GlobeNewswire Inc | Mar 3, 2021 04:05PM EST

March 03, 2021

- Q4 2020 Net Income of $7.2 Million, or $0.93 per Diluted Share -

- Full Year 2020 Net Income of $33.8 Million, or $4.39 per Diluted Share -

VANCOUVER, Wash., March 03, 2021 (GLOBE NEWSWIRE) -- 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 December31, 2020.

Fourth Quarter 2020 Financial Summary vs. Year-Ago Quarter

-- Net revenues down 5% to $233.2 million. -- Gross billings up 1% to $1.60 billion. -- Average worksite employees (WSEs) down 6%. -- Net income of $7.2 million, or $0.93 per diluted share, compared to $11.7 million, or $1.51 per diluted share. -- Unrestricted cash and investments up 34% to $169.9 million.

Full Year 2020 Financial Summary vs. 2019

-- Net revenues down 7% to $880.8 million. -- Gross billings down 1% to $5.92 billion. -- Average WSEs down 5%. -- Net income of $33.8 million, or $4.39 per diluted share, compared to $48.3 million, or $6.27 per diluted share.

Once again, we had a stronger-than-expected quarter, finishing out an extremely challenging year with continued resilience, said BBSI President and CEO, Gary Kramer. While business volume and earnings were impacted by the pandemic, I am extremely proud of the work that our teams performed throughout the year. We helped thousands of small businesses in a year of great need while at the same time implementing strategies to make BBSI even stronger coming out of the COVID-19 pandemic.

Fourth Quarter 2020 Financial Results

Net revenues in the fourth quarter of 2020 decreased 5% to $233.2 million compared to $245.2 million in the fourth quarter of 2019.

Total gross billings in the fourth quarter increased 1% to $1.60 billion compared to $1.59 billion in the same year-ago quarter (see Key Performance Metrics and Non-GAAP Financial Measures below). The increase was primarily due to higher average payroll per WSE, partially offset by a 6% decrease in average WSEs attributable to the effects of the ongoing COVID-19 pandemic.

Non-GAAP gross workers compensation expense as a percent of gross billings was 3.7% in the fourth quarter of 2020 and benefited from a favorable one-time adjustment of prior accident year liability of $1.2 million, as well as other cost-saving measures. This compares to 4.2% in the fourth quarter of 2019.

Net income for the fourth quarter of 2020 decreased to $7.2 million, or $0.93 per diluted share, compared to $11.7 million, or $1.51 per diluted share, in the year-ago quarter. The decline in net income is primarily attributable to a lower level of favorable development on prior year claims and lower investment income in the quarter.

Full Year 2020 Financial Results

Net revenues in 2020 decreased to $880.8 million compared to $942.3 million in 2019.

Total gross billings in 2020 decreased 1% to $5.92 billion compared to $5.97 billion in 2019 (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, including a decrease in average WSEs of 5% for the year, offset in part by higher average payroll per WSE.

Non-GAAP gross workers compensation expense as a percent of gross billings was 3.8% in 2020 and benefited from favorable adjustments of prior accident year liability of $6.4 million, as well as other cost-saving measures. This compares to 4.1% in 2019.

Net income in 2020 decreased to $33.8 million, or $4.39 per diluted share, compared to $48.3 million, or $6.27 per diluted share, in 2019. The decline in net income is primarily attributable to a lower level of favorable development on prior year claims compared to 2019, as well as lower billing volume and investment income, partially offset by reductions in operating expenses in 2020.

Liquidity

As of December 31, 2020, unrestricted cash and investments increased 34% to $169.9 million compared to $127.2 million in the year-ago quarter. BBSI remains debt free apart from the $3.7 million mortgage on its corporate headquarters.

Capital Allocation

BBSIs board of directors has confirmed its regular quarterly cash dividend of $0.30 per share. The cash dividend will be paid on April 2, 2021 to all stockholders of record as of March 19, 2021. Since the repurchases reported in its last earnings release, the Company also repurchased an additional 28,000 shares at an average price of $71.80 per share.

Outlook

In 2021, BBSI expects the following:

-- Gross billings growth of 2% to 5% -- Growth in the average number of WSEs of 1% to 3% -- Gross margin as a percent of gross billings of 2.9% to 3.1% -- Effective annual tax rate of 21% to 23%

Conference Call

BBSI will conduct a conference call on Wednesday, March 3, 2021, at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss its financial results for the fourth quarter and the full year ended December 31, 2020.

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

Date: Wednesday, March 3, 2021Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)Toll-free dial-in number: 1-877-407-4018International dial-in number: 1-201-689-8471Conference ID: 13716825

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.bbsi.com.

A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through April 3, 2021.

Toll-free replay number: 1-844-512-2921International replay number: 1-412-317-6671Replay ID: 13716825

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 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 twelve months ended December31, 2020 and 2019.

