BBSI Reports Third Quarter 2017 Financial Results

11/7/2017 Print Version

- Q3 Net Revenues up 7% to $240.1 Million (Non-GAAP Gross Revenues up 11%) -

VANCOUVER, Wash., Nov. 07, 2017 (GLOBE NEWSWIRE) -- 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, 2017.

Third Quarter 2017 Financial Summary vs. Year-Ago Quarter

“Strong continued performance yielded record earnings in the third quarter,” said Michael Elich, president and CEO of BBSI. “Additionally, we delivered solid growth marked by the addition of 169 net new PEO clients.

“Our top-line growth was slightly impacted by one less work day in the third quarter when compared to the same quarter last year. This tempered our revenue growth rate and same-customer sales, which came in at 5.9%. However, when adjusting for this difference, our non-GAAP gross revenues increased by 13% and same-customer sales were up 8.4%.”

Third Quarter 2017 Financial Results

Net revenues in the third quarter of 2017 increased 7% to $240.1 million compared to $225.1 million in the third quarter of 2016.

Total non-GAAP gross revenues in the third quarter increased 11% to $1.4 billion compared to $1.2 billion in the same year-ago quarter (see “Reconciliation of Non-GAAP Financial Measures” below). The increase was primarily due to the continued build in the Company’s PEO client count and same-customer sales growth, which was partially offset by a decrease from staffing revenues.

Net income for the third quarter of 2017 increased to $14.8 million, or $1.96 per diluted share, compared to net income of $10.2 million, or $1.38 per diluted share, in the year-ago quarter.

Revised Outlook

For the full year 2017, the Company continues to expect diluted earnings per share to be approximately $3.10. This continues to assume approximately $0.13 per diluted share in estimated costs associated with accounting and securities law issues, as well as the return to an effective tax rate of approximately 32.9%.

BBSI now expects non-GAAP gross revenues for the next 12-month period (through September 30, 2018) to increase approximately 14% (previous outlook was 15%). This revision is partially attributed to slight headwinds in staffing and a continued tightening of the labor market.

Conference Call

BBSI will conduct a conference call tomorrow, November 8, 2017 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) to discuss its financial results for the third quarter ended September 30, 2017. The Company’s President and CEO Michael Elich and CFO Gary Kramer will host the call, followed by a question and answer period.

Date: Wednesday, November 8, 2017
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Toll-free dial-in number: 1-800-930-1344
International dial-in number: 1-719-457-2085
Conference ID: 2614932

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 Liolios Group at 1-949-574-3860.

The conference call will be broadcast live and available for replay here and via the investor relations section of the BBSI website at

A replay of the conference call will be available after 3:00 p.m. Eastern time on the same day through December 8, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 2614932

Reconciliation of Non-GAAP Financial Measures

In addition to the results prepared in accordance with generally accepted accounting principles (“GAAP”), the Company is disclosing non-GAAP gross revenues.

The Company reports its Professional Employer Services revenues on a net basis because it is not the primary obligor for the services provided by the Company’s co-employed clients to their customers. The gross revenues and cost of revenues information below, although not in accordance with GAAP, is presented for comparison purposes and because management believes such information is more informative as to the level of the Company’s business activity and more useful in managing its operations.

    (Unaudited) (Unaudited)
    Three Months Ended Nine Months Ended
Non-GAAP (in thousands) September 30, September 30,
    2017 2016 2017 2016
Gross revenues:        
 Professional employer services $1,328,465 $1,184,159 $3,750,908 $3,314,641
 Staffing services  42,747  47,874  118,391  121,806
  Total gross revenues  1,371,212  1,232,033  3,869,299  3,436,447
Gross cost of revenues:        
 Direct payroll costs  1,154,012  1,036,769  3,258,993  2,889,278
 Payroll taxes and benefits  94,922  82,888  304,268  269,533
 Workers' compensation  67,361  62,817  196,457  175,437
  Total gross cost of revenues  1,316,295  1,182,474  3,759,718  3,334,248
Gross margin $54,917 $49,559 $109,581 $102,199

A reconciliation of net revenues to non-GAAP gross revenues is as follows:

