bbsi-ex991

- 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.

“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.”

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.

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.

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.

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.

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.

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.

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

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

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.

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.

	(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.

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.

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.

	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


(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

	(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