CBIZ, Inc. Price & Performance (CBZ)

Forward looking statements represent only our expectations, estimates, projections as of this date of this call and are not intended to give any assurance of future results. Because forward looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause future results to differ materially, and CBIZ assumes no obligation to update these statements except as required by law. A more detailed description of such factors can be found in today's press release and in our financial filings with the Securities and Exchange Commission. Joining us for today's call are Jerry Grisco, President and Chief Executive Officer Brad Lakia, chief financial officer and Chris Burrillo, President of our Financial Services Division. I will now turn the call over to Jerry Grisco for his opening remarks. Jerry?

Thank you, Laurie, good morning, everyone. I am pleased to be able to provide an overview of our strong first quarter performance and results along with an update on our progress with integration following our acquisition of Markham in November of last year. Overall, our integration efforts are on schedule, and we are encouraged by the outstanding collaboration we are experiencing among our teams, as we build on the best of both legacy organizations and continue to position ourselves as the premier provider of professional services to the middle market. Now before I turn to our results, I want to take this opportunity to highlight the key attributes of our business model and how these attributes enable us to perform relatively well even in more challenging economic environments such as the one we faced in the first quarter. First, approximately 77% of our services are essential and recurring, meaning that our clients need these services regardless of business climate. We also have strong and consistent cash flows, high client retention rates, a broad geographic footprint, serve businesses across a diverse set of industries, and are not overly concentrated in any one market or industry. Also inherent to our business model is a high degree of variable expenses that serve as leverage we can pull to manage our expenses in response to changing conditions including a compensation structure tied to growth, profitability and other key performance metrics.

Those attributes have served us well throughout challenging economic environments in our whether it was through the great financial crisis or the pandemic. Our historic performance during those times demonstrates our ability to successfully position our business to deliver relatively strong earnings results and at the same time improve the strategic positioning of our company to emerge even stronger when conditions improve. When assessing our revenue results for the first quarter, it is important to recognize that we find ourselves in a rapidly evolving ever changing and increasingly uncertain economic and geopolitical environment. While the essential nature of many of our services makes us more resilient, our overall business and our clients are not entirely immune to the challenging business climates, and our Q1 revenue results and full year outlook should be viewed through that lens. With that said, I am very pleased to report that our business model enabled us to continue to deliver very strong results for the first quarter. Among the high notes, the essential compliance portion of our core accounting and tax business generally performed as expected through the traditional busy season. There are a number of areas of our business that we expected some revenue softness, due to a special project work that we performed in the first quarter of twenty twenty four that we knew would not recur to the same degree in 2025.

Our revenue was also impacted by the anticipated loss of a number of clients due to conflicts that prohibited us from continuing that work related to the transaction. In addition, the current economic and geopolitical environment has had a significant impact on a number of industries that affect our clients. Including the capital markets and not for profit industries, as well as on certain of our advisory services, which tend to be more project based than discretionary. On a positive note, our government health care consulting business continues to build our strong pipeline of new projects and posted very strong revenue growth in Q1. And our Benefits and Insurance business also performed very well with growth coming from nearly every service line. In summary, we are very pleased with how the business performed for the first quarter with strong earnings and consistent cash flows. As we look forward to the rest of the year, we recognize that we may continue to be operating in a more challenging economic environment and we are taking all appropriate steps to continue to protect and grow our earnings in the event that the business climate does not improve. Based on the fundamental attributes of the business, that allows us to protect profitability, we are pleased to be able to confirm and maintain our previously announced guidance for adjusted EBITDA and adjusted EPS.

