Barrett Business Services(BBSI) - 2023 Q1 - Quarterly Report

Revenue and Income Performance - Total revenues for Q1 2023 increased to $254.667 million, up 3.4$246.375 million in Q1 2022[17] - Net income for Q1 2023 was $819 thousand, compared to$288 thousand in Q1 2022[17] - Professional employer services revenue grew to $232.307 million in Q1 2023, up 6.8$217.433 million in Q1 2022[17] - Staffing services revenue declined to $22.360 million in Q1 2023, down 22.7$28.942 million in Q1 2022[17] - Gross margin improved to $41.544 million in Q1 2023, up 3.0$40.353 million in Q1 2022[17] - Comprehensive income for Q1 2023 was $4.471 million, compared to a comprehensive loss of$14.070 million in Q1 2022[20] - Net income for 2023 increased to $819 million from$288 million in 2022[31] - Total revenues for the three months ended March 31, 2023, were $254.7 million, with professional employer services accounting for 91.2$1.79 billion, with PEO and staffing wages totaling $1.55 billion[90] - BBSI's gross margin for the three months ended March 31, 2023, was 16.3$0.2 million, representing 0.2% of total revenues[87] - Gross margin for Q1 2023 was 16.3% of revenue, totaling $41.5 million, compared to 16.4$254.7 million, driven by a 6.8% increase in PEO service revenue, while staffing services revenue decreased by 22.8%[94] - Net income for Q1 2023 was $0.8 million, up from$0.3 million in Q1 2022, with diluted net income per share rising to $0.12 from$0.04[94] Cash and Investments - Cash and cash equivalents decreased to $52.635 million as of March 31, 2023, down from$91.423 million as of December 31, 2022[15] - Net cash used in operating activities decreased to $26.515 million in 2023 from$30.209 million in 2022[31] - Cash, cash equivalents, and restricted cash at the end of the period were $68.059 million in 2023 compared to$54.837 million in 2022[31] - Restricted cash included in restricted cash and investments was $15.424 million in 2023, down from$15.955 million in 2022[49] - Total cash equivalents decreased from $40.3 million in December 2022 to$26.8 million in March 2023[56] - Total current investments increased from $68.3 million in December 2022 to$80.1 million in March 2023[56] - Total restricted cash and investments decreased from $199.3 million in December 2022 to$194.5 million in March 2023[56] - Total investments decreased from $307.9 million in December 2022 to$301.4 million in March 2023[56] - Corporate bonds recorded basis decreased from $33.3 million in December 2022 to$33.8 million in March 2023[59] - U.S. treasuries recorded basis decreased from $57.3 million in December 2022 to$50.5 million in March 2023[59] - Mortgage backed securities recorded basis decreased from $40.1 million in December 2022 to$39.5 million in March 2023[59] - U.S. government agency securities recorded basis increased from $24.3 million in December 2022 to$24.8 million in March 2023[59] - Corporate bonds total $105,802 thousand, with$2,536 thousand maturing in less than 1 year, $53,788 thousand between 1 to 5 years,$49,300 thousand between 5 to 10 years, and $178 thousand after 10 years[62] - Total investments as of March 31, 2023, amount to$241,463 thousand, including $39,011 thousand in less than 1 year,$94,851 thousand between 1 to 5 years, $106,129 thousand between 5 to 10 years, and$1,472 thousand after 10 years[62] - The company's investment portfolio at March 31, 2023, included $105.8 million in corporate bonds and$61.6 million in U.S. treasuries[102] - The company's cash balance decreased by $39.3 million to$68.1 million in Q1 2023, primarily due to increased trade accounts receivable and repurchases of common stock[98] - Net cash used in operating activities for Q1 2023 was $26.5 million, compared to$30.2 million in Q1 2022[98] Workers' Compensation and Liabilities - Workers' compensation claims liabilities decreased to $14.412 million in 2023 from$16.894 million in 2022[31] - Safety incentives liability decreased to $1.8 million in 2023 from$2.0 million in 2022[44] - Workers' compensation claims liabilities decreased from $215,987 thousand