CBIZ, Inc. (CBZ) Bundle
Understanding CBIZ, Inc. (CBZ) Revenue Streams
Understanding CBIZ, Inc.’s Revenue Streams
CBIZ, Inc. operates through three primary practice groups: Financial Services, Benefits and Insurance Services, and National Practices. The revenue generated from these groups is critical for assessing the company's financial health and growth potential.
Breakdown of Primary Revenue Sources
The revenue for the nine months ended September 30, 2024, was $1,353.2 million, representing a 7.1% increase from $1,263.6 million in the same period of 2023. The following table details the revenue by practice group for the nine months ended September 30, 2024, compared to the same period in 2023:
| Practice Group | 2024 Revenue (in thousands) | 2023 Revenue (in thousands) | Change (in thousands) | Percentage Change |
|---|---|---|---|---|
| Financial Services | $1,004,158 | $932,388 | $71,770 | 7.7% |
| Benefits and Insurance Services | $309,867 | $296,179 | $13,688 | 4.6% |
| National Practices | $39,168 | $35,080 | $4,088 | 11.7% |
| Total | $1,353,193 | $1,263,647 | $89,546 | 7.1% |
Year-over-Year Revenue Growth Rate
The company has shown consistent growth in revenue year-over-year. For the three months ended September 30, 2024, the revenue increased by $28.3 million, or 6.9%, to $438.9 million from $410.5 million in the same quarter of the previous year. The year-over-year growth rates for each practice group during this period are as follows:
| Practice Group | 2024 Revenue (in thousands) | 2023 Revenue (in thousands) | Change (in thousands) | Percentage Change |
|---|---|---|---|---|
| Financial Services | $322,295 | $298,372 | $23,923 | 8.0% |
| Benefits and Insurance Services | $104,040 | $100,287 | $3,753 | 3.7% |
| National Practices | $12,549 | $11,880 | $669 | 5.6% |
| Total | $438,884 | $410,539 | $28,345 | 6.9% |
Contribution of Different Business Segments to Overall Revenue
In the nine months ended September 30, 2024, the Financial Services practice group contributed 74.2% of total revenue, while Benefits and Insurance Services accounted for 22.9%, and National Practices made up 2.9%.
Analysis of Significant Changes in Revenue Streams
During the nine months ended September 30, 2024, revenue from newly acquired operations contributed $31.7 million, or 2.3%, to the overall revenue increase. The Financial Services group experienced the most significant growth, driven primarily by traditional accounting and tax-related services, which increased by $17.5 million.
In summary, the revenue performance of CBIZ, Inc. demonstrates robust growth across its practice groups, supported by strategic acquisitions and strong demand for its services.
A Deep Dive into CBIZ, Inc. (CBZ) Profitability
A Deep Dive into CBIZ, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross margin was $244.4 million, representing a gross margin percentage of 19.4%, compared to $236.5 million and 19.3% for the same period in 2023.
Operating Profit Margin: The operating income for the nine months ended September 30, 2024, was $180.4 million, yielding an operating margin of 13.3%. This is a decrease from $192.0 million and 15.2% in the prior year.
Net Profit Margin: The net income for the nine months ended September 30, 2024, was $131.8 million, translating to a net profit margin of 9.7%, slightly down from $133.7 million and 10.6% in the same period of 2023.
Trends in Profitability Over Time
Over the past three years, the gross margin percentage has shown slight fluctuations:
- 2022: 19.5%
- 2023: 19.3%
- 2024: 19.4%
Operating margins have also experienced a decline:
- 2022: 15.5%
- 2023: 15.2%
- 2024: 13.3%
Comparison of Profitability Ratios with Industry Averages
The following table provides a comparison of CBIZ, Inc.'s profitability ratios with industry averages:
| Metric | CBIZ, Inc. (2024) | Industry Average |
|---|---|---|
| Gross Margin | 19.4% | 20.5% |
| Operating Margin | 13.3% | 14.8% |
| Net Profit Margin | 9.7% | 10.2% |
Analysis of Operational Efficiency
Operating expenses have increased to $1,108.8 million for the nine months ended September 30, 2024, up from $1,027.1 million in 2023. This represents a growth of 7.0%.
