now provided currently guided high XX% to strong in year a Ware, comments over within our will anticipate quarter revenue

Chief So quarter provide Grove, to the over Financial more details year and with on guidance. our I'll additional performance turn information first to this, for on Ware? Officer, Ware our it full our financial

Ware Grove

Thank you, good morning, Jerry, and everyone.

core quarter health for and unit quarter was year. the XX.X%, strong first first quarter for morning. by unit for key up last has this me in ago. we through growth traditional revenue increased saw numbers Same-unit the another same by to government up with by Within X.X%. first strong the of acquisitions X.X% consulting quarter first and XX.X%, XX% by was Let released was accounting, Insurance, revenue up growth quarter this XXXX revenue revenue by Total a the quarter we XX.X% few the the highlights throughout a over about year through Services, take The first first revenue Benefits to first compared services. minutes grew in of Financial business services momentum and Within year. same total revenue the advisory continued with our with talk care quarter contributing

additional this investments February make onetime from closing acquisition. hiring and XXXX, are expect approximately acquired costs approximately retention has With traction gain strong producers. to X, client of record We new estimated Benefits further of we as client There new to continue committed million $XX increasing years revenue we within The to see we growth and see based made to production. strong have in will recent revenue Indianapolis. this $XX investments we the in Insurance and transaction. transaction associated with continued integration-related Effective is we in Somerset remain production. business that expenses new to enhancing million group, continue business plus in to CPAs annual hire and We Advisors capabilities producers

a GAAP year, that report adjusted these Paneth an results we In adjustment acquisition-related year. costs from reporting similar this Marks results matter eliminate report to acquisition-related reported from costs to last will

You earnings a of items a will find reconciliation release. included in these as the schedule

we is year to the items, with $XX.X view share of this the health and months board, EBITDA these the impact and on travel seeing normalizing the are low considering After the previously per information, of of Adjusted of earnings eliminating share in meaningful talked business performing pleased have last $X.XX. year and of level million expectations. artificially extremely expenses team same our this adjusted entertainment first was With earnings a per expenses up adjusted to with these up last XX.X%, the and have about three adjustments, EBITDA, over higher care good levels $X.XX, XX% for Somerset the year. year, are for We million that line benefits, towards $XXX.X expenses pandemic, adjusted through levels. presenting comparable was quarter marketing

last X of basis for continue We impacts. with this to point months income a to tax first expenses before see year-over-year represented margin compared these year, the And on headwind year. XX

in than period these of pre-pandemic levels. project will the expenses to continue time, comparison a But presents lower a settle We that year-over-year headwind. for

year basis year basis also increased full XX presents higher approximately margin. approximately interest rates borrowing In revenue first expense as And to increased with XX a quarter, a this points. could of levels, as a a for headwind coupled caused this ago. the represent by points expense Interest percent year, of to rates, have increase headwind the from

For we costs, Despite in points per and acquisition share a earnings income of costs XXX the impacted the an leveraging adjusted reported $X.XXX of integration per Eliminating quarter, increase basis the onetime impact increase headwinds, share. transaction approximately expense first can pretax quarter, and interest that for the $X.X report these are million, in we by we margin.

in We point range. income expect XX will continue we to our end margin. in years, over performance that pretax time, recent achieve to of that the has higher to say And annual XX a increase exceeded basis

year full pretax of 'XX, the annual points will of XX revenue to basis XX on within range margin fall the expect improvement. For this we

compensation markets plan we this there look and a operating outlined 'XX markets significant numbers to the gains of details income. gross with the and in the you at losses our deferred both in for gains release. of are As a accounting always, compared reported nonqualified is margin impact losses, as in GAAP impact comparing with capital period capital year, Because are

pretax impacted not accounting. margin income reminder, a is this As by

years. of with with million leverage balance X.X plenty on In this we the million million with first balance XX year by provides our $XXX times on flexibility increase purposes. for facility capacity. March newly and On approximately $XXX million million at $XXX $XXX transaction, amended facility with continue to unsecured earn-out quarter previously transactions, year, sheet Turning to adjusted to with payments we repurchases. of closed strong, the extended to 'XX, $XXX.X five the cash approximately EBITDA. strategic unused The $XX.X capacity was combined the XX outstanding flow credit provides year this to about continuous maturity the million, In used the items. acquisitions the from and unsecured Somerset This March this upsized of the availability of is acquisition share

