Q1 2021 CBIZ Inc Earnings Call

[music].

Good morning, welcome to see best first quarter 2021 results conference call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed.

Zero after today's presentation there'll be an opportunity to ask questions. Please note that this event is being recorded.

I would now like to turn the conference over to Lori Nobody Kiss.

Go ahead.

Good morning, everyone and thank you for joining us from the seabed <unk> first quarter 2021 results conference call and.

In connection with this call today's press release has been posted to the Investor Relations page of our website <unk> Dot com.

As a reminder, this call is being webcast and.

And a link to the live webcast as well as an archived replay and transcript can also be found on our website.

And we begin our presentation, we would like to remind you that during the call management may discuss certain non-GAAP financial measures.

Reconciliations of these measures can be found and financial tables of today's press release and in the Investor and the Investor presentation on our website.

Today's conference call May also include forward looking statements, including statements regarding our business financial condition.

Results of operations cash flows strategies and prospects.

Forward looking statements represent only <unk> estimates on the date of this conference call and are not intended to give any assurance as to actual 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 more detailed description of such factors can be found in the filings with the Securities and Exchange Commission.

Please note that this assumes no obligation to update forward looking statements.

Joining us for today's call are Jerry <unk>, President and Chief Executive Officer, and Ware Grove, Chief Financial Officer, I will now turn the call over to Jerry for his opening remarks Jerry.

Thank you and good morning, everyone.

Release of our first quarter results. This morning, we are pleased with our strong start to the year.

We experienced growth and total revenue same unit revenue earnings per share and adjusted EBITDA for the first quarter of 2021.

These results provide important momentum for the remainder of the year.

Our results demonstrate the fundamental attributes of our business model that I've emphasized throughout the past year.

These characteristics continue to enable our positive performance during both favorable and less favorable business conditions.

These attributes includes the proportion representing approximately 70% of our revenue that comes from our central and recurring services, including our tax services and insurance services payroll services and a host of others that our clients rely on us to provide regardless of business conditions.

Our high client retention rates, our broad geographic footprint the diversity of our client base in terms of industry and size of the business are strong and consistent cash flow and a substantial amount of variable expenses and our business.

We continue to capitalize on the stability of our business model affords us.

Throughout the last year and into the first quarter of 2021, we have watched Televisa attributes provided us an opportunity for growth regardless of economic environment.

In addition, we continue to be extremely vigilant and managing our overall expenses and discretionary spending practice.

Practices, we focused on at the start of the pandemic and carried into the first quarter of this year.

And as recovery continues and we return to some level of normalcy. These expenses will begin to return as well, albeit at somewhat reduced levels compared to 2019.

Now I will turn to the performance of our two primary practice groups.

Within our financial services group, we continue to experience very strong demand for our core services.

Including many of the compliance related services that are weighted more heavily towards the first quarter of each year.

This year the IRS tax filing deadline was extended to may 15th.

So a portion of our tax compliance revenue work, we will extend beyond the traditional mid April timeframe.

Within our discretionary and project based businesses, we continue to experience increasing demand for our litigation support business and are seeing returning interest and our private equity advisory services and our valuation services.

Further we anticipated that some project based and discretionary work that was put on hold or delayed last year.

And carryover into 2021, and we're seeing that now, especially for our services that touch M&A transactions.

While it is still too early to tell if this trend will continue throughout the year.

All signs are positive and we remain encouraged based on the general level of optimism. We are hearing from our clients and the external signs of economic recovery.

Also important to note the passage of the most recent COVID-19 relief and stimulus package like those past and 2020 present, new consideration for businesses and translates to more opportunity for us to deepen our client relationships and offer support when our clients need it most.

We continue to be active and our outreach and engagement of our clients to help supporting.

Access and these new and expanded opportunities.

Our government health care consulting business ended in 2020 strong.

And started this year with tailings is delayed contracts resumed and.

And we find our clients have largely adjusted to working with us using virtual tools.

We are also seeing new projects move forward, including increasing interest and our services related to managed care, which means additional opportunities for this business.

Turning to our benefits and insurance group.

We started the year strong and are seeing a continuation of the positive trends that we experienced and the second half of last year and our employee benefits business. The core of our property and casualty business and the advisory services provided within our retirement plan services businesses.

