After a growth spurt featuring a hot stock price that at one point topped $100 a share, Barrett Business Services Inc. said Wednesday it's experiencing "growing pains" and is making adjustments to put the company back on track.
The Vancouver-based firm, a supplier of staffing and outsourced human resources services, reported a net loss of $3.6 million in the first quarter, or 50 cents per share. That compares with a net loss of $2.5 million, or 36 cents a share, during the same three-month period in 2013.
First-quarter losses, however, aren't unusual for Barrett. Historically, it incurs such losses because of higher payroll taxes at the beginning of each year.
What was unusual — and what came as a disappointment to investors Wednesday, as the company's shares were down by as much as 9 percent following Barrett's first-quarter earnings release — was Barrett President and CEO Michael Elich's comments about a wrinkle in how the company vets its clients. That process has traditionally driven a 90 percent-plus retention rate.
However, Elich said, over the past several months the company has had to cancel its relationships with a number of clients who were using a "disproportionate level" of the company's resources. Some analysts have suggested Elich's statement means the company expects reduced revenue moving forward.
But Elich said the company's move to identify and scrub certain clients has positioned it to "achieve a long-term increase in efficiencies and quality of operations, which will benefit remaining and future clients."
The company, which has more than 3,000 clients in 23 states, is a pioneer of "professional employer organization" services. Under this system, Barrett becomes a co-employer of a client's workforce, handling human resources responsibilities, including workers' compensation claims.
Its clients include electronics manufacturers, light-industrial companies, forest products and agriculture-based businesses, transportation and shipping enterprises, and food-processing and telecommunications companies.
In response to questions from analysts during the company's earnings call Wednesday, Elich said the client-vetting problem surfaced in mid-2013, with "some larger clients" causing Barrett more of a problem "than we may have understood earlier, and it just made sense to move them out."
Barrett still does business with larger companies but part of the issue with larger organizations is that "sometimes you don't have access to the owner," Elich said, and that makes it "difficult for us to support change within that organization."
Elich said Barrett realizes "we're not perfect" and that the company has experienced "recent growing pains."
While it may take "a couple quarters to get things firmly back on track," Elich added, Barrett will become a better company for it.
Other numbers the company posted Wednesday were healthy.
For example, Barrett recorded net revenue of $135.1 million in the first quarter. That's up 21 percent from $111.5 million in the January-to-March period in 2013. And the jettisoning of some larger clients aside, the company recorded 149 net new clients in the first quarter of this year.
The company's stock, which trades as BBSI, closed down $3.57 Wednesday, at $50.41 per share. The company's shares have traded between $48.08 and $102.20 in the past 52 weeks.