Form: 8-K

Current report filing

November 8, 2017

 

Exhibit 99.1

 

 

 

BBSI Reports Third Quarter 2017 Financial Results

 

- Q3 Net Revenues up 7% to $240.1 Million (Non-GAAP Gross Revenues up 11%) -

 

VANCOUVER, Washington, November 7, 2017 – 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, 2017.

 

Third Quarter 2017 Financial Summary vs. Year-Ago Quarter

 

· Net revenues up 7% to $240.1 million.

 

· Non-GAAP gross revenues up 11% to $1.4 billion.

 

· Net income up to $14.8 million, or $1.96 per diluted share, compared to net income of $10.2 million, or $1.38 per diluted share.

 

“Strong continued performance yielded record earnings in the third quarter,” said Michael Elich, president and CEO of BBSI. “Additionally, we delivered solid growth marked by the addition of 169 net new PEO clients.

 

“Our top-line growth was slightly impacted by one less work day in the third quarter when compared to the same quarter last year. This tempered our revenue growth rate and same-customer sales, which came in at 5.9%. However, when adjusting for this difference, our non-GAAP gross revenues increased by 13% and same-customer sales were up 8.4%.”

 

Third Quarter 2017 Financial Results

 

Net revenues in the third quarter of 2017 increased 7% to $240.1 million compared to $225.1 million in the third quarter of 2016.

 

Total non-GAAP gross revenues in the third quarter increased 11% to $1.4 billion compared to $1.2 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 PEO client count and same-customer sales growth, which was partially offset by a decrease from staffing revenues.

 

Net income for the third quarter of 2017 increased to $14.8 million, or $1.96 per diluted share, compared to net income of $10.2 million, or $1.38 per diluted share, in the year-ago quarter.

 

Revised Outlook

 

For the full year 2017, the Company continues to expect diluted earnings per share to be approximately $3.10. This continues to assume approximately $0.13 per diluted share in estimated costs associated with accounting and securities law issues, as well as the return to an effective tax rate of approximately 32.9%.

 

BBSI now expects non-GAAP gross revenues for the next 12-month period (through September 30, 2018) to increase approximately 14% (previous outlook was 15%). This revision is partially attributed to slight headwinds in staffing and a continued tightening of the labor market.

 

1

 

 

Conference Call

 

BBSI will conduct a conference call tomorrow, November 8, 2017 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, 2017. 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 8, 2017

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

Toll-free dial-in number: 1-800-930-1344

International dial-in number: 1-719-457-2085

Conference ID: 2614932

 

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 here 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 8, 2017.

 

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

International replay number: 1-412-317-6671

Replay ID: 2614932

 

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.

 

2

 

 

    (Unaudited)     (Unaudited)  
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
Non-GAAP (in thousands)   2017     2016     2017     2016  
                         
Gross revenues:                                
Professional employer services   $ 1,328,465     $ 1,184,159     $ 3,750,908     $ 3,314,641  
Staffing services     42,747       47,874       118,391       121,806  
Total gross revenues     1,371,212       1,232,033       3,869,299       3,436,447  
Gross cost of revenues:                                
Direct payroll costs     1,154,012       1,036,769       3,258,993       2,889,278  
Payroll taxes and benefits     94,922       82,888       304,268       269,533  
Workers' compensation     67,361       62,817       196,457       175,437  
Total gross cost of revenues     1,316,295       1,182,474       3,759,718       3,334,248  
Gross margin   $ 54,917     $ 49,559     $ 109,581     $ 102,199  

 

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  
    (GAAP)     Non-GAAP Adjustments     (Non-GAAP)  
(in thousands)   2017     2016     2017     2016     2017     2016  
                                     
Revenues:                                                
Professional employer services   $ 197,388     $ 177,229     $ 1,131,077     $ 1,006,930     $ 1,328,465     $ 1,184,159  
Staffing services     42,747       47,874       -       -       42,747       47,874  
Total revenues   $ 240,135     $ 225,103     $ 1,131,077     $ 1,006,930     $ 1,371,212     $ 1,232,033  
Cost of revenues   $ 185,218     $ 175,544     $ 1,131,077     $ 1,006,930     $ 1,316,295     $ 1,182,474  

