Investment research report for CBZ

Table of Contents

Executive Summary
Valuation Analysis
Industry and Competitors Analysis
Financial Analysis
Earnings Call Multi-Year Analysis
Financial Statements Multi Year
Insider Trading Analysis
Management Compensation Benchmark Analysis
Proxy Statement Analysis
News Analysis
Technical Indicators Analysis
Financial Statements Annual
Financial Statements Quarterly
Earnings Call Analysis

Executive Summary

Company Description

CBIZ, Inc. is a leading provider of professional business services, offering financial, insurance, and advisory services to small and medium-sized businesses, as well as individuals, governmental entities, and non-profit enterprises. With over 6,700 employees and operations across the United States and Canada, CBIZ offers a diverse range of services, including accounting, tax, financial advisory, employee benefits consulting, payroll/HR management, property and casualty insurance, retirement services, IT managed services, and healthcare consulting.

Financial Performance

CBIZ has demonstrated consistent revenue growth and profitability over the past few years, driven by a combination of organic growth and strategic acquisitions. The company’s diversified business model, spanning financial services, benefits/insurance, and advisory services, has contributed to its resilience and ability to navigate economic cycles. CBIZ maintains a healthy balance sheet and liquidity position, providing financial flexibility to support its growth initiatives.

Growth Strategy

CBIZ’s growth strategy is centered around organic initiatives, such as expanding its service offerings, enhancing operational efficiency, and leveraging its national scale and expertise. Additionally, the company actively pursues strategic acquisitions to strengthen its capabilities, broaden its geographic reach, and enter new markets. CBIZ’s disciplined capital allocation approach, focused on acquisitions and share repurchases, supports its long-term growth objectives.

Competitive Landscape

CBIZ operates in a competitive landscape, facing competition from larger professional services firms, accounting firms, HR consulting firms, and insurance brokers. However, the company’s focus on small and medium-sized businesses, coupled with its diverse service portfolio and national presence, positions it well to cater to a specific market segment effectively. CBIZ’s ability to navigate regulatory changes, attract and retain top talent, and maintain consistent profitability growth will be crucial in sustaining its competitive advantage.

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Valuation Analysis

PE ratio

  • Low: 15.35530974457336
  • Base: 21.10429644370912
  • High: 26.85328314284488

PB ratio

  • Low: 1.530590209855159
  • Base: 2.5932078594422547
  • High: 3.6558255090293503

EPS Growth

  • Low: 12.58%
  • Med: 15.94%
  • High: 18.61%

FCF Growth

  • Low: 3.17%
  • Med: 9.61%
  • High: 13.79%

Value forecast by FCF

  • Low: 40.95
  • Med: 59.88
  • High: 77.25

Value forecast by EPS

  • Low: 71.73
  • Med: 88.22
  • High: 104.02

The current price for CBZ is $76.92.

Price target for 18 months from now

  • Low: 73.06
  • Med: 75.78
  • High: 78.31

Price target for 4 years from now

  • Low: 66.64
  • Med: 73.88
  • High: 80.62

Price target for 10 years from now

  • Low: 51.21
  • Med: 69.32
  • High: 86.18

The net present value multiplier discounted at 10.22% suggests the value of the stock is:
– Low: 0.67
– Med: 0.90
– High: 1.12

The upside/downside ratio is 0.78, and our rating is Sell.

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Industry and Competitors Analysis

CBIZ, Inc. (CBZ) and the Specialty Business Services Industry

Based on the information provided, CBIZ, Inc. (CBZ) operates in the specialty business services industry, providing financial, insurance, and advisory services to small and medium-sized businesses, as well as individuals, governmental entities, and non-profit enterprises.

Key Points about CBIZ and its Competitive Positioning

  1. CBIZ offers a diverse range of services including accounting, tax, financial advisory, employee benefits consulting, payroll/HR management, property and casualty insurance, retirement services, IT managed services, and healthcare consulting. This broad service portfolio allows it to cater to various needs of its clients.

  2. With over 6,700 employees and operations across the United States and Canada, CBIZ has a significant scale and geographic reach, which can be an advantage in the competitive landscape.

  3. The company’s financial performance has been relatively stable, with consistent revenue growth and profitability over the past few years, indicating its ability to compete effectively in the market.

  4. CBIZ’s main competitors are likely other large professional services firms that offer similar services, such as accounting firms (e.g., Ernst & Young, Deloitte, PwC, KPMG), HR consulting firms (e.g., Aon, Mercer, Willis Towers Watson), and insurance brokers (e.g., Marsh, Gallagher, Aon).

  5. Compared to some of the larger competitors, CBIZ’s focus on small and medium-sized businesses could be a differentiating factor, allowing it to cater to a specific market segment more effectively.

Overall Assessment

Overall, CBIZ appears to be a well-established player in the specialty business services industry, with a diversified service offering and a strong presence in its target market. However, it faces competition from larger firms that may have more resources and broader service capabilities.

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Chart of Competitors

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Financial Analysis

Financial Strength

The company has maintained a relatively healthy current ratio between 1-2.5 over the years, indicating decent liquidity to cover short-term obligations. The debt-to-equity ratio has been moderate, ranging from 0.2-0.8, suggesting a reasonable level of leverage. Interest coverage ratios have been mostly positive, except for a few quarters, implying the ability to service debt obligations.

Potential for Growth

Revenue growth has been inconsistent, with periods of growth and decline, indicating potential challenges in sustaining growth momentum. The company has experienced periods of positive net income growth, suggesting the ability to generate profits when conditions are favorable. Analyst estimates project moderate revenue and earnings growth over the next two years, indicating expectations for continued growth, albeit at a slower pace.

Competitive Advantage

The company operates in the financial services, benefits and insurance, and consulting industries, which are competitive markets. The financial data does not provide specific insights into the company’s competitive advantages, such as market share, unique offerings, or intellectual property.

