And company, and I thank you for joining the Sidoti December Small Cap Virtual Conference. Now, joining us today is CBIZ, the ticker is CBZ, and our speakers will be Jerry Grisko, President and CEO, and Ware Grove, Chief Financial Officer. Now, before we begin that, as a reminder, we will have time for QA at the end of Q&A, at the end of prepared remarks. Just click on the QA button at the bottom of your screen. You can submit those at any point during the presentation. You don't need to wait until the end. And before we do that, we will turn the call over to Lori Novickis, the Investor Relations Leader at CBIZ. Good morning.
Great. Thank you, Marc. Good morning, and good morning, everyone. Thank you for joining us today. Before we begin, I just wanted to let you know that the presentation we're going to be using today is essentially the same abridged version that we've used on July 30th when we announced our intention to acquire Marcum. Now, we have since closed that transaction and announced the closing on November 1st, so this presentation includes pro forma data that, you know, was our best estimate back in July, and we'll go ahead and update all of that information when we announce our fourth quarter and full year results coming up in February, so we'll update everything for the Marcum impact and the 2025 guidance at that time, and now I'd like to turn the call back over to Jerry Grisko and Ware Grove.
Thank you, Lori. Thank you for joining us, everybody. We thought we'd spend our time today really talking about, as Lori indicated, the Marcum transaction and really kind of two different pieces. One is the strategic rationale behind the transaction, and I'll take that piece, and then we'll turn it over to Ware to talk about the financial aspects of the transaction. We oftentimes get the question, you know, how did the transaction come about, and tell us about the process, and what we start with is that our strategy, really. We've had a long strategy around growth in our company, both organic and inorganic. On the inorganic side, we've been in existence for about 28 years. Inorganic, or M&A, has been a key component of our growth. So we've been at this for a long time. Several years ago, we started considering a larger transaction.
We had built the platform within the organization to support that type of transaction and went out into the market and started looking at firms that might be the, you know, an ideal fit for us. At or about that time, we were introduced to Marcum. Now, this was a considerable number of years ago, but we were introduced to them. We got to know them. We got to know their senior team. We got to know some of their key contributors. And from that time forward, we've kind of, we've watched them and tracked them. And while we didn't know at that time that this opportunity would present itself, I will say we've long admired them over that period of time. Why? Because we think by coming together, we can make each other even stronger. And that's kind of been the theme of our transaction, stronger together.
First of all, it positions ourselves better in the market. Prior to the transaction, we were the 11th, you know, considering including the Big Four, we were the 11th largest accounting firm. They were the 13th. Together, we're the 7th. Why is that important to us being 7th? Because when we think about people and the talent that comes into this industry, when people are looking to join a firm, they oftentimes go to the top tier of firms because they provide better growth opportunities, better career opportunities, more interesting work for a broader array of clients. So winning that war for talent, I think this helps us position ourselves even stronger.
Similarly, from a client perspective, oftentimes when we win clients, we win those clients because they've outgrown that local market firm or that middle market regional firm, and they're looking for a firm that can do more for them. And those larger firms have both deeper industry expertise and a broader array of services. So that scale really matters for us. As far as investments in the business are concerned, ours is an industry where, compared to 10 years ago, there are increasingly, it's important to increasingly make investments in the business. And with scale, you can spread those investments over a larger platform. So for all of those reasons, the size, scale matters, and this positions us for that.
Further, from a forward growth strategy on the acquisition side, we are having, have had, and continue to have a considerable amount of conversations with firms that realize that in order for them to continue to compete both for talent and for clients, they're going to need to join a firm like ours that has all the things that we've built out. And this even better positions us, we like to say, as the acquirer of choice when they're having conversations. We talked about the war for talent. For a lot of reasons, this is a very important opportunity for us and could not be better aligned. Obviously, there's a compelling shareholder value. Ware will get into more of those details as I turn it over to Ware later in the presentation. I talked about kind of our relative positioning.
