Barrett Business Services, Inc. (“BBSI” or the “Company”) (NASDAQ:
BBSI), a leading provider of business management solutions,
reported financial results for the third quarter ended
September 30, 2023.
Third Quarter 2023 Financial Summary vs.
Year-Ago Quarter
- Revenues down 0.2% to $273.3 million.
- Gross billings up 3% to $1.96 billion.
- Average worksite employees (“WSEs”) up 1%.
- Net income up to $18.2 million, or $2.68 per diluted share,
compared to $17.4 million, or $2.45 per diluted share.
“We continued to generate strong results from our expanding
client base and on-going roll-out of BBSI Benefits,” said BBSI
President and CEO, Gary Kramer. “I’m proud of the success we’ve had
adding net new clients as we've continued to experience results
from our investments in marketing and new product offerings. We
also continued to see positive results in our pricing and cost
management strategies, resulting in strong, sustainable earnings
growth.”
Third Quarter 2023 Financial
Results
Revenues in the third quarter of 2023 decreased 0.2% to $273.3
million compared to $273.8 million in the third quarter of 2022.
The slight decrease was driven by a decrease in staffing services
revenue, which was primarily due to lower demand for staffing
services and continued tight labor market conditions in the third
quarter of 2023.
Total gross billings in the third quarter of 2023 increased 3%
to $1.96 billion compared to $1.91 billion in the same year-ago
quarter (see “Key Performance Metrics” below). The increase was
driven by growth in PEO services resulting from increased WSEs from
net new clients and higher average billings per WSE, offset in part
by reductions in WSEs at existing clients.
Workers’ compensation expense as a percent of gross billings was
2.7% in the third quarter of 2023 and benefited from favorable
prior year liability and premium adjustments of $2.2 million. This
compares to 3.0% in the third quarter of 2022, which included
favorable prior year liability and premium adjustments of $1.4
million.
Net income for the third quarter of 2023 was $18.2 million, or
$2.68 per diluted share, compared to $17.4 million, or $2.45 per
diluted share, in the year-ago quarter. The increase is primarily
attributable to higher gross margin in the third quarter of
2023.
Liquidity
As of September 30, 2023, unrestricted cash and investments
were $129.2 million compared to $159.7 million at the end of 2022.
BBSI was debt free at quarter end.
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
December 1, 2023, to all stockholders of record as of November 17,
2023.
Continuing under the Company’s stock repurchase program
established in July 2023, BBSI repurchased 115,400 shares in the
third quarter at an average price of $94.60. At September 30, 2023,
approximately $64.1 million remained available under the repurchase
program.
Outlook
BBSI now expects the following for 2023:
- Gross billings growth of 4% to 5%
- Growth in the average number of WSEs of 2% to 3%
- Gross margin as a percent of gross billings of 3.1% to
3.15%
- Effective annual tax rate of 27% to 28%
Conference Call
BBSI will conduct a conference call on Wednesday, November 1,
2023, at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss
its financial results for the quarter ended September 30,
2023.
BBSI’s CEO Gary Kramer and CFO Anthony Harris will host the
conference call, followed by a question and answer period.
Date: Wednesday, November 1, 2023 Time: 5:00 p.m. Eastern time
(2:00 p.m. Pacific time) Toll-free dial-in number: 1-877-407-4018
International dial-in number: 1-201-689-8471 Conference ID:
13741346
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
ir.bbsi.com.
A replay of the conference call will be available after 8:00
p.m. Eastern time on the same day through December 1, 2023.
Toll-free replay number: 1-844-512-2921 International replay
number: 1-412-317-6671 Replay ID: 13741346
Key Performance Metrics
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 nine months ended
September 30, 2023 and 2022.