However, based on the business climate we experienced through the first quarter, continued uncertainty for the months ahead and the proportion of our work that is more discretionary through much of the remainder of the year we are widening our revenue guidance to be within a range of 2,800,000,000.0 to $2,950,000,000 At this point, I would like now to now introduce Brad Lakia, our new Chief Financial Officer, who joined us in March following the retirement of Ware Grove. We welcome Brad to our team at a time of incredible opportunity as we integrate Markham and position our company for accelerated long term growth. Brad brings nearly thirty years of experience within larger complex companies across a broad range of financial disciplines including capital markets, M and A, treasury, financial planning and analysis and investor relations. I'm pleased to welcome Brad to the call today and look forward to connecting him with our shareholders and analysts following call. I'll now turn it over to Brad. Thank you, Jerry, and good morning, everyone. I'm happy to have the opportunity to join you today on my first CBIZ earnings call. And I'm excited to work along Jerry, the entire CBIZ team and our investment community.

Before I discuss our first quarter financial results, I want to start by providing a few reminders regarding some financial reporting impacts we highlighted on our last earnings call that resulted from the Marcom transaction. First, to be consistent with our 10 Q MD and A, and due to complexities associated with providing accurate comparability, we will not be providing same unit comparisons in 2025. These complexities include a number of factors such as accounting policy differences, impacts associated with integrating businesses, teams, systems and business processes. We plan to reassess our ability to provide same unit comparisons once we lap into our 2026 financial reporting periods. Second, to facilitate a better understanding of our operating performance, are reporting adjusted non GAAP financial metrics include adjusted EBITDA, adjusted net income, and adjusted diluted earnings per share. For 2025, these adjustments were relate to acquisition and integration related costs, non cash intangible acquisition amortization expense, and facility optimization charges. Reconciliations to these non GAAP measures are provided in the supplemental schedules included our earnings release published earlier this morning. Lastly, our 2025 results will reflect the impact of higher share count and higher interest expense. Both of which are directly connected to the funding of the Marcom acquisition.

With that, I'll turn to our results. As Gerry indicated, our overall performance met our expectations. And with the full quarter of the acquisition now reflected in our results, we are beginning to experience the scale and accretive benefits associated with this transformative acquisition. We are equally pleased to see the combined team collaborating to pursue the unique growth opportunities that are enabled by the one CBIZ service client offering. On a consolidated basis, first quarter revenue increased 70% from $494,000,000 to $383,000,000 due primarily to the acquisition. Adjusted EBITDA doubled from 119,000,000 to $238,000,000 reflecting the strong margin and scale attributes of our business model as well as the meaningful accretive impact of the acquisition. Please note, going forward, we expect to focus our profitability reporting using adjusted EBITDA given higher interest expense levels. In the past, we focused primarily on pretax income and margins. And we targeted 20 to 50 basis point improvements annually on that pre tax margin. Going forward, we will target 20 to 50 basis point improvements of annual adjusted EBITDA margin improvement. Pretax income was $173,000,000 up $69,000,000 or 66%. When we announced the Marcom acquisition, we said we expected it to be 10% accretive within the first year.

Therefore, we are pleased to report adjusted diluted EPS increased approximately 40% in the first quarter from $1.63 to $2.29 per share. The lower drop through rate from adjusted EBITDA to pretax income to adjusted net income and EPS is explained primarily by higher interest and tax expense. Interest expense was $21,000,000 higher than last year due to increased borrowing and borrowing rates resulting from the acquisition funding. Our effective tax rate increased approximately 300 basis points reflecting $5,000,000 in higher tax expense. The increase in our effective tax rate is primarily driven by the addition of legacy Markham revenue coming from jurisdictions with higher rates. Higher interest expense and tax rate represent an impact on GAAP diluted EPS of approximately $0.02 3 and $08 per share respectively. Our Financial Services segment first quarter revenue was $714,000,000 up $341,000,000 or approximately 92%. Financial Services adjusted EBITDA doubled $230,000,000 reflecting an adjusted EBITDA margin of 32% which was similar to last year. And our Benefits and Insurance segment delivered revenue of 113,000,000 up $5,000,000 or approximately 4%. B and I adjusted EBITDA was $30,000,000 up $3,000,000 or 10%. B and I adjusted EBITDA margin was 27%, up nearly 150 basis points versus last year.