(Unaudited) (Unaudited) Three Months Ended Year Ended December31, December31,(in thousands) 2020 2019 2020 2019Gross billings $ 1,603,521 $ 1,593,919 $ 5,924,539 $ 5,971,008PEO and staffing $ 1,387,816 $ 1,365,527 $ 5,098,604 $ 5,090,943wages

Because safety incentives represent consideration payable to PEO customers, safety incentive costs are netted against PEO revenue in our consolidated statements of operations. Management considers safety incentives to be closely connected to our workers compensation program because they encourage client companies to maintain safe work practices and minimize workplace injuries. We therefore present below for purposes of analysis non-GAAP gross workers compensation expense, which represents workers compensation costs including safety incentive costs. We believe this non-GAAP measure is useful in evaluating the total costs of our workers compensation program.

(Unaudited) (Unaudited) Three Months Ended Year Ended December31, December31,(in thousands) 2020 2019 2020 2019Workers' compensation $ 54,624 $ 57,600 $ 200,744 $ 211,890Safety incentive costs 4,394 8,862 23,544 31,663Non-GAAP gross workers' $ 59,018 $ 66,462 $ 224,288 $ 243,553compensation

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 Percentage of Gross Billings Billings Three Months Ended Year Ended December31, December31, 2020 2019 2020 2019PEO and staffing wages 86.5% 85.7% 86.1% 85.3%Payroll taxes and benefits 6.6% 6.8% 7.1% 7.2%Non-GAAP gross workers' 3.7% 4.2% 3.8% 4.1%compensationGross margin 3.2% 3.4% 3.1% 3.5%

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) Year Ended December 31, 2020 % Change 2019 % Change 2018Average WSEs 108,249 -5.3 % 114,341 4.1 % 109,859Ending WSEs 109,292 -4.6 % 114,584 4.6 % 109,527

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 7,500 clients across all lines of business in 39 states. For more information, please visit www.bbsi.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 growth in gross billings, average number of WSEs, earnings per share, workers compensation expense as a percentage of gross billings, gross margin as a percentage of gross billings and effective annual tax rates, 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, 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 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 Companys 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, 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)

December31, December31,(in thousands) 2020 2019Assets Current assets: Cash and cash equivalents $ 68,688 $ 44,570Investments 101,244 82,590Trade accounts receivable, net 118,506 163,561Income taxes receivable 6,485 1,335Prepaid expenses and other 15,961 14,919Restricted cash and investments 96,991 116,873Total current assets 407,875 423,848Property, equipment and software, net 34,916 31,724Operating lease right-of-use assets 23,025 23,805Restricted cash and investments 258,153 327,326Goodwill 47,820 47,820Other assets 3,161 3,618Deferred income taxes ? 2,788 $ 774,950 $ 860,929Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 221 $ 221Accounts payable 4,746 5,993Accrued payroll, payroll taxes and related benefits 149,989 174,168Current operating lease liabilities 7,539 6,671Other accrued liabilities 7,275 8,846Workers' compensation claims liabilities 102,040 118,273Safety incentives liability 18,827 27,950Total current liabilities 290,637 342,122Long-term workers' compensation claims liabilities 255,706 320,713Long-term debt 3,510 3,730Deferred income taxes 4,518 ?Long-term operating lease liabilities 16,419 17,883Customer deposits and other long-term liabilities 5,925 4,682Stockholders' equity 198,235 171,799 $ 774,950 $ 860,929

Barrett Business Services, Inc.Condensed Consolidated Statements of Operations(Unaudited)

(in thousands, except per Three Months Ended Year Endedshare amounts) December31, December31, 2020 2019 2020 2019Revenues: Professional employer $ 204,268 $ 212,033 $ 777,430 $ 819,873service feesStaffing services 28,908 33,119 103,394 122,438Total revenues 233,176 245,152 880,824 942,311Cost of revenues: Direct payroll costs 22,055 25,157 78,380 92,455Payroll taxes and benefits 105,518 108,372 418,793 429,713Workers' compensation 54,624 57,600 200,744 211,890Total cost of revenues 182,197 191,129 697,917 734,058Gross margin 50,979 54,023 182,907 208,253Selling, general and 40,959 40,362 141,916 153,879administrative expensesDepreciation and 1,332 977 4,844 3,886amortizationIncome from operations 8,688 12,684 36,147 50,488Other income, net 756 2,704 6,449 10,650Income before income taxes 9,444 15,388 42,596 61,138Provision for income taxes 2,293 3,674 8,831 12,846Net income $ 7,151 $ 11,714 $ 33,765 $ 48,292Basic income per common $ 0.94 $ 1.57 $ 4.46 $ 6.48shareWeighted average basic 7,590 7,505 7,577 7,451common shares outstandingDiluted income per common $ 0.93 $ 1.51 $ 4.39 $ 6.27shareWeighted average diluted 7,686 7,736 7,688 7,699common shares outstanding

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