There's a quiet revolution happening in the world of Professional Employer Organizations (PEOs), and Barrett Business Services, Inc. (BBSI) is leading the charge. While Wall Street analysts focus on predictable metrics like gross billings and worksite employee growth, a deeper dive into BBSI's Q1 2024 earnings call reveals a hidden gem: the strategic rollout of their health insurance offering, BBSI Benefits.

Yes, everyone knows BBSI Benefits exists. It's been mentioned in previous calls, and analysts are aware of its potential. But what they seem to be missing is the sheer magnitude of what BBSI is building - a healthcare juggernaut capable of disrupting the PEO landscape and potentially catapulting BBSI into a whole new league of growth.

Breaking the Blue-Collar Mold

Traditionally, BBSI has been known for its strong presence in blue-collar industries, particularly in the construction sector. This sector, while lucrative, is also cyclical and prone to economic fluctuations. In 2023, BBSI experienced the impact of this cyclicality firsthand, as client workforce reductions partially offset strong controllable growth.

BBSI Benefits, however, opens the door to a new world of white-collar clients, a sector largely untouched by BBSI in the past. The Q4 2023 earnings call revealed that 25% of new BBSI Benefits clients came from the white-collar space. This is a game-changer. By diversifying its client base, BBSI is effectively mitigating its exposure to economic volatility and creating a more stable, predictable revenue stream.

<br>Reference: BBSI Q4 2023 Earnings Call Transcript

The Kaiser Effect

Now, consider the impact of the new Kaiser Permanente partnership. BBSI is partnering with a healthcare giant renowned for its brand recognition and penetration in key markets like California and Oregon. This partnership isn't just about adding another carrier; it's about aligning BBSI with a trusted brand that resonates deeply with potential clients.

Think about it: a small business owner is faced with rising healthcare costs and a confusing array of insurance options. They're already familiar with Kaiser and trust their services. Suddenly, BBSI, a company they trust for their PEO needs, offers them a Kaiser HMO option, seamlessly integrated with their existing services. It's a no-brainer.

"CEO Gary Kramer on the Kaiser Partnership: "Kaiser is renowned for its excellence in health care services and offers one of the most complete and competitive HMO products in the marketplace... The addition of Kaiser will further round out our product offering for blue and gray-collar clients... We believe that this is going to give us a lift post 7/1, but more importantly, be an accelerant to growth as we look out to 2025 and beyond." Reference: BBSI Q1 2024 Earnings Call Transcript"

Explosive Growth Potential

This is where the numbers get truly mind-blowing. BBSI has set a target of doubling their BBSI Benefits participation by January 2025. Let's do some quick math. In Q1 2024, they reported 280 clients with over 7,000 participants. Doubling that means reaching approximately 560 clients and over 14,000 participants within the next year and a half.

While BBSI hasn't disclosed specific revenue figures for BBSI Benefits, CEO Gary Kramer has stated they're not "doing this for pennies, but for dollars." Consider the potential revenue stream generated by servicing 560 clients with a combined workforce of over 14,000 individuals. This isn't just incremental growth; it's a potential revenue explosion, fueled by a strategically crafted and meticulously executed plan.

<br>Reference: BBSI Q4 2023 Earnings Call Transcript

Wall Street's Blind Spot

Here's the kicker. Wall Street seems to be largely focused on BBSI's traditional PEO business, predicting modest worksite employee growth and relying on client hiring to fuel revenue. They're missing the bigger picture. BBSI Benefits, with its potential for explosive growth and a more diversified, stable client base, could be the hidden engine that drives BBSI's future success, exceeding even the most optimistic analyst projections.

Keep your eyes on this sleeping giant. BBSI is awakening, and the PEO world may never be the same.

"Fun Fact: BBSI scored a Net Promoter Score of 64, indicating exceptional client satisfaction and a strong likelihood of referrals. A score above 50 is considered exceptional. Reference: BBSI Q4 2023 Earnings Call Transcript"