Quality of Management

Profitability metrics like return on equity and return on assets have been volatile, suggesting potential inconsistencies in management’s ability to generate returns efficiently. The company has maintained a relatively stable capital structure, indicating a disciplined approach to managing debt levels.

Shareholder Friendliness

The company has not paid dividends in the past, which may be less attractive to income-seeking investors. Share repurchases or other shareholder-friendly initiatives are not evident from the provided data.

Valuation

The price-to-earnings ratio has fluctuated significantly, ranging from single digits to negative values, making it challenging to assess a consistent valuation trend. The price-to-book ratio has generally been in the range of 1.5-4, which could be considered reasonable for the industry, but a more detailed comparison with peers would be necessary for a comprehensive valuation assessment.

Overall, CBIZ, Inc. appears to have a moderate financial position, with potential for growth tempered by inconsistent performance. The company’s competitive advantages and management quality are difficult to assess based solely on the provided financial data. Shareholder friendliness could be improved through dividend payments or share buybacks. A more detailed analysis, including industry comparisons and qualitative factors, would be necessary to make a comprehensive assessment of the company’s valuation and investment potential.

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Chart of Key Per Share Metrics

"Chart of Key Per Share Metrics"

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Chart of Absolute Metrics

"Chart of Absolute Metrics"

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Earnings Call Multi-Year Analysis

Diversified and resilient business model

CBIZ has a diversified revenue base across different service lines (Financial Services, Benefits & Insurance, Advisory/Consulting) and industries, providing stability through economic cycles. A significant portion of revenue is recurring and essential in nature.

Strong organic growth drivers

The company is experiencing robust organic revenue growth across its major service lines, driven by strong demand, pricing power, and investments in talent, technology, and processes.

Disciplined acquisition strategy

Acquisitions are a key part of CBIZ’s growth strategy. The company has been actively pursuing strategic acquisitions to expand its capabilities, geographic reach, and scale. It has a healthy pipeline and the financial capacity to continue being acquisitive.

Pricing power and margin expansion

CBIZ has demonstrated the ability to raise prices and improve profitability through pricing discipline, cost management, and operational leverage.

Investments in talent and technology

The company has made significant investments in talent acquisition/retention, tools, systems, and processes, which are supporting sustainable growth and operational efficiency.

Cautious outlook on economic conditions

While CBIZ’s clients remain generally optimistic, the company is prepared to navigate potential economic headwinds or recessions by leveraging its diversified model, variable cost structure, and experience from past downturns.

Strong financial performance and outlook

CBIZ has consistently reported strong revenue growth, earnings growth, and cash flow generation, and has provided positive financial guidance, reflecting confidence in the underlying business momentum.

Overall, CBIZ appears to have a resilient and well-diversified business model, strong organic growth drivers, a disciplined acquisition strategy, and a focus on operational excellence – attributes that position the company well for long-term success and shareholder value creation.

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Financial Statements Multi Year

Revenue Growth

CBIZ has demonstrated consistent revenue growth driven by a combination of organic growth (same-unit revenue increases) and strategic acquisitions across its diversified service lines like financial services, benefits/insurance, and national practices. In recent years, revenue growth has been in the range of 10-15% annually.

While revenue has grown steadily, profitability has fluctuated somewhat due to factors like legal settlements, acquisition/integration costs, and operating expense management. However, CBIZ has generally shown an ability to expand margins and drive earnings growth over time through operating leverage.

Disciplined Capital Allocation

CBIZ has a clear capital allocation strategy focused on funding strategic acquisitions to expand capabilities and geographic reach, while also returning capital to shareholders through share repurchases when value-accretive. The company maintains a strong balance sheet and liquidity position to support these initiatives.

Diversified Business Model

With service lines spanning financial services, employee benefits, insurance, and advisory services across multiple industries, CBIZ has a diversified revenue base that can help mitigate risks from any single market segment.

Competitive Advantages

CBIZ’s national scale, diversified offerings, focus on workplace culture/talent, and ability to navigate a complex regulatory environment position it well competitively in the professional services space.

Risks

Potential risks include integration challenges from acquisitions, regulatory changes impacting its service lines, competition for talent, and the ability to maintain consistent profitability growth alongside revenue expansion.

Overall, CBIZ appears to be a well-managed professional services firm executing a clear growth strategy through organic initiatives and acquisitions, while maintaining financial discipline and returning capital to shareholders – attributes that could make it an attractive long-term investment opportunity.

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Insider Trading Analysis

Long-Term Patterns

The CEO (GROVE WARE H) and CFO (Kouzelos Michael P) have been actively managing their equity positions through a combination of option exercises, stock sales, and awards. This suggests they are closely aligning their interests with shareholders.

Several other key executives like GRISKO JEROME P (EVP) and SPURIO CHRIS (EVP) have also been actively trading, indicating broad participation in equity incentives across the leadership team.

Over the long-term, insiders have been steadily increasing their ownership through equity awards, with large grants made in 2018 and 2019. This suggests the board believes in the long-term growth potential of the business.

Short-Term Patterns

In the most recent 12 months, there have been a high volume of option exercises and stock sales by executives, likely driven by the strong stock price performance (up over 30% in the last year).

The CEO and CFO have been actively selling shares, likely for diversification and personal financial planning purposes, but still maintain substantial ownership stakes (over 300,000 shares each).

Some other executives like GRISKO JEROME P have also been selling shares, but continue to hold large positions (over 600,000 shares).

Implications

For long-term investors, the insider buying activity, equity awards, and sustained high ownership levels suggest the leadership team is committed to the company’s long-term success.

The short-term selling activity is not concerning, as it appears to be more related to personal financial management rather than a lack of confidence in the business.