to$201,641 thousand in Q1 2023, with incurred but not reported (IBNR) at $103,804 thousand, representing 51$22.5 million for the twelve-month policy period, with no additional premium charged if claims develop adversely[66] - Loss portfolio transfer agreements (LPT 1 and LPT 2) reduced the company's outstanding workers' compensation liabilities by $115.7 million and$53.1 million, respectively[66] - The trust account balance for the insured program was $178.8 million at March 31, 2023, down from$188.2 million at December 31, 2022[68] - Self-insured programs cover approximately 17% of the company's workers' compensation exposure, with retention limits ranging from $1.0 million to$5.0 million per occurrence depending on the state[70] - Workers' compensation expense for Q1 2023 was $51.7 million, or 20.3$48.2 million, or 19.6% of revenue in Q1 2022[94] Share Repurchases and Stock - The company repurchased $8.030 million worth of common stock during Q1 2023[24] - The company repurchased$8.030 million worth of common stock in 2023, slightly down from $8.575 million in 2022[31] - The company repurchased 90,553 shares in March 2023 at an average price of$88.67 per share, reducing the remaining repurchase authorization to $19,803,564[114] - The company's stock repurchase plan had an approximate remaining dollar value of$27,832,833 as of January 2023[114] Tax and Legal Matters - The IRS intends to disallow certain wage-based tax credits claimed for the years 2017 through 2020, potentially resulting in additional taxes of $5.5 million and penalties of$1.7 million[75] - The company has total gross unrecognized tax benefits of $0.6 million as of March 31, 2023, which could affect the effective tax rate if recognized in future periods[75] - The company recorded estimated liabilities totaling$2.7 million in other accrued liabilities related to ongoing litigation[77] Employee Benefits and Compliance - In 2023, BBSI began offering employee benefits to clients, including medical, dental, vision plans, and other voluntary coverages[85] - The company began offering employee health and welfare benefits to PEO clients in 2023, which may be subject to future changes in healthcare legislation or increased costs[110] - Compliance with HIPAA and HITECH Act is required for handling protected health information (PHI) of client employees, with non-compliance potentially leading to penalties and fines[111] - The company faces risks related to healthcare reforms, including potential penalties if it fails to offer required health coverage to eligible employees under the Affordable Care Act[110] Workforce and Payroll - Average WSEs grew by 2.7% to 119,313 in Q1 2023, compared to 116,197 in Q1 2022[92] - Ending WSEs increased by 2.9% to 121,363 in Q1 2023, compared to 117,924 in Q1 2022[92] - Payroll taxes and benefits for Q1 2023 totaled $144.6 million, or 56.8$135.9 million, or 55.1% of revenue in Q1 2022[94] Credit Facility and Financial Covenants - The company maintains a revolving credit facility of $50.0 million with Wells Fargo Bank, N.A., with no outstanding borrowings as of March 31, 2023[72] - The company was in compliance with all financial covenants under the revolving credit facility agreement as of March 31, 2023[74] - The company was in a cumulative income position for the 12 quarters ended March 31, 2023, indicating a strong financial performance over the past three years[75] Allowance for Doubtful Accounts - The allowance for doubtful accounts was$885,000 at March 31, 2023, compared to $893,000 at December 31, 2022[42] Income Taxes - Income taxes paid during the three months ended March 31, 2023, totaled$0.01 million, down from $0.04 million in 2022[48] Shares Outstanding - Weighted average number of basic shares outstanding decreased from 7,406 in 2022 to 6,866 in Q1 2023[52] - Weighted average number of diluted shares outstanding decreased from 7,474 in 2022 to 6,985 in Q1 2023[52] Market and Operations - BBSI operates in 68 markets throughout the United States, supporting over 7,770 companies daily with its decentralized delivery model[81]