Earnings call transcript Q2 2023

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Operator

Good afternoon, everyone, and thank you for participating in today's conference call to discuss BBSI's Financial Results for the Second Quarter Ended June 30, 2023.

Joining us today are BBSI's President and CEO, Mr. Gary Kramer; and the company's CFO, Mr. Anthony Harris.

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

please the of Securities meaning Act XXXX. further, harbor company's Litigation go of within statement of we take the note safe Reform Before the Private cautions statements. The regarding provides important statement forward-looking today's conference The company's remarks call include forward-looking will statements. during presented other fact, 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 those for that with recent company's to quarterly the by to and filed uncertainties and or statements. refer expressed about Please the results information release Securities Commission more and from the reports annual earnings implied forward-looking to risks differ cause could

XXXX, to I provided ET will www.bbsi.com. that p.m. well available will starting tonight. company's remind A call on webcast X, press at be today's this as link at everyone the would available available via the replay X:XX for like as be release, also in September replay through website

to over would BBSI, Sir, ahead. go I Executive to please Mr. Gary the of Chief and like Officer Now, President Kramer. the turn call

Gary Kramer

afternoon, good everyone, thank joining the you and call. you, Thank for and

We our results. strong pleased I'm with had second a quarter, and

of and performance We on execute our exceeded short controllable indicators. internal objectives continued and we term all to our key long-term

and new to I'm the our employees. clients exceeded to stack, increase and top we Regarding quarter our the in execute funnel, client exceeded our that new in growth pleased strategies various and WSE the once worksite as our expectations to our expectations controllable on we continued say of in again sales

size and progress of are the and clients clients with are larger off. to able This the average average larger continues As that we of our to have sell favorably, discussed been licenses. we upgraded that are the stack technology PEO support than running clients national adding the size and previously,

teams attribute was than the that our levels. I'd runoff, client in remain to stronger prior-year like clients retention work with and we pre-pandemic continues do and the value to better our quarter provide. to our than the Regarding quarter the

of controllable growth is new or from all I employees The approximately refer year-over-year these what net result efforts that added worksite X,XXX clients. we to as

However, our in a around clients Northern we employees, clients Northwest or client reduced with particular, in These forecasted. experienced in and slowdown we worked. May who lower California work In worksite April and construction. was hours reduced the new hiring than and their reduced overtime, our residential in

client hiring quarter. more Northwest, client We positive in the by which in offset the and had our geographies, hiring than net weakness and negative other was in was Northern California the our

To more the summarize, in Northern we and grew our on sold for was California worksite operations. which business, and we as retained offset partially by employees was by Northwest this X%, weakness and quarter, plan

Moving staffing our operations. to

and mentioned prior-year over who not than We anticipated. that declined quarter was portfolio we achieving Our we the return. XX% adequate previously staffing business jettisoned repriced were an clients the by lower and

We generated our also in but less clients placed strategy which applicants to to the quarter, resulted and topline revenue. in staffing, for PEO equal recruit XXX margin shifted

sentiment limited business increase requisitions seeing in not which it or but to, Overall, We varies below sequentially, including also experienced supply prior is by are July was quarter. macroeconomic second geography. owner we while factors, year. demand, And the cautious

operational field the to Moving updates.

We markets are our model. very pleased into new asset-light our with with entrance

new of doing managers development adding clients servicing are partners. Our largely goal well referral and and market new achieving and their

all in and markets three classes were their the first graduated have respective quarter. second Our in selling

in in selling through their fourth class Our is training and markets been QX. has

far Our results expected we are than thus hurdle and are exceeding our better rate. return internal

health BBSI insurance our the and new sale we Benefits, of product continue updates, on Regarding to offering. execute service

we XXX operate. BBSI have and participation X,XXX on we rolled out participants. servicing more over Benefits are in to in market now quarter plan that pleased the total California in second As quarter now I'm selling and than where report the clients and our more our a various refresher, than our with offering in we Benefits doubled every plans,

resonating small is blue we and and and proposition in distribution value every channel. white a we and success clients with have large in state with diverse well collar Our operate industries

have company and and We have successful. the way. in our shifting some have and place teams we along selling craft to learned technology some operations lessons to gained modifications in have to our the XX/XX/XX our made and season, to the now and product be The confidence is

to like I'd our of to shift for view the year. Next, the remainder

of quarters consecutive great have momentum. We

QX, in our July. expectations into continued Our growth controllable and this trend exceeded

