Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 7, 2024

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2024

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

Commission File Number 0-21886

 

BARRETT BUSINESS SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

Maryland

 

52-0812977

(State or other jurisdiction of
Incorporation or organization)

 

(IRS Employer
Identification No.)

 

 

 

8100 NE Parkway Drive, Suite 200

 

 

Vancouver, Washington

 

98662

(Address of principal executive offices)

 

(Zip Code)

(360) 828-0700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par Value $0.01 Per Share

BBSI

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of October 23, 2024, 25,937,049 shares of the registrant’s common stock ($0.01 par value) were outstanding.

 

 


 

BARRETT BUSINESS SERVICES, INC.

INDEX TO FORM 10-Q

 

Part I - Financial Information (Unaudited)

Page

Item 1.

Unaudited Interim Condensed Consolidated Financial Statements

3

 

Condensed Consolidated Balance Sheets - September 30, 2024 and December 31, 2023

3

 

Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2024 and 2023

4

 

 

Condensed Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2024 and 2023

5

 

Condensed Consolidated Statements of Stockholders’ Equity - Three and Nine Months Ended September 30, 2024

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity - Three and Nine Months Ended September 30, 2023

 

7

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2024 and 2023

8

 

Notes to Condensed Consolidated Financial Statements

9

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

 

Item 4.

Controls and Procedures

26

 

Part II - Other Information

 

 

Item 1.

Legal Proceedings

27

 

Item 1A.

Risk Factors

27

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

27

 

Item 6.

 

Exhibits

 

28

 

 

 

 

 

Signatures

28

 

 

2


 

PART I – FINANCIAL INFORMATION

Item 1. Unaudited Interim Condensed Consolidated Financial Statements

Barrett Business Services, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In Thousands, Except Par Value)

 

 

September 30,

 

 

December 31,

 

 

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

 

Total liabilities

 

 

510,382

 

 

 

522,398

 

Commitments and contingencies (Notes 4 and 6)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, $.01 par value; 82,000 shares authorized, 25,937
   and
26,290 shares issued and outstanding (1)

 

 

259

 

 

 

263

 

Additional paid-in capital (1)

 

 

38,640

 

 

 

36,743

 

Accumulated other comprehensive loss

 

 

(15,536

)

 

 

(20,801

)

Retained earnings

 

 

192,023

 

 

 

182,935

 

Total stockholders' equity

 

 

215,386

 

 

 

199,140

 

Total liabilities and stockholders' equity

 

$

725,768

 

 

$

721,538

 

(1) Prior period results have been adjusted to reflect the four-for-one stock split effected in the form of a stock dividend in June 2024. See Note 1, Basis of Presentation of Interim Period Statements for details.

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In Thousands, Except Per Share Amounts)

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

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 number of 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 number of diluted common
   shares outstanding
(1)

 

 

26,620

 

 

 

27,182

 

 

26,736

 

 

 

27,541

 

(1) Prior period results have been adjusted to reflect the four-for-one stock split effected in the form of a stock dividend in June 2024. See Note 1, Basis of Presentation of Interim Period Statements for details.

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(In Thousands)

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2024

 

 

2023

 

Net income

 

$

19,628

 

 

$

18,219

 

Unrealized gains (losses) on investments, net of tax of $2,600 and ($1,417) in 2024 and 2023, respectively

 

 

6,804

 

 

 

(3,707

)

Comprehensive income

 

$

26,432

 

 

$

14,512

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2024

 

 

2023

 

Net income

 

$

36,193

 

 

$

36,054

 

Unrealized gains (losses) on investments, net of tax of $2,012 and ($796) in 2024 and 2023, respectively

 

 

5,265

 

 

 

(2,083

)

Comprehensive income

 

$

41,458

 

 

$

33,971

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Three and Nine Months Ended September 30, 2024

(Unaudited)

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Retained

 

 

 

 

 

Shares (1)

 

 

Amount (1)

 

 

Capital (1)

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance, December 31, 2023

 

26,290

 

 

$

263

 

 

$

36,743

 

 

$

(20,801

)

 

$

182,935

 

 

$

199,140

 

Common stock issued on exercise of options,
   purchase of ESPP shares and vesting of
   restricted stock units and performance awards

