BBSI - Earnings call transcript Q3 2017 | Barrett Business Services, Inc.

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Operator

Good day everyone and thank you for participating in today's conference call to discuss BBSI's Financial Results for the Third Quarter Ended September 30, 2017.

Joining us today are BBSI's President and CEO, Mr. Michael Elich; and the Company's CFO, Mr. Gary Kramer.

Following their remarks, we'll open the call for your questions.

please within note Private the Reform of further, Safe the Securities go Act statement Harbor meaning XXXX. we take of a company's Litigation Before of the regarding statements. cautions important provides statement The forward-looking today's conference The company remarks call include forward-looking will statements. during presented other facts to of These number not uncertainties. and subject does information along reflect that statements a risks with historical are Actual statements. results these by forward-looking may differ implied materially from those and the Exchange the actual company's for that with recent company's to quarterly to and filed uncertainties and refer about Please the results information release Securities Commission more and the reports annual earnings to risks differ. cause could I for everyone replay remind at that available X, December will XXXX, starting be would like through X this to P.M. call Eastern afternoon. Standard Time this provided on release, well A webcast replay company's will the also link today's as as in be available at the available www.barrettbusiness.com. website press via

I to like Gary Please over go Now, ahead BBSI, the Chief turn call Mr. to Officer of Kramer. would sir. the Financial

Gary Kramer

was morning in Depending Thank to increased upon Shannon. good Gross record company which the operations be you, share afternoon earnings are strong period. continue compared $XXX.X Diluted XXXX. resulted was Net QX where dialing a everyone. quarter. million over in compared billion record revenue $X.XX per to XXXX. grew $X.X revenue income QX of in same The of from or this to XX% you good X% $X.XX the

quarter quarter and of revenue over X.XX In sales revenue adjusting by year period. XXXX one gross XX% the PEO compared When had the less the XXXX. compared quarter quarter, X.X%. to gross year third customer third a when the prior Our XX% third billion different, for one last workday for by grew same increased our increased day to

and However, our line adjusting X.X% for was and one was in in expectation. with difference customer sales which day growth the

market. we Each is to or difficult $XX.X affect are third XXX and quarter. result expected and continue to XX% a discussed trend direct for addition business. a has was decrease we greater quarter it to quarter in continued Staffing million. revenue tight the our staffing our runoff clients hire clients consistently experiencing this client increase the with that meadow labor decreased than our in XXX this we of base gross in We a This in making

We of X.X% our the have our decreased low than is this the the slightly Claim better and in compensation we're client it hiring was favorable standard. without of from such, expense quarter our at in $XXX,XXX expected fulfill demand a revenue estimate. X.X%. challenging all resulted headwind percentage to for development and gross end change growth. expecting now outside to will orders our that prior to Workers of compromising is as revenue a near-term independent expected staffing straight actuary by At which range be X.X% on orders selection to a years

and to and we our As administering and also insurance quarter this costs actuarial continued attention discussed, our a was have provides adequacy chosen The to the quarterly pay insurance previously of reserves. our associated to lower of in overall of confidence evaluation independent with were heightened result the insurance our greater program a program structure which efforts operations. the have

as workers we relative decline reported. compensation frequency to continue claim improve frequency the claims Our as experience in a

XX% claims of XXXX. a quarter compared third saw decreased at of gross we quarter percentage period. the XX% In and revenue at claims XQ claims for same 'XX, grew XX to month while the of grew working X% compared total to XXXX payroll QX third of as X% Our relative 'XX the open from quarter trailing frequency the decreased

