Q1 2025 Barrett Business Services Inc Earnings Call
Speaker Change: [music].
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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 first quarter year, March 31, 2025.
Good afternoon, everyone and thank you for participating in today's conference call to discuss Bbsi's financial results for the first quarter you much stricter 1025.
Operator: Joining us today are BBSI's President and CEO, Mr. Gary Kramer, and the company's CFO, Mr. Anthony Harris. Following their remarks, we'll open the call for your questions.
Gary FEMA: Joining us today I B B S ice precedent in C L. Mr. Gary FEMA and the company's CFO, Mr. Anthony Hamish.
For yoga much well open the call for your questions.
Operator: Before we go further, please take note of the company's Safe Harbor Statement within the meaning of the Private Securities Litigation Reform Act of 1995. This 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.
Gary FEMA: Before we go figure. Please take note of the company's Safe Harbor statement within the meaning of the private Securities Litigation Reform Act.
Gary FEMA: Yeah.
Gary FEMA: The statement provides important cautions regarding forward looking statements. The company is too much joined today's conference calls when it was good forward looking statements.
Gary FEMA: These statements along with other information presented that does not just take historical facts are subject to a number of risks and uncertainties.
Gary FEMA: So lets me do you feel materially from those implied by these forward looking statements.
Operator: Please refer to the company's recent earnings release and to the company's quarterly and annual reports filed with the Securities and Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ from those expressed or implied by the forward-looking statements.
Gary FEMA: Please refer to the company's recent earnings release and to the company's quarterly and annual reports filed with the Securities and Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ from don't inspect or implied we deploy we're looking statements.
Operator: I would like to remind everyone that this call will be available for replay through May 30th starting at 8 o'clock p.m. Eastern Time tonight and 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.bbsi.com.
Gary FEMA: I'd like to remind everyone that this call will be available for replay through may 30th starting at eight o'clock P. M. Eastern time Tonight and a webcast replay will also be available they don't eat because I didn't meet today's press release as well as available on the company's website at Www Dot B B S site that come.
Gary Kramer: Now, I would like to turn the call over to the President and Chief Executive Officer of BBSI, Mr. Gary Kramer. Sir, please go ahead. Thank you and good afternoon, everyone, and thank you for joining the call. I am pleased to report that we had a record start. Our new client sales coupled with our upselling of new products plus great client have resulted in our revenue exceeding our expectations. continue to execute our growth objectives. added a record number of worksite Moving to our financial results and our worksite employees. During the quarter, our gross billings increased 9.5% over the prior year's quarter and was greater than our expectations.
Gary FEMA: Now I would like to turn the call over to the President and Chief Executive Officer of BBSI, Mr. Gary Kramer, Sir. Please go ahead.
Gary FEMA: Thank you and good afternoon, everyone and thank you for joining the call I'm pleased to report that we had a record start to the year, our new client sales coupled with our up selling of new products plus great client retention resulted in our revenue exceeded our expectations.
Gary FEMA: We continued to execute our growth objectives, and we added a record number of Worksite employees.
Gary FEMA: Moving to our financial results in our Worksite employees.
Gary FEMA: During the quarter, our gross billings increased nine 5% over the prior year's quarter and was greater than our expectations.
Gary Kramer: We continue to execute on our various strategies to increase the top of the sales funnel and we are seeing positive results. We had a very strong Q1 selling. adding 55% more WSEs from new client ads than prior year. Our client retention continues to trend better than our historical I'd like to attribute that to the work we do with our clients and the value our team As a result of all these efforts, or what I refer to as controllable... that we added approximately 7,900 worksite employees year-over-year from that new client. We mentioned previously that we began to see our clients resume hiring, but below historical levels.
Gary FEMA: We continued to execute on our various strategies to increase the top of the sales funnel and we are seeing positive results.
Gary FEMA: <unk> had a very strong Q1, selling season, adding 55% more wsu's from new client adds and prior year quarter.
Gary FEMA: Our client retention continues to trend better than our historical levels I'd like to attribute that to the work, we do with our clients and the value our teams provide.
Gary FEMA: As a result of all these efforts are what I refer to as controllable growth is that we added approximately 7900 worksite employees year over year from net new clients.
Gary FEMA: We mentioned previously that we began to see our clients resume hiring but below historical levels.
Gary Kramer: January and February followed this fact pattern, but hiring slowed down in March and was less than we expected. Our clients' workforce still grew in Q1, but at a slightly slower pace than we is a net result of strong customer ads and positive customer hiring. that we grew worksite employees by seven.
Gary FEMA: January and February followed this fact pattern, but hiring slowed down in March and was less than we expected our.
Gary FEMA: Our clients' workforce still grew in Q1, but at a slightly slower pace than we planned for that.
Gary FEMA: The net result of strong customer adds and positive customer hiring what is that we grew worksite employees by seven 6%.
Gary Kramer: Moving to our staffing operation. Our staffing business declined by 10% over the prior year quarter and was below our expectations. January and February were in line with our expectations, but we experienced a slowdown in March. continue to execute on our strategy to recruit for our PEO. We also experience macroeconomic headwinds, including supply and demand imbalance.
Gary FEMA: Moving to our staffing operations, our staffing business declined by 10% over the prior year quarter and was below our expectations.
Gary FEMA: January and February were in line with our expectations, but we experienced a slowdown in March we continued to execute on our strategy to recruit for our PEO clients and we placed 105 applicants in the quarter.
Gary FEMA: We also experienced macroeconomic headwinds, including supply and demand imbalances, which vary by geography.
Gary Kramer: https://brewstew.com https://www.brewstew.com Moving to the field operational updates, we're very pleased with our entrance into new markets with our asset light model. We have 21 total new market development managers in various stages of their development. These folks have been gaining traction and concern. and had a great first quarter by adding over 600 new W... We've hired additional folks locally to support our clients and are in the process of moving into traditional brick-and-mortar BBSI. We expect to move into new physical locations in Chicago, Dallas, and Nashville by early Thursday. We continue to see positive results from our investments in new markets and are actively recruiting additional new market developers.
