CBIZ Reports Fourth-Quarter and Full-Year 2017 Results

CBIZ, INC.

FINANCIAL HIGHLIGHTS (UNAUDITED)

THREE MONTHS ENDED DECEMBER 31, 2017 AND 2016

(In thousands, except percentages and per share data)

THREE MONTHS ENDED

DECEMBER 31,

2017

%

2016

%

Revenue

$

195,142

100.0

%

$

178,785

100.0

%

Operating expenses (1)

189,975

97.4

%

171,544

95.9

%

Gross margin

5,167

2.6

%

7,241

4.1

%

Corporate general and administrative expenses (1)

7,316

3.7

%

9,049

5.1

%

Operating loss

(2,149)

-1.1

%

(1,808)

-1.0

%

Other income (expense):

Interest expense

(1,689)

-0.9

%

(1,574)

-0.9

%

Gain on sale of operations, net

-

0.0

%

375

0.2

%

Other income, net (1) (2)

5,196

2.7

%

1,475

0.8

%

Total other income, net

3,507

1.8

%

276

0.1

%

Income (loss) from continuing operations before income tax
expense

1,358

0.7

%

(1,532)

-0.9

%

Income tax benefit

(3,368)

(967)

Income (loss) from continuing operations

4,726

2.4

%

(565)

-0.3

%

Income (loss) from operations of discontinued businesses,
net of tax

121

(121)

Net income (loss)

$

4,847

2.5

%

$

(686)

-0.4

%

Diluted earnings (loss) per share:

Continuing operations

$

0.08

$

(0.01)

Discontinued operations

-

-

Net income (loss)

$

0.08

$

(0.01)

Diluted weighted average common shares outstanding

55,822

53,019

Other data from continuing operations:

Adjusted EBITDA (3)

$

8,940

$

5,406

(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" ($3.3 million expense in 2017 and $0.9 million expense in
2016, or (1.7%) and (0.5%) of revenue, respectively) and "Corporate general and administrative expenses"
($0.4 million expense in 2017 and $0.1 million expense in 2016, or (0.2%) and (0.1%) of revenue for 2017 and
2016, respectively) and are directly offset by deferred compensation gains or losses in "Other income, net"
($3.7 million income in 2017 and $1.0 million income in 2016, or 1.9% and 0.6% 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 December 31, 2017 and 2016, is income of
$1.3 million and $0.4 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)

TWELVE MONTHS ENDED DECEMBER 31, 2017 AND 2016

(In thousands, except percentages and per share data)

TWELVE MONTHS ENDED

DECEMBER 31,

2017

%

2016

%

Revenue

$

855,340

100.0

%

$

799,832

100.0

%

Operating expenses (1)

755,584

88.3

%

697,726

87.2

%

Gross margin

99,756

11.7

%

102,106

12.8

%

Corporate general and administrative expenses (1)

33,295

3.9

%

36,319

4.6

%

Operating income

66,461

7.8

%

65,787

8.2

%

Other income (expense):

Interest expense

(6,675)

-0.8

%

(6,593)

-0.8

%

Gain on sale of operations, net

45

0.0

%

855

0.1

%

Other income, net (1) (2)

14,489

1.7

%

6,957

0.9

%

Total other income, net

7,859

0.9

%

1,219

0.2

%

Income from continuing operations before income tax expense

74,320

8.7

%

67,006

8.4

%

Income tax expense

23,288

26,399

Income from continuing operations

51,032

6.0

%

40,607

5.1

%

Loss from operations of discontinued businesses, net of tax

(655)

(542)

Net income

$

50,377

5.9

%

$

40,065

5.0

%

Diluted earnings (loss) per share:

Continuing operations

$

0.92

$

0.76

Discontinued operations

(0.01)

(0.01)

Net income

$

0.91

$

0.75

Diluted weighted average common shares outstanding

55,689

53,513

Other data from continuing operations:

Adjusted EBITDA (3)

$

104,011

$

94,842

(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" ($10.9 million expense in 2017 and $4.6 million expense in 2016, or (1.3%) and
(0.6%) of revenue, respectively) and "Corporate general and administrative expenses" ($1.2 million expense in 2017 and
$0.7 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" ($12.1 million income in 2017 and $5.3 million income in 2016, or 1.4%
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 twelve months ended December 31, 2017 and 2016, is income of $1.5 million and $1.3
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 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

TWELVE MONTHS ENDED

DECEMBER 31,

DECEMBER 31,

2017

2016

2017

2016

Revenue

Financial Services

$

118,786

$

103,195

$

540,315

$

501,307

Benefits and Insurance Services

68,523

67,816

283,909

267,606

National Practices

7,833

7,774

31,116

30,919

Total

$

195,142

$

178,785

$

855,340

$

799,832

Gross Margin

Financial Services

$

(1,067)

$

(2,960)

$

72,226

$

69,053

Benefits and Insurance Services

11,380

11,980

47,592

44,119

National Practices

802

854

2,734

3,222

Operating expenses - unallocated (1):

