Form: 8-K

Current report filing

November 8, 2016

Documents

 

Exhibit 99.1 

 

 

 

 

BBSI Reports Third Quarter 2016 Financial Results

 

- Q3 Net Revenues up 13% to $225.1 Million (Non-GAAP Gross Revenues up 17%) -

 

VANCOUVER, Washington, November 8, 2016 – 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, 2016.

 

Third Quarter 2016 Financial Summary vs. Year-Ago Quarter

 

· Net revenues up 13% to $225.1 million.

 

· Non-GAAP gross revenues up 17% to $1.2 billion.

 

· Net income of $10.2 million or $1.38 per diluted share, compared to net income of $11.0 million or $1.49 per diluted share. Net income in the third quarter of 2016 included a $0.30 per diluted share expense for the settlement of a November 2014 class action shareholder lawsuit.

 

“We are seeing consistency in our performance, which speaks to the depth of our operational teams,” said Michael Elich, president and CEO of BBSI. “In the third quarter, we saw 9.1% same-store sales growth and added 200 net new clients, supporting 17% gross revenue growth. Additionally, we continued to make progress on key initiatives, including paying off our term loan with Wells Fargo and adding a new member to our board of directors. We will continue to execute on our plan as we look towards 2017 and beyond.”

 

Third Quarter 2016 Financial Results

 

Net revenues in the third quarter of 2016 increased 13% to $225.1 million compared to $198.7 million in the third quarter of 2015.

 

Total non-GAAP gross revenues in the third quarter of 2016 increased 17% to $1.2 billion compared to $1.1 billion in the same year-ago quarter (see “Reconciliation of Non-GAAP Financial Measures” below). The increase was primarily due to the continued build in the Company’s client count and same-store sales growth.

 

Net income for the third quarter of 2016 was $10.2 million or $1.38 per diluted share, compared to net income of $11.0 million or $1.49 per diluted share in the year-ago quarter. The third quarter of 2016 included a $0.30 per diluted share expense for the recent settlement of a November 2014 class action shareholder lawsuit.

 

At September 30, 2016, the Company’s cash, cash equivalents, investments and restricted cash and investments increased 7% to $325.6 million compared to $305.3 million at December 31, 2015. Total debt was reduced significantly to $4.7 million compared to $19.8 million at the end of 2015 due to the full pay down of the Company’s $40.0 million term loan.

 

Outlook

 

Parting from the previous outlook of $3.50 per diluted share, the Company expects diluted earnings per share in 2016 to be $3.00, which includes an estimate of $8.2 million (approximately $0.76 per diluted share) for legal and accounting costs associated with financial restatements, changing auditors, outside investigations and legal proceedings related to securities law issues, and $3.3 million (approximately $0.30 per diluted share) for the shareholder litigation settlement. The Company reported $3.47 diluted earnings per share in 2015. 

 

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Conference Call

 

BBSI will conduct a conference call tomorrow, November 9, 2016 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) to discuss its financial results for the third quarter ended September 30, 2016. The Company’s President and CEO Michael Elich and CFO Gary Kramer will host the call, followed by a question and answer period.

 

Date: Wednesday, November 9, 2016

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

Toll-free dial-in number: 1-877-681-3367

International dial-in number: 1-719-325-4845

Conference ID: 7180987

 

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=121606 and via the 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 December 9, 2016.

 

Toll-free replay number: 1-844-512-2921

International replay number: 1-412-317-6671

Replay ID: 7180987

 

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 Services 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)  
    Three Months Ended     Nine Months Ended  
Non-GAAP (in thousands)   September 30,     September 30,  
    2016     2015     2016     2015  
                         
Gross Revenues:                                
Professional employer services   $ 1,184,159     $ 1,010,757     $ 3,314,641     $ 2,798,039  
Staffing services     47,874       46,617       121,806       128,130  
Total gross revenues     1,232,033       1,057,374       3,436,447       2,926,169  
Gross Cost of revenues:                                
Direct payroll costs     1,036,769       886,984       2,889,278       2,457,193  
Payroll taxes and benefits     82,888       75,237       269,533       235,122  
Workers' compensation     62,817       52,263       175,437       145,555  
Total gross cost of revenues     1,182,474       1,014,484       3,334,248       2,837,870  
Gross margin   $ 49,559     $ 42,890     $ 102,199     $ 88,299  

 

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

 

    (Unaudited)  
    Three Months Ended September 30,  
    Net Revenue           Gross Revenue  
    Reporting Method           Reporting Method  
(in thousands)   (GAAP)     Non-GAAP Adjustments     (Non-GAAP)  
    2016     2015     2016     2015     2016     2015  
Revenues:                                                
Professional employer services   $ 177,229     $ 152,108     $ 1,006,930     $ 858,649     $ 1,184,159     $ 1,010,757  
Staffing services     47,874       46,617       -       -       47,874       46,617  
Total revenues   $ 225,103     $ 198,725     $ 1,006,930     $ 858,649     $ 1,232,033     $ 1,057,374  
Cost of revenues   $ 175,544     $ 155,835     $ 1,006,930     $ 858,649     $ 1,182,474     $ 1,014,484  

