Steven L. Gerard - Chairman and Chief Executive Officer Ware H. Grove - Senior Vice President and Chief Financial Officer.

James R. MacDonald - First Analysis Securities Corp..

Good morning and welcome to the CBIZ Fourth Quarter and Full-Year 2014 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Steven Gerard. Please go ahead..

Thank you, Amy. Good morning everyone and thank you for calling into CBIZ's fourth quarter and full-year 2014 conference call. Before I begin my comments, I would like to remind you of a few things. As with all our conference calls, this call is intended to answer the questions of our shareholders and analysts.

If there are media representatives on the call, you’re welcome to listen in. However I ask that if you have questions you hold them until after the call and we’ll be happy to address them at that time. The call is also being webcast and you can access that overall our website.

You should have all received a copy of the press release which we issued this morning and if you did not, you can also access that on our website. Finally, please remember that during the course of our call, we may make forward-looking statements.

Those statements represent management’s intentions, hopes, beliefs, expectations and possibly predictions of the future. Actual results can and sometimes do differ materially from those projected in the forward-looking statements.

Additional information concerning the factors that could cause actual results to differ materially from those in forward-looking statements is contained in our SEC filings on Form 10-K and press releases. Joining me on the call this morning is Jerry Grisko, our President and Chief Operating Officer and Ware Grove, our Chief Financial Officer.

Prior to the opening this morning, we were pleased to report our full-year 2014 results highlighted by revenue growth an excess of 6% and normalized earnings per share growth of over 17%, both of these numbers were well within the upper end of the guidance we gave a year ago.

So that year 2014 came in very much on a positive note and very much the way we thought it was going to. With that let me turn it over to Ware to give you the details and then I’ll come back at the end take your questions and to you give you some color on the market..

Thanks, Steve and good morning everyone. I want to take a few minutes to run through the highlights for the number we released this morning for the fourth quarter and full year ended December 31, 2014.

Bear in mind that has we look at 2014 results and compare results to the prior year, the results are restated to reflect the impact of several discontinued operations. Now thanks to the many efforts of the many CBIZ associates who are working hard to serve clients in our various offices throughout the U.S.

As Steve indicated, see this reported total revenue for the full-year 2014 of $719.5 million, which is an increase of $42.3 million or up by 62.2% compared with the prior year. Same unit revenue increased by $18.6 million of 2.7% in 2014 and revenue from acquired businesses contributed another $23.7 million or 3.5% to revenue growth.

The pretax income margin from continuing operations, improved by 80 basis points in 2014 and this resulted in an increase in pretax income of slightly over 20%.

Eliminating the impact or the share equivalence associated with accounting for the convertible notes, the normalized earnings per share was $0.61 compared with $0.52 the prior year or an increase of 17.3% which as Steve indicated within the range of the 15% to 18% growth that we expected for 2014 compared to the prior year.

Now beyond recording very good financial results from operations, we accomplished several other important things during 2014. First of all, during the year we announced six new acquisitions and we continue to have an active pipeline of potential transactions.

This acquisition activity continues to strengthen our service offerings in targeted markets through the U.S. and this is an important component to our gross strategy, as we continue to combine organic same unit revenue growth with acquisition activities. As has been our pattern overtime, we typically expect to close four to six transactions each year.

Secondly, during the year we established a new $400 million credit facility which positions us very well to address the upcoming October 1, 2015 maturity, the remaining balance outstanding on the 4.78% convertible notes. During 2014 and two separate privately negotiated transactions with current note holders we retired $32.4 million of the notes.

Today, we have $97.6 million remaining on the convertible notes. The $400 million credit facility gives us the capacity to refinance the convertible notes and also gives us considerable flexibility to continue an active acquisition program and also opportunistically continue to repurchase shares.

With the current interest rate environment, the borrowing cost on our credit facility is currently well under 3% and that compared with 7.5% interest rate we are currently recording on the outstanding balance of the convertible notes.

We will continue to evaluate further early repurchases of these notes that may occur before maturity, but it is unclear if additional transactions can be completed or if so on what terms. Our first priority for using capital continues to be focused on building our business through acquisitions.

