CBIZ, INC.

FINANCIAL HIGHLIGHTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(In thousands, except percentages and per share data)

THREE MONTHS ENDED

SEPTEMBER 30,

2018

%

2017

%

Revenue

$

224,249

100.0

%

$

207,723

100.0

%

Operating expenses (1)

198,607

88.6

%

184,723

88.9

%

Gross margin

25,642

11.4

%

23,000

11.1

%

Corporate general and administrative expenses (1)

10,279

4.5

%

7,979

3.8

%

Operating income

15,363

6.9

%

15,021

7.3

%

Other (expense) income:

Interest expense

(1,614)

-0.8

%

(1,777)

-0.9

%

Other income, net (1) (2)

3,143

1.4

%

2,792

1.3

%

Total other income, net

1,529

0.6

%

1,015

0.4

%

Income from continuing operations before income

tax expense

16,892

7.5

%

16,036

7.7

%

Income tax expense

3,297

6,172

Income from continuing operations

13,595

6.1

%

9,864

4.7

%

Loss from operations of discontinued businesses, net of

tax

(9)

(206)

Net income

$

13,586

6.1

%

$

9,658

4.6

%

Diluted earnings per share:

Continuing operations

$

0.24

$

0.18

Discontinued operations

-

-

Net income

$

0.24

$

0.18

Diluted weighted average common shares outstanding

56,740

55,827

Other data from continuing operations:

Adjusted EBITDA (3)

$

24,358

$

23,701

(1)

CBIZ sponsors a deferred compensation plan, under which a CBIZ employee's compensation deferral is held in a rabbi trust and invested accordingly as directed by the employee. Income and expenses related to the deferred compensation plan are included in "Operating expenses" ($3 million expense in 2018 and $2.7 million expense in 2017, or (1.4%) and (1.3%) of revenue, respectively) and "Corporate general and administrative expenses" ($0.4 million expense in both 2018 and 2017, respectively, or (0.1%) and (0.1%) of revenue, respectively) and are directly offset by deferred compensation gains or losses in "Other income, net" ($3.4 million income in 2018 and $3 million income in 2017, or 1.5% and 1.4% of revenue, respectively). The deferred compensation plan has no impact on "Income from continuing operations before income tax expense."    

(2)

Included in "Other income, net" for the three months ended September 30, 2018 and 2017, is income of $0.2 million and $0.5 million, respectively, related to net changes in the fair value of contingent consideration related to CBIZ's prior acquisitions.

(3)

Refer to the financial highlights tables for a reconciliation of Non-GAAP financial measures to the nearest generally accepted accounting principles ("GAAP") financial measure, and for additional information as to the usefulness of the Non-GAAP financial measures to shareholders and investors. 

CBIZ, INC.

FINANCIAL HIGHLIGHTS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(In thousands, except percentages and per share data)

NINE MONTHS ENDED

SEPTEMBER 30,

2018

%

2017

%

Revenue

$

722,980

100.0

%

$

660,198

100.0

%

Operating expenses (1)

608,459

84.2

%

565,609

85.7

%

Gross margin

114,521

15.8

%

94,589

14.3

%

Corporate general and administrative expenses (1)

30,300

4.2

%

25,979

3.9

%

Operating income

84,221

11.6

%

68,610

10.4

%

Other (expense) income:

Interest expense

(5,211)

-0.7

%

(4,986)

-0.8

%

Gain on sale of operations, net

663

0.1

%

45

0.0

%

Other income, net (1) (2)

2,544

0.4

%

9,293

1.5

%

Total other (expense) income, net

(2,004)

-0.2

%

4,352

0.7

%

Income from continuing operations before income

tax expense

82,217

11.4

%

72,962

11.1

%

Income tax expense

19,691

26,656

Income from continuing operations

62,526

8.6

%

46,306

7.0

%

Gain (loss) from operations of discontinued businesses, net of

tax

17

(776)

Net income

$

62,543

8.7

%

$

45,530

6.9

%

Diluted earnings (loss) per share:

Continuing operations

$

1.11

$

0.83

Discontinued operations

-

(0.01)

Net income

$

1.11

$

0.82

Diluted weighted average common shares outstanding

56,393

55,641

Other data from continuing operations:

Adjusted EBITDA (3)

$

104,293

$

95,070

(1)

CBIZ sponsors a deferred compensation plan, as discussed in the quarterly footnote section. Income and expenses related to the deferred compensation plan are included in "Operating expenses" ($4.7 million expense in 2018 and $7.6 million expense in 2017, or (0.7%) and (1.2%) of revenue, respectively) and "Corporate general and administrative expenses" ($0.5 million expense in 2018 and $0.8 million expense in 2017, or (0.2%) and (0.1%) of revenue, respectively) and are directly offset by deferred compensation gains or losses in "Other income, net" ($5.2 million income in 2018 and $8.4 million income in 2017, or 0.9% and 1.3% of revenue, respectively). The deferred compensation plan has no impact on "Income from continuing operations before income tax expense." 

(2)

Included in "Other income, net" for the nine months ended September 30, 2018 is expense of $3.3 million related to net changes in the fair value of contingent consideration which is mostly attributable to the required mark-to-market accounting of future share issuances for contingent acquisitions. For the same period in 2017, "Other income, net" included $0.2 million of income related to net changes in the fair value of contingent consideration related to CBIZ's prior acquisitions.

(3)

Refer to the financial highlights tables for a reconciliation of Non-GAAP financial measures to the nearest GAAP financial measure, and for additional information as to the usefulness of the Non-GAAP financial measures to shareholders and investors.

CBIZ, INC.