revenue quarter increase we with bench gross and revenue with from or $XX.X million partners. associated compared as build operation. frequency in with successful nonrecurring margin credit the to borrowings investments of compared out the the deeper a We with our to line the the Gross in million the we IT, X.X% an support and we as $X.X total gross over accounting in been future of with in to last in law our or corporate leverage to The line our have quarter. accounting, expenses groups field the to our compared expectations. the We've margin provision taxes were internal $XXX,XXX and In of has audit quarter. external securities XX.X%. or $XX.X $X.X in in X% X.X% is SG&A XX/XX/XX. spend prior this in as under was million year constant fee in as our quarter. clients issues gain no year Nonrecurring three $XX.X The added Our tax growth. We was years. remain decline million corporate Wells rate can for to third initiated had third of well charge gradually and prior the strategy field of and $XX.X expect and annual see was gross with prior had expenses million the we in Fargo this our quarter in quarter made expected income our growth build X% was in million to of reduce year scale XXXX or

is $XX.X We at million Vancouver, the second for in long-term liability XXXX. compared third to $XX.X had is we continue million quarter cash XX, except on it the million XXXX increased in due mortgage the and QX this in headquarters as million $X.X restricted million investments quarter. At $X.X Washington. mortgage our corporate classified cash cash, position $XXX.X to XXXX. from equivalent XX, be September debt-free The as of of unrestricted in totaling securities December million $XXX.X to

quarters fourth build third where unrestricted and are a profitable typically The cash. we experienced our most quarters in and

Chubb called of part account Chubb, program with workers funded a the As Trust. our funded and established trust insurance compensation we

quality restricted liability $XXX.X million XXXX the December XX, was Trust is Trust at XX, of on Trust was sheet, of no class September $XXX.X balance balance million the at This the cash than of income, the At quality the in matching and of the in investment. and asset has portfolio restrictions targeting yield will and Trust. strategy, September On half greater three The with X/XX/XX fixed asset invested believe now quarter AA In with low asset is the we earned high is a the investment diversification. X.X X% portfolio. XXX in average highly X.X greater Trust was eligible The XX, At portfolio. duration continue liquid security guidelines the The book grow as EDCI Chubb the return on duration with fully years. result included million the to income the The from a with was and and XXXX. Trust Chubb company. the we and years. points basis the risk asset to investment will of and grows

We we're will later making our today would I provide with and to XX-Q on remediation like the release our plan. progress an update

one $X.XX plan completely IT and pleased have made controls. remaining to with summary, by the a be record confident shareholders remediated we to via a to In in quarterly regarding had and while share end we year. place returning deficiency We I we of thus grew to the have quarter dividend. be the the that unrestricted cash the earnings I’m in continue have far progress we

of new and strong our remains pipeline we continue to build net client. base Our

relationships distribution to referral Our widen. and deep are our continues channel

from per our moving share well assume as effective tightening This of to accounting tax of law in in labor to wind we expectation earnings to the XXXX staffing continues to gross market, XX%. reconfirming securities With XX.X% be the over be issues, diluted prior for the of our Now XX% estimate next $X.XX. rate outlook, approximately XX-month in $X.XX approximately head continuation per in period full-year are of we our expect to cost a compared revenue the approximately share with the and XXXX. estimated to rolling return XX.X% an associated slight as growth diluted approximately and down

and be release. for we XXXX fourth-quarter quarter, our guidance this our earnings During provide plan full finalizing year in will XXXX will

call to for of as recently Mike? third year. to the and who like BBSI, on remaining as turn the completed our the Michael outlook of I’d Now the President Elich well over will further the comment operational CEO quarter,

Michael Elich

Hello for to on call. be the time and taking thank you

a about note. I areas the on I’d discussion quarter, to Before to a of few move like highlight to

seeing at year and every on continued the around From experience do quarter, consistency XXXX. geography. I of team, in time maturation approach regardless of in organization, vision end our this I of towards spend our recently talent I’m getting field the the and looking As alignment our in third business, perspective the guiding

of meet clients with teams, I've In had our months. a recent addition partners meeting with referral in number and opportunities to to also

delivering. from feedback our our consistent a as I’m the are and As value teams to getting result clients partners

me owners we to Additionally our and confident business in my organization should into long-term bring gives experience relevant shareholder in value. translate and the the our value future field for ability

