Barrett Business Services(US:BBSI)2024-03-02 16:44Financial Data and Key Metrics Changes - Gross billings increased by 4% to $7.7 billion in 2023 compared to $7.4 billion in the prior year, while diluted earnings per share rose by 13% to $7.39 from $6.54 [13][14] - In Q4 2023, gross billings increased by 5% to $2.05 billion compared to $1.95 billion in Q4 2022, and diluted earnings per share increased by 32% to $2.16 from $1.64 [14] Business Line Data and Key Metrics Changes - PEO gross billings increased by 6% in Q4 to $2 billion, while staffing revenues were $22 million, reflecting a 22% decline year-over-year [14][15] - PEO worksite employees grew by 2% in Q4, driven by strong growth from net new PEO clients, despite slower hiring within existing clients [14][15] Market Data and Key Metrics Changes - The East Coast PEO gross billings grew by 16%, Mountain States by 10%, Southern California by 6%, Pacific Northwest by 3%, while Northern California remained flat [15] - The staffing business experienced a 22% decline year-over-year, attributed to macroeconomic factors and a shift in strategy [9][15] Company Strategy and Development Direction - The company is focusing on expanding its asset-light model and entering new markets, with plans to establish physical locations in three markets in 2024 [10][45] - Continued investment in technology and product offerings, including enhancements to myBBSI and the introduction of new health insurance products, is expected to drive growth [11][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2024, expecting gross billings to increase between 6% and 8% and average worksite employees to rise by 4% to 5% [20] - The company anticipates a return to positive net client hiring in 2024, with signs of improvement in residential construction spending [20][21] Other Important Information - The company achieved a Net Promoter Score of 64, indicating strong client satisfaction and willingness to recommend BBSI [7] - The company repurchased $5 million of shares in Q4 2023, with a total of over $34 million repurchased throughout the year [19] Q&A Session Summary Question: Can you discuss the underwriting risk on healthcare? - Management clarified that they do not take on underwriting risk for healthcare, opting for a fixed fee model to ensure consistent cash flow and earnings [24] Question: How has the renewal season gone and what is the pricing environment? - Management reported a 94% renewal rate and noted that while medical costs are rising, they have been able to offer competitive pricing due to being a new entrant in the market [32][33] Question: What is the outlook for workers' compensation adjustments? - Management indicated that favorable adjustments for prior year liabilities are expected to continue, with 2023 being the largest in history [38] Question: How has the view of the economy changed? - Management noted improvements in client hiring and stability in the workforce, particularly in the construction sector, leading to optimism for 2024 [40] Question: What are the plans for physical locations? - Management confirmed plans to open three physical locations in 2024, with ongoing recruitment to support these expansions [45]