Q4 2023 Barrett Business Services Inc Earnings Call
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Anthony J. Harris: Our gross margin rate improved in the quarter due to the cost savings from lower workers' compensation expense and our ongoing focus on pricing discipline. Our overall profitability has continued to benefit from operating cost management. For both Q4 and the full year 2023, SG&A expense increased by approximately 3%.
Anthony J. Harris: As a result, SG&A for the year grew slower than our building's growth rate, and we expect this trend to continue in 2024, providing ongoing operating leverage. Moving to investment income, our investment portfolios earned $1.7 million in the fourth quarter, and our investment portfolio continues to be managed conservatively with an average duration of 3.1 years, average quality of investment at AA, and average book yield of 2.8%. Our balance sheet remains strong with $152 million of unrestricted cash investments at December 31st and no debt. Our philosophy for capital allocation remains unchanged.
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 23.
Joining us today are bbsi's, president and CEO, Mr Gatti, FEMA and the company's CFO, Mr. Anthony Harris.
Following their remarks, we will open the call for your questions.
Before we go forward, though please take note of the company's Safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995.
Anthony J. Harris: We continue to prioritize our investments back into the company on strategic value-add initiatives. For the last several years, these initiatives have been expanding our IT capabilities with the launch and continued enhancement of MyBBSI. The launch of new products, including our health benefits offerings, our client learning management system, and improved system integrations, among others, and Geographic Expansion, which has been accelerated by our asset-led approach in new markets. We expect our level of investment in these areas to remain similar going forward as we continue to enhance our product and expand our reach. Beyond these investments, our next priority is to distribute capital to our shareholders. Continuing under the board's July 2023 repurchase program announced last year, BBSI repurchased $5 million of shares in the fourth quarter at an average price of $111 per share, with $59 million remaining available under the program at year end.
The statement provides important cautions regarding forward looking statements.
The company's remarks during today's conference call will include forward looking statements. These statements along with other information presented that does not reflect historical facts 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 company's recent earnings release, and the company's quarterly and annual reports filed with the Securities and exchange.
Exchange Commission for more information about the risks and uncertainties.
Cause actual results to differ from those expressed or implied by the forward looking statements.
I'd like to remind everyone that this call will be available for replay through March 'twenty eight 'twenty 'twenty four starting at eight P M Eastern time Tonight.
Oh Gosh replay will also be available via the link provided in today's press release.
Well as available on the company's website at Www Dot B B S Dot com.
Now I would like to turn the call over to the President and Chief Executive Officer of BBSI. Mr. Campbell Sub please go ahead.
Thank you and good afternoon, everyone and thank you for joining the call. We had another strong quarter capping off an equally strong year and I am pleased with our results.
Anthony J. Harris: In total, in 2023, we repurchased over 5% of the company's shares outstanding through purchases of more than $34 million, and we also paid over $8 million in dividends for the year, bringing total capital return to shareholders in 2023 to $42 million. Looking ahead to 2024, we expect to continue to generate excess available cash and to continue these capital allocation strategies. Now turning to our outlook for 2024, we expect gross billings and average WSEs to strengthen from 2023, with 2024 gross billings expected to increase between 6% and 8% and average WSEs expected to increase between 4% and 5%. As a baseline, we expect client wage inflation to continue at a similar rate to 2023. But for 2024, we now also expect a return to positive net client hiring. While 2023 had net negative client hiring, most of the reductions occurred early in the year, with trends improving as the year progressed.
Before I speak about our financial performance I would like to recap some of the key operational and strategic accomplishments for the year.
We are successfully selling and servicing BBSI benefits in every one of our markets our existing clients are buying and so or new clients on the new clients. We are seeing success in white collar verticals that we previously had a difficult time penetrating.
Our strategic sales initiatives had been operationalized and are resulting in consistent and predictable acquisition of new clients and new referral partners. We continue to invest in our asset light model and have successfully expanded into new geographies and are gaining momentum.
We continue to invest and perfect. Our other new products would be the SRU and BBSI recruiting.
We continue to invest and bolster our tech stack with enhancements to my Mediasite.
And we also made further advancements in our employer of choice initiatives and earned the great place to work designation for the third year in a row.
Our client retention continues to trend better than the pre pandemic are every year, we conduct a survey of our clients to evaluate customer satisfaction and needs. This year, we modified our survey. Some so that we can calculate a net promoter score which is an evaluation of how many of our clients would be willing to recommend and refer BBSI.
I'm pleased to say that we scored a 64 to put this in perspective, our net promoter score above zero is considered good and anything above 50 is exceptional.
