Barrett Business Services Inc 10-Q for FY2021 Q3

Barrett Business Services Inc (BBSI)

10-Q 2021-11-03 For: 2021-09-30

Added on April 08, 2026

About this 10-Q

Barrett Business Services Inc filed this 10-Q on November 3, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).

Headline figures

Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $246.95M; up 8.5% from $227.51M a year earlier
Net income: $14.93M; down 19.4% from net income of $18.51M a year earlier
Diluted EPS: $1.96; down 18.3% from $2.40 a year earlier

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Maryland		52-0812977
(State or other jurisdiction of Incorporation or organization)		(IRS Employer Identification No.)

8100 NE Parkway Drive, Suite 200
Vancouver, Washington		98662
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.01 Per Share	BBSI	The NASDAQ Stock Market LLC

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

Part I - Financial Information (Unaudited)
		Page
Item 1.	Unaudited Interim Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets - September 30, 2021 and December 31, 2020	3

	Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2021 and 2020	4

	Condensed Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2021 and 2020	5

	Condensed Consolidated Statements of Stockholders’ Equity - Three and Nine Months Ended September 30, 2021	6

	Condensed Consolidated Statements of Stockholders’ Equity - Three and Nine Months Ended September 30, 2020	7

	Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2021 and 2020	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

Part II - Other Information

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 6.	Exhibits	32

Signature		33

	September 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	12,860	$	68,688
Investments		102,709		101,244
Trade accounts receivable, net		240,293		118,506
Income taxes receivable		1,732		6,485
Prepaid expenses and other		23,418		15,961
Restricted cash and investments		82,273		96,991
Total current assets		463,285		407,875
Property, equipment and software, net		35,965		34,916
Operating lease right-of-use assets		22,058		23,025
Restricted cash and investments		237,182		258,153
Goodwill		47,820		47,820
Other assets		2,657		3,161
	$	808,967	$	774,950
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	3,565	$	221
Accounts payable		4,483		4,746
Accrued payroll, payroll taxes and related benefits		249,713		149,989
Current operating lease liabilities		7,435		7,539
Other accrued liabilities		8,190		7,275
Workers' compensation claims liabilities		78,225		102,040
Safety incentives liability		5,363		18,827
Total current liabilities		356,974		290,637
Long-term workers' compensation claims liabilities		218,774		255,706
Long-term debt		—		3,510
Deferred income taxes		2,946		4,518
Long-term operating lease liabilities		15,720		16,419
Customer deposits and other long-term liabilities		6,920		5,925
Total liabilities		601,334		576,715
Commitments and contingencies (Notes 4 and 6)
Stockholders' equity:
Common stock, $.01 par value; 20,500 shares authorized, 7,505 and 7,566 shares issued and outstanding		75		76
Additional paid-in capital		27,981		24,885
Accumulated other comprehensive income		3,464		7,564
Retained earnings		176,113		165,710
Total stockholders' equity		207,633		198,235
	$	808,967	$	774,950

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Revenues:
Professional employer service fees	$	217,972		$	199,082		$	620,287		$	573,162
Staffing services		28,978			28,431			78,311			74,486
Total revenues		246,950			227,513			698,598			647,648
Cost of revenues:
Direct payroll costs		21,870			21,452			58,818			56,325
Payroll taxes and benefits		115,012			100,142			349,514			313,275
Workers' compensation		49,833			46,685			141,693			146,120
Total cost of revenues		186,715			168,279			550,025			515,720
Gross margin		60,235			59,234			148,573			131,928
Selling, general and administrative expenses		41,170			35,587			113,939			100,957
Depreciation and amortization		1,342			1,341			3,967			3,512
Income from operations		17,723			22,306			30,667			27,459
Other income (expense):
Investment income, net		1,825			1,664			5,559			6,431
Interest expense		(46	)		(366	)		(433	)		(907	)
Other, net		—			(4	)		(4	)		169
Other income, net		1,779			1,294			5,122			5,693
Income before income taxes		19,502			23,600			35,789			33,152
Provision for income taxes		4,573			5,089			8,324			6,538
Net income	$	14,929		$	18,511		$	27,465		$	26,614
Basic income per common share	$	1.98		$	2.42		$	3.63		$	3.51
Weighted average number of basic common shares outstanding		7,545			7,639			7,559			7,572
Diluted income per common share	$	1.96		$	2.40		$	3.59		$	3.46
Weighted average number of diluted common shares outstanding		7,607			7,709			7,642			7,688