of then and XXXX, capital Deploying $X.X to $XX.X in shares, remainder deployed payments. time. open closed our April million our capital end XXB purposes, for approximately making and transactions in an shares repurchased market, million $XX.X March total XX highest at earnout the have million Through expect have XXX,XXX approximately repurchased $XX.X approximately the to acquisition We the million. common over Since for be in a in XXXX we this the shares year XX, over these program, purposes approximately we shares. XXX,XXX XX $XXX XXXX through we have our earnout of XXX,XXX of estimated and acquisition for strategic stock year, priority. $XX.X of XX additional this payments the Since approximately approximately we year, use continues million approximately of under XXXX, million cost including have March repurchased this

XXXX. of March end years as shares of of To we million days, this of slightly revenue, and to the and that compared months this quarter shares, the million in open ago. Approximately a X.X ago. expense XX quarter sales was Bad used period. that more has outstanding activity basis on was basis million this the XXXX, repurchase approximately of with amortization XX $XXX recent year recap points compared first million same it a market this Depreciation that for been towards since to was year repurchased expense activity the end year. year Days was the X year points the and year for $X.X last represents XX% the have first outstanding over debt repurchase $X.X compared XX than XX first was capital

the year related last full year. associated facilities. $XX spending with leasehold million our new to office compared Greater capital later $X.X year, depreciation million. headquarter to quarter spending approximately Most at for Capital the anticipated third first improvements expect planned year, is million our quarter for and for approximately and with we this move our spending of amortization improvements $XX For is tenant this facilities. furniture was

year this year, to approximately the $XX million capital expecting to million. spending For full $XX be we're

new a a major our headquarters building with As a long-term lease. we are reminder, in tenant

are owner building. the not We an of

in is from result rate effective 'XX The with in expiration effective approximately tax of expenses share. with to future rate nondeductible a XX.X%, of provided tax effective were unique in tax year The the year XXXX. XX.X% of associated increased increase increase tax that that's $X.XX forecasted in a level was The for we XX%, Reform we quarter grandfathered in impact Plus year this headwind, In of to last years, compensation tax effective compared months certain tax of rate a was in The X year. was $X.XX the with to primarily and XXXX. XX%. be the as as expect a there rate relatively this share. impact an stock-based compared at Tax up the the approximately first is full full Act a ago. year 'XX expense at effective the year expect And benefits rate increased rate approximately per full the

to we But and revenue if services focused So traction. strong there'll businesses, within cost increase producers, and cycles. Benefits Insurance to benefits further through we ahead nature new underlying and this and measures of are client put gained made economic within And for beyond have steady we seeing margins. we strong seeing payroll year. the experience essential structure leverage growth, in year-over-year driving we are at have we continued provide recent potential and many protect employment we pressure headwind and place pace and consider our clients. to can this be take keep The economic particularly and our with coupled and continuing stability investments is have and have number variable our of strong point, we retention, of slowdown, tools new business with pressures, and metrics are business, The recurring make The look revenue us no growth. signs systems look in At and in years we on as our of as our our costs a that group, cost mitigate items the pricing in enabled employment-driven impact. in

turn want you back our Jerry, Now provide to thoughts it to before I over full I year on guidance. with

to results strong. strong. financial Somerset results quarter to core Somerset Somerset. very And guiding the earnings that busy adjusted were quarter and see common seasonally plan stage operation revenue meaningful address a in the acquisition integration in this growth set The initial at full high we services strong acquired year came It results very system comfortable was first early of second and are the the operations quarter growth results a first February contributed we from from quarter, after of Our particularly is year, the ranges we from acquired first for the a end for very manner. newly in in both with at and our the the season, tax other per In February in issues share. to

also end we compared which is the The year, will gain at XXXX this We of the to full and on presents second estimated quarter. to revisit per visibility full year when tax forecasted prior with guidance increased equal work to year. the headwinds will greater year, approximately rate expectations, the $X.XX annual for unique share

increased compare year. We approximately by year earnings share also we impacted quarterly prior may interest headwinds full commented $X.XXX, versus and interest increased the increased on in similar the rates we per this a on expect in as year. 'XX And quarter, rates expense have to year presented the prior impact by first

