Barrett Business Services, Inc. (
Q1 2011 Earnings Call
April 27, 2011 12:00 pm ET
Mike Elich - Interim President, CEO and COO
James Miller - CFO, VP of Finance, Treasurer, PAC and Secretary
Josh Vogel - Sidoti
Jeff Martin - Roth Capital Partners
Michael Prouting - 10K Capital
Kimberly Sherertz - Estate of William Sherertz
Ken Thomas - Progressive Investment
Previous Statements by BBSI
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Good afternoon. My name is Parnell and I will be your conference operator today. At this time, I would like to welcome everyone to the Barrett Business Services Investor Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. (Operator Instructions) Thank you Mr. Miller. You may begin your conference.
Thank you. Good morning, this is Jim Miller, with Mike Elich. Today we'll provide you with our comments regarding the company's operating results for the recently completed first quarter, ended March 31st and our outlook for the second quarter of 2011.
Our remarks during today's conference call may include forward-looking statements. These statements, along with other information presented that are not historical facts are subject to a number of risks and uncertainties. Actual results may differ materially from those implied by these forward-looking statements.
Please refer to our recent earnings release and to our quarterly and annual reports filed with the Securities & Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ.
Page one of yesterday's earnings release reflecting our operating results summarizes the company's revenues and cost of revenues on a net revenue basis as required by Generally Accepted Accounting Principles.
Most of our comments today, however, will be based upon gross revenues and various relationships to gross revenues, as management believes such information is more informative as to the level of our business activity, two more useful in managing and analyzing our operations and three, add more transparency to the trends within our business.
Cost related to gross revenues as compared to a net revenue basis of reporting have no effect on gross margin dollars, SG&A expenses or net income. Looking out at the first quarter results, as reported the company earned $0.54 per diluted share in the 2011 first quarter as compared to a diluted loss per share of $0.16 for the 2010 first quarter.
Income for the 2011 first quarter included the $10 million of proceeds in the Key Man Life Insurance policy, a Company maintained on Bill Sherertz, the Company’s President and CEO, who passed away in January of this year. But after that sort of the life insurance proceeds and certain incremental SG&A expense associated with the leadership transition, the company experienced a net loss of approximately $0.19 per share of the 2011 first quarter.
Total gross revenues for the 2011 first quarter of $331.1 million increased $68.5 million or 26.1% over the 2010 first quarter. California which comprised approximately 83% of our overall first quarter gross revenues increased 29.6% owning to continued growth and new PEO business.
Staffing revenues for the first quarter of 2011 increased $1.3 million or 4.7% over the first quarter of 2010, primarily due to an increase in demand for our staffing services from existing customers. New staffing business during the first quarter approximately offset the loss of business from former staffing customers.
PEO gross revenues increased $67.2 million or 28.6% on a quarter-over-quarter basis primarily due to the addition of new customers. Our new PEO business during the quarter from customer's added since April 1, 2010 totaled $73.7 million, which tripled the amount of last PEO business from the first quarter of 2010 from former customers. Our PEO revenues from existing customers also experienced an increase of $13.5 million or 6.4% on a quarter over quarter basis. Increase in PEO revenues from existing customers represents the fourth consecutive quarter of existing customer growth.
Gross margin dollars for the 2011 first quarter of $5.6 million increased approximately $233,000 over the 2010 first quarter, primarily due to the increase in revenues. Gross margin percent on a gross revenue basis was 1.7% for the 2011 first quarter as compared to 2.1% for the 2010 first quarter, primarily attributable to higher direct payroll cost and higher payroll taxes and benefits.
Direct payroll cost increased 23 basis points over the 2010 first quarter, due to an increase in our mix of PEO services, which typically have a much higher payroll cost component than staffing services.
Payroll taxes and benefits for the 2011 first quarter as a percentage of gross revenues increased from approximately 9.4% to 9.6% due to a higher state unemployment tax rates in various states the company operates in. To mitigate the impact of the increased unemployment tax expense from our PEO customers, we analyzed PEO customer unemployment experience and negotiate higher mark-up rates when warranted upon the customer's annual contract renewal.
Worker's compensation expense for the 2011 first quarter increased 2.1 million over the 2010 quarter. Worker compensation expense for the first quarter as a percentage of gross revenues decreased slightly from 3.4% to 3.3% primarily due to the relative stability of the fixed cost component of our self-insured program.
The company experienced similar loss levels for the 2011 first quarter in relationship to business volume as compared to the 2010 first quarter. Selling, general and administrative or SG&A expenses of $8.8 million increases approximately $600,000 or 7.3% of the 2010 first quarter. This increase was primarily due to increases in branch management payroll, travel and cost associated with the leadership transition.