CBIZ Reports First-Quarter 2018 Results

CBIZ, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(In thousands, except percentages and per share data)

THREE MONTHS ENDED

MARCH 31,

2018

%

2017

%

Revenue

$

266,090

100.0

%

$

241,459

100.0

%

Operating expenses (1)

204,750

76.9

%

192,766

79.8

%

Gross margin

61,340

23.1

%

48,693

20.2

%

Corporate general and administrative expenses (1)

10,028

3.8

%

8,768

3.7

%

Operating income

51,312

19.3

%

39,925

16.5

%

Other (expense) income:

Interest expense

(1,780)

-0.7

%

(1,517)

-0.6

%

Gain on sale of operations, net

663

0.3

%

22

0.0

%

Other (expense) income, net (1) (2)

(1,229)

-0.5

%

2,737

1.1

%

Total other (expense) income, net

(2,346)

-0.9

%

1,242

0.5

%

Income from continuing operations before income tax

   expense

48,966

18.4

%

41,167

17.0

%

Income tax expense

13,156

16,141

Income from continuing operations

35,810

13.5

%

25,026

10.4

%

Income (loss) from operations of discontinued businesses, net of   tax

41

(152)

Net income

$

35,851

13.5

%

$

24,874

10.3

%

Diluted earnings per share:

Continuing operations

$

0.64

$

0.45

Discontinued operations

-

-

Net income

$

0.64

$

0.45

Diluted weighted average common shares outstanding

55,924

55,214

Other data from continuing operations:

Adjusted EBITDA (3)

$

55,858

$

48,303

(1)

CBIZ sponsors a deferred compensation plan, under which a CBIZ employee's compensation deferral is held in a rabbi trust and invested accordingly as directed by the employee. Income and expenses related to the deferred compensation plan are included in "Operating expenses" ($0.1 million income in 2018 and $3.0 million expense in 2017, or 0.0% and (1.2%) of revenue, respectively) and "Corporate general and administrative expenses" ($16 thousand income in 2018 and $0.3 million expense in 2017, or 0.0% and (0.1%) of revenue for 2018 and 2017, respectively) and are directly offset by deferred compensation gains or losses in "Other (expense) income, net" ($0.1 million expense in 2018 and $3.3 million income in 2017, or 0.0% and 1.3% of revenue, respectively). The deferred compensation plan has no impact on "Income from continuing operations before income tax expense".    

(2)

Included in "Other (expense) income, net" for the three months ended March 31, 2018 and 2017, is expense of $1.6 million and $0.6 million, respectively, related to net changes in the fair value of contingent consideration related to CBIZ's prior acquisitions.

(3)

Refer to the financial highlights tables for a reconciliation of Non-GAAP financial measures to the nearest generally accepted accounting principles ("GAAP") financial measure, and for additional information as to the usefulness of the Non-GAAP financial measures to shareholders and investors. 

CBIZ, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
(In thousands)

SELECT SEGMENT DATA

THREE MONTHS ENDED

MARCH 31,

2018

2017

Revenue

Financial Services

$

180,603

$

158,633

Benefits and Insurance Services

77,330

75,164

National Practices

8,157

7,662

Total

$

266,090

$

241,459

Gross Margin

Financial Services

$

47,570

$

39,244

Benefits and Insurance Services

16,197

15,022

National Practices

882

655

Operating expenses - unallocated (1):

Other

(3,423)

(3,274)

Deferred compensation

114

(2,954)

Total

$

61,340

$

48,693

(1)

Represents operating expenses not directly allocated to individual businesses, including stock-based compensation, consolidation and integration charges, and certain advertising expenses. "Operating expenses - unallocated" also include gains or losses attributable to the assets held in the Company's deferred compensation plan, which do not impact "Income from continuing operations before income tax expense" as they are directly offset by the same adjustment to "Other (expense) income, net" in the Consolidated Statements of Comprehensive Income. Net gains/losses recognized from adjustments to the fair value of the assets held in the deferred compensation plan are recorded as compensation income/expense in "Operating expenses" and as income/expense in "Other (expense) income, net".