This gives us great confidence in the value our clients place on the services and solutions, we provide our clients love, what we do and they are ready and willing to spread the word about BBSI.
2023 was a great year for BBSI and I am proud of what our team accomplished.
Moving to our financial results for the quarter.
We surpassed our gross billings estimate for the quarter by continuing to execute on our various strategies to increase the top of the sales funnel.
Anthony J. Harris: While only modestly factored into our outlook, we are also starting to see signs of residential construction spending improving, benefiting our construction sector clients, who were a primary driver of declines in 2023. Beyond our client hiring, we are optimistic about the momentum we see in our sales pipeline, and 2023 has shown that even in a year with negative client hiring, we were able to grow our total WSC stack by adding new customers more consistently. This improvement in our ability to sell and service our products through economic fluctuations will bring even more stability to our long-term growth. For 2024, we expect gross margin as a percent of gross billings to be between 2.95% and 3.15%, in line with our 2023 rates, with pricing adjustments being matched to ongoing cost savings. Finally, we expect our effective annual tax rate to be between 26% and 27%.
In 2023, we added 6% more <unk> from new client adds versus the prior year.
I'm pleased to say that we once again exceeded our controllable growth expectations in the quarter for net new clients. We finished the year with more ws ease and we forecasted which sets us up well for the start of 2024.
As discussed previously we have been able to sell and support larger clients with our upgraded technology stack national PEO licenses, along with BBSI benefits.
Continues to progress favorably and the average size of the clients that we are adding are larger than the average size of the clients that are running off.
Regarding our client run off our retention in the quarter continues to remain stronger than pre pandemic levels.
Like to attribute that to the work, we do with our clients and the value. Our teams provide the result of all these efforts or what I refer to as our controllable growth is that we added approximately 3800 worksite employees year over year from net new clients.
To summarize for the year, we grew our worksite employees by two 2% year.
Year over year, we sold and retained more business, which was partially offset by reductions in ws. He is at our existing clients. We started to see client workforces stabilize in Q3 and that trend continued in Q4.
Moving to our staffing operations, our staffing business declined by 22% over the prior year quarter and was in line with our forecast.
We mentioned previously that we repriced the portfolio and jettison clients, where we were not achieving an adequate return. We also shifted our strategy to recruit for our PEO clients and placed 83 applicants in the quarter.
We are also experiencing macroeconomic factors, including supply and demand imbalances, which varies by geography, we.
We expect our staffing revenue to stabilize in 2024.
Moving to the field operational updates.
We are very pleased with our entrance into new markets with our asset light model. We have 15 total new market development managers in various stages of their development they.
They are doing well and largely achieving their goals of adding in servicing new clients and new referral partners. Some of these will graduate to a traditional BBSI branch in 'twenty 'twenty four as we are actively searching for real estate and recruiting locally to support the business.
Operator: I will now turn the call back to the operator for questions. Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue.
Our next classes in training and will begin selling in their markets in March we anticipate that we will have three classes. This year, depending upon the talent in the marketplace.
Regarding our product updates.
We continued to execute on the sales and service of BBSI benefits, our new health insurance offering we had a successful year end selling season and I am pleased to report that through January we have approximately 275 clients on our various plans with more than 6800 total participants.
Our value proposition resonates well and we are having success with small and large clients in white and blue collar industries in every state, we operate and with a diverse distribution channel.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question is from the line of Chris Moore with CJS Securities. Please go ahead. Hey, it's actually Legia Goethe for Chris this evening.
We are pleased with these results and this product will be accretive to earnings in 2024, when we were in a great position and will now reap the benefit of leverage through scale.
For BBSI benefits, we have operational plans in 2024 to enhance our check refine our processes and add additional carriers to our offering.
We think the additional carriers will be attractive and compelling in certain markets and may further accelerate our growth.
Legia Goethe: Good afternoon. Hi Lee. So, Gary, I guess just starting with health care first, some of your health care competitors obviously take underwriting risk on health care, but you don't. Can you talk a little bit about the puts and takes, and clearly there's less risk for you all, but what are you giving up as a result? Yeah, good question. I mean, over the years, we've evolved our model on the workers comp side so that we no longer take the workers comp risk; we lay it all, primarily all of it, off to the insurance and reinsurance market. You know, when we brought on healthcare, we didn't want to have, you know, the perceived underwriting risk on the healthcare side.
We are estimating that we will double our participation by January of 2025.
Next I'd like to shift to my view of 2024.