In recent years, share repurchase activity has been focused on maintaining a constant share count. During 2014, we repurchased 3.2 million shares of our common stock at a cost of approximately $26.7 million.

Since year-end and through February 5 this year, we have repurchased an additional 600,000 shares through a 10b5-1 program that we have had in place. The fully diluted weighted average share count at year-end 2014 was 51.5 million shares compared with 49.1 shares a year ago.

Based on an average share price of $8.71 during 2014, the fully diluted weighted average share count at year-end includes approximately 2 million share equivalents that are associated with accounting for the convertible note.

Given the very unpredictable nature of this share count calculation please remember that our earnings guidance for 2014, excluded the impact of these share equivalents. Reported earnings per share this year or for 2014 was $0.59 however excluding the impact of the additional 2 million share equivalents, the earnings per share is adjusted to $0.61.

CBIZ has the option to settle the convertible notes either in cash or by issuing shares and of course the new $400 million credit facility gives us more than sufficient capacity to settle in cash. Turning, to our financial services group, during the fourth quarter total revenue for this group increased by 4.3% compared with a prior year.

For the full-year, 2014 total revenue for this group increased by 5.3%. Same unit revenue for the fourth quarter increased by 2.1% and for the full-year same unit revenue grew by 2.9% compared with a prior year.

During 2014, we’ve recorded growth in our core accounting businesses and we also saw continued strong growth in our government and healthcare consulting business where we continue to see a robust pipeline of RFPs that are converting into engagements for us at a very nice rate.

Within employee services total revenue increased by 14.4% in the fourth quarter and for the full-year total revenue increased by 9.8% for this group. Same unit revenue increased by 3.7% in the fourth quarter and for the full-year same unit revenue increased by 3.2% for this group compared with a prior year.

Margin was impacted within this group as a result of investments we made to improve and strengthen client service staffing levels, business development, actuarial wellness and pharmacy benefit services over this past year. With the exception of our small life insurance business, we continue to record growth in all areas within employee services.

Cash flow from operating activities continues to be strong. During 2014, we used $53.9 million for acquisition related purposes including $6.5 million for earnouts on prior acquisitions. As I commented earlier, we also used approximately $26.7 million for share repurchases during 2014.

At year end, our total debt was approximately $205 million which resulted in a leverage ratio compared to EBITDA of approximately 2.5 times. The outstanding balance on the $400 million revolver at year end was a $107.4 million compared to $48.5 million a year ago.

Now as we look at future payment obligations and connection with acquisition earnouts, we estimate future payments of approximately $13.3 million in 2015, $8.1 million in 2016, $5.2 million in 2017 and approximately $1 million in 2018 for approximately $27.5 million of our total balance or obligation.

Capital spending for 2014 was $5.2 million of which $1.2 million was in the fourth quarter. This is very consistent with our historic capital spending levels, so that typically they fall within a range of $4 million to $6 million in any given year.

Days sales outstanding on receivables stood at 70 days at the end of this year compared to 73 days a year ago. Bad debt expense for 2014 was 76 basis points of revenue compared to 65 basis points a year ago. The effective tax rate for 2014 was 39.9% which was effectively flat compared with the effective tax rate a year-ago.

Looking ahead 2015 we expect our effective tax rate will continue to be very close to 40% in the year ahead. As I commented earlier, we continue to be active with our share repurchase activity.

Over time we have returned considerable capital to our shareholders through share repurchase activity and including the recent 10b5-1 purchases through February 5, plus the activity through 2014 we’ve used slightly over $31 million to repurchase approximately 3.8 million shares of our common stock over the past 14-months.

This activity is opportunistic and at this time again our goal is to maintain a cost of share count and that is our expectation as we look at 2015 compared to 2014.

Again, looking ahead to 2015, we continue to expect positive trends in our business and we expect continued stronger organic revenue growth in 2015 compared to the levels achieved in 2014.

