Form: 8-K

Current report filing

March 2, 2022

Exhibit 99.1

 

 

BBSI Reports Fourth Quarter and Full Year 2021 Financial Results

 

- Q4 2021 Net Income of $10.6 Million, or $1.40 per Diluted Share -

- Full Year 2021 Net Income of $38.1 Million, or $5.00 per Diluted Share -

- Board of Directors Authorizes New $75 Million Share Repurchase Program Over Two Years -

VANCOUVER, Washington, March 2, 2022 – Barrett Business Services, Inc. (“BBSI” or the “Company”) (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the fourth quarter and full year ended December 31, 2021.

Fourth Quarter 2021 Financial Summary vs. Year-Ago Quarter

 

Net revenues up 10% to $256.6 million.

 

 

Gross billings up 13% to $1.81 billion.

 

 

Average worksite employees (“WSEs”) up 7%.

 

 

Net income of $10.6 million, or $1.40 per diluted share, compared to $7.2 million, or $0.93 per diluted share.

 

Full Year 2021 Financial Summary vs. 2020

 

Net revenues up 8% to $955.2 million.

 

 

Gross billings up 11% to $6.57 billion.

 

 

Average WSEs up 4%.

 

 

Net income of $38.1 million, or $5.00 per diluted share, compared to $33.8 million, or $4.39 per diluted share.

 

“2021 was a tremendous year for our organization that ended with great momentum,” said BBSI President and CEO, Gary Kramer. “We continued our positive trend in billings growth, including the addition of more WSEs from net new clients than in any of the last four years. In fact, due to this growth, we finished the year with our highest-ever WSE count. Given our client momentum and the strength of our fourth quarter results, we are well positioned for another terrific year in 2022.”

 

Fourth Quarter 2021 Financial Results

Net revenues in the fourth quarter of 2021 increased 10% to $256.6 million compared to $233.2 million in the fourth quarter of 2020.

 

Total gross billings in the fourth quarter increased 13% to $1.81 billion compared to $1.60 billion in the same year-ago quarter (see “Key Performance Metrics and Non-GAAP Financial Measures” below). The increase was primarily due to higher average billings per WSE and an increase in average WSEs.

 

Non-GAAP gross workers’ compensation expense as a percent of gross billings was 3.1% in the fourth quarter of 2021 and benefited from a favorable one-time adjustment of prior accident year liability of $1.7 million. This compares to 3.7% in the fourth quarter of 2020.

 

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Net income for the fourth quarter of 2021 increased to $10.6 million, or $1.40 per diluted share, compared to $7.2 million, or $0.93 per diluted share, in the year-ago quarter. The increase is primarily attributable to higher revenue in 2021.

 

Full Year 2021 Financial Results

Net revenues in 2021 increased 8% to $955.2 million compared to $880.8 million in 2020.

 

Total gross billings in 2021 increased 11% to $6.57 billion compared to $5.92 billion in 2020 (see “Key Performance Metrics and Non-GAAP Financial Measures” below). The increase was primarily due to higher average billings per WSE and an increase in average WSEs.

 

Non-GAAP gross workers’ compensation expense as a percent of gross billings was 3.0% in 2021 and benefited from favorable adjustments of prior accident year liability of $9.2 million. This compares to 3.8% in 2020.

 

Net income in 2021 increased to $38.1 million, or $5.00 per diluted share, compared to $33.8 million, or $4.39 per diluted share, in 2020. The increase is primarily attributable to higher revenue in 2021.

 

 

Liquidity

As of December 31, 2021, unrestricted cash and investments increased to $166.2 million compared to $115.6 million in the prior quarter. At year-end BBSI remained debt free apart from the $3.5 million mortgage on its corporate headquarters. Subsequent to year-end, BBSI entered into a revised credit agreement with Wells Fargo, its primary bank, which increased the borrowing limit of its credit facility to $50 million and extended the maturity date to June 2024. BBSI also paid off the remaining balance on its headquarters mortgage and is now completely debt free.

 

Capital Allocation

BBSI’s board of directors has confirmed its regular quarterly cash dividend of $0.30 per share. The cash dividend will be paid on April 1, 2022 to all stockholders of record as of March 18, 2022. The Company also repurchased an additional 91,104 shares in the fourth quarter at an average price of $71.48 per share.

 

BBSI’s board of directors also approved a new stock repurchase program, which will replace the $50 million repurchase program that was previously in effect. Under the newly announced program, BBSI is authorized to purchase up to $75 million of its stock over the next 24 months. Purchases under the program will be made in the open market, including in block trades.