Overall, the insider trading patterns indicate a well-aligned management team that is incentivized to drive shareholder value creation over the long run.

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Management Compensation Benchmark Analysis

Executive Compensation Analysis

Based on the executive compensation details provided, it appears that the compensation for the executives at CBIZ, Inc. (CBZ) is not fully aligned with creating long-term shareholder value:

  1. The base salary portion of total compensation is relatively high, averaging around 37% across all the reported executives and years. This suggests that a significant portion of the compensation is not tied to performance-based incentives.

  2. There is no bonus compensation reported for any of the executives over the years. Bonuses are typically used to incentivize and reward short-term performance, and the lack of bonuses may indicate a lack of emphasis on meeting near-term goals.

  3. The stock awards, which could help align executive interests with long-term shareholder value creation, make up a relatively small portion of the total compensation, averaging around 35-40%.

  4. The incentive plan compensation, which is typically tied to longer-term performance metrics, also makes up a relatively small portion of the total compensation, averaging around 25-30%.

Benchmark Comparison

In comparison, the executive compensation structures at other companies like Network-1 Technologies, Inc. (NTIP), Civeo Corporation (CVEO), BrightView Holdings, Inc. (BV), and Maximus, Inc. (MMS) appear to have a higher proportion of performance-based and equity-linked compensation components. These companies generally have a lower base salary portion (around 25-55%) and a greater emphasis on bonuses, stock awards, and incentive plan compensation.

Recommendations

The lack of a stronger performance-based and equity-linked compensation structure at CBIZ, Inc. may not provide the best incentives for the executives to focus on long-term value creation for shareholders. To better align the executive compensation with shareholder interests, the company could consider increasing the proportion of variable, performance-based compensation components and tying a larger portion of the total compensation to the achievement of long-term strategic goals and stock price performance.

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Proxy Statement Analysis

Compensation Structure

Evaluate the different components (base salary, annual bonus, long-term incentives) and their relative weightings to see if they incentivize long-term performance.

Performance Metrics

Assess the specific metrics used for annual and long-term incentive payouts (e.g., revenue growth, EPS, ROIC) and whether they are appropriate for driving long-term value creation.

Long-Term Incentive Plans

Review the structure, vesting periods, and performance conditions of stock options, RSUs, etc. Longer vesting and performance-based vesting better align with long-term interests.

Stock Ownership Guidelines

Check if there are robust stock ownership requirements for executives to further align their interests with shareholders.

Clawback Policies

The presence of strong clawback provisions to recover compensation in cases of misconduct or restatements is positive.

Peer Group Benchmarking

Evaluate the reasonableness of the peer group used for benchmarking compensation levels and design.

By carefully analyzing these elements, a long-term investor can assess if the executive compensation program is structured to incentivize sustainable long-term value creation and alignment with shareholder interests.

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News Analysis

Earnings and Revenue Performance

CBIZ has generally been reporting solid earnings and revenue growth over the years, often beating analyst estimates. This consistent financial performance could be attractive for long-term investors.

Acquisitions

CBIZ has been actively acquiring companies in various sectors like accounting, insurance, and consulting. These acquisitions have been contributing to its revenue growth and expanding its service offerings. However, investors need to monitor the integration and performance of these acquired businesses.

Small Business Employment Index

CBIZ publishes a monthly Small Business Employment Index, which provides insights into hiring trends in the small business sector. This index could be useful for investors to gauge the overall economic conditions and demand for CBIZ’s services.

Service Offerings and Market Position

CBIZ offers a wide range of services including accounting, tax, advisory, risk advisory, and benefits and insurance services. It has a strong market position in serving small and mid-sized businesses, which could provide a stable revenue stream.

Guidance and Outlook

CBIZ has been raising its full-year guidance on multiple occasions, reflecting management’s confidence in the company’s growth prospects. Investors should pay attention to the company’s guidance and outlook statements.

Awards and Recognition

CBIZ has received various awards and recognition for its services, workplace culture, and employee benefits programs. These accolades could positively impact the company’s reputation and ability to attract and retain talent.

Overall, CBIZ seems to be a consistently performing company with a focus on acquisitions and serving the small and mid-sized business market. Long-term investors may find the company’s financial performance, growth strategies, and market positioning attractive, but they should also monitor the integration of acquisitions and the overall economic conditions that could impact the demand for CBIZ’s services.

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Technical Indicators Analysis

Next Week Trading

The recent price action and technical indicators suggest a neutral to slightly bearish outlook for the next week. The TEMA (Triple Exponential Moving Average) has been declining, indicating a potential short-term downtrend. The RSI (Relative Strength Index) is in the neutral range, not signaling overbought or oversold conditions. Traders may want to be cautious and look for opportunities to enter short positions or wait for a clearer trend to emerge.

Resistance and Support Levels

The 20-day SMA (Simple Moving Average) at around $75.99 and the 50-day SMA at $75.57 could act as potential resistance levels. The 200-day SMA at $65.63 could provide support if the stock price declines further. Traders may want to monitor these levels for potential entry or exit points.

Short-Term Investor

The recent price action and technical indicators suggest a mixed outlook for short-term investors. The declining TEMA and neutral RSI indicate a lack of clear momentum, which could lead to sideways or choppy trading in the near term. Short-term investors may want to consider taking a cautious approach and wait for a clearer trend to emerge before taking a position.

Long-Term Investor

For long-term investors, the overall technical picture appears more favorable. The 200-day SMA is well below the current price, suggesting a positive long-term trend. However, the recent decline in the TEMA and the potential resistance levels mentioned above may warrant a closer examination of the company’s fundamentals and long-term prospects before making an investment decision.

