SOURCE: Barrett Business Services, Inc.

Barrett Business Services, Inc.

August 09, 2016 16:05 ET

BBSI Reports Second Quarter 2016 Financial Results

Q2 Net Revenues up 12% to $203.4 Million (Non-GAAP Gross Revenues up 17%)

VANCOUVER, WA--(Marketwired - Aug 9, 2016) - Barrett Business Services, Inc. ("BBSI" or the "Company") (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the second quarter ended June 30, 2016.

Second Quarter 2016 Financial Summary vs. Year-Ago Quarter

  • Net revenues up 12% to $203.4 million.
  • Non-GAAP gross revenues up 17% to $1.1 billion.
  • Net income of $8.5 million or $1.16 per diluted share, compared to net income of $8.9 million or $1.21 per diluted share. Net income in the second quarter of 2016 included $0.24 per diluted share in legal and accounting costs associated with financial restatements, outside investigations and legal proceedings related to securities law issues.

"We are seeing consistency in our performance, which we believe is the result of focused attention on our referral channels and the depth of our operational teams," said Michael Elich, president and CEO of BBSI. "In the second quarter, we saw 8.7% same-store sales growth, and added 266 net new clients, supporting 17% gross revenue growth. We continue to execute on our plan as we look towards the remainder of 2016 and beyond."

Second Quarter 2016 Financial Results

Net revenues in the second quarter of 2016 increased 12% to $203.4 million compared to $182.0 million in the second quarter of 2015.

Total non-GAAP gross revenues in the second quarter of 2016 increased 17% to $1.1 billion compared to $971.9 million in the same year-ago quarter (see "Reconciliation of Non-GAAP Financial Measures" below). The increase was primarily due to the continued build in the Company's client count and same-store sales growth, partially offset by an 11% decline in staffing services revenue.

Net income for the second quarter of 2016 was $8.5 million or $1.16 per diluted share, compared to net income of $8.9 million or $1.21 per diluted share in the year-ago quarter. The second quarter of 2016 included $0.24 per diluted share in legal and accounting costs associated with financial restatements, outside investigations and legal proceedings related to securities law issues.

At June 30, 2016, the Company's restricted and unrestricted cash, cash equivalents, marketable securities, and restricted securities totaled $296.7 million compared to $305.3 million at December 31, 2015. Total debt was $12.2 million compared to $19.8 million at the end of 2015.

12-Month Outlook

BBSI continues to expect non-GAAP gross revenues for the next 12-month period (through June 30, 2017) to increase approximately 18%. For the full year 2016, the Company continues to expect diluted earnings per share to be $3.50, which includes an estimate of $6.4 million (approximately $0.57 per diluted share) for legal and accounting costs associated with financial restatements, outside investigations and legal proceedings related to securities law issues. The Company reported $3.47 diluted earnings per share in 2015. 

Conference Call

BBSI will conduct a conference call tomorrow, August 10, 2016 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) to discuss its financial results for the second quarter ended June 30, 2016. The Company's President and CEO Michael Elich and Interim CFO Tom Carley will host the call, followed by a question and answer period.

Date: Wednesday, August 10, 2016
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Toll-free dial-in number: 1-877-419-6603
International dial-in number: 1-719-325-4807
Conference ID: 6276674

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/player/index.php?id=120579 and via the 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 September 10, 2016.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 6276674

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 Services 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)
    Three Months Ended   Six Months Ended
Non-GAAP (in thousands)   June 30,   June 30,
    2016   2015   2016   2015
        (As Restated)       (As Restated)
Revenues:                
  Professional employer services   $ 1,102,884   $ 929,521   $ 2,130,482   $ 1,787,282
  Staffing services     37,641     42,347     73,932     81,513
    Total revenues     1,140,525     971,868     2,204,414     1,868,795
Cost of revenues:                        
  Direct payroll costs     958,458     815,773     1,852,508     1,570,209
  Payroll taxes and benefits     82,885     71,808     186,645     159,885
  Workers' compensation     56,929     47,809     112,621     93,292
    Total cost of revenues     1,098,272     935,390     2,151,774     1,823,386
Gross margin   $ 42,253   $ 36,478   $ 52,640   $ 45,409
                         

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

     
    (Unaudited)
    Three Months Ended June 30,
    Gross Revenue         Net Revenue
    Reporting Method         Reporting Method
(in thousands)   (Non-GAAP)   Reclassification     (GAAP)
    2016   2015   2016     2015     2016   2015
Revenues:       (As Restated)         (As Restated)         (As Restated)
  Professional employer services   $ 1,102,884   $ 929,521   $ (937,108 )   $ (789,909 )   $ 165,776   $ 139,612
  Staffing services     37,641     42,347     -       -       37,641     42,347
    Total revenues   $ 1,140,525   $ 971,868   $ (937,108 )   $ (789,909 )   $ 203,417   $ 181,959
Cost of revenues   $ 1,098,272   $ 935,390   $ (937,108 )   $ (789,909 )   $ 161,164   $ 145,481
                                         
