Good 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 31st, 2024. Joining us today are BBSI's President and CEO, Mr. Gary Kramer and the company's CFO, Mr. Anthony Harris. Following their remarks, we'll open the call for 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. The 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 to 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 from those expressed or implied by the forward-looking statements. I would like to remind everyone that this call will be available for replay through March 26, 2024, starting at 8:00 P.M. Eastern Time tonight. 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.bbsi.com. Now, I would like to turn the call over to the President and Chief Executive Officer of BBSI, Mr. Gary Kramer. Sir, please go ahead.

Thank you and good afternoon everyone and thank you for joining the call. I am pleased to report that we had a strong fourth quarter, capping off an equally strong year. Our financial results exceeded our expectations and we are optimistic for the future. We continue to execute our short and long-term objectives, and we added a record number of worksite employees from new clients. Before I speak about our financial performance, I would like to recap some of the key operational and strategic accomplishments for the year. We are successfully selling and servicing BBSI Benefits in every one of our markets. We entered into an additional strategic multiyear partnership with a new carrier that set us up for a great 1/1/2025 selling season. Of the 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 greater velocity at the top of the sales funnel, resulting in record worksite employees. We have more referral partners that understand and appreciate our value proposition and are referring more business to BBSI. We continue to invest in our asset-light model and have successfully expanded into new geographies and continue to gain momentum. We continue to invest in myBBSI and in our tech stack, which resulted in multiple product releases in 2024 and we are executing on exciting new product releases in 2025. We also made further advancements on our Employer Choice initiative and earned the Great Place to Work designation for a fourth year in a row. Every year, we conduct a survey of our clients to evaluate customer needs and satisfaction and I am pleased to report that our Net Promoter Score increased 5 points to 69. This gives us great confidence in the value our clients place on the service and solutions we provide. Our clients love what we do and they are ready and willing to spread the word about BBSI. This is further illustrated in our record client retention rate for the year. 2024 was a great year with great results and I am proud of what our teams accomplished. Moving to our financial results and worksite employees. During the quarter, our gross billings increased 10% over the prior year quarter, which is greater than we expected. We continue to execute various strategies to increase the top of the sales funnel and we achieved a record number of worksite employees from new client adds during the fourth quarter and for the full year. Our client retention set a record and exceeded our expectations in both the fourth quarter and the full year. I like to attribute that to the work we do with our clients and the value our teams provide. The result of all these efforts, or what I refer to as our controllable growth, is that we added approximately 4,000 worksite employees year-over-year from net new clients. While our clients' growth remained below our historical averages, our clients' workforce continued to grow modestly in the fourth quarter and was up sequentially and year-over-year. We anticipate these hiring trends will continue in 2025. To summarize for the quarter, we grew our worksite employees by 5.2% as we sold and retained more business and benefited from our clients' net hiring. For the year, our gross billings grew 8%, driven by 4.2% growth in average worksite employees. Moving to our staffing operation. Our staffing business declined by 9% over the prior year quarter and 7% for the year. Please note the rate of decline in our staffing business has slowed significantly compared to the previous year and we are forecasting our staffing business to modestly grow in 2025 as our higher-value recruitment offering for our PEO clients commands a higher share of the business. In fact, we continue to execute our strategy to recruit for our PEO clients and placed 103 applicants in the quarter. Moving to the field operational updates. We are very pleased with our entrance in