Q4 2020 Barrett Business Services Inc Earnings Call
Good afternoon, everyone and thank you for participating in today's conference call to discuss Bbsi's financial results for the fourth quarter and full year ended December 31 2020.
Joining us today are Bbsi's, president and CEO, Mr. Gary Kramer and the Companys CFO, Mr. Anthony Harris.
Their remarks, we will open the call for your questions before we go further please take note of the Companys Safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995.
Statement provides important cautions regarding forward looking statements the company's remarks during todays conference call will include forward looking statements. These.
These statements along with other than for any new information presented that does not reflect historical fact are subject to a number of risks and uncertainties actual results may differ materially from those implied by these forward looking statements. Please refer to the Companys recent earnings release and to the Companys quarterly and annually annual reports filed with the Securities and exchange.
Range Commission for more information about the risks and uncertainties that could cause actual results to differ.
I'd like to remind everyone that this call will be available for replay through April three 2021, starting at eight P. M. Eastern Tonight, a webcast replay will also be available via the link provided in today's press release as well as available on the company's website at Www Dot BBSI dotcom now I'd like to turn the call over to President and <unk>.
<unk> Executive officer of BBSI, Mr. Gary Kramer, Sir Please go ahead.
Thank you and good afternoon, everyone and thank you for joining the call 2020 proved to be a challenging year for the world and the economy I am extremely proud of the work that our business teams performed throughout the year, we quickly embraced working remotely and our operations did not Miss a beat as we assisted our clients with the rapidly changing ex.
<unk> and regulatory landscape.
Our client retention rate was the best we've experienced in years and our client failure rate was better than expected I'd like to attribute that to the work we do with our clients. This ultimately led to our gross revenue and profit being better than we forecasted.
We also executed on various long term strategic initiatives, including securing a nationwide PEO license standing up my BBSI are state of the art technology portal and Derisking the company with an alternative insurance structure.
I want to again, thank everyone on the BBSI family for their exceptional efforts plainly stated I am proud of the actions everyone at BBSI contributed and of our financial results.
Before I step into the fourth quarter operations and the outlook for 2021 I'd like to take some time to discuss metrics that the executive team utilizes to measure and manage the operations.
First we grow by adding additional clients maintaining good client retention and by our clients themselves growing our clients grow by adding more employees, which we refer to as worksite employees by their employees working more hours and with wage inflation.
Worksite employees is a key driver of our clients' businesses and are the closest metric that correlates with gross billings going forward, we will be reporting on and providing guidance for worksite employees and average worksite employee growth.
We will no longer be providing information regarding client accounts.
This may not truly reflect gross billings.
The Purest example of why this is important is to take a retrospective look at 2020.
We started the year with 7200 clients and 115000 Worksite employees. We finished the year with an additional 398 net new clients, but our worksite employees decreased to 109000 or 5% as a result of the pandemic.
The decrease in Worksite employees for the year translates better to our gross billings decrease of 1%.
Regarding the fourth quarter operations, we exceeded our expectations in virtually every financial metric in the quarter, our gross billings increased 6% over the prior year quarter and benefited from greater than expected bonus payments and from strong revenue per worksite employee.
Our Worksite employees grew an average of one 8% during the quarter sequentially.
Regarding our new business pipeline, we added 271, new PEO clients. We have previously mentioned that we saw referral partners and business owners go into their bunker in reaction to Covid. Each month, we are seeing we were seeing more and more leads and October was our busiest month since March.
We saw our leads retrace in November and December as the shelter in place orders resumed in California.
Our sales conversion ratio continues to be consistent with pre COVID-19 metrics, but simply put there is just not as much business transacting.
Our staffing business has rebounded slightly and grew sequentially over Q3 results vary by geography, but in the aggregate we are seeing our staffing business pick up and are forecasting growth in staffing in 2021.
Regarding other operational updates.
We had been previously communicating the softness in the workers' compensation market and that we took various steps and actions to navigate the cycle.
We enacted cost reduction measures portfolio management reduce the safety incentive and initiated profitability management.
Regarding profitability management, our branches and underwriting teams thoroughly triage the book and we priced out of 124 clients in the quarter because the price to risk was not adequate or the price was not commensurate to the work effort to support the worksite employees.
Regarding client attrition, we lost three due to accounts receivable.