Gary FEMA: Moving to the field operational updates, we're very pleased with our entrance into new markets with our asset light model.
Gary FEMA: We have 21 total new market development managers in various stages of their development.
Gary FEMA: These folks have been gaining traction and consistency and had a great first quarter by adding over 600, new ws he's.
Gary FEMA: And three of the markets, we hired additional folks locally to support our clients and are in the process of moving into traditional brick and mortar BBSI branches.
Gary FEMA: We expect to move into new physical locations in Chicago, Dallas, and Nashville by early third quarter.
Gary FEMA: We continue to see positive results from our investments in new markets and are actively recruiting additional new market development managers.
Gary Kramer: regarding product updates. continue to execute on the sale and service of BBSI Benefits, our new health insurance. We're off to a great start. For the 1-1 selling season, we added approximately 3,000 participants to our various benefits programs. I am pleased to report that through April, we have approximately 640 clients on our various plans. for more than $17,500. for gaining traction and continue to improve the sale and servicing of BBSI benefits. Our value proposition resonates well and we're having success with small and large clients. in every state that we operate, and with a diverse We are pleased with the results of BBSI benefits, and this product will be accretive to earnings in 2025.
Gary FEMA: Regarding product updates.
Gary FEMA: We continued to execute on the sale and service of BBSI benefits, our new health insurance offering.
Gary FEMA: We're off to a great start for the year for the one one selling season, we added approximately 3000 participants to our various benefits products.
Gary FEMA: Pleased to report that through April we have approximately 640 clients on our various plans with more than 17500 total participants.
Gary FEMA: We're gaining traction and continue to improve the sale and servicing of BBSI benefits, our value proposition resonates well and we're having success with small and large clients and white and blue collar industries in every state that we operate and with a diverse distribution channel.
Gary FEMA: We are pleased with the results of BBSI benefits and this product will be accretive to earnings in 2025, we.
Gary Kramer: We are bullish on this product and will now reap the benefit of leverage.
Gary FEMA: We are bullish on this product and will now reap the benefit of leverage through scale.
Gary Kramer: Next, I'd like to shift to our 2025 IT product. We've previously mentioned that we've been investing in our tech stack on the product side to service and support our clients. Over the last couple of years, we've made additional investments in MyDVSI. for BBSI Benefits. added a learning manager. and numerous integrations with third parties. As we evolve and look forward to the remainder of 2025, we will be making additional investments to round out the employee life cycle. We think of the employee life cycle from the client's perspective, from when an employee is hired to when the employee retires, and everywhere in business.
Next I'd like to shift to our 2025 product objectives.
Gary FEMA: I've previously mentioned that we have been investing in our tech stack on the product side to service and support our clients better over.
Gary FEMA: Over the last couple of years, we've made additional investments that might be BSI to support BBSI benefits added a learning management system and numerous integrations with third parties as.
Gary FEMA: As we evolve and look forward to the remainder of 2025, we will be making additional investments to round out the employee lifecycle experience.
Gary FEMA: We think of the employee lifecycle from the client's perspective from when an employee is hired when the employee retires and everywhere in between we.
Gary Kramer: We will be replacing or bolstering attributes of the life cycle with additional product launches throughout the year.
Gary FEMA: We will be replacing or bolstering attributes of the lifecycle with additional product launches throughout the year.
Gary Kramer: In March, we launched a BBSI applicant track. Cutting-edge tool that allows our clients to create job postings from our centralized and integrates with various third-party jobs. Finance can manage the interview process in our system, and then when an employee is hired, they integrate seamlessly with our payroll. This will help our clients with organization and create multiple... still early days, but we're hearing only positive. Clients appreciate the investment and appreciate the time there. We are excited about this launch and the future launches as we execute on our product roadmap.
Gary FEMA: In March we launched the BBSI applicant tracking system cutting edge tool that allows our clients to create job postings from our centralized system, which integrates with various third party job boards bites can manage the interview process in our system and then when employees hired they integrate seamlessly with our payroll and time keeping systems.
Gary FEMA: This will help our clients with the organization and create multiple efficiencies.
Gary FEMA: It is still early days, but we're hearing only positive feedback clients appreciate the investment and appreciate the time. They are saving we're excited about this launch and the future launches as we execute on our product roadmap for 2025.
Gary Kramer: Next, I'd like to shift to our view of the remainder of We had a fabulous start to the year, and we have great momentum on building. We have more products to sell, more folks selling them, and more referral partners recommending you. But we would be remiss if we didn't acknowledge that the remainder of the year may look different than the beginning. Trade negotiations and other government initiatives are creating a time of uncertainty. PBSI has minimal to no direct exposure to target. However, we have indirect exposure if this causes our clients to reduce or increase their and you have a time of uncertainty.
Gary FEMA: Next I'd like to shift to our view of the remainder of the year.
Gary FEMA: We had a fabulous start to the year and we have great momentum on billings growth.
Gary FEMA: Have consistently achieved strong controllable growth by focusing on the needs of our clients and by adding new clients we.
Gary FEMA: We have more products to sell more folks selling them and more referral partners recommending BBSI.
Gary FEMA: But we would be remiss, if we didn't acknowledge that the remainder of the year may look different than the beginning of the year.
Gary FEMA: Trade negotiations and other government initiatives are creating a time of uncertainty.
Gary FEMA: BDSI has minimal to no direct exposure to tariffs.
Gary FEMA: However, we have indirect exposure if this causes our clients to reduce or increase their workforce when.
Gary FEMA: When you have a time of uncertainty you typically see hiring slowdown.
Gary Kramer: https://www.barrett.com The Demand Environment can become more restrained and price. Regarding our outlook for the remainder of the year in a traditional economy and based upon our strength in Q1. would have raised our billings out. With this uncertainty, we think it prudent to err on the side of caution and maintain our outlook for Billings growth and WSC growth. would have tightened the gross margin. We believe the current environment has clouded our ability to appropriately update our 2025 estimates. Nevertheless, we believe BBSI is well-suited to navigate these macroeconomic dynamics. are in challenging times, small businesses are better off in a PEO relationship.
