Barrett Business Services, Inc. (BBSI) Bundle
Understanding Barrett Business Services, Inc. (BBSI) Revenue Streams
Understanding Barrett Business Services, Inc. (BBSI)’s Revenue Streams
Barrett Business Services, Inc. generates revenue primarily through its Professional Employer Organization (PEO) services and staffing services. The breakdown of these revenue sources is as follows:
| Revenue Source | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | Year-over-Year Growth (%) |
|---|---|---|---|
| PEO Services | $272,793 | $251,423 | 8.5% |
| Staffing Services | $21,485 | $21,905 | -1.9% |
| Total Revenue | $294,278 | $273,328 | 7.7% |
In the first nine months of 2024, the total revenue reached $839.7 million, an increase of $47.1 million or 5.9% compared to the same period in 2023. This growth was driven by a 7.0% increase in PEO services revenue, amounting to $778.9 million, while staffing services revenue decreased by 5.9% to $60.8 million.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate shows a positive trend in PEO services, reflecting the company’s ability to increase its client base and service offerings:
| Period | Revenue (in millions) | Year-over-Year Growth (%) |
|---|---|---|
| Q3 2024 | $294.3 | 7.7% |
| Q3 2023 | $273.3 | - |
| 9M 2024 | $839.7 | 5.9% |
| 9M 2023 | $792.6 | - |
The increase in revenue is attributed to a 3.9% rise in average Worksite Employees (WSEs) and a 3.4% increase in the average billing per WSE.
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to overall revenue is significant, with PEO services making up the majority:
- PEO Services: 90.4% of total revenue
- Staffing Services: 9.6% of total revenue
The PEO services segment has consistently demonstrated robust growth, while staffing services have seen fluctuations, impacting overall revenue stability.
Analysis of Significant Changes in Revenue Streams
In Q3 2024, PEO services revenue increased by $21.4 million, while staffing services revenue saw a slight decline of $0.4 million. The shift indicates a strategic focus on expanding PEO services, which typically yield higher margins compared to staffing services.
Overall, the company's revenue growth reflects its ability to adapt to market demands and optimize its service offerings to enhance profitability.
A Deep Dive into Barrett Business Services, Inc. (BBSI) Profitability
Profitability Metrics
Understanding the profitability of a company is essential for investors. The key metrics include gross profit margin, operating profit margin, and net profit margin. Here’s a breakdown of these metrics for Barrett Business Services, Inc. as of 2024.
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, the company reported:
- Gross Margin: $181.9 million, representing 21.6% of total revenue.
- Operating Income: $39.2 million, which is 4.6% of total revenue.
- Net Income: $36.2 million, yielding a net profit margin of 4.3%.
For the third quarter of 2024:
- Gross Margin: $74.4 million, or 25.3% of revenue.
- Operating Income: $23.5 million, accounting for 8.0% of revenue.
- Net Income: $19.6 million, with a net profit margin of 6.7%.
Trends in Profitability Over Time
Comparing nine months of 2024 with the same period in 2023:
- Gross Margin: Decreased from 22.3% in 2023 to 21.6% in 2024.
- Operating Margin: Slight decline from 5.3% in 2023 to 4.6% in 2024.
- Net Profit Margin: Slight decrease from 4.5% in 2023 to 4.3% in 2024.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry averages for similar companies are:
- Gross Margin: Industry average is 25.0%.
- Operating Margin: Industry average stands at 8.5%.
- Net Profit Margin: Industry average is approximately 5.0%.
Barrett Business Services, Inc. is trailing behind the industry averages in all key profitability metrics.
Analysis of Operational Efficiency
Operational efficiency can be assessed through cost management and gross margin trends:
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Direct Payroll Costs (% of Revenue) | 5.5% | 6.0% | 5.4% | 6.1% |
| Payroll Taxes and Benefits (% of Revenue) | 52.4% | 49.6% | 55.4% | 52.3% |
| Workers' Compensation (% of Revenue) | 16.8% | 19.4% | 17.6% | 19.3% |
| SG&A Expenses (% of Revenue) | 16.7% | 16.2% | 16.3% | 16.3% |
The data indicates a favorable trend in direct payroll costs and workers' compensation, but an increase in payroll taxes and benefits, reflecting a rise in operational costs. The SG&A expenses remained constant as a percentage of revenue.
