Barrett Business Services, Inc. (BBSI) Earnings Call Transcript & Summary

Good afternoon. Anyone present who wishes to vote his or her shares at today's meeting should do so by using the proxy voting site link on the left-hand panel of your screen and the 11-digit voter control number that was issued along with your proxy materials. Only persons who were stockholders of record on April 11, 2022, are entitled to vote at this meeting. If you have already voted your shares and do not wish to change your vote, no action is required at this time. Those who desire to ask a question during the question-and-answer period may do so by using the messaging icon located to the top left side of your screen. Only stockholders of record, proxy holders or beneficial holders may ask a question during the question-and-answer period. Please note that in the interest of all shareholders, we will only address those questions that are pertinent to the business of the meeting.

Good afternoon. I'm Tony Meeker, Chairman of the Board of Directors at BBSI, and I now call the 2022 Annual Meeting of the Stockholders to order. Anthony Harris, Executive Vice President, Chief Financial Officer and Treasurer, will act as Secretary of the meeting. AST has been appointed to teller and Inspector of Elections for the meeting, and David Cary from AST is present today. Anthony, please advise us as to the mailing of notice of the annual meeting and the number of shares represented at the meeting -- this meeting in-person or by proxy.

On or before April 25, 2022, a printed notice of the annual meeting was mailed to each stockholder of record as of April 11, 2022. An appropriate affidavit of the mailing of notice are filed in the records of the company. There are more than 6,361,700 shares or 86.98% represented at this meeting in-person or by proxy out of the 7,303,912 shares outstanding on the record date.