CBIZ, INC.
SELECT CASH FLOW DATA
(In thousands)

THREE MONTHS ENDED

MARCH 31,

2018

2017

Net income

$

35,851

$

24,874

Adjustments to reconcile net income to net cash provided by operating

   activities:

Depreciation and amortization expense

5,775

5,641

Bad debt expense, net of recoveries

1,766

734

Adjustments to contingent earnout liability

1,609

616

Other

(1,244)

195

Net income, after adjustments to reconcile net income to net

   cash used in operating activities

43,757

32,060

Changes in assets and liabilities, net of acquisitions and divestitures

(64,396)

(46,434)

Operating cash flows used in continuing operations

(20,639)

(14,374)

Operating cash flows provided by (used in) discontinued operations

139

(118)

Net cash used in operating activities

(20,500)

(14,492)

Net cash provided by investing activities

37,455

48,847

Net cash used in financing activities

(20,296)

(36,654)

Net decrease in cash, cash equivalents and restricted cash

$

(3,341)

$

(2,299)

CBIZ, INC.
SELECT FINANCIAL DATA AND RATIOS
(In thousands, except for percentages and days sales outstanding)

MARCH 31,

DECEMBER 31,

2018

2017

Cash and cash equivalents

$

295

$

424

Restricted cash

29,773

32,985

Accounts receivable, net

261,336

188,300

Current assets before funds held for clients

315,907

245,061

Funds held for clients

147,655

203,112

Goodwill and other intangible assets, net

631,956

613,206

Total assets

$

1,214,353

$

1,176,231

Notes payable, current

$

1,743

$

1,861

Current liabilities before client fund obligations

139,687

130,664

Client fund obligations

148,654

203,582

Notes payable, non-current

1,824

2,164

Bank debt, net of debt issuance costs

214,002

177,672

Total liabilities

$

642,737

$

645,352

Treasury stock

$

(491,604)

$

(491,046)

Total stockholders' equity

$

571,616

$

530,879

Debt to equity

38.1

%

34.2

%

Days sales outstanding (DSO) - continuing operations (1)

92

72

Shares outstanding

54,956

54,592

Basic weighted average common shares outstanding

54,071

53,862

Diluted weighted average common shares outstanding

55,924

55,689

(1)

DSO is provided for continuing operations and represents accounts receivable, net, at the end of the period, divided by trailing twelve month daily revenue. The Company has included DSO data because such data is commonly used as a performance measure by analysts and investors and as a measure of the Company's ability to collect on receivables in a timely manner. DSO should not be regarded as an alternative or replacement to any measurement of performance under GAAP. DSO at March 31, 2017 was 91.

CBIZ, INC.
GAAP RECONCILIATIONS

Income from Continuing Operations to Non-GAAP Financial Measures (1)
(In thousands)

THREE MONTHS ENDED

MARCH 31,

2018

2017

Income from continuing operations

$

35,810

$

25,026

Interest expense

1,780

1,517

Income tax expense

13,156

16,141

Gain on sale of operations, net

(663)

(22)

Depreciation

1,404

1,247

Amortization

4,371

4,394

Adjusted EBITDA

$

55,858

$

48,303

(1)

CBIZ reports its financial results in accordance with GAAP. This table reconciles Non-GAAP financial measures to the nearest GAAP financial measure, "Income from continuing operations". Adjusted EBITDA is not defined by GAAP and should not be regarded as an alternative or replacement to any measurement of performance or cash flow under GAAP. Adjusted EBITDA is commonly used by the Company, its shareholders and debt holders to evaluate, assess and benchmark the Company's operational results and to provide an additional measure with respect to the Company's ability to meet future debt obligations.

Guidance on 2018 Earnings Per Diluted Share from Continuing Operations

Low

High

2018 outlook growth in earnings per share

13

%

17

%

2018 outlook earnings per share

$

1.04

$

1.08

2018 outlook growth in earnings per diluted share, excluding impact of Tax Reform Act

20

%

24

%