Benefits are servicing ahead. and optimistic and regarding be to continue We we road BBSI now, selling in markets all the

a record We in track in The have achieving the confidence have in results business growth. controllable cash our strong the operations of strength and predictability of flows. derisked

to our million As $XX a program. new stock such, has I'm authorized pleased announce that Board repurchase

Now, call his for I'm turn Anthony going to remarks. over the prepared to

Anthony Harris

everyone. hello and Gary, Thanks,

controllable we strong the clients. as we to report with for in new strong QX expectations added growth our employees results to pleased from worksite I'm finished and exceed quarter continue

QX billion to to billion, increased while earnings year over staffing We Our versus share billings increased prior the XX% $X.XX, of in per million. overall billion revenues the $X.X decreased in $X.X diluted gross in the 'XX prior-year achieved to compared prior-year over X% gross X.X% to PEO 'XX. $X.X $XX quarter. quarter billings $X.XX QX

net X% more in employees clients, offset by adding by part employees customer reduction the our a hiring from in expected worksite in worksite quarter, Our existing which was the new of base. PEO within than grew result

Average billing in per the increased WSE X% quarter.

quarter, continued billings and going hours per employee As hours increased worked and Average improvement but we to the have expected, forward. growth will prior remain a since year, lower than be which seen hours continue average of source client worked have wage QX. rates resilient in remained overtime in

positive worked hiring Within improved month. the hours month more improvement, sequential each with previous there the was quarter, and than showing

decreased XX%, Northern California Southern East California in by grew by Northwest Looking grew gross X%. Coast prior-year at X%, grew PEO and by total States billings the second X%, X%, versus Mountain decreased growth the Pacific region quarter.

As environment. volume economic positive staffing in by Gary trends The and focus shifts support profitable in been to in are staffing accompanied driven decline we down, on our by model orders, in with discussed, the lower year-over-year the of the the improve to year. expect our and reduced staffing current revenues strategic clients, costs model, has the remainder

adjustments program again compensation and workers' benefit once performance continues perform in and favorable claim of strong trends well favorable frequency prior-year Our to favorable development. liability. has claim This claim resulted actuarial from

with As a compensation primarily now liability retained our exposure insured workers' client BBSI. covered reminder, fully our is program, no by current by

years, derisked several agreements over into to workers' provide have we claims we in fully favorably developed policies for and entered insured our As compensation have returned that premium potential recent if time. program BBSI

will In prior-year premiums, we return the favorable As of in we the prior-year recognize quarter premium QX refer adjustments to effect to recognized million. liability liability million compensation This second adjustments workers' and and XXXX. of to $X.X now from we premium how benefits adjustments and $X.X 'XX, liability the update premium begin adjustments. as of these favorable we of prior-year compares

The no premium. continued compensation any adverse including continues via future We perform for policies renewed our cost for renewed favorable claim we return the insured downside and favorable to again and fully multi-year participate savings, well, terms, effective in program commitment, July claim development, X, a development to with ability once risk BBSI workers' BBSI XXXX. to

we revised to result us addition, our increased the XXXX. longer, XXXX which hold to enable funds in program for In terms investment in income will payment and

increased rate our lower margin quarter on focus gross workers' and due in discipline. expected Our savings cost was compensation than expense from better the to the pricing

better are the gross reflect the tightening outlook to as first favorable in well margin QX. and our year as QX through results We our for the six anticipated months, trends for rate