  

    (Unaudited)  
    Nine Months Ended September 30,  
    Net Revenue           Gross Revenue  
    Reporting Method           Reporting Method  
(in thousands)   (GAAP)     Non-GAAP Adjustments     (Non-GAAP)  
    2016     2015     2016     2015     2016     2015  
Revenues:                                                
Professional employer services   $ 497,682     $ 418,954     $ 2,816,959     $ 2,379,085     $ 3,314,641     $ 2,798,039  
Staffing services     121,806       128,130       -       -       121,806       128,130  
Total revenues   $ 619,488     $ 547,084     $ 2,816,959     $ 2,379,085     $ 3,436,447     $ 2,926,169  
Cost of revenues   $ 517,289     $ 458,785     $ 2,816,959     $ 2,379,085     $ 3,334,248     $ 2,837,870  

 

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 4,100 clients across all lines of business in 22 states. For more information, please visit www.barrettbusiness.com.

 

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Forward-Looking Statements

 

Statements in this release about future events or performance, including expectations regarding revenue and earnings per share growth, 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 changes in executive management, the ineffectiveness of the Company’s internal control over financial reporting, the Company’s relationship with its primary bank lender, potential delisting of the Company’s common stock by Nasdaq, current and future shareholder litigation, the ongoing investigation of accounting issues by the Securities and Exchange Commission and the United States Department of Justice, 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 2015 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 Consolidated Balance Sheets

(Unaudited)

 

    September 30,     December 31,  
(in thousands)   2016     2015  
Assets                
Current assets:                
Cash and cash equivalents   $ 26,786     $ 25,218  
Trade accounts receivable, net     140,074       90,529  
Income taxes receivable     -       1,038  
Prepaid expenses and other     3,637       3,173  
Investments     1,013       -  
Restricted cash and investments     51,959       86,110  
Deferred income taxes     20,906       20,941  
Total current assets     244,375       227,009  
Investments     863       6,082  
Property, equipment and software, net     25,790       22,820  
Restricted cash and investments     245,020       187,916  
Goodwill     47,820       47,820  
Other assets     15,937       5,130  
    $ 579,805     $ 496,777  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
Current portion of long-term debt   $ 221     $ 19,833  
Accounts payable     4,520       3,217  
Accrued payroll, payroll taxes and related benefits     161,062       121,343  
Income taxes payable     4,797       -  
Other accrued liabilities     10,751       6,166  
Workers' compensation claims liabilities     77,683       65,581  
Safety incentives liabilities     24,997       21,253  
Total current liabilities     284,031       237,393  
Long-term workers' compensation claims liabilities     214,248       190,094  
Long-term debt     4,447       -  
Deferred income taxes     13,256       13,256  
Customer deposits and other long-term liabilities     1,443       1,483  
Stockholders' equity     62,380       54,551  
    $ 579,805     $ 496,777  

 

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Barrett Business Services, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

    (Unaudited)     (Unaudited)  
(in thousands, except per share amounts)   Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2016     2015     2016     2015  
Revenues:                                
Professional employer service fees   $ 177,229     $ 152,108     $ 497,682     $ 418,954  
Staffing services     47,874       46,617       121,806       128,130  
Total revenues     225,103       198,725       619,488       547,084  
Cost of revenues:                                
Direct payroll costs     37,017       35,308       92,667       97,260  
Payroll taxes and benefits     82,888       75,237       269,533       235,122  
Workers' compensation     55,639       45,290       155,089       126,403  
Total cost of revenues     175,544       155,835       517,289       458,785  
Gross margin     49,559       42,890       102,199       88,299  
Selling, general and administrative expenses     30,440       25,440       80,834       63,839  
Depreciation and amortization     823       721       2,341       2,113  
Income from operations     18,296       16,729       19,024       22,347  
Other expense, net     (3,280 )     (216 )     (3,281 )     (1,061 )
Income before income taxes     15,016       16,513       15,743       21,286  
Provision for income taxes     4,783       5,540       4,991       7,239  
Net income   $ 10,233     $ 10,973     $ 10,752     $ 14,047  
Basic earnings per common share   $ 1.41     $ 1.52     $ 1.49     $ 1.96  
Weighted average number of basic common shares outstanding     7,243       7,201       7,220       7,163  
Diluted earnings per common share   $ 1.38     $ 1.49     $ 1.46     $ 1.91  
Weighted average number of  diluted common shares outstanding     7,405       7,362       7,350       7,340  

 

Investor Relations:

Liolios

Cody Slach

Tel 1-949-574-3860

BBSI@liolios.com

 

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