Barrett Business Services, Inc. (NASDAQ:BBSI) Q3 2023 Earnings Call Transcript

Operator: Our next question comes from the line of Marc Redick with Sidoti & Company. Please proceed with your question.

Marc Redick: I wanted to just touch a little bit on the follow-up on the construction commentary. And if I want to — I just want to sort of go back because if I remember correctly from a timing perspective versus last year, there was — there were impacts some beyond the controllables, if you will. If I remember correctly, you had weather impacts, I think in — if I remember correctly, book at the fourth quarter and into the first quarter, I was wondering if you can talk a little bit about the timing of maybe what you saw then and how that might sort of play out if — I don’t know if easing comparison is a fair way to put it, but I was wondering if you could talk a little bit about maybe what you saw there in — how we might see it flow through this time around?

Gary Kramer: Yes, we saw our clients start to shrink Q4 and it accelerated into Q1. It happened at the same time you had interest rates going up really high. You had a shift in the macro economy and then we also had terrible weather in California, specifically Northern Cal as well. So, you had a confluence of all of these happening at the same time. It left us in that position of we think — it’s a piece of — it’s a little bit of each. It was hard to discern from where we were sitting, what was going to happen. We thought it was going to come back in Q2 of ’23, but ultimately, it didn’t come back. But our confidence now is in those clients that reduce staff that we just referenced, we saw them hire more folks in Q3, and we saw sequentially our clients grow in Q3. So that’s what gives us the optimism of — they dipped for three quarters and then they pulled back and started to add people back into Q3 this year.

Marc Redick: That’s where I was going with that. And then I was sort of curious as to — on a different track, but there’s a little similarity there. So bring us up to speed maybe what you’re seeing with the banking and finance customers. I mean, as we showed to anniversary those challenges that again or outside of the controllables, maybe you could sort of bring us up to speed — maybe on what you’re seeing there?

Anthony Harris: I mean we really weren’t that affected by the banking crisis a year ago. We don’t have a lot of direct clients in that space. Obviously, all of our clients use banking services. So, we were watching very closely to see if there are impacts of our clients. It wasn’t a prevailing pain point beyond a few anecdotal stories. So, we recover very quickly from that. I mean for our clients in the blue- and gray-collar space, the biggest headwind has been construction and really driven by the cyclical nature of that with interest rates.

Marc Redick: And then the last one for me. I was wondering if you could circle back to benefits for a moment. Are there any particular client verticals or any particular customer groups that are who have responded more positively than others? Or are there any differentiation that you’re seeing as to those who are being part of that add? And then also maybe you talk a little bit about the sales cycle and maybe how that’s played out compared to what your expectations were.