So if you think about, you know, the Big Four, right below the Big Four, there's RSM, and then there's really BDO and CBIZ, right? And so being positioned at the top of that second tier is very important to us for all the reasons that I explained just a moment ago. The profile of the company that's stronger together, you know, as a result of the combination, first of all, what they brought to us is real scale in very important strategic markets to us: New York, New England, Mid-Atlantic, South Florida, California. We are better positioned than any firm in that second tier to be able to be that firm for that middle market business. Just with our scope of services, our depth of expertise, our industry knowledge, we're really today unmatched by any of our competitors in those areas. So very well positioned.
From a revenue side, together, and this is as of really the end of 2023, we took their revenue, and our revenue is about $2.8 billion. It will obviously be higher coming into 2024 and then into 2025. Over 10,000 employees, 135,000 clients, 21 major markets, coast to coast. Again, unmatched, even in that second tier, breadth of services, depth of expertise, and industry expertise within that second tier of firms, so very well positioned going forward. And again, on the right-hand side of that, just the complement of all the things we can do around technology, benefits, and insurance, accounting and tax, advisory, the full scope of services, really well positioned to serve that middle market client. It also bolstered our presence in our delivery in key areas of our practice, like tax. We already had a sizable tax practice at almost $500 million. We are now almost $1 billion.
Our accounting services were considerably larger. We were about $300 million there, almost $800 million today with the combination, and the list goes on, right, so key service offerings, considerably more scale in those service offerings, and then, you know, from a shareholder perspective, when you think about, we get asked this question a lot around, what are the things that have driven your success over the years? Those things are around strong historic growth rate, both in favorable and less favorable business climates, and an array of essential services, so about 70% of our revenue tends to recur in favorable and less favorable business climates, high client retention rates, strong cash flow, variable expenses. We went through and said, CBIZ has those things, and Marcum has them as well, so we're even stronger.
Those things that you've come to know and trust in CBIZ and rely on in making those investment decisions, this makes us even stronger with those attributes. Our combined revenue profile, as I indicated, about 77% of our revenue today. It used to be about 75%, 74%, about 77% of our services tend to recur. Again, favorable, less favorable business climates. Our clients turn to us for the accounting and tax, for our group health insurance, for property and casualty, for payroll. That ratio is even a little bit more favorable with this combination than it was before. We're now at about 77%, and still, about 23% of our revenue tends to be in the more project-oriented work. We like that work as well. It's differentiating. Oftentimes, our competitors don't have those services. In more favorable business climates, they tend to be faster growing and higher margin.
So we really like this mix of 77%, 23%, a very favorable portfolio mix for us. And then lastly, the key driver here now going forward is to make sure that we are focused on combining the two firms and that we have a strong integration plan, and we land that, and we do. At closing, we've already gotten off to a very strong start as far as communicating the value proposition of this transaction internally to our team, to the legacy Marcum team, to our clients, to their clients. A great deal of enthusiasm around all that this brings. Our focus from closing forward will be, of course, integration. That's around systems and processes and methodologies. We have a very detailed integration plan, and we are working through that plan already.
We think at the outside that that may take up to 18 months, but we're trying to get as much of that accelerated into the first 12 months. And then going forward is where it becomes even more compelling with the cost savings on the synergy side, but more importantly, the revenue synergies for bringing these two organizations together. So with that, I'll turn it over to Ware to talk about the financial attributes.
Sure. Absolutely. Thanks, Jerry. CBIZ, you're familiar. We have a track record of reasonably good revenue growth in that 8%-10% range of recent 7.4%. And then with the operating leverage built into our business model and the ability to improve margins 20-50 basis points a year, what we achieve is a growth rate of adjusted EPS or EBITDA of roughly 1.5x to 2x the top- line growth.
That's a nice metric, and we think that will continue. We think the scale will accelerate the top line growth, as Jerry commented. There's a good fit there for a number of different reasons. There are some synergies. We have not penciled in a high level of synergies. We think this is a fairly conservative level of synergies so that this transaction and the returns that we're talking about here are not hinged upon whether we get the synergies or not. The synergies will come, and I'll talk about that in a minute, over the first 24-36 months before they're fully realized. With the operating leverage from increased scale, we think that we will probably have amplified opportunities to improve margins beyond that 20-50 basis points, but more about that later.