the new markets with our asset-light model. We have 21 total new market development managers in various stages of their development. These folks have been gaining traction and consistency. January was a big month. Our MDMs added over 500 new worksite employees. In three of the markets, we hired additional local talent to support our clients and we anticipate having ribbon-cutting ceremonies for the new brick-and-mortar branches by the end of the second quarter. We continue to see positive results from our investments in new markets and are actively recruiting additional new market development managers. Regarding product updates, we continue to execute on the sale and service of BBSI Benefits, our new health insurance offering. To recap, we started off the year with 275 clients on our various plans with more than 6,800 total participants. Our plan was to double the book in 12 months and I am pleased to say that we have exceeded our plan. At the end of January, we have approximately 575 clients on our various plans with more than 16,000 total participants. As a reminder, we partnered with Kaiser Permanente and added their best-in-class HMO product to our offering midyear. We saw strong momentum in Q4 that carried into Q1 of this year due to the attractiveness of a national PPO side-by-side with Kaiser HMO in California. I'm very pleased with our teams, our progress, and our financial results. As we look forward to 2025, this product is now a profit center for us and we reap the benefit of leverage through scale. Our value proposition resonates well and we are having success with small and large clients in white and blue-collar industries in every state we operate and with a diverse distribution channel. Next, I'd like to shift to our 2025 IT product objectives. I previously mentioned that we have been investing in our tech stack on the product side to service and support our clients better. Over the last couple of years, we've made additional investments in myBBSI to support our BBSI Benefits offering, learning management system, and to integrate with additional third parties. As we evolve and look forward to 2025, we will be making additional investments to round out the employee life cycle experience. We think of the employee life cycle from a client perspective from when an employee is hired to when the employee retires and everywhere in between. We will be replacing or bolstering attributes of the lifecycle with additional product launches throughout the year. On Monday, we issued a press release for our first new product launch of the year, BBSI Applicant Tracking System. This cutting-edge tool allows for our clients to create job postings from our centralized system, which integrates with various third-party job boards. Clients can manage the interview process in our system and then when employees are hired, they integrate seamlessly with our payroll and timekeeping system. This will help our clients with organization and create multiple efficiencies. You may ask why we are doing this now? Simply put, our clients are asking for it. With our benefits offering, we are seeing larger clients, but we are also seeing more white-collar businesses. This product will help support those clients and is designed for the employer who has multiple hires per month. This does not replace BBSI Recruiting, which is our product that is utilized by our PEO clients for hard-to-place candidates or clients who don't have much velocity in hiring. We are excited about this launch and the future launches as we execute on our product roadmap in 2025. We are also making investments in systems and AI that will launch in 2025 to better support our employees and create efficiencies that Anthony will discuss in his prepared remarks. Next, I would like to shift to my view of 2025. We have consistently achieved strong controllable growth by focusing on the needs of our clients and by adding new clients. Furthermore, we've also seen improvements in client hiring in 2024, especially in Q4, and we expect these hiring trends to continue in 2025. We have been executing on the sale and service of BBSI Benefits and this has become one of our core competencies. We have IT product enhancements rolling out, more products to sell, more folks selling, and more referral partners recommending BBSI. We will execute on our additional IT initiatives that are going to increase our efficiencies and also increase our financial results. We have a culture of taking care of our clients and executing a plan and I look forward to 2025. Now, I'm going to turn the call over to Anthony for his prepared remarks.

