Barrett Business Services' Q1 Loss Wider than Expected - Analyst Blog
May 01 2014 - 12:00PM
Zacks
Barrett Business Services
Inc. (BBSI) reported first-quarter 2014 loss per share of
50 cents, which was wider than the Zacks Consensus Estimate loss of
49 cents. Loss also widened from the year-ago loss of 36 cents,
primarily due to higher effective payroll taxes and higher share
count.
Quarter Details
Barrett reported gross revenues of $727.4 million in the
first-quarter of 2014, up 23.0% from the year-ago quarter.
Quarterly revenues missed the Zacks Consensus Estimate of $746.0
million. The year-over-year growth was primarily attributable to
continuous increase in the company's co-employed client count as
well as improvement in same-store sales.
Professional employer service fees grew 23.6% year over year to
$693.9 million, primarily driven by new client additions. Revenues
from Staffing Services were $33.5 million, up 12.5% from the
year-ago quarter, primarily attributable to an increase in new
businesses.
Barrett’s gross margin decreased 13 basis points on a year over
year basis to 1.3% due to higher costs. The company’s operating
expenses increased 21.9% from the year-ago quarter to $14.9
million, primarily due to higher incentive pay and increases in
payroll expenses within selling, general and administrative
expenses (SG&A). As a percentage of revenue, operating expenses
remained relatively flat year over year and came in at 2.1%.
Higher-than-expected operating expenses impacted the overall
operating results. Operating loss came in at $5.6 million, wider
than a loss of $3.9 million in the year-ago quarter. Barrett
reported net loss of $3.6 million or 50 cents compared with $2.5
million or 36 cents in the year-ago quarter.
Barrett exited the quarter with cash, cash equivalents and
marketable securities of approximately $97.3 million compared with
$113.3 million in the previous quarter. Long-term debt balance
(including current portion) was $5.2 million compared with $5.3
million in the previous quarter.
Guidance
For the second-quarter of 2014, Barrett expects gross revenue to
increase 15.0% on a year over year basis and range between $780.0
million and $800.0 million, up from $675.0 million reported in the
year-ago quarter. The Zacks Consensus Estimate is pegged at $837.0
million. Management expects second-quarter 2014 earnings per share
to range between 93 cents to 98 cents, up from 80 cents reported in
the year-ago quarter. The Zacks Consensus Estimate is pegged at
$1.01 per share.
Our Take
Barrett reported dismal first-quarter results and provided a tepid
second quarter guidance. Loss per share widened from the year-ago
quarter but revenues increased on a year over year basis. Revenues
were positively impacted by solid client growth. Despite the
continuing macro uncertainty, Barrett expects strong business
pipeline and a healthy client base in the future. However, higher
effective payroll taxes negatively impacted Barrett’s bottom line
in the current quarter.
Nonetheless, we prefer to wait and see whether the company’s
continued investments in operational infrastructure improvements
rationalize margins in the near term. Moreover, growing competition
from Paychex, Inc. (PAYX) and Insperity,
Inc. (NSP) remains a headwind going forward.
Currently, Barrett has a Zacks Rank #3 (Hold). Western
Digital Corporation (WDC) is a better-ranked technology
stock carrying a Zacks Rank #1 (Strong Buy).
BARRETT BUS SVS (BBSI): Free Stock Analysis Report
INSPERITY INC (NSP): Free Stock Analysis Report
PAYCHEX INC (PAYX): Free Stock Analysis Report
WESTERN DIGITAL (WDC): Free Stock Analysis Report
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