Third Quarter Results Exceed Management Expectations, Diluted EPS for 2020 Now Expected to be $4.10 -
VANCOUVER, Wash., Nov. 03, 2020 (GLOBE NEWSWIRE) -- 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, 2020.
Third Quarter 2020 Financial Summary vs. Year-Ago Quarter
Net revenues down 8% to $227.5 million.
Gross billings down 3% to $1.51 billion.
Net income of $18.5 million, or $2.40 per dilu ted share, compared to net income of $25.0 million, or $3.24 per diluted share. Unrestricted cash and investments up 8% to $147.9 million (up 14% versus Q2 2020).
“Our third quarter results exceeded our expectations and are reflective of the adaptability and resilience of small businesses in America,” said Gary Kramer, CEO of BBSI. “I am proud of the work and support that we are providing to our clients as we navigate these unprecedented times together.”
(Unaudited) | (Unaudited) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Gross billings | $ | 1,511,908 | $ | 1,552,882 | $ | 4,321,018 | $ | 4,377,089 | ||||||||
PEO and staffing wages | $ | 1,300,352 | $ | 1,322,469 | $ | 3,710,788 | $ | 3,725,416 |
Because safety incentives represent consideration payable to PEO customers, safety incentive costs are netted against PEO revenue in our consolidated statements of operations. Management considers safety incentives to be closely connected to our workers’ compensation program because they encourage client companies to maintain safe work practices and minimize workplace injuries. We therefore present below for purposes of analysis non-GAAP gross workers’ compensation expense, which represents workers’ compensation costs including safety incentive costs. We believe this non-GAAP measure is useful in evaluating the total costs of our workers’ compensation program.
(Unaudited) | (Unaudited) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Workers' compensation | $ | 46,685 | $ | 46,887 | $ | 146,120 | $ | 154,290 | ||||||||
Safety incentive costs | 5,369 | 8,265 | 19,150 | 22,801 | ||||||||||||
Non-GAAP gross workers' compensation | $ | 52,054 | $ | 55,152 | $ | 165,270 | $ | 177,091 |
In monitoring and evaluating the performance of our operations, management also reviews the following ratios, which represent selected amounts as a percentage of gross billings. Management believes these ratios are useful in understanding the efficiency and profitability of our service offerings.
(Unaudited) | (Unaudited) | |||||||||||
Percentage of Gross Billings | Percentage of Gross Billings | |||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
PEO and staffing wages | 86.0% | 85.2% | 85.9% | 85.1% | ||||||||
Payroll taxes and benefits | 6.6% | 6.8% | 7.3% | 7.3% | ||||||||
Non-GAAP gross workers' compensation | 3.4% | 3.6% | 3.8% | 4.0% |
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 7,200 clients across all lines of business in 35 states. For more information, please visit www.mybbsi.com.
Forward-Looking Statements
Statements in this release about future events or performance, including expectations regarding the effects of the COVID-19 pandemic on our business operations and product relevance, and future gross billings, effective tax rates, earnings per share, and workers’ compensation expense as a percentage of gross billings, are forward-looking statements. Such statements 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 effects of governmental orders imposing business closures and stay-at-home and physical distancing requirements, 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 Company's relationship with its primary bank lender, the potential for material deviations from expected future workers' compensation claims experience, changes in the workers’ compensation regulatory environment in the Company’s primary markets, litigation costs, the effect of governmental investigations, security breaches or failure