FINANCIAL HIGHLIGHTS (UNAUDITED)

(In thousands)

SELECT SEGMENT DATA

THREE MONTHS ENDED

NINE MONTHS ENDED

SEPTEMBER 30,

SEPTEMBER 30,

2018

2017

2018

2017

Revenue

Financial Services

$

146,145

$

130,305

$

478,485

$

421,529

Benefits and Insurance Services

70,069

69,663

220,152

215,386

National Practices

8,035

7,755

24,343

23,283

Total

$

224,249

$

207,723

$

722,980

$

660,198

Gross Margin

Financial Services

$

21,599

$

17,309

$

91,836

$

73,293

Benefits and Insurance Services

10,670

10,508

38,455

36,212

National Practices

521

646

1,987

1,932

Operating expenses - unallocated (1):

Other

(4,126)

(2,779)

(13,010)

(9,220)

Deferred compensation

(3,022)

(2,684)

(4,747)

(7,628)

Total

$

25,642

$

23,000

$

114,521

$

94,589

(1)

Represents operating expenses not directly allocated to individual businesses, including stock-based compensation, consolidation and integration charges, and certain advertising expenses. "Operating expenses - unallocated" also include gains or losses attributable to the assets held in the Company's deferred compensation plan. These gains or losses do not impact "Income from continuing operations before income tax expense" as they are directly offset by the same adjustment to "Other income, net" in the Consolidated Statements of Comprehensive Income. Net gains/losses recognized from adjustments to the fair value of the assets held in the deferred compensation plan are recorded as compensation expense in "Operating expenses" and as income in "Other income, net."

CBIZ, INC.

SELECT CASH FLOW DATA

(In thousands)

NINE MONTHS ENDED

SEPTEMBER 30,

2018

2017

Net income

$

62,543

$

45,530

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization expense

17,528

17,167

Bad debt expense, net of recoveries

3,697

4,265

Adjustments to contingent earnout liability

3,290

(221)

Stock-based compensation expense

5,358

4,247

Other noncash adjustments

(1,989)

(3,273)

Net income, after adjustments to reconcile net income to net cash provided by operating activities

90,427

67,715

Changes in assets and liabilities, net of acquisitions and divestitures

(26,993)

(29,116)

Operating cash flows provided by continuing operations

63,434

38,599

Operating cash used in discontinued operations

(162)

(748)

Net cash provided by operating activities

63,272

37,851

Net cash provided by investing activities

42,201

43,463

Net cash used in financing activities

(102,838)

(79,306)

Net increase in cash, cash equivalents and restricted cash

$

2,635

$

2,008

CBIZ, INC.

SELECT FINANCIAL DATA AND RATIOS

(In thousands)

SEPTEMBER 30,

DECEMBER 31,

2018

2017

Cash and cash equivalents

$

3,493

$

424

Restricted cash

32,551

32,985

Accounts receivable, net

234,906

188,300

Current assets before funds held for clients

297,526

245,061

Funds held for clients - current and non-current

126,311

203,112

Goodwill and other intangible assets, net

636,202

613,206

Total assets

$

1,189,856

$

1,176,231

Notes payable - current

$

1,523

$

1,861

Current liabilities before client fund obligations

154,500

130,664

Client fund obligations

127,297

203,582

Notes payable - long-term

1,480

2,164

Bank debt

165,482

177,672

Total liabilities

$

587,941

$

645,352

Treasury stock

$

(499,167)

$

(491,046)

Total stockholders' equity

$

601,915

$

530,879

Debt to equity

28.0

%

34.2

%

Days sales outstanding (DSO) - continuing operations (1)

81

75

Shares outstanding

55,492

54,592

Basic weighted average common shares outstanding

54,489

53,862

Diluted weighted average common shares outstanding

56,393

55,689

(1)

DSO is provided for continuing operations and represents accounts receivable, net, at the end of the period, divided by trailing twelve month daily revenue. The Company has included DSO data because such data is commonly used as a performance measure by analysts and investors and as a measure of the Company's ability to collect on receivables in a timely manner. DSO should not be regarded as an alternative or replacement to any measurement of performance under GAAP. DSO at September 30, 2017 was 84.

CBIZ, INC.

GAAP RECONCILIATION

Income from Continuing Operations to Non-GAAP Financial Measures (1)

(In thousands)

THREE MONTHS ENDED

NINE MONTHS ENDED

SEPTEMBER 30,

SEPTEMBER 30,

2018

2017

2018

2017

Income from continuing operations

$

13,595

$

9,864

$

62,526

$

46,306

Interest expense

1,614

1,777

5,211

4,986

Income tax expense

3,297

6,172

19,691

26,656

Gain on sale of operations, net

-

-

(663)

(45)

Depreciation

1,465

1,402

4,383

3,864

Amortization

4,387

4,486

13,145

13,303

Adjusted EBITDA

$

24,358

$

23,701

$

104,293

$

95,070

(1)

CBIZ reports its financial results in accordance with GAAP. This table reconciles Non-GAAP financial measures to the nearest GAAP financial measure, "Income from continuing operations." Adjusted EBITDA is not defined by GAAP and should not be regarded as an alternative or replacement to any measurement of performance or cash flow under GAAP. Adjusted EBITDA is commonly used by the Company, its shareholders and debt holders to evaluate, assess and benchmark the Company's operational results and to provide an additional measure with respect to the Company's ability to meet future debt obligations.

Guidance on 2018 Earnings Per Diluted Share from Continuing Operations

Low

High

2018 outlook growth in earnings per diluted share

13

%

17

%

2018 outlook earnings per diluted share

$

1.04

$

1.08

2018 outlook growth in adjusted earnings per diluted share, excluding impact of Tax Cuts and Jobs Act

20

%

24

%