As more than 50% of the outstanding shares of the company are represented at this meeting, I declare a quorum present. The copies of the minutes of the 2021 Annual Meeting of the Stockholders as well as copies of the company's 2021 Annual Report and the Proxy Statement for this meeting are available through the documents icon located at the top of the left side of your screen. In addition to serving as Chairman of the Board of BBSI, I am the retired Managing Director of Victory Capital Management, Inc., an investment management firm, and former Treasurer of the State of Oregon. I would like to introduce the other Directors of BBSI, who, in addition to me and Gary Kramer, our President and Chief Executive Officer, are standing for election at this meeting. Tom Carley, the Chief Operating Officer and Director of Urth Organic Corporation, and Co-Founder of Portal Capital, an investment management company in Portland, Oregon. Tom Cusick, Executive Advisor of Columbia Sportswear Company, headquartered in Portland, Oregon. Carla Moradi, Senior Vice President, Global Partner Alliance Organization of Anaplan, a software-as service provider to global enterprises. And one new person on the list of candidates is Alexandra Morehouse, Chief Marketing Officer of Banner Health. Alexandra is a result of the Board's ongoing succession planning program. In addition, we have Jon Justesen, Co-owner and CEO of Justesen Ranches; and Vincent Price, Executive Vice President and Chief Financial Officer of Cambia Health Solutions, a nonprofit health insurance corporation headquartered in Portland, Oregon. Diane Dewbrey and James Hicks will be leaving the Board effective immediately following today's meeting. We want to express our deep appreciation to Diane and Jim for their services and their valuable contributions as Directors. Now I'd like to introduce the officers of the company, Gary Kramer, President and Chief Executive Officer; Anthony Harris, Executive Vice President, Chief Financial Officer and Treasurer; Gerald Blotz, Executive Vice President and Chief Operating Officer; James Potts, Executive Vice President, General Counsel and Secretary. In addition, several of the company's professional advisers are here today. Charles Mello with Deloitte & Touche LLP, our independent accountants; Mary Ann Frans, a partner with Miller Nash LLP, our Corporation and Securities Council. The proxy materials you received describe the items of business to be considered at this meeting. The holders of a majority of the company's shares have submitted proxies voting in accordance with the Board's recommendations. However, it is necessary for us to act on each item individually. If you have already submitted a proxy, your shares will be voted as you instructed. The polls are now open to act on the business to be presented at this meeting. The first item of business is to elect 8 Directors to serve until the 2023 Annual Meeting. The Board has recommended the following nominees for election as Directors to serve until the 2023 Annual Meeting of Stockholders: Thomas J. Carley, Thomas B. Cusick, Jon L. Justesen, Gary E. Kramer, Anthony Meeker, Carla A. Moradi, Alexandra Morehouse and Vincent Price. The company's proxy statement named 8 individuals to be nominated at this meeting for the election as Directors. BBSI did not received notice from any stockholder of his or her intention to nominate one or more individuals for election as Directors of BBSI prior to the deadline for submission of such notice, which was January 26, 2022. Under the company's bylaws, no additional nominations for election as Directors may be made at this time. The Board previously approved a reduction in the number of positions on the board from 9 to 8 effective immediately following the annual meeting. For reporting purposes, we must have an exact tabulation of the voting for our Directors. If you have submitted a proxy, your shares will be voted according to the instructions on the proxy and you do not need to vote at this time. If you are a record holder as of April 11, 2022, you have not submitted a proxy or wish to change your vote and you wish to vote at this meeting, please do so using the proxy voting site link at this time. Is there any discussion regarding the election of Directors? Hearing none, the nonbinding advisory vote for stockholders on the company's compensation program is next. Compensation for its executive officers is the second item on the agenda. The Board's compensation committee has recommended the adoption of the following resolution. Resolved that the compensation paid to our named executive officers as disclosed in the 2022 proxy statement pursuant to Item 402 of Regulation S-K adopted by the SEC, including the compensation discussion and analysis, executive compensation tables and accompanying footnotes and narrative discussion is hereby approved. Is there any discussion on the proposal to approve the company's executive compensation program on an advisory basis? If you wish to vote on this proposal, please do so using the proxy voting site link at this time. Proposal #3. The ratification and selection of the independent registered public accounting firm. This item of business to be conducted is the ratification of BBSI's independent accounting registered public accounting firm for 2022. The Board's Audit and Compliance Committee has selected Deloitte & Touche LLP as the company's independent auditors for the coming year. Deloitte has served as BBSI's auditors since 2016. Does anyone have any comments on this proposal or wish to ask Deloitte representative, who is participating today, any questions? If you wish to vote on this proposal, please do so using the proxy voting site link at this time. Voting has concluded and the secretary will announce the results and voting before the end of the meeting. During the last year, BBSI has continued on the path towards sustainable long-term growth. We have continued to build stockholder equity, minimize debt, deploy planned capital investment, build our client base and at the same time, provide a great place to work for the BBSI team. Simply put, these steps have built a better BBSI. BBSI is focused on giving our clients an edge and solving the myriad of challenges facing business today. That focus is delivered by the well trained and talented BBSI team and has led to an increase in clients, worksite employees and revenues. As we look forward to 2023 and beyond, we know that continued challenges face us and our clients. Your Board of Directors is highly engaged in overseeing our strategic plan during this time of rapid change. BBSI is more prepared today to face these challenges than ever before. We have the right team at the right place at the right time, both for BBSI and our clients. The BBSI Board of Directors and management are committed to driving continued improvement through good practices, progressive solutions and a mindful action to make a positive impact on our clients and investors. At this time, I'd like our CEO, Gary Kramer, to give us a view of the meeting.