 

Outlook

In 2022, BBSI expects the following:

 

Gross billings growth of 7% to 9%

 

 

Growth in the average number of WSEs of 3% to 4%

 

 

Gross margin as a percent of gross billings of 3.0% to 3.1%

 

 

Effective annual tax rate of 24% to 25%

 

 

Conference Call

BBSI will conduct a conference call on Wednesday, March 2, 2022, at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss its financial results for the fourth quarter and the full year ended December 31, 2021.

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BBSI’s CEO Gary Kramer and CFO Anthony Harris will host the conference call, followed by a question and answer period.

Date: Wednesday, March 2, 2022

Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)

Toll-free dial-in number: 1-877-407-4018

International dial-in number: 1-201-689-8471

Conference ID: 13726898

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 Gateway Investor Relations at 1-949-574-3860.

The conference call will be broadcast live and available for replay here and via the Investors section of the BBSI website at www.bbsi.com.

A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through April 2, 2022

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13726898

Key Performance Metrics and Non-GAAP Financial Measures

We report PEO revenues net of direct payroll costs because we are not the primary obligor for wage payments to our clients’ employees. However, management believes that gross billings and wages are useful in understanding the volume of our business activity and serve as an important performance metric in managing our operations, including the preparation of internal operating forecasts and establishing executive compensation performance goals. We therefore present for purposes of analysis gross billings and wage information for the three and twelve months ended December 31, 2021 and 2020.

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Gross billings

 

$

1,807,793

 

 

$

1,603,521

 

 

$

6,569,986

 

 

$

5,924,539

 

PEO and staffing wages

 

$

1,574,668

 

 

$

1,387,816

 

 

$

5,693,903

 

 

$

5,098,604

 

 

Because safety incentives represent consideration payable to PEO customers, safety incentive costs are netted against PEO revenue in our consolidated statements of operations. We therefore present below for purposes of analysis non-GAAP gross workers’ compensation expense, which represents workers’ compensation costs including safety incentive costs. We believe this non-GAAP measure is useful in evaluating the total costs of our workers’ compensation program. In July 2020, the Company began limiting its safety incentive offering in certain markets, resulting in a substantial reduction in safety incentive costs.

 

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(Unaudited)

 

 

(Unaudited)

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Workers' compensation

 

$

55,256

 

 

$

54,624

 

 

$

196,949

 

 

$

200,744

 

Safety incentive costs

 

 

822

 

 

 

4,394

 

 

 

2,985

 

 

 

23,544

 

Non-GAAP gross workers' compensation

 

$

56,078

 

 

$

59,018

 

 

$

199,934

 

 

$

224,288

 

 

In monitoring and evaluating the performance of our operations, management also reviews the following ratios, which represent selected amounts as a percentage of gross billings. Management believes these ratios are useful in understanding the efficiency and profitability of our service offerings.

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

Percentage of Gross Billings

 

 

Percentage of Gross Billings

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

 

 

2020

 

PEO and staffing wages

 

87.1%

 

 

86.5%

 

 

86.7%

 

 

 

 

86.1%

 

Payroll taxes and benefits

 

6.7%

 

 

6.6%

 

 

7.2%

 

 

 

 

7.1%

 

Non-GAAP gross workers' compensation

 

3.1%

 

 

3.7%

 

 

3.0%

 

 

 

 

3.8%

 

Gross margin

 

3.1%

 

 

3.2%

 

 

3.1%

 

 

 

 

3.1%

 

 

We refer to employees of our PEO clients as WSEs. Management reviews average and ending WSE growth to monitor and evaluate the performance of our operations. Average WSEs are calculated by dividing the number of unique individuals paid in each month by the number of months in the period. Ending WSEs represents the number of unique individuals paid in the last month of the period.

 

 

 

(Unaudited)

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

% Change

 

 

2020

 

 

% Change

 

 

2019

 

Average WSEs

 

 

112,928

 

 

4.3%

 

 

 

108,249

 

 

-5.3%

 

 

 

114,341

 

Ending WSEs

 

 

116,154

 

 

6.3%

 

 

 

109,292

 

 

-4.6%

 

 

 

114,584

 

 

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 7,600 clients across all lines of business in 47 states. For more information, please visit www.bbsi.com.

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Forward-Looking Statements

Statements in this release about future events or performance, including future growth in gross billings and average number of WSEs, gross margin as a percentage of gross billings and effective annual tax rates, are forward-looking statements. Such statements 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 effects of governmental orders responding to the effects of the COVID-19 pandemic, 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 and to achieve revenue growth, the availability of financing or other sources of capital, the Company’s relationship with its primary bank lender, the potential for material deviations from expected future workers’ compensation claims experience, changes in the workers’ compensation regulatory environment in the Company’s primary markets, litigation costs, security breaches or failures in the Company’s information technology systems, the collectability of accounts receivable, changes in executive management, the carrying value of deferred income tax assets and goodwill, the effects of the pandemic and conditions in the global capital markets on the Company’s investment portfolio, and the potential for and effect of acquisitions, among others. Other important factors that may affect the Company’s prospects are described in the Company’s 2020 Annual Report on Form 10-K and in subsequent reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934. 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)