We have consistently achieved strong controllable growth by focusing on the needs of our clients and by adding new clients. These actions more than outweighed our clients' workforce reduction in 2023.
We have more product to sell more folks selling it and more referral partners recommending BBSI.
We will have additional health insurers to offer and we will have additional client focused advancements in it that are going to make our value proposition more compelling.
If there is no dislocation in the economy, and we expect to see greater gross billings growth in 2024, then in 2023 now.
Now I'm going to turn the call over to Anthony for his prepared remarks.
Thanks, Gary Hello, everyone.
I'm pleased to report we finished the year with strong results and strong momentum in our sales pipeline.
Gross billings increased 4% to $7 7 billion in 2023.
One 4 billion in the prior year.
While diluted earnings per share increased 13% to $7 39.
Gary Edward Kramer: So we made sure that when we partnered with our partners, they were going to be long-term strategic plays. You know, we think of it as a seller's fee, and arguably, we're able to charge more for our product. So that's really, you think of it as a fixed fee type business that we're getting. The economics that we give up is the risk versus reward as far as the underwriting on the health side that our competitors do, right? Some years, they're making money; some years, they're losing money. We just want to have a consistent cash flow and earnings pattern. And then in terms of the geographic bias, once this is fully rolled out, how should we think about geographies in the sense that, obviously, most of your working workers comp today is in California; is it going to be a similar geographic split? Or is there any other moving? We have workers comp in every state, not just California. I would say it's pretty, pretty well distributed based upon the way the payroll operations are.
Compared to $6.54 in the prior year.
Looking at Q4, our gross billings increased 5% to 2.05 billion versus $1 $95 billion in Q4 of 2022.
While diluted earnings per share increased 32% to $2 16.
Compared to $1.64 in the prior year quarter.
PEO gross billings increased 6% in the quarter to 2 billion, while staffing revenues were 22 million in the quarter, representing a modest increase on a sequential basis, but a decline year over year of 22%.
Our PEO Worksite employees grew by 2% in the quarter.
Which was the result of strong controllable growth from net new PEO clients.
Offset in part by slower hiring within our existing customer base.
Looking at trends in client hiring more closely we continue to see hiring stabilized in the quarter with.
With most of the year over year WMC reductions occurring early in 2023.
The pace of hiring remains broadly slower than historical trends, while we continue to see the largest impact is concentrated in the construction sector and in our Northern California region.
Average hours worked and overtime hours per employee have also remained stable in the quarter and for the first time in over a year total overtime hours worked were higher than the prior year quarter.
Average billing per WMC increased 3% in the quarter driven by higher average client wage rates, which remain resilient and which will continue to be a source of billings growth going forward.
Looking at PEO gross billings growth by region versus the prior year fourth quarter, the East coast grew 16%.
And states grew 10%.
Southern California grew 6%.
Pacific Northwest grew by 3% and Northern California was flat.
Okay.
Turning to margin and profitability, our workers' compensation program continues to perform well and benefit from favorable claim frequency trends and favorable claim development.
Gary Edward Kramer: You know, California is our largest market, we've got 20 branches there, it's, I'd rather be big in California than bigger in Rhode Island, right? So, you know, but when we look at, when we look at the map, we're able to sell this product everywhere, and we're able to bring in white-collar business. I think about 25% of the new business we brought in for healthcare was in the white-collar space, which is fun and exciting for us, right? That was an industry that was a little more challenging for us to penetrate because of being heavy blue-gray with workers' comp. But we're filling in the map with our market development managers, but as we grow outside of California, we grow in California, so our plan is to ultimately be a national player and be big everywhere. And then one more for me, and I'll hop back in queue.
This strong performance is once again resulted in favorable adjustments for prior year claims.
In Q4, 2023, three we recognized favorable prior year liability and premium adjustments.
$5 4 million compared to favorable adjustments of $600000 in the fourth quarter of 2022.
As a reminder, our client workers' compensation exposure is now primarily covered by our fully insured program with no retained liabilities.
Hi.
Our gross margin rate improved in the quarter due to the cost savings from lower workers' compensation expense and our ongoing focus on pricing discipline.
Our overall profitability is continuing to benefit from operating cost management.
For both Q4 and the full year 2023, SG&A expense increased by approximately 3%.
As a result, SG&A for the year grew slower than our billings growth rate.
And we expect this trend to continue in 2020 for providing ongoing operating leverage.
Moving to investment income our investment portfolios earned $1 $7 million in the fourth quarter and our investment portfolio continues to be managed conservatively with an average duration of three one years average quality of investment in double E and average book yield of two 8%.
