Form: 8-K

Current report filing

August 3, 2022

Exhibit 99.1

 

BBSI Reports Strong Second Quarter 2022 Financial Results

 

- Q2 2022 Net Income of $18.0 Million, or $2.48 per Diluted Share -

- Raises Full-Year Outlook -

 

VANCOUVER, Washington, August 3, 2022 – Barrett Business Services, Inc. (“BBSI” or the “Company”) (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the second quarter ended June 30, 2022.

 

Second Quarter 2022 Financial Summary vs. Year-Ago Quarter

 

Net revenues up 12% to $262.2 million.

 

 

Gross billings up 14% to $1.83 billion.

 

 

Average worksite employees (“WSEs”) up 9%.

 

 

Net income up to $18.0 million, or $2.48 per diluted share, compared to $17.1 million, or $2.24 per diluted share.

 

“Our strong performance trends have continued across the business, and we have once again exceeded our expectations for the quarter,” said BBSI President and CEO, Gary Kramer. “Our sales and marketing efforts continue to bring in more WSEs from client additions than prior years, and clients continued their pace of strong hiring. Given these positive results, we are again pleased to raise our outlook for the year.

 

“Looking even further ahead, I am also excited about BBSI’s new health benefits offering, which will launch in 2023. The ability to offer health insurance benefits to clients further enhances our value proposition and will aid in helping clients attract and retain employees.”

 

Second Quarter 2022 Financial Results

Net revenues in the second quarter of 2022 increased 12% to $262.2 million compared to $233.2 million in the second quarter of 2021.

 

Total gross billings in the second quarter increased 14% to $1.83 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 driven by higher WSEs from net client additions and net client hiring, as well as from higher average billings per WSE.

 

Non-GAAP gross workers’ compensation expense as a percent of gross billings was 2.6% in the second quarter and benefited from a favorable adjustment of prior accident year liability of $6.5 million. This compares to 2.9% in the second quarter of 2021.

 

Net income for the second quarter of 2022 was $18.0 million, or $2.48 per diluted share, compared to $17.1 million, or $2.24 per diluted share, in the year-ago quarter. The increase is primarily attributable to higher revenue, lower workers’ compensation expense and favorable payroll tax rates.

 


 

 

Liquidity

As of June 30, 2022, unrestricted cash and investments were $111.4 million compared to $127.4 million in the prior quarter. The decline was due to the timing of payroll tax payments and stock repurchases. BBSI is debt free at quarter end.

 

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 September 2, 2022, to all stockholders of record as of August 19, 2022.

 

On February 28, 2022, BBSI’s board of directors approved a new stock repurchase program authorizing the Company to purchase up to $75 million of its stock over a two-year period. In the second quarter, BBSI repurchased 269,581 shares at an average price of $73.88 per share.

 

Outlook

In light of the strong performance in the second quarter, BBSI is increasing its outlook for 2022 and now expects the following:

 

Gross billings growth of 11% to 13%, increased from 10% to 12% in the prior outlook

 

 

Growth in the average number of WSEs of 7% to 8%, increased from 4% to 6% in the prior outlook

 

 

Gross margin as a percent of gross billings of 3.05% to 3.15%, increased from 3.0% to 3.1%

 

 

Effective annual tax rate of 26% to 28%, increased from 25% to 27% in the prior outlook

 

 

Conference Call

BBSI will conduct a conference call on Wednesday, August 3, 2022, at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss its financial results for the second quarter ended June 30, 2022.

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

Date: Wednesday, August 3, 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: 13731534

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 ir.bbsi.com.

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A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through September 3, 2022.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13731534

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 six months ended June 30, 2022 and 2021.

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Gross billings

 

$

1,829,225

 

 

$

1,601,339

 

 

$

3,536,400

 

 

$

3,072,880

 

PEO and staffing wages

 

$

1,588,990

 

 

$

1,384,861

 

 

$

3,071,196

 

 

$

2,656,253

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Workers' compensation

 

$

46,483

 

 

$

45,513

 

 

$

94,719

 

 

$

91,860

 

Safety incentive costs

 

 

511

 

 

 

1,470

 

 

 

1,027

 

 

 

1,476

 

Non-GAAP gross workers' compensation

 

$

46,994

 

 

$

46,983

 

 

$

95,746

 

 

$

93,336

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

PEO and staffing wages

 

86.9%

 

 

86.5%

 

 

86.8%

 

 

86.4%

 

Payroll taxes and benefits

 

6.9%

 

 

7.0%

 

 

7.4%

 

 

7.6%

 

Non-GAAP gross workers' compensation

 

2.6%

 

 

2.9%

 

 

2.7%

 

 

3.0%

 

Gross margin

 

3.7%

 

 

3.6%

 

 

3.0%

 

 

2.9%

 

 

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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)

 

 

 

Three Months Ended June 30,

 

 

 

2022

 

 

% Change

 

 

2021

 

 

% Change

 

 

Average WSEs

 

 

 

122,234

 

 

8.8%

 

 

 

112,363

 

 

9.5%

 

 

Ending WSEs

 

 

 

123,853

 

 

8.4%

 

 

 

114,288

 

 

8.0%

 

 

 

 

 

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

% Change

 

 

2021

 

 

% Change

 

 

Average WSEs

 

 

 

119,216

 

 

9.1%

 

 

 

109,311

 

 

1.3%

 

 

Ending WSEs

 

 

 

123,853

 

 

8.4%

 

 

 

114,288

 

 

8.0%

 

 

 

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. For more information, please visit www.bbsi.com.