Gary FEMA: Company invest and slowdown in the demand environment and become more of a strained and price sensitive.
Gary FEMA: Regarding our outlook for the remainder of the year and the traditional economy and based upon our strength in Q1, we would have raised our billings outlook for the year, but with this uncertainty we think it prudent to err on the side of caution and maintain our outlook for billings growth and WSI growth.
Gary FEMA: Similarly, we would've tightening the gross margin range.
Gary FEMA: We believe the current environment has clouded our ability to appropriately update our 2025 outlook.
Gary FEMA: Nevertheless, we believe BBSI is well suited to navigate these macroeconomic dynamics.
Gary FEMA: Our champion challenging times small businesses are better off in our PEO relationship and can benefit from our scale and expertise our consistent execution.
Gary Kramer: benefit from our scale and. are consistent. Unferentiated service model and strong client relationships position us to continue driving sustainable growth in 2025 and long-term value .
Gary FEMA: <unk> service model and strong client relationships position us to continue driving sustainable growth in 2025, and long term value beyond now.
Anthony Harris: Now I'm going to turn the call over to Anthony for his... Thanks, Gary. Hello, everyone. I'm pleased to report we finished the quarter with strong results and exceeded our Gross billings increased 9.5% to $2.09 billion in Q125. $1.91 billion.
Anthony: Now I'm going to turn the call over to Anthony for his prepared remarks. Thanks.
Anthony: Thanks, Gary and Hello, everyone.
Anthony: I am pleased to report that we finished the quarter with strong results and exceeded our plan.
Anthony: Gross billings increased nine 5% to $2 9 billion in Q1 25 versus $1 91 billion in Q1 24.
Anthony Harris: CEO, Gross Billing. 10% staffing revenues declined 10% to $18 million. Our PEO worksite employees grew by seven. As Gary noted, it was driven by a record number of WSE's added... coupled with ongoing strong client retention. continued a strong trend of control. In addition, we thought continued, but still subdued, client hiring. Total hours and overtime hours increased. continuing to show stability. Wage rates... as well, and average billing per WS... Average billing for WSC would have been higher, but Q1 included one less business day than the prior year.
Anthony: Gross billings increased 10% in the quarter to $2 7 billion.
Anthony: Staffing revenues declined 10% to $18 million in the quarter.
Gary: Our PEO Worksite employees grew by seven 6% in the quarter, which as Gary noted was driven by a record number of WSI is added from new clients.
Gary: This was coupled with ongoing strong client retention, which continued a strong trend of controllable growth.
Gary: In addition, we saw continued but still subdued client hiring in the quarter.
Gary: Total hours and overtime hours increased modestly year over year continuing to show stability.
Gary: Wage rates continue to increase as well in average billing per WMC increased two 6% in the quarter.
Gary: Average billing per WRC would have been higher but Q1 included one less business day than the prior year.
Anthony Harris: Looking at the Year-over-Year PEO Growth Buildings Growth by Region for Q1. Southern California grew by 11 Mountain grew by nine. Northern California grew by 6% and the Pacific Northwest declined by 1%. Southern California represents our large Transcripts provided by Transcription Outsourcing, LLC. better than expected. Strong East Coast performance. is also driven by strong control. Pacific Northwest Region is our smallest region, comprising about 5% of our population.
Gary: Looking at the year over year PEO gross billings growth by region for Q1.
Gary: The East Coast grew by 14% Southern California grew by 11%.
Gary: <unk> grew by 9%.
Gary: Northern California grew by 6% in the Pacific Northwest declined by 1%.
Gary: Southern California represents our largest region.
Gary: And has improved to double digit growth through a combination of consistent client adds and customer hiring.
Gary: And better than expected client retention.
Gary: The strong east coast performance represents the 16th consecutive quarter of double digit growth in that region.
Gary: Also driven by strong controllable growth.
Gary: The Pacific Northwest region is our smallest region, comprising about 5% of our gross billing.
Gary: And they had a modest reduction in net client hiring.
Anthony Harris: Turning to Margin and Profitability. Our Workers' Compensation Program. Unknown Speaker, Transcription by Transcription Outsourcing, LLC. Transcription by Transcription Outsourcing, LLC. Strong performance has once again resulted in favorable adjustments. We recognize favorable prior year liability and premiums. compared to favorable adjustments of $3 million in the first quarter. As a reminder, our client workers' compensation expo... is now primarily covered by our fully insured. with no retained risk by As with past quarters, the cost savings we recognize on workers' compensations... Offset Pricing Pressure in the Workers' Compensation Insurance Market. © The Bollinger Boards All Rights Reserved, LLC. The Bollinger Boards is a registered Trademark of The Bollinger Bands.
Gary: Turning to margin and profitability.
Gary: Our workers compensation program continues to perform well and benefit from favorable claim frequency trends and favorable claim development.
Gary: This strong performance has once again resulted in favorable adjustment for prior year claims.
Gary: In Q1, 25, we recognized favorable prior year liability and premium adjustments of $3 8 million compared to favorable adjustment of $3 million in the first quarter of 2024.
Gary: As a reminder, our client workers' compensation exposure is now primarily covered by a fully insured program with no retained risk by BBSI.
Gary: As with past quarters, the cost savings, we recognized that workers' compensation expense has continued to offset pricing pressure in the workers' compensation insurance market, which continued to move overall rate lower.
Anthony Harris: Looking at our payroll tax costs, payroll taxes are typically highest in Q1. This year has seen modestly higher effective unemployment tax rates than in recent years. These rates are reflected in our billing rates over the course of the year. Our overall profitability. operating Unknown Attendee, Barrett Business Services Inc. primarily. higher profit share. Investment Income, our Investment Portfolio. and from the prior year. Unknown Speaker.
Gary: Looking at our payroll tax cost payroll taxes are typically highest in Q1 as wage caps reset.