   Three Months Ended September 30,
   Net Revenue   Gross Revenue
(in thousands)Reporting Method     Reporting Method
   (GAAP) Non-GAAP Adjustments (Non-GAAP)
   2017 2016 2017 2016 2017 2016
  employer services$197,388 $177,229 $1,131,077 $1,006,930 $1,328,465 $1,184,159
 Staffing services 42,747  47,874  -  -  42,747  47,874
  Total revenues$240,135 $225,103 $1,131,077 $1,006,930 $1,371,212 $1,232,033
Cost of revenues$185,218 $175,544 $1,131,077 $1,006,930 $1,316,295 $1,182,474
   Nine Months Ended September 30,
   Net Revenue   Gross Revenue
(in thousands)Reporting Method     Reporting Method
   (GAAP) Non-GAAP Adjustments (Non-GAAP)
   2017 2016 2017 2016 2017 2016
  employer services$557,315 $497,682 $3,193,593 $2,816,959 $3,750,908 $3,314,641
 Staffing services 118,391  121,806  -  -  118,391  121,806
  Total revenues$675,706 $619,488 $3,193,593 $2,816,959 $3,869,299 $3,436,447
Cost of revenues$566,125 $517,289 $3,193,593 $2,816,959 $3,759,718 $3,334,248

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 5,000 clients across all lines of business in 20 states. For more information, please visit

Forward-Looking Statements

Statements in this release about future events or performance, including expectations regarding revenue growth and earnings per share, are forward-looking statements which 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 changes in executive management, the ineffectiveness of the Company’s internal control over financial reporting, the Company’s relationship with its primary bank lender, current and future shareholder litigation, the ongoing investigation of accounting issues by the Securities and Exchange Commission and the United States Department of Justice, economic conditions in the Company's service areas, 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, the availability of financing or other sources of capital, the potential for material deviations from expected future workers' compensation claims experience, the effect of changes in the workers’ compensation regulatory environment in one or more of the Company’s primary markets, the collectability of accounts receivable, the carrying value of deferred income tax assets and goodwill, and the effect of 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 2016 Annual Report on Form 10-K. 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
    September 30, December 31,
(in thousands)2017 2016
Current assets:   
 Cash and cash equivalents$  35,570  $  50,768
 Trade accounts receivable, net 156,368   126,484
 Prepaid expenses and other 6,605   3,899
 Investments 796   5,675
 Restricted cash and investments 90,681   48,557
  Total current assets 290,020   235,383
Investments  1,191   642
Property, equipment and software, net 26,296   26,673
Restricted cash and investments 281,286   252,707
Goodwill  47,820   47,820
Other assets 3,376   9,293
Deferred income taxes 9,241   9,370
    $659,230 $  581,888
Liabilities and Stockholders' Equity   
Current liabilities:   
 Current portion of long-term debt$  221  $  221
 Accounts payable 4,033   4,944
 Accrued payroll, payroll taxes and related benefits 182,267   153,110
 Income taxes payable 6,781   3,041
 Other accrued liabilities 7,407   7,674
 Workers' compensation claims liabilities 89,601   81,339
 Safety incentives liability 27,559   24,835
  Total current liabilites 317,869   275,164
Long-term workers' compensation claims liabilities 255,084   231,198
Long term debt 4,226   4,392
Customer deposits and other long-term liabilities 1,389   1,441
Stockholders' equity 80,662   69,693
    $659,230 $  581,888

Barrett Business Services, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts) Three Months Ended Nine Months Ended
    September 30, September 30,
   2017  2016   2017  2016 
 Professional employer service fees $  197,388 $  177,229  $  557,315 $  497,682 
 Staffing services    42,747    47,874     118,391    121,806 
  Total revenues    240,135    225,103     675,706    619,488 
Cost of revenues:        
 Direct payroll costs    31,986    37,017     89,182    92,667 
 Payroll taxes and benefits    94,922    82,888     304,268    269,533 
 Workers' compensation    58,310    55,639     172,675    155,089 
  Total cost of revenues    185,218    175,544     566,125    517,289 
Gross margin    54,917    49,559     109,581    102,199 
Selling, general and administrative expenses    33,925    30,440     88,595    80,834 
Depreciation and amortization    1,062    823     2,989    2,341 
Income from operations    19,930    18,296     17,997    19,024 
Other income (expense), net    1,514    (3,280)    2,915    (3,281)
Income before income taxes    21,444    15,016     20,912    15,743 
Provision for income taxes    6,659    4,783     6,228    4,991 
Net income $  14,785 $  10,233  $  14,684 $  10,752 
Basic income per common share $  2.03 $  1.41  $  2.02 $  1.49 
Weighted average basic common shares outstanding    7,296    7,243     7,266    7,220 
Diluted income per common share $  1.96 $  1.38  $  1.95 $  1.46 
Weighted average diluted common shares outstanding    7,527    7,405     7,539    7,350 

Investor Relations: 
Cody Slach
Tel 1-949-574-3860

Barrett Business Services Inc