 

Forward-Looking Statements

Statements in this release about future events 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 the COVID-19 pandemic, inflation, and potential recessionary pressures on our clients, our plans to make certain fully insured medical and other health and welfare benefits available to qualifying worksite employees beginning in 2023, 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 2021 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)

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

34,098

 

 

$

69,405

 

Investments

 

 

77,303

 

 

 

96,763

 

Trade accounts receivable, net

 

 

266,870

 

 

 

155,707

 

Prepaid expenses and other

 

 

20,358

 

 

 

17,606

 

Restricted cash and investments

 

 

111,905

 

 

 

67,238

 

Total current assets

 

 

510,534

 

 

 

406,719

 

Property, equipment and software, net

 

 

41,726

 

 

 

36,277

 

Operating lease right-of-use assets

 

 

18,601

 

 

 

20,697

 

Restricted cash and investments

 

 

128,059

 

 

 

232,965

 

Goodwill

 

 

47,820

 

 

 

47,820

 

Other assets

 

 

2,438

 

 

 

2,474

 

Deferred income taxes

 

 

7,096

 

 

 

 

 

 

$

756,274

 

 

$

746,952

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

 

 

$

3,510

 

Accounts payable

 

 

4,321

 

 

 

4,485

 

Accrued payroll, payroll taxes and related benefits

 

 

282,754

 

 

 

199,067

 

Income taxes payable

 

 

5,214

 

 

 

1,673

 

Current operating lease liabilities

 

 

6,716

 

 

 

7,191

 

Other accrued liabilities

 

 

18,873

 

 

 

15,120

 

Workers' compensation claims liabilities and premiums

 

 

69,130

 

 

 

80,028

 

Safety incentives liability

 

 

2,760

 

 

 

4,322

 

Total current liabilities

 

 

389,768

 

 

 

315,396

 

Long-term workers' compensation claims liabilities

 

 

172,380

 

 

 

199,379

 

Deferred income taxes

 

 

 

 

 

1,687

 

Long-term operating lease liabilities

 

 

13,267

 

 

 

14,598

 

Customer deposits and other long-term liabilities

 

 

6,361

 

 

 

7,362

 

Stockholders' equity

 

 

174,498

 

 

 

208,530

 

 

 

$

756,274

 

 

$

746,952

 

 


5

 


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

 

 

 

 

 

(in thousands, except per share amounts)

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional employer service fees

 

$

232,174

 

 

$

208,496

 

 

$

449,607

 

 

$

402,315

 

Staffing services

 

 

30,005

 

 

 

24,707

 

 

 

58,947

 

 

 

49,333

 

Total revenues

 

 

262,179

 

 

 

233,203

 

 

 

508,554

 

 

 

451,648

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct payroll costs

 

 

22,458

 

 

 

18,498

 

 

 

44,379

 

 

 

36,948

 

Payroll taxes and benefits

 

 

126,353

 

 

 

111,719

 

 

 

262,218

 

 

 

234,502

 

Workers' compensation

 

 

46,483

 

 

 

45,513

 

 

 

94,719

 

 

 

91,860

 

Total cost of revenues

 

 

195,294

 

 

 

175,730

 

 

 

401,316

 

 

 

363,310

 

Gross margin

 

 

66,885

 

 

 

57,473

 

 

 

107,238

 

 

 

88,338

 

Selling, general and administrative expenses

 

 

42,272

 

 

 

35,662

 

 

 

82,437

 

 

 

72,769

 

Depreciation and amortization

 

 

1,523

 

 

 

1,328

 

 

 

3,031

 

 

 

2,625

 

Income from operations

 

 

23,090

 

 

 

20,483

 

 

 

21,770

 

 

 

12,944

 

Other income, net

 

 

1,554

 

 

 

1,873

 

 

 

3,190

 

 

 

3,343

 

Income before income taxes

 

 

24,644

 

 

 

22,356

 

 

 

24,960

 

 

 

16,287

 

Provision for income taxes

 

 

6,630

 

 

 

5,266

 

 

 

6,658

 

 

 

3,751

 

Net income

 

$

18,014

 

 

$

17,090

 

 

$

18,302

 

 

$

12,536

 

Basic income per common share

 

$

2.52

 

 

$

2.26

 

 

$

2.51

 

 

$

1.66

 

Weighted average basic common shares outstanding

 

 

7,162

 

 

 

7,554

 

 

 

7,284

 

 

 

7,565

 

Diluted income per common share

 

$

2.48

 

 

$

2.24

 

 

$

2.48

 

 

$

1.64

 

Weighted average diluted common shares outstanding

 

 

7,257

 

 

 

7,645

 

 

 

7,365

 

 

 

7,658

 

 

 

Investor Relations:

Gateway Group, Inc.

Cody Slach

Tel 1-949-574-3860

BBSI@gatewayir.com

 

 

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