Gary: This results in lower margins in the first quarter of the year.
Gary: This year has seen modestly higher effective unemployment tax rates than in recent years. These rates are reflected in our billing rates over the course of the year or.
Gary: Our gross margin rate remained in line with our expectation for the quarter.
Gary: Our overall profitability has continued to benefit from operating cost leverage for Q1, SG&A expense increased by approximately 6% due primarily to employee related costs, including higher profit share incentives due to the strong quarter.
Gary: SG&A costs continue to grow slower than our billings growth rate.
Gary: Moving to investment income our investment portfolios earned $2 6 million in the first quarter down approximately 600000 from the prior year due to lower average interest rates.
Anthony Harris: And as a reminder, our The combined results of these activities was a net loss per diluted share of... Unknown Attendee, Barrett Business Services Inc. As a reminder, Page PAGE of NUMPAGES www.verbalink.com Our balance sheet remains strong with $99 million of unrestricted cash and investments at March 31st and no... Continued, our consistent approach to capital... investment back into the company through product. contributing excess capital to our shareholders through our dividend and stock buyback. Under our $75 million repurchase program, BBSI repurchased $9 million of shares. an average price of $39. $21,000,000 remaining available under the program at This company also paid $2.1 million in dividends in the quarter and reaffirmed its dividend for the fall.
Gary: As a reminder, our investment portfolio continues to be managed conservatively with an average quality of investment at double a.
Gary: The combined results of these activities was a net loss per diluted share of <unk> <unk> compared to a net loss of <unk> <unk> per diluted share in the year ago quarter.
Gary: As a reminder, due to the seasonality in payroll tax expense, we typically incur a loss in the first quarter of the year.
Gary: Our balance sheet remains strong with $99 million of unrestricted cash and investments at March 31, and no debt.
Gary: We continued our consistent approach to capital allocation, making investments back into the company through product enhancements and geographic expansion.
Gary: And distributing excess capital to our shareholders through our dividend and stock buyback plan.
Gary: Under our $75 million repurchase program BBSI repurchased $9 million of shares in the first quarter at an average price of $39 85 per share with.
Gary: With $21 million remaining available under the program at quarter end.
Gary: The company also paid $2 $1 million of dividends in the quarter and reaffirmed its dividend for the following quarter.
Anthony Harris: Now turning to our Outlook for the Q1 Results Exceeded Expected. Collecting straw. However, as Gary mentioned, we're approaching the rest of the year with measured caution. Unknown AttendeeGiven the potential effects of economic uncertainty on our We're therefore maintaining our power.
Gary: Now turning to our outlook for the full year.
Gary: Our Q1 results exceeded expectation, reflecting strong execution across the company. However.
Gary: However, as Gary mentioned, we are approaching the rest of the year with measured caution given.
Gary: Given the potential effects of economic uncertainty on our clients.
Gary: And we are therefore, maintaining our outlook outlook from the beginning of the year.
Anthony Harris: To recap, that outlook includes a growth billings increase between 7% and 9% for the year, WSE growth between 4% and 6% for the year, growth margin.
Gary: To recap that outlook include the gross billings increased between seven and 9% for the year.
Gary: <unk> growth between four and 6% for the year gross.
Gary: Gross margin as a percent of gross billings between $2 85 to three 1%.
Gary: And an effective annual tax rate between 26 at 27%.
Operator: I will now turn the call back to the operator. Thank you.
Gary: I will now turn the call back to the operator for questions.
Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 4 by the 1 on your telephone keypad. You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star 4 by the 2. If you are using a speakerphone, please lift the handset before pressing any key.
Gary: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star one on your telephone keypad.
Gary: Prompt that Johanna has been raised and should you wish to cancel your request. Please press star followed by the June if you're using your speaker phone. Please tasty handset before pressing any Keith.
Operator: One moment, please, for your first question.
Gary: One moment. Please for your first question.
Christopher Moore: Your first question comes from the line of Chris Moore from CJS Securities. Please go ahead. Hey, good afternoon, guys. Congrats on a nice quarter. And thanks for taking a few.
Speaker Change: Your first question comes from the line of Chris Moore from CJS Securities. Please go ahead.
Chris Moore: Hey, good afternoon, guys congrats on a nice quarter.
Speaker Change: Hey, Thanks for taking a few so maybe just on the tariff side.
Gary Kramer: So maybe just on the on the tariff side, I think we talked about this a little bit last quarter, but you know, roughly what percentage of your clients would you estimate have direct tariff exposure and that that could be positive or negative? Yeah, just in general, we primarily deal with service Unknown Attendee, Barrett Business Services Inc. supplies. We'll We don't have a ton of manufacturing which would have to deal with this. where we do see it is. Southern L.A. or Long Beach area. We do have some trucking. Intermodal Business, that that. www.barrett.com. less ships are coming in from China.
Chris Moore: We talked about this a little bit last quarter, but.
Speaker Change: Roughly what percentage of your clients.
Chris Moore: Would you estimate have.
Chris Moore: Direct tariff exposure and that that could be positive or negative.
Chris Moore: Yes, I mean, just in general we primarily deal with service businesses think of the Blue Gray the contractors the trades.
Chris Moore: They're not going to have the direct they're gonna have the indirect which is maybe some other materials or supplies will cost more.
Chris Moore: We don't have a ton of manufacturing, which would have to deal with this.
Chris Moore: Where we do see it is.
Chris Moore: Called our southern La long Beach area.
Chris Moore: We do have some trucking and logistics business intermodal business that that we've seen.
Chris Moore: Start to slow down as you look at the.
Chris Moore: I think it's like <unk>.
Chris Moore: 60% less shifts are coming in from China to the port and if theres less ships coming in there's less freight to move we're seeing it there, but I would say in the aggregate it's nothing that's material.
Gary Kramer: There's less ships coming in. There's less... there, but I would say in the got very helpful.
Chris Moore: Got it very helpful.
