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, 2020.
Fourth Quarter 2020 Financial Summary vs. Year-Ago
Quarter
- Net revenues down 5% to $233.2
million.
- Gross billings up 1% to $1.60
billion.
- Average worksite employees (“WSEs”)
down 6%.
- Net income of $7.2 million, or
$0.93 per diluted share, compared to $11.7 million, or $1.51 per
diluted share.
- Unrestricted cash and investments
up 34% to $169.9 million.
Full Year 2020 Financial Summary vs. 2019
- Net revenues down 7% to $880.8
million.
- Gross billings down 1% to $5.92
billion.
- Average WSEs down 5%.
- Net income of $33.8 million, or
$4.39 per diluted share, compared to $48.3 million, or $6.27 per
diluted share.
“Once again, we had a stronger-than-expected quarter, finishing
out an extremely challenging year with continued resilience,” said
BBSI President and CEO, Gary Kramer. “While business volume and
earnings were impacted by the pandemic, I am extremely proud of the
work that our teams performed throughout the year. We helped
thousands of small businesses in a year of great need while at the
same time implementing strategies to make BBSI even stronger coming
out of the COVID-19 pandemic.”
Fourth Quarter 2020 Financial Results
Net revenues in the fourth quarter of 2020 decreased 5% to
$233.2 million compared to $245.2 million in the fourth quarter of
2019.
Total gross billings in the fourth quarter increased 1% to $1.60
billion compared to $1.59 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 payroll per WSE,
partially offset by a 6% decrease in average WSEs attributable to
the effects of the ongoing COVID-19 pandemic.
Non-GAAP gross workers’ compensation expense as a percent of
gross billings was 3.7% in the fourth quarter of 2020 and benefited
from a favorable one-time adjustment of prior accident year
liability of $1.2 million, as well as other cost-saving measures.
This compares to 4.2% in the fourth quarter of 2019.
Net income for the fourth quarter of 2020 decreased to $7.2
million, or $0.93 per diluted share, compared to $11.7 million, or
$1.51 per diluted share, in the year-ago quarter. The decline in
net income is primarily attributable to a lower level of favorable
development on prior year claims and lower investment income in the
quarter.
Full Year 2020 Financial Results
Net revenues in 2020 decreased to $880.8 million compared to
$942.3 million in 2019.
Total gross billings in 2020 decreased 1% to $5.92 billion
compared to $5.97 billion in 2019 (see “Key Performance Metrics and
Non-GAAP Financial Measures” below). The decrease was directly
attributable to the effects of the ongoing COVID-19 pandemic and
its impact on the economy and operations of small businesses,
including a decrease in average WSEs of 5% for the year, offset in
part by higher average payroll per WSE.
Non-GAAP gross workers’ compensation expense as a percent of
gross billings was 3.8% in 2020 and benefited from favorable
adjustments of prior accident year liability of $6.4 million, as
well as other cost-saving measures. This compares to 4.1% in
2019.
Net income in 2020 decreased to $33.8 million, or $4.39 per
diluted share, compared to $48.3 million, or $6.27 per diluted
share, in 2019. The decline in net income is primarily attributable
to a lower level of favorable development on prior year claims
compared to 2019, as well as lower billing volume and investment
income, partially offset by reductions in operating expenses in
2020.
Liquidity
As of December 31, 2020, unrestricted cash and investments
increased 34% to $169.9 million compared to $127.2 million in the
year-ago quarter. BBSI remains debt free apart from the $3.7
million mortgage on its corporate headquarters.
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
April 2, 2021 to all stockholders of record as of March 19, 2021.
Since the repurchases reported in its last earnings release, the
Company also repurchased an additional 28,000 shares at an average
price of $71.80 per share.
Outlook
In 2021, BBSI expects the following:
- Gross billings growth of 2% to 5%
- Growth in the average number of WSEs of 1% to 3%
- Gross margin as a percent of gross billings of 2.9% to
3.1%
- Effective annual tax rate of 21% to 23%
Conference Call
BBSI will conduct a conference call on Wednesday, March 3, 2021,
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, 2020.
BBSI’s CEO Gary Kramer and CFO Anthony Harris will host the
conference call, followed by a question and answer period.