Client retention is also up to these same services, so far and 2021.

From a consolidated viewpoint, we continue to experience some softness and the portion of our payroll business that generally serve smaller businesses, including a number and the food services industry.

And puts us in context, the total revenue from this segment of our payroll clients represents less than 4% of fee business total revenues.

One additional area I want to highlight is our investment and producers.

Our ability to attract retain and develop our producers is essential to accelerate organic growth and I am pleased to report that our overall number of producers is up at the start of 2021, and we continue to make progress in this area.

The new producers we brought on in recent years continue to outperform our projections and as a result, we are continuing to add new producers and to expand this program to other areas of our business.

In summary, we are pleased to start 2021, and a position of financial strength.

With a strong balance sheet low debt and ready access to capital.

With that I will turn it over to wear for his comments.

Thank you Jerry and good morning, everyone.

I wanted to take a few minutes to run through the highlights of the numbers. We released this morning.

With total revenue growing by eight 4% and the first quarter revenue growth from acquired businesses accounted for four 8% of that growth with same unit growth up by three 6%.

After facing uncertainty and 2020 coming into this year, we were unclear how the year over year comparison to 2020 will unfold and the first quarter.

Our core business has continued its steady performance that we saw through much of last year and as expected the advisory and transaction oriented business services that are more vulnerable to the conditions encountered last year.

Largely stabilized and we are positioned to record growth this year.

Our financial services group recorded total revenue growth of eight 1% with same unit revenue growth of four 5%.

And with no industry concentration within our core services clients. The diverse set of clients, we serve lend stability to this business.

The acquisitions, we closed last year are performing extremely well with the only soft comparison between the private equity focused advisory business, where the first quarter of this year compares with a strong first quarter a year ago.

Currently have a full pipeline of prospective work within this group and we expect to record growth for the full year.

Continue to work under remote conditions, our government health care consulting business had a strong first quarter.

Turning to the benefits and insurance growth total revenue grew by nine 6% with same unit revenue growth of one 6% and the first quarter of this year.

Some of the transactional based businesses such as payroll services are soft and comparison with first quarter a year ago.

But after reporting a same unit revenue decline of 3% for the full year last year. The one 6% first quarter same unit revenue growth within benefits and insurance.

This year is noteworthy.

As Jerry commented our investment and additional producers that has occurred in recent years as a resulting in stronger pipelines of new business. We.

And we're continuing to invest and bringing additional producers onboard to further enhance growth prospects.

And when coupled with strong client retention, we are well positioned for growth.

As Terry discussed, we remain vigilant and managing our expenses, which include for example, lower levels of expenses for travel and entertainment.

And that given the constraints caused by the pandemic are directly tied to a remote work.

Also as a reminder, and the first quarter a year ago, we recorded an additional $2 million of bad debt expense and so with the improvement and client receivables. We are seeing bad debt expense was lower this year.

And we're pleased to report 390 basis point margin expansion on pre tax income leading to a 39, 4% increase and earnings per share.

Up to <unk> 92 per share this year compared with 66 cents.

And the first quarter a year ago.

As we progress through this year, we intend to restore some level of discretionary spending and that May challenge the year over year comparisons and the second quarter and for the balance of the year for.

For example, our investments and our national marketing and media campaign was paused.

2020, but this is now underway and the second quarter.

Also last year, as we pointed out and our quarterly calls benefits and health care costs were lower as many medical procedures were delayed or deferred.

After experiencing lower trends and this cost and the second third and fourth quarters at 2020 NSX and health care costs were again, lower and the first quarter of this year.

And this expense is hard to predict and the near term, but we expect a more normal level of expense over the balance of this year. So bear in mind. This trend may create some volatility to margin as we progress through the balance of this year.

You will see a table attached to our earnings release that reconciles the impact of the accounting for gains and losses, and our deferred compensation plan assets.

This impacts our reported gross margin, which was 27, 1% on an adjusted basis this year compared to 22, 6% a year ago and.

And operating margin on an adjusted basis was 22, 4% compared with 18, 2% a year ago.

As a reminder, there is no impact to pretax income.