Thanks Gary and hello everyone. I'm pleased to report that we finished the year with strong results and are off to a strong start in 2025. For the quarter, our gross billings increased 10% to $2.25 billion versus $2.05 billion in Q4 2023, while diluted earnings per share increased 17% to $0.63 compared to $0.54 in the prior year quarter. For the full year, gross billings increased 7.9% to $8.3 billion in 2024 versus $7.7 billion in the prior year, while diluted earnings per share increased 7% to $1.98 compared to $1.85 in the prior year. Looking at the quarterly results more closely, PEO growth billings increased 10% in the quarter, while staffing revenues declined 9% to $20 million. Our PEO worksite employees grew by 5.2% in the quarter, which as Gary noted, was driven by a record number of worksite employees added from new clients in the fourth quarter. This continued a strong trend of controllable growth during the year and was once again combined with positive and improved client hiring in Q4. The pace of client hiring exceeded our expectations in the quarter, but still remains below our long-term historical averages. We continue to see consistency in client hiring across most regions and across the industry. Looking at wage rates and hours worked, total hours remained stable in the quarter, while overtime hours increased modestly year-over-year. Wage rates continue to increase and average billing per WSE increased 3.3% in the quarter. Looking at year-over-year PEO gross billings growth by region for Q4, East Coast grew by 21%, Southern California grew by 11%, Mountain grew by 10%, Northern California grew by 5%, and the Pacific Northwest declined by 4%. Southern California represents our largest region and has improved to double-digit growth through a combination of consistent client adds and stable customer hiring. The strong East Coast performance represents the 15th consecutive quarter of double-digit growth in that region, also driven by a combination of strong controllable growth and above-average client hiring. The Pacific Northwest region is our smallest region, comprising about 5% of our gross billings and continues to have the weakest client hiring. However, those trends have begun to stabilize and the region had a successful year-end selling season. As such, we expect the Pacific Northwest region to return to growth in 2025. Turning to margin and profitability. Our workers' compensation program continues to perform well and benefits from favorable claim frequency trends and favorable claim development. This strong performance has once again resulted in favorable adjustments for prior year claims. In Q4 2024, we recognized favorable prior year liability and premium adjustments of $2.4 million compared to favorable adjustments of $5.4 million in the fourth quarter of 2023. As a reminder, our client workers' compensation exposure is now primarily covered by our fully insured program with no retained claims risk by BBSI. As with past quarters, the cost savings we recognize in workers' compensation expense continue to offset pricing pressure in the workers' compensation insurance market, which continued to move overall rates lower. Moving to SG&A. Fourth quarter SG&A expense increased 7% on a year-over-year basis, primarily due to increases in variable employee compensation and incentive pay related to stronger financial results compared to the fourth quarter of 2023. For the full year 2024, SG&A expense increased by approximately 6%. We continue to see efficiencies from our operating investments in 2024 and prior, including investments in technology and new product support. As such, we expect our SG&A growth rate to slow in 2025 compared to 2024. Moving to investment income. Our investment portfolios earned $2.5 million in the fourth quarter, down approximately $300,000 from the prior year due to lower average interest rates. Our average investment balance is expected to remain stable in the year ahead, but average book yield will come down with short-term rates decreasing year-over-year leading to lower investment income in 2025. As a reminder, our investment portfolio continues to be managed conservatively with an average quality of investment in AA. Our balance sheet remains strong with $122 million of unrestricted cash investments at December 31st and no debt. Our approach to capital allocation remains consistent, and that includes first making investments back into the company where we can. In 2024, these investments included several initiatives that Gary mentioned, including technology investments related to ongoing product development as we continue to invest in and expand our value proposition and investments in our sales team, including our asset-light expansion in 2024. In 2025, we expect to continue these investments and will launch additional systems and initiatives that will make our internal operations more efficient across our team, including leveraging modern systems, AI tools, and streamlined processes. We are also excited about the launch of additional sales technologies that should further improve our sales velocity, increase our operating efficiency, and help accelerate the success of our new sales team members. After investing in the company, we continue to generate excess cash flow and we continue to distribute excess capital to our shareholders through our dividend and stock buyback plan. Under our $75 million July 2023 repurchase program, BBSI repurchased $7 million of shares in the fourth quarter at an average price of $43 per share with $30 million remaining available under the program at quarter-end. In total in 2024, we repurchased over 3% of the company's shares outstanding through purchases of more than $29 million. We also paid over $8 million in dividends for the year, bringing total capital return to shareholders in 2024 to $37 million. Looking ahead to 2025, we expect to continue to generate excess available cash and to continue these capital allocation strategies. Now, turning to our outlook for 2025. We expect gross billings and average worksite employees to strengthen from 2024, with 2025 gross billings expected to increase between 7% and 9% and average worksite employees to increase between 4% and 6%. As a reminder, 2025 includes one less business day, which equates to about a 0.5 percentage point lower billings growth. However, we expect that to be more than offset by continued growth in our net client adds, a trend that has continued throughout 2024 and from continued, but modest improvements in client hiring. For 2025, we expect gross margin to remain generally consistent with 2024 and range between 2.85% and 3.10%. There are two variables that I would like to call out. First, client payroll tax rates have increased in 2025, similar to the increases we saw in 2024. These rates are being reflected in our pricing but may have some lag impacting the shape of our earnings. Second, we expect continued softness in workers' compensation pricing, offset by savings in our workers' compensation costs. And finally, we expect our effective annual tax rate to be between 26% and 27%. I will now turn the call back to the operator for questions.

