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BBSI Reports Second Quarter 2017 Financial Results

- Q2 Net Revenues up 11% to $225.6 Million (Non-GAAP Gross Revenues up 14%) -

VANCOUVER, Wash., Aug. 08, 2017 (GLOBE NEWSWIRE) -- 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, 2017.

/EIN News/ -- Second Quarter 2017 Financial Summary vs. Year-Ago Quarter

  • Net revenues up 11% to $225.6 million.
  • Non-GAAP gross revenues up 14% to $1.3 billion.
  • Net income up 31% to $11.1 million, or $1.47 per diluted share, compared to net income of $8.5 million, or $1.16 per diluted share.

“We had a strong quarter represented by record gross client additions while maintaining retention of greater than 90%,” said Michael Elich, president and CEO of BBSI. “In the second quarter, we added 269 net new clients, driven in part by strong growth across all markets, underscoring the consistency of our model and width of new business pipelines. Same-customer sales were up 7.6%, an improvement over the first quarter but still lagging our historical average. Given this dynamic, we have decided to slightly lower our full-year and rolling 12-month outlook.”

Second Quarter 2017 Financial Results

Net revenues in the second quarter of 2017 increased 11% to $225.6 million compared to $203.4 million in the second quarter of 2016.

Total non-GAAP gross revenues in the second quarter increased 14% to $1.3 billion compared to $1.1 billion in the same year-ago quarter (see “Reconciliation of Non-GAAP Financial Measures” below). The increase was primarily due to the continued build in the Company’s client count and same-customer sales growth.

Net income for the second quarter of 2017 increased 31% to $11.1 million, or $1.47 per diluted share, compared to net income of $8.5 million, or $1.16 per diluted share, in the year-ago quarter.

Revised Outlook

Given the continued softness of same-customer sales trends, BBSI now expects non-GAAP gross revenues for the next 12-month period (through June 30, 2018) to increase approximately 15% (previous outlook was 16%). For the full year 2017, the Company now expects diluted earnings per share to be approximately $3.10, up 22% compared to $2.55 per diluted share in 2016 (previous outlook was $3.65 per share). This continues to assume approximately $0.13 per diluted share in estimated costs associated with accounting and securities law issues, as well as the return to an effective tax rate of approximately 32.9%. The revised earnings per share guidance also assumes non-GAAP gross revenue growth in 2017 of approximately 14%.

Conference Call

BBSI will conduct a conference call tomorrow, August 9, 2017 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) to discuss its financial results for the second quarter ended June 30, 2017. The Company’s President and CEO Michael Elich and CFO Gary Kramer will host the call, followed by a question and answer period.

Date: Wednesday, August 9, 2017
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Toll-free dial-in number: 1-888-726-2413
International dial-in number: 1-719-325-4893
Conference ID: 5249588

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 Liolios Group at 1-949-574-3860.

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

A replay of the conference call will be available after 3:00 p.m. Eastern time on the same day through September 9, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 5249588

Reconciliation of Non-GAAP Financial Measures

In addition to the results prepared in accordance with generally accepted accounting principles (“GAAP”), the Company is disclosing non-GAAP gross revenues.

The Company reports its Professional Employer Services revenues on a net basis because it is not the primary obligor for the services provided by the Company’s co-employed clients to their customers. The gross revenues and cost of revenues information below, although not in accordance with GAAP, is presented for comparison purposes and because management believes such information is more informative as to the level of the Company’s business activity and more useful in managing its operations.

 
    (Unaudited)   (Unaudited)
    Three Months Ended   Six Months Ended
Non-GAAP (in thousands)   June 30,   June 30,
    2017   2016   2017   2016
                 
                 
Gross revenues:                
Professional employer services   $ 1,260,683   $ 1,102,884   $ 2,422,443   $ 2,130,482
Staffing services     37,856     37,641     75,644     73,932
Total gross revenues     1,298,539     1,140,525     2,498,087     2,204,414
Gross cost of revenues:                
Direct payroll costs     1,093,291     958,458     2,104,981     1,852,508
Payroll taxes and benefits     93,946     82,885     209,345     186,645
Workers' compensation     67,088     56,929     129,097     112,621
Total gross cost of revenues     1,254,325     1,098,272     2,443,423     2,151,774
Gross margin   $ 44,214   $ 42,253   $ 54,664   $ 52,640
 

A reconciliation of net revenues to non-GAAP gross revenues is as follows:

      (Unaudited)
      Three Months Ended June 30,
      Net Revenue       Gross Revenue
(in thousands) Reporting Method           Reporting Method
      (GAAP)   Non-GAAP Adjustments   (Non-GAAP)
      2017   2016   2017   2016   2017   2016
                           
Revenues:                          
Professional                      
employer services $ 187,718   $ 165,776   $ 1,072,965   $ 937,108   $ 1,260,683   $ 1,102,884
Staffing services   37,856     37,641     -     -     37,856     37,641
Total revenues $ 225,574   $ 203,417   $ 1,072,965   $ 937,108   $ 1,298,539   $ 1,140,525
Cost of revenues $ 181,360   $ 161,164   $ 1,072,965   $ 937,108   $ 1,254,325   $ 1,098,272
                           