We think that the structure of the transaction does offer the shareholder roughly 10% accretion in year one versus what you would have had with CBIZ on a standalone otherwise. Now, bear in mind that half of the consideration paid is paid in cash, and therefore we finance that portion of it, and half of it is in shares, and that the new share count will go from roughly 50 million-65 million shares. That will not be dilutive. In fact, the net result will be an accretion of roughly 10%. As we realize synergies and delever and interest costs reduced in the out years, we believe that accretion will only improve from that 10% in year one, so the leverage in the balance sheet historically has been around 1.5x to 2 x EBITDA in terms of the debt level.
We're leveraging up to roughly three and a half times to close the transaction, and that's where we sit today. We have great cash flow. The Marcum profile of cash flow and operating leverage is very similar to CBIZ, so you should expect a very similar cash flow conversion ratio to net income once we're out from under kind of the initial integration expenses and things like that, so that we will be able to rapidly delever. We will still have some opportunity for ordinary course acquisitions and some level of share repurchases, so at close, we have over $500 million of excess capacity, so we'll have that. But the priority is to delever and get that down back into the two-time range, so the synergies coming from normal sources, we've got duplicative corporate functions and operating expenses.
We can scale and leverage the marketing spend on both sides so that we have some synergies there. And there's a lot of synergy opportunity in the IT platforms as we combine into one platform as opposed to two separate platforms. And we scale the licensing and the software, and those costs can be scaled. And of course, facilities, we have over 120 facilities, and I think Marcum has 50 or 60. We can reduce those facilities and reduce the footprint. That'll take a little bit of time just because of the term of the leases and things like that.
But already, we've identified 22 markets where we have a great opportunity, and we've done all of the location and the employee scattergrams, if you will, so that it will make sense to co-locate in sooner rather than later, but it will take a little bit of time to realize those synergies. The transaction funding, I talked about that earlier, $2.3 billion. That's 12x the EBITDA acquired. About 50% of that was in cash, and about 50% of that was in shares. And the fact that 50% of the consideration was paid in shares really serves to align the new Marcum partners who are now new CBIZ shareholders. It serves to align those people with our shareholders and your shareholder interests going forward. The cash funding requirement was funded through a $2 billion facility led by Bank of America.
We have a $600 million five-year revolver and a $1.4 billion Term Loan A facility, both of which are five years with minimal amortization over those five years. The initial pricing grid on the outstandings is SOFR plus 225, but then 225 basis points. But then as we delever, that pricing grid only improves a bit. The post-closing liquidity, I talked about the fact that we currently sit with a little over $500 million of unused capacity. We seasonally will use some cash in the first half of the year. That's just the seasonal nature of our business. Nothing unusual here. So we need a little excess capacity as we sit here today for the upcoming surge in working capital that, you know, after the first half of the year, those receivables convert to cash, and we liquidate, and we've got a lot of cash flow for the full year.
So we'll need to accommodate that, but it also enables us to do some ordinary course acquisitions and, if needed, and we would desire to do this, some share repurchases under the right circumstances. And let me just say that the share consideration is structured so that if there's a six-month lock-up after the January initial issuance of those shares, so in the second half of the year, if some of those holders need to liquidate a portion or all of those shares for purposes of their own tax planning and tax payments and their own liquidity, we would want to, and we have the ability to buy back those shares. In fact, there's a first right of refusal structure built into the mechanics of how that will work.
So I just want to assure you that we've already, you know, considered the possible overhang, the potential pressure that might occur, and we've got the capacity and the desire to use the balance sheet to address that. So the other piece, there's a 36-month installment issuance of the majority of those shares, and that's a very, I'll call it tax-friendly way to issue the shares, but it also serves to mitigate any overhang of a huge initial issuance of shares that might impact the trading and the trading volume. And lastly, there's roughly a 5% of those shares are considered what we call Performance Shares, and that's a retention tool with a four-year cliff vesting for those shares. And those shares are awarded to key performing, high-performing individuals where retention is really desired, and that's a good retention tool for us to use for those people.
And then lastly, I referenced earlier the same steady and good cash flow metrics that you are familiar with CBIZ will be true of the combined entity as we go forward. Now, after we get out from under kind of the first-year integration expenses and transaction and closing costs and things like that, in the first year, if we're at three and a half times, we'll likely be closer to three times by the end of the first year. And then in the second year, once we're out from under those extraordinary transaction-related costs, we would forecast to be leveraged down into two to two and a quarter times. But that assumes that we use all the liquidity to delever. So we have capacity there.
