SOURCE: Barrett Business Services, Inc.

Barrett Business Services, Inc.

February 03, 2015 16:26 ET

BBSI Reports Fourth Quarter and Full Year 2014 Financial Results

Q4 Net Revenues up 21% to $175.0 Million; Non-GAAP Gross Revenues up 19% to $931.1 Million

VANCOUVER, WA--(Marketwired - Feb 3, 2015) - Barrett Business Services, Inc. ("BBSI" or the "Company") (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the fourth quarter and full year ended December 31, 2014.

Fourth Quarter 2014 Financial Summary vs. Year-Ago Quarter

  • Net revenues up 21% to $175.0 million
  • Gross revenues up 19% to $931.1 million
  • Net income increased 27% to $7.0 million or $0.97 per diluted share, compared to $5.6 million or $0.74 per diluted share
  • Excluding the $1.4 million effect of a higher than historical tax rate of 46.6% as a result of the Company's pre-tax loss position for the full year, net income increased 52% to $8.4 million or $1.17 per diluted share

Fourth Quarter 2014 Financial Results

Net revenues in the fourth quarter of 2014 increased 21% to $175.0 million compared to $144.5 million in the fourth quarter of 2013.

Total non-GAAP gross revenues in the fourth quarter of 2014 increased 19% to $931.1 million compared to $779.3 million in the fourth quarter of 2013 (see "Reconciliation of Non-GAAP Financial Measures" below). The increase was primarily due to the continued build in the Company's co-employed client count and same-store sales growth.

Net income in the fourth quarter of 2014 increased 27% to $7.0 million compared to $5.6 million in the year-ago quarter. Diluted earnings per share in the fourth quarter of 2014 increased 31% to $0.97 compared to $0.74 per diluted share in the year-ago quarter.

As expected, diluted earnings per share in the fourth quarter of 2014 was impacted by the effect of a higher annual income tax rate due to the Company's pre-tax loss position for full year 2014. Without the effect of the higher fourth quarter income tax rate, net income would have increased 32% to $8.4 million, or $1.17 per diluted share, based on a provision for income taxes of $4.8 million rather than $6.2 million. In 2015, the Company expects its tax rate to return to the mid-to-upper 30's.

At December 31, 2014, the Company's cash, cash equivalents, marketable securities and restricted securities totaled $239.1 million compared to $143.2 million at December 31, 2013. At December 31, 2014, the Company had no outstanding borrowings on its revolving credit line.

During the fourth quarter, BBSI finalized a new credit facility with Wells Fargo that includes a $40.0 million term loan, as well as a $14.0 million revolving credit line. The Company obtained this additional capacity to address the increase in its workers' compensation liability and claims expense accrual for the 2014 third quarter. On December 29, 2014, BBSI used a combination of cash on hand and proceeds from the term loan to satisfy its workers' compensation reserve funding requirements at December 31, 2014.

Management Commentary

"We ended 2014 on a strong note, reporting a 19% increase in revenues supported by 9% same-store sales growth and 167 net PEO client adds in the quarter, both of which were at the upper end of our expectations," said Michael Elich, president and CEO of BBSI. "These results reflect the positive influence our management platform has on our clients' businesses, as well as the continued development of our brand name in a growing number of markets.

"Over the course of the last year, we've continued to strengthen operations while maturing our entire organization. We've taken significant steps to strengthen our workers' compensation reserves and increased our financial capacity to support the company and our growing client base. These steps, along with the momentum we experienced in our fourth quarter, positions BBSI for a strong 2015."

Full Year 2014 Financial Results

Net revenues in 2014 increased 19% to $636.2 million compared to $532.8 million in 2013. Total non-GAAP gross revenues in 2014 increased 19% to $3.4 billion compared to $2.8 billion in 2013. The increase was primarily attributable to the previously discussed increase in net PEO clients and same-store sales growth.

As a result of the previously reported incremental increase to the Company's self-insured workers' compensation reserve during the third quarter of 2014, the Company experienced a net loss in 2014 of $27.1 million compared to net income of $17.9 million in 2013. Diluted loss per share was ($3.78) in 2014 compared to diluted earnings per share of $2.42 in 2013.

12 Month Outlook

BBSI expects gross revenues for all of 2015 to increase approximately 18%. Included in this expectation is a high single-digit contribution from same-store sales growth as well as growth from new business consistent with current trends. The Company also expects diluted earnings per share for the full year of 2015 to increase to approximately $3.30.

