Press Releases

BBSI Reports Record Earnings in Third Quarter 2018 Financial Results

- Q3 Diluted Earnings Per Share up 28% to a Record $2.50 -

VANCOUVER, Wash., Nov. 06, 2018 (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, 2018.

Third Quarter 2018 Financial Summary vs. Year-Ago Quarter

  • Net revenues up 3% to $247.3 million.
  • Gross billings up 6% to $1.4 billion.
  • Net income up 29% to $19.1 million.
  • Diluted earnings per share up 28% to $2.50.

“We achieved record earnings in the third quarter, validating the leverage in our business model,” said president and CEO, Mike Elich. “We also continued to build width in our client base, adding 218 net new clients in the quarter. I am pleased with our continued progress as an organization and the value we are bringing to a growing number of small businesses.”

Third Quarter 2018 Financial Results

Net revenues in the third quarter of 2018 increased 3% to $247.3 million compared to $240.1 million in the third quarter of 2017.

Total gross billings in the third quarter increased 6% to $1.45 billion compared to $1.37 billion in the same year-ago quarter (see “Key Performance Metrics and Non-GAAP Financial Measures” below). The increase was primarily due to the continued build in the Company’s PEO client count and same-customer sales growth, which was partially offset by a decrease in staffing revenue.

Workers’ compensation expense as a percent of gross billings was 4.5% in the third quarter and benefited from lower frictional costs and a favorable one-time adjustment of prior accident year liability of $2.3 million. This compares to 4.9% in the third quarter of 2017.

Net income for the third quarter of 2018 increased 29% to $19.1 million, or $2.50 per diluted share, compared to net income of $14.8 million, or $1.96 per diluted share, in the year-ago quarter.

Reaffirmed Outlook

For the full year 2018, BBSI continues to expect diluted earnings per share of $4.31, which reflects the one-time SEC settlement, compared to $3.33 earnings per diluted share in 2017. The forecast continues to assume an effective tax rate of approximately 20%.

BBSI also continues to expect gross billings to increase approximately 10% for the next rolling 12-month period and 8% for fiscal year 2018.

Conference Call

BBSI will conduct a conference call tomorrow, November 7, 2018, 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, 2018. 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 7, 2018
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Toll-free dial-in number: 1-888-254-3590
International dial-in number: 1-323-994-2093
Conference ID: 157083

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 here 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 7, 2018.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 157083

Key Performance Metrics and Non-GAAP Financial Measures                       

We report PEO revenues net of direct payroll costs because we are not the primary obligor for wage payments to our clients’ employees. However, management believes that gross billing amounts and wages are useful in understanding the volume of our business activity and serve as an important performance metric in managing our operations, including the preparation of internal operating forecasts and establishing executive compensation performance goals. We therefore present for purposes of analysis, gross billing and wage information for the three and nine months ended September 30, 2018 and 2017.

  (Unaudited)  (Unaudited) 
  Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)     2018     2017     2018     2017
Gross Billings   $ 1,447,852   $ 1,371,212   $ 4,147,179   $ 3,869,299
PEO and staffing wages   $ 1,222,617   $ 1,154,012   $ 3,503,184   $ 3,258,993

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 an integral part of 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)    2018     2017     2018     2017
Workers' compensation   $ 56,412   $ 58,310   $ 172,388    $ 172,674
Safety incentive costs     8,790     9,051     24,394     23,783
Non-GAAP gross workers' compensation   $ 65,202   $ 67,361   $ 196,782   $ 196,457

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,
  2018   2017   2018   2017
PEO and staffing wages 84.4%   84.2%   84.5%   84.2%
Payroll taxes and benefits 6.9%   6.9%   7.8%   7.9%
Non-GAAP gross workers' compensation 4.5%   4.9%   4.7%   5.1%

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 5,600 clients across all lines of business in 24 states. For more information, please visit www.barrettbusiness.com.

Forward-Looking Statements

Statements in this release about future events or performance, including expectations regarding gross billings growth, future effective tax rates, and earnings per share, 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, the Company's relationship with its primary bank lender, the potential for material deviations from expected future workers' compensation claims experience, the workers’ compensation regulatory environment in the Company’s primary markets, litigation costs, the effect of governmental investigations, security breaches or failures 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 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 prospects are described in the Company’s 2017 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)    2018    2017  
                       
Assets          
Current assets:          
  Cash and cash equivalents   $   34,975   $   59,835  
  Trade accounts receivable, net     162,574     136,664  
  Income taxes receivable     -     1,686  
  Prepaid expenses and other     12,444     5,724  
  Investments     395     674  
  Restricted cash and investments     112,385     103,652  
    Total current assets     322,773     308,235  
Investments       1,649     1,199  
Property, equipment and software, net      26,731     24,909  
Restricted cash and investments     333,062     291,273  
Goodwill         47,820     47,820  
Other assets     3,148     3,215  
Deferred income taxes     8,158     5,834  
                $   743,341   $   682,485  
                       
Liabilities and Stockholders' Equity          
Current liabilities:          
  Current portion of long-term debt   $   221   $   221  
  Accounts payable     4,464     5,166  
  Accrued payroll, payroll taxes and related benefits     194,718     181,639  
  Income taxes payable     2,429     -  
  Other accrued liabilities     8,860     9,024  
  Workers' compensation claims liabilities     103,527     97,673  
  Safety incentives liability     28,600     28,532  
    Total current liabilites     342,819     322,255  
Long-term workers' compensation claims liabilities      295,311     265,844  
Long-term debt     4,006     4,171  
Customer deposits and other long-term liabilities     1,276     1,381  
Stockholders' equity     99,929     88,834  
                $   743,341   $   682,485  
                       


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,
      2018     2017     2018     2017
                             
Revenues:                    
  Professional employer service fees   $   206,320   $   197,388   $   592,559   $   557,315
  Staffing services       40,967       42,747       110,307       118,391
    Total revenues       247,287       240,135       702,866       675,706
Cost of revenues:                
  Direct payroll costs       30,842       31,986       83,265       89,182
  Payroll taxes and benefits       100,348       94,922       322,784       304,268
  Workers' compensation       56,412       58,310       172,388       172,675
    Total cost of revenues       187,602       185,218       578,437       566,125
    Gross margin       59,685       54,917       124,429       109,581
Selling, general and administrative expenses       36,670       33,925       101,713       88,595
Depreciation and amortization       949       1,062       3,228       2,989
    Income from operations       22,066       19,930       19,488       17,997
Other income       1,780       1,514       5,896       2,915
    Income before income taxes       23,846       21,444       25,384       20,912
Provision for income taxes       4,759       6,659       4,178       6,228
    Net income   $   19,087   $   14,785   $   21,206   $   14,684
Basic income per common share   $   2.59   $   2.03   $   2.89   $   2.02
Weighted average basic common shares outstanding       7,369       7,296       7,327       7,266
Diluted  income per common share   $   2.50   $   1.96   $   2.77   $   1.95
Weighted average diluted common shares outstanding       7,643       7,527       7,652       7,539
                             


Investor Relations:
Liolios
Cody Slach
Tel 1-949-574-3860
BBSI@liolios.com

BBSI Solid Color logo 2009.jpg

Source: Barrett Business Services Inc