Our balance sheet remains strong with 152 million of unrestricted cash and investments at December 31.
And no debt.
Our philosophy for capital allocation remains unchanged, we continue to prioritize our investments back into the company on a strategic value add initiatives.
Over the last several years these initiatives expanding our capabilities with the launch and continued enhancement it might be BSI.
The launch of new products, including our health benefits offering our client learning management system and improved system integration among others.
Gary Edward Kramer: So gross billings this year were around 4%, and you're guiding to 6 to 8% in 2024. Is there a scenario or what would it take to sort of approach double-digit gross billings at some point, or have you just gotten too large, and it's the law of large numbers preventing it? Now, so, we grew in 23 when our clients were reducing their workforce, right? So as we think of 24, we think our clients are modestly going to hire, and we have that model that it's going to be more in the back half of the year starting in Q2. But realistically, you know, if our clients hire, we could easily get into the double digit range. Great. Thanks very much. I'll hop back in later.
And geographic expansion, which has been accelerated by our asset light approach in new markets.
We expect our level of investment in these areas to remain similar going forward as we continue to enhance our product and expand our reach.
Beyond these investments our next priority is to distribute capital to our shareholders.
Continuing under the boards July 2023 repurchase program announced last year.
<unk> repurchased $5 million of shares in the fourth quarter at an average price of $111 per share.
With $59 million remaining available under the program at year end.
In total in 2023, we repurchased over 5% of the company's shares outstanding through purchases up more than $34 million.
So paid over $8 million in dividends for the year, bringing total capital returned to shareholders in 2000 $23 million to $42 million.
Looking ahead to 2024, we expect to continue to generate excess available cash and to continue these capital allocation strategy.
Now turning to our outlook for 2024.
We expect gross billings and average ws ease to strengthen from 2023 with 2024 gross billings are expected to increase between six and 8% and average WCS to increase between four and 5%.
As a baseline we expect client wage inflation to continue at a similar to 2023.
For 2024, we now also expect a return to positive net client hiring.
Gary Edward Kramer: Thank you. Our next question is from Jeff Martin with Rock Capital Partners. Please go ahead.
While 2023 had net negative quite hiring most of the reductions occurred early in the year with trends improving as the year progressed.
I'll only modestly factored into our outlook. We are also starting to see signs of residential construction spending improving benefiting our construction sector clients, which were a primary driver of declines in 2023.
Jeffrey Michael Martin: Thanks, good afternoon. So Kramer, I wanted to get into the renewal season, you know, a lot of our portfolio of clients renew and, first two months of the year, even. For more information, visit www.barrett.com. Barrett Business Services, LLC.
Beyond our client hiring we are optimistic about the momentum we see in our sales pipeline and 2023 has shown that even in a year with negative client hiring we were able to grow our total WSI stack by adding new customers more consistently.
This improvement in our ability to sell and service through economic fluctuations will bring even more stability to our long term growth.
For 2024, we expect gross margin as a percent of gross billings to be between $2, 95% at 315% in line with our 2023 rates with pricing adjustments being matched to ongoing cost savings.
Gary Edward Kramer: Just curious how that renewal period has gone and how the pricing environment is within new and existing. Yeah, so this is a good question. So there were a couple of firsts for us, right? So the first was, This was our first 1-1 selling season in California, and I can say I'm pleased with what we did in California. The other first was that this was our first renewal. So clients that we brought on outside of California for 1-1-23, this was our first renewal. I can tell you that our carriers are happy.
Finally, we expect our effective annual tax rate to be between 26% and 27%.
I will now turn the call back to the operator for questions.
Okay.
Thank you.
Ladies and gentlemen, we will now be conducting a question and answer session.
If you would like to ask a question. Please that's star then 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 remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock east.
Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Yeah.
Gary Edward Kramer: Our carriers are honestly ecstatic, and this is why we're able to bring on more carriers this year. They're ecstatic about how well we've done. They're ecstatic about our loss ratio and how good our underwriting is. But this was our first renewal season, and we renewed, I want to say, 94 percent of the benefits. So we only had a couple that fell out, and they fell out for either, primarily underwriting reasons that they fell out, but I was pleased with the operations for what we got done for both renewal and new business. And in terms of the pricing environment on new and renewal business. I don't know, you know, inflation is everywhere, right?
Our first question is from the line of Chris Moore with CJS Securities. Please go ahead.
Hey, its actually lead you go into for Christmas evening, Oh, good afternoon.