at of the or we individual approach XX evolve had four of to on same clients of sale were competition nine This is an Looking to solid referral in client which lack receivable, new accounts outsourced work experienced the channels. line we companies quarter attrition in quarter seen results two, X.X% customer profile price businesses then developing mentioned we that moved expectation. third ability sold, We and was remains as new contribution tier pipeline due businesses closed the build to we start our XX to XXX of of model. continue have day this eight quarter having progression, of from in PEO model business affected fundamental to Related due saw our a to away scale systemic in XXX the represents left Gary We added and base the net from less one for cancelled XXX strong. for to approximate clients by market XXXX. risk with quarter

referral channels this base today we development market. we are in strong larger from Year-to-date seeing we're new a all result new supports from have all seeing which markets referral contribution partners significantly in of consistent business because growth. pipeline to of to seen pipeline contribution As

base pipeline runway XX ability Related add bench. we in large existing extend move growth to our to market client to support to roughly and into me have of and structure organizational our all numbers. months in market leadership to ability our into with approach our confidence operationalized developing and Our gives have consistently new

continue scale than rate measure a is in we to branch ability leverage. have XX the in XX housed branches with now offering. our teams branches build We to supporting teams anticipate the million. excess Currently, use XXX mature support XX having into of to support to of locations. have with out increase more This into business we $XXX field At stratification to typically business physical run we Related XXXX, of growth, invest we markets locations. future and of XX product end organization identify

We gross have between branches as that capacity support into million these in XXX back revenue. XX We to they emerging grow. reinvest running are XX and teams regularly

XX we run to while pipeline have in gross consider they XX maintaining support to Finally developing of as we branches branches of up rate with scale. we integrity invest product million revenue consistently in these of

time we as Looking spend I what mentioned forward, gives visibility business exposure our the to this into time our of opportunity from our team me as me field combined in client companies referral accomplishing. force team partners. owners the well and the are This as client with year are to and meeting

Our focus thing. right they’re team and mature on to the continues

scalable. the continues expansion value in leveraging our model to expand of and of factors owners while bench support which brand These meaningful proposition ongoing allows offering to and for our leadership Our is relevance markets infrastructure. portable has the existing business

increase I'll result that, value. our that for gives focus which question. shareholder continued which me renewed open of to goal is and it for up With All confidence our

Operator

Securities. We first [Operator Instructions] CJS with Chris Moore go to

Chris Moore

how Maybe guidance between XX% gross rough expansion? same-store provide growth up and just see non-GAAP at start between Can a that on you you client picking maybe least the branchless with ruling revenue. breakdown

Gary Kramer

spot. a we growth standards there to we’re three the fourth branches that similar get the - a to to the In we say with are XX. on over for going we’re out the headwind to quarter to that a same-store when talked time branches but And was into continue in add XX% about the have aiming available staffing of take having demand going going there's based add see those think and third as find function we’re quarter the we’re upon for and to build out to fill to we sales employees expect our us to would quarter to XXXX three going our is the to we and next which continue we revenue to have headwind averages, and staffing, Mike to difficult we well fourth to headwind continue did which going a be in historical hiring to staffing we’re business going those but that comparable rolling

Chris Moore

The can you them of of them most XXX or strength that seeing all markets net new kind of geographically California. new Are roughly clients you Baltimore? or break down much like nearly in

Michael Elich

percentage much now. across in pretty just of and markets mostly consistency on a Yes, right of base all growth

take that that channels, August during more understanding summer make quarter doing that I as seems it September. little the decision. is to to referral the get consistency months The seeing difficult in probably tricky would a from has. probably We’re about Coast lose but more it - Northwest on states more bit been Southern the growth or watched used California has get we people focus and is headwind Mount the it in of but growth and late strong them even particular keep is winter includes to better thing for it’s little And bit is business then our if quarter economy the the that and owner, about third off during to in settle early it the was down a maybe in third I've been to this sometimes to focused - kind has time just East we’re one and think though them a anything in the really your July, California years the

round third lack model always about the of there's where and six So volatility bit the of then we September And you in that the end simply or the in up and because always period you as October come a quarter to see towards focus. year. is typically the recovery the through you you in most got of watch as little week eight there just

