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, 2022.
Third Quarter 2022 Financial Summary vs.
Year-Ago Quarter
- Revenues up 11% to $273.8 million.
- Gross billings up 13% to $1.91 billion.
- Average worksite employees (“WSEs”) up 8%.
- Net income up to $17.4 million, or $2.45 per diluted share,
compared to $14.9 million, or $1.96 per diluted share.
“We once again exceeded our expectation for the
quarter, which is setting us up for a strong finish to the year,”
said BBSI President and CEO, Gary Kramer. “We continue to see
positive trends in our sales efforts as well as resiliency in our
clients’ hiring. We also successfully launched our new health
benefits offering in select markets for a January 2023 start. I’m
excited about expanding our market opportunities and the value we
can bring to clients as we roll out this offering nationwide in the
year ahead.”
Third Quarter 2022 Financial
Results
Revenues in the third quarter of 2022 increased
11% to $273.8 million compared to $247.0 million in the third
quarter of 2021.
Total gross billings in the third quarter
increased 13% to $1.91 billion compared to $1.69 billion in the
same year-ago quarter (see “Key Performance Metrics and Non-GAAP
Financial Measures” below). The increase was driven by higher WSEs
from net client additions and net client hiring, as well as from
higher average billings per WSE.
Non-GAAP gross workers’ compensation expense as a
percent of gross billings was 3.0% in the third quarter and
benefited from a favorable adjustment of prior accident year
liability of $1.4 million. This compares to 3.0% in the third
quarter of 2021.
Net income for the third quarter of 2022 was $17.4
million, or $2.45 per diluted share, compared to $14.9 million, or
$1.96 per diluted share, in the year-ago quarter. The increase is
primarily attributable to growth in revenue.
Liquidity
As of September 30, 2022, unrestricted cash and
investments were $132.1 million compared to $111.4 million in the
prior quarter. 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 2, 2022, to all stockholders of
record as of November 18, 2022.
On February 28, 2022, BBSI’s board of directors
approved a new stock repurchase program authorizing the Company to
purchase up to $75 million of its stock over a two-year period. In
the third quarter, BBSI repurchased 129,180 shares at an average
price of $81.74 per share. At September 30, 2022, approximately $36
million remains available under the repurchase program.
Outlook
In light of continued strong performance, BBSI is
increasing its outlook for 2022 and now expects the following:
- Gross billings growth of 12% to 13%, increased from 11% to 13%
in the prior outlook
- Growth in the average number of WSEs of 8% to 9%, increased
from 7% to 8% in the prior outlook
- Gross margin as a percent of gross billings of 3.1% to 3.2%,
increased from 3.05% to 3.15%
- Effective annual tax rate to remain 26% to 28%, consistent with
the prior outlook
Conference Call
BBSI will conduct a conference call on Wednesday,
November 2, 2022, at 5:00 p.m. Eastern time (2:00 p.m. Pacific
time) to discuss its financial results for the third quarter ended
September 30, 2022.
BBSI’s CEO Gary Kramer and CFO Anthony Harris will
host the conference call, followed by a question and answer
period.
Date: Wednesday, November 2, 2022 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: 13733245
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 2,
2022.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671 Replay ID: 13733245
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 nine months
ended September 30, 2022 and 2021.
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
(in
thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
Gross billings |
|
$ |
1,908,818 |
|
|
$ |
1,689,313 |
|
|
$ |
5,445,217 |
|
|
$ |
4,762,193 |
PEO and
staffing wages |
|
$ |
1,656,580 |
|
|
$ |
1,462,982 |
|
|
$ |
4,727,772 |
|
|
$ |
4,119,235 |
Because safety incentives represent consideration
payable to PEO customers, safety incentive costs are netted against
PEO revenue in our consolidated statements of operations. 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. In July 2020, the Company began
limiting its safety incentive offering in certain markets,
resulting in a substantial reduction in safety incentive costs.
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
(in
thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
Workers' compensation |
|
$ |
56,350 |
|
|
$ |
49,833 |
|
|
$ |
151,069 |
|
|
$ |
141,693 |
Safety
incentive costs |
|
|
527 |
|
|
|
687 |
|
|
|
1,554 |
|
|
|
2,163 |
Non-GAAP
gross workers' compensation |
|
$ |
56,877 |
|
|
$ |
50,520 |
|
|
$ |
152,623 |
|
|
$ |
143,856 |
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, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
PEO and
staffing wages |
|
86.8% |
|
|
86.6% |
|
|
86.8% |
|
|
86.5% |
Payroll
taxes and benefits |
|
6.7% |
|
|
6.8% |
|
|
7.2% |
|
|
7.3% |
