Good morning, and welcome to the CBIZ’s Third Quarter and Nine Month 2018 Results Conference Call. [Operator Instructions] 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.

Thank you, Sean. Good morning, everyone. And thank you for joining us for the CBIZ third quarter and nine months 2018 results conference call. In connection with this call, today's press release has been posted on the Investor Relations page of our website, www.cbiz.com. This call is also being webcast. And a link to the live webcast, as well as the replay 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 financial tables of today’s press release. Finally, remember that management may also make forward-looking statements. Such statements are based on current information, 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 Grisko, President and CEO; and Ware Grove, Chief Financial Officer. I will now turn the call over to Jerry Grisko for his opening remarks. Jerry?

Thank you, Lori. Good morning, everyone. With this morning's release, we're pleased to report continued strong results for the third quarter and for the first nine months of this year. Total revenue grew by 8% in the third quarter and by 9.5% for the first nine months. Of those growth rates, same unit revenue represented 6.3% for the third quarter, and 6% for the first nine months. Recently completed acquisitions are performing well and contributed 1.7% to our third quarter growth rate and 3.5% to our revenue growth for the first nine months of this year. For the third quarter earnings per share from continuing operations was $0.24, a 33.3% increase over the $0.18 recorded in the third quarter of last year. For the nine months, our earnings per share from continuing operations, was $1.11, an increase of 33.7% over the $0.83 recorded a year ago. As we have discussed over the years, in times of strong revenue growth, our leverage model allows us to experience even greater growth in our pretax earnings and profit margins. This year, the strong revenue growth that we've experienced has allowed us to report an increase of 30 basis points on pretax margin – pretax income margin for the first nine months. And at the same time make strategic investments to enhance the future growth and performance of our business. Among those investments, in the third quarter we launched our first ever national cable television advertising campaign aimed at increasing brand awareness. Throughout this year we also continued our investment in hiring and developing new producers in our Benefit and Insurance Services group,, which we expect to enhance organic growth rates in the years to come. The business climate remains very favorable and we continue to see strong demand within our Financial Services group…

Thank you, Jerry. And good morning everyone. We are very happy with the performance of the business to date this year. We are in a very solid position, leveraging our 9.5% top line growth with strong cash flow from operations and plenty of debt capacity to address strategic growth opportunities. The outstanding balance on our $400 million credit facility as September 30 was $167.1 million, compared with a balance of $178.5 million at year-end 2017. Leverage is measured by comparing debt levels against the EBITDA, is at 1.5 times. For the nine months this year we used approximately $36.7 for acquisition related payments. And through September 30, we have used $6.2 million to repurchase approximately 284,000 shares of our common stock. Since September 30 through the end of business yesterday, we have repurchased an additional 56,000 shares for a total of approximately 340,000 shares repurchased to date this year. We're in the market with a steady level of daily share repurchases and we continue to look for volatility in the share price to find opportunities to increase the volume of repurchase activity. We expect the fully diluted share count for the full year 2018 to be within a range of 56 million to 56.5 million shares, compared with 56.4 million shares reported at September 30. With debt currently at 1.5 five times EBITDA, we have $226 million of unused financing capacity as of September 30 this year. Interest expense for the first nine months this year is $5.2 million, compared with $5.0 million a year ago. That does not represent a significant item year-over-year, But with a rise in interest rates in recent months, you may have general concerns over interest rate risk on your radar screens. And I want to make a few observations and comments relative to CBIZ.…

Thank you, Ware. I'd like to add to Ware’s comments on our guidance. As you think about our strong financial results through the first nine months of this year and our guidance for the full year, we cautioned against projecting our fourth quarter results from the last year on top of our nine-month performance for 2018. Please keep in mind that our fourth quarter results are more heavily dependent on project work that tends to be more difficult to predict. In addition, we experienced several unusual factors in the second half of last year that will not recur As you may recall, Hurricane Irma occurred in September of last year and our third quarter results were negatively impacted by that event. We also experienced several temporary contract related delays within our government healthcare consulting business that also had a negative impact on our third quarter results. As we had anticipated, much of the unfavorable impact of those events in the third quarter last year was made up in the fourth quarter, but the pacing of our revenue in the third and fourth quarters last year makes it difficult to compare the same periods this year. So with that clarification, I'll turn it over to questions and answers.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Chris Moore with CJS Securities. Please go ahead, Chris.

Hey, good morning guys. Thanks for taking my questions. Maybe we can just start with the kind of the growth mix in Q3, So obviously it was skewed heavier towards kind of same unit growth and I'm just trying to get a sense as you know, any reason to think that trend will continue in 2019 or likely more balanced towards the acquisitions?

Yes. Chris, I think right now our visibility towards 2019 is much like what we're seeing in 2018, so it's very difficult to predict acquisitions. We usually say that our mix is about half organic, half acquired in any given period of time. It may be more heavily weighted towards one or the other. As you indicated this year it's been more heavily weighted towards organic. We're very pleased with that, it's hard to predict what it's going to look like in 2019, although we're at this point bullish about the economic outlook for 2019 and the amount of activity that we'll see in that period of time.