14 business is sold 41 business is closed including 20 to 22 due to COVID-19, nine left due to pricing competition or companies that moved away from the outsource model and 124 for profitability management.
To summarize our build for the quarter, we added 271 clients initiated intentional run off of 127.
Unintentional runoff of 154, four net reduction of 10 clients. However, our average Worksite employee stat grew one 8% sequentially and we finished the quarter with a stronger WSI stack than what we started with.
Regarding our branch footprint at year end, we had 56 total branches.
We continue to be mindful of operating efficiencies and consolidated Moses Lake and the Yakima, Washington, The Dalles into Portland, Oregon, and Albany, and the sale of Morganton.
The decision was made with the intention of continuing to grow revenue, while servicing our clients, but doing so in a more cost effective manner.
Our branch stratification of the 56 total branches is as follows.
'twenty mature branches with run rates in excess of $100 million 20 emerging branches running between 30 and $100 million six.
16 branches, we consider developing with run rates of up to $30 million.
Our business unit teams totaled a 110.
Next I'm going to provide an update on other initiatives and strategies.
In February we released the third major milestone from my BBSI. This release completed the build of our portal and included upgraded electronic on boarding improved reporting as well as other enhancements are big build is now complete.
I am proud of our product and I am proud of our team that brought it to market. We will continue to invest in enhancements it might be BSI.
The slower pace than in 2020.
Regarding our nationwide offering in the quarter, we expanded relationships with 37 existing clients and successfully brought on nine new clients that utilize this offering.
When we package, our new technology with our nationwide offering we are able to pursue larger opportunities.
Regarding larger clients, we added 25% more clients in the quarter with a payroll greater than $1 million versus Q3.
In 2020, we tested out a new business team structure with an eye to continue to provide the best of BBSI with a more targeted and cost effective manner.
Historically, our business teams have been structured in a team of four which includes a business partner, our human resource manager, a risk and safety consultant and to payroll analyst.
We were able to modify our business teams to a six member team.
Consisting of a business partner three human resource managers of risk and safety consultant and to payroll analysts. This model allows us to service more clients with less management employees and increases our return on management payroll from five ex up to eight ex when it capacity.
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We are applying working remote practices plus efficiencies that we gain with my BBSI and we will grow into the new model through 2021.
Yeah.
When we go to market, we are offering the best of BBSI, we have various products and services consisting of strategic consulting human resources information technology insurance risk management retirement services staffing and recruiting when we meet with a potential client they may join BBSI, because they have a certain pain point today.
But they will stay because we deliver our whole suite of products flawlessly.
Now I'm going to turn the call over to Anthony for his prepared remarks.
Thanks, Gary Hello, everyone.
I am pleased to report that our Q4 results and our full year 2020 results for both stronger than expected. Despite the continued economic impacts of the COVID-19 pandemic.
Looking at the full year first our gross billings declined only 1% for the year to $5 9 billion, while diluted EPS was $4 39.
The COVID-19 pandemic presented significant uncertainty and operational disruption throughout most of the year.
We were consistently impressed by the resilience of our small business customers and proud of the impact our team had in working with them.
Looking at our Q4 numbers net income for the quarter was $7 2 million compared to $11 7 million in Q4 19.
With the reduction due primarily to lower favorable development on claims incurred in prior years and a new.
Decrease in investment income.
PEO gross billings increased 1% over prior year quarter to one $5 7 billion the.
The increase in PEO gross billings was primarily attributable to higher average payroll per WMC, including higher than expected client bonuses at year end.
Staffing revenues declined 13% over the prior year to $28 9 million.
But did experience modest sequential growth from Q3.
PEO gross billings growth by region versus the prior year fourth quarter were as follows.
Mountain States grew 23%.
East Coast grew 5%.
Northern California grew 4%.
The Pacific Northwest grew 2% and southern California declined by 5%.
For the year all regions experienced positive growth with the exception of southern California, where market and economic conditions affected customers to a greater extent than in other regions.
Same customer sales for the period were up one 4% from Q4 to 19 due primarily to the increase in bonuses paid.
Workers' compensation expense as a percentage of gross billings was three 7% in the fourth quarter, which is at the low end of our expected range of $3 7 million to three 9%.