first the the are to in results But the stage quarter. Now quarter despite this for more is expected too growth unique year, was first the operating second business, at stronger our half the dependent these early extremely project-oriented that headwinds guidance. underlying of are it upon early update strong. Revenue annual 'XX, than to with

the of full XX% we'll adjusted of higher So guidance, to total XXXX. per reported share the range year; to range of of growth our growth the the per the recap adjusted of basis, increase we we $X.XX earnings following: X% over end adjusted year to revenue an to on the was increase to share at end expect earnings at 'XX in for XX% XX% expect the higher that say

for the full for the growth effective is expected of XX%. is expected reported $X.XX of share range of XXXX. approximately per over end increase at The the earnings reported to year 'XX tax at XX% higher to GAAP rate XX% the Now

is be count you up lower impacted that should diluted the average the this shares initial than slightly or range number Now lastly, expected a unpredictable could down now either note XX count million within our share XX.X 'XX, and weighted of year by of to for estimate. a fully this And million full is factors. share

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

Jerry Grisko

you, Thank Ware.

take do, quarter. acquisitions. the to we've an start a I I'd results the the on few update our year, minutes of provide X M&A first generally Since to for like As completed

acquisition litigation Tennessee. firm was working effective tax closely and with West Michigan advisory of Somerset, in the assets already in first of Coast to February was in referred, That Also, Ware on and accounting, support support City, announce litigation Fort small firm an the Irvine, Nashville, pleased we are a will and practice additional talent located to bring and headquartered firm in Indiana The and California. Wayne and the growing team our that market. X, expertise with our as Indianapolis, offices non-attest

platform with the is terrific with a allows along firm we CBIZ. what scale Somerset professionals with and million acquisition, two our growing geographic to us team as $XX would added that their to attractive clients. in to offer XXX consider these provides enter us at it clients acquisitions annualized and and market additional a outset, significant a approximately opportunities a professionals of services Combined, immediate to revenue and

In most new proactive remains addition to our pipeline those to we X be and evaluating M&A continue in healthy, opportunities. acquisitions, recent

move over will that Q&A. said, With to we it

Operator

first with CJS Christopher [Operator Securities. comes from Instructions] Today's Moore question

Christopher Moore

quarter. couple great questions. of another on A Congratulations

little the next of by offset the down situation. the we've that was X% growth you Organic down. big do partially last So frequently, in areas ability was a turn will one bit costs roughly your just how to CBIZ XXXX, big discussed one, on touched in earlier, it flex in

in revenue that of how mix vulnerable more the Is you the slowing versus work revenue much sustainability from or guess both as today base as I XXXX, less project of project Is currently? the to a the different work? is, of recurring standpoint, question the the of as compare percentage economy? revenue terms So would well a a

Jerry Grisko

recurring its that of natural it It's start looked was attrition seeing a And today, as within have of said enough period period, improvements different off of work Benefits really that -- our that overcome in the business. that to at back investments that producers our investments this: area. we've business. time during But was revenue at X% is substantial to over we higher We've time, the company a would group. from our We're we said, as X% and mix the time. across versus that lowest we in What question only great not then. tends and look It to did that with We've even the that only of was period get at of in also that growth nonrecurring we substantial the time, Insurance division. different we significant getting compared and time, about rate be others. XX% than not kind that the many made Insurance know. back declined, from Over and recurring one that was time back line we're of when were in within causing you're was that made time you category. When I impact a What period you substantial of rate Benefits and within organic to today

then. different were very than a we're back think I company So we today

a us I our today. versus we've in different, outcomes with I stronger that mix of made would similar environment nonrecurring. provide investments think And is recurring substantially think

Ware Grove

that to year to business environment. thing instructive, look time. pandemic But with add back think of point I the the the look XXXX. as to also kind company Jerry it's to it's tools only much recession-like and manage XXXX, XXXX, different And this a was is, different instructive in I at The a at important think, comments, year, we're would I

was that revenue same-unit Our year. flat

as the Jerry's comment and we've traction. group more invested, Benefits it's So to Insurance that gained

there positives XXXX. the the kind saw So we that outweighed of project-oriented vulnerabilities in

So points don't two ahead, consider. but what data know to think lies I important those are

Christopher Moore

basis -- the was sure seen any any number about the are we Is of industry points, you you terms in that of prepared labor or XXX there? One out bit. organic your Have was? challenges or what XXX just talking accounting estimates if not slowed things remarks growth the was little a in there statistics talked that

