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

Hello, and welcome to the Barrett Business Services, Inc. Annual Meeting of Stockholders. Please note that this meeting is being recorded. The meeting is about to begin.

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 by AST along with your proxy materials. Only persons who were stockholders of record on April 8, 2024 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. [Operator Instructions] 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 stockholders, 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 BBSI, and I now call the 2024 Annual Meeting of the Stockholders to order. James Potts, Executive Vice President, General Counsel and Secretary, will act as Secretary of the meeting. AST has been appointed the Inspector of Elections for this meeting. Dave Cary from AST is present today. James Potts, please advise us as to the mailing of notice of the Annual Meeting and the number of shares represented at this meeting in person and by proxy.

On or before April 24, 2024, a printed notice of the annual meeting was mailed to each stockholder of record as of April 8, 2024. An appropriate affidavit of the mailing of the notice is on file in the records of the company. There are more than 5,898,383 shares or 90.24% represented at this meeting in person or by proxy, out of the 6,536,500 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. Copies of minutes of the 2023 Annual Meeting of Stockholders as well as copies of the company's 2023 annual report and the proxy statement for this meeting are available by clicking on the documents icon located at the top of the left side of your screen. Now my honor to introduce the Board of Directors. 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 will now introduced the other directors. In addition to me and Gary Kramer, our President and CEO, are standing election at this meeting. Tom Carley, retired Chief Operating Officer and a Director of Urth Organic Corporation and Co-Founder of Portal Capital, an investment management company in Portland, Oregon; Joe Clabby, retired senior executive of Chubb Limited, and before that, ACE Limited; Tom Cusick, retired Executive Adviser and Executive Officer of the Columbia Sportswear Company headquartered in Portland, Oregon; Carla Moradi, former Senior Vice President, Global Partner and Alliance organization at Anaplan, Inc. and the Board member of Patriot both Insurance Service and LLC; Alexandra Morehouse, former Chief Marketing Officer of Banner Health and a Board member of Evalueserv, Inc; Vincent Price, Adviser to the Chief Executive Officer of Cambia Health Solutions, a nonprofit health insurance corporation headquartered in Portland, Oregon. Next, I would like to introduce the officers of the company: Gary Kramer, President and CEO; Anthony Harris, Executive Vice President and CFO and Treasurer; Gerald Blotz, Executive Vice President and COO; James Potts, Executive Vice President, General Counsel and Secretary. In addition, Meghann Hartley with Deloitte Touche LLP, our independent accountant, is present today. The proxy material you received describe the items of business to be considered at this meeting. 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 the meeting and any stockholder of record, who has not yet voted or wishes to change their vote may do so at any time until the polls are closed by using the proxy voting site link. I'm now going to briefly introduce each of the proposals that are under consideration at this meeting, and then I will invite a comment and discussion concerning any of these proposals. The first proposal is the election of 8 directors to serve until the 2025 Annual Meeting. The Board has recommended the following nominees for election as directors to serve until the 2025 Annual Meeting of Stockholders: Thomas J. Carley, Joseph S. Clabby, Thomas B. Cusick, Gary E. Kramer, Anthony Meeker, Carla A. Moradi, Alexandra Morehouse and Vincent P. Price. The company's proxy statement named 8 individuals to be nominated at this annual meeting for election as directors. BBSI did not receive 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 25, 2023 -- or excuse me, '24. Under the company's bylaws, no additional nominations for election as directors may be made at this time. The second proposal is the approval of stockholders of the amendment of the company's amended and restated charter and the proposal is to amend that charter in order to increase the authorized shares of common stock to 82 million shares, which will facilitate a plan for a 4:1 split of the company's common stock. The nonbinding advisory vote by stockholders of the company's compensation program for its executive officers is the third proposal. Board's Compensation Committee has recommended the adoption of the following resolution. Resolve that the compensation paid to our named executive officers as disclosed in the 2024 proxy statement pursuit to Item 402 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. The final proposal is the ratification of the selection of BBSI's independent registered public accounting firm for 2024. 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. Having heard the 4 proposals, is there any comment or other discussion of any of the proposals that have been put to the stockholders vote at this meeting? Hearing none, the Secretary will announce the results of the voting before the end of the meeting. I would like to thank you for participating in the BBSI 2024 Annual Meeting of Stockholders. When BBSI was founded, our vision was to provide small and medium businesses, quality services at a reasonable price, allowing business owners to focus on what they do best. Now much has changed in 30 years in technology, the economy, the business regulatory environment and, of course, in our company. Throughout it all, one constant has been our dedication and determination to deliver our core principles. Those principles are providing relevant first-in-class service to our clients, investing in the people and technology necessary to deliver growth for our company and its investors. 2023 marked several significant achievements in driving to that vision to those principles. For the third year in a row, BBSI was recognized as a great place to work. The company saw the successful roll out of our health care benefits with client adds on plan. In July, the Board of Directors approved a $75 million stock buyback plan with 375,114 shares purchased in 2023. Gross billings grew to $7.716 billion, a 4.4% increase over '23. Net income was $50.6 million and a 7% increase over our last year. As we look forward to the second half of 2024, the Board of Directors is confident that the BBSI team is focused on the path forward. We believe the management team will successfully execute the BBSI business plan, producing excellent results for our clients, our employees and our investors. I'd now like to introduce Gary Kramer, our CEO, to give us a few comments.

