Cbiz Inc CBZ

CBIZ, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 2022 AND 2021
(In thousands, except percentages and per share data)

Three Months Ended December 31,

2022

%

2021

%

Revenue

$ 295,043

100.0 %

$ 242,828

100.0 %

Operating expenses ⁽¹⁾

302,560

102.5

246,402

101.5

Gross loss

(7,517)

(2.5)

(3,574)

(1.5)

Corporate general and administrative expenses ⁽¹⁾

11,895

4.0

14,816

6.1

Operating loss

(19,412)

(6.5)

(18,390)

(7.6)

Other (expense) income:

Interest expense

(2,830)

(0.9)

(1,016)

(0.4)

Gain (loss) on sale of operations, net

102

—

(390)

(0.2)

Other income, net ^{(1) (2)}

5,694

1.9

6,212

2.6

Total other income, net

2,966

1.0

4,806

2.0

Loss from continuing operations before income tax benefit

(16,446)

(5.5)

(13,584)

(5.6)

Income tax benefit

(4,953)

(3,971)

Loss from continuing operations

(11,493)

(3.9)

(9,613)

(4.0)

Loss from operations of discontinued businesses, net of tax

(5)

(7)

Net loss

$ (11,498)

(3.9) %

$   (9,620)

(4.0) %

Diluted loss per share:

Continuing operations

$     (0.23)

$     (0.19)

Discontinued operations

—

—

Net loss

$     (0.23)

$     (0.19)

Diluted weighted average common shares outstanding

50,538

51,899

Other data from continuing operations:

Adjusted EBITDA ⁽³⁾

$   (4,351)

$   (5,021)

Adjusted EPS ⁽³⁾

$     (0.21)

$     (0.19)

⁽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" and "Corporate general and administrative expenses," and are directly offset by deferred
compensation gains in "Other income, net." The deferred compensation plan has no impact on "Loss from continuing
operations before income tax benefit."

Income and expenses related to the deferred compensation plan for the three months ended December 31, 2022, and 2021 are as follows (in thousands):

Three Months Ended December 31,

2022

% of Revenue

2021

% of Revenue

Operating expenses

$       5,748

1.9 %

$       6,152

2.5 %

Corporate general and administrative expenses

926

0.3 %

908

0.4 %

Other income, net

6,674

2.3 %

7,060

2.9 %

Excluding the impact of the above-mentioned income and expenses related to the deferred compensation plan, the operating
results for the three months ended December 31, 2022, and 2021 are as follows (in thousands):

Three Months Ended December 31,

2022

2021

As
Reported

Deferred
Compensation
Plan

Adjusted

% of
Revenue

As
Reported

Deferred
Compensation
Plan

Adjusted

% of
Revenue

Gross (loss) margin

$   (7,517)

$       5,748

$   (1,769)

(0.6) %

$   (3,574)

$       6,152

$    2,578

1.1 %

Operating loss

(19,412)

6,674

(12,738)

(4.3) %

(18,390)

7,060

(11,330)

(4.7) %

Other income (expense), net

5,694

(6,674)

(980)

(0.3) %

6,212

(7,060)

(848)

(0.3) %

Loss from continuing operations before
income tax benefit

(16,446)

—

(16,446)

(5.6) %

(13,584)

—

(13,584)

(5.6) %

(2)

Included in "Other income, net" for the three months ended December 31, 2022 and 2021, is expense of $0.5 million and $0.8
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 most directly comparable
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, 2022 AND 2021
(In thousands, except percentages and per share data)

Twelve Months Ended December 31,

2022

%

2021

%

Revenue

$ 1,411,979

100.0 %

$ 1,104,925

100.0 %

Operating expenses ⁽¹⁾

1,188,612

84.2

945,635

85.6

Gross margin

223,367

15.8

159,290

14.4

Corporate general and administrative expenses ⁽¹⁾

55,023

3.8

56,150

5.1

Legal settlement, net

—

—

30,468

2.7

Operating income

168,344

12.0

72,672

6.6

Other income (expense):