Thank you. We will now start the question-and-answer session. Our first question comes from Chris Moore with CJS Securities. Please go ahead.

Hey, good evening guys. Thanks for taking a couple of questions and congrats on another good year and on the NPS score. Maybe we'll talk about obviously higher wages in a vacuum positive for you guys. What are you hearing from clients in terms of being able to continue to grow in the current environment? It sounds like hiring is picking up a little bit, but just any further thoughts there?

Yes. Thanks, Chris. This is Anthony. We're really seeing stability and recovery in those metrics. So, first of all, you mentioned wage inflation. We've continued to see consistent wage inflation every year and that's a baseline driver of growth for us and we're seeing that rate remain stable. We continue to see on a year-over-year and sequential basis wage inflation remain consistent. In terms of hiring, we've seen that trend improve during the year. And notably in Q3 and Q4, we also saw overtime hours improve in the year, also indicating increased activity in our clients. So, as I mentioned in my remarks in our outlook, we're cautiously optimistic. We're expecting only modest improvement for the purposes of our outlook, but we see the trends that are favorable.

Got it. I appreciate that. Average worksite employee growth is targeting around 5% this year. Just wondering the majority of those come from new clients, correct?

Yes, that's going to be the lion's share of our growth is going to come from our controllable growth, which is the clients we add and the worksite employees they have and the clients we retain.

Got it. And maybe one more on the healthcare side. Can you just maybe talk a little bit about the mechanics of how you get paid on healthcare, like reseller fees versus admin fee expansion and where that looks to go over time in terms of that split?

Yes, we had a great performance last quarter. During our previous earnings call, we discussed our expectations for 2025, which we anticipated would be similar to 2024. However, we finished the year very strongly and started the year even better, achieving our best January selling season ever, with around 20% more new business compared to any previous January. As a result, we have increased our gross billings estimate by about 200 basis points from what we originally expected a quarter ago. A part of this increase is attributed to the strong closing of our Benefits product, where we doubled our targets for the 1/1 business and exceeded our goals for the latter half of the year. This strong finish and positive start contribute to compounding benefits reflected in our financials throughout the year. Regarding healthcare, we do not assume any health insurance risk or take on significant risk for workers' compensation. We operate primarily on a commission basis for selling health insurance products and charge slightly more for our PEO administration due to the value we provide through our services like administration, compliance, enrollment, and IT support.

Got it. And I'm sorry, last one. On the healthcare revenue side, is that something that you would eventually break out on the financials to give investors a look a couple of years down the line of what's being generated there?

Yes. We've discussed this and we aim to disclose the right metrics to help understand the business. One aspect of revealing revenue related to benefits is that our income from this program is twofold. It includes the reseller fees but is also combined with our overall admin fee, which reflects the value we provide to our clients. A significant portion of that now includes health benefits. Therefore, when considering the profitability of that program, the income involves more than just the reseller fee; it also encompasses the expansion of the admin fee. We are carefully considering how to present and disclose this information, and we will continue to enhance these disclosures.

I appreciate it. I'll jump back in line.

Thank you. Our next question comes from Jeff Martin with ROTH Capital Partners LLC. Please go ahead.

Thanks. Hi Kramer, hi Anthony, how are you doing?

Good.

So, Kramer, I wanted to drill down on the tech investments. It sounds like this is in part, I mean, I'm sure this is part of a roadmap that had been planned for quite a while, but just curious if you've enhanced your technology initiatives or your technology product initiatives as a result of starting to attract non-traditional clients in the white collar space and larger clients?

Yes. So, when you're running a company, the biggest decisions you have to make are strategy and allocating capital. And if you think of how we've shifted over the years, right, we've repositioned the product to sell health insurance and to have a learning management system for all these different things. And those all have an IT component to them, right? So, we have been really investing and bolstering up our IT tech stack for the last three years to support the business. And that was really designed for the products that we were trying to launch. Now, we're really thinking of using software as a support for our business and to help support the business. The first one we've launched is the applicant tracking, right? And it's pretty cool because if you're a client and you hire a lot, and it could be anything from a franchise to you name it, right? It doesn't need to be just like an office worker. It could be anything in that space and has a lot of volume in the hiring. But the basic idea is you can come into our system. We have a bunch of job descriptions that are curated. You can take the job descriptions. You can then modify them to better fit your company. You can post it. It posts out to different job boards. People go in and apply. When they apply, they come into our system. When they come into our system, depending on how the client has it set up, they can ask them questions, do screening, do the interviews in there, push out emails and calendars and all those things. Now, we want to hire the person, hire the person, boom, we push out the I-9s, the background checks, the different forms through our system. Now, they passed all that, boom, we want to hire them and then they go right into payroll, into our payroll platform and into our timekeeping systems if they buy our timekeeping systems. So, that's the front end and that's what we talk about on the employee life cycle, right? So, it's how do you attract clients, how do you bring them in, how do you hire them. That's the first step I would say that we're building out in 2025 and we launched it this week and we're going to start selling it in March. But the idea is that's the front end and then throughout the year, we're going to have additional products that come out that support that client employee life cycle. So, you'll see more of this coming out in the back half of the year. We've got a roadmap that's going to be a couple of years until we get to what I would call best-in-class.

Great. And on the payroll tax side, I think you were I think rates were due for a catch-up. Did the rate come in, in line with your expectations? Did it surprise you to the extent that it cost you a little bit of margin relative to your initial budget for the year? And is there an ability to recapture some of that if that's the case with pricing?

