BBSI Reports Strong Third Quarter 2024 Financial Results

- Q3 2024 Net income of $19.6 Million, or $0.74 per Diluted Share -

VANCOUVER, Wash., Nov. 06, 2024 (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, 2024.

All share and per share amounts presented herein have been retroactively adjusted to reflect the impact of the four-for-one stock split that was distributed in the form of a stock dividend in June 2024 (the “Stock Split”).

Third Quarter 2024 Financial Summary vs. Year-Ago Quarter

  • Revenues up 8% to $294.3 million.
  • Gross billings up 9% to $2.14 billion.
  • Average worksite employees (“WSEs”) up 5%.
  • Net income of $19.6 million, or $0.74 per diluted share, compared to net income of $18.2 million, or $0.67 per diluted share.

“The momentum of our business strengthened in the third quarter, with billings growth ahead of our expectations and a record number of gross WSE additions from new clients,” said BBSI President and CEO Gary Kramer. “Once again, these results are attributed to various strategies to increase our sales funnel, strong client retention and the continued rollout of value-added offerings like BBSI Benefits. Our performance highlights the value we deliver to our clients, which in turn drives robust shareholder returns. We are excited to build on this momentum as we end 2024 and believe we are well-positioned for a strong 2025.”

Third Quarter 2024 Financial Results

Revenues in the third quarter of 2024 increased 8% to $294.3 million compared to $273.3 million in the third quarter of 2023.

Total gross billings in the third quarter of 2024 increased 9% to $2.14 billion compared to $1.96 billion in the same year-ago quarter (see “Key Performance Metrics” below). The increase was driven by growth in professional employer (“PEO”) services, specifically resulting from increased WSEs from net new clients and client hiring and higher average billings per WSE.

Workers’ compensation expense as a percent of gross billings was 2.3% in the third quarter of 2024 and benefited from favorable prior year liability and premium adjustments of $4.3 million. This compares to 2.7% in the third quarter of 2023, which included favorable prior year liability and premium adjustments of $2.2 million.

Net income for the third quarter of 2024 was $19.6 million, or $0.74 per diluted share, compared to net income of $18.2 million, or $0.67 per diluted share, in the year-ago quarter.

Liquidity

As of September 30, 2024, unrestricted cash and investments were $94.4 million compared to $110.4 million as of June 30, 2024. BBSI remained debt free at quarter end.

Capital Allocation

Continuing under the Company’s stock repurchase program established in July 2023, BBSI repurchased $8 million of stock in the third quarter comprising 228,570 shares at an average price of $35.09. At September 30, 2024, approximately $36.9 million remained available under the $75 million repurchase program.

The Company paid $2.1 million of dividends in the quarter at the recently increased dividend rate of $0.08 per share, and BBSI’s board of directors confirmed its next regular quarterly cash dividend at $0.08 per share. The cash dividend will be paid on December 6, 2024, to all stockholders of record as of November 22, 2024.

Through the combination of stock repurchases and dividends, year-to-date capital returned to shareholders totaled $28 million through Q3.

Outlook

BBSI expects the following for 2024:

  • Gross billings growth of 7% to 8% (versus 6% to 8% prior)
  • Growth in the average number of WSEs of 4% to 5%
  • Gross margin as a percent of gross billings of 3.03% to 3.07% (versus 3.0% to 3.1% prior)
  • Effective annual tax rate to remain at 26% to 27%

Conference Call

BBSI will conduct a conference call on Wednesday, November 6, 2024, at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss its financial results for the quarter ended September 30, 2024.

BBSI’s CEO Gary Kramer and CFO Anthony Harris will host the conference call, followed by a question and answer period.

Date: Wednesday, November 6, 2024
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Toll-free dial-in number: 1-877-407-4018
International dial-in number: 1-201-689-8471
Conference ID: 13748631

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 Investors section of the BBSI website at www.ir.bbsi.com.

A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through December 6, 2024.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13748631

Key Performance Metrics

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 billings and wages are useful in understanding the volume of our business activity and serve as important performance metrics 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 billings and wage information for the three and nine months ended September 30, 2024 and 2023.

    (Unaudited)     (Unaudited)  
    Three Months Ended September 30,     Nine Months Ended September 30,  
(in thousands)   2024     2023     2024     2023  
Gross billings   $ 2,138,510     $ 1,963,462     $ 6,075,094     $ 5,664,230  
PEO and staffing wages   $ 1,860,466     $ 1,706,302     $ 5,281,092     $ 4,919,323  
                                 

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,
    2024   2023   2024   2023
PEO and staffing wages   87.0%   86.9%   86.9%   86.9%
Payroll taxes and benefits   7.2%   6.9%   7.7%   7.3%
Workers' compensation   2.3%   2.7%   2.4%   2.7%
Gross margin   3.5%   3.5%   3.0%   3.1%
 

We refer to employees of our PEO clients as WSEs. Management reviews average and ending WSE growth to monitor and evaluate the performance of our operations. Average WSEs are calculated by dividing the number of unique individuals paid in each month by the number of months in the period. Ending WSEs represents the number of unique individuals paid in the last month of the period.