Interest expense

(8,039)

(0.6)

(3,868)

(0.4)

Gain on sale of operations, net

413

—

5,995

0.5

Other (expense) income, net ^{(1) (2)}

(19,225)

(1.4)

18,241

1.7

Total other (expense) income, net

(26,851)

(2.0)

20,368

1.8

Income from continuing operations before income tax expense

141,493

10.0

93,040

8.4

Income tax expense

36,121

22,129

Income from continuing operations

105,372

7.5

70,911

6.4

Loss from operations of discontinued businesses, net of tax

(18)

(24)

Net income

$  105,354

7.5 %

$   70,887

6.4 %

Diluted income per share:

Continuing operations

$        2.01

$       1.32

Discontinued operations

—

—

Net income

$        2.01

$       1.32

Diluted weighted average common shares outstanding

52,388

53,723

Other data from continuing operations:

Adjusted EBITDA ⁽³⁾

$  190,143

$  148,459

Adjusted EPS ⁽³⁾

$        2.13

$       1.66

⁽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" and "Corporate general and administrative expenses," and are directly offset by deferred compensation gains
in "Other (expense) income, net." The deferred compensation plan has no impact on "Income from continuing operations before
income tax expense."

Income and expenses related to the deferred compensation plan for the twelve months ended December 31, 2022, and 2021
are as follows (in thousands):

Twelve Months Ended December 31,

2022

% of Revenue

2021

% of Revenue

Operating (income) expenses

$   (17,252)

(1.2) %

$     17,317

1.6 %

Corporate general and administrative (income) expenses

(2,393)

(0.2) %

2,168

0.2 %

Other (expense) income, net

(19,645)

(1.4) %

19,485

1.8 %

Excluding the impact of the above-mentioned income and expenses related to the deferred compensation plan, the operating
results for the twelve months ended December 31, 2022, and 2021 are as follows (in thousands):

Twelve Months Ended December 31,

2022

2021

As
Reported

Deferred
Compensation
Plan

Adjusted

% of
Revenue

As
Reported

Deferred
Compensation
Plan

Adjusted

% of
Revenue

Gross margin

$ 223,367

$    (17,252)

$ 206,115

14.6 %

$ 159,290

$     17,317

$ 176,607

16.0 %

Operating income

168,344

(19,645)

148,699

10.5 %

72,672

19,485

92,157

8.3 %

Other (expense) income, net

(19,225)

19,645

420

— %

18,241

(19,485)

(1,244)

(0.1) %

Income from continuing operations
before income tax expense

141,493

—

141,493

10.0 %

93,040

—

93,040

8.4 %

⁽²⁾

Included in "Other (expense) income, net" for the twelve months ended December 31, 2022 and 2021, is expense of $2.4 million
and $2.4 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 most directly comparable
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 December
31,

Twelve Months Ended December
31,

2022

2021

2022

2021

Revenue

Financial Services

$      202,016

$      156,056

1,010,068

734,026

Benefits and Insurance Services

81,746

76,667

358,007

332,323

National Practices

11,281

10,105

43,904

38,576

Total

$      295,043

$      242,828

$   1,411,979

$   1,104,925

Gross Margin

Financial Services ⁽¹⁾

(8,242)

(3,338)

$      160,030

$      125,788

Benefits and Insurance Services

12,357

8,765

67,620

60,673

National Practices

1,298

1,153

4,703

4,082

Operating expenses - unallocated ⁽²⁾:

Other expense

(7,182)

(4,002)

(26,238)

(13,936)

Deferred compensation

(5,748)

(6,152)

17,252

(17,317)

Total

$        (7,517)

$        (3,574)

$      223,367

$      159,290

⁽¹⁾ 

Gross margin for the Financial Services practice group included approximately $0.8 million and $6.7 million one-time and non-recurring integration and retention costs related to Marks Paneth for the three months and twelve months ended December 31, 2022, respectively.