										Accumulated
							Additional			Other
	Common Stock						Paid-in			Comprehensive			Retained
	Shares			Amount			Capital			Income			Earnings			Total
Balance, December 31, 2020		7,566		$	76		$	24,885		$	7,564		$	165,710		$	198,235
Common stock issued on exercise of options, purchase of ESPP shares and vesting of restricted stock units and performance awards		38			—			815			—			—			815
Common stock repurchased on vesting of restricted stock units and performance awards		(1	)		—			(107	)		—			—			(107	)
Share-based compensation expense		—			—			1,060			—			—			1,060
Company repurchase of common stock		(49	)		—			(170	)		—			(3,266	)		(3,436	)
Cash dividends on common stock ($0.30 per share)		—			—			—			—			(2,278	)		(2,278	)
Unrealized loss on investments, net of tax		—			—			—			(5,250	)		—			(5,250	)
Net loss		—			—			—			—			(4,554	)		(4,554	)
Balance, March 31, 2021		7,554		$	76		$	26,483		$	2,314		$	155,612		$	184,485
Common stock issued on exercise of options and vesting of restricted stock units		15			—			61			—			—			61
Common stock repurchased on vesting of restricted stock units		(4	)		—			(287	)		—			—			(287	)
Share-based compensation expense		—			—			1,335			—			—			1,335
Company repurchase of common stock		(42	)		(1	)		(155	)		—			(2,986	)		(3,142	)
Cash dividends on common stock ($0.30 per share)		—			—			—			—			(2,271	)		(2,271	)
Unrealized gain on investments, net of tax		—			—			—			2,151			—			2,151
Net income		—			—			—			—			17,090			17,090
Balance, June 30, 2021		7,523		$	75		$	27,437		$	4,465		$	167,445		$	199,422
Common stock issued on exercise of options, purchase of ESPP shares and vesting of restricted stock units		51			1			279			—			—			280
Common stock repurchased on vesting of restricted stock units		(14	)		—			(1,010	)		—			—			(1,010	)
Share-based compensation expense		—			—			1,479			—			—			1,479
Company repurchase of common stock		(55	)		(1	)		(204	)		—			(3,992	)		(4,197	)
Cash dividends on common stock ($0.30 per share)		—			—			—			—			(2,269	)		(2,269	)
Unrealized loss on investments, net of tax		—			—			—			(1,001	)		—			(1,001	)
Net income		—			—			—			—			14,929			14,929
Balance, September 30, 2021		7,505		$	75		$	27,981		$	3,464		$	176,113		$	207,633

	September 30, 2021							December 31, 2020
			Gross							Gross
			Unrealized							Unrealized
			Gains			Recorded				Gains			Recorded
	Cost		(Losses)			Basis		Cost		(Losses)			Basis
Current:
Cash equivalents:
Money market funds	$	10,742	$	—		$	10,742	$	42,007	$	—		$	42,007
Total cash equivalents		10,742		—			10,742		42,007		—			42,007
Investments:
Corporate bonds		42,007		344			42,351		50,918		884			51,802
Asset backed securities		33,548		(25	)		33,523		36,948		(146	)		36,802
Mortgage backed securities		19,197		(296	)		18,901		4,367		24			4,391
U.S. government agency securities		7,386		548			7,934		7,396		752			8,148
U.S. treasuries		—		—			—		100		1			101
Total current investments		102,138		571			102,709		99,729		1,515			101,244
Restricted cash and investments ⁽¹⁾:
Corporate bonds		127,026		1,209			128,235		88,902		4,091			92,993
Mortgage backed securities		71,546		1,331			72,877		48,795		2,356			51,151
U.S. treasuries		67,908		(32	)		67,876		4,371		19			4,390
U.S. government agency securities		32,928		1,703			34,631		29,737		2,466			32,203
Mutual funds		6,104		—			6,104		5,036		—			5,036
Asset backed securities		150		1			151		256		4			260
Money market funds		143		—			143		40,063		(4	)		40,059
Supranational bonds		—		—			—		4,775		3			4,778
Total restricted cash and investments		305,805		4,212			310,017		221,935		8,935			230,870
Total investments	$	418,685	$	4,783		$	423,468	$	363,671	$	10,450		$	374,121

	September 30, 2021
(In thousands)	Less than 1 Year		Between 1 to 5 Years		Between 5 to 10 Years		After 10 Years		Total
Corporate bonds	$	22,114	$	48,127	$	100,345	$	—	$	170,586
U.S. treasuries		1,005		1,987		64,884		—		67,876
U.S. government agency securities		—		23,742		18,823		—		42,565
Asset backed securities		—		153		2,200		31,321		33,674
Money market funds	$	10,885	$	—	$	—	$	—	$	10,885
Total	$	34,004	$	74,009	$	186,252	$	31,321	$	325,586

	December 31, 2020
(In thousands)	Less than 1 Year		Between 1 to 5 Years		Between 5 to 10 Years		After 10 Years		Total
Corporate bonds	$	49,308	$	61,315	$	34,172	$	—	$	144,795
Money market funds		82,066		—		—		—		82,066
U.S. government agency securities		1,013		18,668		20,670		—		40,351
Asset backed securities		2		267		—		36,793		37,062
Supranational bonds		4,778		—		—		—		4,778
U.S. treasuries		1,367		1,504		1,620		—		4,491
Total	$	138,534	$	81,754	$	56,462	$	36,793	$	313,543

