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, 2023.
Second Quarter 2023 Financial Summary vs.
Year-Ago Quarter
- Revenues up 1% to $264.6 million.
- Gross billings up 5% to $1.91 billion.
- Average worksite employees (“WSEs”) up 2%.
- Net income of $17.0 million, or $2.47 per diluted share,
compared to $18.0 million, or $2.48 per diluted share.
“In the second quarter, we continued to exceed expectations by
adding net new clients and expanding benefits sales,” said BBSI
President and CEO, Gary Kramer. “These positive results in our
controllable growth have helped offset slower client hiring in the
quarter as small businesses remained cautious. We are pleased with
the ongoing ramp of our BBSI Benefits offering as we have continued
to broaden our client base, and our profitability metrics continue
to exceed our internal expectations. I am also pleased that our
board has authorized a new $75 million stock repurchase program,
which speaks to the strength of our operations, the durability of
our cash flows and our long-term optimism.”
Second Quarter 2023 Financial
Results
Revenues in the second quarter of 2023 increased 1% to $264.6
million compared to $262.2 million in the second quarter of
2022.
Total gross billings in the second quarter of 2023 increased 5%
to $1.91 billion compared to $1.83 billion in the same year-ago
quarter (see “Key Performance Metrics” below). The increase was
driven by WSEs from net client additions and higher average
billings per WSE, offset in part by net client hiring.
Workers’ compensation expense as a percent of gross billings was
2.6% in the second quarter of 2023 and benefited from favorable
prior year liability and premium adjustments of $6.3 million. This
compares to 2.5% in the second quarter of 2022, which included
favorable prior year liability and premium adjustments of $8.5
million.
Net income for the second quarter of 2023 was $17.0 million, or
$2.47 per diluted share, compared to $18.0 million, or $2.48 per
diluted share, in the year-ago quarter. The decrease is primarily
attributable to lower favorable adjustments to workers’
compensation expense in the second quarter of 2023.
Liquidity
As of June 30, 2023, unrestricted cash and investments were
$133.0 million compared to $159.7 million at the end of 2022. BBSI
was debt free at quarter end.
Capital Allocation
BBSI’s board of directors has confirmed its regular quarterly
cash dividend of $0.30 per share. The cash dividend will be paid on
September 1, 2023, to all stockholders of record as of August 18,
2023.
Continuing under the Company’s stock repurchase program
established in February 2022, BBSI repurchased 123,361 shares at an
average price of $82.23 per share in the second quarter. At
June 30, 2023, approximately $9.7 million remained available
under the repurchase program.
On July 31, 2023, BBSI’s board of directors approved a new stock
repurchase program authorizing the Company to purchase up to $75
million of its stock over a two-year period. This new program
replaces any remaining authority under the February 2022
program.
Outlook
BBSI now expects the following for 2023:
- Gross billings growth of 4% to 6%
- Growth in the average number of WSEs of 2% to 4%
- Gross margin as a percent of gross billings of 3.1% to
3.15%
- Effective annual tax rate of 27% to 28%
Conference Call
BBSI will conduct a conference call on Wednesday, August 2,
2023, at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss
its financial results for the quarter ended June 30, 2023.
BBSI’s CEO Gary Kramer and CFO Anthony Harris will host the
conference call, followed by a question and answer period.
Date: Wednesday, August 2, 2023 Time: 5:00 p.m. Eastern time
(2:00 p.m. Pacific time) Toll-free dial-in number: 1-877-407-4018
International dial-in number: 1-201-689-8471 Conference ID:
13739669
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 Gateway Investor Relations at
1-949-574-3860.
The conference call will be broadcast live and available for
replay here and via the Investors section of the BBSI website at
ir.bbsi.com.
A replay of the conference call will be available after 8:00
p.m. Eastern time on the same day through September 2, 2023.
Toll-free replay number: 1-844-512-2921 International replay
number: 1-412-317-6671 Replay ID: 13739669
Key Performance Metrics
We report PEO revenues net of direct payroll costs because we
are not the primary obligor for wage payments to our clients’
employees. However, management believes that gross billings and
wages are useful in understanding the volume of our business
activity and serve as an important performance metric in managing
our operations, including the preparation of internal operating
forecasts and establishing executive compensation performance
goals. We therefore present for purposes of analysis gross billings
and wage information for the three and six months ended
June 30, 2023 and 2022.
