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CI

CBIZ, Inc. (CBZ)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 results reflect the November 1 Marcum close: revenue rose 40.5% to $460.3M, but GAAP diluted EPS was a $(1.53) loss as seasonal tax/accounting activity and one‑time transaction/integration costs depressed margins; adjusted EPS was $(0.20) vs $(0.26) a year ago .
  • Same‑unit growth stayed healthy: +6.4% in Q4 and +4.8% for FY24; ex‑Marcum, full‑year revenue grew 7.1% and adjusted EPS rose 10.8% to $2.67, in line with guidance ranges provided earlier in 2024 .
  • 2025 outlook anchors the new CBIZ: revenue $2.90–$2.95B, GAAP EPS $1.97–$2.02, adjusted EPS $3.60–$3.65, and adjusted EBITDA $450–$456M; tax ~29%, diluted shares 64.5–65.0M; management expects stronger 1H seasonality post‑Marcum .
  • Strategic update: integration is on track with an Integration Management Office and early cross‑sell traction; $25M synergy opportunity identified over ~3 years, deleveraging target to ~2–2.25x EBITDA within 24 months from $1.42B YE debt on a new $2B facility .

What Went Well and What Went Wrong

  • What Went Well

    • Same‑unit growth: Q4 same‑unit revenue +6.4%; FY24 same‑unit +4.8% (ex‑Marcum total revenue +7.1%) .
    • Integration momentum and strategic positioning: “Stronger Together” with largest U.S. middle‑market professional services platform; early cross‑sell and unified leadership across six A&T regions and six industry leaders .
    • Clear 2025 roadmap: Adjusted EPS $3.60–$3.65 and adjusted EBITDA ~$455M; additional cash‑flow benefit from goodwill tax amortization expected to grow to ~$30M/year as share installments complete .

  • What Went Wrong

    • Profitability optics: Q4 gross margin and operating margin were materially negative (gross −13.4%, operating −23.1%) due to seasonal loss at Marcum (Nov–Dec), $8.9M incremental amortization and $14.5M incremental interest, plus transaction/integration costs; GAAP diluted loss per share $(1.53) .
    • Segment pressure: Financial Services Q4 gross loss of $(66.2)M, including ~$4.5M Marcum‑related integration costs; contrasted with Benefits & Insurance positive gross margin .
    • Leverage step‑up: YE24 total debt rose to ~$1.40B+ (LT $1,333.8M; current $66.2M) under the new $2.0B facility; debt/equity 78.6%, with deleveraging dependent on cash generation and limited 2025 share repurchases .

Financial Results

Note: Estimate comparisons are not shown because S&P Global consensus data could not be retrieved at this time (API limit exceeded).

MetricQ4 2023Q3 2024Q4 2024
Revenue ($M)$327.5 $438.9 $460.3
GAAP Diluted EPS ($)$(0.26) $0.70 $(1.53)
Adjusted Diluted EPS ($)$(0.26) $0.84 $(0.20)
Gross Margin %(4.1)% 16.6% (13.4)%
Operating Margin %(8.2)% 11.3% (23.1)%
Same‑Unit Revenue Growth %—5.1% 6.4%
Interest Expense ($M)$5.1 $5.0 $19.0

Segment Revenue and Gross Margin (Q4)

SegmentQ4 2023 Revenue ($M)Q4 2024 Revenue ($M)YoY %Q4 2023 Gross Margin ($M)Q4 2024 Gross Margin ($M)
Financial Services$228.3 $358.4 57%$(9.2) $(66.2)
Benefits & Insurance$86.4 $91.2 5%$10.8 $12.8
National Practices$12.8 $10.7 (16)%$1.6 $1.2
Total$327.5 $460.3 40%$(13.3) $(61.9)

Key Balance Sheet & Cash Metrics

KPIQ3 2024Q4 2024
Total Assets ($M)$2,133.4 $4,470.9
Total LT Debt, net ($M)$335.8 $1,333.8
Current Portion LT Debt, net ($M)— $66.2
Debt to Equity (%)36.2% 78.6%
DSO (days)97 73
Cash from Operations ($M, FY)—$123.7 (FY24)

Non‑GAAP Reconciliation Highlights (Q4 and FY)

  • Q4 Adjusted EPS excludes Marcum impact ($57.1M operating loss for Nov–Dec), $34.1M acquisition‑related costs (incl. $20.9M transaction), and $14.5M incremental interest, with tax effects; adjusted EPS $(0.20) vs $(0.26) prior year .
  • FY24 Adjusted EPS was $2.67 (+10.8% YoY), excluding the Marcum impact ($127.1M), acquisition costs, and normalizing tax/share count effects .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueFY2025Not previously provided$2.90B–$2.95B New
GAAP Diluted EPSFY2025Not previously provided$1.97–$2.02 New
Adjusted Diluted EPSFY2025Not previously provided (prior projection: ~+10% accretion vs standalone CBIZ) $3.60–$3.65 New; consistent with ~10% accretion
Adjusted EBITDAFY2025Not previously provided$450.4–$456.2M New
Effective Tax RateFY2025—~29% New
Diluted SharesFY2025—64.5–65.0M New
Seasonality NoteFY2025—1H earnings ~10% stronger; 2H ~10% weaker vs historical CBIZ pattern New
Leverage Target~24 months—Deleverage to ~2–2.25x EBITDA; YE24 debt $1.42B, $0.55B unused capacity on $2B facility New

