CBIZ, Inc. (NYSE:CBZ) is a diversified professional services firm that has been providing a wide range of business solutions to small and medium-sized businesses, as well as individuals, governmental entities, and not-for-profit enterprises across the United States and parts of Canada. The company's integrated services are delivered through three main practice groups: Financial Services, Benefits and Insurance Services, and National Practices.

In the fiscal year 2023, CBIZ reported annual revenue of $1,591,194,000 and net income of $120,968,000. The company also generated annual operating cash flow of $153,507,000 and free cash flow of $130,455,000, demonstrating its ability to consistently convert earnings into cash.

For the first quarter of 2024, CBIZ reported total revenue of $494,297,000, up 8.7% from the same period in 2023. This growth was driven by a 5.9% increase in same-unit revenue, as well as a 2.8% contribution from recent acquisitions. Net income for the quarter was $76,884,000, or $1.53 per diluted share, compared to $73,160,000, or $1.44 per diluted share, in the first quarter of 2023.

Business Overview

CBIZ's Financial Services practice group, which accounts for 75.4% of total revenue, provides a range of accounting, tax, advisory, and consulting services. This division demonstrated strong growth across its three major service lines – Accounting & Tax, Advisory, and Government Health Care Consulting – in the first quarter of 2024. The Accounting & Tax business continued to see high demand for its essential and recurring services, while the Advisory Services group benefited from increased M&A activity, particularly in the private equity space. The Government Health Care Consulting business also built on its progress from the second half of 2023, securing new business and launching new projects.

The Benefits and Insurance Services practice group, which represents 21.9% of total revenue, maintained its record of growth across all four of its major service lines: Employee Benefits, Property and Casualty, Retirement & Investment Services, and Payroll. The Employee Benefits and Property and Casualty businesses were the primary drivers of growth, benefiting from strong client retention, market rate increases, and new business opportunities.

The National Practices group, which accounts for the remaining 2.7% of revenue, is primarily driven by a cost-plus contract with a single client, which has existed since 1999. This segment reported a 15.6% increase in same-unit revenue in the first quarter of 2024.

Financials

CBIZ's financial performance in the first quarter of 2024 was in line with the company's expectations. Excluding the impact of certain non-operating items, such as higher legal expenses, self-funded health care plan costs, and the increase in the company's share price, adjusted earnings per share for the quarter was $1.54, up 5.5% compared to the first quarter of 2023.

The company is affirming its previously issued guidance for the full year 2024. CBIZ expects total revenue to increase within a range of 7% to 9% for the year. GAAP reported earnings per share is expected to increase within a range of 13% to 15% over the $2.39 reported in 2023, while adjusted earnings per share is expected to increase within a range of 12% to 14% over the $2.41 reported in 2023. The effective tax rate for the full year of 2024 is expected to be approximately 28%.

Liquidity

As of March 31, 2024, CBIZ had $437.8 million outstanding under its $600 million unsecured financing facility, with approximately $148 million of unused capacity. This provides the company with ample liquidity to continue its strategic acquisition program and share repurchase activities.

During the first quarter of 2024, CBIZ completed two acquisitions for a total of $21.3 million in cash. The company also repurchased 0.2 million shares of its common stock for tax withholding purposes at a total cost of approximately $11.2 million. Since the end of 2019, CBIZ has closed 22 transactions, deploying approximately $444 million of capital for acquisition purposes, including earn-out payments. The company has also used approximately $342 million of capital towards share repurchases, buying back about 17% of its shares outstanding since the end of 2019.

Risks and Challenges

While CBIZ has demonstrated consistent growth and financial performance, the company faces several risks and challenges that investors should be aware of. These include potential volatility in revenue and earnings due to the seasonal nature of its Accounting and Tax services, as well as the potential for increased competition from private equity-backed firms in the accounting and advisory services space.

Additionally, CBIZ is subject to various legal and regulatory risks, including the potential for errors and omissions claims, as well as the impact of changes in healthcare or public health regulations on its clients' businesses. The company also faces cybersecurity risks, as evidenced by the recent data breach incident involving its MOVEit Transfer software.

Despite these risks, CBIZ's diversified business model, strong financial position, and consistent track record of growth and profitability make it an attractive investment opportunity for investors seeking exposure to the professional services industry.

Conclusion

CBIZ, Inc. is a well-diversified professional services firm that has demonstrated its ability to deliver consistent growth and financial performance across its three main practice groups. The company's strong liquidity position and strategic capital allocation priorities, including acquisitions and share repurchases, further enhance its growth prospects and shareholder value creation. While the company faces certain risks, its diversified business model and market leadership in its core service offerings position it well for continued success in the years ahead.