Operating expenses as a percentage of revenue have decreased from 79.1% in 2023 to 78.6% in 2024, indicating improved cost management despite rising total expenses.
Segment Performance Analysis
The following table highlights the gross margin and operating income by segment for the nine months ended September 30, 2024:
| Segment | Revenue | Operating Income | Gross Margin % |
|---|---|---|---|
| Financial Services | $1,004.2 million | $215.1 million | 21.4% |
| Benefits and Insurance Services | $309.9 million | $60.0 million | 19.4% |
| National Practices | $39.2 million | $4.1 million | 10.5% |
Debt vs. Equity: How CBIZ, Inc. (CBZ) Finances Its Growth
Debt vs. Equity Structure
As of September 30, 2024, the company's total debt was $362.1 million, with an average interest rate of 5.40%. This reflects a slight decrease from $368.2 million in total debt during the same period of 2023, which had an average interest rate of 5.16%.
The debt-to-equity ratio stands at 0.39, indicating a balanced approach to leveraging debt while maintaining equity funding. This ratio is significantly lower than the industry average of 0.75, suggesting a conservative capital structure.
Recent debt activity includes the establishment of the 2024 Credit Facilities, which resulted in $1,465.5 million in outstanding debt as of November 1, 2024. The new credit facility replaced the previous arrangements and is crucial for financing strategic acquisitions.
The company's credit rating is currently Baa3, reflecting a stable outlook with adequate capacity to meet financial commitments.
In terms of balancing debt and equity funding, the company has focused on maximizing cash flow to facilitate debt repayment while maintaining flexibility for future acquisitions. In 2024, the company completed three acquisitions costing $22.5 million.
| Debt Type | Amount ($ million) | Interest Rate (%) | Debt-to-Equity Ratio | Credit Rating |
|---|---|---|---|---|
| Short-term Debt | $337.3 | 5.40 | 0.39 | Baa3 |
| Long-term Debt | 1,465.5 | Floating Rate | ||
| Total Debt | $1,802.8 | Average 5.40 | Average 0.39 | Average Baa3 |
This strategic approach allows the company to maintain a robust financial position while pursuing growth opportunities through acquisitions and share repurchases. In the nine months ended September 30, 2024, the company repurchased 0.2 million shares of common stock for $11.4 million, showcasing its commitment to returning value to shareholders.
Assessing CBIZ, Inc. (CBZ) Liquidity
Assessing CBIZ, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 1.12, reflecting a slight increase from 1.09 in the previous year. This indicates that the company has sufficient current assets to cover its current liabilities.
Quick Ratio: The quick ratio stands at 0.95, up from 0.92 in 2023. This ratio suggests that, excluding inventories, the company can still meet its short-term obligations using its most liquid assets.
Working Capital Trends
Working Capital: As of September 30, 2024, working capital is reported at $112.4 million, a decrease from $120.5 million the previous year. This decline is primarily attributed to increased operational expenses.
| Period | Current Assets ($ millions) | Current Liabilities ($ millions) | Working Capital ($ millions) |
|---|---|---|---|
| September 30, 2024 | 250.0 | 137.6 | 112.4 |
| September 30, 2023 | 247.5 | 126.9 | 120.5 |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities was $68.2 million, compared to $57.3 million for the same period in 2023. This increase is attributed to improved net income and effective management of working capital.
Investing Cash Flow: Net cash used in investing activities amounted to $(24.9 million) in 2024, significantly lower than $(76.6 million) in 2023. This reduction is primarily due to fewer acquisitions.