Earnings Call Themes & Trends

TopicQ2 2024 (two quarters back)Q3 2024 (prior quarter)Q4 2024 (current)Trend
Macro/Client SentimentSome clients delayed discretionary projects; election/interest‑rate uncertainty; reaffirmed FY24 adj. EPS growth 10–12% ex‑Marcum Cautious optimism; pricing drove growth; reaffirmed FY24 guidance Optimism for improved discretionary/advisory in 2025 post‑election; tariffs watched Improving
Pricing/YieldPricing a key driver; P&C producer loss hurt B&I 80–90% of FS organic growth from pricing; pricing moderating with lower inflation Mid‑single‑digit organic framework; pricing still strong Sustained but moderating
Advisory ServicesMixed in Q2 amid client caution Stronger than expected; more, smaller PE‑related projects Expect stronger discretionary demand in 2025 Reaccelerating
Government Health Care ConsultingHealthy; part of resilient mix Strong; high single‑digit growth; scaling to ~$200M+ No expected pause; may benefit if federal workforce reduced Strong
Marcum AcquisitionAgreement announced; expected 4Q close; accretive in first full year Pre‑close planning; $2.0B facility syndicated; accretion/EBITDA leverage outlined Closed Nov 1; integration IMO; early cross‑sell; $25M synergies over ~3 years Integration underway
Seasonality/Modeling—FY24 guide re‑affirmed ex‑Marcum; normal CBIZ seasonality Post‑Marcum, 1H to be ~10% stronger, 2H weaker; more pronounced A&T seasonality Seasonality amplified
Leverage & DeleveragingDebt $381M 6/30; facility upsizing planned New $2.0B facility ready; initial leverage 3.25–3.5x, to ~2x in 24 months YE24 debt $1.42B; path to ~2–2.25x in ~24 months On plan
Technology/ScaleAnnounced tech solutions (e.g., CompuData) —Larger scale enables more tech/innovation investment Investment capacity up

Management Commentary

  • “With the successful close of the Marcum transaction…CBIZ has solidified our position as the largest provider of professional services of our kind to middle‑market businesses.” – CEO Jerry Grisko .
  • “There is a significant seasonal loss from the newly acquired Marcum operations for the months of November and December… The additional amortization expense of $8.9 million, plus the incremental interest expense of $14.5 million, further increases the seasonal operating loss.” – CFO Ware Grove .
  • “Our expectation for 2025 calls for adjusted earnings per share within a range of $3.60 to $3.65 per share… Adjusted EBITDA for 2025 is expected at approximately $455 million.” – CFO Ware Grove .
  • “We’re making excellent progress [on integration]… taking a best‑of‑both approach… and a shared commitment to achieving our milestones, including the anticipated synergies.” – CEO Jerry Grisko .
  • “At that scale, we can do more on the technology side… innovation and transformation… elevate our brand… attract talent.” – CEO Jerry Grisko .

Q&A Highlights

  • Adjusted EPS construction: Management confirmed adjusted EPS adds back non‑cash amortization of intangibles and acquisition‑related costs (tax‑affected), with no “double counting”; separate cash‑flow tax asset benefit discussed outside adjusted EPS .
  • Deleveraging cadence: Expect leverage to initially steady/tick up in 1H25 due to seasonality, then fall in 2H; to ~2x by end of year two; interest expense projected at ~$100M in 2025 assuming flat rates .
  • Seasonality shift: Combined A&T mix means 1H earnings ~10% stronger and 2H ~10% weaker than historical CBIZ pattern; important for modeling .
  • Marcum organic outlook and cross‑sell: Core Marcum expected to track CBIZ’s core accounting growth; early cross‑serving with Benefits & Insurance showing “terrific” opportunities .
  • Pricing: Ongoing pricing power remains a key contributor to organic growth (mid‑single digits overall), embedded in annual renewals; moderation aligns with lower inflation .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 revenue/EPS and prior quarters was unavailable due to a temporary data access limit, so beat/miss analysis versus consensus is not included at this time. We attempted retrieval but could not obtain values via S&P Global at the time of this report.

Key Takeaways for Investors

  • The headline Q4 loss is largely optical: a two‑month seasonal stub from Marcum plus one‑time costs and incremental amortization/interest; excluding these, FY24 adjusted EPS rose 10.8% to $2.67, consistent with targets .
  • 2025 setup is clear and measurable: revenue $2.90–$2.95B, adjusted EPS $3.60–$3.65, adjusted EBITDA $450–$456M, with a tax rate ~29% and shares 64.5–65.0M; model a stronger 1H and softer 2H vs historic CBIZ seasonality .
  • Integration is progressing with identifiable synergy levers (~$25M over ~3 years) and early cross‑sell; management expects modest synergy realization in 2025, building more in 2026+ .
  • Leverage rose as expected (YE debt $1.42B); robust cash generation, a goodwill tax shield, and disciplined capex ($20–$25M) support the deleveraging plan to ~2–2.25x within ~24 months; share repurchases may resume later in 2025 as lockups roll off and conditions permit .
  • Watch catalysts: 1) busy‑season execution and realization in A&T, 2) pace of integration milestones and synergy capture, 3) advisory and discretionary demand re‑acceleration, 4) interest‑rate path vs ~$100M 2025 interest guide, 5) client/people retention and brand consolidation post‑Marcum .

Appendix – Additional Reference Items

  • Transaction close and strategic benefits: CBIZ completed the non‑attest acquisition of Marcum on Nov. 1, 2024; expected combined annualized revenue of ~$2.8B; accretive to 2025 adjusted EPS by ~10% .
  • FY24 Financial snapshot: Revenue $1,813.5M (+14%); GAAP EPS $0.78; Adjusted EPS $2.67; YE cash from operations $123.7M; assets $4.47B; debt $1.40B+ under $2.0B facility .