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BBSI Reports First Quarter 2014 Financial Results

Q1 Net Revenues Up 21% to $135.1 Million; Non-GAAP Gross Revenues Up 23% to $727.4 Million

VANCOUVER, WA -- (Marketwired) -- 04/29/14 -- 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, 2014.

First Quarter 2014 Financial Summary vs. Year-Ago Quarter

  • Net revenues up 21% to $135.1 million
  • Gross revenues up 23% to $727.4 million
  • Net loss was $3.6 million, or $(0.50) per diluted share, compared to a net loss of $2.5 million, or $(0.36) per diluted share

First Quarter 2014 Financial Results

Net revenues in the first quarter of 2014 increased 21% to $135.1 million compared to $111.6 million in the first quarter of 2013.

Total non-GAAP gross revenues in the first quarter of 2014 increased 23% to $727.4 million compared to $591.2 million in the first quarter of 2013 (see "Reconciliation of Non-GAAP Financial Measures" below). The increase was due primarily to the continued build in the Company's co-employed client count and same-store sales growth, partially offset by the vetting of specific clients who no longer met certain performance criteria.

Net loss for the first quarter of 2014 was $3.6 million, or $(0.50) per diluted share, compared to a net loss of $2.5 million, or $(0.36) 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.

At March 31, 2014, the Company's cash, cash equivalents, marketable securities, and restricted securities totaled $147.9 million compared to $143.2 million at December 31, 2013. At March 31, 2014, the Company had no outstanding borrowings on its revolving credit facility.

Management Commentary

"BBSI's 23% increase in gross revenues during the first quarter reflects our continued focus on delivering a management platform that is both predictable and adaptable in how it supports well-run companies over the long term," said Michael Elich, president and CEO of BBSI. "Vital to this long-term model is a client vetting process which has driven our 90%-plus retention rate. Over the past several months, however, the size of clients that we ultimately determined did not fit our platform has been larger than in the past. By identifying and canceling clients who were utilizing a disproportionate level of BBSI resources, we expect to achieve a long-term increase in efficiencies and quality of operations, which will benefit remaining and future clients.

"This recent trend does not change our long-term view about our untapped market opportunity, the health of our client base and the strength of our referral network. In fact, we see it as more episodic and expect we will return to a higher pace of growth as we work to backfill lost revenues created by the vetting process. Given this view, we remain well-positioned to continue gaining market share and deliver another record year for our shareholders."

Second Quarter 2014 Outlook

For the second quarter of 2014, the Company expects gross revenues to increase at least 15% to between $780 million and $800 million compared to $675.0 million in the second quarter of 2013. Diluted income per common share in the second quarter of 2014 is expected to be between $0.93 and $0.98 compared to $0.80 in the second quarter of 2013.

Conference Call

BBSI will conduct a conference call tomorrow, April 30, 2014 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, 2014. 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, April 30, 2014
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Toll-free dial-in number: 1-877-941-1428
International dial-in number: 1-480-629-9665
Conference ID: 4679014

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=108701 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 May 30, 2014.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 4679014

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)
                                                  First Quarter Ended
(in thousands)                                         March 31,
                                           ---------------------------------
                                                 2014             2013
                                           ---------------- ----------------

Revenues:
  Professional employer services           $        693,926 $        561,483
  Staffing services                                  33,451           29,733
                                           ---------------- ----------------
    Total revenues                                  727,377          591,216
                                           ---------------- ----------------
Cost of revenues:
  Direct payroll costs                              613,320          498,738
  Payroll taxes and benefits                         72,817           59,123
  Workers' compensation                              31,934           25,044
                                           ---------------- ----------------
    Total cost of revenues                          718,071          582,905
                                           ================ ================
Gross margin                               $          9,306 $          8,311
                                           ================ ================


