CBIZ, Inc. Q1 FY2025 earnings call

• Integration efforts are on schedule, with strong collaboration among teams. - Business model attributes: ~77% of services are essential and recurring, strong cash flows, high client retention, broad geographic footprint, diverse industries. - Q1 performance: Government healthcare consulting had strong revenue growth; Benefits and Insurance business performed well with growth in nearly every service line. - Progress with integration: Focus on integrating technology systems, accelerating efforts post-busy season. - M&A strategy: Evaluating opportunities to build geographic presence and strengthen service lines.

Consolidated first quarter revenue increased 70% from $494 million to $383 million primarily due to the acquisition. The Financial Services segment had first quarter revenue of $714 million, up $341 million or approximately 92%. The Benefits and Insurance segment delivered revenue of $113 million, up $5 million or approximately 4%. Adjusted EBITDA doubled from $119 million to $238 million. Financial Services adjusted EBITDA doubled to $230 million with an adjusted EBITDA margin of 32%. Benefits and Insurance adjusted EBITDA was $30 million, up $3 million or 10% with a margin of 27%, up nearly 150 basis points versus last year.

• Adjusted EBITDA and adjusted EPS guidance remains unchanged. - Widened revenue guidance to $2.8 billion to $2.95 billion due to economic and geopolitical uncertainty affecting non-recurring services. - Expect approximately $60 million of earn-out payments in 2025, with $30 million paid in Q1. - Estimate $20 million to $25 million in capital expenditures for 2025, with $5 million incurred in Q1. - Plan to be prudent and disciplined in managing share repurchase program.

• Client conflicts from acquisitions, which can impact revenue. - Economic and geopolitical uncertainties affecting non-recurring service lines. - Potential pricing pressure in a more challenging business climate if work becomes harder to come by.

Q: About non-recurring services representing 23% of revenue, specifically capital markets and deal-related work, and if softer conditions would hit the low end of revenue range?

A: Capital markets and deal-related work are significant parts, difficult to predict, but reliance on middle market clients which need line of sight; uncertainty week-to-week impacts predictability.

Q: Strong government healthcare consulting in Q1, expect continuation and opportunity from government cutbacks?

A: Government healthcare consulting business has direct and indirect relationships, team encouraged by Q1 performance and outlook for remainder of year.

Q: Integration costs related to acquisition, break down and when to decline?

A: Total earmarked integration costs ~$75 million this year, significant IT-related portion into 2026; facility optimization costs likely more pronounced next year.

Q: Revised revenue guide, conditions for bottom end; operationally what to offset pressures?

A: Revenue guide based on annualizing Q1 performance and considering analogous periods like COVID; operationally use levers like people and comp costs (reversing accruals if no growth, lighter headcount), and reducing discretionary costs like T&E, advertising, recruiting.

Q: Capital allocation prioritization post-Marcum acquisition?

A: Focus on getting leverage back down to below 2.5 times by end of 2026, be opportunistic for strategic opportunities, and prudent with share repurchase program.

Q: Client conflicts from acquisitions, timing and impact?

A: Client conflicts from acquisitions are inevitable when combining organizations, like healthcare practice conflicts and de minimis additional conflicts, within model range and mostly behind us now.

Q: Timing of impacts on audit practice and advisory work?

A: Audit practice (SEC PCAOB) work related to client financing, filing S-1s; uncertainty around timing as market improves affects work, more uncertainty than historical experience.

Q: Pricing environment changes?

A: Saw nice lift in pricing through Q1, but in a more challenging environment, people might lower rates if work harder to come by.