Other

(2,640)

(1,734)

(11,860)

(9,722)

Deferred compensation

(3,308)

(899)

(10,936)

(4,566)

Total

$

5,167

$

7,241

$

99,756

$

102,106

(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)

TWELVE MONTHS ENDED

DECEMBER 31,

2017

2016

Net income

$

50,377

$

40,065

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

Depreciation and amortization expense

23,061

22,098

Amortization of discount on notes and deferred financing costs

523

523

Bad debt expense, net of recoveries

5,137

4,090

Adjustments to contingent earnout liability

(2,128)

(1,342)

Employee stock awards

5,705

5,725

Other adjustments

1,081

3,756

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

83,756

74,915

Changes in assets and liabilities, net of acquisitions and divestitures

(11,198)

(4,260)

Operating cash flows provided by continuing operations

72,558

70,655

Operating cash flows (used in) provided by discontinued operations

(627)

387

Net cash provided by operating activities

71,931

71,042

Net cash used in investing activities

(29,408)

(50,014)

Net cash used in financing activities

(45,593)

(18,384)

Net (decrease) increase in cash and cash equivalents

$

(3,070)

$

2,644

CBIZ, INC.

SELECT FINANCIAL DATA AND RATIOS

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

DECEMBER 31,

DECEMBER 31,

2017

2016

Cash and cash equivalents

$

424

$

3,494

Restricted cash

32,985

27,880

Accounts receivable, net

188,300

175,354

Current assets before funds held for clients

245,061

228,135

Funds held for clients

203,112

213,457

Goodwill and other intangible assets, net

613,206

584,401

Total assets

$

1,176,231

$

1,118,588

Notes payable, current

$

1,861

$

1,060

Current liabilities before client fund obligations

130,664

125,592

Client fund obligations

203,582

213,855

Notes payable, non-current

2,164

1,721

Bank debt, net of debt issuance costs

177,672

190,049

Total liabilities

$

645,352

$

638,567

Treasury stock

$

(491,046)

$

(471,311)

Total stockholders' equity

$

530,879

$

480,021

Debt to equity

34.2

%

40.2

%

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

75

76

Shares outstanding

54,592

54,044

Basic weighted average common shares outstanding

53,862

52,321

Diluted weighted average common shares outstanding

55,689

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.

CBIZ, INC.

GAAP RECONCILIATIONS

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

(In thousands)

THREE MONTHS ENDED

TWELVE MONTHS ENDED

DECEMBER 31,

DECEMBER 31,

2017

2016

2017

2016

Income (loss) from continuing
operations

$

4,726

$

(565)

$

51,032

$

40,607

Interest expense

1,689

1,574

6,675

6,593

Income tax (benefit) expense

(3,368)

(967)

23,288

26,399

Gain on sale of operations, net

-

(375)

(45)

(855)

Depreciation

1,410

1,355

5,274

5,378

Amortization

4,483

4,384

17,787

16,720

Adjusted EBITDA

$

8,940

$

5,406

$

104,011

$

94,842

(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.

CBIZ, INC.

GAAP RECONCILIATIONS

Income (Loss) from Continuing Operations and Earnings (Loss) Per Diluted Share

(In thousands, except percentages and per share data)

THREE MONTHS ENDED

DECEMBER 31,

2017

EPS

2016

EPS

Income (loss) from continuing operations

$

4,726

$

0.08

$

(565)

$

(0.01)

Impact of Tax Reform Act

(2,487)

(0.04)

-

-

Income (loss) from continuing operations, adjusted

$

2,239

$

0.04

$

(565)

$

(0.01)

Diluted weighted average common shares outstanding

55,822

53,019

TWELVE MONTHS ENDED

DECEMBER 31,

2017

EPS

2016

EPS

Income from continuing operations

$

51,032

$

0.92

$

40,607

$

0.76

Impact of Tax Reform Act

(2,487)

(0.05)

-

-

Income from continuing operations, adjusted

$

48,545

$

0.87

$

40,607

$

0.76

Diluted weighted average common shares outstanding

55,689

53,513

Income from Continuing Operations and Earnings Per Diluted Share Growth

TWELVE MONTHS ENDED

DECEMBER 31, 2017

Year-over-year growth of income from continuing operations

25.7%

Impact of Tax Reform Act

-6.2%

Year-over-year growth of income from continuing operations, adjusted

19.5%

Year-over-year growth of diluted earnings per share from continuing operations

21.1%

Impact of Tax Reform Act

-6.6%

Year-over-year growth of diluted earnings per share from continuing operations, adjusted

14.5%

Guidance on 2018 Earnings Per Diluted Share from Continuing Operations

Low

High

2018 outlook growth in earnings per share

13

%

17

%

2018 outlook earnings per share

$

1.04

$

1.08

2018 outlook growth in earnings per diluted share, excluding impact of Tax Reform Act

20

%

24

%