s in the Company's information technology systems, the collectability of accounts receivable, changes in executive management, the carrying value of deferred income tax assets and goodwill, and the effects of the pandemic, economic slowdown, and conditions in the global capital markets on the Company’s investment portfolio, among others. Other important factors that may affect the Company’s prospects are described in the Company’s 2019 Annual Report on Form 10-K and in subsequent reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934. 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) | 2020 | 2019 | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 61,193 | $ | 44,570 | ||||
Investments | 86,679 | 82,590 | ||||||
Trade accounts receivable, net | 212,362 | 163,561 | ||||||
Income taxes receivable | 1,740 | 1,335 | ||||||
Prepaid expenses and other | 13,883 | 14,919 | ||||||
Restricted cash and investments | 90,608 | 116,873 | ||||||
Total current assets | 466,465 | 423,848 | ||||||
Property, equipment and software, net | 35,148 | 31,724 | ||||||
Operating lease right-of-use assets | 23,730 | 23,805 | ||||||
Restricted cash and investments | 245,035 | 327,326 | ||||||
Goodwill | 47,820 | 47,820 | ||||||
Other assets | 5,081 | 3,618 | ||||||
Deferred income taxes | - | 2,788 | ||||||
$ | 823,279 | $ | 860,929 | |||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 221 | $ | 221 | ||||
Accounts payable | 6,447 | 5,993 | ||||||
Accrued payroll, payroll t axes and related benefits |
205,476 | 174,168 | ||||||
Current operating lease liabilities | 7,303 | 6,671 | ||||||
Other accrued liabilities | 6,603 | 8,846 | ||||||
Workers' compensation claims liabilities | 96,583 | 118,273 | ||||||
Safety incentives liability | 23,354 | 27,950 | ||||||
Total current liabilities | 345,987 | 342,122 | ||||||
Long-term workers' compensation claims liabilities | 250,765 | 320,713 | ||||||
Long-term debt | 3,565 | 3,730 | ||||||
Deferred inco me taxes |
2,947 | - | ||||||
Long-term operating lease liabilities | 17,355 | 17,883 | ||||||
Customer deposits and other long-term liabilities | 5,348 | 4,682 | ||||||
Stockholders' equity | 197,312 | 171,799 | ||||||
$ | 823,279 | $ | 860,929 |
Barrett Business Services, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(Unaudited) | (Unaudited) | ||||||||||||||
(in thousands, except per share amounts) | Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues: | |||||||||||||||
Professional employer service fees | $ | 199,082 | $ | 214,156 | $ | 573,162 | $ | 607,840 | |||||||
Staffing services | 28,431 | 33,806 | 74,486 | 89,319 | |||||||||||
Total revenues | 227,513 | 247,962 | 647,648 | 697,159 | |||||||||||
Cost of revenues: | |||||||||||||||
Direct payroll costs | 21,452 | 25,464 | 56,325 | 67,298 | |||||||||||
Payroll taxes and benefits | 100,142 | 104,847 | 313,275 | 321,341 | |||||||||||
Workers' compensation | 46,685 | 46,887 | 146,120 | 154,290 | |||||||||||
Total cost of revenues | 168,279 | 177,198 | 515,720 | 542,929 | |||||||||||
Gross margin | 59,234 | 70,764 | 131,928 | 154,230 | |||||||||||
Selling, general and administrative expenses | 35,587 | 41,352 | 100,957 | 113,517 | |||||||||||
Depreciation and amortization | 1,341 | 970 | 3,512 | 2,909 | |||||||||||
Income from operations | 22,306 | 28,442 | 27,459 | 37,804 | |||||||||||
Other income, net | 1,294 | 2,488 | 5,693 | 7,946 | |||||||||||
Income before income taxes | 23,600 | 30,930 | 33,152 | 45,750 | |||||||||||
Provision for income taxes | 5,089 | 5,959 | 6,538 | 9,172 | |||||||||||
Net income | $ | 18,511 | $ | 24,971 | $ | 26,614 | $ | 36,578 | |||||||
Basic income per common share | $ | 2.42 | $ | 3.34 | $ | 3.51 | $ | 4.92 | |||||||
Weighted average basic common shares outstanding | 7,639 | 7,483 | 7,572 | 7,433 | |||||||||||
Diluted income per common share | $ | 2.40 | $ | 3.24 | $ | 3.46 | $ | 4.76 | |||||||
Weighted average diluted common shares outstanding | 7,709 | 7,711 | 7,688 | 7,686 |
Investor Relations:
Gateway Investor Relations
Cody Slach
Tel 1-949-574-3860
BBSI@gatewayir.com