    (Unaudited)
    Three Months Ended September 30,
    2024     Year-over-year %
Growth
  2023     Year-over-year %
Growth
Average WSEs   133,398     4.8%   127,232     1.1%
Ending WSEs   132,698     3.3%   128,448     0.9%

  (Unaudited)
    Nine Months Ended September 30,
    2024     Year-over-year %
Growth
  2023     Year-over-year %
Growth
Average WSEs   128,394     3.9%   123,577     1.8%
Ending WSEs   132,698     3.3%   128,448     0.9%
 

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 8,000 clients across all lines of business and is licensed to operate in all 50 states. For more information, please visit www.bbsi.com.

Forward-Looking Statements

Statements in this release about future events and financial outlook 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 inflation on our operating expenses and those of our clients; the availability of certain fully insured medical and other health and welfare benefits to qualifying worksite employees; the effect of changes in the Company’s mix of services on gross margin; the Company’s ability to attract and retain clients and to achieve revenue growth; 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; PEO client benefits costs; litigation costs; security breaches or failures in the Company’s information technology systems; the collectability of accounts receivable; changes in executive management; changes in effective payroll tax rates and federal and state income tax rates; the carrying value of deferred income tax assets and goodwill; the outcome of tax audits; the effects of conditions in the global capital markets on the Company’s investment portfolio; and the potential for and effect of acquisitions, among others. Other important factors that may affect the Company’s prospects are described in the Company’s 2023 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)   2024     2023  
ASSETS            
Current assets:            
Cash and cash equivalents   $ 14,429     $ 71,168  
Investments     79,934       81,027  
Trade accounts receivable, net     253,749       171,407  
Income taxes receivable     2,796       7,987  
Prepaid expenses and other     18,768       18,443  
Restricted cash and investments     83,009       97,470  
Total current assets     452,685       447,502  
Property, equipment and software, net     55,633       50,295  
Operating lease right-of-use assets     20,595       19,898  
Restricted cash and investments     140,834       145,583  
Goodwill     47,820       47,820  
Other assets     5,995       6,222  
Deferred income taxes     2,206       4,218  
Total assets   $ 725,768     $ 721,538  
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities:            
Accounts payable   $ 4,222     $ 6,593  
Accrued payroll, payroll taxes and related benefits     268,831       234,080  
Current operating lease liabilities     6,304       6,623  
Current premium payable     12,778       35,276  
Other accrued liabilities     10,453       10,674  
Workers' compensation claims liabilities     42,291       50,006  
Total current liabilities     344,879       343,252  
Long-term workers' compensation claims liabilities     94,512       117,757  
Long-term premium payable     44,621       37,812  
Long-term operating lease liabilities     15,416       14,590  
Customer deposits and other long-term liabilities     10,954       8,987  
Stockholders' equity     215,386       199,140  
Total liabilities and stockholders' equity   $ 725,768     $ 721,538  
 

Barrett Business Services, Inc.

Consolidated Statements of Operations

(Unaudited)

             
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
(in thousands, except per share amounts)   2024     2023     2024     2023  
Revenues:                        
Professional employer services   $ 272,793     $ 251,423     $ 778,869     $ 727,986  
Staffing services     21,485       21,905       60,842       64,639  
Total revenues     294,278       273,328       839,711       792,625  
Cost of revenues:                        
Direct payroll costs     16,208       16,318       45,618       48,299  
Payroll taxes and benefits     154,109       135,704       464,814       414,395  
Workers' compensation     49,549       52,977       147,403       153,012  
Total cost of revenues     219,866       204,999       657,835       615,706  
Gross margin     74,412       68,329       181,876       176,919  
Selling, general and administrative expenses     49,060       44,160       137,051       129,194  
Depreciation and amortization     1,899       1,867       5,663       5,273  
Income from operations     23,453       22,302       39,162       42,452  
Other income (expense):                        
Investment income, net     2,265       2,412       8,608       6,856  
Interest expense     (45 )     (80 )     (133 )     (118 )
Other, net     31       38       124       93  
Other income, net     2,251       2,370       8,599       6,831  
Income before income taxes     25,704       24,672       47,761       49,283  
Provision for income taxes     6,076       6,453       11,568       13,229  
Net income   $ 19,628     $ 18,219     $ 36,193     $ 36,054  
Basic income per common share (1)   $ 0.75     $ 0.68     $ 1.38     $ 1.33  
Weighted average basic common shares outstanding (1)     26,052       26,795       26,133       27,088  
Diluted income per common share (1)   $ 0.74     $ 0.67     $ 1.35     $ 1.31  
Weighted average diluted common shares outstanding (1)     26,620       27,182       26,736       27,541  
 
(1) Prior period results have been adjusted to reflect the Stock Split.
 

Investor Relations:
Gateway Group, Inc.
Cody Slach
Tel 1-949-574-3860
BBSI@gateway-grp.com


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Source: Barrett Business Services Inc