The revenue and profitability improvements were driven by nearly all B and I service lines, and our B and I team is engaging aggressively to pursue a strong pipeline of Marcom related cross serving opportunities. In terms of cash flow and net debt, and consistent with prior years, we experienced seasonal peak levels of working capital usage during the quarter. DSOs were ninety six days five days lower than prior year driven by improved collections. Total debt at the end of the quarter was approximately $1,500,000,000 we had approximately $385,000,000 of unused capacity on our $2,000,000,000 facility. As a result, our leverage at the end of the Q1 was approximately four times or approximately zero five turn higher than year end. This increase is consistent with what we experienced prior to the Marcom acquisition. And as we discussed on prior calls, assuming we use all or most of our free cash flow to reduce debt, we estimate our leverage could be two to two point times by the end of twenty twenty six. Turning to our outlook and guidance items, Our adjusted EBITDA and adjusted EPS guidance is unchanged. However, the uncertainty in the current economic and geopolitical environment has already led to softness our non recurring service lines.

And that is a trend we expect to continue. Non recurring services now represent approximately 23% of our revenue. Given this uncertainty and the company's limited visibility into forecasting demand for these services, for the balance of the year, we now expect full year 2025 revenue to be within a range of $2,800,000,000 to 2,950,000,000.00 And as we have previously said, we have a range of variable cost items that we can fairly quickly adjust to mitigate the uncertain impacts of our top line. We expect approximately $60,000,000 of payments in 2025 related to prior acquisitions, primarily earn out payments, of which $30,000,000 was paid in the first quarter. [indiscernible] expect another $30,000,000 of payments related to prior acquisition related earn outs 2026. And approximately $10,000,000 in 2027. And we continue to estimate between 20,000,000 and $25,000,000 in capital expenditures for 2025 of which $5,000,000 was incurred in the first quarter. Depreciation and amortization was nearly $25,000,000 for the first quarter, we estimate approximately $100,000,000 for the full year. And we continue to expect approximately $25,000,000 in synergies the majority to be delivered in year two and beyond. Finally, as a reminder, approximately 4,400,000.0 shares will have been issued to former Marcom Partners will become eligible for resale effective 05/01/2025.

After May 1, there will be an additional approximately 300,000 shares delivered monthly 2027, All of these shares are subject to our first right of first refusal and were authorized to repurchase up to 5,000,000 shares. We'll be prudent and disciplined in managing our share repurchase program. And with that, I'll turn it back to Jerry. Thank you, Brad. Before we move to Q and A, I want to provide further update on our progress with integration, and our M and A strategy going forward. As we are wrapping up our traditional financial services busy season, and most of the time sensitive client deadlines will soon be behind us, we now have the opportunity to accelerate our integration efforts deepen collaboration, and move forward with key initiatives and strategies that will begin to unlock the synergies and growth potential of our exciting combination with Markham. A major area of focus in the months ahead will be the integration of our technology systems, and moving our teams onto a unified technology environment This is one of the most critical enablers to operational improvements process standardization, and our ability to drive consistency in everything from delivery of client services to our CLIP to our team member experiences.

Once in place, these integrated systems will allow us to streamline and automate processes, enhance data visibility and analysis, and ultimately deliver greater value to all of our stakeholders. As with every step in our integration process, we continue to take a thoughtful and intentional approach balancing progress with change management and training to support a smooth transition for our entire team. As we reflect on the past few months, I'm incredibly proud of the progress we've made on many fronts, from identifying a group of incredibly talented leaders to drive our most impactful strategic initiatives to establishing new operating models For our people, we continue to see high retention and strong engagement and we're gathering feedback and input along the way. In terms of future M and A, with the successful completion of the Marcom transaction and our continued progress with integration, we're seeing an increased interest in CBIZ as an acquirer of choice. We expected this outcome and are thoughtfully evaluating a number of opportunities that will continue to build on our geographic presence in key markets and add strength to our existing service lines. Finally, I want to touch on two items that Brad talked on, I touched on in my opening remarks, specifically relating to organic revenue growth and our guidance for the year.

