CBIZ maintains $2.8B–$2.95B revenue outlook for 2025 as Marcum integration drives margin gains

Earnings Call Insights: CBIZ, Inc. (CBZ) Q3 2025

MANAGEMENT VIEW

* President and CEO Jerry Grisko highlighted the one-year anniversary of the Marcum acquisition, describing the integration as "on or ahead of schedule in most key areas" and emphasizing "opportunities we now have to accelerate growth and break away from our competitors". Grisko stated, "We are now able to leverage those investments company-wide, including go-to-market industry groups, AI and other crucial technologies as well as offshoring resources."
* Grisko noted the establishment of standardized processes, policies, and systems, and the alignment of teams under a common reporting structure to enhance collaboration and resource sharing. He pointed to investments in national tax and assurance quality resources, a 60-member transformation and innovation team, and increased offshore resources in India and the Philippines.
* The CEO reported the launch of CBIZ Vertical Vector AI and a national brand campaign, both aimed at improving client offerings and market visibility.
* Grisko asserted, "We have clear line of sight to achieve our 2025 revenue outlook and the entire leadership team and all our client-facing leaders are laser-focused on capitalizing on these opportunities and trends."
* CFO Brad Lakhia stated, "Revenue and cash flow were in line with our expectations and earnings exceeded. The benefits of greater scale and the resiliency of our business model once again are reflected in our operating and financial performance and leave us well positioned for sustainable long-term growth."

OUTLOOK

* Lakhia confirmed, "We are maintaining our revenue and earnings guidance for the year. At this time, we continue to have line of sight to the low end of the revenue guidance of $2.8 billion to $2.95 billion we set earlier this year. We are also maintaining our adjusted EBITDA and adjusted EPS guidance."
* Management increased its synergy goal from the Marcum acquisition to a total of $50 million or more, expecting $35 million in synergies realized in 2025 and the majority of the balance in 2026.
* Lakhia noted, "The timing for achieving [the leverage] range may shift to 2027" due to capital allocation toward share repurchases in 2025.

FINANCIAL RESULTS

* Lakhia reported consolidated third quarter revenue of $694 million and year-to-date revenue of $2.2 billion, a 58% and 64% increase, respectively, driven by the Marcum acquisition.
* Adjusted EBITDA reached $120 million for the quarter and $476 million year-to-date, with an adjusted EBITDA margin of 17.3% for the quarter and 21.5% year-to-date.
* Third quarter adjusted diluted earnings per share was $1.01, and year-to-date adjusted EPS was $4.27.
* Year-to-date tax expense was $76 million, $25 million higher than last year, primarily due to $88 million increase in pretax income.
* Financial Services segment revenue was $579 million, up $256 million or 80%, with adjusted EBITDA increasing 86% to $126 million and a margin of 21.7%.
* Benefits and Insurance segment revenue was $103 million; year-to-date revenue grew 2.7%, and adjusted EBITDA grew 6.7%.
* Net debt stood at $1.6 billion, and $128 million in share repurchases were completed year-to-date.

Q&A

* Christopher Moore, CJS Securities: Asked about pricing trends and future expectations. Grisko responded, "We're really pleased, first of all, this year to be realizing mid-single digits. I think that's above what we're hearing some of our competitors to be receiving in this market...there's nothing structural in the industry that would prevent us from continuing to do that."
* Moore inquired about client losses post-acquisition. Grisko stated, "We expected to lose some clients...Put those things aside, we're really pleased with what we've seen as far as client retention rates to date and also staff retention rates."
* Moore also asked about rainmaker departures. Grisko replied, "I would say not notable...there's really a lot of energy around the power of the combined entity."
* Moore sought clarification on integration costs. Lakhia said, "The nature and the kind of the overall mix of the integration costs will be overall pretty similar next year...some acceleration of real estate facilities-based costs."
* Andrew Nicholas, William Blair: Asked about macro tailwinds, insurance brokerage softness, and M&A market-sensitive projects. Grisko explained, "We did see some lift in the third quarter as a result of...discussing things like OBBBA...our benefits and insurance revenues were a little soft this quarter...pleased...to see increased activity [in M&A] compared to the first half of the year."
* Nicholas asked about Q4 pro forma growth rates. Lakhia estimated "somewhere in the neighborhood of 6% to 8% growth year-over-year on our base Q4 revenue on a pro forma basis."
* Nicholas requested margin insights for next year. Lakhia confirmed, "We have increased and pleased to have increased the synergy outlook for the acquisition from $25 million to more than $50 million...the $35 million...is the amount that we expect to fully realize in this year's operating income."
* Marc Riddick, Sidoti: Asked about client feedback, rate cuts, government shutdown effects, and industry vertical activity. Grisko replied, "Rate cuts...that's just positive...72% of our business...is going to come in the door in more or less favorable times...large win within our food industry...strength of the industry groups is early, but it's starting to come together."
* Riddick inquired about co-location efforts. Lakhia noted ongoing progress in "bringing our people together...on both physical location level and on a virtual level as well."

SENTIMENT ANALYSIS

* Analyst tone was generally constructive but probing, with questions focusing on integration costs, client and staff retention, pricing sustainability, and margin trajectory. There was interest in understanding risks but limited skepticism, as reflected in the nature of multi-part and clarifying questions.
* Management's tone remained confident, emphasizing resilience, operational improvements, and the transformative impact of the Marcum integration. Grisko frequently used phrases such as "we are pleased", "we have clear line of sight", and "we are well positioned", underscoring optimism.
* Compared to the previous quarter, management's sentiment shifted from a defensive stance addressing macro headwinds to a more confident and forward-looking posture, driven by stronger results and integration progress. Analysts' tone remained neutral to slightly positive, pressing for clarity on future growth levers and potential risks.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter reflected continued strong performance in core businesses, while improved market conditions supported growth in nonrecurring areas, compared to ongoing headwinds and client pushback on pricing in the previous quarter.
* Guidance language shifted from expectations of persistent headwinds and a focus on mitigating pressures, to maintaining guidance and expressing confidence in achieving the low end of the revenue range.
* Management highlighted increased synergy targets and successful integration, compared to the previous quarter's more cautious approach.
* Key metrics such as revenue, adjusted EBITDA, and EPS all showed year-over-year and quarter-over-quarter growth, with margin improvements attributed to scale and lower incentive compensation.
* Analysts maintained a focus on integration, cost control, and sustainability of improved performance, with the tone remaining cautious yet optimistic.

RISKS AND CONCERNS

* Management cited the need to complete key real estate decisions in major metro markets as an ongoing integration challenge.
* Increased integration cost estimates for 2025, primarily due to additional severance, were disclosed.
* Softness in the insurance business was attributed to market trends, with management monitoring discretionary project work and P&C trends.
* Analysts raised concerns about margin sustainability, normalization of incentive compensation, and the timeline for capturing full synergies from the Marcum acquisition.

FINAL TAKEAWAY

CBIZ leadership emphasized that the company is pleased with its third quarter results and integration progress, maintaining revenue and earnings guidance for 2025 while increasing synergy targets from the Marcum acquisition. Management sees clear momentum in both core and nonrecurring businesses, supported by operational initiatives, investments in technology and AI, and successful team integration, with an outlook for accelerated growth and margin expansion as synergies are realized and market conditions improve.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/cbz/earnings/transcripts]

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