 

140

 

 

 

1

 

 

 

375

 

 

 

 

 

 

 

 

 

376

 

Common stock repurchased on vesting of
   restricted stock units and performance
   awards

 

(50

)

 

 

(1

)

 

 

(1,455

)

 

 

 

 

 

 

 

 

(1,456

)

Share-based compensation expense

 

 

 

 

 

 

 

2,187

 

 

 

 

 

 

 

 

 

2,187

 

Company repurchases of common stock

 

(236

)

 

 

(2

)

 

 

(350

)

 

 

 

 

 

(6,704

)

 

 

(7,056

)

Cash dividends on common stock ($0.075 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,970

)

 

 

(1,970

)

Unrealized loss on investments, net of tax

 

 

 

 

 

 

 

 

 

 

(1,496

)

 

 

 

 

 

(1,496

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(136

)

 

 

(136

)

Balance, March 31, 2024

 

26,144

 

 

$

261

 

 

$

37,500

 

 

$

(22,297

)

 

$

174,125

 

 

$

189,589

 

Common stock issued on exercise of options,
   purchase of ESPP shares and vesting of
   restricted stock units and performance awards

 

41

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Common stock repurchased on vesting of
   restricted stock units and performance
   awards

 

(13

)

 

 

 

 

 

(397

)

 

 

 

 

 

 

 

 

(397

)

Share-based compensation expense

 

 

 

 

 

 

 

2,106

 

 

 

 

 

 

 

 

 

2,106

 

Company repurchases of common stock

 

(223

)

 

 

(2

)

 

 

(334

)

 

 

 

 

 

(6,711

)

 

 

(7,047

)

Cash dividends on common stock ($0.075 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,955

)

 

 

(1,955

)

Unrealized loss on investments, net of tax

 

 

 

 

 

 

 

 

 

 

(43

)

 

 

 

 

 

(43

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

16,701

 

 

 

16,701

 

Balance, June 30, 2024

 

25,949

 

 

$

259

 

 

$

38,882

 

 

$

(22,340

)

 

$

182,160

 

 

$

198,961

 

Common stock issued on exercise of options,
   purchase of ESPP shares and vesting of
   restricted stock units and performance awards

 

302

 

 

 

3

 

 

 

545

 

 

 

 

 

 

 

 

 

548

 

Common stock repurchased on vesting of
   restricted stock units and performance
   awards

 

(85

)

 

 

(1

)

 

 

(2,801

)

 

 

 

 

 

 

 

 

(2,802

)

Share-based compensation expense

 

 

 

 

 

 

 

2,355

 

 

 

 

 

 

 

 

 

2,355

 

Company repurchases of common stock

 

(229

)

 

 

(2

)

 

 

(341

)

 

 

 

 

 

(7,679

)

 

 

(8,022

)

Cash dividends on common stock ($0.08 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,086

)

 

 

(2,086

)

Unrealized gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

6,804

 

 

 

 

 

 

6,804

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

19,628

 

 

 

19,628

 

Balance, September 30, 2024

 

25,937

 

 

$

259

 

 

$

38,640

 

 

$

(15,536

)

 

$

192,023

 

 

$

215,386

 

(1) Prior period results have been adjusted to reflect the four-for-one stock split effected in the form of a stock dividend in June 2024. See Note 1, Basis of Presentation of Interim Period Statements for details.

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Three and Nine Months Ended September 30, 2023

(Unaudited)

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Retained

 

 

 

 

Shares (1)

 

 

Amount (1)

 

 

Capital (1)

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance, December 31, 2022

 

27,483

 

 

$

275

 

 

$

32,538

 

 

$

(27,594

)

 

$

172,623

 

 

$

177,842

 

Common stock issued on exercise of options,
   purchase of ESPP shares and vesting of
   restricted stock units and performance awards

 

122

 

 

 

1

 

 

 

338

 

 

 

 

 

 

 

 

 

339

 

Common stock repurchased on vesting of
   restricted stock units and performance
   awards

 

(43

)

 

 

 

 

 

(1,005

)

 

 

 

 

 

 

 

 

(1,005

)

Share-based compensation expense

 

 

 

 

 

 

 

1,928

 

 

 

 

