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) -- 02/03/15 -- 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,
-----------------------------------------------------------------
(in Gross Revenue Net Revenue
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
========== ========== ========== ==========
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
Source: Barrett Business Services, Inc.
Released February 3, 2015