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Edited Transcript of BBSI earnings conference call or presentation 8-Mar-17 5:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Barrett Business Services Inc Earnings Call

VANCOUVER Mar 8, 2017 (Thomson StreetEvents) -- Edited Transcript of Barrett Business Services Inc earnings conference call or presentation Wednesday, March 8, 2017 at 5:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Gary Kramer

Barrett Business Services, Inc. - CFO

* Michael Elich

Barrett Business Services, Inc. - President and CEO

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Conference Call Participants

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* Rich Murphy

Cross River Capital Management LLC - Analyst

* Matt Dhane

Tieton Capital Management, LLC - Analyst

* Craig Pieringer

Wells Capital Management - Analyst

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Presentation

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Operator [1]

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Good morning and afternoon, everyone, and thank you for participating in today's conference call to discuss BBSI's financial results for the fourth quarter and full year ended December 31, 2016. Joining us today are BBSI's President and CEO, Mr. Michael Elich; and the Company's CFO, Mr. Gary Kramer. Following their remarks, we will open up the call to your questions.

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 fact, are subject to a number of risks and uncertainties. Actual results may differ materially from those implied by these forward-looking statements. Please refer to the Company's recent earnings release and 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.

I would like to remind everyone that this call will be available for replay through April 8, 2017, starting at 3:00 PM Eastern this afternoon. 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.BarrettBusiness.com.

Now, I would like to turn the call over to the Chief Financial Officer of BBSI, Mr. Gary Kramer. Please go ahead, sir.

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Gary Kramer, Barrett Business Services, Inc. - CFO [2]

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Thank you, Ebony. Good morning or afternoon, everyone, and thank you for joining our call. The operations of the Company were strong in the fourth quarter, and we believe our results represent a solid foundation on which to build.

Net revenue of $221.1 million increased 14% from Q4 2015. Gross revenue of $1.3 billion grew 15% over the same period. Diluted earnings per share were $1.08, compared to $1.55 in Q4 2015.

The Q4 2016 results included non recurring expenses of $0.16 per share for outside investigation and legal proceedings. The total cost of non-recurring expenses for the year was $8.5 million or $0.69 per share, versus a prior estimate of $8.2 million. The $300,000 increase is related to the acceleration of legal expenses incurred.

Net income in the fourth quarter of 2015 included a $0.32 per share diluted benefit for a change in estimate of prior years' Workers Compensation liabilities. Also in the quarter, PEO gross revenue increased 15% to $1.2 billion, compared to the fourth quarter last year. Contributing to this growth were 185 net new PEO client additions, and growth in same-customer sales of 3.3%.

The growth in same-customer sales was met by some less than predictable and uncontrollable events in the quarter. First, we saw a net hiring slowdown in the fourth quarter, due to what we believe was the uncertainty in the political environment. Second, the labor market has tightened to levels where our employers cannot easily hire to fulfill their needs.

Finally, severe weather in many of our markets had a direct effect on hours worked in certain industries, with some clients losing 7 to 11 workdays in the quarter. The severe weather carried into the New Year, and will influence the full year revenue guidance for 2017, which I will address shortly.

Staffing revenue in the fourth quarter increased 11% to $44.9 million, primarily due to an increase in new business. As mentioned last quarter, we tempered growth in this business due to a continued labor shortage, and chose not to pursue client relationships that do not align with our own values. We believe that this decision was sound, and now believe that we will see sequential growth for the foreseeable future.

Gross margin in the fourth quarter was $43.3 million or 19.6% of total net revenues, compared to $41.2 million or 21.2% in the prior-year quarter. Since we find comparison to gross revenue more useful in managing our operations, I will break down the ratios accordingly. Total gross margin in Q4 2016 was 345 basis points, compared to 378 basis points in the prior-year quarter.

Payroll as a percentage of gross revenue increased 21 basis points from the year-ago quarter. This is related to an increase in PEO business mix, and we have and will continue to expand outside of California, and this will have an accretive effect on payroll as a percentage of gross revenue.

Workers Compensation expense as a percentage of gross revenue increased due to an unfavorable change in the estimate of prior-year liabilities of $1.3 million. This was slightly offset by an improvement in payroll tax as a percentage of gross revenue, which was attributable to the accretion of the federal unemployment tax credit for prior wages, and as payroll tax caps continued to lag with wage inflation.