Jerry Grisko

heads here. do want hear it has didn't we a over it we offices, than of work easing. didn't that had kind see couple different work. always pipeline our as to as we response we to had give were and spoke we I that years that Yes, maybe We quantified. see quantified, based -- always that Ware could we the past response with getting in But I'll but overriding that -- just the is on the of respond of more do we the number

announcements things some seen they've Big heard recently in from workforce. We've You've the those areas. of where Four their other produced

and those work while be, see I made environment. is [competitive] is it will We it a it -- So ease. of and past the challenges years been, competitive has some over that starting think, always couple to of

Operator

[Operator from comes next Andrew Blair. Instructions] question The Nicholas with William

Andrew Nicholas

most more you an question. sure that is of good. it the would we have you I'll have in mean do think how Is seems with on maybe pricing. financial not assume necessarily operational from think like integrate capacity, or as Somerset, I that I that XXXX? importantly possible is in start the deal perspective, And through capacity But you tuck-ins be with the concentrating primarily about you'd that terms financial this a update rest but to should don't capacity? I'm year later fair still M&A if it my of on any pipeline chunkier market It you capacity.

Jerry Grisko

But the the one of actually ordinary Let of reflect be in any year. no have I of prediction types we here. the throughout present as say itself, we If capacity have would also, course, rest is the course do start of would to through absorb capacity would what will me well. able Somerset remainder closed of certainly year. size what My the get comments of firm another transactions to to way the that of of more

particular it around it resource of But find individual constrained really we're kind I timing this and on So resource at But on time. deal. depends see we a constrained that this don't circumstances point. depends at ourselves don't the all particularly

Andrew Nicholas

strong revenue I And was was in Financial commentary Services, then at how specifically surprised was the in in the period, quarter. the strong around demand the how on project-based least I or guess demand

despite potential noted you PE a services as strong in be what activity headwind. thought demand as I think would deal I declining well

just could you think growth that other some project-based move strength maybe April this progressing kind through of how period? any will year? you that's on unpack in or the you So the in and could provide tidbits how it revenue of And in the rest of

Ware Grove

very to described million services. a our advisory business we Just you within business give the little internal audit, very, SOX, recurring has a the as color, approximately and good does tends a be demand, business strong. valuation of service. advisory of was the lot business. piece more outsourcing. we've of co-sourcing, team as collection RAS to The include and risk That's that $XXX And That there,

of the that year, transaction have also remains due is diligence, No pieces. that's services. bit and the We consulting a the a X the strong. augmentation very the prediction Coast-based that's saw venture capital in business. That services advisory softness to PE business very, but West balance One into strong. divided business. staff We provides of on very

eyes and that, the misses. got strength outweighs the but on the we've So hits

services. good advisory So net, good in we transaction that growth saw strength business some and

Andrew Nicholas

if in. maybe could one more squeeze then And I

various across offices. I in about talked the the strength practices you've regions positioning and estate and real think of past, competitive your

that Paneth cross-sell had within excited real I estate a into. practice it to Marks sizable you're also think

was concerns there's higher estate of real the end the of And see there? rates on and or if the to be it risk in flesh of you commercial out I that interest whether headlines and about health Given exposure vacancy hoping your year you market, specifically, the impact some years? that any more market this the coming rates could

Jerry Grisko

of are office end think real to who types at every estate go Prior were not level of our of we group. a hearing the those every to from But or client facing. office questions to we and I the expecting higher ask quarter, actually And see of caution call that. we're people,

impact or Now -- they're I'm a of our a be did type we that real are in hear in our may the In rates to an not provides responses not speaking, They that business. larger in some are do. not that existence what the have that market it heard but access way interest the may particular that larger receiving clients. scale from compared the organizations and of funding opportunities holding, those -- instances, course, more is estate of that to that side portfolios those with we particular we

wait the first we're So right didn't and with the it think real certainly clients. and it. in quarter, really it I it's see, estate hearing we're but our not construction not We feel and now, hearing a across board

Operator

with The next question Sidoti. comes from Marc Riddick

Marc Riddick

your regional clients seeing sort So be not might or maybe things touched stand a basis thinking but little technology bit other a you're what clients, and there are vertical amongst matter? I of on that industry wondering industry vertical the I an we on for think out you could maybe there, was if you some about basis talk -- that if

