CBIZ Reports Fourth-Quarter and Twelve-Month 2018 Results

PR Newswire

CLEVELAND, Feb. 13, 2019 /PRNewswire/ --

FOURTH-QUARTER HIGHLIGHTS:

REVENUE +2.0%
SAME-UNIT REVENUE +0.4%

FULL-YEAR HIGHLIGHTS:

REVENUE +7.8%
SAME-UNIT REVENUE +4.7%
EPS FROM CONTINUING OPERATIONS +18.5%

CBIZ, Inc. (NYSE: CBZ) (the "Company") today announced fourth-quarter and full-year results for the period ended December 31, 2018.

For the 2018 fourth quarter, CBIZ reported revenue of $199.0 million, an increase of $3.9 million, or 2.0%, over the $195.1 million reported in 2017. Same-unit revenue increased by $0.8 million, or 0.4%, for the quarter, compared with the same period a year ago. Newly acquired operations contributed $3.1 million, or 1.6%, to revenue in the quarter. CBIZ reported a loss from continuing operations of $1.0 million, or $0.02 per diluted share, in the 2018 fourth quarter, compared with income of $4.7 million, or $0.08 per diluted share, for the same period a year ago. Adjusted EBITDA for the fourth quarter was $4.8 million, compared with $8.9 million for the fourth quarter of 2017.

For the twelve-month period ended December 31, 2018, CBIZ reported revenue of $922.0 million, an increase of $66.7 million, or 7.8%, over the $855.3 million recorded for 2017. Same-unit revenue increased by $40.2 million, or 4.7%, compared with the same period a year ago. Acquisitions contributed $26.5 million, or 3.1%, to revenue growth. Income from continuing operations was $61.6 million, or $1.09 per diluted share, for the full-year 2018, compared with $51.0 million, or $0.92 per diluted share, for the same period a year ago. Adjusted EBITDA was $109.1 million, compared with $104.0 million for 2017.

Jerry Grisko, CBIZ President and Chief Executive Officer, said, "As our financial results reflect, 2018 was an exceptional year for CBIZ. In addition to experiencing strong demand for our core tax and accounting, advisory and government health care consulting services, we also benefited from strong revenue from some of our more transactional businesses where timing is less predictable. The strength of our business over the past several years has provided us with the opportunity to make significant investments in our future growth. During this past year we continued our investment in new producers within our Benefits and Insurance Services group, invested in new technologies to support a number of our businesses, and added more than $11 million in annualized revenue from strategic acquisitions."

Grisko continued, "Considering the exceptional year we just reported while also being sensitive to future economic uncertainty, we currently foresee continued favorable business conditions and expect strong demand for our services in 2019."

2019 Outlook

The Company expects growth in total revenue within a range of 4% to 6%.
Although a number of factors may impact the tax rate, the Company expects an effective tax rate of approximately 25%.
The Company expects a weighted average fully diluted share count of approximately 56.5 to 57.0 million shares.
The Company expects to grow fully diluted earnings per share within a range of 10% to 12% over the $1.09 reported for 2018.

Conference Call

CBIZ will host a conference call at 11:00 a.m. (ET) today to discuss its results. The call will be webcast live for the media and the public, and can be accessed at www.cbiz.com. Shareholders and analysts who would like to participate in the call can register at http://dpregister.com/10128312 to receive the dial-in number and unique personal identification number. Participants may register at any time, including up to and after the call start time.

A replay of the webcast will be made available approximately two hours following the call on the Company's web site at www.cbiz.com. For those without internet access, a replay of the call will also be available starting at approximately 1:00 p.m. (ET), February 13, through 5:00 p.m. (ET), February 15, 2019. The toll-free dial-in number for the replay is 1-877-344-7529. If you are listening from outside the United States, dial 1-412-317-0088. The access code for the replay is 10128312.

About CBIZ

CBIZ, Inc. is a leading provider of financial, insurance and advisory services to businesses throughout the United States. Financial services include accounting, tax, government health care consulting, transaction advisory, risk advisory, and valuation services. Insurance services include employee benefits consulting, retirement plan consulting, property and casualty insurance, payroll, and human capital consulting. With more than 100 Company offices in 32 states, CBIZ is one of the largest accounting and insurance brokerage providers in the U.S. For more information, visit www.cbiz.com.

Forward-Looking Statements

Forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, but are not limited to, the Company's ability to adequately manage and sustain its growth; the Company's dependence on the current trend of outsourcing business services; the Company's dependence on the services of its CEO and other key employees; competitive pricing pressures; general business and economic conditions; and changes in governmental regulation and tax laws affecting the Company's insurance business or its business services operations. A more detailed description of such risks and uncertainties may be found in the Company's filings with the Securities and Exchange Commission at www.sec.gov.

