CBIZ(US:CBZ)2025-10-30 12:54Revenue Growth - Revenue for Q3 2025 increased by $254.9 million, or 58.1%, to $693.8 million from $438.9 million in Q3 2024[86] - Revenue for the nine months ended September 30, 2025, rose by $862.1 million, or 63.7%, to $2,215.3 million compared to $1,353.2 million in the same period of 2024[86] - Revenue from newly acquired operations contributed $245.6 million, or 56.0%, of incremental revenue for Q3 2025[86] - Financial Services accounted for 83.4% of total revenue in Q3 2025, with revenue of $578.5 million, an increase of 79.5% from Q3 2024[92] - Total revenue for the nine months ended September 30, 2025, from Financial Services was $1,862.0 million, representing 84.1% of total revenue[92] - Revenue for the Financial Services practice group for the three months ended September 30, 2025, grew by 79.5% to $578.5 million from $322.3 million in the same period of 2024[116] - Revenue for the nine months ended September 30, 2025, increased by 85.4% to $1,862.0 million from $1,004.2 million in the same period of 2024[120] - Revenue for the Benefits and Insurance Services practice group for the three months ended September 30, 2025, decreased slightly by 0.6% to $103.4 million from $104.0 million in the same period of 2024[123] - Revenue for the Benefits and Insurance Services practice group increased by $8.4 million, or 2.7%, to $318.3 million for the nine months ended September 30, 2025, compared to $309.9 million for the same period in 2024[127] - Revenue for the National Practices group decreased by $4.1 million, or 10.6%, to $35.0 million for the nine months ended September 30, 2025[129] Net Income and Expenses - Net income for Q3 2025 was $30.1 million, or $0.48 per diluted share, down from $35.1 million, or $0.70 per diluted share, in Q3 2024[87] - For the nine months ended September 30, 2025, net income increased to $194.9 million, or $3.06 per diluted share, from $131.8 million, or $2.62 per diluted share, in the same period of 2024[87] - Total operating expenses for the three months ended September 30, 2025 increased by $237.7 million, or 65.0%, to $603.7 million compared to $366.0 million in the same period in 2024[96] - For the nine months ended September 30, 2025, total operating expenses increased by $700.4 million, or 63.2%, to $1,809.2 million compared to $1,108.8 million in the same period in 2024[99] - Operating expenses excluding deferred compensation for the three months ended September 30, 2025 were $595.8 million, or 85.9% of revenue, compared to $358.7 million, or 81.7% of revenue, in the same period in 2024[96] - Operating expenses excluding deferred compensation for the nine months ended September 30, 2025 were $1,792.1 million, or 80.9% of revenue, compared to $1,090.7 million, or 80.6% of revenue, in the same period in 2024[99] - Total operating expenses increased by $10.6 million, or 30.4%, during the nine months ended September 30, 2025, primarily driven by higher facility and professional service costs[137] - Total corporate general and administrative expenses increased by $23.0 million, or 35.9%, during the nine months ended September 30, 2025, with significant increases in professional fees and personnel costs[138] Cash Flow and Debt Management - The company repurchased 1.4 million shares for $102.8 million and 0.4 million shares for $25.0 million during the nine months ended September 30, 2025[90] - As of September 30, 2025, the company had $1,586.8 million of outstanding debt under the 2024 Credit Facilities[89] - The company maintains low cash levels and applies available cash to pay down outstanding debt, with cash flows from operations expected to exceed cash use in the first quarter of the fiscal year[140] - Cash provided by operating activities for the nine months ended September 30, 2025, was $48.8 million, down from $68.2 million in the same period of 2024, reflecting a working capital use of $258.0 million offset by net income of $194.9 million[145] - Cash used in financing activities for the nine months ended September 30, 2025, was $75.2 million, including $135.6 million for share repurchases, compared to $85.2 million in 2024[148] - As of September 30, 2025, the company had $1,586.8 million outstanding under the 2024 Credit Facilities, with available funds of approximately $316.0 million[149] - The weighted average interest rate under the 2024 Credit Facilities was 6.64% for the nine months ended September 30, 2025, compared to 5.40% for the same period in 2024[149] - Cash requirements for the remainder of 2025 will include share repurchases, debt repayment, strategic acquisitions, and capital expenditures, with expected sufficiency from operations and available credit[153] - The company is focused on maximizing cash flow to fund working capital and drive organic growth while paying down debt to enhance liquidity for future acquisitions[151] Interest Expense and Financial Risks - Interest expense for the three months ended September 30, 2025 was $(22.99) million, compared to $(27.96) million in the same period in 2024[104] - For the three months ended September 30, 2025, the average debt balance was $1,554.7 million with a weighted average effective interest rate of 6.62%, compared to $350.7 million and 5.37% in the same period of 2024, resulting in an increase in interest expense of $23.0 million[106] - For the nine months ended September 30, 2025, the average debt balance was $1,513.9 million with an interest rate of 6.64%, compared to $362.1 million and 5.40% in the same period of 2024, leading to an increase in interest expense of $65.6 million[107] - Total other expense, net increased by $46.7 million during the nine months ended September 30, 2025, primarily due to a $65.6 million increase in interest expense[139] - A 100 basis point change in market rates would result in an annual interest expense change of approximately $10.9 million[166] - The company has multiple interest rate swaps with notional amounts totaling $400,000, with fixed rates ranging from 1.186% to 4.488%[168] - The interest rate swap expiring on July 14, 2026, has a notional amount of $100,000 and a fixed rate of 4.047%[168] - Forward-looking statements indicate potential risks including economic uncertainties, regulatory changes, and operational challenges that could impact future performance[161] Taxation - Income tax expense for the three months ended September 30, 2025, was $10,260 thousand, a decrease of 35.4% from $15,887 thousand in the same period of 2024[112] - The effective tax rate for the three months ended September 30, 2025, was 25.4%, down from 31.2% in the same period of 2024[112] Integration Costs - Integration costs associated with the Transaction for the three months ended September 30, 2025 were approximately $23.2 million[96] - Integration costs for the nine months ended September 30, 2025 included approximately $43.3 million related to the Transaction[99] - The deferred compensation plan increased operating expenses by $17.1 million for the nine months ended September 30, 2025[137] - Integration costs associated with the Transaction amounted to approximately $20.2 million for the nine months ended September 30, 2025[138] Investments - Investments from client accounts are classified as available-for-sale securities and are adjusted to fair value at each balance sheet date[169] - All investments made by the company carry an investment grade rating at the time of acquisition[169] - If an investment is deemed to be other-than-temporarily impaired, the adjustment is recorded in "Other income, net"[169] - The company does not engage in trading market risk sensitive instruments and uses interest rate swaps to manage exposure[167] - Management will continue to evaluate the use of interest rate swaps under certain operating and market conditions[168] - The company has a policy to invest client funds in short-term investments, such as corporate and municipal bonds[169] Operational Performance - The company expects continued softness in demand for nonrecurring project-based services due to the current economic and geopolitical environment[88] - Days sales outstanding (DSO) improved to 94 days at September 30, 2025, compared to 97 days at the same date in 2024[143] - The company was in compliance with financial covenants under the 2024 Credit Facilities as of September 30, 2025[150]