CBZ

Overall Performance

• Q1 2026 performance was in line with management expectations, delivering year-over-year growth in revenue, profitability, and free cash flow, with accretive share repurchases returning value to shareholders. • Organic growth improved sequentially from Q4 2025 (which was flat due to 2025 transformation/integration work), and management expects full-year organic growth to hit the mid-single-digit target. • Q1 2026 marked the first busy season as a fully integrated company, with teams delivering strong client results, maintaining solid utilization, and operating as a unified organization with aligned culture, common systems, and a strengthened go-to-market model.

Strategic Growth Priorities

1. Talent Attraction & Retention: CBIZ was named a Top Workplace in the U.S. by USA TODAY for the sixth consecutive year, supporting strong employee retention. Financial Services has an active lateral hiring initiative for high-producing senior MDs with completed new hires and a robust candidate pipeline. B&I aims for a 15% full-year increase in producer count, with net new quality producers added in Q1 and strong momentum for Q2. A unified technology leadership structure was established with the appointment of Peter Scavuzzo as CIO/President of CBIZ Technology to align AI and technology roadmaps.
2. Brand & Industry Vertical Go-To-Market: A national spring brand campaign with targeted TV ads in key markets launched to increase visibility, drive client engagement, and support talent recruitment. The 12-industry vertical structure, designed to deliver tailored cross-service solutions, is driving increased new client pipeline activity across key verticals including Consumer and Industrial Products, Capital Markets, Alternative Investments, and Construction, with improved cross-functional collaboration winning new engagements.
3. Cross-Selling to Existing Clients: A systematic approach to cross-selling across services and geographies is increasing the share of clients using multiple CBIZ services, which is expected to drive sustained organic growth over time, leveraging CBIZ's high recurring revenue base and strong client retention.

AI Technology Initiatives

• CBIZ has completed the foundational phase of AI deployment and is now entering full company-wide rollout of advanced agentic-based AI solutions, timed after busy season to avoid disrupting client delivery. • AI reduces manual repetitive work, improving employee retention and making CBIZ a more attractive employer for new talent. AI-driven data extraction already delivers 20% efficiency in attest services, with expected efficiency rising to 40% in subsequent years. • AI supports revenue growth by improving RFP response speed/quality, enabling pursuit of opportunities previously out of reach due to resource constraints, and generating data insights that create cross-selling conversation starters with existing clients. • CBIZ leverages a partner ecosystem of leading AI technology providers combined with its own proprietary workflows and domain expertise to reduce deployment risk, move faster, and deliver innovative solutions to underserved middle market clients. • Management expects AI to drive margin expansion via efficiency gains, enable a mix shift to higher-value advisory services, and create competitive advantage through scale that smaller competitors cannot match.

Offshoring Efficiency

• CBIZ is on track to hit its 2026 target of increasing offshore hours from 6% (2025) to 10%, with high-quality delivery from partners in the Philippines and India. Management expects to accelerate expansion of global capabilities, targeting more than 20% of total hours completed offshore over the next several years, consistent with peer levels, to drive margin expansion.

Capital Allocation

• Free cash flow improved $64 million year-over-year in Q1, driven by a $53 million onetime final purchase price adjustment. $63 million in share repurchases were completed through the end of April 2026, with 2 million shares repurchased year-to-date. Net leverage fell to 3.4x from 3.9x at Q1 2025, and the fully diluted share count declined by 2.6 million year-over-year. • Capital allocation priorities are: 1) funding organic growth and maintenance capital; 2) deleveraging to a target net leverage ratio below 2.5x by 2027; 3) opportunistic accretive share repurchases at current undervalued valuations.

• Full-year 2026 revenue guidance is maintained at $2.8 billion to $2.9 billion, representing 2% to 5% year-over-year organic growth. Management expects organic growth to accelerate sequentially each quarter throughout 2026, as transitory integration and client attrition impacts abate in the second half of the year. • Adjusted EBITDA guidance is effectively maintained, updated only to reflect a stock-based compensation adjustment to a range of $465 million to $475 million. • Adjusted EPS guidance was increased to a range of $4.00 to $4.10 per share, up from prior guidance, reflecting the lower outstanding share count from accretive share repurchases completed through April 2026. • Full-year 2026 free cash flow guidance is maintained at $270 million to $290 million, representing a 60% conversion rate at the midpoint of adjusted EBITDA. Management expects higher conversion over time from lower integration spending, lower interest costs, and improved DSO. • The expected half-year revenue split of 45% first half / 55% second half, and EBITDA split of 30% first half / 70% second half, remains intact with only minor tweaks.