Our Workers Compensation claim frequencies continued to improve, as we experienced a decline in the relative frequency of claims reported. Our total open claims of Q4 2016 grew 11% from open claims at Q4 2015, while gross revenue grew 17% from the same period. In the quarter, we saw trailing 12-month relative frequency of claims as a percentage of payroll decrease 14% compared to the fourth quarter of 2015, and a decrease of 17% compared to the fourth quarter of 2014.

Claims severity continues to trend normally. All-in, the Workers Compensation program is performing as expected. This is a continued result of the way our branches manage their client retention, and the controls and processes that we have in place to manage and mitigate risk.

SG&A in the fourth quarter was $32.5 million or 2.6% of gross revenues, compared to $26.3 million or 2.4% in the prior-year quarter. The increase as a percentage of revenue was primarily due to non-recurring expenses of $1.8 million related to accounting and legal costs associated with outside investigation, and legal proceedings related to security law issues.

The provision for income taxes in the fourth quarter was $1.8 million which represented the annual tax rate of approximately 26.5%, down from 27.5% in the prior year. The rate decrease was primarily due to more favorable allocation of state income, and work opportunity credits, as well as lower pretax income.

As announced during our last call, we fully paid off our note with Wells Fargo in the third quarter, and we continue to be debt free, except for the mortgage on the corporate headquarters in Vancouver, Washington. We had no borrowings under our line of credit with Wells Fargo as of 12/31/2016. In December, we increased the credit limit under the agreement by $11 million to $25 million, and reduced the number of covenants. At December 31, we had cash, cash equivalents, investments, and restricted securities totaling $358.3 million compared to $305.3 million at December 31, 2015.

As I mentioned in the third-quarter call, the [CHUD] program has matured and is stabilizing, and the net funding level will decrease going forward. This will, in turn, increase our unrestricted cash position over time. The unrestricted cash position in the quarter increased by $24 million to $50.8 million at Q4 2016.

On December 20, Vincent Price was appointed to our Board of Directors, effective January 1, 2017, and then subsequently appointed to be a member of the new Risk Committee. The Risk Committee's responsibility will include oversight over Workers Compensation insurance, all other insurance, investments, and information technology. This appointment and these actions are all part of our short and long term remediation plan, and we are pleased with our progress thus far.

In fact, we will be releasing our 10-K later today, which puts us ahead of the filing deadline. In the 10-K, please take notice that we remediated most of the previously identified control deficiencies.

A few other items to call to your attention. On February 9, we increased our dividend by 14% to $0.25 a share. This increase supports our belief in the longevity and sustainability of our organization's fundamentals.

On February 23, a judge entered an order granting final approval regarding the shareholder class action. We are pleased to say that this matter is now fully concluded.

In summary, our pipeline remains strong, and we continue to build our base of net new clients. While our income in the fourth quarter was impacted by a slowdown in same-customer sales, greater than expected non-recurring expenses, and an adverse change in estimate for prior years Workers Compensation liability, we anticipate that the continued growth in the economy, coupled with our ongoing efforts to deepen our referral relationships, and the ability of our teams to remain focused on delivering value to our clients will result in another strong year for the Company.

As introduced in 2015, in order to provide our investors with a more appropriate forward-looking view of our business, we initiated a rolling 12-month outlook for gross revenues, which we will update on a quarterly basis. The severe weather that I spoke to earlier carried into 2017, and will have a slight impact on Q1 revenues. Taking this into consideration, we expect gross revenues for the next rolling 12-month period to increase approximately 16%.

For the full year 2017, we are introducing diluted earnings per share expectations of $3.65, a 43% increase compared to $2.55 in 2016. This includes non-recurring legal and accounting expenses of $1.6 million or $0.13 per diluted share, as well as the return to a more normalized effective tax rate of 33.5%, compared to 26.5% in 2016.

Now, I'd like to turn the call over to the President and CEO of BBSI, Mike Elich, who will comment further on the recently-completed fourth quarter, as well as our operational outlook for the remainder of the year. Mike?

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Michael Elich, Barrett Business Services, Inc. - President and CEO [3]

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Hello, and thank you for taking time to be on the call. Before I move into discussions about the quarter, I'd like to comment on 2016. 2016 was a year met with challenges, but also a year in which we accomplished a great deal, including adding a new CFO, adding two new Board members, and successfully navigating through turmoil, while continuing to grow gross revenues by 17%, adding 810 net new clients, and maintaining better than 90% retention.