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Chart of Valuation History

"Chart of Valuation History"

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Financial Statements Annual

Financial Statements Annual 2024 Q2

Strong Revenue Growth

CBIZ’s revenue grew 12.7% in 2023 to $1.59 billion, driven by 7.4% same-unit revenue growth and 5.3% growth from acquisitions. This demonstrates the company’s ability to grow both organically and through strategic acquisitions.

Profitability Improvement

Net income increased 14.8% to $121 million in 2023, and diluted earnings per share grew 18.9% to $2.39. This indicates CBIZ is effectively managing costs and leveraging its scale to drive bottom-line growth.

Diversified Business Model

CBIZ operates across three main practice groups – Financial Services, Benefits and Insurance Services, and National Practices. This diversification helps mitigate risks and provides opportunities for cross-selling and synergies.

Disciplined Capital Allocation

CBIZ’s first priority for capital is strategic acquisitions, which it has executed well, adding five businesses in 2023. The company also has the financial flexibility to actively repurchase its own shares, returning capital to shareholders in a disciplined manner.

Strong Balance Sheet and Cash Flows

CBIZ generated $153.5 million in operating cash flow in 2023, providing the resources to fund growth initiatives and shareholder returns. The company’s debt levels appear manageable, with a net debt to EBITDA ratio of around 2.5x.

Regulatory and Competitive Landscape

As a professional services firm, CBIZ faces risks related to regulatory changes, competition, and talent retention. However, the company’s diversified service offerings, national platform, and focus on high-growth markets position it well to navigate these challenges.

Overall, CBIZ demonstrates a track record of consistent revenue and earnings growth, a diversified business model, disciplined capital allocation, and a strong financial position – all of which are attractive attributes for long-term investors.

Financial Statements Annual 2023 Q2

Strong Revenue Growth

CBIZ’s revenue grew 27.8% in 2022 compared to 2021, driven by both organic growth (10.9%) and acquisitions (16.9%). This demonstrates the company’s ability to grow both through its existing operations as well as strategic acquisitions.

Improved Profitability

Income from continuing operations increased 48.7% in 2022, reflecting CBIZ’s operating leverage and ability to drive margin expansion. Earnings per diluted share from continuing operations increased from $1.32 in 2021 to $2.01 in 2022.

Disciplined Capital Allocation

CBIZ’s primary use of capital is strategic acquisitions, which have strengthened its service offerings and market position. The company also has an active share repurchase program, demonstrating its commitment to returning capital to shareholders when accretive.

Diversified Client Base

CBIZ serves over 100,000 clients across 25 industries, which helps insulate the company from downturns in any particular industry or geographic market. The largest client accounts for only 2.4% of consolidated revenue.

Regulatory Environment

CBIZ’s operations are subject to various regulations, particularly around accounting, insurance, and healthcare services. Changes in these regulations could impact the company’s business, though management appears adept at navigating the regulatory landscape.

Acquisition Integration Risks

CBIZ’s growth strategy relies on successful integration of acquired businesses. The company incurred $10.5 million in non-recurring integration and retention costs related to the Marks Paneth acquisition in 2022, which could be a risk factor going forward.

Leverage and Liquidity

CBIZ has a $600 million unsecured credit facility that provides ample liquidity to fund operations and acquisitions. The company’s net debt position was $469.8 million at the end of 2022, giving it financial flexibility to pursue its strategic initiatives.

Overall, CBIZ appears to be a well-managed, diversified professional services firm with a track record of profitable growth through a combination of organic initiatives and strategic acquisitions. The company’s strong financial position and disciplined capital allocation suggest it is well-positioned for long-term success.

Financial Statements Annual 2022 Q2

Revenue Growth

Total revenue grew 14.6% in 2021 to $1.105 billion, driven by 7.7% same-unit revenue growth and 6.9% growth from acquisitions. The Financial Services practice group saw 16.6% revenue growth, with same-unit revenue up 9.3% across all service lines. The Benefits and Insurance Services practice group grew revenue by 11.6%, with 4.6% same-unit growth and 7.0% from acquisitions.

Profitability

Income from continuing operations decreased 9.5% to $70.9 million, primarily due to a $30.5 million legal settlement. Earnings per diluted share from continuing operations were $1.32 compared to $1.42 in 2020, with a lower share count.

Capital Allocation

CBIZ completed 6 acquisitions in 2021 to strengthen its service offerings and market position. The company repurchased 30 million shares of its common stock in 2021 at a cost of $964 million, demonstrating its commitment to returning capital to shareholders. CBIZ has ample liquidity and financing flexibility, with $2.3 billion available under its $4.0 billion credit facility as of December 31, 2021.

Workforce and Culture

CBIZ was recognized with 93 workplace awards in 2021, including being named one of America’s Best Midsize Employers by Forbes and a Top Workplace in the Financial Services industry. The company’s focus on attracting, developing and retaining top talent is a key competitive advantage.

Overall, CBIZ delivered solid revenue growth, maintained profitability despite a significant legal settlement, and continued to execute on its strategic priorities of acquisitions and share repurchases – all while fostering a strong workplace culture that enables it to serve clients effectively. These factors position the company well for long-term success.

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Financial Statements Quarterly

Financial Statements Quarterly 2024 Q2

Revenue Growth

Total revenue increased by 8.7% to $494.3 million in Q1 2024 compared to $454.6 million in Q1 2023. Same-unit revenue grew by 5.9%, driven by strong performance across the Financial Services and Benefits and Insurance Services practice groups. Acquired businesses contributed an additional 2.8% to revenue growth.

Profitability

Net income increased to $76.9 million in Q1 2024, up from $73.2 million in Q1 2023. Diluted earnings per share increased to $1.53 in Q1 2024 from $1.44 in Q1 2023. Operating income margin was 20.0% in Q1 2024 compared to 21.6% in Q1 2023, primarily due to higher operating expenses.