Continued decline is primarily attributable to actuarially determined reductions of prior year estimated liabilities of $1 2 million in the fourth quarter.
Our overall workers' compensation claims frequency continues to trend favorably in the quarter. We saw trailing 12 months relative to the of claims as a percentage of payroll decreased 11% compared to the fourth quarter of 2019.
We reported previously we've had minimal COVID-19 claims exposure and minimal claims reported and we continue to believe that COVID-19 claims will not materially increase our overall workers' compensation costs.
However, we continue to monitor the situation, including the broader economic conditions and potential effects on our workers' compensation program.
We've discussed for several quarters now that our pricing has faced increased pressure from a competitive workers' compensation market, particularly in California.
These cyclical market forces have continued to put pressure on the rates that we were able to charge our clients and we have responded by implementing several of the strategies that Gary mentioned earlier.
<unk> cost reductions and portfolio and from a profitability management initiatives.
We believe that workers' compensation pricing is at or near its low point and that overall rates should now trend flat or increase in 2021.
Looking at operating expenses SG&A in the quarter effectively flat from the prior year at $41 million cost savings in the quarter, including from structural efficiencies implemented in response to COVID-19.
<unk> planned cost increases associated with the maintenance of the might be BSI Portland.
For the year SG&A costs were down $12 million over prior year and were approximately $22 million lower than our original plan for 2020.
As we implemented several cost savings and efficiency strategies, including changes to our business team model.
Finished the year with management employee head count approximately 10% lower debt at the beginning of the year.
While maintaining our focus on efficiency, our operating expenses will increase in 2021 due in part to a full year of operation and amortization of that might be BSI portal versus only a half year in 2020.
And continued investment in our operations and growth strategies, including planned new branch openings.
Overall 2021, SG&A costs are still expected to remain slightly below 2019 levels and well below the trend from our pre COVID-19 plans and cost structure.
Our investment portfolios earned $1 6 million in the fourth quarter compared to $3 2 million in the prior year the.
The decrease in investment income is directly attributable to the low interest rate environment compared to the prior year and is consistent with our expectations for the period.
Our investments continue to be managed conservatively, but the average duration of one four and average quality of investment at the play.
Due primarily to our variable rate holding our average book yield has decreased to one 3% from two 3% at December 2019.
Turning to the balance sheet.
We had $170 million of unrestricted cash and investments at December 31, compared to 148 million at September 30.
Continue to be debt free at quarter end, except for our $4 million mortgage on our corporate headquarters.
We are proud of our results for the year, we face significant uncertainty and plan for a wide variety of scenarios, which resulted in some tough decisions.
We've always remained focus on our customers and.
And delivering value and we continued to improve our operations and execute on our strategy as we invest in new sales and marketing initiatives continued enhancements to our my BBSI portal and open new branches.
We also returned capital to shareholders in the form of $9 million in dividends and $8 million of repurchase stock in the year, which includes the repurchase of an additional $2 million of stock since our last quarterly call.
Turning to the outlook for the year.
With this being the first full year as a new management team. We wanted to think carefully about the key drivers of our business and ensure that we are providing the most useful metrics externally.
With that in mind, we have refreshed some of the information that we will focus on and reported on including as Gary said and emphasis on worksite employees or Ws EPS.
We will now report and discuss average <unk> in each period and will provide an outlook with our expected growth in average wsb's for the upcoming year.
As we refocus on WCS as a primary measure of our business volume. We will also recast what was formerly described as same customer sales.
To be growth in WSI is from existing customers.
Another key measure of our business is gross margin as a percentage of gross billings.
In addition to discussing quarterly margin results. In these terms. We are also now provide an outlook of expected gross margin as a percent of gross billings for the upcoming year.
We will also continue to give our expected effective tax rate for the upcoming.
Lastly to reflect the ongoing uncertainties at the full year ahead and to better align with industry norms. We will now provide expected ranges when discussing forward looking metrics.
We believe that these updates will provide more useful information overall and will allow better monitoring and modeling of our business performance.
2021, we expect average WCS to increase between one and 3% and total gross billings to increase between 2% and 5% we.
We expect gross margin as a percent of gross billings to range between $2 nine and three 1% and we expect our effective annual tax rate to be between 21 and 23%.
Our business has been resilient, we have new strategies underway and although we remain in a period of economic uncertainty we are optimistic about the year ahead.