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

		THREE MONTHS ENDED
		DECEMBER 31,
		2018		%			2017		%
	Revenue	$	199,023		100.0	%	$	195,142		100.0	%
	Operating expenses (1)		181,824		91.4	%		189,975		97.4	%
	Gross margin		17,199		8.6	%		5,167		2.6	%
	Corporate general and administrative expenses (1)		8,873		4.5	%		7,316		3.7	%
	Operating income		8,326		4.1	%		(2,149)		-1.1	%
	Other (expense) income:
	Interest expense		(1,434)		-0.7	%		(1,689)		-0.9	%
	Gain on sale of operations, net		362		0.2	%		-		0.0	%
	Other (expense) income, net (1) (2)		(9,631)		-4.8	%		5,196		2.7	%
	Total other (expense) income, net		(10,703)		-5.3	%		3,507		1.8	%
	(Loss) income from continuing operations before income tax expense		(2,377)		-1.2	%		1,358		0.7	%
	Income tax expense		(1,424)					(3,368)
	(Loss) income from continuing operations		(953)		-0.5	%		4,726		2.4	%
	(Loss) income from operations of discontinued businesses, net of tax		(20)					121
	Net (loss) income	$	(973)		-0.5	%	$	4,847		2.5	%

	Diluted (loss) earnings per share:
	Continuing operations	$	(0.02)				$	0.08
	Discontinued operations		-					-
	Net (loss) income	$	(0.02)				$	0.08

	Diluted weighted average common shares outstanding		56,580					55,822
	Other data from continuing operations:
	Adjusted EBITDA (3)	$	4,842				$	8,940

(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" ($9.2 million income in 2018 and $3.3 million expense in 2017, or 4.6% and (1.7%) of revenue, respectively) and "Corporate general and administrative expenses" ($0.9 million income and $0.4 million expense in 2018 and 2017, respectively, or 0.5% and (0.2%) of revenue, respectively) and are directly offset by deferred compensation gains or losses in "Other (expense) income, net" ($10.1 million expense in 2018 and $3.7 million income in 2017, or 5.1% and 1.9% of revenue, respectively). The deferred compensation plan has no impact on "(Loss) income from continuing operations before income tax expense."

(2)	Included in "Other (expense) income, net" for the three months ended December 31, 2018 is income of $0.7 million related to net changes in the fair value of contingent consideration which is mostly attributable to the required mark-to-market accounting of future share issuances for contingent acquisitions. For the same period in 2017, "Other (expense) income, net" included $1.3 million of income related to net changes in the fair value of contingent consideration related to our prior acquisitions.

(3)	Refer to the financial highlights tables for a reconciliation of Non-GAAP financial measures to the nearest United States 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) YEAR ENDED DECEMBER 31, 2018 AND 2017 *(In thousands, except percentages and per share data)*

		YEAR ENDED
		DECEMBER 31,
		2018		%			2017		%
	Revenue	$	922,003		100.0	%	$	855,340		100.0	%
	Operating expenses (1)		790,283		85.7	%		755,584		88.3	%
	Gross margin		131,720		14.3	%		99,756		11.7	%
	Corporate general and administrative expenses (1)		39,173		4.2	%		33,295		3.9	%
	Operating income		92,547		10.1	%		66,461		7.8	%
	Other (expense) income:
	Interest expense		(6,645)		-0.7	%		(6,675)		-0.8	%
	Gain on sale of operations, net		1,025		0.1	%		45		0.0	%
	Other (expense) income, net (1) (2)		(7,087)		-0.8	%		14,489		1.7	%
	Total other (expense) income, net		(12,707)		-1.4	%		7,859		0.9	%
	Income from continuing operations before income tax expense		79,840		8.7	%		74,320		8.7	%
	Income tax expense		18,267					23,288
	Income from continuing operations		61,573		6.7	%		51,032		6.0	%
	Loss from operations of discontinued businesses, net of tax		(3)					(655)
	Net income	$	61,570		6.7	%	$	50,377		5.9	%

	Diluted earnings (loss) per share:
	Continuing operations	$	1.09				$	0.92
	Discontinued operations		-					(0.01)
	Net income	$	1.09				$	0.91

	Diluted weighted average common shares outstanding		56,487					55,689
	Other data from continuing operations:
	Adjusted EBITDA (3)	$	109,135				$	104,011

(1)	CBIZ sponsors a deferred compensation plan, as discussed in the quarterly footnote section. Income and expenses related to the deferred compensation plan are included in "Operating expenses" ($4.5 million income in 2018 and $10.9 million expense in 2017, or 0.5% and (1.3%) of revenue, respectively) and "Corporate general and administrative expenses" ($0.4 million income in 2018 and $1.2 million expense in 2017, or 0.0% and (0.1%) of revenue, respectively) and are directly offset by deferred compensation gains or losses in "Other (expense) income, net" ($4.9 million expense in 2018 and $12.1 million income in 2017, or (0.5%) and 1.4% 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 twelve months ended December 31, 2018 is expense of $2.6 million related to net changes in the fair value of contingent consideration which is mostly attributable to the required mark-to-market accounting of future share issuances for contingent acquisitions. For the same period in 2017, "Other (expense) income, net" included $1.5 million of income related to net changes in the fair value of contingent consideration related to our prior acquisitions.