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


                                          (Unaudited)
                                  Three Months Ended March 31,
                   ---------------------------------------------------------
                     Gross Revenue                            Net Revenue
(in thousands)      Reporting Method   Reclassification     Reporting Method
                   ----------------- --------------------  -----------------
                     2014     2013      2014       2013      2014     2013
                   -------- -------- ---------  ---------  -------- --------
Revenues:
  Professional
   employer
   services        $693,926 $561,483 $(592,237) $(479,665) $101,689 $ 81,818
  Staffing
   services          33,451   29,733         -          -    33,451   29,733
                   -------- -------- ---------  ---------  -------- --------
    Total revenues $727,377 $591,216 $(592,237) $(479,665) $135,140 $111,551
                   ======== ======== =========  =========  ======== ========
Cost of revenues   $718,071 $582,905 $(592,237) $(479,665) $125,834 $103,240
                   ======== ======== =========  =========  ======== ========


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 second 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 2013 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)

                                               March 31,      December 31,
(in thousands)                                   2014             2013
                                           ---------------- ----------------
                  Assets
Current assets:
  Cash and cash equivalents                $         66,268 $         93,557
  Marketable securities                              31,013           19,787
  Trade accounts receivable, net                     95,956           85,586
  Income taxes receivable                             1,596                -
  Prepaid expenses and other                          4,621            3,026
  Deferred income taxes                               8,936            8,929
                                           ---------------- ----------------
    Total current assets                            208,390          210,885
Marketable securities                                 6,680            5,909
Property, equipment and software, net                21,779           20,549
Restricted certificates of deposit                   12,789           12,789
Restricted marketable securities and
 workers' compensation deposits                      31,133           11,205
Other assets                                          4,028            4,165
Goodwill                                             47,820           47,820
                                           ---------------- ----------------
                                           $        332,619 $        313,322
                                           ================ ================

   Liabilities and Stockholders' Equity
Current liabilities:
  Current portion of long-term debt        $            220 $            220
  Accounts payable                                    2,382            3,252
  Accrued payroll, payroll taxes and
   related benefits                                 112,000           92,516
  Income taxes payable                                    -            1,236
  Other accrued liabilities                             411              313
  Workers' compensation claims liabilities           38,306           35,841
  Safety incentives liabilities                      12,192           13,086
                                           ---------------- ----------------
    Total current liabilities                       165,511          146,464
Long-term workers' compensation claims
 liabilities                                         81,829           76,603
Long term debt                                        4,998            5,053
Deferred income taxes                                10,392           10,787
Customer deposits and other long-term
 liabilities                                          1,799            1,862
Stockholders' equity                                 68,090           72,553
                                           ---------------- ----------------
                                           $        332,619 $        313,322
                                           ================ ================



                       Barrett Business Services, Inc.
                    Consolidated Statements of Operations

                                                     (Unaudited)
(in thousands, except per share amounts)         First Quarter Ended
                                                      March 31,
                                         ----------------------------------
                                               2014              2013
                                         ----------------  ----------------
Revenues:
  Professional employer service fees     $        101,689  $         81,818
  Staffing services                                33,451            29,733
                                         ----------------  ----------------
    Total revenues                                135,140           111,551
                                         ----------------  ----------------
Cost of revenues:
  Direct payroll costs                             25,417            22,296
  Payroll taxes and benefits                       72,817            59,123
  Workers' compensation                            27,600            21,821
                                         ----------------  ----------------
    Total cost of revenues                        125,834           103,240
                                         ----------------  ----------------
Gross margin                                        9,306             8,311
Selling, general and administrative
 expenses                                          14,369            11,811
Depreciation and amortization                         584               460
                                         ----------------  ----------------
Loss from operations                               (5,647)           (3,960)
Other income, net                                      90                87
                                         ----------------  ----------------
Loss before taxes                                  (5,557)           (3,873)
Benefit from income taxes                          (1,974)           (1,324)
                                         ----------------  ----------------
Net loss                                 $         (3,583) $         (2,549)
                                         ================  ================
Basic loss per common share              $          (0.50) $          (0.36)
                                         ================  ================
Weighted average basic common shares
 outstanding                                        7,170             7,022
                                         ================  ================
Diluted loss per common share            $          (0.50) $          (0.36)
                                         ================  ================
Weighted average diluted common shares
 outstanding                                        7,170             7,022
                                         ================  ================



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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

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