BBSI - Earnings call 3 2023 | Barrett Business Services, Inc.

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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 third quarter ended September 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 will 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 and quarterly filed earnings Actual refer to statements. Please the results statements. I results December these starting at release expressed would those to could available this uncertainties Exchange more by forward-looking remind X, and or forward-looking Commission may XXXX, reports differ risks information to be that implied materially through and that everyone the cause to and differ Securities replay p.m. about company's company's like the X:XX with call actual implied from recent by annual will those from for for the the tonight. Eastern be today's company's well the replay via link webcast available at www.bbsi.com. in website available will as provided A as also on release press the

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

Gary Kramer

with strong Thank and joining the another good you I thank for you, We had am afternoon, and call. everyone, and our pleased results. quarter,

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

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

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

provide. like that quarter teams we the with continues in the our attribute to or than employees clients. growth, year from what as added runoff, efforts was by that controllable Regarding approximately I'd our to year-over-year partially our client prior is quarter. all worksite our in the quarter offset and stronger This work hiring we better to net The result I value remain X,XXX levels. to the retention slower and than was of clients these do refer the new pre-pandemic client

over and the were worksite sold slower-than-anticipated will business, the Our than partially for slightly as clients industry. To but than geography but we forecast X%, and retained by Anthony second by hiring. which client sequentially we portfolio forecasting. by grew summarize, increased offset lower for was we was this the color quarter more their less by our workforce quarter, more provide employees

staffing our operations. Moving to

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

to our recruit We the margin revenue. but top staffing line which and XX traditional our placed clients our strategy applicants generated in less to also shifted model, quarter, in for resulted equal PEO

We also supply and experienced microeconomic demand vary imbalances, factors, by geography. which including

updates. Moving operational to the field

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

adding that market partners new largely and are development. stages and their clients referral well servicing total have a We achieving have pipeline. robust XX new managers and They their doing and development of are in of new various goals

rate, are the our thus far expected and Our return are and for hurdle recruiting we internal next results class. actively than we better are exceeding

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

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

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

are We thick and our Benefits at offering current provide existing the we definitive in our potential with pipeline season, of our as selling early pleased as too new It BBSI historical close XXXX. the guidance then are X/X this business are we in are clients. still the benefits is well will our clients earnings rate, our in be teams product any that accretive current we are If confident to opportunities but that closing to pipeline. to

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

various continue growth the exceeded strategies this our into and our sales increase October. sales controllable top that quarter every of trend funnel, to expectations continued Our year, the

expect benefits Our ourselves close at we to close If economy, there's start business dislocation strong were the and in the quarter XXXX. gross a qualified the of just we prior manner for we this XX% in greater the opportunities, improved our see described growth XXXX. If billings are year over the we to XXXX prospects our out and that than end close year up quarter. setting I historical no close plus the approximately rate on in near

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

Anthony Harris

as finished clients. profitability the we quarter in expectations worksite report I'm everyone. with net we to and strong for pleased continue added employees exceed our Hello, Gary. results for Thanks, QX to new

gross billion billion Our to $X.XX billings in versus in 'XX overall QX 'XX. X% $X.XX increased

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

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

Looking closely. client hiring at more

slower historical expected. trends We have sequential slower the and than pace stabilized increased remains hiring on and trends a the basis, quarter in hiring modestly seen overall but of than

by our Average hours the region. quarter, We average be rates, and which concentrated this worked continue source forward. increased to driven primarily in hours going overtime as California to stabilize remain and in billing continued quarter slowness a to employee wage have in X.X% growth see and higher well. Average continue most of per resilient will billings Northern per the the construction in client WSE sector which

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

revenues our continue through increased and staffing That driven stability sequentially our in strategic model As current expect down this year-end. the to Gary discussed, staffing environment. said, revenues by are year-over-year, economic shifts and we

the continues prior compensation This well favorable in benefit perform strong claims. and favorable recognized of of from once frequency year 'XX, adjustments in and for trends $X.X workers' to has program of and million premium premium adjustments favorable favorable In quarter year we favorable of QX year liability liability compares XXXX. resulted adjustments Our performance $X.X million. again prior This prior claim third to claim development.