 

 

 

 

 

1,928

 

Company repurchases of common stock

 

(362

)

 

 

(4

)

 

 

(444

)

 

 

 

 

 

(7,582

)

 

 

(8,030

)

Cash dividends on common stock ($0.075 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,067

)

 

 

(2,067

)

Unrealized gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

3,652

 

 

 

 

 

 

3,652

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

819

 

 

 

819

 

Balance, March 31, 2023

 

27,200

 

 

$

272

 

 

$

33,355

 

 

$

(23,942

)

 

$

163,793

 

 

$

173,478

 

Common stock issued on exercise of options,
   purchase of ESPP shares and vesting of
   restricted stock units and performance awards

 

50

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Common stock repurchased on vesting of
   restricted stock units and performance
   awards

 

(14

)

 

 

 

 

 

(304

)

 

 

 

 

 

 

 

 

(304

)

Share-based compensation expense

 

 

 

 

 

 

 

1,963

 

 

 

 

 

 

 

 

 

1,963

 

Company repurchases of common stock

 

(492

)

 

 

(5

)

 

 

(640

)

 

 

 

 

 

(9,500

)

 

 

(10,145

)

Cash dividends on common stock ($0.075 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,013

)

 

 

(2,013

)

Unrealized loss on investments, net of tax

 

 

 

 

 

 

 

 

 

 

(2,028

)

 

 

 

 

 

(2,028

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

17,016

 

 

 

17,016

 

Balance, June 30, 2023

 

26,744

 

 

$

267

 

 

$

34,376

 

 

$

(25,970

)

 

$

169,296

 

 

$

177,969

 

Common stock issued on exercise of options,
   purchase of ESPP shares and vesting of
   restricted stock units and performance awards

 

257

 

 

 

3

 

 

 

358

 

 

 

 

 

 

 

 

 

361

 

Common stock repurchased on vesting of
   restricted stock units and performance
   awards

 

(73

)

 

 

(1

)

 

 

(1,589

)

 

 

 

 

 

 

 

 

(1,590

)

Share-based compensation expense

 

 

 

 

 

 

 

2,136

 

 

 

 

 

 

 

 

 

2,136

 

Company repurchases of common stock

 

(462

)

 

 

(4

)

 

 

(633

)

 

 

 

 

 

(10,280

)

 

 

(10,917

)

Cash dividends on common stock ($0.075 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,025

)

 

 

(2,025

)

Unrealized loss on investments, net of tax

 

 

 

 

 

 

 

 

 

 

(3,707

)

 

 

 

 

 

(3,707

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

18,219

 

 

 

18,219

 

Balance, September 30, 2023

 

26,466

 

 

$

265

 

 

$

34,648

 

 

$

(29,677

)

 

$

175,210

 

 

$

180,446

 

(1) Prior period results have been adjusted to reflect the four-for-one stock split effected in the form of a stock dividend in June 2024. See Note 1, Basis of Presentation of Interim Period Statements for details.

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

7


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In Thousands)

 

 

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

36,193

 

 

$

36,054

 

Reconciliations of net income to net cash
   (used in) provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

5,663

 

 

 

5,273

 

Non-cash lease expense

 

 

4,876

 

 

 

5,270

 

Net investment (accretion) amortization and (gains) losses recognized

 

 

(309

)

 

 

543

 

Share-based compensation

 

 

6,648

 

 

 

6,027

 

Changes in certain operating assets and liabilities:

 

 

 

 

 

 

Trade accounts receivable

 

 

(82,342

)

 

 

(41,379

)

Income taxes

 

 

5,191

 

 

 

176

 

Prepaid expenses and other

 

 

(325

)

 

 

2,651

 

Accounts payable

 

 

(2,371

)

 

 

(2,996

)

Accrued payroll, payroll taxes and related benefits

 

 

35,026

 

 

 

25,801

 

Other accrued liabilities

 

 

(245

)

 

 

(6,447

)

Premium payable

 

 

(15,689

)

 

 

23,234

 

Workers' compensation claims liabilities

 

 

(30,735

)

 

 

(38,693

)

Operating lease liabilities

 

 

(5,066

)

 

 

(5,274

)

Other assets and liabilities, net

 

 

197