Form: 8-K

Current report filing

July 29, 2014

Documents

 

 

BBSI Reports Second Quarter 2014 Financial Results

 

- Q2 Net Revenues Up 17% to $151.1 Million Drives 23% Increase in Diluted Earnings per Share to $0.98 -

 

VANCOUVER, Washington, July 29, 2014 – Barrett Business Services, Inc. (“BBSI” or the “Company”) (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the second quarter ended June 30, 2014.

 

Second Quarter 2014 Financial Summary vs. Year-Ago Quarter

 

· Net revenues up 17% to $151.1 million

 

· Gross revenues up 18% to $798.4 million

 

· Net income increased 24% to $7.3 million

 

· Diluted earnings per share increased 23% to $0.98

 

Second Quarter 2014 Financial Results

 

Net revenues in the second quarter of 2014 increased 17% to $151.1 million compared to $128.8 million in the second quarter of 2013.

 

Total non-GAAP gross revenues in the second quarter of 2014 increased 18% to $798.4 million compared to $675.0 million in the second quarter of 2013 (see “Reconciliation of Non-GAAP Financial Measures” below). The increase was due primarily to the continued build in the Company’s co-employed client count and same-store sales growth.

 

Net income in the second quarter of 2014 increased 24% to $7.3 million compared to net income of $5.9 million in the year-ago quarter. Diluted earnings per share in the second quarter of 2014 increased 23% to $0.98 compared to $0.80 per diluted share in the year-ago quarter.

 

At June 30, 2014, the Company’s cash, cash equivalents, marketable securities, and restricted securities totaled $146.1 million compared to $143.2 million at December 31, 2013. At June 30, 2014, the Company had no outstanding borrowings on its revolving credit facility.

 

Management Commentary

 

“The growth in our business for the second quarter of 2014 is a direct result of BBSI’s continued brand maturation in the marketplace,” said Michael Elich, president and CEO of BBSI. “Complemented by healthy organic growth from our existing client base and strong referral channels, we continue to drive new business and maintain our high client retention rate.

 

“Looking towards the second half of the year, BBSI remains well-positioned to deliver another strong year for our shareholders, despite the client backfilling process we have undertaken. We also continue to expand and invest in our infrastructure and internal talent, which we believe will help us ultimately support a much larger, more mature company.”

 

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Third Quarter 2014 Outlook

 

For the third quarter of 2014, the Company expects gross revenues to increase at least 14% to range between $870 million and $890 million compared to $764.1 million in the third quarter of 2013. Diluted earnings per common share in the third quarter of 2014 is expected to range between $1.30 and $1.35 compared to $1.21 in the third quarter of 2013. Diluted earnings per common share in the third quarter of 2013 included a positive impact of approximately $0.08 per common share from a more favorable tax rate compared to the estimated tax rate for the third quarter of 2014.

 

Conference Call

 

BBSI will conduct a conference call tomorrow, July 30, 2014 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) to discuss its financial results for the second quarter ended June 30, 2014. The Company’s president and CEO Michael Elich and CFO James Miller will host the call, followed by a question and answer period.

 

Date: Wednesday, July 30, 2014

Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)

Toll-free dial-in number: 1-888-430-8691

International dial-in number: 1-719-325-2376

Conference ID: 3575137

 

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.

 

The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=110019 and via BBSI’s investor relations section of the BBSI website at www.barrettbusiness.com.

 

A replay of the conference call will be available after 3:00 p.m. Eastern time on the same day through August 30, 2014.

 

Toll-free replay number: 1-877-870-5176

International replay number: 1-858-384-5517

Replay ID: 3575137

 

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.

 

The Company reports its Professional Employer Service revenues on a net basis because it is not the primary obligor for the services provided by the Company’s co-employed 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.

 

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    (Unaudited)     (Unaudited)  
    Second Quarter Ended     Six Months Ended  
(in thousands)   June 30,     June 30,  
    2014     2013     2014     2013  
Revenues:                        
Professional employer services   $ 759,838     $ 639,663     $ 1,453,764     $ 1,201,146  
Staffing services     38,566       35,304       72,017       65,037  
Total revenues     798,404       674,967       1,525,781       1,266,183  
Cost of revenues:                                
Direct payroll costs     672,078       568,800       1,285,398       1,067,538  
Payroll taxes and benefits     61,130       53,483       133,947       112,606  
Workers' compensation     35,344       28,958       67,278       54,002  
Total cost of revenues     768,552       651,241       1,486,623       1,234,146  
Gross margin   $ 29,852     $ 23,726     $ 39,158     $ 32,037  

  

A reconciliation of non-GAAP gross revenues to net revenues is as follows:

 