As we shift focus to 2017 and beyond, we continue to strengthen and mature our bench of leadership throughout the organization. We also continue to expand our bench of referral channels, by operationalizing methods to develop and strengthen our relationships. And we continue to take broader approaches to how we evolve our effects on bringing value to small business.

Moving forward, in the fourth quarter of 2016, we saw progress through growth and maturing of our brand in all markets. The strength of our organizational bench and culture of BBSI is evidenced by my experience with our teams in the field, and consistency in tone and messaging across the organization, and in all markets.

In the quarter, we added 311 new PEO clients. We experienced attrition of 126 clients; 8 were due to accounts receivable issues, 9 were due to lack of tier progression, 10 were cancelled due to risk profile, 29 businesses sold or closed, and 70 clients left to pricing, to competition, or companies that have moved away from the outsourcing model. This represents an approximate net build in our quarter of 185 new clients.

Same-customer sales increased 3.3% in the quarter, as Gary mentioned. We attribute softness in this measure to be related to the election environment in October and early November, a tight labor market, and severe weather in nearly every region we serve. We are seeing some spillover into the first quarter, and we'll continue to monitor trends closely.

While same-customer sales were softer than expected, we continue to experience strong future pipeline and client adds. Related to pipeline and regional growth, we continue to see consistent activity in pipeline and new client adds, as a result of focused efforts with our referral channels. As we focused attention on the drivers supporting growth and retention, we continue to see broader contributions to client growth from all regions, as a result of these efforts.

Also we see more consistent growth across all markets and developing branches. We are paying close attention to smaller-sized clients, as less mature branches tend to maintain a smaller average client size. While we don't expect a shift in the aggregate client size, we will monitor the growth of our new and developing branches closely.

Related to structure and organizational build, we continue to build business units as needed, to support our current and future organizational and market demands. Currently, we have 95 business teams, housed in 57 physical branches. We currently have 54 business units with an additional 6 in build, which will bring us to a total of 60 by the end of 2017.

We now have 15 branches that are at or near $100 million in gross revenue, a measure we use to indicate a branch's ability to increase leverage and tipping point in our brand in these markets. We also expect to add five new branches in 2017, with tuck-ins in the western third of the United States, while continuing to expand on the East Coast.

We continue to make progress -- related to systems, we continue to invest in systems that lead to the efficiencies of our teams and integrity of our product. We also continue to make progress in systems that allow us to have better visibility and predictability in the business.

Related to Workers Comp and the underwriting of risk, we continue to make progress in bringing predictability to Workers Compensation expense. Through our approach to running the Company and helping business owners to run better companies, we are seeing systemic improvement related to stronger cultural alignment in all disciplines during pipeline phase, which continues through the client relationship.

Emphasis on continuous improvement and on root cause analysis, as we interface with our client, and focus on frequency as a controllable factor in claims expense. Moving forward, we will continue to monitor trends to maintain a proactive position related to Workers Compensation. We expect this to continue to result in greater predictability within the model.

Looking forward to 2017, having spent the past two months in the field, I am impressed with the continued growth of our leadership, the progress our teams are making, and the impact we are having on our client base. The real proof of the organizational progress is feedback I've received from our clients and referral partners in recent months, as I have spent time in the field. It is a good representation of our current and future product relevance and strength, and stretch to look at the next five years.

As I look at the organization today, I look forward with confidence that our current, that our efforts are beginning to have the intended effect. We have put resources into the organization we're building, with the emphasis on bringing predictability to the model. We have operationalized our approach to developing our leadership bench, and have roughly 18 months of runway.

We have brought a consistent approach to channel development, resulting in predictable pipelines and new client build. We have focused on systemic reduction of risk in our client business, resulting in continued decrease in relative frequency and an increase in predictability and we have defined a variety of methods to stretch our teams, with the focus on continued product relevance.

As I reflect on my six years as CEO, I have shared with my teams after several years of reengineering every piece of the business, we are finally becoming the Company I've always wanted to lead. This said, we have also learned there is no their, and it is our collective job to ensure all future growth is built on a foundation of bedrock.

With that I'll turn it over to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

We will take our first question from Rich Murphy with Cross River.

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Rich Murphy, Cross River Capital Management LLC - Analyst [2]

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I've got a question on the guidance. Just going back through history, you did $3.48 in earnings in 2015. You did $3.61 and the question, in the third quarter you say you took $1.06 charge. Is that, have you retracted taking some back from that, and you're talking about $0.69 now? Where is the difference in that charge, first of all, before I go further?