I think this signals that we have considerable capacity to, you know, restore, you know, to buy back shares and to do some ordinary course acquisitions if the opportunities arise. So with those brief comments, we can conclude, Marc, and we can turn this back over to discussion and any questions that people may have.
Great. And then as a reminder, folks, if you would like to submit a question, just click on the Q&A prompt at the bottom of your screen and feel free to submit those questions accordingly. Well, before we get started with those, I did want to highlight for those who may not have seen the news yesterday the announcement of a new CFO incoming and the planned retirement of Ware, and we've had the opportunity to work together for quite some time. So I want to take the opportunity to thank you. It's been a pleasure working with you. And certainly, you're not going anywhere right away, but certainly, you know, which is also a good thing, but I did want to thank you for everything that you've done over the years, and it's certainly been a pleasure working with you there.
Thanks, Marc. I just want to say that there's a great opportunity for CBIZ going forward, and you're in good hands, and let me assure you that the hands are very capable. I don't think we'll miss a beat, but this is my time to step aside, and it's just a good time. You know, despite all the opportunities I had, it's just time for me to step aside.
Okay. Well, thank you very much again. And so now I did want to shift now to sort of the, we had the, I guess the question of the moment when you reported your three-year results. It was prior to the election. And so with this now being the case, I wanted to see if we could take a moment to sort of go over some thoughts as to with the upcoming Trump administration, maybe your views on maybe thoughts around potential business trends, feedback, things of that nature that you see as actionable for CBIZ going forward.
Yeah. So, you know, Marc, what we see prior to any presidential election, so we've seen this repeat kind of in every cycle, is that immediately prior to the election and as leading up to the election, the portion of our work that is more discretionary, people are out making, you know, capital investments or making acquisitions or investing in their business, those things typically slow as you get closer to the election because of the uncertainty around that. Almost regardless of who comes out the back end, we then see our clients, that middle market business start to reinvest, right? They now know what the landscape, they know what the playing field looks like, and they start to invest. So as we entered into 2024, we were less certain around what the year would look like for us.
As it turned out, it ended up being stronger than we had anticipated. So we've had a very strong 2024 year-to-date or through the third quarter, really pleased with the activity. But, you know, anecdotally, as we look forward now, we haven't surveyed our clients since the election, but what we're hearing is that even increased optimism going into 2024, 2025. So we would expect that naturally that those discretionary advisory more services would pick up in 2025 post-election compared to 2024. As far as changes are concerned, what we've always seen is whenever there's changes in a new administration, those things are good for us because our clients turn to us to try to understand how they impact them, how they impact their business and their plans going forward. So that just means more project-oriented consulting work for us regardless of what those changes are as well.
Kind of all positive as we look forward going into 2025.
Excellent. And then we do have several questions that have come in. Why don't we start with one that sort of talks about the acquisition activity historically? Certainly, you've probably done on average about five deals a year or so historically. This question asks around, as you integrate Marcum, would you still be open to other potential transactions as well?
Yeah. So first, I would say first priority is obviously making sure that we have the time, attention, and resources on making sure that we onboard this one and integrate that well. And that's our first, second, and third priorities for the next 10 to 12, 18 months. With that said, we can't go radio silent in the market. We actually have a considerable amount of interest in CBIZ, even more as a result of the transaction. We have firms contacting us. We have advisors contacting us. I think we're, we call it the acquirer of choice. We're even more attractive as a partner than we were pre-transaction.
And so I would expect even in the first kind of 12-18 months that we will pursue some smaller transactions much along the lines that we've done historically, a $25 million or $50 million revenue opportunity in key strategic markets or in key strategic service lines. But I would expect that coming out of that 12-18-month period of time, we would look again at larger transactions, not the scale of a Marcum, but something more like the Marks Paneth of $150 million-$200 million transactions that we've done historically.
Okay. Excellent. And then we do have a question around the pricing dynamic, and maybe you could talk a little bit about your views on sort of your own internal pricing actions recently and pricing power that you currently have, and maybe your thoughts on what a post-Marcum pricing dynamic looks like.