    (Unaudited)
    Three Months Ended June 30,
    Gross Revenue                 Net Revenue  
(in thousands)   Reporting Method     Reclassification     Reporting Method  
    2014     2013     2014     2013     2014     2013  
Revenues:                                    
Professional employer services   $ 759,838     $ 639,663     $ (647,335 )   $ (546,169 )   $ 112,503     $ 93,494  
Staffing services     38,566       35,304       -       -       38,566       35,304  
Total revenues   $ 798,404     $ 674,967     $ (647,335 )   $ (546,169 )   $ 151,069     $ 128,798  
Cost of revenues   $ 768,552     $ 651,241     $ (647,335 )   $ (546,169 )   $ 121,217     $ 105,072  

 

  (Unaudited)
    Six Months Ended June 30,
    Gross Revenue                 Net Revenue  
(in thousands)   Reporting Method     Reclassification     Reporting Method  
    2014     2013     2014     2013     2014     2013  
Revenues:                                    

Professional

employer services

   $ 1,453,764     $ 1,201,146     $ (1,239,572 )   $ (1,025,834 )   $ 214,192     $ 175,312  
Staffing services     72,017       65,037       -       -     $ 72,017       65,037  
Total revenues   $ 1,525,781     $ 1,266,183     $ (1,239,572 )   $ (1,025,834 )   $ 286,209     $ 240,349  
Cost of revenues   $ 1,486,623     $ 1,234,146     $ (1,239,572 )   $ (1,025,834 )   $ 247,051     $ 208,312  

   

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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 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 third quarter of 2014, 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 2013 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.

 

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Barrett Business Services, Inc.

Condensed Balance Sheets

(Unaudited)

 

    June 30,     December 31,  
(in thousands)   2014     2013  
Assets            
Current assets:            
Cash and cash equivalents   $ 47,869     $ 93,557  
Marketable securities     32,033       19,787  
Trade accounts receivable, net     104,008       85,586  
Prepaid expenses and other     5,283       3,026  
Deferred income taxes     8,944       8,929  
Total current assets     198,137       210,885  
Marketable securities     10,597       5,909  
Property, equipment and software, net     21,786       20,549  
Restricted certificates of deposit     20,943       12,789  
Restricted marketable securities and workers' compensation deposits     34,696       11,205  
Other assets     3,979       4,165  
Goodwill     47,820       47,820  
    $ 337,958     $ 313,322  
Liabilities and Stockholders' Equity                
Current liabilities:                
Current portion of long-term debt   $ 220     $ 220  
Accounts payable     2,435       3,252  
Accrued payroll, payroll taxes and related benefits     105,710       92,516  
Income taxes payable     2,322       1,236  
Other accrued liabilities     1,081       313  
Workers' compensation claims liabilities     39,069       35,841  
Safety incentives liabilities     12,718       13,086  
Total current liabilities     163,555       146,464  
Long-term workers' compensation claims liabilities     83,437       76,603  
Long term debt     4,943       5,053  
Deferred income taxes     10,392       10,787  
Customer deposits and other long-term liabilities     1,967       1,862  
Stockholders' equity     73,664       72,553  
    $ 337,958     $ 313,322  

   

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Barrett Business Services, Inc.

Consolidated Statements of Operations

 

    (Unaudited)     (Unaudited)  
(in thousands, except per share amounts)   Second Quarter Ended     Six Months Ended  
    June 30,     June 30,  
    2014     2013     2014     2013  
Revenues:                        
Professional employer service fees   $ 112,503     $ 93,494     $ 214,192     $ 175,312  
Staffing services     38,566       35,304       72,017       65,037  
Total revenues     151,069       128,798       286,209       240,349  
Cost of revenues:                                
Direct payroll costs     29,311       26,611       54,728       48,907  
Payroll taxes and benefits     61,130       53,483       133,947       112,606  
Workers' compensation     30,776       24,978       58,376       46,799  
Total cost of revenues     121,217       105,072       247,051       208,312  
Gross margin     29,852       23,726       39,158       32,037  
Selling, general and administrative expenses     17,958       14,494       32,327       26,305  
Depreciation and amortization     613       506       1,197       966  
Income from operations     11,281       8,726       5,634       4,766  
Other income, net     106       110       196       197  
Income before taxes     11,387       8,836       5,830       4,963  
Provision for income taxes     4,104       2,950       2,130       1,626  
Net income   $ 7,283     $ 5,886     $ 3,700     $ 3,337  
Basic income per common share   $ 1.02     $ 0.83     $ 0.52     $ 0.47  
Weighted average basic common shares outstanding     7,173       7,082       7,171       7,052  
Diluted income per common share   $ 0.98     $ 0.80     $ 0.50     $ 0.45  
Weighted average diluted common shares outstanding     7,421       7,374       7,444       7,344  

  

Company Contact:

Michael L. Elich

President and CEO

Tel 1-360-828-0700

 

Investor Relations:

Liolios Group, Inc.

Scott Liolios or Cody Slach

Tel 1-949-574-3860

BBSI@liolios.com

 

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