CBIZ Reports Second-Quarter And First-Half 2017 Results

CBIZ, INC.

FINANCIAL HIGHLIGHTS (UNAUDITED)

THREE MONTHS ENDED JUNE 30, 2017 and 2016

(In thousands, except percentages and per share data) 

THREE MONTHS ENDED

JUNE 30,

2017

%

2016

%

Revenue

$           211,016

100.0%

$           197,015

100.0%

Operating expenses (1)

188,120

89.1%

173,996

88.3%

Gross margin

22,896

10.9%

23,019

11.7%

Corporate general and administrative expenses (1)

9,232

4.4%

8,346

4.2%

Operating income

13,664

6.5%

14,673

7.5%

Other income (expense): 

Interest expense

(1,692)

-0.8%

(1,733)

-0.9%

Gain on sale of operations, net

23

0.0%

50

0.0%

Other income, net (1) (2)

3,764

1.8%

703

0.4%

Total other income (expense), net

2,095

1.0%

(980)

-0.5%

Income from continuing operations before income tax expense

15,759

7.5%

13,693

7.0%

Income tax expense

4,343

5,306

Income from continuing operations

11,416

5.4%

8,387

4.3%

Loss from operations of discontinued businesses, net of tax

(418)

(258)

Net income

$            10,998

5.2%

$              8,129

4.1%

Diluted earnings (loss) per share:

Continuing operations

$                0.20

$                0.16

Discontinued operations

(0.01)

-

Net income

$                0.19

$                0.16

Diluted weighted average common shares outstanding

55,831

53,079

Other data from continuing operations:

Adjusted EBITDA (3)

$            23,066

$            20,813

(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" ($2 million expense in 2017 and $1 million expense in 2016, or (0.9%) and (0.5%) of revenue, respectively) and "Corporate general and administrative expenses" ($0.2 million expense in 2017 and $0.3 million expense in 2016, or (0.1%) and (0.2%) of revenue, respectively) and are directly offset by deferred compensation gains or losses in "Other income, net" ($2.2 million income in 2017 and $1.3 million income in 2016, or 1.0% and 0.7% 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 June 30, 2017 and 2016, is income of $1.4 million and expense of $0.5 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)

SIX MONTHS ENDED JUNE 30, 2017 and 2016

(In thousands, except percentages and per share data) 

SIX MONTHS ENDED

JUNE 30,

2017

%

2016

%

Revenue

$           452,475

100.0%

$           421,253

100.0%

Operating expenses (1)

380,886

84.2%

352,113

83.6%

Gross margin

71,589

15.8%

69,140

16.4%

Corporate general and administrative expenses (1)

18,000

4.0%

18,591

4.4%

Operating income

53,589

11.8%

50,549

12.0%

Other income (expense): 

Interest expense

(3,209)

-0.7%

(3,259)

-0.8%

Gain on sale of operations, net

45

0.0%

151

0.0%

Other income, net (1) (2)

6,501

1.5%

2,850

0.7%

Total other income (expense), net

3,337

0.8%

(258)

-0.1%

Income from continuing operations before income tax expense

56,926

12.6%

50,291

11.9%

Income tax expense

20,484

20,106

Income from continuing operations

36,442

8.1%

30,185

7.2%

Loss from operations of discontinued businesses, net of tax

(570)

(288)

Net income

$            35,872

7.9%

$            29,897

7.1%

Continuing operations

$                0.66

$                0.57

Discontinued operations

(0.01)

(0.01)

Net income

$                0.65

$                0.56

Diluted weighted average common shares outstanding

55,530

52,901

Other data from continuing operations:

Adjusted EBITDA (3)

$            71,369

$            64,081

(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" ($4.9 million expense in 2017 and $1.5 million expense in 2016, or (1.1%) and (0.4%) of revenue, respectively) and "Corporate general and administrative expenses" ($0.5 million expense in 2017 and $0.4 million expense in 2016, or (0.1%) of revenue for both 2017 and 2016) and are directly offset by deferred compensation gains or losses in "Other income, net" ($5.4 million income in 2017 and $1.9 million income in 2016, or 1.2% and 0.5% 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 six months ended June 30, 2017 and 2016, is income of $0.8 million and $0.7 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 

