News

BBSI Reports Fourth Quarter and Full Year 2013 Financial Results

2/4/2014 Print Version

Q4 Net Revenues up 27% to $144.5 Million; Non-GAAP Gross Revenues up 31% to $779.3 Million

VANCOUVER, WA -- (Marketwired) -- 02/04/14 -- 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, 2013.

Fourth Quarter 2013 Financial Highlights vs. Year-Ago Quarter

Net revenues up 27% to $144.5 million

Gross revenues up 31% to $779.3 million

Net income was $5.6 million, or $0.74 per diluted share, compared to $5.8 million, or $0.80 per diluted share

Excluding $5.1 million, or $3.1 million after tax, for an increase in workers' compensation reserve, net income was $8.7 million

Excluding $0.42 per diluted share for the increase to workers' compensation reserve, diluted earnings per share was $1.16

Fourth Quarter 2013 Financial Results
Net revenues in the fourth quarter of 2013 increased 27% to $144.5 million compared to $113.7 million in the fourth 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 fourth quarter of 2013 increased 31% to $779.3 million compared to $596.7 million in the fourth quarter of 2012 (see "Reconciliation of Non-GAAP Financial Measures" below).

In the fourth quarter of 2013, the Company recorded an additional increase to its self-insured workers' compensation reserve of $5.1 million, or $3.1 million after tax, equating to $0.42 per diluted share. The increase represents approximately 5% of the Company's total workers' compensation reserve and is a result of increased estimated reserves for prior year injury claims, primarily in the state of California.

Taking into account the effect of this expense, net income in the fourth quarter of 2013 was $5.6 million compared to $5.8 million in the year-ago quarter. Diluted earnings per share in the fourth quarter of 2013 was $0.74 compared to $0.80 in the year-ago quarter. Excluding the effect of the increase in workers' compensation reserve, net income increased 50% to $8.7 million and diluted earnings per share increased 45% to $1.16 in the fourth quarter of 2013.

At December 31, 2013, the Company's cash, cash equivalents, marketable securities, as well as restricted securities totaled $143.2 million, compared to $82.1 million at December 31, 2012. At December 31, 2013, the Company had no outstanding borrowings on its revolving credit facility.

Full Year 2013 Financial Results
Net revenues in 2013 increased 32% to $532.8 million compared to $402.7 million in 2012. Total non-GAAP gross revenues in 2013 increased 35% to $2.8 billion compared to $2.1 billion in 2012. The increase was primarily attributable to the previously discussed increase in net PEO clients and same-store sales growth.

Net income in 2013 increased 36% to $17.9 million compared to $13.1 million in 2012. Diluted earnings per share increased 45% to $2.42 compared to $1.67 per diluted common share in 2012.

Management Commentary
"In addition to record revenue and earnings growth in 2013, we accomplished several important strategic initiatives during the year," said Michael Elich, president and CEO of BBSI. "All clients have now transitioned to our new payroll and data technology platform, which we expect will improve the quality and consistency of BBSI's offering. We also continued to expand our infrastructure, as we started 12 business units during the year with another 11 in development for the first half of 2014. We also plan to open two new branches, one in San Luis Obispo and a second in Reno, during 2014.

"BBSI remains well positioned for 2014 and beyond. Along with the maturation of our infrastructure and internal talent, our referral network partners remain strong. Going forward, we are focused on becoming a much larger company with a product offering that remains adaptable and predictable long-term."

First Quarter 2014 Outlook
For the first quarter of 2014, the Company expects gross revenues to increase at least 24% to between $735 million and $755 million compared to $591.2 million in the first quarter of 2013. Diluted loss per common share in the first quarter of 2014 is expected to be between $(0.45) and $(0.50) compared to $(0.36) in the first quarter of 2013. The Company historically incurs losses in the first quarter due to the higher effective payroll taxes at the beginning of each year.

Conference Call
BBSI will conduct a conference call tomorrow, February 5, 2014 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) to discuss its financial results for the fourth quarter and full year ended December 31, 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, February 5, 2014
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Toll-free dial-in number: 1-877-941-2068
International dial-in number: 1-480-629-9712
Conference ID: 4663393

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=107533 and via BBSI's investor relations section at www.barrettbusiness.com.

