BBSI Reports Second Quarter 2013 Financial Results

Q2 Net Revenues Up 35% to $128.8 Million Drives 51% Increase in Diluted Earnings per Share to $0.80

Marketwired

VANCOUVER, WA--(Marketwired - Jul 23, 2013) - Barrett Business Services, Inc. ("BBSI" or the "Company") (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the second quarter ended June 30, 2013.

Second Quarter 2013 Financial Summary vs. Year-Ago Quarter:

  • Net revenues up 35% to $128.8 million
  • Gross revenues up 37% to $675.0 million
  • Net income increased 57% to $5.9 million
  • Diluted earnings per share increased 51% to $0.80

Second Quarter 2013 Financial Results

Net revenues in the second quarter of 2013 increased 35% to $128.8 million compared to $95.5 million in the second quarter of 2012. The increase was due primarily to the continued build in the Company's co-employed client count and same-store sales growth.

Total non-GAAP gross revenues in the second quarter of 2013 increased 37% to $675.0 million compared to $494.1 million in the second quarter of 2012 (see "Reconciliation of Non-GAAP Financial Measures" below).

Net income for the second quarter of 2013 increased 57% to $5.9 million compared to net income of $3.7 million in the year-ago quarter. Diluted earnings per share in the second quarter of 2013 increased 51% to $0.80 compared to $0.53 per diluted share in the year-ago quarter.

During the second quarter of 2013, the Company posted $63.9 million in restricted investments to collateralize a letter of credit issued to satisfy a surety requirement for its self-insured workers' compensation program in the state of California. As a result, on June 30, 2013, the Company's cash, cash equivalents and marketable securities totaled $18.6 million compared to $72.4 million at December 31, 2012. At June 30, 2013, the Company had no outstanding borrowings on its revolving credit facility.

Management Commentary

"The second quarter's gross revenue figure was the highest in our company's history and the sixth consecutive quarter we grew gross revenues by more than 30%," said Michael Elich, president and CEO of BBSI. "We continue to see our strong referral channels drive new business, increased organic growth from existing clients, and heightened brand awareness within our markets. Investments in our operational infrastructure were an important contributor to the quarter's results and will continue to be a strategic focus as we prepare for future growth. Ultimately, we are confident BBSI's brand will continue to mature in the marketplace."

Third Quarter 2013 Outlook

For the third quarter of 2013, the Company expects gross revenues to increase at least 31% to between $730.0 million and $735.0 million compared to $558.0 million for the third quarter of 2012. Diluted income per common share in the third quarter of 2013 is expected to increase at least 30% to between $1.05 and $1.10 compared to $0.81 in the third quarter of 2012.

Conference Call

BBSI will host a conference call tomorrow, Wednesday, July 24, 2013 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) to discuss its financial results for the second quarter ended June 30, 2013. The Company's president and CEO Michael Elich and CFO James Miller will host the call, followed by a question and answer period.

Date: Wednesday, July 24, 2013
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Dial-In Number: 1-877-941-4774
International: 1-480-629-9760
Conference ID: 4628405

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 at http://public.viavid.com/index.php?id=105208 and via BBSI's investor relations section of the Company's website at www.barrettbusiness.com.

A replay of the call will be available after 3:00 p.m. Eastern time on the same day through August 24, 2013.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 4628405

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 Service 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)
    Second Quarter Ended   Six Months Ended
(in thousands)   June 30,   June 30,
    2013   2012   2013   2012
                         
Revenues:                        
  Professional employer services   $ 639,663   $ 463,671   $ 1,201,146   $ 869,521
  Staffing services     35,304     30,387     65,037     56,598
    Total revenues     674,967     494,058     1,266,183     926,119
Cost of revenues:                        
  Direct payroll costs     568,800     418,594     1,067,538     785,527
  Payroll taxes and benefits     53,483     39,332     112,606     82,324
  Workers' compensation     28,958     19,791     54,002     35,370
    Total cost of revenues     651,241     477,717     1,234,146     903,221
Gross margin   $ 23,726   $ 16,341   $ 32,037   $ 22,898
                         
                         

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

     
    (Unaudited)
    Three Months Ended June 30,
    Gross Revenue         Net Revenue
(in thousands)   Reporting Method   Reclassification     Reporting Method
    2013   2012   2013     2012     2013   2012
Revenues:                                        
  Professional employer services   $ 639,663   $ 463,671   $ (546,169 )   $ (398,558 )   $ 93,494   $ 65,113
  Staffing services     35,304     30,387     -       -       35,304     30,387
    Total revenues   $ 674,967   $ 494,058   $ (546,169 )   $ (398,558 )   $ 128,798   $ 95,500
Cost of revenues   $ 651,241   $ 477,717   $ (546,169 )   $ (398,558 )   $ 105,072   $ 79,159
                                         