I'll now turn the call back to Gary for closing remarks.
Thanks, Anthony in conclusion, 2020 was a challenging year in the company managed to exceed expectations. Our product is strong and has never been more relevant to the business owner.
We are working on the right things and I am extremely optimistic of the future.
We continue to always think of the client first and to advocate for the success of the business owner.
Now I would like to turn the call over to the operator for questions.
Thank you Sir at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is from the question queue. You May press star two if you'd like to remove your question from the queue from participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
And our first question comes from Chris Moore with CJS Securities. Please proceed.
Hey, good afternoon guys.
Hey, Chris.
Maybe we could start with the gross billings growth.
The guidance is two 5% can you maybe talk a little bit about the.
Puts and takes between the low and high end.
Yeah, just hey, Chris It's Kramer just in general.
You know forecasting in this environment is a challenge and we wanted to put something out there that we felt.
I'm very comfortable with that we think is.
Payable I'm not trying to say its a lay up but we think it is.
And attainable range.
If you think about the shape of the curve.
Q1 is going to be our hardest compare.
Q2 is going to be our biggest growth Q3 will be lower than Q2, and then Q4 will be less in Q3.
But we feel we feel comfortable with with those numbers out there of debt of the two to five and then just in general if you try to think of.
The macro assumption trend, it's that the economy kind of behaves like it is right now.
And then in the back half of the year starting in say.
Third quarter is where we anticipated that business flow is going to pick up for our business as far as.
M more ads.
Got you.
So just in terms of SG&A is going to be a little bit below fiscal 19.
I haven't I haven't had a chance to put the sensor at the mid point of gross billings growth.
3.5% say.
And gross margin net 3% range.
Roughly where does that get us EPS.
We gave you all the numbers you Gotta go do the math.
Fair enough.
Make sure I understand that the WMC growth versus the gross billings.
The Delta is just that the payroll growth abbvie at Dws East.
Yeah, Yeah, that's correct.
Okay.
And last one for me is just on the <unk>.
Six team approach can you just talk to that a little bit further it's so there's three human resource people within each team.
Yeah, what we were what we were able to do there is we picked up efficiencies with our new technology portal, which is a good thing that helps us on both the risk and the payroll.
On the risk side, there are some things that we've learned.
From working remotely and how to do our jobs more efficiently and if we think about where one of the one of the strong value props of BBSI as our HR and HR consulting.
So what we're able to do is.
Kind of load that business unit up with more HR to support almost double the amount of clients to get us.
The return on management dollars, which is the way that we like to think about the business as it gets them from a five ex return on management dollars up to an eight ex returns. So we are we are able to service more clients with the best of BBSI.
But with less management payroll.
Okay.
Got it that's helpful I'll jump back in line I appreciate it.
Okay.
Okay.
And our next question is from Jeff Martin with Roth Capital Partners.
Jeffrey either.
Sorry, I was on mute.
Hi, Kramer Hi, Anthony how are you doing.
Oh, Yeah, Hey, Jeff.
Yeah, I wanted to get your sense in terms of growth initiatives not necessarily this year, but over a five year period.
Our U R.
No.
On hold with some of those are pairing them back while we kind of pledge along and gradually recover here. This year and then also wanted to get a sense of your view on lead generation, if you see a shift over.
Intermediate to longer term in terms of <unk>.
<unk> generated additional client referrals given that that's one of the.
Primary inhibitors to growth currently and we'll it will you take a direct sales approach at some point to go after larger accounts.
Okay.
So I guess from <unk> question, Yes, sorry, I think you said I have two questions whether it was like 12 in there Jeff.
So let me right.
Let me go with the our growth plans right. So we consolidated three branches in the quarter.
And that's the same idea that we've done in the subset in the previous quarters, where we can service those branches.
And still grow that business.
Some of those branches are less than 40 minutes from the other adjacent branch and we're able to service them under one management team.
The business, while being I'll say more cost conscience.
But we are still investing in anthonys numbers that we have for the SG&A that includes us adding additional branches. So.
We will add anywhere from three to five branches.
In 'twenty one M.
And when we open those branches theyre going to be similar to the model that we've adopted in 2020, which is it'll be a person that is selling in that market and then we're servicing that business.