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(in thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Gross billings |
|
$ |
1,911,550 |
|
|
$ |
1,829,225 |
|
|
$ |
3,700,768 |
|
|
$ |
3,536,400 |
|
PEO and staffing wages |
|
$ |
1,661,668 |
|
|
$ |
1,588,990 |
|
|
$ |
3,213,021 |
|
|
$ |
3,071,196 |
|
In monitoring and evaluating the performance of our operations,
management also reviews the following ratios, which represent
selected amounts as a percentage of gross billings. Management
believes these ratios are useful in understanding the efficiency
and profitability of our service offerings.
|
|
(Unaudited) |
|
(Unaudited) |
|
|
Percentage of Gross
Billings |
|
Percentage of Gross
Billings |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
PEO and staffing wages |
|
86.9 |
% |
|
86.9 |
% |
|
86.9 |
% |
|
86.9 |
% |
Payroll taxes and
benefits |
|
7.0 |
% |
|
6.9 |
% |
|
7.5 |
% |
|
7.4 |
% |
Workers' compensation |
|
2.6 |
% |
|
2.5 |
% |
|
2.7 |
% |
|
2.7 |
% |
Gross margin |
|
3.5 |
% |
|
3.7 |
% |
|
2.9 |
% |
|
3.0 |
% |
We refer to employees of our PEO clients as WSEs. Management
reviews average and ending WSE growth to monitor and evaluate the
performance of our operations. Average WSEs are calculated by
dividing the number of unique individuals paid in each month by the
number of months in the period. Ending WSEs represents the number
of unique individuals paid in the last month of the period.
|
|
(Unaudited) |
|
|
Three Months Ended June 30, |
|
|
2023 |
|
|
% Change |
|
2022 |
|
|
% Change |
Average WSEs |
|
|
124,186 |
|
|
1.6 |
% |
|
|
122,234 |
|
|
8.8 |
% |
Ending WSEs |
|
|
127,336 |
|
|
2.8 |
% |
|
|
123,853 |
|
|
8.4 |
% |
|
|
(Unaudited) |
|
|
|
Six Months Ended June 30, |
|
|
|
2023 |
|
|
% Change |
|
2022 |
|
|
% Change |
|
Average WSEs |
|
|
121,749 |
|
|
2.1 |
% |
|
|
119,216 |
|
|
9.1 |
% |
|
Ending WSEs |
|
|
127,336 |
|
|
2.8 |
% |
|
|
123,853 |
|
|
8.4 |
% |
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. For more information, please visit
www.bbsi.com.
Forward-Looking Statements
Statements in this release about future events and financial
outlook are forward-looking statements. Such statements 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 lingering effects of the COVID-19 pandemic; inflation;
the availability of certain fully insured medical and other health
and welfare benefits to qualifying worksite employees; the effect
of changes in the Company’s mix of services on gross margin; the
Company’s ability to attract and retain clients and to achieve
revenue growth; the availability of financing or other sources of
capital; the Company’s relationship with its primary bank lender;
the potential for material deviations from expected future workers’
compensation claims experience; changes in the workers’
compensation regulatory environment in the Company’s primary
markets; litigation costs; security breaches or failures in the
Company’s information technology systems; the collectability of
accounts receivable; changes in executive management; the carrying
value of deferred income tax assets and goodwill; the effects of
conditions in the global capital markets on the Company’s
investment portfolio; and the potential for and effect of
acquisitions, among others. Other important factors that may affect
the Company’s prospects are described in the Company’s 2022 Annual
Report on Form 10-K and in subsequent reports filed with the
Securities and Exchange Commission under the Securities Exchange
Act of 1934. 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(Unaudited)
|
|
June 30, |
|
|
December 31, |
|
(in thousands) |
|
2023 |
|
|
2022 |
|
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