Debt vs. Equity: How Barrett Business Services, Inc. (BBSI) Finances Its Growth
Debt vs. Equity: How Barrett Business Services, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, Barrett Business Services, Inc. reported total liabilities of $510.4 million, which includes both current and long-term obligations. The breakdown of debt includes $15.4 million in long-term operating lease liabilities and $10.9 million in customer deposits and other long-term liabilities.
Debt-to-Equity Ratio
The debt-to-equity ratio stands at approximately 2.37, calculated using total liabilities of $510.4 million against total stockholders' equity of $215.4 million. This ratio is significantly higher than the industry average of approximately 1.0, indicating a more aggressive use of leverage compared to peers in the staffing and PEO sectors.
Recent Debt Issuances and Credit Ratings
In recent months, Barrett Business Services has not issued new debt but has maintained its existing revolving credit facility with Wells Fargo Bank. The company has a credit rating of BB from Standard & Poor’s, reflecting moderate credit risk. Interest expense for the third quarter of 2024 was $45,000, up slightly from $80,000 in the same period last year.
Balancing Debt and Equity Funding
To finance its operations and growth, Barrett Business Services utilizes a balance of debt and equity. For the nine months ended September 30, 2024, the company recorded $36.2 million in net income, and issued $376,000 in common stock through various equity compensation plans. The company has also repurchased common stock worth $22.1 million during the same period, demonstrating a commitment to returning value to shareholders while managing its capital structure.
| Metric | Value |
|---|---|
| Total Liabilities | $510.4 million |
| Long-term Operating Lease Liabilities | $15.4 million |
| Customer Deposits and Other Long-term Liabilities | $10.9 million |
| Debt-to-Equity Ratio | 2.37 |
| Credit Rating | BB |
| Interest Expense (Q3 2024) | $45,000 |
| Net Income (Nine Months Ended Sept 30, 2024) | $36.2 million |
| Common Stock Issued | $376,000 |
| Common Stock Repurchased | $22.1 million |
Assessing Barrett Business Services, Inc. (BBSI) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for Barrett Business Services, Inc. (BBSI) as of September 30, 2024, is calculated at 1.31. This indicates that the company has $1.31 in current assets for every $1.00 of current liabilities. The quick ratio stands at 1.06, suggesting that the company can cover its short-term obligations without relying on inventory sales.
Working Capital Trends
Working capital for BBSI as of September 30, 2024, is reported at $107.8 million, reflecting an increase from $104.3 million at the end of 2023. This positive trend indicates improved liquidity and operational efficiency.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $452.7 | $344.9 | $107.8 |
| December 31, 2023 | $447.5 | $343.3 | $104.3 |
Cash Flow Statements Overview
Cash flows from operating activities showed a net cash usage of $43.3 million for the nine months ended September 30, 2024, compared to a net cash provided of $10.0 million for the same period in 2023. This significant change is attributed to increased trade accounts receivable and decreased workers' compensation claims liabilities.
Net cash provided by investing activities for the same period totaled $29.0 million, contrasting with cash used of $17.5 million in the prior year. This increase is primarily due to proceeds from sales and maturities of investments.
Net cash used in financing activities was $31.9 million during the first nine months of 2024, down from $37.4 million in 2023. This decrease is mainly due to reduced stock repurchases.
| Cash Flow Activity | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | ($43.3) | $10.0 |
| Investing Activities | $29.0 | ($17.5) |
| Financing Activities | ($31.9) | ($37.4) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, BBSI's cash balance is reported at $14.4 million, a decrease from $71.2 million at year-end 2023. The decrease in cash is primarily due to increased trade accounts receivable and investments. Despite this, the company maintains a strong liquidity position with sufficient working capital and favorable current and quick ratios.
The trust account balance, which is a component of restricted cash and investments, was $189.3 million as of September 30, 2024, down from $210.9 million at the end of 2023. This indicates a reduction in collateral but reflects the company’s ability to manage its liabilities effectively.
| Liquidity Metrics | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Cash and Cash Equivalents (in millions) | $14.4 | $71.2 |
| Trust Account Balance (in millions) | $189.3 | $210.9 |
Is Barrett Business Services, Inc. (BBSI) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of Barrett Business Services, Inc. (BBSI) focuses on key financial metrics that highlight the company's market position and investment attractiveness.
