CBIZ(CBZ) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Total revenue for Q2 2023 increased by $36.6 million, up 10.1$15.0 million or 4.1% [31] - For the first half of 2023, total revenue grew by $99.4 million, up 13.2$53.9 million or 7.2% [38] - Adjusted EBITDA for the first half of 2023 was $167.8 million, up 12.9$2.01, up 11% YoY [41] - The company raised full-year revenue guidance to 10%-12% growth and affirmed adjusted EPS guidance of 11%-13% growth [10] Business Line Performance Financial Services - Q2 2023 total revenue grew by $31.6 million, up 12.2$10 million or 3.9% [8][18] - For the first half of 2023, total revenue grew by $86 million, up 15.7$185 million in annual revenue, experienced delays in project work, impacting Q2 results [14][16] - The delayed tax filing in California impacted Q2 and first-half results, with an estimated 0.04 per share impact [34] - The company expects stronger results in the second half of 2023 for both Government Health Care and California tax work [37] Strategic Direction and Industry Competition - The company completed four acquisitions in the first half of 2023, including Somerset CPAs and Advisors, Pivot Point Security, and American Pension Advisors [40][70][72] - The M&A pipeline remains active, with a focus on strategic acquisitions to enhance service offerings [74] - The company is investing in cybersecurity and retirement plan consulting to meet growing client demand [70][72] Management Commentary on Operating Environment and Outlook - Management highlighted headwinds from higher interest rates and tax rates, impacting earnings by 0.09 and $0.04 per share, respectively [11][32] - The company expects expenses to normalize below pre-pandemic levels but acknowledges year-over-year headwinds [21] - Management remains optimistic about the second half of 2023, projecting stronger results and continued growth [37][90] Other Key Information - The company repurchased 975,000 shares in the first half of 2023 at a cost of$48.5 million [43] - Leverage stands at 2x adjusted EBITDA, with $178 million of unused capacity on a$600 million facility [22][47] - Capital spending for 2023 is expected to be $15 million to$20 million, primarily for tenant improvements and office facilities [94] Q&A Session Summary Question: Impact of the delayed Government Health Care consulting project - The delay of a significant contract renewal into 2024 impacted Q2 results, with immediate actions taken to align costs with projected revenue [77] Question: Cybersecurity opportunity and Pivot Point acquisition - The company has high client demand for cybersecurity services and sees Pivot Point as a strategic fit to enhance advisory offerings [79][80] Question: M&A pipeline and pricing trends - The M&A pipeline remains active, with no significant changes in pricing despite higher interest rates [81][82] Question: Investment in headcount and technology - The company continues to invest in new business producers, particularly in Benefits and Insurance, while maintaining technology spend at consistent levels [86][99] Question: Customer trends and economic outlook - Small and middle-market businesses remain optimistic, with rising interest rates and access to credit being noted but not materially impacting business [65]