Yes, Jeff. This is Anthony. You're correct that rates were due for a catch-up to some extent, right? They have been coming down for multiple years in a row. Last year, they went up. This year, they went up as well, but I would say very much in line with expectations. We saw that trend coming. We see the unemployment activity, and that was in line with our expectations. That said, every client in our client reporting states like California has their own rate, so we need to wait till those rates come in to effectively reprice most of them. So, we have processes to do that. But as I mentioned, there is some lag in that. At the end of the day, that will be captured, but there may be some change in the shape of our earnings, a little bit more of a loss in Q1. We saw that trend last year as well. But overall, especially over a rolling 12 months, we are not expecting margin degradation.

Okay, great. And then one more if I could, two-part question. One, any signs of a turnaround in the pricing side of the workers' comp market? And then secondly, what is your exposure to businesses that have been affected by the California wildfires?

Kind of the joke at the new organization is I've been trying to call the bottom for workers' comp for six years and I've been calling it wrong. You're seeing a deceleration in rate decreases now. It hasn't flattened. It's still trending downward, but at a much smaller rate. So, I would think workers' comp is going to decelerate slower from here and we're seeing that in the market, but it's still there are still pressures. If it's a good account, it attracts a lot of buyers. And when there's a lot of buyers, it drives down the price, if that makes sense. So, we don't see the bottom yet. We're hopeful that we're going to see the bottom soon, but I don't know when it's going to turn. For the California wildfires, directly for us, I'd say for our employees, there were minimal employees that were affected. There were minimal branches that were affected. We did have to evacuate a couple of times, but no there was no loss of property on our branch side. When we think of our clients, the Palisades, the Malibu per se are not big grounds for our clients. So, we had minimal client effects. I think we had one client who had his facility burned down, but out of call it 8,500 clients having one that was affected by it is, you call it almost nothing. The real question that we think is unfortunately when there's a tragedy in the way it was, it's gotta get rebuilt. And when it gets rebuilt, we think of our clients being prone in position to capitalize on the especially in our blue-gray collar, to capitalize on the rebuild. So, we think a lot of our clients will get business from the rebuild. We've seen it with our restoration companies already. Think of the restoration types of companies that go in and do the rehab for the water damages and the fire damages; we've seen them boom already. What we haven't seen yet is the construction uptick, but ultimately that will follow. I don't know if that's going to be a 2025 event or if that's going to be 2026 by the time all the permitting and everything shakes out. But we definitely think that that business specifically is going to have a tailwind in California for us.

Great. Appreciate the thoughts.

Thank you. Our next question comes from the line of Marc Riddick with Sidoti & Company LLC. Please go ahead.

Hey, good evening.

Hey Marc. Hello.

I wanted to follow up on your comment on the strong finish to the year and strong beginning to the year. I was wondering if you could talk a little bit about maybe if you're seeing any particular client industry verticals that are kind of leading the way that you touched a little bit on construction, but are there any sort of call outs that you're seeing that might be leading away in that activity?

Marc, I would say it's not so much related to any one geography or any one industry. I would say broad-based, the company just did well in Q4 and the company did well in January. The one call out I did give in my script was our asset-light, our Market Development Managers. They added over 500 worksite employees in January, which is a really good accomplishment for them. We're starting to see consistency out of that group and I'm looking forward to watching that grow.

Great. I was wondering if you could discuss the benefits. I know it's early in the new year, but can you talk about your current competitive positioning? What aspects give you confidence in the strength of your ads so far? I appreciate the details and updates on the data, but could you highlight what you think sets you apart, particularly regarding the increase in activity on the white-collar side that you mentioned earlier?

Yes, if you just kind of take a step back and look at our value proposition. We're going to we've got more products now with Benefits and with other things in IT. We're going to have more IT products coming out. But they will never replace our core product, which is our people, right? So, people are our product. They will always be our product. That's our differentiator in the local market. So, if I can have a local team that is second to none and then I've got all of these additional products and if those products are even, let's say we're equal to the different marketplace, if you can be equal to the marketplace plus have that killer team there, it's going to be hard to beat us, right? If the price is the same and you get our teams, it's going to be hard to not go with BBSI. And that's why we're seeing the uptick in sales.

Great. And then congratulations again on the Net Promoter progress that you made there as well. That's certainly a positive as well. Thanks.

Thank you.

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

Just want to thank everybody for dialing in. Thanks everybody, all of our BBSI professionals for a great Q4 and really for a great start of the year. I'm looking forward to 2025. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.