CBIZ, Inc. — FY 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the supplied text does not provide clear standalone fourth-quarter results. CBIZ provides accounting, tax, insurance, benefits, payroll, and advisory services through Financial Services, Benefits and Insurance Services, and National Practices.
Financial performance
Amounts are in millions of dollars, except per-share data and percentages.
| Metric | FY 2022 | FY 2021 | Change |
|---|---|---|---|
| Revenue | $1,412.0 | $1,104.9 | +27.8% |
| Income from continuing operations | $105.4 | $70.9 | +48.7% |
| Diluted EPS from continuing operations | $2.01 | $1.32 | +$0.69 |
| Operating income | $168.3 | $72.7 | +$95.7 |
| Operating margin | 11.9% | 6.6% | +5.3 percentage points |
| Net cash from operating activities | $126.1 | $131.2 | -$5.0 |
| Net cash used in investing activities | $99.1 | $82.0 | -$17.1 |
| Net cash used in financing activities | $17.3 | $69.0 | +$51.7 |
- Revenue growth: Same-unit revenue rose 10.9%; acquisitions, net of divestitures, contributed $187.2 million, or 16.9% growth. Financial Services revenue increased 37.6% to $1,010.1 million; Benefits and Insurance Services rose 7.7% to $358.0 million; National Practices rose to $43.9 million.
- Margins and earnings: GAAP gross margin was $223.4 million, or 15.8% of revenue, versus $159.3 million, or 14.4%, in 2021. Adjusted EBITDA, a non-GAAP measure, was $190.1 million versus $148.5 million. The 2021 results included a $30.5 million legal settlement loss, while 2022 included $10.5 million in Marks Paneth transaction, retention, and integration costs.
- Taxes and interest: Income tax expense was $36.1 million, and the effective tax rate was 25.5%, compared with 23.8% in 2021. Interest expense rose to $8.0 million from $3.9 million, reflecting higher average debt and interest rates.
- Cash flow and working capital: Operating cash flow declined despite higher net income, principally because receivables consumed more cash as revenue grew. Year-end DSO increased to 74 days from 71. Capital expenditures were $8.6 million; cash paid for acquisitions and client lists, net of cash acquired, was $79.1 million.
- Liquidity and debt: Year-end bank debt was $265.7 million, compared with $155.3 million in 2021. CBIZ had a $600 million unsecured credit facility maturing in 2027 and approximately $319.9 million of available funds at year-end; it reported compliance with debt covenants. Cash and cash equivalents were $4.7 million, excluding $28.5 million restricted cash and $171.3 million of funds held for clients. Total stockholders’ equity was $713.5 million.
- Capital returns: CBIZ repurchased 2.8 million shares for approximately $122.8 million in 2022. It historically has not paid cash dividends. The board authorized a renewed program for up to 5.0 million shares in February 2023.
Material changes versus FY 2021
- Marks Paneth, acquired effective January 1, 2022, and Stinnett, acquired effective July 1, 2022, added approximately $148.1 million of incremental revenue. Acquisitions overall contributed $187.2 million of revenue growth, net of divestitures.
- Financial Services grew to 71.5% of consolidated revenue from 66.4%; Benefits and Insurance Services declined to 25.4% from 30.1% of the mix, despite higher revenue.
- Reported operating income increased substantially, with the comparison benefiting from the absence of the $30.5 million 2021 legal settlement loss. In addition, deferred-compensation investment gains and losses created large year-to-year movements in reported expenses and other income; the corresponding compensation expense offsets mean the plan did not affect pretax income or diluted EPS.
- Goodwill increased to $819.9 million from $740.7 million, and net goodwill and intangible assets increased to $951.7 million from $840.8 million, primarily reflecting acquisitions.
- Shares repurchased reduced year-end outstanding shares to 50.2 million from 52.0 million, while diluted weighted-average shares declined to 52.4 million from 53.7 million.
Outlook, risks, contingencies, and unusual items
- Outlook: The filing gives no quantified FY 2023 revenue or earnings guidance. Management expected cash from operations and available credit to be sufficient for the next 12 months, including seasonal working capital needs, debt interest, contingent acquisition payments, capital expenditures, acquisitions, and share repurchases. Somerset was acquired effective February 1, 2023; its annualized revenue was estimated at $55 million.
- Operating risks: Key exposures include recruiting and retaining professionals, competition, acquisition integration and financing, collectability of receivables, regulatory changes, technology disruption, and cyber or data-security incidents. Accounting and tax services are seasonal, with heavier activity in the first four months of the year.
- Customer concentration: The National Practices group’s long-standing cost-plus contract with one client accounted for about 75% of that group’s revenue; the contract was renewed through December 31, 2023. The client represented approximately 2.4% of consolidated revenue.
- Interest-rate exposure: Of $265.7 million debt outstanding, $150.7 million was subject to rate risk. Management estimated a 100-basis-point rate change would affect annual interest expense by approximately $1.5 million. Interest-rate swaps had a combined $115 million notional value.
- Legal matter: In the Zotec litigation, the jury found for CBIZ on claims at trial, and in November 2022 the court ruled for CBIZ on statutory securities fraud and on CBIZ’s contractual indemnification counterclaim. Further proceedings to determine damages owed by Zotec were expected. The company also noted ordinary-course claims whose outcomes and potential losses could not be estimated.
- Asset and estimate risks: Goodwill and intangible assets were substantial; management reported no goodwill impairment in its 2022 annual assessment. The allowance for doubtful accounts was $20.8 million, up from $16.2 million, and receivables estimation was identified as a critical audit matter.
Important facts for investors to verify
- How much of future growth and profitability comes from same-unit operations versus acquisitions, and whether Marks Paneth and Stinnett integration costs or benefits differ from expectations.
- Receivables quality, collection trends, the rise in DSO, and the adequacy of the $20.8 million doubtful-account allowance.
- Renewal and economics of the National Practices’ concentrated client contract, which was due to expire at the end of 2023.
- Debt capacity, covenant headroom, floating-rate exposure, and the cash demands of contingent acquisition consideration and share repurchases.
- Developments in the Zotec matter, including the determination and collection of any damages awarded to CBIZ.
- Trends in adjusted EBITDA and other non-GAAP measures alongside GAAP earnings, including the effects of acquisition-related costs and deferred-compensation accounting.