CBIZ Reports First-Quarter 2020 Results

CBIZ, INC.

FINANCIAL HIGHLIGHTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(In thousands, except percentages and per share data)

THREE MONTHS ENDED

MARCH 31,

2020

%

2019

%

Revenue

$

277,455

100.0

%

$

269,998

100.0

%

Operating expenses (1)

199,827

72.0

%

215,496

79.8

%

Gross margin

77,628

28.0

%

54,502

20.2

%

Corporate general and administrative expenses (1)

10,489

3.8

%

11,680

4.3

%

Operating income

67,139

24.2

%

42,822

15.9

%

Other (expense) income:

Interest expense

(1,119)

(0.4)

%

(1,401)

(0.5)

%

Gain on sale of operations, net

95

0.0

%

497

0.2

%

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

(15,800)

(5.7)

%

9,260

3.4

%

Total other (expense) income, net

(16,824)

(6.1)

%

8,356

3.1

%

Income from continuing operations before income tax expense

50,315

18.1

%

51,178

19.0

%

Income tax expense

13,453

13,613

Income from continuing operations

36,862

13.3

%

37,565

13.9

%

Loss from operations of discontinued businesses, net of tax

(14)

(96)

Net Income

$

36,848

13.3

%

$

37,469

13.9

%

Diluted income per share:

Continuing operations

$

0.66

$

0.67

Discontinued operations

-

-

Net income

$

0.66

$

0.67

Diluted weighted average common shares outstanding

55,945

55,915

Other data from continuing operations:

Adjusted EBITDA (3)

$

57,043

$

57,741

(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" ($14.8 million income in 2020 and $8.2 million expense in 2019, or (5.3%) and 3.0% of revenue, respectively) and "Corporate general and administrative expenses" ($1.8 million income in 2020 and $0.9 million expense in 2019, respectively, or (0.7%) and 0.3% of revenue, respectively) and are directly offset by deferred compensation gains or losses in "Other (expense) income, net" ($16.6 million loss in 2020 and $9.1 million gain in 2019, or (6.0%) and 3.4% of revenue, respectively). The deferred compensation plan has no impact on "Loss from continuing operations before income tax expense".    

(2)      Included in "Other (expense) income, net" for the three months ended March 31, 2020 and 2019 is income of $0.7 million and $0.3 million 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,

2020

2019

Revenue

Financial Services

$

188,777

$

185,144

Benefits and Insurance Services

79,612

76,255

National Practices

9,066

8,599

Total

$

277,455

$

269,998

Gross Margin

Financial Services

$

50,179

$

50,686

Benefits and Insurance Services

14,389

14,884

National Practices

783

599

Operating expenses - unallocated (1):

Other

(2,523)

(3,449)

Deferred compensation

14,800

(8,218)

Total

$

77,628

$

54,502

(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)

MARCH 31,

2020

2019

Net income

$

36,848

$

37,469

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization expense

5,704

5,659

Bad debt expense, net of recoveries

2,289

1,054

Adjustments to contingent earnout liability

(684)

(281)

Other noncash adjustments

1,712

511

Net income, after adjustments to reconcile net income to net cash provided by operating activities

45,869

44,412

Changes in assets and liabilities, net of acquisitions and divestitures

(64,500)

(69,074)

Operating cash flows used in continuing operations

(18,631)

(24,662)

Operating cash used in discontinued operations

(16)

(91)

Net cash used in operating activities

(18,647)

(24,753)

Net cash provided by (used in) investing activities

4,355

(9,736)

Net cash provided by financing activities

207,772

10,025

Net change in cash, cash equivalents and restricted cash

$

193,480

$

(24,464)

Cash, cash equivalents and restricted cash at beginning of year

146,505

130,554

Cash, cash equivalents and restricted cash at end of year

$

339,985

$

106,090

Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheet:

Cash and cash equivalents

$

216,942

$

2,143

Restricted cash

28,927

27,721

Cash equivalents included in funds held for clients

94,116

76,226

Total cash, cash equivalents and restricted cash

$

339,985

$

106,090

CBIZ, INC.

SELECT FINANCIAL DATA AND RATIOS

(In thousands, except for percentages and days sales outstanding)

MARCH 31,

DECEMBER 31,

2020

2019

Cash and cash equivalents

$

216,942

$

567

Restricted cash

28,927

29,595

Accounts receivable, net

263,180

222,031

Current assets before funds held for clients

533,589

276,518

Funds held for clients

141,984

179,502

Goodwill and other intangible assets, net

666,112

654,671

Total assets

$

1,616,558

$

1,400,774

Current liabilities before client fund obligations

$

167,210

$

186,906

Client fund obligations

142,219

179,020

Bank debt

381,923

104,333

Total liabilities

$

946,298

$

741,536

Treasury stock

$

(565,180)

$

(535,693)

Total stockholders' equity

$

670,260

$

659,238

Debt to equity

57.2

%

16.0

%

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

94

75

Shares outstanding

54,430

55,419

Basic weighted average common shares outstanding

54,571

54,299

Diluted weighted average common shares outstanding

55,945

55,895

(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, 2019 was 97.

CBIZ, INC.

GAAP RECONCILIATIONS

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

(In thousands)

THREE MONTHS ENDED

MARCH 31,

2020

2019

Income from continuing operations

$

36,862

$

37,565

Interest expense

1,119

1,401

Income tax expense

13,453

13,613

Gain on sale of operations, net

(95)

(497)

Depreciation

2,283

2,157

Amortization

3,421

3,502

Adjusted EBITDA

$

57,043

$

57,741

(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.