Yeah. Interesting. We have talked continually about our pricing in recent years, and so the competitive landscape has been favorable for that. I think it will continue to be favorable, but I think what we really need to be careful of, we don't want to enter this new relationship with our new clients with a pricing announcement or anything like that. So we need to be smart about it. We think there is an opportunity out there with CBIZ. We'll bring that same discipline to the Marcum team. And by the way, they already do a pretty nice job with pricing to begin with. So I think we'll have the same pricing opportunities that we've enjoyed in the past.
Okay, and then one of the questions here is, and actually it's one that we've talked about quite a bit over the years, is on client retention activity and the like, and maybe you could talk a little bit about your own historically for those who may not be familiar, as well as maybe comparing that to Marcum's.
Yeah. So again, favorable on both notes. We were pleased to see that with Marcum. Our client retention rates have been around 90%, higher in some service lines and not as high in other service lines, but about a 90% retention rate. Marcum has the same approximate retention rate from what we can see. And we would expect that that would improve over time, even improve because of the breadth of services. What we found with our clients is if we're doing monoline services, if we're providing a monoline service, we have generally the same retention rates as others in our industries. But what makes us unique is that breadth of services, our ability to bring even more things to our clients. And as we do that, it makes us harder to displace, right?
If we're not only providing your accounting and tax, but we're also helping you with your insurance needs and your retirement needs, that makes that client all the more sticky. So as we bring those breadth of services into the Marcum client base, we would expect that our retention rates would improve even over that 90% rate over time.
Okay.
I think the other aspect here too is with the benefits and insurance group now being available to the Marcum client base, that too becomes more sticky and should improve the client retention.
Great. And then we do have another question that came in around the cost synergies. You mentioned in your prepared remarks, but the question is specifically if you view the $25 million in cost synergies as incremental to your 20-50 basis points annual margin improvement.
Yeah. We're not really prepared to change the 20-50 basis points margin improvement guidance. There are going to be a lot of moving pieces and parts over the next 24 months. So we just need to get our arms around it. When we announce earnings at the end of February, we'll give more granular guidance for the 2025 year. Again, the $25 million is kind of embedded for now, kind of embedded into that 20-50 basis points guidance.
Okay. And then maybe you could talk a little bit about your, how you view organic growth, what has been just more recently, and then sort of maybe that attribution as to how much of that is pricing versus volume?
Yeah. In recent years, the organic revenue has been fueled largely by pricing. There has been some volume improvement and some client build and things like that. But over time, we want to gain a model and hit a healthy balance that 50% of the organic revenue may come from pricing and 50% should come from net new business with clients, whether it's expanded relationships with current clients or new business with new logos, new clients coming into the fold. So that's the model. And I think that's where we like to get to. Some time ago, it used to be 50/50. In recent years, and this is kind of post-pandemic where we've had, you know, some choppiness in costs and pricing favorability and things like that, it's been more heavily weighted, more 75%-80% pricing and 25% volume.
Excellent. Well, this has certainly been really helpful and certainly a very exciting time for CBIZ as we're at the end of our time together. I was just wondering if you'd like to extend any closing remarks.
Yeah. I'll just say thank you again for giving us the opportunity to present here today. For those of you who don't know us as well, we oftentimes get asked the question, you know, what is unique about CBIZ? And I think the unique attributes that we hear back from investors are that it's, you know, they don't often see a company with our track record of continued growth, both in favorable and less favorable business climates. What gives us those attributes are that obviously on the organic side, we've been very effective at getting pricing and building volume. We also have an environment where our industries are highly fragmented. We've been very successful over a long period of time in acquiring and successfully integrating firms.
That on top of strong cash flow, that high client retention rate that we've talked about, recurring service models and variable expenses all give us the ability to drive strong performance kind of in every business climate that we face. So we'd love to have an opportunity to talk to you more about the model and just appreciate the opportunity to spend time with you today.
Thank you so much, and I want to thank all of our participants for joining us today and hope everybody has a wonderful and productive remainder of the day. Thank you so much, everyone.
Thank you, Marc. Thank you, everybody.