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Gary Kramer, Barrett Business Services, Inc. - CFO [3]

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It's Gary Kramer. Can you ask that question again, I didn't follow it. So $0.69 was for the full year.

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Rich Murphy, Cross River Capital Management LLC - Analyst [4]

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Yes, so in the quarter, in the third quarter, you said you had a $0.76 charge, plus $0.30 for litigation for the year. That was your guidance, so what am I missing between the $1.06 and the number you just announced?

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Gary Kramer, Barrett Business Services, Inc. - CFO [5]

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For the number we gave for the $8.6 million, that's $6.9 million diluted per share, and that does not include the shareholder settlement. That's for non-recurring legal, non-recurring legal and accounting.

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Rich Murphy, Cross River Capital Management LLC - Analyst [6]

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Okay, so when I look at kind of normalizing earnings from the $2.55 do I add back $1.06 or I just add back the [$0.78] or the number you announced today?

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Gary Kramer, Barrett Business Services, Inc. - CFO [7]

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The reason we didn't include the shareholder settlement in this quarter was because in third quarter, we also mentioned that we had a one-time federal unemployment tax refund, and the sum of those two just about equal out, so then you're left with the non-recurring legal and accounting which is the $8.6 million or the $0.69 per diluted share.

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Rich Murphy, Cross River Capital Management LLC - Analyst [8]

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Got it, okay. So then I add back the $0.69 to the $2.55 and that will get me there, with what like a normalized run rate is?

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Gary Kramer, Barrett Business Services, Inc. - CFO [9]

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Yes.

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Rich Murphy, Cross River Capital Management LLC - Analyst [10]

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So the $3.23 or the $3.24 and then the $3.65 is really $3.78 if you add back the $0.13 in the guidance?

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Gary Kramer, Barrett Business Services, Inc. - CFO [11]

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Yes, when you're going to do, yes exactly, and then when you're going to do your roll, one of the big factors is picking up 700 basis points in income taxes, and that adds to about a $0.39 drain on the 2017 outlook. So the effective tax rate is going out to 33.5%, which is a 700 basis point change, and that costs about $0.40 per diluted share.

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Rich Murphy, Cross River Capital Management LLC - Analyst [12]

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That effective tax rate is going up. Is that an estimate, or is that something you are pretty confident in?

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Gary Kramer, Barrett Business Services, Inc. - CFO [13]

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They are all an estimate, but that's the function of -- the increase in the effective tax rate is a function of, as we earn more money it dilutes the credit we get for the Work Opportunity Tax Credit.

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Rich Murphy, Cross River Capital Management LLC - Analyst [14]

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And so, just to spin this in a different angle the number of clients we've grown, and you have done a great job adding clients, growing from 3,000 to 4,400 or somewhere in that neighborhood, how do I think about marrying the additional clients or customers, I should say, into the earnings equation? Because it doesn't seem over those three years, the earnings growth has kept up with the client additions.

Is there some type of leverage? We already talked about the SG&A leverage that should kick in at some point in this model, and again, it's been hard because there's been so many moving parts. But I'm trying to get my hands around how to view this business model as we add clients. You talked about the million--

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Gary Kramer, Barrett Business Services, Inc. - CFO [15]

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Yes, so when we do our modeling, we do it at the book, we don't do it at the account. And when we give the guidance for the 16%, that includes the 810 net new clients that we added in 2016. So it includes that base plus our future adds, which gets us to that 16% revenue growth guidance.

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Michael Elich, Barrett Business Services, Inc. - President and CEO [16]

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I would say also, as it relates to the business we've been pouring a lot of resources in addition to the non-recurring stuff back into the business over the last couple of years. I think that we've somewhat made a turn there. I think one indicator is the number of branches that we're getting to that $100 million mark, but interesting enough, getting from about that $60 million to $100 million mark, you pour more SG&A into branches, because we are now building business units.

But once you get your critical mass of two to three business units built in a branch, you can probably get to $200 million in a branch without adding a lot of capacity. So you're front loading quite a bit. So even today, as we watched SG&A grow both at a corporate level and in the field level, it was really spear-headed at staying in front of growth.

And today, I think we're somewhat front loaded there. One of the things I worry about is that we will have slippage there and lose runway, but for the growth rate that we see today, we have probably 18 months to maybe even two years of runway in front of us, if we didn't do anything to develop.

But we also know that it takes us probably a year to 18 months to build and mature teams. But the critical mass of the number of business unit teams that we have built now and even with mature branches versus fledgling branches is starting to outpace. So even future build of new branches will be less of a headwind to earnings as it relates to our SG&A in the coming two or three years.