Cash flow has continued to be strong with day sales outstanding on receivables improving from 94 days a year ago to 91 days this year.

Seasonally cheetos typically uses cash and the first quarter each year as receivables build and connection with our busy season revenue.

At March 31, this year the balance outstanding on our $400 million unsecured credit facility was $162 million compared with 108 million outstanding at December 31, 2020.

This leaves approximately $230 million of unused capacity at March 31, So we have plenty of dry powder to address strategic acquisition opportunities as well as continue with share repurchases.

And the first quarter, we used approximately $32 $7 million to repurchase approximately one 1 million shares since the end of the quarter through April 27, we have purchased approximately 278000 additional shares under our <unk> program for a total of approximately $1 4 million.

Shares repurchased this year to date.

As a result of this repurchase activity, we expect a fully diluted weighted average share count for 2021 within a range of 54 to $54 5 million shares, which represents a slight reduction and our full year expectation compared with guidance earlier this year and we will provide further updates as we progress.

<unk> per year.

Of course strategic acquisitions continue to be the top priority as we deploy capital.

With over $200 million of unused capacity, we have the flexibility to be aggressive and pursuing potential acquisitions.

Last year, we closed seven acquisitions, and we announced and eighth acquisition effective on January one this year.

<unk>. These acquisitions are expected to contribute approximately $48 million with annualized revenue and we will see these transactions contributed to revenue growth throughout this year.

And the first quarter, we used $3 7 million for acquisitions, including earn out payments on acquisitions closed in previous years.

Future earn out payments are estimated at approximately $11 $8 million for the balance of this year $16 $1 million next year, and 2020 to approximately $9 7 million and 2023, approximately $13 $5 million and 2024.

<unk> and $800000 in 2020 five.

Jerry will comment further on the recently announced acquisition, which is effective on May one and.

And to be clear the numbers I just referenced do not include the impact of this new acquisition.

Beyond the acquisition, we announced today, we continue to have a full pipeline of potential acquisitions.

Capital spending and the first quarter was $1 $1 million.

Last year capital spending for the full year was $11 7 million and for 'twenty 'twenty. One we continue to estimate capital spending at approximately $12 million to $15 million for the full year.

Adjusted EBITDA grew by 28, and a 5% to $73 $3 million reported and the first quarter. This year up from $57 million a year ago. The margin expansion on adjusted EBITDA was 370 basis points to 24, 3% of revenue this year.

Year, compared with 26% a year ago.

The effective tax rate and the first quarter was 24, 1% and we continue to project and effective tax rate for the full year of approximately 25%.

Of course as a reminder, the effective tax rate can be impacted either up or down by a number of factors that can be unpredictable and we are not speculating on the impact of potential legislative changes and the tax rates. It may occur. So with these comments I'll conclude and I'll turn it back over to Terry.

Thank you Ware I'd like to touch on a couple of additional areas before we turn it over for Q&A.

First in regards to M&A and we started 2021 with the strongest M&A pipeline, we've had in many years.

Already this year, we've completed one acquisition within our core accounting and tax practice and and other within our retirement plan services business.

I mentioned and the acquisition of Middle market Advisory group during our last call MMA provides tax compliance and consulting services to middle market companies and family groups and a number of attractive industries and is located in Denver, Colorado.

And this acquisition complements our rapidly growing Denver based practice.

Im also pleased to announce the acquisition of Wright retirement services.

A provider of third party administrative services to retirement plan clients across the country.

Located and Valdosta, Georgia, right retirement services has a longstanding relationship with Cvs and the client.

And we are excited by the opportunity to offer their clients a broader array of services.

As we commented in our earnings release, we are also pleased to announce our latest acquisition and welcome the new team to Cdos and.

This week, we signed a definitive documents to acquire the non attest assets and business of <unk> and quarter.

Our Bellevue, Washington based accounting firm.

And as you know for a number of years, we've talked about identifying partners and completing acquisitions and attractive and growing markets for.

The Pacific Northwest has been high and our list.

And to enter a market like this we wanted to do it with a partner that brought the size scope and client base that would serve as a platform and be a catalyst for growth in that region.

And as always we prioritize cultural fit alignment of value and strong leadership is essential for future success.

