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, 2022.
Fourth Quarter 2022 Financial Summary vs. Prior Year
Quarter
- Revenues up 6% to $272.0 million.
- Gross billings up 8% to $1.95 billion.
- Average worksite employees (“WSEs”) up 6%.
- Net income up to $11.5 million, or $1.64 per diluted share,
compared to $10.6 million, or $1.40 per diluted share.
Full Year 2022 Financial Summary vs. 2021
- Revenues up 10% to $1.05 billion.
- Gross billings up 13% to $7.39 billion.
- Average WSEs up 8%.
- Net income up to $47.3 million, or $6.54 per diluted share,
compared to $38.1 million, or $5.00 per diluted share.
“We had a strong finish to a year that consistently exceeded
expectations,” said BBSI President and CEO, Gary Kramer. “We
continued to see positive results from our sales efforts through Q4
with a larger portion of our WSE growth resulting from new clients
in the quarter. Looking ahead to 2023, we are now launching our
health benefits offering nationwide after our successful roll-out
in select markets in the fourth quarter. This new product offering,
paired with continued innovation in our sales and service delivery,
brings exciting growth potential in the years ahead.”
Fourth Quarter 2022 Financial Results
Revenues in the fourth quarter of 2022 increased 6% to $272.0
million compared to $256.6 million in the fourth quarter of
2021.
Total gross billings in the fourth quarter increased 8% to $1.95
billion compared to $1.81 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 fourth quarter of 2022 and benefited
from a favorable adjustment of prior accident year liability of
$0.6 million. This compares to 3.1% in the fourth quarter of 2021,
which included a favorable adjustment of prior accident year
liability of $1.7 million.
Net income for the fourth quarter of 2022 was $11.5 million, or
$1.64 per diluted share, compared to $10.6 million, or $1.40 per
diluted share, in the year-ago quarter. The increase is primarily
attributable to growth in revenue.
Full Year 2022 Financial Results
Revenues in 2022 increased 10% to $1.05 billion compared to
$955.2 million in 2021.
Total gross billings in 2022 increased 13% to $7.39 billion
compared to $6.57 billion in 2021 (see “Key Performance Metrics and
Non-GAAP Financial Measures” below). The increase was primarily due
to an increase in average WSEs and higher average billings per
WSE.
Non-GAAP gross workers’ compensation expense as a percent of
gross billings was 2.9% in 2022 and benefited from favorable
adjustments of prior accident year liability of $11.3 million. This
compares to 3.0% in 2021, which included favorable adjustments of
prior accident year liability of $9.2 million.
Net income in 2022 increased to $47.3 million, or $6.54 per
diluted share, compared to $38.1 million, or $5.00 per diluted
share, in 2021. The increase is primarily attributable to higher
revenue in 2022.
Liquidity
As of December 31, 2022, unrestricted cash and investments
increased to $159.7 million compared to $132.1 million in the prior
quarter. BBSI was debt free at year 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
March 31, 2023, to all stockholders of record as of March 17,
2023.
On February 28, 2022, BBSI’s board of directors approved a stock
repurchase program authorizing the Company to purchase up to $75
million of its stock over a two-year period. In the fourth quarter,
BBSI repurchased 92,308 shares at an average price of $87.92 per
share. At December 31, 2022, approximately $28 million remains
available under the repurchase program.
Outlook
In 2023, BBSI expects the following:
- Gross billings growth of 5% to 8%
- Growth in the average number of WSEs of 2% to 4%
- Gross margin as a percent of gross billings of 3.0% to
3.15%
- Effective annual tax rate to remain at 27% to 28%
Conference Call
BBSI will conduct a conference call on Wednesday, March 1, 2023,
at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss its
financial results for the year ended December 31, 2022.
BBSI’s CEO Gary Kramer and CFO Anthony Harris will host the
conference call, followed by a question and answer period.
Date: Wednesday, March 1, 2023Time: 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: 13736188
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 April 1, 2023.