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Rich Murphy, Cross River Capital Management LLC - Analyst [17]

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Okay. Well thank you.

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Operator [18]

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We will take our next question from Matt Dhane with Tieton Capital Management.

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Matt Dhane, Tieton Capital Management, LLC - Analyst [19]

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A couple questions for you. The first one, wanted to talk about the weather impact in Q1 versus Q4. Obviously, I would expect you probably have a pretty good sense of how that's going to play out in Q1 here. Is it worse in the first quarter compared to the fourth quarter, the weather impact that you have seen to date, or how would you classify that?

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Michael Elich, Barrett Business Services, Inc. - President and CEO [20]

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I would probably say that what we have seen, what we saw in December, the weather impact in December was more towards the trail end of September or December. When we look at California, we looked at the East Coast, in particular in December, the East Coast was hit in December, California was hit in December somewhat, but the weather really got worse in January, and even spilled into February.

The Northwest hadn't been affected in the fourth quarter was probably more affected in January and into February, as there was quite a bit of snow. And the one thing that happens in the Northwest is when you get snow, it shuts everything down, so if you are measuring same-store sales off the basis of hours worked, you just have fewer hours worked when the job sites are either shutdown or just business shuts down for a period of time.

So we are seeing that have the impact, as for January and February, we're seeing some improvement. We still are looking at the labor shortage. When we went out and did an anecdotal survey of our clients, and have dug pretty deep on this, one of the things that they talked about was jobs being pushed off, not necessarily cancelled, which is a positive. They are very optimistic. Small business owners right now are very optimistic about, for the most part, about where their business is, and where it's going.

But the challenge that they are facing is there is a labor shortage out there, and the thing about where our book of business lands today is that when we were paying people $10 an hour, those clients would add an $10 an hour person, because there wasn't necessarily a challenge, there's not a lot of risk there. But when you get your average wage rate to about $25 an hour now, there's more risk, so they are being more particular in who they are hiring, which is creating a little bit of that labor shortage.

So you have a confluence of those two variables that are working into the first quarter, but the most noticeable one at this point would be the weather, where you have, out of 11 days worked in January, I think there was seven days that were -- there were seven out of 11 days that were just not there, and that if you look at that as a percentage of the whole month, it takes a pretty good swath out of what would help you in the area of same-store sales.

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Matt Dhane, Tieton Capital Management, LLC - Analyst [21]

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Okay, the other thing I wanted to ask about is California, I believe, increased its minimum wage, Washington State did as well. Can you walk us through the impact benefit from the minimum wage increase that went into effect? And I guess there's, a lot of the states have laid out paths for additional minimum wage increases. How should we think about that and the impact of the business?

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Michael Elich, Barrett Business Services, Inc. - President and CEO [22]

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Well I look at it two ways. One, from our standpoint, our average employee on the PEO side is making $25 an hour, so if you look at the effect of somebody, how much wage inflation will you see for $25 an hour and above, that's a question that we don't necessarily have an answer to.

Where you're paying below that minimum wage, it's going to bring that up to $15 over time, but what it's really going to do is it's going to take the person that was making $15 an hour and you'll see wage inflation of the $15 an hour person that goes to $20 an hour, in that same equation. For us, as it relates to same-store sales, you're going to have wage inflation, which will actually increase in the aggregate base.

It's hard to measure how much that's going to be, because you're stratifying your overall labor pool and going, how much of it is going to be affected by it. But I worry a little bit that the same increase might be offset by where companies just look and they say, I'm not going to hire anybody, or my model won't sustain the increase. So it should be if nothing, net neutral, but I worry more about the small business owners that we're supporting that will be faced with inflation, and then they are going to have to pass those costs on.

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Matt Dhane, Tieton Capital Management, LLC - Analyst [23]

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Great thanks, Mike.

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Operator [24]

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(Operator Instructions)

We'll take our next question from Craig Pieringer with Wells Capital Management.

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Craig Pieringer, Wells Capital Management - Analyst [25]

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You mentioned something about February 23, some final class action dismissed. Can you summarize for me the remaining legal overhang that you can front? At one point there was an SEC investigation, someone was on maternity leave, I'm not even sure where that stands anymore. Could you just summarize your current challenges legal wise?