Over the years, we've evaluated a number of opportunities and the greater Seattle Metropolitan market.

And that process led us to Bernstein Porter, founded and 1985 by Bob Burton and Greg quarter overtime for instance, <unk> grew to be one of the top 10, CPA firms and the Puget Sound region.

First and quarters team under the leadership of President Mary after brings with it and outstanding reputation for exceptional client service and <unk>.

But to the growth and development of their team members and service to the communities, where they work and live.

And all qualities that align with Cvs and core values and beliefs.

The effective date for the acquisition is may one but.

But we wanted to do now to today is all conditions to closing having satisfied and <unk>.

And to take this opportunity to welcome the burst and quarter team to seasons.

M&A continues to be a key component and <unk> growth strategy and will be a top priority for us and 2021 and beyond especially as we see increasing interest and fee business potential partner.

Our performance over the last year on the backdrop of the pandemic demonstrates the value and stability of our business model.

We also continue to emphasize our unique position and the market given the breadth and depth of our expertise and services and.

And our strong and steady cash flow.

Our access to capital allows us to continue to make investments and the business that many of our competitors simply cannot afford.

We know that these messages resonate with firms and each of our various businesses and we are eager to explore these opportunities.

I would now like to turn to our revised guidance.

As a result of our strong performance and the first quarter.

And the acquisition of Bernstein quarter effective on May one.

We are revising upward our previously announced guidance.

Our revised guidance is to grow revenue between 8% per 10% and earnings per share within a range of 12% from 15% for the full year of 2021 compared to the full year of 2020.

While there is still uncertainty as we navigate this next phase of the pandemic our guidance assumes that recovery will continue and that business conditions will remain the same or improve throughout the remainder of the year.

With this revision and guidance and the announcement of the acquisition I wanted to point out that burst and quarter as the traditional accounting firm that recognizes a disproportionate amount of its revenue and the first half of the year due to the timing of tax deadlines and the busy season.

Given the seasonal nature of this business the earnings impact of this acquisition will be more fully realized in 2022 and beyond.

With this I will turn it over to Q&A.

We will now begin the question and answer session.

And I ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two and.

At this time, we will pause momentarily to assemble our roster.

Our first question is from Andrew Nicholas from William Blair Go ahead.

Thank you and good morning.

And I just wanted to start with a question on M&A and I mean with respect to the broader market and not see EBIT specifically.

Obviously, it was and I think record levels throughout the first quarter.

Is there any way for you to maybe help me or help us dimensionalize how much it positively impacted your growth in the period and also how you think about your exposure to that dynamic for the business as a whole.

So Andrew this is Jerry.

Sure.

When you think about how it impacted our growth that would be difficult to really count.

I'll tell you why there's really two pieces of our business that really are highly dependent on specifically highly dependent on acquisitions and first is the obvious one the private equity advisory business that we have that's now about a $50 million of business in that business, we provide quality of earnings we provide.

<unk>, we provide a host of other services, principally and primarily to private equity.

Funds from their portfolio companies and assessing acquisition opportunities that $50 million average is obviously highly tied to the general broader overall M&A activity market, but we also do an awful lot of work with our clients within our traditional accounting practice.

Around helping them structure and consider capital large capital investments and <unk>, certainly, including M&A and net net a little bit more difficult for us to.

To assess as to how the direct dollar impact and I will tell you that.

A more robust economy, a more favorable business climate for M&A.

And certainly helps us and our and our growth for the year.

Great. Thank you that's helpful. And then I know you touched on it a little bit.

And your prepared remarks, where but.

Gross margins at the segment level.

Look to be records by a pretty sizable amount per each segment. So I was kind of hoping you could spend some time walking through what's driving that improvement.

And maybe speak to the sustainability of that level of performance and future years.

Understanding that Q1 is seasonally high and that there are some some costs that youll layer back and as that.

Pandemic kind of hopefully fades away.

But any color there would be helpful.

Yes, Andrew Thanks.

Yes, the gross margins and pre tax margins were extraordinarily high and the first quarter and they were aided by a couple of year over year comparisons, which quite frankly won't be sustainable throughout the year. There were unique to comparing this year and the expense levels versus last year with.

It was largely pre COVID-19 expense level so far.

