BBSI Reports Fourth Quarter and Full Year 2019 Financial Results
- Full Year Net Income up 27% to a Record $48.3 Million, or $6.27 per Diluted Share -
VANCOUVER, Wash., Feb. 25, 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 fourth quarter and full year ended December 31, 2019.
Fourth Quarter 2019 Financial Summary vs. Year-Ago Quarter
- Net revenues increased 3% to $245.2 million versus $237.8 million.
- Gross billings up 5% to $1.59 billion.
- Net income of $11.7 million versus $16.9 million.
- Diluted earnings per share of $1.51 versus $2.21.
Full Year 2019 Financial Summary vs. 2018
- Net revenues increased to $942.3 million versus $940.7 million.
- Gross billings up 5% to $5.97 billion.
- Net income up 27% to $48.3 million.
- Diluted earnings per share up 26% to $6.27.
“We had a strong quarter, culminating in a record year of earnings,” said BBSI President and CEO Mike Elich. “While topline growth remains softer than historical levels, we continue to see strength in our client additions. As I look at 2020, our foundation is strong. We have invested in our infrastructure over the years and are now positioned to complement our high touch model with enhanced technology solutions.”
Fourth Quarter 2019 Financial Results
Net revenues in the fourth quarter of 2019 increased 3% to $245.2 million compared to $237.8 million in the fourth quarter of 2018.
Total gross billings in the fourth quarter increased 5% to $1.59 billion compared to $1.52 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.
Non-GAAP gross workers’ compensation expense as a percent of gross billings was 4.2% in the fourth quarter and benefited from lower frictional costs and a favorable one-time adjustment of prior accident year liability of $3.1 million. This compares to 4.8% in the fourth quarter of 2018.
Net income for the fourth quarter of 2019 decreased to $11.7 million, or $1.51 per diluted share, compared to $16.9 million, or $2.21 per diluted share, in the year-ago quarter. Net income in the fourth quarter of 2019 reflected an effective tax rate of 24%, up from 13% in the year-ago quarter.
Full Year 2019 Financial Results
Net revenues in 2019 increased to $942.3 million compared to $940.7 million in 2018.
Total gross billings increased 5% to $5.97 billion compared to $5.66 billion in 2018 (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.
Non-GAAP gross workers’ compensation expense as a percent of gross billings was 4.1% in 2019 and benefited from lower frictional costs and favorable one-time adjustments of prior accident year liability of $13.4 million. This compares to 4.7% in 2018.
Net income in 2019 increased 27% to $48.3 million, or $6.27 per diluted share, compared to $38.1 million, or $4.98 per diluted share, in 2018. Net income in 2019 reflected an increase in the effective tax rate to 21% compared to 15% in the prior year.
Outlook
For the full year 2020, the company expects diluted earnings per share of $5.05. This includes an increase in SG&A of $5.5 million, or $0.56 in earnings per diluted share, for the planned launch of mybbsi.com, the company’s new and improved customer portal. This also assumes an effective tax rate of approximately 20%.
BBSI expects gross billings to increase approximately 7% for the next rolling 12-month period.
The company also expects the range for workers’ compensation expense as a percentage of gross billings to be 4.2% to 4.4%. This does not include any change in estimate for prior year workers’ compensation liability, which has been trending favorably over the previous nine quarters.
Conference Call
BBSI will conduct a conference call on Wednesday, February 26, 2020, 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, 2019.
BBSI’s President and CEO Michael Elich and CFO Gary Kramer will host the conference call, followed by a question and answer period.
Date: Wednesday, February 26, 2020
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Toll-free dial-in number: 1-877-407-4018
International dial-in number: 1-201-689-8471
Conference ID: 13699147
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 Gateway Investor Relations 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.mybbsi.com.
A replay of the conference call will be available after 3:00 p.m. Eastern time on the same day through March 26, 2020.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13699147
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 twelve months ended December 31, 2019 and 2018.
| (Unaudited) | (Unaudited) | ||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| (in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
| Gross billings | $ | 1,593,919 | $ | 1,515,916 | $ | 5,971,008 | $ | 5,663,095 | |||||||
| PEO and staffing wages | $ | 1,365,527 | $ | 1,287,485 | $ | 5,090,943 | $ | 4,790,669 | |||||||
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 December 31, | Year Ended December 31, | ||||||||||||||
| (in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
| Workers' compensation | $ | 57,600 | $ | 63,191 | $ | 211,890 | $ | 235,579 | |||||||
| Safety incentive costs | 8,862 | 8,991 | 31,663 | 33,385 | |||||||||||
| Non-GAAP gross workers' compensation | $ | 66,462 | $ | 72,182 | $ | 243,553 | $ | 268,964 | |||||||
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 December 31, | Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| PEO and staffing wages | 85.7 | % | 84.9 | % | 85.3 | % | 84.6 | % | |||||||
| Payroll taxes and benefits | 6.8 | % | 5.6 | % | 7.2 | % | 7.2 | % | |||||||
| Non-GAAP gross workers' compensation | 4.2 | % | 4.8 | % | 4.1 | % | 4.7 | % | |||||||
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 29 states. For more information, please visit www.mybbsi.com.
