Form: 8-K

Current report filing

October 28, 2015

Documents

 

Exhibit 99.1

 

 

 BBSI Reports Third Quarter 2015 Financial Results

 

- Q3 Net Revenues up 14% to $199.3 Million; Non-GAAP Gross Revenues up 17% to $1.1 Billion -

 

VANCOUVER, Washington, October 27, 2015 – 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, 2015.

 

Third Quarter 2015 Financial Summary vs. Year-Ago Quarter

 

· Net revenues up 14% to $199.3 million

 

· Non-GAAP gross revenues up 17% to $1.1 billion

 

· Net income of $11.6 million compared to a net loss of $37.8 million

 

· Diluted earnings per share of $1.57 compared to a loss of $5.27 per diluted share

 

Third Quarter 2015 Financial Results

 

Net revenues in the third quarter of 2015 increased 14% to $199.3 million compared to $175.0 million in the third quarter of 2014.

 

Total non-GAAP gross revenues in the third quarter of 2015 increased 17% to $1.1 billion compared to $900.2 million in the third quarter of 2014 (see “Reconciliation of Non-GAAP Financial Measures” below). The increase was primarily due to the continued build in the Company’s co-employed client count and same-store sales growth, partially offset by a 4% decline in staffing services revenue.

 

Net income for the third quarter of 2015 was $11.6 million or $1.57 per diluted share, compared to a net loss of $37.8 million or $(5.27) per diluted share in the year-ago quarter. The net loss in the third quarter of 2014 was the result of the Company’s recognition of an additional increase to its self-insured workers’ compensation reserve of $80.0 million.

 

At September 30, 2015, the Company’s cash, cash equivalents, marketable securities, and restricted securities totaled $273.9 million compared to $239.1 million at December 31, 2014.

 

Management Commentary

 

“We delivered another quarter of strong results with gross revenues up 17%, surpassing a quarterly threshold of $1 billion for the first time in our Company’s history,” said Michael Elich, president and CEO of BBSI. “These results were driven by the addition of 160 new client companies and 10.6% same-store sales growth. This was tempered by a slight year-over-year decline in our staffing business due to a decrease in seasonal employee hiring related to the West Coast drought, as well as a shortage in labor to meet the staffing demand in some of our markets.

 

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“These types of episodic fluctuations are not uncommon in the staffing industry and we expect the seasonal challenges to subside in our fourth quarter. We are not experiencing these same impacts in our PEO business, which comprises the majority of our revenues and, as such, we reiterate our rolling 12-month outlook of 18% gross revenue growth.”

 

12 Month Outlook

 

BBSI expects non-GAAP gross revenues for the next 12 month period to increase approximately 18%. Included in this expectation is a high single-digit contribution from same-store sales growth, as well as continued growth from new business consistent with current trends.

 

Conference Call

 

BBSI will conduct a conference call tomorrow, October 28, 2015 at 9:00 a.m. Pacific time (12:00 p.m. Eastern time) to discuss its financial results for the third quarter ended September 30, 2015. 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, October 28, 2015

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

Toll-free dial-in number: 1-888-523-1225

International dial-in number: 1-719-325-2354

Conference ID: 9461426

 

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=116529 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 12:00 p.m. Pacific time on the same day through November 28, 2015.

 

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

International replay number: 1-858-384-5517

Replay ID: 9461426

 

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)  
    Third Quarter Ended     Nine Months Ended  
(in thousands)   September 30,     September 30,  
    2015     2014     2015     2014  
                         
Revenues:                                
Professional employer services   $ 1,010,757     $ 851,649     $ 2,798,038     $ 2,305,413  
Staffing services     46,617       48,503       128,130       120,520  
Total revenues     1,057,374       900,152       2,926,168       2,425,933  
Cost of revenues:                                
Direct payroll costs     886,984       756,665       2,457,192       2,042,063  
Payroll taxes and benefits     74,358       65,061       234,798       199,008  
Workers' compensation     52,081       121,208       145,087       188,486  
Total cost of revenues     1,013,423       942,934       2,837,077       2,429,557  
Gross margin   $ 43,951     $ (42,782 )   $ 89,091     $ (3,624 )

 

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

 

    (Unaudited)  
    Three Months Ended September 30,  
    Gross Revenue           Net Revenue  
(in thousands)   Reporting Method     Reclassification     Reporting Method  
    2015     2014     2015     2014     2015     2014  
Revenues:                                                
Professional employer services   $ 1,010,757     $ 851,649     $ (858,123 )   $ (725,193 )   $ 152,634     $ 126,456  
Staffing services     46,617       48,503       -       -       46,617       48,503  
Total revenues   $ 1,057,374     $ 900,152     $ (858,123 )   $ (725,193 )   $ 199,251     $ 174,959  
Cost of revenues   $ 1,013,423     $ 942,934     $ (858,123 )   $ (725,193 )   $ 155,300     $ 217,741  