First of all is the bad debt expense.

Roughly at $2 $2 million swing.

And that's a one time first quarter comparison that won't be sustainable for the balance of the year.

Also we had on the benefits and insurance side, we typically get and the first quarter.

Carrier contingents and carrier bonuses that relate to the prior year of client retention and the claims experience and things like that so that also was kind of a onetime non recurring favorable thing to the first quarter.

And that was a $1 4 million dollar item.

And then when you just look at the other expense items like travel and entertainment and it continued to be very low this year as it was.

Most of last year, but in the first quarter remember COVID-19 really didn't start to impact our expense levels until about midway through March when stay at home orders and those things started to impact the business. So once again, you have kind of a favorable.

Year over year comparison, and the first quarter with respect to the expense levels.

So the key takeaway would be that yes, we're very pleased to see that big margin expansion for.

For the first quarter, but we're going to experience. Some choppiness. This year as we've signaled that with the original guidance, we're going to see some choppiness. This year with respect to the year over year comparisons just because and another example, we talked about was the marketing media campaign, we totally paused and pull that out of the mix last year.

Here on a discretionary basis just to protect the business. This year, we think it's the right thing it'll enhance long term opportunities so and the second quarter you can see the impact of that expense, whereas last year, you wouldn't have seen it.

So.

I think it's fair to say that.

And we will see margin expansion this year, we commonly say.

And our long term basis Thats our goal.

Get $25 20.

50 basis points improvement each and every year and I think that will occur this year, but it certainly won't be upwards into the 300 plus basis points, just because of the things I've talked about.

Great. Thank you very much and if you wouldn't mind me squeeze and one more in and the government health care business. I think you noted in your prepared remarks, some some acceleration there, but I'm just wondering.

And.

And well I guess first could you say what the specific growth was for that business and the quarter, but also maybe just more.

Qualitatively, how close is that business to returning to pre pandemic type utilization levels and if you have any thoughts on the recovery cadence for those levels to the extent that they haven't already come through thank you.

Yes, Andrew this is where again that business and you may remember and maybe that's behind your question. We've often said it typically grows and the high single digit range, but at some point it gets big enough that the percentage is get really tough, but the growth dollar wise is still pretty impressive.

And last year as we converted to remote conditions that good news was we saw very little disruption and client work, but some of it was pushed out and delay just because the remote work is less efficient and so some of that will.

Come back into this year and we.

We did grow and the first quarter kind of mid single digit range not high single digit range and thats the expectation for the year.

Thanks again.

Again, if you have a question. Please press Star then one.

Our next question is from Marc Riddick from Sidoti and company go ahead.

Hi, good morning.

Good morning, Mark.

So wondering if you could talk a little bit about the.

The.

The.

Opportunities for for growth around the hiring and and maybe what youre seeing there and what those plans and maybe to sort of take advantage of future.

<unk>.

And future opportunities and then I have a couple of follow ups around that.

Yeah and more specifically.

Mark I'm going to answer and I'm not sure I really fully understand the question book, but we are.

And in our plan and our guidance for this year.

Is the staffing that we have today. So we think we have plenty of staffing to achieve.

And the guidance that we set out as far as growth is concerned.

<unk> as you see generally and the economy that.

There are some constraints on resources that are available we believe that we have a compelling value proposition to our workforce and we think that we'll win our share but theres. No question that there is somewhat of a tightening of the labor market is certainly across the board and mix. That's also true and our industries with that said.

There are other opportunities other levers in addition to just head count that we can pull.

And to achieve the growth that we again that we have put into our guidance and things including.

Pricing things, including the types of services that we provide to our clients.

The programs that we've put in place to help our clients navigate things like.

And the additional stimulus packages that are and in the work. So we think we have a considerable number of levers that will help us get the growth that we guided towards hiring is certainly one of them and.

And.

We've talked a little bit about the producer program. We also believe that we have a very.

And very attractive model to have recruited too on the producer side and we're confident that we will continue to add to those numbers.

Okay, Great and then one of the things I wanted to circle back on and.

During the course of the pandemic one of the things that you were very active with it was.

The outreach programs that you had for your customers as far as providing resources for.

And for information and sort of helping helping.

Your existing customers.