                                         
    (Unaudited)
    Six Months Ended June 30,
    Gross Revenue         Net Revenue
(in thousands)   Reporting Method   Reclassification     Reporting Method
    2013   2012   2013     2012     2013   2012
Revenues:                                        
  Professional employer services   $ 1,201,146   $ 869,521   $ (1,025,834 )   $ (748,197 )   $ 175,312   $ 121,324
  Staffing services     65,037     56,598     -       -       65,037     56,598
    Total revenues   $ 1,266,183   $ 926,119   $ (1,025,834 )   $ (748,197 )   $ 240,349   $ 177,922
Cost of revenues   $ 1,234,146   $ 903,221   $ (1,025,834 )   $ (748,197 )   $ 208,312   $ 155,024
                                         
                                         

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 3,000 clients across all lines of business in 23 states. For more information, please visit www.barrettbusiness.com.

Forward-Looking Statements

Statements in this release about future events or performance, including gross revenues and earnings expectations for the third quarter of 2013, 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 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, 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, 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 future prospects are described in the Company's 2012 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.

 
Condensed Balance Sheets
Barrett Business Services, Inc.
(Unaudited)
         
    June 30,   December 31,
(in thousands)   2013   2012
Assets            
Current assets:            
  Cash and cash equivalents   $ 8,847   $ 45,747
  Marketable securities     5,349     16,748
  Trade accounts receivable, net     80,852     63,921
  Income taxes receivable     5,358     -
  Prepaid expenses and other     2,985     4,854
  Restricted investments     63,944     -
  Deferred income taxes     8,177     8,148
    Total current assets     175,512     139,418
Marketable securities     4,389     9,899
Property, equipment and software, net     19,933     18,489
Restricted marketable securities and workers' compensation deposits     10,505     9,726
Other assets     3,170     3,509
Goodwill     47,820     47,820
    $ 261,329   $ 228,861
             
Liabilities and Stockholders' Equity            
Current liabilities:            
  Line of credit   $ -   $ 4,532
  Accounts payable     2,810     1,995
  Accrued payroll, payroll taxes and related benefits     86,835     69,568
  Income taxes payable     -     272
  Other accrued liabilities     636     306
  Workers' compensation claims liabilities     28,115     24,541
  Safety incentives liabilities     10,939     9,842
  Current portion of long-term debt     220     220
    Total current liabilities     129,555     111,276
Long-term workers' compensation claims liabilities     56,428     46,023
Long term debt     5,163     5,273
Deferred income taxes     10,607     10,607
Customer deposits and other long-term liabilities     1,470     1,786
Stockholders' equity     58,106     53,896
    $ 261,329   $ 228,861
             
             
             
Barrett Business Services, Inc.
Consolidated Statements of Operations
         
    (Unaudited)   (Unaudited)
(in thousands, except per share amounts)   Second Quarter Ended   Six Months Ended,
    June 30,   June 30,
    2013   2012   2013   2012
Revenues:                        
  Professional employer service fees   $ 93,494   $ 65,113   $ 175,312   $ 121,324
  Staffing services     35,304     30,387     65,037     56,598
    Total revenues     128,798     95,500     240,349     177,922
Cost of revenues:                        
  Direct payroll costs     26,611     22,843     48,907     42,495
  Payroll taxes and benefits     53,483     39,332     112,606     82,324
  Workers' compensation     24,978     16,984     46,799     30,205
    Total cost of revenues     105,072     79,159     208,312     155,024
Gross margin     23,726     16,341     32,037     22,898
Selling, general and administrative expenses     14,494     10,549     26,305     20,313
Depreciation and amortization     506     357     966     704
Income from operations     8,726     5,435     4,766     1,881
Other income, net     110     196     197     412
Income before taxes     8,836     5,631     4,963     2,293
Provision for income taxes     2,950     1,888     1,626     763
Net income   $ 5,886   $ 3,743   $ 3,337   $ 1,530
Basic income per common share   $ 0.83   $ 0.54   $ 0.47   $ 0.18
Weighted average basic common shares outstanding     7,082     6,995     7,052     8,435
Diluted income per common share   $ 0.80   $ 0.53   $ 0.45   $ 0.18
Weighted average diluted common shares outstanding     7,374     7,078     7,344     8,511
                         
                         
                         
Contact:
Company
Michael L. Elich
President and CEO
Tel 1-360-828-0700

Investor Relations:
Liolios Group, Inc.
Scott Liolios or Cody Slach
Tel 1-949-574-3860
Email Contact
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