I N V E S T O R P R E S E N TAT I O N NASDAQ: BBSI SEPTEMBER 2018

Transcription

1 I N V E S T O R P R E S E N TAT I O N NASDAQ: BBSI SEPTEMBER 2018

2 FORWARD-LOOKING STATEMENTS Statements in this presentation about future events or performance, including expectations for market opportunities and capacity, growth in new clients, the effectiveness of our referral-based channels, rate of client retention, gross billings and diluted earnings per share, are forward-looking statements which involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from any future results expressed or implied by such forward-looking statements. Factors that could affect future results include economic conditions in our service areas and their effect on revenue levels, the effect of changes in our mix of services on gross margin, our ability to retain current clients and attract new clients, difficulties with integrating clients into our operations, the availability of financing or other sources of capital, the potential for material deviations from expected future workers' compensation claims experience, the workers compensation regulatory environment in our primary markets, litigation costs, the effect of government and investigations, security breaches or failures in our information technology systems, the effect of escalating medical costs on our business, the collectability of accounts receivable, the carrying value of deferred income tax assets and goodwill, and the effect of conditions in the global capital markets on our investment portfolio, among others. Other important factors that may affect our prospects are described in our 2017 Annual Report on Form 10-K. Although forward-looking statements help to provide complete information about our Company, investors should keep in mind that forward-looking statements are less reliable than historical information. We undertake no obligation to update or revise forwardlooking statements in this presentation to reflect events or changes in circumstances that occur after the date of this presentation. 2

3 PURPOSE FOR APPROACHING THE MARKET 3

4 VISION: IMPROVE THE PROBABILITY OF SMALL BUSINESS SUCCESS Source: Bureau of Labor Statistics. 4

5 HOW WE ARE POSITIONED TYPICAL OUTCOME: TOOLS, SYSTEMS, PROCESSES Engage as a tactical subordinate Minimal integration with the business TYPICAL OUTCOME: BLUEPRINT TO MORE EFFICIENTLY RUN BUSINESS TYPICAL OUTCOME: WHITE PAPERS Engage as an expert guide Highly integrated with the business 5

6 OUR VIEW TO THE BUSINESS CYCLE RE- L E V E R RE- L E V E R V O L U M E RE- L E V E R P L AT E A U O P E R AT I O N A L I N F L E C T I O N P O I N T I D E A T I M E 6

7 POTENTIAL BRAND IMPACT 1,000 >5,600 15,000 45,000+ TODAY 7

8 FIELD STRUCTURE & FOOTPRINT 105 teams housed in 60 physical locations Decentralized structure Most clients within 50-mile radius of BBSI branch 8

9 HOW WE BUILD & SUPPORT OUR TEAMS $500K investment per team Capacity of ~90 clients Average: 30 employees per client Ability to lever operating margins 9

10 TRAITS OF A BBSI PROFESSIONAL INNATELY CURIOUS ENTREPRENEURIAL STRONG BUSINESS ACUMEN OWNERSHIP MENTALITY SEASONED PROFESSIONAL 10

11 HOW WE BUILD PIPELINE REFERRAL-BASED CHANNELS PATH TO MUTUAL UNDERSTANDING ~25% YIELD +90% CLIENT RETENTION 11

12 HOW WE ALIGN WITH OUR CLIENTS OUTCOMES Stability Capacity Leverage Profitability Predictability 90%+ Retention 12

13 MARKET OPPORTUNITY BBSI works with approximately 5,600 businesses roughly 3% BBSI works with less than 1% of target market in U.S. Source: Statistics of U.S. Businesses, SBA Office of Advocacy, Updated Feb 9,

14 CURRENT STATE Leverage net client add to support referrals Expand within existing markets build branches within branches Penetrate adjacent markets to meet demand 14

15 FUTURE STATE Leverage net client add to support referrals Expand within existing markets build branches within branches Penetrate adjacent markets to meet demand 15

16 BRANCH STRATIFICATION 60 physical locations 17 Mature = run rate of $100 million + 17 Emerging = run rate of $30 million + 26 Developing = run rate of $1-$30 million 16

17 ANNUAL NET REVENUE GROWTH $Millions $741 $841 $920 $537 $636 $

18 Gross Billings ($Millions) PEO Customers¹ ~2,200 ~2,600 ANNUAL GROSS BILLINGS & PEO CLIENT GROWTH ~3,000 ~4,000 $4,016 ~4,900 $4,693 ~5,600 $5,301 ~10% expected gross billings growth for the next rolling 12-month period² ~$6,052 $2,817 $3,357 $2, Thru Q ) PEO customers defined as the active number of customer Federal Employee Identification Numbers (FEINs). Please take into consideration that this figure is a broad estimate of the Company s actual client count. However, the Company does believe the number represents an effective proxy for the health of its business client count represents the Company s estimated client count at the end of the year. 2) Guidance revised on August 8,

19 ANNUAL DILUTED EPS PERFORMANCE $3.47 $2.55 $3.30 $4.31 -$ ¹ E² 1) The net loss per share in 2014 is primarily due to expense associated with an increase in the Company s reserve for workers compensation claims liabilities of approximately $104.2 million. 2) Guidance revised on August 8, Includes a lower effective tax rate of ~20% and $0.14 per share in costs to reflect the pending SEC settlement. 19

20 DRIVERS OF FUTURE GROWTH ORGANIC GROWTH New client stack Runoff Same customer sales LEVERAGE Capacity utilization against infrastructure SCALE Expansion 20

21 $3,357 $4,016 $4,693 $5,301 KEY STATS: BBSI (NASDAQ) Trading Data August 30, 2018) Stock Price $ Week High/Low $98.76/$49.98 Financial Highlights June 30, 2018) Gross Billings (ttm) $5,502M Income from Ops. (ttm) $29.3M Annual Gross Billings ($Millions) Avg. Daily Vol. (3 mo.) 40,816 Diluted EPS (ttm) $3.55 Shares Outstanding 7.4M Institutional Holdings 83% Insider Holdings 4% Valuation Measures Market Cap $538.3M Cash¹ (mrq) Total Assets (mrq) Total Debt (mrq) Total Liabilities (mrq) Total Equity (mrq) $458.8M $708.5M $4.3M $623.6M $84.9M P/E (ttm) 20.6x Dividend Payout Ratio (ttm) 28% Source: CapitalIQ & Company filings. ttm = trailing twelve months; mrq = most recent quarter. 1) Represents cash and cash equivalents, investments, and restricted cash and investments Clients ~3000 ~4000 ~4900 ~

22 INVESTOR CONTACT Cody Slach Liolios NASDAQ: BBSI SEPTEMBER 2018