(3)	Refer to the financial highlights tables for a reconciliation of Non-GAAP financial measures to the nearest 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				YEAR ENDED
		DECEMBER 31,				DECEMBER 31,
		2018		2017		2018		2017
	Revenue
	Financial Services	$	122,441	$	118,786	$	600,926	$	540,315
	Benefits and Insurance Services		68,285		68,523		288,437		283,909
	National Practices		8,297		7,833		32,640		31,116
	Total	$	199,023	$	195,142	$	922,003	$	855,340

	Gross Margin
	Financial Services	$	437	$	(1,067)	$	92,273	$	72,226
	Benefits and Insurance Services		10,336		11,380		48,791		47,592
	National Practices		650		802		2,637		2,734
	Operating expenses - unallocated (1):
	Other		(3,421)		(2,640)		(16,431)		(11,860)
	Deferred compensation		9,197		(3,308)		4,450		(10,936)
	Total	$	17,199	$	5,167	$	131,720	$	99,756

(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 our deferred compensation plan. These gains or losses do not impact "(Loss) income from continuing operations before income tax expense" as they are directly offset by an 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 an increase or decrease to compensation expense in "Operating expenses" and are directly offset by an increase or decrease to "Other (expense) income, net."

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


	YEAR ENDED
	DECEMBER 31,
	2018		2017
Net income	$	61,570	$	50,377
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		23,675		23,061
Bad debt expense, net of recoveries		3,665		5,137
Adjustments to contingent earnout liability		2,617		(1,494)
Stock-based compensation expense		6,866		5,705
Other noncash adjustments		1,890		970
Net income, after adjustments to reconcile net income to net cash provided by operating activities		100,283		83,756
Changes in assets and liabilities, net of acquisitions and divestitures		5,149		(6,093)
Operating cash flows provided by continuing operations		105,432		77,663
Operating cash used in discontinued operations		(184)		(627)
Net cash provided by operating activities		105,248		77,036
Net cash used in investing activities		(1,156)		(29,408)
Net cash used in financing activities		(109,380)		(45,593)
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(5,288)	$	2,035

	CBIZ, INC. SELECT FINANCIAL DATA AND RATIOS *(In thousands)*

		DECEMBER 31,			DECEMBER 31,
		2018			2017
	Cash and cash equivalents	$	640		$	424
	Restricted cash		27,481			32,985
	Accounts receivable, net		206,635			188,300
	Current assets before funds held for clients		261,597			245,061
	Funds held for clients - current and non-current		161,289			203,112
	Goodwill and other intangible assets, net		637,009			613,206

	Total assets	$	1,182,379		$	1,176,231

	Notes payable - current	$	1,465		$	1,861
	Current liabilities before client fund obligations		159,240			130,664
	Client fund obligations		162,073			203,582
	Notes payable - long-term		1,001			2,164
	Bank debt		133,974			177,672

	Total liabilities	$	589,185		$	645,352

	Treasury stock	$	(508,530)		$	(491,046)

	Total stockholders' equity	$	593,194		$	530,879

	Debt to equity		23.0	%		34.2	%
	Days sales outstanding (DSO) - continuing operations (1)		70			73

	Shares outstanding		55,072			54,592
	Basic weighted average common shares outstanding		54,561			53,862
	Diluted weighted average common shares outstanding		56,487			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.

	CBIZ, INC. GAAP RECONCILIATION (Loss) Income from Continuing Operations to Non-GAAP Financial Measures (1) (In thousands)

		THREE MONTHS ENDED				YEAR ENDED
		DECEMBER 31,				DECEMBER 31,
		2018		2017		2018		2017
	(Loss) income from continuing operations	$	(953)	$	4,726	$	61,573	$	51,032
	Interest expense		1,434		1,689		6,645		6,675
	Income tax (benefit) expense		(1,424)		(3,368)		18,267		23,288
	Gain on sale of operations, net		(362)		-		(1,025)		(45)
	Depreciation		1,757		1,410		6,140		5,274
	Amortization		4,390		4,483		17,535		17,787

	Adjusted EBITDA	$	4,842	$	8,940	$	109,135	$	104,011

(1)	CBIZ reports its financial results in accordance with GAAP. This table reconciles Non-GAAP financial measures to the nearest GAAP financial measure, "(Loss) 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 our operational results and to provide an additional measure with respect to our ability to meet future debt obligations.