Barrett Business Services NASDAQ: BBSI executives said the company finished 2025 with “strong results” despite a late-year moderation in same-customer sales trends and accelerating client workforce reductions tied to macroeconomic uncertainty. Management also introduced its 2026 outlook, emphasizing continued “controllable growth” from new client wins while planning conservatively for client hiring trends and insurance pricing dynamics.
2025 results: billings up 8.6%, EPS up 5%
Chief Financial Officer Anthony Harris said full-year gross billings increased 8.6% to $9.0 billion from $8.3 billion in the prior year. Diluted earnings per share rose 5% to $2.08 from $1.98.
For the fourth quarter, gross billings increased 6.4% to $2.4 billion versus $2.25 billion in the year-ago period. Diluted EPS increased 2% to $0.64 from $0.60.
CEO Gary Kramer said revenue for the quarter came in “slightly below” the company’s forecast as same-customer sales trends moderated, but he added that earnings exceeded the company’s full-year guidance.
Worksite employee growth offset by client workforce reductions
Kramer said the company produced record growth in its worksite employee (WSE) base, powered by sales execution and retention, but noted that client workforce reductions were a headwind throughout the year and accelerated in Q4. He said client net hiring was below historical norms “all year” due to macroeconomic uncertainties.
During the quarter, BBSI added approximately 8,300 WSEs year-over-year from net new clients, which management described as the result of its “sale and service” engine and other top-of-funnel initiatives. Still, reductions across “all geographies and nearly all industries” tempered growth, with California clients and construction having the most pronounced impact on gross billings.
Harris said PEO worksite employees grew 5.1% in Q4, while average billing per WSE per day increased 1.5%, driven by sustained wage growth and partially offset by lower average hours per WSE.
Regional and business-line performance
On a year-over-year basis in Q4, Harris broke out PEO gross billings growth by region:
- Southern California: +5%
- Northern California: +5%
- Mountain region: +10%
- East Coast: +10%
- Pacific Northwest: -4%
- Asset-light markets: +95%
He said California remained supported by controllable growth even as hiring slowed, while the Mountain and East Coast regions delivered “very strong results.” The Pacific Northwest, he added, remained the region most impacted by economic conditions. Asset-light markets continued building their client base at “near 100%” growth rates.
In staffing, Kramer said the business declined 13% year-over-year in Q4 and 11% for the full year, reflecting client reluctance to place staffing orders amid macro uncertainty. He added that BBSI leveraged its recruiting expertise to support PEO clients, placing 81 applicants in the quarter and 432 in 2025.
Benefits, technology roadmap, and operating discipline
Kramer highlighted progress with BBSI Benefits, saying the company is “successfully selling and servicing” the offering in all markets and is seeing traction in white-collar verticals. He said the company began 2025 with 575 clients on its plans and about 16,000 total participants; by the end of January, it had approximately 800 clients and more than 24,000 participants. He described the 1/1/2026 selling and renewal season as successful, citing more than 80 new clients and a 93% renewal rate, or 97% on an “adjusted basis” that accounts for clients leaving the benefits platform but remaining with BBSI.
On technology, Kramer and Harris discussed continued investment in myBBSI and product development. Kramer said BBSI launched an “Employee File Cabinet” in January and is beta testing a performance management module targeted for release in Q2. Harris added that BBSI expects depreciation to increase in 2026 as IT systems come online, and said the company is pursuing “modern systems, AI tools, and streamlined processes” to improve efficiency.
Harris said operating leverage continued in 2025, with SG&A growing slower than billings and gross margin. SG&A expense fell about 2.5% in Q4 and rose a modest 2.5% for the full year.
Insurance pricing, capital returns, and 2026 outlook
Management spent significant time discussing workers’ compensation pricing. Harris said BBSI recognized favorable prior-year liability and premium adjustments of $2.2 million in Q4, compared with $2.4 million in Q4 2024. He said the company has seen a “positive shift” after the California Insurance Commissioner approved an average 8.7% premium rate increase in late 2025, and noted carriers have filed for similar increases and competitive quotes are rising. Kramer described the pricing environment as previously “choppy” but said the last several months of renewals showed positive aggregate rate trends, while also cautioning that market behavior remains an unknown variable.
On payroll taxes, Kramer said unemployment tax rates were “modestly higher” but the increase was smaller than last year, and BBSI has mechanisms to price them in, though timing can affect margin.
Harris said BBSI ended the year with a strong balance sheet, including $157 million of unrestricted cash and investments and no debt. The company repurchased $17 million of shares in Q4 under its August 2025 authorization, with $75 million remaining at year-end. For 2025, it repurchased $42 million of stock—nearly 4% of shares outstanding—and paid $8.2 million in dividends, returning a total of $50 million to shareholders.
Looking ahead, Harris guided to 2026 gross billings growth of 3% to 5% and average WSE growth of 2% to 4%, reflecting controllable growth offset by weak hiring trends “particularly earlier in the year.” The company expects 2026 gross margin of 2.7% to 2.85% and an effective annual tax rate of 26% to 27%.
In the Q&A, Kramer said BBSI expects same-customer sales to be worse early in 2026 and improve as the year progresses, consistent with broader macro forecasts. He also said wage growth has moderated but remains “real,” citing a 2% to 4% range, and noted skilled labor availability remains a top client concern.
About Barrett Business Services NASDAQ: BBSI
Barrett Business Services, Inc NASDAQ: BBSI is a professional employer organization (PEO) headquartered in Northridge, California. Founded in 1971 by Barrett K. Levesque, the company provides comprehensive human resources outsourcing solutions to small and mid-sized businesses. Through its consultative model, Barrett Business Services helps clients streamline administrative processes, mitigate regulatory risk and focus on core operations.
The company's core offerings include payroll administration, employee benefits management, workers' compensation and risk management services.
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