Conference Call

BBSI will conduct a conference call tomorrow, February 4, 2015 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) to discuss its financial results for the fourth quarter and full year ended December 31, 2014. The Company's President and CEO Michael Elich and CFO James Miller will host the call, followed by a question and answer period.

Date: Wednesday, February 4, 2015
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Toll-free dial-in number: 1-888-539-3678
International dial-in number: 1-719-325-2463
Conference ID: 6150119

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.

The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=112749 and via BBSI's investor relations section of the BBSI website at www.barrettbusiness.com.

A replay of the conference call will be available after 3:00 p.m. Eastern time on the same day through March 4, 2015.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 6150119

Reconciliation of Non-GAAP Financial Measures

In addition to the results prepared in accordance with generally accepted accounting principles ("GAAP"), the Company is disclosing non-GAAP gross revenues.

The Company reports its Professional Employer Service revenues on a net basis because it is not the primary obligor for the services provided by the Company's co-employed clients to their customers. The gross revenues and cost of revenues information below, although not in accordance with GAAP, is presented for comparison purposes and because management believes such information is more informative as to the level of the Company's business activity and more useful in managing its operations.

                 
                 
    (Unaudited)   (Unaudited)
    Fourth Quarter Ended   Year Ended
(in thousands)   December 31,   December 31,
    2014   2013   2014   2013
                         
Revenues:                        
  Professional employer services   $ 885,816   $ 742,181   $ 3,191,229   $ 2,665,714
  Staffing services     45,313     37,118     165,833     143,881
    Total revenues     931,129     779,299     3,357,062     2,809,595
Cost of revenues:                        
  Direct payroll costs     785,669     658,262     2,827,732     2,369,282
  Payroll taxes and benefits     67,836     58,320     266,844     228,903
  Workers' compensation     43,583     38,416     232,069     124,886
    Total cost of revenues     897,088     754,998     3,326,645     2,723,071
Gross margin   $ 34,041   $ 24,301   $ 30,417   $ 86,524
                         
                         

A reconciliation of non-GAAP gross revenues to net revenues is as follows:

     
     
    (Unaudited)
    Three Months Ended December 31,
    Gross Revenue         Net Revenue
(in thousands)   Reporting Method   Reclassification     Reporting Method
    2014   2013   2014     2013     2014   2013
Revenues:                                        
  Professional employer services   $
885,816
  $
742,181
  $
(756,113
)   $
(634,774
)   $ 129,703   $ 107,407
  Staffing services     45,313     37,118     -       -       45,313     37,118
    Total revenues   $ 931,129   $ 779,299   $ (756,113 )   $ (634,774 )   $ 175,016   $ 144,525
Cost of revenues   $ 897,088   $ 754,998   $ (756,113 )   $ (634,774 )   $ 140,975   $ 120,224
                                         
                                         
    (Unaudited)
    Year Ended December 31,
    Gross Revenue         Net Revenue
(in thousands)   Reporting Method   Reclassification     Reporting Method
    2014   2013   2014     2013     2014   2013
Revenues:                                        
  Professional employer services   $
3,191,229
  $ 2,665,714   $ (2,720,878 )   $
(2,276,751
)   $ 470,351   $ 388,963
  Staffing services     165,833     143,881     -       -       165,833     143,881
    Total revenues   $ 3,357,062   $ 2,809,595   $ (2,720,878 )   $ (2,276,751 )   $ 636,184   $ 532,844
Cost of revenues   $ 3,326,645   $ 2,723,071   $ (2,720,878 )   $ (2,276,751 )   $ 605,767   $ 446,320
                                         
                                         

About BBSI

BBSI (NASDAQ: BBSI) is a leading provider of business management solutions, combining human resource outsourcing and professional management consulting to create a unique operational platform that differentiates it from competitors. The Company's integrated platform is built upon expertise in payroll processing, employee benefits, workers' compensation coverage, risk management and workplace safety programs, and human resource administration. BBSI's partnerships help businesses of all sizes improve the efficiency of their operations. The Company works with more than 3,000 clients across all lines of business in 23 states. For more information, please visit www.barrettbusiness.com.