 

    (Unaudited)  
    Nine Months Ended September 30,  
    Gross Revenue           Net Revenue  
(in thousands)   Reporting Method     Reclassification     Reporting Method  
    2015     2014     2015     2014     2015     2014  
Revenues:                                                
Professional employer services   $ 2,798,038     $ 2,305,413     $ (2,377,605 )   $ (1,964,765 )   $ 420,433     $ 340,648  
Staffing services     128,130       120,520       -       -       128,130       120,520  
Total revenues   $ 2,926,168     $ 2,425,933     $ (2,377,605 )   $ (1,964,765 )   $ 548,563     $ 461,168  
Cost of revenues   $ 2,837,077     $ 2,429,557     $ (2,377,605 )   $ (1,964,765 )   $ 459,472     $ 464,792  

 

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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 expectations for gross revenues for the next 12 months, 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, the potential for material deviations from expected 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, the carrying value of deferred income tax assets and goodwill, 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 2014 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)

 

    September 30,     December 31,  
(in thousands)   2015     2014  
Assets                
Current assets:                
Cash and cash equivalents   $ 16,881     $ 11,544  
Marketable securities     5,071       29,957  
Trade accounts receivable, net     155,706       102,627  
Income taxes receivable     -       11,421  
Prepaid expenses and other     4,268       3,813  
Restricted marketable securities and workers' compensation deposits     30,849       3,776  
Deferred income taxes     15,770       15,791  
Total current assets     228,545       178,929  
Marketable securities     6,088       20,930  
Property, equipment and software, net     22,465       22,675  
Restricted certificates of deposit     88,320       114,335  
Restricted marketable securities and workers' compensation deposits     126,694       58,533  
Other assets     4,728       5,306  
Goodwill     47,820       47,820  
    $ 524,660     $ 448,528  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
Current portion of long-term debt   $ 25,220     $ 25,220  
Accounts payable     3,182       2,719  
Accrued payroll, payroll taxes and related benefits     161,445       120,133  
Income taxes payable     5,300       -  
Other accrued liabilities     1,802       1,917  
Workers' compensation claims liabilities     62,167       54,049  
Safety incentives liabilities     19,960       14,232  
Total current liabilities     279,076       218,270  
Long-term workers' compensation claims liabilities     175,789       161,933  
Long-term debt     9,667       19,833  
Deferred income taxes     8,159       8,159  
Customer deposits and other long-term liabilities     1,475       1,675  
Stockholders' equity     50,494       38,658  
    $ 524,660     $ 448,528  

 

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Barrett Business Services, Inc.

Consolidated Statements of Operations

  

    (Unaudited)     (Unaudited)  
    Third Quarter Ended     Nine Months Ended  
    September 30,     September 30,  
(in thousands, except per share amounts)   2015     2014     2015     2014  
Revenues:                                
Professional employer service fees   $ 152,634     $ 126,456     $ 420,433     $ 340,648  
Staffing services     46,617       48,503       128,130       120,520  
Total revenues     199,251       174,959       548,563       461,168  
Cost of revenues:                                
Direct payroll costs     35,308     37,087       97,260       91,815  
Payroll taxes and benefits     74,358       65,061       234,798       199,008  
Workers' compensation     45,634       115,593       127,414       173,969  
Total cost of revenues     155,300       217,741       459,472       464,792  
Gross margin     43,951       (42,782 )     89,091       (3,624 )
Selling, general and administrative expenses     25,440       21,213       63,693       53,540  
Depreciation and amortization     721       646       2,113       1,843  
Income (loss) from operations     17,790       (64,641 )     23,285       (59,007 )
Other (expense) income, net     (309 )     290       (1,233 )     486  
Income (loss) before taxes     17,481       (64,351 )     22,052       (58,521 )
Provision for (benefit from) income taxes     5,903       (26,533 )     7,530       (24,403 )
Net income (loss)   $ 11,578     $ (37,818 )   $ 14,522     $ (34,118 )
Basic income (loss) per common share   $ 1.61     $ (5.27 )   $ 2.03     $ (4.76 )
Weighted average basic common shares outstanding     7,201       7,177       7,163       7,173  
Diluted income (loss) per common share   $ 1.57     $ (5.27 )   $ 1.98     $ (4.76 )
Weighted average diluted common shares outstanding     7,362       7,177       7,339       7,173  

 

Investor Relations:

Liolios

Cody Slach

Tel 1-949-574-3860

BBSI@liolios.com

 

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