Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

August 4, 2022

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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

 

 

 

 

 

 

2


 

 

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.

3


 

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.

 

 

4


 

 

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.

 

 

5


 

 

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.

 

6


 

 

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)