48,347 |
|
|
$ |
91,423 |
|
Investments |
|
|
84,658 |
|
|
|
68,325 |
|
Trade accounts receivable, net |
|
|
198,055 |
|
|
|
163,838 |
|
Prepaid expenses and other |
|
|
17,625 |
|
|
|
19,787 |
|
Restricted cash and investments |
|
|
68,970 |
|
|
|
110,989 |
|
Total current assets |
|
|
417,655 |
|
|
|
454,362 |
|
Property, equipment and
software, net |
|
|
48,354 |
|
|
|
45,954 |
|
Operating lease right-of-use
assets |
|
|
19,818 |
|
|
|
19,804 |
|
Restricted cash and
investments |
|
|
123,443 |
|
|
|
104,277 |
|
Goodwill |
|
|
47,820 |
|
|
|
47,820 |
|
Other assets |
|
|
3,995 |
|
|
|
3,281 |
|
Deferred income taxes |
|
|
10,819 |
|
|
|
11,440 |
|
Total assets |
|
$ |
671,904 |
|
|
$ |
686,938 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
5,701 |
|
|
$ |
8,264 |
|
Accrued payroll, payroll taxes and related benefits |
|
|
238,388 |
|
|
|
222,331 |
|
Income taxes payable |
|
|
4,491 |
|
|
|
610 |
|
Current operating lease liabilities |
|
|
6,882 |
|
|
|
6,957 |
|
Other accrued liabilities |
|
|
22,785 |
|
|
|
31,603 |
|
Workers' compensation claims liabilities |
|
|
55,941 |
|
|
|
62,917 |
|
Safety incentives liability |
|
|
1,630 |
|
|
|
2,049 |
|
Total current liabilities |
|
|
335,818 |
|
|
|
334,731 |
|
Long-term workers'
compensation claims liabilities |
|
|
135,881 |
|
|
|
153,070 |
|
Long-term operating lease
liabilities |
|
|
14,236 |
|
|
|
14,225 |
|
Customer deposits and other
long-term liabilities |
|
|
8,000 |
|
|
|
7,070 |
|
Stockholders' equity |
|
|
177,969 |
|
|
|
177,842 |
|
Total liabilities and
stockholders' equity |
|
$ |
671,904 |
|
|
$ |
686,938 |
|
Barrett Business Services,
Inc.Condensed Consolidated Statements of
Operations(Unaudited)
|
|
|
|
|
|
|
(in thousands, except per
share amounts) |
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Professional employer services |
|
$ |
244,256 |
|
|
$ |
232,174 |
|
|
$ |
476,563 |
|
|
$ |
449,607 |
|
Staffing services |
|
|
20,374 |
|
|
|
30,005 |
|
|
|
42,734 |
|
|
|
58,947 |
|
Total revenues |
|
|
264,630 |
|
|
|
262,179 |
|
|
|
519,297 |
|
|
|
508,554 |
|
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Direct payroll costs |
|
|
15,110 |
|
|
|
22,458 |
|
|
|
31,981 |
|
|
|
44,379 |
|
Payroll taxes and benefits |
|
|
134,109 |
|
|
|
126,353 |
|
|
|
278,691 |
|
|
|
262,218 |
|
Workers' compensation |
|
|
48,365 |
|
|
|
46,483 |
|
|
|
100,035 |
|
|
|
94,719 |
|
Total cost of revenues |
|
|
197,584 |
|
|
|
195,294 |
|
|
|
410,707 |
|
|
|
401,316 |
|
Gross margin |
|
|
67,046 |
|
|
|
66,885 |
|
|
|
108,590 |
|
|
|
107,238 |
|
Selling, general and
administrative expenses |
|
|
43,808 |
|
|
|
42,272 |
|
|
|
85,034 |
|
|
|
82,437 |
|
Depreciation and
amortization |
|
|
1,729 |
|
|
|
1,523 |
|
|
|
3,406 |
|
|
|
3,031 |
|
Income from operations |
|
|
21,509 |
|
|
|
23,090 |
|
|
|
20,150 |
|
|
|
21,770 |
|
Other income, net |
|
|
2,148 |
|
|
|
1,554 |
|
|
|
4,461 |
|
|
|
3,190 |
|
Income before income taxes |
|
|
23,657 |
|
|
|
24,644 |
|
|
|
24,611 |
|
|
|
24,960 |
|
Provision for income
taxes |
|
|
6,641 |
|
|
|
6,630 |
|
|
|
6,776 |
|
|
|
6,658 |
|
Net income |
|
$ |
17,016 |
|
|
$ |
18,014 |
|
|
$ |
17,835 |
|
|
$ |
18,302 |
|
Basic income per common
share |
|
$ |
2.52 |
|
|
$ |
2.52 |
|
|
$ |
2.62 |
|
|
$ |
2.51 |
|
Weighted average basic common
shares outstanding |
|
|
6,751 |
|
|
|
7,162 |
|
|
|
6,809 |
|
|
|
7,284 |
|
Diluted income per common
share |
|
$ |
2.47 |
|
|
$ |
2.48 |
|
|
$ |
2.57 |
|
|
$ |
2.48 |
|
Weighted average diluted
common shares outstanding |
|
|
6,875 |
|
|
|
7,257 |
|
|
|
6,931 |
|
|
|
7,365 |
|
Investor Relations: Gateway Group, Inc.Cody
Slach Tel 1-949-574-3860 BBSI@gateway-grp.com
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