GlobeNewswire Inc | Aug 4, 2020 04:05PM EDT

August 04, 2020

- Continues to Navigate COVID-19 From a Position of Strength, Reporting a 38% Sequential Quarter Increase in Unrestricted Cash and Investments to $129.7 Million and $11.5 Million in Net Income -

- Reinstates 2020 Financial Outlook, Expecting Diluted EPS of $3.70 -

VANCOUVER, Washington, Aug. 04, 2020 (GLOBE NEWSWIRE) -- Barrett Business Services, Inc. (BBSI or the Company) (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for thesecond quarter endedJune30, 2020.

Second Quarter 2020 Financial Summary vs. Year-Ago Quarter

-- Net revenues down13% to $201.0 million. -- Gross billingsdown 6% to $1.37 billion. -- Net income of $11.5 million, or$1.51 per diluted share, compared to net income of $13.9 million, or$1.81 per diluted share. -- Unrestricted cash and investments up 28% to $129.7 million (up 38% versus Q1 2020).

I am proud of the work and support that we have provided to our clients to help them navigate these unprecedented times, said Gary Kramer, CEO of BBSI. Our teams were there to support over 7,000 business owners in a time of great uncertainty and, for many, significant stress.

Our results reflect the strength of our business model, the execution of our COVID-19 strategy and, more importantly, the resilience of small businesses. Our people, product, information technology and financial position have never been more relevant, and we are poised to emerge from this period even stronger than when we entered it.

Second Quarter 2020 Financial Results

Net revenues in thesecond quarter of 2020 weredown 13% to $201.0 million compared to $231.0 million in thesecond quarter of 2019.

Total gross billings in thesecond quarterdecreased6% to $1.37 billion compared to $1.46 billion in the same year-ago quarter (see Key Performance Metrics and Non-GAAP Financial Measures below). The decrease was directly attributable to the effects of the ongoing COVID-19 pandemic and its impact on the economy and operations of small businesses. Gross billings reached their lowest point in April with a rebound in payrolls occurring in May and June.

Non-GAAP gross workers compensation expense as a percent of gross billings was3.8% in thesecond quarter and benefited from a favorable one-time adjustment of prior accident year liability of $1.4 million as well as other cost-saving measures.

Net income for thesecond quarter of 2020decreased to $11.5 million, or$1.51 per diluted share, compared tonet income of $13.9 million, or$1.81 per diluted share, in the year-ago quarter. The decline in net income is primarily attributable to the decline in billing volume and lower investment income in the quarter, partially offset by reductions in operating expenses in the period.

Liquidity

As of June 30, 2020, unrestricted cash and investments increased 28% to $129.7 million compared to $101.0 million in the year-ago quarter and a 38% increase compared to the first quarter of 2020. BBSI remains debt free with the exception of the $3.8 million mortgage on its corporate headquarters. On May 15, 2020, BBSI increased its borrowing capacity from $33 million to $50 million on its revolving line of credit.

Dividend

BBSIs board of directors has confirmed its regular quarterly cash dividend of $0.30 per share. The cash dividend will be paid on September 4, 2020 to all stockholders of record as of August 21, 2020.

Outlook

BBSI expects diluted earnings per share of $3.70 for the full year 2020. This includes an estimate that gross billings will decrease approximately 3% for the year, with the low point for gross billings occurring in the second quarter. This estimate assumes an effective tax rate of approximately 21%.

BBSI also expects workers compensation expense as a percentage of gross billings to decrease to a range of 3.8% to 4.0%, which includes the favorable adjustments to liabilities recorded through the second quarter.

Conference Call

BBSI will conduct a conference call on Wednesday, August 5, 2020, 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, 2020.

BBSIs CEO Gary Kramer and CFO Anthony Harris will host the conference call, followed by a question and answer period.

Date: Wednesday, August 5, 2020 Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time) Toll-free dial-in number: 1-877-407-4018 International dial-in number: 1-201-689-8471 Conference ID: 13707226

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 www.mybbsi.com.

A replay of the conference call will be available after 3:00 p.m. Eastern time on the same day through September 5, 2020.

Toll-free replay number: 1-844-512-2921 International replay number: 1-412-317-6671 Replay ID: 13707226

Key Performance Metrics and Non-GAAP Financial Measures

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 billing amounts 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 billing and wage information for thethree and six months ended June30, 2020 and 2019.

(Unaudited) (Unaudited) Three Months Ended June30, Six Months Ended June30,(in thousands) 2020 2019 2020 2019Gross billings $ 1,369,990 $ 1,463,962 $ 2,809,110 $ 2,824,206 PEO and staffing $ 1,177,855 $ 1,246,576 $ 2,410,435 $ 2,402,947 wages Because safety incentives represent consideration payable to PEO customers,safety incentive costs are netted against PEO revenue in our consolidatedstatements of operations. Management considers safety incentives to be anintegral part of our workers? compensation program because they encourageclient companies to maintain safe work practices and minimize workplaceinjuries. We therefore present below for purposes of analysis non-GAAP grossworkers? compensation expense, which represents workers? compensation costsincluding safety incentive costs. We believe this non-GAAP measure is useful inevaluating the total costs of our workers? compensation program.

