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) -- 11/08/16 -- 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 | ||||||||||||||
Investor Relations:
Liolios
Cody Slach
Tel 1-949-574-3860
Email Contact
Source: Barrett Business Services, Inc.
Released November 8, 2016