⁽²⁾

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 includes gains or losses attributable to the assets held in a rabbi trust associated with 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 rabbi trust are recorded as compensation expense in "Operating expenses" and "Corporate, general and administrative expenses," and offset in "Other income, net."

CBIZ, INC.
SELECT CASH FLOW DATA
(In thousands)

Twelve Months Ended December 31,

2022

2021

Net income

$       105,354

$         70,887

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

Depreciation and amortization expense

32,895

27,078

Gain on sale of operations, net

(413)

(5,995)

Bad debt expense, net of recoveries

1,173

3,054

Adjustments to contingent earnout liability, net

2,435

2,367

Stock-based compensation expense

14,689

11,407

Other noncash adjustments

12,060

9,108

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

168,193

117,906

Changes in assets and liabilities, net of acquisitions and divestitures

(42,043)

13,272

Operating cash flows provided by continuing operations

126,150

131,178

Operating cash used in discontinued operations

(18)

(24)

Net cash provided by operating activities

126,132

131,154

Net cash used in investing activities

(99,118)

(82,010)

Net cash used in financing activities

(17,343)

(69,005)

Net increase (decrease) in cash, cash equivalents and restricted cash

9,671

(19,861)

Cash, cash equivalents and restricted cash at beginning of year

$       150,474

$       170,335

Cash, cash equivalents and restricted cash at end of period

$       160,145

$       150,474

Reconciliation of cash, cash equivalents and restricted cash to the
consolidated balance sheet:

Cash and cash equivalents

$           4,697

$           1,997

Restricted cash

28,487

30,383

Cash equivalents included in funds held for clients

126,961

118,094

Total cash, cash equivalents and restricted cash

$       160,145

$       150,474

CBIZ, INC.
SELECT FINANCIAL DATA AND RATIOS
(In thousands)

December 31, 2022

December 31, 2021

Cash and cash equivalents

4,697

1,997

Restricted cash

28,487

30,383

Accounts receivable, net

334,498

242,168

Current assets before funds held for clients

397,113

293,765

Funds held for clients

171,313

157,909

Goodwill and other intangible assets, net

951,702

840,783

Total assets

1,879,124

1,627,934

Current liabilities before client fund obligations

338,940

265,174

Client fund obligations

173,467

158,115

Total long-term debt

263,654

154,851

Total liabilities

1,165,672

923,386

Treasury stock

(824,778)

(694,716)

Total stockholders' equity

713,452

704,548

Debt to equity

37.0 %

22.0 %

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

74

71

Shares outstanding

50,180

52,038

Basic weighted average common shares outstanding

51,502

52,637

Diluted weighted average common shares outstanding

52,388

53,723

⁽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 Adjusted EBITDA ⁽¹⁾
(In thousands)

Three Months Ended December
31,

Twelve Months Ended December
31,

2022

2021

2022

2021

(Loss) Income from continuing operations

$      (11,493)

$        (9,613)

$      105,372

$        70,911

Interest expense

2,830

1,016

8,039

3,868

Income tax (benefit) expense

(4,953)

(3,971)

36,121

22,129

(Gain) loss on sale of operations, net

(102)

390

(413)

(5,995)

Gain on sale of assets, net ⁽²⁾

—

—

(2,391)

—

Legal settlement, net

—

—

—

30,468

Transaction costs related to Marks Paneth ⁽³⁾

—

—

1,329

—

Integration and retention costs related to Marks Paneth ⁽³⁾

1,179

—

9,191

—

Depreciation

2,853

2,771

11,231

10,781

Amortization

5,335

4,386

21,664

16,297

Adjusted EBITDA

$        (4,351)

$        (5,021)

$      190,143

$      148,459

⁽¹⁾

CBIZ reports its financial results in accordance with GAAP. This table reconciles Adjusted EBITDA to the most directly comparable 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 under GAAP. Adjusted EBITDA is commonly used by the Company, its shareholders and debt holders as a performance measurement to evaluate, assess and benchmark the Company's operational results.