Date: Wednesday, March 3, 2021Time: 5:00 p.m. Eastern time (2:00
p.m. Pacific time)Toll-free dial-in number:
1-877-407-4018International dial-in number:
1-201-689-8471Conference ID: 13716825
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 3,
2021.
Toll-free replay number: 1-844-512-2921International replay
number: 1-412-317-6671Replay ID: 13716825
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 twelve months ended
December 31, 2020 and 2019.
|
(Unaudited) |
|
(Unaudited) |
|
Three Months Ended December 31, |
|
Year Ended December 31, |
(in thousands) |
2020 |
|
2019 |
|
2020 |
|
2019 |
Gross billings |
$ |
1,603,521 |
|
$ |
1,593,919 |
|
$ |
5,924,539 |
|
$ |
5,971,008 |
PEO and staffing wages |
$ |
1,387,816 |
|
$ |
1,365,527 |
|
$ |
5,098,604 |
|
$ |
5,090,943 |
Because safety incentives represent consideration payable to PEO
customers, safety incentive costs are netted against PEO revenue in
our consolidated statements of operations. Management considers
safety incentives to be closely connected to our workers’
compensation program because they encourage client companies to
maintain safe work practices and minimize workplace injuries. 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.
|
(Unaudited) |
|
(Unaudited) |
|
Three Months Ended December 31, |
|
Year Ended December 31, |
(in thousands) |
2020 |
|
2019 |
|
2020 |
|
2019 |
Workers' compensation |
$ |
54,624 |
|
$ |
57,600 |
|
$ |
200,744 |
|
$ |
211,890 |
Safety incentive costs |
|
4,394 |
|
|
8,862 |
|
|
23,544 |
|
|
31,663 |
Non-GAAP gross workers'
compensation |
$ |
59,018 |
|
$ |
66,462 |
|
$ |
224,288 |
|
$ |
243,553 |
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, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
PEO and staffing wages |
86.5% |
|
85.7% |
|
86.1% |
|
85.3% |
Payroll taxes and
benefits |
6.6% |
|
6.8% |
|
7.1% |
|
7.2% |
Non-GAAP gross workers'
compensation |
3.7% |
|
4.2% |
|
3.8% |
|
4.1% |
Gross margin |
3.2% |
|
3.4% |
|
3.1% |
|
3.5% |
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) |
|
Year Ended December 31, |
|
2020 |
|
% Change |
|
2019 |
|
% Change |
|
2018 |
Average WSEs |
|
108,249 |
|
|
-5.3 |
% |
|
114,341 |
|
|
4.1 |
% |
|
109,859 |
Ending WSEs |
|
109,292 |
|
|
-4.6 |
% |
|
114,584 |
|
|
4.6 |
% |
|
109,527 |
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
7,500 clients across all lines of business in 39 states. For more
information, please visit www.bbsi.com.
Forward-Looking Statements
Statements in this release about future events or performance,
including expectations regarding the effects of the COVID-19
pandemic on our business operations and product relevance, and
future growth in gross billings, average number of WSEs, earnings
per share, workers’ compensation expense as a percentage of gross
billings, 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 imposing business
closures and stay-at-home and physical distancing requirements, 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, and the effects of the pandemic, economic slowdown, and
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
2019 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.