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
(in thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Gross billings |
|
$ |
1,963,462 |
|
|
$ |
1,908,818 |
|
|
$ |
5,664,230 |
|
|
$ |
5,445,217 |
|
PEO and staffing wages |
|
$ |
1,706,302 |
|
|
$ |
1,656,580 |
|
|
$ |
4,919,323 |
|
|
$ |
4,727,772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
PEO and staffing wages |
|
86.9% |
|
86.8% |
|
86.9% |
|
86.8% |
Payroll taxes and
benefits |
|
6.9% |
|
6.7% |
|
7.3% |
|
7.2% |
Workers' compensation |
|
2.7% |
|
3.0% |
|
2.7% |
|
2.8% |
Gross margin |
|
3.5% |
|
3.5% |
|
3.1% |
|
3.2% |
|
|
|
|
|
|
|
|
|
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 September 30, |
|
|
2023 |
|
|
% Change |
|
2022 |
|
|
% Change |
Average WSEs |
|
|
127,232 |
|
|
1.1% |
|
|
125,813 |
|
|
8.2% |
Ending
WSEs |
|
|
128,448 |
|
|
0.9% |
|
|
127,297 |
|
|
9.8% |
|
(Unaudited) |
|
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
% Change |
|
2022 |
|
|
% Change |
Average WSEs |
|
|
123,577 |
|
|
1.8% |
|
|
121,415 |
|
|
8.8% |
Ending
WSEs |
|
|
128,448 |
|
|
0.9% |
|
|
127,297 |
|
|
9.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
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. For more information, please visit
www.bbsi.com.
Forward-Looking Statements
Statements in this release about future events and financial
outlook 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 lingering effects of the COVID-19 pandemic; the effects
of inflation on operating expenses; the availability of certain
fully insured medical and other health and welfare benefits to
qualifying worksite employees; the effect of changes in the
Company’s mix of services on gross margin; the Company’s ability to
attract and retain 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; changes in effective payroll tax
rates and federal and state income tax rates; the carrying value of
deferred income tax assets and goodwill; the effects of conditions
in the global capital markets on the Company’s investment
portfolio; and the potential for and effect of acquisitions, among
others. Other important factors that may affect the Company’s
prospects are described in the Company’s 2022 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)(In Thousands) |
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
2023 |
|
|
2022 |
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
41,579 |
|
|
$ |
91,423 |
|
Investments |
|
87,653 |
|
|
|
68,325 |
|
Trade accounts receivable, net |
|
205,217 |
|
|
|
163,838 |
|
Prepaid expenses and other |
|
17,136 |
|
|
|
19,787 |
|
Restricted cash and investments |
|
75,876 |
|
|
|
110,989 |
|
Total current assets |
|
427,461 |
|
|
|
454,362 |
|
Property, equipment and
software, net |
|
48,679 |
|
|
|
45,954 |
|
Operating lease right-of-use
assets |
|
18,428 |
|
|
|
19,804 |
|
Restricted cash and
investments |
|
131,619 |
|
|
|
104,277 |
|
Goodwill |
|
47,820 |
|
|
|
47,820 |
|
Other assets |
|
3,765 |
|
|
|
3,281 |
|
Deferred income taxes |
|
12,236 |
|
|
|
11,440 |
|
Total assets |
$ |
690,008 |
|
|
$ |
686,938 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
5,268 |
|
|
$ |
8,264 |
|
Accrued payroll, payroll taxes and related benefits |