As it relates to organic revenue growth, as you know, we've historically provided that guidance annually throughout the year. The reason that we were not able to do that this year is because when we look at the Markham numbers they were private obviously, before they joined CBIZ. It's very difficult for us, from an apples to apples comparison to have a good baseline for them, a good reliable on their organic growth And, so we just really don't have good line of sight More importantly, we've already, as you would expect, and we we've already begun to bring these businesses together. Regionally, we're combining their offices with ours. We have combined leadership. We're combining our teams. So So while we do have a little bit of line of sight in the first quarter, that's going to be that's going to be even more difficult as we progress throughout the year. With that said, we did have some line of sight in the first quarter and I want to lend that to you. Based on the internal analysis that we have, very encouragingly, as expected, the recurring portion of our accounting and tax business both within legacy CBIZ and legacy MARCUM performed as expected in that mid single digit range as well as our Benefits and Insurance group performing within that mid single digit range.

So I just want to convey that message that we're pleased with the performance of the business through the first quarter. And where we expected it to be strong, it was strong, that being our seasonally kind of predictable, more heavily more recurring business in the first quarter. I'll also want to touch on a couple of things. Noticed that that there were some comments around our revenue not hitting guidance or I'm sorry, expectations, consensus for the year. That really falls into two buckets. As you know, we don't guide quarterly. We guide annually. So let me kind of bring a little bit of color to that. The two buckets are the known things. We knew some things that that we couldn't convey to the analysts, that created consensus. And that resulted in about a $30,000,000 change, and it's really pacing and timing, on the year. We had about $30,000,000 in category, one being the SPAC business. We've talked a lot about this. Mark them within their capital markets practice traditionally did a lot of SPAC work. That work predictably has been winding down. From a peak in 2023. And we saw it decline in '24 and expectedly decline again in '25.

We're not concerned about that. We know that we'll sell over. There's other parts of the business that are in fact increasing. But we knew that SPAC business would would wind down. The other thing that we expected, we talked about this, we haven't quantified it, is there were a couple of portions of the business that we were going to have conflicts with. Most notably on their health care side, Markham had a health care practice that was in conflict with our government health care consulting practice. That's another piece of that. And then of course, as you know, announced last year, we sold our Ka consulting business that was in last year's number, isn't in this year's number. That's about impact on the quarter about $30,000,000 of known items. The unknown portion of it was really related to the, the economic climate and while there's a number of items there, I would just say it was the impact on the capital markets. So our SEC audit practice and the work that we would traditionally do there, when that When the markets just kind of hit the pause button, as result of some of the policies of the administration that work just kind of halted.

No one saw that when we began the year. And and of course it had a like impact on our advisory practice. So those two things are about $20,000,000 So combined about $50,000,000 Again, we don't guide the quarters. But when I saw the comments that we missed the consensus I would say, it wasn't far off our weren't far off. Our internal expectations certainly on the items that we knew and expected. Lastly, turning to guidance. We're really pleased. And again, the model affirms that that despite some of the softness on the top line, we're able to yet affirm our earnings guidance for the year and other earnings related metrics. From a top line, we don't want the message to be concern over optimism or of the business. That's why we didn't guide down on the top end of that. The guidance is really just a result of kind of a pragmatic look at what we've seen so far in the year. And what we expect to see, through the continuance of the year if conditions don't improve. Again, with 23% of our revenue really being more advisory project discretionary side we thought it was prudent at this point to widen that range on the revenue side because we know some things now that we didn't know when we gave that guidance.

But in no in no term should it be viewed as a lack of optimism about the prospects for the range of the business. And in fact, we have some line of sight that if if things improve a little bit, we will in fact hit that original guidance. But we wanted to to broaden that range. So with that, I'll turn it over to Q and A. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speaker phone, please pick up your hands up before pressing the keys. At any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Comes from Christopher Moore with CJS Securities. Please go ahead.

Hey, good morning guys. Thanks for taking a few questions.