Gary Kramer: One of the, I've seen one of the bigger changes in the BBSI model last Five years or so is the asset light model, you know, allows you to cost effectively determine if a new geography makes sense. You mentioned three new physical locations. Is there an annual goal or target for the number of new physical offices?
Chris Moore: So one of the obviously one of the bigger changes in the BBSI model with less <unk>.
Chris Moore: Five years or so is the asset light model allows you to cost effectively to determine if a new geography it makes sense.
Speaker Change: You mentioned <unk>.
Chris Moore: Three new.
Chris Moore: Physical locations.
Chris Moore: Is there an annual goal or target for the number of new physical offices.
Gary Kramer: Good question, it really has to do with the development in that area. Some markets develop quicker than others. We expect all the markets to develop.
Yes. Good question its really has to do with the development in that area.
Chris Moore: Yeah.
Chris Moore: Some markets are.
Chris Moore: Our markets develop quicker than others, we expect all of the markets to develop we don't really have a plan for how many.
Gary Kramer: We don't really have a plan for how. Page PAGE of NUMPAGES www.verbalink.com We look at it and say, when does it make business sense to put the brick and mortar there? And the reason we do that is... Once you get the brick and mortar, you're going to have the expense that goes with it and you want to make sure that you can justify it. When we look at the first three, it's Dallas where we're doing well, Chicago where we're doing well, Nashville where we're doing well. They will come online.
Chris Moore: Physical locations, we're going to have any year.
Chris Moore: Some of them.
Chris Moore: We look at it and say what when does it make business sense to put the brick and mortar there.
Chris Moore: And the reason we do that it's just because when you once you get the brick and mortar you're going to have the expense that goes with it you want to make sure that you can justify the expense. So when we look at the first three its Dallas, where we're doing well Chicago, where were doing well national where were doing well they.
Chris Moore: They will come online in <unk>.
Speaker Change: Q2 early Q3 is where we're going to have the ribbon cutting for them.
Gary Kramer: Transcripts provided by Transcription Outsourcing, LLC. Possibly two more followed next year, but we don't have when they're ready for it.
Chris Moore: And then we will probably have one more by the end of the year.
Chris Moore: With possibly two more followed next year, but we don't have a cadence of say three year, its really when they're ready for it and surprisingly the thing that has really surprised me is.
Gary Kramer: And surprisingly I was really surprised. I would think it'd be easier to get commercial real estate in this market. It's been a challenge in some places we we wanted to Challenge on the Rills.
Chris Moore: I would think it would be easier to get commercial real estate in this market. It's been a challenge in some places we wanted to be in these in these locations sooner, but it's been a challenge on the real estate, so I believe it or not.
Gary Kramer: Interesting. I'm just trying to understand, you know, kind of estimate what percentage of growth, you know, over the next, say, five years could come from geographic expansion. I mean, can that add a point or two of growth a year over time? Or is that too aggressive?
Chris Moore: Interesting.
Chris Moore: I'm, just trying to understand kind of estimate.
Chris Moore: What percentage of growth over.
Chris Moore: Over the next say five years could come from geographic expansion.
Chris Moore: Can that add a point or two of growth a year over time or is that.
Chris Moore: To correct too aggressive.
Gary Kramer: We really think of it as, you know, I like to call them our 401k, right? These are our investments. We know that we're going to get revenue out of them in the short term. We know that we have a plan that they're going to get up to speed and cover their costs. But we're really not doing this for profitability until we get out. We look at it as a profitability play, not a revenue play. Got it. And that makes sense.
Chris Moore: We really think of it as you know I like to I like to call them. Our 401K right. These are these are investments for the future. We know that that were never going to get revenue out of them in the short term and we know that we have a plan that they're going to get up to speed and cover their cost in the short term.
Chris Moore: But we're really not doing this for profitability until we get out until year three and beyond.
Chris Moore: When we look at as a profitability play not a revenue play.
Chris Moore: Got it.
Gary Kramer: Maybe just the last one for me on the healthcare side. Obviously, you have two key relationships, you know, Aetna and Kaiser Permanente.
Chris Moore: And that makes sense, maybe just last one for me in the health care side, obviously, you have two key relationships Aetna Kaiser Permanente.
Gary Kramer: Is that enough? Is there any value in a third partner at this point in time? We have partnerships that we. that are not as large as those, you know, we have some blues, we have some other other carriers. Typically, when we're in a market, we try to understand How is the Aetna network? Do we need to complement the Aetna network with a regional carrier? Transcripts provided by Transcription Outsourcing, LLC. Got it.
Chris Moore: Is that enough is there any value in it and a third partner at this point in time.
Chris Moore: We have partnerships.
Chris Moore: Partnerships that we got.
Chris Moore: They're not as large as those we have some blues we have some other other carriers in certain states.
Chris Moore: Typically when we're in a market we try to understand.
Chris Moore: How is the Aetna network do we need to complement the network Aetna network with a regional carrier or if we do have the complemented with a region or regional carrier, we had them in so in certain states, where it makes sense I think it's like three or four states. We already have additional carriers in those states.
Christopher Moore: I'll jump back in line. Thank you.
Chris Moore: Got it and then I'll jump back in line. Thank you.
Jeff Martin: And your next question comes in the line of Jeff Martin from Roth Capital Markets. Please go ahead. Thanks, good afternoon.
Speaker Change: Thank you and your next question comes from the line of Jeff Martin from Roth Capital markets. Please go ahead.
Speaker Change: Thanks, Good afternoon.
Gary Kramer: Kramer wanted to dig in a little bit more on, you know, kind of how you when you when you updated guidance or maintain guidance relative to Q1B, what were some of the factors that you considered and come into your conclusion? That seven to 9% gross billings growth is is a good number to stick with given the uncertainty. I mean, Just kind of look at where we finished. Right, so we finished above our range on. above our range on WSC growth. Just kind of look at that and said if the year was going to play out, we would have had to increase our guys.
Jeff Martin: Kevin I wanted to dig in a little bit more on kind of how you. When you updated guidance you maintained guidance relative to the Q1 beat what were some of the factors that you considered in coming to a conclusion.