Hi, Lee.
So Gerry I guess, just starting with health care first.
Some of your health care competitors, obviously take underwriting risk on the health care, but you don't can you talk a little bit about the puts and takes and clearly there's less risk for you all but what are you, giving up as a result.
Yeah.
Yeah. Good question I mean.
Over the years, we've evolved our model on the workers' comp side, so that we no longer take the workers' comp risk we lay it all primarily all of it off to the insurance and reinsurance market.
So when we brought on the health care, we didn't want to have the <unk>.
Perceived underwriting risk on the health care side. So we've made sure that when we partnered with our partners that we're gonna be.
Long term strategic plays.
You know we.
We think of it as a we get a seller's fee and arguably we're able to charge more for our products. So that's really you think of it as a fixed fee type business that we're getting.
Gary Edward Kramer: So, you're seeing on the benefits side, the medical cost trend, and some of the other drugs that are coming out and driving up the RX prices. So, you know, there were some markets that were up 20%, but us being new, you know, being a new entrant into the game, we didn't have to try to push those 20% rate increases to our clients. What we were able to do was be an alternative for them. And we saw, because of the, you know, I'll say, You know, we're still new at this, right? We don't have a lot of years of experience to talk about it.
The economics that we give up is the risk versus reward as far as the underwriting on the health side that our competitors do read some some years, they're making money some years, they're losing money. We just want to have a consistent cash flow and earnings pattern.
And then in terms of the geographic bias. Once this is fully rolled out how should we think about geographies in the sense that obviously most of your working with workers' comp today is in California is it or is it going to be a similar geographic split or is there any.
Other moving parts there.
We we have workers comp in every state.
Not just California, I would say, it's it's pretty pretty well distributed based upon.
The way the payroll operations are you know.
California is our largest market we've got 20 branches there it's.
I'd, rather be big in California, the bigger, Rhode Island right. So.
But when we look at when we look at the map.
We're able to sell this product to everywhere and we're able to bring on.
Gary Edward Kramer: But, you know, I can tell you that we had more submissions and more transactions coming in because the market was charging a higher rate and folks were shopping around. It sounds like you're looking to continue to kind of bolster the technology platform for clients. Just curious if there are any strategic things you can tell us about what you're doing there and is this client-driven? Yeah, I would say it's predominantly client-driven. As we think of our enhancements to MyBBSI, it's really think of that client first and think about the employee life cycle that they have with their employees. And then how do we fill that employee life cycle better, number one. And then, number two, how do we push and pull data via APIs and things like that with other sources?
White collar business I think it was about 25% of the new business. We brought on for the health care was was in the white collar space, which which is fun and exciting for US right that was that was an industry that was a little more challenging for us to penetrate because of being heavy blue gray with the workers' comp.
But you know where we're filling in the map with our market development managers, but you know as we grow outside of California, we grow in California. So.
Our plan is to ultimately be a national player in big everywhere.
And then one more for me and I'll hop back in queue. So gross billings issue around 4% and you're guiding to 6% to 8% in 'twenty 'twenty four is there a scenario or what would it take to sort of approach double digit gross billings if at some point or have you just gotten too large and it's the law of large numbers preventing that.
No yeah.
So.
Alright, we grew in twenty-three when our clients were reducing their workforce right. So as we think of 'twenty for we think our clients are modestly go into higher and we have that model that it's gonna be.
More in the back half of the year starting in Q2.
But realistically Oh, if our clients hire us.
We could we could easily get into the double digit range.
Great. Thanks, very much I'll hop back in queue.
Yeah.
Gary Edward Kramer: So that's kind of the focus of thinking of the client first as far as specifics go. I don't want to give specifics until we actually launch products, and we have products that we're launching later in the year. And then last one for me, if I could, on the adjustments to prior year workers' compensation, liability, and premiums. 13 million last year; roughly 15 million this year.
Thank you.
Our next question is from Jeff Martin with Roth Capital Partners. Please go ahead.
Thanks, Good afternoon.
So Kramer I wanted to get into the renewal season, you know a lot of a lot of the portfolio of clients renew in the first two months of year, even some in December I would assume November December it I would assume just curious how that renewal.
It has gone in and how the pricing environment is within our new and existing clients.
Yeah. So this is good question. So there was a couple first for US right. So the first was.
Gary Edward Kramer: I assume that's going to tail off at some point. How should we think about that for maybe the 20? range? I know it's hard. Just in terms of how to think, and how people should think about it.
This was our first one one selling season in California, and I can say I'm pleased with with what we did in California.