Out of either an adjacent market or back at corporate and when that happens and they start to grow. Their book then we'll start to hire locally to support the business. So we are continuing to invest in the new branches invest a new business unit, so that hasnt changed at all.
And then if I get to the the lead Gen.
We have initiatives and we are working on things and.
We recognize that it is.
A little more challenging than COVID-19 as far as business coming to us.
We're not sitting back on our laurels and waiting for the business to come to US we're going to go get it and we've got.
Plans and strategies for that that we've baked into our operational plan for 'twenty one.
But that's something that I'm not ready to share.
Until we know its successful let me know that we're going to adopt it throughout the organization, but we are we are being mindful and working on that as well.
Okay, and then was curious if you have a sense of.
Relative to the first round of PPP loans, if you're seeing significant number of clients get a second round or if they are applying for a second round.
So similar to last time, it's difficult for us to get good data on that right. It's mostly anecdotal, but the answer is yes, our clients are participating in that and taking advantage of that as well as the other relief that was included the expansion of the employee retention tax credits.
As far as the extension of the CRA. So those are all a boon for our small business.
And including our clients and so we're grateful for those and they are having an impact.
Okay, and then I know you gave guidance for gross profit as a percentage of gross billings, but within that.
Gross profit guidance, what kind of assumption is.
Better than that for workers compensation is that going to stay in the three seven to three nine range that you expected for the third quarter for next year or is there additional benefit forthcoming.
So we introduced that workers comp guide range at a time when our program is experiencing some uncertainty and we wanted to be able to give that transparency and as the program has become more predictable.
And then a pretty steady trend of favorable results really the more important metric. We think is the gross margin percent, which obviously is.
Influenced by that workers comp number, but we've seen the positive trends in workers' comp, we expect those to continue.
Not giving a specific guide range for workers comp this year.
There is no evidence that the positive trend line, we've seen would change.
Okay, and then final question overall pricing on a on a blended basis across the book.
Whats your expect what was that experience in 2020 and what's your expectation in 2021, just just directionally would be helpful.
Yeah, we we've been mentioned and for a couple of years the softness in the workers' comp market and we've done things accordingly to react to navigate through the softness in that cycle right as far as portfolio management and profitability management.
In the second quarter, we talked about reducing the safety incentives.
So the.
The basic idea is if we.
We need debt program to be as efficient as possible because we're not able to charge as much as we once were.
But when we look at when we look at.
When I look at where one one kind of landed for the cycle.
It.
It feels like we're close to the bottom it feels like it's turning it feels like when we're looking at 'twenty, one that it's going to be flat to up as we get out into 'twenty. One I mean, you can have.
You can't have interest rates as low as they are and everything else going on and not be able to get rate on the workers' comp side. So we feel we're not out there pushing it.
But we see our competitors starting to charge more.
We're obviously going to jump on that bandwagon when the market turns.
Great. Thanks for your time guys.
Yeah.
And our next question is from Josh Vogel with Sidoti <unk> Company.
Thank you Gary and Anthony Hope you guys are well.
Okay.
You were talking about profitability management, and you'd price that 124 clients in the quarter.
Are you done with that or should we expect to see more of that at least in the early part of this year.
We good question adjusted that in General is addition through subtraction for how we think about it.
We may we may shed some revenue dollars, but we make them up in profit.
So when we when we think about that strategy that was enacted.
Back in this soft market mentality for workers' comp right. So that was enacted back in second quarter.
<unk> 'twenty and it started with with how our underwriters will work with our branches to try to.
Scrub, where we need to be with certain accounts and making <unk>.
Price to risk moves and we saw those happened in throughout the year.
We saw a little more in this quarter because of.
How the market cycle works four for year end for 12 to 30 111 business. So.
I would think Inc. Q1, we're going to see a little more.
We're all I think in Q, almost we'll still see some coming through.
And then it will subside after we get through Q2 and beyond I mean, it's part of our DNA that we always want to be.
We like our clients and we want to make money and they want it we want them to make loans. So it's part of our DNA.
We're going to continue to do that but I don't think you'll see a move as big as we had in Q4.
Great. Thank you.
I know in the pandemic makes this.
Next question are a little bit murky, but it's been about nine months since the rollout of the portal and the Big Bill that you said was completed in February but have you seen any quantifiable success here, when we think about new business or opportunities in the pipeline that we're driven to you because of the portal.
