BBSI Reports Second Quarter 2013 Financial Results

7/23/2013 Print Version

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

VANCOUVER, WA -- (Marketwired) -- 07/23/13 -- 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 and via BBSI's investor relations section of the Company's website at

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.

Second Quarter EndedSix Months Ended
(in thousands)June 30,June 30,
Professional employer services$639,663$463,671$1,201,146$869,521
Staffing services35,30430,38765,03756,598
Total revenues674,967494,0581,266,183926,119
Cost of revenues:
Direct payroll costs568,800418,5941,067,538785,527
Payroll taxes and benefits53,48339,332112,60682,324
Workers' compensation28,95819,79154,00235,370
Total cost of revenues651,241477,7171,234,146903,221
Gross margin$23,726$16,341$32,037$22,898

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

Three Months Ended June 30,
Gross RevenueNet Revenue
(in thousands)Reporting MethodReclassificationReporting Method
Professional employer services$639,663$463,671$(546,169)$(398,558)$93,494$65,113
Staffing services35,30430,387--35,30430,387
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
Six Months Ended June 30,
Gross RevenueNet Revenue
(in thousands)Reporting MethodReclassificationReporting Method
Professional employer services$1,201,146$869,521$(1,025,834)$(748,197)$175,312$121,324
Staffing services65,03756,598--65,03756,598
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

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.
June 30,December 31,
(in thousands)20132012
Current assets:
Cash and cash equivalents$8,847$45,747
Marketable securities5,34916,748
Trade accounts receivable, net80,85263,921
Income taxes receivable5,358-
Prepaid expenses and other2,9854,854
Restricted investments63,944-
Deferred income taxes8,1778,148
Total current assets175,512139,418
Marketable securities4,3899,899
Property, equipment and software, net19,93318,489
Restricted marketable securities and workers' compensation deposits10,5059,726
Other assets3,1703,509
Liabilities and Stockholders' Equity
Current liabilities:
Line of credit$-$4,532
Accounts payable2,8101,995
Accrued payroll, payroll taxes and related benefits86,83569,568
Income taxes payable-272
Other accrued liabilities636306
Workers' compensation claims liabilities28,11524,541
Safety incentives liabilities10,9399,842
Current portion of long-term debt220220
Total current liabilities129,555111,276
Long-term workers' compensation claims liabilities56,42846,023
Long term debt5,1635,273
Deferred income taxes10,60710,607
Customer deposits and other long-term liabilities1,4701,786
Stockholders' equity58,10653,896

Barrett Business Services, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)Second Quarter EndedSix Months Ended,
June 30,June 30,
Professional employer service fees$93,494$65,113$175,312$121,324
Staffing services35,30430,38765,03756,598
Total revenues128,79895,500240,349177,922
Cost of revenues:
Direct payroll costs26,61122,84348,90742,495
Payroll taxes and benefits53,48339,332112,60682,324
Workers' compensation24,97816,98446,79930,205
Total cost of revenues105,07279,159208,312155,024
Gross margin23,72616,34132,03722,898
Selling, general and administrative expenses14,49410,54926,30520,313
Depreciation and amortization506357966704
Income from operations8,7265,4354,7661,881
Other income, net110196197412
Income before taxes8,8365,6314,9632,293
Provision for income taxes2,9501,8881,626763
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 outstanding7,0826,9957,0528,435
Diluted income per common share$0.80$0.53$0.45$0.18
Weighted average diluted common shares outstanding7,3747,0787,3448,511

Company Contact:
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

Source: Barrett Business Services, Inc.