plan, is year SG&A line and billings to grow with to continues than growth our for rate. Turning slower which prior slower year expenses, operating our in the than

been As Benefits, a launch increases cost offset savings includes BBSI by SG&A driven have management the with efforts. largely by of associated reminder, which

to Moving income. investment our

investment Our million prior earned quarter, $XXX,XXX in portfolios the the year. from up second $X.X

from yield prior-year the X.X% quarter. X.X%, up book Our in is

of managed average to quality AA. continues with of portfolio at Our years an and conservatively, average investment be duration X.X

The million unrestricted and June had compared repurchases. the balance timing cash we investments sheet, XX. payments to of the and $XXX stock payroll is due Turning to $XXX December decrease quarterly to XX, million tax at of at primarily

BBSI and with rates. reminder, any not increased interest expense do completely a higher associated incur we As is debt-free

XXXX, of share. repurchase representing following the the February over in repurchased company of Continuing million an under per share. repurchased $X the Board's million of program price of an the share $XX.XX dividend $XX.XX of average BBSI stock, $XX shares for repurchase price program, has $XX at the of at in the second shares of outstanding its million approximately quarter in also company quarter, paid and reaffirmed now launch dividends XX% quarter. per the average The Since

business and to potential more highly long-term we've of the Management value and compelling the growth made even over that enhancements compensation workers' addressable years, continue about made - our ahead us. Board The of optimistic the positive by controllable program, value product have the be the market. is client risk stronger our leverage, in past adds, and been that growth from earnings several from strong expansion reflected and increases performance which reduced our

has to share outstanding the value the With previous program, and XX. repurchase renewed at price. approximately the capacity current The will effective repurchase capital stock the program to February long-term shares thoughtful new success our $XX the XXXX new management and of for company approved program to continue this program, being show XX% shareholders. stewards acquire with two-year program Board the million represents replaces generating of to and perspective of July of commitment allow The the a

the to year. slower and outlook, between for observed X%, our account X% in existing Turning in gross We worked customer to our prior from base. billings to to expect decrease X% now the for outlook hiring a client our hours and the slight have X% we increase

year. continue X% the increase for WSEs We expect average and to to X% between

to expense increased rate XX%. gross as discipline, And given of percentage we be now And and we compensation lower tax to and our workers' focus X.XX%. margin billings pricing remain to X.X% effective expect on continue annual gross a and between the expect between our XX%

questions. the the for operator I call will now turn to back

Operator

of [Operator Instructions] from Chris Moore ahead. is Please CJS. go The question first

Chris Moore

Hi, taking challenges compare might of I thought I and but the make a and go thought sure contrast you be different, questions. a feel Could the I wanted now afternoon, the little my anyway, They deeper good I Thanks them. helpful. to beginning it versus at quite there understand you're guys. couple bit for that for you own education, facing that have maybe pandemic? - of

Gary Kramer

can we clients have the and off Hi, we clients the I - talk they better WSEs and we WSEs now our say controllable, add - would controllable Chris. are So, And We pre-pandemic. things can than run and about plain that right? company were far ever simple. we we were much which ultimately is a that handle is things pre-pandemic. that have. we we been, the things it's the they can they our the that and and than The control are superior best

clients I June, added better think after that's WSEs are we as like were how as six year. through after through up we last they months year much of far compared XX% Like, and year. have year

we not it's in every seeing slowness them and and workforce to in in place day-to-day residential us, of operations. Many shedding deal confident construction are clients the with Northern of one construction. for are bit we very the - where good we existing geography the has - and a in Cal our little clients' for our feel it's So, But primarily are vertical very slowness in go-to-market and our a that Northwest, in hiring.

is ultimately, So, we're just selling be. whatever of start sell thing kind That's we keep then, if we And turn again. what to we through we're going to the don't and and it know that's control, grow going keep are - what think We through. our one selling when service. to going - is going clients we to can to if just you do,

