BBSI Reports Fourth Quarter and Full Year 2012 Financial Results
41% Increase in Q4 Gross Revenues to $597 Million Drives Diluted Earnings per Share of $0.80
VANCOUVER, WA -- (Marketwire) -- 02/12/13 -- 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, 2012.
Fourth Quarter 2012 Financial Highlights vs. Year-Ago Quarter
- Net revenues increased 34% to $113.7 million
- Gross revenues increased 41% to $596.7 million
- Net income increased to $5.8 million or $0.80 per diluted common share, compared to a net loss of $93,000 or $(0.01) per diluted common share
Fourth Quarter 2012 Financial Results
Net revenues in the fourth quarter of 2012 increased 34% to $113.7 million, compared to $84.7 million in the fourth quarter of 2011.
Total non-GAAP gross revenues in the fourth quarter of 2012 increased 41% to $596.7 million, compared to $423.6 million in the fourth quarter of 2011 (see "Reconciliation of Non-GAAP Financial Measures" below). The increase is due primarily to the continued build in the Company's Professional Employer Organization (PEO) client count and same-store sales growth.
Net income in the fourth quarter of 2012 increased to $5.8 million or $0.80 per diluted common share, compared to a net loss of $93,000 or $(0.01) per diluted common share in the year-ago quarter. The fourth quarter of 2011 included an increase to the workers' compensation reserve of approximately $8.5 million and the benefit of a lower annual effective income tax rate resulting from the non-taxable $10.0 million of key man life insurance proceeds received following the passing of the Company's former president and CEO. Excluding these items, non-GAAP net income in the fourth quarter of 2011 was $4.1 million or $0.41 per diluted common share (see "Reconciliation of Non-GAAP Financial Measures" below).
At December 31, 2012, the Company's cash, cash equivalents and marketable securities totaled $72.4 million, compared to $81.8 million at December 31, 2011. During 2012, the Company repurchased 3.0 million shares of its common stock for $59.7 million, which included the redemption of $34.8 million of preferred shares issued to finance the repurchase. The completion of the repurchase was financed using a combination of cash on hand and availability under a new revolving credit facility provided by its principal bank. At December 31, 2012, total debt was $10.0 million, which included $4.5 million outstanding on the Company's revolving credit line.
Full Year 2012 Financial Results
Net revenues in 2012 increased 28% to $402.7 million, compared to $314.9 million in 2011. Total non-GAAP gross revenues in 2012 increased 36% to $2.1 billion, compared to $1.5 billion in 2011. The increase was primarily attributable to the previously discussed increase in net PEO clients and same-store sales growth.
Net income in 2012 was $13.1 million or $1.67 per diluted common share, compared to net income of $14.3 million or $1.41 per diluted common share in 2011. Excluding $460,000 of incremental legal and professional fees associated with the response to requests for a special stockholders meeting, non-GAAP net income in 2012 was $13.4 million or $1.71 per diluted common share. Net income in 2011 included $10.0 million of key man life insurance proceeds received following the passing of the Company's former president and CEO, a lower annual effective income tax rate resulting primarily from these proceeds and the $8.5 million increase to workers' compensation reserve. Excluding these non-recurring items, non-GAAP net income in 2011 was $9.0 million or $0.89 per diluted share.
Management Commentary
"The fourth quarter was a continuation of the positive trends we experienced in the first three quarters of 2012," said Michael Elich, president and CEO of BBSI. "These include our strong referral channels driving new business, solid organic growth from continuing customers and the overall maturation of our brand. We also continued investing in our operational infrastructure and professional talent, which has played an integral role in supporting our growth and maintaining our greater than 90% client retention rate. We expect these growth drivers to continue as we move through 2013 and remain committed to investing in the business to ultimately support a larger and more mature company."
First Quarter 2013 Outlook
For the first quarter of 2013, the Company expects gross revenues to range between $585 million and $590 million, compared to $432.1 million for the first quarter of 2012. Net loss per common share in the first quarter of 2013 is expected to range between $(0.36) and $(0.40), which includes the effect of the decrease in outstanding shares as a result of the Company's 3.0 million share repurchase, compared to a net loss per common share of $(0.22) in the year-ago quarter. The first quarter of 2012 included $460,000 of incremental legal and professional fees from the previously mentioned special stockholders meeting. Excluding these fees, non-GAAP net loss for the first quarter of 2012 was $1.9 million or $(0.19) per common share.
The Company historically incurs losses in the first quarter due to the higher effective payroll taxes at the start of the new year.
Conference Call
BBSI will host a conference call tomorrow, Wednesday, February 13, 2013 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, 2012. The Company's president and CEO Michael Elich and CFO James Miller will host the call, followed by a question and answer period.
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.
Date: Wednesday, February 13, 2013
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Dial-In Number: 1-877-941-4774
International: 1-480-629-9760
Conference ID#: 4592162
The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=103215 and via the investor relations section of the Company's website at www.barrettbusiness.com.
