CBIZ Reports Fourth-Quarter and Twelve-Month 2018 Results
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%
For the 2018 fourth quarter,
For the twelve-month period ended
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
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
About
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
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 |
(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 |
(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 |
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 |
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 |
(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 |
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 |
||||||||
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 |
100,283 |
83,756 |
||||||
Changes in assets and liabilities, net of acquisitions and |
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 |
$ |
(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 |
$ |
(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. |
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SOURCE
Ware Grove, Chief Financial Officer or Lori Novickis Director, Corporate Relations, CBIZ, Inc., Cleveland, Ohio, (216) 447-9000