Toll-free replay number: 1-844-512-2921International replay
number: 1-412-317-6671Replay ID: 13736188
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, 2022 and 2021.
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
Three Months Ended December 31, |
|
|
Year Ended December 31, |
|
(in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Gross billings |
|
$ |
1,948,591 |
|
|
$ |
1,807,793 |
|
|
$ |
7,393,808 |
|
|
$ |
6,569,986 |
|
PEO and staffing wages |
|
$ |
1,697,514 |
|
|
$ |
1,574,668 |
|
|
$ |
6,425,286 |
|
|
$ |
5,693,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31, |
|
|
Year Ended December 31, |
|
(in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Workers' compensation |
|
$ |
58,076 |
|
|
$ |
55,256 |
|
|
$ |
209,145 |
|
|
$ |
196,949 |
|
Safety incentive costs |
|
|
298 |
|
|
|
822 |
|
|
|
1,852 |
|
|
|
2,985 |
|
Non-GAAP gross workers'
compensation |
|
$ |
58,374 |
|
|
$ |
56,078 |
|
|
$ |
210,997 |
|
|
$ |
199,934 |
|
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, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
PEO and staffing wages |
|
87.1% |
|
87.1% |
|
86.9% |
|
86.7% |
Payroll taxes and
benefits |
|
6.8% |
|
6.7% |
|
7.0% |
|
7.2% |
Non-GAAP gross workers'
compensation |
|
3.0% |
|
3.1% |
|
2.9% |
|
3.0% |
Gross margin |
|
3.1% |
|
3.1% |
|
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) |
|
|
|
Year Ended December 31, |
|
|
|
2022 |
|
|
% Change |
|
2021 |
|
|
% Change |
|
2020 |
|
Average WSEs |
|
|
122,001 |
|
|
8.0% |
|
|
112,928 |
|
|
4.3% |
|
|
108,249 |
|
Ending WSEs |
|
|
122,306 |
|
|
5.3% |
|
|
116,154 |
|
|
6.3% |
|
|
109,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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)
|
|
December 31, |
|
|
December 31, |
|
(in thousands) |
|
2022 |
|
|
2021 |
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
91,423 |
|
|
$ |
69,405 |
|
Investments |
|
|
68,325 |
|
|
|
96,763 |
|
Trade accounts receivable, net |
|
|
163,838 |
|
|
|
155,707 |
|
Prepaid expenses and other |
|
|
19,787 |
|
|
|
17,606 |
|
Restricted cash and investments |
|
|
110,989 |
|
|
|
67,238 |
|
Total current assets |
|
|
454,362 |
|
|
|
406,719 |
|
Property, equipment and
software, net |
|
|
45,954 |
|
|
|
36,277 |
|
Operating lease right-of-use
assets |
|
|
19,804 |
|
|
|
20,697 |
|
Restricted cash and
investments |
|
|
104,277 |
|
|
|
232,965 |
|
Goodwill |
|
|
47,820 |
|
|
|
47,820 |
|
Other assets |
|
|
3,281 |
|
|
|
2,474 |
|
Deferred income taxes |
|
|
11,440 |
|
|
|
- |
|
Total assets |
|
$ |
686,938 |
|
|
$ |
746,952 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
- |
|
|
$ |
3,510 |
|
Accounts payable |
|
|
8,264 |
|
|
|
4,485 |
|
Accrued payroll, payroll taxes and related benefits |
|
|
222,331 |
|
|
|
199,067 |
|
Income taxes payable |
|
|
610 |
|
|
|
1,673 |
|
Current operating lease liabilities |