Got it. On the National Practices side, the Edward Jones contract that expires the end of the year any updates or any thoughts on that?

Yeah. While it's not been signed yet, we've been told that all the terms have been agreed to and it's just working its way through the process for signature at the point.

Got it. And Ware for you, the $600,000 in terms of the share revaluation, you mentioned a little bit of that was an operating expense and was it significant enough to have any impact on the adjusted operating margin or really was below the line?

Yeah, not really Chris, most of it is not included in operating expense. There might be a little bit of the equity-aligned cash bonus plan accrued in operating expense, but most of it is in other areas. It would be in the other income a part of the adjustment for contingent payouts. That's where the majority is.

Got it. I'm sure you had talked in your comments in terms of some of the areas that are still really performing really well on the Financial Services, Healthcare Consulting. So that's kind of been a jewel, you guys have been able to grow that kind of high-single digits, is the growth there coming from new contracts to the 500 or so that you have or just expanding the scope a little bit above?

Its little bit above Chris. We continue to see growth within our existing clients as we continue to expand the scope of services that we provide to them, and we've also been successful at picking up new engagements. One of which most recently is a pretty sizable engagement with the federal government. So as you know, we've been working at that segment of the market for some time and we're beginning to have some success there.

Got it. Last question, just I know payrolls is small piece of revenue at this point in time and you've talked in the past about developing kind of employer, employee service organization and, kind of leveraging growth [indiscernible] maybe just talk a little bit about what that looks like and the progress to-date?

Yes, I would say it's, we believe that's an incredible opportunity for us. We believe that that's where the market is going. We believe that you have to have the right approach to the market in order to be successful there, including the right technology solution. We are pleased that, we believe that we've found that technology solution. We recently contracted with a national provider of technology that we think is going to be a tremendous tool for us in the last kind of puzzle piece that we need in order to go-to market with that ESO strategy. Having said that, we know the demand is there, but it's going to take some time for our team to familiarize themselves with the software that we've just contracted for and to build the service team around it and then to get our salesforce trained on going out and selling that value proposition. So more to come, but we're very optimistic about the opportunities here.

Got It. All right. Let me come back in line. I appreciate it guys.

Our next question comes from Jim Macdonald with First Analysis. Please go ahead Jim.

Hey, good morning guys.

Good morning Jim.

Just following up on that last question, will that new software require a conversion of all your existing accounts and what's sort of the process there?

We don't believe so Jim, there is – it's really two different segments of the market. So the software that we've historically used is very well positioned for a good segment of the clients that we serve within that business although what we've learned over the past several years is that. it wasn't well suited for larger clients with more sophisticated needs, so we've been actively in the market searching for that solution and pleased to have been able to find the one that we have just contracted with.

So, just to clarify, you'll be operating on potentially two platforms?

That's correct for the foreseeable future.

Okay. And going back to Financial Services, first, I missed the same store sales number there, but it sounds like the tax consulting may have kicked in a little bit. Maybe you could talk – give me that number and talk about that?

Yeah. So it's difficult to, first of all, as we commented, we've had very strong growth in our Financial Services business and our systems while we have a method and a process for recording revenue specifically related to the tax reform act, it's really discretionary on behalf of the billing person as to where they entered that revenue. So it's very difficult to track with precision, The amount of revenue that's coming from the tax reform act, although if you look at the growth that we've experienced, we believe that the amount of revenue that we would receive – that we expected to receive from that initiative is in fact in our numbers. So it's hard to say it was, x dollars or y dollars, but the growth is very strong and we believe that it reflects a good portion of the tax reform act revenue.

Great. Just one more, you've been investing in benefits producers all year. Can you just give us a feel for me? I know it takes, there's a lag time, but you know, when you think benefits, we'll go back positive and when we can start to maybe see some reasonable growth for that segment?

Yes. So basically, and we've talked about this, I think in prior calls that it typically turns from a new producer, typically you see the productivity of that person kind of start to return after about 12 – about 24 months and then return cash-on-cash at about 36 months, if they're successful.. And so what we've done is obviously we've hired the number that we targeted for the year. We're tracking the performance of the people that we've hired as a group. They are performing in excess of what the targets or goals were for that group. So we're very pleased with the performance to-date, although, it will take some time and I don’t have an exact date for U.S. to, when that growth rate will begin to see that growth rate. But, within the next 12, 24 or 36 months, we would expect to really see the return from the investments that we're making there.

Okay. Thanks a lot guys.

Our next question comes from Tim McHugh with William Blair & Company. Please go ahead. Tim.

Thanks. I just want to follow up a little bit on the margin question. I know it's early, but does the spending on the TV contract or TV advertisements and/or the producers for insurance change at all your perspective for 2019 and 2020 in terms of the normal target for margin expansion?