Speaker Change: 790% gross billings charters, taking under stick with given the uncertainty.
Speaker Change: I mean, if you just kind of look at where we finished for the quarter right. So we finished above our range on gross billings, we finished above our range on WMC growth.
Speaker Change: And if you just kind of look at that instead of the year was going to play out we would've had to increase our guide for that.
Gary Kramer: They're the and then the tape.
Speaker Change: So there they are the they.
Speaker Change: They are the puts.
And then it takes would really be how's how's the profitability of the business going in the profitability of the business is on plan for the quarter.
Gary Kramer: Unknown Speaker This work station, my boy, when he came www.barrett.com. So, you know, as we look out to the future. The thing that, you know, the thing that we've learned COVID environment.
Speaker Change: So.
Speaker Change: As we looked out to the future.
Speaker Change: The thing that the thing that we've learned in the Covid environment is when they're when they're these macro shifts.
Gary Kramer: Unknown Speaker 0 during COVID. We saw new business slow down and we saw...
Speaker Change: During COVID-19.
Speaker Change: Saw new business slowed down and we saw and we experienced our retention going up and then the only time.
Gary Kramer: Unknown Attendee, Barrett Business Services Inc. The only time. Unknown Speaker, Unknown Attendee, Unknown Speaker, Unknown Speaker, Unknown Speaker, So we're looking at the future, and we say, all right, well... Unknown Speaker We're into April already, well, we're in May already, but for us, our April account has... For April, we saw positive trends. You call it cash versus accrual, so you work this way. We don't actually know all of the April hours. For what we know, we know for April. We met our client ad numbers, we met our benefit ad number that we have. Our WFCs for April are higher than the plan.
Speaker Change: As we're moving in that time of uncertainty was if it was a cost savings or cost play.
Speaker Change: So we're looking at the future and we say all right well.
Speaker Change: And then the April already of Oliver May already but for US Our April April account it hasnt closed yet.
Speaker Change: For April we saw positive trends as well.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: We call it cash versus accrual. So you work this week, but you don't get paid for two weeks. So we don't actually know all of the April ours yet.
Speaker Change: But for what we know we know for April we've.
Speaker Change: We've met our client add numbers, we met our benefit add number that we have for the plan. Our ws CES for April are higher than the plan that trend continues.
Gary Kramer: That trend continues. And, you know, just that's.
Speaker Change:
Speaker Change: And.
Speaker Change: Just that's what we can see right and unfortunately, we don't have line of sight further out past April.
Gary Kramer: and unfortunately, we don't have line of sight further out.
Gary Kramer: Page PAGE of NUMPAGES www.verbalink.com Okay. And then on the on the benefits side, how much do you think that's driving new client growth versus existing clients adding the benefits to? their package. Yeah, we good question. We're now getting through the cycle of When we rolled this product out, we had better success selling it into our existing clients than new. Now we're getting more of a balance as we got through 1.1. If you looked at the 1.1. For selling season, it was about 75% existing, 25% new when we looked at the selling. 1125, it shifted to about parity of 50-50.
Speaker Change: And then based upon that we looked at it and said well you know what we're ahead of plan on these metrics the macro may pull it back.
Speaker Change: There's puts and takes so let's keep the plan where its at or let's keep the forecast our outlook where it's out.
Speaker Change: Okay.
Speaker Change: And then on the on the benefit side, how much do you think that's driving new client growth versus existing loans, adding the benefits too.
Patrick: There Patrick.
Speaker Change: Yes.
Speaker Change: Good question, we're now getting through the cycle of.
Speaker Change: When we rolled this product out we have better success selling it into our existing clients and new clients.
Speaker Change: Now, we're getting more of a balance as we got through one one.
Speaker Change: If you looked at the one 120 for selling season, it was about 75% existing 25% new when we looked at the selling season for 125, it shifted to about parity of 50 50. So.
Gary Kramer: A lot of these clients that we brought on would not have joined BBSI. So that's where we're. to really have the wind at our back. We're able to get into markets where we weren't before, into distribution houses where we weren't before, into, you know, bringing on doctors and lawyers and, you know, businesses that we wouldn't have brought on. or a real tailwind. Great, that's good news.
Speaker Change: A lot of these clients that we brought all would not have joined BBSI. If we didn't have this benefits offering. So that's where we are we're really have the wind at our backs as we're able to get into markets, where we were before and the distribution houses where we were before into.
Speaker Change: We're bringing on doctors and lawyers.
Speaker Change: Businesses that we wouldn't have brought all before and we're getting a real tailwind in that space for us.
Speaker Change: Great. That's good news and then last one from me is.
Gary Kramer: And then last one for me is. when you're going out there and selling to clients, are you displacing more PEOs and legacy PEOs than you had in the past? reason I asked the question is you're posting growth that's several factors of what others in the industry are showing in their more recent results. Anything in particular you could attribute that to outside of the benefits being an incremental value driver? you know, we're to tell you that it's a lot of little things that we've been doing to get the sales.
Speaker Change: When your.
Speaker Change: Going out there and selling to clients are you displacing more <unk>.
Speaker Change: Legacy tiers, and then you had in the past.
Speaker Change: Ladies and I asked the question.
Speaker Change: Hosting growth.
Speaker Change: Several factors Thats, what others in the industry are showing.
Speaker Change: Our more recent results anything in particular, you could attribute that to the outside of the benefits being an incremental value driver.
Speaker Change: Yes.
Speaker Change: I can just tell you that it's a lot of little things that we've been doing to get the sales machine going.
Speaker Change: The people we hire the training we have the technology, we're using better products, we're bringing to market. There's a lot of things that we've changed the organization and you're seeing.
Gary Kramer: www.barrett.com. products we're bringing to market.
Gary Kramer: There's a lot of www.barrett.com. Predominantly, the clients that we bring on are converting to a PEO for the first time, we are seeing more PEO takeaways. Our market development managers, they typically have a strategy. look at the, one of the reasons we love 85% of the businesses out there are not with us.