The new potential customers and Jordan navigate as much as possible from and information standpoint.

And navigate the pandemic was information and Webinars and the light and I was wondering if there was an and.

And that as or if <unk> got the opportunity and sort of looked at how that can sort of work going forward and maybe and how that is translated into new customer growth and.

And what that part may airplanes, and and generating the numbers that you were able to deliver today. Thank you.

Yes, Mark. Thank you we learned a lot last year right and first of all it was very affirming.

As to our business model our approach the value of the breadth and depth of services that we provide the value of the depth of the expertise we provide and.

And as I commented last year and I think at the end early this year.

And that all came together and the way that we holistically packages to our products and services through Webinars and through other.

Outreach programs to be able to serve them and ways that many of our competitors cant.

They just simply have the scope of services and the depth of expertise and we've received terrific feedback from our clients and prospects through that engagement and so to your question and that will continue into the future. We have programs that are continually being developed and hosted <unk>.

Right.

And clients need by prospects by key decision makers to participate and those programs.

And as a result.

We are very very pleased with the kind of top of the funnel on our new clients and additional revenue.

Pipeline, so those things of work force we learn.

To execute that on on those things much better in 2020 through the pandemic and those programs will continue into the future.

Okay, Great and then the last one from me and I know this might be a little tricky, but I guess a couple of years ago, we had several delays due to the following the government shutdown.

And you of course.

It was the initial thing that make and this year one months.

Delay and is there sort of a weighted.

And I haven't had a normal season, and I suppose and several years, but is there a way to sort of.

Quantifying maybe how much of how much potential revenue may have shifted or or maybe even if there's a way to sort of think about what that difference might have been if not versus last year because last year of course, it was unusual as well.

Maybe Kevin and sort of compared to what it traditionally would have been under normal circumstances.

And so mark Great point, what we're learning is there is no typical year okay.

And.

We are always going to face something a lot of times I think the very positive message that hopefully you have received over those periods of time does that business doesn't go away it may be deferred.

There may be other reasons why the revenue might shift from one quarter to another or went into the year, but generally the revenue. Once we have these contracts we have longstanding relationships with the states.

And that work needs to be done we're going to get that work done.

And it's really just a timing issue and as between quarters and years and that's often why it's very difficult and we caution against.

Trying to model quarter over quarter, our results for us because those are can be large swings in our business is sizable as MFS and with regard to outside large those contracts are with that said.

The best guidance that we can provide is the guidance that were alluded to in his remarks, which is we've traditionally.

<unk> grown that business at kind of mid to high single digits.

And while it will be harder and the future to keep the percentage of growth at those levels as the business gets lower and I think you could look at the certainly the dollar impact of that growth.

And being fairly consistent over longer periods of time year over year.

And I really appreciate that and I just want to sneak in one last one I wanted to sort of touch on and and this is sort of more general but wanted to get a sense of what your feelings, whereas too you guys have always done acquisitions and executed really well on them and I'm sort of curious as to maybe what those converse.

Patients are like or it seems as though you'd be a more attractive destination and relatively speaking and the eyes and potential partners future partners.

Following the challenges we've seen so I was wondering that are sensitive to the conversations that youre, having now or are they different than they were maybe six years ago and win.

So sort of clear that.

And attractive destination and future partner. Thank you.

Yes, Mark there not only different from five or six years ago, they're different from 18 months ago. As a result of what we experienced over the past 2000.

In 2020 compared to many of our competitors. So let me kind of talk about both of those things first of all I think.

And when people come to appreciate and recognize is that and when they look back over our performance over a long period of time, we've had sustained revenue growth, we've had sustained earning margin and we have substantial scale and so those attributes allow us to continue to make investments and the business investments in and.

Practices investments and technology investments and people investments and the growth and development and products and solutions for our clients.

And simply.

Smaller competitors just they just don't have the resources to make those investments and and they come to appreciate those things.

The difference really over the past 20 months or I'm, sorry, really over the past year since 2020 years prior to that time and we've seen this at various points and our history. Prior to that time, we're only interested in bringing on the most highly regarded service providers and our markets and and our industries and when we <unk>.