(Unaudited) (Unaudited) Three Months Ended June30, Six Months Ended June30,(in thousands) 2020 2019 2020 2019Workers' $ 44,921 $ 53,174 $ 99,435 $ 107,403 compensationSafety incentive 6,802 7,833 13,781 14,536 costsNon-GAAP grossworkers' $ 51,723 $ 61,007 $ 113,216 $ 121,939 compensation In monitoring and evaluating the performance of our operations, management alsoreviews the following ratios, which represent selected amounts as a percentageof gross billings. Management believes these ratios are useful in understandingthe efficiency and profitability of our service offerings.

(Unaudited) (Unaudited) Percentage of Gross Billings Percentage of Gross Billings Three Months Ended June30, Six Months Ended June30, 2020 2019 2020 2019PEO and staffing 86.0% 85.2% 85.8% 85.1%wagesPayroll taxes and 6.8% 6.9% 7.6% 7.7%benefitsNon-GAAP grossworkers' 3.8% 4.2% 4.0% 4.3%compensation

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 Companys integrated platform is built upon expertise in payroll processing, employee benefits, workers compensation coverage, risk management and workplace safety programs, and human resource administration. BBSIs partnerships help businesses of all sizes improve the efficiency of their operations. The Company works with more than 7,200 clients across all lines of business in 31 states. For more information, please visit www.mybbsi.com.

Forward-Looking Statements

Statements in this release about future events or performance, including expectations regarding the effects of the COVID-19 pandemic on our business operations and product relevance, and future gross billings, effective tax rates, earnings per share, and workers compensation expense as a percentage of gross billings, 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 effects of governmental orders imposing business closures and stay-at-home and physical distancing requirements, 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 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 Companys primary markets, litigation costs, the effect of governmental investigations, 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, and the effects of the pandemic, economic slowdown, and conditions in the global capital markets on the Companys investment portfolio, among others. Other important factors that may affect the Companys prospects are described in the Companys 2019 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)

June30, December31,(in thousands) 2020 2019Assets Current assets: Cash and cash equivalents $ 62,210 $ 44,570Investments 67,473 82,590Trade accounts receivable, net 188,383 163,561Income taxes receivable 3,506 1,335Prepaid expenses and other 17,377 14,919Restricted cash and investments 82,567 116,873Total current assets 421,516 423,848Property, equipment and software, net 35,278 31,724Operating lease right-of-use assets 24,985 23,805Restricted cash and investments 239,032 327,326Goodwill 47,820 47,820Other assets 3,707 3,618Deferred income taxes - 2,788 $ 772,338 $ 860,929Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 221 $ 221Accounts payable 4,951 5,993Accrued payroll, payroll taxes and related benefits 181,406 174,168Current operating lease liabilities 7,244 6,671Other accrued liabilities 6,553 8,846Workers' compensation claims liabilities 89,868 118,273Safety incentives liability 25,767 27,950Total current liabilities 316,010 342,122Long-term workers' compensation claims liabilities 246,636 320,713Long-term debt 3,620 3,730Deferred income taxes 2,685 -Long-term operating lease liabilities 18,630 17,883Customer deposits and other long-term liabilities 4,869 4,682Stockholders' equity 179,888 171,799 $ 772,338 $ 860,929

Barrett Business Services, Inc.Condensed Consolidated Statements of Operations(Unaudited) (Unaudited) (Unaudited)(in thousands, except per Three Months Ended Six Months Endedshare amounts) June30, June30, 2020 2019 2020 2019Revenues: Professional employer $ 180,488 $ 203,157 $ 374,080 $ 393,684service feesStaffing services 20,543 27,825 46,055 55,513Total revenues 201,031 230,982 420,135 449,197Cost of revenues: Direct payroll costs 15,796 20,992 34,873 41,834Payroll taxes and benefits 93,671 101,697 213,133 216,494Workers' compensation 44,921 53,174 99,435 107,403Total cost of revenues 154,388 175,863 347,441 365,731Gross margin 46,643 55,119 72,694 83,466Selling, general and 33,255 39,005 65,370 72,165administrative expensesDepreciation and 1,171 970 2,171 1,939amortizationIncome from operations 12,217 15,144 5,153 9,362Other income, net 1,666 2,851 4,399 5,458Income before income taxes 13,883 17,995 9,552 14,820Provision for income taxes 2,373 4,088 1,449 3,213Net income $ 11,510 $ 13,907 $ 8,103 $ 11,607Basic income per common $ 1.52 $ 1.88 $ 1.07 $ 1.57shareWeighted average basic 7,557 7,410 7,539 7,408common shares outstandingDiluted income per common $ 1.51 $ 1.81 $ 1.06 $ 1.51shareWeighted average diluted 7,647 7,692 7,678 7,674common shares outstanding

Investor Relations: Gateway Investor RelationsCody Slach Tel 1-949-574-3860 BBSI@gatewayir.com