Thanks, Tony. Hello, everyone, and thank you for your support and confidence in BBSI. As Tony mentioned in his prepared remarks, in 2023, we executed on our strategic plan and delivered solid operational and financial results. First and foremost, I am very proud of the work and support that we deliver to our clients. Our clients tell us that we make a difference in their business' success, and this is validated by our strong retention rate and our Net Promoter Score of 64. Secondarily, I am very happy with the advancements we made regarding our operational and strategic initiatives. We are successfully selling and servicing BBSI benefits in every one of our markets. Our existing clients are buying and so are new clients. Regarding new clients, we are seeing success in white collar verticals that we previously had a difficult time penetrating. Our strategic sales initiatives have been operationalized and are resulting in a 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 19 new geographies and are gaining momentum. We continue to invest and perfect our other new products with BBSI U and BBSI Recruiting. We continue to invest and bolster our tech stack with enhancements to myBBSI. And we made further advancements on our Employer of Choice initiative and earned the great place to work designation for a third year in a row. We delivered superior services while executing to our long-term strategic plan, and I would just like to 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 results we earned in 2023. Our gross billings were up 4%, our earnings per share were up 13% to $7.39 per share. We paid a dividend of $8.1 million. We bought back 5% of our outstanding shares, and our stock price appreciated by 26%. As we look to the remainder of 2024 and beyond, BBSI is poised for success. Our balance sheet has been derisked, and our capital position is strong. Our financials are predictable, and we are generating strong positive cash flow. We will continue to execute on our strategic plan to grow and expand, whether this is in our current markets or new markets with existing clients or new clients with existing products or new products or with our existing distribution channels or in new distribution channels. We will continue to bring the best of BBSI and deliver the expertise and solutions that enable our clients to prosper on our journey to becoming a truly national PEO. This is the shareholder meeting and what does this mean to shareholders. We believe we can continue to make investments in the business while executing to a strategic plan, targeting annual average double-digit gross billings growth with leverage in the model that results 1.5x earnings growth over a market cycle. As we look to allocate excess capital, we first look at investments in the company, followed by acquisitions, stock repurchases and supporting the dividend. We believe that executing on these strategies will continue to provide growth in total shareholder return. And with that, I'll open it up for questions.

It looks like we had one question. It's more of a statement by shareholder Wayne King. It's published by -- we'll read it now. I'd like to address the Board's long-held commitments to the core principle of creating shareholder value, creating shareholder value is a choice. Many publicly traded companies distracted by other priorities place shareholders in a secondary position, not BBSI. As a shareholder since 2008, I've witnessed firsthand our growth from a company with $1 billion in gross billings to a company today with a $1 billion enterprise value. Despite overcoming many difficult challenges around this period, gross billings are up 8x. Net income is up 10x. Shares outstanding are down 35%. Once more risk is down, and we have a best-in-class management team in a position to further the progress already made. None of this is possible without an engaged Board of Directors who design and stay true to our core principle. Recognition is well deserved. I'd like to offer congratulations to the BBSI directors for their success and look forward to the future where our best days are yet to come.

I would like to thank Wayne King for the kind words. King has been an investor in the company for a long time, and it's nice to hear Wayne. Thank you.

Yes. Thank you.

Are there any further questions. With that, the polls are now closed. James Potts, will you please give us the results of the voting?

Yes. The preliminary results are that each of the nominees for election as directors has been elected. The amendment to the company's amended and restated charter has been approved. The company's executive compensation program has been approved on an advisory basis and the selection of Deloitte & Touche 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 through the filing of a current report on Form 8-K with the SEC by June 7, 2024.

Thank you, James. All the business of the stockholders' meeting of BBSI for 2024 be concluded. This meeting is now adjourned. Thank you for attending.

Thank you.