SOURCE: Barrett Business Services, Inc.

Barrett Business Services, Inc.

November 08, 2016 16:05 ET

BBSI Reports Third Quarter 2016 Financial Results

Q3 Net Revenues up 13% to $225.1 Million (Non-GAAP Gross Revenues up 17%)

VANCOUVER, WA--(Marketwired - Nov 8, 2016) - Barrett Business Services, Inc. ("BBSI" or the "Company") (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the third quarter ended September 30, 2016.

Third Quarter 2016 Financial Summary vs. Year-Ago Quarter

  • Net revenues up 13% to $225.1 million.
  • Non-GAAP gross revenues up 17% to $1.2 billion.
  • Net income of $10.2 million or $1.38 per diluted share, compared to net income of $11.0 million or $1.49 per diluted share. Net income in the third quarter of 2016 included a $0.30 per diluted share expense for the settlement of a November 2014 class action shareholder lawsuit.

"We are seeing consistency in our performance, which speaks to the depth of our operational teams," said Michael Elich, president and CEO of BBSI. "In the third quarter, we saw 9.1% same-customer sales growth and added 200 net new clients, supporting 17% gross revenue growth. Additionally, we continued to make progress on key initiatives, including paying off our term loan with Wells Fargo and adding a new member to our board of directors. We will continue to execute on our plan as we look towards 2017 and beyond."

Third Quarter 2016 Financial Results
Net revenues in the third quarter of 2016 increased 13% to $225.1 million compared to $198.7 million in the third quarter of 2015.

Total non-GAAP gross revenues in the third quarter of 2016 increased 17% to $1.2 billion compared to $1.1 billion 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-customer sales growth.

Net income for the third quarter of 2016 was $10.2 million or $1.38 per diluted share, compared to net income of $11.0 million or $1.49 per diluted share in the year-ago quarter. The third quarter of 2016 included a $0.30 per diluted share expense for the recent settlement of a November 2014 class action shareholder lawsuit.

At September 30, 2016, the Company's cash, cash equivalents, investments and restricted cash and investments increased 7% to $325.6 million compared to $305.3 million at December 31, 2015. Total debt was reduced significantly to $4.7 million compared to $19.8 million at the end of 2015 due to the full pay down of the Company's $40.0 million term loan.

Outlook
Parting from the previous outlook of $3.50 per diluted share, the Company expects diluted earnings per share in 2016 to be $3.00, which includes an estimate of $8.2 million (approximately $0.76 per diluted share) for legal and accounting costs associated with financial restatements, changing auditors, outside investigations and legal proceedings related to securities law issues, and $3.3 million (approximately $0.30 per diluted share) for the shareholder litigation settlement. The Company reported $3.47 diluted earnings per share in 2015. 

Conference Call
BBSI will conduct a conference call tomorrow, November 9, 2016 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) to discuss its financial results for the third quarter ended September 30, 2016. The Company's President and CEO Michael Elich and CFO Gary Kramer will host the call, followed by a question and answer period.

Date: Wednesday, November 9, 2016
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Toll-free dial-in number: 1-877-681-3367
International dial-in number: 1-719-325-4845
Conference ID: 7180987

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=121606 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 December 9, 2016.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 7180987

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   Nine Months Ended
Non-GAAP (in thousands)   September 30,   September 30,
    2016   2015   2016   2015
                 
Gross Revenues:                
  Professional employer services   $ 1,184,159   $ 1,010,757   $ 3,314,641   $ 2,798,039
  Staffing services     47,874     46,617     121,806     128,130
    Total gross revenues     1,232,033     1,057,374     3,436,447     2,926,169
Gross Cost of revenues:                        
  Direct payroll costs     1,036,769     886,984     2,889,278     2,457,193
  Payroll taxes and benefits     82,888     75,237     269,533     235,122
  Workers' compensation     62,817     52,263     175,437     145,555
    Total gross cost of revenues     1,182,474     1,014,484     3,334,248     2,837,870
Gross margin   $ 49,559   $ 42,890   $ 102,199   $ 88,299
                         

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

     
    (Unaudited)
    Three Months Ended September 30,
    Net Revenue       Gross Revenue
    Reporting Method       Reporting Method
(in thousands)   (GAAP)   Non-GAAP Adjustments   (Non-GAAP)
    2016   2015   2016   2015   2016   2015
Revenues:                        
  Professional employer services   $ 177,229   $ 152,108   $ 1,006,930   $ 858,649   $ 1,184,159   $ 1,010,757
  Staffing services     47,874     46,617     -     -     47,874     46,617
    Total revenues   $ 225,103   $ 198,725   $ 1,006,930   $ 858,649   $ 1,232,033   $ 1,057,374
Cost of revenues   $ 175,544   $ 155,835   $ 1,006,930   $ 858,649   $ 1,182,474   $ 1,014,484
                                     