Chris Moore

use a for switch X.X% to great XX% just clients looked is worker's understanding comp you. Maybe to worker's number roughly quarter. the for the comp second, your obviously My of

you think reasonably percentage So likely reason market to move percentage is a as into kind will very new markets? into you change California few markets litigious stay here, new out that as is questions that smooth any expand to of

Gary Kramer

expand that now see model that one pretty market The we products of changing The have as comp in of is is program and that geographies. don't the that that much Chubb glory offer the we the in we we any have ability. where with we available we go comp is

try the to So if we that offer. it’s not lead with, we product where but

Chris Moore

view that standpoint comp mean today? clients I years of ago the have it you to do today is clients they was comp leading for do worker's And a higher percentage think must couple three that from a worker's different say ago your versus of a years any percent client than

Michael Elich

absolutely. Yes

XX%. I of even get today would much have lose. more be as and that would've third offering that asked XXXX/XXXX same infrastructure steps probably in and in we the an to the mature not business least basis are its to question below that of and - that been back than comp trust I organization frequently north did our ask it idea one our number we think if quite I teams we XX% on how at our is would by in the continuing closer annual a If I we that as mature question a when that

Operator

Jeff ROTH Partners. with from comes question Next Capital Martin

Jeff Martin

them. curious the you're or details you’re some recently I that with today that and regarding out year if Was could your a connected could you client new new how with curious referral it’s some was thinking comments that give there if or partners seeing surrounding on channels that you what ago? by and you of Mike expand additions compares two

Michael Elich

insurance of from we've business a that things we referral probably done business to of the a business our XX% of some your get whether one new to might those is existing We referrals we planner we the account are clients work to comes through pay trusted and new well. our up. been of attorney that bring to that's how your basis to of financial to sort So it’s actually your owner partner always advisor a channels to that from is an increasing whether XX% small referral from getting always broker it’s pipeline opportunities, number as your grown

to a one the So but relationship years the creating we a with that things the one-to-one when discovered that those was had use for we channel professional that we on if of - somewhat was typically we look at was individuals broader that much market. the a branch individual where we that source relationship I business the it finite geography that us. referral ago was larger call referring couple What could two working individual the footprint were impact realized referral a was and working us

- that ago it end we of the looked XX, we a large if couple having pipeline in a to a problem wondered would probably optimize could bit of consistency lot the shift we So of was had. where little we with and kind started up the back of a did bit at relationships and we we little if up numbers and August years our

who past. started really we time referral versus proposition in value it our between at alignment been educate the in what them bringing with our channels have creating and the intent the as and might are we’re it about today we more So to is what about with

they’re with as we’re that our next how business them the and algorithm know doing a value brings look channels this and of help their lot a they to better referral then seeing to or harder reaffirmation intent to at eyes individual the a leverage client, business. running them scheduled partners of see are of referral two of business. And one scale individual then out us partner use to they're we've own how running and can the through XXX of bring that we’re how getting business the have taken leverage close and As have a filled done that to their through we business proposition and now lot that year the their referral their we full

interface isolated we’re doing by lot have taking refer where traction looking have we’re by even that XX The of could always now even business that across with getting or larger more that United a this East States. we a finding as other players and we’re a thing at superregional and we’re or - the region perspective now be Western we've global Coast or here been and branch can somewhat by to grown-up large us regions

more create multiplier starting we’re one when having pipeline can partner we’re referral that might find the to to many that too one where have that contact we us be they and much within have organization. with So business own larger that their that might individual one because relationship relationships are XXX

Jeff Martin

we little X% the bigger dive is relatively a same-store drivers growth more, the X% of pricing in the Well to bit sales rate? as then is what stable sales shall growth intra