Non-GAAP
gross workers' compensation |
|
3.0% |
|
|
3.0% |
|
|
2.8% |
|
|
3.0% |
Gross
margin |
|
3.5% |
|
|
3.6% |
|
|
3.2% |
|
|
3.1% |
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, |
|
|
2022 |
|
|
% Change |
|
|
2021 |
|
|
% Change |
Average WSEs |
|
125,813 |
|
|
8.2% |
|
|
116,258 |
|
|
8.0% |
Ending
WSEs |
|
127,297 |
|
|
9.8% |
|
|
115,949 |
|
|
7.7% |
|
|
(Unaudited) |
|
|
Nine Months Ended September 30, |
|
|
2022 |
|
|
% Change |
|
|
2021 |
|
|
% Change |
Average WSEs |
|
121,415 |
|
|
8.8% |
|
|
111,640 |
|
|
3.6% |
Ending
WSEs |
|
127,297 |
|
|
9.8% |
|
|
115,949 |
|
|
7.7% |
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 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
the COVID-19 pandemic, inflation, and potential recessionary
pressures on our clients, our plans to make certain fully insured
medical and other health and welfare benefits available to
qualifying worksite employees beginning in 2023, 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, the effects of
the pandemic and 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 2021 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) |
|
|
|
September 30, |
|
|
December 31, |
(in
thousands) |
|
2022 |
|
|
2021 |
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
58,951 |
|
|
$ |
69,405 |
Investments |
|
|
73,185 |
|
|
|
96,763 |
Trade accounts receivable, net |
|
|
194,537 |
|
|
|
155,707 |
Prepaid expenses and other |
|
|
20,167 |
|
|
|
17,606 |
Restricted cash and investments |
|
|
113,942 |
|
|
|
67,238 |
Total current assets |
|
|
460,782 |
|
|
|
406,719 |
Property, equipment and software, net |
|
|
43,221 |
|
|
|
36,277 |
Operating lease right-of-use assets |
|
|
20,919 |
|
|
|
20,697 |
Restricted cash and investments |
|
|
110,412 |
|
|
|
232,965 |
Goodwill |
|
|
47,820 |
|
|
|
47,820 |
Other assets |
|
|
3,339 |
|
|
|
2,474 |
Deferred income taxes |
|
|
10,497 |
|
|
|
— |
|
|
$ |
696,990 |
|
|
$ |
746,952 |
Liabilities and Stockholders' Equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Current portion of long-term debt |
|
$ |
— |
|
|
$ |
3,510 |
Accounts payable |
|
|
4,553 |
|
|
|
4,485 |
Accrued payroll, payroll taxes and related benefits |
|
|
232,219 |
|
|
|
199,067 |
Income taxes payable |
|
|
2,572 |
|
|
|
1,673 |
Current operating lease liabilities |
|
|
6,908 |
|
|
|
7,191 |
Other accrued liabilities |
|
|
27,461 |
|
|
|
15,120 |
Workers' compensation claims liabilities and premiums |
|
|
65,537 |
|
|
|
80,028 |
Safety incentives liability |
|
|
2,505 |
|
|
|
4,322 |
Total current liabilities |
|
|
341,755 |
|
|
|
315,396 |
Long-term workers' compensation claims liabilities |
|
|
161,806 |
|
|
|
199,379 |
Deferred income taxes |
|
|
— |
|
|
|
1,687 |
Long-term operating lease liabilities |
|
|
15,405 |
|
|
|
14,598 |
Customer deposits and other long-term liabilities |
|
|
6,661 |
|
|
|
7,362 |
Stockholders' equity |
|
|
171,363 |
|
|
|
208,530 |
|
|
$ |
696,990 |
|
|
$ |
746,952 |
|
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, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Professional employer services |
|
$ |
244,567 |
|
|
$ |
217,972 |
|
|
$ |
694,174 |
|
|
$ |
620,287 |
Staffing services |
|
|
29,255 |
|
|
|
28,978 |
|
|
|
88,202 |
|
|
|
78,311 |
Total revenues |
|
|
273,822 |
|
|
|
246,950 |
|
|
|
782,376 |
|
|
|
698,598 |
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
Direct payroll costs |
|
|
22,112 |
|
|
|
21,870 |
|
|
|
66,491 |
|
|
|
58,818 |
Payroll taxes and benefits |
|
|
128,459 |
|
|
|
115,012 |
|
|
|
390,677 |
|
|
|
349,514 |
Workers' compensation |
|
|
56,350 |
|
|
|
49,833 |
|
|
|
151,069 |
|
|
|
141,693 |
Total cost of revenues |
|
|
206,921 |
|
|
|
186,715 |
|
|
|
608,237 |
|
|
|
550,025 |
Gross margin |
|
|
66,901 |
|
|
|
60,235 |
|
|
|
174,139 |
|
|
|
148,573 |
Selling, general and administrative expenses |
|
|
43,001 |
|
|
|
41,170 |
|
|
|
125,438 |
|
|
|
113,939 |
Depreciation and amortization |
|
|
1,554 |
|
|
|
1,342 |
|
|
|
4,585 |
|
|
|
3,967 |
Income from operations |
|
|
22,346 |
|
|
|
17,723 |
|
|
|
44,116 |
|
|
|
30,667 |
Other income, net |
|
|
1,568 |
|
|
|
1,779 |
|
|
|
4,758 |
|
|
|
5,122 |
Income before income taxes |
|
|
23,914 |
|
|
|
19,502 |
|
|
|
48,874 |
|
|
|
35,789 |
Provision for income taxes |
|
|
6,476 |
|
|
|
4,573 |
|
|
|
13,134 |
|
|
|
8,324 |
Net income |
|
$ |
17,438 |
|
|
$ |
14,929 |
|
|
$ |
35,740 |
|
|
$ |
27,465 |
Basic income per common share |
|
$ |
2.48 |
|
|
$ |
1.98 |
|
|
$ |
4.96 |
|
|
$ |
3.63 |
Weighted average basic common shares outstanding |
|
|
7,036 |
|
|
|
7,545 |
|
|
|
7,201 |
|
|
|
7,559 |
Diluted income per common share |
|
$ |
2.45 |
|
|
$ |
1.96 |
|
|
$ |
4.91 |
|
|
$ |
3.59 |
Weighted average diluted common shares outstanding |
|
|
7,127 |
|
|
|
7,607 |
|
|
|
7,286 |
|
|
|
7,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor Relations: Gateway
Group, Inc. Cody Slach Tel 1-949-574-3860
BBSI@gatewayir.com
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