Business Overview and History

CBIZ, Inc. (CBZ) is a leading national professional services advisor that has solidified its position as a dominant player in the industry through strategic acquisitions and organic growth. With a diverse portfolio of offerings spanning accounting, tax, advisory, benefits, insurance, and technology services, CBIZ has emerged as a one-stop-shop for middle-market businesses across the United States.

CBIZ was founded in 1996 with the goal of providing comprehensive business services to companies of all sizes. The company manages and reports its operations along three practice groups: Financial Services, Benefits and Insurance Services, and National Practices. In its early years, CBIZ focused on building its core accounting, tax, and advisory services, expanding through strategic acquisitions to strengthen its presence in existing markets and enter new high-growth industries.

A major milestone in CBIZ's history came in 2000 when it acquired Century Business Services, significantly expanding its national footprint. This acquisition set the stage for two decades of continued growth and expansion. Over the years, CBIZ has faced and overcome various challenges, including the impact of the 2008-2009 financial crisis on demand for its services and the need to navigate changing regulations and industry dynamics, such as evolving independence requirements for accounting firms.

Despite these obstacles, CBIZ's diversified business model, focus on strategic acquisitions, and dedication to exceptional client service have allowed it to emerge as an industry leader. The company's growth strategy has proven successful, with CBIZ completing numerous acquisitions that have broadened its service offerings and industry expertise.

In 2024, CBIZ took a major leap forward with the transformative acquisition of Marcum LLP, the largest transaction in the company's history. This acquisition significantly expanded CBIZ's footprint, adding over 3,000 team members and bolstering its service capabilities. The Marcum acquisition solidified CBIZ's position as one of the largest professional services providers of its kind in the U.S., with over 10,000 team members across more than 160 locations.

Prior to the Marcum acquisition, CBIZ was already a formidable player in the professional services industry, generating $1.6 billion in revenue. With the addition of Marcum, CBIZ's revenue has now surpassed $3 billion, cementing its position as the seventh-largest accounting firm in the United States.

Financial Performance and Ratios

CBIZ's financial performance has been consistently strong, with the company reporting revenue of $1.81 billion and net income of $41.04 million in 2024. The company's gross profit margin stood at 10.07% in 2024, while its operating profit margin was 4.08%. CBIZ's return on assets and return on equity were 0.92% and 3.68%, respectively, in 2024.

The company's balance sheet remains healthy, with a current ratio of 1.18 and a debt-to-equity ratio of 1.03 as of the end of 2024. CBIZ's operating cash flow and free cash flow for the year were $123.69 million and $110.78 million, respectively, highlighting the company's ability to generate strong cash flows to support its growth initiatives.

In the most recent quarter (Q4 2024), CBIZ reported revenue of $460.29 million, representing a 40.5% year-over-year growth. This growth was driven by a 33.2% increase from the newly acquired Marcum operations and a 6.4% increase in same-unit revenue. However, the company reported a net loss of $90.72 million in Q4 2024, primarily due to the seasonal nature of the Marcum operations, which typically generate a loss in the fourth quarter, as well as transaction and integration costs related to the Marcum acquisition.

Liquidity

CBIZ's liquidity position remains strong, as evidenced by its healthy current ratio and robust cash flow generation. The company's ability to consistently generate positive operating and free cash flows provides it with the financial flexibility to pursue growth opportunities, invest in its business, and return value to shareholders through share repurchases or potential dividend payments in the future.

As of the end of 2024, CBIZ had $13.83 million in cash and cash equivalents and $556 million available under its 2024 Credit Facilities. The company's quick ratio stood at 1.18, further underscoring its strong liquidity position.

Segmental Performance and Geographic Diversification

CBIZ operates through three main business segments: Financial Services, Benefits and Insurance Services, and National Practices. The Financial Services segment, which includes accounting, tax, and advisory services, contributed 75.1% of the company's total revenue in 2024, generating $1.36 billion. This segment reported pre-tax income of $149.54 million in 2024, with personnel costs being the largest expense at $972.73 million.

The Benefits and Insurance Services segment accounted for 22.1% of revenue, generating $401.05 million in 2024. This segment reported pre-tax income of $72.92 million, with personnel costs of $257.17 million being the largest expense.

The National Practices segment made up the remaining 2.8% of revenue, generating $49.88 million in 2024. This segment reported pre-tax income of $10.19 million, with personnel costs of $42.91 million being the primary expense.

Geographically, CBIZ has a diverse footprint, with operations across 22 major markets in the United States. The company generated $1.81 billion in revenue from its U.S. operations in 2024. CBIZ also has a presence in Canada, which contributed $2.36 million in revenue in 2024. This diversification helps mitigate the company's exposure to regional economic fluctuations and provides a robust platform for growth.

Growth Strategies and Outlook

CBIZ's growth strategy is centered around a two-pronged approach: organic growth and strategic acquisitions. The company has a proven track record of successfully integrating acquired businesses, leveraging their capabilities to cross-sell services and achieve synergies.

Looking ahead, CBIZ's management has provided guidance for 2025, expecting total revenue to be within the range of $2.9 billion to $2.95 billion. The company anticipates adjusted earnings per share (EPS) to be in the range of $3.60 to $3.65, reflecting the benefits of the Marcum acquisition and the company's continued focus on operational excellence. Adjusted EBITDA is expected to be approximately $455 million.

The company expects revenue growth in 2025 to primarily come from organic sources as it focuses on integration activities. The effective tax rate is projected to be around 29%, and the fully diluted weighted average share count is expected to be approximately 64.5 million to 65 million shares.

CBIZ anticipates a cash flow benefit from the goodwill deduction for tax purposes to be around $15 million in 2025, growing to approximately $30 million per year. Capital spending is expected to be in the range of $20 million to $25 million. The company does not currently plan for any share repurchases in 2025.

It's worth noting that CBIZ's revenue growth for the full year of 2024 was within the 7% to 9% range they had previously provided, excluding the impact of the Marcum acquisition. Additionally, the company's adjusted earnings per share growth for 2024 was 10.8%, within the 10% to 12% growth range they had outlined earlier.

Risks and Challenges

While CBIZ's growth trajectory appears promising, the company faces some risks and challenges. The professional services industry is highly competitive, with CBIZ competing against global, national, and local firms. The company's ability to attract and retain top talent is also crucial to its success.

Additionally, CBIZ is subject to various regulatory and compliance requirements, which could pose challenges and increase operating costs. The company's reliance on certain key clients and industries, such as healthcare, could also expose it to industry-specific risks.

Conclusion

CBIZ's transformation into a powerhouse in the professional services industry has been nothing short of impressive. The Marcum acquisition has significantly expanded the company's capabilities, client base, and geographic reach, positioning it for continued growth and success. With a strong financial profile, diversified service offerings, and a proven track record of integration and organic growth, CBIZ appears well-equipped to navigate the challenges of the industry and capitalize on the opportunities ahead.

The company's robust performance across its three main practice groups, combined with its strategic focus on both organic growth and acquisitions, sets a solid foundation for future success. As CBIZ continues to integrate the Marcum acquisition and execute on its growth strategies, it is well-positioned to maintain its status as a leading player in the professional services industry and deliver value to its shareholders.