Michael Elich

all the but we’re it labor was So were over people work. a prior not business what the against where ad ago increased making we back in we hard and we through were up we talk owners over saw it’s saw year to look headwind hours to But I’ll say were to easily pushing hiring where in the look up they Gary but mix, I’ll let been as they to we priced spend when what numbers we've last compared we months. the what XX election as about back look

was if we they and XX. the hours leading going our associated back hours I look can down somewhere more maybe from ago. a chart end in I the XX, election were that by hours after of drop a year between – that election of was with And hours dropped almost and XX it so was saw infrastructure go up. we when why XX where to XX like results would we build to idea at worked know It risk believe average I So a and see say I the didn't

to that the impact soften. saw So we first was same-store when sales

wage year thing which has we hour. to other not had have notice that The moved that the what probably a And be yet did about counterbalance would we inflation an really wages gone last in market. tight labor and we've up as a $X see done was that

even to we $XX pushing were hour a $XX hour. ago So maybe about $XX.X six to year an running we’re months now an $XX.XX

and have few it's starting we’re built some where do seeing you’re in So slower. rebound a we’re see but wage what see you to headcount starting hours with is work to inflation

easy So pace. visibility it got world we quarter more a difficult stability that to we you from if kind next of and sales the will right robust of that the when people ratchet past looking and growth the is you growth working in be in XX% first back one. same-store works know of at pushing where today we’re there's X% X% a you've off kind the of got second year you orders probably We of not in cloudy XX%, it’s what a band now and just got a of of XX% averages stability economy were X%, sometimes find in used to hours wage same-store because

offset And so our stacking pipe. to we’re of how with that into we’re left kind building and

Gary Kramer

XX and as we fourth quarter of we’re well. comp next look saw against quarter. into is And going where call softer the quarter continued we’re that's in in rolling first drop then the the we comp the at lows going customers to then where the in it fourth a and the the When first softer really then against it same XXXX quarter

XX% it well good we and that forward softer we the X put And if pretty over So feel then pretty to we feel we historically rolling rolling comfortable say look the going range. at X comp at we about when XX growth. revenue take

Jeff Martin

the things place and taxes California areas And progress next or may then there? into budget shortly any payroll needle move goes here expected year the taxes as changes and other that margins material that on of are

Michael Elich

haven't industry Yes if the half staying up we and a seen XXXX. that actually are anything we going limits into and pseudo the so the drastic are so seen to inflation we I obviously what with or and not far the don't for us to see rates wage rising watched the go or regarding going we’ve halves benefit

I from to going tax what consistent it’s XXXX. payroll have be pretty think So for with we

Jeff Martin

And then last is how larger over question change competitive is the in Mike year? the for dynamic your past markets

Michael Elich

pricing When we a I look we’re seen at PEO losing what our competitors as the world is there still the has don't that business of worker’s in years of worker's there comp been do of see direct the we comp market we when few so over of business pure seeing in lot the clear has we a been market we’re last we show not as and up softness comp. to have a portion lot there that to built pressure

on When development we’re our pricing at not adverse thing and book also little we We that after run a a we able bit brand so. is won't larger based our that that, given look we've is probably of numbers. businesses where last so in having competitive year have seeing the runoff reasons that test number overall - that less against so for into or in been even we’re One and would that overall not X% than do probably an in and against or leave to area. still I

good don't then zero think enough won’t and the because I to – I that know or charging be ever want I to if we pretty get we case feel that wouldn’t that So probably could. where about was

Operator

next We move Instructions] Tieton Capital. Bill to with [Operator Dezellem

Bill Dezellem

price And hours relative the to the work. commentary and about

been rate client growth if of that said either existing you back as I you circle what your change already or said has you what If share missed employment or to it? would

Gary Kramer

you regarding that is growth? a selling fully that question we’re Could quantify more little

Bill Dezellem

change? Existing for client employment growth

Gary Kramer

more same in three employees the or was That sales that factors number they calculated so kind sales rate and more working customer Are same they add at paying quarter. into a the numbers the was wrapped of on higher all about gets that employees. we our hours over customer the you day gave if which XX it extra prior calendar for the XX quarter growth it’s within look but XX% or it is

Michael Elich

low inflation hours some get number. is wage still we'll on been that degree then to of one works Yes pretty that contributing it’s that cloudy have And you that you Bill stable. have

price using comp at But or - looking year. clients stack. is that X% a that the probably XX% growth been X% you're that’s period little on is probably of of come more The of period be it's from us than the XX%, slag. we’re year So little majority clients have clients challenge with only that even so has add been a may there that includes it a in recent have close that if to the doesn't probably over seeing count same-store it’s bit bit

Bill Dezellem

Right so X%?