Jerry Grisko

start here. me Let

or is that attributes one that concentrated As mentioned our helps particular are the, And business overly we've stated in very kind in said, we IT. all of particular think the all geography you of I any I not think, With in any attractive of business of the us past, environments. industry.

the a kind of see of three, for little the six bit referenced, months. Silicon business softness, certainly, exception a past focused really which over did technical accounting Valley which the IPO, business, that of is very Ware prep With

overall way, or client impacted the to any of across in or our material geographies material are being by results one seeing not the concentration particular are We current board that any our groups, environment. again,

Marc Riddick

it's on an and offerings like, little a when you wondering competitors. the client competitive could talk outsourcing impact sort relative or to you maybe well you're as going now as to something decisions macro maybe where behaviors the that then local service as maybe you're And if was I as additional on comes bit about of a pace far whether having forward, the anticipate it seeing maybe engaging seeing of dynamic

Jerry Grisko

through in years. that bit the pulse is our couple very And on proactive to out to little through around are I -- we're would leadership, through trying your are there's past anticipating finger a the our needs we think anticipate to that some we've trying seen thought is on the to clients outreach what of over greatest them. reaching than topics But the interest future business in we on the look, the today always I And types say seminars, a that climate of market. are digital keep of I'm of uncertainty what webinars, question. more of

So to in those a services event clients around interest other cadence of pretty flow the types see And the we regular those we those and capital by how our and market prepare are a programs. by things in provide. programs of prospective And there we is to in that access significant analysis, that have clients. cash recession,

our think how the that have, our is question ask more So relative entire the of unique relative depth we have, key to we the you when our breadth to of to some regional compare we smaller us the compared is expertise of competitors, services which not that business to competitors, but market. attribute certainly around another only of I

serve sorry, yes, breadth way, of challenging to breadth certainly that more expertise of environment. in well to a be so expertise and of I'm able clients business unique positions the services And -- in us depth our a

Marc Riddick

be lumpy following lines to timing that should related thinking additional or it acquisitions, might if of that not technology, or be in I perspective are be as should along we from curious thinking about for that thing particular is, we then And about the those anything me additional heads any on of seeing was whether investment the a be quarters. sort last potentially spending, anything to timing we

Ware Grove

level. to lump that your year, attention ahead. draw aggregate a million And I think there's don't to wanted there is for one to of in as $XX capital million a spending The we're may million. thing spending. $XX it's any the occupy I capital lumpiness typically forecasting we But spending. And year, to new a normal $XX the our be in $XX million headquarters,

half people. good constantly capacity. hiring or circumstance right fact in. be to We're a team And in year, improving the similar don't tended So capacity last it's a anything earlier for that's second seeing a constrained item. on not a year, good there bit a have to that good We position big It's and we the commented the recruiting now. out the We our on we're see ease that side. of technology but looking

So shape we're investment good in lumpiness I issue -- think some see on there any with I with don't ahead.

Marc Riddick

see I then there throughout more? often, throw marketing used year I'll And in this the but I what can on because we it and to kind Thoughts plans? ask now. or spending sneak of might I guess, those one in

Ware Grove

have for on noticed call, the ad And right TV may anybody running now. we're you of a wave campaigns

So see the CNBC. you'll on ads CBIZ

see events, sporting watch you other and there. PGA them you'll If

like way. dark for have good We we're the in and And that. that tools, respect digital lead virtual with side, other things marketing to campaigns a on along gone a using webinars and other restoring while so on we're that, more items marketing, effectively with

think, I a in, So using we're very technology efficient manner. really

a significant part So our not is structure. expense of marketing the spend

Operator

and CEO, session. Ladies would back for Jerry to our I concludes remarks. the any President to this and gentlemen, call now closing question-and-answer Grisko turn like

Jerry Grisko

and that year record our of year and the momentum we off of also XXXX. Thank in for you. to shareholders enjoy I and the rest as our I continued on your your analysts want support. and had for start your us thank fantastic our everybody, CBIZ thank a team efforts all the build performance you, coming of always, for today Thank day. want to to joining for last to

Operator

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

disconnect. now may You

CBIZ (CBZ) 27 Apr 232023 Q1 Earnings call transcript