 

    (Unaudited)  
    Nine Months Ended September 30,  
    Net Revenue           Gross Revenue  
    Reporting Method                 Reporting Method  
    (GAAP)     Non-GAAP Adjustments     (Non-GAAP)  
(in thousands)   2017     2016     2017     2016     2017     2016  
                                     
Revenues:                                                
Professional employer services   $ 557,315     $ 497,682     $ 3,193,593     $ 2,816,959     $ 3,750,908     $ 3,314,641  
Staffing services     118,391       121,806       -       -       118,391       121,806  
Total revenues   $ 675,706     $ 619,488     $ 3,193,593     $ 2,816,959     $ 3,869,299     $ 3,436,447  
Cost of revenues   $ 566,125     $ 517,289     $ 3,193,593     $ 2,816,959     $ 3,759,718     $ 3,334,248  

 

3

 

 

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 5,000 clients across all lines of business in 20 states. For more information, please visit www.barrettbusiness.com.

 

Forward-Looking Statements

 

Statements in this release about future events or performance, including expectations regarding revenue growth and earnings per share, 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, 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 prospects are described in the Company’s 2016 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.

 

4

 

Barrett Business Services, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

    September 30,     December 31,  
(in thousands)   2017     2016  
             
Assets                
Current assets:                
Cash and cash equivalents   $ 35,570     $ 50,768  
Trade accounts receivable, net     156,368       126,484  
Prepaid expenses and other     6,605       3,899  
Investments     796       5,675  
Restricted cash and investments     90,681       48,557  
Total current assets     290,020       235,383  
Investments     1,191       642  
Property, equipment and software, net     26,296       26,673  
Restricted cash and investments     281,286       252,707  
Goodwill     47,820       47,820  
Other assets     3,376       9,293  
Deferred income taxes     9,241       9,370  
    $ 659,230     $ 581,888  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
Current portion of long-term debt   $ 221     $ 221  
Accounts payable     4,033       4,944  
Accrued payroll, payroll taxes and related benefits     182,267       153,110  
Income taxes payable     6,781       3,041  
Other accrued liabilities     7,407       7,674  
Workers' compensation claims liabilities     89,601       81,339  
Safety incentives liability     27,559       24,835  
Total current liabilities     317,869       275,164  
Long-term workers' compensation claims liabilities     255,084       231,198  
Long term debt     4,226       4,392  
Customer deposits and other long-term liabilities     1,389       1,441  
Stockholders' equity     80,662       69,693  
    $ 659,230     $ 581,888  

 

5

 

 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

  Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
(in thousands, except per share amounts)   2017     2016     2017     2016  
                         
Revenues:                                
Professional employer service fees   $ 197,388     $ 177,229     $ 557,315     $ 497,682  
Staffing services     42,747       47,874       118,391       121,806  
Total revenues     240,135       225,103       675,706       619,488  
Cost of revenues:                                
Direct payroll costs     31,986       37,017       89,182       92,667  
Payroll taxes and benefits     94,922       82,888       304,268       269,533  
Workers' compensation     58,310       55,639       172,675       155,089  
Total cost of revenues     185,218       175,544       566,125       517,289  
Gross margin     54,917       49,559       109,581       102,199  
Selling, general and administrative expenses     33,925       30,440       88,595       80,834  
Depreciation and amortization     1,062       823       2,989       2,341  
Income from operations     19,930       18,296       17,997       19,024  
Other income (expense), net     1,514       (3,280 )     2,915       (3,281 )
Income before income taxes     21,444       15,016       20,912       15,743  
Provision for income taxes     6,659       4,783       6,228       4,991  
Net income   $ 14,785     $ 10,233     $ 14,684     $ 10,752  
Basic income per common share   $ 2.03     $ 1.41     $ 2.02     $ 1.49  
Weighted average basic common shares outstanding     7,296       7,243       7,266       7,220  
Diluted income per common share   $ 1.96     $ 1.38     $ 1.95     $ 1.46  
Weighted average diluted common shares outstanding     7,527       7,405       7,539       7,350  

 

Investor Relations:

Liolios

Cody Slach

Tel 1-949-574-3860

BBSI@liolios.com

 

6