Barrett Business Services, Inc. (“BBSI” or the “Company”) (NASDAQ:
BBSI), a leading provider of business management solutions,
reported financial results for the first quarter ended
March 31, 2021.
First Quarter 2021 Financial Summary vs. Year-Ago
Quarter
- Net revenues essentially flat at $218.4 million versus $219.1
million.
- Gross billings up 2% to $1.47 billion.
- Average worksite employees (“WSEs”) down 6%.
- Net loss of $4.6 million, or $(0.60) per diluted share,
compared to net loss of $3.4 million, or $(0.45) per diluted
share.
- Unrestricted cash and investments
up 52% to $142.7 million.
“Our performance in the first quarter was strong and exceeded
our expectations,” said BBSI President and CEO, Gary Kramer. “While
the year-over-year comparison includes results prior to the effects
of the pandemic, our gross billings and gross margin exceeded the
prior year quarter, and our overall performance is trending ahead
of plan, leading us to raise our full-year outlook.”
First Quarter 2021 Financial Results
Net revenues in the first quarter of 2021 decreased slightly to
$218.4 million compared to $219.1 million in the first quarter of
2020.
Total gross billings in the first quarter increased 2% to $1.47
billion compared to $1.44 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 billings per WSE,
partially offset by a decrease in average WSEs attributable to the
effects of the COVID-19 pandemic.
Non-GAAP gross workers’ compensation expense as a percent of
gross billings was 3.2% in the first quarter 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 4.3% in the first quarter of 2020.
Net loss for the first quarter of 2021 was $4.6 million, or
$(0.60) per diluted share, compared to net loss of $3.4 million, or
$(0.45) per diluted share, in the year-ago quarter. The decline is
attributable to increased SG&A expense of $5.0 million,
primarily related to one-time cost reversals in the prior year due
to management changes, as well as lower investment income of $1.4
million, partially offset by increased gross margin of $4.8
million. BBSI historically incurs losses in the first quarter due
to the higher effective payroll taxes at the beginning of each
year.
Liquidity
As of March 31, 2021, unrestricted cash and investments
increased 52% to $142.7 million compared to $93.6 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
June 4, 2021 to all stockholders of record as of May 21, 2021. The
Company also repurchased an additional 48,594 shares in the first
quarter at an average price of $70.73 per share. Approximately $39
million remains available on its $50 million share repurchase
program.
Outlook
In light of the strong performance in the quarter, BBSI is
revising its outlook for the year and now expects the
following:
- Gross billings growth of 5% to 7%, increased from 2% to 5% in
the prior outlook
- Growth in the average number of WSEs of 2% to 4%, increased
from 1% to 3%
- Outlook for gross margin as a percent of gross billings remains
2.9% to 3.1%
- Effective annual tax rate remains 21% to 23%
Conference Call
BBSI will conduct a conference call on Wednesday, May 5, 2021,
at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss its
financial results for the first quarter ended March 31, 2021.
BBSI’s CEO Gary Kramer and CFO Anthony Harris will host the
conference call, followed by a question and answer period.
Date: Wednesday, May 5, 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: 13718970
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 June 5, 2021.
Toll-free replay number: 1-844-512-2921International replay
number: 1-412-317-6671Replay ID: 13718970
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 months ended March 31, 2021
and 2020.
|
|
(Unaudited) |
|
|
Three Months Ended March 31, |
(in thousands) |
|
2021 |
|
2020 |
Gross billings |
|
$ |
1,471,541 |
|
|
$ |
1,439,120 |
|
PEO and staffing wages |
|
$ |
1,271,392 |
|
|
$ |
1,232,581 |
|
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) |
|
|
Three Months Ended March 31, |
(in thousands) |
|
2021 |
|
2020 |
Workers' compensation |
|
$ |
46,347 |
|
|
$ |
54,514 |
|
Safety incentive costs |
|
|
1,075 |
|
|
|
6,979 |
|
Non-GAAP gross workers'
compensation |
|
$ |
47,422 |
|
|
$ |
61,493 |
|
