Executive Summary / Key Takeaways

• CBIZ, Inc. has undergone a transformative period, solidifying its position as a leading professional services advisor to the middle market through the strategic acquisition of Marcum LLP, now ranking as the nation's seventh-largest accounting firm.
• The company delivered strong third-quarter 2025 results, with total revenue increasing by 58.1% to $693.8 million and adjusted EBITDA rising 57.4% to $120.0 million, largely driven by the Marcum integration and resilient core businesses.
• CBIZ has increased its synergy target from the Marcum acquisition to "$50 million or more," with $35 million expected to be realized in 2025, demonstrating accelerated value creation from the combination.
• Despite ongoing economic and geopolitical uncertainties impacting nonrecurring project-based services, CBIZ maintains its adjusted EBITDA and adjusted EPS guidance for 2025, leveraging its variable cost structure and operational efficiencies.
• The company is prioritizing debt reduction to achieve a target leverage of 2x to 2.5x by 2027, while also engaging in opportunistic share repurchases, reflecting a balanced capital allocation strategy.

A New Era of Scale and Specialization

CBIZ, Inc. has evolved from its 1996 origins as a provider of professional business services to small and medium-sized businesses into a formidable force in the advisory landscape. The company's overarching strategy has consistently centered on organic growth complemented by strategic acquisitions, aiming to deepen its market penetration, venture into high-growth sectors, and broaden its service offerings. This strategic blueprint culminated in a landmark event on November 1, 2024, with the acquisition of Marcum LLP, a move that fundamentally reshaped CBIZ's competitive standing and growth trajectory.

This transformative acquisition propelled CBIZ to become the seventh-largest accounting firm in the U.S., significantly expanding its capabilities and service portfolio. The combined entity now boasts an "unmatched breadth of service and depth of expertise" for middle-market businesses, a critical differentiator in a fragmented and competitive industry. CBIZ's business model is inherently resilient, with approximately 72% of its services being essential and recurring, providing a stable revenue base regardless of economic fluctuations. This foundation, coupled with a broad geographic footprint and diverse industry exposure, mitigates concentration risks.

Technological Edge and Innovation Driving Efficiency

CBIZ is actively investing in technology and innovation to enhance its competitive moat and operational efficiency. The company has significantly bolstered its shared resource centers, including its national tax office and national assurance quality and support partner, CBIZ CPAs. A dedicated "transformation and innovation team," comprising over 60 members, is focused on developing new products, solutions, and deploying advanced technologies like Artificial Intelligence (AI) to improve operational efficiency.

A key technological differentiator is the launch of "CBIZ Vertical Vector AI," a proprietary AI platform designed to empower clients and improve their business performance. While specific quantifiable performance metrics for this platform are not yet publicly detailed, its strategic intent is clear: to deliver valuable client insights and impact, thereby transforming possibilities for clients and driving sustainable long-term growth and profitability for CBIZ. These technological investments are further supported by increased offshore resources in India and the Philippines, aimed at enhancing efficiency and capacity. The integration of technology systems across the combined entity is a major focus, creating a unified environment crucial for process standardization and consistent service delivery, ultimately streamlining operations and improving data visibility.

Competitive Dynamics in a Fragmented Market

CBIZ operates in a highly competitive and fragmented landscape, vying for market share against a diverse set of players. Its primary publicly traded direct competitors include Automatic Data Processing (ADP), Paychex (PAYX), and Robert Half (RHI), each with distinct strengths and market positioning.

ADP, a leader in cloud-based human capital management (HCM) solutions, generally possesses a more advanced technological infrastructure, offering greater efficiency in processing and automation. CBIZ, in contrast, emphasizes tailored financial and advisory services, particularly for governmental and not-for-profit entities, where its specialized expertise in government healthcare consulting and risk advisory provides a unique value proposition. While ADP excels in scalable, technology-driven solutions for broader commercial clients, CBIZ's integrated approach and niche advisory depth allow it to capture opportunities in regulated sectors.

Paychex specializes in payroll, HR, and retirement services, primarily for small and medium-sized businesses, known for its cost-effective and user-friendly technology. CBIZ's Benefits and Insurance Services segment overlaps with Paychex in payroll and human capital management but offers a broader suite, including property and casualty insurance and retirement services. Paychex's streamlined, cost-focused approach may result in lower operating costs, while CBIZ's diversified services, though potentially higher-cost, offer a more comprehensive advisory experience.

Robert Half focuses on staffing, consulting, and executive search, particularly in finance, accounting, and technology roles. CBIZ competes in financial advisory and IT consulting, with its National Practices offering more integrated solutions compared to Robert Half's staffing-centric model. While Robert Half's extensive talent network provides faster access to specialized expertise, CBIZ's multi-segment expertise and strategic advisory are designed for complex, long-term consulting needs.

Post-Marcum, CBIZ's increased scale and expanded capabilities position it to "break away from our competitors" by offering services and solutions "unmatched by any of our competitors in the industry." The company's pricing strategy, which achieved "mid-single-digit rate increases" in Q3 2025, is noted by management as "above what we're hearing some of our competitors to be receiving in this market," reflecting strong client relationships. However, CBIZ acknowledges that growth in nonrecurring project-based services has been "particularly challenging for our competitors as well this year," indicating broad industry headwinds.

Financial Performance and Operational Resilience

CBIZ's financial performance in the third quarter and year-to-date 2025 reflects the initial impact of the Marcum acquisition and the resilience of its core operations. Total revenue for the three months ended September 30, 2025, surged by 58.1% to $693.8 million, and for the nine months, it increased by 63.7% to $2.22 billion. This substantial growth was primarily driven by newly acquired operations, which contributed $245.6 million (56%) and $835.2 million (61.7%) of incremental revenue for the three and nine months, respectively.