Financing Cash Flow: Cash used in financing activities totaled $(85.2 million) in 2024, compared to $(18.4 million) in 2023. The increase is mainly due to higher repayments on bank debt and share repurchases.
| Cash Flow Type | 2024 ($ millions) | 2023 ($ millions) |
|---|---|---|
| Operating Activities | 68.2 | 57.3 |
| Investing Activities | (24.9) | (76.6) |
| Financing Activities | (85.2) | (18.4) |
Potential Liquidity Concerns or Strengths
Despite the increase in operational cash flow, the company faces potential liquidity concerns due to rising operational costs and a higher debt burden. Total outstanding debt as of November 1, 2024, is $1,465.5 million, with a weighted average interest rate of 5.40%.
Days Sales Outstanding (DSO): The trailing twelve-month DSO is 97 days as of September 30, 2024, indicating a slight increase from 96 days in 2023. This trend suggests that the company may be experiencing slower collections, which could impact liquidity if not addressed.
Overall Cash Position: The net decrease in cash, cash equivalents, and restricted cash for the nine months ended September 30, 2024, was $(41.965 million), compared to $(37.818 million) in 2023. This trend highlights the need for careful cash management moving forward.
| Metric | 2024 | 2023 |
|---|---|---|
| Outstanding Debt ($ millions) | 1,465.5 | 1,368.2 |
| Weighted Average Interest Rate (%) | 5.40 | 5.16 |
| Days Sales Outstanding (DSO) | 97 | 96 |
Is CBIZ, Inc. (CBZ) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key valuation ratios, stock performance, and analyst opinions.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 24.0, calculated using the latest earnings per diluted share of $2.62 for the nine months ended September 30, 2024. The industry average P/E ratio is approximately 20.5.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 2.5, with the book value per share reported at $10.50. The industry average P/B ratio is around 2.0.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 13.5, based on an enterprise value of $1.8 billion and EBITDA of $133 million for the trailing twelve months.
Stock Price Trends
Over the last 12 months, the stock price has shown a general upward trend, moving from $45.00 to a current price of $62.00, reflecting an increase of approximately 37.8%.
Dividend Yield and Payout Ratio
The current dividend yield is 1.2%, with an annual dividend of $0.75 per share. The payout ratio is approximately 28.6%, indicating a sustainable dividend policy.
Analyst Consensus
Currently, analyst consensus ratings indicate a majority recommendation of Buy, with 60% of analysts suggesting a buy, 30% recommending hold, and 10% advising sell.
| Valuation Metric | Company Value | Industry Average |
|---|---|---|
| P/E Ratio | 24.0 | 20.5 |
| P/B Ratio | 2.5 | 2.0 |
| EV/EBITDA Ratio | 13.5 | N/A |
| Current Stock Price | $62.00 | N/A |
| 12-Month Price Change | 37.8% | N/A |
| Dividend Yield | 1.2% | N/A |
| Payout Ratio | 28.6% | N/A |
| Analyst Consensus | 60% Buy | N/A |
Key Risks Facing CBIZ, Inc. (CBZ)
Key Risks Facing CBIZ, Inc.
CBIZ, Inc. faces a variety of internal and external risks that could impact its financial health. The following outlines the key risk factors influencing the company:
Industry Competition
The professional services industry is characterized by intense competition. CBIZ competes with numerous firms, including large national firms and smaller regional firms. This competitive landscape can pressure pricing and margins, affecting overall profitability. For instance, the company's gross margin percentage was reported at 21.4% for the nine months ended September 30, 2024, compared to 20.9% for the same period in 2023.
Regulatory Changes
Changes in laws and regulations can have substantial impacts on operations, particularly in the financial and insurance services sectors. Compliance with evolving regulations can increase operational costs. As of September 30, 2024, the company maintained compliance with financial covenants under its credit facilities.
Market Conditions
The economic environment can adversely affect client demand for services. Economic downturns can lead to reduced spending on consulting and professional services. Revenue for the nine months ended September 30, 2024, increased by $89.5 million, or 7.1%, compared to the same period in 2023, indicating resilience in a challenging market.
Operational Risks
Operational risks include challenges related to service delivery and client retention. During the nine months ended September 30, 2024, operating expenses increased by $51.4 million, or 7.0%, reflecting rising personnel and technology costs.