Have those conversations with whether it's on the accounting side of the benefits insurance side often times. The responses. We know Steve is we like <unk>, we really like what Youre doing we'd love to be part of it someday, but theres no compelling reason to do it today as opposed to tomorrow.

What changed from 2020 is that they faced pressures that they would not typically face in more favorable economic conditions and things like being able to maintain your workforce being able to continue to make investments and the business being able to bring the types of programs that we are able to bring to our.

And to help them and that very uncertain and unsettling time, and we did in 2020 and then the strength of our balance sheet the strength of our cash flow breadth and depth of expertise all of those things were telling next door and youre, telling that story by the way 2019, as well, but we're telling it in 2020 and 2010.

And we won and they are hearing are different and they're leading into that message more and as a result.

As I said at the outset of this call. We have had the fullest pipeline of M&A transactions and I've seen and many many years and that continues and Theres a great deal of receptivity to the message.

And that's very helpful. Thank you very much.

Thank you Mark.

Question is from cash from.

And J F. Kennedy.

Alright, good morning.

Just a few here one one follow up on and on the gross margin. So obviously.

Good day, I've gone through where some of that excess margins coming from.

And the discretionary side travel and expense does it impact the segments.

The same or differently.

Yes, probably the bad debt expense.

Delta would be clearly more oriented towards the financial services side.

And we've got kind of the traditional billing and trade receivables and our clients.

The carrier contingents would be impactful on the benefits and insurance side, and then I think on the travel and entertainment side, which I called out it's probably proportionately.

<unk> kind of a sales mix or the revenue mix between the two.

Without getting too and I, just don't have the detail, but I think cash is safe and that's fine.

That's helpful.

Still I want to make sure that I understand from a from a seasonality standpoint, obviously financial services very seasonal on the benefits and insurance piece and the margins you walk through where in terms of why <unk>.

Q1 gets impacted sometimes et cetera, I guess more from a revenue standpoint, you did $87 million and revenue and the first quarter and benefits and insurance.

One 6% I think same story you said so simple.

Acquisitions, and there what I'm trying to understand is is that $87 million moving forward.

How does the Q1 revenue seasonality and benefits and insurance how significant is it.

Yes, great question most of the businesses that are embedded into the benefits and insurance arent really seasonal for instance.

Employee benefits kind of throughout the year.

And the payroll businesses throughout the year pretty equally.

The retirement planning services.

Same thing on the property and casualty side, when we see renewals that happened typically annually.

You typically recognize revenue there so that might be a little more front end loaded kind of a year and cycle as opposed to a mid year cycle, but I would say, it's not highly seasonal because we have a fair share of clients that do a mid year renewal as opposed to a calendar year and renewal.

Thank the one seasonal thing that we did talk about was that the carrier.

Commissions that come through based on the prior year and they typically come through and the and the first quarter.

Got it and that's helpful.

And then last one just in terms of the 8% to 10% revenue.

Our revenue guide is that.

Pretty evenly skewed between acquisitions and same store or is it more skewed towards to the acquisition side.

Okay.

It's probably.

It's safe to say that with the acquisitions.

Accounting for a larger portion and the first quarter that will continue throughout most of the year.

Bad debt.

It's probably two thirds, one third split as opposed to the typical kind of 50 50 split that might be more true over time, Hey, Chris I do want to clarify, though we don't we only count and that number kind of acquisitions that have been closed as you know there are there is a hybrid and multi rate it's hard to predict so I don't want you to think that we have future acquisitions and that.

<unk>.

Understood understood got it okay.

Helpful.

I will leave it there.

Yes.

And just.

We did eight acquisitions through January one plus just announced a new one so it is more heavily weighted towards acquisitions. This year.

Got it.

And I appreciate it guys.

And.

This concludes our question and answer session I would like to turn the conference back over to Jay Chris and go for closing remarks.

Thank you I wanted to close today by thanking our analysts and our investors as we always do for your continued confidence and support.

And I also want to take this opportunity to recognize our <unk> team members.

Our noteworthy performance and the first quarter is a direct result of your commitment and dedication.

And I remain incredibly proud of what we've accomplished over the last year working together and I'm, even more excited for what we can achieve and the year ahead.

And we look forward to talking to everybody. After the end of the second quarter have a great day.

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

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