Liquidity and Capital Resources

Cash used in operating activities was $63.7 million in Q1 2024, primarily due to working capital requirements. The company completed two acquisitions for $213 million in cash during Q1 2024. The company repurchased 0.2 million shares of common stock for $11.2 million in Q1 2024. The company had $1.48 billion in available funds under its $600 million credit facility as of March 31, 2024.

Segment Performance

The Financial Services practice group saw revenue growth of 8.6%, driven by strong performance in traditional accounting and tax-related services, government healthcare compliance, and advisory services. The Benefits and Insurance Services practice group revenue grew by 8.3%, with increases across employee benefits, retirement services, and property and casualty insurance. The National Practices group revenue increased by 15.6%, primarily due to a cost-plus contract with a single client.

Overall, CBIZ delivered solid financial results in Q1 2024, with revenue growth, profitability improvements, and continued strategic investments through acquisitions and share repurchases. The company’s diversified service offerings and strong liquidity position it well to navigate the current business environment.

Financial Statements Quarterly 2024 Q1

Revenue Growth

Revenue for the three months ended September 30, 2023 increased by 13.0% to $410.5 million from $363.3 million in the same period in 2022. Revenue for the nine months ended September 30, 2023 increased by 13.1% to $1,263.6 million from $1,116.9 million in the same period in 2022. The revenue growth was driven by both same-unit revenue increases (8.3% in Q3 and 7.5% in 9M) as well as contributions from newly acquired operations (4.7% in Q3 and 5.6% in 9M).

Profitability

Net income was $33.7 million or $0.67 per diluted share in Q3 2023, compared to $27.5 million or $0.53 per diluted share in Q3 2022. For the nine months ended September 30, 2023, net income was $133.7 million or $2.64 per diluted share, compared to $116.9 million or $2.22 per diluted share in the same period in 2022. The improvement in profitability was driven by higher revenue and operating leverage, partially offset by higher interest expense.

Strategic Acquisitions and Share Repurchases

The company completed five acquisitions for $530 million in cash during the nine months ended September 30, 2023. The company also repurchased 1.3 million shares of its common stock at a total cost of approximately $66.4 million during the nine months ended September 30, 2023. These strategic acquisitions and share repurchases demonstrate the company’s focus on growth and returning capital to shareholders.

Liquidity and Financing

The company had $1,950 million of available funds under its $600 million credit facility as of September 30, 2023. The company’s debt balance increased to $394.7 million as of September 30, 2023, up from $265.7 million as of December 31, 2022, primarily to fund the acquisitions. The company’s liquidity position and access to financing provide flexibility to continue executing its strategic initiatives.

Overall, the financial statements demonstrate CBIZ’s ability to drive strong revenue and earnings growth through a combination of organic initiatives and strategic acquisitions, while also actively managing its capital structure to support future growth.

Financial Statements Quarterly 2023 Q4

Revenue Growth

Revenue for the three months ended June 30, 2023 increased by 10.1% to $398.5 million from $362.0 million in the same period in 2022. Revenue for the six months ended June 30, 2023 increased by 13.2% to $853.1 million from $753.7 million in the same period in 2022. The revenue growth was driven by both same-unit revenue increases (4.1% in Q2 and 7.2% in H1) as well as revenue from newly acquired operations (6.0% in Q2 and 6.0% in H1).

Profitability

Net income was $26.9 million or $0.53 per diluted share in Q2 2023 compared to $31.3 million or $0.60 per diluted share in Q2 2022. For the six months ended June 30, 2023, net income was $100.0 million or $1.98 per diluted share compared to $89.4 million or $1.70 per diluted share in the same period in 2022. The decrease in Q2 net income was primarily due to higher operating expenses, including increased interest expense, partially offset by higher revenue.

Strategic Acquisitions and Share Repurchases

The company completed four acquisitions during the six months ended June 30, 2023 for $485 million in cash. The company repurchased 1.1 million shares of its common stock at a total cost of approximately $56.8 million during the six months ended June 30, 2023.

Liquidity and Financing

Cash provided by operating activities was $29.7 million during the six months ended June 30, 2023. The company had $1.775 billion of available funds under its $600 million credit facility as of June 30, 2023. The company is in compliance with its financial covenants under the credit facility as of June 30, 2023.

Overall, the financial statements show strong revenue growth, both organically and through acquisitions, though profitability was impacted by higher operating expenses. The company continues to execute on its strategic priorities of making acquisitions and repurchasing shares while maintaining a solid liquidity position.

Financial Statements Quarterly 2023 Q3

Revenue Growth

Total revenue increased by 16.1% to $454.6 million in Q1 2023 compared to $391.7 million in Q1 2022. Same-unit revenue (excluding acquisitions) increased by 10.0%, driven by growth across all service lines in the Financial Services practice group. Acquisitions contributed $23.9 million or 6.1% of the revenue growth in Q1 2023.

Profitability

Net income increased by 25.8% to $73.2 million in Q1 2023 compared to $58.1 million in Q1 2022. Diluted earnings per share increased by 30.9% to $1.44 in Q1 2023 compared to $1.10 in Q1 2022. Gross margin percentage improved to 25.0% in Q1 2023 from 25.9% in Q1 2022.

Segment Performance

Financial Services revenue grew 18.8% driven by strong performance across all service lines, particularly in traditional accounting and tax-related services. Benefits and Insurance Services revenue grew 8.2% with increases across all service lines. National Practices revenue grew 9.3% primarily due to a cost-plus contract with a single client.

Cash Flows and Liquidity

Cash used in operating activities was $44.5 million in Q1 2023 compared to $50.9 million in Q1 2022, primarily due to changes in working capital. The company completed two acquisitions for $39.0 million in cash during Q1 2023. The company repurchased 0.6 million shares of common stock for $28.9 million during Q1 2023. The company had $1.9 billion of available funds under the $600 million credit facility as of March 31, 2023.