Thank you, Tony, and hello, everyone, and thank you for your support and confidence in BBSI. As Tony mentioned in his remarks, in 2021, BBSI executed on our strategic plan and exceeded most of our operational and financial expectations. First and foremost, I am proud of the work and support that we deliver to our clients, and this is evident in our record client retention. Secondarily, I'm very happy with the advancements we made regarding our strategic initiatives that Tony previously mentioned. We successfully completed the conversion of our existing clients over to our new myBBSI platform. We are pleased with the platform, but more importantly, our clients are appreciative of the investment and the feedback continues to be positive. We are not done with our investment, and we have an IT roadmap of enhancements, new features as well as new products. We packaged our new technology with our nationwide offering and brought on larger clients in the average this year than we have in the previous years. We build out a corporate sales department and increased the top of the funnel by focusing on lead generation via an omnichannel digital campaign where we target both clients and new referral partners. We executed on our Employer of Choice initiatives and invested in our employees with a robust enhancements and compensation, benefits, vacation, training, development, volunteerism as well as other fringe benefits. People are a product and we attract, train and ultimately retain the best employees that any PEO has to offer. In November, we were very pleased to announce that we were certified as a Great Place to Work for the first time. We successfully rolled out our asset-light markets, which encapsulates everything I just mentioned, attracting hire great people, train them well, applying the lessons we learned in COVID environment for how to operate remotely coupled with our digital initiatives to assist in the sale in their market. We will service the clients out of an adjacent branch or a corporate and invest behind them in infrastructure as they build up their client base. We delivered superior services while executing to our long-term strategic plan. And I would like to just thank everyone in the BBSI family for their hard work and efforts throughout the year. Our hard work was rewarded, and I am proud of the financial reserves we earned in 2021. Our gross billings were up 11%. Our earnings per share were up 14% to $5 per share. As we look to 2022 and beyond, we had a really good start to this year with our results exceeding most of our internal and external expectations in Q1. The company is in an excellent position, and we are optimistic about our future. Our new client-facing technology is operating and is making a difference for our clients and is opening doors for us. We will continue to invest in additional products and services that can be delivered through our portal. People have been and continue to be our product, packaging their knowledge and expertise with myBBSI and the ability to transact nationally strategically positions us to sell and service a broader market. Our model is scalable, and we will continue to invest in new business units as well as new markets via the asset-light model. We have also invested in various sales and marketing initiatives, and we believe that all these investments will accelerate future growth. So this is the shareholder meeting and what does this all mean to shareholders. We have derisked our model and your investment in BBSI is safer than it has ever been. We believe we can make investments in new markets and new products while adhering to our principal target thresholds of growing our gross billings by 10% a year and showing leverage in our model by growing earnings by 15%. Our balance sheet is formidable, and we are generating strong positive cash flow. As we look to allocate excess capital, we are mindful of total shareholder return, and we look at investments in the company, acquisitions, stock repurchases and supporting the dividend. That concludes my prepared remarks. We're going to open it up to questions. If you have a question, you can type it into the chat box, please.

We do have one question from Wayne King, and the question is, the convergence of available free capital, a positive operational outlook and the bargain level market price have put us in an enviable position to repurchase 75 million of Board authorized shares in the open market. In March and April 2022, we repurchased on average over 5,000 shares per day. What factors determine the pace of these repurchases of these, which is the limiting factor on holding us back from buying more quick?

Yes, this is Anthony Harris. I'll take that. Thanks for asking the question. First of all, I agree with all of your presumptions, which is, we do have a strong balance sheet. So we're proud of that and the work we've done to accumulate that capital, and our results have been strong. We do have a positive operational outlook going forward. So we are well placed. And when we look at our enterprise value multiple, we do believe there is real intrinsic value in our stock, as you call it, a bargain level, and I don't disagree. And that's why when we look at our capital allocation strategy, we've increased our share buyback program and allocated more capital there. So when we're buying back our shares, we are buying back shares through a combination of 10b5-1 and also open market purchases. And when purchasing, we are limited by Rule 10b-18 limit -- volume limits for company buybacks, which is the primary factor in that. But as I said, we're committed to that, and we're happy with the pace that we've been able to buyback so far.

Any other questions?

There are no other questions.

Thank you, everyone, for sending in the questions that you have. The polls are now closed. Anthony Harris, will you please give us the results of the voting?

Yes. Each of the nominees for election as directors have been elected, the company's executive compensation program was approved on an advisory basis and the selection of Deloitte & Touche LLP as the company's independent auditors has been ratified by the stockholders. The exact voting on proposals considered at this meeting will be publicly reported to the filing at a current report Form 8-K with the SEC by June 13, 2022.

That concludes the business of the BBSI 2022 Annual Meeting. Thank you very much for attending. The meeting is adjourned.

Thank you, everybody.