A replay of the call will be available after 3:00 p.m. Eastern time on the same day through March 13, 2013.
Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay pin number: 4592162
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 and non-GAAP net income.
The Company reports its PEO revenues on a net basis because it is not the primary obligor for the services provided by the Company's PEO 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,
--------------------- ---------------------
2012 2011 2012 2011
---------- ---------- ---------- ----------
Revenues:
Professional employer services $ 562,850 $ 392,283 $1,954,207 $1,402,779
Staffing services 33,856 31,322 126,648 124,761
========== ========== ========== ==========
Total revenues 596,706 423,605 2,080,855 1,527,540
---------- ---------- ---------- ----------
Cost of revenues:
Direct payroll costs 505,507 360,735 1,761,984 1,300,481
Payroll taxes and benefits 44,485 32,048 169,724 123,017
Workers' compensation 24,462 22,403 82,433 60,590
---------- ---------- ---------- ----------
Total cost of revenues 574,454 415,186 2,014,141 1,484,088
========== ========== ========== ==========
Gross margin $ 22,252 $ 8,419 $ 66,714 $ 43,452
========== ========== ========== ==========
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
--------------------- ----------------------- -----------------
2012 2011 2012 2011 2012 2011
---------- ---------- ----------- ----------- -------- --------
Revenues:
Professional
employer
services $ 562,850 $ 392,283 $ (483,044)$ (338,896)$ 79,806 $ 53,387
Staffing
services 33,856 31,322 - - 33,856 31,322
---------- ---------- ----------- ----------- -------- --------
Total
revenues $ 596,706 $ 423,605 $ (483,044)$ (338,896)$113,662 $ 84,709
========== ========== =========== =========== ======== ========
Cost of
revenues $ 574,454 $ 415,186 $ (483,044)$ (338,896)$ 91,410 $ 76,290
========== ========== =========== =========== ======== ========
(Unaudited)
Year Ended December 31,
---------------------------------------------------------------
Gross Revenue Net Revenue
(in
thousands) Reporting Method Reclassification Reporting Method
--------------------- ----------------------- -----------------
2012 2011 2012 2011 2012 2011
---------- ---------- ----------- ----------- -------- --------
Revenues:
Professional
employer
services $1,954,207 $1,402,779 $(1,678,203)$(1,212,666)$276,004 $190,113
Staffing
services 126,648 124,761 - - 126,648 124,761
---------- ---------- ----------- ----------- -------- --------
Total
revenues $2,080,855 $1,527,540 $(1,678,203)$(1,212,666)$402,652 $314,874
========== ========== =========== =========== ======== ========
Cost of
revenues $2,014,141 $1,484,088 $(1,678,203)$(1,212,666)$335,938 $271,422
========== ========== =========== =========== ======== ========
The Company is presenting non-GAAP net income because it believes it is more reflective of its actual operating results due to the effects of non-recurring items. In the fourth quarter of 2011 the Company recorded an increase to its workers' compensation reserve of approximately $8.5 million as a result of adverse development in the estimate of the ultimate cost of the Company's self-insured workers' compensation claims liabilities. For the full year of 2011, non-recurring items included $10 million of key man life insurance proceeds received following the passing of the Company's former president and CEO and the $8.5 million increase to its workers' compensation reserve. The fourth quarter of 2011 as well as the full year 2011 included the benefit of a lower annual effective income tax rate resulting from the non-taxable key man life insurance proceeds. The full year of 2012 included $460,000 of incremental legal and professional fees associated with the response to requests for a special stockholders meeting. A Reconciliation of GAAP net income to non-GAAP operating performance is provided in the tables below:
(Unaudited)
Fourth Quarter Ended
(in thousands, except per share
amounts) December 31,
-----------------------------------------
2012 2011
--------- -------------------------------
GAAP GAAP Adjust non-GAAP
--------- --------- --------- ---------
Cost of revenues $ 91,410 $ 76,290 $ (8,510) $ 67,780
Gross margin 22,252 8,419 16,929
Income (loss) before taxes 8,564 (2,353) 6,157
Provision for (benefit from)
income taxes 2,775 (2,260) 4,353 2,093
--------- --------- ---------
Net income (loss) $ 5,789 $ (93) $ 4,064
========= ========= =========
Basic income (loss) per share $ .83 $ (.01) $ .41
========= ========= =========
Weighted average basic shares
outstanding 7,014 9,877 9,877
========= ========= =========
Diluted income (loss) per share $ .80 $ (.01) $ .41
========= ========= =========
Weighted average diluted shares
outstanding 7,244 9,877 9,935
========= ========= =========
(Unaudited) (Unaudited)
(in thousands, except
per share amounts) Year Ended Year Ended