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

savings margin our rate discipline. to compensation pricing the cost focus expense from ongoing gross workers' quarter lower the on due and improved Our in

ongoing efforts, that In continues of Benefits launch from cost managers. our our BBSI investments expanding market team development largely have in impact profitability of addition, and our benefit the management of the offset to

billings than year prior result, rate. to grow and continues our SG&A slower the for a growth than As slower year

investment income. Moving to

Our quarter, fully and year investment from million due our $XXX,XXX program. timing portfolios up the to in insured yields $X.X cash favorable earned current the flow third higher prior with more associated

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

dividend the $XX remains with million The cash quarter, for dividends July paid repurchased quarter under unrestricted the sheet program and and $XXX of million the Continuing in no balance last $X repurchase quarter, third announced investments reaffirmed million the Board's shares $XX debt. to the at September strong following XX quarter. million Our BBSI of under available in company also in remaining program. its XXXX

outlook Turning our to year. the for

reflect slight X% slight outlook. gross X% the decrease X% increase We X% prior increase in and our expect we billings results, X% a from X%, between from now the to X% the our prior we are WSE in to outlook to And and to average for updating our decrease a X% outlook. to year-to-date expect between year, and our

to annual for tax effective a between percentage be as and the to gross expect and margin between the to to back operator gross X.X% continue billings remain our of continue rate XX% call expect X.XX% questions. now We to and turn will we XX%. I

Operator

[Operator Instructions].

with Capital ROTH line Our comes Partners. from question Jeff of first Martin the

Jeff Martin

controllable things Hope year bit maybe on more afternoon, sales your targets? you of versus a you into funnel. are some that's differently and past, Wanted little you're Anthony. leading Gary are to hit dive internal doing to well. What Good the this years the doing

Gary Kramer

funnel. say Jeff, refined we're laser I as of referral targeting many focus benefits We've clients had getting and we the that looks years would sure of over past top targeting the targeting brokers. can, couple we've tried as to on partners, directly, that make the

our So we're I'll We've we the -- remarks September than it's -- X-plus were that in that for we're have 'XX. the been against we're a of over strategies really one say, executing just good prepared end then my that button. XX% September seeing these higher right? not different process And results now. that of in It's lot qualified easy past, on really years. just the at prospects, prospects I about So with said we are of

possible we've QX. got into more many that potential QX clients So can into join that

going energy -- a to see it of hopefully, So QX. we're into we're the of got going reward QX and lot going we've and just there,

Jeff Martin

can what's some accretive some and us year cover be referral the the us got side, BBSI earnings that second And then helpful. there? brought is, that And Benefit, that you've to the for update to give would then year to on new question on part remind investment partners board Benefits specifically on of an essentially this next you've BBSI you become

Anthony Harris

take to operate investment Anthony. program. then Jeff, spent question, and about Sure. This expense speak the total of the can million investment partners. I'll referral we $X to this But Gary is

we're right could change we're it that's a time, the but where So little rate that's essentially over run Obviously, as at at. now. that bit, scales

Gary Kramer

army And part wasn't addressable the it brought it we how the partner referral in, to the as new because in they before a I they product just then partners stat, -- didn't sell clients in now what brokerages it could discipline on of we have quarter, out talk a that total go call health -- we're we -- didn't we're many we health partners. friends. making have insurance, of that could referral on I they're we and they market referral have folks got but to to many to brokers twice well an is as the refer -- new really about basis, now constant me that the our able is, it a as with but where do very side, have that's benefits field, we're a for making the don't doing to almost new But attract day-to-day have But into we strategy We've as there. employee have -- we their into insurance. employee able us, far tap

Jeff Martin

one last me. then for And

in potential In rebound from But potential a a in terms California, workers' compensation growth that of big is one. a are would is you as drivers particular, driver for year? for in that clients be -- next year, rates obviously, next growth viewing hiring

Gary Kramer

than some prior in carriers seeing seeing than were. not seeing marketplace, in aggressive they're were. said be I There's they the we're still think any competition but the I less they calls We're we're aggressive -- less that

that We markets, comp increases percent getting market insurance workers' go side. the seeing rate the We're in far clients driving on to they're rate is We're seeing side. XX-plus that medicals. on accounts their health as as market are seeing not of some on increases anything some because to

workers' market to forecasting trading a not accounts So the plus it's yet, plus still pain some that's in we're point that X%. not driving X%, on comp, It's business and or driving market. minus or to really that. minus that's But

Operator

line question comes with from Securities. CJS next Chris the Moore Our of

Christopher Moore

million $X expense The on health just care. incremental Maybe follow-up. a quick

is that does 'XX? where 'XX of that placed? get some Some Or in and in

Anthony Harris

Annual expense we ramped fully were is in a staffed mostly little XXXX, year. bit, for we fully -- and but the

rate run well. approximate So as the 'XX that's for

Christopher Moore

just care maybe the one more on And health side.

by business, kind of you to to some XX% for in be here do employment? to the the Just of bias your bias? match type penetration example, it penetration [indiscernible] Is health Is get the California. existing expect So care of there other there. thoughts of ultimate trying

Gary Kramer

our As we've we installed had success it for are mastering craft into base. our selling better benefits,

XX% clients of of that those through XXX think new are said XXX, those have we October So I enrolled business.