The other first was this was our first renewal so clients that we brought on outside of California for one 123. This was our first renewable.
Gary Edward Kramer: You know, we're um... We're conservative by nature when we set our current year loss rates. And then, sorry, this is a Kramer answer. I'm going to wander on this one, Jeff. So, you know, we have what I call "best in class structural partners." We've got best in class risk managers, underwriting, claims folks, operations, and actuarial. We are a very mature organization. We have tech, we have AI that we use to help us with all this. And then we have about 200 folks, either directly or indirectly, that work on workers' comp at our organization.
I can tell you that our carriers are happy are our carriers are honestly ecstatic and that's why we're able to bring on more carriers. This year, they're ecstatic about how well we've done they're ecstatic about our loss ratio and how how good our underwriting is.
But this was our first renewal season.
And we renewed I wouldn't say it was 94% of the benefits so.
So we only had we only had a couple that fell out and they fell out.
You know for either an under primarily there for underwriting reasons that we said they fell out but I'm pleased that we're pleased with the operations for what we got the order for both new and renewal.
And in terms of the pricing environment on new and renewals.
Yeah.
Hum.
You know inflation's everywhere right, so you're you're seeing on the on the benefit side, the medical cost trend and.
Some of the other drugs that are coming out and draw and driving up the Rx prices. So.
There was some there were some markets that were up 20%.
But us being new you know being a new entrant into the game, we didn't have to try to push those 20% rate increases to our clients. What we're able to do is be an alternative for them.
And we saw because of the you know I'll say.
Yeah, we're we're still new at this rate.
We don't have a lot of years of experience to talk about it but I can tell you that we had more.
Gary Edward Kramer: Um, you know, we structured these new programs so that the interest is aligned with the market. If things are favorable, the market makes money, and then we as BBSI and as shareholders get money back. You know, we did that because we thought this would be more attractive to investors because it's a de-risk model, and we thought that we would get multiple expansion with it. You know, our conservatism and our results, but I think we've had 20 plus quarters, Anthony, 20, 20 quarters of favorable changes as an estimate for prior liabilities and for premium adjustments. 2024 was the largest event in our history.
More submissions and more transactions coming through because the market was charging a higher rate than folks for shopping around.
Makes sense.
It sounds like you're looking to continue to kind of bolster up the technology platform for clients just curious if there are.
Specific things that you can yeah yeah.
Enlighten us with in terms of strategically what you're doing there and as this client driven.
Is the underlying driver behind further enhancement.
Yeah, I would say it's it's.
Predominantly client driven.
We think of our enhancements to my BBSI. It's it's really think of think of that client first and think about the employee lifecycle that they have with their employees.
How do we.
How do we fill that employee lifecycle better number one and then number two how do we push and pull data via Apis and things like that with other sources. So that's that's kind of the focus so think of the client first as far as specifics.
I don't want to I don't want to give specifics until we actually launch products and we're going to have products that we're launching later in the year.
Okay, and then last one for me if I could on.
On the adjustments to prior year workers' compensation liability and premiums.
Yeah, 13 million last year, roughly $15 million. This year I assume that's going to tail off at some point, how should we think about that for maybe 2024 and 2025 in terms of a potential range I know, it's hard for you to predict but just in terms of how to think how people should think about it from a modeling standpoint.
You know were.
We're conservative by nature, when we set our are our current year loss rates.
Gary Edward Kramer: So if you just look at the trend, the trend for that aspect is our friend, right? So we feel like we've set ourselves up for this trend to continue. And if you look at 23, that was the largest number we've had in our history.
And then sorry. This is I'm going to give you a cramer answer I'm going to wander on this one Jeff so.
We have what I call the.
Best in class structural partners, we've got best in class risk managers Underwritings claims folks operation actuarial, we are very mature organization.
We have tech we have AI that we adopt to help us with all of this and then we have about 200 folks.
Either directly or indirectly that work on workers comp and organization.
Vincent Alexander Colicchio: Thank you. Ladies and gentlemen, a reminder, if you wish to ask a question, please press star and 1. Our next question is from the line of Vincent Colicchio with Barrington Research. Please go ahead.
We structured these new programs.
So that the interest is aligned with the market if things are favorable the market makes money in and then we use BBSI and of shareholders get money back.
We did that because we thought this would be more attractive to investors because it is a derisked model and we thought that we would get multiple expansion with them.
Our conservatism in our results.
Gary Edward Kramer: Yeah, good afternoon, Gary. Curious how your view of the economy has changed since last quarter. I assume it's a bit better.