December 31, 2012 December 31, 2011
------------------------- ---------------------------
GAAP Adjust non-GAAP GAAP Adjust non-GAAP
-------- ------ -------- -------- -------- --------
Cost of revenues $335,938 $335,938 $271,422 $ (8,510) $262,912
Gross margin 66,714 66,714 43,452 51,962
Selling, general and
administrative
expenses 46,450 (460) 45,990 38,174 38,174
Life insurance
proceeds - - 10,000 (10,000) -
Income before taxes 19,459 19,919 15,155 13,665
Provision for income
taxes 6,328 155 6,483 837 3,796 4,633
-------- -------- -------- --------
Net income $ 13,131 $ 13,436 $ 14,318 $ 9,032
======== ======== ======== ========
Basic income per share $ 1.70 $ 1.74 $ 1.42 $ .90
======== ======== ======== ========
Weighted average basic
shares outstanding 7,723 7,723 10,083 10,083
-------- -------- -------- --------
Diluted income per
share $ 1.67 $ 1.71 $ 1.41 $ .89
======== ======== ======== ========
Weighted average
diluted shares
outstanding 7,863 7,863 10,150 10,150
======== ======== ======== ========
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. BBSI 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 gross revenues and earnings expectations for the first quarter of 2013, 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, 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 2011 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 Balance Sheets
(Unaudited)
December 31, December 31,
(in thousands) 2012 2011
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 45,747 $ 49,571
Marketable securities 16,748 16,878
Trade accounts receivable, net 63,921 46,520
Income taxes receivable - 4,133
Prepaid expenses and other 4,854 5,897
Deferred income taxes 8,148 5,958
------------- -------------
Total current assets 139,418 128,957
Marketable securities 9,899 15,395
Property, equipment and software, net 18,489 15,007
Restricted marketable securities and workers'
compensation deposits 9,726 9,923
Other assets 1,833 3,027
Workers' compensation receivables for insured
claims 1,676 2,968
Goodwill 47,820 47,820
------------- -------------
$ 228,861 $ 223,097
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Line of credit $ 4,532 $ -
Accounts payable 1,995 1,639
Accrued payroll, payroll taxes and related
benefits 69,568 52,340
Income taxes payable 272 -
Other accrued liabilities 306 300
Workers' compensation claims liabilities 24,541 18,718
Safety incentives liabilities 9,842 6,321
Current portion of L/T debt 220 -
------------- -------------
Total current liabilities 111,276 79,318
Long-term workers' compensation claims
liabilities 45,266 30,596
Long-term workers' compensation liabilities for
insured claims 757 1,879
Long term debt 5,273 -
Deferred income taxes 10,607 8,152
Customer deposits and other long-term
liabilities 1,786 1,497
Stockholders' equity 53,896 101,655
------------- -------------
$ 228,861 $ 223,097
============= =============
Barrett Business Services, Inc.
Consolidated Statements of Operations
(Unaudited) (Unaudited)
(in thousands, except per share Fourth Quarter
amounts) Ended Year Ended
December 31, December 31,
------------------- -------------------
2012 2011 2012 2011
--------- --------- --------- ---------
Revenues:
Professional employer service
fees $ 79,806 $ 53,387 $ 276,004 $ 190,113
Staffing services 33,856 31,322 126,648 124,761
--------- --------- --------- ---------
Total revenues 113,662 84,709 402,652 314,874
--------- --------- --------- ---------
Cost of revenues:
Direct payroll costs 25,475 23,736 95,128 94,568
Payroll taxes and benefits 44,485 32,048 169,724 123,017
Workers' compensation 21,450 20,506 71,086 53,837
--------- --------- --------- ---------
Total cost of revenues 91,410 76,290 335,938 271,422
========= ========= ========= =========
Gross margin 22,252 8,419 66,714 43,452
Selling, general and administrative
expenses 13,393 10,596 46,450 38,174
Depreciation and amortization 400 345 1,477 1,344
--------- --------- --------- ---------
Income (loss) from operations 8,459 (2,522) 18,787 3,934
Life insurance proceeds - - - 10,000
Other income, net 105 169 672 1,221
--------- --------- --------- ---------
Income (loss) before taxes 8,564 (2,353) 19,459 15,155
Provision for (benefit from) income
taxes 2,775 (2,260) 6,328 837
--------- --------- --------- ---------
Net income (loss) $ 5,789 $ (93) $ 13,131 $ 14,318
========= ========= ========= =========
Basic income (loss) per common
share $ .83 $ (.01) $ 1.70 $ 1.42
========= ========= ========= =========
Weighted average basic common
shares outstanding 7,014 9,877 7,723 10,083
========= ========= ========= =========
Diluted income (loss) per common
share $ .80 $ (.01) $ 1.67 $ 1.41
========= ========= ========= =========
Weighted average diluted common
shares outstanding 7,244 9,877 7,863 10,150
========= ========= ========= =========
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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 12, 2013