have to those So would to have that on have BBSI. benefits. not those we we on XX%, new brought didn't We if clients brought that's wouldn't clients call

It's want pick see to clients we'll bit But as that in -- sell that to business probably know clients. where on us how to to sell They trust time, kind goes know allowing double sell us. to They to our the it ramp products bit installed into our as will it's a we sell X/X. it from as sell received. right, to you a this future craft, have a into again base and of to little after us new. But well. it friends, that's will our easier deliver. little in They we're there. it So we benefits, of than sell additional up we But wouldn't far your our right? the an this We on to then the what clients. portfolio learning buy it the doubled your get easier new X/X installed the over We'll book continue is of base can through see we

Christopher Moore

just And big of picture. kind

to visibility have a as to early much as you Just trying didn't Just how much today get that sense Do of you to sense know get you how to 'XX X. a fiscal X seeing ago? November you're trying to know months 'XX. X better as in

Gary Kramer

if that good 'XX. historical at pipelines a got a going accretive loan pipeline benefits we feel close year we benefits We've that to have opportunities. we that And have, at -- in feel think. closing we're we our that our for of looking rate we've benefits got with to pipeline X

we've at to So $X going pipeline not get end more had but 'XX, QX. million give going on our right? than to going it's going we're going for to than million then we're the to be non-benefits the number pipeline We're if ever more -- until make to to spend, it. And we're look the prospects. at a the That's the going traditional into make spend we're $X you largest of we

and keep what if really 'XX. adding optimistic years, So last doing X at right? controllable, what the been we of executing we pipeline on feel we're clients doing adding we're right, have, we do that, with we've Over about WSEs. our we good doing the do, we and very If

say, the then all a to and you things say, going going is 'XX right, to for these our in flat. over all got hiring client if So be easy It's good side better year we've us 'XX. on controllable even if, have gross billings

Operator

the Barrington line Our next from with question of Vincent Research. comes Colicchio

Unknown Analyst

If site Gary, weak for seeing time. been weak that is deteriorate? are that's construction I'm curious, you some a correctly, sector. I remember

Gary Kramer

saw I back we're come actually it -- mean, in No, we QX. some

hired QX clients in our over sequentially, QX. So

it if over still Now positive, it But think we've you of will 'XX. it November, was it was started the positive. slight to time. seen in of QX big when wasn't and a And slowdown see was I a reverse it QX. come come of December a 'XX, then of but into out back, positive. take QX positive It our 'XX, clients, negative back in And we slowly any a we saw

So it's but Area that, back. reversed. in especially trend we're still thinking, the is it seeing where We're we're early, hoping Bay that come

Unknown Analyst

the in the you one clients from And losses from say you staffing profits staffing within shared offset PEO clients clarification. that gained Did line?

Gary Kramer

for recruiting phase, to for hire a when recruiting recruit and $XX,XXX, get So a somebody explain. -- We this paid the challenging fee. our clients is right? And hire booked and try we We they our one to $XX,XXX say now. do clients we we recruiting

The recruiting recognize on simple us. is profit we profit recognize it is we that $XX,XXX. keep The sale $XX,XXX. that to for So free

person is Now taxes things and wages, traditional where plus that's business in was different line. say that book we staffing would been if that has plus wages the revenue into $XX,XXX aging other the

in revenue call would that profit. So we $XXX,XXX, but our been, $XX,XXX made have have would it,

an profit of for We're realizing bit cost the as all the we're to revenue adequate we're trying it's as for are margins of used a staffing. staffing. So accounting we realizing we're to, on nor on not little making We're making not much is realizing shift it. adequate just a -- say in just staffing. And we recruiting

Unknown Analyst

And driving sequentially. you in grow then staffing. should -- you mentioned particular? What's believe is I mentioned that

Anthony Harris

quarter, modest declines are think, We really, had large projecting sequential key sequential Again, increases. growth small large in we're us. growth talking behind we're not the here, and takeaway this next quarter. is the percentage sequential we positives But

the the just example, so flat compare in positive. now, it's for really if where you look is trend XX% that And to revenue the decrease -- at line year-over-year now representing

holding really showing and that still about large as we're we're margin. that. increases We've the to not it's staffing said, excited but necessitating Gary some in is revenue, So as revenue certainly activity seen, in up

Unknown Analyst

I after increased and competitive Are current bigger is different. go the a you pressures the As competition think clients competitive, environment? in little you the seeing

Gary Kramer

the than there's That we're keeps sell there field our able in field, market. people that work in product, as That's workers' or far no one talk this business I all find the with that the -- No, the We that's value what but core comp differentiator, those the in our in truly to the the the competition books. yada, and our about more product really owner. normal. is different being clients and That's have right? everywhere. the the business doing yada, But is the on what it's unit. the insurance with as health we mean, yada tools can people and these