Maybe I'll just start with where you left off, Gerry, in terms of the the nonrecurring services represent about 23% of revenue. You called out capital markets. Are there [indiscernible] [indiscernible] softer if you were to be closer to low end of that revenue range?

Yes, Chris, thank you for the question. I would say capital markets is a big piece of that. The other thing is anything deal related. As you know, we have a pretty sizable private equity practice that really relies heavily on deal flow. We've seen that's a mixed bag, right? We saw kind of [indiscernible] through part of this year through the first kind of quarter, saw some softness. We're actually seeing some encouraging kind of activity in the pipeline And it's almost kind of month by month, right? As tariffs are imposed, you know, activity slows this kind of ninety day actually increased our pipe pipeline. So it's just very difficult to predict. So that's a sizable part of our practice. And then we do a lot of other work that's kind of harder to quantify and identify, but related to to transactions when our clients are selling, of course, we help them in that process. When our clients are buying, we help them in their practice. It's not all within that PE practice. It's kind of within our core advisory and core accounting business. So there's a pretty heavy reliance [indiscernible] on M and A, and we just don't have a lot of visibility into what that might look like this year.

I will also comment on that note that we serve predominantly a middle market client. That client tends to be very optimistic and resilient kind of regardless of business conditions. But what they do need is line of sight, right? And I think the thing that's been unique to this start of this year is the uncertainty almost week to week and certainly month to month that they're seeing. If we get more predictability in kind of what the landscape looks like, then our optimism has to what those project works will look like will obviously improve. It's just been a very uncertain environment for us.

Got it. Very helpful. You mentioned strong government healthcare consulting during Q1. I'm just given the the current conditions, just trying to get a sense whether you expect to continue and is there potentially an opportunity here from some of the just some of these government entities will will need more help from you if if some of the cutbacks actually [indiscernible] Yeah, Chris, that's exactly the way we're looking at it. You know, the question that we get sometimes is how much of your total revenue is tied to these federal contracts? Within that government healthcare consulting business, it's about 40,000,000 directly related, but But there's also an indirect relationship in that the work that we do on the Medicaid side is is in part dependent on getting data from the federal government But as we sit here today, we actually are on the, I think the the right side of the Doge and efforts around cost containment and savings because in fact, the work we do is work that supports that, right? Making sure that [indiscernible] programs are in compliance making sure that eyes are dotted and T's are crossed. When we talk to our team on that side of the business, they're quite encouraged right now, by not only how the business performed through the first quarter, but the outlooks of the business for the remainder of the Got it.

Maybe just last one for me. So integration costs related to acquisition, it's obviously a big piece of the add backs. I think it was 15,700,000.0 this quarter. Can you just can you break that down into a few more primary buckets and maybe give us a sense as when that will start to meaningfully decline? Is that next year? Is that later this year? Just how you're looking at it?

Yeah, I think the total amount that we have kind of earmarked for, again, it's kind of excluding real estate is about $75,000,000 will come this year. But we will have a significant we will have a significant IT related portion of that kind of into 'twenty six. But a large portion of the 'twenty five will come into into this year. I'm sorry, the '75 will come into 2025.

Got it. I appreciate it. I'll leave it there.

Chris, this is Brad. I I just wanna point out on the facility based, integration We haven't provided any outlook on that at this point in time. We're starting to obviously get the integration team is starting to get its arms around what that's going to look like, how it's going to unfold kind of market to market. But those facility optimization costs will probably be more pronounced next year. So obviously, when we're at a point where we can provide more information, we have better line of sight to that, we will. But that currently is not incorporated just generally speaking in what we provided. Just wanna remind you of that.

Got it. And I appreciate that. Yeah. I'll jump back in line. Thanks, guys.

The next question comes from Andrew Nicholas with William Blair. Please go ahead.

Hi, good morning. Thanks for taking my questions.

First question, just to clarify, on the revised revenue guide, Can you speak to kind of the conditions that the bottom end of the new range would assume Gerry, you talked about, I think, 20,000,000 of headwind that was a little bit unknown in the first quarter. SEC audit practice maybe there's some transactional headwinds there in the PE business.