|
247,454 |
|
|
|
222,331 |
|
Income taxes payable |
|
786 |
|
|
|
610 |
|
Current operating lease liabilities |
|
6,753 |
|
|
|
6,957 |
|
Current premium payable |
|
18,853 |
|
|
|
18,920 |
|
Other accrued liabilities |
|
6,904 |
|
|
|
12,683 |
|
Workers' compensation claims liabilities |
|
53,622 |
|
|
|
62,917 |
|
Safety incentives liability |
|
1,469 |
|
|
|
2,049 |
|
Total current liabilities |
|
341,109 |
|
|
|
334,731 |
|
Long-term workers'
compensation claims liabilities |
|
124,180 |
|
|
|
153,070 |
|
Long-term premium payable |
|
23,301 |
|
|
|
- |
|
Long-term operating lease
liabilities |
|
13,049 |
|
|
|
14,225 |
|
Customer deposits and other
long-term liabilities |
|
7,923 |
|
|
|
7,070 |
|
Stockholders' equity |
|
180,446 |
|
|
|
177,842 |
|
Total liabilities and
stockholders' equity |
$ |
690,008 |
|
|
$ |
686,938 |
|
Barrett Business Services, Inc.Condensed
Consolidated Statements of Operations(Unaudited)(In
Thousands, Except Per Share Amounts) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Professional employer services |
|
$ |
251,423 |
|
|
$ |
244,567 |
|
|
$ |
727,986 |
|
|
$ |
694,174 |
|
Staffing services |
|
|
21,905 |
|
|
|
29,255 |
|
|
|
64,639 |
|
|
|
88,202 |
|
Total revenues |
|
|
273,328 |
|
|
|
273,822 |
|
|
|
792,625 |
|
|
|
782,376 |
|
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Direct payroll costs |
|
|
16,318 |
|
|
|
22,112 |
|
|
|
48,299 |
|
|
|
66,491 |
|
Payroll taxes and benefits |
|
|
135,704 |
|
|
|
128,459 |
|
|
|
414,395 |
|
|
|
390,677 |
|
Workers' compensation |
|
|
52,977 |
|
|
|
56,350 |
|
|
|
153,012 |
|
|
|
151,069 |
|
Total cost of revenues |
|
|
204,999 |
|
|
|
206,921 |
|
|
|
615,706 |
|
|
|
608,237 |
|
Gross margin |
|
|
68,329 |
|
|
|
66,901 |
|
|
|
176,919 |
|
|
|
174,139 |
|
Selling, general and
administrative expenses |
|
|
44,160 |
|
|
|
43,001 |
|
|
|
129,194 |
|
|
|
125,438 |
|
Depreciation and
amortization |
|
|
1,867 |
|
|
|
1,554 |
|
|
|
5,273 |
|
|
|
4,585 |
|
Income from operations |
|
|
22,302 |
|
|
|
22,346 |
|
|
|
42,452 |
|
|
|
44,116 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Investment income, net |
|
|
2,412 |
|
|
|
1,584 |
|
|
|
6,856 |
|
|
|
4,790 |
|
Interest expense |
|
|
(80 |
) |
|
|
(35 |
) |
|
|
(118 |
) |
|
|
(102 |
) |
Other, net |
|
|
38 |
|
|
|
19 |
|
|
|
93 |
|
|
|
70 |
|
Other income, net |
|
|
2,370 |
|
|
|
1,568 |
|
|
|
6,831 |
|
|
|
4,758 |
|
Income before income taxes |
|
|
24,672 |
|
|
|
23,914 |
|
|
|
49,283 |
|
|
|
48,874 |
|
Provision for income
taxes |
|
|
6,453 |
|
|
|
6,476 |
|
|
|
13,229 |
|
|
|
13,134 |
|
Net income |
|
$ |
18,219 |
|
|
$ |
17,438 |
|
|
$ |
36,054 |
|
|
$ |
35,740 |
|
Basic income per common
share |
|
$ |
2.72 |
|
|
$ |
2.48 |
|
|
$ |
5.32 |
|
|
$ |
4.96 |
|
Weighted average basic common
shares outstanding |
|
|
6,699 |
|
|
|
7,036 |
|
|
|
6,772 |
|
|
|
7,201 |
|
Diluted income per common
share |
|
$ |
2.68 |
|
|
$ |
2.45 |
|
|
$ |
5.24 |
|
|
$ |
4.91 |
|
Weighted average diluted
common shares outstanding |
|
|
6,795 |
|
|
|
7,127 |
|
|
|
6,885 |
|
|
|
7,286 |
|
|
Investor Relations: Gateway Group, Inc.Cody
Slach Tel 1-949-574-3860 BBSI@gateway-grp.com
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