                                         
    (Unaudited)
    Six Months Ended June 30,
    Gross Revenue         Net Revenue
    Reporting Method         Reporting Method
(in thousands)   (Non-GAAP)   Reclassification     (GAAP)
    2016   2015   2016     2015     2016   2015
Revenues:       (As Restated)         (As Restated)         (As Restated)
  Professional employer services   $ 2,130,482   $ 1,787,282   $ (1,810,030 )   $ (1,520,436 )   $ 320,452   $ 266,846
  Staffing services     73,932     81,513     -       -       73,932     81,513
    Total revenues   $ 2,204,414   $ 1,868,795   $ (1,810,030 )   $ (1,520,436 )   $ 394,384   $ 348,359
Cost of revenues   $ 2,151,774   $ 1,823,386   $ (1,810,030 )   $ (1,520,436 )   $ 341,744   $ 302,950
                                         

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 4,000 clients across all lines of business in 22 states. For more information, please visit www.barrettbusiness.com.

Forward-Looking Statements

Statements in this release about future events or performance, including expectations regarding revenue and earnings per share growth, 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 changes in executive management, the ineffectiveness of the Company's internal control over financial reporting, the Company's relationship with its primary bank lender, potential delisting of the Company's common stock by Nasdaq, current and future shareholder litigation, the ongoing investigation of accounting issues by the Securities and Exchange Commission and the United States Department of Justice, 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, the potential for material deviations from expected 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 2015 Annual Report on Form 10-K. 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 Consolidated Balance Sheets
(Unaudited)
 
    June 30,   December 31,
(in thousands)   2016   2015
Assets        
Current assets:        
  Cash and cash equivalents   $ 422   $ 25,218
  Trade accounts receivable, net     177,927     90,529
  Income taxes receivable     -     1,038
  Prepaid expenses and other     4,818     3,173
  Restricted certifcates of deposit     -     10,000
  Restricted marketable securities and workers' compensation deposits     48,371     76,110
  Deferred income taxes     20,908     20,941
    Total current assets     252,446     227,009
Marketable securities     2,362     6,082
Property, equipment and software, net     23,958     22,820
Restricted certificates of deposit     10,000     -
Restricted marketable securities and workers' compensation deposits     235,584     187,916
Other assets     4,551     5,130
Goodwill     47,820     47,820
    $ 576,721   $ 496,777
             
Liabilities and Stockholders' Equity            
Current liabilities:            
  Current portion of long-term debt   $ 7,721   $ 19,833
  Accounts payable     4,458     3,217
  Accrued payroll, payroll taxes and related benefits     186,295     121,343
  Income taxes payable     71     -
  Other accrued liabilities     4,419     6,166
  Workers' compensation claims liabilities     71,785     65,581
  Safety incentives liabilities     24,262     21,253
    Total current liabilities     299,011     237,393
Long-term workers' compensation claims liabilities     205,265     190,094
Long-term debt     4,502     -
Deferred income taxes     13,256     13,256
Customer deposits and other long-term liabilities     1,399     1,483
Stockholders' equity     53,288     54,551
    $ 576,721   $ 496,777
             
 
Barrett Business Services, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
 
    (Unaudited)     (Unaudited)  
(in thousands, except per share amounts)   Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2016   2015     2016     2015  
Revenues:       (As Restated)           (As Restated)  
  Professional employer service fees   $ 165,776   $ 139,612     $ 320,452     $ 266,846  
  Staffing services     37,641     42,347       73,932       81,513  
    Total revenues     203,417     181,959       394,384       348,359  
Cost of revenues:                              
  Direct payroll costs     28,223     32,188       55,649       61,952  
  Payroll taxes and benefits     82,885     71,808       186,645       159,885  
  Workers' compensation     50,056     41,485       99,450       81,113  
    Total cost of revenues     161,164     145,481       341,744       302,950  
Gross margin     42,253     36,478       52,640       45,409  
Selling, general and administrative expenses     28,490     21,429       50,394       38,399  
Depreciation and amortization     769     709       1,518       1,392  
Income from operations     12,994     14,340       728       5,618  
Other income (expense), net     6     (398 )     (2 )     (845 )
Income before income taxes     13,000     13,942       726       4,773  
Provision for income taxes     4,478     5,040       207       1,699  
Net income   $ 8,522   $ 8,902     $ 519     $ 3,074  
Basic earnings per common share   $ 1.18   $ 1.24     $ 0.07     $ 0.43  
Weighted average number of basic common shares outstanding     7,210     7,151       7,209       7,143  
Diluted earnings per common share   $ 1.16   $ 1.21     $ 0.07     $ 0.42  
Weighted average number of diluted common shares outstanding     7,328     7,327       7,323       7,328  
                               

Contact Information

  • Investor Relations:
    Liolios
    Cody Slach
    Tel 1-949-574-3860
    Email Contact