November 3, 2021 - 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, 2021

☐	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 20, 2021, 7,504,924 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

	Condensed Consolidated Balance Sheets - September 30, 2021 and December 31, 2020	3

	Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2021 and 2020	4

	Condensed Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2021 and 2020	5

	Condensed Consolidated Statements of Stockholders’ Equity - Three and Nine Months Ended September 30, 2021	6

	Condensed Consolidated Statements of Stockholders’ Equity - Three and Nine Months Ended September 30, 2020	7

	Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2021 and 2020	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

Part II - Other Information

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 6.	Exhibits	32

Signature		33

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,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	12,860	$	68,688
Investments		102,709		101,244
Trade accounts receivable, net		240,293		118,506
Income taxes receivable		1,732		6,485
Prepaid expenses and other		23,418		15,961
Restricted cash and investments		82,273		96,991
Total current assets		463,285		407,875
Property, equipment and software, net		35,965		34,916
Operating lease right-of-use assets		22,058		23,025
Restricted cash and investments		237,182		258,153
Goodwill		47,820		47,820
Other assets		2,657		3,161
	$	808,967	$	774,950
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	3,565	$	221
Accounts payable		4,483		4,746
Accrued payroll, payroll taxes and related benefits		249,713		149,989
Current operating lease liabilities		7,435		7,539
Other accrued liabilities		8,190		7,275
Workers' compensation claims liabilities		78,225		102,040
Safety incentives liability		5,363		18,827
Total current liabilities		356,974		290,637
Long-term workers' compensation claims liabilities		218,774		255,706
Long-term debt		—		3,510
Deferred income taxes		2,946		4,518
Long-term operating lease liabilities		15,720		16,419
Customer deposits and other long-term liabilities		6,920		5,925
Total liabilities		601,334		576,715
Commitments and contingencies (Notes 4 and 6)
Stockholders' equity:
Common stock, $.01 par value; 20,500 shares authorized, 7,505 and 7,566 shares issued and outstanding		75		76
Additional paid-in capital		27,981		24,885
Accumulated other comprehensive income		3,464		7,564
Retained earnings		176,113		165,710
Total stockholders' equity		207,633		198,235
	$	808,967	$	774,950

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,
	2021			2020			2021			2020
Revenues:
Professional employer service fees	$	217,972		$	199,082		$	620,287		$	573,162
Staffing services		28,978			28,431			78,311			74,486
Total revenues		246,950			227,513			698,598			647,648
Cost of revenues:
Direct payroll costs		21,870			21,452			58,818			56,325
Payroll taxes and benefits		115,012			100,142			349,514			313,275
Workers' compensation		49,833			46,685			141,693			146,120
Total cost of revenues		186,715			168,279			550,025			515,720
Gross margin		60,235			59,234			148,573			131,928
Selling, general and administrative expenses		41,170			35,587			113,939			100,957
Depreciation and amortization		1,342			1,341			3,967			3,512
Income from operations		17,723			22,306			30,667			27,459
Other income (expense):
Investment income, net		1,825			1,664			5,559			6,431
Interest expense		(46	)		(366	)		(433	)		(907	)
Other, net		—			(4	)		(4	)		169
Other income, net		1,779			1,294			5,122			5,693
Income before income taxes		19,502			23,600			35,789			33,152
Provision for income taxes		4,573			5,089			8,324			6,538
Net income	$	14,929		$	18,511		$	27,465		$	26,614
Basic income per common share	$	1.98		$	2.42		$	3.63		$	3.51
Weighted average number of basic common shares outstanding		7,545			7,639			7,559			7,572
Diluted income per common share	$	1.96		$	2.40		$	3.59		$	3.46
Weighted average number of diluted common shares outstanding		7,607			7,709			7,642			7,688

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,
	2021			2020
Net income	$	14,929		$	18,511
Unrealized (losses) gains on investments, net of tax of ($383) and $263 in 2021 and 2020, respectively		(1,001	)		688
Comprehensive Income	$	13,928		$	19,199

	Nine Months Ended
	September 30,
	2021			2020
Net income	$	27,465		$	26,614
Unrealized (losses) gains on investments, net of tax of ($1,567) and $1,847 in 2021 and 2020, respectively		(4,100	)		4,830
Comprehensive income	$	23,365		$	31,444

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, 2021

(Unaudited)

(In Thousands)


										Accumulated
							Additional			Other
	Common Stock						Paid-in			Comprehensive			Retained
	Shares			Amount			Capital			Income			Earnings			Total
Balance, December 31, 2020		7,566		$	76		$	24,885		$	7,564		$	165,710		$	198,235
Common stock issued on exercise of options, purchase of ESPP shares and vesting of restricted stock units and performance awards		38			—			815			—			—			815
Common stock repurchased on vesting of restricted stock units and performance awards		(1	)		—			(107	)		—			—			(107	)
Share-based compensation expense		—			—			1,060			—			—			1,060
Company repurchase of common stock		(49	)		—			(170	)		—			(3,266	)		(3,436	)
Cash dividends on common stock ($0.30 per share)		—			—			—			—			(2,278	)		(2,278	)
Unrealized loss on investments, net of tax		—			—			—			(5,250	)		—			(5,250	)
Net loss		—			—			—			—			(4,554	)		(4,554	)
Balance, March 31, 2021		7,554		$	76		$	26,483		$	2,314		$	155,612		$	184,485
Common stock issued on exercise of options and vesting of restricted stock units		15			—			61			—			—			61
Common stock repurchased on vesting of restricted stock units		(4	)		—			(287	)		—			—			(287	)
Share-based compensation expense		—			—			1,335			—			—			1,335
Company repurchase of common stock		(42	)		(1	)		(155	)		—			(2,986	)		(3,142	)
Cash dividends on common stock ($0.30 per share)		—			—			—			—			(2,271	)		(2,271	)
Unrealized gain on investments, net of tax		—			—			—			2,151			—			2,151
Net income		—			—			—			—			17,090			17,090
Balance, June 30, 2021		7,523		$	75		$	27,437		$	4,465		$	167,445		$	199,422
Common stock issued on exercise of options, purchase of ESPP shares and vesting of restricted stock units		51			1			279			—			—			280
Common stock repurchased on vesting of restricted stock units		(14	)		—			(1,010	)		—			—			(1,010	)
Share-based compensation expense		—			—			1,479			—			—			1,479
Company repurchase of common stock		(55	)		(1	)		(204	)		—			(3,992	)		(4,197	)
Cash dividends on common stock ($0.30 per share)		—			—			—			—			(2,269	)		(2,269	)
Unrealized loss on investments, net of tax		—			—			—			(1,001	)		—			(1,001	)
Net income		—			—			—			—			14,929			14,929
Balance, September 30, 2021		7,505		$	75		$	27,981		$	3,464		$	176,113		$	207,633

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, 2020

(Unaudited)

(In Thousands)


							Accumulated
					Additional		Other
	Common Stock				Paid-in		Comprehensive		Retained
	Shares		Amount		Capital		Income		Earnings		Total
Balance, December 31, 2019		7,514	$	75	$	20,227	$	2,819	$	148,678	$	171,799
Common stock issued on exercise of options, purchase of ESPP shares and vesting of restricted stock units and performance awards		56		1		903		—

Form: 10-Q

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