Speaker Change: The benefit of all of those now.
Speaker Change: Predominantly the clients that we bring on our convert into a PEO for the first time.
Speaker Change: Are seeing more PEO takeaways now.
Speaker Change: Especially in.
Speaker Change: Our market development managers.
Speaker Change: <unk> typically have a strategy to.
Speaker Change: Do PEO takeaways in our other markets, we do PEO takeaways too but.
Speaker Change: It's not.
Speaker Change: When we look at the one of the reasons, we love this industry right.
Speaker Change: Like 85% of the business is out there now with the PEO right. So there is plenty of ocean to go fishing.
Gary Kramer: Unknown Attendee Unknown Attendee where nobody else is at.
Speaker Change: We view it as you know go fishing spot, where nobody else is at and that's the way we've been successful.
Gary Kramer: Appreciate the time. Thank you.
Speaker Change: Appreciate the time thank you.
Speaker Change: Okay.
Operator: Once again, should you have a question, please press star followed by the one on your telephone keypad.
Speaker Change: Thank you once again should you have a question. Please press star followed by the one on your telephone keypad.
Vincent Colicchio: And your next question comes from the line of Vincent Colicchio from Barrington Research. Please go ahead. Yeah, Gary, impressive net new client ads in a quarter. Is there anything that you'd want to add to, you know, what's already been mentioned in terms of how you were able to achieve that? Anything new with the marketing tools that you're using? Anything of that nature?
Speaker Change: And your next question comes from the line of Vincent Colicchio from Barrington Research. Please go ahead.
Speaker Change: Yes, Gary.
Speaker Change: Impressive net new client adds in the quarter.
Speaker Change: There anything that you'd want to add too.
Speaker Change: What's already been mentioned in terms of how you were able to achieve that and if you can do with the marketing tools that you're using.
Speaker Change: Think of that nature.
Gary Kramer: I'm not going to give our playbook to the competitors. That's fine, that's fair.
Speaker Change: I'm not going to play.
Speaker Change: Playbook that the competitors there.
Speaker Change: [laughter].
Speaker Change: That's fine that's fair.
Gary Kramer: On the staffing side, I thought that you had some manufacturing in there, is that, would you answer that question differently than the overall, as far as exposure to tariffs? We've looked, you know, in the Northwest, we have of our on-site during agriculture. you know, part of the concern was that China and what's going to be rejected. The business that we have there stays U.S., like think of Potatoes, things of that nature. or Unions, a lot of that gets profited.
Speaker Change: On the staffing side.
Speaker Change: You had some manufacturing in there is that would you answer that question differently than the overall as far as exposure to tariffs.
Speaker Change: And we've looked in the northwest we have.
Speaker Change: Some of our on sites or in agriculture.
Speaker Change: Part of the concern was that was business that was ultimately going to go to China and what's gonna be rejected now with the with the tariffs.
Speaker Change: The business that we have there stays U S. Like think of potatoes things of that nature or audience a lot of that gets processed into different truth that gets sold into the U S.
Gary Kramer: Unknown Speaker, the raw materials of agriculture that go to China for us. So when we looked at When we look at a The agriculture side, we feel pretty good that that's not going to pull back in the Northwest.
Speaker Change: Typically the raw materials of agriculture that go to China for us from the U S. So when we looked at.
Speaker Change: When we looked at.
Speaker Change: The agriculture side, we feel pretty good that thats not going to pull back in the northwest and when we looked at down south.
Gary Kramer: And when we looked at down south... Southern Cal. We do have... business that deals with logistics and warehousing. I haven't seen the effect there as of yet. where those folks tried to stock up.
Speaker Change: Southern Cal we do have some staffing business that deals with.
Speaker Change: Logistics and warehousing.
Speaker Change: Haven't seen the effect of there as of yet.
Speaker Change: If anything it pulled it forward as folks try to stock up before these tariffs went into effect.
Gary Kramer: Unknown Attendee, Barrett Business Services Inc We don't know how that's going to play out.
Speaker Change: We don't know how that's going to play out.
Speaker Change: And the rest of the year.
Gary Kramer: This is just a reminder that stamping is a very...
Speaker Change: Rider that staffing with a very very small piece of our business.
Gary Kramer: And how is pricing trending? I think I may have missed your comment on that. Is you seeing any pressure from any pockets of clients given the economic backdrop? You know, there's We've said this for quarters and years now about the workers comp pricing. Workers comp pricing has what I would say now moderated. It's not going up much.
Speaker Change: And how is pricing trend and I think that.
Speaker Change: You may have missed that.
Speaker Change: Comment on that.
Speaker Change: Is are you seeing any pressure from any pockets of clients given the economic backdrop.
Speaker Change: There is.
Speaker Change: And we've said this for quarters and years now about the workers' comp pricing.
Speaker Change: Workers comp pricing has.
Speaker Change: What I would say now moderated it's not going up much it's not going down much call. It plus two minus two is the range we're seeing.
Gary Kramer: Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES The biggest promise we've seen is the Regulatory Agency of California, the WCIRB. recommended a advisory rate increase of, I think it's, was it 11.2 or 11.3? So you're having the rating agencies say workers' comp premium prices should go up, and we view that as...
Speaker Change: The promise we have seen is the.
Speaker Change: The regulatory agency of California, the WC IRB has.
Speaker Change: Recommended a advisory rate increase of.
Speaker Change: It was at 11 point to a little bit of 11, 2%.
Speaker Change: So you're having the rating agencies say workers comp premium prices should go up.
Speaker Change: And we view that as you know.
Speaker Change: It's been the job of the organization that I that I am not good at calling the bottom, but I feel like we're closer to the bottom now than we've ever been.
Gary Kramer: Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES Nice quarter, thanks. Thank you.
Speaker Change: Okay.
Nice quarter. Thanks.
Speaker Change: Thanks.
Marc Riddick: And your next question comes from the line of Marc Riddick from CDoD. Please go ahead. Thank you.