Should we assume that continuation of that would get you to the bottom end? Or is there some cushion if things were to get worse from the prevailing run rate?

Yes, Andrew, we think it's a pretty reliable range at this point. And here's how we got there, right? We basically, to your point, we looked at kind of how the business has performed so far in the first quarter. We kind of annualize that through the rest of the year. Again, we're certainly hopeful that things will improve. But we said if they don't, what could that look like? Again, with 23% of our revenue kind of tied to kind of a more project and discretionary work. We also looked at how the business performed in kind of the two most analogous periods that we've seen, most notably or most recently was kind of COVID. In COVID, that portion of the practice was down 10% to 15% if you do the math on that. So we basically looked at our range that we had originally provided, which we were very, very comfortable with obviously at that time. But through that lens, we said, look, the environment is a little bit different today. When we go and say, how did it perform the business performed during that period of time, again, COVID, down 10 to 15, what would that look like How did the business perform in the first quarter?

Let's annualize that. Again, kind of a pretty pragmatic approach to let's just widen that range Again, emphasize that we have line of sight to hitting the original guidance, but we just thought it was such a tight range that we'd rather kind of address it now than than throughout year.

Yeah. Make makes sense. That's helpful.

Obviously, just asked a question about revenue. But you are maintaining the earnings guide even despite those potential headwinds. So can you maybe just spend a little bit more time talking about the puts and takes there? Like, what are the things operationally that you're doing, if anything, to offset some of those pressures versus, you know, things that are inherent to the model. In terms of variable comp and the like. And then also, if there are any synergies that are included in 25 that you have visibility on that you might not have a handful of months ago?

Okay. Yeah, so let me before I get to that kind of related, let me little bit about pacing, right? So the other thing we didn't do is raise our guidance on the earnings side the rest of the year. So while we're ahead of guidance, right now we're being pretty pragmatic and looking or we're ahead of consensus, I guess. We're pretty pragmatic in looking at the rest of the year. Basically saying, as we as suggested at the year end the pacing is going to be a little bit different than what you've seen historically. Just because of the acquisition and the seasonality of the business now. So So we're maintaining that full year guidance to spec despite the fact that I think we're ahead of consensus really on that side. So but to more specifically answer your question, I think naturally as you've seen with our business, even when we have a more challenging economic environment or business climate that affects our revenue. We nonetheless have a considerable number of levers that we can pull to protect the earnings side of the business. They come in these buckets really. One is around kind of our people in comp costs.

Our comp structure is designed to reward growth And when we get that growth, there's meaningful upside bonus and other consideration that we were pleased to be able to reward to people. We kind of accrue that ratably throughout the year. And so in periods of time when we're not seeing that growth, obviously, those amounts can be reversed, right? We wouldn't accrue if we're not getting the growth or we're not getting the performance. Also, with kind of a little lighter demand for certain of our services We're not filling headcount. To the same degree. So it affects compensation that way. We've also had really encouraging progress on outsourcing and our reliance on outsourcing. That favorably impacts, those metrics as well. So there's a number kind of on the people side, and I would say that's about two thirds of adjustments that we've been able to make or savings we've been able to incur. And then the other third is around what you would just expect on discretionary side, T and E, advertising, recruiting costs, those types of things are all kind of naturally lower during this period of time. So I'd say two thirds, one third, And, we experienced that in the first quarter and we'd expect to be able to continue to pull those levers if we don't see improvement in the top line.

Very helpful. Thanks, Jerry. And then maybe just one last one. On capital allocation. I think you've talked since the Marcom announcement about a willingness to buy back some shares if the opportunity presents itself, also kind of save up [indiscernible] consider deals maybe later this year or early next? Just Just in light of the current environment, and what you've seen so far, with Markham in the first half year or so, if you could just kind of give us an update on prioritization amongst all the different items, that would be great.

Thanks again.