Forward-Looking Statements

Statements in this release about future events or performance, including expectations for gross revenues, diluted earnings per share and tax rate for 2015, are forward-looking statements which involve known and unknown risks, uncertainties and other factors that may cause the actual results of the Company 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 the Company's service areas, the effect of changes in the Company's mix of services on gross margin, the Company's ability to retain current clients and attract new clients, the availability of financing or other sources of capital, future workers' compensation claims experience, the effect of changes in the workers' compensation regulatory environment in one or more of the Company's primary markets, 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 the Company's investment portfolio, among others. Other important factors that may affect the Company's future prospects are described in the Company's 2013 Annual Report on Form 10-K and its quarterly report on Form 10-Q for the quarter ended September 30, 2014. Although forward-looking statements help to provide complete information about the Company, readers should keep in mind that forward-looking statements are less reliable than historical information. The Company undertakes no obligation to update or revise forward-looking statements in this release to reflect events or changes in circumstances that occur after the date of this release.

 
 
Barrett Business Services, Inc.
Condensed Balance Sheets
(Unaudited)
         
         
    December 31,   December 31,
(in thousands)   2014   2013
Assets            
Current assets:            
  Cash and cash equivalents   $ 11,544   $ 93,557
  Marketable securities     29,957     19,787
  Trade accounts receivable, net     102,627     85,586
  Income taxes receivable     11,421     -
  Prepaid expenses and other     3,813     3,026
  Restricted markertabe securities and workers' compensation deposits     3,776     -
  Deferred income taxes     15,791     8,929
    Total current assets     178,929     210,885
Marketable securities     20,930     5,909
Property, equipment and software, net     22,675     20,549
Restricted certificates of deposit     114,335     12,789
Restricted marketable securities and workers' compensation deposits     58,533     11,205
Other assets     5,306     4,165
Goodwill     47,820     47,820
    $ 448,528   $ 313,322
             
Liabilities and Stockholders' Equity            
Current liabilities:            
  Current portion of long-term debt   $ 25,220   $ 220
  Accounts payable     2,719     3,252
  Accrued payroll, payroll taxes and related benefits     120,133     92,516
  Income taxes payable     -     1,236
  Other accrued liabilities     1,917     313
  Workers' compensation claims liabilities     54,049     35,841
  Safety incentives liabilities     14,232     13,086
    Total current liabilities     218,270     146,464
Long-term workers' compensation claims liabilities     161,933     76,603
Long-term debt     19,833     5,053
Deferred income taxes     8,159     10,787
Customer deposits and other long-term liabilities     1,675     1,862
Stockholders' equity     38,658     72,553
    $ 448,528   $ 313,322
             
             
 
 
Barrett Business Services, Inc.
Consolidated Statements of Operations
 
         
         
    (Unaudited)   (Unaudited)
(in thousands, except per share amounts)   Fourth Quarter Ended   Year Ended Ended
    December 31,   December 31,
    2014   2013   2014     2013
Revenues:                          
  Professional employer service fees   $ 129,703   $ 107,407   $ 470,351     $ 388,963
  Staffing services     45,313     37,118     165,833       143,881
    Total revenues     175,016     144,525     636,184       532,844
Cost of revenues:                          
  Direct payroll costs     34,584     28,310     126,399       108,800
  Payroll taxes and benefits     67,836     58,320     266,844       228,903
  Workers' compensation     38,555     33,594     212,524       108,617
    Total cost of revenues     140,975     120,224     605,767       446,320
Gross margin     34,041     24,301     30,417       86,524
Selling, general and administrative expenses     20,281     16,948     73,821       60,061
Depreciation and amortization     663     550     2,506       2,037
Income (loss) from operations     13,097     6,803     (45,910 )     24,426
Other income, net     87     170     573       476
Income (loss) before taxes     13,184     6,973     (45,337 )     24,902
Provision for (benefit from) income taxes     6,150     1,413     (18,253 )     7,010
Net income (loss)   $ 7,034   $ 5,560   $ (27,084 )   $ 17,892
Basic income (loss) per common share   $ 0.99   $ 0.78   $ (3.78 )   $ 2.52
Weighted average basic common shares outstanding     7,122     7,165     7,160       7,105
Diluted income (loss) per common share   $ 0.97   $ 0.74   $ (3.78 )   $ 2.42
Weighted average diluted common shares outstanding     7,234     7,477     7,160       7,397
                           
                           

Contact Information

  • Company Contact:
    Michael L. Elich
    President and CEO
    Tel 1-360-828-0700

    Investor Relations:
    Liolios Group, Inc.
    Cody Slach
    Tel 1-949-574-3860
    Email Contact