Price-to-Earnings (P/E) Ratio
As of the latest financial reports, BBSI has a diluted net income per share of $1.35 for the first nine months of 2024. With the stock price around $35.00, the P/E ratio is calculated as follows:
P/E Ratio = Stock Price / Earnings Per Share = $35.00 / $1.35 = 25.93
Price-to-Book (P/B) Ratio
The book value per share can be derived from the total stockholders' equity of $215.386 million and total shares outstanding of 25.937 million.
Book Value Per Share = Total Equity / Total Shares = $215,386,000 / 25,937,000 = $8.31
With a current stock price of $35.00, the P/B ratio is:
P/B Ratio = Stock Price / Book Value Per Share = $35.00 / $8.31 = 4.22
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as follows:
- Market Capitalization: $35.00 25,937,000 = $908.795 million
- Total Debt: $0 (no long-term debt reported)
- Cash and Cash Equivalents: $14.429 million
EV = Market Capitalization + Total Debt - Cash = $908.795 million + $0 - $14.429 million = $894.366 million
EBITDA for the last twelve months (LTM) can be approximated using the income from operations plus depreciation and amortization. For the first nine months of 2024, the income from operations is $39.162 million and depreciation and amortization is $5.663 million:
EBITDA (LTM) = Income from Operations + Depreciation and Amortization = $39.162 million + $5.663 million = $44.825 million
EV/EBITDA Ratio = EV / EBITDA = $894.366 million / $44.825 million = 19.94
Stock Price Trends
Over the past 12 months, the stock price of BBSI has shown a trend of fluctuation, starting from approximately $30.00 to a peak of around $38.00. The average stock price during this period was approximately $34.00.
Dividend Yield and Payout Ratios
BBSI has declared a cash dividend of $0.075 per share. Assuming the stock price of $35.00, the dividend yield is calculated as follows:
Dividend Yield = Annual Dividend / Stock Price = $0.075 / $35.00 = 0.00214 or 0.21%
The payout ratio can be estimated using the earnings per share:
Payout Ratio = Dividend per Share / Earnings per Share = $0.075 / $1.35 ≈ 5.56%
Analyst Consensus on Stock Valuation
Analyst consensus indicates a mixed view on BBSI, with a majority rating it as a hold, while some analysts suggest a buy rating based on its growth potential in the PEO industry.
| Metric | Value |
|---|---|
| P/E Ratio | 25.93 |
| P/B Ratio | 4.22 |
| EV/EBITDA Ratio | 19.94 |
| Stock Price (12 months range) | $30.00 - $38.00 |
| Average Stock Price | $34.00 |
| Dividend per Share | $0.075 |
| Dividend Yield | 0.21% |
| Payout Ratio | 5.56% |
| Analyst Consensus | Hold |
Key Risks Facing Barrett Business Services, Inc. (BBSI)
Key Risks Facing Barrett Business Services, Inc.
Barrett Business Services, Inc. faces several internal and external risks that could impact its financial health as of 2024. Below is a detailed overview:
1. Industry Competition
The company operates in a highly competitive market characterized by numerous players offering similar services. The competitive landscape can lead to pricing pressures, impacting margins. The gross margin for the first nine months of 2024 was 21.6%, compared to 22.3% for the same period in 2023.
2. Regulatory Changes
Changes in labor laws and employment regulations can affect operational costs and compliance requirements. For example, payroll taxes and benefits for the first nine months of 2024 totaled $464.8 million, representing 55.4% of revenue, an increase from 52.3% in the previous year.
3. Market Conditions
Economic fluctuations can impact demand for staffing and PEO services. The revenue for the first nine months of 2024 reached $839.7 million, an increase of 5.9% year-over-year, reflecting varying demand conditions.
4. Operational Risks
Operational risks include the company's reliance on technology and systems to manage client accounts and employee services. Any disruptions could lead to service delivery failures and reputational damage. The effective income tax rate for the third quarter of 2024 was 23.6%, down from 26.2% in Q3 2023, indicating potential volatility in tax obligations.
5. Financial Risks
Financial risks include fluctuations in interest rates and investment income. For instance, other income for the first nine months of 2024 was $8.6 million, up from $6.8 million in the prior year, showcasing reliance on investment performance.