Chris Moore

possible? a frame it. Maybe could as you'll to gears the or time shift results? That's healthcare could there? more on have it healthcare Got Is When generate meaningful to side. have Is when impact meaningful that a 'XX to that you helpful. visibility of Is really meaningful - just unrealistic? get 'XX whether we the not revenue or start

Gary Kramer

the selling. We're - we we're in XXX% technology to healthcare a service our now, business. So, we to of the and some the expense numbers reflect the reflecting business service of the

say always revenue. our is So, our kicks the some going modified that in XX/XX/XX said September. go before And of off lessons. really some. with We're that to mid is would on modified August expense craft. really, getting And be now selling comfortable when and our is operations, - to 'XX. right we've usually going XXXX into The I generate embark season, ready and learned we're IT to mid-to-end revenue that We've we've we've

your sale sometime your will you and when typically start QX, is onboarding you the QX make and then So, XX/XX. the in do enrollment to in for

So, in for I our be how QX well our get 'XX. November, for when earnings an is have that to and we'll going QX, because sell-through our 'XX say which be for we what to going to for idea participation's is

So, be our QX foreshadow earnings be we 'XX the we'll calendar is think able what year. to to in going for effect the

Chris Moore

Got helpful. it. That's

So, leave it it. I will there. Appreciate

Operator

question next MKM. ROTH of go from is The Jeff Martin ahead. Please

Jeff Martin

that to are? wanted you making. those Gary that more I if I X, Gary, here. But your referenced? mind Jan back in don't we Is that adjustments a what Hi, you're Anthony. bit 'XX to related dive on you and the little Great. the just specifically specifically hope and Thanks. Wondering season just reference selling go operational [indiscernible] technology to into

Gary Kramer

spend So, Jeff. right? going lessons some is that technology high-burden Good handling field we're lot Really, changes can the have comfortable our for our a we're to sales efficient opposed process, how question, the as to learned handle are we're more make and with investments there. we making so that the much of more now Yes. say IT I'll in folks selling, activities. client-facing kind changes of leverage sales time efficiency making to we're and they not

Jeff Martin

additional renewal, of should then investment mentioned there renewal year about other how and comp this And Great. benefits coming that longer workers' And the also from some see hold and balance any? through for program then renewal, on think What opportunity generate if Okay. cash expense you workers' income. - you ratio the for the do XXXX? to the the we compensation

Anthony Harris

of the be consistent, has Jeff. the continued ratios and that. Thanks, very of to - proud performance and, the Yes. frankly, Yes, strong portfolio we're

renewal, reflected savings. I really cost the For the

So, we renewed lower at rates.

even continue premium if overtime. back get that Now, continue claims at to rate, favorably we develop those will to

key about key - before income think year. on the that alone $X remit to our premium the one $X so hold to changes change And the payment million in that was should of carriers. terms The and investment can million the to we longer closer for add changing that we from the current that year we clients next of

of Overall, very terms that that big program though, refining us in change point. continues for really the a the So, that's economics at we're this just operate and the model. favorably - to

Jeff Martin

Okay. Great. more, one And could. then if I

to healthcare helpful. anything X terms In of July there? it's the the of July largest I in have things offering you would second being you referred be early, last the anecdotal year, how any quarter season still performed very but know do the around selling comments there

Gary Kramer

better of right? we what for mean, than our participants selling plan think how well I more if XX/XX not XX/XX, the in we just Yes. did the we did if did prepared doubled - said than my we on you remarks, the equally, season. quarter, if in for you So, we

really, result. if - you pleased - - real of was what with quick. give think it, at So, that I'm that you that looking stat a And we're here

the was started in about a quarter we Benefits. less XX/XX, that California, was to deals it little really for than For XX they that their and sold that first sell quarter,

so We're comfortable make reps. can say, bit that okay, we with little sell doing. this part know reps, we're But do XX/XX got what plan was right? the the out that it. So, have get for capitalize season, selling that some and to confidence ready can to do The the we well, go we really, the plan, XX/XX. business so we to We can do look of and the better. it We was we that got now at a we for which how modifications