⁽²⁾

This gain is related to a sale of a book of business in CBIZ's property and casualty line of service, and is recorded in Other income (expense), net. 

⁽³⁾ 

These costs include, but are not limited to, certain consulting, technology, personnel, as well as other first year operating and general administrative costs that are non-recurring in nature. 

CBIZ, INC.
GAAP RECONCILIATION
(Loss) Income and Diluted Earnings Per Share ("EPS") from Continuing Operations to Adjusted (Loss) Income
from Continuing Operations and EPS⁽¹⁾
(In thousands)

Three Months Ended December
31, 2022

Three Months Ended
December 31, 2021

Amounts

EPS

Amounts

EPS

Loss from continuing operations

$      (11,493)

$         (0.23)

$       (9,613)

$         (0.19)

Adjustments:

Integration and retention costs related to Marks Paneth ⁽⁴⁾

1,179

0.02

—

—

Income tax effect related to adjustments

(355)

—

—

—

Adjusted loss from continuing operations

$      (10,669)

$         (0.21)

$       (9,613)

$         (0.19)

Twelve Months Ended December
31, 2022

Twelve Months Ended
December 31, 2021

Amounts

EPS

Amounts

EPS

Income from continuing operations

$     105,372

$           2.01

$       70,911

$           1.32

Adjustments:

Gain on sale of operations, net ⁽²⁾

—

—

(6,311)

(0.12)

Gain on sale of assets, net  ⁽³⁾

(2,391)

(0.05)

—

—

Legal settlement, net

—

—

30,468

0.57

Transaction costs related to Marks Paneth ⁽⁴⁾

1,329

0.03

—

—

Integration and retention costs related to Marks Paneth ⁽⁴⁾

9,191

0.18

—

—

Income tax effect related to adjustments

(2,075)

(0.04)

(5,746)

(0.11)

Adjusted income from continuing operations

$     111,426

$           2.13

$       89,322

$           1.66

⁽¹⁾ 

CBIZ reports its financial results in accordance with GAAP. This table reconciles Adjusted (Loss) Income and Adjusted EPS to the most directly comparable GAAP financial measures, "(Loss) Income from continuing operations" and "Diluted earnings per share from continuing operations." Adjusted (Loss) Income and Adjusted EPS are not defined by GAAP and should not be regarded as an alternative or replacement to any measurement of performance under GAAP. Adjusted (Loss) Income and Adjusted EPS, are used by the Company for its shareholders and debt holders as a performance measure to evaluate, assess and benchmark the Company's operational results.

⁽²⁾

This gain related to a one-time non-recurring gain from the sale of an operation in CBIZ's Benefit and Insurance Services practice group.

⁽³⁾

This gain is related to a sale of a book of business in CBIZ's property and casualty line of service, and is recorded in Other income (expense), net. 

⁽⁴⁾

These costs include, but are not limited to, certain consulting, technology, personnel, as well as other first year operating and general administrative costs that are non-recurring in nature. 

CBIZ, INC.
GAAP RECONCILIATION
Full Year 2023 EPS from Continuing Operations Guidance to Full Year 2023 Adjusted Diluted EPS
(In thousands)

Full Year 2023 Guidance

Low

High

Diluted EPS - GAAP Guidance

$                2.31

$                  2.36

Integration cost related to Somerset acquisition

0.05

0.05

Adjusted Diluted EPS Guidance

$                2.36

$                  2.41

GAAP Diluted EPS for 2022

$                2.01

$                  2.01

Adjusted Diluted EPS for 2022

$                2.13

$                  2.13

GAAP Diluted EPS Range

15 %

17 %

Adjusted Diluted EPS Range

11 %

13 %