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Gary Kramer, Barrett Business Services, Inc. - CFO [26]

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Yes so what I referenced in my discussion was the shareholder settlement class action. That has been settled and is fully concluded. What we still have out there is the SEC and DOJ investigations that are still pending. We're cooperating fully with those investigations, and they are just going to take as long as they take.

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Craig Pieringer, Wells Capital Management - Analyst [27]

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So the $0.13 that you speak about continuing into 2017, is that going to be done with, or is that just an estimate, and it could go higher and/or longer?

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Gary Kramer, Barrett Business Services, Inc. - CFO [28]

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That's an estimate for the legal regarding those investigations. And it's an estimate, and in that estimate it doesn't include any settlement or anything like that. It's just the estimate for what the legal would be. There may not be a settlement. There may not be an action, we still don't know yet.

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Craig Pieringer, Wells Capital Management - Analyst [29]

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So there's still an overhang?

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Gary Kramer, Barrett Business Services, Inc. - CFO [30]

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Yes. And the only thing we know for certain is that we need to defend the Company, and that's the legal cost to defend the Company.

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Craig Pieringer, Wells Capital Management - Analyst [31]

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Okay and moving on, so there's no Wall Street coverage at present. Are you doing anything on that front to bring the analysts back to BBSI?

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Michael Elich, Barrett Business Services, Inc. - President and CEO [32]

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We've continued to maintain relationships and communication with those that were covering us, and as analysts do their job, it's their choice to come back. But we continue to entertain all calls that we have, and look towards expanding coverage. We've had decent conversations in the last couple months, and I think getting our K filed is a good first, and bringing on -- I have to give Gary Kramer a lot of credit here.

He and his team have done a lot of heavy lifting in the last six months, and to switch auditors and go through everything that we've been through, and to be able to get our K filed ahead of schedule, and bring on that new auditor and be able to work through a process, I actually consider that a huge success. And with that in its own, I think that begins to clear some of the overhang that might be impacting where analysts might be, but that's for them to define more than us.

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Craig Pieringer, Wells Capital Management - Analyst [33]

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All right, and continuing on that track, the worst of the storm seems to be behind you, and you alluded to that, Mike, in your comments about building a strong foundation in the Company that you've always imagined you wanted to lead, and maturity of the brand. So now that some of this storm may be passed, do you contemplate any new strategic direction, maybe new geographic expansion? You talk about the maturity of the brand. Over time, that can be a national brand, I would surmise. Can you talk about any plans along those lines?

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Michael Elich, Barrett Business Services, Inc. - President and CEO [34]

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Well we've actually put a lot of energy in the last year in developing the East Coast. We have opened two new branches just on the East Coast in the last six months, and we're continuing to expand through tuck ins in the western third of the United States. And from where I sit, I'm feeling more optimistic and bullish about expanding footprint today than I have just in the past, just simply because I do. I feel like we've gotten a lot of the, I'll call it cleanup, but even reengineering to get to a good solid foothold.

And today, we know that our model can transfer, it can move to new markets. We've got [front end] position, pretty strong bench that's maturing in a way that gives us that foundation, to be able to build on.

I think even, I don't want to speak for Gerald Blotz, our COO, who runs all operations in the field. But I know as he and I visited, his energies are less and less spent on what has to happen day-to-day, and we're able to work on the business strategically now, compared to where we've been over the last several years.

And even getting down to the mechanisms that we are in the process of maturing, but we built related to how we're maturing pipeline, how we're maturing and building our bench and our teams, our ability to be able to look at new markets and be able to piggyback off success that we've had in existing markets in the new markets, those are all positives. And the next, I'm pretty excited about the next three to five years.

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Craig Pieringer, Wells Capital Management - Analyst [35]

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Good. That's illuminating. Thank you so much.

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Operator [36]

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At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Elich for closing remarks.

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Michael Elich, Barrett Business Services, Inc. - President and CEO [37]

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Again, thank you for continuing to join us and staying in the ring with us. And I just want to throw a compliment out to all of my teams that have continued to stay in the ring, and be there for what we have had to go through in 2016 and prior. And I still believe that what we've had, what we've been challenged with has made us stronger and better, even bringing new partners into the room, having even a rebuild of our accounting department. It's taken us to a whole new level, and I'm really proud of that and I'm excited about our future. So we'll see you in the field and looking forward to next quarter, thank you.

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Gary Kramer, Barrett Business Services, Inc. - CFO [38]

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Thank you, everybody.

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Operator [39]

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Thank you for your participation. This concludes our call. You may now disconnect.