Hi, Andrew. Brad here. Appreciate the question. So listen, I think I'll start by saying, in the quarter, I'll remind you kind of what I said previously, which is working capital usage was consistent with what we expected. And consistent with our prior patterns that we saw from just a general legacy CBIZ perspective. And really our cash generation or cash usage, I should say, in the quarter was a little better than what we expected. So we were encouraged by that. Turning to your question, I guess from a capital allocation perspective, remember, historically, we've prioritized organic inorganic opportunities. So in terms of using free cash flow, for those opportunities, And then really that was kind of followed by shareholder returns, right? And then keeping our leverage usually around 2.5 times or below. Flexing for higher leverage for strategic opportunities. So that was our historical capital allocation priority. I'd say going forward, here for the next year or two, Andrew, we are focused on getting our leverage back down. So we'll continue to focus on getting our debt down to underneath 2.5 times. And we feel like I said, you know, with free cash flow generation, that we should be able to get there by the end of twenty twenty six.

But we're also going to be very, very opportunistic and be kind of ready and flexible to do some things strategically if the right opportunity presents itself. And then as you said, we have the opportunity to deal with our our share repurchase program. We have shares coming back on the rover potentially, and we feel like we're very, very well positioned to be able to do the right thing there and be prudent and financially disciplined. So those will be our priorities here over the next year or Thanks, Brett. Again, if you have a question, please press then 1. Our next question comes from Mark Riddick with Sidoti. Please go ahead.

Hey, good morning, everyone.

Brad, welcome. Looking forward to working with you going forward.

Wanted to sort of touch a little bit [indiscernible] the mention on the client reception, and I guess it's sort of a combination. Right? There's the there's the general retention, which seems to be fine. And then the client conflicts, some of which are, you know, obviously to be expected. Can you talk a little bit about how the as you sort of discover where the conflicts are and how they've arisen to this point, what your thoughts are as to the timing of those impacts and how that played into guidance for the remainder of the year? Do you think you kind of through most of that? Or how should we think about that as sort of, you know, go through that process?

Yeah, Mark, I'll take it. Let me let me deal with the client side first Let start here. Whenever you combine two organizations of our size, it's inevitable you're going to have some client conflicts. You can't continue that work. We knew about the health care practice We modeled that. And by the way the numbers that we experienced which are all behind us at this point are within the model. We also expected that there would be some de minimis amount of additional client conflicts that were going to occur. And it might be as simple as we're doing a test work for the engagement and that was legacy Markham was doing that a test work and legacy CBIZ may have been providing a commissioned insurance product The independence rules prohibit us from doing those types of things. So we have to shed the client. So I will tell you it's not a large number in the scope of our total revenue and it's also within the range that we had within our model least what we've experienced so far. And we don't think we think most of that's behind us as well. So again, as expected, within the model, but year over year it certainly did impact the comparable numbers year over year.

Okay. And then I was sort of curious as to the I guess, maybe the timing of when you began to see impacts on the audit practice and and advisory, work. I mean, interesting because it's some things you can sort of point to and say, oh, okay. Was when the tariffs were announced or what have you. Is there sort of any particular signpost? Or was it sort of a gradual process as far as the timing of when some of those impacts were seen.

Mark, truthfully, did not ask that specific question, but what I've learned and again just remember that that's a practice that kind of SEC PCoB practice is one that legacy Markham brought to us, by the way, great practice, great people, great opportunity work excited about it. But not one that we had before. So as to how that the client work evolves and comes the timing those some of those things it's just new to us as well. But when we asked the question it was logical, right? They The response is that many of the clients that we're serving there are going out regularly for for financing. They need comfort letters. If they're not raising funds, they don't need those comfort letters.

They're filing s ones with a whole considerable amount of work to be done when they do those things. If that work stalls, that work doesn't get done. Now that's not to say that work won't come. It will come. I think naturally, as the market improves and as optimism improves, we just can't predict the timing. So there's a little more around even that portion of the practice than we've historically experienced.

Okay. That's very helpful.

And I was sort of curious as to I'm not sure if we discussed the pricing environment. Have you seen any any changes there or anything that's different than what you would have originally experienced as far as just general price and trends?

