Barrett Business Services, Inc. (BBSI) Q1 2010 Earnings Call Transcript April 28, 2010 12:00 pm ET Executives Jim Miller – VP-Finance, Treasurer and Secretary Bill Sherertz – President and CEO Analysts Josh Vogel – Sidoti & Company Alex Smith – Bellone & Associates Limited Jeff Martin – Roth Capital John Willer [ph] – ORCA Investment [ph] Presentation Operator
Previous Statements by BBSI
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Most of our comments today, however, will be based upon gross revenues and various relationships to gross revenues because management believes such information is, one, more informative as to the level of our business activity; two, more useful in managing and analyzing our operations; and three, adds more transparency to the trends within our business. Comments 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.Turning now to the first quarter results, as reported, the company experienced $0.16 loss per diluted share in the 2010 first quarter as compared to a $0.30 loss per share for the first quarter of 2009. Total gross revenues for the 2010 first quarter of $262.6 million increased $34.7 million or 15.2% over the 2009 first quarter. California, which comprised approximately 81% of our overall first quarter gross revenues, increased 19.4%, owing to modest growth in PEO revenues, partially offset by a small decline in staffing revenues. Staffing revenues for the first quarter of 2010 increased $3 million or 12.6% over the first quarter of 2009, primarily due to an increase in demand for our staffing services from existing customers in both our Northwest and Intermountain markets, as our new staffing business during the quarter nearly equalled the loss of business from former customers. The increase in staffing revenues from existing customers reverses a trend of declines over the past five quarters. PEO gross revenues increased $31.7 million or 15.5% on a quarter-over-quarter basis due to the addition of new customers. Our new PEO business during the quarter from customers added since April 1 of 2009 exceeded the sum of lost PEO business from the first quarter of 2009 from former customers, and a decline in hours worked at existing customer work sites. Bill will comment further on the growth of new PEO customers in a few minutes.
Gross margin dollars for the 2010 first quarter increased approximately $1.7 million over the 2009 first quarter primarily due to the 15.2% increase in revenues, and to a lower payroll taxes and benefit cost component as a percentage of revenues. Gross margin percent on a gross revenue basis was 2.1% compared to 1.6% from the prior year, again primarily due to the decline in the payroll taxes and benefits expense percentage.Direct payroll cost increased 20 basis points over the 2009 first quarter, primarily attributable to an increase in the mix of PEO services, which typically have a much higher payroll cost component than staffing services. Payroll taxes and benefits for the 2009 first quarter as a percentage of gross revenues decreased from 9.9% to 9.4% primarily resulting from the company changing to client specific state unemployment wage reporting in California for all our PEO clients. The change resulted in a decline in the company’s overall average effective California state unemployment rate. These wages were previously all reported under BBSI’s account, which generally has a higher unemployment tax rate due to the impact of our staffing employee population. Workers' compensation expense for the first quarter of 2010 as a percentage of gross revenues decreased slightly from 3.5% to 3.4%, as the company experienced similar loss levels for 2010 compared to 2009 in relationship to the increased business volume. Selling, general and administrative or SG&A expenses of $8.2 million increased $184,000 or 2.3% over the 2009 first quarter. This small increase was primarily due to the increased level of business activity. The benefit from income taxes for the first quarter of 2010 included an additional benefit of $248,000 or approximately $0.02 per share, primarily from a reduction to a deferred tax asset allowance as sales of certain closed-in bond funds during the first quarter of 2010 allowed the company to carry back these tax losses against unused 2009 taxable capital gains. We expect our overall tax rate for the remainder of 2010 to be in the low 30% range. Read the rest of this transcript for free on seekingalpha.com