 SIX MONTHS ENDED 

 JUNE 30, 

 JUNE 30, 

2017

2016

2017

2016

Revenue

Financial Services

$           132,591

$           122,856

$           291,224

$           275,063

Benefits and Insurance Services

70,559

66,484

145,723

130,811

National Practices

7,866

7,675

15,528

15,379

Total

$           211,016

$           197,015

$           452,475

$           421,253

Gross Margin

Financial Services

$            16,740

$            15,869

$            55,984

$            54,579

Benefits and Insurance Services

10,682

10,140

25,704

20,787

National Practices

631

670

1,286

1,497

Operating expenses - unallocated (1):

Other

(3,167)

(2,614)

(6,441)

(6,195)

Deferred compensation

(1,990)

(1,046)

(4,944)

(1,528)

Total

$            22,896

$            23,019

$            71,589

$            69,140

(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 (expense), 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 (expense), net".

CBIZ, INC.

SELECT CASH FLOW DATA

(In thousands) 

 SIX MONTHS ENDED 

 JUNE 30, 

2017

2016

Net income 

$            35,872

$            29,897

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization expense

11,279

10,682

Amortization of discount on notes and deferred financing costs

262

262

Bad debt expense, net of recoveries

2,439

2,205

Adjustments to contingent earnout liability

(1,032)

(714)

Employee stock awards

2,790

2,842

Other adjustments

(1,101)

464

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

50,509

45,638

Changes in assets and liabilities, net of acquisitions and divestitures

(32,775)

(23,806)

Operating cash flows provided by continuing operations

17,734

21,832

Operating cash flows (used in) provided by discontinued operations

(540)

428

Net cash provided by operating activities

17,194

22,260

Net cash provided by (used in) investing activities

31,757

(32,196)

Net cash (used in) provided by financing activities

(51,284)

17,578

Net (decrease) increase in cash and cash equivalents

$              7,642

CBIZ, INC.

SELECT FINANCIAL DATA AND RATIOS

(In thousands)

JUNE 30,

DECEMBER 31,

2017

2016

Cash and cash equivalents

$              1,161

$              3,494

Restricted cash

34,924

27,880

Accounts receivable, net

218,317

175,354

Current assets before funds held for clients

279,891

228,135

Funds held for clients - current and non-current

148,704

213,457

Goodwill and other intangible assets, net

618,846

584,401

Total assets

$        1,150,666

$        1,118,588

Current liabilities before client fund obligations

$           141,434

$           125,592

Client fund obligations

148,814

213,855

Notes payable - long-term

1,696

1,721

Bank debt

209,510

190,049

Total liabilities

$           627,304

$           638,567

Treasury stock

$          (476,986)

$          (471,311)

Total stockholders' equity

$           523,362

$           480,021

Debt to equity

40.6%

40.2%

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

88

76

Shares outstanding

55,055

54,044

Basic weighted average common shares outstanding

53,632

52,321

Diluted weighted average common shares outstanding

55,530

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 June 30, 2016 was 83.

CBIZ, INC.

GAAP RECONCILIATION

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

(In thousands)

THREE MONTHS ENDED

SIX MONTHS ENDED

JUNE 30,

JUNE 30,

2017

2016

2017

2016

Income from continuing operations

$            11,416

$              8,387

$            36,442

$            30,185

Interest expense

1,692

1,733

3,209

3,259

Income tax expense

4,343

5,306

20,484

20,106

Gain on sale of operations, net

(23)

(50)

(45)

(151)

Depreciation

1,215

1,342

2,462

2,655

Amortization

4,423

4,095

8,817

8,027

Adjusted EBITDA

$            23,066

$            20,813

$            71,369

$            64,081

(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.