 
      (Unaudited)
      Six Months Ended June 30,
      Net Revenue       Gross Revenue
(in thousands) Reporting Method           Reporting Method
      (GAAP)   Non-GAAP Adjustments   (Non-GAAP)
      2017   2016   2017   2016   2017   2016
                           
Revenues:                          
Professional                      
employer services $ 359,927   $ 320,452   $ 2,062,516   $ 1,810,030   $ 2,422,443   $ 2,130,482
Staffing services   75,644     73,932     -     -     75,644     73,932
Total revenues $ 435,571   $ 394,384   $ 2,062,516   $ 1,810,030   $ 2,498,087   $ 2,204,414
Cost of revenues $ 380,907   $ 341,744   $ 2,062,516   $ 1,810,030   $ 2,443,423   $ 2,151,774
                           

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 5,000 clients across all lines of business in 20 states. For more information, please visit www.barrettbusiness.com.

Forward-Looking Statements

Statements in this release about future events or performance, including expectations regarding revenue growth and earnings per share, are forward-looking statements which 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 changes in executive management, the ineffectiveness of the Company’s internal control over financial reporting, the Company’s relationship with its primary bank lender, current and future shareholder litigation, the ongoing investigation of accounting issues by the Securities and Exchange Commission and the United States Department of Justice, economic conditions in the Company's service areas, 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, the availability of financing or other sources of capital, the potential for material deviations from expected future workers' compensation claims experience, the effect of changes in the workers’ compensation regulatory environment in one or more of the Company’s primary markets, the collectability of accounts receivable, the carrying value of deferred income tax assets and goodwill, and the effect of conditions in the global capital markets on the Company’s investment portfolio, among others. Other important factors that may affect the Company’s prospects are described in the Company’s 2016 Annual Report on Form 10-K. 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.


 
Barrett Business Services, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
 
 
  June 30,   December 31,
(in thousands) 2017   2016
       
Assets      
Current assets:      
Cash and cash equivalents $ 17,865   $ 50,768
Trade accounts receivable, net   147,141     126,484
Prepaid expenses and other   8,582     3,899
Investments   965     5,675
Restricted cash and investments   87,516     48,557
Total current assets   262,069     235,383
Investments     590     642
Property, equipment and software, net   27,035     26,673
Restricted cash and investments   259,797     252,707
Goodwill

  47,820     47,820
Other assets   3,196     9,293
Deferred income taxes   9,292     9,370
  $ 609,799   $ 581,888
       
Liabilities and Stockholders' Equity      
Current liabilities:      
Current portion of long-term debt $ 221   $ 221
Accounts payable   4,945     4,944
Accrued payroll, payroll taxes and related benefits   166,982     153,110
Income taxes payable   174     3,041
Other accrued liabilities   7,891     7,674
Workers' compensation claims liabilities   88,431     81,339
Safety incentives liability   26,084     24,835
Total current liabilites   294,728     275,164
Long-term workers' compensation claims liabilities   241,648     231,198
Long term debt   4,263     4,392
Customer deposits and other long-term liabilities   1,297     1,441
Stockholders' equity   67,863     69,693
  $ 609,799   $ 581,888
       


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,
    2017   2016   2017
  2016
                 
Revenues:
               
Professional employer service fees   $ 187,718   $ 165,776   $ 359,927     $ 320,452  
Staffing services     37,856     37,641     75,644       73,932  
Total revenues     225,574     203,417     435,571       394,384  
Cost of revenues:                
Direct payroll costs     28,486     28,223     57,196       55,649  
Payroll taxes and benefits     93,946     82,885     209,346       186,645  
Workers' compensation     58,928     50,056     114,365       99,450  
Total cost of revenues     181,360     161,164     380,907       341,744  
Gross margin     44,214     42,253     54,664       52,640  
Selling, general and administrative expenses     28,060     28,490     54,670       50,394  
Depreciation and amortization     985     769     1,927       1,518  
Income (loss) from operations     15,169     12,994     (1,933 )     728  
Other income (expense), net     1,326     6     1,401       (2 )
Income (loss) before income taxes     16,495     13,000     (532 )     726  
Provision for (benefit from) income taxes     5,369     4,478     (431 )     207  
Net income (loss)   $ 11,126   $ 8,522   $ (101 )   $ 519  
Basic income (loss) per common share   $ 1.53   $ 1.18   $ (0.01 )   $ 0.07  
Weighted average basic common shares outstanding     7,254     7,210     7,252       7,209  
Diluted income (loss) per common share   $ 1.47   $ 1.16   $ (0.01 )   $ 0.07  
Weighted average diluted common shares outstanding     7,550     7,328     7,252       7,323  
                 

Investor Relations:
Liolios
Cody Slach
Tel 1-949-574-3860
BBSI@liolios.com

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