Debt and Financing

The company had $403.7 million outstanding under the $600 million credit facility as of March 31, 2023. The weighted average interest rate under the credit facility was 4.54% during Q1 2023 compared to 1.79% in Q1 2022.

Overall, the financial statements demonstrate strong revenue growth, improved profitability, and continued strategic use of capital through acquisitions and share repurchases, while maintaining a solid liquidity position.

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Earnings Call Analysis

Earnings Call Analysis 2024 Q2

Diversified business model

CBIZ has a diversified revenue base across different service lines and industries, which provides stability through economic cycles. The company is not overly concentrated in any single industry or geography.

Consistent demand for services

The company is seeing continued strong demand for its essential and recurring services, particularly in Accounting & Tax, Advisory, and Government Healthcare Consulting. This suggests a resilient business model.

Acquisition strategy

M&A is a key part of CBIZ’s growth strategy. The company has completed 22 acquisitions since 2019, deploying over $444 million in capital. The recent acquisitions of EBK and CompuData are expected to strengthen the company’s service offerings and capabilities.

Margin pressures

The company faced some non-operating cost pressures in Q1 2024 related to legal expenses, self-funded healthcare costs, and phantom share plan adjustments. These items impacted margins but are expected to be unpredictable throughout the year.

Positive outlook

CBIZ reaffirmed its full-year 2024 guidance, expecting 7-9% revenue growth and 12-14% adjusted EPS growth. The company appears confident in the overall health and resilience of its business.

Analyst questions

The analysts probed for more details on the company’s M&A pipeline, deal multiples, and the potential impact of interest rate changes on the business. The management team provided transparent and detailed responses, suggesting a high level of engagement with investors.

Overall, the key insights suggest CBIZ is a well-diversified, acquisition-focused professional services firm with a resilient business model and positive long-term outlook. The management team appears focused on driving growth and shareholder value.

Earnings Call Analysis 2024 Q1

Diversified business model

CBIZ has a blend of essential recurring services and discretionary project-based services, serving a diverse client base across companies of all sizes and a broad geographic footprint. This diversification has driven the company’s success.

Strong financial performance

CBIZ reported impressive growth in 2023, with total revenue up 12.7%, organic revenue growth of 7.4%, and adjusted EPS up 13.1%. The company expects continued steady growth in 2024.

Resilient business segments

Both the Financial Services and Benefits & Insurance divisions demonstrated strong growth across their major service lines, indicating the resilience of CBIZ’s business model.

Pricing power

CBIZ has been able to increase prices in excess of wage increases, suggesting it has pricing power and the ability to pass on cost increases to clients.

Acquisition strategy

CBIZ completed several strategic acquisitions in 2023, including Somerset CPAs and Advisors and Pivot Point Security, which expanded its geographic reach and service capabilities. The company maintains an active M&A pipeline.

Cautious optimism

Management expressed cautious optimism about the economic climate, noting that clients remain generally optimistic despite some uncertainty. The company is well-positioned to navigate potential economic challenges.

Analyst questions

Analysts probed for more details on pricing trends, labor market conditions, and the project-based work outlook, to which management provided reassuring responses.

Overall, the call suggests CBIZ is a well-diversified, financially strong company with a resilient business model and a disciplined approach to growth, both organically and through acquisitions. The long-term investor should be encouraged by the company’s performance and outlook.

Earnings Call Analysis 2023 Q4

Diversified business model

CBIZ operates across multiple service lines (Financial Services, Benefits and Insurance Services, National Practices) and serves a diverse client base of small/medium businesses, individuals, government entities, and non-profits. This diversification provides stability through economic cycles.

Strong organic growth

The company is seeing strong organic growth across its major service lines, driven by healthy demand for core accounting/tax services as well as advisory services. This indicates the business is performing well.

Resilient model with recurring revenue

Many of CBIZ’s services are recurring and essential in nature, providing stability. This is evident in the steady performance of employment-driven metrics in the Benefits and Payroll businesses.

Disciplined M&A strategy

CBIZ continues to actively pursue strategic acquisitions, having completed 5 deals so far in 2023. The integration of recent acquisitions like Somerset CPAs appears to be progressing well.

Margin pressure from higher costs

The company is facing some near-term margin headwinds from higher healthcare/travel expenses, marketing costs, and interest expense. However, it expects these to moderate over time.

Cautious on macro outlook

While clients remain generally optimistic, CBIZ is monitoring areas like construction/real estate that may face more pressure from higher interest rates and economic uncertainty. The company has variable cost levers to mitigate any revenue pressure.

Overall, the call suggests CBIZ is executing well operationally, maintaining pricing power, and deploying capital prudently – factors that should benefit long-term investors despite some near-term margin pressures.

Earnings Call Analysis 2023 Q3

Core Business Performance

The core business performed well in the first half of the year, with strong organic revenue growth of 7.2% for the first six months, excluding the impact of two specific issues.

Impacting Factors

The two issues that disproportionately impacted Q2 results were:
a. Delays in tax filing work in California due to weather-related extensions, which pushed revenue into Q3/Q4.
b. Delays in project work in the Government Healthcare consulting business, including one significant contract being pushed into 2024.

Cost Alignment

The company is taking immediate actions to align costs with the projected revenue in the Government Healthcare consulting business to mitigate the impact.

Earnings Growth

Excluding the impact of higher interest expense and tax rates, the core business would have generated much higher earnings growth in the first half.

Guidance and Outlook

The company raised its full-year revenue growth guidance to 10-12% and affirmed adjusted EPS growth guidance of 11-13%, demonstrating confidence in the underlying business performance.

Mergers and Acquisitions

M&A remains a key priority, with three acquisitions and two tuck-in deals completed so far this year. The pipeline remains healthy.