 

 

 

December 31,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

69,405

 

 

$

68,688

 

Investments

 

 

96,763

 

 

 

101,244

 

Trade accounts receivable, net

 

 

155,707

 

 

 

118,506

 

Income taxes receivable

 

 

 

 

 

6,485

 

Prepaid expenses and other

 

 

17,606

 

 

 

15,961

 

Restricted cash and investments

 

 

67,238

 

 

 

96,991

 

Total current assets

 

 

406,719

 

 

 

407,875

 

Property, equipment and software, net

 

 

36,277

 

 

 

34,916

 

Operating lease right-of-use assets

 

 

20,697

 

 

 

23,025

 

Restricted cash and investments

 

 

232,965

 

 

 

258,153

 

Goodwill

 

 

47,820

 

 

 

47,820

 

Other assets

 

 

2,474

 

 

 

3,161

 

 

 

$

746,952

 

 

$

774,950

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

3,510

 

 

$

221

 

Accounts payable

 

 

4,485

 

 

 

4,746

 

Accrued payroll, payroll taxes and related benefits

 

 

199,067

 

 

 

149,989

 

Income taxes payable

 

 

1,673

 

 

 

 

Current operating lease liabilities

 

 

7,191

 

 

 

7,539

 

Other accrued liabilities

 

 

15,120

 

 

 

7,275

 

Workers' compensation claims liabilities

 

 

80,028

 

 

 

102,040

 

Safety incentives liability

 

 

4,322

 

 

 

18,827

 

Total current liabilities

 

 

315,396

 

 

 

290,637

 

Long-term workers' compensation claims liabilities

 

 

199,379

 

 

 

255,706

 

Long-term debt

 

 

 

 

 

3,510

 

Deferred income taxes

 

 

1,687

 

 

 

4,518

 

Long-term operating lease liabilities

 

 

14,598

 

 

 

16,419

 

Customer deposits and other long-term liabilities

 

 

7,362

 

 

 

5,925

 

Stockholders' equity

 

 

208,530

 

 

 

198,235

 

 

 

$

746,952

 

 

$

774,950

 


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Barrett Business Services, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

 

 

 

(in thousands, except per share amounts)

Three Months Ended

 

 

Year Ended

 

 

December 31,

 

 

December 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional employer service fees

$

223,528

 

 

$

204,268

 

 

$

843,815

 

 

$

777,430

 

Staffing services

 

33,040

 

 

 

28,908

 

 

 

111,351

 

 

 

103,394

 

Total revenues

 

256,568

 

 

 

233,176

 

 

 

955,166

 

 

 

880,824

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct payroll costs

 

25,003

 

 

 

22,055

 

 

 

83,821

 

 

 

78,380

 

Payroll taxes and benefits

 

120,374

 

 

 

105,518

 

 

 

469,888

 

 

 

418,793

 

Workers' compensation

 

55,256

 

 

 

54,624

 

 

 

196,949

 

 

 

200,744

 

Total cost of revenues

 

200,633

 

 

 

182,197

 

 

 

750,658

 

 

 

697,917

 

Gross margin

 

55,935

 

 

 

50,979

 

 

 

204,508

 

 

 

182,907

 

Selling, general and administrative expenses

 

41,320

 

 

 

40,959

 

 

 

155,259

 

 

 

141,916

 

Depreciation and amortization

 

1,359

 

 

 

1,332

 

 

 

5,326

 

 

 

4,844

 

Income from operations

 

13,256

 

 

 

8,688

 

 

 

43,923

 

 

 

36,147

 

Other income, net

 

1,616

 

 

 

756

 

 

 

6,738

 

 

 

6,449

 

Income before income taxes

 

14,872

 

 

 

9,444

 

 

 

50,661

 

 

 

42,596

 

Provision for income taxes

 

4,258

 

 

 

2,293

 

 

 

12,582

 

 

 

8,831

 

Net income

$

10,614

 

 

$

7,151

 

 

$

38,079

 

 

$

33,765

 

Basic income per common share

$

1.42

 

 

$

0.94

 

 

$

5.05

 

 

$

4.46

 

Weighted average basic common shares outstanding

 

7,482

 

 

 

7,590

 

 

 

7,540

 

 

 

7,577

 

Diluted income per common share

$

1.40

 

 

$

0.93

 

 

$

5.00

 

 

$

4.39

 

Weighted average diluted common shares outstanding

 

7,559

 

 

 

7,686

 

 

 

7,621

 

 

 

7,688

 

 

 

Investor Relations:

Gateway Group

Cody Slach

Tel 1-949-574-3860

BBSI@gatewayir.com

 

 

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