August 4, 2022 - 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 June 30, 2022

☐	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 July 20, 2022, 7,088,682 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	3

	Condensed Consolidated Balance Sheets - June 30, 2022 and December 31, 2021	3

	Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 2022 and 2021	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) - Three and Six Months Ended June 30, 2022 and 2021	5

	Condensed Consolidated Statements of Stockholders’ Equity - Three and Six Months Ended June 30, 2022	6

	Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2022 and 2021	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	28

Item 4.	Controls and Procedures	28

Part II - Other Information

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 6.	Exhibits	30

Signature		31

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)

	June 30,			December 31,
	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		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
Total liabilities		581,776			538,422
Commitments and contingencies (Notes 4 and 6)
Stockholders' equity:
Common stock, $.01 par value; 20,500 shares authorized, 7,314 and 7,415 shares issued and outstanding		71			74
Additional paid-in capital		30,941			29,054
Accumulated other comprehensive (loss) income		(21,903	)		1,079
Retained earnings		165,389			178,323
Total stockholders' equity		174,498			208,530
	$	756,274		$	746,952

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						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 (expense):
Investment income, net		1,568			1,965			3,206			3,734
Interest expense		(33	)		(79	)		(67	)		(387	)
Other, net		19			(13	)		51			(4	)
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 number of 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 number of diluted common shares outstanding		7,257			7,645			7,365			7,658

The accompanying notes are an integral part of these condensed consolidated financial statements.

Barrett Business Services, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In Thousands)

	Three Months Ended
	June 30,
	2022			2021
Net income	$	18,014		$	17,090
Unrealized (losses) gains on investments, net of tax of ($3,296) and $828 in 2022 and 2021, respectively		(8,624	)		2,151
Comprehensive income	$	9,390		$	19,241

	Six Months Ended
	June 30,
	2022			2021
Net income	$	18,302		$	12,536
Unrealized (losses) gains on investments, net of tax of ($8,783) and ($1,179) in 2022 and 2021, respectively		(22,982	)		(3,099	)
Comprehensive (loss) income	$	(4,680	)	$	9,437

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 Six Months Ended June 30, 2022

(Unaudited)

(In Thousands)


										Accumulated
							Additional			Other
	Common Stock						Paid-in			Comprehensive			Retained
	Shares			Amount			Capital			Income			Earnings			Total
Balance, December 31, 2021		7,415		$	74		$	29,054		$	1,079		$	178,323		$	208,530
Common stock issued on exercise of options, purchase of ESPP shares and vesting of restricted stock units and performance awards		18			—			411			—			—			411
Common stock repurchased on vesting of restricted stock units and performance awards		(4	)		—			(185	)		—			—			(185	)
Share-based compensation expense		—			—			1,830			—			—			1,830
Company repurchase of common stock		(115	)		(1	)		(484	)		—			(8,090	)		(8,575	)
Cash dividends on common stock ($0.30 per share)		—			—			—			—			(2,229	)		(2,229	)
Unrealized loss on investments, net of tax		—			—			—			(14,358	)		—			(14,358	)
Net income		—			—			—			—			288			288
Balance, March 31, 2022		7,314		$	73		$	30,626		$	(13,279	)	$	168,292		$	185,712
Common stock issued on exercise of options and vesting of restricted stock units		12			—			—			—			—			—
Common stock repurchased on vesting of restricted stock units		(3	)		—			(258	)		—			—			(258	)
Share-based compensation expense		—			—			1,766			—			—			1,766
Company repurchase of common stock		(270	)		(2	)		(1,193	)		—			(18,722	)		(19,917	)
Cash dividends on common stock ($0.30 per share)		—			—			—			—			(2,195	)		(2,195	)
Unrealized loss on investments, net of tax		—			—			—			(8,624	)		—			(8,624	)
Net income		—			—			—			—			18,014			18,014
Balance, June 30, 2022		7,053		$	71		$	30,941		$	(21,903	)	$	165,389		$	174,498

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 Six Months Ended June 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)

Form: 10-Q

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