Operator

line of Sidoti question next with Redick & the Company. from comes Mark Our

Unknown Analyst

first controllables, just if if I I And from go I on a to I want some the construction correctly year, correctly, were think the on there you -- to last if remember little fair will. can touch correctly, might perspective, just maybe -- timing of if timing you wondering little if flow what talk into remember it, if a the easing I impacts could had what bit you wanted if follow-up and see maybe of quarter the fourth don't and weather time how because you know there was I remember out saw a but in book put was this I that bit impacts, I at a of a sort If play around? -- I if about it quarter, I -- then was is sort you talk comparison how you commentary. want beyond way little we about bit there the in wondering to through back saw the might -- to first,

Gary Kramer

it really saw and clients you high. start up into interest We our the QX. QX rates at shrink It going same happened time accelerated to had

You had then macro in California, the a Northern shift weather also and well. we had terrible economy Cal specifically in as

left It you So of to back sitting, we same clients is to in these each. We just in bit happening our was that and of sequentially thought that back. But position QX. come saw the discern to that QX of it it's staff confluence them didn't those going saw had in time. in folks ultimately, now our in hire QX, was it's hard referenced, where 'XX, clients grow more happen. we reduce come confidence what we we of us from going a of we piece was of a think at -- little -- were all It a but it

then X So of and back they pulled and QX started gives back add this quarters -- people us dipped for to that's what they into the year. optimism

Unknown Analyst

curious little -- there. That's And but was there's then I that. I a track, to on was different going sort a with similarity of as where

customers. what -- maybe those bring speed anniversary on So controllables, of with challenges we finance mean, bring showed seeing what us or maybe there? to maybe banking speed us I as could you're up of the you're you to again that sort outside up and the to seeing

Anthony Harris

banking lot We weren't that space. direct banking Obviously, have crisis use that clients the a we services. in year mean really of our a I affected by don't all clients of ago.

pain So we It wasn't anecdotal beyond there impacts a see few were point very clients. watching are a if closely prevailing our to stories. of

that from quickly and biggest So we nature has the in cyclical that. and recover really mean for our interest the clients the gray-collar blue- rates. of space, I construction with driven been headwind very by

Unknown Analyst

that benefits if are particular the any have I last than any positively your responded client one that then also to there differentiation who groups about were. And being customer there particular moment. part for more was of sales circle maybe compared bit played are could me. then Or Are seeing you're cycle expectations others? a talk you that to who the and for out those any you are that's wondering verticals a to how And maybe back little what as or add?

Gary Kramer

we're If you installed base. we're who into primarily sell to, of selling just to think trying our

us, having but not So to we're that's able new not our state, really into and state no success good base right? in we're every installed vertical selling sell for a really it There's that into.

So state we feel and we in product have to clients comfortable our that and that pay the works every are that for. willing eager

I would we success seeing our on in markets, as is business, we're managers the right? one thing bringing benefits our So development feel market about they're there. The new well. they're business of XX% for good just selling say new So that

and the have all doing different the feel products cracking great of they to these try I'm pretty and them. of the proud we out many that job market, what's sell, best figure greenfield, in market. So a to crack to optimistic they they're way

blue-collar we just just than of because their So the in their from the [indiscernible] seeing they comfort coats because more business, or in white-collar typically new adjacent that hiring that around we're general, maybe markets, folks come I'll our and industry. from those and industry know say, are in

to enrollments the folks make number the mid-November, are of the you take as right, then to going typically is in right just decisions. get give process. right X are right? Thanksgiving buying the done time we to employees quick sure through cycle, months, sick takes more it's wrapped through sure with you the first lead that X it's better sell real sales our you middle of cycle, the Most this a good make then have what to for kind to So now, so enrollments, start everything for time by X/X time to feel a decisions December, on definitive those their going the enrollment but right, this the you the of and underwriting of not up around season. the the sell-through we week we mid-to-end-November -- the of we know a make sales It is Most properly, your or months a the we're we're going of with -- to there. And from in good to mid-December. But their growth it. in you get accurately. sell make for It's have get like to the idea clients the the wish until But could -- season. we done do going think the estimate little not you X/X was From

Operator

the There are management call hand in no to the back questions for further like I'd queue. to remarks. closing

Gary Kramer

Thank you.

Just thank growth. again, BBSI to for doing want everything you, the a is and do great everybody. we professionals another Thank quarter great all the controllable organization. Everybody on you for I appreciate job,

Operator

today's conclude your does this teleconference. gentlemen, Thank participation. and for you Ladies

You a time, this lines wonderful and may at disconnect your day. have

Barrett Business Services (BBSI) 1 Nov 232023 Q3 Earnings call transcript