CBIZ, Inc. Q3 FY2025 earnings call

• Celebrated 1-year anniversary of Marcum acquisition, pleased with Marcum's quality, fit, and integration progress. - Aligned teams under common reporting structure, made investments in shared resources centers, transformation and innovation team, and offshore resources. - Established 12 industry groups, launched CBIZ Vertical Vector AI and a national brand campaign. - Recurring businesses held steady, core accounting and tax business had organic growth, project-based advisory businesses saw improved growth. - Retention of top talent and key clients during transition.

Financial Services segment: Third quarter revenue was $579 million, up $256 million or approximately 80%. Adjusted EBITDA increased 86% to $126 million, with a margin of 21.7%. Benefits and Insurance (B&I) segment: Third quarter revenue was $103 million. Year-to-date, B&I segment revenue grew by 2.7% and adjusted EBITDA grew by 6.7%.

• Maintained 2025 revenue and earnings guidance, with line of sight to the low end of the revenue guidance range. - Updated synergy goal from the acquisition to over $50 million, expecting $35 million in synergies in 2025 and the majority in 2026. - Increased 2025 integration costs by $14 million to $89 million, no change expected for 2026 integration costs. - Updated operating expense modeling, including total compensation and benefits and incentive compensation programs.

• Key real estate decisions in large metro markets remaining ahead as an integration challenge. - Market conditions and regulatory changes could impact business performance. - Potential impact of unforeseen events on client projects and revenue streams.

Q: About pricing, how to view 2026 and moving forward?

A: Jerry said mid-single digits this year is above competitors, expect mid-single digits in 2026 and beyond.

Q: Any significant client loss from Marcum acquisition?

A: Expected some client loss, but client and staff retention rates are in line with model.

Q: Notable loss of rainmaking partners?

A: Not notable, instead, there's energy around combined entity's industry groups and services.

Q: Integration costs in 2026 vs 2025?

A: Brad said nature and mix of integration costs will be similar, but 2026 will have some acceleration of real estate facilities-based costs.

Q: Benefit from OBBBA?

A: Yes, OBBBA gave opportunity to discuss with clients, resulting in increased revenue.

Q: Softness in insurance brokerage business?

A: Benefits and insurance revenues were soft due to soft P&C market and discretionary project work.

Q: M&A market activity?

A: More activity in third quarter compared to first half, expected to continue into fourth quarter and 2026.

Q: Fourth quarter outlook?

A: Core recurring business continues to grow, improved market conditions help non-recurring businesses, operational excellence initiative to improve staff utilization.

Q: Margin puts and takes for next year?

A: Synergy outlook increased, normalization of incentive comp, offshore usage ramping up.

Q: Rate cuts and government shutdown impact?

A: Rate cuts positive for discretionary work, government shutdown had little impact except in government health care consulting.

Q: Client industry vertical activities?

A: Had nice wins in food, energy, capital markets industries through industry groups.

Q: Co-location and resource bringing?

A: Both physical and virtual co-location of teams, national tax groups working seamlessly.