Business Investments

The company continues to invest in new business producers, particularly in the Benefits and Insurance division, which is driving strong new business and client retention.

Overall, the call suggests the core business is performing well, with the company taking actions to address the specific issues that impacted Q2. The long-term growth outlook remains intact.

Earnings Call Analysis 2023 Q2

Diversified business model

CBIZ has a diversified revenue mix across different service lines and industries, which helps mitigate risks from any particular segment. This diversification has been a key strength, especially during economic downturns.

Recurring revenue

Approximately 75% of CBIZ’s revenue is recurring in nature, providing stability and predictability to the business model. This high proportion of recurring revenue is an attractive feature for long-term investors.

Acquisition strategy

CBIZ has been actively pursuing strategic acquisitions, which have contributed significantly to its growth. The recent acquisition of Somerset CPA and Advisors is expected to be accretive and provide a platform for further expansion in the Indianapolis market.

Talent management

CBIZ has made investments in its recruitment team to attract top talent, which has helped the company address labor constraints in the accounting industry and support its growth.

Margin expansion

CBIZ has demonstrated the ability to leverage its cost structure and expand margins, with a target of 20-50 basis points of annual improvement in pre-tax income margin.

Capital allocation

CBIZ has a strong balance sheet and has been actively deploying capital for strategic acquisitions and share repurchases, which aligns with shareholder interests.

Cautious outlook

While CBIZ is currently performing well, management is mindful of potential economic headwinds and is proactively engaging with clients to address their needs in a more challenging business environment.

Overall, CBIZ’s diversified business model, recurring revenue streams, acquisition strategy, and focus on talent and cost management make it an attractive long-term investment proposition. However, investors should closely monitor the company’s performance and ability to navigate any potential economic slowdown.

Earnings Call Analysis 2023 Q1

Resilient Business Model

CBIZ has a resilient business model with a combination of essential recurring services and discretionary project-based services. This makes the company less susceptible to market conditions impacting certain industries or geographies.

Strong Performance Across Service Lines

The company has seen strong performance across its major service lines, with the Financial Services division seeing record 37.6% revenue growth in 2022. This was driven by strong demand and the ability to raise prices to offset wage pressures.

Investments in Innovation and Efficiency

CBIZ has made strategic investments in tools, processes and talent that have enhanced client and employee experience, and improved profitability. The company plans to continue investing in innovation, automation and data usage to drive further efficiency.

Acquisitions as a Growth Strategy

Acquisitions are a key part of CBIZ’s growth strategy. The company completed two sizable acquisitions in 2022 and recently announced the acquisition of Somerset, which will allow CBIZ to enter the attractive Indianapolis market. The company has a healthy M&A pipeline and access to capital to pursue further opportunities.

Outlook for 2023

While the company expects a more challenging business climate in 2023, it remains confident in the resilience of its business model and client base. CBIZ is providing guidance for 8-10% revenue growth and 11-13% adjusted EPS growth in 2023.

Potential Softness in Advisory Services

Analysts should be cautious about potential softness in the company’s more discretionary advisory services, which make up around 14% of revenue. However, CBIZ believes it can manage through any slowdown given the variable nature of its cost structure.

Overall, CBIZ appears to be executing well on its strategic plan and has a resilient business model that should allow it to navigate potential economic headwinds. The company’s focus on innovation, talent, and strategic acquisitions position it well for long-term growth.

Earnings Call Analysis 2022 Q4

Strong Organic Growth

CBIZ is experiencing impressive organic revenue growth across its major service lines, with the Financial Services segment seeing 14.4% organic growth in Q3 and 12% YTD. This reflects their success in hiring talent and improving pricing discipline.

Resilient Business Model

Approximately 75% of CBIZ’s revenue comes from essential and recurring services, providing stability through economic cycles. They have high client retention rates, diverse geographic and industry exposure, and strong cash flow.

Pricing Power

CBIZ has made significant investments in tools and systems to improve pricing visibility and discipline. They believe there is still room for further pricing increases, even in a more challenging business environment.

Acquisition Integration

Recent acquisitions like Marks Paneth are performing well and integrating as expected. CBIZ has a strong M&A pipeline and access to capital to continue this growth strategy.

Potential Headwinds

While CBIZ sees continued strength in employment-driven metrics, they acknowledge potential economic slowdown risks. However, they have variable cost structures and mitigation strategies to protect margins if revenue growth slows.

Analyst Insights

Analysts noted CBIZ’s ability to gain market share through its expanded expertise and service offerings, as well as the effectiveness of its marketing and digital outreach efforts. They also highlighted the diversified client base as a strength.

Overall, the key takeaway is that CBIZ appears to have a resilient business model, strong organic growth drivers, and a disciplined approach to pricing and acquisitions that could position it well for long-term success, even in a more challenging economic environment.

Earnings Call Analysis 2022 Q3

Strong Organic Growth

CBIZ reported strong organic revenue growth across all major service lines in Q2 and the first half of 2022. This was driven by high demand for their essential tax, accounting, and advisory services.

Pricing Power

CBIZ has been able to take an aggressive approach to pricing, especially in their Financial Services and Advisory Services segments, which has bolstered their growth rates. This suggests they have pricing power.

Diversified Business Model

CBIZ has a diversified business model with Financial Services, Benefits/Insurance, and National Practices segments. This helps provide stability through economic cycles.

Investments in Talent and Technology

CBIZ has made substantial investments in systems, processes, and tools to support sustainable growth and resilience. This includes investments in talent acquisition and retention.

Acquisition Strategy

M&A continues to be a key priority, with CBIZ recently acquiring Marks Paneth and Stinnett & Associates. The expanded $600 million credit facility provides flexibility for future acquisitions.