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) |
|
|
Percentage of Gross Billings |
|
|
Three Months Ended March 31, |
|
|
2021 |
|
2020 |
PEO and staffing wages |
|
86.4% |
|
85.6% |
Payroll taxes and
benefits |
|
8.3% |
|
8.3% |
Non-GAAP gross workers'
compensation |
|
3.2% |
|
4.3% |
Gross margin |
|
2.1% |
|
1.8% |
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 March 31, |
|
|
|
2021 |
|
% Change |
|
2020 |
|
% Change |
Average WSEs |
|
|
106,300 |
|
-6.1% |
|
|
113,226 |
|
|
3.1% |
Ending WSEs |
|
|
108,423 |
|
-4.3% |
|
|
113,349 |
|
|
1.6% |
About BBSIBBSI (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 40 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, future growth in gross
billings and average number of WSEs, 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 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 2020 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) |
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
(in thousands) |
2021 |
|
|
2020 |
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
28,545 |
|
|
$ |
68,688 |
|
Investments |
|
114,142 |
|
|
|
101,244 |
|
Trade accounts receivable, net |
|
207,430 |
|
|
|
118,506 |
|
Income taxes receivable |
|
8,209 |
|
|
|
6,485 |
|
Prepaid expenses and other |
|
14,613 |
|
|
|
15,961 |
|
Restricted cash and investments |
|
99,183 |
|
|
|
96,991 |
|
Total current assets |
|
472,122 |
|
|
|
407,875 |
|
Property, equipment and
software, net |
|
35,400 |
|
|
|
34,916 |
|
Operating lease right-of-use
assets |
|
23,475 |
|
|
|
23,025 |
|
Restricted cash and
investments |
|
261,020 |
|
|
|
258,153 |
|
Goodwill |
|
47,820 |
|
|
|
47,820 |
|
Other assets |
|
2,818 |
|
|
|
3,161 |
|
|
$ |
842,655 |
|
|
$ |
774,950 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Current portion of long-term debt |
$ |
221 |
|
|
$ |
221 |
|
Accounts payable |
|
5,611 |
|
|
|
4,746 |
|
Accrued payroll, payroll taxes and related benefits |
|
233,132 |
|
|
|
149,989 |
|
Current operating lease liabilities |
|
8,006 |
|
|
|
7,539 |
|
Other accrued liabilities |
|
8,292 |
|
|
|
7,275 |
|
Workers' compensation claims liabilities |
|
103,290 |
|
|
|
102,040 |
|
Safety incentives liability |
|
11,254 |
|
|
|
18,827 |
|
Total current liabilities |
|
369,806 |
|
|
|
290,637 |
|
Long-term workers'
compensation claims liabilities |
|
259,373 |
|
|
|
255,706 |
|
Long-term debt |
|
3,455 |
|
|
|
3,510 |
|
Deferred income taxes |
|
2,511 |
|
|
|
4,518 |
|
Long-term operating lease
liabilities |
|
16,387 |
|
|
|
16,419 |
|
Customer deposits and other
long-term liabilities |
|
6,638 |
|
|
|
5,925 |
|
Stockholders' equity |
|
184,485 |
|
|
|
198,235 |
|
|
$ |
842,655 |
|
|
$ |
774,950 |
|
|
|
|
|
|
|
|
|
|
Barrett Business Services, Inc.Condensed
Consolidated Statements of Operations(Unaudited) |
|
|
|
(in thousands, except per
share amounts) |
Three Months Ended |
|
|
March 31, |
|
|
2021 |
|
|
2020 |
|
Revenues: |
|
|
|
|
|
|
|
Professional employer service fees |
$ |
193,819 |
|
|
$ |
193,592 |
|
Staffing services |
|
24,626 |
|
|
|
25,512 |
|
Total revenues |
|
218,445 |
|
|
|
219,104 |
|
Cost of revenues: |
|
|
|
|
|
|
|
Direct payroll costs |
|
18,450 |
|
|
|
19,077 |
|
Payroll taxes and benefits |
|
122,783 |
|
|
|
119,462 |
|
Workers' compensation |
|
46,347 |
|
|
|
54,514 |
|
Total cost of revenues |
|
187,580 |
|
|
|
193,053 |
|
Gross margin |
|
30,865 |
|
|
|
26,051 |
|
Selling, general and
administrative expenses |
|
37,107 |
|
|
|
32,115 |
|
Depreciation and
amortization |
|
1,297 |
|
|
|
1,000 |
|
Loss from operations |
|
(7,539 |
) |
|
|
(7,064 |
) |
Other income, net |
|
1,470 |
|
|
|
2,733 |
|
Loss before income taxes |
|
(6,069 |
) |
|
|
(4,331 |
) |
Benefit from income taxes |
|
(1,515 |
) |
|
|
(924 |
) |
Net loss |
$ |
(4,554 |
) |
|
$ |
(3,407 |
) |
Basic loss per common
share |
$ |
(0.60 |
) |
|
$ |
(0.45 |
) |
Weighted average basic common
shares outstanding |
|
7,576 |
|
|
|
7,521 |
|
Diluted loss per common
share |
$ |
(0.60 |
) |
|
$ |
(0.45 |
) |
Weighted average diluted
common shares outstanding |
|
7,576 |
|
|
|
7,521 |
|
|
|
|
|
|
|
|
|
Investor Relations: Gateway Investor
RelationsCody Slach Tel 1-949-574-3860 BBSI@gatewayir.com
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