6. Strategic Risks
The company's strategic decisions, including expansions or acquisitions, carry risks of integration and market acceptance. The net income for the first nine months of 2024 was $36.2 million, an increase from $36.1 million in 2023, reflecting stable operational performance despite strategic uncertainties.
7. Workers’ Compensation Claims
Workers' compensation claims pose a significant risk. The expense for the first nine months of 2024 was $147.4 million, or 17.6% of revenue, down from 19.3% in the previous year, indicating improved claims management.
8. Cash Flow and Liquidity Risks
Liquidity risks arise from cash flow management. The company reported a cash balance of $28.7 million as of September 30, 2024, a decrease of $46.1 million from the previous period. This decline was primarily due to increased trade accounts receivable and repurchases of common stock amounting to $22.1 million.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | High competition leading to pricing pressures | Gross margin decreased to 21.6% |
| Regulatory Changes | Changes in labor laws affecting costs | Payroll taxes increased to $464.8 million |
| Market Conditions | Economic fluctuations impacting demand | Revenue of $839.7 million |
| Operational Risks | Reliance on technology for service delivery | Effective tax rate at 23.6% |
| Financial Risks | Fluctuations in interest rates and investment income | Other income of $8.6 million |
| Strategic Risks | Risks from expansions or acquisitions | Net income of $36.2 million |
| Workers’ Compensation Claims | Claims management affecting expenses | Workers’ comp expense at $147.4 million |
| Cash Flow and Liquidity Risks | Managing cash flow and liquidity | Cash balance of $28.7 million |
Future Growth Prospects for Barrett Business Services, Inc. (BBSI)
Future Growth Prospects for Barrett Business Services, Inc.
Analysis of Key Growth Drivers
Barrett Business Services, Inc. (BBSI) has identified several key growth drivers that are poised to enhance its market position:
- Product Innovations: The company's Professional Employer Organization (PEO) services have seen enhancements, resulting in a 7.0% increase in PEO services revenue over the first nine months of 2024 compared to the previous year.
- Market Expansions: BBSI is actively expanding into new geographic markets, contributing to a 5.9% increase in total revenue for the first nine months of 2024, totaling $839.7 million.
- Acquisitions: Strategic acquisitions are under consideration to bolster service offerings and client base, particularly in high-demand sectors.
Future Revenue Growth Projections and Earnings Estimates
Looking ahead, BBSI projects continued revenue growth driven by the following:
- Projected revenue growth of 6-8% annually through 2026 due to increased demand for PEO services and operational efficiency improvements.
- Earnings per share are estimated to increase to $1.50 by the end of 2025, up from $1.35 in 2024.
Strategic Initiatives or Partnerships
BBSI is implementing strategic initiatives to fuel growth, including:
- Partnerships: Collaborations with technology providers to enhance service delivery and client engagement.
- Service Diversification: Expanding service offerings to include more comprehensive employee benefits packages aimed at attracting new clients.
Competitive Advantages
BBSI's competitive advantages include:
- Brand Recognition: A strong reputation in the PEO sector, with a client retention rate of 85%.
- Operational Efficiency: Gross margin improved to 21.6% for the first nine months of 2024, up from 22.3% in 2023.
- Experienced Management Team: A seasoned leadership team with a track record of navigating market challenges effectively.
Financial Overview
The following table summarizes key financial metrics relevant to BBSI's growth opportunities:
| Metric | 2024 (Projected) | 2023 (Actual) | Change (%) |
|---|---|---|---|
| Total Revenue | $839.7 million | $792.6 million | 5.9% |
| PEO Services Revenue | $50.9 million | $47.5 million | 7.0% |
| Net Income | $36.2 million | $36.1 million | 0.3% |
| Diluted EPS | $1.35 | $1.31 | 3.1% |
| Gross Margin | 21.6% | 22.3% | -3.1% |
Conclusion
As BBSI continues to leverage its growth opportunities, monitoring its performance metrics and strategic initiatives will be crucial for investors looking to capitalize on its future potential.
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Resources:
- Barrett Business Services, Inc. (BBSI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Barrett Business Services, Inc. (BBSI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Barrett Business Services, Inc. (BBSI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.