Speaker Change: Thank you and your next question comes from the line of Marc Riddick from Sidoti. Please go ahead.
Gary Kramer: Good evening. So, a lot of my questions were already covered. I was sort of wondering, though, and congratulations on a great start for the years, particularly with benefits. I was wondering if you could talk a little bit about some of the, were there any particular new service offerings or sort of new paths that you think would resonate particularly well, given the current environment? I mean, I can imagine there are certain things that you had planned for the year, but can you sort of share with us? Are there any sort of things that might be maybe more of a priority now than vis-a-vis what it might have been six months ago or so that's helping with the new client ads or along those lines?
Marc Riddick: Hey, good evening.
Speaker Change: Good morning.
Speaker Change: So a lot of my questions were already covered I was sort of wondering though and congratulations on a great start for the year is particularly with with benefits I was wondering if you can talk a little bit about some of the.
Speaker Change: Were there any particular, new service offerings or sort of new new paths that.
Speaker Change: You'd think would resonate, particularly well given the current environment.
Speaker Change: I mean I can imagine there are certain things that you had plans for the year, but.
Speaker Change: Can you share with us are there any sort of.
Speaker Change: Things that might be maybe more of a priority now vis vis what it might've been six months ago, or so that's helping with the new client ads or <unk> or one of those lines.
Gary Kramer: Yeah, I would definitely say, you know, we added Kaiser into our medical offering on 7-1. This was our first one-on-one with selling the Kaiser products, right? So we have the Kaiser HMO, side-by-side, the Aetna PPO. We had estimates with Kaiser and, you know, to add. How many participants are we going to add? We had estimates with Kaiser in our agreement. Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES So our Kaiser offering is definitely helping us in California in both I think just having, you know, better act better better, better action. for us. So that's one and that's going to continue throughout.
Speaker Change: Yeah, I would definitely say we added <unk>.
Speaker Change: Kaiser into our medical offering.
Speaker Change: Seven one this was our first one one with selling the Kaiser products right. So we have the Kaiser HMO side by side the Aetna PPO.
Speaker Change: And.
Speaker Change: <unk>.
Speaker Change: We had a.
Speaker Change: Estimates with Kaiser.
Speaker Change: And to add.
Speaker Change: About how many participants are we gonna add in a year when we had.
Speaker Change: Estimates with Kaiser in our agreement and we blew the doors off of that we like two and a half X to what we thought we would do.
Speaker Change: In a year, we did it in about seven months, so our Kaiser offering is definitely helping us in California in both north and South.
Speaker Change: I think just having better act better.
Speaker Change: Having better better access for folks is really working for us. So that's one and that's going to continue throughout the year.
Gary Kramer: We're excited about our applicant tracking. still very new, right? We just launched in March, we've got less than 50 clients on but we're seeing the positive of that. http://www.barrett.com Barrett Business Services, Inc. more efficient. That's great. And then between the commentary around client retention and things like this, it seems as though, you know, you're certainly moving in the right direction as far as wallet share. Is, are there, were there any sort of areas that have not sort of performed as you would have hoped or expected given the headlines or was there anything that we should be thinking about that could maybe, you know, take a little longer to gain traction?
Speaker Change: We're excited about our applicant tracking.
Speaker Change: Got.
Speaker Change: It's still very new right. We just launched in March we've got less than 50 clients on there now.
Speaker Change: But we're seeing the positive of that and we're seeing that.
Speaker Change: The clients appreciate the investment, we're making because it makes their life easier because it makes their life more efficient and ultimately the the more they have with us longer they'll stay with us.
Speaker Change: That's great and then between the commentary around client retention and things like this it seems as though.
Speaker Change: You are certainly moving in the right direction as far as wallet share.
Speaker Change: Is are there were there any sort of.
Speaker Change: The areas that have not sort of performed as you would have hoped or expected given the headlines or or what was it was there anything that we should be thinking about that.
Speaker Change: Maybe I'll take a little longer to gain traction.
Gary Kramer: Thanks. Yeah, just, you know, as we, you know, we, we have our it product roadmap that we're filling out the employee lifecycle for, you know, we're going to have releases, you know, pretty much every quarter to get to Employee Life Cycle from Hire to Retire. That's one that. turn it on doesn't mean they're going to jump in. Time to get that thing. We know for the businesses that have higher turnover, that they need these tech resources and we're building out. that and say, you know, that's not real. going to have a material effect. Transcripts provided by Transcription Outsourcing, LLC.
Speaker Change: Yes, just as we.
Speaker Change: We have our product roadmap that we're filling out the employee lifecycle for we're going to have releases pretty much every quarter.
Speaker Change: Two.
Speaker Change: Good.
Speaker Change: Employee lifecycle from hire to retire that's one that just because you turn it on doesn't mean, they're going to jump into it and it's going to take some time to get that thing.
Speaker Change: Fully integrated with our clients some clients may want it to clients and clients would want it right. So that's one that we look at it and say we know in the white collar verticals, we know in the larger businesses. We know for the businesses that have higher turnover that they need these tech resources and we're building out those tech resources. So we look at that and say.
Speaker Change: You know.
Speaker Change: That's not really.
Speaker Change: Selling to have a material effect on the organization in 'twenty five we view this as a longer term play as we make these investments.
Gary Kramer: That's very helpful. Thank you very much. Thank you.
Speaker Change: That's very helpful. Thank you very much.
Operator: There are no further questions at this time.
Speaker Change: Thank you there are no further questions at this time I would now hand, the call back to Mr. Gary Kramer for any closing remarks.
Gary Kramer: I would now hand the call back to Mr. Gary Kramer for any closing remarks. I just want to thank all the VBSI professionals for a great quarter and thank everybody for their support.
Speaker Change: I just want to thank all the BBSI professionals for a great quarter and thank everybody for their support.
Speaker Change: Thank you.
Operator: This concludes today's call. Thank you for participating.
Speaker Change: This concludes today's call. Thank you for participating you may all disconnect.
Operator: You may all disconnect.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].