Cautious on Recession Impacts

While CBIZ clients remain confident, the company is prepared to navigate a potential recession based on its experience and investments made since the 2008-2009 financial crisis.

Guidance Raised

CBIZ raised its full-year 2022 revenue and adjusted EPS guidance based on the strong first half performance.

Overall, the call suggests CBIZ is well-positioned for continued growth and resilience, with a diversified business model, pricing power, and a disciplined acquisition strategy – key attributes for a long-term investor.

Earnings Call Analysis 2022 Q2

Strong financial performance

CBIZ reported very strong Q1 2022 results, with total revenue growth over 30% and same-unit revenue growth of 9.6%. This momentum is expected to continue for the full year, with guidance at the high end of previous ranges.

Diversified business model

CBIZ’s three main segments – Financial Services, Benefits and Insurance Services, and National Practices – all showed solid growth, indicating a diversified and resilient business model.

Pricing power and investments

CBIZ has been able to capitalize on pricing power, with about two-thirds of the same-unit revenue growth coming from pricing versus volume. This is attributed to investments in tools and processes to support pricing and profitability.

Acquisition strategy

CBIZ continues to be active on the M&A front, with the recent acquisition of Marks Paneth. Integration efforts are underway, and the company has a robust pipeline of potential acquisitions.

Talent management

CBIZ is proactively addressing the competitive labor market through retention and recruitment initiatives, including expanding internship programs and leveraging employee referrals.

Caution on quarterly comparisons

Due to the impact of recent acquisitions, the company advises against comparing quarterly results year-over-year, as there may be more volatility in the financial results.

Overall, the conference call suggests CBIZ is executing well on its strategic priorities and is well-positioned for continued growth, though the company cautions that some of the exceptional first-quarter performance may be difficult to sustain throughout the full year.

Earnings Call Analysis 2022 Q1

Strong financial performance in 2021

CBIZ reported 14.6% total revenue growth, 7.7% organic revenue growth, 16.9% growth in adjusted EPS, and 12.4% improvement in adjusted EBITDA. This was driven by strong demand across most service lines.

Continued momentum into 2022

CBIZ is providing financial guidance for 2022, expecting 19-21% revenue growth and 14-16% growth in GAAP EPS, or 20-22% growth in adjusted EPS. This is driven by the core business performance as well as the impact of recent acquisitions.

Acquisition strategy is a key growth driver

CBIZ completed 7 acquisitions in 2021 adding over $200 million in annualized revenue. The recent acquisition of Marks Paneth is expected to contribute $138 million in revenue in 2022. CBIZ has a strong M&A pipeline and financial capacity to continue being acquisitive.

Investments in talent and technology are paying off

CBIZ has made investments to improve processes, systems, and training which have helped drive growth and profitability. The company is also focused on recruiting and retaining talent in a competitive labor market.

Caution on quarterly comparisons

Due to the impact of acquisitions, CBIZ advises against comparing any given quarter to the prior year period, as there will be more volatility in the financial results.

Overall, CBIZ appears to be executing well on its strategic priorities, driving strong financial performance, and positioning itself for continued growth through organic initiatives and acquisitions. The long-term investor should focus on the company’s ability to sustain this momentum.

Earnings Call Analysis 2021 Q4

Strong financial performance

CBIZ reported strong revenue growth of 14.5% for the first 9 months of 2021 and adjusted EPS growth of 30.5%. This demonstrates the resilience and strength of the business.

Diversified growth

The growth is coming from both the Financial Services and Benefits/Insurance segments, across various service lines. This indicates a well-diversified business model.

Acquisition strategy

CBIZ has an active pipeline of acquisition targets, having closed 5 deals so far in 2021 contributing $72 million in annualized revenue. This inorganic growth supplements the organic growth.

Client retention

CBIZ is maintaining client retention rates over 90% in its key businesses, indicating strong client relationships and value proposition.

Expense management

While expenses have increased from pandemic-impacted levels in 2020, CBIZ is managing this well and expects margin expansion on an adjusted basis for the full year.

Outlook

CBIZ has raised its full-year 2021 guidance for both revenue growth (12-15%) and adjusted EPS growth (20-24%), reflecting confidence in the business momentum.

Overall, the call highlights CBIZ’s diversified business model, strong financial performance, active M&A strategy, and positive outlook – all of which are favorable for long-term investors. The management team appears transparent and focused on driving shareholder value.

Earnings Call Analysis 2021 Q3

Diversified business model

CBIZ has a diversified business model across Financial Services, Benefits/Insurance Services, and National Practices. This diversification has allowed the company to perform well even in uncertain economic conditions.

Recurring and essential services

CBIZ provides essential, recurring services to its clients, which contributes to the stability and resilience of the business model.

Strong client retention

The company has demonstrated high client retention rates year-over-year, indicating the value it provides to customers.

Broad geographic footprint and client base

CBIZ has a broad geographic reach and serves a diverse client base in terms of size and industry, reducing concentration risk.

Investments in people, tools, and systems

The company has made long-term investments in its people, tools, and systems, which are now contributing to the strong performance and growth across its service lines.

Acquisition strategy

CBIZ continues to actively pursue acquisitions as a key component of its growth strategy, having completed 11 acquisitions in the last 18 months.

The company took a prudent approach in settling the UPMC lawsuit, despite the complex and technical nature of the claims, to mitigate the risk of a large jury verdict.

Margin improvement and cash flow

CBIZ has demonstrated strong margin improvement and cash flow generation, providing financial flexibility for investments, acquisitions, and share repurchases.

Overall, the call highlights CBIZ’s resilient business model, strategic investments, and disciplined approach to managing risks and opportunities, which are positive indicators for long-term investors.

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The information provided on this blog is for informational purposes only and should not be considered as financial advice. You should consult with a qualified financial professional before making any investment decisions. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal.