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BBSI Reports Second Quarter 2014 Financial Results

Q2 Net Revenues Up 17% to $151.1 Million Drives 23% Increase in Diluted Earnings per Share to $0.98

VANCOUVER, WA -- (Marketwired) -- 07/29/14 -- Barrett Business Services, Inc. ("BBSI" or the "Company") (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the second quarter ended June 30, 2014.

Second Quarter 2014 Financial Summary vs. Year-Ago Quarter

  • Net revenues up 17% to $151.1 million
  • Gross revenues up 18% to $798.4 million
  • Net income increased 24% to $7.3 million
  • Diluted earnings per share increased 23% to $0.98

Second Quarter 2014 Financial Results
Net revenues in the second quarter of 2014 increased 17% to $151.1 million compared to $128.8 million in the second quarter of 2013.

Total non-GAAP gross revenues in the second quarter of 2014 increased 18% to $798.4 million compared to $675.0 million in the second 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.

Net income in the second quarter of 2014 increased 24% to $7.3 million compared to net income of $5.9 million in the year-ago quarter. Diluted earnings per share in the second quarter of 2014 increased 23% to $0.98 compared to $0.80 per diluted share in the year-ago quarter.

At June 30, 2014, the Company's cash, cash equivalents, marketable securities, and restricted securities totaled $146.1 million compared to $143.2 million at December 31, 2013. At June 30, 2014, the Company had no outstanding borrowings on its revolving credit facility.

Management Commentary
"The growth in our business for the second quarter of 2014 is a direct result of BBSI's continued brand maturation in the marketplace," said Michael Elich, president and CEO of BBSI. "Complemented by healthy organic growth from our existing client base and strong referral channels, we continue to drive new business and maintain our high client retention rate.

"Looking towards the second half of the year, BBSI remains well-positioned to deliver another strong year for our shareholders, despite the client backfilling process we have undertaken. We also continue to expand and invest in our infrastructure and internal talent, which we believe will help us ultimately support a much larger, more mature company."

Third Quarter 2014 Outlook

For the third quarter of 2014, the Company expects gross revenues to increase at least 14% to range between $870 million and $890 million compared to $764.1 million in the third quarter of 2013. Diluted earnings per common share in the third quarter of 2014 is expected to range between $1.30 and $1.35 compared to $1.21 in the third quarter of 2013. Diluted earnings per common share in the third quarter of 2013 included a positive impact of approximately $0.08 per common share from a more favorable tax rate compared to the estimated tax rate for the third quarter of 2014.

Conference Call

BBSI will conduct a conference call tomorrow, July 30, 2014 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, 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, July 30, 2014
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Toll-free dial-in number: 1-888-430-8691
International dial-in number: 1-719-325-2376
Conference ID: 3575137

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=110019 and via BBSI's investor relations section of the BBSI website 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 August 30, 2014.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 3575137

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)           (Unaudited)
                                  Second Quarter Ended    Six Months Ended
(in thousands)                          June 30,              June 30,
                                 --------------------- ---------------------
                                    2014       2013       2014       2013
                                 ---------- ---------- ---------- ----------

Revenues:
  Professional employer services $  759,838 $  639,663 $1,453,764 $1,201,146
  Staffing services                  38,566     35,304     72,017     65,037
                                 ---------- ---------- ---------- ----------
    Total revenues                  798,404    674,967  1,525,781  1,266,183
                                 ---------- ---------- ---------- ----------
Cost of revenues:
  Direct payroll costs              672,078    568,800  1,285,398  1,067,538
  Payroll taxes and benefits         61,130     53,483    133,947    112,606
  Workers' compensation              35,344     28,958     67,278     54,002
                                 ---------- ---------- ---------- ----------
    Total cost of revenues          768,552    651,241  1,486,623  1,234,146
                                 ========== ========== ========== ==========
Gross margin                     $   29,852 $   23,726 $   39,158 $   32,037
                                 ========== ========== ========== ==========

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

                                               (Unaudited)
                                       Three Months Ended June 30,
                            ------------------------------------------------
                                Gross Revenue
(in thousands)                 Reporting Method       Reclassification
                            --------------------- ------------------------
                               2014       2013        2014         2013
                            ---------- ---------- -----------  -----------
Revenues:
  Professional employer
   services                 $  759,838 $  639,663 $  (647,335) $  (546,169)
  Staffing services             38,566     35,304           -            -
                            ---------- ---------- -----------  -----------
    Total revenues          $  798,404 $  674,967 $  (647,335) $  (546,169)
                            ========== ========== ===========  ===========
Cost of revenues            $  768,552 $  651,241 $  (647,335) $  (546,169)
                            ========== ========== ===========  ===========


                                 (Unaudited)
                              Three Months Ended
                                   June 30,
                            ---------------------
                                 Net Revenue
(in thousands)                 Reporting Method
                            ---------------------
                               2014       2013
                            ---------- ----------
Revenues:
  Professional employer
   services                 $  112,503 $   93,494
  Staffing services             38,566     35,304
                            ---------- ----------
    Total revenues          $  151,069 $  128,798
                            ========== ==========
Cost of revenues            $  121,217 $  105,072
                            ========== ==========


                                               (Unaudited)
                                        Six Months Ended June 30,
                            ------------------------------------------------
                                Gross Revenue
(in thousands)                 Reporting Method       Reclassification
                            --------------------- ------------------------
                               2014       2013        2014         2013
                            ---------- ---------- -----------  -----------
Revenues:
  Professional employer
   services                 $1,453,764 $1,201,146 $(1,239,572) $(1,025,834)
  Staffing services             72,017     65,037           -            -
                            ---------- ---------- -----------  -----------
    Total revenues          $1,525,781 $1,266,183 $(1,239,572) $(1,025,834)
Cost of revenues            $1,486,623 $1,234,146 $(1,239,572) $(1,025,834)



                                 (Unaudited)
                            Six Months Ended June
                                     30,
                            ---------------------
                                 Net Revenue
(in thousands)                 Reporting Method
                            ---------------------
                               2014       2013
                            ---------- ----------
Revenues:
  Professional employer
   services                 $  214,192 $  175,312
  Staffing services         $   72,017     65,037
                            ---------- ----------
    Total revenues          $  286,209 $  240,349
Cost of revenues            $  247,051 $  208,312

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 third 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)
                                                  June 30,     December 31,
(in thousands)                                      2014           2013
                                               -------------- --------------
                    Assets
Current assets:
  Cash and cash equivalents                    $       47,869 $       93,557
  Marketable securities                                32,033         19,787
  Trade accounts receivable, net                      104,008         85,586
  Prepaid expenses and other                            5,283          3,026
  Deferred income taxes                                 8,944          8,929
                                               -------------- --------------
    Total current assets                              198,137        210,885
Marketable securities                                  10,597          5,909
Property, equipment and software, net                  21,786         20,549
Restricted certificates of deposit                     20,943         12,789
Restricted marketable securities and workers'
 compensation deposits                                 34,696         11,205
Other assets                                            3,979          4,165
Goodwill                                               47,820         47,820
                                               -------------- --------------
                                               $      337,958 $      313,322
                                               ============== ==============

     Liabilities and Stockholders' Equity
Current liabilities:
  Current portion of long-term debt            $          220 $          220
  Accounts payable                                      2,435          3,252
  Accrued payroll, payroll taxes and related
   benefits                                           105,710         92,516
  Income taxes payable                                  2,322          1,236
  Other accrued liabilities                             1,081            313
  Workers' compensation claims liabilities             39,069         35,841
  Safety incentives liabilities                        12,718         13,086
                                               -------------- --------------
    Total current liabilities                         163,555        146,464
Long-term workers' compensation claims
 liabilities                                           83,437         76,603
Long term debt                                          4,943          5,053
Deferred income taxes                                  10,392         10,787
Customer deposits and other long-term
 liabilities                                            1,967          1,862
Stockholders' equity                                   73,664         72,553
                                               -------------- --------------
                                               $      337,958 $      313,322
                                               ============== ==============



                       Barrett Business Services, Inc.
                    Consolidated Statements of Operations


                                         (Unaudited)
(in thousands, except per share         Second Quarter       (Unaudited)
 amounts)                                   Ended          Six Months Ended
                                           June 30,            June 30,
                                     ------------------- -------------------
                                        2014      2013      2014      2013
                                     --------- --------- --------- ---------
Revenues:
  Professional employer service fees $ 112,503 $  93,494 $ 214,192 $ 175,312
  Staffing services                     38,566    35,304    72,017    65,037
                                     --------- --------- --------- ---------
    Total revenues                     151,069   128,798   286,209   240,349
                                     --------- --------- --------- ---------
Cost of revenues:
  Direct payroll costs                  29,311    26,611    54,728    48,907
  Payroll taxes and benefits            61,130    53,483   133,947   112,606
  Workers' compensation                 30,776    24,978    58,376    46,799
                                     --------- --------- --------- ---------
    Total cost of revenues             121,217   105,072   247,051   208,312
                                     --------- --------- --------- ---------
Gross margin                            29,852    23,726    39,158    32,037
Selling, general and administrative
 expenses                               17,958    14,494    32,327    26,305
Depreciation and amortization              613       506     1,197       966
                                     --------- --------- --------- ---------
Income from operations                  11,281     8,726     5,634     4,766
Other income, net                          106       110       196       197
                                     --------- --------- --------- ---------
Income before taxes                     11,387     8,836     5,830     4,963
Provision for income taxes               4,104     2,950     2,130     1,626
                                     --------- --------- --------- ---------
Net income                           $   7,283 $   5,886 $   3,700 $   3,337
                                     ========= ========= ========= =========
Basic income per common share        $    1.02 $    0.83 $    0.52 $    0.47
                                     ========= ========= ========= =========
Weighted average basic common shares
 outstanding                             7,173     7,082     7,171     7,052
                                     ========= ========= ========= =========
Diluted income per common share      $    0.98 $    0.80 $    0.50 $    0.45
                                     ========= ========= ========= =========
Weighted average diluted common
 shares outstanding                      7,421     7,374     7,444     7,344
                                     ========= ========= ========= =========

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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