|
|
6,957 |
|
|
|
7,191 |
|
Other accrued liabilities |
|
|
31,603 |
|
|
|
15,120 |
|
Workers' compensation claims liabilities |
|
|
62,917 |
|
|
|
80,028 |
|
Safety incentives liability |
|
|
2,049 |
|
|
|
4,322 |
|
Total current liabilities |
|
|
334,731 |
|
|
|
315,396 |
|
Long-term workers'
compensation claims liabilities |
|
|
153,070 |
|
|
|
199,379 |
|
Deferred income taxes |
|
|
- |
|
|
|
1,687 |
|
Long-term operating lease
liabilities |
|
|
14,225 |
|
|
|
14,598 |
|
Customer deposits and other
long-term liabilities |
|
|
7,070 |
|
|
|
7,362 |
|
Stockholders' equity |
|
|
177,842 |
|
|
|
208,530 |
|
Total liabilities and
stockholders' equity |
|
$ |
686,938 |
|
|
$ |
746,952 |
|
Barrett Business Services,
Inc.Condensed Consolidated Statements of
Operations(Unaudited)
|
|
|
|
|
|
|
Three Months Ended |
|
|
Year Ended |
|
|
December 31, |
|
|
December 31, |
|
(in thousands, except per
share amounts) |
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Professional employer services |
$ |
243,189 |
|
|
$ |
223,528 |
|
|
$ |
937,363 |
|
|
$ |
843,815 |
|
Staffing services |
|
28,761 |
|
|
|
33,040 |
|
|
|
116,963 |
|
|
|
111,351 |
|
Total revenues |
|
271,950 |
|
|
|
256,568 |
|
|
|
1,054,326 |
|
|
|
955,166 |
|
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
Direct payroll costs |
|
21,453 |
|
|
|
25,003 |
|
|
|
87,944 |
|
|
|
83,821 |
|
Payroll taxes and benefits |
|
131,715 |
|
|
|
120,374 |
|
|
|
522,392 |
|
|
|
469,888 |
|
Workers' compensation |
|
58,076 |
|
|
|
55,256 |
|
|
|
209,145 |
|
|
|
196,949 |
|
Total cost of revenues |
|
211,244 |
|
|
|
200,633 |
|
|
|
819,481 |
|
|
|
750,658 |
|
Gross margin |
|
60,706 |
|
|
|
55,935 |
|
|
|
234,845 |
|
|
|
204,508 |
|
Selling, general and
administrative expenses |
|
44,204 |
|
|
|
41,320 |
|
|
|
169,642 |
|
|
|
155,259 |
|
Depreciation and
amortization |
|
1,643 |
|
|
|
1,359 |
|
|
|
6,228 |
|
|
|
5,326 |
|
Income from operations |
|
14,859 |
|
|
|
13,256 |
|
|
|
58,975 |
|
|
|
43,923 |
|
Other income, net |
|
1,570 |
|
|
|
1,616 |
|
|
|
6,328 |
|
|
|
6,738 |
|
Income before income taxes |
|
16,429 |
|
|
|
14,872 |
|
|
|
65,303 |
|
|
|
50,661 |
|
Provision for income
taxes |
|
4,901 |
|
|
|
4,258 |
|
|
|
18,035 |
|
|
|
12,582 |
|
Net income |
$ |
11,528 |
|
|
$ |
10,614 |
|
|
$ |
47,268 |
|
|
$ |
38,079 |
|
Basic income per common
share |
$ |
1.67 |
|
|
$ |
1.42 |
|
|
$ |
6.63 |
|
|
$ |
5.05 |
|
Weighted average basic common
shares outstanding |
|
6,918 |
|
|
|
7,482 |
|
|
|
7,130 |
|
|
|
7,540 |
|
Diluted income per common
share |
$ |
1.64 |
|
|
$ |
1.40 |
|
|
$ |
6.54 |
|
|
$ |
5.00 |
|
Weighted average diluted
common shares outstanding |
|
7,048 |
|
|
|
7,559 |
|
|
|
7,226 |
|
|
|
7,621 |
|
Investor Relations: Gateway Group, Inc.Cody
Slach Tel 1-949-574-3860 BBSI@gatewayir.com
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