Year	Claims risk retained
2014	No
2015	No
2016	No
2017	No
2018 ⁽¹⁾	No
2019 ⁽¹⁾	Yes
2020	Yes
2021 - Through June 30	Yes
2021 - July 1 and after	No

	Percentage of Total Net Revenues
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2021				2020				2021				2020
Revenues:
Professional employer service fees	$	217,972	88.3	%	$	199,082	87.5	%	$	620,287	88.8	%	$	573,162	88.5	%
Staffing services		28,978	11.7			28,431	12.5			78,311	11.2			74,486	11.5
Total revenues		246,950	100.0			227,513	100.0			698,598	100.0			647,648	100.0
Cost of revenues:
Direct payroll costs		21,870	8.9			21,452	9.4			58,818	8.4			56,325	8.7
Payroll taxes and benefits		115,012	46.6			100,142	44.0			349,514	50.0			313,275	48.4
Workers’ compensation		49,833	20.2			46,685	20.5			141,693	20.3			146,120	22.6
Total cost of revenues		186,715	75.7			168,279	73.9			550,025	78.7			515,720	79.6
Gross margin		60,235	24.3			59,234	26.1			148,573	21.3			131,928	20.4
Selling, general and administrative expenses		41,170	16.7			35,587	15.6			113,939	16.3			100,957	15.6
Depreciation and amortization		1,342	0.5			1,341	0.6			3,967	0.6			3,512	0.5
Income from operations		17,723	7.1			22,306	9.9			30,667	4.4			27,459	4.2
Other income, net		1,779	0.7			1,294	0.6			5,122	0.7			5,693	0.9
Income before income taxes		19,502	7.9			23,600	10.4			35,789	5.1			33,152	5.1
Provision for income taxes		4,573	1.9			5,089	2.2			8,324	1.2			6,538	1.0
Net income	$	14,929	6.0	%	$	18,511	8.1	%	$	27,465	3.9	%	$	26,614	4.1	%

	(Unaudited)				(Unaudited)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Gross billings	$	1,689,313	$	1,511,908	$	4,762,193	$	4,321,018
PEO and staffing wages	$	1,462,982	$	1,300,352	$	4,119,235	$	3,710,788

	(Unaudited)		(Unaudited)
	Percentage of Gross Billings		Percentage of Gross Billings
	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2021	2020	2021	2020
PEO and staffing wages	86.6%	86.0%	86.5%	85.9%
Payroll taxes and benefits	6.8%	6.6%	7.3%	7.3%
Non-GAAP gross workers' compensation	3.0%	3.4%	3.0%	3.8%
Gross margin	3.6%	3.9%	3.1%	3.1%

Month	Total Number of Shares Repurchased		Average Price Paid Per Share		Total Number of Shares Repurchased as Part of Publicly Announced Plan ⁽¹⁾		Approximate Dollar Value of Shares that May Yet Be Repurchased Under the Plan ⁽¹⁾
July		7,687	$	71.54		7,687	$	34,819,079
August		—		—		—		34,819,079
September		47,860		76.19		47,860		31,172,822
Total		55,547				55,547

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
32*		Certification pursuant to 18 U.S.C. Section 1350.
101.INS		Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, has been formatted in Inline XBRL.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Beginning balance
Workers' compensation claims liabilities	$	315,733		$	336,504		$	357,746		$	438,986
Add: claims expense accrual
Current period		2,394			35,138			71,407			106,359
Prior periods		(823	)		(2,977	)		(7,486	)		(5,163	)
		1,571			32,161			63,921			101,196
Less: claim payments related to
Current period		6,149			7,046			11,129			13,123
Prior periods		14,018			15,640			113,022			181,170
		20,167			22,686			124,151			194,293

Change in claims incurred in excess of retention limits		(138	)		1,369			(517	)		1,459

Ending balance
Workers' compensation claims liabilities	$	296,999		$	347,348		$	296,999		$	347,348
Incurred but not reported (IBNR)	$	162,382		$	203,595		$	162,382		$	203,595

Ratio of IBNR to workers' compensation claims liabilities		55	%		59	%		55	%		59	%

	(Unaudited)
	Three Months Ended
	September 30,
	2021		% Change	2020		% Change
Average WSEs		116,258	8.0%		107,600	-8.1%
Ending WSEs		115,949	7.7%		107,612	-7.6%

	(Unaudited)
	Nine Months Ended
	September 30,
	2021		% Change	2020		% Change
Average WSEs		111,640	3.6%		107,809	-5.2%
Ending WSEs		115,949	7.7%		107,612	-7.6%

	BARRETT BUSINESS SERVICES, INC.
	Registrant

Date: November 3, 2021	By:	/s/ Anthony J. Harris
		Anthony J. Harris
		Executive Vice President and Chief Financial Officer and Treasurer