Forward-Looking Statements
Statements in this release about future events or performance, including expectations regarding gross billings growth, workers’ compensation expense, SG&A expenses, 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 2018 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)
| December 31, | December 31, | |||||
| (in thousands) | 2019 | 2018 | ||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 44,570 | $ | 35,371 | ||
| Investments | 82,590 | 416 | ||||
| Trade accounts receivable, net | 163,561 | 151,597 | ||||
| Income taxes receivable | 1,335 | — | ||||
| Prepaid expenses and other | 14,919 | 13,880 | ||||
| Restricted cash and investments | 116,873 | 120,409 | ||||
| Total current assets | 423,848 | 321,673 | ||||
| Investments | — | 1,687 | ||||
| Property, equipment and software, net | 31,724 | 24,812 | ||||
| Operating lease right-of-use assets | 23,805 | — | ||||
| Restricted cash and investments | 327,326 | 348,165 | ||||
| Goodwill | 47,820 | 47,820 | ||||
| Other assets | 3,618 | 3,474 | ||||
| Deferred income taxes | 2,788 | 8,458 | ||||
| $ | 860,929 | $ | 756,089 | |||
| Liabilities and Stockholders' Equity | ||||||
| Current liabilities: | ||||||
| Current portion of long-term debt | $ | 221 | $ | 221 | ||
| Accounts payable | 5,993 | 4,336 | ||||
| Accrued payroll, payroll taxes and related benefits | 174,168 | 158,683 | ||||
| Income taxes payable | — | 4,403 | ||||
| Current operating lease liabilities | 6,671 | — | ||||
| Other accrued liabilities | 8,846 | 20,566 | ||||
| Workers' compensation claims liabilities | 118,273 | 109,319 | ||||
| Safety incentives liability | 27,950 | 29,210 | ||||
| Total current liabilities | 342,122 | 326,738 | ||||
| Long-term workers' compensation claims liabilities | 320,713 | 304,078 | ||||
| Long-term debt | 3,730 | 3,951 | ||||
| Long-term operating lease liabilities | 17,883 | — | ||||
| Customer deposits and other long-term liabilities | 4,682 | 2,285 | ||||
| Stockholders' equity | 171,799 | 119,037 | ||||
| $ | 860,929 | $ | 756,089 | |||
Barrett Business Services, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| (Unaudited) | (Unaudited) | |||||||||||||
| (in thousands, except per share amounts) | Three Months Ended | Year Ended | ||||||||||||
| December 31, | December 31, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||
| Revenues: | ||||||||||||||
| Professional employer service fees | $ | 212,033 | $ | 200,840 | $ | 819,873 | $ | 793,399 | ||||||
| Staffing services | 33,119 | 36,992 | 122,438 | 147,299 | ||||||||||
| Total revenues | 245,152 | 237,832 | 942,311 | 940,698 | ||||||||||
| Cost of revenues: | ||||||||||||||
| Direct payroll costs | 25,157 | 28,178 | 92,455 | 111,443 | ||||||||||
| Payroll taxes and benefits | 108,372 | 84,219 | 429,713 | 407,003 | ||||||||||
| Workers' compensation | 57,600 | 63,191 | 211,890 | 235,579 | ||||||||||
| Total cost of revenues | 191,129 | 175,588 | 734,058 | 754,025 | ||||||||||
| Gross margin | 54,023 | 62,244 | 208,253 | 186,673 | ||||||||||
| Selling, general and administrative expenses | 40,362 | 43,752 | 153,879 | 145,465 | ||||||||||
| Depreciation and amortization | 977 | 991 | 3,886 | 4,219 | ||||||||||
| Income from operations | 12,684 | 17,501 | 50,488 | 36,989 | ||||||||||
| Other income, net | 2,704 | 1,884 | 10,650 | 7,780 | ||||||||||
| Income before income taxes | 15,388 | 19,385 | 61,138 | 44,769 | ||||||||||
| Provision for income taxes | 3,674 | 2,529 | 12,846 | 6,707 | ||||||||||
| Net income | $ | 11,714 | $ | 16,856 | $ | 48,292 | $ | 38,062 | ||||||
| Basic income per common share | $ | 1.57 | $ | 2.28 | $ | 6.48 | $ | 5.18 | ||||||
| Weighted average basic common shares outstanding | 7,505 | 7,388 | 7,451 | 7,342 | ||||||||||
| Diluted income per common share | $ | 1.51 | $ | 2.21 | $ | 6.27 | $ | 4.98 | ||||||
| Weighted average diluted common shares outstanding | 7,736 | 7,634 | 7,699 | 7,647 | ||||||||||
Investor Relations:
Gateway Investor Relations
Cody Slach
Tel 1-949-574-3860
BBSI@gatewayir.com
Released February 25, 2020