Jeff Martin

And then more, one Okay. if could. I

the in uptake, of Is the more - clients at are seeing new clients, In the from you clients? that more terms seeing more areas? that existing it from Thanks. just Are of from area, dependent? blue of really than collar you collar the kind white new

Gary Kramer

clients XX% sell-through clients. the - Benefits brought to of to right It's have been now on about been our Yes. The clients. we existing existing is about for

and at So say, part and really with with new to we're it, where development partners central it's I we're versus that have of it mix market white you want - you with collar, in existing having well a if and our managers, doing collar. other, this success there, business look it's if to of blue new the at look would more BBSI, do offering. But call the XX%, board, the state get then clients, across the starting because good we're - then we that's with predominantly collar white really clients, blue referral

Jeff Martin

you, Great. both. Thank

Operator

The ahead. is Vincent Instructions] [Operator Research. go Please from of question next Colicchio Barrington

Vincent Colicchio

Gary, trending versus curious, inflation wage client your Yes, expectation? was prior how your base in I'm

Anthony Harris

Yes, Vince, see I'll take very that to one. We're continuing resilient wages.

X% our national up last that that. mentioned still are wages seeing I or above Even quarter average, little we're again. up So, sequentially, are and and which is with client a consistent X%, between wages

So, the said, be with of line as resiliency is in of will I in continue expectations to those future. and that a billings wages the growth source

Vincent Colicchio

plan? that how pricing then And alignment renewing with new and clients? Is about Okay. on in

Anthony Harris

Yes.

a we've of initiatives So, internally. had lot

mentioned, we're continuing product, or PEO especially and are seeing on margin pricing I results. expectations, that to our focus we As which discipline, in exceed meet on our those

Gary Kramer

guide if of up of would and margin brought - I more look reason product charge brought - at re-guide, our Yes. for or we now. target, our margin to of up because part our gross our ability we our you say, part gross the was

Vincent Colicchio

all better the a word, fold Are could become maybe energized, this, or healthcare source about lack know referrals, of referrals. but the assess is early them early seeing to for I that? it a are you too in of you to gauge of idea brokers it's the for And bring you

Gary Kramer

question. Good

understand are comfortable about We us. folks value We and love excited it. with partner to feel our that recommending prop

at skin that better our getting on getting is, learn comfortable our gaining brokers. comfort craft go to talking and more product trade, our that own Part regarding health to able offering. of we're are this talk we're we're We and and to now, had them and we to

still that I that make if going pendulum on the that's it we It's knock and have focus and making the days. size say attention on, it's still anything we're to can't partner the company, but potential to we're to discipline trying we're anything, and doors. yet, those early see of something just could that referral we if double sure tilt sure all

Vincent Colicchio

one back then for you me. one last revenue the in of help can the two to and Any And cadence quarters? in give terms earnings

Anthony Harris

So, consistent that controllable on we're trends seeing growth.

forecasting and we're be hiring in QX that client to Obviously, QX. slower. So, been pretty consistent has

So, we into factoring forecast. that our are

Our profitable quarter typical QX continue, though. our being most pattern should of

Vincent Colicchio

Thanks, Okay. guys.

Operator

back At closing over this like the turn our Mr. question-and-answer remarks. time, this I to now call ahead. Please session. Kramer would go concludes to for

Gary Kramer

thank want I call. the the concludes hard supporting thank clients, and Sure. our professionals this Thank you, you. dialing our just to BBSI Thank everybody, work and And you. in. all they all for do for

Operator

concludes that us. conference. today's gentlemen, Thank and Ladies you for joining

You may now your disconnect lines.

Barrett Business Services (BBSI) 2 Aug 232023 Q2 Earnings call transcript