You have to fact check me on this but I think we've had 20 plus quarters, Anthony Tony 20 quarters of favorable.
Favorable changes in estimate for prior year liabilities and for premium adjustments 2024 was our largest in our history.
So if you just look at the trend the trend for that aspect is our friend right. So we we feel like we've set ourselves up that this trend is going to continue and if you look at 'twenty three that was the largest number we've had in our history.
Gary Edward Kramer: If I understand correctly, you're assuming that existing clients will hire, you know, people will expand their roles in 24. Yeah, if you just think about all the things we've learned in our last 18 months of experience, right from just the payroll exposure. We started to see our clients pull back in Q4 of 22, and they pulled back in Q1 of 23, and pulled back some in Q2. The nice thing was that in Q3 of 23, we started to see it stabilize, you know, slight hiring. In 24, or Q4 of 23, we saw slight hiring as well, right? So we're seeing stability in Q3, we see stability in Q4, and then the numbers that we're seeing so far through January and February are more stability. So, you know, when we look at businesses that reduced their workforce, that was, you know, primarily in the construction and trades. And if you look at the construction trades, you just look at the housing starts, things are coming back now.
That's helpful. Thank you.
Thank you.
Ladies and gentlemen.
If you wish to ask a question please press star and one.
Yeah.
Our next question is from the line of Vincent Colicchio with Barrington Research. Please go ahead.
Yeah. Good afternoon, Gary I'm curious how your view of the economy has changed since last quarter I assume it's a bit better if I heard correctly, you're assuming that existing clients will hire.
People will expand their roles in 'twenty four.
Yeah. If you just think about call. It our last 18 months of experience right from just the payroll exposure.
We started to see our clients pull back.
And at Q4 of 'twenty, two and they pulled back in Q1 of 'twenty three pull.
Pulled back some in Q2.
The nice thing was in Q3 of 23 was when we started to see it stabilize.
Slight hiring.
And 24.
For Q4 of 'twenty, three we saw slight hiring as well right. So we're seeing stability in Q3, we seek to build stability in Q4, and then the numbers that we're seeing so far through January and February is more stability.
Yeah, we when we look at the business that reduce their workforce that was primarily in the construction trades and if you look at the construction trades.
Gary Edward Kramer: And that's what gives us, you know, kind of more optimism for our workforce, that our clients are going to resume hiring into 24. And if you double your health care clients by, you know, next year, the amount of income that comes in from that is that, Uh, you know, what you would have. Let me ask you something. What I'm trying to say is, uh, will that be a meaningful amount of income to the company? If you hit that goal,
You just look at the housing starts things are coming back now and Thats what gives us.
Kind of more optimism for our workforce that our clients are going to resume hiring into 'twenty four.
Yeah.
And if you double your your health care clients by you know next year.
The amount of.
Income that comes in from that is that.
You know what you would have expected.
I mean, what I'm trying to say is would that be a meaningful amount of income to the company.
You hit that goal.
Vincent Alexander Colicchio: We're not going to guide you to just the product line. But we're not doing this for pennies. We're doing it for dollars. And then you said you have 15 AssetLight programs in place currently. Curious if some of those have already converted to physical locations and how do you feel about opening additional physical locations this year? Yeah, we are in a couple of the markets, and we're actively searching for real estate.
E.
We're not going to guide to just the product line, but we're not we're not doing this for paintings where donor for dollars.
Okay.
And then.
<unk> said you have 15 asset light.
Programs in place currently.
Curious if some of those have already converted two physical locations and how do you feel about opening additional physical locations. This year.
Yes, we are in a couple of the markets. We are actively searching for real estate and we are also recruiting to have local support so in a couple of the markets. We're looking at.
Gary Edward Kramer: And we are also recruiting to have local support. So in a couple of the markets, we're looking at local HR because we're doing pretty well in those spots. We anticipate that we'll probably have three markets that go brick and mortar in 24.
Local HR, because we're doing pretty well in those spots.
We anticipate that we'll probably have three markets that deco brick and mortar in 'twenty four and then more to that to follow in 'twenty five.
Vincent Alexander Colicchio: And then more to that the following 25. Thanks, Gary. I'll go back in the queue in a nice quarter.
Thanks, Gary I'll go back in the queue and nice quarter.
Vincent Alexander Colicchio: Thank you. Thank you. Our next question is from the line of Marc Riddick with Sidoti and Company. Please go ahead.
Thank you.
Yeah.
Thank you.