A replay of the conference call will be available after 3:00 p.m. Eastern time on the same day through March 5, 2014.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 4663393

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)
Fourth Quarter EndedYear Ended
(in thousands)December 31,December 31,
2013201220132012
Revenues:
Professional employer services$742,181$562,850$2,665,714$1,954,207
Staffing services37,11833,856143,881126,648
Total revenues779,299596,7062,809,5952,080,855
Cost of revenues:
Direct payroll costs658,262505,5072,369,2821,761,984
Payroll taxes and benefits58,32044,485228,903169,724
Workers' compensation38,41624,462124,88682,433
Total cost of revenues754,998574,4542,723,0712,014,141
Gross margin$24,301$22,252$86,524$66,714

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

(Unaudited)
Three Months Ended December 31,
Gross RevenueNet Revenue
(in thousands)Reporting MethodReclassificationReporting Method
201320122013201220132012
Revenues:
Professional employer services$742,181$562,850$(634,774)$(483,044)$107,407$79,806
Staffing services37,11833,856--37,11833,856
Total revenues$779,299$596,706$(634,774)$(483,044)$144,525$113,662
Cost of revenues$754,998$574,454$(634,774)$(483,044)$120,224$91,410

(Unaudited)
Year Ended December 31,
Gross RevenueNet Revenue
(in thousands)Reporting MethodReclassificationReporting Method
201320122013201220132012
Revenues:
Professional employer services$2,665,714$1,954,207$(2,276,751)$(1,678,203)$388,963$276,004
Staffing services143,881126,648--143,881126,648
Total revenues$2,809,595$2,080,855$(2,276,751)$(1,678,203)$532,844$402,652
Cost of revenues$2,723,071$2,014,141$(2,276,751)$(1,678,203)$446,320$335,938

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 first quarter of 2014, 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.

Barrett Business Services, Inc.
Condensed Balance Sheets
(Unaudited)
December 31,December 31,
(in thousands)20132012
Assets
Current assets:
Cash and cash equivalents$93,557$45,747
Marketable securities19,78716,748
Trade accounts receivable, net85,58663,921
Prepaid expenses and other3,0264,854
Deferred income taxes8,9298,148
Total current assets210,885139,418
Marketable securities5,9099,899
Property, equipment and software, net20,54918,489
Restricted certificates of deposit12,789-
Restricted marketable securities and workers' compensation deposits11,2059,726
Other assets4,1653,509
Goodwill47,82047,820
$313,322$228,861
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt$220$220
Line of credit-4,532
Accounts payable3,2521,995
Accrued payroll, payroll taxes and related benefits92,51669,568
Income taxes payable1,236272
Other accrued liabilities313306
Workers' compensation claims liabilities35,84124,541
Safety incentives liabilities13,0869,842
Total current liabilities146,464111,276
Long-term workers' compensation claims liabilities76,60346,023
Long term debt5,0535,273
Deferred income taxes10,78710,607
Customer deposits and other long-term liabilities1,8621,786
Stockholders' equity72,55353,896
$313,322$228,861

Barrett Business Services, Inc.
Consolidated Statements of Operations
(Unaudited)(Unaudited)
(in thousands, except per share amounts)
Fourth Quarter EndedYear Ended
December 31,December 31,
2013201220132012
Revenues:
Professional employer service fees$107,407$79,806$388,963$276,004
Staffing services37,11833,856143,881126,648
Total revenues144,525113,662532,844402,652
Cost of revenues:
Direct payroll costs28,31025,475108,80095,128
Payroll taxes and benefits58,32044,485228,903169,724
Workers' compensation33,59421,450108,61771,086
Total cost of revenues120,22491,410446,320335,938
Gross margin24,30122,25286,52466,714
Selling, general and administrative expenses16,94813,39360,06146,450
Depreciation and amortization5504002,0371,477
Income from operations6,8038,45924,42618,787
Other income, net170105476672
Income before taxes6,9738,56424,90219,459
Provision for income taxes1,4132,7757,0106,328
Net income$5,560$5,789$17,892$13,131
Basic income per common share$0.78$0.83$2.52$1.70
Weighted average basic common shares outstanding7,1657,0147,1057,723
Diluted income per common share$0.74$0.80$2.42$1.67
Weighted average diluted common shares outstanding7,4777,2447,3977,863

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.