Barrett Business Services(US:BBSI)2021-11-06 04:26Financial Data and Key Metrics Changes - The company reported a 12% increase in gross billings year-over-year, reaching $1.66 billion, and a 5% sequential increase from Q2 [17] - Average worksite employees (WSEs) increased by 8% year-over-year, exceeding expectations, with higher average billing per WSE up 3% [17][18] - Workers' compensation liabilities decreased by nearly $19 million due to the transition to a fully insured program [20] Business Line Data and Key Metrics Changes - Staffing revenues increased by 2% year-over-year to $29 million, although growth was constrained by labor market tightness [17][7] - The staffing business faced challenges in filling orders, but improvements in applicant numbers were noted post-government stimulus expiration [7] Market Data and Key Metrics Changes - PEO gross billings growth varied by region: Mountain States grew 35%, East Coast 16%, Pacific Northwest 14%, Northern California 13%, and Southern California 6% [18] - Client retention rates are stronger than pre-pandemic levels, indicating improved client relationships and service value [11] Company Strategy and Development Direction - The company is focusing on expanding its branch footprint, with new branches opened in Nashville and Pittsburgh, while consolidating others for efficiency [9][10] - A new strategy targeting asset-light markets is being implemented, leveraging remote operations and digital initiatives [14] - The company is enhancing its technology platform, myBBSI, to offer additional products and services, aiming to increase client engagement and retention [15][51] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic recovery and its impact on business performance, leading to an increased full-year outlook for gross billings and WSE growth [6][23] - The management team is actively preparing clients for potential vaccine mandates, emphasizing the importance of their support during challenging times [43] Other Important Information - The company remains debt-free, with $116 million in unrestricted cash and investments, and has returned capital to shareholders through dividends and stock repurchases [22] - The company is committed to maintaining competitive pricing while ensuring strong client retention [57] Q&A Session Summary Question: Impact of the Chubb agreement on workers' compensation claims - Management confirmed that the current agreement with Chubb covers claims from 2019-2021, with only self-insured claims remaining on the balance sheet [26][27] Question: Future LPTs and claims aging - Management indicated plans to evaluate future LPTs based on economic sense and pricing [30] Question: Investment income and decline rate - Investment balances are expected to decline gradually as claims are paid, with a rule of thumb of 25% of remaining claims paid annually [32] Question: SG&A run rate and future expectations - Q3's SG&A was higher due to variable compensation linked to exceeding revenue targets, and it is expected to decrease in Q4 [36] Question: Pricing pressures from wage increases - Management noted no significant pushback on pricing, maintaining flat renewal rates despite competitive market conditions [56] Question: Performance of new branches - New branches in Pittsburgh and Nashville are still in early stages, and management is optimistic about their future performance [62]