Yes, good question, Josh that's why.
Part of what we're talking about Ws CES externally that that's how we're talking about the business internally right and even our even our sales team. Our sales teams has metrics and I'll say their goals are based upon ws. He is not on client size.
And what we're seeing now is larger opportunities so.
Q3, we had more large opportunities come to us in Q4, we closed more large opportunities.
And that's why in my remarks, I said, we were up 25% in Q4 over Q3 for accounts that we landed over $1 million in payroll and that has a strong correlation with.
US being able to provide the solutions that those larger clients low before.
I appreciate that so your definition of a large client is north of $1 million in annual payroll. So what percent of your client base exiting the year.
Falls under.
That definition.
I don't have that but just just in general what when we looked at our profitability management, we looked at it two ways, we looked at it as you know.
What what we're really not making money on from an insurance perspective.
And then what were we not making money on from a margin to WSI perspective, So a lot of what we saw in Q4 was.
We were raising pricing pricing on smaller accounts.
Which are the more price sensitive, but if you look at the.
<unk>.
For the Stat I gave for what we added versus what we lost we still had our worksite employees grow in the quarter and thats because of losing losing a fair amount of smalls.
Alright, great.
I got to ask obviously, you've done a tremendous job building up a quarter of cash.
<unk> been investing internally.
On the portal.
Business teams talked about potential acquisitions in Underpenetrated markets, where there's a good client and culture fit.
I'm, just curious and and yes, you've been buying back stock the dividend place, but what's the plan for capital deployment.
This year and what's what's a good base number happy amount of cash I just want to have on the books for the times.
Yes, so we've said that.
Priority, one is maintaining that financial moat as Gary has called it and we have not disclosed kind of what that that safety net number is that we feel comfortable with and frankly it is somewhat relative I mean, theres. Some theres some science to it and some art and we have a number but we haven't disclosed that but as we look at ex.
Excess cash we walk through our capital philosophy last quarter.
And the first area, we look to is investing in the business and that could be through M&A, which is still on the table.
Still exploring potential targets and opportunities there that are strategic but it's also going to be through continued enhancements through it.
We will we fully expect to continue to evolve and enhance our might be DSI portal and other system.
Our systems are developing in the year.
And other initiatives. So some of these sales and marketing initiatives that Gary said as well we will take some money.
That we're obviously committed to buying back stock and the dividend as we continue to see how the year progresses, we can update that but it currently that's the.
The plan, we're sticking to and our philosophy.
Yeah, Josh and then on the acquisition side you know we've been active in the market for the last couple of quarters.
Probably for the last three quarters and you know.
My my view on acquisitions is I'd, rather not do an acquisition and do the wrong acquisition.
So we will be.
Articulate and thoughtful about companies that we bring in under the BBSI umbrella.
We are looking but.
I come from the school of you got to Kiss a lot of frogs. When you when you do acquisitions, and we're not going to rush into it.
That's certainly a good strategy.
Just last one win.
We think about the your PEO platform today.
Clearly theres, a digitization revolution going on seeing in large enterprise, but trickling down to the SMB space.
As everyone looks to continue to get on the cloud and further facilitate more of their back office and admin functions.
How well is your P O platform prepared to handle this and beyond the portal and you alluded to it a little bit Anthony but what are the rollouts or capabilities are you potentially looking to add to the platform and would that be done all internally and organically.
Yeah. Good question, Josh we're not ready to.
We put ourselves in an excellent position now with building out my BBSI.
Because we have the flexibility to plug in what other whatever widget, we want to.
Whatever product, we want to through our portal to make it available to our our clients right.
Whether we get revenue, whether we get margin, whether we get stickiness of the business as the way that we think about it.
But we werent in that we weren't in that we didn't have that opportunity until now.
And now that we have we literally just stood up.
Last promote a week and a half ago.
To get to where our call at the my BBSI as is completed.
The next stages, we're looking at Okay. What else can we what else can we roll into add or enhance the offering.
We have things, we're working on but nothing that we're ready to disclose yet.
Understood. Thanks for taking my questions I'll hop back in the queue.
And our next question is from Vincent Colicchio.
With Barrington research.
Okay.
Gary just curious in the workers' comp market as it simply pricing discipline, that's brought to market.
