BBSI Reports First Quarter 2017 Financial Results

5/4/2017 Print Version

Q1 Net Revenues up 10% to $210 Million (Non-GAAP Gross Revenues up 13%)

VANCOUVER, Wash., May 04, 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 first quarter ended March 31, 2017.

First Quarter 2017 Financial Summary vs. Year-Ago Quarter

Net revenues up 10% to $210.0 million.

Non-GAAP gross revenues up 13% to $1.2 billion.

Net loss of $11.2 million or $1.55 per diluted share, compared to net loss of $8.0 million or $1.11 per diluted share.

“While our client build remained strong, many of our markets continued to face severe weather in the first quarter,” said Michael Elich, president and CEO of BBSI. “Additionally, we experienced a slowdown in hiring due to a tightening labor market that presented challenges for our clients. Both factors contributed to soft contributions from same-customer sales of 3.7%.

“Despite these headwinds, the fundamentals of our business remain strong, our value proposition in the market is maturing, and we are seeing consistent new business pipelines. We increased gross revenues by 13% and the organization added 225 net new clients, all while maintaining our better-than-90% retention rate. As we move further into 2017, I’m confident that our organization is focused on perpetuating our relationships, our value proposition and, ultimately, our brand.”

First Quarter 2017 Financial Results

Net revenues in the first quarter of 2017 increased 10% to $210.0 million compared to $191.0 million in the first quarter of 2016.

Total non-GAAP gross revenues in the first quarter increased 13% to $1.2 billion compared to $1.1 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 client count and same-customer sales growth.

Net loss for the first quarter of 2017 was $11.2 million or $1.55 per diluted share, compared to net loss of $8.0 million or $1.11 per diluted share in the year-ago quarter. The Company historically incurs losses in the first quarter due to the higher effective payroll taxes at the beginning of each year.


BBSI continues to expect non-GAAP gross revenues for the next 12-month period (through March 31, 2018) to increase approximately 16%. For the full year 2017, the Company also continues to expect diluted earnings per share to be approximately $3.65, a 43% increase compared to $2.55 per diluted share in 2016. This assumes approximately $0.13 per diluted share in remaining costs associated with accounting and securities law issues, as well as the return to an effective tax rate of approximately 33.5%.

Conference Call

BBSI will conduct a conference call tomorrow, May 5, 2017 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) to discuss its financial results for the first quarter ended March 31, 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: Friday, May 5, 2017
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Toll-free dial-in number: 1-888-487-0346
International dial-in number: 1-719-457-2084
Conference ID: 9273736

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 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 June 5, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 9273736

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.

      First Quarter Ended 
(in thousands) March 31, 
      2017 2016 
Gross revenues:     
Professional employer services  $1,161,761 $1,027,599 
Staffing services  37,788  36,290 
Total gross revenues  1,199,549  1,063,889 
Gross cost of revenues:     
Direct payroll costs  1,011,690  894,050 
Payroll taxes and benefits  115,400  103,760 
Workers' compensation  62,009  55,692 
Total gross cost of revenues  1,189,099  1,053,502 
Gross margin $10,450 $10,387 

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

     Three Months Ended March 31, 
     Net Revenue   Gross Revenue 
(in thousands)Reporting Method     Reporting Method 
     (GAAP) Non-GAAP Adjustments (Non-GAAP) 
     2017 2016 2017 2016 2017 2016 
employer services $172,209 $154,678 $989,552 $872,921 $1,161,761 $1,027,599 
Staffing services 37,788  36,290  -  -  37,788  36,290 
Total revenues $209,997 $190,968 $989,552 $872,921 $1,199,549 $1,063,889 
Cost of revenues$199,547 $180,581 $989,552 $872,921 $1,189,099 $1,053,502 

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 4,900 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 future 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 
     March 31, December 31, 
(in thousands)2017 2016 
Current assets:    
Cash and cash equivalents$18,429 $50,768 
Trade accounts receivable, net 139,277  126,484 
Income taxes receivable 3,078  - 
Prepaid expenses and other 6,830  3,899 
Investments 973  5,675 
Restricted cash and investments 51,078  48,557 
Total current assets 219,665  235,383 
Investments  333  642 
Property, equipment and software, net 26,633  26,673 
Restricted cash and investments 272,624  252,707 
Goodwill   47,820  47,820 
Other assets 20,958  9,293 
Deferred income taxes 9,384  9,370 
     $597,417 $581,888 
Liabilities and Stockholders' Equity    
Current liabilities:    
Current portion of long-term debt$4,557 $221 
Accounts payable 3,509  4,944 
Accrued payroll, payroll taxes and related benefits 173,493  153,110 
Income taxes payable -  3,041 
Other accrued liabilities 6,523  7,674 
Workers' compensation claims liabilities 85,481  81,339 
Safety incentives liability 24,204  24,835 
Total current liabilites 297,767  275,164 
Long-term workers' compensation claims liabilities 240,752  231,198 
Long term debt -  4,392 
Customer deposits and other long-term liabilities 1,353  1,441 
Stockholders' equity 57,545  69,693 
     $597,417 $581,888 

Barrett Business Services, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts) First Quarter Ended 
      March 31, 
   2017   2016  
Professional employer service fees $172,209  $154,678  
Staffing services  37,788   36,290  
Total revenues  209,997   190,968  
Cost of revenues:     
Direct payroll costs  28,710   27,427  
Payroll taxes and benefits  115,400   103,760  
Workers' compensation  55,437   49,394  
Total cost of revenues  199,547   180,581  
Gross margin  10,450   10,387  
Selling, general and administrative expenses  26,610   21,904  
Depreciation and amortization  942   749  
Income from operations  (17,102)  (12,266) 
Other income (expense), net  75   (8) 
Income before income taxes  (17,027)  (12,274) 
Provision for income taxes  (5,800)  (4,271) 
Net income  $(11,227) $(8,003) 
Basic income per common share $(1.55) $(1.11) 
Weighted average basic common shares outstanding  7,249   7,208  
Diluted income per common share $(1.55) $(1.11) 
Weighted average diluted common shares outstanding  7,249   7,208  

Investor Relations:

Cody Slach
Tel 1-949-574-3860

Barrett Business Services Inc