CBIZ, Inc.

Welcome to the CBiz second quarter 2020 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Lori Novickis, Director of Corporate Relations. Please go ahead.

Good morning, everyone, and thank you for joining us for the CBiz second quarter and first half 2020 results conference call. In connection with this call, today's press release has been posted on the Investor Relations page of our website, cbiz.com. This call is being webcast. A link to the live webcast, as well as the replay and transcript, can also be found on our website. Before we begin our presentation, we would like to remind you that during the call, management may discuss certain non-GAAP financial measures. A reconciliation of these measures can be found in the financial tables of today's press release. Finally, remember that management may also make forward-looking statements. Such statements are based on current information and management's expectations as of this date and do not guarantee future performance. Forward-looking statements involve certain risks, uncertainties, and assumptions that can be difficult to predict. Actual results can and sometimes do differ materially. A more detailed description of such risks and uncertainties can be found in the company's filings with the Securities and Exchange Commission. Joining us for today's call are Jerry Grisco, President and Chief Executive Officer, and Ware Grove, Chief Financial Officer. I will now turn the call over to Jerry for his opening remarks. Jerry?

Thank you, Lori, and good morning, everyone. Before I discuss our results for the quarter and year to date, I thought it would be helpful to review certain of the key attributes of our business that we discussed at the end of the first quarter, including that approximately 70% of our revenue is generated from essential services, including our tax services, insurance services, payroll services, and a host of others that we provide to our clients regardless of economic conditions in the market. We generally retain approximately 90% of our clients from year to year. We have a broad geographic footprint. We serve a diverse client base in terms of size and industry. We enjoy strong and consistent cash flow. We have a substantial amount of variable expenses in our business. including a considerable amount of variable compensation based on the performance of the business. We have a strong balance sheet with ready access to capital, and we entered into the current environment with very low amount of debt and in a very strong financial position. And it's those attributes that make us confident our business will continue to perform well in our current environment. And in fact, that's precisely what we experienced in the second quarter and year to date. For the second quarter of 2020, revenue increased by $1.4 million over the same period in 2019. Earnings per share increased by 30% from 30 cents per diluted share for the second quarter last year compared with 39 cents per diluted share for the same period this year. And our adjusted EBITDA for the second quarter was $35.9 million compared with $28.8 million for the second quarter of 2019. an increase of 24.7%. As we expected, our business performed best in those areas where we provide the essential services that our clients need regardless of the business climate. Within our financial services segment, our core accounting service delivered strong performance throughout the second quarter, bolstered by the IRS extension of tax filing deadline from April 15th to July 15th. We also received strong contributions from our risk and advisory practice and our litigation support practices within this group. Within our benefits and insurance group, we were pleased to see strong contributions from our employee benefits business, our 401k advisory practice, and the personal and commercial lines portions of our property and casualty business. In addition, we're encouraged by favorable market reaction to our new payroll platform that targets midsize and larger clients with more sophisticated needs. And as we described in the past, our business always benefits in times of complexity and change, and the economic hardship faced by many of our clients following the onset of COVID-19 allowed us to showcase our breadth of services and depth of expertise. Our teams quickly mobilized to help our clients and prospects understand and access the wide range of stimulus and other relief packages available in this challenging business climate. including the payroll protection plan and the main street lending program. While our approach resonated with our current clients, it also allowed us to attract and serve new prospects in need of more sophisticated support to take advantage of the emerging relief programs. These efforts combined with our ongoing digital outreach and thought leadership has led to a more robust pipeline of prospects for new business. In addition, The support that we continue to provide to our clients in many cases is vital to their financial health and will deepen our ongoing relationships in ways that will improve client retention and support ongoing growth. Also, as we expected, we did experience some softness in certain business lines that provide more discretionary project-oriented services, those that require us to be at the client's site to perform our work, and a small amount of business tied to those industries hardest hit by the pandemic including hospitality and restaurant businesses. With that said, it's worth noting that the amount of our revenue tied to clients in those specific industries represents less than 5% of our total revenues. We also experienced some softness in our payroll business, which was impacted by layoffs and risks among a number of small and mid-sized business clients, although we have seen an improvement in that area over the past several weeks. Finally, Our government healthcare consulting business continues to perform well, but did not provide the growth that we normally experience as a result of the slowdown in the delivery of the information from our clients that we need to do our work and our ability to be onsite to perform certain work. With that said, we are working with our clients to adopt virtual solutions that will lessen the need to be onsite. And moreover, the work that we do in this area still needs to be performed, So we would expect that the work that was delayed in the second quarter will shift to the second half of this year and possibly flow into 2021. We've been asked on a number of occasions to compare the current economic climate to the financial crisis of 2008 and 2009. Although there are substantial differences in the two scenarios, it was the attributes of our business that I described earlier that allowed us to perform well during the financial crisis. And it's those same attributes that are allowing us to continue to perform well in our current environment. In addition, since that time, we've made substantial investments in our people, processes, and technology. These investments have been meaningful in numerous aspects of our business, including the expansion of our producer team, implementation of a more sophisticated payroll platform, and improvements in our processes and systems with the goal of enabling more granular visibility into the profitability and pricing in our financial services businesses. These investments make us significantly stronger and more resilient today than we were in 2008. As mentioned earlier, we came into COVID-19 pandemic in a very solid financial position, coming off a strong performance in 2019. In addition, at the outset of the pandemic, we took a number of cost control measures to preserve cash and ensure liquidity. including implementing our hiring freeze, placing limits on all discretionary spending, and suspending our stock buyback program. The strength of our balance sheet and our cost control measures have allowed us to avoid the more severe actions taken by many of our competitors, including across-the-board compensation reductions, significant reductions in workforce, and extensive furloughs. We believe that our team members are among the best in the industries. And throughout this time, maintaining our workforce has been a key priority. We know from watching the experience of other professional services firms following the 2008 downturn that those that significantly reduced their workforce found themselves in a challenging position when conditions started to improve. While that was not our experience in 2008, our own lessons and those from others continue to inform our approach to the pandemic. All that being said, we recognize that the pandemic may be with us for the foreseeable future. While we are pleased with our performance in weathering the storm to date, and we are presently more focused on growth opportunities and survival, we have identified a number of additional cost control levers that are available to us if we should need to use them in the future. At this point, I'll turn it over to Ware Grove, our Chief Financial Officer, to provide more specific details on our financial performance for the second quarter and year-to-date.