Barrett Business Services,
Inc.Condensed Consolidated Balance
Sheets(Unaudited)
|
December 31, |
|
December 31, |
(in thousands) |
2020 |
|
2019 |
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
68,688 |
|
$ |
44,570 |
Investments |
|
101,244 |
|
|
82,590 |
Trade accounts receivable, net |
|
118,506 |
|
|
163,561 |
Income taxes receivable |
|
6,485 |
|
|
1,335 |
Prepaid expenses and other |
|
15,961 |
|
|
14,919 |
Restricted cash and investments |
|
96,991 |
|
|
116,873 |
Total current assets |
|
407,875 |
|
|
423,848 |
Property, equipment and
software, net |
|
34,916 |
|
|
31,724 |
Operating lease right-of-use
assets |
|
23,025 |
|
|
23,805 |
Restricted cash and
investments |
|
258,153 |
|
|
327,326 |
Goodwill |
|
47,820 |
|
|
47,820 |
Other assets |
|
3,161 |
|
|
3,618 |
Deferred income taxes |
|
— |
|
|
2,788 |
|
$ |
774,950 |
|
$ |
860,929 |
Liabilities and Stockholders' Equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Current portion of long-term debt |
$ |
221 |
|
$ |
221 |
Accounts payable |
|
4,746 |
|
|
5,993 |
Accrued payroll, payroll taxes and related benefits |
|
149,989 |
|
|
174,168 |
Current operating lease liabilities |
|
7,539 |
|
|
6,671 |
Other accrued liabilities |
|
7,275 |
|
|
8,846 |
Workers' compensation claims liabilities |
|
102,040 |
|
|
118,273 |
Safety incentives liability |
|
18,827 |
|
|
27,950 |
Total current liabilities |
|
290,637 |
|
|
342,122 |
Long-term workers'
compensation claims liabilities |
|
255,706 |
|
|
320,713 |
Long-term debt |
|
3,510 |
|
|
3,730 |
Deferred income taxes |
|
4,518 |
|
|
— |
Long-term operating lease
liabilities |
|
16,419 |
|
|
17,883 |
Customer deposits and other
long-term liabilities |
|
5,925 |
|
|
4,682 |
Stockholders' equity |
|
198,235 |
|
|
171,799 |
|
$ |
774,950 |
|
$ |
860,929 |
Barrett Business Services,
Inc.Condensed Consolidated Statements of
Operations(Unaudited)
(in thousands, except per
share amounts) |
Three Months Ended |
|
Year Ended |
|
December 31, |
|
December 31, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Professional employer service fees |
$ |
204,268 |
|
$ |
212,033 |
|
$ |
777,430 |
|
$ |
819,873 |
Staffing services |
|
28,908 |
|
|
33,119 |
|
|
103,394 |
|
|
122,438 |
Total revenues |
|
233,176 |
|
|
245,152 |
|
|
880,824 |
|
|
942,311 |
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
Direct payroll costs |
|
22,055 |
|
|
25,157 |
|
|
78,380 |
|
|
92,455 |
Payroll taxes and benefits |
|
105,518 |
|
|
108,372 |
|
|
418,793 |
|
|
429,713 |
Workers' compensation |
|
54,624 |
|
|
57,600 |
|
|
200,744 |
|
|
211,890 |
Total cost of revenues |
|
182,197 |
|
|
191,129 |
|
|
697,917 |
|
|
734,058 |
Gross margin |
|
50,979 |
|
|
54,023 |
|
|
182,907 |
|
|
208,253 |
Selling, general and
administrative expenses |
|
40,959 |
|
|
40,362 |
|
|
141,916 |
|
|
153,879 |
Depreciation and
amortization |
|
1,332 |
|
|
977 |
|
|
4,844 |
|
|
3,886 |
Income from operations |
|
8,688 |
|
|
12,684 |
|
|
36,147 |
|
|
50,488 |
Other income, net |
|
756 |
|
|
2,704 |
|
|
6,449 |
|
|
10,650 |
Income before income taxes |
|
9,444 |
|
|
15,388 |
|
|
42,596 |
|
|
61,138 |
Provision for income
taxes |
|
2,293 |
|
|
3,674 |
|
|
8,831 |
|
|
12,846 |
Net income |
$ |
7,151 |
|
$ |
11,714 |
|
$ |
33,765 |
|
$ |
48,292 |
Basic income per common
share |
$ |
0.94 |
|
$ |
1.57 |
|
$ |
4.46 |
|
$ |
6.48 |
Weighted average basic common
shares outstanding |
|
7,590 |
|
|
7,505 |
|
|
7,577 |
|
|
7,451 |
Diluted income per common
share |
$ |
0.93 |
|
$ |
1.51 |
|
$ |
4.39 |
|
$ |
6.27 |
Weighted average diluted
common shares outstanding |
|
7,686 |
|
|
7,736 |
|
|
7,688 |
|
|
7,699 |
Investor Relations: Gateway Investor
RelationsCody Slach Tel 1-949-574-3860 BBSI@gatewayir.com
Barrett Business Services (NASDAQ:BBSI)
Historical Stock Chart
From Apr 2024 to May 2024
Barrett Business Services (NASDAQ:BBSI)
Historical Stock Chart
From May 2023 to May 2024