                         
    (Unaudited)
    Nine Months Ended September 30,
    Net Revenue       Gross Revenue
    Reporting Method       Reporting Method
(in thousands)   (GAAP)   Non-GAAP Adjustments   (Non-GAAP)
    2016   2015   2016   2015   2016   2015
Revenues:                        
  Professional employer services   $ 497,682   $ 418,954   $ 2,816,959   $ 2,379,085   $ 3,314,641   $ 2,798,039
  Staffing services     121,806     128,130     -     -     121,806     128,130
    Total revenues   $ 619,488   $ 547,084   $ 2,816,959   $ 2,379,085   $ 3,436,447   $ 2,926,169
Cost of revenues   $ 517,289   $ 458,785   $ 2,816,959   $ 2,379,085   $ 3,334,248   $ 2,837,870
                                     

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 4,100 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)
 
    September 30,   December 31,
(in thousands)   2016   2015
Assets        
Current assets:        
  Cash and cash equivalents   $ 26,786   $ 25,218
  Trade accounts receivable, net     140,074     90,529
  Income taxes receivable     -     1,038
  Prepaid expenses and other     3,637     3,173
  Investments     1,013     -
  Restricted cash and investments     51,959     86,110
  Deferred income taxes     20,906     20,941
    Total current assets     244,375     227,009
Investments     863     6,082
Property, equipment and software, net     25,790     22,820
Restricted cash and investments     245,020     187,916
Goodwill     47,820     47,820
Other assets     15,937     5,130
    $ 579,805   $ 496,777
             
Liabilities and Stockholders' Equity            
Current liabilities:            
  Current portion of long-term debt   $ 221   $ 19,833
  Accounts payable     4,520     3,217
  Accrued payroll, payroll taxes and related benefits     161,062     121,343
  Income taxes payable     4,797     -
  Other accrued liabilities     10,751     6,166
  Workers' compensation claims liabilities     77,683     65,581
  Safety incentives liabilities     24,997     21,253
    Total current liabilities     284,031     237,393
Long-term workers' compensation claims liabilities     214,248     190,094
Long-term debt     4,447     -
Deferred income taxes     13,256     13,256
Customer deposits and other long-term liabilities     1,443     1,483
Stockholders' equity     62,380     54,551
    $ 579,805   $ 496,777
 
 
Barrett Business Services, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
 
 
(in thousands, except per share amounts)
 
 
(Unaudited)
Three Months Ended
 
 
 
 
(Unaudited)
Nine Months Ended
 
 
    September 30,     September 30,  
    2016     2015     2016     2015  
Revenues:                        
  Professional employer service fees   $ 177,229     $ 152,108     $ 497,682     $ 418,954  
  Staffing services     47,874       46,617       121,806       128,130  
    Total revenues     225,103       198,725       619,488       547,084  
Cost of revenues:                                
  Direct payroll costs     37,017       35,308       92,667       97,260  
  Payroll taxes and benefits     82,888       75,237       269,533       235,122  
  Workers' compensation     55,639       45,290       155,089       126,403  
    Total cost of revenues     175,544       155,835       517,289       458,785  
Gross margin     49,559       42,890       102,199       88,299  
Selling, general and administrative expenses     30,440       25,440       80,834       63,839  
Depreciation and amortization     823       721       2,341       2,113  
Income from operations     18,296       16,729       19,024       22,347  
Other expense, net     (3,280 )     (216 )     (3,281 )     (1,061 )
Income before income taxes     15,016       16,513       15,743       21,286  
Provision for income taxes     4,783       5,540       4,991       7,239  
Net income   $ 10,233     $ 10,973     $ 10,752     $ 14,047  
Basic earnings per common share   $ 1.41     $ 1.52     $ 1.49     $ 1.96  
Weighted average number of basic common shares outstanding     7,243       7,201       7,220       7,163  
Diluted earnings per common share   $ 1.38     $ 1.49     $ 1.46     $ 1.91  
Weighted average number of diluted common shares outstanding     7,405       7,362       7,350       7,340  
                                 

Contact Information

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