Yeah, I guess I have two responses to that, Mark. Great comments. As you know, we I think ahead of others in the industry have really a very disciplined approach to pricing and making sure we have pricing and processes behind it and reporting and follow-up and training. Of those things. So we've had considerable success in pricing over the past couple of years. We've actually seen and yield is kind of our proxy for pricing. We've actually seen really nice lift in our pricing through the first quarter. The second part of that I said there were two parts. The second part is inevitably if the market continues to be a more challenging environment and work is harder to come by. People look to keep their people busy and oftentimes that translates into into people lowering rates. So we haven't seen that yet but but I wouldn't be surprised, that we'd see a more challenging environment in the future if the business climate doesn't improve there.

Understandable, thank you very much.

This concludes our question and answer session. Would like to turn the conference back over to Jerry Grisco for any closing remarks.

Sure. Thank you. As we wrap up today, I as we always do, I want to thank our shareholders and analysts for joining us and for your continued support. There's a headline that I that I'd like to leave you with today and that is the business despite revenue some revenue and some macroeconomic kind of pressures on the business The business performed very well, right? And it performed as it should in this climate. Very strong earnings number, right? And so even environments where the revenue might be off a consensus a little bit, were able to deliver very strong earnings and in fact ahead of consensus a little bit. The other high note is the core business, the core recurring business, both on the benefits and insurance side and on the core accounting and tax side continued to perform as expected and within the range of the mid single digits that we had guided. [indiscernible] The integration again it's no easy task bring two organizations of this size and scale together on schedule and by all accounts going very well. We have a very disciplined process behind that. I'm having regular check ins with our team and things are on schedule and very pleased.

We kind of look at it every week as a red, yellow, green and it's almost green always across the board. So we have a strong team working on it a strong leadership working on it, and very happy there. And then maybe most encouragingly just kind of the cultural alignment. You don't know what you're going to find you bring two organizations together. And just the I wouldn't say cultural identical, but cultural alignment has been, far better than expected. Legacy Markham brought to us really strong leadership. They brought exceptional talent They brought a really strong culture that combined with our extraordinary culture is you can feel it. You can feel when you go in the offices. You can feel as a team sit around the table and clap and collaborate. So we couldn't be more pleased sitting here today in light of all the work that that everybody's put into getting us to where we are with how we're we're we're proceeding, through the first quarter. More importantly, and I've said this to our team and I'll say it to you, the future has never looked brighter. Just as a reminder as to why we brought this together, we now have scale that we never had before.

That scale will allow us to make investments in the firm to continue the growth and success in all the areas that we need to continue to invest in the business. It'll provide us with the ability to go to market and provide our clients and our prospects with services and solutions that we feel are unmatched by any of our competitors in the industry.

And equally important position us to be able to win that war for talent by offering people career opportunities that they would never have had in a smaller organization or one that doesn't have the culture and the commitment to people that CBIZ has. I mentioned the client side. On top of scale, if you consider CBIZ today compared to anyone else that might be in our peer group, we are unmatched not only in our geographic presence, in our breadth of services, in our industry expertise. And on that industry stress side, we now have eight industry groups with revenues between hundred million and $300,000,000 actually have identified 12 industry groups The power of bringing our breadth of services our depth of expertise, a holistic approach to the solutions that we can bring to those clients, again unmatched. And so while there's no question a lot of work that still needs to be done, we sit here today more excited today than we've ever been about the prospects of the business and even more excited than we were on November 1 we announced the closing of the transaction. I'd be remiss if I didn't acknowledge the tremendous effort and adaptability and resilience of each of our team members that's been involved in this process.

Everything that we've accomplished, every milestone, every client win, is made possible as a result of your hard work, your commitment, your dedication to the team and to the clients. As I mentioned, I've never been more excited for the future of the business and I'm incredibly proud of all that you've accomplished to date. And I'm excited to be on this journey with you in the future. With that, I'll conclude the call and thank you for you for joining us today.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.