To a better place orders have been any consolidation or any other industry changes.
No.
It's a function of workers' comp has been a profitable low.
Mind.
When there's profit people flocked to when they flop two if prices go down.
And we've seen year over year price decreases.
That we think are going to subside in 'twenty one.
Okay. You gave you gave a.
Good read on the quarter.
Orderly.
Revenue.
Outlook I missed if you said it on Q1, how does that look sequentially.
Q1, we thought was going to be our toughest compare because we grew 6% in Q1 19 for.
For Q1 of 'twenty.
So we thought that that was going to be our toughest compare.
<unk>.
And what we're what we're seeing so far is and we've got a we had a strong year and as far as our WSI stack being up we've got a strong selling season and the one one.
And.
Sure.
Q1 will be our our lowest growth quarter for the for the year, but we feel we feel good that we have a good.
A good base, our we call it our stack, we feel that we have a very good stack to grow from here.
You get the positive.
Other new growth two three years.
Okay.
And.
I'm curious.
Feedback.
What are you hearing about the new portal in terms of how it compares to your more automated competitor.
For us.
It is light years from where we were before.
Four we had a payroll engine now we have a platform.
So it's it's a much.
It's a much more user friendly adaptable system and we're hearing a lot of great things from our clients because of it.
Use the freedom and flexibility to perform.
So we're hearing great things from the clients.
And then we.
Look we do a bake off right, we know what our what our system adds versus whatever competitor system as in.
We know we know where we think we are when we look at.
Our technology to the industries.
Pound for pound I'd put us I'd put us up there with them with anybody industry on the technology side.
Okay.
Thanks for answering my questions.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to move your question from the queue for participants using speaker may be necessary to pick up your handset before price.
The Star Keys.
One moment, please while we poll for further questions.
And our next question is from Bill doesn't them with Titan capital management.
Thank you a couple of questions I'm not sure. If you covered this but I'm trying to back into whats happening with wages.
You had a 6% decline in employees with billings up 1% does that.
Ply that compensation on average was up 7%.
Not not the seven but you're you're picking at the point, which is.
What we saw when our clients faced tough times was that they let go theyre low wage employees.
Which was driving up our average wage per WSI.
Okay.
That's very helpful and actually leads into the next question I was trying to trying to think through.
So employee count is down 6% how much of that is to your point cost savings where they weren't.
Where do they were let go.
Again to improve profitability.
Vs Covid restrictions, leading to to them being furloughed or other otherwise laid off.
And I'm trying to really differentiate between those two buckets of cost savings measured versus COVID-19 restrictions.
It's.
I'd be shooting from the hip if we gave you that we don't when we receive payrolls, we run the payrolls if people aren't on there we don't know.
We can tell you that day.
The COVID-19 restrictions that we saw were the heaviest in Q2 and then it started to rebound in Q3 and Q4, we got to normalcy.
But we were very fortunate we've been saying that this whole time right.
We are we are not in the industries that are heavily affected. So we were very fortunate with our client base. Our clients are very resilient our product is very strong.
And we are.
If you would've asked me in March if we would've been down 1% for the year.
I would have I would have taken the under on that one so we're very pleased with with where we ended up for the year.
Great. Thank you and then finally relative to southern California.
But is there anything that you feel like you have in terms of levers.
You can improve the revenue.
Situation down there since it's the only region, where you are seeing a decline.
The decline in revenue in southern Cal is mainly from our clients shrinking and from the effects of Covid in southern Cal.
So we think that if depending up depending upon how the economy comes back.
We think that southern Cal we will get the biggest pop out of any other region right. Our mountain states held up pretty much resiliency through the whole thing and they're not going to get the upward trend that say southern Cal is going to get so we're looking at when the economy gets back to normalcy, we're going to have a nice tailwind for us in southern Cal.
Great. Thank you.
At this time. This concludes our question and answer session I would now like to turn the call back over to Mr. Kramer for closing remarks.
Once again I just wanted to thank everybody and I want to thank all the BBSI employees for all their hard work and challenging year getting through 2020.
We are very optimistic about the future. We know that we're working on the right things. We know that we have the right product and we know that our product is irrelevant. So we are excited about the future here so with that we're going to let it go and thank you everybody for joining us.
Okay.