Adjusted EBITDA for the third quarter rose 57.4% to $120.0 million, with the year-to-date figure reaching $475.6 million, up 92.9%. The year-to-date adjusted EBITDA margin expanded by approximately 325 basis points, with about 250 basis points attributable to lower incentive compensation expense. Excluding this, margin expansion is considered consistent with or better than historical performance, indicating the realization of benefits from greater scale. Net income for the third quarter was $30.1 million, resulting in diluted EPS of $0.48. For the nine months, net income was $194.9 million, and diluted EPS was $3.06.

The Financial Services segment, the largest contributor, saw revenue grow by 79.5% in Q3 2025 to $578.5 million and 85.4% year-to-date to $1.86 billion. On a pro forma basis, core accounting and tax services achieved low single-digit growth, while advisory services experienced improved single-digit growth in Q3 due to better market conditions. The Benefits and Insurance Services segment's revenue remained relatively flat in Q3 2025 at $103.4 million, with a 2.7% increase year-to-date to $318.3 million. This segment faced a "soft P&C market" and some softness in discretionary project work. The National Practices segment's revenue declined by 5.1% in Q3 and 10.6% year-to-date, primarily due to the sale of CBIZ KA Consulting Services, LLC in Q3 2024.

Interest expense significantly increased, reaching $28.0 million in Q3 2025 (up $23.0 million year-over-year) and $81.0 million year-to-date (up $65.6 million), driven by higher debt levels and increased weighted average effective interest rates (6.64% year-to-date) associated with the Marcum acquisition financing. Despite these higher financing costs, the company's effective tax rate for Q3 2025 decreased to 25.4% from 31.2% in the prior year, primarily due to higher tax benefits from stock-based compensation and lower state income tax expense from recent tax planning.

Liquidity and Capital Allocation Strategy

CBIZ maintains a robust liquidity position, with its primary debt financing being the $2 billion 2024 Credit Facilities, maturing in November 2029. As of September 30, 2025, $1.5868 billion was outstanding under these facilities, with approximately $316 million of available funds. Net debt stood at approximately $1.6 billion, largely unchanged from the previous quarter.

The company's capital allocation strategy prioritizes funding organic growth and maintenance capital, including disciplined investments in client service delivery, operational excellence, technology (including AI), and offshore capabilities. The second priority is debt repayment, targeting a leverage ratio of 2x to 2.5x over time, though this timeline may extend to 2027 due to opportunistic share repurchases in 2025. Share repurchases are considered accretive at the current valuation, and CBIZ maintains a "balanced, opportunistic and disciplined" approach to repurchases and delevering. During the nine months ended September 30, 2025, CBIZ repurchased 1.40 million shares for $102.8 million under a Right of First Refusal Agreement and 0.40 million shares for $25 million in the open market. The Board has authorized repurchases of up to 5 million shares through March 2026. Management believes cash generated from operations and available credit will be sufficient to meet future cash requirements, including debt service, acquisitions, and working capital.

Outlook, Guidance, and Strategic Initiatives

CBIZ is maintaining its revenue and earnings guidance for 2025. The company anticipates full-year revenue at the low end of its $2.8 billion to $2.95 billion guidance range, reflecting the expectation that market conditions experienced in the first half of 2025, characterized by uncertainty and softness in nonrecurring services, will persist. However, management has "clear line of sight" to achieving this, supported by resilient core accounting and tax growth, improved market conditions for project-based advisory services in Q3 and Q4, and an operational excellence initiative to enhance staff utilization. For Q4 2025, pro forma revenue growth is expected to be in the 6% to 8% range year-over-year.

The synergy goal from the Marcum acquisition has been updated to "$50 million or more," with $35 million expected to be realized in 2025 and the majority of the balance in 2026. Estimated 2025 integration costs have increased by $14 million to $89 million, primarily due to additional severance, with similar levels expected in 2026, including a greater focus on real estate facility optimization. The annual target of 20 to 50 basis points of adjusted EBITDA margin improvement remains intact. The cash flow benefit from the goodwill deduction for tax purposes is estimated at approximately $15 million for 2025, growing to $30 million annually as shares are fully issued. The increased concentration of core tax and accounting business post-Marcum will shift quarterly seasonality, with first-half earnings expected to be about 10% stronger and second-half earnings about 10% weaker than historical patterns.

Risks and Challenges

Despite the positive outlook, CBIZ faces several risks. The ongoing "uncertainty in the current economic and geopolitical environment" poses a significant challenge, potentially limiting demand for nonrecurring project-based services and management's forecasting ability. The company is also a defendant in two putative class action lawsuits related to a May 2023 cyberattack, with the ultimate outcome and potential losses currently undeterminable. While integration of Marcum is progressing well, large-scale integrations inherently carry execution risks. The increased debt levels from the acquisition expose CBIZ to interest rate risk, although the company uses interest rate swaps to manage this exposure.

Conclusion

CBIZ, Inc. stands at a pivotal juncture, having successfully integrated the transformative Marcum acquisition to emerge as a significantly larger and more diversified professional services powerhouse. The company's strategic focus on leveraging its enhanced scale, deep industry expertise, and technological investments—including its proprietary AI platform and expanded offshore capabilities—is poised to drive accelerated growth and margin expansion. While macroeconomic uncertainties and integration costs present near-term challenges, CBIZ's resilient business model, characterized by a high proportion of recurring revenue and a flexible cost structure, provides a strong foundation to mitigate these headwinds. The commitment to delevering while opportunistically returning capital to shareholders underscores a disciplined approach to long-term value creation. CBIZ's competitive positioning, strengthened by its "unmatched" breadth of services and depth of expertise, coupled with its technological roadmap, positions it favorably to capitalize on evolving client needs and solidify its leadership in the middle-market advisory space.