Michael Elich

X% would inflation. be

Bill Dezellem

flat roughly and for remainder And employment? worked puts the are since hours that

Michael Elich

back into it. added kind that of Yes,

Bill Dezellem

happened? growth. I couple an year help understanding that this clearly XX how you the that And versus that last I then but numbers payroll costs were million basis direct more of would absolute to clarify XX on for apologize understand million questions don’t revenue a not down on

Michael Elich

is at on gross Bill. net the gross you are the looking or really payroll - The the

Bill Dezellem

full - it's net at the statement looking I’m published income on is you the would the last the published when I be that press night you believe last, last it release? the in -

Michael Elich

on because as net but actually the a a piece a our the book looking book why net gross this small on our larger it’s distorts staffing as when of portfolio basis it’s a of look far the at basis net. piece we Yes it you’re is

we why that’s look basis. So and we gross measure on book a our

payroll you by where we should gross staffing it if that's think a on a XX% it's at distorting So look where net basis. down But you when it line with gross going you be. in at look revenue at basis on the

Bill Dezellem

payroll did up gross there? direct the would confused that it revenue costs am and I I down. went still What is the because go be it's missing

Gary Kramer

why net That's basis payroll. to the they direct costs payroll payroll go go gross payroll that offline gross basis - for staffing has right that's so on revenue. going but and net basis I into can on clients staffing that the a a with they the a and Because walk down don't have so through you our into a through it we PEO on effect it go

Bill Dezellem

And QX that but worker's happened? versus looking a a is net help versus your understand this me declined you and phenomenon describe net a on of gross I the here and or how comp basis so outs also am maybe revenues the and of PEO QX ins the percent would as

Gary Kramer

look the had say We I’ll The a what worker’s - study but out that we at expenses do manage was and goes to continually to came was comp with the is a to a focused workers small try comp manage out our of and cost, favorable cost. ways it. laser the XXX,XXX to manage really better to minimize structure the development figure effort that which which the to try we

to I’ll expense So end to starting a concerted to that effort the get is down really see range. try say comp to what we’re of lower the part

Bill Dezellem

quarter. you you - laser a a implying does say maybe I on So this you result successful were said that were something real this may you like focus if didn't as actually had infer but you and

into us want incorporate wouldn’t forward to that too thinking. You our far

the to continue directionally to able PEO are moving of down as a you may be you worker's be that if However, percentage comp revenue? successful

Gary Kramer

we as if just much or to the and we structures look opportunity try every at expenses control like our focus The costs that. can there business. intent and have as do going we idea possible down to is everything to in to cost that value try do bring shareholders with we’re to Yes and to the drive

Michael Elich

a of program especially getting that years, Yes were program. we’ll we’re we the new call with Chubb we’re Bill normal we’re with establishing a building last and the where now just finding and can kind is would I also Gary's to areas to it efficiencies point add bring the where over up several expertise, back we

Operator

to the this this to over Mr. session. I'd now time remarks. back At our closing concludes for call Elich question-and-answer like turn

Michael Elich

the pleased for the Again us call. we're done. joining with for you getting Thank with pleased very quarter, what

Thank quarter. and again you. forward call announce the the joining in the February the the of close all as on to fourth of Looking you close year we

Operator

you. may does today's and that your now disconnect. Ladies you gentlemen And We conference. conclude participation. for you Thank thank

Barrett Business Services (BBSI) 8 Nov 172017 Q3 Earnings call transcript