CBIZ reported consolidated Q1 2026 revenue of $849 million, a 1.3% year-over-year increase, with 1% organic revenue growth. Adjusted EBITDA was $244 million, up $3 million year-over-year, for an adjusted EBITDA margin of 28.7%, up 10 basis points year-over-year. Adjusted diluted EPS was $2.50, a 7% increase from $2.33 in Q1 2025.

1. Financial Services: Revenue increased 2.1% year-over-year, with 1.8% organic growth, contributing 87.3% of total consolidated revenue. Transitory impacts (elevated client attrition from integration and prior profitability-focused client exits) reduced reported Q1 organic growth by 200 basis points; excluding this impact, organic growth would have been approximately 4%.

2. Benefits and Insurance (B&I): Q1 2026 revenue was $108 million, a 4% year-over-year decrease, contributing 12.7% of total consolidated revenue. The decline was driven by tough year-over-year comparables for project work and contingent commissions (from 2025 client attrition), plus an isolated unexpected departure of one producer and his team in February 2026. Normalized for the producer departure, recurring B&I revenue grew approximately 4% year-over-year in the quarter. Adjusted EBITDA for the segment was impacted by flow-through from lower nonrecurring revenue and planned incremental marketing investments for growth initiatives.

• Transitory headwinds from residual integration-related productivity impacts and prior profitability-focused client exits reduced Q1 2026 organic growth by 200 basis points, and full-year results depend on these impacts abating as expected in the second half of 2026. • B&I revenue faced unexpected headwinds from an isolated producer departure in Q1 2026, though management notes this is a one-off event and does not expect similar departures going forward. • Forward-looking results depend on sustained favorable macroeconomic conditions for discretionary project-based advisory work; weaker-than-expected market conditions would push results toward the lower end of guidance ranges. • AI deployment is still in early stages, and full efficiency and revenue benefits are dependent on successful scaling of new capabilities and upskilling of the workforce.

Q: Could client adoption of AI tools lead to unbundling of CBIZ services and increased pricing pressure? / A: Management stated that general AI tools cannot replace the specialized domain expertise, professional accountability, and regulatory compliance required for CBIZ's services, which operate in heavily regulated environments requiring third-party validation. Clients may get anecdotal information from general AI, but cannot replicate the decades of specialized expertise CBIZ provides, so unbundling and pricing pressure from this source is not a pressing concern.

Q: From a competitive perspective, will smaller competitors' AI capabilities create pricing pressure, or does CBIZ's scale create an advantage? / A: Management confirmed that CBIZ's competitive thesis relies on its scale: only larger firms like CBIZ can make the substantial investments in AI infrastructure, tooling, and workforce upskilling required to deploy advanced AI solutions. Smaller competitors will not be able to match these investments, creating meaningful market share opportunity for CBIZ, both to gain share from smaller peers and to move upmarket to serve larger clients. AI strengthens CBIZ's competitive position rather than weakening it.

Q: What is the full-year target for B&I producer count growth, and how do cross-servicing opportunities work for new producers? / A: Management reaffirmed the 15% year-over-year increase in B&I producer count for full-year 2026, noting that quarterly progress is lumpy but the pipeline is strong and the target remains achievable. CBIZ's industry-focused go-to-market structure creates a strong draw for external producers, as they can offer clients a full suite of integrated services (from tax/attest to bonds, payroll, and employee benefits) through CBIZ's cross-functional industry teams, driving higher win rates and larger client relationships.

Q: How should investors think about the pace of share repurchases going forward? / A: Management stated that share repurchases remain a highly opportunistic and compelling use of free cash flow at current valuations, which CBIZ views as meaningfully undervalued, making repurchases highly accretive. The company's strong recurring cash flow generation and stable client base provide flexibility to remain active in repurchases while still progressing toward its 2027 net leverage target of below 2.5x. Improving free cash flow conversion from lower integration spending and better DSO will support continued repurchase activity and deleveraging.