Financial Risks
Financial risks include the company's high level of debt. As of November 1, 2024, the company reported $1,465.5 million in outstanding debt under the 2024 Credit Facilities. Interest expense was $15.4 million for the nine months ended September 30, 2024.
Strategic Risks
CBIZ's strategy includes acquisitions to strengthen its market position. While acquisitions can drive growth, they also pose integration risks. The company completed three acquisitions for $22.5 million in cash during the nine months ended September 30, 2024.
Mitigation Strategies
To address these risks, CBIZ has implemented several strategies, including:
- Enhancing compliance frameworks to adapt to regulatory changes.
- Investing in technology to improve operational efficiency and service delivery.
- Maintaining strong cash flow management to service debt obligations, with $68.2 million in cash provided by operating activities for the nine months ended September 30, 2024.
| Risk Factor | Description | Impact on Financials |
|---|---|---|
| Industry Competition | Intense competition in professional services | Pressure on pricing and margins |
| Regulatory Changes | Compliance with evolving regulations | Increased operational costs |
| Market Conditions | Economic downturns affecting client demand | Potential decline in revenues |
| Operational Risks | Challenges in service delivery and client retention | Increased operating expenses |
| Financial Risks | High level of debt | Interest expense impacts profitability |
| Strategic Risks | Integration risks from acquisitions | Potential disruption in operations |
Future Growth Prospects for CBIZ, Inc. (CBZ)
Future Growth Prospects for CBIZ, Inc. (CBZ)
The financial health of CBIZ, Inc. reveals several key growth opportunities that investors should consider as of 2024. This chapter analyzes the primary growth drivers, revenue projections, strategic initiatives, and competitive advantages that position the company for future expansion.
Key Growth Drivers
- Product Innovations: CBIZ continues to enhance its service offerings, particularly in financial and insurance services, which saw a 8.0% increase in revenue to $322.3 million for the three months ended September 30, 2024, compared to $298.4 million in the same period of 2023.
- Market Expansions: The company has increased its footprint through strategic acquisitions, contributing an additional $30.0 million in revenue from newly acquired businesses.
- Acquisitions: In 2024, CBIZ completed three acquisitions for a total cost of $22.5 million, further bolstering its market presence.
Future Revenue Growth Projections
CBIZ projects continued revenue growth driven by both organic growth and acquisitions. Revenue for the nine months ended September 30, 2024, increased by 7.1% to $1,353.2 million from $1,263.6 million in 2023. The company anticipates further growth through the following:
| Year | Projected Revenue ($ millions) | Year-over-Year Growth (%) |
|---|---|---|
| 2024 | 1,353.2 | 7.1 |
| 2025 | 1,450.0 | 7.2 |
| 2026 | 1,550.0 | 6.9 |
Strategic Initiatives and Partnerships
CBIZ's strategic focus includes maximizing cash flow to reduce debt and enhance liquidity for future acquisitions. As of November 1, 2024, the company had $1,465.5 million in outstanding debt. The company’s share repurchase program, authorized for up to 5.0 million shares, is also a focus for returning value to shareholders.
Competitive Advantages
CBIZ maintains several competitive advantages that position it favorably for growth:
- Diverse Service Offerings: The company provides a range of integrated services across three practice groups, enhancing its ability to serve various clients.
- Strong Client Relationships: A substantial portion of revenue is derived from longstanding contracts, such as the cost-plus contract with a significant client contributing approximately 75% of revenue in one practice group.
- Experienced Management Team: The leadership team's experience in the industry facilitates strategic decision-making for growth and operational efficiency.
Overall, the combination of product innovations, market expansion, strategic acquisitions, and competitive advantages indicates a robust outlook for CBIZ, Inc. as it navigates the financial landscape in 2024 and beyond.
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Resources:
- CBIZ, Inc. (CBZ) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of CBIZ, Inc. (CBZ)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View CBIZ, Inc. (CBZ)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.