I want to remind you that we announced the sale of our Miami financial services office in the fourth quarter 2014, with approximately $5.5 million of revenue in 2014 this will have a small impact on our reported revenue growth as we look at 2015 compared with 2014.

Now considering the impact of acquisition we’ve already made to-date and adjusting for the operations sold in 2014, we expect revenue growth in 2015 to be within a range of 5% to 7% over 2014.

With continued margin expansion opportunities we expect earnings per share in 2015 to increase within a range of approximately 12% to 15% over the normalized $0.61 we achieved in 2014. Cash flow will continued to be strong and we expect EBITDA to grow within a range of 8% to 10% over the $82.2 million that we recorded in 2014.

So with these comments I’ll conclude and I’ll turn it back over to Steve..

Thank you Ware. Just a few general comments where mentioned our share repurchase program, I would like to remind our investors and shareholders that since we began our share repurchase, we have spent slightly under $500 million returning capital to shareholders in the share repurchase program since 2003.

Our M&A pipeline as Ware pointed out is consistently strong, I’m confident that we will be able to do the four to six transactions we normally do.

Our sense of the market today is that our clients continue to be cautious, but slightly more optimistic then they were perhaps a year ago, we think that 2015 revenue opportunities, because of the improving view of our clients has some opportunity to grow on the upside.

So as Ware pointed out, we are well positioned for next year, our cash flows is expected to continue to increase and we will be able to take out the convert in October as planned. With that let me stop and ask for question of our listeners..

[Operator Instructions] Our first question comes from Jim MacDonald at First Analysis..

Yes, good morning guys..

Hey Jim..

Hi, Jim..

Juts clarifying on financial services, so you are removing the $5.5 million Miami office from your previous results for comparison purposes?.

Yes, we are Jim. We’ll continue to report it, because it’s not really a discontinued operation for accounting purposes, but essentially it’s gone and we’ll continue to remind you as we go through 2015 that adjustment will be need to be made..

Okay, and whether other adjustment and – or maybe you could talk about the - I think there was a onetime gain on the P&L this quarter..

Yes, when we sold the Miami operations we recorded a gain of approximately $1.2 million and that’s in the fourth quarter that certainly will not recur next year and that’s also included in our guidance..

And just in general on financial services, so I guess excluding those items as a pretty good quarter and you are still seeing good internal growth in financial services?.

Yes, we are I just want to remind you that both of third and the fourth quarter are little less predictable than the first half of the year. But as we look at 2015 compared to the whole year 2014 we are very positive about the outlook and we continue to expect stronger trends in 2015 versus 2014..

Okay, moving on to employee services any comments about impact of The Affordable Care Act during this enrollment season?.

No, we continue to categorize The Affordable Care Act as the gift that keeps on giving for us with new reporting requirements and new data collection requirements, we’re still essentially to our clients to help guide them through this rather complicated process.

We have not seen any significant amount of migration to the exchanges in this enrollment period, we really haven’t - we’ve seen very much business as usual, but with more questions now being asked to make sure that as they get ready for the next year they can report properly as to the status of their workforce..

Great. And just a couple of other technical ones for me here.

Could you tell how many shares have you repurchased in the fourth quarter?.

Oh boy Jim, I don’t have that in my finger tips I would have to go back to third quarter and I can get that to you, I just don’t know off the top of my head..

Okay, great.

And more on G&A line it was a little bit lighter than I expected or lighter than last year, anything unusual going on there?.

No, nothing unusual in G&A. We continue to leverage G&A through process improvement and basically as we make acquisitions, we are not really growing G&A in any significant way as a result of acquisition growth, so that’s very leverageable..

Great. Thanks very much guys, good quarter..

Thanks, Jim. End of Q&A.

[Operator Instructions] And I show no further questions would you like to make any closing remarks..

Yes, thank you Amy. Okay, to all our shareholders and all of our associates thanks for your continued support. 2014 was a good year for us, one of the best, it came in where we thought we would be with aggressive goals. I particularly want to thank all of our associates for their hard work and I am actually looking forward to a much stronger 2015.

Thank you and I look forward to speaking to you all with the release of our first quarter earnings..

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