Yeah. Tim, this is Ware a great question. I don't think so, we've said 25 basis points to 30 basis points a year, sometimes more and may be sometimes less, depending on the pace and the timing it may be a little choppy, like you said, saw a disproportionate impact in the third quarter margin here and you may see a disproportionate impact in the fourth quarter because of the things we just described, but year-over-year we would still strive to improve margins at least at 25 basis points and still invest in the business. So we're pleased to have 30 basis points year-to-date improvement this year, through the nine months, but as Jerry and I described the fourth quarter, we'll probably have an increased pace of spending so that 30 basis points we're happy with it year-to-date and we think we can still maintain some improvement in the years ahead and still invest.

And then just how should I think about the new TV advertising campaigns, it's just part of the normal marketing that we'll see kind of opened in the next few years or is this kind of project, you're testing, well this may not be kind of always part of the spending, I guess, can you frame for us how to think about that?

Yeah. Tim, it's really the former, not the latter. This is something that we would expect to continue on into the future. We've been considering this type of investment for some period of time and really now at the scale that allows us to make this investment. The one, in our marketing spend and our marketing initiatives, have been building over time, but the one comment that we oftentimes receive as we travel office to office is that, while we're very well known in those local offices, we don’t have the national brand recognition that some of our competitors have, those competitors follow a similar strategy of investing in a number of areas including television cable. So we wanted to be able to do that and we're pleased that our growth and our profitability at this stage has allowed us to do that.

Thank you.

[Operator Instructions] Marc Riddick with Sidoti & Company. Please go ahead.

Very good morning.

Good morning Marc.

Wanted to see if there was any feedback that you were getting. You admitted – brief, mentioned that you were feeling fairly positive about the macroeconomic type of issues. I wanted to see if there was a little bit of feedback that you've been receiving from customers and if there are any areas of concern maybe that are specific to the upcoming election or any potential legislative regulatory issues that we should be on the lookout for that you would be a position to take advantage of it?

Yeah. Marc, its Jerry. So we get our data from a couple of different sources. First of all, we ask our offices as we travel what they're seeing within their client base and their level of optimism. We also generally survey that group at least at a pretty high level before this call just to make sure that our data is still correct. And then we're following all the publications on small middle market business, which is really where our clients are, based on all that information our clients in the segment of the market that we serve continues to be very optimistic about the foreseeable future that being in the next 12 months. With that said, the types of concerns that they have today are no different than what we heard from them over the past three to six months, which is a difficulty in hiring labor, rising labor costs and some concern around the regulatory environment and the higher level global issues around tariffs, et cetera. With that said our experience is that those types of issues sometimes are favorable for us. So as the labor market tightens and it's more difficult for our clients to hire at least back office people that provide the types of services that we provide, oftentimes they'll look to us to outsource those types of things so that's favorable. If in fact the regulatory environment becomes more complex, our experiences – our clients turn to us even more often to help them understand and navigate that complexity. So it's a bit of a two edge sword for us, but the overall kind of theme is that our clients remain optimistic about at least the foreseeable future.

Okay, great. Thank you for the color there. Wanted to shift gears and get any thoughts on the acquisition pipeline? Certainly you had quite a bit earlier in the year, want to get a sense of if there are any changes that you've seen maybe a given the pull back of the overall stock market that we've seen since the summer. Have you seen any differences in the pipeline there?

What I'd say Marc is our pipeline is consistent with what we've generally had in our pipeline over the past several years. We'd like it to be fuller and we're making investments in committing resources to fill that pipeline. But we're pleased with where it is today and again, consistent with where it's been. Our pipeline, really we haven't seen variability in the pipeline based on performance of the stock market at least as it relates to the types of firms and, and businesses that we acquire.

Okay. And then the last one for me, I was wondering if there are any key highlights that you were seeing as far as a strength, whether it's regional or certain states that you see its performing particularly well or any areas of concern that would be worth calling out? Thanks.

Yeah, Marc, interesting question, no areas of concern and in fact, what makes us is bullish as we are today is that the growth that we've experienced throughout the year has come across all geographies in offices. So all of our larger offices and our larger markets are performing at a very encouraging rates so, oftentimes in the past when we've had very favorable results, its coming in a particular business segment or in a particular geography today, it's really across all geographies. So it's very encouraging.

Okay, great. Thank you very much.

[Operator Instructions]. At this time there are no further questions, this now concludes the question and answer session, and I would like to turn the conference back over to Jerry Grisko, President and CEO for any closing remarks.

Thanks Sean. I'd like to end the call by thanking our analysts and our investors for their continued support and to congratulate our team members for an outstanding first nine months of the year. Not only our financial results have been very strong, but we're very proud of the number of best places to work awards that we continue to receive across the country and within our individual businesses. Including our recent recognition for the fourth year in a row is the best place to work in insurance, and our recognition as the best place to work by our in inner industries by a number of very prestigious publications including Forbes, and Fortune. We look forward to speaking with you again when we report our fourth quarter and year-end results. Thank you and have a nice day.

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