Our next question is from the line of Marc Riddick with Sidoti and company. Please go ahead.
Hey, good evening everybody.
Marc Frye Riddick: Good evening, everybody. I was wondering if, with this being the first selling season for BBSI, if you could talk a little bit about the benefits, sorry, for the, were there any particular learnings or things that have taken place as you've gone through this process thus far that have been a slight positive surprise, slight negatives, anything as part of that process that was outside of expectation? I'd say I'm glad I lost my hair prior to this rollout, but it was not a straight line.
So I was wondering if I was wondering if within.
With this being the first selling season for us for the first key selling season.
You could talk a little bit about the <unk>.
Benefits I'm, sorry for the were there any particular learnings or things that have taken place as you've gone through this process. Thus far that have been a slight positive surprise slight negative as anything as part of that process that.
Was was outside of expectations.
Yeah.
I'd say I'm glad I lost my hair prior to this rollout it was not a straight line it was.
Gary Edward Kramer: We learned a lot of things along the way. Part of what we're doing right now is, while it's still fresh, we have a whole continuous improvement team to go through and understand what we need to do better on the sales service underwriting for new and renewal. I can say I'm proud of the team, I'm proud of the company, and I'm proud of the organization for getting it done. We learned a lot of lessons, probably good lessons that we can build upon.
Got.
It was we learned a lot of things along the way part of what we're doing right now as you know.
While it's still fresh you know, where we're having a whole continuous improvement team to go through and understand what do we need to do better on the sales service underwriting for new and renewal.
I can say I'm proud of the team are proud of the company and I'm proud of the organization for getting it done we learned a lot of lessons.
But probably good lessons that we can build upon.
Marc Frye Riddick: Okay, excellent. Then, shifting gears a little bit, I wanted to sort of go back to your commentary on the NPS exercise that you did. I thought it was kind of interesting.
Okay excellent and then the other thing was shifting gears a little bit I wanted to sort of go back to your commentary around the <unk>.
M. P. S exercise, but you did I thought that was kind of interesting one maybe you could talk a little bit about what led you to.
Gary Edward Kramer: One, maybe you could maybe talk a little bit about what led you to do that. And two, was there any sort of differentiation between certain industry or client verticals that maybe scored higher than others? Or was there any, or was that, you know, generally across the board with those scores?
To do that.
And two was there any sort of differentiation.
Certain industry or client verticals that may be scored higher than others or was there any was that generally across the board with those scores.
Gary Edward Kramer: Thanks. That's a good question. I mean, part of this was, you know, every year we do a survey, and surprisingly, we get a lot of folks that utilize it. We get a good sample, right? And we use that to understand, you know, what we are doing well. What do we need to do better? What are our clients asking for? And that's how we shape some of the directions that we take with our IT products.
Good question I mean part of this was you know every year, we do a survey.
And we can begin surprisingly.
We get a lot of folks that utilize it if we get a good sample right and we use that to understand you know what are we doing well what do we need to do better what our clients are asking for and that's that's how we shape some of the directions that we go with our it products Oh, that's really where we're listening to our clients and they're telling us that.
Marc Frye Riddick: It's really, we're listening to the clients, and they're telling us that, www.barrett.com.au, It's pretty remarkable to have a score that high. I'm really proud of the work we're doing. I'm glad you actually called that out, because that was pretty interesting to hear, so I really appreciate that.
The net promoter score was a was it was a good.
Thought from some of our board. They said if you're doing this why don't you do the net promoter score. So I honestly didn't know what it was I had to read it up.
But I'm pretty pleased with.
With the results of the survey I mean, it's.
It's.
It's pretty remarkable to have a score that high I'm really proud of the work we're doing.
No I'm glad you actually called it out so it's a pretty pretty interesting to hear so I really appreciate that thank you.
Gary Edward Kramer: Ladies and gentlemen, 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. Yeah, I just want to thank all of our BBSI employees for a great year. And I want to thank all of our clients for partnering with BBSI.
Okay.
Okay.
Thank you.
Ladies and gentlemen 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.
Yeah, I just want to thank all of our BBSI employees for a great year and I want to thank all of our clients for partnering with BBSI I. Appreciate your time. Thank you.
Operator: I appreciate your time. Thank you. Thank you. The conference of BBSI has now concluded. Thank you for your participation. You may now disconnect your line. Unknown Speaker 00.00.00.00. [inaudible]
Yeah.
Thank you the conference of BBSI has now concluded. Thank you for your participation you may now disconnect your lines.
Okay.
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Yeah.
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