CBIZ Reports First-Quarter 2017 Results

CBIZ, INC.

FINANCIAL HIGHLIGHTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2017 AND 2016

(In thousands, except percentages and per share data)

 THREE MONTHS ENDED

 MARCH 31,

2017

%

2016

%

Revenue

$

241,459

100.0%

$

224,238

100.0%

Operating expenses (1)

192,766

79.8%

178,117

79.4%

Gross margin

48,693

20.2%

46,121

20.6%

Corporate general and administrative expenses (1)

8,768

3.7%

10,245

4.6%

Operating income

39,925

16.5%

35,876

16.0%

Other (expense) income:

     Interest expense

(1,517)

-0.6%

(1,526)

-0.7%

     Gain on sale of operations, net

22

0.0%

101

0.0%

     Other income, net (1) (2)

2,737

1.1%

2,147

1.0%

                         Total other income, net

1,242

0.5%

722

0.3%

Income from continuing operations before income tax expense

41,167

17.0%

36,598

16.3%

Income tax expense

16,141

14,800

Income from continuing operations

25,026

10.4%

21,798

9.7%

Loss from operations of discontinued businesses, net of tax

(152)

(30)

Net income

$

24,874

10.3%

$

21,768

9.7%

     Diluted earnings per share:

     Continuing operations

$

0.45

$

0.41

     Discontinued operations

-

-

     Net income

$

0.45

$

0.41

Diluted weighted average common shares outstanding

55,214

52,745

Other data from continuing operations:

Adjusted EBITDA (3)

$

48,303

$

43,268

(1)

CBIZ sponsors a non-qualified 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" ($3.0 million and $0.5 million expense in 2017 and 2016, respectively, or (1.2%) and (0.2%) of revenue, respectively) and "Corporate general and administrative expenses" ($0.3 million and $0.1 million expense in 2017 and 2016, respectively, or (0.1%) and 0.0% of revenue, respectively) and are directly offset by deferred compensation gains or losses in "Other income, net" ($3.3 million and $0.6 million income in 2017 and 2016, or 1.4% and 0.3% of revenue, respectively). The deferred compensation plan has no impact on "Income from continuing operations before income tax expense."

(2)

Included in "Other income, net" for the three months ended March 31, 2017 and 2016, is expense of $0.6 million and income of $1.3 million, respectively, related to net decreases/increases 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,

2017

2016

Revenue

Financial Services

$         158,633

$     152,207

Benefits and Insurance Services

75,164

64,327

National Practices

7,662

7,704

   Total

$         241,459

$     224,238

Gross Margin

Financial Services

$           39,244

$       38,710

Benefits and Insurance Services

15,022

10,647

National Practices

655

827

Operating expenses - unallocated (1):

   Other

(3,274)

(3,581)

   Deferred compensation

(2,954)

(482)

   Total

$           48,693

$       46,121

(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. These gains or losses do not impact "Income from continuing operations before income tax expense" as they are directly offset by the same adjustment to "Other 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 expense in "Operating expenses" and as income in "Other income, net."

CBIZ, INC.

SELECT CASH FLOW DATA

(In thousands)

 THREE MONTHS ENDED

 MARCH 31,

2017

2016

Net income

$       24,874

$     21,768

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

   Depreciation and amortization expense

5,641

5,245

   Amortization of discount on notes and deferred financing costs

131

131

   Bad debt expense, net of recoveries

734

1,170

   Adjustments to contingent earnout liability

485

(1,263)

   Employee stock awards

1,374

1,409

   Other adjustments

(1,179)

297

Net income, after adjustments to reconcile net income to net cash

used in operating activities

32,060

28,757

   Changes in assets and liabilities, net of acquisitions and divestitures

(45,205)

(46,425)

   Operating cash flows used in continuing operations

(13,145)

(17,668)

   Operating cash flows (used in) provided by discontinued operations

(118)

506

Net cash used in operating activities

(13,263)

(17,162)

Net cash provided by investing activities

48,847

17,916

Net cash used in financing activities

(36,654)

(43)

Net (decrease) increase in cash and cash equivalents

$          711

CBIZ, INC.

FINANCIAL HIGHLIGHTS (UNAUDITED)

(In thousands, except percentages and ratios)

SELECT FINANCIAL DATA AND RATIOS

 MARCH 31,

 DECEMBER 31,

2017

2016

Cash and cash equivalents

$           2,424

$           3,494

Restricted cash

26,651

27,880

Accounts receivable, net

220,859

175,354

Current assets before funds held for clients

273,958

228,135

Funds held for clients - current and non-current

158,676

213,457

Goodwill and other intangible assets, net

582,404

584,401

Total assets

$    1,111,187

$    1,118,588

Current liabilities before client fund obligations

$       118,718

$       125,592

Client fund obligations

159,053

213,855

Notes payable - long-term

1,443

1,721

Bank debt

211,479

190,049

Total liabilities

$       603,922

$       638,567

Treasury stock

$      (473,582)

$      (471,311)

Total stockholders' equity

$       507,265

$       480,021

Debt to equity

42.2%

40.2%

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

92

76

Shares outstanding

54,321

54,044

Basic weighted average common shares outstanding

53,293

52,321

Diluted weighted average common shares outstanding

55,214

53,513

(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, 2016 was 92.

CBIZ, INC.

GAAP RECONCILIATION

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

(In thousands)

THREE MONTHS ENDED

MARCH 31,

2017

2016

Income from continuing operations

$                        25,026

$                        21,798

Interest expense

1,517

1,526

Income tax expense

16,141

14,800

Gain on sale of operations, net

(22)

(101)

Depreciation

1,247

1,313

Amortization

4,394

3,932

Adjusted EBITDA

$                        48,303

$                       43,268

(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.