November 7, 2024 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

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

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.

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

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

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.

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

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

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

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

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

Form: 10-Q

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